~~Group employees~~

In 2002/03 the average number of full-time equivalent persons employed (including directors) was 14,160 (UK: 4,746; US: 9,414).The Company usually employs a limited number of temporary employees during each Christmas season.

None of Signet’s employees in the UK and less than 1% of Signet’s employees in the US are covered by collective bargaining agreements. Signet considers its relationship with its employees to be excellent.

Description of property

Signet attributes great importance to the location and appearance of its stores. Accordingly, in both Signet’s US and UK operations, investment decisions on selecting sites and refurbishing stores are made centrally, and strict real estate criteria are applied.

The Company has sufficient distribution capacity to meet its current requirements in the US. It is planned to increase this capacity in 2004 to support future sales growth. In the UK investment is being made to reflect the increase in diamonds in the sales mix.

US

Substantially all of Signet’s US stores are leased. In addition to a minimum annual rental, a significant number of stores will pay additional rent based on sales above a specified base level. Under the terms of the typical lease, the US business is required to conform and maintain its usage to agreed standards, including meeting required advertising expenditures as a percentage of sales, and is responsible for its proportionate share of expenses associated with common area maintenance, utilities and taxes of the mall. The initial term of a mall store lease is generally ten years. At ~~1 February 2003~~31 January 2004 the average unexpired lease term of US leased premises was six years and some ~~44%~~43% of leases had terms expiring within five years. The Jared stores are normally on 20 year leases and rents are not turnover related.

During the past five financial years the US business has been generally successful in renewing its store leases as they expire and has not experienced difficulty in securing suitable locations for its stores. It is not believed that any of the store leases are individually material to the Group’s US operations.

A 337,000 square foot head office facility is leased in Akron, Ohio.

UK
At ~~1 February 2003~~31 January 2004 Signet UK held ~~seven~~ten freehold premises, 1815 premises where the lease had a remaining term in excess of 25 years and ~~675~~671 other leasehold premises. As is typically the case in retailing in the UK, the division’s stores are leased for

terms of up to 25 years, generally under full repairing and insuring leases (equivalent to triple net leases in the US). Wherever possible Signet is shortening the length of new leases that it enters into in order to improve the flexibility of its lease commitments. Rents are usually subject to upward review every five years if market conditions so warrant. An increasing proportion of rents are related to sales of the store, subject to a minimum annual value. At the end of the lease period, subject to certain limited exceptions, leaseholders generally have statutory rights to enter into a new lease of the premises on negotiated terms. At ~~1 February 2003~~31 January 2004 the average unexpired lease term of Signet’s leased premises in the UK was 1413 years. As current leases expire, Signet believes that it will be able to renew leases, if desired, for present store locations or to obtain leases in equivalent or improved locations in the same general areas. Signet has not experienced difficulty in securing leases for suitable locations for its UK stores. ~~Wherever possible Signet~~It is ~~shortening~~not believed that any of the ~~length of new~~store leases ~~that it enters into in order~~are individually material to ~~improve~~ the ~~flexibility of its lease commitments.~~Group’s UK operations.

Signet owns a 255,000 square foot warehouse and distribution centre in Birmingham and a 120,000 square foot administration centre at Colindale in North London.

Trademarks and trade names
Signet is not dependent on any material patents or licenses in either the US or the UK; however, it does have several well established trademarks and trade names which are significant in maintaining its reputation and competitive position in the jewellery retailing industry in both the US and the UK. These registered trademarks and trade names include the following in Signet’s US operations: Kay Jewelers; Jared The Galleria Of Jewelry; JB Robinson Jewelers; Marks & Morgan Jewelers; Belden Jewelers; Weisfield Jewelers; Osterman Jewelers; Shaw’s Jewelers; Rogers Jewelers; LeRoy’s Jewelers; Goodman Jewelers; Friedlander’s Jewelers; Every kiss begins with Kay; and Perfect Partner. These trademarks and trade names include the following in Signet’s UK operations: H.Samuel; Ernest Jones; Leslie Davis; and Forever Diamonds.

Group employees

In 2003/04 the average number of full-time equivalent persons employed (including directors) was 14,502 (UK: 4,562; US: 9,940). The Company usually employs a limited number of temporary employees during each Christmas season.

None of Signet’s employees in the UK and less than 1% of Signet’s employees in the US are covered by collective bargaining agreements. Signet ~~Group plc 21~~considers its relationship with its employees to be excellent.

20	Signet Group plc Annual Report & Accounts year ended 31 January 2004

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Financial review
for the 52 weeks ended 31 January 2004

	2003/04				2002/03⁽¹⁾				2001/02⁽¹⁾

	£m		%		£m		%		£m		%

Sales:
US	1,116.2		69.0		1,134.4		70.5		1,126.0		71.4
UK	501.0		31.0		473.6		29.5		452.1		28.6

Total	1,617.2		100.0		1,608.0		100.0		1,578.1		100.0

Operating profit:
US	151.4		71.4		155.2		77.6		145.1		79.0
UK	76.6		36.2		64.7		32.4		58.8		32.0
Group central costs	(5.7	)	(2.7	)	(6.0	)	(3.0	)	(5.1	)	(2.8	)

	222.3		104.9		213.9		107.0		198.8		108.2
Net interest payable	(10.4	)	(4.9	)	(14.0	)	(7.0	)	(15.0	)	(8.2	)

Profit before tax	211.9		100.0		199.9		100.0		183.8		100.0

(1)	Restated for the implementation of FRS 17 – ‘Retirement Benefits’.

Introduction
The key drivers of operating profitability are the:

•	rate of sales growth,
•	balance between like for like sales growth and sales from new space,
•	achieved gross margin,
•	level of cost increases experienced by the Group,
•	level of net bad debt charge relating to the in-house credit card in the US, and
•	movements in the US dollar to pound sterling exchange rate, since the majority of the Group’s profits are generated in the US and the Group reports in pounds sterling.

Gross margins in retail jewellery are above the average for speciality retailers reflecting the slow inventory turn. Gross margins depend on Signet’s pricing policy and movements in its costs of goods sold. In general, gross margins on gold jewellery are above the Group’s average, while diamond jewellery margins are broadly in line with the Group’s average. The gross margin on watches and gift products is normally below that of diamonds. In addition, the gross margin in a Jared store is slightly below that of a mall store, although at maturity the operating margin for a Jared store is expected to be similar to that of a mall store.

In the US, the growth of the Jared concept and anticipated changes in mix within the diamond category, result in a small downward pressure on the gross margin achieved by the US business each year. In the UK the strategy to increase diamonds has a broadly neutral impact on gross margins.

To maintain the operating profit margin the Group needs to achieve like for like sales growth sufficient to offset any adverse movement in gross margin, the increase in operating costs and the impact of immature selling space. Like for like sales growth above this level allows the Group to achieve leverage of its fixed cost base and improve operating margins; slower sales growth results in reduced operating margins.

Signet’s longer term strategy of 6% – 8% space growth in the US, with minimal net new space in the UK, means lower like for like sales growth is required in the UK than in the US to maintain operating margins.

The impact on operating profits of sales variances (either adverse or favourable) is less in the US division than the UK as certain expense items are more related to sales volumes in the US.

A key factor in driving operating margin is the level of average sales per store, with higher productivity allowing leverage of expenses both in store and in central office functions.

Movements in the US dollar to pound sterling exchange rate impact the reported results of the Group as the US division’s results are translated into pounds sterling. The Board believes it is inappropriate to hedge this exposure as the US division’s sales and costs are dollar denominated and the cash flow from the US division is largely reinvested in the US space expansion or used to pay down US dollar denominated borrowings. The Group therefore would be putting in place a cash exposure to hedge a translation risk.

Signet Group plc Annual Report & Accounts year ended 31 January 2004

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Financial review (continued)

52 weeks ended 31 January 2004
Total Group sales rose to £1,617.2 million (2002/03: £1,608.0 million), up 0.6% on a reported basis and 7.3% at constant exchange rates. Group like for like sales were up 4.9% and new space contributed 2.4% (see table below).

Group operating margin increased to 13.7% (2002/03: 13.3% restated), leverage from like for like sales growth more than offsetting the impact of immature space growth with gross margin little changed. The growth in total sales and the increased operating margin resulted in Group operating profit advancing to £222.3 million (2002/03: £213.9 million restated), up 3.9% on a reported basis and 11.2% at constant exchange rates.

Net interest payable decreased to £10.4 million (2002/03: £14.0 million). £1.5 million of the reduction was due to exchange translation, the balance attributable to lower levels of net debt which more than offset the decrease in net interest credit on the UK defined benefit pension scheme.

Group profit before tax increased to £211.9 million (2002/03: £199.9 million restated), up 6.0% on a reported basis and 13.0% at constant exchange rates. After a tax charge of 35.3% (2002/03: 35.4%) profit for the financial period rose to £137.2 million (2002/03: £129.1 million restated). It is anticipated that the tax charge for 2004/05 will be marginally lower than that for 2003/04. Earnings per share was 8.0p (2002/03: 7.5p restated), up 6.7% on a reported basis and 12.7% at constant exchange rates.

Sales

2003/04 sales growth
	US %		UK %	Group %

Like for like	4.6		5.5	4.9
New space	3.4		0.3	2.4
Exchange translation	(9.6	)	–	(6.7	)

Total sales growth	(1.6	)	5.8	0.6

US
Like for like sales for the US division increased by 4.6% and total US dollar sales by 8.0%. Trading in the first half was adversely affected by the geo-political situation, however the second half saw a marked improvement in the retail environment culminating in a particularly strong fourth quarter when like for like sales rose by 7.2%. The contribution from new space and the impact of exchange rate movements is shown in the table above.

UK
As in the US, trading in the first half of the year in the UK was also affected by geo-political factors, but the second half saw improved trading with a strong Christmas season when like for like sales rose by 6.7%. For the year as a whole like for like sales increased by 5.5% and total sales by 5.8%.

Operating profit

	Operating margin movement
		US %		UK %		Group %

	2002/03 margin	13.7		13.7	⁽¹⁾	13.3	⁽¹⁾
	Gross margin	(0.4	)	0.8		–
	Expenses	0.7		0.8		0.7
	New space	(0.4	)	–		(0.3	)

	2003/04 margin	13.6		15.3		13.7

(1) Restated for the implementation of FRS 17 – ‘Retirement Benefits’ .

US
The operating margin in the US division was little changed at 13.6% (2002/03: 13.7%), with the leverage from like for like sales growth offsetting the impact of slightly lower gross margins and immature store space (see table above). The ratio of net bad debt to sales decreased to 2.8% (2002/03: 3.0%). Operating profit was £151.4 million (2002/03: £155.2 million), down 2.4% on a reported basis but up 7.1% at constant exchange rates reflecting the movement in sales.

UK
An increase in gross margin and leverage from improved store productivity meant that the UK operating margin increased to 15.3% (2002/03: 13.7% restated). Operating profit grew by 18.4% to £76.6 million (2002/03: £64.7 million restated).

Group costs
Group costs amounted to £5.7 million (2002/03: £6.0 million which included a property provision of £0.5 million).

Prior year adjustment
The Group has adopted FRS 17 – ‘Retirement Benefits’ in 2003/04. Under the market-based approach of FRS 17 there was a £6.7 million Group Scheme deficit at 1 February 2003 in comparison to a balance sheet asset of £19.1 million under SSAP 24. Consequently a non-cash charge of £18.1 million, net of deferred tax, has been accounted for by way of a prior year adjustment charged directly to reserves to reflect this change, representing 2.7% of shareholders’ funds at 1 February 2003.

22	Signet Group plc ~~Financial review~~Annual Report & Accounts year ended 31 January 2004

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Return on capital employed
The Group’s ROCE increased to 24.8% (2002/03: 24.1% restated). In the US the ROCE was 20.5% (2002/03: 21.5%) reflecting the impact of an increased proportion of immature space largely from new Jared stores. In the UK there was an increase to 47.1% (2002/03: 41.2% restated) due to improved store productivity. US capital employed included in-house credit card debtors of £292.6 million at 31 January 2004 (2002/03: £299.2 million at 1 February 2003).

Depreciation and capital expenditure
Depreciation charges were £39.3 million (2002/03: £36.6 million): £23.6 million (2002/03: £24.1 million) in the US and £15.7 million (2002/03: £12.5 million) in the UK. Capital expenditure in the US was £33.1 million (2002/03: £33.1 million) and in the UK was £17.8 million (2002/03: £16.4 million).

Dividends
In November 2003 an interim dividend of 0.341p per share was paid (2002/03: 0.310p). The Board is recommending to shareholders a final dividend of 2.16p (2002/03: 1.80p) per share for 2003/04, which, subject to shareholder approval, is to be paid on 2 July 2004 to those shareholders on the register of members at close of business on 4 June 2004. Future dividends will continue to take account of earnings, cash flow, gearing and the needs of the business.

Liquidity and capital resources
It is the objective of the Group to be broadly cash flow neutral annually, subject to timing differences, after implementing its established 6% – 8% space growth strategy in the US together with the continuing programme of store refurbishments and relocations. Factors which could impact this objective would be if a business was acquired or the Group’s distribution policy to shareholders changed.

The cash flow performance of the Group depends on a number of factors such as the:

•	operating performance of the business,
•	rate of space expansion which influences both fixed and working capital investment,
•	level of store refurbishment and relocations,
•	level of inventory investment,
•	proportion of sales made on the in-house credit card and the average monthly collection rate of the credit balances.

Investment in new space requires significant investment in working capital, as well as fixed capital investment, due to the slow inventory turn, and the proportion of sales in the US that are made utilising the in-house credit card.

In years when the rate of space expansion in the US is towards the lower end of the planned 6% – 8% range, or the level of store refurbishment and relocation are lower than the normal cycle, the Group will have a reduced levels of investment in fixed and working capital. In the last three years, when the level of investment has been lower than normal, and the trading performance has continued to grow, the Group has reduced its level of net debt.

The Group’s working capital requirements fluctuate during the year as a result of the seasonal nature of its business. As inventory is purchased for the Christmas season there is a working capital outflow which reaches its highest levels in the late autumn. This position then reverses over the key selling period of November and December. The working capital needs of the business are then relatively stable from January to August. The timing of the payment of the final dividend, normally in July, is also material.

The Board considers that the capital resources currently available are sufficient for both its present and near term requirements. The primary borrowing facilities are a $251 million securitisation against the US customer receivables which amortises between December 2005 and October 2006 and a $410 million unsecured multi-currency revolving credit facility which expires in August 2006. Further details of these and other facilities are given below.

Cash generated from operating activities increased to £203.8 million (2002/03: £182.2 million), reflecting the funding of working capital investment from the increase in operating profit. It is anticipated that in 2004/05 there will be a further increase in working capital due to planned store openings. Net financing costs of £11.0 million (2002/03: £16.5 million) and tax of £69.0 million (2002/03: £57.3 million) were paid. Cash flow before investing activities was £123.8 million (2002/03: £108.5 million).

Group capital expenditure was £50.9 million (2002/03: £49.5 million). Disposal proceeds were £0.2 million (2002/03: £1.3 million). The level of capital expenditure was some 1.3 times the depreciation charge. Capital expenditure in 2004/05 is expected to be approximately £80 million, most of which will be store related. Equity dividends of £36.7 million (2002/03: £30.8 million) were paid.

Signet Group plc Annual Report & Accounts year ended 31 January 2004

2002/03 2001/02 2000/01

£m % £m % £m %

Sales:
US 1,134.4 70.5 1,126.0 71.4 978.1 70.5
UK 473.6 29.5 452.1 28.6 409.2 29.5

Total 1,608.0 100.0 1,578.1 100.0 1,387.3 100.0

Operating profit:
US 155.2 71.8 145.1 72.3 132.2 74.0
UK 67.0 31.0 60.7 30.2 50.0 28.0
Group central costs (6.0 ) (2.8 ) (5.1 ) (2.5 ) (3.5 ) (2.0 )

Total 216.2 100.0 200.7 100.0 178.7 100.0

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Financial review (continued)

Net debt
Net debt at 31 January 2004 was £79.9 million (1 February 2003: £140.1 million, £122.6 million restated at constant exchange rates). Group gearing (net debt to shareholders’ funds) at the year end was 11.0% (1 February 2003: 20.7%). Under UK GAAP, bank loans and overdrafts at 31 January 2004 include a $251.0 million borrowing secured against the Group’s US customer receivables (1 February 2003: $251.0 million). Excluding this $251.0 million facility net cash was £58.0 million (1 February 2003: net cash £12.9 million).

The Company funds part of its private label credit card receivables programme through a privately placed receivables securitisation. Under this securitisation, interests in the US receivables portfolio held by a trust were sold principally to institutional investors in the form of fixed-rate Class A, Class B and Class C investor certificates. The aggregate outstanding principal amount of the certificates totalled $251.0 million at 31 January 2004 and 24 March 2004. The certificates have a weighted average interest rate of 5.42% and interest is paid monthly in arrears from the finance charges collections generated by the receivables portfolio. The revolving period of the securitisation ends in December 2005, with a final expected principal payment date in November 2006.

In January 2002 the Group entered into a $70 million Conduit securitisation facility (the “Conduit”). Under this securitisation, interests in the US receivables portfolio held by a trust could be sold to Sheffield Receivables Corporation (a US subsidiary of Barclays Capital Inc.) in the form of an unsecured revolving variable rate certificate. The Conduit bears interest at a margin of 0.375% above the cost of funds paid by Sheffield Receivables Corporation. At 31 January 2004 and 24 March 2004 the amount outstanding under the Conduit was $nil.

In August 2001 the Group and certain of its subsidiaries entered into a $410 million unsecured multi-currency five year revolving credit facility agreement (the “Facility Agreement”) under which a syndicate of banks made facilities available to the Group in the form of multi-currency cash advances and sterling acceptance credits on, inter alia, the following terms:

•	the Facility Agreement bears a maximum margin of 0.85% above LIBOR, though the margin may be lower dependent upon the performance of the Group. Since the commencement of the facility the margin has been 0.65% above LIBOR; and

•	the Facility Agreement is guaranteed by the Group’s principal holding and operating subsidiaries.

The continued availability of the Facility Agreement is conditional upon the Group achieving certain financial performance criteria (see note 16 on page 74). It also has certain provisions which are customary for this type of agreement, including standard “negative pledge” and “pari passu” clauses. At 31 January 2004 and 24 March 2004 the amount outstanding under the Facility Agreement was $nil.

In July 1998 the Group entered into a $60 million unsecured seven year senior note issue (“Loan Note”), bearing a 7.25% fixed coupon. The Loan Note is also guaranteed by the Group’s principal holding and operating subsidiaries. The continued availability of the Loan Note is conditional upon the Group achieving certain financial performance criteria (see note 16 on page 74). The Loan Note also has certain provisions which are customary to this type of agreement, including standard “negative pledge” and “pari passu” clauses. At 31 January 2004 and 24 March 2004 the amount outstanding under the Loan Note was $30 million (1 February 2003: $45 million).

The principal financial covenants on each of these facilities are set out in note 16 on page 74.

It is the policy of the Group to enter into interest rate protection agreements in respect of at least 75% of its forecast US dollar borrowings. At 31 January 2004 the interest rate of forecast US dollar borrowings for 2004/05 was capped effectively at 5.66%.

Pensions
An actuarial valuation of the UK defined benefit pension scheme (“the Group Scheme”) was carried out at 5 April 2003. The market value of the Group Scheme’s assets at that date was £82.2 million, a deficit of £6.7 million on the Group Scheme’s accrued liabilities. As a result of the valuation the Group has recommenced contributions to the Group Scheme and in 2003/04 this amounted to £1.2 million. In 2004/05 contributions are expected to be £3.7 million. The Group has adopted FRS 17 – ‘Retirement Benefits’ and the FRS 17 valuation at 31 January 2004 showed a surplus in the Group Scheme of £1.8 million.

Contingent property liabilities
Approximately 150 UK property leases had been assigned by the Group up to 31 January 2004 (and remained unexpired and occupied by assignees at that date) and approximately 40 additional properties were sub-let at that date. Should the assignees or sub-tenants fail to fulfil any obligations in respect of those leases or any other leases which have at any other time been assigned or sub-let, the Group or one of its UK subsidiaries may be liable for those defaults. The number of such claims arising to date has been small, and the liability, which is charged to the profit and loss account as it arises, has not been material.

24	Signet Group plc Annual Report & Accounts year ended 31 January 2004

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Contractual obligations
Long term debt comprises borrowings with an original maturity of greater than one year. Purchase obligations comprise contracts entered into for the forward purchase of gold and US dollars with an original maturity of greater than one year. These contracts are

taken out to manage market risks. It is expected that operating commitments will be funded from future operating cash flows and no additional facilities will be required to meet these obligations.

As at 31 January 2004	Less than	Between one	Between three	More than
As at 31 January 2004	one year	and three years	and five years	five years	Total

	£m	£m	£m	£m	£m

Long-term debt obligations	8.2	146.2	–	–	154.4
Finance lease obligations	2.4	–	–	–	2.4
Operating lease obligations	120.4	224.9	203.2	563.9	1,112.4
Purchase obligations	19.3	4.1	–	–	23.4
Creditors falling due after one year	–	–	–	11.1	11.1

Total	150.3	375.2	203.2	575.0	1,303.7

Impact of constant exchange rates
The Group has historically used constant exchange rates to compare period to period changes in certain financial data. This is referred to as “at constant exchange rates” throughout these accounts. The Group considers this to be a useful measure for analysing and explaining changes and trends in the Group’s

results. The impact of the recalculation of sales, operating profit, profit before tax, earnings per share and net debt at constant exchange rates, including a reconciliation to the Group’s GAAP results, is analysed below.

				⁽¹⁾
									2002/03		Growth at
					Growth at		Impact of		at constant		constant
			2002/03		actual		exchange rate		exchange rates		exchange rates
	2003/04		as restated		exchange rates		movement		(non–GAAP)		(non–GAAP)

	£m		£m		%		£m		£m		%

Sales by origin and destination
UK	501.0		473.6		5.8		–		473.6		5.8
US	1,116.2		1,134.4		(1.6	)	(101.2	)	1,033.2		8.0

	1,617.2		1,608.0		0.6		(101.2	)	1,506.8		7.3

Operating profit:
UK – Trading	76.6		64.7		18.4		–		64.7		18.4
– Group central costs	(5.7	)	(6.0	)	n/a		–		(6.0	)	n/a

	70.9		58.7		n/a		–		58.7		n/a
US	151.4		155.2		(2.4	)	(13.9	)	141.3		7.1

	222.3		213.9		3.9		(13.9	)	200.0		11.2

Profit before tax	211.9		199.9		6.0		(12.4	)	187.5		13.0

Earnings per share	8.0p		7.5p		6.7		(0.4	)p	7.1p		12.7


			Impact of	At constant
			exchange rate	exchange rates
	31 January 2004	1 February 2003	movement	(non–GAAP)

	£m	£m	£m	£m

Net debt	(79.9)	(140.1)	17.5	(122.6)

(1)	Restated for the implementation of FRS 17 – ‘Retirement Benefits’ (see note 17).

Signet Group plc Annual Report & Accounts year ended 31 January 2004

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Financial review (continued)

Critical accounting policies
Critical accounting policies covering areas of greater complexity or those particularly subject to the exercise of judgement are listed below. There are no material off-balance sheet structures under UK GAAP. The principal accounting policies are set out in note 1 on pages 62 to 64.

UK retirement benefits
In 2003/04 the Group implemented FRS 17, resulting in a charge of £18.1 million that has been accounted for as a prior year adjustment charged directly to shareholders’ funds. Full details are given in note 17 on page 75. The surplus or deficit on the Group Scheme that is charged to shareholders’ funds through the Statement of Recognised Gains and Losses is subject to a number of assumptions and uncertainties. A qualified actuary is engaged to calculate the expected liabilities of the Group Scheme based on assumptions regarding salary and pension increases, inflation rates, discount rates and the long term rate of return expected on the Group Scheme’s assets. Details of these assumptions are given in note 22 on page 80. The value of the assets of the Group Scheme is measured as at the balance sheet date, this being particularly dependent on the value of equity investments held by the Group Scheme at that date.

Revenue recognition
Sales represent sales to customers outside the Group, exclusive of VAT and sales tax. Repair revenues are recognised when the service is complete and the merchandise is delivered to the customer. The revenue from the sale of warranties in the US, such as extended service plans on products, is recognised at the date of sale with provision being made for the estimated cost of future claims arising.

Stock valuation
Stock is valued on a first-in, first-out basis and includes appropriate overheads. Where necessary provision is made for obsolete, slow-moving and damaged stock. This provision represents the difference between the cost of the stock and its estimated market value, based upon stock turn rates, market conditions and trends in consumer demand. In the US stock losses are recognised at the mid-year and fiscal year end based on complete physical inventories. In the UK stock losses are estimated for the period from the last stock count date to the end of the financial year on a store by store basis. These estimates are based on the overall divisional stock loss experience since the last stock count.

Foreign currency translation
The results of overseas subsidiary undertakings are translated into pounds sterling at the weighted average rates of exchange,

based on US sales, during the period and their balance sheets and attributable goodwill at the rates at the balance sheet date. Exchange differences arising from the translation of the net assets and attributable goodwill of overseas subsidiary undertakings and matched foreign currency borrowings less deposits are charged or credited to reserves. Other exchange differences arising from foreign currency transactions are included in profit before taxation.

Depreciation and impairment
Depreciation is provided on freehold and long leasehold premises over a useful life not exceeding 50 years. Freehold land is not depreciated. Depreciation is provided on other fixed assets at rates between 10% and 33¹/₃%. Shopfit depreciation rates have been set based on the refit cycle for each store fascia and the useful lives of each individual element of the shopfit. Tills and other IT equipment have separately determined depreciation rates.

Where appropriate, provision is made on assets that have a lower economic value than net book value. Additionally, provision is made against tangible fixed assets relating to stores planned for closure where the stores’ return on capital is below the level required. These impairment provisions are made on a store by store basis and updated annually based on actual closures and a review of individual store performance.

Lease costs and incentives
Operating lease costs are charged to the profit and loss account as incurred and amounts payable in respect of turnover leases are charged in the period to which the turnover relates. Premiums paid to acquire short leasehold properties are amortised over their lease period and incentives received relating to leased properties are amortised over the period to the next rent review.

In accordance with FRS 12, where the Group has onerous lease obligations, provision is made for the discounted cash outflow that is expected to arise under the lease. This will take account of any sublet income received or reasonably expected, incentives to be received or paid and the time to lease expiry or reversal of the net cash outflow, whichever is the later.

Receivables
Full provision is made for debts that are 90 days past their due date on a recency basis. A provision is also made based on the historic performance of the receivables portfolio. The bad debt experience of the Group has been relatively stable over the past five years at between 2.8% and 3.4% of sales.

Signet Group plc Annual Report & Accounts year ended 31 January 2004

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Goodwill
Purchased goodwill reflects the acquisition of Marks & Morgan in July 2000. The amortisation period of 20 years is in line with guidance in FRS 10 on the useful economic life of purchased goodwill. Although there is no requirement under FRS 11 for annual impairment reviews where the amortisation period does not exceed 20 years, such a review is performed annually as this is required under US GAAP in place of an amortisation charge. For 2003/04, this review indicated that no impairment charge was required.

Advertising and promotional costs
Advertising costs are expensed as incurred. In accordance with the guidance issued in the US under EITF 02-16, where vendor contributions are received in respect of identifiable promotional events, these are matched against the costs of these promotions. Vendor contributions that are received as general contributions and not against specific promotional events are allocated against stock.

International Accounting Standards
The Group will be required to adopt International Accounting Standards for the first time in 2005/06, the process and disclosures required having been specified in IFRS 1. The Group is actively considering the impact that the initial adoption of International Accounting Standards will have on the format and content of its published accounts.

Prior year review of the 52 weeks ended 1 February 2003
Total Group sales for 2002/03 rose by 1.9% to £1,608.0 million compared with £1,578.1 million in 2001/02 (7.9% on a comparable 52 week basis at constant exchange rates).

Group profit before tax for the year was ~~£199.7~~£199.9 million (2001/02: ~~£182.8~~£183.8 million), which represented a ~~16.2%~~15.7% increase on a comparable 52 week basis at constant exchange rates. After a tax charge of ~~35.5%~~35.4% (2001/02: 34.5%) earnings per share were 7.5p (2001/02: 7.1p), an increase of 5.6%. Operating profit increased by ~~7.7%~~7.6% to ~~£216.2~~£213.9 million (2001/02: ~~£200.7~~£198.8 million), a 14.8% increase on a comparable 52 week basis.

Sales
US
Like for like sales grew by 5.4%. Significant benefit was obtained from a number of management initiatives in merchandising, staff training, marketing and real estate. During the Christmas season consumer spending was more restrained and like for like sales increased by 4.3% in the fourth quarter, significantly ahead of the main competition. Jared continued to perform particularly ~~well.Total~~well. Total sales for the year grew by 0.7%

to £1,134.4 million (8.6% on a comparable 52 week basis at constant exchange rates).

UK
The UK division had a good year. Particular advantage was derived from the focus on increasing diamond sales. Like for like sales were up by 5.2% and total sales rose to £473.6 million (2001/02: £452.1 million), a 6.1% increase on a comparable 52 week basis. Sales in H.Samuel were £279.1 million (2001/02: £277.3 million), with a like for like increase of 2.6%. Ernest Jones sales rose to £188.0 million (2001/02: £168.5 million) the like for like sales increase being 9.4%. This was a particularly good result given the strong comparatives. Against a background of a slowing in the growth in consumer expenditure, like for like sales

increased by 3.1% in the fourth quarter (H.Samuel up by 1.0% and Ernest Jones up by 6.7%).

Operating profit
US
The trading environment in 2002/03 was very challenging. Tight control of costs, margins and inventory was maintained. Operating profit rose by 7.0% to £155.2 million (2001/02: £145.1 million). On a comparable 52 week basis at constant exchange rates the increase was 15.6%. Goodwill amortisation of £1.2 million was charged (2001/02: £1.3 million). Operating profit as a percentage of sales increased to 13.7% (2001/02: 12.9%), reflecting leverage from like for like sales growth which more than offset the adverse impact of immature store space. The gross margin rate was slightly down on last year’s level, due to anticipated changes in the sales mix. The increase in the price of gold bullion had limited adverse impact on the year but could have a greater impact in 2003/04. The ratio of bad debts to total sales decreased to 3.0% (2001/02: 3.2%) before a $2.2 million ~~one-off~~ benefit from the better than anticipated performance of the residue of the acquired Marks & Morgan receivables portfolio.

UK
In the UK the strong like for like sales growth underpinned an improvement in operating profit, which increased to ~~14.1%~~13.7% of sales (2001/02: ~~13.4%~~13.0%). Operating profit grew to ~~£67.0~~£64.7 million (2001/02: ~~£60.7~~£58.8 million), an increase of ~~10.4%~~10.0%, equivalent to ~~13.2%~~12.9% on a comparable 52 week ~~basis.This~~basis. This resulted from further leverage of the divisional cost base, with gross margin slightly ahead of last year.

Net income
Net income for the year increased by ~~7.7%~~7.2% to ~~£128.9~~£129.1 million (2001/02: ~~£119.7~~£120.4 million), ~~14.5%~~14.0% on a comparable 52 week basis at constant exchange rates.

~~22 Signet Group plc~~

Signet Group plc Annual Report & Accounts year ended 31 January 2004

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Financial review (continued)

Return on capital employed ~~(“ROCE”)~~
The Group’s ROCE increased to ~~23.8%~~24.1% (2001/02: ~~23.3%)~~23.6). In the US the ROCE rose to 21.5% (2001/02: 20.4%) and in the UK there was a slight fall to ~~38.0%~~41.2% (2001/02: ~~39.4%~~43.6%). US capital employed included US in-house credit card debtors amounting to £299.2 million at 1 February 2003 (2 February 2002: £327.0 million).

Depreciation and capital expenditure
Depreciation charges were £36.6 million (2001/02: £33.4 million): £24.1 million in the US (2001/02: £23.0 million) and £12.5 million in the UK (2001/02: £10.4 million). Capital expenditure in the US was £33.1 million (2001/02: £41.0 million) and in the UK was £16.4 million (2001/02: £18.8 million).

Group costs
Group central costs amounted to £6.0 million (2001/02: £5.1 million) including a charge of £0.5 million relating to an increase in the provision against an onerous lease of a dormant Group property (2001/02: £nil).

Net interest payable
Net interest payable and similar charges amounted to ~~£16.5~~£14.0 million (2001/02: ~~£17.9 million, at constant exchange rates the equivalent figure was £16.8~~£15.0 million).

Taxation
The tax charge of £70.8 million (2001/02: ~~£63.1~~£63.4 million) represents an effective tax rate of ~~35.5%~~35.4% (2001/02: 34.5%). ~~It is anticipated that the effective tax rate for the Group in 2003/04 will remain at approximately the same level as in 2002/03.~~

Dividends
In November 2002 an interim dividend of 0.310p per share was paid (2001/02: 0.289p)~~.The Board is recommending to shareholders~~. Additionally, a final dividend of 1.80p (2001/02: 1.50p) per share for 2002/03, ~~which, subject to shareholder approval, is to be~~was paid on 14 July 2003 to those shareholders on the register of members at close of business on 6 June 2003. ~~Future dividend policy will continue to take account of earnings, cash flow, gearing and the needs of the business.~~

Impact of 53rd week
2001/02 was a 53 week financial ~~year.The~~year. The extra week increased total sales by ~~1.7% (1.8%~~£22.4 million (£16.5 million in the US and ~~1.6%~~£5.9 million in the UK) and contributed £4.0 million to operating profit (£2.5 million in the US and £1.5 million in the UK). Net of additional interest costs of £0.4 million, profit before tax benefited by £3.6 million in 2001/02.

~~Liquidity and capital resources~~Impact of constant exchange rates
The Group ~~requires significant working capital~~has historically used constant exchange rates to ~~support its inventory requirements.The Group’s working capital requirements fluctuate during the year~~compare period to period changes in certain financial data. This is referred to as ~~a result of the seasonal nature of its business and normally reach their highest levels in the late Autumn in preparation for the Christmas season.~~

Cash generated from operating activities amounted to £182.2 million (2001/02: £188.0 million).This reflected an increase in operating profit, offset by working capital requirements for stores opened in the period. It is anticipated that in 2003/04 there will be a further increase in working capital due to planned store openings. Net financing costs of £16.5 million (2001/02: £17.9 million) and tax of £57.3 million (2001/02: £57.9 million) were paid. Cash flow before investing activities was £108.5 million (2001/02: £112.2 million).

Group capital expenditure was £49.5 million (2001/02: £60.7 million). Disposal proceeds were £1.3 million (2001/02: £nil). Capital expenditure in 2003/04 is expected to be approximately £65 million, the vast majority relating to store openings, refurbishments and relocations.

~~Equity dividends of £30.8 million (2001/02: £27.7 million) were paid.~~

‘at constant exchange rates’ throughout these accounts. The Group considers ~~its currently available capital resources to be sufficient~~this a useful measure for ~~its present requirements.~~

~~Net debt~~
Net debt at 1 February 2003 was £140.1 million (2 February 2002: £201.7 million, £175.6 million restated at constant exchange rates). Group gearing (that is the ratio of net debt to shareholders’ funds) at the year end was 20.1% (2 February 2002: 29.7%). Under UK GAAP, bank loansanalysing and ~~overdrafts at 1 February 2003 include a $251.0 million borrowing secured against~~explaining changes and trends in the Group’s ~~US customer receivables (2 February 2002: $251.0 million). Excluding this $251.0 million facility net cash was £12.9 million (2 February 2002: net debt £24.9 million).~~

results. The Company funds part of its private label credit card receivables programme through a privately placed receivables securitisation. Under this securitisation, interests in the US receivables portfolio held by a trust were sold principally to institutional investors in the form of fixed-rate Class A, Class B and Class C investor certificates.The aggregate outstanding principal amountimpact of the ~~certificates totalled $251.0 million at 1 February 2003 and 26 March 2003.The certificates have a weighted average interest rate~~

~~Signet Group plc 23~~

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~~Financial review (continued)~~

recalculation of 5.42% and interest is paid monthly in arrears from the finance charges collections generated by the receivables portfolio.The revolving period of the securitisation ends in December 2005, with a Final Expected Principal Payment Date in November 2006.This securitisation replaced a previous securitisation facility of $191.5 million, which commenced repayment in December 2000 and was fully repaid in September 2001.

In January 2002 the Group entered into a $70 million Conduit securitisation facility (the “Conduit”). Under this securitisation, interests in the US receivables portfolio held by a trust could be sold to Sheffield Receivables Corporation (a US subsidiary of Barclays Capital Inc.) in the form of an unsecured revolving variable rate certificate. The Conduit bears interest at a margin of 0.375% above the cost of funds paid by Sheffield Receivables Corporation. At 1 February 2003 and 26 March 2003 the amount outstanding under the Conduit was $nil.

•	the Facility Agreement bears a maximum margin of 0.85% above LIBOR, though the margin may be lower dependent upon the performance of the Group. Since the commencement of the facility the margin has been 0.65% above LIBOR; and

•	~~the Facility Agreement is guaranteed by the Group’s principal holding and operating subsidiaries.~~

The continued availability of the Facility Agreement is conditional upon the Group achieving certain financial performance criteria (see note 16 on page 69). It also has certain provisions which are customary for this type of agreement, including standard “negative pledge” and “~~pari passu~~~~” clauses. At 1 February 2003 the amount outstanding under the Facility Agreement was $nil and at 26 March 2003 it was $nil.~~

conditional upon the Group achieving certain financial performance criteria (see note 16 on page 69).The Loan Note also has certain provisions which are customary to this type of agreement, including standard “negative pledge” and “pari passu” clauses. At 1 February 2003 and 26 March 2003 the amount outstanding under the Loan Note was $45 million (2 February 2002: $60 million).

~~The principal financial covenants on each of these facilities are set out in note 16 on page 69.~~

It is the policy of the Group to enter into interest rate protection agreements in respect of at least 75% of its forecast US dollar borrowings. At 1 February 2003 the interest rate (before margin) on 75% of forecast US dollar borrowings for 2003/04 was capped effectively at 5.79%. Further details of the interest rate protection agreements are given in note 26 on page 78.

~~Pensions~~
In 2002/03 the Group has continued to account for its UK defined benefit scheme under SSAP 24. Consistent with prior years, the Group has used the most recent actuarial investigation (for 2002/03 as at 5 April 2002) as the basis for the SSAP 24 calculations.

Under this accounting treatment the net pension charge in respect of the UK scheme is £nil (2001/02: £nil).The balance sheet continues to reflect a deferred asset, before deferred tax, of £19.1 million (2001/02: £19.1 million).

Under the transitional arrangements for FRS17 the additional required disclosures are set out in note 22 on page 74. In summary, compliance would have resulted in a net pension credit of £0.2 million in respect of the UK Scheme for 2002/03. As a result of the fall in the value of the UK Scheme’s assets, under FRS17 the market value of those assets compared to the present value of the UK Scheme’s liabilities at 1 February 2003 showed a deficit of £6.7 million before deferred tax, compared to a surplus of £24.9 million at 2 February 2002.

~~Contingent property liabilities~~
Approximately 164 UK property leases had been assigned by the Group up to 1 February 2003 (and remained unexpired and occupied by assignees at that date) and approximately 45 additional stores were sub-let at that date. Should the assignees or sub-tenants fail to fulfil any obligations in respect of those leases or any other leases which have at any other time been assigned or sub-let, the Group or one of its UK subsidiaries may

~~24 Signet Group plc~~

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~~be liable for those defaults. The number of such claims arising to date has been small, and the liability, which is charged to the~~ profit, ~~and loss account as it arises, has not been material.~~

~~Critical accounting policies~~
Critical accounting policies for Signet include revenue recognition, particularly with regard to special customer programmes such as warranties; stock valuation; accounting for operating leases commitments; fixed asset depreciation and the bad debt provisioning policy relating to the in-house credit operation in the US.There are no material off-balance sheet structures under UK generally accepted accounting principles.The principal accounting policies are set out in note 1 on pages 58 to 60 and are summarised below.

•	Sales represent sales to customers outside the Group, exclusive of VAT and sales tax. Repair revenues are recognised when the service is complete and the merchandise is delivered to the customer. The revenue from the sale of warranties in the US, such as extended service plans on products, is recognised at the date of sale with provision being made for the estimated cost of future claims arising.

•	Stock is valued on a first-in, first-out basis and includes appropriate overheads. Where necessary provision is made for obsolete, slow-moving and damaged stock. This provision represents the difference between the cost of the stock and its estimated market value, based upon stock turn rates, market conditions and trends in consumer demand. Stock losses are estimated for the period from the last stock count date to the end of the financial year on a store by store basis. These estimates are based on the overall division stock loss experience since the last stock count.

•	Depreciation is provided on freehold and long leasehold premises over a useful life not exceeding 50 years. Freehold land is not depreciated.Depreciation is provided on other fixed assets at rates between 10% and 33¹/₃~~%. Where appropriate, provision is made on assets that have a lower economic value than net book value. Additionally,~~

	~~provision is made against tangible fixed assets relating to stores planned for closure where the stores’ return on capital is below the level required.~~

•	~~Operating lease costs are charged on a straight line basis over the term of the lease and amounts payable in respect of turnover leases are recognised in the period to which the turnover relates.~~

•	Premiums paid to acquire short leasehold properties are amortised over their lease period and incentives received relating to leased properties are amortised over the period to the next rent review. Provision is made for future net lease obligations in respect of onerous leases of vacant, partially vacant or sublet properties. This provision is calculated on the basis of discounted forecast cash flows arising from future net obligations on each of those properties.

•	~~Full provision is made for debts that are 90 days past their due date on a recency basis and there is a general provision based on the historic performance of the receivables portfolio.~~

•	~~Advertising costs are expensed as incurred.~~

•	The results of overseas subsidiary undertakings are translated into pounds sterling at the weighted average rates of exchange during the period and their balance sheets and attributable goodwill at the rates at the balance sheet date. Exchange differences arising from the translation of the net assets and attributable goodwill of overseas subsidiary undertakings and matched foreign currency borrowings less deposits are charged or credited to reserves. Other exchange differences arising from foreign currency transactions are included in profit before taxation.

•	Purchased goodwill arising on consolidation in respect of acquisitions since 1 February 1998 is capitalised and amortised to nil by equal annual instalments over 20 years. Impairment reviews are carried out annually to ensure goodwill and intangible assets are not carried at above their recoverable amounts.

~~Signet Group plc 25~~

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~~Financial review (continued)~~

~~53 weeks ended 2 February 2002~~
~~Total Group sales for 2001/02 rose by 13.8% to £1,578.1 million compared with £1,387.3 million in 2000/01.The like for like sales increase of 3.1% was unaffected by the 53rd week.~~

~~Group~~ profit before tax for the year was £182.8 million (2000/01: £162.8 million). After a tax charge of 34.5% (2000/01: 32.0%) earnings per share were 7.1p (2000/01: 6.6p), an increase of 7.6%. Operating profit increased by 12.3% to £200.7 million (2000/01: £178.7 million).

~~Sales~~
US
~~Like for like sales (including Marks & Morgan from 31 July 2001) grew by 0.6%. Significant benefit was obtained from both merchandising~~ and marketing initiatives, including a further concentration on broadcast media advertising. Like for like sales were down by 2.3% in the first nine months of the year reflecting the challenging trading conditions. During the Christmas season consumer spending improved and like for like sales increased by 4.6% in the fourth quarter, ahead of the main competition. Jared continued to perform particularly well.Total sales for the year grew by 15.1% to £1,126 million (11.3% at constant exchange rates).The acquisition of Marks & Morgan (which was completed on 31 July 2000) contributed sales of £42.0 million (3.7% of annual sales growth) and new space (excluding Marks & Morgan) contributed 5.1%.

UK
In a favourable retail environment the UK division had an excellent year. Advantage was derived from product range improvements, increased marketing activity, enhanced staff incentives and a stepped-up programme of store refurbishments. Like for like sales were up by 9.4% and total sales rose to £452.1 million (2000/01: £409.2 million). Sales in H.Samuel were £277.3 million (2000/01: £259.8 million), with a like for like increase of 6.4%. For Ernest Jones like for like sales increased by 14.6% and sales were £168.5 million (2000/01: £143.9 million). In the fourth quarter like for like sales increased by 9.7% (H.Samuel up by 7.2% and Ernest Jones up by 14.2%), a particularly strong performance given the demanding comparatives.

~~Operating profit~~
US
The trading environment in 2001/02 was very challenging. Operating profit rose by 9.8% to £145.1 million (2000/01: £132.2 million) and on a constant exchange rate basis increased by 6.1%. Goodwill amortisation of £1.3 million

was charged (2000/01: £0.6 million, also charged in 2000/01 were £1.7 million of non-recurring acquisition costs). Operating profit as a percentage of sales declined to 12.9% (2000/01: 13.5%), reflecting the low level of like for like sales growth and a significant increase in new selling space in recent years, offset by tight control of costs. Gross margin percentage was slightly below last year’s level, due to changes in the sales mix and the increasing proportion of sales from Jared stores.The ratio of bad debts to total net ~~sales decreased to 3.2% (2000/01: 3.4%).~~

UK
In the UK the strong like for like sales growth underpinned an improvement in operating profit, which, as a percentage of sales, increased to 13.4% (2000/01: 12.2%). Operating profit grew to £60.7 million (2000/01: £50.0 million), an increase of 21.4%.This resulted from further leverage of the divisional cost base, with gross margin in line with that of last year.

~~Net~~ income
~~Net income for the year increased by 8.1% to £119.7 millon (2000/01: £110.7 million).~~

~~Return on capital employed (“ROCE”)~~
The Group’s ROCE decreased to 23.3% (2000/01: 25.2%), and to 20.4% in the US (2000/01: 23.1%) while ROCE increased to 39.4% in the UK (2000/01: 35.6%). US capital employed included US in-house credit card debtors amounting to £327.0 million at 2 February 2002 (27 January 2001: £314.7 million).

~~Depreciation and capital expenditure~~
~~Depreciation charges were £33.4 million (2000/01: £30.0 million): £23.0 million in the US (2000/01: £19.2 million) and £10.4 million in the UK (2000/01: £10.8 million).~~

~~Capital expenditure in the US was £41.0 million (2000/01: £46.5 million) and in the UK was £18.7 million (2000/01: £9.7 million).~~

~~Group costs~~
~~Group central costs amounted to £5.1 million (2000/01: £4.9 million before crediting property gains of £1.4 million).~~

~~Net interest payable~~
~~Net interest payable and similar charges amounted to £17.9 million (2000/01: £15.9 million,~~ at constant exchange rates, ~~£16.5 million).The increase was principally due~~including a reconciliation to the ~~full year funding~~Group’s GAAP results, is analysed below.

All figures for 2001/02 are stated on a comparable 52 week basis. The impact of the ~~Marks & Morgan acquisition which~~53rd week is described in the paragraph above.

				2001/02	⁽¹⁾				2001/02		Growth at
				comparable		Growth at	Impact of		at constant		constant
		2002/03		52 week		actual	exchange rate		exchange rates		exchange rates
		as restated	⁽¹⁾	basis		exchange rates	movement		(non–GAAP)		(non–GAAP)

		£m		£m		%	£m		£m		%

Sales by origin and destination
UK		473.6		446.2		6.1	–		446.2		6.1
US		1,134.4		1,109.5		2.2	(65.3	)	1,044.2		8.6

		1,608.0		1,555.7		3.4	(65.3	)	1,490.4		7.9

Operating profit:
UK	– Trading	64.7		57.3		12.9	–		57.3		12.9
	– Group central costs	(6.0	)	(5.1	)	n/a	–		(5.1	)	n/a

		58.7		52.2		n/a	–		52.2		n/a
US		155.2		142.6		8.8	(8.4	)	134.2		15.6

		213.9		194.8		9.8	(8.4	)	186.4		14.8

Profit before tax		199.9		180.2		10.9	(7.4	)	172.8		15.7

Net income		129.1		118.1		9.3	(4.9	)	113.2		14.0

(1)	Restated for the implementation of FRS 17 – ‘Retirement Benefits’ (see note 17).

~~26 Signet Group plc~~

Signet Group plc Annual Report & Accounts year ended 31 January 2004

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~~took place in July 2000, the impact of which was partially offset by the benefit of lower interest rates.~~

~~Taxation~~
~~The tax charge of £63.1 million (2000/01: £52.1 million) represents an effective tax rate of 34.5% (2000/01: 32.0%).~~

~~Impact of 53rd week~~
~~2001/02 was a 53 week financial year.The extra week increased total sales by 1.7% (1.8% in the US~~Risk and 1.6% in the UK) and contributed £4.0 million to operating profit (£2.5 million in the US and £1.5 million in the UK). Net of additional interest costs of £0.4 million, profit before tax benefited by £3.6 million.other factors

~~Dividends~~
In November 2001 an interim dividend of 0.289p per share was paid (2000/01: 0.275p). Additionally, a final dividend of 1.50p (2000/01: 1.35p) per share for 2001/02, was paid on 5 July 2002 to those shareholders on the register of members at close of business on 7 June 2002.

~~Prior year adjustment~~
In 2001/02 the Group adopted FRS 19 – ‘Deferred Tax’, which requires that deferred tax be provided in respect of all timing differences regardless of the likelihood of the reversal of such timing differences. As a result an additional provision for deferred tax of £6.2 million was accounted for by way of a prior year adjustment charged directly to shareholders’ funds. There is no material effect on the profit and loss account for the year ended 2 February 2002 or the preceding years.

~~Signet Group plc 27~~

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~~Risk and other factors~~

Forward-looking statements
All statements, other than statements of historical fact included in this document, are or may be deemed to be forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995. These statements, based upon management’s beliefs as well as on assumptions made by and data currently available to management, appear in a number of places throughout this document. These forward-looking statements are not guarantees of future performance and are subject to a number of risks. Important factors that could cause actual results to differ materially from those discussed in such forward-looking statements include:

•	adverse trends in the general economy which may impact negatively on discretionary consumer spending, including unemployment levels, the level of consumers’ disposable income, consumer confidence, business conditions, interest rates, consumer debt levels, availability of credit and levels of taxation;

•	the Group’s ability to anticipate consumer preferences and the merchandising, pricing and inventory policies it follows;

•	the reputation of the Group and its trading names, together with the success of the Group’s marketing and promotional programmes;

•	the ability to recruit, train and retain staff;

•	the extent and results of the Group’s net store expansion and refurbishment strategy together with the availability of suitable real estate;

•	the level of competition in the selling of jewellery and the development of new distribution channels in competition with the Group;

•	the level of dependence on particular suppliers of merchandise;

•	fluctuations in the supply, price and availability of diamonds, gold and other precious and semi-precious metals and stones as well as the consumer attitude to those and other products;
•	~~the suitability and reliability of the Group’s systems and procedures, including its information technology, warehousing and distribution systems;~~
•	the seasonality of the Group’s business, the risk of disruption during the Christmas trading period, and the availability of inventory during the three months leading up to the Christmas season;

•	social, ethical and environmental risks;

•	the suitability and reliability of the Group’s systems and procedures, including its information technology, warehousing and distribution systems;

•	the cost and availability of borrowings and equity capital; and
•	financial market risk, including fluctuations in exchange rates between the pound sterling and the US dollar which may affect reported revenues, costs, the value of the Group’s consolidated borrowings, and the cost of capital.

financial market risk, including fluctuations in exchange rates between the pound sterling and the US dollar which may affect reported revenues, costs, the value of the Group’s consolidated borrowings, and the cost of capital.

Impact of general economic conditions

Jewellery purchases are discretionary and may be particularly affected by adverse trends in the general ~~economy and changes in taste by consumers.~~economy.

The success of the Group’s operations depends to a significant extent upon a number of factors relating to discretionary consumer ~~spending.These~~spending. These include economic conditions and perceptions of such conditions by consumers, employment, the rate of change in employment, the level of consumers’ disposable income, business conditions, interest rates, consumer debt levels, availability of credit and levels of taxation for the economy as a whole and in regional and local markets where the Group ~~operates.There~~operates. There can be no assurance that consumer spending on jewellery will not be adversely affected by changes in general economic conditions. However, due to the limited seasonality in the product mix the risk of having to discount inventory in order to be correctly stocked for the next selling season is more limited than for some other retail sectors.

As a substantial proportion of the Group’s US sales are made on credit, any significant deterioration in general economic conditions or consumer debt levels may inhibit consumers’ use of credit and cause a material adverse effect on the Group’s revenues and profitability. Furthermore, any downturn in general or local economic conditions in the markets in which the Group operates may adversely affect its collection of outstanding credit accounts receivable and hence the net bad debt charge. Currently there are all-time high levels of consumer debt in the ~~US.The Group’s~~US however the level of net bad debt charge as a percentage of credit sales in ~~2002/03~~the Group’s US division in 2003/04 was ~~below that of~~the lowest for the last ~~five~~eight years.

Merchandise selection, pricing, inventory and purchasing
The Group depends on consumer fashions, preferences for jewellery in general and the demand for particular products. Design trends in jewellery normally only change over relatively long periods and there is little seasonality in the merchandise ~~mix.The~~mix. The ability to predict accurately future changes in taste, respond to changes in consumer preferences, carry the inventory demanded by customers, deliver the appropriate quality, price products correctly and implement effective purchasing procedures, all have an important influence on determining sales performance and achieved gross margin (see pages 1112 and 18 for more ~~details)~~details of the Group’s merchandising and purchasing procedures).

~~28 Signet Group plc~~

Signet Group plc Annual Report & Accounts year ended 31 January 2004

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Risk and other factors (continued)

~~Market research and the~~The Group’s operating experience ~~suggest~~suggests that while the price of jewellery is a consideration for consumers it is not among the top three factors in determining where they buy ~~jewellery.The~~jewellery. The Group believes these factors to be the level of service provided to the customer, the quality together with the selection of merchandise offered and the reputation of the retailer. Therefore while discounting price may increase sales, it may not increase profit.

