REG - Dunelm Group plc - Preliminary Results
11/09/2024 07:00
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RNS Number : 6690D Dunelm Group plc 11 September 2024
11 September 2024
Dunelm Group plc
Preliminary Results for the 52 weeks ended 29 June 2024
Strong performance and a clear pathway to further market share gains
Dunelm Group plc ("Dunelm" or "the Group"), the UK's leading homewares
retailer, today announces its preliminary results for the 52 weeks to 29 June
2024.
FY24 FY23 YoY
Total sales £1,706.5m £1,638.8m +4.1%
Digital % total sales(1) 37% 36% +1ppt
Gross margin 51.8% 50.1% +170bps
Operating costs:sales ratio 39.3% 38.0% +130bps
Profit before tax (PBT) £205.4m £192.7m +6.6%
Diluted earnings per share 74.4p 75.0p (0.8%)
Free cash flow(2) £132.2m £160.4m (£28.2m)
Net debt(3) £55.6m £30.7m +£24.9m
Ordinary dividend per share 43.5p 42.0p +3.6%
Special dividend per share 35.0p 40.0p n/a
Highlights
· Sales of £1.71bn (FY23: £1.64bn), up 4.1% on FY23 despite the
softer market
· Customers responded well to our relevance, value and choice with
sales growth driven by volumes (+6.2%)
· Further 60bps market share gain in combined homewares and furniture
markets, now at 7.7%(4)
· Increase in active customers of 5.1%(5), with growth across all age,
income and geographic cohorts
· Growth delivered across both stores and online, with digital sales
now comprising 37% of total sales (FY23: 36%)
· Six new stores opened (including one relocation) in line with our
plans, giving us confidence to extend store rollout plan across different
sizes and formats
· Further progress in our Good and Circular approach to
sustainability(6), with improvements in Scope 1 carbon intensity reduction,
expansion of our community initiatives such as 'Delivering Joy' and greater
diversity amongst our leaders
Financial highlights
· Strong gross margin of 51.8% (FY23: 50.1%), benefiting from net
freight tailwinds and operational grip
· Profit before tax ("PBT") growth ahead of sales, up 6.6% to £205m
(FY23: £193m)
· Diluted earnings per share of 74.4p (FY23: 75.0p), with increased PBT
offset by 520bps higher effective tax rate, given changes to the statutory
rate
· £132m free cash flow (FY23: £160m)(2), year-on-year impacted by
higher tax rate, working capital outflow and increased capex
· Final ordinary dividend of 27.5p per share (FY23: 27.0p) taking the
full year ordinary dividend to 43.5p per share (FY23: 42.0p), an increase of
3.6%
· £158m total dividends paid to shareholders during the year,
including special dividend of 35p per share declared with the interim results
and paid in April
Outlook
· We continue to see a challenging consumer environment and the timing
of a sector recovery remains uncertain
· Sales growth in FY25 expected to be driven by volume and further
market share gains
· Strong plans underpin confidence in FY25 progress with ongoing
investment in both growth and productivity drivers, whilst maintaining
operational grip
· Evolved focus areas framing our strategic plans: elevating our
product offer; connecting to more customers; and harnessing our operational
capabilities
· Confident in our plans to reach next milestone of 10% market share in
the medium term
· Well-placed to unlock our full potential as The Home of Homes
Nick Wilkinson, Chief Executive Officer, commented:
"This strong set of results is testament to the hard work of our adaptable and
committed colleagues. In a period when consumers faced inflationary pressures
and competing demands for their disposable income, we have continued to raise
the bar on the relevance and value we offer at Dunelm. The continued delivery
of volume-driven sales growth and further share gains in this softer market
underlines this, and the strength and resilience of our business model.
"We have made good progress with our growth plans, including the expansion of
our store estate, building a faster and better digital experience for
customers, and advancing our tech and data capabilities. As we evolve our
strategic thinking in this changing environment, we are now even clearer on
the areas which will help us to unlock our full potential as The Home of
Homes.
"Whilst we are gradually seeing improvements to economic indicators, we are
yet to see a meaningful change in consumer spending habits in our markets.
Against this backdrop, and compared to a strong first quarter last year, we
have made a solid start to FY25. Our plans give us a clear pathway to reaching
our next milestone of 10% market share in the medium term, and we remain very
confident in our ability to deliver long-term sustainable growth as a result."
1 Digital includes home delivery, Click & Collect and tablet-based sales
in store.
2 Free cash flow is defined as net cash generated from operating activities
less capex (net of disposals) and business combinations, net interest paid
(including leases) and loan transaction costs, and repayment of principal
element of lease liabilities. A reconciliation of operating profit to free
cash flow is included in the CFO review.
3 Excluding lease liabilities. Full definition provided in the table of
alternative performance measures.
(4) GlobalData UK combined homewares and furniture markets, excluding kitchen
cabinetry and bathroom furniture. Market share for the period July 2023 to
June 2024 was 7.7%. Prior year comparative restated.
(5) Growth in unique active customers who have transacted at least once in the
12 months to June 2024. Management estimates using Barclays data.
(6) Described in more detail on our corporate website at
https://corporate.dunelm.com/sustainability
(https://protect.checkpoint.com/v2/___https:/corporate.dunelm.com/sustainability___.bXQtcHJvZC1jcC1ldXcyLTE6bmV4dDE1OmM6bzowMWJlYmQ0ODRjODYyYmY3OGM3Nzg0MmE1YTc2NmRkNTo2OmFjN2M6MGMzMTk0YjQ5ZGI5YjZkMDEzNGQ0MDVhZGE4ZTg0YzkyNmE1YjM2YmVmZDA1NmY5NDY0MDM5MjY3ODlmNThmMDpwOlQ6Tg)
.
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 hugo.harris@mhpgroup.com
(mailto:hugo.harris@mhpgroup.com) . A copy of the presentation will be made
available at https://corporate.dunelm.com (https://corporate.dunelm.com)
For further information please contact:
Dunelm Group plc investorrelations@dunelm.com (mailto:investorrelations@dunelm.com)
Nick Wilkinson, Chief Executive Officer
Karen Witts, Chief Financial Officer
MHP 07595 461 231
Oliver Hughes / Rachel Farrington / Charles Hirst dunelm@mhpgroup.com (mailto:dunelm@mhpgroup.com)
Next scheduled event:
Dunelm will release its first quarter trading update on 24 October 2024.
Quarterly analysis:
52 weeks to 29 June 2024
Q1 Q2 H1 Q3 Q4 H2 FY
Total sales £389.6m £482.9m £872.5m £434.5m £399.5m £834.0m £1,706.5m
Total sales growth +9.2% +1.0% +4.5% +2.6% +5.0% +3.8% +4.1%
Digital % total sales 35% 37% 36% 37% 40% 39% 37%
52 weeks to 1 July 2023
Q1 Q2 H1 Q3 Q4 H2 FY
Total sales £356.7m £478.3m £835.0m £423.3m £380.5m £803.8m £1,638.8m
Total sales growth (8.3%) +17.6% +5.0% +6.1% +6.1% +6.1% +5.5%
Digital % total sales 33% 35% 34% 36% 39% 37% 36%
Notes to Editors:
Dunelm is the UK's market leader in homewares with a purpose 'to help
create the joy of truly feeling at home, now and for generations to come'. Its
specialist customer proposition offers value, quality, choice and style across
an extensive range of c.85,000 products, spanning multiple homewares and
furniture categories and including services such as Made to Measure window
treatments.
The business was founded in 1979 by the Adderley family, beginning as a
curtains stall on Leicester market before expanding its store footprint. The
business has grown to 184 stores across the UK and has developed a successful
online offer through dunelm.com which includes home delivery and Click &
Collect options. 155 stores include Pausa coffee shops, where customers can
enjoy a range of hot and cold food and drinks.
From its textiles heritage in areas such as bedding, curtains, cushions,
quilts and pillows, Dunelm has built a comprehensive offer as The Home of
Homes including furniture, kitchenware, dining, lighting, outdoor, decoration
and DIY. The business predominantly sells specialist own-brand products
sourced from long-term, committed suppliers.
