TIDMDEB
RNS Number : 8006E
Debenhams plc
15 April 2014
15 April 2014
DEBENHAMS PLC
HALF YEAR RESULTS FOR 26 WEEKS TO 1 MARCH 2014
Debenhams plc, the leading international, multi-channel brand,
today announced half year results for the 26 weeks to 1 March 2014
which were in line with the guidance provided on 31 December
2013.
Financial headlines
-- Gross transaction value (GTV) up 2.1%
o UK up 1.0%
o International up 6.8%
-- Group like-for-like sales up 1.5%
-- Group gross margin down 100bps
-- Clean stock position at end of half, terminal stock of 2.6% in line with long-term average
-- Profit before tax* down 24.5% at GBP85.2m, in line with guidance
-- Earnings per share* down 21.1% to 5.6p
-- Interim dividend of 1.0p per share maintained
*Comparators for 2013 have been adjusted for the introduction of
IAS 19(R) "Employee benefits" (see note 1)
Operational headlines
-- Group online GTV up 24.1%, accounting for 15.4% of total GTV
-- Next day delivery to home launched in UK
-- Oxford Street international flagship transformation completed
on plan, encouraging trading to date
-- Maintained market share in key product categories
-- 2 new UK stores opened in Haverfordwest and Leamington Spa
-- Strong performance from Magasin du Nord
-- 4 new international franchise stores opened, 1 closed
Michael Sharp, Chief Executive of Debenhams, said:
"Whilst this has been a challenging first half, we are clear on
the issues and are taking decisive action to address them. In
particular we are focused on building a more competitive
multi-channel offer for our customers and improving the operational
effectiveness of the overall business.
"The Debenhams brand remains strong with sales continuing to
grow and a resilient market share performance. Whilst we remain
cautious about the strength of the UK consumer recovery, I am
confident the changes we are putting in place will provide a better
customer experience and, over time, stronger results for our
shareholders."
FINANCIAL SUMMARY
H1 14 H1 13 % change
--------------------------------------- -------------- -------------- ----------
Gross transaction value(1,2)
UK GBP1,267.8m GBP1,255.1m 1.0%
International GBP299.1m GBP280.0m 6.8%
Group GBP1,566.9m GBP1,535.1m 2.1%
--------------------------------------- -------------- -------------- ----------
Statutory revenue(1,2)
UK GBP1,080.0m GBP1,076.1m 0.4%
International GBP224.4m GBP206.2m 8.8%
Group GBP1,304.4m GBP1,282.3m 1.7%
--------------------------------------- -------------- -------------- ----------
Group like-for-like sales movement(3) 1.5%
--------------------------------------- -------------- -------------- ----------
Group gross margin movement -100bps
--------------------------------------- -------------- -------------- ----------
Total operating costs(4,6) GBP1,211.0m GBP1,161.1m 4.3%
--------------------------------------- -------------- -------------- ----------
EBITDA(1,5,6)
UK GBP116.6m GBP141.1m -17.4%
International GBP28.0m GBP27.9m 0.4%
Group GBP144.6m GBP169.0m -14.4%
--------------------------------------- -------------- -------------- ----------
Operating profit(1,6)
UK GBP70.5m GBP98.5m -28.4%
International GBP22.9m GBP22.7m 0.9%
Group GBP93.4m GBP121.2m -22.9%
--------------------------------------- -------------- -------------- ----------
Group profit before tax(6) GBP85.2m GBP112.8m -24.5%
--------------------------------------- -------------- -------------- ----------
Basic earnings per share(6) 5.6p 7.1p -21.1%
--------------------------------------- -------------- -------------- ----------
Interim dividend per share 1.0p 1.0p -
--------------------------------------- -------------- -------------- ----------
01-03-14 02-03-13
--------------------------------------- -------------- -------------- ----------
Net debt GBP370.9m GBP321.6m
--------------------------------------- -------------- -------------- ----------
Net debt : EBITDA (last 12 months) 1.6x 1.3x
--------------------------------------- -------------- -------------- ----------
Notes to the above table and to all references in this
statement:
1. UK operating segment comprises stores in the UK and online
sales to UK addresses. International operating segment comprises
the international franchise stores, the owned stores in Denmark and
the Republic of Ireland and online sales to addresses outside the
UK.
2. Gross transaction value: sales on a gross basis before
adjusting for concessions, consignments and staff discounts.
Statutory revenue: sales after adjusting for these items.
3. Like-for-like sales movement relates to sales from stores
which have been open for more than 12 months plus online sales.
4. Total operating costs comprise cost of sales, distribution costs and administrative expenses.
5. EBITDA is earnings before interest, taxation, depreciation and amortisation.
6. Comparators for the first half of 2013 for all measures of
profitability and earnings have been adjusted for the introduction
of IAS 19(R) "Employee benefits". See note 1 for more details.
Enquiries
Analysts and Investors
Lisa Williams, Debenhams plc 020 3549 6304, 07908 483841
Media
Simon Sporborg, Brunswick Group 020 7404 5959
Tim Danaher, Brunswick Group 020 7404 5959
FIRST HALF PERFORMANCE REVIEW
The first half of 2014 was a difficult trading period for
Debenhams which resulted in an early announcement to the financial
markets on 31 December 2013. Group gross transaction value
increased by 2.1% and statutory revenue by 1.7% with like-for-like
sales growing for the sixth consecutive half, by 1.5%. However,
lower than expected sales in the UK and the resulting 100 basis
points decline in gross margin led to a reduction in Group profit
before tax of 24.5%.
UK performance
The UK market was challenging and competitive throughout the
first half and our performance was affected in the main by three
factors. First, clothing sales were below expectations, largely as
a result of sales targets based on a strong performance last year,
exacerbated by a weaker market in September and October. Secondly,
the promotional environment was more intense than last year,
particularly in December, which diluted the impact of our
promotions.
Thirdly, convenience became a much more important driver of
customer behaviour in the crucial pre-Christmas period than in
previous years. This favoured retailers with better developed
multi-channel models than Debenhams. Service improvements made
during the half include next day delivery to home which was
launched in September 2013 and showed steady growth during the
period, peaking at c.50% of orders in the last few days before
Christmas Day. There was a significant increase in demand for Click
& Collect which accounted for c.24% of our online orders during
the first half compared to c.7% of orders in the same period last
year. During the half we trialled increasing the threshold for free
standard delivery, however the negative impact on sales was
unsustainable and so the increased charge was reversed, leading to
lower than expected online delivery income during the period.
As a result of these factors, sales before Christmas in the UK
were lower than expected, leading to higher levels of markdown
required to clear stock in the post-Christmas sale period. Overall,
GTV increased by 1.0% but the increased markdown and resulting
decline in gross margin led to a decrease in UK EBITDA of 17.4% and
operating profit of 28.4%.
The transformation of Oxford Street into our international
flagship store was completed on plan with the interior launched in
December 2013 and the exterior finished in February 2014. The
performance of the store since completion has been encouraging.
The UK store portfolio stood at 158 stores at the end of the
first half (H1 2013: 155). Two new stores opened in Leamington Spa
and Haverfordwest in October 2013, adding 60,000 sq ft of space.
