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Dunelm Group plc  -  DNLM   

Interim Results

Released 07:00 20-Feb-2018

RNS Number : 3281F
Dunelm Group plc
20 February 2018
 

 

 

20 February 2018

Dunelm Group plc ("Dunelm")

Interim Results for the 26 weeks to 30 December 2017

 

Continuing sales growth and market share gains

  

Dunelm Group plc, the UK's leading homewares retailer, today announces its interim results for the 26 weeks to 30 December 2017.

 

 

FY18 H1

 

 

 

Underlying*

 

FY18 H1

 

 

 

Exceptional items

FY18 H1

 

 

 

Reported

FY17 H1

 

 

 

Underlying

 

FY17 H1

 

 

 

Exceptional items

FY17 H1

 

 

 

Reported

Year-on-year change

 

Underlying

Year-on- year change

 

Reported

Total revenues

£545.4m

 

£545.4m

£460.5m

 

£460.5m

+18.4%

+18.4%

Like-for-like sales

£469.3m

 

£469.3m

£442.6m

 

£442.6m

+6.0%

+6.0%

Gross margin

48.6%

 

48.6%

50.4%

 

50.4%

-180bps

-180bps

EBITDA

£79.1m

-£2.7m

£76.4m

£80.7m

-£9.3m

£71.4m

-2.0%

7.0%

Profit before tax

£60.0m

-£3.7m

£56.3m

£65.2m

-£9.3m

£55.9m

-8.0%

0.7%

Free cash flow

 

 

£27.8m

 

 

£19.0m

 

+46.0%

Net debt

 

 

-£134.3m

 

 

-£103.8m

 

-29.4%

 

 

 

 

 

 

 

 

 

Basic EPS

23.9p

 

22.3p

25.6p

 

21.9p

-6.6%

+1.8%

Fully diluted EPS

23.8p

 

22.2p

25.6p

 

21.8p

-7.0%

+1.8%

Interim dividend

 

 

7.0p

 

 

6.5p

 

+7.7%

 

 

Highlights

·      Good sales growth; 6.0% like-for-like (LFL) sales growth, including store LFL sales growth of 3.5%, and 18.4% total growth.

·      Continued market share gains in a broadly static homewares market.

·      Good strategic online progress, with 36.8% LFL sales growth on Dunelm.com. Total online sales now at 18.5% of our total revenues, up from 11.7% last year.

·      The integration of Worldstores is progressing well, with cost and efficiency programmes on track, and benefits to Dunelm.com sales proven. Revenue synergies dependent on a single, integrated, web platform.

·     EBITDA of £79.1m (pre-exceptional items) down 2.0% year-on-year reflecting investment for growth and consolidation of Worldstores trading losses.

·      EBTIDA (post exceptional items) of £76.4m up 7% year-on-year.

·      PBT pre-exceptional items down 8.0% to £60.0m, and up 0.7% to £56.3m post-exceptional costs.

·      Earnings per share up 1.8% to 22.2 pence (fully diluted, post-exceptional items), with core growth largely offset by acquired Worldstores losses year-on-year.

·      Interim dividend increased by 7.7% to 7.0 pence per share (FY17: 6.5 pence per share).

 

Andy Harrison, Chairman, commented:

 

"The strength of our customer proposition has helped us to deliver a good sales performance in the first half, with like-for-like sales growth of 6.0% and total sales growth of 18.4%, boosted by the Worldstores acquisition. We have made good strategic progress, best highlighted by the 36.8% like-for-like growth in our online sales (including reserve and collect), which now account for 18.5% of our total sales, up from 11.7% last year.

 

"Our gross margin in the first half was lower due to the mix effect of acquired Worldstores sales and a higher proportion of end of season and seasonal products. We expect a more stable margin performance in the second half, which, together with reduced losses and increased integration benefits from the acquisition, should deliver good full year profit growth.

 

"The Board has increased the interim dividend by 7.7% to 7.0 pence per share, reflecting both Dunelm's future profit growth potential and our strong cash generating capability.

 

"We are very pleased to welcome Nick Wilkinson who took up the reins as our new Chief Executive on February 1st.  We are confident that Nick's leadership skills and retail pedigree will help us to deliver our ambitious growth plans to build Dunelm as the leading multi-channel retailer in our space."

There will be a presentation for analysts at 9.30am this morning at UBS, 5 Broadgate, London EC2M 2QS.  If you have not already registered for attendance then please contact Peter Lambie at MHP Communications on peter.lambie@mhpc.com. A copy of this presentation will be available to download from our corporate website shortly after the briefing.

 

For further information please contact:

 

Dunelm Group plc

Keith Down, Chief Financial Officer

 

0116 2644439

 

 

 

MHP Communications

020 3128 8789

Tim Rowntree / Simon Hockridge

dunelm@mhpc.com

 

For photography, please contact MHP Communications

 

Notes to Editors

 

Dunelm was founded in 1979 as a market stall business, selling ready-made curtains. The first shop was opened in Leicester in 1984 and over the following years the business developed into a successful chain of high street shops before expanding, following the opening of the first Dunelm superstore in 1991, into broader homewares categories. Dunelm is now a multi-channel retailer, with Dunelm.com being launched in 2005 and the acquisition of the Worldstores Group accelerating this yet further. Today, around 20% of sales are generated online. 

 

Dunelm is market leader in the £12bn UK homewares market and active in the £11bn UK furniture market. It currently operates 173 stores, of which 169 are out-of-town superstores and 4 are located on high streets, and online stores, the largest of which can be found at www.dunelm.com, www.worldstores.co.uk and www.kiddicare.com. Dunelm employs approximately 10,000 colleagues and sells around 30,000 product lines in store, increasing to around 300,000 online.

 

Dunelm, "The Home of Homes", offers a customer proposition of style, value, quality and ease of shopping. From its textiles heritage, in areas such as bedding, curtains, cushions, quilts and pillows, Dunelm has rapidly broadened its product offering to a complete homewares offer including the likes of kitchenware, dining, lighting, seasonal, wall art and rugs. Dunelm is one of the few national retailers to offer an authoritative selection of curtain fabrics on the roll, and owns a specialist UK facility dedicated to producing made-to-measure curtains.

 

The product range includes many, exclusive, own brand designs and premium brands such as Dorma, Fogarty and Kiddicare. This is augmented by a range of other well-known brands and license agreements.

Dunelm has been listed on the London Stock Exchange since October 2006 (DNLM.L) and has a current market capitalisation of approximately £1.3bn.

 

CHAIRMAN'S STATEMENT

Introduction

We aim to be the customers' number one choice for homewares and furniture in the UK, famous for style, value, quality and ease of shopping. Our extensive choice of good quality, great value products, backed up by friendly and knowledgeable service in our nationwide network of 169 stores, provides a strong foundation for future growth.

