Final Results
17 Octobre 2000 - 9:00AM
UK Regulatory
RNS Number:6029S
Debenhams PLC
17 October 2000
DEBENHAMS PLC
PRELIMINARY RESULTS FOR THE YEAR ENDED 26 AUGUST 2000
FULL YEAR HIGHLIGHTS:
* Total sales up 1.4% at #1,397.9 million (1998/9 #1,378.8 million)
* Profit before tax #129.6 million (1998/9 #138.8 million)
* Cash inflow from operating activities of #193.3 million (1998/9 #179.8
million)
* Final dividend at 6.5p per share, making a total dividend up 2.9% at 10.7p
(1998/9 10.4p)
* Market share increased
* During the year 4 new stores were opened, 11 stores were modernised and
significant investment was made in the internet, home shopping catalogue and
brand advertising campaign
CURRENT TRADING AND DEVELOPMENTS:
* In the 7 weeks to 14 October 2000 total sales were up 11.5% with like for
like sales up 7.5%
* 5 new store openings this current financial year and a further 2 new UK
stores announced today
Commenting on the results, Peter Jarvis, Chairman said:
"We believe that we are well positioned to continue to outperform competitors
and to grow the business by evolving our proven strategy and attracting new
customers into our stores.
These full year results represent a very creditable performance bearing in
mind the difficulties in the market. The sales trend over the year improved as
we adapted to the challenging environment. Our strong operating cash flow
underpins our investments designed to benefit the business in the future.
Since the financial year end we have continued to build on the positive sales
momentum. During the first 7 weeks to Saturday 14 October 2000 total sales
were up 11.5% with an improvement in like for like sales of 7.5% and the
gross margin was level on the year."
For further information, please contact:
Matthew Roberts
Finance Director
020 7408 3229
matthew.roberts@debenhams.com
Joanna Lane-Jones
Head of Corporate Communications
020 7408 3459
joanna.lane-jones@debenhams.com
Martin Leeburn
The Maitland Consultancy
020 7379 5151
mleeburn@maitland.co.uk
DEBENHAMS PLC
PRELIMINARY RESULTS FOR THE YEAR ENDED 26 AUGUST 2000
RESULTS:
Total sales for the year to 26 August rose by 1.4% to #1,397.9 million with
like for like sales up 1.8%. The gross margin as a percentage of total sales
was up 0.5% for the year. The profit before tax fell to #129.6 million with
the effective tax rate being 32%. Earnings per share for the full year were
23.6p.
During the second half of the financial year total sales increased by 4.9% and
like for like sales were up 3.9%. As at 26 August 2000 terminal stock levels
were at a similarly low level to the previous year.
The analysis of the trading results from the main distribution channels were
as follows:
52 weeks to 52 weeks to
26 August 2000 28 August 1999
_____________________________________
#m #m #m #m
Core Retailing : 140.1 145.3
New businesses:
E-commerce (3.8) (0.1)
Home shopping (1.9) (0.2)
______ ______
(5.7) (0.3)
______ ______
Total 134.4 145.0
______ ______
CASH FLOW AND CAPITAL INVESTMENT:
Cash generated from operating activities during the year was #193.3 million,
in comparison with #179.8 million the previous year. Free cash inflow before
dividends and share buyback was #15.2 million.
Total capital investment was #133.9 million for the full year. Capital
investment for the current year is expected to be approximately #150 million
and #120 million in each of the following two years. The majority of the
investment will be in new stores and initiatives to drive future sales growth.
NET DEBT, INTEREST COVER AND GEARING:
As at 26 August 2000, net debt was #143.7 million, interest cover was 27.9
times and gearing was 23.7%. During the year net debt increased by #36.4
million.
DIVIDEND:
The Board has proposed a final dividend of 6.5p, which will be paid on 5
January 2001 to shareholders on the Register of Members at the close of
business on 24 November 2000, subject to approval at the Annual General
Meeting on 8 December 2000. Including the interim dividend of 4.2p the total
dividend payment for the year is 10.7p.
CURRENT TRADING:
Since the financial year end we have continued to build on the positive sales
momentum. During the first 7 weeks to Saturday 14 October 2000 total sales
were up 11.5% with an improvement in like for like sales of 7.5% and the gross
margin was level on the year.
REVIEW OF THE YEAR
Over the last year we have significantly outperformed our competitors. We
have a clear strategy to drive future profitability and grow market share.
This is being achieved by increasing sales to our existing customers,
attracting new customers and moving into new markets.
