DFS Furniture’s Strategic Execution Fuels Profit Surge and Debt Reduction

DFS Furniture plc (LON: DFS) reported its preliminary full-year results for FY25 on Thursday, showcasing significant profit growth and a substantial reduction in leverage, driven by strategic execution and a strengthened customer proposition.

Like-for-like order intake grew by 10.2% year-over-year, a stark contrast to the 1.8% decline in the previous year. Reported order intake growth was 8.7%. Gross sales reached £1,388.3 million, up 5.8% from £1,311.8 million.

Revenue increased by 4.4% to £1,030.3 million, compared to £987.1 million in the prior year. Gross margin expanded by 70 basis points to 56.5%.

Underlying profit before tax (PBT) surged to £30.2 million, a £19.7 million increase year-over-year. Reported profit before tax was £32.9 million, a significant turnaround from the £1.7 million loss in the previous year.

Underlying basic earnings per share (EPS) rose to 9.2p, up 7.7p. Reported basic EPS reached 10.5p, a 12.4p increase. Net bank debt decreased substantially to £107.0 million from £164.8 million, reducing bank leverage to 1.4x from 2.5x.

The company's strong performance and disciplined cash management have strengthened its financial position. However, current leverage remains outside the target range of 0.5x-1.0x, and given the uncertain macroeconomic environment, the Board has decided not to recommend a FY25 dividend.

The company said its focus remains on reducing debt levels and maintaining capital investment discipline.

Trading in the first 12 weeks of the new financial period aligns with expectations. The company anticipates profit growth in FY26, despite a projected subdued market, supported by a compelling customer proposition, further gross margin improvements, and ongoing cost discipline.

Tim Stacey, Group Chief Executive Officer, stated, “I believe that our customer proposition has never been in better shape and that all elements of our vertically integrated business model are working efficiently and effectively, leading to record net promoter scores.” He added that the company expects to grow profit before tax in FY26 and further strengthen the balance sheet, even in a subdued market.

The long-term outlook remains positive, with the Board confident in achieving medium-term targets of £1.4 billion in revenue and 8% PBT margins. While challenges persist in the near term, DFS Furniture's strategic execution and improved financial health position it well for future growth.