DFS Furniture profits, revenue drop but results in line

DFS Furniture posted a 58% drop in first-half profit on Wednesday as revenue declined amid “challenging” market conditions, but the results were broadly in line with expectations and the company sounded an optimistic note on its outlook.

In the 26 weeks to 27 January 2018, pre-tax profit dropped to £7m from £16.7m in the same period a year ago as revenue before acquisitions slipped 3.5% to £366.5m. Including the recent acquisition of Sofology, group revenue was up 4.3% to £396.1m, while over a two-year period, revenue was 3% higher.

Basic earnings per share fell to 2.6p from 6.2p, the interim dividend was held steady at 3.7p and underlying free cash flow generation was £25.5m versus £27.2m the year before.

Chief executive officer Ian Filby said: "We are pleased to report a performance in line with our expectations despite a furniture market that continues to be challenging. As a result, and supported by the strengthening trading momentum that we have seen since July 2017, including across the first three months of this year, we continue to believe we will deliver modest growth in EBITDA and strong cash generation across the financial year.

"We have also accelerated our strategic development over the period, completing the acquisitions of Sofology and the Multiyork assets in addition to progressing our programme of growth levers."

Neil Wilson, senior market analyst at ETX Capital, said: "Whilst rivals fail, the scale and flexibility of DFS is insulating it from the worst of the troubles facing the market. After the Feb update was a little sparse and may have dented confidence in the stock, it was a marginally rosier picture in today’s half-year results, which are in line with full-year guidance maintained.

"Sales are down but this is a case of battening down the hatches and riding out the storm. DFS has form here and looks to have turned a corner.

"Broadly speaking, DFS is managing to handle the broader downturn in retail pretty well. The collapse of Feather & Black, Warren Evans and Multiyork, whose assets DFS has acquired, served to indicate the severe pressure on the market and the opportunity for those with enough scale to see it out."

At 0805 GMT, the shares were up 5.9% to 180p.