Dunelm is headquartered in Leicester and employs c.11,500 colleagues. It has
been listed on the London Stock Exchange since October 2006 (DNLM.L) and
the business has returned c.£1.5bn in distributions to shareholders since
IPO(7).
(7) Ordinary dividends plus special distributions.
CHIEF EXECUTIVE OFFICER'S REVIEW
Introduction
I am pleased to report another strong performance, in what remained a tough
consumer environment. The homewares and furniture market was still soft and
during the year we faced both inflationary pressures and disruption to major
shipping routes. Nevertheless, we have again demonstrated the resilience of
our business model in achieving growth, stable operating margins and strong
cash returns. At the same time, we continue to invest for the long-term as we
identify growth and productivity opportunities for the future.
As we assess the changing consumer landscape, we are evolving our focus areas
to frame our strategic priorities and investment choices. Entering this next
phase of growth, we are committed to our vision to become the UK's most
trusted and valuable homewares and furniture brand, and will achieve this by
unlocking our full potential as The Home of Homes.
With a focus on further elevating our product offer, developing and expanding
our stores and digital channels to connect with more customers and harnessing
our operational capabilities, we are confident in continued market share
gains. Indeed, our plans now give us a clear pathway to 10% market share in
the medium term.
As ever, our strong performance and excitement for the future is due to the
support, adaptability and skills of our committed colleagues and supplier
partners. I would like to thank them all for everything they continue to do to
grow, adapt and develop. It is due to them that we achieve these results and
are well-placed to unlock our full potential.
FY24 Review
A strong performance balancing growth and grip
In FY24 we successfully balanced delivering growth with maintaining our firm
operational grip on the business amidst a challenging consumer environment. We
made good progress against our objectives, expanding our store estate in
different sizes and locations as planned, continuing to improve our digital
proposition, and enhancing our multi-channel experience for customers who
prefer to shop both online and in store, including through a better Click
& Collect proposition.
We grew our sales by 4.1%, in a market which declined, reflecting our ongoing
customer appeal and continuing our consistent track record of market share
gains. We now have a 7.7%(8) share of a total addressable market (combining
homewares and furniture) valued at c.£24bn(8), up 60bps year-on-year and
significantly higher than the 5% we held in FY19, and see significant scope to
increase this further.
We were particularly pleased with the quality of our sales growth, with
volumes up 6.2% being a positive indicator of our overall appeal. With volume
growth ahead of sales, we saw a small reduction in our average item value,
reflecting a slightly different product mix to the prior year, with the impact
of price changes broadly stable. The strong volume growth was supported by an
increase in the number of active customers, up 5.1%(9). Pleasingly, this
growth was seen across all age, income and geographical cohorts.
Gross margin was strong in FY24, expanding by 170bps to 51.8% (FY23: 50.1%),
ahead of our expectations at the start of the year. There were various moving
parts within our input costs, and we particularly benefited from a net
tailwind from lower freight rates which has now largely annualised. We were
also able to avoid any significant impact from the disruption in the Red Sea,
working closely with our freight providers to manage the impact of surcharges,
whilst using the capabilities within our commercial teams to minimise
availability issues. Our strong margin was achieved without price increases,
as we maintained our commitment to offering outstanding value to our
customers. As expected, operating costs as a proportion of sales increased to
39.3%, driven by inflation and the investments we are making to drive future
growth. Cost increases were partly offset by productivity improvements across
the Group. Overall, PBT grew ahead of sales, up 6.6% to £205m (FY23: £193m),
representing a strong PBT margin of 12.0% (FY23: 11.8%). Diluted EPS fell by
0.8% to 74.4p (FY23: 75.0p), with our pre-tax profit growth offset by a higher
effective tax rate, largely the result of increased corporation tax.
Our financial strength, including a healthy balance sheet and a capital-light
growth model, is one of our core business advantages. This was reflected in
another good year of cash generation, with free cash flow of £132m (FY23:
£160m) representing 62% of operating profit. This enabled us to increase our
ordinary dividend once again, and we are proposing a final dividend of 27.5p
per share, bringing the full year ordinary dividend to 43.5p per share, up
3.6% year-on-year. In total, we returned £158m to shareholders during the
year, including a special dividend of 35p announced at the interim results.
This reflects our confidence in the business and ongoing commitment to our
capital allocation policy and wider principle of delivering strong cash
returns for our shareholders. Since our IPO in 2006, we have now returned
c£1.5bn(10) to shareholders.
(8) GlobalData UK combined homewares and furniture markets, excluding kitchen
cabinetry and bathroom furniture, including VAT. Prior year comparative
restated.
(9) Growth in unique active customers who have transacted at least once in the
12 months to June 2024. Management estimates using Barclays data.
(10) Ordinary dividends plus special distributions.
Delivering for all our stakeholders
As well as a strong financial performance, we have delivered positive outcomes
across our broad group of key stakeholders. We strive to make good decisions
and ensure what we do is increasingly sustainable. During the year we
reiterated our good and circular approach to sustainable growth, and continue
to ensure it is embedded into our strategy and ways of working so that we are
delivering for all of our stakeholders and focussing on our planet,
communities and people.
In FY24 we were proud to become the first homewares specialist to have
validated SBTi targets across Scope 1,2 and 3 carbon emissions(11), which sees
us align to the latest climate science from the Intergovernmental Panel on
Climate Change (IPCC). We have also made further progress in extending our
good and circular approach into our customer proposition, increasing the
proportion of own-brand products which have our more sustainable 'Conscious
Choice' label, and introducing the 'Too Good to Go' initiative to our Pausa
cafes to help reduce food waste.
Our committed supplier partners are also helping us to limit our impact on the
planet. Having grown together over several decades, we see these enduring
relationships as a key strength of our unique operating model. On
sustainability matters, we work together with our suppliers and continue to
learn. Where necessary, we have been encouraging suppliers to adopt a data
monitoring standard and action planning tool (the Higg Index) to underpin
their improved manufacturing programmes.
We continue to place importance on and build momentum in the work our stores
and sites do in their local communities. Originating during the pandemic and
expanding since, all our stores now support important local organisations
including selected schools, care homes, women's refuges and more. Our annual
Delivering Joy campaign is an example of this work in practice. Last year, I
am immensely proud to say that we delivered 125,000 gifts to these local
causes. Communities also form the backbone of some of our circularity
initiatives, including our expanding takeback schemes and 'Home to Home',
through which customers can donate pre-loved homewares items to those in need.
We place great importance on the development and engagement of our committed
colleagues. Developing our talent improves retention, enables internal
succession, and increases our productivity and business resilience.
Encouragingly, we saw colleague retention increase to 89%(12) during the year
(FY23: 87%). Whilst our colleague engagement score fell in FY24(13), although
high by industry standards, we are actively listening to our colleagues. We
see very strong response rates to our colleague engagement surveys throughout
the year, which give us detailed and extensive feedback, from which we are
building positive action plans across the business.
As technology changes the nature of all roles across our business, we are as
committed to lifetime learning as we are to early careers recruitment and
development. Our data academy and apprenticeships are good examples of this.
We are also excited about our 'Reach' development programme which launched
during the year and is focused on increasing the number of ethnically diverse
colleagues in senior positions. We have much more to do in this area but are
encouraged that the proportion of our 'role model' leaders(14) from ethnically
diverse backgrounds increased to 5.8% in FY24 (FY23: 3.8%).
(11) Our targets approved by the SBTi are as follows. Overall Net-Zero Target:
Dunelm Group PLC commits to reach net-zero greenhouse gas emissions across the
value chain by FY40 from a FY19 base year. Near-Term Targets: Dunelm Group PLC
commits to reduce absolute Scopes 1 and 2 GHG emissions by 50% by FY30 from a
FY19 base year. Dunelm Group PLC also commits to reduce absolute Scope 3 GHG
emissions by 50% within the same timeframe. Long-Term Targets: Dunelm commits
to reduce absolute Scope 1, 2 and 3 GHG emissions by 90% by FY40 from a FY19
base year.
