TIDMDFS
RNS Number : 9077L
DFS Furniture plc
06 October 2016
6 October 2016 For immediate release
GENERAL TEXT AMMENT
The following amendments have been made to the ' Preliminary
Results' announcement released on 06 October 2016 at 07:00am under
RNS No 8182L.
The original text stated incorrect dates for when DFS Furniture
plc shares would trade ex-dividend and the record date.
The correct information is that DFS Furniture plc shares will
trade ex-dividend from 8 December 2016 and the record date will be
9 December 2016.
All other details remain unchanged.
The full amended text is shown below.
DFS Furniture plc
Preliminary Results
RECORD FINANCIAL RESULTS AND POSITIVE OPERATIONAL PROGRESS
DFS Furniture plc, (the "Group"), the market leading retailer of
upholstered furniture in the United Kingdom today announces its
preliminary results for the 52 weeks ended 30 July 2016 (prior
year: 52 weeks ended 1 August 2015).
Financial Highlights:
-- Gross sales up 7.4% to GBP980.4 million (FY15: GBP913.1 million)
-- Revenue up 7.1% to GBP756.0 million (FY15: GBP706.1 million)
-- Underlying EBITDA up 5.8% to GBP94.4 million (FY15: GBP89.2 million)
-- Profit before tax GBP64.5 million (FY15 underlying: GBP33.3 million)
-- Continued strong cash generation : 1.45x net debt / adjusted EBITDA
-- Adjusted underlying EPS up 28.1% to 23.7p (FY15: 18.5p)
-- Final dividend of 7.5p per share proposed giving a total of
11.0p for the year (+18.3%; FY15: 9.3p)
-- Further special capital return to shareholders expected later in FY17
Operational Highlights:
-- Proven growth strategy on track:
o Broadening our appeal
-- 35% growth in branded upholstery orders through DFS
-- Sofa Workshop ranges performing well in DFS stores
o UK stores
-- Three new 10-15,000 sq. ft. DFS stores opened in the UK and
ROI
-- DFS small store trial opening in Bromley, with further store
in Crawley to open shortly
o International
-- Netherlands stores trading in line with our expectations with
third store opened post year end
o Full utilisation of retail space
-- Eleven Customer Distribution Centres operating at year
end
-- Twelve Dwell co-located stores performing strongly; potential
for over 40 Dwell stores in total
o Online
-- Continued double-digit growth in gross sales, profits and
site traffic
-- Continued strong increases in customer satisfaction scores;
average post-purchase NPS above 80%; established customer NPS
rising from 21.9% to 31.2%
-- Positive customer and employee response to partnership with Team GB for Rio Olympics
DFS Chairman Richard Baker said:
"The tried and tested DFS growth strategy has delivered another
set of record results and puts us in an excellent position, as the
market leader, to continue to generate shareholder value. Our
unique and flexible business model, the quality and commitment of
our people, our family culture and our focus on customer
satisfaction remain the key factors behind our continuing
success."
DFS Chief Executive Officer Ian Filby said:
"It is naturally pleasing to again report record results that
demonstrate the robustness of our business model, the effectiveness
of our growth strategy and the excellence of our products and our
people. Together these unique assets give DFS the proven ability to
achieve consistent outperformance of the retail furniture market
over the long-term."
Key Performance Indicators
The performance measures below are those applicable to the Group
for the period under review. We report KPIs over a twelve month
period, in order to balance the effect of seasonality and short
term fluctuations which can affect our market from time to time.
FY15 measures include part of the period prior to the completion of
the Group's IPO on 11 March 2015. Other comparative measures
typically presented by public companies such as earnings per share
for the prior year reflect historical shareholding structures and
are not representative of underlying performance, but will become
more relevant for the next financial year.
FY 16 FY 15 Year on
year change
========================== ========== ========== =============
Financial KPIs
Gross sales GBP980.4m GBP913.1m +7.4%
Revenue GBP756.0m GBP706.1m +7.1%
Underlying EBITDA GBP94.4m GBP89.2m +5.8%
Underlying profit GBP64.5m GBP33.3m
before tax
Free cash flow GBP75.6m GBP70.7m
Cash conversion 80.1% 79.2%
Return on capital
employed 21.2% 21.2%
Non Financial KPIs
Number of DFS stores
(UK & RoI) 109 105
Net Promoter Score
- post purchase 83.9% 78.8%
- established customer 31.2% 21.9%
Growth in exclusive
brand sales +35% +75%
Online growth rate +15.6% +17.5%
Stores with converted
warehouse space 19 8
Analyst Presentation
DFS will be hosting an analyst presentation at 9.45am today. The
presentation slides and a listen only web-cast facility will be
available through the Group's corporate website:
www.dfscorporate.co.uk. There will be a telephone dial-in facility
available on +44 (01452) 569393 with passcode 83315235. The
presentation slides will be made available on the Group's website:
www.dfscorporate.co.uk. A replay facility will be available for two
weeks after the event. To access the replay please dial +44 (0)1452
550000 and use passcode 83315235.
Enquiries:
DFS (enquiries via FTI) FTI Consulting
Ian Filby (CEO) Jonathon Brill
Nicola Bancroft (CFO) Georgina Goodhew
Mike Schmidt (Director of Tom Hufton
Corporate Finance)
Eleanor Purdon
+44 (0) 20 3727 1000
dfsfurniture@fticonsulting.com
About DFS Furniture plc
DFS is the clear market leading retailer of upholstered
furniture in the United Kingdom. We design, manufacture, sell and
deliver to our customers an extensive range of upholstered
furniture products. The business operates a retail network of
upholstered furniture stores in the United Kingdom and Europe,
together with an online channel. These have been established and
developed gradually over more than 47 years of operating history.
We attract customers to our stores and website through our
substantial and continued investment in nationwide marketing
activities and our reputation for high quality products and
service, breadth of product ranges and price points and favourable
consumer financing options.