The new store pipeline stands at 14 stores which will collectively
add c.8.5% of new space over the next four years. It includes
Cheshire Oaks and Hereford which are both expected to open in the
second half of this year. New stores are sized and configured to
take account of the changing role of the store in a multi-channel
world.
International performance
The International business delivered GTV growth of 6.8%. Magasin
du Nord performed well with like-for-like sales up 5.5% in local
currency. However, the Republic of Ireland stores experienced
difficult trading conditions resulting in a significant decline in
gross margin which impacted profitability. Sales to franchise
partners were higher than last year and International online,
although small in size, is growing strongly with sales increasing
by 56.0% during the first half.
Overall, a stronger profit performance in Magasin and the
franchise business was offset by lower profits in the Republic of
Ireland stores as a result of which International EBITDA increased
by 0.4% and operating profit by 0.9%.
The total number of international stores stood at 82 at the end
of the first half (H1 2013: 79), comprising 65 franchise stores and
17 owned stores across 27 countries. Four new franchise stores
opened during the first half including market entry in Estonia and
Libya as well as additional stores in Malaysia and Saudi Arabia,
whilst one store closed in Vietnam. One new store has opened since
the end of the half and three more are scheduled to open in the
remainder of the year, including our first store in Latvia. The
contracted pipeline for the following two years stands at 21
stores.
STRATEGY UPDATE
We continue to believe that the four pillars of our strategy to
build a leading international, multi-channel brand are the key to
success for Debenhams. They are:
-- Delivering a compelling customer proposition
-- Increasing availability and choice through multi-channel
-- Focusing on UK retail
-- Expanding the brand internationally
We are focusing on clear priorities under each pillar to address
issues which affected our performance during the first half and to
ensure we are in the best possible shape for the 2014 peak.
Delivering a compelling customer proposition
Our customers remain at the heart of everything we do. We
believe that our proposition remains compelling, as evidenced in
the most recent market share data which shows growth in key
categories including total clothing/footwear/accessories,
womenswear and menswear (Kantar Worldpanel Fashion market share 12
weeks to 16 March 2014 vs 2013).
Our unique mix of own brands (including Designers at Debenhams),
international brands and concessions will continue to give
customers choice and exclusivity and provide us with the most
profitable route to market.
Promotions are a traditional strength of Debenhams but in the
run up to Christmas their impact was diluted by the highly
promotional trading environment in the UK. We are therefore
refocusing our promotional strategy which will see more clearly
defined promotional periods in the trading calendar with fewer days
on promotion.
Increasing availability and choice through multi-channel
The importance of continuing to build a more competitive and
more economic multi-channel business was brought into sharp focus
during the recent Christmas trading period when convenience became
the key factor in customers' shopping choices. We will begin to
offer a more competitive range of premium delivery options over the
course of the next six months in time for peak trading in 2014.
This will include next day Click & Collect and extending the
cut-off for next day delivery to home from 2pm to up to 10pm,
thereby capturing peak shopping hours, as well as nominated day
delivery including Saturday. At the same time, the programme we
have been working on for the past year to reduce the cost per unit
of fulfilment will continue, particularly around Click &
Collect. As a result we are accelerating our investment in
automation in our distribution centres, starting with the packing
process in time for peak trading. We have completed a thorough
analysis of customer "pain points" which has identified areas such
as checkout and returns and these will be addressed over the coming
months as well as a visual refresh in key online product categories
starting with furniture, childrenswear and womenswear. Our mobile
platform will also be strengthened as we continue to build our
mobile advantage as this is the fastest growing channel in terms of
visits and sales.
Focusing on UK retail
As with many retailers, sales densities have declined in our UK
stores over the past five years, principally due to concession
failures and the growth of online sales. A detailed analysis of
each store has identified that c.10% of total UK store space is
currently delivering sub-optimal sales density which could increase
over the next 3-5 years as the channel shift continues. We continue
to work on a number of routes to improve sales densities. These
include adding more choice of products, brands and services. We are
currently in discussions with a number of well-known brands, some
of which are expected to be trialled over the next six months.
Every store will have at least one restaurant or café by this time
next year and we will also be trialling a third party food offer.
We are doubling the store space allocated to Click & Collect
activities, both front-of-house and stockrooms. We will also be
closing six off-site stockrooms by the end of the calendar
year.
Expanding the brand internationally
During the first half we revisited the strategy for the
International segment to ensure that this part of the business has
the focus and support required to accelerate growth. We know we
have a credible, exportable proposition and believe that through
this strategy International can become a significant and growing
part of the Group's activities. This includes the introduction of
new operating models such as wholesale and licencing to our
existing models of owned stores, franchise stores and online as
well as expansion into new countries. Our priorities include
ensuring closer integration of International with the Group's
buying and merchandising function as well as developing and
improving management of the International supply chain. A guiding
principle for international expansion will remain the need for
management of risk and prudent investment.
FINANCIAL REVIEW
Sales and revenue
Group gross transaction value (GTV) for the 26 weeks to 1 March
2014 grew by 2.1% to GBP1,566.9 million versus the previous year.
UK GTV grew by 1.0% to GBP1,267.8 million, despite the difficult
trading conditions. International GTV increased by 6.8% to GBP299.1
million, largely due to a good performance from Magasin du Nord,
higher sales to franchise partners and international online.
Statutory revenue for the Group of GBP1,304.4 million was 1.7%
higher than last year. UK statutory revenue grew by 0.4% to
GBP1,080.0 million and International was 8.8% higher at GBP224.4
million.
Group like-for-like sales for the first half increased by 1.5%
year-on-year. This was principally driven by growth in online sales
of 24.1% to GBP241.2 million, representing 15.4% of total sales (H1
2013: 12.7%, FY 2013: 13.2%). The performance of the UK stores
continues to be impacted by lower footfall due to the ongoing
channel shift from stores to online.
The contribution of each channel to total Group sales growth in
the first half is shown below.
UK stores sales contribution -2.4%
--------------------------------------------- ------
UK online sales contribution +2.8%
--------------------------------------------- ------
International owned stores and online
contribution +1.1%
--------------------------------------------- ------
Group like-for-like sales +1.5%
--------------------------------------------- ------
New UK space contribution +0.4%
--------------------------------------------- ------
International franchise stores contribution +0.2%
--------------------------------------------- ------
Group gross transaction value +2.1%
--------------------------------------------- ------
Sales from own bought products (those for which Debenhams owns
the stock) increased by 1.8% during the first half, including a
0.7% increase in Designers at Debenhams sales. Sales from
concession products, where the stock belongs to a third party, grew
by 1.9%. As a result, Group own bought sales mix decreased
marginally from 78.3% in the first half of last year to 78.0%. UK
own bought mix was 81.4% (H1 2013: 81.7%) whilst International own
bought mix increased from 62.8% to 63.8%.
Gross margin
Group gross margin (GTV less the cost of goods sold as a
percentage of GTV) declined by 100 basis points compared with the
first half of last year, in line with the revised guidance provided
on 31 December 2013. This was chiefly driven by the requirement to
clear higher levels of stock during the post-Christmas sale period
in the UK and the Republic of Ireland.