(12) Retention is the percentage of colleagues from the start of the financial
year (July 2023) who remained employed until the end of the financial year
(June 2024), excluding any planned leavers.
(13) Colleague engagement score (eNPS) is based on responses to the question
'How likely are you to recommend Dunelm as a place to work' from our May
colleague survey. Our eNPS score fell 10%pts year-on-year.
(14) Regional and store coaches plus all colleagues at 'Head of' level and
above, of which we currently have around 300 across the organisation.
Unlocking our full potential as The Home of Homes
Looking forward, we have three broad focus areas which frame our priorities
and investments. These are an evolution of the strategy we have followed over
many years, and in combination will allow us to achieve our full potential as
the Home of Homes, and to be the UK's most trusted and valuable brand for
homewares and furniture.
Firstly, in the area of product: we see opportunity to redouble our focus on
product development, increasing our curated ranges, bolder design
differentiation, enhancing cross-category coordination in our collections and
innovation in sustainable materials. In recent times we have been acutely
aware of the importance in having the right product offer, at the right time,
to ensure we remain relevant and appealing to customers. In the year we saw
this demonstrated with stronger upholstered furniture collections, combined
with 5-day delivery lead-times.
Secondly, we are building further confidence in opening more stores and
developing our digital channels to deliver an outstanding and connected
multi-channel shopping experience for our customers. We know that
multi-channel shopping is the preference for most when it comes to homewares
and furniture, so joining up our channels as much as possible is a priority.
Thirdly, after building up our skills and operational capabilities in recent
years, we see significant opportunity to harness them to achieve both
productivity improvements and further strengthen our customer offer. In light
of elevated wage inflation, and with growing technology and data capabilities,
where foundational investment has been made over recent years, there are
increasing opportunities to introduce more automation and productivity tools
throughout the business. These are already driving efficiencies in parts of
our operations (such as reducing volumes in the Customer Contact Centre) and
our capacity to successfully implement more of these initiatives will increase
going forward.
Our three focus areas are therefore as follows:
1. Elevate our product offer
2. Connect with more customers
3. Harness our operational capabilities
These focus areas are an evolution of the strategy that we have followed over
many years and, in combination, will allow us to unlock our full potential as
The Home of Homes. They support broad-based and long-term sustainable market
share growth which can be delivered alongside stable operating margins and
strong cash generation. In the medium term they shape our clear pathway to
reaching our next milestone of 10% market share.
There are various examples which bring to life the initiatives which sit under
each of our focus areas:
1. Elevate our product offer
Product has always been at the heart of Dunelm, and we have well-established
capabilities across a broad range of categories, particularly in textiles and
soft furnishings where our specialism dates back 45 years. The scope for
product elevation is very exciting, not just through broadening our ranges,
but also by increasing relevance with more coordination and style. We are
taking our existing product strengths and elevating them further through
design and innovation across all price and quality tiers.
Lighting is a good example of the level of further opportunity we see ahead.
We have consistently grown market share in the last five years and see
headroom for more growth and innovation. Our in-house design capability allows
us to coordinate across the wider Dunelm range, including our core textiles
collections and cross-category labels such as Elements and our National
History Museum collaboration. We are also working to accelerate our product
development cycles to allow us to respond faster to trends and increase the
choice we offer at all price and quality tiers. Our growing knowledge of more
sustainable materials will also allow us to offer better choice to customers,
as well as introduce more circular product design that uses more sustainable
materials and facilitates repair and recycling.
The made-to-measure window treatments category is another example of our
product elevation opportunity, where taking greater end-to-end control of the
supply chain will enable accelerated growth and returns. Alongside our
well-established manufacturing centre for made-to-measure curtains and Roman
blinds, we have chosen to invest in more vertical integration. In FY24 we
brought the manufacture of custom hard blinds in-house and started
manufacturing roller blinds and Venetian blinds in the Sunflex business we
acquired two years ago. Looking ahead, we are bringing shutters into our own
manufacturing facility, with a plan to launch our new offer to customers in
FY25. This will give us differentiated and advantaged product, the ability to
specify materials and design, shorten UK lead times relative to competitors,
and improve factory utilisation by aligning demand and supply capacity.
2. Connect with more customers
As we elevate our product offer, we will further improve how we connect our
products to more customers through our total retail system. We have known for
many years that the combination of stores and digital is the winning formula
for our existing and target customers, and we are continuing to optimise our
cross-channel offer, making the customer experience both easier and more
personalised.
We have continued to open new superstores, with six new openings (including
one relocation) in FY24, split evenly between our traditional c.30,000 sq ft
size and newer smaller stores of c.15,000 sq ft. We are pleased with the
returns of our new stores, typically paying back within three years, giving us
confidence to open more stores in a range of sizes and locations.
We will continue to open 30,000 sq ft superstores in large catchments given
their very strong returns, however supply of appropriate sites has become more
limited, so we are being agile in our approach. In the early part of the new
financial year, we completed the freehold purchase of a tenanted retail site,
which we will look to convert to a Dunelm format in the future.
We will also open more smaller superstores, in smaller catchments and in the
white space between stores in densely populated areas. Although this footprint
is less developed for us, we are excited by what we have seen in our new
smaller stores and by the opportunity to optimise sales densities and
productivity as we continue to learn. Overall, having previously guided on 5 -
10 new openings in FY24 and FY25, we now see a runway for this rate of growth
continuing into the medium term (expected to be evenly split between larger
and smaller sizes).
In addition, and to better serve our target customers in inner London
boroughs, we are testing some smaller stores in London. Our first inner London
store, at c.5,000 sq ft, will open in the first half of FY25, and we are
exploring other locations to unlock the opportunity with this significant
segment of the UK population where we know we are under-represented.
Complementing our stores, we have made continued progress in our digital
channels, building strong foundations in our front-end architecture and
customer data platform. As we move forward, we are advancing through
optimisation and experimentation, with meaningful opportunities for improving
our proposition. Offering a more personalised experience to our customers
takes many forms, and using our improved data and technology will be key to
improving our proposition.
One example of this is a change to product discovery on dunelm.com, where we
are implementing new AI search functionality in the first half of this year,
having carried out testing in FY24. This will improve the quality, relevance
and presentation of results when searching on our website, with test results
showing fewer 'zero results' searches and more personalised results. This
change moves us from earlier generation functionality towards an advanced AI
solution. This will increase the appeal of searching on our site - a
significant opportunity given customers who use search are four times more
likely to complete a purchase than those who do not.
3. Harness our operational capabilities
Though operational grip has been a characteristic of the Dunelm business for
some time, we recognise an increased opportunity to harness our operational
skills and scale. An ongoing focus on continuous improvement will remain,
driving annual productivity savings, and with elevated wage inflation, there
is now more scope for attractive returns from productivity tools and
automation. Here we will test and learn to ensure we adopt the most
appropriate technologies for our products and business model.
We are making good progress in scaling our commercial operations, improving
demand forecasting and replenishment across our stores and own distribution
centres. Having carried out testing in FY24, we are in the process of rolling
out new technology and ways of working in the first half of this year,
introducing machine learning, automating low value tasks and reducing our
reliance on manual processes and spreadsheets.
Going forward, there is more work to do in relation to our smaller store
footprints, specifically developing our processes and tools for optimising
space, grading and range planning. This level of commercial transformation
will facilitate our expanding product ranges, the efficiency of stock
management in our distribution centres and our different store locations and
sizes, and the speed of product development. These are complicated
developments, but we expect these new capabilities to help us grow our market
share profitably, while serving more customers and increasing the advantages
of our business model.
Downstream from demand forecasting, we have an ongoing programme of continuous
improvement to maximise the utilisation of our network capacity and improve
labour productivity in our supply chain. In FY24 we focused on a series of
tactical initiatives, including the optimisation of shift patterns for our
colleagues; reducing our rate of returned products; and diversifying our
carrier network to improve variable costs.
