DFS FURNITURE PLC

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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. 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   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  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   118 Notes to the consolidated  151 Company balance sheet 152 Company statement of changes in equity   statements 156 Financial history 157 Shareholder information Sustainable Becoming a circular business Our Sofa Cycle strategy sets out a framework for the future. page 44 Affordable Choice and innovation Through market-leading scale and service. page 15 Responsible Driving change and creating value Through well governed environmental and social targets. page 41 DFS Furniture plc 1 Strategic Report 34.5p 12.3p 11.1p FY20 FY21 FY22 FY23 ONCE GRAPH IS BUILT, DATA FIGS SHOULD BE ALIGNED TO FAR RIGHT GUIDE £1,060.2m £1,149.8m £1,088.9m FY20 FY21 FY22 FY23 ONCE GRAPH IS BUILT, DATA FIGS SHOULD BE ALIGNED TO FAR RIGHT GUIDE 36.0p 16.9p 9.4p FY20 FY21 FY22 FY23 ONCE GRAPH IS BUILT, DATA FIGS SHOULD BE ALIGNED TO FAR RIGHT GUIDE £102.6m £58.5m £29.7m FY20 FY21 FY22 FY23 ONCE GRAPH IS BUILT, DATA FIGS SHOULD BE ALIGNED TO FAR RIGHT GUIDE 86.4% 86.3% 91.3% FY20 FY21 FY22 FY23 ONCE GRAPH IS BUILT, DATA FIGS SHOULD BE ALIGNED TO FAR RIGHT GUIDE 30.7% 11.7% 18.6% FY20 FY21 FY22 FY23 ONCE GRAPH IS BUILT, DATA FIGS SHOULD BE ALIGNED TO FAR RIGHT GUIDE £109.2m £60.3m £30.6m FY20 FY21 FY22 FY23 ONCE GRAPH IS BUILT, DATA FIGS SHOULD BE ALIGNED TO FAR RIGHT GUIDE 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. HIGHLIGHTS Financial highlights      1    1           Operational and strategic highlights   4                Post purchase NPS 2 91.3% Established customer NPS 2 18.6% Group revenue £1,088.9m  £29.7m   1 £30.6m Earnings per share 11.1p Underlying earnings per share 1 9.4p DFS Furniture plc 2 Strategic Report PURPOSE DRIVEN APPROACH CULTURE AND VALUES     Think customer    Be real     Aim high    RESPONSIBILITY AND SUSTAINABILITY         page 39  OUR PURPOSE 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 we do, and our culture is rooted in our core values. OUR STRATEGY FOR GROWTH     Group strategy Sourcing & Manufacturing Technology & Data Logistics People & Culture PILLARS ESG PLATFORMS MARKET CUSTOMER FINANCIALS GROUP STRATEGY page 17 OUR STAKEHOLDERS                 page 36  DFS Furniture plc 3 Strategic Report Strategic report CONTENTS 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 DFS Furniture plc 4 Strategic Report AT A GLANCE page 5 page 6  page 6 DFS Furniture plc 5 Strategic Report AT A GLANCE                       117   £858.5m 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 6 Strategic Report AT A GLANCE         Delivery vehicles 276                 58 FY23 brand revenue £230.4m DFS Furniture plc 7 Strategic Report OUR FUNDAMENTALS 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.    the DFS group is over three times the size       page 17  digital and physical assets is the right       We are committed to building a sustainable  on the environment and our long-term                4.   DFS Furniture plc 8 Strategic Report CHAIR’S STATEMENT Growing market share in a challenging year               Financial results          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.   Appointment of a new Chair  Recruitment of a new CFO  Appointment of a new Chair of the Remuneration Committee   of the Group STEVE JOHNSON  Bio onpage 63 DFS Furniture plc 9 Strategic Report                People                Strategy                 Board and Governance             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                   Capital structure and returns              Looking Forward                  STEVE JOHNSON Chair of the Board  CHAIR’S STATEMENT Group revenue £1,088.9m  £29.7m  brand amortisation 1 £30.6m   DFS Furniture plc 10 Strategic Report CHIEF EXECUTIVE’S 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. TIM STACEY  Bio onpage 63   Continuing to win share in a very tough market, 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 DFS Furniture plc 11 Strategic Report    1          Market update                          Reflections on FY23 financial performance        1                  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      The home market opportunity                 Our supporting platforms           CHIEF EXECUTIVE’S REPORT   DFS Furniture plc 12 Strategic Report                        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      Sustainability                                                  Outlook              1          Conclusion                    TIM STACEY Chief Executive Officer  CHIEF EXECUTIVE’S REPORT   DFS Furniture plc 13 Strategic Report We are the leading sofa retailer in the digital age Large potential customer base          Clear leader in the segment    1                            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(32.9) (38.9) (14.5) (24.3) (12.7) (9.5) (8.8) (3.3) 3.1 (2.6) (18.6) 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            MARKET OVERVIEW DFS Furniture plc 15 Strategic Report OUR CUSTOMER JOURNEY Through our innovative in-house design teams and with our buying expertise we remain at the forefront of home furnishing trends with each of our brands offering a distinct curated range. We inspire consumers to consider a purchase through memorable advertising, inspirational web content and the use of augmented reality technology. Sustainability is a growing feature of our products. Our Grand Designs ranges feature all elements made from recycled or recyclable materials and our fully circular Gaia sofa. The combination of our well invested websites, national showroom networks and call centres which are staffed by well trained and highly motivated sales teams provide a market-leading integrated retail experience to our customers. Collectively across all our brands we have styles and price points that appeal to the majority of the market and we make our products more affordable through offering interest free credit. The customer is at the heart of our Group journey  research online 90%  175   INTEGRATED RETAIL MODEL DESIGN & INSPIRE We focus on embracing and leveraging technology to maintain our position as the leading sofa retailer in the digital age. Aftercare is provided by highly skilled teams with the majority of after-sales issues being addressed in customers’ homes by our own colleagues. We are one of the largest manufacturers of upholstered furniture in the UK. Our factories collectively produce around 20% of all the furniture we sell. The Sofa Delivery Company is our leading Group-wide supply chain platform. Through our own network of customer delivery centres and our own delivery fleet we carefully deliver our products to customers’ homes and provide a comprehensive installation service. Getting rid of an old sofa responsibly and conveniently is a real issue for customers. Unless old sofas are passed on to family, friends or charity, many go into landfill. Our experienced specialist partner Clearabee will collect customers old sofas and take them to the nearest recycling centre where it will be broken down to its component parts to reuse, recycle or create new energy. Service managers 220 Delivery vehicles 276  84,000 Colleagues enrolled on  programme 40   20%      CUTTING EDGE TECHNOLOGY MANUFACTURING SERVICE INNOVATIVE DELIVERY OPTIONS SOFA COLLECTION & RECYCLING DFS Furniture plc 16 Strategic Report BUSINESS MODEL OUR ENABLERS Customer ethos    Unparalleled scale  1   Complementary brands          Made-to-order products    Vertically integrated model        WHAT WE DO Design and inspire       Retail            Deliver and install      Service     OUTCOMES Sustain sector-leading operating margins          Maintain strong cash generation    Continue to invest in the business     VALUE FOR STAKEHOLDERS CUSTOMERS 91.3%  EMPLOYEES 35%  SUPPLIERS 37%  2 SHAREHOLDERS £182m  3 COMMUNITY £6.9m          How we create value… How we deliver value… DFS Furniture plc 17 Strategic Report OUR STRATEGY Pillars DFS & Home Customer proposition and service innovation New services to engage customers Focus for 23/24       Sofology Increase scale of business To further grow the showroom estate throughout the UK Focus for 23/24       Platforms Group Enabling Platforms 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. Technology & data Using data and technology to unlock growth in our brands Logistics Best in market two person delivery and installation Sourcing & manufacturing Optimising our supplier portfolio People & culture Delivering fundamental cultural change Focus for 23/24        Focus for 23/24       Focus for 23/24    Focus for 23/24       DFS Furniture plc 18 Strategic Report OUR STRATEGY Revenue ambition £1.4bn  8%   Best experience  86%   Best ranges 91%   Best sales teams 9/10   Best online brand strength  1.8x  87%   Best enhanced technology     Best ecommerce platform    S u s t a i n a b i l i t y S u s t a i n a b i l i t y Sourcing & Manufacturing platform Technology & Data platform Logistics platform People & Culture platform  DFS Furniture plc 19 Strategic Report £1,165m £1,287.2m £935.0m £1,359.4m £1,474.6m £1,423.6m FY19 FY19* FY20 FY21 FY22 FY23 ONCE GRAPH IS BUILT, DATA FIGS SHOULD BE ALIGNED TO FAR RIGHT GUIDE £28.2m £50.2m (£63.1m) £109.2m £60.3m £30.6m FY19 FY19 FY20 FY21 FY22 FY23 ONCE GRAPH IS BUILT, DATA FIGS SHOULD BE ALIGNED TO FAR RIGHT GUIDE 38.7% 18.7% 13.5% FY21 FY22 FY23 £141.7m (£5.0m) (£7.0m) FY21 FY22 FY23 0.2x 1.0x 1.9x FY21 FY22 FY23  Gross Sales 1 £1,423.6m Description       Performance   Description   Performance     1 (£7.0m) Leverage 1 1.9x Description     Performance      Underlying return on capital employed 1 13.5% Description      Performance       1 £30.6m Description   Performance     Key            DFS Furniture plc 20 Strategic Report 86.4% 86.3% 91.3% FY21 FY22 FY23 ONCE GRAPH IS BUILT, DATA FIGS SHOULD BE ALIGNED TO FAR RIGHT GUIDE 30.7% 11.7% 18.6% FY21 FY22 FY23 ONCE GRAPH IS BUILT, DATA FIGS SHOULD BE ALIGNED TO FAR RIGHT GUIDE 30.6 35.8 39.4 FY21 FY22 FY23 ONCE GRAPH IS BUILT, DATA FIGS SHOULD BE ALIGNED TO FAR RIGHT GUIDE 71.8% 72.0% 73.8% FY21 FY22 FY23 ONCE GRAPH IS BUILT, DATA FIGS SHOULD BE ALIGNED TO FAR RIGHT GUIDE 50 55 58 FY21 FY22 FY23 ONCE GRAPH IS BUILT, DATA FIGS SHOULD BE ALIGNED TO FAR RIGHT GUIDE     91.3%    18.6% Description   Performance   Description     Performance     Description   Performance   Description   Performance    58 Description   Performance     39.4 days  73.8% Strategic Links Strategic Links Strategic Links Strategic Links Strategic Links Key to Strategic Links     DFS Furniture plc 21 Strategic Report FINANCIAL REVIEW 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. JOHN FALLON  Bio onpage 63    1 of £30.6m, within guidance at interims     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 lending group DFS Furniture plc 22 Strategic Report                          Gross profit            Basis of preparation          Revenue and gross sales  1            