Interim Results
15/02/2023 07:00
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RNS Number : 9344P Dunelm Group plc 15 February 2023
15 February 2023
Dunelm Group plc
Interim Results for the 26 weeks ended 31 December 2022
Strong performance and seizing the opportunity for sustainable growth
Dunelm Group plc ("Dunelm" or "the Group"), the UK's leading homewares
retailer, today announces its interim results for the 26 weeks to 31 December
2022.
FY23 H1 FY22 H1 YoY
Total sales £835.0m £795.6m +5.0%
Gross margin 51.1% 52.8% -170bps
Operating costs:sales ratio 36.6% 34.8% +180bps
Profit before tax (PBT) £117.4m £140.8m -16.6%
Digital % total sales(1) 34% 33% +1ppt
Free cash flow(2) £102.1m £106.3m -£4.2m
Net cash(3) £18.2m £47.7m -£29.5m
Diluted earnings per share 45.8p 55.4p -17.3%
Ordinary dividend per share 15p 14p +7.1%
Special dividend per share 40p 37p n/a
Highlights
· Strong sales growth of 5%, with total sales 43% higher than H1 FY20
(pre-pandemic), as we helped customers manage their household budgets
· Customers responded well to the Dunelm offer across our categories,
with a significantly increased range on Dunelm.com, where we launched c.10,000
new SKUs
· 160bps market share gain in homewares and continued share gains in
furniture(4)
· Active customers 5.7% higher than last year(5), with 4.8% increase in
shopping frequency(6)
· Three new stores opened, including one relocation
· Tripled our 'Delivering Joy' campaign, with over 60,000 Christmas
gifts donated to local causes
Financial highlights
· Tight commercial discipline and operational grip delivered gross
margin of 51.1%
· PBT of £117.4m, down on the prior year as expected, reflecting impact
of Sale timing and strong post-pandemic demand in the prior year, and
inflationary impacts
· £17m of investment in digitalisation, capability and capacity to
support future growth opportunity
· Free cash flow of £102.1m, an excellent cash conversion of operating
profit of 84%
· Interim dividend of 15p (FY22 H1: 14p), an increase of 7.1%
· Special dividend of 40p declared to return to target leverage range of
0.2× - 0.6× net debt:EBITDA(7)
Outlook and current trading
· Strong performance in the first half and a strong Winter Sale
· Whilst customers have been resilient to date, the consumer outlook
remains unpredictable
· Our expectations for FY23 PBT remain unchanged(8)
Nick Wilkinson, Chief Executive Officer, commented:
"We are all learning to live in a new, complex and rapidly evolving economic
reality. Recognising this, our focus has been on ensuring that we continue to
offer outstanding value to our savvy customers through a proposition which is
committed to quality, at the right price, across an expanding range of
relevant products. We believe that this is why we have continued to grow our
sales, customer numbers and market share.
"In this environment, agility, creativity and innovation are more important
than ever and we have endeavoured to make every pound count, both for
ourselves and for our customers, helping to mitigate the impact of inflation.
While we do this, it is important that we also maintain our long-term
thinking, invest for sustainable growth and continue to ensure we are in a
position to seize the significant opportunities ahead of us.
"Much like during the pandemic, our customers, colleagues and the communities
we operate in will remember how businesses behaved when times were tough, and
we are confident that our approach of offering outstanding value and choice
for all will enable us to - once again - emerge from this challenging period
stronger than ever."
1 Digital includes home delivery, Click & Collect and tablet-based sales
in store
2 Free cash flow is defined as net cash generated from operating activities
less capex (net of disposals) and business combinations, net interest paid
(including leases) and loan transaction costs, and repayment of principal
element of lease liabilities. A reconciliation of operating profit to free
cash flow is included in the CFO review
3 Excluding lease liabilities. Full definition provided in the table of
alternative performance measures in the CFO review
(4) GlobalData UK homewares and furniture markets, January 2022 to December
2022. Furniture excludes kitchen and bathroom furniture
(5) Unique active customers who have transacted at least once in the 12 months
to December 2022. Management estimates using Barclays data
(6) Number of visits per retained customer in the 12 months to December 2022.
Retained customers defined as those who have shopped with Dunelm in the 12
months to December 2021 and the 12 months to December 2022. Source: Barclays
(7) Operating profit plus depreciation and amortisation of property, plant and
equipment and intangible assets plus loss on disposal and impairment of
property, plant and equipment and intangible assets plus depreciation on
right-of-use assets
(8) At our Preliminary results in September 2022, we confirmed that we were on
track to deliver FY23 PBT in line with analysts' expectations. In September
2022, the company compiled consensus average of analysts' expectations for
FY23 PBT was £178m, with a range of £130m to £193m. The current company
compiled consensus average of analysts' expectations for FY23 PBT is £176m,
with a range of £131m to £188m
Analyst Presentation:
There will be an in-person presentation for analysts and institutional
investors this morning at 9.30am, hosted at Peel Hunt LLP, 100 Liverpool
Street, London, EC2M 2AT, as well as a webcast and conference call with a
facility for Q&A. For details, please contact pauline.guenot@mhpgroup.com
(mailto:pauline.guenot@mhpgroup.com) . A copy of the presentation will be made
available at https://corporate.dunelm.com (https://corporate.dunelm.com)
For further information please contact:
Dunelm Group plc investorrelations@dunelm.com
Nick Wilkinson, Chief Executive Officer
Karen Witts, Chief Financial Officer
MHP 07710 032 657
Simon Hockridge / Rachel Farrington / Pete Lambie dunelm@mhpgroup.com
Next scheduled event:
Dunelm will release its third quarter trading update on 20 April 2023.
Quarterly analysis:
52 weeks to 1 July 2023
Q1 Q2 H1 Q3 Q4 H2 FY
Total sales £356.7m £478.3m £835.0m
Total sales growth -8.3% 17.6% 5.0%
Digital % total sales 33% 35% 34%
53 weeks to 2 July 2022
Q1 Q2 H1 Q3 Q4 H2 FY
Total sales £388.8m £406.8m £795.6m £399.0m £386.7m £785.7m £1,581.4m
Total sales growth 8.3% 12.9% 10.6% 68.6% 1.7% 27.4% 18.4%
Digital % total sales 33% 33% 33% 35% 37% 36% 35%
52 weeks to 26 June 2021
Q1 Q2 H1 Q3 Q4 H2 FY
Total sales £359.1m £360.4m £719.4m £236.6m £380.2m £616.8m £1,336.2m
Total sales growth 36.7% 11.8% 23.0% -16.8% 101.7% 30.4% 26.3%
Digital % total sales 30% 41% 35% 93% 37% 59% 46%
Notes to Editors:
Dunelm is the UK's market leader in homewares, with a specialist offering
for customers across multiple categories via its 179 predominantly out-of-town
superstores and website, dunelm.com.
The business was founded in 1979 as a market stall, selling ready-made
curtains. The first shop was opened in Leicester in 1984, with the first
superstore opening in 1991. With a vision to become the 1(st) Choice for Home,
Dunelm offers quality, value and style throughout its extensive product range,
alongside services such as Home Delivery, Click & Collect and Made to
Measure window treatments. From its textiles heritage in areas such as
bedding, curtains, cushions, quilts and pillows, Dunelm has broadened its
range into categories including furniture, kitchenware, dining, lighting,
outdoor, craft and decoration. Its c.60,000 product lines include specialist
own brands and labels such as Dorma and Fogarty, sourced from long-term
committed suppliers.
Dunelm's purpose is 'To help create the joy of truly feeling at home, now and
for generations to come'. The business is headquartered in Leicester and
employs over 11,000 colleagues. It has been listed on the London Stock
Exchange since October 2006 (DNLM.L) and has a current market
capitalisation of approximately £2.3bn.
