Debenhams PLC - Interim Results
11 Avril 2000 - 9:03AM
UK Regulatory
RNS Number:8530I
Debenhams PLC
11 April 2000
INTERIM RESULTS
26 WEEKS ENDED 26 FEBRUARY 2000
DEBENHAMS PLC
INTERIM RESULTS FOR THE 26 WEEKS ENDED 26 FEBRUARY 2000
Highlights
- Total sales at #775.1 million (1999: #785.2m)
- Like for like sales up 0.2%
- Gross margin up 0.9%
- Profit before tax at #73.8 million (1999: #79.4m)
- Earnings per share at 13.1p (1999: 14.1p)
- Interim dividend up to 4.2p per share (1999: 4.1p)
- Free cash inflow of #90.2 million in the first half
- Improvement in current trading
Commenting on the results, Peter Jarvis, Chairman, said:
"We continue to outperform most of our competitors and
believe the interim results are a creditable performance
given the market circumstances. Over the last six months
we have enhanced the future prospects of the Company.
This has been achieved by developing our brands and
extending product availability through new stores, the
Internet and our home-shopping catalogues.
The trading stance during the first six weeks of the
current half is distorted by the timing of Easter and the
Mid Season Sale. For this reason, we are not in a
position to quote comparable current trading figures.
However, the underlying trend in like for like sales to
Saturday 8 April has continued to improve since the end
of the first half. The gross margin is adversely
affected by the inclusion of the Mid Season Sale in the
period but is expected to be up for the half as a whole.
Total sales are ahead of last year and are benefiting
from the recently opened stores and stronger clothing
sales."
For further information:
Matthew Roberts Finance Director
matthew.roberts@debenhams.com
0171 408 3229
Joanna Lane-Jones Head of Corporate Communications
joanna.lane-jones@debenhams.com
0171 408 3459
Martin Leeburn Maitland Consultancy
mleeburn@maitland.co.uk
0171 379 5151
DEBENHAMS PLC
INTERIM RESULTS FOR THE 26 WEEKS ENDED 26 FEBRUARY 2000
RESULTS:
Total sales for the 26 weeks to 26 February 2000 fell by
1.3% to #775.1 million with like for like sales up 0.2%.
As expected total sales were adversely affected by a
number of stores being closed for redevelopment during
the period. The gross margin as a percentage of total
sales was up 0.9%. Profit before tax fell by 7.1% to
#73.8 million. The earnings per share for the first half
of the financial year were 13.1p.
Analysis of trading results
Following the launch of the home shopping catalogue by
the Group's joint venture and the launch of the Internet
site, the trading results for these distribution channels
were:
26 weeks to 26 weeks to
26 February 2000 27 February 1999
------------------------------------
#m #m #m #m
Existing businesses:
Core Retailing 78.1 83.4
New businesses:
E-Commerce (2.0) -
Home Shopping (Joint (0.5) -
venture)
----- -----
(2.5) -
----- -----
Total 75.6 83.4
===== =====
Review of first half trading
Like for like sales were down 3.4% in the autumn but
showed a significant improvement over Christmas ending
the period with 1% growth. We saw further sales growth in
January and February with like for like sales up 1.8%.
Tax charge
The Company is anticipating a tax charge of 33% for the
current full year and the following year.
CASH FLOW AND CAPITAL INVESTMENT:
Cash generated from operating activities during the first
half of the financial year was #156.4 million. Free cash
inflow before dividends and share buyback was #90.2
million resulting in a decrease in net debt of #56.8
million.
Total capital investment in the first half was #47.3
million and is expected to be in the region of #140
million for the current full year and #110 million for
each of the next two years. The majority of the
investment will be attributable to new stores and
modernising the existing store portfolio.
As at 26 February 2000, terminal stock levels were at a
similar low level to the previous year.
NET DEBT:
As at 26 February 2000, the Company had net debt of #50.5
million and gearing was 8.5%.
DIVIDEND PER SHARE:
The Board has proposed an interim dividend of 4.2p per
share, which will be paid on 7 July 2000 to shareholders
on the Register of Members at the close of business on 5
June 2000.
