TIDMDFS
RNS Number : 5550K
DFS Furniture PLC
22 April 2020
THIS ANNOUNCEMENT, INCLUDING THE APPICES AND THE INFORMATION IN
THEM, IS RESTRICTED AND IS NOT FOR PUBLICATION, RELEASE OR
DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, IN OR
INTO ANY JURISDICTION IN WHICH SUCH PUBLICATION, RELEASE OR
DISTRIBUTION WOULD BE UNLAWFUL.
FURTHER, THIS ANNOUNCEMENT IS FOR INFORMATION PURPOSES ONLY AND
IS NOT AN OFFER OF SECURITIES IN ANY JURISDICTION.
THIS ANNOUNCEMENT INCLUDES INSIDE INFORMATION
For Immediate Release
DFS Furniture PLC ("DFS" or the "Group")
Update on the Impact of COVID-19 and New Financing
Arrangements
22 April 2020
On 25 March 2020, DFS released an update in response to the UK
Government's announcement on 23 March 2020 which requested the
closure of all "non-essential" retail stores and operations. Today,
DFS is providing a further update on how the measures it announced
to combat the spread of COVID-19 are impacting the Group's business
and the actions it is taking.
Current Trading
The Group's key priority, as always, remains the health and
wellbeing of its people. All of the Group's showrooms,
manufacturing and two-man distribution operations in the United
Kingdom, Ireland and Spain remain closed and deliveries continue to
be suspended to protect DFS's people and its customers.
However, the Group's websites remain operational and continue to
take orders. There has been strong momentum from the Group's online
platform with www.dfs.co.uk online gross sales orders up by 24%
over the period from 25 March 2020 to 19 April 2020. Consequently,
The Group's order bank has risen to GBP194 million as at 19 April
2020 from approximately GBP185 million on 25 March 2020.
During the last three weeks, DFS's colleagues across the UK have
been supporting their local communities. The Group has been
delivering sofas and sofa beds to hospitals across the UK, enabling
the NHS staff to get some much needed and well-deserved rest.
Protecting Our Business
As announced on 25 March 2020, the Group is undertaking a number
of mitigating actions to protect its financial position. The Group
has the following mitigating actions in place:
1. Operating cost base under tight control
a. Marketing spend rephased to autumn
b. c. 5,000 employees promptly furloughed
c. 20% reduction in pay of all Board members and 38 senior
management employees who are still working
d. Discretionary operating expenditure tightly controlled
2. Working with our suppliers
a. Supplier payments rephased to limit the unwind of the Group's
negative working capital position to c. GBP70 million
b. Far East finished goods suppliers are shipping customer
orders to the UK, however have agreed payment upon customer
delivery
3. Landlord discussions progressing well
a. Majority of landlords that have engaged with the Group to
date have been co-operative given our strong position as an
'anchor' tenant
4. Capital expenditure commitments rephased
a. All but non-discretionary maintenance expenditure incurred in
lock down period (c.GBP0.4m/month)
b. Gradual return of growth capex post COVID-19 lockdown with
total capex at c.50% of recent levels in first year
5. Tax payment phasing benefits secured
a. PAYE/NIC deferral agreed, utilising COVID-19 VAT and import
duty deferral scheme, longer term time to pay opportunity
b. GBP25 million reduction on business rates until April 2021
As a result of the agreements we have, or expect to put in place
with our suppliers and landlords, cash operating costs during the
lockdown are now expected to be less than GBP14 million per
month.
Financing
The Board has also taken steps to increase the resilience of the
business by strengthening the Group's balance sheet and liquidity
position with additional financing.
The Group has a GBP250 million Revolving Credit Facility
maturing in August 2022 which provides immediately available cash
resources of GBP70 million. In addition to the existing facilities,
the Group has received credit approval for a new 12-month bank
facility of GBP70 million with its existing lending banks, which
further strengthens the Group's balance sheet. This new bank
facility is intended to cover the working capital unwind described
above and will be repaid once deliveries resume. Existing covenants
will drop away whilst this new bank facility is in place and for
the six months following, but new financial covenants of minimum
rolling quarterly EBITDA and cash covenants will apply. The Group
also has undertaken to not pay dividends or conduct any
acquisitions until either six months after the repayment of the
incremental facility, or following the refinancing of the existing
bank facilities. This new facility is subject to documentation on
terms and conditions in line with the existing facilities and is
conditional on the completion of the Placing.
