TIDMDEB
RNS Number : 1408V
Debenhams plc
14 April 2016
DEBENHAMS PLC - HALF YEAR RESULTS
"Further strategic progress delivering strong performance"
Debenhams plc, the leading international, multi-channel brand,
today announces half year results for the 26 weeks to 27 February
2016.
Financial headlines
-- Gross transaction value ('GTV') up 1.6% to GBP1,628.7m (2015:
GBP1,602.4m). Group like-for-like sales up 2.4% in constant
currency, up 1.1% as reported
-- Group gross margin rate up 20bps, with mix partly offsetting
90bps markdown improvement on last year
-- Group EBITDA up 1.3% to GBP153.0m (2015: GBP151.0m). UK
EBITDA up 3.0% to GBP125.5m (2015: GBP121.8m)
-- International EBITDA declined 5.8% to GBP27.5m (2015:
GBP29.2m) reflecting adverse currency movements, on GTV down 3.7%
as reported. In constant currency, International GTV grew by
3.2%
-- Group profit before tax up 5.5% to GBP93.8m (2015: GBP88.9m),
basic EPS up 5.1% to 6.2p (2015: 5.9p)
-- Interim dividend increased by 2.5% to 1.025p per share (2015: 1.000p)
-- Following strong cash generation and working capital
management, net debt reduced by GBP95.6m to GBP224.2m. Net
debt/EBITDA at 0.9x, marking further progress towards medium term
leverage target of 0.5x
Operational headlines
-- Further progress on strategic priorities has delivered a
strong trading and operational performance over peak
o Full price sales mix improvement of 5.1% delivered against
background of refocused promotional activity and less
discounting
o This is supported by a planned reduction in stock levels and
has delivered terminal stocks at 2.9%, in line with our long term
average
o Space optimisation roll-out continues; over 50% of targeted
space now filled with new brands, formats and services and we are
on target to fill 75% by Christmas
-- As planned, five new stores opened between September and
November 2015: in Bradford, Wandsworth, Rugby, Beverley and
Newport, contributing 1.1% to sales growth in the half. We also
closed a store at Cheltenham, due to a lease expiry
-- Further multi-channel service improvements supported
continued online growth, particularly over peak, with online sales
growth of 10%(1) and online EBITDA up 12% in the half. Orders on
mobile devices continue to be our fastest-growing channel,
representing almost 50% of online sales
-- New international web platform launched as planned, enabling
local currency, payment and local language options to support
further international multi-channel growth
-- As previously announced, we have appointed David Smith,
formerly Managing Director (Asia Pacific) of the Body Shop
International, as International Director. He will join Debenhams
next month and will lead the drive to build Debenhams'
international presence across all channels.
Michael Sharp, Chief Executive of Debenhams, said:
"A strong operational performance resulted in a record
Christmas, and further growth in first half profits against a good
performance in the prior year. Our customers are responding
positively to our multi-channel strategy, finding our mix of
products and brands both compelling and great value for money.
"Although there is plenty more to do, we are on track to deliver
full year results in line with market expectations. When I leave
the business later this year I am confident that it will be in a
good position to deliver continued sustainable growth under a
strong and capable management team."
Sir Ian Cheshire, Non-Executive Chairman of Debenhams,
commented:
"As this will be his last set of results, on behalf of the
Board, I would like to thank Michael for his service as Chief
Executive of Debenhams. He has led the business through an
unprecedented period of change for the sector, leaving the business
in good shape for the future as these results demonstrate. I am
pleased that this means we can today announce an increase in the
interim dividend, consistent with our progressive dividend policy.
The foundations to deliver sustainable growth are in place and we
are in the final stages of appointing a new CEO to lead the
business."
Presentation
A presentation for analysts and investors will be held today
(Thursday 14 April 2016) at 9:00am 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/r6or6xci.
Enquiries
Analysts and Investors
Matt Smith, Debenhams plc
Katharine Wynne, Debenhams plc 020 3549 6304
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 253 stores
in 27 countries and was available online in more than 60 countries.
Our first half results demonstrate continuing progress in
implementing our strategic priorities as set out two years ago.
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. Our trading performance demonstrates that we continue
to provide our customers with great product, wide choice and
excellent value for money.
-- Having taken 42 days out of the promotional calendar since
spring 2014, the current schedule of promotions, focusing on the
events we are known for, is broadly where it should be. However, we
have continued to reduce the breadth and depth of individual
promotions as planned, which has supported a 5.1% improvement in
full price sales mix in the half year.
-- We have reduced stock levels in the half year by 1.9%
overall, (4.3%) like-for-like in the UK. In certain categories, in
line with our plan to reduce our exposure to weather-sensitive
product, the stock reduction has been materially greater. As a
result we carried less stock into the post-Christmas Sale. While
this has reduced the rate of sales growth in the balance of the
half, it has supported a further 90bps reduction in markdowns in
the half year, building on the improvement delivered in the prior
year.
-- We have re-balanced our sales towards non-clothing categories
which has resulted in a strong performance, particularly over
Christmas, in the destination categories of Gifting and Beauty.
This has reinforced our market position in the premium beauty
segment and despite tough comparatives over peak, sales across gift
categories have shown further good growth. Whilst both these
categories have a lower weighting in the second half, we expect
they will continue to grow their share of our sales mix.
-- Following the price investment we undertook in FY2015,
focusing on childrenswear, menswear and home, we continue to review
our price positioning but for now we believe we have completed the
action necessary to remain competitive. Our sourcing work should
support any further necessary price investment.
-- Supporting our full price trading strategy, our successful
marketing campaign, "a match made in Debenhams", which showcased
some of our Designer brands in the autumn, is being repeated in the
summer season. Following the successful launch of our latest
Designers at Debenhams brand, Nine by Savannah Miller, the range
has been extended into lingerie for this season.
-- We have launched a 0% interest credit option which supports
our plan to grow the bigger ticket category within our home
offer.
-- We continue to work on developing the next stage of our
compelling customer proposition, taking a more customer-led
approach, focusing on our core customer and identifying how we can
better fulfil her wants and needs from Debenhams.
Increasing availability and choice through multi-channel
-- Our ambition is to grow our multi-channel business, in order
to meet the evolving needs of our customers. Our aim is that online
sales should reach around 30% of our UK GTV. In the half year,
online sales increased by 10.0% to GBP246 million, accounting for
15.1% of total sales, up from 14.0% in the previous year. Online
EBITDA grew by 12.0% over the half year.
-- We have rolled out further service improvements in order to
maintain the momentum in our online performance. As planned, ahead
of the Christmas peak, we extended cut-off times further for next
day and evening deliveries, we introduced more competitive delivery
charges, and an improvement in the number of concession partners
able to meet our next day delivery/collection promise.
Additionally, we extended "endless aisle" to c150 stores, whereby
online orders can be picked from a store for home delivery.
