TIDMDEB
RNS Number : 6232B
Debenhams plc
19 April 2012
19 April 2012
DEBENHAMS PLC
HALF YEAR RESULTS FOR 26 WEEKS TO 3 MARCH 2012
Higher sales and profits in a difficult market
Financial Highlights
-- Group gross transaction value up 1.4%
-- Group like-for-like sales up 1.4% including VAT, up 0.3% excluding VAT
-- Group gross margin down 30 basis points, in line with guidance
-- Profit before tax ahead of market expectations, up 1.4% at GBP127.1m
-- Earnings per share up 4.2% to 7.4p
-- Interim dividend of 1.0p per share
-- Net debt reduced by GBP71.9m during half to GBP311.8m
-- Long-term share buyback programme to commence with initial GBP20m over next 6 months
Operational Highlights
-- Experienced management team in place under leadership of CEO Michael Sharp
-- Investment in UK store estate: pipeline now at 14 stores up to 2017
-- On target to complete 45 store modernisations in next 2 years
-- Multi-channel business continues to grow strongly; online sales up 34.7%*
-- Awarded Multi-Channel Retailer of the Year at Oracle Retail Week Awards 2012
-- 3 new international franchise stores opened; pipeline now at 13 stores
-- Solid performance by Magasin du Nord: like-for-like sales up 0.9%
-- International online delivery expanded to 40 countries
-- Ongoing cost, stock and capital discipline
*excluding Magasin
Michael Sharp, Chief Executive of Debenhams, said:
"We are pleased with our results for the first half, with profit
before tax ahead of market expectations despite the challenges
presented by the overall retail climate and unfavourable weather
conditions in the autumn.
"At this stage we remain comfortable with the market's current
outlook for the full year. However, we are mindful of the impact
the wider economy may have on consumer behaviour in the second half
of the year as well as the uncertain effects of the major one-off
events taking place in the UK during the summer. Disruption from
the store modernisation programme will also be at its highest
during the second half.
"I set out the four pillars of our strategy to create a leading
international, multi-channel brand in October last year. I am
encouraged by the strong execution over the last six months and am
confident of the long-term success of this strategy and the
benefits it will bring to our business and our shareholders. We are
also pleased to be announcing today the commencement of a long-term
share buyback programme."
FINANCIAL SUMMARY
H1 12 H1 11 % change
----------------------------------- ------------ ------------ ---------
Group gross transaction value
(incl. Magasin) GBP1,483.6m GBP1,463.0m +1.4%
----------------------------------- ------------ ------------ ---------
Gross transaction value (excl.
Magasin) GBP1,346.0m GBP1,328.8m +1.3%
----------------------------------- ------------ ------------ ---------
Statutory revenue GBP1,238.3m GBP1,222.3m +1.3%
----------------------------------- ------------ ------------ ---------
Group like-for-like sales - incl.
VAT +1.4%
----------------------------------- ------------ ------------ ---------
Group like-for-like sales - excl.
VAT +0.3%
----------------------------------- ------------ ------------ ---------
Group gross margin(a) - incl.
Magasin -0.3%
----------------------------------- ------------ ------------ ---------
Gross margin(a) - excl. Magasin -0.5%
----------------------------------- ------------ ------------ ---------
Group operating profit GBP134.9m GBP137.7m -2.0%
----------------------------------- ------------ ------------ ---------
Headline profit before tax (b) GBP128.5m GBP129.2m -0.5%
----------------------------------- ------------ ------------ ---------
Reported profit before tax GBP127.1m GBP125.3m +1.4%
----------------------------------- ------------ ------------ ---------
Earnings per share 7.4p 7.1p +4.2%
----------------------------------- ------------ ------------ ---------
Interim dividend per share 1.0p 1.0p -
----------------------------------- ------------ ------------ ---------
03-03-12 26-02-11
----------------------------------- ------------ ------------ ---------
Net debt GBP311.8m GBP351.6m GBP39.8m
----------------------------------- ------------ ------------ ---------
Net debt : EBITDA(c) 1.1x 1.3x
----------------------------------- ------------ ------------ ---------
(a) Gross margin: gross transaction value less cost of goods
sold, as a percentage of gross transaction value
(b) After adding back GBP1.4m of amortisation on capitalised bank fees (H1 11: GBP3.9m)
(c) Period end net debt divided by last 12 months' EBITDA
Enquiries
Investors and analysts
Debenhams plc
Lisa Williams, Investor Relations 020 7408 3304, 07908
483841
Press
FTI Consulting
Jonathon Brill 020 7269 7170
Caroline Stewart 020 7269 7227
A presentation for investors and analysts will be held today at
10:00am in King Edward Hall Auditorium at Bank of America Merrill
Lynch, 2 King Edward Street, London EC1A 1HQ. A live webcast of
this presentation will be available at www.debenhamsplc.com.
High resolution images are available for media to view and
download free of charge from www.prshots.com/Debenhams.
FIRST HALF FINANCIAL PERFORMANCE
Note: all comparisons relate to the 26 weeks to 3 March 2012
versus the 26 weeks to 26 February 2011 unless stated
otherwise.
We are pleased with Debenhams' financial performance in the
first half given the difficult economic environment and the impact
of unseasonably warm weather in the autumn, which affected sales of
key product categories such as outerwear.
Sales
Group gross transaction value for the period grew by 1.4% to
GBP1,483.6 million. Excluding Magasin, gross transaction value was
GBP1,346.0 million (H1 2011: GBP1,328.8 million). Statutory revenue
increased by 1.3% to GBP1,238.3 million.
Group like-for-like sales increased by 1.4% including VAT and by
0.3% excluding VAT.
Magasin has continued to perform well. Like-for-like sales
increased by 0.9% on a Danish kroner basis and by 1.7% on a
sterling basis.
