Debenhams, a well-known retail group, has announced plans for a £35 million equity fundraise to support its turnaround plan. The group’s board believes that this fundraise will provide additional liquidity and result in the optimal capital structure for the company. The fundraise is expected to reduce Debenhams’ net debt to adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) ratio to less than 2x within the financial year ending in 2027.
Currently, Debenhams’ board is in advanced discussions with the group’s lending syndicate to improve covenant terms and increase financial flexibility for ongoing turnaround and growth initiatives. These discussions aim to secure revised loan terms contingent on the successful completion of the planned fundraise. Directors Dan Finley, Mahmud Kamani, and Iain McDonald have all expressed their intention to participate in the fundraising by subscribing at an issue price of 20 pence per ordinary share.
The company plans to consult with institutional shareholders in the coming days before formally launching the fundraising process. Debenhams’ board remains confident in achieving £50 million in adjusted EBITDA for the financial year ending in February 2026, with expectations for double-digit growth in the following year.
The group has reported positive trends in gross merchandise value during the fourth quarter and continues to make progress in reducing operational costs. Cost reduction measures have resulted in a fixed cost exit rate of £130 million for the financial year 2026, down from £175 million.
All brands under the Debenhams group are trading profitably on an adjusted EBITDA basis, with PLT no longer classified as an asset held for sale. The company is exploring strategies for deleveraging and working capital management, including IP licensing, supply chain partnerships, alternative capital financing options, and disposal of non-core assets.
The board believes that implementing the planned fundraise will lead to an optimal capital structure and the most economic financing for the company. Additional liquidity from the fundraising and amended loan terms will support the transition to a more asset-light business model.
Debenhams projects a decline in cash lease costs from £17 million in the financial year 2026 to approximately £13 million in 2027, with further reductions expected after exiting a vacant US property lease. Capital expenditure is forecasted to decrease from around £16 million this year to £8 million next year.
Depreciation is expected to fall from about £51 million currently to around £37 million following the sale of Burnley. Interest costs are anticipated to decrease as leverage reduces, and working capital is expected to become marginally cash flow positive by 2027. The board also forecasts a significant reduction in exceptional items over the next two years.
In a statement to the London Stock Exchange, Debenhams expressed confidence in the outlook for the financial years 2026 and 2027. The company had previously reported a return to profitability across all brands during the first half of 2026, with improvements in adjusted EBITDA and reductions in statutory losses and net debt.
The information presented in this article has been sourced from Just Style, a GlobalData-owned brand. It is important to note that this content is for general informational purposes only and should not be relied upon as professional advice. It is recommended to seek specialist advice before making any decisions based on the information provided.