 

We are extending our online offering and continuing the integration of the Worldstores businesses. We are growing our online scale and capability, together with a substantial expansion of our product offering, including furniture. We are encouraged by the progress so far and see potential for further business benefits once this integration is complete.

 

Over the medium term our aim is to double our sales to £2bn, with 30-40% from the increasingly important online channel. We shall achieve this by making our business twice as good for customers as it is today.  

Performance

We delivered a creditable performance in the first half of our financial year, which positions us well for the full year. The strength of our customer proposition has driven a 6.0% growth in our total LFL sales, supported by good store LFL sales growth of 3.5%, and an 18.4% growth in our total sales, boosted by the Worldstores acquisition in late November 2016. We are continuing to win market share in a broadly static homewares market. We have also achieved good strategic progress, best illustrated by the doubling of our online sales, and in particular the 36.8% LFL sales growth on Dunelm.com. Online sales, including reserve and collect, now represent 18.5% of our total revenues, up from 11.7% last year.

 

There is still more work to do to convert our good top line growth into better bottom line profit growth. Our gross margin in H1 was reduced by the addition of lower margin Worldstores' sales and by a higher proportion of end of season and seasonal sales. We also continue to invest in building a stronger business, focusing in particular on our IT systems, supply chain and new stores, such that we still anticipate operating costs growing slightly ahead of sales in the full year.

 

The combined effect of all these factors was a reduction in our pre-tax profits, before exceptional costs, from £65.2m last year to £60.0m. Pre-tax profits, after exceptional costs, rose by 0.7% to £56.3m due to lower exceptional costs.

 

For the second half, we expect a more stable gross margin performance, similar to that of the first half, which combined with increasing integration benefits from Worldstores, should help us to deliver good profit growth for the full year.

 

The integration of the Worldstores acquisition is progressing well, with cost and efficiency programmes on track and the benefits of extended ranges on Dunelm.com sales being achieved, although we have seen a weaker sales performance in the legacy Worldstores business (including the transitional Dunelm Extra website). The scale of the opportunity to fully integrate Worldstores' capabilities into Dunelm remains compelling.

 

Having run the Achica  business for a year, and gained a better understanding of the business and its customers, we decided that the brand does not fit with the core Dunelm proposition. On 15 February we completed the disposal of the Achica business for a cash consideration of £600,000.

Dividends

Your Board has increased the interim dividend by 7.7% to 7.0 pence per share, reflecting both our confidence in Dunelm's future profit growth potential and our strong cash generating capability.

Board and People

We are very pleased to welcome Nick Wilkinson, who took up the reins as our new Chief Executive on February 1st. We believe that Nick has the leadership skills and retail experience to lead Dunelm through the next chapter of our development and to deliver substantial, profitable growth as we become the leading multi-channel retailer in our space.

 

It has been a busy six months and I would like to thank all our colleagues for their hard work and their commitment to our customers and to achieving our goals.

Outlook

We continue to make good strategic progress, building our online capability, and we are confident that the strength of our customer proposition will allow us to continue to win market share, albeit in a challenging consumer environment.  Our strong sales performance should facilitate good full year profit growth. We are building towards our medium term revenue target of £2bn, of which 30-40% will be online.

 

Our gross margin is expected to be more stable in the second half, with the annualisation of the Worldstores acquisition, and the second half gross margin should be similar to that in the first half. The weakness in the legacy Worldstores business, and our continued investment in infrastructure, means that we expect operating costs to grow slightly ahead of sales in the full year.

 

Dunelm is a strong business, with ambitious plans to extend our leading market position, which we are confident will create substantial shareholder value.

 

Andy Harrison

Chairman

20 February 2018

BUSINESS REVIEW

 

We are pleased to report good LFL sales growth in H1 of 6.0%, supported by good store LFL sales growth of 3.5%, and total sales growth of 18.4%. We have continued to take market share in what is a challenging trading environment. We have opened 10 new stores in the period, including one relocation, and have continued our refit programme with four major refits completed, providing better opportunities for our customers to visit our stores and for us to provide them with inspiring environments to shop in. We do not anticipate opening any further new stores in the second half.

 

We are continuing to integrate the Worldstores business into Dunelm and whilst the sales performance of the legacy Worldstores businesses, including the transitional Dunelm Extra website, has been weaker than expected, we are encouraged by the continued strong performance of Dunelm.com with growth of 36.8% in the first half, which has benefitted from the extended furniture ranges from Worldstores. Our cost, margin and efficiency programmes are on track and are delivering benefits year-on-year.

 

We now expect the Worldstores acquisition, net of integration benefits, to have a negative impact on our full year pre-tax profit of c.£7-8m, of which c.£5.6m was in the first half. The annualised (run rate) losses of the Worldstores businesses will have been reduced from c£20m at the time of acquisition to approaching breakeven at the end of this financial year, again including integration benefits.

Once we have fully integrated Worldstores into our core business, by combining our websites, harmonising supply chains and processes, and driving volume growth by leveraging the Dunelm brand, we are confident that this will support our continuing rapid and profitable sales growth.

 

Last year we introduced our four business goals, which help us to shape and prioritise our activities to support our growth. We have made good progress on each of these in the first half.

 

1.     Creating new reasons for customers to shop with Dunelm

We shall continue to develop our ranges and offer new reasons for customers to visit Dunelm, whether that be in store or online. During the first half we have benefited from more trend and style-led newness introduced into the Autumn/ Winter ranges. We are continuing to broaden our proposition to suit all customer types. We are using our online platforms to introduce further extended ranges  which is helping us trial products earlier and identify winners sooner.

 

We have continued to build our Seasonal offering this winter. This has resonated well with our customers and helped drive growth over the key trading period in the run up to Christmas. In the first half we achieved LFL Seasonal sales growth of 25%.

 

Our LFL online channel continued to benefit from an extended range in the first half, as we continue to add Worldstores products onto the Dunelm.com site. With growth of 36.8%, the Dunelm website is going from strength to strength. We are excited about the potential here for profitable growth as we build more scale, especially in our two-man home delivery operations.

 

Kiddicare is a new category for us, following the acquisition of Worldstores last year. In the first half, we relocated the Kiddicare store in Peterborough and completed two significant 10,000 sq. ft. Kiddicare departments; with 20 other stores having smaller concessions introduced.

 

Our Made to Measure business continues to grow well. We have significantly increased sales of made to measure blinds, shutters and our fitting service. We look forward to the launch of the additional Made to Measure ranges on our website in the second half enabling customers to browse and buy online. 

 

We have trialled new formats for Furniture including mattresses in store and the results look promising. We will monitor this closely and listen carefully to customer feedback before making further roll-out decisions.

 

2.     Easy and inspiring for customers to shop (both instore and online)

As we move towards our target of being the clear leader in multi-channel retailing in our markets, we must make it easy for customers to switch between channels. Whether that be to order online and collect in store, or order in store for delivery at home, the customer journey must be seamless.

