TIDMDEB
RNS Number : 3615K
Debenhams plc
16 April 2015
16 April 2015
DEBENHAMS PLC - HALF YEAR RESULTS
"Good progress against strategic priorities"
Debenhams plc, the leading international, multi-channel brand,
today announces half year results for the 26 weeks to 28 February
2015.
Financial headlines
-- Gross transaction value ("GTV") up 2.3% to GBP1,602.4m
-- Group like-for-like sales up 1.3%
-- Group gross margin rate maintained, with savings in markdown
offset by price investment and sales mix
-- Profit before tax up 4.3% at GBP88.9m (2014: GBP85.2m)
-- Reported EPS up 5.4% to 5.9p (2014: 5.6p)
-- Interim dividend of 1.0p per share maintained
-- Stock value reduced by 5.6% to GBP335.4m (2014: GBP355.4m),
with terminal stock of 2.9% in line with long-term average
-- Net debt reduced by GBP64.2m to GBP297.3m due to strong
operational cashflows and some timing benefits
-- New Season Spectacular brought forward into H1 to align with
payday cycle, enhancing LFL sales by c1% and profits before tax by
cGBP3m but diluting gross margin rate by c10bps for the period
Operational headlines
-- Good progress made in first half against strategic priorities
to deliver long-term sustainable growth
o Refocusing of promotional strategy resulted in 9.0% increase
in own brand full price sell-through in first half, with tightly
controlled stock and more flexible purchasing strategies
o New online delivery options launched for Peak including next
day click & collect and 10pm cut-off for next day delivery to
home. Service improvements drove click & collect growth of
22.1% in H1, with next day services accounting for 49% of orders in
the seven days prior to Christmas
o UK space optimisation trials now utilising over 20% of
targeted 1m sq ft , with encouraging initial results prompting roll
out to more stores
-- Multi-channel continued to grow with online sales up 12.7%,
representing 17.0% of GTV. Mobile penetration now accounts for 42%
of online sales
-- Investment in the design and buying capability continued with
strong performance following the launch of casualwear in Principles
by Ben de Lisi, fronted by Sophie Dahl, and the roll out of Hammond
& Co, with Savile Row tailor, Patrick Grant
-- Good performance by international franchise stores and by
Magasin du Nord, which achieved local currency LFL sales growth of
9.9%
-- New Chief Financial Officer, Matt Smith, joined strengthening the management team
Michael Sharp, Chief Executive of Debenhams, said:
"I am pleased with the good progress we have made against the
strategic priorities we set out last year. We have improved our
multi-channel offer and successfully introduced the premium
delivery options that we promised for the important peak period,
which met with a positive response from our customers. The
continued refocusing of our promotional strategy delivered a strong
increase in full price sales, an improvement in value perception
and enabled us to end the half with an improved stock position.
Overall we delivered a good first half performance despite a
difficult clothing season in Autumn and we are on track to achieve
full year expectations.
"Looking forward, our customers tell us they are feeling a
little more optimistic about the economic outlook, but they remain
cautious. Accordingly we are continuing to plan prudently in the
near term, while remaining focused on our strategic priorities, and
are continuing to invest to ensure that our business is
well-positioned to drive sustainable growth in the longer
term."
Presentation
A presentation for analysts and investors will be held today
(Thursday 16 April 2015) at 9:45am UK time at The Lincoln Centre,
17 Lincoln's Inn Fields, London WC2A 3ED. The presentation will be
webcast live at http://edge.media-server.com/m/p/edpv276v
Enquiries
Analysts and Investors
Matt Smith, Debenhams plc
Katharine Wynne, Debenhams plc 020 3549 6304, 07867 613829
Media
Simon Sporborg, Brunswick Group 020 7404 5959
Jon Drage, Brunswick Group 020 7404 5959
STRATEGIC AND OPERATIONAL REVIEW OF THE HALF YEAR
At the end of the half year Debenhams operated from 246 stores
in 27 countries and was available online in a number of countries
worldwide. We have continued to execute our strategy to build a
leading international, multi-channel brand with progress on each of
our strategic priorities, in order to deliver long term sustainable
growth.
Delivering a compelling customer proposition
-- We continue to invest in our product and brand strategy to
ensure our customer proposition remains both compelling and
competitive, with our own brands providing exclusivity and
differentiation. The work to refocus our promotional strategy
continued during the first half with 14 fewer days on promotion
overall, making a total reduction of 39 days on promotion in the
last 12 months, and a reduced level of discounting during
promotional events. The end of season sale commenced on Boxing Day
as planned. This approach resulted in an increase in own brand full
price sell-through of 9.0% and this contributed to the 100bps gross
margin rate improvement from lower markdown.
-- Our New Season Spectacular event was brought forward into the
first half to better align with the payday cycle, which enhanced
sales and profit, at the expense of a slight dilution of margin, as
described further in the financial review.
-- Alongside the promotional calendar, we continued to improve
the value proposition in key categories, extending it further in
childrenswear, menswear and home to ensure we deliver "first price,
right price".
-- Stock efficiency improved leading to a 5.6% reduction in the
stock value at the half year end.
-- Our investment in design and buying capability included the
launch of casualwear in Principles by Ben de Lisi, fronted by
Sophie Dahl. Our most successful Designer brand in menswear,
Hammond & Co, led by Savile Row tailor Patrick Grant, was
extended to 80 stores.
-- Our gifting offer across a diverse mix of categories
including beauty, accessories and home was strong and delivered
good sales growth of 25.0%. There is an opportunity to expand this
further in the year ahead.
Increasing availability and choice through multi-channel
-- Online sales increased by 12.7% to GBP271.8 million,
accounting for 17.0% of GTV in the half, up from 15.4% in the
previous year.
-- Online EBITDA increased by 7.1%, reflecting an increased mix
to lower margin concession sales and the investment in premium
services including next day click & collect.
-- New delivery options were launched on time on 11 October and
operated well during Black Friday and the Christmas period. They
include next day click & collect, order cut-off for next day
delivery to home extended from 2pm to up to 10pm, evening and
weekend deliveries and nominated day deliveries.
-- Customers' desire for convenience was a key driver of demand
for click & collect which increased by 22.1%. Over the
important Christmas period, in the 4 weeks to 10 January 2015,
online sales increased by 28.9%, supported by the take-up of the
new premium fulfilment services. Next day services accounted for
49% of orders in the seven days prior to Christmas.
-- The number of visits to Debenhams.com increased by 6.6% to
158 million, including a 34% increase in visits from mobile
devices. Mobile now accounts for 42% of online sales.
-- Conversion rates have also improved, by c. 6% over the half year.
-- The visual refresh of the website has continued, with the
Furniture and Home section being upgraded in March with improved
navigation and imagery.