COSTS:
Total costs rose by 4.8% during the first half. The
majority of this growth was attributable to strategic
investments which will drive future sales. These
included new stores, home shopping catalogues, e-commerce
operations and our brand advertising campaign. For the
year as a whole, we expect total costs to rise at a
slightly higher rate than that seen in the first half.
CURRENT TRADING:
The trading stance during the first six weeks of the
current half is distorted by the timing of Easter and the
Mid Season Sale. For this reason, we are not in a
position to quote comparable current trading figures.
However, the underlying trend in like for like sales to
Saturday 8 April has continued to improve since the end
of the first half. The gross margin is adversely
affected by the inclusion of the Mid Season Sale in the
period but is expected to be up for the half as a whole.
Total sales are ahead of last year and benefiting from
the recently opened stores and stronger clothing sales.
CHIEF EXECUTIVE'S REVIEW
Debenhams occupies a unique position in the market. We
satisfy our customer's aspirations by offering a
combination of super value brands together with premium
national and international labels. We maximise market
opportunities through product innovation and have the
flexibility to adapt our product mix into growth areas.
We have significant potential to expand through
exploiting our new products and new markets.
GROWING SALES:
New products
Prior to the start of the current financial year, we
anticipated the increase in demand for gifts, home and
health & beauty products. These trends were reflected in
our buying patterns and had a positive impact on our
performance over the Christmas period.
During the first half of the financial year we launched a
mixture of own brands, international and designer brands.
These included our contemporary lifestyle brand "Red
Herring" and "Kickers" an international brand launched
across clothing and accessories. In addition, we launched
our first range of designer childrenswear called "junior
j" by Jasper Conran and introduced the "Early Learning
Centre" into selected stores.
In the second half of the year, we will continue to
develop our ranges to meet changes in the market.
"Designers at Debenhams" will be featured in all our
stores by Christmas 2000. Many ranges will be extended
such as "Sweet Pea" by Elspeth Gibson and "Calvin Klein"
lingerie for women. We will also be introducing several
new designers such as Janet Reger, and John Rocha whose
collection will be our largest designer launch to date.
In addition, we are planning to launch our first own
brand skin care and colour range to be called "MEA" and
will extend our "Relax and Revive" label to meet the
increase in demand for beauty products. It is our
intention to continue to flex the product mix and move
into areas of growth such as media and entertainment
merchandise.
New markets - store openings
The new store-opening programme remains on schedule.
During the first half of the financial year we opened new
stores in Reading and Weymouth, and have since opened a
store in Dundee. We currently operate 91 stores in the UK
and Republic of Ireland on an average total trading space
of 6.7m sq ft.
Our new store in Banbury is scheduled to open on the 14
April 2000. A further five new stores are planned to open
in the next financial year. The new store opening
programme will add 17% to our total trading space over
the next four years. The opening date for Newcastle
Metrocentre has been delayed by a year because the
planning application was referred to the Secretary of
State. We are currently not represented in 37% of the
available UK market and therefore still have significant
expansion opportunities for the future.
Location Opening date
Milton Keynes Autumn 2000
Sunderland Autumn 2000
Carlisle Autumn 2000
Oxford* Autumn 2000
Uxbridge Spring 2001
Edinburgh Leith Autumn 2001
Basingstoke Autumn 2002
Newcastle Metrocentre Spring 2003
Birmingham Bull Ring Autumn 2003
York* Spring 2004
* denotes relocation or resite
We are delighted with the performance of our new stores.
In particular Trafford Park is currently showing a like
for like sales growth of approximately 20%. Our Leeds
Briggate store was voted "Department Store of the Year"
at the Drapers Record Awards in January 2000.
During the first half of the financial year, we
modernised four stores and are on schedule to complete
another seven by the end of the financial year. Over the
last two years, we have become more efficient at
modernising our stores and the average spend per store
has been reduced from c.#3 million to c.#1.5 million.
We currently operate three international franchise stores
and have plans to open a further five over the next three
years. We are actively seeking to identify further
international franchise opportunities and expect to make
an announcement in the near future.
Customer initiatives
We have a clear understanding of our customer profile and
because of the demographic trend our target market is
forecast to increase over the next five years. Over the
last 12 months 28% of the UK adult population visited our
stores. We have over 2.5 million store cardholders, of
which 500,000 are higher spending Gold Cardholders.
