Annual report and accounts 2019

Index
Strategic report Financial statements
Chairman’s statement 1 Consolidated income statement 63
Our business model 2 Consolidated statement of comprehensive income 63
Our market 4 Statements of changes in equity 64
Our customer journey 5 Balance sheets 65
Chief Executive’s review 6 Statements of cash flow 66
Measuring our performance 10 Notes to the financial statements 67
Financial review 11 Group five-year financial summary 108
Managing risk 21 Independent auditors’ report 109
Principal risks and uncertainties 23
Corporate responsibility 26 Shareholder information
Advisers 117
Directors’ report
Corporate governance 28
Board of Directors 31
Audit Committee report 32
Directors’ remuneration report 36
Other information 60

Carpetright is Europe’s leading specialist floorcoverings

retailer in the domestic home improvement sector.
Our primary business objective is to help customers
transform their homes using our products and services,
whether they choose to shop with us in-store or by using
our online platforms.
Our multi-channel proposition will maximise value for
our shareholders by delivering long-term sustainable
growth in earnings per share and cash flow.

We’re honest and straightforward

We care about our customers and colleagues
We make it easy

This Strategic Report was More online

approved by the Board of
This report, along with our other
Directors on 25 June 2019
announcements and stakeholder
and was signed on its
information, can be found on our
behalf by Jeremy Sampson
corporate website: carpetright.plc.uk
– Company Secretary and
Legal Director.
Strategic report Directors’ report Financial statements Shareholder information

Chairman’s statement

UK like-for-like sales declined by 9.1% with an Further details of the Board’s work can
increase of 3.4% in the Rest of Europe. The be found in the Directors’ report starting
disruption surrounding the CVA hit UK sales on page 28 of this Annual Report.
hard in the first half, although this improved in
the second half, placing us well for continuing Our people
the recovery of the business. Our Rest of
Europe operations performed well, largely On behalf of the Board, I would like to offer
escaping the collateral damage from the thanks to the more than 3,000 colleagues
CVA and under the leadership of a new working in our stores, distribution centre
management team from the second half. and support offices for their dedication,
hard work and resilience through the year,
Underlying EBITDA decreased by 59.2% particularly in playing their full part in steering
to a £2.9m (2018: £7.1m). After the impact the Group through the CVA, a period that
of separately reported items, the statutory will have been uncertain for them and their
loss before tax was £24.8m, representing a families. I regret the loss of a number of
64.5% improvement on the prior year (2018: colleagues arising from the store closures
loss of £69.8m). Basic earnings per share that were necessary in underpinning the
were 7.9p loss (2018: 93.6p loss per share). recovery of the Group, but believe this
leaves the business stronger for those
In light of the continued turnaround of
that remain and whose livelihoods rely
the Group and early signs of recovery,
on its future success.
the Board considers it appropriate to
Overview manage cash tightly, investing prudently in
Carpetright has endured a difficult 12 our store infrastructure and certain strategic Summary and outlook
months and I have been pleased with investments, such as furthering our online The consumer environment remains
the resilience shown by our operations, presence. As a result, the Board has taken fragile, in light of the uncertainties in our
together with the faith customers have the decision not to pay a final dividend economy surrounding the UK’s decision
continued to show in the business during (2018: £nil). Based on our current outlook to leave the EU. We are pleased that
the period. The Company Voluntary we do not expect this position to change the Carpetright brand retains the highest
Arrangement (“CVA”) announced on in the current financial year. prompted recognition in the market and
12 April 2018, together with a £65.1m we achieved and maintained a five star
Placing and Open Offer, announced on The Board “Trustpilot” score during the fourth quarter.
18 May 2018, were concluded successfully We saw in the year the departures of As Europe’s leading flooring specialist, our
on 8 June 2018. Taken in conjunction our Chief Financial Officer, Neil Page and performance is reflective of the wider “big
with a £17.25m (gross) shareholder loan Senior Independent Director, Andrew Page. ticket” home improvement sector. We
in May 2018, this provided the Group with I would like to extend my thanks to Neil for remain confident in our strategy and the
the opportunity to stabilise its finances and his dedication and resilience through an vision to deliver our operational turnaround
rationalise a number of stores, from 545 to exceptionally challenging period for the through the coming year.
466 by year end. Group. Andrew provided me and the rest
I appreciate the pain that has been
of the Board with crucial guidance and
We launched the “Carpetright for Life” shared by our wider stakeholder group
insight and I am delighted that David
campaign in September 2018, which of customers, suppliers, landlords,
Clifford has agreed to take over as Senior
helped reinforce the Group’s position shareholders and colleagues through this
Independent Director. We welcomed
as market leader and reassure customers year and believe the Group ends the year
Jeremy Simpson as Chief Financial Officer
we will be around for the long term when far stronger than it started. We continue
and Jemima Bird as Non-Executive Director
considering a purchase. The Board has to focus on the management of costs and
and look forward to both of them playing
overseen an evolution in our strategy, conservation of cash, but importantly are
a full part in the turnaround of the Group.
continuing investments (finance permitting) determined to take the initiative in driving
in our brand and stores, whilst growing We are further announcing today, the strategic and tactical improvements to
areas such as online and hard flooring. departure of Sandra Turner, after nearly the business that will benefit both the
nine years’ service on the Board. Sandra short and long term.
Results and dividend will be missed greatly and I would like to
I remain optimistic for the future of
offer my sincere appreciation for all she
Total revenue for the year ended 27 April Carpetright and the opportunity to
has done. We are pleased to announce
2019 decreased by 13.4% to £386.4m deliver value to shareholders and
that Pauline Best will join the Board as
(2018: £446.3m), reflecting some 80 UK our wider stakeholder group.
an independent non-executive director
store closures arising as a result of the
with effect from 1 August 2019 and
CVA and our desire to rightsize the estate.
will succeed Sandra as Chair of the Bob Ivell
Remuneration Committee. Chairman

www.carpetright.plc.uk | 1
Strategic report continued

Our business model

We are a specialist Our enablers Our strategy

floorcoverings retailer focused
on helping our customers in Market leader 1. Who we are
the UK, Netherlands, Belgium
We are the clear market leader We are working hard to transform
and the Republic of Ireland in highly fragmented but growing our brand, culture, values and
to transform their homes. floorcoverings markets corporate identity

Through our multichannel

proposition, we are committed
18%
share of the £2bn UK market
to creating a sustainable
business for the benefit
of our key stakeholders. Brand awareness 2. What we sell
We are, by quite some way, the leader We are broadening our total
in terms of brand awareness, with high floorcovering range to meet
familiarity among consumers customer demand

88%
UK prompted brand awareness

3. How we sell
Significant scale
We are embedding product training,
We are investing in modernising customer service standards, interest
our network of stores to deliver an free credit and a host of other initiatives
exceptional customer experience

466
stores in our key regions

Dedicated people 4. Where we sell

We are driven by a team of skilled and We are repositioning our stores estate,
dedicated people across our stores, allowing customers to access our
distribution centres and support offices products in a contemporary and
welcoming retail environment

> 3,000
people

2
2 | | Annual
Annual report
Report andand accounts
Accounts 2019 2019
Strategic report Directors’ report Financial statements Shareholder information

The customer journeyy The Value we Create

Customers
Customer
needs 1 We transform our customers’ homes
with high quality, inspirational products
at great value
Marketing
2 stimulus

In-store support
Online / phone
support
3 Colleagues
We provide a rewarding work
environment which is fair, open, and
provides opportunities to develop
Customer
4 selects preferred
product/solution

Survey and
measurement 5 Shareholders
We are re-building the business
to deliver long-term growth for
Order is confirmed the benefit of our shareholders
6 by customer and
payment taken

Professional
installation 7
service Suppliers
We work collaboratively to
After sales
8 services
bring great products to market

Providing a high quality experience

We aim to provide a seamless customer experience with advice and support
throughout to ensure satisfaction and loyalty

www.carpetright.plc.uk |
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Strategic report continued

Our market

The Group has a specialist Market Leader 2019 UK Market share estimate
focus on the domestic
Carpetright is the clear market
floorcoverings markets in leader in highly fragmented,
the UK, Netherlands, Belgium but growing floorcoverings 18.0%
markets across Europe.
and the Republic of Ireland.
We are the only scale
The Group also offers a specialist in the residential 2019
selected range of beds in floorcoverings markets in
the Netherlands and Belgium.
the UK, and curtains and
Given its 35 year heritage,
blinds in the Netherlands the brand is widely known
and Belgium, giving access and benefits from high brand
Carpetright Tapi IKEA Amazon
to other segments of the awareness in all territories.
B&Q John Lewis ScS Others

home furnishings sector. Wickes United Carpets Next

Growing market UK Flooring market (£bn)

The UK floorcoverings market

2.20
was estimated to be worth
£1.9bn and the markets in
the Netherlands and Belgium 2.12
2.10
were estimated to be worth 2.08
a combined £1 6bn in 2018. 2.04

2.00
All markets are expected 2.00
1.97
to continue to grow, reaching
a combined £3.9bn in 2021
delivering 3.0% Compound 1.90
Average Growth rate assuming
constant exchange rates.
1.80
2019e 2020e 2021e 2022e 2023e

Consumer trends Product mix (%)

100
Carpetright offers the broadest Market
Carpetright
range of floorcovering products 85.1
and accessories (carpets, 80
rugs, wood, laminates, luxury
vinyl tile (LVT)) as well as
60
curtains and blinds and home 52.3
decorations in Europe.
40
The business maintains an
on-trend proposition with
products from leading 20
13.4
brands and ranges being 9.4 7.5 8.9 8.1 9.2
4.3
continuously refreshed. 0.6 1.1 0.0
0
Carpet Wood Laminate Vinyl Rugs Tiles &
Other

4
4 | | Annual
Annual report
Report andand accounts
Accounts 2019 2019
Strategic report Directors’ report Financial statements Shareholder information

Our customer journey

Customer needs
New home that requires flooring
1 Marketing stimulus
TV
Replacement of current flooring Website/Social media
Renovation of one or more rooms
Desire for something new
2 Print/Newspaper
Radio

In-store support
Potential customers can walk in
or pre-book in-store appointments
with trained specialists
Customers find these initial consultations
3 Customer
helpful as they learn more about the selects preferred
options available to them and receive product/solution
recommendations on products that Customer uses expert advice
meet their needs and price appetite to choose their preferred
flooring option and place
Online / phone support an order
Transactional websites and dedicated Carpetright gives the
service departments help customers
choose a new flooring without needing 4 customer confidence that they
have made the right choice
to visit a store
Flooring product samples are provided
to potential customers free of charge
to bring options to life
Order is confirmed
by customer and
Survey and measurement payment taken
5
Professional ‘Home flooring surveyors’ Customer visits store/
visit the customer’s home to take phones to confirm order
measurements, which are provided and make payment
to the store
Customer service is monitored
Surveyors can provide detailed quotation to ensure all requirements
at time of visit and complete order process have been met and order

6
in the home if desired processed correctly
Full permission from the FCA allows us
to take orders in the home in the UK

After sales services

Professional installation Customer contacted
services
Customers can arrange their own fitting
7 to check satisfaction
Ensures customer satisfaction
service or Carpetright can allocate the in order to drive loyalty and
installation to one of its approved, repeat business
independently qualified third party fitters
Products are typically collected by fitters
from the store on behalf of their client
8

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Strategic report continued

Chief Executive’s review

After a difficult year of essential restructuring The strategy is supported by clear,

for the business, I am pleased to be able to uncomplicated principles and I am delighted
adopt a more upbeat tone when reflecting to report that in our recent UK Employee
on the current state of our company. While Attitude Survey, 70% of respondents
it’s clearly too early to declare the job done, indicated that they were “proud” to work
we have made substantive progress in the for Carpetright. After a year when we
key areas that drove us to make the difficult closed 83 stores across the Group and,
but necessary decision to restructure regrettably, had to make a number of roles
the business via a Company Voluntary redundant, both in the field and at Store
Arrangement (CVA) and re-capitalisation. Support Office (SSO), this is particularly
Subsequent moves by a host of other reassuring and reinforces our values –
retailers to do the same proves that we
We are honest and straightforward
are not unique in pursuing a plan to build
a sustainable and successful future for We care about customers and
the brand. colleagues
We make it easy
Specifically, our major issue was an
unsustainable lease profile and a legacy Dealing with the four main planks of the
property portfolio, which, despite our strategy in turn:
best efforts, proved too difficult to address
without resorting to drastic action. I
Wilf Walsh am grateful to our colleagues, suppliers Who we are
Chief Executive and landlords in helping to make this Carpetright remains comfortably the largest
a success. Against a background of floorcovering retailer in the UK and this
declining consumer confidence and leadership position was undoubtedly
“Set against a background of an uncertain political and economic one of the key reasons why shareholders
declining consumer confidence environment, we have materially reduced and other parties supported the £65m
and an uncertain political and our rent and rates profile while achieving recapitalisation of the business that
economic environment, we have the predicted sales transfer from closed followed the CVA.
materially reduced our rent and stores and reducing central costs.
2019 UK Market share estimate
rates profile while achieving the I am pleased to say that we remain on
predicted sales transfer from closed track to deliver the promised benefits of
stores with reduced central costs” the CVA process, with £19m of annualised
18.0%
cash savings. This included a £6m sales
transfer to remaining stores, equating to
our 20% target.
2019
Through these challenges, we have
adopted a consistent strategy and are
transforming this business by focussing
on a simple plan:
Who we are. Our brand, our stores,
our people Carpetright John Lewis Next
What we sell. An unrivalled choice B&Q United Carpets Amazon
of floorcoverings Wickes IKEA Others
Tapi ScS
How we sell. Great customer service
at unbeatable value Source: GlobalData, March 2019
Where we sell. An improved store
portfolio supported by an outstanding
digital offer

6 |  Annual report and accounts 2019

Strategic report Directors’ report Financial statements Shareholder information

While our total sales were impacted by It's clear that once we get to the one-year What we sell
store closures and the negative newsflow anniversary of a competitor store opening
We want to maintain our credentials as
surrounding the CVA over the first half of we begin to recover lost ground rapidly
Europe’s leading floorcovering retailer.
the year, in too many cases we also had as the local market stabilises. This effect
That means retaining our clear leadership
multiple stores in some towns, delivering is most pronounced where we invest
position on carpet and growing our share
negative contributions. Despite recent in refurbishment and upgrade to our
of hard flooring as consumer tastes evolve.
upheavals and the restructuring of our “graphite” design store format. While this
Our aim is to make hard flooring 25% of
business, we retain clear market leadership investment was restricted during the year,
our overall business by 2022.
by some distance in the UK and this is we are working hard to create a sustainable
a strong position from which to build financing structure for 2020 onwards that It is imperative that we stay on top of
our recovery. will allow us to support the growth and changes in consumer tastes and, in terms
development of the organisation. of product, we update our ranges across
It is also worth reflecting on the strength
categories three times a year to ensure
of the Carpetright brand and consumer We have been extremely robust in taking
that we stay at the forefront of home
perceptions. We have always enjoyed on competition and it’s clear that this is
interior design trends. Our new “Soft”
strong brand metrics, however these did a very difficult market for a new entrant
carpet collection was our fastest growing
take a dip in relation to trust and reputation and brand to gain traction unless they are
own label product in the period, while our
during the launch of the CVA as customers prepared to pursue an uneconomic model,
exclusive “Tegola” own brand laminate
were, understandably, nervous about the of course until time and money run out.
was launched successfully during the year
future of the business at that point. Unlike
By the end of the 2019 financial year, and has been well-received by customers.
other retailers where the product is out on
we had 241 stores trading under the Our “House Beautiful” and “Country Living”
the shelf and available to take away, we ask
new brand format. Our objective is to collections are also exclusive to Carpetright,
customers to leave a deposit with us for a
ensure that every store has some form providing differentiation in a sector where
bespoke product ahead of delivery in days
of consistent new branding and additional brands have not historically been strong.
or, usually, weeks.
investment by the end of the CVA period Our “Essential Value” range continues to
I am pleased to note that our brand in April 2021. provide budget conscious customers with
metrics bounced back strongly following a quality product at an affordable price.
In terms of people, we will continue to We continue to convert more effectively
our “Carpetright For Life” campaign
invest in training – our Fuse platform with increased higher margin underlay
which we embarked on after our equity
acts as an effective tool for both product and accessories penetration.
fundraise. Brand attributes such as
training and communication. Our key
Quality and Value/Affordable are now at
development focus for colleagues will be At cost to our suppliers (mainly on
their highest level since we began tracking
on the implementation of the Microsoft consignment) we established safety
these measures. Additionally, as a retailer
Dynamics 365 cloud-based platform as supplies of product in our Purfleet SSO
that customers “know and trust” and which
we migrate from our aged legacy systems. in the run-up to the original date for the
“has a really good reputation”, our brand
UK’s exit from the EU in March to ensure
perceptions have improved markedly We have been honest and straightforward we were prepared for a “No Deal” Brexit.
since Spring/Summer 2018. Prompted with all our colleagues on the need for While, in this scenario, current expectations
and spontaneous brand awareness both further restructuring in our business during are that there would be no additional
remain incredibly strong. the CVA period ending in April 2021. We tariffs on the products we source from
encourage direct feedback and our staff the EU, our concern remains the immediate
We have been facing significant competitive
forum on Fuse gives us constant and robust potential disruption at port of entry. We are
challenges over the past few years and,
reminders of what is on colleagues’ minds confident that, with supplier support, we
importantly, we can prove that, with the
both in terms of day to day issues and the can repeat this process later in the year to
exception of a very small number of
company in general. guarantee no short-term material disruption
individual stores, we are more than holding
our own – whether that’s in locations where I am constantly impressed by the number to our product pipeline as market leader.
we face one direct national competitor of long service awards that I get to sign
or larger conurbations where there are every month. The loyalty and dedication
multiple brand operators and options for of long serving colleagues throughout the
the consumer. Our performance against past twelve months has been incredibly
our competition has improved consistently stoic and is very much appreciated.
over the past 52 weeks.

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Strategic report continued
Chief Executive’s review continued

How we sell Likewise, recommending the appropriate It’s also interesting to note that, since the
floorcovering and underlay/accessories to CVA, we have maintained several stores,
Great customer service is at the heart
make the chosen carpet last longer and previously earmarked for closure, on zero
of everything that we do, so we were
perform more efficiently are beneficial for rent, as landlords would rather not have
rightly delighted when the business
both the customer and our business as an empty store on their site or indeed pick
achieved five-star Trustpilot status for
we improve conversion rates and average up the rates bill of a departed tenant.
customer satisfaction earlier this calendar
transaction values. The contribution from these previously
year. We intend to maintain this level
loss-making stores has, unsurprisingly, been
consistently. In comparison to other We have been trialling a new “instore
much improved although the oppressive
retailers the customer journey between experience” colleague training programme
rates burden remains something in clear
accessing our brand online and the after- in two of our Southern regions and the early
need of Government reform.
care following the flooring being fitted at the results look promising ahead of a potential
customer’s home is usually quite complex, nationwide rollout in 2020. The inherent flexibility in our restructured
not least due to the bespoke nature of the estate will be enhanced by a project we
product and service provided. Where we sell are currently undertaking with Javelin
UK store numbers Group to review our portfolio against an
Inevitably, a floorcovering purchase
“ideal” bricks and mortar model across
involves disruption and some form of
600 the UK. The output from this study will
intrusion whether that’s a visit from one 539
490 478 472 enable us to make our retail estate more
of our highly trained Home Flooring 500 460
435 426
410 flexible and ensure improved certainty
Surveyors, to measure a property and 400
334 of contribution in direct contrast to our
advise on potential options, or third party 300 historical legacy portfolio.
fitters moving items of furniture, laying the
200
chosen product and taking away unwanted We have several successful department
surplus. While we serviced over one million 100 store concessions around the UK and
orders last year with a very low number 0 we recently tied up with leading retailer,
of complaints, one complaint is one too 2011 2012 2013 2014 2015 2016 2017 2018 2019
Furniture Village, for a concession in
many and we know there is room for further Our restructuring programme clearly had Guildford. This was on a site where
improvement. With a relentless focus on its greatest impact within the UK store we had to shut a store that had an
genuinely great customer service, we have estate as we addressed the significant unsustainable rent and the concession
a key differentiator in our sector. legacy issues discussed above. The model allows both parties flexibility as
bottom line is that excessive property well as a mutually lower cost model.
Despite a difficult year for colleagues
caused by some uncertainty about the costs were primarily to blame for our While the complexity of our product
business, our “Do We Measure Up?” decision to restructure via a CVA. and customer journey means it does
score of customers being “highly satisfied” Landlords, in the main, have been not necessarily lend itself to a solely online
was at 75%. In our industry, good news understanding and supportive of transaction, as market leader we need
tends to travel slowly as a customer getting Carpetright’s need to restructure its to ensure that we lead the way on digital to
what they paid for with accompanying store portfolio and we are grateful for this satisfy those customers who do not want
excellent service is the default position and partnership and a welcome spirit of genuine to visit a physical retail outlet. Last year
shouldn’t be seen as remarkable. Bad collaboration. Most landlords now realise we doubled our conversion rate online
news, however, travels incredibly quickly, that the focus on estimated rental values and Jeremy Maxwell, our new Group
especially on social media. So when and upward-only rent reviews has been Commercial Director, has led a
we’ve got it wrong, engaging with our overtaken by events. Retailers faced with comprehensive review of our digital
detractors and resolving issues rapidly enormous pressures need more flexibility operations. Jeremy’s team is working on
is vital for reputation, repeat business around their lease portfolio and we have several exciting initiatives to grow remote
and recommendations. noticed that landlords are now prioritising sales and develop a new CRM capability
security of income as the property world to support our rationalised store estate.
Part of that process is about understanding
customer needs and utilising the outstanding realigns itself with the real world. These initiatives will centre on maximising
product knowledge our colleagues have The year-on-year reduction in store the quantity and quality of website traffic
in store to greatest effect. Interest Free numbers since 2014 shows that the and high impact referrals, as well as
Credit (up to four years at 0% interest) is CVA merely accelerated the strategic innovative digital content and tools to
a great enabler for both the customer and decision we made some years ago enhance the user experience and maintain
colleagues in delivering affordable home to right-size the business on a more and grow a quality customer database.
transformation. economic physical footprint.

8 |  Annual report and accounts 2019

Strategic report Directors’ report Financial statements Shareholder information

Summary Finally, I am delighted to welcome Jeremy

Simpson to the Board as Group CFO. He
For Carpetright, in common with a host
has made a swift and positive impact on
of other retailers, 2018/19 was a year that
the team and our business in general.
was all about survival. This coming year
will be about steering the business through The focus of our strategy remains
an improvement in performance and laying unchanged as we maintain and grow
the groundwork for longer term, sustainable our position as market leader. My thanks,
earnings and cash generation. We have as ever, go to our resilient and supportive
made significant inroads into the major shareholders, to the Board and of course
challenges of last year. Specifically, we to our hard-working, loyal colleagues from
have restructured our property estate, Aberdeen to Truro, Belfast to Cork, and
with further flexibility and cost reductions from Amsterdam down to Brussels.
to come, and developed a credible
digital strategy. Whilst the financial and political climate
remains unpredictable and we know that
We have also challenged competition there is still hard work ahead, we remain
from other retailers robustly to maintain confident and positive about our future.
our market leadership position, and dealt
with a decline in consumer confidence by We are Carpetright.
reinforcing our brand credentials, improving
our range of floorcoverings and enhancing Wilf Walsh
our reputation for quality and value. Chief Executive Officer
I am pleased to report that with the majority
of our supplier partners we are negotiating
terms closer to those we enjoyed before the
CVA. We are grateful to all those suppliers
in the UK, Belgium and Northern Europe for
their support and for their agreement that
nursing the market leader back to health
was in everybody’s long term interests.
As expected, the performance of the
business improved significantly over the
second half of the period, with the like-for-
like decline in sales reducing significantly,
as both colleagues and customers had
their confidence in the brand restored.
Our performance in the early weeks
of the 2019/20 financial year has been
encouraging, with positive like-for-like
sales growth indicating that we are clearly
beginning to recover lost ground. With
the disruptions of last year now behind us,
we can concentrate fully on the day-to-day
running of this customer facing business.

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Strategic report continued

Measuring our performance

The Board of Directors and senior management receive a wide range of management information delivered in a timely manner.
Listed below are the principal measures that are reviewed on a regular basis to monitor the performance of the Group.

Like-for-like sales Gross profit Underlying Net Promoter Operating

% growth percentage EBITDA Score (NPS) cash flow
Definition Definition Definition Definition Definition
Calculated as this year’s Gross profit as a Underlying EBITDA Net Promoter Score This measure is
sales divided by last year’s percentage of revenue means underlying (NPS) is a measure of a determined by taking
sales for all stores that are (calculated in local earnings before interest, customer’s willingness underlying operating profit
at least 12 months old at currency). taxation, depreciation to recommend our service and adding back non-cash
the beginning of the and amortisation. to others in terms of items and any movements
financial year. Satisfaction and Loyalty in working capital.
calculated by subtracting
Stores closed during the
the percentage of
year and “C” stores under
Detractors from the
the CVA are excluded from
percentage of Promoters.
both years (calculated in
local currency).

Rationale Rationale Rationale Rationale Rationale

Maximising like-for-like Gross profit is an Underlying EBITDA Customer Satisfaction The Group’s ability
sales opportunities drives important indicator of is used to analyse the and Loyalty are important to finance its future
cash inflow. This KPI also the Group’s financial Group’s core operating indicators of the success, investment, pay
measures the health of performance. It reflects our profitability before non- or not, of the Customer corporation taxes,
our core retail estate ability to source effectively, operating expenses and Journey, our colleague pay interest on its
and reflects customer run an efficient supply non-cash charges interaction and our range borrowings and make
reaction to our products, chain, and promote and (depreciation and of products and services. returns to shareholders
proposition and price. deliver the correct mix amortisation). is aided by strong cash
of products to maximise flows from its operations.
cash margin.

Performance Performance* Group (£m)* Performance Group (£m)

UK (%) UK (%) UK (%)
63.0 76.0%
10 35.0 32.8 76.0 30
7.3% 25.1
61.4% 29.4 75.0% 24
6 30.0 75.0
61.0 60.7% 74.1% 18 13.3
2.8% 25.0 74.0 12 7.7
2 59.5%
59.0 20.0 73.0 6
-0.5% 16.0 0
-2
-3.6% 15.0 72.0 -6
57.0 57.0%
-6 71.0 71.0% -12
10.0
55.8% 7.1
-9.1% -18
-10 55.0 5.0 2.9 70.0
-24 -21.5
0 69.0 -30 -24.6
2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019

Rest of Europe (%) Rest of Europe (%)

5 4.8% 4.8% 62.0
60.0 59.5%
4
3.4% 58.0 57.2%
3 56.1%
56.0
54.0
2
52.1%
1.2% 52.0
1
50.0 49.5%
0.3%
0 48.0
2015 2016 2017 2018 2019 2015 2016 2017 2018 2019

Note:
* Prior financial years have been restated, where necessary, as a result of the adoption of IFRS 15 – see note 33 for details.

10 |  Annual report and accounts 2019

Strategic report Directors’ report Financial statements Shareholder information

Financial review

As previously reported, trading during the first half of the year was challenging, as a
consequence of weakening consumer demand, exceptionally warm weather and the
negative impact associated with the CVA. This led to a 15.7% first half decline in Group
revenues, including a 12.7% like-for-like decline in the UK. Whilst second half revenues
were down 11.1% on the prior year, we saw steady improvement, with UK like-for-like
revenues down 8.2% in the third quarter and 2.3% in the fourth. Full year revenues
decreased by 13.4% to £386.4m (2018: £446.3m), impacted particularly by store
closures as part of the CVA; an analysis of like-for-like revenues is provided in the
operational reviews below.
Gross margin declined by 1.6ppts to 54.5% (2018: 56.1%). This arose from two primary
sources: promotional activity to mitigate competitor action arising from publicity surrounding
the CVA and a change in sales mix in Rest of Europe. Whilst the promotional activity was
necessary to maintain sales during a difficult period, the position improved during Q4 as
revenues recovered, and we saw a 0.5% margin improvement. The Rest of Europe saw
a particular improvement in hard flooring sales in the year – an important strategic initiative
for the Group – and we need to respond to the improved scale this offers with further
buying improvements, especially as we continue to grow this category in the UK.
We closed 80 UK stores in the year as part of the CVA and three in Rest of Europe, with
four opening. This net decrease of 79 meant our total store base numbered 466 at year
end (2018: 545), with total store space decreasing by 14% to 4.2 million square feet during
Jeremy Simpson
the period (2018: 4.9 million square feet).
Chief Financial Officer
2019 2018
£m £m Change
Revenue 386.4 446.3 (13.4%)
“We saw steady improvement as
the year progressed, both in the UK Gross profit 210.4 250.3 (15.9%)
and Benelux and the Group made Gross profit % 54.5% 56.1% (1.6ppts)
significant progress in reducing its Costs (excluding depreciation & amortisation) (207.5) (243.2) 14.7%
cost base” Costs (excluding depreciation & amortisation) % (53.7%) (54.5%) 0.8ppts
Underlying EBITDA 2.9 7.1 (59.2%)
Depreciation and amortisation (11.4) (12.3) 7.3%
Underlying operating loss (8.5) (5.2) (63.5%)
Net finance charges (8.4) (2.8) (200%)
Underlying (loss)/profit before tax (16.9) (8.0) –
Separately reported items (7.9) (61.8) –
(Loss)/profit before tax (24.8) (69.8) –
(Loss)/Earnings per share (pence)
Underlying (5.1p) (5.8p) –
Basic (7.9p) (93.6p) –
Net debt (27.4) (53.0) £25.6m lower
The Group made significant progress in reducing its cost base and is on track to deliver
the annualised savings of £19m outlined at the time of the equity raise in June 2018.
We achieved a saving of £13.6m in the period and the remaining initiatives to deliver
the full savings target are well underway. Overall, expenses fell by £35.7m to £207.5m
(2018: £243.2m), a decrease of some 14.7%.
Underlying EBITDA declined by £4.2m to £2.9m (2018: £7.1m), reflecting lower revenues,
which were mitigated in part by the expense savings and Q4 margin improvement
discussed above.
Depreciation and amortisation charges were £11.4m (2018: £12.3m). The Group’s
underlying operating loss was £8.5m (2018: £5.2m).

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Financial review continued

Net finance charges were £5.6m higher than the prior year at £8.4m (2018: £2.8m), reflecting the higher rate of interest payable on the
Group’s loans and amortisation of fees associated with the shareholder loan agreed in May 2018.
Separately reported items totalled £7.9m (2018: £61.8m). The primary drivers of this charge related to a review of asset impairment in
light of developments within the Group’s property portfolio, together with a review of inventory and project costs incurred ahead of the
implementation of a new ERP platform, Microsoft Dynamics 365 (“D365”). Further detail on these costs can be found below. Taking into
account separately reported items, the statutory loss before tax for the period was £24.8m (2018: £69.8m loss) and basic loss per share
was 7.9p (2018: 93.6p loss per share).
The Group ended the year with net debt of £27.4m (2018: £53.0m), reflecting the receipt of proceeds from the Placing and Open Offer
and shareholder loan, offset by pre-tax losses resulting from the turnaround of the Group, an adverse movement in working capital due to
a number of factors, including the withdrawal of credit insurance from many of our suppliers and the continued, albeit reduced investment
in the store refurbishment programme. The shareholder loan of £17.25m (gross) delivered cash inflow of £2.4m, net of fees and settlement
of the previous loan. A summary of the net debt movement is outlined below:
2019
£m
Opening net debt (53.0)
Operating cash flow 2.9
Working capital movement (27.5)
Interest and tax cash expense (2.1)
Investing activities (8.1)
Capital proceeds 62.7
Non-cash items (2.3)
Closing net debt (27.4)

Revenue Recognition
The Group adopted IFRS 15 “Revenue from Contracts with Customers” from 29 April 2018. The accounting standard has been
retrospectively applied resulting in restatements to prior year comparatives. Under the new standard, the point at which revenue is
recognised has changed and due to IFRS 15’s definition of ‘transfer of control’, revenue will be deferred and recognised at a later date
than previously recorded under IAS 18. Underlying revenues and profit before tax for the year were reduced by £17.2m and £8.2m
respectively, with a corresponding release from 2018 increasing revenues and profit before tax by £20.7m and £10.1m respectively,
the difference reflecting the year on year fall in revenues. The overall full year impact on the income statement was a £3.5m increase
in revenues and £1.9m increase in profit before tax. Further details are set out in note 33.

UK – Performance review
The key financial results for the UK were:
2019 2018
£m £m Change
Revenue 301.0 362.5 (17.0%)
Like-for-like revenue (9.1%) (3.6%)
Gross profit 168.1 206.6 (18.6%)
Gross profit % 55.8% 57.0% (1.2ppts)
Costs (excluding depreciation & amortisation) (168.5) (203.2) 17.1%
Costs (excluding depreciation & amortisation) % (56.0%) (56.1%) 0.1ppts
Underlying EBITDA (0.4) 3.4 (111.8%)
Underlying EBITDA % (0.1%) 0.9% (1.0ppts)
The first half of the year was challenging, with a combination of consumer uncertainty and exceptionally warm weather compounding the
negative newsflow surrounding the CVA. Our competitors sought to take advantage and it was a testament to our store colleagues and
support staff that we managed to maintain market leadership during the period. The second half saw a significant improvement in like-for-
like sales, with a 5.4% decline, compared to a 12.7% decline in the first half. Within this, we saw a substantial improvement during the
fourth quarter, when like-for-like sales decline moderated to 2.3%. The combined result was a full year like-for-like sales decline of 9.1%
(2018: down 3.6%).

12 |  Annual report and accounts 2019

Strategic report Directors’ report Financial statements Shareholder information

Flooring revenues in the year were £280.2m (2018: £333.8m), with a like-for-like decline of 8.4%. This performance whilst disappointing,
was in line with other major flooring specialists and reflected wider challenges in the “big ticket” home improvement sector. Whilst Brexit
is a prevailing source of uncertainty, the detail is more nuanced, with political distractions from wider domestic initiatives, a weak housing
market and a more cautious approach taken by our customers. Flooring is a product that can be “left for another day” by customers, but
importantly is one that is needed by every householder, suggesting significant latent demand when confidence returns.
Whilst we cannot control the wider economy, we can inspire customer confidence in Carpetright as Europe’s leading flooring retailer.
We offer 0% finance over periods of up to 48 months to help in the affordability of our products. Supplies were disrupted in the immediate
aftermath of the CVA, but it is a testament to our store support colleagues and the partnership shown by our suppliers that this was short
lived. We offer an unrivalled range suitable for every domestic need and customers can place orders with us knowing we control our supply
chain end to end, with our own cutting operations, and can be relied upon to see the journey through to fitting, care of our Which? Trusted
Trader third party fitters.
Our bed performance in the year was weak, with revenues of £20.8m, down 27.5% on prior year (2018: £28.7m), representing a like-for-
like decline of 18.4%. We are not known as a bed specialist, notwithstanding stocking beds in some 197 of our stores. An attempt to
improve both the breadth and presentation of the range in 2018 was not successful and we sought to retrench in the period, focusing both
on service and price point against the competition. We saw improved traction through the year, particularly during the fourth quarter, when
the like-for-like decline reduced significantly. Whilst no cause for celebration, the steady improvement in performance showed our strategy
is working and we move into 2020 with a drive to regain lost ground.
We opened four stores and closed 80 stores during the period, including one relocation. This translated into a net space reduction of
643,000 sq ft, a decrease of 18.0%. At the year end the average store size was 8,784 sq ft (2018: 8,724 sq ft) and average lease length
was 4.0 years (2018: 4.8 years).

The UK portfolio is now as follows:

Store numbers Sq ft (’000)
28 April 2018 Openings Closures 27 April 2019 28 April 2018 27 April 2019
Total 410 4 (80) 334 3,577 2,934
We had to engage in significant promotional activity during the first half, with gross margins consequently falling 3.5ppts to 55.9%
(2018 H1: 59.4%). We maintained margins in the second half at 55.8%, some 1.2ppts ahead of the comparative period (2018 H2: 54.5%).
The average Euro/Sterling rate in the year was unchanged at 1.13 (2018 1.13). Gross profit decreased by £38.5m to £168.1m
(2018: £206.6m).
The cost base (excluding depreciation and amortisation) decreased by 17.1% to £168.5m (2018: £203.2m). Costs as a percentage of
sales were largely unchanged at 56.0% (2018: 56.1%). The movement in costs reflected a £32.7m reduction in store costs and a £1.9m
reduction in central costs. Utilisation of onerous lease provisions within these figures increased to £4.6m (2018: £4.3m) and advance rental
accrual releases to £5.7m (2018: £3.1m). This reflected the acceleration arising from the curtailing of lease periods in our “C” and “B”
stores and will in future be impacted by the new IFRS 16 lease accounting standard, further details of which are set out in note 33.
The combination of the above factors resulted in underlying EBITDA decreasing by 111.8% to a loss of £0.4m (2018: profit of £3.4m).

Rest of Europe – Performance review

The key financial results for the Rest of Europe were:
Change
2019 2018 (Reported Change
£m £m currency) (Local currency)
Revenue 85.4 83.8 1.9% 1.9%
Like-for-like revenue 3.4% 1.2%
Gross profit 42.3 43.7 (3.2%) (3.2%)
Gross profit % 49.5% 52.1% (2.6ppts)
Costs (excluding depreciation & amortisation) (39.0) (40.0) 2.7% 2.6%
Costs (excluding depreciation & amortisation) % (45.7%) (47.7%) 2.0ppts
Underlying EBITDA 3.3 3.7 (10.8%) (11.9%)
Underlying EBITDA % 3.9% 4.4% (0.5ppts)

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Financial review continued

In local currency terms, the three businesses in the Rest of Europe combined to produce an encouraging increase in revenue on the prior
year. The first half of the period saw a total revenue decline of 1.2% and like-for-like sales increase by 0.5%, partly impacted by supply
challenges arising from the UK’s CVA. The second half saw a restoration of supply, together with a new leadership team in the Benelux,
leading to a significant improvement in total revenue of 5.7% and like-for-like sales growth of 6.4%. These combined to deliver a full year
increase in total sales of 1.9% (2018: 3.6%) and like-for-like sales improvement of 3.4% (2018: 1.2%).
The Netherlands posted the most significant improvement in the year, with revenues of €69.5m (2018: €66.9m), representing an absolute
increase of 3.9% and 4.9% on a like-for-like basis. This was driven by an increase in hard flooring sales, underpinned by our “new store
concept” store presentation. This approach illustrates our product range in combination, in a variety of presentation themes, that inspire
customers to visualise how the floorcovering might look in their home, helping them to select those that best match their tastes.
The Belgian business posted revenues of €18.7m, representing an absolute decline of 1.6%, albeit an increase of 0.3% on a like-for-like
basis. The business has historically been underinvested, reflecting demand for capital elsewhere in the Group. The capital constraints we
experienced across the Group during the year impacted on this business in particular. We remain confident in its long term prospects with
relatively modest investment. Our Irish business posted revenues of €8.6m, representing a decline of 5.5%, or some 1.3% on a like-for-like
basis. This business has an oversized store footprint which we are looking to reduce as opportunities arise. We believe at the core of the
Irish business, we have a strong operation focused on the major cities that is capable of delivering value to the Group once we have an
economic operating footprint.
Total revenues of €96.8m were 1.9% ahead of the prior year (2018: €95.0m). This translated into revenues of £85.4m, a rise of 1.9%
on the prior year (2018: £83.8m), reflecting the unchanged average exchange rate.
The number of stores decreased by three during the year, there were no openings during the period. The associated trading space
reduced by 3.3%. The average store size was broadly unchanged at 10,129 sq ft (2018: 10,244 sq ft), with an average lease length
of 3.5 years in the Benelux (2018: 2.6 years) and 3.3 years in Ireland (2018: 4.2 years).
The Rest of Europe portfolio is now as follows:
Store numbers Sq ft (’000)
28 April 2018 Openings Closures 27 April 2019 28 April 2018 27 April 2019
Netherlands 92 – (1) 91 950 932
Belgium 23 – (1) 22 228 213
Republic of Ireland 20 – (1) 19 153 143
Total 135 – (3) 132 1,331 1,288
Gross profit percentage decreased by 2.6ppts to 49.5%, primarily as a result of the higher proportion of hard flooring sales in Benelux.
Whilst this is a pleasing strategic development, it has highlighted the need to review our supply chain profile and opportunities to leverage
our improved purchasing power. Margins were also impacted by an exceptionally high level of rebates in 2018, with a sum of £0.7m
(0.8% of sales) not recurring in 2019. Gross profit fell by 3.2% to £42.3m (2018: £43.7m).
Operating costs in local currency (excluding depreciation and amortisation) decreased by 2.5%, predominantly relating to Irish rental costs.
Utilisation of previously made onerous lease provisions, relating to the Irish operations, rose to £1.7m (2018: £1.2m); this will in future be
impacted by the new IFRS 16 lease accounting standard, further details of which are set out in note 33. In reported currency, costs
decreased by 2.5% to £39.0m (2018: £40.0m).
The combination of the above factors resulted in underlying EBITDA decreasing by 11.9% in local currency, which translated to a decrease
of 10.8% in reported currency to £3.3m (2018: £3.7m).