CHAIR'S STATEMENT
These are the first set of Interim results since I became Chair of Dunelm and
I am very pleased to be able to report that the business has delivered another
strong performance in the first half of FY23. Dunelm's outstanding offer
continues to resonate with customers in these challenging and uncertain times,
by providing them with value, choice and relevance. I would like to thank all
of our 11,000 colleagues for their hard work and dedication and for continuing
to deliver an outstanding service to our customers every day.
Sustainability and community are at the heart of what we do, and are
increasingly integrated with our day-to-day working practices. We are making
good progress on our 'Pathway to Zero', for example in our Conscious Choice
ranges, where we will soon have the first products in store using materials
like those recycled through our own textiles take-back scheme. We were very
pleased with our 'Delivering Joy' campaign, which saw more than 60,000 gifts -
three times as many as in the previous year - donated by our customers and
colleagues to support local causes over the festive period.
We have continued to strengthen our position as the UK's leading homewares
retailer with further market share gains in both homewares and furniture. Our
sales increased by 5% to £835.0m (FY22 H1: £795.6m) in the first half of our
financial year, despite a strong comparative period. We generated profit
before tax of £117.4m (FY22 H1: £140.8m), and delivered free cash flow of
£102.1m (FY22 H1: £106.3m), a cash conversion rate of 84%.
The Board has declared an ordinary dividend of 15 pence per share (FY22 H1: 14
pence), reflecting our strong financial performance and our confidence in
future growth. With our continued strong cash generation, healthy balance
sheet, and an ongoing commitment to our published capital policy, the Board
has also declared a special dividend of 40 pence per share.
I would like to thank and congratulate my predecessor, Andy Harrison, for his
considerable achievements in his time at Dunelm. Having joined the Board in
2014, Andy has left a strong legacy with the business developing significant
new capabilities during his tenure, which provide us with a strong base on
which we can build for the future.
I am delighted to have taken on the Dunelm Chair role in January this year,
having joined the Board last September. I have long admired Dunelm as a
customer and over the last few months I have thoroughly enjoyed visiting many
of our stores and sites as well as meeting some of our excellent suppliers.
This is a business with very special colleagues, who are ambitious and
passionately demonstrate their commitment to the company and its values.
The Board is fully committed to our strategy to become the 1st Choice for Home
and believes in the significant growth opportunities ahead. Whilst we
recognise ongoing uncertainty in the macroeconomic and consumer environment,
we are performing well and will focus on being adaptable and maintaining
strong operational grip.
We will invest in providing outstanding products, service, value and choice
for our customers, gaining market share and continuing to deliver for
colleagues, communities, suppliers and shareholders.
Alison Brittain
Chair
15 February 2023
CHIEF EXECUTIVE OFFICER'S REVIEW
Introduction
The first half of FY23 was characterised by more external uncertainty, during
which inflationary pressure on consumers was high. It is in these ongoing
turbulent times that our ability to act with agility whilst continuing to
listen and learn from our customers really shines through and makes Dunelm's
offer as relevant as ever. Our increasing range of products across multiple
homewares and furniture categories, combined with outstanding value, was able
to play a key role in helping our customers both manage their household
budgets and feel good in their homes.
Ambition and adaptability are equally important in such a challenging
environment. We are ambitious about profitable growth and, alongside the
delivery of another set of strong financial results, we continue to focus on
digitalising the business and building our capability and capacity as a
platform for our future growth. We see a lot of opportunity in a large market
where - in a number of categories - we are still in the early stages of our
development, with low shares. As we learn, build our capabilities and expand
our product range in these areas, we see a significant runway for growth.
As the difficult economic climate continues to impact consumers and
businesses, we continue to adapt to these changes, both as a business, and in
response to our customers' evolving needs. We learn as we adapt, and I am
confident that Dunelm will continue to develop as a stronger and better
business as a result.
I offer my sincerest thanks to all my Dunelm colleagues, who continue to serve
our customers and support each other brilliantly. Dunelm's continued success
is testament to their hard work, commitment and resilience in these
challenging times.
H1 Review
A resilient performance with strong operational grip
We were pleased to deliver another strong performance in H1, with total sales
5% higher than FY22 and 43% higher than the comparable period in FY20
(pre-pandemic). While the year-on-year comparatives reflect some shifts in the
timing of our Sale events(9) we saw good rates of underlying growth throughout
the half.
Our growth continues to be broad-based across our categories and we continue
to offer customers a wide choice of relevant products at outstanding value.
Items that helped savvy customers to manage their budgets, such as heated
airers and thermal curtains, were particularly popular. We saw good growth in
customer numbers which increased by 5.7%(10), and shopping frequency grew by
4.8%(11). Our market share in homewares improved by 160bps, and we also gained
share in the furniture market(12), where we continue to build our offer,
particularly online. Sales increased in both stores and digital channels, once
again reflecting the strength of our total retail system.
Our gross margin of 51.1% (FY22 H1: 52.8%) was consistent with previous
guidance. We have forward buying and hedging policies in place that give us
good visibility and provide a degree of certainty over our input costs,
helping us to manage our overall margin structure across our categories and
good/better/best pricing hierarchies. Better visibility of some of the larger
operating costs also helped us to manage the impact of inflation. The
combination of robust sales and tight operational grip delivered PBT of
£117.4m, with a strong PBT margin of 14.1%. As expected, this was lower than
the FY22 H1 PBT of £140.8m, which benefitted from a rescheduled Summer Sale
and particularly high levels of store sales, as stores reopened post pandemic.
In addition to this, strong free cash flow of £102.1m enabled us to declare a
special dividend of 40 pence per share alongside our interim dividend of 15
pence per share, reflecting our confidence in the future performance of the
business and returning leverage to within our target range.
(9) The Q1 comparative benefitted from the rescheduled Summer Sale in 2021.
Due to the 53(rd) week at the end of FY22, six days of the Winter Sale fell
into Q2 this year (the Sale began in Q3 last year)
(10) Unique active customers who have transacted at least once in the 12
months to December 2022. Management estimates using Barclays data
(11) Number of visits per retained customer in the 12 months to December 2022.
Retained customers defined as those who have shopped with Dunelm in the 12
months to December 2021 and the 12 months to December 2022. Source: Barclays
(12) GlobalData UK homewares and furniture markets, January 2022 to December
2022. Furniture excludes kitchen and bathroom furniture
Seizing the opportunity
Our purpose as a company is to help create the joy of truly feeling at home,
now and for generations to come. This purpose, along with our ambitions and
values, were set out before the pandemic, reinforced during the pandemic and
remain as relevant as ever today. They have guided us as we have adapted
quickly to a rapidly evolving landscape, helping us to deliver continued
market share gains and profitable growth. Alongside being adaptable, we have
been confident enough to continue investing, to strengthen our proposition for
the long term, enabling us to digitalise and transform. It is this
adaptability and long-term focus that has allowed Dunelm to thrive and
demonstrate healthy returns on these investments.
We have made great progress in recent years but are more excited about the
opportunities that lie ahead. There is enormous scope for us to gain further
market share across the homewares and furniture landscapes and deliver
profitable, sustainable growth long into the future.
Market share runway
Dunelm operates in the large and fragmented markets of homewares and
furniture, with each featuring a significant number of sub-categories. The
combined market size is c.£23bn, with our share of this total market being
c.7%(13). We have higher market shares (in excess of 10%) in our
longer-established homewares categories, such as window dressings and bedding,
which account for c.£5bn of the total market. We believe we will continue to
grow share in these categories. There is further opportunity to optimise our
ranges, and for our brand and channels to reach more customers and for their
shopping experience to be easier and more convenient.
The remaining homewares categories represent a market of c.£9bn where our
share is less than 10%. We are confident in achieving higher share in all of
these categories as our relatively lower product maturity gives significant
headroom for further growth and share gain. The £9bn(13) furniture market,
where we currently have a very low share, is another substantial opportunity.
Our broad range of categories, combined with our deep product knowledge,
provide an exciting runway for growth.