We are fully committed to offering superior levels of
customer service. We provide a range of benefits
including a personal shopper service, lockers and
designated lounges for our Gold Card customers.
Advertising campaign
We launched a national brand advertising campaign in the
autumn, to promote Debenhams as "Britain's Favourite
Department Store" and attract new customers into our
stores. Initial feedback has been very encouraging.
Research has shown that customers' perceptions of
Debenhams have improved since the campaign was started.
In addition, new customers are being attracted into the
stores and existing shoppers are visiting on a more
regular basis. We have recently launched the second phase
of the brand advertising campaign. It will emphasise our
famous brands and will be featured in magazines and
newspapers.
New markets - home shopping
In February 2000, we launched our first major home
shopping catalogue, "Debenhams Direct", through our joint
venture with Freemans. The 540 page book contains a
unique range of merchandise for women, men, children and
the home. Only 7% of Debenhams product lines are featured
in the catalogue. Demand for the first edition of
"Debenhams Direct" exceeded our initial expectations.
The second edition of the catalogue will be launched in
the autumn and we are planning to distribute over 300,000
copies.
New markets - E-commerce
We relaunched our fully transactional website in October
1999. Since then the site has been voted the best retail
website operated by a high-street retailer in the "1999
On-line Shopping Report" and the top fashion and beauty
website by "Internet Monthly". In addition, our on-line
Wedding Service was recently voted "Customer Initiative
of the Year" at the Retail Week Awards.
We are very encouraged by the traffic and sales through
our website and during February over 1.5 million pages
were viewed. We have recently expanded the number of
products available on the site to include a fashion offer
with over 1,500 lines for sale and have launched an
interactive Wedding Stationery site.
Our objective is to quantum leap our presence on the
Internet. This will be achieved by leveraging our
established brands and service expertise with strategic
partners. We are in discussions with a number of possible
partners, including a major media company, and expect to
make further announcements in the near future. We are
also forming a new web-based company to fully
potentialise the on-line business.
We are developing a series of solutions based portals.
The portals will provide our customers with a range of
merchandise, content and services. Strategic partnerships
will maximise the performance and offering of each
portal. In addition, we are investigating the
opportunities available to us through Digital TV and WAP
technology.
Debenhams operates one of the largest wedding services in
the UK and was the first department store to develop a
fully on-line service. Approximately 10% of our wedding
service registrations this year are expected to be
through our website. It is our intention to gain critical
mass in this market by integrating the in-store format
with the on-line business.
We are in advanced discussions with WeddingChannel.com,
the leading US wedding service operator.
WeddingChannel.com is in partnership with Federated
Stores in the US, the world's largest department store
group. WeddingChannel.com has significant experience
and technical expertise in this specialised market and
completed over 100,000 wedding lists last year.
A strategic partnership would allow us to enhance our
existing wedding service in the UK and give us the
opportunity to expand into the European market.
We have significant intrinsic advantages over pure e-
tailers including high customer loyalty, established
brands and retailing skills. In addition, we have access
to Otto Versand's leading fulfilment and distribution
capabilities through our joint venture partnership with
Freemans. Otto Versand is the world's largest mail order
group.
SHARE PURCHASE:
At the AGM on 10 December 1999, we received authorisation
from our shareholders to buy back up to 10% of our Issued
Share Capital.
During the first half of the current financial year we
bought a total of 8.7 million shares, at an average price
of 155p, for cancellation and for our executive share
incentive programme. This cost a total of #13.5 million
and comprises 2.3% of our Issued Share Capital.
As at 10 April 2000 there were 371.2 million shares in
issue. It is our intention to continue to purchase shares
when appropriate.
CALENDAR:
We will make a commentary on current trading on 18 July
2000 and our Preliminary results announcement is
scheduled for 17 October 2000.
The financial year ending August 2001 will be a 53 week
year.