Net finance charges

The Group has two principal sources of debt funding (see page 20):
A £45m revolving credit facility and committed overdraft facilities of £7.5m and €2.4m, all of which run to 31 December 2019
A £17.25m (gross) shareholder loan with an 18% coupon, repayable with interest on 31 July 2020 and expected to amount to £25.7m

Net finance charges for the period increased by £5.6m to £8.4m (2018: £2.8m), comprising:
£3.3m charge relating to the shareholder loan
£0.2m relating to a higher rate of interest payable on bank debt
Offset by £0.1m lower finance lease charges

14 |  Annual report and accounts 2019

Strategic report Directors’ report Financial statements Shareholder information

The remaining £2.2m increase relates to fees associated with:

£1.0m in loan fee amortisation relating to the shareholder loan repaid on 13 June 2018 (fees of £1.5m charged in the period)
£1.0m in loan fee amortisation relating to the £17.25m shareholder loan put in place on 11 May 2018
£0.2m relating to the extension in May 2018 of the Group’s revolving credit and overdraft facilities to 31 December 2019

Taxation
The weighted average effective tax rate for the year was a credit of 10.9% (2018: credit of 9.0%), a variance of 8.1% compared to the UK
corporation tax rate of 19.0%. This variance is due predominantly to a decrease in non-deductible items and the derecognition of a £4.0m
deferred tax asset, offset in part by a prior year adjustment arising from a review of deferred tax on historic rollover relief claims (resulting in a
deferred tax credit of £3.5m).

Separately reported items

The Group makes certain adjustments to statutory profit measures in order to help investors understand the underlying performance of the
business. These adjustments are reported as separately reported items. The Group recorded a net charge of £7.9m (2018: £61.8m).
2019 2018
£m £m
Underlying loss (16.9) (8.0)

Non-cash items
Impairment of goodwill – (34.7)
Freehold property (impairment)/reversal (0.8) (5.1)
Store asset impairment (1.0) (5.7)
Net onerous lease charge (0.9) (2.3)
Release of fixed-rent accruals and lease incentives – 2.8
Inventory adjustments (3.0) –

Restructuring costs
Redundancy provisions 0.5 (3.8)
CVA rent guarantee liability (0.6) –
Store closure costs associated with CVA – (2.0)
Professional fees – (6.4)

Profit/(loss) on disposal of properties 1.3 (1.7)

Strategy
Store refurbishment – asset write-offs – (0.6)
ERP dual running costs (2.0) (1.5)

Other
Share based payments (0.5) (0.5)
Pension administration costs (0.9) (0.3)

Total separately reported items (7.9) (61.8)

Statutory loss before tax (24.8) (69.8)

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Financial review continued

Non-cash items
The Group performed an impairment review of its goodwill, freehold properties and store fixed assets in accordance with IAS 36, following
recent potential indicator events.
The Group reviewed its goodwill balances and determined that no impairment was required (2018: charge of £34.7m).
The Group sold three UK properties shortly after year end, in Salford, Devizes and Newtownards, as the Board determined the sale
would be value accretive for shareholders when assessing the implied yield against the Group’s cost of capital. This raised £2.6m in cash
proceeds, which was transferred to a reserved account as required by the Group’s lenders. The associated loss on disposal was £0.8m
and accordingly, an impairment was made in the period (2018: £5.1m). The Group continues to review its property portfolio and will
consider further disposals where the Board believes there is an opportunity to realise value for shareholders.
Store and other fixed assets of £1.0m (2018: £5.7m) were impaired as a result of a review of potential closures and transfers arising from
the CVA process, together with a small sum relating to legacy systems we will be replacing as part of the implementation of D365 during
FY20. Following the collapse of our former tenant in March 2019, an assigned lease reverted back to the Group and an onerous lease
provision of £0.9m made accordingly (2018: £2.3m).
Ahead of the introduction of D365, we performed a data migration exercise, which included cleansing historic records. As part of this
exercise, differences were identified between stock records, predominantly relating to the Purfleet warehouse. To correct this and ensure
a cleaner migration to D365, a sum of £2.3m was provided against these stock balances. In addition, following a review of inventory levels,
additional provisions totalling £0.7m were established, principally against hard flooring in Purfleet.
Restructuring costs
Restructuring provisions totalling £3.8m were recognised at 28 April 2018 reflecting the expected cost of the Group’s restructuring, including
redundancy, legal and logistical costs. During the period £0.5m of the provision was released, reflecting the reassessed total cost of
implementing the restructuring.
As part of the CVA, the Group is obliged to provide a fund of £0.6m against which creditors may claim for losses associated with the
process. We felt it prudent to reserve for this sum, in light of the determination of successful claims being in the hands of the CVA
administrator and therefore outside the control of the Group.
Profit on disposal of properties
A net gain of £1.3m was made on the disposal of properties during the year (2018: £1.7m loss), principally from the landlord exercising an
option at the Lewisham store.
Strategy
The Group has continued to incur dual running costs as it replaces legacy IT systems and transitions to D365. Historically, these types of
cost would have been capital spend, but with the switch to cloud-based software services, these are classified as operating expenditure.
Due to the quantum and one-off nature of the project, these costs have been reported as separately reported items and amounted to
£2.0m in the period (2018: £1.5m).
Other
In light of the variable nature of employee share based payments, these have been classified as separately reported items. This also allows
for greater visibility of these charges in the financial statements. A charge of £0.5m was incurred during the period (2018: £0.5m).
A sum of £0.9m (2018: £0.3m) was incurred in payments made to the Group’s legacy defined benefit pension schemes, including a sum
of £0.4m relating to Guaranteed Minimum Pension equalisation ahead of formal government direction on the subject.
The tax impact of the separately reported items is a credit of £0.2m (2018: credit of £2.2m).
The total cash impact of separately reported items is an outflow of £1.0m (2018: outflow of £12.8m).

Earnings per share

Underlying loss per share was 5.1p (2018: 5.8p loss per share) and basic loss per share 7.9p (2018: 93.6p earnings per share).

Dividend
The Board continues to prioritise the use of cash in its turnaround strategy for the Group, principally by investing further in the existing
store estate and growth strategies, such as online development. Based on the Group’s current outlook and restrictions on the payment
of dividends under current lending facilities, the Directors do not expect this position to change prior to the maturity of the Shareholder Loan
on 31 July 2020. However, the intention is to return to paying a dividend when the Company has sufficient distributable reserves and the
Directors believe it is financially prudent to do so.

16 |  Annual report and accounts 2019

Strategic report Directors’ report Financial statements Shareholder information

Balance sheet
The Group had net assets of £49.7m at the end of the period (2018: £9.6m), a year-on-year increase of £40.1m.
27 April 28 April
2019 2018
Freehold & long leasehold property 52.3 54.6
Tangible assets 46.9 54.6
Intangible assets 29.6 27.0
Other non-current assets 1.4 3.0
Non-current assets 130.2 139.2
Inventories 43.7 45.7
Trade debtors 1.5 3.2
Prepayments and accrued income 10.2 12.2
Other debtors 1.2 1.3
Current assets 56.6 62.4
Trade payables (24.8) (30.2)
Rent and rates accruals (3.4) (2.9)
Taxation and social security (8.7) (11.0)
Other creditors and accruals (32.9) (38.5)
Provisions (5.0) (10.6)
Corporate tax payable (1.2) (0.8)
Creditors < 1 year (76.0) (94.0)
Deferred tax provision (2.7) (7.1)
Pension deficit (0.6) (0.8)
Provisions (6.1) (9.1)
Other long-term creditors (24.3) (28.0)
Creditor > 1 year (33.7) (45.0)
Cash and overdraft 12.9 4.8
Loans (38.9) (56.0)
Finance leases (1.4) (1.8)
Net debt (27.4) (53.0)
Net assets 49.7 9.6

Non-current assets
The Group owns a significant property portfolio, most of which is used for retail purposes. The carrying value of these properties reduced
by £2.3m to £52.3m as at the balance sheet date (2018: £54.6m), predominantly reflecting depreciation costs of £0.9m (2018: £1.1m). As
noted above, the Group performed an impairment review in light of the sale of three properties for £2.6m shortly after year end, amounting
to £0.8m; no further impairments were deemed necessary. The balance of the change related to the sale of one freehold in the period,
together with depreciation. Carrying values of properties are supported by a combination of value-in-use and independent valuations.
The value of tangible assets fell by £7.7m to £46.9m (2018: £54.6m), reflecting the £0.8m impairment discussed above, together with
depreciation of £9.8m, offset by additions of £4.1m and exchange differences.
Intangible assets consists primarily of goodwill and software assets. The increase of £2.6m to £29.6m (2018: £27.0m) reflects £3.1m for
the continued expenditure on D365 – which is expected to become operational in the latter part of the current financial year – and £0.6m
for website re-platforming, offset by amortisation and impairment. Other non-current assets decreased by £1.6m to £1.4m (2018: £3.0m),
primarily from the decrease in deferred tax assets as a result of derecognition of prior year losses.
Current assets
Inventories fell by £2.0m to £43.7m (2018: £45.7m), comprising an underlying increase of £1.0m in stock levels relating predominantly to Brexit
planning, offset by the £3.0m impairment as discussed above. Trade debtors decreased by £1.7m to £1.5m (2018: £3.2m), of which £1.4m
relates to the reclassification of monies due from our Interest Free Credit (“IFC”) provider, Hitachi, to be recognised as cash-in-transit under IAS 7.
Prepayments and accrued income decreased by £2.0m to £10.2m (2018: £12.2m), predominantly reflecting lower rent and rates
prepayments due to store closures.

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Creditors less than one year

Trade payables reduced by £5.4m to £24.8m (2018: £30.2m) reflecting an adverse movement in credit terms with suppliers, in light of a
withdrawal of credit insurance by the majority of providers. Rent and rates accruals increased by £0.5m to £3.4m (2018: £2.9m) largely
from UK store rent settlements. Tax and social security decreased by £2.3m to £8.7m (2018: £11.0m) primarily from the timing of VAT
payments between 2018 and 2019. Other creditors and accruals fell by £5.6m to £32.9m (2018: £38.5m), principally due to the payment
of £3.2m advisor fees associated with the CVA which were accrued at the 2018 year end. Average trade creditor days at the year end
date were 63 days (2018: 108 days).
Creditors greater than a year
The deferred tax provision reduced by £4.4m, to £2.7m (2018: £7.1m). The movement was primarily as result of an adjustment arising
from a review of the UK deferred tax liability on historic rollover relief claims with a value of £5.3m.
At 27 April 2019, the IAS 19 net retirement benefit deficit was £0.6m (2018: £0.8m). Under the technical provision basis, the Group’s
schemes would have a £1.2m surplus resulting from a reduction in scheme liabilities, combined with increases in the market value of
scheme assets and Company contributions. However, application of the ‘asset ceiling’ under IAS 19 results in the Group de-recognising
the £1.5m surplus from the Storey’s scheme. An additional £0.3m funding commitment for the scheme was also provided. The
discount rate was 2.5% (2018: 2.5%), reflecting prevailing corporate bond rates. The scheme was closed to future accrual with effect from
1 May 2010. Following the triennial valuation as of 6 April 2017, the Company agreed a recovery plan with the Trustees on 27 June 2018.
The Company made deficit contributions of £0.9m in the period and it is expected it will continue at this level in the current financial year.
Provisions
Total provisions (less than one year, together with longer term) decreased by £8.6m to £11.1m (2018: £19.7m), reflecting a £3.3m
utilisation of the restructuring provision in relation to the CVA and a £6.3m utilisation of onerous lease provisions reflecting the revised,
shorter lease periods up to break clauses under the terms of the CVA and the smaller property estate. This was offset in part by the
£0.9m onerous lease provision discussed above.
Net debt
Cash and overdrafts of £12.9m (2018: £4.8m) comprised cash of £0.8m (net of overdrafts of £2.5m) and cash equivalents of £12.1m,
principally monies due from our credit card and Interest Free Credit providers receivable within 30 days and classified as “cash equivalents”
under IAS7.
Loans of £38.9m (2018: £56.0m) comprised drawings under the RCF of £23.0m and £15.9m related to the shareholder loan (the difference
to the £17.25m gross sum being fees incurred upon drawing the loan). Further sums relating to accrued interest on loans are included in
Creditors greater than one year of £3.3m (2018: £nil) and Creditors less than one year of £0.5m (2018: £0.2m).
Further details are set out in Notes 17 and 19.
Operating leases and impact of IFRS 16
As a consequence of the continued focus on managing the estate to reduce square footage, eliminate store catchment overlap and
implementing the CVA, operating lease liabilities for land and buildings reduced to £320.1m (2018: £408.0m).
We will be adopting the new lease accounting standard IFRS 16 – Leases on 28 April 2019 for the year ending 25 April 2020. Using
lease data from 27 April 2019, the expected impact on the Group will be as follows:
Recognise a right-of-use asset as at 28 April 2019 of between £245m and £255m, net of impairment relating to onerous lease provisions
and advance rental accruals;
Recognise a lease liability of between £277m and £287m, with a consequent increase in net debt;
Increase underlying EBITDA, by approximately £60m;
Increase underlying operating profit by between £18m and £20m;
Increase finance costs by between £25m and £27m; and
Decrease Profit Before Tax by approximately £7m.

We will also cease to utilise onerous lease provisions (2019: £6.3m) and advance rental accrual releases (2019: £5.7m), with a further £10m
to £12m impact on presented profitability. As discussed above, the provisions will instead be used to impair the “right of use” asset, with a
resultant reduction in deprecation over the depreciation period, resulting in a timing difference that as with interest, impact early and benefit
later years. The depreciation impact was factored into the assessment outlined above.

18 |  Annual report and accounts 2019

Strategic report Directors’ report Financial statements Shareholder information

The total pre-tax impact on the Group on a like-for-like basis would therefore be of the order of £17m to £19m. IFRS 16 has no economic
impact on the Group, nor how the business is run or its cash flows. It is expected that banking covenants will be normalised to reflect a
position consistent with historical accounting standards. The Group does not currently intend to alter its approach going forward as to
whether assets should be leased or purchased. Further details are provided in note 33.

Cash flow
The Group’s net debt at 27 April 2019 was £27.4m, an improvement of £25.6m on the prior year (2018: £53.0m debt). Average net debt
was £25.3m over the financial year (2018: £30.7m).
2019 2018
£m £m
Underlying operating (loss)/profit (8.5) (5.2)
Depreciation & amortisation 11.4 12.3
(Increase)/decrease in inventories (1.1) 6.4
Increase in working capital (14.1) (24.1)
Net income/(expenditure) on exit of operating leases 0.9 (1.9)
Restructuring costs (2.4) (2.6)
Contributions to pension schemes (1.2) (0.9)
Provisions paid (9.6) (5.5)
Operating cash flows (24.6) (21.5)
Net interest paid (2.4) (1.8)
Corporation tax received/(paid) 0.3 (1.4)
Net capital expenditure (8.1) (19.9)
Free cash flows (34.8) (44.6)
Net capital proceeds 62.7 –
Other (2.3) 1.4
Movement in net debt 25.6 (43.2)
Opening net debt (53.0) (9.8)
Closing net debt (27.4) (53.0)
The working capital outflow of £14.1m was attributable to a decrease in trade payables as credit terms were reduced as a result of
the CVA, together with an adverse movement in VAT payable and accruals, arising from the settlement of fees in relation to the CVA.
Provisions fell by £9.6m, due to utilisation of lease incentives and restructuring provisions.
Gross capital expenditure was £8.7m (2018: £20.2m), representing a decrease of £11.5m. This reflected the Board’s drive to manage
cash in light of trading performance, together with the imposition of capital expenditure restrictions by our lenders in August 2018 under the
terms of our banking documentation. After allowing for proceeds from asset disposals, net capital expenditure was £8.1m (2018: £19.9m).
The major element of capital expenditure was the investment in store refurbishments, with 209 now completed in the UK and a further
32 stores in the Netherlands and Belgium. The expenditure within IT reflected a combination of the replacement of legacy systems with
our new ERP platform and replacement of hardware and network infrastructure within stores in the Netherlands and Belgium.
2019 2018
£m £m
Refurbishment (2.6) (10.7)
New stores & relocations (0.1) (1.4)
IT (4.2) (4.6)
Property costs (0.3) (0.8)
Capital maintenance (1.5) (2.7)
Gross capital expenditure (8.7) (20.2)
Proceeds from freehold property disposals 0.6 0.3
Net capital expenditure (8.1) (19.9)
Our expectation is for capital expenditure to be approximately £8m to £13m in 2020, focused on the continued refurbishment of stores and
investment in our IT systems infrastructure.

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Strategic report continued
Financial review continued

Current liquidity
To address the liquidity issues in the previous year, the Group took a series of actions to recapitalise the business to provide a strong
platform to continue the turnaround of the business:
Secured a loan note of £17.25m (gross) from a shareholder (£15.9m net of fees), which matures in July 2020.
Raised £65.1m of gross equity in the form of cash via a Placing and Open Offer.
Repaid the first shareholder loan of £12.5m at a cost of £1.5m.
Agreed new facilities with its principal lending banks whereby the £45m RCF remained in place, approximately £10m of overdrafts became
committed and, subject to terms, all facilities continued to be available until December 2019. The three main financial covenants within the
banking arrangements assess underlying EBITDA, debt levels and fixed-charge cover and were all met in the year.

Gross bank borrowings at the balance sheet date were £25.5m (2018: £46.8m), being a combination drawn down from overdraft and
revolving credit facilities. The Group had further undrawn facilities of £29.1m at the balance sheet date. In addition, the Group held gross
cash and cash equivalent balances of £15.4m. The combination of these resulted in net bank borrowings of £10.1m, which is £44.5m
lower than the total facilities. This difference would have been £36m if a tighter definition of "cash" had been applied under the facilities
agreements which we are discussing with the lenders.
As a result of the above, the Group has access to total committed debt facilities of approximately £72m through to December 2019.

Going concern
The Group meets its day-to-day working capital requirements through its bank facilities and a shareholder loan. The principal banking
facility includes a revolving credit facility of £45.0m, a Sterling overdraft of £7.5m and a euro overdraft of €2.4m, all of which are committed
to the end of December 2019. The shareholder loan of £17.25m gross (£15.9m net of fees) is committed to 31 July 2020. The three main
financial covenants within the banking facility assess underlying EBITDA, debt levels and fixed-charge cover. Given the trading performance
since the CVA in June 2018 when covenants were set, headroom against the EBITDA covenant is expected to be the most sensitive both
at present and over the remaining term of the facility.
As part of the Board’s assessment of going concern, trading and working capital requirements, together with the shareholder loan due
for repayment in July 2020, forecasts have been prepared covering a 15 month period from June 2019. These forecasts have been
subjected to a sensitivity testing to reflect market and trading uncertainties, offset by the opportunity to take mitigating action through
this forecast period.
The forecasts have been updated for actual trading to week seven of the current year and the latest view of trading to the end of June
2019. As discussed in the Chief Executive’s report, trading for this period has been encouraging, with positive like-for-like revenues in all of
our businesses. Consumer confidence however remains uncertain, with the British Retail Consortium reporting the biggest decline in retail
sales on record in May 2019. The financial forecasts have been sensitised to take account of future volatility in demand outside the Group’s
control, which in certain downside cases would require us to renegotiate our covenants with lenders. This presents an uncertainty to the
Going Concern assessment, albeit we are confident in a number of mitigating opportunities to help manage this risk.
The most critical assumption when assessing the Group’s Going Concern position is whether it has adequate resources to continue
in operational existence for the foreseeable future, determined to be at least 12 months from the date of approval of these financial
statements. The Group’s principal banking facility falls due within this period, with the shareholder loan falling due within 15 months.
The Group is in active discussions regarding refinancing its borrowings and the Directors are confident of obtaining a suitable long term
arrangement. In the absence of these discussions coming to fruition, the Directors are confident of there being a market for strategic
asset sales that would enable the Group to raise sufficient funds to meet the future cash requirements of the Group and its liquidity needs.
However, without either of these developments, and assuming no additional financing or the successful renegotiation of existing covenants
under the existing banking facility, the Group and Parent Company may be unable to meet their liabilities as they fall due. These conditions
indicate the existence of material uncertainties which may cast significant doubt about the Group’s ability to continue as a going concern.
Whilst recognising the inevitable uncertainties of the current retail market and the Group’s restructuring, the Directors confirm that, after
considering the matters set out above, they have a reasonable expectation that the Company and the Group have adequate resources
to continue in operational existence for a minimum of 15 months following the signing of these financial statements. For this reason, they
continue to adopt the going concern basis in preparing the financial statements.
Further information on the Group’s borrowings is given in note 19.

Jeremy Simpson
Chief Financial Officer
25 June 2019

20 |  Annual report and accounts 2019

Strategic report Directors’ report Financial statements Shareholder information

Managing risk

The Group faces a number of risks and uncertainties in both the development and day-to-day
operations of its business.
We are confident that the current risk activities. This includes the Committee’s Oversight and assurance
management process is robust, and oversight of the Group’s Internal Audit
The Group Finance department is
this has been of vital importance during department, which:
responsible for the financial policies
the past couple of years. Having identified
undertakes its work, both on central and standards adopted within the Group.
the structural challenges facing the Group,
functions and in the field, based on a risk It also manages the financial reporting
the CVA was announced on 12 April 2018,
assessment model; and processes to ensure the timely and accurate
together with a £65.1m Placing and Open
monitors adherence to the Group’s key provision of information which enables the
Offer, announced on 18 May 2018 and
policies and principles. Board to discharge its responsibilities.
concluded successfully on 8 June 2018.
With a shareholder loan of £17.25m (gross) The Company Secretary and Legal
agreed in May 2018, this placed the Group The Audit Committee reports to the Board Director is responsible for maintaining
on a far sounder financial footing. on its activities and makes recommendations and developing the Group’s framework
and escalates significant risks or issues to the of governance, including our anti-bribery
Board as appropriate. Its role is described in
General approach to risk more detail on pages 32 to 35.
policy and whistleblowing process, alongside
management ensuring that any changes to the Group’s
The Board has reviewed the Group’s legal obligations are brought to the attention
Carpetright recognises that effective of the relevant teams who are responsible
systems of internal control including financial,
business management requires regular for the implementation of any changes.
operational and compliance controls as
review of business risks. The Group
well as risk management, and is satisfied The Internal Audit department provides
has established a flexible and practical
that these accord with the guidance on independent assessment on the robustness
framework, sponsored by senior executives,
internal controls set out in the Guidance and effectiveness of the systems and
which aims to identify and manage the
on Risk Management, Internal Control processes of risk management and control
principal risks that may prevent the Group
and Related Financial and Business Control, across the Group. It achieves this through
from achieving its strategic objectives.
issued by the Financial Reporting Council undertaking reviews which are reported to
in September 2014. and approved by the Audit Committee. The
The Board and Audit Group also uses the services of independent
Committee Identification of business risks third-party advisers and consultants to review
The Board has overall responsibility for the An Executive Risk Committee (‘ERC’) controls and processes where the nature
Group’s risk appetite, more details of which comprising the Executive Directors and of the review requires expertise not available
can be found on page 29. It also has overall senior managers exists to review key risk in-house.
responsibility for the system of internal control and control issues, and the Group’s principal
and for reviewing its effectiveness. In order risks are individually sponsored by a member Principal risks and uncertainties
to fulfil this responsibility, the Directors have of the ERC. The ERC met four times during
established an organisational framework The Group is subject to the same general
the period. risks as many other businesses; for example,
with clear operational procedures, lines of
responsibility and delegated authority which The ERC identifies and assesses risks to the changes in general economic conditions,
has operated throughout the year under Group’s medium-term strategy and directs currency and interest rate fluctuations,
review and up to the date of approval of the risk management processes within both changes in taxation legislation, cyber-security
the Annual Report and Accounts. the UK and the Rest of Europe to address breaches, failure of our IT infrastructure,
each of the identified risks, formulate a the cost of our raw materials, the impact
The system of internal control is designed mitigation strategy and assess the likely of competition, political instability, regulatory
to identify, evaluate and manage significant impact of such risk occurring. The Chief compliance obligations and the impact
risks associated with the achievement of Financial Officer provides regular reports to of natural disasters.
the Group’s objectives. Because of the the Audit Committee in relation to its work.
limitations inherent in any system of internal The Group uses its risk management process
control, this system is designed to meet The ERC also considers new and emerging as described on page 21 to identify, monitor,
the Group’s particular needs and the risks to risks as a standing agenda item, including evaluate and escalate such issues as they
which it is exposed rather than eliminate risk those identified by the Board of Directors. emerge, enabling management to take
altogether. Consequently, it can only provide The Committee has also reviewed the appropriate action wherever possible in order
reasonable and not absolute assurance ranking of the business’s key strategic to control them and also enabling the Board
against material misstatement or loss. risks during the year to ensure that this to keep risk management under review.
remains an appropriate reflection of their The risk factors addressed on pages 23
The Audit Committee assists the relative standing. The principal risks and
Board through its work covering the to 25 are those which are believed to be
uncertainties affecting the business are the most material to its business model,
Group’s system of internal controls, the set out on pages 23 to 25.
assessment of risks and related compliance which could adversely affect the operations,

www.carpetright.plc.uk | 21
Strategic report continued
Managing risk continued

revenue, profit, cash flow or assets of the This assessment included sensitivity and May 2019. The financial forecasts have been
Group and which may prevent us from stress testing analysis on the impact of sensitised to take account of future volatility in
achieving the Group’s strategic objectives. reduced revenues; a decrease in gross demand outside the Group’s control, which
Additional risks and uncertainties currently margin; further working capital challenges, in certain downside cases would require us
unknown, or which are currently believed offset by identified mitigating actions. As a to renegotiate our covenants with lenders.
immaterial, may also have an adverse effect result, the Board concluded that the business This presents an uncertainty to the Going
on the Group. would remain viable over the three-year Concern assessment, albeit we are confident
period of the plan. in a number of mitigating opportunities to
In reviewing risk in the current year, we
help manage this risk.
removed “legal, regulatory and compliance” Based on the outcome of this assessment
in light of this being important, but a general and notwithstanding the uncertainties set The most critical assumption when
risk. We included a new risk of change out in the following paragraphs, the Directors assessing the Group’s Going Concern
management, in light of the turnaround have a reasonable expectation that the position is whether it has adequate
programme being followed by the Group Group will be able to continue in operation resources to continue in operational
following on from the CVA. and meet its liabilities as they fall due over existence for the foreseeable future,
the three-year period of their assessment. determined to be at least 12 months
Viability statement from the date of approval of these financial
In accordance with provision C.2.2 Going concern statements. The Group’s principal banking
facility falls due within this period, with the
of the 2014 revision of the Code, the The Group meets its day to day working shareholder loan falling due within 15
Board has assessed the prospects of the capital requirements through its bank months. The Group is in active discussions
Company over a longer period than the facilities and a shareholder loan. The regarding refinancing its borrowings and
12 months from the date of approval of principal banking facility includes a revolving the Directors are confident of obtaining a
the financial statements. credit facility of £45.0m, a Sterling overdraft suitable long term arrangement. In the
of £7.5m and a euro overdraft of €2.4m, absence of these discussions coming to
The Board conducted the review for a three-
all of which are committed to the end of fruition, the Directors are confident of there
year period to April 2022 corresponding with
December 2019. The shareholder loan being a market for strategic asset sales that
the period over which the Group’s various
of £17.25m gross (£15.9m net of fees) is would enable the Group to raise sufficient
growth initiatives are anticipated to have
committed to 31 July 2020. The three main funds to meet the future cash requirements
a key impact and aligned to the Group’s
financial covenants within the banking facility of the Group and its liquidity needs. However,
planning cycle. These plans are updated
assess underlying EBITDA, debt levels and without either of these developments, and
annually taking into account the current
fixed-charge cover. Given the trading assuming no additional financing or the
and prospective macro-economic conditions
performance since the CVA in June 2018 successful renegotiation of existing covenants
and the competitive tension that exists in the
when covenants were set, headroom under the existing banking facility, the Group
markets that we trade in. The plans consider
against the EBITDA covenant is expected and Parent Company may be unable to
profits, cash flows, funding requirements
to be the most sensitive both at present meet their liabilities as they fall due. These
and other key financial ratios over the period,
and over the remaining term of the facility. conditions indicate the existence of material
as well as the headroom on liquidity and
the financial covenants as may be contained As part of the Board’s assessment of uncertainties which may cast significant
in our funding arrangements. going concern, trading and working doubt about the Group’s ability to continue
capital requirements, together with the as a going concern.
Important assumptions underlying the
shareholder loan due for repayment in Whilst recognising the inevitable
plans include:
July 2020, forecasts have been prepared uncertainties of the current retail market
funding in the form of debt, sourced covering a 15 month period from June 2019. and the Group’s restructuring, the Directors
from the capital markets, banks or other These forecasts have been subjected to a confirm that, after considering the matters
sustainable sources will be available in sensitivity testing to reflect market and trading set out above, they have a reasonable
all plausible market conditions; and uncertainties, offset by the opportunity expectation that the Company and the
following the UK’s vote to leave the to take mitigating action through this Group have adequate resources to continue
European Union, the terms of exit are such forecast period. in operational existence for a minimum of
that Carpetright will be able to continue to The forecasts have been updated for actual 15 months following the signing of these
operate and source product competitively trading to week seven of the current year and financial statements. For this reason, they
in the same European markets as it the latest view of trading to the end of June continue to adopt the going concern basis
presently does. 2019. As discussed in the Chief Executive’s in preparing the financial statements.
report, trading for this period has been Further information on the Group’s
The Group’s CVA, together with the renewal encouraging, with positive like-for-like
discussions surrounding its funding facilities borrowings is given in note 19.
revenues in all of our businesses. Consumer
provided valuable insight to the Board into confidence however remains uncertain, with
the significance and impact of risks faced the British Retail Consortium reporting the
by the Group. This learning has been biggest decline in retail sales on record in
incorporated into the testing of future plans.

22 |  Annual report and accounts 2019

Strategic report Directors’ report Financial statements Shareholder information

Principal risks and uncertainties

Description Possible impacts Mitigation actions

Customer proposition and changing customer preferences 1 2 3 4
Failure to anticipate and plan for Failure to deliver our business Establish and communicate a clear strategy
changes in consumer tastes could objectives Prioritise investment in both our existing estate and
have a material effect on future Loss of revenue online platforms
operations and financial performance
Diminished reputation Strengthen customer feedback processes to help
Reduction in market share improve our offering
Reduction in customer service Complete regular customer research
levels Frequently introduce new and exclusive product ranges
Economic uncertainty 2 3
Consumers need to feel confident Failure to deliver our business Provide a broad range of products and price points in our
to invest money in their homes. In objectives categories to make it easy for our customers to trade up
the event of a significant reduction Loss of revenue or down
in house prices, housing transactions Detailed sales information by product and by store is
or consumer confidence, the Group Supply disruption
reviewed weekly, enabling changes to prices, incentive
would expect this to adversely impact Reduced long-term growth
structures and marketing activity to optimise sales
on its performance and profit
The Group’s interest free credit offer allows customers
One of the key assumptions to spread cost into affordable monthly payments
underlying the Group’s three-year plan Review the potential to source more product from the
is that, following the UK’s vote to leave UK or outside the EU
the European Union, the terms of exit
are such that Carpetright will be able
to continue to operate and source
product competitively in the same
European markets as it presently
does, without significant additional
costs or disruption

Financial risk and liquidity 1

The Group risks exposure to Failure to deliver our business Supplier agreements in place to mitigate the impact
exchange rate, interest rate, liquidity objectives of a movement in exchange rates
and credit risks having an adverse or Reduced long-term growth Active management of our financial position to ensure
unexpected impact on results, funding and profit that funding requirements are being met
requirements or purchasing ability
Suppliers’ failure to obtain credit Bank covenant tests are regularly monitored
risk insurance leading to adverse Committed bank facilities have been agreed to
impact on Group’s cash position December 2019
Absorbed impact of withdrawal of credit insurance during
the period through utilising existing banking facilities and
negotiating supplier terms

www.carpetright.plc.uk | 23
Strategic report continued
Principal risks and uncertainties continued

Description Possible impacts Mitigation actions

Property portfolio 4
Property costs form a significant part Reduced long-term growth, The Group continuously reviews the location and format
of our fixed cost base and as such all profit and cash flow of its stores and their contribution to the overall results
decisions in this area have an impact Unsustainable fixed cost base Implementation of the CVA allowed the Group to
on the long-term value of the business challenges the Group’s ability reduce its UK property portfolio by 80 stores, significantly
to trade as a going concern reducing the number of locations on unsustainable
Restrictions in our banking rental agreements
facilities prevent investment The CVA provided greater flexibility to exit “B1, B2 and C”
in the store estate leases, relating to stores with a lower profit contribution
Continue to invest in the modernisation and refurbishment
of stores through co-operation with our lenders
Continue to utilise a detailed location planning model
which aids our understanding of store catchments and
customer demographics
Consult external advisers, where appropriate, to provide
expert advice and inform decision making on which stores
to retain / exit
Brand, reputation and product 1 2 3
The Carpetright name is a key asset of Failure to deliver our business The Group works closely with its suppliers to ensure the
the business and, as the largest operator objectives products it sells are of the highest quality and meet the
in its markets, expectations of the Group Diminished reputation organisation’s required ethical and safety standards
are high Invest in marketing designed to communicate our
Loss of revenue
credentials on range, choice and value, driving brand
Loss of consumer trust and
awareness and customer visits to store or online
confidence
“Which? Trusted Trader” status in the UK for the
Inability to recruit the best people
recommended fitting services
Regularly engage with our customers and act upon
their feedback
Competition 1 2 3 4
The Group competes with a wide Failure to deliver our business Invest in marketing designed to communicate our
variety of retailers across multiple objectives credentials on range, choice and value
channels and across a broad Loss of revenue Continuous monitoring of customer service, product
spectrum of price points and advertising performance and competitor activity
Reduced long-term growth
and profit
People 1 3
The Group relies upon attracting and Reduced long-term growth Recruit, train and develop a suitably skilled and
retaining talented and appropriately and profit qualified team
qualified people in order to deliver its Reduced customer service Senior management provide regular business updates
long-term objectives levels Monitor remuneration packages within our markets
Inadequate succession planning to ensure they are fair and competitive
Continue to invest in training for our store colleagues to
ensure they both feel valued and can support achieving
the Group’s objectives

24 |  Annual report and accounts 2019

Strategic report Directors’ report Financial statements Shareholder information

Description Possible impacts Mitigation actions

IT performance and cyber-security 1 3 4
Carpetright is dependent on the Diminished reputation Active management of our systems
reliability, availability, capability and Loss of revenue Reviewed and tested continuity plans
security of key information systems
Loss of consumer trust and Developed separate disaster recovery facilities
and technology
confidence Regular systems testing by third parties to provide
Reduced customer service levels assurance as to their security
Commenced a transition from legacy systems to new
Microsoft Dynamics 365 platform
Business continuity planning 1 3
A major incident, such as a key Failure to deliver our business Developed separate disaster recovery facilities
system or supplier failure, could objectives Reviewed and tested continuity plans
impact the ability of the Group to Loss of revenue The Group has long-established and good working
continue trading
Diminished reputation relationships with its key suppliers
Actively monitor the supply base to identify exposures
and identify appropriate contingency solutions
Change management 1 3 4
The Group is implementing a number Reduced long-term growth Regular monitoring of performance to ensure promises
of actions as part of a turnaround plan and profit are being delivered
– including commercial initiatives, a Unsustainable fixed cost base Steering groups for all significant projects, involving senior
new ERP operating platform, colleague challenges the Group’s ability managers and subject matter experts
training and cost management actions. to trade as a going concern Third party support to ensure programmes being
This requires a significant level of
cultural change management, which if Reduction in customer service delivered to plan
levels
implemented incorrectly could result in
significant levels of business disruption

Link to Strategy
1 Who we are 2 What we sell 3 How we sell 4 Where we sell

www.carpetright.plc.uk | 25
Strategic report continued

Corporate responsibility

Corporate responsibility is about doing business the right way.

Our Corporate responsibility (CR) policy Ireland have also raised more than €8,000 Whilst we are pleased to report that
is designed to support our objectives and for the Irish Heart Foundation. both figures are lower than last year and
strategy. There are three areas of focus significantly lower than the national average
and further details of our progress in each Our workplace and the average for the retail industry, we
area can be found below: The Group employs over 2,500 people remain keen to address this gap and ensure
and has some impact on many more equality across all levels at Carpetright.
Our communities – how we treat
via our supply chain. We recognise
our customers, and give back to the It is our ambition to attract more females
that matters such as how we treat our
communities in which we operate; into our business and we continually review
colleagues and suppliers, approach
Our workplace – the Group’s policies our HR policies and recruitment practices
diversity and source our products are
and actions towards our colleagues to ensure we are increasingly inclusive.
important to our customers.
and supply chain; and We continue to focus on modernising our
Equal opportunities
Our environment – the impact we have business, addressing every aspect including
on the environment and how we are The Board believes in creating, throughout who we are, what we sell, where we sell
seeking to reduce this. the Group, a culture that is free from and how we sell. This has clearly helped
discrimination and harassment, and will to drive some change – five years ago our
Wilf Walsh is the director responsible for CR. not tolerate discrimination in any form. business was 82% male and today we’re
We are an equal opportunities employer down to 75%.
Our communities and our people and applicants are treated
fairly and equally regardless of their age, The full report can be found on our website
Corporate responsibility starts with colour, creed, disability, full or part time www.carpetright.plc.uk.
our relationship with customers and the status, gender, marital status, nationality
interaction we have with the communities Training and development
or ethnic origin, race, or sexual orientation.
in which we operate. Applications from people with disabilities Over the last twelve months we have
are always fully considered. Should an invested in training and developing our
Our customers people, providing the opportunity for all
individual become disabled while working
We take customer service seriously. colleagues to increase their skills and,
for the Company, efforts are made to
In the UK in early 2019, we built on the where relevant, develop their careers. We
continue their employment and retraining
foundations of the Customer Journey have continued to provide both mandatory
is provided, if necessary.
through a new training programme and colleague-led training via our social
called the “In-store experience”, giving a We believe the attributes of individuals and learning platform, Fuse. This has included
framework to each customer interaction. their different perspectives and experiences training in relation to health and safety,
This will enable our teams to deliver a more add value to our business. We recognise Interest Free Credit, product knowledge,
consistent level of service across our store that a diverse workforce will provide us customer service, management skills
estate. Our customers are invited to rate with an insight into different markets and and personal development.
and provide feedback on all three stages help us to anticipate and provide what
of their experience – in-store ordering, our customers want from us. Engagement
estimating and fitting. The feedback is There are a number of communication
invited either through our own programme A breakdown by gender of the number of channels in place to help people develop
“Do We Measure Up?” or through persons who were Directors of the Company, their knowledge of and enhance their
Trustpilot, where we achieved a 5-star senior managers and other employees as of involvement with the Group. These include
rating from Trustpilot in the year. The Do 27 April 2019 is set out below. surveys, management briefings, briefings
We Measure Up? feedback is immediately Male Female to stores and offices, annual events, store
available to our store and support office Directors 4 2 visits and video updates. We continue to
colleagues, where it is used to continually benefit from increased engagement due
Senior managers 7 1
monitor and improve our levels of service. to the use of Fuse, our social learning and
Other employees 2,394 773 communications tool, which allows for real-
Giving back Total 2,405 776 time interaction of colleagues at all levels and
Since March 2016, following a colleague functions. Additionally, all annual results and
vote, in the UK we have been supporting Our Gender Pay Gap interim management statements are made
the British Heart Foundation. The We take equality seriously, and we available in real-time on this platform.
partnership, which is largely centred recognise the importance of Gender pay
on colleague fundraising, has raised Gap reporting. Our mean gender pay Share ownership
more than £200,000 since the partnership gap in the UK, as of the snapshot date of All UK based colleagues have an
started. Our colleagues in the Republic of 4 April 2018, is +5.1% (2017: +8.1%) and opportunity to invest in the Company’s
our median gap is +3.6% (2017: +6.5%). shares through a Savings Related Share

26 |  Annual report and accounts 2019

24 | Annual Report and Accounts 2019
Strategic report Directors’ report Financial statements Shareholder information

Option Scheme. Over 750 colleagues Our environment of Automatic Meter Readers for electricity
participate in this scheme. and gas, which enable us to identify high-
In line with our strategy of building a
use locations and take corrective action
Bribery and whistleblowing sustainable business, we are committed
where necessary, together with proactive
As a responsible employer we maintain a to taking steps to control and minimise
management preventing us from heating
firm stance against any type of corruption any damage our operations may cause
stores overnight.
within the business. There is a Group-wide to the environment through manufacturing
Anti-Bribery and Corruption Policy in place processes, transport, energy usage and During 2018/19 we were able to reduce
which requires compulsory Anti-Bribery packaging. In particular, we are aware our electricity consumption further by
compliance and a copy of the Policy is of the issue of climate change and we are introducing LED lighting into seven newly
circulated to all new starters when they taking steps to understand and minimise refurbished stores and installing motion-
join the business. our carbon emissions. sensor technology into a further twelve
stores, to ensure lights are only being
The Group operates whistleblowing hotlines Energy usage and greenhouse gas
used when necessary. Additionally, we
through third party providers enabling emissions
have introduced LED maintenance practices
matters of concern to be raised with the We recognise that the Company benefits into a further 28 stores.
Company on a named or anonymous basis. through reduced cost and the environment
Further details can be found in the Audit benefits by reducing our consumption Non-financial reporting directive
Committee report on page 34. of energy and water. The release of guidance
greenhouse gases (ghg), notably carbon We are committed to operating a sustainable
Health and safety dioxide generated by burning fossil fuels, business model and continually evaluate and
We operate an established process for risk has an impact on climate change, which update our initiatives in line with best practice.
assessment and employees are expected presents a risk to both our business and While we have discussed progress in each of
and encouraged to be proactive on health the wider environment. the key areas above, we do not necessarily
and safety issues. Health and Safety have specific, relevant policies in line with
Committees meet to review any issues to We accept our responsibility to continually
the Non-financial Reporting Directive.
identify, prevent and militate against potential improve our environmental performance.
risks. We investigate all accidents and We continue to benefit from the introduction
recommend changes to working practices,
additional colleague training and disciplinary
action as and when appropriate. There have CO2e CO2e
(carbon (carbon
not been any fatalities this year (2018: nil). dioxide dioxide
equivalent) equivalent)
We have received notification of 135 Emission type 2019 2018 Change
accidents across the Group during the Scope 1: Operation of facilities 7,424 7,712 (4%)
year, compared to 138 in the prior year. Scope 1: Company owned vehicles 3,823 3,775 1%
Of these, 118 were in the UK with the
remaining 17 occurring in Europe and Scope 1: Emissions 11,247 11,487 (2%)
Republic of Ireland. Scope 2: Purchased energy 9.445 14,257 (34%)
Scope 2: Emissions 9,445 14,257 (34%)
Human rights and modern slavery
Total Scope 1 & 2 Emissions (tCO2e) 20,692 25,744 (20%)
We do not have a specific human
rights policy at present, but we do
have policies that adhere to international Greenhouse gas emissions intensity ratio:
human rights principles. We will review
from time to time whether a specific human 2019 2018 Change
rights policy is needed in the future, over Total footprint (Scope 1 and Scope 2) 20,692 25,744 (20%)
and above our existing policies. Our Turnover (£m) 386.4 443.8 (13%)
statement on modern slavery is available Intensity ratio (tCO2/turnover £000) 0.054 0.058 (7%)
on our website www.carpetright.plc.uk.
Notes:
Products and suppliers 1. Our methodology has been based on the principles of the Greenhouse Gas Protocol.
We have an Ethical and Environmental 2. Consumption is based on utility bills.
Code of Conduct (the Code) to ensure that
3. We have reported on all the measured emission sources required under the Companies Act 2006
we have an ethical supply chain and require (Strategic Report and Directors’ Report) Regulations. The period used is 1 May 2018 to 30 April 2019.
our suppliers to sign up to the Code. The
4. Conversion factors for electricity, gas and other emissions are those published by the Department for
Code prohibits, for example, animal testing,
Environment, Food and Rural Affairs in 2017 – GHG Conversion Factors for Company Reporting.
the use of timber from non-sustainable
sources and the use of certain chemicals 5. Refrigerant fugitive emissions have been excluded as the impact was immaterial.
which may be harmful to customers.