Focusing on UK retail
-- UK GTV grew at 2.5% during the period. The UK store estate
comprised 161 stores trading from 11.2 million sq ft at the end of
the period.
-- Two new stores opened during the half in Scunthorpe and
Borehamwood adding 69,000 sq ft of trading space and one store, the
Newbury clearance outlet, closed during the half, resulting in a
net footage increase of 53,000 sq ft.
-- Space optimisation trials continued with a number of brands
including Sports Direct, Costa, Monsoon and Mothercare. The initial
results have been encouraging and the trials are being extended to
further stores, in addition to the launch of further brands new to
Debenhams, Only and Jack & Jones.
-- The third party food offer is also being extended to
additional stores, with further openings at Costa and the launch of
a number of new third party brands, including Joe and the Juice and
Insomnia.
-- New menswear Designer at Debenhams brand, Hammond & Co by
Patrick Grant, was rolled out to 80 stores following its successful
launch in 20 stores.
-- The confirmed new store pipeline stands at eight stores. Five
stores will open in the Autumn of 2015 ready for peak trading,
adding 287,000 sq ft of new trading space. The remaining three are
planned to open over the following three years.
Expanding the brand internationally
-- At the end of the period, the international store estate
totalled 85 stores, comprising 68 franchise stores in 24 countries,
6 Magasin du Nord stores in Denmark and 11 Debenhams stores in the
Republic of Ireland.
-- Despite adverse foreign exchange movements in the period,
International sales increased by 1.5% to GBP303.5 million and
EBITDA by 4.3% to GBP29.2 million.
-- Three new franchise stores opened during the first half in
Egypt, Abu Dhabi and The Philippines; three franchise stores
closed, two in India and one in Saudi Arabia.
-- We are contracted to open 11 new franchise stores over the
next three years. Two stores have opened so far this half in
Romania and Saudi Arabia, one store closed in Saudi Arabia and we
expect a further two openings in the second half. There are a
further 18 stores in final negotiation, and we are in discussion in
relation to opening approximately 25 additional stores in
subsequent years.
-- Magasin du Nord delivered another good sales performance with
LFL sales increasing by 9.9% in local currency.
-- The Republic of Ireland remains a challenging market but
represents a small part of the Group.
-- International online, a key focus for the future, continued
to grow, albeit from a relatively modest base, with sales up by
21.4% in the first half.
FINANCIAL REVIEW
FINANCIAL SUMMARY
26 weeks to 26 weeks to % change
28 February 1 March 2014
2015
---------------------------------- -------------- -------------- ---------
Gross transaction value(1,2,6)
UK GBP1,298.9m GBP1,267.8m +2.5%
International GBP303.5m GBP299.1m +1.5%
Group GBP1,602.4m GBP1,566.9m +2.3%
---------------------------------- -------------- -------------- ---------
Statutory revenue(1,2, 6)
UK GBP1,098.3m GBP1,080.0m +1.7%
International GBP227.1m GBP224.4m +1.2%
Group GBP1,325.4m GBP1,304.4m +1.6%
---------------------------------- -------------- -------------- ---------
Group like-for-like sales
movement(3,6) +1.3%
---------------------------------- -------------- -------------- ---------
Group gross margin movement(4,6) Flat
---------------------------------- -------------- -------------- ---------
EBITDA(1,5,6)
UK GBP121.8m GBP116.6m +4.5%
International GBP29.2m GBP28.0m +4.3%
Group GBP151.0m GBP144.6m +4.4%
---------------------------------- -------------- -------------- ---------
Operating profit(1,6)
UK GBP74.5m GBP70.5m +5.7%
International GBP24.9m GBP22.9m +8.7%
Group GBP99.4m GBP93.4m +6.4%
---------------------------------- -------------- -------------- ---------
Profit before tax(6) GBP88.9m GBP85.2m 4.3%
---------------------------------- -------------- -------------- ---------
Basic earnings per share(6) 5.9p 5.6p 5.4%
---------------------------------- -------------- -------------- ---------
Dividend per share 1.0p 1.0p -
---------------------------------- -------------- -------------- ---------
28 February 1 March 2014
2015
---------------------------------- -------------- -------------- ---------
Net debt GBP297.3m GBP370.9m
---------------------------------- -------------- -------------- ---------
Net debt : EBITDA (last 12
months) 1.3x 1.6x
---------------------------------- -------------- -------------- ---------
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 (GTV): 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. Gross margin: GTV less the value of cost of goods sold, as a percentage of GTV.
5. EBITDA is earnings before interest, taxation, depreciation
and amortisation (including loss on disposal of property, plant and
equipment).
6. New Season Spectacular brought forward into the first half to
better align with the payday cycle, which enhanced sales and profit
at the expense of a slight dilution of gross margin as described
further in the financial review.
SEGMENTAL PERFORMANCE
UK
Gross transaction value for the UK segment increased by 2.5% to
GBP1,298.9 million and reported revenue grew by 1.7% to GBP1,098.3
million. This was a result of a strong Christmas performance, the
impact of moving the New Season Spectacular promotion forward one
week into the first half to coincide with the pay day at the end of
February and the benefit of two new stores opened in the second
half of 2014 and two new stores opened in the first half of 2015.
As previously reported, this uplift was in part diluted by the
difficult season for clothing across the sector in the Autumn.
The performance of stores continued to be impacted by the
channel shift into online, with strong growth in online concessions
the principal reason behind the movement in own bought mix from
81.4% last year to 80.6% this year.
UK operating profit for the year increased by 5.7% to GBP74.5
million due to the sales growth and the continued focus on cost
discipline across the business, together with the New Season
Spectacular being brought forward, which resulted in cGBP3 million
in profits moving into the first half. This is a timing benefit in
the first half with a corresponding profit move of cGBP3 million
out of the second half.
International
In the International segment gross transaction value of GBP303.5
million was 1.5% higher than the same period last year. Revenue
increased by 1.2% to GBP227.1million, with the weaker Euro and
Danish Kroner exchange rates having reduced the Group LFL by 1.1%
on translation into Sterling.
Magasin du Nord continued its strong performance and franchise
revenue increased with the addition of three new larger stores
offset by the closure of three smaller stores, whilst trading
conditions in the Republic of Ireland remained difficult.
Online sales to customers outside of the UK also continued to
grow and were 21.4% higher than the same period last year. Own
bought mix decreased from 63.8% to 63.4% mainly due to an increased
mix of sales within the segment to Magasin du Nord, where the own
bought mix is lower.
International operating profit increased by 8.7% to GBP24.9
million. In line with the sales performance, the profit growth was
driven by Magasin and the franchise business which offset lower
profits in the Republic of Ireland.
