Interim Results

D.F.S. Furniture Company PLC 18 April 2002 18 April 2002 DFS FURNITURE COMPANY plc INTERIM RESULTS FOR THE 26 WEEKS ENDED 26 JANUARY 2002 'Another shareholder windfall - £21.8 million interim dividends' • Record operating profit* £25.7m up 8.9% • Sales £211.7m up 9.9% • Like-for-like sales up 2.0% • Earnings per share* 16.4p up 4.5% • Interim dividend per share 6.7p up 9.8% • Special dividend per share 14.1p * before exceptional profit relating to the Primback case 'It is a pleasure to report another six months of good progress for DFS, in line with our plans. Progress represented not only by the continuing growth of sales and profits, but also by the great strides we have made in extending our store portfolio, acquiring superb new facilities enabling us to expand our manufacturing capacity and building ever-greater consumer awareness of DFS as the leading brand in our sector. The Board has declared an interim dividend of £7.0 million - 6.7 pence per share, an increase of 9.8%. We are also progressing towards a resolution of the issues resulting from the Primback case. I am particularly pleased that this now enables us to return £14.8 million of cash to our shareholders through a special dividend. Another shareholder windfall - the fifth special dividend in recent years. DFS has now returned approaching £200 million in dividends to shareholders since flotation, including £21.8 million in this half alone - testament to our ongoing focus on shareholder value. Following a successful Winter Sale, we entered the second half with a strong order bank and are on track to meet our targets for this year. Although the current trading environment seems somewhat less buoyant our order intake since the AGM is 3% up on a like-for-like basis. All our new stores are trading successfully, in line with projections, and we have a record number of new store openings in the pipeline. Looking ahead, I feel confident that this will be another successful year for DFS: a business that is a proven and strong generator of cash from its operations, with the final resolution of the Primback issues still to come in the future. The Company is maturing into a bigger, stronger and better business than ever, and we are well placed to deliver continued growth in shareholder value as we maximise the benefits of our growing strength.' Graham Kirkham, Executive Chairman Enquiries DFS Furniture Company plc Hudson Sandler Graham Kirkham, Executive Chairman Keith Hann Jon Massey, Chief Operating Officer Noemie de Andia Ian Bowness, Finance Director Tel: 020 7796 4133 Tel: 020 7796 4133 (on 18 April 2002) CHAIRMAN'S STATEMENT It is a pleasure to report another six months of good progress for DFS, in line with our plans. Progress represented not only by the continuing growth of sales and profits, but also by the great strides we have made in extending our store portfolio, acquiring superb new facilities enabling us to expand our manufacturing capacity and building ever-greater consumer awareness of DFS as the leading brand in our sector. The Board has declared an interim dividend of £7.0 million - 6.7 pence per share, an increase of 9.8%. We are also progressing towards a resolution of the issues resulting from the Primback case. I am particularly pleased that this now enables us to return £14.8 million of cash to our shareholders through a special dividend. Another shareholder windfall - the fifth special dividend in recent years. DFS has now returned approaching £200 million in dividends to shareholders since flotation, including £21.8 million in this half alone - testament to our ongoing focus on shareholder value. RESULTS Sales in the 26 weeks to 26 January 2002 grew by 9.9% to £211.7million, with like-for-like sales increasing by 2.0%. Operating profit, before the exceptional item relating to the Primback case, advanced by 8.9% to £25.7million, with an operating margin, before the exceptional item, of 12.1% matching that achieved in the second half last year. Increased store pre-opening costs of £2.1 million (2001: £1.6 million) account for the modest variance from the operating margin of 12.3% reported in the previous first half. Profit before tax and the exceptional item increased by 5.3% to £25.7 million, following interest receivable before exceptional item of £29,000 (2001: £827,000) reflecting the payment of a £20.7 million special dividend in November 2000 and lower interest rates. Earnings per share before the exceptional item grew by 4.5% to 16.4 pence. Prior year figures have been restated, for ease of comparison, following our adoption of the FRS 19 accounting standard for deferred tax which increases our deferred tax provision by £963,000 in the