Debenhams plc's profits down 16 per cent

Debenhams Plc,Britain's second-biggest department store chain, posted a 16 per cent drop in annual profit yesterday, in line with expectations, and halved its dividend amid worsening trading conditions.

The group, which returned to the stock market laden with debt in 2006 after two-and-a-half years in private equity hands, said it made profit before tax and one-off items of £110.1 million in the year ended August 30. Forecasts ranged from £109 million to £110 million in a company poll of analysts.

Debenhams, which runs 145 stores across the UK and Ireland, proposed a final dividend of 0.5 pence a share, giving a total for the year of three pence, down from 6.3 pence the year before.

Like-for-like sales fell 0.9 per cent and were down a further 4.2 per cent in the first six weeks of the new financial year, although the group said it was gaining market share.

It also announced a series of measures aimed at accelerating the repayment of its debt, which stood at £994 million at August 30. These include a target for £10 to £15 million of cost savings and the reduction of capital spending to £90 million this financial year from £129.1 million last year. Icelandic investor Baugur has a stake of about 13 per cent in Debenhams, while Milestone Resources, an investment group linked to Dubai-based retailer Landmark, has 10 per cent.