Dunelm Group PLC (LON:DNLM) drew back the curtains on strong trading in the new financial year and announced a special dividend alongside its final results.
The homewares retailer will pay a final dividend of 20.5p, meaning the full-year ordinary dividend will have increased 6% year-on-year to 28p, and unveiled a plump special dividend of 32p for October.
Analysts and investors had expected a special payout but the timing had not been certain.
Numbers for the 52 weeks to 29 June had already been well flagged, with profit before tax rising 35% to £125.9mln and earnings per share 38% to 50.2p as revenue rose 5% to £1.1bn.
Free cash flow nearly tripled to £154.4mln and net debt slashed almost fivefold to £25.3mln.
Opposing forces in year ahead
With capital investment anticipated at around £30mln in the new financial year, analysts at Peel Hunt said they believe the special dividend “can be repeated”.
Chief executive Nick Wilkinson said: “Recent trading performance has continued to be strong, reflecting both weak comparatives in the prior year and continued market share growth.
“However, we remain cautious about the full year outlook due to increased Brexit uncertainty and specifically the impact it may have on consumer spending as we enter our peak period.”
Indeed, Peel Hunt said the “key question” was whether management can keep up the momentum after a strong year.
Analysts at UBS said the recent trading is against a weak comparative period a year ago but helped by market share gains.
Looking ahead, the analysts said Dunelm faces a “tough comp” but believe 5% like-for-like growth is achievable for the year, given "(1) the launch of a new web platform (which should drive higher conversion rates); (2) benefits from digital investments including click & collect; (3) range extensions including 6k new online [items on top of around 60,000 currently]; (4) share gains from capacity exits”.
“Offsetting this, the impending Brexit process could see LFL weakness. A low average basket (under £40) offers some protection however in Jun '16 following the UK's decision to leave the EU, Dunelm's LFL fell to -4% in the 3 months to Oct '16.”
Dunelm shares were down 9% to 801.94p by late morning on Wednesday.
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