current and comparative balance sheets. The estimated effective tax rate for the current year, before the exceptional item, is 33.0%. EXCEPTIONAL ITEM On 26 March 2002 we announced the release of £17.4 million, from creditors relating to the Primback case, to our profit and loss account as an exceptional item. This represents amounts which H.M. Customs & Excise can no longer claim. Including this exceptional item, profit before tax rose by 76.6% to £43.2 million and earnings per share by 94.3% to 30.5 pence. FINANCES Our balance sheet has remained very strong, reflecting the tremendous cash generating capabilities of our business. At 26 January 2002 we had no debt and total cash balances of £88.8 million (2001: £87.1 million) including balances associated with the Primback case of £55.9 million after release of the £17.4 million exceptional item (2001: £61.8 million). POST BALANCE SHEET EVENT On 5 February 2002 we paid £44.4 million of the £55.9 million balance to H.M. Customs & Excise to protect ongoing appeals associated with the Primback case, in which we are contesting all amounts claimed. Additionally, on 22 March 2002, the High Court gave judgment in favour of DFS for the repayment of £6.2 million, plus interest and costs, relating to VAT payments made by DFS to H.M. Customs & Excise in June 1997 associated with the Primback case. This income has not been reflected in the interim financial statements pending the possibility of any appeal. DIVIDEND The Board has declared an ordinary interim dividend of 6.7 pence per share, an increase of 9.8%. This is a higher rate of growth than in earnings per share before the exceptional item, reflecting our confidence in the prospects for DFS and our long-standing commitment to a progressive dividend policy which aims to provide shareholders with increases in their income that broadly reflect the trend in earnings over the medium term. SPECIAL DIVIDEND Following the release of funds from our creditor provision relating to the Primback case, the Board takes great pleasure in declaring another special dividend of 14.1 pence per share. This will amount to £14.8 million, equivalent to the whole of the exceptional credit after taxation. We have always believed that shareholders should derive full benefit from any cash surplus within the business. Even with record capital expenditure planned for the current year, I am confident that we have the funds available to continue with our ambitious plans for expansion, including the purchase of store freeholds where suitable opportunities arise. STORES Our store expansion programme remains on target, with three new leasehold stores opened during the first half. Our Basildon store began trading during the first week of the financial year while Belfast and Taunton both opened on 8 December enabling us to capitalize on the important Winter Sale trading period. In the second half, we have opened a leasehold store at Borehamwood in Hertfordshire, which began trading on 16 March, and our new leasehold store in Stevenage is scheduled to open towards the end of our financial year. Tollcross (Glasgow), Aberdeen, Carlisle and Tunbridge Wells are already planned to open in our next financial year together with a relocation of our existing store in Hull. DFS has a clear programme of store expansion with openings planned for the following year putting us well on track to achieve our target of 15-20 new stores over three years. The scope for expansion is enormous, with 62 branches currently trading and potential for at least 100 DFS upholstery stores within the UK alone. MANUFACTURING Our three factories have achieved record levels of output to keep pace with the growth of our retail business. As I announced at the AGM in December, we have acquired the long leasehold of a new 120,000 sq ft unit on the outskirts of Doncaster. This extra space will allow further production expansion and more efficient and effective distribution. The new facility has superb transport links, being located next to a motorway interchange, and gives us the potential to double our current levels of production in South Yorkshire and to increase efficiencies. Over time, we expect this growth opportunity to create up to 250 new jobs. We have also acquired further land on the site, giving us even more scope for expansion in the future. In addition, we have recently applied for planning permission to increase the capacity of our smallest factory at Long Eaton in Nottinghamshire. Together, these developments will ensure that we have the capability to maintain the current proportion of products manufactured in-house, with all the advantages this brings in control of designs, quality and lead times, as