Reputation and marketing
Primary factors in determining customer buying decisions in the jewellery sector include customer confidence in the retailer and the merchandise sold, together with the level and quality of customer ~~service.The~~service. The Group carries out quality control and staff training procedures and provides customer service facilities to help protect its ~~reputation. In 2002/03~~reputation (see page 104 for details of the ~~procedures for resolving~~processes by which the Group obtains an understanding of customer ~~issues in the stores were enhanced.~~attitudes).

The ability to differentiate the Group’s stores from competitors by its branding, marketing and advertising programmes is a factor in attracting ~~consumers.Therefore~~consumers. Therefore these programmes are carefully tested and their success monitored by methods such as market research (see pages 1312 and 1918 for more details).

The Diamond Trading Company (“DTC”), a subsidiary of De Beers Consolidated Mines Limited (“De Beers”), promotes diamonds and diamond jewellery in the US and the UK. The level of support provided by the DTC and the success of the promotions influence the size of the total jewellery market in those countries.

The Group’s reputation in the financial markets can influence the availability of capital, the cost of capital and the share price.

Social, ethical and environmental (“SEE”) matters can also influence the Group’s reputation, demand for merchandise by consumers, the ability to recruit staff, relations with suppliers and standing in the financial markets. Using outside consultants, the Group has continued to carry out benchmarking and a risk assessment of its policies, procedures and controls with regard to SEE matters. As with all retailers the greatest risks relate to customer service and to the supply chain (see below). SEE matters are dealt with in more detail on pages 97 to 99 and in the corporate responsibility section on~~www.signetgroupplc.com~~.

Staff

In speciality jewellery retailing the level and quality of customer service is largely determined by the effectiveness of recruitment, training and retention of suitably qualified sales staff and this will help determine sales and profitability. The ~~recruitment, training and retention of suitably qualified~~support provided to the Group’s store employees by staff at the divisional head offices and in the corporate functions will also influence the performance of the Group. Consequently the Group has in place

comprehensive recruitment, training and incentive programmes, and employee attitude surveys (see pages 11 and 17 for more details).

Store portfolio

The future growth of sales is partly dependent on the extent and results of the Group’s net space expansion and refurbishment ~~strategy.The~~strategy. The Group has followed a steady programme of space expansion and refurbishment and has established capital expenditure procedures with investment criteria set by the ~~Board.The~~Board.

The projections used for investment decisions are reviewed and adjusted based on experience and economic conditions.

In particular, the success of the Jared off-mall destination store concept, which accounts for the majority of the Group’s net increase in space, will influence the future performance of the Group. This concept has been tested and developed over a number of years and its performance against the investment model is regularly reviewed. The rate of development is dependent on a number of factors including obtaining suitable real estate, the capital resources of the Group and the availability of appropriate staff and management.

The Group’s results are dependent on a number of factors relating to its ~~stores.These~~stores. These include the availability of property, the location of the mall or shopping centre, the availability of attractive locations within a mall or high street, the terms of leases agreed with landlords and the design and maintenance of the stores. In addition, the Group’s operations, particularly in the US, are dependent upon the continued popularity of malls as a shopping destination and the ability of malls, their tenants and other mall features to attract customers.

Competition

Competitive factors in the jewellery sector are discussed in the US and UK ~~Operating~~operating reviews (see pages 7 to ~~20)~~19).

If the Group falls behind competitors with respect to one or more of these factors, the Group’s operating results ~~of operations~~ or financial condition could be adversely affected. In the US the Group has an estimated ~~6.7%~~7% market share of the speciality jewellery sector and has only one major national competitor. While another major national brand could develop, the sector is highly fragmented. In the UK the Group has an estimated 17% share of the total jewellery sector and has only limited scope to increase sales by opening new stores.

The channels through which consumers buy jewellery continually evolve and a major non-speciality retailer could

~~Signet Group plc 29~~

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~~Risk and other factors (continued)~~

enter the wider jewellery market. In the US, for example, sales by discount retailers have increased, while those of the department stores have been in relative decline and catalogue retailers have withdrawn from the market. In the UK a number of fashion and general retailers, including a major supermarket chain, have introduced jewellery into their ranges whilst others have reduced their selection. In both the US and the UK Internet retailers sell jewellery and watches. The Group monitors the competitive environment and the development of possible new channels of distribution such as the Internet. As part of this process there are marketing web sites for each of the Group’s major brands, and regular exercises to “shop the competition” take place.

30	Signet Group plc Annual Report & Accounts year ended 31 January 2004

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Supply chain
During ~~2002/03~~2003/04 the Group had one supplier that accounted for 9%8% of its merchandise. No other supplier accounted for more than 5% of its merchandise. Although the Group believes that alternative sources of supply are available, the abrupt loss of any significant supplier during the three month period (August to October) leading up to the Christmas season could result in a material adverse effect on the Group’s business. The Group is therefore in regular dialogue with suppliers and uses its merchandising systems to test and predict its future inventory needs.

Raw materials

The jewellery industry generally is affected by fluctuations in the price and supply of diamonds, gold and, to a lesser extent, other precious and semi-precious metals and stones. The Group undertakes ~~limited~~some hedging of its requirement for gold through the use of options, forward contracts and outright commodity purchasing. It does not hedge against fluctuations in the cost of ~~diamonds.The~~diamonds. The Group does hedge the exposure of the UK division to the US dollar with regard to diamond and other costs of goods sold. The cost of raw materials is only part of the costs involved in the retail selling price of jewellery with labour costs also being a significant factor.

Diamonds are the largest product category sold by the ~~Group.The~~Group. The supply and price of diamonds in the principal world markets are significantly influenced by a single ~~entity, the Diamond Trading Company (“DTC”), a subsidiary of De Beers Consolidated Mines Limited (“De Beers”).The~~entity. The DTC (and its predecessor, the Central Selling Organisation) has ~~traditionally~~for many years controlled the marketing of a substantial majority of the world’s supply of rough diamonds and sells diamonds to diamond cutters in quantities and at prices determined at its sole discretion. In 2000 De Beers announced a change in corporate strategy designed to improve the efficiency of the supply chain and ~~in 2001 there was a change in control~~increase the level of ~~De Beers.To date these changes have not had any material impact on the availability and pricing of, and demand~~marketing support for ~~diamonds, but may do so in the future.~~diamonds.

The availability of diamonds to the DTC and the Group’s suppliers is to some extent dependent on the political situation in diamond producing countries. Until alternative sources can be developed, any sustained interruption in the supply of diamonds from the significant producing countries could adversely affect the Group and the retail jewellery industry as a whole.

Consumer confidence in diamonds, gold and other metals and gemstones also influences the level of Group sales. Confidence could be affected by a variety of issues including the availability and consumer awareness of substitute products such as cubic ~~zirconia~~zirconium, moisanite and the development of synthetic diamonds; labour conditions in the supply chain; and concern over the source of raw ~~materials.The~~materials. The Group ~~has~~ therefore ~~introduced~~has a Supplier Code of Conduct which sets out the Group’s expectations of its suppliers.

An example of an issue that could affect confidence in this way is that of ~~“conflict diamonds”,~~conflict diamonds, which is the term used for diamonds sold by rebel movements to raise funds for military ~~campaigns.There~~campaigns. There have been a number of United Nations resolutions regarding ~~“conflict diamonds”~~conflict diamonds and an international agreement, known as the Kimberley Process, was signed in November 2002. This iswas designed to exclude ~~“conflict diamonds”~~conflict diamonds from the legitimate diamond ~~trade and~~trade. During 2003 legislation was ~~due to be implemented with effect from 1 January 2003. Legislation supporting the Kimberley Process became fully effective~~passed in the European Union ~~on 13 February 2003. In~~and the ~~United States~~US implementing the Kimberley ~~Process is currently being implemented by a voluntary industry initiative.The~~Process. The impact of the Kimberley Process and its associated legislation ishas not ~~known.~~resulted in any disruption to the supply of rough diamonds to date and has helped to improve the integrity of the supply chain.

The Group ~~has~~ reviewed its procedures and documentation for compliance with the Kimberley Process and made appropriate amendments. In addition, staff ~~have been~~were briefed and suppliers have been contacted about the changes. During the year the Group’s internal audit function checked for compliance with the new procedures. See page 98104 for further information on the Supplier Code of Conduct, the Kimberley Process and the Group’s policy on ~~“conflict diamonds”.~~

~~Systems~~
The Group is dependent on the suitability and reliability of its systems and procedures, including its information technology, warehousing and distribution systems.The Group has emergency procedures and carries out rehearsals to test them.The Group carries out evaluation, planning and implementation analysis before updating or introducing new systems that have an impact on a function critical to the Group.conflict diamonds.

Seasonality
The Group’s business is highly seasonal, with a very significant proportion of its sales and operating profit generated during its fourth quarter, which includes the Christmas ~~season.The~~season. The Group expects to continue to experience a seasonal fluctuation in its sales and profit. Therefore the Group has limited ability to compensate for shortfalls in fourth quarter sales or earnings by changes in its operations and strategies in other quarters, or to recover

~~30 Signet Group plc~~

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from any extensive disruption due to inclement weather conditions. A significant shortfall in results for the fourth quarter of any financial year would thus be expected to have a material adverse effect on the Group’s annual results of operations. However, due to the limited seasonality in the product mix, the risk of having to discount inventory in order to be correctly stocked for the next selling season is more limited than for some other retail sectors.

Social, ethical and environmental risks
Social, ethical and environmental (“SEE”) matters influence the Group’s reputation, demand for merchandise by consumers, the ability to recruit staff, relations with suppliers and standing in the financial markets. Signet therefore is committed to managing the SEE risks and responsibilities facing the Group. This commitment stems from the understanding that Signet’s success is dependent on the strength and effectiveness of its relationships with its various stakeholders: shareholders, customers, employees and suppliers.

Signet Group plc Annual Report & Accounts year ended 31 January 2004

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Risk and other factors (continued)

In recent years stakeholder expectations of public companies have increased. Managing and responding as a business to these changing expectations, including with regard to SEE issues, is part of the normal responsibilities of corporate management.

The Group regularly carries out SEE risk reviews and benchmarking exercises with the assistance of an external adviser. Such reviews include an assessment of Group policies, procedures and controls in respect of SEE matters. Reports are regularly made to the Group’s Risk Committee and to the Board.

On 21 October 2001 the Association of British Insurers published guidelines on Socially Responsible Investment. In line with that guidance the Board confirms that they have identified and assessed the Group’s SEE risks and that these are being managed.

SEE matters are dealt with in more detail on pages 103 to 106 and in the corporate responsibility section on www.signetgroupplc.com.

Systems
The Group is dependent on the suitability and reliability of its systems and procedures, including its information technology, warehousing and distribution systems. The Group has emergency procedures and carries out rehearsals to test them. The Group carries out evaluation, planning and implementation analysis before updating or introducing new systems that have an impact on a function critical to the Group.

Equity and debt financing
The Group is dependent upon the availability of equity and debt financing to fund its operations and growth. Therefore it prepares annual budgets, medium term plans and headroom models which help to identify the future capital requirements so that appropriate facilities can be put in place on a timely basis. If these models are inaccurate adequate facilities may not be available.

Financial market risks
The Group publishes its consolidated annual accounts in pounds sterling. The Group held approximately ~~72%~~64% of its total assets in US dollars at ~~1 February 2003~~31 January 2004 and generated approximately ~~71%~~69% of its sales and ~~72%~~68% of its operating profit in US dollars for the financial year then ended. Thus, although the Group’s US operations make substantially all of their sales and incur substantially all of their expenses in US dollars, in translating the results of its US operations, the Group’s results are subject to fluctuations in the exchange rate between the pound sterling and the US dollar. Accordingly, depreciation in the weighted average value of the US dollar against the pound sterling could

decrease reported revenues and operating profit (as was the case in ~~1997/98, 1998/99~~2002/03 and ~~2002/03)~~2003/04), and appreciation in the weighted average value of the US dollar against the pound sterling could increase reported revenues and operating profit (as was the case in 1999/00, 2000/01 and 2001/02). The Board has chosen not to hedge the translation effect of exchange rate movements on the results of the Group given that there is nolittle movement of ~~cash.~~cash between the Group’s two divisions.

As part of its long-term strategy, the Group seeks to finance its US net assets with borrowings denominated in US dollars as a hedge against the impact of exchange rate fluctuations on its US operating profit. Currently ~~nearly~~ all of the Group’s borrowings are denominated in US dollars. Therefore fluctuations in the exchange rate between the pound sterling and the US dollar affect the amount of the Group’s consolidated borrowings.

In addition, the prices of materials and certain products bought on the international markets by the UK division are denominated in US dollars, and therefore the Group has an exposure to exchange rates on the cost of goods sold which will have an opposite effect to its exposure on US operating ~~profit.The~~profit. The Group does use hedging operations in respect of purchases of US dollars by its UK operating division, within the treasury guidelines approved by the Group’s Board.

Cash dividends paid by the Group in respect of the shares will be in pounds sterling and fluctuations in the exchange rate between the pound sterling and the US dollar will affect the dollar amount received by holders of ADSs upon conversion of such dividends. Moreover, fluctuations in the exchange rate between the pound sterling and the US dollar will affect the US dollar equivalents of the pound sterling price of the shares on the London Stock Exchange and, as a result, are likely to affect the market price of the ADSs in the US.

The table ~~below~~on page 33 sets out, for the calendar years indicated, the average, high, low and period end exchange rates for the pound sterling expressed in US dollars per ~~£1.00.~~£1.

The Group’s policy is to manage financial risk resulting from exposure to currency and interest rate fluctuations. Translation exposure relating to non-pound sterling denominated assets in the US is partially hedged by borrowing in US dollars. Interest rate exposure is managed through the use of swaps, caps and floors.

Exchange rates between £ sterling and the US dollar
Calendar year

Average⁽¹⁾
High
Low
At period
end

1998 1.66 1.72 1.61 1.67
1999 1.62 1.68 1.55 1.62
2000 1.51 1.65 1.40 1.50
2001 1.44 1.50 1.38 1.45
2002 1.51 1.61 1.41 1.61
2003 (up to 26 March) 1.59 1.65 1.56 1.57

~~(1) The average of the exchange rates on the last day of each full month during the period.~~

~~Signet Group plc 31~~

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~~Risk and other factors (continued)~~

A committee of the Board is responsible for the implementation of treasury policies and guidelines which are considered to be

Signet Group plc Annual Report & Accounts year ended 31 January 2004

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Exchange rates between pound sterling and the US dollar⁽¹⁾

				At period
	Average	High	Low	end

Calendar year
1999	1.62	1.68	1.55	1.62
2000	1.51	1.65	1.40	1.50
2001	1.44	1.50	1.38	1.45
2002	1.51	1.61	1.41	1.61
2003	1.62	1.79	1.55	1.77
2004 (cumulative to 24 March)	1.81	1.91	1.78	1.84
Month
September 2003	1.60	1.66	1.56	1.66
October 2003	1.67	1.71	1.65	1.70
November 2003	1.69	1.72	1.65	1.72
December 2003	1.74	1.79	1.72	1.77
January 2004	1.81	1.86	1.78	1.82
February 2004	1.85	1.91	1.81	1.87

(1)	Based on unweighted data points sourced from Reuters.

appropriate by the Board for the management of financial ~~risk.The~~risk. The Group’s funding, liquidity and exposure to interest rate and exchange rate risks are managed by the Group’s treasury ~~department.The~~department. The Group uses derivative instruments for risk management purposes only, and these are transacted by specialist treasury personnel.

For financial instruments held, the Group has used a sensitivity analysis technique that measures the change in the fair value of the Group’s financial instruments from hypothetical changes in market rates and this is shown in the table below.

The amounts generated from the sensitivity analysis are forward-looking estimates of market risk assuming certain adverse market conditions occur. Actual results in the future may differ materially from those projected due to changes in the portfolio of financial instruments held and actual developments in the global financial ~~markets.These~~markets. These may cause fluctuations in interest and exchange rates to exceed the hypothetical amounts disclosed in the table below.

The analysis ~~method used by the Group to assess and mitigate risk discussed~~ below should not be considered a projection of likely future ~~events and losses.~~

events.

The example shown for changes in the fair values of borrowings and associated derivative financial instruments at ~~1 February 2003~~31 January 2004 is set out in the table ~~below.The~~below. The fair values of borrowings and derivative financial instruments are estimated by discounting the future cash flows to net present values using appropriate market rates prevailing at the period end.

The estimated changes in fair values for interest rate movements are based on an instantaneous decrease of 1% (100 basis points) in the specific rate of interest applicable to each class of financial instruments from the levels effective at ~~1 February 2003~~31 January 2004 with all other variables remaining ~~constant.The~~constant. The estimated changes in the fair value for foreign exchange rates are based on an instantaneous 10% weakening of the pound sterling against the US dollar from the levels applicable at ~~1 February 2003~~31 January 2004 with all other variables remaining constant.

Fair value changes arising from:													10%
									Estimated		1%		weakening in		Estimated
									fair value at		decrease in		£ against $		fair value at
									31 January		interest rates		favourable/		1 February
	Estimated fair value at 1 February 2003		1% decrease in interest rates (unfavourable)		10% weakening in £ against $ favourable/ (unfavourable)		Estimated fair value at 2 February 2002		2004		(unfavourable)		2003

	£m		£m		£m		£m		£m		£m			£m		£m

Borrowings	(229.4	)	(9.0	)	(23.9	)	(268.1	)	(207.9	)	(6.8	)	(17.2	)	(229.4	)
Foreign currency receivables	299.2		–		33.2		327.0
Foreign currency receivable									292.9		–		32.5		299.2
Foreign exchange contracts	(1.4	)	–		2.9		–		(2.9	)	–		4.1		(1.4	)
Commodity hedging contracts									(2.1	)	–		(2.1	)	–

~~32 Signet Group plc~~

Signet Group plc Annual Report & Accounts year ended 31 January 2004

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~~Directors, officers and advisers~~

Directors, officers and advisers

Directors
James McAdam CBE ~~CBE, 72,~~, 73, Chairman, appointed in 1992. He was also Group Chief Executive from 1992 until March 2000. From 31 March 2001, while continuing as Chairman, he ceased to be a full-time executive.

~~Lee Abraham~~*, 75, appointed in 1994. He has wide experience Mr. McAdam is the non-executive Chairman of ~~US retailing over many years~~Bisley Office Equipment Company Limited, Chairman of the British Clothing Industry Association Limited and ~~is a director~~Chairman of ~~Salomon Smith Barney Investment Funds. Mr. Abraham served as~~ the ~~lead director~~British Apparel & Textile Confederation; he devotes approximately 25% of ~~Liz Claibourne Inc. before~~ his ~~retirement in 1997.~~time to these roles collectively.

Robert Blanchard*, ~~58,~~59, appointed in 2000. He was a Group Vice President of Procter & Gamble and President of its Global Skin Care and Cosmetics business until his retirement in 1999. He is a non-executive director of Best Buy Co. Inc. and Bandag Inc. Mr. Blanchard also serves as President of Strategic and Marketing Services, a consulting company he founded upon his retirement from Procter & Gamble.

Walker Boyd, ~~50,~~51, appointed Group Finance Director in 1995. He is a member of the Institute of Chartered Accountants of Scotland. From 1992 he was Finance Director of the Group’s UK division. Mr. Boyd was appointed a non-executive director of WH Smith PLC in March 2004.

Terry Burman, ~~57,~~58, appointed Group Chief Executive in March 2000. He is also Chief Executive Officer of the Group’s US division. MrMr. Burman was appointed to the Board in 1996. Prior to joining the Group in 1995 he was Chief Executive Officer of Barry’s Jewelers, Inc.

Brook Land*, ~~54,~~55, appointed in ~~1995.~~1995 and first elected to the Board in 1996. Until 1996 he was a senior partner of, and is now a consultant to, solicitors Nabarro Nathanson. He is also non-executive Chairman of RPS Group plc and Medal Entertainment & Media plc. HeMr. Land was nominated as the senior independent director of Signet in June 2002.

Dale Hilpert*, 61, appointed in September 2003. He was Chief Executive of Williams-Sonoma, Inc. from April 2001 until his retirement in January 2003. Prior to this he was Chairman and Chief Executive of Foot Locker, Inc. (formerly the Venator Group, Inc.) which he joined as President and Chief Operating Officer in 1995.

*	Non-executive directors, all of whom satisfied the definitions of independence in the revised Combined Code and are viewed as independent by the Board.

Russell Walls*, ~~59,~~60, appointed in August 2002. He was Group Finance Director at BAA plc until his retirement in August ~~2002. He has been a non-executive~~2002 and was the senior independent director of Hilton Group plc ~~for seven years but has announced his intention to resign with effect from 16~~until May 2003. ~~He serves as their senior independent director.~~ Mr. Walls is ~~also a non-executive~~the senior independent director of Stagecoach Group ~~plc and Mersey Docks and Harbour Co.~~plc. He is a Fellow of the Association of Chartered Certified Accountants.

*	~~Non-executive directors, all of whom satisfy the definitions of independence in the “Review of the role and effectiveness of non-executive Directors” (the “Higgs report”).~~

~~Alternate director~~Lee Abraham
* retired from the Board with effect from 8 January 2004.

Richard Miller~~, 58, Executive Vice President and Chief Financial Officer of the Group’s US division. He was appointed in 1994, and has announced~~served as an alternate director until his ~~intention to retire in~~retirement on 30 April 2003.

Committees
Remuneration Robert Blanchard (Chairman), ~~Lee Abraham,~~Russell Walls, Brook Land (until 31 March ~~2003), Russell Walls.~~2003 and from 7 January 2004) and Lee Abraham until 7 January 2004.

AuditRussell Walls (Chairman from 1 April 2003), Dale Hilpert (from 7 January 2004) and Brook Land (Chairman until 31 March 2003),. Robert Blanchard was a member until 31 March 2003 and Lee Abraham ~~Robert Blanchard (until 31 March 2003), Russell Walls (Chairman from 1 April 2003).~~was a member until 7 January 2004.

Nomination Brook Land (Chairman), Robert Blanchard and James McAdam. Russell Walls and Lee Abraham ~~(until~~were members until 31 March ~~2003), Robert Blanchard, James McAdam, Russell Walls (until 31 March 2003).~~

~~David Wellings~~ ~~retired from the Board with effect from 13 June 2002. Up until that time he also served on all the above committees and was the senior independent director of Signet.~~

~~Ian Dahl~~ ~~resigned from the Board with effect from 30 September 2002.~~2003.

Under the Company’s Articles of Association, directors appointed by the Board since the last annual general meeting, either to fill a vacancy or as an additional director, must retire at the next annual general meeting.

The Articles also specify that every director is required to retire at the annual general meeting in the third calendar year after he was last elected or re-elected, except for directors over the age of 70 who are required to retire at every annual general meeting, but such directors may, in either circumstance, seek re-election.

Messrs. ~~Abraham, Land,~~Blanchard, Boyd, Hilpert and McAdam ~~and Walls~~ retire from the Board at the forthcoming annual general meeting. Following consideration by the Board of the recommendations of the Nomination Committee, they offer themselves for re-election.

~~Signet Group plc 33~~

Signet Group plc Annual Report & Accounts year ended 31 January 2004

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~~Directors, officers and advisers (continued)~~

Officers

~~Stephen Card~~Mark Jenkins, ~~43, Group Treasurer,~~46, Company Secretary, appointed ~~in 1999.~~1 March 2004. He is a barrister. Previously he was ~~Treasury Manager of Nycomed Amersham~~Company Secretary at COLT Telecom Group plc and ~~prior to that Group Treasurer of Scapa~~at Peek plc. ~~He has resigned with effect from 28 March 2003.~~

Timothy Jackson, ~~44,~~45, Company Secretary and Investor Relations Director, appointed in 1998. He is a Fellow of the Association of Chartered Certified Accountants. ~~Prior~~On 1 March 2004 he resigned as Company Secretary to ~~joining the~~focus on his duties as Investor Relations Director.

Liam O’Sullivan, 32, Group Treasurer, appointed 2 June 2003. Previously he was ~~Company Secretary~~Group Treasury Manager at Rank Group Plc. He is a member of the Institute of Chartered Accountants in England and ~~Director~~Wales and a member of ~~Investor Relations~~the Association of ~~Cordiant Communications~~Corporate Treasurers.

Stephen Card was Group ~~plc.~~Treasurer until his resignation on 28 March 2003.

No director or officer has any family relationship with any other director or officer.

Advisers
Auditors
~~Auditors~~ KPMG Audit Plc,
8 Salisbury Square, London EC4Y 8BB.

Financial advisers
Lazard Brothers & Co. Limited, ~~21 Moorfields,~~
50 Stratton Street, London ~~EC2P 2HT.~~W1J 8LL.

Stockbrokers
Deutsche Bank AG,
Winchester House,
1 Great Winchester Street, London EC2N 2DB.

Cazenove & Co. Ltd, ~~12 Tokenhouse Yard,~~
20 Moorgate, London EC2R ~~7AN.~~6DA

UK lawyers
~~Theodore Goddard, 150 Aldersgate~~Herbert Smith,
Exchange House,
Primrose Street, London ~~EC1A 4EJ.~~EC2A 2HS.

US lawyers
Weil, Gotshal & Manges,
One South Place, London EC2M 2WG.

Principal bankers
Barclays Bank PLC,
5 The North Colonnade, Canary Wharf, London E14 4BB.

HSBC Bank plc,
8 Canada Square, Canary Wharf, London E14 5HQ.

Royal Bank of Scotland plc,
135 Bishopsgate, London EC2M 3UR.

Registrars
Capita Registrars,
The Registry,
34 Beckenham Road, Beckenham, Kent BR3 4TU.

~~34 Signet Group plc~~


	Signet Group plc Annual Report & Accounts year ended 31 January 2004	35

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Report of the directors

~~for the 52 weeks ended 1 February 2003~~

Business review
The principal activity of the Group is the retailing of jewellery, watches and gifts with branches throughout the UK and the US. A review of the Group’s performance during the year, with comments on the financial results and likely future developments, ~~are~~is set out on pages 7 to 2728 and ~~form~~forms part of this Report.

Going concern
On the basis of current financial projections and facilities available, the directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future and, accordingly, consider that it is appropriate to continue to adopt the going concern basis in preparing its annual accounts.

Results and dividends
The results of the Group for the year appear on page ~~52.~~56. The directors recommend the payment of a final dividend of ~~1.80p~~2.16p per share, to be paid on 142 July ~~2003~~2004 to shareholders on the register of members at close of business on 64 June ~~2003.~~2004. An interim dividend of ~~0.310p~~0.341p per share was paid in November ~~2002~~2003 making a total of ~~2.110p~~2.501p for the year ~~(2001/02: 1.789p)~~(2002/03: 2.110p). See note 8 on page 6569 for waiver of dividend by Signet Group QUEST Limited.

Directors and alternate director
The directors who served during the period were James McAdam (Chairman), Lee Abraham, Robert Blanchard, Walker Boyd, Terry Burman, ~~Ian Dahl,~~Dale Hilpert, Brook Land and Russell ~~Walls and David Wellings.~~Walls. Details of the current directors are shown on page ~~33.~~34. Richard Miller served as an alternate director.

Directors’ remuneration, service contracts and share interests
Details of directors’ remuneration, service contracts and the interests in the share capital of the Company of the directors and their immediate families at ~~1 February 2003~~31 January 2004 are given in the Directors’ remuneration report on pages 4042 to ~~49.~~53.

Allotment of equity securities
There were no equity securities allotted save in relation to the exercise of options as set out in note 27 on page ~~80.~~85.

Social, ethical and environmental matters
Matters relating to these issues, including employees, payment of creditors and charitable and political donations, are set out on pages 97103 to ~~99.~~106.

Substantial shareholdings and control of the Company
Details of substantial shareholdings and control of the Company are as set out on ~~page 102.~~pages 109 and 110.

Purchase of own shares
At ~~1 February 2003~~31 January 2004 there was outstanding an authority, granted by the shareholders at the annual general meeting in ~~2002,~~2003, to purchase, in the market, up to ~~170,793,336~~171,400,228 shares of 0.5p each in the Company at a minimum price of 0.5p per share and a maximum price of 105% of the average of the market values derived from the London Stock Exchange Daily Official List for the preceding five business days. During the financial year no purchases were made or proposed to be made and no purchases or options or contracts to make purchases have been made or entered into since the end of the financial ~~year.The~~year. The authority expires at the forthcoming annual general meeting and a resolution to renew it will be proposed at the meeting.

Pension funds
Information about the Group’s pension schemes is set out in note 22 on page ~~73 in the notes to the accounts.~~79. Information about pension arrangements for executive directors is set out in the Directors’ remuneration report on pages 4042 to ~~49.~~53.

~~Auditors~~Auditor
The ~~auditors,~~auditor, KPMG Audit Plc, ~~are~~is willing to continue in office and a resolution for ~~their~~its re-appointment as ~~auditors~~auditor of the Company will be submitted to the annual general meeting.

Annual general meeting
The annual general meeting is to be held at ~~2.00 pm~~12.00 noon on ~~8 July 2003~~9 June 2004 at The Café Royal, 68 Regent Street, London W1B 5EL. A description of the business to be transacted at the annual general meeting is included with the notice of the meeting.

By order of the Board

~~T J Jackson~~Mark Jenkins
Secretary
2624 March ~~2003~~2004

~~Signet Group plc 35~~


36	Signet Group plc Annual Report & Accounts year ended 31 January 2004

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~~Corporate governance statement~~

Corporate governance statement

~~The Board~~
The Board has as its prime objective the enhancement of business performance and shareholder value over time. It carries the responsibility for determining all major policies, for ensuring that effective strategies are in place, and for reviewing the system of internal control, including those relating to social, ethical and environmental matters (see pages 97 to 99 for details of corporate governance relating to social, ethical and environmental matters). The Board also seeks to present to shareholders, potential investors and other interested parties a balanced and coherent assessment of the Company’s strategy, financial position and prospects.

The Board retains responsibility for a range of specific matters including the approval of the annual report and other documents circulated to shareholders by the Company, annual and quarterly results announcements, other trading statements, dividend policy, acquisitions, disposals, risk management, material agreements, major capital expenditures, budgets, long range plans, senior executive appointments and the setting of social, ethical and environmental policies. The day to day running of the business is delegated to the executive management who report to the Board on a regular basis. Procedures are also in place to enable the Board to monitor the implementation of management decisions and review the performance of executive directors. Certain matters are delegated to Board committees, each with defined terms of reference, procedures, responsibilities and powers.

~~Application of corporate governance principles~~
The Board
The Board has as its prime objective the sustainable enhancement of business performance and shareholder value. It carries the responsibility for determining all major policies, for ensuring that effective strategies and management are in place, for assessing the performance of the Group and its senior management and for reviewing the system of internal control, including those relating to social, ethical and environmental matters (see pages 103 to 106). The Board also seeks to present to shareholders, potential investors and other interested parties a balanced and coherent assessment of the Company’s strategy, financial position and prospects. The Board retains responsibility for a range of specific matters including approval of the annual report and other documents circulated to shareholders by the Company; quarterly and annual results announcements; other trading statements; distribution policy; acquisitions, disposals, material agreements and capital expenditures outside predetermined limits set by the Board; risk management; budgets; long range plans; senior executive appointments; succession planning and the setting of social, ethical and environmental policies.

The Board monitors all developments in corporate governance, including the revised Combined Code (the Financial Reporting Council’s “Audit Committees: Combined Code of Governance”, the “Smith Report”) and changes due to the Sarbanes-Oxley Act of 2002 in the US. The Board reviews its performance and procedures in the light of changing expectations regarding best practice and makes amendments where it believes appropriate, to take account of them.

The formal schedule of matters reserved for the Board was updated in early 2004/05 and the division of responsibilities between the Chairman and the Group Chief Executive was set out in writing and agreed by the Board. In summary, the Chairman is responsible for:
•	the effective running of the Board, including the evaluation of its performance and of the individual directors, the balance of the Board and compliance with corporate governance;
•	the review, prior to their presentation to the Board by executive management, of strategy, medium term plans and annual budget;
•	reviewing, prior to their presentation to the Remuneration Committee, the recommendations of the Group Chief Executive regarding the remuneration of senior executives and for making a recommendation regarding that of the Group Chief Executive;
•	maintaining contact with major shareholders to understand directly their issues and concerns;

•	keeping the non-executive directors appropriately informed of developments within the business and shareholders’ attitude to the Group; and
•	the reputation of the Group, and representing it both internally and externally.
The Chairman is also a member of the Nomination Committee.

In summary, the Group Chief Executive is responsible for:
•	the executive leadership of the Group;
•	the development, and presentation to the Chairman and the Board, of strategy, medium term plans and budgets;
•	within this framework, for the performance of the business;
•	compliance with legal and corporate governance requirements, together with the social, ethical and environmental principles of the Group; and
•	making recommendations on the appointment and remuneration of senior executives and management development.
The Group Chief Executive is also Chief Executive of the US division.

The Board met nine times in 2003/04, including three extended sessions of more than one day. All directors attended all meetings of the Board with the sole exception of a meeting for which one director was unable to attend.

The Board currently consists of seven ~~directors in total:~~directors: the Chairman, two executive directors (the Group Chief Executive and the Group Finance Director), and four independent non-executive directors, one of whom is nominated as the senior independent ~~director and the Chairman (who is not considered to be independent).~~director. Incumbents are identified on page ~~33.~~

34. Directors are subject to election at the first annual general meeting after appointment and then to re-election by shareholders at no more than three yearly intervals. The Board ~~met eight times~~is of the view that fixed term or age limits should not be set for non-executive directors as it considers it important that the particular contribution being made by individual directors be taken into account in ~~2002/03, including three extended sessions~~deciding their tenure of ~~more than one day. All directors receive written reports in a timely manner prior to~~office and that the performance of each ~~meeting which enables them to make informed decisions~~director be reviewed annually. Any non-executive director who has served on the ~~corporate and business issues under consideration.~~Board for nine years since first being elected as a non-executive director must stand for annual re-election; also any director over the age of 70 must stand annually for re-election.

It is believed that the composition of the Board gives an appropriate balance of skills, experience, independence and executive involvement, whilst being small enough for efficient operation. No one individual has unfettered powers

~~of decision and no individual or grouping is in a position to unduly influence the Board’s decision making.~~ The mix of skills and business experience of the directors is considered to be appropriate for the proper and efficient functioning of the Board. The terms of reference of the Nomination Committee include the regular review of the composition ~~performance~~ and balance of the Board. No one individual has unfettered powers of decision and no individual or grouping is in a position to unduly influence the Board’s decision making.


	Signet Group plc Annual Report & Accounts year ended 31 January 2004	37

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~~The Company Secretary is responsible to~~Corporate governance statement (continued)

At least once a year the ~~Board for ensuring that Board procedures are followed and all~~non-executive directors ~~have access to his advice and service. There is~~meet without the executive directors being present. They also ~~a procedure for directors to take independent advice in~~meet occasionally without the ~~course of their duties, if considered appropriate, at the Company’s expense.~~

The Group comprises two separate operating divisions, one for the US and one for the UK, each with a separate executive committee which meets regularly. The Group Chief Executive is also Chief Executive of the Group’s US division.The Group Finance Director and the Chief Executive of the UK division report to the Group Chief Executive.Chairman being present.

On appointment new directors take part in an induction programme and are given an opportunity to familiarise themselves with the Group’s business, procedures and investor perceptions. In addition to meeting with management this process includes briefings from the Group’s external auditors, lawyers, financial advisers and stockbrokers. ~~The Group also makes available~~Directors are kept informed of the ~~opportunity for all directors to~~latest developments and best practice in corporate governance and attend relevant courses or receive appropriate training to equip them to carry out their ~~duties as~~duties. The non-executive directors are given regular opportunities to see the operations of the business and to meet management and staff.

All directors receive written reports in a timely manner prior to each meeting which enables them to make informed decisions on the issues under consideration.

The performance of the Board, its Committees and individual members is rigorously monitored. The Board has agreed a formal written procedure for the evaluation process which is conducted by the Chairman, in conjunction with the senior independent director and the Company Secretary. The performance evaluation of the Chairman is led by the senior independent director and takes into account the views of both the non-executive and executive directors.

~~Directors~~The Company Secretary is responsible, through the Chairman, for advising the Board on all governance matters and ensuring that Board procedures are ~~subject~~followed. All directors have access to ~~election~~his advice and service. There is also a procedure for directors to take independent advice in the course of their duties, if considered appropriate, at the first annual general meeting after appointment and periodic re-election by shareholders thereafter, normally every three years. The Board is of the view that term of office or age limits should not be set for non-executive directors as it considers it important that the particular contribution being made by individual directors be taken into account in deciding when they should retire. However, any director over the age of 70 must stand annually for re-election to the Board.Group’s expense.

Board committees
~~The Group operates a number~~Certain matters are delegated to Board committees, each with defined terms of ~~committees to which specific tasks are delegated.The~~reference, procedures, responsibilities and powers. The principal committees ~~are:~~are as follows:

The Audit Committee ~~which in 2002/03 consisted of all the non-executive directors, was chaired by Brook Land and met five times. From 1 April 2003 the Committee will consist of Lee Abraham, Brook Land and Russell Walls~~

~~36 Signet Group plc~~

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(Chairman). All members of the Audit Committee are independent, one being a “financial expert” as defined by the Securities and Exchange Commission (“SEC”). The only remuneration members of the Audit Committee receive, from the Group, is as directors.

~~Although foreign private issuers listed on Nasdaq are not currently required to comply with the audit committee requirements of the National Association of Securities Dealers (“NASD”), Signet~~ has chosen to do so voluntarily. The NASD is currently revising its corporate governance standards to comply with provisions of the Sarbanes-Oxley Act of 2002 (“the Sarbanes-Oxley Act”) (which imposes new requirements on companies registered with the SEC in the US), and Signet will undertake a review of its compliance with the corporate governance standards and audit committee requirements once the NASD’s revised rules are finalised in order to ensure Signet’s continued compliance with the NASD’s requirements. The Audit Committee has adopted a clear written charter ~~and has an established channel of direct communication with~~which is available on request from the ~~external auditors who normally attend meetings except in relation to certain aspects of their own appointment, assessment of their independence and determination of their fees.~~Company Secretary or on the Group’s web site. The Chairman, the executive directors and any other officer of the Group may be invited to attend meetings.The Audit Committee meets at least once a year with the external auditors without executive management being present.charter was updated during 2003/04.

The appointment of the external auditors, the determination of their fees and an assessment of their independence (including consideration of a written disclosure by the external auditors of all relationships that they have with the Company), are matters that are considered by the Audit Committee. The Audit Committee also approves in advance all audit and non-audit work carried out by the external auditors. See page 62 for details of fees paid to the external auditors. The Audit Committee’s responsibilities ~~also~~ include the review of the appropriateness and effectiveness of the Group’s accounting policies and financial procedures and oversight of the external ~~auditors’~~auditor’s work, including the scope and result of the audit. The Audit Committee also reviews the work of the internal auditors, the Disclosure Control Committee and the Group’s whistleblowing procedures. The review of the whistleblowing procedures includes receiving reports on all matters raised and on actions taken. The Audit Committee reviews, discusses with management and approves for submission to the Board all Group audited accounts, trading statements and selected internal financial reports. It also reviews reports submitted to the Board by the Group’s external ~~auditors.~~auditor.

Following the introduction of the revised Combined Code, the Audit Committee will review the Group’s internal control and risk management systems and will report to the Board on their effectiveness.

The external auditor’s objectivity and independence is safeguarded by the Audit Committee having primary responsibility for making a recommendation on the appointment of the external auditor, the determination of their fees and making an annual assessment of their independence (including consideration of a written disclosure by the external auditor of all relationships that they have with the Company). The planned rotation of partners and staff of the external auditor, together with a “cooling off” period before anyone from the external auditor joins the Group, also assist in maintaining the independence of the external auditor. The Audit Committee has reviewed and approved a policy for the provision of audit and non-audit services by the auditor. The policy requires that the Audit Committee approves in advance all audit and non-audit work carried out by the external auditor (subject to a de minimus amount, this being then reported to the Audit Committee on a quarterly basis). The approval process requires disclosure of the objectives and scope of services to be performed in addition to the fee structure. The Audit Committee also reviews all approved services and fees at subsequent meetings. See page 66 for details of fees paid to the ~~work~~external auditor.

The Audit Committee has an established channel of direct communication with the external auditor who normally attend meetings except in relation to certain aspects of their own appointment, assessment of their independence and determination of their fees. The Chairman, the Chief Executive, the Finance Director and others attend the meeting by invitation. The Audit Committee meets at least once a year with the external auditor without executive management being present.


38	Signet Group plc Annual Report & Accounts year ended 31 January 2004

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All members of the ~~internal auditors.~~Audit Committee are independent, and the only remuneration members of the Audit Committee receive, from the Group, is as directors. Russell Walls succeeded Brook Land as chairman on 1 April 2003, and is an “audit committee financial expert” as defined by the applicable Securities and Exchange Commission regulations. From 7 January 2004 the Audit Committee consisted of Dale Hilpert, Brook Land and Russell Walls. From 1 April 2003 to 7 January 2004 it consisted of Lee Abraham, Brook Land and Russell Walls and from 2 February 2003 to 31 March 2003 Robert Blanchard was also a member. The Audit Committee met six times in 2003/04, including a meeting dedicated to the consideration of corporate governance matters. Two directors were each unable to attend one meeting.

The Nomination Committee ~~which~~charter was revised in ~~2002/03 consisted of all~~early 2004/05 to reflect corporate governance developments in the ~~non-executive directors~~UK and the

~~Chairman of~~ US and is available on request from the ~~Board, is chaired by~~Company Secretary or on the ~~senior independent non-executive director and met as required. From 1 April 2003~~Group’s web site. The Nomination Committee has responsibility for reviewing the ~~Committee will consist of Robert Blanchard, Brook Land (Chairman) and James McAdam. Having reviewed the~~ composition ~~performance~~ and balance of the Board, ~~the Committee~~as well as Board and senior management succession. It also makes recommendations to the Board on all new Board appointments and nominations for re-election as directors. ~~The~~Once the Nomination Committee ~~uses~~has agreed a job specification the services of external recruitment agencies ~~in both the UK and US~~are used to identify suitable candidates for senior executive posts and for all Board appointments. The Nomination Committee carries out interviews with such individuals. The re-election procedures have been reviewed and formalised, particularly with regard to the performance evaluation procedures for individual directors. The review of any non-executive director, who is serving beyond six years from first being elected to the Board, is considered with particular care. No director is involved in any decision about his own re-appointment. The procedure for the election of directors is laid out on page ~~33. The Committee also reviews a number of other senior appointments within the Group.~~34.

When the role of the Group Chairman or any matter relating to succession to that role is discussed, the Chairman may be consulted, but the responsibility for preparing a job specification and making any recommendation to the Board rests solely with the independent non-executive directors of the Nomination Committee. The Nomination Committee also reviews a number of other senior appointments within the Group, such as the Company Secretary.

The senior independent director chairs the Nomination Committee. From 1 April 2003 the Nomination Committee consisted of Robert Blanchard, Brook Land and James McAdam and from 2 February 2003 to 31 March 2003 Lee Abraham and

Russell Walls were also members. The Nomination Committee met four times in 2003/04 and there was full attendance at all meetings.

The role of the Remuneration Committee is discussed in the Board report on remuneration on page ~~40.~~42.

Further details regarding the chairmen and members of these Committees are set out on page ~~33.~~34.

Executive management
The Group comprises two separate operating divisions, one in the US and one in the UK, each with a separate executive committee which meets regularly. The Group Chief Executive is also Chief Executive of the Group’s US division. The Group Finance Director and the Chief Executive of the UK division report to the Group Chief Executive.

The executive management is responsible to the Board for the performance of the Group and its compliance with the internal policies and procedures set by the Board. As part of this responsibility the executive management regularly reports to the Board on the performance of the Group, its competitive environment and its relations with stakeholders.

Business strategies; long range plans; budgets; acquisitions, disposals, material agreements and capital expenditures outside predetermined limits set by the Board; internal policies and procedures are presented to the Board by executive management for consideration. Within this approved framework the executive management is responsible for the day to day running of the business including: merchandising; store operations; human resource management and planning; marketing; real estate; financial reporting; treasury management; risk management; tax management; social, ethical and environmental matters; and communications with investors.

Code of Conduct and Code of Ethics
Signet strives to act in accordance with the laws and customs of each country in which it operates; to adopt proper standards of business practice and procedure; to operate with integrity; and to observe and respect the culture of each country in which it operates. To that end, the Group has adopted a Statement of Social, Ethical and Environmental Principles and supporting policies applicable to all officers and employees of the Group and substantially complies with the requirement of Nasdaq. In addition, it has a policy on business integrity, as well as more detailed guidance and regulations in the Group’s staff induction, training and operational procedures. The Group is


Signet Group plc Annual Report & Accounts year ended 31 January 2004	39

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Corporate governance statement (continued)

currently reviewing these policies in order to meet the recently revised corporate governance requirements of the Nasdaq National Market, which require a code of business conduct and ethics. This Nasdaq requirement is not currently effective but will take effect after May 2004. A code of ethics meeting the requirements of the Sarbanes-Oxley Act covering the Group Chief Executive, the Group Finance Director and senior financial officers is also in place. These codes are available on request from the Company Secretary or on the Group’s web site.

Relations with shareholders
The Board recognises the importance of relations with shareholders and communicates regularly with ~~shareholders~~them about the Group’s strategy, financial performance and ~~prospects~~prospects. It does this through ~~communications sent~~documents distributed to shareholders, stock exchange announcements and ~~general meetings of shareholders. In addition, executive members of the Board~~in meetings. Presentations on quarterly and the Company Secretary and Investor Relations Director carry out a programme of meetings with institutional investors.The Chairman and the senior independent non-executive director are also available to meet with investors. Through the use of teleconferences and web casting, presentations on quarterlyannual results and the Christmas trading statement are open to all interested parties, including private ~~shareholders.~~shareholders, through the use of teleconferences and web casting. Other presentations are available on the Group web site (~~www.signetgroupplc.com~~(www.signetgroupplc.com)).

The Board recognises that the prime opportunity for private investors to question the Board is at a general meeting of shareholders. At the annual general meeting the chairmen of the Audit, Nomination and Remuneration Committees, in addition to the Chairman of the Board, are expected to be available for questions relating to the function of their respective Committees.

The Group Chief Executive, the Group Finance Director and the Investor Relations Director carry out an extensive programme of meetings with institutional investors. The Chairman and the senior independent director also meet with investors from time to time. Following the appointment of a new non-executive director, major shareholders will in future be offered an opportunity to meet the individual.

~~Signet~~The Board is kept informed of investment market attitudes to the Group ~~plc 37~~by receiving regular reports on investor relations, copies of brokers’ research, press cuttings and third party surveys of investor perceptions.

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~~Corporate governance (continued)~~

Compliance statement and revised Combined Code
In June 1998 the London Stock Exchange published the Principles of Good Corporate Governance and the Code of Best Practice (“the Combined Code”). The Board ~~of Directors~~ considers that it has complied throughout the year with the provisions of the Combined Code required to be observed by companies. In July 2003 a revised Combined Code was issued that applies for reporting years starting on or after 1 November 2003. During

2003/04 the Board reviewed the revised Combined Code, the Smith Report and corporate governance developments in the US. Based on that review the Board agreed a programme of action that has largely been completed with any remaining actions being scheduled for later in 2004/05.

Internal control
The Combined Code requires that the directors review the effectiveness of the Group’s system of internal control including the following areas:

•	Financial
•	Operational
•	Compliance
•	Risk management

Guidance for directors Internal Control: Guidance for Directors on the Combined Code (“the Turnbull guidance”) was published in September 1999. The Board of Directors considers that it has complied with the Turnbull guidance throughout the year and up to the date of approval of this Annual ~~Report.~~Report & Accounts. In addition, during ~~2002/03~~2003/04 the Board ~~reviewed~~continued to review the implications of the Sarbanes-Oxley Act and took steps to ensure compliance. ~~The Group Chief Executive and the Group Finance Director intend to sign certifications as required by the Sarbanes-Oxley Act.~~

The Board exercises ultimate responsibility for the Group’s system of internal controls and for monitoring its effectiveness. The internal control system is designed to safeguard shareholders’ investment and the Group’s assets, both tangible and intangible, including the reputation of the Group with its various stakeholders. Procedures are in place to ensure the maintenance of proper accounting records, the reliability of the financial information used within the business or for publication and the determination of disclosure obligations and of materiality. These procedures also cover disclosure on a timely basis of information to the investment markets. However, such procedures are designed to manage rather than wholly eliminate the risk of failure to achieve business objectives and can provide only reasonable, not absolute, assurance against material misstatement or loss.

~~Following the passing of the Sarbanes-Oxley Act a review of the~~Signet’s disclosure control ~~procedures was undertaken and a Disclosure Control Committee was formed as part of the internal control system. The Group’s disclosure control~~

procedures are designed to help ensure that processes and procedures for information management are in place at all levels of the ~~Group so that appropriate information is publicly disclosed in a timely manner.~~Group. The disclosure control procedures ~~are also designed~~aim to ensure that any information disclosed by the Group is recorded, processed, and summarised ~~and reported and~~appropriately. The procedures are also designed to ensure that ~~the~~ information is accumulated and communicated to management


40	Signet Group plc Annual Report & Accounts year ended 31 January 2004

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to allow timely decisions to be made regarding required disclosure. The Group’s Disclosure Control Committee consists of the Group Finance Director, the Company Secretary, ~~and~~the Investor Relations Director and the Group Financial Controller who consult with the Group’s external advisers and auditors as necessary.

These procedures enable Signet to make timely and accurate public disclosures.

Key procedures ~~that have been established and are~~ designed to provide effective internal control are:

•	Control environment – control is exercised through an organisational structure with clearly defined levels of responsibility and authority together with appropriate reporting procedures, particularly with respect to financial information, capital expenditure, investment, granting of guarantees and the use of treasury products (see pages 3132 and 3233 for more detail) as well as health, safety, environmental and customer service issues.

•	Reporting and information systems – the Group has a comprehensive budgeting and five year strategic planning system with an annual budget and strategic plan approved by the Board. Monthly trading results and balance sheets ~~are~~when reported ~~against~~include the corresponding figures for the budget or revised forecast and the previous year. Any significant variances are examined by divisional operating management and discussed with Group management, with action being taken as appropriate. A forecast of the full year’s results is updated regularly, based on performance to date and any changes in outlook. The executive directors regularly report to the Board on the development of the business, the competitive environment and any material breaches of procedure. Through these mechanisms, the Group’s performance is continually monitored, risks identified in a timely manner and their implications assessed, control procedures re-evaluated and corrective actions agreed and implemented. The Group issues both sales and financial results on a quarterly basis. The external ~~auditors review~~auditor reviews the quarterly and half year statements, and ~~present a report~~Christmas Trading Statement and presents reports to the Audit Committee for consideration.

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•

Risk management – the identification of major business risks is carried out in conjunction with ~~operating~~operational management and appropriate steps are taken to monitor and mitigate risks. The Risk Management Committee, whose members include the Group Finance Director ~~the Chairman of the Audit Committee~~ and senior divisional executives, meets on a regular basis, at least four times a year. ~~The matters~~Matters considered by the Risk Management Committee include ~~the review~~reviews of the Group’s risk register, emerging issues, new

	regulations and the activity of the internal audit function. The external auditors receive copies of the papers submitted to the committee. A report from each Risk Management Committee meeting, and any material non-compliance or emerging issue, is considered by the Board in a timely manner. From the start of 2004/05 the Audit Committee will review the effectiveness of the Group’s internal control and risk management procedures and report to the Board on these matters.

•	Control procedures – each operating division maintains documented financial and operating controls as well as procedures appropriate to its own business environment and in conformity with Group guidelines. Each of the operating divisions has an internal audit function which primarily reviews the processes in the store operations but also reviews central service functions. The work of the internal audit function is monitored by senior divisional executives, Group management, the Risk Management Committee and the Audit Committee.

•	Reviews of effectiveness ~~- The~~– the Board, in addition to receiving the Risk Management Committee reports,

annually reviews the effectiveness of the internal control system on the basis of a report submitted to the Risk Management Committee. This report is based on annual written self-certification statements prepared by the operating divisions and head office departments which confirm the extent of their compliance with all material internal financial operating and disclosure controls. These statements are prepared by the divisional finance directors on behalf of each operating division and are reviewed by senior divisional executives, Group management and the Board. As of the time of this Annual Report, the Board is not aware of any significant changes in the Group’s internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. The Disclosure Control Committee reports to the Audit Committee on a quarterly basis as to the effectiveness of the disclosure control procedures.

Based on their review of the Group’s disclosure controls and procedures, as of the end of the period covered by this Annual Report & Accounts, the Group Chief Executive and Group Finance Director have concluded that the Group’s current disclosure controls and procedures are effective in achieving their objective of ensuring that information regarding the Group is recorded, processed, summarised and reported and that the information is accumulated and communicated to management to allow timely decisions regarding required disclosure. They concluded that there have not been any significant changes in the Group’s internal controls over financial reporting during the period covered by this Annual Report that have materially affected, or are reasonably likely to materially affect those controls.

•Signet Group plc Annual Report & Accounts year ended 31 January 2004

Conclusions of Group Chief Executive and Group Finance Director – based on their review of the Group’s disclosure controls and procedures, the Group Chief Executive and Group Finance Director have concluded that the Group’s current disclosure controls and procedures are effective in achieving their objective of ensuring that information regarding the Company is recorded, processed, summarised and reported and that the information is accumulated and communicated to management to allow timely decisions regarding required disclosure.41

	Performance will be measured over three years from the start of the financial year in which the award is made, and may then be measured from the same start point to the end of the fourth and fifth years if not previously satisfied.