We have identified three priorities to seize this opportunity and drive
profitable and sustainable growth:
1) Strengthening our customer offer to provide unbeatable value and choice;
2) Digitalising the total business; and
3) Bringing together our marketing ecosystem in order to acquire and develop
customers cost effectively.
(13) GlobalData UK homewares and furniture markets, January 2022 to December
2022. Furniture excludes kitchen and bathroom furniture
1. Strengthening our customer offer
Product mastery is at the heart of the Dunelm business. Our colleagues are
passionate about offering our customers outstanding value and quality for
every space, style and budget. We are constantly improving and innovating
across our ranges.
We are increasingly seeing innovation in more sustainable materials as an
opportunity for further differentiation, particularly when offered at
affordable price points. We are already making good progress, having launched
our Conscious Choice range last year. Conscious Choice offers
sustainably-focused own-brand lines, with each product being made from at
least 50% more sustainable materials (by weight) compared to conventional
alternatives. We recently extended this range to include our polycotton
bedding, which is now all made from recycled polycotton.
We have also been innovating in product design, to offer customers a broader
range while maintaining value. For example, changing the mix of raw materials
to maintain a desired price point without sacrificing quality, offering
self-build alternatives in furniture to offer customers more choice, and
innovating in the design of packaging to reduce transport costs.
The power of our total retail system gives us the opportunity to extend and
broaden our ranges beyond the physical limitations of our store estate, while
maintaining a curated offering. Our 'supplier to site' programme has allowed
us to quickly test new product and increase the choice available to customers
with limited commitment. This programme has gathered momentum in the first
half, with the introduction of c.10,000 additional SKUs into the product
range, and offers significant opportunity for further range extension.
Our ambition is to continue to offer customers great value and choice, and to
achieve significant market share across all the categories in which we
operate. We are focused on developing our capabilities and supplier
relationships in our less mature categories in order to achieve the same
levels of product mastery as we have in our heritage categories.
2. Digitalising the total business
We have been investing in technology for a number of years. We refer to this
as 'digitalisation', which means not just efficient digital experiences on
Dunelm.com, but also the wider introduction of technology across the business
and leveraging the data generated to further improve our proposition and
operations.
We have made great progress in building strong foundational capabilities to
provide a platform for future development and have been strengthening our data
capability and digitalising our total business across five key areas:
1. Data and insight: Data platforms and capabilities for decision
optimisation
2. Commercial operations: Product data, forecasting and range planning
3. Customer marketing: Personalised customer experience based on
attitudes and behaviours
4. Shopping experience: Easy, seamless online and instore customer and
colleague experience
5. Post-sales experience: Personal, high quality and efficient delivery,
service and support
The foundational technology for our data platform is now in place, and we are
beginning to leverage the customer data and marketing technology stack and our
data and digitalisation capability to power growth. We see a significant and
exciting opportunity ahead to both enhance our customer proposition and
improve our productivity.
In the first half, our work in this area delivered a number of improvements to
our proposition. We diversified our payment options, introducing Apple Pay and
'Pay in 3', using functionality from our new online payment platform. We
introduced more convenient delivery options, with a trial of parcel shop
collections in London and the Midlands. We are also trialling bookable
consultations and live chat, to give more customers access to the expert help
available from our store colleagues. We are excited about the significant
opportunities in our plan; over the next 12 months we will introduce long term
credit, achieve higher 'perfect order' rates by shortening lead times and
improving communications, and we will also use our data to inform our plans
for new stores and refits.
Data and digitalisation are helping us to become more productive. We launched
self-help tools for customers for order tracking, which provide both a better
experience for our customers and reduce calls to our customer care centre. We
have worked hard to reduce the number of separate home delivered parcels for
single orders by stocking products in multiple locations across our
distribution network. There are significant opportunities for further
improvement here, which we expect to progress over the next year. We are well
into a multi-year programme to improve our commercial operations by
introducing new tools for master data management, forecasting and
replenishment, and a new portal to help us collaborate even more effectively
with our suppliers. Once complete, we will be able to bring products to market
more quickly, improve availability for our customers and reduce manual work
for our colleagues. As our customer data matures over time we have a
significant opportunity to offer customers more personalised communications
and experiences, further increasing the efficiency of our marketing spend. We
will begin using our single customer view to test and learn over the coming
year.
3. Marketing ecosystem evolution
Alongside product mastery and digitalisation, we are evolving our marketing
ecosystem to enable more cost effective customer acquisition and development,
which we believe offers a significant competitive advantage. Our customer data
platform is taking shape and will continue to be progressed over the next 12
months. Our online payment platform will be extended to our store estate,
enabling the matching of transactions to identify single customer behaviour
across all channels. We will supplement this transactional data to gain deeper
insight through a variety of other data sources, including customer
demographics, engagement with marketing content and understanding of
interactions with customer services.
In recent years we have scaled up in brand, digital, and, most recently,
community marketing. The next stage of evolution is to begin building on these
strong foundations through personalised content and activity. We recently
introduced personalised recommendations in our email campaigns and used a new
model to predict when customers will churn, enabling us to intervene with
appropriate communications.
The omni-channel combination of a national brand, digital reach and local
community of followers makes our ecosystem structurally different to most
competitors. Our largely exclusive product range offers further
differentiation, alongside the ability of our colleagues to deliver on our
brand purpose of helping create joy.
Doing the right thing
We continue to strive to make decisions that are guided by our values and
deliver for all of our stakeholders in a balanced way. We have much to learn
but we are becoming bolder in our ambition and delivering meaningful
initiatives in support of our ambitions.
In FY22 we rolled out our textiles take-back scheme nationwide, allowing
customers to return unwanted items, whether or not they were purchased from
Dunelm. We recently launched a new product range, in our Conscious Choice
assortment, using up to 100% recycled fibres, with at least 40% of those
materials coming from pre-loved textiles like those generated from our
take-back scheme. The range reflects our commitment to creating a more
circular future, by recycling returned materials and developing products from
end-of-life items. The new range includes waffle cushion covers, waffle
throws, muslin throws and printed cushions. The products feature at
competitive price points, because we believe sustainability should be
accessible to all, and is a further example of innovative product development
in our heritage categories.
Since 2020 we have been running our 'Delivering Joy' campaign in the period up
to Christmas, offering colleagues and customers the chance to donate gifts
which we distribute to local good causes. This year we significantly increased
awareness of the campaign via social media and partnerships with national and
local radio stations. As a result we more than tripled the number of gifts
donated to over 60,000, in support of over 550 good causes.
Summary and Outlook
We delivered another strong performance in the first half, with strong sales,
tight operational grip, robust profits and cashflow, and more customers who
are shopping more often.
We remain committed to making sure our broad product ranges continue to
resonate, offering outstanding value for all styles and budgets. We have a
clear customer 1(st) plan for growth that will enable us to strengthen our
customer offer as a value retailer for savvy home lovers, through product
mastery, innovation and outstanding execution. We now see an even bigger
opportunity for digitalisation, and using the data created to drive growth and
efficiency. We are developing a marketing ecosystem which is cost effective at
attracting and developing customers, and which we are beginning to
personalise. We continue to invest in these areas to seize the opportunities
for growth.
Whilst customers have been resilient to date, the outlook remains
unpredictable as consumers are still adapting to the new economic reality. Our
expectations for FY23 PBT remain unchanged from previous results
announcements(14).
We are more excited than ever about the significant growth runway ahead to
grow market share and deliver sustainable growth for all our stakeholders.
(14) At our Preliminary results in September 2022, we confirmed that we were
on track to deliver FY23 PBT in line with analysts' expectations. In September
2022, the company compiled consensus average of analysts' expectations for
FY23 PBT was £178m, with a range of £130m to £193m. The current company
compiled consensus average of analysts' expectations for FY23 PBT is £176m,
with a range of £131m to £188m
Nick Wilkinson
Chief Executive Officer
15 February 2023
CHIEF FINANCIAL OFFICER'S REVIEW
Revenue
Total sales for the 26-week period to 31 December 2022 increased by 5.0% to
£835.0m (FY22 H1: £795.6m). Compared to FY20 (the last fully comparable
period), total sales grew by 42.7% (FY20 H1: £585.0m).
