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WITH
DESIGN
LEADING
DFS Furniture plc
Annual Report and Accounts 2025
DFS Furniture plc Annual Report and Accounts 2025
Read more in the Chief Executive’s report on page 8
WELCOME MESSAGE
FROMTHE CEO
I am pleased to share our 2025 Annual Report, a year marked
by strategic progress and an improved financial result. Despite a
challenging market environment, the Group delivered profit and
free cash flow growth through focusing on what we can control;
we grew our market share, our gross margins and improved the
efficiency of our cost base. At the same time we achieved record
netpromoter scores.
I want to sincerely thank our colleagues for their truly outstanding
and consistently high level of determination and dedication to
deliver at their best for the Group and for their help in getting
ustoour strongest ever position in terms of market share.
Tim Stacey
Chief Executive Officer
OUR WEBSITE
We are pleased to announce the launch
ofour newly redesigned corporate
website,built to provide a more engaging,
transparent, and accessible experience
forall our stakeholders. Visit to find out
more about our performance.
dfscorporate.co.uk
OUR PURPOSE AND VALUES
Our purpose is to bring great design and
comfort into every home, in an affordable,
responsible and sustainable manner. Our
customers and our people are at the heart
ofeverything we do, and our culture is
rooted inour core values:
Think customer
Be real
Aim high
Annual Report and Accounts 2025 DFS Furniture plc 1
Strategic Report Corporate Governance Financial Statements Shareholder Information
OUR 2025 PERFORMANCE
HIGHLIGHTS
Good strategic progress driving profit growth
andstrong cash returns in a subdued market.
CONTENTS
Strategic Report
1 Highlights
2 At a glance
4 Purpose driven approach
5 Our fundamentals
6 Chair’s statement
8 Chief Executive’s report
12 Market review
14 Business model
15 Investment case
16 Strategy
18 Key performance indicators
20 Financial review
26 Alternative performance measures
28 Risks and uncertainties
34 Stakeholder engagement and Section 172
36 Responsible business report
47
Task Force on Climate-related Financial Disclosures
53
Viability reporting
Governance Report
55 Chair’s introduction to governance
56 Directors and officers
58 Corporate governance report
66 Audit and Risk Committee report
71 Nomination Committee report
73 Directors’ Remuneration report
88 Directors’ report
92 Statement of Directors’ responsibilities
in respect of the Annual Report and the
financialstatements
93 Independent auditor’s report
Financial Statements
102 Consolidated income statement
103 Consolidated statement of
comprehensiveincome
104 Consolidated balance sheet
105 Consolidated statement of changes in equity
106 Consolidated cash flow statement
107 Notes to the consolidated financial statements
127 Company balance sheet
128 Company statement of changes in equity
129 Notes to the Company financial statements
Shareholder Information
131 Financial history
132 Shareholder information
FINANCIAL HEADLINES
Definitions and reconciliations of Alternative
Performance Measures (‘APMs’) can be found
onpages 26 and 27. Throughout this report,
references to income statement measures including
revenue, EBITDA
1
, profit before tax, and underlying
profit before tax and brand amortisation
1
are in
respect of continuing operations.
Group revenue
£1,030.3m
Profit/(loss) before tax
£32.9m
FY25 FY25
FY25
FY25
FY25
FY25 FY25
£1,030.3m 9.2p
91.8%
54.1%
£30.2m
FY24 FY24
FY24
FY24
FY24
FY24 FY24
£987.1m 1.5p
92.8%
28.3%
£10.5m
(£1.7m) (1.9)p
£32.9m
FY23 FY23
FY23
FY23
FY23
FY23 FY23
£1,088.9m 9.4p
91.3%
18.6%
£30.6m
£29.7m 11.1p
10.5p
Underlying profit before tax, excluding
amortisation of brand names
1
£30.2m
Underlying earnings per share
9.2p
Earnings/(loss) per share
10.5p
Post-purchase NPS
2
91.8%
Established customer NPS
2
54.1%
OPERATIONAL AND
STRATEGIC HIGHLIGHTS
Execution of our strategy consolidating our position
as the clear market leader.
•
Exclusive brand partnership ranges resonating
well with the customer, with La-Z-Boy
partnership launched in the period.
•
Sofology range refresh and promotional
mechanics driving significant order intake growth.
•
Strong performance across all areas of our
vertically integrated group; record established
customer NPS scores achieved.
•
£50m Cost to Operate programme delivered
ayear ahead of plan.
1. Refer to pages 26 and 27 for APM definitions.
2. Net Promoter Scores for the dfs brand.
Annual Report and Accounts 2025 DFS Furniture plc2
Strategic Report
OUR UNPARALLELED
SCALE
AT A GLANCE
BRINGING
GREAT DESIGN
AND COMFORT
INTOEVERYHOME
We are the leading sofa retailing group in the UK
– we operate across two retail brands, offering a
differentiated service and innovative product ranges,
that have broad appeal across different customer
segments and demographics.
dfs
Sofology
dfs and Sofology
Annual Report and Accounts 2025 DFS Furniture plc 3
Strategic Report Corporate Governance Financial Statements Shareholder Information
•
Sofology is the third largest retailer of sofas
inthe UK.
•
It trades through 57 showrooms and its
website.
•
Our Sofology retail brand appeals to a style
conscious customer, willing to invest their time
and money on their perfect sofa. The average
order value for Sofology is 20% higher than
theretail park average.
•
Our Group-wide logistics platform is one of
several key infrastructure components
supporting our retail brands.
•
It is the largest two person sofa delivery
business in the UK.
Delivery vehicles
240
AT A GLANCE CONTINUED
In addition to dfs’s own brand
products, it also offers a wide
range of exclusive products
created in collaboration
with the UK’s top home
andlifestylebrands.
•
dfs is the leading retailer of sofas in the UK
withover 55years’ heritage.
•
It operates 115 showrooms
in the UK and
Republic of Ireland, and a leading web platform.
•
Our dfs retail brand is synonymous with
upholstery and has become part of the national
culture. In fact dfs is the most searched for term
in the category with over 50% ofthe UK
population spontaneously aware of the brand.
•
dfs has a track record of working with top home
and fashion brands, to co-create exclusive
product designs and style for our customers.
These sit alongside our exclusive in-house
brands providing great customer choice.
•
dfs is the largest sofa manufacturer in the UK.
OUR BRANDS
FY25 brand revenue
£804.6m
FY25 number of showrooms
115
FY25 brand revenue
£225.7m
FY25 number of showrooms
57
Annual Report and Accounts 2025 DFS Furniture plc4
Strategic Report
PURPOSE DRIVEN APPROACH
OUR PURPOSE
Our purpose is to bring great design and comfort into every home, in an affordable, responsible and sustainable manner.
Our customers and our people are at the heart of everything we do, and our culture is rooted in our core values.
OUR VISION
Our vision is to lead furniture retailing in the digital age.
OUR STRATEGY DELIVERS...
AFFORDABLE...
RESPONSIBLE, SUSTAINABLE LONG-TERM VALUE CREATION...
FOR OUR...
See pages 2 to3
Customers Colleagues Communities Suppliers Environment Investors
Our culture
andvalues
Our culture and values run
through everything we do.
Theyguide our actions and
create a sustainable and
responsible business.
See pages 10 and 77
Business model
Our business model continues
todeliver on our objectives in
challenging market conditions
and creates value for all our
stakeholders.
See pages 14 to15
Our markets
We are the clear market leader
in the upholstered furniture
market. We believe our ‘integrated
retail’ business model allows us to
adapt to fast-changing consumer
shopping habits and positions us
well for the future.
See pages 12 to 13
Governance
Our Board sets the Group’s
purpose and strategy to
promote our long-term
sustainable success.
See page 55
Risk management
We are focused on effectively
mitigating the risks and
uncertainties that may impact
our business operations and
strategic development.
See page 28
Responsibility
andsustainability
Our business is built on the right
ethical foundations to ensure
that with our sofas people feel
more comfortable – in every way.
See pages 36 to 52
Our unparalleled scale
Provides valuable customer and market insight as well as economies of scale and national coverage.
Our retail brands
Our platforms
Technology
and data
Sourcing and
manufacturing
Logistics
See page 17 See page 38
Our exceptional people
People
and culture
Annual Report and Accounts 2025 DFS Furniture plc 5
Strategic Report Corporate Governance Financial Statements Shareholder Information
OUR FUNDAMENTALS
Our Group benefits from four fundamental advantages that provide
our business model with resilience and position us well for the future.
DELIVERING SUSTAINABLE GROWTH
CLEAR MARKET
LEADER
With 39%
1
of the sofa retailing market, the DFS
Group is over three times the size of our nearest
competitor. This market leadership enables
significant economies of scale benefits.
INTEGRATED
RETAILBUSINESS
We believe our winning combination of digital and
physical assets is the right long-term approach for
the sofa market. With our integrated platform,
we’re ‘channel agnostic’ and flexible to support
customers however they want to shop. This is
supported by our own dedicated manufacturing
and supply chain operations.
SUSTAINABLE
BUSINESSMODEL
We are committed to building a sustainable
business model, both in terms of our impact on
theenvironment and our long-term success and
resilience as a group. Our scale and profitability
have allowed us to invest for the long term
throughout the economic cycle, leaving us with
well-invested platforms to support future growth.
HOME MARKET
OPPORTUNITY
The UK beds and mattresses segment represents
asizeable medium-term opportunity for the Group.
We believe that our existing customer base, our
interest free credit offer and our assets including
sourcing, web and logistics platforms, marketing
expertise and differentiated brand partnerships
leave us well positioned to grow market share in
this segment.
SUSTAINABLE GROWTH
We believe the fundamental strengths of our business model leave the Group well positioned
for medium-term growth in shareholder returns. High levels of free cash flow generation are
along-term feature of our business model.
