Dfs Furniture Plc · LSE:DFS
Dfs Furniture — H1 FY2020 Earnings Presentation
37 slides from Dfs Furniture's earnings presentation, Mar 10, 2020
Slide 1: Leading Sofa Retailing in the Digital Age
Leading Sofa Retailing in the Digital Age 10 March 2020
Slide 2: Today
Today Introduction (Tim Stacey) Financials (Mike Schmidt) Strategic and Operational update (Tim Stacey) Summary / Outlook (Tim Stacey) Q&A (Tim Stacey / Mike Schmidt) 1
Slide 3: Good strategic progress in a challenging market environment
Good strategic progress in a challenging market environment KEY FINANCIALS STRATEGIC & OPERATIONAL HIGHLIGHTS £488.0m H1 Revenue -5.7% Pro forma Yo2Y +2.6% £41.5m H1 EBITDA -28.3% 2.2x Leverage (+0.3x) H1 performance as expected given strong comparative period driven by latent demand Good strategic
Slide 4: Today
Today Introduction (Tim Stacey) Financials(Mike Financials (Mike Schmidt) Schmidt) Strategic and Operational update (Tim Stacey) Summary / Outlook (Tim Stacey) Q&A (Tim Stacey / Mike Schmidt) 3
Slide 5: Financial overview
Financial overview OVERVIEW All numbers quoted are Pre H1 2019 H1 2020 FY 20193 application of IFRS 16 26 weeks 26 weeks LTM to Strong revenue comparator and 30-Dec- 29-Dec 30-Jun- challenging environment driving (£m) 2018 2019 2019 lower profits as expected Revenue 517.6 488.0 996.2 Comparative Gro
Slide 6: Brand performance: DFS
Brand performance: DFS REVENUES (£M) GROSS MARGIN OPERATING COSTS (£M) 721.7 60.3% 60.0% 60.1% 232.2 Overview 354.5 372.6 115.4 110.7 1H20 1H19 FY19 1H20 1H19 FY19 1H20 1H19 FY19 Key Trend AOV and conversion growth in Higher margin from sourcing, Tight control of operating costs showrooms and online
Slide 7: Brand performance: Sofology
Brand performance: Sofology REVENUES (£M) GROSS MARGIN OPERATING COSTS (£M) 56.9 205.9 50.6% 51.0% 50.8% Overview 110.6 28.5 28.9 102.1 1H20 1H19 FY19 1H20 1H19 FY19 1H20 1H19 FY19 Key Trend Marketing phasing test and Underlying upholstery margin Investment to support learns ongoing – some impact co
Slide 8: Brand performance: Dwell & Sofa Workshop
Brand performance: Dwell & Sofa Workshop REVENUES (£M) GROSS MARGIN OPERATING COSTS (£M) 68.6 54.4% 25.5 53.3% Overview 31.4 34.4 52.1% 12.8 12.3 1H20 1H19 FY19 1H20 1H19 FY19 1H20 1H19 FY19 Dwell revenue increased year Significantly impacted by Operating costs controlled Key Trend on year promotion
Slide 9: Property cost savings on track
Property cost savings on track KEY DRIVERS GBP millions New showrooms and CDCs driven by new Sofology showrooms, new Belfast FY19 H1 Property costs 53.6 and enlarged Bristol CDCs Net new showrooms and CDCs +0.7 Market rent inflation largely offset by successful rates determinations Market rent and r
Slide 10: PBT performance
PBT performance KEY DRIVERS GBP millions PBT decline driven by lower revenue H1 FY19 underlying PBT 38.0 Revenue & Gross Margin -16.9 Gross margin % flat year on year overall, Property Costs Selling & Distribution with potential for growth in H2 +4.6 Property Costs -0.5 Reduced advertising expenditu
Slide 11: Capital expenditure
Capital expenditure CAPITAL EXPENDITURE (INC. FINANCE LEASES) Capex % of Revenue £31.8m Post acquisition capex 4.5% 4.2% (Sofology acquired end £26.8m 4.0% November 2017) Capex guidance for FY20 of £35-37m £22.8m 3.5% £27.1m £31.5m £35-£37m inclusive of finance leases 3.5% 3.2% 1.3% 3.1% 3.1% 3.0% 1
Slide 12: Cash flow and leverage
Cash flow and leverage NET DEBT (£m) COMMENTS 300 262 250 200 162 158 172 159 158 176 160 Net debt in absolute terms at December 2019 137 136 145 150 broadly flat year on year 100 50 0 2.2x Net Debt / EBITDA reflecting profit performance NET DEBT / EBITDA (x) Acquisition of 5.0 Special Dividend Sofo