26 weeks to 31 December 2022
FY23 YoY 3YoY
Total Group sales £835.0m +5.0% +42.7%
Digital % total sales 34% +1ppt +14ppts
Homewares market share(15) 10.8% +1.6ppts
Furniture market share(15) 2.1% +0.2ppts
Our trading performance was robust, despite a strong comparative period, with
Q1 last year benefitting from pent up demand and our rescheduled Summer
Sale(16). The YoY growth rate included a benefit of c.2ppts from the timing of
our Winter Sale, with this impact due to reverse in the second half(17).
We saw growth both in stores and online, with digital sales now making up 34%
of total sales, up 14ppts since H1 FY20. Digital sales growth was particularly
strong in the late Autumn and run-up to Christmas. These growth rates reflect
our highly relevant product range and continued focus on delivering
exceptional value for money during a time when customers are facing high
inflationary pressures.
We continue to see broad-based growth across categories. Customers responded
well to our 'Winter Warm' and Christmas ranges. As people try to find ways to
mitigate heating costs, lines such as rugs, thermal curtains and heated airers
proved popular. Our make and mend and haberdashery categories have also
performed well as customers look to repair and upcycle. Our offer is relevant
all year round and as the weather gets warmer, customers will find products
related to outdoor drying, spring cleaning the home, and living and eating
outdoors.
Our approach to retail pricing remains dynamic, and we have implemented not
just retail price increases, but also price reductions in different categories
as we balanced input cost pressures with offering exceptional value.
For the calendar year 2022, the homewares market declined by c.2% while we
reported good growth for the year. In homewares, our market share increased by
160bps to 10.8%(15). We also gained share in the furniture market, from a
smaller base(15).
(15) GlobalData UK homewares and furniture markets, January 2022 to December
2022. Furniture excludes kitchen and bathroom furniture
(16) The 2021 Summer Sale was rescheduled and took place in Q1 FY22 (the
Summer Sale usually takes place in Q4)
(17) Due to the 53(rd) week at the end of FY22, six days of the Winter Sale
fell into Q2 this year (the Sale began in Q3 last year)
Gross margin
Gross margin of 51.1% was strong and in line with our expectations that it
would reduce from the temporarily higher level seen during the pandemic
period, with a reduction of 170bps in H1 FY23 (FY22 H1: 52.8%). There was also
a modest gross margin headwind of c.30bps from the timing of our Winter Sale.
We seek good visibility of input costs as we plan our purchasing for each
season and this helps to manage changes in raw material prices, freight costs
and foreign exchange within our margin rates. Looking ahead, we expect H2
gross margin to be lower than H1 due to the impact of the two Sale events and
our full year gross margin expectation is in line with our previous guidance
of around 50%.
Operating costs
Total operating costs were £305.2m (FY22 H1: £277.0m), representing an
operating cost ratio of 36.6% (FY22 H1: 34.8%). The operating cost ratio
benefitted from the timing of the Winter Sale, which increased sales in the
half with relatively little additional operating cost. The prior year
operating cost:sales ratio was also low, reflecting exceptionally strong
sales, particularly in stores.
Inflationary pressures, mainly on wages, increased operating costs by c.£8m.
We maintain a tight operational grip on costs and worked hard to mitigate the
impact of these increases through operational efficiencies in stores and the
supply chain. We invested £11m in digitalisation and building new capability
in data, tech and insight and analytics. We are realising the benefits of
these investments through our sales growth, providing us with confidence to
continue to invest. The annualisation of the supply chain capacity we invested
in during FY22 and new store openings added £6m to operating costs in the
half. The expected withdrawal of business rates relief, introduced in response
to the pandemic, increased operating costs by £3m.
We expect further inflationary cost pressures in the second half and will
continue to invest in capability to drive growth as we digitalise the
business. These increases will be partially offset by lower stockholding costs
as we reduce our inventory levels.
Profit and earnings per share
Operating profit of £121.8m was 14.6% lower than FY22 H1 (FY22 H1: £142.7m),
reflecting the Summer Sale and store reopening impacts in the comparative
period.
Net finance costs of £4.4m (FY22 H1: £1.9m) included interest on IFRS 16
lease liabilities of £2.6m (FY22 H1: £2.4m). FY22 H1 included foreign
exchange gains on the revaluation of USD balances which did not recur this
year.
Profit before tax in the period was £117.4m (FY22 H1: £140.8m), a reduction
of £23.4m year on year. Profit after tax of £93.0m (FY22 H1: £113.4m)
reflected an effective tax rate of 20.8% (FY22 H1: 19.5%). The increase in the
effective tax rate is broadly in line with the increase to the UK headline
rate of corporation tax. The effective tax rate was 30bps higher than the UK
headline rate, due to certain disallowable expenditures. We expect the
effective tax rate to continue to trend slightly above the headline rate.
Basic earnings per share (EPS) for the period were 46.1 pence (FY22 H1: 55.9
pence). Diluted earnings per share were 45.8 pence (FY22 H1: 55.4 pence).
Cash generation and net cash
In the period, the Group generated £102.1m of free cash flow (FY22 H1:
£106.3m), with strong conversion of operating profit to free cash flow of 84%
(FY22 H1: 74%).
FY23 H1 FY22 H1
£m £m
Operating profit 121.8 142.7
Depreciation and amortisation(18) 38.9 38.1
Share-based payments 2.0 3.2
Net movement in working capital (1.9) (21.0)
Tax paid (17.9) (15.0)
Net cash generated from operating activities 142.9 148.0
Capex and business combinations (12.5) (14.2)
Net interest and loan transaction costs(19) (0.9) (1.6)
Interest paid on lease liabilities (2.6) (2.4)
Repayment of principal element of lease liabilities (24.8) (23.5)
Free cash flow 102.1 106.3
(18) Including impairment and loss on disposal
(19 )Excluding interest on lease liabilities
There was a small working capital outflow of £1.9m in the period (FY22 H1:
£21.0m outflow). The FY22 H1 outflow reflected the decision to build
inventory in order to mitigate against the risk of further supply chain
disruption. Inventories at the end of the period were £233.4m (FY22 H1:
£204.4m), £29m higher than H1 FY22, mainly due to inflation in the cost of
inventories. We are comfortable with the quality of our inventory, but we do
expect stock holding to reduce during H2. For the full year, we expect a
modest working capital inflow due to the lower stockholding.
Total capital investment was £12.5m (FY22 H1: £14.2m). This included £11m
spent on the three new stores opened in the period, as well as refits of seven
existing stores and decarbonisation initiatives. We expect capital investment
for the full year to be c.£20-25m, depending on the timing of new store
openings.
Cash tax paid was £17.9m (FY22 H1: £15.0m). FY22 H1 included cash receipts
in relation to research and development claims made at the end of FY21.
In the period, the Group spent £7.0m (FY22 H1: £9.6m) purchasing shares to
be held in treasury to satisfy future obligations under its employee share
schemes. The Group held 2.1m shares in treasury as at 31 December 2022.
After total dividend payments in the period of £52.4m (FY22 H1: £178.7m),
the Group ended the year with net cash of £18.2m (FY22 H1: £47.7m).
Banking agreements
In December 2021 the Group agreed a new £185m sustainability-linked
unsecured revolving credit facility ("RCF"). The facility had an initial term
of four years, with an option to extend by a maximum of a further two years
at Dunelm's request, subject to lender consent. In December 2022 the first
option was agreed, extending the facility until December 2026. The RCF
incorporates four sustainability-linked performance targets which align with
our ambitious sustainability plans, including our commitment to pursue a Net
Zero Pathway. We will report on our achievements against these targets in our
results announcement in September 2023; we remain confident that we will
achieve our long-term targets. The terms of the RCF include covenants in
respect of leverage (net debt(20) to be no greater than 2.5× adjusted
EBITDA(21)) and fixed charge cover (EBITDAR(22) to be no less than 1.75×
fixed charges(23)), both of which were met comfortably as at 31 December 2022.