1. GlobalData August 2025.
1 2 3 4
Annual Report and Accounts 2025 DFS Furniture plc6
Strategic Report
CHAIR’S STATEMENT
The outlook for the Group remains positive despite the challenging
economic and geopolitical environment.
CRAFTING COMFORT,
BUILDING CONFIDENCE
Steve Johnson
Chair of the Board
Read Steve’s profile
onpage 56
This year our revenue performance has improved
significantly compared to the prior year as both our
retail brands successfully implemented our growth
initiatives and grew their market share despite the
subdued market for upholstered furniture in the
UK. We believe that the outlook for the Group
remains positive despite the challenging economic
and geopolitical environment that we operate in.
We have maintained our focus on disciplined cost
management and continued to improve our gross
margins. Delivery against our £50m cost saving
plan has helped limit operating cost increases to
2% year on year despite significant inflationary
headwinds due to the well-publicised increases in
the National Minimum Wage and National Insurance
as well as volume related variable cost increases.
The medium-term prospects for the upholstered
furniture market remain strong and we are optimistic
that our market leading position and our long-term
growth strategy will ensure the business is well
positioned to take advantage as the market recovers.
We will continue to actively manage our cost
basein FY26 in the face of a significant increase
inbusiness rates in April 2026 and an expected
further increase to the National Minimum Wage.
The savings we have made to date demonstrate
ourability to remain agile and reshape our operations
in light of prevailing market conditions.
A retailer is nothing without its colleagues and its
customers. At DFS Group we have built a dedicated
and highly capable team of colleagues who have
demonstrated a consistent ability to deliver a
product and service proposition that continues to
be highly valued by our customers. This underpins
our belief that our two retail brands can continue
togrow their market share.
FINANCIAL RESULTS
We were pleased that full year underlying PBT(A)1
of £30.2m was above the top end of guidance
(£25m to £29m) andan increase of £19.7m year on
year. Reported PBT was £32.9m (FY24: loss of £1.7m).
Our profit performance was driven by strong trading,
gross margin rate progression and continued
costdiscipline.
In an environment of low consumer confidence,
theBoard and the Group Leadership Team have
been focused on achieving the optimum near term
financial results whilst ensuring that the Group
remains primed to respond to a better market and
strengthening our balance sheet to ensure that
wecan invest for the future.
Leverage1 at year end was 1.4x (FY24 year end 2.5x)
which showed a considerable improvement against
prior year, although remaining above our stated
target level of 0.5x–1.0x. Bringing the level down
towards our target using the twin levers of absolute
debt reduction and profit improvement remains a
key focus for the coming year.
1. Refer to pages 26 and 27 for APM definitions.
Annual Report and Accounts 2025 DFS Furniture plc 7
Strategic Report Corporate Governance Financial Statements Shareholder Information
CHAIR’S STATEMENT CONTINUED
STRATEGIC FOCUS
During the year we undertook a restructure of the
leadership team in our two retail brands, creating
new Group Marketing, Commercial and Customer
Services functions to sit alongside the existing
Group functions which support our brands. These
changes support our existing pillars and platforms
strategy, provide greater clarity and consistency,
and allow the Group to make better use of its scale.
We continue to leverage our two market-leading
complementary retail brands, dfs and Sofology;
they appeal to different customer segments and
allow us to target a wide section of the market with
creative direction managed by each brand team.
Each brand curates its own ranges, supported by
specialist in-house design teams. The focus on
innovation continued during the year with further
enhancements to our product ranges, incorporating
new technology into several more ranges to appeal
to a broader group of customers. This approach is
exemplified by our Cinesound
®
technology which
turns home entertainment into a 4D immersive
experience, packed with state-of-the-art features,
including vibration pads and powered head and
footrests. The customer response has been incredibly
positive with these high-end products rapidly
becoming a key differentiator for us in the market.
The dfs team has also focused on developing our
wider Home offering, especially in beds, building
stronger relationships direct with suppliers, with
afocus on both quality and improving the delivery
time to our customers.
We have continued to invest in our national network
of showrooms across the UK and the Republic of
Ireland and in our websites, to ensure they continue
to inspire our customers and provide a leading
customer experience. We were pleased to open
ournew Sofology store in Carlisle shortly after
yearend, in August 2025.
We will continue to assess the pace and priorities
of all our strategic objectives as market conditions
evolve over the next 12 months.
CULTURE AND OUR PEOPLE
Our colleagues and their contribution to our
cultureand values are what make DFS Group great.
Theyare dedicated, enthusiastic and proud of our
market-leading position. They put the customer
first in everything they do and work hard to deliver
outcomes informed by our values.
The market challenges facing retailers over the
lastfew years are well understood and the actions
taken to manage our cost base, improve our customer
NPS scores, build our market share to a record high
and return the Group to a more stable financial
position have required the dedication and
commitment of all our colleagues.
We rely on their skills, knowledge and experience,
competence, agility, and passion for our business
tocontinue to innovate and to continue to deliver
for all our customers in this challenging economic
environment. My thanks on behalf of the Board
goto all of them.
SUSTAINABILITY
We are pleased that during the year our publicly
committed net zero plans were approved by the
Science Based Targets initiative, validating both our
2050 and near-term decarbonisation targets. Given
the vertically integrated nature of our Group our
journey to net zero will not be linear. In some areas
progress is dependent on the development of
innovative technologies but we are pleased with
the progress we are making, and we remain
committed to our ambitious targets. This is
described in more detail in the Responsible
business report on page 36.
GOVERNANCE AND BOARD CHANGES
Good governance is critical for all businesses.
Attimes of continued geopolitical and economic
uncertainty, it plays a particularly key role in
building and retaining trust among a diverse base
of stakeholders. DFS Group operates to a high level
of governance and the Board will maintain this
approach going forward.
Having welcomed Bruce Marsh to our Board at the
start of the financial year, in October we announced
John Fallon had taken the decision to step down as
our CFO. We thank John and wish him the best for
the future. In January we welcomed Marie Wall
tothe Board as our Interim Chief Financial Officer.
Marie is an experienced leader who has previously
held senior finance roles at listed FMCG and retail
businesses including Imperial Brands PLC, Wolseley
PLC and Dixons Carphone PLC. She brings expertise
in retail and finance transformation and has created
value and strengthened our finance team. Then in
February we were pleased to be joined by Tony
Buffin, our new Non-Executive Director. Tony has
significant retail experience that is directly relevant
to the Group’s long-term strategy and will help to
accelerate growth in our brands and develop our
Home offering.
In April Jo Boydell announced her intention to
retirefrom the Board at the close of the AGM
inNovember. Jo was appointed to the Board in
December 2018 and served as Audit and Risk
Committee Chair from April 2019 until the
appointment of Bruce Marsh. We thank Jo forher
wise counsel and significant contribution toDFS
Group and wish her all the very best for thefuture.
All the Directors continue to visit different areas
ofthe Group spending time in our showrooms,
customer distribution centres, factories and design
studios as well as with individual members of the
Group Leadership Team and the Employee Voice
Forum. This helps to ensure that all of the
Non-Executive Directors have a thorough understanding
of the business and that the Non-Executives’
contributions to Board discussions are well
informed and constructive in helping them
ensurethe views of the wider stakeholder
population are considered in any decision.
DIVIDEND
At the time of the interim results in March 2025 the
Board confirmed that due to the ongoing economic
headwinds and the Group’s net debt position being
outside our target range it would not approve the
payment of an interim ordinary dividend.
Given the continuing economic uncertainty the
Board has concluded that to build further resilience
the focus should be on further reducing net debt
and has therefore concluded that it would not be
appropriate to propose a final dividend. We recognise
that this decision may be disappointing for some of
our shareholders. However, we believe that it is in
the best long-term interests of the Group.
LOOKING AHEAD
The Group has developed a unique position at the
heart of British homemaking over the past 55 years.
We are the UK’s largest upholstery retailer and
manufacturer. This, coupled with our in-house
twoperson delivery and service teams, clear
strategy, great leadership team, market-leading
position, innovative products and the strength
ofour brands will allow us to take advantage
ofopportunities todeliver on the expectations
ofcustomers and shareholders and continue
toprovide a rewarding place for our colleagues
tobuild their careers.
As detailed in the Chief Executive’s outlook
statement, the market for upholstery remains
delicately balanced and whilst the Group is not
immune to the impact of the continuing political
uncertainty, the Board considers that the Group is
well placed to manage these challenges and
remains optimistic about thefuture.
I am proud of the Group’s achievements in FY25
and remain confident in the plans that we have
forthe year ahead.
ANNUAL GENERAL MEETING
We continue to encourage all shareholders to
attend our Annual General Meeting, which will
beheld in Doncaster on 14 November 2025.
Thisprovides a great opportunity to hear from
andspeak with members of the Board and
GroupLeadership Team.
Steve Johnson
Chair of the Board
25 September 2025
Annual Report and Accounts 2025 DFS Furniture plc8
Strategic Report
All of this has led to revenue and profit growth
with underlying profit before tax and brand
amortisation
2
(uPBT(A)) slightly ahead of expectations
,
up nearly £20m year on year to £30.2m, and reported
PBT up £34.6m year on year to £32.9m. In addition
we have generated good levels of free cash flow
enabling us to reduce our net bank debt by £57.8m
and strengthen our balance sheet.
Stepping back, our Group has evolved considerably
over the last five years. We have simplified our
structures, developed Group platforms to leverage
expertise and scale benefits, continued to grow
ourmarket share and we have what I believe is a
unique culture that binds and energises our people
to help us win with customers and look after each
other. As a result, the Group is strongly positioned
to capitalise on our growth opportunities and any
market recovery.