well as enhanced margins. INVESTMENT Capital expenditure during the first half showed a substantial increase to £20.3 million (2001: £7.3 million), reflecting the purchase of two store freeholds and our new 120,000 sq ft unit in South Yorkshire, as well as the fitting-out of new stores and the refurbishment of existing branches. As a result, we anticipate that our investment in capital expenditure for the year will be in the order of £30 million. This is a record level of capital expenditure and compares with £13.9 million last year. DFS BRAND AND MARKETING In recent times the thrust of our advertising and marketing has been re-focused to emphasise the fundamental values of the DFS brand. Consumers increasingly recognize us as the leading specialist in upholstered furniture offering the widest possible range of products with the broadest design appeal. This is reflected in advertising industry surveys in which we have achieved exceptional levels of unprompted brand awareness. Following our store opening in Belfast, we are now advertising in all the principal UK TV regions and every future store opening will increase the cost-effectiveness of our advertising not just on television but also in national newspapers, colour supplements, magazines and on radio. We are also deriving increasing benefits from our position as a major national advertiser. Our website at http://www.dfs.co.uk/ continues to be upgraded, enabling us to display an even larger selection of our products, and is achieving record visitor numbers. MANAGEMENT AND STAFF The quality of the DFS team has always been key in differentiating us from the competition and our care in both recruitment and training is paying growing dividends as our expansion continues. The new trading board structure that we established a year ago is working very well indeed, contributing to our continued success and providing a strong framework for our further planned expansion in the years ahead. OUTLOOK Following a successful Winter Sale, we entered the second half with a strong order bank and are on track to meet our targets for this year. Although the current trading environment seems somewhat less buoyant our order intake since the AGM is 3% up on a like-for-like basis. All our new stores are trading successfully, in line with projections, and we have a record number of new store openings in the pipeline. Looking ahead, I feel confident that this will be another successful year for DFS: a business that is a proven and strong generator of cash from its operations, with the final resolution of the Primback issues still to come in the future. The Company is maturing into a bigger, stronger and better business than ever, and we are well placed to deliver continued growth in shareholder value as we maximise the benefits of our growing strength. Graham Kirkham Executive Chairman 18 April 2002 CONSOLIDATED PROFIT AND LOSS ACCOUNT 26 wks ended 26 wks ended 26 wks ended 26 wks ended 52 wks ended 26 January 26 January 26 January 27 January 28 July 2002 2002 2002 2001 2001 Notes £000 £000 £000 £000 £000 Before Exceptional item Total Restated exceptional and related item dividend (note 1) Turnover 211,689 - 211,689 192,585 401,940 Operating profit 25,712 8,699 34,411 23,616 48,859 Interest receivable 29 8,723 8,752 827 1,197 Profit before taxation 25,741 17,422 43,163 24,443 50,056 Taxation 2 (8,495) (2,610) (11,105) (8,188) (16,567) Profit for the 17,246 14,812 32,058 16,255 33,489 financial period Dividends 3 (7,034) (14,812) (21,846) (6,308) (21,580) Retained profit 10,212 - 10,212 9,947 11,909 Earnings per ordinary share 4 16.4p 14.1p 30.5p 15.7p 32.3p Dividend per ordinary share 6.7p - 6.7p 6.1p 20.6p Special dividend per ordinary share - 14.1p 14.1p - - NOTES TO THE ACCOUNTS 1. Certain amounts previously provided in respect of the Primback case have been released in the period. These comprise VAT no longer recoverable by H.M. Customs & Excise and related interest accruals. The interest accruals were not allowed for corporation tax and no charge will therefore be incurred on their release. 2. The tax charge on profit before exceptional item for the half year period is based on the estimated effective rate before exceptional item for the full year of 33.0% (2001: 33.5%). 3. An interim dividend of 6.7p per ordinary share will be paid on 13 June 2002 to shareholders on the register on 17 May 2002. A special dividend of 14.1p per ordinary share will be paid on 10 May 2002 to shareholders on the register on 26 April 2002. 