### DFS Furniture plc ### Annual Report & Accounts 2023 ## LEADING ## THE WAY IN ## FURNITURE ## RETAIL ## Affordable Sustainable Responsible → Strategic Report DFB Furniture plc Annual Report & Accounts 2023 In a challenging economic climate, the Group has continued to progress its strategy and grow market share. # OUR PURPOSE To bring great design and comfort into every home, in an affordable, responsible and sustainable manner. Our customers and our people are at the heart of everything we do, and our culture is rooted in our core values. # → Affordable Choice and innovation Through market-leading scale and service page 15 ![img-0.jpeg](img-0.jpeg) ![img-1.jpeg](img-1.jpeg) # ← Sustainable Becoming a circular business Our Safe Cycle strategy sets out a framework for the future. page 44 ![img-2.jpeg](img-2.jpeg) # ↑ Responsible Driving change and creating value Through well governed environmental and social targets. page 41 # CONTENTS # Strategic report 1 Highlights 2 Purpose-driven approach 4 At a glance 7 Our fundamentals 8 Chair's statement 10 Chief Executive's report 13 Market overview 15 Our customer journey 16 Our business model 17 Our strategy 19 Key performance indicators 21 Financial review 25 Alternative performance measures 28 Risks and uncertainties 36 Section 172 statement 39 Responsibility and sustainability report # Governance report 63 Directors and officers 65 Corporate governance report 71 Audit Committee report 76 Nomination Committee report 78 Directors' remuneration report 100 Directors' report 103 Statement of Directors' responsibilities in respect of the annual report and the financial statements 104 Independent auditor's report # Financial statements 113 Consolidated income statement 114 Consolidated statement of comprehensive income 115 Consolidated balance sheet 116 Consolidated statement of changes in equity 117 Consolidated cash flow statement 118 Notes to the consolidated financial statements 151 Company balance sheet 152 Company statement of changes in equity 153 Notes to the Company financial statements 156 Financial history 157 Shareholder information ### HIGHLIGHTS ### Strategic Report ## The Group has made good operational and strategic progress in a challenging ## environment as we focused on executing our strategy and continuously ## improving our operating platforms. ### Financial highlights Operational and strategic highlights 2  Post purchase NPS  1    4   ## 91.3% 1   ## £30.6m   1     £30.6m 91.3%  £60.3m 86.3%  £109.2m  86.4%    1 2 Group revenue Underlying earnings per share Established customer NPS   ## £1,088.9m 9.4p 18.6%  £1,088.9m 9.4p 18.6%  £1,149.8m 16.9p  11.7%  £1,060.2m 36.0p 30.7%  DFS Furniture plc  Earnings per share ## £29.7m 11.1p | | | £29.7m | 11.1p | | --- | --- | --- | --- | | | | £58.5m | 12.3p | | | | £102.6m | 34.5p | | ONCE GRAPH IS BUILT, DATA FIGS SHOULD BE ONCE GRAPH IS BUILT, DATA FIGS SHOULD BE ONCE GRAPH IS BUILT, DATA FIGS SHOULD BE ONCE GRAPH IS BUILT, DATA FIGS SHOULD BE ONCE GRAPH IS BUILT, DATA FIGS SHOULD BE ONCE GRAPH IS BUILT, DATA FIGS SHOULD BE ONCE GRAPH IS BUILT, DATA FIGS SHOULD BE | | | | | ALIGNED TO FAR RIGHT GUIDE ALIGNED TO FAR RIGHT GUIDE ALIGNED TO FAR RIGHT GUIDE ALIGNED TO FAR RIGHT GUIDE ALIGNED TO FAR RIGHT GUIDE ALIGNED TO FAR RIGHT GUIDE ALIGNED TO FAR RIGHT GUIDE |   | | |     | FY23 FY23 FY23 FY23 FY23 FY23 FY23 | 1 |   | | --- | --- | --- | | FY22 FY22 FY22 FY22 FY22 FY22 FY22 | | | | FY21 FY21 FY21 FY21 FY21 FY21 FY21 | | | | FY20 FY20 FY20 FY20 FY20 FY20 FY20 | | | ### PURPOSE DRIVEN APPROACH ### Strategic Report OUR PURPOSE OUR STRATEGY FOR GROWTH ###  ## Our Purpose is to bring great design and comfort into every  home, in an affordable, responsible and sustainable manner.   ## Our customers and our people are at the heart of everything ### Group strategy ## we do, and our culture is rooted in our core values. MARKET CUSTOMER CULTURE AND RESPONSIBILITY AND VALUES SUSTAINABILITY ###   GROUP ###   STRATEGY ###   ###  PILLARS   ### Think customer       DFS Furniture plc ### Be real PLATFORMS page 39      OUR STAKEHOLDERS ### Aim high Sourcing & Technology Logistics People  ###  Manufacturing & Data & Culture  ###       ESG         FINANCIALS   page 36  page 17 ### 2 ### Strategic Report DFS Furniture plc ### CONTENTS ## Strategic | | 4 At a glance | 17 Our strategy | | --- | --- | --- | | | 7 Our fundamentals | 19 Key performance indicators | | | 8 Chair’s statement | 21 Financial review | | | 10 Chief Executive’s report | 25 Alternative performance measures | | | 13 Market overview | 28 Risks and uncertainties | | report | 15 Our customer journey | 36 Section 172 statement | | | 16 Our business model | 39 Responsibility and sustainability report | ### 3 ### AT A GLANCE ### Strategic Report page 6 page 5  page 6 DFS Furniture plc ### 4 ### AT A GLANCE ### Strategic Report We are the leading sofa retailing group in the UK – we operate across  two retail brands, each appealing to different customer segments.               DFS Furniture plc         ## £858.5m  ## 5 117 ### AT A GLANCE ### Strategic Report       ## 58     FY23 brand revenue    ##  £230.4m      Delivery vehicles   ## 276    DFS Furniture plc ### 6 ### OUR FUNDAMENTALS ### Strategic Report ### Delivering sustainable growth ## Our Group benefits from four fundamental advantages that provide ## our business model with resilience and position us well for the future. | 1. | 2. | 3. | 4. | | --- | --- | --- | --- | |  |  |  |  | | |  |  |  | |  |  | We are committed to building a sustainable |  | | the DFS group is over three times the size | digital and physical assets is the right |  |  | |  |  | on the environment and our long-term |  | |  |  |  |  | |  |  |  |  | | |  |  |  | | |  |  |  | | |  |  |  |  DFS Furniture plc ##     page 17 ### 7 ### CHAIR’S STATEMENT ### Strategic Report ## Growing market share ## in a challenging year ## The year to June 2023 has been marked by an uncertain and disrupted external ## environment, with the continuing impact of the conflict in Ukraine, global ## inflationary pressures, and the move away from the extremely low level of ## interest rates seen over the last ten years all weighing on UK consumers.        DFS Furniture plc        Financial results     Appointment of a new Chair   Recruitment of a new CFO   Appointment of a new Chair of the  Remuneration Committee     ### STEVE JOHNSON  of the Group ###   ### 8 Bio onpage 63 ### CHAIR’S STATEMENT ### Strategic Report    Capital structure and returns                          Board and Governance                      Looking Forward       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                   DFS Furniture plc        Strategy ### STEVE JOHNSON   Chair of the Board          1 brand amortisation      ##  £30.6m        Group revenue    ## £1,088.9m £29.7m  ### 9 ### CHIEF EXECUTIVE’S REPORT ### Strategic Report ## Strategic progress in a ## challenging environment ## The Group has made good progress strategically and operationally throughout the year ## as we focused on executing our growth strategy and continuously improving our operating ## platforms. We have continued our long term track record of growing our market share in ## the UK upholstery sector with a significant 2% pts step up in the period, taking the Group’s ## value share of the upholstery market to a record high of 38%. This has been achieved whilst ## rebuilding our gross margin rate back towards historical levels. We have also seen a step ## change in our customer experience scores through improved operational grip and the easing ## of the external supply chain crisis.       Continuing to win share in a very tough market, DFS Furniture plc  extending market leadership with 2% pts share  gain to a record 38% of the UK upholstery market   Brands continue to evolve: DFS range continues  to broaden appeal to wider customer base; further  three Sofology showrooms opened taking the  total to 58 (38 at acquisition)   Continue to strengthen the foundations for  growth in the £3bn beds and mattresses market  with drop-ship delivery solution launched and  exclusive brand partnerships extended to bed  ranges, driving online sales up 69% year on year    Operationally in the strongest position since  scores with supply chains, order banks and ### customer lead times all fully back to normal TIM STACEY ###  ### 10 Bio onpage 63 ### CHIEF EXECUTIVE’S REPORT ### Strategic Report     1      1             Our brands                         Market update                  The home market opportunity                 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             Our supporting platforms                  Reflections on FY23 financial performance           Strategic update               ### 11   ### CHIEF EXECUTIVE’S REPORT ### Strategic Report     1                                         Conclusion                                   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     Sustainability           DFS Furniture plc            Outlook ### TIM STACEY    Chief Executive Officer                              ### 12   ### Strategic Report ### MARKET OVERVIEW ## We are the leading sofa retailer in the digital age ## The Group has continued its long term track record of market share growth achieving a record 38% in FY23. Large potential customer base Clear leader in the segment   DFS Furniture plc        1                                        ### 13 ### Strategic Report ### MARKET OVERVIEW ## Market conditions are currently challenging with the UK upholstery market seeing a reduction in volumes. ## Historically, the Group has been able to grow market share during economically challenging times. ### Key Market Drivers Consumer confidence Housing Market Consumer credit                            1 2 3      | (32.9) | 2023 YTD | YoY (19.9%) | | | 7.6 | | --- | --- | --- | --- | --- | --- | | (38.9) | 2022 | | 1,265 | | 6.1 | | (14.5) | 2021 | | 1,480 | (3.5) | | | (24.3) | 2020 | | 1,040 | (2.0) | | DFS Furniture plc | | | (12.7) | | 2019 | | 1,177 | | | 6.5 | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | (9.5) | | 2018 | | 1,189 | | | 8.3 | | 2023 YTD 2023 YTD | | | | | | | | | | | | | (8.8) | | 2017 | | 1,223 | | | 10.0 | | 2022 2022 | | | | | | | | | | | | | (3.3) | | 2016 | | 1,232 | | | 10.1 | | 2021 2021 | | | | | | | | | | | | | | 3.1 | 2015 | | 1,226 | | | 7.7 | | 2020 2020 | | | | | | | | | | | | | (2.6) | | 2014 | | 1,223 | | | 5.9 | | 2019 2019 | | | | | | | | | | | | | (18.6) | | 2013 | | 1,068 | | | 3.6 | | 2018 2018 | | | | | | | | | | | 2017 2017 | | | | | | | | | | | |     | | | | | |   | | | | 2016 2016 | | | | | | | | | | | | | | | |  | | |  | | ### 14 | 2015 2015 | | --- | | 2014 2014 | | 2013 2013 | ### OUR CUSTOMER JOURNEY ### Strategic Report ## The customer is at the heart of our Group journey ##        DESIGN INTEGRATED CUTTING EDGE INNOVATIVE SOFA COLLECTION & INSPIRE RETAIL MODEL TECHNOLOGY MANUFACTURING SERVICE DELIVERY OPTIONS & RECYCLING | | Through our innovative | The combination of our well | We focus on embracing and | We are one of the largest | Aftercare is provided by | The Sofa Delivery Company | Getting rid of an old sofa | | --- | --- | --- | --- | --- | --- | --- | --- | | | in-house design teams and | invested websites, national | leveraging technology to | manufacturers of | highly skilled teams with | is our leading Group-wide | responsibly and conveniently | | | with our buying expertise we | showroom networks and | maintain our position as the | upholstered furniture in the | the majority of after-sales | supply chain platform. | is a real issue for customers. | | | remain at the forefront of | call centres which are staffed | leading sofa retailer in the | UK. Our factories collectively | issues being addressed in | Through our own network of | Unless old sofas are passed | | | home furnishing trends with | by well trained and highly | digital age. | produce around 20% of | customers’ homes by our | customer delivery centres | on to family, friends or charity, | | | each of our brands offering | motivated sales teams | | all the furniture we sell. | own colleagues. | and our own delivery fleet we | many go into landfill. Our | | | a distinct curated range. | provide a market-leading | | | | carefully deliver our products | experienced specialist | | | We inspire consumers to | integrated retail experience | | | | to customers’ homes and | partner Clearabee will collect | | | consider a purchase through | to our customers. | | | | provide a comprehensive | customers old sofas and take | | DFS Furniture plc | memorable advertising, | Collectively across all our | | | | installation service. | them to the nearest recycling | | | inspirational web content and | brands we have styles and | | | | | centre where it will be broken | | | the use of augmented reality | price points that appeal to | | | | | down to its component parts | | | technology. Sustainability | the majority of the market | | | | | to reuse, recycle or create | | | is a growing feature of our | and we make our products | | | | | new energy. | | | products. Our Grand Designs | more affordable through | | | | | | | | ranges feature all elements | offering interest free credit. | | | | | | made from recycled or recyclable materials and our fully circular Gaia sofa.   Colleagues enrolled on  Service managers Delivery vehicles  research online   programme ## 175 220 276 84,000 ## 90% 20% ## 40 ### 15 ### BUSINESS MODEL ### Strategic Report ## How we create value… How we deliver value… OUR ENABLERS WHAT WE DO OUTCOMES VALUE FOR STAKEHOLDERS Customer ethos Design and inspire Sustain sector-leading CUSTOMERS operating margins |  |  | | | | --- | --- | --- | --- | |  |  |  | | |  |  |  | 91.3% | | |  |  | |  | Unparalleled scale | |  | | | --- | --- | --- | --- | | | 1 |  |  | |  |  | | | |  | | |  | Retail  EMPLOYEES Complementary brands      ## 35%       Maintain strong cash generation        SUPPLIERS      Continue to invest in the business ##  37%    2    Made-to-order products  Deliver and install     SHAREHOLDERS    ##  £182m Vertically integrated model  DFS Furniture plc 3    Service    COMMUNITY     ##  £6.9m         ### 16   ### OUR STRATEGY ### Strategic Report Our strategy is made up of the three pillars of our business: Our DFS brand, our Sofology brand, and our expansion into the Home market. The growth of our pillars will be enabled by our group enabling platforms: Technology and data, Logistics, Sourcing and manufacturing and People and culture. The strategy reflects the Group’s expertise, scale, assets and supporting infrastructure and the ability to use our enabling platforms to both improve the operational efficiency and the growth across our brand portfolio. We are committed to building a sustainable business model, both in terms of our impact on the environment and preserving our long-term success as a Group. ### Pillars ## DFS & Home Sofology ### Customer proposition and service innovation Increase scale of business New services to engage customers To further grow the showroom estate throughout the UK Focus for 23/24 Focus for 23/24             ### Platforms DFS Furniture plc ## Group Enabling Platforms | | | Technology & data | | | Logistics | | | Sourcing & | | | People & culture | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | Using data and technology to | | | Best in market two person | | | manufacturing | | | Delivering fundamental | | | | unlock growth in our brands | | | delivery and installation | | | Optimising our supplier portfolio | | | cultural change | | Focus for 23/24 | | | Focus for 23/24 | | | Focus for 23/24 | | | Focus for 23/24 | | | |   | | |   | | |   | | |   | | | | |  | | |  | | |  | | |  | | | |  | | | | | | | | |  | |        ### 17 ### OUR STRATEGY ### Strategic Report ##   ### u s t a i n a b i l i t S y ### Best experience Best online brand strength   ## 86% 1.8x    ## 87% ### Best ranges  ##   ## 91% ###  Best enhanced technology     ### Best sales teams ### Best ecommerce platform  ## 9/10  ### Sourcing & Technology Logistics People &  ### Manufacturing & Data platform Culture  ### platform platform platform DFS Furniture plc ### S u s i l i t y ### t a i n a b Revenue ambition  ##  ## £1.4bn 8% ### 18 ###  ### Strategic Report 1 1 Gross Sales  Leverage 1  ## £1,423.6m 1.9x ## £30.6m | £1,423.6m | | £30.6m | 1.9x | | --- | --- | --- | --- | | £1,474.6m | | £60.3m | 1.0x | | £1,359.4m | | £109.2m | 0.2x | | £935.0m | (£63.1m) | | | Description £1,287.2m £50.2m   Performance  Description Description         Performance     Performance    1 1 Underlying return on capital employed  ## 13.5% (£7.0m) DFS Furniture plc 13.5% (£7.0m) 18.7% (£5.0m) 38.7% Description Description   ONCE GRAPH IS BUILT, DATA FIGS SHOULD BE ONCE GRAPH IS BUILT, DATA FIGS SHOULD BE Key   ALIGNED TO FAR RIGHT GUIDE ALIGNED TO FAR RIGHT GUIDE     | |   |  |  | | --- | --- | --- | --- | | FY23 FY23 |   | | | | | | Performance | Performance |      FY22 FY22       FY21 FY21  ### 19 | FY23 FY23 | | | --- | --- | | FY20 FY20 FY23 | | | FY22 FY22 | | | FY19* FY19* FY22 | | | FY21 FY21 | £141.7m | | FY19** FY19** FY21 | £1,165m £28.2m | ### Strategic Report ###      ## 39.4 days 58 ## 91.3% 91.3% 86.3% Description Description Description       Performance Performance Performance       Strategic Links Strategic Links Strategic Links    ## 73.8% ## 18.6% DFS Furniture plc Description Description      Performance Performance    Key to Strategic Links      Strategic Links Strategic Links  ONCE GRAPH IS BUILT, DATA FIGS SHOULD BE ONCE GRAPH IS BUILT, DATA FIGS SHOULD BE ONCE GRAPH IS BUILT, DATA FIGS SHOULD BE ONCE GRAPH IS BUILT, DATA FIGS SHOULD BE ONCE GRAPH IS BUILT, DATA FIGS SHOULD BE ALIGNED TO FAR RIGHT GUIDE ALIGNED TO FAR RIGHT GUIDE  | ALIGNED TO FAR RIGHT GUIDE ALIGNED TO FAR RIGHT GUIDE ALIGNED TO FAR RIGHT GUIDE | | | | | | --- | --- | --- | --- | --- | | FY23 FY23 | 20 | 18.6% | | 58 | | FY23 FY23 FY23 | | | 73.8% | 39.4 | | FY22 FY22 | | 11.7% | | 55 | | FY22 FY22 FY22 | | | 72.0% | 35.8 | | FY21 FY21 | | 30.7% | | 50 | | FY21 FY21 FY21 | | 86.4% | 71.8% | 30.6 | ### FINANCIAL REVIEW ### Strategic Report ## Financial review ## The Group has operated through a challenging trading environment in FY23, influenced ## by reductions in consumer disposable income and increased market volatility. Against this ## backdrop, we delivered strong market share gains despite Group revenue being towards ## the lower end of our expectations coming into the year. There was good progress on gross ## margin rate and this together with disciplined cost control helped to underpin profit ## conversion and ensured that full year profits were delivered within the guidance range ## we shared at our interim results.     1    of  £30.6m, within guidance at interims DFS Furniture plc         share gains   Gross margin up 170bps to 54.4%, on track to keep improving towards our pre-Covid average of 58%   established, targeting c£50m of annualised savings by FY26  Net debt increased to £140m from £90m due to  pandemic period, and shareholder returns   extending the facility and diversifying the ### JOHN FALLON lending group ###  ### 21   Bio onpage 63 ### FINANCIAL REVIEW ### Strategic Report        FY23    1 Gross Sales 1,423.6     1,125.5     298.1    24.0%    Revenue 1,088.9            Depreciation, amortisation and interest Basis of preparation                                        Revenue and gross sales  1                          Selling, distribution and administration and   DFS Furniture plc property costs          2               Gross profit  Profits and earnings per share          1                              ### 22   ### FINANCIAL REVIEW ### Strategic Report   Looking forward    FY24 Guidance                  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                     |  |  | | | | | | --- | --- | --- | --- | --- | --- | | | | | 1 | |  | | | |    | |  | |    Cash flow, net debt and dividends                                              DFS Furniture plc        1               | | | |  |  | | --- | --- | --- | --- | --- | |  | | 2 | | | | |  |  | | | | | | |  |  |           ‘Cost to Operate’ efficiencies programme                      ### 23  ### FINANCIAL REVIEW ### Strategic Report ###             Profit margin growth                ### DFS Furniture plc JOHN FALLON Chief Financial Officer  ### 24 ### ALTERNATIVE PERFORMANCE MEASURES ### Strategic Report                             Gross sales       Brand contribution    Adjusted EBITDA    Non-underlying items      Underlying EBITDA    Underlying profit before tax and brand   amortisation PBT(a)  Underlying earnings per share     DFS Furniture plc Net bank debt     Cash EBITDA      Underlying free cash flow to equity holders      Leverage (or gearing)     Underlying return on capital employed   (underlying ROCE)    ### 25 Strategic Report DFR Furniture plc Annual Report & Accounts 2023 26 # ALTERNATIVE PERFORMANCE MEASURES CONTINUED # Key performance indicators # Reconciliations to IFRS measures | | Note | FY23 £m | FY22 £m | | --- | --- | --- | --- | | **Adjusted EBITDA** | | | | | Operating profit from continuing operations | 2 | 63.8 | 87.3 | | Depreciation | 3 | 80.5 | 77.7 | | Amortisation | 3 | 11.6 | 10.5 | | Impairments | 3 | 2.0 | – | | Adjusted EBITDA from continuing operations | | 157.9 | 175.5 | | **Underlying EBITDA** | | | | | Adjusted EBITDA from continuing operations | Note | FY23 £m | FY22 £m | | Non-underlying operating items | 3 | 157.9 | 175.5 | | Underlying EBITDA from continuing operations | | (0.5) | 0.4 | | | | 157.4 | 175.9 | | **Underlying profit before tax and brand amortisation – PBTs** | | | | | Profit before tax from continuing operations | Note | FY23 £m | FY22 £m | | Non-underlying items | 2 | 29.7 | 58.5 | | Amortisation of brand names | 3 | (0.5) | 0.4 | | Underlying profit before tax and brand amortisation | 10 | 1.4 | 1.4 | | | | 30.6 | 60.3 | | **Net bank debt** | | | | | Interest bearing loans and borrowings | Note | FY23 £m | FY22 £m | | Unamortised issue costs | | 165.8 | 93.5 | | Cash and cash equivalents (including bank overdraft) | 18 | 1.2 | 1.5 | | | | (26.7) | (5.0) | | Net bank debt | | 140.3 | 90.0 | | **Movement in net bank debt** | | | | | Closing net bank debt | | FY23 £m | FY22 £m | | Less: Opening net bank debt | | (140.3) | (90.0) | | Movement in net bank debt | | 90.0 | 19.0 | | | | (50.3) | (71.0) | | **Underlying free cash flow to equity holders** | | | | | Movement in net bank debt | Note | FY22 £m | FY21 £m | | Dividends | | (50.3) | (71.0) | | Purchase of shares by Employee Benefit Trust | 21 | 12.1 | 53.8 | | Proceeds from sale of own shares | | – | 8.2 | | Purchase of own shares | | – | (0.4) | | Non-underlying cash items included in cash flow statement | | 30.9 | 4.4 | | | | 0.3 | – | | Underlying free cash flow to equity holders | | (7.0) | (5.0) | | Exclude | | | | | Working capital outflow | | 40.0 | 28.8 | | Operating result from discontinued operations | 29 | (3.6) | 13.4 | | | | 29.4 | 37.2 | | **Underlying free cash flow to equity holders excluding operating result from discontinued operations and working capital outflow** | | | | Strategic Report DFB Furniture plc Annual Report & Accounts 2023 # ALTERNATIVE PERFORMANCE MEASURES CONTINUED | Leverage | Note | FY23 £m | FY22 £m | | --- | --- | --- | --- | | Net bank debt (A) | | **140.3** | 90.0 | | Net cash from operating activities before tax | 26 | **122.4** | 139.7 | | Adjusted for: | | | | | Pre-tax non-underlying items | | **(4.3)** | 11.7 | | Movement in trade and other receivables | | **(13.2)** | 7.2 | | Movement in inventories | | **(8.6)** | 3.3 | | Movement in trade and other payables | | **55.8** | 16.6 | | Movement in provisions | | **6.0** | 1.7 | | Payment of interest on lease liabilities | | **(23.5)** | (25.0) | | Payment of lease liabilities | | **(61.6)** | (63.5) | | Cash EBITDA (B) | | **73.0** | 91.7 | | **Leverage (A/B)** | | **1.9x** | 1.0x | | **Underlying return on capital employed from continuing operations** | Note | **FY23 £m** | **FY22 £m** | | Operating profit from continuing operations | | **63.8** | 87.3 | | Non-underlying operating items | | **(0.5)** | 0.4 | | Pre-tax return | | **63.3** | 87.7 | | Effective tax rate for continuing operations | | **22.6%** | 24.3% | | **Tax adjusted return (A)** | | **49.0** | 66.4 | | Property, plant and equipment | 8 | **97.4** | 105.9 | | ROU assets | 9 | **312.6** | 338.0 | | Computer software | 10 | **22.0** | 17.7 | | | | **432.0** | 461.6 | | Inventories | 14 | **55.8** | 64.4 | | Trade receivables | 15 | **7.7** | 12.6 | | Prepayments | 15 | **3.0** | 11.4 | | Accrued income | 15 | **0.1** | 0.3 | | Other receivables | 15 | **0.3** | — | | Payments received on account | 16 | **(39.1)** | (72.2) | | Trade payables | 16 | **(97.6)** | (122.5) | | Working capital | | **(69.8)** | (106.0) | | **Total capital employed (B)** | | **362.2** | 355.6 | | **Underlying ROCE (A/B)** | | **13.5%** | 18.7% | 47 ### RISKS AND UNCERTAINTIES ### Strategic Report ## The Group faces a number of risks and uncertainties in both its day-to-day business operations and strategic ## development. Effective mitigation of these risks is essential to enable us to meet the needs of our customers. Identification of risks              1. Principal risks    1      2. Strategic risks    2        3. Operational risks   3   DFS Furniture plc          Group Leadership Team Board Audit Committee Group Risk Team               Group Governance, Risk & Compliance Committee  ### 28 ### RISKS AND UNCERTAINTIES ### Strategic Report Evaluation of risks  ### Principal risks  1     2   Principal risks and mitigation 3     4     7 5    3  6      7  5    8    8 6 4 Changes to principal risks in the year 9    LIKELIHOOD  1   Risk heat map 2  9     DFS Furniture plc       Management of climate change and other  POTENTIAL IMPACT  significant ESG risks            ### 29  ### RISKS AND UNCERTAINTIES ### Strategic Report Principal Risk Principal Risk FINANCIAL RISK AND LIQUIDITY REGULATORY ENVIRONMENT What is the risk? Strategic link What is the risk? Strategic link     1   2    3 Potential impact      Potential impact                 Mitigation               Mitigation FY23 progress Movement                   DFS Furniture plc              FY23 progress Movement   Link to strategic pillars and platforms | Pillars: | 1 |  | 2 |  | 3 |  | | --- | --- | --- | --- | --- | --- | --- | | Platforms: | |     | | | | | | Movement: | | Increase | | Unchanged | | Decrease | | | |  | |  | |  | ### 30 ### RISKS AND UNCERTAINTIES ### Strategic Report Principal Risk Principal Risk CYBER SUPPLY CHAIN AND MANUFACTURING RESILIENCE What is the risk? Strategic link What is the risk? Strategic link      Potential impact        Potential impact        Mitigation         Mitigation        FY23 progress Movement                   FY23 progress Movement DFS Furniture plc        Link to strategic pillars and platforms | Pillars: | 1 |  | 2 |  | 3 |  | | --- | --- | --- | --- | --- | --- | --- | | Platforms: | |     | | | | | | Movement: | | Increase | | Unchanged | | Decrease | | | |  | |  | |  | ### 31 ### RISKS AND UNCERTAINTIES ### Strategic Report Principal Risk Principal Risk MACROECONOMIC UNCERTAINTY ENVIRONMENTAL, SOCIAL AND GOVERNANCE What is the risk? Strategic link What is the risk? Strategic link     1   2   3 Potential impact Potential impact                Mitigation Mitigation                       FY23 progress Movement FY23 progress Movement                DFS Furniture plc Link to strategic pillars and platforms | Pillars: | 1 |  | 2 |  | 3 |  | | --- | --- | --- | --- | --- | --- | --- | | Platforms: | |     | | | | | | Movement: | | Increase | | Unchanged | | Decrease | | | |  | |  | |  | ### 32 ### RISKS AND UNCERTAINTIES ### Strategic Report Principal Risk Principal Risk RETENTION OF SKILLED WORKERS DUE TO LABOUR SHORTAGES CONSUMER PROPOSITION AND INDUSTRY COMPETITION What is the risk? Strategic link What is the risk? Strategic link     1   2  Potential impact 3 Potential impact             Mitigation      Mitigation                  FY23 progress Movement          FY23 progress Movement    DFS Furniture plc Link to strategic pillars and platforms | Pillars: | 1 |  | 2 |  | 3 |  | | --- | --- | --- | --- | --- | --- | --- | | Platforms: | |     | | | | | | Movement: | | Increase | | Unchanged | | Decrease | | | |  | |  | |  | ### 33 ### RISKS AND UNCERTAINTIES ### Strategic Report Principal Risk TRANSFORMATION What is the risk? Strategic link   1 Potential impact 2   3      Mitigation             FY23 progress Movement      DFS Furniture plc Link to strategic pillars and platforms | Pillars: | 1 |  | 2 |  | 3 |  | | --- | --- | --- | --- | --- | --- | --- | | Platforms: | |     | | | | | | Movement: | | Increase | | Unchanged | | Decrease | | | |  | |  | |  | ### 34 ### RISKS AND UNCERTAINTIES ### Strategic Report ### Viability Reporting Key Assumptions Results                               Approach                                          DFS Furniture plc                   ### 35 ### SECTION 172 STATEMENT ### Strategic Report Section 172(1) (a)-(f) of the Companies Act 2006 (‘Section 172(1)’) requires a director of a company to act in the way he or she considers, in good faith, ## would most likely promote the success of the company for the benefit of its members as a whole.             Engaging with our stakeholders           The likely The Board reviewed the progress made against the      consequences of Group’s Pillars and Platforms strategy and ensured     ## A | any decision in | that both decisions taken and future plans support |   |   |  | | --- | --- | --- | --- | --- | | the long term | the long-term success of the Group. |  |   |  | | | |   |   | 35 | | | |  |   |  | | | |  |   |  | The interests of Our colleagues are critical to the success of our business      our colleagues and the Board has ultimate responsibility for ensuring the     ## B Group’s decisions consider their interests. During the year      colleagues have taken part in our Voice forums held by     members of the Board to raise any concerns or issues     with them directly.                  DFS Furniture plc   The need to build Managing these relationships is critical in ensuring the      strong beneficial Group delivers on its strategy. We are committed to     ## C | relationships | bringing great design and comfort to our customers, |   |   |  | | --- | --- | --- | --- | --- | | with our |  |  |   |  | | customers and | We regularly engage with our suppliers to discuss how |  |   | 13 | | suppliers. | we can achieve our purpose. |   |   |  | | | |  |   |  | | | |   |   |  |   ### 36 ### SECTION 172 STATEMENT ### Strategic Report     The impact of the As a responsible business, the Group is committed to      company’s acting in the best interests of our communities and in     ## D operations on the a sustainable manner. We are committed to working     community and to lessen our impact on the environment and improve     the environment the communities in which we operate.               Committee the Group’s ESG strategy has clear targets   that aim to integrate sustainability throughout all aspects  of our business, to minimise any adverse impact we might have on the environment. The desirability We have strong internal governance processes and all      of the company our colleagues receive mandatory online training on Our     ## E maintaining a Code of Conduct, Data Protection, Modern Slavery, Cyber     reputation for    high standards of are required to comply with our supplier code of practice   business conduct which details our requirements for product quality, safety,  employee standards and anti-bribery and corruption policies. We seek to have a positive and constructive relationship with the regulatory bodies that authorise and regulate our business activities. The need to act The Board seeks to ensure Investors receive a fair and      fairly as between balanced return on their investment. During the year the     ## F members of the Board approved a £10m share buyback and paid investors      DFS Furniture plc company   policy of 1.5p. Throughout the year the Group has  continued to engage with our investors to ensure   their views and interests are taken into account  when making decisions.    ### 37 ### SECTION 172 STATEMENT ### Strategic Report The chart below demonstrates the Board process in considering Section 172(1) in its decision-making. S172 Statement of non-financial information   Board papers highlight information considering Section 172(1) matters              ## Board Information        page 36                   The Group’s culture helps ensure that there is proper    consideration of the potential impacts of decisions         ## Board Strategic Discussion                  DFS Furniture plc        Actions taken as a result of Board engagement   ## Board Decision  ### 38 ### RESPONSIBILITY AND SUSTAINABILITY REPORT ### Strategic Report ## “The Responsible and Sustainable Business ## A responsible and ## Committee remains focused on ensuring the ## business is supporting Our People, Our Planet, ## Our Customers and Our Communities.” ## sustainable business ###  ###  ###  ###                              DFS Furniture plc                     ### ALISON HUTCHINSON   ###   ###  ALISON HUTCHINSON ###   Chair of the Responsible and page 63 | |  | Sustainable Business Committee | | --- | --- | --- | | |  | Senior Non-Executive Director | | 39 |  | | ### RESPONSIBILITY AND SUSTAINABILITY REPORT ### Strategic ReportStrategic Report ## Our Pillars and Highlights ## Our People Our Planet Our Customers Our Communities              UNDERSTANDING DELIVERING EMISSION SUSTAINABLE SOURCING NEW CHARITY PARTNERSHIP OUR PEOPLE REDUCTION ## Home-Start  ## partnership providing ## 387 ## support direct to our  e ## more than 2 80% communities  ## >99%  SUPPORTING OUR CUSTOMERS  DFS Furniture plc     WINNING PRODUCT DESIGN ## -30 to +20 BUILDING A HEALTH & SAFETY ## CULTURE Launched fully INVESTING IN OUR PEOPLE ## circular sofa range Reduced accidents by ## and award-winning ## 20% ## recyclable seat ## 129 ##  cushions   ### 40 ### RESPONSIBILITY AND SUSTAINABILITY REPORT ### Strategic Report ## Our ESG Targets      ### Our Planet Sustainable sourcing     Sustainable sourcing     | Sustainable sourcing |  |  | | | | --- | --- | --- | --- | --- | | |  |  | | | | | | | Viscose | 78% |   Sustainable sourcing    Sustainable sourcing    Sustainable sourcing    Carbon reduction    2    15,297 t CO e 2 Carbon reduction   DFS Furniture plc ### Our People Inclusion and     Diversity Inclusion and    Female Male Diversity ### Our Community Charity    days  Charity    | | | Key |   | |  |  |   | | --- | --- | --- | --- | --- | --- | --- | --- | | | | | |  |  |  | | | 41 |  | | | | | | |  Cotton 87% Responded Upholstery Upholstery FY23 FY23 9.1% FY23 £660,000 FY23 40% FY23 40 FY23 FY23 100% 33:67 64% 51% 47% 27% FY22 FY24 Polyester 2 81% Home Home 53% 3% ### RESPONSIBILITY AND SUSTAINABILITY REPORT ### Strategic Report  ## Our commitment ## to our team Strategy summary        ## 20%        DFS Furniture plc   ##  64%          ## 24,000   ### 42 ### RESPONSIBILITY AND SUSTAINABILITY REPORT ### Strategic Report Inclusion Training Health and safety campaign    CASE STUDY       ## Our Driver       ##   School                         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               DFS Furniture plc          accessed by         ## 6,000              ## 22,600          Leaders programme ## 43 100+ ### RESPONSIBILITY AND SUSTAINABILITY REPORT ### Strategic Report  ## Our roadmap ## to the future    ## 387kt CO e ## 2 Reduced scope 1 & 2 emission intensity  DFS Furniture plc Strategy summary ## 26%        ## Over 80%         ## 70%   ### 44 ### RESPONSIBILITY AND SUSTAINABILITY REPORT ### Strategic Report Better sourcing Textiles                           Timber     Chemicals and waste             Leather          DFS Furniture plc                           ### 45 ### RESPONSIBILITY AND SUSTAINABILITY REPORT ### Strategic Report Our Net Zero strategy ## Net Zero Pathway  ### NET ZERO PATHWAY          ## CO 2  e (FY23)  2 PHASE 1 – FY24-29   Suppliers set their own  387,000t CO Net Zero targets    Suppliers engage their value chains while PHASE 2 – FY30-34 reducing their emission           DFS Furniture plc  PHASE 3 – FY35-39 Suppliers evolve  manufacturing methods  to support circular design      Replace legacy technolgy  Using sustainable with lower footprint  materials alternatives e (FY39/40) 2  Reducing our emissions Increase reuse and New circular retail models Fully circular products in operations recycling in operations and products and net zero operations 38 t CO S1 – 40-50% reduction S1 – 90% reduction S1 – Net Zero ### 46 (intensity) (intensity) S2 – Net Zero ## Net Zero | | S2 – Net Zero | | S2 – Net Zero | | S3 – 90% reduction | | | --- | --- | --- | --- | --- | --- | --- | | 2024 | | 2030 | | 2035 | | 2040 | | | S3 – Supplier Engagment | | S3 – 50% reduction | | | | ### RESPONSIBILITY AND SUSTAINABILITY REPORT ### Strategic Report Scope 1 & 2 progress                                                    DFS Furniture plc      Scope 3 progress and plan           ### 47 ### RESPONSIBILITY AND SUSTAINABILITY REPORT ### Strategic Report Scope 1 and 2 emissions Our Carbon Methodology   |  | | | |  | | --- | --- | --- | --- | --- | |  | | | |  | | | FY23 |  |  | | | | MWh |  |  |  |   27,006    18,717     41,304     5,698    256     200    Total energy consumption 93,181     |   | | | | | | |  | | --- | --- | --- | --- | --- | --- | --- | --- | | | |  | |   |  | |  | | | | | | 2 | 2 | | | | | | |  | | |  |  | | | |  | | |  | | | | | FY23  |      FY23  | | |    | | | Scope 1 & 2 emissions  15,297      1 10.7      1  104 223     2 0.1      5,684      4.0     Total scope 1+2 MB 15,401      10.8     Gross sales (£m) 1,423.6           DFS Furniture plc     Scope 3 emissions* | |  |   | |  | | --- | --- | --- | --- | --- | | | | 2 | | 2 | | |  | |  | | | FY23  |     FY23  | |     | |  320.0      224.8       3.7      2.6    11   5.2      3.6    4 3  36.7      25.8     32 | | 104 |  0.3      0.2    1 1 | 223 | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | | 1,697 | | 5,195 | | 6,189 | | 15,297 | |  0.5      0.3    1 1 16,215 | | 18,058 | | 17,462 | | 16,873 | |  4.8      3.4       0.6      0.4       0.0      0.0       0.1      0.1      Total scope 3 emissions 371.9      261.2      ### 48 2023YTD 2022 2021 2020 2019 ### RESPONSIBILITY AND SUSTAINABILITY REPORT ### Strategic Report   2 CASE STUDY A Circular Business   ## Award-winning     ##  product     ##  innovation                      CASE STUDY    ## Our first circular product range                DFS Furniture plc                                  ### 49 ### RESPONSIBILITY AND SUSTAINABILITY REPORT ### Strategic Report OUR CUSTOMERS ## Our customers, ## our commitment Strategy summary      ##  50 points   established customer NPS score      Quality DFS Furniture plc            ## ‘Excellent’        ### 50 ### RESPONSIBILITY AND SUSTAINABILITY REPORT ### Strategic Report   CASE STUDY   ## Sofology customer service  Ethical business   Code of Conduct                                            Data protection policy and cyber security                    DFS Furniture plc     ### 51 ### RESPONSIBILITY AND SUSTAINABILITY REPORT ### Strategic Report OUR COMMUNITIES ## Our commitment to ## helping everyone thrive Strategy summary            ##  >60   DFS Furniture plc    labour in their operations and value chain    ## 250     Donated to charity in FY23  ##  £660,000 ### 52 ### RESPONSIBILITY AND SUSTAINABILITY REPORT ### Strategic Report          ## Our Home-Start Partnership                                 Modern slavery                           DFS Furniture plc    ## DFS Group is a values driven business with people at the heart of ## everything we do. How we engage our teams, work with our suppliers, ## support our communities and lead our industry through change, ## always stems from our values – Think Customer, Aim High and Be Real. ## The challenges we face, particularly to address the escalating climate ## crisis, will rely on the passion and perseverance of our teams and partners, ## but we’re confident we can achieve our ambitions, working together. ### 53 ### RESPONSIBILITY AND SUSTAINABILITY REPORT ### Strategic Report ## TCFD We are committed to building a sustainable business model, both in terms of our impact on the environment and Our progress in FY23 ## preserving our long-term success as a Group. As climate reporting continues to evolve along with the pressing    ## nature of climate change issues, so does our performance and strategic reporting. To further align with the  TCFD framework, we have completed our climate scenario analysis, as described in the Strategy section below.                     ### DFS Furniture plc Area of focus in FY24       Compliance Statement                    ### 54 ### RESPONSIBILITY AND SUSTAINABILITY REPORT ### Strategic Report Governance    Ga) Board oversight of climate-related risks    and opportunities      Low Carbon World scenario (1.5°C) ### Strategy    Sa&b) climate-related risks and opportunities over    short, medium, and long term and its impact to our   Gb) Role of management in assessing businesses, strategy, and financial planning.   and managing climate-related risks    and opportunities.           2           Hot House World scenario (4°C)            1                                            Sc) Resilience of strategy, taking into     consideration different climate related scenarios,    including a 2°C or lower scenario    Intergovernmental Panel on Climate Change  DFS Furniture plc    (IPCC)    2                      International Energy Agency (IEA) scenarios                   NGFS (Network for Greening the Financial  Looking ahead System) scenarios                   2 ### 55  ### RESPONSIBILITY AND SUSTAINABILITY REPORT ### Strategic Report ### Risk Management  Ra) Processes for identifying and assessing  climate-related risks               ###  Metrics and Targets  Ma) Metrics used to assess climate-related risks  and opportunities in line with our strategy and  risk management process            Rb&c) processes for managing climate-related  risks and the integration with our overall risk  management framework              DFS Furniture plc   Mb) Scope 1, scope 2, and, scope 3 greenhouse  gas (GHG) emissions    Mc) Targets used to manage climate related risks,  opportunities and performance                      ### 56 ### RESPONSIBILITY AND SUSTAINABILITY REPORT ### Strategic Report Risk type: Scenarios: Risk rating: P  T  M  R  Ph        Short term risk and opportunities # Risk Risk/opportunities description Indicator Risk rating Our response 1 Mandates and regulation on our products         P        2 Carbon pricing          P  3 Climate change litigation          RPP      DFS Furniture plc            ### 57 ### RESPONSIBILITY AND SUSTAINABILITY REPORT ### Strategic Report Risk type: Scenarios: Risk rating: P  T    R  Ph       # Risk Risk/opportunities description Indicator Risk rating Our response 4 Building code requirements          P       5 Investment Risk         R     Medium to long term risk and opportunities # Risk Risk/opportunities description Indicator Our response 1 Transition to lower emission technology    and maintaining a circular system.        T            DFS Furniture plc             2 Increased cost of raw materials         ### 58 ### RESPONSIBILITY AND SUSTAINABILITY REPORT ### Strategic Report Risk type: Scenarios: Risk rating: P  T    R  Ph       # Risk Risk/opportunities description Indicator Risk rating Our response 3 Shift in customer values                   4 Cost of capital          5 Physical risk            Ph      5 Physical risk           DFS Furniture plc  Ph         ### 59 ### RESPONSIBILITY AND SUSTAINABILITY REPORT ### Strategic Report SUSTAINABILITY GOVERNANCE 2023 ### OUR BOARD The board is responsible for ensuring the Group meet their corporate governance requirements and the ESG strategy is robust and aligned with the Group’s strategic objectives. Nine meetings per annum ### Responsible and Sustainable Business Committee (RSC) Audit Committee ### OversightManagement roles        Three meetings per annum Three meetings per annum ###   in the day-to-day operations and assess the progress against targets, while ensuring that sufficient oversight, guidance, support and resource are available. Monthly meetings DFS Furniture plc ### Group Steering Committees (inclusion and sustainability) Group Sustainability and ESG meeting          Monthly meetings Quarterly meetings ### SUSTAINABILITY CHAMPIONS AND INCLUSION COUNCIL We want to empower our colleagues to drive change and improvements in both environmental and social areas. The goal of these councils is to educate and engage the wider population as well as support business initiatives and generate ideas. Bi-monthly meetings ### 60 ### RESPONSIBILITY AND SUSTAINABILITY REPORT ### Strategic Report TCFD CONSISTENCY INDEX MATERIALITY ASSESSMENT       Governance         Strategy             Risk   Management       Importance to external stakeholders Metrics and   Impact to DFS Targets   Area Definition Area Definition  GHG emissions  Inclusion & diversity   (scope 1, 2, 3)      Deforestation &  DFS Furniture plc  biodiversity  Data protection   and cyber risk     Customer satisfaction    & product quality   Colleague  Material usage  engagement      Talent &   A circular approach  development      Health, safety  ### TIM STACEY  & wellbeing  Chief Executive Officer   Sustainable  Plastics, packaging  sourcing  & waste  ### JOHN FALLON    Chief Financial Officer Supply chain  Community  traceability &  engagement  transparency  & investment   ### 61 M G E L D K H N F C N M J I A B C K A B L F E H G D J I ### Governance ### This section introduces our CONTENTS ### Directors, and details the   ## Governance activities of our Board and     ### Board Committees.          ## report    DFS Furniture plc ### 62 ### DIRECTORS AND OFFICERS ### Governance STEVE JOHNSON TIM STACEY JOHN FALLON ALISON HUTCHINSON CBE NR S – A NR S Non-Executive Chair Chief Executive Officer Chief Financial Officer Senior Independent Non-Executive Director Date of joining DFS Date of joining DFS:  Date of joining DFS: Date of joining DFS:  Experience: Experience: Experience: Experience:                                        Qualifications: Qualifications: Qualifications: Qualifications: DFS Furniture plc –  –  –  –     –  –    External appointments: External appointments: External appointments: External appointments: –  –  –  –  –   –   Independent: Independent: Independent: Independent: –   –  –  –   Committee membership key A  N  R  S   –  ### 63  ### DIRECTORS AND OFFICERS ### Governance JO BOYDELL LORAINE MARTINS OBE GILL BARR LIZ MCDONALD A NR A NR S A NR S Non-Executive Director Non-Executive Director Non-Executive Director Group General Counsel Designated Non-Executive Director and Company Secretary for Workforce Engagement Date of joining DFS Date of joining DFS:  Date of joining DFS: Date of joining DFS: Experience: Experience: Experience: Experience:                                         Qualifications: Qualifications: Qualifications: Qualifications: DFS Furniture plc                      External appointments: External appointments: External appointments: External appointments:               Independent: Independent: Independent: Independent:            Committee membership key A  N  R  S   –  ### 64  ### CORPORATE GOVERNANCE REPORT ### Governance  Our commitment to good governance ## “Ensuring that we are an agile organisation     ## that is able to respond to changing market   conditions and stakeholder needs is     ## a key focus of the Board.”                  2023 AGM              ###  STEVE JOHNSON  Chairman    Board activities in 2023 at a glance   Assessing the operating and long term Our Board in 2023 DFS Furniture plc financial planning, budgeting and the  performance and strategy of the Group,    environment and market expectations   Designing the new Capital allocation  and Distribution policy    Overseeing stakeholder communications   Internal Board Evaluation and a review  of Board composition and skills   Overseeing the strategic changes in our  manufacturing operations    The induction of the new Chief Financial  ### STEVE JOHNSON Officer, John Fallon, and a new Non-  Executive Director, Gill Barr ###  page 63 ### 65 ### CORPORATE GOVERNANCE REPORT ### Governance ### Governance at a glance ### DFS Furniture plc Board Governance framework Audit Remuneration Nomination Responsible & Sustainable ###  Committee Committee Committee Business Committee          ###     ###          ###   pages 71 to 75  pages 78 to 99  pages 76 to 77 pages 39 to 61 ###  Chief Executive ###  Responsible for the day-to-day running of the Group’s business and performance, the development and implementation of strategy and promoting our culture and standards. ###  Group Leadership Team ###    Group financial and operational performance and executing on the strategic initiatives required to deliver the Group’s strategy set by the Board. ###  Governance, Risk & Compliance Committee Brand ESG Committees ###      implementation of the People, Planet, Customer and Communities strategy.   