DFS is sitting pretty as sales strengthen

​The Doncaster-based firm said the furniture market is healthy​ and gross sales growth in the ​half year to January ​30 rose seven per cent, an improvement on the five per cent growth in the year to January 30.

Chief executive Ian Filby said: “After the credit crunch the market went backwards, but now we’re seeing steady growth. Consumer confidence is back to pre-credit crunch levels.”

He said that underlying like-for-like sales grew at four to five per cent.

“We are delighted with that. It’s in line with our plan. Like-for-like sales are above the market and we are spot on with good progress and good cash generation.”

DFS said its sub brands Sofa Workshop​ and​ Dwell ​put in a good performance while its start up​, DFS Netherlands​, also made an encouraging contribution.

“We are seeing really good progress at Sofa Workshop​ and​ Dwell with double digit growth. We are really pleased with their contribution. We’ve started putting shops within shops,” said Mr Filby.

The group now has two stores in the Netherlands and will open a third in the summer and it believes the market has the potential for 15 stores.

DFS has 109 stores and plans to open a further three to four each year including some smaller store formats.

The group said the results reflect its proven growth strategy, building on the ​g​roup’s established market leadership to broaden its products and brand appeal.

​It said that given the broadly stable general macro-economic trends in the UK and the fact that all its strategic initiatives are on track, the board believes the group is in a strong position to sustain its record of sales growth, market share capture and cash generation.

​It added that ​​b​ased on the trading performance over the first half, expectations for the full year ​performance ​remain unchanged.

“The group enjoys excellent prospects to deliver long-term profitable growth, strong cash generation and a progressive dividend policy as one of the UK’s best-known brands, a major British manufacturer and the country’s leading retailer of upholstered furniture​,” said Mr Filby.

​DFS said that finance director ​Bill Barnes has decided to retire in the summer after almost 13 years with the group. Nicola Bancroft, who is currently commercial finance director, will become chief financial officer and an executive director from August 1.

Mr Filby said that Mr Barnes and Ms Bancroft have worked closely together for over three years and will complete a smooth handover of responsibilities over the next six months.

“It’s been an incredibly smooth succession,” he said.

“Bill brought in Nicola three years ago. Bill has been outstanding. He’s done 13 years with us and he played a fantastic role in the IPO.”

The group said f​ree cashflow remains robust and ​the​ gearing ratio at the half year will be similar to the previous financial year end at​ ​1.8​ times​ net debt/ EBITDA, after the payment of both the interim and full year dividend, ​which amounted to​ £19.8m​.

I​t said that s​trong cash generation will underpin ​its progressive interim dividend, in line with the policy stated at the IPO last year.

The group opened its first store in Spain in Alicante last year, giving ex-pats the chance to create a home away from home.

The Alicante store has been decked out with the same DFS fascia that adorns high streets throughout the UK.

The target market is the 800,000 British people who have moved to the south coast of Spain and the plan is to use the store as a showroom for the DFS website.

Mr Filby said the ex-pat community are lapping up the chance to buy a British sofa.

“We are hopeful we can develop a small chain using a smaller format model,” he said.

“There are a lot of ex-pats in Spain - it’s a big market. Our proposition is very competitive in terms of value. It’s a very fragmented market and we’ll be up against relatively expensive rivals.”