 

We have trialled tablet based selling (with integrated chip and pin technology) in our stores, and we are aiming to roll this out across our store estate in the remainder of the financial year. This will give customers access to the full range of products in store for home delivery, and will allow our colleagues to highlight and sell the full breadth of our offer.

 

We now have a well advanced plan, with activities underway to fully integrate our websites. Work will continue on this in the second half and will ultimately enable us to better leverage the Dunelm brand, thus attracting more customers for lower cost, and will provide more inspiration and broader ranges to our customers.

 

In the first half, we completed four major refits in our new store format. We have also trialled smaller refits focusing on key departments and as a result of strong performance, we plan to roll these modules out to more stores in the second half of the year as well as complete at least one more major refit.

 

We have launched e-receipts in stores to strengthen our customer insight capabilities and looking ahead, we will increase the level of personalisation in email communication to ensure we target customers with products and offers that resonate with them.

 

3.     A simple and low-cost operating model

As a business with a low-cost operating model, our continued focus on costs and efficiencies is paramount. During the year we have made improvements in productivity at our Stoke Distribution Centre (DC) operations following the opening of Stoke DC2 last year, and the subsequent introduction of Kiddicare fulfillment from the same site. We anticipate more benefits to come from here and we will continue this work into H2, especially as we focus on improving productivity in our two-man Home delivery network.

 

During the half, we have made further structural improvements in our stores, and simplified our processes. This has enabled us to largely offset the cost of National Living Wage increases, whilst maintaining good levels of service to our customers. In the second half we will continue to focus in this area, particularly around stock processes.

 

We have made the decision to invest in a new made to measure manufacturing facility in Leicester which will transform our capability to deliver leading-quality bespoke curtains and blinds to our customers with shorter lead times.

 

Additionally, we have moved the location of the London digital office to a smaller, more suitable location, and completed the integration of our support functions.

 

4.     A great place to work for our colleagues

Making Dunelm a great place to work is at the heart of what we do. To retain our talent and ensure customers receive excellent service, we need to ensure colleagues are engaged and are in rewarding roles.

 

We are encouraged by our progress in the first half. We have seen a significant rise in colleague engagement metrics and an even higher percentage of store manager roles being filled by internal candidates.

 

There is a high level of employment in the UK and we are working hard to ensure that colleague development opportunities are given more focus, and that we offer strong reward opportunities. In H2 we will introduce a new benefits programme for all colleagues. We are also working harder than ever on communicating effectively with our colleagues across our business.

 

Summary

We have ambitious plans to deliver profitable growth, as we make Dunelm the leading multi-channel retailer in our space, building on  the integration of Worldstores and driving market share gains with improvements to our online offer.

 

We are strongly cash generative and our are confident that this growth will create a great business and substantial shareholder value.

Andy Harrison / Keith Down

20 February 2018

FINANCIAL REVIEW

Revenue

Total revenue for the 26 weeks to 30 December 2017 grew by 18.4% to £545.4m (FY17 H1: £460.5m). Total LFL growth was 6.0% with Store sales growing by 3.5% and LFL Dunelm.com business growing by 36.8%.

 

 

26 weeks to 30 December 2017

 

Revenue

(£m)

YoY Growth (£m)

YoY Growth (%)

LFL Stores1

423.2

14.3

3.5%

LFL Online2

46.0

12.4

36.8%

Total LFL

469.3

26.7

6.0%

Non-LFL Stores3

35.2

25.0

 

Non-LFL Online4

41.0

33.1

 

Total Dunelm Group

545.4

84.9

18.4%

 

1.        LFL Stores - stores trading for at least one full financial year prior to 2 July 2017 without any significant change of space

2.        LFL Online - Dunelm.com

3.        Non-LFL Stores - new stores opened within the current financial year or prior financial year

4.        Non-LFL Online - Worldstores.co.uk, Kiddicare.com and Achica.com

 

The LFL Stores performance benefited from favourable weather conditions year-on-year in Q1, with improved availability and more product newness and seasonal lines. During the first half, 10 new stores were opened (including one relocation) taking our superstore footprint to 169 stores.

 

Continuing LFL online growth of 36.8% in the first half, coupled with us passing the first anniversary of the Worldstores acquisition, has helped our online revenues grow to 16.0% of total revenue in the first half (18.5% including Reserve and Collect). 

 

Gross margin

Group gross margin for the half year of 48.6% was 180bps lower than last year. This was partially due to the continued mix effect of the additional lower margin Worldstores sales, which reduced gross margin by 80bps. Also, we have continued to see the impact of our focus on newness in our ranges, which involves a planned higher participation of end of season and seasonal product lines, reducing gross margin by 100bps.

 

Our gross margins are expected to be more stable in the second half, with the annualisation of the Worldstores acquisition. We expect gross margins in the second half to be similar to the first half.

 

Operating costs

Operating costs before exceptional items for the period were £203.7m, an increase of £37.7m year-on-year (22.7%). The main drivers of the year-on-year increase were:

 

·     Worldstores was within the Group for the full period, as opposed to only one month post-aquisition in the prior year, increasing operating costs by £16.9m.

·     Store costs increased by £9.2m, largely as a result of opening a net nine new stores in the half.

·     Marketing increased by £1.5m; increased spend on digital marketing and investment in brand marketing and seasonal campaigns to drive customer awareness.

·     Depreciation increased by £3.4m due to significant capital investments we have made over recent years.

 

Looking ahead to the second half of the year, we expect year-on-year cost growth to slow significantly as we annualise the Worldstores acquisition, realise more synergy benefits, and open fewer new stores.  The weakness in the legacy Worldstores businesses and the continued investment in our infrastructure means that, overall, we expect costs to grow slightly ahead of sales in the full year.

 

Exceptional Items in respect of the Worldstores acquisition

 

 

FY18 HY1

Key management retention bonuses

£1.4m

Asset write-offs, impairments and accelerated depreciation

£1.0m

Other integration costs

£1.3m

 

£3.7m

 

Exceptional items have occurred as a result of the acquisition of the Worldstores Group on 28 November 2016. £16.9m of exceptional costs were reported in the prior year, with a further £3.7m in this half, taking the total incurred to date to £20.6m. Key elements of exceptional items incurred this reporting period include:

·      Key management retention bonuses which have both retention and performance conditions attached.

·      Accelerated depreciation charges following a review of websites and other intangible IT assets of both the existing Dunelm business and the acquired business. Decisions were made in the prior year to integrate the available assets, and as a result, certain assets were written off and others' useful economic lives were reduced resulting in accelerated depreciation.

·      Other integration costs largely reflect restructuring costs.

 

Of the above exceptional items, £1.3m relates to cash outflows in the period. We currently anticipate that approximately £3m of exceptional costs will be incurred in respect of these items in the second half of the year. This excludes the exceptional costs associated with the loss on disposal of Achica, which is anticipated to be in the region of £0.5m to £1.0m.

