- Boohoo owner incentivises boss as it plots turnaround strategy
The chief executive of Debenhams could be handed almost £150million under a new bonus scheme revealed by the clothing retailer on Thursday.
It comes amid an ongoing spat between top brass at Debenhams and significant shareholder Mike Ashley.
Debenhams revealed the new bonus scheme designed to incentivise bosses and other members of senior management to execute its turnaround strategy.
As part of the plans, chief executive Dan Finley could end up trousering a £148.1million maximum bonus if the company’s share value rises to nearly 26 times its current value.
Shares in Debenhams shares would need to rise from their current level of around 11.5p a share to £3 per share over a five-year period in order for the full payment to be dished out.
The business would pay out a total of £222.2million to all members of the incentive scheme if shares rose to £3, it said on Thursday.
Pay day: Chief executive Dan Finley could end up trousering a £148.1m bonus
Debenhams said the proposed scheme would not require a shareholder vote at a general meeting.
In this regard, the group flagged the action of ‘a major competitor who is a significant shareholder of Debenhams’ who it claimed had sought to ‘disrupt the Debenhams Group’s growth strategy and operations’.
This could be a reference to Mike Ashley’s Frasers Group, which owns nearly 30 per cent of the business.
Boohoo Group, the online retailer now operating as Debenhams Group, separately reported a return to profitability across all its brands in the first half of its financial year, despite a drop in sales.
Adjusted EBITDA jumped 5 per cent year-on-year to £20million in the six months to 31 August, while statutory losses from continuing operations narrowed to £3.4million from £126.7million.
Debenhams saw a 20 per cent rise in pre-returns gross merchandise value, while the youth brands which made boohoo’s name, fell 41 per cent and Karen Millen fell 31 per cent.
Revenue slumped 23 per cent to £296.9million, while gross merchandise value, which is the value of goods sold via the group’s new marketplace model, fell 19 per cent to £630.8million, or 23 per cent to £406.9million when returned items are taken into account.
Net debt fell to £111million in the six months ending 31 August, against £143million in the previous half.
Shares in the group jumped 23.88 per cent or 2.77p to 14.37p on Thursday, having fallen around 45 per cent in the last year.
Finley, said: ‘Our turnaround is gathering real pace. We are making progress, we are moving fast, and we are transforming the business.
‘We have returned all our brands to profitability and grown adjusted EBITDA. These results show that our strategy is working.’
He added: ‘We built this turnaround on three clear pillars: creating the right operating model, supercharging Debenhams, and pivoting our other brands into fashion-led marketplaces. We have simplified, we have focused, we are staying disciplined in how we execute, and we know there is more to do.’
The business expects full-year EBITDA of around £45million, with further growth in expected the following year.
Adam Vettese, a market analyst at eToro, said: ‘Debenhams latest update shows the turnaround is gaining real momentum, with losses sharply narrowing and underlying profitability finally emerging as the group slashes costs and pivots to a marketplace model.
‘Revenue remains under pressure, but the structural improvements such as lower inventory, reduced capex, and a leaner cost base are clear, and the Debenhams brand is now a standout performer, driving growth and proving the new strategy can work.’
Dan Coatsworth, head of markets at AJ Bell, said: ‘Boohoo’s patience with major investor Frasers has reached breaking point.
‘The online retailer’s implied hatred for the Sports Direct owner means it won’t seek approval from its broader shareholder base before implementing a new management incentive plan.
‘Frasers hasn’t been explicitly named in the commentary, but it’s easy to guess which shareholder it is referring to. Boohoo says that ‘a major competitor’ and “significant shareholder” continues to seek to cause disruption.
‘In essence, it implies that asking Frasers to vote on the new incentive plan would be pointless as the 29.7 per cent shareholder might reject it, no matter the contents.’
He added: ‘The tense relationship between the two sides cannot stay this way forever – one side will need to back down, otherwise all kinds of chaos could ensue.
‘Despite this drama, the market has lapped up Boohoo’s latest results, sending its share price soaring. There is clear progress with the turnaround efforts as its marketplace model is resonating with shoppers. Costs are being stripped out of the business, and it is talking up the benefits of being leaner and keener.
“’Boohoo’s comeback will be noted elsewhere in the fast-fashion industry. Management at ASOS will be crying into their cornflakes as their arch-rival gains momentum and leaves them for dust.’
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