23rd Oct 2007 07:02
Debenhams plc23 October 2007 23 October 2007 DEBENHAMS PLC Preliminary Results for 52 weeks to 1 September 2007 Financial Highlights 2007 2006 changeGross transaction value £2,305.6m £2,192.9m +5.1%Operating profit £194.1m £238.2m -18.5%Headline profit before tax & exceptional items* £131.4m £117.9m +11.5%Profit before tax & exceptional items £127.5m £112.8m +13.0% *Before non-cash debt fee write-off of £3.9m (2006: £5.1m) • Like-for-like sales down 5.0% • Like-for-like sales for 7 weeks to 20 October 2007 up 2.1%**; total sales up 3.9%; market share improving • Gross margin down 90bps • Net debt £1,017m; reduction of £80m • Basic earnings per share 9.3p (2006: 7.4p) • Dividend per share 6.3p (2006: 2.4p) **Excluding Roches. Operating Highlights • 792,000 sq ft space growth, including: - Acquisition and substantial conversion of 9 Roches stores - 8 new store openings, including 5 Desire stores and 1 resite • Store pipeline at 29 stores over the next 4 years • Store refurbishment programme accelerated - Will be completed during two year time frame - 9 completed during year; 12 more before Christmas 2007 • Significant investment in debenhams.com producing strong sales and profit growth • Four new International stores opened • Brand development - New brands include Mantaray (menswear), Baker by Ted Baker (childrenswear) - St. George by Duffer brought in-house Rob Templeman, Chief Executive of Debenhams, said: "Despite wider concerns about the macro economic environment and how this willimpact on the retail sector, we are confident that the changes we are makingthroughout Debenhams are benefiting the business. Our new Autumn/Winter rangesare being well received and this, together with the refitting of stores andprevious investment in a new IT platform and Distribution Centre, is improvingthe customer experience. Our growth in like-for-like sales and gross marginhave both been positive for the first seven weeks of the new financial year eventhough there has been some disruption from the accelerated refurbishmentprogramme. We have also seen growth in market share over the past 12 weeksaccording to the latest TNS data. Enquiries: Analysts/ShareholdersDebenhams plc Rob Templeman, Chief ExecutiveChris Woodhouse, Finance Director 020 7408 3302Lisa Williams, Investor Relations 020 7408 3304 MediaCollege HillAndy Cornelius 020 7457 2822Duncan Murray 020 7457 2823 A presentation for analysts and shareholders will be held today at 9:30am atMerrill Lynch, 2 King Edward Street, London EC1. An archived webcast of thispresentation will be available at www.debenhamsplc.com/deb/res-pres/ from 3pm. High resolution images are available for media to view and download free ofcharge from www.prshots.com/Debenhams. 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 predict accurately 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; competitive factors in the highly competitiveretail industry; Debenhams' ability to implement successfully its new storerollout and department store refurbishment/modernization strategy; Debenhams'ability to maintain its relationships with certain designers and its significantconcession partners; 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, childrenswear, homeware andhealth and beauty. Debenhams has a total of 135 department stores in the UK and Republic Irelandand 9 Desire by Debenhams stores, which are a new small store concept featuringa mix of womenswear, accessories, lingerie, cosmetics and childrenswear.Debenhams has a further 36 international franchise stores in 16 countries and anonline store available at www.debenhams.com. Debenhams is the second largest department store chain in the UK. Designers at Debenhams include Ted Baker, Nigel Cabourn, Jasper Conran, TheoFennell, Pearce Fionda, Frost French, Betty Jackson, Ben de Lisi, JulienMacdonald, John Richmond, John Rocha and Matthew Williamson. OPERATING REVIEW Overview For the year ending 1 September 2007, Debenhams gross transaction value grew by£112.7 million to £2,305.6 million, driven primarily by the addition of 792,000square feet of new space to the store portfolio. This included nine storesacquired from Roches in the Republic of Ireland and the opening of eight otherstores including five Desire by Debenhams stores and one resite. Merchandise sales growth by product category was varied. Good performance wasachieved in a number of areas including Health & Beauty and Accessories but thiswas offset by weaker sales from