Gross margin for the full year is expected to be down 50-70
basis points.
Costs
Total operating costs grew by 4.3%. This was largely a result of
the increase in the variable costs associated with growing online
sales, higher store establishment costs and the increased running
costs associated with the new Head Office. For the full year, we
expect costs to be within the range of guidance provided in October
2013.
Depreciation and amortisation (including asset write-offs)
increased from GBP47.8 million last year to GBP51.2 million as a
result of higher levels of capital expenditure in recent years. For
the full year, depreciation and amortisation is expected to be in
the region of GBP104 million.
The net finance costs were GBP8.2 million in the first half
compared to GBP8.4 million last year. Excluding the impact of the
revision to IAS 19, underlying interest increased from GBP7.2
million to GBP7.9 million, primarily due to higher net debt. Full
year net finance costs are expected to be GBP18-20 million, in line
with guidance provided in October.
Profitability
Group EBITDA decreased by 14.4% during the first half to
GBP144.6 million and operating profit was 22.9% lower than last
year at GBP93.4 million. This was driven by the performance of the
UK where lower than anticipated sales and the subsequent reduction
in gross margin resulted in a decline in EBITDA of 17.4% to
GBP116.6 million and operating profit of 28.4% to GBP70.5 million.
International delivered a modest increase in EBITDA of 0.4% to
GBP28.0 million and operating profit of 0.9% to GBP22.9 million
with higher profits in Magasin and the franchise business offset by
a decline in profits in the Republic of Ireland.
As a result, Group profit before tax fell by 24.5% to GBP85.2
million (H1 2013: GBP112.8 million).
Basic and diluted earnings per share were both 5.6 pence, a
decrease of 21.1% compared to the first half of the prior year (H1
13: 7.1 pence).
Taxation
Taxation decreased from GBP23.6 million in the first half of
last year to GBP16.5 million, mainly due to lower profits and a
decrease in the corporation tax rate. This represents an effective
tax rate of 19.4% based on the full year forecast (H1 2013: 20.9%).
We continue to expect the effective tax rate for the full year will
be c.20%.
Stocks
A focus on tightening stock levels throughout the business has
resulted in a decrease in store like-for-like stock value of 2.2%.
Growth in stock value associated with new stores and online of 1.1%
and 1.8% respectively resulted in a total increase in stock value
of 0.7%.
The successful clearance of stock in January and February
resulted a clean stock position at the end of the half. Terminal
stock (which is stock from the previous season as the end of the
financial half) at 1 March 2014 of 2.6% represented an improvement
over the 3.0% achieved at the same point last year and in line with
our long-term average.
Cash generation and uses of cash
Cash flow before financing and taxation of GBP72.6 million
during the first half fell by 35.6% (H1 2013: GBP112.8 million) due
to lower than expected sales and profits.
The principal uses of cash during the first half were as
follows:
-- Capital investment: A total of GBP62.8 million was spent
during the first half, up from GBP51.9 million in the same period a
year ago. The largest areas of investment were UK store
modernisations including Oxford Street (35% of spend), systems
(23%) and UK maintenance (14%). Guidance for the full year remains
GBP130-135 million. The acceleration of investment in automation to
support multi-channel growth is now expected to require capital
investment to remain at around the same level in 2015.
-- Dividends:Total cash paid in dividends of GBP29.4 million
related to the 2013 final dividend of 2.3 pence per share that was
paid to shareholders on 10 January 2014.
-- Share buyback: GBP15.1 million was spent to acquire 14.4
million shares during the first half of the year. On 31 December
2013 the board announced that the share buyback would cease with
immediate effect.
Net debt and funding
Net debt stood at GBP370.9 million as at 1 March 2014, a
decrease of GBP1.1 million since the start of the financial year
but GBP49.3 million higher than the end of the first half in 2013.
The reduction in EBITDA associated with the UK business resulted in
net debt to EBITDA (last 12 months) increasing to 1.6 times from
1.3 times at the same point last year. It remains the board's
intention to reduce net debt to EBITDA over the medium-term and
this was a key driver of the decision to cease the share buyback
programme.
Our current bank facilities extend to October 2016 and, in line
with good practice, over the next year we expect to start exploring
opportunities to diversify our sources of funding.
Dividend
The board has resolved to maintain the interim dividend of 1.0
pence per share with the following timetable.
Ex-dividend date 4 June 2014
Record date 6 June 2014
Payment date 4 July 2014
Looking forward, the board's intention is to maintain the total
dividend for 2014 at the same level as last year in absolute terms
(3.4 pence per share) and to rebuild cover over the next few years
as the performance of the business strengthens.
OUTLOOK
Customers tell us they are encouraged by news of improvements in
the economy but this has yet to translate into higher disposable
income. We therefore remain cautious about the strength of a UK
consumer recovery over the balance of the financial year and expect
that the marketplace will remain highly competitive.
Whilst we remain cautious about the strength of the UK consumer
recovery, we are confident the changes we are putting in place will
provide a better customer experience and, over time, stronger
results for our shareholders.
PRINCIPAL RISKS AND UNCERTAINTIES
The principal risks and uncertainties for the remainder of the
year are largely unchanged from those detailed in the Group's
Annual Report and Accounts for 2013. The board would highlight the
following two risks as increasing in severity since the publication
of that document and of particular relevance for the outcome of the
financial year.
-- Factors outside Debenhams' control, such as increases in
energy or fuel costs, may have an adverse effect on its results
o This risk has increased due to the political crisis in Ukraine
which could impact energy supplies or costs for Debenhams, its
suppliers or partners.
o An energy hedging policy is in place to provide a high degree
of cost certainty in the short-term.
-- Disruptions or other adverse events affecting relationships
with or the performance of major suppliers, franchise partners,
store card providers, designers or concessionaires
o This risk has increased due to potential instability in
various territories.
o In order to minimise the impact of any third party
relationship or performance issues, our objectives are to: maintain
excellent third party relationships by ensuring strategies are
aligned; have appropriate, unambiguous contracts in place; ensure
third parties are financially robust; and have contingency plans in
place in the event of a failure.
Reference should be made to the Annual Report and Accounts for
more details on the potential impact of these risks and examples of
mitigation.
BOARD OF DIRECTORS
Suzanne Harlow, Group Trading Director, was appointed to the
board as an executive director on 11 December 2013.
Simon Herrick resigned as Chief Financial Officer and as a
director on 2 January 2014. Neil Kennedy has assumed the role of
Acting Chief Financial Officer.
The board of directors as at 15 April 2014 is as follows: Nigel
Northridge (Chairman), Michael Sharp (Chief Executive), Suzanne
Harlow (Group Trading Director), Dennis Millard (senior independent
non-executive director), Peter Fitzgerald (non-executive director),
Stephen Ingham (non-executive director), Martina King
(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.
PRESENTATION
A presentation for analysts and investors will be held today at
9:00am at The Lincoln Centre, 18 Lincoln's Inn Fields, London WC2A
3ED. It will be webcast live at www.debenhamsplc.com.
NOTES TO EDITORS
Debenhams is a leading international, multi-channel brand with a
proud British heritage which trades out of 240 stores across 28
countries. Debenhams gives its customers around the world a unique,
differentiated and exclusive mix of own brands, international
brands and concessions.