DFS has separately announced today a proposed non pre-emptive
equity placing of new ordinary shares representing up to 19.9% of
its issued share capital (the "Placing") which will supplement the
bank financing and further strengthen the Group's balance sheet,
working capital and liquidity position.
DFS has consulted with a number of its major shareholders on the
rationale for, and the structure of, the Placing prior to this
announcement. The Directors believe that the Placing is in the best
interests of shareholders and will promote the success of the
Group. This view has been strengthened by the shareholder
consultation that has been undertaken.
Directors and members of the senior management team of DFS,
including the Chairman, CEO and CFO will be participating alongside
the Placing and intend to contribute GBP445,000 in aggregate.
Depending on the results of the Placing, the Company may have to
undertake a share split in order to reduce the nominal value of its
ordinary shares before the Placing can be completed. If required,
an explanatory Circular together with a notice of General Meeting
will be sent to shareholders who will be asked to approve the share
split, by means of two ordinary resolutions.
Outlook
It is clear that the lockdown is having a very significant
impact on the Group's business. However, what is uncertain is the
duration of the Company's store closures and delivery suspension
and as such the effect it may have on the Group's financial
performance. The cost saving and deferral measures we have put in
place, together with the Placing and bank financing announced
today, will make the Group significantly more resilient.
Based on their scenario planning, which includes a continuation
of current levels of government and other stakeholder support
throughout the lockdown, management believe that the cost saving
and deferral measures they have put in place, together with the
Placing and bank financing announced today gives the Company
liquidity headroom through a pessimistic scenario of a lockdown to
December 2020, followed by a historically weak sofa market.
Looking past the current crisis, the Group's operating model
remains strong and is reinforced by a flexible cost base and
ongoing actions to drive group efficiencies in operating overheads
and marketing spend. The operating profit drop through of any
revenue variances following re-opening of showrooms is expected to
be approximately 45%. There will also be an GBP18 million benefit
in FY21 from the business rates holiday, in addition to the
benefits from actions on marketing and overheads. The Group's
current order bank and latent customer demand is expected to
mitigate a weaker macroeconomic environment following store
re-openings. The Group can fulfil its order bank quickly once
lockdown ends, with a third of the order book either in stock or in
transit from suppliers.
With over 50 years of heritage, DFS is the leading retailer of
living room furniture in the United Kingdom. The Group has
historically been a strong, profitable and cash generative
business, that has traditionally grown market share in periods of
market weakness, and capitalised on market recovery. Management is
confident that, given the support the Group continues to receive
from its loyal employees, committed suppliers and understanding
landlords, it can navigate the current uncertainty and be a
stronger and more efficient business when the Company can be fully
operational again.
Comment from Tim Stacey, Group Chief Executive
"The mitigating actions we have taken in response to COVID-19,
alongside the new financing arrangements and Placing announced
today, significantly increases the financial resilience of DFS for
the months ahead. Alongside these actions, we also greatly
appreciate the support and efforts from our loyal employees,
committed suppliers and understanding landlords. Working together,
we have made as much progress as possible to navigate these
challenging times. While the outlook remains uncertain, DFS is well
placed to navigate the coming months and the Board remains positive
about the long-term prospects of the Group."
Enquiries:
DFS (enquiries via Tulchan) Tulchan
Tim Stacey (CEO) James Macey-White
Mike Schmidt (CFO) Jessica Reid
Philip Hutchison (Investor Relations) Amber Ahluwalia
Liz McDonald (Company Secretary) +44 (0)20 7353 4200
dfs@tulchangroup.com
Important Notices
The information contained in this announcement is for background
purposes only and does not purport to be full or complete. No
reliance may be placed for any purpose on the information contained
in this announcement for accuracy or completeness. The information
in this announcement is subject to change.
