DFS shares jumped on Tuesday after reporting a boost in profit for the six months to December, raising the possibility it could restore payouts.
The sofa company reported underlying pre-tax profit and brand amortisation is expected to be between £30million and £31million in the first half of the year, a year-on-year increase of £13-14million.
Gross sales increased by 8.7 per cent year-on-year despite an unpredictable macroeconomic and consumer outlook.
Higher profits were matched by an increase in cash flow, with net bank debt falling from £107million to £60-61million.
Shares in DFS rose by 7.1 per cent and are up 12 per cent year-to-date, as it upgraded its full year profit expectations. Peel Hunt upgraded its target price to 250p hailing ‘sector-beating growth’.
DFS upgraded its full year profit expectations raising hopes of a dividend payout in 2026
Chief executive Tim Stacey said: ‘We have continued to make good progress growing our gross margins and managing our cost base effectively.
‘As a result, I am pleased to report an upgrade to our full year profit expectations following a strong first half performance.
‘I am confident that the business is well positioned to continue delivering against our strategy and we remain committed to achieving our medium term targets of £1.4billion revenue and 8 per cent PBT margin and delivering attractive return for our shareholders as the market recovers.’
Shore Cap analysts said the results show a ‘continuation of the positive momentum at DFS’ with market share of 39 per cent at year-end.
‘The high drop densities offered by the position, combined with the fact that DFS runs its own deliveries through its Sofa Delivery Company subsidiary, allows DFS to keep delivery costs relatively and makes it harder for others to effectively compete’.
A strong performance over the first half will galvanise investors looking for DFS to resume dividend payouts, which was last paid in May 2024.
AJ Bell’s investment director Russ Mould said: ‘Many companies hit by the pandemic are still lumbered with onerous borrowings, but DFS is well on way to wiping out its debts and investors may now be looking to the restoration of a dividend’.
‘Having navigated its way through tough conditions, DFS will also hope the signs of life in the UK property market seen at the start of 2026 continue.
‘A higher number of transactions should stoke demand as people look to spruce up their new homes with a sofa of their choice.’
DFS also announced the appointment of a new chief financial officer, Dominique Highfield who joins from Bloom and Wild.
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