Dunelm Group Plc · LSE:DNLM
Dunelm — Q4 2023 Earnings Presentation
35 slides from Dunelm's earnings presentation, Sep 20, 2023
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Slide 2: Annual Results FY23
Annual Results FY23 Introduction Financialreview Seizing the opportunity Q&A
Slide 3: Introduction
Introduction Nick Wilkinson
Slide 4: FY23 key highlights
+6% +49% +40bps +2.8% Active Total YoY sales Total 4YoY Market share customers YoY growth1 sales growth2 YoY growth3 growth4 50.1% £193m £160m 42p FY22: 51.2% FY22: £209m5 FY22: £153m FY22: 40p Ordinary Profit before Gross margin Free cash flow6 dividends per tax share7 1 For statutory purposes FY22
Slide 5: Progress on colleagues, customers, communities and environment
• Increased support on financial wellbeing • Relentless focus on value, with price • More circular solutions through take- amidst cost-of-living pressures reductions on >1,000 products in Q4 back services and ‘Home to Home’ trial • Continued focus on development and • Expanded Conscious Choice to •
Slide 6: Continuing long-term sales growth, more opportunity in a fragmented market
Continuing long-term sales growth More opportunity, in a fragmented market1 Market size c.£24bn Dunelm share c.7% 1 GlobalData UK combined homewares and furniture markets, excluding kitchen and bathroom furniture. Market share for the period July 2022 to June 2023 was 7.2% • Long-term sales CAGR of
Slide 7: Financial review
Financial review Karen Witts CFO
Slide 8: FY23 financial summary
Memo: FY23 FY22 YoY FY22 YoY (52 weeks) (52 weeks) (52w v 52w) (53 weeks) Sales £1,638.8m £1,553.1m +5.5% £1,581.4m +3.6% Gross margin 50.1% 51.2% -110 bps 51.2% -110 bps Operating cost % sales 38.0% 37.5% +50 bps 37.4% +60 bps Profit before tax £192.7m £209.0m -7.8% £212.8m -9.4% Diluted earnings p
Slide 9: Sales
Memo: FY23 FY22 YoY FY22 YoY (52 weeks) (52 weeks) (52w v 52w) (53 weeks) Total sales £1,638.8m £1,553.1m +5.5% £1,581.4m +3.6% Digital % total sales1 36% 35% +1ppts 35% +1ppts FY23 FY22 YoY Active customer growth2 +2.8% Homewares market share3 11.0% 10.3% +70bps Furniture market share3 2.0% 2.0% +0
Slide 10: Gross margin
• Gross margin of 50.1%, tightly controlled throughout the year • 110bps lower than FY22 reflecting more normal event mix and input cost price inflation • Gross margin benefiting in near term from freight rates and operational grip – currently expect c.100bps higher in FY24 than FY23 ANNUAL RESULTS
Slide 11: Operating costs
• Operating cost:sales ratio of 38.0% • Sales growth offset inflation • Operating leverage created headroom for continued investment in digitalisation and capability • £14m saved from Memo: productivity initiatives FY23 FY22 YoY FY22 including removal of FY22 YoY (52 weeks) (52 weeks) (52w v 52w) (5
Slide 12: Profit before tax and earnings per share
Memo: FY23 FY22 FY22 (52 weeks) (52 weeks) (53 weeks) Financial income and expenses (£6.1m) (£4.8m) (£4.9m) Profit before tax £192.7m £209.0m £212.8m Tax (£40.8m) (£40.8m) (£41.6m) Effective tax rate 21.2% 19.5% 19.5% Profit after tax £151.9m £168.2m £171.2m Basic earnings per share 75.2p 83.0p 84.5
Slide 13: Cash flow
FY23 FY22 • Strong cash generation with free (52 weeks) (53 weeks) cash flow:operating profit ratio of Operating profit £198.8m £217.7m 81% (FY22: 70%) Depreciation & amortisation1 £79.4m £79.3m • Small working capital outflow: • Inventories £12m lower as expected Working capital outflow (£4.2m) (£1
Slide 14: Dividends and capital policies
Dividend history (pence per share) • Final dividend of 27p (FY22: 26p) • Total ordinary dividend for the year of 42p (FY22: 40p) • Special dividend of 40p paid in April 2023 • £163m returned to shareholders in the year Capital and dividend policies • Significant returns to • Target average net debt
Slide 15: FY24 outlook
• Consumer outlook remains uncertain, but we expect year-on-year sales and PBT growth, driven by volume • Gross margin: • Benefiting in near term from freight rates and operational grip – currently expect c.100bps higher in FY24 than FY23 • Balancing input cost price changes with outstanding value f
Slide 16: Seizing the opportunity
1 ry é, 5 Z a bar ¢ ? ©) Seizing the opportunity / YT 4 | os é y \ (ZA, | > Nick Wilkinson
Slide 17: A highly fragmented market
• A highly fragmented market with multiple product categories and customer missions • Interest in products for the home remains high despite cost-of-living pressures • Customers are seeking propositions that meet their emotional and functional needs • Multi-channel shopping fully established in home
Slide 18: Ambitious, confident and disciplined about seizing the opportunity
