TIDMDNLM
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 FY18 FY17 FY17 Year-on-year Year-on-
H1 FY18 H1 H1 FY17 H1 change year
H1 H1 change
Underlying
Reported
Underlying* Reported Underlying Reported
Exceptional Exceptional
items items
--------------- ------------ ------------- ----------- ----------- ------------- ----------- ------------- ---------
Total revenues GBP545.4m GBP545.4m GBP460.5m GBP460.5m +18.4% +18.4%
--------------- ------------ ------------- ----------- ----------- ------------- ----------- ------------- ---------
Like-for-like
sales GBP469.3m GBP469.3m GBP442.6m GBP442.6m +6.0% +6.0%
--------------- ------------ ------------- ----------- ----------- ------------- ----------- ------------- ---------
Gross margin 48.6% 48.6% 50.4% 50.4% -180bps -180bps
--------------- ------------ ------------- ----------- ----------- ------------- ----------- ------------- ---------
EBITDA GBP79.1m -GBP2.7m GBP76.4m GBP80.7m -GBP9.3m GBP71.4m -2.0% 7.0%
--------------- ------------ ------------- ----------- ----------- ------------- ----------- ------------- ---------
Profit
before
tax GBP60.0m -GBP3.7m GBP56.3m GBP65.2m -GBP9.3m GBP55.9m -8.0% 0.7%
--------------- ------------ ------------- ----------- ----------- ------------- ----------- ------------- ---------
Free cash
flow GBP27.8m GBP19.0m +46.0%
--------------- ------------ ------------- ----------- ----------- ------------- ----------- ------------- ---------
Net debt -GBP134.3m -GBP103.8m -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%
--------------- ------------ ------------- ----------- ----------- ------------- ----------- ------------- ---------
*Underlying numbers exclude exceptional items associated with
the acquisition of Worldstores on 28 November 2016
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 GBP79.1m (pre-exceptional items) down 2.0%
year-on-year reflecting investment for growth and consolidation of
Worldstores trading losses.
-- EBTIDA (post exceptional items) of GBP76.4m up 7% year-on-year.
-- PBT pre-exceptional items down 8.0% to GBP60.0m, and up 0.7%
to GBP56.3m 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 GBP12bn UK homewares market and
active in the GBP11bn 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 GBP1.3bn.
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 GBP2bn,
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 GBP65.2m last year
to GBP60.0m. Pre-tax profits, after exceptional costs, rose by 0.7%
to GBP56.3m 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 GBP600,000.
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 GBP2bn, 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.GBP7-8m, of which c.GBP5.6m was in the first half. The
annualised (run rate) losses of the Worldstores businesses will
have been reduced from cGBP20m 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 GBP545.4m (FY17 H1: GBP460.5m). 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 YoY Growth YoY Growth
(GBPm) (GBPm) (%)
------------------- -------- ----------- -----------
LFL Stores(1) 423.2 14.3 3.5%
------------------- -------- ----------- -----------
LFL Online(2) 46.0 12.4 36.8%
------------------- -------- ----------- -----------
Total LFL 469.3 26.7 6.0%
------------------- -------- ----------- -----------
Non-LFL Stores(3) 35.2 25.0
------------------- -------- ----------- -----------
Non-LFL Online(4) 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
GBP203.7m, an increase of GBP37.7m 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 GBP16.9m.
-- Store costs increased by GBP9.2m, largely as a result of
opening a net nine new stores in the half.
-- Marketing increased by GBP1.5m; increased spend on digital
marketing and investment in brand marketing and seasonal campaigns
to drive customer awareness.
-- Depreciation increased by GBP3.4m 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 GBP1.4m
--------------------------------- ---------
Asset write-offs, impairments GBP1.0m
and accelerated depreciation
--------------------------------- ---------
Other integration costs GBP1.3m
--------------------------------- ---------
GBP3.7m
--------------------------------- ---------
Exceptional items have occurred as a result of the acquisition
of the Worldstores Group on 28 November 2016. GBP16.9m of
exceptional costs were reported in the prior year, with a further
GBP3.7m in this half, taking the total incurred to date to
GBP20.6m. 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, GBP1.3m relates to cash outflows
in the period. We currently anticipate that approximately GBP3m 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 GBP0.5m to GBP1.0m.
Profit and Earnings per Share
Operating profit before exceptional items for the period was
GBP61.3m (FY17 H1: GBP66.3m), a decrease of GBP5.0m (-7.5%). This
is predominantly related to the consolidation of an additional five
months (GBP5.1m) 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 GBP57.6m (FY17 H1: GBP57.0m)
after GBP3.7m of exceptional items that were incurred as part of
the acquisition of Worldstores Group (FY17 H1: GBP9.3m).
Earnings before interest, tax, depreciation and amortisation
(EBITDA) before exceptional cash items reduced by 2.0% to GBP79.1m
(FY17 H1: GBP80.7m). The EBITDA before exceptional items margin
achieved was 14.5% (FY17 H1: 17.5%).
There was a net cost of GBP1.3m (FY17 H1: GBP1.1m) 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 GBP1.1m (FY17 H1: GBP0.8m) and
losses of GBP0.2m (FY17 H1: GBP0.3m) resulting from foreign
exchange differences on the translation of dollar denominated
assets and liabilities.