In addition, the Group maintains £10m of uncommitted overdraft facilities.
2(0) Excluding lease liabilities. Full definition provided in the table of
alternative performance measures in the CFO review
(21 )Adjusted EBITDA defined as EBITDA less depreciation on right-of-use
assets
(22 )EBITDAR defined as EBITDA plus rent
(23 )Fixed charges are defined as net interest costs plus right-of-use asset
depreciation plus rent
Capital and dividend policies
The Board policy on capital structure targets an average net debt level
(excluding lease obligations and short-term fluctuations in working capital)
of between 0.2× and 0.6× the last 12 months' EBITDA(24). The Group's
dividend policy targets ordinary dividend cover of between 1.75× and 2.25×
earnings per share during the financial year to which the dividend relates.
The Board will continue to consider returning surplus cash to shareholders if
average net debt, excluding lease liabilities, over a period consistently
falls below the minimum target of 0.2× EBITDA(24), subject to known and
anticipated investment plans at the time.
The Group's full capital and dividend policies are available on our website at
www.corporate.dunelm.com (https://corporate.dunelm.com/) .
(24 )EBITDA defined as operating profit plus depreciation and amortisation of
property, plant and equipment and intangible assets plus loss on disposal and
impairment of property, plant and equipment and intangible assets plus
depreciation on right-of-use assets
Dividends
Reflecting the strong performance in the first half of FY23 and confidence in
the full year outlook, the Board has declared an interim ordinary dividend of
15 pence per share, totalling £30m. The interim dividend will be paid on 11
April 2023 to shareholders on the register on 17 March 2023.
Strong cash generation in the period has enabled the Board to also declare a
special dividend of 40 pence per share, totalling £81m, returning the Group
to its target leverage range. The special dividend will be paid on 11 April
2023 to shareholders on the register on 17 March 2023.
Principal risks and uncertainties
The Board regularly reviews and monitors the risks and uncertainties which
could have a material effect on the Group's results. The principal risks and
uncertainties that could lead to a material impact have not significantly
changed from those listed in the FY22 Annual Report. A summary of the
principal risks has been provided below:
Risk Impact
Competition, market and customers Failure to respond to changing consumer needs e.g. the shift towards online
sales, personalisation, rental versus ownership, sustainability and customer
experience, and to maintain a competitive offer (range, quality, value and
ease of shopping) could impact profitability and limit opportunities for
growth.
A downturn in the economy and consumer spending, aggressive competitor
activity (especially with cost price pressures) could impact sales and profit.
Catastrophic business events Failure to withstand the impact of an external event or combination of events
that severely disrupts markets and causes significant damage to all or a
substantial part of the Group's sales or operations (e.g. pandemic).
Brand damage Our customers expect us to deliver products that are safe, compliant with
legal and regulatory requirements, and fit for purpose. Increasingly,
customers also want to know that products have been responsibly sourced and
that their environmental impact is minimised.
We must also ensure that our suppliers share and uphold our approach to
business ethics, human rights (including safety and modern slavery) and the
environment.
Failure to do so could result in harm to individuals with the potential for
customers, colleagues and other stakeholders to lose confidence in the Dunelm
brand.
People and culture The success of the business could be impacted if it fails to attract, retain
and motivate high-calibre colleagues.
Maintaining and evolving the culture of our business (embodied in our shared
values) is essential to delivering our strategy and ensuring the long-term
sustainability of our business.
IT systems, data and cyber security Operations impacted by failure to develop technology to support the strategy,
lack of systems availability due to cyber attack or other failure, and
reputational damage/fines due to loss of personal data.
Regulatory and compliance Fines, damages claims, and reputational damage could be incurred if we fail to
comply with legislative or regulatory requirements, including consumer law,
health and safety, employment law, GDPR and data protection, Bribery Act, or
competition law.
Climate change and environment Failure to anticipate and address the strategic, regulatory, and reputational
impact of climate change and environmental matters, and governmental, consumer
and media action in response to it.
Supply chain disruption Changes in global supply chain capacity, labour shortages, ongoing disruption
from Covid-19 and geo-political instability may cause interruption to the
supply of stock to our stores and fulfilment of online orders which could
impact sales. Inflationary pressures linked to these challenges could impact
profitability.
Business efficiency Profitability could be impacted by failure to operate the business efficiently
or to manage margin volatility.
Finance and treasury Progress against business objectives constrained by a lack of short-term
funding and long term capital.
Alternative performance measures (APMs)
APM Definition, purpose and reconciliation to statutory measure
Unique active customers growth 12-month rolling growth in unique active customers who have shopped in the 12
months, based on Barclays transactional data. Note that Barclays data
represents approximately 10% of total Dunelm transactions. To measure whether
we are continuing to grow our active customer base - from both new customers
and retention of existing customers.
Total sales Equivalent to revenue (from all channels). This is net of customer returns.
Digital sales Digital sales include home delivery, Click & Collect (or Reserve &
Collect before October 2019) and tablet-based sales in store.
Digital % total sales Digital sales (as defined above) expressed as a percentage of revenue. This is
not a measure that we seek to maximise in itself, but we measure it to track
our adaptability to changing customer behaviours.
Gross margin % Gross profit expressed as a percentage of revenue. Measures the profitability
of product sales prior to operating costs.
Operating costs to sales ratio Operating costs expressed as a percentage of revenue. To measure the growth of
costs relative to sales growth.
EBITDA Earnings before interest, tax, depreciation, amortisation and impairment.
Operating profit plus depreciation and amortisation of property, plant and
equipment, right-of-use assets and intangible assets plus loss on disposal and
impairment of property, plant and equipment and intangible assets. Used in our
capital and dividend policy.
Adjusted EBITDA EBITDA less depreciation on right-of-use assets. To measure compliance with
bank covenants
EBITDAR EBITDAR is calculated as EBITDA plus rent. To measure compliance with bank
covenants
Effective tax rate Taxation expressed as a percentage of profit before taxation. To measure how
close we are to the UK corporation tax rate and understand the reasons for any
differences.
Capex (net of disposals) Acquisition of intangible assets and acquisition of property, plant and
equipment less proceeds on disposal of property, plant and equipment and
intangibles.
Free cash flow Free cash flow is defined as net cash generated from operating activities less
capex (net of disposals) and business combinations, net interest paid
(including leases) and loan transaction costs, and repayment of principal
element of lease liabilities. Measures the cash generated that is available
for disbursement to shareholders.
Net cash/(debt) Cash and cash equivalents less total borrowings (as shown in note 14).
Excludes IFRS 16 lease liabilities.
Cash conversion Free cash flow expressed as a percentage of operating profit.
Karen Witts
Chief Financial Officer
15 February 2023
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The directors confirm that these condensed interim financial statements have
been prepared in accordance with UK adopted International Accounting Standard
34, 'Interim Financial Reporting' and the Disclosure Guidance and Transparency
Rules sourcebook of the United Kingdom's Financial Conduct Authority and that
the interim management report includes a fair review of the information
required by DTR 4.2.7 and DTR 4.2.8, namely:
● an indication of important events that have occurred during the first 26
weeks and their impact on the condensed set of financial statements, and a
description of the principal risks and uncertainties for the remaining 26
weeks of the financial year; and
● material related-party transactions in the first 26 weeks and any
material changes in the related-party transactions described in the last
annual report.
The maintenance and integrity of the Dunelm Group Plc website is the
responsibility of the directors; the work carried out by the auditors does not
involve consideration of these matters and, accordingly, the auditors accept
no responsibility for any changes that might have occurred to the interim
financial statements since they were initially presented on the website.
