DFS' latest financial summary, outlining the company's full-year results for the 53 weeks ending 2nd August 2014, outlines a strong performance in the second half, with continued momentum in sales and EBITDA throughout.
The year saw the upholstery giant widen its audience by developing new brand partnerships, open three stores – ahead of its first overseas store in The Netherlands shortly – and appoint ex-John Lewis MD Luke Mayhew as a non-executive director.
DFS CEO Ian Filby says: “I am pleased to report continued momentum in our second half results. As we anticipated in our third quarter report, the significantly improved trading that began with the launch of our Winter Sale in December continued through to the end of the financial year. Gross sales in the second half grew by 6.6%, delivering a 2.8% increase in gross sales to £827m (2013: £804.3m) for the year as a whole.
"Adjusted EBITDA in the second half also showed a satisfactory increase of 8.1%, making up the majority of the shortfall reported in the first half. Full year adjusted EBITDA was £81.4m (2013: £84.6m) after adding back non-recurring exceptional legal and professional expenses of £2.4m.
“Our key financial measure of cash generation remained very strong, delivering cash balances at the year-end of £53.8m (2013: £38m) after the payment of a £20m dividend to our shareholders during the first quarter. The consistent strength of our cash flow means that we are well placed to provide further cash returns to stakeholders.
“During the year we have made good progress in the implementation of our strategy, which seeks to build on DFS’s well-established strengths as one of the UK’s best-known brands, a major British manufacturer and the country’s leading retailer of upholstered furniture.
“Our strategy remains focused on broadening our appeal, enhancing our service and making our products more accessible to our customers than ever before. This has been achieved by opening 25 additional DFS stores over the last four years, combined with continued expansion of our multichannel offer and enhancements to our product range. Following three new store openings at Aintree, Ipswich and Torquay during the first half, we reached the significant milestone of 100 DFS stores in the UK and Ireland.
“The improved trading momentum of the second half has continued in the current year to date, and we remain confident that DFS has excellent prospects to deliver long-term profitable growth and total shareholder return as the UK market leader in upholstered furniture”
"We plan to continue our retail expansion at the rate of three to five new stores per year, and have three new UK stores at York, Ayr and Basingstoke scheduled to open in the early part of the current financial year. We also plan to launch our first trial of the DFS concept in Continental Europe with the opening of a new store at Cruquius in The Netherlands later in 2014.
“During Autumn 2013 we launched our new website, designed to ensure ease and efficiency for the growing number of customers who access our online channel through tablets and mobile phones. This has delivered strong results, contributing to our improved performance in the second half and further strengthening our position as the market leader for online upholstered furniture sales.
“We have continued to extend our product range and develop our offer for more aspirational customers through our brand partnerships with Sofa Workshop and Dwell. Both these businesses are now wholly owned by DFS Furniture Holdings and their results will be consolidated from the beginning of our 2014/15 financial year. The partnerships with these complementary brands build on the success we have already achieved with our exclusive ranges of high quality sofas handcrafted in the UK under brands such as Country Living, House Beautiful and French Connection, which achieved more than £60m of gross sales orders in the year.
“Following a successful trial in south-east England we extended our customer distribution centre concept into the North West during the second half. Pooling our stores’ warehouse and distribution operations in this way has created additional selling space in existing stores, allowing us to sell an extended range of products and reducing the cost of our warehouse space. This concept has now proven its ability to create additional sales profitably and has improved our customers’ experience. We will consider further extending the concept across our national estate over the next few years.
“I am delighted to announce the appointment of Luke Mayhew to our board as a non-executive director. Luke was formerly MD of John Lewis and chairman of Pets at Home and the British Retail Consortium. He has been a non-executive director at IHG, Brambles and WH Smith. He is a trustee of BBC Children in Need. He will bring a wealth of experience which will be important in both guiding our growth strategy and enhancing our corporate governance.
“The improved trading momentum of the second half has continued in the current year to date, and we remain confident that DFS has excellent prospects to deliver long-term profitable growth and total shareholder return as the UK market leader in upholstered furniture.”