-- We have continued to focus our investment using a
mobile-first approach, and within overall online growth, orders on
mobile devices continue to be our fastest growing channel,
representing almost 50% of online sales. Smartphones are driving
this, delivering year on year revenue growth of almost 70%.
-- We continue to channel online marketing investment into
driving visits and conversion on mobile devices. We re-launched our
app before Christmas and supported by our multi-channel marketing
approach, Debenhams moved up into the top 5 of the Experian Hitwise
measure of the most visited online retailers in the pre-Christmas
period.
-- A key support to the growth in performance has been the
increased participation of concession partners in our next day
delivery/collection services, with around half of them now able to
meet this timeframe.
-- We have seen significant further progress in click &
collect penetration, which averaged 31% for the half year and
peaked at 46% over Christmas. This is our lowest cost delivery
option and drives traffic back into stores, with more than one in
ten click & collect customers making a purchase while in store
to collect their order.
Focusing on UK retail
(MORE TO FOLLOW) Dow Jones Newswires
April 14, 2016 02:00 ET (06:00 GMT)
-- Our stores remain central to our customer proposition. We
have a well-invested, modern store estate in prime locations. In
the half year, as planned, we opened five stores between September
and November in time for peak trading. These stores have
contributed approximately 1.1% to GTV growth in the half year. We
also closed a store at Cheltenham, due to a lease expiry, and end
the half with 165 UK stores trading from 11.5 million sq ft.
-- As part of our strategic priority to achieve a better return
from UK stores, we identified 1m sq ft of space where there was an
opportunity to achieve higher profit densities. This led to our
"space optimisation programme", where we have to date filled over
50% of the identified space, in line with our previous guidance,
with a combination of own brand extensions, new concessions
offering complementary product and additional service
propositions.
-- In this season we have committed additional space to our
Designer brands, we have launched new concession Little Mistress in
15 stores and added another 13 Monsoon concessions. We have also
added a further 15 third party branded food service offers,
including Costa Coffee, Patisserie Valerie and Ed's Easy Diner. The
programme continues to deliver performance in line with our
targets.
-- We have also applied some of the lessons learnt to space
allocation in our new stores and are including some of the new
initiatives as part of our continuing store modernisation plans. We
completed the modernisation of Birmingham and Westfield White City
before Christmas, including new food service offers in each, Chi
Kitchen in Birmingham and Ed's Easy Diner in White City. This forms
part of our plan to achieve 10% of sales from food services
compared with 3% currently.
-- There are no further store openings planned in the UK until
FY2018, when we expect to open three stores, trading approximately
220,000 sq ft, in Stevenage, Wolverhampton and Watford, where we
have recently agreed to take a site in the extension to the
successful Harlequin Centre. These stores are in key target
locations not currently served by Debenhams and will support
multi-channel growth in these markets.
Expanding the brand internationally
-- Debenhams operates both its own and franchised stores
overseas and sells product online in over 60 countries. Over time,
we plan to grow our international business to around a third of
total GTV, exploiting multi- and single channel opportunities as
appropriate to the local market.
-- On a constant currency basis international sales increased
3.2%. On a reported basis, GTV declined by 3.7% to GBP292.2 million
in the half year, reflecting adverse foreign exchange translation
effects. International operating profit declined by 5.6% to GBP23.5
million.
-- In the half year our partners opened franchised stores in
Isfahan, Iran and Bucharest, Romania and closed one in the
Philippines. Since the half year end two stores have closed, in
Riyadh, Saudi Arabia and Ledra, Cyprus. As a result of more
difficult trading conditions in some franchise markets together
with ongoing de-stocking by some of our partners, overall franchise
sales are down slightly.
-- Magasin du Nord continues to deliver strong momentum, with
strong growth from its website. It will benefit from the
refurbishment of its flagship store's ground floor beauty hall in
time for peak trading. In the Republic of Ireland sales grew in
constant currency.
-- International online sales have grown at over 40% in local
currency in the half year. We have launched our new international
web platform, initially including France, Spain, Germany, Australia
and Cyprus, with further releases to follow.
-- As part of our strategic aim to develop the distribution of
our brands into new markets, we have as previously announced,
signed agreements for Australia and Vietnam. As part of assessing
routes to market in China, we are currently trialling a limited
brand offer in partnership with innovative Chinese multi-channel
retailer 'Yuou'. This showroom format only carries display stock
but allows the customer to order for home delivery.
Operational effectiveness
-- We are building an infrastructure that is sustainable and fit
for future growth, to enable us to exploit the continuing channel
shifts in UK retail and drive international growth in a
cost-effective way. Operating cost growth of 2.6% before
depreciation in the half year was in line with our guidance.
-- Capital expenditure in the half year was GBP53.5 million,
compared with GBP51.4 million in the comparative period, and is
expected to be in the region of GBP130 million for the full year,
as previously guided. As last year, the proportion of spending on
systems and infrastructure is expected to be close to half the
total in FY2016 as we continue this multi-year programme. Spending
on new stores is expected to reduce in the second half, as the five
stores opening this year all launched before the Christmas peak. As
planned, we will complete the modernisation of Lakeside and
Chelmsford stores before the year end.
-- In the first stage of our buying & merchandising systems
renewal programme, we have implemented a new sourcing programme,
product lifecycle management, which is currently piloting in a
number of departments. In addition, following the successful
knitwear trial, we have extended category buying across menswear in
the current season.
-- Our new single warehouse management system is now being
implemented as planned, and will be operational in time for peak
trading. As we transition from the existing systems to a single
provider this is expected to deliver benefits in picking costs and
reduced stockholding over time.
-- From 1 April 2016, we are paying our colleagues who are 21
and over the National Living Wage. We have taken the opportunity to
simplify our wage structures, but no-one will have benefits taken
away. The net cash cost of implementing these proposals in FY2016
is expected to be cGBP3 million with an additional GBP8 million in
FY2017, before mitigation, in line with previous guidance.
-- We have appointed a new International Director, David Smith,
who will lead the drive to build Debenhams' international presence
across the franchise, online and wholesale channels. For the UK
business we plan to align the management of the retail and online
operations within a single structure under the leadership of Ross
Clemmow. This is designed to deliver a seamless shopping experience
across the UK business. As a result of these changes, Debenhams'
operational management is now structured to support the future
development strategies of the Group.