CHAIRMAN'S STATEMENT
Growth strategy on track
I am delighted to report that our financial and operational
progress remains on track. These excellent results reflect the
executive management team's successful implementation of multiple
strategic initiatives that have delivered ahead of our expectations
in a number of areas, enabling us once again to outperform the
furniture retail market as a whole. Such outperformance has been a
consistent feature of the DFS track record in all the varied market
conditions the business has encountered throughout its long
operating history.
Our markets
The key macroeconomic indicators of consumer confidence, housing
market activity and consumer credit availability remained generally
favourable throughout the year, enabling the UK retail furniture
market to continue its recovery from the low point it reached in
2011, in the wake of the global financial crisis. The market still
remains, however, some 20% smaller by value than at its peak in
2007, potentially indicating further scope for growth in the longer
term once current economic uncertainties are resolved.
Results and dividend
The business performed strongly throughout the year to deliver
continued record levels of revenues, profits and cash flow. The
strong cash generation that is such an important feature of our
business enables the Board to recommend payment of a final dividend
of 7.5 pence per share (FY15: 6.2 pence), an increase of 21.0%.
Together with the increased interim dividend of 3.5 pence (FY15:
3.1. pence) paid in June, this makes a total dividend for the year
of 11.0 pence (FY15: 9.3 pence), a rise of 18.3%, in line with our
commitment to deliver excellent returns to our shareholders through
a consistently progressive dividend policy.
Given the strong progress in reducing our financial leverage and
current positive trading momentum, the Board is also pleased to
confirm it currently expects that the business will be in a
position, at the interim results in March 2017, to announce a
further special capital return to shareholders anticipated to occur
prior to the current financial year end in July 2017. In the
interests of prudence, the return would depend on the capital
requirements of the business, in line with the detailed guidance
given within the Financial Review.
People
Our whole family of some 4,000 people deserve our sincere thanks
for their hard work in delivering another record set of results.
Their commitment to delivering outstanding service to our customers
at every stage of their experience with DFS is endorsed by record
levels of customer satisfaction, as measured by our Net Promoter
Scores.
I am delighted to welcome Nicola Bancroft to our Board as Chief
Financial Officer, following the retirement of Bill Barnes after
almost 13 years. Bill leaves with our thanks and our very best
wishes for the future. Nicola and Bill have worked closely together
for the last three years and the handover of responsibilities has
therefore been seamless and smooth. I am particularly pleased that
we now have equal representation of women and men on our Board.
Conclusion
DFS has weathered many forms of political and economic
turbulence during its 47 years of operating history, and I have
confidence that we will continue to be well positioned despite the
uncertainties inevitably surrounding the EU Referendum. Our
business model, scale, vertical integration and highly flexible
cost base all provide resilience against potentially weaker trading
conditions, relative to the market. We will continue to pursue our
proven long-term growth strategy, leveraging our excellent cash
flow to invest in the business for the future, and I am confident
that this will continue to deliver long-term profitable growth and
cash returns for the benefit of all our stakeholders.
Richard Baker
Chairman
CHIEF EXECUTIVE'S OPERATING REVIEW
Our strong sales growth was sustained throughout the year, as
many of our strategic initiatives continued to deliver ahead of our
expectations within a healthy furniture market environment. This
performance enabled us to deliver profit before tax at the upper
end of market expectations despite the increased operating costs
arising from our investment for the future in the development of
Dwell, Sofa Workshop and DFS internationally. The business also
remains highly cash generative, enabling us to fund our investments
in store openings and refurbishments, and an accelerated programme
of retail space conversion, while reducing gearing and increasing
returns to our shareholders.
Growth strategy update
Broadening our appeal to customers
We remain committed to "creating and making sofas that every
home loves and can afford", and have focused on extending our
appeal to an even broader range of customers so as to consolidate
our position as the UK market leader in upholstered furniture
across all customer segments.
Our ranges of Exclusive Brands have performed well ahead of
expectations, with a 35% increase in total sales orders over the
year as a whole. Highlights included the introduction of a number
of new models under the House Beautiful brand, and the continued
outstanding success of the French Connection Zinc range. Our close
supplier relationships and vertical integration insights have
enabled us to introduce a seven-day express delivery option across
the Zinc sofa range.
We extended our partnership agreements with French Connection,
House Beautiful and Country Living during the year, and are also
achieving encouraging results from the sale of sofas from our own
Sofa Workshop Dillon and Ellie ranges through DFS stores.
UK and Republic of Ireland DFS store roll-out
Our well-established programme of adding new 10-15,000 sq. ft.
DFS stores at the rate of three to five per annum has continued to
plan, with the successful opening of three new stores at
Christchurch and Kettering in the UK and Limerick in the Republic
of Ireland. Our established customer catchment area model,
leveraging our comprehensive delivery postcode data, enables us to
make a highly accurate assessment of new store opportunities to
target new stores likely to deliver substantial incremental EBITDA,
and achieve rapid payback within two years. Progress in opening new
stores this financial year is well-advanced with two new stores
opened in Truro and Salisbury, and further openings planned in the
next six months.
Following the success of our initial trial of a smaller 2,500
sq. ft. store last year in the Westfield shopping centre in
Stratford, London, we opened a further small store in Bromley in
April 2016 and will shortly open a third store in this format in
Crawley, extending the trial outside the M25. The development of
this smaller concept is made possible by our market-leading website
and innovative "Swoosh" furniture visualisation technology,
allowing us to demonstrate the comfort of our products to customers
with just one unit from each range in store, while using large
screens to show our complete range of sizes, types, coverings and
colour options.
International expansion
We continue to make progress in The Netherlands, where we opened
a second store in Rotterdam's Alexandrium shopping mall and retail
park in September 2015. At 10,000 sq ft this store is smaller than
our initial trial opening in Cruquius and is achieving comparable
results, giving us reassurance that store performance is replicable
and predictable in new locations. Cruquius also achieved
satisfactory growth in sales year-on-year.
As expected, our investment in long-term brand-building for DFS
in The Netherlands was reflected in operating costs, net of
incremental revenue, of approximately GBP2 million during the year,
and we expect to maintain a similar GBP2 - 3 million of net
investment in the current financial year. In September 2016 we
opened a 3,300 sq ft store in Amsterdam as our first trial in The
Netherlands of a smaller format store in a shopping centre
location. We intend to maintain a measured approach to additional
store openings as we strengthen customer awareness and reputation
in this market, with the long-term aim of building the scale needed
to support national TV marketing based on the proven model of DFS
in the UK.