We are ambitious, confident and disciplined about seizing the opportunity • In this update we will deep dive three areas of our plan where we are seizing the opportunity to: 1. Strengthen our customer offer 2. Extend and digitalise our total retail system 3. Evolve our marketing ecosystem • We conti
Slide 19: Examples of strengthening the customer offer
Price drops We are constantly seeking opportunities to reduce prices. During the year we reduced the price of this 3-seater sofa by £100 to £699 and reduced prices on over 1,000 lines in the spring, passing on lower freight costs. We will continue to ensure we maintain our value proposition Improvin
Slide 20: Strengthening our customer offer
Seizing the opportunity 1. Strengthening our customer offer: joy = = —_ = —_ I a wel — ANNUAL RESULTS FY23
Slide 21: Store roll-out
• Recent openings include stores outside of our traditional size and location Typical superstore In town superstore Smaller superstore • Continue to see strong payback, in under three years • For the next two years expect to see 5-10 new (or relocated) stores per annum: • Long-term target catchments
Slide 22: Capability building
ACHIEVED IN LAST 6 MONTHS IN FOCUS FOR NEXT 12 MONTHS HIGHER CUSTOMER ‘PERFECT ORDER’ RATES 1 IMPROVE SITE EXPERIENCE shorter lead times, fewer split deliveries & better comms new search tools, ‘my account’ development, faster site architecture, furniture delivery options BUILDING AND OPTIMISING MOR
Slide 23: Deeper insight into target customers
• We now have deeper insight into how we can target the most valuable customers for our next phase of growth VARIED ATTITUDES DIFFERING PERCEPTIONS • New consumer insight1 allows us to: TO HOME OF VALUE • Understand current attitudes towards homewares Focus on the home continues to Value is importan
Slide 24: Personalisation and brand marketing
Personalisation Brand marketing • Continuing to make good progress towards a • Data led approach to understanding return single view of store and online customers on marketing investment • Personalisation presents an exciting opportunity • Regional hold-out test completed within our to improve our c
Slide 25: Summary
• Good performance in a challenging year, underpinned by strategic progress and tight operational grip • Value proposition resonating well despite pressure on the consumer • Easing freight costs support gross margin • Tight operational grip to help mitigate ongoing inflation in operating costs • Con
Slide 26: Annual Results FY22
ANNUAL RESULTS FY22 26
Slide 27: Annual Results 2022
ANNUAL RESULTS 2022 27
Slide 28: Income statement
Memo: FY23 FY22 YoY FY22 YoY (52 weeks) (52 weeks) (52w vs 52w) (53 weeks) Revenue £1,638.8m £1,553.1m £85.7m £1,581.4m £57.4m Cost of Sales (£817.9m) (£757.5m) (£60.4m) (£772.0m) (£45.9m) Gross Profit £820.9m £795.6m £25.3m £809.4m £11.5m Gross margin % 50.1% 51.2% (110) bps 51.2% (110) bps Operati
Slide 29: Balance sheet
FY23 FY22 1 July 2023 2 July 2022 Right-of-use assets £231.3m £248.5m Other non-current assets £182.1m £192.3m Inventories £211.0m £223.0m Cash £46.3m £30.2m Other current assets £26.1m £43.9m Total assets £696.8m £737.9m Lease liabilities (£258.2m) (£278.1m) Bank loans (£75.9m) (£52.8m) Other curre
Slide 30: Five-year summary
FY19 FY201 FY21 FY22 FY23 (52 weeks) (52 weeks) (52 weeks) (53 weeks) (52 weeks) Total sales £1,100.4m £1,057.9m £1,336.2m £1,581.4m £1,638.8m Total sales growth 4.8% (3.9%) 26.3% 18.4% 3.6% Gross margin % 49.6% 50.3% 51.6% 51.2% 50.1% Profit before tax £125.9m £109.1m £157.8m £212.8m £192.7m Free c
Slide 31: Dividend history
FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 Ordinary dividend per share Interim 5.0p 5.5p 6.0p 6.5p 7.0p 7.5p - 12.0p 14.0p 15.0p Final 15.0p 16.0p 19.1p 19.5p 19.5p 20.5p - 23.0p 26.0p 27.0p Total 20.0p 21.5p 25.1p 26.0p 26.5p 28.0p - 35.0p 40.0p 42.0p Special distributions per share - 70.0p
Slide 32: Brand purpose and proposition
Brand purpose A brand appealing to a wide range of customers, market leader in a large fragmented market, with a challenger brand mentality Product proposition A distinctive and specialist product portfolio - offering quality, value and style - largely own brand and sourced from long-term committed
Slide 33: Colleagues and communities
Colleagues • Invested in learning and development opportunities to strengthen our leadership capabilities and promote a learning for life mindset • Increased our focus on financial wellbeing given the ongoing cost of living pressures • New support packages for pregnancy loss, menopause and parenthoo
Slide 34: Our vision and purpose
Our Vision is to build the UK’s most trusted and valuable brand for homewares & furniture Our Purpose: To help create the joy of truly feeling at home, now and for generations to come We will deliver our purpose by being Customer 1st, striving to improve our offer for savvy home-lover customers Valu
Slide 35: Thank you