Dfs Furniture Plc · LSE:DFS
Dfs Furniture — H1 2021 Earnings Presentation
41 slides from Dfs Furniture's earnings presentation, Mar 9, 2021
Slide 1: DFS Furniture plc Interim Results Presentation
LEADING SOFA RETAILING IN THE DIGITAL AGE DFS FURNITURE PLC Interim Results Presentation 9 March 2021
Slide 2: Agenda
AGENDA Welcome & Introduction Tim Stacey Financials Mike Schmidt Strategy Update Tim Stacey Tim Stacey & Q&A Mike Schmidt 2
Slide 3: H1 Summary
H1 SUMMARY We continue to strengthen our market leading position in a resilient ‘Home & Furnishings’ category Strong revenue, profits and cash generation, despite ongoing mobility restrictions Benefitted from both market growth post lockdown and market share gains of 2 ppts + Exceptional online perf
Slide 4: Today: The Fundamentals of the Group
TODAY: THE FUNDAMENTALS OF THE GROUP DFS GROUP: STRONG & RESILIENT; SET FOR GROWTH 2. INTEGRATED 3. SUSTAINABLE 1. CLEAR MARKET LEADER + RETAIL BUSINESS + BUSINESS MODEL SET FOR GROWTH 4. HOMEWARE MARKET GROWTH 34% share already, Increasingly strong Well invested retail, Revenue growth + with clear
Slide 5: Agenda
AGENDA Welcome & Introduction Tim Stacey Financials Mike Schmidt Strategy Update Tim Stacey Tim Stacey & Q&A Mike Schmidt 5
Slide 6: Financial Overview
FINANCIAL OVERVIEW IFRS 16 ACCOUNTS SUMMARY (£m) OVERVIEW H1 2020 H1 2021 26 weeks to 29- 26 weeks to Dec-19 27-Dec-20 Strong order intake drives significant Revenue 488.0 572.6 revenue and profit growth Growth (%) (5.7%) 17.3% Comparative growth n/a 18.7% Underlying PBT pre 16.6 76.5 brand amortisa
Slide 7: Profit Drivers
PROFIT DRIVERS PBT MOVEMENTS £m - FY21 vs. FY20 OVERVIEW FY20 H1 Underlying PBT 16.6 Revenues the key driver of profit growth Volume and Manufacturing 43.2 Retail Margins 3.3 Operating Costs 10.2 Retail margins healthy despite cost headwinds Depreciation and interest 3.2 FY21 H1 Underlying PBT 76.5
Slide 8: Revenue: Our Position Today
OUR POSITION TODAY CUMULATIVE (DELIVERED) REVENUES £m - FY21 & FY20 OVERVIEW FY21 FY20A FY20 (Expected pre-COVID) Today, +£65m year-on-year 1,000 resilience remains +£200m revenue benefit 900 as at 22 December Deliveries have continued at 800 high rates throughout the financial year 700 600 Revenue
Slide 9: Looking Forward...
LOOKING FORWARD... POTENTIAL SCENARIOS OVERVIEW (Base cash showroom reopening on 12 April 21) LOW MEDIUM HIGH Targeting full year pre-tax profit out-turn of approximately £105m despite fourteen-week national Order Intake vs. FY19 0% +30% +50% shutdown of showrooms from 12 April 2021* Context: Post ‘
Slide 10: Advantaged Cash Generation Model
ADVANTAGED CASH GENERATION MODEL + + = Focused Asset Attractive Cash Negative Working Advantaged Cash Base and Proven Profit Margins Capital Model Generation Capex Returns (“mid-case”) >£100m PBT + (£10m-£20m) + Capex in line with fixed = £70m-80m Cash FY21 reversion of FY20 asset depreciation -£5m
Slide 11: Key Financial Metrics
KEY FINANCIAL METRICS METRIC TARGET COMMENTARY Above market growth Preliminary data shows c.2% market share gain through H1 LTM GROSS SALES GROWTH by 1% to 2% plus grow share in implying >5% sustainable sales growth ahead of market homewares market Growth to at least 7% At an elevated 13% over the f
Slide 12: Agenda
AGENDA Welcome & Introduction Tim Stacey Financials Mike Schmidt Strategy Update Tim Stacey Tim Stacey & Q&A Mike Schmidt 12
Slide 13: To Cover
TO COVER THE FUNDAMENTALS OF STRATEGY IMPLEMENTATION SPOTLIGHT ON THREE THE GROUP UPDATE SPECIFIC TOPICS Manufacturing Home market ESG 13
Slide 14: Today: The Fundamentals of the Group
