15th Apr 2008 07:00
Debenhams plc15 April 2008 15 April 2008 DEBENHAMS PLC INTERIM RESULTS FOR 26 WEEKS ENDED 1 MARCH 2008 Financial Highlights • Gross transaction value for 26 weeks up 1.2%; like-for-like sales down 0.7% • Gross transaction value for 32 weeks to 12 April 2008 up 0.8%; like-for-like sales down 1.0% • Gross margin for 26 weeks down 20bps following investment in lower prices; gross margin for 32 weeks down 10bps • Headline profit before tax* ahead of consensus at £94.1m (H1 2007: £107.4m) • Net debt at 1 March 2008 improved by £37.2m to £979.3m • Basic earnings per share 7.6p (H1 2007: 8.8p) • Interim dividend per share maintained at 2.5p; scrip alternative to be offered *Before non-cash debt fee write-off of £2.1m (H1 2007: £1.9m) Operating Highlights • Market share gains in all major clothing categories • Strong sales performance from Designers at Debenhams • 3 new department stores, 2 resited department stores and 1 Desire store opened; net 107,000 sq ft space growth • Store pipeline at 22 department stores over the next 3 years including flagship stores in Liverpool and White City • Refurbished stores continuing to perform well; programme being managed in line with prevailing market conditions • Continued strong growth in debenhams.com with sales up 81% • 7 new international stores opened Rob Templeman, Chief Executive of Debenhams, said: "Against the backdrop of a tough retail marketplace, I am pleased with our salesperformance for the first half relative to the sector which has resulted inmarket share gains across our core clothing categories. We have beenparticularly pleased with the sales from our exclusive Designers at Debenhamsranges where our continued emphasis on design, quality and value has beenrecognised by customers. "We expect the trading environment to remain challenging so we will continue tofocus on the areas of our business that are within our control; making furtherimprovements to our own bought products and providing customers with a pleasingshopping experience. "In the second half we look forward to the opening of our flagship store inLiverpool in May and, further ahead, to another flagship store in White Citytowards the end of 2008." FINANCIAL SUMMARY H1 2008 H1 2007 Change Gross transaction value (GTV) £1,303.6m £1,287.8m +1.2%Like-for-like sales -0.7%Operating profit £127.5m £139.6m -8.7%Gross margin -20bpHeadline profit before tax* £94.1m £107.4m -12.4%Profit before tax £92.0m £105.5m -12.8%Earnings per share 7.6p 8.8p -13.6%Dividend per share 2.5p 2.5p - 01-03-08 01-09-07 ChangeNet debt £979.3m £1,016.5m £37.2m *After adding back £2.1m of capitalised bank fees (H1 07 £1.9m); includes £7.0mdeduction for flat lining of lease rentals (£101.1m before deduction). Enquiries Debenhams plcRob Templeman, Chief ExecutiveChris Woodhouse, Finance Director 020 7408 3302Lisa Williams, Investor Relations 020 7408 3304 Financial DynamicsJonathon Brill 020 7269 7170Billy Clegg 020 7269 7157Caroline Stewart 020 7269 7227 High resolution images are available for media to view and download free ofcharge from www.prshots.com/Debenhams. REVIEW OF THE FIRST HALF Market conditions Trading conditions across the retail sector deteriorated during the first halfwith a strong September giving way to weaker conditions in October and November. Christmas trading and the January sale provided a fillip to the high streetbut conditions softened again in the remainder of January and February.Debenhams' trading broadly followed this pattern. Despite this environment, Debenhams has taken market share in all of the majorclothing categories. In particular the market share lost last year in mensweardue to ranging problems has been regained as the action taken to address thisissue became effective. Financial performance For the 26 weeks ended 1 March 2008, gross transaction value grew by £15.8million to £1,303.6 million. This increase of 1.2% broadly corresponds to newspace growth during the period. Like-for-like sales fell by 0.7% during thehalf, reflecting the challenging trading conditions across the retail sector,particularly in January and February. Gross margin for the 26 week period was 20 basis points lower than last year.Positive contributions from a stronger own bought sales mix versus concessions,higher concession rates and intake margin were offset by the impact of pricechanges undertaken in the second half of last year (especially in menswear) anda shift towards lower margin sales in the Direct and International businesses. Headline profit before tax (which excludes non-cash debt fee write-offs) for thefirst half was £94.1 million, compared with £107.4 million last year. Profitbefore tax of £92.0 million was £13.5 million lower than a year ago. Basic earnings per share of 7.6 pence compared with 8.8 pence for the first halfof last year. Cash inflow from operating activities during the first half was £180.9 million.Net debt at the end of the half on 1 March 2008 was £979.3 million. This was animprovement of £37.2 million over the position