Market Share
Total fashion market share for the 12 weeks to 18 March 2012 was
flat at 4.7%. Womenswear share fell by 10 basis points as we
completed the work to replace closed concessions. Menswear grew by
20 basis points whilst childrenswear was flat. We continue to see
market share growth in categories which have been especially
targeted for share growth, such as footwear and health and beauty.
Women's and men's footwear market share each increased by 60 basis
points over the 12 week period. Health and beauty market share
continues to grow strongly. For the 52 weeks to February 2012 our
share of the premium health and beauty market increased by 110
basis points to 29.1%. (Sources: fashion Kantar Worldpanel Fashion
12 weeks market share to 18 March 2012 vs. 2011; health and beauty
NPD 52 weeks to February 2012.)
Margins and Costs
Gross margin on a Group basis was 30 basis points lower than
last year in the period, in line with guidance. This includes
Magasin where gross margin increased by 140 basis points as a
result of a higher own bought sales mix. Excluding Magasin, gross
margin fell by 50 basis points, largely as a result of strong sales
growth in the lower margin health and beauty category. For the full
year, our gross margin guidance remains broadly flat.
The Group continues to manage costs tightly. Total costs
(excluding interest and tax) increased by 1.7% in the first half.
Full year expectations for the major cost categories remain in line
with guidance provided at the start of the year.
The net interest charge decreased from GBP12.4 million in the
first half of last year to GBP7.8 million this year due mainly to
lower interest costs associated with the bank facilities which were
refinanced in July 2011 and lower net debt.
Stock
Stock levels remain firmly under control. Terminal stock at the
end of the half was in line with our long-term average at 2.7%.
Total stock grew by 4.5%, largely due to new space and growth in
online sales.
Profitability
Group EBITDA for the first half fell by 1.0% to GBP181.1
million. Group operating profit declined by 2.0% to GBP134.9
million.
Profit before tax was ahead of market consensus for the first
half, up 1.4% at GBP127.1 million (H1 2011: GBP125.3 million).
Headline profit before tax which adds back amortisation of
capitalised bank fees of GBP1.4 million (H1 2011: GBP3.9 million)
was GBP128.5 million (H1 2011: GBP129.2 million). Going forward, we
will discontinue the use of headline profit before tax as it will
continue to converge with the reported number.
Basic earnings per share increased by 4.2% to 7.4 pence compared
with 7.1 pence for the first half of last year, benefitting from
lower interest charges and a reduction in the tax rate.
Capital Expenditure
Further investment was made in the Group's business during the
half resulting in capital investment of GBP47.7 million. Capital
expenditure guidance for the year remains in the region of GBP120
million.
Capital Generation and Net Debt
The business generated a cash inflow from operating activities
before financing and after capital expenditure of GBP131.6 million
(H1 2011: GBP123.7 million excluding the impact of the lease
transactions) in the first six months of the year. Net debt at the
end of the period was GBP311.8 million. This was an improvement of
GBP39.8 million over the position at the end of the first half last
year (26 February 2011) and GBP71.9 million better than at the end
of the last financial year (3 September 2011). Lower net debt
resulted in an improvement in the gearing ratio (net debt to last
12 months' EBITDA) from 1.3 times at the end of the first half last
year to 1.1 times this year.
Taxation
The Group's taxation charge of GBP31.6 million (H1 2011: GBP33.8
million) represents an effective tax rate of 24.9% (H1 2011:
27.0%).
Dividend
An interim dividend per share for 2012 of 1.0 pence (2011: 1.0
pence) will be paid on 6 July 2012 (see timetable below). The scrip
dividend scheme, which was last offered in 2009, has been
discontinued.
Share Buyback Programme
As stated at the full year results in October 2011, the board of
Debenhams sees little benefit in sustaining leverage below 1.0
times EBITDA. The Group generates strong cash flows and has a
robust balance sheet. We continue to invest in the business and in
new growth opportunities; capital expenditure in the last financial
year was GBP114 million and guidance for the current financial year
remains at around GBP120 million as we invest in the four pillars
of the strategy set out last year.
We believe that Debenhams will increasingly generate cash in
excess of that required to fund our growth plans and to grow the
dividend. Alongside our goal of moving towards 1.0x net
debt/EBITDA, we are today announcing that we will commence a
long-term share buyback programme.
Over the next six months, Debenhams intends to use up to GBP20
million to buy back shares. We will update the market on our
intentions for the following twelve months at the full year results
in October 2012.
STRATEGY UPDATE
A number of key management appointments were made during the
half. Michael Sharp succeeded Rob Templeman as Chief Executive on 5
September 2011. Simon Herrick replaced Chris Woodhouse as Chief
Financial Officer on 10 January 2012. Mike Goring took up the
appointment of Retail Director on 12 January 2012.
We set out the four pillars of our strategy to create a leading
international, multi-channel brand in October 2011. They are:
1. focusing on UK retail;
2. delivering a compelling customer proposition;
3. increasing availability and choice through multi-channel; and
4. expanding the brand internationally.
Focusing on UK retail
The UK store base will continue to be Debenhams' largest single
sales channel for the foreseeable future. At the end of the first
half the store portfolio in the UK and Republic of Ireland
consisted of 164 stores occupying 11,606,000 sq ft of trading
space. Of these 142 are full department stores and 22 are small
format stores (25,000 sq ft or less).
One new store opened during the first half in Newbury (53,000 sq
ft, opened October 2011). In total, we believe there are
opportunities for up to 240 economically viable stores in the UK
and Ireland. Five new stores have recently been contracted taking
the new store pipeline to 14 including Dumfries, opening in May
2012, and Chesterfield, scheduled to open in September 2012. These
14 stores represent a total of 660,000 sq ft of space. We are in
discussion on another 25 new store opportunities.