DFS Spain, acquired in October 2015, performed well during the
year following the refit of its showroom in Murcia in January 2016.
However, since our brand primarily appeals to the 800,000-strong
British expatriate community in Spain, recent trading in this
business has understandably seen some impact from the uncertainty
arising from the EU referendum vote.
Retail space optimisation
We have established a successful model for Dwell to occupy store
warehousing space converted for retail use within the DFS estate.
This has two positive results. First, the new Dwell stores generate
higher revenue and profits than we have been able to achieve by
using converted space to sell ranges of beds and dining furniture.
Secondly, the first twelve Dwell stores opened have also generated
a c.2% like-for-like increase in DFS bookings within the associated
DFS stores, as these stores have benefited from increased footfall
through new customers and an increased frequency of return
visits.
The success of the Dwell store-in-store concept has led us to
accelerate our investment in the Customer Distribution Centre
("CDC") conversion programme. This programme releases additional
retail space by removing DFS's warehouse operations from stores and
consolidating them into larger, purpose-built, off-site facilities.
A further six CDCs opened during the year, giving us a total of
eleven at the year-end which serve approximately half of our store
estate. We now expect to complete the programme with the opening of
a further eight CDCs during the new financial year.
On completion of the CDC conversion programme and store-in-store
roll-out we will have over 40 Dwell stores giving us nationwide
coverage, together with more than five new Sofa Workshop stores,
whilst in the remainder of the DFS estate we will utilise the
remaining expanded retail space to carry additional ranges of beds
and dining furniture. Whereas previously we have guided to
incremental EBITDA per CDC of c. GBP500k, we now expect each of the
CDC conversions will generate GBP650k-GBP700k of incremental EBITDA
including both the benefit of the incremental Dwell profitability
and also the impact of DFS LFL sales growth.
The roll-out of this programme involves significant pre-opening
costs in the short term, as new sales staff are recruited and
trained and we scale up our supply chain and head office to support
the new stores. With the scale and pace of roll-out this financial
year, we believe the incremental benefits we are currently seeing
will be offset by implementation costs however from FY18 and into
FY19 we expect there will be a GBP3-4 million increase in EBITDA in
aggregate above the previous guidance given for this growth
lever.
Omnichannel
Today the web is the natural starting point for most people
researching a potential furniture purchase and a vital gateway and
complement to our physical stores. Our website dfs.co.uk remains a
strong leader, continuing to attract over 40% of upholstery sector
web traffic over the course of the year.
Continued investment in our web channel this year has included
the upgrading of our product viewer and room planning apps, the
development of a new online payment system, and the introduction of
an online order tracking service that allows customers to follow
the progress of their new furniture through every step from placing
their order to its installation in their home. Our mobile and
tablet sites have remained a focus for our development reflecting
the changing mix of devices our customers use to visit our site.
Subsequent to the end of the financial year we also successfully
replatformed our website to continue to allow us to grow our scale
and add incremental functionality.
We have also enjoyed continued double-digit growth in sales
completed online, making a valuable contribution to overall Group
sales growth.
The integration of online technology with our stores has also
continued during the financial year, with roll-out of 'Swoosh'
furniture visualisation technology in over 70% of the DFS estate,
with all stores planned to have the technology before our key
Winter Sale trading period. This allows us to project the full
range of models, colours and materials on a video wall in store,
enabling customers to see exactly how their chosen product will
look in their homes, and helping our store staff to sell the full
breadth of the DFS range.
Customer service
We remain determined to deliver the highest standards of service
to all our customers. Our approach relies both on proactive
training and Net Promoter Score ("NPS") linked incentivisation of
our staff, combined with a feedback system that allows us
accurately to measure and track the satisfaction of customers
throughout their purchase down to product, store, factory and
employee level.
I am pleased to report a further improvement in our
post-purchase NPS to 83.9% (FY15: 78.8%) during the year. As I
indicated in our last annual report, we have placed increasing
emphasis on our ability to deliver established customer
satisfaction - the willingness of customers to recommend our
products to their friends or family six months after making their
own purchase. This established customer satisfaction (surveyed six
months post-delivery) showed a substantial improvement to 31.2%,
compared with 21.9% in the prior year. All our management and
customer-facing staff are now incentivised according to the results
achieved in these established customer NPS.
Management
I would like to join the Chairman in thanking Bill Barnes for
his great contribution to DFS as our Group Finance Director since
2003, and to wish him a very long and happy retirement.
As well as welcoming Nicola Bancroft to her new role as Chief
Financial Officer, I would like to welcome Toni Wood to our
Executive Committee as Chief Marketing Officer. Toni joins us from
Costa Coffee, where she was Global Brand & Digital Director,
and has previously held senior marketing roles at The Jordans &
Ryvita Company, Findus and Procter & Gamble.
Corporate responsibility
We have continued to work hard to be a responsible and
sustainable business that puts something back into the communities
where we operate. Our Energy Management Policy has continued to
reduce our environmental impact by reducing emissions from our
delivery vehicles and company car fleet, and by upgrading store
lighting through the installation of low-energy LED equipment. Our
ISO 14001 environmental accreditation was extended during the year
to cover DFS retail stores as well as our head office in
Doncaster.
In the community, we have continued our partnership with the
British Heart Foundation (BHF) both in fundraising through the
successful sofa recycling scheme and in training and raising
awareness among our people. All new starters at DFS receive
training in CPR skills which may prove literally life-saving. We
are proud to have raised GBP3.4 million for BHF during the year and
also to have raised more than GBP750,000 for BBC Children in
Need.
Team GB Partnership
We were delighted to play a part in the historic and
well-deserved success of Team GB in the Rio 2016 Olympics through
our sponsorship as Team GB's official homeware partner. In this
role we were responsible for making Team GB's base in Rio a
comfortable home-from-home for our athletes. It was naturally a
source of particular pride and pleasure that all our participating
Brand Ambassadors - Adam Peaty, Laura Trott and Max Whitlock - won
gold medals during the games: successes which we were able to
celebrate on digital billboards across the UK highlighting our
partnership.