FINANCIAL REVIEW
FINANCIAL SUMMARY
26 weeks 26 weeks % change
to 27 February to 28 February
2016 2015
-------------------------------- ---------------- ---------------- ---------
Gross transaction value(1,2) GBP1,336.5m GBP1,298.9m +2.9%
UK GBP292.2m GBP303.5m (3.7%)
International GBP1,628.7m GBP1,602.4m +1.6%
Group
-------------------------------- ---------------- ---------------- ---------
Statutory revenue(1,2) GBP1,109.7m GBP1,098.3m +1.0%
UK GBP217.5m GBP227.1m (4.2%)
International GBP1,327.2m GBP1,325.4m +0.1%
Group
-------------------------------- ---------------- ---------------- ---------
Group like-for-like
sales movement(3) +1.1%
-------------------------------- ---------------- ---------------- ---------
Group gross margin movement(4) +20bps
-------------------------------- ---------------- ---------------- ---------
EBITDA(1,5) GBP125.5m GBP121.8m +3.0%
UK GBP27.5m GBP29.2m (5.8%)
International GBP153.0m GBP151.0m +1.3%
Group
-------------------------------- ---------------- ---------------- ---------
Operating profit(1) GBP76.1m GBP74.5m +2.1%
UK GBP23.5m GBP24.9m (5.6%)
International GBP99.6m GBP99.4m +0.2%
Group
-------------------------------- ---------------- ---------------- ---------
Profit before tax GBP93.8m GBP88.9m +5.5%
-------------------------------- ---------------- ---------------- ---------
Basic earnings per share 6.2p 5.9p +5.1%
-------------------------------- ---------------- ---------------- ---------
Dividend per share 1.025p 1.000p +2.5%
-------------------------------- ---------------- ---------------- ---------
27 February 28 February
2016 2015
-------------------------------- ---------------- ---------------- ---------
Net debt GBP224.2m GBP297.3m
-------------------------------- ---------------- ---------------- ---------
Net debt : EBITDA (last
12 months) 0.9x 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.
(MORE TO FOLLOW) Dow Jones Newswires
April 14, 2016 02:00 ET (06:00 GMT)
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).
SEGMENTAL PERFORMANCE
UK
Gross transaction value for the UK segment increased by 2.9% to
GBP1,336.5 million and reported revenue grew by 1.0% to GBP1,109.7
million. This was a result of continued online sales growth and the
benefit of five new store openings in the first half of 2016 which
overall led to a strong Christmas trading period. As expected, the
sales growth slowed in the latter period of the half as a result of
the Beauty and Gifting categories representing a lower proportion
of the sales and the anniversarying of last year's stock clearance
activity.
The like-for-like performance of stores was broadly flat in the
half, despite the continued impact of the channel shift into
online. As we have added choice in concessions, the own bought mix
has decreased from 80.6% to 79.4% with a consequent dilution in
gross margin rate, offset by reduced markdown.
EBITDA increased by 3.0% to GBP125.5 million reflecting the
benefits of lower markdown, continued sales growth and good cost
discipline. Operating profit for the year increased by 2.1% to
GBP76.1 million.
International
In the International segment gross transaction value of GBP292.2
million was 3.7% lower than last year and reported revenue
decreased by 4.2% to GBP217.5 million. Both metrics have been
impacted by weaker Euro and Danish Kroner exchange rates,
suppressing Group LFL by 1.3%. On a constant currency basis,
International gross transaction value improved by 3.2%.
The constant currency growth was driven by Magasin du Nord's
continued strong performance, and some improvement in the Republic
of Ireland sales. Franchise despatches had a (0.6%) impact on Group
GTV. A number of franchise partners have sought to improve their
working capital positions by reducing stock intake in the Autumn
Winter 2015 and Spring Summer 2016 seasons. A number of markets,
such as the Middle East and Russia, are also planning more
prudently as a result of more difficult trading conditions.
International operating profit decreased by 5.6% to GBP23.5
million as a result of lower franchise despatches and the impact of
the foreign currency translation of results into Sterling.
GROUP SALES AND PROFITS
Sales and revenue
Group gross transaction value increased by 1.6% to GBP1,628.7
million for the 26 weeks to 27 February 2016 whilst Group revenue
increased by 0.1% to GBP1,327.2 million. Group like-for-like sales
increased by 2.4% on a constant currency basis and 1.1% on a
reported basis.
Like--for--like sales growth was principally driven by 10.0%
growth in online sales; online now represents 15.1% of Group gross
transaction value (2015: 14.0%). The components of the gross
transaction value increase of 1.6% and like--for--like sales growth
of 1.1% are shown below
UK stores +0.1%
UK online +1.2%
International +1.1%
Like-for-like sales +2.4%
- constant currency
Exchange rate impact (1.3%)
Like-for-like sales
- reported +1.1%
New UK space +1.1%
International franchises (0.6%)
GTV movement +1.6%
-------------------------- --------
Group own bought mix decreased from 77.3% in 2015 to 76.3% as a
result of the movement in the UK mix, with the sales growth from
Concessions increasing at a faster rate.
Operating profit
Growth in the lower margin cosmetic and gifting categories has
also continued to impact sales mix. However, further progress has
been made to tighten stock and reduce the breadth and depth of
promotions, resulting in reduced markdown and a 90bps benefit to
gross margin. As a result, the gross margin rate has improved
overall by 20bps.
Operating costs before depreciation increased in line with
expectations, growing 2.6% despite the further shift into online.
As previously guided, from April 2016, the impact of National
Living Wage will come into effect, having a c.GBP3 million impact
in the second half of the financial year.
Depreciation and amortisation (including losses on disposals)
increased by 3.5% to GBP53.4 million, reflecting higher capital
expenditure over the last few years.
As a result of the above, Group operating profit for the 26
weeks to 27 February 2016, was GBP99.6 million, 0.2% above last
year.
Inventory
Stock levels were managed tightly during the first half,
reflecting the continued plan to reduce the depth of markdown
requirement. Total stock value decreased by 1.9% to GBP329.1
million reflecting a 4.3% 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
Net finance costs decreased by 44.8% to GBP5.8 million
reflecting the benefit of lower debt levels, a foreign exchange
credit of GBP1.2 million (2015: GBP1.1 million cost) from the
translation of Euros during the half year and a GBP0.6 million
pension valuation credit associated with the pension surplus in
accordance with IAS 19 revised "Employee benefits" (2015: GBP0.1
million).
Profit before tax
Reported profit before tax increased by 5.5% to GBP93.8 million
(2015: GBP88.9 million).
Taxation
Taxation increased from GBP17.1 million in the first half of
last year to GBP17.4 million principally due to
the higher reported profit before tax. This represents an
effective tax rate of 18.6% (2015: 19.2%).
Profit after tax
Profit after tax increased by 6.4% to GBP76.4 million.
Earnings per share
Increased profits resulted in a 5.1% increase in both basic and
diluted earnings per share to 6.2 pence. The basic weighted average
number of shares in issue increased from 1,226.1 million last year
to 1,227.2 million and diluted weighted average number of shares
increased from 1,228.2 million to 1,230.2 million.
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 progressive dividend. Third, as we communicated
in October 2015, we have a medium--term target for net debt to
EBITDA of 0.5 times, an improvement from the previous level of 1.0
times.