GOOD STRATEGIC
PROGRESS DRIVING
PROFIT GROWTH
CHIEF EXECUTIVE’S REPORT
Our customer propositions and operating platforms have never been in
better shape with all elements of our vertically integrated business model
working together, efficiently and effectively, leading to record market share
1
,
record customer satisfaction scores and high levels of colleague engagement.
Through focusing on what we can control and executing our strategy we have
delivered a resilient performance, growing profits and free cash flow in a weak
market environment.
Tim Stacey
Chief Executive
Officer
Read Tim’s profile
onpage 56
I am pleased to report that FY25 was a year where
we accelerated our momentum by focusing our
energies and efforts on what we can control and
relentlessly executing our strategy. Our customer
propositions are in great shape across both our dfs
and Sofology retail brands leading to strong Group
order intake growth, up +10.2% year on year, and
continued market share growth in another year
where market demand has remained weak.
The brands have been supported by our operational
platforms working efficiently and effectively.
Strong performance across the customer journey
from our commercial and product design teams,
ourmarketing teams, our retail brands, our
manufacturing operations, The Sofa Delivery
Company logistics business and our service teams
have collectively resulted in us achieving record
established customer NPS scores. This has been
achieved bythe hard work of our fantastic, passionate
and dedicated colleagues and our investment in
data and technology which provides insight, improved
decision making and operational efficiency.
1. Proprietary banking data covering 13 specialist
upholstery retailers.
2. Refer to pages 26 and 27 for APM definitions.
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Strategic Report Corporate Governance Financial Statements Shareholder Information
CHIEF EXECUTIVE’S REPORT CONTINUED
STRATEGIC UPDATE
Our ambition is to profitably and sustainably grow
our dfs and Sofology retail brands and step change
our share of the non-upholstery Home market
through leveraging our Sourcing and Manufacturing,
Technology and Data, People and Culture and
TheSofa Delivery Company logistics platforms.
The strategic progress we are making is the result
of our focus in three key areas:
Leveraging our scale
andverticalintegration
Through leveraging our scale and vertical integration
we provide a differentiated customer experience
and drive greater efficiency.
The Group has a 39% market share by value
1
with
sales densities in DFS Group over three times that
of our nearest competitor. Given our scale, well
known brands want to work with us to develop
unique and exclusive sofa ranges. We have created
a unique proposition in dfs through working on an
exclusive basis with high quality brand partners
that resonate strongly with the consumer such
asFrench Connection, Joules and Country Living.
Ourrecently launched partnerships with Ted Baker
(FY24) and La-Z-Boy (FY25) and new ranges with
existing partner brands such as the Joules Gilmorton
are all performing well and our exclusive brand
sales mix has reached a record high of over 40%
oftotal dfs brand sales.
Our sales volumes and demand forecasting
capability have enabled us to work with our third
party suppliers to efficiently and effectively service
customers that value obtaining products at speed.
Our suppliers also offer new ranges to us first to
sell on an exclusive basis and as we are a major
customer our scale enables us to source efficiently
and deliver industry leading gross margins. We
have grown our gross margins 70 basis points
inFY25 and through recently combining the
commercial buying teams of the dfs and Sofology
brands under one leader we can share best
practices and further leverage our scale in the
future. We have a highly skilled and creative design
team that research and identify emerging trends in
the wider home categories that can be applied to
our sector. We have the ability to develop a prototype,
test, and put new ranges on our showroom floors in
as little as six weeks enabling us to be first to market.
Interest free credit ('IFC') is a key feature of the UK
upholstery market. Given our scale, we are a major
customer of our IFC lending partners enabling us
tooffer a market leading proposition. This year we
offered IFC on a 48 month term to customers in
keyperiods to drive demand in the weak market
environment and increase average order values
contributing to our strong order intake performance,
ahead of the market2.
Our vertical integration enables us to capture
valueacross the supply chain. We produce around
20% of what we sell in our UK factories and our
scale enables us to operate them efficiently. They
provide the benefits of being able to offer short
lead times and insight to optimise cost pricing for
ranges sourced from third parties. Thisyear we
have improved the efficiency of ourfactories whilst
further enhancing quality.
The Sofa Delivery Company, our logistics operation,
is the largest two person sofa delivery company in
the UK. It delivers for both our retail brands using
the same infrastructure and we offer a seven day
aweek installation and delivery service which is
focused on providing great customer service, including
the removal and recycling of all packaging waste.
This is evidenced by record post-delivery NPS scores
achieved at the same time as reducing our delivery
cost per order despite inflationary headwinds.
Utilising data and technology
Through utilising data and technology we drive
insight, innovation, better decisions and a continuous
improvement approach to operational efficiency.
We have made significant progress over the last
three years in simplifying how we store, access and
connect data and gain insight through developing a
data hub that sources data from around 85 sources.
A good example of how we are utilising data is in
The Sofa Delivery Company where we have powerful
dashboards that enable us to drill down in detail to
drive performance. For instance, we can review the
individual performance of each delivery vehicle by
the hour and review the reasons for failed deliveries
to identify root causes. Having this knowledge has
helped us deliver a 10% efficiency improvement
and reduce failed deliveries to record lows.
The Sofa Delivery Company uses machine learning
through its proprietary software that carries out
dynamic real time route scheduling to optimise van
fill and doorstep time ensuring we maximise the
use of our assets and provide great customer service.
Another example is in retail where we are able
tosignificantly improve our overall store by
storeperformance through the use of store level
dynamic balanced scorecards which improve
visibility and provide real time insight across our
people, processes, customer and financial lenses.
We are also utilising data in marketing to improve
our efficiency of spend and our team recently won
the Bloomreach ‘Data Driven Leader’ award,
recognising our effective and impactful use
ofcustomer data and analytics.
We utilise cutting edge technology to improve the
customer experience and operational performance.
Our proprietary Intelligent Lending Platform (ILP)
now has multiple IFC lending partners operating
across both dfs and Sofology enabling high first
time acceptance rates and management of subsidy
costs, shortening transaction times, enabling in
store conversion uplift in busy periods. ILP also
enables fully digitised processing with no colleague
intervention making the customer journey seamless,
offering customers the credit that is right for them.
We have continued to innovate with more
technology included in our sofas such as wireless
charge points, wine coolers, speakers and vibrating
seats such as in our Cinesound
®
ranges and our
recently patented heated seats.
We continually look to improve the customer
journey and provide a seamless experience across
all channels. This year we have been enhancing
both retail brands’ websites. The dfs brand has
recently launched a personalised homepage that
changes content displayed based on where the
customer isin their journey, providing inspirational
content forthose early in the journey and returning
users
totheir previous product selections. This
personalised
approach has proven to be a hit with
customers, reducing bounce rate, improving click
through rateand conversion.
We have made numerous enhancements to the
Sofology website including improved image zoom
to provide a detailed view of fabrics, autoplay
videocontent to capture customer attention
andimproved 3D augmented reality coverage.
We have begun to utilise artificial intelligence ('AI')
across a number of areas in the business. We are
utilising a CRM platform in Sofology to develop
AIdriven email marketing campaigns to improve
personalisation of individual communications
bytailoring them to the customer’s online and
offline interactions. There are early indications that
this has yielded a significant conversion rate and
average order value increase. In addition, we have
recently published a case study with our digital
creative and activation platform on the use of AI
forboth media effectiveness and image generation,
asour work to
push our digital capability continues.
The advancements
we are making with our media
partners led to global first trials with Pinterest
anda Digital Out Of Home award with JCDecaux.
1. GlobalData calendar year 2024 market share
(August2025).
2. Proprietary banking data covering 13 specialist
upholstery retailers.
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Strategic Report
STRATEGIC UPDATE CONTINUED
In our customer service operations we are enhancing
colleague written emails by using AI to draft
written responses to customer service tickets
which has helped reduce resolution times and
increase colleague productivity. Finally, our
in-house creative production capability will
continue to provide us with leading CGI (over
125,000 product images produced) and video
technology across the Group, and a recent ‘Inside
Out’ award nomination globally recognises our
in-house creative excellence.
Harnessing our unique culture
todrive performance
We fully recognise that delivering an exceptional
customer experience requires a dedicated and
passionate workforce. It’s the commitment and
talent of our people that truly drive our business
forward. That is why I feel so strongly about, and
take great pride in, the unique culture we have
cultivated across our Group.
We aim to lead our people with an open and
empathetic leadership style, supported by customer
centric, aspiring values which drives high engagement
levels and ultimately our performance. We assess
colleague engagement levels through our ‘Your Say’
survey and we’ve made good progress with colleague
engagement stepping forwards 11.6%pts year on year.
Expertise in our sector is important. In manufacturing,
from sewing to frame assembly, quality and efficiency
are critical. Equally, our retail teams need to engage
effectively with customers to encourage them to
shop with us– because the overall experience truly
matters, and in The Sofa Delivery Company, high
service levels are imperative as the sofa delivery
isusually our last touch point with the customer.
We invest in our colleagues to help equip them
with the right skills and to develop and progress.
I’m very proud of our Leadership Development
Programme which 12 leaders completed in 2024
with a further 21 taking part in the 2025 cohort.
Inaddition our Group Leadership Academy, which
offers opportunities for colleague development
andstrengthens our future leader pipeline, has
proved popular with more than 500 managers
attending workshops.
To help ensure colleagues stay with us we want
tocreate an environment where everyone feels
welcome, valued and respected. Diversity in our
teams helps us in many ways from obtaining
differing perspectives, increasing creativity and
innovation and being better able to serve a wider
customer base. Our six colleague networks, which
each have senior leadership representation, help us
connect like-minded people and help us to activate
change and engagement initiatives identified in our
inclusion agenda. We are constantly seeking to
raise standards and this year we achieved the ‘strategic
level’ in the Diversity in Retail inclusion maturity curve.
We also want to ensure that our people can
workfor us whilst managing their busy lifestyles.
