TIDMDNLM
RNS Number : 9344P
Dunelm Group plc
15 February 2023
15 February 2023
Dunelm Group plc
Interim Results for the 26 weeks ended 31 December 2022
Strong performance and seizing the opportunity for sustainable
growth
Dunelm Group plc ("Dunelm" or "the Group"), the UK's leading
homewares retailer, today announces its interim results for the 26
weeks to 31 December 2022.
FY23 FY22 YoY
H1 H1
====================== ========== ========== ==========
Total
sales GBP835.0m GBP795.6m +5.0%
---------- ---------- ----------
Gross
margin 51.1% 52.8% -170bps
---------- ---------- ----------
Operating
costs:sales
ratio 36.6% 34.8% +180bps
---------- ---------- ----------
Profit
before
tax
(PBT) GBP117.4m GBP140.8m -16.6%
---------- ---------- ----------
Digital
%
total
sales(1) 34% 33% +1ppt
---------- ---------- ----------
Free GBP102.1m GBP106.3m -GBP4.2m
cash
flow
(2)
---------- ---------- ----------
Net GBP GBP47.7m -GBP29.5m
cash 18.2m
(3)
---------- ---------- ----------
Diluted earnings per
share 45.8p 55.4p -17.3%
---------- ---------- ----------
Ordinary
dividend
per
share 15p 14p +7.1%
---------- ---------- ----------
Special
dividend
per
share 40p 37p n/a
---------- ---------- ----------
Highlights
-- Strong sales growth of 5%, with total sales 43% higher than
H1 FY20 (pre-pandemic), as we helped customers manage their
household budgets
-- Customers responded well to the Dunelm offer across our
categories, with a significantly increased range on Dunelm.com,
where we launched c.10,000 new SKUs
-- 160bps market share gain in homewares and continued share gains in furniture(4)
-- Active customers 5.7% higher than last year(5) , with 4.8% increase in shopping frequency(6)
-- Three new stores opened, including one relocation
-- Tripled our 'Delivering Joy' campaign, with over 60,000
Christmas gifts donated to local causes
Financial highlights
-- Tight commercial discipline and operational grip delivered gross margin of 51.1%
-- PBT of GBP117.4m, down on the prior year as expected,
reflecting impact of Sale timing and strong post-pandemic demand in
the prior year, and inflationary impacts
-- GBP17m of investment in digitalisation, capability and
capacity to support future growth opportunity
-- Free cash flow of GBP102.1m, an excellent cash conversion of operating profit of 84%
-- Interim dividend of 15p (FY22 H1: 14p), an increase of 7.1%
-- Special dividend of 40p declared to return to target leverage
range of 0.2× - 0.6× net debt:EBITDA(7)
Outlook and current trading
-- Strong performance in the first half and a strong Winter Sale
-- Whilst customers have been resilient to date, the consumer outlook remains unpredictable
-- Our expectations for FY23 PBT remain unchanged(8)
Nick Wilkinson, Chief Executive Officer, commented :
"We are all learning to live in a new, complex and rapidly
evolving economic reality. Recognising this, our focus has been on
ensuring that we continue to offer outstanding value to our savvy
customers through a proposition which is committed to quality, at
the right price, across an expanding range of relevant products. We
believe that this is why we have continued to grow our sales,
customer numbers and market share.
"In this environment, agility, creativity and innovation are
more important than ever and we have endeavoured to make every
pound count, both for ourselves and for our customers, helping to
mitigate the impact of inflation. While we do this, it is important
that we also maintain our long-term thinking, invest for
sustainable growth and continue to ensure we are in a position to
seize the significant opportunities ahead of us.
"Much like during the pandemic, our customers, colleagues and
the communities we operate in will remember how businesses behaved
when times were tough, and we are confident that our approach of
offering outstanding value and choice for all will enable us to -
once again - emerge from this challenging period stronger than
ever."
1 Digital includes home delivery, Click & Collect and
tablet-based sales in store
2 Free cash flow is defined as net cash generated from operating
activities less capex (net of disposals) and business combinations,
net interest paid (including leases) and loan transaction costs,
and repayment of principal element of lease liabilities. A
reconciliation of operating profit to free cash flow is included in
the CFO review
3 Excluding lease liabilities. Full definition provided in the
table of alternative performance measures in the CFO review
(4) GlobalData UK homewares and furniture markets, January 2022
to December 2022. Furniture excludes kitchen and bathroom
furniture
(5) Unique active customers who have transacted at least once in
the 12 months to December 2022. Management estimates using Barclays
data
(6) Number of visits per retained customer in the 12 months to
December 2022. Retained customers defined as those who have shopped
with Dunelm in the 12 months to December 2021 and the 12 months to
December 2022. Source: Barclays
(7) Operating profit plus depreciation and amortisation of
property, plant and equipment and intangible assets plus loss on
disposal and impairment of property, plant and equipment and
intangible assets plus depreciation on right-of-use assets
(8) At our Preliminary results in September 2022, we confirmed
that we were on track to deliver FY23 PBT in line with analysts'
expectations. In September 2022, the company compiled consensus
average of analysts' expectations for FY23 PBT was GBP178m, with a
range of GBP130m to GBP193m. The current company compiled consensus
average of analysts' expectations for FY23 PBT is GBP176m, with a
range of GBP131m to GBP188m
Analyst Presentation:
There will be an in-person presentation for analysts and
institutional investors this morning at 9.30am, hosted at Peel Hunt
LLP, 100 Liverpool Street, London, EC2M 2AT, as well as a webcast
and conference call with a facility for Q&A. For details,
please contact pauline.guenot@mhpgroup.com . A copy of the
presentation will be made available at
https://corporate.dunelm.com
For further information please contact:
Dunelm Group plc investorrelations@dunelm.com
Nick Wilkinson, Chief Executive Officer
Karen Witts, Chief Financial Officer
MHP 07710 032 657
Simon Hockridge / Rachel Farrington / Pete Lambie dunelm@mhpgroup.com
Next scheduled event:
Dunelm will release its third quarter trading update on 20 April
2023.
Quarterly analysis:
52 weeks to 1 July 2023
Q1 Q2 H1 Q3 Q4 H2 FY
---------- ---------- ---------- --- --- --- ---
Total sales GBP356.7m GBP478.3m GBP835.0m
---------- ---------- ---------- --- --- --- ---
Total sales growth -8.3% 17.6% 5.0%
---------- ---------- ---------- --- --- --- ---
Digital % total
sales 33% 35% 34%
---------- ---------- ---------- --- --- --- ---
53 weeks to 2 July 2022
Q1 Q2 H1 Q3 Q4 H2 FY
---------- ---------- ---------- ---------- ---------- ---------- ------------
Total sales GBP388.8m GBP406.8m GBP795.6m GBP399.0m GBP386.7m GBP785.7m GBP1,581.4m
---------- ---------- ---------- ---------- ---------- ---------- ------------
27.4
Total sales growth 8.3% 12.9% 10.6% 68.6% 1.7% % 18.4%
---------- ---------- ---------- ---------- ---------- ---------- ------------
Digital % total
sales 33% 33% 33% 35% 37% 36 % 35%
---------- ---------- ---------- ---------- ---------- ---------- ------------
52 weeks to 26 June 2021
Q1 Q2 H1 Q3 Q4 H2 FY
---------- ---------- ---------- ---------- ---------- ---------- ------------
Total sales GBP359.1m GBP360.4m GBP719.4m GBP236.6m GBP380.2m GBP616.8m GBP1,336.2m
---------- ---------- ---------- ---------- ---------- ---------- ------------
Total sales growth 36.7% 11.8% 23.0% -16.8% 101.7% 30.4% 26.3%
---------- ---------- ---------- ---------- ---------- ---------- ------------
Digital % total
sales 30% 41% 35% 93% 37% 59% 46%
---------- ---------- ---------- ---------- ---------- ---------- ------------
Notes to Editors:
Dunelm is the UK's market leader in homewares, with a specialist
offering for customers across multiple categories via its 179
predominantly out-of-town superstores and website, dunelm.com.