We have committed to modernising the 45 core stores in the UK
and Ireland portfolio within the next two years (i.e. those which
are neither new nor recently modernised). Six refits which had
commenced during the previous financial year were completed in the
first half of this year. Another nine are currently on site and
will be completed by mid-June 2012 with a further nine commencing
in May 2012. Results from the 14 modernisations completed over the
past 18 months continue to be encouraging with an average sales
increase post-modernisation of around 6% and return on capital in
the region of 15%. We have managed the disruption caused by
modernisations well but there will still inevitably be an impact on
sales due to the large number of projects being undertaken. This
will be particularly pronounced in the second half of this
financial year as some 20 stores will be undergoing work at the
same time.
Delivering a compelling customer proposition
Our focus is on the brand and product strategy, instore
execution and communicating the proposition.
Own bought sales were broadly flat on last year during the first
half at 81.9% (H1 2011: 82.1%) excluding Magasin. The strength of
Debenhams model - which encompasses Designers at Debenhams, core
brands and international brands complemented by concessions - was
demonstrated in the first half by allowing customers to trade up
and down the price architecture to meet their budgets. Core own
brands performed well in the main clothing categories and overall
were up 0.7% during the first half. Designers at Debenhams sales
were undoubtedly impacted by the warm autumn weather which affected
sales of outerwear in particular, a key product category for a
department store. As a result, Designer sales fell by 2.6% versus
last year to GBP285 million. Our medium-term target is to grow
Designers at Debenhams to annual sales of GBP750 million.
Increasing availability and choice through multi-channel
Whilst online is just one of the multiple channels now available
for our customers to shop Debenhams, online sales are a useful
proxy for the growth of the multi-channel business as a whole.
Online sales have continued to grow strongly, increasing by 34.7%
to GBP124.3 million for the first half (excluding Magasin). On a
two year basis, sales are up by nearly 150%. Our target is to grow
online sales to GBP500 million over the medium-term. Online EBITDA
increased by 36.4% as the initiatives we are taking to improve the
profitability on this business, particularly in relation to
fulfilment costs, began to take effect.
Key initiatives in the first half included the deployment of
kiosks across the entire store base which increase availability in
all stores and provide range extension in smaller stores. Sales
generated by the kiosks were very encouraging over the important
Christmas trading period. We continue to carry out trials to find
the optimum number and grouping of kiosks in stores. Mobile is the
fastest growing channel and 20% of online traffic is now generated
by mobile devices. "Endless Aisle", which aims to increase
fulfilment rates by utilising the store base as well as fulfilment
centres to meet customer demand, was introduced during the first
half and is already proving successful. We estimate that some GBP10
million of potentially lost sales were captured during the
period.
We were delighted to be awarded Multichannel Retailer of the
Year at the Oracle Retail Week Awards in March 2012.
Expanding the brand internationally
International expansion will be achieved through three routes:
international franchise stores; owned international assets; and
international online delivery.
Gross transaction value for the international franchise stores
increased by 23.5% to GBP44.1 million during the first half. Three
new stores opening during the first half (two in the Philippines,
one in Iran), taking the total at the end of the period to 67
stores in 25 countries. Three more are scheduled to open in the
second half (two in India, one in Pakistan). Six stores are due to
open next year and four in 2014. A further 50 opportunities are
under discussion and it is our ambition to have 130 franchise
stores by 2016/17.
Owned international assets comprise Magasin du Nord, the leading
Danish department store group with six stores. Magasin's first half
performance is discussed in the financial review section above.
Of the online sales target of GBP500 million, we anticipate some
20% will be generated by international online delivery. During the
first half the number of countries we deliver to has increased from
seven to 40. This will increase again to 67 by the end of the
summer. The first local language, local currency website will be
officially launched in Germany in May 2012 and this will be
followed by a number of other sites over the coming months,
facilitated by our investment in the latest IBM Websphere 7
platform.
OUTLOOK
At this stage we remain comfortable with the market's current
outlook for the full year. However, we are mindful of the impact
the wider economy may have on consumer behaviour in the second half
of the year as well as the uncertain effects of the major one-off
events taking place in the UK during the summer. Disruption from
the store modernisation programme will also be at its highest
during the second half.
PRINCIPAL RISKS AND UNCERTAINTIES
The principal risks and uncertainties for the remainder of the
year are unchanged from those detailed in the Group's Annual Report
and Accounts for 2011 (see pages 32 to 37 of that document). The
risks which are most relevant to the second half of the financial
year are: a consistent fall in customer spending as a result of
economic downturn, inflation or deflation; competitive pressures in
existing markets influencing customer behaviour; and inability to
predict or fulfil customer demands or preferences.
BOARD OF DIRECTORS
Simon Herrick joined the board of directors on 1 November 2011
and was appointed Chief Financial Officer on 10 January 2012. Chris
Woodhouse resigned from the board on 10 January 2012.
The board of directors as at 19 April 2012 is as follows: Nigel
Northridge (chairman), Michael Sharp (chief executive), Simon
Herrick (chief financial officer), Adam Crozier (non-executive
director), Martina King (non-executive director), Dennis Millard
(non-executive director), Mark Rolfe (non-executive director) and
Sophie Turner Laing (non-executive director).
GOING CONCERN
After making enquiries, the directors of Debenhams plc consider
that the Group has adequate resources to continue in operation for
the foreseeable future. For this reason, they have adopted the
going concern basis in preparing these interim financial
statements.
DIVIDEND TIMETABLE
The following timetable applies to the interim dividend of 1.0
pence per share which the board has today resolved to pay.
Ex-dividend date 6 June 2012
Record date 8 June 2012
Dividend payment date 6 July 2012
Notes to editors
Debenhams is an iconic British department store group which was
established over 200 years ago. Debenhams has a strong presence in
key product categories including womenswear, menswear,
childrenswear, home and health and beauty and offers its customers
a unique and differentiated mix of exclusive own bought brands
including Designers at Debenhams, international brands and
concessions.
