Dfs Furniture Plc · LSE:DFS
Dfs Furniture — FY2020 Earnings Presentation
41 slides from Dfs Furniture's earnings presentation, Sep 24, 2020
Slide 1: DFS Furniture plc Results Presentation
LEADING SOFA RETAILING IN THE DIGITAL AGE DFS FURNITURE PLC Results Presentation 24 September 2020
Slide 2: Agenda
AGENDA Welcome & Introduction Tim Stacey Financials Mike Schmidt Strategy Update Tim Stacey Q&A Tim Stacey and Mike Schmidt 2
Slide 3: Firstly…Leading through Covid-19
FIRSTLY…LEADING THROUGH COVID -19 We used our values to guide our decision making through Covid-19 and emerge with stronger and deeper relationships with our people and our stakeholders FOR OUR PEOPLE… FOR OUR STAKEHOLDERS… • Full pay for April and topped up to 80% through May & June in • Positive a
Slide 4: Secondly… Current trends
SECONDLY… CURRENT TRENDS Despite the macro economic clouds, the current Footfall and web traffic trends strong post lockdown market environment is favourable and we benefit Retail park locations advantaged versus high street from our leading digital presence supported by a / shopping centres nat
Slide 5: Thirdly... Enables strategy acceleration
THIRDLY... ENABLES STRATEGY ACCELERATION This intense period of learning has further sharpened our focus & ambitions. We are well positioned to accelerate the execution of our strategy Following re-opening, a period of Allows acceleration exceptional trading of our clear strategy Weekly Current year
Slide 6: In summary
IN SUMMARY FY20 was a challenging year operationally and financially given the impact of the lockdown, but we have emerged stronger and more resilient FY20 financial performance severely impacted by suspension of deliveries in Q4 due to Covid-19 restrictions By leading through Covid-19 with our valu
Slide 7: Agenda
AGENDA Welcome & Introduction Tim Stacey Financials Mike Schmidt Strategy Update Tim Stacey Q&A Tim Stacey and Mike Schmidt ESG Overview 7
Slide 8: Financial overview
FINANCIAL OVERVIEW OVERVIEW IAS 17 IFRS16 FY 20192 FY 2020 FY 2020 • All operations paused from 23 March £m LTM to 30-Jun- LTM to 28-Jun- LTM to 28-Jun- with gradual, safe restart from late May 2019 2020 2020 Revenue 996.2 724.5 724.5 • Losses partially mitigated through CJRS, retail rates Growth (%
Slide 9: Reported gross sales vs weekly orders
REPORTED GROSS SALES VS WEEKLY ORDERS Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 to date Orders completed online 19% from Nov-19 to lockdown Online penetration currently 22% Year end • Reduction in order intake whilst showrooms closed – significant majority o
Slide 10: PBT evolution
PBT EVOLUTION GBP millions -150 -100 -50 0 50 KEY DRIVERS FY19 LTM PBT Pro forma 50.2 • Gross profit reduction from £272m lower revenues Gross Margin -157.5 Furlough and rates relief +26.0 • Quick and decisive cost action to minimise discretionary expenditure Mitigating cost actions +24.5 Underlying
Slide 11: Gross margin and operating costs
GROSS MARGIN AND OPERATING COSTS 65% KEY DRIVERS 60% • Gross margin up in DFS due to sourcing, pricing 55% and quality improvements 50% • Sofology margin slightly down due to accelerated 45% clearance stock sales - underlying trend up Y-o-Y 40% • Dwell & Sofa Workshop margins broadly flat FY15 FY16
Slide 12: Capital expenditure
CAPITAL EXPENDITURE Capital expenditure (inc. IAS 17 Finance leases) £31.5m £28.7m • Capital expenditure reduced in H2 FY20 to protect H2 cash position H2 £15.8m £8.4m • FY21 focus on critical initiatives and highest returning investments H1 H1 £20.3m £15.7m • Continued focus on technology to drive
Slide 13: Cash flow and net debt
CASH FLOW AND NET DEBT (150) (160) 0 (170) (169.2) (180) (176.3) -4.5 Trade creditors (75) (190) (200) Payments on account 45 -23.4 26.0 -23.4 (210) -9.5 (220) -6.1 Deferred VAT/PAYE 28 (230) -15.9 63.9 Deferred rent 28 (240) FY19 net FCF W/c and Finance Cash Interest Corp'n Dividends Equity FY20 ne