 

Profit and Earnings per Share

Operating profit before exceptional items for the period was £61.3m (FY17 H1: £66.3m), a decrease of £5.0m (-7.5%). This is predominantly related to the consolidation of an additional five months (£5.1m) of trading losses in respect of Worldstores post acquisition. Operating profit margins for the core business (excluding Worldstores) remain similar with incremental Dunelm sales being offset by lower gross margin, depreciation and reward costs.

 

Operating profit for the period was £57.6m (FY17 H1: £57.0m) after £3.7m of exceptional items that were incurred as part of the acquisition of Worldstores Group (FY17 H1: £9.3m).

 

Earnings before interest, tax, depreciation and amortisation (EBITDA) before exceptional cash items reduced by 2.0% to £79.1m (FY17 H1: £80.7m). The EBITDA before exceptional items margin achieved was 14.5% (FY17 H1: 17.5%).

 

There was a net cost of £1.3m (FY17 H1: £1.1m) in respect of financial items in the period. Costs were made up of interest payable and amortisation of arrangement fees relating to the Group's revolving credit facility of £1.1m (FY17 H1: £0.8m) and losses of £0.2m (FY17 H1: £0.3m) resulting from foreign exchange differences on the translation of dollar denominated assets and liabilities.

 

Profit before tax and exceptional costs was £60.0m (FY17 H1: £65.2m), a reduction of 8.0% year-on-year. Profit before tax (PBT) after exceptional costs increased by £0.4m to £56.3m. Profit after tax of £45.0m (FY17 H1: £44.2m) reflects the projected full year effective tax rate of 20.1% (FY16: 20.9%) which falls year-on-year due to the 0.75% reduction in headline corporation tax rate.

 

Fully diluted earnings per share before exceptional costs were 23.8 pence (FY17 H1: 25.6 pence), a decrease of 7.0%. Including exceptional costs, fully diluted earnings per share were 22.2 pence, 0.4 pence up on the prior year.

 

Foreign exchange

After 23 June 2016, sterling depreciated strongly against the US dollar but it has made back some ground in the last few months. The maximum level of hedging coverage undertaken is 100% of anticipated expenditure on a three-month horizon, stepping down to 75% on a nine to twelve-month horizon. Coverage levels then drop off further out over a 24 month hedging period.

 

Cash generation

Dunelm remains a highly cash generative business and has the ability to make investment decisions for the long term to support growth, or to make capital distributions to shareholders. In the period, the Group generated £59.8m (FY17 H1: £53.0m) of net cash from operating activities, an increase of 12.8%.

 

Period end working capital increased by £11.3m (FY17 H1: £5.6m increase). The majority of the movement relates to a reduction in payables (£9.1m) as a result of later purchasing of stock for Spring/Summer launch compared to Autumn/Winter launch. Additionally, inventories increased by £1.9m due to the increase in the number of stores which was partially offset by the later stock flow for Spring/Summer, which has been described above, and clearance of end-of-season stock.

Capital investment was £31.0m in the period (FY17 H1: £33.3m). Spend in the period included investment in ten new store openings (£15.7m), investment in IT infrastructure (£6.3m) and store refit expenditure in existing stores (£8.9m).

 

Free cash flow, defined as net cash generated from operating activities less net cash used in investing activities, was £27.8m (FY17 H1: £19.0m) an increase of 46%. No further purchases of shares into treasury were made in the period (FY17 H1: £4.2m to purchase 500,000 shares into treasury).

 

Capital Policy

During FY16, the Board updated the policy on capital structure, targeting an average net debt level (excluding lease obligations and short-term fluctuations in working capital) of between 0.25 x and 0.75 x of the last twelve months' EBITDA. This policy provides the flexibility to continue to invest in the Group's growth strategy and to take advantage of investment opportunities as and when they arise, for example freehold property acquisitions. Furthermore, the policy targets ordinary dividend cover of between 1.75x and 2.25x during the financial year in which the dividend is paid.

 

We will pay a regular interim dividend of 7.0p per share (totalling £14.2m), a 7.7% increase year-on-year, to shareholders on the register at 23 March 2018. The payment is expected to be made on 13 April 2018.

 

The Board will consider special distributions if average net debt over a period consistently falls below the minimum target of 0.25 x EBITDA, subject to known and anticipated investment plans at the time.

 

The Group's full capital and dividend policy is available on our website at www.corporate.dunelm.com.

 

Banking Agreements and Net Debt

The Group has in place a £150m syndicated Revolving Credit Facility (RCF) which matures in 2020. The terms of the RCF are consistent with normal practice and include covenants in respect of leverage (net debt to be no greater than 2.5× EBITDA) and fixed charge cover (EBITDA to be no less than 1.5 x fixed charges), both of which were met comfortably as at 30 December 2017.

 

In addition, the Group maintains £20m of uncommitted overdraft facilities with two syndicate partner banks and has an accordian option with a maximum facility of £75m.

 

Net debt at 30 December 2017 was £134.3m compared with net debt of £122.1m at 1 July 2017. Daily average net debt (facilities drawn plus cash at bank) was £117m (FY17 H1: £77.6m).  Net debt at the period end was equivalent to 0.96 x historical EBITDA, excluding exceptional items. This falls comfortably within our banking covenants, although as at the prior year end, it is higher than our Board's long term target range for net debt. We expect net debt to be within the targeted range at the year end.

 

Principal Risks and Uncertainties

There are a number of potential risks and uncertainties which could have a material impact on the Group's performance over the remaining six months of the financial year and beyond, and could cause actual results to differ materially from expected and historical results. The Board considers that the majority of significant risks and uncertainties remain as published in the Annual Report for the year ended 1 July 2017. These comprise:

·      Loss of market share through failing to maintain a competitive offer in the homewares market

·      Damage to brand reputation through product and service quality

·      Failure to successfully integrate the Worldstores businesses

·      Reduced portfolio expansion through the inability to secure or develop the required retail trading space

·      Impact on the business should it fail to attract, retain and motivate high calibre colleagues

·      Prosecution and other regulatory action as a result of failure to comply with legislative or regulatory requirements

·      Disruption to key IT systems from a major incident, including a cyber-attack

·      Impact on trade, or reduced efficiencies, from supply chain disruption

·      Inability to compete and grow the business in line with the strategy through failure to operate the business in an efficient manner

·      Unforeseen financing requirements or treasury exposures

·      Failure to anticipate and manage the potential impact of Britain leaving the European Union

 

A detailed explanation of these risks can be found on pages 30 to 36 of the 2017 Annual Report which is available at www.corporate.dunelm.com.

 

Keith Down

Chief Financial Officer

20 February 2018

 

STATEMENT OF DIRECTORS' RESPONSIBILITIES

 

The Directors confirm that these condensed interim financial statements have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and that the interim management report includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8, namely:

 

·      an indication of important events that have occurred during the first six months and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and

 

·      material related-party transactions in the first six months and any material changes in the related-party transactions described in the last annual report.