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Directors’ report

Corporate governance

Introduction There were a significant number of

meetings in the financial year, with the
One of the Board’s key responsibilities is
Board being closely involved and informed
to ensure that the Company is run in the
in relation to the Group’s restructuring.
long-term interests of its shareholders
Details of the number of meetings and
and broader stakeholder base. The
Board attendance are set out below:
Group recognises the importance of high
standards of corporate governance and is Number of meetings: 15
committed to operating within an effective Meetings
corporate governance framework. Executive eligible to
Directors Attendance attend
Application of the UK Corporate Wilf Walsh 15 15
Governance Code Neil Page 14 14
The version of the Corporate Governance Jeremy Simpson 1 1
Code applicable to the current reporting
period is the April 2016 UK Corporate Meetings
Governance Code (the Code). The Code Non-Executive eligible to
is issued by the Financial Reporting Council Directors Attendance attend
and is available for review on its website. Bob Ivell 15 15
(Chairman)
During the financial year ended 27 April
David Clifford 15 15
2019, the Company complied with the
Bob Ivell provisions set out in the UK Corporate Sandra Turner 15 15
Non-Executive Chairman Governance Code. Jemima Bird 3 3
Andrew Page 9 12
Governance structure Andrew Page was unable to attend three
“The Group is committed to The structure of the Board and its
operating within an effective meetings as a result of Board meetings
Committees is set out below. which were arranged at short notice
corporate governance framework.”
The Board which clashed with other pre-arranged
commitments overseas.
There have been a number of changes
to the Board this year. Neil Page stepped The Board considers that it is appropriately
down from the Board as Chief Financial balanced and currently consists of the
Officer on 25 February 2019 after more Chairman, two Executive and three Non-
than ten years in post and over 30 years Executive Directors, brief biographies of
in retailing, but continued to work in the whom can be found on page 31. There is a
business until the end of the financial year. formal, rigorous and transparent procedure
He was succeeded by Jeremy Simpson, for the appointment of new Directors to the
who became Chief Financial Officer on Board and this is described in the section
25 February 2019. concerning the Nomination Committee on
page 30.
Andrew Page stepped down from the
Board on 31 December 2018 and was The Board believes that its current
succeeded as the Senior Independent size and structure are appropriate for
Director by David Clifford. managing the Group in an effective
and successful manner.
Having completed nine years as a Non-
Executive Director, Sandra Turner will All Directors, other than Sandra Turner,
be stepping down from the Board at the will offer themselves for election or re-
conclusion of the Annual General Meeting election, as appropriate, at the Annual
in September. General Meeting.
We were pleased to announce the A Disclosure Committee comprising the
appointment of Jemima Bird, who Chief Executive and Chief Financial Officer
joined the Board as a Non-Executive and attended by the Company Secretary
Director on 2 January 2019 and Pauline and Legal Director and members of the
Best who will join the Board on 1 August advisory team met once during the year in
and will replace Sandra as the chair connection with the restructuring with full
of the Remuneration Committee at the attendance to ensure that the Company
conclusion of the Annual General Meeting was monitoring and ensuring compliance
in September. with its disclosure obligations to the market.

28
26 | |  Annual
Annual report
Report andand accounts
Accounts 20192019
Strategic report Directors’ report Financial statements Shareholder information

Non-Executive Directors Chairman’s performance by meeting with

Highlights The Non-Executive Directors of the the Non-Executive Directors and providing
During the year the Board: Company play a key governance role and feedback to the Chairman.
bring an extra dimension to the Board’s Culture and engagement
approved a placing and open offer as part
deliberations. The Board considered the
of the Company’s broader restructuring The Board has put a programme in place
independence of each Non-Executive
approved the refinancing arrangements for the financial year ending 2020 to allow
Director against the criteria specified in
with both Meditor and the lending banks it to understand and monitor culture and
the Code and has determined that each
ensure that it is aligned with and supports
reviewed and approved all trading remains fully independent. The Board
the Group’s values. The programme
announcements and the interim and identified as part of its succession plans
includes feedback from the employee
final results that marketing and digital insight would
survey, store visits, focus groups, meetings
monitored and received updates in be a welcome addition to the Board’s
with suppliers and reports on other sources
relation to the achievement of £19m skills, and is therefore pleased that
of cultural insight. The Board believes that
cash savings set out in the business Jemima has joined the Board.
the engagement with the workforce will
plan supporting the restructuring It is also pleased that Pauline will add a allow their interests to be considered and
monitored the store closure programme wealth of HR and broader commercial will be effective.
as part of the company voluntary experience to the Board from August.
arrangement Leadership and risk appetite
Board evaluation The Board is responsible for setting the
appointed a new Chief Financial
An annual process of evaluation Group’s objectives and policies, providing
Officer and a Non-Executive Director
of the Board and its Audit, Nomination effective leadership and for approving the
reviewed the terms of reference and Remuneration Committees has been Group strategy, budgets, business plans
of its Committees undertaken. This was led by Bob Ivell with and major capital expenditure. It has
approved option grants the assistance of the Company Secretary. responsibility for the management,
approved the Statement on Modern The Board and each of its Committees direction and performance of the Group
Slavery considered the effectiveness of the Chair and is accountable to the Company’s
and the Secretariat. The results were shareholders for the proper conduct of its
reviewed the new Corporate Governance considered by the Board and confirmed the business. The Board has a formal schedule
Code and accompanying guidance strength of leadership within the business which sets out those matters requiring
on Board Effectiveness and determined and a sound governance framework. An Board approval and specifically reserved
the appropriate steps it will take to external facilitator was not used this year. to it for decision. The Board is responsible
ensure compliance for determining its risk appetite and did
The Non-Executive Directors meet, with
so in the year. It has regularly reviewed the
no Executive Directors present, at least
current assessment of the principal and
once each year. David Clifford, the Senior
emerging risks compared to the desired
Independent Director, led the review of the
level of risk. Further details of the principal
risks affecting the Group can be found on
pages 23 to 25.

Board Committees
The Board has three Committees, The Board periodically reviews the of the Committees. The Company
each of which has written terms membership of its Committees. provides the Committees with sufficient
of reference which are available on All Non-Executive Directors (other than resources to undertake their duties.
the Company’s corporate website the Chairman) are members of each The Company Secretary, or his nominee,
(www.carpetright.plc.uk). acts as Secretary to each Committee.

Board of Directors
The role of the Audit Committee, its members and details of how it carried out its duties are set out
Audit Committee in the Audit Committee report on pages 32 to 35.

The role of the Remuneration Committee, its members and details of how it carried out its duties
Remuneration Committee are set out in the Directors’ remuneration report on pages 36 to 59.

The role of the Nomination Committee, its members and details of how it carried out its duties are
Nomination Committee set out on page 30.

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Directors’ report continued
Corporate governance continued

Information and independent advice Non-Executive Directors have access During the year members of the Committee,
Directors receive weekly sales updates, to professional development provided led by the Chairman, drew up specifications
monthly trading results, commentary, by external bodies. Their continuing for the appointment of a new Chief Financial
briefing notes and reports for their competence is considered by the Officer and Non-Executive Directors and led
consideration in advance of each Board Nomination Committee as part of the the recruitment. A consensus was reached,
meeting, including reports on the Group’s annual process of recommending the and recommendation made to the Board
operations, to ensure that they remain reappointment of Directors at the AGM. as to the appointment of Jeremy, Jemima
briefed on the latest developments and and Pauline.
Shareholder votes
are able to make fully informed decisions. An external search consultancy is ordinarily
There was no significant vote against any of
All Directors have access to the advice used in relation to the appointment of both
the resolutions passed at the AGM last year.
and services of the Company Secretary Executive and Non-Executive Directors.
In the event that a significant vote of 20% or
and the Board has established a procedure This occurred in relation to the new
more is cast against a resolution the Board
whereby Directors may take independent appointments. Two search consultancies
will engage with the relevant shareholders
professional advice at the Company’s were used, Spencer Stuart in respect of the
and seek to address their concerns to avoid
expense. This was not utilised during search for the Non-Executive Directors and
significant percentages of votes against
the year (2018: once). In addition, such Norman Broadbent in respect of the search
similar resolutions in the future.
advice may include training in order to for the Chief Financial Officer. Neither
enable them to discharge their roles Share capital consultancy has any other connection
and responsibilities as a Director. Details of the Company’s share capital with the Company.
All new Directors receive an induction and significant shareholders can be found
tailored to their particular requirements. The Board evaluation and outcome was
on pages 60 and 61.
conducted as explained on page 29. The
Details of the Company’s employment
practices and current gender diversity can
Nomination Committee Board composition is reviewed annually,
and any matters identified will influence
be found in the Corporate responsibility The Nomination Committee is chaired by
the future composition of the Board.
report on pages 26 and 27. Bob Ivell. Details of its membership and
attendance are set out below: The Committee considers the diversity of
Contribution to strategy the Board (including gender and race) and
The Group’s strategy is set by the Board. Number of meetings: 1 the skills and competencies of the existing
The Board’s mix of skills and experience, Meetings eligible
Members Attendance to attend Directors. The Committee is aware of the
understanding of the culture of the business Parker review and its recommendations.
through the mechanisms explained above, Bob Ivell
Since the year end the HR director has
regular trading updates and an independent (Committee 1 1
attended a Nomination Committee meeting
view by the Non-Executive Directors allows Chairman)
to provide insight, so far as it is available,
the Board to effectively contribute to who Andrew Page – 1 in relation to the gender and ethnicity mix
we are, what we sell, where we sell and Sandra Turner 1 1 within the broader employee base. The
how we sell. David Clifford 1 1 current gender diversity of the organisation
is set out on page 26.
Continuing professional development
All Board members are updated on matters The Committee is also undertaking
relevant to the Group, including legal and a process to understand how talent
The responsibilities of the
regulatory developments, and members of is managed throughout the organisation
Nomination Committee include:
Board Committees are updated on matters and the succession plans for the orderly
relevant to their Committee membership. identifying and nominating replacement of senior executives on
In the year, the Remuneration Committee candidates for appointment a contingency, medium-term and
received updates on current best practice to the Board for the approval long-term basis. The Committee ensures
from Aon. of the Board; that the development needs of Executive
reviewing development needs Directors and other senior managers
The performance of individual Directors of the Executives; and are addressed appropriately.
is considered as part of the annual
Board appraisal process. The individual making recommendations The Committee also considers whether
development needs of Executive Directors to the Board on Board Directors due to retire at an Annual General
are overseen by the Nomination Committee. composition balance. Meeting should be recommended for re-
appointment, and whether the appointment
of Non-Executive Directors reaching the
end of their three-year term should be
renewed. Committee members do
not vote on their own re-appointment.

30
28 | | Annual
Annual report
Report andand accounts
Accounts 2019 2019
Strategic report Directors’ report Financial statements Shareholder information

Board of Directors

Bob Ivell with Smiths Group plc. Prior to Smiths, Jemima Bird
Non-Executive Chairman Jeremy was an Associate Director at Non-Executive Director
KPMG Corporate Finance, having
Bob joined the Board as Chairman on previously qualified as a chartered Jemima joined the Board in January 2019.
1 November 2014. He is currently Non- accountant with Ernst & Young LLP. She formed Hello Finch, a brand and
Executive Chairman of Mitchells & Butlers Jeremy has a BA in Psychology from marketing consultancy, in 2013 and has
plc and Non-Executive Director at Charles Reading University and is currently Deputy more than 20 years’ experience working
Wells Ltd. He was previously Chairman of Chair of Jubilee Hall Trust, a charity for with many of the UK’s leading high street
David Lloyd Leisure Limited, Park Resorts building healthier communities. brands, most recently leading the rebrand
Group Limited, Next Generation Clubs for the Co-op Food business. Between
Pacific, the Senior Independent Director Sandra Turner 2008 and 2015, Jemima held executive
of Britvic plc and AGA Rangemaster Group Non-Executive Director board positions at Moss Bros Plc, Tragus
plc and a Non-Executive Director of The and Musgrave Retail Partners. She is the
Sandra joined the Board in October 2010
Restaurant Group plc. He has over 30 Senior Independent Director of Revolution
and will step down from the Board at the
years’ experience in the food and beverage Bars Group plc where she chairs the
conclusion of the forthcoming AGM. She
industry, holding executive roles with Remuneration Committee, and a Board
spent 21 years at Tesco and was part
Regent Inns plc, Scottish & Newcastle plc Trustee for the Football Foundation, the
of its senior management team, holding
and Whitbread plc, each of which involved UK’s largest sports charity.
senior commercial and operational roles
the management of large consumer-facing
in the UK and Ireland. From 2003 to Pauline Best
estates. Bob holds a qualification in
2009 she was the Commercial Director Non-Executive Director
management and business studies.
of Tesco Ireland. She is the Senior
He chairs the Nomination Committee. Pauline will join the Board on 1 August
Independent Director of Greggs plc and
Wilf Walsh a Non-Executive Director of McBride plc, 2019. Pauline is an experienced Human
Greene King plc and Huhtamäki Oyj and Resources professional who was the
Chief Executive Officer Global People and Organisation Director
was previously a Non-Executive Director
Appointed to the Board as Chief Executive of Northern Foods plc and Countrywide plc. of Specsavers for ten years. Prior to
on 21 July 2014, Wilf has held senior Sandra holds a BA (Hons) in marketing. that she spent 20 years in the mobile
positions in various roles, most recently She chairs the Remuneration Committee. communications industry, including
as Chairman of Fortuna Entertainment 12 years with Vodafone where she
Group NV, and was also the Managing David Clifford most recently held the position of
Director of Coral and a Non-Executive Non-Executive Director Global Leadership, Talent and
Director of Gala Coral Group between People Capability Director.
David, a Chartered Accountant, joined
2000 and 2016. Prior to that he spent
the Board in December 2011. He was She is also a Non-Executive Director of
six years with HMV Media Group as the
previously a Senior Partner with KPMG. Vertu Motors plc where she also chairs
Managing Director of HMV Germany and as
Throughout his career he held a variety of its Remuneration Committee.
Operations Director for the UK and Ireland.
roles and led the Consumer Markets Unit
Wilf graduated in Law from the University Pauline will chair the Remuneration
of KPMG for a period, advising a number
of Leeds and is a Chartered Fellow of the Committee when Sandra steps down
of retailers. He is a Trustee of the Varkey
Institute of Personnel and Development. from the Board.
Foundation, an educational charity, and
Wilf is the Senior Independent Director
a Non-Executive Director and chair of
at the Racing Authority.
the Audit and Risk Committee of Optivo,
Jeremy Simpson a housing association. He chairs the
Chief Financial Officer Audit Committee and is the Senior
Independent Director.
Jeremy joined Carpetright in February 2019
with day-to-day responsibility for overseeing
the Group’s finance and property functions.
Prior to joining Carpetright, Jeremy was
Chief Financial Officer with Sureserve Group
plc, from April 2014 to October 2018, which
included listing the business in March 2015.
Prior to Sureserve, Jeremy held positions
with other leading companies, including
Group Corporate Development Director
at Shanks Group plc, VP Finance EMEA,
Retail Information Services at Avery
Dennison and senior finance roles

www.carpetright.plc.ukl | 29
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Directors’ report continued

Audit Committee report

Dear Shareholder, – reviewed the scope, resources, results

and effectiveness of the activity of the
I am pleased to introduce the report
Group internal audit department;
of the Audit Committee for 2019.
– reviewed the work of the Executive
The Committee plays an important part Risk Committee, which oversees the
in the governance of the Group, with identification and management of the
its principal activities focused on the risks to the business, together with
integrity of financial reporting, quality reports on the Group’s systems of
and effectiveness of internal and external internal control;
audit, risk management and the system
– performed in-depth reviews of specific
of internal control.
areas of financial reporting, risk and
During the year the Audit Committee internal controls and discussed these
has undertaken the following tasks: with the executives responsible for
– considered our financial results the relevant area;
announcements and financial statements – considered all matters reported via the
and monitored compliance with relevant whistleblowing line and reports relating
statutory and listing requirements; to fraud;
– reviewed the working capital statement, – reviewed the viability and going concern
the financial statements and the profit statements; and
David Clifford estimate, and reports from external – reviewed its terms of reference and
Chairman of the Audit Committee accountants in relation to each effectiveness.
contained in the Prospectus relative
to the Placing and Open Offer and We meet formally at key times within our
made recommendations to the reporting calendar, and the agendas are
Board accordingly; designed to cover significant areas of risk
over the course of the year and to provide
– reported to the Board on the
oversight and challenge to the key financial
appropriateness of our accounting
judgments, controls and processes that
policies and practices;
operate within the Company.
– overseen the relationship with
the external auditors including The Committee will continue to keep
reviewing their independence, its activities under review in the light
objectivity and effectiveness; of regulatory developments and the
emergence of best practice.
– reviewed the external auditors’ plan
for the audit of the Group’s accounts, Overall, I am satisfied that the activities
approved the terms of engagement for of the Committee during the year enable
the audit and reviewed their findings; it to gain a good understanding of the key
– reviewed the process for ensuring that risks impacting the Group along with the
senior management confirm that they oversight of its key controls.
have supplied the auditors with relevant I will be available to answer any questions
audit information; at the AGM in September.
– approved the audit fees paid to the
external auditors and reviewed the
application of the policy on non-audit David Clifford
work performed by them together with Chairman of the Audit Committee
the non-audit fees payable to them; 25 June 2019

32
30 | | Annual
Annual report
Report andand accounts
Accounts 2019 2019
Strategic report Directors’ report Financial statements Shareholder information

Composition Andrew Page was unable to attend two Financial reporting

meetings as a result of meetings being
Ordinarily the Committee meets four The Committee reviewed, with
arranged at short notice relating to the
times each year. Meetings are attended management and the external auditors,
restructuring which clashed with other
by the members who are independent the half-year and annual financial
pre-arranged commitments overseas.
Non-Executive Directors and, by invitation, statements, and the financial statements
the Chairman, the Chief Executive, the Main activities of the contained in the Prospectus concentrating
Chief Financial Officer, and the Director on, amongst other matters:
of Group Internal Audit. The external
Committee during the year
The Committee assisted the Board in – the appropriateness and application
auditors, PricewaterhouseCoopers LLP
carrying out its responsibilities in relation of accounting policies and compliance
(PwC), were invited to five meetings
to financial reporting requirements, risk with the relevant financial reporting
this year.
management and the assessment of internal requirements;
Other relevant individuals from the business controls and has an agenda linked to events – material areas in which significant
are also invited to attend certain meetings in the Group’s financial calendar. It also judgments have been applied or
in order to provide a deeper level of insight reviewed the effectiveness of the Group’s there has been discussion with
into certain key issues and developments. internal audit function and managed the the external auditors; and
There are also private meetings with the Group’s relationship with the external – whether the Annual report and accounts
external and internal auditors without auditors. The Committee Chairman reported contains the necessary disclosures
management present. to the Board, as part of a separate agenda to fairly reflect the Group’s financial
The Audit Committee is appointed by the item, on the activity of the Committee and condition and results of its operations.
Board from the Non-Executive Directors of matters of particular relevance to the Board
the Company. The terms of reference are in the conduct of its work. To aid its review, the Committee considered
reports from the Chief Financial Officer and
reviewed annually by the Audit Committee The Committee reviewed the working capital also reports from the external auditors on
and are then referred to the Board for statement, the financial statements and the
approval. These are available on the the outcomes of their half-year review,
profit estimate, and reports from the external reviews in respect of the Prospectus and
Company’s corporate website at auditors or the reporting accountants (as annual audit.
www.carpetright.plc.uk. appropriate) in relation to each contained in
the Prospectus and made recommendations The primary areas of judgment considered
The Audit Committee is chaired by David
Clifford. The Board has determined that to the Board appropriately. by the Committee are set out below. In all
cases the Committee discussed with PwC
David Clifford has recent and relevant The Committee reviewed the viability its work in respect of these areas.
financial experience. Andrew Page stepped statement, which is designed to be a
down from the Committee at the end longer-term view of the sustainability
of December and Jemima Bird joined of the Company’s strategy and business
the Committee in early January. The model and related resourcing, in the light
biographies of the members of the of projected wider economic and market
Committee can be found on page 31. developments. The Committee reviewed
Details of membership and attendance the processes designed to enable the
are set out below: Board to make the statement this year.
The statement appears on page 22
Number of meetings: 6 together with details of the processes,
Meetings
eligible to assumptions, and testing which underpin it.
Members Attendance attend
David Clifford 6 6
(Committee
Chairman)
Andrew Page 3 5
Sandra Turner 5 6
Jemima Bird 1 1

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Directors’ report continued
Audit Committee report continued

Goodwill impairment testing Impact of New Accounting Internal control

The judgments in relation to goodwill Standards The Committee reviewed the process
impairment historically largely relate to by which the Group evaluated its
Introduction of IFRS 15
the assumptions underlying the calculation control environment. Its work here is
of the value-in-use of the business being The Group adopted IFRS 15 – ‘Revenue driven primarily by the work undertaken
tested for impairment. Following the write- from Contracts with Customers’ in the by the Group’s Internal Audit department,
off of the entire goodwill in the UK and period. Under the new standard, revenue which includes any reported fraud.
£4.9m of goodwill in the Netherlands in will be deferred and recognised at a later The Director of Group Internal Audit
the prior year, a detailed review performed date than previously recorded under IAS 18. monitored the timely implementation of
in the period determined no further The Committee agreed with management any recommendations and reported to the
impairment was required. that an adjustment to brought forward Committee accordingly. The Committee
reserves of £9.7m be made and the also reviewed the documentation prepared
Impairment of assets movement in accrued sums resulted in to support the Board’s annual statement on
The Committee has carried out a further a £3.5m increase in revenues and £1.9m internal controls before its consideration by
review of the freehold and long-leasehold increase in profit before tax in the period. the full Board.
property valuations, supported by a Further details are set out in note 33 to
comprehensive external valuation, and the financial statements on page 105. Whistleblowing
also reviewed the store asset impairment The Company operates a whistleblowing
Introduction of IFRS 16
assessment. The Committee agreed with telephone line in the UK and an email
management that further impairments of The new lease accounting standard, IFRS whistleblowing facility in Europe. Both
£0.8m of the freehold and long-leasehold 16 – ‘Leases’ will be introduced on 28 April are operated by independent companies
properties and £1.0m of store assets 2019 and is expected to have a material and reports are received by the Director
is appropriate. impact on the Group’s financial statements. of Group Internal Audit, the Company
The standard provides a single lessee Secretary or the HR Director. Matters
Onerous lease provision accounting model, requiring lessees to reported related to individual treatment
The practice is to treat a lease as being recognise assets and liabilities for all leases, by line managers or colleagues, dishonesty,
onerous if the store relative to the lease in line with the treatment of finance leases right to work in the UK and breach of
is closed or if the expected benefits of under its predecessor standard, IAS 17. Company policy. In each case the issues
using the leased property are less than the A preliminary review was conducted by were investigated, a judgment was made
unavoidable property costs. Management management and an assessment of the and action taken where appropriate. The
makes an assessment as to the cost potential impacts is outlined in note 33 outcome of all matters was reported to
of exiting the lease based on available to the financial statements on page 105. the Audit Committee.
information and knowledge of the property
market. The Committee considered the Risk management and Risk management
potential for onerous leases in light of the internal control The Group’s risk assessment process
CVA and more flexible terms secured for Internal audit and the way in which significant business
underperforming stores. The Committee The Committee considered and approved risks are managed is a key area of focus
agreed with management that a provision of the Annual Internal Audit plan and at each for the Committee. The Committee
£0.9m was required in respect of a formerly meeting reviewed reports from the Director received and considered reports from the
assigned lease that reverted back to the of Group Internal Audit, including those Chief Financial Officer on the Group’s risk
Group on the insolvency of the assignee. showing performance against the plan, evaluation process and reviewed changes
and approved changes as appropriate. to significant risks identified. It also
Going concern and viability discussed emerging and potential risks.
As disclosed under the heading “Main The reports include updates on audit
activities of the Committee” on page 33 the activities, progress of the Group audit The Committee reviewed, in detail, the
Committee reviewed draft going concern plan, the results of any unsatisfactory assessment and controls for the principal
and viability statements. In reviewing the audits and the action plans to address risks and uncertainties as set out on pages
drafts, the Committee considered, amongst these areas, and resource requirements 23 to 25. The work included a review
other things, the financial forecasts, the of the Internal Audit department. The of the controls in place to mitigate the risk,
status of discussions with banks and internal audit team utilises the services the assessment by the Director of Group
current trading performance of the Group. of third party firms to assist in the discharge Internal Audit and a discussion with the
of its functions. Private discussions are held risk owner, being a senior executive.
The Board’s assessments, and the final with the Director of Group Internal Audit as The Committee considered in-depth
versions, of the going concern and viability necessary throughout the year. reviews into the risks relating to reputation,
statements can be found on page 22. fitters, economic uncertainty, and finance
and treasury.

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The Committee considers these reviews Appointment and The auditors may only provide such
to be an important part of its role, as they independence services provided that such advice
allow it to meet executive management does not conflict with their statutory
responsible for these areas and undertake The Committee and Board place great responsibilities and ethical guidance.
independent challenge of their activities. emphasis on the independence and For those permitted services that exceed
objectivity of the Group’s auditors, PwC, the specified fee limits, the Audit Committee
External audit when performing their role in the Group’s Chairman’s or the Committee’s approval,
Assessing the effectiveness of the external reporting to shareholders and considering depending upon the financial expenditure, is
audit process is dependent on appropriate their re-appointment each year. required before PwC can provide non-audit
audit risk identification at the start of the The Committee reviews the independence, services. The Audit Committee Chairman’s
audit cycle. The Committee received a objectivity and performance of the auditors approval is required for any engagement of
detailed audit plan from PwC, identifying annually, including the annual report on PwC where the fee would exceed 10% of
their assessment of these key risks. For the auditors produced by the Audit Quality the audit fee, but is less than 25% of the
the 2019 financial year the primary risks Review Team of the Financial Reporting audit fee, with the Committee’s approval
identified and how the scope of the audit Council and the auditors’ own annual being required for expenditure more than
addressed the area of focus are set out in report on its independence. 25% of the audit fee.
the auditors’ report on pages 109 to 115.
PwC have been auditors to the Company The Committee monitors the volume of
The Committee discusses the work carried since 2005 when they were appointed work provided by the auditors and the
out by the auditors to test management’s following a competitive tender. They were, fees incurred in order to consider whether
assumptions and estimates around these again, re-appointed following a competitive to use other firms. The Company continues
areas. The Committee assesses the tender which concluded in May 2016 and to use other firms for general tax advice
effectiveness of the audit process in was reported in the 2016 Annual Report. and to support the internal audit function.
addressing these matters through the
The auditors’ tenure runs from one AGM During the year the significant non-
reporting it receives from, and discussions
to the next and there are no contractual audit services work undertaken by
with, PwC at both the half-year and year-
obligations that restrict the Committee’s PwC related to the provision of assurance
end. In addition, the Committee also seeks
choice of external auditors. services in relation to the replacement
feedback from management on the
of older finance and retail systems with
effectiveness of the audit process. The external auditors are required to rotate Microsoft Dynamics 365.
For the 2019 financial year, management the audit partner responsible for the Group
audit every five years. The audit of this Additionally, and as reported last year,
was satisfied that there had been
Report and Accounts of the Group is the significant non-audit services work
appropriate focus and challenge on the
last to be carried out by the current was undertaken by PwC related to
primary areas of audit risk and assessed
audit partner. the Prospectus relating to the Placing
the quality of the audit process to be good.
and Open Offer in the early part of the
The Audit Committee concurred with the Non-audit services financial year incurring fees of £200k.
view of management.
To further safeguard the objectivity and
Audit and non-audit fees
The Committee holds private meetings independence of the external auditors
with the external auditors twice a year from becoming compromised, the Details of the auditors’ remuneration
to provide additional opportunity for Committee has a formal policy governing for audit work and non-audit fees for the
open dialogue and feedback from the the engagement of the external auditors period ended 27 April 2019 are disclosed
auditors without management being to provide non-audit services. This in note 3 to the financial statements
present. Matters discussed include the precludes the auditors from providing on page 75 and disclosed above. The
transparency and openness of interactions certain services such as valuation work, Committee approved the fees for both
with management and confirmation that the provision of accounting services, audit and non-audit services for 2019.
there has been no restriction in scope certain tax services and HR services and
placed on them by management. The also sets a presumption that the auditors Committee evaluation
Audit Committee chairman also meets should only be engaged for non-audit The Committee’s activities formed part
with the audit partner from time to time services where the appointment of of the review of Board effectiveness
outside the formal committee process. an alternative supplier would be either undertaken. Details of this process can
impractical or inefficient, bearing in mind be found on page 29. No matters were
the particular circumstances. identified which needed to be addressed.

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Directors’ report continued

Directors’ remuneration report

Dear Shareholder, proposed at this year’s AGM, are clearly

explained and justified such that they will
I am pleased to present the Directors’
drive behaviour that is both appropriate
remuneration report on behalf of the Board.
and in the long-term interests of the
Our remuneration policy was approved by Company and shareholders.
shareholders at our AGM on 7 September
Remuneration policy review
2017 and became effective for three years.
However, as explained below, we have The Committee has engaged and consulted
decided to seek shareholder approval for with its key shareholders and shareholder
a revised policy at the forthcoming AGM. representative bodies with regard to director
remuneration focusing, in particular, on
The report comprises three key sections: obtaining feedback on the proposals for the
– this annual letter; New Policy. The Committee has considered
and taken into account all of the feedback
– our proposed remuneration policy report which it has received and is grateful for the
to be approved by shareholders at the engagement that has taken place.
AGM, which sets out a summary of the
new Directors’ remuneration policy for Shareholders approved the Current
all Directors of Carpetright; and Policy at the 2017 AGM, with proxy
– our annual remuneration report, which votes submitted in advance of the meeting
sets out how our current remuneration representing a vote in favour of 98.5%.
Sandra Turner policy has been implemented. The 2018 remuneration report detailing
Chair of the Remuneration Committee the application year-on-year of the Current
The new policy is subject to a binding Policy was approved by shareholders with
shareholder vote and the annual proxy votes submitted in advance of the
remuneration report is subject to an meeting in favour of 99.9%.
“The Committee continues to remain advisory shareholder vote at the 2019 AGM.
mindful of the interest in executive The Committee remains firmly committed
remuneration. The Committee Remuneration policy overview of to ensuring that the remuneration of the
has therefore carefully reviewed approach Executive Directors supports and drives
and taken into consideration Our current remuneration policy was the Carpetright strategy based on a
the developments in corporate approved by shareholders at our AGM framework which both challenges and
governance and best practice in 2017 and became effective for three motivates management to deliver the
during the year.” years (the ‘Current Policy’). I am pleased strategy and value for our shareholders.
to summarise the Current Policy and the A summary of the changes proposed
way it has been implemented during the between the Current Policy and the New
financial year ended April 2019. Policy is set out in the policy table on pages
Looking ahead, I also explain in this report 41to 45 and, as can be seen, the principal
the Committee’s thinking with regard to change relates to the introduction of the
the design and structure of the revised award of Restricted Share Units under the
remuneration policy (the ‘New Policy’) Long-term incentive plan. Other changes
which is being placed before shareholders proposed relate to the introduction of
for approval on a binding basis at the deferred bonus arrangements and aligning
Annual General Meeting to be held in pensions for newly appointed directors with
September 2019. If approved, the New the majority of the UK workforce.
Policy is expected to operate from the
Long-term incentive plan – policy changes
conclusion of the 2019 AGM until our
AGM in 2022. When we last changed our policy
we highlighted that the Company
The Committee continues to remain mindful was planning to introduce a second
of the interest in executive remuneration. performance measure for LTIP awards
The Committee has therefore carefully (in addition to the cumulative underlying
reviewed and taken into consideration profit before tax target that applied to the
the developments in corporate governance 2014 and 2015 LTIP awards). Our focus
and best practice during the year. In line at that time was to see whether it would
with this the Committee has again sought be advisable to include a relative total
to ensure that the remuneration policies shareholder return (“TSR”) target; however,
and practices, and the New Policy being

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following detailed analysis of our TSR – 25% of the awards will vest after In assessing whether the Company is on
performance and that of a number of four years followed by a one-year a sound financial footing the Committee
different potential comparator groups it holding period. will be considering all the financial
became clear that there was little, if any, – 25% of the awards will vest after five measures including quality of earnings,
correlation between our TSR and that of years at which time there would be the debt position and covenant compliance
any comparator group that we might select. no additional holding period. and headroom.
The implication of this, based of course on
We believe that this approach is in line Award size and cap
historical evidence, was that it would not be
advisable to introduce a relative TSR target with practice adopted by other companies As I set out last year, it had been intended
unless and until there was a reasonably that have introduced RSU plans in that due to the poor financial performance
high level of correlation so as to avoid this recent years and provides an appropriate and resultant decline in the share price, the
measure becoming a complete lottery. balance between rewarding executives Committee had decided that the level of
for performance delivered (particularly awards would be significantly lower than
This resulted in us continuing with just given the lack of any LTIP awards for the level of awards made in previous years
using cumulative underlying profit before Executive Directors last year) and aligning (reduced from 150% to 100% of salary for
tax for the 2016 and 2017 awards. them with shareholders more generally. the CEO and from 125% to 85% of salary
However, following the CVA and Placing for the CFO).
and Open Offer last year the Committee Underpin
spent a considerable amount of time in Historically RSU plans did not contain any It is proposed that the size of the award
considering whether it would be appropriate form of underpin. However, the Committee be reduced by a further 50% to reflect the
to grant the 2018 LTIP awards subject is aware of the guidance that has been change from performance-based awards to
to cumulative underlying profit before tax issued by various bodies around the need time-based awards. This is consistent with
targets. Indeed, last year I explained that for some form of underpin if RSU plans are the approach adopted for executives below
the conditions or timing of awards had yet to be introduced for Executive Directors. the Board last year.
to be determined. The concern centred Having considered this issue, the Committee Hence, a participant who would normally
around our ability to set meaningful and believes that the new RSU plan should have received a performance-based award
stretching targets over a three-year contain appropriate underpin which would over 100% of salary received a time-based
period when the future performance allow the Committee to reduce the number award over 33% of salary. Had a similar
of the Company was so uncertain and, of shares that ultimately vest (potentially approach been applied to the CEO his
in many respects, outside the control down to 0%) if any one or more of the normal award of 150% of salary would
of management. The combined impact underpins was not, in the opinion of the have been reduced to a time-based
of our legacy property estate, increased Committee, satisfied. award of 50% of salary.
competition and a downturn in consumer
The proposed underpins to be used for In the context of the proposed RSU plan,
spending and then the fact that we were
grants to be made in the period following the Committee intends to take a similar
just starting on a turnaround strategy with a
the Annual General Meeting can be approach as a result of which:
revised business plan meant that we did not
summarised as follows:
feel confident in setting targets. As a result, – The CEO would receive an award in 2019
we made the decision last year not to make 1. Share price – share price at date of vesting of 50% of salary (150% x 66.67% x 50%).
awards to the two Executive Directors as (measured on a one-month average) is at
the policy did not allow for the introduction – The CFO would receive an award in 2019
least the higher of the share price used for
of Restricted Share Units (RSUs). Awards of 41.67% of salary (125% x 66.67% x
the grant and 28 pence (being the recent
were, however, made to executives below 50%) although in practice we will round
Placing price).
Board, which I refer to later in this letter. this up to 42%.
2. Customer satisfaction – there is an
It is, therefore, proposed that the ability appropriate improvement in customer subject to an overriding limit of 1% of the
to grant RSUs to Executive Directors be satisfaction between grant and vesting. issued share capital over which awards
introduced with the main characteristics set can be granted to all participants (i.e. both
out below: 3. Sound financial footing as determined by
executive directors and also below Board
the Committee.
Vesting period participants of which there are currently
The Committee believes that this balance expected to be approximately 35) which
Our current LTIP has a three-year vesting
will ensure that participants will only receive would be applied to reduce all awards
period followed by, for directors, a two-year
shares if overall performance warrants it. on a pro rata basis.
holding period. For the RSU plan it is
proposed that: Customer satisfaction will be measured
through direct customer feedback using
– 50% of the awards will vest after
the “Do We Measure Up?” programme
three years followed by a two-year
in place.
holding period.

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In addition, the Committee is conscious Post-employment shareholding Taken together, the Committee believes
that with very strong performance there requirements – policy changes that the above approach is an appropriate
could be a substantial improvement in policy for the Company to adopt in respect
Our Current Policy covers this issue in
share price over the vesting period and of post-employment shareholding
two ways as follows:
has therefore decided that awards should requirements.
also be subject to a cap on the value of 1. Awards under the LTIP – awards made
shares that can vest by reference to the to Executive Director participants (and Annual bonus plan – policy changes
historic normal level of LTIP award, with such others (if any) as the Committee There is one change to the policy proposed
the cap being set at twice this which is requires) are subject to a two-year post in respect of the annual bonus plan.
equivalent to the gain a participant would vesting holding period. They will ordinarily
The Committee plans to introduce a
have received had the LTIP award vested be required to retain any vested shares
deferred share bonus plan (“DSBP”) which
in full and the share price had doubled. (on an after-tax basis) acquired under the
has been designed to improve alignment
For the two executive directors this is Plan until at least the second anniversary
of interests with shareholders. Under
equivalent to a cap of 300% and 250% of the vesting of the relevant award.
the DSBP 100% of any bonus payable in
respectively of salary at date of grant. 2. Share retention guidelines – in addition excess of target will be deferred into shares
The Committee believes that by setting to executive directors being expected to for a two-year period. Any awards made
a cap at this level the RSU plan will provide build up and retain a shareholding in the under the DSBP will lapse if the participant
a strong incentive to participants to grow Company having a value equal to the is dismissed for cause but otherwise will
the share price but will ensure that the same multiple of base salary as the vest at the normal time even if the director
rewards they ultimately receive are not awards are made in respect of normal leaves, except in the case of death, injury
overly generous. grant levels of performance shares under or ill-health in which case the award will
the LTIP through the retention of shares vest on cessation.
Life of RSU plan with a minimum value equal to 50%
The Committee will review each year of the net of tax gain arising from any Conclusion – Proposed New Policy
whether it remains appropriate to continue vesting or exercise under the LTIP, The Committee is confident that the
with the new RSU plan or whether it is executive directors are required to New Policy will ensure that the level of
appropriate to switch back to the current continue to hold the lower of 50% remuneration in place and its linkage to
LTIP and therefore the New Policy will of their guideline level and 50% of the achievement of increasing shareholder
provide us flexibility to do this. Our current the value of shares they own at value continues to remain appropriate. In
expectation is that there could well be two cessation of employment (excluding particular, the New Policy is designed to:
or three years’ worth of awards under the shares purchased in the market) for ensure that executive remuneration will
RSU plan before we feel confident to switch a period of one year following cessation continue to be directly related to the
back to the current plan. of employment. achievement of the Company’s strategic
Pensions – policy changes In addition, under the proposed changes aims; link a significant proportion of pay to
to the policy: performance, with appropriate and robust
The Committee has considered the performance criteria and targets; directly
inclusion in the new UK Corporate 1. Shares vesting under the RSU plan relate increases in pay and pension to the
Governance Code of the provision which will also be subject to a Holding Period workforce in general; have no retrospective
states that “the pension contribution rates ending five years after grant and will be adjustment or re-testing of performance
for executive directors, or payments in lieu, covered by the requirement to retain at or related metrics; be compatible with
should be aligned with those available to least 50% of the net of tax gain arising the Company’s risk policies and systems;
the workforce” and has decided to include from any vesting or exercise until the and remain sufficiently flexible to address
in the New Policy a statement that any shareholding guideline is met. changing circumstances as they arise but
new executive directors will receive pension within carefully agreed parameters. The
contributions (or cash in lieu) at a rate in line 2. Vesting of awards made under the new
deferred share bonus plan (see below) Committee therefore commends the New
with the majority of the UK workforce which Policy to shareholders at the 2019 AGM
is currently at 3% and will increase to 5% will not normally be accelerated on
cessation and will be covered by the as set out in the Notice of Meeting.
with effect from April 2020.
requirement to retain at least 50% of the Salaries
net of tax gain arising from any vesting
During the year Jeremy Simpson was
or exercise until the shareholding
appointed as the Chief Financial Officer with
guideline is met.
a remuneration package commensurate
with that role, details of which are set out in
the annual remuneration report on page 52.

