Debenhams’ pre-tax profits up 9.6%

DEBENHAMS, the British department stores group currently the subject of a £1.66 billion takeover bid, has reported a pre-tax profits rise of 9.6%.

The group has one Dublin store and before the bid planned to open a second in Cork in spring, 2005.

When the bid costs are included, the profits are lower than the previous year's.

The results are regarded as impressive given the distractions of the takeover bid for the group and the very hot weather during the summer months. The share price rose in London following publication of the figures.

In the six weeks to October 11, like-for-like sales which exclude the effect of new stores were up 2.7% and profit margins rose, outperforming rivals Marks and Spencer and Next.

Debenhams is recommending a £1.66 billion offer from Baroness Retail led by equity groups CVC Capital and Texas Pacific. Rival Laragrove, led by equity firm Permira, has until around the end of the month to respond after kicking off the contest in May.

Back then, the independent directors came out and supported the Laragrove bid, but at the time that discussions were ongoing with CVC Capital Texas Pacific. Texas Pacific is owned by Ryanair chairman David Bonderman and at this stage it looks as if bid is going his way.

The second half of the year has built on the good showing in the first half when the group earned pre-tax profits of £96.5 million for its first half to March 1, a rise of 5% on the same period a year earlier.

Like-for-like sales then, which also exclude the effect of new stores, were 3.5% higher.

While Debenhams is planning to open its second store in the Republic in Cork in the spring of 2005 to complement its Dublin's Jervis Street Centre, it is not yet known if the takeover will have any impact on the group's Irish strategy. Back in July, private equity group Permira was first to enter the bidding process for Debenhams.

At the time it offered £1.54 billion for the group after the British retailer's directors came out in support of the offer.

Bid vehicle Laragrove, backed by Permira, said it was making a recommended cash offer for Debenhams, valuing the business at 425p per share.

In a joint statement with Laragrove, the independent directors of Debenhams recommended that shareholders accept the offer.

Recent developments have changed all that.

In London the shares rose 0.16% or 0.75p to 472.5p which is well ahead of the initial bid price of 425p.

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