GROUP SALES AND PROFITS
Sales and revenue
Group gross transaction value increased by 2.3% to GBP1,602.4
million for the 26 weeks to 28 February 2015 whilst Group revenue
increased by 1.6% to GBP1,325.4 million.
Group like-for-like sales increased by 1.3%. The impact of
moving the New Season Spectacular promotion forward one week into
the first half had c. +1% benefit on the LFL in the first half.
Strong growth in online sales, which increased by 12.7% to GBP271.8
million, and Magasin du Nord, which grew 9.9% LFL in local currency
(3.0% in Sterling), more than offset lower like-for-like sales from
the stores in the UK and Republic of Ireland.
The components of the gross transaction value increase of 2.3%
and like-for-like sales growth of 1.3% are shown below
UK stores (0.6%)
UK online +1.8%
International +1.2%
Exchange rate impact (1.1%)
Like-for-like sales
movement +1.3%
New UK space +0.8%
International franchise
stores +0.2%
GTV movement +2.3%
------------------------- --------
Group own bought mix decreased from 78.0% in 2014 to 77.3% as a
result of the movement in the UK mix, with sales from Concessions
growing at a faster rate.
Operating profit
Good progress has been made in re-focusing our approach to
promotions, with a further 14 fewer days on promotion in H1 and
tight stock control leading to less markdown.
Reduced markdown resulted in a 100bps benefit to gross margin,
but this was offset by:
(i) the ongoing impact of sales mix from growing sales in the
lower margin cosmetics category and weaker womenswear sales arising
from the Autumn season (50bps reduction); and
(ii) planned investment in reducing prices in some categories (50bps reduction).
As a result the Group gross margin rate was flat compared with
last year. This includes the effect of moving the New Season
Spectacular promotion forward one week into the first half which
had a negative 10bps gross margin impact.
Costs were well controlled and increased by only 1.4% despite
the further shift into online and the investment in expanded online
services such as next day click & collect from stores.
Depreciation and amortisation (including losses on disposals)
increased by 0.8% to GBP51.6 million, largely reflecting higher
capital expenditure over the last few years.
As a result of the above, Group operating profit improved by
6.4% to GBP99.4 million for the 26 weeks to 28 February 2015.
Inventory
Stock levels were managed tightly during the first half,
reflecting the commitment to re-focus the promotional strategy.
More stock was held back as a contingency and released once sales
came through. Total stock value decreased by 5.6% to GBP335.4
million reflecting a 4.7% decline in like-for-like stock. Terminal
stock of 2.9% was in line with our historical range of 2.5% to
3.5%.
Net finance costs
As anticipated and in line with previous guidance, net finance
costs increased by 28.0% to GBP10.5 million as a result of
increased interest following the refinancing of the borrowing
facilities in 2014, including the issue of GBP225.0 million of
senior notes in July 2014.
Profit before tax
Reported profit before tax increased by 4.3% to GBP88.9 million
(2014: GBP85.2 million), which includes an estimated benefit of c.
GBP3 million relating to the New Season Spectacular promotion
moving forward one week into the first half.
Taxation
Taxation increased from GBP16.5 million in the first half of
last year to GBP17.1 million principally due to the higher reported
profit before tax. This represents an effective tax rate of 19.2%
(2014: 19.4%). We continue to expect our effective tax rate will
revert to more normalised levels of 20%.
Profit after tax
Profit after tax increased by 4.5% to GBP71.8 million.
Earnings per share
Increased profits resulted in a 5.4% increase in both basic and
diluted earnings per share to 5.9 pence.
The basic weighted average number of shares in issue decreased
from 1,227.9 million last year to 1,226.1 million and diluted
weighted average number of shares decreased from 1,229.6 million to
1,228.2 million. This was due to the purchase of 14.4 million
shares in the share buyback scheme in the first half of 2014.
CASH FLOW, USES OF CASH AND MOVEMENT IN NET DEBT
Debenhams is cash generative and has clear priorities for the
uses of cash. The first priority is to invest in our strategy to
build a leading international, multi-channel brand. Second, we pay
our shareholders a dividend. Third, we have a medium-term target
for net debt to EBITDA of 1.0 times.
Operating cash flow before financing and taxation increased from
GBP72.6 million to GBP103.5 million as a result of higher profits,
lower capital expenditure and an improvement in working capital
inflow of GBP3.9 million compared to a GBP9.2 million outflow in
2014. The movement in working capital is supported by the
additional sales arising from the New Season Spectacular promotion,
which was brought forward one week into the first half, and the
strategy to reduce stock levels.
Cash flow generation, the uses of cash and the movement in net
debt are summarised below.
H1 2015 H1 2014
-------------------------------------- ----------- -----------
EBITDA GBP151.0m GBP144.6m
Working capital GBP3.9m GBP(9.2)m
-------------------------------------- ----------- -----------
Cash generated from operations GBP154.9m GBP135.4m
Capital expenditure GBP(51.4)m GBP(62.8)m
-------------------------------------- ----------- -----------
Operating cash flow before financing GBP103.5m GBP72.6m
& taxation
Taxation GBP0.6m GBP(15.8)m
Financing GBP(9.9)m GBP(6.3)m
Dividends paid GBP(29.4)m GBP(29.4)m
Share buyback - GBP(15.1)m
Other non-cash movements GBP(0.6)m GBP(4.9)m
Change in net debt GBP64.2m GBP1.1 m
-------------------------------------- ----------- -----------
Opening net debt GBP361.5m GBP372.0m
Closing net debt GBP297.3m GBP370.9m
-------------------------------------- ----------- -----------
Net debt: EBITDA (last 12 months) 1.3x 1.6x
-------------------------------------- ----------- -----------
Capital expenditure
Capital expenditure was GBP51.4 million during the half compared
to the spend of GBP62.8 million in the same period last year. The
variance is principally associated with the cost of the Oxford
Street store modernisation last year. Capital spend to date has
focused on operational effectiveness, including systems
development, particularly to support the Group's multi-channel
business, and investment in space optimisation initiatives.
Guidance for capital expenditure for the year remains in the region
of GBP130 million and so is expected to be more second
half-weighted this year, including spend on the new stores due to
open in the early part of the next financial year and the
modernisations of stores in Westfield White City and the Birmingham
Bull Ring.
Dividends
Total cash paid in dividends of GBP29.4 million related to the
2014 final dividend of 2.4 pence per share that was paid to
shareholders on 9 January 2015.
In line with the dividend policy, the Board has resolved to pay
an interim dividend of 1.0 pence per share, maintaining the same
level as last year. The interim dividend will be paid on 3 July
2015 to shareholders who are on the register of members at close of
business on 5 June 2015.