at 1 September 2007. An interim dividend of 2.5 pence per share (2007: 2.5p) will be paid on 4 July2008 to shareholders on the register at 6 June 2008. The Company intends tooffer shareholders a scrip alternative. The Board continues to monitor thedividend cover in light of the 2x target set at IPO. The Board's willingness tocontinue running at a level below this target will depend on the outturn for2008 and the Board's view on the broader environment and Debenhams' futureprospects. Given the present retail climate and the uncertain macroeconomic outlook, theBoard is strongly focused on the Company's balance sheet and to this end, anumber of actions have been instigated which will achieve a significantreduction in gearing over the next few years. These include cost reductions,managing the capex programme in the light of trading conditions, a continuedpush on working capital efficiency and reductions in stock density throughfaster stock turn and reduced markdown. New store openings Net new space in the first half was 107,000 square feet, taking total space to10.373 million square feet at the end of the half. Six new stores were openedduring the first half, comprising three new department stores (Llanelli, WelwynGarden City and Glasgow Silverburn), two resited department stores (Exeter andDerby) and one new Desire store (Ballymena). The department store at JervisStreet in Dublin was closed in January following the conversion of the formerRoches Henry Street store to Debenhams. Returns from new stores continue to bevery attractive. The pipeline for new department stores remains strong. Since the end of thefirst half, a new 61,000 square feet store has opened in Ashford, Kent and theBangor store has been resited, adding a home offering for the first time. Threemore department stores will be opened during the second half, including a125,000 square feet flagship store in Liverpool at the end of May. In total,second half openings will add 335,000 square feet of space, an increase of 3.2%during the period, although this space will not make a significant contributionto sales until the first half of next year. Five department stores are expected to open in 2008/9, including the flagshipstore at the Westfield London development at White City. This will open towardsthe end of 2008. A further five department stores will open in 2009/10. Store refurbishments Eighteen core stores were refurbished during the first half. The stores whichhave been refurbished as part of the current programme are trading well,recording sales uplifts and higher gross margins than the rest of the estateduring prime trading. This is predominantly due to a higher mix of own boughtproducts. The return on capital achieved from these refits - which focus onvisual merchandising and the things in store customers really notice - continuesto be attractive and ahead of those achieved by others in the sector. Nevertheless, given the current market environment, it has been decided thatsome of the refurbishments which had been scheduled for the second half of 2008will be deferred in order to avoid the inevitable disruption to sales. As aresult, three stores will be refurbished during the remainder of the year.Notwithstanding this reduction in activity, Debenhams remains committed torefurbishing the remaining core stores during the next two to three years. Conversion of the nine stores acquired from Roches in September 2006 wascompleted by December 2007 and all are now trading well as Debenhams. Products and supply chain Improving the quality, design content and value of Debenhams' own boughtproducts at all price points continues to be an important part of the Company'sstrategy. Own bought product sales accounted for 72.2% of total sales duringthe first half, compared to 70.5% in the same period last year. Customers responded well to the Autumn/Winter ranges, as evidenced byimprovements in Debenhams' market shares in all major clothing categories. Therecently introduced Spring/Summer ranges are also proving popular withcustomers. The performance of Designers at Debenhams ranges continue to moveforward across all departments. Clear brand delineation now exists between theDesigner ranges, complemented by distinct shop fits for each brand. Womenswear: market share gains were particularly strong in formalwear andoccasionwear. Betty Jackson Black, Rocha.John Rocha and Star by JulienMacdonald all performed well, as did special occasion designers BDL by Ben DeLisi and Pearce Fionda II. The fastest selling line of the Christmas season wasa £350 Star by Julien Macdonald dress. The strong performance of Designers atDebenhams reflects customers' affirmation of the greater brand differentiationand increased attention to detail put into these ranges during the first half.New stories for spring include Red Herring Special Edition which extendsDebenhams' occasionwear expertise into the young fashion brand for the firsttime. In women's accessories, Debenhams now enjoys the leading market positionin handbags, driven by