Final Results

RNS Number : 7920N

Dunelm Group plc

12 September 2013

 



12 September 2013

Dunelm Group plc ("Dunelm")

Preliminary Results for the 52 weeks to 29 June 2013

Dunelm Group plc, the leading specialist out-of-town homewares retailer, today announces its preliminary results for the 52 weeks to 29 June 2013.

Financial summary

	FY13	FY12	Change
Total revenues	£677.2m	£603.7m	+12.2%
Like-for-like growth	+1.7%	+3.1%
Gross margin	48.7%	48.3%	+40 basis points
Operating profit	£106.5m	£95.2m	+11.9%
Profit before tax	£108.1m	£96.2m	+12.3%
Basic EPS	40.2p	35.3p	+13.9%
Fully diluted EPS	40.0p	35.1p	+14.0%
Ordinary dividends	16.0p	14.0p	+14.3%
Year-end net cash	£44.7m	£65.2m

Highlights

·    Continuing market share gains;  now market leader with 6.9% of UK homewares market (source:  Verdict Research);

·    14 new openings in the year (including two relocations and one re-opening) increasing footprint to 126 superstores;

·    Contractually committed to 10 more superstores;

·    80% growth in multi-channel revenues, now representing over 4% of total business;

·    Increasing investment in brand awareness - "There's no place like Dunelm"; 

·    Continued investment in customer proposition, infrastructure, IT systems and people,to underpin long-term growth;

Dividends

·    Recommended final dividend of 11.5p per share (2012: 10.0p), giving full year dividend of 16.0p (2012: 14.0p);

·    Special dividend of 25.0p per share to be paid in October, returning a further £50.7m of excess cash to shareholders.

Nick Wharton, Chief Executive, commented:

"Dunelm delivered robust trading results over the year, in a demanding retail environment. We have strengthened our specialist proposition, improved customer service in store and increased the profile of our brand. Each of these, together with our traditional product strength, has enabled us to increase sales on a like-for-like basis. We have also made good strategic progress, scaling our business through new stores and multi-channel, and strengthening our infrastructure. I would like to thank all my colleagues for their hard work and commitment in achieving this.

While recent economic data, particularly the volume of housing transactions, may suggest some improvement in consumer confidence, a degree of caution in relation to the broader UK economic environment remains appropriate.  Furthermore, the unusually warm summer weather has had a temporary dampening effect on recent trading.

With strong plans in place to improve brand awareness and to grow Dunelm further through new stores and multi-channel expansion, we remain confident in the future prospects for the business. Combined with our very strong financial position, this enables us to pay a special dividend equal to 25p per share as well as proposing an increase in the ordinary dividend in line with earnings."

For further information please contact:

Dunelm Group plc	0116 2644356
Nick Wharton, Chief Executive
David Stead, Finance Director
MHP Communications	020 3128 8100
John Olsen / Simon Hockridge / Naomi Lane	[e-mail]

For photography, please contact MHP Communications

Notes to Editors

Dunelm is market leader in the £11bn UK homewares market. The Group currently operates 135 stores, branded Dunelm Mill, of which 126 are out-of-town superstores and 9 are located on high streets, and an on-line store, to be found at www.dunelm.com.

Dunelm's customer proposition offers industry-leading choice of quality products at keen prices, with high levels of availability and supported by friendly service. Core ranges include many exclusive designs and premium brands such as Dorma, and are supported by a frequently changing series of special buys. The superstore format provides an average of 30,000 sq ft of selling space with over 20,000 products across a broad spectrum of categories, extending from the Group's home textiles heritage (bedding, curtains, cushions, quilts and pillows) to a complete homewares offer including kitchenware and dining, lighting, wall art, furniture and rugs. Dunelm is one of the few national retailers to offer an authoritative selection of curtain fabrics on the roll, and owns a specialist UK facility dedicated to producing made to measure curtains.

Dunelm was founded in 1979 as a market stall business, selling ready-made curtains. The first shop was opened in Leicester in 1984 and over the following years the business developed into a successful chain of high street shops before expanding into broader homewares categories following the opening of the first Dunelm superstore in 1991.

Dunelm has been listed on the London Stock Exchange since October 2006 (DNLM.L) and has a current market capitalisation of approximately £1.8bn.

CHAIRMAN'S STATEMENT

I am pleased to report another year of strong progress. The management team has continued to focus on our well-established strategy for developing the business, as well as keeping tight control on day to day operations. As a result, Dunelm has posted good growth in revenue and profits in the latest financial year, accompanied by further strong cash generation. More details are given by Nick Wharton, our Chief Executive, in his report.