TODAY: THE FUNDAMENTALS OF THE GROUP DFS GROUP: STRONG & RESILIENT; SET FOR GROWTH 2. INTEGRATED 3. SUSTAINABLE 1. CLEAR MARKET LEADER + RETAIL BUSINESS + BUSINESS MODEL SET FOR GROWTH 4. HOMEWARE MARKET GROWTH 34% share already, Increasingly strong Well invested retail, Revenue growth + with clear
Slide 15: Strong & Resilient; Set for Growth: Clear Market Leader
STRONG & RESILIENT; SET FOR GROWTH 1. CLEAR MARKET LEADER + + Clear market leadership enables ability to unlock strong economies of scale Group market share >34% pre External evidence of market share Scale enables sector leading pandemic, over 3x nearest competitor growth of +2ppts in Half 1 operati
Slide 16: Strong & Resilient; Set for Growth: Integrated Retail Business
STRONG & RESILIENT; SET FOR GROWTH 2. INTEGRATED + RETAIL BUSINESS + Our integrated retail and operating platforms enable agility and channel agnostic growth Well invested, modern Clear leader in Sector leading website Integrated channel- showrooms with leading digital search for driven by ongoing a
Slide 17: Strong & Resilient; Set for Growth: Sustainable Business Model
STRONG & RESILIENT; SET FOR GROWTH 3. SUSTAINABLE + + BUSINESS MODEL Well invested business, resilient through pandemic + sustainability being embedded Consistent historical investment has Increasing focus of capital investment Sector leading ESG strategy created relatively well invested and in digi
Slide 18: Homeware Market Growth
STRONG & RESILIENT; SET FOR GROWTH 4. HOMEWARE MARKET GROWTH Resilient market demand: “home” remains key focus of discretionary consumer spending Homewares market bounced back to >20% growth post DFS Group recovered vast majority of lost sales on lockdown 1 & 2 showroom re-openings 11 weeks 11 weeks
Slide 19: Set for Growth: Cash Flow and Operating Leverage
STRONG & RESILIENT; SET FOR GROWTH SET FOR GROWTH 4. HOMEWARE MARKET GROWTH Resilient market demand: “home” remains key focus of discretionary consumer spending + + Strong post-tax, post interest = Strong revenue growth post IPO Scaleable platform, with Negative working annual free cash flow of in F
Slide 20: To Cover
TO COVER THE FUNDAMENTALS OF STRATEGY IMPLEMENTATION SPOTLIGHT ON THREE THE GROUP UPDATE SPECIFIC TOPICS Manufacturing Home market ESG 20
Slide 21: Strategy Implementation Update
STRATEGY IMPLEMENTATION UPDATE 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 unique and be
Slide 22: Strategy Implementation Update
STRATEGY IMPLEMENTATION UPDATE 1. OMNI-CHANNEL £7m 2. PRODUCT INNOVATION achieved to date 3. CUSTOMER PROPOSITION AND SERVICE INNOVATION 1. COST EFFECTIVENESS AND PROPERTY COST REDUCTION £5m 2. SUPPLY CHAIN £3m* 3. MARKETING INVESTMENT £6m 1. SOFOLOGY £7m 2. DWELL 3. INTERNATIONAL – DFS NL REINVESTM
Slide 23: Strategy Implementation Update: Omni-channel
STRATEGY IMPLEMENTATION UPDATE Driving continuous incremental gains from wide-ranging omnichannel initiatives 1 Continuous online 2 Data led product innovation, driving new customers and AOV investment, driving engagement & conversion 1. OMNI-CHANNEL: develop seamless customer journey across channel
Slide 24: Strategy Implementation Update: Multi-brand retail platform
STRATEGY IMPLEMENTATION UPDATE Progress in development of our multi-brand retail platform 1 Property savings on track, latest lease 2 Sofa Delivery Company rolling out, re-gear savings >30% targeting £3m+ savings p.a. by end FY22 £6-8m FY21-FY23 £5.2m to date Cumulative annual savings FURTHER £2-4M
Slide 25: Strategy Implementation Update: Sofology
STRATEGY IMPLEMENTATION UPDATE Focus on driving revenue & profit growth in Sofology New showroom New product openings, 3 so far innovation, in H1, targeting including eco 6-8 in next 12 sofas, driving AOV 1. SOFOLOGY: months develop to a nationwide business 2. DWELL: broaden reach through digital, w