Operating cash flow before financing and taxation increased from
GBP103.5 million to GBP133.5 million as
a result of higher EBITDA and working capital improvements. Of
this improvement: GBP10 million related to timing, reversing in
2017; and GBP10 million related to the timing of payments around
the half year, which will reverse in the second half of the year;
the remaining improvement in working capital related to the
progress made on stock reduction and the impact of initiatives
working with suppliers to align trading terms.
Cash flow generation, the uses of cash and the movement in net
debt are summarised below.
26 weeks 26 weeks
to 27 February to 28 February
2016 2015
-------------------------------- ---------------- ----------------
EBITDA GBP153.0m GBP151.0m
Working capital GBP34.0m GBP3.9m
-------------------------------- ---------------- ----------------
Cash generated from operations GBP187.0m GBP154.9m
Capital expenditure (GBP53.5m) (GBP51.4m)
-------------------------------- ---------------- ----------------
Operating cash flow before GBP133.5m GBP103.5m
financing & taxation
Taxation (GBP1.5m) GBP0.6m
Financing (GBP6.2m) (GBP9.9m)
Dividends paid (GBP29.5m) (GBP29.4m)
Debt issue costs (GBP1.1m) (GBP0.3m)
Other non-cash movements GBP0.4m (GBP0.3m)
Change in net debt GBP95.6m GBP64.2m
-------------------------------- ---------------- ----------------
Opening net debt GBP319.8m GBP361.5m
Closing net debt GBP224.2m GBP297.3m
-------------------------------- ---------------- ----------------
Net debt: EBITDA (last
12 months) 0.9x 1.3x
-------------------------------- ---------------- ----------------
Capital expenditure
Capital expenditure was GBP53.5 million during the half compared
to the spend of GBP51.4 million in the
same period last year. The increase is principally associated
with the cost of the new store openings in the first half of the
year. Guidance for capital expenditure for the year remains in the
region of GBP130 million.
Dividends
Total cash paid in dividends of GBP29.5 million related to the
2015 final dividend of 2.4 pence per share
that was paid to shareholders on 22 January 2016.
Consistent with the progressive dividend policy outlined in
October 2015, the Board has decided to increase the interim
dividend by 2.5% to 1.025 pence per share (2015: 1.000 pence per
share). The interim dividend will be paid on 1 July 2016 to
shareholders who are on the register of members at close of
business on 3 June 2016.
Net debt
(MORE TO FOLLOW) Dow Jones Newswires
April 14, 2016 02:00 ET (06:00 GMT)
The Group's net debt position as at 27 February 2016 of GBP224.2
million was GBP73.1 million better than the same point in the prior
year (2015: GBP297.3 million), a result of improved operating cash
flows and the continued 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 improvement in net debt
is expected to move to be in line with the full year guidance as a
result of the reversal of some of the first half working capital
timing benefits as previously mentioned.
The ratio of net debt to EBITDA of 0.9 times compares with 1.3
times at the end of the previous year, the improvement being in
line with our intention to reduce to 0.5 times over the medium
term.
During the 26 weeks ended 27 February 2016 the Group refinanced
its GBP350.0 million revolving credit facility (28 February 2015:
GBP425.0 million), reducing the facility size to GBP320.0 million
in the process and extending the maturity from October 2018 to June
2020. The amended revolving credit facility contains an option to
request an extension to June 2021.
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 27 February 2016 was GBP51.8 million (28 February
2015: GBP21.2 million). The surplus was driven by asset returns.
During June 2015, the triennial actuarial valuation was completed
and a new agreement was concluded under which the Group agreed to
contribute GBP9.5 million per annum to the pension schemes
(previously GBP8.9 million per annum) for the period from 1 April
2014 to 31 March 2022 increasing by the percentage increase in RPI
over the year to the previous December. The Group agreed to
continue to cover 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 by defined contribution pension schemes.
.
GUIDANCE FOR 2016
Guidance for 2016 is re-iterated and is shown below. As
previously confirmed FY2016 will be a 53 week year, but all
guidance is given on a 52 week basis.
Gross margin Flat to +50bps
Total cost growth* 2%-4%
Depreciation & c.GBP110 million
amortisation
Net finance costs GBP16-GBP18 million
(from GBP18-GBP20
million)
Taxation c.20%
Capital expenditure c.GBP130 million
Net Debt c.GBP270-GBP290
*including estimated million
cost of implementing
National Living
Wage proposals
----------------------- --------------------
OUTLOOK
We have delivered continued progress in implementing our
strategic priorities as set out two years ago, as our first half
results demonstrate. A strong operational performance resulted in a
record Christmas, and a further uplift in first half profits
against a good performance in the prior year.
Our customers are responding positively to our multi-channel
strategy, finding our mix of products and brands both compelling
and great value for money. We are satisfied with progress to date,
but there is plenty more to do.
We are on track to deliver full year results in line with market
expectations. The business is in good shape and is well-positioned
to deliver continued sustainable growth.
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 2015.
Reference should be made to the 2015 Annual Report and Accounts for
more details on the potential impact of these risks and examples of
mitigation.
The referendum on the UK's membership of the EU may increase
both economic and political uncertainty, and create the possibility
of a disruptive exit from the EU. Debenhams will continue to
monitor the situation, assess potential impacts and manage
exposures according to its current risk appetite, both before and
after the referendum.
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
Sir Ian Cheshire was appointed a non-executive director and
Chairman-elect on 14 January 2016 and succeeded Nigel Northridge as
non-executive Chairman on 7 April 2016. The board of directors as
at 14 April 2016 is as follows: Sir Ian Cheshire (Chairman),
Michael Sharp (Chief Executive), Matt Smith (Chief Financial
Officer), Suzanne Harlow (Group Trading Director), Terry Duddy
(senior independent 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
Dennis Millard (non-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 27 February 2016 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
14 April 2016
NOTES TO EDITORS
Debenhams is a leading international, multi--channel brand with
a proud British heritage which at the
end of H1 FY16 traded from 253 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, Ted Baker, Jeff Banks,
Jasper Conran, Giles Deacon, Vicki Elizabeth, FrostFrench, Patrick
Grant, Henry Holland, Betty Jackson, Ben de Lisi, Julien Macdonald,
Savannah Miller, Jenny Packham, Stephen Jones, Todd Lynn, 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 interim condensed consolidated financial
statements
Our conclusion
We have reviewed Debenhams plc's interim condensed consolidated
financial statements (the "interim financial statements") in the
half year results of Debenhams plc for the 26 week period ended 27
February 2016. Based on our review, nothing has come to our
attention that causes us to believe that the interim financial
statements are not prepared, in all material respects, in
accordance with International Accounting Standard 34, 'Interim
Financial Reporting', as adopted by the European Union and the
Disclosure Rules and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
What we have reviewed
The interim financial statements comprise:
-- the Consolidated Balance Sheet as at 27 February 2016;
-- 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 interim financial statements.
The 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 Rules and Transparency
Rules of the United Kingdom's Financial Conduct Authority.
As disclosed in note 1 to the interim financial statements, 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.