The business was founded in 1979 as a market stall, selling
ready-made curtains. The first shop was opened in Leicester in
1984, with the first superstore opening in 1991. With a vision to
become the 1(st) Choice for Home, Dunelm offers quality, value and
style throughout its extensive product range, alongside services
such as Home Delivery, Click & Collect and Made to Measure
window treatments. From its textiles heritage in areas such as
bedding, curtains, cushions, quilts and pillows, Dunelm has
broadened its range into categories including furniture,
kitchenware, dining, lighting, outdoor, craft and decoration. Its
c.60,000 product lines include specialist own brands and labels
such as Dorma and Fogarty, sourced from long-term committed
suppliers.
Dunelm's purpose is 'To help create the joy of truly feeling at
home, now and for generations to come'. The business is
headquartered in Leicester and employs over 11,000 colleagues. It
has been listed on the London Stock Exchange since October 2006
(DNLM.L) and has a current market capitalisation of approximately
GBP2.3bn.
CHAIR'S STATEMENT
These are the first set of Interim results since I became Chair
of Dunelm and I am very pleased to be able to report that the
business has delivered another strong performance in the first half
of FY23. Dunelm's outstanding offer continues to resonate with
customers in these challenging and uncertain times, by providing
them with value, choice and relevance. I would like to thank all of
our 11,000 colleagues for their hard work and dedication and for
continuing to deliver an outstanding service to our customers every
day.
Sustainability and community are at the heart of what we do, and
are increasingly integrated with our day-to-day working practices.
We are making good progress on our 'Pathway to Zero', for example
in our Conscious Choice ranges, where we will soon have the first
products in store using materials like those recycled through our
own textiles take-back scheme. We were very pleased with our
'Delivering Joy' campaign, which saw more than 60,000 gifts - three
times as many as in the previous year - donated by our customers
and colleagues to support local causes over the festive period.
We have continued to strengthen our position as the UK's leading
homewares retailer with further market share gains in both
homewares and furniture. Our sales increased by 5% to GBP835.0m
(FY22 H1: GBP795.6m) in the first half of our financial year,
despite a strong comparative period. We generated profit before tax
of GBP117.4m (FY22 H1: GBP140.8m), and delivered free cash flow of
GBP102.1m (FY22 H1: GBP106.3m), a cash conversion rate of 84%.
The Board has declared an ordinary dividend of 15 pence per
share (FY22 H1: 14 pence), reflecting our strong financial
performance and our confidence in future growth. With our continued
strong cash generation, healthy balance sheet, and an ongoing
commitment to our published capital policy, the Board has also
declared a special dividend of 40 pence per share.
I would like to thank and congratulate my predecessor, Andy
Harrison, for his considerable achievements in his time at Dunelm.
Having joined the Board in 2014, Andy has left a strong legacy with
the business developing significant new capabilities during his
tenure, which provide us with a strong base on which we can build
for the future.
I am delighted to have taken on the Dunelm Chair role in January
this year, having joined the Board last September. I have long
admired Dunelm as a customer and over the last few months I have
thoroughly enjoyed visiting many of our stores and sites as well as
meeting some of our excellent suppliers. This is a business with
very special colleagues, who are ambitious and passionately
demonstrate their commitment to the company and its values.
The Board is fully committed to our strategy to become the 1st
Choice for Home and believes in the significant growth
opportunities ahead. Whilst we recognise ongoing uncertainty in the
macroeconomic and consumer environment, we are performing well and
will focus on being adaptable and maintaining strong operational
grip.
We will invest in providing outstanding products, service, value
and choice for our customers, gaining market share and continuing
to deliver for colleagues, communities, suppliers and
shareholders.
Alison Brittain
Chair
15 February 2023
CHIEF EXECUTIVE OFFICER'S REVIEW
Introduction
The first half of FY23 was characterised by more external
uncertainty, during which inflationary pressure on consumers was
high. It is in these ongoing turbulent times that our ability to
act with agility whilst continuing to listen and learn from our
customers really shines through and makes Dunelm's offer as
relevant as ever. Our increasing range of products across multiple
homewares and furniture categories, combined with outstanding
value, was able to play a key role in helping our customers both
manage their household budgets and feel good in their homes.
Ambition and adaptability are equally important in such a
challenging environment. We are ambitious about profitable growth
and, alongside the delivery of another set of strong financial
results, we continue to focus on digitalising the business and
building our capability and capacity as a platform for our future
growth. We see a lot of opportunity in a large market where - in a
number of categories - we are still in the early stages of our
development, with low shares. As we learn, build our capabilities
and expand our product range in these areas, we see a significant
runway for growth.
As the difficult economic climate continues to impact consumers
and businesses, we continue to adapt to these changes, both as a
business, and in response to our customers' evolving needs. We
learn as we adapt, and I am confident that Dunelm will continue to
develop as a stronger and better business as a result.
I offer my sincerest thanks to all my Dunelm colleagues, who
continue to serve our customers and support each other brilliantly.
Dunelm's continued success is testament to their hard work,
commitment and resilience in these challenging times.
H1 Review
A resilient performance with strong operational grip
We were pleased to deliver another strong performance in H1,
with total sales 5% higher than FY22 and 43% higher than the
comparable period in FY20 (pre-pandemic). While the year-on-year
comparatives reflect some shifts in the timing of our Sale
events(9) we saw good rates of underlying growth throughout the
half.
Our growth continues to be broad-based across our categories and
we continue to offer customers a wide choice of relevant products
at outstanding value. Items that helped savvy customers to manage
their budgets, such as heated airers and thermal curtains, were
particularly popular. We saw good growth in customer numbers which
increased by 5.7%(10) , and shopping frequency grew by 4.8%(11) .
Our market share in homewares improved by 160bps, and we also
gained share in the furniture market(12) , where we continue to
build our offer, particularly online. Sales increased in both
stores and digital channels, once again reflecting the strength of
our total retail system.
Our gross margin of 51.1% (FY22 H1: 52.8%) was consistent with
previous guidance. We have forward buying and hedging policies in
place that give us good visibility and provide a degree of
certainty over our input costs, helping us to manage our overall
margin structure across our categories and good/better/best pricing
hierarchies. Better visibility of some of the larger operating
costs also helped us to manage the impact of inflation. The
combination of robust sales and tight operational grip delivered
PBT of GBP117.4m, with a strong PBT margin of 14.1%. As expected,
this was lower than the FY22 H1 PBT of GBP140.8m, which benefitted
from a rescheduled Summer Sale and particularly high levels of
store sales, as stores reopened post pandemic.
In addition to this, strong free cash flow of GBP102.1m enabled
us to declare a special dividend of 40 pence per share alongside
our interim dividend of 15 pence per share, reflecting our
confidence in the future performance of the business and returning
leverage to within our target range.
(9) The Q1 comparative benefitted from the rescheduled Summer
Sale in 2021. Due to the 53 (rd) week at the end of FY22, six days
of the Winter Sale fell into Q2 this year (the Sale began in Q3
last year)
(10) Unique active customers who have transacted at least once
in the 12 months to December 2022. Management estimates using
Barclays data
(11) Number of visits per retained customer in the 12 months to
December 2022. Retained customers defined as those who have shopped
with Dunelm in the 12 months to December 2021 and the 12 months to
December 2022. Source: Barclays
(12) GlobalData UK homewares and furniture markets, January 2022
to December 2022. Furniture excludes kitchen and bathroom
furniture
Seizing the opportunity
Our purpose as a company is to help create the joy of truly
feeling at home, now and for generations to come. This purpose,
along with our ambitions and values, were set out before the
pandemic, reinforced during the pandemic and remain as relevant as
ever today. They have guided us as we have adapted quickly to a
rapidly evolving landscape, helping us to deliver continued market
share gains and profitable growth. Alongside being adaptable, we
have been confident enough to continue investing, to strengthen our
proposition for the long term, enabling us to digitalise and
transform. It is this adaptability and long-term focus that has
allowed Dunelm to thrive and demonstrate healthy returns on these
investments.
We have made great progress in recent years but are more excited
about the opportunities that lie ahead. There is enormous scope for
us to gain further market share across the homewares and furniture
landscapes and deliver profitable, sustainable growth long into the
future.
