TIDMDNLM
RNS Number : 5839O
Dunelm Group plc
10 February 2016
10 February 2016
Dunelm Group plc
Interim Results Announcement
Dunelm Group plc, the UK's leading homewares retailer, announces
its interim results for the 26 weeks to 2 January 2016.
Financial Highlights
FY16 FY15 +/-
H1 H1 change
------------ ------------ ----------
Sales GBP448.1m GBP406.4m + 10.3%
--------------------- ------------ ------------ ----------
Total LFL * GBP404.9m GBP387.0m +4.6%
LFL stores GBP376.9m GBP364.5m + 3.4%
Home delivery GBP28.0m GBP22.5m +24.4%
--------------------- ------------ ------------ ----------
Gross margin 50.7% 50.4% + 30 bps
EBITDA GBP88.7m GBP77.6m + 14.3%
Profit before
tax GBP75.5m GBP68.2m + 10.7%
EPS (fully diluted) 29.3p 26.4p + 11.0%
Free cash flow GBP76.7m GBP46.1m + 66.4%
* Calendar impact
Due to the 53(rd) week included in the last financial year, the
above figures include eight days of our Winter Sale, compared to
two days of Winter Sale included in the comparative period. This
has boosted LFL growth by approximately GBP10.0m (equivalent to
2.6% over the half year). These impacts will reverse in the next
quarter. Therefore, adjusting for this calendar impact, underlying
LFL performance was +2.0% for the 26 week period.
Business Highlights
-- Continued focus on three part growth strategy - growing like
for like sales, rolling out new stores, and growing our home
delivery channel - with eight core projects now in place to deliver
this
-- Solid progress in LFL store sales, underpinned by strong
performance from curtains and bedding, particularly our new Kids
range
-- On-going store portfolio expansion, with future focus now increasingly on London
-- Further strong growth in home delivery of 24.4% with growth
starting to accelerate following new web platform launch last
year
Dividends
-- Interim dividend increased by 9.1% to 6.0p per share (FY15: 5.5p per share)
-- Special distribution of 31.5p per share (totalling GBP63.9m),
in line with capital structure policy and reflecting continued
strong cash generation
John Browett, Chief Executive Officer, said:
"It is a really exciting time to be at Dunelm - a business built
on a strong foundation of exciting product and design, unrivalled
knowledge of the homewares market, a low-cost store network, great
people and investment in systems.
"Our focus remains on growing the business for the longer term.
After making good progress so far, we are continuing to work
towards our three part growth strategy and are now focused on eight
core projects that will enable us to achieve this. This will allow
us to improve our business substantially for our customers and, as
we increase both our store network around London and our online
presence, to develop Dunelm into a truly national homewares
brand.
"After a solid performance in the first half, we had a strong
sale after Christmas and we expect further good progress in the
remainder of the year."
For further information, please contact:
Dunelm Group plc 0116 2644 356
John Browett, Chief Executive
Officer
Keith Down, Chief Financial
Officer
MHP Communications 020 3128 8100
John Olsen / Simon Hockridge
/ Tom Horsman
Notes to Editors
Dunelm is market leader in the GBP11bn UK Homewares market. The
Group currently operates 157 stores, of which 151 are out-of-town
superstores and 6 are located on high streets, and an on-line
store, to be found at www.dunelm.com.
Dunelm's "Simply Value for Money" customer proposition offers
industry-leading choice of quality products at keen prices, with
high levels of availability and supported by friendly service. Core
ranges include many exclusive designs and premium brands such as
Dorma, and are supported by a frequently changing series of special
buys. The superstore format provides an average of 30,000 sq. ft.
of selling space with over 20,000 products across a broad spectrum
of categories, extending from the Group's home textiles heritage
(bedding, curtains, cushions, quilts and pillows) to a complete
Homewares offer including kitchenware and dining, lighting, wall
art, furniture and rugs. Dunelm is one of the few national
retailers to offer an authoritative selection of curtain fabrics on
the roll, and owns a specialist UK facility dedicated to producing
made-to-measure curtains.
Dunelm was founded in 1979 as a market stall business, selling
ready-made curtains. The first shop was opened in Leicester in 1984
and over the following years the business developed into a
successful chain of high street shops before expanding into broader
homewares categories following the opening of the first Dunelm
superstore in 1991.