Debenhams has 170 stores in the UK, the Republic of Ireland and
Denmark as well as 67 international franchise stores in 25
countries. Debenhams products are also available online at
www.debenhams.com and www.debenhams.ie and through iPhone, iPad,
Android and Nokia apps.
Designers at Debenhams include Ted Baker, Jeff Banks, Jasper
Conran, Erickson Beamon, FrostFrench, Henry Holland, Roksanda
Ilincic, Betty Jackson, Jonathan Kelsey, Carol Lake, Ben de Lisi,
Julien Macdonald, Melissa Odabash, Jane Packer, Jenny Packham,
Pearce Fionda, Preen, Janet Reger, John Rocha, Jonathan Saunders,
Lisa Stickley, Yukari Sweeney, Ashley Thomas, Eric Van Peterson and
Matthew Williamson.
Debenhams was awarded "Multichannel Retailer of the Year" at the
Oracle Retail Week Awards in March 2012.
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. Neither the content of the Company's website
nor the content of any website accessible from hyperlinks on the
Company's website (or any other website) is (or is deemed to be)
incorporated into or forms (or is deemed to form) part of this
announcement.
Independent review report to Debenhams plc
Introduction
We have been engaged by the Company to review the interim
condensed consolidated financial information in the half-yearly
financial report for the 26 weeks ended 3 March 2012, which
comprises the consolidated income statement, the consolidated
statement of comprehensive income, the consolidated balance sheet,
the consolidated statement of changes in equity, the consolidated
cash flow statement and related notes. We have read the other
information contained in the half-yearly financial report and
considered whether it contains any apparent misstatements or
material inconsistencies with the information in the condensed set
of financial statements.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the Directors. The Directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure and Transparency Rules of the United Kingdom's
Financial Services Authority.
As disclosed in note 1, the annual financial statements of the
Group are prepared in accordance with IFRSs as adopted by the
European Union. The condensed set of financial statements included
in this half-yearly financial report has been prepared in
accordance with International Accounting Standard 34, 'Interim
Financial Reporting', as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review. This report, including the
conclusion, has been prepared for and only for the Company for the
purpose of the Disclosure and Transparency Rules of the Financial
Services Authority and for no other purpose. We do not, in
producing this report, accept or assume responsibility for any
other purpose or to any other person to whom this report is shown
or into whose hands it may come save where expressly agreed by our
prior consent in writing.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, 'Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity' issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK and Ireland) and consequently does not enable us to
obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the interim condensed consolidated
financial information in the half-yearly financial report for the
26 weeks ended 3 March 2012 is not prepared, in all material
respects, in accordance with International Accounting Standard 34
as adopted by the European Union and the Disclosure and
Transparency Rules of the United Kingdom's Financial Services
Authority.
PricewaterhouseCoopers LLP
Chartered Accountants
19 April 2012
London
Consolidated Income Statement
For the 26 weeks ended 3 March 2012
Unaudited Unaudited Audited
26 weeks 26 weeks 53 weeks
to to to
Note 3 March 26 February 3 September
2012 2011 2011
GBPm GBPm GBPm
---------------------------------------------- ------ ---------- ------------- -------------
Revenue 2,3 1,238.3 1,222.3 2,209.8
Cost of sales (1,038.9) (1,027.1) (1,913.1)
Gross profit 199.4 195.2 296.7
Distribution costs (42.3) (37.6) (70.2)
Administrative expenses (22.2) (19.9) (42.8)
Operating profit 3 134.9 137.7 183.7
Finance income 4 0.6 3.7 3.9
Finance costs 5 (8.4) (16.1) (27.3)
Profit before taxation 127.1 125.3 160.3
Taxation 6 (31.6) (33.8) (43.1)
Profit for the financial period attributable
to equity shareholders 95.5 91.5 117.2
Earnings per share attributable to the equity shareholders
(expressed in pence per share)
Pence per Pence per Pence per
share share share
--------------------------------- ------------ ------------ -------------- ----------
Basic 7 7.4 7.1 9.1
Diluted 7 7.4 7.1 9.1
----------------------------------------------- ------------ -------------- ----------
The notes on pages 16 to 22 form an integral part of this
condensed consolidated interim financial information.
Consolidated Statement of Comprehensive Income
For the 26 weeks ended 3 March 2012
Note Unaudited Unaudited Audited
26 weeks 26 weeks 53 weeks
to to to
3 March 26 February 3 September
2012 2011 2011
GBPm GBPm GBPm
------------------------------------------------------- ------- ---------- ------------- -------------
Profit for the financial period 95.5 91.5 117.2
Other comprehensive (expense)/income
Actuarial (losses)/gains recognised
in the pension schemes 10 (13.0) 62.0 75.8
Deferred tax movement on actuarial
losses/(gains) 0.8 (17.9) (22.5)
Current tax movement on the pension
schemes 1.1 - 2.1
Sale of available-for-sale investment - - (2.0)
Change in the value of available-for-sale
investments (0.3) 0.1 (0.2)
Currency translation differences (3.8) 2.6 4.3
Cash flow hedges
- net fair value gains/(losses) 8.4 (5.6) (15.7)
- tax on net fair value gains/(losses) (2.1) 1.5 3.9
* reclassified and reported in net profit - - 4.7
- tax on items reclassified and reported
in net profit - - (1.2)
* recycled and adjusted against the cost of sales 0.4 (2.4) 1.8
* tax on items recycled against the cost of sales (0.1) 0.6 (0.5)
Total other comprehensive (expense)/income (8.6) 40.9 50.5
Total comprehensive income for the period 86.9 132.4 167.7
The notes on pages 16 to 22 form an integral part of this
condensed consolidated interim financial information.
