TIDMDFS
RNS Number : 4031B
DFS Furniture PLC
10 June 2021
10 June 2021
THIS STATEMENT CONTAINS INSIDE INFORMATION
DFS Furniture plc
Strong trading performance and outlook, with fourth quarter
order intake to date up 92.1% on FY19, demonstrating the strength
of our 'Integrated Retail' operating model
Ahead of its financial year end on 27 June 2021, DFS Furniture
plc ("DFS" or "the Group"), the UK's leading retailer of living
room furniture, provides the following update on recent trading
through to 6 June 2021.
Highlights
-- Fourth quarter to date (10 weeks) total order intake up
+92.1%*** on FY19 (the most recent pre-lockdown comparable period),
driven by customers waiting for showrooms to reopen post lockdown
and increased consumer spending on home categories
-- Online order intake over the third quarter (with almost all
showrooms closed) was up 222.5%*** on the prior year
-- Second half to date (23 weeks), total order intake of
+14.0%*** on FY19 demonstrates the strength and resilience of our
'Integrated Retail' model
-- Continuing group market share gain of 2%+, in a growing
upholstery market, with further progress on our strategy to lead
sofa retailing in the digital age
-- On course to achieve FY21 underlying profit before tax**** of at least GBP105m
-- Revenues and profits from recent strong order intake will be
recognised in FY22: profit before tax**** scenarios of
GBP66m-GBP96m are materially ahead of analyst consensus*
-- Intention to recommend a final dividend of 7.5p, underpinned
by robust cash generation and underlying FY21 leverage within our
0.5x - 1.0x target range
Trading Overview
-- Strong recent order intake level reflects our leading online
and physical presence that has driven overall market share gains
together with significant consumer spending in 'home' categories
driving market growth
-- Revenue growth over the first 49 weeks of +10.4%*** on FY19,
with output in our made-to-order business model ramping up to meet
demand despite disruptions
-- FY21 full year underlying profit before tax**** expected to
be at least GBP105m, despite c. 21 weeks of showroom closures
across lockdowns 2 and 3, sector-wide supply chain disruption and
raw material availability limitations
Online order intake over the third quarter was up 222.5%***
compared to the same period in the prior year, with gross online
order intake totalling GBP178.5m. This online order intake growth
was inevitably increased by the forced closure of the vast majority
of retail showrooms, but also through our continued strategic
investment and progress in driving our position as the clear market
leader in online upholstery retail in the UK and ROI. Over the last
five years we have seen a compound annual growth rate in order
intake of 28.4%** in our online channels.
Total order intake over the first 10 weeks of the fourth quarter
was up 92.1%*** compared to the same period in the 2019 financial
year (this is the most recent pre-lockdown fourth quarter period,
and hence the most relevant comparable given significant disruption
to trading in 2020). The significant growth reflects the majority
of consumers choosing to defer purchases until retail showrooms
reopened early in the fourth quarter.
Total order intake over the twenty-three weeks of the second
half to date was up 14.0%*** compared to the same period in the
2019 financial year. We continue to observe a 2%+ group market
share gain as disclosed in our interim results. We also believe
that there has also been growth in the upholstery market size
driven by a sustained increase in consumer interest in spending in
home categories, reflecting both growth in remote working and also
reduced leisure and travel spend.
We recognise revenues and profits upon delivery to our customers
through our made-to-order operating model, using our own three
factories and also our partner suppliers located in the UK, Eastern
Europe and the Far East. In order to maintain manufacturing
efficiency, we manage our lead times to keep output broadly
consistent across a year, and minimise idle capacity. In response
to the exceptional demand that we have seen, we have already
increased capacity significantly sufficient to support revenue
growth over the first 49 weeks of 10.4%*** relative to the same
period in the 2019 financial year.
Our revenue growth in FY21 has however been constrained by
sector-wide pressures on supply chains from raw materials
availability, container shipping delays (including the effects of
disruption in the Suez Canal), and Covid-19 disruption of factory
production. Therefore the majority of the revenues and profits from
our strong final quarter of trading will be recognised in our FY22
financial year. In FY21 we remain on track to deliver underlying
profit before tax**** of at least GBP105m.