Given the continuing strong business performance, the Board is able to recommend a 15% increase in the final dividend to 11.5p per share (2012: 10.0p), bringing the total ordinary dividends for the year to 16.0p (2012: 14.0p). We have also announced a special dividend of 25p per share, returning a further £50.7m of excess cash to shareholders.

The Board has continued to evolve over the last financial year with the appointment of a new Non-Executive Director, Liz Doherty. Liz joined the board in May, bringing a wealth of experience across large retail and consumer businesses.

Looking ahead, we have a range of exciting development initiatives and in particular continue to see significant potential to expand our store portfolio further within the UK. We remain confident in the Dunelm proposition and look forward to further profitable growth.

Geoff Cooper

Chairman

CHIEF EXECUTIVE'S REVIEW

Overview

Against the background of continued pressures on the consumer throughout the last financial year, the business delivered a robust trading performance and made good progress against both its operational and strategic objectives.

We remain focused on close operational management and on enhancing our customer experience, while investing confidently in the future growth of the business. This investment, consistent with our four strategic priorities, centres on the further strengthening of our specialist proposition, while at the same time increasing scale through store portfolio and multi-channel expansion.

Reflecting the benefit of a particularly strong store opening programme over the last two financial years, our total revenue for the year increased by 12.2%. Within this, like-for-like sales (calculated by comparing stores which have traded throughout the last two financial years) grew by 1.7% as we continued to gain share in amarket which we believe to be broadly flat. During the year we opened 14 new superstores, including two relocations and the reopening of our Coventry store after a major fire in 2011.

Our growth has meant that during the past year we have become, according to Verdict Research, market leader for the first time with a share of 6.9% of the UK homewares market.

Disciplined inventory management and continued progress with direct sourcing delivered a 40 basis points expansion in gross margin year on year. With operating costs growing slightly ahead of sales, reflecting our on-going investment in the customer proposition as well as building capability across the business for longer term growth, our operating margin remained at a similar level to the previous year, at 15.7%.

The business remains highly cash generative, readily funding the capital requirements associated with our growth as well as allowing a 14% year on year increase in the level of the ordinary dividend for the year. In addition we have been able to announce a special dividend totalling £50.7m to be distributed to shareholders in October 2013. This reflects our on-going approach of periodically distributing surplus cash to shareholders.

Strategy development

We have continued to make good progress with our four strategic priorities.

Priority 1 - develop our specialist proposition

The UK homewares market is estimated by Verdict Research to be worth approximately £11bn. As market leaders, our key differentiator is industry-leading choice, offering quality products over the broadest price spectrum. This is supported by strong availability, customer convenience through an established multi-channel proposition, and friendly knowledgeable service.

Our range and choice are complemented by exceptional value for money at all price points together with strong brand representation. The Dunelm brand, with its core attributes of trust and value, is applied to the majority of products across the proposition. In addition we stock a number of key owned brands including Dorma, Hotel and Spectrum alongside major proprietary brands such as Fogarty, Tempur, Kenwood and Brabantia.

Our broad price architecture is mirrored across each of our core categories and creates a proposition that is attractive to a very wide customer set. This positioning has continued to help preserve existing footfall and attract new customers during the past financial year. The Dunelm offer ranges from our entry price position, which competes with products offered by grocers and discount multiples but at a higher quality, through a number of mid-market options, to our highest quality products which are comparable with offerings in department stores and higher-end independent retailers but at keener prices.

We continue constantly to evolve our offer to ensure it remains contemporary, fresh and relevant. Through two seasonal refreshes we change approximately 25% of our ranges each year; while Special Buys and Miss it Miss Out ('MIMO') promotions emphasise Dunelm's value credentials and provide a seasonal feel to the store.

We have a clear opportunity to build further awareness of the Dunelm brand. During the year, in addition to increasing our presence in national press and growing our social media activity, we invested in our first full catalogue. Our initial 200 page edition was distributed to 700,000 people in autumn 2012 and proved extremely effective in showcasing the breadth and authority of the Dunelm product offer. We followed this with a spring catalogue and plan to build on these successful investments with a larger autumn 2013 catalogue which will have a distribution of one million copies.

Our next phase of investment in brand awareness incorporates an evolution of the current Dunelm branding. This evolution aims to communicate Dunelm's range authority across all homewares categories and to highlight our strengths in value, convenience and service.  We are introducing a new primary strapline of "There's no place like Dunelm", are migrating to the more user-friendly domain name of www.dunelm.com and will remove our traditional "Mill" suffix from across the business.  Research has shown that these changes will be positively received by both existing and new customer groups. The new strapline in particular is seen as a better reflection of our customers' emotional connection with the home. We will use this evolution in our branding to increase brand awareness and introduce Dunelm to a wider group of homewares shoppers through our first significant TV advertising campaign. Subject to performance in pilot, our planned investment in this campaign will amount to approximately £3m over the current financial year.