Recognising this, we adapted our retail model to
increase the availability of part-time roles and in
FY25 the part-time mix in both brands grew over
4%pts with dfs’s part-time mix now over 58%. This
model is facilitated by our workforce management
system that predicts footfall and sales six weeks
ahead, helping us to plan to have the right number
of colleagues at peak times and maximise conversion.
We are also working towards equal gender
representation in our business and are making
progress with 41% of senior leadership roles now
held by female colleagues.
CHIEF EXECUTIVE’S REPORT CONTINUED
1. Proprietary banking data covering cash transactions
from 13 specialist upholstery retailers.
As a result of our strategic
progress we have delivered against
our three key financial areas:
Growth – We achieved strong and consistent
performance across the year with like-for-like order
intake growth of +10.1% in H1 and +10.3% in H2
with both brands gaining share in a market that
was slightly down year on year
1
. The dfs
brand'slike-for-like order intake growth of 8.7%
was driven by new product development, our
industry leading IFC offer and great customer
service with established customer NPS at a record
level of 54.1. Sofology grew order intake by
+16.2% as a result of a significant volume uplift
with the range development and price changes
made at the end ofFY24 proving very effective.
Gross margin – Our gross margin rate stepped on
another 70 basis points year on year to 56.5% as
we target a return to our target and pre-pandemic
average of 58%. Margins improved as a result of
product margin progression supported by cost of
goods savings that more than offset headwinds
from elevated freight rates.
Cost to Operate programme – We achieved
£25.5m of cost savings in FY25 which means
cumulatively we have now surpassed our £50m
annual savings target, a year ahead of expectation.
The Group now has a more efficient cost base and
we have retained operational capacity to capitalise
on any market recovery.
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CHIEF EXECUTIVE’S REPORT CONTINUED
STRATEGIC UPDATE CONTINUED
Our progress in these areas has led to profit growth
with underlying PBT(A)1 up £19.7m to £30.2m.
Wedelivered strong free cash flow1 generation in
the year of £57.8m supported by working capital
inflows arising from our negative working capital
model and from disciplined investment choices.
Asaresult we have strengthened our balance
sheetthrough significantly reducing debt and
ourleverage1 has improved from 2.5x to1.4x.
SUSTAINABILITY
We are committed to reducing our impact on the
environment and I am pleased to report that we
have obtained validation from the Science Based
Targets initiative of our emissions reduction target
to cut emissions by 90% across Scope 1, 2 and 3
by2050. Our emissions are heavily weighted to
Scope 3 and we launched an ‘In This Together’
engagement campaign with our suppliers to set
their own science-based targets. We sought buy-in
to cover 20% of our Scope 3 emissions and surpassed
this by achieving support for 59%. Iwould like to
thank our suppliers for working collaboratively
withus on our journey.
Tackling our Scope 1 emissions is proving challenging
due to the significant investment required to upgrade
our legacy electricity infrastructure and the limited
availability of electric/hydrogen heavy goods
vehicles on the market. However, we remain
committed to our reduction path and are working
toaddress these challenges over the next few years.
We are already making good progress to ensure
our business can make the most of the opportunities
of a circular economy and deliver sustainable
performance and are working to ensure responsible
and sustainable use of materials through transparency
and traceability. All these endeavours will support
the future EU requirement to provide a Digital
Product Passport with every product, a requirement
which we have started work on, with a pilot in FY25.
For further details on sustainability see pages 36 to 52
FUTURE GROWTH
The Group has evolved considerably in the last
fiveyears. We have simplified our structure by
removing sub-scale loss making entities such
asthe Sofa Workshop brand and international
operations in Spain and the Netherlands.
We have developed The Sofa Delivery Company
toachieve scale economies and provide a market
leading delivery and installation service, right-sized
UK manufacturing, and created Group functions
since the Sofology acquisition to create centres of
excellence. The Group is well positioned for
future
profitable growth through anumber of avenues:
•
Innovation: Supported by innovative new
product development, leveraging our scale to
offer great value for money, providing leading
customer service through our experienced
colleagues and creating a seamless customer
journey, enabled by technology.
•
Footprint expansion: Sofology new showroom
roll out of one to two showrooms per year,
increasing theestate from 57 to between 65
and 70 showrooms. Weknow the target locations
and there is relatively low cannibalisation when
opening near dfs showrooms.
•
58% gross margins: We are targeting a return
to our pre-pandemic gross margins of 58%.
Recent organisational design changes will
enable better buying opportunities and margin
growth will be further supported by self help
and any Bank of England base rate reductions
and freight rate normalisation.
•
Core sofa market recovery: Market volumes
arec.20% below pre-pandemic levels. Market
recovery is linked to consumer confidence and
the housing market and when the recovery
comes, the operational leverage in the business
is expected to result in high profit growth with
revenue toprofit drop through at around 40%.
•
Growth of share in the £5bn non-upholstery
Home market (beds and mattresses, dining
and other living room furniture): We have
established the foundations to enable
future
growth in the non-upholstery Home market
including the roll out of a warehouse
management
system, the expansion of some of our exclusive
upholstery brand partnerships to bed frames and
consolidated supply to improve gross margins.
We have recently started to invest in digital
marketing toincrease customer awareness
ofour Home proposition and we are targeting
an incremental £100m of revenue in the
medium term.
•
Business development opportunities:
Wearecurrently trialling providing a two
person delivery service to third party retailers
through The Sofa Delivery Company infrastructure.
We believe that there will be additional opportunities
especially with seasonal furniture retailers and
lower volume sofa retailers to provide a great
customer service and maximise utilisation of our
assets, generating incremental revenue.
CONCLUSION AND OUTLOOK
I believe that our customer proposition has never
been in better shape and that all elements of our
vertically integrated business model are working
together efficiently and effectively, leading
torecord NPS scores. Through focusing on what
we can control and executing our strategy we
havegrown profits and free cash flow in a weak
market environment. This would not have been
possible without the passion and dedication of our
colleagues and I would like to sincerely thank them
all for their hard work and support for our business.
The market demand drivers for the upholstery
sector remain delicately balanced. Consumer
confidence isbelow the long-term average and
inflation remains elevated but housing transactions
have been recovering, consumer savings levels are
relatively high and interest rates look setto fall.
Given the market share gains that we have made
inthe last few years, the recovery in our gross
margins and the significant reduction in our cost
base, despite inflation, I am optimistic about the
future. We will continue to focus on what we can
control and, evenin a subdued market, we expect
to grow our profit before tax in FY26 and further
strengthen our balance sheet. When the market
recovers we are well positioned to achieve strong
growth and importantly profit and cash conversion
and remain committed to achieving our medium
term targets of £1.4bn revenue and 8% PBT margin.
Tim Stacey
Chief Executive Officer
25 September 2025
1. Refer to pages 26 and 27 for APM definitions.
Annual Report and Accounts 2025 DFS Furniture plc12
Strategic Report
MARKET REVIEW
WE ARE THE LEADING SOFA RETAILER IN THE UK
The Group has consolidated its position as the clear
market leader in challenging conditions.
LARGE POTENTIAL CUSTOMER BASE
The Group has a specialist focus on the retail
upholstered furniture segment. The UK upholstery
furniture market was estimated by GlobalData to
be valued at £3.0bn (incl. VAT) in the calendar
year2024. As a Group, we view the beds and
mattresses segment as a key opportunity
increasing our total addressable market
byapproximately £3bn.
CLEAR LEADER IN THE SEGMENT
The Group, through its dfs and Sofology brands, is
the clear leader in the upholstered furniture market,
with 39%1 market share by value in calendar year
2024. This market remains highly fragmented and
we see further opportunities togrow our market
share. We see four broad categories of companies
actively competing in the upholstered furniture
retail market: specialist chains such as dfs, Sofology,
ScS and Furniture Village; independents that are
typically single store operations; predominantly
online furniture retailers such as Wayfair; and
larger general merchandise or homeware retailers
such as Amazon, Argos, Dunelm, Ikea, John Lewis
and Next.
We believe the integration of digital and physical is
the right long-term approach to serveour customers.
Our well-invested ‘integrated retail’ business
model allows us to adapt to changing consumer
shopping habits, and positions us well for the future.
Market conditions are challenging with UK
upholstery market volumes remaining well
belowlong-term average levels.
Historically, the Group has tended to gain market
share during periods of market weakness as weaker
multiples and independent chains have exited the
market. For example, the Group’s market share
increased from c.19% to 24% during the 2008 to
2011 global financial crisis impacted calendar years
and from 33% to 39% in the 2020 to 2024 calendar
years impacted by the Covid pandemic and cost of
living crisis (GlobalData).
Demand is supported by an average seven year
replacement cycle and underpinned by demographic
trends. We believe over shorter time frames the
segment is principally driven by three key factors:
consumer confidence, housing market activity and
consumer credit availability, discussed below. In
addition to these market drivers we do see from
time to time some volatility in market demand
levels caused by particularly hot or cold weather
and significant public events.
1. GlobalData August 2025 report. Market share: calendar year 2024.
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Strategic Report Corporate Governance Financial Statements Shareholder Information
MARKET REVIEW CONTINUED
Market conditions are currently challenging with UK upholstery market demand
levels at a record low. Historically, the Group has been able to grow market share
during economically challenging times.
KEY MARKET DRIVERS
CONSUMER CONFIDENCE
Levels of consumer spending, particularly for big
ticket items, are influenced by general consumer
confidence. In 2020, consumer confidence fell due
to economic and financial uncertainty around the
pandemic, but recovered slightly in 2021. In 2022
consumer confidence fell to record low levels due
to high inflation and elevated interest rates putting
pressure on consumer budgets. Confidence levels
have recovered slightly but remain relatively subdued.
