DFS Furniture PLC has released a trading update for the twenty-six-week financial reporting period to 24 December 2023, along with an update on recent trading. The company reported a 1.1% decrease in group order intake compared to the previous year, outperforming a challenging market. Despite weaker market demand, DFS expects its first-half underlying profit before tax and brand amortization to be slightly up year on year, supported by progress on gross margin and cost base improvements. The full-year profit guidance remains unchanged at £30-35 million.
The overall market demand was weaker than anticipated, down approximately 9% year on year in volume terms, with a particularly significant impact from record hot weather in September and early October. However, DFS managed to outperform the market, with a 1.1% year-on-year decrease in group order intake. Gross sales recognized on delivery of orders to customers were down 5.6% (£39 million) year on year, reflecting the unwind of an elevated opening order bank at the start of the prior year.
Despite the challenging market conditions, DFS expects to report a first-half profit before tax slightly ahead of the prior year, supported by improved operational performance, manufacturing & sourcing, and cost-to-operate efficiency programs. The company also anticipates non-underlying charges for the period to be around £6 million, with a cash cost of approximately £4 million, primarily related to the planned closure of part of its manufacturing operations and implementation costs associated with its cost-to-operate efficiency programs.
DFS expects to report closing net bank debt at the end of the period (excluding capitalized leases) of approximately £134 million and leverage of around 1.7x. Looking ahead, the company has reduced its revenue guidance to reflect weaker-than-expected demand but expects the impact of this reduction on profit before tax to be offset by progress in lowering operating costs. The full-year profit guidance remains unchanged at £30-35 million.
Commenting on the performance, Tim Stacey, Group Chief Executive, stated, "The Group has performed well in tough trading conditions. Despite the weaker than expected market, good operational performance and progress on gross margins and lowering our cost base have enabled us to deliver a profit for the first half that is slightly ahead of the prior year and we remain on track to deliver our full year profit target."
The Group will announce its interim results for the period ending 24 December 2023 on 19 March 2024. Looking beyond FY24, DFS believes it is well positioned to deliver strong shareholder returns, capitalizing on market recovery and growing its Home offering, with confidence in its 8% profit before tax target over the medium term.