Profit before tax and exceptional costs was GBP60.0m (FY17 H1:
GBP65.2m), a reduction of 8.0% year-on-year. Profit before tax
(PBT) after exceptional costs increased by GBP0.4m to GBP56.3m.
Profit after tax of GBP45.0m (FY17 H1: GBP44.2m) 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 GBP59.8m (FY17 H1: GBP53.0m) of net
cash from operating activities, an increase of 12.8%.
Period end working capital increased by GBP11.3m (FY17 H1:
GBP5.6m increase). The majority of the movement relates to a
reduction in payables (GBP9.1m) as a result of later purchasing of
stock for Spring/Summer launch compared to Autumn/Winter launch.
Additionally, inventories increased by GBP1.9m 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 GBP31.0m in the period (FY17 H1:
GBP33.3m). Spend in the period included investment in ten new store
openings (GBP15.7m), investment in IT infrastructure (GBP6.3m) and
store refit expenditure in existing stores (GBP8.9m).
Free cash flow, defined as net cash generated from operating
activities less net cash used in investing activities, was GBP27.8m
(FY17 H1: GBP19.0m) an increase of 46%. No further purchases of
shares into treasury were made in the period (FY17 H1: GBP4.2m 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 GBP14.2m), 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 GBP150m 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 GBP20m of uncommitted overdraft
facilities with two syndicate partner banks and has an accordian
option with a maximum facility of GBP75m.
Net debt at 30 December 2017 was GBP134.3m compared with net
debt of GBP122.1m at 1 July 2017. Daily average net debt
(facilities drawn plus cash at bank) was GBP117m (FY17 H1:
GBP77.6m). 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
INDEPENT 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
26 weeks ended 26 weeks ended 52
30 December 2017 31 December 2016 weeks
ended
1 July
2017
Note (unaudited) (unaudited) (audited)
Underlying Exceptional Reported Underlying Exceptional Reported Reported
Items Items
(Note (Note
6) 6)
GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm GBP'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 26 weeks 52 weeks
ended ended ended
30 December 31 December 1 July
2017 2016 2017
(unaudited) (unaudited) (audited)
GBP'm GBP'm GBP'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 31 December 1 July
2017 2016 2017
(unaudited) (unaudited) (audited)
GBP'm GBP'm GBP'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 - 0.3 -
instruments
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 26 weeks 52 weeks
ended ended ended
30 December 31 December 1 July
2017 2016 2017
(unaudited) (unaudited) (audited)
GBP'm GBP'm GBP'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
Issued Share Capital
share premium redemption Hedging Retained Total
Note capital account reserve reserve earnings equity
GBP'm GBP'm GBP'm GBP'm GBP'm GBP'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 26 weeks 52 weeks
ended ended ended
30 December 31 December 1 July
2017 2016 2017
GBP'm GBP'm GBP'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, GBP1.3m 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 26 weeks 52 weeks
ended ended ended
30 December 31 December 1 July
2017 2016 2017
GBP'm GBP'm GBP'm
------------------------ ------------- ------------- ------------- ---------
Final for the period - paid 19.1
ended 2 July 2016 pence - 38.5 38.5
Interim for the period - paid 6.5
ended 1 July 2017 pence - - 13.1
Final for the period - paid 19.5 39.3 - -
ended 1 July 2017 pence
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 GBP14.2m. 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 26 weeks 52 weeks
ended ended ended
30 December 31 December 1 July
2017 2016 2017
GBP'm GBP'm GBP'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 26 weeks 52 weeks
ended ended ended
30 December 31 December 1 July
2017 2016 2017
GBP'm GBP'm GBP'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 Property, Total
assets plant
and equipment
GBP'm GBP'm GBP'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 26 weeks 52 weeks
ended ended ended
30 December 31 December 1 July
2017 2016 2017
GBP'm GBP'm GBP'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 - - 7.5 -
secured creditor
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 GBP7.5m 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
GBP4.6m (FY17 H1: GBP3.8m, FY17: GBP4.8) and capital accruals of
GBP3.9m (FY17 H1: GBP2.1m, FY17: GBP4.9m).
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 26 weeks 52 weeks
ended ended ended
30 December 31 December 1 July
2017 2016 2017
GBP'm GBP'm GBP'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 26 weeks 52 weeks
ended ended ended
30 December 31 December 1 July
2017 2016 2017
GBP'm GBP'm GBP'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 GBP150m (FY17 H1:
GBP150m; FY17: GBP150m) committed until 9 February 2020. GBP150m of
this facility was drawn down at 30 December 2017 (FY17 H1: GBP125m;
FY17: GBP140m). The carrying amount of bank borrowings is
materially equal to fair value. The Group also has an accordian
option with a maximum facility of GBP75m, as well as an overdraft
facility of GBP20m.
14 Capital Commitments
As at 30 December 2017 the Company had entered into capital
contracts amounting to GBP3.7m (FY17 H1: GBP5.9m).
15 Post balance sheet events
On the 15 February we completed the disposal of the Achica
business for a cash consideration of GBP600,000.
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
END
IR UKUARWBAUAUR
(END) Dow Jones Newswires
February 20, 2018 02:00 ET (07:00 GMT)
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