Net debt
The Group's net debt position as at 28 February 2015 of GBP297.3
million was GBP73.6 million better than the same point in the prior
year (2014: GBP370.9 million), a result of improved operating cash
flows and the effect of reduced tax payments from the adoption of
FRS 101 Reduced disclosure framework. This is an accounting
standard that the Group is required to adopt in its subsidiary
company statutory accounts. The difference between full year net
debt and that reported in 2014 is expected to narrow from the half
year position as capital expenditure accelerates in the second half
of the year. The ratio of net debt to EBITDA of 1.3 times compares
with 1.6 times at the end of the previous year. In order to
optimise its funding position, the Group decided to repurchase
GBP13.2 million of senior notes for a consideration of GBP13.0
million during the period.
PENSIONS
The Group provides a number of pension arrangements for its
employees. These include the Debenhams Retirement Scheme and the
Debenhams Executive Pension Plan (together the "Group's pension
schemes") which both closed for future service accrual from 31
October 2006. Under IAS 19 "Employee benefits" revised, the surplus
on the Group's pension schemes as at 28 February 2015 was GBP21.2
million (1 March 2014: net deficit of GBP4.2 million). The surplus
was driven by asset returns.
An actuarial valuation as at 31 March 2014 is underway. The
previous actuarial valuation was dated 31 March 2011 following
which a funding plan was agreed with the pension scheme's trustees
intended to restore the schemes to a fully funded position on an
ongoing basis by 31 March 2022. As a consequence of this agreed
plan, annual contributions to the schemes were set at GBP8.9
million, rising each year by RPI over the year to the previous
December. The Group also pays the non-investment expenses and
levies of the pension schemes including those payable to the
Pension Protection Fund.
Current pension arrangements for Debenhams' employees are
provided either through a money purchase stakeholder plan or a
defined contribution pension scheme.
GUIDANCE FOR 2015
Reiteration of guidance given in 10 January 2015 Trading
Statement
Gross margin Lower end of +10-40bps
Total costs Lower end of +2-4%
Depreciation & amortisation c.GBP105 million
Net finance costs c.GBP22 million
Taxation c.20%
Capital expenditure c.GBP130 million
Net debt GBP320-340 million
---------------------------- -------------------------
OUTLOOK
Overall we delivered a good first half performance despite a
difficult clothing season in Autumn and we are on track to achieve
full year expectations.
Looking forward, our customers tell us they are feeling a little
more optimistic about the economic outlook, but they remain
cautious. Accordingly we are continuing to plan prudently in the
near term, while remaining focused on our strategic priorities, and
are continuing to invest to ensure that our business is
well-positioned to drive sustainable growth in the longer term.
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 2014.
Reference should be made to the 2014 Annual Report and Accounts
for more details on the potential impact of these risks and
examples of mitigation.
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 the Group's financial
statements.
BOARD OF DIRECTORS
Matt Smith joined the board and was appointed Chief Financial
Officer on 26 January 2015. Terry Duddy was appointed a
non-executive director on 10 April 2015.
The board of directors as at 16 April 2015 is as follows: Nigel
Northridge (Chairman), Michael Sharp (Chief Executive), Matt Smith
(Chief Financial Officer), Suzanne Harlow (Group Trading Director),
Dennis Millard (senior independent non-executive director), Terry
Duddy (independent non-executive director), Peter Fitzgerald
(independent non-executive director), Stephen Ingham (independent
non-executive director), Martina King (independent non-executive
director), Mark Rolfe (independent non-executive director) and
Sophie Turner Laing (independent non-executive director).
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The directors confirm that to the best of their knowledge:
-- the condensed consolidated interim financial statements for
the 26 weeks ended 28 February 2015 have been prepared in
accordance with IAS 34 as adopted by the European Union;
-- the interim management report includes 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 interim management report includes 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 above.
By order of the Board
Michael Sharp Matt Smith
Chief Executive Chief Financial Officer
16 April 2015
NOTES TO EDITORS
Debenhams is a leading international, multi-channel brand with a
proud British heritage which at the end of H1 FY15 traded from 246
stores across 27 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 is a market
leader in premium health and beauty.
Debenhams has been investing in British design for 20 years
through its exclusive Designers at Debenhams portfolio of brands.
Current designers include Abigail Ahern, Jeff Banks, Jasper Conran,
FrostFrench, Patrick Grant, Henry Holland, Betty Jackson, Stephen
Jones, Ben de Lisi, Todd Lynn, Julien Macdonald, Jenny Packham,
Pearce Fionda, Preen, Janet Reger, John Rocha, Ashley Thomas, Eric
Van Peterson 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
Independent review report to Debenhams plc
Report on the condensed consolidated interim financial
statements
Our conclusion
We have reviewed the condensed consolidated interim financial
statements, defined below, in the half year results of Debenhams
plc for the six months ended 28 February 2015. Based on our review,
nothing has come to our attention that causes us to believe that
the condensed consolidated interim financial statements are 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.
This conclusion is to be read in the context of what we say in
the remainder of this report.
What we have reviewed
The condensed consolidated interim financial statements, which
are prepared by Debenhams plc, comprise:
-- the consolidated balance sheet as at 28 February 2015;
-- the consolidated income statement and consolidated statement
of comprehensive income for the period then ended;
-- the consolidated cash flow statement for the period then ended;
-- the consolidated statement of changes in equity for the period then ended; and
-- the explanatory notes to the condensed consolidated interim financial statements.
As disclosed in note 1, the financial reporting framework that
has been applied in the preparation of the full annual financial
statements of the group is applicable law and International
Financial Reporting Standards (IFRSs) as adopted by the European
Union.
The condensed consolidated interim financial statements included
in the half year results have been prepared in accordance with
International Accounting Standard 34, 'Interim Financial
Reporting', as adopted by the European Union and the Disclosure and
Transparency Rules of the United Kingdom's Financial Conduct
Authority.
What a review of condensed consolidated interim financial
statements involves
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.
We have read the other information contained in the half year
results and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the condensed consolidated interim financial statements.
Responsibilities for the condensed consolidated interim
financial statements and the review
Our responsibilities and those of the directors
The half year results, including the condensed consolidated
interim financial statements, is the responsibility of, and has
been approved by, the directors. The directors are responsible for
preparing the half year results in accordance with the Disclosure
and Transparency Rules of the United Kingdom's Financial Conduct
Authority.
Our responsibility is to express to the company a conclusion on
the condensed consolidated interim financial statements in the half
year results based on our review. This report, including the
conclusion, has been prepared for and only for the company for the
purpose of complying with the Disclosure and Transparency Rules of
the Financial Conduct Authority and for no other purpose. We do
not, in giving this conclusion, 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.