The directors of Dunelm Group Plc are listed in the Company's annual report
for 2 July 2022. A list of current directors is maintained on the Company's
website: www.corporate.dunelm.com.
By order of the board
Nick Wilkinson
Karen Witts
Chief Executive Officer
Chief Financial
Officer
15 February 2023
15 February
2023
INDEPENDENT REVIEW REPORT TO DUNELM GROUP PLC
Report on the condensed consolidated interim financial statements
Our conclusion
We have reviewed Dunelm Group plc's condensed consolidated interim financial
statements (the "interim financial statements") in the Interim Results of
Dunelm Group plc for the 26 week period ended 31 December 2022 (the
"period").
Based on our review, nothing has come to our attention that causes us to
believe that the interim financial statements are not prepared, in all
material respects, in accordance with UK adopted International Accounting
Standard 34, 'Interim Financial Reporting' and the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial Conduct
Authority.
The interim financial statements comprise:
· the consolidated statement of financial position as at
31 December 2022;
· the consolidated income statement and consolidated statement of
comprehensive income for the period then ended;
· the consolidated statement of cash flows for the period then ended;
· the consolidated statement of changes in equity for the period then
ended; and
· the explanatory notes to the interim financial statements.
The interim financial statements included in the Interim Results of Dunelm
Group plc have been prepared in accordance with UK adopted International
Accounting Standard 34, 'Interim Financial Reporting' and the Disclosure
Guidance and Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority.
Basis for conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410, 'Review of Interim Financial Information Performed by
the Independent Auditor of the Entity' issued by the Financial Reporting
Council for use in the United Kingdom ("ISRE (UK) 2410"). A review of interim
financial information consists of making enquiries, primarily of persons
responsible for financial and accounting matters, and applying analytical and
other review procedures.
A review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK) and, consequently, does not
enable us to obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do not express
an audit opinion.
We have read the other information contained in the Interim Results and
considered whether it contains any apparent misstatements or material
inconsistencies with the information in the interim financial statements.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for conclusion section of this report,
nothing has come to our attention to suggest that the directors have
inappropriately adopted the going concern basis of accounting or that the
directors have identified material uncertainties relating to going concern
that are not appropriately disclosed. This conclusion is based on the review
procedures performed in accordance with ISRE (UK) 2410. However, future events
or conditions may cause the group to cease to continue as a going concern.
INDEPENDENT REVIEW REPORT TO DUNELM GROUP PLC (CONTINUED)
Responsibilities for the interim financial statements and the review
Our responsibilities and those of the directors
The Interim Results, including the interim financial statements, is the
responsibility of, and has been approved by the directors. The directors are
responsible for preparing the Interim Results in accordance with the
Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's
Financial Conduct Authority. In preparing the Interim Results, including the
interim financial statements, the directors are responsible for assessing the
group's ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the group or to
cease operations, or have no realistic alternative but to do so.
Our responsibility is to express a conclusion on the interim financial
statements in the Interim Results based on our review. Our conclusion,
including our Conclusions relating to going concern, is based on procedures
that are less extensive than audit procedures, as described in the Basis for
conclusion paragraph of this report. This report, including the conclusion,
has been prepared for and only for the company for the purpose of complying
with the Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority and for no other purpose. We do not, in
giving this conclusion, accept or assume responsibility for any other purpose
or to any other person to whom this report is shown or into whose hands it may
come save where expressly agreed by our prior consent in writing.
PricewaterhouseCoopers LLP
Chartered Accountants
Birmingham
15 February 2023
CONSOLIDATED INCOME STATEMENT
(UNAUDITED)
For the 26 weeks ended 31 December 2022
26 weeks ended 26 weeks ended 53 weeks ended
31 December 2022 25 December 2021 2 July
2022
Note £'m £'m £'m
Revenue 5 835.0 795.6 1,581.4
Cost of sales (408.0) (375.9) (772.0)
Gross profit 427.0 419.7 809.4
Operating costs (305.2) (277.0) (591.7)
Operating profit 121.8 142.7 217.7
Financial income 0.2 0.9 1.2
Financial expenses (4.6) (2.8) (6.1)
Profit before taxation 117.4 140.8 212.8
Taxation 6 (24.4) (27.4) (41.6)
Profit for the period 93.0 113.4 171.2
Earnings per Ordinary Share - basic 8 46.1p 55.9p 84.5p
Earnings per Ordinary Share - diluted 8 45.8p 55.4p 83.6p
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(UNAUDITED)
For the 26 weeks ended 31 December 2022
26 weeks ended 26 weeks ended 53 weeks ended
31 December 2022 25 December 2021 2 July
2022
£'m £'m £'m
Profit for the period 93.0 113.4 171.2
Other comprehensive (expense)/income:
Items that may be subsequently reclassified to profit or loss:
Movement in fair value of cash flow hedges (1.0) 5.7 32.4
Deferred tax on hedging movements 1.7 (1.4) (5.3)
Other comprehensive income for the period, net of tax 0.7 4.3 27.1
Total comprehensive income for the period 93.7 117.7 198.3
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(UNAUDITED)
As at 31 December 2022
31 December 2022 25 December 2021 2 July
2022
Note £'m £'m £'m
Non-current assets
Intangible assets 9 7.7 12.1 9.9
Property, plant and equipment 9 175.0 169.3 173.7
Right-of-use assets 10 241.9 264.4 248.5
Deferred tax assets 4.6 7.7 4.1
Derivative financial instruments 1.1 0.9 4.6
Total non-current assets 430.3 454.4 440.8
Current assets
Inventories 11 233.4 204.4 223.0
Trade and other receivables 21.2 20.1 22.9
Current tax asset - - 1.1
Derivative financial instruments 13.4 2.4 19.9
Cash and cash equivalents 40.2 47.7 30.2
Total current assets 308.2 274.6 297.1
Total assets 738.5 729.0 737.9
Current liabilities
Trade and other payables 12 (231.2) (204.8) (223.2)
Lease liabilities (53.4) (51.8) (52.8)
Current tax liability (4.8) (8.3) -
Derivative financial instruments (1.8) (1.2) -
Total current liabilities (291.2) (266.1) (276.0)
Non-current liabilities
Bank loans 14 (20.7) - (52.8)
Lease liabilities (217.5) (243.7) (225.3)
Provisions (5.5) (4.2) (5.5)
Derivative financial instruments (2.3) (0.2) -
Total non-current liabilities (246.0) (248.1) (283.6)
Total liabilities (537.2) (514.2) (559.6)
Net assets 201.3 214.8 178.3
Equity
Issued share capital 2.0 2.0 2.0
Share premium account 1.7 1.6 1.7
Capital redemption reserve 43.2 43.2 43.2
Hedging reserve 7.8 1.5 20.2
Retained earnings 146.6 166.5 111.2
Total equity 201.3 214.8 178.3
Karen Witts
Chief Financial Officer
15 February 2023
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
For the 26 weeks ended 31 December 2022
26 weeks ended 26 weeks ended 53 weeks ended
31 December 2022 25 December 2021 2 July
2022
Note £'m £'m £'m
Cash flows from operating activities
Profit before taxation 117.4 140.8 212.8
Net financial expense 4.4 1.9 4.9
Operating profit 121.8 142.7 217.7
Depreciation and amortisation of property, plant and equipment and intangible 9 14.6 14.6 30.5
assets
Depreciation on right-of-use assets 10 24.2 23.4 48.6
Loss on disposal and impairment of property, plant and equipment and 0.1 0.1 0.3
intangible assets
(Gain) on disposal of right-of-use assets - - (0.1)
Share based payments expense 2.0 3.2 4.8
Operating cash flow before movements in working capital 162.7 184.0 301.8