We differentiate Debenhams from other retailers by better understanding our
customers' needs and aspirations. We sell a unique range of product
categories and brands in an attractive shopping environment.
SALES GROWTH:
New and existing customers
We have a loyal and well established customer base. It is our objective to
sell more to our existing customers and attract new customers to Debenhams.
According to independent research carried out by Verdict, we have increased
our share of the UK department store market to over 13%. Over the last year
we have also increased market share in all our major product categories.
We initiated a national brand advertising campaign last year to update the
perception of Debenhams and promote our unique product offer. Research has
shown that the perception of Debenhams has improved significantly since the
campaign was launched. We are running a wider advertising campaign during the
Autumn on television and in magazines.
We enhance the shopping experience by offering free services such as Personal
Shoppers. This service is currently offered in 44 of our stores and is aimed
at helping our customers select the most appropriate merchandise for their
needs. Evidence shows that customers value the Personal Shopper service and as
a result they spend more.
New customers have also been introduced through the Wedding Service. During
the last year we completed 32,000 wedding lists. We have maintained our
position as the UK's largest wedding gift service provider and now have
approximately 20% of the wedding list market. We were also the first UK
department store to offer a fully transactional service on the Internet,
allowing our customers to order gifts either on-line or in-store. Over the
year, we have continued to enhance the service and now offer value added
features such as wedding stationery and ready-to-wear designer bridal wear.
New and modernised stores
It is our strategy to ensure that Debenhams is represented in every major UK
market. The majority of our investment programme is attributable to new
stores and modernising our existing stores.
We are delighted with the performance of our new stores with the 4 that were
opened in Autumn 1998 achieving like for like sales growth of 16% in the
second half of the last financial year. The strong performance of our new
stores justifies our new store opening programme.
During the last financial year we opened 4 new stores situated in Dundee,
Reading, Weymouth and Banbury. Since the financial year end we have opened
stores in Sunderland and Milton Keynes. We will be opening a further 3 stores
over the next six months in Carlisle, Uxbridge and Oxford. We expect the 5
new stores to contribute approximately 4% to total sales in the current
financial year.
We are pleased to announce two new stores in Inverness and Redditch. Both
stores will occupy anchor sites in purpose built retail developments and are
new markets for Debenhams. We currently operate 94 stores, in the UK and
Republic of Ireland and our current store opening programme will take us to
103 sites by 2004.
New store locations Scheduled opening date
Oxford* Autumn 2000
Carlisle Autumn 2000
Uxbridge Spring 2001
Edinburgh Leith Autumn 2001
Basingstoke Autumn 2002
Redditch Spring 2003
East Kilbride Spring 2003
Inverness Autumn 2003
Birmingham Bull Ring Autumn 2003
Gateshead MetroCentre Spring 2004
York* Autumn 2004
* denotes resite or relocation
Over the last financial year we have modernised 11 stores including our
flagship store on Oxford Street. We have a rolling modernisation programme and
are planning to modernise a further 4 stores during the current financial
year. Modernising a store allows us to introduce new services, such as beauty
treatment rooms, and to realign the product offer to best meet the needs of
the local market.
New international franchise stores
Debenhams' unique range of brands and products are easily transferred into
international markets through franchise partnerships.
We currently have 4 international franchise stores. We have recently signed an
agreement with Starcity Departmental Store Sdn. Bhd, a new Malaysian franchise
partner, to open an anchor store in a major retail development in Kuala
Lumpur. The store is scheduled to open in Autumn 2002. The current store
opening programme will result in us trading 10 international franchise stores
by 2002. We will continue to investigate further international opportunities
and expect to make further announcements in due course.
International franchise location Scheduled opening date
Qatar - Doha Spring 2001
Hungary - Budapest Autumn 2001
Saudi Arabia - Riyadh Autumn 2001
Iceland - Reykjavik Autumn 2001
Sweden - Stockholm Autumn 2002
Malaysia - Kuala Lumpur Autumn 2002
New shopping channels
We are fully committed to ensuring that Debenhams' merchandise is easily
accessible to the widest possible customer base. We have continued to develop
and enhance the offers available through our website and home shopping
catalogue.
During the last year our website, www.debenhams.com, won a number of high
profile accolades including Retail Week's "Customer Initiative of the Year
2000" award for the on-line Wedding Service and the best retail website
operated by a high street retailer in the "1999 On-line Shopping Report". We
have increased the range of merchandise available through the website and
currently feature over 3,000 product lines including a comprehensive fashion
offer for all the family.