Role of the Chair and Chief Executive Officer   Role of the Chair Role of the Chief Executive Officer Role of the Senior Independent Director (‘SID’) Role of the Company Secretary     DFS Furniture plc                                           ### 66 ### CORPORATE GOVERNANCE REPORT ### Governance ### Governance at a glance Appointment, election and re-election   Gender Diversity Ethnicity      1    3 3 3   4 4 4 Independence   6                        Customer People,  Skills and Services/ Diversity & Governance & DFS Furniture plc experience Retail Marketing Inclusivity Operations International Regulatory Finance Digital M&A Environmental Logistics Manufacturing      Directors’ skills and experience           ### 67 ### CORPORATE GOVERNANCE REPORT ### Governance ### Governance at a glance Board meeting attendance  Meetings Maximum Date of  Name attended meetings Independent Responsibility and role during 21/22 appointment  CHAIRMAN  Chairman 3 3    Chairman       EXECUTIVE DIRECTORS  CEO           CFO 2 2      CFO 4 4    NON-EXECUTIVE DIRECTORS  (SID)                           3 3   External appointments STANDING ATTENDEES       Company Secretary   ATTENDED BY INVITATION   3   2   2   2   3 DFS Furniture plc  3 Committee meetings            2 3 3 1  3 4 4 3  3 4 4 3  3 4 4 3    2 2 1 2   1 1 1 1     3 4 4 2    3 4 4 3   3 4 4 3    1 1 1 1 ### 68 ### CORPORATE GOVERNANCE REPORT ### Governance How the Board operates Directors’ indemnities and conflicts Stages of our Board evaluation   Stage 1 Stage 2 Stage 3                            Results overview                                             New Directors induction         Board action plan for FY24           UK Corporate Governance Code 2018    Compliance statement           Board Evaluation  DFS Furniture plc                ###  Understand    ### their duties                 ###  Meet the ###  colleagues        ### Visit the business   ### 69 ### CORPORATE GOVERNANCE REPORT ### Governance Shareholder engagement External auditor                Internal audit        Remuneration                 DTR Disclosure  Interaction with all shareholders               DFS Furniture plc  ### ELIZABETH MCDONALD                 ### 70 ### AUDIT COMMITTEE REPORT ### Governance  Composition                                                     DFS Furniture plc         ## “The primary responsibilities of the Committee  ## remain the oversight of the Group’s external  ## financial reporting, internal controls and risk   ## management, and the effectiveness of both the Key activities during FY23   Embedding of new risk management  ## internal audit function and the external audit.” technology introduced in FY22    Continued focus on the Group’s ### JO BOYDELL  approach to UK audit and corporate ###   governance reform  page 64 ### 71 ### AUDIT COMMITTEE REPORT ### Governance Performance evaluation Internal controls and risk management:  Significant issues considered in relation to the     financial statements                           Roles and responsibilities   Viability            Financial reporting:   Activities of the Audit Committee                    Fair, balanced and understandable    Financial Reporting   Financial Statements                     Internal and external audit:     DFS Furniture plc                         ### 72 ### AUDIT COMMITTEE REPORT ### Governance Impairment of goodwill  External Audit  Assessment of effectiveness of the external    audit process       Safeguarding objectivity and independence    relative to non-audit services                        Prohibited       Going concern and viability reporting    Permissible (subject to approval limits)                     Services to be considered on a case-by-case   basis                      Parent company investments      DFS Furniture plc                            Independence assessment by the Audit   Committee           Appointment of the external auditor          ### 73 ### AUDIT COMMITTEE REPORT ### Governance                                   Internal Audit                               Internal control and risk management                           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                                         | |  | | |  | | --- | --- | --- | --- | --- | | | |  |  | | | 74 |  | | |  | ### AUDIT COMMITTEE REPORT ### Governance    Business ethics Accountability                                          ###  JO BOYDELL     Chair of the Audit Committee                                     Whistleblowing      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      ### 75 ### NOMINATION COMMITTEE REPORT ### Governance          CFO Succession            Chair Succession                      NED Appointment        Key activities during FY23  DFS Furniture plc   Conducted the search for, consideration  of, and recommendation to the Board of  the appointment of the new Chair   Recommending the appointment of the ## “This year, the Nomination Committee focused  Chief Financial Officer  ## on the appointment of the new CFO, and  Recommending the appointment of the  new Non-Executive Director and Chair of ## strengthening the Board with the appointment  the Remuneration Committee  ## of an additional Non-Executive to continue to  Recommending the appointment of  ## support the long term strategy of the Group.” Non-Executive Director  Reviewing the pipeline of talent within the ### STEVE JOHNSON  ###  their development needs page 63 ### 76 ### NOMINATION COMMITTEE REPORT ### Governance Composition ‘Everyone Welcome’ What we will do in 2024                                                             ###   STEVE JOHNSON  Chair of the Nomination Committee Board Evaluation      Principle Duties          DFS Furniture plc                ### 77 ### DIRECTORS’ REMUNERATION REPORT ### Governance Contents of this report ## Part A: Annual statement 78 Part A: Annual statement by the ## by the Remuneration Remuneration Committee Chair 81 Part B: Remuneration at a glance ## Committee Chair 82 Part C: Our remuneration philosophy and workforce reward 84 Part D: Remuneration policy On behalf of the Board, I am pleased to present the 90 Part E: Annual Report on Remuneration Remuneration Committee report for the financial year ended 25 June 2023, my first as Chair of the Remuneration Committee having joined the Board and the Committee in March 2023. I would like to thank my predecessor, Steve Johnson, for his guidance and support as I transitioned into the role. The Remuneration Report provides a comprehensive picture of the structure of our remuneration framework, its implementation and its alignment with the business strategy. In addition, we explain the impact on the rest of the workforce, and the decisions made by the Committee as a result of the Group’s performance in FY23. Finally, we share the intended arrangements for FY24. As this was not a policy renewal year, we have included a summarised version of directors’ | Key activities during FY23 | | remuneration policy. The full report as approved by | | --- | --- | --- | | – Approving the recruitment arrangements | | shareholders at the 2021 AGM can be accessed | | | for our new Chief Financial Officer, John | online: https://www.dfscorporate.co.uk/investors/ | | | Fallon, and the termination arrangements | annual-report-2021. | of his predecessor | DFS Furniture plc | | Remuneration in context | | --- | --- | --- | | | – Determining outturns for incentives in | The Committee were delighted by the positive | | | respect of FY23, taking into consideration | voting outcome for the annual report on | | | the experience of key stakeholders over | remuneration at the 2022 AGM which received | | | the period | 91.8% votes in favour. We would like to thank our | | | – Assessing the competitiveness of | shareholders for their continued support, and we | | | executive director remuneration | look forward to engaging with our shareholders | ## “The Committee seeks to ensure a clear arrangements during FY24 as part of the triennial review of ## link between Executive Directors’ pay, directors’ remuneration policy ahead of it being – Setting performance targets for FY24 put to vote at the 2024 AGM. incentives ## the delivery of our strategy and – Consideration of market trends and FY23 has been another challenging year. The ## enhancement of shareholder value.” governance updates well-publicised global macroeconomic challenges impacted overall market volumes, which were – Consideration of pay and conditions down c.15% compared to pre-pandemic levels, ### GILL BARR across the wider workforce but the Group achieved record market share of 38%. ### Chair of the Remuneration Committee The Group benefited from the its leading brands, page 64 ### 78 ### DIRECTORS’ REMUNERATION REPORT ### Governance  Colleague experience Pay outcomes in FY23 LTIP vesting in respect of FY23   Base salary increases in FY23  2              2                  | |  | |  | | --- | --- | --- | --- | |  | | Annual Bonus in FY23 | | |  |  |  | Committee consideration of incentive outturns | | |  |  | in the context of stakeholder experiences and | Group performance   overall Group performance            1                          1 Base salary for FY24             Shareholder experience                      DFS Furniture 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                          ### GILL BARR   Chair of the Remuneration Committee             Annual Bonus for FY24    Management changes             DFS Furniture plc                     ### 80 ### DIRECTORS’ REMUNERATION REPORT ### Governance Key implementation decisions for FY23 ## Part B: Remuneration at a glance  Overview of remuneration policy Annual bonus Element Policy Performance measure Weighting Achievement (% max)        1                             1    Our compliance with the 2018 UK Corporate Governance Code (‘the Code’)  Key Element of the 2018 Code How is this considered within DFS’s remuneration framework?   LTIP   Performance measure Weighting Achievement                          Implementation of policy for FY24 DFS Furniture plc  Element Implementation                                  ### 81   ### DIRECTORS’ REMUNERATION REPORT ### Governance Remuneration in the wider context ## Part C: Our Remuneration Philosophy and Workforce Reward   Our remuneration philosophy & Principles                       Aligned to our business strategy Supports a high-performance sales  Fair, market competitive pay and benefits and culture and service culture                                              DFS Furniture plc                     ### 82 ### DIRECTORS’ REMUNERATION REPORT ### Governance Cascade of remuneration across the group  Annual bonus or incentive / | | Employee | | | Fixed | commission | | Restricted | | Long-term | All employee | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Level | numbers | | remuneration | | | plans | share plan | incentive plan | | HMRC plans | |  | | 5 | | | | | | | | |          Annual bonus and Base salary Pension & benefits recognition awards LTIP, RSP & SAYE                                       DFS Furniture plc                            ### 83 ### DIRECTORS’ REMUNERATION REPORT ### Governance ## Part D: Remuneration Policy Benefits  Operation              Remuneration principles                Maximum opportunity       Performance measures/assessment and recovery provisions          Pension  Executive Remuneration Policy Table Operation Base salary        Operation   Maximum opportunity    DFS Furniture plc            Performance measures/assessment and recovery provisions      Maximum opportunity          Performance measures/assessment and recovery provisions     ### 84 ### DIRECTORS’ REMUNERATION REPORT ### Governance Annual bonus Long-term incentive plan   Operation    Operation                       Maximum opportunity    Maximum opportunity        Performance measures/assessment and recovery provisions          Performance measures/assessment and recovery provisions               Minimum shareholding requirements DFS Furniture plc  Operation      Maximum opportunity     Performance measures/assessment and recovery provisions   ### 85 ### DIRECTORS’ REMUNERATION REPORT ### Governance Illustrations of application of Policy All-employee incentives    Operation        Maximum opportunity      Performance measures/assessment and recovery provisions £2.5m   £2,006,000 £2.0m £1,690,004 54% £1.5m 44% £1,412,034 £1,356,000 49% 39% 39% £971,253 £1.0m | | | 30% | 25% | | 34% | | | | --- | --- | --- | --- | --- | --- | --- | --- | | £531,000 | 22% | | | | | 31% | 26% | | | | | | £419,284 | 22% | | | £0.5m 100% 39% 26% 22% 100% 43% 30% 25% £0 Minimum On-target Maximum Maximum Minimum On-target Maximum Maximum with share with share £2,443,500 price growth price growth DFS Furniture plc Tim Stacey (CEO) John Fallon (CFO)         ### 86 ### DIRECTORS’ REMUNERATION REPORT ### Governance  Element Policy description                                             Approach to recruitment and promotions                               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                 ### 87 ### DIRECTORS’ REMUNERATION REPORT ### Governance Executive Director service contracts             1 Consideration of employee remuneration and shareholders    Consideration of shareholder views            Payments for loss of office Consideration of employee views and employment conditions elsewhere in the Group                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  ### 88 ### DIRECTORS’ REMUNERATION REPORT ### Governance Non-executive Director Remuneration Policy Letters of appointment Remuneration Policy table           Purpose   Date of appointment Operation                                   Maximum opportunity      Performance measures/assessment and recovery provisions     DFS Furniture plc               ### 89 ### DIRECTORS’ REMUNERATION REPORT ### Governance Performance against objectives ## Part E: Annual Report on Remuneration for the Financial Year Maximum Outcome ## ended 25 June 2023 Performance measure Weighting Threshold (0%) Target (100%) (% of max)       | Single total figure of remuneration for Executive Directors – audited | | | | | | | | | | | | |  |      | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | |  | | | | | | | | | | | | |  | | |  | | | | | | | | | | | | |  |      | |  | | | | | | | | | | | | |  | | | |  |  | | | | | | | |  | |  |  | | | | | | 1 | | 2 | | 3 | | 4 | | | | | | |   |  |  | |   | |  | |  | |  |   | | | |     Tim Stacey 2023 453 11 170 – 30 1 495 170 665        443    44 2     John Fallon 2023 240 – 80 – 8 38 286 80 366  | |           |  | | | --- | --- | --- | --- | | Mike Schmidt 2023 110 6 – – 7 1 124 – 124 | |  |      | | |  332 14    4    |  |      |                                   Annual Bonus outturn for FY23 – Audited    DFS Furniture plc   ### 90 ### DIRECTORS’ REMUNERATION REPORT ### Governance Detail of performance against personal objectives      CEO – Tim Stacey                                                CFO – John Fallon                                  DFS Furniture plc ### 91 ### DIRECTORS’ REMUNERATION REPORT ### Governance | LTIP awards vesting in relation to performance in FY23 – audited | | | | | | | | | Scheme interests awarded in FY23 (2022 awards) – audited | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | |  | | | | | | | | |  | | | | | | | | |  | | | | | | | | |  | | | | | | | | | | | | | | | | | | | | |  | |  |  | | | | | | | | | | | |    | | | |  |  | |  | | | Performance | Weighting | Entry level | | | Max | | Actual | | | | | | | | | | LTIP award | conditions | (% award) Detail | performance | | performance | | performance Vesting % | | | 1 | | | | | | | | | | | | | | | | |   | |     | | | | | | |     | | | |     | | | | | | 2 | | | | | | | | | | | | | | | | |   | |     | | | | | |                            Performance conditions for FY23 (2022 award) LTIP    Adjusted EPS (50%)  Percentage of this portion of the Award vesting      Total 0%  vesting      Relative TSR (50%)  Percentage of this portion of the Award vesting                             DFS Furniture plc      ### 92 ### DIRECTORS’ REMUNERATION REPORT ### Governance SAYE awards – audited  Details of LTIP award performance conditions (where not disclosed elsewhere in report) Performance Weighting Entry level Target Max Threshold level LTIP award conditions (% award) Detail performance performance performance vesting Target vesting Maximum vesting                                   Dilution   Payment to past directors – audited  Payment for loss of office – audited  Single figure remuneration table for Non-Executive Directors – audited   Director Fees Other Total 1  2023 21 – 21     2 DFS Furniture plc  2023 96 1 97   1   2023 74 – 74      2023 64 – 64     3  2023 148 – 148     4  2023 54 – 54  52  52  2023 54 – 54  52  52          ### 93 ### DIRECTORS’ REMUNERATION REPORT ### Governance Shareholding and other interests at 25 June 2023 Number of Number of shares under Shareholding – audited | | | | beneficially | | the Deferred | | % of salary | | | requirement | | | Subject to | | Not subject to | | Vested but | | Unvested | | Total at | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | |  | | | | 1 | | 2 | | | 3 | | | 3 | | 4 | | | | | | | | | | Director | owned shares | | | Bonus Plan | | | held | | | met | | conditions | | | conditions | unexercised | SAYE awards | | 25 June 2023 | |                        5                       5                       5                                          Total 945,884 35,961 – – 1,373,212 – – – 2,355,057              Outstanding share awards  Number of Outstanding Market price on Normal 1 Director Type of award Date of grant awards Award vested Awards lapsed awards date of grant vesting date                  DFS Furniture plc                                      ### 94 GREENSBORO DFG Furniture plc Annual Report & Accounts 2023 95 # DIRECTORS' REMUNERATION REPORT CONTINUED ## Remuneration of CEO role versus wider company performance since IPO The chart below illustrates the Group's Total Shareholder Return performance against the FTSE250 Index and FTSE 350 General Retailers Index since 5 March 2015, the date of IPO, to the end of FY23 (25 June 2023). The peer groups here represent the Company's key markets for investment capital. ![img-3.jpeg](img-3.jpeg) The table below indicates the total single figure of remuneration for the CEO since IPO, along with the annual bonus payout and LTIP vesting level as a percentage of the maximum opportunity. | | FY23 Tim Stacey | FY22 Tim Stacey | FY21 Tim Stacey | FY20 Tim Stacey | FY19 Tim Stacey | FY18 Jan Fifty | FY17 Jan Fifty | FY16 Jan Fifty | FY15 Jan Fifty | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | CEO | | | | | | | | | | | Single Figure | **665** | 496 | 1,999 | 568^{1} | 464 | 374 | 673 | 666 | 804 | | Annual Bonus (% of max) | **31.1%** | 0% | 100% | 0%^{2} | 26.2% | 32.2% | 36% | 37.5% | 71.9% | | LTIP vesting (% of max) | **0%** | 0% | 100% | 0% | 28.6% | 28.6% | 0% | 0% | n/a | Notes: 1. Tim Stacey became CEO and Executive Director on 1 November 2018. 2. This Committee applied downward discretion to override the formulae, outcome of the FTSE annual bonus to zero. 3. Tim Stacey's single figure for FTSE includes an award under the DFG Restricted Share Plan which was made to the CEO prior to his appointment as an Executive Director. The award had a value of $97.7k and vested on 16 November 2018. ### DIRECTORS’ REMUNERATION REPORT ### Governance Percentage change in the Directors’ FY19 – FY20 FY20 – FY21 FY21 – FY22 FY22 – FY23 remuneration Base Annual Base Annual Base Annual Base Annual 1 Annual % change salary Benefits bonus salary Benefits bonus salary Benefits bonus salary Benefits bonus                 2                 2                                                                                                            DFS Furniture plc ### 96 ### DIRECTORS’ REMUNERATION REPORT ### Governance Relative Importance of spend on pay ESG (10% of the award)     Significant distributions 2023 2022 % change   £202.5m   Percentage of this portion of the Award vesting  £43.0m   Between 20% and 100%  Measure Weighting Nil 20% 100% on a straight line basis        | |  |  | | --- | --- | --- | | Statement of implementation of remuneration policy in FY24 |  | | | Base salary |  | | |  |  | |              Underlying EPS (45% of the award) Pension and benefits        Annual bonus           Percentage of this portion of the Award vesting  Above Nil and Between 20% Between 60% DFS Furniture plc up to 20% on a and 60% on and 100% on LTIP straight-line a straight-line a straight-line  Measure Nil 20% 60% 100% basis basis basis                Relative TSR (45%) Percentage of this portion of the Award vesting Between 20% and 100% on a straight | Measure and weighting Nil 20% 100% | | | | -line basis | | --- | --- | --- | --- | --- | |   | |  |  |  | | |  |  |  |  | | | | |  |  | |  |  |  |  |  | |  |  |  |  |  | | |  |  |  |  | | | | |  |  | ### 97 ### DIRECTORS’ REMUNERATION REPORT ### Governance Non-Executive Director fees CEO pay ratio     Gender pay gap reporting and diversity and inclusiveness initiatives  Gender pay gap reporting                                      Inclusivity and diversity    CEO Pay Ratio Data  25th 50th 75th Year Method Measure CEO percentile percentile percentile   DFS Furniture plc 2023 Option B Pay Ratio 27:1 18:1 18:1   Salary £453,200 £22,907 £32,606 £33,032 Total pay and benefits £665,037 £24,377 £36,407 £37,032                                                                     ### 98  ### DIRECTORS’ REMUNERATION REPORT ### Governance Matters covered during the Committee’s meetings in FY23 Internal and external support for the Committee                    July Sep Oct Mar  Matter 2022 2022 2022 2023   ### •   ### • ###  GILL BARR ### • • Chair of the Remuneration Committee  ### •   ### •  ### •   ### •   ### •  ### •  ### • •   ### •  ### • DFS Furniture plc   ### 99 ### DIRECTORS’ REPORT ### Governance  Shareholder and voting rights Directors ###     ###             ###    | | |  |  | | | --- | --- | --- | --- | --- | |  |  12 |  | |  | | |   | | |  |  ###        1 ###  Steve Johnson       ###       ###   43 Ian Durant     53     43        Tim Stacey              |  |  52 | |  | John Fallon  | |  | | --- | --- | --- | --- | --- | --- | --- | |  |   | |  | |  |  | |  |  | 54 |  | | |  | |  |  | |  | Mike Schmidt  | |  | |  | | |  | |  |  | |  | Annual General Meeting (‘AGM’) | |  | | |  | |  |  | | | Alison |  |  | |  |  | | | Hutchinson |  |  | |  |  | | | |  |  | |  |  | | | | | | | | | | | Jo Boydell  | |  | |  |  | | | | | | | | | | | |  |  | |  |  | | | | | | | | | | | |  |  | DFS Furniture plc   Jane Bednall           Loraine Martins        Gill Barr         ### 100 ### DIRECTORS’ REPORT ### Governance Articles of Association Directors’ indemnities and insurance Substantial Shareholders                    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 Number of Ordinary % voting Date of    Investor Shares rights notification                   Conflicts of interest         15                      Share Buyback              Directors’ service contracts         Dividends                  DFS Furniture plc                   Takeover directive information    Authority to purchase own shares                       Shares         Authority to allot shares                 ### 101 ### DIRECTORS’ REPORT ### Governance  Independent auditors          Change of control            Going concern                           Subsequent events                     Significant relationships             DFS Furniture plc   Donations ###  Disclaimer ELIZABETH MCDONALD      Public Policy          Treasury and risk management         ### 102 ### STATEMENT OF DIRECTORS’ RESPONSIBILITIES IN RESPECT OF THE ANNUAL REPORT ### Governance ### AND THE FINANCIAL STATEMENTS    Responsibility statement of the directors in    respect of the annual financial report                                                                           ###  TIM STACEY   Chief Executive Officer       ### JOHN FALLON   Chief Financial Officer   DFS Furniture plc     ### 103 ### INDEPENDENT AUDITOR’S REPORT ### Governance ### TO THE MEMBERS OF DFS FURNITURE PLC | 1. Our opinion is unmodified | In our opinion: | | Basis for opinion |  | | | | | --- | --- | --- | --- | --- | --- | --- | --- | |  |   | |  | Materiality | | |  | |  | |  |  |  | |  | | |  | |  |  |  |  | | | |  | |  |  |  | | |  | |  | | |  | | |  | |                            Coverage                     Key audit matters  Recurring risks        DFS Furniture plc   ### 104 ### INDEPENDENT AUDITOR’S REPORT ### Governance 2. Key audit matters: our assessment of risks of material misstatement      The risk Our response Impairment of goodwill Forecast-based assessment             Historical comparisons:     Benchmarking assumptions:       Sensitivity analysis:      Our sector experience:       Comparing valuations:     Assessing transparency:    Our results   DFS Furniture plc     ### 105 ### INDEPENDENT AUDITOR’S REPORT ### Governance The risk Our response Going Concern Disclosure quality                      Funding assessment:       Historical comparisons:     Benchmarking assumptions:    Sensitivity analysis:          Evaluation of directors’ intent:       Assessing transparency:         DFS Furniture plc  ### 106 ### INDEPENDENT AUDITOR’S REPORT ### Governance The risk Our response Recoverability of the parent’s Low risk, high value  investment in subsidiaries and   receivables from other group   companies   Tests of detail:                           Assessing subsidiary audits:    Our results     DFS Furniture plc ### 107 ### INDEPENDENT AUDITOR’S REPORT ### Governance | 3. Our application of materiality and an |  | Normalised Group profit before tax | Group materiality | | --- | --- | --- | --- | | overview of the scope of our audit |  |  |  | |  |  | | | |  |  | | £2.5m |        £1.85m      £2m        £0.125m  Normalised PBT   Group materiality        Group revenue from   continuing operations       99% 98% 91% (2022: 99%) (2022: 92%) (2022: 94%)        Full scope for group audit purposes 2023 DFS Furniture plc   Full scope for group audit purposes 2022          from continuing operations       ### 108   Residual components ### INDEPENDENT AUDITOR’S REPORT ### Governance 4. Going concern 5. Fraud and breaches of laws and regulations    – ability to detect     Identifying and responding to risks of material    misstatement due to fraud                                                Identifying and responding to risks of material   misstatement due to non-compliance with     laws and regulations                          Context of the ability of the audit to detect     fraud or breaches of law or regulation                       DFS Furniture plc                                                                ### 109  ### INDEPENDENT AUDITOR’S REPORT ### Governance 6. We have nothing to report on the other Disclosures of emerging and principal risks Corporate governance disclosures 7. We have nothing to report on the other information in the Annual Report and longer-term viability  matters on which we are required to report    by exception                                                                Strategic report and directors’ report                                 Directors’ remuneration report        DFS Furniture plc               ### 110 ### INDEPENDENT AUDITOR’S REPORT ### Governance 8. Respective responsibilities 9. The purpose of our audit work and to whom Directors’ responsibilities we owe our responsibilities                        ###  FRANCES SIMPSON  (Senior Statutory Auditor)  Auditor’s responsibilities Chartered Accountants                 DFS Furniture plc          ### 111 ### Financial Statements ### This section presents details of CONTENTS ### the Group’s and the Company’s 113 Consolidated income statement ### financial performance and 114 Consolidated statement of comprehensive income ## Financial position as at 25 June 2023. 