 

The Directors are responsible for the maintenance and integrity of the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

 

By order of the Board

 

Andy Harrison                                                                                      Keith Down

Chairman                                                                                              Chief Financial Officer

20 February 2018                                                                                20 February 2018

 

INDEPENDENT REVIEW REPORT TO DUNELM GROUP PLC

Report on the interim financial statements

Our conclusion

We have reviewed Dunelm Group plc's interim financial statements (the "interim financial statements") in the Interim Report and Financial Statements of Dunelm Group plc for the 26 week period ended 30 December 2017. Based on our review, nothing has come to our attention that causes us to believe that the interim financial statements are not prepared, in all material respects, in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

 

What we have reviewed

The interim financial statements comprise:

·      the consolidated statement of financial position as at 30 December 2017;

·      the consolidated income statement and consolidated statement of comprehensive income for the period then ended;

·      the consolidated statement of cash flows for the period then ended;

·      the consolidated statement of changes in equity for the period then ended; and

·      the explanatory notes to the interim financial statements.

The interim financial statements included in the Interim Report and Financial Statements have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

 

As disclosed in note 2 to the interim financial statements, the financial reporting framework that has been applied in the preparation of the full annual financial statements of the Group is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.

 

Responsibilities for the interim financial statements and the review

Our responsibilities and those of the directors

The Interim Report and Financial Statements, including the interim financial statements, is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the Interim Report and Financial Statements in accordance with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

 

Our responsibility is to express a conclusion on the interim financial statements in the Interim Report and Financial Statements based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of complying with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority and for no other purpose.  We do not, in giving this conclusion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

 

What a review of interim financial statements involves

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.

 

A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

We have read the other information contained in the Interim Report and Financial Statements and considered whether it contains any apparent misstatements or material inconsistencies with the information in the interim financial statements.

 

PricewaterhouseCoopers LLP

Chartered Accountants

Birmingham

20 February 2018

 

CONSOLIDATED INCOME STATEMENT

(UNAUDITED)

For the 26 weeks ended 30 December 2017

 

 

Note

26 weeks ended 30 December 2017
(unaudited)

26 weeks ended 31 December 2016
(unaudited)

52 weeks ended 1 July 2017
(audited)

 

 

Underlying

Exceptional
Items
(Note 6)

Reported

Underlying

Exceptional
Items
(Note 6)

Reported

Reported

 

 

£'m

£'m

£'m

£'m

£'m

£'m

£'m

Revenue

5

545.4

                     -  

              545.4

460.5

                     -  

              460.5

955.6

Cost of sales

 

(280.4)

-

(280.4)

(228.2)

(0.2)

(228.4)

(488.5)

Gross profit

 

265.0

-

265.0

232.3

-

232.1

467.1

Operating costs

 

(203.7)

(3.7)

(207.4)

(166.0)

(9.1)

(175.1)

(372.3)

Operating profit

 

61.3

(3.7)

57.6

66.3

(9.3)

57.0

94.8

Financial income

 

                     -  

                     -  

                     -  

-

                     -  

                     -  

0.2

Financial expenses

 

                 (1.3)

                     -  

                 (1.3)

(1.1)

                     -  

                 (1.1)

(2.6)

Profit before taxation

 

60.0

(3.7)

56.3

65.2

(9.3)

55.9

92.4

Taxation

7

               (11.8)

                   0.5

(11.3)

(13.5)

                   1.8

(11.7)

(19.3)

Profit for the period

 

48.2

(3.2)

45.0

51.7

(7.5)

44.2

73.1

 

 

 

 

 

 

 

 

 

Earnings per Ordinary Share - basic (pence)

9

23.9

 

22.3

25.6

 

21.9

36.3

Earnings per Ordinary Share - diluted (pence)

9

23.8

 

22.2

25.6

 

21.8

36.1

 

 

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(UNAUDITED)

For the 26 weeks ended 30 December 2017

 

 

26 weeks ended
30 December
2017
(unaudited)

26 weeks ended
31 December
2016
(unaudited)

52 weeks ended
1 July
2017
(audited)

 

 

£'m

£'m

£'m

Profit for the period

 

45.0

44.2

73.1

Other comprehensive income/(expense):

 

 

 

 

Items that may be subsequently reclassified to profit or loss:

 

 

 

 

Movement in fair value of cash flow hedges

 

(3.7)

5.1

1.4

Transfers of cash flow hedges to inventory

 

0.4

(5.8)

(9.4)

Deferred tax on hedging movements

 

0.6

0.3

1.4

Other comprehensive income for the period, net of tax

 

(2.7)

(0.4)

(6.6)

Total comprehensive income for the period

 

42.3

43.8

66.5

 

 

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION 

(UNAUDITED)

As at 30 December 2017

 

 

 

 

Note

30 December
2017
(unaudited)

31 December
2016
(unaudited)

1 July
2017
(audited)

 

 

 

 

 

£'m

£'m

£'m

Non-current assets

 

 

 

 

 

 

 

Intangible assets

 

 

 

10

28.4

27.2

27.5

Property, plant and equipment

 

 

 

10

206.5

187.5

195.2

Deferred tax assets

 

 

 

 

1.3

-

0.3

Derivative financial instruments

 

 

 

 

-

0.3

-

Total non-current assets

 

 

 

 

236.2

215.0

223.0

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

Inventories

 

 

 

 

167.2

136.9

165.3

Trade and other receivables

 

 

 

 

26.5

23.1

26.4

Deferred tax assets

 

 

 

 

-

-

-

Derivative financial instruments

 

 

 

 

0.1

6.6

1.1

Cash and cash equivalents

 

 

 

 

15.3

20.5

17.4

Total current assets

 

 

 

 

209.1

187.1

210.2

Total assets

 

 

 

 

445.3

402.1

433.2

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

Trade and other payables

 

 

 

11

(123.5)

(122.5)

(133.1)

Liability for current tax

 

 

 

 

(11.5)

(11.0)

(7.0)

Derivative financial instruments

 

 

 

 

(3.5)

(0.4)

(0.4)

Total current liabilities

 

 

 

 

(138.5)

(133.9)

(140.5)

 

 

 

 

 

 

 

 

Non-current liabilities

 

 

 

 

 

 

 

Bank loans

 

 

 

13

(149.6)

(124.3)

(139.5)

Trade and other payables

 

 

 

11

(40.7)

(40.6)

(39.8)

Deferred tax liabilities

 

 

 

 

-

(0.4)

-

Provisions

 

 

 

 

(1.7)

(1.9)

(1.7)

Derivative financial instruments

 

 

 

 

(0.7)

-

(1.6)

Total non-current liabilities

 

 

 

 

(192.7)

(167.2)

(182.6)

Total liabilities

 

 

 

 

(331.2)

(301.1)

(323.1)

Net assets

 

 

 

 

114.1

101.0

110.1

 

 

 

 

 