a unique mix of own brands, Designers at Debenhams andinternational brands. Menswear: performance of Menswear has markedly improved with adjustments to theprice architecture and the improvements made to the design and quality of rangesresulting in the recovery of market share lost last year. The strongestperforming areas during the first half were knitwear, shirts and denim.Designers at Debenhams - principally J by Jasper Conran, Rocha.John Rocha andSt. George by Duffer - all recorded strong gains as customers responded tobetter products at lower prices. Mantaray has established itself as one of themost profitable menswear brands in its first full Autumn/Winter season. InFebruary a new Fairtrade collection was introduced within Maine New England inconjunction with Olympic legend Sir Steve Redgrave; FiveG has shown anencouraging start with customers appreciating the strong styling, superiorquality and Fairtrade credentials. Health & Beauty: the division performed well in the first half. New fragrancelaunches including Elle by YSL and Daisy by Marc Jacobs complemented strongsales of classic fragrances whilst product innovation drove increases in make-upsales. Childrenswear: Baker by Ted Baker was launched in early September in 60 storeswith a further ten added in November. Sales performance has been extremelystrong with sales density significantly higher than core children's ranges. Home: performance of the Home division has improved after a slow start asbetter product and presentation in-store has begun to take effect. The Designerbusiness has shown good growth especially across soft and accessory categories,indicating an opportunity to sell exclusive, contemporary ranges at great value. A new concept for the Home division will be introduced in the new Liverpoolstore opening in May which will be both more visually inspiring and easier toshop. Stock levels continue to be managed tightly. At the end of the half terminalstocks were as planned and at historical levels. Given the current tradingenvironment, a brand rationalisation programme is being undertaken which willsee stock density reduced during the second half. This will principally beachieved through reducing the number of lines available in some brands andrationalising others, such as the merging of Casual Club into Collection inwomenswear. Whilst there is evidence of some inflation in the supply chain, in particularrelating to higher raw material prices and labour costs in China, this had nomaterial impact on the results for the first half. Debenhams Direct Debenhams Direct has continued to grow strongly. Visitors and sales were up by58% and 81% respectively during the first half. The website is being continually expanded with new ranges added every month andup to 250 new lines every week. New features added recently include styleguidance and advice, a wide electrical offering and a Beauty Club. From the endof April time items bought online can be returned to a store as well as by mail. The Company continues to see significant potential for growth in thisbusiness. International franchise stores At the end of the first half, there were 39 international franchise stores in 15countries. The seven new openings during the first half of the year includedstores in Cyprus, India, Romania, Jordan, the Philippines and the UAE. Furthernew stores are planned in Romania, India and Saudi Arabia in the second half.The strongest retail sales were recorded by stores in the Middle East, Turkeyand Indonesia which saw double digit retail like-for-like sales growth. Management Angela Spindler joined the Board of Debenhams on 4 February in the newly createdrole of Managing Director. Reporting to Rob Templeman, Chief Executive, Ms.Spindler has direct responsibility for the future development of the Debenhamsbrand and for Marketing, Visual and Creative and the Direct business. Corporate responsibility Uzbekistan has been on Debenhams' banned country list for some time and thisincludes a ban on any material of Uzbek origin being used in its products.Continuing concern over the use of cotton from Uzbekistan has led the Company torequire all its suppliers to certify that no such material is used in themanufacture of any product for Debenhams. Debenhams fully supports the DEFRA initiative to reduce the impact of plasticbags on the environment. All store staff have received training on this issue.Trials are currently underway to find a solution which meets the needs of boththe environment and our customers. These include charging for plastic bags andthe sale of reusable cotton bags. Menswear brand Mantaray has teamed up with the Marine Conservation Society tosupport the charity in a number of ways through instore activities and otherevents including beach clean-ups. Marketing and promotions On 1 February Debenhams announced that it would not renew its Nectar contractwith Loyalty Management Group which expired on 15 February 2008. Since thisdate, Nectar points have no longer been issued or redeemed in Debenhams stores.The