Slide 13: IFRS 16 transition
IFRS 16 transition IMPACT ON REPORTED RESULTS COMMENTS Add Exclude Income statement H1 - IAS17 Amort'n H1 IFRS 16 Rent* & interest IFRS 16 H1 PBT impact £3.9m Revenue 488.0 488.0 Gross profit 281.8 281.8 Operating costs (255.7) 37.9 (28.7) (246.5) Underlying Op. profit 26.1 37.9 (28.7) 35.3 Net fina
Slide 14: Key financial metrics
Key financial metrics METRIC TARGET LTM Dec-19 Above market growth -3.0% LTM Gross Sales Growth by 1% to 2% (pro forma Yo2Y + 2.6%) Growth from increased usage 3.4% LTM PBT Margin of Group assets (Jun-19 5.0%) Reduce leverage to 1.5x in 2.17x Cash Generation / Leverage short term (Dec-18 1.88x) Grow
Slide 15: Today
Today Introduction (Tim Stacey) Financials (Mike Schmidt) Strategic and Operational update (Tim Stacey) Stacey) Summary / Outlook (Tim Stacey) Q&A (Tim Stacey / Mike Schmidt) 14
Slide 16: Leading sofa retailing in the digital age
Leading sofa retailing in the digital age 1. Drive DFS Core 2. Build the Platforms 3. Unlock New Growth 1. Omnichannel: 1. Cost effectiveness and property 1. Sofology: develop seamless customer cost reduction: develop to a nationwide business journey across channels reduce our relative cost base 2.
Slide 17: Drive DFS Core – Omnichannel
1 Drive DFS Core – Omnichannel MARKET RESEARCH STATISTICS ‘BUYING’ ELEMENT OF BUSINESS MODEL 85% Percentage of customers Research online on our market leading website starting their sofa buying journey online 117 UK&ROI showrooms ‘sit test’ and advice in our well invested showrooms . 90% . . . . Per
Slide 18: Drive DFS Core – Online
1 Drive DFS Core – Online ONLINE INITIATIVES EXAMPLES RESULTS Working in successful partnership with Facebook, +4.8% DFS web revenue growth Instagram and Pinterest £172m DFS web business size New visual search technology launched £200 DFS web gross sales (£’m) £160 New augmented reality £120 partner
Slide 19: Drive DFS Core – Investment in showrooms
1 Drive DFS Core – Investment in showrooms INITIATIVES RECENT SHOWROOM REFURBISHMENTS Regular investment in showrooms maintained Colleagues equipped with 1,200 new chrome tablets Store colleagues access to online saved baskets enabling better customer journey Artificial intelligence solution to pred
Slide 20: Drive DFS Core – Customer proposition and service
1 Drive DFS Core – Customer proposition and service INITIATIVES SUPPLIER NPS QUALITY SCORE Effective use of data and root cause analysis to drive product quality standards H2 FY19 H1 FY20 SERVICE CALLS OUTSTANDING AI service repair driver routing reducing outstanding service issues H2 FY19 H1 FY20 E
Slide 21: Build the platforms – Property
2 Build the platforms – Property LEASE RENEWAL OPPORTUNITY £6-8m £3.4m annualised property savings secured as at December 2019 Cumulative annual savings opportunity FY20 – FY23 further £3-5m opportunity Average annualised rent saving 29% £0.4m £1.7m Timing of renewal for leases driven £1.2m by oppor
Slide 22: Build the platforms – Final mile delivery
2 Build the platforms – Final mile delivery INITIATIVES EXAMPLES New Group final mile delivery solution ‘Sofa Delivery Co’ launched in Belfast 7 day a week delivery trialled in Glasgow: Improved post delivery NPS & fantastic colleague feedback Customer delivery slot booking launched in November 2019
Slide 23: Unlock new growth – Sofology
3 Unlock new growth – Sofology INITIATIVES EXAMPLES New showroom roll-out acceleration – 3 opened in late H1 FY20, 5 secured for H1 FY21 Omnichannel and digital innovation continues Operational improvements in customer journey post purchase Sofology well set for future growth 22
Slide 24: Unlock new growth – Dwell & Sofa Workshop