Dunelm has been listed on the London Stock Exchange since
October 2006 (DNLM.L) and has a current market capitalisation of
approximately GBP1.7bn.
CHAIRMAN'S STATEMENT
Dunelm has delivered a solid performance in the first six
months, with total sales growing by 10.3% to GBP448.1m, three new
stores were opened and like for like sales growth was 3.4%. Profit
before tax increased by 10.7% to GBP75.5m. The Board has declared
an interim dividend of 6 pence per share, up 9% on last year and
broadly in line with the 11% growth in our earnings per share.
In line with our Capital Structure policy to maintain our
average net debt to EBITDA at between 0.25 times and 0.75 times the
Board has declared a Special Dividend of 31.5 pence per share,
which will be payable, together with the ordinary dividend, to
shareholders on the register on the 4th March. This Special
Dividend is supported by our strong cash performance in the period
with free cash flow increasing by 66.4% year on year to
GBP76.7m.
John Browett became Chief Executive on January 1st, having been
CEO Designate since July 2015, and is already having a substantial
positive impact on the business. As mentioned in our Annual Report,
Will Adderley continues to play an active role in the business as
Deputy Chairman. Keith Down joined as our new Chief Financial
Officer in December 2015, following the retirement of David Stead.
William Reeve and Peter Ruis have also recently joined the Board as
Non-Executive Directors.
We look forward to further good progress in the remainder of the
year.
Andy Harrison
Chairman
10 February 2016
CHIEF EXECUTIVE OFFICER'S REVIEW
The Foundation of our success
Our business is built on a strong foundation of exciting product
and design, unrivalled knowledge of the homewares market, a low
cost store network, great people and investment in systems. Our
focus continues to be on developing the business for the longer
term. We can continue to grow strongly and profitably through store
sales growth, new stores (particularly in London) and through
on-line enabled home delivery.
At our heart we are a product company through and through. We
love to design and source new lines that offer exceptional value
for money. We have a great supply base that helps us source new
product at fantastic prices and our stores have, on average, 20,000
well-chosen lines. It is a pleasure to join a company that really
understands how to find lines for whatever budget our customers
have.
Our stores and online offer continue to evolve, and we are
constantly improving the shopping trip. Historically we have
focused on range and stock density to drive sales. While this will
always be important, in our latest stores, refits and new website
we are particularly focused on making our offer easier to shop.
Most notably we have had some great breakthroughs in the last six
months on visual merchandising in key categories.
In any retail business people are a critical part of delivering
for customers. I believe this to be particularly true for Dunelm.
Perhaps this is why our stores and delivery service achieve very
high net promoter scores from our customers. We welcomed the Living
Wage increases as we had already planned to significantly increase
our pay for our store colleagues. We want to recognise the major
role they have in making Dunelm a great place to shop.
As we grow, we are also strengthening our senior team, investing
in our capability to accelerate the development of the business.
Wherever possible we promote from within our business. 80% of the
latest store manager appointments were internal promotions.
Over the years we have invested in our core systems to make our
business efficient and effective. We are focused on building the
systems around this strong IT core, which will enable us to
continue to develop without taking on significant costs as turnover
expands.
Growth Strategy
Since I joined the business we have reviewed our strategy and
whilst we continue to work towards the three part growth strategy
reported last year; growing like for like sales, rolling out new
stores and growing our home delivery channel, we have focused our
work on eight key initiatives that I believe will enable us to
achieve this. These core projects are not everything we do day to
day and do not represent all of our project work but instead focus
our effort and will be the key method by which we improve our
business substantially for our customers over the medium term.
Online
We have built our store estate for a post-internet view of UK
retailing. Our aspiration is to increase our store estate to 200
locations from the 151 superstores we have today. We cannot clearly
see what the final split of sales between stores and online will
be, however we do believe in a multi-channel world for homewares
and see online as a critical part of the shopping trip.
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The web enables us to engage with customers before they leave
home, in store and when they make a final decision. It enables us
to service our customers far more effectively; whether through
offering an extended range, walking through all of the options,
tracking orders or following up appointments.
In July we launched our new website; while growth initially
slowed as we got used to a new robust platform, sales growth has
started to accelerate and we are now able to develop our offer far
more rapidly. We have lots of ideas to implement and online has
significantly expanded the reach for our great product.