 

 

 

Equity

 

 

 

 

 

 

 

Issued share capital

 

 

 

 

2.0

2.0

2.0

Share premium account

 

 

 

 

1.6

1.6

1.6

Capital redemption reserve

 

 

 

 

43.2

43.2

43.2

Hedging reserve

 

 

 

 

(3.4)

5.5

(0.7)

Retained earnings

 

 

 

 

70.7

48.7

64.0

Total equity

 

 

 

 

114.1

101.0

110.1

 

 

CONSOLIDATED STATEMENT OF CASH FLOWS

(UNAUDITED)

For the 26 weeks ended 30 December 2017

 

Note

26 weeks ended
30 December
2017
(unaudited)

26 weeks ended
31 December
2016
(unaudited)

52 weeks ended
1 July
2017
(audited)

 

 

£'m

£'m

£'m

Profit before taxation

 

56.3

55.9

92.4

Adjustment for exceptional operating costs

 

3.7

9.3

16.9

Adjustment for net financing costs

 

1.3

1.1

2.4

Operating profit before exceptional operating costs

 

61.3

66.3

111.7

Depreciation and amortisation

10

17.2

13.9

29.3

Loss/(profit) on disposal of non-current assets

10

0.6

0.5

1.2

Operating cash flows before exceptional operating costs and movements in working capital

 

79.1

80.7

142.2

(Increase) in inventories

 

(1.9)

(16.3)

(45.0)

(Increase) in receivables

 

(0.3)

(1.1)

(4.6)

(Decrease)/increase in payables

 

(9.1)

11.8

23.4

Net movement in working capital before exceptional operating costs

 

(11.3)

(5.6)

(26.2)

Share-based payments expense/(credit)

 

0.5

0.2

(0.3)

Interest received

 

-

-

0.1

Tax paid

 

(7.2)

(13.2)

(25.0)

Net cash generated from operating activities before excpetional operating costs

 

61.1

62.1

90.8

Cash flows in respect of exceptional operating costs

 

(1.3)

(9.1)

(11.3)

Net cash generated from operating activities

 

59.8

53.0

79.5

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

Acquisition of intangible assets

 

(5.6)

(5.1)

(11.4)

Proceeds on disposal of property, plant and equipment

 

-

-

0.2

Acquisition of property, plant and equipment

 

(26.4)

(28.9)

(46.6)

Amounts due to secured creditor on acquisition

 

-

-

(7.5)

Net cash used in investing activities

 

(32.0)

(34.0)

(65.3)

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

Proceeds from exercise of share options

 

0.5

0.1

0.9

Purchase of treasury shares

 

-

(4.2)

(4.2)

Drawdowns on revolving credit facility

13

10.0

40.0

50.0

Repayments of revolving credit facility

13

-

(10.0)

(5.0)

Interest paid

 

(0.9)

(0.7)

(1.4)

Ordinary dividends paid

8

(39.3)

(38.5)

(51.6)

Net cash flows used in financing activities

 

(29.7)

(13.3)

(11.3)

Net (decrease)/increase in cash and cash equivalents

 

(1.9)

5.7

2.9

 

 

 

 

 

Foreign exchange revaluations

 

(0.2)

(0.1)

(0.4)

Cash and cash equivalents at the beginning of the period

 

17.4

14.9

14.9

Cash and cash equivalents at the end of the period

 

15.3

20.5

17.4

 

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

(UNAUDITED)

For the 26 weeks ended 30 December 2017

 

Note

Issued share capital

Share premium account

Capital redemption reserve

Hedging reserve

Retained earnings

Total equity

 

 

£'m

£'m

£'m

£'m

£'m

£'m

As at 1 July 2017

 

2.0

1.6

43.2

(0.7)

64.0

110.1

Profit for the period

 

-

45.0

45.0

Fair value losses on cash flow hedges

 

-

-

-

(3.7)

-

(3.7)

Losses on cash flow hedges transferred to inventory

 

-

-

-

0.4

-

0.4

Deferred tax on hedging movements

 

-

-

-

0.6

-

0.6

Total comprehensive income for the period

 

-

-

-

(2.7)

45.0

42.3

Purchase of treasury shares

 

-

-

-

Proceeds from issue of treasury shares

 

-

-

-

-

0.5

0.5

Share based payments

 

-

-

-

-

0.5

0.5

Deferred tax on share based payments

 

-

-

-

-

0.1

0.1

Current tax on share options exercised

 

 

 

 

 

(0.1)

(0.1)

Ordinary dividends paid

8

-

-

-

-

(39.3)

(39.3)

Total transactions with owners, recorded directly in equity

 

-

-

-

-

(38.3)

(38.3)

As at 30 December 2017

 

2.0

1.6

43.2

(3.4)

70.7

114.1

 

 

 

 

 

 

 

 

As at 2 July 2016

 

2.0

1.6

43.2

5.9

46.9

99.6

Profit for the period

 

-

-

-

-

44.2

44.2

Fair value gains on cash flow hedges

 

-

-

-

5.1

-

5.1

Gains on cash flow hedges transferred to inventory

 

-

-

-

(5.8)

-

(5.8)

Deferred tax on hedging movements

 

-

-

-

0.3

-

0.3

Total comprehensive income for the period

 

-

-

-

(0.4)

44.2

43.8

Purchase of treasury shares

 

-

(4.2)

(4.2)

Issue of treasury shares

 

-

-

-

-

0.1

0.1

Share based payments

 

-

-

-

-

0.2

0.2

Deferred tax on share based payments

 

-

-

-

-

-

-

Ordinary dividends paid

8

-

-

-

-

(38.5)

(38.5)

Total transactions with owners, recorded directly in equity

 

-

-

-

-

(42.4)

(42.4)

As at 31 Dec 2016

 

2.0

1.6

43.2

5.5

48.7

101.0

 

 

 

 

 

 

 

 

As at 2 July 2016

 

2.0

1.6

43.2

5.9

46.9

99.6

Profit for the period

 

-

-

-

-

73.1

73.1

Fair value gains of cash flow hedges

 

-

-

-

1.4

-

1.4

Gains on cash flow hedges transferred to inventory

 

-

-

-

(9.4)

-

(9.4)

Deferred tax on hedging movements

 

-

-

-

1.4

-

1.4

Total comprehensive income for the period

 

-

-

-

(6.6)

73.1

66.5

Purchase of treasury shares

 

-

(4.2)

(4.2)

Proceeds from issue of treasury shares

 

-

-

-

-

0.9

0.9

Share based payments

 

-

-

-

-

(0.3)

(0.3)

Deferred tax on share based payments

 

-

-

-

-

(0.6)

(0.6)

Current tax on share options exercised

 

-

-

-

-

(0.2)

(0.2)

Ordinary dividends paid

8

-

-

-

-

(51.6)

(51.6)

Total transactions with owners, recorded directly in equity

 

-

-

-

-

(56.0)

(56.0)

As at 1 July 2017

 

2.0

1.6

43.2

(0.7)

64.0

110.1

 

 

 

NOTES TO THE INTERIM FINANCIAL STATEMENTS

For the 26 weeks ended 30 December 2017

 

1 General information

Dunelm Group plc and its subsidiaries ('the group') are incorporated and domiciled in the UK. Dunelm Group plc is a listed public company, limited by shares and the company registration number is 04708277. The registered office is Watermead Business Park, Syston Leicestershire, LE7 1AD.