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Responsibilities for the interim financial statements and the
review
Our responsibilities and those of the directors
The half year results, including the 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 Rules and
Transparency Rules of the United Kingdom's Financial Conduct
Authority.
Our responsibility is to express a conclusion on the 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 Rules and Transparency Rules of the United Kingdom's
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.
What a review of 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 interim financial statements.
PricewaterhouseCoopers LLP
Chartered Accountants
London
14 April 2016
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 interim 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 27 February 2016
Unaudited Unaudited Audited
26 weeks 26 weeks 52 weeks
Note to to to
27 February 28 February 29 August
2016 2015 2015
GBPm GBPm GBPm
--------------------------------- ------- -------------- -------------- ------------
Revenue 2,3 1,327.2 1,325.4 2,322.7
Cost of sales (1,134.8) (1,137.1) (2,023.5)
Gross profit 192.4 188.3 299.2
Distribution costs (63.1) (59.8) (111.1)
Administrative expenses (29.7) (29.1) (54.0)
Operating profit 4 99.6 99.4 134.1
Finance income 6 2.0 0.2 0.2
Finance costs 7 (7.8) (10.7) (20.8)
Profit before taxation 93.8 88.9 113.5
Taxation 8 (17.4) (17.1) (20.0)
Profit for the financial period
attributable to owners of the
parent 76.4 71.8 93.5
Earnings per share attributable to the owners of the parent
(expressed in pence per share)
Pence Pence Pence
per per per
Share share Share
---------------------------------------- -------- -------- --------
Basic earnings per share attributable
to the owners of the parent 9 6.2 5.9 7.6
Diluted earnings per share
attributable to the owners
of the parent 9 6.2 5.9 7.6
----------------------------------------- -------- -------- --------
The notes on pages 19-27 form an integral part of this condensed
consolidated interim financial information.
Consolidated Statement of Comprehensive Income
For the 26 weeks ended 27 February 2016
Note
Unaudited Unaudited Audited
26 weeks 26 weeks 52 weeks
to to to
27 February 28 February 29 August
2016 2015 2015
GBPm GBPm GBPm
--------------------------------------- ----- -------------- -------------- ------------
Profit for the financial period 76.4 71.8 93.5
Other comprehensive income/(expense)
Items that will not be reclassified
to the income statement
Remeasurements of pension
schemes 14 20.3 18.8 17.8
Taxation relating to items
that will not be reclassified (4.9) (3.8) (3.6)
15.4 15.0 14.2
Items that may be reclassified
to the income statement
Currency translation differences 4.5 (7.7) (5.2)
Change in the valuation of
available-for-sale investments (0.2) (1.1) (1.5)
Gains on cash flow hedges 38.6 42.9 39.2
Transferred to the income statement
on cash flow hedges 0.4 0.8 1.6
Recycled and adjusted against
cost of inventory (12.6) (4.7) (8.7)
Taxation relating to items that
may be reclassified (6.4) (7.7) (6.7)
24.3 22.5 18.7
Total other comprehensive income 39.7 37.5 32.9
Total comprehensive income for
the financial period 116.1 109.3 126.4
The notes on pages 19-27 form an integral part of this condensed
consolidated interim financial information.
Consolidated Balance Sheet
As at 27 February 2016
Unaudited Unaudited Audited
27 February 28 February 29 August
Note 2016 2015 2015
GBPm GBPm GBPm
---------------------------------- ------- --------------- --------------- ------------
Assets
Non-current assets
Intangible assets 11 940.5 899.9 931.5
Property, plant and equipment 11 667.9 673.2 675.3
Available-for-sale investments 13 1.9 2.5 2.1
Derivative financial instruments 13 12.3 18.1 12.1
Trade and other receivables 15.8 14.7 14.9
Retirement benefit surplus 14 51.8 21.2 26.2
Deferred tax assets 12.3 30.8 20.8
1,702.5 1,660.4 1,682.9
---------------------------------- ------- --------------- --------------- ------------
Current assets
Inventories 329.1 335.4 331.6
Trade and other receivables 75.6 69.1 78.0
Derivative financial instruments 13 33.6 16.7 17.4
Cash and cash equivalents 18 35.8 37.3 32.7
474.1 458.5 459.7
---------------------------------- ------- --------------- --------------- ------------
Liabilities
Current liabilities
12,
Bank overdraft and borrowings 18 (63.0) (125.3) (155.4)
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Derivative financial instruments 13 (3.8) (1.2) (1.3)
Trade and other payables (531.7) (523.5) (523.6)
Current tax liabilities (23.1) (7.7) (9.0)
Provisions (6.3) (7.2) (6.4)
(627.9) (664.9) (695.7)
---------------------------------- ------- --------------- --------------- ------------
Net current liabilities (153.8) (206.4) (236.0)
----------------------------------- ------- --------------- --------------- ------------
Non-current liabilities
12,
Bank overdraft and borrowings 18 (197.0) (209.3) (197.1)
Derivative financial instruments 13 (1.9) (0.4) (1.1)
Deferred tax liabilities (59.2) (64.4) (54.8)
Other non-current liabilities 15 (349.9) (332.1) (340.6)
(608.0) (606.2) (593.6)
---------------------------------- ------- --------------- --------------- ------------
Net assets 940.7 847.8 853.3
Shareholders' equity
Share capital 16 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 37.9 23.4 17.9
Other reserves (12.2) (18.2) (16.5)
Retained earnings 231.0 158.6 167.9
Total equity 940.7 847.8 853.3
The notes on pages 19-27 form an integral part of this condensed
consolidated interim financial information.
Consolidated Statement of Changes in Equity
For the 26 weeks ended 27 February 2016
Share
capital Reverse
and Merger acquisition Hedging Other Retained
share reserve reserve reserve reserves earnings Total
premium GBPm GBPm GBPm GBPm GBPm equity
account GBPm
GBPm
--------------------------- ---------- ---------- -------------- ---------- ----------- ----------- ---------
Balance at 29 August
2015 683.0 1,200.9 (1,199.9) 17.9 (16.5) 167.9 853.3
Profit for the financial
period - - - - - 76.4 76.4
Other comprehensive
income for the financial
period - - - 20.0 4.3 15.4 39.7
--------------------------- ---------- ---------- -------------- ---------- ----------- ----------- ---------
Total comprehensive
income for the financial
period - - - 20.0 4.3 91.8 116.1
--------------------------- ---------- ---------- -------------- ---------- ----------- ----------- ---------
Share-based payment
charge - - - - - 0.8 0.8
Dividends paid - - - - - (29.5) (29.5)
Total transactions
with owners - - - - - (28.7) (28.7)
--------------------------- ---------- ---------- -------------- ---------- ----------- ----------- ---------
Balance at 27 February
2016 683.0 1,200.9 (1,199.9) 37.9 (12.2) 231.0 940.7
--------------------------- ---------- ---------- -------------- ---------- ----------- ----------- ---------
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 30 August
2014 683.0 1,200.9 (1,199.9) (7.9) (9.4) 100.7 767.4
-------------------------- ------ -------- ---------- ------ ------- ------- -------
Profit for the financial
year - - - - - 93.5 93.5
Other comprehensive
income/(expense) for
the financial year - - - 25.8 (7.1) 14.2 32.9
-------------------------- ------ -------- ---------- ------ ------- ------- -------
Total comprehensive
income/(expense) for
the financial year - - - 25.8 (7.1) 107.7 126.4
-------------------------- ------ -------- ---------- ------ ------- ------- -------
Share-based payment
charge - - - - - 1.1 1.1
Unallocated dividends - - - - - 0.1 0.1
Dividends paid - - - - - (41.7) (41.7)
Total transactions
with owners - - - - - (40.5) (40.5)
-------------------------- ------ -------- ---------- ------ ------- ------- -------
Balance at 29 August
2015 683.0 1,200.9 (1,199.9) 17.9 (16.5) 167.9 853.3
-------------------------- ------ -------- ---------- ------ ------- ------- -------
The notes on pages 19-27 form an integral part of this condensed
consolidated interim financial information.
