DFS boss to net £1.25m windall

FURNITURE giant DFS looks likely to unveil a tax windfall for investors this week. The store chain is expected to announce a special dividend of up to 15p a share, bringing a £1m-plus payout for chairman and founder Lord Kirkham.

The company has been building up a special fund in case it has to pay out money for VAT that Customs & Excise has been claiming. Court cases to decide whether the money will have to be paid have been rumbling on for years and have not been finally settled.

The cases hinge on whether furniture retailers that sell goods on interest-free deals are liable for VAT on the full ticket price of an item, or on the lower amount they receive from the finance houses that provide loans to customers.

DFS has been told by lawyers that even if judgments go against it, about £17m of the £70m it has set aside cannot be claimed by Customs. DFS said last month that the £17m - equivalent to nearly 17p a share - would be credited to its interim profits, due to be announced on Thursday.

And it is expected that DFS will say on Thursday that most of the money - somewhere between 12p and 15p a share - will be handed direct to shareholders as a special dividend.

Brokers expect that DFS will report half-year profits of about £25.5m and are forecasting a total for the full year of about £54m. It is not the first time that DFS has paid a special dividend.

In autumn 2000 the company paid out 20p a share. Kirkham, who was the target of shareholder anger over plans to make major increases to the company's share option scheme late last year, owns about 8.3m DFS shares. A special dividend on Thursday would bring him £1.25m in one fell swoop.

Following last year's row, Kirkham was forced to climb down on DFS's option scheme, which would have given him an extra £660,000 worth of shares a year. He said it was designed to act as an incentive for more lowly paid employees. He has pledged to come back with fresh proposals.

Executives have said they are determined to be able to give rewards to employees such as store managers who earn about £40,000 a year and have to be kept loyal.