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Section 172 Statement

Year ending 21st February 2021

This statement summarises how the directors have exercised their duties with regards to the matters set out in section 172 (a to f) of the Companies Act 2006.

Hobbycraft Group of Companies

The Hobbycraft group of companies comprises:

Company NameCompany Number
Hobbycraft Group Limited07216034
Stitch 2 Limited07216740
Stitch 3 Limited07217283
Stitch Bidco Limited07068903
Hobbycraft Trading Limited00806269
Hobbycraft Superstores Limited03289788

Hobbycraft Group Limited is the group’s parent company and the only trading company is Hobbycraft Trading Limited.

Our stakeholders

The Board considers the interests of stakeholders in decision-making and seeks to understand their interests via direct engagement by directors and by reviewing reports and updates from members of management. The directors consider that the following are the group’s key stakeholders:

  • Colleagues: the strength of our business depends upon the knowledge, hard work and dedication of our colleagues, who in turn rely on the business for stable employment and for opportunities to realise their potential.
  • Customers: it is essential to our future that we consistently meet the needs of our customers and maintain brand loyalty, supported by our highly successful Club which has over 5 million loyal members. We aim to continuously provide high quality products at accessible prices and to stay up to date with crafting trends.
  • Communities and the environment: serving local communities is at the heart of Hobbycraft’s ethos, whether through catering for local crafting needs or through our charity partnerships, whilst we seek to minimise any adverse impact upon the environment.
  • Suppliers: supplier relationships are fundamental to our success, not least because all our products are manufactured and delivered by suppliers, all our locations are leased sites and many of our essential services are provided by third parties. Furthermore, suppliers often rely on us for income and to create employment in their local areas.
  • Regulators: we seek to comply with all applicable laws and regulations and to maintain a cooperative relationship with regulatory bodies. We are proud of our reputation for high standards of business conduct.
  • Shareholders: we have a collaborative relationship with our shareholders and welcome the advice and experience that the majority shareholder brings to our Board. We rely on the majority shareholder as our main source of debt funding, and they rely on us to manage their investment in a sustainable way that generates value.

Consideration of long-term factors

The Board is mindful of the long-term implications of strategic decisions and carefully assesses those implications. For example, decisions around capital expenditure aim to balance the need to invest in the existing infrastructure with the objectives of growing the business and implementing new and improved systems.

The group’s success is dependent on the proper selection, pricing and merchandising of arts and craft products. We believe it is important to retain a range that meets the needs of our established customer base, who continue to benefit from our evolving specialist products, while also inspiring a new generation of customers through more accessible pricing and inspiring product selection. This is coupled with the inspiration that is provided by a wide range of in-store demonstrations and workshops as well as our online ‘Ideas’ blog and social media content. Our workshops in particular provide inspiration to customers in the local community and allow our colleagues to demonstrate their incredible knowledge and passion for crafting.

The group is also focused on multi-channel growth as we seek to better serve our customers’ needs. The group employs a robust selection process with regards to the opening of new stores and will continue to open new stores in relevant locations across the United Kingdom (including Northern Ireland) to drive profitability and brand awareness. This is coupled with the aim of increasing E-commerce participation as we continue to grow both online sales and profitability through further digital investment, whilst improving our online experience and offering.

The interests of colleagues

The interests of colleagues are always factored into the Board’s decision-making. That principle is helped by the length of service of the CEO and that of several members of the senior management team. There is extensive retail experience among the senior team members who have a strong understanding of and rapport with the colleague base. The senior team’s knowledge and active engagement enable the Board to maintain a sharp insight into the culture and views of colleagues, which is further informed by the annual engagement survey conducted anonymously. The results of the survey are considered a core KPI, and the overall engagement score of 92% for the year ending 21st February 2021 retained the high score from the prior year.

In addition, Hobbycraft has a number of other effective engagement mechanisms including the fact that colleagues are kept informed of performance and strategy through regular presentations and updates. These updates are delivered via a combination of face-to-face meetings and company newsletters.

Executive directors attend key trading meetings throughout the year as well as regular meetings with colleagues, including listening groups conducted by the CEO. These inclusive principles were evidenced by Hobbycraft finishing fifth in the Sunday Times Best Companies Survey 2020 and fourth in the Best Companies Survey 2021, along with receiving 3-star accreditation in 2021.

Board meetings are attended by the People Director to ensure that the Board is kept abreast of employee-related matters, including demographics, engagement activities, the results of surveys, labour turnover rates, diversity and gender equality, learning and development activity, and pay and reward matters. The latter is also discussed in formal remuneration committee meetings. A new Diversity and Inclusion committee has been formed, with the following mission statement: making sure all diversities are represented and included within our recruitment, advertising, products and content. The committee is made up of a diverse group of colleagues from across the business.

