Blackfriar: SIG signals the way ahead with a broadening of horizons

It has been through a gruelling past three or four years and there are no signs of a pick up this year.

Despite this, it managed to produce a 27 per cent increase in 2011 profits to £81.7m while revenues rose eight per cent to £2.74bn.

Its UK and Irish businesses have been fairly awful – they scraped an operating profit of £1.1m in the year to December 31, although this was a vast improvement on the previous year’s £68m loss.

Thankfully for shareholders the Sheffield-based group has expanded abroad and its mainland Europe business has put the UK in the shade. Mainland Europe reported a 62 per cent increase in operating profit to £32m. Continental Europe is becoming increasingly important to SIG.

The Continent now accounts for 56 per cent of group sales compared with 38 per cent in 2007 and this trend looks set to continue with just four out of the group’s 18 new stores opening in the UK.

SIG has taken advantage of European markets to thrive in a very difficult marketplace.

With Ireland falling up to 10 per cent this year and the UK down three to five per cent, SIG’s European focus has been its saviour.

Ireland is still struggling and the UK has seen a technical recession much longer and deeper than in France and Germany.

Shareholders were pleased to hear yesterday that the final dividend has been restored, reflecting the board’s confidence going forward.

SIG is a prime example of a Yorkshire company that has seen stagnation in its home markets and hasn’t been afraid to expand abroad.

Other companies in the region should learn from its lesson. All the signs are that the UK is going nowhere this year. UK companies must broaden their horizons if they are to succeed.

Another lesson has been the company’s decision to continue to open branches despite the recession. The downturn has made the group far stricter on its criteria for new branch openings and a lot more aggressive with its cost base.

SIG has shown that continued investment is vital, however tough the marketplace is.

As a monk, Blackfriar doesn’t often get quizzed about his virginity, but he was recently informed by the boss of Doncaster-based DFS that he was a “DFS virgin”.

For those of you reading this twice, this means he hasn’t ever been into a DFS before.

And he’s not alone.

Blackfriar, like 50 per cent of the country, has scoffed at the DFS TV ads – loud and brash.

But under chief executive Ian Filby, this is slowly changing.

The furniture specialist has launched a multi-million pound advertising campaign in a bid to appeal to more upmarket customers who have deemed DFS too downmarket for them in the past.

While the group is keen to maintain its price credentials and its core customers, the new adverts focus on the family instead of hard bargains.

DFS is keen to attract the female audience, as it is usually the woman who makes the final decision on a new three-piece suite.

No surprise there.

The new adverts show various couples, friends and notably families with children who see their sofa as the heart of the home. While price deals play a part they are no longer the sole message.

“The whole furniture industry has lost sight of women,” said Filby.

“Advertising that says ‘Here’s a great deal at nought per cent finance’ is great for males, but we haven’t bought into the emotional position.”

He believes the change will be gradual and it will take a number of years to change people’s perceptions.

With an advertising budget of just under £100m a year, DFS really needs to buck up its advertising if it is to initiate those of us who are still DFS virgins.

At the moment half of us wouldn’t consider DFS and that has little to do with the quality of its produce and everything to do with the way we see it.

Blackfriar has a theory to share with readers.

We will find out whether there’s a load of baloney being spoken next Wednesday when Sainsbury’s reports its fourth quarter trading update.

Of late, Sainsbury’s has invited the press to some very fine lunches in the City with really not much reason for the get-together.

But next Wednesday it’s just holding a conference call for journalists. Could it be that the news will be a tad disappointing?

Blackfriar may be getting cynical in old age, but could the decision to hold the conference on the same day as the Budget also be a means to bury bad news? We will report back in next week’s column.

See Page 4 for interview with DFS founder Lord Kirkham