Market share runway
Dunelm operates in the large and fragmented markets of homewares
and furniture, with each featuring a significant number of
sub-categories. The combined market size is c.GBP23bn, with our
share of this total market being c.7%(13) . We have higher market
shares (in excess of 10%) in our longer-established homewares
categories, such as window dressings and bedding, which account for
c.GBP5bn of the total market. We believe we will continue to grow
share in these categories. There is further opportunity to optimise
our ranges, and for our brand and channels to reach more customers
and for their shopping experience to be easier and more
convenient.
The remaining homewares categories represent a market of
c.GBP9bn where our share is less than 10%. We are confident in
achieving higher share in all of these categories as our relatively
lower product maturity gives significant headroom for further
growth and share gain. The GBP9bn(13) furniture market, where we
currently have a very low share, is another substantial
opportunity.
Our broad range of categories, combined with our deep product
knowledge, provide an exciting runway for growth.
We have identified three priorities to seize this opportunity
and drive profitable and sustainable growth:
1) Strengthening our customer offer to provide unbeatable value
and choice;
2) Digitalising the total business; and
3) Bringing together our marketing ecosystem in order to acquire
and develop customers cost effectively.
(13) GlobalData UK homewares and furniture markets, January 2022
to December 2022. Furniture excludes kitchen and bathroom
furniture
1. Strengthening our customer offer
Product mastery is at the heart of the Dunelm business. Our
colleagues are passionate about offering our customers outstanding
value and quality for every space, style and budget. We are
constantly improving and innovating across our ranges.
We are increasingly seeing innovation in more sustainable
materials as an opportunity for further differentiation,
particularly when offered at affordable price points. We are
already making good progress, having launched our Conscious Choice
range last year. Conscious Choice offers sustainably-focused
own-brand lines, with each product being made from at least 50%
more sustainable materials (by weight) compared to conventional
alternatives. We recently extended this range to include our
polycotton bedding, which is now all made from recycled
polycotton.
We have also been innovating in product design, to offer
customers a broader range while maintaining value. For example,
changing the mix of raw materials to maintain a desired price point
without sacrificing quality, offering self-build alternatives in
furniture to offer customers more choice, and innovating in the
design of packaging to reduce transport costs.
The power of our total retail system gives us the opportunity to
extend and broaden our ranges beyond the physical limitations of
our store estate, while maintaining a curated offering. Our
'supplier to site' programme has allowed us to quickly test new
product and increase the choice available to customers with limited
commitment. This programme has gathered momentum in the first half,
with the introduction of c.10,000 additional SKUs into the product
range, and offers significant opportunity for further range
extension.
Our ambition is to continue to offer customers great value and
choice, and to achieve significant market share across all the
categories in which we operate. We are focused on developing our
capabilities and supplier relationships in our less mature
categories in order to achieve the same levels of product mastery
as we have in our heritage categories.
2. Digitalising the total business
We have been investing in technology for a number of years. We
refer to this as 'digitalisation', which means not just efficient
digital experiences on Dunelm.com, but also the wider introduction
of technology across the business and leveraging the data generated
to further improve our proposition and operations.
We have made great progress in building strong foundational
capabilities to provide a platform for future development and have
been strengthening our data capability and digitalising our total
business across five key areas:
1. Data and insight: Data platforms and capabilities for decision optimisation
2. Commercial operations: Product data, forecasting and range planning
3. Customer marketing: Personalised customer experience based on attitudes and behaviours
4. Shopping experience: Easy, seamless online and instore customer and colleague experience
5. Post-sales experience: Personal, high quality and efficient delivery, service and support
The foundational technology for our data platform is now in
place, and we are beginning to leverage the customer data and
marketing technology stack and our data and digitalisation
capability to power growth. We see a significant and exciting
opportunity ahead to both enhance our customer proposition and
improve our productivity.
In the first half, our work in this area delivered a number of
improvements to our proposition. We diversified our payment
options, introducing Apple Pay and 'Pay in 3', using functionality
from our new online payment platform. We introduced more convenient
delivery options, with a trial of parcel shop collections in London
and the Midlands. We are also trialling bookable consultations and
live chat, to give more customers access to the expert help
available from our store colleagues. We are excited about the
significant opportunities in our plan; over the next 12 months we
will introduce long term credit, achieve higher 'perfect order'
rates by shortening lead times and improving communications, and we
will also use our data to inform our plans for new stores and
refits.
Data and digitalisation are helping us to become more
productive. We launched self-help tools for customers for order
tracking, which provide both a better experience for our customers
and reduce calls to our customer care centre. We have worked hard
to reduce the number of separate home delivered parcels for single
orders by stocking products in multiple locations across our
distribution network. There are significant opportunities for
further improvement here, which we expect to progress over the next
year. We are well into a multi-year programme to improve our
commercial operations by introducing new tools for master data
management, forecasting and replenishment, and a new portal to help
us collaborate even more effectively with our suppliers. Once
complete, we will be able to bring products to market more quickly,
improve availability for our customers and reduce manual work for
our colleagues. As our customer data matures over time we have a
significant opportunity to offer customers more personalised
communications and experiences, further increasing the efficiency
of our marketing spend. We will begin using our single customer
view to test and learn over the coming year.
3. Marketing ecosystem evolution
Alongside product mastery and digitalisation, we are evolving
our marketing ecosystem to enable more cost effective customer
acquisition and development, which we believe offers a significant
competitive advantage. Our customer data platform is taking shape
and will continue to be progressed over the next 12 months. Our
online payment platform will be extended to our store estate,
enabling the matching of transactions to identify single customer
behaviour across all channels. We will supplement this
transactional data to gain deeper insight through a variety of
other data sources, including customer demographics, engagement
with marketing content and understanding of interactions with
customer services.
In recent years we have scaled up in brand, digital, and, most
recently, community marketing. The next stage of evolution is to
begin building on these strong foundations through personalised
content and activity. We recently introduced personalised
recommendations in our email campaigns and used a new model to
predict when customers will churn, enabling us to intervene with
appropriate communications.
The omni-channel combination of a national brand, digital reach
and local community of followers makes our ecosystem structurally
different to most competitors. Our largely exclusive product range
offers further differentiation, alongside the ability of our
colleagues to deliver on our brand purpose of helping create
joy.
Doing the right thing
We continue to strive to make decisions that are guided by our
values and deliver for all of our stakeholders in a balanced way.
We have much to learn but we are becoming bolder in our ambition
and delivering meaningful initiatives in support of our
ambitions.
In FY22 we rolled out our textiles take-back scheme nationwide,
allowing customers to return unwanted items, whether or not they
were purchased from Dunelm. We recently launched a new product
range, in our Conscious Choice assortment, using up to 100%
recycled fibres, with at least 40% of those materials coming from
pre-loved textiles like those generated from our take-back scheme.
The range reflects our commitment to creating a more circular
future, by recycling returned materials and developing products
from end-of-life items. The new range includes waffle cushion
covers, waffle throws, muslin throws and printed cushions. The
products feature at competitive price points, because we believe
sustainability should be accessible to all, and is a further
example of innovative product development in our heritage
categories.
Since 2020 we have been running our 'Delivering Joy' campaign in
the period up to Christmas, offering colleagues and customers the
chance to donate gifts which we distribute to local good causes.
This year we significantly increased awareness of the campaign via
social media and partnerships with national and local radio
stations. As a result we more than tripled the number of gifts
donated to over 60,000, in support of over 550 good causes.
Summary and Outlook
We delivered another strong performance in the first half, with
strong sales, tight operational grip, robust profits and cashflow,
and more customers who are shopping more often.
We remain committed to making sure our broad product ranges
continue to resonate, offering outstanding value for all styles and
budgets. We have a clear customer 1(st) plan for growth that will
enable us to strengthen our customer offer as a value retailer for
savvy home lovers, through product mastery, innovation and
outstanding execution. We now see an even bigger opportunity for
digitalisation, and using the data created to drive growth and
efficiency. We are developing a marketing ecosystem which is cost
effective at attracting and developing customers, and which we are
beginning to personalise. We continue to invest in these areas to
seize the opportunities for growth.
Whilst customers have been resilient to date, the outlook
remains unpredictable as consumers are still adapting to the new
economic reality. Our expectations for FY23 PBT remain unchanged
from previous results announcements(14) .
We are more excited than ever about the significant growth
runway ahead to grow market share and deliver sustainable growth
for all our stakeholders.
