Sofas seller DFS Furniture (DFS) saw first half profits crash 70% and lowered guidance for the full year as supply chain challenges and rising costs hit hard.
In the period ended 26 December 2021 underlying pre-tax profit fell from £72.1 million to £21.6 million. But investors were handed news of a £80 million cash return to soften the blow. This will include ordinary dividends, a one-off 10p per share payout and a planned £25 million share buyback over the next 12 months.
The cash return did the trick, with DFS shares rising more than 2% in Tuesday (15 March 2022) trading to 202.1p.
GUIDANCE DOWNGRADE
DFS narrowed its 2022 earnings scenario range to reflect the risk that disruption to manufacturing and logistics could continue into the second half.
The company had previously guided for pre-tax profits of between £66 million and £96 million this year, but the top of the range has now been cut to £85 million.
For the half to 26 December 2021, DFS reported group revenue growth of 15% on 2020 equivalent figures to £561.1 million, to account for the huge impact of Covid. On the same basis, it implies that underlying pre-tax profit rose 33% from £16.6 million two years ago.
Revenue and profits were both below the prior year’s demanding comparatives, which benefited from the release of pent-up demand post lockdown.
SUPPLY CHAIN PAIN, MARKET SHARE GAIN
CEO Tim Stacey commented: ‘We delivered a strong performance in the first half of the year, with market share gains and strong revenue growth on the pre-pandemic comparators.
‘This was in spite of significant logistics and supply chain challenges and once again I would like to thank all of our colleagues across the group for their hard work and resilience in achieving this result.
‘Trading across the second half to date has started strongly, again emphasising the increased scale of the business and demonstrating the success of our approach to mitigating the impact of inflationary pressures on our profit expectations.’
THE SHORE CAPITAL VIEW
‘In our view, these are resilient results,’ said Shore Capital, ‘and show the investment in multichannel operations and the benefits of being vertically integrated.’
The broker added; ‘DFS continues to monitor the price of energy and timber affected by the recent invasion of Ukraine but otherwise notes limited operational impacts on the business. We believe that management has a tight grip on cost, stock, and cash generation and has shown the multichannel opportunity through the pandemic.’