We have continued to develop initiatives to drive on-line sales and raise
awareness of the Debenhams offer. We have recently joined the yahoo.co.uk
shopping platform and will be one of the featured stores selling a range of
products including flowers, gifts and clothing. In April we signed an alliance
with the Express Group Newspapers to provide the merchandise to support a
series of its lifestyle websites.
In February 2000 our first major home shopping catalogue, "Debenhams Direct",
was produced under the joint venture agreement with Freemans, a subsidiary of
Otto Versand GmbH. It was distributed to over 150,000 UK households. In
response to demand the planned distribution levels of the second edition have
been increased to 330,000 copies. The catalogue increases the product choice
available to our customers with over 35% of the merchandise not available in
our stores.
In order to accelerate the integration of our main shopping channels and
increase accessibility of the Debenhams offer, we are developing shopping
kiosks. At designated areas within our larger stores customers will be able to
access our website or browse through our home shopping catalogue and then
order merchandise. We have also introduced a Special Order Service in all our
stores, allowing customers to have access to the full product offer regardless
of the store size.
BRAND AND PRODUCT DEVELOPMENTS:
We have continued to develop our unique mix of exclusive own brands including
"Designers at Debenhams", international brands and concessions. Our own
brands currently account for approximately 50% of our annual turnover. Our
strategy is to ensure that our customers are offered unrivalled levels of
choice and newness.
"Designers at Debenhams" achieved record levels of sales last year and is
forecast to double in the current financial year to #60 million. We have
recently launched our single biggest designer collection by John Rocha. The
range, "Rocha.John Rocha", was released across all our main product divisions
simultaneously and currently represents 10% of our designer sales. We are
also launching new designer ranges such as Anna Scholz as well as expanding
our existing names, especially "junior j" by Jasper Conran. Over the last
year, our share of the lingerie market has increased from 3.7% to 4.8% and our
first designer ranges by Janet Reger and Abe Hamilton are being introduced to
meet the growth in this market.
Over the last year we have entered several new product categories that
represent major growth areas. The audio visual market is forecast to grow by
more than 30% over the next five years. We launched our Media and
Entertainment division in August featuring a carefully selected range of
international brands such as Sony and Panasonic together with our own brand
"Lecson". The division represents less than 1% of our total trading space and
is forecast to achieve sales of approximately #25 million in its first year of
trading.
Health and beauty is another key growth area. We were the first department
store group to develop our own range of cosmetics with the launch of "MEA". It
was launched in June into a market dominated by international brands and has
already become one of our top ten selling make-up brands.
Our in-store catering offering has been extended with over 20 million
customers being catered for during the year. The "VIP baby" and children's
"Pick & Mix" initiatives were voted "Best Group Marketing Campaign" at the
Cateys 2000 Awards. We currently operate Cafe Venue in 28 of our stores and a
further 6 Interc@fes. Our new stores will feature a family restaurant,
specialising in freshly prepared foods and a Cafe Venue.
FINANCIALS:
Margin growth
Over the last 5 years we have improved the gross margin. During the year the
level was increased by a further 0.5% benefiting from a 2% rise in the level
of own bought sales to 75% and improved buying in margin. We are confident
that we can deliver further margin improvements in the future by increasing
the level of own bought business and by actively managing our sourcing
policies.
Cost investment and control
We have a strong track record of controlling our costs and will continue to
drive out savings where possible. We review the structure of the business on
a regular basis and reallocate costs to the areas of maximum need without
damaging the long term fabric of the business. Fixed costs account for under
10% of our total sales.
Our investments in new stores, e-commerce and home shopping increased our
total costs by 3.2%. These investments are designed to drive future sales.
For our existing business, costs went up by only 2.6% with depreciation
accounting for all of the increase. Payroll, establishment costs, such as
rents and rates, and other costs were down on the year, despite investing an
incremental #5 million on advertising. Total costs rose by 5.8% during the
year.
Share repurchase
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
financial year we bought a total of 7.6 million shares, at an average price of
160p. This cost a total of #12.3 million. In addition, 2 million shares were
purchased at 153p for the Employees Share Ownership Plan Trust. As at 26
August 2000 there were 370.2 million shares in issue.
CALENDAR:
Our AGM will be held on 8 December 2000. We will not be issuing a trading
statement on that date due to the close proximity of Christmas and the
importance of the Christmas trading period. However, as in previous years it
is our intention to issue a trading statement in January 2001 that will
incorporate the Christmas sales. Our Interim results announcement is scheduled
for 10 April 2001.