(14) At our Preliminary results in September 2022, we confirmed
that we were on track to deliver FY23 PBT in line with analysts'
expectations. In September 2022, the company compiled consensus
average of analysts' expectations for FY23 PBT was GBP178m, with a
range of GBP130m to GBP193m. The current company compiled consensus
average of analysts' expectations for FY23 PBT is GBP176m, with a
range of GBP131m to GBP 188m
Nick Wilkinson
Chief Executive Officer
15 February 2023
CHIEF FINANCIAL OFFICER'S REVIEW
Revenue
Total sales for the 26-week period to 31 December 2022 increased
by 5.0% to GBP835.0m (FY22 H1: GBP795.6m). Compared to FY20 (the
last fully comparable period), total sales grew by 42.7% (FY20 H1:
GBP585.0m).
26 weeks to 31 December 2022
FY23 YoY 3YoY
------------ ---------- --------
Total Group sales GBP835.0m +5.0% +42.7%
------------ ---------- --------
Digital % total 34% +1ppt +14ppts
sales
------------ ---------- --------
Homewares market 10.8 % +1.6ppts
share (15)
------------ ----------
Furniture market 2.1 % +0.2ppts
share (15)
------------ ----------
Our trading performance was robust, despite a strong comparative
period, with Q1 last year benefitting from pent up demand and our
rescheduled Summer Sale(16) . The YoY growth rate included a
benefit of c.2ppts from the timing of our Winter Sale, with this
impact due to reverse in the second half(17) .
We saw growth both in stores and online, with digital sales now
making up 34% of total sales, up 14ppts since H1 FY20. Digital
sales growth was particularly strong in the late Autumn and run-up
to Christmas. These growth rates reflect our highly relevant
product range and continued focus on delivering exceptional value
for money during a time when customers are facing high inflationary
pressures.
We continue to see broad-based growth across categories.
Customers responded well to our 'Winter Warm' and Christmas ranges.
As people try to find ways to mitigate heating costs, lines such as
rugs, thermal curtains and heated airers proved popular. Our make
and mend and haberdashery categories have also performed well as
customers look to repair and upcycle. Our offer is relevant all
year round and as the weather gets warmer, customers will find
products related to outdoor drying, spring cleaning the home, and
living and eating outdoors.
Our approach to retail pricing remains dynamic, and we have
implemented not just retail price increases, but also price
reductions in different categories as we balanced input cost
pressures with offering exceptional value.
For the calendar year 2022, the homewares market declined by
c.2% while we reported good growth for the year. In homewares, our
market share increased by 160bps to 10.8%(15) . We also gained
share in the furniture market, from a smaller base(15) .
(15) GlobalData UK homewares and furniture markets, January 2022
to December 2022. Furniture excludes kitchen and bathroom
furniture
(16) The 2021 Summer Sale was rescheduled and took place in Q1
FY22 (the Summer Sale usually takes place in Q4)
(17) Due to the 53(rd) week at the end of FY22, six days of the
Winter Sale fell into Q2 this year (the Sale began in Q3 last
year)
Gross margin
Gross margin of 51.1% was strong and in line with our
expectations that it would reduce from the temporarily higher level
seen during the pandemic period, with a reduction of 170bps in H1
FY23 (FY22 H1: 52.8%). There was also a modest gross margin
headwind of c.30bps from the timing of our Winter Sale.
We seek good visibility of input costs as we plan our purchasing
for each season and this helps to manage changes in raw material
prices, freight costs and foreign exchange within our margin rates.
Looking ahead, we expect H2 gross margin to be lower than H1 due to
the impact of the two Sale events and our full year gross margin
expectation is in line with our previous guidance of around
50%.
Operating costs
Total operating costs were GBP305.2m (FY22 H1: GBP277.0m),
representing an operating cost ratio of 36.6% (FY22 H1: 34.8%). The
operating cost ratio benefitted from the timing of the Winter Sale,
which increased sales in the half with relatively little additional
operating cost. The prior year operating cost:sales ratio was also
low, reflecting exceptionally strong sales, particularly in
stores.
Inflationary pressures, mainly on wages, increased operating
costs by c.GBP8m. We maintain a tight operational grip on costs and
worked hard to mitigate the impact of these increases through
operational efficiencies in stores and the supply chain. We
invested GBP11m in digitalisation and building new capability in
data, tech and insight and analytics. We are realising the benefits
of these investments through our sales growth, providing us with
confidence to continue to invest. The annualisation of the supply
chain capacity we invested in during FY22 and new store openings
added GBP6m to operating costs in the half. The expected withdrawal
of business rates relief, introduced in response to the pandemic,
increased operating costs by GBP3m.
We expect further inflationary cost pressures in the second half
and will continue to invest in capability to drive growth as we
digitalise the business. These increases will be partially offset
by lower stockholding costs as we reduce our inventory levels.
Profit and earnings per share
Operating profit of GBP121.8m was 14.6% lower than FY22 H1 (FY22
H1: GBP142.7m), reflecting the Summer Sale and store reopening
impacts in the comparative period.
Net finance costs of GBP4.4m (FY22 H1: GBP1.9m) included
interest on IFRS 16 lease liabilities of GBP2.6m (FY22 H1:
GBP2.4m). FY22 H1 included foreign exchange gains on the
revaluation of USD balances which did not recur this year.
Profit before tax in the period was GBP117.4m (FY22 H1:
GBP140.8m), a reduction of GBP23.4m year on year. Profit after tax
of GBP93.0m (FY22 H1: GBP113.4m) reflected an effective tax rate of
20.8% (FY22 H1: 19.5%). The increase in the effective tax rate is
broadly in line with the increase to the UK headline rate of
corporation tax. The effective tax rate was 30bps higher than the
UK headline rate, due to certain disallowable expenditures. We
expect the effective tax rate to continue to trend slightly above
the headline rate.
Basic earnings per share (EPS) for the period were 46.1 pence
(FY22 H1: 55.9 pence). Diluted earnings per share were 45.8 pence
(FY22 H1: 55.4 pence).
Cash generation and net cash
In the period, the Group generated GBP102.1m of free cash flow
(FY22 H1: GBP106.3m), with strong conversion of operating profit to
free cash flow of 84% (FY22 H1: 74%).
FY23 H1 FY22 H1
GBPm GBPm
Operating profit 121.8 142.7
-------- --------
Depreciation and amortisation(18) 38.9 38.1
-------- --------
Share-based payments 2.0 3.2
-------- --------
Net movement in working capital (1.9) (21.0)
-------- --------
Tax paid (17.9) (15.0)
-------- --------
Net cash generated from operating
activities 142.9 148.0
-------- --------
Capex and business combinations (12.5) (14.2)
-------- --------
Net interest and loan transaction costs(19) (0.9) (1.6)
-------- --------
Interest paid on lease liabilities (2.6) (2.4)
-------- --------
Repayment of principal element of lease
liabilities (24.8) (23.5)
-------- --------
Free cash flow 102.1 106.3
-------- --------
(18) Including impairment and loss on disposal
(19) Excluding interest on lease liabilities
There was a small working capital outflow of GBP1.9m in the
period (FY22 H1: GBP21.0m outflow). The FY22 H1 outflow reflected
the decision to build inventory in order to mitigate against the
risk of further supply chain disruption. Inventories at the end of
the period were GBP233.4m (FY22 H1: GBP204.4m), GBP29m higher than
H1 FY22, mainly due to inflation in the cost of inventories. We are
comfortable with the quality of our inventory, but we do expect
stock holding to reduce during H2. For the full year, we expect a
modest working capital inflow due to the lower stockholding.
Total capital investment was GBP12.5m (FY22 H1: GBP14.2m). This
included GBP11m spent on the three new stores opened in the period,
as well as refits of seven existing stores and decarbonisation
initiatives. We expect capital investment for the full year to be
c.GBP20-25m, depending on the timing of new store openings.
Cash tax paid was GBP17.9m (FY22 H1: GBP15.0m). FY22 H1 included
cash receipts in relation to research and development claims made
at the end of FY21.
In the period, the Group spent GBP7.0m (FY22 H1: GBP9.6m)
purchasing shares to be held in treasury to satisfy future
obligations under its employee share schemes. The Group held 2.1m
shares in treasury as at 31 December 2022.