Excellent customer service, a high quality in-store experience and differentiating services are all important in ensuring that our overall customer experience meets the promise of the "There's no place like Dunelm" campaign. During the last financial year, we invested across each of these dimensions, foremost of which was a significant customer service training programme for store colleagues - Customer First. This has been funded largely by re-assigning colleague time in store from non-customer facing tasks which we have been able to eliminate or reduce through better processes and systems. Initial results are pleasing in terms of both customer satisfaction, where our net promoter score hit new heights after the completion of the training, and external recognition, where Dunelm ranked very positively in the most recent annual survey of customer service undertaken by Which? Magazine

Our Window Treatments offer spanning fabrics, readymade and made-to-measure curtains and blinds is a category that relies on high levels of expertise, service and customer interaction. During the year we have successfully developed and piloted a new more intuitive and interactive system to support our made-to-measure service and this will be introduced to all stores this autumn ahead of our peak window treatments season.

Our Dunelm At Home service, through which customers can select bespoke, made-to-measure curtains and other window treatments via a free home consultation, is now available from 30 stores, with a further phased roll-out planned over the current financial year. Customers of this service are rightly demanding and we invest significantly in the training and development of our home consultants to ensure good levels of customer satisfaction.

Priority 2 - develop the store portfolio

Dunelm trades from two store formats. The bulk of the portfolio comprises out-of-town superstores, with our average new store footprint now targeted towards 30,000 square feet of retail space. This space enables us to offer over 20,000 homewares products with the depth of range and availability that customers expect from a specialist retailer. It also accommodates a Pausa coffee shop, now present in 92 stores, providing an additional reason for customers to visit and increasing their engagement and dwell time. In addition to superstores, we also trade profitably from nine smaller high street locations where there are currently no suitable out-of town alternatives.

In the last financial year we again opened over 400,000 square feet of selling space through fourteen new superstores (two being relocations and one a re-opening) taking our superstore chain to 126 stores at the year end, providing 3.8 million square feet of selling space in total. A further 10 new stores are contractually committed. Following a detailed catchment analysis process completed in 2011, which sought to incorporate the impact of the anticipated growth of our multi-channel sales, we believe our mature UK superstore portfolio will consist of approximately 200 stores.

Our new stores continue to deliver strong returns on invested capital with the average expected discounted payback for stores opened in the last three financial years being approximately 28 months. We will continue to target the majority of our new store openings to achieve discounted cash flow payback of 36 months. However, as our portfolio becomes more mature our investment criteria will need to reflect some cannibalisation of revenues from existing stores, and going forward we anticipate that a proportion of new stores (perhaps up to 30%) will be targeted to achieve payback in up to 48 months.

Our refit programme covered 14 superstores this year of which four were 'major' refits. The programme is designed to improve the shopping environment in our existing stores, and to create a more consistent customer experience in terms of space allocation and department layouts.

As a result of this continued investment our portfolio is highly contemporary with 42% of the superstore chain either new or having benefited from a major refit over the past three years.

Priority 3 - grow multi-channel

In common with trends elsewhere in UK retail, Dunelm customers are embracing the convenience and value of multi-channel shopping with a significant proportion of shopping journeys now involving some element of on-line activity (browsing, research or purchasing) through our website, www.dunelm.com.

The last financial year saw continued investment in both website development, to enhance the customer experience, and in digital marketing where returns remain attractive. Our Reserve and Collect (R&C) proposition, which links our store stock files to the web in real time, enables our customers to check availability and order from over 16,000 products. This was further enhanced during the year to provide for same day collection. R&C customers, who represent approximately a third of multi-channel revenues, pay for their reserved products on collection in store creating a clear opportunity for add-on or incremental sales in store.

Development of the core website included the redesign of our homepage as well as key product pages where customers "land" following an internet search. We have also introduced Paypal as a payment alternative and optimised our site for tablet users in response to the rapid increase in the number of customers accessing our site from these devices. Developments such as expert guides, better recommendations for complementary products and enhanced alternative images also ensure that our website stimulates interest, communicates our expertise and provides added value.

As a consequence of all of the above, our multi-channel revenues continued to grow strongly, representing over 4% of revenues over the full financial year and approximately 4.5% in the final quarter.

