Debenhams Group has confirmed plans for an approximately £35 million equity raise after being forced to respond to market speculation about a possible funding round.
The AIM-listed online fashion platform, formerly known as Boohoo Group, said the proceeds would bolster liquidity and reshape its balance sheet, with the board targeting a net debt-to-adjusted EBITDA ratio of around 2x for the financial year ending February 2027 and below 1x by year-end.
Directors Dan Finley, Mahmud Kamani, and Iain McDonald intend to participate at an issue price of 20p per share, and the company will hit up institutional shareholders in the coming days before formally launching the raise.
Announcing a funding round before it gets underway in earnest isn’t ideal, and news of the round inevitably hit shares on Tuesday. The share price fell by around 10% to trade just above the 20p price proposed for the funding round.
Trading holds up
The funding round comes against a backdrop of improving operational performance and a turnaround plan the company says is ‘going apace’. Whether this will be enough to boost shares post-funding round remains to be seen.
Debenhams used this morning’s announcement to reiterate its guidance of £50 million adjusted EBITDA for the current financial year to February 2026, in line with upgraded forecasts issued in late January.
It expects double-digit EBITDA growth the following year.
The group’s cost-cutting programme has been aggressive. Fixed costs have been brought down to an exit rate of £130 million, from £175 million, with a £100 million target still in sight. All brands are now profitable on an EBITDA basis.
Investors may also be encouraged by the improvement in cash dynamics over FY27. Capital expenditure is set to halve from roughly £16 million to £8 million. Lease costs should fall from £17 million to around £13 million, dropping further to just £6 million once a vacant US property is exited.
There are savings across the board, but investors will need to see signs of stabilisation in the top line to get truly excited about the future.