Shares of Doncaster-based DFS Furniture fell 4% after it said its profit before tax fell 22.3% to £50.1 million in the year to July 29 and its CEO Ian Filby warned that the UK furniture market “continues to be very challenging and the outlook for the sector remains uncertain.”

Revenue edged up 0.9% to £762.7 million, with Filby saying the results reflected “the impact of the very challenging UK furniture market environment that developed in the second half of our financial year …”

In his outlook, Filby added: “Since early July our order intake has however been satisfactory, seeing a limited decline in year-on-year like-for-like order intake that we believe is consistent with the overall furniture retail market and is within the range of our expectations for the full year.

“Historically DFS has been able to build its market leading position and generate strong cash flow for shareholders in all environments by leveraging its fundamental strengths in store sales densities, scale of operations, flexible cost base and vertically integrated business model. 

“We therefore intend to maintain our plans for growth investment and we believe the acquisition of Sofology further strengthens the group’s position and creates additional opportunities for earnings growth in the future.

“Although group sales will inevitably be affected by the market environment, we have identified opportunities to drive operating efficiencies and reduce financing costs that are expected to deliver near-term benefits, particularly in the second half of the financial year. 

“Furthermore some pre-opening and similar costs will not recur.

“Based on these plans and the current market environment, we would expect to achieve modest, second-half weighted profit growth and good cash generation in the current financial year and we continue to have excellent prospects for the longer term.”