2                                            Selling, distribution and administration and property costs                             Depreciation, amortisation and interest                         Profits and earnings per share     1          FINANCIAL REVIEW    FY23  Gross Sales 1 1,423.6   1,125.5   298.1   24.0%  Revenue 1,088.9          DFS Furniture plc 23 Strategic Report                         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     1                    Looking forward FY24 Guidance                   1                      ‘Cost to Operate’ efficiencies programme                                                          FINANCIAL REVIEW      DFS Furniture plc 24 Strategic Report             Profit margin growth                 JOHN FALLON Chief Financial Officer  FINANCIAL REVIEW  DFS Furniture plc 25 Strategic Report ALTERNATIVE PERFORMANCE MEASURES    Gross sales        Brand contribution    Adjusted EBITDA    Non-underlying items      Underlying EBITDA    Underlying profit before tax and brand amortisation PBT(a)    Underlying earnings per share     Net bank debt      Cash EBITDA      Underlying free cash flow to equity holders      Leverage (or gearing)     Underlying return on capital employed (underlying ROCE)                                 DFS Furniture plc 26 Strategic Report Key performance indicators Reconciliations to IFRS measures Adjusted EBITDA  FY23 £m    2 63.8   3 80.5   3 11.6   3 2.0   157.9  Underlying EBITDA  FY23 £m    157.9   3 (0.5)   157.4  Underlying profit before tax and brand amortisation – PBTa  FY23 £m    2 29.7   3 (0.5)    1.4   30.6  Net bank debt  FY23 £m    165.8    1.2   (26.7)   140.3  Movement in net bank debt FY23 £m    (140.3)   90.0   (50.3)  Underlying free cash flow to equity holders  FY22 £m    (50.3)   21 12.1   –   –   30.9   0.3   (7.0)    40.0    (3.6)  Underlying free cash flow to equity holders excluding operating result from discontinued operations and working capital outflow 29.4  ALTERNATIVE PERFORMANCE MEASURES DFS Furniture plc 27 Strategic Report Leverage  FY23 £m    140.3    122.4    (4.3)   (13.2)   (8.6)   55.8   6.0   (23.5)   (61.6)   73.0  Leverage (A/B) 1.9x  Underlying return on capital employed from continuing operations  FY23 £m    63.8   (0.5)   63.3   22.6%  Tax adjusted return (A) 49.0    97.4    312.6    22.0  432.0   14 55.8   15 7.7   15 3.0   15 0.1   15 0.3    (39.1)    (97.6)   (69.8)  Total capital employed (B) 362.2  Underlying ROCE (A/B) 13.5%  ALTERNATIVE PERFORMANCE MEASURES DFS Furniture plc 28 Strategic Report 1 2 3 RISKS AND UNCERTAINTIES 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                                     Board   Audit Committee   Group Risk Team   Group Leadership Team    Group Governance, Risk & Compliance Committee        1. Principal risks     2. Strategic risks    3. Operational risks    DFS Furniture plc 29 Strategic Report 4 3 5 8 2 1 9 7 6 Evaluation of risks     Principal risks and mitigation            Changes to principal risks in the year     Risk heat map          Management of climate change and other significant ESG risks              RISKS AND UNCERTAINTIES Principal risks 1   2   3   4   5   6   7    8   9       POTENTIAL IMPACT LIKELIHOOD DFS Furniture plc 30 Strategic Report RISKS AND UNCERTAINTIES Principal Risk FINANCIAL RISK AND LIQUIDITY What is the risk?      Strategic link Potential impact            Mitigation        FY23 progress       Movement Principal Risk REGULATORY ENVIRONMENT What is the risk?       Strategic link 1 2 3 Potential impact                 Mitigation                           FY23 progress   Movement Link to strategic pillars and platforms Pillars: 1  2  3  Platforms:     Movement:  Increase  Unchanged  Decrease DFS Furniture plc 31 Strategic Report RISKS AND UNCERTAINTIES Principal Risk CYBER What is the risk?      Strategic link Potential impact         Mitigation                    FY23 progress        Movement Principal Risk SUPPLY CHAIN AND MANUFACTURING RESILIENCE What is the risk?   Strategic link Potential impact         Mitigation        FY23 progress     Movement Link to strategic pillars and platforms Pillars: 1  2  3  Platforms:     Movement:  Increase  Unchanged  Decrease DFS Furniture plc 32 Strategic Report RISKS AND UNCERTAINTIES Principal Risk MACROECONOMIC UNCERTAINTY What is the risk?      Strategic link Potential impact        Mitigation             FY23 progress      Movement Principal Risk ENVIRONMENTAL, SOCIAL AND GOVERNANCE What is the risk?      Strategic link 1 2 3 Potential impact         Mitigation            FY23 progress           Movement Link to strategic pillars and platforms Pillars: 1  2  3  Platforms:     Movement:  Increase  Unchanged  Decrease DFS Furniture plc 33 Strategic Report RISKS AND UNCERTAINTIES Principal Risk RETENTION OF SKILLED WORKERS DUE TO LABOUR SHORTAGES What is the risk?     Strategic link Potential impact      Mitigation            FY23 progress    Movement Principal Risk CONSUMER PROPOSITION AND INDUSTRY COMPETITION What is the risk?    Strategic link 1 2 3 Potential impact          Mitigation                 FY23 progress    Movement Link to strategic pillars and platforms Pillars: 1  2  3  Platforms:     Movement:  Increase  Unchanged  Decrease DFS Furniture plc 34 Strategic Report RISKS AND UNCERTAINTIES Principal Risk TRANSFORMATION What is the risk?   Strategic link 1 2 3 Potential impact        Mitigation              FY23 progress      Movement Link to strategic pillars and platforms Pillars: 1  2  3  Platforms:     Movement:  Increase  Unchanged  Decrease DFS Furniture plc 35 Strategic Report Viability Reporting           Approach                                 RISKS AND UNCERTAINTIES Key Assumptions                                Results                   DFS Furniture plc 36 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. SECTION 172 STATEMENT       A The likely consequences of any decision in the long term The Board reviewed the progress made against the Group’s Pillars and Platforms strategy and ensured that both decisions taken and future plans support the long-term success of the Group.                             35   B The interests of our colleagues Our colleagues are critical to the success of our business and the Board has ultimate responsibility for ensuring the 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.                                          C The need to build strong beneficial relationships with our customers and suppliers. Managing these relationships is critical in ensuring the Group delivers on its strategy. We are committed to bringing great design and comfort to our customers,  We regularly engage with our suppliers to discuss how we can achieve our purpose.                                     13            Engaging with our stakeholders             DFS Furniture plc 37 Strategic Report SECTION 172 STATEMENT       D The impact of the company’s operations on the community and the environment As a responsible business, the Group is committed to acting in the best interests of our communities and in a sustainable manner. We are committed to working to lessen our impact on the environment and improve 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.                                  E The desirability of the company maintaining a reputation for high standards of business conduct We have strong internal governance processes and all our colleagues receive mandatory online training on Our Code of Conduct, Data Protection, Modern Slavery, Cyber  are required to comply with our supplier code of practice 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.                   F The need to act fairly as between members of the company The Board seeks to ensure Investors receive a fair and balanced return on their investment. During the year the Board approved a £10m share buyback and paid investors  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.                       DFS Furniture plc 38 Strategic Report S172 Statement of non-financial information                                                                          SECTION 172 STATEMENT 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    Actions taken as a result of Board engagement Board Decision  The chart below demonstrates the Board process in considering Section 172(1) in its decision-making. DFS Furniture plc 39 Strategic Report RESPONSIBILITY AND SUSTAINABILITY REPORT                                 ALISON HUTCHINSON   page 63                              ALISON HUTCHINSON Chair of the Responsible and Sustainable Business Committee Senior Non-Executive Director A responsible and sustainable business “The Responsible and Sustainable Business Committee remains focused on ensuring the business is supporting Our People, Our Planet, Our Customers and Our Communities.” DFS Furniture plc 40 Strategic ReportStrategic Report RESPONSIBILITY AND SUSTAINABILITY REPORT Our Pillars and Highlights INVESTING IN OUR PEOPLE 129    WINNING PRODUCT DESIGN Launched fully circular sofa range and award-winning recyclable seat cushions BUILDING A HEALTH & SAFETY CULTURE Reduced accidents by 20%  NEW CHARITY PARTNERSHIP Home-Start partnership providing support direct to our communities UNDERSTANDING OUR PEOPLE more than >99%   SUSTAINABLE SOURCING 80%   DELIVERING EMISSION REDUCTION  387  2 e SUPPORTING OUR CUSTOMERS   -30 to +20 Our People Our Planet Our Customers Our Communities              DFS Furniture plc 41 Strategic Report             Key      Our Planet Sustainable sourcing      Upholstery Home 27% 53% Sustainable sourcing     FY23 51% Sustainable sourcing       Cotton Viscose 87% 78% Polyester 81% Sustainable sourcing     FY23 40% Sustainable sourcing    FY23 47% Sustainable sourcing    Upholstery Home 100% 3% Carbon reduction  2   2    FY23 9.1% 15,297 t CO 2 e Carbon reduction   FY22 FY24 Our People Inclusion and Diversity     Responded 64% Inclusion and Diversity    FY23 Female Male 33:67 Our Community Charity     FY23 40 days Charity    FY23 £660,000 Our ESG Targets RESPONSIBILITY AND SUSTAINABILITY REPORT DFS Furniture plc 42 Strategic Report RESPONSIBILITY AND SUSTAINABILITY REPORT Our commitment to our team Strategy summary                     20%   24,000   64%      DFS Furniture plc 43 Strategic Report RESPONSIBILITY AND SUSTAINABILITY REPORT Inclusion                                             Training              Employee wellbeing                       Health and safety campaign    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     accessed by 6,000  22,600   Leaders programme 100+ CASE STUDY Our Driver School                                 DFS Furniture plc 44 Strategic Report RESPONSIBILITY AND SUSTAINABILITY REPORT Our roadmap to the future Strategy summary               Reduced scope 1 & 2 emission intensity  26%   70%    387kt CO 2 e  Over 80%   DFS Furniture plc 45 Strategic Report RESPONSIBILITY AND SUSTAINABILITY REPORT Better sourcing               Timber           Leather                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  Chemicals and waste                     DFS Furniture plc 46 Strategic Report 387,000t CO 2 e (FY23) 38 t CO 2 e (FY39/40) 2024 2030 2035 2040 S1 – 40-50% reduction (intensity) S2 – Net Zero S3 – Supplier Engagment Suppliers set their own Net Zero targets Using sustainable materials Reducing our emissions in operations Suppliers engage their value chains while reducing their emission Replace legacy technolgy with lower footprint alternatives Suppliers evolve manufacturing methods to support circular design New circular retail models and products Fully circular products and net zero operations Increase reuse and recycling in operations S1 – 90% reduction (intensity) S2 – Net Zero S3 – 50% reduction S1 – Net Zero S2 – Net Zero S3 – 90% reduction Net Zero Net Zero Pathway CO 2 RESPONSIBILITY AND SUSTAINABILITY REPORT NET ZERO PATHWAY Our Net Zero strategy             PHASE 1 – FY24-29       PHASE 2 – FY30-34         PHASE 3 – FY35-39              DFS Furniture plc 47 Strategic Report Scope 1 & 2 progress                                   Scope 3 progress and plan                                        RESPONSIBILITY AND SUSTAINABILITY REPORT DFS Furniture plc 48 Strategic Report 6,189 16,873 5,195 17,462 1,697 18,058 223 16,215 104 15,297 2023YTD 2022 2021 2020 2019 RESPONSIBILITY AND SUSTAINABILITY REPORT Scope 1 and 2 emissions    FY23 MWh      27,006    18,717    41,304    5,698    256    200   Total energy consumption 93,181      2   2  FY23         FY23        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                Scope 1 & 2 emissions   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  0.3      0.2    1 1  0.5      0.3    1 1  4.8      3.4       0.6      0.4       0.0      0.0       0.1      0.1      Total scope 3 emissions 371.9      261.2      Our Carbon Methodology                  DFS Furniture plc 49 Strategic Report RESPONSIBILITY AND SUSTAINABILITY REPORT CASE STUDY Award-winning product innovation                          CASE STUDY Our first circular product range                               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              DFS Furniture plc 50 Strategic Report RESPONSIBILITY AND SUSTAINABILITY REPORT Our customers, our commitment Strategy summary           Quality                  50 points established customer NPS score    ‘Excellent’  OUR CUSTOMERS DFS Furniture plc 51 Strategic Report RESPONSIBILITY AND SUSTAINABILITY REPORT      Ethical business Code of Conduct              Data protection policy and cyber security          CASE STUDY Sofology customer service                                               DFS Furniture plc 52 Strategic Report RESPONSIBILITY AND SUSTAINABILITY REPORT Our commitment to helping everyone thrive Strategy summary                          >60  labour in their operations and value chain 250 Donated to charity in FY23 £660,000  OUR COMMUNITIES DFS Furniture plc 53 Strategic Report RESPONSIBILITY AND SUSTAINABILITY REPORT              Modern slavery                                Our Home-Start Partnership                             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. DFS Furniture plc 54 Strategic Report 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. 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. Compliance Statement         Our progress in FY23                         Area of focus in FY24                  RESPONSIBILITY AND SUSTAINABILITY REPORT TCFD DFS Furniture plc 55 Strategic Report Governance Ga) Board oversight of climate-related risks and opportunities               1                               Gb) Role of management in assessing and managing climate-related risks and opportunities.                        2             Looking ahead         Strategy Sa&b) climate-related risks and opportunities over short, medium, and long term and its impact to our businesses, strategy, and financial planning.                             Intergovernmental Panel on Climate Change (IPCC)        International Energy Agency (IEA) scenarios       NGFS (Network for Greening the Financial System) scenarios      2     Low Carbon World scenario (1.5°C)        2    Hot House World scenario (4°C)           Sc) Resilience of strategy, taking into consideration different climate related scenarios, including a 2°C or lower scenario                     RESPONSIBILITY AND SUSTAINABILITY REPORT DFS Furniture plc 56 Strategic Report Risk Management Ra) Processes for identifying and assessing climate-related risks                 Rb&c) processes for managing climate-related risks and the integration with our overall risk management framework                                     Metrics and Targets Ma) Metrics used to assess climate-related risks and opportunities in line with our strategy and risk management process                 Mb) Scope 1, scope 2, and, scope 3 greenhouse gas (GHG) emissions  Mc) Targets used to manage climate related risks, opportunities and performance           RESPONSIBILITY AND SUSTAINABILITY REPORT DFS Furniture plc 57 Strategic Report RESPONSIBILITY AND SUSTAINABILITY REPORT  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                         Risk type: P  T  M  R  Ph  Scenarios:   Risk rating:    DFS Furniture plc 58 Strategic Report RESPONSIBILITY AND SUSTAINABILITY REPORT # 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                                 2 Increased cost of raw materials         Scenarios:   Risk rating:    Risk type: P  T    R  Ph  DFS Furniture plc 59 Strategic Report RESPONSIBILITY AND SUSTAINABILITY REPORT # 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   Ph                  Scenarios:   Risk rating:    Risk type: P  T    R  Ph  DFS Furniture plc 60 Strategic Report SUSTAINABILITY GOVERNANCE 2023     Three meetings per annum      Quarterly meetings    Three meetings per annum     Monthly meetings 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   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 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 OversightManagement roles Responsible and Sustainable Business Committee (RSC) Group Steering Committees (inclusion and sustainability) Audit Committee Group Sustainability and ESG meeting RESPONSIBILITY AND SUSTAINABILITY REPORT DFS Furniture plc 61 Strategic Report RESPONSIBILITY AND SUSTAINABILITY REPORT TCFD CONSISTENCY INDEX     Governance          Strategy                Risk Management            Metrics and Targets                   TIM STACEY Chief Executive Officer JOHN FALLON Chief Financial Officer MATERIALITY ASSESSMENT Impact to DFS Importance to external stakeholders A B D E F G H I J K L M N C Area Definition A GHG emissions (scope 1, 2, 3)   B Deforestation & biodiversity    C Customer satisfaction & product quality   D Material usage    E A circular approach       F Sustainable sourcing     G Supply chain traceability & transparency     Area Definition H Inclusion & diversity    I Data protection and cyber risk     J Colleague engagement    K Talent & development    L Health, safety & wellbeing    M Plastics, packaging & waste    N Community engagement & investment        DFS Furniture plc 62 Governance Governance report This section introduces our Directors, and details the activities of our Board and Board Committees.                   CONTENTS DFS Furniture plc 63 Governance Committee membership key A  N  R  S    –  STEVE JOHNSON Non-Executive Chair NR TIM STACEY Chief Executive Officer S JOHN FALLON Chief Financial Officer – ALISON HUTCHINSON CBE Senior Independent A NR S 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: –   External appointments: –  External appointments: –  External appointments: –  External appointments: –  –   –   Independent: –   Independent: –  Independent: –  Independent: –   DIRECTORS AND OFFICERS DFS Furniture plc 64 Governance DIRECTORS AND OFFICERS Committee membership key A  N  R  S    –  JO BOYDELL Non-Executive Director A NR LORAINE MARTINS OBE Non-Executive Director A NR S Designated Non-Executive Director for Workforce Engagement GILL BARR Non-Executive Director A NR S LIZ MCDONALD Group General Counsel and Company Secretary Date of joining DFS Date of joining DFS:  Date of joining DFS: Date of joining DFS: Experience:          Experience:            Experience:              Experience:         Qualifications:         Qualifications:      Qualifications:     Qualifications:       External appointments:       External appointments:   External appointments:     External appointments:   Independent:    Independent:    Independent:    Independent:   DFS Furniture plc 65 Governance Our commitment to good governance               2023 AGM       STEVE JOHNSON Chairman  Board activities in 2023 at a glance  Assessing the operating and long term 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 Officer, John Fallon, and a new Non- Executive Director, Gill Barr                            Our Board in 2023                STEVE JOHNSON  page 63 CORPORATE GOVERNANCE REPORT “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.” DFS Furniture plc 66 Governance Governance, Risk & Compliance Committee   Brand ESG Committees  implementation of the People, Planet, Customer and Communities strategy. Governance at a glance Governance framework              DFS Furniture plc Board 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. Audit Committee    Remuneration Committee    Nomination Committee    Responsible & Sustainable Business Committee      pages 71 to 75    pages 78 to 99    pages 76 to 77   pages 39 to 61 Role of the Chair               Role of the Chief Executive Officer                Role of the Senior Independent Director (‘SID’)         Role of the Company Secretary          Role of the Chair and Chief Executive Officer   CORPORATE GOVERNANCE REPORT   DFS Furniture plc 67 Governance 3 4 6 1 3 4 3 4  Skills and experience Retail Customer Services/ Marketing People, Diversity & Inclusivity Operations International Governance & Regulatory Finance Digital M&A Environmental Logistics Manufacturing        Appointment, election and re-election            Independence                     Directors’ skills and experience              Governance at a glance CORPORATE GOVERNANCE REPORT Gender Diversity Ethnicity   DFS Furniture plc 68 Governance Name Meetings attended Maximum meetings Independent Responsibility and role during 21/22 Date of appointment CHAIRMAN Chairman 3 3    Chairman    EXECUTIVE DIRECTORS CEO         CFO 2 2     CFO 4 4   NON-EXECUTIVE DIRECTORS (SID)                       3 3  STANDING ATTENDEES  Company Secretary     ATTENDED BY INVITATION  3      2  2  2  3  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            Governance at a glance CORPORATE GOVERNANCE REPORT Board meeting attendance                   External appointments     DFS Furniture plc 69 Governance CORPORATE GOVERNANCE REPORT How the Board operates                         UK Corporate Governance Code 2018 Compliance statement                      Directors’ indemnities and conflicts                            Board Evaluation           Results overview             Board action plan for FY24                     New Directors induction          Stages of our Board evaluation Stage 1 Stage 2 Stage 3            