In the coming years we will be working across our own distribution centres and
with our supplier partners to increasingly automate our processes. Automation
investment is becoming more attractive and we will find ways to optimise this
for the specific product characteristics of homewares and furniture. For
example, we will introduce simple automation of parcel packing and dispatch in
our small-parcel home delivery operation in conjunction with our supply chain
partner.
Technology is moving rapidly but cannot provide the solution in isolation. It
is the combination of technology and well-executed business change that leads
to improvement. As we continue to test and learn, we are increasingly
confident in our capabilities and capacity to do this successfully, in ways
that deliver both growth and returns, in balance.
Summary and outlook
We delivered another strong performance in FY24, successfully balancing growth
and operational grip in a soft market. We achieved high-quality sales and
volume growth, and increased our PBT ahead of sales, whilst continuing to make
progress against our strategic objectives.
We are gradually seeing improvements to economic indicators, however we are
yet to see a meaningful change in consumer spending habits in our markets. In
this context, we have made a solid start to the new financial year, against a
strong prior year comparator.
We have refined our thinking on the key opportunities ahead of us, with three
clear focus areas framing our investments and strategic priorities for the
coming years, and we are confident we can accelerate into a consumer
environment which presents a significant opportunity for market share growth.
We now have good line of sight to continued market share gains and expect to
reach our next milestone of a 10% total share in the medium term. We are very
confident in our business model and clear plans that will continue to deliver
sustainable growth and unlock our full potential as The Home of Homes.
Nick Wilkinson
Chief Executive Officer
11 September 2024
CHIEF FINANCIAL OFFICER'S REVIEW
Revenue
FY24 YoY
Total Group sales £1,706.5m +4.1%
Digital % total sales 37% +1ppt
Market share(15) 7.7% +60bps
Active customer growth(16) N/A +5.1%
Total sales for the period to 29 June 2024 grew by 4.1% to £1,706m (FY23:
£1,639m), with growth in all quarters of the year, despite ongoing
uncertainty in our market. We are pleased that our sales progression was again
driven by volume, which was up 6.2% supported by the strength and relevance of
our proposition. The impact of pricing was broadly stable, and we saw an
overall reduction in average item values driven by the product mix of sales.
Both store and digital channels grew year-on-year, and digital participation
increased again, up 1ppt to 37%.
Customers continue to respond well to the breadth of our ranges, which we
expanded throughout the year, ensuring that it remained curated and relevant.
Overall growth was broad-based across categories, demonstrating our customer
appeal and the resilience of our proposition. We continue to benefit from
elevating our product offer, with our 'Cook & Dine' and upholstered
furniture categories maintaining their strong performance from the first half
of the year. We also saw significant growth in our made-to-measure window
treatments, where we have continued to expand our capability, bringing more of
the manufacturing in-house and introducing new ranges such as Venetian blinds.
Towards the end of the year, whilst seasonal ranges saw softer sales during a
cooler spring and summer period, the Summer Sale performed particularly well,
with customers taking advantage of both the discounted offers available, and
shopping for full-priced products and new ranges.
In a challenging market which declined year-on-year, our combined homewares
and furniture market share increased by 60bps to 7.7%(15). This continues our
strong track record of share gains, and we remain confident in our ability to
keep growing our share of this large and fragmented market.
Total active customers increased by 5.1%(16), an acceleration on the previous
year (FY23: +2.8%), with growth across all customer age, income and
geographical cohorts. In a year where we invested in brand awareness, we saw
particularly strong growth rates in London and in younger (16-24 years)
demographics. We were also pleased to see expansion in both multi-channel
shoppers and those who shop only in-store or online, demonstrating the
strength of our total retail system.
(15) GlobalData UK combined homewares and furniture markets, excluding kitchen
cabinetry and bathroom furniture, for the period July 2023 to June 2024. Prior
year comparative restated.
(16) Growth in unique active customers who have transacted at least once in
the 12 months to June 2024. Management estimates using Barclays data.
Gross margin
Gross margin was strong at 51.8%, 170bps ahead of FY23 (FY23: 50.1%).
Throughout the year we benefitted from a freight tailwind (partly offset by a
foreign exchange headwind), despite Red Sea volatility and resulting
surcharges. We are pleased that sales volumes grew alongside this strengthened
margin, as we worked with our suppliers and applied operational grip to
maintain our outstanding value proposition for customers.
In FY25 we will continue to tightly manage our input costs to deliver a
continued strong gross margin, alongside outstanding value to customers. With
year-on-year freight benefits now largely annualised and Red Sea disruption
ongoing, we currently expect FY25 gross margins to be within a range of 51% -
52%.
Operating costs
Total operating costs were £670m (FY23: £622m) representing an operating
costs:sales ratio of 39.3% (FY23: 38.0%). The year-on-year increase in the
costs:sales ratio reflects ongoing inflationary pressures, and although we
have partially offset these with productivity gains across our operations, our
commitment to long-term investment in the business and the volume-driven
nature of our sales growth means that as expected, there has been an increase
in operating costs relative to sales. We focus on managing operating costs
whilst optimising our overall operating margin to deliver long-term profitable
growth.
The volume-driven nature of our sales growth resulted in an incremental £14m
of variable costs, primarily across performance marketing and in our supply
chain. Looking ahead, we expect our sales growth to continue to be volume
driven.
We have seen another year of inflationary headwinds, which increased costs by
£20m for the year, consistent with the impact we saw in FY23. The main driver
of this was wages, with the largest element of our cost base being the cost of
hourly-paid colleagues. This cost has been impacted by the National Living
Wage increasing by close to 10% in each of the last two years. Whilst we do
not have visibility of the National Living Wage increases going forward, we
expect this inflationary headwind to persist for some time. Therefore, we
expect inflation in our operating cost base to continue at 3%-4% in FY25.
Despite the ongoing challenging consumer environment, we have continued to
invest in the business for the long-term, investing £25m in the year on new
store openings, continuing to improve our digital proposition, and
strengthening brand awareness and customer reach with our 'Home of Homes'
campaigns. Our new store opening programme accelerated to six new store
openings (including one relocation) in the year, and we now plan for 5 - 10
new stores per year over the medium term.
We continue to apply tight operational grip to cost management, and in the
year we generated productivities and efficiencies of £11m, including savings
from the optimisation of performance marketing costs, distribution cost
savings from exiting external storage facilities, and continued process
improvements in stores. As we move forward, as well as focussing on further
continuous improvement initiatives, we will be investing in programmatic
activities to help mitigate the impact of a wage inflationary environment.
Alongside this, we remain committed to investment for long-term profitable
growth from our strategic priorities.
Profit and earnings per share
Operating profit of £213m was £14m higher than the prior year (FY23:
£199m), reflecting sales growth and gross margin expansion coupled with tight
operational cost control in an environment where wage inflation continues to
be a headwind.
In a year of higher base rates, net finance costs of £8m (FY23: £6m)
included interest on IFRS 16 lease liabilities of £6m (FY23: £5m). Our
strong cash flows and low levels of debt meant other financing costs did not
put pressure on the business.
Profit before tax in the period was £205m (FY23: £193m) with PBT margin of
12.0% (FY23: 11.8%). In FY25, we expect PBT margin to remain broadly stable,
reflecting the balance of volume-driven sales growth, strong gross margin and
grip on operating costs in an inflationary environment, alongside a commitment
to continued investment.
Profit after tax of £151m (FY23: £152m) reflected an effective tax rate of
26.4% (FY23: 21.2%), the 5.2ppt increase largely due to the annualisation of
the higher UK headline rate of corporation tax introduced in April 2023. The
effective tax rate was 140bps higher than the 25% headline rate, as we had
slightly more disallowable expenditures in FY24 due to higher new store spend,
and also included the impact of a non-recurring deferred tax adjustment, as
previously reported. Going forward, we expect the effective tax rate to trend
between 50bps and 100bps above the headline tax rate of 25%.
Basic earnings per share (EPS) for the period was 74.7 pence (FY23: 75.2
pence). Diluted earnings per share was 74.4 pence (FY23: 75.0 pence).
