TIDMDNLM
RNS Number : 0431L
Dunelm Group plc
08 September 2021
8 September 2021
Dunelm Group plc
Preliminary Results for the 52 weeks ended 26 June 2021
Moving forward and becoming the 1(st) choice for home
Dunelm Group plc ("Dunelm" or "the Group"), the UK's leading
homewares retailer, today announces its preliminary results for the
52 weeks to 26 June 2021.
FY21 FY20 YoY
========================== ============ ============ ===========
Total sales GBP1,336.2m GBP1,057.9m +26.3%
------------ ------------ -----------
Gross margin 51.6% 50.3% +130bps
------------ ------------ -----------
Profit before tax (PBT) GBP157.8m GBP109.1m +44.6%
------------ ------------ -----------
Digital % total sales(1) 46% 27% +19%pts
------------ ------------ -----------
Free cash flow(2) GBP108.5m GBP174.7m GBP(66.2)m
------------ ------------ -----------
Net cash/(debt)(3) GBP128.8m GBP45.4m +GBP83.4m
------------ ------------ -----------
Diluted earnings per
share 62.9p 42.9p +46.6%
------------ ------------ -----------
Ordinary dividend 35.0p - +35.0p
------------ ------------ -----------
Special dividend 65.0p - +65.0p
------------ ------------ -----------
FY21 Highlights
-- Very strong sales growth of 26% (21% vs FY19), despite stores
being closed to customers for more than a third of the financial
year, reflecting the strength of our total retail system
-- Significant market share gain, with FY21 UK homewares market share up 1.6%pts to 9.1%(4)
-- Active customer growth of 8.5%(5) , driven by strong growth across digital channels
-- Digital sales grew by 115%, with successful scaling of
technology and operations to respond to the increase in demand,
including significant expansion of our Click & Collect
offer
-- Gross margin +130bps, benefiting from a smaller Winter Sale
due to store closures, sourcing gains and the delayed timing of our
Summer Sale (into FY22)
-- PBT of GBP157.8m, +45% (FY20: GBP109.1m, FY19 GBP125.9m)
reflecting ongoing focus on operational grip, despite the impact of
store closures
-- Free cash flow of GBP108.5m, including working capital
outflow of GBP35.0m (FY20 working capital inflow GBP80.1m), with
net cash at period end of GBP128.8m (FY20: GBP45.4m)
-- Commitment to a Net Zero Pathway, targeting a 50% reduction
in greenhouse gas emissions by 2030
-- Final dividend of 23.0p, taking the full year ordinary
dividend to 35.0p, reflecting our strong performance and confidence
in future growth
-- In addition, and noting that no dividends were paid to
shareholders in respect of FY20, the Board has declared a special
dividend of 65.0p in line with our published capital policy,
maintaining a prudent approach to leverage given the uncertain
macroeconomic outlook
Current Trading
Sales growth in the first ten weeks of the new financial year
has been encouraging, including a positive response from customers
to our Summer Sale in July and continued outperformance versus the
homewares market(6) . This strong start to the year, showing
further growth against a tough comparative period, has been better
than anticipated. Whilst there remains some macro level uncertainty
relating to further demand and supply impacts from Covid-19, in the
absence of any trading restrictions, the Board expects that FY22
PBT will be modestly ahead of the top of the range of analysts'
expectations(7) .
Nick Wilkinson, Chief Executive Officer, commented :
"We delivered an excellent performance in FY21, despite our
stores being closed for more than a third of the year,
demonstrating the strength and resilience of our business model and
the adaptability and commitment of our colleagues and
suppliers.
"The digital investments we had made enabled us to rapidly adapt
to the changing environment and deliver strong growth and an
improved customer experience. We are emerging from the pandemic as
a stronger and better business, having transitioned from being a
physical retailer with digital aspirations to being a proven,
digital first, multichannel retailer.
"We have renewed purpose, bold ambitions and an increased
opportunity to attract more customers and grow their frequency. We
aim to be our customers' 1st choice for home, helping everyone to
create the joy of truly feeling at home, now and for the
generations to come. Our business plans will deliver for all our
stakeholders, and include our commitment to a Net Zero Pathway,
with an absolute reduction in emissions of 50% by 2030.
"Whilst the macro-outlook remains uncertain and we are seeing
some industry-wide issues such as ongoing supply chain disruption
and inflationary pressures from raw materials, freight costs and
driver shortages, we feel well placed to continue managing these
challenges.
"Trading in the first ten weeks of the new financial year has
been encouraging, with growth against strong comparatives and
continued market outperformance."
1 Digital includes home delivery, Click & Collect (or
Reserve & Collect before October 2019) and tablet-based sales
in store
2 Free cash flow is defined as net cash generated from operating
activities less capex (net of disposals), net interest paid,
interest on lease liabilities and repayment of lease
liabilities
3 Excluding lease liabilities, including unamortised debt issue
costs
(4) GlobalData UK homewares market, July 2020 to June 2021
5 Unique active customers who have shopped in the 12 months to
June 2021, based on management estimates using Barclays data
(6) Homewares market (excluding Dunelm) calculated using GfK
data and management estimates. Dunelm growth for comparable
categories
(7) Management understand the range of analysts' estimates
(which have been updated since the Q4 trading statement on 14(th)
July 2021) for FY22 Profit Before Tax is GBP153-GBP175m
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 charlotte.anstey@mhpc.com .
For further information please contact:
Dunelm Group plc investorrelations@dunelm.com
Nick Wilkinson, Chief Executive Officer
Laura Carr, Chief Financial Officer
MHP Communications 07710 032 657
Simon Hockridge / Rachel Mann / Pete Lambie dunelm@mhpc.com
Next scheduled event:
Dunelm will release its first quarter trading update on 14
October 2021 .
Notes
Quarterly sales analysis:
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 LFL growth(8) 35.8% 11.3% 22.3% -15.9% 100.0% 30.4% 25.9%
---------- ---------- ---------- ---------- ---------- ---------- ------------
Total Group growth 36.7% 11.8% 23.0% -16.8% 101.7% 30.4% 26.3%
---------- ---------- ---------- ---------- ---------- ---------- ------------
Gross margin improvement +100bps +10bps +50bps +30bps +460bps +220bps +130bps
---------- ---------- ---------- ---------- ---------- ---------- ------------
52 weeks to 27 June 2020
Q1 Q2 H1 Q3 Q4 H2 FY
---------- ---------- ---------- ---------- ---------- ---------- ------------
Total sales GBP262.6m GBP322.4m GBP585.0m GBP284.4m GBP188.5m GBP472.9m GBP1,057.9m
---------- ---------- ---------- ---------- ---------- ---------- ------------
Total LFL growth 6.4% 5.0% 5.6% -1.3% -29.0% -14.6% -4.5%
---------- ---------- ---------- ---------- ---------- ---------- ------------
Total Group growth 5.8% 6.2% 6.0% 0.0% -28.6% -13.8% -3.9%
---------- ---------- ---------- ---------- ---------- ---------- ------------
Gross margin improvement +130bps +110bps +120bps +130bps -210bps +0bps +70bps
---------- ---------- ---------- ---------- ---------- ---------- ------------
8 Total LFL: Excludes new stores and stores which have had a
significant change of space, which have been trading for less than
one full financial year prior to 27 June 2020
Notes to Editors:
Dunelm is the UK's market leader in homewares, with a specialist
offering for customers across multiple categories via its 175
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.50,000 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 the generations to come'. The business is
headquartered in Leicester and employs over 10,000 colleagues. It
has been listed on the London Stock Exchange since October 2006
(DNLM.L) and has a current market capitalisation of approximately
GBP2.6bn.
CHAIRMAN'S STATEMENT
This financial year was dominated by the Covid pandemic, which
provided an enormous multi-dimensional challenge for our business,
our colleagues and our partners. Our deeply rooted Dunelm shared
values have continued to guide our actions and I am very proud of
how the business has met these challenges, delivering to the very
best of our abilities for all our stakeholders. Personally, and on
behalf of the Board, I would like to thank all our Dunelm
colleagues, leaders and our supplier partners for their hard work,
dedication and agility.
Dunelm is emerging from the pandemic as a stronger business,
with a clear and engaging purpose, ambitious to deliver for all our
stakeholders and an even more exciting future ahead. As the
pandemic began we were developing our digital platform and have
emerged as a proven multichannel retailer. Our enhanced customer
proposition means we are fully equipped to continue to win market
share.
The investments we had made to develop our digital capabilities
enabled us to respond quickly to the increased demand online,
including through our successful Click & Collect proposition,
which continued to offer customers safe, local, convenient and
friendly service throughout most of the restricted trading
periods.