Consolidated Cash Flow Statement
For the 26 weeks ended 27 February 2016
Unaudited Unaudited Audited
26 weeks 26 weeks 52 weeks
to to to
Note 27 February 28 February 29 August
2016 2015 2015
GBPm GBPm GBPm
--------------------------------- ------- ------------- ------------- -----------
Cash flows from operating
activities
Cash generated from operations 17 187.0 154.9 236.3
Finance income 1.7 0.1 0.1
Finance costs (7.9) (10.0) (19.4)
Tax (paid)/received (1.5) 0.6 1.1
Net cash generated from
operating activities 179.3 145.6 218.1
Cash flows from investing
activities
Purchase of property, plant
and equipment (35.8) (37.2) (79.6)
Purchase of intangible assets (17.7) (14.4) (54.0)
Sale of property, plant
and equipment - 0.2 0.2
-
--------------------------------- ------- ------------- ------------- -----------
Net cash used in investing
activities (53.5) (51.4) (133.4)
Cash flows from financing
activities
Repurchase of senior notes - (13.0) (24.8)
Repayment of revolving credit
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facility (104.0) (78.0) (65.0)
Dividends paid (29.5) (29.4) (41.7)
Finance lease payments (1.9) (2.0) (3.3)
Debt issue costs (1.1) (0.3) 0.2
Net cash used in financing
activities (136.5) (122.7) (134.6)
Net decrease in cash and cash
equivalents 18 (10.7) (28.5) (49.9)
Net cash and cash equivalents
at beginning of financial
period 14.4 64.4 64.4
Foreign exchange losses on
cash and cash equivalents (0.3) - (0.1)
Net cash and cash equivalents
at end of financial period 18 3.4 35.9 14.4
The notes on pages 19-27 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 27 February 2016 should be read in
conjunction with the annual financial statements for the 52 weeks
ended 29 August 2015 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 29 August 2015, which are available on our website
www.debenhamsplc.com. The report of the auditors for the financial
statements for the 52 weeks ended 29 August 2015 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 29 August 2015 and the
26 weeks ended 28 February 2015 are consistent with the Group's
2015 annual report and financial statements and interim financial
statements respectively.
On 13 January 2016 the International Accounting Standards Board
issued IFRS 16 - "Leases" which is effective for periods that
commence on or after 1 January 2019. IFRS 16 requires lessees to
recognise a lease liability reflecting future lease payments and a
right-of-use asset for lease contracts, subject to limited
exceptions for short-term leases and leases of low value assets.
The quantitative impact of IFRS 16 on the Group's net assets and
results is being assessed. 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 pages 106 and 107 of the annual
report and financial statements for the 52 weeks ended 29 August
2015 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 receivable rather than
the gross value achievable 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
27 February 28 February 29 August
2016 2015 2015
GBPm GBPm GBPm
------------------- ------------- ------------- -----------
Gross transaction
value 1,628.7 1,602.4 2,860.1
A reconciliation of gross transaction value to external revenue
is included in note 3.
3 Segmental information
IFRS 8 "Operating segments" requires disclosure of the operating
segments which are reported to the Chief Operating Decision Maker
("CODM"). The CODM has been identified as the executive 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 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 27 February
2016
Gross transaction value 1,336.5 292.2 1,628.7
Concessions, consignments
and staff discounts (226.8) (74.7) (301.5)
-------------------------------- -------- -------------- --------
External revenue 1,109.7 217.5 1,327.2
-------------------------------- -------- -------------- --------
Operating profit 76.1 23.5 99.6
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
52 weeks ended 29 August
2015
Gross transaction value 2,323.5 536.6 2,860.1
Concessions, consignments
and staff discounts (401.2) (136.2) (537.4)
-------------------------------- -------- -------------- --------
External revenue 1,922.3 400.4 2,322.7
-------------------------------- -------- -------------- --------
Operating profit 101.7 32.4 134.1
Total segmental operating profit may be reconciled to total
profit before taxation as follows:
26 weeks 26 weeks 52 weeks
to to to
27 February 28 February 29 August
2016 2015 2015
GBPm GBPm GBPm
Total operating profit 99.6 99.4 134.1
Finance income 2.0 0.2 0.2
Finance costs (7.8) (10.7) (20.8)
Total profit before taxation 93.8 88.9 113.5
4 Operating profit
The following items have been included in arriving at operating
profit:
26 weeks 26 weeks 52 weeks
to to to
27 February 28 February 29 August
2016 2015 2015
GBPm GBPm GBPm
Amounts of inventory written
down during the financial
period 4.7 6.3 10.1
Cost of inventory recognised
as an expense 676.2 686.0 1,164.7
Depreciation and amortisation 53.3 51.6 104.2
Loss on disposal of property,
plant and equipment 0.1 - 0.3
Operating lease rentals 107.9 107.3 213.9
Foreign exchange (gains)/losses (11.1) 3.5 (5.7)
5 Employment costs
26 weeks 26 weeks 52 weeks
to to to
27 February 28 February 29 August
2016 2015 2015
GBPm GBPm GBPm
------------- -------------
Wages and salaries 186.5 177.7 344.7
Social security costs 11.5 11.1 21.7
Other pension costs 8.3 8.1 15.1
Share-based payments 0.8 0.5 1.1
207.1 197.4 382.6
6 Finance income
26 weeks 26 weeks 52 weeks
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to to to
27 February 28 February 29 August
2016 2015 2015
GBPm GBPm GBPm
Interest on bank deposits 1.4 0.1 0.1
Net interest on net defined
benefit pension schemes asset/liability 0.6 0.1 0.1
2.0 0.2 0.2
7 Finance costs
26 weeks 26 weeks 52 weeks
to to to
27 February 28 February 29 August
2016 2015 2015
GBPm GBPm GBPm
------------- -------------
Interest payable on bank loans
and overdrafts 2.1 3.4 5.3
Interest payable on senior
notes 5.2 5.8 11.4
Cash flow hedges reclassified
and reported in the income
statement 0.4 0.8 1.6
Amortisation of issue costs
on loans and senior notes 0.7 0.8 1.6
Interest payable on finance
leases - 0.1 0.2
Other financing costs 0.3 0.1 1.4
Capitalised finance costs
- qualifying assets (0.9) (0.3) (0.7)
7.8 10.7 20.8
8 Taxation
The taxation charge for the 26 weeks ended 27 February 2016 is
based on an estimated effective tax rate for the full year of 18.6%
(52 weeks ended 29 August 2015: 17.6%). This is lower than the
standard rate of corporation tax (20.0%) due to the impact of
future corporation tax rate reductions upon the existing deferred
tax balance. The Finance (No. 2) Act 2015 implemented a staged
reduction to the main rate of UK corporation tax from 20.0% to
19.0% from 1 April 2017 and to 18.0% from 1 April 2020. This has
reduced the corporation and deferred tax liabilities thereby
reducing the income statement tax charge by GBP3.6 million in the
26 weeks ended 27 February 2016. As these changes had not been
substantively enacted at the prior period balance sheet date, their
effects were not included in the financial statements for that
period.
