Takeover Panel
14 October 2003

2003/23

OFFERS BY

LARAGROVE LIMITED ('LARAGROVE')

AND

BARONESS RETAIL LIMITED ('BARONESS')

FOR

DEBENHAMS PLC ('DEBENHAMS')




On 4 August, Laragrove posted an offer to Debenhams' shareholders. On 29 September, Baroness posted an offer to
Debenhams' shareholders, such offer to be implemented by way of a scheme of arrangement. Neither offer has yet been
declared final and either offer may therefore be increased or otherwise revised.

In order to provide an orderly framework for resolution of the competing offers and in accordance with Rule 32.5, the
Panel Executive has ruled, following discussions with the parties, that except with the consent of the Panel
Executive:


if either Laragrove or Baroness wishes to revise or increase its offer (other than in
accordance with the following procedure) after 5.00 p.m. on Thursday 30 October then that
bidder must lodge any increased offer with the Panel Executive by 4.00 p.m. on Friday 31
October (the 'Auction Start Date'), such increased offer to be announced at approximately 5.00
p.m. that day;


if the bidder with the lower offer at 5.00 p.m. on Thursday 30 October, or if both bidders,
announce(s) an increased offer by approximately 5.00 p.m. on the Auction Start Date then an
open auction procedure shall begin and the bidder with the lower offer following such
announcement(s) shall have until 4.00 p.m. on Saturday 1 November to lodge an increased offer
with the Panel Executive, such increased offer to be announced at approximately 5.00 p.m. that
day;


if the bidder with the lower offer after the announcement(s) at approximately 5.00 p.m. on the
Auction Start Date, or if both bidders, announce(s) an increased offer on Saturday 1 November,
the bidder which then has the lower offer outstanding shall have until 4.00 p.m. on Sunday 2
November to lodge an increased offer with the Panel Executive, such increased offer to be
announced at approximately 5.00 p.m. that day. If the bidder with the lower offer after the
announcement(s) at approximately 5.00 p.m. on Saturday 1 November, or if both bidders,
announce(s) an increased offer on Sunday 2 November, the lower bidder shall have until 4.00
p.m. on Monday 3 November to lodge an increased offer with the Panel Executive, such increased
offer to be announced at approximately 5.00 p.m. that day;


if such an increased offer is announced on Monday 3 November, then the open auction procedure
shall cease to operate. Both bidders shall be invited to submit sealed bids to the Panel
Executive by 1.00 p.m. on Tuesday 4 November specifying a fixed maximum price that each bidder
is prepared to pay. Formula offers will not be permitted. An announcement by the bidder
with the highest offer will, unless otherwise agreed by the Panel Executive, be released by
5.00 p.m. that day;


if, during the open auction, the bidder with the lower offer does not lodge an offer with the
Panel Executive by 4.00 p.m. the next day or if a party is the under-bidder in the sealed bid
process (as appropriate) then that bidder will not be able to amend its offer thereafter;


a further announcement will be made regarding the offer timetable once the above process has
been completed; and


the Panel Executive reserves the discretion to amend the above procedure as appropriate.



Each of the parties has accepted this ruling.

14 October 2003

Elsewhere on the high street, department store group Debenhams (LSE: DEB.L - news) saw like-for-like (LFL) sales rise 3.7% in the final 10 weeks of its financial year, which ran to September 1st. For the full-year, LFL sales were up 1.6%. Despite the sales figures being better than expected, the company did not increase profit guidance for the year, which may account for why the shares closed little changed.


Having read the above that LFL sales ran to sept 1 and the company did not increase
profit guidance for the year end, I wonder if they are facing the same slowdown as Next has. Next reported into two weeks of September .

Hmmmm

While other high-street retail shares have floundered, department store Debenhams shares have soared by 75% over the past 12 months to 102p -- yet they're still only on a P/E of 11, which seems fairly modest. Mind you, the shares did slide from around £1 in 2009 to a low last year of 51p, so what we've seen is a recovery -- but it's a better recovery than many others have managed.