In the UK, Debenhams has a top five market share in womenswear
and menswear and a top ten share in childrenswear. It leads the
market in premium health and beauty.
Debenhams is the eleventh biggest UK online retailer by traffic
volume and the sixth most visited mobile retail site (source:
IMRG-Experian Hitwise).
Debenhams has been investing in British design for 20 years
through its exclusive Designers at Debenhams portfolio of brands.
Current designers include Abigail Ahern, Ted Baker, Jeff Banks,
Jasper Conran, FrostFrench, Patrick Grant, Henry Holland, Betty
Jackson, Ben de Lisi, Markus Lupfer, Todd Lynn, Julien Macdonald,
Jane Packer, Jenny Packham, Pearce Fionda, Stephen Jones, Preen,
Janet Reger, John Rocha, Jonathan Saunders, Ashley Thomas, Eric Van
Peterson, Vicki Elizabeth and Matthew Williamson.
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.
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
and their impact 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 10 of this
interim report.
By order of the board
Paul Eardley
Company Secretary
15 April 2014
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 1 March 2014, 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 Conduct 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
Conduct 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 1 March 2014 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 Conduct
Authority.
PricewaterhouseCoopers LLP
Chartered Accountants
15 April 2014
London
Consolidated Income Statement
For the 26 weeks ended 1 March 2014
Restated(1) Restated(1)
Unaudited Unaudited Audited
26 weeks 26 weeks 52 weeks
Note to to to
1 March 2 March 31 August
2014 2013 2013
GBPm GBPm GBPm
---------------------------------------------- ------- ------------ ------------ ------------
Revenue 2,3 1,304.4 1,282.3 2,282.2
Cost of sales (1,129.4) (1,085.9) (1,982.6)
Gross profit 175.0 196.4 299.6
Distribution costs (54.4) (52.8) (97.5)
Administrative expenses (27.2) (22.4) (46.7)
Operating profit 4 93.4 121.2 155.4
Finance income 6 0.1 1.0 1.5
Finance costs 7 (8.3) (9.4) (17.9)
Profit before taxation 85.2 112.8 139.0
Taxation 8 (16.5) (23.6) (23.1)
Profit for the financial period attributable
to owners of the parent 68.7 89.2 115.9
Earnings per share attributable to the owners of the parent
(expressed in pence per share)
Restated(1) Restated(1)
Pence per Pence per Pence per
share share share
--------------------------------- ------------ -------------- ---------------- ------------
Basic 9 5.6 7.1 9.2
Diluted 9 5.6 7.1 9.2
----------------------------------------------- -------------- ---------------- ------------
The notes on pages 20-28 form an integral part of this condensed
consolidated interim financial information.
(1) Restatement relates to the adoption of IAS 19 "Employee
benefits" revised (note 1).
Consolidated Statement of Comprehensive Income
For the 26 weeks ended 1 March 2014
Note
Restated(1) Restated(1)
Unaudited Unaudited Audited
26 weeks 26 weeks 52 weeks
to to to
1 March 2 March 31 August
2014 2013 2013
GBPm GBPm GBPm
-------------------------------------------------- ---------- ------------ -------------- --------------
Profit for the financial period 68.7 89.2 115.9
Other comprehensive (expense)/income
Items that will not be reclassified
to profit and loss
Remeasurements of pension schemes 13 11.4 27.3 30.6
Deferred tax charge on pension schemes (3.2) (9.1) (9.3)
Current tax credit on pension schemes 1.2 1.2 2.5
Items that may be reclassified to profit
and loss
Currency translation differences (2.3) 5.1 3.6
Change in the valuation of available-for-sale
investments 1.4 (0.2) (0.8)
(Losses)/gains on cash flow hedges (26.6) 13.4 11.9
Losses/(gains) on cash flow hedges
- tax credit/(charge) 5.3 (2.8) (2.7)
Transferred to the income statement on cash
flow hedges 1.5 1.6 3.3
Transferred to the income statement on
cash flow hedges - tax charge (0.2) (0.8) (0.8)
Recycled and adjusted against the cost of
inventory 3.2 (2.6) (7.6)
Recycled and adjusted against the cost of
inventory - tax (charge)/credit (0.6) 0.6 1.7
Total other comprehensive (expense)/income (8.9) 33.7 32.4
Total comprehensive income for the period 59.8 122.9 148.3
The notes on pages 20-28 form an integral part of this condensed
consolidated interim financial information.
(1) Restatement relates to the adoption of IAS 19 "Employee
benefits" revised (note 1).
Consolidated Balance Sheet
At 1 March 2014
Unaudited Unaudited Audited
1 March 2 March 31 August
Note 2014 2013 2013
GBPm GBPm GBPm
---------------------------------- ------- ------------- ------------- ------------
ASSETS
Non-current assets
Intangible assets 11 882.6 872.7 876.5
Property, plant and equipment 11 688.9 660.5 692.1
Available-for-sale investments 12 2.5 1.7 1.1
Derivative financial instruments 12 0.8 7.2 1.9
Trade and other receivables 16.3 17.2 16.8
Retirement benefit surplus 13 6.2 3.8 4.6
Deferred tax assets 72.2 74.0 69.3
1,669.5 1,637.1 1,662.3
---------------------------------- ------- ------------- ------------- ------------
Current assets
Inventories 355.4 353.1 357.9
Trade and other receivables 68.0 70.2 78.3
Derivative financial instruments 12 1.0 14.9 7.3
Cash and cash equivalents 17 31.8 30.6 27.0
456.2 468.8 470.5
---------------------------------- ------- ------------- ------------- ------------
LIABILITIES
Current liabilities
Bank overdraft and borrowings 17 (164.7) (103.2) (163.1)
Derivative financial instruments 12 (16.6) (4.0) (2.1)
Trade and other payables (508.6) (537.9) (545.8)
Current tax liabilities (28.2) (36.4) (25.3)
Provisions (7.1) (7.1) (5.6)
(725.2) (688.6) (741.9)
---------------------------------- ------- ------------- ------------- ------------
Net current liabilities (269.0) (219.8) (271.4)
---------------------------------- ------- ------------- ------------- ------------
Non-current liabilities
Bank overdraft and borrowings 17 (238.0) (249.0) (235.9)
Derivative financial instruments 12 (7.6) (5.6) (3.7)
Deferred tax liabilities (57.7) (64.8) (59.1)
Other non-current liabilities 14 (326.9) (319.7) (322.1)
Provisions (1.1) (1.2) (1.1)
Retirement benefit obligations 13 (10.4) (30.6) (24.6)
(641.7) (670.9) (646.5)
---------------------------------- ------- ------------- ------------- ------------
NET ASSETS 758.8 746.4 744.4
SHAREHOLDERS' EQUITY
Share capital 15 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 (14.2) 6.8 3.2
Other reserves (8.6) (5.6) (7.7)
Retained earnings 97.6 61.2 64.9
TOTAL EQUITY 758.8 746.4 744.4
The notes on pages 20-28 form an integral part of this condensed
consolidated interim financial information.
