DFS ‘well placed to weather economic storms’

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SOFA CHAIN DFS reported record annual results and said it is well placed to weather any economic turbulence from ​the vote to leave the European Union​.

The Doncaster-based group said full​ ​year pre-tax profits rose from £33.3m to £64.5​m in the year to July 30 after sales rose 7.4​ per cent​ to £980.4​m.

Chairman Richard Baker said: “DFS has weathered many forms of political and economic turbulence during its 47 years of operating history, and I have confidence that we will continue to be well positioned despite the uncertainties inevitably surrounding the EU referendum.”

DFS said there has not been any weakening demand since the vote on June 23, but chief executive Ian Filby warned that the furniture sector faces an “increased risk of a market slowdown” in 2017.

“14 weeks on from the referendum we are not seeing any change in the level of business,” he said.

“14 weeks is still a relatively short period of time, but our expectation is things should remain fairly stable unless there are unexpected announcements.”

He added that the key measure is consumer confidence and this has remained stable since the EU vote.

“If consumer confidence did fall, we would have a number of options. We have stayed fairly competitive. We have sharpened our prices,” he said.

He added that DFS’s size as one of the biggest players in the market gives it a competitive advantage.

“Our competitors make very thin margins and that could give us opportunities. In the financial crisis in 2007 and 2008 DFS performed very well. It was a major economic shock and the business came through unscathed. We took on market share following the exit of other players,” he said.

He said the sharp rise in profits followed a good performance from the business and the lower costs of financing following the group’s IPO in March 2015.

The firm has seen no impact from the collapse in sterling following the Brexit vote, but it could mean bringing more manufacturing to the UK. UK manufacturing currently accounts for just under a half of the group’s sofas.

Consumer awareness of the group’s British manufacturing credentials was helped by DFS sponsoring Team GB at the Rio Olympics.

“We were delighted to play a part in the historic and well-deserved success of Team GB in the Rio 2016 Olympics through our sponsorship as Team GB’s official homeware partner,” said Mr Filby.

“In this role we were responsible for making Team GB’s base in Rio a comfortable home from home for our athletes. It was naturally a source of particular pride and pleasure that all our participating Brand Ambassadors – Adam Peaty, Laura Trott and Max Whitlock – won gold medals during the games - successes which we were able to celebrate on digital billboards across the UK highlighting our partnership.”

The group will pay out a f​inal dividend of 7.5p per share​, giving a total of 11.0p for the year​, up 18 per cent on last year.

I​t also said it expects to pay out a ​further special capital return to shareholders ​in 2017, but declined to say how much this will be.

Caroline Gulliver, analyst at Jefferies, said: “DFS has delivered 6 per cent growth in underlying 2016 EBITDA and pre-tax profit at the upper end of consensus expectations, with no slowdown in trading since Brexit.”

DFS said its range of Exclusive Brands performed well ahead of expectations, with a 35 per cent increase in total sales orders.

Highlights included the introduction of a number of new models under the House Beautiful brand, and the continued “outstanding success” of the French Connection Zinc range.

“The French Connection Zinc range is absolutely flying,” said Mr Filby.

“It’s a mixture of branding and a retro twist in the design.”

Close supplier relationships have enabled DFS to introduce a seven-day express delivery option across the Zinc sofa range.

“We extended our partnership agreements with French Connection, House Beautiful and Country Living during the year, and are also achieving encouraging results from the sale of sofas from our own Sofa Workshop Dillon and Ellie ranges,” said Mr Filby.