Cash generation and net debt
In the period, the Group generated £132m of free cash flow (FY23: £160m),
with conversion of operating profit to free cash flow of 62% (FY23: 81%). The
lower conversion year-on-year is driven by higher capex, increased tax paid
and a working capital outflow.
FY24 FY23
£m £m
Operating profit 213.3 198.8
Depreciation and amortisation(17) 82.0 79.4
Net movement in working capital (17.7) (4.2)
Share-based payments 4.3 4.8
Tax paid (49.6) (38.2)
Net cash generated from operating activities 232.3 240.6
Capex and business combinations (39.9) (21.8)
Net interest and loan transaction costs(18) (3.3) (1.1)
Interest paid on lease liabilities (6.1) (5.3)
Repayment of principal element of lease liabilities (50.8) (52.0)
Free cash flow 132.2 160.4
(17) Including impairment and loss on disposal.
(18) Excluding interest on lease liabilities.
The working capital outflow in the period was £18m (FY23: £4m outflow). The
main contributing factors driving the outflow were the timing of a VAT payment
and the impact on inventory of delays in our main shipping route, which we
continue to manage well operationally. We expect working capital to be broadly
neutral for FY25.
Total capital investment was £40m (FY23: £22m), in line with our guidance.
Capex of c.£25m related to stores, including the six new superstores opened
in the year, 13 refits of existing stores and our ongoing decarbonisation
programme. In June 2024 we purchased a tenanted non-retail freehold property
for £8m, providing current rental income and future capacity for our support
centre.
In FY25 we expect our capital expenditure to increase to £50m - £60m. In
line with previous guidance, we expect to open 5 - 10 new superstores (as in
FY24, broadly evenly split between larger and smaller sites(19)) and we now
expect new openings to continue at this rate for the medium term. In the early
part of the new financial year, we secured a freehold tenanted retail property
in an attractive location for £22m which we plan to convert to a Dunelm
format in the future. Whilst we expect the majority of our new openings to be
leasehold, we have the capacity to purchase freeholds where there are
sufficiently attractive returns.
Cash tax paid was £50m (FY23: £38m), reflecting the higher effective tax
rate.
In the period, the Group did not purchase any shares to be held in treasury
(FY23: £7m). The Group held 1.2m shares in treasury as at 29 June 2024,
sufficient to satisfy future obligations under its employee share schemes.
After total dividend payments in the period of £158m (FY23: £163m), the
Group ended the year with net debt(20) of £56m (FY23: £31m).
(19) Larger superstores c.30,000 sq ft, smaller superstores c.15,000 sq ft.
(20) Excluding lease liabilities. Full definition provided in the table of
alternative performance measures.
Banking agreements
At the year end, the Group had in place a £250m unsecured revolving credit
facility ("RCF"). The terms of the RCF included covenants in respect of
leverage (net debt(21) to be no greater than 2.5× adjusted EBITDA(22)) and
fixed charge cover (EBITDAR(23) to be no less than 1.75× fixed charges(24)),
both of which were met comfortably as at 29 June 2024. A one-year extension to
the facility was agreed in August 2024, with a maturity date of September
2028. The terms are consistent with normal business practice and the covenants
are unchanged. There is an option to extend by another year at Dunelm's
request, subject to lender consent. The Group also maintains £10m of
uncommitted overdraft facilities.
(21) Excluding lease liabilities. Full definition provided in the table of
alternative performance measures.
(22) Adjusted EBITDA defined as EBITDA less depreciation on right-of-use
assets.
(23) EBITDAR defined as EBITDA plus rent.
(24) Fixed charges are defined as net interest costs plus right-of-use asset
depreciation plus rent.
Going concern
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 operation and as such can continue to adopt the 'going concern'
basis of accounting. To support this assessment, the Board is required to
consider the Group's current financial position, its strategy, the market
outlook and its principal risks.
The key judgement that the Directors have considered in forming their
conclusion is the potential impact on future revenue, profits and cashflows of
a downturn in consumer spending away from homewares, due to the ongoing impact
of sustained inflation, as well as the impact of broader economic uncertainty
across a three-year review period. This scenario could result in no growth in
Year 1 and lower sales and higher costs across all channels throughout the
review period. The Directors have also considered a deeper downturn in
consumer spending away from homewares, resulting in negative growth in Year 1
and lower sales and higher costs across all channels throughout the review
period.
In both downside scenarios Dunelm has sufficient liquidity to continue
trading, including maintaining the payment of dividends in line with the
business' dividend policy, and to comfortably meet financial covenants. The
Directors continue to assess the risks that climate change poses to the
business. Currently, climate change is not expected to have a significant
impact on the Group's going concern assessment or on the viability of the
Group over the next three years.
Reverse stress modelling has demonstrated that a prolonged sales reduction of
26% in each year is required to breach covenants by the end of FY26 and a 42%
sales reduction in each year is required to breach the RCF limit by the end of
FY26, assuming reasonable mitigating actions have been implemented.
Even in such an event, management would follow a similar course of action to
that initially undertaken during the COVID-19 pandemic. Such actions could
include reductions in discretionary spend and delaying investments.
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 and meet its liabilities
as they fall due, for at least the next three years. 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 policies
The Board policy on capital structure targets an average net debt level
(excluding lease obligations and short-term fluctuations in working capital)
of between 0.2× and 0.6× the last 12 months' EBITDA(25). The Group expects
to maintain or steadily increase the absolute amount of each dividend payment
in line with the growth of the business.
The Group's dividend policy targets ordinary dividend cover of between 1.75×
and 2.25× earnings per share during the financial year to which the dividend
relates. The Board may allow a temporary fall in dividend cover requirements
in order to maintain the dividend.
The Board will continue to consider returning surplus cash to shareholders if
average net debt, excluding lease liabilities, over a period, consistently
falls below the minimum target of 0.2× EBITDA(25), subject to known and
anticipated investment and expenditure plans at the time.
The Group's full capital and dividend policies are available on our website at
corporate.dunelm.com (https://corporate.dunelm.com/) .
(25) EBITDA defined as operating profit plus depreciation and amortisation of
property, plant and equipment and intangible assets plus loss on disposal and
impairment of property, plant and equipment and intangible assets plus
depreciation on right-of-use assets.
Dividends
The Board has proposed a final ordinary dividend of 27.5 pence per share,
recognising our performance in the year and ongoing confidence in the
business. This takes the full year ordinary dividend to 43.5 pence per share,
3.6% ahead of the 42.0 pence per share paid in FY23, with dividend cover(26)
of 1.71×. Whilst dividend cover is slightly below the range set out in the
Group's policy, the Board considers the level of cover appropriate in light of
the 6.6% year-on-year increase in PBT, with earnings impacted by the increase
in effective tax rate, including a non-recurring impact. The final dividend
will be paid on 26 November 2024 subject to approval by shareholders at the
AGM on 21 November 2024. The ex-dividend date is 31 October 2024 and the
record date is 1 November 2024.
We paid total dividends of £158m in the year, including a special dividend of
£71m.
(26) Dividend cover is calculated as earnings per share divided by the total
ordinary dividend relating to the financial year.
Principal risks and uncertainties
The Board regularly reviews and monitors the risks and uncertainties which
could have a material effect on the Group's results. The principal risks and
uncertainties that could lead to a material impact have not significantly
changed from those listed in the FY23 Annual Report.
A summary of the principal risks has been provided below:
Risk Impact
Customer offer Ongoing external uncertainty and inflationary pressure on consumers has led to
significant change in consumer behaviour. Failure to respond to changing
consumer needs and to maintain a competitive offer (value & choice,
friendly & expert, fast & convenient and good & circular) will
undermine our ambition to increase market share and drive profitable and
sustainable growth.
Product reputation and trust Our stakeholders expect us to deliver products that are safe, compliant with
legal and regulatory requirements, and fit for purpose. Our customers are
increasingly aware of the environmental and social impact of their purchases
and want to know that our products have been responsibly sourced and that
their environmental impact is minimised.
Nonconformance by our suppliers to uphold our approach to business ethics,
human rights (including safety and modern slavery) and the environment may
undermine our reputation as a responsible retailer.