Terry Green
Chief Executive
Consolidated profit and loss account
For the 26 weeks ended 26 February 2000
Unaudited Unaudited Audited
26 weeks to 26 weeks to 52 weeks to
26 February 27 February 28 August
2000 1999 1999
Note #m #m #m
Turnover: 2
Group and share of joint 775.1 785.2 1,378.8
venture
Less: share of joint (0.1) - -
venture's turnover
------- ------- -------
Group turnover 775.0 785.2 1,378.8
======= ======= =======
Trading profit
Group trading profit 76.1 83.4 145.2
Share of trading loss in (0.5) - (0.2)
joint venture
------- ------- -------
Total trading profit 75.6 83.4 145.0
Net interest payable and 3 (1.8) (4.0) (6.2)
similar charges
------- ------- -------
Profit on ordinary 73.8 79.4 138.8
activities before taxation
Taxation 4 (24.3) (26.2) (45.8)
------- ------- -------
Profit for the financial 49.5 53.2 93.0
period
Dividends 5 (15.5) (15.5) (39.3)
------- ------- -------
Retained profit 34.0 37.7 53.7
======= ======= =======
Earnings per share 6
- Basic 13.1p 14.1p 24.7p
- Diluted 13.1p 14.1p 24.6p
======= ======= =======
Dividends per ordinary 5 4.2p 4.1p 10.4p
share
======= ======= =======
All items in the profit and loss account relate to continuing activities.
There is no significant difference between the results shown in the profit
and loss account and the results as stated on an unmodified historical
cost basis.
There are no recognised gains and losses other than those included in the
profit and loss account for each period.
Consolidated balance sheet
At 26 February 2000
Unaudited Unaudited Audited
26 27 28 August
February February 1999
Note 2000 1999 #m
#m #m
Fixed assets
Tangible assets 759.4 725.0 753.4
Investments:
Investment in joint ventures
Share of gross assets 4.0 - 0.2
Share of gross (4.6) - (0.4)
liabilities
------- ------- -------
(0.6) - (0.2)
Loan to joint venture 1.8 - 0.2
Investment in own shares 6 4.3 1.3 1.2
------- ------- -------
Total investments 5.5 1.3 1.2
------- ------- -------
764.9 726.3 754.6
Current assets
Stocks 167.0 171.7 177.2
Debtors 41.3 27.3 34.9
Cash at bank and in hand 14.7 27.7 14.1
------- ------- -------
223.0 226.7 226.2
Creditors: amounts falling due
within one year
Funding debt (3.7) (17.6) (60.3)
Other creditors (292.1) (285.3) (254.4)
------- ------- -------
(295.8) (302.9) (314.7)
------- ------- -------
Net current liabilities (72.8) (76.2) (88.5)
------- ------- -------
Total assets less current 692.1 650.1 666.1
liabilities
Creditors: amounts falling due
after more than one year
Funding debt (61.5) (60.5) (61.1)
Provisions for liabilities and (36.2) (34.9) (34.2)
charges
------- ------- -------
Net assets 594.4 554.7 570.8
======= ======= =======
Capital and reserves
Called up share capital 37.1 37.8 37.8
Share premium account 0.1 - 0.1
Capital redemption reserve 0.7 - -
Other reserves 43.2 43.2 43.2
Profit and loss account 513.3 473.7 489.7
------- ------- -------
Shareholders' funds - Equity 7 594.4 554.7 570.8
interests
======= ======= =======
Gearing 8.5% 9.1% 18.8%
======= ======= =======
Consolidated cash flow statement
For the 26 weeks ended 26 February 2000
Unaudited Unaudited Audited
26 weeks to 26 weeks to 52 weeks to
26 February 27 February 28 August
2000 1999 1999
Note #m #m #m
Net cash inflow from 8 156.4 124.7 179.8
operating activities
Returns on investment and (0.4) (1.5) (5.3)
servicing of finance
Taxation paid (16.9) (3.7) (48.4)
Capital expenditure (47.3) (57.0) (104.3)
Acquisitions and disposals (1.6) - (0.2)
Equity dividends paid (23.8) (22.3) (37.8)
------- ------- -------
Cash inflow/(outflow) before 66.4 40.2 (16.2)
financing
Financing
Purchase of own shares (9.2) - -
Repayment of bank loans due (7.1) (3.4) (3.4)
within one year
Issue of ordinary share - - 0.1
capital
------- ------- -------
Net cash outflow from (16.3) (3.4) (3.3)
financing
------- ------- -------
Increase/(decrease) in cash 50.1 36.8 (19.5)
======= ======= =======
Reconciliation of net debt:
Opening net debt (107.3) (89.8) (89.8)
Increase/(decrease) in cash 50.1 36.8 (19.5)
Cash used to repay loans and 7.1 3.4 3.4
lease financing
Other non-cash movements (0.4) (0.8) (1.4)
------- ------- -------
Closing net debt (50.5) (50.4) (107.3)
======= ======= =======
Notes to the interim results
For the 26 weeks ended 26 February 2000
1 Basis of preparation
The interim results have been prepared on the basis of the accounting
policies set out in the financial statements of Debenhams plc for the
year ended 28 August 1999, as amended by:
* Financial Reporting Standard 15 'Tangible Fixed Assets', the adoption
of which results in freehold and leasehold buildings being depreciated to
their estimated residual value over their estimated remaining economic
lives. In addition, the Group has followed the transitional provisions of
FRS 15 to cease its previous policy of revaluing freehold and long
leasehold land and buildings other than rack-rented properties every five
years, instead retaining them at their current book values which were last
revalued in The Burton Group plc (now known as Arcadia Group plc) as at
September 1995. The adoption of these transitional provisions does not
result in any adjustment to the financial statements.