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 in issue 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 26 weeks 52 weeks
Basic and diluted to to to
earnings per 27 February 28 February 29 August
share 2016 2015 2015
Basic Diluted Basic Diluted Basic Diluted
GBPm GBPm GBPm GBPm GBPm GBPm
---------------------- --------- -------- -------- -------- -------- --------
Profit for the
financial period
after taxation 76.4 76.4 71.8 71.8 93.5 93.5
Number Number Number Number Number Number
m m m m m m
---------------------- --------- -------- -------- -------- -------- --------
Weighted average
number of shares 1,227.4 1,227.4 1,226.4 1,226.4 1,226.7 1,226.7
Shares held by
ESOP (weighted)
(weighted) (0.2) (0.2) (0.3) (0.3) (0.3) (0.3)
Shares issuable
(weighted) - 3.0 - 2.1 - 2.3
Weighted average
number of shares
used in calculating
earnings per
share 1,227.2 1,230.2 1,226.1 1,228.2 1,226.4 1,228.7
Pence Pence Pence Pence Pence Pence
per per per per per per
share share share share share share
---------------------- --------- -------- -------- -------- -------- --------
Earnings per
share 6.2 6.2 5.9 5.9 7.6 7.6
10 Dividends
The Company paid a final dividend in respect of the 52 weeks
ended 29 August 2015 of 2.4 pence per share on 22 January 2016. The
directors have resolved to pay an interim dividend in respect of
the 26 weeks ended 27 February 2016 of 1.025 pence per share (28
February 2015: 1.000 pence) which will absorb an estimated GBP12.6
million of shareholders' funds (28 February 2015: GBP12.3 million).
It will be paid on 1 July 2016 to shareholders who are on the
register of members at close of business on 3 June 2016.
11 Intangible assets and property, plant and equipment
27 February 28 February 29 August
2016 2015 2015
GBPm GBPm GBPm
---------------------------------------- ------------ ------------ ----------
Opening net book amount 1,606.8 1,582.0 1,582.0
Additions:
* Intangible assets 17.6 15.6 56.0
* Property, plant and equipment 34.4 31.1 77.0
Foreign currency revaluation 3.0 (3.8) (3.5)
Disposals (0.1) (0.2) (0.5)
Depreciation and amortisation (53.3) (51.6) (104.2)
Closing net book amount 1,608.4 1,573.1 1,606.8
Capital commitments contracted but not provided for by the Group
amounted to GBP11.6 million (29 August 2015: GBP11.3 million; 28
February 2015: GBP15.9 million).
12 Bank overdraft and borrowings
During the 26 weeks ended 27 February 2016 the Group refinanced
its GBP350.0 million revolving credit facility
(28 February 2015: GBP425.0 million), reducing the facility size
to GBP320.0 million in the process and extending the maturity from
October 2018 to June 2020. The amended revolving credit facility
contains an option to request an extension to June 2021.
13 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 29 August 2015. 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 Total
1 2
GBPm GBPm GBPm
--------------------------------------------------------------- ---- -------- -------- --------
At 27 February 2016
Assets
Available-for-sale financial
instruments 1.9 - 1.9
Derivative financial instruments:
* Forward foreign currency contracts held as cash flow
hedges - 37.0 37.0
* Other forward foreign currency contracts - 8.9 8.9
Total assets 1.9 45.9 47.8
Liabilities
* Interest rate swaps held as cash flow hedges - (0.6) (0.6)
* Forward foreign currency contracts held as cash flow
hedges - (4.7) (4.7)
(MORE TO FOLLOW) Dow Jones Newswires
April 14, 2016 02:00 ET (06:00 GMT)
* Other forward foreign currency contracts - (0.4) (0.4)
--------------------------------------------------------------------- -------- -------- --------
-
Total liabilities - (5.7) (5.7)
Level Level Total
1 2
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 flow hedges - (1.2) (1.2)
* Other forward foreign currency contracts - (0.4) (0.4)
Total liabilities - (1.6) (1.6)
Level Level Total
1 2
GBPm GBPm GBPm
--------------------------------------------------------------- ------ ------ ------
At 29 August 2015
Assets
Available-for-sale financial
instruments 2.1 - 2.1
Derivative financial instruments:
* Forward foreign currency contracts held as cash flow
hedges - 25.6 25.6
* Other forward foreign currency contracts - 3.9 3.9
Total assets 2.1 29.5 31.6
Liabilities
Derivative financial instruments:
* Interest rate swaps held as cash flow hedges - (0.7) (0.7)
* Forward foreign currency contracts held as cash flow
hedges - (1.3) (1.3)
* Other forward foreign currency contracts - (0.4) (0.4)
---------------------------------------------------------------- ------ ------ ------
Total liabilities - (2.4) (2.4)
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 28 February 2015:
no transfers). None of the Group's financial assets and liabilities
are classed as level 3 within the fair value hierarchy.
During the 26 weeks ended 27 February 2016 the Group closed out
certain forward foreign currency contracts and reset the contracts
to current market rates. As a result of this transaction, cash
amounting to GBP11.2 million was received in the period. The gains
on these forward foreign currency contracts continue to be held in
the hedging reserve and there was no impact on the income
statement. The Group's accounting policy for forward foreign
currency contracts that qualify as cash flow hedges is shown on
page 104 of the Group's 2015 annual report and financial
statements.
Available-for-sale financial instruments relate to the Group's
holding at 27 February 2016 of 10% (28 February 2015: 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 27 February 2016, 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 GBP0.2 million (28
February 2015: GBP0.3 million) for the Group as a result of the
changes in the fair value of available-for-sale investments
The above movement in rates is considered to represent
reasonable possible changes. Other larger or smaller changes are
also possible.