After total dividend payments in the period of GBP52.4m (FY22
H1: GBP178.7m), the Group ended the year with net cash of GBP18.2m
(FY22 H1: GBP47.7m).
Banking agreements
In December 2021 the Group agreed a new GBP185m
sustainability-linked unsecured revolving credit facility ("RCF").
The facility had an initial term of four years, with an option to
extend by a maximum of a further two years at Dunelm's request,
subject to lender consent. In December 2022 the first option was
agreed, extending the facility until December 2026. The RCF
incorporates four sustainability-linked performance targets which
align with our ambitious sustainability plans, including our
commitment to pursue a Net Zero Pathway. We will report on our
achievements against these targets in our results announcement in
September 2023; we remain confident that we will achieve our
long-term targets. The terms of the RCF include covenants in
respect of leverage (net debt(20) to be no greater than 2.5×
adjusted EBITDA(21) ) and fixed charge cover (EBITDAR(22) to be no
less than 1.75× fixed charges(23) ), both of which were met
comfortably as at 31 December 2022. In addition, the Group
maintains GBP10m of uncommitted overdraft facilities.
2 (0) Excluding lease liabilities. Full definition provided in
the table of alternative performance measures in the CFO review
(21) Adjusted EBITDA defined as EBITDA less d epreciation on
right-of-use assets
(22) EBITDAR defined as EBITDA plus rent
(23) Fixed charges are defined as net interest costs plus
right-of-use asset depreciation plus rent
Capital and dividend policies
The Board policy on capital structure targets an average net
debt level (excluding lease obligations and short-term fluctuations
in working capital) of between 0.2× and 0.6× the last 12 months'
EBITDA(24) . The Group's dividend policy targets ordinary dividend
cover of between 1.75× and 2.25× earnings per share during the
financial year to which the dividend relates.
The Board will continue to consider returning surplus cash to
shareholders if average net debt, excluding lease liabilities, over
a period consistently falls below the minimum target of 0.2×
EBITDA(24) , subject to known and anticipated investment plans at
the time.
The Group's full capital and dividend policies are available on
our website at www.corporate.dunelm.com .
(24) EBITDA defined as operating profit plus d epreciation and
amortisation of property, plant and equipment and intangible assets
plus l oss on disposal and impairment of property, plant and
equipment and intangible assets plus d epreciation on right-of-use
assets
Dividends
Reflecting the strong performance in the first half of FY23 and
confidence in the full year outlook, the Board has declared an
interim ordinary dividend of 15 pence per share, totalling GBP30m.
The interim dividend will be paid on 11 April 2023 to shareholders
on the register on 17 March 2023.
Strong cash generation in the period has enabled the Board to
also declare a special dividend of 40 pence per share, totalling
GBP81m, returning the Group to its target leverage range. The
special dividend will be paid on 11 April 2023 to shareholders on
the register on 17 March 2023.
Principal risks and uncertainties
The Board regularly reviews and monitors the risks and
uncertainties which could have a material effect on the Group's
results. The principal risks and uncertainties that could lead to a
material impact have not significantly changed from those listed in
the FY22 Annual Report. A summary of the principal risks has been
provided below:
Risk Impact
Competition, Failure to respond to changing consumer needs e.g. the
market and shift towards online sales, personalisation, rental versus
customers ownership, sustainability and customer experience, and
to maintain a competitive offer (range, quality, value
and ease of shopping) could impact profitability and
limit opportunities for growth.
A downturn in the economy and consumer spending, aggressive
competitor activity (especially with cost price pressures)
could impact sales and profit.
----------------------------------------------------------------
Catastrophic Failure to withstand the impact of an external event
business events or combination of events that severely disrupts markets
and causes significant damage to all or a substantial
part of the Group's sales or operations (e.g. pandemic).
----------------------------------------------------------------
Brand damage Our customers expect us to deliver products that are
safe, compliant with legal and regulatory requirements,
and fit for purpose. Increasingly, customers also want
to know that products have been responsibly sourced and
that their environmental impact is minimised.
We must also ensure that our suppliers share and uphold
our approach to business ethics, human rights (including
safety and modern slavery) and the environment.
Failure to do so could result in harm to individuals
with the potential for customers, colleagues and other
stakeholders to lose confidence in the Dunelm brand.
----------------------------------------------------------------
People and The success of the business could be impacted if it fails
culture to attract, retain and motivate high-calibre colleagues.
Maintaining and evolving the culture of our business
(embodied in our shared values) is essential to delivering
our strategy and ensuring the long-term sustainability
of our business.
----------------------------------------------------------------
IT systems, Operations impacted by failure to develop technology
data and cyber to support the strategy, lack of systems availability
security due to cyber attack or other failure, and reputational
damage/fines due to loss of personal data.
----------------------------------------------------------------
Regulatory Fines, damages claims, and reputational damage could
and compliance be incurred if we fail to comply with legislative or
regulatory requirements, including consumer law, health
and safety, employment law, GDPR and data protection,
Bribery Act, or competition law.
----------------------------------------------------------------
Climate change Failure to anticipate and address the strategic, regulatory,
and environment and reputational impact of climate change and environmental
matters, and governmental, consumer and media action
in response to it.
----------------------------------------------------------------
Supply chain Changes in global supply chain capacity, labour shortages,
disruption ongoing disruption from Covid-19 and geo-political instability
may cause interruption to the supply of stock to our
stores and fulfilment of online orders which could impact
sales. Inflationary pressures linked to these challenges
could impact profitability.
----------------------------------------------------------------
Business efficiency Profitability could be impacted by failure to operate
the business efficiently or to manage margin volatility.
----------------------------------------------------------------
Finance and Progress against business objectives constrained by a
treasury lack of short-term funding and long term capital.
----------------------------------------------------------------
Alternative performance measures (APMs)
APM Definition, purpose and reconciliation to statutory
measure
Unique active 12-month rolling growth in unique active customers who
customers growth have shopped in the 12 months, based on Barclays transactional
data. Note that Barclays data represents approximately
10% of total Dunelm transactions. To measure whether
we are continuing to grow our active customer base -
from both new customers and retention of existing customers.
----------------------------------------------------------------
Total sales Equivalent to revenue (from all channels). This is net
of customer returns.
----------------------------------------------------------------
Digital sales Digital sales include home delivery, Click & Collect
(or Reserve & Collect before October 2019) and tablet-based
sales in store.
----------------------------------------------------------------
Digital % total Digital sales (as defined above) expressed as a percentage
sales of revenue. This is not a measure that we seek to maximise
in itself, but we measure it to track our adaptability
to changing customer behaviours.
----------------------------------------------------------------
Gross margin Gross profit expressed as a percentage of revenue. Measures
% the profitability of product sales prior to operating
costs.
----------------------------------------------------------------
Operating costs Operating costs expressed as a percentage of revenue.
to sales ratio To measure the growth of costs relative to sales growth.
----------------------------------------------------------------
EBITDA Earnings before interest, tax, depreciation, amortisation
and impairment. Operating profit plus depreciation and
amortisation of property, plant and equipment, right-of-use
assets and intangible assets plus loss on disposal and
impairment of property, plant and equipment and intangible
assets. Used in our capital and dividend policy.
----------------------------------------------------------------
Adjusted EBITDA EBITDA less d epreciation on right-of-use assets. To
measure compliance with bank covenants
----------------------------------------------------------------
EBITDAR EBITDAR is calculated as EBITDA plus rent. To measure
compliance with bank covenants
----------------------------------------------------------------
Effective tax Taxation expressed as a percentage of profit before taxation.
rate To measure how close we are to the UK corporation tax
rate and understand the reasons for any differences.
----------------------------------------------------------------
Capex (net Acquisition of intangible assets and acquisition of property,
of disposals) plant and equipment less proceeds on disposal of property,
plant and equipment and intangibles.
----------------------------------------------------------------
Free cash flow Free cash flow is defined as net cash generated from
operating activities less capex (net of disposals) and
business combinations, net interest paid (including leases)
and loan transaction costs, and repayment of principal
element of lease liabilities. Measures the cash generated
that is available for disbursement to shareholders.