Failure to meet these expectations could result in reputational damage and
loss of confidence in Dunelm.
People and culture Our business could be adversely impacted if we fail to attract, retain, and
develop colleagues with the appropriate skills, capabilities and diverse
background.
Failing to embed and live our values could impact business performance, the
delivery of our purpose and the long-term sustainability of our business.
IT systems, data and cyber security Our IT systems and infrastructure are critical to managing our operations,
interacting with customers, and trading successfully.
A key system being unavailable or suffering a security breach could lead to
operational difficulties, loss of sales and productivity, legal and regulatory
penalties due to loss of personal data, reputational damage, and loss of
stakeholder trust.
Business change Dunelm recognises that there is a huge opportunity in digitalising the
business and has invested and will continue to invest in system improvements
to drive growth and efficiency.
Failing to successfully introduce and deliver wider technology and new systems
across the business and leverage the data generated to further improve our
proposition and operations could result in reduced operational efficiency,
competitiveness, relevance and growth. Furthermore, failure to deliver the
expected objectives on time and on budget, could impact the delivery of the
planned business benefits.
Regulatory and compliance We operate in an increasingly regulated environment and must comply with a
wide range of laws, regulations, and standards.
Failure to comply with or to take appropriate steps to prevent a breach of
these requirements could result in formal investigations, legal and financial
penalties, reputational damage and loss of business.
Supply chain resilience We are dependent on complex global supply chains and fulfilment solutions to
deliver products to our customers. Instability in the global supply chain or
failure of a key supplier may impact our ability to effectively manage stock
and satisfy customer demand.
Finance and treasury Progress against business objectives may be constrained by a lack of
short-term funding or access to long-term capital.
Climate change and environment Failure to positively change our impact on the environment would fall short of
the expectations of our customers, colleagues, shareholders, and other
stakeholders which could lead to reputational damage and financial loss.
In addition, an inability to anticipate and mitigate against climate change
and other environmental risks could cause disruption in the availability and
quality of raw materials such as cotton and timber, affecting production
capacity, product quality, and overall supply chain resilience. This, and
potential transition risks related to environmental taxation, could result in
higher costs, delays, and potential loss of customers.
Alternative performance measures (APMs)
APM Definition, purpose and reconciliation to statutory measure
Total sales Equivalent to revenue (from all channels). This is net of customer returns.
Digital sales Digital sales include home delivery, Click & Collect and tablet-based
sales in store.
Digital % total sales Digital sales (as defined above) expressed as a percentage of revenue. This is
not a measure that we seek to maximise in itself, but we measure it to track
our adaptability to changing customer behaviours.
Ordinary dividend cover Ordinary dividend cover is calculated as earnings per share divided by the
total ordinary dividend relating to the financial year. This measure is used
in our capital and dividend policy.
Gross margin % Gross profit expressed as a percentage of revenue. Measures the profitability
of product sales prior to operating costs.
Operating costs to sales ratio Operating costs expressed as a percentage of revenue. To measure the growth of
costs relative to sales growth.
EBITDA Earnings before interest, tax, depreciation, amortisation and impairment.
Operating profit plus depreciation and amortisation of property, plant and
equipment, right-of-use assets and intangible assets plus loss on disposal and
impairment of property, plant and equipment and intangible assets. Used in our
capital and dividend policy.
Adjusted EBITDA EBITDA less depreciation on right-of-use assets. To measure compliance with
bank covenants.
EBITDAR EBITDAR is calculated as EBITDA plus rent. To measure compliance with bank
covenants.
Effective tax rate Taxation expressed as a percentage of profit before taxation. To measure how
close we are to the UK corporation tax rate and understand the reasons for any
differences.
Capex (net of disposals) Acquisition of intangible assets, property, plant and equipment and investment
properties, less proceeds on disposal of intangible assets, property, plant
and equipment and investment properties.
Free cash flow Free cash flow is defined as net cash generated from operating activities less
capex (net of disposals) and business combinations, net interest paid
(including leases) and loan transaction costs, and repayment of principal
element of lease liabilities. Measures the cash generated that is available
for disbursement to shareholders.
Net cash/(debt) Cash and cash equivalents less total borrowings (as shown in note 16).
Excludes IFRS 16 lease liabilities.
Cash conversion Free cash flow expressed as a percentage of operating profit.
Karen Witts
Chief Financial Officer
11 September 2024
Consolidated Income Statement
For the 52 weeks ended 29 June 2024
2024 2023
52 weeks
52 weeks
Note £'m £'m
Revenue 1 1,706.5 1,638.8
Cost of sales (823.2) (817.9)
Gross profit 883.3 820.9
Operating costs 2 (670.0) (622.1)
Operating profit 3 213.3 198.8
Financial income 5 2.0 1.7
Financial expenses 5 (9.9) (7.8)
Profit before taxation 205.4 192.7
Taxation 6 (54.2) (40.8)
Profit for the period 151.2 151.9
Earnings per Ordinary Share - basic 8 74.7p 75.2p
Earnings per Ordinary Share - diluted 8 74.4p 75.0p
Consolidated Statement of Comprehensive Income
For the 52 weeks ended 29 June 2024
2024 2023
52 weeks
52 weeks
Note £'m £'m
Profit for the period 151.2 151.9
Other comprehensive income/(expense):
Items that may be subsequently reclassified to profit or loss:
Movement in fair value of cash flow hedges 0.2 (14.0)
Deferred tax on hedging movements (1.0) 6.6
Other comprehensive income/(expense) for the period, net of tax (0.8) (7.4)
Total comprehensive income for the period 150.4 144.5
Consolidated Statement of Financial Position
As at 29 June 2024
Note 29 June 1 July
2024
2023
£'m £'m
Non-current assets
Intangible assets 9 3.8 5.3
Property, plant and equipment 10 173.0 169.9
Right-of-use assets 11 222.9 231.3
Investment property 12 7.5 -
Deferred tax assets 1.8 6.9
Derivative financial instruments 0.1 -
Total non-current assets 409.1 413.4
Current assets
Inventories 13 223.0 211.0
Trade and other receivables 14 26.2 24.3
Derivative financial instruments 0.3 1.8
Cash and cash equivalents 23.4 46.3
Total current assets 272.9 283.4
Total assets 682.0 696.8
Current liabilities
Trade and other payables 15 (205.0) (208.1)
Lease liabilities 11 (52.1) (53.4)
Current tax liability (1.5) (0.2)
Derivative financial instruments (4.9) (7.9)
Total current liabilities (263.5) (269.6)
Non-current liabilities
Bank loans 16 (77.0) (75.9)
Lease liabilities 11 (197.5) (204.8)
Provisions (5.5) (5.9)
Derivative financial instruments (0.6) (3.1)
Total non-current liabilities (280.6) (289.7)
Total liabilities (544.1) (559.3)
Net assets 137.9 137.5
Equity
Issued share capital 2.0 2.0
Share premium account 1.7 1.7
Capital redemption reserve 43.2 43.2
Hedging reserve (3.8) (6.9)
Retained earnings 94.8 97.5
Total equity attributable to equity holders of the Parent 137.9 137.5
Consolidated Statement of Cash Flows
For the 52 weeks ended 29 June
2024
Note 2024 2023
52 weeks
52 weeks
£'m £'m
Cash flows from operating activities
Profit before taxation 205.4 192.7
Net financial expense 5 7.9 6.1
Operating profit 213.3 198.8
Depreciation and amortisation of property, plant and equipment and intangible 3 30.4 29.8
assets
Depreciation of right-of-use assets 3 50.2 49.3
Loss on disposal and impairment of property, plant and equipment and 3 0.5 0.3