Debenhams account card programme is being relaunched to remind customers ofthe many benefits available to them. Risks and uncertainties The principal risks and uncertainties for the remainder of the year areunchanged from those detailed in the Company's Annual Report and Accounts for2007 (see page 33 of that document). The most relevant of risks are: Debenhams' ability to predict or fulfil customerdemands or preferences; competitive pressures in the highly competitive retailsector; and factors outside Debenhams' control such as adverse economicconditions and a downturn in the retail industry. Current trading and outlook Sales for the 32 weeks to 12 April 2008 were 0.8% higher than the same periodlast year; like-for-like sales were down by 1.0%. Gross margin for the 32 weekswas 10bps lower than the corresponding period a year ago. In the expectation that the trading environment will remain challenging, theCompany will continue to focus on the areas of the business that are within itscontrol; making further improvements to own bought products and providingcustomers with a pleasing shopping experience. Statements made in this announcement that look forward in time or that expressmanagement's beliefs, expectations or estimates regarding future occurrences andprospects are "forward-looking statements" within the meaning of the UnitedStates federal securities laws. These forward-looking statements reflectDebenhams' current expectations concerning future events and actual results maydiffer materially from current expectations or historical results. Any suchforward-looking statements are subject to various risks and uncertainties,including: Debenhams' ability to accurately predict customer preferences anddemands; the effectiveness of Debenhams' brand awareness and marketingprogrammes; the occurrence of weak sales during peak selling seasons or extremeor unseasonal weather conditions; difficult market conditions and fragileconsumer confidence; competitive factors in the highly competitive retailindustry; Debenhams' ability to successfully implement its new store rollout anddepartment store refurbishment/modernization strategy; Debenhams' ability tomaintain its relationships with certain designers and its significant concessionpartners; and currency fluctuations and currency risk. * * * Additional risk factors that you may want to consider are: Debenhams' abilityto retain key management and personnel; disruptions or other adverse eventsaffecting Debenhams' relationship with its major suppliers or its store cardprovider; factors outside Debenhams' control, such as changes in the financialor equity markets, adverse economic conditions or a downturn in the retailindustry, or damage or interruptions due to operational disruption, naturaldisaster, war or terrorist activity; and work stoppages; slowdowns or strikes. Notes to Editors Debenhams is a leading department stores group with a strong presence in keyproduct categories, such as womenswear, menswear, homeware and health andbeauty. Debenhams has a total of 135 department stores in the UK and Republic Irelandand 10 Desire by Debenhams stores, which are a new small store concept featuringa mix of womenswear, accessories, lingerie, cosmetics and childrenswear.Debenhams has a further 39 international franchise stores in 15 countries and anonline store, www.debenhams.com, through which much of the Debenhams range isavailable. Debenhams is the second largest department store chain in the UK. Designers at Debenhams include Ted Baker, Jasper Conran, Theo Fennell, PearceFionda, Frost French, Betty Jackson, Ben de Lisi, Julien Macdonald, JohnRichmond, John Rocha and Matthew Williamson. Independent review report to Debenhams plc Introduction We have been engaged by the company to review the condensed set of financialstatements in the half-yearly financial report for the 26 weeks ended 1 March2008, which comprises the income statement, balance sheet, statement ofrecognised income and expense, cash flow statement and related notes. We haveread the other information contained in the half-yearly financial report andconsidered whether it contains any apparent misstatements or materialinconsistencies with the information in the condensed set of financialstatements. Directors' responsibilities The half-yearly financial report is the responsibility of, and has been approvedby, the directors. The directors are responsible for preparing the half-yearlyfinancial report in accordance with the Disclosure and Transparency Rules of theUnited Kingdom's Financial Services Authority. As disclosed in note 1, the annual financial statements of the group areprepared in accordance with IFRSs as adopted by the European Union. Thecondensed set of financial statements included in this half-yearly financialreport has been prepared in accordance with International Accounting Standard34, "Interim Financial Reporting", as adopted by the European Union. Our responsibility Our responsibility is to express to the company a conclusion on the condensedset of