clothing ranges, in particular Menswear asdetailed at the time of the interim results. This resulted in an overalldisappointing year for the company with a like-for-like sales decline of 5.0 %.Gross margin fell by 90 basis points, mostly due to greater markdown in highermargin product categories and selected investment in pricing. Headline profit before tax and exceptional items (which also excludes non-cashdebt fee write-offs) was £131.4 million, up 11.5% on last year. Profit beforetax and exceptional items of £127.5 million compared to £112.8 million achievedin the previous year, a 13.0% increase. Against a background of increasingcompetition, all areas of the business - the store portfolio, the customerexperience in store, products, the supply chain and marketing - were reviewedduring the second half of the year with the clear objective of ensuring anyissues raised were dealt with in time for the new Autumn/Winter season and newfinancial year. Progress made during the year in these areas is detailed below. Store Portfolio At the end of the year, Debenhams was trading from 142 stores across the UK andthe Republic of Ireland. Trading space increased during the year by 792,000square feet to 10.3 million square feet. However, we remain under representedin some key shopping locations and increasing the size of the store portfolioremains a key strategic aim. Department Stores During the year, nine department stores were acquired from Roches Stores in theRepublic of Ireland, new department stores were opened in Llandudno andWarrington and the Wigan store was resited, taking the year end total to 133.Since then, the stores in Exeter and Derby have been resited increasing theirfootage by some 20,000 square feet each. Two further stores have opened sincethe end of the year, in Llanelli and Welwyn Garden City. There is a strong pipeline of new contracted department stores which, whenopened, will add an additional 1.8 million square feet of prime retail space tothe portfolio over the next four years. Desire by Debenhams The roll-out of the Desire by Debenhams format - smaller stores focusing onwomenswear, health and beauty and childrenswear - continues. Five Desire storeswere opened during the year in Birmingham Fort, Kirkcaldy, Merthyr, Altrinchamand Walton-on-Thames, bringing the total to nine. Contracts have been exchanged on a further four Desire stores. International Stores Successful franchise stores play an important part in extending the global reachof Debenhams brand and awareness of our product ranges. During the year, newInternational stores were opened in Bucharest, Moscow, Kuwait and Mecca and atyear-end 34 stores were trading in 15 countries across the world. Since the end of the year stores have opened in Delhi and Jordan with furtherstore openings expected in India, Cyprus, Romania, the Middle East and thePhilippines. Debenhams Online Significant investment has been made in our online store to ensure customershave 24/7 access to Debenhams and we believe that within a short period of timeit will become our largest store. During the year the rebuilding and upgrade of debenhams.com was completed. Thissignificant investment brings our product ranges to a larger audience and allowsthe development of niche micro-sites such as Health & Beauty. As a result, the number of orders received has risen substantially and grosstransaction value has increased by 32% over last year. Further improvements tothe design and marketing of debenhams.com are underway; this will continue toimprove sales and extend the reach of the Debenhams brand to areas of thecountry not covered by the store estate. Improving the Customer Experience In Store Creating a pleasing environment for our customers in all our stores is vital. Over the past three years, capital expenditure has been primarily focused on newstores and infrastructure improvements, including the new distribution facilityat Peterborough and numerous IT developments such as the rebuilding ofdebenhams.com and the introduction of a radio frequency platform across thestore base. These investments have been essential to provide a sound foundationfor the development of the business. We have always acknowledged that some of the older stores have been in need ofrefurbishment, particularly those which have been within the portfolio for manyyears and for the past few years Debenhams has been committed to a rollingrefurbishment programme. During the year, nine stores were refurbished withanother 