The current financial year ending 1 September 2001 will be a 53 week year as
previously advised.
Belinda Earl
Chief Executive
Consolidated profit and loss account
For the financial year ended 26 August 2000
Note 2000 1999
#m #m
Turnover 2
Group and share of joint venture 1,397.9 1,378.8
Less: share of joint venture's turnover (0.7) -
_______ _______
Group turnover 1,397.2 1,378.8
Cost of sales (1,198.3) (1,182.0)
_______ _______
Gross profit 198.9 196.8
Distribution costs (25.3) (23.5)
Administrative expenses (37.3) (28.1)
_______ _______
Trading profit
Group trading profit 136.3 145.2
Share of trading loss in joint venture (1.9) (0.2)
_______ _______
Total trading profit 134.4 145.0
Net interest payable and similar charges 3 (4.8) (6.2)
_______ _______
Profit on ordinary activities before taxation 129.6 138.8
Taxation 4 (41.5) (45.8)
_______ _______
Profit for the financial year 88.1 93.0
Dividends 5 (39.4) (39.3)
_______ _______
Retained profit 48.7 53.7
_______ _______
_______ _______
Earnings per share 6
- Basic 23.6p 24.7p
- Diluted 23.6p 24.6p
_______ _______
_______ _______
Dividends per ordinary share 5 10.7p 10.4p
_______ _______
_______ _______
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 August 2000
2000 1999
Note #m #m #m #m
Fixed assets
Tangible assets 819.9 753.4
Investments:
Investments in joint ventures
Share of gross assets 5.2 0.2
Share of gross liabilities (7.3) (0.4)
_______ _______
(2.1) (0.2)
Loan to joint venture 4.2 0.2
Investment in own shares 6 4.2 1.2
_______ _______
Total investments 6.3 1.2
_______ _______
826.2 754.6
Current assets
Stocks 195.3 177.2
Debtors 42.0 34.9
Cash at bank and in hand 10.2 14.1
_______ _______
247.5 226.2
Creditors: amounts falling due within one year
Funding debt (92.0) (60.3)
Other creditors (270.6) (254.4)
_______ _______
(362.6) (314.7)
_______ _______
Net current liabilities (115.1) (88.5)
_______ _______
Total assets less current liabilities 711.1 666.1
Creditors: amounts falling due after more than one year
Funding debt (61.9) (61.1)
Provisions for liabilities and charges (42.0) (34.2)
_______ _______
Net assets 607.2 570.8
_______ _______
_______ _______
Capital and reserves
Called up share capital 37.0 37.8
Share premium account 0.1 0.1
Capital redemption reserve 0.8 -
Other reserves 43.2 43.2
Profit and loss account 526.1 489.7
_______ _______
Shareholders' funds - Equity 7 607.2 570.8
interests _______ _______
_______ _______
Gearing 23.7% 18.8%
_______ _______
_______ _______
Consolidated cash flow statement
For the financial year ended 26 August 2000
Note 2000 1999
#m #m
Net cash inflow from operating activities 8 193.3 179.8
Returns on investment and servicing of finance (4.0) (5.3)
Taxation paid (39.4) (48.4)
Capital expenditure and financial investments (133.9) (104.3)
Acquisitions and disposals - (0.2)
Equity dividends paid (39.3) (37.8)
______ _______
Cash outflow before financing (23.3) (16.2)
Financing
Purchase of own shares (12.3) -
Repayment of bank loans due within one year (7.1) (3.4)
Issue of ordinary share capital - 0.1
______ _______
Net cash outflow from financing (19.4) (3.3)
______ _______
Decrease in cash (42.7) (19.5)
______ _______
______ _______
Reconciliation of net debt:
Opening net debt (107.3) (89.8)
Decrease in cash (42.7) (19.5)
Cash used to repay loans and lease financing 7.1 3.4
Other non-cash movements (0.8) (1.4)
______ _______
Closing net debt (143.7) (107.3)
______ _______
______ _______
Notes to the accounts
For the financial year ended 26 August 2000
1. Basis of preparation
The consolidated financial statements have been prepared on the basis of the
accounting policies set out in the financial statements of Debenhams plc for
the year ended 26 August 2000, including the following new accounting
standards adopted during the year.