----------------------------------------------------------------
Net cash/(debt) Cash and cash equivalents less total borrowings (as shown
in note 14). Excludes IFRS 16 lease liabilities.
----------------------------------------------------------------
Cash conversion Free cash flow expressed as a percentage of operating
profit.
----------------------------------------------------------------
Karen Witts
Chief Financial Officer
15 February 2023
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The directors confirm that these condensed interim financial
statements have been prepared in accordance with UK adopted
International Accounting Standard 34, 'Interim Financial Reporting'
and the Disclosure Guidance and Transparency Rules sourcebook of
the United Kingdom's Financial Conduct Authority 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 26 weeks and their impact on the condensed set of
financial statements, and a description of the principal risks and
uncertainties for the remaining 26 weeks of the financial year;
and
-- material related-party transactions in the first 26 weeks and
any material changes in the related-party transactions described in
the last annual report.
The maintenance and integrity of the Dunelm Group Plc website is
the responsibility of the directors; the work carried out by the
auditors does not involve consideration of these matters and,
accordingly, the auditors accept no responsibility for any changes
that might have occurred to the interim financial statements since
they were initially presented on the website.
The directors of Dunelm Group Plc are listed in the Company's
annual report for 2 July 2022. A list of current directors is
maintained on the Company's website: www.corporate.dunelm.com.
By order of the board
Nick Wilkinson Karen Witts
Chief Executive Officer Chief Financial Officer
15 February 2023 15 February 2023
INDEPENT REVIEW REPORT TO DUNELM GROUP PLC
Report on the condensed consolidated interim financial
statements
Our conclusion
We have reviewed Dunelm Group plc's condensed consolidated
interim financial statements (the "interim financial statements")
in the Interim Results of Dunelm Group plc for the 26 week period
ended 31 December 2022 (the "period").
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 UK adopted
International Accounting Standard 34, 'Interim Financial Reporting'
and the Disclosure Guidance and Transparency Rules sourcebook of
the United Kingdom's Financial Conduct Authority.
The interim financial statements comprise:
-- the consolidated statement of financial position as at 31 December 2022;
-- 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 Results
of Dunelm Group plc have been prepared in accordance with UK
adopted International Accounting Standard 34, 'Interim Financial
Reporting' and the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority.
Basis for conclusion
We conducted our review in accordance with International
Standard on Review Engagements (UK) 2410, 'Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity' issued by the Financial Reporting Council for use in the
United Kingdom ("ISRE (UK) 2410"). 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
Results and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the interim financial statements.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis for
conclusion section of this report, nothing has come to our
attention to suggest that the directors have inappropriately
adopted the going concern basis of accounting or that the directors
have identified material uncertainties relating to going concern
that are not appropriately disclosed. This conclusion is based on
the review procedures performed in accordance with ISRE (UK) 2410.
However, future events or conditions may cause the group to cease
to continue as a going concern.
INDEPENT REVIEW REPORT TO DUNELM GROUP PLC (CONTINUED)
Responsibilities for the interim financial statements and the
review
Our responsibilities and those of the directors
The Interim Results, including the interim financial statements,
is the responsibility of, and has been approved by the directors.
The directors are responsible for preparing the Interim Results in
accordance with the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority. In
preparing the Interim Results, including the interim financial
statements, the directors are responsible for assessing the group's
ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern basis
of accounting unless the directors either intend to liquidate the
group or to cease operations, or have no realistic alternative but
to do so.
Our responsibility is to express a conclusion on the interim
financial statements in the Interim Results based on our review.
Our conclusion, including our Conclusions relating to going
concern, is based on procedures that are less extensive than audit
procedures, as described in the Basis for conclusion paragraph of
this report. 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.
PricewaterhouseCoopers LLP
Chartered Accountants
Birmingham
15 February 2023
CONSOLIDATED INCOME STATEMENT
(UNAUDITED)
For the 26 weeks ended 31 December 2022
26 weeks 26 weeks 53 weeks
ended ended ended
31 December 25 December 2 July
2022 2021 2022
Note GBP'm GBP'm GBP'm
------------- ------------- ---------
Revenue 5 835.0 795.6 1,581.4
Cost of sales (408.0) (375.9) (772.0)
------------------------- ----- ------------- ------------- ---------
Gross profit 427.0 419.7 809.4
Operating costs (305.2) (277.0) (591.7)
------------------------- ----- ------------- ------------- ---------
Operating profit 121.8 142.7 217.7
Financial income 0.2 0.9 1.2
Financial expenses (4.6) (2.8) (6.1)
------------------------- ----- ---------
Profit before taxation 117.4 140.8 212.8
Taxation 6 (24.4) (27.4) (41.6)
Profit for the period 93.0 113.4 171.2
------------------------- ----- ------------- ------------- ---------
Earnings per Ordinary
Share - basic 8 46.1p 55.9p 84.5p
Earnings per Ordinary
Share - diluted 8 45.8p 55.4p 83.6p
------------------------- ----- ------------- ------------- ---------
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(UNAUDITED)
For the 26 weeks ended 31 December 2022
26 weeks 26 weeks 53 weeks
ended ended ended
31 December 25 December 2 July
2022 2021 2022
GBP'm GBP'm GBP'm
------------- ------------- ---------
Profit for the period 93.0 113.4 171.2
Other comprehensive (expense)/income:
Items that may be subsequently
reclassified to profit or loss:
Movement in fair value
of cash flow hedges (1.0) 5.7 32.4
Deferred tax on hedging
movements 1.7 (1.4) (5.3)
Other comprehensive income for
the period, net of tax 0.7 4.3 27.1
---------------------------------------- ------------- ------------- ---------
Total comprehensive
income for the period 93.7 117.7 198.3
----------------------------------------- ------------- ------------- ---------
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(UNAUDITED)
As at 31 December 2022
31 December 25 December 2 July
2022 2021 2022
Note GBP'm GBP'm GBP'm
Non-current assets
Intangible assets 9 7.7 12.1 9.9
Property, plant and equipment 9 175.0 169.3 173.7
Right-of-use assets 10 241.9 264.4 248.5
Deferred tax assets 4.6 7.7 4.1
Derivative financial
instruments 1.1 0.9 4.6
Total non-current assets 430.3 454.4 440.8
-------------------------------- ----- ------------ ------------ --------
Current assets
Inventories 11 233.4 204.4 223.0
Trade and other receivables 21.2 20.1 22.9
Current tax asset - - 1.1
Derivative financial
instruments 13.4 2.4 19.9
Cash and cash equivalents 40.2 47.7 30.2
Total current assets 308.2 274.6 297.1
-------------------------------- ----- ------------ ------------ --------
Total assets 738.5 729.0 737.9
-------------------------------- ----- ------------ ------------ --------
Current liabilities
Trade and other payables 12 (231.2) (204.8) (223.2)
Lease liabilities (53.4) (51.8) (52.8)
Current tax liability (4.8) (8.3) -
Derivative financial
instruments (1.8) (1.2) -
Total current liabilities (291.2) (266.1) (276.0)
-------------------------------- ----- ------------ ------------ --------
Non-current liabilities
Bank loans 14 (20.7) - (52.8)
Lease liabilities (217.5) (243.7) (225.3)
Provisions (5.5) (4.2) (5.5)
Derivative financial
instruments (2.3) (0.2) -
Total non-current liabilities (246.0) (248.1) (283.6)
-------------------------------- ----- ------------ ------------ --------
Total liabilities (537.2) (514.2) (559.6)
-------------------------------- ----- ------------ ------------ --------
Net assets 201.3 214.8 178.3
-------------------------------- ----- ------------ ------------ --------
Equity
Issued share capital 2.0 2.0 2.0
Share premium account 1.7 1.6 1.7
Capital redemption reserve 43.2 43.2 43.2
Hedging reserve 7.8 1.5 20.2
Retained earnings 146.6 166.5 111.2
Total equity 201.3 214.8 178.3
-------------------------------- ----- ------------ ------------ --------
Karen Witts
Chief Financial Officer
15 February 2023
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
For the 26 weeks ended 31 December 2022
26 weeks 26 weeks 53 weeks
ended ended ended
31 December 25 December 2 July
2022 2021 2022
Note GBP'm GBP'm GBP'm
Cash flows from operating
activities
Profit before taxation 117.4 140.8 212.8
Net financial expense 4.4 1.9 4.9