3 Unlock new growth – Dwell & Sofa Workshop DWELL Capital light opportunities to grow in Dwell e.g. DFS & Sofology accessories, Homebase concessions Dwell cost base reviewed including outsourcing final mile delivery SOFA WORKSHOP Disruption experienced through systems and website re-platform Adverse
Slide 25: Long term sustainability
Long term sustainability THE SOFA CYCLE OVERVIEW Ambition to drive a more circular economy for mass-market sofa manufacturing & retailing Meeting consumer expectations, stakeholder demands and delivering growth Integrating sustainability into the way we do business 24
Slide 26: Sofa rescue case study
Sofa rescue case study SOFA RESCUE OVERVIEW New not for profit service offered to remove customers old sofas and minimise landfill Partnered with waste recycling experts Clearabee Trialed in 2019, with national boxing day launch in DFS. Popular service and take-up rate growing 25
Slide 27: Tree planting case study
Tree planting case study TREE PLANTING OVERVIEW Sofology Green Friday trial launched in October 2019 - Tree planted for every order Partnership with Woodland Trust Rolling out across Sofology in March 2020 for all orders 26
Slide 28: Today
Today Introduction (Tim Stacey) Financials (Mike Schmidt) Strategic and Operational update (Tim Stacey) Summary / Outlook (Tim Stacey) Q&A (Tim Stacey / Mike Schmidt) 27
Slide 29: Market drivers
Market drivers 20 +3.1 Slight uptick in 0 Consumer -20 -6.2 -2.6 -3.3 -8.0 consumer -8.8 -9.5 -12.7 Confidence -40 -26.0 -18.6 confidence but (%)1 remains in negative territory 2,000 1,644 1,500 898 1,068 1,223 1,226 1230 1224 1189 1175 +5.2% Housing Housing 1,000 transactions remain 500 Transaction
Slide 30: COVID-19
COVID-19 Our people Prioritising health and wellbeing of all colleagues and customers and Clear guidance in line with latest government advice (policies, procedures inc. sick pay) customers 2-3 week disruption in Far East supply, now getting back on track Supply Increased supply chain costs of c £1m
Slide 31: Summary, outlook and approach
Summary, outlook and approach SUMMARY H1 performance as expected given strong comparator period Pro forma year on two year revenue growth +2.6% Good progress in implementing strategic priorities, particularly in DFS; Sofa Workshop turnaround underway OUTLOOK Macro economic factors indicate an improv
Slide 32: Today
Today Introduction (Tim Stacey) Financials (Mike Schmidt) Strategic and Operational update (Tim Stacey) Summary / Outlook (Tim Stacey) Q&A (Tim Stacey / Mike Schmidt) 31
Slide 33: APPENDICES
@ - dfs dwell. soraworksnor “sofology
Slide 34: Segment shares - Sofas
Segment shares - Sofas GROUP SHARE CAPTURE 34% 3.9 3.8 3.7 3.6 3.7 3.5 3.4 3.3 3.2 3.2 3.2 3.2 3.2 3.0 3.0 2.9 2.9 2.9 2.9 2.8 2.4 2.2 2.0 2.0 1.7 1994A 1996A 1998A 2000A 2002A 2004A 2006A 2008A 2010A 2012A 2014A 2016A 2018A UK Upholstery Segment Size (£bn) DFS Group Upholstery Segment Share (%) Sou
Slide 35: Group showroom profile
Group showroom profile AS AT 29 DEC 2019 (VS. 30 JUN 2019) UK ROI Holland Spain TOTAL Large Format (c. 15,000sq.ft.+) 91 3 2 1 97 Medium Format (c. 10,000sq.ft.) 17 2 3 - 22 Small Format (c. 5,000sq.ft.) 4 - 1 1 6 DFS TOTAL 112 5 6 2 125 Sofology (10-12,000 sq.ft. & 5-7,000 sq.ft. Mezzanine) 45 (+3)
Slide 36: Performance for the 6 months to Dec-19 and Dec-18
Performance for the 6 months to Dec-19 and Dec-18 Total pre IFRS 16 Total post 6 months to 29 December 2019 DFS Other brands Sofology IFRS 16 impact IFRS 16 Gross sales 462.0 38.7 129.0 629.7 629.7 Revenue 354.5 31.4 102.1 488.0 488.0 Cost of sales (140.7) (15.0) (50.5) (206.2) (206.2) Gross profit
Slide 37: 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