Profits have a lie-down at sofa maker DFS as acquisition costs exert impact
● But boss highlights increase in top-line growth and recent sector recovery
Sofa retailer DFS laid the blame yesterday on acquisi‑ tion‑related costs for a drag on earnings, but maintained that its takeover of rival Sofol‑ ogy was already boosting rev‑ enues and that trading was looking up.
DFS said profits dived nearly 60 per cent to £7 mil‑ lion in the six months to 27 January, from £16.7m a year earlier, having been hit by acquisition expenses includ‑ ing those related to its £25m deal to acquire Sofology last year.
But the retailer highlighted a 4.3 per cent rise in revenues to £396m, which it said reflected increasing scale and “relative market leadership” thanks to the takeover.
Excluding the boost from its acquisitions – including its £1.2m purchase of Multiyork’s assets, brand and stores – DFS revenues were down 3.5 per cent at £366.5m.
DFS chief executive Ian Fil‑ by said he was pleased with the performance, achieved despite what he called tough conditions across the furni‑ ture market.
However, Filby said there were signs of improvement in recent months. “We have seen a strengthening trad‑ ing performance across the first half of the financial year and through February into March,” he said.
“We therefore remain con‑ fident that, despite the cur‑ rent challenging market con‑ ditions, the group will deliv‑ er modest growth in Ebitda (earnings before interest, tax‑ es, depreciation and amorti‑ sation) and generate strong cashflow across this financial year, in line with our expecta‑ tions.”
Neil Wilson, an analyst at ETX Capital, said DFS was cushioned from the worst of the troubles facing the market thanks to its “scale and flexi‑ bility”.
He said: “Broadly speak‑ ing, DFS is managing to han‑ dle 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.”
Wilson added that the sector was “in a bad place”, but DFS hadweatheredpreviousdown‑ turns when consumers stop splashing out on so‑called “big ticket”itemslikehomefurnish‑ ings, and the failure of some of its competitors might pave the way for further growth.
“Scale, flexibility and the vertically integrated busi‑ ness model are all serving it well, whilst the acquisition of Sofology offers good optional‑ ity and strengthens its online/ omni‑channel offering,” he said.