Understand their duties            Meet the colleagues      Visit the business    DFS Furniture plc 70 Governance CORPORATE GOVERNANCE REPORT Shareholder engagement                      Interaction with all shareholders                         External auditor        Internal audit    Remuneration        DTR Disclosure        ELIZABETH MCDONALD   DFS Furniture plc 71 Governance                               Composition                                            AUDIT COMMITTEE REPORT Key activities during FY23  Embedding of new risk management technology introduced in FY22  Continued focus on the Group’s approach to UK audit and corporate governance reform “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 internal audit function and the external audit.” JO BOYDELL  page 64 DFS Furniture plc 72 Governance AUDIT COMMITTEE REPORT Performance evaluation        Roles and responsibilities   Financial reporting:                   Internal and external audit:              Internal controls and risk management:               Activities of the Audit Committee       Financial Reporting Financial Statements                          Viability          Fair, balanced and understandable               Significant issues considered in relation to the financial statements            DFS Furniture plc 73 Governance AUDIT COMMITTEE REPORT Impairment of goodwill                       Going concern and viability reporting                    Parent company investments                       External Audit Assessment of effectiveness of the external audit process                                     Appointment of the external auditor       Safeguarding objectivity and independence relative to non-audit services       Prohibited    Permissible (subject to approval limits)      Services to be considered on a case-by-case basis               Independence assessment by the Audit Committee          DFS Furniture plc 74 Governance AUDIT COMMITTEE REPORT        Internal Audit                                                                                                                Internal control and risk management                        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              DFS Furniture plc 75 Governance AUDIT COMMITTEE REPORT                                                                   Whistleblowing                      Business ethics                                          Accountability         JO BOYDELL Chair of the Audit Committee  DFS Furniture plc 76 Governance           Chair Succession                  CFO Succession                 NED Appointment                NOMINATION COMMITTEE REPORT Key activities during FY23  Conducted the search for, consideration of, and recommendation to the Board of the appointment of the new Chair  Recommending the appointment of the Chief Financial Officer  Recommending the appointment of the new Non-Executive Director and Chair of the Remuneration Committee  Recommending the appointment of  Non-Executive Director  Reviewing the pipeline of talent within the  their development needs “This year, the Nomination Committee focused on the appointment of the new CFO, and strengthening the Board with the appointment of an additional Non-Executive to continue to support the long term strategy of the Group.” STEVE JOHNSON  page 63 DFS Furniture plc 77 Governance NOMINATION COMMITTEE REPORT Composition                        Principle Duties                ‘Everyone Welcome’                     Board Evaluation            What we will do in 2024                       STEVE JOHNSON Chair of the Nomination Committee  DFS Furniture plc 78 Governance Contents of this report 78 Part A: Annual statement by the Remuneration Committee Chair 81 Part B: Remuneration at a glance 82 Part C: Our remuneration philosophy and workforce reward 84 Part D: Remuneration policy 90 Part E: Annual Report on Remuneration DIRECTORS’ REMUNERATION REPORT Key activities during FY23 – Approving the recruitment arrangements for our new Chief Financial Officer, John Fallon, and the termination arrangements of his predecessor – Determining outturns for incentives in respect of FY23, taking into consideration the experience of key stakeholders over the period – Assessing the competitiveness of executive director remuneration arrangements – Setting performance targets for FY24 incentives – Consideration of market trends and governance updates – Consideration of pay and conditions across the wider workforce “The Committee seeks to ensure a clear link between Executive Directors’ pay, the delivery of our strategy and enhancement of shareholder value.” GILL BARR Chair of the Remuneration Committee page 64 Part A: Annual statement by the Remuneration Committee Chair On behalf of the Board, I am pleased to present the 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’ remuneration policy. The full report as approved by shareholders at the 2021 AGM can be accessed online: https://www.dfscorporate.co.uk/investors/ annual-report-2021. Remuneration in context The Committee were delighted by the positive voting outcome for the annual report on remuneration at the 2022 AGM which received 91.8% votes in favour. We would like to thank our shareholders for their continued support, and we look forward to engaging with our shareholders during FY24 as part of the triennial review of directors’ remuneration policy ahead of it being put to vote at the 2024 AGM. FY23 has been another challenging year. The well-publicised global macroeconomic challenges impacted overall market volumes, which were down c.15% compared to pre-pandemic levels, but the Group achieved record market share of 38%. The Group benefited from the its leading brands, DFS Furniture plc 79 Governance DIRECTORS’ REMUNERATION REPORT            Group performance                 Shareholder experience        Colleague experience                                     Pay outcomes in FY23 Base salary increases in FY23          Annual Bonus in FY23       1        1                  LTIP vesting in respect of FY23   2      2      Committee consideration of incentive outturns in the context of stakeholder experiences and overall Group performance        Base salary for FY24                      DFS Furniture plc 80 Governance DIRECTORS’ REMUNERATION REPORT                    Annual Bonus for FY24               LTIP awards for FY24                       Management changes                      Looking ahead            GILL BARR Chair of the Remuneration Committee  DFS Furniture plc 81 Governance DIRECTORS’ REMUNERATION REPORT Part B: Remuneration at a glance Overview of remuneration policy Element Policy               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?                              Key implementation decisions for FY23  Annual bonus Performance measure Weighting Achievement (% max)     1                   1    LTIP Performance measure Weighting Achievement            Implementation of policy for FY24 Element Implementation                            DFS Furniture plc 82 Governance DIRECTORS’ REMUNERATION REPORT Part C: Our Remuneration Philosophy and Workforce Reward Our remuneration philosophy & Principles     Fair, market competitive pay and benefits Aligned to our business strategy and culture Supports a high-performance sales and service culture                             Remuneration in the wider context                                                                  DFS Furniture plc 83 Governance DIRECTORS’ REMUNERATION REPORT Cascade of remuneration across the group  Level Employee numbers Fixed remuneration Annual bonus or incentive / commission plans Restricted share plan Long-term incentive plan All employee HMRC plans   5         Base salary Pension & benefits Annual bonus and recognition awards LTIP, RSP & SAYE                                                                   DFS Furniture plc 84 Governance DIRECTORS’ REMUNERATION REPORT Part D: Remuneration Policy       Remuneration principles                Executive Remuneration Policy Table Base salary   Operation             Maximum opportunity          Performance measures/assessment and recovery provisions     Benefits  Operation                    Maximum opportunity    Performance measures/assessment and recovery provisions   Pension  Operation       Maximum opportunity       Performance measures/assessment and recovery provisions   DFS Furniture plc 85 Governance DIRECTORS’ REMUNERATION REPORT Annual bonus  Operation              Maximum opportunity      Performance measures/assessment and recovery provisions          Long-term incentive plan    Operation              Maximum opportunity         Performance measures/assessment and recovery provisions           Minimum shareholding requirements  Operation       Maximum opportunity     Performance measures/assessment and recovery provisions   DFS Furniture plc 86 Governance DIRECTORS’ REMUNERATION REPORT All-employee incentives  Operation     Maximum opportunity    Performance measures/assessment and recovery provisions   Illustrations of application of Policy        £0 £0.5m £1.0m £1.5m £2.0m £2.5m 100% £531,000 39% 22% 39% £1,356,000 26% 30% 44% £2,006,000 22% 25% 54% £2,443,500 100% £419,284 43% 22% 34% £971,253 30% 31% 39% £1,412,034 25% 26% 49% £1,690,004 Minimum On-target Maximum Maximum with share price growth Tim Stacey (CEO) Minimum On-target Maximum Maximum with share price growth John Fallon (CFO)         DFS Furniture plc 87 Governance DIRECTORS’ REMUNERATION REPORT                        Approach to recruitment and promotions         Element Policy description                                                       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         Consideration of employee remuneration and shareholders Consideration of shareholder views      Consideration of employee views and employment conditions elsewhere in the Group           DFS Furniture plc 89 Governance DIRECTORS’ REMUNERATION REPORT Non-executive Director Remuneration Policy Remuneration Policy table     Purpose   Operation                      Maximum opportunity      Performance measures/assessment and recovery provisions                     Letters of appointment       Date of appointment                 DFS Furniture plc 90 Governance DIRECTORS’ REMUNERATION REPORT Part E: Annual Report on Remuneration for the Financial Year ended 25 June 2023 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         Performance against objectives Performance measure Weighting Threshold (0%) Target Maximum (100%) Outcome (% of max)                                                                    DFS Furniture plc 91 Governance DIRECTORS’ REMUNERATION REPORT Detail of performance against personal objectives               CEO – Tim Stacey                                       CFO – John Fallon                                  DFS Furniture plc 92 Governance DIRECTORS’ REMUNERATION REPORT LTIP awards vesting in relation to performance in FY23 – audited   LTIP award Performance conditions Weighting (% award) Detail Entry level performance Max performance Actual performance Vesting %                                  