Slide 26: To Cover
TO COVER THE FUNDAMENTALS OF STRATEGY IMPLEMENTATION SPOTLIGHT ON THREE THE GROUP UPDATE SPECIFIC TOPICS Manufacturing Home market ESG 26
Slide 27: Manufacturing in Focus
MANUFACTURING IN FOCUS We plan to invest further in vertical integration to increase capacity, reduce lead times, improve ESG oversight & control and capture additional margin Own manufacturing today Benefits of own manufacturing Future plans For customers Short term - invest in UK existing • Differ
Slide 28: Home Market
HOME MARKET Clear opportunity to extend into the Living Room Furniture and Bedroom market increasing our Total Addressable Market (TAM) Living Room Furniture Home market Bedroom Bedroom £3.7bn Living Room £1.2bn Upholstery £3.2bn Attachment opportunity across channels Home category extension Online
Slide 29: ESG in Focus
ESG IN FOCUS We have a long-term commitment to a building a sustainable business model and embed ESG Environment Social & Governance Commitments ● Signed up to BRC climate action roadmap to reach net zero ● Scope 1 by 2035 ● Scope 2 by 2030 ● Scope 3 by 2040 Inclusion and diversity ● We aim to make
Slide 30: In Summary
IN SUMMARY • Strong and resilient business model; set for growth • Positive first half performance, and full-year profit outlook • Reopening on the front foot, building on market share gains • Strategic agenda is on-track • Further opportunities are emerging, especially in manufacturing and adjacent
Slide 31: Agenda
AGENDA Welcome & Introduction Tim Stacey Financials Mike Schmidt Strategy Update Tim Stacey Tim Stacey & Q&A Mike Schmidt 31
Slide 32: THE SOFA DELIVERY CQ
THE SOFA DELIVERY CQ dfs dwel | * sofology
Slide 33: Appendices
dfs dwell — “sofology — THE SOFA DELIVERY CQ
Slide 34: 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 35: Brand Performance
BRAND PERFORMANCE Revenues (£m) Gross margin Operating costs (£m) DFS • Strong showroom and web order intake • Mix effect from high margin internal • Cost increase expected given higher sales manufacturing already operating at capacity volumes • Revenue growth lower than order intake due to manufact
Slide 36: Performance for the 26 Weeks
PERFORMANCE FOR THE 26 WEEKS Total before non - 26 weeks ended 27 December 2020 DFS Sofology Subtotal Sofa Workshop Non underlying Total underlying charges Gross Sales 587.1 141.4 728.5 6.3 734.8 - 734.8 Revenue 454.9 112.6 567.5 5.1 572.6 - 572.6 Cost of Sales (190.0) (53.0) (243.0) (1.3) (244.3) -
Slide 37: Cash Flow and Net Debt
CASH FLOW AND NET DEBT H1 FY21 CASH FLOW Significant reduction in net bank debt Working capital inflow driven by trends in trading activity Low tax payments made due to part utilisation of FY20 losses Working capital outflow of c.£60m within next 6-12 months (order bank and residual rent deferrals)
Slide 38: Group Showroom Profile
GROUP SHOWROOM PROFILE As at 27 December 2020 (vs. 29 December 2019 excluding sofa workshop) UK ROI Holland Spain TOTAL Large Format (c. 15,000sq.ft.+) 91 3 2 1 97 Medium Format (c. 10,000sq.ft.) 18 (+1) 2 4 (+1) - 24 (+2) Small Format (c. 5,000sq.ft.) 4 - (-1) 1 5 (-1) Dwell standalone 2 (-1) - - -
Slide 39: ESG - Progress and Targets
ESG - PROGRESS AND TARGETS SECTION KPI TARGET DFS SOFOLOGY DWELL Environmental All aspects Of Timber Sourcing for sofa manufacture from FSC certified 100% ESC certified Wood by 2025 Dec - 2025 Dec - 2025 Dec - 2025 Wood Sourcing sources. Publish timber sourcing policy for sofa by brands. Environment
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 Interim Results Presentation
LEADING SOFA RETAILING IN THE DIGITAL AGE DFS FURNITURE PLC Interim Results Presentation 9 March 2021