IAS 1 paras 134,135, capital management including facilities and covenant disclosures

Dunelm Group plc – Annual report – 27 June 2020

Industry: retail

17 FINANCIAL RISK MANAGEMENT (extract)

CAPITAL MANAGEMENT

The Group considers equity plus debt as capital. There are no externally imposed capital requirements on the Group.

The Board’s objective with respect to capital management is to ensure the Group continues as a going concern in order to optimise returns to shareholders. The Board’s policy is to retain a strong capital base so as to maintain investor, creditor and market confidence, and to sustain future development. The Board regularly monitors the level of capital in the Group to ensure that this can be achieved.

From time to time the Group purchases its own shares on the market. These shares are intended to be used for issuing shares under the Group’s share option programmes. The Board has authorised a share purchase programme designed to ensure that all options expected to vest under share option schemes can be fulfilled out of treasury shares.

The Group has a syndicated Revolving Credit Facility (RCF) of £165m which is in place until 2023. There is also an optional accordion facility of £75m. The terms of the RCF are consistent with normal practice and include covenants in respect of leverage (net debt to be no greater than 2.5× EBITDA before exceptional items and IFRS 16 impact) and fixed charge cover (EBITDA before exceptional items and IFRS 16 impact to be no less than 1.75× fixed charges), both of which were met comfortably as at 27 June 2020 as shown on page 192. In addition, the Group maintains £10m of uncommitted overdraft facilities with one syndicate partner bank.

The gearing ratio and banking covenants, on a pre-IFRS 16 basis, were as follows:

The gearing and net debt ratios are negative due to the Group being in a net cash position at the period end date.