RNS Number:9640U
Debenhams plc
17 April 2007
17 April 2007
Debenhams plc
Interim Results for the 26 weeks to 3 March 2007
Debenhams plc, the leading department stores group, today announces its interim
results for the half year to 3 March 2007.
Financial Highlights:
* Pre-tax profits #105.5 million, up 34.4%
* Sales #1,287.8 million, up 5.8%
* Like-for-like sales down 4.5%
* Underlying earnings per share 9.5p, down from 11.1p
* Interim dividend of 2.5p, payable on 4 July 2007 to shareholders on
the register on 8 June 2007
* Free cash flow #98.9 million (2006 #99.1 million)
* Net debt #1,031.5m
Business Highlights
* Store refurbishment programme to be significantly accelerated
* New website fully launched
* Launch of Mantaray and Gorgeous own brands
* Roches store conversions ahead of schedule and performance on track
* 132 department stores open and a pipeline of 29 contracted new
stores
* Seven Desire stores open with 5 new stores contracted
* 32 international stores open including new stores in Germany and
Russia and 20 further stores contracted
Rob Templeman, Chief Executive, said:
"Sales from 4th March (the beginning of the second half year) to 15th April were
2.9% above last year (6.9% lower on a like-for-like basis). Although the
comparative period last year was particularly strong, sales achieved during
these weeks are below our expectations. Clearly it is very early in the period
but given this trend we must plan on the basis that like-for-like sales
performance may be negative in the second half. Any shortfall in sales will
inevitably impact on gross margins and we are therefore taking actions to
mitigate its effect on profits in the second half. Nevertheless we expect profit
for the year to be below current market expectations.
During the last 18 months we have necessarily focused our capital expenditure on
new store openings and acquisitions including Allders and Roches. We are now
planning to refit around 60 of our stores in the next 18 months. The refits may
cause some disruption but this investment will ensure that Debenhams stays at
the forefront of the UK retail market.
Throughout the business we are investing in better in-store service levels and
more contemporary presentation. I am confident that our investment in product,
value, service and our stores will drive like-for-like sales later in the
calendar year."
There will be a presentation for analysts today at 9.30am at the City
Presentation Centre, 4 Chiswell Street, London, EC1Y 4UP.
Enquiries:
Media
College Hill
Andy Cornelius 020 7457 2822
Duncan Murray 020 7457 2823
Analysts
Debenhams plc
Rob Templeman, Chief Executive
Chris Woodhouse, Finance Director 020 7408 3302
Statements made in this announcement that look forward in time or that express
management's beliefs, expectations or estimates regarding future occurrences and
prospects are "forward-looking statements" within the meaning of the United
States federal securities laws. These forward-looking statements reflect
Debenhams' current expectations concerning future events and actual results may
differ materially from current expectations or historical results. Any such
forward-looking statements are subject to various risks and uncertainties,
including: Debenhams' ability to accurately predict customer preferences and
demands; the effectiveness of Debenhams' brand awareness and marketing
programmes; the occurrence of weak sales during peak selling seasons or extreme
or unseasonal weather conditions; competitive factors in the highly competitive
retail industry; Debenhams' ability to successfully implement its new store
rollout and department store refurbishment/modernisation strategy; Debenhams'
ability to maintain its relationships with certain designers and its significant
concession partners; and currency fluctuations and currency risk.
* * *
Additional risk factors that you may want to consider are: Debenhams' ability
to retain key management and personnel; disruptions or other adverse events
affecting Debenhams' relationship with its major suppliers or its store card
provider; factors outside Debenhams' control, such as changes in the financial
or equity markets, adverse economic conditions or a downturn in the retail
industry, or damage or interruptions due to operational disruption, natural
disaster, war or terrorist activity; and work stoppages; slowdowns or strikes.
Chairman's Statement
During the first half of the 2006/07 financial year the Debenhams business has
continued to grow. A step change in space expansion has been achieved through
the acquisition from Roches of nine stores in Ireland and we have opened new
Desire and international franchise stores and a new Department store in the UK.
However, in a difficult retail market, like-for-like sales were 4.5% lower than
the same period last year. Growth will continue to be driven by the strong
pipeline of new space; there is also potential in the core business from the
strength of product and value of our Designers at Debenhams and own-brands and
from the refurbishment of existing stores.
