Debenhams has buying plans as profits soar

Department store group Debenhams yesterday unveiled a 21 per cent surge in full-year profits and outlined plans to reinstate its shareholder dividend in the spring.

Chief executive Rob Templeman said the restoration of the dividend payout in 2011 did not mean acquisitions were off the table.

The retailer, which trades from 167 stores in Britain, Ireland and Denmark, as well as 60 franchised outlets in 23 countries, posted a profit before tax and one-off items of 151 million for the year to 28 August. The figure was in line with company guidance, and up from 125.2m in 2008-09.

There was a 10.9 per cent increase in statutory revenues to 2.1 billion.

Last year, the group purchased Danish department stores firm Magasin du Nord for 12.3m and Templeman has said he is keen to do more deals in western Europe, with further purchases in other Nordic areas most likely.

Yesterday, he said: "Because we pay a dividend doesn't rule out (further acquisitions]. We still would have firepower if we wanted to look at other things. The free cash flow is incredibly strong."

Templeman said some shareholders were keen on a dividend payout while others wanted the company to focus on acquisitions.

Debenhams, which returned to the stock market in 2006 after two-and-a-half years in private equity hands, has seen its shares increase by more than 25 per cent over the last three months, outperforming an 8 per cent rise in the general retailers index.

Seymour Pierce analyst Kate Calvert said: "We believe the business should deliver double-digit earnings growth with a further bolt-on acquisition a possibility."

Templeman said although he remained concerned about the general retail environment in the wake of the coalition government's spending review, he was encouraged by the start to the group's new financial year with both underlying sales and gross margin positive.

Debenhams has stripped back concession space in recent months to focus on brands including designer collections from Henry Holland and Ben de Lisi.

The move cost the retailer around 1.5 per cent in like-for-like sales, resulting in flat same-store sales for the full year.

It said its product strategy had led to an increase in market share in clothing, footwear and accessories by 0.2 per cent, with the strongest performance in menswear and childrenswear.

As part of its plan to put margins ahead of sales, set out 18 months ago, the group has also completed a series of store refits and openings, as well as developing its website.

It opened six stores in the financial year, and completed refits in Glasgow, Manchester and Swindon. The firm is currently in the process of refitting five stores, with a further five scheduled for next year.

Yesterday's results also highlighted an 88.4 per cent leap in sales on website Debenhams Direct to 103.8m.