London
We still need around 50 stores to give us national coverage in
the UK. London and the South East provide a significant portion of
this opportunity, although we recognise that it is a challenging
market to penetrate. We are already at 8 stores in the Greater
London area and can see opportunities to increase this. Stores are
a critical way for us to build awareness around our product and
design.
Stock Management
Dunelm operates with high stock density and availability both at
the shelf-edge and online. This enables our customers to shop with
confidence knowing, for example, that when buying bed linen the
whole set is in stock.
We have carefully analysed our stock flow through the Company
and concluded that we can further improve availability whilst still
running with lower stock both in stores and in our supply chain.
This will make us more efficient which will enable us to reinvest
in the customer offer.
Store Operations
Our stores are at the heart of everything we do. We have
reviewed all activities carried out in the stores and as a result
have found several opportunities to use our colleagues more
effectively.
After a careful study we are reducing the "waste" activity in
store. This has been and will be facilitated by improving our
management of stock. Consequently we can redirect our store effort
to helping customers, which we know will drive sales.
The improvement in store operation is not just a one-off for
this year. We can see several rounds of improvement that will allow
us to reinvest in wages, make our stores more efficient and an even
better place to shop through continued investment in service.
Store Format
Our customers love our stores, but they do tell us that we could
make them easier to shop. Historically we have always focused on
range and stock density at the expense of customer space. The work
on stock is making our stores a little easier to navigate, but
there remains an opportunity to make our displays more
attractive.
We have implemented many good visual merchandising initiatives
recently; for example the Rug Bazaar we are rolling out and the
half beds we use to show bedding. However, the work on the format
will take this much further. We have incorporated elements of this
thinking in some of our stores, but this is merely an indication of
where we are travelling, not the final destination.
Made to Measure
Made to Measure is a service that differentiates us from many of
our competitors. We manufacture the majority of our curtains
ourselves and believe we offer great value for money.
We know this business can grow significantly as we improve the
efficiency and effectiveness of the operation with the aim of
increasing our overall market share. Although we have a market
leading offer we can do even better for our customers. We will
implement a new system to manage the customer order end to end and
will make the offer much easier to shop online.
Furniture
Dunelm continues to develop its furniture offer across all
channels. We are focused on readymade furniture, our value is
strong and we have grown the business significantly.
We have major opportunities to deliver even better ranges,
better in store displays and more service in our stores. Behind the
scenes we are improving stock management, delivery options and
after sales service. Customers are happy with what we deliver today
but we can do more to grow this business, recognising that it will
take some time.
The work on the supply chain over the last six months means our
total furniture sales are profitable today but increased scale will
make this a much more profitable business in the future.
Supply Chain
In the summer, as previously announced, we will double our
warehouse capacity in a purpose built facility that will enable a
lower cost logistics platform. Ultimately we will achieve greater
savings per unit as we grow.
The new facility will also enable us to further integrate our
e-commerce and direct to store distribution over time. This will
enable improved availability, productivity and cleaner realisation
of end of season clearance.
Outlook
After a solid performance in the first half, we had a strong
sale after Christmas and we expect further good progress in the
remainder of the year.
We are working hard to build an even better business for the
future. We want to improve the shopping trip for customers both in
store and online. Our work on the supply chain will provide better
service in store and to the home at lower cost. We can make
ourselves more efficient and effective in the stores and the
office. As we work through all the product ranges, including
furniture and Made to Measure, I am confident that we can find even
more ways to improve value for money for our customers.
It is a really exciting time to be at Dunelm; we have the key
infrastructure projects in place, the right team, a great heritage
and a continued focus on our product and people.
John Browett
Chief Executive Officer
10 February 2016
CHIEF FINANCIAL OFFICER'S REVIEW
Financial Performance
Sales
Total sales for the 26 weeks to 2 January 2016 were GBP448.1m
(FY15 H1: GBP406.4m), representing growth of 10.3%.
