Debenhams still considering 'longer-term options', reviewing non-core assets
With its shares in freefall following reports that it has called in KPMG to explore restructuring plans, beleaguered department store chain Debenhams put out a statement on Monday in a bid to reassure investors.
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The company, which has issued three profit warnings this year, said it was still working with its advisers on longer-term options and reviewing its non-core assets. The statement followed a Times report that Debenhams has asked KPMG to compile a list of options, which could include plans to hand back excess store space to landlords and ask creditors to accept a compulsory voluntary arrangement.
Chairman Ian Cheshire said in the statement: "As we stated in June, the board continues to work with its advisers on longer term options, which include strengthening our balance sheet and reviewing non-core assets. This activity is in order to maximise value for shareholders and protect other stakeholders, including our employees."
The company also provided an update on recent trading, saying it expects to report pre-tax profit of around £33m for FY2019, within the current market range of between £31m and £36.5m, and earnings before interest, taxes, depreciation and amortisation of around £157m. In addition, it expects year-end net debt to be approximately £320m, in line with guidance and leaving "significant" headroom on its £520m medium-term facilities.
Debenhams said the early weeks of the new season have shown more positive trends and any sustained upturn would result in a rebound in its profit performance.
Chief executive officer Sergio Bucher said: "The market environment remains challenging and underlying trends deteriorated through the summer months. Nevertheless the product and format improvements we have tested are gaining traction and we are ready to scale up some of our strategic activity ahead of peak.
"Having put in place a leaner operational structure and strong leadership team, and taken action to strengthen our financial position, we are well equipped to navigate these market conditions and take advantage of any trading opportunities that emerge."
Commenting on the press reports earlier, Markets.com analyst Neil Wilson said: "A CVA is being talked about, but given the weakness in the share price and the recent acquisition of House of Fraser, we must consider the possibility that Mike Ashley’s Sports Direct - which has a near 30% stake in Debenhams - will swoop.
"The rationale for combining the two to create the House of Debenhams is compelling enough. As previously noted, combining the two businesses, reducing overheads and at a stroke removing a key leg of competition, seems like the only viable solution for the two ailing department stores. The fact is the market is screaming for restructuring and consolidation looks a sensible route to take given the well documented structural pressures on the sector."
At 1335 BST, the shares were down 14% to 11.01p.