2021 performance summary Contents ACTIVE CUSTOMER GROWTH¹ Strategic report +8.5% 1 2021 performance summary 2 Introduction from our CEO 3 Our purpose 2020 4 Ambitious about our brand 6 Ambitious about being a good +1.3% company 8 Ambitious about profitable growth 10 Our business TOTAL SALES 12 Chairman’s statement +26.3% 14 Stakeholder overview 18 Sustainability overview 20 CEO’s review 2020 26 Customer insights –3.9% and market trends 28 Our business model 30 Our strategy 32 Key performance indicators PROFIT BEFORE TAX 34 CFO’s review £157.8m 40 Sustainability 76 Risks and risk management 79 Principal risks and uncertainties 2020 89 Going concern, viability £109.1m and s172(1) statements Governance & regulatory information 93 Corporate governance report FREE CASH FLOW² 93 Chairman’s letter 96 Directors and officers £108.5m 2020£174.7m100 Board leadership andcompany purpose103 Section 172 Companies Act 2006114 Division of responsibilities120 Composition, succession and evaluation 120 – Nominations Committee report 130 Audit, risk and internal control FY21 highlights 130 – Audit and Risk Committee report 138 Remuneration • Very strong sales growth of 26% (21% vs FY19), despite stores being closed 138 – Remuneration Committee report to customers for more than a third of the financial year, reflecting the strength142 – Directors’ Remuneration Policy 2020 of our total retail system 153 – Implementation report 172 Directors’ report • Significant market share gain, with FY21 UK homewares market share up 177 Statement of Directors’ 1.6%pts to 9.1%3 responsibilities • Active customer growth of 8.5%, driven by strong growth across digital Financial statements channels 179 Independent auditors’ report • Digital sales grewby 115%, with successful scaling of technology and 186 Consolidated Income Statement 186 Consolidated Statement operations to respond to the increase in demand, including significant of Comprehensive Income expansion of our Click & Collect offer 187 Consolidated Statement • Gross margin +130bps, benefiting from a smaller Winter Sale due to store of Financial Position closures, sourcing gains and the delayed timing of our Summer Sale (into FY22) 188 Consolidated Statement of Cash Flow • PBT of £157.8m, +45% (FY20: £109.1m, FY19 £125.9m) reflecting ongoing 189 Consolidated Statement focus on operational grip, despite the impact of store closures of Changes in Equity • Free cash flow of £108.5m, includingworking capital outflow of £35.0m 190 Accounting Policies (FY20 working capital inflow £80.1m), with net cash at period end of £128.8m 197 Notes to the Consolidated Financial Statements (FY20: £45.4m) 217 Parent Company Statement • Commitment to a Net Zero Pathway, targeting a 50% reduction in of Financial Position greenhouse gas emissions by 2030 218 Parent Company Statement of Cash Flows • Final dividend of 23.0p, taking the full year ordinary dividend to 35.0p, 218 Parent Company Statement of reflecting our strong performance and confidence in future growth Changes in Equity • In addition, and noting that no dividends were paid to shareholders in respect 219 Parent Company Accounting Policies 221 Notes to the Parent Company of FY20, the Board has declared a special dividend of 65.0p in line with our Financial Statements published capital policy, maintaining a prudent approach to leverage given Other information the uncertain macroeconomic outlook. 225 Advisers and contacts 226 Store listing 1. Unique active customers who have shopped in the 12 months to June 2021, based on management estimates using Barclays data. 2. Free cash flow is defined as net cash generated from operating activities less capex (net of disposals), net interest paid, interest on lease liabilities and repayment of lease liabilities. 3. GlobalData UK homewares market, July 2020 to June 2021. DUNELM GROUP PLC ANNUAL REPORT & ACCOUNTS 2021 1 STRATEGIC REPORT GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION O ur renewed purpose