That it can afford such a scheme despite a major investment programme shows how much progress has been made at the once troubled department store retailer. Having completed nine store refits in the first half, the plan is to modernise 45 more over the next two years with 20 of those likely to be in progress in the second half. This will have some impact on sales, but management said it remained comfortable with full year forecasts.
Debenhams also secured five additional sites for new UK stores, which means the business now has a pipeline of 14 stores to be opened by 2017 and the aim of becoming a multichannel international retailer remain on track. Three new overseas franchised stores were opened in the six-month period, with 13 more in the pipeline, and international online delivery has been rolled out to 40 countries, helping drive a 35 per cent increase in internet sales.
Broker Espirito Santo expects full-year underlying pre-tax profits of £156m and EPS of 9.1p (from £158m and 9p in 2011).
|ORD PRICE:||82.5p||MARKET VALUE:||£1.06bn|
|TOUCH:||82-83p||12-MONTH HIGH:||84p||LOW: 50p|
|DIVIDEND YIELD:||3.6%||PE RATIO:||9|
|NET ASSET VALUE:||56p*||NET DEBT:||43%|
|Half-year to 3 Mar||Turnover (£bn)||Pre-tax profit (£m)||Earnings per share (p)||Dividend per share (p)|
Ex-div: 6 Jun
Payment: 6 Jul
*Includes intangible assets of £862m, or 67p a share
Debenhams is now financially stable, and its investment programme will deliver decent long-term growth. Alongside decent cash returns, a modest forecast PE ratio of 9 makes the shares a buy.
Last IC view: Good value, 67p, 24 October 2011