12 due for completion before Christmas 2007. The sales uplifts and return on investment from our refurbished stores have beeneither in line or ahead of expectations. The latest iteration of thismodernisation programme has been based on the shop fit employed in thesuccessful Desire format. The first of these stores, Uxbridge, is trading wellabove internal expectations with a sales uplift of some 10%. As a result, theroll out programme of refits under the new format has been accelerated so thatthe majority of stores within the estate will be refurbished within the next twoyears. Products and the Supply Chain Product innovation, style, quality and value are absolutely critical to thesuccess of any retailer. Over the last six months, an in-depth review coveringall brands has been undertaken to ensure every product in every brand deliversan improved customer offer in each of these areas. This is being executedacross all merchandise categories throughout the Autumn/Winter collection and isparticularly evident within the clothing ranges. Sourcing gains - resultingmainly from new offices in Asia and Turkey which are facilitating more directproduct sourcing - are being reinvested into better fabrics, improved stylingand more design content across a large part of the product portfolio at the sameor lower prices that last year. New brands introduced during the course of the year include casual menswearbrand Mantaray, new designer Melissa Odabash in women's swimwear and accessoriesand the extension of designer brands by Betty Jackson, Julien Macdonald and JeffBaker into homeware. St. George by Duffer has been brought in-house infurtherance of the strategy to increase the sales participation from own boughtlines. Since the end of the year, Baker by Ted Baker, an exciting newchildrenswear brand, was launched in September 2007. Reducing the impact of our products on the environment has also been animportant focus during the year. Initiatives range from introducing 100%recycled (post-consumer waste) carrier bags to using Fair Trade cotton andeco-friendly packaging in our lingerie ranges to serving "Good Origin" coffee inour 160 restaurants and cafes. Supplier selection and monitoring is also of theutmost importance to ensuring products are sourced through reputable supplierswho meet our own standards for ethical trading. This is an ongoing process,conducted through both an independent audit programme and Debenhams' ownassessments. Marketing The new marketing campaign was launched in September with new "club style"advertisements which demonstrate the breadth of choice that Debenhams has tooffer through its exciting and stylish product portfolio. Marketing spend hasbeen maintained with a higher proportion directed towards print media. Initial results from the first iteration of the campaign - which featuredamongst others Wetherby Women's Association, Stoke Newington Surf Club andKettering Kite Club - have been encouraging both from a brand projection andthrough the rate of sale of the featured lines. Current Trading Despite wider concerns about the macro economic environment and how this willimpact on the retail sector, we are confident that the changes we are makingthroughout Debenhams are benefiting the business. Our new Autumn/Winter rangesare being well received and this, together with the refitting of stores andprevious investment in a new IT platform and Distribution Centre, is improvingthe customer experience. Our growth in like-for-like sales and gross marginhave both been positive for the first seven weeks of the new financial year eventhough there has been some disruption from the accelerated refurbishmentprogramme. We have also seen growth in market share over the past 12 weeksaccording to the latest TNS data. FINANCIAL REVIEW Sales, margins and costs During the 52 weeks ended 1 September 2007 gross transaction value grew by 5.1%to £2,305.6 million (2006: £2,192.9 million) and revenue correspondinglyincreased by 3.9%. These increases were driven by good performance from newstores and modernisations. However like-for-like sales fell by 5.0%. Although currently a relatively small portion of the overall business, stronggrowth was achieved from the website which was relaunched during November 2006.Gross transaction value from the web was up 31.7% on 2006 through a 31.2%increase in orders taken. The international business also continued to grow and four new franchise storeswere opened during the year. Although product intake margin