In addition to the nine Roches stores, Debenhams opened a new store in Llandudno
in the first half of the year. Trading footage since last year has increased by
10.4%. In total 132 Department stores were trading at the end of the half year
and contracts have been signed for a further 29 stores. Nevertheless, Debenhams
is still under-represented and there is potential to increase to 240 Department
stores in the United Kingdom.
Three new Desire by Debenhams stores opened in the first half and there are now
seven stores trading in the UK. It is a unique concept predominantly selling
Designers by Debenhams and other exclusive own-brands in stores of 12-18,000 sq
ft of trading space. The stores are successful, with higher sales densities and
margins than Department stores, and we continue to refine the model to further
enhance performance. There is a considerably shorter lead time for a new Desire
store than a Department store; two new Desires will open in the second half
year, contracts have been signed for two further stores to open within the next
12 months and we are in various stages of negotiation for a number of further
stores; it has the potential in total for 100 stores in high street and retail
park locations.
The international franchise and internet businesses have the capacity to expand
rapidly from the current base. The first stores in Russia, Germany and Romania
opened this year and we now have 35 franchised stores in 16 countries. The
internet offers great opportunities to Debenhams through the main transactional
site, the sale of certain products through micro-sites, and to the wedding gift
business.
The UK retail market is challenging. Consumer spending has been affected by
three recent increases in interest rates, bringing them to their highest level
in over three years, as well as higher utility and council tax bills and subdued
wage increases. In this economic environment, it is even more important that we
build on the strengths of the business.
The management team have put together an action plan for 2007 to enhance the
store environment through an increased focus on the refurbishment as well as the
new store programme, increased style and fashion through the growth of designers
and other exclusive ranges, and through sharper value-for-money supported by
premium product marketing.
I would like to thank all our employees for their continued hard work and
enthusiasm over the peak first-half trading period.
The strategy for growth over the next few years, outlined in May 2006 at the
time of the IPO, remains unchanged but its execution has been accelerated
through increased space expansion from the Roches acquisition and through
increasing the refurbishment programme to around 60 stores over the next 18
months.
In light of the actions being taken to improve sales and our confidence in the
performance of the business in the medium term, the board has decided to pay an
interim dividend of 2.5p per share. This will be paid on 4th July to
shareholders on the register on 8th June 2007.
Chief Executive's Review
Gross transaction value for the first half of the financial year increased by
#71.0 million to #1,287.8 million, an increase of 5.8% over the corresponding
period last year. The principal drivers of growth were department store space
expansion, the roll-out of the Desire by Debenhams format and the increase in
our international franchise stores.
Like-for-like sales at 4.5% below last year were below our expectations,
predominantly caused by an underperformance in our menswear division and
disappointing sales from our outerwear and knitwear ranges.
Debenhams continues to offer a unique and differentiated customer proposition.
We have a diverse brand and product mix with a particular focus on style and
fashion through our Designer at Debenhams ranges and our own exclusive brands.
We have taken action to enhance our product offer across our ranges with
particular emphasis on building on our designer and style heritage and
reinforcing our quality and value proposition. Our menswear division has been
strengthened and the product offer reviewed and re-balanced.
Financial Performance
In the twenty-six weeks to 3rd March 2007 gross transaction value rose to
#1,287.8 million. Underlying operating profit, after adjusting, as at the full
year, for lease costs and for the costs of share-based payments, was #148.4
million, a decrease of #21.2 million compared to last year.
Underlying profit before tax was #116.2 million compared to #135.6 million last
year, and underlying earnings per share 9.5p compared to 11.1p last year. The
underlying profit before tax and earnings per share measures remove
non-comparable items, reflect the number of shares in issue following the
re-listing and are consistent with how the business is managed internally. On a
reported basis earnings per share were 8.8p compared to 11.7p last year. Cash
inflow from operating activities was #173.4 million and net debt at the end of
the half year was #1,031.5 million.
Products and Supply Chain
Although our total sales for the period under review have grown, the underlying
performance from some of our clothing ranges was clearly disappointing.
Menswear sales were poor with a number of our product ranges not achieving their
expected sell through. A new Head of Menswear has been appointed; the division
has also undergone a full product review to ensure that the appropriate actions
are taken to address the issues identified and to rebalance the product mix. We
have expanded our opening price point participation to approximately 13% of our
ranges and re-sourced a number of product lines to support the margin. A new
own bought surfwear/leisure brand under the Mantaray label has just been
launched for the Spring/Summer season and work continues on addressing some of
the underperforming brands.
Within our clothing divisions we also experienced a large sales decline in
outerwear and knitwear sales, which account for some 38% of our own-bought
ranges during the Autumn/Winter season.