----- ------------- ------------- ---------
Operating profit 121.8 142.7 217.7
Depreciation and amortisation
of property, plant and equipment
and intangible assets 9 14.6 14.6 30.5
Depreciation on right-of-use
assets 10 24.2 23.4 48.6
Loss on disposal and impairment of property,
plant and equipment and intangible assets 0.1 0.1 0.3
(Gain) on disposal of right-of-use
assets - - (0.1)
Share based payments expense 2.0 3.2 4.8
Operating cash flow before movements
in working capital 162.7 184.0 301.8
Increase in inventories (10.4) (32.0) (40.3)
Decrease/(increase) in receivables 1.7 (7.1) (7.7)
Increase in payables 6.8 18.1 33.2
Net movement in working capital (1.9) (21.0) (14.8)
Tax paid (17.9) (15.0) (35.2)
------------- ------------- ---------
Net cash generated from operating
activities 142.9 148.0 251.8
Cash flows from investing
activities
Acquisition of intangible
assets (0.2) (0.5) (0.7)
Acquisition of property, plant
and equipment (12.3) (13.7) (23.3)
Acquisition of business combination - - (17.7)
Interest received 0.2 - 0.1
Net cash used in investing
activities (12.3) (14.2) (41.6)
Cash flows from financing
activities
Proceeds from exercise of
share options 0.2 0.2 3.9
Purchase of treasury shares (7.0) (9.6) (28.3)
Drawdowns on revolving credit
facility 80.0 - 85.0
Repayments of revolving credit
facility (112.0) - (31.0)
Interest paid and loan transaction
costs (1.1) (1.6) (2.2)
Interest paid on lease liabilities (2.6) (2.4) (4.8)
Repayment of principal element
of lease liabilities (24.8) (23.5) (50.2)
Dividends paid 7 (52.4) (178.7) (282.1)
Net cash flows used in financing
activities (119.7) (215.6) (309.7)
------------------------------------------ ----- ------------- ------------- ---------
Net increase/(decrease) in cash
and cash equivalents 10.9 (81.8) (99.5)
Foreign exchange revaluations (0.9) 0.9 1.1
Cash and cash equivalents at the
beginning of the period 30.2 128.6 128.6
Cash and cash equivalents at
the end of the period 40.2 47.7 30.2
------------------------------------------ ----- ------------- ------------- ---------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(UNAUDITED)
For the 26 weeks ended 31 December 2022
Note Issued Share Capital Hedging Retained Total
share premium redemption reserve earnings equity
capital account reserve attributable
to equity
holders
of the
Parent
GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
------------------------------------ ----- --------- --------- ------------ --------- ---------- --------------
As at 2 July 2022 2.0 1.7 43.2 20.2 111.2 178.3
Profit for the period - - - - 93.0 93.0
Movement in fair value of
cash flow hedges - - - (1.0) - (1.0)
Deferred tax on hedging
movements - - - 1.7 - 1.7
------------------------------------ ----- --------- --------- ------------ --------- ---------- --------------
Total comprehensive income
for the period - - - 0.7 93.0 93.7
------------------------------------ ----- --------- --------- ------------ --------- ---------- --------------
Proceeds from issue of treasury
shares - - - - 0.2 0.2
Purchase of treasury shares - - - - (7.0) (7.0)
Share based payments - - - - 2.0 2.0
Deferred tax on share based
payments - - - - (0.7) (0.7)
Current tax on share options
exercised - - - - 0.3 0.3
Movement on cash flow hedges transferred
to inventory - - - (13.1) - (13.1)
Dividends paid 7 - - - - (52.4) (52.4)
------------------------------------ ----- --------- --------- ------------ --------- ---------- --------------
Total transactions with owners,
recorded directly in equity - - - (13.1) (57.6) (70.7)
------------------------------------------- --------- --------- ------------ --------- ---------- --------------
As at 31 December 2022 2.0 1.7 43.2 7.8 146.6 201.3
------------------------------------ ----- --------- --------- ------------ --------- ---------- --------------
As at 26 June 2021 2.0 1.6 43.2 (4.3) 238.7 281.2
------------------------------------ ----- --------- --------- ------------ --------- ---------- --------------
Profit for the period - - - - 113.4 113.4
Movement in fair value of
cash flow hedges - - - 5.7 - 5.7
Deferred tax on hedging
movements - - - (1.4) - (1.4)
------------------------------------ ----- --------- --------- ------------ --------- ---------- --------------
Total comprehensive income
for the period - - - 4.3 113.4 117.7
------------------------------------ ----- --------- --------- ------------ --------- ---------- --------------
Proceeds from issue of treasury
shares - - - - 0.2 0.2
Purchase of treasury shares - - - - (9.6) (9.6)
Share based payments - - - - 3.2 3.2
Deferred tax on share based
payments - - - - (1.1) (1.1)
Current tax on share options
exercised - - - - 0.4 0.4
Movement on cash flow hedges transferred
to inventory - - - 1.5 - 1.5
Dividends paid 7 - - - - (178.7) (178.7)
------------------------------------ ----- --------- --------- ------------ --------- ---------- --------------
Total transactions with owners,
recorded directly in equity - - - 1.5 (185.6) (184.1)
--------- --------- ------------ --------- ---------- --------------
As at 25 December 2021 2.0 1.6 43.2 1.5 166.5 214.8
------------------------------------ ----- --------- --------- ------------ --------- ---------- --------------
NOTES TO THE INTERIM FINANCIAL STATEMENTS
For the 26 weeks ended 31 December 2022 (UNAUDITED)
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 online.
The Group's financial results and cash flows are subject to
seasonal trends between the first and second half of the financial
period. Traditionally, revenue and profit are higher in the first
half of the financial period due to the performance of seasonal
lines and the timing of sale events.
2 Basis of preparation
This condensed consolidated interim financial report for the
half-year reporting period ended 31 December 2022 has been prepared
in accordance with the UK-adopted International Accounting Standard
34, 'Interim Financial Reporting' and the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority.
The interim report does not include all of the notes of the type
normally included in an annual financial report. Accordingly, this
report is to be read in conjunction with the annual report for the
year ended 2 July 2022, which has been prepared in accordance with
UK-adopted International Accounting Standards and with the
requirements of the Companies Act 2006 as applicable to companies
reporting under those standards.
3 Going concern basis
The interim financial statements have been prepared on a going
concern basis. In adopting the going concern basis, the Board of
Directors have considered the current financial position of the
Group, its strategy, the market outlook, and its principal risks.
The Directors have also considered the Group's current cash
position and its available facilities, including the Group's
Revolving Credit Facility ('RCF') committed until 9 December 2026,
which may be extended by a further year at Dunelm's request,
subject to lender consent. Furthermore, cash flow forecasts have
demonstrated that covenants will continue to be comfortably met
even in downside scenarios such as a general economic downturn
resulting in consumers switching away from spending on homewares.
Following this review, the Directors have a reasonable expectation
that the Group has adequate resources to continue in operational
existence for the foreseeable future and they continue to adopt the
going concern basis of accounting in preparing these interim
financial statements.
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, as well as significant
judgements and key estimates applied, are consistent with those in
the annual financial statements for the period ended 2 July 2022,
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.
NOTES TO THE INTERIM FINANCIAL STATEMENTS (CONTINUED)
For the 26 weeks ended 31 December 2022 (UNAUDITED)
5 Revenue
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.
6 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 20.8% (26 weeks ended 25 December 2021: 19.5%, 53 weeks ended 02
July 2022: 19.5%).
7 Dividends
26 weeks 26 weeks 53 weeks
ended ended ended
31 December 25 December 2 July 2022
2022 2021
GBP'm GBP'm GBP'm
--------------------------------- ------------- ------------- ------------- -------------
Final dividend for the period - paid 23.0
ended 26 June 2021 pence - 46.8 46.8
Special dividend for the period - paid 65.0
ended 26 June 2021 pence - 131.9 131.9
Interim dividend for the period - paid 14.0
ended 2 July 2022 pence - - 28.3
Special dividend for the period - paid 37.0
ended 2 July 2022 pence - - 75.1
Final dividend for the period - paid 26.0 52.4 - -
ended 2 July 2022 pence
52.4 178.7 282.1
----------------------------------------------- ------------- ------------- -------------
The Directors have declared an interim dividend of 15.0 pence
per Ordinary Share for the financial year ending 1 July 2023. This
equates to an interim dividend of GBP30.2m. The dividend will be
paid on 11 April 2023 to shareholders on the register at the close
of business on 17 March 2023. The Directors have also declared a
special dividend of 40.0 pence per Ordinary Share for the period
ending 1 July 2023 which equates to GBP80.6m. This will be paid on
11 April 2023 to shareholders on the register at the close of
business on 17 March 2023.