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For the 2019 pay review, the Chief Long-term incentives Pension arrangements
Executive indicated to the Committee The performance condition set in relation The Committee is very aware of the views
that, in light of the performance of the to the grant of LTIP awards in 2016 related expressed by investment bodies in relation
business, his base salary should remain to cumulative underlying earnings per share. to the alignment of pensions benefits with
unchanged. The Committee therefore Due to the business performance, none of the workforce. The pension contributions
decided not to conduct a review of the LTIP awards made in 2016 will vest. applicable to Jeremy Simpson aligned his
his pay and, as a result, his base pension provision with that of the majority
salary remains unchanged. The Committee has reviewed the current
of other senior executives, and is half that
performance of the LTIP awards made
Annual bonus scheme which was paid to Neil Page as the previous
in 2017, which were also based upon
CFO. As outlined above, the pension
As described in the financial review cumulative underlying earnings per share
provision for any new Executive Director
section of this Annual report the Group measures, and has concluded that they
would be in line with the majority of the
has delivered earnings before interest, are currently unlikely to vest. Further details
UK workforce.
tax, depreciation and amortisation of can be found on pages 53 and 54.
£2.9m. This result is below the level at Gender pay gap reporting
Last year I explained that the
which an annual bonus would be earned. In addition to the consideration of executive
performance condition relating to the
Consequently, no bonus will be paid in remuneration, the Committee has taken a
awards to be made in the financial year
respect of the financial year ended April keen interest in the gender pay gap and,
ending April 2019 had yet to be determined.
2019. Further details can be found in the whilst there is a gap, the gap is below the
The Committee spent a considerable
annual report on remuneration on page 52. national average, details of which can be
amount of time considering whether it
As we explained in the Directors’ would be appropriate to make an award found on page 26.
remuneration report last year, performance in 2018 subject to cumulative underlying Closing comments
targets for the Executive Directors for the profit before tax targets. A number of
I will be available to answer any
financial year ending 27 April 2019 were performance conditions were considered,
questions at the AGM in September
expected to be based on underlying but none was thought to be appropriate
and recommend that you support
EBITDA. This measure was selected in as the performance of the Company was
the Directors’ remuneration report and
order to align it with the Group’s banking subject to a significant number of variables
annual report on remuneration at our
covenants and measures used by similar of which the outcome was uncertain. The
forthcoming meeting.
companies. In the circumstances of the Committee did not feel confident in setting
Group’s financial position it was not thought management meaningful targets that would This is my final letter to shareholders as
appropriate to include other measures for stand the test of time, without being too Chair of the Remuneration Committee
that year. easy or too difficult to achieve. Therefore and I would like to thank my colleagues
the Committee concluded that awards of on the Committee for their support, as I
For the financial year commencing on RSUs should be made to senior executives hand over the reins to Pauline Best at the
28 April 2019 the Committee has decided below Board level with no performance conclusion of the forthcoming AGM. I am
that, in addition to an underlying EBITDA condition, but that no awards would be sure can be confident of receiving the same
measure, there would be a reintroduction of made to the Executive Directors in 2018 support as I have received.
a customer service metric, as this provides as the remuneration policy prevented a
a basis for longer-term value accretion. The similar approach being taken.
customer service metric would account for Sandra Turner
20% of the maximum bonus opportunity. The awards made to the senior executives Chair of the Remuneration Committee
were made on the basis of firstly reducing
The only other material change that the the level of award to 2/3rds of historic
Committee intends to make is that the norms and then making a further reduction
amount payable at threshold performance of 50% to take account of the awards being
is to be reduced from 20% of maximum time-based, rather than performance-
opportunity to 10%. based, awards.

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Directors’ remuneration report continued

Part 2 – Directors’ remuneration policy report

Introduction
This report has been prepared to comply with the provisions of the Companies Act 2006 and other applicable legislation, including the
Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 (as amended) (‘Regulations’), and has also
been prepared in line with the Listing Rules of the UK Listing Authority and having regard to the recommendations of the UK Corporate
Governance Code (the ‘Code’).
Adoption of New Policy
The Company’s existing remuneration policy was subject to a binding vote at the 2017 Annual General Meeting of the Company.
The Company is proposing the New Policy to shareholders at the forthcoming AGM. An explanation of the changes to the Current Policy
is set out on pages 36 to 38, and details of the New Policy are set out on pages 41 to 45. The New Policy is again designed to ensure
that the remuneration framework will support and drive the strategy forward by both challenging and motivating the Executive Directors
and senior management to deliver it and drive value for our shareholders.
The remuneration policy report as approved by shareholders at the Company’s 2017 AGM is set out in the Company’s 2017 and 2018
Annual Reports which can be found on the Company’s website at www.carpetright.plc.uk.
Policy overview
A key part of the Committee’s role is to ensure that the remuneration of Executive Directors and senior management is aligned to the
Company’s strategic objectives. It is key that the Company is able to attract and retain leaders who are focused and also appropriately
incentivised to deliver the Company’s strategic objectives within a framework which is aligned with the interests of the Company’s
shareholders. This alignment has historically been achieved through a combination of setting appropriate performance targets and a
retention period for vested LTIP awards and share ownership guidelines which requires executives to build up holdings of Carpetright
shares. These guidelines, which are reviewed at least annually, require Executive Directors to build up and maintain a target holding
having a value equal to the same multiple of base salary as awards are made under the LTIP on the basis that awards have been made
in respect of performance shares (150% for Wilf Walsh, 125% for Jeremy Simpson). Until such a holding is achieved, each Executive
Director is obliged to retain shares with a minimum value equal to 50% of the post-tax vested shares under the LTIP.
The Committee ensures that a significant proportion of the overall remuneration package of Executive Directors remains at risk. With
all packages for Executive Directors substantially geared towards meeting targets set under the annual bonus and long-term incentive
schemes, the Committee believes that the pay and benefits of its Executive Directors and senior management adequately take account
of reward versus risk. As explained on pages 36 to 38 the Company is proposing introducing the ability to make awards of Restricted
Share Units, subject to judgment by the Committee as to the level of achievement (if any) of criteria underpinning the award, whilst capping
the benefit which can arise under the awards resulting from share price increases, thereby ensuring that there is an incentive to grow the
share price, whilst ensuring that the ultimate value of awards is not over-generous. Further alignment is proposed by amending the policy
to introduce deferred bonus arrangements for any payment in excess of target and, for new directors, ensuring pension provision is aligned
to that of the majority of the UK workforce.
The Committee considers that no element of the remuneration arrangements, which are all very carefully considered, will encourage
inappropriate risk taking or behaviour by any executive.
The policy for the remuneration of the Executive and Non-Executive Directors is set out in the tables below.

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Policy Table – Elements of Directors’ remuneration package

Executive Directors
Performance
Purpose and link to strategy Operation Maximum measurement
Base salary
Helps to recruit and Generally reviewed annually (with any change Annual increases generally in line with Not applicable
retain Executive effective in May) but exceptionally at other times the level of standard increase awarded
Directors. of the year. to other employees.
Reflects Set with reference to individual performance, More significant increases may be
responsibilities, experience and responsibilities, reflecting the awarded at the discretion of the
performance, market rate for the individual and their role. Committee in connection with:
experience and role.
When reviewing the salaries of the Executive an increase in the scope and
Directors, the Committee also has regard to responsibility of the individual’s role; or
the impact on the cost of pension provision the individual’s development and
and pay and conditions elsewhere in the Group. performance in the role following
In particular, the Committee takes account of appointment.
the level of salary increases awarded to other
employees of the Group when deciding on
increases for Executive Directors.
No substantive change to policy from the 2017 vote.

Benefits
Provides a competitive Executive Directors are entitled to a competitive The value of a car allowance is of a level Not applicable
package of benefits to package of benefits, including: appropriate to the individual’s role and
assist with recruitment is subject to review from time to time.
car benefits;
and retention of
life assurance; and The cost to the Company of other benefits
Executive Directors.
is not predetermined and may vary from
private medical cover.
year-to-year.
No substantive change to policy from the 2017 vote.

Pension
The Company The Company operates a defined contribution Up to 20% of base salary for those Not applicable
aims to provide Group Personal Pension Plan (‘GPPP’). individuals who are Directors as at
competitive Executive Directors are offered a specific 1 September 2019.
retirement benefits. percentage of their base salary to fund their
Up to the level of pension contributions in
own pension provision. The Executive Directors
This helps recruit line with the majority of the UK workforce
are able to choose whether the allowance is
and retain Executive for any individuals appointed to the Board
paid to the GPPP or to receive the allowance
Directors. on or after 1 September 2019.
by way of a salary supplement.
Proposed substantive policy change for 2019:
The introduction of a cap on pensions contributions for individuals appointed to the Board on or after 1 September 2019 such that
the maximum payable is in line with the majority of the UK workforce.

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Purpose and link to strategy Operation Maximum Performance measurement

Annual bonus
To incentivise Bonuses are awarded by reference to performance Capped at 100% The measures and targets
achievement of annual against specific targets measured over a single of base salary. are set annually by the
targets and objectives financial year. Committee in order to
The percentage
consistent with the ensure that they are
100% of any bonus payable in excess of target will payable for on-
short to medium-term relevant to participants
be deferred into Carpetright shares for two years target performance
strategic needs of and take account of the
under the Deferred Share Bonus Plan (“DSBP”). is determined by the
the business, so most up-to-date business
Committee each year
as to encourage Executive Directors are required to retain at least plan and strategy.
in light of the degree
sustainable growth 50% of the post-tax shares received upon vesting
of stretch in the All or a significant majority
in the Company’s of the DSBP until shareholding guidelines are met.
targets and affordability of the bonus opportunity
operating profits.
Any amounts payable in cash to an Executive Director of the resulting bonus will normally be
under this arrangement are paid out in full shortly pay-outs relative to determined by reference
after the assessment of the performance targets budgeted levels to performance against
has been completed. of profit. a demanding Group
underlying profit target.
Bonuses do not form part of the Executive Directors’ Dividend equivalents
pensionable earnings. may be payable on Additional targets
DSBP awards, to the applied may relate to
Bonuses and DSBP awards are subject to clawback
extent that awards vest. the achievement of
and malus at the discretion of the Committee in
specific strategic or
the event of a material misstatement of the financial
personal objectives.
results, an error in assessing the size of the bonus or
These measures will be
where the individual had committed an act of gross
disclosed in the annual
misconduct during the relevant financial year.
report on remuneration,
where not deemed
commercially sensitive.
A maximum of 20% of
the maximum bonus
payable by reference to
the financial targets will
be payable for threshold
performance and a
maximum of 25% of
the bonus payable by
reference to personal
and/or strategic targets
will be payable for
threshold performance.
Proposed substantive policy change for 2019:
Any bonus payable in excess of target will be deferred into shares for a two-year period with 50% of the post-tax shares that vest being
required to be retained until the shareholding guideline is met.
Performance measures clarify the maximum proportion of a bonus payable in respect of targets which have been set.

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Accounts 2019 2019
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Purpose and link to strategy Operation Maximum Performance measurement

Long-Term Incentive Plan (‘LTIP’)
Incentivises Executive The current LTIP was approved at the
Directors to deliver 2013 AGM (Carpetright Long-Term
superior levels of long- Incentive Plan 2013).
term performance for the
Awards may be made on the principles of
benefit of shareholders,
either (A) the award of Performance Share
thereby aligning their
Units or (B) the award of Restricted Share
interests with those of
Units, but not a mixture of the two:
the Company’s investors.
A. Performance share awards Normal maximum of 150% The measures and targets are
Awards consist of annual awards of salary; and set annually by the Committee
of shares that vest three years after Exceptional circumstances ensuring alignment with the
grant to the extent that performance maximum 250% Company’s medium to long-
conditions have been met over a three- of salary. term strategy.
year performance period. Dividend equivalents may be 25% will vest at threshold
A two-year post-vesting holding period payable on LTIP awards, in with full vesting taking place
applies to shares (less any required to cash or shares, to the extent for equalling or exceeding the
be sold to cover tax and social security) that awards vest. maximum target, with a sliding
that vest. scale between the two points.
Awards are subject to clawback The Committee has discretion
and malus at the discretion of the to set different and multiple
Committee in the event of a material metrics and targets for
misstatement of the financial results, future awards.
an error in the calculation of
performance conditions or if the
participant ceases to be employed
as a result of misconduct.
B.Restricted share awards Normal maximum of The underpins are set annually
Awards consist of annual awards 50% of salary; and by the Committee, ensuring
of restricted share units. Exceptional circumstances alignment with the Company’s
maximum 83% of salary. medium to long-term strategy.
The awards will be subject to one or
more underpins and the Committee Not more than 1% of the The underpins for awards to be
will determine whether and the extent share capital in respect of made following the AGM in
to which the underpins have been awards in any financial year, 2019 are:
achieved and may reduce the else the limits will be subject
1. Share price – share price at
vesting accordingly. to a pro-rata reduction.
date of vesting (measured on
Subject to the achievement of Maximum vesting at twice a one-month average) is at
the underpins and continued the normal (unreduced) level least the higher of the share
employment: of performance share units price used for the grant and
under the LTIP (currently 28 pence (being the recent
50% of the award will vest after 300% for CEO and 250% Placing price).
three years of base salary for CFO). 2. Customer satisfaction – there
25% of the award will vest after Dividend equivalents may be is an appropriate improvement
four and five years payable on LTIP awards, in in customer satisfaction
cash or shares, to the extent between grant and vesting.
that awards vest. 3. Sound financial footing as
determined by the Committee.
Proposed substantive change for 2019:
The introduction of the ability to make awards of Restricted Share Units as an alternative to the awards of Performance Share Units.

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Purpose and link to strategy Operation Maximum Performance measurement

All-employee share schemes, including a Sharesave Plan and Share Incentive Plan (‘SIP’)
Encourages a broad range The Company operates HM Revenue and Sharesave and SIP Not applicable.
of employees to become Customs approved Sharesave and SIP plans participation limits are
long-term shareholders. with standard terms. as set by the UK tax
authorities from time
to time.
No substantive change to policy from the 2017 vote.

Share retention guidelines

To further align the interests Executive Directors are expected to build up and Not applicable. Not applicable.
of Executive Directors to retain a shareholding of the same percentage of
those of shareholders. salary as the normal level of performance share
awards made under the LTIP (currently 150% for
the CEO and 125% for the CFO) by the retention
of shares with a minimum value equal to 50%
of the net of tax gain arising from any vesting
or exercise under the Company’s Long-Term
Incentive Plan (whether Performance Share
Units or Restricted Share Units).
The Executive Directors are required to continue
to hold the lower of 50% of their guideline level
and 50% of the value of shares they own at
cessation of employment (excluding shares
purchased in the market) for a period of
one year following cessation of employment.
Proposed substantive change for 2019:
Clarity that the level of shareholding is set by reference to the normal level of performance share awards. Clarity that the retention
of shares appies to awards of both performance share units and restricted share units.

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Purpose and link to strategy Operation Maximum Performance measurement

Non-Executive Directors
Helps recruit and retain The Chairman is paid a fee, and no additional fee will The aggregate Not applicable.
high quality, experienced be paid for chairing any of the Board’s Committees. amount of Directors’
individuals. fees is limited by the
Non-Executive Directors are paid an annual
Company’s Articles
Reflects time commitment basic fee. Additional fees are payable to the
of Association.
and role. Senior Independent Director (SID) and the Chair
of each of its Committees.
Non-Executive Directors are not eligible for
pension scheme membership, bonus or incentive
arrangements. They are entitled to reimbursement
of reasonable business expenses and tax thereon.
Limited benefits relating to travel, accommodation
and hospitality may be provided in relation to the
performance of any Directors’ duties.
Non-Executive Directors’ fees are set by the
Executive Directors with reference to external data
on fee levels in similar businesses, having taken
account of the responsibilities of individual Directors
and their expected annual time commitment.
No substantive change to policy from the 2017 vote.

Differences in remuneration policy across the Group

The remuneration policy for the Executive Directors and other senior executives is designed with regard to the policy for employees
across the Group as a whole. However, the differences set out above arise from the development of remuneration arrangements that
are market competitive for the various categories of individuals. They also reflect the fact that, in the case of the Executive Directors and
senior executives, a greater emphasis is typically placed on performance-related pay and in share-based form, which provides a good
link to long-term Company performance.
The following differences exist between the above policy for the remuneration of Directors and its approach to the payment of
employees generally:
– a lower level of maximum annual bonus opportunity applies to employees other than the Executive Directors and certain
senior managers;
– store-based colleagues receive commission based upon sales achieved, and field-based colleagues receive bonuses based upon
the performance of their sphere of responsibility;
– participation in the LTIP is limited to the Executive Directors and certain selected senior managers. Other employees are eligible
to participate in the Company’s all-employee share schemes;
– under the Company’s defined contribution pension scheme, the Company contribution for less senior employees is lower than that
provided to Executive Directors; and
– benefits offered to other employees generally comprise colleague discount and, depending upon the colleague’s seniority, healthcare.

Incentive plan determinations and discretions

The Committee fully recognises that the exercise of discretion must be undertaken in a very careful and considered way and that it is
an area that will quite rightly come under scrutiny from shareholders and other stakeholders. It is, however, important for the Committee
to retain some discretion to make payments outside its remuneration policy in exceptional circumstances. The Committee confirms that
any exercise of discretion in such circumstances would be within the available discretions set out in this report, the rules of the relevant
schemes, the Listing Rules and HMRC rules where relevant and that the maximum levels available under any relevant plans would not
be exceeded.
The Committee may grant awards under the LTIP as conditional share awards or nil (or nominal) cost options. The Committee may also
decide to grant cash-based awards of an equivalent value to share-based awards or to satisfy share-based awards in cash, although it

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does not currently intend to do so, other than in respect of the tax element of any vesting of awards made under the LTIP. The Committee
may decide that participants will receive a dividend equivalent payment (in cash and/or shares).
The choice of the performance metrics applicable to the annual bonus reflect the Committee’s aim that annual incentives should promote
growth in underlying earnings, while also promoting the achievement of key non-financial objectives. The Committee will ensure that the
incentive structure for Executive Directors and senior management will not raise environmental, social or governance risks by inadvertently
motivating irresponsible behaviour. More generally, the Committee will ensure that the overall remuneration policy does not encourage
inappropriate operational risk-taking.
With regard to the annual bonus scheme and the LTIP, the Committee, consistent with market practice, is required to make certain
determinations under and retains discretion over a number of areas relating to the operation and administration of these plans. These
include (but are not limited to) the following (with the maximum level of restricted awards as set out in the policy table on pages 42 and 43):
– who participates in the plans;
– the timing of grant of award and/or payment;
– the size of an award and/or a payment (within the limits set out in the policy table above);
– whether performance share awards or restricted share awards should be granted in any year;
– the choice of (and adjustment of) performance measures, underpins and targets for each incentive plan in accordance with the policy
set out above and the rules of each plan;
– whether, and the extent to which, any underpins have been achieved where awards of Restricted Share Units have been made;
– discretion relating to the measurement of performance in the event of a change of control or reconstruction;
– determination of good leaver status for incentive plan purposes based on the rules of each plan and the appropriate treatment chosen;
– making adjustments required in certain circumstances (e.g. rights issues, corporate restructuring, on a change of control and special
dividends), provided that the revised conditions or targets are not materially less difficult to satisfy; and
– discretion to allow participants to sell, transfer, assign or dispose of some or all of their shares in exceptional circumstances before
the end of the holding period, subject to such additional terms and conditions as the Committee may specify.
Any exercise of discretions would, where relevant, be explained in the annual report on remuneration and may, as appropriate,
be the subject of consultation with the Company’s major shareholders.

Legacy arrangements
In approving the Policy Report, authority is given to the Company to honour any commitments entered into with current or former Directors
that are consistent with the approved remuneration policy in force at the time the commitment was made (or, if made before the Current
Policy was approved, as have been disclosed previously to shareholders), or were made at a time when the relevant individual was not
a Director of the Company.

Consideration of employee views

Although the Committee does not formally consult employees on executive remuneration, the Committee considers the general basic
salary increase as well as pay and conditions for the broader employee population when determining the annual salary increases for
the Executive Directors.

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Service agreements and policy on termination

It is the Company’s policy to employ UK Executive Directors under contracts with an indefinite term subject to termination by notice given
by either party, normally of 12 months or less. Non-UK Executive Directors would be employed under contracts with similar terms to those
of UK Executive Directors, subject to market practice and laws of any other jurisdiction where an employee is based.
The Company seeks to avoid any payment for failure. The circumstances of the termination (taking into account the individual’s
performance) and an individual’s duty and opportunity to mitigate losses are taken into account in every case.
If the Company terminates employment without giving full notice to the Executive Director, under the service contracts the Company
has the option to either:
– pay damages calculated by reference to common law principles, including an obligation on the Executive Director to mitigate loss; or
– make a payment in lieu of notice calculated by reference to basic salary and benefits only. Such payments may be phased and would
be reduced or terminated if alternative employment was secured during the notice period. There is also a requirement to mitigate loss.
The Company also retains flexibility to pay reasonable legal fees and other costs incurred by the individual that are associated with
the termination (including the settlement of claims brought against the Company) and to provide outplacement services.
In circumstances in which a departing director may be entitled to pursue a legal claim, the Company may negotiate settlement terms
and, with the approval of the Committee on the remuneration elements therein, enter into a settlement agreement accordingly.
In addition, the Company would honour any legal entitlements, such as statutory redundancy payments or awards made by any
tribunal or court, which executives may have on, or in respect of, termination.
No bonuses are payable to individuals who are no longer employed or are under notice at the end of the financial year.
Long-term incentive awards lapse on cessation of employment other than in certain ‘good leaver’ circumstances (including death,
retirement with the agreement of the Committee, ill health, or because the individual’s employing company or part of the business in which
employment is transferred out of the Group or as otherwise determined by the Committee). Where an individual is a ‘good leaver’, awards
would not lapse but would normally continue to vest at the end of the original performance period but only if, and to the extent that, the
applicable performance conditions are satisfied. Awards would also normally be subject to a pro-rata reduction to take account of the
proportion of the vesting period that has elapsed, although the Committee has discretion to disapply pro-rating in certain circumstances.
On a change of control awards would vest early, subject to performance conditions being achieved, and would normally be subject to
a pro-rata reduction, although the Committee has discretion to disapply pro-rating.
Wilf Walsh and Jeremy Simpson have contracts of an indefinite term, subject to a 12 month notice period. Non-Executive Directors
are entitled to one month’s notice.

Recruitment remuneration
Salaries for new hires (including internal promotions) will be set to reflect their skills and experience, the Company’s intended pay positioning
and the market rate for the role. If it is considered appropriate to appoint a new Director on a below market salary (for example, to allow
them to gain experience in the role), their salary may be increased to a market level over a number of years by way of a series of increases
above the general rate of wage growth in the Group and inflation.
The remuneration package for a new Executive Director would be set in accordance with the terms of the Company’s approved
remuneration policy in force at the time of appointment. The Committee has discretion to set different targets and/or vary the weightings
of the targets used in the annual bonus and LTIP for the first year following appointment. In addition, the Committee may offer additional
cash and/or share-based elements if it considers these to be in the best interests of the Company (and therefore shareholders). Any such
additional cash and/or share-based payments would be: (i) based solely on remuneration lost when leaving the former employer and would
reflect (as far as practicable) the delivery mechanism, time horizons and performance requirement attaching to that remuneration; and
(ii) delivered under the Group’s existing incentive arrangements to the extent possible, although awards may also be granted outside
these schemes, if necessary, and as permitted under the Listing Rules.
In the case of an internal appointment, any outstanding variable pay awarded in relation to the previous role will be allowed to pay out
according to its terms of grant (adjusted as relevant to take into account the Board appointment).
The Committee may also agree that the Company will compensate executives, both internal and external, for certain relocation expenses
as appropriate. Tax equalisation may also be considered if an executive is adversely affected by taxation due to their employment with
the Company. Legal fees and other costs incurred by the individual may also be paid by the Company.
Fees for new Non-Executive Directors would be set in line with the policy set out above.

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Outside appointments of the Executive Directors

The Non-Executive Directors may serve on a number of other company boards provided they continue to demonstrate the requisite
commitment to discharge their duties to the Company effectively and such external appointments are seen as being beneficial to
the overall decision-making process of the Board as a whole. The Company also encourages the Executive Directors to take up
non-executive positions, with the prior consent of the Company, in the belief that such appointments broaden their skills and
enhance the contribution which they can make to the Company’s performance. Generally, no more than one such appointment
may be undertaken by the Executive Directors. Wilf Walsh was appointed as the Senior Independent Director at the Racing Authority
Limited during the year ended 27 April 2019.

Policy for Non-Executive Directors

The Non-Executive Directors do not have service contracts. They are appointed for an initial three-year period, subject to being re-elected
by members annually.

Consideration of shareholder views

The Remuneration Committee considers shareholder feedback received on the Directors’ remuneration report each year and guidance
from shareholder representative bodies more generally. Shareholders’ views are key inputs when shaping remuneration policy.
Details of votes cast for and against the resolution to approve last year’s annual report on remuneration, and any matters discussed
with shareholders during the year, are set out in the annual report on remuneration.

Expected value of the proposed annual remuneration packages for Executive Directors
The following charts indicate the level of remuneration payable to Executive Directors in respect of the financial year ending 26 April 2020
based on the New Policy being approved at ‘minimum’ remuneration; remuneration in line with ‘on-target’ performance and the maximum
remuneration available for stretch performance.

1500

£1,267
1250
18%

£1,038
Total remuneration (£000s)

1000 22% 36%

£725
750 22%
17%
£579 £585

21% 39%
500 100% 56% 46%

24%
£323

250 100% 55% 45%

0
Fixed only Target Stretch Fixed only Target Stretch
CEO CFO
Fixed Bonus LTIP

Assumptions:
– Fixed only – fixed pay only, including base salary (at current rates), pension allowance (based on current base salary) – 20% CEO/10%
CFO and benefits as disclosed in the single figure table on page 51.
– On-target – fixed pay, plus 50% of salary annual bonus, plus 50% of salary restricted shares (CEO) / 43.5% of salary restricted shares
(CFO) (i.e. assuming grants of restricted share awards are not reduced on a pro rata basis as would be required if more than 1% of
share capital would otherwise be required and that underpins do not result in any reduction of vesting).
– Maximum – fixed pay, plus 100% of salary annual bonus, plus 50% of salary restricted shares (CEO) / 43.5% of salary restricted shares
(CFO) (i.e. assuming grants of restricted share awards are not reduced on a pro rata basis as would be required if more than 1% of
share capital would otherwise be required and that underpins do not result in any reduction of vesting).

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Part 3 – Annual report on remuneration

Introduction
This annual report on remuneration provides details of the way in which the Committee implemented its policy during the financial year
to 27 April 2019. It also summarises how the policy contained within the Directors’ remuneration policy report on pages 40 to 48 will
be applied in the financial year ending 26 April 2020.
It has been prepared in accordance with the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations
2008 (as amended) (the ‘Regulations’). In accordance with the Regulations, this part of the report will be subject to an advisory vote
at the forthcoming AGM on 5 September 2019.
The Company’s auditors are required to report to Carpetright’s shareholders on the “auditable parts” of this annual report on remuneration
(which have been highlighted as such below) and to state whether, in their opinion, those parts have been properly prepared in accordance
with the Regulations and the Companies Act 2006.
Structure and Responsibilities of the Remuneration Committee
The Remuneration Committee is chaired by Sandra Turner. Details of its membership during the period, the date they joined the
Committee and attendance are set out below:

Number of meetings: 6
Meetings eligible
Members Date joined Committee Attendance to attend
Sandra Turner (Committee Chairman) October 2010 6 6
David Clifford September 2014 6 6
Jemima Bird January 2019 1 1
Andrew Page July 2013 5 6
The Non-Executive Directors who served on the Committee had no personal financial interest (other than as shareholders) in the matters
decided, no potential conflicts of interest from cross-directorships and no day-to-day involvement in running the business. Biographical
information on the current Committee members is shown on page 31. The Company Secretary (Jeremy Sampson) acts as secretary
to the Committee.
At the invitation of the Committee, the Chairman (Bob Ivell), the Chief Executive (Wilf Walsh), the Chief Financial Officer (Neil Page until
February 2019, Jeremy Simpson subsequently), and the Director of Human Resources (Rachel Wheeler) attend Committee meetings.
The Committee considers their views when reviewing the remuneration of the Executive Directors and senior executives. They are not
involved in decisions concerning their own remuneration.

The responsibilities of the Committee include:

– determining and agreeing with the Board the broad remuneration policy for the Chairman, Executive Directors and senior executives;
– setting individual remuneration arrangements for the Chairman and Executive Directors;
– recommending and monitoring the level and structure of remuneration for those members of senior management within the scope
of the Committee; and
– approving the service agreements of each Executive Director, including termination arrangements.

The Committee’s terms of reference are available on the Company’s corporate website (www.carpetright.plc.uk).

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Summary of Committee activity during the year ended 2019

During the year ended 2019 the Committee has:
– discussed and reviewed the salaries of Directors and other senior executives;
– considered the arrangements and remuneration for Neil Page during his notice period;
– agreed the remuneration arrangements for Jeremy Simpson’s appointment as Chief Financial Officer;
– discussed and reviewed the level of awards under the LTIP and to whom awards should be made;
– considered the appropriate metrics and targets for the annual bonus;
– considered and made awards to senior executives below Board level of restricted share units under the LTIP
– determined that it would be inappropriate to set any performance targets for awards under the LTIP and, therefore, that no awards would
be made to the Executive Directors in 2018;
– considered performance against the targets for the 2018 annual bonus (and following the year end, the 2019 annual bonus);
– considered, since the year end, the performance against targets for the 2016 LTIP;
– developed and, following the year-end, consulted with shareholders in relation to the policy changes proposed in Part 2 of this Directors’
remuneration report;
– considered and approved the content of the Directors’ remuneration report;
– approved the launch of an annual invitation under the SAYE scheme; and
– reviewed its own performance.
Remuneration advice
The Committee is authorised by the Board to appoint external advisers if it considers this beneficial. Over the course of the year, the
Committee was advised by the Executive Compensation practice of Aon plc. Aon (then known as New Bridge Street) was appointed as
advisers in 2010 following a competitive tender. The Committee’s advisers attended four Committee meetings. Aon, which is a signatory
to the Remuneration Consultants’ Group Code of Conduct for Executive Remuneration Consultants, did not provide other services to the
Company. Fees paid (excluding VAT) by the Company to the Executive Compensation practice of Aon plc during the year amounted to
£18k (2018: £18k). Although other members of the Aon plc group of companies provided insurance broking, pensions and advisory
services to the Company, the Committee is satisfied that the provision of such services did not create any conflict of interest. The
Committee reviews the effectiveness and independence of its advisers at a Committee meeting on an annual basis.
Statement of shareholder voting at the 2018 AGM
The table below shows the proxy votes received for the 6 September 2018 AGM in respect of the approval of the 2018 Directors’
remuneration report.

Total votes cast

For (including (for and against Total votes cast
discretionary excluding votes (including
votes) Against withheld) Votes withheld1 withheld votes)

To approve the remuneration report 133,133,734 52,647 133,186,381 4,087,984 137,274,365

% votes cast 99.9% 0.1%
Note:
1. A vote withheld is not a vote in law.

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How our remuneration policy was implemented in the financial year ended 27 April 2019
Single total figure table for the financial year ended 27 April 2019 (audited)
The remuneration of the Directors for the year was as follows:
All Subtotal Single figure
Notes Salary Subtotal fixed Long-term employee variable for total
to this and fees Benefits1
Pension 2
remuneration Bonus 3
Incentives schemes remuneration
4
remuneration
table £000 £000 £000 £000 £000 £000 £000 £000 £000
Executive Directors
Wilf Walsh 459 28 92 579 – – 3 3 582
Jeremy Simpson 5 62 3 6 71 – – – – 71
Neil Page 5 246 23 49 318 – – – – 318
Total 767 54 147 968 – – 3 3 971

Non-Executive Directors
Bob Ivell 150 – – 150 – – – – 150
Sandra Turner 44 – – 44 – – – – 44
David Clifford 46 – – 46 – – – – 46
Jemima Bird 6 13 13 13
Andrew Page 6 29 – – 29 – – – – 29
Total 282 – – 282 – – – – 282
The remuneration of the Directors for the financial year ended 28 April 2018 was as follows:

All- Subtotal Single figure

Salary Subtotal fixed Long-term employee variable for total
and fees Benefits1
Pension 2
remuneration Bonus 3
incentives schemes remuneration remuneration
£000 £000 £000 £000 £000 £000 £000 £000 £000
Executive Directors
Wilf Walsh 459 28 92 579 – – – – 579
Neil Page 300 28 60 388 – – – – 388
Total 759 56 152 967 – – – – 967

Non-Executive Directors
Bob Ivell 150 – – 150 – – – – 150
Sandra Turner 44 – – 44 – – – – 44
David Clifford 44 – – 44 – – – – 44
Andrew Page 44 – – 44 – – – – 44
Total 282 – – 282 – – – – 282
Notes to the table:
1. The main benefits available to the Executive Directors during the year ended 27 April 2019 were a car allowance, life assurance and private medical cover.
2. The pension provision is by way of a salary supplement to the Executive’s base salary.
3. This column shows the amount of bonus paid or payable in respect of the year in question.
4. These figures represent the value of the 20% discount on the Sharesave option price granted in the relevant year.
5. Neil Page stepped down from the Board on 25 February 2019 and Jeremy Simpson was appointed to the Board on that date.
6. Andrew Page stepped down from the Board on 31 December 2018 and Jemima Bird joined the Board on 2 January 2019.

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Payments to past directors (audited)

Neil Page gave the Company notice of termination of his employment, such that his employment will terminate on 30 April 2020
(the “Termination Date”). In the meantime, he will continue to be paid his salary, car allowance and pension contributions from
25 February 2019 (being the date he stepped down from the Board) to the Termination Date. However, if the Termination Date is
brought forward and he commences employment elsewhere mitigation will apply for the remainder of his notice. Neil was paid basic pay
of £54k, pension contributions of £11k and benefits of £5k in respect of the period between 25 February 2019 and 27 April 2019. Neil will
not be entitled to receive any payments under the annual bonus scheme. All granted but unvested share awards under the Company’s
long-term incentive plan have lapsed.
Recruitment (not audited)
Jeremy Simpson was appointed to the Board with effect from 25 February 2019 as the Chief Financial Officer. He will receive a base salary
at a rate of £280,000 p.a, a pension allowance of 10% of base salary, which is in line with the majority of other members of the Operating
Committee, a car allowance of £14,000 p.a., maximum bonus of 100% of base salary and awards under the long-term incentive plan in
line with the remuneration policy.
Pensions (audited)
Executive Directors are offered an allowance of a proportion of their base salary to fund their own pension provision (Wilf Walsh: 20%,
Jeremy Simpson: 10%). Wilf Walsh and Jeremy Simpson both received their allowance as a salary supplement.
Annual incentives – 2019 structure and outcome (audited)
In respect of the financial year ended 27 April 2019, Executive Directors were eligible to receive an annual performance bonus based
on the achievement of performance targets relating to Group underlying EBITDA. This metric was selected to align the measure to one
of the Group’s principal banking covenants, to eliminate the virtual fixed element of the finance charges of the Company’s borrowings
and to be consistent with that of other retailers.
The maximum bonus opportunity for Executive Directors for the financial year ended 27 April 2019 was 100% (2018: 100%) of basic
salary earned in the financial year; 50% (2018: 50%) of the financial element was payable for on-target performance.
The Committee considered the extent to which the Executive Directors had achieved the financial objective.

Maximum Actual
percentage percentage
Metric Threshold Target Maximum Actual performance of bonus of bonus
Financial 20% 50% 100%
payout payout payout
Underlying EBITDA (£m) £8.4 £21.1 £30.0 £2.9 100% 0%
Bonus payout 100% 0%

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Strategic report Directors’ report Financial statements Shareholder information

Long-term incentives (audited)

LTIP awards granted in July 2015 and included in the single figure for the year ended 28 April 2018
The LTIP awards granted in July 2015, which would vest in July 2018, were based on performance over the three financial years ended
28 April 2018. There was a single underlying cumulative profit performance condition relating to these awards, with pro-rata straight-line
vesting between the points:

Cumulative underlying earnings per share over the performance period Vesting level
Less than 65.6p 0%
65.6p 25%
80.2p 100%
The actual cumulative underlying earnings per share over the three financial years ended 28 April 2018 was 30.4p. As a result the awards
did not vest and, consequently, there is no figure included in the single figure table.

LTIP granted September 2016

The LTIP awards granted in September 2016, which would vest in September 2019, and were based on performance over the three
financial years beginning 30 April 2016, are shown in the table below:
Average share
price in 5 Number of
working days shares over
preceding which award Face value of Threshold Maximum Performance
Type of award Basis of grant date of grant was granted award vesting vesting measure
Wilf Walsh Nil cost 150% of 241p 285,684 £688,498 25% 100% Cumulative
option salary underlying
Neil Page Nil cost 125% of 241p 155,601 £374,998 25% 100% earnings per
option salary share to the
financial year
ending 2019
Awards would vest according to performance against the cumulative underlying earnings per share, as set out below:

% of award
that vests Equivalent to
(on a straight-line compound profit
basis between growth from
Cumulative underlying earnings per share over the performance period Vesting level points) 2016
Less than 68.6p Nil 0% <5.9%
68.6p Threshold 25% 5.9%
83.8p Maximum 100% 13.2%
The actual performance was such that the awards will not vest and, consequently, there is no figure included in the single figure table:

Actual Actual vesting Date at end of Share price

LTIP award Performance target Weighting performance1 level performance period Date of vesting at vesting1
Sept 2016 Cumulative underlying 100% 4.5p 0% 27 April 2019 13 Sep 2019 N/A
earnings per share
1. The cumulative EPS is shown using IFRS 15 for 2019 and IAS 18 for 2017 and 2018. Whichever accounting basis was selected, the actual performance will be below
the threshold.

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Directors’ remuneration report continued

LTIP granted July 2017

The LTIP awards granted in July 2017, which will vest in July 2020, were based on performance over the three financial years beginning
29 April 2017, are shown in the table below:

Average share
price in 5 Number of
working days shares over
preceding which award Face value of Threshold Maximum Performance
Type of award Basis of grant date of grant was granted award vesting vesting measure
Wilf Walsh Nil cost 150% of 189p 364,285 £688,498 25% 100% Cumulative
option salary underlying
Neil Page Nil cost 125% of 189p 198,412 £374,998 25% 100% earnings per
option salary share to the
financial year
ending
25 April 2020
Awards will vest according to performance against the cumulative underlying earnings per share, as set out below:

% of award Equivalent to
that vests compound profit
(on a straight-line growth from
basis between financial year
Cumulative underlying earnings per share over the performance period Vesting level points) ended 2017
Less than 64.8p Nil 0% <14.8%
64.8p Threshold 25% 14.8%
79.2p Maximum 100% 22.8%
Based on current performance these awards are unlikely to vest. Neil Page’s awards have lapsed, in any event. See page 52.

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Strategic report Directors’ report Financial statements Shareholder information

All-employee share plans (audited)

Sharesave
Details of options awarded to the Executive Directors under the Sharesave plan during the course of the year are set out in the table below.
Wilf Walsh cancelled his participation in previous schemes in order to participate in the 2019 scheme.

Granted during the year Exercise price First exercise date Last exercise date
Wilf Walsh 112,500 16p April 2022 October 2022

Share Incentive Plan

Carpetright operated a SIP until January 2015, when it was closed as there were fewer than 50 participants. Neil Page participated in
the plan, but since closure shares are being transferred out of the trust to Neil as and when they are able to be transferred to him on
a tax-free basis. This will continue to January 2020 when all shares will have been transferred to him.