Overall, Dunelm delivered a remarkably strong performance during
FY21, with good progress across all our financial and non-financial
performance indicators, despite the extended periods of store
closures.
Delivering for all our stakeholders
Living and working through the pandemic has reaffirmed our
belief that being a purpose-led business that delivers for all our
stakeholders is critical for our continued success.
The Board has been particularly mindful that our decisions and
actions must always balance the needs of our customers, colleagues,
communities, suppliers and shareholders, as well as wider society
and the environment.
Through the year our customer experience was significantly
enhanced, whilst maintaining the health and safety of colleagues
and customers as the number one priority. We have provided job
security, training and development for over 10,000 colleagues and
created over 700 new roles as we enact our ambitious plans for the
future. We paid a second special 'thank you' bonus to colleagues in
August 2021, reflecting the significant role they played in driving
exceptional performance against this challenging backdrop. We
worked closely with our committed and long-term suppliers to enable
significant growth, supporting our ambitions as the 1(st) choice
retailer for homewares in the UK.
We deepened our relationships with local communities mainly
through our store community Facebook groups, but also through our
charitable partnerships with Macmillan at a national level and many
other local organisations.
We have continued to pay all our suppliers and landlords in
full, throughout the Covid crisis. We also took the decision to
repay the monies we received in FY20 under the Job Retention Scheme
and did not make any claims under that scheme during this financial
year, operating a company-funded furlough scheme for colleagues to
whom we could not provide work when our stores were closed. We have
also committed to repay the local Covid relief grants that we
received. In making decisions around government Covid support, the
Board has carefully considered both the respective interests of all
of our stakeholders and a range of other factors, including the
strong recovery of the business, the fact that our stores were
closed to customers for a third of the financial year and the
competitive imbalances arising from the boundaries between
essential and non-essential retail.
Our plans and ambitions for sustainability have taken a big leap
forward. Our Net Zero Pathway commitment is now integrated into our
wider thinking and is developing at pace. Our Chief Executive
Officer talks in more detail in his review about the targets we
have set ourselves. There is much to do. As a Board, we are united
and determined to ensure we play our part in reducing carbon
emissions and making our environment a better and more sustainable
place.
Dividends
Reflecting our strong performance in the year and our confidence
in future growth, the Board has proposed a final dividend of 23
pence per share. This takes the full year ordinary dividend to 35
pence per share. We did not pay any dividends in respect of
FY20.
Additionally, reflecting our stated intention to return to our
published capital policies, the Board has announced a special
dividend of 65 pence per share.
We remain committed to our published policies. This total
dividend of 100 pence in respect of FY21 returns us to the bottom
of our published target leverage range, reflecting a prudent
approach given the current macro-outlook.
Board
Paula Vennells stepped down from the Board in April 2021 and we
thank her for her contributions. During the year, we welcomed Arja
Taaveniku as a new Non-Executive Director and were pleased to
announce that Vijay Talwar will join the Board as Non-Executive
Director on 1(st) October 2021. Arja and Vijay's experiences in
international and digital retail businesses make them great
additions to our Board.
Forward together
Dunelm has a long history of profitable growth and market share
gains, based on great products, great service and excellent value
for money. We are continuing to invest in our existing strengths
and the new capabilities needed to be a digital first retailer. We
look to the future with ambition, a commitment to learning and
developing new capabilities, and are determined to deliver ever
higher standards of performance for our customers, our colleagues,
our communities, the environment, and of course for our
shareholders.
Andy Harrison
Chairman
8 September 2021
CHIEF EXECUTIVE OFFICER'S REVIEW
Introduction
FY21 was a year that tested the strength of our business model
and the resilience and adaptability of our colleagues. I am pleased
that Dunelm responded exceptionally well to the most challenging of
times. We have emerged from the pandemic as a far stronger
business, with clear digital capabilities to complement our
existing retail strengths.
Our learnings during the pandemic have reaffirmed our purpose,
our strategy and our ambitions. We are clear on the opportunities
to accelerate our growth and have the right plans in place to
achieve our goals.
I would personally like to thank my amazing colleagues and
supplier partners who have worked together to deliver an enhanced
customer experience, an excellent financial performance and a
stronger business for the future. We have lived our shared value of
being 'stronger together' and I am hugely grateful for their
commitment to the business and each other.
FY21 Review
Strong trading performance
We delivered excellent sales growth of 26.3% compared to FY20
despite facing major trading restrictions during extended periods.
Our trading performance in the year was impacted by two significant
periods of enforced closures, when Dunelm's 'non-essential'
retailer status meant that we were not allowed to let customers
into our stores. Our online business continued to thrive, with
digital sales penetration of 46% (FY20: 27%).
The flexibility of our digital platform and supply chain allowed
us to respond to high levels of customer demand, leading to growth
in digital sales of 115% in the year, which included significant
growth in Click & Collect. When fully open, our stores proved
equally popular, with high levels of demand for our products and
good growth being sustained during both initial re-opening periods
and subsequently.
The appeal of our proposition enabled us to grow our active
customer base by 8.5% year over year, with growth of 106% in
digital and multichannel customers, partially offset by a decline
in the store-only customer base as a result of periods of store
closure. Market insight from GlobalData shows that we increased our
share of the UK homewares market to 9.1%, up 160bps year over
year.
Gross margin improved by 130bps, mainly due to a reduced Winter
Sale and the postponement of the usual Summer Sale into FY22.
Additionally, we continued to focus on driving sourcing gains to
offset emerging cost price pressures from raw materials and
freight. We maintained our focus on operational grip across our
cost base and delivered record profit before tax of GBP157.8m, up
45% compared to FY20, despite the very challenging conditions.
Performance driven by digital investments
Investments made in our digital proposition, including the new
platform which launched in October 2019, meant that we have been
able to scale in response to the increased digital demand,
expanding our online experience, home delivery services and our
contactless, local and friendly Click & Collect service. Our
focus in FY21 was also to further improve the quality of our
customers' experience, with customer satisfaction scores increasing
across all digital fulfilment channels.
We continued to develop our proposition rapidly throughout the
year. We extended the range available for Click & Collect
through fulfilment from our central warehouse and improved the
speed of order fulfilment. As we scaled to meet the increased
demand for home delivery, we significantly shortened lead times, as
well as enhanced our post-sales communications to improve the
customer end to end journey and remove friction. We made it easier
for customers to shop our Made to Measure ranges by introducing a
significant proportion of the product range online and offering
customers a choice of virtual or physical consultations with
experienced colleagues.
Improvements to our dunelm.com site drove an increase in organic
search traffic and we also optimised our paid search marketing by
implementing profitability-based bidding. When stores re-opened in
April, we were able to offer an enhanced in-store tablet selling
experience, allowing customers to shop the full Dunelm range.
Delivering for all our stakeholders
As well as enhancing the experience of our customers, we have
ensured that our decisions and actions this year have delivered for
all our stakeholders.
During the year, we created over 700 new roles across the
business, reflecting the confidence in our growth plans. Colleagues
received a second special 'thank you' bonus in recognition of their
dedication in delivering exceptional performance against a
challenging backdrop.
In progressing our inclusion & diversity strategy, we signed
up to the British Retail Consortium's Charter and committed to its
six pledges. We also developed our own inclusion & diversity
strategy, called 'this is me', with the aspiration that all our
colleagues are able to be their true self at work without fear of
discrimination. We provided specialist training to all senior
leaders across the business and have recently established a series
of colleague network groups designed to support and acknowledge
diverse communities throughout our business. We also provided
mental health training for all our store colleagues during the
year, to support them in looking after themselves and each
other.
Having successfully transitioned all our previously office-based
support centre colleagues, including the Customer Care Centre, to
working from home at the start of the pandemic, we have been
thoughtful about how we respond to the relaxing of restrictions. We
have listened closely to our colleagues throughout the crisis and
have adopted a goal of 'feeling at home wherever you work' for
those colleagues who do not need to be in a store or in a
distribution centre to fulfil their role. We have redesigned our
central office locations to provide more collaboration space and
are encouraging teams to adopt the appropriate hybrid arrangements
that work for them. We will continue to listen and learn and remain
flexible to ensure we continue to be a great place to work and an
employer of choice.
We have found new ways to continue to offer support to charities
and our communities during the year, despite the challenges
presented by Covid-19. Macmillan has been our main charity partner
since February 2019. During this partnership our colleagues have
taken part in a range of fundraising activities and we are proud
that we have raised a total of GBP1.3m.
When choosing our new national charity partner for the next two
years, we consulted with our colleagues and they overwhelmingly
chose Mind, reflecting the increasing importance of mental health.
Our ambition through this new partnership is to create a positive
impact that is broader than just fundraising.