As well as helping to enhance the profile of DFS through
connected advertising, the partnership enabled us to engage our
staff with the athletes' philosophy of how marginal gains in many
areas can add up to a noticeable improvement in overall
performance. We held a number of internal events to drive staff
engagement across the business, including holding our very own DFS
Olympics in Doncaster, and were grateful to our Brand Ambassador
Denise Lewis, the 2000 gold medallist in the heptathlon, for
helping to build excitement and support in the run-up to the games
by undertaking a nationwide tour of our stores and factories.
Outlook
The relatively short trading period inevitably makes it hard to
predict the impact of the EU Referendum on the furniture retail
market however we are reassured that the Group's trading in the
last fourteen weeks has not indicated any weakening of demand to
date. We recognise that in 2017 retailing of furniture in the UK
faces an increased risk of a market slowdown with additional cost
pressures from foreign exchange movements, whilst it is likely that
the retail environment will remain intensely competitive. However,
with its proven resilient operating model the Group remains very
well positioned to mitigate economic headwinds and achieve
continued growth in its share of the UK retail furniture
market.
Overall we believe DFS enjoys excellent prospects to deliver
long-term profitable growth, strong cash generation and a
progressive dividend policy as one of the UK's best-known brands, a
major British manufacturer and the country's leading retailer of
upholstered furniture.
Ian Filby
Chief Executive Officer
FINANCIAL REVIEW
I am delighted to present my first financial review as CFO and
to report on another successful year for DFS. My thanks to my
predecessor Bill Barnes and to the rest of the Board for their
support in achieving a smooth handover of responsibilities.
This review covers the financial year to 30 July 2016, our first
full financial year since becoming a public company in March 2015.
As a different pre-IPO capital structure was in place for the
majority of the previous year, the table below is presented in
order to show an underlying comparative position:
Underlying Non FY16 Underlying Non FY15
underlying Total underlying Total
GBPm GBPm GBPm GBPm GBPm GBPm
==================== ========== =========== ====== ========== =========== ======
EBITDA 94.4 - 94.4 89.2 (11.6) 77.6
Depreciation
and amortisation (18.6) - (18.6) (17.0) - (17.0)
==================== ========== =========== ====== ========== =========== ======
Operating profit 75.8 - 75.8 72.2 (11.6) 60.6
Net finance expense (11.3) - (11.3) (38.9) (11.0) (49.9)
==================== ========== =========== ====== ========== =========== ======
Profit/(loss)
before tax 64.5 - 64.5 33.3 (22.6) 10.7
Taxation (14.2) 9.9 (4.3) (10.4) 2.9 (7.5)
==================== ========== =========== ====== ========== =========== ======
Profit/(loss)
for the year 50.3 9.9 60.2 22.9 (19.7) 3.2
=========== ====== =========== ======
Adjusted for:
Shareholder loan
interest - 16.6
==================== ========== ==========
Adjusted profit
after tax 50.3 39.5
==================== ========== ==========
Earnings per
share 23.7p 18.5p
Sales and revenue
Group gross sales for the full year increased by 7.4% to
GBP980.4 million (FY15: GBP913.1 million), including a 6.1%
increase in DFS sales as well as increased contributions from Dwell
and Sofa Workshop. This growth was ahead of the 7.0% reported at
the half year as a result of the acceleration of the conversion of
in-store warehouses into new retail space, predominantly new Dwell
stores.
Group revenue grew by 7.1% to GBP756.0 million (FY15: GBP706.1
million). The slightly different growth rate to gross sales
reflects increased uptake of interest free credit by Dwell and Sofa
Workshop customers and a change in the rate of insurance premium
tax increasing the cost of certain aftercare services.
Gross margin
Gross profit has continued to increase at a faster rate than
revenue, up 9.9% to GBP134.3 million (FY15: GBP122.3 million). This
reflects a small improvement in gross margin on goods sold,
consistent with our previous guidance that planned investments in
price points is now complete. We also continue to benefit from the
spreading of our marketing costs over a wider revenue base as the
business continues to grow.
Currently prevailing US Dollar and Euro foreign exchange rates,
particularly the US Dollar which is the currency denomination in
which we purchase c. $120 million annually of finished goods,
present us with some challenges in sustaining this progress. Active
management of our sourcing, cost base and range mix will, we
believe, already offset approximately two thirds of the gross
impact in the financial year, with a GBP4 million adverse net
impact remaining to be addressed. We continue to work to seek to
offset the remainder of the impact within the financial year.
Looking further ahead, the actions we are taking together with
the scale of our operations, geographical mix of our sourcing and
our significant UK own-manufacturing capability provide us with
significant advantages compared to many other retailers in our
sector.
Central costs
Underlying administrative expenses rose by GBP6.8 million to
GBP39.9 million for the full year. This arose from a number of
factors:
In line with our accounting policy, in FY15 GBP2.8 million of
first year costs relating to international and acquired business
start-up activity were included within non-underlying items,
reducing reported underlying administrative costs by this amount
last year. These businesses are now presented entirely within
underlying operations.
The accelerated expansion of our subsidiary businesses through
our ongoing retail space optimisation programme has also resulted
in increased costs of c.GBP1.3 million arising in advance of sales
growth.
The remaining increase is due to additional costs associated
with our new status as a publicly listed company, including
employee share based remuneration charges, performance-related
bonuses and additional training and compliance costs.
For the new financial year, we anticipate a further increase in
share based payment charges and some continuation of investment for
growth, totalling c.GBP2 million.
Operating profit and EBITDA
The net impact of the sales and margin effects noted above was a
5.8% increase in underlying EBITDA for the year to GBP94.4 million
(FY15: GBP89.2 million), with the underlying EBITDA margin
decreasing slightly to 12.5% (FY15: 12.6%) as a result of the
increase in central costs noted above. Underlying operating profit
rose 5.0% to GBP75.8 million (FY15: GBP72.2million).