Taking our three key growth avenues in turn, sales performance
was as follows:
H1 sales Growth Growth
(GBPm) (GBPm) (%)
--------------- --------- -------- -------
LFL stores 376.9 12.4 3.4%
--------------- --------- -------- -------
Home delivery 28.0 5.5 24.4%
--------------- --------- -------- -------
Total LFL 404.9 17.9 4.6%
--------------- --------- -------- -------
Non-LFL
stores 43.2 23.8 -
--------------- --------- -------- -------
Total 448.1 41.7 10.3%
--------------- --------- -------- -------
Due to the 53(rd) week included in the last financial year, the
above figures include eight days of our Winter Sale, compared to
two days of Winter Sale included in the comparative period. This
has boosted like for like (LFL) stores growth by approximately
GBP10.0m (equivalent to 2.6% over the half year). These impacts
will reverse in the next quarter. Therefore, adjusting for this
calendar impact, underlying LFL performance was +2.0% for the 26
week period.
Having adjusted for the beneficial calendar impact, performance
in the period reflected:
-- Good performance in curtains and bedding, particularly our
new Kids range. We also saw good growth in our rugs and utility
departments;
-- Ongoing store portfolio expansion, with three new superstores
opened and one major refit completed; and
-- Continuing growth of our on-line business, including a +24.4%
increase in home delivery sales.
Gross margin
Gross margin for the half year increased by 30 basis points
(bps) to 50.7% (FY15 H1: 50.4%). This included the impact of Winter
Sale as described above, which is estimated to have depressed
margin growth by -10bps over the half year. Underlying margin
improved due to a small increase in direct sourcing, (increasing to
19.4% from 19.0% in the comparative period) better buying and less
promotional clearance.
Operating costs
Operating costs for the period were GBP151.4m, an increase of
GBP13.7m (10.0%) year on year. The main drivers of this increase
were:
-- IT capability - we continue to recognise the importance of IT
in our business, not only investing in the new web platform but
also the scale and capability of our IT function;
-- Store portfolio growth - we opened three new stores
increasing selling space by 2.1% in the first half of the year;
-- Multi-channel fulfilment - we continue to invest in our home
delivery service, and the value of this business rose by 24%
compared to the previous year;
-- Dunelm At Home - we finalised the roll-out of our in-home
consultation service adding another 10 stores;
-- Stoke 2 transition - we have invested around GBP0.3m in
transition costs relating to the new warehouse which is due to open
in the second half of the year;
-- Stores - we continue to invest in customer service and in our
workforce through higher wage increases. We anticipate that these
incremental costs will be offset by productivity benefits over
time;
-- Investment in board and executive team - we have
significantly invested in senior management capability as we look
to develop the business further; and
-- Property - we saw a one-off benefit of GBP0.7m in the first
half relating to the reassignment of an onerous lease
Profit and Earnings per Share
Operating profit for the period was GBP75.6m (FY15 H1:
GBP67.1m), an increase of GBP8.5m (12.7%). Operating profit margin
was 16.9%, 40bps higher than FY15 H1 due to the increase in gross
margin and the benefit of the Winter Sale brought forward into the
first half of the year.
Earnings before interest, tax, depreciation and amortisation
(EBITDA) rose by 14.3% to GBP88.7m (FY15 H1: GBP77.6m). On a last
twelve months basis, EBITDA was GBP155.2m (FY15 H1: GBP142.3m). The
EBITDA margin achieved was 19.8% (FY15 H1: 19.1%)
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There was a net loss of GBP0.1m (FY15 H1: GBP1.1 gain) on
financial items in the period. Interest payable and amortisation of
arrangement fees relating to the Group's revolving credit facility
of GBP0.8m (FY15 H1: nil) were offset by gains of GBP0.6m (FY15 H1:
GBP0.7m) resulting from foreign exchange differences on the
translation of dollar denominated assets and liabilities along with
interest earned on cash deposits of GBP0.1m (FY15 H1: GBP0.4m).
Profit before tax (PBT) grew by 10.7% to GBP75.5m (FY15 H1:
GBP68.2m). Profit after tax of GBP59.5m (FY15 H1: GBP53.5m)
reflects the projected full year effective tax rate of 21.2% (FY15
H1: 21.5%). The effective rate has reduced compared with last year
primarily due to the lowering of the headline rate of corporation
tax offset by depreciation charged on non-qualifying capital
expenditure.
Fully diluted earnings per share were 29.3p (FY15 H1: 26.4p), an
increase of 11.0%.
Cash generation
Dunelm continues to deliver strong cash returns. In the period,
the group generated GBP96.8m (FY15 H1: GBP58.7m) of net cash from
operating activities, an increase of 64.9%. This includes some
benefit of seasonality, which is expected to reverse in the second
half of the financial year.