Consolidated Statement of Changes in Equity
At 1 March 2014
Share Merger Reverse Hedging Other Retained Total
capital reserve acquisition reserve reserves earnings restated(1)
and reserve restated(1)
share GBPm GBPm GBPm GBPm GBPm GBPm
premium
GBPm
Balance at 31 August
2013 683.0 1,200.9 (1,199.9) 3.2 (7.7) 64.9 744.4
Profit for the
financial
period - - - - - 68.7 68.7
Remeasurements of
pension
schemes - - - - - 11.4 11.4
Deferred tax payable
on
pension schemes - - - - - (3.2) (3.2)
Current tax credit
on pension
schemes - - - - - 1.2 1.2
Change in the value
of
available-for-sale
investments - - - - 1.4 - 1.4
Currency translation
differences - - - - (2.3) - (2.3)
Losses on cash flow
hedges
(net of tax) - - - (21.3) - - (21.3)
Reclassification
adjustments
- transferred to the
income
statement on cash
flow hedges
(net of tax) - - - 1.3 - - 1.3
- recycled and
adjusted
against the
cost of inventory
(net
of tax) - - - 2.6 - - 2.6
Total comprehensive
income
and expense for the
financial
period - - - (17.4) (0.9) 78.1 59.8
Share-based payment
charge - - - - - (0.9) (0.9)
Purchase of treasury
shares - - - - - (15.1) (15.1)
Dividend paid in
period - - - - - (29.4) (29.4)
Total transactions
with
owners - - - - - (45.4) (45.4)
Balance at 1 March
2014 683.0 1,200.9 (1,199.9) (14.2) (8.6) 97.6 758.8
--------------------- ---------- ---------- -------------- ---------- ----------- -------------- --------------
Balance at 1
September 2012 683.0 1,200.9 (1,199.9) (2.6) (10.5) (9.9) 661.0
Profit for the
financial
period - - - - - 89.2 89.2
Remeasurements of
pension
schemes - - - - - 27.3 27.3
Deferred tax payable
on
pension schemes - - - - - (9.1) (9.1)
Current tax credit
on pension
schemes - - - - - 1.2 1.2
Change in the value
of
available-for-sale
investments - - - - (0.2) - (0.2)
Currency translation
differences - - - - 5.1 - 5.1
Gains on cash flow
hedges
(net of tax) - - - 10.6 - - 10.6
Reclassification
adjustments
- transferred to the
income
statement on cash
flow hedges
(net of tax) - - - 0.8 - - 0.8
- recycled and
adjusted
against the
cost of inventory
(net
of tax) - - - (2.0) - - (2.0)
Total comprehensive
income
and expense for the
financial
period - - - 9.4 4.9 108.6 122.9
Share-based payment
charge - - - - - 0.2 0.2
Share option
receipts - - - - - 0.2 0.2
Purchase of treasury
shares - - - - - (9.0) (9.0)
Dividend paid in
period - - - - - (28.9) (28.9)
Total transactions
with
owners - - - - - (37.5) (37.5)
Balance at 2 March
2013 683.0 1,200.9 (1,199.9) 6.8 (5.6) 61.2 746.4
--------------------- ---------- ---------- -------------- ---------- ----------- -------------- --------------
Share Merger Reverse Hedging Other Retained Total
capital reserve acquisition reserve reserves earnings restated(1)
and share reserve restated(1)
premium GBPm GBPm GBPm GBPm GBPm GBPm
GBPm
-------------------------- ----------- --------- ------------- --------- ---------- ------------- -------------
Balance at 1 September
2012 683.0 1,200.9 (1,199.9) (2.6) (10.5) (9.9) 661.0
Profit for the financial
year - - - - - 115.9 115.9
Remeasurements of pension
schemes - - - - - 30.6 30.6
Deferred tax charge on
pension
schemes - - - - - (9.3) (9.3)
Current tax credit on
pension
schemes - - - - - 2.5 2.5
Change in the value of
available-for-sale
investments - - - - (0.8) - (0.8)
Currency translation
differences - - - - 3.6 - 3.6
Gains on cash flow hedges
(net of tax) - - - 9.2 - - 9.2
Reclassification
adjustments
- transferred to the
income
statement on cash flow
hedges
(net of tax) - - - 2.5 - - 2.5
- recycled and adjusted
against the
cost of inventory (net
of tax) - - - (5.9) - - (5.9)
Total comprehensive
income
and expense for the
financial
year - - - 5.8 2.8 139.7 148.3
Share-based payment
charge - - - - - 1.5 1.5
Share option receipts - - - - - 0.1 0.1
Purchase of treasury
shares - - - - - (25.1) (25.1)
Dividends paid - - - - - (41.4) (41.4)
Total transactions with
owners - - - - - (64.9) (64.9)
Balance at 31 August 2013 683.0 1,200.9 (1,199.9) 3.2 (7.7) 64.9 744.4
-------------------------- ----------- --------- ------------- --------- ---------- ------------- -------------
The notes on pages 20-28 form an integral part of this condensed
consolidated interim financial information.
(1) Restatement relates to the adoption of IAS 19 "Employee
benefits" revised (note 1).
Consolidated Cash Flow Statement
For the 26 weeks ended 1 March 2014
Unaudited Unaudited Audited
26 weeks 26 weeks 52 weeks
to to to
Note 1 March 2 March 31 August
2014 2013 2013
---------------------------------------------- --- ------- ---------- ---------- -----------
Cash flows from operating activities
Cash generated from operations 16 135.4 164.7 241.1
Finance income 0.1 0.1 0.4
Finance costs (6.4) (6.6) (12.9)
Tax paid (15.8) (19.7) (29.3)
Net cash generated from operating
activities 113.3 138.5 199.3
Cash flows from investing activities
Purchase of property, plant and equipment (54.6) (40.1) (113.7)
Purchase of intangible assets (8.2) (11.8) (19.6)
-
---------------------------------------------- --- ------- ---------- ---------- -----------
Net cash used in investing activities (62.8) (51.9) (133.3)
Cash flows from financing activities
Repurchase of term loan facility - - (13.3)
(Drawdown)/repayment of facility (0.9) (55.0) 6.0
Purchase of treasury shares (15.1) (9.0) (25.1)
Dividends paid (29.4) (28.9) (41.4)
Share option receipts - 0.2 0.1
Finance lease payments (1.5) (1.4) (2.3)
Debt issue costs - - (0.5)
Net cash used in financing activities (46.9) (94.1) (76.5)
Net increase/(decrease) in cash and
cash equivalents 17 3.6 (7.5) (10.5)
Net cash and cash equivalents at beginning
of financial period 24.1 34.6 34.6
Foreign exchange gains on cash and - 0.1 -
cash equivalents
Net cash and cash equivalents at
end of financial period 17 27.7 27.2 24.1
The notes on pages 20-28 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 Financial Conduct
Authority (previously the Financial Services Authority) and IAS 34
"Interim Financial Reporting" as adopted by the European Union. The
condensed consolidated financial statements for the 26 weeks ended
1 March 2014 should be read in conjunction with the annual
financial statements for the 52 weeks ended 31 August 2013 which
have been prepared in accordance with International Financial
Reporting Standards (IFRSs) as adopted by the European Union.