115 Consolidated balance sheet 116 Consolidated statement of changes in equity     151 Company balance sheet 152 Company statement of changes in equity   ## stateme nts 156 Financial history 157 Shareholder information DFS Furniture plc ### 112 Financial Statements DFB Furniture plc Annual Report & Accounts 2023 # **CONSOLIDATED INCOME STATEMENT FOR 52 WEEKS ENDED 25 JUNE 2023** (52 WEEKS ENDED 26 JUNE 2022) | | Note | 52 weeks to 25 June 2023 | | | 52 weeks to 26 June 2022 | | | | --- | --- | --- | --- | --- | --- | --- | --- | | | | Underlying £m | Non-underlying £m | Total £m | Underlying £m | Non-underlying £m | Total £m | | **Gross sales^{1}** | 1, 2 | **1,423.6** | | **1,423.6** | 1,474.6 | – | 1,474.6 | | **Revenue** | 2 | **1,088.9** | – | **1,088.9** | 1,149.8 | – | 1,149.8 | | Cost of sales | | **(496.7)** | – | **(496.7)** | (543.9) | – | (543.9) | | **Gross profit** | | **592.2** | – | **592.2** | 605.9 | – | 605.9 | | Selling and distribution costs | | **(364.6)** | – | **(364.6)** | (368.0) | – | (368.0) | | Administrative expenses | | **(70.2)** | 0.5 | **(69.7)** | (62.0) | (0.4) | (62.4) | | **Operating profit/(loss) before depreciation, amortisation and impairment** | 3 | **157.4** | 0.5 | **157.9** | 175.9 | (0.4) | 175.5 | | Depreciation | | **(80.5)** | – | **(80.5)** | (77.7) | – | (77.7) | | Amortisation | | **(11.6)** | – | **(11.6)** | (10.5) | – | (10.5) | | Impairment | | **(2.0)** | – | **(2.0)** | – | – | – | | **Operating profit/(loss)** | 2, 3 | **63.3** | 0.5 | **63.8** | 87.7 | (0.4) | 87.5 | | Finance income | 5 | **0.2** | – | **0.2** | – | – | – | | Finance expenses | 5 | **(34.3)** | – | **(34.3)** | (28.8) | – | (28.8) | | **Profit/(loss) before tax** | | **29.2** | 0.5 | **29.7** | 58.9 | (0.4) | 58.5 | | Taxation | 6 | **(6.6)** | (0.1) | **(6.7)** | (14.3) | – | (14.3) | | **Profit/(loss) for the period from continuing operations** | | **22.6** | 0.4 | **23.0** | 44.6 | (0.4) | 44.2 | | Profit/(loss) for the period from discontinued operations | 29 | **(0.3)** | 3.5 | **3.2** | (1.5) | (11.3) | (12.8) | | **Profit/(loss) for the period** | | **22.3** | 3.9 | **26.2** | 43.1 | (11.7) | 31.4 | | **Earnings per share** | | | | | | | | | Basic | 7 | | | | | | | | – from continuing operations | | **9.6p** | 0.2p | **9.8p** | 17.5p | (0.2)p | 17.3p | | – from discontinued operations | | **(0.2)p** | 1.5p | **1.3p** | (0.6)p | (4.4)p | (5.0)p | | **Total** | | **9.4p** | 1.7p | **11.1p** | 16.9p | (4.6)p | 12.3p | | Diluted | 7 | | | | | | | | – from continuing operations | | **9.5p** | 0.2p | **9.7p** | 17.4p | (0.2)p | 17.2p | | – from discontinued operations | | **(0.2)p** | 1.5p | **1.3p** | (0.6)p | (4.4)p | (5.0)p | | **Total** | | **9.3p** | 1.7p | **11.0p** | 16.8p | (4.6)p | 12.2p | 1. Refer to pages 25 to 27 for APM definitions. 113 ### CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR 52 WEEKS ENDED 25 JUNE 2023 ### Financial Statements ###  | 52 weeks to | | 52 weeks to | | | --- | --- | --- | --- | | 25 June 2023 | | 26 June 2022 | | | | £m | | £m | Profit for the period 26.2 31.4 Other comprehensive income Items that are or may be reclassified subsequently to profit or loss: Effective portion of changes in fair value of cash flow hedges (8.7) 23.6 Net change in fair value of cash flow hedges reclassified to profit or loss Recognised in cost of sales (13.7) 1.9 Income tax on items that are or may be reclassified subsequently to profit or loss 5.9 (6.4) Other comprehensive income/(expense) for the period, net of income tax (16.5) 19.1 Total comprehensive income for the period 9.7 50.5 Total comprehensive income for the period attributable to owners of the parent – from continuing operations 6.5 63.3 – from discontinued operations 3.2 (12.8) 9.7 50.5 DFS Furniture plc ### 114 Financial Statements # CONSOLIDATED BALANCE SHEET AT 25 JUNE 2023 (26 JUNE 2022) | | Note | 25 June 2023 £m | 26 June 2022 £m | | --- | --- | --- | --- | | **Non-current assets** | | | | | Property, plant and equipment | 8 | **97.4** | 105.9 | | Right of use assets | 8, 9 | **312.6** | 338.0 | | Intangible assets | 10 | **536.7** | 533.8 | | Other financial assets | 12 | — | 4.8 | | Deferred tax assets | 13 | **15.5** | 10.8 | | | | **962.2** | 993.3 | | **Current assets** | | | | | Inventories | 14 | **55.8** | 64.4 | | Other financial assets | 12 | **0.7** | 12.8 | | Trade and other receivables | 15 | **11.1** | 24.3 | | Current tax assets | | **2.7** | 7.8 | | Cash and cash equivalents (excluding bank overdrafts) | | **26.7** | 17.3 | | | | **97.0** | 126.6 | | **Total assets** | | **1,059.2** | 1,119.9 | | **Current liabilities** | | | | | Bank overdraft | | — | (12.3) | | Trade payables and other liabilities | 16 | **(224.9)** | (280.7) | | Lease liabilities | 9 | **(84.1)** | (89.0) | | Provisions | 20 | **(6.2)** | (12.8) | | Other financial liabilities | 17 | **(6.7)** | — | | | | **(321.9)** | (394.8) | | **Non-current liabilities** | | | | | Interest bearing loans and borrowings | 18 | **(165.8)** | (93.5) | | Lease liabilities | 9 | **(327.3)** | (356.4) | | Provisions | 20 | **(6.9)** | (6.3) | | Other financial liabilities | 17 | **(0.2)** | — | | | | **(500.2)** | (456.2) | | **Total liabilities** | | **(822.1)** | (851.0) | | **Net assets** | | **237.1** | 268.9 | | **Equity attributable to owners of the Company** | | | | | Share capital | 22 | **24.1** | 25.9 | | Share premium | 22 | **40.4** | 40.4 | | Merger reserve | 22 | **18.6** | 18.6 | | Capital redemption reserve | 22 | **359.6** | 357.8 | | Treasury shares | 22 | **(10.1)** | (4.9) | | Employee Benefit Trust shares | 22 | **(6.6)** | (6.9) | | Cash flow hedging reserve | 22 | **(4.9)** | 17.5 | | Retained earnings | | **(184.0)** | (179.5) | | **Total equity** | | **237.1** | 268.9 | These financial statements were approved by the board of directors on 21 September 2023 and were signed on its behalf by **Tim Stacey** Chief Executive Officer **John Fallon** Chief Financial Officer Company registered number: 07236769 DFB Furniture plc Annual Report & Accounts 2023 15 Financial Statements DFB Furniture plc Annual Report & Accounts 2023 116 # CONSOLIDATED STATEMENT OF CHANGES IN EQUITY | | Share capital £m | Share premium £m | Margin reserve £m | Capital redemption reserve £m | Treasury shares £m | Employee Benefit Trust shares £m | Cash flow hedging reserve £m | Retained earnings £m | Total equity £m | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | **Balance at 27 June 2021** | **25.9** | **40.4** | **18.6** | **357.8** | **(0.7)** | **(0.2)** | **(8.0)** | **(149.3)** | **284.5** | | Profit for the year | – | – | – | – | – | – | – | 31.4 | 31.4 | | Other comprehensive income/(expense) | – | – | – | – | – | – | 25.5 | (6.4) | 19.1 | | Total comprehensive income for the year | – | – | – | – | – | – | 25.5 | 25.0 | 50.5 | | Dividends | – | – | – | – | – | – | – | (53.8) | (53.8) | | Purchase of own shares | – | – | – | – | (4.4) | – | – | – | (4.4) | | Treasury shares issued | – | – | – | – | 0.2 | – | – | (0.2) | – | | Purchase of shares by Employee Benefit Trust | – | – | – | – | – | (8.1) | – | – | (8.1) | | Employee Benefit Trust shares issued | – | – | – | – | – | 1.4 | – | (1.0) | 0.4 | | Settlement of share based payments | – | – | – | – | – | – | – | (2.7) | (2.7) | | Share based payments | – | – | – | – | – | – | – | 2.6 | 2.6 | | Tax recognised directly in equity | – | – | – | – | – | – | – | (0.1) | (0.1) | | **Balance at 26 June 2022** | **25.9** | **40.4** | **18.6** | **357.8** | **(4.9)** | **(6.9)** | **17.5** | **(179.5)** | **268.9** | | Profit for the year | – | – | – | – | – | – | – | 26.2 | 26.2 | | Other comprehensive income/(expense) | – | – | – | – | – | – | (22.4) | 5.9 | (16.5) | | Total comprehensive income for the year | – | – | – | – | – | – | (22.4) | 32.1 | 9.7 | | Dividends | – | – | – | – | – | – | – | (12.1) | (12.1) | | Purchase of own shares | – | – | – | – | (30.9) | – | – | – | (30.9) | | Employee Benefit Trust shares issued | – | – | – | – | – | 0.3 | – | (0.3) | – | | Settlement of share based payments | – | – | – | – | – | – | – | (0.3) | (0.3) | | Share based payments | – | – | – | – | – | – | – | 1.8 | 1.8 | | Cancellation of treasury shares | (1.8) | – | – | 1.8 | 25.7 | – | – | (25.7) | – | | **Balance at 25 June 2023** | **24.1** | **40.4** | **18.6** | **359.6** | **(10.1)** | **(6.6)** | **(4.9)** | **(184.0)** | **237.1** | ### CONSOLIDATED CASH FLOW STATEMENT FOR 52 WEEKS ENDED 25 JUNE 2023 ### Financial Statements ###  | | 52 weeks to | | 52 weeks to | | | --- | --- | --- | --- | --- | | | 25 June 2023 | | 26 June 2022 | | | Note | | £m | | £m | Net cash from operating activities 26 121.7 132.9 Investing activities Proceeds from sale of property, plant and equipment 1.3 1.8 Interest received 0.2 – Acquisition of property, plant and equipment 8 (20.4) (36.8) Acquisition of other intangible assets 10 (14.5) (10.6) Net cash used in investing activities (33.4) (45.6) Financing activities Interest paid (10.5) (3.8) Interest paid on lease liabilities 9 (23.5) (25.0) Payment of lease liabilities 9 (61.6) (63.5) Drawdown/(repayment) of borrowings 27 72.0 70.0 Purchase of own shares – (8.2) Proceeds from sale of own shares – 0.4 Purchase of treasury shares (30.9) (4.4) Ordinary dividends paid (12.1) (28.4) Special dividends paid – (25.4) Net cash used in financing activities (66.6) (88.3) Net increase/(decrease) in cash and cash equivalents 27 21.7 (1.0) Cash and cash equivalents at beginning of period 27 5.0 6.0 Cash and cash equivalents (including bank overdraft) at end of period 27 26.7 5.0 DFS Furniture plc ### 117 Financial Statements DFB Furniture plc Annual Report & Accounts 2023 108 # NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AT 25 JUNE 2023 ## 1 Accounting policies DFB Furniture plc (the Company) is a company incorporated and domiciled in England, in the United Kingdom (Company number: 072367691). The address of the registered office is 1 Rockingham Way, Redhouse Interchange, Adwick-Le-Street, Doncaster, South Yorkshire, DN6 7NA. The consolidated financial statements consolidate those of the Company and its subsidiaries (together referred to as the Group). The parent company financial statements present information about the Company as a separate entity and not about its group. The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented in these consolidated financial statements. Judgements made by the directors, in the application of these accounting policies that have significant effect on the financial statements and estimates with a significant risk of material adjustment in the next year are discussed in note 1.20. ### 1.1 Basis of preparation The consolidated financial statements have been prepared and approved by the directors in accordance with international accounting standards in accordance with UK adopted international accounting standards (UK adopted IFRS). The financial statements are prepared on the historical cost basis except for certain financial instruments and share based payment charges which are measured at their fair value. The financial statements are for the 52 weeks to 25 June 2023 (last year 52 weeks to 26 June 2022). The Company has elected to prepare its parent company financial statements in accordance with Financial Reporting Standard 101 *Reduced Disclosure Framework (FRS 101)*, these are presented on pages 151 to 155. ### Going concern The financial statements are prepared on a going concern basis, which the directors believe to be appropriate for the following reasons. The Company heads a group which at 25 June 2023 had a £215.0m revolving credit facility maturing in December 2025. On 1 September 2023 the Group refinanced its borrowing facilities, replacing the previous £215.0m facility with a combination of a new £200.0m revolving credit facility with a consortium of lending banks maturing in September 2027 and £50.0m of private placement debt, £25.0m of which matures in September 2028 and £25.0m in September 2030. At 18 September 2022, £65.2m of the revolving credit facility remained undrawn, in addition to cash in hand, at bank of £2.4m. Covenants applicable to both the new revolving credit facility and the private placement debt are unchanged from the previous facility, being: 3.0x Net Debt / EBITDA and 1.5x Fixed Charge Cover, and are assessed on a six-monthly basis at June and December. The Directors have prepared cash flow forecasts and performed a going concern assessment for the Group covering a period of at least twelve months from the date of approval of these financial statements (the 'going concern assessment period'), which indicate that the Group will be in compliance with these covenants. These forecasts include a number of assumptions in relation to market size and the Group's order intake volumes; inflationary impacts on gross margin and other costs; further increases in UK interest rates; sector-wide manufacturing and supply chain capacities; and achievement of cost savings in line with the Group's strategic plans. The Directors have also prepared severe but plausible downside sensitivity scenarios which cover the same going concern assessment period as the base case. These scenarios include: significantly reduced customer spending; impacts on gross margin and other costs from inflationary cost pressures; increases in interest rates; and a combination of these scenarios. The Directors have also performed reverse stress testing analysis to confirm that circumstances resulting in a covenant breach were beyond those considered plausible. As part of this analysis, mitigating actions within the Group's control should these severe but plausible scenarios occur have also been considered. Should these severe but plausible scenarios occur, the Directors could implement these actions to help reduce the impact on the Group. These mitigating actions include reducing discretionary advertising and other expenditure, retail price increases, a pause on expansionary capital investment, a reduction or pause in dividend payments, and other measures to protect cash balances. These forecast cash flows, considering the ability and intention of the Directors to implement mitigating actions should they need to indicate that there remains sufficient headroom in the forecast period for the Group to operate within the committed facilities and to comply with all relevant banking covenants during the going concern assessment period. The Directors have considered all of the factors noted above, including the inherent uncertainty in forecasting the impact of the current economic and political environment, and are confident that the Group has adequate resources to continue to meet all liabilities as and when they fall due for at least twelve months from the date of approval of these financial statements. Accordingly, the financial statements are prepared on a going concern basis. ### 1.2 Basis of consolidation The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries). Control exists when the Group is exposed to or has rights to variable returns from its investment with the investee and has the ability to affect those returns through its power over the investee. In assessing control, potential voting rights that are currently exercisable or convertible are taken into account. The results of subsidiaries acquired or disposed of during the period are included in the consolidated income statement from the date that control commences until the date that control ceases. The acquisition method is used to account for the acquisition of subsidiaries. All intra-group transactions, balances, income and expenses are eliminated on consolidation. ### 1.3 Climate change As noted in the Responsibility and sustainability report the Group is committed to addressing climate-related risks and is focused on reducing its environmental impact. The potential impact of climate change has been considered in the preparation of these financial statements, including in the carrying values of goodwill and tangible assets, the measurement of financial instruments, and in relation to the Group's going concern and viability assessments. No material impact was noted on the consolidated financial statements in relation to climate change. The potential impact will continue to be assessed on an ongoing basis. ### 1.4 Gross sales and revenue Revenue is measured at the fair value of the consideration receivable by the Group for the provision of goods to external customers, being the total amount payable by the customer ('gross sales') less value added and other sales taxes, the costs of obtaining interest free credit on behalf of customers and the amounts payable to third parties relating to products for which the Group acts as an agent. For products where the Group acts as an agent, the amount recognized in revenue is the net fee receivable by the Group. Many of the Group's customers choose to take advantage of the interest-free credit that the Group makes available. This credit is provided by external finance houses, who pay the Group the gross sales value of the customer order on delivery, less a fee for taking responsibility for payment collection and bearing the full credit risk for any future default by the customer. The fee due to the finance house varies depending on the amount borrowed by the customer, the length of the repayment term and the applicable SONIA rate at the time of the transaction. In calculating reported revenue in accordance with IFRS the Group is required to deduct these fees from the value of the customer order. Reported revenue will therefore vary depending on the proportion of customers who choose to take up the interest free credit offer, the average duration of the interest free loan period and the prevailing interest rates. For the purposes of managing its business the Group focuses on gross sales, which is defined as the total amount payable by customers, inclusive of VAT. Financial Statements DFRS furniture plc Annual Report & Accounts 2023 109 # NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED AT 25 JUNE 2023 ## 1 Accounting policies continued **1.4 Gross sales and revenue continued** and other sales taxes and prior to any accounting adjustments for interest-free credit fees or aftercare product costs. The directors believe gross sales is a more transparent measure of the activity levels and performance of its stores and online channels as it is not affected by customer preferences on payment options. Accordingly gross sales is presented in this annual report in addition to statutory revenue, with a reconciliation between the two measures provided in note 2 to the financial statements. Both gross sales and revenue are stated net of returns and sales allowances, and are recognised when goods have been delivered to the customer, the revenue and costs in respect of the transaction can be measured reliably and collectability is reasonably assured. Receipt of goods by the customer represents the completion of the Group's performance obligation under the sales contract and payment is received prior to or immediately after delivery. Expected future costs of satisfying the Group's obligations under long-term product guarantees offered to customers are determined at the time of the sale, provided for separately (note 20) and charged to cost of sales. ### 1.5 Government grants Government grants are recognised where there is reasonable assurance that the Group will comply with all attached conditions and that the grant will be received. When the grant relates to an expense item, it is recognised as a deduction from the related expense within the period it becomes receivable. ### 1.6 Expenses #### Non-underlying items Items that are material in size, unusual or non-recurring in nature are disclosed separately in the income statement in order to provide an indication of the Group's underlying business performance. The principal items which may be included as non-underlying are: - significant profit or loss on the disposal of non-current assets - significant impairment charges - significant non-recurring tax charges or credits - costs associated with significant corporate, financial or operating restructuring, including acquisitions - initial costs of establishing operations in new geographical territories Material finance income or expenses associated with significant changes in the Group's borrowings are disclosed separately as non-underlying items below operating profit. #### Royalty payments Royalties payable to brand partners on sales of branded products are charged to cost of sales when the related product is delivered to the customer. #### Finance income and expenses Finance expenses comprise interest payable, finance charges on lease liabilities recognised in profit or loss using the effective interest method and unwinding of the discount on provisions and other liabilities measured at present value. Finance income comprises interest receivable on funds invested, dividend income, and net foreign exchange gains and losses. Interest income and interest payable is recognised in profit or loss as it accrues, using the effective interest method. Dividend income is recognised in the income statement on the date the Group's right to receive payments is established. ### 1.7 Employee benefits #### Defined contribution plans Payments to defined contribution pension plans are recognised as an expense in the income statement as they fall due. #### Short-term benefits Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. #### Share based payments The fair value of equity settled share based payments is recognised as an expense over the vesting period of the related awards, with a corresponding increase in equity. Fair values are calculated using option pricing models appropriate to the terms and conditions of the awards. The amount charged as an expense is regularly reviewed and adjusted to reflect the achievement of service and non-market based performance conditions. ### 1.8 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 a business combination, or terms recognised directly in equity or other comprehensive income. Current tax is the expected tax payable or receivable on the taxable income or loss for the period, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years. Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: the initial recognition of goodwill, the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss, and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date. At interim reporting periods the tax charge is calculated in accordance with IAS 54, adjusted for material non-taxable items. A deferred tax asset is recognised on deductible temporary differences only to the extent that it is probable that future taxable profits will be available against which they can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. ### 1.9 Foreign currency Transactions in foreign currencies are translated to the respective functional currencies of Group entities at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are retranslated to the functional currency at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in the income statement except for effective differences arising on qualifying cash flow hedges, which are recognised directly in other comprehensive income. ### 1.10 Business combinations Business combinations are accounted for by applying the acquisition method as at the acquisition date, which is the date on which control is transferred to the Group. Goodwill is initially measured at cost, being the excess of the acquisition cost over the Group's interest in the assets and liabilities recognised. When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss. Costs related to the acquisition, other than those associated with the issue of debt or equity securities, are expensed as incurred. Any contingent consideration payable is recognised at fair value at the acquisition date if the contingent consideration is classified as equity, it is not remeasured and settlement is accounted for within equity. Otherwise, subsequent changes to the fair value of the contingent consideration are recognised in profit or loss. ### Acquisitions prior to 31 July 2011 (date of transition to IFRSs) IFRS 1 grants certain exemptions from the full requirements of Adopted IFRSs in the transition period. The Group and Company elected not to restate business combinations that took place prior to 31 July 2011. In respect of acquisitions prior to transition, goodwill is included at 31 July 2011 on the basis of its deemed cost, which represents the amount recorded under UK GAAP which was broadly comparable save that goodwill was amortised. On transition, amortisation of goodwill ceased as required by IFRS 1. ### NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED ### Financial Statements ### AT 25 JUNE 2023  continued 1.13 Intangible assets and goodwill DFS Furniture plc ### 120 1.11 Property, plant and equipment Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment. Depreciation is charged to the income statement on a straight-line basis over the estimated useful life of each part of an item of property, plant and equipment. Land is not depreciated. The estimated useful lives are as follows: – buildings 50 years – plant and equipment 3 to 10 years – motor vehicles 4 years – leasehold improvements the period of the lease, or useful life if shorter Depreciation methods, useful lives and residual values are reviewed at each balance sheet date. 1.12 Leases At the inception of a contract, the Group assesses whether a contract is, or contains, a lease under IFRS 16. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Lease liability – initial recognition The Group recognises right of use assets and lease liabilities at the lease commencement date. The lease liabilities are recognised at the present value of future lease payments discounted at the incremental borrowing rate applicable to the lease. Lease payments included in the measurement of the lease liability comprise the following: – fixed payments, including in-substance fixed payments; and – amounts expected to be payable under a residual value guarantee Lease liability – subsequent measurement The lease liability is subsequently increased by the interest cost arising from the unwind of the discount, and decreased by the cash lease payments made. Lease liability – remeasurement The lease liability is remeasured if: – there is a change in either the lease term or the assessment of an option to purchase the underlying asset. In these circumstances, the lease liability is remeasured using a revised discount rate; or – there is a change in the amounts expected to be payable under a residual guarantee or if there is a change in future lease payments resulting from a change in an index or a rate used to determine those payments. In these circumstances, the discount rate remains unchanged, unless the change in lease payments results from a change in floating interest rates. In both scenarios, the carrying value of the right of use asset will generally be adjusted by the amount of the remeasurement of the lease liability, to the extent that the right of use asset will be reduced to nil, with any further adjustment required from the remeasurement being recorded in profit or loss. Right of use asset – initial recognition IFRS 16 defines a right of use asset as an asset which represents a lessee’s right to use an underlying asset for the lease term. Generally, right of use assets are initially measured at an amount equal to the lease liability. Right of use asset – subsequent measurement Right of use assets are subsequently measured at initial carrying value: – less any accumulated depreciation and any accumulated impairments losses: and – adjusted for any remeasurement of the lease liability. The right of use asset is subsequently depreciated on a straight line basis from the commencement date to the end of the lease term. In addition, the right of use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability. Practical expedients and exemptions used The Group has opted to apply the following practical expedients and exemptions: – use of a single discount rate to a portfolio of leases with reasonably similar characteristics; – recognising lease payments on short term (less than 12 months) leases and low value leases as an expense; Goodwill Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to cash generating units and is not amortised but is tested annually for impairment. Other intangible assets Expenditure on internally generated goodwill and brands is recognised in the income statement as an expense as incurred. Other intangible assets that are acquired by the Group are stated at cost less accumulated amortisation and accumulated impairment losses. Implementation costs associated with software and cloud computing arrangements are only capitalised where they relate to an identifiable asset under the control of the Group. Amortisation Amortisation is charged to the income statement on a straight-line basis over the estimated useful lives of intangible assets unless such lives are indefinite. Intangible assets with an indefinite useful life and goodwill are systematically tested for impairment at each balance sheet date. Other intangible assets are amortised from the date they are available for use. Estimated useful lives are as follows: – computer software and website costs 3 years – acquired brand names 10 to 20 years 1.14 Inventories Inventories are stated at the lower of cost and net realisable value. The cost of finished goods manufactured by the Group includes direct materials, direct labour and appropriate overhead expenditure. 1.15 Impairment The carrying amounts of the Group’s tangible and intangible assets other than goodwill are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. For goodwill, and intangible assets that have indefinite useful lives or that are not yet available for use, the recoverable amount is estimated each year at the same time. An impairment loss is recognised if the carrying amount of an asset exceeds its estimated recoverable amount. Impairment losses are recognised in profit or loss. An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. 1.16 Provisions A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a past event, that can be reliably measured and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects risks specific to the liability. Details of provisions recognised are in note 20 and the related significant estimates and judgements in note 1.20. Financial Statements DFRS^{}[] Annual Report & Accounts 2023 122 # NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED AT 25 JUNE 2023 ## 1 Accounting policies continued ### 1.17 Non-derivative financial instruments Non-derivative financial instruments comprise investments in equity and debt securities, trade and other receivables, cash and cash equivalents, loans and borrowings, and trade and other payables. #### Trade and other receivables Trade and other receivables are recognised initially at fair value. Subsequent to initial recognition they are measured at amortised cost using the effective interest method, less any impairment losses. #### Trade and other payables Trade and other payables are recognised initially at fair value. Subsequent to initial recognition they are measured at amortised cost using the effective interest method. #### Cash and cash equivalents Cash and cash equivalents comprise cash balances and call deposits. #### Interest-bearing borrowings Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest-bearing borrowings are stated at amortised cost using the effective interest method. ### 1.18 Derivative financial instruments and hedging #### Derivative financial instruments Derivative financial instruments are recognised at fair value. The gain or loss on remeasurement to fair value is recognised immediately in profit or loss. However, where derivatives qualify for hedge accounting, recognition of any resultant gain or loss depends on the nature of the item being hedged (see below). #### Cash flow hedges On adoption of IFRS 9, the Group made the election to continue to apply the hedge accounting requirements of IAS 39 to all of its hedging relationships. Therefore, where a derivative financial instrument is designated as a hedge of the variability in cash flows of a highly probable forecast transaction, the effective part of any gain or loss on the derivative financial instrument is recognised in other comprehensive income and presented within the hedging reserve. Any ineffective portion of the hedge is recognised immediately in the income statement. When the forecast transaction subsequently results in the recognition of a non-financial asset or non-financial liability, the associated cumulative gain or loss remains in the hedging reserve and is reclassified into profit or loss in the same period or periods during which the asset acquired or liability assumed affects profit or loss. For other cash flow hedges the associated cumulative gain or loss is removed from equity and recognised in the income statement in the same period or periods during which the hedged forecast transaction affects profit or loss. When a hedging instrument expires or is sold, terminated or exercised, or the Group receives designation of the hedge relationship but the hedged forecast transaction is still expected to occur, the cumulative gain or loss at that point remains in equity and is recognised in accordance with the above policy when the transaction occurs. If the hedged transaction is no longer expected to take place, the cumulative unrealised gain or loss recognised in equity is recognised in the income statement immediately. ### 1.19 Profit or loss from discontinued operations A discontinued operation is a component of the Group that either has been disposed of, abandoned, or is classified as held for sale. A discontinued operation represents a separate major line of the business or geographical area of operation. Profit or loss from discontinued operations comprises the post-tax profit or loss of discontinued operations and the post-tax gain or loss recognised on the measurement to fair value less costs to sell of the disposal group(s) constituting the discontinued operation (see also note 29). When an operation is classified as a discontinued operation, the comparative Consolidated Income Statement is restated as if the operation had been discontinued from the start of the comparative period. ### 1.20 Significant areas of estimation and judgement In the application of the Group's accounting policies, the Directors are required to make judgements, estimates and assumptions that affect the value of reported assets, liabilities, revenues and expenses. The estimates and associated assumptions are based on historical experience and other relevant factors, but may differ from actual results. No significant areas of judgement or estimation arose in the current financial statements. In the period ended 26 June 2022 the presentation of discontinued operations was considered to be an area of significant judgement requiring consideration of the criteria under IFRS 5 Non-current Assets Held for Sale and Discontinued Operations as to whether the terminated operations represented a major separate line of business or geographical area of operations, were part of a single coordinated disposal plan or represented a subsidiary acquired exclusively with a view to resale. The Directors judged that these operations represented a major geographical area business and the closure was part of a single coordinated disposal plan and were therefore satisfied that the criteria under IFRS 5 were met and presentation as discontinued operations was appropriate. Accordingly, the results of these operations were presented as discontinued operations in the consolidated income statement in that period and in the current period. The following are other areas of important estimates and judgements relating to material balances in the Group's financial statements, but which do not meet the IFRS-defined criteria of a significant estimate: #### Going concern In making the assessment of going concern for the Group and the Company, the Directors consider a number of assumptions and estimates relating to the future performance of the Group, as detailed in note 1.1. The Directors are satisfied that no reasonably possible change in these estimates would result in a change in the going concern assessment of the Group or the Company and therefore it is not considered a significant estimate as at 25 June 2023. #### Goodwill impairment Goodwill is tested annually for impairment by comparing its carrying value to a calculation of the value in use of the relevant cash-generating units. This exercise requires estimates to be made of future cash flows arising from each cash-generating unit and the appropriate discount rate to apply. Further details of the key assumptions underlying the calculation are provided in note 10. The Directors are satisfied that no reasonably possible change in these estimates would result in the recognition of an impairment within the next twelve months and accordingly the carrying value of goodwill is not considered a significant estimate as at 25 June 2023. #### Customer guarantees The Group maintains a provision for its obligations under long term product guarantees offered to its customers. In determining the value of this provision estimates are made of the number of future claims that will be received and the cost of satisfying those claims. Further details are provided in note 20. The Directors are satisfied that no reasonably possible change in these estimates would result in a material difference to the value of the provision and therefore it is not considered a significant estimate as at 25 June 2023. #### Net realisable value of inventories As detailed in note 14, the Group makes estimates of applicable selling prices to determine the net realisable value of inventories. The Directors are satisfied that no reasonably possible change in these estimates would result in a material difference to the value of the provision and therefore it is not considered a significant estimate as at 25 June 2023. ### 1.21 New accounting standards There are no new standards, amendments to existing standards or interpretations that are effective for the first time in the period ended 25 June 2023 that have a material impact on the Group's results. A number of new but not yet effective, standards, amendments to existing standards and interpretations have been published by the IASB. None of these have been adopted early and therefore have not been applied by the Group in these financial statements. Financial Statements DFS furniture plc Annual Report & Accounts 2023 122 # NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED AT 25 JUNE 2023 ## 2. Segmental Analysis The Group's operating segments under IFRS 8 have been determined based on management accounts reports reviewed by the Group Leadership Team. Segment performance is assessed based upon brand contribution. Brand contribution is defined as underlying EBITDA (being earnings before interest, tax, depreciation, amortisation and non-underlying items) excluding property costs and central administration costs. The Group reviews and manages the performance of its operations on a retail brand basis, and the identified reportable segments and the nature of their business activities are as follows: DFS: the retailing of upholstered furniture and related products through DFS and Dwell branded stores and websites. Sofology: the retailing of upholstered furniture and related products through Sofology branded stores and website. Other segments comprises the manufacture of upholstered furniture and the supply of contract logistics. ### Segment revenue and profit – continuing operations | | External gross sales | | Inter-segment sales | | Total gross sales | | | --- | --- | --- | --- | --- | --- | --- | | | 52 weeks to 25 June 2023 £m | 52 weeks to 26 June 2022 £m | 52 weeks to 25 June 2023 £m | 52 weeks to 26 June 2022 £m | 52 weeks to 25 June 2023 £m | 52 weeks to 26 June 2022 £m | | DFS | 1,125.5 | 1,169.1 | – | – | 1,125.5 | 1,169.1 | | Sofology | 298.1 | 304.9 | – | – | 298.1 | 304.9 | | Other segments | – | 0.6 | 215.6 | 187.9 | 215.6 | 188.5 | | Eliminations | – | – | (215.6) | (187.9) | (215.6) | (187.9) | | Gross sales | 1,423.6 | 1,474.6 | – | – | 1,423.6 | 1,474.6 | | | | | | | 52 weeks to 25 June 2023 £m | 52 weeks to 26 June 2022 £m | | Total segments gross sales | | | | | 1,423.6 | 1,474.6 | | Less: value added and other sales taxes | | | | | (226.2) | (233.8) | | Less: costs of interest free credit and aftercare products | | | | | (108.5) | (91.0) | | Revenue | | | | | 1,088.9 | 1,149.8 | | Of which | | | | | | | | Furniture sales | | | | | 1,033.3 | 1,096.8 | | Sales of aftercare products | | | | | 55.6 | 53.0 | | Revenue | | | | | 1,088.9 | 1,149.8 | ### 52 weeks to 25 June 2022 – continuing operations | | DFS £m | Sofology £m | Other Segments £m | Eliminations £m | Total £m | | --- | --- | --- | --- | --- | --- | | Revenue | 858.5 | 230.4 | 215.6 | (215.6) | 1,088.9 | | Cost of sales | (424.8) | (106.8) | (61.6) | 96.5 | (496.7) | | Gross profit | 433.7 | 123.6 | 154.0 | (119.1) | 592.2 | | Selling & distribution costs (excluding property costs) | (229.0) | (64.5) | (129.3) | 88.4 | (334.4) | | Brand contribution (segment profit) | 204.7 | 59.1 | 24.7 | (30.7) | 257.8 | | Property costs | | | | | (30.2) | | Underlying administrative expenses | | | | | (70.2) | | Underlying EBITDA | | | | | 157.4 | Financial Statements DFB furniture plc Annual Report & Accounts 2023 # NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED AT 25 JUNE 2023 # 2 Segmental Analysis continued 52 weeks to 26 June 2022 – continuing operations | | DFB £m | Sofology £m | Other Segments £m | Eliminations £m | Total £m | | --- | --- | --- | --- | --- | --- | | Revenue | 906.3 | 242.9 | 188.5 | (187.9) | 1,149.8 | | Cost of sales | (452.9) | (121.6) | (59.8) | 90.4 | (543.9) | | Gross profit | 453.4 | 121.3 | 128.7 | (97.5) | 605.9 | | Selling & distribution costs (excluding property costs) | (210.1) | (65.9) | (137.1) | 74.7 | (338.4) | | **Brand contribution (segment profit)** | **243.3** | **55.4** | **(8.4)** | **(22.8)** | **267.5** | | Property costs | | | | | (29.6) | | Underlying administrative expenses | | | | | (62.0) | | Underlying EBITDA | | | | | 175.9 | | | Note | 52 weeks to 25 June 2023 £m | 52 weeks to 26 June 2022 £m | | --- | --- | --- | --- | | Underlying EBITDA | | **157.4** | 175.9 | | Non-underlying items | 3 | **0.5** | (0.4) | | Depreciation, amortisation and impairments | | **(94.1)** | (88.2) | | **Operating profit** | | **63.8** | 87.3 | | Finance income | | **0.2** | – | | Finance expenses | | **(14.3)** | (28.8) | | Profit before tax | | **29.7** | 58.5 | A geographical analysis of revenue is presented below: | | 52 weeks to 25 June 2023 £m | 52 weeks to 26 June 2022 £m | | --- | --- | --- | | United Kingdom | **1,067.7** | 1,129.3 | | Republic of Ireland | **21.2** | 20.5 | | Total revenue | **1,088.9** | 1,149.8 | 123 Financial Statements # NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED AT 25 JUNE 2023 # 2 Segmental Analysis continued Segment assets and liabilities | | Assets | | Liabilities | | | --- | --- | --- | --- | --- | | | 25 June 2023 £m | 25 June 2022 £m | 25 June 2023 £m | 25 June 2022 £m | | DFS | 942.9 | 948.4 | (537.3) | (625.0) | | Sofology | 146.0 | 167.6 | (135.3) | (142.6) | | Other segments | 26.4 | 30.0 | (51.8) | (52.2) | | **Total segments** | **1,115.3** | **1,146.0** | **(724.4)** | **(819.8)** | | Loans and financing | – | – | (165.8) | (93.5) | | Financial assets/(liabilities) | 0.7 | 17.6 | (6.9) | – | | Current tax | 2.7 | 7.8 | – | – | | Deferred tax | 15.5 | 10.8 | – | – | | Eliminations | (75.0) | (62.3) | 75.0 | 62.3 | | **Total Group** | **1,059.2** | **1,119.9** | **822.1** | **(851.0)** | Segment assets comprise tangible and intangible non-current assets including goodwill and brand names, inventories, trade and other receivables, cash and cash equivalents. Segment liabilities comprise trade payables and current and non-current other liabilities and provisions. | | Additions to non-current assets | | Depreciation, amortisation and impairment | | | --- | --- | --- | --- | --- | | | 52 weeks to 25 June 2023 £m | 52 weeks to 26 June 2022 £m | 52 weeks to 25 June 2023 £m | 52 weeks to 26 June 2022 £m | | DFS | 42.7 | 72.0 | 70.1 | 66.0 | | Sofology | 11.4 | 14.8 | 17.6 | 17.3 | | Other segments | 6.0 | 12.5 | 6.4 | 4.9 | | **Total Group** | **60.1** | **99.3** | **94.1** | **88.2** | Additions to non-current assets include both tangible and intangible non-current assets. DFS furniture plc Annual Report & Accounts 2023 124 Financial Statements DFG Furniture plc Annual Report & Accounts 2023 # NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED AT 25 JUNE 2023 # 3 Operating profit – continuing operations Group operating profit is stated after charging/(crediting): | | 52 weeks to 25 June 2023 £m | 52 weeks to 26 June 2022 £m | | --- | --- | --- | | Depreciation on tangible assets (including depreciation on right of use assets) | 80.5 | 77.7 | | Amortisation of intangible assets | 11.6 | 10.5 | | Impairments | 2.0 | – | | Net gain on disposal of property, plant and equipment | (0.8) | (1.1) | | Net loss/(gain) on disposal of right of use assets | (1.2) | 0.1 | | Cost of inventories recognised as an expense | 509.1 | 548.1 | | Write down of inventories to net realisable value | 2.0 | 4.6 | | Other costs of sales | (14.4) | (8.8) | | Release of provisions (note 20) | (0.9) | (2.1) | | Government grants received (business rates relief) | (0.2) | (2.0) | | Operating lease rentals | 0.2 | 0.7 | # Non-underlying items | | 52 weeks to 25 June 2023 £m | 52 weeks to 26 June 2022 £m | | --- | --- | --- | | Release of lease guarantee provision | (0.5) | (0.5) | | Restructuring costs | – | 0.9 | | Acquisition costs | – | (0.2) | | | (0.5) | 0.4 | The release of the lease guarantee provision relates to the property provisions detailed in note 20. In addition to the non-underlying items for continuing operations above, a further £3.8m of non-underlying credits were recognised in respect of discontinued operations. This amount related to the closure costs of discontinued operations. Further details are presented in note 29 to the consolidated financial statements. # Auditor's remuneration | | 52 weeks to 25 June 2023 £m | 52 weeks to 26 June 2022 £m | | --- | --- | --- | | Audit of these financial statements | 0.3 | 0.5 | | Audit of the financial statements of Group subsidiaries | 0.5 | 0.4 | | Amounts receivable by the Company's auditor and its associates in respect of: | | | | All other services | 0.1 | – | | | 0.9 | 0.7 | During the period, an amount of £49,500 was paid to the Company's auditor in respect of the review of the Group's interim financial statements (FY22: £49,500) and £55,000 in respect of other audit related assurance services (FY22: £nil). 