DFS Furniture PLC · LSE:DFS
DFS Furniture — H1 2017 Earnings Presentation
30 slides from DFS Furniture's earnings presentation, Mar 30, 2017
Slide 1: Interim results 30 March 2017
Interim results 30 March 2017
Slide 2: Highlights
Highlights lan Filby dfs
Slide 3: Continued Financial Growth and Strong Operational Progress
Continued Financial Growth and Strong Operational Progress H1 FINANCIALS OPERATIONAL Good growth in UK revenues with positive £493.7m Gross sales LFLs and new store openings +7.0% International progressing as expected Positive Dwell and Sofa Workshop £16.7m Profit before tax performance using conver
Slide 4: Milestone of £1bn of Gross Sales, as Part of our Long-Term Journey
Milestone of £1bn of Gross Sales, as Part of our Long-Term Journey Market CAGR 94A-16A: 3.0% DFS CAGR FY94-FY16: 8.7% 1200 Market CAGR 07A-13A: (4.7%) 300 DFS CAGR FY07-FY13: 2.0% >£1bn Enters Netherlands Gross Sales 1000 www.dfs.co.uk 250 launches Acquisition of dwell Northern DFS becomes No.1 Upho
Slide 5: Financials
Financials Nicola Bancroft dfs
Slide 6: Record Financial Results
Record Financial Results OVERVIEW H1 2016 H1 2017 FY 2016 LTM H1 2017 26 weeks 26 weeks 52 weeks 52 weeks (£m) 30-Jan-2016 28-Jan-2017 30-Jul-16 28-Jan-2017 Further consistent growth in Gross Sales 461.3 493.7 980.4 1,012.8 gross sales and revenue Growth (%) +7.0% +7.0% +7.4% +7.4% Revenue 355.8 379
Slide 7: All Segments Seeing Revenue Growth
All Segments Seeing Revenue Growth Y-o-Y REVENUE CONTRIBUTION TO GROUP REVENUE GROWTH GROWTH RATE Existing (% of total group revenues) Stores (net) Web +6.1% +0.8% +1.7% UK Total UK +1.5% +1.9% +5.9% UK DFS LFL 2.8%1 +2.5% DFS Core Estate DFS New Sofa Workshop & Stores Dwell +33.4% International (in
Slide 8: Cost Base Flexibility
Cost Base Flexibility LTM Cost Base Key Components Key Trends LTM H1 FY16 LTM H1 FY17 Direct cost of furniture sold Impact of USD exchange rates Historical trends reflect price Mitigation action plan ongoing Directly variable investments Inventory 41.9% 42.4% COS Largely discretionary marketing Long
Slide 9: Margin Action Plan Well Underway
Margin Action Plan Well Underway Half-on-Half Inventory CoS Bridge Key Drivers H1 FY16 Inventory CoS 41.7% (six months) Underlying Average US$ purchase rate fell 19¢ to $1.40 year-on-year FX Impact +2.0%p Further impact from EUR/GBP Margin Action Comprehensive programme in place -1.2%p Plan Benefits
Slide 10: Strong Cash Generation Supporting Announcement of Special Dividend
Strong Cash Generation Supporting Announcement of Special Dividend Y-O-Y PROGRESS IN LINE WITH ANTICIPATED TRENDS SPECIAL DIVIDEND LTM H1 LTM H1 Stronger year-on-year cash position as (£m) 2016 FY 2016 2017 expected Underlying EBITDA 92.6 94.4 95.8 ̵ Record levels of capital investment Capex (20.7)
Slide 11: Investment in Infrastructure for Future Growth
Investment in Infrastructure for Future Growth CASH CAPITAL EXPENDITURE 35 £30.9m £28-30m Other (inc. commercial 30 vehicles) • Continue similar 7.9 Capital Expenditure (£m) 25 £24.5m investment levels to maintain our well- Store refurbishment invested estate 6.8 4.8 20 3.6 • Similar levels of spend
Slide 12: Summary: Positive Financial KPIs
Summary: Positive Financial KPIs GROSS SALES (£M) UNDERLYING EBITDA (£M) 1,012.8 94.4 95.8 980.4 913.1 89.2 853.4 82.3 FY 2014 FY 2015 FY 2016 LTM H1 FY17 FY 2014 FY 2015 FY 2016 LTM H1 FY17 FREE CASH FLOW (£M) CASH CONVERSION (%) LEASE ADJUSTED ROCE (%) 79.0 80.1 73.2 75.6 22.4 65.1 68.0 21.2 21.3
Slide 13: Operational Update
Operational Update Ian Filby
Slide 14: Our Proven Levers of Growth
Our Proven Levers of Growth 5 Online 4 Retail space efficiency 3 International 2 UK stores 1 Broadening our appeal Strong fundamentals of Scale, Flexible Cost Base and Vertical Integration 13
Slide 15: Ongoing Broadening of Appeal
1 Ongoing Broadening of Appeal NEW CREATIVE APPROACH WITH AARDMAN OPERATIONAL UPDATE Positive brand benefits from successive successful innovative advertising campaigns Continued growth in branded product sales Product innovation maintained ̵ Country Living Keswick and French AWARD WINNING TEAM GB C
Slide 16: DFS Store Network Development
2 DFS Store Network Development OPERATIONAL UPDATE NEW STORE OPENINGS Truro and Salisbury opened in half-year and trading well, with Ashford opening imminent Crawley small-store trial location opened successfully and operating profitably ̵ c. 5,200 sq ft footprint ̵ Small store operating model being
Slide 17: International Development – Netherlands & Spain