Period end working capital decreased by GBP20.5m. (FY15 H1:
GBP5.1m increase). The majority of this movement relates to an
improvement in stock and inventories of GBP14.7m which reflects
better stock control and the impact of the Winter Sale being
brought forward. We expect that the majority of this working
capital benefit will continue in the second half of the year.
Capital investment was GBP20.0m in the period (FY15 H1:
GBP12.6m). Spend in the period included the purchase of the Fogarty
brand (GBP4.8m), investment in the new distribution centre (GBP2.5m
of a GBP12m total expected investment), and investment in new and
existing stores (GBP9.5m). Free cash flow was GBP76.7m (FY15 H1:
GBP46.1m), representing 102% of PBT (FY15 H1: 68%).
Capital Policy
During FY15, the Board adopted a new policy on capital
structure, targeting an average net debt level (excluding lease
obligations and short-term fluctuations in working capital) of
between 0.25× and 0.75× historical EBITDA. This policy provides the
flexibility to continue to invest in the Group's growth strategy
and to take advantage of investment opportunities as and when they
arise, for example freehold property acquisitions. Furthermore, the
board intends that ordinary dividend cover should in future be
between 2.0x and 2.5x on a full year basis.
Reflecting these policies, we will pay a regular interim
dividend of 6p per share (totalling GBP12.2m, a 9% increase year on
year) and a special distribution of 31.5p per share (totalling
GBP63.9m) to shareholders on the register at 4 March 2016. Both
payments are expected to be made on 24 March 2016.
The Board will consider further special distributions in the
future if average debt over a period consistently falls below the
minimum target level of 0.25x EBITDA, subject to known and
anticipated investments plans at the time.
Banking Agreements and Net Debt
The Group has in place a GBP150m syndicated Revolving Credit
Facility (RCF) which expires on 9 February 2020. The terms of the
RCF are consistent with normal practice and include covenants in
respect of leverage (net debt to be no greater than 2.5× EBITDA)
and fixed charge cover (EBITDA to be no less than 1.5× fixed
charges), both of which were met comfortably as at 2 January
2016.
In addition the Group maintains GBP20m of uncommitted overdraft
facilities with two syndicate partner banks.
Net debt at 2 January 2016 was GBP29.4m compared with net debt
of GBP73.6m at 4 July 2015. Daily average net debt (facilities
drawn plus cash at bank) was GBP47.5m. This falls within our target
range of net debt.
Principal Risks and Uncertainties
There are a number of potential risks and uncertainties which
could have a material impact on the Group's performance over the
remaining six months of the financial year and beyond, and could
cause actual results to differ materially from expected and
historical results. The Board considers that the majority of
significant risks and uncertainties remain as published in the
Annual Report for the year ended 4 July 2015. These comprise:
-- Damage to brand reputation through product and service quality
-- Loss of market share through increased competition
-- Prosecution and other regulatory action as a result of
failure to comply with legislative or regulatory requirements
-- Disruption to key IT systems from a major incident, including a cyber-attack
-- Fluctuations in commodity prices
-- Access to sites for store chain expansion
-- Loss of a key part of our infrastructure
-- Unforeseen financing requirements or treasury exposures
-- Loss of key personnel
A detailed explanation of these risks can be found on pages 24
to 28 of the 2015 Annual Report which is available at
www.dunelm.com.