With regards to health, safety and wellbeing, the Board is updated monthly on safety performance and risk management. Trained mental health first aiders are available to all colleagues, which is complemented by Hobbycraft’s partnership with retailTRUST, a charity that provides practical and emotional support. The group also operates flexible working arrangements, which all colleagues are invited to apply for.

Relationships with suppliers, customers and others

The Board is briefed on major contract negotiations with key suppliers and a formal policy is in place to govern the contract approval process. A balance is sought between the need to obtain value for money, to maintain or improve quality of service and to foster strong relationships with key suppliers. Any new suppliers are subject to a due diligence review, determining their ability to supply the products or service with acceptable quality, along with their financial stability and their legal and ethical position.

The sentiment of customers is measured via monitoring sales performance figures and shopping behaviours, as well as direct engagement using surveys and listening groups, all of which are closely monitored by the Board on a weekly or monthly basis. The interests of customers are considered in decision-making, such as with respect to the store portfolio, the online shopping experience, product selection, and the monitoring of suppliers to ensure quality and safety standards are met. Customer satisfaction is a core KPI, and the Net Promoter Score (NPS) for stores of 88.0% for the year ending 21st February 2021 improved upon the high standard shown by the prior year’s result of 86.0%. NPS is an industry-wide management tool that is used to assess the loyalty of customer relationships by asking “How likely is it you would recommend us to a friend?”, with the balance of responses between “Promoters” and “Detractors” generating the NPS %.

The Board is focused on meeting all regulatory obligations and strives for best practice in that regard, with decision-making informed by regular dialogues with regulatory bodies, such as the Chartered Trading Standards Institute. Hobbycraft manages its tax affairs proactively to comply with tax legislation, engaging with HMRC where required and seeking expert advice from qualified tax professionals. Full information on risk management and regulatory compliance is included in the accounts of Hobbycraft Group Limited, which are publicly available and can be obtained from 7 Enterprise Way, Aviation Park, Bournemouth International Airport, Christchurch, Dorset, BH23 6HG.

The CFO is responsible for managing the relationships with our lenders, insurance provider and credit rating agencies, and for the group’s cash and debt management and financing activities. The CFO provides regular reports to the Board on these activities, including plans to ensure appropriate access to debt capital and monitoring headroom on facilities.

Acting fairly between company members

Ownership of the Company is divided between “A” and “B” ordinary shares. Each of these shares carries a single right to vote and entitles the holder to attend general meetings and to receive dividends, with no class of shares preferred to the other. As such, all shareholders benefit from the same rights, as set out in the Company’s articles of association and the Companies Act 2006. This structure is reflective of the Board’s key principle of treating all Company members fairly.

Standards of business conduct and impacts on the community and the environment

The Board supports the group’s strategy with regards to supporting local communities, aiming to reduce adverse impacts on the environment and seeking to maintain the highest standards of business conduct. Environmental, social and corporate governance (ESG) principles are central to the business and factoring these into business decisions is important for stakeholders, colleagues and the communities in which we operate. As well as complying with regulatory requirements, we actively encourage our teams to make ESG considerations a part of everyday business decision-making.

As a group, we are committed to becoming more sustainable as we grow, with a focus on colleague wellbeing, our store communities and the way we use our buying power to drive positive change.

We continue to make progress against our internal Sustainability Commitment that we launched two years ago, with particular highlights in the year ending 21st February 2021 being:

  • Changes made to own-brand best sellers to reduce packaging waste and launched compostable packaging for our Christmas seasonal ranges
  • Mental health first aiders in all areas of the business and retailTRUST employee assistance programme for all colleagues
  • All electricity sourced from renewable energy
  • Further investment in our Artisan programme (our in-store expert crafting colleagues who embody our love of craft and all things making) taking the total number of Artisans to 31, with the aim to have 100 Artisans in the business by the end of the next financial year
  • Signed up to the OPRL (on packaging recycling label) scheme which means the most recognised consumer symbols for recycling information are now applied to all own-brand products
  • Continued fundraising for our charity partner, Together for Short Lives, with over £1.8m raised since the start of our partnership
  • Backhauling all store waste to our distribution centre for recycling, with 1,394 tonnes of distribution centre materials recycled in the year
  • During the year, we have also supported multiple charities, with the donation of free products to support in the making of PPE for NHS staff as well as offering donations of goods to multiple children’s and homeless charities
  • In April 2021, Hobbycraft became a member of Sedex, an organisation that provides one of the world’s leading online platforms for companies to manage and improve working conditions in global supply chains
  • In June 2021, Hobbycraft became an FSC trademark licence holder able to promote FSC-certified goods, further strengthening our commitment to sourcing products with ethical and sustainable origins

Going forwards, we remain committed to continue to reduce our impact on the environment, support our colleagues and chosen charities, and ensure that we maintain integrity through ethical sourcing and supplier partnerships.

This statement has been approved and is fully supported by the Board of Directors.

Russell Harrison

Chief Financial Officer

5th August 2020