HOUSING MARKET
Independent research conducted on our behalf
suggests that c.20% of upholstery purchases are
triggered by a house move. As the pandemic
spread
in spring 2020, government social distancing
measures
led to a sharp contraction in housing market activity,
which subsequently bounced back in 2021 as a
result of temporary government measures to reduce
stamp duty payable on residential property purchases
.
Housing transactions declined through 2022 and
2023 due to increasing Bank of England base rates
and the cost of living crisis. Throughout 2024 and
2025 we have seen a recovery in housing transactions
back towards longer-term average levels.
CONSUMER CREDIT
Upholstered furniture typically has relatively high
unit prices and the availability of consumer credit
can facilitate purchases and upselling. Through
thepandemic, UK consumers reduced debt, as
government restrictions reduced options for
discretionary spending (e.g. foreign travel and
leisure). Since 2022, consumer unsecured lending
has grown and is broadly in line with long-term
growth rates.
Consumer confidence
1
Housing transactions p.a. ('000
2
) Net unsecured lending growth
3
(%)
2025 2025 2025YTD (19.7)
(17.8
(29.3)
(24.3)
(38.5)
(12.7)
YTD +16.6% YTD 6.6
7.9
7.8
6.1
6.5
8.3
10.0
1,093
1,024
1,265
1,480
1,040
1,177
1,189
1,223
(14.5) (3.5)
(2.0)
(8.8)
(9.5)
2024 2024 2024
2022 2022 2022
2019 2019 2019
2023 2023 2023
2020 2020 2020
2021 2021 2021
2017 2017 2017
2018 2018 2018
1. GfK UK Consumer Confidence average of individual month scores for each year.
2.
HMRC – number of residential property transaction completions with a value over £40,000 for the UK, seasonally adjusted.
3. Monthly 12 month growth rate of total (excluding the Student Loans Company) Sterling net consumer credit lending to
individuals (in percent) seasonally adjusted.
Annual Report and Accounts 2025 DFS Furniture plc14
Strategic Report
BUSINESS MODEL
A FULLY INTEGRATED CUSTOMER JOURNEY
OUR GROUP USP:
•
Highly skilled design teams
and experienced buyers that
curate innovative and distinct
ranges, including Cinesound
and the Platinum collection
•
Exclusive partnerships with
well known high quality
brands such as La-Z-Boy,
TedBaker, Joules, French
Connection, Country Living
and House Beautiful.
•
Retail brands that are
household names, memorable
advertising, and award winning
data driven marketing
BENEFITS FOR CUSTOMERS:
•
Access to high quality,
wellknown UK brands
•
Experience the latest
technology such as our 4D
immersive cinema sofas and
our patented heated seats
•
We have the ability to
develop a prototype, test,
and put new ranges on our
showroom floors in as little
as six weeks, giving customers
the latest innovations in
upholstered furniture
DESIGN AND INSPIRE
OUR GROUP USP:
Best online brand strength
‘DFS’ is searched for
1.5x
more than the term ‘sofas’
Best sales teams
94%
of people would recommend
Sofology having purchased
within a Sofology showroom
92%
dfs post-purchase
NPS score
Best enhanced technology
The largest collection of
augmented reality (AR) assets
accessed through a web browser
in the furniture category
BENEFITS FOR CUSTOMERS:
Best experience
Thecritical‘sit test’:
88%
of dfs customers visit
ashowroombefore buying
Best e-commerce platform
Purchase online, in the
showroom, over the phone
orbuild an order in the
showroom and complete
thetransaction athome
INTEGRATED RETAIL CHANNEL
OUR GROUP USP:
Our installation experts operate
from customer distribution
centres spread across the UK
and Ireland using custom-built
route-mapping technology
to reduce lead times, lower
emissions and optimise efficiency.
BENEFITS FOR CUSTOMERS:
•
Market leading technology
ensures our customers
stayinformed from the
pointof sale right through
toinstallation
•
Our data driven approach and
powerful dashboards enable
us to drive performance across
the network resulting in a
great customer experience
OUR GROUP USP:
We manufacture around 20%
ofthe Group’s sofa orders in our
own British factories, resulting
inshorter lead times and greater
oversight on sustainability.
Wesource the remainder from
our trusted partners.
BENEFITS FOR CUSTOMERS:
•
We’re able to offer short lead
times to our customers
•
Economies of scale benefits
enable us to offer customers
great value for money
•
Fantastic product quality
OUR GROUP USP:
Occasionally things go wrong
and, if they do, we have our own
teams of upholsterers that are
on hand to visit customers’
homes and address any
after-sales issues.
BENEFITS FOR CUSTOMERS:
•
After-sales issues
addressedin customers’
homes by our highly trained
service upholsterers
SECTOR LEADING
OPERATING MARGINS
Scale advantages across the
value chain, from sourcing and
shipping rates to maximising
delivery and service fleet utilisation.
GROWING
MARKINGSHARE
We have a history of growing
our market share over the long
term in all economic climates.
Our exclusive brands enable
usto target the majority of the
market and we have a clear
opportunity to grow further.
STRONG CASH
GENERATION
We aim to deliver high levels
offree cash flow generation,
enabling us to invest for growth
and return funds to shareholders.
INVESTING INTHE BUSINESS
We reward our colleagues fairly,
maintain and enhance our existing
assets and selectively invest in
growth opportunities to optimise
the returns for our shareholders.
MANUFACTURE OUTCOMES
DELIVER AND INSTALL
SERVICE
Annual Report and Accounts 2025 DFS Furniture plc 15
Strategic Report Corporate Governance Financial Statements Shareholder Information
GROWTH AMBITIONS
Revenue
£1.4bn
PBT margin
8%
INVESTMENT CASE
“The Group is strategically
well-positioned to deliver
robust growth in shareholder
returns, driven by its strong
market leadership position
and ongoing focus
oninnovation and
operationalexcellence.”
Tim Stacey
Chief Executive Officer
DELIVERING
SUSTAINABLE
GROWTH
COMPLEMENTARY BRANDS
dfs and Sofology are two complementary
retailbrands that are household names and
collectively target the majority of the market.
We have good growth opportunities in our core
business through market share growth, market
recovery potential and increasing the Sofology
estate to between 65 and 70 showrooms.
UNPARALLELED SCALE
We are the largest upholstery retailer
intheUK, over three times the size of our
nearestcompetitor.
We gain valuable customer and market insight
as well as significant economies of scale
benefits across the value chain.
VERTICALLY INTEGRATED
We design, retail, manufacture, deliver
andinstall and provide after sales service.
We have full control of the customer journey
and capture value across the supply chain.
WELL INVESTED PLATFORMS
Our sector leading margins and high free cash
flow generation enable us to reinvest to make
our business stronger.
Our well invested websites and modern, well
located showrooms provide inspirational settings
leading to market leading sales densities and
our investment in technology and data provides
a seamless customer journey across all channels,
enabling operational efficiency and improved
decision making.
HOME MARKET
OPPORTUNITY
The wider home market1 is an attractive
opportunity, expanding our total addressable
market by £5bn.
We can utilise our existing assets and
relationships, our showrooms, our websites,
our exclusive brand partnerships and our
data-led marketing strategy to gain market
share efficiently.
EXCEPTIONAL PEOPLE
We have over 55 years of expertise and recruit,
train and retain individuals who we believe are
the best in the industry.
The dedication, talent and loyalty of our
colleagues who live our values day in day out
are what really drives this business forward.
HIGHER CASH
GENERATIVEMODEL
The majority of the products we sell are made
to order. We operate with negative working
capital and our maintenance capital
requirements of c.1.5% to 2% of revenue
arerelatively low, enabling us to reinvest
inthebusiness for growth andreturn funds
toshareholders.
1. Beds and mattresses, dining and other living
roomfurniture.
Annual Report and Accounts 2025 DFS Furniture plc16
Strategic Report
STRATEGY
Our vision is to lead furniture retailing
in the digital age, and we pursue this
through our ‘Pillars and Platforms’ strategy
which will unlock new categories of growth,
whilst leveraging our proven andleading
upholstery market made-to-order
modeladvantages.
The growth of our three pillar brands
dfs,Sofology and our expansion into the
non-upholstery market with Home will
be enabled by our four Group platforms:
sourcing and manufacturing, technology
and data, people and culture and The
SofaDeliveryCompany logistics platform.
The strategy reflects the Group’s
expertiseand scale and the ability
to utilise our enabling platforms to
improveoperational efficiency and
growthacross our brand portfolio.
Financials
Pillars
Platforms
NEW PRODUCTS AND
SERVICES TO ENGAGE
CUSTOMERS
GROW THE SHOWROOM
ESTATE THROUGHOUT
THE UK
INVEST TO GROW BEDS
AND MATTRESS SALES
TECHNOLOGY
AND DATA
SOURCING AND
MANUFACTURING
LOGISTICS PEOPLE AND
CULTURE
ESG
Customer
Market
Group
strategy
UNLOCKING GROWTH
Annual Report and Accounts 2025 DFS Furniture plc 17
Strategic Report Corporate Governance Financial Statements Shareholder Information
NEW PRODUCTS AND SERVICES TO ENGAGE CUSTOMERS
•
Range enhancements including successfully launching new
brandpartnerships
•
Continued innovation to be first to market with new concepts
•
Continual improvement of the customer experience
TO FURTHER GROW THE SHOWROOM ESTATE
THROUGHOUT THE UK
•
Refine and optimise ranges
•
Roll out of showrooms on the route to targeted 65 to 70 locations
•
Continual improvement of the customer experience
INVEST TO GROW BEDS AND MATTRESS SALES,
LEVERAGING THE FOUNDATIONS ALREADY LAID
•
Growth in the £5bn non upholstery Home market - starting with
the beds and mattresses segment as a key opportunity increasing
our total addressable market by approximately £3bn
•
Investment to grow brand awareness as we target an incremental
£100m of revenue
TECHNOLOGY AND DATA
Using data and technology to unlock growth in
our brands and optimise operational performance
•
Development and enhancement of our websites and customer
contact platforms
•
Continue to trial AI to improve the customer experience
SOURCING AND MANUFACTURING
Optimising our own manufacturing
andoursupplierportfolio
•
Grow gross margin rate to 58% target
LOGISTICS
Best in market two person delivery
andinstallation
•
Continue to optimise operational performance
•
Explore opportunities to further utilise asset base
PEOPLE AND CULTURE
Attract, grow and retain the best talent
•
Continue to develop our Employee Value Proposition ('EVP')
ensuring our external perception is appealing and matches
ourinternal reality
•
Develop our leadership pipeline
STRATEGY CONTINUED
PILLARS IN FOCUS PLATFORMS IN FOCUS
We are committed to building a sustainable business model, both
interms of our impact on the environment and preserving our
long-term success as a Group.