	*US executives* For US executives there is a pre-grant test based on both personal and corporate performance. In addition there is a post grant exercise condition that annual compound growth in earnings per share will be more than 3% above inflation.

	The post grant performance condition will be measured over three years from the start of the financial year in which the award is made, and may then be measured from the same start point to the end of the fourth and fifth years if not previously satisfied.

~~42 Signet Group plc~~

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~~Directors’ remuneration report (continued)~~

~~granted in October 1997, April 1998, April 1999 and May 2000; the performance criteria having been satisfied in each case over the first three year period following the grant of the options.~~ Options granted under the executive share option ~~plan~~plans are normally only exercisable between three and ten years from the date of grant, after which the options lapse.

In July 2003 options of five times salary were awarded to the Group Chief Executive. In 2004 options amounting to five times salary will be awarded to the Group Chief Executive, the grant price to be fixed following the announcement of the preliminary results. The awards to the Group Chief Executive were based on principles 2 (iv), 2 (v), 2 (vi) (set out on pages 42 and 43), a remuneration survey that was undertaken, and reflected the strong performance of both the Group and the executive over the prior three years. In the case of the Group Finance Director, he was awarded options amounting to one and a quarter times salary in July 2003 and will be awarded options amounting to one and a half times salary in 2004.

Certain provisions of all the share option plans may be amended by the Board, but certain basic provisions (and in particular most of the limitations on individual participation, the number of shares and the percentage of share capital that can be issued thereunder) cannot be altered to the advantage of the participants except with the approval of the shareholders of the Company or in accordance with the adjustment provisions in the plans.

(ii) ~~Employee~~All-employee share plans

In 1998/99 the Group introduced an Inland Revenue approved savings related share option scheme for UK employees (the “Sharesave Scheme”), a US ~~section~~Section 423 Plan (the “Employee Stock Savings Plan”) and a savings related share option scheme for employees in the Republic of Ireland (the “Irish Sharesave Scheme”), together, the “All-employee Schemes”. These schemes give those employees with qualifying service the opportunity to participate in the equity of the Company, with the aim of aligning the interests of employees with those of shareholders.

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The options granted under the Sharesave Scheme and the Irish Sharesave Scheme are normally exercisable between 36 and 42 months from the date of the relevant savings contract. Options were granted under these plans at a price approximately 20% below the middle market price of the shares on the London Stock Exchange on the dealing day prior to the date that employees were invited to participate in them.

The options granted under the Employee Stock Savings Plan, which is for employees in the US, are normally exercisable between 24 and 27 months from the date of grant, such date being the first business day of any period during which savings may be accumulated under a savings contract. The options under this plan were granted at a price approximately 15% below the middle market price of the shares on the London Stock Exchange on the date of grant. The period of exercise and the discount allowed vary from the UK due to different legal regulations in the US.

(iii) Long term incentive plan
Shareholders gave approval, in June 2000, to the Signet Group plc 2000 Long Term Incentive Plan (“2000 LTIP”).

Awards were made to executive directors and other senior executives in 2000/01, 2001/02, 2002/03 and ~~2002/03.~~2003/04. All these awards are subject to fulfilment of minimum performance conditions set at the time of the award as to:

compound annual growth in the profit before tax of the Group using a constant exchange rate (or, in the case of the former Chief Executive of the UK division, the operating profit of the UK division) (“Profit Growth”) and

~~the return on capital employed (“ROCE”) of the Group (or, in the case of the former Chief Executive of the UK division, the ROCE of the UK division)~~

•	compound annual growth in the profit before tax of the Group using a constant exchange rate (“Profit Growth”) and

•	the return on capital employed (“ROCE”) of the Group

in each case over a fixed period of three successive financial years starting with the one in which the award was made. Nothing is payable under the award unless both minimum performance conditions are ~~achieved.The~~achieved. The minimum Profit

Growth is set at a threshold level ~~based on~~after taking account of inflation. The conditions were selected to ensure that awards would only vest provided that growth in profits exceeded the rate of inflation and that the business’s targeted ROCE is ~~broadly maintained or improved.~~achieved.

If the performance conditions are achieved the award will vest and its value will depend on the extent to which the minimum performance conditions are exceeded:

•	if Profit Growth exceeds the minimum threshold inflation level, the amount of the award will be calculated on a straight line basis from that level up to a specified inflection point, at which point 37.5% of the award will vest, and then at an accelerated rate on a straight line basis up to the maximum set for the particular participant. This maximum is equal to a specified percentage of his base salary at the time at which the award vests. The maximum award for the Group Chief Executive is equal to 70% of base salary at vesting and for the Group Finance Director ~~and the former Chief Executive of the UK division to~~ 50% of base salary at vesting.

•	if the minimum threshold inflation level of Profit Growth is achieved but the maximum award has not been earned by reference to Profit Growth, then, in addition to the percentage of base salary which has been earned on the above basis, the amount of the award earned on the basis of Profit Growth may be increased on the basis of the ROCE increase. In the case of the Group Chief Executive, for each 0.5% by which the ROCE exceeds the level specified in the award, the amount of the award would increase by an amount equal to 5% of base salary (at vesting) up to a maximum increase equal to 35% of such base salary. Similarly in the case of the Group Finance Director, for each 0.5% by which the ROCE exceeds the specified level the amount of the award would increase by an amount equal to 3% of such base salary up to a maximum increase equal to 25% of such base salary. In ~~the case of the former Chief Executive of the UK division, for every 0.5% by which the ROCE exceeds the specified level the amount of~~

~~Signet Group plc 43~~

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~~Directors’ remuneration report (continued)~~

~~the award would increase by an amount equal to 2% of such base salary up to a maximum increase equal to 25% of such base salary. In~~ no event, however, can any such increase result in the applicable maximum award amount stated in the preceding paragraph being exceeded.

2000 LTIP performance criteria
	2004/05	2003/04	2002/03	2001/02
	award	award	award	award

Minimum performance for any vesting
Profit measure	Profit Growth in excess of threshold inflation level
ROCE measure	22.2%	21.0%	20.5%	20.5%

Profit Growth performance measure
Profit Growth rate inflection point	10.0%	10.0%	10.0%	10.0%
Profit Growth rate required for maximum vesting	15.0%	15.0%	15.0%	15.0%

ROCE performance measure
Specified ROCE required	23.2%	22.0%	21.5%	22.5%

Signet Group plc Annual Report & Accounts year ended 31 January 2004

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Directors’ remuneration report (continued)

The table ~~below~~on page 47 shows the percentages and the inflection points which have been specified for the existing awards and indicates the relevant profits and ROCE to be used for measurement in the case of each participant.

When the performance conditions have been satisfied 50% of the amount which vests will be payable in cash and the other 50% will consist of the grant of an option to acquire shares in the ~~Company.The~~Company, the number of shares being determined by using the middle market price on the day preceding the grant of the award. For the ~~2000/01,~~ 2001/02, ~~and~~ 2002/03 and 2003/04 awards, ~~the~~that share price ~~that will be used is 55.25p,~~was 74.75p, 121.00p and ~~121.0p~~83.50p respectively. Due to the deferred equity nature of the share linked element of the award the exercise price of the option is a nominal amount of ~~£1.~~£1 or $1, as appropriate. The participants can normally exercise their option at any time after vesting, until the tenth anniversary of the grant of the award.

~~It is anticipated that in 2003/04~~In 2004/05 awards under the 2000 LTIP ~~will be~~were made to the Group Chief Executive and the Group Finance Director at a similar level to that of previous ~~years.~~years, the share price to be fixed following the announcement of the preliminary results.

~~(c)~~(d) Employee trusts
The share option plans may be operated in conjunction with one or more employee share ownership trusts (the Signet Group Employee Share Trust (“ESOT”) or the Signet Group Qualifying Employee Share Trust (“QUEST”)) which may acquire shares in the Company for the purposes of satisfying the exercise of options.

The 2000 LTIP operates in conjunction with the ESOT which may be funded by the Group to acquire shares in the Company for the purposes of meeting the Company’s obligation to provide shares on the exercise of options.

The trustees of the ESOT and QUEST have waived their rights to any dividends declared on shares held in the trusts.

(e) Share Scheme Limits
The executive share option plans are subject to the following limits on the number of shares that may be issued:

(i)	the maximum number of shares that have been or may be issued pursuant to options granted under the executive share option plans and any other discretionary share option scheme adopted by the Company may not exceed 5% of the shares from time to time in issue in any ten year period;

(ii)	the maximum number of shares that have been or may be issued pursuant to options granted under the executive share

	option plans and any other employees’ share scheme adopted by the Company may not exceed 10% of the shares from time to time in issue in any ten year period; and

(iii)	the maximum of 171,376,839 shares (representing 10% of the issued share capital on 8 July 2003) may be issued pursuant to incentive options granted under the US Plan (the equivalent 10% limit for incentive stock options under the US section of the 1993 Scheme as at 8 June 2000 was 167,996,844 shares).

In any ten year period not more than 10% of the issued share capital of the Company from time to time may in aggregate be issued or issuable pursuant to options granted under the All-employee Schemes or any other employees’ share schemes adopted by the Company.

The number of shares which may be issued or issuable pursuant to the 2000 LTIP (including to the ESOT), when aggregated with any shares issued or issuable by the Company in the preceding ten years under any employees’ share scheme, participation in which is at the discretion of the Board, is limited to 5% of the Company’s issued share capital from time to time. The number of shares which may be issued or issuable pursuant to the 2000 LTIP (including to the ESOT), when aggregated with all shares issued or issuable by the Company in the preceding ten years under any other employees’ share scheme, is limited to 10% of the Company’s issued share capital from time to time.

No more than 5% of the issued share capital of the Company may be held by the trustee of the ESOT without prior approval of shareholders.

(f) Shareholding guidelines
When the 2003 Plans were introduced shareholding guidelines were set for executive directors and senior executives of the Group. The Group Chief Executive is expected to build a holding of shares equal to at least twice salary and the Group Finance Director to at least one times salary. Until these levels have been achieved, half of any post tax option gains under the 2003 Plans should be held in Signet shares.

(g) Service contracts

The Group Chief Executive has a rolling service contract (dated 20 December 2000) with a US subsidiary which can be terminated on one year’s notice in writing by either party.

The Group Finance Director has a rolling service contract (dated 14 June 1995 and amended on 15 May 2000) with the Company, which can be terminated on one year’s notice in writing by either party and terminates on his 60th birthday. The service contracts for the Group Chief Executive and the Group Finance Director provide for ~~liquidated damages~~

48	Signet Group plc Annual Report & Accounts year ended 31 January 2004

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termination payments in the ~~case~~cases of early termination by the Group or ~~change~~in the event of certain changes of control. In these circumstances the amount of ~~liquidated damages~~termination payments due to the Group Chief Executive would equal, in summary, the aggregate of (i) 100% of his base salary at the time of termination (ii) 25% of his base salary in respect of pension and other benefits, (iii) his outstanding ~~contractual~~ entitlement to a cash bonus under the annual bonus plan referred to on page 4244 in respect of the ~~period~~proportion of the fiscal year prior to the effective date of termination and (iv) a ~~further~~ sum equal to a variable percentage (currently ~~87.8%~~80.6%) of the ~~next~~ cash bonus to which he would have become entitled under the annual bonus ~~plan.The~~plan during the notice period. The amount of ~~liquidated damages~~termination payments due to the Group Finance Director would equal, in summary, the aggregate of (i) his annual salary as at the time of termination, (ii) the market value of the contractual benefits in kind (including any pension contribution) to which he would have become entitled during the following 12 months, and (iii) all payments to which he would have become entitled under the annual bonus plan during the same 12 month period. Entitlement to any share options or LTIP awards is governed by the rules of the relevant ~~scheme.The~~scheme. The contracts contain confidentiality and non-competition clauses.

The Chairman has a letter of appointment (dated 20 June 2001), with no fixed ~~term, which~~term. The appointment can be terminated in writing by either party on reasonable notice. Each non-executive director has a letter of appointment from the Company which does not have a termination clause and does not provide for compensation for loss of office.

~~2000 LTIP performance criteria~~

2002/03 award
2001/02 award 2000/01 award

Group⁽¹⁾

UK⁽²⁾

Group⁽¹⁾

UK⁽²⁾

Group⁽¹⁾

UK⁽²⁾

Minimum performance for any vesting
Profit measure Profit Growth in excess of threshold inflation level
ROCE measure
20.5%

35.0%
20.5% 32.0% 20.5% 25.0%

Profit Growth performance measure
Profit Growth rate – inflection point
10.0%

10.0%
10.0% 10.0% 10.0% 10.0%
Profit Growth rate required for
maximum vesting
15.0%

15.0%
15.0% 15.0% 15.0% 15.0%

ROCE performance measure
Specified ROCE required
21.5%

37.0%
22.5% 34.0% 22.5% 27.0%

~~(1)~~	~~For Group Chief Executive and Group Finance Director.~~
~~(2)~~	~~For the former Chief Executive of the UK division, the 2001/02 and 2002/03 awards were forefeited following his resignation.~~

44 ~~Signet Group plc~~

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The duration of any such appointment is subject to the terms of the Articles of Association and normally runs until ~~they are~~such director is next required to stand for election or ~~re-election.The~~re-election.

The letters of appointment are dated as set out below:

	~~Lee Abraham~~	~~21 December 1994~~
	Robert Blanchard	5 September 2000
	Dale Hilpert	15 July 2003
	Brook Land	16 October 1995
	Russell Walls	29 May 2002

~~(d)~~(h) Company pension
The Chairman did not receive any pension provision in

~~2002/03.The~~ 2003/04. The amount paid in respect of life assurance for him in the period was £19,100 ~~(2001/02: £19,100)~~^ß(2002/03: £19,100^ß).

The Group Chief Executive is a member of the Sterling Jewelers Inc. 401(k) Retirement Savings Plan and an unfunded, unqualified deferred compensation plan. Contributions made by Signet’s US division in respect of the Group Chief Executive during the period totalled £1,797* (2001/02: £1,771*£1,786^ß(2002/03: £1,797^ß) and £145,571* (2001/02: £144,061*£140,091^ß(2002/03: £145,571^ß) respectively.

Pension benefits in respect of UK based directors are set out below.

(i) Aggregate emoluments
The total emoluments for directors of the Company and officers of the Group (excluding amounts due under the LTIP), as listed on pages 34 and 35, for services in all capacities was 2,403,000 (2002/03: £3,340,000). The amounts due under the 2000 LTIP for directors of the Company and officers of the Group was £760,000 (2002/03: £1,107,000, restated to reflect the market value at vesting). 50% of the amounts due under the 2000 LTIP are payable in cash and the other 50% consists of the grant of an option to acquire shares in the Company. Details of the directors’ emoluments are given on page ~~46.~~45.

~~Directors’ emoluments~~*

~~Details of directors’ emoluments for the year to 1 February 2003 were as follows:~~

Basic salary or fees Benefits⁽¹⁾ Short term bonuses⁽²⁾ Termination payments⁽³⁾ Total

2003
2002
2003
2002
2003

2002

2003

2002

2003

2002

£000
£000
£000
£000
£000

£000

£000

£000

£000

£000

Executive

James McAdam
Chairman
271 286 24 22 – 270 – – 295 578
Walker Boyd
Group Finance Director
291 268 21 16 131 70 – – 443 354
Terry Burman⁽⁴⁾
Group Chief Executive
743 735 30 32 444 288 – – 1,217 1,055
Ian Dahl⁽⁵⁾
Former Chief Executive of UK division
184 262 15 18 – 159 304 – 503 439

Non-executive

Lee Abraham 35 31 – – – – – – 35 31
Robert Blanchard 35 31 – – – – – – 35 31
Brook Land 35 31 – – – – – – 35 31
Russell Walls⁽⁶⁾
18 – – – – – – – 18 –
David Wellings⁽⁷⁾
13 31 – – – – – – 13 31

Total 1,625 1,675 90 88 575 787 304 – 2,594 2,550

~~(1)~~	~~Benefits incorporate all benefits arising from employment by the Group, which relate in the main to the provision of a company car and private health insurance.~~
~~(2)~~	~~The profit growth rates used to calculate the annual bonus in 2001/02 and 2002/03 were adjusted to take account of the 53rd week in 2001/02.~~
~~(3)~~	On 30 September 2002 the former Chief Executive of the UK division, Ian Dahl resigned giving 12 months’ notice.The Group opted to make his resignation effective immediately in accordance with the terms of his contract and made a payment in February 2003 of £280,000 in lieu of notice. Signet also agreed to continue providing certain benefits that would have been payable had Ian Dahl remained in employment during his notice period, which are estimated to amount to £24,000 in total. No payments were made in respect to pensions. In accordance with the rules of the schemes the Remuneration Committee exercised its discretion to allow 434,211 executive share options, with an exercise price of 57.0p, to become exercisable in May 2003 and the 2000 LTIP grant to vest in 2003. Under the LTIP grant a payment of £62,222 will be paid and an option over 112,619 shares at an exercise price of £1 in total will be granted. All other executive options and LTIP awards held by Ian Dahl were forfeited.
~~(4)~~	~~Terry Burman’s emoluments are specified in US dollars and an average exchange rate of US$1.53 was used (2001/02: US$1.44).~~
~~(5)~~	~~Until his resignation on 30 September 2002.~~
~~(6)~~	~~From his appointment on 1 August 2002.~~
~~(7)~~	~~Until his retirement on 13 June 2002.~~
The figures above represent emoluments earned as directors during the relevant financial year. Such emoluments are paid in the same financial year with the exception of bonus payments, which are paid in the year following that in which they are earned.

~~Signet Group plc 45~~

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~~Directors’ remuneration report (continued)~~

Pension benefits for UK based executive directors *


Pension benefits for UK based executive directors^ß
								Ian Dahl
						Walker Boyd		former Chief Executive of
						Group Finance Director		the UK division
	Walker Boyd Group Finance Director			Ian Dahl former Chief Executive of the UK division
						2003/04	2002/03	2003/04	2002/03	⁽¹⁾
		2002/03	2001/02	2002/03⁽¹⁾	2001/02
						£	£	£	£
		£	£	£	£

Change in accrued benefits during the year (gross of inflation) (A)		3,814	4,222	2,295	3,330	3,934	3,814	–	2,295
Change in accrued benefits during the year (net of inflation)		3,285	3,768	2,173	3,265	2,955	3,285	–	2,173
Accrued benefits at the end of the year		34,954	31,140	9,450	7,155	38,888	34,954	–	9,450
Transfer value of (A)⁽²⁾		37,621	39,959	36,393	46,720	35,071	37,621	–	36,393
Transfer value of accrued benefits at the beginning of the year⁽²⁾		336,380	322,757	104,583	57,516	400,303	336,380	–	104,583
Transfer value of accrued benefits at the end of the year⁽²⁾		400,303	336,380	158,266	104,583	408,530	400,303	–	158,266
Change in transfer value of accrued benefits⁽²⁾⁽³⁾		63,923	13,623	53,683	47,067	8,227	63,923	–	53,683
Group payments to the FURBS		38,787	34,540	30,027	33,457	41,760	38,787	–	30,027
Life insurance contributions		2,127	1,756	4,265	3,536
Life assurance contributions						2,508	2,127	–	4,265

(1)	Until his resignation on 30 September 2002.
(2)	No contributions were made by a director.
(3)	Calculated in accordance with the Actuarial Guidance Note GN 11.

Signet Group plc Annual Report & Accounts year ended 31 January 2004

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4 Directors’ interests in shares*remuneration report
(continued)

4.	Directors’ interests in shares^ß
(a)	Directors’ interest in share options^ß

Director				Number of shares under option

			At 2					At 31			Date from
			February					January	Exercise		which		Expiry
			2003	Granted	Forfeited	Exercised		2004	price		exercisable	⁽¹⁾	date	⁽¹⁾

Walker Boyd⁽²⁾
			837,037	–	–	–		837,037	33.75p		6.10.00		5.10.07
			745,665	–	–	–		745,665	43.25p		28.4.01		27.4.08
			429,648	–	–	–		429,648	49.75p		10.4.02		31.3.09
			611,842	–	–	–		611,842	57.00p		8.5.03		7.5.10
			179,401	–	–	–		179,401	75.25p		2.5.04		1.5.11
	(3	)	19,000	–	–	–		19,000	50.00p		1.1.05		30.6.05
			225,000	–	–	–		225,000	120.00p		11.4.05		10.4.12
			–	133,484	–	–		133,484	£1 in total		15.4.03		18.7.10
	(4	)	–	397,435	–	–		397,435	97.50p		14.7.06		13.7.13

Total			3,047,593	530,919	–	–		3,578,512	55.04p	⁽⁵⁾

Terry Burman⁽²⁾
	(6	)	1,968,122	–	–	(1,968,122	)	–	$0.72		–		–
			1,094,239	–	–	–		1,094,239	$0.80		10.4.02		31.3.09
			2,217,280	–	–	–		2,217,280	$0.87		8.5.03		7.5.10
			496,289	–	–	–		496,289	$1.08		2.5.04		1.5.11
			1,242,019	–	–	–		1,242,019	$1.72		11.4.05		10.4.12
	(3	)	8,670	–	–	–		8,670	$1.10		3.11.04		31.1.05
	(6	)	–	486,384	–	(486,384	)	–	$1 in total		–		–
	(4	)	–	3,807,426	–	–		3,807,426	$1.59		14.7.06		13.7.13

Total			7,026,619	4,293,810	–	(2,454,506	)	8,865,923	$1.30	⁽⁵⁾

James McAdam
			1,075,145	–	–	–		1,075,145	43.25p		28.4.01		27.4.08
			869,347	–	–	–		869,347	49.75p		10.4.02		31.3.09
	(3	)	19,000	–	–	–		19,000	50.00p		1.1.05		30.6.05

Total			1,963,492	–	–	–		1,963,492	46.19p	⁽⁵⁾

All options were granted to directors while they were directors. The performance conditions for grants made under the 2003 Plans are set out on page 46. The conditions set by the Remuneration Committee for exercise of options granted under the Executive Share Option Scheme 1993 were that for vesting to take place a post inflation minimum growth in earnings per share of 10% over any consecutive three year period had to be achieved. This performance condition was chosen as the Remuneration Committee believed it to be in line with market practice. This condition has been met in respect of the options granted between October 1997 and May 2001; the performance criteria having been satisfied in each case over the first three year period following the grant of the options. The Black-Scholes option-pricing model fair value is given on page 99 for options granted in the last three years.
(1)	The dates from which options are exercisable and the expiry dates are the dates that normally apply. Other dates apply in certain circumstances, such as an option holder ceasing to be employed.
(2)	See page 46 regarding awards that will be made in 2004/05.
(3) & (4)	The options above were all granted under the 1993 Scheme except those marked (3) which were granted under the terms of the Sharesave Scheme or, in the case of Terry Burman, the Employee Stock Savings Plan, and those marked (4) which were granted under the 2003 Plans.
(5)	These are weighted averages of the exercise prices per share for the options held at the year end.
(6)	Exercised on 9 September 2003, when the market price was 113.5p.
The aggregate amount of gains made by directors on the exercise of options during the year amounted to £1,934,651 (2002/03: £594,191)


50	Signet Group plc Annual Report & Accounts year ended 31 January 2004

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Except as set out in ~~table~~tables (a), (b) and (c) ~~on page 49,~~, or in the notes under these tables, no director nor any member of any director’s immediate family had an interest in, or was granted or exercised any right to subscribe for, shares or debentures of the Company or any subsidiary, nor did any such right to subscribe lapse during the financial year, nor was there any change between the end of the financial year and 2624 March ~~2003~~2004 in the interests of any director of the Company disclosed to the Company under the provisions of section 324 (duty of directors to disclose shareholdings in own company) as extended by section 328 (extension of section 324 to spouses and children) of the Companies Act 1985 nor in any right to subscribe for shares in, or debentures of, the Company.

At ~~2 February 2002,~~ 1 February 2003, 31 January 2004 and 2624 March ~~2003,~~2004, according to the register kept by the Company under section 325 of the Companies Act 1985, the directors held interests in the shares of the Company as indicated in tables (a), (b) and (c) on pages 4750 to ~~49.~~52. As explained on page 4347 the value of the awards that vest under the 2000 LTIP depends upon the extent to which the performance conditions are met. The awards are also capped by reference to a percentage of the recipient’s base salary.

Although the minimum performance conditions for the ~~2000/01~~2001/02 award have been ~~met,~~exceeded, vesting will only occur within 60 days of the preliminary results announcement for the year ended ~~February 2003.~~31 January 2004.

(b)	Directors’ interests in LTIPs^ß

Awards subject to

Awards where the performance

performance conditions

conditions have been satisfied⁽¹⁾

Option

Cash and

Expiry of

Cash

Option

Cash

Option

portion

options total

options

award or

Date of

portion

⁽²⁾

portion

⁽²⁾

portion

⁽³⁾

portion

⁽³⁾

(current

⁽⁴⁾

current

⁽⁴⁾⁽⁵⁾

total

⁽⁶⁾

vested

award

(grant value)

(number)

(grant value)

(number)

value)

value

vested

option

Director

Walker Boyd⁽⁷⁾

2000/01 award⁽⁸⁾

19.7.00

–

176,533

18.7.10

2001/02 award⁽⁸⁾

4.5.01

–

65,410

87,504

94,505

159,915

–

3.5.11

2002/03 award⁽⁸⁾

26.4.02

77,500

64,049

–

146,673

–

⁽⁹⁾

2003/04 award

2.5.03

77,500

92,814

–

177,739

–

⁽⁹⁾

Awards at end of year

155,000

156,863

65,410

87,504

94,505

484,327

176,533

Terry Burman⁽⁷⁾

2000/01 award⁽⁸⁾

19.7.00

–

630,886

18.7.10

2001/02 award⁽⁸⁾

4.5.01

–

201,623

344,941

372,537

574,160

–

3.5.11

2002/03 award⁽⁸⁾

26.4.02

230,163

240,005

–

489,369

–

⁽⁹⁾

2003/04 award

2.5.03

230,163

316,318

–

571,787

–

⁽⁹⁾

Awards at end of year

460,326

556,323

201,623

344,941

372,537

1,635,316

630,886

All grants were made to directors while they were directors and the performance conditions relating to the awards are set out on page 47.
(1)	In respect of the 2001/02 awards the Group performance achieved was a growth in profit before tax of 12.3% per annum and a ROCE of 24.0% . This resulted in 87.6% of the award vesting for the Group Chief Executive and 84.4% for the Group Finance Director.
(2)	Assumes maximum performance conditions are satisfied and is calculated using salary at 24 March 2004, a share price at the time of grant in 2002 of 121.0p and in 2003 of 83.5p and in the case of Terry Burman an exchange rate of $1.84.
(3)	Calculated using salary at 24 March 2004 and a share price at the time of grant in 2001 of 74.75p. The LTIP payment is made in the year following the last year in respect of which the performance condition was set.
(4)	Calculated using share price as at 24 March 2004 of 108p.
(5)	Cash portion plus option portion value at 24 March 2004. For awards where the level of performance is currently unknown, no payment, or a reduced payment may be made. In respect of awards where the performance is known the base salary may be different at the date of vesting.
(6)	Vesting took place on 15 April 2003 and the cash portion was worth £73,750 and £256,369 respectively for Walker Boyd and Terry Burman. The option interest was over 133,484 shares for Walker Boyd and 486,384 shares for Terry Burman and are included in the table of directors’ interests in share options on page 50. The share price on the day of vesting was 77p. For Terry Burman an exchange rate of $1.57 was used.
(7)	The Remuneration Committee approved grants of LTIP awards to Terry Burman (maximum of 70% of salary at vesting) and Walker Boyd (maximum of 50% of salary at vesting) on 23 March 2004.
(8)	Awards at start of year.
(9)	Expiry dates of awards will be known within 60 days after the announcement of the preliminary results for the last financial year in the performance period.


Signet Group plc Annual Report & Accounts year ended 31 January 2004	51

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Directors’ remuneration report (continued)

(c)	Directors’ interests in shares^ß

	Number of shares

	At start	At end	At 24 March
Director	of year	of year	2004

Lee Abraham⁽¹⁾	75,000	75,000	–
Robert Blanchard	6,360	6,360	6,360
Walker Boyd	433,495	433,495	433,495
Terry Burman	322,266	460,866	460,866
Dale Hilpert	–	–	–
Brook Land	25,000	25,000	25,000
James McAdam⁽²⁾	242,088	242,088	242,088
Russell Walls	4,000	4,000	4,000

(1)	Until his retirement as a director on 8 January 2004.
(2)	22,000 of those shares held were, at each date, held by James McAdam’s wife in trust for their grandchildren and, while James McAdam is taken to have an interest in them for Companies Act purposes, neither he nor his wife has a beneficial interest in them.

The Group operates the ~~Signet Qualifying Employee Share Trust (“QUEST”)~~QUEST which is currently used ~~to facilitate~~in connection with the Sharesave Scheme, and the ~~Signet Employee Share Ownership Trust (“ESOT”).~~ESOT. Walker Boyd and James McAdam, at ~~2 February 2002,~~ 1 February 2003, 31 January 2004 and 2624 March ~~2003, and Ian Dahl at 2 February 2002 and 30 September 2002,~~2004, were, in common with all other UK employees of the Group, deemed to have an interest in the shares held by the QUEST and the ESOT. The QUEST held ~~395,528~~180 shares ~~on 2 February 2002, 180~~ on 30 September ~~2002, 110,857~~2002,110,857 on 1 February 2003, 41,065 on 31 January 2004 and ~~125,930~~35,992 on 2624 March ~~2003,~~2004, and the ESOT held nil shares on each of those dates. No director had been granted any specific interest in such shares other than options held by them under a savings-related share option scheme.

The Company’s register of directors’ interests, which is open to inspection at the registered office, contains full details of directors’ shareholdings and share options.

46 ~~Signet Group plc~~

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~~(a) Directors’ interest in share options~~*

Director
Number of shares under option

At
start
of year
Granted Forfeited Exercised
At
year
end

Exercise
price

Date from
which
exercisable
⁽¹⁾
Expiry
date
⁽¹⁾

Walker Boyd
(2) 1,637,037 – – (800,000 ) 837,037 33.75 p 6.10.00 5.10.07
745,665 – – – 745,665 43.25 p 28.4.01 27.4.08
429,648 – – – 429,648 49.75 p 10.4.02 31.3.09
611,842 – – – 611,842 57.00 p 8.5.03 7.5.10
179,401 – – – 179,401 75.25 p 2.5.04 1.5.11
(3) 19,000 – – – 19,000 50.00 p 1.1.05 30.6.05
– 225,000 – – 225,000 120.00 p 11.4.05 10.4.12

3,622,593 225,000 – (800,000 ) 3,047,593 51.91p ⁽⁴⁾

Terry Burman
1,968,122 – – – 1,968,122 $0.72 28.4.01 27.4.08
1,094,239 – – – 1,094,239 $0.80 10.4.02 31.3.09
2,217,280 – – – 2,217,280 $0.87 8.5.03 7.5.10
(3)(5) 14,760 – – (14,760 ) – $0.64 – –
496,289 – – – 496,289 $1.08 2.5.04 1.5.11
– 1,242,019 – – 1,242,019 $1.72 11.4.05 10.4.12
(3) – 8,670 – – 8,670 $1.10 3.11.04 31.1.05

5,790,690 1,250,689 – (14,760 ) 7,026,619 $0.98 ⁽⁴⁾

Ian Dahl (6)
434,211 – – – 434,211 57.00 p 8.5.03 7.11.03
352,159 – (352,159 ) – – – – –
– 220,833 (220,833 ) – – – – –

786,370 220,833 (572,992 ) – 434,211 57.00p ⁽⁴⁾

James McAdam
1,075,145 – – – 1,075,145 43.25 p 28.4.01 27.4.08
(3)(7) 45,588 – – (45,588 ) – 21.25 p – –
869,347 – – – 869,347 49.75 p 10.4.02 31.3.09
(3) 19,000 – – – 19,000 50.00 p 1.1.05 30.6.05

2,009,080 – – (45,588 ) 1,963,492 46.19p ⁽⁴⁾

All options were granted to directors while they were directors and the performance conditions are set out on page 42. The Black-Scholes option-pricing model fair value is given on page 93 for options granted in the last three years.
~~(1)~~	~~The dates from which options are exercisable and the expiry dates are the dates that normally apply. Other dates apply in certain circumstances, such as an option holder ceasing to be employed.~~
~~(2)~~	~~As already disclosed in last year’s accounts 800,000 of these options were exercised on 8 February 2002, when the market price was 102.25p.~~
~~(3)~~	The options above were all granted under the 1993 Scheme except those marked (3) which were granted under the terms of the Sharesave Scheme or, in the case of Terry Burman, the Employee Stock Savings Plan.
~~(4)~~	~~These are weighted averages of the exercise prices per share for the options held at year end.~~
~~(5)~~	~~Exercised on 23 January 2003, when the market price was 69p.~~
~~(6)~~	~~Until his resignation as a director on 30 September 2002.~~
~~(7)~~	~~As already disclosed in last year’s accounts these options were exercised on 7 March 2002, when the market price was 113p.~~
~~The aggregate amount of gains made by the three directors on the exercise of options during the year amounted to £594,191 (2001/02: £4,476,654).~~

~~Signet Group plc 47~~

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~~Directors’ remuneration report (continued)~~5.

Share price

~~(b) Directors’ interests in LTIPs~~*

Awards subject to
performance condition

Awards where the performance
condition has been satisfied⁽¹⁾

Director

Date
of award

Cash
value⁽²⁾
£

Number
of share
options

Cash
value⁽³⁾
£

Number
ofshare
options⁽³⁾

Option
interest
market
value⁽⁴⁾£

Total
current
value⁽⁵⁾
£

Vested and
paid in
year
£

Expiry of
award or
vested
option

Walker Boyd
   2000/01 award ⁽⁶⁾ 19.7.00 – – 73,750 133,484 97,110 170,860 – 18.7.10
   2001/02 award⁽⁶⁾ 4.5.01 73,750 98,662 – – – 145,527 – (7 )
   2002/03 award 26.4.02 73,750 60,950 – – – 118,091 – (7 )

Awards at end of year 147,500 159,612 73,750 133,484 97,110 434,478

Terry Burman
   1999/00 award ⁽⁶⁾ 6.4.99 – – – – – – 520,000 ⁽⁸⁾
   2000/01 award ⁽⁶⁾ 19.7.00 – – 256,369 464,017 337,572 593,941 – 18.7.10
   2001/02 award⁽⁶⁾ 4.5.01 256,369 342,969 – – – 505,879 – (7 )
   2002/03 award 26.4.02 256,369 211,876 – – – 410,508 – (7 )

Awards at end of year 512,738 554,845 256,369 464,017 337,572 1,510,328

Ian Dahl
   2000/01 award ⁽⁶⁾ 19.7.00 – – 62,222 112,619 81,931 144,153 – 30.9.03
   2001/02 award ⁽⁶⁾⁽⁹⁾ 4.5.01 70,000 93,645 – – – – – forfeited
   2002/03 award⁽⁹⁾ 26.4.02 70,000 57,851 – – – – – forfeited

Awards at end of year – – 62,222 112,619 81,931 144,153

~~All grants were made to directors while they were directors and the performance conditions relating to the awards are set out on page 44.~~
~~(1)~~	In respect of the 2000/01 awards the Group performance achieved was a growth in profit before tax of 14.1% per annum and a ROCE of 24.1% and the UK performance achieved was a growth in operating profit of 19.5% and a ROCE of 37.7%.This resulted in 100% of the award vesting with regard to both the Group and UK performance conditions.
~~(2)~~	Assumes maximum peformance conditions satisfied and is based on salary at 26 March 2003, a share price at the time of grant in 2001 of 74.75p and in 2002 of 121.0p and in the case of Terry Burman an exchange rate of $1.57.
~~(3)~~	Based on salary at 26 March 2003 and a share price at the time of grant in 2000 of 55.25p. The LTIP payment is made in the year following the last year in respect of which the performance condition was set. In the case of Terry Burman an exchange rate of $1.57 was used.
~~(4)~~	~~Calculated using the share price as at 26 March 2003 of 72.75p.~~
~~(5)~~	Cash interest plus option interest value at 26 March 2003. For awards where the level of performance is currently unknown, no payment, or a reduced payment may be made. In respect of awards where the performance is known the base salary and market value may be different at the date of vesting.
~~(6)~~	~~Awards at start of year.~~
~~(7)~~	~~Expiry dates of awards are 60 days after the announcement of the preliminary results for the last financial year in the performance period.~~
~~(8)~~	Until the introduction of the 2000 LTIP Terry Burman was the only director entitled to participate in a LTIP. This was included in his service contract on recruitment.The terms were similar to the 2000 LTIP but had a 100% cash payment. As already disclosed in last year’s accounts an award made in 1999/00 vested on 8 April 2002 and was the maximum payable as the performance conditions exceeded the target criteria laid down. An exchange rate of $1.44 was used.
~~(9)~~	~~Until he resigned as a director on 30 September 2002. The 2001/02 and 2002/03 awards were forfeited.~~

48 ~~Signet Group plc~~

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~~(c) Directors’ interests in shares~~*

Number of shares

Director At start At end At 26 March
of year of year 2003

Lee Abraham 75,000 75,000 75,000
Robert Blanchard 6,360 6,360 6,360
Walker Boyd 433,495 433,495 433,495
Terry Burman 307,506 322,266 322,266
Ian Dahl⁽¹⁾ – 10,000 –
Brook Land 25,000 25,000 25,000
James McAdam⁽²⁾ 131,500 242,088 242,088
Russell Walls⁽³⁾ – 4,000 4,000
David Wellings⁽⁴⁾ 32,500 32,500 –

~~(1)~~	~~Ian Dahl acquired 10,000 shares on 8 February 2002 and held them until his resignation as a director on 30 September 2002.~~
~~(2)~~	22,000 of those shares held were, at each date, held by James McAdam’s wife in trust for their grandchildren and, while James McAdam is taken to have an interest in them for Companies Act purposes, neither he nor his wife has a beneficial interest in them.
~~(3)~~	~~Russell Walls acquired 4,000 shares on 15 January 2003.~~
~~(4)~~	~~Until his retirement as a director on 13 June 2002.~~

5~~Share price~~
The middle market price of a Signet share on the London Stock Exchange was ~~75.00p~~94.5p on 31 January 2004 and was 75.0p on 1 February ~~2003 and was 103.50p on 2 February 2002.~~2003. During the 52 weeks ended ~~1 February 2003,~~31 January 2004, the middle market prices on the London Stock Exchange ranged between a low of ~~65.00p~~66.0p and a high of ~~132.50p.~~114.5p. On 2624 March ~~2003~~2004 the middle market price was ~~72.75p.~~108.0p.


6.	Total shareholder return (“TSR”)

6~~Total shareholder return~~
The graph ~~below~~on page 53 (left) shows the cumulative annual total return (share price movement and dividends) to shareholders of the Group since ~~1 February 1998~~31 January 1999 based on the 30 day average of value of the share price compared to the FTSE 350 ~~index.This~~index. This index was chosen as a suitable comparator as it is a major market index of which the Group is a member. Also shown on a similar basis on the graph ~~below~~on page 53 (right), is the Group’s performance compared to the FTSE general retail sector.

52	Signet Group plc Annual Report & Accounts year ended 31 January 2004

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Five year historical TSR performance

Growth in the value of a hypothetical £100 holding over five years

FTSE 350 (excluding investment trusts) comparison based on 30 trading day average values

Five year historical TSR performance

Growth in the value of a hypothetical £100 holding over five years

FTSE general retailers index comparison based on 30 trading day average values

The directors’ remuneration report was approved by the Board on 2624 March ~~2003,~~2004, and signed on its behalf by:
Robert Blanchard,Chairman, Remuneration Committee

~~Signet Group plc 49~~


	Signet Group plc Annual Report & Accounts year ended 31 January 2004	53

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~~Statement of directors’ responsibilities~~

Statement of directors’ responsibilities

The directors are required to prepare accounts for each financial period which give, in accordance with the Companies Act 1985, a true and fair view of the state of affairs of the Company and the Group as at the end of that financial period and of the profit or loss for that period. In preparing those accounts, the directors are required to:

•	select suitable accounting policies and then apply them consistently;

•	make judgements and estimates that are in their opinion reasonable and prudent; and

•	state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the accounts; and

•	prepare the accounts on a going concern basis unless in their view, based on the information then available to them, that basis of preparation would not be appropriate.

The directors are responsible for ensuring that the Company complies with the requirements of the Companies Act 1985 in regard to keeping adequate accounting records which disclose with reasonable accuracy, at any time, the financial position of the Company and to enable them to ensure that the accounts comply with the Companies Act ~~1985.They~~1985. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.

~~50 Signet Group plc~~


54	Signet Group plc Annual Report & Accounts year ended 31 January 2004

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~~Independent auditors’~~

Independent auditor’s report ~~to the members of Signet Group plc~~

To the Board of Directors and shareholders of Signet Group plc

We have audited the accompanying consolidated balance sheets of Signet Group plc and subsidiaries as at 31 January 2004 and 1 February 2003, and the related consolidated profit and loss accounts, consolidated statements of total recognised gains and losses and consolidated cash flow statements for the 52 week period ended 31 January 2004, the 52 week period ended 1 February 2003 and the 53 week period ended 2 February 2002 presented on pages 5256 to ~~96.~~

~~We have also audited~~102. These consolidated financial statements are the ~~information in the Directors’ Remuneration Report that is described as having been audited.~~

~~Respective responsibilities of directors and auditors~~
~~The directors are responsible for preparing the Annual Report and Form 20-F and the Directors’ Remuneration Report. As described on page 50, this includes~~ responsibility for preparing the accounts in accordance with applicable United Kingdom law and accounting standards.The directors have also presented additional information under US requirements. Our responsibilities, as independent auditors, are established in the United Kingdom by statute, auditing standards generally accepted in the United Kingdom and in the United States, the Listing Rules of the ~~United Kingdom Financial Services Authority, the United States Securities and Exchange Commission and by our profession’s ethical guidance.~~

~~We report~~Company’s management. Our responsibility is to you our United Kingdom opinion as to whether the accounts give a true and fair view and whether the accounts and the part of the Directors’ Remuneration Report to be audited have been properly prepared in accordance with the Companies Act 1985.We also report to you if, in our opinion, the directors’ report is not consistent with the accounts, if the Company has not kept proper accounting records, if we have not received all the information and explanations we require for our audit, or if information specified by law or the Listing Rules regarding directors’ remuneration and transactions with the Group is not disclosed.

We review whether the statement on page 38 reflects the Company’s compliance with the seven provisions of the Combined Code specified for our review by the Listing Rules, and we report if it does not. We are not required to consider whether the Board’s statements on internal control cover all risks and controls, or formexpress an opinion on ~~the effectiveness of the Group’s corporate governance procedures or its risk and internal control procedures.~~these consolidated financial statements based on our audits.

We read the other information contained in the Annual Report and Form 20-F, including the corporate governance statement and the unaudited part of the Directors’ Remuneration Report, and consider whether it is consistent with the audited accounts. We consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the accounts.

~~Basis of audit opinion~~
We conducted our ~~audit~~audits in accordance with auditing standards generally accepted in the United ~~Kingdom~~States of America. Those standards require that we plan and inperform the ~~United States.~~audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes ~~examination,~~examining, on a test

basis, of evidence ~~relevant to~~supporting the amounts and disclosures in the ~~accounts and the part of the Directors’ Remuneration Report to be audited. It~~financial statements. An audit also includes ~~an assessment of~~assessing the accounting principles used and significant estimates ~~and judgements~~ made by ~~the directors in the preparation of the accounts, and of whether the accounting policies are appropriate to the Group’s circumstances, consistently applied and adequately disclosed.~~

~~We planned and performed our audit so~~management, as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the accounts and the part of the Directors’ Remuneration Report to be audited are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluatedwell as evaluating the overall ~~adequacy of the presentation of information in the accounts and the part of the Directors’ Remuneration Report to be audited.~~

~~United Kingdom opinion~~
Infinancial statement presentation. We believe that our ~~opinion the accounts give~~audits provide a ~~true and fair view of the state of affairs of the Company and the Group as at 1 February 2003 and of the profit of the Group~~reasonable basis for ~~the 52 week period then ended and the accounts and the part of the Directors’ Remumeration Report to be audited have been properly prepared in accordance with the Companies Act 1985.~~our opinion.

~~United States opinion~~
In our opinion, the consolidated ~~accounts~~financial statements referred to above present fairly, in all material respects, the financial position of Signet Group plc and subsidiaries as at 31 January 2004 and 1 February 2003, and the results of operations and cash flows for the 52 week period ended 31 January 2004, the 52 week period ended 1 February 2003 and the 53 week period ended 2 February 2002 in conformity with accounting principles generally accepted in the United States of America.

As discussed in note 17 to the financial statements, the Company adopted FRS 17 – ‘Retirement Benefits’ resulting in the restatement of the financial position of Signet Group plc and subsidiaries as at 1 February 2003 and ~~2 February 2002 and~~ the results of ~~its~~ operations and ~~its~~ cash flows for the 52 week period ended 1 February 2003 and the 53 week period ended 2 February ~~2002 and the 52 week period ended 27 January 2001 in conformity with generally accepted accounting principles in the United Kingdom.~~2002.

Generally accepted accounting principles in the United Kingdom vary in certain significant respects from generally accepted accounting principles in the United ~~States. Application~~States of ~~generally accepted accounting principles~~America. Information relating to the nature and effect of such differences is presented on pages 94 to 102 in the United States would have affected the results of operations for the 52 week period ended 1 February 2003, and the 53 week period ended 2 February 2002 and the 52 week period ended 27 January 2001 and shareholders’ equity at 1 February 2003 and 2 February 2002 to the extent summarised on pages 88 to 96.consolidated financial statements.

KPMG Audit Plc

Chartered Accountants, Registered Auditor
London

2624 March ~~2003~~

2004

~~Signet Group plc 51~~


	Signet Group plc Annual Report & Accounts year ended 31 January 2004	55

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Consolidated profit and loss account
~~Consolidated profit and loss account~~

for the 52 weeks ended ~~1 February 2003~~31 January 2004

52 weeks
ended
1 February
2003 53 weeks
ended
2 February
2002 52 weeks
ended
27 January
2001 Notes

£m £m £m

Sales 1,608.0 1,578.1 1,387.3 2
Cost of sales (1,331.6 ) (1,318.3 ) (1,158.9 )

Gross profit 276.4 259.8 228.4
Administrative expenses (60.2 ) (59.1 ) (49.7 )

Operating profit 216.2 200.7 178.7 2
Net interest payable and similar charges (16.5 ) (17.9 ) (15.9 ) 3

Profit on ordinary activities before taxation 199.7 182.8 162.8 4
Tax on profit on ordinary activities (70.8 ) (63.1 ) (52.1 ) 7

Profit for the financial period 128.9 119.7 110.7
Dividends (36.1 ) (30.5 ) (27.4 ) 8

Retained profit attributable to shareholders 92.8 89.2 83.3

Earnings per share – basic 7.5 p 7.1 p 6.6 p 9
Earnings per share – diluted 7.5 p 7.0 p 6.5 p 9

	52 weeks ended 31 January 2004		52 weeks ended 1 February 2003 as restated	⁽¹⁾	53 weeks ended 2 February 2002 as restated	⁽¹⁾
	£m		£m		£m		Notes

Sales	1,617.2		1,608.0		1,578.1		2
Cost of sales	(1,330.9	)	(1,331.6	)	(1,318.3	)

Gross profit	286.3		276.4		259.8
Administrative expenses	(64.0	)	(62.5	)	(61.0	)

Operating profit	222.3		213.9		198.8		2
Net interest payable and similar charges	(10.4	)	(14.0	)	(15.0	)	3

Profit on ordinary activities before taxation	211.9		199.9		183.8		4
Tax on profit on ordinary activities	(74.7	)	(70.8	)	(63.4	)	7

Profit for the financial period	137.2		129.1		120.4
Dividends	(43.2	)	(36.1	)	(30.5	)	8

Retained profit attributable to shareholders	94.0		93.0		89.9

Earnings per share – basic	8.0p		7.5p		7.1p		9
Earnings per share – diluted	7.9p		7.5p		7.1p		9

All of the above relate to continuing activities during the current and previous periods.

The profit impact of the 53rd week in 2001/02 is analysed on page ~~23.~~28.

~~52 Signet Group plc~~

(1)	Restated for the implementation of FRS 17 – ‘Retirement Benefits’.








56	Signet Group plc Annual Report & Accounts year ended 31 January 2004

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Consolidated balance sheet
at 31 January 2004

	31 January 2004		1 February 2003 as restated	⁽¹⁾
	£m		£m		Notes

Fixed assets:
Intangible assets	16.8		19.8		10
Tangible assets	202.8		205.5		11

	219.6		225.3

Current assets:
Stocks	541.5		539.5		12
Debtors⁽²⁾	339.5		345.9		13
Cash at bank and in hand	128.0		89.2		14

	1,009.0		974.6
Creditors: amounts falling due within one year	(332.0	)	(324.9	)	15

Net current assets⁽²⁾	677.0		649.7

Total assets less current liabilities	896.6		875.0
Creditors: amounts falling due after more than one year	(157.2	)	(189.1	)	16
Provisions for liabilities and charges:
Deferred taxation	(5.4	)	–		18
Other provisions	(6.4	)	(7.5	)	19

Total net assets	727.6		678.4

Capital and reserves – equity:
Called up share capital	8.6		8.6		20
Share premium account	60.7		53.9		21
Revaluation reserve	3.1		3.1		21
Special reserves	142.2		101.7		21
Profit and loss account	513.0		511.1		21

Shareholders’ funds	727.6		678.4

~~Consolidated balance sheet~~(1)	Restated for the implementation of FRS 17 – ‘Retirement Benefits’.
(2)	Debtors and net current assets include amounts recoverable after more than one year of £1.2 million (2003: £5.2 million) (see note 13).

~~at 1 February 2003~~

1 February
2003 2 February
2002 Notes

£m £m

Fixed assets:
Intangible assets 19.8 24.2 10
Tangible assets 205.5 214.1 11

225.3 238.3

Current assets:
Stocks 539.5 555.5 12
Debtors⁽¹⁾ 359.8 380.7 13
Cash at bank and in hand 89.2 66.5 14

988.5 1,002.7
Creditors: amounts falling due within one year (324.9 ) (320.5 ) 15

Net current assets⁽¹⁾ 663.6 682.2

Total assets less current liabilities 888.9 920.5
Creditors: amounts falling due after more than one year (184.4 ) (224.6 ) 16
Provisions for liabilities and charges:
Deferred taxation (0.5 ) (9.2 ) 18
Other provisions (7.5 ) (7.0 ) 19

Total net assets 696.5 679.7

Capital and reserves – equity:
Called up share capital 8.6 8.6 20
Share premium account 53.9 48.3 21
Revaluation reserve 3.1 3.0 21
Special reserves 101.7 38.3 21
Profit and loss account 529.2 581.5 21

Shareholders’ funds 696.5 679.7

~~(1) Debtors and net current assets include amounts recoverable after more than one year of £19.1 million (2002: £19.1 million) (see note 13).~~

These accounts were approved by the Board of Directors on 2624 March ~~2003,~~2004, and were signed on its behalf by:

James McAdam Director

Walker Boyd Director

~~Signet Group plc 53~~








Signet Group plc Annual Report & Accounts Year Ended 31 January 2004	57

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Company balance sheet
at 31 January 2004

	31 January 2004		1 February 2003 as restated	⁽¹⁾
	£m		£m		Notes

Fixed assets:
Tangible assets	53.9		51.3		30	(b)
Investments	766.8		803.4		30	(j)

	820.7		854.7

Current assets:
Debtors⁽²⁾	375.3		233.2		30	(c)
Cash at bank and in hand	98.3		45.0		30	(d)

	473.6		278.2
Creditors: amounts falling due within one year	(536.8	)	(456.1	)	30	(e)

Net current liabilities⁽²⁾	(63.2	)	(177.9	)

Total assets less current liabilities	757.5		676.8
Creditors: amounts falling due after more than one year	(8.3	)	(18.3	)	30	(f)

Total net assets	749.2		658.5

Capital and reserves - equity:
Called up share capital	8.6		8.6		20	(g)
Share premium account	60.7		53.9		30	(g)
Special reserves	565.1		565.1		30	(g)
Profit and loss account	114.8		30.9		30	(g)

Shareholders’ funds	749.2		658.5

~~Company balance sheet~~(1)	Restated for the implementation of FRS 17 - ‘Retirement Benefits’.
(2)	Debtors and net current liabilities include amounts recoverable after more than one year of £2.2 million (2002: £1.5 million) (see note 30(c)).