financial statements in the half-yearly financial report based on ourreview. This report, including the conclusion, has been prepared for and onlyfor the company for the purpose of the Disclosure and Transparency Rules of theFinancial Services Authority and for no other purpose. We do not, in producingthis report, accept or assume responsibility for any other purpose or to anyother person to whom this report is shown or into whose hands it may come savewhere expressly agreed by our prior consent in writing. Scope of review We conducted our review in accordance with International Standard on ReviewEngagements (UK and Ireland) 2410, 'Review of Interim Financial InformationPerformed by the Independent Auditor of the Entity' issued by the AuditingPractices Board for use in the United Kingdom. A review of interim financialinformation consists of making enquiries, primarily of persons responsible forfinancial and accounting matters, and applying analytical and other reviewprocedures. A review is substantially less in scope than an audit conducted inaccordance with International Standards on Auditing (UK and Ireland) andconsequently does not enable us to obtain assurance that we would become awareof all significant matters that might be identified in an audit. Accordingly, wedo not express an audit opinion. Conclusion Based on our review, nothing has come to our attention that causes us to believethat the condensed set of financial statements in the half-yearly financialreport for the 26 weeks ended 1 March 2008 is not prepared, in all materialrespects, in accordance with International Accounting Standard 34 as adopted bythe European Union and the Disclosure and Transparency Rules of the UnitedKingdom's Financial Services Authority. PricewaterhouseCoopers LLPChartered AccountantsLeeds 15 April 2008 Consolidated Income StatementFor the 26 weeks ended 1 March 2008 Unaudited Unaudited Audited 26 weeks to 26 weeks to 52 weeks to 1 March 3 March 1 Sept Note 2008 2007 2007 £m £m £m Revenue 2 1,029.3 997.5 1,774.4 Cost of sales (854.5) (815.0) (1,508.4) Analysed as:Cost of sales before exceptional items (854.5) (815.0) (1,494.9)Exceptional cost of sales 5 - - (13.5) Gross profit 174.8 182.5 266.0 Distribution costs (26.9) (23.3) (47.0) Analysed as:Distribution costs before exceptional items (26.9) (23.3) (46.2)Exceptional distribution costs 5 - - (0.8) Administrative expenses (20.4) (19.6) (39.2) Operating profit 127.5 139.6 179.8 Analysed as:Operating profit before exceptional items 127.5 139.6 194.1Exceptional operating items 5 - - (14.3) Interest receivable and similar income 6 2.6 3.8 4.2Interest payable and similar charges 7 (38.1) (37.9) (70.8) Profit before taxation 92.0 105.5 113.2 Taxation 8 (26.9) (31.4) (34.2) Analysed as:Taxation before exceptional items (26.9) (31.4) (36.9)Taxation credit on exceptional items - - 2.7 Profit for the financial period attributable to equity 13 65.1 74.1 79.0shareholders Earnings per share attributable to the equity shareholders(expressed in pence per share) Pence per share Pence per Pence per share share Basic 10 7.6 8.8 9.3 Diluted 10 7.6 8.8 9.3 Dividends per share (expressed in pence per share) Pence per share Pence per Pence per share share Dividends per share - interim 9 2.5 2.5 2.5Dividends per share - final 9 - - 3.8 All Group operations during the financial periods were continuing operations. Consolidated Statement of Recognised Income & ExpensesFor the 26 weeks ended 1 March 2008 Unaudited Unaudited Audited 26 weeks to 26 weeks to 52 weeks to 1 March 3 March 1 Sept 2008 2007 2007 £m £m £m Profit for the financial period 65.1 74.1 79.0 Actuarial gain recognised in the pension scheme 4.2 6.6 60.7 Movement on deferred tax relating to the pension scheme (1.2) (2.0) (16.5) Change in the valuation of the available for sale investments (8.4) - 12.1 Currency translation 2.5 - 0.4 Cash flow hedges - Net fair value (losses)/gains (net of tax) (14.9) 6.0 17.5 - Recycled and adjusted against the initial (0.4) 2.5 (3.6) measurement of the acquisition cost of inventory Net (losses)/gains recognised directly in equity (18.2) 13.1 70.6 Total recognised income attributable to the equity shareholders of 46.9 87.2 149.6the Company Consolidated Balance SheetAt 1 March 2008 Unaudited Unaudited Audited Note 1 March 3 March 1 Sept 2008 2007 2007 £m £m £mASSETSNon current assetsIntangible assets 11 841.6 841.2 842.9Property, plant and equipment 11 680.9 646.2 667.7Financial assets- Available for sale investments 11.9 8.2 20.3- Derivative financial instruments 0.8 15.1 19.7Retirement benefit assets 14 100.6 26.1 87.3Deferred tax assets 55.2 49.4 52.3 1,691.0 1,586.2 1,690.2 Current assets Inventories 249.0 231.2 244.6Trade and other receivables 50.7 68.7 65.6Financial assets - Derivative financial instruments 2.4 0.4 3.0Cash and cash equivalents 139.2 68.3 80.4 441.3 368.6 393.6 LIABILITIESCurrent liabilitiesFinancial liabilities- Bank overdraft and borrowings (126.0) (1.3) (104.8)- Derivative financial instruments (0.8) (1.8) (2.2)Trade and