Debenhams to consider flotation

High street retailer Debenhams is considering the possibility of returning to the stock market with a price tag of over £3 billion as early as this spring. The company recently reported that profits doubled last year. If Debenham', which is headed by Rob Templeman, decides to go ahead, he and 200 managers, including the multi-billionaire private equity baron John Lovering, who is chairman, stand to collect around £300 million.

Floating Debenhams would yield a huge return for the private equity groups - CVC, Texas Pacific and Merrill Lynch Global private equity - that paid £1.9bn to take the company private in 2003. Industry sources say that an announcement could come after Debenhams reveals its interim figures in February, but a decision is contingent on stock market conditions at the time. Although the retail sector faces a tough trading environment, it is possible Templeman will be able to convince the City that buying shares in Debenhams is a great way to exploit a possible return of consumer confidence in late 2006, assuming that interest rates are cut.

Templeman has boosted margins and sales by squeezing suppliers and by successfully expanding the new smaller format, Desire, with plans to launch more of the stores abroad over the next two years. Debenhams has also launched its new Designers line. Some City analysts say that a float in 2006 is a racing certainty as there are doubts about whether Debenhams can continue its momentum into 2007 and beyond. The £3bn price tag will surprise some in the City, who believe that the target is too ambitious. The sales growth - coupled with an improvement in the operating margin - helped Debenhams lift pre-tax profits by 123 per cent to £238.6m, on the back of a 10 per cent rise in sales to £2.09bn.