Read more about our ESG strategy on pages 46 to 52
EMBEDDING ESG INTO OUR STRATEGY
Annual Report and Accounts 2025 DFS Furniture plc18
Strategic Report
KEY PERFORMANCE INDICATORS
FINANCIAL
1. Refer to pages 26 and 27 for APM definitions.
FY25 FY25
FY25 FY25
FY25£1,388.3m 1.4x
16.3%
£30.2m
FY24 FY24
FY24 FY24
FY24£1,311.8m 2.5x
10.8%
£10.5m
FY23 FY23
FY23 FY23
FY23£1,423.6m 1.9x
13.5%
£30.6m
Gross sales
1
£1,388.3m
Underlying profit before tax, excluding
amortisation of brand names
1
£30.2m
Banking leverage
1
1.4x
Description
Gross sales represents the total amounts payable
by external customers for goods and services supplied
by the Group, including the cost of interest free
credit and aftercare services (for which the Group
acts as an agent), delivery charges and value added
and other sales taxes.
Performance
Increase from strong order intake performance
during the year.
Description
Profit before tax from continuing operations
adjusted for non-underlying items and amortisation
associated with acquired brands.
Performance
Increase driven by improved sales performance,
gross margin expansion and good cost control.
Description
Ratio of period end net bank debt to bank covenant
(IAS 17) EBITDA for the previous twelve months.
Performance
Decrease driven by higher EBITDA and reducednet
bank debt.
Underlying return on capital employed
1
16.3%
Free cash flow
1
£57.8m
£57.8m
(£15.1m)
(£7.3m)
Description
Underlying return on capital employed (‘underlying
ROCE’) is underlying post-tax operating profit from
continuing operations expressed as a percentage of
the sum of property, plant and equipment,
computer software, right of use assets and
workingcapital.
Performance
Increase driven by improved profitability in
theperiod with a lower asset base.
Description
Free cash flow is the change in net bank debt for
the period after adding back dividends and the cost
of purchasing own shares.
Performance
Increase driven by stronger trading performance,
and working capital inflows due to phasing of the
strong order intake and sales performance in the
final quarter.
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Strategic Report Corporate Governance Financial Statements Shareholder Information
KEY PERFORMANCE INDICATORS CONTINUED
Read more on page 17
NON-
FINANCIAL
Key to strategic links
Sourcing and manufacturing
Technology and data
Logistics
People and culture
FY25
FY25FY25
FY25FY2591.8%
92.1%54.1%
5749.5
FY24
FY24FY24
FY24FY2492.8%
77.1%28.3%
5848.5
FY23
FY23FY23
FY23FY2391.3%
73.8%18.6%
5839.4
Net Promoter Score (%) –
Post-purchase
91.8%
Suppliers –
Average days to pay
49.5 days
Sofology UK stores
57
Description
Average across all dfs stores based on
post-purchase customer satisfaction surveys.
Performance
A strong performance, close to FY24 record high.
Description
Average number of days between receipt and
payment of supplier invoices.
Performance
Slight increase year on year due to continued
standardisation of payment terms to 60 days.
Description
Number of Sofology stores trading at the end ofthe
financial period.
Performance
Temporary reduction due to closure of clearance store
during FY25. Openings recommenced in August
2025 with the opening of a new Carlisle showroom.
Strategic links Strategic links
Strategic links
Net Promoter Score (%) – Established
54.1%
Suppliers – % paid on time
92.1%
Description
Average across all dfs stores based on established
customer satisfaction surveys (six months after order).
Performance
Record high score, with all elements of our vertically
integrated business model performing well.
Description
Percentage of supplier invoices paid within
agreedterms.
Performance
Significant year on year improvement due to
process changes and detailed monitoring.
Strategic links Strategic links
Annual Report and Accounts 2025 DFS Furniture plc20
Strategic Report
DELIVERING PROFITABLE
GROWTH,
STRONG
CASH RETURNS AND
IMPROVED RESILIENCE
FINANCIAL REVIEW
FY25 was a year of profitable growth delivering strong cash returns
and building balance sheet resilience. This was achieved in a challenging
market that remained in decline amidst ongoing macro uncertainty.
Looking forward, the Group is well placed to grow profit and generate
high levels of free cash flow given its market leadership position,
progress on our strategic initiatives, the underlying operational
gearingin the business andour negative working capital profile.
Marie Wall
Interim Chief
Financial Officer
Read Marie’s profile
onpage 56
OVERVIEW
FY25 was a year of profitable growth, delivering
strong cash returns and building balance sheet
resilience. This was achieved in a challenging
market that remained in decline
1
amidst ongoing
macro uncertainty.
The Group achieved over 10% like for like order
intake growth, 4.4% revenue growth, 70 basis
points of gross margin expansion and tightly
managed its cost base in an ongoing inflationary
environment. All of these factors contributed
tounderlying profit before tax and brand
amortisation
2
increasing £19.7m to £30.2m.
Reported profit before tax increased by agreater
extent than the underlying result, from aloss of
£1.7m to a profit of £32.9m due to recognition
ofanon-underlying credit in the current year
compared with non-underlying charges in the
prioryear. These are explained later in the report.
We have continued to focus on strengthening the
Group’s balance sheet through reducing our debt
level. Our strong performance for the year has
driven significant free cash flow2 generation,
resulting in net bank debt2 decreasing by £57.8m
to£107.0m and bank leverage2 decreasing from
2.5xatthe previous year end to 1.4x as we make
good progress towards our 0.5x–1.0x target range.
Annual Report and Accounts 2025 DFS Furniture plc 21
Strategic Report Corporate Governance Financial Statements Shareholder Information
OVERVIEW CONTINUED
Looking forward, the Group is well placed to grow
profit and generate high levels of free cash flow
given its market leading position, ongoing momentum
on strategic initiatives, the underlying operational
gearing in the business and our negative working
capital profile.
BASIS OF REPORTING
The financial year ended 29 June 2025 represents
a52week trading period. FY24 was a 53 week
reporting period. All information presented is on
a52 week vs 53 week basis with the exception
oforder intake growth where we also refer to a
‘likefor like’ comparison of 52 weeks vs 52 weeks
to aid the readers understanding of performance.
ORDER INTAKE
The Group achieved strong levels of growth in a
market that was marginally down in value terms
year on year
1
. Momentum was maintained across
both halves of the year, with order intake relatively
consistent at +10% like for like growth.
Sofology performed very well in the period. The
range and pricing changes implemented at the end
of the last financial year have had a positive impact
leading to stronger conversion rates and like for like
order intake growth
of +16.2%. The dfs brand also
performed well, with like for like order intake
growing by +8.7%, as the continued expansion
ofour exclusive brands resonated well with
customers. These brands are enhancing our
customer proposition, with perceived quality
andon-trend designs contributing to growth in
both average order valueand order volumes.
Order intake growth measured on a 52 week vs
53week basis was 1.5%pts lower than the like
forlikegrowth at +8.7%, reflecting the impact
ofthe53rd week in FY24.
FINANCIAL REVIEW CONTINUED
Order intake growth:
Order intake
YoY
dfs 8.7%
Sofology 16.2%
Group like for like (52 weeks vs 52 weeks)
10.2%
Group reported (52 weeks vs 53 weeks) 8.7%
GROSS SALES AND REVENUE
Gross sales2 increased +5.8% year on year which
was lower than the reported order intake growth
of+8.7%. This was due to two factors. Firstly,
Easter fell later in the year meaning some orders
placed in this high demand period could not be
manufactured and delivered in the financial year
and secondly there was a shift in customer orders
to ranges with longer lead times. As a result, the
Group ended theyear with a resilient order bank.
Gross sales2 and revenue growth bybrand:
FY25
(52 wks)
£m
FY24
(53 wks)
£m
YoY (52
weeks vs
53 weeks)
dfs 1,091.3 1,047.0 4.2%
Sofology 297.0 264.8 12.2%
Gross sales 1,388.3 1,311.8 5.8%
Revenue 1,030.3 987.1 4.4%
Reported revenue growth is stated after deducting
VAT, the cost of providing warranty products and
interest free credit subsidy costs from Gross sales.
Revenue growth at 4.4% was lower than Gross
sales growth andwas driven by the decision in dfs
to offer customers extended (48 month) interest
free credit in key promotional periods to increase
affordability and drive conversion and sales in the
weak market environment.
GROSS MARGIN
Gross margin % of revenue improved by 70 basis
points year on year to 56.5%, representing a third
consecutive year of growth and good progress
towards our 58% target whilst maintaining our
value proposition for customers. Gross profit
increased £30.9m year onyear as a result of the
revenue growth and the margin rate improvement.