Increase in inventories (10.4) (32.0) (40.3)
Decrease/(increase) in receivables 1.7 (7.1) (7.7)
Increase in payables 6.8 18.1 33.2
Net movement in working capital (1.9) (21.0) (14.8)
Tax paid (17.9) (15.0) (35.2)
Net cash generated from operating activities 142.9 148.0 251.8
Cash flows from investing activities
Acquisition of intangible assets (0.2) (0.5) (0.7)
Acquisition of property, plant and equipment (12.3) (13.7) (23.3)
Acquisition of business combination - - (17.7)
Interest received 0.2 - 0.1
Net cash used in investing activities (12.3) (14.2) (41.6)
Cash flows from financing activities
Proceeds from exercise of share options 0.2 0.2 3.9
Purchase of treasury shares (7.0) (9.6) (28.3)
Drawdowns on revolving credit facility 80.0 - 85.0
Repayments of revolving credit facility (112.0) - (31.0)
Interest paid and loan transaction costs (1.1) (1.6) (2.2)
Interest paid on lease liabilities (2.6) (2.4) (4.8)
Repayment of principal element of lease liabilities (24.8) (23.5) (50.2)
Dividends paid 7 (52.4) (178.7) (282.1)
Net cash flows used in financing activities (119.7) (215.6) (309.7)
Net increase/(decrease) in cash and cash equivalents 10.9 (81.8) (99.5)
Foreign exchange revaluations (0.9) 0.9 1.1
Cash and cash equivalents at the beginning of the period 30.2 128.6 128.6
Cash and cash equivalents at the end of the period 40.2 47.7 30.2
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(UNAUDITED)
For the 26 weeks ended 31 December 2022
Note Issued share capital Share premium account Capital redemption reserve Hedging reserve Retained earnings Total equity attributable to equity holders of the Parent
£'m £'m £'m £'m £'m £'m
As at 2 July 2022 2.0 1.7 43.2 20.2 111.2 178.3
Profit for the period - - - - 93.0 93.0
Movement in fair value of cash flow hedges - - - (1.0) - (1.0)
Deferred tax on hedging movements - - - 1.7 - 1.7
Total comprehensive income for the period - - - 0.7 93.0 93.7
Proceeds from issue of treasury shares - - - - 0.2 0.2
Purchase of treasury shares - - - - (7.0) (7.0)
Share based payments - - - - 2.0 2.0
Deferred tax on share based payments - - - - (0.7) (0.7)
Current tax on share options exercised - - - - 0.3 0.3
Movement on cash flow hedges transferred to inventory - - - (13.1) - (13.1)
Dividends paid 7 - - - - (52.4) (52.4)
Total transactions with owners, recorded directly in equity - - - (13.1) (57.6) (70.7)
As at 31 December 2022 2.0 1.7 43.2 7.8 146.6 201.3
As at 26 June 2021 2.0 1.6 43.2 (4.3) 238.7 281.2
Profit for the period - - - - 113.4 113.4
Movement in fair value of cash flow hedges - - - 5.7 - 5.7
Deferred tax on hedging movements - - - (1.4) - (1.4)
Total comprehensive income for the period - - - 4.3 113.4 117.7
Proceeds from issue of treasury shares - - - - 0.2 0.2
Purchase of treasury shares - - - - (9.6) (9.6)
Share based payments - - - - 3.2 3.2
Deferred tax on share based payments - - - - (1.1) (1.1)
Current tax on share options exercised - - - - 0.4 0.4
Movement on cash flow hedges transferred to inventory - - - 1.5 - 1.5
Dividends paid 7 - - - - (178.7) (178.7)
Total transactions with owners, recorded directly in equity - - - 1.5 (185.6) (184.1)
As at 25 December 2021 2.0 1.6 43.2 1.5 166.5 214.8
NOTES TO THE INTERIM FINANCIAL STATEMENTS
For the 26 weeks ended 31 December 2022 (UNAUDITED)
1 General information
Dunelm Group plc and its subsidiaries ('the Group') are incorporated and
domiciled in the UK. Dunelm Group plc is a listed public company, limited by
shares and the company registration number is 04708277. The registered office
is Watermead Business Park, Syston, Leicestershire, LE7 1AD.
The primary business activity of the Group is the sale of homewares through a
network of UK stores and online.
The Group's financial results and cash flows are subject to seasonal trends
between the first and second half of the financial period. Traditionally,
revenue and profit are higher in the first half of the financial period due to
the performance of seasonal lines and the timing of sale events.
2 Basis of preparation
This condensed consolidated interim financial report for the half-year
reporting period ended 31 December 2022 has been prepared in accordance with
the UK-adopted International Accounting Standard 34, 'Interim Financial
Reporting' and the Disclosure Guidance and Transparency Rules sourcebook of
the United Kingdom's Financial Conduct Authority.
The interim report does not include all of the notes of the type normally
included in an annual financial report. Accordingly, this report is to be read
in conjunction with the annual report for the year ended 2 July 2022, which
has been prepared in accordance with UK-adopted International Accounting
Standards and with the requirements of the Companies Act 2006 as applicable to
companies reporting under those standards.
3 Going concern basis
The interim financial statements have been prepared on a going concern basis.
In adopting the going concern basis, the Board of Directors have considered
the current financial position of the Group, its strategy, the market outlook,
and its principal risks. The Directors have also considered the Group's
current cash position and its available facilities, including the Group's
Revolving Credit Facility ('RCF') committed until 9 December 2026, which may
be extended by a further year at Dunelm's request, subject to lender
consent. Furthermore, cash flow forecasts have demonstrated that covenants
will continue to be comfortably met even in downside scenarios such as a
general economic downturn resulting in consumers switching away from spending
on homewares. Following this review, the Directors have a reasonable
expectation that the Group has adequate resources to continue in operational
existence for the foreseeable future and they continue to adopt the going
concern basis of accounting in preparing these interim financial statements.
4 Accounting policies
The condensed financial statements have been prepared under the historical
cost convention, except for derivative financial instruments and share based
payments which are stated at their fair value.
The accounting policies adopted, as well as significant judgements and key
estimates applied, are consistent with those in the annual financial
statements for the period ended 2 July 2022, as described in those financial
statements, except as described below:
· Taxes on income in the interim periods are accrued using the tax
rate that would be applicable to expected total annual profit or loss.
NOTES TO THE INTERIM FINANCIAL STATEMENTS (CONTINUED)
For the 26 weeks ended 31 December 2022 (UNAUDITED)
5 Revenue
The Group has one reportable segment, in accordance with IFRS 8 - Operating
Segments, which is the retail of homewares in the UK.
Customers access the Group's offer across multiple channels and often their
journey involves more than one channel. Therefore, internal reporting focuses
on the Group as a whole and does not identify individual segments.
6 Taxation
The taxation charge for the interim period has been calculated on the basis of
the estimated effective tax rate for the full year of 20.8% (26 weeks ended 25
December 2021: 19.5%, 53 weeks ended 02 July 2022: 19.5%).
7 Dividends
26 weeks ended 26 weeks ended 53 weeks ended
31 December 2022 25 December 2021 2 July 2022
£'m £'m £'m
Final dividend for the period ended 26 June 2021 - paid 23.0 pence - 46.8 46.8
Special dividend for the period ended 26 June 2021 - paid 65.0 pence - 131.9 131.9
Interim dividend for the period ended 2 July 2022 - paid 14.0 pence - - 28.3
Special dividend for the period ended 2 July 2022 - paid 37.0 pence - - 75.1
Final dividend for the period ended 2 July 2022 - paid 26.0 pence 52.4 - -
52.4 178.7 282.1
The Directors have declared an interim dividend of 15.0 pence per Ordinary
Share for the financial year ending 1 July 2023. This equates to an interim
dividend of £30.2m. The dividend will be paid on 11 April 2023 to
shareholders on the register at the close of business on 17 March 2023. The
Directors have also declared a special dividend of 40.0 pence per Ordinary
Share for the period ending 1 July 2023 which equates to £80.6m. This will be
paid on 11 April 2023 to shareholders on the register at the close of business
on 17 March 2023.