* Financial Reporting Standard 16 'Current Tax', the adoption of which
does not result in any adjustment to the financial statements.
2 Turnover
The Group has one class of business, retailing, and all material
operations are in the UK.
3 Net interest payable and similar charges
26 weeks to 26 weeks to 52 weeks to
26 February 27 February 28 August
2000 1999 1999
#m #m #m
Payable on bank loans and (0.6) (2.1) (2.3)
overdrafts repayable within
five years
Payable on debenture loans (0.1) (0.1) (0.3)
repayable within five years
Rentals payable on property (1.7) (2.3) (4.3)
lease obligations
------- ------- -------
(2.4) (4.5) (6.9)
Interest receivable 0.6 0.5 0.7
------- ------- -------
Net interest payable and (1.8) (4.0) (6.2)
similar charges
======= ======= =======
4 Taxation
The tax charge reflects the full year's effective estimated rate of
33.0% (1999: 33.0%), all of which arises in the UK.
5 Dividends
26 weeks to 26 weeks to 52 weeks to
26 February 27 February 28 August
2000 1999 1999
#m #m #m
Interim ordinary dividend 15.5 15.5 15.5
declared - 4.2p (1999: paid 4.1p)
Final ordinary dividend paid - - 23.8
(1999: 6.3p)
------- ------- -------
15.5 15.5 39.3
======= ======= =======
The interim dividend will be paid on 7 July 2000 to shareholders on the
Register at the close of business on 5 June 2000. The shares will be
quoted ex dividend on 30 May 2000.
Shareholders now have the opportunity to reinvest their cash dividend
cost effectively in Debenhams shares bought on the London Stock Exchange
through a dividend reinvestment plan. Full details, together with an
application form, will be sent to shareholders with a copy of this
Report. All applications to join this plan must be received by the
Company's registrars by 5.00pm on 16 June 2000 if they are to apply to
this interim dividend.
Notes to the interim results (continued)
For the 26 weeks ended 26 February 2000
6 Earnings per share
Basic and diluted earnings per share have been calculated based on:
26 weeks to 26 26 weeks to 27 52 weeks to 28
February 2000 February 1999 August 1999
---------------- ---------------- ----------------
Weighted Weighted Weighted
average average average
number number number
Earnings of shares Earnings of shares Earnings of shares
#m m #m m #m m
Basic 49.5 376.5 53.2 377.1 93.0 377.2
earnings /
Number of
shares
Dilutive - 0.1 - 1.1 - 1.3
potential
ordinary
shares
------ ----- ----- ----- ----- -----
Diluted 49.5 376.6 53.2 378.2 93.0 378.5
earnings /
Number of
shares
===== ===== ===== ===== ===== =====
pence pence pence
Basic 13.1 14.1 24.7
earnings per
ordinary
share
===== ===== =====
Diluted 13.1 14.1 24.6
earnings per
ordinary
share
===== ===== =====
The calculation of earnings per share is based on the profit for the
financial period. The weighted average number of shares used in the
basic earnings per share calculation excludes own shares held by ESOP
trusts for subsequent transfer to employees under various incentive
schemes. On 25 February 2000 these ESOP trusts purchased 2.0 million
own shares at a total cost of #3.1 million. The dilutive potential
ordinary shares arise from employee share and incentive plans.