Our leading 'Integrated Retail' model
-- The investment in our 'Integrated Retail' model over the last
3 years is increasingly enabling us to extend our market leading
position, and create sustainable value
-- Our retail estate underpins our clear long-term upholstery
market leadership, with our network of destination showrooms
creating a distinctive customer experience for well over 80% of
market-wide consumers that visit a showroom prior to purchase
-- We believe our online channels match our physical retail
leadership, through inspirational and easy-to-transact channels
that support in-depth research and generates more upholstery sales
than the next four online competitors combined
-- Together we believe our channels create a powerful
market-leading and channel-agnostic customer proposition, that is
set for growth
Our third quarter online order intake performance demonstrates
the Group's market leading presence online in upholstery, that
complements our proven showroom network. While some customers will
choose the convenience of an online checkout, we firmly believe
that upholstery will remain a well-researched category and that a
significant majority of customers, across all demographics, remain
enthusiastic to visit our showrooms to select the right product for
their home. The strength of our fourth quarter total order intake
performance is evidence of this, and since reopening our showrooms
we have seen online penetration settle 1-2 percentage points above
pre Covid-19 levels at c.19%.
Our long term approach of investing in our product offering,
showrooms, digital assets and infrastructure aims to create an
overall proposition for our customers that is channel agnostic and
stands out in terms of product design, comfort, quality, service
and value. We believe it is easier to influence a customer that our
exclusive range of sofas and other products are 'right for them'
once they have seen, touched and, importantly, sat on them.
Physical retail and personal service can also create a distinctive
representation of a brand and service proposition for consumers,
and we have invested heavily to create an engaging experience but
one that is augmented by online technology and seamless channel
integration. We believe the strength of performance demonstrated in
recent trading validates our view that the combination of the
physical and digital channels, an integrated retail approach, is
the right business model for the upholstery market.
Trading Outlook & Scenarios
-- FY21: Despite Covid-19 and related supply chain challenges,
on track to report at least GBP105m underlying profit before
tax****
-- FY22: Underlying profit before tax**** range of
GBP66m-GBP96m, with a medium-case scenario of GBP85m PBT**** (+70%
relative to FY19)
-- Following robust underlying cash generation and significantly
reduced leverage we expect to be able to recommend a final dividend
of 7.5p in September 2021
We are on track to report at least GBP105m of FY21 underlying
profit before tax****, slightly above the 'medium' scenario
discussed in our interim results, despite sector-wide pressures on
supply chains from Covid-19 disruption of factory production, raw
materials availability and container shipping delays.
Given made-to-order lead times, our recent strong trading will
underpin the Group's revenues and profits in financial year FY22.
The macroeconomic environment however remains unpredictable and we
therefore present three alternative scenarios:
Scenario: Low Medium High
Like-for-like order intake vs
FY19 2% 7% 7%
Order intake vs FY19 (excl Sofa
Workshop) 6% 11% 11%
Revenue 1,083 1,130 1,155
Revenue growth vs FY19 (excl
Sofa Workshop) 12% 17% 19%
PBT 66 85 96
-------------------------------- ----- ------ -----
Our medium scenario is based upon a like-for-like order intake
level of 7%. This growth primarily reflects continuation of the
c.2% points of market share that we have captured since FY19. Total
order intake growth of 11% is higher than the like-for-like growth
due to the expected addition of 16 showrooms by the end of FY22
relative to FY19. The outturn in the medium scenario is constrained
by the level of throughput in our made-to-order supply chain (that
is expected to operate at 17% (excluding Sofa Workshop) above FY19
output levels), and not due to order intake performance.
In the high scenario, we therefore do not assume additional
order intake growth, but we assume that we either secure further
additional manufacturing capacity, or deliver increased levels of
non-sofa home category orders - which drive higher revenues in the
FY22 period. These are strategic initiatives that we are actively
progressing, as described in previous results announcements. Any
additional order intake growth achieved in FY22 would likely
bolster FY23 performance unless further capacity can be
secured.