Gross profit and margin FY24 to FY25:
£m
% of
revenue
FY24 gross profit and margin
550.8 55.8%
Volume 23.0 n/a
Product margin 14.6 1.4%
FX 5.2 0.5%
Freight (11.9) (1.2%)
FY25 gross profit and margin
581.7 56.5%
The increase in sales volume drove an incremental
£23.0m of gross margin year on year.
The gross margin rate improvement resulted from
strong progress on our commercial product
margins in combination with favourable FX.
Together these more than offset the adverse
impact from freight rates linked to the closure
ofthe Red Sea to shipping lines in FY24.
Our product margins improved 140 basis points or
£14.6m through further range optimisation, product
design optimisation and savings from our Cost to
Operate programme which contributed £10.5m to
the growth. The Cost to Operate savings include
the benefit from right sizing our own manufacturing
operations in FY24 and consolidating supply across
our external manufacturing partners, enabling us
to ensure we are sourcing products from the right
partners to optimise quality and reduce cost of goods.
In addition, we improved processes to clear through
cancelled orders and damaged items more efficiently.
We benefited from an FX tailwind in FY25 linked
toan improved USD rate applied to our Far East
purchases. The average USD/GBP rate paid
through the period was 5 cents favourable year
onyear resulting in a £5.2m/50 basis point rate
benefit year on year.
Annual Report and Accounts 2025 DFS Furniture plc22
Strategic Report
FINANCIAL REVIEW CONTINUED
GROSS MARGIN CONTINUED
Freight rates remained elevated over most of the
year and averaged over twice the amount of the
prior year, resulting in a 120 basis point margin rate
reduction. It is worth noting that every $1,000
movement in freight rate per container impacts our
annual freight cost charge by c.£7m–£8m a year.
We are encouraged that our current gross margin
would be at our 58% target if freight rates were
atlong-term average levels and interest rates were
at market consensus expectations of c.3.5%.
OPERATING COSTS
Underlying operating costs include selling and
distribution, administration, depreciation, amortisation
and impairment costs. These totalled £514.7m,
anincrease of £14.1m year on year, representing
apercentage cost of revenue of 50.0% (FY24: 50.7%)
.
The improved ratio is testament to the success of
our Cost to Operate programme which has
mitigated inflationary headwinds.
Underlying operating cost breakdown FY25 vs FY24:
£m FY25 FY24 Total
Selling, distribution
andadmin costs (424.5) (408.8) (15.7)
Depreciation,
amortisation and
impairment (90.2) (91.8) 1.6
Underlying operating
costs (514.7) (500.6) (14.1)
The absolute operating cost increase is primarily
driven by volume related costs which have increased
with the growing revenues of the Group, wage and
NIC inflation, achievement of financial bonus targets,
and discrete investment behind commercial initiatives
like new exclusive brands, tocontinue to position
the business for ongoing growth through the cycle.
These cost increases have been partially offset by
£15.0m of savings through our Cost to Operate
programme and lower depreciation, amortisation
and impairment charges.
In FY24, the business took a more disciplined
approach to capital spend prioritisation in response
to the more challenging market conditions. The
Group continued this approach in FY25, as we
prioritised reducing our debt. This lower recent level
of capital investment is the main driver of the
reduction in depreciation, amortisation and
impairment charges of £1.6m.
Cost to Operate programme
We have had another good year of sustainably
reducing our cost base through our Cost to Operate
programme. This delivered £25.5m of savings in
FY25 bringing cumulative savings to £53.0m,
marking the achievement of our £50m target one
year ahead of expectation.
Cumulative savings from Cost to Operate programme:
£m FY25 FY24 Total
COGS 10.5 4.9 15.4
Operating and property
costs 15.0 22.6 37.6
Total saving 25.5 27.5 53.0
In FY25 we achieved in year cost of goods savings
of £10.5m and £15.0m of operating and property
cost savings.
The operating and property cost savings result
from improving the efficiency of our operations in
our retail and customer service teams, The Sofa
Delivery Company logistics operation and Group
support functions through restructuring to leaner
operating models, improving and streamlining
processes, improved procurement and utilising data
and insightful dashboards to drive operational efficiency.
A lasting outcome of the programme is that there is
a much stronger cost culture embedded within the
business that we will continue to benefit from going
forward and we have line of sight to additional cost
savings that we expect will partially offset future
inflationary headwinds.
Annual Report and Accounts 2025 DFS Furniture plc 23
Strategic Report Corporate Governance Financial Statements Shareholder Information
FINANCIAL REVIEW CONTINUED
FINANCE COSTS
Underlying finance costs of £38.2m (FY24: £41.1m) are lower year on year primarily as a result of utilising
ahigh level of free cash flow generation to reduce our net bank debt. Our average funding cost of c.8% has
remained relatively flat year on year.
Underlying finance costs:
£m FY25 FY24 YoY
Lease interest (24.2) (24.6) 0.4
Debt and other interest (14.0) (16.5) 2.5
Underlying finance costs (38.2) (41.1) 2.9
PROFITS, TAX AND EARNINGS PER SHARE
Underlying profit before tax and brand amortisation
2
was £30.2m, an increase of £19.7m resulting from
thesales growth, gross margin expansion and good cost control. This reflects a strong profit drop through
of 46% of the year on year revenue increase and highlights the operational leverage in the business.
Reported profit before tax increased from a loss of £1.7m in FY24 to a profit of £32.9m in FY25.
Theyearon year growth is higher than the underlying profit increase due to the recognition of a
nonunderlying credit in FY25 and a non underlying charge in FY24, as detailed below.
Underlying profit before tax and brand amortisation to reported profit before tax reconciliation:
FY25 FY24 YoY
Underlying profit beforetax and brand amortisation 30.2 10.5 19.7
Brand amortisation (1.4) (1.4) —
Non-underlying charges 4.1 (10.8) 14.9
Reported profit beforetax 32.9 (1.7) 34.6
Non-underlying items
In FY25 a £4.1m non-underlying credit was recognised and in FY24 a non-underlying £10.8m charge was realised
.
Non-underlying items breakdown:
FY25 FY24
Credit/(Cost)
Income
statement Cash
Income
statement Cash
Fair value lease adjustment 4.7 n/a n/a n/a
Restructuring costs (0.7) (0.7) (6.5) (4.1)
Land slippage costs (0.5) — (3.1) (0.2)
Release of lease guarantee 0.6 n/a 0.7 n/a
Refinancing costs n/a n/a (1.9) (0.8)
4.1 (0.7) (10.8) (5.1)
The FY25 credit has arisen from the release of acquisition-related fair value lease adjustments (£4.7m)
relating to properties where the rent has since been renegotiated and now represents a market rate, and
a£0.6m credit in relation to a non-cash lease guarantee provision release associated with former subsidiary
companies (FY24: £0.7m credit). The fair value lease adjustment relates to negotiations that took place in
previous periods, and should have been recorded at the time of the negotiation, but as it is not material to
those individual previously reported periods it has been corrected in the current period. These credits were
partially offset by £0.7m of restructuring costs associated with the Cost to Operate programme (FY24: £6.5m)
and a £0.5m increase in the anticipated cost to remediate land slippage identified in FY24 at one ofour
manufacturing sites (FY24: £3.1m).
Tax
The tax charge recognised in the financial statements is £8.7m (FY24 £3.0m) and the effective tax
rateof26.4% is 1.4% higher than the statutory rate of 25.0% due to disallowable depreciation
onnon-qualifying assets.
The Group updates its Tax Strategy Statement each year, which is published on the Group’s website, in
compliance with its duty under the Finance Act 2016, which sets out details of the Group’s attitude to tax
planning and tax risk.
EPS
Underlying basic earnings per share was 9.2 pence (FY24: 1.5 pence) and basic earnings per share
was10.5pence (FY24: loss of 1.9 pence). There was no material change in the weighted average number
ofshares in issue.
Annual Report and Accounts 2025 DFS Furniture plc24
Strategic Report
Our strong free cash flow generation has been
supported by our disciplined approach to capital
investment with cash capital expenditure levels
well below historical levels. Maintenance capital
has been maintained at our historical level of
c.1.5%-2.0% of sales and growth investment has
been focused on lower risk, short payback projects.
InFY25 expenditure focused on showroom
enhancements to showcase new exclusive ranges
such as Ted Baker and La-Z-Boy in dfs and creation
of additional selling space through installation of
mezzanines in some showrooms. We continue to
invest in technology and data to ensure our front
and mid office systems are supporting both a great
customer experience and efficient operations as
noted in the CEO statement.
We expect to incur relatively low levels of capital
expenditure, up slightly year on year to £24m–£28m
reflecting at least one new Sofology showroom
and additional showroom refurbishments.
Interest costs reduced £4.4m to £14.0m reflecting
lower average levels of net bank debt in the period
and non-recurrence of refinancing costs in FY24.
Corporation tax payments of £3.7m were low
relative to our profit performance due to utilisation
of historical overpayments.
Lease liability payments reduced by £3.7m. The
prior year was impacted by additional payments
falling into the longer 53 week accounting period.
The majority of our sales are made to order and as
such we operate with a negative working capital
model with customer deposits and final payments
occurring before payments fall due to our suppliers.
The improved trading performance in the final
quarter along with one fewer VAT payments
(reversing the adverse impact in the 53 week FY24
period) has resulted in a total working capital inflow
of £24.9m.
Finally, total cash flow for the year is supported
bynot making a dividend payment, having not
declared a final dividend in respect of FY24 or
aninterim dividend in respect of FY25.
FINANCIAL REVIEW CONTINUED
CASH FLOW, NET DEBT, RETURN ONCAPITAL AND DEBT FACILITIES
Free cash flow generated in FY25 was £57.8m, an increase of £82.3m year on year driven by stronger
trading and working capital inflows, lower interest and lower non underlying charges.