As mentioned above, we are deepening our connection with the
communities around our stores. We ran campaigns through the year to
support our local communities, including our 'delivering joy'
campaign which resulted in over 18,000 Christmas gifts being
donated through our stores and support sites.
Committed to Net Zero Pathway
Sustainability is becoming integrated into our thinking at all
levels and in all parts of the business, and we have moved forward
substantially with our plans in this area. Our ambition to 'Be a
Good Company' means that our commitment to net zero emissions is
integrated into our company purpose, metrics and management
incentives.
We have established science-based targets for scopes 1, 2 and
now scope 3 carbon emissions. Over 97% of our emissions fall into
scope 3, which represents emissions outside of our direct control.
We have committed to reduce scope 1 emissions by 50% in absolute
terms by 2030; under scope 2 we will continue to purchase only
renewable electricity; and for scope 3 we are announcing our
intention to reduce emissions by 50% in absolute terms by 2030(9)
.
Recognising the need for collaboration to ensure we achieve
global emission reduction targets, we are supporting the BRC's
Climate Action Roadmap which aims to achieve net zero by 2040.
Additionally, we are members of Textiles 2030(10) , which is
designed to limit the impact clothes and home textiles have on
climate change and includes targets for water and carbon
reduction.
To help us achieve our ambitious targets we are building
capabilities and partnerships to accelerate both circular sourcing
and customer engagement. We are also making progress on practical
improvements, with the introduction of more sustainable product
ranges and trialling of services to support our customers to live
more sustainably. We are offering more choices in our product
ranges to help customers care for (and repair) products, and we are
developing a number of customer take-back trials. We have set
ourselves targets to reduce the amount of packaging that we use and
ensure that our packaging is more sustainable. As an example, the
packaging which we use for the mailing bags of our
courier-delivered home delivery items is moving to over 95% (from
30%) recycled content, as well as being 100% recyclable.
(9) Scopes 1 and 2 cover emissions from owned sources as well as
emissions associated with purchased electricity. Scope 3 includes
all other emissions. The baseline year chosen for comparison is
FY19
(10) Textiles 2030 is a voluntary agreement, backed by
government. Signatories will collaborate on carbon, water and
circular textile targets
Strategic Update - Becoming the 1(st) choice for home
Well positioned with a clear runway for growth
As we look forwards, we are confident and also mindful of the
work required to grow our business sustainably. Having been a
successful physical retailer for many years, we are now both a
capable digital player and the operator of great stores, run by
colleagues with better links to their local communities. We intend
to use this enhanced market leading position to become the 1(st)
choice for home for more customers and to increase shopping
frequency.
We have a distinctive and specialist product portfolio -
offering quality, value and style - that is largely own brand and
sourced from long-term committed suppliers. Our total retail system
combines the advantages of integrated digital and local shopping
experiences to best serve UK homewares shoppers. Dunelm remains a
highly cash generative business, which provides the agility to
invest in opportunities for growth, and is built on solid
foundations with deep-rooted shared values, strong relationships
and a commitment to doing the right thing for the long term, for
all our stakeholders.
The digital transition we have been on influences how we now
think about growth, and the runway ahead of us for attracting more
customers and increasing their frequency. Our brand will
increasingly reach new customers through digital content and
performance marketing. Similarly, digital capabilities allow us to
offer more choice, more reach, more convenient services, and more
effective marketing, all of which will enable us to grow
frequency.
Moving forward with renewed purpose
Our experiences during the pandemic caused us to reflect on the
broader role that we play in the lives of our customers,
communities and other stakeholders. In the first lockdown, when our
stores were closed, we began to get to know our local communities
better and listened hard to better understand what customers wanted
from their homes. This led to a highly collaborative journey with
our customers, colleagues and communities to renew and clarify our
company purpose.
Our renewed purpose is founded on the insight that truly feeling
at home is one of the greatest joys in life. 'To help create the
joy of truly feeling at home. Now and for the generations to come.'
This is a purpose that goes beyond offering our customers the means
to make their homes comfortable, beautiful, organised and secure:
touching on how inclusive and respectful we are in operating our
business, and how well we respond to the challenges of sustainable
living. This renewed purpose is creating energy and focus and
deepening the engagement of our colleagues and customers.
Significant headroom in a large market
The UK homewares and furniture markets are large (estimated to
be over GBP25bn combined(11) ) and fragmented. GlobalData publishes
the most comprehensive assessment of the homewares and furniture
markets and estimates that both markets declined (vs. the prior
year) in FY20 and recovered back to FY19 levels in FY21. There is a
potential inflationary tailwind likely in the short to medium term.
The market is predicted to grow in low single digits over the
coming years.
The pandemic has created a renewed focus on the home both
practically, as it serves many new purposes, and emotionally, as it
provides safety, security and sanctuary. In addition, new needs are
emerging which are fuelling demand for innovative products and
services, with consumers returning to 'wholesome' home making
activities and focussing on wellbeing and more sustainable living.
Our customer segmentation(12) shows that 'Home Lovers', classified
as those who are highly engaged with improving, styling and
shopping for their homes, make up over 50% of UK households.
As the homewares market leader, but with only 9.1% market share,
and with only 1.3% share of the furniture market, we have
significant headroom to grow market share. We expect that share
gains will be driven equally from acquiring new customers and
increasing their purchase frequency.
(11) GlobalData homewares and furniture markets. Market size is
quoted including VAT
(12) Internal analysis based on Dunelm market segmentation
research, February 2019 and August 2020
Growing customer base and increased engagement
In addition to growth in our overall active customer base of
8.5% and in digital and multichannel customers of 106%, the levels
of customer engagement with digital content also increased. We grew
our engaged contactable email base by 30%(13) year on year and each
of our stores now has a local community Facebook group. Membership
of these groups has grown to over 700,000 followers, with 78% of
them believing that Dunelm makes a positive contribution to their
local community(14) . We also experienced substantially higher
levels of engagement through social media channels throughout the
year, with our own and customer or influencer posts showcasing
products and 'how to' content regularly receiving over 5,000
likes.
(13) Active email customers who have opted-in to marketing in
last 30 days and customers who have opened an email in the last 90
days
(14) Source: Community Insight question in NPS survey, May-June
2021
The frequency opportunity
We classify 12% of our customer base as 'high value' and these
customers contribute 40% of our sales and are likely to shop across
more product categories, and across both our digital and physical
channels. In addition, these customers have a deeper emotional
connection with Dunelm, and are more likely to say they 'love' the
brand(15) . We know that a customer shopping multi-category and
multichannel with us shops almost five times more frequently in a
year than a single-category, single-channel customer and that their
average spend with us over 12 months is approximately six times as
much(16) .
We are focusing on growing the number of high value customers by
improving the consistency of execution in order to reduce customer
friction and churn, for example through growing our rate of
'perfect orders', focusing on a 'fast & friendly' store
experience and improving issue resolution. We are developing our
insights and capabilities to understand more about our customers.
We are also expanding our proposition in a way that will encourage
frequency as well as building further emotional connection and
engagement with our brand.
(15) Dunelm customer survey, March 2021, 68% of 'high value'
customers love or like Dunelm vs. 54% of other customers
(16) Source: Internal analysis based on Barclays Analytics, FY21
data
Customer proposition development drives growth
To become the '1(st) choice for home' we are focused on
developing our proposition in terms of products, services and
experiences.
1) Products proposition
We have a comprehensive product offer in homewares and
furniture, with over 50,000 SKUs across more than 30
sub-categories, which are largely own brand, including specialist
exclusive to Dunelm brands such as Dorma and Fogarty. Our range is
curated for choice across price tiers and styles, with strong (and
growing) value and quality credentials understood by our
customers(17) . Our close relationships with our suppliers enable
us to offer customers excellent product innovation and
availability. We offer Made to Measure curtains, roman blinds and
cushions made in our own UK factory.
Going forward, we will develop our product proposition further
by raising the bar on range development. We are adapting our mix of
good/better/best price points and the size of our promotional buys.
We are now using online customer insight to increase choice and
fill in gaps in those categories that we know are more frequently
shopped. We will continue to extend our range in new and developing
categories, such as Decorate, Outdoor Lighting and Sofas &
Chairs. Additionally, we will introduce new collections and
sub-brands created by our in-house designers, for example NHM in
collaboration with the National History Museum, and the expansion
of Churchgate, a timeless brand which draws on Dunelm's
heritage.
We are committed to introducing more sustainable products and
are building capability to accelerate the introduction of new
materials and circular sourcing into the design and manufacturing
process. We will also be broadening our sustainable 'The Edited
Life' range to more categories, following the launch of our made to
order sofa range (made from recycled materials, and designed for
longevity with a 25-year guarantee).
