Dunelm Group plc

Hi there, hello and good morning and welcome to the Dunelm Interims presentation covering the first half of our financial year. My name is Nick Wilkinson and Karen Witts and I are here and delighted to welcome you to the offices of Peel Hunt in London. Whether you're here in person or joining virtually, I hope you're well and feel connected to us and to the continuing story of Dunelm. Into that story, please welcome Alison Britton. our chair since January, a customer for much longer. Alison spent the last six months getting to know the business and its colleagues, and it's a great pleasure to have you in the Dunelm team, Alison. Those of you who were here 17 years ago for the IPO Roadshows may recall that we had some product samples that we shared at that time. And today in the room we have some more samples, this time of our most circular product range yet. These summer weight throws are made using Second Life textiles, including those that our customers have placed into our very own in-store take-back scheme earlier in the year. Please do take one home. When they are launched later this month, you can post a review online, and I hope you enjoy using them in your gardens this summer. At heart, we're a product company. So before we get into the financial highlights, I thought that for once we'd do something different, and we would start with a short video of our latest product introductions. This was filmed in Somerset House, an event we held for press and influencers in November, and you'll be shown around by our design director, Debbie Drake.

Welcome everybody to the beautiful setting of Somerset House here in the middle of London for our Spring Summer Product Showcase at Dunelm. So we're in our Natural History Museum collection room now. This is the third season of our Natural History Museum collaboration. And this, as you might know, every season we sort of focus on a particular environment or habitat to sort of highlight the environmental struggles that that habitat are going through. a collection called Shore, which is about the British shoreline and focusing on shoreline erosion, sea kelps and fossils. This is my absolute favourite piece from the collection. The ammonite lamp. I really love it. It's just a beautiful objet, but it's also a beautiful lamp and I think that's going to do really well for us. And then over here is the other half of our sort of seaside collection. Now this is called Reef. People come to us and they like to buy something that actually makes them smile. So a few more of those with the octopus, the little spectacle holder, and then some of the ornaments and vases that are like things that you would find in the coral reef. We're nipped through into our furniture gallery. Now, the main purpose of this display is to really raise awareness with everybody that we actually do furniture and how serious we are about it. And I think we're getting a lot of interest from people, a lot of questions, and they're amazed at the sort of breadth and scope of the range we've got because there's still furniture at good, better, and best. We've got every price tier and every customer style covered. made to measure collection where we're showcasing our shutters which is a new addition to our range. All of our 40 paint colours that you can see here They're all available in our shutters at no extra cost. So even though they might not buy a jazzy colour, the fact that we've got that choice I think is really appealing to customers. And I hear that we have started to sell some colours and navy blue being a favourite at the moment and sage green. So the beauty of Dunelm is that whatever your budget, there's a way of co-operating. coordinating your home interior collection. So you can buy into shutters, you can buy into made-to-measure curtains, or ready-made curtains, or made-to-measure upholstery, or paint, or wallpaper, or any of the other home accessory products that we sell, and they all coordinate with each other. So that's a real USP for Dunelm. So we've really got every base cupboard, every customer style, every price point, everything you really want for your home. And it's getting a really fantastic response from the visitors here.

Great. Thanks, Debbie. Thanks for watching. I know some of you managed to attend that event and we'll do some more in the future if you missed it. I hope you enjoyed the video. Of course, there's more to our plans than product, but it all does begin with product. So here's the running order for this morning. I'll get us started. Karen will then take you through the first half financials and show you how we're navigating the current economic climate. Then I'll be back to talk about our plans for growth and for seizing the opportunities which we see ahead of us. So onwards. Financial highlights. A strong first half in a period of low consumer confidence and up against tough comparables from the prior year. We're pleased, really pleased with performance. A particularly strong Q2 for sales, good gross margin and excellent operating cost ratios throughout the half resulting in profit before tax of £170 million and high free cash flow conversion. Another standout is the strong market share performance, which is a calendar year number. We've announced an interim dividend and a special today of 55 pence in total per share. We'll share more details with you to help you understand the moving parts, but in essence, what we think happened is pretty simple. Firstly, we grew. What we're seeing is consumers working hard to find ways to balance their budgets. They want to be smart and savvy. They don't want to waste the money. They want to feel in control. How they do that is very personal to them, their preferences and their circumstances. Into this market, we've been able to offer a wide choice of relevant products, outstanding value at all quality tiers, and we've strove to be communicating as an ally, helping customers find what's right for them and not putting them under undue pressure. In the picture, some examples, warmer weight bedding and door curtains to save on home heating, batch cooking and food storage to save on waste, gifts and treats that are practical, from onesies to hot water bottles. Products that make homes feel cosier like rugs and lighting. We're still selling winter warm products now as we come into spring to help people save on outdoor heating or get into the garden this weekend. But that's in addition to our normal spring and summer collections and campaigns. As a result of all of this, we've continued to see growth in terms of our customer runway. So more active customers and increased shopping frequency. And on the right, you can see almost 6% growth year on year in the last 12 months for active customers with shopping frequency also growing by about 5%. So if that's how we grew, we were also resilient. We often talk about operational grip as being one of the drivers of our performance, and that's never been more true. Obviously, the big challenge we faced into has been how best to manage inflation while offering outstanding value to our customers at a time when they need it most. It's detailed work, but we keep it simple with clear frameworks like our good, better, best tiers. Being simple allows us to put our energy into innovation and adapting quickly. Innovation adapting is fun, and it turns a challenge into an opportunity. Of course, it's easier to have fun when you feel that your operating model is a strong one. Our brand has broad appeal, and our audience of home lovers is engaged in our content even when they need to budget carefully. Added to this, our product offer is largely own-brand and exclusive, and we cherish our long-standing supplier relationships. And in the half when both our stores and our digital channels perform well, we benefit now from not just a low-cost store portfolio, but a cost-effective total retail system. But of all the factors behind our resilience, the greatest is the quality of my colleagues and our shared values. And whilst as a company we do many good things to support our colleagues' financial well-being, our colleagues do even more to help the communities in which they work. Our Delivering Joy campaign supported over 500 local causes this Christmas, and this work builds our brand, and it makes us stronger and therefore more resilient as an organisation. For this and for all the other great work they do, thank you to my Dunham colleagues. Our good performance is testament to their hard work, commitment and resilience. And now to give you more insight into our performance, I'm delighted to hand over to Karen.