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.
14 Retirement benefit schemes
The Group operates defined contribution pension schemes for its
employees.
The Group also 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. The Group's pension schemes were closed
to 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.
During June 2015, the Group agreed a recovery plan for the
Group's pension schemes, which was intended to restore the schemes
to a fully funded position on an ongoing basis. Under that
agreement, the Group agreed to contribute GBP9.5 million per annum
to the pension schemes for the period from 1 April 2014 to 31 March
2022 increasing by the percentage increase in RPI over the year to
the previous December. The agreement replaced an agreement made in
2012 under which the Group agreed to contribute GBP8.9 million per
annum to the pension schemes for the period from 1 April 2012 to 31
March 2022 increasing by the percentage increase in RPI over the
year to the previous December.
Additionally during 2015, the Group agreed to continue to cover
the non-investment expenses and levies of the pension schemes,
including those payable to the Pension Protection Fund. Employees
make no further contributions to the schemes.
Further details of the Group's pension arrangements are set out
in pages 126 to 129 of the annual report and financial statements
for the 52 weeks ended 29 August 2015.
The major assumptions used by the actuary were:
27 February 28 February 29 August
2016 2015 2015
per annum per annum per annum
% % %
--------------------------------- -------------------- ------------ ----------
Inflation assumption 3.0 2.9 3.2
General salary and
wage increase 3.0 2.9 3.2
Rate of increase in pension
payments and deferred payments 3.0 2.9 3.2
Pension increase rate 2.9 2.7 3.0
Discount rate 3.7 3.5 3.8
The amounts recognised in the balance sheet were as follows:
27 February 28 February 29 August
2016 2015 2015
GBPm GBPm GBPm
-------------------------- -------------- -------------- ------------
Total market value
of assets 809.4 800.1 795.8
Present value of scheme
liabilities (757.6) (778.9) (769.6)
Net surplus in pension
schemes 51.8 21.2 26.2
Analysed as:
DEPP scheme surplus 19.1 10.6 13.1
DRS scheme surplus 32.7 10.6 13.1
------------------------------- -------------- -------------- ------------
(MORE TO FOLLOW) Dow Jones Newswires
April 14, 2016 02:00 ET (06:00 GMT)
The movement in the net pension surplus/(deficit) during the
financial period is as follows:
27 February 28 February 29 August
2016 2015 2015
GBPm GBPm GBPm
---------------------------------- ------------ ------------ ----------
Net surplus/(deficit)
in the schemes at the
start of the financial
period 26.2 (2.4) (2.4)
Movement in the financial
period:
- Company contributions 5.5 5.5 11.1
- Settlements - - 1.1
- Current service cost
(including expenses) (0.8) (0.8) (1.5)
- Net interest on net
defined benefit asset/liability 0.6 0.1 0.1
- Remeasurements of pension
schemes 20.3 18.8 17.8
Net surplus in the schemes
at end of the financial
period 51.8 21.2 26.2
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.
27 February 28 February 29 August
2016 2015 2015
GBPm GBPm GBPm
------------------------ ------------------- ------------ ----------
Increase in schemes'
liabilities arising
from:
- a 0.5% increase
in inflation 84.1 60.5 85.4
- a 0.5% reduction 88.0 73.7 93.1
in the discount rate
- a one year increase 20.3 24.5 20.6
in life expectancy
A 0.5% reduction in the inflation assumption, a 0.5% 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.
15 Other non-current liabilities
27 February 28 February 29 August
2016 2015 2015
GBPm GBPm GBPm
Property lease incentives
received 349.9 331.6 340.6
Other non-current liabilities - 0.5 -
Total other non-current liabilities 349.9 332.1 340.6
Property lease incentives received from landlords, either
through developers' 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.
16 Share capital
GBP Number
---------------------------------- -------- --------------
Issued and fully paid - ordinary
shares of GBP0.0001 each
At 28 February 2015 128,684 1,286,849,672
Allotted under share option
schemes 1 2,868
At 27 February 2016 and 29
August 2015 128,685 1,286,852,540
No shares were purchased by the Company and transferred to
treasury during the financial period or the preceding financial
periods.
17 Cash generated from operations
26 weeks 26 weeks 52 weeks
to to to
27 February 28 February 29 August
2016 2015 2015
GBPm GBPm GBPm
-------------------------------------- ------------- ------------- -----------
Profit before taxation 93.8 88.9 113.5
Depreciation and amortisation
(note 11) 53.3 51.6 104.2
Loss on disposal of property,
plant and equipment 0.1 - 0.3
Share-based payment charge 0.8 0.5 1.1
Fair value losses/(gains) on
derivative instruments 2.2 (3.8) (4.4)
Net movements in provisions (0.1) 0.1 (0.7)
Finance income (note 6) (2.0) (0.2) (0.2)
Finance costs (note 7) 7.8 10.7 20.8
Cash received on close out 11.2 - -
of
forward foreign currency contracts
(note 13)
Pension current service cost
(note 14) 0.8 0.8 0.4
Cash contributions to pension
schemes (note 14) (5.5) (5.5) (11.1)
Net movement in other long-term
receivables 0.3 (0.5) (0.5)
Net movement in other non-current
liabilities 9.2 (0.6) 7.9
Changes in working capital
Decrease in inventories 2.5 9.3 14.3
Decrease/(increase) in trade
and other receivables 2.5 4.5 (3.9)
Increase/(decrease) in trade
and other payables 10.1 (0.9) (5.4)
Cash generated from operations 187.0 154.9 236.3
18 Analysis of changes in net debt
At At
29 August Non-cash 27 February
2015 Cash movements 2016
flow
GBPm GBPm GBPm GBPm
------------------------------- ----------- ------- ------------ -------------
Analysis of net debt
Cash and cash equivalents 32.7 3.4 (0.3) 35.8
Bank overdrafts (18.3) (14.1) - (32.4)
------------------------------- ----------- ------- ------------ -------------
Net cash and cash equivalents 14.4 (10.7) (0.3) 3.4
Debt due within one
year (134.2) 104.0 0.9 (29.3)
Debt due after one year (196.8) 1.1 (1.3) (197.0)
Finance lease obligations
due within one year (2.9) 1.9 (0.3) (1.3)
Finance lease obligations
due after one year (0.3) - 0.3 -
(319.8) 96.3 (0.7) (224.2)
19 Related parties
There have been no significant related party transactions during
the period.
20 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: 0371 384 2766), and at the
Company's registered office, 10 Brock Street, Regent's Place,
London, NW1 3FG.
(1) Online sales adjusted for online orders returned to store,
as previously announced in October 2015
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR IJMMTMBTBTJF
(END) Dow Jones Newswires
April 14, 2016 02:00 ET (06:00 GMT)
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