~~at 1 February 2003~~

1 February
2003
2 February
2002

Notes

£m
£m

Fixed assets:
Tangible assets 51.3 47.8 30(b)
Investments 803.4 809.1 30(j)

854.7 856.9

Current assets:
Debtors⁽¹⁾ 233.2 198.3 30(c)
Cash at bank and in hand 45.0 9.2 30(d)

278.2 207.5
Creditors: amounts falling due within one year (456.1 ) (380.6 ) 30(e)

Net current liabilities⁽¹⁾ (177.9 ) (173.1 )

Total assets less current liabilities 676.8 683.8
Creditors: amounts falling due after more than one year (18.3 ) (31.7 ) 30(f)
Deferred taxation – (0.4 )

Total net assets 658.5 651.7

Capital and reserves – equity:
Called up share capital 8.6 8.6 20
Share premium account 53.9 48.3 30(g)
Special reserves 565.1 565.1 30(g)
Profit and loss account 30.9 29.7 30(g)

Shareholders’ funds 658.5 651.7

~~(1) Debtors and net current liabilities include amounts recoverable after more than one year of £1.5 million (2002: £nil) (see note 30(c)).~~

These accounts were approved by the Board of Directors on 2624 March ~~2003,~~2004, and were signed on its behalf by:

James McAdam Director
Walker Boyd Director

~~54 Signet Group plc~~

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*~~Consolidated cash flow statement~~58*	Signet Group plc Annual Report & Accounts year ended 31 January 2004

~~for the 52 weeks ended 1 February 2003~~

52 weeks
ended
1 February
2003
53 weeks
ended
2 February
2002
52 weeks
ended
27 January
2001 Notes

£m £m £m

25(a)
Net cash inflow from operating activities 182.2 188.0 132.1

Returns on investments and servicing of finance:
Interest received 1.1 1.6 3.7
Interest paid (17.6 ) (19.5 ) (19.8 )

Net cash outflow from returns on investments and
servicing of finance (16.5 ) (17.9 ) (16.1 )

Taxation paid (57.3 ) (57.9 ) (50.9 )

Capital expenditure:
Purchase of tangible fixed assets (49.5 ) (60.7 ) (56.2 )
Proceeds from sale of tangible fixed assets 1.3 – 2.2

Net cash outflow from capital expenditure (48.2 ) (60.7 ) (54.0 )

Acquisition:
Purchase of subsidiary undertaking – – (107.5 )

Equity dividends paid (30.8 ) (27.7 ) (24.8 )

Cash inflow/(outflow) before use of liquid
resources and financing 29.4 23.8 (121.2 )

Management of liquid resources:
(Increase)/decrease in bank deposits (29.9 ) (27.9 ) 57.0

Financing:
Proceeds from issue of shares 4.3 8.9 2.0
(Repayment of)/increase in bank loans (12.1 ) (16.5 ) 50.2

Cash (outflow)/inflow from financing (7.8 ) (7.6 ) 52.2

Decrease in cash in the period (8.3 ) (11.7 ) (12.0 )

~~Reconciliation of net cash flow to movement in net debt~~

52 weeks
ended
1 February
2003 53 weeks
ended
2 February
2002 52 weeks
ended
27 January
2001 Notes

£m £m £m

Decrease in cash in the period (8.3 ) (11.7 ) (12.0 )
Cash outflow/(inflow) from decrease/(increase) in debt 12.1 16.5 (50.2 )
Cash outflow/(inflow) from increase/(decrease) in liquid resources 29.9 27.9 (57.0 )

Change in net debt resulting from cash flows 33.7 32.7 (119.2 )
Translation difference 27.9 (5.3 ) (18.3 )

Movement in net debt in the period 61.6 27.4 (137.5 )
Opening net debt (201.7 ) (229.1 ) (91.6 )

Closing net debt (140.1 ) (201.7 ) (229.1 ) 25(b)

~~Signet Group plc 55~~

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Consolidated cash flow statement
~~Consolidated statement of total recognised gains and losses~~

for the 52 weeks ended ~~1 February 2003~~31 January 2004

52 weeks
ended
1 February
2003 53 weeks
ended
2 February
2002 52 weeks
ended
27 January
2001

£m £m £m

Profit for the financial period 128.9 119.7 110.7
Adjustment to property revaluation – 2.1 –
Translation differences (net of £0.7 million tax credit (2002: £0.5 million charge)) (143.2 ) 28.0 77.2

Total recognised gains and losses relating to the period (14.3 ) 149.8 187.9
Prior year adjustment (note 17) – (6.2 ) –

Total recognised gains and losses since last Annual Report (14.3 ) 143.6 187.9

	52 weeks ended		52 weeks ended		53 weeks ended
	31 January 2004		1 February 2003		2 February 2002
	£m		£m		£m		Notes

Net cash inflow from operating activities	203.8		182.2		188.0		25(a	)

Returns on investments and servicing of finance:
Interest received	0.9		1.1		1.6
Interest paid	(11.9	)	(17.6	)	(19.5	)

Net cash outflow from returns on investments and servicing of finance	(11.0	)	(16.5	)	(17.9	)

Taxation paid	(69.0	)	(57.3	)	(57.9	)

Capital expenditure:
Purchase of tangible fixed assets	(50.9	)	(49.5	)	(60.7	)
Proceeds from sale of tangible fixed assets	0.2		1.3		–

Net cash outflow from capital expenditure	(50.7	)	(48.2	)	(60.7	)

Equity dividends paid	(36.7	)	(30.8	)	(27.7	)

Cash inflow before use of liquid resources and financing	36.4		29.4		23.8

Management of liquid resources:
Increase in bank deposits	(42.4	)	(29.9	)	(27.9	)

Financing:
Proceeds from issue of shares	6.3		4.3		8.9
Repayment of bank loans	(12.1	)	(12.1	)	(16.5	)

Cash outflow from financing	(5.8	)	(7.8	)	(7.6	)

Decrease in cash in the period	(11.8	)	(8.3	)	(11.7	)

Reconciliation of net cash flow to movement in net debt

	52 weeks ended		52 weeks ended		53 weeks ended
	31 January 2004		1 February 2003		2 February 2002
	£m		£m		£m		Notes

Decrease in cash in the period	(11.8	)	(8.3	)	(11.7	)
Cash outflow from decrease in debt	12.1		12.1		16.5
Cash outflow from increase in liquid resources	42.4		29.9		27.9

Change in net debt resulting from cash flows	42.7		33.7		32.7
Translation difference	17.5		27.9		(5.3	)

Movement in net debt in the period	60.2		61.6		27.4
Opening net debt	(140.1	)	(201.7	)	(229.1	)

Closing net debt	(79.9	)	(140.1	)	(201.7	)	25(b	)


Signet Group plc Annual Report & Accounts Year Ended 31 January 2004		*~~Note of consolidated historical cost profits and losses~~59*

52 weeks
ended
1 February
2003 53 weeks
ended
2 February
2002 52 weeks
ended
27 January
2001

£m £m £m

Profit on ordinary activities before taxation 199.7 182.8 162.8
Realisation of property revaluation deficit (0.1 ) – –

Historical cost profit on ordinary activities before taxation 199.6 182.8 162.8

Historical cost retained profit attributable to equity shareholders 92.7 89.2 83.3

~~56 Signet Group plc~~

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~~Consolidated shareholders’ funds~~

Ordinary
share
capital Deferred
share
capital Share
premium
account Revaluation
reserve Special
reserves Profit
and
loss
account Total

£m £m £m £m £m £m £m

Balance at 29 January 2000 8.4 0.1 36.3 0.9 96.6 306.0 448.3
Retained profit attributable to
equity shareholders – – – – – 83.3 83.3
Exercise of share options – – 2.0 – – – 2.0
Translation differences – – – – (45.4 ) 77.2 31.8

Balance at 27 January 2001 8.4 0.1 38.3 0.9 51.2 466.5 565.4
Retained profit attributable to
equity shareholders – – – – – 89.2 89.2
Shares issued to QUEST/ESOT – – 2.2 – – (2.2 ) –
Exercise of share options 0.1 – 7.8 – – – 7.9
Property revaluation – – – 2.1 – – 2.1
Translation differences – – – – (12.9 ) 28.0 15.1

Balance at 2 February 2002 8.5 0.1 48.3 3.0 38.3 581.5 679.7
Retained profit attributable to
equity shareholders – – – – – 92.8 92.8
Shares issued to QUEST/ESOT – – 1.9 – – (1.9 ) –
Exercise of share options 0.1 – 3.7 – – – 3.8
Redemption of deferred share capital – (0.1 ) – – – 0.1 –
Transfer on property disposals – – – 0.1 – (0.1 ) –
Translation differences – – – – 63.4 (143.2 ) (79.8 )

Balance at 1 February 2003⁽¹⁾ 8.6 – 53.9 3.1 101.7 529.2 696.5

Consolidated statement of total recognised gains and losses
for the 52 weeks ended 31 January 2004

	52 weeks ended		52 weeks ended		53 weeks ended
	31 January 2004		1 February 2003		2 February 2002
			as restated	⁽¹⁾	as restated	⁽¹⁾
	£m		£m		£m

Profit for the financial period	137.2		129.1		120.4
Adjustment to property revaluation	–		–		2.1
Translation differences (net of tax £nil (2003: £0.7 million credit;
2002: £0.5 million charge))	(96.7	)	(143.2	)	28.0
Actuarial profit/(loss) arising on pension asset (net of £2.8 million
tax charge (2003: £9.5 million 2002: £6.1 million credit))	6.4		(22.3	)	(14.3	)

Total recognised gains and losses relating to the period	46.9		(36.4	)	136.2
Prior year adjustments (note 17) - FRS 17 (adopted in 2003/04)	(18.1	)	–		–
Prior year adjustments (note 17) - FRS 19 (adopted in 2001/02)	–		–		(6.2	)

Total recognised gains and losses since last Annual Report	28.8		(36.4	)	130.0

Note of consolidated historical cost profits and losses

	52 weeks ended	52 weeks ended		53 weeks ended
	31 January 2004	1 February 2003		2 February 2002
		as restated	⁽¹⁾	as restated	⁽¹⁾
	£m	£m		£m

Profit on ordinary activities before taxation	211.9	199.9		183.8
Realisation of property revaluation deficit	–	(0.1	)	–

Historical cost profit on ordinary activities before taxation	211.9	199.8		183.8

Historical cost retained profit attributable to equity shareholders	94.0	92.9		89.9

(1) ~~Shareholders’ funds at 1 February 2003 include cumulative losses~~

Restated for the implementation of ~~£51.8 million (2002: £28.0 million profits, 2001: £12.9 million profits) in respect of translation differences. (see note 21, page 73)~~FRS 17 - ‘Retirement Benefits’.


60	Signet Group plc Annual Report & Accounts Year Ended 31 January 2004

~~Signet Group plc 57~~

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Consolidated shareholders’ funds

Ordinary

Deferred

Share

Profit

share

premium

Revaluation

Special

and loss

capital

account

reserve

reserves

account

Total

£m

Balance at 27 January 2001

– as previously stated

8.4

0.1

38.3

0.9

51.2

466.5

565.4

– prior year adjustment (note 17)

–

17.6

– as restated

8.4

0.1

38.3

0.9

51.2

484.1

583.0

Retained profit attributable to equity shareholders

–

89.9

Shares issued to QUEST/ESOT

–

2.2

–

(2.2

)

–

Exercise of share options

0.1

–

7.8

–

7.9

Property revaluation

–

2.1

–

2.1

Actuarial loss recognised

–

(14.3

)

(14.3

)

Translation differences

–

(12.9

)

28.0

15.1

Balance at 2 February 2002

8.5

0.1

48.3

3.0

38.3

585.5

683.7

Retained profit attributable to equity shareholders

–

93.0

Shares issued to QUEST/ESOT

–

1.9

–

(1.9

)

–

Exercise of share options

0.1

–

3.7

–

3.8

Redemption of deferred share capital

–

(0.1

)

–

0.1

–

Transfer on property disposals

–

0.1

–

(0.1

)

–

Actuarial loss recognised

–

(22.3

)

(22.3

)

Translation differences

–

63.4

(143.2

)

(79.8

)

Balance at 1 February 2003

8.6

–

53.9

3.1

101.7

511.1

678.4

Retained profit attributable to equity shareholders

–

94.0

Shares issued to QUEST/ESOT

–

1.8

–

(1.8

)

–

Exercise of share options

–

5.0

–

5.0

Actuarial gain recognised

–

6.4

Translation differences

–

40.5

(96.7

)

(56.2

)

Balance at 31 January 2004⁽¹⁾

8.6

–

60.7

3.1

142.2

513.0

727.6


(1)	Shareholders’ funds at 31 January 2004 include cumulative losses of £108.0 million (2003: £51.8 million losses, 2002: £28.0 million profits) in respect of translation differences (see note 21, page 79).


	Signet Group plc Annual Report & Accounts Year Ended 31 January 2004	61

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Notes to the accounts

~~Notes~~1.

Principal accounting policies

The consolidated accounts of Signet Group plc and its subsidiary companies (“the Group”) are prepared in accordance with generally accepted accounting principles in the UK (“UK GAAP”). These principles differ in certain significant respects from generally accepted accounting principles in the US (“US GAAP”). Application of US GAAP would have affected shareholders’ funds and results of operations at and for the 52 weeks ended 31 January 2004, the 52 weeks ended 1 February 2003 and the 53 weeks ended 2 February 2002 to the extent summarised on pages 97 and 98. The following accounting policies are applied consistently in dealing with items which are considered material in relation to the accounts of the Group:

~~1 Principal accounting policies~~
The consolidated accounts of Signet Group plc and its subsidiary companies (“the Group”) are prepared in accordance with generally accepted accounting principles in the UK (“UK GAAP”).These principles differ in certain significant respects from generally accepted accounting principles in the US (“US GAAP”). Application of US GAAP would have affected shareholders’ funds and results of operations at and for the 52 weeks ended 1 February 2003, the 53 weeks ended 2 February 2002 and the 52 weeks ended 27 January 2001 to the extent summarised on pages 91 and 92.The following accounting policies are applied consistently in dealing with items which are considered material in relation to the accounts of the Group:

(a) Basis of preparation

The Group is a speciality jewellery retailer in both the UK and the US.

The consolidated accounts have been prepared in accordance with applicable UK accounting standards and under the UK historical cost convention as modified by the revaluation of freehold and long leasehold properties.

The preparation of consolidated accounts in conformity with UK GAAP and US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the accounts and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

The consolidated accounts comply with the Accounting Standards issued by the Accounting Standards Board. ~~Since the previous accounts were issued, further transitional rules relating to disclosures required under Financial Reporting Standard (“FRS”)~~FRS 17 – ‘Retirement Benefits’ ~~have~~has been ~~applied (see~~implemented during 2003/04 which has resulted in a prior year adjustment as described in note ~~22).~~17.

(b) Consolidation
The Group accounts include the accounts of the Company and its subsidiary undertakings made up for the 52 week period ended ~~1 February 2003~~31 January 2004 (the comparatives are for the 52 week period ended 1 February 2003 and the 53 week period ended 2 February ~~2002 and the 52 week period ended 27 January 2001)~~2002). Unless otherwise stated, the acquisition method of accounting has been adopted. Under this method, the results of subsidiary undertakings acquired or disposed of in the year are included in the consolidated profit and loss account from the date of acquisition or up to the date of disposal.

Under section 230(3) of the Companies Act 1985 the Company is exempt from the requirement to present its own profit and loss account.

(c) Goodwill
Purchased goodwill (representing the excess of the fair value of the consideration given and associated costs over the fair value of the separable net assets acquired) arising on consolidation in respect of acquisitions since 1 February 1998 is capitalised. Positive goodwill is amortised to nil by equal annual instalments over its estimated useful life, normally 20 years.

In the Company’s ~~financial statements,~~accounts, investments in subsidiary undertakings are stated at cost less any impairment in value.

Impairment reviews are carried out annually to ensure goodwill and intangible assets are not carried at above their recoverable amounts. Wherever events or changes in circumstances indicate that the carrying amount may not be recoverable, the Group performs discounted cash flow analyses to compare discounted estimated future operating cash flows to the net carrying value of goodwill. Any amortisation or impairment write downs identified are charged to the profit and loss account.

(d) Sales
Sales represent sales to customers outside the Group, exclusive of value added and sales taxes. Repair revenues are recognised when the service is complete and the merchandise is delivered to the customer.

Revenue from the sale of warranties in the US, such as extended service plans, is recognised at the date of sale. Provision is made for the estimated cost of future claims arising under these service plans.

~~58 Signet Group plc~~

62	Signet Group plc Annual Report & Accounts year ended 31 January 2004

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(e) Cost of sales

Cost of sales includes the cost of goodwill amortisation, distribution costs and selling costs. Advertising costs are expensed as incurred.

(f) Foreign currency translation

The results of overseas subsidiary undertakings are translated into pounds sterling at the weighted average rates of exchange during the period and their balance sheets and attributable goodwill at the rates at the balance sheet date. Exchange differences arising from the translation of the net assets and attributable goodwill of overseas subsidiary undertakings and matched foreign currency borrowings less deposits are charged or credited to reserves. Other exchange differences arising from foreign currency transactions are included in profit before taxation.

(g) Depreciation and amortisation

Depreciation is provided on freehold and long leasehold retail premises over an estimated useful life not exceeding 50 years. Long leaseholds relate to leases that have an original and unexpired lease term of greater than 25 years. Freehold land is not depreciated.

Premiums paid to acquire short leasehold properties are amortised over their lease periods (up to 25 years) while incentives received are amortised over the period to the first rent review. Provision is made for future net lease obligations in respect of onerous leases of vacant, partially vacant or sublet properties. Depreciation on other fixed assets is provided on a straight line basis at the following annual rates:

Plant, machinery and vehicles – 10%, 20%, 33^1/1/₃%,
Shopfronts, fixtures and fittings – rates up to 33^1/1/₃%.

Where appropriate, provision is made on assets that have a lower economic value than book value. Additionally, provision is made against tangible fixed assets relating to stores planned for closure.

(h) Stocks

Stocks represent goods held for resale and are valued at the lower of cost and net realisable value. Cost is determined using the first-in, first-out method and includes appropriate overheads. Provision is made for obsolete, slow moving or defective items.

(i) Shares in subsidiary undertakings

Shares in subsidiary undertakings are stated at cost, less amounts written off for any impairment in value.

(j) ~~QUEST~~
Leases~~The investment in the shares subscribed for by the Group’s Qualifying Employee Share Trust (“QUEST”) is recorded at nil value.~~

~~(k) Leases~~
Rentals paid under operating leases are charged to the profit and loss account ~~on a straight line basis over the lease term.~~as incurred. Amounts payable in respect of turnover leases are recognised in the period to which the turnover relates.

Assets held under finance leases, which are leases where substantially all the risks and rewards of the asset have passed to the Group, are capitalised in the balance sheet and depreciated over their estimated useful lives. Future instalments under such leases, net of finance charges, are included within creditors. Rental payments are apportioned between the finance element, which is charged to the profit and loss account, and the capital element which reduces the outstanding obligation for future instalments.

~~Signet Group plc 59~~

Signet Group plc Annual Report & Accounts year ended 31 January 2004

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~~Notes to the accounts (continued)~~

Notes to the accounts (continued)

~~(l)~~(k) Deferred taxation
Deferred taxation is provided on a full provision basis, without discounting, on all timing differences which have arisen but not reversed at the balance sheet date. Except where otherwise required by UK Accounting Standards no timing differences are recognised in respect of:

	(a)	property revaluation surpluses where there is no commitment to sell the asset;

	(b)	gains on sale of assets where those assets have been rolled over into replacement assets; and

	(c)	additional tax which would arise if profits of overseas subsidiaries were distributed.

~~(m)~~(l) Pension schemes

The Group ~~operates a defined benefit pension scheme in the UK,~~Scheme, covering one of the executive directors and all participating eligible employees, which provides benefits based on members’ salaries at retirement. The assets are held by the trustees of the ~~scheme~~Group Scheme and are completely separate from those of the Group.

The ~~expected~~full service cost of pension provisions relating to the ~~Group’s defined benefit scheme~~period is charged to ‘administrative expenses’ in the profit and loss ~~account so as to spread~~account. The expected return on the ~~cost~~Group Scheme’s assets is credited and the interest element of ~~pensions over~~ the ~~remaining service lives of employees~~increase in the ~~scheme. Variations from~~present value of the ~~regular cost are spread over~~Group Scheme’s liabilities is charged to ‘net interest payable and similar charges’ in the profit and loss account.

The difference between the market value of the assets of the Group Scheme and the present value of accrued pension liabilities is shown as an asset or liability on the balance sheet, net of deferred tax. The difference between the expected ~~remaining service lives of current employees~~return on assets and that actually achieved is recognised in the ~~scheme.~~ statement of total recognised gains and losses along with any differences that may arise from experience or assumption changes.

The pension cost is assessed in accordance with the advice of independent qualified actuaries. Where appropriate, supplementary pensions and life assurance benefits for UK directors and senior executives are provided through the Signet Group Funded Unapproved Retirement Benefits Scheme. Cash contributions under the Group’s US defined contribution 401(k) Retirement Savings Plan are ~~expensed in~~charged to the profit and loss account as incurred.

Differences between the amounts charged in the profit and loss account and payments to pension plans are treated as assets or liabilities. Deferred tax is accounted for on those assets and liabilities.

~~(n)~~(m) Net interest payable and similar charges

Premiums paid in respect of the establishment and maintenance of borrowing facilities or purchased interest rate protection agreements are amortised to interest payable and similar charges over the term of the relevant agreement. All such interest rate protection agreements must be related to an asset or liability and must change the character of the interest rate by converting a variable rate to a fixed rate, or vice versa, to qualify for accrual accounting. In addition the term and notional amount of the swap, cap or floor must not exceed the term and principal amount of the debt or asset. Amounts payable or receivable under such agreements are accrued within net interest payable and similar charges in the profit and loss account and recorded as current assets or liabilities on the balance sheet. If the agreements are terminated early, the gain or loss is spread over the shorter of the remaining term of the original investment or the remaining term of the related debt.

(n) Vendor contributions
Where vendor contributions are received in respect of identifiable promotional events, these are matched against the costs of these promotions. Vendor contributions which are received as general contributions and not against specific promotional events are allocated against stocks.

(o) Liquid resources

Liquid resources comprise money market deposits and amounts placed with external fund managers with an original maturity of three months or less, and are carried at cost which approximates to fair value.

~~60 Signet Group plc~~

64	Signet Group plc Annual Report & Accounts year ended 31 January 2004

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~~2 Segment information~~

2.	Segment information

The Group’s results derive from one business segment – the retailing of jewellery, watches and ~~gifts.The~~gifts. The Group is managed as two operating segments, being the US and UK divisions.

2003
2002 2001

£m
£m £m

Sales by origin and destination:
UK 473.6 452.1 409.2
US 1,134.4 1,126.0 978.1

1,608.0 1,578.1 1,387.3

Operating profit:
UK – Trading 67.0 60.7 50.0
UK – Group central costs⁽¹⁾ (6.0 ) (5.1 ) (3.5 )

61.0 55.6 46.5
US 155.2 145.1 132.2

216.2 200.7 178.7

Depreciation and amortisation:
UK 12.5 10.4 10.8
US 25.3 24.3 19.8

37.8 34.7 30.6

Net interest payable/(receivable) and similar charges:
UK 1.3 3.9 (0.9 )
US 15.2 14.0 16.8

16.5 17.9 15.9

Additions to tangible fixed assets:
UK 16.4 18.8 9.7
US 33.1 41.0 46.5

49.5 59.8 56.2

Tangible fixed assets:
UK 70.5 67.6 57.4
US 135.0 146.5 125.5

205.5 214.1 182.9

Total assets⁽²⁾:
UK 394.4 343.2 295.1
US 819.4 897.8 838.2

1,213.8 1,241.0 1,133.3

Net assets⁽³⁾⁽⁴⁾:
UK 144.3 136.1 125.0
US 692.3 745.3 669.5
Net debt (140.1 ) (201.7 ) (229.1 )

696.5 679.7 565.4

~~Notes~~
~~(1)~~	~~Group central costs include a charge of £0.5 million relating to an increase in the provision against an onerous lease of a dormant Group property (2002: £nil, 2001: £1.4 million property profit).~~
~~(2)~~	~~Total assets includes fixed and current assets but excludes current liabilities or debt.~~
~~(3)~~	~~Net debt has been excluded from the two operating segments.~~
~~(4)~~	~~As restated for 2001 (see note 17).~~

~~Signet Group plc 61~~

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~~Notes to the accounts (continued)~~

~~The business is~~ Both divisions are managed by ~~the divisional~~ executive committees ~~in the UK and the US~~ which report through the Group Chief Executive to the Group Board. Each divisional executive committee is responsible for operating decisions within guidelines set by the Group Board.

3 Net interest payable and similar charges

2003
2002 2001

£m
£m £m

Interest on bank loans and overdrafts 4.7 7.7 6.5
Interest expense of US securitisation facility 9.0 5.9 9.1
Interest on loan notes 2.5 3.0 2.6
Facilities fees and related costs 1.4 2.8 1.4

17.6 19.4 19.6
Interest receivable (1.1 ) (1.5 ) (3.7 )

16.5 17.9 15.9

4 Profit on ordinary activities before taxation
2003 2002 2001

£m
£m £m

Profit on ordinary activities before taxation is stated after charging:
Depreciation – owned assets 34.8 30.5 27.1
Depreciation – assets held under finance leases 1.8 2.9 2.9
Goodwill amortisation 1.2 1.3 0.6
Fees payable to KPMG Audit Plc and their associates:
   Audit fees 0.4 0.4 0.4
   Audit-related fees⁽¹⁾ 0.1 0.1 0.1
   Fees for other services⁽²⁾ 0.3 0.2 0.1
Advertising 69.4 70.1 59.9
Operating lease rentals – plant, machinery and vehicles 2.1 2.2 3.0
Operating lease rentals – property 135.5 130.6 117.8

		2004		2003		2002
		£m		£m		£m

Sales by origin and destination:
UK		501.0		473.6		452.1
US		1,116.2		1,134.4		1,126.0

		1,617.2		1,608.0		1,578.1

Operating profit⁽¹⁾:
UK	– Trading	76.6		64.7		58.8
	– Group central costs⁽²⁾	(5.7	)	(6.0	)	(5.1	)

		70.9		58.7		53.7
US		151.4		155.2		145.1

		222.3		213.9		198.8

Depreciation and amortisation:
UK		15.7		12.5		10.4
US		24.7		25.3		24.3

		40.4		37.8		34.7

Net interest payable/(receivable) and similar charges⁽¹⁾:
UK		(2.3	)	(1.2	)	1.0
US		12.7		15.2		14.0

		10.4		14.0		15.0

Additions to tangible fixed assets:
UK		17.8		16.4		18.8
US		33.1		33.1		41.0

		50.9		49.5		59.8

Tangible fixed assets:
UK		72.6		70.5		67.6
US		130.2		135.0		146.5

		202.8		205.5		214.1

Total assets⁽¹⁾⁽³⁾:
UK		446.3		375.3		324.1
US		782.3		819.4		897.8

		1,228.6		1,194.7		1,221.9

Net assets⁽¹⁾⁽⁴⁾:
UK		209.9		126.2		140.1
US		597.6		692.3		745.3
Net debt		(79.9	)	(140.1	)	(201.7	)

		727.6		678.4		683.7

(1)	~~Audit-related fees~~2003 and 2002 restated for the implementation of FRS 17 – ‘Retirement Benefits’ (see note 17).
(2)	Group central costs for 2002/03 include a charge of £0.5 million relating to an increase in the provision against an onerous lease of a dormant Group property.
(3)	Total assets includes fixed and current assets but excludes current liabilities and debt.
(4)	Net debt has been excluded from the two operating segments.


	Signet Group plc Annual Report & Accounts year ended 31 January 2004	65

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Notes to the accounts (continued)

3.	Net interest payable and similar charges

	2004		2003		2002
	£m		£m		£m

Interest on bank loans and overdrafts	1.9		4.7		7.7
Interest expense of US securitisation facility	8.2		9.0		5.9
Interest on loan notes	1.7		2.5		3.0
Facilities fees and related costs	0.9		1.4		2.8

	12.7		17.6		19.4
Interest receivable	(1.7	)	(1.1	)	(1.5	)

	11.0		16.5		17.9
Net interest credit on defined benefit pension scheme (note 22)	(0.6	)	(2.5	)	(2.9	)

	10.4		14.0		15.0


4.	Profit on ordinary activities before taxation

	2004	2003	2002
	£m	£m	£m

Profit on ordinary activities before taxation is stated after charging:
Depreciation – owned assets	37.6	34.8	30.5
Depreciation – assets held under finance leases	1.7	1.8	2.9
Goodwill amortisation	1.1	1.2	1.3
Fees payable to KPMG Audit Plc and their associates:
Audit services	0.4	0.4	0.4
Further assurance services⁽¹⁾	0.1	0.1	0.1
Tax services	–	0.3	0.2
Other services	–	–	–
Advertising	73.7	69.4	70.1
Operating lease rentals – plant, machinery and vehicles	2.2	2.1	2.2
Operating lease rentals – property	136.7	135.5	130.6

(1)	Further assurance services were for work carried out in respect of the quarterly reviews and Christmas trading review.
~~(2)~~	~~Fees for other services were primarily for tax advice.~~

5.	Foreign currency translation

5 Foreign currency translation

2003
2002 2001

The exchange rates used for translation of US dollar transactions and balances
in these accounts are as follows:
Profit and loss (average rate) 1.53 1.44 1.49
Balance sheet (year end rate) 1.64 1.42 1.46

	2004	2003	2002

The exchange rates used for translation of US dollar transactions and balances in these accounts are as follows:
Profit and loss (average rate)	1.68	1.53	1.44
Balance sheet (year end rate)	1.82	1.64	1.42

The effect of translation on foreign currency borrowings less deposits in the period was to decrease the Group’s net borrowings by £17.5 million (2003: £27.9 million ~~(2002:~~decrease, 2002: £5.3 million ~~increase, 2001: £18.3 million~~ increase)~~.The~~. The net effect of exchange rate movements on foreign currency investments (excluding goodwill) and foreign currency borrowings less deposits in the period was a loss of £56.2 million (2003: £79.8 million ~~(2002:~~loss, 2002: £15.1 million ~~gain, 2001: £31.8 million~~ gain)~~.This~~. This amount has been taken to reserves in accordance with SSAP 20.

~~62 Signet Group plc~~


66	Signet Group plc Annual Report & Accounts year ended 31 January 2004

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6 Directors and employees

2003
2002 2001

£m
£m
£m

Directors’ emoluments 2.6 2.6 3.0
LTIP⁽¹⁾– cash 0.4 0.5 0.5
– share options (at market value) 0.6 – –
Contributions to pension scheme 0.2 0.2 0.3

6.	Directors and employees

		2004	2003	2002
		£m	£m	£m

Directors’ emoluments		2.0	2.6	2.6
Directors’ LTIP⁽¹⁾	– cash	0.3	0.4	0.5
	– share options (at market value)	0.5	0.6	–
Contributions in respect of Directors’ to pension schemes		0.2	0.2	0.2

(1)

For ~~2003,~~2004, 50% of the amounts due under the 2000 LTIP is payable in cash and the other 50% consists of a grant of an option to acquire shares in the Company. The market value of those options has been calculated using the share price as at 24 March 2004. The amount included for 2003 has been restated to reflect the market value of the option grant at vesting on 15 April 2003 rather than the market value as at 26 March 2003.

Details of directors’ emoluments are shown in the Board report on remuneration on page 45.

The aggregate emoluments (excluding amounts due under the 2000 LTIP) of the highest paid director,Terry Burman, as US Chief Executive and as Group Chief Executive were ~~£1,217,000 (2002: £1,055,000; 2001: £1,285,000)~~£1,100,000 (2003: £1,217,000; 2002: £1,055,000). The amounts due to him under the 2000 LTIP were ~~£594,000 (2002: £520,000; 2001: £470,000)~~£574,000 (2003: £631,000, restated). In 2002 under a prior LTIP a payment of £520,000 was made to him wholly in cash. For ~~2003,~~2004, 50% of the amount due under the 2000 LTIP is payable in cash (£~~256,000)~~201,000; 2003: £256,000) and the other 50% consists of the grant of an option to acquire shares in the Company (market value at 2624 March ~~2003: £338,000)~~2004: £373,000). ~~For 2002 and 2001, the amounts were paid wholly in cash.~~ Additionally, pension contributions of ~~£147,000 (2002: £146,000; 2001: £107,000)~~£142,000 (2003: £147,000; 2002: £146,000) were made to money purchase schemes on his behalf. The gain made by him on the exercise of options in the Group was ~~£4,364 (2002: £2,132,038; 2001: £9,597)~~£1,934,651 (2003: £4,364; 2002: £2,132,038).

2003
2002 2001

Number of
persons
Number of
persons
Number of
persons

Retirement benefits are accruing to the following numbers of directors under:
Money purchase schemes 1 1 2
Defined benefit schemes 1 2 2

The average number of full-time equivalent persons employed
(including directors) during the period, analysed by category and division, was:
Total Group:
Management 512 495 463
Administration 1,296 1,243 1,168
Distribution and sales staff 12,352 11,787 10,889

14,160 13,525 12,520

UK:
Management 377 363 342
Administration 240 220 228
Distribution and sales staff 4,129 4,023 3,944

4,746 4,606 4,514

US:
Management 135 132 121
Administration 1,056 1,023 940
Distribution and sales staff 8,223 7,764 6,945

9,414 8,919 8,006

£m £m £m

The aggregate Group payroll cost was as follows:
Wages and salaries 282.5 278.3 246.1
Social security costs 22.1 22.5 19.4
Pension costs 2.0 1.6 1.3

306.6 302.4 266.8

~~Signet Group plc 63~~

	2004	2003	2002
	Number of	Number of	Number of
	persons	persons	persons

Retirement benefits are accruing to the following numbers of directors under:
Money purchase schemes	1	1	1
Defined benefit schemes	1	1	2

The average number of full-time equivalent persons employed (including directors)
during the period, analysed by category and division, was:
Total Group:
Management	530	512	495
Administration	1,314	1,296	1,243
Distribution and sales staff	12,658	12,352	11,787

	14,502	14,160	13,525

UK:
Management	389	377	363
Administration	231	240	220
Distribution and sales staff	3,942	4,129	4,023

	4,562	4,746	4,606

US:
Management	141	135	132
Administration	1,083	1,056	1,023
Distribution and sales staff	8,716	8,223	7,764

	9,940	9,414	8,919


	£m	£m	£m

The aggregate Group staff costs were as follows:
Wages and salaries	276.9	282.5	278.3
Social security costs	22.5	22.1	22.5
Pension costs (restated for the implementation of FRS 17 – ‘Retirement Benefits’)	4.4	4.2	3.5

	303.8	308.8	304.3


	Signet Group plc Annual Report & Accounts year ended 31 January 2004	67

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Notes to the accounts (continued)

7.	Taxation
		2004	2003	⁽¹⁾	2002	⁽¹⁾
		£m	£m		£m

Profit on ordinary activities before taxation:
UK		73.2	59.9		52.7
US		138.7	140.0		131.1

		211.9	199.9		183.8

~~Notes to~~(1)	Restated for the ~~accounts (continued)~~implementation of FRS 17 – ‘Retirement Benefits’ (see note 17).

~~Notes to the accounts (continued)~~

7 Taxation

2003
2002
2001

£m
£m £m

Profit on ordinary activities before taxation:
UK 59.7 51.7 47.4
US 140.0 131.1 115.4

199.7 182.8 162.8

2003 2002 2001

£m
£m £m

Taxes on profit:
UK corporation tax payable 22.6 19.5 8.8
US taxes 55.6 36.7 46.7
Deferred taxation:
UK (0.7 ) 0.3 1.0
US (6.7 ) 6.6 (4.4 )

70.8 63.1 52.1

2003 2002 2001

£m
£m £m

Sources of deferred taxation are as follows:
Accelerated capital allowance 0.1 0.2 0.3
Other timing differences (7.5 ) 6.7 (3.7 )

(7.4 ) 6.9 (3.4 )

		2004	2003		2002	⁽¹⁾
		£m	£m		£m


Taxes on profit:
UK corporation tax payable		26.2	22.6		19.8
US taxes		36.2	55.6		36.7
Deferred taxation:
UK		0.5	(0.7	)	0.3
US		11.8	(6.7	)	6.6

		74.7	70.8		63.4

(1)	Restated for the implementation of FRS 17 – ‘Retirement Benefits’ (see note 17).

	2004		2003		2002
	£m		£m		£m


Sources of deferred taxation are as follows:
Accelerated capital allowances	(0.4	)	0.1		0.2
Other timing differences	12.7		(7.5	)	6.7

	12.3		(7.4	)	6.9

The differences between the standard rate of corporation tax in the UK and the current and effective tax rates for the Group are explained below:

	2003		2002		2001		2004		2003		2002
							%		%
	%		%		%

UK statutory tax rates	30.0		30.0		30.0		30.0		30.0			30.0
Expenditure permanently disallowable for tax purposes, net of
permanent undercharges	0.8		–		(0.2	)
Expenditure permanently disallowable for tax purposes, net of permanent undercharges							0.4		0.7		–
Differences between UK and US (including state) standard tax rates	4.9		5.6		5.6		5.3		4.9		5.6
Over provision in respect of previous periods	(0.2	)	(1.1	)	(3.4	)	(0.4	)	(0.2	)	(1.1	)
Differences between capital allowances and depreciation	(0.1	)	(0.1	)	(0.2	)	0.2		(0.1	)	(0.1	)
Other timing differences	3.8		(3.7	)	2.3		(6.0	)	3.8		(3.7	)


Current tax rate	39.2		30.7		34.1		29.5		39.1		30.7
Deferred tax rate	(3.7	)	3.8		(2.1	)	5.8		(3.7	)	3.8

Effective tax rates in accounts	35.5		34.5		32.0		35.3		35.4		34.5

The effective tax rate for the Group is higher than the UK statutory tax rate ~~due to~~because the significant proportion of the Group’s business ~~which~~ is conducted in the US where the combined federal and state tax rate approaches 40%. The Group’s future effective tax rate is also dependent on the movement in foreign exchange translation rates. It is anticipated that the effective tax rate for the Group in ~~2003/04~~2004/05 will ~~remain at approximately~~be marginally below the ~~same~~ level ~~as in 2002/03.~~for 2003/04.

~~64 Signet Group plc~~


68	Signet Group plc Annual Report & Accounts year ended 31 January 2004

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8 Dividends

2003
2002
2001

£m
£m £m

Interim dividend paid of 0.310p per share (2002: 0.289p; 2001: 0.275p) 5.3 5.0 4.6
Final dividend proposed of 1.80p per share (2002: 1.50p; 2001: 1.35p) 30.8 25.5 22.8

36.1 30.5 27.4

8.	Dividends
		2004	2003	2002
		£m	£m	£m

Interim dividend paid of 0.341p per share (2003: 0.310p; 2002: 0.289p)		5.9	5.3	5.0
Final dividend proposed of 2.16p per share (2003: 1.80p; 2002: 1.50p)		37.3	30.8	25.5

		43.2	36.1	30.5

The interim dividend was paid on 87 November ~~2002.~~2003. Subject to shareholder approval, the proposed final dividend is to be paid on 142 July ~~2003~~2004 to those shareholders on the register of members at close of business on 64 June ~~2003.~~2004.

Signet Group QUEST Limited, the trustee of the Signet Group Qualifying Employee Share ~~Ownership~~ Trust, has waived its right to participate in any dividends declared by the Company in respect of shares held by it in the Company. The interim dividend paid on 87 November ~~2002~~2003 was not paid in respect of the ~~17,280~~45,757 shares then held by the trustee, nor will the final dividend or any future dividend be paid in respect of any shares held by it unless the Company shall have directed the trustee to accept any particular dividend.

9 Earnings per share

2003
2002 2001

£m
£m £m

Profit for the financial period 128.9 119.7 110.7

2003 2002 2001

Basic weighted average number of shares in issue (million) 1,710.7 1,690.2 1,676.8
Dilutive effect of share options (million) 16.4 12.5 13.9

Diluted weighted average number of shares (million) 1,727.1 1,702.7 1,690.7

Earnings per share – basic 7.5p 7.1p 6.6p p
– diluted 7.5p 7.0p 6.5p

Under recently enacted US tax legislation the rate of US federal income tax on dividends received by individual US shareholders from qualified foreign corporations is reduced to 15%. Dividends paid by the Group to individual US holders of shares or ADSs should qualify for this preferential dividend tax treatment. The change in legislation only applies to individuals subject to US federal income taxes and therefore the tax position of UK shareholders is unaffected. Individual US holders are urged to consult their tax advisers regarding the application of this recent US tax legislation to their particular circumstances.

9.	Earnings per share
		2004	2003	⁽¹⁾	2002	⁽¹⁾
		£m	£m		£m

Profit for the financial period		137.2	129.1		120.4


		2004	2003		2002

Basic weighted average number of shares in issue (million)		1,718.4	1,710.7		1,690.2

Dilutive effect of share options (million)		12.5	16.4		12.5

Diluted weighted average number of shares (million)		1,730.9	1,727.1		1,702.7

Earnings per share – basic		8.0p	7.5p		7.1p
Earnings per share – diluted		7.9p	7.5p		7.1p

The basic weighted average number of shares in issue excludes those shares held in the QUEST (see note 20).

~~Signet Group plc 65~~

(1)	Restated for the implementation of FRS 17 – ‘Retirement Benefits’ (see note 17).


Signet Group plc Annual Report & Accounts year ended 31 January 2004	69

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Notes to the accounts (continued)

10 10.	Intangible fixed assets
		~~Purchased~~ ~~goodwill~~

			£mPurchased
		goodwill
		£m

Cost:
At 21 February ~~2002~~2003			~~26.1~~22.6
Translation differences			(~~3.5~~2.2	)

At ~~1 February 2003~~31 January 2004			~~22.6~~20.4

Amortisation:
At 21 February ~~2002~~2003			~~1.9~~2.8
Charged in period			~~1.2~~1.1
Translation differences			(0.3	)

At ~~1 February 2003~~31 January 2004			~~2.8~~3.6

Net book value:

At ~~1 February 2003~~31 January 2004			~~19.8~~16.8

At 21 February ~~2002~~2003			~~24.2~~19.8

The purchased goodwill above arose on the acquisition of Marks & Morgan on 31 July 2000 and will be amortised over 20 years. Consequently the amortisation expense is expected to be ~~£1.2~~£1.1 million for each of the next five financial years to ~~2007/8.~~2008/09. This may be affected by movements in exchange rates. An impairment review was performed at ~~1 February 2003,~~31 January 2004, concluding that the carrying value of ~~£19.8~~£16.8 million does not require an impairment adjustment.

11 Tangible fixed assets
Land and buildings

Freehold

Long
leasehold

Short
leasehold

Plant,
machinery
and vehicles

Shopfronts,
fixtures and
fittings

Total

£m

£m

£m

£m

£m

£m

Cost or valuation:
At 2 February 2002 17.9 2.4 129.6 56.7 235.5 442.1
Additions – – 12.3 6.8 30.4 49.5
Disposals (0.5 ) – (2.0 ) (0.1 ) (3.3 ) (5.9 )
Transfers 0.5 (0.5 ) – – – –
Translation differences (0.3 ) – (17.2 ) (5.9 ) (21.8 ) (45.2 )

At 1 February 2003
17.6

1.9

122.7

57.5

240.8

440.5

Depreciation:
At 2 February 2002 1.4 – 64.2 38.9 123.5 228.0
Charged in period 0.1 – 9.2 6.4 20.9 36.6
Disposals – – (1.7 ) (0.3 ) (2.6 ) (4.6 )
Translation differences – – (8.8 ) (4.5 ) (11.7 ) (25.0 )

At 1 February 2003
1.5

–

62.9

40.5

130.1

235.0

Net book value:

At 1 February 2003
16.1

1.9

59.8

17.0

110.7

205.5

At 2 February 2002 16.5 2.4 65.4 17.8 112.0 214.1

~~66 Signet Group plc~~


70	Signet Group plc Annual Report & Accounts year ended 31 January 2004

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11. Tangible fixed assets

	Land and buildings

						Plant,		Shopfronts,
			Long	Short		machinery		fixtures and
	Freehold		leasehold	leasehold		and vehicles		fittings		Total
	£m		£m	£m		£m		£m		£m

Cost or valuation:
At 1 February 2003	17.6		1.9	122.7		57.5		240.8		440.5
Additions	–		–	12.5		7.5		30.9		50.9
Disposals	–		–	(1.6	)	(0.4	)	(3.2	)	(5.2	)
Translation differences	(0.2	)	–	(12.4	)	(4.4	)	(15.7	)	(32.7	)

At 31 January 2004	17.4		1.9	121.2		60.2		252.8		453.5

Depreciation:
At 1 February 2003	1.5		–	62.9		40.5		130.1		235.0
Charged in period	0.2		0.1	9.0		6.3		23.7		39.3
Disposals	–		–	(1.6	)	(0.3	)	(3.1	)	(5.0	)
Translation differences	–		–	(6.6	)	(3.3	)	(8.7	)	(18.6	)

At 31 January 2004	1.7		0.1	63.7		43.2		142.0		250.7

Net book value:

At 31 January 2004	15.7		1.8	57.5		17.0		110.8		202.8

At 1 February 2003	16.1		1.9	59.8		17.0		110.7		205.5

Cost or valuationAll fixed assets are stated at cost ~~and~~with the exception of all UK freehold and long leasehold properties which are stated on the basis of their latest professional valuation. An external valuation was undertaken by NAI Gooch Webster, Chartered Surveyors, at 2 February ~~2002.The~~2002. The valuation was in accordance with the Royal Institute of Chartered Surveyors’ Appraisal and Valuation Manual. ~~Of these properties, a~~A total of 14 were valued on an existing use basis and are stated at net realisable value, and one was valued on an open market basis and is stated on that basis.

Freehold properties in the consolidated balance sheet include £7.5 million of depreciable assets ~~(2002: £7.6~~(2003: £7.5 million). The net book value of shopfronts, fixtures and fittings held under finance leases is ~~£8.3~~£7.5 million ~~(2002: £11.6~~(2003: £8.3 million).

	2003		2002
					2004		2003
	£m		£m		£m		£m

Freehold and long leasehold land and buildings are stated at:
Cost	1.6		1.9		1.5		1.6
Valuation	17.9		18.4		17.8		17.9

	19.5		20.3		19.3		19.5

The net book value of freehold and long leasehold land and buildings on an historical
cost basis would be:
The net book value of freehold and long leasehold land and buildings on an historical cost basis would be:
Cost	26.2		27.0		26.0		26.2
Depreciation	(7.5	)	(7.2	)	(7.7	)	(7.5	)

	18.7		19.8		18.3		18.7

Signet Group plc Annual Report & Accounts year ended 31 January 2004

Back to Contents

Notes to the accounts (continued)

1212. Stocks
Stocks constitute goods held for resale.

Subsidiary undertakings held ~~£74.4~~£83.1 million of consignment stocks at ~~1 February 2003 (2002: £96.1~~31 January 2004 (2003: £74.4 million) which is not recorded on the balance ~~sheet.The~~sheet. The principal terms of the consignment agreements, which can generally be terminated by either side, are such that the Group can return any or all of the stocks to the relevant suppliers without financial or commercial penalties and the supplier can vary stock prices.

Stock provisions 52/53 weeks ended	Balance at beginning of period	Acquisition of subsidiary undertaking	Charged to profit	Utilised		Balance at end of period
Stock provisions
							Balance at
	£m	£m	£m	£m		£m	beginning
							of period
27 January 2001	11.9	1.1	17.1	(19.1	)	11.0
52/53 weeks ended							£m

2 February 2002	11.0	–	20.4	(23.5	)	7.9	11.0	20.4	(23.5	7.9
1 February 2003	7.9	–	19.5	(21.3	)	6.1	7.9	19.5	(21.3	6.1
31 January 2004							6.1	16.8	(18.4	4.5

Stock provisions have been made for obsolete, slow-moving and damaged stock on a consistent basis.

13. Debtors
		2004	2003	⁽¹⁾
		£m	£m

Trade debtors (net of allowances):
– US receivables programme		292.9	299.2
– Other		8.7	8.3

		301.6	307.5
Other debtors		22.5	22.5
Corporation tax recoverable		0.6	0.2
Prepayments and accrued income		13.6	10.5

Debtors recoverable within one year		338.3	340.7
Debtors recoverable after more than one year – deferred taxation (note 18)		–	5.2
	– pension scheme asset (note 22)	1.2	–

		339.5	345.9

(1)	Restated for the implementation of FRS 17 – ‘Retirement Benefits’ (see note 17)

Allowances for doubtful debts
52/53 weeks ended	Balance at beginning of period	Charged to profit			Balance at end of period
	Balance at beginning of period	Charged to profit	Utilised	⁽¹⁾	Balance at end of period
	£m	£m	£m		£m

2 February 2002	27.0	45.7	(46.4	)	26.3
1 February 2003	26.3	39.1	(44.1	)	21.3
31 January 2004	21.3	36.9	(38.4	)	19.8

(1)	Including the impact of foreign exchange translation between opening and closing balance sheet dates.

13 Debtors

2003
2002

£m
£m

Trade debtors (net of allowances):
– US receivables programme
299.2
327.0
– Other
8.3
7.4

307.5
334.4
Other debtors
22.5
20.1
Corporation tax recoverable
0.2
–
Prepayments and accrued income
10.5
7.1

Debtors recoverable within one year
340.7
361.6
Debtors recoverable after more than one year – Pension fund prepayment
19.1
19.1

359.8
380.7

~~Signet Group plc 67~~

72	Signet Group plc Annual Report & Accounts year ended 31 January 2004

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~~Notes to the accounts (continued)~~

Allowances for doubtful debts
52/53 weeks ended

Balance at
beginning
of period

Acquisition
of
subsidiary
undertaking

Charged to
profit

Utilised

Balance
at end of
period

£m

£m

£m

£m

£m

27 January 2001 16.4 4.3 41.6 (35.3 ) 27.0
2 February 2002 27.0 – 45.7 (46.4 ) 26.3
1 February 2003 26.3 – 39.1 (44.1 ) 21.3

14 Cash at bank and in hand

2003
2002

£m
£m

Bank deposits
88.6
65.9
Other cash
0.6
0.6

89.2
66.5

15 Creditors: amounts falling due within one year

2003
2002

£m
£m

Bank overdrafts
42.9
38.8
Loan notes
9.1
10.6
Obligations under finance leases
3.3
3.5
Trade creditors
58.7
84.0
Corporation tax
58.8
41.4
Social security and PAYE
1.5
1.3
Other taxes
21.8
21.4
Other creditors
6.7
3.7
Accruals and deferred income
91.3
90.2
Proposed dividend
30.8
25.6

324.9
320.5

14. Cash at bank and in hand
	2004	2003
	£m	£m

Bank deposits	127.4	88.6
Other cash	0.6	0.6

	128.0	89.2

15. Creditors: amounts falling due within one year
	2004	2003
	£m	£m

Bank overdrafts	51.1	42.9
Loan notes	8.2	9.1
Obligations under finance leases	2.4	3.3
Trade creditors	55.6	58.7
Corporation tax	54.2	58.8
Social security and PAYE	1.4	1.5
Other taxes	23.5	21.8
Other creditors	5.3	6.7
Accruals and deferred income	93.0	91.3
Proposed dividend	37.3	30.8

	332.0	324.9

The weighted average interest rate on short-term borrowings at 131 January 2004 was 1.85% (1 February ~~2003 was~~2003: 3.48% ~~(2 February 2002: 5.28%~~).

16 Creditors: amounts falling due after more than one year

2003
2002

£m
£m

Loan notes falling due between one and two years
9.1
10.6
Loan notes falling due between two and five years
9.2
21.1
Bank loans falling due between two and five years
153.1
176.8
Obligations under finance leases falling due between one and two years
2.6
3.7
Obligations under finance leases falling due between two and five years
–
3.1
Other creditors
10.4
9.3

184.4
224.6

~~68 Signet Group plc~~

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16. Creditors: amounts falling due after more than one year
	2004	2003	⁽¹⁾
	£m	£m

Loan notes falling due between one and two years	8.3	9.1
Loan notes falling due between two and five years	–	9.2
Bank loans falling due between one and two years	137.9	153.1
Obligations under finance leases falling due between one and two years	–	2.6
Other creditors	11.0	10.4
Pension scheme liability (note 22)	–	4.7

	157.2	189.1

(1)	Restated for the implementation of FRS 17 – ‘Retirement Benefits’ (see note 17).

In August 2001 the Group entered into an unsecured $410 million multi-currency revolving credit facility with a syndicate of banks for a period of five years at a variable interest rate at a maximum margin of 0.85% above LIBOR. From commencement, the applicable margin has been 0.65% above LIBOR. At ~~1 February 2003~~31 January 2004 the amount outstanding under this facility was $nil.

Commitment fees are paid on the undrawn portion of this credit facility at a rate of 50.0% of the applicable margin.

Signet Group plc Annual Report & Accounts year ended 31 January 2004

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Notes to the accounts (continued)

The principal financial covenants on this facility are as follows:

•	The ratio of Consolidated Net Debt to Consolidated EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) shall not exceed 3:1;

•	Consolidated Net Worth (total net assets) must not fall below £400 million; and

•	The ratio of Consolidated EBITARR (Earnings Before Interest,Tax, Amortisation, Rents, Rates and Operating Lease Expenditure) to Consolidated Net Interest Expenditure plus Rents, Rates and Operating Lease Expenditure shall be equal to or greater than 1.4:1.

In July 1998 the Group entered into a $60 million seven year unsecured note issue with a fixed interest rate of 7.25%. This note issue is repayable in four equal annual instalments of $15 million, ~~commencing~~which commenced in July 2002. At ~~1 February 2003~~31 January 2004 the amount outstanding under this note issue was ~~$45~~$30 million.

The principal financial covenants on this note issue are as follows:

•	Gearing (net debt, excluding the US receivables funding, expressed as a percentage of total net assets) must not exceed 60.0%;

•	Consolidated net worth (total net assets) must not fall below £300 million; and

•	Interest cover must not fall below three times.