Sales from our other divisions, such as Health & Beauty, Accessories and
Lingerie continued to demonstrate growth. During the second half of this
financial year we are introducing more designer ranges into our Home division
with the launch of new collections from Jane Packer and Jeff Banks.
Designers at Debenhams have been a success for the Company and will continue to
form the basis of our growth and innovation. In the first half year we expanded
the ranges of successful designers such as Betty Jackson and entered into new
contracts with Melissa Odadash for women's swimwear and accessories and with
Jane Packer for flowers, vases and other home products. The first Limited
Edition collection was launched in the half year. Each season, selected
designers, such as Jasper Conran and Julien Macdonald, release a limited number
of fashion and accessory pieces produced from high-quality fabrics. Designer
sales increased as a proportion of own-bought sales in the first half and our
target is to achieve sales in excess of #400 million this year.
The actions identified following the review of our supply chain in 2004 continue
to be implemented. We focus on fewer, better suppliers, have expanded the
products directly sourced and have further developed our sourcing hubs through
the opening in September of an office in Turkey. We are shortening lead times
and so increasing the availability of on-trend merchandise and improving the
management of markdowns. We have increased the investment in our own design
resource and in fabric and production management. Our investment in logistics,
particularly the new warehouse in Peterborough, as well as improving the data on
deliveries and the standards of presentation to the stores, has resulted in
efficiency gains.
Store Portfolio
Although Debenhams has a retail heritage of more than 100 years, we only have
132 Department stores across the United Kingdom and the Republic of Ireland. We
remain under-represented in many large cities and towns across the country which
presents us with significant expansion opportunities.
Debenhams now trades from 10.2 million square feet of prime retail space. We
continue to focus on our programme of expanding our Department store network,
alongside investing in the refurbishment of our core stores.
New Department Stores
One of the key growth drivers for Debenhams is to expand the store portfolio
across the country, particularly into some of the larger retail destinations
such as Liverpool, Newcastle and Bath where we are not currently represented.
Good progress has been made with our store acquisition programme. At the half
year end we had a new store pipeline of 29 Department stores contracted to open.
In the first half of this year we opened a new store in Llandudno, have since
opened the re-sited Wigan store in an exciting new position and will complete
before the year-end the opening of a new store in Warrington.
On 12th September 2006, the Company completed the acquisition from Roches of
nine stores in the Republic of Ireland. These stores are in prime retail
locations and have enabled us to gain critical mass within the country.
The integration of the former Roches stores and their conversion to the
Debenhams' format is progressing well. Seven of the nine stores have now been
largely converted and we expect to convert the remaining two stores by the end
of the year.
New Department stores continue to achieve a high return on capital invested and,
alongside our refurbishment programme, represent one of the best areas for the
deployment of capital for shareholders.
Desire by Debenhams
Three further Desire stores opened in the first half of the year, at Birmingham
Fort, Merthyr Tydfil and Kirkcaldy, and two more stores, in Altrincham and
Walton on Thames, are scheduled to open in the second half. The stores feature
women's fashion, lingerie, cosmetics and accessories; following analysis of the
results from the initial stores the accessories range has been expanded and
childrenswear now forms part of the core product ranging. Desire has a higher
own-bought participation and achieves higher gross margins than the department
stores. It benefits by leveraging off the existing Debenhams infrastructure but
there are also benefits to the Department store business, for example applying
aspects of the way in which Desire presents own brands in new Department stores
(such as Llandudno) and refurbishments.
International
Our international franchise business continues to extend the global reach of the
Debenhams' brand. During the first half of this year we opened our first
franchise store in Russia, and at the end of the half year there were 32 stores
in 15 countries. Since the end of the half year we have opened a third store in
Germany, one in Kuwait and our first store in Romania. We have contracted to
open a further 17 stores with identified sites by the end of the 2009 financial
year.
Internet
The new website was launched before Christmas. It has the capacity to manage
the significant demand for our products in this rapidly growing market. In
addition to increasing the availability of our ranges to a wider audience, the
new site also has enhanced navigation and search features. There has been a
significant increase in orders and average order value since it was launched and
our objective is to build on this new platform and develop the internet into one
of our largest stores.
Refurbishment Programme
During the first half of the year we continued our rolling programme of
refurbishments. The newly-refitted stores demonstrate strong performance
compared to our un-modernised stores and attractive returns on invested capital.