increased by around 0.4%, this was more thanoffset by the impact of lower pricing, product mix and higher clearancemarkdown, the latter being required to maintain terminal stock at a similarlylow level to last year. Overall gross margin declined by 0.9%. A new sourcing office opened in Turkey. This has improved efficiency in thesupply chain, in particular shortening delivery lead times and as a resultimproving markdown through more flexible stock management. Focus on cost control continues to be a critical issue in the business. Storeoperational costs grew due to new stores opened during the year along with asignificant increase in the unit cost of energy. Distribution costs fellyear-on-year, primarily as a result of the closure of distribution centres inBedford and Daventry towards the end of the previous financial year. Centraladministrative costs also reduced slightly. The above combined to generate a gross profit of £279.5 million (2006: beforeexceptional items £331.4 million). Underlying operating profit beforeexceptional items decreased to £210.1 million (2006: £267.4 million). Operatingprofit after exceptional items for 2007 stood at £179.8 million (2006: £223.6million). Exceptional items Total exceptional items for 2007 were £14.3 million (2006: £50.7 million). On12 September 2006 the Group acquired nine stores from Roches Stores in theRepublic of Ireland. Following this acquisition the Group assigned the existingDublin store lease (Jervis Street) which will result in the closure of thatstore after the year end. The acquisition of the nine stores, assignment of thelease and subsequent closure of the Jervis Street store has created exceptionalcosts of £14.3 million. Exceptional costs comprise: accelerated depreciationcharge £6.3 million, redundancy costs £4.6 million and other integration costs£3.4 million. Interest The net interest cost for the financial year ended 1 September 2007 was £66.6million, this compares to a net interest charge, before exceptional items, of£125.4 million in 2006. The reduction of £58.8 million is principally due tothe full year impact of a new lower-cost finance structure which was put inplace in May 2006 after the Group's admission to the London Stock Exchange. Taxation The Group's tax charge of £34.2 million on profit of £113.2 million gives aneffective rate of 30.2%. The charge includes the impact of exceptional costsincurred in the Republic of Ireland and the movement in deferred tax as a resultof the rate of tax changing from 30% to 28% in April 2008. Earnings The basic earnings per share of 9.3p per share (2006: 7.4p per share) anddiluted earnings per share of 9.3p per share (2006: 7.4p per share) reflect theweighted average number of shares in issue during the course of the financialyear and similarly for the comparative period. As a result of admission to theLondon Stock Exchange in May 2006, significant changes in the Group's capitalstructure occurred. An underlying earnings per share figure has been calculatedat 11.9p per share (2006: 16.5p per share) reflecting the underlying earningsfigure and for both financial periods the number of shares in issue now beingthe same figure as at the re-listing of the business on the London StockExchange. The adjustments to earnings which have been made in calculating underlyingearnings per share concern the removal of non-comparable amounts in order toarrive at an underlying earnings figure. Dividends An interim dividend of 2.5p per share was paid in July 2007. The directors areproposing a final dividend in respect of the financial year ended 1 September2007 of 3.8p per share. It will be paid on 4 January 2008 to shareholders whoare on the register of members at close of business on 7 December 2007. Capital expenditure Expansion of the store portfolio continued this year. Nine stores were acquiredin the Republic of Ireland from Roches Stores, two new and one re-siteddepartment stores were opened alongside five Desire stores. This investment innew stores of £81.5 million combined with £18.0 million in refurbishing existingstores and £37.1 million invested in developing and improving the infrastructureof the business, particularly in the IT area, grew total capital assets by£136.6 million. Cash flow Net cash generated from operating activities in the year ended 1 September 2007was £227.4 million, a £37.1 million increase on the prior year (2006: £190.3million). The growth was mainly the result of lower interest payments followingthe finance