Summary of all share awards to Directors under the long-term incentive and sharesave plans
Set out below is a summary of all share awards as at 27 April 2019.
Market Market Amount
Share price price at price at realised
Balance at Granted Vested/ Lapsed Balance at at grant/ date of date of on Date from
Date 28 April during exercised during 27 April invitation Exercise vesting exercise vesting which Expiry
granted 2018 year during year year 2019 (p) price (p) (pence) (pence) £000 exercisable date Scheme
Wilf Jul 15 119,324 – – 119,324 – 577 nil – – – Jul 18 Jul 28 LTIP
Walsh Sept 16 285,684 – – – 285,684 241 nil – – – Sept 19 Sept 29 LTIP
Feb 17 13,846 – – 13,846 – 162 130 – – – Apr 21 Oct 21 SAYE
Jul 17 364,285 – – – 364,285 189 nil – – – Jul 20 Jul 30 LTIP
Feb 19 – 112,500 – – 112,500 19 16 – – – Apr 22 Oct 22 SAYE
783,139 112,500 – 133,170 762,469

Neil Jul 15 64,991 – – 64,991 – 577 nil – – – Jul 18 Jul 28 LTIP

Page Sept 16 155,601 – – 155,601 – 241 nil – – – Sept 19 Sept 29 LTIP
Feb 17 13,846 – – 13,846 – 162 130 – – – Apr 21 Oct 21 SAYE
Jul 17 198,412 – – 198,412 – 189 nil – – – Jul 20 Jul 30 LTIP
432,850 – – 432,850 –
Notes:

Following Neil Page resigning as a director and employee, all options will lapse.
No grants have yet been made to Jeremy Simpson.

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Directors’ remuneration report continued

Share ownership and shareholding guidelines for Directors (audited)

The Company has a share ownership policy that requires the Executive Directors to build up and maintain a target holding having a value
equal to the same multiple of base salary as performance share awards are normally made under the LTIP. Until such a holding is
achieved, an Executive Director is obliged to retain shares with a minimum value equal to 50% of the post-tax vested shares under the LTIP
(whether by way of Performance Share Units or Restricted Share Units). The Executive Directors are required to hold the lower of 50% of
their guideline level and 50% of the value of shares they own at cessation of employment (excluding any shares purchased in the market)
for a period of one year following cessation of employment. All Directors have complied with the guidelines, although the holdings of
Wilf Walsh and Neil Page were below the target holding of base salary.
The beneficial interests of those individuals who were Directors as at 27 April 2019 and their immediate families in the ordinary shares
of the Company are set out in the table below. There have not been any changes since that date. Additionally, the Executive Directors
have an indirect interest in 175,078 shares held in trust to satisfy awards made under the LTIP.

Value of
holding
as a % of Ordinary
salary on Ordinary shares subject
Financial Ordinary the last day of shares under to outstanding
year Ordinary shares held Total holding of the relevant option under the unvested awards Total interest in
ended shares in the SIP1 ordinary shares financial year2 Sharesave Plan3 under the LTIP4 ordinary shares
Executive
Wilf Walsh 2019 734,428 – 734,428 49% 112,500 649,969 1,496,897
2018 85,028 – 85,028 8% 13,846 769,293 868,167
Jeremy Simpson 2019 – – – – – – –
Non-Executive
Bob Ivell – – – – – – –
Sandra Turner – – – – – – –
David Clifford 21,296 – 21,296 – – – 21,296
Andrew Page – – – – – – –
To the best of the Directors’ knowledge, the beneficial interests as at 27 April 2019 of those individuals who ceased to be Directors during
the year are set out below:
Ordinary
Ordinary shares subject
Ordinary shares under to outstanding
Ordinary shares held Total holding of option under the unvested awards Total interest in
shares in the SIP1 ordinary shares Sharesave Plan3 under the LTIP4 ordinary shares
Executive
Neil Page 233,950 268 234,218 – – 234,218
Non-Executive
Andrew Page – – – – – –
Notes:
1. Under the rules of the SIP, certain shares awarded to participants must be retained in the plan for a specified “holding period” of up to five years. The receipt of these
shares is not subject to the satisfaction of performance conditions. The shares held in the SIP will reduce over time as the SIP has closed. Please see page 55.
2. Share price used is the price as at 27 April 2019: 30.6p.
3. None of these options are subject to a performance condition. Details of the Sharesave interests can be found on page 55.
4. This column shows all unvested and outstanding awards under the LTIP that were held by the Executive Director concerned as at 27 April 2019 (i.e. including
those granted during the year). Details of these entitlements, the vesting of which is subject to the satisfaction of performance conditions, are set out on page 55.

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Application of the remuneration policy for the financial year ending 26 April 2020
Basic salary
For the 2019 pay review, the Chief Executive indicated to the Committee that, in light of the performance of the business, his base salary
should remain unchanged. Jeremy Simpson had recently commenced as the Chief Financial Officer and no review of his salary would be
appropriate. The Committee therefore decided not to conduct a review of their pay and, as a result, their base salaries remain unchanged.
The current salaries of the Executive Directors are as follows:

Base salary as at Current base Percentage

29 April 2017 salary change
Wilf Walsh £459,000 £459,000 0%
Jeremy Simpson – £280,000 –

Benefits and pension

Benefits and pension will operate in the financial year ending 26 April 2020 as per their respective policies set out in the Policy Report
on pages 40 to 48.
Annual bonus plan performance targets
The annual bonus plan for the financial year ending 26 April 2020 will operate consistently with the policy detailed in the Policy Report
on page 42. If the New Policy is approved, any payments in excess of on-target performance will be deferred into shares.
Performance targets for the Executive Directors for the financial year ending 26 April 2020 are expected to be based on underlying
EBITDA (80%) and customer service (20%). The EBITDA measure has been selected in order to align it with the Group’s banking
covenants and measures used by similar companies and the customer service metric is designed to incentivise the Directors to
provide great customer service and build the brand and reputation of the business for the future. The customer service metric will
be subject to an EBITDA underpin.
Consistent with our policy and the Group’s practice over a number of years, the Committee has set the percentage of bonus payable
for on-target performance in light of the degree of stretch in the targets and the affordability of the pay-outs to the Group. It has, however,
reduced the quantum of payment for threshold performance to 10% as it thought that to be appropriate in the circumstances. The range
will be to pay 0% unless a threshold level of performance has been achieved, 10% of maximum at threshold and 50% of maximum for
achieving target and maximum for achieving a stretch level of performance, with straight-line vesting between each point. Further details
of the targets are currently commercially sensitive and the Company will not be disclosing them at the start of the year. However, they
will, unless they remain commercially sensitive, be disclosed retrospectively in the 2020 Annual report and accounts.
Long-term incentive awards
The Committee plans to make awards to Executive Directors of Restricted Share Units following the Annual General Meeting in September,
subject to the New Policy being adopted. Assuming awards are made, the characteristics and quantum of award will be as set out in my
Annual Letter to shareholders in Part 1 of this Remuneration Report.
Non-Executive Directors’ fees
Non-Executive Directors’ fees have been reviewed and no changes were made. The current fees are as follows:

Chairman fee
(including base Additional
fee and chairing fee for
Base fee the Nomination Committee
Base fee for SID Committee) Chairman
Current fees £39,000 £44,000 £150,000 £5,000

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Directors’ report continued
Directors’ remuneration report continued

Other information
Performance graph
The graph below shows the value, by 27 April 2019, of £100 invested in Carpetright plc on 2 May 2009 compared with that of £100
invested in the FTSE Small Cap Index and the FTSE All Share General Retailers Index, which the Directors believe to be the most suitable
broad comparators. The other points plotted are the values at intervening financial year-ends.

350

300

250

200
Value (£)

150

100

50

02-May-09 01-May-10 30-Apr-11 28-Apr-12 27-Apr-13 26-Apr-14 02-May-15 30-Apr-16 29-Apr-17 28-Apr-18 27-Apr-19

Carpetright FTSE Small Cap Index FTSE All Share General Retailers Index Source: Thomson-Reuters

Statement of change in total remuneration of the Chief Executive

Total remuneration of individuals undertaking the role of Chief Executive in each of the past nine years is as follows:
Annual variable Long-term
element award incentive
Total rates for Chief vesting rates for
remuneration Executive Chief Executive
Financial year of Chief Executive2 (as % of max. (as % of max.
ended April Chief Executive1 £’000 opportunity) opportunity)
2019 Wilf Walsh 582 0% 0%
2018 Wilf Walsh 579 0% 0%
2017 Wilf Walsh 727 0% 75%
2016 Wilf Walsh 819 52% 0%
2015 Combined remuneration 842
2015 Wilf Walsh (21 July 2014 to 30 April 2015) 749 86% 0%
2015 Lord Harris (1 May 2014 to 20 July 2014) 93 0% 0%
2014 Combined remuneration 490
2014 Lord Harris (3 October 2013 to 30 April 2014) 249 0% 0%
2014 Darren Shapland (1 May 2013 to 3 October 2013) 241 0% 0%
2013 Combined remuneration 1,025
2013 Darren Shapland (14 May 2012 to 30 April 2013) 1,007 29% 0%
2013 Lord Harris (1 May 2012 to 14 May 2012) 18 0% 0%
2012 Lord Harris 522 0% 0%
2011 Lord Harris 522 0% 0%
2010 Lord Harris 721 37% 26%
Notes:
1. Lord Harris stood down as Chief Executive in May 2012, at which point Darren Shapland was appointed Chief Executive. Darren Shapland stood down on
3 October 2013, at which point Lord Harris was appointed as full-time Executive Chairman. Wilf Walsh joined as Chief Executive on 21 June 2014, at which
point Lord Harris ceased to fulfil that role.
2. The amounts shown in this column have been calculated using the same methodology prescribed by the Regulations for the purposes of preparing the single
total figure table shown on page 51.

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Strategic report Directors’ report Financial statements Shareholder information

Statement of change in pay of individuals undertaking the role of Chief Executive compared to other employees
The table below shows the movement in the remuneration for the role of Chief Executive between the current and previous financial
year compared to the average (per full-time equivalent) for all employees.

Bonus/payments
as a result of
Salary Benefits performance
% change % change % change
Chief Executive Officer 0% 0% 0%
Average per employee 1% 0.4% (0.8)%
Bonus figures include commission payments.
Relative importance of spend on pay
The table below illustrates the change in expenditure on remuneration paid to all the employees of the Group and distributions
to shareholders from the financial year ended 28 April 2018 to the financial year ended 27 April 2019.

2019 2018 Percentage

£m £m change
Overall expenditure on pay 80.9 91.8 (12)%
Dividend plus share buyback – – –
These matters were selected to be shown as they represent key distributions by the Group to its stakeholders. Further details on overall
expenditure on pay can be found in note 4 to the financial statements on pages 75 to 76.

By order of the Board

Sandra Turner
Chairman of the Remuneration Committee
25 June 2019

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Directors’ report continued

Other information

This section contains the remaining Directors’ interests under the Company’s all-employee
matters on which the Directors are required and discretionary share schemes, a
Directors’ share interests are disclosed
to report each year, which do not appear change of control of the Company would
in the Directors’ report on remuneration
elsewhere in this Directors’ Report. Certain normally be a vesting event, facilitating
on page 56. Except as disclosed in this
other matters required to be reported on the exercise or transfer of awards,
report, no Director had a material interest
appear elsewhere in the Annual report subject to any relevant performance
in any contract or arrangement with the
and accounts as detailed below, and conditions being satisfied.
Company during the year, other than
each forms part of this Directors’ Report:
through their respective service contracts. The Company does not have agreements
– the Strategic Report, including an Some Directors made purchases of with any Director or officer that would
indication of likely future developments the Company’s products in the period, provide compensation for loss of office
in the business, appears from the inside on normal commercial terms available or employment resulting from a takeover,
front cover to page 27; to all employees. except that provisions in the Company’s
– the Directors’ remuneration report share plans may cause options and awards
appears on pages 36 to 59; Directors’ indemnity granted under such plans to vest on
– the going concern statement appears arrangements a takeover.
on page 22; The Company has provided qualifying third- There is no information that the Company
– the viability statement appears party indemnities for the benefit of each would be required to disclose about
on page 22; Director who held office during the financial persons with whom it has contractual
– a list of the subsidiary and associated year ended 2019, all of which remain in or other arrangements which are essential
undertakings, including branches place as at the date of this report. The to the business of the Company.
outside the UK, appears on page 86; Company has also purchased and
maintained Directors’ and Officers’ Share capital
– changes in asset values are set out in liability insurance throughout the
the consolidated balance sheet on page financial year ended 2019. Details of the Company’s issued share
65 and in the notes to the financial capital can be found in note 24 to the
statements on pages 67 to 105; financial statements. All of the Company’s
Significant agreements – issued ordinary shares are fully paid up
– the Group’s profit before taxation and the
profit after taxation and minority interests
change of control and rank equally in all respects.
appear in the consolidated income There are a number of agreements that take
The rights and obligations attaching to
statement on page 63; effect, alter or terminate upon a change of
the Company’s ordinary shares, in addition
control of the Company following a takeover
– a detailed statement of the Group’s to those conferred on their holders by law,
bid, such as bank loan agreements and
treasury management and funding are contained in the Company’s Articles
employee share plans. None of these are
is set out in note 23 to the financial of Association, copies of which can be
deemed to be significant in terms of their
statements on pages 96 to 98; obtained from Companies House in the
potential impact on the business of the
– matters concerning the employment etc. UK or by writing to the Company Secretary.
Group as a whole, except for:
of disabled persons appear on page 26; The holders of ordinary shares are entitled
– a facilities agreement dated 19 March to receive the Company’s report and
– details of employee involvement appear
2008, as amended and restated accounts, to attend and speak at general
on pages 26 and 27;
most recently on 10 May 2018. This meetings of the Company, to appoint
– disclosures concerning greenhouse provides that on a change of control proxies and to exercise voting rights.
gas emissions appear on page 27; all lenders’ commitments are cancelled
There are no restrictions on the transfer
– a statement that this Annual report and all outstanding loans, together with
of ordinary shares or on the exercise of
and accounts meets the requirements accrued interest, will become immediately
voting rights attached to them, except
of Provision C.1.1 of the UK Corporate due and payable and committed
(i) where the Company has exercised its
Governance Code (‘the Code’) is set out overdraft facilities of £7.5m and €2.4m
right to suspend their voting rights or to
on page 28; and which will similarly become due and
prohibit their transfer following the omission
in accordance with Listing Rule 9.8.4, payable upon a change of control.
of their holder or any person interested
details of dividend waivers appear on Details of balances at the financial
in them to provide the Company with
page 61. year end can be found in note 23 to
information requested by it in accordance
the consolidated financial statements;
with Part 22 of the Companies Act 2006
– a loan note instrument creating or (ii) where their holder is precluded from
£17,250,000 guaranteed 18% unsecured exercising voting rights by the FCA’s Listing
loan notes 2020 which provides that on a Rules or the City Code on Takeovers
change of control the loan notes must be and Mergers.
mandatorily repaid in full; and

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Report andand accounts
Accounts 2019 2019
Strategic report Directors’ report Financial statements Shareholder information

The Company is not aware of any Shareholders’ views UK company law requires the Directors
agreements between shareholders that to prepare financial statements for
There is a formal investor relations
might result in the restriction of transfer each financial year. Under that law, the
programme based around the results
or voting rights in relation to the shares Directors have prepared the Group and
presentations and interim management
held by such shareholders. Parent Company financial statements in
statements. All of the Non-Executive
accordance with International Financial
Shares acquired through Carpetright’s Directors are available to attend meetings
Reporting Standards (IFRSs) as adopted
employee share schemes rank equally should shareholders so request. The
by the European Union. The financial
with all other ordinary shares in issue and Chairman and Executive Directors feed
statements are required by law to give
have no special rights. The Trustee of the back any investor comments to the Board.
a true and fair view of the state of affairs
Company’s Employee Benefit Trust (‘EBT’) All Directors normally attend the Annual
of the Company and the Group and of
has waived its rights to dividends on shares General Meeting and are available to
the profit or loss of the Company and
held by the EBT and does not exercise answer any questions that shareholders
Group for that period.
its right to vote in respect of such shares. may raise.
Shares held in trust on behalf of participants In preparing those financial statements,
All shareholders will have at least 20
in the All Employee Share Ownership Plan the Directors are required to:
working days’ notice of the Annual General
are voted by the Trustee as directed by
Meeting. As required by the Code, the – select suitable accounting policies
the participants. Details of share-based
Board will, at the 2019 Annual General and then apply them consistently;
payments, including information regarding
Meeting, announce the proxy votes in – make judgments and estimates that
the shares held by the EBT, can be found in
favour of and against each resolution are reasonable and prudent;
notes 24 and 25 to the financial statements
following a vote by a show of hands,
on pages 98 to 100. – state that the financial statements comply
and the votes cast will be posted
on the corporate website. with IFRSs as adopted by the European
Substantial shareholdings Union; and
As at 25 June 2019, the Company has Authority to purchase prepare the financial statements on
been notified of the following substantial the going concern basis, unless it is
own shares inappropriate to presume that the Group
shareholdings in accordance with the
Disclosure and Transparency Rules, other At the 2018 Annual General Meeting, will continue in business, in which case
than those of the Directors, in the issued shareholders gave the Company renewed there should be supporting assumptions
share capital of the Company: authority to purchase a maximum of or qualifications as necessary.
30,378,716 shares of one penny each.
Shares This resolution remains valid until the date The Directors are responsible for keeping
held as a
percentage of this year’s Annual General Meeting. proper accounting records that disclose
of the issued As at 27 April 2019, the Directors had with reasonable accuracy at any time the
share capital financial position of the Company and the
not used this authority. The Company’s
Meditor Capital Management present intention is to cancel any shares Group and to enable them to ensure that
Limited and Meditor Group 29.99% acquired under such authority, unless the financial statements and the Directors’
Limited purchased to satisfy outstanding awards remuneration report comply with the
Aberforth Partners LLP 12.32% under employee share incentive plans. Companies Act 2006 and, as regards the
Competrol Establishment 12.08% A resolution seeking renewal of the Group financial statements, Article 4 of the
Wellcome Trust 7.24% authority will be proposed at this year’s IAS Regulation. They are also responsible
Majedie Asset Management 5.06% Annual General Meeting. for safeguarding the assets of the Company
Limited and the Group and hence for taking
Statement of directors’ reasonable steps for the prevention and
Donations responsibilities detection of fraud and other irregularities.
No political donations were made during The Directors are responsible for The Directors are responsible for the
the year (2018: £nil). preparing the Annual Report, the maintenance and integrity of the corporate
Directors’ remuneration report and and financial information on the Company’s
the financial statements in accordance websites. Legislation in the United
with applicable laws and regulations. Kingdom governing the preparation and
dissemination of financial statements may
differ from legislation in other jurisdictions.

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Directors’ report continued
Other information continued

Each of the Directors (other than Pauline Disclosure of information

Best, whose details are set out and who to auditors
joins the Board on 1 August 2019) whose
names and details are set out on page Each of the Directors of the Company
31 of this report confirms that to the has confirmed that, as far as they are
best of their knowledge: aware, there is no relevant audit information
of which the auditors are unaware and
– the financial statements, which have that each Director has taken all steps to
been prepared in accordance with make him or herself aware of any relevant
IFRSs as adopted by the EU, give a audit information and to establish that
true and fair view of the assets, liabilities, the Company’s auditors are aware of
financial position and profit or loss of that information.
the Company and the undertakings
included in the consolidation taken as Annual General Meeting
a whole; and
The 2019 Annual General Meeting of the
the Strategic Report and the Directors’
Company will be held on 5 September
Report include a fair review of the
2019 at Carpetright plc, Purfleet Bypass,
development and performance of
Purfleet, Essex RM19 1TT at 12:00 p.m.
the business and the position of the
A full description of the business to be
Company and the undertakings included
conducted at the meeting is set out in the
in the consolidation taken as a whole,
separate Notice of Annual General Meeting.
together with a description of the principal
risks and uncertainties that they face. The Directors’ Report was approved
and signed by order of the Board
Statement of the directors in
respect of the annual report Jeremy Sampson
and financial statements Company Secretary and Legal Director
As required by the Code, the Directors 25 June 2019
confirm that they consider that the Annual
Report, taken as a whole, is fair, balanced
and understandable and provides the
information necessary for shareholders
to assess the Company’s performance,
business model and strategy. When
arriving at this position the Board was
assisted by a number of processes,
including the following:
– the Annual Report is drafted by
appropriate senior management
with overall co-ordination by the
Chief Financial Officer to ensure
consistency across sections;
– an extensive verification exercise is
undertaken to ensure factual accuracy;
– comprehensive reviews of drafts of
the Report are undertaken by the
Executive Directors and other senior
management; and
a draft is considered by the Audit
Committee prior to consideration
by the Board.

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Strategic report Directors’ report Financial statements Shareholder information

Financial statements

Consolidated income statement

for the 52 weeks ended 27 April 2019

Group 52 weeks to 28 April 2018

Group 52 weeks to 27 April 2019 restated*
Separately Separately
Underlying reported Underlying reported
performance items Total performance items Total
Notes £m £m £m £m £m £m
Revenue 2 386.4 – 386.4 446.3 – 446.3
Cost of sales (176.0) – (176.0) (196.0) – (196.0)
Gross profit 2 210.4 – 210.4 250.3 – 250.3
Administration expenses (209.5) (9.2) (218.7) (245.6) (59.5) (305.1)
Other operating income/(loss) 2.0 1.3 3.3 2.4 (2.3) 0.1

Operating profit/(loss) before depreciation

and amortisation 2.9 (7.9) (5.0) 7.1 (61.8) (54.7)
Depreciation 3 (10.7) – (10.7) (11.0) – (11.0)
Amortisation 3 (0.7) – (0.7) (1.3) – (1.3)

Operating loss 2,3 (8.5) (7.9) (16.4) (5.2) (61.8) (67.0)

Finance costs 6 (8.4) – (8.4) (2.8) – (2.8)
Loss before tax (16.9) (7.9) (24.8) (8.0) (61.8) (69.8)
Tax 7 2.6 0.2 2.8 4.0 2.2 6.2
Loss for the financial period attributable to
equity shareholders of the Company (14.3) (7.7) (22.0) (4.0) (59.6) (63.6)

Basic loss per share (pence) 9 (5.1) (7.9) (5.8) (93.6)

Diluted loss per share (pence) 9 (7.9) (93.6)
Note:

* The prior year was restated as a result of the adoption of IFRS 15 – see note 33.

Consolidated statement
of comprehensive income
for the 52 weeks ended 27 April 2019
Group
Group 52 weeks to
52 weeks to 28 April
27 April 2018
2019 Restated
Notes £m £m
Loss for the financial period (22.0) (63.6)

Items that may not be reclassified to the income statement:

Re-measurement of defined benefit plans 22 (0.5) 1.6
Tax on items that may not be reclassified to the income statement 7 0.1 (0.4)
Total items that may not be reclassified to the income statement (0.4) 1.2
Items that may be reclassified to the income statement:
Exchange gains (0.7) 2.4
Total items that may be reclassified to the income statement (0.7) 2.4

Other comprehensive (expense)/income for the period (1.1) 3.6

Total comprehensive expense for the period attributable to equity shareholders
of the Company (23.1) (60.0)

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Financial statements continued

Statements of changes in equity

for the 52 weeks ended 27 April 2019

Capital
Share Share Treasury redemption Translation Merger Retained
capital premium shares reserve reserve reserve earnings Total
Group £m £m £m £m £m £m £m £m
At 29 April 2017 0.7 17.8 (1.6) 0.1 7.6 – 53.4 78.0
IFRS 15 adjustments – see note 33 – – – – – – (10.2) (10.2)
At 29 April 2017 – restated 0.7 17.8 (1.6) 0.1 7.6 – 43.2 67.8
Loss for the period – restated – – – – – – (63.6) (63.6)
Other comprehensive income for the financial period – – – – 2.4 – 1.2 3.6
Total comprehensive income/(expense) for the financial period – – – – 2.4 – (62.4) (60.0)
Issue of new shares – 1.3 – – – – – 1.3
Transfer of treasury shares to participants – – 0.2 – – – (0.2) –
Share based payments and related tax – – – – – – 0.5 0.5
At 28 April 2018 – restated 0.7 19.1 (1.4) 0.1 10.0 – (18.9) 9.6
Loss for the period – – – – – – (22.0) (22.0)
Other comprehensive expense for the financial period – – – – (0.7) – (0.4) (1.1)
Total comprehensive expense for the financial period – – – – (0.7) – (22.4) (23.1)
Issue of new shares 2.3 – – – – 60.4 – 62.7
Transfer from merger reserve – – – – – (60.4) 60.4 –
Share based payments and related tax – – – – – – 0.5 0.5
At 27 April 2019 3.0 19.1 (1.4) 0.1 9.3 – 19.6 49.7

Capital
Share Share Treasury redemption Translation Merger Retained
capital premium shares reserve reserve reserve earnings Total
Company £m £m £m £m £m £m £m £m
At 29 April 2017 0.7 17.8 (1.6) 0.1 (0.3) – 31.2 47.9
IFRS 15 adjustments see note 33 – – – – – – (7.2) (7.2)
At 29 April 2017 – restated 0.7 17.8 (1.6) 0.1 (0.3) – 24.0 40.7
Loss for the period – restated – – – – – – (52.2) (52.2)
Other comprehensive income for the financial period – – – – 0.2 – 1.2 1.4
Total comprehensive income/(expense) for the financial period – – – – 0.2 – (51.0) (50.8)
Issue of new shares – 1.3 – – – – – 1.3
Transfer of treasury shares to participants – – 0.2 – – – (0.2) –
Share based payments and related tax – – – – – – 0.5 0.5
At 28 April 2018 – restated 0.7 19.1 (1.4) 0.1 (0.1) – (26.7) (8.3)
Loss for the period – – – – – – (20.1) (20.1)
Other comprehensive income/(expense) for the financial period – – – – 0.1 – (0.4) (0.3)
Total comprehensive income/(expense) for the financial period – – – – 0.1 – (20.5) (20.4)
Issue of new shares 2.3 – – – – 60.4 – 62.7
Transfer from merger reserve – – – – – (60.4) 60.4 –
Share based payments and related tax – – – – – – 0.5 0.5
At 27 April 2019 3.0 19.1 (1.4) 0.1 – – 13.7 34.5

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Balance sheets
as at 27 April 2019

Group Company Group Company

Group 2018 Company 2018 2017 2017
2019 restated 2019 restated restated restated
Notes £m £m £m £m £m £m
Assets
Non-current assets
Intangible assets 10 29.6 27.0 8.0 5.2 57.2 27.8
Property, plant and equipment 11 88.9 98.7 55.0 62.7 102.0 67.6
Investment property 12 10.3 10.5 1.4 1.4 15.3 2.3
Investment in subsidiary undertakings 13 – – 15.7 15.7 – 15.7
Deferred tax assets 21 0.9 2.3 0.9 – 2.3 –
Trade and other receivables 15 0.5 0.7 0.4 0.7 0.4 0.4
Total non-current assets 130.2 139.2 81.4 85.7 177.2 113.8

Current assets
Inventories 43.7 45.7 33.9 37.2 51.8 43.6
Trade and other receivables 15 12.9 16.7 50.0 55.5 17.4 56.8
Cash and cash equivalents 16 15.4 6.6 13.7 4.3 12.5 9.3
Total current assets 72.0 69.0 97.6 97.0 81.7 109.7

Total assets 202.2 208.2 179.0 182.7 258.9 223.5

Liabilities
Current liabilities
Trade and other payables 17 (69.8) (82.6) (65.9) (79.3) (98.8) (96.9)
Obligations under finance leases 18 (0.1) (0.1) (0.1) (0.1) (0.1) (0.1)
Borrowings and overdrafts 19 (25.5) (57.8) (25.5) (57.8) (20.1) (20.1)
Provisions for liabilities and charges 20 (5.0) (10.6) (5.0) (10.6) – –
Current tax liabilities (1.2) (0.8) (0.8) (0.8) (1.7) (1.7)
Total current liabilities (101.6) (151.9) (97.3) (148.6) (120.7) (118.8)

Non-current liabilities
Trade and other payables 17 (24.3) (28.0) (24.3) (28.0) (34.5) (34.5)
Obligations under finance leases 18 (1.3) (1.7) (0.3) (0.7) (2.1) (1.0)
Borrowings and overdrafts 19 (15.9) – (15.9) – – –
Provisions for liabilities and charges 20 (6.1) (9.1) (6.1) (9.1) (17.5) (17.5)
Deferred tax liabilities 21 (2.7) (7.1) – (3.8) (13.1) (7.8)
Retirement benefit obligations 22 (0.6) (0.8) (0.6) (0.8) (3.2) (3.2)
Total non-current liabilities (50.9) (46.7) (47.2) (42.4) (70.4) (64.0)
Total liabilities (152.5) (198.6) (144.5) (191.0) (191.1) (182.8)
Net assets/(liabilities) 49.7 9.6 34.5 (8.3) 67.8 40.7

Equity
Share capital 24 3.0 0.7 3.0 0.7 0.7 0.7
Share premium 24 19.1 19.1 19.1 19.1 17.8 17.8
Treasury shares 24 (1.4) (1.4) (1.4) (1.4) (1.6) (1.6)
Other reserves 29.0 (8.8) 13.8 (26.7) 50.9 23.8
Total equity attributable to equity shareholders
of the Company 49.7 9.6 34.5 (8.3) 67.8 40.7

The loss for the Company for the period was £20.1m (2018: loss of £52.2m restated).
As required under IAS 8, the material impact of IFRS15 requires the Group to disclose the restated 2017 balance sheet.
Company Registration Number: 2294875.
These financial statements from pages 63 to 107 were approved by the Board of Directors on 25 June 2019 and were signed
on its behalf by:

Wilf Walsh Jeremy Simpson

Directors

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Financial statements continued

Statements of cash flow

for the 52 weeks ended 27 April 2019

Group Company
Group 52 weeks to Company 52 weeks to
52 weeks to 28 April 52 weeks to 28 April
27 April 2018 27 April 2018
2019 restated 2019 restated
Notes £m £m £m £m
Cash flows from operating activities
Loss before tax (24.8) (69.8) (25.2) (56.4)
Adjusted for:
Depreciation and amortisation 2,3 11.4 12.3 8.5 9.6
(Profit)/ loss on property disposals 5 (1.3) 2.3 (1.3) 2.1
Separately reported non-cash items 5 6.3 47.8 5.7 32.7
Separately reported cash items 5 2.4 11.2 2.0 10.9
Share based payments 5,25 0.5 0.5 0.5 0.5
Net finance costs 6 8.4 2.8 8.2 2.6
Operating cash flows before movements in working capital 2.9 7.1 (1.6) 2.0
(Decrease)/increase in inventories (1.1) 6.4 0.3 6.5
Increase/(decrease) in trade and other receivables 3.8 0.4 3.9 (1.9)
Decrease in trade and other payables (17.9) (24.5) (17.3) (23.5)
Net income/(expenditure) on exit of operating leases 0.9 (1.9) 0.9 (1.8)
Restructuring costs (2.4) (2.6) (2.0) (2.4)
Provisions paid (9.6) (5.5) (9.6) (5.5)
Contributions to pension schemes (1.2) (0.9) (1.2) (0.9)
Cash used in operations (24.6) (21.5) (26.6) (27.5)
Interest paid (2.4) (1.8) (2.4) (1.9)
Corporation taxes received/(paid) 0.3 (1.4) 0.6 (1.5)
Net cash used in operating activities (26.7) (24.7) (28.4) (30.9)

Cash flows from investing activities

Purchase of intangible assets (3.9) (4.5) (3.7) (3.0)
Purchase of property, plant and equipment and investment property (4.8) (15.7) (3.1) (10.4)
Proceeds on disposal of property, plant and equipment and investment
property 0.6 0.3 0.6 0.3
Interest received – – 0.2 0.2
Net cash used in investing activities (8.1) (19.9) (6.0) (12.9)

Cash flows from financing activities

Issue of new shares 62.7 – 62.7 –
Repayment of finance lease obligations (0.2) (0.3) (0.1) (0.2)
Movement in borrowings 29,30 (34.5) 32.0 (34.5) 32.0
New loans advanced 29,30 14.9 12.0 14.9 12.0
Net cash generated from financing activities 42.9 43.7 43.0 43.8

Net increase/(decrease) in cash and cash equivalents in the period 29 8.1 (0.9) 8.6 –
Cash and cash equivalents at the beginning of the period 4.8 5.4 2.5 2.2
Exchange differences 29 – 0.3 0.1 0.3
Cash and cash equivalents at the end of the period 16,29 12.9 4.8 11.2 2.5

For the purposes of the statements of cash flow, cash and cash equivalents are reported net of overdrafts repayable on demand.
Overdrafts are excluded from the definition of cash and cash equivalents disclosed in the balance sheets and are included in borrowings
and overdrafts under current liabilities.

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Notes to the financial statements

1. Principal accounting policies
The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies
have been consistently applied to all the periods presented unless otherwise stated.
General information
Carpetright plc (‘the Company’) and its subsidiaries (together, ‘the Group’) are retailers of floorcoverings and beds. The Company is
listed on the London Stock Exchange and incorporated in England and Wales and domiciled in the United Kingdom. The address
of its registered office is Carpetright plc, Purfleet Bypass, Purfleet, Essex, RM19 1TT.
The nature of the Group’s operations and its principal activities are set out on pages 2 to 5 of the Annual report and accounts.
Basis of preparation
The consolidated financial statements of the Group and the Company are drawn up to within seven days of the accounting record date,
being 30 April of each year. The financial period for 2019 represents the 52 weeks ended 27 April 2019. The comparative financial period
for 2018 was 52 weeks ended 28 April 2018.
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs)
and International Financial Reporting Interpretations Committee (IFRS IC) interpretations as adopted by the European Union, together
with those parts of the Companies Act 2006 applicable to companies reporting under IFRS.
The consolidated financial statements have been prepared on the historical cost basis except for pension assets and liabilities and
share based payments which are measured at fair value.
The Company has elected to take the exemption under section 408 of the Companies Act 2006 not to present its income statement
and statement of comprehensive income. The loss for the Company for the period was £20.1m (2018: loss of £52.2m restated).
Going concern
The Group meets its day to day working capital requirements through its bank facilities and a shareholder loan. The principal banking
facility includes a revolving credit facility of £45.0m, a Sterling overdraft of £7.5m and a euro overdraft of €2.4m, all of which are committed
to the end of December 2019. The shareholder loan of £17.25m gross (£15.9m net of fees) is committed to 31 July 2020. The three main
financial covenants within the banking facility assess underlying EBITDA, debt levels and fixed-charge cover. Given the trading performance
since the CVA in June 2018 when covenants were set, headroom against the EBITDA covenant is expected to be the most sensitive both
at present and over the remaining term of the facility.
As part of the Board’s assessment of going concern, trading and working capital requirements, together with the shareholder loan
due for repayment in July 2020, forecasts have been prepared covering a 15 month period from June 2019. These forecasts have been
subjected to a sensitivity testing to reflect market and trading uncertainties, offset by the opportunity to take mitigating action through this
forecast period.
The forecasts have been updated for actual trading to week seven of the current year and the latest view of trading to the end of June
2019. As discussed in the Chief Executive’s report, trading for this period has been encouraging, with positive like-for-like revenues in all
of our businesses. Consumer confidence however remains uncertain, with the British Retail Consortium reporting the biggest decline in
retail sales on record in May 2019. The financial forecasts have been sensitised to take account of future volatility in demand outside the
Group’s control, which in certain downside cases would require us to renegotiate our covenants with lenders. This presents an uncertainty
to the Going Concern assessment, albeit we are confident in a number of mitigating opportunities to help manage this risk.
The most critical assumption when assessing the Group’s Going Concern position is whether it has adequate resources to continue
in operational existence for the foreseeable future, determined to be at least 12 months from the date of approval of these financial
statements. The Group’s principal banking facility falls due within this period, with the shareholder loan falling due within 15 months.
The Group is in active discussions regarding refinancing its borrowings and the Directors are confident of obtaining a suitable long term
arrangement. In the absence of these discussions coming to fruition, the Directors are confident of there being a market for strategic
asset sales that would enable the Group to raise sufficient funds to meet the future cash requirements of the Group and its liquidity needs.
However, without either of these developments, and assuming no additional financing or the successful renegotiation of existing covenants
under the existing banking facility, the Group and Parent Company may be unable to meet their liabilities as they fall due. These conditions
indicate the existence of material uncertainties which may cast significant doubt about the Group’s ability to continue as a going concern.
Whilst recognising the inevitable uncertainties of the current retail market and the Group’s restructuring, the Directors confirm that, after
considering the matters set out above, they have a reasonable expectation that the Company and the Group have adequate resources
to continue in operational existence for a minimum of 15 months following the signing of these financial statements. For this reason, they
continue to adopt the going concern basis in preparing the financial statements.
Further information on the Group’s borrowings is given in note 19.

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Financial statements continued
Notes to the financial statements continued

1. Principal accounting policies continued

Alternative Performance Measures
The Group uses a number of Alternative Performance Measures (APMs) in addition to those reported in accordance with IFRS. The
Directors believe that these APMs, listed below, are important when assessing the underlying financial and operating performance of
the Group and its segments. The following APMs do not have standardised meanings prescribed by IFRS and therefore may not be
directly comparable to similar measures presented by other companies.

Sales
Sales represents amounts payable by customers for goods and services before deducting VAT and other charges.

Underlying performance
Underlying performance, reported separately on the face of the Consolidated income statement, is from continuing operations and before
separately reported items on the face of the Consolidated income statement.

Gross profit ratio

Calculated as gross profit as a percentage of revenue. It is one of the Group’s key performance indicators and is used to assess the
underlying performance of the Group’s businesses.

Separately reported items

Defined below.

Underlying EBITDA
Underlying EBITDA is defined as operating profit before tax, interest, depreciation, amortisation and separately reported items. It is one
of the Group’s key performance indicators and is used to assess the trading performance of Group businesses. Underlying EBITDA is
also used as one of the targets against which the annual bonuses of certain employees are measured.

Underlying operating profit

Underlying operating profit is defined as operating profit before separately reported items. It is one of the Group’s key performance
indicators and is used to assess the trading performance of Group businesses.

Underlying profit before tax

Underlying profit before tax is calculated as the net total of underlying operating profit less total net finance costs associated with underlying
performance. It is one of the Group’s key performance indicators and is used to assess the financial performance of the Group as a whole.

Underlying earnings per share

Underlying earnings per share is calculated by dividing underlying profit before tax less associated income tax costs by the weighted
average number of ordinary shares in issue during the year.

Net debt
Net debt comprises the net total of current and non-current interest-bearing borrowings and finance leases, offset by cash and short-term
deposits. Net debt is a measure of the Group’s net indebtedness to banks and other external financial institutions.

Operating cash flow

This measure is determined by taking underlying operating profit and adding back non-cash items and any movements in working capital.

Disclosure of ‘separately reported items’

IAS 1 ‘Presentation of Financial Statements’ provides no definitive guidance as to the format of the income statement but states key lines
which should be disclosed. It also encourages the disclosure of additional line items and the reordering of items presented on the face of
the income statement when appropriate for a proper understanding of the entity’s financial performance. In accordance with IAS 1, the
Company has adopted a columnar presentation for its Consolidated income statement, to separately identify underlying performance
results, as the Directors consider that this gives a better view of the underlying results of the ongoing business. As part of this presentation
format, the Company has adopted a policy of disclosing separately on the face of its Consolidated income statement, within the column
entitled ‘Separately reported items’, the effect of any components of financial performance for which the Directors consider separate
disclosure would assist both in a better understanding of the financial performance achieved. In its adoption of this policy, the Company
applies a balanced approach to both gains and losses and aims to be both consistent and clear in its accounting and disclosure of
such items.
Both size and the nature and function of the components of income and expense are considered in deciding upon such presentation.
Such items may include, inter alia, the financial effect of separately reported items which occur infrequently, such as major reorganisation
costs, onerous leases and impairments and the taxation impact of the aforementioned separately reported items.

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1. Principal accounting policies continued

New and amended accounting standards adopted by the Group
The following new amendments, which are mandatory for the first time for the 52 weeks ended 27 April 2019, have been applied and
aside from IFRS 15 ‘Revenue from Contracts with Customers’, have not had a material impact on the Group’s and the Company’s
financial results for the 52 weeks ended 27 April 2019:
IFRS 15 ‘Revenue from Contracts with Customers’ – this is discussed in detail in note 33.
IFRS 9 ‘Financial Instruments’ (effective for the Group’s 2018/19 financial year).
IFRS 9 ‘Financial Instruments’ is a new standard which enhances the ability of investors and other users of financial information to understand
the accounting for financial assets and reduces complexity. As the Group’s financial assets are immaterial, the adoption of IFRS 9 has no
material impact on the Group’s financial statements and subsequently prior year comparatives have not been restated. The Group has
determined that the provision arising from the expected credit losses on financial assets is in line with the levels of provisions already held.
There are no other new or amended standards effective during the period that have had a material impact on the Group’s financial
statements.
New standards and interpretations not yet adopted
A number of new standards, interpretations and amendments to existing standards were issued but not yet effective and have not been
applied in preparing these consolidated financial statements. These include:
IFRS 16 ‘Leases’ (effective for the Group’s 2019/20 financial year).
Given the potential significance of the introduction of this standard, the Group has established a working group to identify the impact and
potential risks associated with its implementation. This is discussed in detail in note 33.

Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company
(its subsidiaries). Control is achieved where the Company has the power to govern the financial and operating policies of a subsidiary
so as to obtain benefits from its activities.
The results of subsidiaries acquired or disposed of during the period are included in the consolidated income statement from the
effective date of acquisition or up to the effective date of disposal, as appropriate. Where necessary, adjustments are made to the
financial statements of subsidiaries to bring the accounting policies used into line with those used by the Group. All intra-group
transactions, balances, income and expenses are eliminated on consolidation.

