DFS Brexit warning as H1 revenue soars to £422m

Doncaster-based DFS Furniture said on Thursday said its revenue rose 29.1% to £422.3 million and profit before tax more than doubled to £14.1 million in the 22 weeks ended December 30, 2018.

But the firm warned that Brexit could present “two principal immediate risks in the near term” — consumer confidence and border delays. 

“While we have sought to mitigate these, their ultimate impact is uncertain and have the potential to affect our overall financial performance in the year,” said DFS Furniture CEO Tim Stacey.

On the first-half results, Stacey said: “We are pleased with the performance for the first five months of the financial year across the group, with all four of our brands achieving like-for-like revenue growth. 

“The benefits of our investments in our online channels, delivery networks and the development of our brands help mitigate the impact of a market which we expect to remain particularly challenging in 2019 given the current political and economic uncertainty.

“Notwithstanding a softer start to 2019, and assuming no weakening of this environment, our profit expectations for the financial year remain unchanged.”

Stacey said any Brexit-related border delays would cause a deferral in revenue in the DFS made-to-order model.

 “… just over half of finished good products that we sell are imported into the UK from mainland Europe or China,” added Stacey.

“Although furniture goods will not ‘spoil’ as a result of any border delays, we would still see a deferral in revenue in our made-to-order model.

“Across the year we on average import goods representing c.£10 million of revenues each week, thus an increase in lead times could have a direct impact on profit and cash generation in the first financial year following delays starting. 

“We do however believe it is unlikely that there will be universal delays across all our points of entry, and likewise imports from the Far East are less likely to be impacted.

“We have analysed the import routes for all our finished goods to ensure that we balance the points of entry and the forms of transportation (containers or Ro-Ro), and we intend to remain vigilant should the need to switch transportation routes arise. 

“We have ensured our suppliers each have in place the necessary permissions for accelerated customs clearances and we have also encouraged the use of container routes where customs clearance can take place while ‘on water’.  

“Our analysis shows that over 85% of our imports by volume are already taking place using containerised freight forwarders holding AEO status. 

“We also import raw materials (principally timber and fabric) to manufacture finished goods and we have requested that our partner suppliers to increase the near-shore supply of these.”

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