Our next targeted development will materially improve speed and choice within our home delivery offering where, despite strong progress elsewhere, our proposition remains below benchmark and therefore provides a clear opportunity for further improvement and revenue growth. The transfer of our fulfilment operation to a scalable facility that will enable us to hold stock of approximately 20,000 lines, each available for next day delivery, is progressing well and is anticipated to be fully operational prior to peak winter trading.

While, as outlined above, significant enhancement of our multi-channel model has been possible on our existing web technology platform, our pace of development is restricted due to the configuration of the current software. Accordingly, we have initiated a programme to upgrade the platform and expect this to be completed during the second half of the current financial year, representing a capital investment of £4-5m. This re-platforming will deliver a more customer-friendly website as well as allowing future developments to be achieved over shorter lead times, thus enabling more frequent introductions of improved functionality to our customers.

Following a successful trial of extended inventory within furniture, we are targeting further web exclusive ranges and will apply our enhanced e:marketing and promotional capability to drive awareness of both core and extended ranges.

Priority 4 - develop and exploit our infrastructure

Focused investment in our business infrastructure across IT systems, distribution facilities and people resources is a key contributor to Dunelm's success and this continued in the past year.

Investment in our IT systems has enabled us to improve stock control, make in-store processes more efficient, and, through the upgrade during the year of our till systems, has enabled a better customer experience when they pay for their goods. The project to upgrade our enterprise wide SAP system is progressing well and is expected to be completed this calendar year.

The capacity and capability of the Group has been further strengthened by targeted recruitment including a Chief Information Officer who joined the business at the start of the current financial year. Meaningful headcount increases made in our buying, supply and space management teams have enabled us to develop product range options such that the best performing products within each category can be matched to each individual store based on their overall space and configuration. This development will continue in the current financial year, helping to create a more consistent shopping experience for our customers and reducing our lifecycle exposure to discontinued inventory.

Summary and outlook

Dunelm delivered robust trading results over the year, in a demanding retail environment. We have strengthened our specialist proposition, improved customer service in store and increased the profile of our brand. Each of these, together with our traditional product strength, has enabled us to increase sales on a like-for-like basis. We have also made good strategic progress, scaling our business through new stores and multi-channel, and strengthening our infrastructure. I would like to thank all my colleagues for their hard work and commitment in achieving this.

While recent economic data, particularly the volume of housing transactions, may suggest some improvement in consumer confidence, a degree of caution in relation to the broader UK economic environment remains appropriate.  Furthermore, the unusually warm summer weather has had a temporary dampening effect on recent trading.

With strong plans in place to improve brand awareness and to grow Dunelm further through new stores and multi-channel expansion, we remain confident in the future prospects for the business.  Combined with our very strong financial position, this enables us to pay a special dividend equal to 25p per share as well as proposing an increase in the ordinary dividend in line with earnings. 

Nick Wharton

Chief Executive

FINANCE DIRECTOR'S REVIEW

Operating result

The '2013' accounting period represents trading for the 52 weeks to 29 June 2013 and the comparative period '2012' represents trading for the 52 weeks to 30 June 2012.

Group revenue for 2013 was £677.2m (2012: £603.7m), an increase of 12.2%. This increase in revenue was achieved through growth in like-for-like sales of 1.7% and contribution from net new space amounting to 10.5%, the latter reflecting the strong store opening programme over the past two years including 14 new openings in 2013 (of which two were relocations and one a re-opening). Like-for-like sales performance was positive in both the first half (+2.2%) and second half (+1.2%) despite very strong comparative sales in the last quarter of 2012.

Gross margin increased by 40 basis points to 48.7% (2012: 48.3%) primarily reflecting benefits from direct sourcing initiatives. We will continue to pursue opportunities to drive margin benefits from direct sourcing and from challenging our UK based suppliers to achieve cost efficiencies.

Operating costs grew by 13.6% compared with last year. Expansion of the store portfolio was the largest driver of this, but we also made important increases to our investment in customer service, the in-store shopping environment, multi-channel operations, marketing and our overall business infrastructure:

• Customer service. Thanks to various operational efficiency initiatives, we were able to reduce the time spent in stores on handling stock. We re-invested significantly in colleague hours to provide improved customer service, supported by a major training initiative under the banner of 'Customer First'

• In-store environment. We introduced improved product display mechanics (such as plastic pallets for walkway displays) and new point-of-sale materials across the estate.

• Multi-channel operations. As well as bearing the costs of a much higher volume of home-delivered orders than previously, we also invested in developing the website itself and in preparing the ground for transfer of our fulfilment operation to a third party provider this autumn.

• Marketing. We continued to increase our marketing investment with the launch of the Dunelm catalogue and further focus on digital marketing activities.