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Financial statements continued
Notes to the financial statements continued

1. Principal accounting policies continued

Exchange differences
The consolidated financial statements are presented in pounds Sterling, which is the Company’s functional and presentation currency.
Transactions in foreign currencies, which are those other than the functional currency of an entity, are recorded at the opening rate for
the month in which the transaction occurs which is used as a reasonable approximation to the rate at the transaction date. Monetary
assets and liabilities denominated in foreign currencies are translated at the rates ruling at the balance sheet date. Resulting exchange
gains or losses are recognised in the income statement for the period, except where they are part of a net foreign investment hedge,
when they are recognised in equity. The Group had no foreign exchange hedge contracts in place at period end.
On consolidation, the assets and liabilities of the Group’s foreign operations are translated at the rate of exchange ruling at the balance
sheet date. Income and expenses of foreign operations are translated at the average rate during the period. Differences on translation
are recognised as a separate component in other comprehensive income. On disposal of a foreign operation, the cumulative exchange
differences for that operation are recognised in the income statement as part of the profit or loss on disposal.
Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of that operation
and are translated at the rate ruling at the balance sheet date and are recognised in other comprehensive income.
Segment reporting
Segmental information is presented using a ‘management approach’ on the same basis as that used for internal reporting to the
Chief Operating Decision Maker. The Chief Operating Decision Maker, who is responsible for resource allocation and assessing
performance of the operating segments, has been identified as the Board of Directors.
Revenue
Revenue: We evaluate our Revenue with customers based on the five-step model under IFRS 15: ‘Revenue from Contracts with
Customers’: (1) identify the contract with the customer; (2) identify the performance obligations in the contract; (3) determine the
transaction price; (4) allocate the transaction price to separate performance obligations; and (5) recognise revenues when (or as)
each performance obligation is satisfied.
Revenue from the sale of goods and services is recognised when the group has satisfied its performance obligations by transferring
control of the goods or service to the customer. Control is considered to be transferred at the point of delivery. When the Group has
received payment and has a commitment to provide goods and services, the value of the goods or service is recognised as “contract
liabilities”. Contract Liabilities are realised and fulfilled within 12 months.
Revenue is shown net of discounts, sales returns, charges for the provision of interest free credit and VAT or other sales related taxes.
Revenue is measured based on the consideration specified in a contract with a customer and excludes amounts collected on behalf
of third parties.
Share based payments
The Group issues equity-settled share based payments to certain employees, the terms of these payments do not contain any market
conditions. The fair value of the employee services received in exchange for the grant of options is recognised as an expense. The value
of the charge is adjusted to reflect expected and actual levels of options vesting. The total amount to be expensed over the vesting period
is determined by reference to the fair value of the options granted, excluding the impact of any service and performance conditions that
are included in the assumptions about the number of options which are expected to become exercisable. At each balance sheet date,
the Group revises its estimates of the number of options which are expected to become exercisable. It recognises the impact of the
revision of original estimates, if any, in the income statement and a corresponding adjustment to equity is made.
Treasury shares
Own equity instruments that are reacquired (Treasury shares) are recognised at cost and deducted from equity. No gain or loss is
recognised in profit or loss on the purchase, sale, issue or cancellation of the Group’s own equity instruments. Any difference between
the carrying amount and the consideration, if reissued, is recognised in the share premium reserve.
Other operating income
Rental income earned on investment property is recognised in other operating income, in accordance with the substance of the relevant
rental agreements.

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1. Principal accounting policies continued

Tax
Current tax liabilities are measured at the amount expected to be paid, based on tax rates and laws that are enacted or substantively
enacted at the balance sheet date in the countries where the Company and its subsidiaries operate and generate taxable income.
Deferred tax expected to be payable or recoverable on differences at the balance sheet date between the tax bases of assets and
liabilities and their carrying amounts for financial reporting purposes is accounted for using the balance sheet liability method. Deferred
tax liabilities are generally recognised for all taxable temporary differences, and deferred tax assets are recognised to the extent that it
is probable that taxable profits will be available against which deductible temporary differences can be utilised.
Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than
in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.
Deferred tax is calculated at the rates of tax that are expected to apply when the asset or liability is settled, based on tax rates that
have been enacted or substantively enacted by the balance sheet date, and is not discounted.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset the current tax assets against the current
tax liabilities and it is the intention to settle these on a net basis.
Tax is charged or credited directly to other comprehensive income if it relates to items that are credited or charged to equity; otherwise,
it is recognised in the income statement.
Dividends
Dividend distribution to the Company’s shareholders is recognised as a liability in the financial statements in the period in which the
dividends are approved by the Company’s shareholders or, in the case of interim dividends, paid.
Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets of the
acquired entity. For the purposes of impairment, goodwill is allocated to each cash-generating unit (or groups of cash-generating units)
that is expected to benefit from the business combination. Goodwill is not amortised, but is reviewed for impairment at least annually or
when there is an indication of impairment. Any impairment is recognised immediately in the income statement and is not subsequently
reversed. On disposal of a subsidiary the attributable amount of goodwill is included in the determination of the profit or loss on disposal.
Impairment
Assets that have an indefinite useful life, for example goodwill, are not subject to amortisation and are tested at least annually for impairment
or when there is an indication of impairment. Assets that are subject to amortisation and depreciation are reviewed for indications of
impairment at each balance sheet date. If there is an indication of impairment, the recoverable amount of either the asset or the cash-
generating unit to which it belongs is estimated. Cash-generating units are used where an individual asset does not generate cash flows
which are independent of other assets. The recoverable amount of a non-financial asset is the higher of its fair value less costs to sell and
its value in use. Value in use is the present value of the future cash flows expected to be derived from the asset or cash-generating unit.
An impairment loss is recognised in the income statement whenever the carrying amount of an asset or cash-generating unit exceeds
its recoverable amount. Non-financial assets other than goodwill that suffer impairment are reviewed for possible reversal of impairment
at each reporting date.
Other intangible assets
Purchased brand names and other intangible assets are capitalised at cost. Acquired software licences and software development
costs are capitalised on the basis of the costs incurred to acquire and bring into use the specific software.
Amortisation of intangible assets is calculated to write off the cost of the asset, on a straight-line basis, over its expected useful life.
The expected useful lives generally applicable are:
Brands 20 years
Computer software 5 to 10 years
Property, plant and equipment
Property, plant and equipment is shown at cost less accumulated depreciation and any provisions for impairment in value.
Depreciation is provided to write down the cost of property, plant and equipment, on a straight-line basis, to their estimated residual
values over their estimated useful lives. Freehold land is not depreciated. The estimated useful lives and residual values of assets
are reviewed annually.
The estimated useful lives by asset category that are generally applicable are:
Freehold and long leasehold buildings 50 years
Short leasehold buildings The shorter of the period of the lease and the estimated useful life
Fixtures and fittings 3 to 15 years, except for fixed racking which is depreciated over 25 years
Other plant and machinery 5 to 10 years

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Financial statements continued
Notes to the financial statements continued

1. Principal accounting policies continued

Borrowing costs
Gross interest costs incurred on the financing of major projects are capitalised until the time that they are available for use. Unless a specific
borrowing is taken out to finance the asset, interest is capitalised using the weighted average interest rate of all non-specific borrowings.
Where a specific borrowing is taken out to finance the asset, interest is capitalised at the rate applicable to that borrowing.
Investment property
Property that is held to earn rental income and for capital appreciation is separately disclosed as investment property. Investment property
is carried at depreciated historical cost. Depreciation rates and useful lives of investment property are the same as those for property, plant
and equipment.
Leasing commitments
Leases are classified as finance leases where the terms of the lease transfer substantially all the risks and rewards of ownership to the
Group. All other leases are classified as operating leases.
Assets used by the Group which have been funded through finance leases are capitalised in property, plant and equipment and the
resulting lease obligations are included in payables. The assets are depreciated over the shorter of their useful lives and the period
of the lease. The interest element of the rental obligations is charged to the income statement over the period of the lease and
represents a constant proportion of the balance of capital repayments outstanding.
Rentals payable under operating leases are charged to income on a straight line basis over the period of the lease. Premiums payable,
rent free periods and contributions receivable on entering an operating lease are charged or credited to the income statement on a straight
line basis over the lease term. In the event of an amendment to the lease term, the period of recognition for any balance outstanding will be
adjusted accordingly.
Investment in subsidiaries
The Company’s investment in subsidiary undertakings is recognised at cost and is accounted for net of impairment losses. Income from
investments is recognised in the income statement to the extent that post acquisition profits are received. Distributions of pre-acquisition
profits reduce the cost of the investment.
Inventories
Inventories are valued at the lower of weighted average cost and net realisable value. Net realisable value is based on estimated selling
prices less further costs to be incurred to disposal. Provisions are made for obsolescence, mark down and shrinkage based on actual
losses, ageing of inventories and sales trends.
Rebates receivable from suppliers
Rebates earned by the Group take the form of volume based rebates, for attaining specific purchase targets, with individual suppliers.
These agreements normally cover the financial period. Agreements that cover more than one financial period are recognised in the
period in which the rebate is earned and are credited to the carrying value of inventory to which they relate.
The Group also receives discounts/rebates from certain suppliers for one-off, targeted marketing and promotional events. These
rebates are recognised in the period in which the promotional activity is held.
Trade receivables and payables
Trade receivables and payables are initially recognised at fair value and subsequently adjusted to the amount receivable or payable.
Receivables are stated net of a provision for impairment.
Cash and cash equivalents
Cash and cash equivalents comprise cash in hand, cash at bank, deposits repayable on demand, highly liquid investments and sums in
transit receivable within 30 days from our credit card and Interest Free Credit providers. For the purposes of the statements of cash flow,
cash and cash equivalents also includes bank overdrafts, which are shown within borrowings and overdrafts in current liabilities on the
balance sheet.
Bank loans and overdrafts
Bank loans and overdrafts are initially recognised at fair value less directly attributable transaction costs and are subsequently measured
at amortised cost using the effective interest rate model.
Provisions
A provision is recognised where the Group has a legal or constructive obligation as a result of a past event and it is probable that an
outflow of economic benefits will be required to settle the obligation. Provisions are calculated on a discounted basis when appropriate.
A provision for vacant properties and onerous leases is recognised when the expected benefits to be derived by the Group from a contract
are lower than the unavoidable cost of meeting its obligations under the contract. The provision is measured at the present value of the
lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract. Before a provision is
established, the Group recognises any impairment losses on the assets associated with that contract.

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1. Principal accounting policies continued

Retirement benefit obligation
The Group operates defined benefit and defined contribution schemes and also participates in a multi-employer pension scheme
in respect of its employees in the Netherlands. The assets and liabilities of all schemes are held separately from those of the Group.
The Group is unable to identify its share of the assets and liabilities of the multi-employer scheme and, therefore, accounts for this
scheme as a defined contribution scheme.
The cost of providing benefits under the defined benefit schemes is determined using the projected unit credit method, with actuarial
valuations being carried out at each balance sheet date. The net retirement benefit obligation recognised in the balance sheet represents
the present value of the defined benefit obligation less the fair value of the scheme assets at the balance sheet date.
The Group does not recognise any scheme surpluses, unless it has an unconditional right to a refund or reductions to future contributions.
Actuarial gains and losses are recognised in full, directly in equity in the period in which they occur and are presented in other
comprehensive income. Other income and expenses associated with the defined benefit scheme are recognised in the income
statement. The pension cost of defined contribution schemes is charged in the income statement as incurred.
Restatement
The financial statements have been restated following the adoption of IFRS 15 – see note 33 for further details. No restatement were
required for the adoption of IFRS 9.
Critical estimates and judgments
The preparation of consolidated financial statements under IFRS requires the Group to make estimates and assumptions that affect the
application of policies and reported amounts. Estimates and judgments are continually evaluated and are based on historical experience
and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Actual results may
differ from these estimates. The estimates and assumptions, which have a significant risk of causing a material adjustment to the carrying
amount of assets and liabilities within the next financial period, are discussed below:
Judgments
Impairment of assets
Property, plant and equipment, investment property and other intangible assets are reviewed for impairment if events or changes in
circumstances indicate that the carrying amount may not be recoverable. When a review for impairment is conducted, the recoverable
amount of an asset or cash-generating unit is determined based on the higher of fair value less costs to sell, and value in use calculations
prepared on the basis of management’s assumptions and estimates. The use of this method requires the estimation of future cash flows
expected to arise from the continuing operation of the cash-generating unit and the choice of a suitable discount rate in order to calculate
the present value. Actual outcomes could vary significantly from these estimates.
Onerous leases
The Group carries an onerous lease provision which recognises the liabilities associated with lease contracts of closed stores and
those that are projected to close. The provision is based on a review of the lease contracts and management’s estimate of the timings
to exit the lease. The Group has also reviewed any trading loss-making stores and provided for the onerous elements of these leases.
These estimates are based upon available information and knowledge of the property market. The ultimate costs to be incurred in this
regard may vary from the estimates. Recognition of onerous lease provisions is made over the remaining term of a lease and revised
accordingly where those lease terms change
Going concern
Management considers going concern to be a matter of critical judgment. Please refer to pages 22 and 34.
Estimates
Retirement benefits
The present value of the defined benefit liabilities recognised in the balance sheet is dependent on the interest rates of high quality
corporate bonds. The net financing charge is dependent on both the interest rates of high quality corporate bonds and the assumed
investment returns on scheme assets. Other key assumptions for pension obligations, including mortality rates, are based in part on
current market conditions.

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Financial statements continued
Notes to the financial statements continued

2. Segmental analysis
The Group’s operating segments are determined on the basis of information provided to the Chief Operating Decision Maker – the Board
of Directors – to review performance and make decisions. The reporting segments are:
UK; and
Rest of Europe (comprising Belgium, the Netherlands and Republic of Ireland).
The reportable operating segments derive their revenue primarily from the retailing of floorcoverings and beds. Central costs of the Group
are incurred principally in the UK. As such, these costs are included within the UK segment. Sales between segments are carried out at
arm’s length. Segment information provided to the Board of Directors for the reportable segments for the 52 weeks ended 27 April 2019
are shown below.
The Group has not presented disaggregation of revenue, as the Group has a main predominant product group – flooring – which is best
disclosed through geographical markets.
52 weeks to 28 April 2018
52 weeks to 27 April 2019 restated
UK Europe Group UK Europe Group
£m £m £m £m £m £m
Gross revenue 369.1 102.3 471.4 445.8 100.5 546.3
Inter-segment revenue (1.5) – (1.5) (2.0) – (2.0)
Gross revenue 367.6 102.3 469.9 443.8 100.5 544.3
Less cost of interest free credit (5.7) – (5.7) (7.3) – (7.3)
Less VAT and other sales tax (60.9) (16.9) (77.8) (74.0) (16.7) (90.7)
Revenue from external customers 301.0 85.4 386.4 362.5 83.8 446.3
Gross profit 168.1 42.3 210.4 206.6 43.7 250.3
Underlying operating (loss)/profit (9.1) 0.6 (8.5) (6.3) 1.1 (5.2)
Separately reported items (7.5) (0.4) (7.9) (49.7) (12.1) (61.8)
Operating (loss)/profit (16.6) 0.2 (16.4) (56.0) (11.0) (67.0)
Finance costs (8.3) (0.1) (8.4) (2.8) – (2.8)
(Loss)/profit before tax (24.9) 0.1 (24.8) (58.8) (11.0) (69.8)
Tax 5.2 (2.4) 2.8 3.4 2.8 6.2
Loss for the financial period (19.7) (2.3) (22.0) (55.4) (8.2) (63.6)

Segment assets:
Segment assets 163.8 85.7 249.5 165.1 90.6 255.7
Inter-segment balances (31.0) (16.3) (47.3) (29.5) (18.0) (47.5)
Balance sheet total assets 132.8 69.4 202.2 135.6 72.6 208.2
Segment liabilities:
Segment liabilities (149.7) (50.1) (199.8) (194.3) (51.8) (246.1)
Inter-segment balances 16.3 31.0 47.3 18.0 29.5 47.5
Balance sheet total liabilities (133.4) (19.1) (152.5) (176.3) (22.3) (198.6)

Other segmental items:

Depreciation and amortisation 8.7 2.7 11.4 9.7 2.6 12.3
Additions to non-current assets 6.3 1.7 8.0 12.7 5.8 18.5

Carpetright plc is domiciled in the UK. The Group’s revenue from external customers in the UK is £301.0m (2018: £362.5m) and the total
revenue from external customers from other countries is £85.4m (2018: £83.8m). The total of non-current assets (other than financial
instruments and deferred tax assets) located in the UK is £106.2m (2018: £110.5m) and the total of those located in other countries is
£70.4m (2018: £73.8m).
Carpetright’s trade has historically shown no distinct pattern of seasonality, with trade cycles more closely following macro-economic indicators.

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3. Operating (loss)/profit, analysis of costs by nature

Operating (loss)/profit is stated after (crediting)/charging:
Group Group
2019 2018
Notes £m £m
Rental income earned on investment property (1.6) (2.1)
Cost of inventories recognised as an expense in cost of sales 138.7 153.9
Operating lease rentals:
Lease payments in respect of land and buildings 63.0 80.2
Lease payments in respect of plant and machinery 2.3 2.5
Other lease items (lease incentives and rent-free credits) (6.5) (4.0)
Sublease rental income (1.1) (1.1)
Auditors’ remuneration:
Audit of the Parent Company’s consolidated financial statements 0.3 0.2
Audit of the subsidiary companies’ financial statements 0.1 0.1
Non audit fees 0.3 0.6
Staff costs 4 90.0 102.0
Impairment of assets 5 1.8 10.8
Impairment of goodwill 5,10 – 34.7
Amortisation of intangible assets 10 0.7 1.3
Depreciation of property, plant and equipment:
Owned assets 11 10.4 10.5
Under finance leases 11 0.2 0.2
Depreciation of investment property 12 0.1 0.3

Non audit fees in the period were £250k (2018: £551k). These fees are explained on page 35 of the Audit Committee report.

4. Staff costs
The average number of persons (full-time equivalents) employed by the Group (including Directors) was as follows:
Group Group Company Company
2019 2018 2019 2018
Number Number Number Number
Stores 2,195 2,539 1,786 2,120
Store support office and distribution centre 367 405 307 344
2,562 2,944 2,093 2,464

The aggregate employment costs of employees and Directors were as follows:

Group Group Company Company
2019 2018 2019 2018
Notes £m £m £m £m
Wages and salaries (including short-term employee benefits) 78.3 89.4 62.2 73.3
Social security costs 8.5 9.7 5.5 6.8
Post-employment benefits – defined contribution 2.7 2.4 1.4 1.2
Share based payments 5, 25 0.5 0.5 0.5 0.5
90.0 102.0 69.6 81.8

Wages and salaries include short-term employee benefits as defined in IAS 19, with the exception of costs associated with the Group’s
pension schemes. Post-employment benefits include costs associated with the Group’s pension schemes (with the exception of net
interest costs and the actuarial gain on the defined benefit pension schemes) and are included in administration expenses. Share based
payments comprise the cost of awards in respect of employee share schemes in accordance with IFRS 2. These costs are explained
in note 25.

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Financial statements continued
Notes to the financial statements continued

4. Staff costs continued

The Group considers key management to be the Executive Directors only. The employment costs of key management were as follows:
Group Group
2019 2018
£m £m
Wages and salaries (including short-term employee benefits) 1.0 0.8
Social security costs 0.2 0.2
Post-employment benefits – defined contribution 0.2 0.2
Share based payments – 0.1
1.4 1.3

Details of these plans, share options and other Directors’ remuneration are disclosed in the Directors’ remuneration report on pages
36 to 59.

5. Separately reported items

In order to provide shareholders with additional insight into the underlying performance of the business, items recognised in reported profit
or loss before tax which, by virtue of their size and/or nature, do not reflect the Group’s underlying performance, have been excluded from
the Group’s underlying results.
Group Group
2019 2018
Notes £m £m
Underlying loss before tax (16.9) (8.0)

Property disposal costs

Profit/(loss) on disposal of properties 1.3 (1.7)
Store refurbishment – asset write-offs – (0.6)
1.3 (2.3)

Other non-cash items

Goodwill impairment 10 – (34.7)
Freehold and investment property impairment (0.8) (5.1)
Store asset impairment (1.0) (5.7)
Net onerous lease charge 20 (0.9) (2.3)
(2.7) (47.8)

Share based payments 25 (0.5) (0.5)

Restructuring costs
Redundancy provisions 20 0.5 (3.8)
Store closure costs associated with the CVA 20 – (2.0)
Professional fees – (6.4)
CVA rent guarantee liability (0.6) –
Release of fixed rent accruals and lease incentives – 2.8
(0.1) (9.4)

ERP dual running costs (2.0) (1.5)

Pension administration costs (0.9) (0.3)
Stock provisions (3.0) –
(5.9) (1.8)

Total separately reported items (7.9) (61.8)

Statutory loss before tax (24.8) (69.8)

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5. Separately reported items continued

Non-cash items
The Group performed an impairment review over its goodwill, freehold properties and store fixed assets in accordance with IAS 36,
following recent trigger events.
The Group reviewed its goodwill balances and determined that no impairment was required (2018: charge of £34.7m).
The Group sold three properties shortly after year end, in Salford, Devizes and Newtonards, as Board determined the sale would be
value accretive for shareholders when assessing the implied yield against the Group’s cost of capital. This raised £2.6m in cash proceeds,
which was transferred to a reserved account as required by the Group’s lenders. The associated loss on sale was £0.8m and accordingly,
an impairment made in the period (2018: £5.1m). The Group continues to review its property portfolio and will consider further disposals
where the Board believes there is the opportunity to realise value for shareholders.
Store and other fixed assets of £1.0m (2018: £5.7m) were impaired as a result of a review of potential closures and transfers arising from
the CVA process, together with a small sum relating to legacy systems we will be replacing as part of the implementation of D365 during
FY20. Following the collapse of our former tenant in March 2019, an assigned lease reverted back to the Group and an onerous lease
reserve of £0.9m made accordingly. Further details of contingent liabilities associated with such risks are discussed in note 28.
Ahead of the introduction of D365, we performed a data migration exercise, which included cleansing historic records. As part of this
exercise, differences were identified between stock records, predominantly relates to the Purfleet warehouse. To correct this and ensure
a cleaner migration to D365, a sum of £2.3m was provided against these stock balances. In addition following a review of the inventory
levels, additional provisions totalling £0.7m were established, principally against hard flooring.
Restructuring costs
Restructuring provisions totalling £5.8m were recognised at 28 April 2018 reflecting the expected cost of the Group’s restructuring,
including redundancy, legal and logistical costs. During the period £0.5m of the provision was released, reflecting the reassessed total
cost of implementing the restructuring.
As part of the CVA, the Group is obliged to provide a fund of £0.6m against which creditors may claim for losses associated with the
process. We felt it prudent to reserve for this sum, in light of the determination of successful claims being in the hands of the CVA
administrator and therefore outside the control of the Group.
Profit on disposal of properties
A net gain of £1.3m was made on the disposal of properties during the year (2018: £1.7m loss), principally from the landlord exercising
an option at the Lewisham store.
Strategy
The Group has continued to incur dual running costs as it replaces legacy IT systems and transitions to D365, which is expected to be
completed in FY20. Historically, these types of cost would have been capital spend, but with the switch to cloud-based software services,
these are classified as operating expenditure. Due to the quantum and one-off nature of the project, these costs have been reported as
separately reported items and amounted to £2.0m in the period (2018: £1.5m).
Other
In light of the variable nature of employee share based payments, these have been classified as separately reported items. This also allows
for greater visibility of these charges in the financial statements. A charge of £0.5m was incurred during the period (2018: £0.5m).
A sum of £0.9m (2018: £0.3m) was incurred in payments made to the Group’s legacy defined benefit pension schemes, including a sum
of £0.4m relating to Guaranteed Minimum Pension, ahead of formal government direction on the subject. Further details are provided in
note 22.
The tax impact of the separately reported items is a credit of £0.2m (2018: credit of £2.2m).
The total cash impact of separately reported items is an outflow of £1.0m (2018: outflow of £12.8m).

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Financial statements continued
Notes to the financial statements continued

6. Finance costs
Group Group
2019 2018
Notes £m £m
Interest on borrowings and overdrafts (1.6) (1.5)
Fees amortisation (3.2) (1.0)
Interest on obligations under finance leases (0.1) (0.2)
Other interest (3.5) –
Net interest on pension scheme obligations 22 – (0.1)
Finance costs (8.4) (2.8)

Net finance charges for the period increased by £5.6m to £8.4m (2018: £2.8m), comprising:
£3.3m relating to the shareholder loan.
£0.2m to a higher rate of interest payable on bank debt.
Offset by £0.1m lower finance lease charges.
The remaining £2.2m increase relates to fees associated with:
£1.0m loan fee amortisation relating to the shareholder loan repaid on 13 June 2018 (fees of £1.5m charged in the period).
£1.0m in loan fee amortisation relating to the £17.25m shareholder loan put in place on 11 May 2018.
£0.2m relating to the extension in May 2018 of the Group’s revolving credit and overdraft facilities to 31 December 2019.

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7. Tax
Group
Group 2018
(i) Analysis of the (credit)/charge in the period 2019 restated
Notes £m £m
UK current tax (0.5) 0.2
Overseas current tax 0.7 0.2
Total current tax 0.2 0.4
UK deferred tax (4.7) (4.4)
Overseas deferred tax 1.7 (2.2)
Total deferred tax 21 (3.0) (6.6)
Total tax credit in the income statement (2.8) (6.2)

Group Group
(ii) Reconciliation of loss before tax to total tax 2019 2018
£m £m
Loss before tax (24.8) (69.8)
Tax credit at UK corporation tax rate of 19% (2018: 19%) (4.7) (13.3)
Adjusted for the effects of:
Overseas tax rates – (0.6)
Deferred tax impact of a fall in tax rates – 0.2
Non-qualifying depreciation 0.4 0.4
Items not taxed (0.7) 5.7
Losses not recognised/de-recognised 6.5 –
Other permanent differences (0.4) 1.6
Prior year adjustments (3.9) (0.2)
Total tax credit in the income statement (2.8) (6.2)

The tax credit for the year includes a credit of £0.2m in respect of separately reported items, (2018: credit of £2.2m).
The weighted average annual effective tax rate for the period is 10.9% credit (2018: 9.0% credit).
Group Group
(iii) Tax on items taken directly to or transferred from equity 2019 2018
£m £m
Deferred tax on actuarial losses recognised in other comprehensive income (0.1) 0.4
Total tax recognised in equity (0.1) 0.4

8. Dividends
The Directors decided that no final dividend will be paid (2018: No final dividend paid). This results in no dividend in the period to 27 April
2019 (2018: No dividend paid).

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Financial statements continued
Notes to the financial statements continued

9. (Loss)/earnings per share

Basic (loss)/earnings per share is calculated by dividing the (loss)/earnings attributable to ordinary shareholders by the weighted average
number of ordinary shares in issue during the period, excluding those held by Equity Trust (Jersey) Limited (see note 25) which are treated
as cancelled.
In order to compute diluted (loss)/earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume
conversion of all potentially dilutive ordinary shares. Those share options granted to employees and Executive Directors where the exercise
price is less than the average market price of the Company’s ordinary shares during the period represent potentially dilutive ordinary shares.
52 weeks to 27 April 2019 52 weeks to 28 April 2018 – restated
Weighted Weighted
average average
number of Loss number of Loss
Loss shares per share Loss shares per share
£m Millions Pence £m Millions Pence
Basic loss per share (22.0) 277.4 (7.9) (63.6) 67.9 (93.6)
Effect of dilutive share options – – – – – –
Diluted loss per share (22.0) 277.4 (7.9) (63.6) 67.9 (93.6)

The Group has share options and awards that are potentially dilutive. However, as the Group has made a loss in the period and as
required by IAS 33 the Group’s diluted EPS is the same as the basic EPS.
The Directors have presented an additional measure of (loss)/earnings per share based on underlying earnings. This is in accordance
with the practice adopted by many major retailers. Underlying earnings is defined as profit/(loss) excluding separately reported items and
related tax.
Reconciliation of (loss)/earnings per share excluding post tax (loss)/profit on separately reported items
52 weeks to 27 April 2019 52 weeks to 28 April 2018 – restated
Weighted Weighted
average (Loss)/ average (loss)/
(Loss)/ number of earnings (Loss)/ number of earnings
earnings shares per share earnings shares per share
£m Millions Pence £m Millions Pence
Basic loss per share (22.0) 277.4 (7.9) (63.6) 67.9 (93.6)
Adjusted for the effect of separately reported items:
Separately reported items 7.9 – 2.9 61.8 – 91.0
Tax thereon (0.2) – (0.1) (2.2) – (3.2)
Underlying loss per share (14.3) 277.4 (5.1) (4.0) 67.9 (5.8)

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10. Intangible assets

Computer
Goodwill software Brands Total
Group £m £m £m £m
Cost:
At 29 April 2017 54.1 22.2 0.1 76.4
Exchange differences 0.9 – – 0.9
Additions – 4.5 – 4.5
Transfer from property, plant and equipment – 0.5 – 0.5
Disposals – (2.0) – (2.0)
At 28 April 2018 55.0 25.2 0.1 80.3
Exchange differences (0.3) (0.2) – (0.5)
Additions – 3.9 – 3.9
Disposals – (0.6) – (0.6)
At 27 April 2019 54.7 28.3 0.1 83.1

Accumulated amortisation and impairment:

At 29 April 2017 0.5 18.5 0.1 19.1
Exchange differences – 0.1 – 0.1
Impairment 34.7 0.1 – 34.8
Amortisation – 1.3 – 1.3
Disposals – (2.0) – (2.0)
At 28 April 2018 35.2 18.0 0.1 53.3
Exchange differences (0.1) – – (0.1)
Impairment – 0.2 – 0.2
Amortisation – 0.7 – 0.7
Disposals – (0.6) – (0.6)
At 27 April 2019 35.1 18.3 0.1 53.5

Net book value:

At 27 April 2019 19.6 10.0 – 29.6
At 28 April 2018 19.8 7.2 – 27.0

Goodwill is not amortised. Instead it is subject to an impairment review at each reporting date or more frequently if there is an indication
that it may be impaired. Other intangible assets are amortised and tested for impairment when there is an indication that the asset may
be impaired. Impairments and amortisation charges are recognised in full in administration expenses in the income statement during the
period in which they are identified.
Goodwill is impaired if the carrying amount exceeds the recoverable amount. The recoverable amount is the higher of fair value less costs
to sell and the value in use. In the absence of a recent market transaction, the recoverable amount of the goodwill held by the Group is
determined from value in use calculations.
Management has identified two cash-generating units (CGUs) supporting goodwill which are the UK and Rest of Europe, being the
Netherlands, Belgium and Ireland. In the prior year as a result of a significant fall in market capitalisation and a downturn in trading, goodwill
was tested for impairment. This resulted in £34.7m of Goodwill being impaired to Nil. This comprised £29.8m in the UK and £4.9m in the
Netherlands. The remaining Goodwill of £19.6m relates to the Goodwill on the acquisition of the Dutch operations. This was tested for
impairment in the period and none deemed required, using value in use calculations based on three-year profit projection models and plans
approved by the Board, adjusted for non-cash items and capital expenditure.
The key assumptions used in the cash flow model when assessing European Goodwill balances are:
Pre-tax -discount rate 9.9%
Long term Growth rate 2.0%
The recoverable amount using value in use calculations exceeded the carrying value of Goodwill. The following amendments to the key
assumptions would result in removal of any available headroom.
An increase of 0.4% in the discount rate
A decrease in the long term growth rate to a 1.7% decline

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Financial statements continued
Notes to the financial statements continued

10. Intangible assets continued

Computer
Goodwill software Brands Total
Company £m £m £m £m
Cost:
At 29 April 2017 24.1 22.1 0.1 46.3
Additions – 3.0 – 3.0
Disposals – (2.0) – (2.0)
At 28 April 2018 24.1 23.1 0.1 47.3
Exchange differences – 0.1 – 0.1
Additions – 3.7 – 3.7
Disposals – (0.6) – (0.6)
At 27 April 2019 24.1 26.3 0.1 50.5

Accumulated amortisation and impairment:

At 29 April 2017 – 18.4 0.1 18.5
Exchange differences – 0.1 – 0.1
Impairment 24.1 0.1 – 24.2
Amortisation – 1.3 – 1.3
Disposals – (2.0) – (2.0)
At 28 April 2018 24.1 17.9 0.1 42.1
Exchange differences – 0.1 – 0.1
Impairment – 0.2 – 0.2
Amortisation – 0.7 – 0.7
Disposals – (0.6) – (0.6)
At 27 April 2019 24.1 18.3 0.1 42.5

Net book value:

At 27 April 2019 – 8.0 – 8.0
At 28 April 2018 – 5.2 – 5.2

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11. Property, plant and equipment

Long
Freehold leasehold Short
land and land and leasehold Fixtures Plant and
buildings buildings buildings and fittings machinery Total
Group £m £m £m £m £m £m
Cost:
At 29 April 2017 42.0 16.4 17.1 97.1 36.3 208.9
Exchange differences 0.6 – 0.1 0.6 1.1 2.4
Additions – – 0.8 12.7 0.5 14.0
Transfer 0.9 – – – – 0.9
Transfer to intangible assets – – – – (0.5) (0.5)
Transfer from investment property – – 0.1 – – 0.1
Disposals (0.4) (0.2) (0.4) (9.5) (0.9) (11.4)
At 28 April 2018 43.1 16.2 17.7 100.9 36.5 214.4
Exchange differences (0.4) – – (0.3) (0.4) (1.1)
Additions – – 0.1 3.8 0.2 4.1
Disposals (0.7) (0.6) (2.9) (18.9) (1.8) (24.9)
At 27 April 2019 42.0 15.6 14.9 85.5 34.5 192.5

Accumulated depreciation and impairment:

At 29 April 2017 7.8 5.6 11.5 55.0 27.0 106.9
Exchange differences 0.2 – 0.1 0.4 0.8 1.5
Impairment – 0.2 0.9 4.1 0.4 5.6
Depreciation 0.6 0.2 0.8 8.1 1.0 10.7
Transfer 0.8 – – 0.1 – 0.9
Transfer from investment property – – 0.1 – – 0.1
Disposals (0.1) (0.1) (0.3) (8.4) (1.1) (10.0)
At 28 April 2018 9.3 5.9 13.1 59.3 28.1 115.7
Exchange differences (0.1) (0.2) (0.1) (0.1) (0.3) (0.8)
Impairment 0.8 – 0.1 0.6 0.1 1.6
Depreciation 0.6 0.2 0.9 7.8 1.1 10.6
Disposals (0.3) (0.6) (2.7) (18.1) (1.8) (23.5)
At 27 April 2019 10.3 5.3 11.3 49.5 27.2 103.6

Net book value:

At 27 April 2019 31.7 10.3 3.6 36.0 7.3 88.9
At 28 April 2018 33.8 10.3 4.6 41.6 8.4 98.7

In accordance with IAS 36, assets are reviewed for impairment whenever changes in circumstances indicate that the carrying value may
not be recoverable.
Property, plant and equipment is subject to an impairment review at each reporting date or more frequently if there is an indication of
impairment. During the period, £0.8m of fixtures and fittings and £0.8m in relation to freehold properties have been subject of an
impairment charge.

Assets held under finance leases have the following net book value:
Group Group Company Company
2019 2018 2019 2018
£m £m £m £m
Cost 8.1 8.7 1.3 1.9
Accumulated depreciation and impairment (3.0) (3.4) (1.1) (1.5)
Net book value 5.1 5.3 0.2 0.4

The assets held under finance leases comprise buildings.

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Financial statements continued
Notes to the financial statements continued

11. Property, plant and equipment continued

Long
Freehold leasehold Short
land and land and leasehold Fixtures Plant and
buildings buildings buildings and fittings machinery Total
Company £m £m £m £m £m £m
Cost:
At 29 April 2017 17.8 9.6 16.3 81.6 8.7 134.0
Exchange differences – – 0.1 – – 0.1
Additions – – 0.7 8.9 0.1 9.7
Disposals (0.4) (0.2) (0.4) (8.7) (0.8) (10.5)
At 28 April 2018 17.4 9.4 16.7 81.8 8.0 133.3
Additions – – 0.1 2.4 0.1 2.6
Disposals (0.7) (0.6) (2.8) (14.3) (0.3) (18.7)
At 27 April 2019 16.7 8.8 14.0 69.9 7.8 117.2

Accumulated depreciation and impairment:

At 29 April 2017 3.1 3.7 11.0 43.6 5.0 66.4
Impairment (0.3) 0.2 0.9 4.0 0.4 5.2
Depreciation 0.2 0.1 0.7 6.5 0.7 8.2
Disposals (0.1) (0.1) (0.3) (7.9) (0.8) (9.2)
At 28 April 2018 2.9 3.9 12.3 46.2 5.3 70.6
Exchange differences – (0.1) (0.1) 0.1 0.1 –
Impairment 0.3 – 0.1 0.6 0.1 1.1
Depreciation 0.2 0.1 0.9 5.9 0.7 7.8
Disposals (0.3) (0.6) (2.7) (13.4) (0.3) (17.3)
At 27 April 2019 3.1 3.3 10.5 39.4 5.9 62.2

Net book value:

At 27 April 2019 13.6 5.5 3.5 30.5 1.9 55.0
At 28 April 2018 14.5 5.5 4.4 35.6 2.7 62.7

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12. Investment property

Investment property is carried at depreciated historical cost and is reviewed for impairment at each balance sheet date or when there
is an indication of impairment. The recoverable amount is the higher of fair value less costs to sell and their value in use. The value in
use calculations are based on five-year income forecasts and a terminal value. These cashflows discounted at a pre-tax rate of 9.9%
for properties based in the UK and 8.0% for the properties located in The Netherlands.
Operating expenses attributable to investment properties are incurred directly by tenants under tenant-repairing leases.
Group Company
£m £m
Cost:
At 29 April 2017 20.2 2.9
Exchange differences 0.7 –
Transfer from property, plant and equipment (0.1) –
At 28 April 2018 20.8 2.9
Exchange differences (0.3) –
Transfer from property, plant and equipment – –
At 27 April 2019 20.5 2.9

Accumulated depreciation and impairment:

At 29 April 2017 4.9 0.6
Exchange differences 0.1 –
Impairment 5.1 0.9
Depreciation 0.3 –
Transfer from property, plant and equipment (0.1) –
At 28 April 2018 10.3 1.5
Exchange differences (0.2) –
Depreciation 0.1 –
At 27 April 2019 10.2 1.5

Net book value:

At 27 April 2019 10.3 1.4
At 28 April 2018 10.5 1.4

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Financial statements continued
Notes to the financial statements continued

13. Investment in subsidiary undertakings

All of the Group’s subsidiary undertakings are included in the consolidated accounts. The Group has the following subsidiaries as at
27 April 2019.
Percentage Percentage
of ordinary of ordinary
shares held shares held
Principal directly by indirectly by
Registered office and country of incorporation activity Company Company
Carpetright of London Limited Purfleet Bypass, Purfleet, Essex, England and Wales Holding 100% –
Melford Commercial Properties Limited Purfleet Bypass, Purfleet, Essex, England and Wales Property 100% –
Carpetright (Torquay) Limited Purfleet Bypass, Purfleet, Essex, England and Wales Property 100% –
Pluto Sp. Z.o.o. Ul. Spacerowa 188, 270 Marki, Poland Property 100% –
Carpetland NV Nieuwe Stallesstraat 215, 1620 Drogenbos, Belgium Retail – 100%
Carpetland BV Franciscusdreef 62, 3565 AC Utrecht, Netherlands Retail – 100%
Fontainebleau Vastgoed BV Franciscusdreef 62, 3565 AC Utrecht, Netherlands Property – 100%
Carpetworld Manchester Limited Purfleet Bypass, Purfleet, Essex, England and Wales Property – 100%
Carpet Express Limited Purfleet Bypass, Purfleet, Essex, England and Wales Dormant 100% –
Carpet Depot Ltd Purfleet Bypass, Purfleet, Essex, England and Wales Dormant 100% –
Carpetright Purfleet Limited Purfleet Bypass, Purfleet, Essex, England and Wales Dormant 100% –
Carpetright Purfleet Holdings Limited Purfleet Bypass, Purfleet, Essex, England and Wales Dormant 100% –
Carpetworld Ltd Purfleet Bypass, Purfleet, Essex, England and Wales Dormant 100% –
Carpetright at Home Limited Purfleet Bypass, Purfleet, Essex, England and Wales Dormant 100% –
Carpetright Card Services Limited Purfleet Bypass, Purfleet, Essex, England and Wales Dormant 100% –
Harris Beds Limited Purfleet Bypass, Purfleet, Essex, England and Wales Dormant 100% –
Harris Carpet Limited Purfleet Bypass, Purfleet, Essex, England and Wales Dormant 100% –
Harris Carpets at Home Limited Purfleet Bypass, Purfleet, Essex, England and Wales Dormant 100% –
Harris Carpets Direct Limited Purfleet Bypass, Purfleet, Essex, England and Wales Dormant 100% –
Harris Carpets Direct.com Limited Purfleet Bypass, Purfleet, Essex, England and Wales Dormant 100% –
Harris Furnishing Limited Purfleet Bypass, Purfleet, Essex, England and Wales Dormant 100% –
In-House Carpets Limited Purfleet Bypass, Purfleet, Essex, England and Wales Dormant 100% –
Mays Holdings Limited Purfleet Bypass, Purfleet, Essex, England and Wales Dormant 100% –
Mays Carpets Limited Purfleet Bypass, Purfleet, Essex, England and Wales Dormant 100% –
New Carpet Express Limited Purfleet Bypass, Purfleet, Essex, England and Wales Dormant 100% –
Premier Carpets Limited Purfleet Bypass, Purfleet, Essex, England and Wales Dormant 100% –
Rugright (EU) Limited Purfleet Bypass, Purfleet, Essex, England and Wales Dormant 100% –
Storey Carpets Limited Purfleet Bypass, Purfleet, Essex, England and Wales Dormant 100% –
Sleepright (UK) Limited Purfleet Bypass, Purfleet, Essex, England and Wales Dormant 100% –
Sleepright (EU) Limited Purfleet Bypass, Purfleet, Essex, England and Wales Dormant 100% –
Woodright Limited Purfleet Bypass, Purfleet, Essex, England and Wales Dormant 100% –

The Group operates in the Republic of Ireland where it trades as a branch of Carpetright plc.
2019 2018
Company £m £m
At the beginning of the period 15.7 15.7
At the end of the period 15.7 15.7

The cost of investments before impairments is £16.7m. As at 27 April 2019, accumulated impairments of £1.0m (2018: £1.0m) have been
recognised against the investment in Pluto Sp Z.o.o.