We intend to significantly accelerate our refurbishment programme and in total
over the next 18 months will refit around 60 of our stores. In the latest phase
of refurbishments we will be introducing some visual merchandising and shop-fit
elements from our Desire stores into the department store programme
CSR
Corporate social responsibility issues are integral to all aspects of the
Company's operations. The Company's main focus in this area continues to be on
it's supply chain, in particular on compliance with the Debenhams' Supplier Code
of Conduct and the controls, inspections and audits, working with the Ethical
Trading Initiative, of the factories in which our goods are made. Other CSR
initiatives in this half include a move to recycled carrier bags (we have
changed the Debenhams core carrier bags to 100% recycled material), the launch
of Fairtrade cotton in our lingerie ranges, the serving of Douwe Egberts Good
Origin Coffee (coffee beans that are certified as deriving from 100% sustainable
sources) throughout our 160 restaurants and cafes, and a programme of reducing
the amount of energy used in stores with on-target performance earning a top-up
to the store's prize fund.
Outlook
Sales from 4th March (the beginning of the second half year) to 15th April were
2.9% above last year (6.9% lower on a like-for-like basis). Although the
comparative period last year was particularly strong, sales achieved during
these weeks are below our expectations. Clearly it is very early in the period
but given this trend we must plan on the basis that like-for-like sales
performance may be negative in the second half. Any shortfall in sales will
inevitably impact on gross margins and we are therefore taking actions to
mitigate its effect on profits in the second half. Nevertheless we expect profit
for the year to be below current market expectations.
During the last 18 months we have necessarily focused our capital expenditure on
new store openings and acquisitions including Allders and Roches. We are now
planning to refit around 60 of our stores in the next 18 months. The refits may
cause some disruption but this investment will ensure that Debenhams stays at
the forefront of the UK retail market.
Throughout the business we are investing in better in-store service levels and
more contemporary presentation. I am confident that our investment in product,
value, service and our stores will drive like-for-like sales later in the
calendar year.
Consolidated Income Statement
For the 26 weeks ended 3 March 2007
Unaudited Unaudited Audited
26 weeks to 26 weeks to 52 weeks to
3 March 4 March 2 Sept
Note 2007 2006 2006
#m #m #m
Revenue 2 997.5 957.8 1,707.7
Cost of sales (815.0) (755.6) (1,376.3)
Gross profit 182.5 202.2 331.4
Distribution costs (23.3) (26.7) (53.0)
Administrative expenses (19.6) (22.4) (54.8)
Analysed as:
Administrative expenses before exceptional (19.6) (22.4) (40.2)
items
Exceptional administrative expenses 4 - - (14.6)
Operating profit 139.6 153.1 223.6
Analysed as:
Operating profit before exceptional items 139.6 153.1 238.2
Exceptional operating items 4 - - (14.6)
Interest receivable and similar income 5 3.8 4.4 7.3
Interest payable and similar charges 6 (37.9) (79.0) (168.8)
Analysed as:
Interest payable and similar charges before 6 (37.9) (79.0) (132.7)
exceptional items
Exceptional interest payable and similar 4,6 - - (36.1)
charges
Profit before taxation 105.5 78.5 62.1
Taxation 7 (31.4) (23.4) (18.4)
Analysed as:
Taxation before exceptional items (31.4) (23.4) (32.7)
Taxation credit on exceptional items - - 14.3
Profit for the financial period attributable to 11 74.1 55.1 43.7
equity shareholders
Earnings per share attributable to the equity shareholders (expressed in pence per share)
Pence per share Pence per share Pence per share
Basic 9 8.8 11.7 7.4
Diluted 9 8.8 11.7 7.4
Underlying earnings per share (non-GAAP 9 9.5 11.1 16.5
measures)
Dividends per share (expressed in pence per share)
Pence per share Pence per share Pence per share
Dividends per share 8 2.5 - 2.4
All Group operations during the financial periods were continuing operations.