• Business infrastructure. We expanded our capabilities in a number of areas, including functions required to support our increasing focus on direct sourcing.

Group operating profit for the financial year was £106.5m (2012: £95.2m), an increase of £11.3m (11.9%).

EBITDA

Earnings before interest, tax, depreciation and amortisation were £127.1m (2012: £113.9m). This has been calculated as operating profit (£106.5m) plus depreciation and amortisation (£20.6m) and represents an increase of 11.6% on the previous year. The EBITDA margin achieved was 18.8% of sales (2012: 18.9%).

Financial items and PBT

The Group generated £1.5m net financial income for the year (2012: £1.0m). Financial items include interest earned on surplus cash deposits of £0.9m (2012: £0.8m) and foreign exchange gains arising from the translation of dollar denominated assets and liabilities at the end of the period, worth £0.6m (2012: £0.2m). As at 29 June 2013 the Group held $4.8m in US dollar cash deposits and additional forward contracts for $45.9m representing approximately 50% of the anticipated US dollar spend over the next 12 months.

After accounting for interest and foreign exchange impacts, profit before tax for the year amounted to £108.1m (2012: £96.2m), an increase of 12.3%.

Tax, PAT and EPS

The tax charge for the year was 24.6% of profit before tax compared with 26.0% in the prior year. This reflects the reduction in the headline rate of corporation tax to 23.75% (2012: 25.50%) as well as a one-off benefit received in 2012 as a result of a project that increased the level of assets qualifying for capital allowances. We expect the tax charge to trend approximately 100 bps ahead of the headline Corporation Tax rate going forward. This difference is mainly due to depreciation charged on non-qualifying capital expenditure.

Profit after tax was £81.5m (2012: £71.2m), an increase of 14.4%.

Basic earnings per share for the year ended 29 June 2013 was 40.2p (2012: 35.3p), an increase of 13.9%. Fully diluted EPS increased by 14.0% to 40.0p (2012: 35.1p).

Capital expenditure

Gross capital expenditure in the financial year was £26.5m compared with £38.6m last year. Significant investments were made in order to support continued growth and development of the superstore portfolio with the addition of 14 new stores (58% of capital expenditure) and 14 refits. The remaining investment related mainly to IT activities, including a refresh of till systems, initial work on upgrading our core enterprise system (SAP) due to be completed this autumn, and initial work on implementing a new technology platform for our multi-channel offer.

Working capital

Investment in working capital increased by £3.4m over the year, primarily as a result of additional stock to support the expansion in the store estate, partially offset by lower average inventories per store.

Cash position and dividend

Dunelm remains a highly cash generative business. In 2013 the Group generated £100.4m (2012: £91.9m) of net cash from operating activities, an increase of 9.2%. Net cash resources at the end of the year were £44.7m (2012: £65.2m) with daily average cleared funds over the course of the financial year £66.2m (2012: £57.6m).

An interim dividend of 4.5p was paid in April 2013 (2012: 4.0p). It is proposed to pay a final dividend of 11.5p per share (2012: 10.0p). The total dividend of 16.0p represents a 14.3% increase over last year reflecting the Group's strong financial performance and leaves dividend cover of 2.5x, in line with our target. This dividend will be paid on 20 December 2013 to shareholders on the register at the close of business on 29 November 2013.

The Board reviews the Group's funding position on a regular basis and has concluded that access to committed lines of external funding is not required in the short term. Dunelm continues to maintain uncommitted lines of funding with partner banks whilst trading with a positive net cash position.

Additional returns to shareholders

The Group's policy is to maintain cash resources such that it is able to invest in the four pillars of its strategy and in addition to take advantage of investment opportunities as and when they arise, for example freehold property acquisitions. It also remains committed to returning excess capital to shareholders from time to time where these cash resources are materially in excess of investment requirements.

During the year, the Group returned excess capital of £65.8m (32.5p per share) to shareholders via a B/C share scheme.

In keeping with its capital policy and taking into account the Group's current financial strength; anticipated trading performance; its known and anticipated investment plans; and the level of cash available, the Board has also announced that surplus cash amounting to £50.7m (25.0p per share) will be returned to shareholders in the form of a special dividend.  This will be paid on 11 October 2013 to shareholders on the register at the close of business on 20 September 2013. 

Share Buyback

The Board has decided to commence the purchase of shares to hold in treasury in order to satisfy future exercises of options granted under incentive plans and other share schemes. This will avoid issuing new shares,which has been our general practice historically. This program will commence in October 2013 and over time we expect to build a holding equivalent to approximately 60% of outstanding options at any time (currently 2.3m options).