In the US, in November 2001, the Company refinanced its private label credit card receivables programme through a privately placed receivables securitisation. Under this securitisation, interests in the US receivables portfolio held by a trust were sold principally to institutional investors in the form of fixed-rate Class A, Class B and Class C investor ~~certificates.The~~certificates. The certificates have a weighted average interest rate of 5.42% and interest is paid monthly in arrears from the finance charges collections generated by the receivables ~~portfolio.The~~portfolio. The revolving period of the securitisation ends in December 2005, with a final expected principal payment date in November ~~2006.This securitisation replaced a previous securitisation facility of $191.5 million, which commenced repayment in December 2000 and was fully repaid in September 2001.The~~2006. The aggregate outstanding principal amount of the certificates amounted to $251 million at 131 January 2004 (1 February ~~2003 (2 February 2002:~~2003: $251 million).

Also in the US, in January 2002, the Group entered into a $70 million Conduit securitisation facility (“Conduit”). Under this securitisation, interests in the US receivables portfolio held by a trust are sold to Sheffield Receivables Corporation (a US subsidiary of Barclays Capital Inc.) in the form of an unsecured revolving variable rate ~~certificate.The~~certificate. The Conduit bears a margin of 0.375% above the cost of funds paid by Sheffield Receivables Corporation. Commitment fees are paid on the undrawn portion of this credit facility at a rate of 0.20%. At ~~1 February 2003~~31 January 2004 the amount outstanding under the Conduit was $nil (2(1 February ~~2002:~~2003: $nil).

~~Signet Group plc 69~~Undrawn committed borrowing facilities

~~Back to Contents~~

~~Notes to the accounts (continued)~~

Undrawn committed borrowing facilities
	2003	2002
			2004	2003
	£m	£m	£m	£m

Expiring within one year	42.7	49.3	38.5	42.7
Expiring between one and two years			–	–
Expiring between two and five years	250.0	288.7	225.3	250.0

	292.7	338.0	263.8	292.7

In October 1999 the Group completed a sale and leaseback agreement in the ~~US.This~~US. This agreement has been treated as a finance lease in accordance with SSAP ~~21.The~~21. The nominal interest rate is 8.44% per annum.

74	Signet Group plc Annual Report & Accounts year ended 31 January 2004

AtBack to Contents

17. Prior year adjustments
Adoption of FRS 17 – ‘Retirement Benefits’
It was previously the Group’s policy, in compliance with SSAP 24, to spread the pension valuation surplus arising under its UK defined benefit pension scheme (the “Group Scheme”) over the average service life of the employees. In compliance with this standard, a pension scheme prepayment of £19.1 million was included in the balance sheet at 1 February 2003 within debtors falling due after more than one year. An associated deferred tax liability of £5.7 million was also carried on the ~~interest payable~~balance sheet at 1 February 2003.

The adoption of FRS 17 – ‘Retirement Benefits’ has led to the write-off of the £19.1 million pension asset previously recognised under SSAP 24 and provision for the deficit of £6.7 million in the Group Scheme as at 1 February 2003. This £6.7 million deficit has been classified as a creditor falling due after more than one year. The £5.7 million deferred tax liability associated with the SSAP 24 pension asset has been written back and a £2.0 million deferred tax asset has been recognised in respect of the deficit provided for under FRS 17 at 1 February 2003. The total net adjustment of £18.1 million arising from the adoption of FRS 17 has been accounted for as a prior year adjustment charged directly to shareholders’ funds as at 1 February 2003.

Shareholders’ funds at 2 February 2002 and at 27 January 2001 (as detailed on page 61) have been restated to reflect the total net surpluses arising at ~~least 75%~~those dates from the adoption of ~~US dollar borrowings was fixed by Fixed Interest Rate Agreements (see note 26).~~FRS 17.

The consolidated statement of total recognised gains and losses has been restated for the 52 weeks ended 1 February 2003 and the 53 weeks ended 2 February 2002 to include the actuarial losses on pension assets arising during those periods net of deferred tax, calculated in accordance with FRS 17. These amounted to £22.3 million and £14.3 million respectively.

The profit and loss accounts for the 52 weeks ended 1 February 2003 and for the 53 weeks ended 2 February 2002 have been restated to include the following items, reflecting the requirements of FRS 17.

	2003		2002
	£m		£m

Operating profit:
As originally reported	216.2		200.7
- Net service cost	(2.3	)	(1.9	)

As restated	213.9		198.8

Net interest payable and similar charges:
As originally reported	(16.5	)	(17.9	)
- Expected return on Group Scheme assets	7.1		7.5
- Interest on Group Scheme liabilities	(4.6	)	(4.6	)

As restated	(14.0	)	(15.0	)

Profit on ordinary activities before taxation:
As originally reported	199.7		182.8
- Net impact of FRS 17 adjustments	0.2		1.0

As restated	199.9		183.8

~~17 Prior year adjustment~~Adoption of FRS 19 – ‘Deferred Tax’
Prior to 2001/02 it was the Group’s policy, in compliance with SSAP 15, to provide for deferred taxation where there was a reasonable probability that a liability would become payable in the foreseeable future. FRS 19 – ‘Deferred Tax’, which the Group adopted in 2001/02, requires that a deferred tax liability should be provided or an asset recognised in respect of all timing differences, regardless of whether it is considered that there is a reasonable probability that such timing differences will reverse.

The impact of the adoption of FRS 19 in 2001/02 led to an additional provision for deferred ~~taxation~~tax of £6.2 million, which was accounted for as a prior year adjustment charged directly to shareholders’ ~~funds.There~~funds. There was no material effect on the profit and loss account for the period ended 2 February 2002 or the preceding years.

18 Deferred taxation
1 February 2003 2 February 2002

Assets

(Liabilities)

Total
Assets (Liabilities) Total

£m

£m

£m
£m £m £m

Accelerated capital allowances
0.7

–

0.7
0.8 – 0.8
Other timing differences
18.0

(19.2
)
(1.2
) 17.3 (27.3 ) (10.0 )
UK property related
1.8

–

1.8
1.8 – 1.8
Value of UK capital losses
carried forward
16.3

–

16.3
16.4 – 16.4

Total deferred tax asset/(liability)
36.8

(19.2
)
17.6
36.3 (27.3 ) 9.0
Valuation allowance
(18.1
)
–

(18.1
) (18.2 ) – (18.2 )

Deferred tax (liability)/asset
18.7

(19.2
)
(0.5
) 18.1 (27.3 ) (9.2 )

UK
(3.7
) (5.7 )
US
3.2
(3.5 )

Deferred tax liability
(0.5
) (9.2 )

Signet Group plc Annual Report & Accounts year ended 31 January 2004

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Notes to the accounts (continued)

18. Deferred taxation

31 January 2004

1 February 2003⁽¹⁾

Assets

(Liabilities)

Total

Assets

(Liabilities)

Total

£m

Accelerated capital allowances

1.1

–

1.1

0.7

–

0.7

Other timing differences

16.6

(23.1

)

(6.5

)

18.0

(13.5

)

4.5

UK property related

1.9

–

1.9

1.8

–

1.8

Value of UK capital losses carried forward

16.1

–

16.1

16.3

–

16.3

Total deferred tax asset/(liability)

35.7

(23.1

)

12.6

36.8

(13.5

)

23.3

Valuation allowance

(18.0

)

–

(18.0

)

(18.1

)

–

(18.1

)

Deferred tax asset/(liability)

17.7

(23.1

)

(5.4

)

18.7

(13.5

)

5.2

2.6

2.0

(8.0

)

3.2

Deferred tax (liability)/asset

(5.4

)

5.2

The difference on translation in respect of deferred tax posted directly to reserves in the period ended ~~1 February 2003~~31 January 2004 was ~~£nil (2002:~~£0.6 million (2003: £nil).

Movement in deferred tax (liability)/asset:

~~Movement in deferred tax liability:~~		Total
~~Movement in deferred tax liability:~~	£m

At 1 February 2003⁽¹⁾		£m 5.2
Transfers		1.1
~~At 2 February 2002~~		~~(9.2~~	)
~~Transfers~~		~~1.3~~
~~Release~~Charge in the period to the profit and loss account	(12.3	~~7.4~~)
Difference on translation	0.6

At ~~1 February 2003~~31 January 2004		(~~0.5~~5.4	)

~~70 Signet Group plc~~

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~~19 Other provisions~~(1)	Restated for the implementation of FRS 17 – ‘Retirement Benefits’ (see note 17).

19. Other provisions

		Total

		£m

At 21 February ~~2002~~2003		~~7.0~~7.5
Charges for the period in the profit and loss account	(0.5	~~1.4~~	)
Utilisation		(~~0.9~~0.6	)

At ~~1 February 2003~~31 January 2004		~~7.5~~6.4

The provision is for onerous leases and includes the discounted cash flows of future net obligations in respect of vacant and partially vacant properties and the rental shortfall on properties which are sublet at below the current rent.

20 Share capital
2003 2002

£m £m

Authorised:
5,929,874,019 Ordinary shares of 0.5p each (2002: 5,929,874,019) 29.6 29.6
Class A Dollar deferred shares of $0.01 each (2003: nil; 2002: 12,320,739) – 0.1
Class B Dollar deferred shares of $1 each (2003: nil; 2002: 2,500) – –

29.6 29.7

76	Signet Group plc Annual Report & Accounts year ended 31 January 2004

~~Following the adoption of new articles of association by shareholders on 13 June 2002 the Company only has authorised ordinary shares of 0.5p each.~~Back to Contents

Number £m

Allotted, called up and fully paid:
Ordinary shares of 0.5p each
At 2 February 2002 1,706,007,484 8.5
Shares issued to QUEST 1,688,035 –
Shares issued to ESOT 1,850,403 –
Other share options exercised 4,222,474 0.1

At 1 February 2003 total allotted, called up and fully paid (2002: £8.6 million) 1,713,768,396 8.6

20. Share capital

	2004	2003
	£m	£m

Authorised:
5,929,874,019 Ordinary shares of 0.5p each (2003: 5,929,874,019)	29.6	29.6

	Number of shares	£m

Allotted, called up and fully paid:
Ordinary shares of 0.5p each
At 1 February 2003	1,713,768,396	8.6
Shares issued to QUEST	226,057	–
Shares issued to ESOT	2,068,812	–
Other share options exercised	10,127,583	–

At 31 January 2004 total allotted, called up and fully paid (2003: £8.6 million)	1,726,190,848	8.6

The consideration received in respect of the ~~7.8~~12.4 million shares issued during the year was £6.3 million (2003: £4.3 ~~million (2002: £8.9~~ million).

On 22 April 2002 each of the 12,320,739 Class A Dollar deferred shares of $0.01 each and 2,500 Class B Dollar deferred shares of $1 each (the “deferred shares”) in issue were redeemed by the Company. All the authorised but unissued deferred shares were cancelled by a special resolution passed on 13 June 2002 and the amount of that part of the Company’s share capital which was denominated in dollars was diminished accordingly and extinguished.

The trustee of the QUEST, Signet Group QUEST Limited (a subsidiary of the Company), held ~~395,528~~110,857 shares at 21 February ~~2002.~~2003. In the year ended ~~1 February 2003~~31 January 2004 the trustee subscribed in cash for ~~313,046~~132,450 shares at ~~99.25p~~75.50p per share on ~~20 February 2002~~3 March 2003 and for ~~1,374,989~~93,607 shares at ~~82.5p~~87.75p per share on ~~10 January 2003.These~~6 June 2003. These subscription prices were the market prices respectively on ~~31 January~~2 March 2003 and ~~9 January~~5 June 2003, the last business days before the dates on which the respective terms of issue were ~~fixed.These~~fixed. These shares were all subscribed for in order to provide shares to satisfy the exercise of options under the Group’s savings related share option scheme for UK employees. In aggregate the subscription monies amounted to ~~£1,445,064.~~£182,140. In the year ended ~~1 February 2003~~31 January 2004 the trustee transferred ~~1,660,908~~981,370 shares to holders of savings related options pursuant to the exercise of such ~~options.The~~options. The trustee held ~~110,857~~41,065 shares at ~~1 February 2003~~31 January 2004 and ~~125,930~~35,992 shares at 2624 March ~~2003.The~~2004. The aggregate market value of the shares at 131 January 2004 was £0.04 million (1 February ~~2003 was~~2003: £0.08 ~~million (2 February 2002: £0.4~~ million)~~.The~~. The investment in these shares is recorded as £nil in the Company’s accounts.

~~Signet Group plc 71~~

~~Back to Contents~~

~~Notes to the accounts (continued)~~

The trustee of the ESOT, Mourant & ~~Co.Trustees~~Co. Trustees Limited, did not hold any shares at 21 February ~~2002.~~2003. In the year ended ~~1 February 2003~~31 January 2004 the trustee subscribed in cash for a total of ~~1,850,403~~2,068,812 shares at an average price of ~~118.85p~~100.00p per share. The subscription prices were the market prices on the last business days before the dates on which the respective terms of issue were fixed and varied between ~~101.5p~~85.25p and ~~132.25p~~103.75p per ~~share.These~~share. These shares were all subscribed for in order to provide shares to satisfy the exercise of executive share options granted to UK employees. At ~~1 February 2003~~31 January 2004 and 2624 March ~~2003~~2004 the trustee did not hold any shares.

On various dates during the year ended ~~1 February 2003~~31 January 2004 a total of ~~4,222,474~~10,127,583 shares were subscribed for in cash by holders of options, at prices between ~~21.25p~~33.75p and 57.00p per share. The subscription prices were the market prices at the various times at which the options were granted. The market prices on the dates of issue varied between ~~68.25p~~73.00p and ~~113.25p~~114.50p and in aggregate the subscription monies amounted to ~~£2,140,502.~~£4,645,381. Details of options in respect of shares are shown in note 27 on page ~~80.~~85.

21 Reserves

Share
premium
account
Revaluation
reserve Special
reserves Profit and
loss account

£m £m £m £m

At 2 February 2002 48.3 3.0 38.3 581.5
Retained profit attributable to equity shareholders – – – 92.8
Shares issued to QUEST/ESOT 1.9 – – (1.9 )
Exercise of share options 3.7 – – –
Redemption of deferred share capital – – – 0.1
Transfer on disposal of fixed assets – 0.1 – (0.1 )
Translation differences (net of £0.7 million tax credit) – – 63.4 (143.2 )

At 1 February 2003 53.9 3.1 101.7 529.2

Signet Group plc Annual Report & Accounts year ended 31 January 2004

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Notes to the accounts (continued)

21.

Reserves

	Share
	premium	Revaluation	Special	Profit and
	account	reserve	reserves	loss account
	£m	£m	£m	£m

At 1 February 2003 – as previously stated	53.9	3.1	101.7	529.2
Prior year adjustment (note 17)	–	–	–	(18.1	)

At 1 February 2003	53.9	3.1	101.7	511.1
Retained profit attributable to equity shareholders	–	–	–	94.0
Shares issued to QUEST/ESOT	1.8	–	–	(1.8	)
Exercise of share options	5.0	–	–	–
Actuarial gain recognised	–	–	–	6.4
Translation differences	–	–	40.5	(96.7	)

At 31 January 2004	60.7	3.1	142.2	513.0

The revaluation reserve represents the unrealised surplus arising from revaluing freehold and long leasehold properties.

Exchange gains of £1.6 million (2003: £1.7 million ~~(2002: £1.1 million losses)~~gains) on foreign currency loans have been offset in reserves against exchange movements on the net investment in overseas subsidiary undertakings.

Following the 1997 capital reduction, the holding company, Signet Group plc, is permitted to make distributions (including dividends, share buy-backs and other transactions classed as distributions) out of profits earned after 2 August 1997, the end of its 1997/98 half ~~year.The~~year. The undertakings given to the High Court at the time of the capital reduction included the requirement that the Company transfer to a new special reserve any dividend paid by a subsidiary from profits earned prior to that ~~date.The~~date. The new special reserve is, for as long as the Company is a public company, treated as a non-distributable reserve for the purposes of section 264 of the Companies Act 1985.

In accordance with undertakings given by the Company to the High Court in connection with previous reductions of the share premium account, an earlier special reserve is available to write-off existing goodwill resulting from acquisitions and otherwise only for purposes permitted in the case of the share premium account. Under English law, dividends can only be paid out of profits available for distribution (generally defined as accumulated realised profits less accumulated realised losses less net unrealised losses) and not out of share capital or share ~~premiums~~premium (generally equivalent in US terms to paid-in surplus).

At ~~1 February 2003,~~31 January 2004, after taking into account the recommended final dividend of ~~1.80p~~2.16p per share, the holding company had distributable reserves of £114.8 million (1 February 2003: £30.9 ~~million (2 February 2002: £29.7~~ million)~~.There~~. There are additional potentially distributable reserves held in subsidiary companies.

~~72 Signet Group plc~~

~~Back to Contents~~

Exchange differences arising on the retranslation of purchased goodwill have been written off against the profit and loss account ~~reserve.This~~reserve. This amount has been transferred to the special reserve where the initial purchased goodwill had previously been eliminated. Cumulative goodwill write-offs at underlying foreign currency amounts included in the special reserve amount to ~~£610.3~~£569.8 million (2(1 February ~~2002: £673.7~~2003: £610.3 million).

The Group’s total recognised gains and losses differ from the net profit for the period (as set out in the Group profit and loss account) in respect of foreign currency translation adjustments amounting to an aggregate loss of ~~£79.8~~£56.2 million for the period ended ~~1 February 2003 (2002: gain of~~31 January 2004 (2003: £79.8 million loss; 2002: £15.1 ~~million; 2001: gain of £31.8 million).The~~million gain). The foreign currency translation adjustments are set out in the statement of total recognised gains and losses.

78	Signet Group plc Annual Report & Accounts year ended 31 January 2004

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The cumulative exchange gains and losses on the translation of foreign currency financial statements into pounds sterling are set out in the table below:

	2003		2002	2001
						2004		2003		2002
	£m		£m	£m		£m		£m		£m

Balance at end of previous period	28.0		12.9	(18.9	)	(51.8	)	28.0		12.9
Movement in period	(79.8	)	15.1	31.8		(56.2	)	(79.8	)	15.1

Balance at end of period	(51.8	)	28.0	12.9		(108.0	)	(51.8	)	28.0

The cumulative adjustments to property valuations are £6.9 million ~~(2002:~~(2003: £6.9 million; ~~2001: £4.8~~2002: £6.9 million)~~.The~~. The tax effect of the cumulative adjustments to property valuations is £nil.

2222. Pension schemes
The Group operates one defined benefit pension scheme in the UK, the Group Scheme, for all eligible employees who meet minimum age and service ~~requirements, the Signet Group Pension Scheme (the ‘Group Scheme’).The~~requirements. The assets of the Group Scheme, which is a funded scheme, are held in a separate trustee administered fund which is independently ~~managed.The~~managed. The trustees of the Group Scheme during the year were Walker Boyd, John Gillum, John Hartwright and The Law Debenture Pension Trust Corporation p.l.c. (independent trustee). Contributions to the Group Scheme, which are assessed in accordance with the advice of independent qualified actuaries ~~primarily~~ using the ~~projected unit~~attained age method of valuation, are charged to the consolidated profit and loss account so as to spread the cost of pensions over participating employees’ working lives with the Group. Where appropriate, supplementary pension and life assurance for UK directors and senior executives is provided through the Signet Group Funded Unapproved Retirement Benefits Scheme.

An actuarial valuation of the Group Scheme was carried out as at 5 April 2003. The market value of the Group Scheme’s assets at that date was £82.2 million, a deficit of £6.7 million on the Group Scheme’s accrued liabilities. As a result of the valuation, the Group has recommenced contributions to the Group Scheme and in 2003/04 this amounted to £1.2 million.

In the US, the Group sponsors a defined contribution 401(k) retirement savings plan for all eligible employees who meet minimum age and service ~~requirements.The~~requirements. The assets of this plan are held in a separate trust managed by KeyBank and under it, the Group matches 25% of up to the first 6% of employee elective salary ~~deferrals.The~~deferrals. The Group has also established, in the US, an unfunded, unqualified deferred compensation plan which permits certain management employees to elect annually to defer all or a portion of their remuneration and earn a guaranteed interest rate on the deferred amounts. The plan also provides for a Group matching contribution based on each participant’s annual remuneration deferral. In connection with this plan, the Group has invested in trust owned life insurance policies.

The most recent actuarial investigation of the Group Scheme was at 5 April 2002 and its results form the basis of the SSAP 24 accounting in 2002/03 in relation to the Group Scheme.The principal actuarial assumptions adopted in the investigation were that the investment returns before and after retirement would be 6.2% per annum and 5.2% per annum respectively, that the increases in pensionable earnings would be 4.25% per annum and that the increases in present and future pensions in payment for the majority of members would be 2.75% per annum. The market value of the Group Scheme’s assets was sufficient to cover 125% of the benefits that had accrued to members at the valuation date, after allowing for expected future increases in earnings and pensions.The market value of the Group Scheme’s assets at 5 April 2002 was £110.0 million.

~~Signet Group plc 73~~

	2004		2003		2002
	£m		£m		£m

The Group pension cost for the period comprises:
Charge to operating profit
UK net service cost	(2.5	)	(2.3	)	(1.9	)
US retirement savings plan	(1.9	)	(1.9	)	(1.6	)

	(4.4	)	(4.2	)	(3.5	)
Credit to net interest payable and similar charges
Expected return on Group Scheme assets	5.3		7.1		7.5
Interest on Group Scheme liabilities	(4.7	)	(4.6	)	(4.6	)

	(3.8	)	(1.7	)	(0.6	)

Signet Group plc Annual Report & Accounts year ended 31 January 2004

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Notes ~~to the accounts (continued)~~

~~In accordance with SSAP 24, previous valuation surpluses arising from the Group Scheme have been included in the consolidated balance sheet as a prepayment and amortised~~ to the ~~consolidated profit and loss account. At 1 February 2003 the resulting prepayment amounted to £19.1 million (2 February 2002: £19.1 million).~~

2003 2002 2001

£m £m £m

The Group pension cost for the period comprises:
Normal UK cost under SSAP 24 (2.5 ) (2.2 ) (0.7 )
Spreading of additional surplus 1.5 1.2 (0.3 )
Interest on UK surpluses 1.0 1.0 1.0
US retirement savings plan (1.9 ) (1.6 ) (1.2 )

(1.9 ) (1.6 ) (1.2 )

~~FRS 17 disclosure~~
~~The pension cost figures used in these~~ accounts comply with the current pension cost accounting standard SSAP 24. A new pension cost accounting standard, FRS 17 – ‘Retirement Benefits’, has to be implemented in full by 2005. However, under transitional arrangements of FRS 17 the Group is required to disclose the following information about the Group Scheme and the figures that would have been shown under FRS 17 in the current balance sheet.(continued)

~~The Group operates a defined benefit scheme in the UK. A full actuarial valuation was carried out at 5 April 2000 and updated to 1 February 2003 by a qualified independent actuary.~~

The financial assumptions used by the actuary to calculate the Group Scheme liabilities were:

	2003	2002	2004	2003	2002

Rate of increase in salaries	3.9%	3.9%	4.3%	3.9%	3.9%
Rate of increase in deferred pensions during deferment	2.4%	2.4%	2.8%	2.4%	2.4%
Rate of increase in pensions in payment⁽¹⁾	2.4%	2.4%	2.8%	2.4%	2.4%
Discount rate	5.4%	5.6%	5.6%	5.4%	5.6%
Inflation assumption	2.4%	2.4%	2.8%	2.4%	2.4%

(1) for the majority of members

(1)	For the majority of members.

The assets in the Group Scheme and the expected rates of return (net of administration expenses) were:

						Long-term				Long-term			Long-term
						rate of return				rate of return			rate of return
	Long-term rate of return expected 2003	Value at 2003		Long-term rate of return expected 2002	Value at 2002	expected	Value at			expected	Value at		expected		Value at
						2004	2003			2002
	%	£m		%	£m	%	£m			%	£m		%		£m

Equities and property	7.1	65.4		7.3	85.3	7.5			70.0			7.1		65.4		7.3	85.3
Bonds	4.5	15.3		4.7	17.4	4.9	26.3			4.5	15.3		4.7		17.4
Cash	3.6	1.5		3.8	5.4	4.0	3.4			3.6	1.5		3.8		5.4

Total market value of assets		82.2			108.1		99.7				82.2				108.1
Present value of Group Scheme liabilities		(88.9	)		(83.2)		(97.9	)			(88.9	)			(83.2	)

(Deficit)/surplus in the Group Scheme		(6.7	)		24.9
Related deferred tax asset/(liability)		2.0			(7.5)
Surplus/(deficit) in the Group Scheme							1.8				(6.7	)			24.9
Related deferred tax (liability)/asset							(0.6	)			2.0				(7.5	)

Net pension (liability)/asset		(4.7	)		17.4
Net pension asset/(liability)							1.2				(4.7	)			17.4

~~74 Signet Group plc~~Analysis of pension costs charged to operating profit

	2004	2003	2002
	£m	£m	£m

Current service cost	2.5	2.3	1.9
Past service cost	–	–	–

Total operating charge	2.5	2.3	1.9

Analysis of amounts included in net interest payable and similar charges

	2004		2003		2002
	£m		£m		£m

Expected return on Group Scheme assets	5.3		7.1		7.5
Interest on Group Scheme liabilities	(4.7	)	(4.6	)	(4.6	)

Net return	0.6		2.5		2.9

80	Signet Group plc Annual Report & Accounts year ended 31 January 2004

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~~If the above pension (liability)/asset was~~Analysis of amount recognised in the ~~financial statements,~~statement of total recognised gains and losses (“STRGL”)

	2004		2003		2002
	£m		£m		£m

Actual return less expected return on Group Scheme assets	15.3		(29.0	)	(19.7	)
Experience gains and losses arising on Group Scheme liabilities	(3.3	)	–		2.1
Changes in assumptions	(2.8	)	(2.8	)	(2.8	)

Actuarial gain/(loss)	9.2		(31.8	)	(20.4	)
Deferred tax	(2.8	)	9.5		6.1

Recognised in STRGL	6.4		(22.3	)	(14.3	)

The movement in the ~~Group’s net assets and profit and loss reserve would be~~surplus/(deficit) during the year was as follows:

2003 2002

£m £m

Net assets excluding pension (liability)/asset⁽¹⁾ 683.1 666.3
Pension (liability)/asset (4.7 ) 17.4

Net assets including pension (liability)/asset 678.4 683.7

	2004		2003
	£m		£m

(Deficit)/surplus in Group Scheme at beginning of year	(6.7	)	24.9
Current service cost	(2.5	)	(2.3	)
Contributions paid	1.2		–
Past service cost	–		–
Interest return	0.6		2.5
Actuarial gain/(loss)	9.2		(31.8	)

Surplus/(deficit) in the Group Scheme at end of year	1.8		(6.7	)

~~(1) excludes existing SSAP 24 pension fund prepayment~~History of ~~£19.1 million (2002: £19.1 million),~~experience gains and ~~the related deferred tax liability of £5.7 million (2002 £5.7 million).~~losses

2003 2002

£m £m

Profit and loss reserve excluding pension (liability)/asset⁽¹⁾ 529.2 568.1
Pension (liability)/asset (4.7 ) 17.4

Profit and loss reserve 524.5 585.5

	2004		2003		2002

Difference between expected and actual return on Group Scheme assets (£ million)	15.3		(29.0	)	(19.7	)
Percentage of Group Scheme assets	15%		-35%		-18%
Experience gains and losses on Group Scheme liabilities (£ million)	(3.3	)	–		2.1
Percentage of Group Scheme liabilities	-3%		–		3%
Total amount recognised in statement of total recognised gains and losses – gross (£ million)	9.2		(31.8	)	(20.4	)
Percentage of Group Scheme liabilities	9%		-36%		-25%

~~(1) excludes existing SSAP 24 pension fund prepayment of £19.1 million (2002: £19.1 million), and the related deferred tax liability of £5.7 million (2002: £5.7 million).~~

~~Analysis of pension costs charged to operating profit~~Signet Group plc Annual Report & Accounts year ended 31 January 2004
	*~~2003~~81*

	£m

~~Current service cost~~	~~2.3~~
~~Past service cost~~	–

~~Total operating charge~~	~~2.3~~


~~Analysis of amounts included in net interest payable and similar charges~~
	~~2003~~

	£m

~~Expected return on Group Scheme assets~~	~~7.1~~
~~Interest on Group Scheme liabilities~~	~~(4.6~~	)

~~Net return~~	~~2.5~~


~~Analysis of amount recognised in the statement of total recognised gains and losses (STRGL)~~
	~~2003~~

	£m

~~Actual return less expected return on Group Scheme assets~~	~~(29.0~~	)
~~Experience gains and losses arising on Group Scheme liabilities~~	–
~~Changes in assumptions~~	~~(2.8~~	)

~~Actuarial loss recognised in STRGL~~	~~(31.8~~	)

~~Signet Group plc 75~~

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Notes to the accounts (continued)

~~Notes to the accounts (continued)~~

~~The movement in the surplus/(deficit) during the year was as follows:~~23.
	~~2003~~

	£m

~~Surplus in Group Scheme at beginning of year~~	~~24.9~~
~~Current service cost~~	~~(2.3~~	)Commitments
~~Contributions paid~~		–
~~Past service cost~~	–
~~Interest cost~~	~~2.5~~
~~Actuarial loss~~	~~(31.8~~	)

~~Deficit~~The Group occupies certain properties and holds plant, machinery and vehicles under operating leases. The property leases usually include renewal options and escalation clauses and in the ~~Group Scheme at end~~US generally provide for contingent rentals based on a percentage of ~~year~~	~~(6.7~~	)lease defined revenues.


~~History of experience gains and losses~~
	~~2003~~

~~Difference between expected and actual return on Group Scheme assets (£ million)~~	~~(29.0~~	)
~~Percentage of Group Scheme assets~~	~~–35%~~
~~Experience gains and losses on Group Scheme liabilities (£ million)~~	~~nil~~
~~Percentage of Group Scheme liabilities~~	~~nil~~
~~Total amount recognised in statement of total recognised gains and losses (£ million)~~	~~(31.8~~	)
~~Percentage of Group Scheme liabilities~~	~~–36%~~	)

~~The Company did not contribute to the Group Scheme during the year.The Company’s contributions will be assessed at the actuarial valuation as at 5 April 2003.~~

~~23 Commitments~~
The Group occupies certain properties and holds plant, machinery and vehicles under operating leases.The property leases usually include renewal options and escalation clauses and in the US generally provide for contingent rentals based on a percentage of lease defined revenues.

The minimum payments in respect of operating leases for the 52 weeks to 3129 January ~~2004~~2005 to which the Group was committed as at ~~1 February 2003~~31 January 2004 were as follows:

Plant,
machinery
& vehicles
Leasehold
premises
Total

£m
£m
£m

Operating leases which expire:
Within one year 0.2 5.5 5.7
In the second to fifth years 2.0 25.2 27.2
Over five years – 86.3 86.3

At 1 February 2003
2.2
117.0
119.2

At 2 February 2002 2.3 120.9 123.2

~~76 Signet Group plc~~

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	Plant,
	machinery	Leasehold
	& vehicles	premises	Total
	£m	£m	£m

Operating leases which expire:
Within one year	0.3	4.9	5.2
In the second to fifth years	1.9	25.7	27.6
Over five years	–	87.6	87.6

At 31 January 2004	2.2	118.2	120.4

At 1 February 2003	2.2	117.0	119.2

The future minimum payments for operating leases having initial or non-cancellable terms in excess of one year are as follows:


	£m	£m

Period ending on or about 31 January:
2004	119.2
2005	112.7	120.4
2006	106.4	114.9
2007	101.6	110.0
2008	95.4	104.2
2009		99.0
Thereafter	564.6	563.9

	1,099.9	1,112.4

Capital commitments at ~~1 February 2003~~31 January 2004 for which no provision has been made in these consolidated accounts were as follows:

2003
2002

£m
£m

Contracted
9.8
14.3

	2004	2003
	£m	£m

Contracted	16.8	9.8

~~24 Contingent liabilities~~
The Group is not party to any legal proceedings considered to be material to profit, financial position or cash flow including any bankruptcy, receivership or similar proceedings involving the Group or any of its significant subsidiaries. No director, officer or affiliate of the Group or any associate of any such director, officer or affiliate has been a party adverse to the Group or any of its subsidiaries or has a material interest adverse to the Group or any of its subsidiaries.

The Group has assigned or sub-let UK property leases in the normal course of business. Should the assignees or sub-tenants fail to fulfil any obligations in respect of these leases, the Group may be liable for those defaults.The number of such claims arising to date has been small, and the liability, which is charged to the profit and loss account as it arises, has not been material.

The Group’s US operation gives its customers the option of purchasing a lifetime service plan on most of the products sold. Such service plans cover the costs of repair, subject to certain terms and conditions. An accrual has been made to cover the cost of future expected claims under plans sold up to the balance sheet date.

25 Notes to the consolidated cash flow statement
(a) Reconciliation of operating profit to operating cash flows

2003
2002 2001

£m
£m £m

Operating profit
216.2
200.7 178.7
Depreciation and amortisation charges
37.8
34.7 30.6
Profit on sale of fixed assets
–
– (1.4 )
Increase in stocks⁽¹⁾
(44.9
)
(30.0 ) (81.7 )
Increase in debtors⁽¹⁾
(26.5
)
(2.2 ) (22.5 )
(Decrease)/increase in creditors⁽¹⁾
(0.9
)
(15.1 ) 29.8
Increase/(decrease) in other provisions⁽¹⁾
0.5
(0.1 ) (1.4 )

Net cash inflow from operating activities
182.2
188.0 132.1

~~(1) The change in each year is stated after eliminating the impact of foreign exchange translation between opening and closing balance sheet dates.~~

~~Signet Group plc 77~~

82	Signet Group plc Annual Report & Accounts year ended 31 January 2004

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~~Notes~~24.	Contingent liabilities
The Group is not party to any legal proceedings considered to be material to profit, financial position or cash flow including any bankruptcy, receivership or similar proceedings involving the Group or any of its significant subsidiaries. No director, officer or affiliate of the Group or any associate of any such director, officer or affiliate has been a party adverse to the ~~accounts (continued)~~Group or any of its subsidiaries or has a material interest adverse to the Group or any of its subsidiaries.

The Group has assigned or sub-let UK property leases in the normal course of business. Should the assignees or sub-tenants fail to fulfil any obligations in respect of these leases, the Group may be liable for those defaults. The number of such claims arising to date has been small, and the liability, which is charged to the profit and loss account as it arises, has not been material.

The Group’s US operation gives its customers the option of purchasing a lifetime service plan on most of the products sold. Such service plans cover the costs of repair, subject to certain terms and conditions. An accrual has been made to cover the cost of future expected claims under plans sold up to the balance sheet date.

25.

Notes to the ~~accounts (continued)~~consolidated cash flow statement
(a)	Reconciliation of operating profit to operating cash flows

(b) Analysis of net debt
At
2 February
2002 Cash flow Exchange
movement Other
movements
At
1 February
2003

£m £m £m £m
£m

Cash at bank and in hand 0.6 – – –
0.6

Bank overdrafts (38.8 ) (8.3 ) 4.2 –
(42.9
)

(38.2 ) (8.3 ) 4.2 –
(42.3
)

Debt due after more than one year (215.3 ) – 28.9 12.4
(174.0
)
Debt due within one year (14.1 ) 12.1 2.0 (12.4 )
(12.4
)
Bank deposits 65.9 29.9 (7.2 ) –
88.6

(163.5 ) 42.0 23.7 –
(97.8
)

Total (201.7 ) 33.7 27.9 –
(140.1
)

	2004		2003	⁽¹⁾	2002	⁽¹⁾
	£m		£m		£m

Operating profit	222.3		213.9		198.8
Depreciation and amortisation charges	40.4		37.8		34.7
Increase in stocks⁽²⁾	(44.9	)	(44.9	)	(30.0	)
Increase in debtors⁽²⁾	(31.1	)	(26.5	)	(2.2	)
Increase/(decrease) in creditors⁽²⁾	18.2		1.4		(13.2	)
(Decrease)/increase in other provisions⁽²⁾	(1.1	)	0.5		(0.1	)

Net cash inflow from operating activities	203.8		182.2		188.0

(1)	Restated for the implementation of FRS 17 – ‘Retirement Benefits’ (see note 17).
(2)	The change in each year is stated after eliminating the impact of foreign exchange translation between opening and closing balance sheet dates.


(b)	Analysis of net debt

	At								At
	1 February		Cash		Exchange		Other		31 January
	2003		flow		movement		movements		2004
	£m		£m		£m		£m		£m

Cash at bank and in hand	0.6		–		–		–		0.6
Bank overdrafts	(42.9	)	(11.8	)	3.6		–		(51.1	)

	(42.3	)	(11.8	)	3.6		–		(50.5	)

Debt due after more than one year	(174.0	)	–		17.2		10.6		(146.2	)
Debt due within one year	(12.4	)	12.1		0.3		(10.6	)	(10.6	)
Bank deposits	88.6		42.4		(3.6	)	–		127.4

	(97.8	)	54.5		13.9		–		(29.4	)

Total	(140.1	)	42.7		17.5		–		(79.9	)


	Signet Group plc Annual Report & Accounts year ended 31 January 2004	83

~~26 Financial instruments~~
~~The Group enters into various interest rate protection agreements, particularly interest rate caps and floors, in order~~Back to ~~limit~~Contents

Notes to the impact of movements in interest rates on its borrowings. It is the policy of the Group to enter into interest rate protection agreements on at least 75% of its forecast US dollar borrowings.The Group does not hold or issue derivative financial instruments for trading purposes. Details of borrowings are shown in note 16 on page 69.accounts (continued)

The Group also enters into the forward purchase of foreign currencies, principally the US dollar and the Euro, in order to limit the impact of movements in foreign exchange rates on its forecast foreign currency purchases. It is the policy of the Group to ensure that identified foreign currency exposures are hedged to at least the following levels:

~~100% – for exposures of less than three months;~~

~~75% – for exposures of between three and six months; and~~

~~50% – for exposures of between six and 12 months.~~

The weighted average interest rate of the fixed rate financial liabilities is 5.79%. The weighted average period for which interest rates on the fixed rate financial liabilities are fixed is 41 months. There are no interest-free financial liabilities.

26.		Financial instruments
The Group may enter into various interest rate protection agreements, particularly interest rate caps and floors, in order to limit the impact of movements in interest rates on its borrowings. It is the policy of the Group to enter into interest rate protection agreements on at least 75% of its forecast US dollar borrowings. The Group does not hold or issue derivative financial instruments for the purpose of trading those instruments. Details of borrowings are shown in note 16 on page 73.

The weighted average interest rate of the fixed rate financial liabilities is 5.66%. The weighted average period for which interest rates on the fixed rate financial liabilities are fixed is 30 months. There are no interest-free financial liabilities.

The Group also enters into the forward purchase of foreign currencies, principally the US dollar and the Euro, in order to limit the impact of movements in foreign exchange rates on its forecast foreign currency purchases. It is the policy of the Group to ensure that identified foreign currency exposures are hedged to at least the following levels:


100%	–	for exposures of less than three months;

75%	–	for exposures of between three and six months; and

50%	–	for exposures of between six and 12 months.

Fair value of financial instruments

These financial instruments involve varying degrees of off-balance sheet market risk whereby changes in interest rates, foreign currency exchange rates or market values of the underlying financial instruments may result in changes in the value of the financial ~~instrument.The~~instrument. The Group is exposed to credit-related losses in the event of non-performance by counterparties to financial instruments. It is the policy of the Group only to transact such financial instruments with financial institutions rated ‘A’ or higher, to ensure that the potential for credit-related losses is minimised. Concentrations of credit risk exist due to the Group operating customer receivables programmes in the US as part of its trading strategy. Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial ~~instrument.These~~instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgement, and therefore cannot be determined precisely. Changes in assumptions could significantly affect the ~~estimates.The~~estimates. The following methods and assumptions were used to estimate the fair value of each class of financial instrument for which it is practicable to estimate that ~~value:~~

~~78 Signet Group plc~~

~~Back to Contents~~value.

Forward purchases of foreign currencies and commodities
The fair value of outstanding forward purchases of foreign currencies was estimated to be a liability of ~~£1,367,000~~£2.9 million at 131 January 2004 (1 February ~~2003 (2 February 2002: £13,000 asset).The~~2003: £1.4 million liability). The net carrying amount of these forward purchases at ~~1 February 2003~~31 January 2004 was £nil (2(1 February ~~2002:~~2003: £nil). The fair value of outstanding forward purchases of commodities was estimated to be a liability of £2.1 million on 31 January 2004 (1 February 2003: £nil). The net carrying amount of these forward purchases at 31 January 2004 was £nil (1 February 2003: £nil). Fair values are calculated with reference to the contracted commodity prices or foreign currency exchange rates and those prevailing at the balance sheet date.

Cash at bank and in hand, and trade accounts payable
The carrying amount is considered to approximate to fair value because of the short maturity of these instruments.

Accounts receivable
Accounts receivable primarily represent credit card ~~receivables.The~~receivables. The carrying value of credit card receivables is considered to approximate to fair value because of their short-term nature and the interest rates being used approximating current market origination rates. Other accounts receivables’ carrying amounts are considered to approximate to fair value because of the short maturity of these instruments.

Debt
The fair value of the Group’s debt is considered to approximate to carrying value at ~~1 February 2003~~31 January 2004 since the rates associated with the debt at that time are consistent with the facilities agreements entered into in August 2001 and January ~~2002.The~~2002. The rates in the facilities agreements are deemed to be current market rates.


84	Signet Group plc Annual Report & Accounts year ended 31 January 2004

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Currency profile

The Group’s net debt includes the following balances denominated in foreign currency:

	2003		2002
					2004		2003
	£m		£m		£m

US dollars – cash	43.4		40.2		67.4			43.4
US dollars – debt	(219.9	)	(234.6	)	(192.9	)	(219.9	)

Interest rate protection agreements

No interest rate protection agreements were in place at ~~1 February 2003~~31 January 2004 because more than 75% of the Group’s forecast US dollar borrowings were covered by ~~Fixed Interest Rate Agreements.~~

~~At 2 February 2002 the Group was a party to the following interest~~fixed rate ~~protection agreements:~~borrowings.

~~Aggregate nominal amounts~~27.	~~Type of~~Share options ~~interest rate~~ ~~protection~~	~~Interest rate~~ ~~obtained~~	~~Term~~

~~$ 6m~~	~~Cap~~	~~5.00%~~	~~Feb 2002 to Mar 2002~~
~~$ 35m~~	~~Cap~~	~~5.00%~~	~~Mar 2002 to Apr 2002~~
~~$ 59m~~	~~Cap~~	~~5.00%~~	~~Apr 2002 to May 2002~~
~~$ 44m~~	~~Cap~~	~~5.00%~~	~~May 2002 to June 2002~~
~~$ 54m~~	~~Cap~~	~~5.00%~~	~~June 2002 to July 2002~~
~~$ 70m~~	~~Cap~~	~~5.00%~~	~~July 2002 to Aug 2002~~
~~$ 74m~~	~~Cap~~	~~5.00%~~	~~Aug 2002 to Sep 2002~~
~~$ 84m~~	~~Cap~~	~~5.00%~~	~~Sep 2002 to Oct 2002~~
~~$ 111m~~	~~Cap~~	~~5.00%~~	~~Oct 2002 to Nov 2002~~
~~$ 135m~~	~~Cap~~	~~5.00%~~	~~Nov 2002 to Dec 2002~~
~~$ 10m~~	~~Cap~~	~~5.00%~~	~~Dec 2002 to Jan 2003~~
~~$ 41m~~	~~Cap~~	~~5.00%~~	~~Jan 2003 to Feb 2003~~
At 31 January 2004 options in respect of 44,717,684 shares were outstanding (including 15,072,944 for directors and officers of the Group) under the Company’s executive share option schemes and sharesave schemes as follows:

~~Signet Group plc 79~~

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~~Notes to the accounts (continued)~~

~~27 Share options~~
At 1 February 2003 options in respect of 43,916,620 shares were outstanding (including 14,211,680 for directors and officers of the Group) under the Company’s executive share option schemes and sharesave schemes as follows:


			Number
Date granted	Number of shares	Exercise price per share	of shares	Exercise price


October 1997	1,414,814	33.75p	1,266,666	33.75	p
October 1997	689,762	$0.55	83,598	$0.55
April 1998	2,611,332	43.25p	2,518,846	43.25	p
April 1998	3,513,207	$0.72	429,924	$0.72
April 1999	2,864,024	49.75p	2,502,214	49.75	p
April 1999	4,007,201	$0.80	1,610,223	$0.80
December 1999⁽¹⁾	310,435	40.00p
December 1999⁽¹⁾	5,468	40.00p
May 2000	2,605,600	57.00p	1,551,597	57.00	p
May 2000	5,636,057	$0.87	3,091,465	$0.87
October 2000⁽¹⁾	92,100	$0.64
November 2000⁽¹⁾	1,074,723	42.00p	206,642	42.00	p
November 2000⁽¹⁾	4,085	42.00p	4,085	42.00	p
May 2001	1,888,520	75.25p	1,835,366	75.25	p
May 2001	3,765,969	$1.08	3,699,180	$1.08
October 2001	248,000	62.50p	248,000	62.50	p
November 2001⁽¹⁾	816,510	$0.77	85,110	$0.77
November 2001⁽¹⁾	2,340,420	50.00p	2,114,016	50.00	p
November 2001⁽¹⁾	12,723	50.00p	12,723	50.00	p
April 2002	1,838,923	120.00p	1,784,760	120.00	p
April 2002	4,454,980	$1.72	4,413,193	$1.72
November 2002⁽¹⁾	843,270	$1.10	746,460	$1.10
November 2002⁽¹⁾	2,852,774	67.00p	2,559,685	67.00	p
November 2002⁽¹⁾	25,723	67.00p	25,723	67.00	p
April 2003			2,826,377	82.25	p
April 2003			4,626,082	$1.30
July 2003			397,435	97.50	p
July 2003			4,059,156	$1.59
November 2003⁽¹⁾			778,320	$1.60
November 2003⁽¹⁾			1,226,802	90.00	p
November 2003⁽¹⁾			14,036	90.00	p

	43,916,620		44,717,684

(1)	The Company has taken advantage of the exception currently permitted under ~~UITF17~~UITF 17 not to take account of the discounts on market price under the sharesave schemes as a charge to the profit and loss account.


	Signet Group plc Annual Report & Accounts year ended 31 January 2004	85

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Notes to the accounts (continued)

The Company’s share option schemes comprise ~~a UK~~four executive share option ~~scheme~~schemes (the “1993 Scheme”), athe “2003 Approved Plan”, the “2003 International Plan” and the “2003 US Plan”, together the “Executive Schemes”) and three all-employee share option schemes (a savings related share option scheme for the UK employees (the “Sharesave Scheme”), a US Section 423 Plan (the “Employee Stock Savings Plan”) and a savings related share option scheme for employees in the Republic of Ireland (the “Irish Sharesave Scheme”), together the “Sharesave Schemes”).

Options granted under the ~~1993 Scheme~~Executive Schemes are generally only exercisable between three and ten years from the date of grant. Performance conditions ~~were~~are attached to all the executive options granted under the Executive Schemes. No further options may be granted under the 1993 Scheme.

Options granted under the Sharesave Scheme and the Irish Sharesave Scheme are generally only exercisable between 36 and 42 months of the commencement of the relevant savings contract. Options granted under the Employee Stock Savings Plan are generally only exercisable between 24 and 27 months of the grant date.

The Executive Schemes and Sharesave Schemes may be operated in conjunction with one or more employee share ownership trusts (the “ESOT” or “QUEST”) which may acquire shares in the Company for the purposes of satisfying the exercise of options.

Executive directors and some senior executives have also been granted awards under the Signet Group plc 2000 Long Term Incentive Plan (“2000 LTIP”)~~.The~~. The vesting of these awards and the extent of vesting depends on the achievement of specified performance conditions. On vesting, 50% of an award is to be made in cash and the other 50% by the grant of an option to acquire shares for a nominal amount. In the event of an award vesting the number of shares to be placed under option would be calculated by dividing 50% of the value of the vested award by the middle market share price on the London Stock Exchange on the dealing day prior to the grant of the award. As the final value of an award cannot be calculated until it vests, the total number of shares over which options might eventually be granted is at present not known and therefore not shown in the above table.

~~80 Signet~~ The 2000 LTIP operates in conjunction with an employee share ownership trust which may be funded by the Group ~~plc~~to acquire shares in the Company for the purposes of meeting the Company’s obligation to provide shares on the exercise of options.

Certain provisions of all the share option schemes may be amended by the Board, but certain basic provisions (and in particular most of the limitations on individual participation, the numbers of shares and the percentage of share capital that may be issued thereunder) cannot be altered to the advantage of the participants except with the approval of the shareholders of the Company or in accordance with the adjustment provisions in the schemes.

The following table summarises the status of rights granted under the Company’s share option schemes at 31 January 2004, 1 February 2003 and 2 February 2002, ~~and 27 January 2001,~~ and changes during the years ended on those dates. For the reason explained above the total number of shares which might be placed under option under the 2000 LTIP is not known.

		Shares						Number of shares (million)

		2003		2002		2001		2004		2003		2002

		million		million		million

Outstanding at beginning of period (at prices from 21.25p to 75.25p)		43.0		59.9		56.5
Granted at 120.00p, 67.00p, $1.72 and $1.10 (2002: 75.25p, 62.50p, 50.00p, $1.08 and $0.77)		10.4		10.0		11.8
Outstanding at beginning of period (at prices from 33.75p to 120.00p)								43.9		43.0		59.9
Granted at 82.25p, 90.00p, 97.50p, $1.31, $1.59 and $1.60
(2003: 120.00p, 67.00p, $1.72 and $1.10)								14.0		10.4		10.0
Exercised (including through QUEST and ESOT)	Exercised (including through QUEST and ESOT)	(7.7	)	(23.7	)	(5.9	)	(11.8	)	(7.7	)	(23.7	)
Lapsed or forfeited	Lapsed or forfeited	(1.8	)	(3.2	)	(2.5	)	(1.4	)	(1.8	)	(3.2	)

		43.9		43.0		59.9		44.7		43.9		43.0

86	Signet Group plc Annual Report & Accounts year ended 31 January 2004

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Share Scheme limits
The ~~1993 Scheme is~~Executive Schemes are subject to the following limits on the number of shares that may be issued:

(a)	the maximum number of shares that have been or may be issued pursuant to options granted ~~up to and including 20 September 2003~~ under the ~~1993 Scheme~~Executive Schemes and any other ~~executive~~discretionary share option scheme adopted by the Company ~~on or after 10 September 1993~~ may not exceed 5% of the shares from time to time in ~~issue;~~issue in any ten year period;

(b)	the maximum number of shares that have been or may be issued pursuant to options granted under the ~~1993 Scheme in~~Executive Schemes and any ~~period of ten years ending at the time of grant of an option, or which have been or may otherwise be issued~~ other ~~than in the pursuance of options granted during that period, under any employee~~employees’ share scheme adopted by the Company may not exceed 10% of the shares from time to time in ~~issue;~~issue in any ten year period; and

(c)	a maximum of ~~167,996,844~~171,376,839 shares (representing 10% of the issued share capital on ~~13 May 2000)~~8 July 2003) may be issued pursuant to incentive options granted under the US ~~Section~~Plan (the equivalent 10% limit for incentive stock options under the US section of the 1993 ~~Scheme.~~Scheme as at 8 June 2000 was 167,996,844 shares).

In any 10ten year period not more than 10% of the issued share capital of the Company from time to time may in aggregate be issued or issuable pursuant to ~~rights acquired~~options granted under the Sharesave Schemes or any other ~~employee~~employees’ share schemes adopted by the Company.

2000 LTIP limits
The 2000 LTIP operates in conjunction with an employee share ownership trust (“ESOT”) which may be funded by the Group to acquire shares in the Company for the purposes of meeting the Company’s obligation to provide shares on the exercise of a share award made under the 2000 LTIP. The number of shares which may be issued or issuable ~~under~~pursuant to the 2000 LTIP ~~or issued~~(including to the ~~ESOT,~~ESOT), when aggregated with any shares issued or issuable by the Company in the preceding ten years under any ~~employee~~employees’ share scheme, participation in which is at the discretion of the Board, is limited to 5% of the Company’s issued share capital from time to time. ~~Such~~The number of shares which may be issued or issuable ~~under~~pursuant to the 2000 LTIP ~~or issued~~(including to the ~~ESOT in the preceding ten years,~~ESOT), when aggregated with all shares issued or issuable by the Company in the preceding ten years under any other ~~employee~~employees’ share scheme, is limited to 10% of the Company’s issued share capital from time to time.

~~Signet Group plc 81~~

~~Notes to the accounts (continued)~~

Outstanding options
~~Certain~~The following table summarises certain information concerning options outstanding under the Company’s share option schemes as at ~~1 February 2003 is presented below:~~31 January 2004:

Outstanding options

Weighted

average

Number of

Range of

exercise

Range of

shares issuable

exercise prices

prices

expiration

Number of
shares issuable
upon exercise

Range of
exercise prices
per share

Weighted average
exercise prices
per share

Range of
Expiration
dates

upon exercise

per share

dates

1993 Scheme

35,538,389

33.75p-120.00p

61.85p

09/2007-4/2012

32,487,491

33.75p – 120.00p

66.59

9/2007 – 4/2013

$0.55-$1.72

09/2007-4/2012

$0.55 – $1.72

9/2007 – 4/2013

2003 Approved Plan

–

2003 International Plan

397,435

97.50p

97.50

7/2013

2003 US Plan

4,059,156

$1.59

7/2013

Sharesave Scheme

6,578,352

40.00p-67.00p

55.59p

6/2003-6/2006

6,107,145

42.00p – 90.00p

64.89

6/2004 – 6/2007

Employee Stock Savings Plan

1,751,880

$0.64-$1.10

$0.92

1/2003-1/2005

1,609,890

$0.77 – $1.60

$1.32

1/2003 – 1/2006

Irish Sharesave Scheme

47,999

40.00p-67.00p

57.29p

6/2003-6/2006

56,567

42.00p – 90.00p

67.08

6/2004 – 6/2007

Signet Group plc Annual Report & Accounts year ended 31 January 2004

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Notes to the accounts (continued)

Fixed share option schemes
The Company has three fixed option schemes, which are the Sharesave Schemes.

