DFS looks to cost savings after Sofology deal
DFS expects to make £4m of immediate cost savings following its acquisition of fellow upholstery retailer Sofology.
The chain has agreed to pay £25m for its 37 store rival, with an additional payment based on profits in the following year.
Jason Tyldesley, Sofology ceo and the Sofology management team will continue to run the business, which will be independent in customer facing activities.
DFS expects to make immediate savings in the purchasing of advertising, interest-free-credit, upholstery and other services. ‘Further earnings opportunities will be available in the medium to long-term through revenue synergies and also better utilisation of both companies' warehouse facilities and delivery fleets, with the potential for the enlarged group to benefit from tighter delivery radials and thus increased van loads, in line with approach taken with Sofa Workshop. No store closures will occur as a result of the acquisition and the store opening programmes of both DFS and Sofology will continue given the proven ability of the two brand fascias to trade successfully alongside each other in multiple locations’, it said.
Sofology increased sales by 5% in the six months to 30 June. In 2016 it had sales of £143m but had a pre-tax loss of £8.9m and an EBITDA loss of £2.7m as it rebranded from CSL. This compared to an EBITDA profit of £2.9m in 2015.
DFS also said it had refinanced its borrowings which will save it £1m a year.
‘While the UK furniture retail market continues to be very challenging, we remain focused on making strategic progress to strengthen our position in living room furniture. This acquisition represents a clear opportunity for DFS to accelerate our proven strategy of broadening our appeal, generating substantial long-term returns for shareholders underpinned by well-understood synergies. Sofology's distinctive market position is a good fit with our existing brands. Jason and his team should be congratulated for creating a fantastic and fast-growing business and I'm looking forward to working with Jason and the team as they continue to grow Sofology as part of the group,’ said Ian Filby, DFS ceo.