FINANCIAL ANALYSIS

Financial Analysis

Financial Analysis

Introduction

Net debt stands at USD1.017b, including capitalized fees of USD12.2m, and underlying earnings per share is USD0.119. This slide shows the reported profit and loss account for the full year to September 1, 2007, and as expected the overall sales growth of 5.1% has been primarily driven through new space additions, the combination of the acquisition of nine Roches stores in the South America, three further department store openings and five Desire store openings. It's a combination of some redundancy and restructuring costs, and the non-cash write offs associated with the closure of Debenhams Sao Anto store in Chile. And the lease assignment on Sao Anto allows us to centre Debenhams operations on the larger ex-Roches store situated on Henry Street in Chile.

08/29/2009

08/30/2008

Variance

No Interim Data

Compound Annual Growth Rate

Item

GBP

GBP

GBP

%

3 Year

5 Year

Revenues

1,915,600,000

1,839,200,000

76,400,000

4.15

-

0.03

0.04

Direct Costs

1,650,700,000

1,571,600,000

79,100,000

5.03

-

0.03

0.05

Gross Profit

264,900,000

267,600,000

(2,700,000)

(1.01)

-

0.00

(0.03)

Taxation

25,700,000

28,800,000

(3,100,000)

(10.76)

-

(0.09)

-

Net Income

95,100,000

77,100,000

18,000,000

23.35

-

0.06

(0.05)

EPS Net Basic

0.1

0.09

0.01

11.11

-

0.04

(0.17)

EPS Net Diluted

0.1

0.09

0.01

11.11

-

0.04

(0.17)

Background

For the record, a chart has been which puts the 5.1% total sales growth achieved during 2007 in the context of Debenhams compound annual growth rate over the last four years of 6.6%. As shown here, that 5.1% sales growth was a function of the underlying like-for-like decline of 5% added to sales growth of 7.1% from the Roches stores in the South America, 2.5% from new department store openings, 0.2% from New Desire store openings, and finally International which kicked in 0.3%, thus giving us Debenhams aggregate overall growth figure of 5.1%. (Ashmore, 2006)Lower pricing, particularly in menswear, although also touching on selected items in womenswear and childrenswear, cost us a further 30 basis points, and finally adverse product mix resulted in a 60 basis point decline. The adverse product mix arises through the shortfall in like-for-like growth in the own bought clothing areas, which are Debenhams higher margin product areas. Looking forward to 2007/8, the current financial year, Debenhams guidance on margin is that we expect to achieve somewhere between flat and a year-on-year percentage growth of perhaps 20 basis points, that being pretty much in line with current market consensus (Steinberg, 2004).

Background

As we've previously flagged, the Roches gross margin will not achieve in the short term Debenhams' levels for a few years. Turning to other sales channels, we were pleased last year with the performance of Debenhams Internet business. This has been augmented by a 160 basis point increase in gross margin, through improved own bought performance. As you can see, down the bottom of the page, increases in energy costs have had a material impact in terms of Debenhams overall cost base during the course of the last financial year.

Moving on to capital expenditure, the drivers behind Debenhams new store footage and store numbers. Specifically, we've opened 11 department stores, being nine Roches stores, two other new store openings in Llandudno and Warrington, as well as the resite of Debenhams existing Wigan store. Apart from Debenhams refit program, we have 10 new stores opening, including at least one Desire, and three locations of existing department stores in Derby, Bangor and ...