A summary of the status of the Company’s fixed share option schemes at 31 January 2004, 1 February 2003 and 2 February 2002 ~~and 27 January 2001~~ and changes during the years ended on those dates is presented below:

	1 February 2003			2 February 2002				27 January 2001			31 January 2004			1 February 2003			2 February 2002

Fixed options											Number of shares		Weighted average exercise price			Weighted			Weighted
																average
														Number		exercise	Number		exercise
	Number of shares		Weighted average exercise price		Number of shares		Weighted average exercise price	Number of shares		Weighted average exercise price				of shares		price	of shares		price

	million		pence		million		pence	million		pence	million		pence	million		pence		million		pence

Outstanding at beginning of period	8.0		44		12.5		32	12.5		28	8.4		56	8.0		44	12.5		32
Granted	3.8		67		3.5		51	2.6		43	2.0		89	3.8		67	3.5		51
Exercised	(2.6	)	36		(6.2	)	24	(1.3	)	26	(1.8	)	41	(2.6	)	36	(6.2	)	24
Lapsed	–		–		(0.3	)	97	–		–	–		–	–		–	(0.3	)	97
Forfeited	(0.8	)	42		(1.5	)	33	(1.3	)	30	(0.8	)	57	(0.8	)	42	(1.5	)	33

Outstanding at end of period	8.4		56		8.0		44	12.5		32	7.8		67	8.4		56	8.0		44

Options exercisable at end of period	0.4		40		0.6		21	0.5		70	0.2		42	0.4		40	0.6		21

The following table summarises the information about fixed stock options outstanding at ~~1 February 2003:~~31 January 2004:

Range of exercise prices					Weighted
					average	Weighted
					remaining	average
				Number	contractual	exercise
	Number of shares	Weighted average remaining contractual life	Weighted average exercise price	of shares	life	price

	million	years	pence	million	years	pence

1p to 45p	1.5	1.6	41	0.3	0.2	42
46p to 70p	6.9	2.6	59
46p to 90p				7.5	1.8	68

1p to 70p	8.4	2.4	56
1p to 90p				7.8	1.7	67

~~82 Signet Group plc~~

88	Signet Group plc Annual Report & Accounts year ended 31 January 2004

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Performance-based share option schemes

In addition to the 2000 LTIP, the Company has ~~one~~four performance-based share option ~~scheme – the 1993 Scheme.~~schemes (the Executive Schemes).

A summary of the status of the Company’s performance based ~~share~~shares options at 31 January 2004, 1 February 2003 and 2 February 2002 ~~and 27 January 2001~~ and changes during the years ended on those dates is presented below:

										31 January 2004			1 February 2003				2 February 2002

												Weighted				Weighted			Weighted
	1 February 2003			2 February 2002			27 January 2001					average				average
										Number		exercise		Number		exercise	Number		exercise
Performance-based options	Number of shares		Weighted average exercise price	Number of shares		Weighted average exercise price	Number of shares		Weighted average exercise price	of shares		price		of shares		price	of shares		price

	million		pence	million		pence	million		pence	million		pence		million		pence		million		pence

Outstanding at beginning of period	35.0		56	47.4		46	43.9		40	35.5		62		35.0		56	47.4		46
Granted	6.6		110	6.5		75	9.2		59	12.0		80		6.6		110	6.5		75
Exercised	(5.1	)	45	(17.5	)	39	(4.5	)	36	(10.0	)	44		(5.1	)	45	(17.5	)	39
Lapsed	–		–	–		–	–		–	–		–		–		–	–		–
Forfeited	(1.0	)	87	(1.4	)	54	(1.2	)	49	(0.6	)	65		(1.0	)	87	(1.4	)	54

Outstanding at end of period	35.5		62	35.0		56	47.4		46	36.9		69		35.5		62	35.0		56

Options exercisable at end of period	15.1		45	10.2		44	16.1		35	13.1		46		15.1		45	10.2		44

The following table summarises the information about performance-based share options outstanding at ~~1 February 2003:~~31 January 2004:

Range of exercise prices Number
of shares Weighted
average
remaining
contractual
life Weighted
average
exercise
price

million years pence

1p to 60p 23.3 6.2 47
61p to 120p 12.2 8.8 89

1p to 120p 35.5 7.1 62

~~Signet Group plc 83~~

		Weighted
		average	Weighted
		remaining	average
	Number	contractual	exercise
Range of exercise prices	of shares	life	price

	million	years	pence

1p to 60p	16.7	5.7	49
61p to 120p	20.2	8.8	86

1p to 120p	36.9	7.4	69

Signet Group plc Annual Report & Accounts year ended 31 January 2004

~~Notes to the accounts (continued)~~89

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Notes to the accounts (continued)

28. Principal subsidiary undertakings

		Share capital
	~~28 Principal subsidiary undertakings~~		~~Share capital~~ issued and
	fully paid
	£m

		£m

Retail jewellers
Ernest Jones Limited		70.8
H.Samuel Limited		23.3
Leslie Davis Limited		14.5
Signet Trading Limited		162.1
Sterling ~~Inc~~Inc. (US)		–
Sterling Jewelers ~~Inc~~Inc. (US)		–
Sterling Jewelers LLC (US)		–

Intermediate holding companies
Signet Holdings Limited		656.5
Signet US Holdings, ~~Inc~~Inc. (US)	0.5	~~0.5~~

Property holding company
Checkbury Limited⁽¹⁾		16.4

(1)	Holds only UK freehold and long leasehold retail and warehouse premises.

All these companies are wholly owned subsidiary undertakings and are included in the consolidation.
The information given in this note is only with respect to such undertakings as are described in section 231(5) of the Companies Act 1985. Unless otherwise stated, all companies are domiciled in the UK.

~~(1) Holds only Group UK freehold and long leasehold retail and warehouse premises.~~

~~All these companies are wholly owned subsidiary undertakings and are included in the consolidation.~~
~~The information given in this note is only with respect to such undertakings as are described in section 231(5) of the Companies Act 1985.~~
~~Unless otherwise stated, all companies are domiciled in the UK.~~

2929. Related party transactions
There are no related party transactions which require disclosure in these accounts.

~~84 Signet Group plc~~

90	Signet Group plc Annual Report & Accounts year ended 31 January 2004

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30 30. Company balance sheet

(a) Profit for the financial period

The profit attributable to shareholders dealt with in the accounts of the Company is £127.1 million (2003: £37.3 ~~million (2002:~~million; 2002: £29.4 ~~million; 2001: £34.7~~ million)~~.The~~. The profit is stated after foreign exchange ~~losses~~gains of ~~£1.7~~£3.9 million, net of tax, ~~(2002:~~(2003: £1.7 million losses; 2002: £1.1 million ~~gains; 2001: £3.0 million~~ gains) ~~attributable to intra-Group dollar balances.~~.

(b) Tangible fixed assets
Short
leasehold
land and
buildings Plant,
machinery
and vehicles Shopfront,
fixtures and
fittings Total

£m £m £m £m

Cost:
At 2 February 2002 4.5 14.4 78.3 97.2
Additions 0.3 2.4 13.2 15.9
Disposals (0.3 ) (0.1 ) (1.0 ) (1.4 )

At 1 February 2003 4.5 16.7 90.5 111.7

Depreciation and amortisation:
At 2 February 2002 1.8 7.5 40.1 49.4
Charged in period 0.2 2.8 9.0 12.0
Disposals (0.2 ) (0.1 ) (0.7 ) (1.0 )

At 1 February 2003 1.8 10.2 48.4 60.4

Net book value:

At 1 February 2003 2.7 6.5 42.1 51.3

At 2 February 2002 2.7 6.9 38.2 47.8

(c) Debtors 2003

2002

£m £m

Debtors recoverable within one year – amounts owed by subsidiary undertakings 231.7 198.3
Debtors recoverable after more than one year – deferred taxation 1.5 –

Total debtors 233.2 198.3

(d) Cash at bank and in hand
2003 2002

£m £m

Bank deposits 45.0 9.2

~~Signet Group plc 85~~(b) Tangible fixed assets

	Short
	leasehold		Plant,		Shopfront,
	land and		machinery		fixtures and
	buildings		and vehicles		fittings		Total
	£m		£m		£m		£m

Cost:
At 1 February 2003	4.5		16.7		90.5		111.7
Additions	0.3		3.0		14.4		17.7
Disposals	(0.5	)	(0.2	)	(2.0	)	(2.7	)

At 31 January 2004	4.3		19.5		102.9		126.7

Depreciation:
At 1 February 2003	1.8		10.2		48.4		60.4
Charged in period	0.3		3.1		11.7		15.1
Disposals	(0.5	)	(0.1	)	(2.1	)	(2.7	)

At 31 January 2004	1.6		13.2		58.0		72.8

Net book value:

At 31 January 2004	2.7		6.3		44.9		53.9

At 1 February 2003	2.7		6.5		42.1		51.3


(c) Debtors
	2004	2003
	£m	£m

Debtors recoverable within one year – amounts owed by subsidiary undertakings	372.6	231.7
Debtors recoverable within one year – corporation tax recoverable	0.5	–
Debtors recoverable after more than one year – deferred taxation	2.2	1.5

	375.3	233.2

(d) Cash at bank and in hand
	2004	2003
	£m	£m

Bank deposits	98.3	45.0

Signet Group plc Annual Report & Accounts year ended 31 January 2004

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(e) Creditors: amounts falling due within one year
2003 2002

£m £m

Bank overdrafts 11.6 2.3
Loan notes 9.1 10.6
Amounts owed to subsidiary undertakings 401.1 337.9
Corporation tax 3.1 3.1
Accruals and deferred income 0.4 1.1
Proposed dividend 30.8 25.6

456.1 380.6

Notes to the accounts (continued)

(e) Creditors: amounts falling due within one year
	2004	2003
	£m	£m

Bank overdrafts	1.6	11.6
Loan notes	8.2	9.1
Amounts owed to subsidiary undertakings	485.3	401.1
Corporation tax	3.1	3.1
Accruals and deferred income	1.3	0.4
Proposed dividend	37.3	30.8

	536.8	456.1

The number of days’ purchases outstanding at ~~1 February 2003~~31 January 2004 was nil.

(f) Creditors: amounts falling due after more than one year
2003 2002

£m £m

Loan notes falling due between one and two years 9.1 10.6
Loan notes falling due between two and five years 9.2 21.1

18.3 31.7

Details of loan notes are shown in note 16 on page 69.

(g) Reserves
Share
premium Special Profit and
account reserves loss account

£m £m £m

At 2 February 2002 48.3 565.1 29.7
Retained profit attributable to equity shareholders – – 1.1
Shares issued to QUEST/ESOT 1.9 – –
Exercise of share options 3.7 – –
Redemption of deferred share capital – – 0.1

At 1 February 2003 53.9 565.1 30.9

(f) Creditors: amounts falling due after more than one year
	2004	2003
	£m	£m

Loan notes falling due between one and two years	8.3	9.1
Loan notes falling due between two and five years	–	9.2

	8.3	18.3

Details of loan notes are shown in note 16 on page 73.

(g) Reserves
	Share
	premium	Special	Profit and
	account	reserves	loss account

At 1 February 2003	53.9	565.1	30.9
Retained profit attributable to equity shareholders	–	–	83.9
Shares issued to QUEST/ESOT	1.8	–	–
Exercise of share options	5.0	–	–

At 31 January 2004	60.7	565.1	114.8

92	Signet Group plc Annual Report & Accounts year ended 31 January 2004

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(h) Commitments

The Company does not occupy any property or hold any plant, machinery and vehicles under operating leases.

Capital commitments at ~~1 February 2003~~31 January 2004 for which no provision has been made in these ~~consolidated~~ accounts were as follows:

2003 2002

£m £m

Contracted 1.5 2.8

~~86 Signet Group plc~~

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	2004	2003
	£m	£m

Contracted	5.4	1.5

(i) Contingent liabilities

The Company is not party to any legal proceedings considered to be material to its profit, financial position or cash flow including any bankruptcy, receivership or similar proceedings involving the Company or any of its significant subsidiaries. No director, officer or affiliate of the Company or any associate of any such director, officer or affiliate has been a party adverse to the Company or any of its subsidiaries or has a material interest adverse to the Company or any of its subsidiaries.

The Company has assigned or sub-let UK property leases in the normal course of business. Should the assignees or sub-tenants fail to fulfil any obligations in respect of these leases, the Company may be liable for those ~~defaults.The~~defaults. The number of such claims arising to date has been small, and the liability, which is charged to the profit and loss account as it arises, has not been material.

(j) Investments


			Shares in
			subsidiary
			undertakings

		£m

Cost at 21 February ~~2002~~2003	803.4
~~809.1~~Disposals	(33.2	)
Translation difference	(3.4	~~(5.7)~~	)

Cost at ~~1 February 2003~~31 January 2004		~~803.4~~766.8

Principal subsidiaries are shown in note 28 on page 90.

	Signet Group plc Annual Report & Accounts year ended 31 January 2004
~~Principal subsidiaries are shown in note 28 on page 84.~~			93

~~Signet Group plc 87~~

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~~Summary of differences between UK and US generally~~

Summary of differences between UK and US generally
accepted accounting principles

The Group’s consolidated accounts are prepared in accordance with generally accepted accounting principles in the United Kingdom ~~(‘‘~~(“UK ~~GAAP’’~~GAAP”), which differ in certain respects from generally accepted accounting principles in the United States ~~(‘‘~~(“US ~~GAAP’’~~GAAP”). Differences which have a significant effect on the consolidated net profit and shareholders’ funds of the Group are set out below. While this is not a comprehensive summary of all differences between UK and US GAAP, other differences would not have a significant effect on the consolidated net profit or shareholders’ funds of the Group.

In accordance with best practice the differences have been shown as gross of tax with the related taxation shown separately.

Cost of sales
Under UK GAAP, selling costs have been included in cost of sales. Under US GAAP, gross profit is determined before deducting selling costs, as they are not included in cost of sales. Selling costs which have been included under UK GAAP for the ~~52 weeks ended 27 January 2001 were £323.9 million, for the~~ 53 weeks ended 2 February 2002 were £371.8 million, ~~and~~ for the 52 weeks ended 1 February 2003 were £361.5 million and for the 52 weeks ended 31 January 2004 were £366.5 million.

Goodwill

Under UK GAAP the Group has implemented FRS 10 in respect of acquisitions since 1 February 1998, amortising goodwill by equal annual instalments over its estimated useful life. ~~Pre~~Prior to the issue of FRS 10, in the Group’s consolidated accounts prepared under UK GAAP, goodwill arising on the acquisition of a subsidiary was written off against reserves in the consolidated balance sheet in the year in which the acquisition was made.

Under US GAAP, prior to the issue of Statement of Financial Accounting Standards (“~~SFAS”~~FAS”) 142, such goodwill was capitalised and amortised through the consolidated profit and loss account over its estimated useful life (not to exceed 40 years). ~~SFAS~~FAS 142, effective for the Group from 3 February 2002, requires that goodwill be tested annually for impairment in lieu of amortisation.

Additionally, UK GAAP requires that on subsequent disposal or closure of a previously acquired subsidiary, any goodwill previously taken directly to shareholders’ funds is then charged to the profit and loss account as part of profit or

loss on disposal or closure. Under US GAAP the appropriate balance to be written off on the disposal of the business is the remaining unamortised balance for goodwill.

For the purposes of calculating the effect of capitalising the goodwill on the consolidated balance sheet and its amortisation

through the consolidated profit and loss account, a life of 20 years has been assumed. However, the value of the goodwill is reviewed periodically by comparing the undiscounted cash flows from operating activities with the carrying value of goodwill. An additional charge to the consolidated profit and loss account is made where a permanent diminution in net book value is identified.

In the Group’s consolidated balance sheet, goodwill written off on the acquisition of Sterling Jewelers has been calculated based upon consideration valued at $17.00 per share of the US convertible preference shares issued to the shareholders of Sterling Jewelers. Under US GAAP, as the fair value of the consideration received by the shareholders is more clearly evident than the fair value of the consideration given, the former is used for determining fair ~~value.The~~value. The fair value of the US convertible preference shares for the purposes of US GAAP has been taken as the initial trading price of the convertible shares upon issuance of $11.125.

In the years ended 31 January 2004, 1 February 2003 and 2 February 2002, ~~and~~

~~27 January 2001,~~ the goodwill arising on the acquisition of Marks & Morgan has been capitalised in line with UK GAAP and is amortised through the consolidated profit and loss account over a life of 20 years.

At ~~1 February 2003~~31 January 2004 the Group had goodwill on its balance sheet of ~~£19.8~~£16.8 million under UK GAAP and ~~£345.1~~£299.2 million under US GAAP. Net income for the year ended ~~1 February 2003~~31 January 2004 includes a charge for goodwill amortisation of ~~£1.2~~£1.1 million under UK GAAP and £nil under US GAAP.

Sale and leaseback transactions

In the Group’s consolidated accounts prepared under UK GAAP, sale and leaseback transactions of freehold and long leasehold properties are accounted for by including in profit before taxation the full gain arising in the financial year in which the transaction took place. Under US GAAP the gain arising is credited to the consolidated profit and loss account in equal instalments over the life of the lease. Adjustments to the amortisation are reflected in periods when the leases are disposed of.

~~88 Signet Group plc~~

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Extended service plans

Under UK GAAP revenue from the sales of extended service plans is recognised at the date of sale and provision is made for the estimated costs of future claims. Under US GAAP, revenues from such sales are deferred and recognised in profit over the expected claim period.

94	Signet Group plc Annual Report & Accounts year ended 31 January 2004

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Pensions
Under UK GAAP, a prepayment representing the surplus of pension fund assets over projected accrued benefit obligations, has been recognised in shareholders’ funds. Under US GAAP the benefit of such prepayment is spread evenly over the remaining service lives of relevant employees.

Under UK and US GAAP, pension costs are determined on a systematic basis over the length of service of employees. US GAAP is more prescriptive in the application of the actuarial method and assumptions to be applied in the calculation of pension costs. As a result, the calculations under US GAAP are more liable to amendment from year to year, giving rise to adjustments by comparison with UK GAAP.

FRS 17 – ‘Retirement Benefits’~~, which has to be fully~~ was adopted by the Group ~~by 2005/06, will require pension~~for 2003/04. For defined benefit schemes such as the UK Group Scheme, the current service cost is charged to operating profit and the interest on scheme ~~surpluses~~liabilities and ~~deficits to be reflected throughout~~expected return on scheme assets are included within the ~~Group’s~~interest cost in the profit and loss ~~account, bringing UK GAAP broadly~~account. Movements in ~~line with US GAAP, although averaging~~a scheme’s funding position arising from changes in actuarial assumptions, in the expected scheme liabilities and between the actual and expected return on the scheme’s assets are recognised in the statement of ~~market values allowed under FAS 87~~total recognised gains and losses. The scheme surplus or deficit is ~~not allowed under FRS 17.~~carried on the Group’s consolidated balance sheet.

Under US GAAP, the ~~estimated Accumulated Benefit Obligation (ABO)~~pension cost for the period is determined based on an actuarial valuation at the start of the ~~UK defined benefit pension~~financial period. The current service cost, the interest cost and the expected return on assets (based on a smoothed market value of assets) are all included within operating profit. The cumulative amounts arising from changes in actuarial assumptions and those arising between the actual and expected return on scheme assets are amortised through operating profit over the average service lives of the employees. If the scheme is in surplus, consolidated net assets will include the difference between the cumulative profit and loss account charges and cumulative cash contributions made to the scheme. A liability will only be included in consolidated net assets when the accrued (rather than the projected) scheme liability is higher than the fair value of the assets.

Additional disclosures are now required under FAS 132 and included on pages 100 to 102.

Under US GAAP, the estimated accumulated benefit obligation of the UK defined benefit pension scheme was higher than the fair value of the assets at

1 February 2003. The difference between the two, plus the balance sheet prepayment as defined under US GAAP, is disclosed as an accrued benefit liability and written off to Other Comprehensive Income. An intangible asset is recognised on the balance sheet under US GAAP, reflecting the unrecognised prior service cost element of the prepaid pension cost. Pension accounting adjustments are made net of tax. The unfunded accumulated benefit obligation was primarily attributable to lower asset values arising from declining stock market prices and to a reduction in the assumed discount rate.

Stock compensation
Under UK GAAP, options granted to employees by the Group to subscribe in the Group’s shares where the exercise price of the option is linked to performance, do not result in any compensation costs being recorded by the Group if the

stated exercise price is equal to, or in excess of, the fair value of the underlying shares at the date of grant.

Under US GAAP a Group can account for employee stock options in accordance with Accounting Principles Bulletin 25 (‘(“APB ~~25’~~25”) ‘Accounting for Stock Issued to Employees’ or ~~SFAS~~FAS 123, ‘Accounting for Stock-Based Compensation’ as amended by ~~SFAS~~FAS 148 ~~‘ Accounting~~‘Accounting for Stock-Based Compensation – Transition and Disclosure’. Under APB 25 there are two types of stock option schemes, fixed plans or variable plans. Fixed plans have terms which fix and provide means for determining, at the date of grant or award, both the number of shares ofor stock that may be acquired by or awarded to an employee and the cash, if any, to be paid by the ~~employee.Variable~~employee. Variable plans have characteristics which prevent the determination of either the number of shares or stock that may be acquired by or awarded to an employee and the cash, if any, to be paid by the employee, or both. For fixed plans, compensation cost must be recognised at the grant date to the extent that the fair value is greater than the exercise price. Compensation expense, the amount by which the fair value exceeds the exercise price for variable plan awards, shall be measured using terms the employee is most likely to receive based upon the facts available each period over the vesting period.

The ~~Company’s~~Group’s share option plans are described in note 27 on page ~~80.The~~85. The Group recognises compensation cost for US GAAP purposes in accordance with the requirements of APB 25.

Revaluation of properties
Under UK GAAP properties may be restated on the basis of appraised values in consolidated accounts prepared in all other respects in accordance with the historical cost convention. Increases in value are credited directly to the revaluation reserve. When revalued properties are sold the gain or loss on sale is calculated based on revalued carrying amounts. Under US GAAP properties are only revalued if a permanent impairment is deemed to have occurred.

Upward revaluations are not permitted.

Depreciation of properties
Following the adoption of FRS 15 in the year ended 29 January 2000, under UK GAAP depreciation is charged on freehold buildings and long leasehold properties based on the revalued amounts. Under US GAAP depreciation is calculated based on the historic cost of the assets.

~~Signet Group plc 89~~

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~~Summary of differences between UK and US generally accepted accounting principles (continued)~~

Securitised customer receivables
Under UK GAAP securitised US customer receivables of £137.9 million (2003: £153.1 ~~million (2002:~~million; 2002: £176.8 ~~million; 2001: £105.3~~ million) are included within trade debtors and bank loans, as the related financing is of a revolving nature and does not represent an outright sale of such accounts receivable. Under US GAAP these amounts would qualify for off balance sheet treatment.

Signet Group plc Annual Report & Accounts year ended 31 January 2004

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Summary of differences between UK and US generally accepted
accounting principles (continued)

Deferred taxes
FRS 19 – ‘Deferred Tax’ requires that a deferred tax liability should be provided or an asset recognised in respect of all timing differences, regardless of whether it is considered that there is a reasonable probability that such timing differences will reverse. UK and US GAAP now both require full provision for deferred tax. There can still be valuation allowance differences.

Dividends
Under UK GAAP, dividends are provided for in the year in respect of which they are declared or proposed. Under US GAAP dividends are given effect only in the period in which they are formally declared.

Cash flows
Under UK GAAP the Group complies with ‘Financial Reporting Standard (Revised 1996) Cash Flow Statements’ (FRS 1 (Revised)). Its objective and principles are similar to those set out in ~~SFAS~~FAS 95 ‘Statement of Cash Flows’~~.The~~

. The principal difference between the standards is in respect of classification. Under FRS 1 (Revised), the Group presents its cash flows for (a) operating activities; (b) returns on investments and servicing of finance; (c) taxation; (d) capital expenditure and financial investment; (e) management of

liquid resources; and (f) financing activities. ~~SFAS~~FAS 95 requires only three categories of cash flow activity (a) operating; (b) investing; and (c) financing.

Cash flows arising from taxation and returns on investments and servicing of finance under FRS 1 (Revised) would be included as operating activities and cash flows arising from management of liquid resources would be included as cash and cash equivalents under ~~SFAS~~FAS 95. In addition, under FRS 1 (Revised) cash includes only cash in hand plus deposits repayable on demand, less overdrafts repayable on demand. Under ~~SFAS~~FAS 95 cash and cash equivalents include all highly liquid short term investments with original maturities of three months or less.

Earnings per share/ADS (“EPS”)

Following the adoption of FRS 14 in the UK and ~~SFAS~~FAS 128 in the US, the computation of the weighted average number of shares and adjusted weighted average number of shares outstanding is generally ~~consistent.The~~consistent. The calculation of fully diluted EPS for the year ended ~~1 February 2003~~31 January 2004 excludes 7,237,016 shares (2003: 6,293,903 ~~shares (2002:~~excluded; 2002: none ~~excluded; 2001: 9,257,223~~ excluded) under share options on the basis that their effect on basic EPS was anti-dilutive.

~~90 Signet Group plc~~

96	Signet Group plc Annual Report & Accounts year ended 31 January 2004

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Estimated effect on profit for the financial period of differences between UK and US GAAP

	52 weeks ended 31 January 2004		52 weeks ended 1 February 2003 as restated		53 weeks ended 2 February 2002 as restated

				⁽¹⁾		⁽¹⁾
	£m		£m		£m

Profit for the financial period in accordance with UK GAAP	137.2		129.1		120.4

US GAAP adjustments:
Goodwill amortisation and write-offs	1.1		1.2		(13.4	)
Sale and leaseback transactions	0.8		0.8		0.7
Extended service plan revenues	(3.5	)	(3.5	)	(2.0	)
Pensions	(1.9	)	(0.5	)	(1.3	)
Depreciation of properties	–		0.2		0.2
Stock compensation	0.7		1.3		(2.2	)

US GAAP adjustments before taxation	(2.8	)	(0.5	)	(18.0	)
Taxation	0.6		(0.3	)	(0.7	)

US GAAP adjustments after taxation	(2.2	)	(0.8	)	(18.7	)

Retained profit attributable to shareholders in accordance with US GAAP	135.0		128.3		101.7

Earnings per ADS in accordance with US GAAP – basic	235.7p		225.0p		180.5p
Earnings per ADS in accordance with US GAAP – diluted	234.0p		222.9p		179.2p
Weighted average number of ADSs outstanding (million) – basic	57.3		57.0		56.3
Weighted average number of ADSs outstanding (million) – diluted	57.9		57.6		56.8

(1)	Restated under UK GAAP for the ~~financial period~~implementation of ~~differences between UK and US GAAP~~FRS 17 – ‘Retirement Benefits’ (see note 17).

Signet Group plc Annual Report & Accounts year ended 31 January 2004

52 weeks
ended
1 February
2003
53 weeks
ended
2 February
2002 52 weeks
ended
27 January
2001

£m

£m

£m

Profit for the financial period in accordance with UK GAAP
128.9
119.7 110.7

US GAAP adjustments:
Goodwill amortisation and write-offs
1.2
(13.4 ) (12.0 )
Sale and leaseback transactions
0.8
0.7 0.6
Extended service plan revenues
(3.5
) (2.0 ) (5.0 )
Pensions
(0.3
) (0.3 ) 4.0
Depreciation of properties
0.2
0.2 0.1
Stock compensation
1.3
(2.2 ) (1.7 )

US GAAP adjustments before taxation
(0.3
) (17.0 ) (14.0 )
Taxation
(0.3
) (1.0 ) 0.4

US GAAP adjustments after taxation
(0.6
) (18.0 ) (13.6 )

Retained profit attributable to shareholders in accordance with US GAAP
128.3
101.7 97.1

Earnings per ADS in accordance with US GAAP – basic
225.0p
180.5p 173.7p
– diluted
222.9p
179.2p 172.2p
Weighted average number of ADSs outstanding (million) – basic
57.0
56.3 55.9
– diluted
57.6
56.8 56.4

~~Signet Group plc 91~~

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Summary of differences between UK and US generally accepted
accounting principles (continued)

Estimated effect on shareholders’ funds of differences between UK and US GAAP

	31 January 2004		1 February 2003 as restated		2 February 2002 as restated
	31 January 2004		1 February 2003 as restated	⁽¹⁾	2 February 2002 as restated	⁽¹⁾
	£m		£m		£m

Shareholders’ funds in accordance with UK GAAP	727.6		678.4		683.7

US GAAP adjustments:
Goodwill in respect of acquisitions (gross)	490.5		531.2		594.7
Adjustment to goodwill	(58.2	)	(64.5	)	(74.7	)
Accumulated goodwill amortisation	(149.9	)	(162.6	)	(181.8	)
Sale and leaseback transactions	(8.9	)	(9.7	)	(10.5	)
Extended service plan revenues	(18.2	)	(16.6	)	(15.3	)
Pensions	21.5		12.0		(2.2	)
Depreciation of properties	(2.5	)	(2.5	)	(2.7	)
Revaluation of properties	(3.1	)	(3.1	)	(3.0	)
Dividends	37.3		30.8		25.6

US GAAP adjustments before taxation	308.5		315.0		330.1
Taxation	(1.3	)	1.9		10.4

US GAAP adjustments after taxation	307.2		316.9		340.5

Shareholders’ funds in accordance with US GAAP	1,034.8		995.3		1,024.2

Shareholders’ funds in accordance with US GAAP at beginning of period	995.3		1,024.2		916.3
Net income in accordance with US GAAP	135.0		128.3		101.7
Issue of shares	4.9		3.8		7.8
(Decrease)/increase in additional paid in capital	(0.5	)	(0.8	)	3.9
Dividends paid	(36.7	)	(30.8	)	(27.7	)
Other comprehensive income	17.3		(15.7	)	–
Translation differences	(80.5	)	(113.7	)	22.2

Shareholders’ funds in accordance with US GAAP at end of period	1,034.8		995.3		1,024.2

(1)	Restated under UK GAAP for the implementation of FRS 17 – ‘Retirement Benefits’ (see note 17).

~~Estimated effect on shareholders' funds of differences between UK and US GAAP~~98

Signet Group plc Annual Report & Accounts year ended 31 January 2004

1 February
2003

2 February
2002

27 January
2001

£m

£m

£m

Shareholders’ funds in accordance with UK GAAP
696.5
679.7 565.4

US GAAP adjustments:
Goodwill in respect of acquisitions (gross)
531.2
594.7 581.7
Adjustment to goodwill
(64.5
) (74.7 ) (72.6 )
Accumulated goodwill amortisation
(162.6
) (181.8 ) (164.8 )
Sale and leaseback transactions
(9.7
) (10.5 ) (11.3 )
Extended service plan revenues
(16.6
) (15.3 ) (12.9 )
Pensions
(13.8
) 9.1 9.4
Depreciation of properties
(2.5
) (2.7 ) (2.9 )
Revaluation of properties
(3.1
) (3.0 ) (0.9 )
Dividends
30.8
25.6 22.8

US GAAP adjustments before taxation
289.2
341.4 348.5
Taxation
12.3
5.8 5.1

US GAAP adjustments after taxation
301.5
347.2 353.6

Shareholders’ funds in accordance with US GAAP
998.0
1,026.9 919.0

Shareholders’ funds in accordance with US GAAP at beginning of period
1,026.9
919.0 785.0
Net income in accordance with US GAAP
128.3
101.7 97.1
Issue of shares
3.8
7.8 2.0
(Decrease)/increase in additional paid in capital
(0.8
) 3.9 1.7
Dividends paid
(30.8
) (27.7 ) (24.8 )
Other comprehensive income
(15.7
) – –
Translation differences
(113.7
) 22.2 58.0

Shareholders’ funds in accordance with US GAAP at end of period
998.0
1,026.9 919.0

92 ~~Signet Group plc~~

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Employee share schemes

A description of the terms of the ~~Company’s~~Group’s employee share schemes is set out in note 27 on page ~~80.~~85.

For the year ended ~~1 February 2003,~~31 January 2004, in compliance with the disclosure requirements of ~~SFAS~~FAS 123, ~~‘Accounting~~’Accounting for Stock-Based Compensation’ as amended by ~~SFAS~~FAS 148, ~~‘Accounting~~’Accounting for Stock Based Compensation-Transition and Disclosure’, the fair value of options granted during the year has been computed. ~~SFAS~~FAS 123 as amended by ~~SFAS~~FAS 148 sets out an alternative methodology for recognising the compensation expense based on the fair value at grant date. Had the ~~Company~~Group adopted this methodology, earnings per ADS and earnings per share under US GAAP would have been decreased/increased to the pro forma amounts indicated below for the financial periods ended 31 January 2004, 1 February 2003 and 2 February ~~2002 and 27 January 2001:~~2002:

2003
2002 2001

£m
£m £m

Net income in accordance with US GAAP:
As reported
128.3
101.7 97.1
(Deduct)/add: Stock-based employee compensation (expense)/income included in reported net income
(1.3
) 2.2 1.8
Deduct: Stock-based employee compensation expense determined under fair value based method for all awards
(1.8
) (1.7 ) (2.2 )

Pro forma
125.2
102.2 96.7

2003
2002 2001

pence
pence pence

Earnings per ADS in accordance with US GAAP:
As reported – basic
225.0
180.5 173.7
– diluted
222.9
179.2 172.3
Pro forma – basic
219.6
181.4 173.0
– diluted
217.5
180.1 171.6

	2004		2003		2002
	£m		£m		£m

Net income in accordance with US GAAP:
As reported	135.0		128.3		101.7
(Deduct)/add: Stock-based employee compensation (expense)/income
included in reported net income	(0.7	)	(1.3	)	2.2
Deduct: Stock-based employee compensation expense determined under
fair value based method for all awards	(1.7	)	(1.8	)	(1.7	)

Pro forma	132.6		125.2		102.2


		2004	2003	2002
		pence	pence	pence

Earnings per ADS in accordance with US GAAP:
As reported	– basic	235.7	225.0	180.5
As reported	– diluted	234.0	222.9	179.2
Pro forma	– basic	231.5	219.6	181.4
Pro forma	– diluted	229.8	217.5	180.1

These pro forma amounts may not be representative of future results as they are subjective in nature and involve uncertainties and matters of judgement, and therefore cannot be determined precisely. Changes in assumptions could affect the estimates.

The fair value of options granted which, in determining the pro forma impact, is assumed to be amortised in the profit and loss account over the option vesting period, is estimated on the date of grant using the Black-Scholes option-pricing model using the following weighted average assumptions for the financial periods ended 31 January 2004, 1 February 2003 and 2 February ~~2002 and 27 January 2001.~~2002.

2003

2002

2001

2004

2003

2002

Weighted average price of options whose exercise price equals

the market price on the grant date

120p

75p

57p

88p

120p

75p

Weighted average assumptions:

Risk free interest rate

3.75%

4.0%

6.0%

4.0%

3.75%

4.0%

Expected life of options

4 years

4 years

4 years

4 years

Expected volatility

31%

32%

27%

19%

31%

32%

Dividend yield

2.8%

1.7%

2.4%

2.6%

2.8%

1.7%

Weighted average grant date fair value of option over one share

37p

22p

18p

20p

37p

22p

~~Signet Group plc 93~~

Signet Group plc Annual Report & Accounts year ended 31 January 2004

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Summary of differences between UK and US generally accepted ~~accounting principles (continued)~~

2003
2002 2001

Weighted average price of options whose exercise price is less than
the market price on the grant date
67p
51p 43p
Weighted average assumptions:
   Risk free interest rate
3.75%
4.0% 6.0%
   Expected life of options
3 years
3 years 3 years
   Expected volatility
31%
32% 27%
   Dividend yield
2.8%
1.7% 2.4%
Weighted average grant date fair value of option over one share
29p
21p 18p

accounting principles (continued)

	2004	2003	2002

Weighted average price of options whose exercise price is less than
the market price on the grant date	89p	67p	51p
Weighted average assumptions:
Risk free interest rate	4.0%	3.75%	4.0%
Expected life of options	3 years	3 years	3 years
Expected volatility	19%	31%	32%
Dividend yield	2.6%	2.8%	1.7%
Weighted average grant date fair value of option over one share	34p	29p	21p

Post employment benefits

The following table shows a reconciliation of the opening and closing balances of the projected benefit obligation under the ~~Signet~~ Group ~~Pension~~ Scheme:

	2003		2002
					2004		2003
	£m		£m		£m		£m

At beginning of period	83.2		81.5		88.9		83.2
Service cost	2.3		2.3		2.7		2.3
Interest cost	4.5		4.8		4.7		4.5
Members’ contributions	0.5		0.5		0.6		0.5
Actuarial loss/(gain)	2.9		(1.0	)
Actuarial gain					5.9		2.9
Benefits paid	(4.5	)	(4.9	)	(4.9	)	(4.5	)

At end of period	88.9		83.2		97.9		88.9

The following ~~table shows a reconciliation~~tables show the change in Group Scheme assets:

	2004		2003
	£m		£m

At beginning of period	82.2		108.1
Actual return on assets	20.6		(21.9	)
Employer contributions	1.1		–
Members’ contributions	0.6		0.5
Benefits paid	(4.9	)	(4.5	)

At end of period	99.6		82.2



	2004		2003
	£m		£m

Funded status	1.8		(6.7	)
Unrecognised prior service cost	6.5		7.1
Unrecognised net actuarial loss	16.9		27.5

Net amount recognised	25.2		27.9

100

Signet Group plc Annual Report & Accounts year ended 31 January 2004

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The amounts recognised in the statement of financial position consist of:

	2004	2003
	£m	£m

Prepaid pension cost	25.2	–
Accrued pension liability	–	(1.8	)
Intangible asset	–	7.1
Accumulated other comprehensive income	–	22.6

Net amount recognised	25.2	27.9

The accumulated benefit obligation of the ~~opening and closing balances of the fair value of the assets of the Signet~~ Group ~~Pension Scheme:~~Scheme at 31 January 2004 was £92.9 million (2003: £84.0 million).

2003
2002

£m
£m

At beginning of period
108.1
124.1
Actual return on assets
(21.9
) (11.6 )
Employer contributions
–
–
Members’ contributions
0.5
0.5
Benefits paid
(4.5
) (4.9 )

At end of period
82.2
108.1

The components of pension expense which arise under ~~SFAS~~FAS 87 for the Group’s pension plans are estimated to be as follows:

52 weeks
ended
1 February
2003

53 weeks
ended
2 February
2002

52 weeks
ended
27 January
2001

£m
£m £m

Service cost
2.3
2.3 2.1
Interest cost
4.5
4.8 4.5
Expected return on plan assets
(7.1
) (9.2 ) (7.3 )
Amortisation of transition assets
–
(1.8 ) (1.8 )
Amortisation of prior service cost
0.6
0.6 0.6
Recognised actuarial gain
–
(0.7 ) (1.1 )

Net periodic pension cost
0.3
(4.0 ) (3.0 )

	2004		2003		2002
	£m		£m		£m

Service cost	2.7		2.3		2.3
Interest cost	4.7		4.5		4.8
Expected return on Group Scheme assets	(5.5	)	(7.1	)	(9.2	)
Amortisation of transition assets	–		–		(1.8	)
Amortisation of prior service cost	0.6		0.6		0.6
Recognised actuarial gain	1.4		–		(0.7	)

Net periodic pension cost	3.9		0.3		(4.0	)


	2004		2003
	£m		£m

Increase in minimum liability included in other comprehensive income	(22.6	)	22.6
Actual return/(loss) on Group Scheme assets	20.6		(21.9	)

94 ~~Signet Group plc~~Assumptions used to determine benefit obligations (at the end of the year):

	2004	2003

Discount rate	5.6%	5.4%
Consumer price index	2.8%	2.4%
Salary increases	4.3%	3.9%

Assumptions used to determine net periodic pension costs (at the start of the year):

	2004	2003

Discount rate	5.4%	5.6%
Long-term rate of return on assets	6.9%	6.7%
Salary increases	3.9%	3.9%
Consumer Price Index	2.4%	2.4%


	Signet Group plc Annual Report & Accounts year ended 31 January 2004	*101*

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Summary of differences between UK and US generally accepted accounting principles (continued)

The ~~following table presents the estimated funded status~~composition of the ~~Group’s pension plans under SFAS 87:~~assets in the Group Scheme was as follows:

2003
2002

£m
   £m

Accumulated benefit obligation, comprising vested benefits
84.0
78.6

Projected benefit obligation
88.9
83.2
Plan assets at fair value, primarily UK equities
82.2
108.1

Plan assets in (deficit)/excess of projected benefit obligation
(6.7
) 24.9
Unrecognised net loss/(gain)
27.5
(1.6)
Unrecognised prior service loss
7.1
7.7

Prepaid pension cost
27.9
31.0

2003
2002

£m
   £m

Required minimum liability (unfunded accumulated benefits)
1.8
–
Adjustments required to reflect minimum liability
   • Additional liability
(29.7
) –
   • Intangible asset
7.1
–
   • Charge to equity
22.6
–
Balance of additional liability
(29.7
) –
Balance of intangible asset
7.1
–
Balance of equity account
22.6
–

	2004	2003

Equities	70%	80%
Bonds	26%	19%
Cash	4%	1%

Total	100%	100%

The ~~weighted average discount rate~~long term target allocation for the Group Scheme’s assets are equities 70%, bonds 30% and ~~the rate~~cash 0%.

The Trustees’ investment strategy is set out in their Statement of ~~increase~~Investment Principles. To guide them in ~~future compensation levels used in determining the actuarial present value~~their management of the ~~projected benefit obligation were 5.4% (2002: 5.6%)~~assets and ~~3.9% (2002: 3.9%) respectively. The expected~~control of the risks to which the Group Scheme is exposed, the Trustees have adopted the following objectives:

•	To make sure that obligations to the beneficiaries of the Group Scheme can be met;

•	To maintain funds above the level required to meet the Minimum Funding Requirement of the Pensions Act 1995; and

•	To acknowledge the Group’s interest on the size and incidence of its contribution payments.

To develop the long term rate of return on ~~plan~~ assets ~~was~~assumption, the Trustees considered the historical returns and the future expected returns for each asset class, as well as the target asset allocation of the pension portfolio. This resulted in the selection of the 6.9% ~~(2002: 6.7%).The excess~~per annum long term rate of ~~plan~~return on assets ~~over~~assumption from 2 February 2003, and 7.0% per annum from 1 February 2004.

The Group expects to make contributions of £3.7 million to the ~~projected benefit obligation at the transition date is recognised as a reduction of pension expense on a prospective basis over 13 years.~~ Group Scheme in 2004/05.

See note 22 for further information on the Group’s pension plans. For US GAAP purposes, the pension fund ~~liability~~asset included in the Group’s consolidated balance sheet would be classified as a non-current ~~liability.~~

asset.

New US accounting standards not yet adopted

SFAS 143, ‘Accounting for Asset Retirement Obligations’, will become effective for the Group from 2 February 2003. This Statement addresses the accounting and reporting obligations associated with the retirement of long-lived assets and the associated asset retirement costs. The impact of the Statement is considered unlikely to be significant.

SFAS 146, ‘Accounting for Costs Associated with Exit or Disposal Activities’, is effective for exit or disposal activities that are initiated after 31 December 2002. This Statement requires that a liability or cost associated with a disposal activity be recognised when the liability is incurred. EITF 94-3 previously required that a liability was recognised at the date of commitment to an exit plan. No such activities have been initiated by the Group since 31 December 2002.

In December 2002, the FASB issued SFAS 148, ‘Accounting for Stock-Based Compensation — Transition and Disclosure — an amendment of FASB Statement 123’.This provides alternative methods of transition for a voluntary change to the fair value method of accounting for stock-based employee compensation. In addition, this Statement amends the disclosure requirements of Statement 123 to require prominent disclosures in both annual and interim financial statements. Certain disclosure modifications are required for financial years ending after 15 December 2002 and are included on page 93. The voluntary change to the fair value method of accounting for stock-based employee compensation has not been adopted for 2002/03.

~~Signet Group plc 95~~

~~Summary of differences between UK and US generally accepted accounting principles (continued)~~

Interpretation 45, ‘Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness to Others’, elaborates on the disclosures to be made by a guarantor in its interim and annual consolidated financial statements about its obligations under guarantees issued.The Interpretation also clarifies that a guarantor is required to recognise, at inception of a guarantee, a liability for the fair value of the obligation undertaken.The initial recognition and measurement provisions are applicable to guarantees issued or modified after 31 December 2002 and are not expected to have a material effect on the Company’s consolidated financial statements. No additional disclosures are required as a result of the application of this Interpretation for 2002/03.

Interpretation 46 ‘Consolidation of Variable Interest Entities, an Interpretation of ARB 51’, issued in January 2003, addresses how a business enterprise should evaluate whether it has a controlling financial interest in an entity through means other than voting rights and accordingly should consolidate the ~~consolidation by business enterprises~~entity. FIN 46R, which was issued in December 2003, replaces FAS Interpretation 46. FIN 46R is to be applied for the first reporting period ending after 15 March 2004. The Group believes that the adoption of ~~variable~~FIN 46R will not have a significant impact on its consolidated accounts.

FAS 150, ‘Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity’, was issued in May 2003 and establishes standards for how certain financial instruments with characteristics of both liabilities and equity are classified. This is effective for the Group from 1 February 2004. Staff Position 150-3 has deferred the effective date of FAS 150 for certain mandatory controlling interests. The Group believes that the adoption of FAS 150 will not have a significant impact on its consolidated accounts.

102

Signet Group plc Annual Report & Accounts year ended 31 January 2004

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Social, ethical and environmental matters

Introduction
Signet recognises that many different stakeholders have an interest ~~entities as defined~~in its activities, and that the Group’s success is dependent on the strength and effectiveness of its relationship with those stakeholders. Signet’s approach to the governance of social, ethical and environmental (“SEE”) matters, its framework of principles and policies, its relationship with key stakeholder groups and major initiatives that have occurred in 2003/04 are set out below.

Governance of SEE matters
The Group has a formal SEE governance framework with SEE matters being included in the ~~Interpretation. This applies immediately~~schedule of matters reserved for the Board. The Group Chief Executive has been designated as the director responsible for SEE matters and reports to ~~variable interests~~the Board on SEE issues on a regular basis.

A SEE Committee, chaired by the Company Secretary, is in ~~variable interest entities created after 31 January 2003~~place consisting of a team of senior managers from the UK and US with key responsibilities for the implementation of the various aspects of the SEE principles and policies. The Committee members are drawn from the merchandising and buying, human resource, finance and internal control functions. It meets at least four times a year. The Company Secretary reports to ~~variable interests~~the Group Chief Executive regarding the Committee’s work in ~~variable interest entities obtained after 31 January 2003.The application of this Interpretation is not expected to have a material effect on~~implementing the ~~Company’s consolidated financial statements.~~

SEE programme that has been approved by the Board.

Matters for which the SEE Committee has responsibility include:

~~96 Signet Group plc~~

~~Social, ethical and environmental matters~~

~~Introduction~~ Signet is committed to managing the social, ethical and environmental (‘SEE’) risks and responsibilities facing the Group. This commitment stems from the understanding that Signet’s success is dependent on the strength and effectiveness of its relationships with various stakeholders: shareholders, customers, employees and suppliers. In recent years stakeholder expectations of public companies have increased. Monitoring, managing and responding as a business to these changing expectations, including with regard to SEE issues, is part of the normal responsibilities of corporate management. The Group regularly carries out SEE risk reviews and benchmarking exercises with the assistance of an external adviser. Such reviews include an assessment of Group policies, procedures and controls in respect of SEE matters. ~~Governance of SEE matters~~ On 21 October 2001 the Association of British Insurers published guidelines on Socially Responsible Investment. In line with that guidance the Board confirms that they have identified and assessed the Group’s SEE risks and that these are being managed. The Group has a formal SEE governance framework with SEE matters being included in the schedule of matters reserved for the Board. The Group Chief Executive has been designated as the director responsible for SEE matters. A SEE Committee is in place consisting of a team of senior managers from the UK and US with key responsibilities for the implementation of the various aspects of the SEE principles and policies. It meets at least four times a year. The procedures for SEE risk management are embedded within the management structure of the Group. ~~Matters for which the SEE Committee has responsibility include:~~
•	identification of significant risks to the Company’s short and long term value arising from SEE ~~matters,~~matters;

•	ensuring that the Board has adequate information to take account of material SEE ~~matters,~~matters;

•	development of relevant SEE principles and policies for consideration and approval by the ~~Board,~~Board;

•	implementation of the SEE programme agreed by the Board;

•	reviewing systems for managing significant SEE ~~risks,~~risks;

•	benchmarking the SEE performance and report of the Group against other general retail sector companies; and

•	preparation, for review and approval by the Board, of public SEE disclosures and reporting.

~~Significant~~The procedures for SEE risk ~~factors, including~~management are embedded within the management structure of the Group. SEE ~~matters relating to customer, employee and supply chain issues~~risks are discussed on pages 2829 to 3233 ‘Risk and other factors’.

Signet has important relationships with a wide range of different stakeholders, including customers, employees, suppliers and shareholders. The Group engages with these stakeholders in a number of ways, including consumer research, customer

service facilities, employee attitude surveys, supplier relationship management systems and investor relations programmes. In addition, Jewelers Of America engages with stakeholders in the industry, including non-governmental organisations, trade unions, producers and manufacturers, governments and consumer groups, on major issues. The Group Chief Executive is on the Board of Jewelers of America and chairs its Ethical Initiatives Committee.

Principles and policies framework
~~In 2001/02 the~~The Board ~~adopted~~has a ~~‘Statement~~Statement of SEE ~~Principles’ (‘Principles’~~Principles (“Principles”) outlining the Group’s policy to operate as a profitable and reputable speciality jewellery retailer, the Group’s responsibilities to various stakeholders and the SEE principles by which it ~~would operate. While this was the first time these responsibilities and principles had been formally adopted, Signet had adhered to them for some time.The~~operates. The Principles cover the following areas:

•	accountability to stakeholders

•	business integrity

•	human rights

•	labour standards

•	health and safety

•	the environment

•	community

~~In 2001/02 the~~The Group also ~~adopted~~has a Supplier Code of Conduct (‘(“Supplier ~~Code’~~Code”) and policies on business integrity, health and safety, the environment and labour standards. The Principles, Supplier Code and other policies are now incorporated, as appropriate, into the Group’s staff induction process ~~training~~ and operational procedures ~~as appropriate~~ within the ~~business and~~business. More detailed information is available on the Group’s web site (www.signetgroupplc.com).

Signet’s principles and policies are intended to provide a framework with which the divisional policies and procedures ~~conform.They~~conform. They do not replace existing detailed divisional policies and procedures.

Developments in 2003/04
During ~~2002/03~~ the year the Group:

•	implemented the revised requirements of the Kimberley Process which was designed to eliminate conflict diamonds from the legitimate diamond trade;

•	improved its environmental management systems; and

•	reviewed its communications with stakeholders.

The Group ~~reviewed its~~has also worked closely with Jewelers of America to establish industry working groups considering environmental ~~impact~~and supply chain issues.


	Signet Group plc Annual Report & Accounts year ended 31 January 2004	*103*

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Social, ethical and environmental ~~management system, formally adopted an environmental policy and set itself qualitative environmental targets. The Group also reviewed its community involvement.~~matters (continued)

Our stakeholders
Signet’s commitments to various stakeholders are articulated in the ~~Principles.These~~Principles. These are summarised below:

Shareholders
Signet’s aim is to deliver an acceptable growth in value to shareholders which is sustainable, thereby protecting shareholders’ short and longer term interests. The Group’s responsibilities to shareholders are set out in more detail in the Corporate governance statement on page ~~36.~~37. The Group is committed to maintaining open dialogue with its shareholders on SEE and other matters. Signet has been a member of FTSE4Good UK Index since its launch and endeavours to meet the changing criteria of the Index.

~~Signet Group plc 97~~

~~Social, ethical and environmental matters (continued)~~

Customers

Signet’s mission is to meet, and where possible exceed, customer expectations through a high standard of customer service, high store standards, and real choice and value. In doing so the Group endeavours to maintain product integrity by ensuring the quality of Signet’s products and by offering merchandise that is responsibly ~~sourced.~~sourced, and is in compliance with the Kimberley Process.

The Group’s policy is that all customers should be treated with respect and ~~warmth.The Group has customer service departments, complaint resolution processes, tracking methods and customer comment cards in the UK and the US.~~warmth. Sales training programmes include modules on treating all customers with respect. The Group has customer service departments, complaint resolution processes, mystery shopper programmes and conducts market research to better understand customer requirements.

Employees
Employees are key to Signet’s ability to achieve its objectives and ~~mission.Therefore~~mission. Therefore teamwork, integrity, communication, and fair treatment of employees all play an important part in the way the Group operates. Furthermore, Signet’s ability to operate in accordance with its Principles is dependent on its employees’ understanding of them and the way in which the Principles impact on their respective roles and responsibilities.

Signet considers its relationship with its employees to be excellent and values honest, open and constructive “two way” communication throughout the ~~organisation.This~~organisation. This is achieved through store, area and regional management ~~meetings.These~~ meetings together with staff opinion surveys and feedback reports and meetings. These procedures facilitate consultation during which the views of employees can be expressed and taken into account in decisions likely to affect their interests. Staff are kept informed of the Group’s performance and objectives through management contact supplemented by staff publications in both the UK and ~~US.The~~US. The involvement of employees in the Group’s performance is encouraged through participation in performance-related

incentive payment schemes which cover all Group employees subject to minimum employment ~~requirements.The~~requirements. The Group does not restrict or discriminate against employees who wish to be covered by collective bargaining agreements.