PricewaterhouseCoopers LLP
Chartered Accountants
16 April 2015
London
Note
(a) The maintenance and integrity of the Debenhams plc website
is the responsibility of the directors; the work carried out by the
auditors does not involve consideration of these matters and,
accordingly, the auditors accept no responsibility for any changes
that may have occurred to the financial statements since they were
initially presented on the website.
(b) Legislation in the United Kingdom governing the preparation
and dissemination of financial statements may differ from
legislation in other jurisdictions.
Consolidated Income Statement
For the 26 weeks ended 28 February 2015
Unaudited Unaudited Audited
26 weeks 26 weeks 52 weeks
Note to to to
28 February 1 March 30 August
2015 2014 2014
GBPm GBPm GBPm
---------------------------------------------- ------- -------------- ------------ ------------
Revenue 2,3 1,325.4 1,304.4 2,312.7
Cost of sales (1,137.1) (1,129.4) (2,033.4)
Gross profit 188.3 175.0 279.3
Distribution costs (59.8) (54.4) (98.5)
Administrative expenses (29.1) (27.2) (52.2)
Operating profit 4 99.4 93.4 128.6
Finance income 6 0.2 0.1 0.6
Total finance costs 7 (10.7) (8.3) (23.4)
Analysed as:
Recurring finance costs 7 (10.7) (8.3) (18.9)
Non-recurring finance costs 7 - - (4.5)
----------------------------------------------- ------- -------------- ------------ ------------
Profit before taxation 88.9 85.2 105.8
Taxation 8 (17.1) (16.5) (18.6)
Profit for the financial period attributable
to owners of the parent 71.8 68.7 87.2
Earnings per share attributable to the owners of the parent
(expressed in pence per share)
Pence per Pence per Pence per
share share share
-------------------------------- ------------- -------------- ---------------- ------------
Basic earnings per share attributable
to the owners of the parent 9 5.9 5.6 7.1
Diluted earnings per share attributable
to the owners of the parent 9 5.9 5.6 7.1
----------------------------------------------- -------------- ---------------- ------------
The notes on pages 20-28 form an integral part of this condensed
consolidated interim financial information.
Consolidated Statement of Comprehensive Income
For the 26 weeks ended 28 February 2015
Note
Unaudited Unaudited Audited
26 weeks 26 weeks 52 weeks
to to to
28 February 1 March 30 August
2015 2014 2014
GBPm GBPm GBPm
-------------------------------------------------- -------- -------------- ------------ ------------
Profit for the financial period 71.8 68.7 87.2
Other comprehensive income/(expense)
Items that will not be reclassified
to the income statement
Remeasurements of pension schemes 13 18.8 11.4 8.8
Taxation relating to items which will
not be reclassified (3.8) (2.0) (1.6)
15.0 9.4 7.2
Items that may be reclassified to the
income statement
Currency translation differences (7.7) (2.3) (4.2)
Change in the valuation of available-for-sale
investments (1.1) 1.4 2.5
Gains/(losses) on cash flow hedges 42.9 (26.6) (24.9)
Transferred to the income statement on cash
flow hedges 0.8 1.5 2.7
Recycled and adjusted against cost of inventory (4.7) 3.2 8.1
Taxation relating to items that may be reclassified (7.7) 4.5 3.0
22.5 (18.3) (12.8)
Total other comprehensive income/(expense) 37.5 (8.9) (5.6)
Total comprehensive income for the financial
period 109.3 59.8 81.6
The notes on pages 20-28 form an integral part of this condensed
consolidated interim financial information.
Consolidated Balance Sheet
As at 28 February 2015
Unaudited Unaudited Audited
28 February 1 March 30 August
Note 2015 2014 2014
GBPm GBPm GBPm
---------------------------------- ------- --------------- ------------- ------------
Assets
Non-current assets
Intangible assets 11 899.9 882.6 892.8
Property, plant and equipment 11 673.2 688.9 689.2
Available-for-sale investments 12 2.5 2.5 3.6
Derivative financial instruments 12 18.1 0.8 3.0
Trade and other receivables 14.7 16.3 15.6
Retirement benefit surplus 13 21.2 6.2 6.9
Deferred tax assets 30.8 72.2 51.0
1,660.4 1,669.5 1,662.1
---------------------------------- ------- --------------- ------------- ------------
Current assets
Inventories 335.4 355.4 345.7
Trade and other receivables 69.1 68.0 74.7
Derivative financial instruments 12 16.7 1.0 1.5
Cash and cash equivalents 17 37.3 31.8 64.4
458.5 456.2 486.3
---------------------------------- ------- --------------- ------------- ------------
Liabilities
Current liabilities
Bank overdraft and borrowings 17 (125.3) (164.7) (202.1)
Derivative financial instruments 12 (1.2) (16.6) (11.4)
Trade and other payables (523.5) (508.6) (529.3)
Current tax liabilities (7.7) (28.2) (9.2)
Provisions (7.2) (7.1) (6.0)
(664.9) (725.2) (758.0)
---------------------------------- ------- --------------- ------------- ------------
Net current liabilities (206.4) (269.0) (271.7)
----------------------------------- ------- --------------- ------------- ------------
Non-current liabilities
Bank overdraft and borrowings 17 (209.3) (238.0) (223.8)
Derivative financial instruments 12 (0.4) (7.6) (2.7)
Deferred tax liabilities (64.4) (57.7) (53.4)
Other non-current liabilities 14 (332.1) (326.9) (332.7)
Provisions - (1.1) (1.1)
Retirement benefit obligations 13 - (10.4) (9.3)
(606.2) (641.7) (623.0)
---------------------------------- ------- --------------- ------------- ------------
Net assets 847.8 758.8 767.4
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 23.4 (14.2) (7.9)
Other reserves (18.2) (8.6) (9.4)
Retained earnings 158.6 97.6 100.7
Total equity 847.8 758.8 767.4
The notes on pages 20-28 form an integral part of this condensed
consolidated interim financial information.
