Debenhams has reported profit before tax (PBT) of £151 million for the year to August 28th following 12 months of business restructuring.
This represents a 20.6 per cent hike in profits before exceptional items, comprising £5.4 million of write-downs in Ireland and amortisation on capitalised bank fees of £5.7 million, are taken into account.
Like-for-like (LFL) sales were flat, but Debenhams has reduced net debt by £73.5 million over the course of the year to £516.8 million.
The 2009-10 financial year saw the department store retailer switch focus to increasing margins and profits by expanding its own-bought ranges, while the acceleration of a store refit programme and the opening of six new outlets were key parts of the restructuring strategy.
More work has been put into developing Debenhams’ multichannel business, resulting in sales growth of 88.4 per cent to £103.8 million in this department, while the acquisition of Danish company Magasin du Nord has increased the UK firm’s presence in Scandinavia.
A report prepared for Investec Securities by analysts David Jeary and Katharine Wynne showed that the investment company has raised its low-end PBT forecast for the forthcoming financial year from £157 million to £164 million.
“Debenhams has had a good run into these results, outperforming the market by 14.5 per cent in the past quarter despite some larger shareholders selling down,” the analysts explained.
“We remain buyers given the degree of self-help to profits from own bought margin gains and benefits from Magasin’s margin normalisation, but wouldn’t be surprised to see some short-term profit taking.”
Rob Templeman, CEO of Debenhams, said: “Although we remain concerned about the general retail environment, we are encouraged by the start to the new financial year which has seen positive LFL sales and gross margin in the early weeks.
“In spite of the uncertain outlook, there is much to be positive about our business which will enable us to make further progress over the next year.”