On Thursday 25 October, the company will present us with its full-year results, and according to the recent trading statement we should be seeing "strong like-for-like sales growth", with pre-tax profit ahead of last year and in line with forecasts. Debenhams is also reducing debt and buying back shares, so we should look for further details of those when we get the figures.

Full Year Results

FINANCIAL HIGHLIGHTS

· Total sales up 2.6%1

o UK segment sales up 2.6%1
o International segment sales up 2.7%1 including franchise stores up 17.2%1

· Group like-for-like sales up 2.3% including VAT, up 1.6% excluding VAT1

· Group statutory revenue up 2.5%1

· Group online sales up 39.8%1

· Gross margin percentage down 30 basis points in line with guidance1

· Group operating profit unchanged at £175.0m1

· Group profit before tax up 4.2% to £158.3m1

· Basic earnings per share up 14.0% to 9.8p1

· Net debt improved by £15.0m to £368.7m after £20.1m share buyback2

· Final dividend up 15.0% to 2.3p; full year dividend up 10.0% to 3.3p

· Share buyback to continue with up to £40m over next 12 months
152 weeks to 1 September 2012 vs. 52 weeks to 27 August 2011
21 September 2012 vs. 3 September 2011


OPERATIONAL HIGHLIGHTS

· Continued progress against the four pillars of our strategy

o 18 UK stores modernised, on track to modernise all outstanding stores
o Expansion of UK regional footprint, 2 new stores adding 170 new jobs
o Investment in brand and product ranges to enhance customer offer
o Further international expansion, entering 2 new territories and 7 new stores

· Market share gains achieved across key product categories, especially non-clothing

· Continued innovation in multi-channel: launch of Endless Aisle, free wi-fi in all stores

· Confidence in strategic delivery leads us to raise targets for online and international operations

o Medium-term target for online sales raised from £500m to £600m
o Five year target for total franchise stores increased from 130 to 150

I've taken some profit here today.

Interim Management Statement

Highlights

· Good sales momentum: 18 weeks LFL sales up 2.9%

· Highest ever December sales: five weeks to 5 January LFL sales up 5.0%

· Online sales ahead of expectations: 18 weeks up 39.0%

First Half Trading Update

The strong sales momentum reported on 8 January 2013, with Group like-for-like sales up 2.9% for the first 18 weeks of the half, initially continued at a similar level with Debenhams making further market share gains in key categories*.

In the latter part of January, however, the UK business was severely disrupted by the snow which fell across the country. Whilst Group like-for-like sales grew by c.3% for the 26 weeks, during the snow-affected period of 14-27 January UK like-for-like sales were down by c.10%.

To recover sales lost due to snow, we introduced additional promotional events in February focused on Valentine's Day, half-term and the month end. Although these events did drive some incremental sales they did not fully recover those lost in January. Further, the sales generated were mainly in lower margin clearance lines which means that gross margin for the first half will be c.20 basis points lower than last year. Therefore, gross margin for the year is now more likely to be flat than the 10 basis points increase previously guided to.

As a consequence of the action taken, terminal stock at the end of the half will be in line with the long-term average of around 3%.

The result of this short but heavy period of disruption is that we now believe profit before tax for the first half of the financial year will be around £120 million.

Outlook for second half

We enter the second half with a strong spring/summer collection and stocks at planned levels. Having undertaken a detailed review of our forecasts for the second half of the year, we believe that they are robust and that we will continue to grow sales as expected.

Full year guidance on costs, capex, dividends and the share buyback programme are unchanged.

Michael Sharp, Chief Executive of Debenhams, said:

"Whilst the impact of the snow on the outcome for the first half is disappointing, it is now behind us and sales volumes have recovered. We are confident in our spring/summer ranges and that we can grow sales in the second half. Our strategy to build a leading international, multi-channel brand remains on track and we continue to focus on the four pillars of the strategy and investing in our business for long-term, sustainable growth."

Debenhams will report its results for the 26 weeks to 2 March 2013 on 18 April 2013.