These product proposition developments are supported by
investments we are making into our commercial systems to better
leverage product data, accelerate the product onboarding process
and add capacity for range expansion.
(17) BrandVue Retail, 3 months rolling to June 2021: 26% of
customers chose Dunelm as 'Good value' (up 1.3%pts vs. FY20) and
36.6% of customers chose Dunelm as 'Quality' (up 2.4%pts vs.
FY20).
2) Services proposition
We service our customers through our integrated digital and
physical shopping channels. Our Click & Collect service, which
offers a three-hour promise for local store stock, has proven very
popular since its launch in Autumn 2019. We offer a national home
delivery service, with the majority of our 'heavy and bulky' items
delivered by our own home delivery network offering high quality
'room of choice' options. In addition, we offer a full Made to
Measure curtains and blinds service, including in-person or virtual
consultation and fitting.
Going forwards, we will develop our services proposition further
by increasing the breadth and availability of products for Click
& Collect, thereby encouraging cross-channel shopping. We will
increase home delivery capacity and improve systems to reduce home
delivery lead times, provide more consistent service and grow the
'perfect order' rate. This will be supported by our new dedicated
e-commerce facility.
We will also improve the range of furniture available for quick
delivery and grow the geographic coverage of our own home delivery
network. This will be enabled by our new furniture warehouse (in
Northamptonshire) as well as investments into supporting supply
chain and transport systems. We will also be extending customer
support hours and offering shorter response times.
We have begun offering customers opportunities to recycle
products and will continue to pilot and test these schemes. In FY21
we introduced an electricals take-back scheme in our stores and we
are currently developing a take-back scheme for textiles, quilts
and pillows. In addition, we have started introducing local
take-back schemes, organised by store colleagues and advertised via
our local community Facebook groups.
3) Experiences proposition
We offer our customers convenient shopping online and in stores,
through dunelm.com and our store estate of 175 mainly out-of-town
superstores. Our colleagues in stores offer personal 'friendly and
helpful' advice(18) and provide access to the total product range
via in-store tablets. Our displays in store inspire customers and
enable them to touch and feel our products and we have growing
engaged local communities supporting local causes and national
charity partners. In addition, our Pausa cafes in 152 stores
enhance the shopping experience for customers and offer our own
range of food and drinks in a friendly environment.
Going forwards, we will develop our experiences proposition
further by expanding our digital and data capabilities to deliver
insight-driven proposition enhancements. We are building a single
view of our customers across channels, both to maximise our
acquisition of 'high value' customers and to improve marketing
communications in order to grow frequency and retention.
We will continue our new store roll-out to our remaining target
catchments, including testing smaller formats. Following reduced
store refit activity over the last 18 months, we will be
accelerating our store refit and refresh programme, improving store
layout and optimising the shopping experience.
(18) For Q4 FY21, following re-opening of stores, customers
assessed their experience on average in store as 9.4/10 for
'Friendly' service
Summary and outlook
We delivered an excellent performance in FY21, despite our
stores being closed for more than a third of the year,
demonstrating the strength and resilience of our business model and
the adaptability and commitment of our colleagues and
suppliers.
The digital investments we had made enabled us to rapidly adapt
to the changing environment and deliver strong growth and an
improved customer experience. We are emerging from the pandemic as
a stronger and better business, having transitioned from being a
physical retailer with digital aspirations to being a proven,
digital first, multichannel retailer.
We have renewed purpose, bold ambitions and an increased
opportunity to attract more customers and grow their frequency. We
aim to be our customers' 1(st) choice for home, helping everyone to
create the joy of truly feeling at home, now and for the
generations to come. Our business plans will deliver for all our
stakeholders, and include our commitment to a Net Zero Pathway,
with an absolute reduction in emissions of 50% by 2030.
Whilst the macro-outlook remains uncertain and fast changing,
with ongoing risks relating to Covid-19, supply chain disruption
and inflationary pressures from raw materials, freight costs and
driver shortages, we feel we are well-placed relatively to manage
these challenges. We continue to focus on what we can control -
namely maintaining good stock levels and mitigating cost pressures,
working closely with our long-term committed suppliers and
partners.
Sales growth in the first ten weeks of the new financial year
has been encouraging, including a positive response from customers
to our Summer Sale in July and continued outperformance versus the
homewares market. This strong start to the year, showing further
growth against a tough comparative period, has been better than
anticipated. In the absence of any further trading restrictions,
the Board now expects that FY22 PBT will be modestly ahead of the
top of the range of latest analysts' expectations.
Nick Wilkinson
Chief Executive Officer
8 September 2021
CHIEF FINANCIAL OFFICER'S REVIEW
Revenue
52 weeks to 26 June 2021
FY21 FY20 YoY Growth
GBPm GBPm %
-------- -------- -----------
Total Group revenue 1,336.2 1,057.9 +26.3%
-------- -------- -----------
Digital % total
revenue 46% 27% +19%pts
-------- -------- -----------
Homewares market
share 9.1% 7.5% +1.6%pts
-------- -------- -----------
Total revenue for the 52 weeks to 26 June 2021 increased by
26.3% to GBP1,336.2m (FY20: GBP1,057.9m). Compared to FY19 sales
grew by 21.4%. During this financial year, performance was impacted
by the two periods of store closure. In the first quarter, when
stores were fully open, revenue grew by 36.7%. During the second
quarter, which included the lockdown in November 2020, when our
stores were only permitted to offer Click & Collect, sales
growth softened to 11.8%. The most significant impact was in the
third quarter when stores were closed for most of the period.
Despite the closures, sales only declined by 16.8% due to the
strength of our digital offer. In the fourth quarter, revenue grew
by 101.7% compared to FY20, and 44.0% compared to FY19, despite the
delay of our Summer Sale event, in part reflecting pent up
demand.
Our digital offer performed strongly throughout the year, and
especially during the periods of store closure when Click &
Collect revenue covered c.30% of prior year store sales. FY21
digital revenue of GBP616m was up by 115% compared to FY20 and
accounted for 46% of total Group sales (FY20: 27%).
From the annual estimate of the UK Homewares market by
GlobalData, we understand that we grew market share by 160bps in
FY21. Furthermore, from our analysis of data from a weekly GfK
homewares panel (which represents just over half of the market size
as defined by GlobalData), we can see that we significantly
outperformed the market when we were able to open our stores.
Conversely, when we were forced to close our stores to customers,
we underperformed the market.
Sales growth in the first ten weeks of the new financial year
has been encouraging, with growth against the strong comparative
period in Q1 FY21 and continued outperformance versus the homewares
market. Quarterly sales growth in FY22 will reflect the volatility
in the prior year trading, with particularly strong comparatives in
Q1 and Q4 and closures in Q2 and Q3.
Gross margin
Gross margin of 51.6% was 130bps higher than the prior year.
Gross margin benefited from a lower level of discounting throughout
the year, including during our Winter Sale when Covid-19
restrictions meant that stores were closed for most of the planned
event. Furthermore, the delayed store re-openings in April 2021 led
us to postpone the Summer Sale into FY22.
We continue to focus on driving sourcing gains by working
closely with our suppliers. In FY21 and in the short- to
medium-term outlook, we are seeing notable cost price inflation
arising from commodity price increases and global pressures on
freight costs. Where appropriate, we are increasing some retail
prices to offset cost price pressures, however we remain committed
to offering our customers great value products at each price point.
We will also augment our standard ranges with increased special
buys and review price architecture to maintain competitiveness.
We expect gross margin in FY22 to decrease by c.50-75bps as the
trading calendar normalises. We expect to mostly mitigate the
impacts of raw material and freight inflationary pressures through
better sourcing and increasing prices where appropriate.
Over the medium term we aim to maintain gross margin of c.50%,
leveraging our strong committed supplier relationships, with a
relentless focus on sourcing and a disciplined approach to
promotional activity and markdowns, whilst continuing to invest in
great value and quality for our customers.
Operating costs
Total operating costs were GBP522.5m (FY20: GBP416.4m),
representing an operating cost ratio of 39.1% (FY20: 39.4%). This
growth in costs was largely driven by the higher sales volume. Both
FY21 and FY20 were impacted by Covid-19.
Costs in FY21 were adversely impacted by the non-recurrence of
benefits in FY20 that arose from the closure of the stores in the
first lockdown. This included GBP14.5m relating to the Job
Retention Scheme which we claimed in Q4 FY20 at the start of the
pandemic. The Board subsequently decided to repay these monies and
the repayment cost impacted FY21. We also experienced GBP8m higher
costs to serve in FY21 relating to Covid-19 restrictions. These
costs mainly related to the additional roles required in stores to
maintain social distancing and capacity requirements, which ensured
a safe environment for our colleagues and customers. The business
benefited from business rates relief which continued throughout
FY21. The lack of rates charges resulted in a year-on-year benefit
of GBP22m, which partially offset the loss of business during the
various restricted trading periods during the year.