125 Financial Statements # NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED AT 25 JUNE 2023 # 4 Staff numbers and costs – continuing operations The average number of persons employed by the Group during the period, analysed by category, was as follows: | | Number of employees | | | --- | --- | --- | | | 52 weeks to 25 June 2023 | 52 weeks to 26 June 2022 | | Production | 1,016 | 1,009 | | Warehouse and transport | 1,316 | 1,315 | | Sales and administration | 3,167 | 3,182 | | | **5,539** | **5,506** | The aggregate payroll costs of these persons were as follows: | | 52 weeks to 25 June 2023 £m | 52 weeks to 26 June 2022 £m | | --- | --- | --- | | Wages and salaries | 177.4 | 180.7 | | Social security costs | 17.5 | 17.6 | | Other pension costs | 5.8 | 5.6 | | | **200.7** | **203.9** | | Share based payment expense (equity settled) | 1.8 | 2.6 | | | **202.5** | **206.5** | Aggregate remuneration payable to directors in respect of qualifying services was as follows: | | 52 weeks to 25 June 2023 £m | 52 weeks to 26 June 2022 £m | | --- | --- | --- | | Emoluments | 1.6 | 1.3 | | Pension contributions | – | 0.1 | | Gain on exercise of share options | – | 0.9 | Three directors accrued retirement benefits under pension schemes in the period (2022: two). All of the directors' pension contributions were to defined contribution schemes. DFB Institute plc Annual Report & Accounts 2023 126 Financial Statements # NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED AT 25 JUNE 2023 # 5 Finance income and expense | | 52 weeks to 25 June 2023 £m | 52 weeks to 26 June 2022 £m | | --- | --- | --- | | *Finance income* | | | | Interest income on bank deposits | 0.2 | – | | Total finance income | 0.2 | – | | | 52 weeks to 25 June 2023 £m | 52 weeks to 26 June 2022 £m | | *Finance expense* | | | | Interest payable on senior revolving credit facility | 10.4 | 2.5 | | Bank fees | 0.4 | 1.5 | | Unwind of discount on provisions | 0.1 | – | | Interest on lease liabilities | 23.4 | 24.7 | | Other interest | – | 0.1 | | Total finance expense | 34.3 | 28.8 | # 6 Taxation # Recognised in the income statement | | 52 weeks to 25 June 2023 £m | 52 weeks to 26 June 2022 £m | | --- | --- | --- | | *Current tax* | | | | Current period | 5.7 | 4.9 | | Adjustments for prior years | 0.1 | 0.9 | | Current tax expense | 5.8 | 5.8 | | *Deferred tax* | | | | Origination and reversal of temporary differences | 2.4 | 6.8 | | Deferred tax rate change | 0.4 | 1.6 | | Adjustments for prior years | (1.5) | (0.8) | | Deferred tax expense | 1.3 | 7.6 | | Total tax expense in income statement | 7.1 | 13.4 | | Total tax expense in income statement | | | | – from continuing operations | 6.7 | 14.3 | | – from discontinued operations | 0.4 | (0.9) | | | 7.1 | 13.4 | DFB Furniture plc Annual Report & Accounts 2023 127 Financial Statements # NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED AT 25 JUNE 2023 ## 6 Taxation continued ### Reconciliation of effective tax rate | | 52 weeks to 25 June 2023 £m | 52 weeks to 26 June 2022 £m | | --- | --- | --- | | Profit before tax for the period from continuing and discontinued operations | 33.5 | 44.8 | | Tax using the UK corporation tax rate of 20.5% (2022: 19%) | 6.9 | 8.5 | | Non-deductible expenses | 2.3 | 2.2 | | Tax exempt revenues | (1.0) | (1.1) | | Effect of tax rates in foreign jurisdictions | (0.4) | 1.4 | | Recognition of previously unrecognised tax losses | – | 0.3 | | Adjustments in respect of share options | 0.3 | 0.4 | | Adjustment in respect of prior years | (1.4) | 0.1 | | Impact of change in tax rate on deferred tax balances | 0.4 | 1.6 | | Total tax expense | 7.1 | 13.4 | The Finance Act 2021, which was substantively enacted in May 2021, included provisions to increase the rate of UK corporation tax to 25% with effect from 1 April 2023. Deferred taxation is measured at tax rates that are expected to apply in the periods in which temporary timing differences are expected to reverse based on tax rates and laws that have been enacted or substantively enacted at the balance sheet date. Accordingly, a tax rate of 25% has been applied when calculating deferred tax assets and liabilities at 25 June 2023 (25% at 26 June 2022). ### Income tax recognised in other comprehensive income | | 52 weeks to 25 June 2023 £m | 52 weeks to 26 June 2022 £m | | --- | --- | --- | | Effective portion of changes in fair value of cash flow hedges | (1.8) | 4.8 | | Net change in fair value of cash flow hedges reclassified to profit or loss | (3.0) | 0.4 | | Impact of change in tax rate on deferred tax balances | (1.1) | 1.2 | | | (5.9) | 6.4 | DFB Institute plc Annual Report & Accounts 2023 128 Financial Statements DFB Furniture plc Annual Report & Accounts 2023 129 # NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED AT 25 JUNE 2023 # 7 Earnings per share # Statutory earnings per share Basic earnings per share is calculated by dividing the net profit or loss for the financial period attributable to ordinary equity holders of the parent company by the weighted average number of ordinary shares outstanding during the period. The weighted average number of shares reflects the movements in share capital detailed in note 22 and the impact of movements in treasury shares held by the Company. Changes in the Company's capital structure with no corresponding change in resources are reflected as if they had occurred at the beginning of the earliest period presented. Diluted earnings per share is calculated using the same net profit or loss for the financial period attributable to ordinary equity holders of the parent company, but increasing the weighted average number of ordinary shares by the dilutive effect of potential ordinary shares. Potential ordinary shares arise from employee share based payment arrangements (note 25). Where share based payments are subject to performance conditions, they are included as potential ordinary shares to the extent that the performance conditions have been met at the reporting date. Details of share based payment vesting conditions are provided in the Director's Remuneration Report. | | 12 weeks to 25 June 2023 pence | 12 weeks to 26 June 2022 pence | | --- | --- | --- | | Basic earnings/(loss) per share | | | | – from continuing operations | 9.8 | 17.3 | | – from discontinued operations | 1.3 | (3.0) | | Total basic earnings per share | 11.1 | 12.3 | | Diluted earnings/(loss) per share | | | | – from continuing operations | 9.7 | 17.2 | | – from discontinued operations | 1.3 | (3.0) | | Total diluted earnings per share | 11.0 | 12.2 | | | 12 weeks to 25 June 2023 £m | 12 weeks to 26 June 2022 £m | | --- | --- | --- | | Profit/(loss) for the period attributable to equity holders of the parent company | | | | – from continuing operations | 23.0 | 44.2 | | – from discontinued operations | 3.1 | (12.8) | | | 26.1 | 31.4 | | | 25 June 2023 No. | 26 June 2022 No. | | --- | --- | --- | | Weighted average number of shares in issue for basic earnings per share | 235,470,857 | 254,675,661 | | Dilutive effect of employee share based payment awards | 1,783,365 | 1,220,492 | | Weighted average number of shares in issue for diluted earnings per share | 237,254,222 | 255,896,153 | # Underlying earnings per share Underlying basic earnings per share and underlying diluted earnings per share are calculated by dividing the profit for the period attributable to ordinary equity holders of the parent company, as adjusted to exclude the effect of non-underlying items, by the same weighted average numbers of ordinary shares above used for basic and diluted earnings per share respectively. | | 12 weeks to 25 June 2023 £m | 12 weeks to 26 June 2022 £m | | --- | --- | --- | | **Continuing operations** | | | | Profit for the period attributable to equity holders of the parent company | 23.0 | 44.2 | | Non-underlying (profit)/loss after tax | (0.4) | 0.4 | | Underlying profit for the period attributable to equity holders of the parent company from continuing operations | 22.6 | 44.6 | Financial Statements # NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED AT 25 JUNE 2023 7 Earnings per share continued | | 52 weeks to 25 June 2023 £m | 52 weeks to 26 June 2022 £m | | --- | --- | --- | | **Discontinued operations** | | | | Profit/(loss) for the period attributable to equity holders of the parent company | **3.1** | (12.8) | | Non-underlying (profit)/loss after tax | **(3.5)** | 11.3 | | Underlying loss for the period attributable to equity holders of the parent company from discontinued operations | **(0.4)** | (1.3) | | | **52 weeks to 25 June 2023 pence** | **52 weeks to 26 June 2022 pence** | | Underlying basic earnings/(loss) per share | | | | – from continuing operations | **9.6** | 17.5 | | – from discontinued operations | **(0.2)** | (0.6) | | Total underlying basic earnings per share | **9.4** | 16.9 | | Underlying diluted earnings/(loss) per share | | | | – from continuing operations | **9.5** | 17.4 | | – from discontinued operations | **(0.2)** | (0.6) | | Total underlying diluted earnings per share | **9.3** | 16.8 | DFG Furniture plc Annual Report & Accounts 2023 130 Financial Statements DFB Institute plc Annual Report & Accounts 2023 # NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED AT 25 JUNE 2023 # 8 Property, plant and equipment | | Land and buildings (m) | Plant and equipment (m) | Motor vehicles (m) | Right of use assets (m) | Total (m) | | --- | --- | --- | --- | --- | --- | | **Cost** | | | | | | | Balance at 27 June 2021 | 20.5 | 192.5 | 10.2 | 462.9 | 686.1 | | Reclassification | – | 0.9 | (0.1) | (0.4) | 0.4 | | Additions | 2.0 | 34.4 | 0.4 | 51.9 | 88.7 | | Remeasurements | – | – | – | 5.4 | 5.4 | | Disposals | (0.6) | (45.3) | (1.8) | (9.6) | (57.3) | | Balance at 26 June 2022 | 21.9 | 182.5 | 8.7 | 510.2 | 723.3 | | Reclassification | (8.3) | 49.3 | 8.8 | 8.3 | 58.1 | | Additions | 0.1 | 20.4 | 0.1 | 25.0 | 45.6 | | Remeasurements | – | – | – | 7.0 | 7.0 | | Disposals | (0.2) | (15.7) | (5.1) | (26.1) | (47.1) | | **Balance at 25 June 2023** | **13.5** | **236.5** | **12.5** | **524.4** | **786.9** | | **Depreciation and impairments** | | | | | | | Balance at 27 June 2021 | 1.7 | 121.4 | 8.5 | 117.8 | 249.4 | | Reclassification | – | 0.5 | – | (0.4) | 0.1 | | Depreciation charge for the period | 0.4 | 19.8 | 0.5 | 58.5 | 79.2 | | Impairments | 0.1 | 1.2 | 0.1 | 3.1 | 4.5 | | Disposals | (0.1) | (45.2) | (1.7) | (6.8) | (53.8) | | Balance at 26 June 2022 | 2.1 | 97.7 | 7.4 | 172.2 | 279.4 | | Reclassification | (1.7) | 49.3 | 8.8 | 1.7 | 58.1 | | Depreciation charge for the period | 0.4 | 20.9 | 0.8 | 58.4 | 80.5 | | Impairments | – | – | – | 2.0 | 2.0 | | Disposals | (0.2) | (15.3) | (5.1) | (22.5) | (43.1) | | **Balance at 25 June 2023** | **0.6** | **152.6** | **11.9** | **211.8** | **376.9** | | **Net book value** | | | | | | | At 27 June 2021 | 18.8 | 71.1 | 1.7 | 345.1 | 436.7 | | At 26 June 2022 | 19.8 | 84.8 | 1.3 | 338.0 | 443.9 | | **At 25 June 2023** | **12.9** | **83.9** | **0.6** | **312.6** | **410.0** | Reclassifications in the year between gross cost and depreciation between plant and equipment and motor vehicles relate to historic disposals made at £ml net book value. In addition, other assets previously presented within land and buildings have been reclassified to property right of use assets during the year. None of these reclassifications impacted reported profit or total non-current assets. Accordingly, the Directors do not consider the changes sufficiently material to require restatement of prior period balances. # Capital commitments At 25 June 2023 the Group had contracted capital commitments of £9.1m (2022: £11.8m) for which no provision has been made in the financial statements. Plant and equipment includes leasehold improvements. 137 Financial Statements DFB Furniture plc Annual Report & Accounts 2023 # NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED AT 25 JUNE 2023 # 9 Leases # Right of use assets | | Property £m | Vehicles £m | Equipment £m | Total £m | | --- | --- | --- | --- | --- | | **Cost** | | | | | | At 27 June 2021 | 443.3 | 17.7 | 1.9 | 462.9 | | Reclassification | (0.4) | – | – | (0.4) | | Additions | 44.2 | 7.7 | – | 51.9 | | Remeasurements | 5.4 | – | – | 5.4 | | Disposals | (6.8) | (2.8) | – | (9.6) | | At 26 June 2022 | 485.7 | 22.6 | 1.9 | 510.2 | | Reclassification | 8.3 | – | – | 8.3 | | Additions | 16.3 | 8.7 | – | 25.0 | | Remeasurements | 7.0 | – | – | 7.0 | | Disposals | (24.0) | (2.1) | – | (26.1) | | **At 25 June 2023** | **493.3** | **29.2** | **1.9** | **524.4** | | **Depreciation and impairment** | | | | | | At 27 June 2021 | 108.0 | 8.6 | 1.2 | 117.8 | | Reclassification | (0.4) | – | – | (0.4) | | Depreciation charge for the period | 54.6 | 3.7 | 0.2 | 58.5 | | Disposals | (4.1) | (2.7) | – | (6.8) | | Impairments | 3.1 | – | – | 3.1 | | At 26 June 2022 | 161.2 | 9.6 | 1.4 | 172.2 | | Reclassification | 1.7 | – | – | 1.7 | | Depreciation charge for the period | 53.7 | 4.5 | 0.2 | 58.4 | | Disposals | (20.5) | (2.0) | – | (22.5) | | Impairments | 2.0 | – | – | 2.0 | | **At 25 June 2023** | **198.1** | **12.1** | **1.6** | **211.8** | | **Net book value** | | | | | | At 27 June 2021 | 335.3 | 9.1 | 0.7 | 345.1 | | At 26 June 2022 | 324.5 | 13.0 | 0.5 | 338.0 | | **At 25 June 2023** | **295.2** | **17.1** | **0.3** | **312.6** | | Amounts recognised in the consolidated balance sheet: | | | | | | | | | **25 June 2023** | **26 June 2022** | | | | | **£m** | **£m** | | Current lease liabilities | | | **84.1** | 89.0 | | Non-current lease liabilities | | | **327.3** | 356.4 | For more information on the maturity of the Group's lease liabilities, see note 24. 132 Financial Statements # NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED AT 25 JUNE 2023 9 Leases continued Amounts recognised in the consolidated income statement: | | 52 weeks to 25 June 2023 £m | 52 weeks to 26 June 2022 £m | | --- | --- | --- | | Interest on lease liabilities | (23.5) | (23.0) | | Variable lease payments not included in the measurement of lease liabilities | (0.3) | 1.0 | | Income from subleasing right of use assets | 0.4 | 0.1 | | Expenses relating to short term leases and low value leases | (0.3) | (1.8) | Amounts recognised in the consolidated cash flow statement: | | 52 weeks to 25 June 2023 £m | 52 weeks to 26 June 2022 £m | | --- | --- | --- | | Total cash outflow for lease liabilities | 85.1 | 88.5 | Non-cancellable short term lease rentals are payable as follows: | | 25 June 2023 £m | 26 June 2022 £m | | --- | --- | --- | | Less than one year | 0.6 | 0.1 | | Between one and five years | – | – | | More than five years | – | – | | | 0.6 | 0.1 | The Group has entered into short term leases in respect of warehouses and equipment. At 25 June 2023, future rentals receivable under non-cancellable leases where the Group is the lessor were £2.4m (2022: £2.8m). DFB Furniture plc Annual Report & Accounts 2023 133 Financial Statements # NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED AT 25 JUNE 2023 10 Intangible assets | | Computer software £m | Brand names £m | Goodwill £m | Total £m | | --- | --- | --- | --- | --- | | **Cost** | | | | | | Balance at 27 June 2021 | 44.9 | 14.8 | 509.3 | 569.0 | | Reclassification | (0.2) | – | – | (0.2) | | Additions | 10.6 | – | – | 10.6 | | Disposals | – | – | – | – | | Balance at 26 June 2022 | 55.3 | 14.8 | 509.3 | 579.4 | | Reclassification | 0.9 | – | – | 0.9 | | Additions | 14.5 | – | – | 14.5 | | Disposals | (0.1) | – | – | (0.1) | | **Balance at 25 June 2023** | **70.6** | **14.8** | **509.3** | **594.7** | | **Amortisation and impairments** | | | | | | Balance at 27 June 2021 | 28.5 | 5.1 | – | 33.6 | | Amortisation charge for the period | 9.1 | 1.4 | – | 10.5 | | Impairments | – | 0.5 | 1.0 | 1.5 | | Balance at 26 June 2022 | 37.6 | 7.0 | 1.0 | 45.6 | | Reclassification | 0.9 | – | – | 0.9 | | Amortisation charge for the period | 10.2 | 1.4 | – | 11.6 | | Disposals | (0.1) | – | – | (0.1) | | **Balance at 25 June 2023** | **48.6** | **8.4** | **1.0** | **58.0** | | **Net book value** | | | | | | At 27 June 2021 | 16.4 | 9.7 | 509.3 | 535.4 | | At 26 June 2022 | 17.7 | 7.8 | 508.3 | 533.8 | | **At 25 June 2023** | **22.0** | **6.4** | **508.3** | **536.7** | Goodwill The carrying amount of goodwill is allocated to the following cash generating units: | | Goodwill | | | --- | --- | --- | | | 25 June 2023 £m | 26 June 2022 £m | | DFS Trading Limited | 479.9 | 479.9 | | Sofology Limited | 28.4 | 28.4 | | | **508.3** | **508.3** | DFS furniture plc Annual Report & Accounts 2023 134 ### NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED ### Financial Statements ### AT 25 JUNE 2023  continued DFS Furniture plc ### 135 Goodwill is tested annually for impairment on the basis of value in use. The key assumptions underlying the calculations are those regarding expected future sales volumes, changes in selling prices and direct costs and the discount rate applied. Cash flow forecasts are prepared from the latest financial results and internal budgets for the next four years, which take into account external macroeconomic indicators as well as internal growth expectations for each cash generating unit. Selling prices and related costs are based on past practice and expected future changes in the market. The base case forecast assumes a further underlying contraction in the Group’s market of 5% in FY24, followed by a slow recovery (mid single digit annual growth) in subsequent years. The base case also reflects a cautious assessment of the anticipated growth in the Group’s market share driven by delivery of our strategic initiatives. Revenue is assumed in line with order intake, keeping order bank levels relatively consistent across the assessment period. Gross margin percentage for FY24 is expected to be ahead of FY23 through more effective sourcing and the annualised impact of price increases and freight rate reductions already implemented. Other costs reflect anticipated inflationary increases and benefits from specific cost saving initiatives. Capital expenditure is assumed to remain in line with planned investments and strategic initiatives. A terminal value was then calculated on the basis of the four year plan and an estimated long-term growth rate for the UK upholstery furniture sector of 2.0% (2022: 2.0%). These cash flow forecasts were then discounted at pre-tax discount rates of 13.3% to 14.6% (2022: 10.3% – 11.1%). The discount rates are estimated based on the Group’s weighted average cost of capital (derived from market indices of risk-free rates, market risk premia, peer group analysis and the Group’s own borrowing costs), risk adjusted for an individual unit’s circumstances. For DFS and Sofology, the value in use calculations showed a significant headroom between the calculated value in use and the carrying value of goodwill in the financial statements. A number of sensitivities were then applied to the base case model to assess whether any reasonably possible changes in assumptions could cause an impairment that would be material to these consolidated financial statements. This analysis applied a number of challenging scenarios, including: possible shortfalls in revenue or gross margin compared to plan, a decrease in the long term growth rate of the UK upholstery market, further increases in UK interest rates, and changes in applicable discount rates. On the basis of this analysis the Directors concluded that a reasonably possible change in assumptions would not lead to an impairment being recognised. 11 Investments in subsidiaries The following companies are incorporated in England & Wales, with the exception of Coin Retail Limited (Jersey) which is incorporated in Jersey. They are all wholly owned by the Group and have been consolidated in these financial statements. Principal activity Diamond Holdco 2 Limited 1 Intermediate holding company Diamond Holdco 7 Limited 1 Intermediate holding company DFS Furniture Holdings plc 1 Intermediate holding company DFS Furniture Company Limited 1 Intermediate holding company DFS Trading Limited 1 Furniture retailer Sofology Limited 3 Furniture retailer Sofaworks Limited 1 Dormant Haydock Furniture Limited 3 Dormant The Sofa Delivery Company Limited 1 Contract logistics The Sofa Manufacturing Company Limited 1 Dormant The Sofa Servicing Company Limited 1 Dormant Coin Retail Limited (Jersey) 2 Intermediate holding company Coin Furniture Limited 1 Furniture retailer DFS Spain Limited 1 Furniture retailer Registered offices: 1. Rockingham Way, Redhouse Interchange, Adwick-le-Street, Doncaster DN6 7NA 2. 26 New Street, St Helier, Jersey, JE2 3RA 3. Ashton Road, Golborne, Warrington, WA3 3UL Financial Statements DFB Furniture plc Annual Report & Accounts 2023 # NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED AT 25 JUNE 2023 # 12 Other financial assets | | 25 June 2023 £m | 26 June 2022 £m | | --- | --- | --- | | **Non-current** | | | | Foreign exchange contracts | – | 4.8 | | **Current** | | | | Foreign exchange contracts | 0.7 | 12.8 | Foreign exchange contracts comprise forward contracts which are used to hedge exchange risk arising from the Group's overseas purchases (note 24). # 13 Deferred tax Deferred tax assets and liabilities are attributable to the following: | | 25 June 2023 £m | 26 June 2022 £m | | --- | --- | --- | | Fixed asset timing differences | 4.4 | 3.6 | | IFRS 16 | 7.8 | 10.6 | | Remeasurement of derivatives to fair value | 3.0 | (4.4) | | Tax losses carried forward | – | 0.4 | | Brand names | (1.5) | (1.9) | | Share based payments | 0.7 | 0.7 | | Other temporary differences | 1.1 | 1.8 | | Net tax assets | 15.5 | 10.8 | The deferred tax movement in the period is as follows: | | 52 weeks to 25 June 2023 £m | 52 weeks to 26 June 2022 £m | | --- | --- | --- | | At start of period | 10.8 | 24.7 | | (Charges) credited to the income statement: | | | | Fixed asset timing differences | 0.8 | (3.7) | | Unwind of IFRS 16 transition impact | (2.8) | (1.2) | | Tax losses carried forward | (0.4) | (2.2) | | Brand names | 0.4 | 0.3 | | Share based payments | – | (0.5) | | Derivatives | 1.5 | – | | Other temporary differences | (0.7) | (0.1) | | Recognised in the statement of comprehensive income | 5.9 | (6.5) | | At end of period | 15.5 | 10.8 | Deferred tax assets on losses of £4.7m (2022: £5.3m) have not been recognised as there is uncertainty over the utilisation of these losses. 136 ### NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED ### Financial Statements ### AT 25 JUNE 2023 14 Inventories 25 June 2023 26 June 2022 £m £m Raw materials and consumables 8.9 7.3 Finished goods and goods for resale 62.8 76.0 71.7 83.3 Write-down to net realisable value (15.9) (18.9) 55.8 64.4 In applying its accounting policy for inventory, the Group identifies those items where there is a risk that net realisable value does not exceed cost, due to either the age or condition of the item. An estimate of the net realisable value of such items is made based on the sale of similar items in the past, taking into account expected future opportunities for sale, and their carrying value reduced by an appropriate provision. 