Consolidated Statement of Recognised Income & Expenses
For the 26 weeks ended 3 March 2007
Unaudited Unaudited Audited
26 weeks to 26 weeks to 52 weeks to
3 March 4 March 2 Sept
2007 2006 2006
#m #m #m
Profit for the financial period 74.1 55.1 43.7
Actuarial gain/ (loss) recognised in the 6.6 1.3 (3.0)
pension scheme
Movement on deferred tax relating to the pension scheme (2.0) (0.4) 0.9
Cash flow hedges
- Net fair value gains (net of tax) 6.0 12.1 15.8
- Recycled and adjusted against the initial 2.5 (0.2)
(2.0)
measurement of the acquisition cost of inventory
- Reclassified and reported in net profit - (0.3) 0.8
Net gains recognised directly in equity 13.1 10.7 14.3
Total recognised income attributable to the equity of the Group 87.2 65.8 58.0
Adoption of IAS 32 and IAS 39 (net of tax) - (11.6) (11.6)
Consolidated Balance Sheet
At 3 March 2007
Unaudited Unaudited Audited
Note 3 March 4 March 2 Sept
2007 2006 2006
#m #m #m
ASSETS
Non current assets
Intangible assets 841.2 831.0 836.1
Property, plant and equipment 646.2 652.8 639.5
Financial assets
- Available for sale investments 8.2 8.2 8.2
- Derivative financial instruments 15.1 2.3 7.8
Retirement benefit assets 26.1 - 13.8
Deferred tax assets 49.4 65.1 51.1
1,586.2 1,559.4 1,556.5
Current assets
Inventories 231.2 226.1 207.8
Trade and other receivables 68.7 55.4 63.9
Financial assets - Derivative financial 0.4 1.1 -
instruments
Cash and cash equivalents 68.3 159.0 34.0
368.6 441.6 305.7
LIABILITIES
Current liabilities
Financial liabilities
- Bank overdraft and borrowings (1.3) (79.3) (33.1)
- Derivative financial instruments (1.8) (1.3) (5.3)
Trade and other payables (410.6) (403.7) (400.4)
Current tax liabilities (48.2) (43.2) (18.8)
Provisions (0.8) (6.0) (4.7)
(462.7) (533.5) (462.3)
Net current liabilities (94.1) (91.9) (156.6)
Non current liabilities
Financial liabilities
- Bank overdraft and borrowings (1,098.5) (1,822.3) (1,097.0)
- Derivative financial instruments (0.5) (7.8) (2.3)
Deferred tax liabilities (91.1) (78.2) (84.8)
Other non-current liabilities (179.9) (175.5) (161.0)
Provisions (0.7) (2.0) (1.5)
Retirement benefit obligations - (7.6) -
(1,370.7) (2,093.4) (1,346.6)
Net assets/(liabilities) 121.4 (625.9) 53.3
SHAREHOLDERS' EQUITY
Share capital 0.1 - 0.1
Share premium 682.9 - 682.9
Merger reserve 1,200.9 1,200.9 1,200.9
Reverse acquisition reserve (1,199.9) (1,199.9) (1,199.9)
Hedging reserve 10.0 (5.1) 1.5
Other reserves 1.0 1.0 1.0
Retained deficit (573.6) (622.8) (633.2)
Total equity 11 121.4 (625.9) 53.3
Consolidated Cash Flow Statement
for the 26 weeks ended 3 March 2007
Unaudited Unaudited Audited
Note 26 weeks to 26 weeks to 52 weeks to
3 March 4 March 2 Sept
2007 2006 2006
#m #m #m
Cash flows from operating activities
Cash generated from operations 12 173.4 203.4 317.0
Interest received 3.8 3.9 7.8
Interest paid (34.0) (74.7) (147.4)
Tax received 0.2 18.0 12.9
Net cash generated from operating activities 143.4 150.6 190.3
Cash flows from investing activities
Purchase of intangible assets (8.4) - -
Purchase of property, plant and equipment (36.1) (51.7) (88.6)
Proceeds from sale of property, plant and - 0.2 0.1
equipment
Net cash used in investing activities (44.5) (51.5) (88.5)
Cash flows from financing activities
Drawdown of Term Loan Facility - - 1,050.0
Drawdown of Senior Term Loan - 0.8 -
Repayment of Senior Term Loan - (9.5) (1,827.6)
Proceeds from issue of ordinary shares - - 700.0
Debt issue costs (2.7) - (12.6)
Appropriation - settlement of 'B' Loan Notes - (0.8) (50.1)
Appropriation - settlement of 'C' Loan Notes - - (22.1)
Dividends paid to shareholders (20.5) - -
Purchase of shares by Debenhams Retail Employee (0.1) - (2.0)
Trust 2004 ("DRET")
Appropriation by DRET (9.7) - (1.1)
Net cash used in financing activities (33.0) (9.5) (165.5)
Net increase/(decrease) in cash and cash equivalents 65.9 89.6 (63.7)
Cash and cash equivalents at beginning of financial 0.3 64.0 64.0
period
Cash and cash equivalents at end of financial 13 66.2 153.6 0.3
period
1 Basis of preparation
The Group's interim results for the 26 weeks ended 3 March 2007 have been
prepared in accordance with the Listing Rules of the Financial Services
Authority using the accounting policies set out in the Group's 2006 Annual
Report and Financial Statements.