Consolidated Statement of Changes in Equity
For the 26 weeks ended 28 February 2015
Share
capital
and
share Reverse
premium Merger acquisition Hedging Other Retained Total
account reserve reserve reserve reserves earnings equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Balance at 30 August 2014 683.0 1,200.9 (1,199.9) (7.9) (9.4) 100.7 767.4
Profit for the financial
period - - - - - 71.8 71.8
Other comprehensive
income/(expense)
for the financial period - - - 31.3 (8.8) 15.0 37.5
----------------------------- ---------- ---------- -------------- ---------- ----------- ----------- ---------
Total comprehensive
income/expense
for the financial period - - - 31.3 (8.8) 86.8 109.3
----------------------------- ---------- ---------- -------------- ---------- ----------- ----------- ---------
Share-based payment charge - - - - - 0.5 0.5
Dividends paid - - - - - (29.4) (29.4)
Total transactions with
owners - - - - - (28.9) (28.9)
Balance at 28 February 2015 683.0 1,200.9 (1,199.9) 23.4 (18.2) 158.6 847.8
----------------------------- ---------- ---------- -------------- ---------- ----------- ----------- ---------
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
Other comprehensive
(expense)/income
for the financial period - - - (17.4) (0.9) 9.4 (8.9)
----------------------------- ---------- ---------- -------------- ---------- ----------- ----------- ---------
Total comprehensive
(expense)/income
for the financial period - - - (17.4) (0.9) 78.1 59.8
----------------------------- ---------- ---------- -------------- ---------- ----------- ----------- ---------
Share-based payment credit - - - - - (0.9) (0.9)
Purchase of treasury shares - - - - - (15.1) (15.1)
Dividends paid - - - - - (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 31 August 2013 683.0 1,200.9 (1,199.9) 3.2 (7.7) 64.9 744.4
Profit for the financial
year - - - - - 87.2 87.2
Other comprehensive
(expense)/income
for the financial year - - - (11.1) (1.7) 7.2 (5.6)
----------------------------- ---------- ---------- -------------- ---------- ----------- ----------- ---------
Total comprehensive
(expense)/income
for the financial year - - - (11.1) (1.7) 94.4 81.6
----------------------------- ---------- ---------- -------------- ---------- ----------- ----------- ---------
Share-based payment credit - - - - - (1.8) (1.8)
Purchase of treasury shares - - - - - (15.1) (15.1)
Dividends paid - - - - - (41.7) (41.7)
Total transactions with
owners - - - - - (58.6) (58.6)
----------------------------- ---------- ---------- -------------- ---------- ----------- ----------- ---------
Balance at 30 August 2014 683.0 1,200.9 (1,199.9) (7.9) (9.4) 100.7 767.4
----------------------------- ---------- ---------- -------------- ---------- ----------- ----------- ---------
The notes on pages 20-28 form an integral part of this condensed
consolidated interim financial information.
Consolidated Cash Flow Statement
For the 26 weeks ended 28 February 2015
Unaudited Unaudited Audited
26 weeks 26 weeks 52 weeks
to to to
Note 28 February 1 March 30 August
2015 2014 2014
---------------------------------------------- --- ------- ------------- ---------- -----------
Cash flows from operating activities
Cash generated from operations 16 154.9 135.4 240.5
Finance income 0.1 0.1 1.2
Finance costs (10.0) (6.4) (14.3)
Tax received/(paid) 0.6 (15.8) (20.6)
Net cash generated from operating
activities 145.6 113.3 206.8
Cash flows from investing activities
Purchase of property, plant and equipment (37.2) (54.6) (102.3)
Purchase of intangible assets (14.4) (8.2) (25.7)
Proceeds from sale of property, plant 0.2 - -
and equipment
-
---------------------------------------------- --- ------- ------------- ---------- -----------
Net cash used in investing activities (51.4) (62.8) (128.0)
Cash flows from financing activities
Issue of senior notes - - 225.0
Repurchase of senior notes (13.0) - -
(Repayment)/drawdown of revolving
credit facility (78.0) (0.9) 200.0
Repayment of term loan and revolving
credit facilities - - (410.7)
Settlement of term loan facility - - 13.3
Purchase of treasury shares - (15.1) (15.1)
Dividends paid (29.4) (29.4) (41.7)
Finance lease payments (2.0) (1.5) (2.2)
Debt issue costs (0.3) - (7.1)
Net cash used in financing activities (122.7) (46.9) (38.5)
Net (decrease)/increase in cash and
cash equivalents 17 (28.5) 3.6 40.3
Net cash and cash equivalents at beginning
of financial period 64.4 24.1 24.1
Net cash and cash equivalents at
end of financial period 17 35.9 27.7 64.4
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 and IAS 34 "Interim Financial Reporting" as adopted by
the European Union. The condensed consolidated financial statements
for the 26 weeks ended 28 February 2015 should be read in
conjunction with the annual financial statements for the 52 weeks
ended 30 August 2014 which have been prepared in accordance with
International Financial Reporting Standards (IFRSs) including
International Accounting Standards ("IAS") and IFRS Interpretations
Committee ("IFRS IC") interpretations 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 30 August 2014, which are available on our website
www.debenhamsplc.com. The report of the auditors for the financial
statements for the 52 weeks ended 30 August 2014 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 30 August 2014 and the
26 weeks ended 1 March 2014 are consistent with the Group's 2014
annual report and financial statements and interim financial
statements respectively.
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 pages 104 and 105 of the annual
report and financial statements for the 52 weeks ended 30 August
2014 except for taxes on income in the interim periods which are
accrued using the tax rate that would be applicable to the expected
total annual profit or loss. The principal risks and uncertainties
are set out on page 11 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
28 February 1 March 30 August
2015 2014 2014
GBPm GBPm GBPm
------------------------- ------------- --------- -----------
Gross transaction value 1,602.4 1,566.9 2,823.9
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. Current assets, current liabilities
and non-current liabilities are not reported to or reviewed by the
CODM on the basis of operating segment as these are reviewed on a
Group-wide basis and therefore these amounts are not presented
below.