Financial risk and treasury management

The Group Board has established an overall Treasury Policy, day-to-day management of which is delegated to the Finance Director. This policy ensures the following:

• Effective management of all Clearing Bank operations

• Access to appropriate levels of funding and liquidity

• Optimal investment of surplus cash within approved risk/return profile

• Appropriate management of foreign exchange exposures and cash flows

Key performance indicators

In addition to the traditional financial measures of sales and profits, the Directors review business performance each month using a range of other KPIs. These include measures shown below.

Sales growth

2013	+12.2%
2012	+12.1%
2011	+9.3%

Like-for-like sales growth

2013	+1.7%
2012	+3.1%
2011	-0.6%

Gross margin change (basis points)

2013	+40bps
2012	+30bps
2011	+120bps

New store openings

2013(includes two relocations and one re-opening)	14
2012 (includes two relocations)	14
2011 (includes one relocation)	10

Major refits

2013	4
2012	4
2011	8

Operating margin

2013	15.7%
2012	15.8%
2011	15.5%

EBITDA £m

2013	£127.1m
2012	£113.9m
2011	£97.4m

Earnings per share (diluted)

2013	40.0p
2012	35.1p
2011	29.3p

Dividend (per share)

2013	16.0p
2012	14.0p
2011	11.5p

David Stead

Finance Director

RESPONSIBILITY STATEMENT

We confirm that to the best of our knowledge, within the Annual Report:

(a)   The financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit of the Group; and

(b)   The management report includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties it faces

Nick Wharton                                                                              David Stead

Chief Executive                                                                          Finance Director

CONSOLIDATED INCOME STATEMENT

For the 52 weeks ended 29 June 2013

	Note	2013 £'000	2012 £'000
Revenue	1	677,192	603,729
Cost of sales		(347,448)	(311,992)
Gross profit		329,744	291,737
Operating costs	3	(223,206)	(196,537)
Operating profit	2	106,538	95,200
Financial income	5	1,518	1,048
Financial expenses	5	(1)	-
Profit before taxation		108,055	96,248
Taxation	6	(26,601)	(25,026)
Profit for the period attributable to equity shareholders of the parent		81,454	71,222
Earnings per ordinary share - basic	8	40.2p	35.3p
Earnings per ordinary share - diluted	8	40.0p	35.1p
Dividend proposed per ordinary share	7	11.5p	10.0p
Dividend paid per ordinary share	7	4.5p	4.0p

All activities relate to continuing operations.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the 52 weeks ended 29 June 2013

	2013 £'000	2012 £'000
Profit for the period	81,454	71,222
Items that may be reclassified subsequently to profit or loss:
Effective portion of movement in fair value of cash flow hedges	443	343
Deferred tax on hedging movements	(102)	(90)
Total comprehensive income for the period	81,795	71,475

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 29 June 2013

		29 June 2013 £'000	30 June 2012 £'000
Non-current assets
Intangible assets		4,262	3,238
Property, plant and equipment		151,060	146,313
Deferred tax asset		1,460	-
Total non-current assets		156,782	149,551
Current assets
Inventories		92,940	86,221
Trade and other receivables		18,344	17,054
Cash and cash equivalents		44,740	65,190
Financial instruments		387	-
Total current assets		156,411	168,465
Total assets		313,193	318,016
Current liabilities
Trade and other payables		(102,106)	(97,442)
Liability for current tax		(13,393)	(13,195)
Financial instruments		-	(56)
Total current liabilities		(115,499)	(110,693)
Non-current liabilities
Deferred tax liability		-	(297)
Total non-current liabilities		-	(297)
Total liabilities		(115,499)	(110,990)
Net assets		197,694	207,026
Equity
Issued capital		2,028	2,023
Share premium		1,612	1,025
Capital redemption reserve		43,157	43,155
Hedging reserve		299	(42)
Retained earnings		150,598	160,865
Total equity attributable to equity holders of the Parent		197,694	207,026