Consolidated Balance Sheet
At 3 March 2012
Unaudited Unaudited Audited
3 March 26 February 3 September
2012 2011 2011
Note GBPm GBPm GBPm
---------------------------------- --- ------ ----------- -------------- -------------
ASSETS
Non-current assets
Intangible assets 9 861.7 847.1 858.1
Property, plant and equipment 9 629.4 618.4 634.6
Available-for-sale investments 2.2 7.7 2.6
Derivative financial instruments 0.7 1.1 1.4
Other receivables 17.3 17.8 18.3
Retirement benefit assets 10 4.1 - 3.9
Deferred tax assets 78.5 77.7 75.7
1,593.9 1,569.8 1,594.6
-------------------------------------- ------ ----------- -------------- -------------
Current assets
Inventories 340.2 325.6 321.3
Trade and other receivables 71.9 71.7 72.1
Derivative financial instruments 6.8 1.2 1.2
Cash and cash equivalents 13 38.8 35.4 29.0
457.7 433.9 423.6
-------------------------------------- ------ ----------- -------------- -------------
LIABILITIES
Current liabilities
Bank overdraft and borrowings 13 (107.1) (143.7) (168.1)
Derivative financial instruments (0.9) (10.0) (8.5)
Trade and other payables (515.7) (496.1) (489.1)
Current tax liabilities (50.5) (51.3) (43.7)
Provisions (6.3) (6.6) (6.2)
(680.5) (707.7) (715.6)
-------------------------------------- ------ ----------- -------------- -------------
Net current liabilities (222.8) (273.8) (292.0)
--------------------------------------- ------ ----------- -------------- -------------
Non-current liabilities
Bank overdraft and borrowings 13 (243.5) (243.3) (244.6)
Derivative financial instruments (5.2) (1.2) (4.2)
Deferred tax liabilities (75.4) (81.1) (74.1)
Other non-current liabilities (321.3) (318.0) (318.9)
Provisions (1.2) (1.4) (1.2)
Retirement benefit obligations 10 (3.0) (14.6) -
(649.6) (659.6) (643.0)
)
-------------------------------------- ------ ----------- -------------- -------------
NET ASSETS 721.5 636.4 659.6
SHAREHOLDERS' EQUITY
Share capital 11 0.1 0.1 0.1
Share premium account 682.9 682.9 682.9
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 0.4 (5.1) (6.2)
Other reserves (7.2) (2.5) (3.1)
Retained earnings 44.3 (40.0) (15.1)
TOTAL EQUITY 721.5 636.4 659.6
The notes on pages 16 to 22 form an integral part of this
condensed consolidated interim financial information.
Consolidated Statement of Changes in Equity
At 3 March 2012
Share Merger Reverse Hedging Other Retained Total
capital reserve acquisition reserve reserves earnings
and reserve
share
premium
GBPm GBPm GBPm GBPm GBPm GBPm
GBPm
Balance at 3 September 2011 683.0 1,200.9 (1,199.9) (6.2) (3.1) (15.1) 659.6
Profit for the financial
period - - - - - 95.5 95.5
Actuarial loss on pension
schemes - - - - - (13.0) (13.0)
Deferred tax movement on
pension schemes - - - - - 0.8 0.8
Current tax movement on
pension schemes - - - - - 1.1 1.1
Change in the value of
available-for-sale
investments - - - - (0.3) - (0.3)
Currency translation
differences - - - - (3.8) - (3.8)
Cash flow hedges
- net fair value gains (net
of tax) - - - 6.3 - - 6.3
- recycled and adjusted
against the
cost of inventory (net
of tax) - - - 0.3 - - 0.3
Total comprehensive income
and expense for the
financial
period - - - 6.6 (4.1) 84.4 86.9
Share based payment charge - - - - - 0.7 0.7
Dividend paid in period - - - - - (25.7) (25.7)
Total transactions with
owners - - - - - (25.0) (25.0)
Balance at 3 March 2012 683.0 1,200.9 (1,199.9) 0.4 (7.2) 44.3 721.5
------------------------------ --------- --------- ------------- --------- ---------- ---------- --------------
Balance at 28 August 2010 683.0 1,200.9 (1,199.9) 0.8 (5.2) (176.2) 503.4
Profit for the financial
period - - - - - 91.5 91.5
Actuarial gain on pension
schemes - - - - - 62.0 62.0
Deferred tax movement on
pension schemes - - - - - (17.9) (17.9)
Change in the value of
available-for-sale
investments - - - - 0.1 - 0.1
Currency translation
differences - - - - 2.6 - 2.6
Cash flow hedges
- net fair value losses
(net of tax) - - - (4.1) - - (4.1)
- recycled and adjusted
against the
cost of inventory (net
of tax) - - - (1.8) - - (1.8)
------------------------------ --------- --------- ------------- --------- ---------- ---------- --------------
Total comprehensive income
and expense for the
financial
period - - - (5.9) 2.7 135.6 132.4
Share based payment charge - - - - - 0.6 0.6
Total transactions with
owners - - - - - 0.6 0.6
Balance at 26 February 2011 683.0 1,200.9 (1,199.9) (5.1) (2.5) (40.0) 636.4
Share Merger Reverse Hedging Other Retained Total
capital reserve acquisition reserve reserves earnings
and reserve
Share
premium
GBPm GBPm GBPm GBPm GBPm GBPm
GBPm
------------------------------- --------- --------- ------------- --------- ---------- ---------- -------------
Balance at 28 August 2010 683.0 1,200.9 (1,199.9) 0.8 (5.2) (176.2) 503.4
Profit for the financial
year - - - - - 117.2 117.2
Actuarial gain on pension
schemes - - - - - 75.8 75.8
Deferred tax movement on
pension schemes - - - - - (22.5) (22.5)
Current tax movement on
pension
schemes - - - - - 2.1 2.1
Sale of available-for-sale
investment - - - - (2.0) - (2.0)
Change in the value of
available-for-sale
investments - - - - (0.2) - (0.2)
Currency translation
differences - - - - 4.3 - 4.3
Cash flow hedges
- net fair value losses (net
of tax) - - - (11.8) - - (11.8)
- reclassified and reported
in net
profit (net of tax) - - - 3.5 - - 3.5
- recycled and adjusted
against
the
cost of inventory (net of
tax) - - - 1.3 - - 1.3
Total comprehensive income
and expense for the financial
year - - - (7.0) 2.1 172.6 167.7
Share based payment charge - - - - - 1.4 1.4
Dividends paid in period - - - - - (12.9) (12.9)
Total transactions with owners - - - - - (11.5) (11.5)
Balance at 3 September 2011 683.0 1,200.9 (1,199.9) (6.2) (3.1) (15.1) 659.6
------------------------------- --------- --------- ------------- --------- ---------- ---------- -------------
The notes on pages 16 to 22 form an integral part of this
condensed consolidated interim financial information.
