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
Wednesday, 18th December 2024
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