Segmental analysis of results UK International Total
GBPm GBPm GBPm
26 weeks ended 28 February 2015
Gross transaction value 1,298.9 303.5 1,602.4
Concessions, consignments and staff
discounts (200.6) (76.4) (277.0)
-------------------------------------- -------- -------------- --------
External revenue 1,098.3 227.1 1,325.4
-------------------------------------- -------- -------------- --------
Operating profit 74.5 24.9 99.4
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
52 weeks ended 30 August 2014
Gross transaction value 2,275.3 548.6 2,823.9
Concessions, consignments and staff
discounts (373.2) (138.0) (511.2)
-------------------------------------- -------- -------------- --------
External revenue 1,902.1 410.6 2,312.7
-------------------------------------- -------- -------------- --------
Operating profit 96.3 32.3 128.6
Total segmental operating profit may be reconciled to total
profit before taxation as follows:
26 weeks 26 weeks 52 weeks
to to to
28 February 1 March 30 August
2015 2014 2014
GBPm GBPm GBPm
Total operating profit 99.4 93.4 128.6
Finance income 0.2 0.1 0.6
Recurring finance costs (10.7) (8.3) (18.9)
Non-recurring finance costs - - (4.5)
------------------------------ ------------- --------- -----------
Total profit before taxation 88.9 85.2 105.8
4 Operating profit
The following items have been included in arriving at operating
profit:
26 weeks 26 weeks 52 weeks
to to to
28 February 1 March 30 August
2015 2014 2014
GBPm GBPm GBPm
Amounts of inventory written down during
the financial period 6.3 6.2 10.4
Cost of inventory recognised as an
expense 686.0 678.2 1,165.0
Employment costs (note 5) 197.4 190.7 369.2
Depreciation and amortisation 51.6 49.9 100.8
Loss on disposal of property, plant
and equipment - 1.3 1.4
Operating lease rentals 107.3 107.5 216.3
Foreign exchange losses/(gains) 3.5 (1.6) (1.3)
5 Employment costs
26 weeks 26 weeks 52 weeks
to to to
28 February 1 March 30 August
2015 2014 2014
GBPm GBPm GBPm
------------- ---------
Wages and salaries 177.7 173.0 334.4
Social security costs 11.1 10.5 20.5
Other pension costs 8.1 8.1 16.1
Share-based payments 0.5 (0.9) (1.8)
197.4 190.7 369.2
6 Finance income
26 weeks 26 weeks 52 weeks
to to to
28 February 1 March 30 August
2015 2014 2014
GBPm GBPm GBPm
Interest on bank deposits 0.1 0.1 0.2
Other financing income - - 0.4
Net interest on net defined benefit 0.1 - -
pension schemes
0.2 0.1 0.6
7 Finance costs
26 weeks 26 weeks 52 weeks
to to to
28 February 1 March 30 August
2015 2014 2014
GBPm GBPm GBPm
------------- ---------
Recurring finance costs
Interest payable on bank loans and overdrafts 3.4 5.3 10.9
Interest payable on senior notes 5.8 - 1.9
Cash flow hedges reclassified and reported
in the income statement 0.8 1.5 2.7
Amortisation of issue costs on loans
and senior notes 0.8 1.0 2.0
Interest payable on finance leases 0.1 0.3 0.2
Net interest on net defined benefit
pension schemes - 0.3 0.6
Other financing costs 0.1 0.2 1.2
Capitalised finance costs - qualifying
assets (0.3) (0.3) (0.6)
10.7 8.3 18.9
Non-recurring finance costs
Unamortised issue costs written off
on repayment of term loan and revolving
credit facilities - - 4.5
----------------------------------------------- ------------- --------- -----------
- - 4.5
Total finance costs 10.7 8.3 23.4
8 Taxation
The taxation charge for the 26 weeks ended 28 February 2015 is
based on an estimated effective tax rate for the full year of 19.2%
(52 weeks ended 30 August 2014: 17.6%). This is lower than the
standard rate of corporation tax (20.6% blended rate) mainly due to
the utilisation of overseas losses brought forward from previous
periods.
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 financial 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 financial period.
26 weeks to 26 weeks to 52 weeks to
Basic and diluted 28 February 1 March 2014 30 August
earnings per share 2015 2014
Basic Diluted Basic Diluted Basic Diluted
GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------- --- -------- ----------- ----------- ----------- --------------- -----------
Profit for the financial
period after taxation 71.8 71.8 68.7 68.7 87.2 87.2
Number Number Number Number Number Number
m m m m m m
---------------------------- ------------- ----------- ----------- ----------- --------------- -----------
Weighted average
number of shares 1,226.4 1,226.4 1,228.2 1,228.2 1,227.1 1,227.1
Shares held by ESOP
(weighted) (weighted) (0.3) (0.3) (0.3) (0.3) (0.3) (0.3)
Shares issuable (weighted) - 2.1 - 1.7 - 1.9
Weighted average
number of shares
used in calculating
earnings per share 1,226.1 1,228.2 1,227.9 1,229.6 1,226.8 1,228.7
Pence Pence Pence Pence Pence Pence
per share per share per share per share per share per share
---------------------------- ------------- ----------- ----------- ----------- --------------- -----------
Earnings per share 5.9 5.9 5.6 5.6 7.1 7.1
10 Dividends
The Company paid a final dividend in respect of the 52 weeks
ended 30 August 2014 of 2.4 pence per share on 9 January 2015. The
directors have resolved to pay an interim dividend in respect of
the 26 weeks ended 28 February 2015 of 1.0 pence per share (1 March
2014: 1.0 pence) which will absorb an estimated GBP12.3 million of
shareholders' funds (1 March 2014: GBP12.3 million). It will be
paid on 3 July 2015 to shareholders who are on the register of
members at close of business on 5 June 2015.
11 Tangible and intangible assets and commitments
Tangible and intangible
assets
28 February 1 March 30 August
2015 2014 2014
GBPm GBPm GBPm
-------------------------------- -------------- --------- -----------
Opening net book amount 1,582.0 1,568.6 1,568.6
Additions 46.7 55.8 118.9
Foreign currency revaluation (3.8) (1.7) (3.3)
Disposals (0.2) (1.3) (1.4)
Depreciation and amortisation (51.6) (49.9) (100.8)
Closing net book amount 1,573.1 1,571.5 1,582.0
Capital commitments contracted but not provided for by the Group
amounted to GBP15.9 million (30 August 2014: GBP1.3 million; 1
March 2014: GBP3.0 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 30 August 2014. 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 Level Total
1 2 3
GBPm GBPm GBPm GBPm
--------------------------------------------------------------- -------- -------- -------- --------
At 28 February 2015
Assets
Available-for-sale financial instruments 2.5 - - 2.5
Derivative financial instruments:
* Forward foreign currency contracts held as cash flow
hedges - 31.5 - 31.5
* Other forward foreign currency contracts - 3.3 - 3.3
Total assets 2.5 34.8 - 37.3
Liabilities
* Interest rate swaps held as cash flows - (1.2) - (1.2)
* Other forward foreign currency contracts - (0.4) - (0.4)
--------------------------------------------------------------- -------- -------- -------- --------
Total liabilities - (1.6) - (1.6)
Level Level Level Total
1 2 3
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 flow hedges - 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)
Level Level Level Total
1 2 3
GBPm GBPm GBPm GBPm
--------------------------------------------------------------- ------ ------- ------ -------
At 30 August 2014
Assets
Available-for-sale financial instruments 3.6 - - 3.6
Derivative financial instruments:
* Interest rate swaps held as cash flow hedges - 0.6 - 0.6
* Forward foreign currency contracts held as cash flow
hedges - 3.8 - 3.8
* Other forward foreign currency contracts - 0.1 - 0.1
Total assets 3.6 4.5 - 8.1
Liabilities
* Interest rate swaps held as cash flows - (1.4) - (1.4)
* Forward foreign currency contracts held as cash flow
hedges - (9.9) - (9.9)
* Other forward foreign currency contracts - (2.8) - (2.8)
--------------------------------------------------------------- ------ ------- ------ -------
Total liabilities - (14.1) - (14.1)
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 28 February 2015 of
10% (1 March 2014: 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 28
February 2015, 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 equity
investments were classified as available-for-sale investments
-- Other reserves would decrease/increase by GBP0.3 million (1
March 2014: 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 current period (26 weeks ended 1 March 2014: no
transfers).