Consolidated Cash Flow Statement
For the 26 weeks ended 3 March 2012
Unaudited Unaudited Audited
3 March 26 February 3 September
2012 2011 2011
Note GBPm GBPm GBPm
---------------------------------------------- --- ------ ---------- ----------------- -------------
Cash flows from operating activities
Cash generated from operations 12 179.3 187.3 267.6
Finance income 0.2 6.5 6.7
Finance costs (6.9) (13.4) (26.3)
Tax paid (26.3) (24.1) (48.6)
Net cash generated from operating
activities 146.3 156.3 199.4
Cash flows from investing activities
Purchase of property, plant and equipment (39.1) (41.0) (94.3)
Purchase of intangible assets (8.6) (4.6) (19.7)
Proceeds from sale of available-for-sale
investment - - 5.0
Proceeds from sale of finance leases 9 - 12.6 12.6
Net cash used in investing activities (47.7) (33.0) (96.4)
Cash flows from financing activities
Repayment of term loan facility - (548.6) (548.6)
(Repayment)/draw down of facility (60.0) 385.0 415.0
Dividends paid (25.7) - (12.9)
Finance lease payments - (1.1) (0.1)
Debt issue costs - (0.8) (4.1)
Net cash used in financing activities (85.7) (165.5) (150.7)
Net increase/(decrease) in cash and
cash equivalents 13 12.9 (42.2) (47.7)
Net cash and cash equivalents at beginning
of financial period 22.8 69.5 69.5
Foreign exchange (losses)/gains on
cash and cash equivalents (0.1) 0.8 1.0
Net cash and cash equivalents at
end of financial period 13 35.6 28.1 22.8
The notes on pages 16 to 22 form an integral part of this
condensed consolidated interim financial information.
1 Basis of preparation
This Interim Report has been prepared in accordance with the
Disclosure and Transparency Rules of the UK Financial Services
Authority, International Financial Reporting Standards (IFRSs) and
International Financial Reporting Interpretations Committee (IFRIC)
as adopted by the European Union (EU). The accounting policies
applied are consistent with those described in the Annual Report
and Financial Statements 2011 except as described below. The
Interim Report has been prepared in accordance with IAS 34,
'Interim Financial Reporting' and should be read in conjunction
with the Annual Report and Financial Statements 2011.
The Group's interim condensed consolidated financial information
is not audited and does not constitute statutory financial
statements as defined in Section 434 of the Companies Act 2006.
Comparative figures for the 53 weeks ended 3 September 2011 have
been extracted from the Group's 2011 Annual Report and Financial
Statements, on which the auditors gave an unqualified opinion and
did not include a statement under Section 498 of the Companies Act
2006. The full financial statements for those 53 weeks have been
filed with the Registrar of Companies.
The following new standards and interpretations are mandatory
for the first time for the 52 weeks beginning 4 September 2011:
-- Annual improvements 2010
-- IFRIC 14 amendment - Prepayments on a minimum funding requirement
-- IAS 24 amendment - Related party disclosures
-- IFRS 1 amendment - 'First time adoption' on hyperinflation and fixed dates
-- IFRS 7 amendment - Financial instruments: Disclosures on derecognition
The following new standards and interpretations have been issued
but are not effective for the 52 weeks beginning 4 September 2011
and have not been adopted early:
International Accounting Standards (IFRS)
Effective
date
IAS 1 amendment 'Presentation of financial statements' 1 July 2012
on other comprehensive income (OCI)
IAS 12 amendment 'Income taxes' on deferred tax 1 Jan 2012
IAS 19 (revised Employee benefits 1 Jan 2013
2011)
IAS 27 (revised Separate financial statements 1 Jan 2013
2011)
IAS 28 (revised Associates and joint ventures 1 Jan 2013
2011)
IFRS 9 Financial instruments 1 Jan 2013
IFRS 10 Consolidated financial statements 1 Jan 2013
IFRS 11 Joint arrangements 1 Jan 2013
IFRS 12 Disclosure of interests in other 1 Jan 2013
entities
IFRS 13 Fair value measurement 1 Jan 2013
The Group is currently considering the implications of the
adoption of these standards and interpretations. The adoption of
IAS 19 (revised) will have an impact on the treatment of past
service costs and the calculation of expected returns on assets.
The remaining standards are not expected to have a material impact
on the Group's Financial Statements.
2 Gross transaction value
Revenue from concession and consignment sales is required to be
shown on a net basis, being the commission received rather than the
gross value achieved on the sale. Management believes that gross
transaction value, which presents revenue on a gross basis before
adjusting for concessions, consignments, staff discounts and the
cost of loyalty scheme points, represents a good guide to the
overall activity of the Group.
26 weeks 26 weeks 53 weeks
to to to
3 March 26 February 3 September
2012 2011 2011
GBPm GBPm GBPm
------------------------- --------- ------------- -------------
Gross transaction value 1,483.6 1,463.0 2,679.3
3 Segmental information
IFRS 8, 'Operating Segments' requires disclosure of the
operating segments which are reported to the Chief Operating
Decision Maker ("CODM"). The CODM has been identified as the
executive management board, which includes the executive directors
and other key management. It is the executive management board that
has responsibility for planning and controlling the activities of
the Group.
