DFS revenue tops pre-Covid levels, share buyback announced

DFS Furniture reported first half group revenue of £561.1m from continuing operations on Tuesday, up 17.4% on the pre-pandemic two-year comparator, with “significant accelerations” in deliveries reported across its second quarter and into the third.

It also announced a share buyback programme worth up to £25m, to be undertaken over the next year.

The London-listed furniture retailer said it overcame “operational pressure” to deliver reported profit before tax of £21.6m for the 26 weeks ended 26 December - up 35.8% from the pre-Covid two-year comparator of £15.9m, but down from £72.1m in the first half of the 2021 financial year.

Its board said that was achieved in the face of pandemic-related supply chain challenges impacting its net margin, as well as operating costs of £21m in the period.

Underlying cash gross profit per transaction remained stable, meanwhile, despite a decrease in the firm’s margin rate, as finished goods cost inflation was offset or passed through.

DFS said its investment in the Sofa Delivery Company and its manufacturing capacity were now enabling it to support the new revenue base, with second quarter delivered revenues 24% higher than the first quarter, and momentum continuing into the third quarter.

The company said its order bank remained £175m higher on a revenue-equivalent basis than the pre-pandemic two-year comparator, giving “increased resilience” in the current year and through into the 2021 financial year.

In a separate announcement, DFS said it had instructed brokers Jefferies and Peel Hunt to buy back up to 25,838,638 of its shares, and spend up to £25m, between now and 1 March 2023.

The company said the sole purpose of the buyback was to reduce its issued share capital.

“We delivered a strong performance in the first half of the year, with market share gains and strong revenue growth on the pre-pandemic comparators,” said group chief executive officer Tim Stacey.

“Trading across the second half to date has started strongly, again emphasising the increased scale of the business and demonstrating the success of our approach to mitigating the impact of inflationary pressures on our profit expectations.

“Our expectations for total profits across the 2022 and 2023 financial years remain unchanged, with our confidence supported by our significant order bank and strong trading in the second half.”

DFS had narrowed its scenario range for 2022, Tim Stacey confirmed, to recognise that manufacturing and logistics disruption could affect second half throughput, although he added that the firm’s “resilient” order bank should mean any in-year disruption would cause profits to shift into 2023.

“We are therefore pleased to be able to reward shareholders with a special capital return that will deliver a total return to shareholders of approximately £80m over a 12-month period.

“Looking forward, whilst the macro-economic environment remains uncertain, we believe that our scale, brand strength and integrated retail strategy will continue to drive market share gains ahead of the competition.

“We will continue to invest in our digital platforms, our showrooms, our delivery networks and our UK manufacturing capacity, as well as expansion into other home categories which we believe will continue to drive long term growth and profitability.”

At 0910 GMT, shares in DFS Furniture were down 0.81% at 196p.