7 Reconciliation of movements in shareholders' funds
26 weeks to 26 weeks to 52 weeks to
26 February 27 February 28 August
2000 1999 1999
#m #m #m
Profit for the financial 49.5 53.2 93.0
period
Dividends (15.5) (15.5) (39.3)
------- ------- -------
Retained profit 34.0 37.7 53.7
Purchase of own shares (10.4) - -
Issue of ordinary share - - 0.1
capital
------- ------- -------
Net addition to shareholders' 23.6 37.7 53.8
funds
Opening shareholders' funds 570.8 517.0 517.0
------- ------- -------
Closing shareholders' funds 594.4 554.7 570.8
======= ======= =======
During the 26 weeks ended 26 February 2000 the Company purchased and
subsequently cancelled 6.7 million ordinary shares of 10 pence each,
representing 1.8% of the issued share capital at the beginning of the
period, at a total cost of #10.4 million which has been charged against
distributable reserves. These purchases were made at prices ranging
from 148.0 pence per share to 161.0 pence per share, the weighted
average price of all purchases being 155.5 pence.
For the 26 weeks ended 26 February 2000
8 Reconciliation of trading profit to net cash flow from operations
26 weeks to 26 weeks to 52 weeks to
26 February 27 February 28 August
2000 1999 1999
#m #m #m
Trading profit 75.6 83.4 145.0
Depreciation charges 26.9 20.5 44.4
Asset write-offs 0.3 1.5 2.9
Share of trading loss in joint 0.5 - 0.2
venture
Decrease/(increase) in stocks 10.2 1.3 (4.2)
Decrease/(increase) in debtors 0.1 (0.3) (4.1)
Increase/(decrease) in 42.8 18.3 (4.4)
creditors and provisions
------- ------- -------
Net cash inflow from operating 156.4 124.7 179.8
activities
======= ======= =======
9 Millennium
As reported in the Company's Annual Report and Accounts for the year
ended 28 August 1999 published in October last year, the Group undertook
various programmes to ensure that the business would not be affected by
the Millennium date change. As a result of these programmes the Group
has not experienced any Year 2000 computer based issues to date and all
systems continue to operate normally.
10 Financial information
The financial information in this statement does not constitute full
statutory accounts within the meaning of Section 240 of the Companies
Act 1985. The statutory accounts of Debenhams plc for the year ended 28
August 1999, which received an unqualified audit report, have been filed
with the Registrar of Companies. The statement of interim results will
be sent to the holders of the Company's listed securities.
Copies will be available at the Company's registrars - Computershare
Services PLC, PO Box 82, The Pavilions, Bridgwater Road, Bristol, BS99
7NH (Telephone 0870 702 0114), and at the Company's registered office, 1
Welbeck Street, London, W1A 1DF from the date of posting.
Review report by the Auditors
Independent review report to Debenhams plc
Introduction
We have been instructed by the Company to review the financial information
set out on pages 8 to 13 and we have read the other information contained
in the interim report for any apparent misstatements or material
inconsistencies with the financial information.
Directors' responsibilities
The interim report, including the financial information contained therein,
is the responsibility of, and has been approved by the directors. The
Listing Rules of the London Stock Exchange require that the accounting
policies and presentation applied to the interim figures should be
consistent with those applied in preparing the preceding annual accounts
except where any changes, and the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin
1999/4 issued by the Auditing Practices Board. A review consists
principally of making enquiries of group management and applying
analytical procedures to the financial information and underlying
financial data, and based thereon, assessing whether the accounting
policies and presentation have been consistently applied unless otherwise
disclosed. A review excludes audit procedures such as tests of controls
and verification of assets, liabilities and transactions. It is
substantially less in scope than an audit performed in accordance with
Auditing Standards and therefore provides a lower level of assurance than
an audit. Accordingly we do not express an audit opinion on the financial
information.
Review conclusion
On the basis of our review we are not aware of any material modifications
that should be made to the financial information as presented for the 26
weeks ended 26 February 2000.
PricewaterhouseCoopers 1 Embankment Place
Chartered Accountants London
WC2N 6NN
END
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