other payables (471.6) (410.6) (468.6)Current tax liabilities (42.7) (48.2) (31.6)Provisions (0.7) (0.8) (2.2) (641.8) (462.7) (609.4) Net current liabilities (200.5) (94.1) (215.8) Non current liabilitiesFinancial liabilities- Bank overdraft and borrowings (992.5) (1,098.5) (992.1)- Derivative financial instruments (2.1) (0.5) -Deferred tax liabilities (111.7) (91.1) (111.6)Other non-current liabilities (207.8) (179.9) (207.1)Provisions (0.4) (0.7) (0.6) (1,314.5) (1,370.7) (1,311.4) Net assets 176.0 121.4 163.0 SHAREHOLDERS' EQUITYShare capital 12 0.1 0.1 0.1Share premium 682.9 682.9 682.9Merger reserve 1,200.9 1,200.9 1,200.9Reverse acquisition reserve (1,199.9) (1,199.9) (1,199.9)Hedging reserve 0.1 10.0 15.4Other reserves 4.7 1.0 13.1Retained deficit (512.8) (573.6) (549.5) Total equity 13 176.0 121.4 163.0 Consolidated Cash Flow StatementFor the 26 weeks ended 1 March 2008 Unaudited Unaudited Audited Note 26 weeks to 26 weeks to 52 weeks to 1 March 3 March 1 Sept 2008 2007 2007 £m £m £mCash flows from operating activitiesCash generated from operations 15 180.9 173.4 311.2Interest received 2.6 3.8 4.3Interest paid (33.8) (34.0) (70.5)Tax (paid)/received (13.7) 0.2 (17.6) Net cash generated from operating activities 136.0 143.4 227.4 Cash flows from investing activitiesPurchase of intangible assets (2.1) (8.4) (11.5)Purchase of property, plant and equipment (69.8) (36.1) (85.2)Proceeds from sale of property, plant and equipment 3.5 - 0.2 Net cash used in investing activities (68.4) (44.5) (96.5) Cash flows from financing activitiesDividends paid (32.6) (20.5) (42.0)Debt issue costs (1.7) (2.7) -Appropriation - settlement of 'C' loan notes - - (0.2)Receipt of monies for share options - - 0.2Capital element of finance leases (0.7) - (0.4)Purchase of shares by Debenhams Retail Employee (1.1) (0.1) (0.1)Trust 2004 ("DRET")Appropriation by DRET - (9.7) (9.4) Net cash used in financing activities (36.1) (33.0) (51.9) Net increase in cash and cash equivalents 31.5 65.9 79.0 Cash and cash equivalents at beginning of financial period 79.3 0.3 0.3 Cash and cash equivalents at end of financial period 16 110.8 66.2 79.3 Notes to the Interim Accounts For the 26 weeks ended 1 March 2008 1 Basis of preparation This Interim Report has been prepared in accordance with the Disclosure andTransparency Rules of the UK Financial Services Authority, InternationalFinancial Reporting Standards (IFRS) and International Financial ReportingInterpretations Committee (IFRIC) as adopted by the European Union (EU). Theaccounting policies applied are consistent with those described in the AnnualReport and Financial Statements 2007. The Interim Report has been prepared inaccordance with IAS 34 'Interim Financial Reporting' and should be read inconjunction with the Annual Report and Financial Statements 2007. The Group's interim condensed consolidated financial information is not auditedand does not constitute statutory financial statements as defined in section 240of the Companies Act 1985. Comparative figures for the 52 weeks ended 1September 2007 have been extracted from the Group's 2007 Annual Report andFinancial Statements, on which the auditors gave an unqualified opinion and didnot include a statement under section 237(2) or (3) of the Companies Act 1985.The full financial statements for those 52 weeks have been filed with theRegistrar of Companies. The following new standards and interpretations are mandatory for the first timefor the financial 52 weeks ended 30 August 2008. International Accounting Standards (IFRS/IAS) Effective date IFRS 7 Financial Instruments: Disclosures 1 January 2007 IFRIC Interpretations IFRIC 10 Interim financial reporting and impairment 1 November 2006IFRIC 11 IFRS 2 - Group and treasury share transactions 1 March 2007 The following new standards and interpretations have been issued but are noteffective for the 52 weeks ended on 30 August 2008 and have not been earlyadopted. International Accounting Standards (IFRS/IAS) Effective date IFRS 8 Operating Segments 1 January 2009 IFRIC Interpretations IFRIC 12 Service concession arrangements 1 January 2008IFRIC 13 Customer loyalty programmes 1 July 2008IFRIC 14 IAS 19 - The limit on a Defined Benefit Asset, Minimum Funding 1 January 2008 Requirements and their Interaction 2 Turnover The Group has one class of business, retailing, and all material operations arein the UK. 3 Gross transaction value Revenue from concessions is required to be shown on a net basis, being thecommission received rather than the gross value achieved by the concessionaireon the sale. Management believes that gross transaction value, which presentsrevenue on a gross basis before adjusting for concessions, staff discounts andthe cost of loyalty scheme points, represents a better guide to the value of theoverall activity of the Group. 