Two profit warnings ahead of these numbers from sofa retailer DFS (DFS) meant the market was well aware that trading conditions had deteriorated – hence the relatively modest share price fall accompanying their release. Sales growth all but ground to a halt due to a “very challenging furniture market” during the second half. This, coupled with rising costs, put significant pressure on the gross margin. The resultant 13 per cent fall in cash profits to £82.4m meant the company only just scraped into the lower end of its previous guidance range of £82m-£87m.
It’s the classic retail horror show that analysts had feared, as rising inflation and wavering consumer confidence put the squeeze on the sector. But what of the future? DFS's management expects the environment to remain challenging in the short term, although the order intake since July has been described as “satisfactory”. Furthermore, there seem to be no regrets over the recent £25m deal to acquire Sofology, given the clear business synergies on offer, although analysts reckon up to £50m could be spent on bringing the business up to scratch.
Analysts at Peel Hunt still expect pre-tax profits of £44.3m for the year ending July 2018, giving EPS of 16.3p, compared with 18.6p in FY2017.
| DFS (DFS) | ||||
| ORD PRICE: | 216.5p | MARKET VALUE: | £458m | |
| TOUCH: | 216.25-216.5p | 12-MONTH HIGH: | 287p | LOW: 190p |
| DIVIDEND YIELD: | 5.2%** | PE RATIO: | 12 | |
| NET ASSET VALUE: | 116p* | NET DEBT: | 59% | |
| Year to 2 Jul | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2013† | 614 | 10.1 | na | na |
| 2014† | 657 | 3.6 | na | na |
| 2015 | 706 | 10.7 | 4.3 | 9.3 |
| 2016 | 980 | 64.5 | 28.3 | 11.0 |
| 2017 | 991 | 50.1 | 18.7 | 11.2 |
| % change | +1 | -22 | -34 | +2 |
| Ex-div: | 07 Dec | |||
| Payment: | 27 Dec | |||
| *Includes intangible assets of £492m or 234p a share | ||||
| **Excludes special dividend worth 9.5p a share, paid in June 2017 †Pre-IPO figures | ||||
