TIDMDFS
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 GBP30-35m 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% / -GBP39m 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 GBP7.1m). 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 cGBP6m,
with a cGBP4m 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 GBP7m (with
a GBP5m 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 cGBP134m (FY23 year end
GBP140m, facility size GBP250m) and leverage of c1.7x (FY23 year
end 1.9x)(2)
Outlook:
Full year guidance September 2023 January 2024
Revenue GBP1,060m-GBP1,080m GBP1,020m-GBP1,040m
-------------------- --------------------
PBTu GBP30m-GBP35m GBP30m-35m
-------------------- --------------------
Cash capex GBP25m-GBP30m GBP25-GBP30m
-------------------- --------------------
Non underlying costs (cash) GBP4m-GBP5m GBP5m
-------------------- --------------------
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 GBP30-35m PBTu (FY23
GBP30.6m).
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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END
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