Total vesting 0%    Scheme interests awarded in FY23 (2022 awards) – audited               1       2             Performance conditions for FY23 (2022 award) LTIP Adjusted EPS (50%) Percentage of this portion of the Award vesting          Relative TSR (50%) Percentage of this portion of the Award vesting                                  DFS Furniture plc 93 Governance DIRECTORS’ REMUNERATION REPORT SAYE awards – audited  Details of LTIP award performance conditions (where not disclosed elsewhere in report) LTIP award Performance conditions Weighting (% award) Detail Entry level performance Target performance Max performance Threshold level 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 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          DFS Furniture plc 94 Governance DIRECTORS’ REMUNERATION REPORT Shareholding and other interests at 25 June 2023 – audited            Director Number of beneficially owned shares 1 Number of shares under the Deferred Bonus Plan 2 % of salary held 3 Shareholding requirement met 3 Subject to conditions 4 Not subject to conditions Vested but unexercised Unvested SAYE awards Total at 25 June 2023                      5                     5                     5                                        Total 945,884 35,961 – – 1,373,212 – – – 2,355,057                 Outstanding share awards  Director Type of award Date of grant Number of awards Award vested Awards lapsed Outstanding awards Market price on date of grant 1 Normal vesting date                                                       DFS Furniture plc 95 Governance DIRECTORS’ REMUNERATION REPORT Remuneration of CEO role versus wider company performance since IPO        160 150 140 130 120 110 100 90 80 70 Mar 2015 Jun 2015 Jun 2016 Jun 2017 Jun 2018 Jun 2019 Jun 2023 Jun 2022 Jun 2021 Jun 2020 DFS Furniture plc FTSE 250 Index   FY 23         CEO Tim Stacey     1       665    3        31.1%    2        0%                  DFS Furniture plc 96 Governance DIRECTORS’ REMUNERATION REPORT Percentage change in the Directors’ remuneration       FY19 – FY20 FY20 – FY21 FY21 – FY22 FY22 – FY23 Annual % change Base salary Benefits Annual bonus Base salary Benefits Annual bonus Base salary Benefits Annual bonus Base salary Benefits Annual bonus 1                 2                 2                                                                                                      DFS Furniture plc 97 Governance DIRECTORS’ REMUNERATION REPORT Relative Importance of spend on pay   Significant distributions 2023 2022 % change  £202.5m     £43.0m    Statement of implementation of remuneration policy in FY24 Base salary      Pension and benefits    Annual bonus        LTIP    ESG (10% of the award)    Percentage of this portion of the Award vesting Measure Weighting Nil 20% 100% Between 20% and 100% on a straight line basis                     Underlying EPS (45% of the award)          Percentage of this portion of the Award vesting Measure Nil 20% 60% 100% Above Nil and up to 20% on a straight-line basis Between 20% and 60% on a straight-line basis Between 60% and 100% on a straight-line basis              Relative TSR (45%) Percentage of this portion of the Award vesting Measure and weighting Nil 20% 100% Between 20% and 100% on a straight -line basis                            DFS Furniture plc 98 Governance DIRECTORS’ REMUNERATION REPORT Non-Executive Director fees    Gender pay gap reporting and diversity and inclusiveness initiatives Gender pay gap reporting                 Inclusivity and diversity                         CEO pay ratio                              CEO Pay Ratio Data Year Method Measure CEO 25th percentile 50th percentile 75th percentile 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                                                     DFS Furniture plc 99 Governance DIRECTORS’ REMUNERATION REPORT Matters covered during the Committee’s meetings in FY23            Matter July 2022 Sep 2022 Oct 2022 Mar 2023  •  •  • •  •  •   •   •  •  •   • •  •  •   Internal and external support for the Committee            GILL BARR Chair of the Remuneration Committee  DFS Furniture plc 100 Governance DIRECTORS’ REPORT                                             12          43  53  43        52     54 Annual General Meeting (‘AGM’)            Shareholder and voting rights                         Directors           Steve Johnson 1     Ian Durant     Tim Stacey      John Fallon      Mike Schmidt      Alison Hutchinson       Jo Boydell       Jane Bednall      Loraine Martins       Gill Barr         DFS Furniture plc 101 Governance DIRECTORS’ REPORT Articles of Association                         Directors’ service contracts                     Directors’ indemnities and insurance               Conflicts of interest          Dividends                       Substantial Shareholders          Investor Number of Ordinary Shares % voting rights Date of notification            15                                  Takeover directive information      Shares                             Share Buyback             Authority to purchase own shares       Authority to allot shares      DFS Furniture plc 102 Governance DIRECTORS’ REPORT      Change of control                     Significant relationships     Donations   Public Policy     Treasury and risk management     Independent auditors                Subsequent events          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   Going concern                      ELIZABETH MCDONALD   DFS Furniture plc 103 Governance STATEMENT OF DIRECTORS’ RESPONSIBILITIES IN RESPECT OF THE ANNUAL REPORT 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 104 Governance INDEPENDENT AUDITOR’S REPORT 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 105 Governance INDEPENDENT AUDITOR’S REPORT 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 106 Governance INDEPENDENT AUDITOR’S REPORT 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 107 Governance INDEPENDENT AUDITOR’S REPORT The risk Our response Recoverability of the parent’s investment in subsidiaries and receivables from other group companies            Low risk, high value                  Tests of detail:            Assessing subsidiary audits:   Our results      DFS Furniture plc 108 Governance INDEPENDENT AUDITOR’S REPORT 3. Our application of materiality and an overview of the scope of our audit                                                                          Normalised Group profit before tax   Normalised PBT  Group materiality £2.5m  £1.85m  £2m  £0.125m  99% (2022: 99%) 91% (2022: 94%)  Full scope for group audit purposes 2023  Full scope for group audit purposes 2022  Residual components Group revenue from continuing operations 98% (2022: 92%)     from continuing operations Group materiality  DFS Furniture plc 109 Governance INDEPENDENT AUDITOR’S REPORT 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 110 Governance INDEPENDENT AUDITOR’S REPORT 6. We have nothing to report on the other information in the Annual Report               Strategic report and directors’ report            Directors’ remuneration report    Disclosures of emerging and principal risks and longer-term viability                                             Corporate governance disclosures                              7. We have nothing to report on the other matters on which we are required to report by exception                    DFS Furniture plc 111 Governance INDEPENDENT AUDITOR’S REPORT 8. Respective responsibilities Directors’ responsibilities               Auditor’s responsibilities                       9. The purpose of our audit work and to whom we owe our responsibilities            FRANCES SIMPSON (Senior Statutory Auditor)  Chartered Accountants     DFS Furniture plc 112 Financial Statements CONTENTS This section presents details of the Group’s and the Company’s financial performance and position as at 25 June 2023. 113 Consolidated income statement 114 Consolidated statement of comprehensive income 115 Consolidated balance sheet 116 Consolidated statement of changes in equity     151 Company balance sheet 152 Company statement of changes in equity   156 Financial history 157 Shareholder information Financial stateme nts DFS Furniture plc 113 Financial Statements 52 weeks to 25 June 2023 52 weeks to 26 June 2022 Note 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) 87.3 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. CONSOLIDATED INCOME STATEMENT FOR 52 WEEKS ENDED 25 JUNE 2023  DFS Furniture plc 114 Financial Statements 52 weeks to 25 June 2023 £m 52 weeks to 26 June 2022 £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 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR 52 WEEKS ENDED 25 JUNE 2023  DFS Furniture plc 115 Financial Statements 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 CONSOLIDATED BALANCE SHEET  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 DFS Furniture plc 116 Financial Statements Share capital £m Share premium £m Merger 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 STATEMENT OF CHANGES IN EQUITY DFS Furniture plc 117 Financial Statements Note 52 weeks to 25 June 2023 £m 52 weeks to 26 June 2022 £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 CONSOLIDATED CASH FLOW STATEMENT FOR 52 WEEKS ENDED 25 JUNE 2023  DFS Furniture plc 118 Financial Statements 1 Accounting policies DFS Furniture plc (‘the Company’) is a company incorporated and domiciled in England, in the United Kingdom (Company number: 07236769). The address of the registered office is 1 Rockingham Way, Redhouse Interchange, Adwick-Le-Street, Doncaster, South Yorkshire, DN6 7NA. The consolidated financial statements consolidate those of the Company and its subsidiaries (together referred to as ‘the Group’). The parent company financial statements present 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 presented in these consolidated financial statements. Judgements made by the directors, in the application of these accounting policies that have significant effect on the financial statements and estimates with a significant risk of material adjustment in the next year are discussed in note 1.20. 1.1 Basis of preparation The consolidated financial statements have 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 payment charges which are measured at their fair value. The financial statements are for the 52 weeks to 25 June 2023 (last year 52 weeks to 26 June 2022). The Company has elected to prepare its parent company financial statements in accordance with Financial Reporting Standard 101 Reduced Disclosure Framework (‘FRS 101’); these are presented on pages 151 to 155. Going concern The financial statements are prepared 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 refinanced its borrowing facilities, replacing 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 Directors have prepared cash flow forecasts and performed a going concern assessment for the Group covering a period of at least twelve months from the date of approval 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 order intake volumes; inflationary 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 included: significantly reduced customer spending; impacts on gross margin and other costs from inflationary cost pressures; increases in interest rates, and a combination of these scenarios. The Directors have also performed reverse stress testing analysis to confirm that circumstances 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 protect cash balances. These forecast cash flows, considering the ability and intention of the Directors to implement mitigating actions should they need to, indicate that there remains 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 environment, and are confident 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 approval of these financial statements. Accordingly, the financial statements are prepared on a going concern basis. 