15 Trade and other receivables 25 June 2023 26 June 2022 £m £m Trade receivables 7.7 12.6 Prepayments 3.0 11.4 Accrued income 0.1 0.3 Other receivables 0.3 – 11.1 24.3 No interest is charged on trade receivables; the Group bears no credit risk in respect of amounts due from retail customers under interest free credit arrangements. Prepayments and accrued income do not include impaired assets. DFS Furniture plc ### 137 16 Trade payables and other liabilities 25 June 2023 £m 26 June 2022 £m Current Payments received on account 39.1 72.2 Trade payables 97.6 122.5 Other creditors including other tax and social security 34.7 32.5 Accruals 53.5 53.5 224.9 280.7 Payments on account represent contract liabilities under IFRS 15, which will be realised through revenue in the subsequent financial year. Trade payables do not bear interest and are paid within agreed credit terms. For more information on lease liabilities, see note 1.12. Financial Statements # NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED AT 25 JUNE 2023 ## 17 Other financial liabilities | | 25 June 2023 £m | 26 June 2022 £m | | --- | --- | --- | | **Non-current** | | | | Foreign exchange contracts | 0.2 | – | | **Current** | | | | Foreign exchange contracts | 6.7 | – | Foreign exchange contracts comprise forward contracts which are used to hedge exchange risk arising from the Group's overseas purchases (note 24). ## 18 Other interest-bearing loans and borrowings This note provides information about the contractual terms of the Group's interest-bearing loans and borrowings, which are measured at amortised cost. For more information about the Group's exposure to interest rate and foreign currency risk, see note 24. | | 25 June 2023 £m | 26 June 2022 £m | | --- | --- | --- | | Senior revolving credit facility | 167.0 | 95.0 | | Unamortised issue costs | (1.2) | (1.5) | | | 165.8 | 93.5 | The revolving credit facility in place at the year end bore interest at a rate of credit spread adjusted SONIA plus 2.955% and was repayable on 21 December 2025. The revolving credit facility was secured on a first priority basis with fixed and floating charges over substantially all of the assets of the Group. Subsequent to the year end, the Group undertook a refinancing of its debt, replacing the previous £215.0m revolving credit facility with a £200.0m facility maturing in September 2027 and £50.0m of private debt. Refer to note 30 for further details. For more information on the maturity of the Group's lease liabilities, see note 24. ## 19 Employee benefits ### Defined contribution pension plans The Group operates a number of defined contribution pension plans under which contributions by the employees and the Group are administered by trustees in funds separate from the Group's assets. The costs of these schemes are charged to the income statement as they become payable under the rules of the scheme. The total pension cost of the Group for the period was £5.8m (2022: £5.6m). DFB Institute plc Annual Report & Accounts 2023 138 Financial Statements DFI Institute plc Annual Report & Accounts 2023 139 # NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED AT 25 JUNE 2023 # 20 Provisions | | Guarantee provision £m | Property provisions £m | Other provisions £m | Total £m | | --- | --- | --- | --- | --- | | Balance at 26 June 2022 | 8.7 | 4.0 | 6.4 | 19.1 | | Provisions made during the period | 3.8 | 1.7 | – | 5.5 | | Provisions used during the period | (5.0) | (0.6) | (1.2) | (6.8) | | Provisions released during the period | – | (0.5) | (4.2) | (4.7) | | **Balance at 25 June 2023** | **7.5** | **4.6** | **1.0** | **13.1** | | Current | 5.2 | 0.3 | 0.7 | 6.2 | | Non-current | 2.3 | 4.3 | 0.3 | 6.9 | | | **7.5** | **4.6** | **1.0** | **13.1** | The Group offers a long-term guarantee on its upholstery products and in accordance with accounting standards a provision is maintained for the expected future cost of fulfilling these guarantees on products which have been delivered before the reporting date. In calculating this provision the key areas of estimation are the number of future claims, average cost per claim and the expected period over which claims will arise (nearly all claims arise within two years of delivery). The Group has considered the sensitivity of the calculation to these key areas of estimation, and determined that a 10% change in either the average cost per claim or the number of expected future calls would change the value of the calculated provision by £0.8m. The directors have therefore concluded that reasonably possible variations in estimate would not result in a material difference. Property provisions relate to potential obligations under lease guarantees offered to former subsidiary companies, the majority of which expire in 2023, and wear and tear costs for Group properties based on anticipated lease expiries and renewals, which will predominantly be utilised more than five years from the reporting date. Other provisions relate to payment of refunds to customers for payment protection insurance policies and other regulatory costs. Other provisions also include costs associated with the exit from the Netherlands and Spain, see note 29 for details. Financial Statements DFS Furniture plc Annual Report & Accounts 2023 # NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED AT 25 JUNE 2023 ## 21 Dividends The following dividends were recognised and paid during the period: | | Percent per ordinary share | 52 weeks to 25 June 2023 £m | 52 weeks to 26 June 2022 £m | | --- | --- | --- | --- | | Final ordinary dividend for FY21 | 7.5p | – | 19.0 | | Interim ordinary dividend for FY22 | 3.7p | – | 9.4 | | Special dividend | 10.0p | – | 25.4 | | Final dividend for FY22 | 3.7p | 8.6 | – | | Interim ordinary dividend for FY23 | 1.5p | 3.5 | – | | | | **12.1** | **53.8** | The Directors recommend a final dividend of 3.0p in respect of the financial period ended 25 June 2023, resulting in a total proposed dividend of £6.9m. Subject to shareholder approval it is intended that this dividend will be paid on 29 December 2023. DFS Furniture plc shares will trade ex-dividend from 30 November 2023 and the record date will be 1 December 2023. This dividend has not therefore been recognised as a liability in these financial statements. ## 22 Capital and reserves ### Share capital The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. | | Number of shares '000 | Ordinary shares £m | | --- | --- | --- | | Ordinary shares of £0.10 each | | | | *Allotted, called up and fully paid* | | | | At the start of the financial period | 258,657 | 25.9 | | Cancelled during the financial period | (17,959) | (1.8) | | At the end of the financial period | **240,678** | **24.1** | On 9 November 2022 17,958,600 ordinary shares which had been held in treasury were cancelled. ### Share premium The share premium account represents the surplus of consideration received for issued ordinary share capital over its nominal value. This arose on the issue of ordinary shares on 11 March 2015. ### Merger reserve The merger reserve arose on the issue of shares in the Company in exchange for minority interests in the issued share capital of a subsidiary company on 10 March 2015. ### Capital redemption reserve The capital redemption reserve represents the par value of cancelled treasury shares. ### Treasury shares Where the Company purchases the Company's equity share capital into treasury (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, reissued or disposed of. During the period ended 25 June 2023 21,694,437 shares (2022: 2,585,666) were acquired at a total cost of £30.9m (2022: £4.4m). 17,958,600 treasury shares (2022: nil) were cancelled on 9 November 2022. None of the Company's own ordinary shares (2022: 63,444) were used to satisfy employee share based payment awards during the year. At 25 June 2023 the company had 6,533,700 ordinary shares held in treasury (2022: 2,797,863). 140 Financial Statements # NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED AT 25 JUNE 2023 ## 22 Capital and reserves continued ### Employee Benefit Trust shares The Employee Benefit Trust holds ordinary shares which are issued for the purpose of satisfying future employee share based payments awards and is consolidated into the Group financial statements. During the period ended 25 June 2023 the Company acquired and issued no ordinary shares to the Employee Benefit Trust (2022: 3,000,000). 172,800 shares were used during the period (2022: 824,009). At 25 June 2023 the Employee Benefit Trust held 3,686,178 of the Company's ordinary shares (2022: 4,040,978). ## 23 Financial instruments: categories and fair value | | 25 June 2023 £m | 26 June 2022 £m | | --- | --- | --- | | *Financial assets* | | | | Derivatives in designated hedging relationships | 0.7 | 17.6 | | Loans and receivables | 8.0 | 12.6 | | Cash | 26.7 | 17.3 | | *Financial liabilities* | | | | Derivatives in designated hedging relationships | (6.9) | – | | Senior revolving credit facility | (165.8) | (93.5) | | Bank overdraft | – | (12.3) | | Amortised cost | (164.2) | (195.1) | | Finance lease obligations | (412.2) | (445.4) | All derivatives are categorised as Level 2 under the requirements of IFRS 7 as they are valued using techniques based significantly on observed market data. The Directors have reviewed for expected credit losses and consider the amount of any such losses to be immaterial. The Directors consider that the fair values of each category of the Group's financial instruments are the same as their carrying values in the Group's balance sheet. DFB furniture plc Annual Report & Accounts 2023 14 Financial Statements DFB Institute plc Annual Report & Accounts 2023 # NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED AT 25 JUNE 2023 # 24 Financial instruments risk management The objectives, policies and processes governing the treasury activities of the Group are reviewed and approved by the Board. The Group's documented treasury policy includes details of authorised counterparties, instrument types and transaction limits and principles for the management of liquidity interest and foreign exchange risks. As part of its strategy for the management of these risks the Group uses derivative financial instruments. The Group does not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes. # Liquidity risk The Group manages its cash and borrowing requirements to ensure that it has sufficient liquid resources to meet its obligations as they fall due while making efficient use of the Group's financial resources. The table below shows the maturity analysis of the undiscounted remaining contractual cash flows (including interest) of the Group's financial liabilities: | | Less than 1 year £m | 1 to 2 years £m | 2 to 5 years £m | Over 5 years £m | Total £m | | --- | --- | --- | --- | --- | --- | | 25 June 2023 | | | | | | | Trade and other payables | 151.1 | – | – | – | 151.1 | | Lease liabilities | 77.2 | 74.2 | 179.1 | 156.0 | 486.5 | | Senior revolving credit facility | 13.0 | 13.0 | 173.2 | – | 199.2 | | Other liabilities | 6.2 | 2.7 | 1.6 | 2.6 | 13.1 | | | **247.5** | **89.9** | **353.9** | **158.6** | **849.9** | | Derivatives: net settled | – | – | – | – | – | | Derivatives: gross settled | – | – | – | – | – | | Cash in flows | (119.1) | (12.0) | – | – | (131.1) | | Cash out flows | 128.2 | 9.8 | – | – | 138.0 | | Total cash flows | **256.6** | **87.7** | **353.9** | **158.6** | **856.8** | | 26 June 2022 | | | | | | | Trade and other payables | 176.0 | – | – | – | 176.0 | | Lease liabilities | 84.3 | 79.0 | 200.8 | 179.0 | 543.1 | | Senior revolving credit facility | 3.5 | 3.5 | 96.6 | – | 103.6 | | Other liabilities | 12.8 | 3.0 | 1.3 | 2.0 | 19.1 | | | **276.6** | **85.5** | **298.7** | **181.0** | **841.8** | | Derivatives: net settled | – | – | – | – | – | | Derivatives: gross settled | – | – | – | – | – | | Cash in flows | (143.7) | (68.3) | – | – | (212.0) | | Cash out flows | 143.0 | 51.6 | – | – | 194.6 | | Total cash flows | **275.9** | **68.8** | **298.7** | **181.0** | **824.4** | 142 Financial Statements DFB furniture plc Annual Report & Accounts 2023 # NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED AT 25 JUNE 2023 ## 24 Financial instruments: risk management continued ### Interest rate risk management The Group's operating profit is affected by the cost of providing interest free credit to its customers. This cost is in turn impacted by interbank lending rates, including SONIA. While the relationship is not wholly direct, an increase in SONIA of one percentage point would reduce the Group's reported revenue by 0.6%. The Group is also exposed to interest rate risk on its senior revolving credit facility, which bears interest at a floating rate of credit spread adjusted SONIA plus a margin (2.955% at 25 June 2023), no related interest rate hedging was in place as at 25 June 2023. Based on drawn amounts under the facility at that date, an increase of one percentage point in SONIA would increase the Group's annual interest cost by £1.7m. ### Foreign exchange risk management The Group is exposed to the risks of exchange rate fluctuations on the purchase of products denominated in foreign currencies. Currency requirements are assessed by analysis of historic purchasing patterns by month, adjusted as appropriate to take into account current trading expectations. The Group's treasury policy allows for the use of forward foreign exchange contracts to hedge the exchange rate risk arising from these anticipated future purchases up to 16 months in advance. These contracts are designated as cash flow hedges. The table below summarises the forward foreign exchange contracts outstanding at the period end: | | Notional amount | | Fair value | | | --- | --- | --- | --- | --- | | | 25 June 2023 £m | 26 June 2022 £m | 25 June 2023 £m | 26 June 2022 £m | | Derivatives in designated hedging relationships | | | | | | US Dollar | 137.9 | 194.6 | (6.2) | 17.6 | The carrying amounts of the Group's foreign currency denominated monetary assets and monetary liabilities at the reporting date are as follows: | | Assets | | Liabilities | | | --- | --- | --- | --- | --- | | | 25 June 2023 £m | 26 June 2022 £m | 25 June 2023 £m | 26 June 2022 £m | | US Dollar | 12.9 | 1.5 | (18.8) | (10.3) | | Euro | 3.0 | 4.2 | (0.2) | (0.2) | ### Foreign currency sensitivity analysis The Group's primary foreign currency exposures are to US Dollars and the Euro. The table below illustrates the hypothetical sensitivity of the Group's reported profit and closing equity to a 10% weakening of these currencies against Sterling, assuming all other variables were unchanged. The sensitivity rate of 10% represents the directors' assessment of a reasonably possible change, based on historic volatility. The analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the period end for a 10% change in foreign currency rates. The analysis assumes that exchange rate fluctuations on currency derivatives that form part of an effective cash flow hedge relationship affect the cash flow hedging reserve in equity. Positive figures represent an increase in profit or equity. | | Income statement | | Equity | | | --- | --- | --- | --- | --- | | | 52 weeks to 25 June 2023 £m | 52 weeks to 26 June 2022 £m | 52 weeks to 25 June 2023 £m | 52 weeks to 26 June 2022 £m | | US Dollar | 0.6 | 0.9 | (13.2) | (20.8) | | Euro | (0.3) | (0.4) | – | – | 48 ### NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED ### Financial Statements ### AT 25 JUNE 2023  continued DFS Furniture plc ### 144 A 10% strengthening of the above currencies against the Sterling at the period end would have had the equal but opposite effect on the above currencies to the amounts shown above, on the basis that all other variables remain constant. IFRS 9 requires the Group to ensure that hedge accounting relationships are aligned with the Group’s risk management objectives and strategy and to apply a qualitative and forward-looking approach to assessing hedge effectiveness. The Group determines the existence of an economic relationship between the hedging instrument and the hedged item based on the currency, amount and timing of their respective cash flows. The Group assesses whether the derivative designated in each hedging relationship is expected to be and, has been, effective in offsetting cash flows of the hedged item using the hypothetical derivative method. In these hedge relationships, the main sources of ineffectiveness are: – the effect of counterparties and the Group’s own credit risk on the fair value of the forward foreign exchange contracts, which is not reflected in the change in the fair value of the hedged cash flows attributable to the change in exchange rates; and – changes in the timing of the hedged transactions. Financial risk management Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group’s investment securities. Investments of cash, borrowings and derivative instruments are transacted only through counterparties meeting the credit rating and investment criteria specified in the Group’s treasury policy. The Group’s exposure and the credit ratings of its counterparties are regularly reviewed. Concentrations of risk are mitigated through the use of multiple counterparties and by counterparty limits which are reviewed and approved by the Board. The Group considers that expected credit losses on derivative assets arising from the default of counterparties are not material. The Group does not have any significant credit risk exposure to any single counterparty or any group of counterparties having similar characteristics. Capital management The capital structure of the Group consists of debt, as analysed in note 27, and equity attributable to the equity holders of the parent company, comprising issued capital, reserves and retained earnings as shown in the consolidated statement of changes in equity. The Group manages its capital with the objective that all entities within the Group continue as going concerns while maintaining an efficient structure to minimise the cost of capital. The Group is not restricted by any externally imposed capital requirements. 25 Share based payments The Group has four share based payment schemes in operation: Long Term Incentive Plan (LTIP) The LTIP is a discretionary executive reward plan that allows the Group to grant conditional share awards or nil-cost options to selected executives at the discretion of the Remuneration Committee. The scheme is focused on the senior leadership roles in the Group, including Executive Directors. The maximum value of LTIP awards granted to an individual is 150% of base salary, although the Remuneration Committee may in exceptional circumstances increase this to 300%. LTIP awards vest after a three year performance period subject to the achievement of performance measures based on earnings per share and total shareholder return targets. Further information on LTIP performance targets and awards made to Directors is given in the Directors’ Remuneration Report on pages 78 to 99. Based on the scheme rules,the Group may settle the vested shares in cash sum equivalent to the market value of the shares and this decision is driven solely at the discretion of the Board. During the year, no LTIP shares vested, so no cash payments were made to participating employees (2022: £1.5m). As there is no present obligation that the Group will settle future awards in cash, the Group will continue to recognise the LTIP as an equity settled scheme. Deferred bonus scheme (DBS) 25% of any bonus earned by the Executive Directors is granted as a deferred award under the Deferred Bonus Plan. The deferred award ordinarily has a vesting period of three years, and its vesting is conditional on the participant’s continued employment with the Group at the end of the vesting period unless they are a ‘good leaver’. Financial Statements DPS furniture plc Annual Report & Accounts 2023 45 # NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED AT 25 JUNE 2023 ## 25 Share based payments continued ### Restricted Share Plan (RSP) The RSP is also a discretionary reward plan under which conditional share awards or nil-cost options may be granted to individuals in key executive roles in the Group, excluding Executive Directors and other recipients of LTP awards. Awards may not exceed 50% of an individual's salary for a particular financial year. RSP awards vest after a three-year performance period (other than those granted shortly after Admission vested in July 2017). For awards granted on or after 1 July 2019, 50% of awards made to each individual are subject to either an earnings per share or underlying profit before tax performance target, remaining awards are not subject to other performance conditions. Based on the scheme rules, the Group may settle the vested shares in cash sum equivalent to the market value of the shares and this decision is driven solely at the discretion of the Board. During the year, the Group settled part of the vested RSP shares by offering cash payments (£0.3m, FY22, £1.2m) to participating employees. As there is no present obligation that the Group will settle future awards in cash, the Group will continue to recognise the RSP as an equity settled scheme. ### Save as You Earn (SAYE) SAYE schemes are currently available to all employees in the UK and Republic of Ireland, with invitations to participate generally issued on an annual basis and subject to HHRC rules. The current maximum monthly savings limit for the schemes is £500. Options are granted at the prevailing market share price less a discount of 20% and vest three years from the date of grant. The movements in outstanding awards under each of the schemes are summarised below: | | 52 weeks to 25 June 2023 | | | | 52 weeks to 26 June 2022 | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | LTP No. | OBS No. | RSP No. | SAYE No. | LTP No. | OBS No. | RSP No. | SAYE No. | | Outstanding at the beginning of the period | 1,982,263 | 93,938 | 2,692,875 | 4,116,029 | 1,929,231 | - | 3,113,529 | 4,197,239 | | Granted | 1,547,809 | - | 2,422,628 | 10,102,311 | 675,766 | 93,938 | 955,496 | 1,094,094 | | Forfeited | (526,237) | (33,727) | (535,072) | (283,551) | (77,435) | - | (347,775) | (151,159) | | Exercised | - | - | (399,060) | - | (545,299) | - | (1,028,375) | (252,598) | | Lapsed | (436,289) | - | (415,394) | (30,622) | - | - | - | (35,689) | | Cancelled | - | - | - | (2,978,743) | - | - | - | (735,858) | | Outstanding at the end of the period | 2,567,546 | 60,211 | 3,765,977 | 10,925,424 | 1,982,263 | 93,938 | 2,692,875 | 4,116,029 | | Weighted average remaining contractual life (months) | 18.8 | 15.9 | 20.4 | 28.1 | 15.9 | 27.6 | 16.0 | 19.4 | | Weighted average share price at exercise | - | - | £1.15 | - | £2.45 | - | £1.64 | £2.28 | At 25 June 2023 the weighted average exercise price of outstanding SAYE options was £1.01 (2022: £1.81) and the range of exercise prices was £0.88 to £2.18 (2022: £1.62 to £2.18). At 25 June 2023 there were 408,057 (2022: 148,051) exercisable SAYE options, with a weighted average exercise price of £1.88 (2022: £1.80). There were no exercisable LTP, DBP or RSP options at 25 June 2023 (2022: nil). Financial Statements DFB Furniture plc Annual Report & Accounts 2023 46 # NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED AT 25 JUNE 2023 ## 25 Share based payments continued ### Fair value calculations The LTIP, DBIS, RSP and SAYE awards are all accounted for as equity-settled under IFRS 2. The fair value of LTIP awards which are subject to a market based performance condition (total shareholder return) is calculated using a stochastic (Monte Carlo) option pricing model. RSP awards, SAYE awards and LTIP awards subject to a non-market based performance condition (earnings per share) are valued using a Black-Scholes option pricing model. The inputs to these models for awards granted during the financial period are detailed below: | | LTIP | RSP | SAYE | | --- | --- | --- | --- | | Grant date | 12 October 2022 and 14 December 2022 | 12 October 2022 | 21 November 2022 | | Share price at date of grant | £1.05 and £1.51 | £1.05 | £1.45 | | Exercise price | Nil | Nil | £0.89 | | Volatility | 56.5% to 42.7%^{1} | —^{2} | 47.8% | | Expected life | 3 years | 3 years | 3.5 years | | Risk free rate | 3.5% to 4.5%^{1} | —^{2} | 3.2% | | Dividend yield | —^{3} | 7.1% | 5.2% | | *Fair value per share* | | | | | Market based performance conditions | £0.39 to £0.69^{1} | — | — | | Non-market based performance condition | £0.91 to £1.40^{1} | £0.85 | — | | No performance condition | — | £0.85 | £0.88 | 1. The 2022 LTIP grant included a number of required holding periods, going on range of volatility and fair values. 