*Sources: Kantar Worldpanel Fashion 24 weeks to 20 January 2013 vs. 2012, NPD January 2013

Note: all numbers are provisional pending the full closing of accounts for the 26 weeks ended 2 March 2013.
- Ends -

Deutsche Bank Buy 83.93 82.60 120.00 100.00 Upgrades

JP Morgan Cazenove Neutral 83.93 82.60 137.00 95.00 Downgrades

Morgan Stanley Equal weight 83.93 82.60 110.00 90.00 Retains

Maybe worth a look now that the 'disruptive snow' has gone!

Half Yearly Results

Financial headlines
· Gross transaction value up 3.5%
o UK up 3.9%
o International up 1.6%
· Group like-for-like sales up 3.1%
· Group gross margin down 20bps
· Profit before tax down 5.4% at £120.3m
· Earnings per share up 2.7% to 7.6p
· Interim dividend of 1.0p per share
· Long-term share buyback programme ongoing

Operational headlines
· Further progress against the four pillars of our strategy to build a leading international, multi-channel brand, supported by disciplined investment in key areas
· Market share gains achieved in clothing and non-clothing product categories
· Strong multi-channel growth with online sales up 46%, now 12.7% of sales
· Continued investment in store modernisations delivering good returns, transformation of Oxford Street into international flagship store on plan
· First Christmas brand advertising campaign for six years achieved our highest ever levels of brand awareness
· New Designers at Debenhams announced: tailor Patrick Grant for menswear and milliner Stephen Jones for women's accessories

Mind the gap.

Still looking to fill that gap.

Interim Management Statement

Highlights

· Robust performance in challenging market conditions: GTV up 1%, LFL flat
· Continued market share gains in clothing, beauty and home
· Online sales grow by 40% in H2 to date
· Transformation of Oxford Street into international flagship store on schedule, creating 430 new jobs

JP Morgan Cazenove Overweight 0.00 95.00 118.00 Upgrades

Citigroup Neutral 0.00 95.00 95.00 Retains

Looking quite bullish.

Trading Statement

Highlights

· Growth in gross transaction value and like-for-like sales over the year including good progress in the last 10 weeks
· Ongoing gains in market share in clothing and non-clothing categories, including womenswear and beauty
· Online sales up 46.2% with 50bps increase in online market share
· Oxford Street flagship transformation on time and on budget
· Modernised stores performing well, 12 completed during the year
· Good international performance in the second half, especially from Magasin du Nord
· Profit before tax anticipated to be in line with current market expectations

Deutsche Bank Buy 105.00 105.00 100.00 115.00 Reiterates

Citigroup Neutral 105.00 105.00 95.00 95.00 Retains

JP Morgan Cazenove Overweight 105.00 105.00 - - Reiterates

Majedie Asset Management Limited < 5%

Final Results

Financial headlines
· Gross transaction value up 2.5%: UK up 2.3%, International up 3.7%
· Group like-for-like sales up 2.0%
· Group gross margin flat
· Profit before tax down 2.7% at £154.0 million
· Earnings per share up 4.1% to 10.2p
· Final dividend of 2.4p per share; full year dividend of 3.4p per share
· Share buyback continued in line with guidance: £40.2 million in last 12 months to date

Operational headlines
· Further progress made against the four pillars of our strategy to build a leading international, multi-channel brand, supported by prudent investment in key areas
· Market share gains achieved in clothing and non-clothing product categories both in stores and online
· Multi-channel continues to grow well ahead of the market with online sales up 46.2%, representing 13.2% of Group sales
· 12 store modernisations completed, transformation of Oxford Street into our international flagship store on track for December 2013 launch
· New Designers at Debenhams: Patrick Grant, Stephen Jones, Todd Lynn
· Good performance from Magasin du Nord

Societe Generale Buy 100.05 120.00 116.00 Reiterates

Barclays Capital Equal weight 100.05 100.00 97.00 Reiterates

JP Morgan Cazenove Overweight 100.05 118.00 118.00 Reiterates

Citigroup Neutral 100.05 95.00 105.00 Retains