CONSOLIDATED STATEMENT OF CASH FLOWS

For the 52 weeks ended 29 June 2013

		2013 £'000	2012 £'000
Profit before taxation		108,055	96,248
Adjustment for net financing costs		(1,517)	(1,048)
Operating profit		106,538	95,200
Depreciation and amortisation		20,358	18,678
Impairment losses on non-current assets		166	-
(Profit)/loss on disposal of property, plant and equipment		76	(15)
Operating cash flows before movements in working capital		127,138	113,863
(Increase) in inventories		(6,719)	(9,766)
(Increase) in receivables		(1,321)	(2,465)
Increase in payables		4,665	11,955
Net movement in working capital		(3,376)	(276)
Share-based payments expense		2,045	1,803
Foreign exchange gains/(losses)		451	218
		126,258	115,608
Interest paid		(1)	-
Interest received		937	756
Tax paid		(26,795)	(24,473)
Net cash generated from operating activities		100,399	91,891
Cash flows from investing activities
Proceeds on disposal of property, plant and equipment		10	634
Acquisition of property, plant and equipment		(23,382)	(37,030)
Acquisition of intangible assets		(3,000)	(1,594)
Net cash utilised in investing activities		(26,372)	(37,990)
Cash flows from financing activities
Proceeds from issue of share capital		589	346
Return of Capital to Shareholders		(65,841)	-
Dividends paid		(29,386)	(24,248)
Net cash flows utilised in financing activities		(94,638)	(23,902)
Net increase in cash and cash equivalents		(20,611)	29,999
Foreign exchange revaluations		161	52
Cash and cash equivalents at the beginning of the period		65,190	35,139
Cash and cash equivalents at the end of the period		44,740	65,190

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the 52 weeks ended 29 June 2013

	Issued share capital £'000	Share premium £'000	Capital Redemp-tion reserve £'000	Hedging reserve £'000	Retained earnings £'000	Total equity £'000
As at 2 July 2011	2,015	681	43,155	(295)	111,662	157,218
Profit for the financial year	-	-	-	-	71,222	71,222
Movement in fair value of cash flow hedges	-	-	-	343	-	343
Deferred tax on hedging movements	-	-	-	(90)	-	(90)
Total comprehensive income for the financial year	-	-	-	253	71,222	71,475
Issue of share capital	8	344	-	-	(6)	346
Share-based payments	-	-	-	-	1,803	1,803
Deferred tax on share-based payments	-	-	-	-	(199)	(199)
Current corporation tax on share options exercised	-	-	-	-	631	631
Dividends	-	-	-	-	(24,248)	(24,248)
Total transactions with owners, recorded directly in equity	8	344	-	-	(22,019)	(21,667)
As at 30 June 2012	2,023	1,025	43,155	(42)	160,865	207,026
Profit for the financial year	-	-	-	-	81,454	81,454
Movement in fair value of cash flow hedges	-	-	-	443	-	443
Deferred tax on hedging movements	-	-	-	(102)	-	(102)
Total comprehensive income for the financial year	-	-	-	341	81,454	81,795
Issue of share capital	5	587	2	-	(6)	588
Share-based payments	-	-	-	-	2,045	2,045
Deferred tax on share-based payments	-	-	-	-	1,006	1,006
Current corporation tax on share options exercised	-	-	-	-	461	461
Dividends	-	-	-	-	(29,386)	(29,386)
Return of Capital to Shareholders	-	-	-	-	(65,841)	(65,841)
Total transactions with owners, recorded directly in equity	5	587	2	-	(91,721)	(91,127)
As at 29 June 2013	2,028	1,612	43,157	299	150,598	197,694

Notes to the annual financial statements

For the 52 weeks ended 29 June 2013

1 Segmental reporting

The Group has one reportable segment, retail of homewares in the UK.

The Chief Operating Decision Maker is the Board of Directors of Dunelm Group plc. Internal management reports are reviewed by them on a monthly basis. Performance of the segment is assessed based on a number of financial and non-financial KPI's as well as on profit before taxation. Management believe that these measures are the most relevant in evaluating the performance of the segment and for making resource allocation decisions.

All material operations of the reportable segment are carried out in the UK. The Group's revenue is driven by the consolidation of individual small value transactions and as a result Group revenue is not reliant on a major customer or group of customers.

2 Operating profit

Operating profit is stated after charging / (crediting) the following items:

	2013 £'000	2012 £'000
Inventories
Cost of inventories included in cost of sales	341,545	310,971
Movement on provisions for write down of inventories	(666)	1,021
Amortisation of intangible assets	2,125	2,445
Depreciation of owned property, plant and equipment	18,233	16,233
Impairment losses on non-current assets	166	-
Operating lease rentals
Land and buildings	30,690	28,287
Plant and machinery	1,354	1,310
Loss/(profit) on disposal of property, plant and equipment and intangible assets	76	(15)

The analysis of auditor's remuneration is as follows:

	2013 £'000	2012 £'000
Fees payable to the Company's auditors for the audit of the Parent and consolidated annual accounts	19	17
Fees payable to the Company's auditors and their associates for other services to the Group
- audit of the Company's subsidiaries pursuant to legislation	58	58
- tax compliance	30	28
- other tax services	125	46

Total audit fees amounted to £76,900, fees for non-audit services amounted to £155,000.