intangible assets
Impairment of right-of-use assets 3 0.9 -
Share-based payments expense 4.3 4.8
Operating cash flows before movements in working capital 299.6 283.0
(Increase)/decrease in inventories (12.0) 12.0
Increase in trade and other receivables (1.9) (1.6)
Decrease in trade and other payables (3.8) (14.6)
Net movement in working capital (17.7) (4.2)
Tax paid (49.6) (38.2)
Net cash generated from operating activities 232.3 240.6
Cash flows from investing activities
Acquisition of intangible assets (2.6) (0.4)
Acquisition of property, plant and equipment (29.8) (21.4)
Acquisition of Investment Property (7.5) -
Interest received 1.6 1.1
Net cash used in investing activities (38.3) (20.7)
Cash flows from financing activities
Proceeds from issue of treasury shares and Ordinary Shares 0.1 2.4
Purchase of treasury shares - (7.0)
Drawdowns on Revolving Credit Facility 110.0 139.0
Repayments of Revolving Credit Facility (108.0) (116.0)
Interest paid and loan transaction costs (4.9) (2.2)
Interest paid on lease liabilities 11 (6.1) (5.3)
Repayment of principal element of lease liabilities (50.8) (52.0)
Dividends paid 7 (157.6) (163.3)
Net cash used in financing activities (217.3) (204.4)
Net (decrease)/increase in cash and cash equivalents (23.3) 15.5
Foreign exchange revaluations 5 0.4 0.6
Cash and cash equivalents at the beginning of the period 46.3 30.2
Cash and cash equivalents at the end of the period 23.4 46.3
Consolidated Statement of Changes in Equity
For the 52 weeks ended 29 June 2024
Note Issued share capital Share premium account Capital redemption reserve Hedging reserve Retained earnings Total equity attributable to equity holders of the Parent
£'m £'m £'m £'m £'m £'m
As at 2 July 2022 2.0 1.7 43.2 20.2 111.2 178.3
Profit for the period - - - - 151.9 151.9
Movement in fair value of cash flow hedges - - - (14.0) - (14.0)
Deferred tax on hedging movements - - - 6.6 - 6.6
Total comprehensive income for the period - - - (7.4) 151.9 144.5
Proceeds from issue of treasury shares - - - - 2.4 2.4
Purchase of treasury shares - - - - (7.0) (7.0)
Share-based payments - - - - 4.8 4.8
Deferred tax on share-based payments - - - - (3.1) (3.1)
Current tax on share options exercised - - - - 0.6 0.6
Movement on cash flow hedges transferred to inventory - - - (19.7) - (19.7)
Dividends paid 7 - - - - (163.3) (163.3)
Total transactions with owners, recorded directly in equity - - - (19.7) (165.6) (185.3)
As at 1 July 2023 2.0 1.7 43.2 (6.9) 97.5 137.5
Profit for the period - - - - 151.2 151.2
Movement in fair value of cash flow hedges - - - 0.2 - 0.2
Deferred tax on hedging movements - - - (1.0) - (1.0)
Total comprehensive income for the period - - - (0.8) 151.2 150.4
Proceeds from issue of treasury shares - - - - 0.1 0.1
Purchase of treasury shares - - - - - -
Share-based payments - - - - 4.3 4.3
Deferred tax on share-based payments - - - - (1.3) (1.3)
Current tax on share options exercised - - - - 0.6 0.6
Movement on cash flow hedges transferred to inventory - - - 3.9 - (3.9)
Dividends paid 7 - - - - (157.6) (157.6)
Total transactions with owners, recorded directly in equity - - - 3.9 (153.9) (150.0)
As at 29 June 2024 2.0 1.7 43.2 (3.8) 94.8 137.9
Accounting Policies
For the 52 weeks ended 29 June 2024
Basis of preparation
The financial statements presented cover a 52-week trading period for the
financial period ended 29 June 2024 (2023: 52-week period ended 1 July 2023).
The annual report and financial statements for the period ended 29 June 2024
were approved by the board of directors on 11 September 2024 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 29 June
2024 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 1 July 2023
have been delivered to the Registrar of Companies. The auditor's report on
the statutory accounts for the period ended 1 July 2023 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.
At the period end the Group had £12.5m (2023: £13.8m) of sales orders placed
that will be recognised in the Consolidated Income Statement when the goods
are despatched in the following financial period.
2. Operating costs
2024 2023
52 weeks
52 weeks
£'m £'m
Selling and distribution costs 528.6 489.7
Tech and Support expenses 141.4 132.4
670.0 622.1
3. Operating profit
Operating profit is stated after charging the following items:
2024 2023
52 weeks
52 weeks
£'m £'m
Cost of inventories included in cost of sales 812.3 803.4
Amortisation of intangible assets 4.1 4.6
Depreciation of owned property, plant and equipment 26.3 25.2
Depreciation of right-of-use assets 50.2 49.3
Loss on disposal and impairment of property, plant and equipment and 0.5 0.3
intangible assets
Impairment of right-of-use assets 0.9 -
Expense related to short-term leases 3.7 1.6
The cost of inventories included in cost of sales includes the impact of a net
increase in the provision for obsolete inventory of £0.6m (2023: £0.8m
decrease).
The analysis of the auditor's remuneration is as follows:
2024 2023
52 weeks
52 weeks
£'000 £'000
Fees payable to the Group's auditor for the audit of the Parent and 37 34
consolidated annual financial statements
Fees payable to the Group's auditor and its associates for other services to
the Group
- Audit of the Company's subsidiaries pursuant to legislation 322 293
- Other assurance services 50 46
4. Employee numbers and costs
The average monthly number of people employed by the Group (including
Directors) was:
2024 2024 2023 2023
52 weeks
52 weeks
52 weeks
52 weeks
Number Full time Number Full time
of heads
equivalents
of heads
equivalents
Selling 9,591 5,258 9,446 5,252
Distribution 1,148 1,110 1,057 1,026
Administration 1,170 1,153 1,099 1,082
11,909 7,521 11,602 7,360
The aggregate remuneration of all employees (including Directors) comprises:
2024 2023
52 weeks
52 weeks
£'m £'m
Wages and salaries (including termination benefits) 248.0 224.8
Social security costs 17.6 16.1
Share-based payment expense (note 22) 4.3 4.8
Pension costs - defined contribution plans 6.9 6.2
276.8 251.9
5. Financial income and expenses
2024 2023
52 weeks
52 weeks
£'m £'m
Financial income
Interest on bank deposits 1.6 1.1
Net foreign exchange gains 0.4 0.6
2.0 1.7
Financial expenses
Interest on bank borrowings (3.0) (2.2)
Amortisation of issue costs of bank loans (0.8) (0.3)
Interest on lease liabilities (6.1) (5.3)
(9.9) (7.8)
Net financial expense (7.9) (6.1)
6. Taxation
2024 2023
52 weeks
52 weeks
£'m £'m
Current taxation
UK corporation tax charge for the period 51.8 40.0
Adjustments in respect of prior periods (0.4) 0.1
51.4 40.1
Deferred taxation
Origination of temporary differences 2.9 0.7
Adjustments in respect of prior periods (0.1) 0.1
Impact of change in tax rate - (0.1)
2.8 0.7
Total tax expense 54.2 40.8
The tax expense is reconciled with the standard rate of UK corporation tax as
follows:
2024 2023
52 weeks
52 weeks
£'m £'m
Profit before taxation 205.4 192.7
UK corporation tax at standard rate of 25.0% (2023: 20.5%) 51.4 39.5
Factors affecting the charge in the period:
Non-deductible expenses 3.2 1.2
Adjustments in respect of prior periods (0.5) 0.2
Profit on disposal of ineligible assets 0.1 -
Impact of change in tax rate - (0.1)
Tax expense 54.2 40.8
The taxation expense for the period as a percentage of profit before tax is
26.4% (2023: 21.2%). 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 1 July 2023 has been calculated based on the rate of 25.0%.
Pillar Two legislation has been enacted or substantively enacted in certain
jurisdictions in which the Group operates. The legislation will be effective
for the Group's financial year beginning 30 June 2024. The Group has performed
an assessment of the Group's potential exposure to Pillar Two income taxes.
This assessment is based on the most recent information available regarding
the financial performance of the constituent entities in the Group. Based on
the assessment performed, the Pillar Two effective tax rates in all
jurisdictions in which the Group operates are above 15% and management is not
currently aware of any circumstances under which this might change. Therefore,
the Group does not expect a potential exposure to Pillar Two top up taxes.