The Group's principal accounting policies used in preparing this
information are as stated in the financial statements for the 52
weeks ended 31 August 2013, which are available on our website
www.debenhamsplc.com, with the exception of the restatement for the
adoption of IAS 19 "Employee benefits" revised, as discussed below.
The report of the auditors for the financial statements for the 52
weeks ended 31 August 2013 was unqualified, did not contain an
emphasis of matter paragraph and did not include a statement under
Section 498 of the Companies Act 2006. The full financial
statements for those 52 weeks have been filed with the Registrar of
Companies.
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. The
comparative figures for the 52 weeks ended 31 August 2013 and the
26 weeks ended 2 March 2013 are consistent with the Group's 2013
annual report and financial statements and interim financial
statements respectively, with the exception of the restatement for
the adoption of the IAS 19 "Employee benefits" revised, as
described below.
The Group has adopted IAS 19 "Employee benefits" revised. The
revised standard has retrospective application and consequently the
relevant charges or income in the Consolidated Income Statement and
the Consolidated Statement of Comprehensive Income for the
financial year ended 31 August 2013 and the 26 weeks ended 2 March
2013 have been restated. As a result of the change, the expected
return on pension scheme assets and the interest cost on pension
scheme liabilities are replaced with a net interest expense
calculated by applying the discount rate to the net defined benefit
or liability. Administration costs of pension funds are now
recognised as an expense when the administration services are
performed. The table below sets out the changes to comparative
amounts.
26 weeks to 2 March 52 weeks to 31 August
2013 2013
Previously Application Restated Previously Application Restated
reported of IAS reported of IAS
19 revised 19 revised
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------- ----------- ------------ ---------- ----------- ------------ ----------
Consolidated income
statement
Revenue 1,282.3 - 1,282.3 2,282.2 - 2,282.2
Cost of sales (1,080.7) (5.2) (1,085.9) (1,972.1) (10.5) (1,982.6)
Gross profit 201.6 (5.2) 196.4 310.1 (10.5) 299.6
Distribution costs (52.7) (0.1) (52.8) (97.4) (0.1) (97.5)
Administrative expenses (21.4) (1.0) (22.4) (44.7) (2.0) (46.7)
Operating profit 127.5 (6.3) 121.2 168.0 (12.6) 155.4
Finance income 1.0 - 1.0 1.5 - 1.5
Finance costs (8.2) (1.2) (9.4) (15.5) (2.4) (17.9)
Profit before taxation 120.3 (7.5) 112.8 154.0 (15.0) 139.0
Taxation (25.1) 1.5 (23.6) (26.1) 3.0 (23.1)
Profit for the financial
period 95.2 (6.0) 89.2 127.9 (12.0) 115.9
Other comprehensive
income (net of tax) 27.7 6.0 33.7 20.4 12.0 32.4
Total comprehensive
income 122.9 - 122.9 148.3 - 148.3
The Group has adopted IFRS 13 "Fair value measurement" which has
affected disclosures only. In accordance with the transitional
provisions of IFRS 13, the Group has applied the new fair value
measurement guidance prospectively and has not provided any
comparative information for new disclosures. There are no other new
standards or amendments to standards which are mandatory for the
first time for the financial year beginning 1 September 2013 and
that will have a material impact on the results or the net assets
of the Group. Other standards and interpretations in issue but not
yet effective are not expected to have a material effect on the
Group's net assets or results.
The critical accounting estimates and judgements made by
management in applying the Group's accounting policies are
consistent with those detailed on page 98 of the annual report and
financial statements for the 52 weeks ended 31 August 2013. The
principal risks and uncertainties are set out on page 9 of this
interim report.
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 and staff discounts,
represents a good guide to the overall activity of the Group.
26 weeks 26 weeks 52 weeks
to to to
1 March 2 March 31 August
2014 2013 2013
GBPm GBPm GBPm
------------------------- --------- --------- -----------
Gross transaction value 1,566.9 1,535.1 2,776.8
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 committee,
which includes the executive directors and other key management. It
is the executive committee that has responsibility for planning and
controlling the activities of the Group.
The Group's reportable segments have been identified as the UK
and international. The segments are reported to the CODM to
operating profit level, using the same accounting policies as
applied to the Group accounts. The Group does not review the assets
and liabilities by operating segment as these are reviewed on a
Group-wide basis given their transposable nature. As a result, no
such analysis has been provided.
Segmental analysis of results UK International Total
GBPm GBPm GBPm
26 weeks ended 1 March 2014
Gross transaction value 1,267.8 299.1 1,566.9
Concessions, consignments
and staff discounts (187.8) (74.7) (262.5)
External revenue 1,080.0 224.4 1,304.4
-------------------------------- -------- -------------- --------
Operating profit 70.5 22.9 93.4
26 weeks ended 2 March 2013
Gross transaction value 1,255.1 280.0 1,535.1
Concessions, consignments
and staff discounts (179.0) (73.8) (252.8)
External revenue 1,076.1 206.2 1,282.3
-------------------------------- -------- -------------- --------
Operating profit - restated(1) 98.5 22.7 121.2
52 weeks ended 31 August
2013
Gross transaction value 2,254.8 522.0 2,776.8
Concessions, consignments
and staff discounts (358.9) (135.7) (494.6)
External revenue 1,895.9 386.3 2,282.2
-------------------------------- -------- -------------- --------
Operating profit - restated(1) 127.2 28.2 155.4
-------------------------------- -------- -------------- --------
(1) Restatement relates to the adoption of IAS 19 "Employee
benefits" revised (note 1).
Total segmental operating profit may be reconciled to total
profit before taxation as follows:
Restated(1) Restated(1)
26 weeks 26 weeks 52 weeks
to to to
1 March 2 March 31 August
2014
2013 2013
GBPm GBPm GBPm
Total operating profit 93.4 121.2 155.4
Finance income 0.1 1.0 1.5
Finance costs (8.3) (9.4) (17.9)
------------------------------ ---------- ------------ ------------
Total profit before taxation 85.2 112.8 139.0
4 Operating profit
Restated(1) Restated(1)
26 weeks 26 weeks 52 weeks
to to to
1 March 2 March 31 August
2014
2013 2013
GBPm GBPm GBPm
The amounts of inventory written down
during the financial year 6.2 5.8 12.0
Cost of inventories recognised as an
expense 678.2 655.0 1,150.2
Employment costs (note 5) 190.7 191.0 375.2
Depreciation and amortisation 49.9 47.7 94.6
Loss on disposal of property, plant
and equipment 1.3 0.1 0.2
Operating lease rentals 107.5 103.2 206.9
Foreign exchange gains (1.6) (8.1) (7.9)
(1) Restatement relates to the adoption of IAS 19 "Employee
benefits" revised (note 1).
5 Employment costs
Restated(1) Restated(1)
26 weeks 52 weeks
to to
2 March 31 August
2013
GBPm 2013
GBPm
------------
26 weeks
to
1 March
2014
GBPm
----------------------- --- --------- ------------
Wages and salaries 173.0 173.1 337.6
Social security costs 10.5 10.8 21.4
Pension costs 8.1 6.9 14.7
Share-based payments (0.9) 0.2 1.5
190.7 191.0 375.2
(1) Restatement relates to the adoption of IAS 19 "Employee
benefits" revised (note 1).
