DFS blames acquisitions, including Sofology and Multiyork, for 58% fall in profits
Archant Norfolk 2018
DFS says its takeover of Sofology is starting to bear fruit, compensating for the drag it says acquisitions put on profits.
Pre-tax profits at the furniture company fell 58% to £7m in the six months to January 27 – down from £16.7m a year earlier – following a hit from acquisitions, including its £25m deal to buy rival Sofology.
But the company highlighted the 4.3% rise in revenues to £396.1m in the half-year, which it said reflected the “relative market leadership” it had achieved through the takeover.
Without the boost from its acquisitions – including its £1.2m deal for Thetford-based Multiyork’s assets, brand and stores – DFS revenues were down 3.5% at £366.5m.
The retailer’s chief executive, Ian Filby, said he was pleased with the performance, which was in line with company expectations despite challenging conditions across the furniture market.
Retailers across the British high street have been contending with weak consumer spending, as shoppers deal with a squeeze from higher inflation and sluggish wage growth.
However, Mr Filby said there were signs of improvement in recent months.
“We have seen a strengthening trading performance across the first half of the financial year and through February into March,” he said.
“We therefore remain confident that, despite the current challenging market conditions, the group will deliver modest growth in EBITDA (earnings before interest, taxes, depreciation and amortisation) and generate strong cashflow across this financial year, in line with our expectations.”
DFS shares were up as much as 5.8% in morning trading.
Neil Wilson, a senior market analyst at ETX Capital, said the furniture retailer was insulated from the worst of the troubles facing the market thanks to its “scale and flexibility”.
“Broadly speaking, DFS is managing to handle the broader downturn in retail pretty well.
“The collapse of Feather & Black, Warren Evans and Multiyork, whose assets DFS has acquired, served to indicate the severe pressure on the market and the opportunity for those with enough scale to see it out,” he said.