Hot weather impacts DFS in fourth quarter

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Continuing the trend indicated in our half-year results in March, the Group saw year-on-year positive like-for-like order intake momentum, ahead of our expectations, across the third quarter of the financial year.  However in the fourth quarter to date, exceptionally hot weather, including over key trading weekends, has led to significantly lower than expected order intake.  Over the period we have also experienced disruption outside of our control to ships bringing made-to-order products from the Far East.  Within the core DFS business, total LFL delivered revenues has therefore been c.3% lower than last year, over the 23 weeks to 7 July 2018, and c. 4% lower over the 49 weeks to 7 July 2018.

Variable cost flexibility and reductions to discretionary costs, have provided some mitigation to this recent trading environment, however we currently anticipate reporting EBITDA for the full financial year below the prior year (FY17 £82.4m), and this will reflect the timing of the arrival of products from the Far East before the financial year end.

Outlook

We continue to expect that the furniture retail market will remain challenging over the next twelve months, given ongoing reduced consumer confidence levels, although we would expect some alleviation of current short-term demand effects.

Our previous investments in our supply chain and the recent acquisition of Sofology, together with progress expected at Dwell and Sofa Workshop will provide benefits to earnings that we expect to help mitigate the challenging sales environment.  The Group has historically capitalised on adverse trading conditions to build our market position and we continue to believe that our cash generation and long-term growth prospects will drive attractive returns for our shareholders.