restructure in May 2006 added to inflows from both long and shortterm working capital, these being offset by an increase in taxation payments. Borrowings and refinancing The Group's net debt position was £1,016.5 million at 1 September 2007. Thisreduced by £79.6 million during the course of the year. Financial risk and treasury management The board has established an overall treasury policy and has approved authoritylevels within which the treasury function must operate. Treasury policy is tomanage risks within the agreed framework whilst not taking speculativepositions. Pensions The Group provides a number of pension benefit arrangements for its employees,which include the Debenhams Retirement Scheme and Debenhams Executive PensionPlan (together the "pension schemes"). Following a consultation period withemployees, which ended on 15 September 2006, the board reached agreement withthe pension schemes' trustees that the pension schemes would close for futureservice accrual from 31 October 2006. The closure to future accrual does notaffect the pensions of those who have retired or the deferred benefits of thosewho have left service or opted out before 31 October 2006. The balance sheetsurplus associated with the pension schemes has increased by £73.5 million overthe year to £87.3 million (2006: £13.8 million). Future pension arrangements will be provided for Debenhams employees by aPrudential stakeholder pension scheme. Consolidated Income StatementFor the financial year ended 1 September 2007 For the financial year ended: Note 1 September 2 September 2007 2006 £m £mRevenue 2 1,774.4 1,707.7 Cost of sales (1,508.4) (1,376.3) Analysed as:Cost of sales before exceptional items (1,494.9) (1,376.3)Exceptional cost of sales 4 (13.5) -Gross profit 266.0 331.4 Distribution costs (47.0) (53.0)Analysed as:Distribution costs before exceptional items (46.2) (53.0)Exceptional distribution costs (0.8) - Administrative expenses (39.2) (54.8) Analysed as:Administrative expenses before exceptional (39.2) (40.2)itemsExceptional administrative expenses 4 - (14.6) Operating profit 179.8 223.6 Analysed as:Operating profit before exceptional items 194.1 238.2Exceptional operating items 4 (14.3) (14.6) Interest receivable and similar income 5 4.2 7.3Interest payable and similar charges 6 (70.8) (168.8) Analysed as:Interest payable and similar charges before 6 (70.8) (132.7)exceptional itemsExceptional interest payable and similar 4,6 - (36.1)charges Profit before taxation 113.2 62.1 Taxation 7 (34.2) (18.4) Analysed as:Taxation before exceptional items (36.9) (32.7)Taxation credit on exceptional items 7 2.7 14.3 Profit for the financial year attributable to equity 10 79.0 43.7shareholders Earnings per share attributable to the equity shareholders (expressed in pence per share) Pence per share Pence per share Basic 9 9.3 7.4Diluted 9 9.3 7.4 Underlying earnings per share 9 11.9 16.5 Dividends per share (expressed in pence per share) Pence per share Pence per shareProposed final dividend per share 8 3.8 2.4 All Group operations during the financial years were continuing operations. Consolidated Statement of Recognised Income & ExpensesFor the financial year ended 1 September 2007 For the financial year ended: 1 September 2 September 2007 2006 £m £m Profit for the financial year 79.0 43.7 Actuarial gain/(loss) recognised in the pension scheme 60.7 (3.0) Currency translation 0.4 - Change in the valuation of the available for sale investments 12.1 - Movement on deferred tax relating to the pension scheme (16.5) 0.9 Cash flow hedges- net fair value gains (net of tax) 17.5 15.8- recycled and adjusted against the initial (3.6) (0.2) measurement of the acquisition cost of inventory- reclassified and reported in net profit - 0.8Net income recognised directly in equity 70.6 14.3 Total recognised income attributable to the equity of the Group 149.6 58.0 Consolidated Balance SheetAt 1 September 2007 1 September 2 September Note 2007 2006 £m £m ASSETSNon current assetsIntangible assets 842.9 836.1Property, plant and equipment 667.7 639.5Financial assets- Available for sale investments 20.3 8.2- Derivative financial instruments 19.7 7.8Retirement benefit obligations 87.3 13.8Deferred tax assets 52.3 51.1 1,690.2 1,556.5 Current assets Inventories 244.6 207.8Trade and other receivables 65.6 63.9Derivative financial instruments 3.0 -Cash and cash equivalents 80.4 34.0 305.7 LIABILITIESCurrent liabilitiesFinancial liabilities- Bank overdraft and borrowings (104.8) (33.1)- Derivative financial instruments (2.2) (5.3)Trade and other payables (468.6) (400.4)Current tax liabilities (31.6) (18.8)Provisions (2.2) (4.7) (609.4) (462.3)Net current liabilities (215.8) (156.6) Non current liabilitiesFinancial liabilities- Bank overdraft and borrowings (992.1) (1,097.0)- Derivative financial instruments - (2.3)Deferred tax liabilities (111.6) (84.8)Other non-current liabilities (207.1) (161.0)Provisions (0.6) (1.5) (1,311.4) (1,346.6)Net assets 163.0 53.3 SHAREHOLDERS' EQUITYShare capital 0.1 0.1Share premium 682.9 682.9Merger reserve 1,200.9 1,200.9Reverse acquisition reserve (1,199.9) (1,199.9)Hedging reserve 15.4 1.5Other reserves 13.1 1.0Retained earnings (549.5) (633.2)Total equity 10 163.0 53.3 Consolidated Cash Flow StatementFor the financial year ended 1 September 2007 For the financial year ended: 1 September 2 September Note 2007 2006 £m £m Cash flows from operating activitiesCash generated from operations 11 311.2 317.0Interest received 4.3 7.8Interest paid (70.5) (147.4)Tax (paid)/received (17.6) 12.9Net cash generated from operating activities 227.4 190.3Cash flows from investing activitiesPurchase of property, plant and equipment (85.2) (88.6)Purchase of intangible assets (11.5) -Proceeds from sale of property, plant and equipment 0.2 0.1Net cash used from investing activities (96.5) (88.5)Cash flows from financing activitiesDrawdown of term loan facility - 1,050.0Repayment of senior term loan - (1,827.6)Proceeds from issue of ordinary shares - 700.0Dividends paid (42.0) -Share issue costs - (12.6)Appropriation - settlement of 'B' Loan Notes - (50.1)Appropriation - settlement of 'C' Loan Notes (0.2) (22.1)Receipt of monies for share options 0.2 -Purchase of shares by Debenhams Retail EmployeeTrust ('DRET') (0.1) (2.0)Capital element of finance leases (0.4) -Appropriation by DRET (9.4) (1.1)Net cash used in financing activities (51.9) (165.5)Net increase/(decrease) in cash and cash equivalents 79.0 (63.7)Cash and cash equivalents at beginning of financial 0.3 64.0year Cash and cash equivalents at end of financial year 12 79.3 0.3 Notes to the AccountsAt 1 September 2007 1 Basis of preparation The consolidated financial statements have been prepared in accordance withInternational Financial Reporting Standards ('IFRS') as adopted in the EuropeanUnion and those parts of the Companies Act 1985 applicable to those companiesreporting under IFRS. The consolidated financial statements have been prepared on the basis of theaccounting policies set out in the financial statements of Debenhams plc for thefinancial year ended 1 September 2007. Accounting policies have beenconsistently applied. The financial information set out in this document does not constitute thestatutory accounts of the Group for the years ended 1 September 2007 and 2September 2006 but is derived from the 2007 annual report and financialstatements. The annual report and financial statements for 2006, which wereprepared under IFRS, have been delivered to the Registrar of Companies and theGroup annual report and financial statements for 2007, prepared under IFRS, willbe delivered to the Registrar of Companies in due course. The auditors havereported on those accounts and have given an unqualified report which does notcontain a statement under section 237 (2) or (3) of the Companies Act 1985. The Directors believe that the underlying operating profit and earnings pershare measures provide additional useful information for shareholders on theunderlying performance of the business and are consistent with how businessperformance is measured internally. It is not a recognised profit measure underIFRS and may not be directly comparable with underlying profit measures used byother companies. Non-GAAP measure 1 September 2 September 2007 2006 £m £m Operating profit before exceptional items 194.1 238.2Leases with fixed annual increments in rent 14.1 14.9Share-based payments 1.9 14.3 Underlying operating profit before exceptional 210.1 267.4items 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 good guide to the value of theoverall activity of the Group. 1 September 2 September 2007 2006 £m £m Gross transaction value 2,305.6 2,192.9 4 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. 