Neither this announcement nor the information contained herein
nor any copy of it is for publication, distribution or release, in
whole or in part, directly or indirectly, in or into or from or any
jurisdiction where to do so would constitute a violation of the
relevant laws of such jurisdiction. The distribution of this
announcement may be restricted by law in certain jurisdictions and
persons into whose possession any document or other information
referred to herein comes should inform themselves about and observe
any such restriction. Any failure to comply with these restrictions
may constitute a violation of the securities laws of any such
jurisdiction.
This Announcement or any part of it does not constitute or form
part of any offer to issue or sell, or the solicitation of an offer
to acquire, purchase or subscribe for, any securities in any
jurisdiction in which the same would be unlawful.
Any securities referred to herein have not been and will not be
registered under the US Securities Act of 1933 (the "Securities
Act") and may not be offered or sold, directly or indirectly, in
the United States unless registered under the Securities Act or
offered in a transaction exempt from, or not subject to, the
registration requirements of the Securities Act. There will be no
public offer of securities in the United States.
Certain statements contained in this announcement may constitute
"forward-looking statements" with respect to the financial
condition, performance, strategic initiatives, objectives, results
of operations and business of the Company. All statements other
than statements of historical fact included in this announcement
are, or may be deemed to be, forward-looking statements. Without
limitation, any statements preceded or followed by or that include
the words "targets", "plans", "believes", "expects", "aims",
"intends", "anticipates", "estimates", "projects", "will", "may",
"would", "could" or "should", or words or terms of similar
substance or the negative thereof, are forward-looking statements.
Such forward-looking statements involve risks and uncertainties
that could significantly affect expected results and are based on
certain key assumptions. Many factors could cause actual results,
performance or achievements to differ materially from those
projected or implied in any forward-looking statements. The
important factors that could cause the Company's actual results,
performance or achievements to differ materially from those in the
forward-looking statements include, among others, economic and
business cycles, the terms and conditions of the Company's
financing arrangements, foreign currency rate fluctuations,
competition in the Company's principal markets, acquisitions or
disposals of businesses or assets and trends in the Company's
principal industries. Due to such uncertainties and risks, readers
are cautioned not to place undue reliance on such forward-looking
statements, which speak only as of the date hereof. In light of
these risks, uncertainties and assumptions, the events described in
the forward-looking statements in this announcement may not occur.
The forward-looking statements contained in this announcement speak
only as of the date hereof. The Company and its directors each
expressly disclaim any obligation or undertaking to update or
revise publicly any forward-looking statements, whether as a result
of new information, future events or otherwise, unless required to
do so by applicable law or regulation.
The forecast financial information contained in this
announcement was prepared based upon certain assumptions about the
development and the impact of the COVID 19 pandemic over the
remainder of the financial year 2020 which are based on publicly
available information and are subject to a wide variety of
significant uncertainties. The Company's actual financial results
for the for the year ending 30 June 2020 and the six months ending
31 December 2020 may differ materially from the forecast financial
information contained in this announcement.
The contents of this Announcement are not to be construed as
legal, business, financial or tax advice. Each investor or
prospective investor should consult his, her or its own legal
adviser, business adviser, financial adviser or tax adviser for
legal, financial, business or tax advice.
The information in this Announcement may not be forwarded or
distributed to any other person and may not be reproduced in any
manner whatsoever. Any forwarding, distribution, reproduction or
disclosure of this information in whole or in part is unauthorised.
Failure to comply with this directive may result in a violation of
the Securities Act or the applicable laws of other
jurisdictions.
Neither the content of the Company's website (or any other
website) nor the content of any website accessible from hyperlinks
on the Company's website (or any other website) is incorporated
into or forms part of this announcement.
This Announcement has been prepared for the purposes of
complying with applicable law and regulation in the United Kingdom
and the information disclosed may not be the same as that which
would have been disclosed if this Announcement had been prepared in
accordance with the laws and regulations of any jurisdiction
outside the United Kingdom.
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END
TSTUUOVRRKUSUAR
(END) Dow Jones Newswires
April 22, 2020 11:42 ET (15:42 GMT)
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