Finance costs
Interest payable primarily relates to the Group's senior bank
facility of GBP200.0 million (together with an undrawn revolving
credit facility of GBP30.0 million). As we noted in last year's
annual report, the new capital structure in place following the IPO
has significantly reduced underlying finance costs.
Tax
As reported at the half year, the Group has now concluded a
long-running negotiation with HMRC in respect of the amount of
shareholder loan interest allowable for corporation tax in the
period of Advent International's ownership. The potential benefit
of this had not previously been recognised and accordingly a prior
year tax credit of GBP9.9 million has been recognised in the income
statement for the current year and is shown as a non-underlying
item. Corporation tax due in respect of historical periods in
relation to this of GBP5.9 million has been received in full and is
included in the cash flow statement.
Excluding this one-off credit, and the impact of a change in the
tax rate applied in the calculation of the Group's deferred tax
asset, the underlying effective tax rate for the year was 20.5%
(FY15: 21.5%), slightly higher than the UK Corporation Tax rate
applicable in the period of 20.0% (FY15: 20.7%).
Earnings per share
Underlying earnings per share ("EPS") for the year was 23.7
pence. Basic earnings per share was 28.3 pence (FY15: 4.3 pence).
The statutory EPS figures for last year were impacted by the
pre-IPO capital structure being in place for the majority of the
year. Using the more comparable adjusted earnings of GBP39.5
million as shown in the table above and the same number of shares
in issue as for this year's EPS calculation results in an adjusted
underlying EPS for the year to July 2015 of 18.5 pence per
share.
Capital expenditure
Cash capital expenditure for the year was GBP24.5 million (FY15:
GBP20.8 million). We have continued our programme of new store
openings and maintained our ongoing investment in the refit of
existing stores to sustain a high quality retail environment.
Additional capital expenditure was made in FY16 in support of the
accelerated roll out of the CDC programme, including the expansion
of Dwell. We have also undertaken further development of our
market-leading retail website and made significant investments in
new in-store technologies such as 'Swoosh'.
We anticipate that capital expenditure will show a similar
increase in the year ahead to
GBP28-30 million (and reducing thereafter) reflecting
significantly more CDC and retail space conversions than in FY16,
as well as maintaining our current rate of new store openings (3-5
new stores per annum) and investment in other growth
initiatives.
Cash flow and balance sheet
The Group continues to maintain a robust balance sheet to
support future growth. We closed the year with cash of GBP66.7
million (FY15: GBP40.7 million), giving a net debt position of
GBP137.1 million (FY15: GBP162.2 million) and achieving a gearing
ratio of 1.45 times underlying EBITDA. This strong performance
included the payment of a total of GBP27.3 million in dividends
(comprising interim and final dividends for FY15 as well as the
interim dividend for FY16) and GBP3.7 million for the purchase of
1.5 million of our own shares. The shares bought back are held in
treasury for the purposes of satisfying employee share awards.
Dividend
The continued strength of our cash flow allows DFS consistently
to both reduce leverage and to return cash to shareholders as part
of our total shareholder return. In line with our previously stated
dividend policy of a pay-out ratio of 45-50% of profit after tax
the Board has therefore proposed a final dividend of 7.5 pence per
share taking total dividends for FY16 to 11.0 pence per share, an
increase on the prior year of 18.3%.
Over the medium term the Board intends to operate leverage
broadly in the range of 1.0 to 1.5 times net debt to underlying LTM
EBITDA. To the extent there is surplus cash within the business,
after taking into account capital requirements of the business, the
Board expects to return this to shareholders.
As outlined in the Chairman's statement, the Board's current
intention is to undertake a special capital return during FY17
while targeting net debt to underlying EBITDA at approximately 1.5
times at the end of the financial year. The final amount and form
of this return will be announced alongside the interim results and
will be subject to the likely capital needs of the business.
The Board's intention is for this return to form a sustainable
and recurring increment to the Group's Total Shareholder
Return.
Nicola Bancroft
Chief Financial Officer
Underlying Non- Total Underlying Non- Total
underlying underlying
Note GBPm GBPm GBPm GBPm GBPm GBPm
================ ==== ============== ================= ============= =============== ================== ===============
Gross sales 2 980.4 - 980.4 913.1 - 913.1
================ ==== ============== ================= ============= =============== ================== ===============
Revenue 2 756.0 - 756.0 706.1 - 706.1
Cost of sales (621.7) - (621.7) (583.8) - (583.8)
================ ==== ============== ================= ============= =============== ================== ===============
Gross profit 134.3 - 134.3 122.3 - 122.3
Administrative
expenses (39.9) - (39.9) (33.1) (11.6) (44.7)
================ ==== ============== ================= ============= =============== ================== ===============
Operating profit
before
depreciation
and
amortisation 94.4 - 94.4 89.2 (11.6) 77.6
Depreciation (16.4) - (16.4) (14.3) - (14.3)
Amortisation (2.2) - (2.2) (2.7) - (2.7)
================ ==== ============== ================= ============= =============== ================== ===============
Operating profit 3 75.8 - 75.8 72.2 (11.6) 60.6
Finance income 0.3 - 0.3 0.1 - 0.1
Finance expenses 4 (11.6) - (11.6) (39.0) (11.0) (50.0)
================ ==== ============== ================= ============= =============== ================== ===============
Profit before
tax 64.5 - 64.5 33.3 (22.6) 10.7
Taxation (14.1) 9.9 (4.2) (10.4) 2.9 (7.5)
================ ==== ============== ================= ============= =============== ================== ===============
Profit/(loss)
for
the period 50.4 9.9 60.3 22.9 (19.7) 3.2
================ ==== ============== ================= ============= =============== ================== ===============
Attributable to:
Owners of the
Company 50.4 9.9 60.3 24.4 (19.7) 4.7
Non-controlling
interests - - - (1.5) - (1.5)
================ ==== ============== ================= ============= =============== ================== ===============
50.4 9.9 60.3 22.9 (19.7) 3.2
================ ==== ============== ================= ============= =============== ================== ===============
Consolidated income statement
Statutory earnings
per share
Basic 523.7p 4.6p 28.3p 22.4p (18.1)p 4.3p
=================== ===== ==== ===== ===== ======= ====
Diluted 523.5p 4.6p 28.1p 22.3p (18.0)p 4.3p
Consolidated statement of comprehensive income
2016 2015