1 September 2 September 2007 2006 £m £mOperating exceptional items:Admission to the London Stock Exchange - 4.6Other exceptional item - 10.0Acquisition/reorganisation of stores in the Republic of Ireland 14.3 - Total operating exceptional items 14.3 14.6Write off of capitalised debt costs on refinancing (note 6) - 33.5Interest on refinancing (note 6) - 2.6 Total exceptional items before tax 14.3 50.7 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 Roche Stores, the total consideration on acquisition of the stores was £30million. Following the acquisition, the Group assigned the existing Dublinstore lease (Jervis Street) which will result in the closure of the store afterthe year-end. The acquisition of the stores, assignment of the lease and subsequent closure ofthe Jervis Street store has 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 include £0.8million of costs which relate to the distribution centre and have been chargedto distribution costs, all other costs relate to the stores and have beencharged to cost of sales. Financial year ended 2 September 2006 Admission to the London Stock Exchange Costs relating to the Company's Admission to the London Stock Exchange on 9 May2006 include taxation and restructuring advice, legal and professional fees,bonuses and other advisory services, relating to printing costs, marketing andpublic relations all of which related to the Admission. Other exceptional item Following Admission to the London Stock Exchange, the restricted cash held byDRET was distributed to the beneficiaries of the trust in accordance with thetrust rules. Interest on refinancing On 30 May 2006 the Group refinanced its debt, which resulted in the repayment ofthe senior credit facilities. As a result of this repayment the Group wrote offall unamortised debt issue costs associated with the senior credit facility. Additional interest relating to the early repayment of the senior creditfacility was paid on refinancing together with the cost associated with therestructuring of the interest rate swaps. 5 Interest receivable and similar income 1 September 2 September 2007 2006 £m £mInterest on bank deposits 4.2 7.3 6 Interest payable and similar charges 1 September 2 September 2007 2006 £m £mInterest payable and similar chargesBank loans and overdrafts (65.1) (124.1)Amortisation of issue costs on loans (3.9) (5.1) Interest payable on finance leases (1.8) (3.5)Interest payable before exceptional items (70.8) (132.7) Exceptional items - interest payable and similarchargesUnamortised issue costs written off on repayment ofthe senior term loan (note 4) - (33.5) Premium on early settlement of the senior term loan (note 4) - (2.1) Cost of restructuring the interest swap portfolio (note 4) - (0.5) Exceptional items - interest payable and similar charges - (36.1) Interest payable and similar charges after exceptional items (70.8) (168.8) 7 Taxation Analysis of tax charge in the year 1 September 2 September 2007 2006 £m £m Current tax:UK corporation tax charge on profit for the year 33.3 9.1Adjustments in respect of prior periods (2.4) (3.6) Current tax expense 30.9 5.5 Deferred taxation:Origination and reversal of timing differences (4.6) 0.9Pension cost relief in excess of pension cost credit/charge 6.1 8.0Adjustments in respect of prior periods - pension costs 2.1 -Adjustments in respect of prior periods (0.3) 4.0 Deferred tax expense 3.3 12.9 Tax charge in the financial year 34.2 18.4 Tax relating to exceptional items as detailed in note 4 and included in theabove tax charge amounted to: 1 September 2 September 2007 2006 £m £m Tax credit relating to:Operating exceptional items 2.7 3.5Interest exceptional items - 10.8 2.7 14.3 8 Dividends The board is proposing a final dividend in respect of the financial year ended 1September 2007 of 3.8 pence per share (2006: 2.4 pence per share), which willabsorb an estimated £32.6 million (2006: £20.6 million) of shareholders' funds.It will be paid on 4 January 2008 to shareholders who are on the register ofmembers at close of business on 7 December 2007. An interim dividend of 2.5 pence per share was paid on 4 July 2007 (2006: nil)which absorbed £21.5 million (2006: £nil) of shareholders' funds. 9 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 year. 