 

The primary business activity of the group is the sale of homewares through a network of UK stores and websites.

 

While the group's financial results and cashflows have historically been subject to seasonal trends between the first and second half of the financial periods, it is not currently expected that there will be material seasonality in FY18.

 

2 Basis of preparation

These condensed interim financial statements for the 26 weeks ended 30 December 2017 have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority (previously the Financial Services Authority) and with IAS 34, 'Interim financial reporting', as adopted by the European Union.

 

The condensed interim financial statements should be read in conjunction with the annual financial statements for the year ended 1 July 2017, which have been prepared in accordance with IFRSs as adopted by the European Union.

 

The presentation of the condensed financial statements requires the Directors to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experiences and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates.

 

The financial information in this document is unaudited, but has been reviewed by the auditors in accordance with the Auditing Practices Board guidance on Review of Interim Financial Information.

 

These condensed interim financial statements do not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006 and are not audited. Statutory accounts for the year ended 1 July 2017 were approved by the Board of Directors on 13 September 2017 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under Section 498 of the Companies Act 2006.

 

3 Going concern basis

The Group has considerable financial resources together with long standing relationships with a number of key suppliers and an established reputation in the retail sector across the UK. In their consideration of going concern, the Directors have reviewed the Group's future cash forecasts and profit projections, which are based on market data and past experience. The Directors are of the opinion that the Group's forecasts and projections, which take into account reasonably possible changes in trading performance, show that the Group is able to operate within its current facilities and comply with its banking covenants for the foreseeable future.

 

As a consequence, the Directors believe that the Group is well placed to manage its business risks successfully. Having reassessed the principal risks, the Directors consider it appropriate to adopt the going concern basis of accounting in preparing the financial information.

 

Further information regarding the Group's business activities, together with the factors likely to affect its future development, performance and position is set out in the Strategic Report on pages 8 to 37 in the 2017 Annual Report available from the website at www.corporate.dunelm.com. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in the Financial Review on pages 6 to 10.

 

4  Accounting policies

The condensed financial statements have been prepared under the historical cost convention, except for derivative financial instruments and share-based payments which are stated at their fair value.

 

The accounting policies adopted are consistent with those of the annual financial statements for the year ended 1 July 2017, as described in those financial statements, except as described below:

 

·      Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual profit or loss.

 

No new standards, amendments or interpretations, effective for the first time for the period beginning on or after 1 July 2017 have had a material impact on the Group.

 

At the balance sheet date, there are a number of new standards and amendments to existing standards in issue but not yet effective. None of these are expected to have a significant effect on the financial statements of the Group, except for the following:

·      IFRS 9, 'Financial Instruments', addresses the classification, measurement of financial assets and liabilities, and replaces IAS 39. It is effective for periods beginning on or after 1 January 2018, i.e. Group's financial year ending June 2019. An initial assessment of the change has been carried out and the impact on the Group is considered to be immaterial.

·      IFRS 15, 'Revenue from contracts and customers' deals with revenue recognition and establishes principles for reporting useful information to users of financial statements about the nature, timing and uncertainty of revenue and cash flows arising from an entity's contracts with customers. It is effective for periods beginning on or after 1 January 2018, i.e. Group's financial year ending June 2019. An initial assessment of the change has been carried out and the impact on the Group is considered to be immaterial.

·      IFRS 16, 'Leases' addresses the definition of a lease, recognition and measurement of leases and establishes principles for reporting useful information to users of financial statements about leasing activities of both lessees and lessors. It is effective for periods beginning on or after 1 January 2019, i.e. Group's financial year ending June 2020. An initial assessment of the impact of IFRS 16 has been reviewed by management and further preparatory work is underway.

 

5  Segmental reporting

The Group has one reportable segment, in accordance with IFRS 8 - Operating Segments, which is the retail of homewares in the UK.

 

Customers access the Group's offer across multiple channels and often their journey involves more than one channel. Therefore, internal reporting focuses on the Group as a whole and does not identify individual segments.

 

The Chief Operating Decision Maker is the Executive Board of Directors of Dunelm Group plc. Internal management reports are reviewed by them on a monthly basis. Performance of the segment is assessed based on a number of financial and non-financial KPIs as well as on profit before taxation.

 

Management believe that these measures are the most relevant in evaluating the performance of the segment and for making resource allocation decisions.

 

All material operations of the reportable segment are carried out in the UK. The Group's revenue is driven by the consolidation of individual small value transactions and as a result Group revenue is not reliant on a major customer or group of customers.

 

6 Exceptional items

Exceptional items are those items which, due to their materiality, nature or infrequency, could distort an assessment of underlying business performance.

 

 

26 weeks ended
30 December
2017

26 weeks ended
31 December
2016

52 weeks ended
1 July
2017

 

 

£'m

£'m

£'m

Acquisition costs - administrator fees

 

-

0.9

0.9

Acquisition costs - other professional fees

 

-

0.4

0.4

Welcome payments for continuation of supply

 

-

7.3

7.3

Impact of fair value adjustment of acquired inventory

 

-

0.2

0.5

Key management retention bonuses

 

1.4

0.5

2.7

Asset write-offs, impairments and accelerated depreciation

 

1.0

-

2.9

Other integration costs

 

1.3

-

2.2

 

 

3.7

9.3

16.9

 

Exceptional items have occurred as a result of the acquisition of the Worldstores Group on 28 November 2016.

 

Key management retention bonuses are potentially payable over a three-year period, and have both retention and performance conditions attached.

 

6 Exceptional items (continued)

 

As a result of the acquisition, a review of the websites and other intangible IT assets of both the existing Dunelm business and the acquired business was undertaken. Decisions were made to integrate the available assets, and as a result, certain assets have been written off and others' useful economic lives have been reduced resulting in accelerated depreciation. Such cost items have been judged as exceptional and one-off in nature and not part of the underlying trading performance of the Group.

 

Other integration costs include professional advisory support and restructuring costs.

 

Of the above exceptional cost items, £1.3m are cash outflows in the period.

 

7 Taxation

The taxation charge for the interim period has been calculated on the basis of the estimated effective tax rate for the full year of 20.1% (26 weeks ended 31 December 2016: 20.9%).

