DFS Furniture PLC

United Kingdom-based DFS Furniture PLC (LON: DFS) is the Home Improvement Retailer company which manufactures, designs and distributes living room and upholstered furniture products since 1969.

On 9^th July 2020, the company will announce its period end trading statement.

Recent News
On 20^th April 2020,the company announced an update, which shows a press comment about the group considering its options with regard to further financing. On 25th March 2020, the company has temporarily shut down all its showrooms, manufacturing and distribution operations post-government announcement on 23 March 2020 to curb coronavirus outbreak. The business confirmed that it is in the advanced stages of negotiating an additional debt facility in the range of £60 million-£70 million with its current lending banks, to supplement the existing £250 million of bank facility. DFS Furniture’s websites have continued to see strong momentum and stayed operational, with an increase of 20.2% in dfs.co.uk online gross sales over the period from 25^th March 2020 to 17^th April 2020. The Group's order banks increased to around £192 million from around £185 million.

Financial Performance for the 26 weeks ended 29 December 2019

(Source: Interim Reports, Company Website)

In H1 FY20 results (ended on 29th December 2019), the group revenue has declined by 5.7% to GBP 488.0 million, primarily influenced by challenging market conditions and political uncertainty, impacting the consumer confidence and footfall. Total Group pro forma revenue was up by 2.6% over a two-year period. Sofa Workshop performance weaker than anticipated. Net debt broadly flat but leverage increased due to profit decline. Interim dividend maintained at 3.7 pence.

Share Price Performance
 
Daily Chart as of April 20th, 2020, after the market closed (Source: Thomson Reuters)

On April 20, 2020, DFS Furniture PLC shares closed at GBX 145, up by 10.86% against the previous day closing price. Stock's 52 weeks High is GBX 302, and 52 weeks Low is GBX 101.80.

Valuation Methodology


Key Risks
However, there are some principal risks and uncertainties, which could impact the overall business of the company. Decline in market demand for the company’s products could affect the revenue of the company. The Group operates in a competitive market, excessive competition could affect the Group’s revenue and profitability. Brexit uncertainty could hamper the operations of the company. The continuing uncertainty presented by the coronavirus (COVID-19) outbreak.

Conclusion
Presently, the company’s mitigated operating cash outflow is projected to be less than £14 million per month until the DFS’s showrooms, manufacturing and distribution operations re-open. Going forward, the store closures and lockdown scenario amid Covid-19 contagion would further affect the financials in H2 FY20 and eventually full-year results. The supply chain issues would keep impacting the company at least in the short run. In such an environment, financial implications would be coupled with liquidity crunch and fluctuating exchange rates. However, the company is focusing on expanding its growing Sofology business since this division shown growth despite the challenging conditions. Besides, short term uncertainties, the management is confident about the financial strength and upcoming strategies to tap the long-term future opportunities. In the longer term, when the trading environment normalises, the management is confident that the company can navigate the unprecedented crisis created by COVID-19 and deliver its strategy over the longer term.

Based on the factors highlighted above, we recommend investors to keep a “Watch” on the stock at the closing price of GBX 145 (as on 20^th April 2020), with support from new catalysts to be evaluated at a later stage. 

Premier Foods PLC

Premier Foods PLC (LON: PFD) is a Great British food company. The company’s operation is differentiated into three segments, include Grocery, Sweet Treats and International.

On 14^th May 2020, the company will release its preliminary results for the 52 weeks ending 28th March 2020.

Update on Quarter 4 and Full-year Trading (as on 20^th April 2020)
The Board expects to deliver trading profit at the top end of expectations for FY20. Net debt/EBITDA will be comfortably lower than 3.0x at the end of March 2020. The extensive strategic review concluded with a landmark pensions agreement which expects to significantly improve the Group’s long-standing pension funding situation and provide a more secure future to Premier Foods’ schemes by leveraging the strength of RHM scheme. Currently, the company experiencing high levels of demand for its Grocery products due to COVID-19 impacts, with contingency planning and protocols in place across the supply chain. A segregated merger of RHM, Premier Grocery and Premier Foods Products pension schemes, under ‘One Trust’.The company expected a substantial decrease in future pension deficit contributions.  Landmark agreement subject to signed legal documentation in place with all parties, including MAC clause and targeting implementation by June 2020. Net Present Value of deficit contribution schedule could reduce from £300-320m.

