Most newly listed stocks underperform the market, but so far DFS Furniture (DFS) has proved an exception. The shares are up more than a fifth from the IPO price of 255p in March, and these maiden annual results go a long way towards justifying that performance. Most eye-catching was the 9.3p dividend, which included an unexpected interim dividend of 3.1p a share. Chief executive Ian Filby said the company was "extremely cash-generative in its own right" and the emphasis will remain on "great returns for shareholders". The dividend is twice covered by underlying earnings.
Gross sales rose 7 per cent in the year to 1 August, driven by a mix of like-for-like sales - up 4.7 per cent - and strong contributions from the Dwell and Sofa Workshop brands, which were acquired in the previous year. Gross margins dipped by 120 basis points due to high levels of investment, but this was offset by other cost-saving initiatives, leaving adjusted cash profit margins 10 basis points higher at 12.6 per cent. The upshot was an 8.4 per cent improvement in cash profits to £89.2m.
Mr Filby insists there's more growth to come. The group is still investing in its online business - which Mr Filby says remains "highly complimentary" to the bricks-and-mortar estate - and has nabbed itself a high-profile marketing opportunity with Team GB at the 2016 Rio Olympics. Management hopes the sponsorship deal will help DFS "broaden its appeal" to include more upmarket consumers - although it also wants to keep the brand "firmly aligned" with its traditional, more budget-conscious customer base.
The group also opened its first overseas store in November 2014 near Amsterdam in the Netherlands. This was followed by a second Dutch store in Rotterdam last month, with another due before the end of the current financial year. DFS has also started to establish a Spanish business through the acquisition of a "locally well-regarded" operator.
Brokerage Numis expects pre-tax profits of £63.5m for the current financial year, giving EPS of 23.6p, compared with £50.2m and 18.5p for the year ended July 2015.
| DFS FURNITURE (DFS) | ||||
|---|---|---|---|---|
| ORD PRICE: | 313p | MARKET VALUE: | £667m | |
| TOUCH: | 310-313p | 12-MONTH HIGH: | 320p | LOW: 252p |
| DIVIDEND YIELD: | 3.0% | PE RATIO: | 73 | |
| NET ASSET VALUE: | 105p* | NET DEBT: | 72% | |
| Year to 1 August | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2012** | 568 | 13.6 | na | na |
| 2013** | 614 | -10.1 | na | na |
| 2014** | 657 | 3.6 | na | na |
| 2015 | 706 | 10.7 | 4.3 | 9.3 |
| % change | +8 | +197 | - | - |
Ex-div: 10 Dec Payment: 30 Dec *Includes intangible assets of £489m, or 230p a share **Prior to flotation in March 2015 | ||||