1.2 Basis of consolidation The consolidated financial statements incorporate the financial statements of the Company 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 affect those returns through 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 considered in the preparation of these financial statements, including in the carrying values of goodwill and tangible assets, the measurement of financial instruments, and in relation to the Group’s going concern and viability assessments. No material impact was noted on the consolidated financial statements in relation to climate change. The potential impact will continue to be assessed on an ongoing basis. 1.4 Gross sales and revenue 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 recognised 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 Group 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 to the finance house varies 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 offer, the average duration of the interest free loan period and the prevailing interest rates. For the purposes of managing its business the Group focuses on gross sales, which is defined as the total amount payable by customers, inclusive of VAT NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AT 25 JUNE 2023 DFS Furniture plc 119 Financial Statements  continued  continued and other sales taxes and prior to any accounting adjustments for interest-free credit fees or aftercare 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 affected by customer preferences 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 to 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 product guarantees offered to customers are determined at the time of the sale, provided for separately (note 20) and charged to cost of sales. 1.5 Government 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 relates to 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 charges or credits – costs associated with significant corporate, financial or operating restructuring, including acquisitions – initial costs of establishing operations in new geographical territories Material finance income or expenses associated with significant changes in the Group’s borrowings are disclosed separately as non-underlying items below operating profit. 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 expenses comprise interest payable, finance charges on lease liabilities recognised in profit or loss using the effective interest method and unwinding 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 accrues, using the effective interest method. Dividend income is recognised in the income statement on the date the Group’s right to receive payments is established. 1.7 Employee benefits Defined contribution plans Payments to defined contribution pension plans are recognised as an expense in the income statement as they fall due. Short-term benefits Short-term employee benefit obligations are 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 reviewed and adjusted to reflect the achievement of service and non-market based performance conditions. 1.8 Taxation Tax on the profit 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. 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 any adjustment to tax payable in respect of previous years. Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: the initial recognition of goodwill; the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss, and differences relating to investments 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 accordance with IAS 34, adjusted for material non-taxable items. A deferred tax asset is recognised on deductible temporary differences only to the extent that it is probable that future taxable profits 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 Foreign 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. Foreign exchange differences arising on translation are recognised in the income statement except for effective differences arising on qualifying cash flow hedges, which are recognised 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 recognised. When the excess is negative, a bargain purchase gain is recognised immediately in profit 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 consideration 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 AT 25 JUNE 2023 DFS Furniture plc 120 Financial Statements  continued 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; 1.13 Intangible assets and goodwill 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. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED AT 25 JUNE 2023 DFS Furniture plc 121 Financial Statements  continued 1.17 Non-derivative financial instruments Non-derivative 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 measured at amortised cost using the effective 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 cost using the effective interest method. Cash and cash equivalents Cash and cash equivalents comprise cash balances and call deposits. Interest-bearing borrowings 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 effective interest method. 1.18 Derivative financial instruments and hedging Derivative financial instruments Derivative financial instruments are recognised at fair value. The gain or loss on remeasurement to fair value is recognised immediately in profit or loss. However, 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 derivative financial instrument is designated as a hedge of the variability in cash flows of a highly probable forecast transaction, the effective part of any gain or loss on the derivative financial instrument is recognised in other comprehensive income and presented within the hedging reserve. Any ineffective portion of the hedge is recognised immediately in the income statement. When the forecast transaction subsequently results in the recognition of a non-financial asset or non- financial liability, the associated cumulative gain or loss remains in the hedging reserve and is reclassified into profit or loss in the same period or periods during which the asset acquired or liability assumed affects profit or loss. For other cash flow hedges the associated cumulative gain or loss is removed from equity and recognised in the income statement in the same period or periods during which the hedged forecast transaction affects profit or loss. When a hedging instrument expires or is sold, terminated or exercised, or the Group revokes 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 discontinued 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 discontinued operation represents a separate major line of the business or geographical area of operation. Profit or loss from discontinued operations comprises the post-tax profit or loss of discontinued 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 discontinued 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 Directors are required to make judgements, estimates and assumptions that affect 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 differ from actual results. No significant areas of judgement or estimation arose 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 requiring consideration of the criteria under IFRS 5 Non-current Assets Held for Sale and Discontinued Operations as to whether the terminated operations represented a major separate 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 represented a major geographical area business and the closure was part of a single coordinated disposal plan and were therefore satisfied that the criteria under IFRS 5 were 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 to material balances in the Group’s financial statements, but which do not meet the IFRS-defined criteria 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 from each cash-generating unit and the appropriate discount rate to apply. Further details of the key assumptions underlying the calculation are provided in note 10. The Directors are 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 considered a significant estimate as at 25 June 2023. Customer guarantees The Group maintains a provision for its obligations under long term product guarantees offered to 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 Directors are satisfied that no reasonably possible change in these estimates would result in a material difference to the value of the provision and therefore it is not considered 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 inventories. The Directors are satisfied that no reasonably possible change in these estimates would result in a material difference to the value of the provision and therefore it is not considered a significant estimate as at 25 June 2023. 1.21 New accounting standards There are no new standards, amendments to existing standards or interpretations that are effective for the first time in the period ended 25 June 2023 that have 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. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED AT 25 JUNE 2023 DFS Furniture plc 122 Financial Statements 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 contribution. Brand contribution 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 retail 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 2023 – 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 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED AT 25 JUNE 2023 DFS Furniture plc 123 Financial Statements  continued 52 weeks to 26 June 2022 – continuing operations DFS £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 (34.3) (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 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED AT 25 JUNE 2023 DFS Furniture plc 124 Financial Statements  continued Segment assets and liabilities Assets Liabilities 25 June 2023 £m 26 June 2022 £m 25 June 2023 £m 26 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. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED AT 25 JUNE 2023 DFS Furniture plc 125 Financial Statements 3 Operating profit – continuing operations 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 Write down of inventories to net realisable 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) (0.3) 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 related to the closure costs of discontinued operations. Further details are presented in note 29 to the consolidated financial statements. Auditor’s remuneration 52 weeks to 25 June 2023 £m 52 weeks to 26 June 2022 £m Audit of these financial statements 0.3 0.3 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 to the Company’s auditor in respect of the review of the Group’s interim financial stat ements (FY22: £49,500) and £35,000 in respect of other audit related assurance services (FY22: £nil). NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED AT 25 JUNE 2023 DFS Furniture plc 126 Financial Statements 4 Staff numbers 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 Warehouse and transport 1,356 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 Wages 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 directors accrued r etirement benefits under pension schemes in the period (2022: two). All of the directors’ pension contributions were to defined contribution schemes. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED AT 25 JUNE 2023 DFS Furniture plc 127 Financial Statements 5 Finance income and expense 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 Taxation 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 for 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 for 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 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED AT 25 JUNE 2023 DFS Furniture plc 128 Financial Statements  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) Effect of tax rates in foreign jurisdictions (0.4) 1.4 Recognition of previously unrecognised tax losses – 0.3 Adjustments in respect of share options 0.3 0.4 Adjustment in respect 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 Act 2021, which was substantively enacted in May 2021, included provisions to increase the rate of UK corporation tax to 25% with effect from 1 April 2023. Deferred taxation is measured at tax rates that are expected to apply in the periods in which temporary timing differences are expected to reverse based on tax rates 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 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED AT 25 JUNE 2023 DFS Furniture plc 129 Financial Statements 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 for 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 average number of shares reflects the movements 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 corresponding change in resources are reflected 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 for the financial period attributable to ordinary equity holders of the parent company, but increasing the weighted average number of ordinary shares by the dilutive effect of potential ordinary shares. Potential ordinary shares arise from employee share based payment arrangements (not e 25). Where share based payments are subject to 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 Director’s Remuneration Report. 52 weeks to 25 June 2023 pence 52 weeks to 26 June 2022 pence Basic earnings/(loss) per share – from continuing operations 9.8 17.3 – from discontinued operations 1.3 (5.0) 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 (5.0) Total diluted earnings per share 11.0 12.2 52 weeks to 25 June 2023 £m 52 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. Weighted average number of shares 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 Weighted average number of shares in issue for diluted earnings per share 237,254,222 255,896,153 Underlying earnings per share Underlying basic earnings per share and underlying diluted earnings per share are calculated by dividing the profit for the period attributable to ordinary equity holders of the parent company, as adjusted to exclude the effect of non-underlying items, by the same weighted average numbers of ordinary shares above used for basic and diluted earnings per share respectively. 52 weeks to 25 June 2023 £m 52 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 DFS Furniture plc 130 Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED AT 25 JUNE 2023  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) (1.5) 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 DFS Furniture plc 131 Financial Statements 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 Reclassifications in the year between gross cost and depreciation between plant and equipment and motor vehicles relate to historic disposals made at £nil net book value. In addition, other assets previously presented within land and buildings have been reclassified to property right of use assets during the year. None of these reclassifications impacted reported profit or total non-current assets. Accordingly, the Directors do not consider the changes sufficiently material to require restatement of prior period balances. Capital commitments At 25 June 2023 the Group had contracted capital c ommitments of £9.1m (2022: £11.8m) for which no provision has been made in the financial statements. Plant and equipment includes leasehold improvements. DFS Furniture plc 132 Financial Statements 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 £m 26 June 2022 £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. DFS Furniture plc 133 Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED AT 25 JUNE 2023  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) (25.0) 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 recognised in the consolidated 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). DFS Furniture plc 134 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 135 Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED AT 25 JUNE 2023  continued 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 DFS Furniture plc 136 Financial Statements 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 Deferred 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 (Charged)/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. DFS Furniture plc 137 Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED AT 25 JUNE 2023 14 Inventories 25 June 2023 £m 26 June 2022 £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 £m 26 June 2022 £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. 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. DFS Furniture plc 138 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 revolving credit facility in place at the year end bore interest at a rate of credit spread adjusted SONIA plus 2.955% and was repayable on 21 December 2025. The revolving credit facility was secured on a first priority basis with fixed and floating charges over substantially all of the assets of the Group. Subsequent to the year end, the Group undertook a refinancing of its debt, replacing the previous £215.0m revolving credit facility with a £200.0m facility maturing in September 2027 and £50.0m of private debt. Refer to note 30 for further details. For more information on the maturity of the Group’s lease liabilities, see note 24. 19 Employee benefits Defined contribution pension plans The Group operates a number of defined contribution pension plans under which contributions by the employees and the Group are administered by trustees 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). DFS Furniture plc 139 Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED AT 25 JUNE 2023 20 Provisions 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 offers a long-term guarantee on its upholstery products and in accordance with accounting standards a provision is maintained for the expected future cost of fulfilling these guarantees on products which have been delivered before the reporting date. In calculating this provision the key areas 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 difference. Property provisions relate to potential obligations under lease guarantees offered to former subsidiary companies, the majority of which expire in 2025, and wear and tear costs for Group properties based on anticipated lease expiries and renewals, which will predominantly be utilised more than five years from the reporting 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. DFS Furniture plc 140 Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED AT 25 JUNE 2023 21 Dividends The following dividends were recognised and paid during the period: Pence 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 Directors recommend a final dividend of 3.0p in respect of the financial period ended 25 June 2023, resulting in a total proposed 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 record date will be 1 December 2023. This dividend has not therefore been recognised as a liability in these financial statements. 22 Capital and reserves 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. Ordinary shares of £0.10 each Number of shares ‘000 Ordinary shares £m 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. 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 Company purchases the Company’s equity share capital into treasury (treasur y shares), the consideration paid, including any directly attributable incremental 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). DFS Furniture plc 141 Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED AT 25 JUNE 2023  continued Employee Benefit Trust shares The Employee Benefit Trust holds ordinary shares which are issued for the purpose of satisfying future employee share based payments awards and is consolidated into the Group financial statements. During the period ended 25 June 2023 the Company acquired and issued no ordinary shares to the Employee Benefit T rust (2022: 3,000,000). 172,800 shares were used  during the period (2022: 824,009). At 25 June 2023 the Employee Benefit Trust held 3,686,178 of the Company’s ordinar y shares (2022: 4,040,978). 