REG - DFS Furniture PLC - Trading Statement

DFS FurnitureAnnouncement

19/01/2024 07:00

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RNS Number : 2118A  DFS Furniture PLC  19 January 2024

19 January 2024

 

Immediate release

 

DFS Furniture plc ("DFS" and the "Group")

 

Trading Update

 

Market share gains and cost base improvements mitigate challenging trading
conditions

Full year profit guidance unchanged

 

DFS Furniture plc, the market leading retailer of living room and upholstered
furniture in the United Kingdom, today announces a trading update for the
twenty six week financial reporting period to 24 December 2023, together with
an update on recent trading.

 

Summary:

●    Group order intake down -1.1% on last year, outperforming a
challenging market

●   First half underlying profit before tax and brand amortisation (PBTu)
expected to be up slightly year on year, supported by continued progress on
gross margin and cost base improvements

●    Full year guidance unchanged at £30-35m PBTu

 

Trading overview:

Overall market demand has been weaker than anticipated, down approximately
-9%(1) year on year in volume terms. We believe this performance was
particularly impacted by record hot weather in September and early October
when footfall and demand proved to be especially weak. We have since seen
demand recover and our profit guidance assumes market volumes are down -5%
year on year through the remainder of the second half.

 

Although we have not been immune to the market volatility and weaker demand,
Group Order Intake for the period of -1.1% year on year was ahead of the
market(1).

 

Gross sales, recognised on delivery of orders to customers were down -5.6% /
-£39m year on year. As expected, this was a greater decline than order intake
as a result of the unwind of an elevated opening order bank at the start of
the prior year resulting in a higher level of delivered sales in the
comparator period.

 

Despite the tougher than expected market conditions, we expect to report PBTu
for the first half slightly ahead of the prior year (FY23 £7.1m). This has
been supported by improved operational performance, manufacturing &
sourcing and cost to operate efficiency programmes.

 

Non underlying charges for the period are expected to be c£6m, with a c£4m
cash cost. These relate to completing the planned closure of part of our
manufacturing operations and implementation costs associated with our cost to
operate efficiency programmes. Our full year expectation for non underlying
charges of £7m (with a £5m cash cost) remains in line with previous
guidance.

 

We expect to report closing net bank debt at the end of the period (excluding
capitalised leases) of c£134m (FY23 year end £140m, facility size £250m)
and leverage of c1.7x (FY23 year end 1.9x)(2)

 

Outlook:

 

 Full year guidance           September 2023     January 2024
 Revenue                      £1,060m-£1,080m    £1,020m-£1,040m
 PBTu                         £30m-£35m          £30m-35m
 Cash capex                   £25m-£30m          £25-£30m
 Non underlying costs (cash)  £4m-£5m            £5m

 

We have reduced our revenue guidance to reflect the weaker than expected
demand. The impact of this reduction on PBT is expected to be offset by
progress lowering our operating costs and our full year profit guidance
remains unchanged at £30-35m PBTu (FY23 £30.6m).

 

Order intake for the winter sale campaign to date is consistent with our first
half run rate. Our full year guidance assumes that Group order intake grows at
low single digit levels across the second half partially supported by growth
in the final quarter as we anniversary softer comparatives. In addition, we
assume that events in the Red Sea are resolved such that customer orders are
delivered in line with typical lead times close to our year end.

 

Looking beyond FY24 we believe the Group is well positioned to deliver strong
shareholder returns. Our scale and trusted brands provide us a relative
advantage and should allow us to maintain our trend of market share gains.
This, together with our strategies to continue improving gross margin rate and
the efficiency of our cost base, should drive improvement in profit levels.
Given market volumes are over 20% below pre-pandemic levels, market recovery
and our planned growth in the Home segment provide us with confidence in our
8% PBT target over the medium term.

 

The Group will announce its interim results for the period ending 24 December
2023 on 19 March 2024.

 

Comment from Tim Stacey, Group Chief Executive

"The Group has performed well in tough trading conditions. Despite the weaker
than expected market, good operational performance and progress on gross
margins and lowering our cost base have enabled us to deliver a profit for the
first half that is slightly ahead of the prior year and we remain on track to
deliver our full year profit target.

 

Looking forward, the Group has good growth prospects and is well positioned to
drive attractive returns for shareholders, capitalising on market recovery as
well as growing our Home offering and delivering our 8% PBT target."

 

(1) Market value share growth based on proprietary Barclaycard data. Market
volume covers July-November period (source: CACI banking data) and an estimate
for December

(2) Leverage: Ratio of period end net bank debt to cash EBITDA for the
previous twelve months

 

Enquiries:

 

DFS (enquiries via Teneo)

Tim Stacey (Group CEO)

John Fallon (Group CFO)

Phil Hutchinson (Investor Relations)

investor.relations@dfs.co.uk

 

Teneo

James Macey-White

Jessica Reid

Ayo Sangobowale

+44 (0)20 7353 4200

85fs.dfs@teneo.com

 

About DFS Furniture plc

 

The Group is the clear market-leading retailer of living room furniture in the
United Kingdom. Our Group purpose is to bring great design and comfort into
every living room, in an affordable, responsible and sustainable manner. We
operate an integrated physical and digital retail network of living room
furniture showrooms and web sites in the United Kingdom and Republic of
Ireland, trading through our leading brands, DFS and Sofology. We attract
customers through our targeted and national marketing activities and our
reputation for high quality products and service, breadth of product offer and
favourable consumer financing options. We fulfil orders for our exclusive
product ranges through our own UK finished goods factories, and through
manufacturing partners located in the UK, Europe and Far East, and delivered
with care through our expert final-mile delivery service "The Sofa Delivery
Company Limited".

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