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14. Inventories
Group and Company inventories are held in the form of finished goods for resale. In the period, a provision of £3.0m was made (2018:
£0.2m), resulting in a stock provision of £3.4m (2018: £0.4m) – refer to note 5 for further details.

15. Trade and other receivables

Group Company
Group 2018 Company 2018
2019 restated 2019 restated
£m £m £m £m
Non-current:
Prepayments 0.5 0.7 0.4 0.7
0.5 0.7 0.4 0.7
Current:
Trade receivables 1.7 4.4 0.6 3.9
Less: provision for impairment (0.2) (1.2) (0.1) (1.2)
1.5 3.2 0.5 2.7
Other receivables 1.2 1.3 0.7 0.8
Prepayments and accrued income 10.2 12.2 9.0 10.7
Receivables from subsidiaries – – 39.8 41.3
12.9 16.7 50.0 55.5

Total trade and other receivables 13.4 17.4 50.4 56.2

The Directors consider that the carrying amounts of trade and other receivables approximate to their fair values.

Intercompany loans with UK subsidiaries are interest free and repayable on demand. Intercompany loans with overseas subsidiaries are
liable to interest at 3.25% + Euribor and are repayable on demand.

Provision for impairment

Group Group Company Company
2019 2018 2019 2018
£m £m £m £m
At the beginning of the period (1.2) (0.7) (1.2) (0.7)
Provision for impairment utilised/(charged) during the period 1.0 (0.5) 1.1 (0.5)
At the end of the period (0.2) (1.2) (0.1) (1.2)

Provisions on customer balances are not material and no further information has been presented. A review of other receivables, given their
nature, do not give rise to a credit risk that is material.
The table below shows the financial assets included in trade and other receivables at the balance sheet date:
Group Company
Group 2018 Company 2018
2019 restated 2019 restated
£m £m £m £m
Major insurance companies 1.1 1.2 0.6 0.7
Property rent receivables 0.1 0.1 0.1 0.1
Receivables from retail credit finance – 1.4 – 1.4
Retail customers 1.5 1.8 0.5 1.3
Trade and other receivables 2.7 4.5 1.2 3.5

Balances from retail customers principally relate to products awaiting collection and are considered to have little credit risk as they are
primarily settled by cash or major credit card. The £1.4m movement in sums receivable from retail credit finance relates to the
reclassification of monies due from our IFC provider, Hitachi, to be recognised as cash-in-transit under IAS7.

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Financial statements continued
Notes to the financial statements continued

16. Cash and cash equivalents

Group Group Company Company
2019 2018 2019 2018
Notes £m £m £m £m
Cash at bank and in hand 15.4 6.6 13.7 4.3
Bank overdrafts 19 (2.5) (1.8) (2.5) (1.8)
Cash and cash equivalents in the cash flow statements 12.9 4.8 11.2 2.5

Cash at bank and in hand of £15.4m comprised cash of £3.3m and cash equivalents of £12.1m, principally monies due from our credit
card and IFC providers.

17. Trade and other payables

Group Company
Group 2018 Company 2018
2019 restated 2019 restated
£m £m £m £m
Current:
Trade payables 24.8 30.2 22.0 26.8
Other taxes and social security 8.7 11.0 6.7 7.7
Accruals and deferred income 18.4 19.1 16.4 18.5
Contract liabilities 17.9 22.3 15.4 19.3
Payable to subsidiaries – – 5.4 7.0
69.8 82.6 65.9 79.3
Non-current:
Accruals and deferred income 21.0 28.0 21.0 28.0
Accrued Interest 3.3 – 3.3 –
24.3 28.0 24.3 28.0

Total trade and other payables 94.1 110.6 90.2 107.3

Trade payables comprise amounts outstanding for trade purchases and ongoing costs. The Directors consider that the carrying amounts
of trade and other payables approximate to their fair values. Trade payables reduced by £5.4m to £24.8m (2018: £30.2m) reflecting
an adverse movement in credit terms with suppliers, in light of a withdrawal of credit insurance by the majority of providers. Accruals
and deferred income fell by £1.4m to £18.4m (2018: £19.8m), due to the payment of CVA fees of £3.2m, offset in part by a £1.5m
reclassification from non-current accruals and deferred income. Tax and social security decreased by £2.3m to £8.7m (2018: £11.0m)
primarily from the timing of VAT payments between 2018 and 2019.
Within non-current items, accruals and deferred income fell by £7m to £21.0m (2018: £28.0m) predominantly as a result of the utilisation
of advanced rent accruals in the year (£4.6m) and the aforementioned reclassification of £1.5m to current liabilities. Accrued interest of
£3.3m relates to sums due on repayment of the shareholder loan in July 2020.
Contract liabilities represent the companies obligations to provide goods and services for customer orders and will be realised in the next
12 months. The movement on contract liabilities year on year is due to normal trading. There are no material movements as a result of
acquisitions, disposals, foreign exchange, changes in variable consideration or other one-off events.
Intercompany loans with UK subsidiaries are interest free and repayable on demand. Intercompany loans with overseas subsidiaries
are liable to interest at 3.25% + Euribor and are repayable on demand.

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18. Obligations under finance leases

Minimum lease payments Present value of minimum lease payments
Group Group Company Company Group Group Company Company
2019 2018 2019 2018 2019 2018 2019 2018
£m £m £m £m £m £m £m £m
Amounts payable within one year 0.2 0.2 0.1 0.2 0.1 0.1 0.1 0.1
Amounts payable between one and
five years 0.6 0.9 0.3 0.6 0.2 0.5 0.2 0.4
Amounts payable after five years 3.1 3.4 0.1 0.3 1.1 1.2 0.1 0.3
3.9 4.5 0.5 1.1
Less: future finance charges (2.5) (2.7) (0.1) (0.3)
Present value of obligations
under finance leases 1.4 1.8 0.4 0.8 1.4 1.8 0.4 0.8
Current 0.1 0.1 0.1 0.1
Non-current 1.3 1.7 0.3 0.7

The Group leases certain properties under finance leases. The average lease term remaining is 17 years (2018: 14 years). The minimum
lease payments are discounted at the rate inherent in the leases. Interest rates are fixed at the contract date. All leases are on a fixed
repayment basis and no arrangements have been entered into for contingent rental payments.

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Financial statements continued
Notes to the financial statements continued

19. Borrowings
Group Group Company Company
2019 2018 2019 2018
£m £m £m £m
Current:
Bank overdraft 2.5 1.8 2.5 1.8
Non-bank loans – 11.0 – 11.0
Revolving credit facility 23.0 45.0 23.0 45.0
25.5 57.8 25.5 57.8
Non-current:
Non-bank loans 15.9 – 15.9 –
15.9 – 15.9 –

Borrowings and overdrafts are denominated in Sterling and euro of which £25.5m (2018: £46.8m) are secured on certain Group freehold
properties. The Group had further undrawn facilities of £29.1m at the balance sheet date.
Non-bank loans are presented at amortised cost. In June 2018, the Group repaid a £12.5m shareholder loan. In May 2018, as part of the
Group’s CVA and refinancing, the Group took a further shareholder loan that delivered £15.9m net of fees (£17.25m gross), repayable on
31 July 2020 and is subject PIK interest at 18% per annum. Further details are in note 17.
The effective interest rates at the period end are as follows:
Group Group Company Company
2019 2018 2019 2018
% % % %
Overdrafts 3.25 3.25 3.25 3.25
Non-bank loans 18.00 3.00 18.00 3.00

The RCF facility was subject to fixed interest rate of 3.75% + libor ( 2018: 3.75 + libor) in addition to a variable PIK interest charge of
between 3% to 5% dependent on the level of utilisation.
The maturity profiles of borrowings are as follows:
Group Group Company Company
2019 2018 2019 2018
£m £m £m £m
Amounts payable within one year 25.5 57.8 25.5 57.8
Amounts payable within two to five years 15.9 – 15.9 –
Amounts payable after five years – – – –
41.4 57.8 41.4 57.8

The maturity analysis is grouped by when the debt is contracted to mature rather than by re-pricing dates.
Further sums relating to accrued interest on loans are included in Creditors greater than one year of £3.3m (2018: £nil) and Creditors less
than one year of £0.5m (2018: £0.2m). Further details are provided in note 23 and 30.

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20. Provisions for liabilities and charges

Group Company
2019 2019
£m £m
Onerous lease Reorganisation Total Onerous lease Reorganisation Total
provisions provisions provisions provisions provisions provisions
Group and Company £m £m £m £m £m £m
At the beginning of the period 13.9 5.8 19.7 13.9 5.8 19.7
Added during the period 3.1 0.6 3.7 3.1 0.6 3.7
Released during the period (2.0) (0.5) (2.5) (2.0) (0.5) (2.5)
Utilised during the period (6.3) (3.3) (9.6) (6.3) (3.3) (9.6)
Utilised on disposal (0.2) – (0.2) (0.2) – (0.2)
At the end of the period 8.5 2.6 11.1 8.5 2.6 11.1

The onerous lease provisions relate to estimated future unavoidable lease costs in respect of closed and loss-making stores. The utilisation
of onerous provisions is dependent on the future profitability of each store, which is subject to uncertainty from both internal and external
factors. It is expected that the provisions will be utilised over a three year period.
Following the adoption of IFRS 16 in 2020, onerous lease provisions and advance rental accruals will cease to be recognised and instead
the right of use asset will be impaired – please refer to note 33.
Refer to note 5 for details of the reorganisation provisions, which include redundancy and other store closure costs in relation to stores
impacted by the CVA. Due to the nature of the provision, uncertainty exists as to the timing and final costs that will be incurred from
implementing the reorganisation programme. It is expected that this will be utilised within the next 12 months.
Group Group Company Company
2019 2018 2019 2018
£m £m £m £m
Non-current 6.1 10.6 6.1 10.6
Current 5.0 9.1 5.0 9.1
Provision for liabilities and charges 11.1 19.7 11.1 19.7

21. Deferred tax assets and liabilities

Group Company
Group 2018 Company 2018
2019 restated 2019 restated
£m £m £m £m
Deferred tax assets (0.9) (2.3) (0.9) –
Deferred tax liabilities 2.7 7.1 – 3.8
Net deferred tax (assets)/liabilities 1.8 4.8 (0.9) 3.8

The Group deferred tax liability has reduced from £4.8m to £1.8m. This is primarily as result of a prior year adjustment arising from a review
of the UK deferred tax liability on historic rollover relief claims, a current year crystallisation of rollover and holdover gains (together totalling
£5.3m) offset by derecognition of previously recognised losses £4.0m.
Deferred tax assets and liabilities are offset against each other where there is a legally enforceable right to offset. Deferred tax liabilities
of £2.7m (2018: £7.1m) comprise deferred tax assets of £1.0m (2018: £7.8m) offset against deferred tax liabilities of £3.7m (2018: £14.9m).
Deferred tax assets on tax losses are recognised to the extent that future taxable profits are probable. The Group has unrecognised tax
losses of £5.1m (2018: nil). Tax losses of £4.0m which were recognised in the prior year have been derecognised in the current year
following a review of the value of the deferred tax asset carried in the balance sheet.

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Financial statements continued
Notes to the financial statements continued

21. Deferred tax assets and liabilities continued

The movement in deferred tax assets and liabilities recognised by the Group during the current and prior period is:

Accelerated Short-term Share Retirement

tax Fair value Deferred timing Tax based benefit
depreciation adjustments capital gains differences losses payments obligations Total
Group £m £m £m £m £m £m £m £m
At 29 April 2017 (assets)/liabilities 5.0 1.3 9.7 (0.3) (1.8) (0.3) (0.3) 13.3
Restatement for IFRS 15 – – – (2.4) – – – (2.4)
At 29 April 2017 (assets)/liabilities – restated 5.0 1.3 9.7 (2.7) (1.8) (0.3) (0.3) 10.9
Exchange differences 0.1 – (0.1) 0.4 (0.1) – (0.2) 0.1
Credit to the income statement (0.9) – (0.1) (1.6) (3.7) (0.1) – (6.4)
Charge to other comprehensive income – – – – – – 0.4 0.4
Transfer to current tax – – (0.2) – – – – (0.2)
At 28 April 2018 (assets)/liability – restated 4.2 1.3 9.3 (3.9) (5.6) (0.4) (0.1) 4.8
Exchange differences (0.1) – 0.1 – – – – –
Credit to the income statement (3.8) – (5.3) 2.2 4.0 (0.1) – (3.0)
At 27 April 2019 (assets)/liability 0.3 1.3 4.1 (1.7) (1.6) (0.5) (0.1) 1.8

Accelerated Short-term Share Retirement

tax Fair value Deferred timing Tax based benefit
depreciation adjustments capital gains differences losses payments obligations Total
Company £m £m £m £m £m £m £m £m
At 29 April 2017 (assets)/liabilities 1.7 – 8.8 (0.9) – (0.3) (0.3) 9.0
Restatement for IFRS 15 – – – (1.1) – – – (1.1)
At 29 April 2017 (assets)/liabilities – restated 1.7 – – (2.0) – (0.3) (0.3) 7.9
Exchange differences – – 0.1 – – – (0.2) (0.1)
Credit to the income statement (0.1) – – (0.8) (3.2) (0.1) – (4.2)
Charge to other comprehensive income – – – – – – 0.4 0.4
Transfer to current tax – – (0.2) – – – – (0.2)
At 28 April 2018 (assets)/liability 1.6 – 8.7 (2.8) (3.2) (0.4) (0.1) 3.8
Exchange differences – – – – – – – –
Credit to the income statement (2.8) – (5.3) 1.9 1.6 (0.1) – (4.7)
At 27 April 2019 (assets)/liability (1.2) – 3.4 (0.9) (1.6) (0.5) (0.1) (0.9)

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22. Retirement benefit obligations

The Group operates a variety of pension schemes, principally in the UK, the Netherlands and Belgium. They comprise defined benefit
schemes where benefits are based on employees’ length of service and average final salary, and defined contribution schemes where
the employer company pays a set contribution to the scheme. The UK defined benefit schemes referred to in note 22 (i) (a) and the
first two defined contribution schemes referred to in note 22 (ii) are accounted for by the Company.

(i) Defined benefit schemes

(a) UK defined benefit schemes
The Company operated a funded defined benefit pension scheme providing benefits based on final pensionable pay for its employees
and has assumed the liability for the scheme previously operated by Storey Carpets Ltd (Storeys). The Company scheme was closed
to defined benefit service accrual on 30 April 2010 and has been closed to new members since 31 March 2006. The scheme previously
operated by Storeys is also closed to new members and has no active members. The assets of the schemes are held separately from
those of the Company.
The assets of the Company scheme are invested in a Managed Fund operated by a fund management company. Contributions are
determined by a qualified actuary using the projected unit credit method. The most recent actuarial review was at 6 April 2017 when the
actuarial value of the assets represented 95% of the benefits accrued to members after allowing for expected future increases in earnings.
A deficit reduction plan has been agreed with the Trustees under which £0.6m was paid in the period (2018: £0.6m).
The assets of the Storeys scheme are held in independently managed funds. The most recent actuarial review of the Storeys scheme
was at 1 March 2017 when the actuarial value of the assets represented 103% of the benefits accrued to members. A contribution plan
has been agreed with the Trustees under which £0.3m was paid in the period (2018: £0.3m).
Risks
The Group schemes are exposed to a number of risks which fall within actuarial risks and investment risks. The risks are monitored by
the Trustees to mitigate them and are detailed below:
Investment return risks: If the assets underperform the returns assumed in setting the funding target then additional contributions may be
required at subsequent valuations.
Investment matching risks: The schemes invest significantly in equity type assets, whereas the solvency target is closely related to the return
on bonds. If the equity type assets have fallen in value relative to the matching assets of bonds additional contributions may be required.
Longevity risk: If future improvements in mortality exceed the assumptions made then additional contribution may be required.
Legislative risk: The Government may introduce over riding legislation which leads to an increase in the value of the plan benefits.
Solvency risks: As the funding target is not a solvency target, and the investment strategy does not follow that required for a solvency
target, the assets of the plan may not be sufficient to provide all members with the full value of their benefits on a plan wind-up.
Some of these risks can be reduced by adjusting the funding strategy with the help of the Trustees, for example investment matching risk.
Other risks cannot so easily be removed, for example longevity risk. The Trustees of the plan regularly review such risks and mitigating
controls and a risk register is approved annually to mitigate such risks.
The Trustees have adopted an investment matching strategy that seeks to match the investment with the cashflow obligations of the
scheme. Thus investing in lower risk assets, such as annuities and bonds, which provide a more secure cashflow, as the pension
obligation approaches maturity.
Employer contributions of £0.9m are expected to be paid into these pension schemes during the financial period 2020.
The weighted average duration of the defined benefit obligation is 20 years for the Carpetright scheme and 16 years for the
Storeys scheme.
The assets and liabilities of the schemes were valued on an IAS 19 basis at 27 April 2019 by a qualified actuary. The numbers set
out below are the aggregate of the two schemes.

1) The table below outlines amounts included in the financial statements arising from the Group’s and Company’s obligations in respect
of the defined benefit scheme:
2019 2018
£m £m
Present value of pension schemes’ obligations (30.1) (29.4)
Fair value of pension schemes’ assets 31.3 30.2
Asset ceiling (1.8) (1.6)
Total recognised in the balance sheet (0.6) (0.8)

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Financial statements continued
Notes to the financial statements continued

22. Retirement benefit obligations continued

2019 2018
Notes £m £m
Net interest cost on pension schemes 6 – (0.1)
Past service costs – Guaranteed Minimum pension equalisation (0.4) –
Administration costs (0.2) –
Total recognised in the income statement (0.6) (0.1)

2019 2018
£m £m
Actuarial (losses)/gains on plan assets 1.0 (0.2)
Change in assumptions underlying present value of liabilities (1.3) 3.4
Asset ceiling movement in period (0.2) (1.6)
Total recognised in the other comprehensive income statement (0.5) 1.6

A scheme surplus of £1.8m on one of the defined benefit scheme has been derecognised as the Group does not have an unconditional
right to refunds or reductions in future contributions. An additional £0.3m obligation has been recognised reflecting the Group’s minimum
committed contributions to the plan.

2) Reconciliation of movement in net pension deficit:

Net defined
Defined benefit obligations Fair value of assets Asset ceiling benefit obligations
2019 2018 2019 2018 2019 2018 2019 2018
£m £m £m £m £m £m £m £m
As at the beginning of the period (29.4) (32.7) 30.2 29.5 (1.6) – (0.8) (3.2)
Interest (expense)/income (0.8) (0.8) 0.8 0.7 – – – (0.1)
Past service costs (0.4) – – – – – (0.4) –
Administration costs of scheme – – (0.1) – – – (0.1) –

Re-measurements:
Actuarial gains and losses from:
Financial assumptions (1.3) 1.6 – – – – (1.3) 1.6
Demographics – 0.9 – – – – – 0.9
Experience adjustments – 0.9 – – – – – 0.9
Return on plan assets excluding – – 1.0 (0.2) – – 1.0 (0.2)
interest
Asset ceiling restriction – – – – (0.2) (1.6) (0.2) (1.6)
Contributions:
Employers – – 1.2 0.9 – – 1.2 0.9

Payments from plan:

Benefits paid 1.8 0.7 (1.8) (0.7) – – – –

As at the end of the period (30.1) (29.4) 31.3 30.2 (1.8) (1.6) (0.6) (0.8)

As at the balance sheet date the defined benefit obligations of £15.5m is due to deferred members and £14.6m to current pensioners.

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22. Retirement benefit obligations continued

3) The fair value of scheme assets split between those which have a quoted market price in an active market and those which are unquoted
are as follows:
2019 2019 2019 2018 2018 2018
Quoted Unquoted Total Quoted Unquoted Total
£m £m £m £m £m £m
Equities 8.1 – 8.1 8.5 – 8.5
Bonds 13.8 – 13.8 13.4 – 13.4
Insurance policy – unquoted – 8.2 8.2 – 7.8 7.8
Cash and cash equivalents 1.2 – 1.2 0.5 – 0.5
Total 23.1 8.2 31.3 22.4 7.8 30.2

The unquoted insurance policy has been valued at an amount equal to the present value of the pensions secured, determined using the
same actuarial assumptions and methodology as have been used to determine the present value of the obligations under the scheme.

4) Key assumptions used:

2019 2018
% %
RPI inflation 3.3 3.3
Discount rate 2.5 2.5
CPI inflation 2.7 2.7

The assumptions used by the actuary are the best estimates chosen from a range of possible actuarial assumptions which, due to the
timescale covered, may not necessarily be borne out in practice. The assumptions used for future life expectancy of members of the
scheme are derived from industry dates and standard tables. Specifically, the S2NXA and S2 table on a year of birth usage with CMI_2016
future improvements factors and a long-term rate of improvement of 1.25% (2018: S2NXA and S2 table on a year of birth usage with
CMI_2016 future improvements factors and a long-term rate of improvement of 1.25% pa). This results in the following life expectancies:
male aged 65 now has life expectancy of 22 years
female aged 65 now has life expectancy of 24 years
The weighted average duration of the defined benefit obligation at the end of the reporting period is 20 years and 16 years for the
Carpetright and Storey’s schemes respectively (2018: 20 years and 16 years respectively).
The most significant assumptions are the discount rate, retail and consumer price index and mortality rates, of which the most sensitive
assumption is the life expectancy. The table below shows the impact on the present value placed on the plan’s liabilities of the stated
changes to the actuarial assumptions and has been derived by applying sensitivities determined at the most recent actuarial valuation
to the projected liability value. The sensitivity analysis is based on a change in one assumption while holding all others constant. Therefore
interdependencies between the assumptions have not been taken into account within the analysis.
2019 2018
£m £m
Increase/(decrease) by 0.1% Discount rate 0.6 0.5
Increase/(decrease) by 0.1% RPI inflation or CPI inflation 0.2 0.2
Increase/(decrease) by 1 year Life expectancy 1.0 1.0

(b) Multi-employer scheme

The Group’s Dutch subsidiary participates in a multi-employer run industry pension scheme which has arrangements similar to those
of a defined benefit scheme. It is not possible to identify the Group’s share of the underlying assets and liabilities of the scheme, and
therefore, in accordance with IAS 19, the Group has taken the exemption for multi-employer pension schemes not to disclose pension
scheme assets and liabilities. Accordingly, although this scheme is a defined benefit scheme it is treated as a defined contribution
scheme, recognising the contributions payable in each period in the income statement. Under the terms of the scheme the scheme
deficit is recovered through increased contributions from participating members. At the period end, the Group was unable to obtain
a valuation of the industry scheme’s full surplus or deficit. The Group was also unable to obtain details concerning the future funding
requirements, and its participation level relative to the other participants. Contributions charged to the income statement amounted
to £1.2m (2018: £1.1m) and expected contribution to this scheme for the financial period 2020 is £1.1m.

(ii) Defined contribution schemes

The Company launched a Group Personal Pension Plan in April 2006. Contributions made by employees are matched by the Company
to an upper limit. The assets of the scheme are held separately from those of the Company and are invested by an Aegon Insurance
Group company. Contributions for the period amounted to £1.4m (2018: £1.2m).

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Financial statements continued
Notes to the financial statements continued

22. Retirement benefit obligations continued

In addition, the Group operates defined contribution pension schemes for subsidiary companies in Belgium and the Netherlands.
The Group makes contributions into the schemes, the assets of which are held separately from those of the Group and are invested
by local insurance companies. The contributions by the Group into individual company schemes for the period were a net charge of
£0.1m (2018: £0.1m) and there were no contributions to industry collective schemes (2018: nil).

23. Financial instruments

(i) Financial risk management objectives and policies
Risk management
The Group’s principal financial instruments comprise borrowings and overdrafts, cash and cash equivalents. These financial instruments
are used to manage funding and liquidity requirements. Other financial instruments which arise directly from the Group’s operations include
trade receivables and payables.
Exposure to credit, liquidity, foreign currency exchange and interest rate risks arise in the normal course of the Group’s business operations
and each of these risks is managed in accordance with the Group’s treasury risk management strategy, which is also discussed in the
Financial Review in the section Current liquidity.
(a) Credit risk
The Group does not have significant concentrations of credit risk as exposure is spread over a number of counterparties and customers.
The Group is exposed to a small amount of credit risk that is primarily attributable to its trade and other receivables, the majority of which
relates to retail customer products held ready for collection (see note 15). Retail customers are required to settle outstanding balances in
cash or using a major credit card prior to goods being collected from/delivered by the store.
The credit risk on liquid funds is limited because the counterparties are reputable banks. The maximum amount of credit risk is represented
by the carrying amounts of financial assets.
(b) Liquidity risk
The Group finances its operations from a mix of retained profits, bank borrowings achieved through revolving credit agreements
and overdraft facilities, and a non-bank loan. Daily cash balances are forecast and surplus cash is placed on treasury deposit with the
Group’s bankers.
The table below summarises the maturity profile of the Group’s financial liabilities based on contractual undiscounted payments,
including interest:
Between Between
Less than 1 and 2 2 and 5 Over
1 year years years 5 years Total
Group £m £m £m £m £m
At 27 April 2019
Interest bearing loans and borrowings 25.9 19.2 – – 45.1
Finance leases 0.2 0.2 0.4 3.1 3.9
Trade and other payables 53.0 – – – 53.0
79.1 19.4 0.4 3.1 102.0
At 28 April 2018
Interest bearing loans and borrowings 58.1 – – – 58.1
Finance leases 0.2 0.2 0.7 3.4 4.5
Trade and other payables – restated 62.5 – – – 62.5
120.8 0.2 0.7 3.4 125.1
Company
At 27 April 2019
Interest bearing loans and borrowings 27.2 19.2 – – 46.4
Finance leases 0.1 0.1 0.2 0.1 0.5
Trade and other payables 50.4 – – – 50.4
77.7 19.3 0.2 0.1 97.3
At 28 April 2018
Interest bearing loans and borrowings 60.6 – – – 60.6
Finance leases 0.2 0.2 0.4 0.3 1.1
Trade and other payables – restated 60.3 – – – 60.3
121.1 0.2 0.4 0.3 122.0

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23. Financial instruments continued

The Group has committed facilities to the end of December 2019 comprising a £45.0m revolving credit facility, a Sterling overdraft of
£7.5m and a euro overdraft of €2.4m. At the balance sheet date the Group had a shareholder loan of £17.25m gross (£15.9m net
of fees) committed until 31 July 2020. The undrawn amounts on the committed facilities were £29.1m (2018: £7.8m).
The bank facilities are subject to a number of financial covenants, being fixed charge cover, EBITDA and net debt. The Group is expected
to remain in compliance with these covenants; further details on this can be found on page 22 of the Strategic Report.
(c) Foreign exchange risk
Outside the UK, the Group operates in the Netherlands, Belgium and the Republic of Ireland and had cash balances in Poland.
Revenues and expenses of these operations are denominated in euros or Zlotys. The Group mitigates currency risk in respect of the
net investment in European operations by designating euro denominated borrowings as hedging instruments of euro denominated
investments in foreign operations.
If the closing Sterling euro rate had been one euro cent lower in the period, the exchange difference reported in the statement of
comprehensive income would have been £0.3m lower (2018: £0.4m lower). At 27 April 2019, if Sterling had weakened/strengthened
by 10% against the euro, the translation of the profit/loss of the European businesses would have increased/decreased by £0.2m
(2018: £0.7m).
Financial assets and liabilities and foreign operations are translated at the following rates of exchange:
euro euro Zloty Zloty
2019 2018 2019 2018
Average rate 1.13 1.13 4.87 5.21
Closing rate 1.16 1.14 4.96 5.01

(d) Interest rate risk

The Group has various borrowings bearing interest at a margin over LIBOR or EURIBOR rates.
In accordance with IFRS 7, the Group has undertaken sensitivity analysis on its financial instruments which are affected by changes
in interest rates. This analysis has been prepared on the basis of a constant amount of net debt and a constant ratio of fixed to floating
interest rates as at 27 April 2019 and 28 April 2018 respectively. Consequently, analysis relates to the situation at those dates and is
not representative of the periods then ended.
Based on the Group’s net debt position at the period end, a 1% change in interest rates would affect the Group’s profit before tax
by approximately £0.3m (2018: £0.5m).
The interest rate profile of the financial assets and liabilities of the Group is as follows:

2019 2018
Weighted Weighted
average average
effective effective
interest Floating Fixed Interest interest Floating Fixed Interest
rate rate rate free Total rate rate rate free Total
% £m £m £m £m % £m £m £m £m
Sterling 0.0% 13.5 – 1.0 14.5 0.1% 4.3 – 3.3 7.6
Euro – 1.6 – 1.7 3.3 – 2.0 – 1.2 3.2
Zloty – 0.3 – – 0.3 – 0.3 – – 0.3
Total financial assets – 15.4 – 2.7 18.1 – 6.6 – 4.5 11.1
Sterling 2.3% (24.6) (20.4) (44.3) (89.3) 2.8% (56.6) (1.7) (54.4) (112.7)
Euro – (1.4) (0.1) (8.7) (10.2) – (1.5) (0.1) (8.1) (9.7)
Total financial
liabilities – (26.0) (20.5) (53.0) (99.5) – (58.1) (1.8) (62.5) (122.4)

Capital management
The Group’s objectives when managing capital are to safeguard its ability to continue as a going concern and retain financial flexibility in
order to continue to provide returns for shareholders and benefits for other stakeholders. The Group considers capital to be equity and
net debt. Net debt is disclosed in note 29.
The Group manages its capital by: continued focus on free cash flow generation; setting the level of capital expenditure and dividend in
the context of the current period and forecast free cash flow; and monitoring the level of the Group’s financial and leasehold debt in the
context of Group performance.

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Financial statements continued
Notes to the financial statements continued

23. Financial instruments continued

(ii) Fair value of financial assets and liabilities
Financial assets and liabilities are classified in accordance with IFRS 9. Financial instruments have not been reclassified or derecognised in
the period. There are no financial assets which have been pledged or held as collateral. The Group does not have any financial assets or
liabilities measured at fair value through the income statement.
The carrying values of all other financial assets and liabilities are deemed to reflect fair value.
Group Company
2018 2018
2019 restated 2019 restated
Amortised Amortised Amortised Amortised
costs costs costs costs
£m £m £m £m

Cash and cash equivalents 15.4 6.6 13.7 4.3

Trade and other receivables 2.7 4.5 41.0 44.8
Total financial assets 18.1 11.1 54.7 49.1

Borrowings and overdrafts (44.7) (57.8) (44.7) (57.8)

Finance lease obligations (1.4) (1.8) (0.4) (0.8)
Trade and other payables (53.4) (62.8) (51.8) (63.1)
Total financial liabilities (99.5) (122.4) (96.9) (121.7)

Net financial liabilities (81.4) (111.3) (42.2) (72.6)

24. Share capital

Number
of allotted,
called up and
fully paid Nominal
ordinary value per Share Share Treasury
shares share capital premium shares Total
Group and Company Millions £ £m £m £m £m
At 29 April 2017 67.9 0.01 0.7 17.8 (1.6) 16.9
Issue of new shares 3.4 – – 1.3 – 1.3
Transfer of treasury shares to participants – – – – 0.2 0.2
At 28 April 2018 71.3 0.01 0.7 19.1 (1.4) 18.4
Issue of new shares 232.5 0.01 2.3 – – 2.3
At 27 April 2019 303.8 0.01 3.0 19.1 (1.4) 20.7

The Group’s LTIP was established to grant contingent rights to shares. Such grants are made on recommendation by the Group’s
Remuneration Committee. Shares are purchased by a Trust and held until they are used to satisfy the LTIP awards. As required by
IAS 32, grants of such shares are classified as Treasury shares and accordingly are deducted from total equity attributable to equity
holders of the parent. During the period, the Trust did not purchase any ordinary shares (2018: 26,554 shares purchased). At the
period end, the Trust held 175,078 (2018: 322,819) ordinary shares of 1p each with a market value of £0.1m (2018: £0.1m).
The Group also operates a share option scheme under which shares are issued to satisfy share options upon exercise.
In June 2018, the Group launched a Placing and Open Offer, raising £62.7m (net of fees of £2.4m). 232,463,221 new ordinary shares
were issued with a nominal value of £0.01. The placing and open offer was structured through a “cash box” mechanism that resulted in
an increase of £2.3m in share capital and a creation of a Merger Reserve of £60.4m. As at 27 April 2019 the amounts held in the Merger
Reserve are considered distributable and have been reclassified to retained earnings.

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25. Share based payments

Included within separately reported items is a charge of £0.5m (2018: charge of £0.5m) in respect of equity-settled share based payments.
The Group’s employee share schemes are described below and additional detail is disclosed in the Directors’ remuneration report on
pages 36 to 59. Scheme participants are either Directors of the Company or employees of the Group. The costs associated with the
schemes are accounted for in the Company’s accounts.
(i) LTIP
Under this scheme, participants may receive annual awards in the form of contingent entitlements to Company shares. These entitlements
are equity-settled through the purchase of existing shares by the administering Trust. The shares vest three years after award if participants
remain with the Group during the vesting period and the Group meets targeted levels of performance. The performance conditions are fully
described in the Directors’ remuneration report in the section titled Long-term incentives.
During the period, contingent entitlements to 2,888,526 shares were granted (2018: 1,151,689). The amount recognised in the income
statement in respect of all LTIP awards is a charge of £0.1m (2018: charge of £0.1m). The fair values of the awards, where there is no
market condition, are valued using a Black-Scholes option pricing model. The Group’s LTIP Trust is administered by Equity Trust (Jersey)
Limited and waives its right to dividends on the shares held.
Reconciliation of movements in the 52 week period ended 27 April 2019
LTIP Oct 2018 LTIP Sept 2017 LTIP Sept 2016 LTIP July 2015 LTIP July 2014
Share Fair Share Fair Share Fair Share Fair Share Share
awards value awards value awards value awards value awards awards
‘000s £m ‘000s £m ‘000s £m ‘000s £m ‘000s ‘000s
Outstanding at 29 April 2017 – – 1,133.4 2.6 436.4 2.4 365.6 2.0
Granted – – 1,511.7 2.7 – – – – – –
Forfeited – – (8.2) – (48.8) (0.1) (19.5) (0.1) – –
Lapsed – – – – – – – – (18.3) (0.1)
Exercised/vested – – – – – – – – (68.9) (0.4)
Expired/lapsed – – – – – – – – – –
Outstanding at 28 April 2018 – – 1,503.5 2.7 1,084.6 2.5 416.9 2.3 278.4 1.5
Granted 2,888.5 0.5 – – – – – – – –
Forfeited (230.4) – (384.1) (0.7) (245.5) (0.6) – – – –
Lapsed – – – – – – – – – –
Exercised/vested – – – – – – – – – –
Expired/lapsed – – – – – – (416.9) (2.3) – –
Outstanding at 27 April 2019 2,658.1 0.5 1,119.4 2.0 839.1 1.9 – – 278.4 1.5

Exercisable at 27 April 2019 – – – – – – – – 278.4 1.5

Exercisable at 28 April 2018 – – – – – – – – 278.4 1.5

The LTIP 2016 award is expected to lapse as the conditions for vesting have not been met. The valuation assumptions used in the
application of the Black-Scholes model applied to the relevant schemes above are as follows:
LTIP Oct LTIP July LTIP Sept LTIP July LTIP July
Valuation assumptions 2018 award 2017 award 2016 award 2015 award 2014 award
Fair value per share (pence) 19 179 231 560 524
Share price at grant (pence) 20 189 241 577 525.5
Exercise price (pence) 0.0 0.0 0.0 0.0 0.0
Expected volatility (%)1 55.3 44.0 38.5 32.4 33.4
Vesting period (years) 3.0 3.0 3.0 3.0 3.0
Dividend yield (%) 0.0 0.0 0.0 0.0 0.0
Risk free interest rate (%) 1.0 0.4 1.6 1.0 1.5
Note:
1. Expected volatility is based on historical volatility over the three-year period preceding the date of grant. The risk free interest rate is the yield on zero-coupon UK
government bonds at the date of grant of the respective awards over a term consistent with the vesting period.

(ii) Savings Related Share Option Scheme (“SAYE”)

The Group operates three and five-year SAYE schemes. Employees and Executive Directors are invited to subscribe for options over
shares in the Company at a 20% discount to market price. The options are ordinarily exercisable within six months from the third or fifth
anniversary of the grant date. The entitlement to share options is equity-settled. Funds for the purchase of Company shares are built up
through the contribution of a maximum of £500 (2018: £500) per month from salary. Share options were valued using a Black-Scholes
option-pricing model. The cost charged to the income statement in respect of this scheme is £0.4m (2018: £0.4m).

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Financial statements continued
Notes to the financial statements continued

25. Share based payments continued

Reconciliation of movements in the period ended 27 April 2019
SAYE SAYE
SAYE 2019 SAYE 2018 SAYE 2017 SAYE 2016 SAYE 2015 2014 2013
3 yr 5 yr 3 yr 5 yr 3 yr 5 yr 3 yr 5 yr 3 yr 5 yr 5 yr 5 yr
Number Number Number Number Number Number Number Number Number Number Number Number
of options of options of options of options of options of options of options of options of options of options of options of options
‘000s ‘000s ‘000s ‘000s ‘000s ‘000s ‘000s ‘000s ‘000s ‘000s ‘000s ‘000s
Outstanding at
29 April 2017 – – – – 3,264.3 463.4 50.6 10.1 81.2 43.2 7.0 2.8
Granted – – 274.5 45.9 – – – – – – – –
Forfeited – – (56.7) – (1,416.2) (213.0) (26.0) (4.2) (37.8) (12.1) (2.0) (1.3)
Vested – – – – (3.3) – – – – – – –
Outstanding at
28 April 2018 – – 217.8 45.9 1,844.8 250.4 24.6 5.9 43.4 31.1 5.0 1.5
Granted 25,338.8 2,103.8 – – – – – – – – – –
Forfeited – – (164.7) (33.6) (1648.9) (225.0) (10.1) (5.5) – (23.8) (3.7) –
Expired – – – – – – – – (43.4) – – (1.5)
Outstanding at
27 April 2019 25,338.8 2,103.8 53.1 12.3 195.9 25.4 14.5 0.4 – 7.3 1.3 –

Exercisable at
27 April 2019 – – – – – – 14.5 – – – 1.3 –
Exercisable at
28 April 2018 – – – – – – – – 43.4 – – 1.5

The valuation assumptions used in the application of the Black-Scholes model applied to the relevant schemes above are as follows:
SAYE SAYE
SAYE 2019 SAYE 2018 SAYE 2017 SAYE 2016 SAYE 2015 2014 2013
Valuation assumptions 3yr 5yr 3yr 5yr 3yr 5 yr 3 yr 5 yr 3 yr 5 yr 5 yr 5 yr
Fair value per share (pence) 9 12 71 80 62 67 148 178 148 184 201 248
Share price at grant (pence) 20 20 168 168 162 162 446 446 446 446 505 679
Exercise price (pence) 16 16 134 134 130 130 356 356 347 347 404 544
Expected volatility (%)1 56.7 70.8 50.5 45.3 43.2 37.3 34.3 34.7 31.5 34.8 34.8 34.7
Vesting period (years) 3.0 5.0 3.0 5.0 3.0 5.0 3.1 5.1 3.1 5.1 5.1 3.1
Dividend yield (%) – – – – – – – – – – – –
Risk free interest rate (%) 0.7 0.7 0.9 1.1 0.3 0.6 0.5 0.8 0.7 1.0 0.8 2.9
Possibility of ceasing
employment before
vesting (%) 42 50 40 50 40 50 40 50 40 50 50 40
Note:
1. Expected volatility is based on historical volatility over the three or five-year period respectively preceding the date of grant. The risk free interest rate is the yield on
zero-coupon UK government bonds at the date of grant of the respective awards over a term consistent with the vesting period.

(iii) All Employee Share Ownership Plan (“AESOP”)

Carpetright operated an Employee Share Ownership Plan under which employees could contribute up to £125 per month from pre-tax
salary to purchase Carpetright shares. The scheme was closed on 12 January 2015 as there were fewer than 50 active participants.
The Group does not incur a share based payment charge in respect of this scheme since the Company shares have been acquired
at market value and are not subject to an accumulation period.