The Group’s policy is not to tolerate any form of unlawful discrimination on any grounds or at any level. In respect of people with disabilities, full and fair consideration is given to employment, opportunities for training, career development and promotion according to their skills and ~~capacity.The~~capacity. The services of any existing employees who become disabled are, where possible, retained and appropriate training is arranged for them wherever possible.

The Group assigns responsibility for human resource matters, including health and safety, to the divisional executive management committees. Both the UK and US operations have established systems which include the provision of training and development opportunities at all levels of the organisation. See pages 11 and 17 for further details.

Suppliers

The Group recognises that stakeholders expect companies to ~~take responsibility for, and~~exert influence, where ~~possible exert influence~~they can, over suppliers to ensure that SEE standards are upheld throughout the supply ~~chain.The~~chain. The Supplier Code outlines Signet’s commitment to its suppliers, and the expectations it has of ~~them.The~~them. The Supplier Code applies to suppliers and agents with whom Signet deals ~~directly.Those~~directly and regularly discusses its implementation with them. Those suppliers and agents are encouraged to ensure that this Supplier Code is communicated throughout the supply chain.

Most of the raw and processed materials for the merchandise sold by Signet are traded on commodity exchanges or through multiple brokers and traders making the original source difficult to trace. Signet believes that SEE risks at the mining, trading and secondary processing phases of the supply chain are more effectively managed through collaboration with the industry. Signet therefore actively participates in Jewelers of America (the US speciality jewellery retail trade association) in considering what action Jewelers of America can take on behalf of its members to set SEE standards and influence matters throughout the supply chain. In 2002 Jewelers of America adopted a Statement of Principles relating to SEE matters and adopted a programme to communicate those principles to its members. Jewelers of America has developed a Supplier Code for the industry that was launched in the first quarter of 2004. The industry will develop an implementation strategy during 2004 through further engagement with stakeholders and analysis of the issues in key sourcing countries.

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Signet is also working, where appropriate, with other trade bodies such as the Jewelers Vigilance ~~Committee.~~Committee to be better able to respond to SEE issues at an industry level.

One of the specific issues facing the Group and the diamond sector is ~~“conflict diamonds”,~~conflict diamonds, which are diamonds being sold by rebel movements to fund military campaigns. The Group is a non-voting member of the World Diamond Council which, together with Jewelers of America, has worked with the United Nations, government bodies, commercial interests and civil society to introduce a workable system for the certification of the source of uncut ~~diamonds.This~~diamonds. This system, known as the Kimberley Process, and Kimberley Process Certification System (“KPCS”) was formally adopted in November 2002 and ~~was due to come~~came into operation ~~on 1 January~~during 2003. ~~The European Union regulations enforcing~~Details regarding the Kimberley Process ~~came fully into force on 13 February 2003.~~are available at www.worlddiamondcouncil.com.

~~98 Signet Group plc~~

Following the adoption of the ~~Kimberley Process~~KPCS process Signet ~~has~~ sent a letter to all its trade diamond and diamond jewellery suppliers. The text, based on the Jewelers of America guidance, requires them to supply the Group with merchandise that complies with the ~~Kimberley Process.~~KPCS. Signet has amended its systems, procedures and documentation to take account of the ~~Kimberley Process.~~KPCS so that only diamonds that are warranted to comply with the KPCS are accepted from trade suppliers. The Group ~~has~~ also trained its buying staff with regard to the KPCS requirements and briefed its sales associates on its operation. During the ~~operation~~year an internal audit of these procedures was carried out, confirming the Group’s compliance with Jewelers of America’s recommendations even though Signet is not directly governed by the KPCS.

Since the formal adoption of the ~~Kimberley Process.~~KPCS in November 2002, two subsequent KPCS plenary meetings have taken a series of decisions to assist in its implementation. These include procedures:

•	Establishing formal rules of procedure for KPCS operation, enabling formal confirmation of participant status of the initial group of participant countries;

•	Enabling a system of peer review of adherence to requisite provisions of national legislation and import/export controls;

•	Enabling collection of statistics from all participant countries in accordance with standard formats and procedures;

•	Enabling annual peer review of comprehensive reporting of information and statistical data that must be submitted by all participant countries;

•	Enabling the dispatch of review visits to any participant country on a voluntary basis;

•	Enabling the dispatch of special review missions where there are credible indications of significant non-compliance with the KPCS;

•	Dispatching the first special review mission to the Central African Republic in order to assess the effectiveness of the control measures; and

•	Confirming review of the entire KPCS is to take place not later than July 2006.

In respect of supplier payment, Group policy is that the operating businesses are responsible for agreeing the terms and conditions under which business transactions with their suppliers are conducted, rather than following any particular code or standard on payment practice (see note 30(e) on page 8692 regarding the number of days purchases outstanding). Accordingly suppliers are aware of the terms of payment and it is Group policy to ensure that payments to suppliers are made in accordance with these agreed terms.

Environment

~~The full text of the environmental policy adopted during 2002/03 is available on the Group’s web site (~~~~www.signetgroupplc.com~~~~).The policy has been communicated to employees and it satisfies the FTSE4Good requirements implemented in March 2003.~~

Whilst the direct environmental impact of its operations is judged to be relatively low compared to many business sectors and to other retailers, Signet recognises that there may be opportunities to improve its performance.

The environmental impact review confirmed that:

(a)	Jewellery has a very long life and ~~very high recyclability.~~is highly recyclable. Recycling takes place in respect of trade-ins, obsolete inventory, used watch batteries and certain packaging.

(b)	Jewellery and watches have an extremely high value to weight ratio and value to volume ratio making transportation through the supply chain relatively low ~~impact.The~~impact. The Group makes use of third party distributors and reusable containers for merchandise distribution.

(c)	The Group’s ratio of sales to square feet of occupied space in stores or warehouse accommodation is high compared to other retailers and is above the jewellery sector average, and therefore given the Group’s size it has less of a physical impact.


(d)	Signet’s supply chain originates with the producers of the raw materials with whom the Group does not have a direct relationship but it is recognised that the extraction of minerals has an environmental impact that requires careful management by mining companies.

During 2003/04 Signet has developed and tested data collection systems for its energy usage, greenhouse gas emissions and water usage in both the US and the UK. This data has then been

Signet Group plc Annual Report & Accounts year ended 31 January 2004

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Social, ethical and environmental matters (continued)

benchmarked against other general retailers. As part of the process to strengthen Signet’s environmental management systems the Board approved following environmental targets for 2004/05:

1.	Complete baseline data collection and validation for energy usage, greenhouse gas emissions, water usage and waste materials.

2.	Benchmark results against published data from UK competitors.

3.	Where possible develop a data collection system for energy usage that includes third party distribution services.

4.	Identify if there is any variation in energy usage between store types.

Further, Signet will continue to work with Jewelers of America who are currently exploring ways in which the jewellery industry can use its influence to improve environmental performance related to mining of minerals, in particular of gold.

Community

Signet’s prime ~~contribution~~benefit to society is through the contribution it makes to the success and efficiency of the economies in which it operates, through the employment it generates both within the business and throughout its supply chain, the taxes it pays and the value it creates for shareholders.

The Group is committed to the support of charitable organisations. Signet believes it is best to give support to a small number of specific charities rather than fragment its charitable giving. In the

US support is primarily given to The United Way, St. Jude Children’s Research Hospital and The Jeweler’s Charity Fund. In the UK the Group primarily supports the Princess Royal Trust for Carers. During the period the Group made provision for total charitable givings of ~~£1,032,000 (2001/02: £912,000).This~~£1,305,000 (2002/03: £1,032,000). This included direct charitable contributions of ~~£243,000 (2001/02: £319,000)~~£338,000 (2002/03: £243,000); of which ~~£152,000 (2001/02: £139,000)~~£177,000 (2002/03: £152,000) was in the UK and ~~£91,000 (2001/02: £180,000)~~£161,000 (2002/03: £91,000) was in the US and marketing initiatives on both sides of the Atlantic which resulted in additional charitable contributions of ~~£789,000 (2001/02: £593,000)~~£967,000 (2002/03: £789,000). Support is also given to the management of Carer Centres operated by the Princess Royal Trust for ~~Carers and~~Carers. Assistance is also given to organisations that ~~aim to assist~~help the disadvantaged into employment in the vicinity of the Group’s US administrative and distribution centre in Northeast Ohio, such as United ~~Disability~~Disabilities Services, ~~Senior Workers~~Mature Services and the Urban League.

No political donations were made in the US or the UK by the Group in the period ~~(2001/02:~~(2002/03: £nil).

Human rights

Signet supports the Fundamental Conventions of the International Labour Organisation and the UN Declaration of Human ~~Rights.The~~Rights. The Group encourages the support and respect for the protection of human rights within its sphere of ~~influence.The~~influence. The Supplier Code sets out the Group’s expectation that suppliers should respect the Fundamental Conventions of the International Labour Organisation and the UN Declaration of Human Rights. Signet is working at a senior executive level through Jewelers of America to address human rights in the jewellery supply chain aton an ~~industry level.~~industry-wide basis.

~~Signet Group plc 99~~

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Signet Group plc Annual Report & Accounts year ended 31 January 2004

~~Shareholder information~~

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Shareholder information

History
Signet Group plc, an English public limited company, has operations in the US and the UK. The Company was incorporated in England and Wales on 27 January 1950 under the name Ratners (Jewellers) Limited. The name of the Company was changed on 10 December 1981 to Ratners (Jewellers) Public Limited Company, on 9 February 1987 to Ratners Group plc and

on 10 September 1993 to

Signet Group plc. A summary of the Company’s Memorandum and Articles of Association, which were adopted on 13 June 2002, was filed with the SEC on a form 6-K on 30 July 2002. The Company’s registered number is 477692. The Company’s registered office is Zenith House, The Hyde, London NW9 6EW.

Significant events that have occurred in the last five years are detailed below:

~~11 Jun 1998~~	~~The Signet Group plc Sharesave Scheme and US Stock Savings Plan were approved by shareholders~~

~~22 Jul 1998~~	Announcement of new unsecured financing which replaced the Group’s existing three year secured banking agreement of $360 million which was due to expire in February 2000. The new arrangements comprised a five year $250 million multi-currency revolving credit facility with a syndicate of banks led by Barclays Capital, HSBC Investment Bank PLC and The Royal Bank of Scotland PLC, and a 7.25% seven year $60 million note issue placed privately with European institutional investors through De Nationale Investeringsbank NV.

30 Mar 1999	Announcement of resumption of dividends with a final dividend of 1.0p being recommended in respect of the year 1998/99 for payment on 1 July 1999.

15 Apr 1999	Laurence Cooklin resigned from the Board and as Chief Executive Officer of the UK jewellery division.

1 Oct 1999	Ian Dahl was appointed to the Board and as Chief Executive Officer of the UK jewellery division.

28 Mar 2000	Terry Burman was appointed Group Chief Executive. He retained his existing role of Chief Executive Officer of the Group’s US division. James McAdam was asked by the Board to remain as Executive Chairman.


31 Jul 2000	Acquisition of Marks & Morgan completed.

	Marks & Morgan, a privately owned company, was the ninth largest speciality retail jeweller in the US. The business consisted of 137 stores predominantly positioned in prime mall locations in the southeast region of the US.

	Signet paid $161.3 million (£107.5 million) in cash to acquire all the outstanding share capital and to repay outstanding debt.

	The acquisition substantially increased Signet’s presence in a key geographic area of the US where it had been under-represented. Approximately 7281 stores have been converted to either the Kay Jewelers ~~brand.~~brand or regional brands. The remaining stores continue to trade as Marks & Morgan and have been integrated into Signet’s division of regional mall stores.

31 Mar 2001	James McAdam continued as Chairman but ceased to be a full-time executive.

30 Aug 2001	The Group entered into a $410 million unsecured multi-currency five year revolving credit facility ~~agreement.This~~agreement. This replaced the $250 million and the $100 million facilities that were due to expire in July 2003. The terms of this agreement were broadly similar to those of the facilities being replaced (see note 16 on page ~~69)~~73).

~~100 Signet Group plc~~


2 Nov 2001	The Group put in place a five year facility of $251 million secured on its US credit card receivables at a fixed rate of 5.42%~~.The~~. The terms were similar to the previous facility of $191.5 million which amortised during the year and had a fixed rate of 7.26% (see note 16 on page ~~69)~~74).

13 Jun 2002	David Wellings retired as a non-executive director.

1 Aug 2002	Russell Walls was appointed to the Board as a non-executive director.

30 Sep 2002	Ian Dahl resigned from the Board and as Chief Executive Officer of the UK jewellery division.

9 Jan 2003	Rob Anderson was appointed as Chief Executive Officer of the UK jewellery division.

1 Sept 2003	Dale Hilpert was appointed to the Board as a non-executive director.

8 Jan 2004	Lee Abraham retired from the Board as a non-executive director.


	Signet Group plc Annual Report & Accounts year ended 31 January 2004	*107*

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Shareholder information (continued)

Nature of trading market
The shares of the Company are traded on the London Stock Exchange (symbol: SIG) and the American Depositary Shares ~~(‘ADSs’~~(“ADSs”) representing the shares quoted on the Nasdaq National Market (symbol: SIGY). The ADSs are evidenced by American Depositary Receipts ~~(‘ADRs’~~(“ADRs”) issued pursuant to an Amended and Restated Deposit Agreement, dated 4 September 1997, and made between the Company, The Bank of New York, as depositary (the ~~‘Depositary’~~“Depositary”) and the holders from time to time of the ADRs. Each ADS represents 30 shares. Prior to 4 September 1997 the ratio of shares per ADS had been three to one.

The table below sets out, for the calendar years ~~andquarters~~and quarters indicated, (i) the reported high and low ~~middlemarket~~ middle market

quotations for the shares of the Company based ~~onthe~~on the Daily Official List of the London Stock Exchange and (ii) the reported high and low closing sales prices of the ~~ADSson~~ADSs on the Nasdaq National Market as reported by Bloomberg.

At 2624 March ~~2003, 68,144~~2004, 32,172 shares and ~~1,755,993~~1,777,322 ADSs (representing ~~52,679,790~~53,319,660 shares) were held of record in the US. These shares and ADSs were held by 2631 record ~~holdersand 578~~holders and 675 record holders, respectively and ~~collectivelyrepresented~~collectively represented approximately 3.1% of the total numbers ~~ofshares~~of shares outstanding. Since certain of the shares and ADSs are

London Stock Exchange
pence per share Nasdaq
US dollars per ADS

High Low High Low

Calendar 1998 51¹/₄ 24¹/₄ 24⁷/₈ 12³/₈

Calendar 1999 70¹/₄ 38³/₄ 31³/₄ 15⁵/₈

Calendar 2000 60³/₄ 43 34¹/₈ 21

Calendar 2001
First quarter 79 51 34¹/₂ 22
Second quarter 88¹/₂ 64¹/₂ 38 27¹/₄
Third quarter 87 53 36³/₄ 23¹/₂
Fourth quarter 95¹/₂ 56 40¹/₂ 24³/₄

Calendar 2002
First quarter 120 97 51 41¹/₈
Second quarter 132¹/₄ 94³/₄ 57³/₈ 44¹/₈
Third quarter – July 99 77 46 35³/₄
   Aug 90 77 42 35
   Sept 92¹/₂ 78³/₄ 43¹/₄ 37³/₄
Fourth quarter – Oct 94³/₄ 74³/₄ 44 36
   Nov 87¹/₂ 75¹/₂ 42 36³/₄
   Dec 90¹/₂ 65 42³/₈ 30⁷/₈

Calendar 2003
First quarter – Jan 82¹/₂ 66¹/₂ 39¹/₄ 32¹/₈
   Feb 76³/₄ 70¹/₂ 36¹/₄ 34¹/₈
   Mar (up to 26 March) 75¹/₂ 66 36¹/₈ 32

~~Signet Group plc 101~~

~~Shareholder information (continued)~~

held by brokers or other nominees, the number of record holders in the US is not representative of the number of beneficial holders or of where the beneficial holders are resident.

		London Stock Exchange pence per share				Nasdaq US dollars per ADS

		High		Low		High		Low

Calendar 1999		70	¹/₄	38	³/₄	31	³/₄	15	⁵/₈

Calendar 2000		60	³/₄	43		34	¹/₈	21

Calendar 2001		95	¹/₂	51		40	¹/₂	22

Calendar 2002
First quarter		120		97		51		41	¹/₈
Second quarter		132	¹/₄	94	³/₄	57	³/₈	44	¹/₈
Third quarter		99		77		46		35
Fourth quarter		94	³/₄	65		44		30	⁷/₈

Calendar 2003
First quarter		82	¹/₂	66		39	¹/₄	32
Second quarter		93		73	¹/₂	48	¹/₈	35
Third quarter –	July	102		89	³/₄	50	¹/₂	44	¹/₈
	Aug	110	³/₄	97		53	¹/₈	47	¹/₄
	Sept	113	³/₄	105	¹/₂	57		52	¹/₄
Fourth quarter –	Oct	114	¹/₂	103	¹/₄	59	³/₈	52	⁵/₈
	Nov	109	³/₄	100	³/₄	56		52	¹/₂
	Dec	104	³/₄	96		56		51	¹/₂

Calendar 2004
First quarter –	Jan	104	¹/₄	93	³/₄	57	¹/₂	52
	Feb	103		94	¹/₂	59		53
	Mar (up to 24 March)	109	³/₄	103	¹/₂	61	¹/₈	57


*108*	Signet Group plc Annual Report & Accounts year ended 31 January 2004

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Dividends
Under English law, dividends can only be paid out of profits available for distribution (generally defined as accumulated realised profits less accumulated realised losses less net unrealised losses) and not out of share capital or share premiums (generally equivalent in US terms to paid-in surplus). At ~~1 February 2003,~~31 January 2004, after taking into account the subsequently recommended final dividend of ~~1.80p~~2.16p per share, the holding company had a distributable reserves balance of ~~£30.9~~£114.8 million (2(1 February ~~2002: £29.7~~2003: £30.9 million).

In order to make further distributions in excess of this figure, the holding company would first need to receive dividends from its subsidiaries. In addition to restrictions imposed at the time of the 1997 capital reduction on the distribution of dividends received from subsidiaries, the payments of dividends from other tax jurisdictions, such as the US, may not be tax efficient. Furthermore, there may be other reasons why dividends may not be paid by subsidiaries to the holding company.

If declared by the Board (and, in the case of a final dividend, if approved by shareholders in general meeting) dividends are paid to holders of shares as at record dates that are decided by the Board.

Substantial shareholdings and control of the Company
So far as the Company is aware, it is neither directly nor indirectly owned by or controlled by one or more corporations or by any government.

As at 2624 March ~~2003~~2004 the interests in the issued shares set out in the table ~~below~~on page 110 had been notified to the Company in accordance with sections 198 to 208 of the Companies

Act 1985 (including interests represented by the ADSs). Shareholders are obliged to notify the Company of their interests in such shares if they hold 3.0% or more beneficially or 10.0% or more in the case of certain shareholders, such as investment managers.

The Company’s major shareholders as listed in the table ~~below~~on page 110 do not have different voting rights per share than other holders of the Company’s shares.

The following shareholders had significant changes in their percentage ownership of the Company’s issued share capital since 2927 January ~~2000.This~~2001. This is based on disclosure made in the accounts for each of the three years since

29 27 January ~~2000,~~2001 and ~~notifications~~notification received by the Company.

•	Deutsche Bank AG had a non-beneficial holding of ~~11.8%~~10.5% at 2927 January ~~2000~~2001 and fell below 10.0% ~~on1~~on 1 March 2001.

•	AMVESCAP PLC had a non-beneficial holding of 10.0% at29 January 2001, 10.0% at 28 March 2001, 11.0% on10 April 2002, 12.0% on 26 March 2003, and fell below 10.0% on 14 August 2003. These figures include the interest of its subsidiary, INVESCO Perpetual High Income Fund, had a non-beneficial holding of 6.0% on 21 September 2001, 6.0% on 10 April 2002, 5.8% on 26 March 2003 and fell below 3.0% on 14 August 2003.

•	The Capital Group Companies, Inc. had a beneficial holding of 10.1% at 28 March 2001, 13.3% on 10 April 2002, 14.0% on 26 March 2003 and as stated in the table on page 110, 12.2% on 24 March 2004.

•	FMR Corp. and Fidelity International Limited had a non-beneficial holding of 3.3% at 28 March 2001, and fell below 3.0% on 24 August 2001. On 17 March 2004, as stated in the table on page 110, they had a non-beneficial holding of 3.3%.

•	Standard Life Group had a beneficial holding of 4.1% ~~at 28 March 2000, 4.1% at 28~~at28 March 2001, 3.7% ~~on10~~on 10 April 2002, and fell below 3.0% on 8 November 2002.

•	~~The Capital Group Companies, Inc.~~Government of Singapore Investment Corporation Pte Ltd had a beneficial holding of ~~4.0% at 28 March 2000, 10.1% at 28 March 2001, 13.3% on 10 April 2002 and, as stated in the table below, 14.0%~~4.1% on 26 March 2003 and fell below 3.0% on 29 May 2003.

•	~~FMR Corp~~Legal & General Investment Management Limited had a beneficial holding of ~~3.3% at14 November 2000, 3.3% at 28~~3.1% on 26 March ~~2001~~2003 and, ~~fell below 3.0%~~as stated in the table on page 110, 3.1% on 24 ~~August 2001.~~March 2004.

•	~~AMVESCAP PLC~~Harris Associates L.P. had a ~~non-beneficial~~beneficial holding of ~~10.0% at 29 January 2001, 10.0% at 28 March 2001, 11.0% on 10~~3.0% on14 April ~~2002~~2003 and, as stated in the table ~~below, 12.0%~~ on 26page 110, 4.0% on 24 March ~~2003.~~

Substantial shareholdings
Number of
shares Percentage
of issued
shares

The Capital Group Companies, Inc⁽¹⁾ 240,183,795 14.0
AMVESCAP PLC⁽²⁾ 205,621,415 12.0
Government of Singapore Investment Corporation Pte Ltd 69,677,460 4.1
Legal & General Investment Management Limited 53,017,838 3.1

~~(1)~~	~~Includes interest of Capital International Limited in 207,918,259 of such shares, notified on their behalf by The Capital Group Companies, Inc.~~
~~(2)~~	~~Includes interest of INVESCO Perpetual High Income Fund in 99,375,354 of such shares, notified on their behalf by AMVESCAP PLC.~~2004.

~~102 Signet Group plc~~

At 2624 March ~~2003,~~2004, the total amount of the Company’s voting securities owned by directors of the Company as a group was ~~1,108,209,~~1,171,809, all of which securities were shares.

The Company does not know of any arrangements, the operation of which, might result in a change of control of the Company.


	Signet Group plc Annual Report & Accounts year ended 31 January 2004	*109*

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Shareholder information (continued)

Substantial shareholdings
		Percentage
	Number of	of issued
	shares	shares

The Capital Group Companies, Inc⁽¹⁾	211,324,782	12.2
Harris Associates L.P.	69,562,600	4.0
FMR Corp. and Fidelity International Limited	56,536,627	3.3
Legal & General Investment Management Limited	53,017,838	3.1

(1)	Includes interest of Capital International Limited in 183,175,446 of such shares, notified on their behalf by the Capital Group Companies, Inc.

Exchange controls and other limitations affecting
security holders
There are currently no UK laws, decrees or regulations restricting the import or export of capital or (save as to taxation) affecting the remittance of dividends or other payments to holders of shares or ADSs who are non residents of the UK, subject to a few limited exceptions. ~~The~~Such exceptions apply ~~in respect of Iraq and in respect of various organisatons (such as Al-Qa’ida and the Taliban), certain individuals (such as Usama Bin Laden and Slobodan Milosevic) and their associates that~~where there are ~~the subject of relevant sanction~~sanctions or similar orders issued by the United Nations, the European Union or the ~~European Union.~~UK Government.

Subject to those exceptions, under English law and the Company’s Memorandum and Articles of Association, persons who are neither residents nor nationals of the UK may freely hold, vote and transfer shares ~~(including shares represented by ADSs)~~(or other securities) in the same manner as UK residents or nationals. ~~However, under the~~The Articles of Association provide that a shareholder with a registered address outside the UK is not entitled to receive notice of any general meeting of the Company unless the shareholder has provided the Company with a UK address, or (in the case of any notice issued electronically) an appropriate electronic address, at which notices may be delivered.

Taxation
Taxation for US residents
The following summary sets out the principal US federal and UK tax consequences of the purchase, ownership and disposition of the Company’s shares or ADSs in respect of such shares by ~~residents of the US~~a “US Holder” (as defined below) and is not intended to be a complete analysis or listing of all the possible tax consequences of such purchase, ownership or disposition.

As used herein a ~~‘US holder’ means:~~US holder means a beneficial owner of the Company’s shares or ADSs that is: a citizen or resident of the US; a corporation (or other entity taxable as a corporation for US federal income tax purposes) created or organised in or under the laws of the US, or any state thereof; an estate whose income is includible in gross income for US federal income tax purposes regardless of its source; or a trust, if a court within the US is able to

exercise primary supervision over the administration of the trust and one or more US persons have the authority to control all substantial decisions of the ~~trust.This~~trust.

This summary deals only with shares and ADSs held as capital assets and does not address any special tax consequences that may be applicable to US holders who are subject to special treatment under the current income tax convention between the US and the UK which came into effect on 31 March 2003 (the ~~‘Convention’~~‘New Convention’), the income tax convention between the US and UK which entered into force in 1980 (the ‘Prior Convention’) or the US Internal Revenue Code of 1986, as amended, such as dealers in securities or foreign currency, traders who elect mark-to-market accounting, financial institutions or financial services entities, insurance companies, persons subject to the alternative minimum tax, tax-exempt entities or private foundations, persons that hold the shares or ADSs as part of a straddle, hedge, conversion or ~~conversion~~constructive sale transaction or other integrated financial transaction, persons whose functional currency is other than the US dollar, certain expatriates or former long-term residents of the US, persons who alone, or together with one or more associated persons, control or controlled (directly, indirectly or constructively) 10% or more of the voting shares of the Company or persons who acquire shares or ADSs as compensation.

Prospective investors are advised to consult their tax advisers with respect to the tax consequences of the purchase, ownership and disposition of shares or ADSs, including specifically the consequences under state and local tax ~~laws.The~~laws. The statements regarding US and UK tax laws set out below are based on US federal and UK tax laws and UK Inland Revenue practice in force on the date of this Annual Report and are subject to change after that date. This summary does not address the tax consequences to partnerships, other pass-through entities or persons who hold shares or ADSs through a partnership or other pass-through entity.

US holders of ADSs will be treated as the owners of the underlying shares for purposes of the double taxation conventions relating to income and estate and gift taxes between the US and the UK and for the purposes of the US Internal Revenue Code of 1986, as amended.


*110*	Signet Group plc Report and Accounts year ended 31 January 2004

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In addition, the following summary assumes that US holders are residents of the US for purposes of the New Convention and are entitled to the benefits of the New Convention.

Taxation of dividends
~~Under~~The New Convention between the US and the UK applies in respect of dividends paid by UK companies from 1 May 2003. US holders can elect, by notifying the US Internal Revenue Service and the UK Inland Revenue, to be taxed for all purposes under the provisions of the Prior Convention ~~and current UK law,~~for a further period of 12 months ending on 30 April 2004. US holders can make such an election if they feel that the provisions of the Prior Convention, taken as a whole, are more beneficial to them.

A US holder who is a US person for US federal income tax purposes and who was eligible for benefits under the Prior Convention (each such US holder, an “eligible US holder”) may elect to continue to apply the provisions of ~~shares or ADSs~~the Prior Convention with respect to dividends paid up to and including 30 April 2004. The Prior Convention also will apply to dividends paid prior to 1 May 2003 to eligible US holders that did not elect to extend the Prior Convention. An eligible US holder electing to apply the provisions of the Prior Convention with respect to the Company’s dividends will be required to apply all of the provisions of the Prior Convention for an entire twelve month period ending on 30 April 2004 (or the UK taxable year ending in 2004 with respect to income, capital gains and corporation taxes). Under the Prior Convention, an electing eligible US holder who is a beneficial owner of an ~~individual~~ADS or a ~~corporate portfolio holder (which is broadly defined as a shareholder who holds less than 10%~~share and of ~~the voting shares of the Company) and who qualifies for the benefits of the Convention is~~any cash dividend paid with respect thereto should be entitled to ~~receive from the~~a foreign tax credit for UK ~~Inland Revenue a payment (the ‘Tax Treaty Payment’) of~~withholding tax in an amount equal to ~~the~~one-ninth of any dividend paid up to and including 30 April 2004, which, subject to applicable limitations as discussed below, would be creditable against such US holder’s US federal income tax liability. This additional tax credit ~~in respect of~~amount would give rise to additional dividend income. Thus, for example, an eligible US holder that elects for treatment under the ~~dividend~~

~~Signet Group plc 103~~

~~Shareholder information (continued)~~

~~minus a withholding tax of 15% of the sum of the cash dividend plus the tax credit (the withholding tax cannot exceed the amount of the tax credit). On the basis of~~Prior Convention and receives an £80 dividend (which amount has been selected for illustrative purposes only) the tax credit relating to the dividend is equal to £8.89 (10% of the sum of the £80 dividend and the £8.89 tax credit). The Tax Treaty Payment is calculated by reducing the £8.89 tax credit by withholding tax of 15% of the sum of the £80 dividend and the £8.89 tax credit. Accordingly, using the example set out above, such US holder will not receive a Tax Treaty Payment. A US holder need not make a claim to the UK Inland Revenue for the Tax Treaty Payment that, as discussed above, will be offset by the UK withholding tax. A US holder who is an individual or a corporate portfolio holder who receives the £80 dividend in the above example should be considered ~~for US federal income tax purposes~~ to receive a dividend of £88.89 (£80 dividend plus ~~the~~a £8.89 gross tax credit) and ~~would include that amount in income. Such US holder also should be considered~~ to have paid £8.89 of UK ~~tax that, subject~~tax.

An eligible US holder can make an election to apply the ~~applicable limitations, would~~provisions of the Prior Convention with respect to a dividend by indicating on Line 5 of US Internal Revenue Service Form 8833 (Treaty Based Return Disclosure Under Section 6114 or 7701(b)). The completed Form 8833 should be ~~creditable against such~~filed with the US holder’s US federal income tax ~~liability.~~

~~The aggregate~~return for the relevant year. Such US holder should also write to the UK Inland Revenue Centre for Non-Residents stating that an election, under Article 29(3) of the

New Convention, is being made to apply the provisions of the Prior Convention with respect to such dividend. Pursuant to this election, the US holder will be treated as having paid the UK tax on the date of the distribution. US holders should consult their tax advisers concerning their eligibility and the procedures for claiming the UK tax credit amount under the Prior Convention.

Any dividend paid toby the Company will generally be included in the gross income of a US holder ~~who is an individual or a corporate portfolio holder and the gross tax credit in respect of it will be treated~~ as dividend income for US federal income tax purposes to the extent made from the Company’s current or accumulated earnings and profits, as determined under US federal income tax principles. Distributions in excess of such current and accumulated earnings and profits will be applied against and will reduce the US holder’s tax basis in the shares or ADSs and to the extent in excess of such tax basis will be treated as a gain from the sale or exchange of the shares or ADSs. For dividends paid prior to 1 May 2003 (or 1 May 2004, if as described above the US holder has elected to extend the Prior Convention), the amount of dividend includible in income of a US holder includes any UK tax withheld from the dividend payment and amounts in respect of the UK tax credit (as discussed above).

The amount of any dividend paid in pounds sterling will equal the US dollar value of the pounds sterling received calculated by reference to the exchange rate in effect on the day that the dividend is received by the US holder, in the case of shares, or by the Depositary (or its Custodian), in the case of ADSs, regardless of whether the dividend payment is converted into US dollars. Foreign currency exchange gain or loss, if any, realised inon a subsequent sale or other disposition of pounds generally will be treated as US source ordinary income or loss to the US holder.

Dividends received on the shares or ADSs generally will be foreign source passive income for US foreign tax credit purposes and generally will not be eligible for the dividends received deduction allowed to US corporations under Section 243 of the US Internal Revenue Code. ~~However,~~

~~as illustrated in the example above, the withholding tax will be treated as foreign income tax eligible for credit or deduction against a US holder’s~~Under recently enacted US federal income tax ~~liability~~legislation generally applicable for 2003, an individual US holder’s “qualified dividend income” is subject to tax at a reduced rate of tax of 15%. For this purpose, qualified dividend income includes dividends from foreign corporations paid prior to 1 January 2009 if (a) the ~~option~~shares of such corporation with respect to which such dividend is paid are readily tradeable on an established securities market in the US, including Nasdaq, or (b) such corporation is eligible for the benefits of a comprehensive tax treaty with the US that includes an information exchange programme and is determined to be satisfactory to the US Secretary of the Treasury. The US Secretary of the Treasury has indicated that the New


Signet Group plc Annual Report & Accounts year ended 31 January 2004	*111*

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Shareholder information (continued)

Convention is satisfactory for this purpose. Dividends will not however qualify for the reduced rate if such corporation is treated for the tax year in which dividends are paid (or in the prior year) as a “foreign investment company”, a “foreign personal holding company”, or a “passive foreign investment company” for US federal income tax purposes. Based on the nature of the Company’s operations and/or its ownership, the Company does not believe that it would be treated as a foreign investment company or a foreign personal holding company. In addition, the Company does not believe it is a passive foreign investment company. Accordingly, dividend distributions with respect to the Company’s shares or ADSs should be treated as qualified dividend income and, subject to the US holder’s satisfaction of the requirements described below, should be eligible for the reduced 15% US federal income tax rate. A US holder will not be entitled to the reduced rate: (a) if the US holder has not held the shares or ADSs for at least 61 days of the 120-day period beginning on the date which is 60 days before the ex-dividend date; (b) to the extent the US holder is under an obligation to make related payments on substantially similar or related property; or (c) if the US holder elects to treat the dividend income as “investment income” pursuant to Section 163(d)(4) of the US Internal Revenue Code. Any days during which a US holder has diminished its risk of loss on the shares or ADSs are not counted towards meeting the 61-day holding period required by the statute. Based on US Internal Revenue Service News Release 2004-22, the US Internal Revenue Service intends to give current effect to proposed legislation changing the forementioned 120-day period to a 121-day period.

The UK does not currently apply a withholding tax on dividends under its internal laws. If the UK were to impose a withholding tax, as permitted under the New Convention, the rate of such withholding tax will not exceed 15% of the dividend paid to a US holder. In such circumstances, subject to applicable ~~limitations.~~limitations, a US holder who was subject to any withholding should be entitled to claim a deduction for withheld tax or, subject to the holding period requirements mentioned below, a credit for such withholding tax, against the US holder’s federal income tax liability. The US foreign tax credit limitation may be reduced to the extent that dividends are eligible for the reduced rate described above. Special rules apply to foreign tax credits relating to qualified dividend income. US holders should consult their tax advisers as to the method of claiming such foreign tax credit or deduction and compliance with special tax return disclosure requirements that apply to US holders who claim the benefit of the foreign tax credit on such US holders’ US federal income tax returns.

A US holder will be denied a foreign tax credit (and instead allowed a deduction) for foreign taxes imposed on a dividend if the US holder has not held the shares or ADSs for at least 16 days in the ~~30 day~~30-day holding period beginning 15 days before the ex-dividend date. Any days during which a US holder has substantially diminished its risk of loss on the shares or ADSs are not counted towards meeting the ~~16 day~~16-day holding period required by statute. A US holder that is under an obligation to make related payments with respect to the shares or ADSs (or substantially similar or related property) also is not entitled to claim a foreign tax credit with respect to a foreign tax imposed on a dividend.

A US holder should elect to receive a foreign tax credit or deduction with respect to any UK withholding tax. This election is made on Line 5 of US Internal Revenue Service Form 8833 (Treaty-Based Return Position Disclosure under Section 6114 or 7701(b)).The completed Form 8833 should be filed with the US holder’s income tax return for the relevant year. Pursuant to this election, the US holder will be treated as having paid the UK withholding tax on the date of the distribution.

The US and the UK have agreed to the form of a new double tax convention (the ‘New Convention’) to replace the existing Convention. The New Convention is not yet in force, but it is anticipated to come into force in the near future. If the New Convention enters into force, the Tax Treaty Payment and UK withholding tax will no longer apply to US holders.The UK does not currently apply a withholding tax on dividends under its internal laws. If the UK were to impose a withholding tax, as permitted under the New Convention, the rate of such withholding tax will not exceed 15% of the dividend paid to a US holder. In such circumstances, a US holder should be entitled to a credit for such withholding tax, subject to applicable limitations, against the US holder’s federal income tax liability. As described above, a US holder will continue to be subject to the holding period requirements.

~~104 Signet Group plc~~

US information reporting and US backup withholding tax
Under US Treasury regulations, dividends paid on shares or ADSs may be subject to US information reporting requirements and backup withholding tax ~~of up to 31%~~(currently 28%). In addition, under US Treasury regulations, the payment of the proceeds of a sale, exchange or redemption of shares or ADSs to a US holder or non-US holder in the US, or through US or US-related persons, may be subject to US information reporting requirements and backup withholding ~~tax.~~tax (currently 28%).

US holders can avoid the imposition of backup withholding tax by reporting their ~~tax payer~~taxpayer identification number to their broker or paying agent on US Internal Revenue Service Form W-9. Non-US holders can avoid the imposition of backup withholding tax by providing a duly completed US Internal Revenue Service Form ~~W-8 BEN, W-8 ECI~~W-8BEN, W-8ECI or ~~W-8 IMY,~~W-8IMY, as appropriate, to their broker or paying agent. Any amounts withheld under the backup withholding rules from a payment to a holder will be allowed as a refund or a credit against such holder’s US federal income tax liability, provided that the required returns are filed with US Internal Revenue Service on a timely basis.

Taxation of capital gains
Upon a sale, exchange or other disposition of shares or ADSs, a US holder will recognise a gain or loss for US federal income tax purposes in an amount equal to the difference between the US dollar value of the amount realised and the US holder’s tax basis (determined in US dollars) in such shares or ADSs. Generally, such gain or loss will be a capital gain or loss and will be a long-term capital gain or loss if the US holder’s holding period for such shares or ADSs exceeds one year. Any such gain or loss generally will be income or loss from sources within the US for foreign tax credit limitation purposes. Long-term capital gains of a non-corporate US holder are generally subject to a maximum tax rate of 15%. The deductibility of a capital loss recognised on the sale or exchange of shares or ADSs is subject to limitations.


*112*	Signet Group plc Annual Report & Accounts year ended 31 January 2004

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If the shares or ADSs are publicly traded, a disposition of such shares or ADSs will be considered to occur on the “trade date”, regardless of the US holder’s method of accounting. A US holder that uses the cash method of accounting calculates the US dollar value of the proceeds received on the sale on the date that the sale settles. However, a US holder that uses the accrual method of accounting is required to calculate the value of the proceeds of the sale on the “trade date” and, therefore, may realise a foreign currency gain or loss, unless such US holder has elected to use the settlement date to determine its proceeds of sale for purposes of calculating such foreign currency gain or loss. In addition, a US holder that receives foreign currency upon the sale or exchange of the shares or ADSs and converts the foreign currency into US dollars subsequent to receipt will have a foreign exchange gain or loss based on any appreciation or depreciation in the value of the foreign currency against the US dollar. A foreign exchange gain or loss will generally be US source ordinary income or loss.

Generally a US holder who is neither resident nor ordinarily resident for tax purposes in the UK will not be liable for UK tax on capital gains realised on the sale or other disposal of shares or ADSs unless, in the year of assessment in which the gain accrues to such holder, that US holder ~~carries on~~has a ~~trade~~permanent establishment in the UK ~~through a branch or agency~~ and the shares or ADSs are or have been used by, held by, or acquired for use by, or for the purpose of, such ~~trade, branch or agency.~~permanent establishment. However, a US holder who has been resident in the UK for at least four years and held shares or ADSs at that time may, in certain circumstances, become liable to UK capital gains tax on his return to the UK following a disposal of such shares or ADSs. Any US holders whose circumstances are such that they may fall within such provisions are advised to consult their tax adviser.

AThe New Convention applies in respect of capital gains in the UK from 6 April 2003 and in the US from 1 January 2004. US holders who have made the election to apply the provisions of the Prior Convention described above will be taxed on capital gains under the Prior Convention. Otherwise, US Holders will be taxed on capital gains under the New Convention.

Under the New Convention, a US holder who is resident or ordinarily resident for tax purposes in the UK, a US corporation which is resident in the UK by reason of being managed and controlled in the UK, or a US holder who, or a US corporation which, ~~is trading~~has a permanent establishment in the UK, ~~through a branch or agency,~~ where shares or ADSs are or have been acquired, used or held for the purposes of such ~~trade, branch~~permanent establishment, should only be liable for either UK tax or ~~agency,~~US federal income tax on a gain on the disposal of the shares

or ADSs. The residence of such US holders is determined under the New Convention. Such US holders will then be taxed by their country of residence as determined under the New Convention.

Under the Prior Convention, a US holder who is resident or ordinarily resident for tax purposes in the UK, a US corporation which is resident in the UK by reason of being managed and controlled in the UK, or a US holder who, or a US corporation which, has a permanent establishment, where shares or ADSs are or have been acquired, used or held for the purposes of such permanent establishment, may be liable for both UK tax and US federal income tax on a gain on the

disposal of the shares or ADSs. Such US holder generally will be entitled to offset a credit for UK tax against its US federal income tax liability in respect of such gain.

A US holder of shares or ADSs will be liable for US federal income tax on gains realised on the sale or exchange of shares or ADSs to the same extent as on any other gains from sales of shares. Such gains will be capital gains if the shares or ADSs were capital assets in the hands of such US holder.

Inheritance tax
Shares or ADSs held by an individual who is domiciled in the US for the purposes of the double taxation convention relating to estate and gift taxes between the US and the UK, and for the purposes of the convention is not a national of the UK, will not be subject to UK inheritance tax on the individual’s death or on a lifetime transfer of shares or ADSs, except in certain cases where the shares or ADSs are placed in trust (other than by a settlor domiciled in the US who is not a national of the UK) and, in the exceptional case, where the shares or ADSs are part of the business property of a UK permanent establishment of an enterprise or pertains to a UK fixed base of an individual used for the performance of independent personal services.

The convention generally provides a credit for the amount of any tax paid in the UK against the US federal tax liability in a case where the shares or ADSs are subject both to UK inheritance tax and to US federal gift or estate tax. However, the terms of the US/UK estate and gift tax convention are currently being reviewed and possibly renegotiated. Further advice should be sought by any holder who is likely to need to rely upon the provisions of the convention.

UK stamp duty and stamp duty reserve tax
Stamp duty is (subject to exceptions for charities) currently payable on any instrument transferring shares to the Custodian of the Depositary at the rate of 1.5% on the value of such shares. In accordance with the terms of the Deposit Agreement relating to the shares, any tax or duty payable by the Depositary or the Custodian of the Depositary on future deposits of shares will be charged by the Depositary to the party to whom ADSs are delivered against such deposits.


Signet Group plc Annual Report & Accounts year ended 31 January 2004	*113*

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Shareholder information (continued)

No UK stamp duty will be payable on transfer of an ADS, provided that the ADS (and any separate instrument of transfer) is executed and retained at all times outside the UK. A transfer of an ADS in the US will not give rise to UK

~~Signet Group plc 105~~

~~Shareholder information (continued~~)

stamp duty provided the instrument of transfer is not brought into the UK. A transfer of an ADS in the UK may attract stamp duty at a rate of 0.5% of the consideration. Any transfer (which will include a transfer from the Depositary to an ADS ~~holder~~)holder) of the shares, including shares underlying an ADS, may result in a stamp duty liability at the rate of 0.5% of the ~~consideration.There~~consideration. There is no charge to ad valorem stamp duty on gifts. On a transfer of shares from a nominee to the beneficial owner (the nominee having at all times held the shares on behalf of the ~~transferee~~)transferee) under which no beneficial interest passes and which is neither on sale, nor arises under or following a contract of sale, nor is in contemplation of sale, a fixed stamp duty of £5 will be payable.

Stamp duty reserve tax generally at a rate of 0.5% of the consideration is currently payable on any agreement to transfer shares or any interest therein unless: (i)(i) an instrument transferring the shares is executed; ~~(ii~~)(ii) stamp duty, generally at a rate of 0.5%, is paid; and ~~(iii~~)(iii) generally the instrument is stamped on or before the accountable date for stamp duty reserve ~~tax.The~~tax. The duty will, however, be refundable if within six years the agreement is completed by an instrument which has been duly stamped, generally at the rate of 0.5%. Stamp duty reserve tax will not be payable on any agreement to transfer ADSs which represent interests in depositary receipts.

~~106 Signet Group plc~~


*114*	Signet Group plc Annual Report & Accounts year ended 31 January 2004

~~Selected financial data~~

2002/03 2002/03⁽¹⁾ 2001/02⁽²⁾ 2000/01 1999/00 1998/99

£m $m £m £m £m £m

Amounts under UK GAAP:
Profit and loss account
Sales 1,608.0 2,637.1 1,578.1 1,387.3 1,136.5 991.2
Cost of sales⁽³⁾ (1,331.6
)
(2,183.8 ) (1,318.3 ) (1,158.9 ) (952.3 ) (843.5 )

Gross profit 276.4 453.3 259.8 228.4 184.2 147.7
Administrative expenses (60.2 ) (98.7 ) (59.1 ) (49.7 ) (45.1 ) (45.4 )

Operating profit 216.2 354.6 200.7 178.7 139.1 102.3
Net interest payable (16.5 ) (27.1 ) (17.9 ) (15.9 ) (11.4 ) (13.1 )

Profit before tax 199.7 327.5 182.8 162.8 127.7 89.2
Taxation (70.8 ) (116.1 ) (63.1 ) (52.1 ) (38.3 ) (24.0 )

Profit for the period 128.9 211.4 119.7 110.7 89.4 65.2

Earnings per share – basic 7.5p $0.12 7.1p 6.6p 5.3p 3.9p
                             – diluted 7.5p $0.12 7.0p 6.5p 5.3p 3.9p
Earnings per ADS – basic 225.0p $3.69 213.0p 198.0p 159.0p 117.0p
                           – diluted 225.0p $3.69 210.0p 195.0p 159.0p 117.0p

Balance sheet data (at period end)
Working capital⁽⁴⁾ 644.2 1,056.5 663.1 405.8 457.2 407.7
Total assets 1,213.8 1,990.6 1,241.0 1,133.3 867.1 766.7
Total debt 229.3 376.1 268.2 266.6 182.9 176.7
Long-term debt 174.0 285.4 215.3 51.5 143.5 153.3
Cash at bank and in hand 89.2 146.3 66.5 37.5 91.3 65.2
Shareholders’ funds (as restated)⁽⁵⁾ 696.5 1,142.3 679.7 565.4 448.3 379.6

Store data:
Number of stores open at end of period:
US 1,050 1,025 999 827 788
UK 610 606 605 606 606
Percentage increase/(decrease) in like for
like sales:
US 5% 1% 6% 11% 10%
UK 5% 9% 9% 5% (1)%
Average sales per store:⁽⁶⁾
US 1,088 1,125 1,117 939 823
UK 747 735 665 613 580

Amounts under US GAAP:
Profit and loss account data
Operating income 215.1 352.8 183.0 164.1 123.8 93.1
Net income 128.3 211.2 101.7 97.1 64.3 49.6
Income/(loss) per share – basic 7.5p $0.12 6.0p 5.8p 3.8p 3.0p
                                  – diluted 7.4p $0.12 6.0p 5.7p 3.8p 3.0p
Income/(loss) per ADS – basic 225.0p $3.70 180.5p 173.7p 115.0p 88.9p
                                  – diluted 222.9p $3.67 179.2p 172.2p 113.8p 88.7p

Balance sheet data (at period end)
Total assets 1,372.8 2,251.4 1,436.1 1,383.0 1,084.4 1,007.1
Total debt 76.3 125.1 91.4 161.3 64.7 59.9
Long-term debt 24.2 39.7 38.7 51.5 48.6 36.6
Cash at bank and in hand 89.2 146.3 66.5 37.5 91.3 65.2
Shareholders’ funds (as restated)⁽⁵⁾ 998.0 1,636.7 1,026.9 919.0 785.0 729.4

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Selected financial data

		2003/04		2003/04	⁽¹⁾	2002/03		2001/02		2000/01		1999/00
						as restated	⁽²⁾	as restated	⁽²⁾⁽³⁾	as restated	⁽²⁾	as restated	⁽²⁾
		£m		$m		£m		£m		£m		£m

Amounts under UK GAAP:
Profit and loss account
Sales		1,617.2		2,943.3		1,608.0		1,578.1		1,387.3		1,136.5
Cost of sales⁽⁴⁾		(1,330.9	)	(2,422.2	)	(1,331.6	)	(1,318.3	)	(1,158.9	)	(952.3	)

Gross profit		286.3		521.1		276.4		259.8		228.4		184.2
Administrative expenses		(64.0	)	(116.5	)	(62.5	)	(61.0	)	(51.6	)	(46.9	)

Operating profit		222.3		404.6		213.9		198.8		176.8		137.3
Net interest payable		(10.4	)	(18.9	)	(14.0	)	(15.0	)	(12.7	)	(8.7	)

Profit before tax		211.9		385.7		199.9		183.8		164.1		128.6
Taxation		(74.7	)	(136.0	)	(70.8	)	(63.4	)	(52.5	)	(38.6	)

Profit for the period		137.2		249.7		129.1		120.4		111.6		90.0

Earnings per share	– basic	8.0p		$0.15		7.5p		7.1p		6.7p		5.4p
	– diluted	7.9p		$0.14		7.5p		7.1p		6.6p		5.3p
Earnings per ADS	– basic	240.0p		$4.37		225.0p		213.0p		201.0p		162.0p
	– diluted	237.0p		$4.31		225.0p		213.0p		198.0p		159.0p

Balance sheet data (at period end)
Working capital⁽⁵⁾		675.8		1,230.0		644.2		663.1		405.8		457.2
Total assets		1,228.6		2,236.1		1,194.7		1,221.9		1,114.2		848.0
Total debt		207.9		378.4		229.3		268.2		266.6		182.9
Long-term debt		146.2		266.1		174.0		215.3		51.5		143.5
Cash at bank and in hand		128.0		233.0		89.2		66.5		37.5		91.3
Shareholders’ funds (as restated)⁽²⁾		727.6		1,324.2		678.4		683.7		583.0		470.4

Store data:
Store numbers
US		1,103				1,050		1,025		999		827
UK		604				610		606		605		606
Percentage increase in like for like sales:
US		5%				5%		1%		6%		11%
UK		6%				5%		9%		9%		5%
Average sales per store (£’000s)⁽⁶⁾:
US		1,040				1,088		1,125		1,117		939
UK		824				747		735		665		613

Amounts under US GAAP:
Profit and loss account data
Operating income		218.7		398.0		215.1		183.0		164.1		123.8
Net income		135.0		245.7		128.3		101.7		97.1		64.3
Income per share	– basic	7.9p		$0.14		7.5p		6.0p		5.8p		3.8p
	– diluted	7.8p		$0.14		7.4p		6.0p		5.7p		3.8p
Income per ADS	– basic	235.7p		$4.29		225.0p		180.5p		173.7p		115.0p
	– diluted	234.0p		$4.26		222.9p		179.2p		172.2p		113.8p

Balance sheet data (at period end)
Total assets		1,417.9		2,580.6		1,370.1		1,433.4		1,380.3		1,081.7
Total debt		70.0		127.4		76.3		91.4		161.3		64.7
Long-term debt		8.3		15.1		24.2		38.7		51.5		48.6
Cash at bank and in hand		128.0		233.0		89.2		66.5		37.5		91.3
Shareholders’ funds		1,034.8		1,883.3		995.3		1,024.2		916.3		782.3

Explanatory notes referred to in the above table are on page ~~108.~~116.

~~Signet Group plc 107~~

~~Selected financial data (continued~~)


	The selected consolidated financial data set out on the preceding page for 1998/99, 1999/00, 2000/01, 2001/02 and 2002/03 has been derived, in part, from the audited consolidated accounts for such periods included elsewhere in this Signet Group plc Annual ~~Report.The selected consolidated financial data should be read in conjunction with the accounts, including the notes thereto, and the Financial review included on pages 22 to 27 of this Annual Report.~~ The accounts of the Group have been prepared in accordance with UK GAAP which differ in certain respects from US GAAP. See pages 88 to 96 for information on the material differences between UK GAAP and US GAAP that affect the Group’s profit and shareholders’ funds.Report & Accounts year ended 31 January 2004	~~Results of operations~~ 115~~The following table sets out certain consolidated financial data as a percentage of reported sales:~~

Percentage of sales

2002/03 2001/02 2000/01

% % %

Sales 100.0 100.0 100.0
Cost of sales⁽³⁾ (82.8 ) (83.5 ) (83.5 )

Gross profit 17.2 16.5 16.5
Administrative expenses (3.8 ) (3.8 ) (3.6 )

Operating profit 13.4 12.7 12.9
Net interest expense (1.0 ) (1.1 ) (1.1 )

Profit before taxation 12.4 11.6 11.8
Taxation (4.4 ) (4.0 ) (3.8 )

Net profit 8.0 7.6 8.0

Back to Contents

Selected financial data (continued)

The selected consolidated financial data set out on the preceding page for 1999/00, 2000/01, 2001/02, 2002/03 and 2003/04 has been derived, in part, from the audited consolidated accounts for such periods included elsewhere in this Annual Report & Accounts. The selected consolidated financial data should be read in conjunction with the accounts, including the notes thereto, and the Financial review included on pages 21 to 28 of this Annual Report & Accounts.