The Group has chosen not to adopt IAS 34, 'Interim financial statements', in
preparing its 2007 interim statements and, therefore, this interim financial
information is not in full compliance with IFRS.
The Group's interim consolidated financial information is not audited and does
not constitute statutory financial statements as defined in section 240 of the
Companies Act 1985. Comparative figures for the year ended 2 September 2006 have
been extracted from the Group's 2006 Annual Report and Financial Statements, on
which the auditors gave an unqualified opinion and did not include a statement
under section 237(2) or (3) of the Companies Act 1985. The full financial
statements for that year have been filed with the Registrar of Companies.
The Directors believe that the underlying operating profit and earnings per
share measures provide additional useful information for shareholders on the
underlying performance of the business, and are consistent with how business
performance is measured internally. It is not a recognised profit measure under
IFRS and may not be directly comparable with underlying profit measures used by
other companies.
Non-GAAP measure
26 weeks to 26 weeks to 52 weeks to
3 March 4 March 2 Sept
2007 2006 2006
#m #m #m
Operating profit before exceptional items 139.6 153.1 238.2
Leases with fixed annual increments in rent 7.3 7.7 14.9
Share-based payments 1.5 8.8 14.3
Underlying operating profit before exceptional items 148.4 169.6 267.4
2 Turnover
The Group has one class of business, retailing, and all material operations are
in the UK.
3 Gross transaction value
Revenue from concessions is required to be shown on a net basis, being the
commission received rather than the gross value achieved by the concessionaire
on the sale. Management believe that gross transaction value, which presents
revenue on a gross basis before adjusting for concessions, staff discounts and
the cost of loyalty scheme points, represents a better guide to the value of the
overall activity of the Group.
26 weeks to 26 weeks to 52 weeks to
3 March 4 March 2 Sept
2007 2006 2006
#m #m #m
Gross transaction value 1,287.8 1,216.8 2,192.9
4 Exceptional items
Exceptional items are events or transactions that fall within the activities of
the Group and which by virtue of their size or incidence have been disclosed in
order to improve a reader's understanding of the financial statements.
26 weeks to 26 weeks to 52 weeks to
3 March 4 March 2 Sept
2007 2006 2006
#m #m #m
Operating exceptional items:
Admission to the London Stock Exchange - - 4.6
Other exceptional item - - 10.0
Total operating exceptional items - - 14.6
Write off of capitalised debt costs on refinancing (note 6) - - 33.5
Interest on refinancing (note 6) - - 2.6
Total exceptional items before tax - - 50.7
Financial period ended 2 September 2006
Admission to the London Stock Exchange
Costs relating to the Company's Admission to the London Stock Exchange include
taxation and restructuring advice of #1.0 million, legal and professional fees
of #1.0 million, bonuses of #1.1 million and other advisory services of #1.5
million, relating to printing costs, marketing and public relations all of which
related to the Admission.
Other exceptional items
Restricted cash of #10.3 million is held by The Debenhams Retail Employee Trust
2004. As a consequence of the Company's Admission to the London Stock Exchange
the trustees agreed to distribute #10.0 million of this restricted cash to the
beneficiaries of the Trust, creating an exceptional cost of #10.0 million.
Interest on refinancing
On 30 May 2006 the Group refinanced its debt, which resulted in the repayment of
the senior credit facilities. As a result of this repayment the Group wrote-off
all unamortised debt issue costs associated with the senior credit facility,
which amounted to #33.5 million. All fees associated with the new term loan
facility are being amortised over the term of the facility.
Additional interest expense of #2.1 million relating to the early repayment of
the senior credit facility was incurred on refinancing. As a result of the
refinancing the interest rate hedging strategy required the restructuring of the
interest rate swap portfolio. This resulted in the close out of the interest
rate cap and the restructuring of the two forward start interest rate swaps at a
cost of #0.5 million.