6 Finance income
26 weeks 26 weeks 52 weeks
to to to
1 March 2 March 31 August
2014 2013 2013
GBPm GBPm GBPm
Interest on bank deposits 0.1 0.2 0.4
Other financing income - 0.8 1.1
0.1 1.0 1.5
7 Finance costs
Restated(1) Restated(1)
26 weeks 52 weeks
to to
2 March 31 August
2013
GBPm 2013
GBPm
------------
26 weeks
to
1 March
2014
GBPm
------------------------------------------- --------- ------------
Bank loans and overdrafts 5.3 4.8 10.8
Cash flow hedge reclassified and reported
in the income statement 1.5 1.6 3.3
Amortisation of issue costs on loans 1.0 1.4 2.7
Interest payable on finance leases 0.3 0.4 0.1
Net interest on net defined benefit
liability 0.3 1.2 2.4
Other financing charges 0.2 - -
Capitalised finance costs - qualifying
assets (0.3) - (1.4)
8.3 9.4 17.9
(1) Restatement relates to the adoption of IAS 19
"Employee benefits" revised (note 1).
8 Taxation
The taxation charge for the 26 weeks ended 1 March 2014 is based
on an estimated effective tax rate for the full year of 19.4% (52
weeks ended 31 August 2013: 16.6% (restated(1) )). This is lower
than the standard rate of corporation tax (22.2% blended rate)
mainly due to the utilisation of overseas losses brought forward
from prior periods.
(1) Restatement relates to the adoption of IAS 19 "Employee
benefits" revised (note 1).
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, excluding
any shares purchased by the Company and held as treasury
shares.
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 Restated(1) Restated(1)
1 March 2014 26 weeks to 52 weeks to
2 March 2013 31 August
Basic and diluted 2013
earnings per share
Basic Diluted Basic Diluted Basic Diluted
GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------- --- -------- ----------- ----------- ----------- --------------- -----------
Profit for the financial
period after taxation 68.7 68.7 89.2 89.2 115.9 115.9
Number Number Number Number Number Number
m m m m m m
---------------------------- ------------- ----------- ----------- ----------- --------------- -----------
Weighted average
number of shares 1,228.2 1,228.2 1,259.0 1,259.0 1,255.1 1,255.1
Shares held by ESOP
(weighted) (weighted) (0.3) (0.3) (0.6) (0.6) (0.6) (0.6)
Shares issuable (weighted) - 1.7 - 2.1 - 2.1
Adjusted weighted
average number of
shares 1,227.9 1,229.6 1,258.4 1,260.5 1,254.5 1,256.6
Pence Pence Pence Pence Pence Pence
per share per share per share per share per share per share
---------------------------- ------------- ----------- ----------- ----------- --------------- -----------
Earnings per share 5.6 5.6 7.1 7.1 9.2 9.2
(1) Restatement relates to the adoption of IAS 19 "Employee
benefits" revised (note 1).
10 Dividends
The Company paid a final dividend in respect of the 52 weeks
ended 31 August 2013 of 2.4 pence per share on 10 January 2014. The
directors have resolved to pay an interim dividend in respect of
the 26 weeks ended 1 March 2014 of 1.0 pence per share (2 March
2013: 1.0 pence) which will absorb an estimated GBP12.3 million of
shareholders' funds (2 March 2013: GBP12.5 million). It will be
paid on 4 July 2014 to shareholders who are on the register of
members at close of business on 6 June 2014.
11 Tangible and intangible assets and commitments
Tangible and intangible
assets
1 March 2 March 31 August
2014 2013 2013
GBPm GBPm GBPm
-------------------------------- ----------- ---------- -------------
Opening net book amount 1,568.6 1,526.5 1,526.5
Additions 55.8 50.1 133.6
Foreign currency revaluation (1.7) 4.4 3.3
Disposals (1.3) (0.1) (0.2)
Depreciation and amortisation (49.9) (47.7) (94.6)
Closing net book amount 1,571.5 1,533.2 1,568.6
Capital commitments contracted but not provided for by the Group
amounted to GBP3.0 million (31 August 2013: GBP3.8 million; 2 March
2013: GBP16.1 million).
12 Financial risk factors and financial instruments
The Group's activities expose it to a variety of financial risks
which include funding and liquidity risk, credit risk, foreign
exchange risk, interest rate risk and other price risk. The
condensed interim financial statements do not include all financial
risk management information and disclosures required in the annual
financial statements and they should be read in conjunction with
the Group's annual financial statements as at 31 August 2013. There
have been no changes in risk management procedures and policies
since the year end.
The Group uses the following hierarchy for determining and
disclosing the fair value of financial instruments by valuation
technique:
-- Level 1 - Quoted prices (unadjusted) based on active markets
for identical assets or liabilities
-- Level 2 - Inputs other than quoted prices included within
level 1 that are observable for the asset or liability,
either directly (that is, prices) or indirectly (that is,
derived from prices)
-- Level 3 - Inputs for the asset or liability that are not based on observable market data
At the end of the reporting period, the Group held the following
financial instruments at fair value:
Level Level 2 Level 3 Total
1
GBPm GBPm GBPm GBPm
--------------------------------------------------------------- -------- ---------- ---------- --------
At 1 March 2014
Assets
Available-for-sale financial
instruments 2.5 - - 2.5
Derivative financial instruments:
* Interest rate swaps held as cash flows - 0.8 - 0.8
* Forward foreign currency contracts held as cash flow
hedges - 1.0 - 1.0
Total assets 2.5 1.8 - 4.3
Liabilities
* Interest rate swaps held as cash flows - (2.7) - (2.7)
* Forward foreign currency contracts held as cash flow
hedges - (18.7) - (18.7)
* Other forward foreign currency contracts - (2.8) - (2.8)
--------------------------------------------------------------- -------- ---------- ---------- --------
Total liabilities - (24.2) - (24.2)
The Group classifies its investments as available-for-sale
financial assets in accordance with IAS 39 "Financial instruments:
recognition and measurement". Available-for-sale financial
instruments relate to the Group's holding at 1 March 2014 of 10% of
the issued shares of Ermes Department Stores Limited ("Ermes"), a
company listed on the Cyprus Stock Exchange whose shares are quoted
in Euros. The fair value of Ermes is based on the market price at
the balance sheet date. At 1 March 2014, if the market value of
equity investments had been 10% higher/lower, when all other
variables were held constant:
-- Net profit would have been unaffected as the investments were
classified as available-for-sale investments
-- Other reserves would decrease/increase by GBP0.2 million for
the Group as a result of the changes in the fair value of
available-for-sale investments
The fair value of interest rate swaps is calculated as the
present value of the estimated future cash flows. The fair value of
forward currency contracts has been determined based on discounted
market forward currency exchange rates at the balance sheet
date.
There were no material differences between the carrying value of
non-derivative financial assets and financial liabilities and their
fair values as at the balance sheet date.
The Group's policy is to recognise transfers into and out of
fair value hierarchy levels as of the date of the event or change
in circumstances that caused the transfer. There have been no
transfers of assets or liabilities between levels of the fair value
hierarchy in the period.