Keith Down
Chief Financial Officer
10 February 2016
CONSOLIDATED INCOME STATEMENT (UNAUDITED)
For the 26 weeks ended 2 January 2016
26 weeks 26 weeks 53 weeks
ended ended ended
2 January 27 December 4 July
Note 2016 2014 2015
GBP'000 GBP'000 GBP'000
----------- ------------- ----------
Revenue 5 448,078 406,372 835,805
Cost of sales (221,021) (201,571) (424,649)
------------------------------------ ----- ----------- ------------- ----------
Gross profit 227,057 204,801 411,156
Operating costs (151,422) (137,688) (288,672)
------------------------------------ ----- ----------- ------------- ----------
Operating profit 75,635 67,113 122,484
Financial income 691 1,061 811
Financial expenses (833) - (673)
------------------------------------ ----- ----------- ------------- ----------
Profit before taxation 75,493 68,174 122,622
Taxation 6 (16,005) (14,657) (26,551)
------------------------------------
Profit for the period attributable
to owners of the parent 59,488 53,517 96,071
------------------------------------ ----- ----------- ------------- ----------
Earnings per Ordinary Share
- basic 8 29.4p 26.5p 47.5p
Earnings per Ordinary Share
- diluted 8 29.3p 26.4p 47.3p
------------------------------------ ----- ----------- ------------- ----------
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)
For the 26 weeks ended 2 January 2016
26 weeks 26 weeks 53 weeks
ended ended ended
2 January 27 December 4 July
2016 2014 2015
GBP'000 GBP'000 GBP'000
----------- ------------- ---------
Profit for the period 59,488 53,517 96,071
Other comprehensive income/(expense):
Items that may be subsequently
reclassified to profit or loss:
Movement in fair value of cash
flow hedges 2,318 4,565 905
Transfers of cash flow hedges
to cost of sales 498 529 1,706
Deferred tax on hedging movements (538) (1,019) (522)
Other comprehensive income for
the period, net of tax 2,278 4,075 2,089
---------------------------------------- ----------- ------------- ---------
Total comprehensive income for the
period attributable to owners of
the parent 61,766 57,592 98,160
---------------------------------------- ----------- ------------- ---------
CONSOLIDATED STATEMENT OF FINANCIAL POSITION (UNAUDITED)
As at 2 January 2016
Note 2 January 27 December 4 July
2016 2014 2015
GBP'000 GBP'000 GBP'000
---------------------------------- ----- ---------- ------------ ----------
Non-current assets
Intangible assets 10 17,636 11,298 13,124
Property, plant and equipment 10 162,047 152,910 158,946
Deferred tax asset 1,153 1,582 1,897
Total non-current assets 180,836 165,790 173,967
---------------------------------- ----- ---------- ------------ ----------
Current assets
Inventories 118,374 135,326 133,118
Trade and other receivables 16,953 20,295 17,962
Cash and cash equivalents 39,590 38,312 16,197
Derivative financial instruments 2,777 2,196 -
Total current assets 177,694 196,129 167,277
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---------------------------------- ----- ---------- ------------ ----------
Total assets 358,530 361,919 341,244
---------------------------------- ----- ---------- ------------ ----------
Current liabilities
Trade and other payables (95,649) (85,059) (88,102)
Liability for current tax (15,443) (13,649) (12,495)
Derivative financial instruments - - (308)
Total current liabilities (111,092) (98,708) (100,905)
---------------------------------- ----- ---------- ------------ ----------
Non-current liabilities
Bank loans 11 (69,008) - (89,840)
Trade and other payables (40,962) (43,546) (42,376)
Provisions for liabilities (1,925) (3,416) (3,055)
Total non-current liabilities (111,895) (46,962) (135,271)
---------------------------------- ----- ---------- ------------ ----------
Total liabilities (222,987) (145,670) (236,176)
---------------------------------- ----- ---------- ------------ ----------
Net assets 135,543 216,249 105,068
---------------------------------- ----- ---------- ------------ ----------
Equity
Issued share capital 2,028 2,028 2,028
Share premium 1,624 1,624 1,624
Capital redemption reserve 43,157 43,157 43,157
Hedging reserve 2,048 1,756 (230)
Retained earnings 86,686 167,684 58,489
Total equity attributable to
equity holders of the Parent 135,543 216,249 105,068
---------------------------------- ----- ---------- ------------ ----------
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
For the 26 weeks ended 2 January 2016
Note 26 weeks 26 weeks 53 weeks
ended ended ended
2 January 27 December 4 July
2016 2014 2015
GBP'000 GBP'000 GBP'000
--------------------------------------- ----- ----------- ------------- ----------
Profit before taxation 75,493 68,174 122,622
Adjustment for net financing
costs 142 (1,061) (138)
----------- ------------- ----------
Operating profit 75,635 67,113 122,484
Depreciation and amortisation 10 12,354 10,509 21,436
Impairment losses on non-current
assets 10 - - 109
Loss on disposal of non-current
assets 10 684 5 102