13 Retirement benefit schemes
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.
Further details of the Group's pension arrangements are set out
in pages 124 to 127 of the annual report and financial statements
for the 52 weeks ended 30 August 2014.
The major assumptions used by the actuary were:
28 February 1 March 30 August
2015 2014 2014
per annum per annum per annum
% % %
----------------------- ------------ ---- ------------------ ---------- ----------
Inflation assumption 2.9 3.2 3.1
General salary and wage increase 2.9 3.2 3.1
Rate of increase in pension payments
and deferred payments 2.9 3.2 3.1
Pension increase rate 2.7 3.0 2.9
Discount rate 3.5 4.4 3.9
The amounts recognised in the balance sheet are determined as
follows:
28 February 1 March 30 August
2015 2014 2014
GBPm GBPm GBPm
------------------------------------- --- -------------- ---------- ------------
Total market value of pension
scheme assets 800.1 692.4 748.4
Present value of defined benefit
obligation (778.9) (696.6) (750.8)
Net surplus/(deficit) in pension
schemes 21.2 (4.2) (2.4)
Analysed as:
DEPP scheme surplus 10.6 6.2 6.9
DRS scheme surplus/(deficit) 10.6 (10.4) (9.3)
---------------------------------------------- -------------- ---------- ------------
The movement in the net pension surplus/(deficit) during the
financial period is as follows:
28 February 1 March 30 August
2015 2014 2014
GBPm GBPm GBPm
-------------------------------------- ------------ -------- ----------
Net deficit in pension schemes
at the start of the financial
period (2.4) (20.0) (20.0)
Movement in the financial period:
- Company contributions 5.5 5.4 10.8
- Current service cost (0.8) (0.7) (1.4)
- Net interest on net defined
benefit schemes 0.1 (0.3) (0.6)
- Remeasurements of pension schemes 18.8 11.4 8.8
Net surplus/(deficit) in pension
schemes at the end of the financial
period 21.2 (4.2) (2.4)
A retirement benefit surplus is only recognised to the extent
that it is expected to be recoverable in the future.
The table below illustrates the estimated impact on the schemes'
liabilities as a result of movements in the principal assumptions
used to measure those liabilities.
28 February 1 March 30 August
2015 2014 2014
GBPm GBPm GBPm
----------------------- ------------ ---- ------------------ -------- ----------
Increase in schemes' liabilities
arising from:
- a 0.5% increase in inflation 60.5 47.1 58.5
- a 1.0% reduction in the 147.4 130.1 141.3
discount rate
- a one year increase in 24.5 20.3 23.1
life expectancy
A 0.5% reduction in the inflation assumption, a 1.0% increase in
the discount rate assumption and a one year reduction in the life
expectancy assumption would result in an equal and opposite change
in the schemes' liabilities.
The above sensitivity analyses are based on a change in an
assumption while holding all other assumptions constant. In
practice, this is unlikely to occur, and changes in some of the
assumptions may be accumulated.
14 Other non-current liabilities
28 February 1 March 30 August
2015 2014 2014
GBPm GBPm GBPm
Property lease incentives received 331.6 325.4 331.7
Other non-current liabilities 0.5 1.5 1.0
Total other non-current liabilities 332.1 326.9 332.7
Property lease incentives received from landlords either through
initial contributions or rent-free periods are recognised as
non-current liabilities and are credited to the income statement on
a straight line basis over the term of the relevant lease. Property
lease incentives received also relate to the spreading of the
charges in respect of leases with fixed annual increments in rent
(escalating rent clauses) over the term of the relevant lease.
15 Share capital
GBP Number
------------------------------------- -------- --------------
Issued and fully paid - ordinary
shares of GBP0.0001 each
At 1 March 2014 and 30 August 2014 128,684 1,286,843,441
Allotted under share option schemes - 6,231
At 28 February 2015 128,684 1,286,849,672
During the period the Company did not purchase any of its own
ordinary shares. During the 52 weeks ended 30 August 2014 the
Company purchased 14,351,525 of its own ordinary shares with a
nominal value of GBP1,435 for a consideration of GBP15.1 million.
These ordinary shares are held as treasury shares. 60,210,320
shares are currently held as treasury shares and these represent
4.7% (2014: 4.7%) of the issued share capital of the Company.
16 Cash generated from operations
26 weeks 26 weeks 52 weeks
to to to
28 February 1 March 30 August
2015 2014 2014
GBPm GBPm GBPm
------------------------------------------------ ------------- --------- -----------
Profit before taxation 88.9 85.2 105.8
Depreciation and amortisation (note
11) 51.6 49.9 100.8
Loss on disposal of property, plant
and equipment - 1.3 1.4
Share-based payment charge/(credit) 0.5 (0.9) (1.8)
Fair value (gains)/losses on derivative
instruments (3.8) 4.0 (1.1)
Net movements in provisions 0.1 1.5 0.4
Finance income (note 6) (0.2) (0.1) (0.6)
Finance costs (note 7) 10.7 8.3 23.4
Pension current service cost 0.8 0.7 1.4
Cash contributions to pension schemes (5.5) (5.4) (10.8)
Net movement in other long-term receivables (0.5) - 0.2
Net movement in other non-current liabilities (0.6) 4.7 10.6
Changes in working capital
Decrease in inventories 9.3 2.4 12.4
Decrease in trade and other receivables 4.5 10.1 2.8
Decrease in trade and other payables (0.9) (26.3) (4.4)
Cash generated from operations 154.9 135.4 240.5
17 Analysis of changes in net debt
At At
30 August Non-cash 28 February
2014 Cash flow movements 2015
GBPm GBPm GBPm GBPm
------------------------------- ----------- ------------ ------------ -------------
Analysis of net debt
Cash and cash equivalents 64.4 (27.1) - 37.3
Bank overdrafts - (1.4) - (1.4)
------------------------------- ----------- ------------ ------------ -------------
Net cash and cash equivalents 64.4 (28.5) - 35.9
Debt due within one year (198.8) 78.0 0.1 (120.7)
Debt due after one year (220.6) 13.3 (0.7) (208.0)
Finance lease obligations due
within one year (3.3) 2.0 (1.9) (3.2)
Finance lease obligations due
after one year (3.2) - 1.9 (1.3)
(361.5) 64.8 (0.6) (297.3)
During February 2015 the Company repurchased GBP13.2 million of
the issued GBP225.0 million 5.25% seven year senior notes for a
consideration of GBP13.0 million. The repurchased senior notes were
cancelled on 26 February 2015.
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 GGUQCCUPAGRA
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