26. Capital and other financial commitments

Capital commitments at 27 April 2019 contracted for but not yet incurred are:
Group Group Company Company
2019 2018 2019 2018
£m £m £m £m
Intangible assets – software costs 0.5 0.7 0.5 0.7
Total capital and financial commitments 0.5 0.7 0.5 0.7

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27. Operating lease commitments

At 27 April 2019, the future minimum lease payments in respect of land and buildings and other assets under operating leases are:
2019 2018
Land and Land and
buildings Other buildings Other
Group £m £m £m £m
Operating leases payable:
Amounts payable within one year 51.9 1.7 64.2 2.1
Amounts payable between one and five years 151.3 1.5 201.3 3.1
Amounts payable after five years 116.9 – 142.5 –
320.1 3.2 408.0 5.2

2019 2018
Land and Land and
buildings Other buildings Other
Company £m £m £m £m
Operating leases payable:
Amounts payable within one year 51.6 1.6 56.5 1.8
Amounts payable between one and five years 139.1 1.2 184.0 2.7
Amounts payable after five years 101.6 – 130.1 –
292.3 2.8 370.6 4.5

The future minimum lease payments in the table above include the revised committed payments under the terms of the CVA impacting
the UK business. The Group’s operating leases (property and non property combined) have an average remaining length of 3.1 years
(2018: 3.8 years).
The remaining lease term for UK property leases has decreased from 4.8 years to 4.0 years, reflecting the impact of the CVA and in
particular, the closure of 80 stores. IFRS 16 will be adopted for the financial year FY2020, and as required by IFRS 16, all operating
leases will be recognised as a right of use asset along with a lease liability. This change in accounting policy is discussed in note 33.
The Group enters into sublease agreements in respect of some of its operating leases for stores. At the reporting date, the Group had
contracted with tenants for future minimum operating sublease receipts as shown below:
2019 2018
Land and Land and
buildings Other buildings Other
Group £m £m £m £m
Operating leases receivable:
Amounts receivable within one year 1.5 – 1.6 –
Amounts receivable between one and five years 3.0 – 4.3 –
Amounts receivable after five years 1.1 – 2.0 –
5.6 – 7.9 –

2019 2018
Land and Land and
buildings Other buildings Other
Company £m £m £m £m
Operating leases receivable:
Amounts receivable within one year 0.5 – 1.5 –
Amounts receivable between one and five years 0.8 – 3.8 –
Amounts receivable after five years 0.5 – 1.9 –
1.8 – 7.2 –

28. Contingent liabilities

We continually review our portfolio for potential contingent liabilities. In light of the current challenges surrounding the retail market, the
Board has assessed a possible risk in relation to the reversion of nine assigned leases, with a total rental value of £6.8m (2018: £nil).
The Company’s also has contingent liabilities that derive from guarantees for subsidiaries, which are disclosed in note 31.

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Financial statements continued
Notes to the financial statements continued

29. Net (debt)/cash

Total Cash Exchange Other Total
Group £m 2018 flow differences non-cash 2019
Current assets:
Cash and cash equivalents in the balance sheet 6.6 15.4
Bank overdraft (1.8) (2.5)
Cash and cash equivalents in the cash flow statement 4.8 8.1 – – 12.9

Current liabilities:
Current borrowing (56.0) 34.5 – (1.5) (23.0)
Non-current borrowing – (14.9) – (1.0) (15.9)
(56.0) 19.6 – (2.5) (38.9)
Obligations under finance leases:
Current obligations under finance leases (0.1) (0.1)
Non-current obligations under finance leases (1.7) (1.3)
(1.8) 0.2 – 0.2 (1.4)
Total net (debt)/cash (53.0) 27.9 – (2.3) (27.4)

Total Cash Exchange Other Total

Group £m 2017 flow differences non-cash 2018
Current assets:
Cash and cash equivalents in the balance sheet 12.5 6.6
Bank overdraft (7.1) (1.8)
Cash and cash equivalents in the cash flow statement 5.4 (0.9) 0.3 – 4.8

Current liabilities:
Current borrowing (13.0) (44.0) – 1.0 (56.0)
Non-current borrowing – – – – –
(13.0) (44.0) – 1.0 (56.0)
Obligations under finance leases:
Current obligations under finance leases (0.1) – – – (0.1)
Non-current obligations under finance leases (2.1) 0.3 – 0.1 (1.7)
(2.2) 0.3 – 0.1 (1.8)
Total net (debt)/cash (9.8) (44.6) 0.3 1.1 (53.0)

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30. Reconciliation of liabilities arising from financing activities

Non cash movement
Total Net cash Exchange Other Total
Group £m 2018 flow differences non-cash 2019
Revolving credit facility (45.0) 22.0 – – (23.0)
Non-bank loans (11.0) (2.4) – (2.5) (15.9)
Finance leases (1.8) 0.2 – 0.2 (1.4)
Liabilities (57.8) 19.8 – (2.3) (40.3)

Non cash movement

Total Net cash Exchange Other Total
Group £m 2017 flow differences non-cash 2018
Revolving credit facility (13.0) (32.0) – – (45.0)
Non-bank loans – (12.0) – 1.0 (11.0)
Finance leases (2.2) 0.3 – 0.1 (1.8)
Liabilities (15.2) (43.7) – 1.1 (57.8)

Non-cash movements of £2.3m (2018: £1.1m) primarily relates to amortisation of non-bank loan fees.

Non cash movement

Total Net cash Exchange Other Total
Company £m 2018 flow differences non-cash 2019
Revolving credit facility (45.0) 22.0 – – (23.0)
Non-bank loans (11.0) (2.4) – (2.5) (15.9)
Finance leases (0.8) 0.2 – 0.2 (0.4)
Liabilities (56.8) 19.8 – (2.3) (39.3)

Non cash movement

Total Net cash Exchange Other Total
Company £m 2017 flow differences non-cash 2018
Revolving credit facility (13.0) (32.0) – – (45.0)
Non-bank loans – (12.0) – 1.0 (11.0)
Finance leases (1.1) 0.2 – 0.1 (0.8)
Liabilities (14.1) (43.8) – 1.1 (56.8)

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Financial statements continued
Notes to the financial statements continued

31. Related parties

Group
The Group considers key management to be the Executive Directors only, details of directors’ emoluments and share based payments
are disclosed on pages 49 to 54 of the Directors’ report.
The Group drew on a shareholder loan from Meditor for £17.25m gross (£15.9m net of fees) and repaid a shareholder loan from Meditor
of £12.5m. Please refer to note 19 for further details.
Costs incurred by the Group to administer pension schemes amounted to £0.4m in 2019 (2018: £0.3m). The Group also incurred a one-
off charge of £0.4m for the recognition of the Guaranteed Minimum Pension (GMP) equalisation.
Company
The following table provides the total amount of transactions and year end balances with related parties for the relevant financial year.
Amounts due Amounts due
Sales of Provision from related to related
goods of services Total parties parties
£m £m £m £m £m
Subsidiary undertakings
2019 – 0.4 0.4 39.8 5.4
2018 0.5 0.5 1.0 41.3 7.0

A full list of subsidiaries is detailed in note 13.

The Company guarantees bank and other borrowings of subsidiary undertakings. At the period-end there were nil drawn borrowings
(2018: nil).

32. Events after the reporting period

Following the period end, the Group sold three properties in Salford, Devizes and Newtownards for a sum of £2.6m.

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33. Changes in accounting standards

i) IFRS 15 ‘Revenue from Contracts with Customers’
IFRS 15 ‘Revenue from Contracts with Customers’ is a new standard based on a five-step model framework, which replaces all existing
revenue recognition standards. The standard requires revenue to represent the transfer of promised goods or services to customers in
an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Group
adopted IFRS 15 from 29 April 2018 using a fully retrospective approach.
Under the new standard, the point at which revenue is recognised has changed and due to IFRS 15’s definition of ‘transfer of control’,
revenue will be deferred and recognised at a later date than previously recorded under IAS18. The Group had previously recognised
revenue when the goods had been prepared on behalf of the customer. However under IFRS 15 revenue is recognised when the
goods and services are delivered to the customer, as this is the point where control passes from the Group to the customer.
This deferral of revenue also impacts the previous period, with details for 2017 and 2018 shown in the tables below:
2017 as 2017 as 2018 as 2018 as
Group £m reported Adjustment restated reported Adjustment restated
Assets:
Deferred tax assets 1.9 0.3 2.2 2.0 0.3 2.3
Inventories 41.1 10.7 51.8 35.7 10.0 45.7
Trade receivables 12.7 (8.4) 4.3 11.9 (8.7) 3.2
Total assets 55.7 2.6 58.3 49.6 1.6 51.2

Liabilities:
Contract liabilities (9.3) (14.9) (24.2) (8.9) (13.4) (22.3)
Deferred tax liabilities (15.2) 2.1 (13.1) (9.0) 2.1 (6.9)
Total liabilities (24.5) (12.8) (37.3) (17.9) (11.3) (29.2)

Equity
Other reserves 61.1 (10.2) 50.9 0.9 (9.7) (8.8)
Total equity 61.1 (10.2) 50.9 0.9 (9.7) (8.8)

2017 as 2017 as 2018 as 2018 as

Group £m reported Adjustment restated reported Adjustment restated
Revenue 457.6 (23.8) 433.8 443.8 2.5 446.3
Cost of sales (188.2) 10.5 (177.7) (194.2) (1.8) (196.0)
Gross profit 269.4 (13.3) 256.1 249.6 0.7 250.3
Administration costs (266.5) 0.7 (265.8) (317.3) – (317.3)
Finance costs (2.0) – (2.0) (2.8) – (2.8)
Profit/(loss) before tax 0.9 (12.6) (11.7) (70.5) 0.7 (69.8)
Tax (0.2) 2.4 2.2 6.3 (0.1) 6.2
Profit/(loss) after tax 0.7 (10.2) (9.5) (64.2) 0.6 (63.6)

Basic EPS pence 1.0p (15.0p) (14.0p) (94.6p) 1.0p (93.6p)

Diluted EPS pence 1.0p (15.0p) (14.1p) (94.6p) 1.0p (93.6p)

The transition from IAS 18 to IFRS 15 on the current year results is shown below:
2019 YoY 2019 YoY
movement movement
Group £m IAS 18 Adjustment IFRS 15
Revenue (0.8) 4.3 3.5
Cost of sales 0.3 (1.9) (1.6)
Gross profit (0.5) 2.4 1.9
Administration costs – – –
Profit impact (0.5) 2.4 1.9

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Financial statements continued
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33. Changes in accounting standards continued

2017 as 2017 as 2018 as 2018 as
Company £m reported Adjustment restated reported Adjustment restated
Assets:
Inventories 35.3 8.3 43.6 29.5 7.7 37.2
Trade receivables 5.7 (1.9) 3.8 5.1 (2.3) 2.8
Total assets 41.0 6.4 47.4 34.6 5.4 40.0

Liabilities:
Contract liabilities (6.4) (14.9) (21.3) (6.9) (13.4) (20.3)
Deferred tax liabilities (9.1) 1.3 (7.8) (4.9) 1.1 (3.8)
Total liabilities (15.5) (13.6) (29.1) (11.8) (12.3) (24.1)

Equity
Other reserves 31.0 (7.2) 23.8 (19.9) (6.9) (26.8)
Total equity 31.0 (7.2) 23.8 (19.9) (6.9) (26.8)

2017 as 2017 as 2018 as 2018 as

Company £m reported Adjustment restated reported Adjustment restated
Revenue 388.5 (17.3) 371.2 368.4 2.1 370.5
Cost of sales (158.2) 8.0 (150.2) (157.1) (1.4) (158.5)
Gross profit 230.3 (9.3) 221.0 211.3 0.7 212.0
Administration costs (236.4) 0.8 (235.6) (265.5) (0.4) (265.9)
Finance costs (1.8) – (1.8) (2.6) – (2.6)
Loss before tax (7.9) (8.5) (16.4) (56.8) 0.3 (56.5)
Tax 1.5 1.3 2.8 4.3 – 4.3
Loss after tax (6.4) (7.2) (13.6) (52.5) 0.3 (52.2)

Basic EPS pence (1.0p) (1.1p) (2.1p) (7.7p) – (7.7p)

Diluted EPS pence (1.0p) (1.1p) (2.1p) (7.7p) – (7.7p)
ii) IFRS 16 – Leases
Introduction
The new lease accounting standard, IFRS 16 – Leases, is expected to have a material impact on the Group’s financial statements in the
period of initial application. IFRS 16 specifies how an organisation will recognise, measure, present and disclose leases. The standard
provides a single lessee accounting model, requiring lessees to recognise assets and liabilities for all leases on balance sheet, in line with the
treatment of finance leases under its predecessor standards, IAS17 and IFRIC 4. A lessee recognises a right-of-use asset representing its
right to use the underlying asset and a lease liability representing its obligation to make lease payments. Excepted from this treatment are
lease terms of 12 months or less or where the underlying asset is of low value, in which case, they may continue to be treated as operating
leases on an elective basis.
IFRS 16 was issued in January 2016 and applies to annual reporting periods beginning on or after 1 January 2019, which in the case of the
Group accounts means the financial year ending 25 April 2020.
No significant impact is expected for the Group’s finance leases.
Overview of impact on the Group’s reporting
The Group will recognise new assets and liabilities predominantly for its operating leases of properties and warehouse vehicles. The nature
of the expenses recognised in the income statement in respect of these leases will change because the Group will recognise a depreciation
charge for right-of-use assets and an interest expense on lease liabilities. Previously the Group recognised an operating lease expense,
‘rent’, on a straight-line basis over the term of the lease.
IFRS16 will have a material effect on the Group’s balance sheet given the current value of operating leases that will be recognised as both
asset and liability, calculated as the discounted value of remaining lease payments at the date of initial recognition (see below). This will
result in a significantly lower rental charge, to be replaced with a higher figure of depreciation and interest. Whilst depreciation will be
recognised on a straight line basis, IFRS 16 requires interest to be calculated on the effective interest rate method.

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33. Changes in accounting standards continued

This results in a higher level of interest being charged during the early period of the lease, falling as the lease progresses and associated
liability falls (similar to a repayment mortgage). When compared to rental costs, this will result in a reduction in the Group’s profit during
the early stage of a lease and an increase during its latter stages.
The Group has prepared an estimate of the impact in the Group’s accounts, but this may change for the following reasons:
in light of the Company Voluntary Arrangement (CVA), all of the Group’s B1, B2 and C category leases are capable of being terminated
at short notice. Management will assess whether they are reasonably certain these leases will extend beyond the CVA period and revert
to their original lease terms.
the Group’s lease portfolio is frequently changing the new accounting policies are subject to change until the Group presents its financial
statements for the year ending 25 April 2020.
Leases in which the Group is a lessor
Lessor accounting remains similar to the current standard: lessors continue to classify leases as finance or operating leases. As such,
no significant impact is expected for leases in which the Group is a lessor.
Impact of the new standard
Given the complexity of the Standard and the number of leases held by the Group, the implementation project remains work in progress
and the figures quoted below therefore illustrative at this stage. The Group plans to apply IFRS 16 initially on 28 April 2019 using the
“modified retrospective” approach electing to value the right-of-use asset at an amount equal to the lease liability on transition. There will
be no restatement of comparative information. All leases entered into on or after 28 April 2019 will be recognised from the date of
inception.
Using this approach, together with management’s selected practical expedients that accompany it, the Group will:
apply IFRS 16 to leases previously identified in accordance with IAS 17 Leases and IFRIC 4 Determining Whether an Arrangement Contains
a Lease.
calculate a lease liability as at 28 April 2019 based on the remaining lease payments payable after that date.
calculate the lease term according to management’s appetite for exercising any available extension/break/purchase options.
discount the remaining gross lease payments using the applicable interest rate, which will generally be the incremental borrowing rate,
as at 28 April 2019 applicable to each relevant business unit, asset type, currency of the arrangement and weighted average length of
the lease term starting on the commencement date.
recognise right-of-use assets as at 28 April 2019 at an amount equal to the lease liability.
exclude any initial direct costs from the measurement of the right-of-use assets that are recognised on adoption of IFRS 16 as at
28 April 2019.
Using lease data as at 28 April 2019, the expected impact of adopting IFRS 16 as at that date, applying the same modified retrospective
approach as described above, would be approximately to:
recognise a right-of-use asset as at 28 April 2019 of between £244.9m and £254.0m, net of impairment relating to onerous lease provisions
and advance rental accruals;
recognise a lease liability of between £277.3m and £286.4m, with a consequent increase in net debt;
increase underlying EBITDA, by approximately £60.8m;
increase underlying operating profit by between £18.5m and £19.7m;
increase finance costs by between £24.8m and £26.5m; and
decrease Profit Before Tax by between £6.3m and £6.8m.
We would also cease to utilise onerous lease provisions (2019: £6.3m) and advance rental accrual releases (2019: £5.7m), with a further
£10m to £12m impact on presented profitability. As discussed above, the provisions will instead be used to impair the “right of use” asset,
with a resultant reduction in deprecation over the depreciation period, resulting in a timing difference that as with interest, impact early and
benefit later years. The depreciation impact was factored into the assessment outlined above. The tax effects of the adoption of IFRS 16
are still being assessed pending the finalisation of the tax treatment in certain jurisdictions.

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Financial statements continued

Group five-year financial summary

2018 2017
2019 restated restated 2016 2015
£m £m £m £m £m
Summarised income statements:
Revenue 386.4 446.3 433.8 456.8 469.8
Gross profit 210.4 250.3 256.1 274.2 287.2
Underlying EBITDA 2.9 7.1 16.0 32.8 29.4
Operating (loss)/profit (16.4) (67.0) (9.7) 14.8 8.2
Underlying operating (loss)/profit (8.5) (5.2) 3.8 20.3 15.8
Net finance costs (8.4) (2.8) (2.0) (2.0) (1.6)
Underlying (loss)/profit before tax (16.9) (8.0) 1.8 18.3 14.2
Separately reported items (7.9) (61.8) (13.5) (5.5) (7.6)
(Loss)/profit before tax (24.8) (69.8) (11.7) 12.8 6.6
Tax 2.8 6.2 2.2 (2.7) (2.1)
(Loss)/profit for the financial period (22.0) (63.6) (9.5) 10.1 4.5
Extracts from balance sheets:
Non-current assets 130.2 139.2 177.2 169.0 171.4
Net assets 49.7 9.6 67.8 74.0 59.5
Net (debt)/cash 27.4 (53.0) (9.8) (1.1) 0.5
Ratios and statistics:
Number of stores at period end 466 545 546 572 597
Total space (sq ft – gross) ‘000 4,222 4,908 5,051 5,150 5,444
Gross margin (%) 54.5% 58.1% 59.0% 60.0% 61.1%
Underlying EBITDA (%) 0.8% 1.6% 0.6% 7.2% 6.3%
Underlying (loss)/earnings per share (pence) (5.1p) (5.8p) (1.3p) 20.8p 15.5p
Basic (loss)/earnings per share (pence) (7.9p) (93.6p) (14.0p) 14.9p 6.7p

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Independent auditors’ report

Report on audit of the financial statements
Opinion
In our opinion, Carpetright plc’s Group financial statements and Company financial statements (the “financial statements”):
give a true and fair view of the state of the Group’s and of the Company’s affairs as at 27 April 2019 and of the Group’s loss and
the Group’s and the Company’s cash flows for the 52 week period (the “period”) then ended;
have been properly prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and,
as regards the Company’s financial statements, as applied in accordance with the provisions of the Companies Act 2006; and
have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards the Group financial statements, Article
4 of the IAS Regulation.
We have audited the financial statements, included within the Annual Report and Accounts (the “Annual Report”), which comprise:
the Group and Company balance sheets as at 27 April 2019; the consolidated income statement and consolidated statement of
comprehensive income, the Group and Company statements of cash flow, and the Group and Company statements of changes
in equity for the 52 week period then ended; and the notes to the financial statements, which include a description of the significant
accounting policies.
Our opinion is consistent with our reporting to the Audit Committee.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities
under ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the financial statements section of our report. We
believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We remained independent of the Group in accordance with the ethical requirements that are relevant to our audit of the financial statements
in the UK, which includes the FRC’s Ethical Standard, as applicable to listed public interest entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements.
To the best of our knowledge and belief, we declare that non-audit services prohibited by the FRC’s Ethical Standard were not provided
to the Group or the Company.
Other than those disclosed in note 3 to the financial statements, we have provided no non-audit services to the Group or the Company
in the period from 29 April 2018 to 27 April 2019.

Material uncertainty relating to going concern – Group and Parent Company

In forming our opinion on the Group and Company financial statements, which is not modified, we have considered the adequacy of
the disclosure made in note 1 to the financial statements concerning the Group and Company’s ability to continue as a going concern.
The Group and Company meet their day-to-day working capital requirements through their debt facilities and available cash resources.
The Group’s current bank facilities include a revolving credit facility of £45.0m, a Sterling overdraft of £7.5m and a Euro overdraft of €2.4m,
all of which are committed to the end of December 2019. The Meditor shareholder loan of £17.3m plus accrued interest, is repayable in
July 2020. The principal bank facilities are subject to a number of financial covenants, comprising a fixed charge cover covenant, an
EBITDA covenant and a net debt covenant. These covenants are subject to testing at the end of July and October 2019 and the rolling
EBITDA covenant is the covenant with the least headroom over the remaining term.
Management’s forecast inherently involves a level of uncertainty due to trading conditions and/or external market conditions, including
any potential impacts relating to the UK’s exit from the European Union, and shows a potential breach of the EBITDA covenant when
management’s downside sensitivities are applied. Should a breach occur and no mitigating action taken, the facilities may be cancelled
and amounts accrued or outstanding would be immediately due and payable. In addition, the existing facilities may not provide sufficient
liquidity if the trading performance is below management’s downside forecast. The forecast for the Group for the 15 months from the
approval of these financial statements includes assumptions that the Group will be able to replace the existing facilities with appropriate new
facilities, pay back or renegotiate the payment terms of the shareholder loan and accrued interest, currently repayable in July 2020, and/or
deliver strategic asset sales to reduce indebtedness. Whilst discussions are ongoing with existing lenders, this is dependent on reaching
an agreement of the overall size and term of the facilities and the covenant restrictions to be applied. Management have already identified
certain strategic assets and are evaluating their disposal, the proceeds of which would reduce the level of refinancing required. Each of
these items are subject to a level of uncertainty, which may also include the need to obtain shareholder approval for new or revised facilities
to be put in place and/or for asset disposals to occur. Additionally, without mitigating action, the trading uncertainties noted above could
impact on compliance with any new covenant restrictions to be put in place and the adequacy of available liquidity as part of any new
facilities. These conditions, along with the other matters explained in note 1 to the financial statements, indicate the existence of material
uncertainties which may cast significant doubt about the Group’s ability to continue as a going concern. The Group and Company financial
statements do not include the adjustments that would result if the Group and/or Company were unable to continue as a going concern.

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Financial statements continued
Independent auditors’ report continued

Our audit approach

Overview

Overall Group materiality: £1.9 million (2018: £2.2 million), based on 0.5% of Group revenue.
Overall Company materiality: £1.5 million (2018: £1.8 million), based on 0.5% of Company revenue.
Materiality

Full scope audits performed over UK segment and Republic of Ireland and Netherlands reporting units.
Audit scope Full scope audits covered 96% of Group revenue and 97% of Group profit before tax.

Areas of Impairment of freehold and long leasehold properties (Group and Company).
focus
Impairment of store assets and onerous leases (Group and Company).
Classification of separately reported items ('SRI') (Group).

The scope of our audit

As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements.
Capability of the audit in detecting irregularities, including fraud
Based on our understanding of the Group and industry, we identified that the principal risks of non-compliance with laws and regulations
related to UK tax legislation (including VAT, payroll taxes and income tax) and health and safety regulations, and we considered the extent
to which non-compliance might have a material effect on the financial statements. We also considered those laws and regulations that
have a direct impact on the preparation of the financial statements such as the Companies Act 2006 and the Listing Rules. We evaluated
management’s incentives and opportunities for fraudulent manipulation of the financial statements (including the risk of override of controls),
and determined that the principal risks were related to posting inappropriate journal entries to increase revenue or reduce expenditure, and
management bias in accounting estimates and judgements. The Group engagement team shared this risk assessment with the
component auditors so that they could include appropriate audit procedures in response to such risks in their work. Audit procedures
performed by the Group engagement team and/or component auditors included:
Discussions with management and internal audit, including consideration of known or suspected instances of non-compliance with laws and
regulation and fraud;
Review of legal expenditure in the year to identify potential non-compliance with laws and regulation;
Assessment of matters reported on the Group’s whistleblowing helpline and the results of management’s investigation of such matters;
Challenging assumptions and judgements made by management in their significant accounting estimates, in particular in relation to
impairment of assets, onerous lease provisions and classification of separately reported items (see related key audit matter below); and
Identifying and testing journal entries, in particular any journal entries posted with unusual account combinations.
There are inherent limitations in the audit procedures described above and the further removed non-compliance with laws and regulations
is from the events and transactions reflected in the financial statements, the less likely we would become aware of it. Also, the risk of not
detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve
deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion.
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud)
identified by the auditors, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit;
and directing the efforts of the engagement team. These matters, and any comments we make on the results of our procedures thereon,
were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters. In addition to going concern, described in the Material uncertainty related to going concern
section above, we determined the matters described below to be the key audit matters to be communicated in our report. This is not a
complete list of all risks identified by our audit.

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Key audit matter How our audit addressed the key audit matter
Impairment of freehold and long leasehold properties We assessed the third party valuations based on our
Refer to Note 1 (Accounting policies and Critical accounting understanding of the UK and European retail property market
estimates and judgments), Note 5 (Separately reported items), and an independent benchmarking analysis performed by
Note 11 (Property, plant and equipment) and to the Audit Committee our internal property valuation experts to consider whether the
Report on pages 32-35. assumptions used in the estimation of the market value were
The Group owns freehold and long leasehold stores in the UK reasonable. Our analysis found that there had been no material
and in Europe. We focused on the risk that the carrying value of change in the commercial property market from the date the third
the properties, including the fixed assets attributable to these stores, party valuations had been carried out (between November 2017
may be overstated and that an impairment charge may be required. and January 2018) to the April 2019 period end.

Having identified that impairment indicators existed at the period We found the methodology to be appropriate for calculating the
end, the directors compared the carrying value of the assets against fair value.
the higher of value in use and fair value less costs to sell. In doing We tested the value-in-use models, including comparing the
so the directors treated each store as a separate cash-generating unit forecasts used in them to the latest three year plan approved
(“CGU”) and valued it at the higher of the value in use calculations or by the Board, and tested the accuracy of underlying calculations.
the market value of the properties and their assets. We sensitised the model by applying a higher discount rate in
The value-in-use calculations are based on a three year perpetuity the UK, and a lower discount rate in the Netherlands to reflect
model using the growth assumptions within the three year plan as the country specific risk conditions. No material differences
applied to each store, with the resulting cash flows discounted at were noted.
the asset-specific pre-tax discount rate of 9.9%. We tested the directors’ key assumptions, in particular:
The fair values are taken from third party valuations carried out by sales growth and margin improvement plans by comparing
an independent valuer between November 2017 and January 2018; these assumptions to recent trading results for the Group
these valuations are based on market value assuming a ten year sale
the long term growth rate by comparing the assumptions to the
and leaseback arrangement.
retail sector as a whole and forecasts of the wider economy in
The directors’ impairment review resulted in an impairment charge UK and Netherlands; and
of £0.8m in the current period.
the discount rate by assessing the cost of capital for the Group.
We focused on this area because of the magnitude of the carrying
Whilst the pre-tax discount rate used in the directors’ impairment
value of the underlying assets and because of the significant
model for freehold and long leasehold properties in the UK is
judgement required in determining the fair value and the value
outside of the range that we independently estimated, based
in use of each store, particularly regarding the sales and operating
on market data and analysis of comparable companies, and
margins, growth rates, and discount rates.
the discount rate applied for the Netherlands' properties is
Group and Company within our range, the resulting difference is not material.

Impairment of store assets and onerous leases We tested the directors’ assessment of impairment triggers
Refer to Note 1 (Accounting policies and Critical accounting for the store assets, making sure store assets at all loss-making
estimates and judgments), Note 5 (Separately reported items), Note stores had been written down to the higher of value in use and
11 (Property, plant and equipment), Note 20 (Provisions for liabilities fair value less costs to sell where considered appropriate.
and charges) and to the Audit Committee Report on pages 32 to 35. With respect to the provision for onerous leases, we checked
The Group operates a number of short leasehold stores. The assets that stores assessed for onerous contracts are those that were
relating to these stores mainly comprise leasehold improvements and identified, and whose assets were impaired, following the store
fixtures and fittings. These are considered for impairment annually impairment review.
by the directors reviewing loss making stores. For all stores that We tested the value in use models, including comparing the
have made a loss in the year, the store assets are written down to forecasts included to the latest three year plan approved by the
the higher of value in use and fair value less costs to sell. Board, which takes into account the current challenging trading
An impairment charge of £0.8m was recognised in relation to store environment, and testing the accuracy of underlying calculations.
assets as a result of underlying store performances. No material exceptions were noted from our testing.
Furthermore, consideration was given to leases where the stores have
been closed or are loss-making to the extent that they cannot cover
their unavoidable property costs and are therefore classified as
onerous leases.
An £8.5m provision for onerous leases remained on the balance
sheet at the April 2019 period end. This has reduced from April 2018
(£13.9m) due to the completion of the CVA process resulting in releases
of £2.0m and utilisation of £6.3m as part of normal trading.
The provision is measured at the present value of the lower of the
expected cost of terminating the contract and the expected net cost
of continuing with the contract. The provision is based on a review
of the lease contracts and the directors’ estimate of the timings to exit
the leases. These estimates are based upon available information and
knowledge of the property market
Group and parent

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Financial statements continued
Independent auditors’ report continued

Classification of separately reported items (‘SRI’) We evaluated the assessment of management covering
Refer to Note 1 (Accounting policies and Critical accounting estimates the nature of the item, cause of occurrence and the scale
and judgments), Note 5 (Separately reported items) and to the Audit of the impact of that item on reported performance.
Committee Report on pages 32-35. We considered and challenged the consistency of these
The Annual Report includes Alternative Performance Measures of exceptional items, both within the single set of financial
(‘APMs’); primarily ‘Underlying performance’ and ‘Separately statements and compared to previous periods.
reported items’. We considered whether the SRI recorded were recognised
Underlying performance is presented before the impact of SRI. and presented in accordance with the Group’s disclosed
The net total SRI charge is £7.9mat the year end, including the £2.7m accounting policy.
asset impairments and net onerous lease charges as detailed above. We agreed that due to either the material quantum of the
Other items included in SRI are £1.3m gain on disposal and exit of amounts or their non-underlying nature it was appropriate
properties, £2.0m ERP dual running costs, £3.0m one-off increase in to classify these as SRI.
inventory provisions, £0.5m share-based payment charge, and £0.9m In relation to the specific types of cost incurred:
legacy pension scheme administration cost. We assessed the different types of costs incurred and the
We focused on the presentation and disclosure of SRI because point an obligation was established to determine whether
of the quantum of the balance and of its importance to the users’ these were recognised in the correct accounting period.
understanding of the underlying performance of the business and For each material category of costs we tested a sample
the risk of manipulation of underlying results. of items by tracing to supporting documentation and
understanding the rationale for the classification as SRI.
We have tested completeness of the SRI by reviewing the
post-balance sheet events.
We found no material issues from our testing.
In our testing of disclosures in the Annual Report we focused
on disclosures of SRI in Note 5 and Alternative Performance
Measures and that these were explained and presented
alongside statutory measures.
We also considered the outcome of the Audit Committee’s
own review which concluded the Annual Report is fair,
balanced, and understandable.
Group

How we tailored the audit scope

We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as a
whole, taking into account the structure of the Group and the Company, the accounting processes and controls, and the industry in which
they operate.
The Group is structured across two segments, being the UK and Rest of Europe, with the majority of trading occurring in the UK segment.
The Rest of Europe segment comprises three reporting units, being the Republic of Ireland, the Netherlands and Belgium.
In establishing the overall approach to the Group audit, we identified that the UK segment and the Republic of Ireland and Netherlands
reporting units required a full scope audit of their complete financial information as they were considered financially significant to the Group.
The audit of the UK segment and the Republic of Ireland reporting unit was performed by the Group audit team. The audit of the
Netherlands reporting unit was performed by PwC Belgium as component auditor operating under our instruction. Audit work was
performed over the consolidation process, asset impairment, onerous leases, separately reported items, tax and going concern at a
consolidated Group level.
Where the work was performed by the component auditor, we determined the level of involvement we needed to have in their audit work
to be able to conclude whether sufficient audit evidence had been obtained as a basis for our opinion on the Group financial statements
as a whole. As part of our year end procedures, we held detailed discussions with the Netherlands reporting unit component audit team
including evaluation of and review of the work performed, update calls on the progress of their fieldwork and attending the clearance
meeting with management (by phone).
The reporting units where we performed full scope audit work accounted for 96% of Group revenue and 97% of Group profit before tax.
Our scoping of the Company was based on the materiality of the Company and covered all material financial statement line items and
related disclosure notes. All work was performed by the Group audit team.

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Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These,
together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit
procedures on the individual financial statement line items and disclosures and in evaluating the effect of misstatements, both individually
and in aggregate on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:

Group Financial Statements Company Financial Statements

Overall materiality £1.9m (2018: £2.2m). £1.5m (2018: £1.8m).

How we determined it 0.5% of Group revenues. 0.5% of Company revenues.

Rationale for benchmark applied Consistent with the prior period, we have used Consistent with the prior period, we have used
revenues as a benchmark given the high level of revenues as a benchmark given the high level of
fixed costs in the business and because a small fixed costs in the business and because a small
fluctuation in revenue can result in a significant fluctuation in revenue can result in a significant
fluctuation of profit before tax. fluctuation of profit before tax.

For each component in the scope of our Group audit, we allocated a materiality that is less than our overall Group materiality. The range of
materiality allocated across components was between £700,000 and £1,500,000. Certain components were audited to a local statutory
audit materiality that was also less than our overall Group materiality.
We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £95,000 (Group audit)
(2018: £110,000) and £75,000 (Company audit) (2018: £107,000) as well as misstatements below those amounts that, in our view,
warranted reporting for qualitative reasons.
Going concern
In accordance with ISAs (UK) we report as follows:

Reporting obligation Outcome

We are required to report if we have anything material to add or draw We have nothing material to add or to draw attention to other
attention to in respect of the directors’ statement in the financial than the material uncertainty we have described in the material
statements about whether the directors considered it appropriate to uncertainty related to going concern section above.
adopt the going concern basis of accounting in preparing the financial
However, because not all future events or conditions can be
statements and the directors’ identification of any material uncertainties
predicted, this statement is not a guarantee as to the Group’s and
to the Group’s and the Company’s ability to continue as a going
Company’s ability to continue as a going concern. For example,
concern over a period of at least twelve months from the date of
the terms on which the United Kingdom may withdraw from the
approval of the financial statements.
European Union are not clear, and it is difficult to evaluate all of the
potential implications on the Group’s trade, customers, suppliers
and the wider economy.

We are required to report if the directors’ statement relating to Going We have nothing to report.
Concern in accordance with Listing Rule 9.8.6R(3) is materially
inconsistent with our knowledge obtained in the audit.

Reporting on other information

The other information comprises all of the information in the Annual Report other than the financial statements and our auditors’ report
thereon. The directors are responsible for the other information. Our opinion on the financial statements does not cover the other
information and, accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly stated in this report, any form
of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether
the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to
be materially misstated. If we identify an apparent material inconsistency or material misstatement, we are required to perform procedures
to conclude whether there is a material misstatement of the financial statements or a material misstatement of the other information. If,
based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to
report that fact. We have nothing to report based on these responsibilities.

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Financial statements continued
Independent auditors’ report continued

With respect to the Strategic Report and Directors’ Report, we also considered whether the disclosures required by the UK Companies
Act 2006 have been included.
Based on the responsibilities described above and our work undertaken in the course of the audit, the Companies Act 2006 (CA06), ISAs
(UK) and the Listing Rules of the Financial Conduct Authority (FCA) require us also to report certain opinions and matters as described
below (required by ISAs (UK) unless otherwise stated).

Strategic Report and Directors’ Report

In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic Report and Directors’ Report
for the period ended 27 April 2019 is consistent with the financial statements and has been prepared in accordance with applicable legal
requirements. (CA06)
In light of the knowledge and understanding of the Group and Company and their environment obtained in the course of the audit, we did
not identify any material misstatements in the Strategic Report and Directors’ Report. (CA06)

The directors’ assessment of the prospects of the group and of the principal risks that would threaten the solvency or liquidity of the group
We have nothing material to add or draw attention to regarding:
The directors’ confirmation on page 21 of the Annual Report that they have carried out a robust assessment of the principal risks facing the
Group, including those that would threaten its business model, future performance, solvency or liquidity.
The disclosures in the Annual Report that describe those risks and explain how they are being managed or mitigated.
The directors’ explanation on page 22 of the Annual Report as to how they have assessed the prospects of the Group, over what period
they have done so and why they consider that period to be appropriate, and their statement as to whether they have a reasonable
expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment,
including any related disclosures drawing attention to any necessary qualifications or assumptions.
We have nothing to report having performed a review of the directors’ statement that they have carried out a robust assessment of the
principal risks facing the Group and statement in relation to the longer-term viability of the Group. Our review was substantially less in
scope than an audit and only consisted of making inquiries and considering the directors’ process supporting their statements; checking
that the statements are in alignment with the relevant provisions of the UK Corporate Governance Code (the “Code”); and considering
whether the statements are consistent with the knowledge and understanding of the Group and Company and their environment obtained
in the course of the audit. (Listing Rules)

Other Code Provisions

We have nothing to report in respect of our responsibility to report when:
The statement given by the directors, on page 62, that they consider the Annual Report taken as a whole to be fair, balanced and
understandable, and provides the information necessary for the members to assess the Group’s and Company’s position and performance,
business model and strategy is materially inconsistent with our knowledge of the Group and Company obtained in the course of performing
our audit.
The section of the Annual Report on page 34 describing the work of the Audit Committee does not appropriately address matters
communicated by us to the Audit Committee.
The directors’ statement relating to the Company’s compliance with the Code does not properly disclose a departure from a relevant
provision of the Code specified, under the Listing Rules, for review by the auditors.

Directors’ Remuneration
In our opinion, the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies
Act 2006. (CA06)

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Responsibilities for the financial statements and the audit

Responsibilities of the directors for the financial statements
As explained more fully in the Statement of directors’ responsibilities set out on page 61 and 62, the directors are responsible for the
preparation of the financial statements in accordance with the applicable framework and for being satisfied that they give a true and fair
view. The directors are also responsible for such internal control as they determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Group’s and the Company’s ability to continue as
a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless the
directors either intend to liquidate the Group or the Company or to cease operations, or have no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and only for the Company’s members as a body in accordance with Chapter 3 of
Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any
other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our
prior consent in writing.

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Financial statements continued
Independent auditors’ report continued

Other required reporting

Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if, in our opinion:
we have not received all the information and explanations we require for our audit; or
adequate accounting records have not been kept by the Company, or returns adequate for our audit have not been received from branches
not visited by us; or
certain disclosures of directors’ remuneration specified by law are not made; or
the Company financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with the
accounting records and returns.
We have no exceptions to report arising from this responsibility.
Appointment
Following the recommendation of the audit committee, we were appointed by the directors on 22 September 2004 to audit the financial
statements for the year ended 30 April 2005 and subsequent financial periods. Following a competitive tender which concluded in May
2016 and was reported in the 2016 Annual Report, we were re-appointed. The period of total uninterrupted engagement is 15 years,
covering the years ended 30 April 2005 to 27 April 2019.

Julian Jenkins
Senior Statutory Auditor
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
25 June 2019

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Advisers

Financial advisers Stockbrokers Registrars

Deutsche Bank AG Deutsche Bank AG Computershare Investor Services plc
1 Great Winchester Street 1 Great Winchester Street The Pavilions
London London Bridgwater Road
EC2N 2DB EC2N 2DB Bristol
BS99 6ZY
Solicitors Peel Hunt
Travers Smith LLP 111 Old Broad Street Company Secretary and
10 Snow Hill London registered office
London EC2N 1PH Jeremy Sampson
EC1A 2AL
Independent auditors Carpetright plc
PricewaterhouseCoopers LLP Purfleet Bypass
Chartered Accountants and Purfleet
Statutory Auditors Essex
1 Embankment Place RM19 1TT
London Telephone: 01708 802000
WC2N 6RH Registered in England & Wales with number
2294875
Bankers
National Westminster Bank plc
Tooting Branch
30 Tooting High Street
London
SW17 0RG

This report is printed on paper certified in accordance with the FSC®

(Forest Stewardship Council®) and is recyclable and acid-free.
Pureprint LTD is FSC certified and ISO 14001 certified showing that
is committed to all round excellence and improving environmental
performance is an important part of this strategy.
Pureprint Ltd aims to reduce at source the effect its operations have
on the environment and is committed to continual improvement,
prevention of pollution and compliance with any legislation or
industry standards.
Pureprint Ltd is a Carbon/Neutral® printing company.
Designed and produced by Black Sun Plc
www.blacksunplc.com   

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Carpetright plc
Purfleet Bypass
Purfleet, Essex RM19 1TT
Telephone +44 (0)1708 802000
www.carpetright.co.uk
www.carpetright.plc.uk