Our investments in digital, data, insights and supply chain
capacity increased by GBP12m year over year (including GBP3m of
digital costs that would previously have been classed as capital
expenditure rather than operating costs). These investments
supported the business growth and customer proposition
development.
Due to the strong business performance this year, operating
costs were impacted by GBP10m of higher management and colleague
incentive costs, given that the majority of FY20 incentive schemes
did not pay out as a result of the unexpected impacts of Covid-19
in Q4 FY20.
We anticipate that, over time, our operating cost to sales ratio
will remain around 38%, with increased scale offsetting ongoing
investments in the proposition. Additionally, we will continue to
focus on driving productivity and efficiency improvements to offset
cost pressures and labour inflation. In FY22 we will invest in
supply chain capacity, expand our teams in digital and data
engineering and build new capabilities, for example in product
management, insight & analytics and sustainability.
Profit and earnings per share
Despite making losses in the third quarter when stores were
closed, operating profit for the year increased significantly to
GBP166.4m (FY20: GBP116.0m). This partially reflects the leverage
of our home delivery fixed cost base due to strong demand, as well
as the higher gross margin. Costs were tightly controlled
throughout the year despite the significant disruption caused by
the periods of lockdown and the specific cost increases required to
operate safely under Covid-19 restrictions.
There was a net cost of GBP8.6m (FY20: GBP6.9m) in respect of
financial items in the period. This included interest on IFRS 16
lease liabilities of GBP5.3m (FY20: GBP5.5m), interest payable and
amortisation of arrangement fees relating to the Group's Revolving
Credit Facility amounting to GBP1.0m (FY20: GBP1.8m) and losses of
GBP2.4m (FY20: GBP0.3m gain) resulting from foreign exchange
differences on the translation of dollar denominated assets and
liabilities. Interest received on cash deposits was GBP0.1m (FY20:
GBP0.1m).
PBT in the period was GBP157.8m (FY20: GBP109.1m), an increase
of GBP48.7m year-on-year. Profit after tax of GBP128.9m (FY20:
GBP87.7m) reflected an effective tax rate of 18.3% (FY20: 19.6%).
The effective tax rate is lower than the previous year due to the
timing of R&D claims and the benefit from the change in future
corporation tax rate on the deferred tax asset.
Basic earnings per share (EPS) for the period were 63.7 pence
(FY20: 43.4p). Diluted earnings per share were 62.9 pence (FY20:
42.9p).
We anticipate maintaining a PBT margin of c.12% over the medium
term, meaning absolute returns will grow as the business
scales.
Cash generation and net cash
In the period, the Group generated GBP108.5m of free cash flow
(FY20: GBP174.7m).
FY21 FY20
GBPm GBPm
Operating profit 166.4 116.0
------- -------
Depreciation and amortisation(19) 80.8 80.2
------- -------
Working capital (outflow) / inflow (35.0) 80.1
------- -------
Share-based payments 7.5 2.1
------- -------
Tax paid (35.5) (34.3)
------- -------
Net cash generated from operating activities 184.2 244.1
------- -------
Capex (net of disposals) (15.7) (24.9)
------- -------
Net interest(20) (0.7) (1.3)
------- -------
Interest on lease liabilities (5.3) (5.5)
------- -------
Repayment of lease liabilities (54.0) (37.7)
------- -------
Free cash flow 108.5 174.7
------- -------
(19) Including impairment and loss on disposal
(20) Excluding interest on lease liabilities
There was a working capital outflow of GBP35.0m in the period
(FY20: GBP80.1m inflow). The inventory balance at the end of FY20
was unusually low due to the strong sales in the final quarter so
the working capital outflow reflected a return to a more usual
stockholding. Inventory at the end of the period was GBP172.4m
(FY20: GBP118.2m). This impact was partially offset by an increase
in the VAT payable due to the strong trading since stores re-opened
in Q4 FY21. We estimate a further working capital outflow of
c.GBP15-25m in FY22.
Total capital investment of GBP15.7m (FY20: GBP24.9m) was lower
than historic levels, due in part to delays in store development
caused by Covid-19 restrictions as well as our policy to expense
digital development spend and the absence of any freehold
acquisitions. FY21 capital expenditure included one new store and
two relocations (GBP4.7m), refits in existing stores (GBP5.5m),
technology and digital infrastructure developments (GBP3.6m) as
well as investment in supply chain operations (GBP1.5m). Moving
forwards over the medium term, we expect capex levels of between
GBP30-40m per annum.
In FY22 approximately half of the capital investment will be in
stores where we expect to open three to five new stores, including
smaller store trials, and accelerate our store refit programme and
decarbonisation initiatives. The remaining capex will be split
between investment in supply chain capacity (new furniture
warehouse and dedicated e-commerce facility) and technology, which
includes upgrades to commercial and supply chain systems to enable
long term growth.
Tax paid of GBP35.5m (FY20: GBP34.3m) was similar to FY20
despite the higher profits. FY20 included two additional payments
on account in order to adopt the new rules on the timing of
corporation tax payments.
Repayments of lease liabilities of GBP54.0m (FY20: GBP37.7m)
were higher than the prior year due to the deferral of the June
2020 rent payments into FY21 and a full year of payments this
year.
After total dividend payments in the period of GBP24.3m (FY20:
GBP106.0m), the Group ended the year with a net cash position of
GBP128.8m (FY20: GBP45.4m).
Banking agreements
The Group has in place a GBP165m syndicated Revolving Credit
Facility (RCF) which matures in March 2023. The terms of the RCF
are consistent with normal practice and include covenants (both
calculated on a pre-IFRS 16 basis) in respect of leverage (net debt
to be no greater than 2.5× EBITDA) and fixed charge cover (EBITDAR
to be no less than 1.75× fixed charges), both of which were met
comfortably as at 26 June 2021.
In addition, the Group maintains GBP10m of uncommitted overdraft
facilities and has an accordion option within the RCF for a maximum
facility of GBP75m.
Going concern and viability statement
At the time of approving the financial statements, the Board of
Directors is required to formally assess that the business has
adequate resources to continue in operational existence for the
foreseeable future and as such can continue to adopt the 'Going
Concern' basis of accounting. The Board is also required to state
that it 'has a reasonable expectation that the Group will continue
in operation and meet its longer-term liabilities as they fall due'
(the 'Viability Statement'). To support this statement, the Board
is required to consider the Group's current financial position, its
strategy, the market outlook and its principal risks. In FY20, a
three-year period was chosen due to the uncertainty arising from
the pandemic. However, in FY21, the Group has chosen to review
viability over a five-year period reflecting the confidence the
Board have in the future growth of the business. This is aligned to
the 'central case' five-year plan approved by the Directors in May
2021, with two 'severe but plausible downside' scenarios and two
reverse stress tests.
The Group ended the financial year with GBP129m cash at bank.
The financial covenants are tested semi-annually in line with our
December Interim reporting and June year-end reporting. These
covenants are normally met with significant headroom. In both
downside scenarios, the Group continues to forecast compliance with
all financial covenants throughout the going concern and viability
period.
In both downside scenarios Dunelm has sufficient liquidity to
continue trading, including maintaining the payment of dividends in
line with its dividend policy and comfortably meet its financial
covenants. The reverse stress modelling has demonstrated that a
prolonged sales reduction of 30% from Q2 FY22 is required to breach
covenants by the end of FY23 and a 50% sales reduction is required
to breach the RCF limit by the end of FY23.
In such an event, management would follow a similar course of
actions to those initially undertaken in March 2020, which include
but are not limited to:
-- Reducing discretionary spend (e.g. marketing and maintenance)
-- A reduction in capital investment (e.g. new stores and refits)
-- Manage stock levels closely to demand
-- Suspension of ordinary dividends, and no special dividends
-- Reduce operating model costs (e.g. reduced store opening
hours, lower technology spend with third-party developers)
-- Delay in payments, including landlords and other suppliers
-- Reduction in support centre headcount.
In addition, similar to during FY20 and FY21, the government
could reintroduce actions to address specific closure periods (Job
Retention Scheme; rates holidays, delay in VAT payments) from which
the Group could choose to benefit. As a result, the Board believes
that the Group is well placed to manage its financing and other
significant risks satisfactorily and that the Group will be able to
operate within the level of its facilities for the foreseeable
future. For this reason, the Board considers it appropriate for the
Group to adopt the going concern basis in preparing its financial
statements.
