DFS springs to record profit

Despite much of the population being sequestered at home during lockdowns and spending more time on the sofa, DFS Furniture (DFS) had a torrid 2020. Restrictions on deliveries and the closure of showrooms, manufacturing and distribution operations had a severe impact, with the group suffering an £81m loss. The 2021 interim results represent a vigorous recovery. The furniture retailer posted record underlying profit before tax of £106m excluding brand amortisation and reinstated the dividend after last year’s suspension, with a proposed 7.5p-a-share payout.

Sales surged in the period, albeit against weak Covid-impacted comparators, aided by increased consumer interest for 'in-home' items due to remote working and the reduction in spend in areas such as leisure and travel. Online sales were a particular boon for the group – investment in technology to improve the customer experience online and the drafting in of showroom workers to help online customers played their part in an 184 per cent rise in online sales. A strong order book, currently at a record high, displays the level of pent-up consumer demand. 

Net debt fell from £674m to £471m, with net bank debt down to £39.8m – lease liabilities form the lion's share. Covenants on a new ESG-linked £225m senior revolving credit facility are consistent with pre-Covid measures. 

Peel Hunt forecasts EPS of 26.7p a share for FY2022, rising to 28.6p for FY2023. The broker also expects continued revenue growth. The opening of five new Sofology showrooms in the year, with eight more planned for FY2022, could conceivably lead to further gains in upholstery market share. Buy. 

Last IC view: Buy, 173p, 24 Sep 2020