From the perspective of Q4 Trading, the company saw a sharp increase in demand in March 2020 due to COVID-19 impact on consumer buying. Q4 Group sales expected to be up by 3.6% and up by 7.3% in the UK. In March 2020, group sales increased by 10.5% and ahead 15.1% in the UK. Foodservice and B2B division had been softer.

During COVID-19, the group’s priority is wellbeing and health of the colleagues and other shareholders.A wide range of additional health, safety and hygiene protocols adopted across the supply chain. Manufacturing and logistics operations have remained fully operational and currently operating at maximum capacity across almost all sites.

Share Price Performance
 
Daily Chart as of April 20th, 2020, after the market closed (Source: Thomson Reuters)

On April 20, 2020, Premier Foods PLC shares closed at GBX 42.20, up by 29.05% against the previous day closing price. Stock's 52 weeks High is GBX 45.90, and 52 weeks Low is GBX 17.86.

Key Risks
The supply of the foods is limited, due to the lockdown of cities. This will impact the company’s financial performance in the fourth quarter of 2020. Fluctuation in the price and availability of raw materials, packaging materials and freight can impact the cost base and margin of the group, the threat of which has substantially risen in recent times due to various macropolitical headwinds.

Conclusion
March saw a sharp peak in volumes throughout the month, reflecting consumer panic buying.The company is expecting to see volumes in FY20/21 Q1 lower than seen in March but higher than usual levels of demand reflecting increased levels of eating in-home by consumers. Also expecting softer Foodservice and B2B volumes in FY20/21 Quarter 1.The Group is also focusing on expanding its international footprint. However, conditions in UK markets have remained challenging, which impacted the volumes and margins for the company.

Unfavourable weather conditions led to a decline in its performance.There are certain orders in the pipeline, which was expected to benefit the growth rate of the company’s business. Being a food producers’ company, Premier Foods needs to invest heavily in innovation and system maintenance and, any failure to do so will impact the brand royalty and may affect the company’s financial performance. Moreover, the company is trading near a 52-week high, raising doubts at its upside potential at current prices.

Based on the factors as highlighted above, we recommend investors to keep a “Watch” on the stock at the closing price of GBX 42.20 (as on 20th April 2020), with support from few catalysts needs to be evaluated at a later stage.
 
*All forecasted figures and Peers information has been taken from Thomson Reuters.

Disclaimer

PLEASE BE ADVISED THAT YOUR CONTINUED USE OF THIS SITE OR THE INFORMATION PROVIDED HEREIN SHALL INDICATE YOUR CONSENT AND AGREEMENT TO THESE TERMS.
References to ‘Kalkine’, ‘we’, ‘our’ and ‘us’ refer to Kalkine Limited.
This website is a service of Kalkine Limited. Kalkine Limited is a private limited company, incorporated in England and Wales with registration number 07903332.
The article has been prepared for informational purposes only and is not intended to be used as a complete source of information on any particular company. Kalkine is not responsible for material posted on this website and does not guarantee the content, accuracy, or use of the content in this site. No advice or information, whether oral or written, obtained by you from Kalkine or through or from the service shall create any warranty not expressly stated.
Kalkine do not offer financial advice based upon your personal financial situation or goals, and we shall NOT be held liable for any investment or trading losses you may incur by using the opinions expressed in our publications, market updates, news alerts and corporate profiles. Kalkine does not in any way endorse or recommend individuals, products or services that may be discussed on this site. You should discuss your portfolios and the risk tolerance level appropriate for your personal financial situation, with a professional licensed financial planner and adviser.