Capital and dividend policy
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 × of the last 12
months' EBITDA (on a post IFRS 16 basis). The Group's capital and
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 over a period consistently falls
below the minimum target of 0.2 × 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 .
Dividends
An interim dividend of 12p per share was paid in April 2021
(FY20: nil). It is proposed to pay a final dividend of 23p per
share (FY20: nil). The total ordinary dividend of 35p gives a
dividend cover of 1.8×. This cover level is within our policy as
described above. Subject to approval by shareholders at the AGM,
the final dividend is payable on 19 November 2021 to shareholders
on the register on 29 October 2021.
In line with our capital policy, and as a result of the strong
cash flow and net cash position at the end of the year, the Board
has declared a special dividend of 65p. The special dividend will
be paid on 8 October 2021 to shareholders on the register at the
close of business on 17 September 2021.
The payment of this special dividend will return us to the
bottom of our target leverage range (0.2 × ), maintaining a prudent
approach given the current macro-outlook.
Treasury management
The Group Board has established an overall Treasury Policy,
day-to-day management of which is delegated to the Chief Financial
Officer. The policy aims to ensure the following:
-- Effective management of all clearing bank operations
-- Access to appropriate levels of funding and liquidity
-- Effective monitoring and management of all banking covenants
-- Optimal investment of surplus cash within an approved risk/return profile
-- Appropriate management of foreign exchange exposures and cash flows
Principal risks and uncertainties
The Board carried out a review in September 2021 of the
principal risks that could threaten the Group's business model,
future performance, solvency or liquidity. The full assessment will
be included in the 2021 Annual Report. A summary is provided
below:
Risk Impact
Competition, Failure to respond to changing consumer needs (personalisation,
market and rental vs. purchase, sustainability and customer experience)
customers and to maintain a competitive offer (range, quality,
value, ease of shopping) could impact profitability and
limit opportunities for growth. A downturn in consumer
spending could impact sales and profit
----------------------------------------------------------------
Resilience Failure to withstand the impact of an event or combination
of events that significantly disrupts all or a large
part of the Group's sales or operations
----------------------------------------------------------------
Brand damage Harm to individuals or reputational damage due to product
safety issues or ethical, slavery, bribery, environmental
or sustainability issues in the supply chain
----------------------------------------------------------------
People and Unable to deliver strategy and sustainable long-term
culture business performance due to failure to attract, retain
and motivate high calibre employees, and to maintain
our culture and business principles
----------------------------------------------------------------
IT systems, Operations impacted by failure to develop technology
data and cyber to support the strategy, lack of availability due to
security cyber-attack or other failure, and reputational damage/fines
due to loss of personal data
----------------------------------------------------------------
Regulatory Fines, damages and reputational risk incurred due to
and compliance failure to comply with legal and regulatory requirements
relating to health and safety
----------------------------------------------------------------
Climate change Failure to anticipate and address the strategic, regulatory
and environment and reputational impact of climate change and environmental
matters, as well as 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 impacted by failure to operate the business
efficiently or to manage cost price volatility
----------------------------------------------------------------
Finance and Growth constrained by lack of access to capital and financial
treasury resources
----------------------------------------------------------------
Laura Carr
Chief Financial Officer
8 September 2021
Consolidated Income Statement
For the 52 weeks ended 26 June 2021
2021 2020
52 weeks 52 weeks
Note GBP'm GBP'm
Revenue 1 1,336.2 1,057.9
Cost of sales (647.3) (525.5)
----------------------------------------- ----- ----------- -----------
Gross profit 688.9 532.4
Operating costs 2 (522.5) (416.4)
----------------------------------------- ----- ----------- -----------
Operating profit 3 166.4 116.0
Financial income 5 0.1 0.4
Financial expenses 5 (8.7) (7.3)
----------------------------------------- ----- ----------- -----------
Profit before taxation 157.8 109.1
Taxation 6 (28.9) (21.4)
-----------------------------------------
Profit for the period 128.9 87.7
----------------------------------------- ----- ----------- -----------
Earnings per Ordinary Share
- basic 8 63.7p 43.4p
Earnings per Ordinary Share
- diluted 8 62.9p 42.9p
----------------------------------------- ----- ----------- -----------
Consolidated Statement of Comprehensive Income
For the 52 weeks ended 26 June 2021
2021 2020
52 weeks 52 weeks
Note GBP'm GBP'm
----------- -----------
Profit for the period 128.9 87.7
Other comprehensive income/(expense):
Items that may be subsequently reclassified
to profit or loss:
Movement in fair value of
cash flow hedges (17.7) 6.8
Deferred tax on hedging movements 2.2 (0.1)
Other comprehensive income
for the period, net of tax (15.5) 6.7
-------------------------------------------------------------- ----------- -----------
Total comprehensive income
for the period 113.4 94.4
-------------------------------------------------------------- ----------- -----------
Consolidated Statement of Financial Position
As at 26 June 2021
Note 26 June 27 June
2021 2020
GBP'm GBP'm
Non-current assets
Intangible assets 9 14.8 22.7
Property, plant and equipment 10 162.6 175.4
Right-of-use assets 11 262.0 283.3
Deferred tax assets 11.4 4.2
Derivative financial instruments 0.3 1.6
Total non-current assets 451.1 487.2
--------------------------------------- ----- -------- --------
Current assets
Inventories 172.4 118.2
Trade and other receivables 11.8 15.6
Current tax asset 2.4 -
Derivative financial instruments 0.4 5.0
Cash and cash equivalents 128.6 90.0
Total current assets 315.6 228.8
--------------------------------------- ----- -------- --------
Total assets 766.7 716.0
--------------------------------------- ----- -------- --------
Current liabilities
Trade and other payables (181.8) (177.2)
Lease liabilities 11 (49.0) (48.0)
Current tax liability - (2.6)
Derivative financial instruments (5.1) -
Total current liabilities (235.9) (227.8)
--------------------------------------- ----- -------- --------
Non-current liabilities
Bank loans - (44.6)
Lease liabilities 11 (244.3) (266.4)
Provisions (4.5) (3.8)
Derivative financial instruments (0.8) -
Total non-current liabilities (249.6) (314.8)
--------------------------------------- ----- -------- --------
Total liabilities (485.5) (542.6)
--------------------------------------- ----- -------- --------
Net assets 281.2 173.4
--------------------------------------- ----- -------- --------
Equity
Issued share capital 2.0 2.0
Share premium account 1.6 1.6
Capital redemption reserve 43.2 43.2
Hedging reserve (4.3) 5.3
Retained earnings 238.7 121.3
Total equity attributable to equity
holders of the Parent 281.2 173.4
-------------------------------------- ----- -------- --------
Laura Carr
Chief Financial Officer
8 September 2021
Consolidated Statement of Cash Flows
For the 52 weeks ended 26 June 2021
Note 2021 2020
52 weeks 52 weeks
GBP'm GBP'm
Cash flows from operating
activities
Profit before taxation 157.8 109.1
Net financial expense 5 8.6 6.9
----------- -----------
Operating profit 166.4 116.0
Depreciation and amortisation of property,
plant and equipment and intangible assets 3 31.8 33.2
Depreciation of right-of-use
assets 3 45.7 45.1
Loss on disposal and impairment of property,
plant and equipment and intangible assets 3 2.3 1.5
Impairment of right-of-use
assets 3 1.0 0.4
----------- -----------
Operating cash flows before movements
in working capital 247.2 196.2
(Increase)/decrease in inventories (54.2) 39.5
Decrease/(increase) in trade
and other receivables 4.1 (1.2)
Increase in payables 15.1 41.8
----------- -----------
Net movement in working capital (35.0) 80.1
Share-based payments expense 7.5 2.1
Tax paid (35.5) (34.3)
----------------------------------------------------- ----- ----------- -----------
Net cash generated from operating
activities 184.2 244.1
Cash flows from investing
activities
Acquisition of intangible
assets (0.6) (4.4)
Acquisition of property, plant
and equipment (15.1) (20.5)
Interest received 0.1 0.1
----------------------------------------------------- ----- -----------
Net cash used in investing
activities (15.6) (24.8)
----------------------------------------------------- ----- ----------- -----------
Cash flows from financing
activities
Proceeds from issue of treasury
shares 1.8 2.0
Drawdowns on Revolving Credit
Facility - 165.0
Repayments of Revolving Credit
Facility (45.0) (165.0)
Interest paid (0.8) (1.4)
Interest on lease liabilities 11 (5.3) (5.5)