----------- ------------- ----------
Operating cash flows before
movements in working capital 88,673 77,627 144,131
Decrease/(increase) in inventories 14,744 (19,798) (17,590)
Decrease/(increase) in receivables 1,002 (771) 1,505
Increase in payables 4,717 15,463 16,236
----------- ------------- ----------
Net movement in working capital 20,463 (5,106) 151
Share-based payments expense 595 (439) 250
----------- ------------- ----------
109,731 72,082 144,532
Interest received 64 273 522
Tax paid (13,043) (13,630) (26,859)
----------- ------------- ----------
Net cash generated from operating
activities 96,752 58,725 118,195
Cash flows from investing activities
Proceeds on disposal of property,
plant and equipment - - 3
Acquisition of property, plant
and equipment (13,315) (9,616) (25,362)
Acquisition of intangible assets (6,723) (2,980) (5,884)
--------------------------------------- ----- ----------- ------------- ----------
Net cash used in investing activities (20,038) (12,596) (31,243)
Cash flows from financing activities
Proceeds from re-issue of treasury
shares 703 22 810
Net (repayments)/drawdowns on
revolving credit facility 11 (21,000) - 91,000
Loan transaction costs 11 - - (1,295)
Interest paid (992) - (148)
Ordinary dividends paid (32,397) (30,322) (41,458)
Special distributions to shareholders - - (141,727)
--------------------------------------- ----- ----------- ------------- ----------
Net cash flows used in financing
activities (53,686) (30,300) (92,818)
--------------------------------------- ----- ----------- ------------- ----------
Net decrease in cash and cash
equivalents 23,028 15,829 (5,866)
Foreign exchange revaluations 365 743 323
Cash and cash equivalents at
the beginning of the period 16,197 21,740 21,740
Cash and cash equivalents at
the end of the period 39,590 38,312 16,197
--------------------------------------- ----- ----------- ------------- ----------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)
For the 26 weeks ended 2 January 2016
Issued Capital
share Share redemption Hedging Retained Total
Note capital premium reserve reserve earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- ----- --------- --------- ------------ --------- ---------- ----------
As at 4 July 2015 2,028 1,624 43,157 (230) 58,489 105,068
-------------------------- ----- --------- --------- ------------ --------- ---------- ----------
Profit for the period - - - - 59,488 59,488
Movement in fair value
of cash flow hedges - - - 2,318 - 2,318
Transfers to cost of
sales - - - 498 - 498
Deferred tax on hedging
movements - - - (538) - (538)
-------------------------- ----- --------- --------- ------------ --------- ---------- ----------
Total comprehensive
income for the period - - - 2,278 59,488 61,766
Issue of treasury shares - - - - 703 703
Share based payments - - - - 595 595
Deferred tax on share
based payments - - - - (258) (258)
Current corporation
tax on share options
exercised 6 - - - - 66 66
Ordinary dividends paid 9 - - - - (32,397) (32,397)
-------------------------- ----- --------- --------- ------------ --------- ---------- ----------
Total transactions with
owners, recorded directly
in equity - - - - (31,291) (31,291)
--------- --------- ------------ --------- ---------- ----------
As at 2 Jan 2016 2,028 1,624 43,157 2,048 86,686 135,543
-------------------------- ----- --------- --------- ------------ --------- ---------- ----------
As at 28 June 2014 2,028 1,624 43,157 (2,319) 145,247 189,737
Profit for the period - - - - 53,517 53,517
Movement in fair value
of cash flow hedges - - - 4,565 - 4,565
Transfers to cost of
sales - - - 529 - 529
Deferred tax on hedging
movements - - - (1,019) - (1,019)
-------------------------- ----- --------- --------- ------------ --------- ---------- ----------
Total comprehensive
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income for the period - - - 4,075 53,517 57,592
Issue of treasury shares - - - - 22 22
Share based payments - - - - (439) (439)
Deferred tax on share
based payments - - - - 133 133
Current corporation
tax on share options
exercised 6 - - - - (474) (474)
Ordinary dividends paid 9 - - - - (30,322) (30,322)
-------------------------- ----- --------- --------- ------------ --------- ---------- ----------
Total transactions with
owners, recorded directly
in equity - - - - (31,080) (31,080)
--------------------------------- --------- --------- ------------ --------- ---------- ----------
As at 27 December 2014 2,028 1,624 43,157 1,756 167,684 216,249
-------------------------- ----- --------- --------- ------------ --------- ---------- ----------
As at 28 June 2014 2,028 1,624 43,157 (2,319) 145,247 189,737
-------------------------- -----
Profit for the period - - - - 96,071 96,071
Movement in fair value
of cash flow hedges - - - 905 - 905
Transfers to cost of
sales - - - 1,706 - 1,706
Deferred tax on hedging
movements - - - (522) - (522)
