Debenhams Group (AIM:DEBS), formerly known as boohoo, reported a swing to profit before tax of £28.3m for the six months to 31 August, up from a £17.9m loss in the same period last year, a £46.2m improvement that the group said was its first positive first-half pre-tax result since August 2021.
The online fashion, home and beauty platform, which trades through Debenhams, boohoo, PrettyLittleThing, MAN and Karen Millen, said reported EBITDA rose to £19.7m from a prior-year loss of £3.5m, a swing it attributed largely to an 82.4% cut in exceptional costs to £4.3m from £24.5m. Adjusted EBITDA increased 14.6% to £24m from £21m, with margin widening to 5.9% from 5.0%.
Gross merchandise value (GMV) before returns grew 1.8% to £863.8m, accelerating from 0.5% growth in the first quarter to 2.9% in the second, while GMV after returns rose 3.7% as the returns rate fell to 28.3% from 29.6%.
The Debenhams brand grew 14.1% and now accounts for around 42% of group GMV, while PrettyLittleThing, boohoo and Karen Millen all returned to growth; MAN's decline is slowing as the group prioritises profitability over volume.
Marketplace sales, where the group earns commission rather than carrying stock, reached a record 38.9% of GMV, up from 32.7% a year earlier, against a stated ambition of "well over 50%", and the mix shift helped lift gross margin by 220 basis points to 54.1%.
"The turnaround continues at pace," said chief executive Dan Finley, noting that net debt is expected to be negligible at the year-end, "significantly ahead of our original guidance provided at the start of the year."
Free cash flow turned to an inflow of £5.6m from an outflow of £22.1m, with capital expenditure down 27% to £5.5m, and net debt fell to £98.5m from £111.1m a year earlier.
The group said two post-period-end disposals will materially reduce debt further: the £90m sale of Sheffield distribution centre automation and lease assignment to Primark Stores, and the $16m (£11.9m) sale of the Nasty Gal brand to White Space Group New York, both completed in September.
Debenhams Group has also appointed GXO as its new global third-party logistics partner to migrate fulfilment from Sheffield to Burnley, saying the move will cost no more than the Sheffield operation while giving it scope to scale its Delivered by Debenhams service using GXO's network; the Burnley site, previously held for sale, will now be retained, with the negligible net debt expectation not reliant on any Burnley proceeds.
Trading in September continued to show accelerated growth, and the board reiterated full-year guidance for adjusted EBITDA of no less than £59m, representing double-digit year-on-year growth, alongside continued improvement in reported EBITDA, positive profit before tax, free cash flow generation and negligible net debt.
The group said further cost reductions are expected in the 2028 financial year, with depreciation falling to £14m from £22m, lease costs to £4m from £14m, and interest costs down by at least £10m based on its current facility, with potential for further reduction under a new financing arrangement.
Debenhams Group said it sees a medium-term opportunity to become a "£multi-billion GMV business" generating profit before tax of more than £100m and significant cash generation.