5 Interest receivable and similar income
26 weeks to 26 weeks to 52 weeks to
3 March 4 March 2 Sept
2007 2006 2006
#m #m #m
Interest on bank deposits 3.8 4.1 7.3
Fair value gain on interest rate swaps transferred from - 0.3 -
equity
3.8 4.4 7.3
6 Interest payable and similar charges
26 weeks to 26 weeks to 52 weeks to
3 March 4 March 2 Sept
2007 2006 2006
#m #m #m
Interest payable and similar charges
Bank loans and overdrafts (33.5) (74.7) (124.1)
Amortisation of issue costs on loans (1.9) (2.8) (5.1)
Interest payable on finance leases (2.5) (1.5) (3.5)
Interest payable before exceptional items (37.9) (79.0) (132.7)
Exceptional items - interest payable and similar charges
Unamortised issue costs written off on repayment of the - -
senior term loan (note 4)
(33.5)
Premium on early settlement of the senior term loan (note - - (2.1)
4)
Cost of restructuring the interest swap portfolio (note - -
4) (0.5)
Exceptional items - interest payable and similar charges - - (36.1)
Interest payable and similar charges after exceptional (37.9) (79.0) (168.8)
items
7 Taxation
The taxation charge for the 26 weeks ended 3 March 2007 is based on an estimated
effective tax rate for the full year of 29.8% (year ended 2 September 2006:
29.6%).
8 Dividends
The Company paid a final dividend in respect of the financial year ended 2
September 2006 of 2.4 pence per share on 4 January 2007. The directors are
proposing an interim dividend in respect of the 26 weeks ended 3 March 2007 of
2.5 pence per share which will absorb an estimated #21.5 million of
shareholders' funds. It will be paid on 4 July 2007 to shareholders who are on
the register of members at close of business on 8 June 2007.
9 Earnings per share
Basic earnings per share is calculated by dividing the earnings attributable to
ordinary shareholders by the weighted average number of ordinary shares
outstanding during the period.
For diluted earnings per share, the weighted average number of ordinary shares
in issue is adjusted to assume conversion of all dilutive potential ordinary
shares. The Group has one class of dilutive potential ordinary shares, those
share options granted to employees where the exercise price is less than the
market price of the Company's ordinary shares during the year. At 3 March 2007
and 4 March 2006, the performance criteria for the vesting period of the share
options had not been met and consequently the shares in question are excluded
from the diluted earnings per share calculation.
9 Earnings per share (continued)
Basic and diluted earnings per share 26 weeks to 26 weeks to 52 weeks to
3 March 4 March 2 Sept
2007 2006 2006
Basic Diluted Basic Diluted Basic Diluted
#m #m #m #m #m #m
Profit for the financial period 74.1 74.1 55.1 55.1 43.7 43.7
Number Number Number Number Number Number
m m m m m m
Weighted average number of shares 859.0 859.0 500.0 500.0 614.4 614.4
Shares held by ESOP (weighted) (16.6) (16.6) (29.7) (29.7) (25.6) (25.6)
Shares issuable (weighted) - 3.2 - - - 5.6
Adjusted weighted average number of shares 842.4 845.6 470.3 470.3 588.8 594.4
Pence per Pence per Pence per Pence per Pence per Pence per
share share share share share share
Earnings per share 8.8 8.8 11.7 11.7 7.4 7.4
Underlying earnings per share
The underlying earnings per share reflects the underlying performance of the
business compared with the prior period and is calculated by dividing underlying
earnings by the number of shares in issue at the period end.
26 weeks to 26 weeks to 52 weeks to
3 March 4 March 2 Sept
2007 2006 2006
#m #m #m
Profit for the financial period 74.1 55.1 43.7
Exceptional items - - 50.7
Leases with fixed annual increments in rent 7.3 7.7 14.9
Share-based payments 1.5 8.8 14.3
Interest adjustments 1.9 40.6 58.3
Adjustment to tax charge to reflect the above items (3.2) (17.1) (40.5)
Underlying profit for the period 81.6 95.1 141.4
Number Number Number
m m m
Issued share capital at 2 September 2006 and at 3 March 2007 859.0 859.0 859.0
Pence per Pence per Pence per
share share share
Underlying earnings per share 9.5 11.1 16.5
Underlying profit is used by management as a measure of profitability within the
Group. It is defined as profit before exceptional items, the impact of leases
with fixed annual increments in rent, charges relating to share-based payments,
debt amortisation costs and adjustments for 53 week periods (if applicable). In
addition, in 2006 the Group underwent significant re-financing. In consequence,
the statutory interest and related financing costs for 2006 and 2005 are not
comparable. The adjustments for interest in 2006 and 2005 assumes that the 2006
re-financing, which took place after the date of Admission, was effective at the
beginning of the year ended 2 September 2006 and that the proceeds of shares
issued on Admission (#700 million) were available at that date.