-------------------------- ----- --------- --------- ------------ --------- ---------- ----------
Total comprehensive
income for the period - - - 2,089 96,071 98,160
Issue of treasury shares - - - - 810 810
Share based payments - - - - 250 250
Deferred tax on share
based payments - - - - (861) (861)
Current corporation
tax on share options
exercised 6 - - - - 157 157
Ordinary dividends paid 9 - - - - (41,458) (41,458)
Special distributions
to shareholders - - - - (141,727) (141,727)
-------------------------- ----- --------- --------- ------------ --------- ---------- ----------
Total transactions with
owners, recorded directly
in equity - - - - (182,829) (182,829)
--------- --------- ------------ --------- ---------- ----------
As at 4 July 2015 2,028 1,624 43,157 (230) 58,489 105,068
-------------------------- ----- --------- --------- ------------ --------- ---------- ----------
NOTES TO THE INTERIM FINANCIAL STATEMENTS
For the 26 weeks ended 2 January 2016
1 General information
Dunelm Group plc and its subsidiaries ('the group') are
incorporated and domiciled in the UK. The registered office is
Watermead Business Park, Syston Leicestershire.
The primary business activity of the group is the sale of
homewares through a network of UK stores, website and our Dunelm at
Home service.
The group's financial results and cash flows have, historically,
been subject to seasonal trends between the first and second half
of the financial year. Traditionally the second half of the
financial year sees higher revenue and profitability due to the
winter sale and colder weather, however due to the first half of
the financial year ending later this year we have captured an
additional week of the winter sale revenue in these results.
2 Basis of preparation
These condensed interim financial statements For the 26 weeks
ended 2 January 2016 have been prepared in accordance with the
Disclosure and Transparency Rules of the Financial Conduct
Authority (previously the Financial Services Authority) and with
IAS 34, 'Interim financial reporting', as adopted by the European
Union.
The presentation of the condensed financial statements requires
the Directors to make judgements, estimates and assumptions that
affect the application of policies and reported amounts of assets
and liabilities, income and expenses. The estimates and associated
assumptions are based on historical experiences and various other
factors that are believed to be reasonable under the circumstances.
Actual results may differ from these estimates.
The financial information in this document is unaudited, but has
been reviewed by the auditors in accordance with the Auditing
Practices Board guidance on Review of Interim Financial
Information
These condensed interim financial statements do not comprise
statutory accounts within the meaning of section 434 of the
Companies Act 2006 and are not audited. Statutory accounts for the
year ended 4 July 2015 were approved by the Board of Directors on
10 September 2015 and delivered to the Registrar of Companies. The
report of the auditors on those accounts was unqualified, did not
contain an emphasis of matter paragraph and did not contain any
statement under section 498 of the Companies Act 2006.
3 Going concern basis
The Group has considerable financial resources together with
long standing relationships with a number of key suppliers and an
established reputation in the retail sector across the UK. Having
assessed the principal risks, the directors considered it
appropriate to adopt the going concern basis of accounting in
preparing the 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 are consistent with those of the
annual financial statements for the year ended 4 July 2015, 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.
The drawdowns and repayments made from the revolving credit
facility (RCF) have been disclosed net rather than gross within the
cash flow.
The condensed interim financial statements should be read in
conjunction with the annual financial statements for the year ended
4 July 2015, which have been prepared in accordance with IFRSs as
adopted by the European Union.
5 Segmental reporting
The Group has only one class of business, retail of homewares,
and operates entirely in the UK market.
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 21.2% (26 weeks ended 27 December 2014: 21.5%).
7 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 4 July 2015. There have been no changes in any
risk management policies since the year end.
Fair value estimation
Financial instruments (hedging) 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); and
Level 3: inputs for the asset or liability that are not based on
observable market data (unobservable inputs).
All financial instruments carried at fair value have been
measured by a Level 2 valuation method, based on observable market
data.
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.
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