GBPm GBPm
====================================== ===== =====
Profit for the year 60.3 3.2
Other comprehensive income
Items that are or may be reclassified
subsequently to profit or loss:
Effective portion of changes in
fair value of cash flow hedges (0.6) 7.0
Net change in fair value of cash
flow hedges reclassified to profit
or loss (4.1) (2.3)
Income tax on items that are/may
be reclassified subsequently to
profit or loss 0.9 (0.9)
====================================== ===== =====
Other comprehensive income/(expense)
for the period, net of income tax (3.8) 3.8
====================================== ===== =====
Total comprehensive income/(expense)
for the period 56.5 7.0
====================================== ===== =====
Attributable to:
Owners of the Company 56.5 8.5
Non-controlling interests - (1.5)
====================================== ===== =====
56.5 7.0
====================================== ===== =====
Consolidated balance sheet
2016 2015
GBPm GBPm
========================================= ======= =======
Non-current assets
Property, plant and equipment 65.1 57.6
Intangible assets 491.2 489.3
Other financial assets - 1.3
Deferred tax assets 9.1 12.1
========================================== ======= =======
565.4 560.3
========================================= ======= =======
Current assets
Inventories 34.9 28.3
Other financial assets 3.1 1.1
Trade and other receivables 26.4 25.3
Cash and cash equivalents 66.7 40.7
========================================== ======= =======
131.1 95.4
========================================= ======= =======
Total assets 696.5 655.7
========================================== ======= =======
Current liabilities
Trade payables and other liabilities (159.3) (145.2)
Provisions (6.6) (6.1)
Other financial liabilities (0.1) (0.8)
Current tax liabilities (3.0) (8.2)
========================================== ======= =======
(169.0) (160.3)
========================================= ======= =======
Non-current liabilities
Interest bearing loans and borrowings (198.3) (197.9)
Provisions (5.1) (4.4)
Other financial liabilities (6.1) -
Other liabilities (67.4) (69.2)
========================================== ======= =======
(276.9) (271.5)
========================================= ======= =======
Total liabilities (445.9) (431.8)
========================================== ======= =======
Net assets 250.6 223.9
========================================== ======= =======
Equity attributable to equity
holders of the parent
Share capital 319.5 319.5
Share premium 40.4 40.4
Merger reserve 18.6 18.6
Treasury shares (3.7) -
Cash flow hedging reserve (3.0) 1.7
Retained earnings (121.2) (156.3)
========================================== ======= =======
Total equity 250.6 223.9
========================================== ======= =======
Consolidated statement of changes in equity
Cash Non-controlling
Treasury flow interest
Share Share Merger shares hedging Retained Total
capital premium reserve reserve earnings equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
===================== ======== ======== ======== ========== =============== ========= =============== =======
Balance at 2
August 2014 42.6 - - - (3.0) (113.5) (0.9) (74.8)
Loss for the
year - - - - - 4.7 (1.5) 3.2
Other comprehensive
income/(expense) - - - - 4.7 (0.9) - 3.8
===================== ======== ======== ======== ========== =============== ========= =============== =======
(
Total comprehensive
income/(expense)
for the period - - - - 4.7 3.8 (1.5) 7.0
Reorganisation
on IPO 219.3 - 18.6 - - (47.2) 3.3 194.0
Equity raised
on IPO 57.6 40.4 - - - - - 98.0
Dividends - - - - - - (0.9) (0.9)
Share based payments - - - - - 0.6 - 0.6
===================== ======== ======== ======== ========== =============== ========= =============== =======
Balance at 1
August 2015 319.5 40.4 18.6 - 1.7 (156.3) - 223.9
Profit for the
year - - - - - 60.3 - 60.3
Other comprehensive
income/(expense) - - - - (4.7) 0.9 - (3.8)
===================== ======== ======== ======== ========== =============== ========= =============== =======
Total comprehensive
income/(expense)
for the period - - - - (4.7) 61.2 - 56.5
Dividends - - - - - (27.3) - (27.3)
Purchase of own
shares - - - (3.7) - - - (3.7)
Share based payments - - - - - 1.2 - 1.2
===================== ======== ======== ======== ========== =============== ========= =============== =======
Balance at 30
July 2016 319.5 40.4 18.6 (3.7) (3.0) (121.2) - 250.6
===================== ======== ======== ======== ========== =============== ========= =============== =======
Consolidated cash flow statement
2016 2015
GBPm GBPm
============================================= ====== =======
Operating profit 75.8 60.6
Adjustments for:
Depreciation, amortisation and impairment 18.6 17.0
Gain on sale of property, plant
and equipment (0.6) (0.8)
Share based payment expense 1.2 0.6
Increase in trade and other receivables (1.1) (1.6)
(Increase)/decrease in inventories (6.6) 0.5
Increase in trade and other payables 11.6 2.4
Increase in provisions 1.2 0.2
============================================= ====== =======
100.1 78.9
Tax paid (11.4) (8.4)
Non-underlying prior year tax credit
received 5.9 -
============================================= ====== =======
Net cash from operating activities 94.6 70.5
Cash flows from investing activities
Proceeds from sale of property,
plant and equipment 0.8 0.9
Interest received 0.3 0.1
Acquisition of business (1.5) -
Acquisition of property, plant and
equipment (21.9) (19.0)
Acquisition of other intangible
assets (2.6) (1.8)
============================================= ====== =======
Net cash from investing activities (24.9) (19.8)
Cash flows from financing activities
Interest paid (8.7) (41.9)
Exceptional finance costs - (10.4)
Proceeds from new loan - 200.0
Repayment of borrowings - (310.0)
Proceeds on issue of new shares - 98.0
Settlement of partly paid share
capital - 2.3
Payment of deferred consideration
on acquisition (2.3) -
Payment of finance lease liabilities (1.7) (0.9)
Purchase of own shares (3.7) -
Dividends paid (27.3) (0.9)
============================================= ====== =======
Net cash from financing activities (43.7) (63.8)
Net increase/(decrease) in cash
and cash equivalents 26.0 (13.1)
Cash and cash equivalents at beginning
of period 40.7 53.8
============================================= ====== =======
Cash and cash equivalents at end
of period 66.7 40.7
============================================= ====== =======
Notes to the condensed consolidated financial statements
1 Basis of preparation
The condensed consolidated financial statements have been
prepared and approved by the directors in accordance with
International Financial Reporting Standards as adopted by the EU
("Adopted IFRS"). The financial statements are prepared on the
historical cost basis except for certain financial instruments and
share based payment liabilities which are measured at their fair
value. The financial statements are for the 52 weeks to 30 July
2016 (last year 52 weeks to 1 August 2015).
