amortisation of arrangement fees relating to There was a working capital outflow of £35.0m the Group’s Revolving Credit Facility amounting in the period (FY20: £80.1m inflow). The inventory to £1.0m (FY20: £1.8m) and losses of £2.4m balance at the end of FY20 was unusually low (FY20: £0.3m gain) resulting from foreign due to the strong sales in the final quarter so the exchange differences on the translation of dollar working capital outflow reflected a return to a denominated assets and liabilities. Interest more usual stockholding. Inventory at the end received on cash deposits was £0.1m (FY20: £0.1m). of the period was £172.4m(FY20: £118.2m). This impact was partially offset by an increase in the PBT in the period was £157.8m (FY20: £109.1m), an VAT payable due to the strong trading since stores increase of £48.7m year-on-year. Profit after tax of re-opened in Q4 FY21. We estimate a further £128.9m (FY20: £87.7m) reflected an effective tax working capital outflow of c.£15-25m in FY22. rate of 18.3% (FY20: 19.6%). The effective tax rate is lower than the previous year due to the timing Total capital investment of £15.7m (FY20: £24.9m) of R&D claims and the enefit from the changeb was lower than historic levels, due in part to in future corporation tax rate on the deferred delays in store development caused by Covid-19 tax asset. restrictions as well as our policy to expense digital development spend and the absence of any Basic earnings per share (EPS) for the period were freehold acquisitions. FY21 capital expenditure 63.7 pence (FY20: 43.4p). Diluted earnings per included one new store and two relocations share were 62.9 pence (FY20: 42.9p). (£4.7m), refits in existing stores (£5.5m), technology and digital infrastructuredevelopments (£3.6m) We anticipate maintaining a PBT margin of c.12% as well as investment in supply chain operations over the medium term, meaning absolute returns (£1.5m). Moving forwards over the medium term, will grow as the business scales. we expect capex levels of between £30-40m per annum. CAPITAL AND In FY22 approximately half of the capital DIVIDEND POLICY investment will be in stores where we expect to open three to five new stores, including • Target average net debt between 0.2× smaller store trials, and accelerate our store and 0.6× of the last 12 months’ EBITDA refit programme and decarbonisation initiatives. (post IFRS 16 basis) The remaining capex will be split between investment in supply chain capacity (new furniture • Ordinary dividend cover of between warehouse and dedicated e-commerce facility) 1.75× and 2.25× earnings per share during and technology, which includes upgrades to the year to which the dividend relates commercial and supply chain systems to enable • Return surplus cash if net debt consistently long term growth. falls below the minimum target of 0.2× EBITDA Tax paid of £35.5m (FY20: £34.3m) was similar to FY20 despite the higher profits. FY20 included two additional payments on account in order to adopt CASH GENERATION AND NET CASH the new rules on the timing of corporation tax In the period, the Group generated £108.5m of payments. free cash flow (FY20: £174.7m). FY21 FY20 Repayments of lease liabilities of £54.0m (FY20: £m £m £37.7m) were higher than the prior year due to the Operating profit 166.4 116.0 deferral of the June 2020 rent payments into FY21 and a full year of payments this year. Depreciation and amortisation 1 80.8 80.2 After total dividend payments in the period of Working capital £24.3m (FY20: £106.0m), the Group ended the year (outflow)/inflow (35.0) 80.1 with a net cash position of £128.8m (FY20: £45.4m). Share-based payments 7.5 2.1 Tax paid (35.5) (34.3) Net cash generated from operating activities 184.2 244.1 Capex (net of disposals) (15.7) (24.9) Net interest2 (0.7) (1.3) Interest on lease liabilities (5.3) (5.5) Repayment of lease liabilities (54.0) (37.7) Free cash flow 108.5 174.7 1. Including impairment and loss on disposal. 2. Excluding interest on lease liabilities. DUNELM GROUP PLCANNUAL REPORT & ACCOUNTS 2021 37 STRATEGIC REPORT GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION