Dunelm Group EBITDA surged on 21.7% while Revenue decreased on 3.9%

10 Sep 2020 • About Dunelm Group ($DNLM) • By InTwits

Dunelm Group reported FY2020 financial results today. Overall the company's long term financial model is characterised by the following facts:

Dunelm Group has low CAPEX intensity: 5 year average CAPEX/Revenue was 2.9%. At the same time it's in pair with industry average of 2.4%
CAPEX is quite volatile: £21m in FY2020, £12m in FY2019, £34m in FY2018, £47m in FY2017, £30m in FY2016
The company has highly profitable business model: ROIC is 27.9%
It operates with medium-size leverage: Net Debt/EBITDA is 1.4x while industry average is 1.2x

Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.

Revenue and profitability

The company's Revenue decreased on 3.9%. During the last 5 years Revenue growth topped in FY2018 at 9.9% and was decelerating since that time. Revenue decline happened at the same time with EBITDA margin expansion. EBITDA Margin increased on 3.9 pp from 14.5% to 18.4% in FY2020. During the last 5 years EBITDA Margin bottomed in FY2018 at 12.3% and was growing since that time.

Gross Margin increased slightly on 0.74 pp from 49.6% to 50.3% in FY2020. During the last 5 years Gross Margin bottomed in FY2018 at 48.0% and was growing since that time. SG&A as a % of Revenue increased slightly on 1.3 pp from 38.0% to 39.4% in FY2020. SG&A as a % of Revenue followed a growing trend at 0.93 pp per annum in FY2016-FY2020.

Net Income margin decreased slightly on 0.92 pp from 9.2% to 8.3% in FY2020.

Investments (CAPEX, working capital and M&A)

Dunelm Group's CAPEX/Revenue was 1.9% in FY2020. CAPEX/Revenue decreased on 2.9 pp from 4.9% in FY2017 to 1.9% in FY2020. Average CAPEX/Revenue for the last three years was 2.1%.

Return on investment

The company operates at high and attractive ROIC (27.9%) and ROE (48.8%). ROIC dropped on 19.5 pp from 47.5% to 27.9% in FY2020. ROE dropped on 14.4 pp from 63.2% to 48.8% in FY2020. ROE stuck to a declining trend at -10.9 pp per annum in FY2016-FY2020.

Leverage (Debt)

Company's Net Debt / EBITDA is 1.4x and Debt / EBITDA is 1.8x. Net Debt / EBITDA jumped on 1.2x from 0.2x to 1.4x in FY2020. Debt surged on 710% while cash jumped on 374%.

Dunelm Group has no short term refinancing risk: cash is higher than short term debt (187.5%).

Valuation and dividends

Dunelm Group's trades at EV/EBITDA 15.6x and P/E 31.4x.

Management team

Dunelm Group's CEO is Nick Wilkinson. Nick Wilkinson has 3 years tenure with the company. The company's CFO is Laura Carr. Laura Carr has 2 years tenure at the company.

Financial and operational results

FY ended 27 Jun 2020

Dunelm Group ($DNLM) key annual financial indicators

mln. £	2016	2017	2018	2019	2020	2020/2019
P&L
Revenue	881	956	1,050	1,100	1,058	-3.9%
Gross Profit	439	467	504	546	532	-2.4%
SG&A	309	356	399	419	416	-0.5%
EBITDA	153	121	129	160	194	21.7%
Net Income	102	73	73	101	88	-13.4%
Balance Sheet
Cash	15	17	15	19	90	373.7%
Short Term Debt	0	0	0	0	48
Long Term Debt	94	140	139	44	311	602.0%
Cash flow
Capex	30	47	34	12	21	70.8%
Ratios
Revenue growth	5.4%	8.5%	9.9%	4.8%	-3.9%
EBITDA growth	6.8%	-20.7%	6.7%	23.4%	21.7%

Gross Margin	49.8%	48.9%	48.0%	49.6%	50.3%	0.7%
EBITDA Margin	17.3%	12.7%	12.3%	14.5%	18.4%	3.9%
SG&A, % of revenue	35.1%	37.2%	38.0%	38.0%	39.4%	1.3%
Net Income Margin	11.6%	7.6%	7.0%	9.2%	8.3%	-0.9%
CAPEX, % of revenue	3.4%	4.9%	3.2%	1.1%	1.9%	0.8%

ROIC	65.9%	41.5%	36.6%	47.5%	27.9%	-19.5%
ROE	100.0%	69.7%	59.9%	63.2%	48.8%	-14.4%
Net Debt/EBITDA	0.5x	1.0x	1.0x	0.2x	1.4x	1.2x

Peers in General Retailers

Below you can find Dunelm Group benchmarking vs. other companies in General Retailers industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.

Top companies by Revenue growth, %


Top 5	FY2016	FY2017	FY2018	FY2019	FY2020
Cvs Group ($CVSG)	30.4%	24.6%	20.4%	24.2%	-
Scs Group ($SCS)	14.7%	4.9%	-6.0%	1.5%	-
Shoe Zone ($SHOE)	-4.2%	-1.3%	1.8%	0.9%	-
Lotte Shopping Co Ltd ($LOTS)	-17.2%	-24.6%	-2.0%	-1.1%	-
Mysale Group ($MYSL)	7.0%	6.4%	8.9%	-28.6%	-
Median (5 companies)	6.6%	-0.5%	1.8%	0.9%	-
Dunelm Group ($DNLM)	-	8.5%	9.9%	4.8%	-3.9%

Top companies by Gross margin, %


Top 5	FY2016	FY2017	FY2018	FY2019	FY2020
Scs Group ($SCS)	47.0%	46.2%	47.1%	47.2%	-
Lotte Shopping Co Ltd ($LOTS)	32.6%	42.0%	42.1%	42.2%	-
Cvs Group ($CVSG)	48.6%	45.8%	46.3%	41.5%	-
Shoe Zone ($SHOE)	17.4%	19.1%	19.0%	15.5%	-
Mysale Group ($MYSL)	26.4%	28.3%	29.3%	8.9%	-
Median (5 companies)	38.8%	43.9%	42.1%	41.5%	-
Dunelm Group ($DNLM)	49.8%	48.9%	48.0%	49.6%	50.3%

Top companies by EBITDA margin, %


Top	FY2016	FY2017	FY2018	FY2019	FY2020
Cvs Group ($CVSG)	14.1%	14.4%	13.5%	11.6%	-
Shoe Zone ($SHOE)	8.5%	8.1%	9.0%	6.2%	-
Scs Group ($SCS)	5.1%	5.2%	6.1%	6.1%	-
Mysale Group ($MYSL)	1.8%	2.0%	1.8%	-24.3%	-
Median (4 companies)	3.6%	3.6%	6.1%	6.2%	-
Dunelm Group ($DNLM)	17.3%	12.7%	12.3%	14.5%	18.4%

Top companies by CAPEX/Revenue, %


Top	FY2016	FY2017	FY2018	FY2019	FY2020
Shoe Zone ($SHOE)	2.0%	3.3%	3.2%	4.5%	-
Cvs Group ($CVSG)	5.2%	4.9%	3.1%	2.9%	-
Scs Group ($SCS)	0.9%	1.4%	0.7%	1.4%	-
Mysale Group ($MYSL)	0.3%	0.4%	0.3%	0.0%	-
Median (4 companies)	1.8%	2.4%	2.9%	2.2%	-
Dunelm Group ($DNLM)	3.4%	4.9%	3.2%	1.1%	1.9%

Top companies by ROIC, %


Top 5	FY2016	FY2017	FY2018	FY2019	FY2020
Scs Group ($SCS)	38.0%	37.2%	35.1%	29.8%	-
Shoe Zone ($SHOE)	30.6%	30.7%	31.7%	19.6%	-
Cvs Group ($CVSG)	9.2%	9.2%	7.4%	5.3%	-
Home Retail Group ($HOME)	-36.4%	-	-	-0.0%	-
Mysale Group ($MYSL)	0.3%	-0.0%	-1.9%	-106.4%	-
Median (6 companies)	9.2%	4.5%	5.5%	5.3%	-
Dunelm Group ($DNLM)	65.9%	41.5%	36.6%	47.5%	27.9%

Top companies by Net Debt / EBITDA


Top	FY2016	FY2017	FY2018	FY2019	FY2020
Cvs Group ($CVSG)	3.0x	2.6x	1.6x	2.2x	-
Shoe Zone ($SHOE)	-1.1x	-0.9x	-1.1x	-1.1x	-
Scs Group ($SCS)	-1.4x	-2.3x	-2.5x	-3.0x	-
Median (3 companies)	0.2x	1.4x	1.2x	-1.1x	-
Dunelm Group ($DNLM)	0.5x	1.0x	1.0x	0.2x	1.4x

Dunelm Group stock price chart

Dunelm Group financials

mln.	FY2015	FY2016	FY2017

Revenue	835.8	880.9	955.6
EBITDA	143.1	152.8	121.2
Net income	96.100	102.3	73.100
CAPEX	25.300	29.600	46.600
Debt	89.800	94.200	139.5
Cash	16.200	14.900	17.400

About Dunelm Group

Dunelm Group plc engages in the retail of homewares and soft furnishings in the United Kingdom. It offers bedding products, such as bed linen, anti-allergy bedding, duvets, pillows, memory foams, bedding protectors, mattress toppers, electric blankets, blankets, and beds and mattresses; various blinds and accessories; curtains, curtain linings, tracks, poles, voile panels, and curtain accessories; and furniture for bedroom, living room, dining room, bathroom, nursery, office, and kids, as well as storage and garden furniture. The company also provides cushions, kids cushions, bean bags, blankets and throws, cushions pads and covers, and seat pads; d?cor products, including wallpapers, garden d?cor products, photo frames, hanging accessories, home accessories, stationery, crafts, gifts, and draught excluders, as well as canvases, prints, and wall art; and lighting products, such as chandeliers, ceiling and wall lights, desk lamps, table and floor lamps, light shades, kids lights, out door and bathroom lights, light bulbs, and electrical accessories. In addition, it offers mirrors; rugs, runners, doormats, and doorstops; clothes storage products, storage boxes and bags, shoe racks, hampers and baskets, office storage products, luggage, and storage hooks and rails; bathroom products comprising towels, bath mats, bathroom storage, dressing gowns, shower curtains, bathroom scales, hooks and organizers, and toilet and bathroom accessories; and kitchen products. Further, the company provides dining products, including dinner sets, crockery, cutlery, glassware, kids dine products, table linen, dining accessories, and disposables; utility products; electrical appliances; and Christmas products. It operates 137 out-of-town superstores under the Dunelm brand name, as well as provides convenience through on-line, mobile, catalogue, telephone ordering, and reserve and collect propositions. The company was founded in 1979 and is headquartered in Syston, the United Kingdom.