Our retail margins and indirect cost base are assumed to be
similar in all scenarios. Retail margins are expected to be lower
in FY22, given manufacturing cost inflation under constrained
output capacities and rising raw material prices, and changes to
our aftercare proposition to support a simpler omnichannel sales
approach. Indirect cost increases relative to FY21 reflect (i) a
significant expected increase in rates taxes levied by the UK
government following the end of the retail business rates holiday,
(ii) operating costs for the larger showroom network, and (iii)
investment in our central capability to support our digital
channels, supply chain development programme and higher operating
volumes.
Each scenario is dependent on there being no prolonged
disruption to manufacturing production or deliveries in the period,
for example due to Covid-19 related factory and warehouse
closures.
Dividend
Excluding favourable one-off working capital benefits, the Group
has returned to operate within its targeted leverage range of
0.5x-1.0x, and is delivering strong levels of underlying cash
generation. In line with our published Capital and Distribution
Policy we therefore expect to be able to recommend a final FY21
dividend of 7.5p/share when we announce our full year results on 23
September 2021.
Comment from Tim Stacey, Group Chief Executive
"This performance once again reflects both the underlying
resilience of the Group and the tremendous support from our
colleagues who have worked with huge dedication and commitment
throughout the pandemic.
Our aim is to lead sofa retailing in the digital age by building
a truly Integrated Retail model that allows us to drive market
share gains ahead of the competition. Looking ahead, we will
continue to invest in key strategic initiatives such as our digital
channels, our showrooms and our Sofa Delivery Company final mile
logistics capability, along with new investment in UK manufacturing
and capacity and expansion into other home categories.
Despite short-term supply chain challenges and a macro
environment that's hard to read, we believe the business is well
set for growth, to be delivered in both a responsible and
sustainable manner. Given our overall financial position and
outlook it is our intention to recommend a full year dividend of
7.5p in September."
* Consensus Underlying Profit Before Tax and Brand Amortisation
median forecast for FY22 of GBP61.4m with a range of GBP47.0m to
GBP80.0m
**Online order intake for the 52 weeks to 6 June 2021 relative
to (ex-Sofa Workshop) group order intake for FY16
***Excludes Sofa Workshop from the prior year comparator
period
****Underlying profit before tax and brand amortisation
Analyst Conference Call:
There will be a conference call for analysts and institutional
investors this morning at 8.30am.
Dial in: +44 330 606 1118
Room number: 666271
Pin: 1394
A copy of the transcript of the call will be available at
www.dfscorporate.co.uk in due course.
Enquiries:
DFS (enquiries via Tulchan)
Tim Stacey (Group CEO)
Mike Schmidt (Group CFO)
Phil Hutchinson (Investor Relations)
Tulchan
James Macey-White
Jessica Reid
+44 (0)20 7353 4200
dfs@tulchangroup.com
This announcement contains inside information for the purposes
of Article 7 of the Market Abuse Regulation (EU) 596/2014. The
person responsible for this announcement is Mike Schmidt, Group
CFO.
About DFS Furniture plc
The Group is the clear market-leading retailer of living room
furniture in the United Kingdom. Our Group purpose is to bring
great design and comfort into every living room, in an affordable,
responsible and sustainable manner. We operate an integrated
physical and digital retail network of living room furniture
showrooms and web sites in the United Kingdom, Republic of Ireland,
Netherlands and Spain, trading through our leading brands, DFS,
Sofology and Dwell. We attract customers through our targeted and
national marketing activities and our reputation for high quality
products and service, breadth of product offer and favourable
consumer financing options. We fulfil orders for our exclusive
product ranges through our own three UK finished goods factories,
and through manufacturing partners located in the UK, Europe and
Far East, and delivered with care through our expert final-mile
delivery service "The Sofa Delivery Company".
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END
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