Repayment of lease liabilities (54.0) (37.7)
Ordinary dividends paid 7 (24.3) (106.0)
Net cash used in financing
activities (127.6) (148.6)
----------------------------------------------------- ----- ----------- -----------
Net increase in cash and cash
equivalents 41.0 70.7
Foreign exchange revaluations 5 (2.4) 0.3
Cash and cash equivalents at the beginning
of the period 15 90.0 19.0
Cash and cash equivalents at the end
of the period 15 128.6 90.0
----------------------------------------------- ---- ----- ----------- -----------
Consolidated Statement of Changes in Equity
For the 52 weeks ended 26 June 2021
Total
equity
attributable
to equity
Issued Share Capital holders
share premium redemption Hedging Retained of the
Note capital account reserve reserve earnings Parent
GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
----------------------------- ----- --------- --------- ------------ --------- ---------- --------------
As at 30 June 2019 2.0 1.6 43.2 5.0 134.0 185.8
Profit for the period - - - - 87.7 87.7
Movement in fair value
of cash flow hedges - - - 6.8 - 6.8
Deferred tax on hedging
movements - - - (0.1) - (0.1)
----------------------------- ----- --------- --------- ------------ --------- ---------- --------------
Total comprehensive income
for the period - - - 6.7 87.7 94.4
Proceeds from issue of
treasury shares - - - - 2.0 2.0
Share-based payments - - - - 2.1 2.1
Deferred tax on share-based
payments - - - - 1.3 1.3
Current tax on share
options exercised - - - - 0.2 0.2
Gain on cash flow hedges
transferred to inventory - - - (6.4) - (6.4)
Ordinary dividends paid 7 - - - - (106.0) (106.0)
Total transactions with owners,
recorded directly in equity - - - (6.4) (100.4) (106.8)
------------------------------------ --------- --------- ------------ --------- ---------- --------------
As at 27 June 2020 2.0 1.6 43.2 5.3 121.3 173.4
Profit for the period - - - - 128.9 128.9
Movement in fair value
of cash flow hedges - - - (17.7) - (17.7)
Deferred tax on hedging
movements - - - 2.2 - 2.2
Total comprehensive income
for the period - - - (15.5) 128.9 113.4
Proceeds from issue of
treasury shares - - - - 1.8 1.8
Share-based payments - - - - 7.5 7.5
Deferred tax on share-based
payments - - - - 2.9 2.9
Current tax on share
options exercised - - - - 0.6 0.6
Loss on cash flow hedges
transferred to inventory - - - 5.9 - 5.9
Ordinary dividends paid 7 - - - - (24.3) (24.3)
Total transactions with owners,
recorded directly in equity - - - 5.9 (11.5) (5.6)
------------------------------------ --------- --------- ------------ --------- ---------- --------------
As at 26 June 2021 2.0 1.6 43.2 (4.3) 238.7 281.2
----------------------------- ----- --------- --------- ------------ --------- ---------- --------------
Accounting Policies
For the 52 weeks ended 26 June 2021
Basis of preparation
The annual report and financial statements for the period ended
26 June 2021 were approved by the Board of Directors on 8 September
2021 along with this preliminary announcement, but have not yet
been delivered to the Registrar of Companies.
The financial information contained in this preliminary
announcement does not constitute the Group's statutory accounts
within the meaning of Section 434 of the Companies Act 2006.
The auditor's report on the statutory accounts for the period
ended 26 June 2021 was unqualified and did not contain a statement
under section 498 of the Companies Act 2006.
The statutory accounts of Dunelm Group plc for the period ended
27 June 2020 have been delivered to the Registrar of Companies. The
auditor's report on the statutory accounts for the period ended 27
June 2020 was unqualified and did not contain a statement under
section 498 of the Companies Act 2006.
1. 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
their journey often 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. The Executive Board reviews internal
management reports on a monthly basis and performance is assessed
based on a number of financial and non-financial KPIs as well as on
profit before taxation.
Management believes that these measures are the most relevant in
evaluating the performance of the Group and for making resource
allocation decisions.
All material operations of the Group 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.
2. Operating costs
2021 2020
52 weeks 52 weeks
GBP'm GBP'm
Selling and distribution costs 423.9 330.6
Administrative expenses 98.6 85.8
522.5 416.4
----------------------------------------------- ---------- ----------
3. Operating profit
Operating profit is stated after charging the following
items:
2021 2020
52 weeks 52 weeks
GBP'm GBP'm
Cost of inventories included
in cost of sales 638.5 519.3
Amortisation of intangible
assets 7.3 7.3
Depreciation of owned property,
plant and equipment 24.5 25.9
Depreciation of right-of-use
assets 45.7 45.1
Loss on disposal and impairment of property,
plant and equipment and intangible assets 2.3 1.5
Impairment of right-of-use
assets 1.0 0.4
Expense related to short-term
leases 1.8 2.3
---------------------------------------------------------- ----------- -----------
The cost of inventories included in cost of sales includes the
impact of a net increase in the provision for obsolete inventory of
GBP5.3m (2020: GBP0.5m increase).
The analysis of the auditor's remuneration is as follows:
2021 2020
52 weeks 52 weeks
GBP'000 GBP'000
Fees payable to the Company's auditors
for the audit of the Parent and consolidated
annual financial statements 29 28
Fees payable to the Company's auditors and
their associates for other services to the
Group
- Audit of the Company's subsidiaries pursuant to legislation 225 201
-Other assurance services 40 29
------------------------------------------------------------------------ ---------- ----------
The prior year audit fees include GBP55,800 which was billed
after the FY20 year end.
4. Employee numbers and costs
The average monthly number of people employed by the Group
(including Directors) was:
2021 2021 2020 2020
52 weeks 52 weeks 52 weeks 52 weeks
Number Full time Number Full time
of heads equivalents of heads equivalents
Selling 9,039 5,390 8,359 5,050
Distribution 829 812 794 778
Administration 704 695 702 691
10,572 6,897 9,855 6,519
--------------------- ----------- ------------- ----------- -------------
The aggregate remuneration of all employees including Directors
comprises:
2021 2020
52 weeks 52 weeks
GBP'm GBP'm
-------------------------------------- ---- ---- ---- ---------- ----------
Wages and salaries (including
termination benefits) 190.8 148.7
Social security costs 13.0 10.5
Share-based payment expense 7.5 2.1
Pension costs - defined contribution
plans 4.5 4.0
215.8 165.3
----------------------------------------------------- ---------- ----------
In the prior year, the Group claimed GBP14.5m under the UK
government's Coronavirus Job Retention Scheme which was netted off
against payroll costs. Following the Board's decision to repay the
Coronavirus Job Retention Scheme claims, the current year payroll
costs include the GBP14.5m repayment.
5. Financial income and expenses
2021 2020
52 weeks 52 weeks
GBP'm GBP'm
---------------------------------- ---- ---- ---- ---------- ----------
Financial income
Interest on bank deposits 0.1 0.1
Net foreign exchange gains - 0.3
0.1 0.4
------------------------------------------------- ---------- ----------
Financial expenses
Interest on bank borrowings (0.8) (1.5)
Amortisation of issue costs of bank
loans (0.2) (0.3)
Net foreign exchange losses (2.4) -
Interest on lease liabilities (5.3) (5.5)
(8.7) (7.3)
------------------------------------------------- ---------- ----------
Net financial expense (8.6) (6.9)
---------------------------------------------------- ---------- ----------
6. Taxation
2021 2020
52 weeks 52 weeks
GBP'm GBP'm
-------------------------------------- ---- ---- ---- ----------- -----------
Current taxation
UK corporation tax charge for
the period 32.7 24.7
Adjustments in respect of prior
periods (1.7) (1.1)
31.0 23.6
----------------------------------------------------- ----------- -----------
Deferred taxation
Origination of temporary differences (1.3) (2.0)
Impact of change in tax rate (0.8) (0.2)
(2.1) (2.2)
----------------------------------------------------- ----------- -----------
Total tax expense 28.9 21.4
-------------------------------------------------------- ----------- -----------
The tax charge is reconciled with the standard rate of UK
corporation tax as follows:
2021 2020
52 weeks 52 weeks
GBP'm GBP'm
---------------------------------- ---- ---- ---- ----------- -----------
Profit before taxation 157.8 109.1
UK corporation tax at standard rate
of 19.0% (2020: 19.0%) 30.0 20.7
Factors affecting the charge
in the period:
Non-deductible expenses 1.4 2.0
Adjustments in respect of prior
periods (1.7) (1.1)
Impact of change in tax rate (0.8) (0.2)
Tax charge 28.9 21.4
---------------------------------------------------- ----------- -----------
The taxation charge for the period as a percentage of profit
before tax is 18.3% (2020: 19.6%).
During the year the UK government substantively enacted an
increase in the corporation tax rate to 25.0% effective from 1
April 2023. The deferred tax asset as at 26 June 2021 has been
calculated based on the rate of 25.0% unless the asset/liability is
expected to be realised or settled before the rate increase in
which case the rate of 19.0% has been used.