The interim and special dividends have not been recognised as a
liability in these interim financial statements. They will be
recognised in the Consolidated Statement of Changes in Equity in
the period ending 1 July 2023.
NOTES TO THE INTERIM FINANCIAL STATEMENTS (CONTINUED)
For the 26 weeks ended 31 December 2022 (UNAUDITED)
8 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 26 weeks ended 53 weeks
ended 25 December ended
31 December 2021 2 July 2022
2022
'000 '000 '000
--------------------------------------- ------------- --------------- -------------
Weighted average number of shares
in issue during the period 201,802 202,899 202,722
Impact of share options 1,044 1,806 2,135
Number of shares for diluted earnings
per share 202,846 204,705 204,857
----------------------------------------- ------------- --------------- -------------
26 weeks 26 weeks ended 53 weeks
ended 25 December ended
31 December 2021 2 July 2022
2022
Profit for the period (GBP'm) 93.0 113.4 171.2
----------------------------------------- ------------- --------------- -------------
Earnings per Ordinary Share - basic 46.1p 55.9p 84.5p
Earnings per Ordinary Share - diluted 45.8p 55.4p 83.6p
----------------------------------------- ------------- --------------- -------------
9 Intangible assets and property, plant and equipment
Intangible Property,
assets plant and
equipment
GBP'm GBP'm
--------------------------------- ----------- -----------
Cost
At 2 July 2022 64.1 403.2
Additions 0.1 13.7
Disposals (0.2) (7.1)
At 31 December 2022 64.0 409.8
------------------------------------ ----------- -----------
Accumulated amortisation
/ depreciation
At 2 July 2022 54.2 229.5
Charge for the financial period 2.3 12.3
Disposals (0.2) (7.0)
At 31 December 2022 56.3 234.8
------------------------------------ ----------- -----------
Net book value
At 2 July 2022 9.9 173.7
At 31 December 2022 7.7 175.0
------------------------------------ ----------- -----------
All amortisation and depreciation charges have been included
within operating costs in the Consolidated Income Statement.
NOTES TO THE INTERIM FINANCIAL STATEMENTS (CONTINUED)
For the 26 weeks ended 31 December 2022 (UNAUDITED)
10 Leases
Right-of-use assets included in the Consolidated Statement of
Financial Position at 31 December 2022 were as follows:
Land and Motor vehicles, Total
buildings plant and
equipment
GBP'm GBP'm GBP'm
At 2 July 2022 240.4 8.1 248.5
Additions 17.2 5.9 23.1
Disposals (5.4) (0.1) (5.5)
Depreciation (22.3) (1.9) (24.2)
At 31 December 2022 229.9 12.0 241.9
=========== ================ =======
Lease liabilities included in the Consolidated Statement of
Financial Position at 31 December 2022 were as follows:
Land and Motor vehicles, Total
buildings plant and
equipment
GBP'm GBP'm GBP'm
At 2 July 2022 (270.1) (8.0) (278.1)
Additions (18.0) (5.9) (23.9)
Disposals 5.3 0.1 5.4
Interest (2.5) (0.1) (2.6)
Repayment of lease liabilities 26.3 2.0 28.3
At 31 December 2022 (259.0) (11.9) (270.9)
=========== ================ ========
The discount rate applied to lease liabilities ranged between
0.9% and 5.1% (FY22 H1: 0.9% and 2.1%, FY22: 0.9% and 2.8%).
The following amounts have been recognised in the Consolidated
Income Statement:
26 weeks 26 weeks 53 weeks
ended ended ended
31 December 25 December 2 July 2022
2022 2021
GBP'm GBP'm GBP'm
Depreciation of right-of-use
assets 24.2 23.4 48.6
Loss on disposal of right-of-use
assets (0.1) - (0.1)
Interest expenses (included in
financial expenses) 2.6 2.4 4.8
Expense relating to short-term
leases 0.7 0.3 0.6
============= ============= =============
The total cash outflow for the leases during the financial
period was GBP27.4m (FY22 H1: GBP25.9m, FY22: GBP55.0m).
NOTES TO THE INTERIM FINANCIAL STATEMENTS (CONTINUED)
For the 26 weeks ended 31 December 2022 (UNAUDITED)
11 Inventories
31 December 25 December 2 July 2022
2022 2021
GBP'm GBP'm GBP'm
------------------ -------------- -------------- --------------
Raw materials 1.7 - 1.7
Work in progress 1.3 - 1.6
Goods for resale 230.4 204.4 219.7
-------------- -------------- --------------
233.4 204.4 223.0
------------------ -------------- -------------- --------------
Goods for resale includes a net realisable value provision of
GBP23.2m (FY22 H1: GBP17.1m, FY22: GBP21.4m). Write-downs of
inventories to net realisable value in the 26 weeks to 31 December
2022 amounted to GBP11.5m (26 weeks ended 25 December 2021:
GBP8.4m, 53 weeks ended 02 July 2022: GBP20.1m). These were
recognised as an expense during the period and were included in
cost of sales in the Consolidated Income Statement.
12 Trade and other payables
31 December 2022 25 December 2021 2 July 2022
GBP'm GBP'm GBP'm
-------------------------------- ------------------- ------------------- --------------
Current
Trade payables 107.3 87.2 98.3
Accruals 65.6 62.5 74.3
Deferred income 16.9 12.0 12.5
Taxation and social security 39.0 42.8 34.0
Other payables 2.4 0.3 4.1
Total trade and other payables 231.2 204.8 223.2
---------------------------------- ------------------- ------------------- --------------
13 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 2 July 2022. 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)
-- 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.
NOTES TO THE INTERIM FINANCIAL STATEMENTS (CONTINUED)
For the 26 weeks ended 31 December 2022 (UNAUDITED)
14 Bank loans
31 December 25 December 2 July 2022
2022 2021
GBP'm GBP'm GBP'm
----------------------------------- --------------- -------------- --------------
Total borrowings 22.0 - 54.0
Less: unamortised debt issue
costs* (1.3) (1.4) (1.2)
Net borrowings 20.7 (1.4) 52.8
------------------------------------- --------------- -------------- --------------
* Unamortised debt issue costs included in other
receivables as at 25 December 2021.
Net cash/(debt) represented
by 31 December 25 December 2 July 2022
2022 2021
Cash and cash equivalents 40.2 47.7 30.2
Total borrowings (22.0) - (54.0)
------------------------------------- --------------- -------------- --------------
Net cash/(debt) 18.2 47.7 (23.8)
------------------------------------- --------------- -------------- --------------
The Company has medium term bank facilities of GBP185m (FY22 H1:
GBP185m; FY22: GBP185m) committed until 9 December 2026, which may
be extended by a further year at Dunelm's request, subject to
lender consent. This is with an associated accordion facility of
GBP75m, subject to lender consent (FY22 H1: GBP75m; FY22: GBP75m).
As at 31 December 2022 GBP22m of this facility was drawn down (FY22
H1: nil; FY22: GBP54m). The Group also has an uncommitted overdraft
facility of GBP10m.
15 Capital Commitments
As at 31 December 2022 the Company had entered into capital
contracts amounting to GBP9.5m (FY22 H1: GBP2.0m; FY22:
GBP4.7m).
16 Announcement
The interim report was approved by the Board on 15 February
2023. Copies are available from www.corporate.dunelm.com.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
IR USRARONUUAUR
(END) Dow Jones Newswires
February 15, 2023 02:00 ET (07:00 GMT)
Dunelm (LSE:DNLM)
Historical Stock Chart
From Jun 2024 to Jul 2024
Dunelm (LSE:DNLM)
Historical Stock Chart
From Jul 2023 to Jul 2024