3 International Development – Netherlands & Spain THE NETHERLANDS SPAIN New stores opened in Heerlen (December) and Trial store to increase access to expatriate Den Haag (March) and in line with plan market opened near Malaga National marketing trial planned for 2017/18 Interest free credit proposit
Slide 18: Retail Space Efficiency
4 Retail Space Efficiency OPERATIONAL UPDATE FOURTEEN UK CDCs NOW OPEN Fourteen UK CDCs operational by end of FY 2013 January FY 2014 FY 2015 39 stores converted at year end FY 2016 ̵ 34 weighted average stores in period FY 2017 Final five CDCs to open in next six months Retail space conversion will
Slide 19: Retail Space Efficiency – Continued Progress with Dwell and Sofa Workshop
4 Retail Space Efficiency – Continued Progress with Dwell and Sofa Workshop DWELL SOFA WORKSHOP 15 new co-located stores opened in period Continued double-digit sales growth New Milton Keynes distribution warehouse New co-located stores in Exeter and successfully opened January 2017 Edinburgh tradin
Slide 20: Continued Online Growth
5 Continued Online Growth ONLINE FUNDAMENTAL TO OMNICHANNEL JOURNEY OPERATIONAL UPDATE of DFS customers start their Continued double-digit sales growth c.80% research online ̵ Trend towards e-commerce transactions ̵ Increasing mix towards mobile devices Significant increases in online visitor number
Slide 21: Operational Update: Investing in Our People
Operational Update: Investing in Our People OPERATIONAL UPDATE CONTINUED RECOGNITION Key point of difference and underpins continued growth of NPS ̵ Post purchase NPS at 85.1% (+1.9% y-o-y) ̵ Established Customer at 35.8% (+5.0% y-o-y) Comprehensive training programme with external accreditation for
Slide 22: Operational Update: Managing the Margin Impact
Operational Update: Managing the Margin Impact Review of key components of product cost Product Zuri Opportunities to improve product margins Respecification without customer detriment Supplier cost sharing Supplier Kalamos Reflects benefits of volume growth from underlying Negotiations DFS growth a
Slide 23: Market Growth Drivers Remain Positive Relative to Historical Lows
Market Growth Drivers Remain Positive Relative to Historical Lows Why People Buy Consumer Confidence Housing Transactions Net Unsecured Lending Upholstery (%)1 ('000s)2 (% change)3 Feb-17 -6.0 2016 +0.4% YoY Jan-17 10.3 2015 +3.1 2015 1,226 2015 7.7 79% 2014 5.9 2014 -2.6 2014 1,223 2013 -18.6 2013
Slide 24: Well Positioned to Prosper in All Environments
Well Positioned to Prosper in All Environments Larger than next four competitors combined 1 Scale Sales and logistics intensity allows us to consistently offer customers better value overall Significant majority of cost base is directly or semi Flexible variable (only c. 15% fixed costs) 2 Business
Slide 25: Summary and Outlook
Summary and Outlook SUMMARY Record results and good strategic progress Special dividend declared reflecting strong cash generation, in-line with long-term gearing policy OUTLOOK Some impact on product margins from adverse currency movements causing cost inflation Mitigating margin benefits still com
Slide 26: Appendix
APPENDIX dfs
Slide 27: Financial Calendar
Financial Calendar Ex-dividend share trading begins – 1 June 2017 Dividend record date – 2 June 2017 Dividend payment date – 21 June 2017 Full year trading update – 10 August 2017 Full year results – 5 October 2017* * Denotes date to be confirmed 26
Slide 28: Group Store Profile (January 2017)
Group Store Profile AS AT 28 JANUARY 2017 UK ROI Holland Spain TOTAL Large Format (c. 15,000sq.ft.+) 97 2 1 - 100 Medium Format (c. 10,000sq.ft.) 8 2 2 - 12 Small Format (<5,000sq.ft.) 3 - 1 - 4 Other (5,000sq.ft.) - - - 1 1 DFS TOTAL 108 4 4 1 117 Standalone 3 - - - 3 DFS Space Conversions 27 - - -
Slide 29: Group Store Profile (March 2017)
Group Store Profile AS AT 30 MARCH 2017 UK ROI Holland Spain TOTAL Large Format (c. 15,000sq.ft.+) 97 2 1 1 101 Medium Format (c. 10,000sq.ft.) 8 2 3 - 13 Small Format (<5,000sq.ft.) 3 - 1 - 4 Other (5,000sq.ft.) - - - 1 1 DFS TOTAL 108 4 5 2 119 Standalone 3 - - - 3 DFS Space Conversions 27 - - - 2
Slide 30: Disclaimer
Disclaimer: This presentation contains statements that constitute forward-looking statements relating to the business, financial performance and results of the Company and the industry in which the Company operates. These statements may be identified by words such as “may”, “will”, “shall”, “anticip