The interim and special dividends have not been recognised as a liability in
these interim financial statements. They will be recognised in the
Consolidated Statement of Changes in Equity in the period ending 1 July 2023.
NOTES TO THE INTERIM FINANCIAL STATEMENTS (CONTINUED)
For the 26 weeks ended 31 December 2022 (UNAUDITED)
8 Earnings per share
Basic earnings per share is calculated by dividing the profit for the period
attributable to equity holders of the Company by the weighted average number
of Ordinary Shares in issue during the period excluding ordinary shares
purchased by the Company and held as treasury shares.
For diluted earnings per share, the weighted average number of Ordinary Shares
in issue is adjusted to assume conversion of all dilutive potential Ordinary
Shares. These represent share options granted to employees where the exercise
price is less than the average market price of the Company's Ordinary Shares
during the period.
Weighted average numbers of shares:
26 weeks ended 26 weeks ended 53 weeks ended
31 December 2022 25 December 2021 2 July 2022
'000 '000 '000
Weighted average number of shares in issue during the period 201,802 202,899 202,722
Impact of share options 1,044 1,806 2,135
Number of shares for diluted earnings per share 202,846 204,705 204,857
26 weeks ended 26 weeks ended 53 weeks ended
31 December 2022 25 December 2021 2 July 2022
Profit for the period (£'m) 93.0 113.4 171.2
Earnings per Ordinary Share - basic 46.1p 55.9p 84.5p
Earnings per Ordinary Share - diluted 45.8p 55.4p 83.6p
9 Intangible assets and property, plant and equipment
Intangible assets Property, plant and equipment
£'m £'m
Cost
At 2 July 2022 64.1 403.2
Additions 0.1 13.7
Disposals (0.2) (7.1)
At 31 December 2022 64.0 409.8
Accumulated amortisation / depreciation
At 2 July 2022 54.2 229.5
Charge for the financial period 2.3 12.3
Disposals (0.2) (7.0)
At 31 December 2022 56.3 234.8
Net book value
At 2 July 2022 9.9 173.7
At 31 December 2022 7.7 175.0
All amortisation and depreciation charges have been included within operating
costs in the Consolidated Income Statement.
NOTES TO THE INTERIM FINANCIAL STATEMENTS (CONTINUED)
For the 26 weeks ended 31 December 2022 (UNAUDITED)
10 Leases
Right-of-use assets included in the Consolidated Statement of Financial
Position at 31 December 2022 were as follows:
Land and buildings Motor vehicles, plant and equipment Total
£'m £'m £'m
At 2 July 2022 240.4 8.1 248.5
Additions 17.2 5.9 23.1
Disposals (5.4) (0.1) (5.5)
Depreciation (22.3) (1.9) (24.2)
At 31 December 2022 229.9 12.0 241.9
Lease liabilities included in the Consolidated Statement of Financial Position
at 31 December 2022 were as follows:
Land and buildings Motor vehicles, plant and equipment Total
£'m £'m £'m
At 2 July 2022 (270.1) (8.0) (278.1)
Additions (18.0) (5.9) (23.9)
Disposals 5.3 0.1 5.4
Interest (2.5) (0.1) (2.6)
Repayment of lease liabilities 26.3 2.0 28.3
At 31 December 2022 (259.0) (11.9) (270.9)
The discount rate applied to lease liabilities ranged between 0.9% and 5.1%
(FY22 H1: 0.9% and 2.1%, FY22: 0.9% and 2.8%).
The following amounts have been recognised in the Consolidated Income
Statement:
26 weeks ended 26 weeks ended 53 weeks ended
31 December 2022 25 December 2021 2 July 2022
£'m £'m £'m
Depreciation of right-of-use assets 24.2 23.4 48.6
Loss on disposal of right-of-use assets (0.1) - (0.1)
Interest expenses (included in financial expenses) 2.6 2.4 4.8
Expense relating to short-term leases 0.7 0.3 0.6
The total cash outflow for the leases during the financial period was £27.4m
(FY22 H1: £25.9m, FY22: £55.0m).
NOTES TO THE INTERIM FINANCIAL STATEMENTS (CONTINUED)
For the 26 weeks ended 31 December 2022 (UNAUDITED)
11 Inventories
31 December 2022 25 December 2021 2 July 2022
£'m £'m £'m
Raw materials 1.7 - 1.7
Work in progress 1.3 - 1.6
Goods for resale 230.4 204.4 219.7
233.4 204.4 223.0
Goods for resale includes a net realisable value provision of £23.2m (FY22
H1: £17.1m, FY22: £21.4m). Write-downs of inventories to net realisable
value in the 26 weeks to 31 December 2022 amounted to £11.5m (26 weeks ended
25 December 2021: £8.4m, 53 weeks ended 02 July 2022: £20.1m). These were
recognised as an expense during the period and were included in cost of sales
in the Consolidated Income Statement.
12 Trade and other payables
31 December 2022 25 December 2021 2 July 2022
£'m £'m £'m
Current
Trade payables 107.3 87.2 98.3
Accruals 65.6 62.5 74.3
Deferred income 16.9 12.0 12.5
Taxation and social security 39.0 42.8 34.0
Other payables 2.4 0.3 4.1
Total trade and other payables 231.2 204.8 223.2
13 Financial risk management and financial instruments
Financial risk factors
The Group's activities expose it to a variety of financial risks including
foreign currency risk, fair value interest rate risk, credit risk and
liquidity risk. The condensed interim financial statements do not include all
financial risk management information and disclosures required in the annual
financial statements; they should be read in conjunction with the Group's
annual financial statements as at 2 July 2022. There have been no changes in
any risk management policies since the year end.
Fair values
The fair value of the Group's financial assets and liabilities are equal to
their carrying value. The fair value of foreign currency contracts are amounts
required by the counterparties to cancel the contracts at the end of the
period.
Fair value hierarchy
Financial instruments carried at fair value are required to be measured by
reference to the following levels:
• Level 1: quoted prices in active markets for identical
assets or liabilities
• Level 2: inputs other than quoted prices included
within Level 1 that are observable for the asset or liability, either directly
(i.e. as prices) or indirectly (i.e. derived from prices)
• Level 3: inputs for the asset or liability that are
not based on observable market data (unobservable inputs)
All derivative financial instruments carried at fair value have been measured
by a Level 2 valuation method, based on observable market data.
NOTES TO THE INTERIM FINANCIAL STATEMENTS (CONTINUED)
For the 26 weeks ended 31 December 2022 (UNAUDITED)
14 Bank loans
31 December 2022 25 December 2021 2 July 2022
£'m £'m £'m
Total borrowings 22.0 - 54.0
Less: unamortised debt issue costs* (1.3) (1.4) (1.2)
Net borrowings 20.7 (1.4) 52.8
* Unamortised debt issue costs included in other receivables as at 25 December
2021.
Net cash/(debt) represented by
31 December 2022 25 December 2021 2 July 2022
Cash and cash equivalents 40.2 47.7 30.2
Total borrowings (22.0) - (54.0)
Net cash/(debt) 18.2 47.7 (23.8)
The Company has medium term bank facilities of £185m (FY22 H1: £185m; FY22:
£185m) committed until 9 December 2026, which may be extended by a further
year at Dunelm's request, subject to lender consent. This is with an
associated accordion facility of £75m, subject to lender consent (FY22 H1:
£75m; FY22: £75m). As at 31 December 2022 £22m of this facility was drawn
down (FY22 H1: nil; FY22: £54m). The Group also has an uncommitted overdraft
facility of £10m.
15 Capital Commitments
As at 31 December 2022 the Company had entered into capital contracts
amounting to £9.5m (FY22 H1: £2.0m; FY22: £4.7m).
16 Announcement
The interim report was approved by the Board on 15 February 2023. Copies are
available from www.corporate.dunelm.com.
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