2. Volatility and risk free rates do not impact the fair value calculation for awards with no exercise price or market based performance condition. 3. LTIP participants are entitled to receive dividend equivalents on unvested awards therefore dividend yield does not impact the fair value calculation. Expected volatility is calculated over the period of time commensurate with the relevant performance period or holding period. Expected life has been assumed to equate to the vesting period of the awards. The total share based payment expense included in administration costs in respect of the above schemes was £1.8m (2022: £2.6m). Financial Statements DFB Furniture plc Annual Report & Accounts 2023 47 # NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED AT 25 JUNE 2023 # 26 Net cash from operating activities | | Note | 52 weeks to 25 June 2023 £m | 52 weeks to 26 June 2022 £m | | --- | --- | --- | --- | | Profit for the period | | **26.2** | 31.4 | | Adjustments for: | | | | | Income tax expense | 6 | **7.1** | 13.4 | | Finance income | 5 | **(0.2)** | – | | Finance expenses | 5 | **34.3** | 29.1 | | Depreciation of property, plant and equipment | 8 | **22.1** | 20.7 | | Depreciation of right of use assets | 9 | **58.4** | 58.5 | | Amortisation of intangible assets | 10 | **11.6** | 10.5 | | Impairment of assets | 8 | **2.0** | 6.0 | | Gain on sale of property, plant and equipment | 3 | **(0.8)** | (1.1) | | (Gain)/loss on disposal of right of use assets | 3 | **(1.2)** | 0.1 | | Settlement of share based payments | | **(0.3)** | (2.7) | | Share based payment expense | 25 | **1.8** | 2.6 | | Foreign exchange impact on cash flow hedges | | **1.4** | – | | Decrease/(increase) in trade and other receivables | | **13.2** | (7.2) | | Decrease/(increase) in inventories | | **8.6** | (3.5) | | Decrease in trade and other payables | | **(55.8)** | (16.6) | | Decrease in provisions | | **(6.0)** | (1.7) | | Net cash from operating activities before tax | | **122.4** | 139.7 | | Tax paid | | **(0.7)** | (6.8) | | **Net cash from operating activities** | | **121.7** | 132.9 | Financial Statements DFB Furniture plc Annual Report & Accounts 2023 # NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED AT 25 JUNE 2023 # 27 Net debt | | 26 June 2022 £m | Cash flow £m | Other non-cash changes £m | 25 June 2023 £m | | --- | --- | --- | --- | --- | | Cash in hand, at bank | 17.3 | 9.4 | – | **26.7** | | Bank overdraft | (12.3) | 12.3 | – | – | | Cash and cash equivalents (including bank overdraft) | 5.0 | 21.7 | – | **26.7** | | Senior revolving credit facility | (93.5) | (72.0) | (0.3) | **(165.8)** | | Lease liabilities | (445.4) | 61.6 | (27.6) | **(411.4)** | | Total net debt | (533.9) | 11.3 | (27.9) | **(550.5)** | | | 27 June 2021 £m | Cash flow £m | Other non-cash changes £m | 26 June 2022 £m | | --- | --- | --- | --- | --- | | Cash in hand, at bank | 22.7 | (5.4) | – | 17.3 | | Bank overdraft | (16.7) | 4.4 | – | (12.5) | | Cash and cash equivalents (including bank overdraft) | 6.0 | (1.0) | – | 9.0 | | Senior revolving credit facility | (23.1) | (70.0) | (0.4) | (93.5) | | Lease liabilities | (454.1) | 63.5 | (54.8) | (445.4) | | Total net debt | (471.2) | (7.5) | (55.2) | (533.9) | Non-cash changes include the addition of leases within the period of £25.0m (2022: £51.9m), lease remeasurements of £7.0m (2022: £5.4m), disposals of leases of £4.7m (2022: £2.5m) and the amortisation of capitalised debt issue costs of £0.3m (2022: £0.4m). # 28 Related parties # Key Management Personnel At 25 June 2023, Directors of the Company held 0.4% of its issued ordinary share capital (2022: 0.4%), and a further 0.1% (2022: 0.1%) was held by other key management personnel. The compensation of key management personnel (including the Directors) is as follows: | | 52 weeks to 25 June 2023 £m | 52 weeks to 26 June 2022 £m | | --- | --- | --- | | Emoluments | **3.5** | 4.0 | | Share based payments expense | **0.1** | 0.8 | | Company contributions to money purchase schemes | **0.1** | 0.3 | | | **3.7** | 5.1 | A number of key management personnel hold positions in other companies that result in them having control or significant influence over these companies. One such relationship was formed during the period, with an entity which the Group already transacted. The terms and conditions of these transactions were no more favourable than those available, or which might reasonably be expected to be available, in similar transactions with other companies with no relationship with members of key management, and were conducted on an arm's length basis. The aggregate value of transactions related to key management personnel and entities over which they have control or significant influence was £4.3m, and the outstanding balance at the year end was £0.6m. From time to time key management personnel or tier related parties may buy goods from the Group. These purchases are on the same terms and conditions as those entered into by other Group employees or customers. 14 Financial Statements DFS Furniture plc Annual Report & Accounts 2023 # NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED AT 25 JUNE 2023 ## 29 Discontinued operations During the period to 26 June 2022 the Group took the decision to exit its operations in the Netherlands and Spain. The cessation of these operations was completed in the year ended 25 June 2023, with the order book at the point of closure being delivered during this year. The revenues and expenses of the discontinued operations have therefore been eliminated from the consolidated income statement for the Group's continuing operations and are shown as a separate single post-tax line item, consistent with the presentation adopted for the year ended 26 June 2022. Prior to being classified as discontinued operations, these operations were included within the DFS segment of the Group's segmental analysis. ### Results from discontinued operations: | | 52 weeks to 25 June 2023 | | 52 weeks to 26 June 2022 | | | --- | --- | --- | --- | --- | | | Underlying £m | Non-underlying £m | Total £m | Total £m | | **Revenue** | **2.0** | **–** | **2.0** | **9.0** | | Cost of sales | **(1.1)** | **–** | **(1.1)** | **(4.6)** | | **Gross profit** | **0.9** | **–** | **0.9** | **4.4** | | Selling and distribution costs | **(1.1)** | **–** | **(1.1)** | **(5.0)** | | Administrative expenses | **–** | **3.8** | **3.8** | **(5.3)** | | **Operating (loss)/profit before depreciation, amortisation and impairment** | **(0.2)** | **3.8** | **3.6** | **(5.9)** | | Depreciation | **–** | **–** | **–** | **(1.5)** | | Impairment | **–** | **–** | **–** | **(6.0)** | | **Operating (loss)/profit** | **(0.2)** | **3.8** | **3.6** | **(13.4)** | | Finance expenses | **–** | **–** | **–** | **(0.5)** | | **(Loss)/profit before tax** | **(0.2)** | **3.8** | **3.6** | **(13.7)** | | Taxation | **(0.1)** | **(0.3)** | **(0.4)** | **0.9** | | **(Loss)/profit for the period from discontinued operations** | **(0.3)** | **3.5** | **3.2** | **(12.8)** | ### Non-underlying items from discontinued operations: | | 52 weeks to 25 June 2023 £m | 52 weeks to 26 June 2022 £m | | --- | --- | --- | | Impairment of right of use assets | **–** | **5.1** | | Impairment of other assets | **–** | **1.4** | | Impairment of goodwill and intangible assets | **–** | **1.5** | | Other closure (credits)/costs | **(3.8)** | **5.3** | | | **(3.8)** | **11.3** | The closure credits in the year relate to the release of provisions made in FY22 for costs associated with the closure of these operations where the actual costs incurred were lower than had been expected when the provision was made. 140 ### NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED ### Financial Statements ### AT 25 JUNE 2023  continued DFS Furniture plc ### 150 Cash flows from discontinued operations: 52 weeks to 25 June 2023 £m 52 weeks to 26 June 2022 £m Net cash from operating activities (0.6) 1.1 Net cash used in investing activities – – Net cash used in financing activities (0.4) (1.4) Net decrease in cash and cash equivalents (1.0) (0.3) Cash and cash equivalents at beginning of period 1.3 1.6 Net cash and cash equivalents (including bank overdraft) at end of period 0.3 1.3 30 Subsequent events Refinancing On 1 September, the Group successfully completed a refinancing of its £215.0m revolving credit facility, replacing it with a new £200.0m revolving credit facility and £50.0m of senior secured notes. The £200.0m revolving credit facility is held with a syndicate of banks and matures in September 2027, with the option of a one year extension, and attracts variable rate interest (credit spread adjusted SONIA plus a margin). The senior secured notes attract fixed rate interest and comprise two tranches: £25.0m maturing September 2028 and £25.0m maturing September 2030. Both of the new debt facilities are subject to the same financial covenants as the previous facility, being: 3.0x Net Debt / EBITDA and 1.5x Fixed Charge Cover, and are assessed on a six-monthly basis at June and December. As a consequence of the refinancing, non-underlying finance costs of £1.9m will be recognised in the income statement in FY24 comprising £0.8 m in associated professional fees and the write-off of £1.1m of unamortised issue costs on the previous £215.0m loan. Restructuring On 11 September, a consultation process was commenced on the potential closure of the smallest of the Group’s UK factories. If the closure goes ahead, it is expected to result in non-underlying restructuring costs of approximately £5.5m, including redundancy costs and asset impairment. Financial Statements # COMPANY BALANCE SHEET AT 25 JUNE 2023 | | Note | 25 June 2023 £m | 26 June 2022 £m | | --- | --- | --- | --- | | **Non-current assets** | | | | | Investments | 2 | **234.5** | 252.7 | | Amounts due from group companies | 3 | **275.0** | 205.1 | | | | **529.5** | 457.8 | | **Current liabilities** | | | | | Amounts due to group companies | 4 | **(63.3)** | (20.1) | | **Net assets** | | **466.2** | 437.7 | | **Capital and reserves** | | | | | Called up share capital | 5 | **24.1** | 25.9 | | Share premium | 5 | **40.4** | 40.4 | | Merger reserve | 5 | **18.6** | 18.6 | | Capital redemption reserve | 5 | **359.6** | 357.8 | | Treasury shares | 5 | **(10.1)** | (4.9) | | Shares held by employee benefit trust | 5 | **(6.6)** | (6.9) | | Retained earnings | | **40.2** | 6.8 | | Equity shareholders' funds | | **466.2** | 437.7 | DFB furniture plc Annual Report & Accounts 2023 251 The Company's profit for the period was £70.0m (2022: £10.0m). These financial statements were approved by the board of directors on 21 September 2023 and were signed on its behalf by **Tim Stacey** Chief Executive Officer **John Fallon** Chief Financial Officer Company registered number: 07236769 Financial Statements ## COMPANY STATEMENT OF CHANGES IN EQUITY AT 25 JUNE 2023 | | Share capital £m | Share premium £m | Merger reserve £m | Capital redemption reserve £m | Treasury shares £m | Shares held by employee benefit trust £m | Retained earnings £m | Total equity £m | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | **Balance at 27 June 2021** | **25.9** | **40.4** | **18.6** | **357.8** | **(0.7)** | **(0.2)** | **52.0** | **493.8** | | Profit for the period | – | – | – | – | – | – | 10.0 | 10.0 | | Other comprehensive income | – | – | – | – | – | – | – | – | | Total comprehensive income for the period | – | – | – | – | – | – | 10.0 | 10.0 | | Dividends paid | – | – | – | – | – | – | (53.8) | (53.8) | | Purchase of own shares | – | – | – | – | (4.4) | – | – | (4.4) | | Treasury shares issued | – | – | – | – | 0.2 | – | (0.2) | – | | Purchase of shares by Employee Benefit Trust | – | – | – | – | – | (8.1) | – | (8.1) | | Employee Benefit Trust shares issued | – | – | – | – | – | 1.4 | (1.0) | 0.4 | | Settlement of share based payments | – | – | – | – | – | – | (2.7) | (2.7) | | Share based payments | – | – | – | – | – | – | 2.6 | 2.6 | | Tax recognised directly in equity | – | – | – | – | – | – | (0.1) | (0.1) | | **Balance at 26 June 2022** | **25.9** | **40.4** | **18.6** | **357.8** | **(4.9)** | **(6.9)** | **6.8** | **437.7** | | Profit for the period | – | – | – | – | – | – | 70.0 | 70.0 | | Other comprehensive income | – | – | – | – | – | – | – | – | | Total comprehensive income for the period | – | – | – | – | – | – | 70.0 | 70.0 | | Dividends paid | – | – | – | – | – | – | (12.1) | (12.1) | | Purchase of own shares | – | – | – | – | (30.9) | – | – | (30.9) | | Cancellation of treasury shares | (1.8) | – | – | 1.8 | 25.7 | – | (25.7) | – | | Employee Benefit Trust shares issued | – | – | – | – | – | 0.3 | (0.3) | – | | Settlement of share based payments | – | – | – | – | – | – | (0.3) | (0.3) | | Share based payments | – | – | – | – | – | – | 1.8 | 1.8 | | **Balance at 25 June 2023** | **24.1** | **40.4** | **18.6** | **359.6** | **(10.1)** | **(6.6)** | **40.2** | **466.2** | DFB Furniture plc Annual Report & Accounts 2023 152 Financial Statements DFB Furniture plc Annual Report & Accounts 2023 A3 # NOTES TO THE COMPANY FINANCIAL STATEMENTS AT 25 JUNE 2023 ## 1 Accounting policies ### Basis of preparation The financial statements are prepared in accordance with Financial Reporting Standard 101 (Reduced Disclosure Framework IFRS 101). In preparing these financial statements, the Company applies the recognition, measurement and disclosure requirements of international accounting standards in conformity with the requirements of the Companies Act 2006 (UK-adopted IFRSs), but makes amendments where necessary in order to comply with Companies Act 2006. The Company has applied the exemption available under IFRS 101 in respect of the following disclosures: - a cash flow statement and related notes - comparative period reconciliations - disclosures in respect of transactions with wholly owned subsidiaries - disclosures in respect of capital management - the impact of new but not yet effective IFRSs As the consolidated accounts of the Company include the equivalent disclosures, the Company has also taken the exemption available under IFRS 101 in respect of IFRS 2 Share Based Payments disclosures of group settled share based payments. Under Section 408 of the Companies Act 2006, the Company is not required to present its own profit and loss account. The Company's profit for the period was £70.0m (2022: £10.0m). The Company proposes to continue to adopt the reduced disclosure framework of IFRS 101 in its next financial statements. The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented in these financial statements. ### Going concern The Company heads a group which at 25 June 2023 had a £215.0m revolving credit facility maturing in December 2025. On 1 September 2023 the Group refinanced its borrowing facilities, replacing the previous £215.0m facility with a combination of a new £200.0m revolving credit facility with a consortium of lending banks maturing in September 2027 and £50.0m of private placement debt, £25.0m of which matures in September 2028 and £25.0m in September 2030. At 18 September 2022, £65.2m of the revolving credit facility remained undrawn, in addition to cash-in-hand, at bank of £2.4m. The Directors have considered the projected trading and cash flow forecasts for the Company, including the inherent uncertainty in forecasting the impact of the current economic and political environment, and are confident that the Company has adequate resources to continue to meet all liabilities as and when they fall due for at least twelve months from the date of approval of these financial statements. Accordingly, the financial statements are prepared on a going concern basis. ### Investments Investments are stated at cost, less any accumulated impairment losses. Carrying values of investments in subsidiary companies are reviewed at each reporting date to determine whether there is any indication of impairment. If any such exists, then the investment's recoverable amount is estimated based on a value in use calculation. An impairment loss is recognised if the carrying amount of the investment exceeds its estimated recoverable amount. Impairment losses are recognised in profit or loss. ### Amounts due from and to group companies Amounts receivable from or payable to other companies within the Company's group are recognised initially at fair value and subsequently measured at amortised cost less any provision for impairment. ### 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 a business combination, or items recognised directly in equity or other comprehensive income. Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. ### Share based payments Awards (options or conditional shares) granted by the Company over its own shares to the employees of subsidiary companies are recognised in the Company's own financial statements as an increase in the cost of investment in subsidiaries. The amount recognised is equivalent to the equity-settled share based payment charge recognised in the consolidated financial statements. The corresponding credit is recognised directly in equity. ### Treasury shares Where the Company purchases the Company's equity share capital into treasury (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, reissued or disposed of. ### Audit fees Amounts receivable by the Company's auditor and its associates in respect of services to the Company and its associates, other than the audit of the Company's financial statements have not been disclosed as the information is required instead to be disclosed on a consolidated basis in the consolidated financial statements. ### Directors' remuneration and staff numbers The Company has no employees other than the Directors, who did not receive any remuneration for their services directly from the Company in either the current or preceding period. See note 28 of the consolidated financial statements for Key Management Personnel compensation. ![img-4.jpeg](img-4.jpeg) ### NOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUED ### Financial Statements ### AT 25 JUNE 2023  | | 52 weeks to | | 52 weeks to | | | --- | --- | --- | --- | --- | | | 25 June 2023 | | 26 June 2022 | | | Shares in subsidiary undertakings | | £m | | £m | Cost and net book value At the start of the financial period 252.7 250.1 Additions 1.8 2.6 At the end of the financial period 254.5 252.7  made in respect of share based payments schemes for the Group’s employees. As a consequence of the Company’s share price at 25 June 2023, a value in use calculation     assumptions would not lead to an impairment being recognised.  s479A of the Companies Act 2006. DFS Furniture plc will guarantee the debts and liabilities of these entities in accordance with Section 479C of the Companies Act 2006.  25 June 2023 26 June 2022 £m £m Amounts due from subsidiary undertakings (non-interest bearing, repayable on demand) 275.0 205.1   DFS Furniture plc 25 June 2023 26 June 2022 £m £m Amounts due to subsidiary undertakings (non-interest bearing, repayable on demand) 63.3 20.1  Share capital The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. Number of shares Ordinary shares ‘000 £m Ordinary shares of £0.10 each Allotted, called up and fully paid At the start of the financial period 258,637 25.9 Cancelled during the financial period (17,959) (1.8) At the end of the financial period 240,678 24.1 On 9 November 2022 17,958,600 ordinary shares which had been held in treasury were cancelled. ### 154 Financial Statements DFB Furniture plc Annual Report & Accounts 2023 155 # NOTES TO THE COMPANY FINANCIAL STATEMENTS AT 25 JUNE 2023 5 Capital and reserves continued Share premium The share premium account represents the surplus of consideration received for issued ordinary share capital over its nominal value. This arose on the issue of ordinary shares on 11 March 2015. Merger reserve The merger reserve arose on the issue of shares in the Company in exchange for minority interests in the issued share capital of a subsidiary company on 10 March 2015. Capital redemption reserve The capital redemption reserve represents the par value of cancelled treasury shares. Treasury shares Where the Company purchases the Company's equity share capital into treasury (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, reissued or disposed of. During the period ended 25 June 2023 21,694,437 shares (2022: 2,585,666) were acquired at a total cost of £30.9m (2022: £4.4m), 17,958,600 treasury shares (2022: nil) were cancelled on 9 November 2022. None of the Company's own ordinary shares (2022: £3,444) were used to satisfy employee share based payment awards. At 25 June 2023 the company had 6,533,700 ordinary shares held in treasury (2022: 2,797,863). Employee Benefit Trust shares The Employee Benefit Trust holds ordinary shares which are issued for the purpose of satisfying future employee share based payments awards. During the period ended 25 June 2023 the Company acquired and issued no ordinary shares to the Employee Benefit Trust (2022: 5,000,000), 172,800 shares were used during the period (2022: 824,009). At 25 June 2023 the Employee Benefit Trust held 3,686,178 of the Company's ordinary shares (2022: 4,040,978). Financial Statements # FINANCIAL HISTORY | | | FY23 | FY22 | FY21 Restated | FY20 | FY19 52 weeks | FY18 48 weeks | | --- | --- | --- | --- | --- | --- | --- | --- | | | | IFRS 18 | | | IFRS 17 | | | | Gross sales | £m | **1,423.6** | 1,474.6 | 1,359.4 | 935.0 | 1,287.2 | 1,165.0 | | Revenue | £m | **1,088.9** | 1,149.8 | 1,060.2 | 724.5 | 996.2 | 901.0 | | Underlying EBITDA | £m | **157.4** | 175.9 | 224.0 | 61.9 | 90.2 | 65.1 | | Underlying profit/(loss) before tax excluding brand amortisation | £m | **30.6** | 60.3 | 109.2 | (63.1) | 50.2 | 28.2 | | Profit/(loss) before tax from continuing operations | £m | | 58.5 | 102.6 | (81.2) | 43.6 | 22.4 | | Basic earnings per share from continuing operations | p | **9.8** | 17.3 | 35.8 | (31.4) | 16.5 | 8.6 | | Ordinary dividends per share | p | **4.5** | 7.4 | 7.5 | – | 11.2 | 11.2 | | Special dividends per share | p | – | 10.0 | – | – | – | – | | Purchase of own shares | £m | **30.9** | 4.4 | – | 1.1 | – | – | | Total shareholder return | % | **-28.3** | -37.9 | +71.4 | -32.5 | +31.9 | +31.5 | 1. Audited statutory period: 48 weeks ended 30 June 2019 2. Unaudited pro forma period: 52 weeks ended 30 June 2019 3. Restated to exclude operations becoming discontinued in FY22. DFB furniture plc Annual Report & Accounts 2023 195 ### SHAREHOLDER INFORMATION ### Financial Statements | Contacts | Shareholder enquiries | Annual General Meeting 2023 | | --- | --- | --- | | | The Company’s registrar is Equiniti. They will be | This year’s AGM will be held at 2:30pm on 10 November 2023 | | Chief Executive Officer | pleased to deal with any questions regarding your |  | | Tim Stacey | shareholding or dividends. Please notify them of your | Adwick-le-Street, Doncaster, DN6 7NA | change of address or other personal information. | Chief Financial Officer | Their address details are: | Financial calendar | | --- | --- | --- | | John Fallon | | FY23 full year results 21 September 2023 | | | Equiniti | Annual General Meeting 10 November 2023 | | Group Company Secretary & General Counsel |  | | | Elizabeth McDonald | Spencer Road | Report and Accounts | | Companysecretary@dfs.co.uk | Lancing | Registered number 7236769 | | |  | 25 June 2023 | | Investor relations | BN99 6DA | Company No. 07236769 | Investor.relations@dfs.co.uk Equiniti helpline: 0371 384 2030. | Corporate website | Overseas holders should contact | | --- | --- | | www.dfscorporate.co.uk | +44 (0)121 415 7047. | | Registered office | Lines are open 8.30am to 5.30pm, Monday to Friday | | DFS Furniture plc | (excluding public holidays). |  | Redhouse Interchange | Shareholders are able to manage their shareholding | | --- | --- | | Adwick-le-Street | online and facilities include electronic communications, | | Doncaster | account enquiries, amendment of address and | | DN6 7NA | dividend mandate instructions. | | Corporate advisors | For institutional investor enquiries, please contact: | | Auditor | Tulchan Group | | KPMG LLP | 85 Fleet Street | | 1 Sovereign Square | London | DFS Furniture plc Sovereign Street EC4Y 1AE Leeds +44 (0)20 7353 4200 LS1 4DA Remuneration advisor  51 Lime Street London EC3M 7DQ Brokers  ### 157 ### NOTES ### Financial Statements DFS Furniture plc ### 158 ## www.dfscorporate.co.uk ## www.dfs.co.uk ## www.sofology.co.uk