7. Dividends
The dividends set out in the table below relate to the 1 pence
Ordinary Shares:
2021 2020
52 weeks 52 weeks
GBP'm GBP'm
--------------------------------- ------------- ---- ---- ---------- ----------
Special dividend for the period - paid
ended 29 June 2019 32.0 pence - 64.6
Final dividend for the period - paid
ended 29 June 2019 20.5 pence - 41.4
Interim dividend for the period - paid 24.3 -
ended 26 June 2021 12.0 pence
24.3 106.0
--------------------------------------------------------- ---------- ----------
The Directors are proposing a final dividend of 23.0 pence per
Ordinary Share for the period ended 26 June 2021 which equates to
GBP46.6m. Subject to shareholder approval at the AGM this will be
paid on 19 November 2021 to shareholders on the register at the
close of business on 29 October 2021. The Directors are also
proposing a special dividend of 65.0 pence per Ordinary Share for
the period ended 26 June 2021 which equates to GBP131.7m. This will
be paid on 8 October 2021 to shareholders on the register at the
close of business on 17 September 2021.
8. Earnings per Ordinary 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:
2021 2020
52 weeks 52 weeks
'000 '000
-------------------------------- ---- ---- ---- ----------- -----------
Weighted average number of shares
in issue during the period 202,445 202,106
Impact of share options 2,445 2,113
Number of shares for diluted
earnings per share 204,890 204,219
-------------------------------------------------- ----------- -----------
2021 2020
52 weeks 52 weeks
GBP'm GBP'm
Profit for the period 128.9 87.7
-------------------------------------------------- ----------- -----------
Earnings per Ordinary Share
- basic 63.7p 43.4p
Earnings per Ordinary Share
- diluted 62.9p 42.9p
-------------------------------------------------- ----------- -----------
9. Intangible assets
Software Rights Total
development to brands
and licences and customer
lists
GBP'm GBP'm GBP'm
--------------------------------- -------------- -------------- ------
Cost
At 30 June 2019 49.8 11.0 60.8
Additions 3.0 - 3.0
Disposals (1.1) - (1.1)
At 27 June 2020 51.7 11.0 62.7
Additions 0.6 - 0.6
Disposals (0.3) - (0.3)
At 26 June 2021 52.0 11.0 63.0
----------------------------------- -------------- -------------- ------
Accumulated amortisation
At 30 June 2019 22.5 11.0 33.5
Charge for the financial period 7.3 - 7.3
Disposals (0.8) - (0.8)
At 27 June 2020 29.0 11.0 40.0
Charge for the financial period 7.3 - 7.3
Disposals (0.3) - (0.3)
Impairment 1.2 - 1.2
At 26 June 2021 37.2 11.0 48.2
----------------------------------- -------------- -------------- ------
Net book value
At 30 June 2019 27.3 - 27.3
At 27 June 2020 22.7 - 22.7
At 26 June 2021 14.8 - 14.8
----------------------------------- -------------- -------------- ------
All amortisation is included within operating costs in the
Consolidated Income Statement.
The impairment of GBP1.2m (2020: nil) relates to tablet-based
sales enabling software that was impaired following the development
and roll out of new functionality in this area.
Within software development and licences there were no additions
(2020: GBP0.8m) related to internally generated assets.
10. Property, plant and equipment
Freehold Leasehold Plant Refit improvements Fixtures Total
land improvements and machinery and fittings
and
buildings
GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
-------------------------- ----------- -------------- --------------- ------------------- -------------- -------
Cost
At 30 June 2019 92.1 158.9 5.8 7.4 112.0 376.2
Additions 5.6 7.3 0.2 1.6 7.2 21.9
Disposals - (14.6) (0.2) - (5.1) (19.9)
At 27 June 2020 97.7 151.6 5.8 9.0 114.1 378.2
Additions - 3.1 1.9 0.7 7.1 12.8
Disposals - (6.7) (0.1) - (4.6) (11.4)
At 26 June 2021 97.7 148.0 7.6 9.7 116.6 379.6
-------------------------- ----------- -------------- --------------- ------------------- -------------- -------
Accumulated depreciation
At 30 June 2019 14.2 83.4 4.7 2.1 91.2 195.6
Charge for the financial
period 1.6 12.2 0.4 1.1 10.6 25.9
Disposals - (14.4) (0.2) - (5.1) (19.7)
Impairment 0.6 0.4 - - - 1.0
At 27 June 2020 16.4 81.6 4.9 3.2 96.7 202.8
Charge for the financial
period 1.7 11.8 0.3 1.4 9.3 24.5
Disposals - (6.2) (0.1) - (4.2) (10.5)
Impairment - 0.1 - - 0.1 0.2
At 26 June 2021 18.1 87.3 5.1 4.6 101.9 217.0
-------------------------- ----------- -------------- --------------- ------------------- -------------- -------
Net book value
At 30 June 2019 77.9 75.5 1.1 5.3 20.8 180.6
At 27 June 2020 81.3 70.0 0.9 5.8 17.4 175.4
At 26 June 2021 79.6 60.7 2.5 5.1 14.7 162.6
-------------------------- ----------- -------------- --------------- ------------------- -------------- -------
All depreciation and impairment charges have been included
within operating costs in the Consolidated Income Statement.
The impairment of GBP0.2m (2020: GBP1.0m) relates to store
impairment as well as the prior year impairment of the Group's head
office. The recoverable amount has been determined as the value in
use applying a discount rate of 10.0% (2020: 10.0%).
11. Leases
Right-of-use assets included in the Consolidated Statement of
Financial Position at 26 June 2021 were as follows:
2021 2021 2021 2020
Land and Motor vehicles, Total Total
buildings plant and
equipment
GBP'm GBP'm GBP'm GBP'm
At the beginning of the period 275.6 7.7 283.3 294.3
Additions 22.6 2.9 25.5 34.9
Disposals - (0.1) (0.1) (0.4)
Impairment (1.0) - (1.0) (0.4)
Depreciation (42.5) (3.2) (45.7) (45.1)
At the end of the period 254.7 7.3 262.0 283.3
--------------------------------- ----------- ---------------- ------- -------
Right-of-use additions include GBP1.3m of lease modifications
(2020: GBP0.4m).
Lease liabilities included in the Consolidated Statement of
Financial Position at 26 June 2021 were as follows:
2021 2021 2021 2020
Land and Motor vehicles, Total Total
buildings plant and
equipment
GBP'm GBP'm GBP'm GBP'm
At the beginning of the period (306.7) (7.7) (314.4) (325.0)
Additions (23.9) (3.0) (26.9) (36.4)
Disposals - 0.1 0.1 0.4
Interest (5.2) (0.1) (5.3) (5.5)
Repayment of lease liabilities 49.7 3.5 53.2 52.1
At the end of the period (286.1) (7.2) (293.3) (314.4)
--------------------------------- ----------- ---------------- -------- --------
The discount rate applied across all lease liabilities ranged
between 1.0% and 2.1% (2020: 1.6% and 2.4%).
The maturity analysis of the lease liabilities is as
follows:
2021 2020
GBP'm GBP'm
Current (49.0) (48.0)
Non-current (244.3) (266.4)
(293.3) (314.4)
------------- -------- --------
The remaining contractual maturities of the lease liabilities,
which are gross and undiscounted, are as follows:
2021 2020
GBP'm GBP'm
Less than one year (53.7) (51.6)
One to five years (170.9) (174.2)
More than five years (88.3) (118.6)
Total undiscounted lease liability (312.9) (344.4)
--------------------------------------- -------- --------
The following amounts have been recognised in the Consolidated
Income Statement:
2021 2021 2021 2020
52 weeks 52 weeks 52 weeks 52 weeks
Land and Motor vehicles, Total Total
buildings plant and
equipment
GBP'm GBP'm GBP'm GBP'm
Depreciation of right-of-use
assets 42.5 3.2 45.7 45.1
Impairment of right-of-use assets 1.0 - 1.0 0.4
Interest expenses (included
in financial expenses) 5.2 0.1 5.3 5.5
Expense relating to short-term
leases 1.7 0.1 1.8 2.3
----------------------------------------- -------------------- --------------------- ---------- ----------
The impairment of GBP1.0m (2020: GBP0.4m) relates to store
impairment. The recoverable amount has been determined as the value
in use applying a discount rate of 10.0% (2020: 10.0%).
The total cash outflow for leases during the financial period
was GBP59.3m (2020: GBP43.2m).
Cash repayment of lease liabilities includes the deferred
payment into this financial year of two months' rent which would
normally have been paid in June 2020. From September 2020 onwards,
we reverted to paying rents quarterly in advance.
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