4. The calculation of earnings per share is based on the profit attributable to ordinary shareholders and a weighted average of 104,964,824 shares in issue during the period (2001: 103,402,086). CONSOLIDATED BALANCE SHEET 26 January 27 January 28 July 2002 2001 2001 Notes £000 £000 £000 Restated Restated Fixed assets Tangible assets 95,406 75,878 78,881 Current assets Stocks 13,114 12,643 13,354 Debtors 8,976 6,745 6,611 Cash at bank and in hand 5 88,756 87,131 97,202 Current liabilities Creditors: amounts due within one year 5 (148,756) (143,389) (149,665) Net current liabilities (37,910) (36,870) (32,498) Provisions for liabilities and charges 6 (9,833) (8,103) (9,433) Net assets 47,663 30,905 36,950 Capital and reserves Called up share capital 5,249 5,170 5,238 Share premium account 6,540 2,059 6,050 Revaluation reserve 4,345 4,396 4,345 Capital redemption reserve 78 78 78 Profit and loss account 31,451 19,202 21,239 Equity shareholders' funds 47,663 30,905 36,950 NOTES TO THE ACCOUNTS CONTINUED 5. Cash at bank and in hand includes £55,890,000 (2001: £61,808,000) associated with the Primback case. The same amount is included in creditors (amounts due within one year) pending resolution with H.M.Customs & Excise. 6. From 29 July 2001 the Group has adopted a new accounting standard, FRS 19 'Deferred Tax', which requires full provision to be made for deferred tax arising from timing differences. The comparative figures for 2001 have been restated to reflect the impact of FRS 19. Consequently, provisions for deferred tax at 27 January 2001 and 28 July 2001 have been increased by £963,000. This had no impact on the profit and loss account for the period ended 27 January 2001 but has increased the tax charge for the period ended 28 July 2001 by £24,000. 7. The results for the 26 weeks to 26 January 2002 and 27 January 2001 are unaudited. The results for the period ended 28 July 2001 are derived from the full accounts for that period which have been filed with the Registrar of Companies. The report of the auditors was unqualified and did not contain a statement under section 237(2) or (3) of the Companies Act 1985. 8. The results for the 26 weeks to 26 January 2002 have been approved by the directors and are prepared using the same accounting policies as were used in the 2001 statutory accounts, except for the adoption of FRS 19 as explained in note 6 above. CONSOLIDATED CASH FLOW STATEMENT 26 wks ended 26 wks ended 52 wks ended 26 January 27 January 28 July 2002 2001 2001 Notes £000 £000 £000 Net cash inflow from operating activities 9 32,974 33,259 62,720 Returns on investments and servicing of finance 10 219 919 1,267 Taxation (6,951) (5,195) (16,228) Capital expenditure 11 (19,998) (7,209) (13,584) Equity dividends paid (15,191) (34,226) (40,615) Financing 12 501 - 4,059 Decrease in cash in the period (8,446) (12,452) (2,381) Reconciliation of net cash flow to movement in net funds Decrease in cash in the period (8,446) (12,452) (2,381) Net funds at the beginning of the period 97,202 99,583 99,583 Net funds at the end of the period 88,756 87,131 97,202 NOTES TO THE ACCOUNTS CONTINUED 9. Reconciliation of operating profit to net cash inflow from operating activities 26 wks ended 26 wks ended 52 wks ended 26 January 27 January 28 July 2002 2001 2001 £000 £000 £000 Operating profit 34,411 23,616 48,859 Depreciation 3,622 2,972 6,219 (Profit)/loss on sale of fixed assets (149) (44) 81 Decrease/(increase) in stocks 240 (922) (1,633) Increase in debtors (2,555) (1,524) (1,270) (Decrease)/increase in creditors and provisions (2,595) 9,161 10,464 Net cash inflow from operating activities 32,974 33,259 62,720 The decrease in creditors and provisions includes a net decrease of £11,527,000 (2001: increase of £6,348,000) associated with the Primback case. 10. Returns on investments and servicing of finance 26 wks ended 26 wks ended 52 wks ended 26 January 27 January 28 July 2002 2001 2001 £000 £000 £000 Interest received 219 919 1,267 11. Capital expenditure 26 wks ended 26 wks ended 52 wks ended 26 January 27 January 28 July 2002 2001 2001 £000 £000 £000 Purchase of tangible fixed assets (20,292) (7,339) (13,904) Sale of fixed assets 294 130 320 Net cash outflow for capital expenditure (19,998) (7,209) (13,584) NOTES TO THE ACCOUNTS CONTINUED 12. Financing 26 wks ended 26 wks ended 52 wks ended 26 January 27 January 28 July 2002 2001 2001 £000 £000 £000 Issue of ordinary share capital 501 - 4,059 13. The interim report will be posted to shareholders on or about 29 April 2002 and will be available on request from the Secretary, DFS Furniture Company plc, Bentley Moor Lane, Adwick-le-Street, Doncaster, South Yorkshire, DN6 7BD. This information is provided by RNS The company news service from the London Stock Exchange

Companies

DFS Furniture (DFS)
UK 100
FTSE quotes by TradingView

Latest directors dealings

All directors dealings today