The Group's reportable segment has been identified as Retail.
The operating segment Magasin is not a reportable segment as it
does not exceed 10 per cent of Group revenues, profits or gross
assets; however, this information has been presented voluntarily
within the segmental analysis below, as it is regularly provided to
the CODM. The segments are reported to the CODM to operating profit
level, using the same accounting policies as applied to the Group
accounts. No analysis has been provided of the assets and
liabilities of each operating segment as this information is not
regularly provided to the CODM within the monthly operating
pack.
Segmental analysis of results Retail Magasin Total
GBPm GBPm GBPm
-------- --------
26 weeks ended 3 March 2012
Gross transaction value 1,346.0 137.6 1,483.6
Concessions, consignments, staff discounts
and loyalty
schemes (186.5) (58.8) (245.3)
-------------------------------------------- -------- -------- --------
External revenue 1,159.5 78.8 1,238.3
Operating profit 126.0 8.9 134.9
-------------------------------------------- -------- -------- --------
26 weeks ended 26 February 2011
Gross transaction value 1,328.8 134.2 1,463.0
Concessions, consignments, staff discounts
and loyalty
schemes (180.5) (60.2) (240.7)
-------------------------------------------- -------- -------- --------
External revenue 1,148.3 74.0 1,222.3
Operating profit 128.4 9.3 137.7
-------------------------------------------- -------- -------- --------
53 weeks ended 3 September 2011
Gross transaction value 2,432.6 246.7 2,679.3
Concessions, consignments, staff discounts
and loyalty
schemes (359.7) (109.8) (469.5)
-------------------------------------------- -------- -------- --------
External revenue 2,072.9 136.9 2,209.8
Operating profit 175.2 8.5 183.7
-------------------------------------------- -------- -------- --------
4 Finance income
26 weeks 26 weeks 53 weeks
to to to
3 March 26 February 3 September
2012 2011 2011
GBPm GBPm GBPm
Interest on bank deposits 0.1 0.4 0.6
Other financing income 0.5 3.3 3.3
0.6 3.7 3.9
5 Finance costs
26 weeks 26 weeks 53 weeks
to to to
3 March 26 February 3 September
2012 2011 2011
GBPm GBPm GBPm
--------- -------------
Bank loans and overdrafts 5.9 11.6 16.2
Cash flow hedge reclassified and
reported in net profit 1.1 - 4.7
Amortisation of issue costs on loans 1.4 3.9 5.8
Other financing charges - 0.6 0.6
8.4 16.1 27.3
6 Taxation
The taxation charge for the 26 weeks ended 3 March 2012 is based
on an estimated effective tax rate for the full year of 24.9% (53
weeks ended 3 September 2011: 26.9%). This is lower than the
standard rate of corporation tax (25.6% blended rate) mainly due to
the utilisation of overseas losses brought forward from prior
periods.
The proposed reduction of the main rate of corporation tax
announced in the recent 2012 budget if applied to the deferred
taxation balances at 3 March 2012 would not have a significant
effect on these statements.
7 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 period.
26 weeks to 26 weeks to 53 weeks to
Basic and diluted 3 March 2012 26 February 3 September
earnings per share 2011 2011
Basic Diluted Basic Diluted Basic Diluted
GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------- --- -------- ----------- ----------- ----------- --------------- -----------
Profit for the financial
period after taxation 95.5 95.5 91.5 91.5 117.2 117.2
Number Number Number Number Number Number
m m m m m m
---------------------------- ------------- ----------- ----------- ----------- --------------- -----------
Weighted average
number of shares 1,286.8 1,286.8 1,286.8 1,286.8 1,286.8 1,286.8
Shares held by ESOP
(weighted) (weighted) (0.6) (0.6) (0.4) (0.4) (0.3) (0.3)
Shares issuable (weighted) - 1.0 - 0.5 - 0.6
1,286.2 1,287.2 1,286.4 1,286.9 1,286.5 1,287.1
Pence Pence Pence Pence Pence Pence
per share per share per share per share per share per share
---------------------------- ------------- ----------- ----------- ----------- --------------- -----------
Earnings per share 7.4 7.4 7.1 7.1 9.1 9.1
8 Dividends
The Company paid a final dividend in respect of the 53 weeks
ended 3 September 2011 of 2.0 pence per share on 13 January 2012.
The directors have resolved to pay an interim dividend in respect
of the 26 weeks ended 3 March 2012 of 1.0 pence per share (26
February 2011: 1.0 pence) which will absorb an estimated GBP12.9
million of shareholders' funds (26 February 2011: GBP12.9 million).
It will be paid on 6 July 2012 to shareholders who are on the
register of members at close of business on 6 June 2012.
Tangible and intangible assets and commitments
Tangible and intangible
assets
3 March 26 February 3 September
2012 2011 2011
GBPm GBPm GBPm
-------------------------------- --------- ------------- ------------
Opening net book amount 1,492.7 1,522.3 1,522.3
Additions 47.4 41.6 114.1
Foreign currency revaluation (2.8) 2.2 3.8
Disposals - (55.4) (55.5)
Depreciation and amortisation (46.2) (45.2) (92.0)
Closing net book amount 1,491.1 1,465.5 1,492.7
Capital commitments contracted but not provided for by the Group
amounted to GBP29.9 million (3 September 2011: GBP5.3 million; 26
February 2011: GBP19.3 million). During the financial year ended 3
September 2011 the Group disposed of the long leases on nine stores
and entered into sale and leaseback agreements on these stores. The
net book amount disposed of was GBP55.3 million. Net cash proceeds
after extinguishing the finance lease obligation of GBP42.7 million
were GBP36.6 million.