13 Retirement benefit obligation
The Group operates defined benefit type pension schemes, being
the Debenhams Executive Pension Plan ("DEPP") and the Debenhams
Retirement Scheme ("DRS") (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 and Hong Kong or a defined contribution
scheme for the employees in the Republic of Ireland and
Denmark.
In accordance with the recovery plan for the Group's pension
schemes, which is intended to restore the schemes to a fully funded
position on an ongoing basis, the Group agreed to contribute to the
pension schemes GBP8.9 million per annum, on 1 April each year, for
the period from 1 April 2012 to 31 March 2022 increasing by the
percentage increase in the RPI over the year to the previous
December. Additionally, the Group has agreed to cover the
non-investment expenses and levies of the pension schemes,
including those payable to the Pension Protection Fund.
The investment strategy for the Group's pension schemes was
changed during the year ended 3 September 2011. Investment of the
schemes' assets is now arranged by AON Hewitt Limited under a
delegated consulting service agreement. As at 1 March 2014, most of
the schemes' assets are invested in a growth component or a
liability hedging component. Actuarial valuations of the Group's
pension schemes using the projected unit basis were carried out at
31 March 2011 and updated as at each relevant year end for the
purposes of IAS 19 "Employee benefits" by Towers Watson Limited, a
qualified independent actuary. The 31 March 2011 actuarial
valuation has been used when calculating the IAS 19 "Employee
benefits" revised valuation at 1 March 2014.
The major assumptions used by the actuary were:
1 March 2 March 31 August
2014 2013 2013
per annum per annum per annum
% % %
----------------------- ------------ ---- ---------------- ---------- ----------
Inflation assumption 3.20 3.30 3.30
General salary and wage increase 3.20 3.30 3.30
Rate of increase in pension payments
and deferred payments 3.20 3.30 3.30
Pension increase rate 2.95 3.20 3.00
Discount rate 4.40 4.60 4.60
The amounts recognised in the balance sheet are determined as
follows:
Restated(1) Restated(1)
1 March 2 March 31 August
2014 2013 2013
GBPm GBPm GBPm
------------------------------ --- --- --------- ------------ ------------
Fair value of scheme
assets 692.4 664.9 673.6
Defined benefit
obligation (696.6) (691.7) (693.6)
Net deficit in pension schemes (4.2) (26.8) (20.0)
Analysed as:
DEPP scheme surplus 6.2 3.8 4.6
DRS scheme deficit (10.4) (30.6) (24.6)
---------------------------------------- --------- ------------ ------------
(1) Restatement relates to the adoption of IAS 19 "Employee
benefits" revised (note 1).
The movement in the net pension deficit is as follows:
Restated(1) Restated(1)
1 March 2 March 31 August
2014 2013 2013
GBPm GBPm GBPm
-------------------------- --------- --- --------- ------------ ------------
Net deficit at the start of
the period (20.0) (57.3) (57.3)
Company contributions 5.4 5.1 10.4
Current service cost (0.7) (0.7) (1.3)
Net interest on net defined
benefit liability (0.3) (1.2) (2.4)
Remeasurements:
Return on plan assets, excluding
amounts included in finance costs 8.5 76.1 75.5
Losses from changes in financial
assumptions (3.3) (49.1) (42.5)
Experience gains/(losses) 6.2 0.3 (2.4)
Net deficit at the end of the
period (4.2) (26.8) (20.0)
(1) Restatement relates to the adoption of IAS 19 "Employee
benefits" revised (note 1).
14 Other non-current liabilities
26 weeks 26 weeks 52 weeks
to to to
1 March 2 March 31 August
2014 2013 2013
GBPm GBPm GBPm
Other liabilities 326.9 319.7 322.1
Included within other liabilities are lease incentives received
from landlords either through initial contributions or rent-free
periods. These incentives are being credited to the income
statement on a straight line basis over the term of the relevant
lease. Additionally, the liability relates to the spreading of the
charges relating to leases with fixed annual increments in
rent.
15 Share capital
GBP Number
------------------------------------ -------- --------------
Issued and fully paid - Ordinary
shares of GBP0.0001 each
At 2 March 2013 128,683 1,286,828,853
Options exercised 1 14,588
At 1 March 2014 and 31 August 2013 128,684 1,286,843,441
During the period the Company purchased 14,351,525 of its own
ordinary shares with a nominal value of GBP14,352 (52 weeks ended
31 August 2013: 23,882,722 shares with a nominal value GBP23,883).
The 14,351,525 ordinary shares were purchased for a consideration
of GBP15.1 million (52 weeks ended 31 August 2013: GBP25.1 million)
and are held as treasury shares. 60,708,721 shares are currently
held as treasury shares and these represent 4.7% (2013: 3.6%) of
the issued share capital of the Company.
16 Cash generated from operations
Restated(1) Restated(1)
26 weeks 26 weeks 52 weeks
to to to
1 March 2 March 31 August
2014 2013 2013
GBPm GBPm GBPm
----------------------------------------------- ---------- ------------ ------------
Profit before taxation 85.2 112.8 139.0
Depreciation and amortisation (note
11) 49.9 47.7 94.6
Loss on disposal of property, plant
and equipment 1.3 0.1 0.2
Employee options granted during the
financial period (0.9) 0.2 1.5
Fair value losses on derivative instruments 4.0 1.6 2.0
Net movements in provisions 1.5 1.8 0.3
Finance income (note 6) (0.1) (1.0) (1.5)
Finance costs (note 7) 8.3 9.4 17.9
Pension current service cost 0.7 0.7 1.3
Cash contributions to pension schemes (5.4) (5.1) (10.4)
Net movement in other long-term receivables - 3.4 3.6
Net movement in other non-current liabilities 4.7 (2.2) 0.2
Changes in working capital
Decrease/(increase) in inventories 2.4 (20.4) (25.5)
Decrease/(increase) in trade and other
receivables 10.1 5.3 (2.9)
(Decrease)/increase in trade and other
payables (26.3) 10.4 20.8
Cash generated from operations 135.4 164.7 241.1
(1) Restatement relates to the adoption of IAS 19 "Employee
benefits" revised (note 1).
17 Analysis of changes in net debt
At Cash flow Non cash At
31 August movements 1 March
2013 2014
GBPm GBPm GBPm GBPm
------------------------------- ----------- ---------- ----------- ---------
Analysis of net debt
Cash and cash equivalents 27.0 4.8 - 31.8
Bank overdrafts (2.9) (1.2) - (4.1)
------------------------------- ----------- ---------- ----------- ---------
Cash and cash equivalents 24.1 3.6 - 27.7
Debt due within one year (158.4) 0.9 (0.4) (157.9)
Debt due after one year (232.8) - (0.6) (233.4)
Finance lease obligations due
within one year (1.8) 1.3 (2.2) (2.7)
Finance lease obligations due
after one year (3.1) - (1.5) (4.6)
(372.0) 5.8 (4.7) (370.9)
18 Related parties
There have been no significant related party transactions during
the period.
19 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, 10 Brock Street, Regent's Place,
London, NW1 3FG.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR EASLLFFALEFF
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