Slide 14: Key financial metrics
KEY FINANCIAL METRICS METRIC TARGET FY21 FOCUS Maximise market share capture from Above market growth competitor exit and new showroom LTM GROSS SALES GROWTH by 1% to 2% opportunities through our targeted product offer and customer experience Dwell integration, roll-out of Sofa Delivery Growth from
Slide 15: Illustrative financial scenarios for FY21
ILLUSTRATIVE FINANCIAL SCENARIOS FOR FY21 LOW MEDIUM HIGH Rest of Year: Rest of Year: Rest of Year: • Dec-19 LTM revenues excl Sofa Workshop: £943m REVENUES* -30% -15% 0% • £226m of y-o-y revenue outperformance secured to date (inc. £100m opening order bank) £959m £1,064m £1,169m • Adverse FX impact
Slide 16: Agenda
AGENDA Welcome & Introduction Tim Stacey Financials Mike Schmidt Strategy Update Tim Stacey Q&A Tim Stacey and Mike Schmidt 16
Slide 17: Leading sofa retailing in the digital age
LEADING SOFA RETAILING IN THE DIGITAL AGE 1. OMNI-CHANNEL: 1. COST EFFECTIVENESS AND PROPERTY 1. SOFOLOGY: develop seamless customer journey COST REDUCTION: develop to a nationwide business across channels reduce our relative cost base 2. PRODUCT INNOVATION: 2. SUPPLY CHAIN: 2. DWELL: enhance our un
Slide 18: DFS Group strategy recap
DFS GROUP STRATEGY RECAP 1. OMNI-CHANNEL: develop seamless customer journey across channels 2. PRODUCT INNOVATION: enhance our unique and differentiated product offer 3. CUSTOMER PROPOSITION AND SERVICE INNOVATION: new services to engage customers 18
Slide 19: 1A. DFS - Omnichannel
1A. DFS - OMNICHANNEL We believe that the combination of digital and physical is the right business model to address the sofa market. In the end comfort is the number 1 reason why a customer chooses to buy a sofa KEY INITIATIVES • Re-platformed DFS website onto Google cloud Increased speed, capacity
Slide 20: 1B. DFS – Product innovation
1B. DFS – PRODUCT INNOVATION INITIATIVES • New exclusive brand partnership with Halo best leather quality, design & sustainability • New exclusive brand products with existing successful partners including Joules, French Connection and Country Living • Strong pipeline of new product development (NPD
Slide 21: 1C. DFS - Customer service
1C. DFS - CUSTOMER SERVICE CUSTOMER SERVICE EXAMPLES INITIATIVES Established customer NPS (3 month rolling average) • Relentless focus on customer service driven by “Think Customer” value & measured by NPS • Step change in established customer NPS measures every element of the customer journey up to
Slide 22: DFS Group strategy recap
DFS GROUP STRATEGY RECAP 1. COST EFFECTIVENESS AND PROPERTY COST REDUCTION: reduce our relative cost base 2. SUPPLY CHAIN: best in market 2 person sofa delivery & installation 3. MARKETING INVESTMENT: Data & insight driven efficiency and effectiveness across Group 22
Slide 23: 2A. Property
2A. PROPERTY LEASE RENEWAL OPPORTUNITY HIGHLIGHTS £6-8m • £4.3m annualised property savings FY21 – FY23 secured as at June 2020 Cumulative annual savings £4.3m to date FURTHER £2-4M OPPORTUNITY • Average annualised rent savings 34% opportunity improving trend based on our anchor tenant status, coven
Slide 24: 2B. Supply chain
2B. SUPPLY CHAIN INITIATIVES • Sofa Delivery Co. trial launched in Belfast consolidates final mile delivery for all sofa brands • Aim to complete roll out by mid FY22 significant reduction in variable cost per delivery and improved customer and colleague experience • New stock management system in r
Slide 25: 2C. Marketing
2C. MARKETING MODELLING & INVESTMENT INSIGHTS & DATA DIGITAL New Econometrics Model Customer segmentation Investing in digital skills & now leveraged throughout business, e.g. NPD capabilities Appointed new Digital Director with a clear remit to extend and develop our digital strategy, partnerships