* 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 and the
retention of previously revalued assets at their current book values. 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
2000 1999
#m #m
Payable on bank loans and overdrafts repayable
within five years (1.9) (2.3)
Payable on debenture loans repayable within five years (0.3) (0.3)
Rentals payable on property lease obligations (3.4) (4.3)
______ ______
(5.6) (6.9)
Interest receivable 0.8 0.7
______ ______
Net interest payable and similar charges (4.8) (6.2)
______ ______
______ ______
The share of net interest payable and similar charges of the joint venture
included above is #0.1 million (1999: #nil).
4. Taxation
2000 1999
#m #m
UK Corporation tax at 30% (1999: 30 7/12%):
Current year (35.0) (39.7)
Prior years 2.4 (1.2)
Deferred taxation:
Current year (7.2) (6.1)
Prior years (2.2) 1.2
Share of tax of joint venture 0.5 -
______ ______
(41.5) (45.8)
______ ______
______ ______
5. Dividends
2000 1999
#m #m
Interim ordinary dividend paid - 4.2p (1999: 4.1p) 15.5 15.5
Final ordinary dividend proposed - 6.5p 23.9 23.8
(1999 paid: 6.3p)
______ ______
39.4 39.3
______ ______
______ ______
The final dividend will be paid on 5 January 2001 to shareholders on the
Register at the close of business on 24 November 2000.
Shareholders will have the opportunity to reinvest their cash dividend cost
effectively in Debenhams shares through a dividend reinvestment plan. All
applications to join that plan or amend existing instructions under it must be
received by the Company's registrars by 5.00pm on 12 December 2000 if they are
to apply to this final dividend.
6. Earnings per share
Basic and diluted earnings per share have been calculated based on:
2000 1999
___________________ ___________________
Weighted Weighted
average average
number of number of
Earnings shares Earnings shares
#m m #m m
Basic earnings / Number of shares 88.1 372.6 93.0 377.2
Dilutive potential ordinary shares - 1.1 - 1.3
_____ _____ _____ _____
Diluted earnings / Number of shares 88.1 373.7 93.0 378.5
_____ _____ _____ _____
_____ _____ _____ _____
Pence Pence
Basic earnings per ordinary share 23.6 24.7
_____ _____
_____ _____
Diluted earnings per ordinary share 23.6 24.6
_____ _____
_____ _____
The calculation of earnings per share is based on the profit for the financial
year. 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. During the year ended
26 August 2000 these ESOP trusts purchased 2 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
2000 1999
#m #m
Profit for the financial year 88.1 93.0
Dividends (39.4) (39.3)
______ ______
Retained profit 48.7 53.7
Purchase of own shares (12.3) -
Issue of ordinary share capital - 0.1
______ ______
Net addition to shareholders' funds 36.4 53.8
Opening shareholders' funds 570.8 517.0
______ ______
Closing shareholders' funds 607.2 570.8
______ ______
______ ______
During the year ended 26 August 2000 the Company purchased and subsequently
cancelled 7.6 million ordinary shares of 10 pence each, representing 2.0% of
the issued share capital at the beginning of the period, at a total cost of
#12.3 million which has been charged against distributable reserves. These
purchases were made at prices ranging from 148 pence per share to 200 pence
per share, the weighted average price of all purchases being 160 pence.
8. Reconciliation of operating profit to net cash flow from operations
2000 1999
#m #m
Trading profit 134.4 145.0
Depreciation charges 55.7 44.4
Asset write-offs 0.6 2.9
Profit on sale of fixed assets (0.7) -
Share of trading loss in joint venture 1.9 0.2
Increase in stocks (18.1) (4.2)
Increase in debtors (1.6) (4.1)
Increase/(decrease) in creditors and provisions 21.1 (4.4)
______ ______
Net cash inflow from operating activities 193.3 179.8
______ ______
______ ______
9. European Monetary Union ("EMU")
In 1998, we established a Steering Group to co-ordinate the activities of nine
working groups covering the main parts of the business affected by the
introduction of the Euro. This project is well underway and continues within
the timescales set, particularly in the Republic of Ireland where the UK
operations will be able to draw on the practical experiences.
The total cost of preparing for the Euro is estimated at under #9.0 million of
which less than #1.0 million has been incurred to date. Our significant
investment in financial and operational systems over the last few years and
that planned in the coming years will ensure that these costs are controlled.
10. Financial information
The financial information set out herein is extracted from the Group's
statutory accounts upon which the auditors have neither qualified their
opinion nor included a statement under section 237(2) or 237(3) of the
Companies Act 1985.
The statutory accounts will be filed with the Registrar of Companies and sent
to the holders of the Company's listed securities in November. 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 W1G 0AA from
the date of posting.
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