26 weeks to 26 weeks to 52 weeks to 1 March 3 March 1 Sept 2008 2007 2007 £m £m £m Gross transaction value 1,303.6 1,287.8 2,305.6 4 Segmental information Based on an analysis of risks and returns, the directors consider that the Grouphas only one identifiable business segment, retailing. All material operationsof the Group are carried out in the UK and, therefore, no geographicalsegmentation is disclosed. The group operates both an internet and aninternational division, both of which remain immaterial for the purposes ofsegmental reporting. Consequently, the Group has considered business segmentation as the primarysegmentation, with a single separately reportable segment, retailing. 5 Exceptional items Exceptional items are events or transactions that fall within the activities ofthe Group and which by virtue of their size or incidence have been disclosed inorder to improve a reader's understanding of the financial statements. Financial year ended 1 September 2007 Acquisition and reorganisation of stores in the Republic of Ireland On 12 September 2006 the Group acquired the business and assets of nine storesfrom Roches Stores. The total consideration on acquisition of the stores was£30.0 million. Following the acquisition, the Group assigned the existing Dublinstore lease (Jervis Street), which resulted in the closure of the store afterthe year-end. The total exceptional costs amounted to £14.3 million. The acquisition of the stores, assignment of the lease and subsequent closure ofthe Jervis Street store created an accelerated depreciation charge of £6.3million and redundancy costs of £4.6 million. Marketing, travel, legal andintegration costs amounted to £3.4 million. Integration costs included £0.8million of costs which related to the distribution centre and have been chargedto distribution costs; all other costs related to the stores and have beencharged to cost of sales. 6 Interest receivable and similar income 26 weeks to 26 weeks to 52 weeks to 1 March 3 March 1 Sept 2008 2007 2007 £m £m £m Interest on bank deposits 2.6 3.8 4.2 7 Interest payable and similar charges 26 weeks to 26 weeks to 52 weeks to 1 March 3 March 1 Sept 2008 2007 2007 £m £m £m Interest payable and similar chargesBank loans and overdrafts (34.6) (33.5) (65.1)Amortisation of issue costs on loans (2.1) (1.9) (3.9)Interest payable on finance leases (1.4) (2.5) (1.8) Interest payable and similar charges (38.1) (37.9) (70.8) 8 Taxation The taxation charge for the 26 weeks ended 1 March 2008 is based on an estimatedeffective tax rate for the full year of 29.6% (52 weeks ended 1 September 2007:30.2%). 9 Dividends The Company paid a final dividend in respect of the 52 weeks ended 1 September2007 of 3.8 pence per share on 4 January 2008. The directors are proposing aninterim dividend in respect of the 26 weeks ended 1 March 2008 of 2.5 pence pershare (3 March 2007: 2.5 pence) which will absorb an estimated £21.5 million ofshareholders' funds (3 March 2007: £20.5 million). It will be paid on 4 July2008 to shareholders who are on the register of members at close of business on6 June 2008. The Company intends to offer shareholders a scrip alternative. 10 Earnings per share Basic earnings per share is calculated by dividing the earnings attributable toordinary shareholders by the weighted average number of ordinary sharesoutstanding during the period. For diluted earnings per share, the weighted average number of ordinary sharesin issue is adjusted to assume conversion of all dilutive potential ordinaryshares. The Group has one class of dilutive potential ordinary shares, thoseshare options granted to employees where the exercise price is less than themarket price of the Company's ordinary shares during the period. Basic and diluted earnings per share 26 weeks to 26 weeks to 52 weeks to 1 March 3 March 1 Sept 2008 2007 2007 Basic Diluted Basic Diluted Basic Diluted £m £m £m £m £m £m Profit for the financial period 65.1 65.1 74.1 74.1 79.0 79.0 Number Number Number Number Number Number m m m m m m Weighted average number of shares 859.0 859.0 859.0 859.0 859.0 859.0 Shares held by ESOP (weighted) (0.7) (0.7) (16.6) (16.6) (11.3) (11.3) Shares issuable (weighted) - - - 3.2 - 2.4Adjusted weighted average number of shares 858.3 858.3 842.4 845.6 847.7 850.1 Pence per Pence per Pence per Pence per Pence per Pence per share share share share share share Earnings per share 7.6 7.6 8.8 8.8 9.3 9.3 11 Capital expenditure and commitments Tangible and intangible assets 1 March 3 March 1 Sept 2008 2007 2007 £m £m £m Opening net book amount 1,510.6 1,475.6 1,475.6Additions 61.0 58.6 136.6Foreign currency revaluation 3.8 - -Disposals (5.0) - (0.7)Depreciation and amortisation (47.0) (46.8) (92.7)Accelerated depreciation (0.9) - (8.2) Closing net book amount 1,522.5 1,487.4 1,510.6 Capital commitments contracted but not provided for by the Group amounted to£14.1 million (1 September 2007: £12.3 million; 3 March 2007: £8.2 million). 