Slide 26: DFS Group strategy recap
DFS GROUP STRATEGY RECAP 1. SOFOLOGY: develop to a nationwide business 2. DWELL: broaden reach through digital, wholesale and right space 3. INTERNATIONAL – DFS NL: to break even & beyond on current model & develop options for medium-term growth 26
Slide 27: 3A. Sofology
3A. SOFOLOGY INITIATIVES EXAMPLES • Biggest ever launch of new products increasing and broadening appeal, driving Average Order Value, improving gross margins • Accelerating new showroom expansion in addition to 3 new showrooms successfully opened in FY20, we are targeting 6-10 new showrooms in FY21
Slide 28: 3B & C. Dwell, Sofa Workshop & International
3B & C. DWELL, SOFA WORKSHOP & INTERNATIONAL DWELL SOFA WORKSHOP INTERNATIONAL • Dwell proposition moved to • Decision taken to sell the • Review of growth options to new wholesale model business be completed in 2021 • Lessons learned from • Dwell products set up on investment being • Product and ma
Slide 29: DFS Group strategy recap
DFS GROUP STRATEGY RECAP Additionally, three strategic reflections: 1. OMNI-CHANNEL: 1. COST EFFECTIVENESS AND PROPERTY 1. SOFOLOGY: develop seamless customer journey COST REDUCTION: develop to a nationwide business across channels reduce our relative cost base 2. PRODUCT INNOVATION: 2. SUPPLY CHAIN
Slide 30: ESG - Our plan for long term sustainability
ESG - OUR PLAN FOR 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 ESG prese
Slide 31: The potential for stronger vertical integration
THE POTENTIAL FOR STRONGER VERTICAL INTEGRATION COMMENTARY • We already benefit from good UK manufacturing • A stronger manufacturing capability enables improved: • Quality • Control • Flexibility • Lead Times • Margin • ESG oversight • We are investing further in this capability • Given Covid-19, w
Slide 32: The increasing opportunity for platform-led retailers
THE INCREASING OPPORTUNITY FOR PLATFORM-LED RETAILERS COMMENTARY • Strong, platform-led retailers have the following characteristics: • Extended, valuable, new, customer data & insights • Further range optimisation & NPD • Strengthen partnerships with brand • Increased ability/speed to adapt & updat
Slide 33: In summary
IN SUMMARY LOOKING BACK TODAY LOOKING AHEAD • Covid-19 had a significant • Accelerating execution of our • Opportunity to further impact on operations strategy including ESG differentiate our core reducing revenues in FY20 propositions • Due to actions taken, we • Growing market share, but • And exp
Slide 34: Agenda
AGENDA Welcome & Introduction Tim Stacey Financials Mike Schmidt Strategy Update Tim Stacey Q&A Tim Stacey and Mike Schmidt 34
Slide 35: dfs dwell “ sofology
‘—] dfs dwell “ sofology
Slide 36: Appendices
= tea APPENDICES THE SOFA DELIVERY CQ dfs dwell * sofology
Slide 37: Performance for the 52 weeks
PERFORMANCE FOR THE 52 WEEKS Group Group Non- Group IFRS 16 52 WEEKS TO 28 JUNE 2020 DFS Sofology Other Brands underlying impact underlying underlying Reported pre IFRS 16 IFRS 16 items IFRS 16 Gross sales 697.1 181.7 56.2 935.0 - 935.0 - 935.0 Revenue 535.2 143.7 45.6 724.5 - 724.5 - 724.5 Cost of
Slide 38: Segment shares - Sofas
SEGMENT SHARES - SOFAS 34% 3.9 3.8 3.6 3.7 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 2.8 2.9 2.4 2.2 2.0 2.0 1.7 1994A 1995A 1996A 1997A 1998A 1999A 2000A 2001A 2002A 2003A 2004A 2005A 2006A 2007A 2008A 2009A 2010A 2011A 2012A 2013A 2014A 2015A 2016A 2017A 2018A 2019A UK Upholstery Seg
Slide 39: Group showroom profile
GROUP SHOWROOM PROFILE AS AT 28 JUNE 2020 (VS. 30 JUNE 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 Large format* (c. 15,000sq.ft.+) 44 (+2) - - - 44 (+2) Mediu
Slide 40: 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”, “anticipa
Slide 41: DFS Furniture plc
DFS FURNITURE PLC Results Presentation 24 September 2020