7. Dividends
The dividends set out in the table below relate to the 1 pence Ordinary
Shares:
2024 2023
52 weeks
52 weeks
Dividend type In respect of period ended Pence per share £'m £'m
Final 2 July 2022 26.0 - 52.4
Interim 1 July 2023 15.0 - 30.2
Special 1 July 2023 40.0 - 80.7
Final 1 July 2023 27.0 54.5 -
Interim 29 June 2024 16.0 32.3 -
Special 29 June 2024 35.0 70.8 -
157.6 163.3
The Board is proposing a final dividend of 27.5 pence per Ordinary Share for
the period ended 29 June 2024 which equates to £55.6m. Subject to shareholder
approval at the AGM this will be paid on 26 November 2024. The ex-dividend
date is 31 October 2024 and the record date is 1 November 2024.
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 Group's Ordinary Shares
during the period.
2024 2023
52 weeks
52 weeks
£'m £'m
Profit for the period 151.2 151.9
2024 2023
52 weeks
52 weeks
'000 '000
Weighted average number of shares in issue during the period 202,355 201,917
Impact of share options 893 746
Number of shares for diluted earnings per share 203,248 202,663
Earnings per Ordinary Share 2024 2023
52 weeks
52 weeks
£p £p
Basic (pence) 74.7 75.2
Diluted (pence) 74.4 75.0
9. Intangible assets
Software Rights to brands and customer lists Total
development
and licences
£'m £'m £'m
Cost
At 2 July 2022 52.6 11.5 64.1
Additions 0.1 - 0.1
Disposals (0.7) - (0.7)
At 1 July 2023 52.0 11.5 63.5
Additions 2.6 - 2.6
Disposals (0.2) - (0.2)
At 29 June 2024 54.4 11.5 65.9
Accumulated amortisation
2 July 2022 43.2 11.0 54.2
Charge for the financial period 4.5 0.1 4.6
Disposals (0.6) - (0.6)
At 1 July 2023 47.1 11.1 58.2
Charge for the financial period 4.0 0.1 4.1
Disposals (0.2) - (0.2)
At 29 June 2024 50.9 11.2 62.1
Net book value
At 2 July 2022 9.4 0.5 9.9
At 1 July 2023 4.9 0.4 5.3
At 29 June 2024 3.5 0.3 3.8
All amortisation is included within operating costs in the Consolidated Income
Statement.
Management's review of indicators of impairment did not result in the
recognition of any impairment in the period (2023: £nil).
Within software development and licences there were £2.4m additions (2023:
£nil) related to internally generated assets.
10. Property, plant and equipment
Freehold land and buildings Leasehold improvements Fixtures, fittings and equipment Total
£'m £'m £'m £'m
Cost
At 2 July 2022 107.0 164.0 132.2 403.2
Transfer - 0.2 (0.2) -
Additions - 10.2 11.4 21.6
Disposals - (7.2) (3.1) (10.3)
At 1 July 2023 107.0 167.2 140.3 414.5
Transfer (0.2) 0.2 - -
Additions 0.3 13.4 15.8 29.5
Disposals - (6.8) (4.3) (11.1)
At 29 June 2024 107.1 174.0 151.8 432.9
Accumulated depreciation
At 2 July 2022 19.9 97.7 111.9 229.5
Transfer 0.1 0.1 (0.2) -
Charge for the financial period 1.8 14.3 9.1 25.2
Disposals - (7.0) (3.1) (10.1)
At 1 July 2023 21.8 105.1 117.7 244.6
Charge for the financial period 1.8 14.0 10.5 26.3
Disposals - (6.7) (4.1) (10.8)
Impairment - (0.1) (0.1) (0.2)
At 29 June 2024 23.6 112.3 124.0 259.9
Net book value
At 2 July 2022 87.1 66.3 20.3 173.7
At 1 July 2023 85.2 62.1 22.6 169.9
At 29 June 2024 83.5 61.7 27.8 173.0
All depreciation charges have been included within operating costs in the
Consolidated Income Statement.
The impairment charge of £(0.2)m recognised in the period (2023: £nil)
relates to temporary provision for impairment in respect of one store. The
recoverable amount calculated in the impairment review was based on a value in
use, applying a pre-tax discount rate of 12.5%.
11. Leases
Right-of-use assets included in the Consolidated Statement of Financial
Position at 29 June 2024 were as follows:
2024 2024 2024 2023
Land and buildings Motor vehicles, plant and equipment Total Total
£'m £'m £'m £'m
At the beginning of the period 215.5 15.8 231.3 248.5
Additions 33.6 11.0 44.6 32.3
Disposals (1.8) (0.1) (1.9) (0.2)
Impairment (0.9) - (0.9) -
Depreciation (44.7) (5.5) (50.2) (49.3)
At the end of the period 201.7 21.2 222.9 231.3
Right-of-use additions included £5.2m of lease modifications in the period
(2023: £nil).
The impairment charge of £(0.9)m (2023: £nil) relates to a temporary
provision for impairment in respect of a lease for a property currently not in
use.
Lease liabilities included in the Consolidated Statement of Financial Position
at 29 June 2024 were as follows:
2024 2024 2024 2023
Land and buildings Motor vehicles, plant and equipment Total Total
£'m £'m £'m £'m
At the beginning of the period (242.5) (15.7) (258.2) (278.1)
Additions (35.1) (11.1) (46.2) (33.2)
Disposals 1.8 0.1 1.9 0.2
Interest (5.1) (1.0) (6.1) (5.3)
Repayment of lease liabilities 52.8 6.2 59.0 58.2
At the end of the period (228.1) (21.5) (249.6) (258.2)
The discount rate applied across all lease liabilities ranged between 0.90%
and 6.76% (2023: 0.90% and 5.85%). The discount rate is determined at the
inception of the lease and the rate reflects our incremental borrowing rate
which we assess by considering the marginal rate on the Group's Revolving
Credit Facility ('RCF'), the Bank of England base rate, the yield on
Government bonds and the term of the lease.
12. Investment Property
In June 2024 we purchased a tenanted freehold property for £7.5m, providing
current rental income and future capacity for our store support centre.
Given the proximity of the transaction to the end of the reporting period, an
independent valuation has not been sought, as it is considered that the
purchase price is consistent with its fair value as at the period-end date.
Subsequent to the period end, we also secured a freehold tenanted retail
property in an attractive location for £22.2m. We expect to convert this
into a Dunelm store in the future upon expiry of the existing lease.
13. Inventories
2024 2023
£'m £'m
Raw materials 1.3 1.6
Work in progress 0.1 -
Goods for resale 221.6 209.4
223.0 211.0
Goods for resale includes a net realisable value provision of £21.3m (2023:
£20.7m). Write-downs of inventories to net realisable value amounted to
£30.7 m (2023: £30.2m). These were recognised as an expense during the
period and were included in cost of sales in the Consolidated Income
Statement.
14. Trade and other receivables
2024 2023
£'m £'m
Trade receivables 3.7 3.1
Other receivables 0.4 0.1
Prepayments and accrued income 22.1 21.1
26.2 24.3
All trade receivables are due within one year from the end of the reporting
period.
No impairment was incurred on trade and other receivables during the period
and the expected credit loss provision held at period end is £nil (2023:
£nil). No material amounts are overdue (2023: £nil).
15. Trade and other payables
2024 2023
£'m £'m
Trade payables 92.3 94.6
Accruals 67.3 63.5
Deferred income 12.5 12.5
Taxation and social security 32.3 37.3
Other payables 0.6 0.2
205.0 208.1
16. Bank loans
2024 2023
£'m £'m
Total borrowings 79.0 77.0
Less: unamortised debt issue costs (2.0) (1.1)
Net borrowings 77.0 75.9
17. Commitments & Contingent liabilities
As at the period end date, the Group had entered into capital contracts for
new stores and refits amounting to £1.5m (2023: £8.1m).
The Group had no contingent liabilities at the period end date (2023: £nil).
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