Summary cash flow and net bank debt FY25 vs FY24:
£m FY25 FY24 YoY
Underlying EBITDA
1
157.2 142.0 15.2
Capital expenditure (20.9) (21.6) 0.7
Interest (14.0) (18.4) 4.4
Tax (3.7) (3.0) (0.7)
Principal and interest paid on lease liabilities (88.7) (92.4) 3.7
Working capital 24.9 (17.8) 42.7
Other
2
3.7 1.2 2.5
Underlying free cash flow 58.5 (10.0) 68.5
Non-underlying items (0.7) (5.1) 4.4
Free cash flow 57.8 (15.1) 72.9
Shareholder returns — (9.4) 9.4
Free cash flow after shareholder returns 57.8 (24.5) 82.3
Closing net bank debt (107.0) (164.8) 57.8
1. Underlying operating profit before depreciation, amortisation and impairment.
2. Other of £3.7m for FY25 and £1.2m for FY24 includes losses/gains on disposal of assets, FX revaluations, share based
payments expense and adjustment for non-underlying P&L charge/credit.
Return on capital employed
Our return on capital employed (ROCE) of 16.3%
has increased from 10.8% in FY24. This increase
was driven by a combination of higher profit
performance and reduced capital employed
resulting from a lower tangible asset and right
ofuse asset base. Weexpect returns to continue
growing over the medium term supported firstly
byimproved profitability from growing our market
share, improving our gross profit margin and
maintaining a disciplined focus on costs and
secondlyournegative working capital model.
Debt facilities and banking covenants
At the end of the year the Group had in place
£250m of debt facilities comprising a £200m
unsecured revolving credit facility (‘RCF’) and
£50m of US private placement notes. A 16 month
extension to the RCF was agreed in December
2024 with a maturity date of January 2029. The
Group’s existing debt facilities have a staggered
maturing profile as follows: £250m is available
until September 2027 reducing to £225m until
September 2028, £200m until January 2029 and
£25m until September 2030. We expect these
facilities to provide sufficient liquidity and a solid
foundation for the future.
The debt facilities are subject to half yearly
covenant tests of 3.0x maximum leverage
3
(net
debt/EBITDA) and 1.5x minimum fixed charge
cover
3
(both measured on an IAS 17 basis).
In September 2024 we agreed temporarily widened
covenants
4
with our lenders to provide additional
headroom in the event of an unanticipated market
downside scenario. These have not been utilised
and we have remained comfortably within the
covenants applicable to the standard terms
throughout the financial year. Our bank leverage
has reduced from 2.5x last year to 1.4xand our
fixed charge cover also improved significantly,
bothfalling well within the ongoing standard
covenant limits.
Annual Report and Accounts 2025 DFS Furniture plc 25
Strategic Report Corporate Governance Financial Statements Shareholder Information
CAPITAL ALLOCATION AND DIVIDENDS
The Group’s capital allocation priorities are for the Group to operate with net debt levels (excluding capitalised
lease obligations) of between 0.5x–1.0x of trailing 12 month EBITDA, to invest to maintain the Group’s
asset base and support future growth, to pay ordinary dividends with a dividend cover of 2.25x–2.75x
earnings per share and to make special returns when leverage is expected to fall below the lower end
ofthe leverage target range.
While our financial position has strengthened due to improved profit performance and disciplined cash
management, our current leverage remains outside our target range of 0.5x–1.0x. Given the continuing
economic uncertainty, the Board has determined that to build further balance sheet resilience the focus
should be on further reducing net debt and has therefore concluded that it would not be appropriate to
propose a final dividend. We will continue to maintain strong capital discipline to bring our leverage into
our target range.
The Board remains committed to returning to the dividend register and providing sustainable
shareholder
returns. A decision will be made in March 2026 on the payment of a FY26 interim dividend based on profit
and leverageoutturn expectations for the full year and the future outlook for the business.
Capital allocation Framework FY25 commentary
Leverage
(excluding
property leases)
0.5x – 1.0x
•
Expect to continue operating outside the Group’s
target leverage range in the near-term
•
Making progress towards reducing the ratio
anddeleveraging remains a high priority
Organic
investment
Strategic organic capital
investment to deliver
attractive returns
•
Our maintenance capital requirements currently
represent c.1.5%-2.0% of revenue
•
In the near-term expect to continue to incur
prudentlevels of capital expenditure, up from the
verylow levels of the last 24 months to
£24m-£28m to pursuegrowth opportunities where
the risk adjusted returns are attractive
Dividend Dividend payout ratio
of2.25x– 2.75x
•
No FY25 dividend
•
A decision will be made on the payment of a FY26
interim dividend based on expected profit and
leverage outturn for the full year and future outlook
Supplementary
shareholder
returns
When the Group is operating
below its target leverage, it
will consider special dividends
/ buybacks
•
No supplementary returns expected given the
Group will be operating above its target leverage
ratio in the short term
1. Proprietary banking data covering 13 specialist
upholstery retailers.
2. Refer to pages 26 and 27 for APM definitions.
3. Bank leverage calculated as net debt divided by last
12months EBITDA. Net debt is net bank debt plus a
proportion of finance leased assets. Fixed charge cover
is calculated as last 12 months EBITDARent divided by
rent + interest.
4. The widened leverage covenant is 3.7x at FY25 period
end before returning to 3.0x at H1 FY26 and the
widened fixed charge cover covenant is 1.3x at FY25
period end and 1.4x at H1 FY26, before returning to
1.5x at FY26 period end.
LOOKING FORWARD
The Group’s performance and position have
improved significantly in FY25 reflecting the
strength of our strategic execution.
Given demand drivers for our sector are delicately
balanced, as referenced in the CEO statement,
wecontinue to plan prudently with a focus on
generating increased profits through the strength
of our commercial initiatives and ongoing cost
discipline and building balance sheet resilience
through strong cash management.
Looking further ahead we remain confident about
the Group’s prospects and achieving our medium-
term targets.
Marie Wall
Interim Chief Financial Officer
25 September 2025
FINANCIAL REVIEW CONTINUED
Annual Report and Accounts 2025 DFS Furniture plc26
Strategic Report
ALTERNATIVE PERFORMANCE MEASURES
In reporting the Group’s financial
performance, the Directors make
use of a number of alternative
performance measures (‘APMs’) in
addition to those defined or specified
under UK-adopted International
Financial Reporting Standards (‘IFRS’).
APMs are not IFRS measures, nor are
they intended to be a substitute for
IFRS measures.
The Directors consider that these APMs provide
useful additional information to support understanding
of underlying trends and business performance.
Inparticular, APMs enhance the comparability of
information between reporting periods by adjusting
for non-underlying items. APMs are therefore used
by the Group’s Directors and management for
internal performance analysis, planning and
incentive setting purposes in addition to external
communication of the Group’s financial results.
In order to facilitate understanding of the APMs
used by the Group, and their relationship to reported
IFRS measures, definitions and numerical
reconciliations are set out below.
Definitions of APMs may vary from business to
business and accordingly the Group’s APMs may
not be directly comparable to similar APMs
reported by other entities.
APM GLOSSARY AND DEFINITIONS
APM Definition Rationale
Gross sales Amounts payable by external customers for goods and services
supplied by the Group, including the cost of interest free credit
and aftercare services (for which the Group acts as an agent),
delivery charges and value added and other sales taxes. See
note 2 to the financial statements for a reconciliation from gross
sales to revenue.
Key measure of overall sales performance which unlike IFRS
revenue is not affected by the extent to which customers take
upthe Group’s interest free credit offering.
Brand contribution Gross profit less selling and distribution costs,
excludingproperty and administration costs.
Measure of brand-controllable profit as it excludes shared
Groupcosts.
Adjusted EBITDA Earnings before interest, taxation, depreciation
andamortisationadjusted to exclude impairments.
A commonly used profit measure.
Non-underlying items Items that are material in size, unusual or non-recurring in
nature which the Directors believe are not indicative of the
Group’s underlying business performance.
Clear and separate identification of such items facilitates
understanding of underlying trading performance.
Underlying EBITDA Earnings before interest, taxation, depreciation and amortisation
from continuing operations, adjusted to exclude impairments
and non-underlying items.
Profit measure reflecting underlying trading performance.
Underlying profit before
taxand brand amortisation
uPBT(A)
Profit before tax from continuing operations adjusted for
non-underlying items and amortisation associated with
theacquired brands of Sofology and Dwell.
Profit measure widely used by investors and analysts.
Underlying earnings per
share
Post-tax earnings per share from continuing operations
asadjusted for non-underlying items.
Exclusion of non-underlying items facilitates year on year
comparisons of the key investor measure of earnings per share.
Net bank debt Balance drawn down on interest-bearing loans, with
unamortised issue costs added back, less cash and cash
equivalents (including bank overdrafts).
Measure of the Group’s cash indebtedness which supports
assessment of available liquidity and cash flow generation
inthereporting period.
Cash EBITDA Net cash from operating activities before tax, less movements
on working capital and provisions balances and payments made
under lease obligations, adding back non-underlying items
before tax.
Measure of the non-underlying operating cash generation of
thebusiness, normalised to reflect timing differences in working
capital movements.
Free cash flow The movement in cash and cash equivalents, excluding the
impact of drawdowns/repayments of financing arrangements,
dividends and the cost of purchasing own shares.
Measure of the cash return generated in the period and
akeyfinancial target for Executive Director remuneration.
Leverage (gearing) The ratio of period end net bank debt to cash EBITDA
fortheprevious twelve months.
Key measure which indicates the relative level of borrowing to
operating cash generation, widely used by investors and analysts.
Underlying return on capital
employed (underlying ROCE)
Underlying post-tax operating profit from continuing activities,
expressed as a percentage of the sum of: property, plant and
equipment, computer software, right of use assets and
workingcapital.
Represents the post-tax return the Group achieves
ontheinvestment it has made in its business.