The accounts of the Group have been prepared in accordance with UK GAAP which differ in certain respects from US GAAP. See pages 94 to 102 for information on the material differences between UK GAAP and US GAAP that affect the Group’s profit and shareholders’ funds.

Results of operations
The following table sets out certain consolidated financial data as a percentage of reported sales:

	Percentage of sales

	2003/04		2002/03		2001/02
	%		%		%

Sales	100.0		100.0		100.0
Cost of sales⁽⁴⁾	(82.3	)	(82.8	)	(83.5	)

Gross profit	17.7		17.2		16.5
Administrative expenses	(4.0	)	(3.9	)	(3.9	)

Operating profit	13.7		13.3		12.6
Net interest expense	(0.6	)	(0.9	)	(1.0	)

Profit before taxation	13.1		12.4		11.6
Taxation	(4.6	)	(4.4	)	(4.0	)

Net profit	8.5		8.0		7.6

(1)(1)	Amounts in pounds sterling are translated into US dollars solely for the convenience of the reader, at a rate of £1.00 to ~~$1.64,~~$1.82, the Noon Buying Rate on ~~1 February 2003.~~30 January 2004.
(2)(2)	During 2003/04 the Group adopted FRS 17 – ‘Retirement Benefits’ and in 2001/02 FRS 19 – ‘Deferred Tax’. The adoption of these standards has resulted in prior year adjustments affecting UK GAAP shareholders’ funds for 1999/00, 2000/01, 2001/02 and 2002/03 (see note 17).
(3)	53 week year.
(3)(4)	Cost of sales includes the costs of goods sold, rental expense and non-headquarters’ selling, general and administrative expenses.
(4)(5)	Working capital represents current assets (excluding amounts recoverable after more than one ~~year~~)year) less current liabilities.
(5)	During 2001/02 the Group adopted FRS19 – ‘Deferred Tax’.The adoption of the standard has resulted in a prior year adjustment affecting UK GAAP shareholders’ funds for 1998/99, 1999/00 and 2000/01 (see note 17).
(6)(6)	Includes only stores operated for the full financial year.

~~108 Signet Group plc~~

116

Signet Group plc Annual Report & Accounts year ended 31 January 2004

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Quarterly results (unaudited)

For the 52 week period ended 1 February 2003
13 weeks 13 weeks 13 weeks 13 weeks 52 weeks
ended ended ended ended ended
4 May 3 August 2 November 1 February 1 February
2002 2002 2002 2003 2003

£m £m £m £m £m

Sales 354.8 328.0 278.9 646.3 1,608.0

Operating profit 28.5 28.0 7.2 152.5 216.2
Net interest payable and similar charges (4.6 ) (4.4 ) (3.6 ) (3.9 ) (16.5 )

Profit on ordinary activities before taxation 23.9 23.6 3.6 148.6 199.7
Tax on profit on ordinary activities (8.5 ) (8.4 ) (1.3 ) (52.6 ) (70.8 )

Profit for the financial period 15.4 15.2 2.3 96.0 128.9 )

For the 53 week period ended 2 February 2002
13 weeks 13 weeks 13 weeks 14 weeks 53 weeks
ended ended ended ended ended
29 April 28 July 27 October 2 February 2 February
2001 2001 2001 2002 2002

£m £m £m £m £m

Sales 312.5 317.2 268.8 679.6 1,578.1

Operating profit 23.0 27.1 7.2 143.4 200.7
Net interest payable and similar charges (5.1 ) (4.8 ) (3.8 ) (4.2 ) (17.9 )

Profit on ordinary activities before taxation 17.9 22.3 3.4 139.2 182.8
Tax on profit on ordinary activities (6.2 ) (7.7 ) (1.2 ) (48.0 ) (63.1 )

Profit for the financial period 11.7 14.6 2.2 91.2 119.7

~~The profit impact of the 53rd week is analysed on page 23.~~

~~Signet Group plc 109~~For the 52 week period ended 31 January 2004

	13 weeks ended		13 weeks ended		13 weeks ended		13 weeks ended		52 weeks ended
	3 May 2003		2 August 2003		1 November 2003		31 January 2004		31 January 2004
	£m		£m		£m		£m		£m

Sales	342.9		324.5		289.4		660.4		1,617.2

Operating profit	27.2		26.7		8.3		160.1		222.3
Net interest payable and similar charges	(3.1	)	(3.0	)	(3.2	)	(1.1	)	(10.4	)

Profit on ordinary activities before taxation	24.1		23.7		5.1		159.0		211.9
Tax on profit on ordinary activities	(8.6	)	(8.4	)	(1.8	)	(55.9	)	(74.7	)

Profit for the financial period	15.5		15.3		3.3		103.1		137.2

For the 52 week period ended 1 February 2003⁽¹⁾

	13 weeks ended		13 weeks ended		13 weeks ended		13 weeks ended		52 weeks ended
	4 May 2002		3 August 2002		2 November 2002		1 February 2003		1 February 2003
	£m		£m		£m		£m		£m

Sales	354.8		328.0		278.9		646.3		1,608.0

Operating profit	27.9		27.4		6.7		151.9		213.9
Net interest payable and similar charges	(4.0	)	(3.7	)	(3.1	)	(3.2	)	(14.0	)

Profit on ordinary activities before taxation	23.9		23.7		3.6		148.7		199.9
Tax on profit on ordinary activities	(8.5	)	(8.4	)	(1.3	)	(52.6	)	(70.8	)

Profit for the financial period	15.4		15.3		2.3		96.1		129.1

~~Definitions~~(1)

Restated for the implementation of FRS 17 – ‘Retirement Benefits’.

~~In this document the following words and expressions shall, unless the context otherwise requires, have the following~~Signet Group plc Annual Report & Accounts year ended 31 January 2004	*117*
~~meanings:~~

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Definitions

In this document the following words and expressions shall, unless the context otherwise requires, have the following meanings:

ADR	American Depositary Receipt evidencing title to an ADS

ADS	American Depositary Share representing 30 Signet Group plc shares

APB	Accounting Principles Bulletin ~~(US~~)(US)

c.a.g.r.	Compound Annual Growth Rate

Company	Signet Group plc

Depositary	The Bank of New York, depositary under the amended and restated deposit agreement for
	~~agreement for~~ the issue of ADRs

Directors	The directors of the Company

Earnings per share ~~(EPS~~)(EPS)	Profit attributable to shareholders divided by the weighted average number of
	shares in ~~issue.~~issue

EPOS	Electronic Point of Sale

ESOT	Signet Group Employee Share ~~Ownership~~ Trust

FAS	Statement of Financial Accounting Standards (US)

FRS	Financial Reporting Standard ~~(UK~~)(UK)

FURBS	Signet Group Funded Unapproved Retirement Benefit Scheme

GAAP (UK or US)US)	Generally Accepted Accounting Principles

Gearing	Net debt as a percentage of shareholders’ funds

Group	Signet Group plc and its subsidiary undertakings

Independent ~~(Directors~~)(directors)	Considered to be independent under ~~“Review of~~ the ~~role and effectiveness of~~
	~~non-executive directors” (the “Higgs report”~~)Combined Code

LIBOR	London Inter-Bank Offered Rate

LTIP	Long Term Incentive Plan

NASD	National Association of Securities Dealers

Nasdaq	National Association of Securities Dealers Automated Quotations

NYSE	New York Stock Exchange

Pounds, £, pound sterling, pence or p	Units of UK ~~Currency~~currency

QUEST	Signet Group Qualifying Employee Share Trust

~~110 Signet Group plc~~

~~Back to Contents~~

~~Definitions (continued)~~


Return on capital employed (ROCE)	Operating profit divided by monthly average capital employed

Shares	Ordinary shares of 0.5 pence each in Signet Group plc

Signet	Signet Group plc and its subsidiary undertakings

SEC	Securities and Exchange Commission

~~SFAS~~	~~Statement of Financial Accounting Standards (US)~~

~~SOP~~	~~Statement of Position (US)~~

SSAP	Statement of Standard Accounting Practice (UK)

UK or United Kingdom	United Kingdom, Channel Islands, Isle of Man and the Republic of Ireland

US or United States	United States of America

US dollar, $ or cents	Units of US currency

~~Signet Group plc 111~~

118

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Glossary of terms

~~Glossary of terms~~


Terms used in Annual Report & Accounts	US equivalent or brief description

Accounts	Financial statements

Allotted	Issued

Called-up share capital	Shares, issued and fully paid

Capital allowances	Tax term equivalent to US tax depreciation allowances

Cash at bank	Cash

Creditors	Payables

Debtors	Receivables

Finance lease	Capital lease

Freehold	Ownership with absolute rights in perpetuity

Interest receivable	Interest income

Interest payable	Interest expense

Like for like sales	Same store sales at constant exchange rates

Loans	Long-term debt

Net asset value	Book value

Profit	Income

Profit and loss account	Income statements

Profit and loss account reserve	Retained earnings

Profit attributable to shareholders	Net income

Share capital	Capital stock or common stock

Share option	Stock option

Shareholders’ funds	Shareholders’ equity / net assets

Share premium account	Additional paid-up capital or paid-in surplus
	(not distributable)

Shares in issue	Shares outstanding

Stocks	Inventories

Tangible fixed assets	Property and equipment

Value Added Tax (VAT)	UK sales tax

~~112 Signet Group plc~~

Signet Group plc Annual Report & Accounts year ended 31 January 2004

119

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Shareholder contacts

~~Shareholder contacts~~ADS information

The ADS programme is administered on behalf of the Company by The Bank of New York and any enquiries, including those to do with change of address or dividend payments, should be addressed to:

The Bank of New York

Investor Services

P.O. Box 11258, Church Street Station

New York, NY 10286-1258

Telephone toll-free from US: +1 888 269 2377

Telephone from outside US: +610 382 7836

e-mail: shareowners@bankofny.com

web site: www.stockbny.com

The Company is subject to the regulations of the United States Securities and Exchange Commission (the “SEC”) as they apply to foreign private issuers and files with the SEC its Annual Report on Form 20-F and other information as required.

UK shareholders

Enquiries concerning the following matters should be addressed to:

Capita Registrars

The Registry

34 Beckenham Road

Beckenham

Kent BR3 4TU

Telephone: 0870 162 3100

Telephone (overseas): +44 208 639 2157

e-mail: ssd@capitaregistrars.com

web site: www.capitaregistrars.com

~~ADS Information~~
~~The ADS programme is administered on behalf of the Company by The Bank of New York and any enquiries, including those to do with change of address or dividend payments, should be addressed to:~~

~~The Bank of New York~~
~~ADR Department – 22W Floor~~
~~101 Barclay Street~~
~~New York, NY 10286~~
~~Telephone toll free:~~
~~+1 888 269 2377~~

~~UK Shareholders~~
~~Enquiries concerning the following matters should be addressed to:~~

~~Capita Registrars~~
~~The Registry~~
~~34 Beckenham Road~~
~~Beckenham~~
~~Kent BR3 4TU~~
~~Telephone: 0870 162 3100~~
~~Telephone (overseas): +44 208 639 2157~~
~~email: ssd@capitaregistrars.com~~
~~web site:~~~~www.capitaregistrars.com~~


•	Dividend payments

•	Dividend mandate instructions

•	Dividend reinvestment plan

•	Loss of share certificates

•	Notification of change of address or name

•	Transfer of shares to another person

•	Amalgamation of shareholdings: if you receive more than one copy of the full Report & Accounts, you may wish to amalgamate your accounts on the share register.

Registered office
Zenith House
The Hyde
London NW9 6EW
Telephone: 0870 909 0301

Investor Relations ~~contact~~

Timothy Jackson

~~Company Secretary and~~ Investor Relations Director
Telephone: 0870 909 0301
e-mail: investorrelations@signet.co.uk

Company Secretary
Mark Jenkins
Company Secretary
Zenith House
The Hyde
London NW9 6EW
Telephone: 0870 909 0301
~~email: investorrelations@signet.co.uk~~e-mail: companysecretary@signet.co.uk

Corporate web site
Further information about the Group including the Annual and Interim Reports, public announcements and share price data are available in electronic format from the Group’s corporate web site at ~~www.signetgroupplc.com~~www.signetgroupplc.com..

Unsolicited mail

As the Company’s share register is, by law, open to public inspection, shareholders may receive unsolicited mail from organisations that use it as a mailing ~~list.To~~list. To limit the amount of unsolicited mail you receive, write to:

Mailing Preference Service
FREEPOST 22
London
W1E 7EZ

~~Signet Group plc 113~~

120

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~~Cross reference to Form 20-F~~~~to Form 20- (continued)~~

The information in this document that is referenced in the following table shall be deemed to be part of the Annual Report on Form 20-F for 2003 and to be filed with the Securities and Exchange Commission for all purposes.Index

~~Item~~		~~Page~~

1	~~Identity of directors, senior~~
	~~management and advisors~~
	~~Not applicable~~	–

2	~~Offer statistics and expected timetable~~
	~~Not applicable~~	–

3A	~~Key information – Selected financial data~~
	~~Five year financial summary~~	6
	~~Risk and other factors – Financial market risks~~	31
	~~Selected financial data~~	~~107~~
3B	~~Key information – Capitalization and~~
	~~indebtedness~~
	~~Not applicable~~	–

3C	~~Key information – Reasons for the offer and~~
	~~use of proceeds~~
	~~Not applicable~~	–

3D	~~Key information – Risk factors~~
	~~Risk and other factors~~	28

4	~~Information on the Company~~
	~~Chairman’s statement~~	2
	~~Group Chief Executive’s review~~	3
	~~US Operating review~~	7
	~~UK Operating review~~	15
	~~Description of property~~	21
	~~Financial review~~	22
	~~Risk and other factors – Seasonality~~	30
	~~Shareholder information~~	~~100~~
	~~Note to the accounts – Note 2~~	61
	~~Note to the accounts – Note 28~~	84

5	~~Operating and financial review and~~
	~~prospects~~
	~~US Operating review~~	7
	~~UK Operating review~~	15
	~~Financial review~~	22
	~~Risk and other factors – Financial market risks~~	31
	~~Note to the accounts – Note 26~~	78

~~Item~~		~~Page~~

6	~~Directors, senior management and~~
	~~employees~~
	~~Group employees~~	21
	~~Social, ethical and environmental matters~~
	~~– Employees~~	98
	~~Directors, officers and advisers~~	33
	~~Directors’ remuneration report~~	40
	~~Corporate governance statement~~	36

7A	~~Major shareholders~~
	~~Shareholder information – Nature of~~
	~~trading market~~	~~101~~
	~~Shareholder information – Substantial~~
	~~shareholdings and control of the Company~~	~~102~~

7B	~~Related party transactions~~
	~~Note to the accounts – Note 29~~	84

7C	~~Interest of experts and counsel~~
	~~Not applicable~~	–

8	~~Financial Information~~
	~~Consolidated balance sheet~~	54
	~~Consolidated cash flow statement~~	55
	~~Consolidated statement of total recognised~~
	~~gains and losses~~	56
	~~Note of consolidated historical cost profits~~
	~~and losses~~	56
	~~Note to the accounts – Note 25~~	77

9A	~~Offer and listing details~~
	~~Shareholder information – Nature of~~
	~~trading market~~	~~101~~

9B	~~Plan of distribution~~
	~~Not applicable~~	–

9C	~~Markets~~
	~~Shareholder information – Nature of~~
	~~trading market~~	~~101~~

~~114 Signet Group plc~~

~~Back to Contents~~

~~Item~~		~~Page~~

9D	~~Selling shareholders~~
	~~Not applicable~~	–

9E	~~Dilution~~
	~~Not applicable~~	–

9F	~~Expenses of the Issuer~~
	~~Not applicable~~	–

~~10A~~	~~Additional information – Share capital~~
	~~Not applicable~~	–

~~10B~~	~~Additional information – Memorandum and~~
	~~Articles of Association~~
	~~Shareholder information – History~~	~~100~~

~~10C~~	~~Additional information – Material contracts~~
	~~Financial review – Liquidity and capital resources~~	23

~~10D~~	~~Additional information – Exchange controls~~
	~~Shareholder information – Dividends~~	~~102~~

~~10E~~	~~Additional information – Taxation~~
	~~Shareholder information – Taxation~~	~~103~~

~~10F~~	~~Additional information – Dividends and~~
	~~paying agents~~
	~~Not applicable~~	–

~~10G~~	~~Additional information – Statement by~~
	~~experts~~
	~~Not applicable~~	–

~~10H~~	~~Additional information – Documents on~~
	~~display~~
	~~Shareholder contacts~~	~~113~~

~~10I~~	~~Additional information – Subsidiary~~
	~~information~~
	~~Not applicable~~	–

~~Item~~		~~Page~~

11	~~Quantitative and qualitative disclosures~~
	~~about market risk~~
	~~Financial review~~	22
	~~Note to the accounts – Note 26~~	78

12	~~Description of securities other than equity~~
	~~securities~~
	~~Not applicable~~	–

13	~~Defaults, dividend arrears and delinquencies~~
	~~None~~	–

14	~~Material modifications to the rights of~~
	~~securities holders and use of proceeds~~
	~~None~~	–

15	~~Controls and procedures~~
	~~Corporate governance statement~~
	~~– Internal control~~	38

16	~~Reserved~~
	~~Not applicable~~	–

17	~~Financial Statements~~
	~~Auditors’ report to the members of~~
	~~Signet Group plc~~	51
	~~Consolidated profit and loss account~~	52
	~~Consolidated balance sheet~~	53
	~~Company balance sheet~~	54
	~~Consolidated cash flow statement~~	55
	~~Consolidated statement of total recognised gains~~
	~~and losses~~	56
	~~Consolidated shareholders’ funds~~	57

18	~~Financial Statements~~
	~~Not applicable~~	–

~~Signet Group plc 115~~

~~Index~~

	~~Page~~

~~Accounting policies~~	~~58-60~~
~~Addresses for correspondence~~	~~113~~
~~Advisers~~	34
~~Annual general meeting~~	35
~~Audit Committee~~
~~– constitution~~	36
~~– members of~~	33
~~Auditors’ report to the members~~
~~of Signet Group plc~~	51
~~Balance sheet~~
~~– Company~~	54
~~– consolidated~~	53
~~Board of directors~~
~~– changes in constitution~~	36
~~– names and biographical details~~	33
~~Cash flow and funding~~	23
~~Cash flow statements~~
~~– consolidated~~	55
~~– notes~~	77
~~Chairman’s statement~~	2
~~Charitable and community support~~	99
~~Commitments~~
~~– capital~~	77
~~– operating leases~~	76
~~Competition~~	~~7, 15, 29~~
~~Contingent liabilities~~	77
~~Corporate governance statement~~	36
~~Creditors~~	68
~~Cross reference to Form 20-F~~	~~114~~
~~Debtors~~	67
~~Deferred taxation~~	70
~~Definitions~~	~~110~~
~~Description of property~~	21
~~Directors~~
~~– incentive plans~~	41
~~– interests in shares~~	49
~~– other information~~	33

		Page

Accounting policies		62-64
Addresses for correspondence		120
Advisers		35
Annual general meeting		36
Audit Committee
– constitution		38
– members of		34
Auditor’s report		55
Balance sheet
– Company		58
– consolidated		57
Board of directors
– changes in constitution		37
–	names and biographical details	34
Cash flow and funding		23
Cash flow statements
– consolidated		59
– notes		83
Chairman’s statement		2
Charitable and community support		106
Commitments
– capital		82
– operating leases		82
Competition		7, 15, 30
Contingent liabilities		83
Corporate governance statement		37-41
Creditors		73
Debtors		72
Deferred taxation		76
Definitions		118
Description of property		20
Directors
– incentive plans		43
– interests in shares		52
– other information		34
– pensions		43, 49

	Page

– ~~pensions~~	~~41, 45, 46~~
– remuneration	4042
– remuneration policy	4042
– share option plans	~~41, 42~~43, 46
Directors’ statements of responsibility
in relation to the accounts	5054
Dividends ~~– ordinary~~	6569
Earnings per share	6569
Employees
– costs	6367
– numbers	6367
Exchange controls	3133
Exchange rates	~~31, 62~~33, 66
Financial instruments	7884
Financial review	~~22-27~~21-28
Financial summary	6
Fixed assets
– intangible	6670
– tangible	6671
Glossary of terms	~~112~~119
Goodwill	6670
Group Chief Executive’s review	3-5
Information systems	14, 19
Interest payable	6266
Legal proceedings	7783
Marketing and advertising	~~13, 19~~12, 18
Net debt	7883
Nomination Committee
– constitution	3739
– members of	3334
Non–executive directors	3334
Notes to the accounts	~~58-87~~62-93
Officers	3435
Operating review
– US	7-14
– UK	~~15-20~~15-19
Other provisions	7176
Pension schemes	43, 79

	Page

~~Pension schemes~~	~~41, 73~~
Profit and loss account
– consolidated	5256
Quarterly results	~~109~~117
Recognised gains and losses
– statement of total	5660
Regulation	14, 2019
Remuneration Committee
– constitution	4042
– members of	3334
Report of the directors	3536
Reserves	7278
Risk and other factors	~~28-31~~29-33
ROCE	2322
Segment information	6165
Selected financial data	~~107~~115
Share capital	7177
Shareholder
– contacts	~~113~~120
– information	~~100-106~~107-114
Shareholders’ funds
– movements in	5761
Share options	~~80-83~~85
Share premium account	7278
Share price	~~101~~108
Social, ethical and environmental
matters	97103-106
Stocks	6772
Subsidiary undertakings	8490
Substantial shareholdings	~~102~~109
Taxation	6468
Treasury policies	~~31, 78~~32, 84
US accounting principles
– material differences
from UK GAAP	~~88-96~~94-102
– reconciliation to	~~91, 92~~97, 98

~~116 Signet Group plc~~

Design consultants corporateprm

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Printed in England by Royle Corporate Print.

Signet Group plc Annual Report & Accounts year ended 31 January 2004

121

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Signatures

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorised the undersigned to sign this annual report on its behalf.

SIGNET GROUP plc

/s/ Walker Boyd
Walker Boyd
Group Finance Director

22 April 2004

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Exhibits

~~Item 19.~~	~~Exhibits~~

~~Exhibit~~ ~~Number~~	~~Description of Exhibit~~

~~1.1~~Number		Description of Exhibit

1.1*		Articles of Association of Signet Group plc, adopted by Special Resolution passed on 13 June ~~13, 2002.~~2002 (incorporated herein by reference to Exhibit 1.1 to the Company’s Annual Report on Form 20-F, as filed with the Securities and Exchange Commission on 24 April 2003 (File No. 0-16945)).

4.1*		$410 million Multicurrency Revolving Facilities Agreement, dated as of 30 August ~~30,~~ 2001, between Signet Group plc, Barclays Capital, HSBC Investment Bank plc, First Union National Bank, The Royal Bank of Scotland plc and HSBC Investment Bank plc (incorporated herein by reference to Exhibit 4.1 to the Company’s Annual Report on Form 20-F, as filed with the Securities and Exchange Commission on 16 May ~~16,~~ 2002 (File No. 0-16945)).

4.2*	$100 million Multicurrency Revolving Credit Facility Agreement, dated as of May 31, 2000, between Signet Group plc; H.Samuel Limited; Signet US Holdings, Inc.; Sterling Inc.; Sterling Jewelers Inc.; James Walker, Goldsmith and Silversmith, Limited; Checkbury Limited; Sterling Jewelers LLC; Signet Holdings Limited; Signet Trading Limited; Signet UK Dormants Limited; Ernest Jones Limited; Barclays Capital; First Union National Bank; HSBC Investment Bank PLC; The Bank of Nova Scotia; The Royal Bank of Scotland PLC; Barclays Bank PLC; and HSBC Bank plc (incorporated herein by reference to Exhibit 4.1 to the Company’s Annual Report on Form 20-F, as filed with the Securities and Exchange Commission on May 11, 2001 (File No. 0-16945)).

4.3*	$250 million Multicurrency Revolving Credit Facility Agreement, dated as of July 13, 1998, between Signet Group plc; H.Samuel Limited; Ratners US Holdings, Inc.; Sterling Inc.; Sterling Jewelers Inc.; James Walker, Goldsmith and Silversmith, Limited; Checkbury Limited; Sterling Jewelers LLC; Barclays Capital; HSBC Investment Bank PLC; The Royal Bank of Scotland PLC; Barclays Bank PLC; Midland Bank plc; First Union National Bank; The Bank of Nova Scotia; Sumitomo Trust & Banking Co. Ltd.; Banca Monte Dei Paschi di Siena SPA, London Branch; Bank Austria AG; Bankgesellschaft Berlin AG, London Branch; The Huntington National Bank; Singer & Friedlander Limited; Banco Espirito Santo e Comercial de Lisboa S.A.; Brown Shipley, & Co. Limited; National City Bank; and Smurfit Paribas International (incorporated herein by reference to Exhibit 4.2 to the Company’s Annual Report on Form 20-F, as filed with the Securities and Exchange Commission on May 11, 2001 (File No. 0-16945)).
4.2*
4.4*	Guarantor Accession Memorandum, dated as of August 12, 1999, with respect to $250 million Multicurrency Revolving Credit Facility Agreement (incorporated herein by reference to Exhibit 4.3 to the Company’s Annual Report on Form 20-F, as filed with the Securities and Exchange Commission on May 11, 2001 (File No. 0-16945)).
*Incorporated by reference.

~~Back to Contents~~

~~Exhibit~~ ~~Number~~	~~Description of Exhibit~~

4.5*	Side Letter, dated as of January 3, 2001, with respect to $250 million Multicurrency Revolving Credit Facility Agreement (incorporated herein by reference to Exhibit 4.4 to the Company’s Annual Report on Form 20-F, as filed with the Securities and Exchange Commission on May 11, 2001 (File No. 0-16945)).

4.6*	$60 million Senior Unsecured Loan Notes Agency Agreement, dated as of 27 July ~~27,~~ 1998, between Signet Group plc; H.Samuel Limited; Ratners US Holdings, Inc.; Sterling Inc.; Sterling Jewelers Inc.; James Walker, Goldsmith and Silversmith, Limited; Checkbury Limited; Sterling Jewelers LLC; and De Nationale Investeringsbank N.V. (incorporated herein by reference to Exhibit 4.5 to the Company’s Annual Report on Form 20-F, as filed with the Securities and Exchange Commission on 11 May ~~11,~~ 2001 (File No. 0-16945)).

4.74.3		Deed of Guarantee, dated as of 12 August ~~12,~~ 1999, with respect to Signet Group plc U.S. $60,000,000 Senior Unsecured Loan Notes due 2005 (incorporated herein by reference to Exhibit 4.6 to the Company’s Annual Report on Form 20-F, as filed with the Securities and Exchange Commission on 11 May ~~11,~~ 2001 (File No. 0-16945)).

4.84.4		Letter of NIB Capital Bank to Signet Group plc, dated as of 24 November ~~24,~~ 2000, with respect to U.S. $60,000,000 Senior Unsecured Loan Notes due 2005 (incorporated herein by reference to Exhibit 4.7 to the Company’s Annual Report on Form 20-F, as filed with the Securities and Exchange Commission on 11 May ~~11,~~ 2001 (File No. 0-16945)).

4.9*4.5		Transfer and Servicing Agreement, dated as of November 2, 2001, between Sterling Receivables Corp., Sterling Jewelers Inc., and Sterling Jewelers Receivables Master Note Trust.

4.6*		Executive Service Agreement, dated as of 14 June ~~14,~~ 1995, between the Company and Walker Boyd, as amended 15 May ~~15,~~ 2000 (incorporated herein by reference to Exhibit 4.8 to the Company’s Annual Report on Form 20-F, as filed with the Securities and Exchange Commission on 11 May ~~11,~~ 2001 (File No. 0-16945)).

4.10*	Contract of Service, dated as of July 26, 1999, between the Company and Ian Xavier Dahl (incorporated herein by reference to Exhibit 4.9 to the Company’s Annual Report on Form 20-F, as filed with the Securities and Exchange Commission on May 11, 2001 (File No. 0-16945)).

~~4.11~~4.7 *		Amended and Restated Employment Agreement, dated as of 20 December ~~20,~~ 2000, between Sterling Jewelers Inc. and Terry Burman (incorporated herein by reference to Exhibit 4.10 to the Company’s Annual Report on Form 20-F, as filed with the Securities and Exchange Commission on 11 May ~~11,~~ 2001 (File No. 0-16945)).

8.1		List of Significant Subsidiaries of Signet Group plc


~~10.1~~12.1	~~Consent~~	Section 302 Certification of ~~KPMG Audit plc~~Walker Boyd

~~10.2~~12.2		Section 302 Certification of Terry Burman

13.1		Certification of Walker Boyd pursuant to 18 U.S.C. Section 1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002

~~10.3~~13.2		Certification of Terry Burman pursuant to 18 U.S.C. Section 1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002

14.1		Consent of KPMG Audit plc


*Incorporated by reference.

Signet Group plc Annual Report & Accounts year ended 31 January 2004

123

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~~SIGNATURES~~Cross reference to Form 20-F

The ~~registrant hereby certifies~~information in this document that ~~it meets all~~is referenced in the following table shall be deemed to be part of the ~~requirements for filing~~Annual Report on Form 20-F for the financial year ended 31 January 2004 and ~~that is has duly caused~~to be filed with the Securities and ~~authorized the undersigned to sign this annual report on its behalf.~~Exchange Commission.

Item		~~SIGNET GROUP PLC~~Page

1	~~By:~~Identity of directors, senior management and	~~/s/ Walker Boyd~~
	~~Name:~~advisors	~~Walker Boyd~~
	~~Title:~~Not applicable	~~Group Finance Director~~

~~Date: April 24, 2003~~

~~CERTIFICATION~~

~~I, Walker Boyd, certify that:~~

~~1. I have reviewed this annual report on Form 20-F of Signet Group plc;~~

2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

~~evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and~~

~~presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;~~

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

~~any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and~~

6. The registrant’s other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

~~Date: April 24, 2003~~	~~By:~~	~~/s/ Walker Boyd~~–
	~~Name:~~	~~Walker Boyd~~
2	Offer statistics and expected timetable
	~~Title:~~Not applicable	–

3A	Key information – Selected financial data
	Five year financial summary	6
	Risk and other factors – Financial market risks	32
	Selected financial data	115

3B	Key information – Capitalisation and indebtedness
	Not applicable	–

3C	Key information – Reasons for the offer and use
	of proceeds
	Not applicable	–

3D	Key information – Risk factors
	Risk and other factors	29

4	Information on the Company
	Chairman’s statement	2
	Group ~~Finance Director~~Chief Executive’s review	3
	US Operating review	7
	UK Operating review	15
	Description of property	20
	Financial review	21
	Risk and other factors – Seasonality	31
	Shareholder information	107
	Note to the accounts – Note 2	65
	Note to the accounts – Note 28	90

5	Operating and financial review and prospects
	US Operating review	7
	UK Operating review	15
	Financial review	21
	Risk and other factors – Financial market risks	32
	Note to the accounts – Note 26	84

Item		Page

6	Directors, senior management and employees
	Group employees	20
	Social, ethical and environmental matters –
	Employees	104
	Directors, officers and advisers	34
	Directors’ remuneration report	42
	Corporate governance statement	37

7A	Major shareholders
	Shareholder information – Nature of
	trading market	108
	Shareholder information – Substantial
	shareholdings and control of the Company	109

7B	Related party transactions
	Note to the accounts – Note 29	90

7C	Interest of experts and counsel
	Not applicable	–

8	Financial Information
	Consolidated balance sheet	57
	Consolidated cash flow statement	59
	Consolidated statement of total recognised
	gains and losses	60
	Note of consolidated historical cost profits
	and losses	60
	Note to the accounts – Note 25	83

9A	Offer and listing details
	Shareholder information – Nature of
	trading market	108

9B	Plan of distribution
	Not applicable	–

9C	Markets
	Shareholder information – Nature of
	trading market	108

124

Signet Group plc Annual Report & Accounts year ended 31 January 2004

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Cross reference to Form 20-F (continued)

Item		Page

9D	Selling shareholders
	Not applicable	–

9E	Dilution
	Not applicable	–

9F	Expenses of the Issuer
	Not applicable	–

10A	Additional information – Share capital
	Not applicable	–

10B	Additional information – Memorandum and Articles
	of Association
	Shareholder information – History	107

10C	Additional information – Material contracts
	Financial review – Liquidity and capital resources	23

10D	Additional information – Exchange controls
	Shareholder information – Dividends	109

10E	Additional information – Taxation
	Shareholder information – Taxation	110

10F	Additional information – Dividends and paying agents
	Not applicable	–

10G	Additional information – Statement by experts
	Not applicable	–

10H	Additional information – Documents on display
	Shareholder contacts	120

10I	Additional information – Subsidiary information
	Not applicable	–

11	Quantitative and qualitative disclosures
	about market risk
	Financial review	21
	Note to the accounts – Note 26	84

Item		Page

12	Description of securities other than
	equity securities
	Not applicable	–

13	Defaults, dividend arrears and delinquencies
	None	–

14	Material modifications to the rights of
	securities holders and use of proceeds
	None	–

15	Controls and procedures
	Corporate governance statement – Internal control	40

16A	Audit Committee Financial Expert
	Corporate governance statement
	– The Audit Committee	38

16B	Code of ethics
	Corporate governance statement – Code of
	Conduct and Code of Ethics	39

17	Financial Statements
	Independent auditor’s report	55
	Consolidated profit and loss account	56
	Consolidated balance sheet	57
	Company balance sheet	58
	Consolidated cash flow statement	59
	Consolidated statement of total recognised
	gains and losses	60
	Consolidated shareholders’ funds	61

18	Financial Statements
	Not applicable	–

19	Exhibits	123

Signet Group plc Annual Report & Accounts year ended 31 January 2004

125

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~~CERTIFICATION~~www.signetgroupplc.com

~~I, Terry Burman, certify that:~~

~~1. I have reviewed this annual report on Form 20-F of Signet Group plc;~~

~~evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and~~

~~presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;~~

~~any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and~~

~~Date: April 24, 2003~~	~~By:~~	~~/s/ Terry Burman~~Exhibit Index
	~~Name:~~	~~Terry Burman~~Exhibit
	~~Title:~~	~~Chief Executive Officer~~

~~Back to Contents~~

~~Exhibit Index~~

~~Exhibit~~ ~~Number~~	~~Description of Exhibit~~

~~1.1~~Number		Description of Exhibit

1.1*		Articles of Association of ~~the Company,~~Signet Group plc, adopted by Special Resolution passed on 13 June ~~13, 2002.~~2002 (incorporated herein by reference to Exhibit 1.1 to the Company’s Annual Report on Form 20-F, as filed with the Securities and Exchange Commission on 24 April 2003 (File No. 0-16945)).

4.1*		$410 million Multicurrency Revolving Facilities Agreement, dated as of 30 August ~~30,~~ 2001, between Signet Group plc, Barclays Capital, HSBC Investment Bank plc, First Union National Bank, The Royal Bank of Scotland plc and HSBC Investment Bank plc (incorporated herein by reference to Exhibit 4.1 to the Company’s Annual Report on Form 20-F, as filed with the Securities and Exchange Commission on 16 May ~~16,~~ 2002 (File No. 0-16945)).

4.2*	$100 million Multicurrency Revolving Credit Facility Agreement, dated as of May 31, 2000, between Signet Group plc; H.Samuel Limited; Signet US Holdings, Inc.; Sterling Inc.; Sterling Jewelers Inc.; James Walker, Goldsmith and Silversmith, Limited; Checkbury Limited; Sterling Jewelers LLC; Signet Holdings Limited; Signet Trading Limited; Signet UK Dormants Limited; Ernest Jones Limited; Barclays Capital; First Union National Bank; HSBC Investment Bank PLC; The Bank of Nova Scotia; The Royal Bank of Scotland PLC; Barclays Bank PLC; and HSBC Bank plc (incorporated herein by reference to Exhibit 4.1 to the Company’s Annual Report on Form 20-F, as filed with the Securities and Exchange Commission on May 11, 2001 (File No. 0-16945)).

4.3*	$250 million Multicurrency Revolving Credit Facility Agreement, dated as of July 13, 1998, between Signet Group plc; H.Samuel Limited; Ratners US Holdings, Inc.; Sterling Inc.; Sterling Jewelers Inc.; James Walker, Goldsmith and Silversmith, Limited; Checkbury Limited; Sterling Jewelers LLC; Barclays Capital; HSBC Investment Bank PLC; The Royal Bank of Scotland PLC; Barclays Bank PLC; Midland Bank plc; First Union National Bank; The Bank of Nova Scotia; Sumitomo Trust & Banking Co. Ltd.; Banca Monte Dei Paschi di Siena SPA, London Branch; Bank Austria AG; Bankgesellschaft Berlin AG, London Branch; The Huntington National Bank; Singer & Friedlander Limited; Banco Espirito Santo e Comercial de Lisboa S.A.; Brown Shipley, & Co. Limited; National City Bank; and Smurfit Paribas International (incorporated herein by reference to Exhibit 4.2 to the Company’s Annual Report on Form 20-F, as filed with the Securities and Exchange Commission on May 11, 2001 (File No. 0-16945)).
4.2*
4.4*	Guarantor Accession Memorandum, dated as of August 12, 1999, with respect to $250 million Multicurrency Revolving Credit Facility Agreement (incorporated herein by reference to Exhibit 4.3 to the Company’s Annual Report on Form 20-F, as filed with the Securities and Exchange Commission on May 11, 2001 (File No. 0-16945)).
*Incorporated by reference.

~~Back to Contents~~

~~Exhibit~~ ~~Number~~	~~Description of Exhibit~~

4.5*	Side Letter, dated as of January 3, 2001, with respect to $250 million Multicurrency Revolving Credit Facility Agreement (incorporated herein by reference to Exhibit 4.4 to the Company’s Annual Report on Form 20-F, as filed with the Securities and Exchange Commission on May 11, 2001 (File No. 0-16945)).

4.6*	$60 million Senior Unsecured Loan Notes Agency Agreement, dated as of 27 July ~~27,~~ 1998, between Signet Group plc; H.Samuel Limited; Ratners US Holdings, Inc.; Sterling Inc.; Sterling Jewelers Inc.; James Walker, Goldsmith and Silversmith, Limited; Checkbury Limited; Sterling Jewelers LLC; and De Nationale Investeringsbank N.V. (incorporated herein by reference to Exhibit 4.5 to the Company’s Annual Report on Form 20-F, as filed with the Securities and Exchange Commission on 11 May ~~11,~~ 2001 (File No. 0-16945)).
4.7*
4.3*		Deed of Guarantee, dated as of 12 August ~~12,~~ 1999, with respect to Signet Group plc U.S. $60,000,000 Senior Unsecured Loan Notes due 2005 (incorporated herein by reference to Exhibit 4.6 to the Company’s Annual Report on Form 20-F, as filed with the Securities and Exchange Commission on 11 May ~~11,~~ 2001 (File No. 0-16945)).

4.84.4		Letter of NIB Capital Bank to Signet Group plc, dated as of 24 November ~~24,~~ 2000, with respect to U.S. $60,000,000 Senior Unsecured Loan Notes due 2005 (incorporated herein by reference to Exhibit 4.7 to the Company’s Annual Report on Form 20-F, as filed with the Securities and Exchange Commission on 11 May ~~11,~~ 2001 (File No. 0-16945)).

4.9*4.5		Transfer and Servicing Agreement, dated as of November 2, 2001, between Sterling Receivables Corp., Sterling Jewelers Inc., and Sterling Jewelers Receivables Master Note Trust.

4.6*		Executive Service Agreement, dated as of 14 June ~~14,~~ 1995, between the Company and Walker Boyd, as amended 15 May ~~15,~~ 2000 (incorporated herein by reference to Exhibit 4.8 to the Company’s Annual Report on Form 20-F, as filed with the Securities and Exchange Commission on 11 May ~~11,~~ 2001 (File No. 0-16945)).

4.10*	Contract of Service, dated as of July 26, 1999, between the Company and Ian Xavier Dahl (incorporated herein by reference to Exhibit 4.9 to the Company’s Annual Report on Form 20-F, as filed with the Securities and Exchange Commission on May 11, 2001 (File No. 0-16945)).

~~4.11~~4.7 *		Amended and Restated Employment Agreement, dated as of 20 December ~~20,~~ 2000, between Sterling Jewelers Inc. and Terry Burman (incorporated herein by reference to Exhibit 4.10 to the Company’s Annual Report on Form 20-F, as filed with the Securities and Exchange Commission on 11 May ~~11,~~ 2001 (File No. 0-16945)).

8.1		List of Significant Subsidiaries of Signet Group plc


~~10.1~~12.1	Section 302 Certification of Walker Boyd	~~Consent of KPMG Audit plc~~

~~10.2~~12.2	Section 302 Certification of Terry Burman

13.1	Certification of Walker Boyd pursuant to 18 U.S.C. Section 1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002

~~10.3~~13.2	Certification of Terry Burman pursuant to 18 U.S.C. Section 1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002

14.1	Consent of KPMG Audit plc


*Incorporated by reference.

Ordinary Shares of 0.5 pence each		~~1,713,768,396~~1,726,190,848
Class A Dollar Deferred Shares of $0.01 each		0
Class B Dollar Deferred Shares of $1.00 each		0

~~(1)~~	~~2001/02 was a 53 week year. On a comparable 52 week basis~~

	2003/04
	Group highlights
			reported	at constant
			basis	exchange rates ~~sales increased by 7.9%, operating profit by 14.8%, profit~~⁽¹⁾
	•	Sales: £1,617.2m	up 0.6%	up 7.3%

	•	Operating profit: £222.3m	up 3.9%⁽²⁾	up 11.2%

	•	Profit before ~~tax by 16.2% and earnings~~tax: £211.9m	up 6.0%⁽²⁾	up 13.0%

	•	Earnings per share ~~by 11.9%~~⁽³⁾: 8.0p	up 6.7%⁽²⁾	up 12.7%

	•	Dividend per share: 2.501p	up 18.5%

	•	Return on capital employed⁽³⁾up from 24.1%⁽²⁾to 24.8%

	•	Gearing⁽³⁾down from 20.7%⁽²⁾to 11.0%

~~(1)~~	~~On a comparable 52 week basis UK total sales increased by 6.2%.~~
~~(2)~~ (1)	~~On a comparable 52 week basis UK operating profit increased by 13.2%~~Restated for the implementation of FRS 17 – ‘Retirement Benefits’ .

(1)	Amounts in pounds sterling are translated into US dollars solely for the convenience of the reader, at a rate of £1.00 to ~~$1.64,~~$1.82, the Noon Buying Rate on 3130 January ~~2003.~~2004.
(2)	During 2003/04 the Group adopted FRS17 – ‘Retirement Benefits’. The adoption of the standard resulted in a prior year adjustment (see note 17 on page 75).
(3)	53 week ~~year.The~~year. The impact of the additional week on sales was £22.4 million, operating profit £4.0 million, net interest payable £0.4 million and profit before tax £3.6 ~~million.~~million
~~(3)~~(4)	During 2001/02 the Group adopted FRS19 – ‘Deferred Tax’. The adoption of the standard resulted in a prior year adjustment (see note 17 on page 75).
(5)	Earnings per share, gearing and return on capital employed are defined on ~~pages 110 and 111.~~page 118.
~~(4)~~	During 2001/02 the Group adopted FRS19 – ‘Deferred Tax’.The adoption of the standard resulted in a prior year adjustment affecting shareholders’ funds for 1998/99, 1999/00, 2000/01 (see note 17 on page 70).
~~(5)~~(6)	Including only stores operated for the full financial period.

In-house credit operations
					2003/04	2002/03		2001/02
	2002/03		2001/02	2000/01

Credit sales ($m)	859.6		817.2	724.0	924.3	859.6		817.2
Credit sales as % of total sales	49.5%		50.4%	49.7%	49.3%	49.5%		50.4%
Number of active credit accounts at year end	798,761		799,043	793,792	807,272	798,761		799,043
Average outstanding account balance ($)	688		660	652	729	688		660
Average monthly collection rates	14.5%		13.9%	13.9%	14.8%	14.5%		13.9%
Bad debt as % of total sales	3.0%⁽¹	⁾	3.2%	3.4%	2.8%	3.0%	⁽¹⁾	3.2%
Bad debt as % of credit sales	6.0%⁽¹	⁾	6.3%	6.8%	5.6%	6.0%	⁽¹⁾	6.3%



	Registration statement pursuant to Section 12(b) or (g) of the Securities Exchange Act of 1934

	Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the fiscal year ended ~~February 1, 2003~~January 31, 2004

	Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the transition period from ________ to ________.

2002/03 Group highlights

Sales	up	1.9%	⁽¹⁾	to	£1,608.0m

Operating profit	up	7.7%	⁽¹⁾	to	£216.2m

Profit before tax	up	9.2%	⁽¹⁾	to	£199.7m

Earnings per share⁽²⁾	up	5.6%	⁽¹⁾	to	7.5p

Dividend per share	up	17.9%		to	2.11p

Return on capital employed⁽²⁾	up from	23.3%		to	23.8%

Gearing	down from	29.7%		to	20.1%

	(1)	See page 25 for reconciliation to Generally Accepted Accounting Principles figures.
	(2)	1999/00 to 2002/03 restated for the implementation of FRS 17 – ‘Retirement Benefits’.
~~(2)~~	(3)	Earnings per share, ~~and~~ return on capital employed and gearing are defined on ~~pages 110 and 111.~~page 118.
	(4)	53 week year.

	2003/04		2002/03		Change		Like for like change

	£m		£m		%		%

Sales	1,116.2		1,134.4		-1.6	⁽¹⁾	+4.6
Operating profit	151.4		155.2		-2.4	⁽²⁾
Operating margin	13.6	%	13.7	%
ROCE	20.5	%	21.5	%

	(1)	~~On a comparable 52 week basis and at~~At constant exchange rates US total sales increased by ~~8.6% (2.2% at actual exchange rates)~~8.0%.
	(2)	~~On a comparable 52 week basis and at~~At constant exchange rates US operating profit increased by ~~15.6% (8.8% at actual exchange rates)~~7.1%.



Signet Group plc Annual Report & Accounts year ended 31 January 2004	3

	Total		Kay		Regional		Jared

2 February 2002	1,025		667		303		55
Openings	48		22		14		12
Closures	(23	)	(13	)	(10	)	–

1 February 2003	1,050		676		307		67

	Total		Kay		Regional		Jared

1 February 2003	1,050		676		307		67
Openings	69		49	⁽¹⁾	8		12
Closures	(16	)	(8	)	(8	)	–

31 January 2004	1,103		717	⁽¹⁾	307		79

							Like
							for like
	2002/03		2001/02		Change		change

	£m		£m		%		%

Sales
H.Samuel	279.1		277.3		+0.6		+2.6
Ernest Jones	188.0		168.5		+11.6		+9.4
Other	6.5		6.3

Total	473.6		452.1		+4.8	⁽¹⁾	+5.2

Operating profit	67.0		60.7		+10.4	⁽²⁾
Operating margin %	14.1	%	13.4	%
ROCE %	38.0	%	39.4	%


	2002/03		2002/03⁽¹⁾		2001/02⁽²⁾		2000/01		1999/00		1998/99

	£m		$m		£m		£m		£m		£m

Sales	1,608.0		2,637.1		1,578.1		1,387.3		1,136.5		991.2

Operating profit	216.2		354.6		200.7		178.7		139.1		102.3
Net interest payable	(16.5	)	(27.1	)	(17.9	)	(15.9	)	(11.4	)	(13.1	)

Profit before tax	199.7		327.5		182.8		162.8		127.7		89.2
Taxation	(70.8	)	(116.1	)	(63.1	)	(52.1	)	(38.3	)	(24.0	)

Profit for the period	128.9		211.4		119.7		110.7		89.4		65.2

Earnings per share⁽³⁾	7.5p		$0.12		7.1p		6.6p		5.3p		3.9p
Dividend per share	2.110p		$0.0346		1.789p		1.625p		1.450p		1.000p

Capital expenditure	49.5		81.2		59.8		56.2		39.3		30.9
Investment in fixed and working capital	121.3		198.9		108.1		132.0		83.2		56.9
Depreciation and amortisation	37.8		62.0		34.7		30.6		27.8		27.6
Net debt	140.1		229.8		201.7		229.1		91.6		111.5
Shareholders’ funds (as restated)⁽⁴⁾	696.5		1,142.3		679.7		565.4		448.3		379.6

Gearing⁽³⁾	20.1%				29.7%		40.5%		20.4%		29.4%
Return on capital employed⁽³⁾	23.8%				23.3%		25.2%		24.1%		19.5%

Store numbers (at end of period):
US	1,050				1,025		999		827		788
UK	610				606		605		606		606
Percentage increase/(decrease)
in like for like sales:
US	5%				1%		6%		11%		10%
UK	5%				9%		9%		5%		(1)%
Average sales per store (000’s):⁽⁵⁾
US	1,088		1,665		1,125		1,117		939		823
UK	747		1,143		735		665		613		580
Number of employees
(full-time equivalents)	14,160				13,525		12,520		11,450		10,919

•	Merchandising
Management believes that in comparison to its competitors Signet has greater capacity and expertise to direct source

•	Store operations
The sales associate’s ability to communicate and explain the value and quality of the merchandise plays a significant part in a retail jewellery purchase. Therefore, the US division has developed specialised training for its retail personnel, and its size provides leverage of training resources and systems.

•	Marketing
Kay is one of a very limited number of US speciality retail jewellery brands with a presence large enough to justify national network television advertising, the most cost effective way to attract customers, enter new markets and increase brand recognition.

•	Real estate
Strict criteria are followed when evaluating real estate investment, and management believes that the quality of its store portfolio is superior to that of its competitors.

•	expansion of the Leo Diamond range,
•	expansion of the Jared luxury watch range,
•	record level of training,
•	further development of systems for greater operational efficiency,
•	increased national TV advertising for Kay,
•	expansion of Jared TV advertising programme,
•	space increase of 7%, and
•	test of Kay off-mall store format.

	Number of stores

	2002/03	2001/02	2000/01

Store refurbishments
and relocations	71	91	99
New mall stores	36	41	40
New Jared stores	12	12	15

Fixed capital expenditure	£28m	£37m	£40m
Total investment⁽¹⁾	£63m	£68m	£72m

(1)	Figures for stores opened during the year are adjusted for the impact of conversions of format between Kay and regional chains.
(2)	Includes test of Kay stores in off-mall shopping centres.
(3)	Based upon stores operated for the full financial year.

~~(1)~~	~~Acquisition of Marks & Morgan on 31 July 2000.~~
~~(2)~~	~~Figures for stores opened and closed during the year exclude conversions of format between Kay and regional chains.~~
~~(3)~~	~~Based upon stores operated for the full financial year.~~

Merchandise mix
	Percentage of sales
		2002/03	2001/02	2000/01

		%	%	%

Diamonds		69	67	66
Gold jewellery		8	10	11
Gemstones		10	10	11
Watches		6	6	7
Repairs		7	7	5

		100	100	100

•	Merchandising
Management believes that the division’s capacity to contract with jewellery manufacturers to assemble products utilising directly sourced loose polished diamonds and gold allows for delivery of better value to the customer.

•	Store operations
The sale of diamond jewellery requires increased standards of product knowledge and customer service from sales associates. The division develops and invests in training procedures and materials tailored to its own requirements to help achieve this. In addition it can take advantage of economies of scale in recruitment and store administration.

•	Marketing
The UK division has strong and well established brands and leverages them with print and television advertising and marketing catalogues.

•	Real estate
The competitive advantage of national coverage for both brands and the prime locations of stores is being enhanced by the rollout of a new format designed to increase the sale of diamonds and fine jewellery, thereby increasing sales per store.

•	development of branded diamonds,

•	improvement in visual merchandising,

•	test television advertising for H.Samuel and Ernest Jones,

•	further development of catalogue design and distribution,

•	enhancement of selection and training processes for sales associates and management,

•	introduction of enhanced computer systems accessible from all stores, which help automate and standardise processes, facilitate training and improve communication, and

•	extension of new store design to an additional 35 stores.

H.Samuel store data
	2002/03		2001/02		2000/01

Number of stores
Opened during year	4		10		9
Closed during year	(8	)	(16	)	(8	)
Open at end of year	418		422		428
Percentage increase in
like for like sales	2.6%		6.4%		6.0%
Average retail price of
items sold⁽¹⁾	£33		£31		£28
Average sales per store in
thousands (exc.VAT)⁽²⁾	£677		£667		£609

~~(1)~~16	~~Excluding accessories, repairs and warranties.~~
~~(2)~~	~~Including only stores operated for the full financial year.~~Signet Group plc Annual Report & Accounts year ended 31 January 2004

Ernest Jones store data⁽¹⁾
	2002/03	2001/02		2000/01

Number of stores
Opened during year	8	9		3
Closed during year	–	(2	)	(5	)
Open at end of year	192	184		177
Percentage increase in
like for like sales	9.4%	14.6%		13.5%
Average retail price of
items sold⁽²⁾	£130	£119		£109
Average sales per store in
thousands (exc.VAT)⁽³⁾	£1,030	£919		£805

Ernest Jones store data⁽¹⁾
	2003/04		2002/03		2001/02

Number of stores
Opened during year	5		8		9
Closed during year	–		–		(2	)
Open at end of year	197		192		184
Percentage increase in like for like sales	8.4	%	9.4	%	14.6	%
Average retail price of items sold⁽²⁾	£139		£130		£119
Average sales per store in thousand (exc. VAT)⁽³⁾	£1,101		£1,030		£919