 

 

8 Dividends

 

 

26 weeks ended
30 December
2017

26 weeks ended
31 December
2016

52 weeks ended
1 July
2017

 

 

£'m

£'m

£'m

Final for the period ended 2 July 2016

- paid 19.1 pence

-

38.5

38.5

Interim for the period ended 1 July 2017

- paid 6.5 pence

-

-

13.1

Final for the period ended 1 July 2017

- paid 19.5 pence

39.3

-

-

 

 

39.3

38.5

51.6

 

The Directors have declared an interim dividend of 7.0 pence per Ordinary Share for the period ended 30 December 2017. This equates to an interim dividend of £14.2m. The dividends will be paid on 13 April 2018 to shareholders on the register at the close of business on 23 March 2018.

 

The interim dividend has not been recognised as a liability in these interim financial statements, it will be recognised in the statement of changes in equity in the period ended 30 June 2018.

 

9 Earnings per share

Basic earnings per share is calculated by dividing the profit for the period attributable to equity holders of the Company by the weighted average number of Ordinary Shares in issue during the period excluding ordinary shares purchased by the Company and held as treasury shares.

 

For diluted earnings per share, the weighted average number of Ordinary Shares in issue is adjusted to assume conversion of all dilutive potential Ordinary Shares. These represent share options granted to employees where the exercise price is less than the average market price of the Company's Ordinary Shares during the period.

 

Weighted average numbers of shares:

 

 

26 weeks ended
30 December
2017

26 weeks ended
31 December
2016

52 weeks ended
1 July
2017

 

 

£'m

£'m

£'m

Weighted average number of shares in issue during the period

201.7

201.6

201.6

Impact of share options

 

0.8

0.7

1.0

Number of shares for diluted earnings per share

 

202.5

202.3

202.6

 

 

 

 

 

 

 

26 weeks ended
30 December
2017

26 weeks ended
31 December
2016

52 weeks ended
1 July
2017

 

 

£'m

£'m

£'m

Profit for the period

 

45.0

44.2

73.1

Profit for the period before exceptional costs

 

48.2

51.7

86.9

Earnings per Ordinary Share - basic (pence)

 

22.3

21.9

36.3

Earnings per Ordinary Share - basic before exceptional costs (pence)

23.9

25.6

43.1

Earnings per Ordinary Share - diluted (pence)

 

22.2

21.8

36.1

Earnings per Ordinary Share - diluted before exceptional costs (pence)

23.8

25.6

42.8


 

10 Intangible assets and property, plant and equipment

 

 

Intangible assets

Property, plant and equipment

Total

 

 

£'m

£'m

£'m

Cost

 

 

 

 

At 1 July 2017

 

53.1

344.5

397.6

Additions

 

6.3

24.7

31.0

Disposals

 

-

(3.0)

(3.0)

At 30 December 2017

 

59.4

366.2

425.6

Accumulated amortisation / depreciation

 

 

 

 

At 1 July 2017

 

25.6

149.3

174.9

Charge for the financial period

 

5.4

12.8

18.2

Disposals

 

-

(2.4)

(2.4)

At 30 December 2017

 

31.0

159.7

190.7

Net book value

 

 

 

 

At 1 July 2017

 

27.5

195.2

222.7

At 30 December 2017

 

28.4

206.5

234.9

 

 

11 Trade and other payables

 

 

26 weeks ended
30 December
2017

26 weeks ended
31 December
2016

52 weeks ended
1 July
2017

 

 

£'m

£'m

£'m

Current

 

 

 

 

Trade payables

 

63.7

60.5

78.7

Accruals and deferred income

 

41.8

40.0

42.4

Other taxation and social security

 

16.6

13.9

10.7

Other payables

 

1.4

0.6

1.3

Loan to third party - secured creditor

 

-

7.5

-

Total current trade and other payables

 

123.5

122.5

133.1

Non-current

 

 

 

 

Accruals and deferred income

 

40.7

40.6

39.8

Total non-current trade and other payables

 

40.7

40.6

39.8

Total trade and other payables

 

164.2

163.1

172.9

 

An amount of £7.5m was owed to a secured creditor as at 31 December 2016 relating to the acquisition of the Worldstores Group. This was paid during the second half of FY17.

 

Current accruals and deferred income include lease incentives of £4.6m (FY17 H1: £3.8m, FY17: £4.8) and capital accruals of £3.9m (FY17 H1: £2.1m, FY17: £4.9m).

 

11              Trade and other payables (continued)

 

The maturity analysis of non-current accruals and deferred income, all of which relate to lease incentives, is as follows:

 

 

26 weeks ended
30 December
2017

26 weeks ended
31 December
2016

52 weeks ended
1 July
2017

 

 

£'m

£'m

£'m

One to two years

 

5.8

5.5

5.9

Two to five years

 

16.0

15.7

15.6

After five years

 

18.9

19.4

18.3

 

 

40.7

40.6

39.8

 

12    Financial risk management and financial instruments

 

Financial risk factors

The Group's activities expose it to a variety of financial risks including foreign currency risk, fair value interest rate risk, credit risk and liquidity risk. The condensed interim financial statements do not include all financial risk management information and disclosures required in the annual financial statements; they should be read in conjunction with the Group's annual financial statements as at 1 July 2017. There have been no changes in any risk management policies since the year end.

 

Fair values

The fair value of the Group's financial assets and liabilities are equal to their carrying value. The fair value of foreign currency contracts are amounts required by the counterparties to cancel the contracts at the end of the period.

 

Fair value hierarchy

Financial instruments carried at fair value are required to be measured by reference to the following levels:

•              Level 1: quoted prices in active markets for identical assets or liabilities;

•              Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

•              Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

 

All derivative financial instruments carried at fair value have been measured by a Level 2 valuation method, based on observable market data.

 

13 Bank loans

 

 

26 weeks ended
30 December
2017

26 weeks ended
31 December
2016

52 weeks ended
1 July
2017

 

 

£'m

£'m

£'m

Total borrowings

 

150.0

125.0

140.0

Less: unamortised debt issue costs

 

(0.4)

(0.7)

(0.5)

Bank borrowings

 

149.6

124.3

139.5

 

 

 

 

 

Cash and cash equivalents

 

(15.3)

(20.5)

(17.4)

Net debt

 

134.3

103.8

122.1

 

 

The Company has medium term bank facilities of £150m (FY17 H1: £150m; FY17: £150m) committed until 9 February 2020. £150m of this facility was drawn down at 30 December 2017 (FY17 H1: £125m; FY17: £140m). The carrying amount of bank borrowings is materially equal to fair value. The Group also has an accordian option with a maximum facility of £75m, as well as an overdraft facility of £20m.

 

14 Capital Commitments

As at 30 December 2017 the Company had entered into capital contracts amounting to £3.7m (FY17 H1: £5.9m).

 

15 Post balance sheet events

On the 15 February we completed the disposal of the Achica business for a cash consideration of £600,000.

 

16 Announcement

The interim report was approved by the Board on 20 February 2018. Copies are available from www.corporate.dunelm.com.

 

 

 

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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Interim Results - RNS