DFS profits dragged down by £25m deal to acquire Sofology

DFS has blamed acquisition costs for dragging down profits, but said its takeover of Sofology was already boosting revenues and that trading was starting to improve.

The furniture company said pre-tax profits tumbled 58% to £7 million in the six months to January 27, down from £16.7m a year earlier, having taken a hit from acquisitions including its £25m deal to buy Sofology last year.

The company instead highlighted the 4.3% rise in revenues to £396.1m logged over the half-year, which it said reflected increasing scale and “relative market leadership” thanks to the takeover.

Without the boost from its acquisitions – including its £1.2m deal for 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.

He said: “We have seen a strengthening trading performance across the first half of the financial year and through February into March.

“We therefore remain confident that, despite the current challenging market conditions, the group will deliver modest growth across this financial year.”

DFS shares were up 14.2p to close at 184.2p.

The DFS store at Kingsway West Retail Park in Dundee.