DFS Furniture has achieved good sales growth throughout the first half of the current financial year. Gross sales in the 26 weeks to 28 January 2017 grew by 7%, measured against the comparable 26-week period in the prior financial year. Once again Dwell and Sofa Workshop have contributed encouragingly to overall Group sales growth.

As DFS anticipated at the time of its preliminary results announcement in October, it saw some impact on product margins in the first half from the impact of adverse foreign exchange movements. The business continues its work to actively offset this impact through range management and supplier negotiations, while the differentiated DFS sourcing model of vertical integration, UK manufacturing capability and superior scale remains an important competitive advantage.

Free cashflow in the period was once again strong and DFS' gearing ratio at the half year end was just below 1.5x EBITDA over the last 12 months, in line with the company's targeted operating range of 1.0x to 1.5x. As previously announced, DFS expects to provide details of a special dividend to shareholders as part of its half year results announcement on 30 March 2017, with this return to be completed before the end of July.

Strategic initiatives delivering results

The results reflect the continued implementation of a proven growth strategy, building on the Group’s established market leadership. DFS' growth initiatives include a measured programme of store expansion and retail space release in the UK and overseas; continued development of our omnichannel proposition; and constant enhancement of the product range, building on the Group’s established success in extending its appeal to more customers. All these initiatives have contributed to the Group’s continued performance throughout the first half of the year.

Outlook

The business recognises that in 2017 the retailing of furniture in the UK faces an increased risk of a market slowdown given the uncertain outlook for consumer confidence. However, with its resilient operating model, DFS believes the Group remains very well positioned to respond to economic headwinds and cost pressures whilst achieving continued growth in its share of the UK retail furniture market.

Consequently DFS' expectations for the Group’s profit before tax in the full year remain unchanged.

Overall DFS' has strong prospects for delivering long-term profitable growth, strong cash generation and a progressive dividend policy.