Debenhams shares plunge after £35m capital raise confirmed
Debenhams shares plunged ten per cent in early deals after the struggling fashion group confirmed plans to launch a £35m equity raising round.
The group’s board said the fundraise will allow it to complete its resurgence but the plans did little to calm investors as its share price tumbled on the Tuesday open.
Debenhams Group, which recently rebranded from Boohoo Group and owns other brands including PrettyLittleThing and Karen Millen, announced the plans on Tuesday morning to counter “speculation” around the company’s health.
The group had been considering dropping fashion brand Pretty Little Thing but decided to retain the label last month, citing a recovery in sales which followed an overhaul of its image last year.
How will Debenhams fundraise?
The group is preparing for an equity fundraise of £35m, which it says will deliver more liquidity and a more secure capital structure.
Dan Coatsworth, head of markets at AJ Bell, said the new shares will be issued at an 11 per cent discount on Monday’s close price.
Key directors, including Mahmud Kamani, Dan Finley and Iain McDonald, are planning to take part in the fundraise, each at a price of 20p per share.
Debenhams’ board is also attempting to secure more financial flexibility from its lending group, pending the completion of the fundraise.
Coatsworth said: “Getting debt under control is a gamechanger for attracting a wider pool of investors and convincing the market that the company has a solid future. The company is certainly making the right noises regarding its comeback, […] but there is still a lot of work to be done.
“Debenhams needs to keep cutting costs and find a way to grow sales across the business without resorting to massive discounting.”
What’s next for Debenhams?
Debenhams’ capital raise is the group’s latest attempt to deliver a turnaround in its fortunes, as it continues plans to drive growth and cut debt.
The group’s board said it is confident it will deliver £50m adjusted earnings in the current financial year.
The group is removing “significant cost” by simplifying the business, the board said.
Debenhams will hope to move on from recent uncertainty around the business’ health, including a tussle with Sports Direct founder Mike Ashley as he sought to gain a board seat.
But shares in Debenhams Group, which trades as Boohoo, were down following the equity raise announcement on Tuesday morning.
Shares in the group opened at 21.00 on Tuesday, down 6.7 per cent from Monday’s close, before falling further to mark a ten per cent drop.