12 Share Capital At 1 March 2008, 1 September 2007 and 3 March 2007 £ Number AuthorisedOrdinary shares of £0.0001 each 128,846 1,288,461,539 £ NumberIssued and fully paidOrdinary shares of £0.0001 each 85,897 858,974,359 2 Consolidated statement of changes in shareholders' equity 26 weeks to 26 weeks to 52 weeks to 1 March 3 March 1 Sept 2008 2007 2007 £m £m £m Opening shareholders' equity 163.0 53.3 53.3 Profit for the financial period 65.1 74.1 79.0Currency translation 2.5 - 0.4Actuarial gain recognised in the pension scheme 4.2 6.6 60.7Movement in deferred tax relating to the pension scheme (1.2) (2.0) (16.5)Change in valuation of available for sale investment (8.4) - 12.1Cash flow hedges (15.3) 8.5 13.9Employee share ownership plans (0.2) 1.5 1.9Proceeds from share options in the DRET - - 0.3Purchase of treasury shares for DRET (1.1) (0.1) (0.1)Dividends paid (32.6) (20.5) (42.0) Closing shareholders' equity 176.0 121.4 163.0 3 Defined benefit pension plans The Group operates defined benefit type pension schemes, being the DebenhamsExecutive Pension Plan and the Debenhams Retirement Scheme, the assets of whichare held in separate trustee-administered funds. Both pension schemes were closed for future service accrual from 31 October2006. The closure to future accrual will not affect the pensions of those whohave retired or the deferred benefits of those who have left service or optedout before 31 October 2006. Future pension arrangements are provided through amoney purchase stakeholder plan or a defined contribution scheme for theemployees in the Republic of Ireland. Actuarial valuations of the Group's pension schemes using the projected unitbasis were carried out at 31 March 2005, and updated as at each relevantperiod-end for the purposes of IAS 19 'Employee benefits' by Watson WyattLimited, a qualified independent actuary. The major assumptions used by the actuary are given below. The mortalityassumptions remain consistent with those disclosed in the Group's 2007 AnnualReport and Financial Statements. 1 March 3 March 1 Sept 2008 2007 2007 % pa % pa % pa Discount rate 6.70 5.20 5.95Price inflation 3.40 3.00 3.10Rate of increase in salaries 4.30 3.80 3.90Rate of increase in pension payments 3.40 3.00 3.10Rate of increase for deferred pensioners 3.40 3.00 3.10 The movement in the pension asset is as follows: 1 March 3 March 1 Sept 2008 2007 2007 £m £m £m Surplus at the start of the period 87.3 13.8 13.8 Current service cost - (2.9) (2.9)Past service cost - (0.4) (0.4)Contributions 4.4 4.6 7.4Interest credit 4.7 4.4 8.7Net actuarial gains on change of assumptions 4.2 6.6 60.7 Surplus at the end of the period 100.6 26.1 87.3 4 Cash generated from operations 26 weeks to 26 weeks to 52 weeks to 1 March 3 March 1 Sept 2008 2007 2007 £m £m £m Profit for the financial period 65.1 74.1 79.0Taxation 26.9 31.4 34.2Depreciation and amortisation (note 11) 47.0 46.8 92.7Accelerated depreciation (note 11) 0.9 - 8.2(Profit)/loss on disposal of property, plant and equipment (3.5) - 0.6Employee share ownership plans (0.2) 1.5 1.9Fair value losses/(gains) on derivative instruments 0.1 (0.9) (1.1)Net movements in provisions (1.7) (3.7) (3.4)Interest income (note 6) (2.6) (3.8) (4.2)Interest expense (note 7) 38.1 37.9 70.8Difference between pension charge and contributions paid (9.1) (5.6) (12.8)Net movement in long-term liabilities 0.7 18.8 46.0 Changes in working capital Increase in inventories (4.4) (23.4) (36.8)Decrease/(increase) in trade and other receivables 13.0 (7.4) 1.1Increase in trade and other payables 10.6 7.7 35.0 Cash generated from operations 180.9 173.4 311.2 5 Analysis of changes in net debt At Cash Non cash At 1 Sept flow movements 1 March 2007 2008 £m £m £m £m Analysis of net debtCash 80.4 58.8 - 139.2Bank overdrafts (1.1) (27.3) - (28.4) Cash and cash equivalents 79.3 31.5 - 110.8 Debt due within one year (96.4) 0.6 (0.2) (96.0)Debt due after one year (941.6) 1.1 (1.9) (942.4)Finance lease obligations due within one year (7.4) 0.7 5.1 (1.6)Finance lease obligations due after one year (50.4) - 0.3 (50.1) (1,016.5) 33.9 3.3 (979.3) 6 Related parties There have been no significant related party transactions during the period. 7 Financial information Copies of the statutory accounts are available from the Company's registrars -Equiniti, Aspect House, Spencer Road, Lancing, West Sussex, BN99 6DA (0871 384 2766), and at the Company's registered office, 1 Welbeck Street, London, W1G 0AA. Statement of Directors' Responsibilities The directors confirm that this condensed set of financial statements has beenprepared in accordance with IAS 34 as adopted by the European Union and that theinterim management report herein includes a fair review of the informationrequired by DTR 4.2.7 and DTR 4.2.8. The directors of Debenhams plc are listed on pages 28 and 29 in the Group's 2007Annual Report and Financial Statements. In addition to those directors, AngelaSpindler was appointed Managing Director of the Group on 4 February 2008. Therehave been no other changes to these directors since that date. A list of current directors is maintained on the Investors section of theDebenhams website at www.debenhams.com. By order of the board Paul EardleyCompany Secretary15 April 2008 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Debenhams