3 Operating costs

	2013 £'000	2012 £'000
Selling and Distribution	183,926	162,097
Administrative	39,037	34,455
(Profit)/loss on disposal of property, plant and equipment and intangible assets	243	(15)
	223,206	196,537

4 Employee numbers and costs

The average number of people employed by the Group (including Directors) was:

	2013 Number of heads	2013 Full time equivalents	2012 Number of heads	2012 Full time equivalents
Selling	7,429	4,238	6,380	3,823
Distribution	289	284	290	283
Administration	259	252	241	235
	7,977	4,774	6,911	4,341

The aggregate remuneration of all employees including Directors comprises:

	2013 £'000	2012 £'000
Wages and salaries including bonuses and termination benefits	87,534	77,248
Social security costs	5,748	5,370
Share-based payment expense	1,798	1,803
Defined contribution pension costs	375	426
	95,455	84,847

5 Financial income and expense

	2013 £'000	2012 £'000
Finance income
Interest on bank deposits	906	778
Foreign exchange gains (net)	612	270
	1,518	1,048
Finance expenses
Interest on bank borrowings and overdraft	-	-
Foreign exchange losses (net)	(1)	-
	(1)	-
Net finance income	1,517	1,048

6 Taxation

	2013 £'000	2012 £'000
Current taxation
UK corporation tax charge for the period	27,715	26,342
Adjustments in respect of prior periods	(261)	(679)
	27,454	25,663
Deferred taxation
Origination of temporary differences	(1,018)	(768)
Adjustment in respect of prior periods	165	131
	(853)	(637)
Total taxation expense in the income statement	26,601	25,026

The tax charge is reconciled with the standard rate of UK corporation tax as follows:

	2013 £'000	2012 £'000
Profit before taxation	108,055	96,248
UK corporation tax at standard rate of 23.75% (2012: 25.5%)	25,663	24,543
Factors affecting the charge in the period:
Non-deductible expenses	27	78
Ineligible depreciation	1,108	1,206
Lease incentive deductions	(96)	(109)
Adjustments to tax charge in respect of prior years	(96)	(548)
Effect of standard rate of corporation tax change	9	(63)
(Profit)/loss on disposal of ineligible assets	(14)	(81)
	26,601	25,026

The taxation charge for the period as a percentage of profit before tax is 24.6% (2012: 26.0%).

7 Dividends

All dividends relate to the 1p Ordinary Shares.

		2013 £'000	2012 £'000
Final for the period ended 2 July 2011	- paid 8.0p	-	(16,158)
Interim for the period ended 30 June 2012	- paid 4.0p	-	(8,090)
Final for the period ended 30 June 2012	- paid 10.0p	(20,259)	-
Interim for the period ended 29 June 2013	- paid 4.5p	(9,127)	-
		(29,386)	(24,248)

The Directors are proposing a final dividend of 11.5p per Ordinary Share for the period ended 29 June 2013 which equates to £23.3m. The dividend will be paid on 20 December 2013 to shareholders on the register at the close of business on 29 November 2013. The Directors have announced a special dividend amounting to £50.7m (25.0p per share), to be paid on 11 October 2013 to shareholders on the register at the close of business on 20 September 2013.

8 Earnings per share

Basic earnings per share is calculated by dividing the profit for the period attributable to equity shareholders by the weighted average number of Ordinary Shares in issue during the period.

For diluted earnings per share, the weighted average number of Ordinary Shares in issue is adjusted to assume conversion of all dilutive Potential Ordinary Shares. These represent share options granted to employees where the exercise price is less than the average market price of the Company's Ordinary Shares during the period.

Weighted average numbers of shares:

	52 weeks ended 29 June 2013 '000	52 weeks ended 2 July 2012 '000
Weighted average number of shares in issue during the period	202,598	201,968
Impact of share options	1,291	1,008
Number of shares for diluted earnings per share	203,889	202,976

9 Basis of preparation

The annual report and financial statements for the year ended 29 June 2013 were approved by the Board of Directors on 12 September 2013 along with this preliminary announcement, but have not yet been delivered to the Registrar of Companies.

The financial information contained in this preliminary announcement does not constitute the Group's statutory accounts within the meaning of Section 434 of the Companies Act 2006.

The auditor's report on the statutory accounts for the year ended 29 June 2013 was unqualified and did not contain a statement under section 498 of the Companies Act 2006.

The statutory accounts of Dunelm Group plc for the year ended 30 June 2012 have been delivered to the Registrar of Companies. The auditor's report on the statutory accounts for the year ended 30 June 2012 was unqualified and did not contain a statement under section 498 of the Companies Act 2006.

 

END

 

 

FR EAPNFFAXDEFF