The comparison of performance period on period has also been made complex by
costs incurred as a result of the Company's Admission to the London Stock
Exchange on 9 May 2006 which increased the number of shares issued by the
Company. The underlying earnings per share uses the capital structure as at 2
September 2006 (which remains unchanged at 3 March 2007) to eliminate the effect
of these changes.
10 Acquisition of a business
On 12 September 2006 the Group acquired the business and assets of 9 stores
based in the Republic of Ireland. The consideration for this acquisition was
Euro44.1 million, with Euro30.1 million payable on completion, Euro5 million payable on
the first anniversary and Euro9 million on the second anniversary of completion.
The assets acquired included stock, fixtures and equipment at each of the stores
and related goodwill.
All tangible and intangible assets acquired have been recognised at their
respective fair values. The provisional fair values of the tangible fixed
assets, stock and receivables acquired were Euro20.7 million, Euro15.1 million and
Euro0.9 million respectively.
The residual excess over the net assets acquired has been recognised as goodwill
and provisionally amounts to Euro7.4 million. Goodwill represents the intrinsic
value to the Group of being able to trade the Debenhams brand in these stores.
11 Consolidated statement of changes in shareholders' equity
26 weeks to 26 weeks to 52 weeks to
3 March 4 March 2 Sept
2007 2006 2006
#m #m #m
Opening shareholders' equity 53.3 (680.7) (680.7)
First time adoption of IAS 32 and 39 - (11.6) (11.6)
53.3 (692.3) (692.3)
Profit for the financial period 74.1 55.1 43.7
Actuarial gain/(loss) gain in pension schemes 6.6 1.3 (3.0)
Movement in deferred tax relating to pension schemes (2.0) (0.4) 0.9
Dividends paid (20.5) - -
Cash flow hedges 8.5 9.8 16.4
Employee share ownership plans (net of tax) 1.5 0.6 2.1
'A' Loan Notes held by DRET - - 26.8
'C' Loan Notes held by Baroness Employee Limited Partnership - - (22.3)
Issue of shares - - 683.0
Purchase of treasury shares for DRET (0.1) - (2.0)
Closing shareholders' equity 121.4 (625.9) 53.3
12 Cash generated from operations
26 weeks to 26 weeks to 52 weeks to
3 March 4 March 2 Sept
2007 2006 2006
#m #m #m
Profit for the financial period 74.1 55.1 43.7
Taxation 31.4 23.4 18.4
Depreciation 43.6 42.4 86.0
Amortisation 3.2 2.3 5.1
Loss/(profit) on disposal of property, plant and equipment - 0.4 (0.1)
Employee options granted during the year 1.5 - 2.8
Appropriation by DRET - - 1.1
Fair value (losses)/gains on derivative instruments (0.9) - 1.9
Swap costs - - (0.8)
Net movements in provisions (3.7) (1.2) (3.0)
Interest income (note 5) (3.8) (4.4) (7.3)
Interest expense (note 6) 37.9 79.0 168.8
Difference between pension charge and contributions paid (5.6) (0.5) (26.2)
Net movement in long-term liabilities 18.8 16.7 2.2
Changes in working capital
Increase in inventories (23.4) (28.9) (10.6)
Increase in trade and other receivables (7.4) (1.6) (8.2)
Increase in trade and other payables 7.7 20.7 43.2
Cash generated from operations
173.4 203.4 317.0
13 Analysis of changes in net debt
At Cash flow Non cash At
2 Sept movements 3 March
2006 2007
#m #m #m #m
Analysis of net debt
Cash 34.0 34.3 - 68.3
Bank overdrafts (33.7) 31.6 - (2.1)
Cash and cash equivalents 0.3 65.9 - 66.2
Debt due within one year 3.6 - (0.3) 3.3
Debt due after one year (1,038.0) 2.7 (4.5) (1,039.8)
Finance lease obligations due within one year (3.0) - 0.5 (2.5)
Finance lease obligations due after one year (59.0) - 0.3 (58.7)
(1,096.1) 68.6 (4.0) (1,031.5)
14 Financial information
Copies of the statutory accounts are available from the Company's registrars -
Lloyds TSB Registrars, The Causeway, Worthing, West Sussex, BN99 6DA (0870 600
3970), and at the Company's registered office, 1 Welbeck Street, London, W1G
0AA.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR GUURWCUPMPUQ
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