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 year. Basic and diluted earnings per share 1 September 2007 2 September 2006 Basic Diluted Basic Diluted £m £m £m £mProfit for the financial year 79.0 79.0 43.7 43.7 Number Number Number Number m m m mWeighted average number of shares 859.0 859.0 614.4 614.4Shares held by ESOP (weighted) (11.3) (11.3) (25.6) (25.6) Shares issuable (weighted) - 2.4 - 5.6Adjusted weighted average number of shares 847.7 850.1 588.8 594.4 Pence per Pence per Pence per Pence per share share share shareEarnings per share 9.3 9.3 7.4 7.4 Underlying earnings per share The underlying earnings per share reflects the underlying performance of thebusiness compared with the prior year and is calculated by dividing underlyingearnings by the number of shares in issue at the year end. 1 September 2 September 2007 2006 £m £mProfit for the financial year 79.0 43.7Exceptional items 14.3 50.7Leases with fixed annual increments in rent 14.1 14.9Share-based payments 1.9 14.3Interest adjustments - 58.3Adjustment to tax charge to reflect the above items (6.9) (40.5)(62.8)Underlying profit for the year 102.4 141.4 Number Number m mIssued share capital at 1 September 2007 and 2 September 2006 859.0 859.0 Pence per Pence per share shareUnderlying earnings per share 11.9 16.5 Underlying profit is used by management as an underlying measure ofprofitability within the Group. It is defined as operating profit beforeexceptional items, the impact of leases with fixed annual increments in rent andcharges relating to share-based payments. In 2006 the Group underwent significant re-financing. Therefore**, the statutoryinterest and related financing costs are not comparable year-on-year. The aboveadjustment for interest assumes that the 2006 re-financing, which took place atthe date of admission, was effective at the beginning of the year ended 2September 2006 and that the proceeds of shares issued on Admission (£700million) were available at that date. The comparison of performance year-on-year has also been made complex by costsincurred as a result of the Company's Admission to the London Stock Exchange on9 May 2006, which increased the number of shares issued by the Company. Theunderlying earnings per share uses the capital structure as at 2 September 2006to eliminate the effect of these changes. 10 Consolidated statement of changes in shareholders' equity 1 September 2 September 2007 2006 £m £m Opening shareholders' equity 53.3 (692.3) Profit for the financial year 79.0 43.7Currency translation differences 0.4 -Actuarial gain/(loss) in pension schemes 60.7 (3.0)Movement in deferred tax relating to pension schemes (16.5) 0.9Change in available for sale investment 12.1 -Cash flow hedges 13.9 16.4Employee share ownership plans 1.9 2.1Proceeds from shares options in the DRET 0.3 -Value of employee services for loan notes issued (net of tax) - 26.8'C' Loan Notes held by Baroness Employee Limited Partnership - (22.3)Issue of shares - 683.0Purchase of treasury shares for DRET (0.1) (2.0)Dividends paid (42.0) - Closing shareholders' equity 163.0 53.3 11 Cash generated from operations 1 September 2 September 2007 2006 £m £m Profit for the financial year 79.0 43.7Taxation 34.2 18.4Depreciation 85.7 86.0Accelerated depreciation 8.2 -Amortisation 7.0 5.1Loss/(profit) on disposal of property, plant and 0.6 (0.1)equipment Employee options granted during the year 1.9 2.8Discretionary bonus granted - 1.1Fair value (gains)/losses on derivative instruments (1.1) 1.9Swap costs - (0.8)Net movements in provisions for liabilities and charges (2.6) (3.0)Interest income (note 5) (4.2) (7.3)Interest expense (note 6) 70.8 168.8Difference between pension charge and contributions paid (12.8) (26.2)Net movement in other non current liabilities 46.0 2.2 Changes in working capitalIncrease in inventories (36.8) (10.6)Decrease/(increase) in trade and other receivables 1.1 (8.2)Increase in trade and other payables 34.2 43.2 Cash generated from operations 311.2 317.0 12 Analysis of changes in net debt At Cash flow Non cash At 2 September movements 1 September 2006 2007 £m £m £m £m Analysis of net debtCash 34.0 46.4 - 80.4Bank overdrafts (33.7) 32.6 - (1.1) Cash and cash equivalents 0.3 79.0 - 79.3 Debt due within one year 3.6 - (100.0) (96.4)Debt due after one year (1,037.8) - 96.2 (941.6)Finance lease obligations due within one year (3.0) 0.4 (4.8) (7.4)Finance lease obligations due after one year (59.2) - 8.8 (50.4) (1,096.1) 79.4 0.2 (1,016.5) 13 Financial information The statutory accounts will be filed with the Registrar of Companies and sent tothe holders of the Company's listed securities in November. Copies will beavailable at the Company's registrars, Lloyds TSB Registrars, The Causeway,Worthing, West Sussex, BN99 6DA (0870 600 3970), and at the Company's registeredoffice 1 Welbeck Street, London, W1G 0AA from the date of posting. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Debenhams