23 Financial instruments: categories 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 derivatives are categorised as Level 2 under the requirements of IFRS 7 as they are valued using techniques based significantly on observed market data. The Directors have reviewed for expected credit losses and consider the amount of any such losses to be immaterial. The Directors consider that the fair values of each category of the Group’s financial instruments are the same as their carrying values in the Group’s balance sheet. DFS Furniture plc 142 Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED AT 25 JUNE 2023 24 Financial instruments: risk management The objectives, policies and processes governing the treasury activities of the Group are reviewed and approved by the Board. The Group’s documented 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 strategy for the management of these risks the Group uses derivative financial instruments. The Group does not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes. Liquidity risk The Group manages its cash and borrowing requirements to ensure that it has sufficient liquid resources to meet its obligations as they fall due while making efficient use of the Group’s financial resources. The table below shows the maturity analysis of the undiscounted remaining contractual cash flows (including int erest) of the Group’s financial liabilities: 25 June 2023 Less than 1 year £m 1 to 2 years £m 2 to 5 years £m Over 5 years £m Total £m 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 Less than 1 year £m 1 to 2 years £m 2 to 5 years £m Over 5 years £m Total £m 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 DFS Furniture plc 143 Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED AT 25 JUNE 2023  continued Interest rate risk management The Group’s operating profit is affected by the cost of providing interest free credit to its customers. This cost is in turn impacted by interbank lending rates, including SONIA. While the relationship is not wholly direct, an increase in SONIA of one percentage point would reduce the Group’s reported revenue by 0.6%. The Group is also exposed to interest rate risk on its senior revolving credit facility, which bears interest at a floating rate of credit spread adjusted SONIA plus a margin (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 exposed to the risks of exchange rate fluctuations on the purchase of products denominated in foreign currencies. Currency requirements are assessed by analysis of historic purchasing patterns by month, adjusted as appropriate to take into account current trading expectations. The Group’s treasury policy allows for 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 flow 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 foreign currency exposures are to US Dollars and the Euro. The table below illustrates the hypothetical sensitivity of the Group’s reported profit 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 foreign currency denominated monetary items and adjusts their translation at the period end for a 10% change in foreign currency rates. The analysis assumes that exchange rate fluctuations on currency derivatives that form part of an effective cash flow hedge relationship affect the cash flow hedging reserve in equity. Positive figures represent an increase 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) – – DFS Furniture plc 144 Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED AT 25 JUNE 2023  continued 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’. DFS Furniture plc 145 Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED AT 25 JUNE 2023  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, excluding Executive Directors and other recipients of LTIP awards. Awards may not exceed 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 awards made to each individual are subject to either an earnings per share or underlying profit before tax performance target; remaining awards are 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 year, the Group settled part of the vested RSP shares by off ering cash payments (£0.3m, FY22: £1.2m) to 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) SAYE schemes are currently available to all employees in the UK and Republic of Ireland, with invitations to participate generally issued on an annual basis and subject to HMRC rules. The current maximum monthly savings limit for the schemes is £500. Options are granted at the prevailing market share price 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 LTIP No. DBS No. RSP No. SAY E No. LTIP No. DBS 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 Weighted average remaining contr actual life (months) 18.8 15.9 20.4 28.1 15.9 27.6 16.0 19.4 Weighted average share price at exercise – – £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 LTIP, DBP or RSP options at 25 June 2023 (2022: nil). DFS Furniture plc 146 Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED AT 25 JUNE 2023  continued Fair value calculations The LTIP, DBS, RSP and SAYE awards are all accounted for as equity-settled under IFRS 2. The fair value of LTIP awards which are subject to a market based performance condition (total shareholder r eturn) is calculated using a st ochastic (Monte Carlo) option pricing model. RSP awards, SAYE awards and LTIP awards subject to a non-market based performance condition (earnings per shar e) are valued using a Black-Scholes option pricing model. The inputs to these models for awards granted 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 £1.43 Exercise price Nil Nil £0.89 Volatility 36.5% to 42.7% 1 – 2 47.8% Expected life 3 years 3 years 3.3 years Risk free rate 3.3% 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, giving a 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). DFS Furniture plc 147 Financial Statements 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 (3.3) 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 DFS Furniture plc 148 Financial Statements 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 – (12.3) Cash and cash equivalents (including bank overdraft) 6.0 (1.0) – 5.0 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 Related parties 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 key management personnel hold positions in other companies that result in them having control or significant influence over these companies. 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 aggregate value of transactions related to key management personnel and entities over which they have control 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. DFS Furniture plc 149 Financial Statements 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 adopted for the year ended 26 June 2022. Prior to being classified as discontinued operations, these operations were included within the DFS 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 – – – (0.3) (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 – 3.1 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. DFS Furniture plc 150 Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED AT 25 JUNE 2023  continued 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. DFS Furniture plc 151 Financial Statements COMPANY BALANCE SHEET AT 25 JUNE 2023 Note 25 June 2023 £m 26 June 2022 £m Non-current assets Investments 2 254.5 252.7 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  (2022: £10.0m).  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 DFS Furniture plc 152 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 DFS Furniture plc 153 Financial Statements  Basis of preparation  with Financial Reporting Standard 101 Reduced Disclosure Framework (‘FRS 101’).  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 FRS 101 in respect of the following disclosures: –  – comparative period reconciliations – disclosures in respect of transactions with wholly owned subsidiaries – disclosures in respect of capital management –  As the consolidated accounts of the Company include the equivalent disclosures, the Company has also taken the exemption available under FRS 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   (2022: £10.0m). The Company proposes to continue to adopt the reduced disclosure framework of FRS 101 in its next  The accounting policies set out below have, unless otherwise stated, been applied consistently to all  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  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 £2.4 m. The Directors have considered  the Company, including the inherent uncertainty in forecasting the impact of the current economic and  Company has adequate resources to continue to meet all liabilities as and when they fall due for at least twelve   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  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  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  the carrying amounts of assets and liabilities for  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  investment in subsidiaries. The amount recognised is equivalent to the equity-settled share based payment  statements. The corresponding credit is recognised directly in equity. Treasury shares  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  the information is required instead to be disclosed  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  Management Personnel compensation. NOTES TO THE COMPANY FINANCIAL STATEMENTS AT 25 JUNE 2023 DFS Furniture plc 154 Financial Statements NOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUED AT 25 JUNE 2023  Shares in subsidiary undertakings 52 weeks to 25 June 2023 £m 52 weeks to 26 June 2022 £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 £m 26 June 2022 £m Amounts due from subsidiary undertakings (non-interest bearing, repayable on demand) 275.0 205.1   25 June 2023 £m 26 June 2022 £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 ‘000 Ordinary shares £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. DFS Furniture plc 155 Financial Statements NOTES TO THE COMPANY FINANCIAL STATEMENTS AT 25 JUNE 2023  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  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. At 25 June 2023 the company had 6,533,700 ordinary shares held in treasury (2022: 2,797,863). Employee Benefit Trust 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   shares were used during the period (2022: 824,009).  3,686,178 of the Company’s ordinary shares (2022: 4,040,978). DFS Furniture plc 156 Financial Statements FINANCIAL HISTORY FY23 FY22 FY21 Restated 3 FY20 FY19 2 52 weeks FY19 1 48 weeks IFRS 16 IAS 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. DFS Furniture plc 157 Financial Statements SHAREHOLDER INFORMATION Contacts Chief Executive Officer Tim Stacey Chief Financial Officer John Fallon Group Company Secretary & General Counsel Elizabeth McDonald [email protected] Investor relations [email protected] Corporate website www.dfscorporate.co.uk Registered office DFS Furniture plc  Redhouse Interchange Adwick-le-Street Doncaster DN6 7NA Corporate advisors Auditor KPMG LLP 1 Sovereign Square Sovereign Street Leeds LS1 4DA Remuneration advisor  51 Lime Street London EC3M 7DQ Brokers  Shareholder enquiries The Company’s registrar is Equiniti. They will be pleased to deal with any questions regarding your shareholding or dividends. Please notify them of your change of address or other personal information. Their address details are: Equiniti  Spencer Road Lancing  BN99 6DA Equiniti helpline: 0371 384 2030. Overseas holders should contact +44 (0)121 415 7047. Lines are open 8.30am to 5.30pm, Monday to Friday (excluding public holidays). Shareholders are able to manage their shareholding online and facilities include electronic communications, account enquiries, amendment of address and dividend mandate instructions. For institutional investor enquiries, please contact: Tulchan Group 85 Fleet Street London EC4Y 1AE +44 (0)20 7353 4200 Annual General Meeting 2023 This year’s AGM will be held at 2:30pm on 10 November 2023  Adwick-le-Street, Doncaster, DN6 7NA Financial calendar FY23 full year results 21 September 2023 Annual General Meeting 10 November 2023 Report and Accounts Registered number 7236769 25 June 2023 Company No. 07236769 DFS Furniture plc 158 Financial Statements NOTES www.dfscorporate.co.uk www.dfs.co.uk www.sofology.co.uk

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