In a trading update covering the 26-weeks to 29th December 2024, DFS reports rising profits, with H1 group PBT(A) expected to be in the range of £16-17m – up some £7-8m YoY.
Notwithstanding the weak market backdrop, group order intake was up +10.1% YoY, supported by the successful implementation of growth initiatives and higher-than-expected market share gains for both brands, with Sofology's improved order intake growth trajectory continuing, at +19.1% YoY.
Gross delivered sales are expected to be up +1.4% YoY, with the group's order bank closing higher YoY, driven by continued Red Sea shipping delays and order intake strengthening through the period.
DFS says the profit increase was driven by the higher sales, operating cost savings and gross margin improvement, more than offsetting current inflationary increases. Net bank debt at the end of the period was down to £117m, with leverage improving to 1.7x compared to 2.5x at the previous FY end – while the key Winter Sale trading period has started in line with expectations.
The group continues to expect full year growth in profits and cash flow, with FY25 PBT expected to be in line with expectations. Profit delivery is now expected to be weighted towards H1, driven by a mix of factors, says DFS: a cautious view on market demand in H2 based on the UK's post-Budget economic performance; gains from competitor disruption in H1 are expected to partially reverse in H2; and an increase in operational costs in H2 due to the rises in National Insurance contributions, the National Living Wage and higher-than-anticipated interest rates, alongside further investment to drive future growth.
Group chief executive Tim Stacey says: "While the market remains relatively subdued, we are continuing to deliver on our self-help initiatives, having strengthened our position as the clear market leader, improved our gross margin and reduced our operating costs, all of which have helped us to deliver YoY profit growth.
"We remain focused on executing our plan, and are cautiously optimistic despite the increased inflationary pressures and less positive market outlook for 2025. Looking forward, we are confident that the group is well positioned to drive attractive returns for shareholders as the market recovers, and we remain focused on delivering our 8% PBT medium-term target."
The group will announce its interim results for the period on 13th March.