9 Defined benefit pension plans
The Group operates defined benefit type pension schemes, being
the Debenhams Executive Pension Plan and the Debenhams Retirement
Scheme (together "the Group's pension schemes"), the assets of
which are held in separate trustee-administered funds.
Both pension schemes were closed for future service accrual from
31 October 2006. The closure to future accrual will not affect the
pensions of those who have retired or the deferred benefits of
those who have left service or opted out before 31 October 2006.
Future pension arrangements are provided through a money purchase
stakeholder plan in the UK or a defined contribution scheme for the
employees in the Republic of Ireland and Denmark.
Actuarial valuations of the Group's pension schemes using the
projected unit basis were carried out at 31 March 2008 and are
updated as at each relevant period-end for the purposes of IAS 19
'Employee benefits' by Towers Watson Limited, a qualified
independent actuary. The 31 March 2008 actuarial valuation has been
used when calculating the IAS 19 'Employee benefits' valuation at 3
March 2012, 3 September 2011 and 26 February 2011.An actuarial
valuation as at 31 March 2011 is being performed by Towers Watson
Limited and the results of this exercise will be incorporated in
the year end position.
The major assumptions used by the actuary are given below. The
mortality assumptions remain consistent with those disclosed in the
Group's 2011 Annual Report and Financial Statements.
3 March 26 February 3 September
2012 2011 2011
per annum per annum per annum
% % %
----------------------- ------------ ---- ---------------- ------------ ------------
Inflation assumption 3.10 3.60 3.30
General salary and wage increase 3.10 3.60 3.30
Rate of increase in pension payments
and deferred payments 3.10 3.60 3.30
Pension increase rate 3.00 3.50 3.20
Discount rate 5.00 5.65 5.75
The movement in the net pension surplus/ (deficit) is as
follows:
3 March 26 February 3 September
2012 2011 2011
GBPm GBPm GBPm
-------------------------------- -------- ------------ ------------
Fair value of scheme assets 609.6 562.4 551.5
Defined benefit obligation (608.5) (577.0) (547.6)
Net pension surplus/(deficit) 1.1 (14.6) 3.9
Surplus/(deficit) at the start
of the period 3.9 (80.7) (80.7)
Company contributions 4.4 3.7 7.9
Pension credit 5.8 0.4 0.9
Net actuarial (losses)/gains (13.0) 62.0 75.8
Surplus/(deficit) at the end
of the period 1.1 (14.6) 3.9
10 Share capital
GBP Number
----------------------------------- -------- --------------
Issued and fully paid - Ordinary
shares of GBP0.0001 each
At 3 March 2012, 3 September 2011
and 26 February 2011 128,680 1,286,806,299
11 Cash generated from operations
26 weeks 26 weeks 53 weeks
to to to
3 March 26 February 3 September
2012 2011 2011
GBPm GBPm GBPm
----------------------------------------------- --------- ------------- -------------
Profit for the financial period 95.5 91.5 117.2
Taxation 31.6 33.8 43.1
Depreciation and amortisation (note
9) 46.2 45.2 92.0
Loss on disposal of property, plant
and equipment - 0.1 0.1
Profit on disposal of available-for-sale
investment - - (2.0)
Employee options granted during the
year 0.7 0.6 1.4
Fair value (gains)/losses on derivative
instruments (2.8) 1.2 2.7
Net movements in provisions 0.1 1.6 1.0
Finance income (note 4) (0.6) (3.7) (3.9)
Finance costs (note 5) 8.4 16.1 27.3
Difference between pension charge and
contributions paid (10.2) (4.1) (8.8)
Net movement in other long-term debtors 0.2 (0.1) 0.1
Net movement in other non-current liabilities 2.4 32.3 33.2
Changes in working capital
Increase in inventories (19.2) (29.8) (25.4)
Increase in trade and other receivables (0.2) (2.7) (4.6)
Decrease/(increase) in trade and other
payables 27.2 5.3 (5.8)
Cash generated from operations 179.3 187.3 267.6
12 Analysis of changes in net debt
At Cash flow Non cash At
3 September movements 3 March
2011 2012
GBPm GBPm GBPm GBPm
------------------------------- ------------- ---------- ----------- ---------
Analysis of net debt
Cash and cash equivalents 29.0 9.9 (0.1) 38.8
Bank overdrafts (6.2) 3.0 - (3.2)
------------------------------- ------------- ---------- ----------- ---------
Cash and cash equivalents 22.8 12.9 (0.1) 35.6
Debt due within one year (160.6) 60.0 (1.6) (102.2)
Debt due after one year (243.2) - 0.2 (243.0)
Finance lease obligations due
within one year (1.3) - (0.4) (1.7)
Finance lease obligations due
after one year (1.4) - 0.9 (0.5)
(383.7) 72.9 (1.0) (311.8)
13 Related parties
There have been no significant related party transactions during
the period.
14 Financial information
Copies of the statutory accounts are available from the
Company's registrars, Equiniti Limited, Aspect House, Spencer Road,
Lancing, West Sussex, BN99 6DA (Tel: 0871 384 2766), and at the
Company's registered office, 1 Welbeck Street, London, W1G 0AA.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The directors confirm that to the best of their knowledge:
-- the interim financial information has been prepared in
accordance with IAS 34 as adopted by the European Union;
-- the financial highlights, review of business performance and
interim financial information include a fair review of the
information required by DTR 4.2.7R (indication of important events
during the first 26 weeks and description of principal risks and
uncertainties for the remaining 26 weeks of the year); and
-- the financial highlights and review of business performance
include a fair review of the information required by DTR 4.2.8R
(disclosure of related party transactions and changes therein).
The directors of Debenhams plc are listed on page 7 of this
interim report.
By order of the board
Paul Eardley
Company Secretary
19 April 2012
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR IPMATMBABBPT
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