The financial information included in these condensed
consolidated financial statements does not constitute statutory
accounts within the meaning of Section 435 of the Companies Act
2006. The statutory accounts for the 52 weeks ended 1 August 2015
have been reported on by the Company's auditors and delivered to
the Registrar of Companies. The auditor's report for those accounts
was unqualified, did not included a reference to any matters to
which the auditor drew attention by way of emphasis without
qualifying their report and did not contain a statement under
Section 498(2) or (3) of the Companies Act 2006.Accounting
policies
Going concern
The Group remains highly cash generative and currently has
sufficient medium and long term facilities in place, including a
GBP200.0 million senior loan facility maturing in 2020 and an as
yet undrawn revolving credit facility of GBP30.0 million in place
until March 2020.
On the basis of their assessment of the Group's financial
position, forecasts and projections the Company's directors have a
reasonable expectation that the Company and the Group will be able
to continue in operational existence for the foreseeable future.
The directors are therefore satisfied that it is appropriate to
adopt the going concern basis of accounting in preparing the
interim financial statements.
2 Segmental Analysis
The Group's operating segments under IFRS 8 have been determined
based on management accounts reports reviewed by the Board. Segment
performance is assessed based upon earnings before interest and tax
excluding depreciation charges and non-underlying items
("underlying EBITDA").
The Group has only one reportable segment, which derives its
revenues from the retailing of upholstered furniture and related
products. Activities included in other segments comprise the
manufacture and distribution of upholstered furniture.
External sales Internal sales Total gross
sales
2016 2015 2016 2015 2016 2015
GBPm GBPm GBPm GBPm GBPm GBPm
============= ======= ======= ======= ======= ====== ======
Retail 980.4 913.1 1.2 0.6 981.6 913.7
Other
segments - - 91.0 92.7 91.0 92.7
Eliminations - - (92.2) (93.3) (92.2) (93.3)
============== ======= ======= ======= ======= ====== ======
Gross
sales 980.4 913.1 - - 980.4 913.1
============== ======= ======= ======= ======= ====== ======
2016 2015
GBPm GBPm
================================== ======= =======
Total segments gross sales 980.4 913.1
Less: value added and other sales
taxes (152.0) (141.4)
Less: costs of interest free
credit and aftercare services (72.4) (65.6)
================================== ======= =======
Revenue 756.0 706.1
================================== ======= =======
2 Segmental Analysis (continued)
2016 2015
GBPm GBPm
================================= ====== ======
Retail underlying EBITDA 87.4 82.4
Other segments underlying EBITDA 7.0 6.8
================================= ====== ======
94.4 89.2
Depreciation & amortisation (18.6) (17.0)
Non-underlying items (note 3) - (11.6)
================================= ====== ======
Operating profit 75.8 60.6
Finance income 0.3 0.1
Finance expenses (11.6) (39.0)
Exceptional refinancing costs - (11.0)
================================= ====== ======
Profit before tax 64.5 10.7
================================= ====== ======
A geographical analysis of revenue is presented below:
2016 2015
GBPm GBPm
=============== ===== =====
United Kingdom 734.2 689.7
Europe 21.8 16.4
=============== ===== =====
Total revenue 756.0 706.1
=============== ===== =====
3 Operating profit
Group operating profit is stated after charging/(crediting):
2016 2015
GBPm GBPm
================================== ===== =====
Depreciation on tangible assets 16.4 14.3
Net gain on disposal of property,
plant and equipment (0.6) (0.8)
Amortisation of intangible assets 2.2 2.7
Cost of inventories recognised as
an expense 315.2 295.8
Write down of inventories to net
realisable value 0.4 0.8
Operating lease rentals 58.9 56.7
================================== ===== =====
Non-underlying items
Items that are material in size, unusual or non-recurring in
nature as disclosed separately in the income statement in order to
provide an indication of the Group's underlying business
performance. Non-underlying items relating to the reported
financial period are as follows:
2016 2015
GBPm GBPm
==================================== ==== ====
Accelerated share based payments
charge - 0.1
International and acquired business
set-up costs - 2.8
Non-recurring and exceptional legal
and professional costs - 8.7
==================================== ==== ====
- 11.6
==================================== ==== ====
4 Finance expense
2016 2015
GBPm GBPm
=================================== ====== ======
Interest payable on senior secured
notes - (14.2)
Interest payable on senior loan
facility (7.9) (2.8)
Bank fees (0.3) (0.5)
Fair value lease adjustment unwind (3.0) (3.0)
Interest payable on parent company
loan - (17.0)
Interest payable on 17% cumulative
redeemable preference shares - (0.1)
Interest payable on 8% vendor loan
notes - (0.2)
Unwind of discount on provisions (0.1) (0.1)
Finance lease interest (0.3) (0.3)
Other interest - (0.8)
=================================== ====== ======
Total finance expense (11.6) (39.0)
=================================== ====== ======
Exceptional finance costs of GBP11.0 million were incurred
during the previous year as a consequence of the refinancing
undertaken in connection with the Company's admission to the London
Stock Exchange. These costs primarily related to the redemption
premium and write off of remaining unamortised issue costs on the
Group's GBP310.0 million senior secured notes.
