DFS profits and revenue jump despite 'subdued' market

(Sharecast News) - DFS Furniture reported a jump in full-year profits and a reduction in debt on Thursday despite a "subdued" market. In the year to 29 June, underlying pre-tax profit rose to £30.2m from £10.5m a year earlier - coming in above the top end of guidance of £25m to £29m - with revenue 4.4% higher at 1.03bn.

DFS said it swung to a reported pre-tax profit of £32.9m from a loss of £1.7m.

The company said its revenue performance improved significantly compared to the prior year as both its retail brands successfully implemented growth initiatives and grew their market share despite the subdued market for upholstered furniture in the UK.

"We believe that the outlook for the group remains positive despite the challenging economic and geopolitical environment that we operate in," it said.

The furniture retailer said its "strong" performance drove significant free cash flow generation, resulting in net bank debt falling to £107m from 164.8m, with bank leverage down from 2.5x at the previous year end to 1.4x as it makes "good progress" towards its 0.5x-1.0x target range.

Chief executive Tim Stacey said: "I believe that our customer proposition has never been in better shape and that all elements of our vertically integrated business model are working efficiently and effectively, leading to record net promoter scores. Through focusing on what we can control and executing our strategy we have grown profits and cash flows in a weak market environment.

"The market demand drivers for the upholstery sector remain delicately balanced. Consumer confidence remains below the long term average and inflation remains elevated but housing transactions have been recovering, consumer savings levels are relatively high and interest rates look set to fall.

"Given the market share gains that we have made in the last few years, the recovery in our gross margins and the significant reduction in our cost base, despite inflation, I am optimistic about the future."

At 1035 BST, the shares were 1.3% higher at 152p.