5 Earnings per share
2016 2015
Pence pence
====================================== =========== ===========
Basic earnings per share 28.3 4.3
Diluted earnings per share 28.1 4.3
====================================== =========== ===========
2016 2015
GBPm GBPm
====================================== =========== ===========
Profit attributable to equity holders
of the parent company 60.3 4.7
====================================== =========== ===========
2016 2015
GBPm GBPm
====================================== =========== ===========
Weighted average number of shares
for basic earnings per share 212,896,904 108,753,074
Dilutive effect of employee share
based payment awards 1,222,417 380,479
====================================== =========== ===========
Weighted average number of shares
for diluted earnings per share 214,119,321 109,133,553
====================================== =========== ===========
Underlying earnings per share
Underlying basic earnings per share and underlying diluted
earnings per share are calculated by dividing the profit for the
period attributable to ordinary equity holders of the parent
company, as adjusted to exclude the effect of non-underlying items,
by the same weighted average numbers of ordinary shares above used
for basic and diluted earnings per share respectively.
2016 2015
GBPm GBPm
====================================== ===== =====
Profit attributable to equity holders
of the parent company 60.3 4.7
Non-underlying items - 22.6
Tax effect of non-underlying items (9.9) (2.9)
====================================== ===== =====
Underlying profit/(loss) attributable
to equity holders of the parent 50.4 24.4
====================================== ===== =====
2016 2015
Pence pence
====================================== ===== =====
Underlying basic earnings per share 23.7 22.4
Underlying diluted earnings per
share 23.5 22.3
====================================== ===== =====
6 Dividends
2016 2015
GBPm GBPm
========================== ==== ==== ==== ====
Interim ordinary dividend
for the period ended 1
August 2015 3.1p paid 6.6 -
Final ordinary dividend
for the period ended 1
August 2015 6.2p paid 13.2 -
Interim ordinary dividend
for the period ended 30
July 2016 3.5p Paid 7.5 -
========================== ==== ==== ==== ====
27.3 -
========================== ==== ==== ==== ====
The directors recommend a final dividend of 7.5 pence per share
in respect of the financial period ended 30 July 2016, resulting in
a total proposed dividend of GBP16.0 million. Subject to
shareholder approval it is intended that this dividend will be paid
on 28 December 2016. DFS Furniture plc shares will trade
ex-dividend from 8 December 2016 and the record date will be 9
December 2016. This dividend has not therefore been recognised as a
liability in these financial statements.
7 Business combinations
On 1 October 2015, the Group acquired the trade and assets of
DFS Spain for cash consideration of GBP1.5 million.
8 Financial instruments
All derivatives are categorised as Level 2 under the
requirements of IFRS 7 as they are valued using techniques based
significantly on observed market data.
The directors consider that the fair values of each category of
the Group's financial instruments are the same as their carrying
values in the Group's balance sheet.
9 Capital expenditure
For the 52 weeks to 30 July 2016, acquisition of property, plant
and equipment (including those acquired under finance leases)
totalled GBP24.1 million (2015: GBP21.1 million). Acquisitions of
intangible assets (computer software) totalled GBP2.6 million
(2015: GBP1.8 million).
At 30 July 2016 the Group had contracted capital commitments of
GBP3.4 million (2015: GBP2.1 million) for which no provision has
been made in the financial statements.
10 Net debt
Other
Cash non-cash
2015 flow changes 2016
GBPm GBPm GBPm GBPm
========================== ====================== ============ ========= ======================
Cash in hand, at
bank 40.7 26.0 - 66.7
========================== ====================== ============ ========= ======================
Cash and cash equivalents 40.7 26.0 - 66.7
Senior loan facility (197.9) - (0.4) (198.3)
Finance lease liabilities (5.0) 1.7 (2.2) (5.5)
========================== ====================== ============ ========= ======================
Total net debt (162.2) 27.7 (2.6) (137.1)
========================== ====================== ============ ========= ======================
11 Annual General Meeting
The Annual General Meeting will be held on Friday 2 December
2016 at 1 Rockingham Way, Redhouse Interchange, Adwick-le-Street,
Doncaster, DN6 7NA. The Annual Report and Accounts and Notice of
Meeting will be sent to shareholders and copies will be available
from the Company's registered office: 1 Rockingham Way, Redhouse
Interchange, Adwick-le-Street, Doncaster, DN6 7NA and on the
Company's website at www.dfscorporate.co.uk.
This interim report, the full text of the Stock Exchange
announcement and the results presentation can be found on the
Company's website at www.dfscorporate.co.uk
This interim report contains statements that constitute
forward-looking statements relating to the business, financial
performance and results of the Company and the industry in which
the Company operates. These statements may be identified by words
such as "may", "will", "shall", "anticipate", "believe", "intend",
"project", "goal", "expectation", "belief", "estimate", "plan",
"target", or "forecast" and similar expressions for the negative
thereof; or by forward-looking nature of discussions of strategy,
plans or intentions; or by their context. No representation is made
that any of these statements or forecasts will come to pass or that
any forecast results will be achieved. All statements regarding the
future are subject to inherent risks and uncertainties and various
factors that would cause actual future results, performance or
events to differ materially from those described or implied in
these statements. Such forward-looking statements are based on
numerous assumptions regarding the Company's present and future
business strategies and the environment in which the Company will
operate in the future. Further, certain forward-looking statements
are based upon assumptions of future events which may not prove to
be accurate and neither the Company nor any other person accepts
any responsibility for the accuracy of the opinions expressed in
this interim report or the underlying assumptions. Past performance
is not an indication of future results and past performance should
not be taken as a representation that trends or activities
underlying past performance will continue in the future. The
forward-looking statements in this interim report speak only as at
the date of this interim report and the Company expressly disclaims
any obligation or undertaking to release any updates or revisions
to these forward-looking statements to reflect any change in the
Company's expectations in regard thereto or any change in events,
conditions or circumstances on which any statement is based after
the date of this interim report or to update or to keep current any
other information contained in this interim report or to provide
any additional information in relation to such forward-looking
statements. Undue reliance should not therefore be placed on such
forward-looking statements.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR MFBBTMBJMBIF
(END) Dow Jones Newswires
October 06, 2016 07:39 ET (11:39 GMT)
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