Debenhams Group Shares Tumble Over Equity Fundraise Announcement

Shares in Boohoo Group (AIM: DEBS), operating under the Debenhams Group banner, experienced a sharp decline of over 8% today following the company's announcement of a planned equity fundraise of approximately £35 million.

The online platform confirmed the speculation in a statement released this morning, outlining its strategy to bolster liquidity and optimize its capital structure.

The company aims to reduce its net debt to Adjusted EBITDA ratio to below 2x by FY27 through the Planned Fundraise. Concurrent discussions are underway with its lending syndicate to secure enhanced financial flexibility, contingent upon the successful completion of the equity raise.

Key insiders, including Directors Dan Finley, Mahmud Kamani, and Iain McDonald, intend to participate in the Planned Fundraise at an issue price of 20 pence per Ordinary Share. The company plans to engage with institutional shareholders in the coming days before formally launching the initiative.

Despite the market’s initial negative reaction, the Board maintains its confidence in achieving £50 million in Adjusted EBITDA for the current financial year ending February 28, 2026 (FY26), aligning with previously upgraded guidance issued in its January 28, 2026, trading update. Furthermore, the company anticipates double-digit Adjusted EBITDA growth in FY27. Q4 has demonstrated material improvements in GMV trend, alongside continued cost reductions as the business is simplified.

The turnaround plan is progressing as expected, with the cost-out strategy delivering a fixed cost exit rate of £130 million, reduced from £175 million for FY26, and remains on track to meet the £100 million target. Management is also exploring strategic IP licensing, supply chain partnerships, other capital financing options, and non-core asset disposals to further deleverage and manage working capital.

The company believes the Planned Fundraise, if implemented, will provide the most economic financing solution. In addition to anticipated trading improvements resulting from the turnaround plan, the Board has multiple strategies to further reduce the company's leverage.

The Planned Fundraise is expected to accelerate the Group's transition to an asset-light model, which remains at the core of the turnaround plan, and enable it to capitalize on the increased momentum in the turnaround plan that recent trading has generated and allow the Group to maximize value from its other deleveraging options.

Further financial guidance indicates anticipated reductions in lease costs, from £17 million in FY26 (including costs of vacant leased properties) to approximately £13 million in FY27. The exit of the vacant US property lease is projected to further reduce lease costs to around £6 million, primarily related to the Manchester head office, the automated warehouse in Sheffield, and a small London footprint. Capex costs are also expected to decrease from £16 million in FY26 to approximately £8 million in FY27. Interest costs are expected to fall in FY27 from c.£20 million in FY26 as the business deleverages.

FY27 working capital is expected to be marginally cash flow positive compared with FY26 and the Board is anticipating further reductions in overall stock levels as a percentage of revenue. Exceptional items are also anticipated to be significantly lower in FY26 and FY27.

The Board expects depreciation in FY27 to fall from c. £51 million in the current year to c. £40 million and then to c. £37 million when Burnley is sold creating a longer-term imbalance between reported Group profit and its underlying cashflow. Due to the imbalance between capex and depreciation, the Board will increasingly focus on free cash flow as a financial metric as to the performance of the business which the Board expects to materially improve in the following year.

The Directors remain confident in the outlook for FY26 and FY27 as a result of the simplification of the Group's business, the Planned Fundraise, the continued focus on improving and growing the asset-lite marketplace model, and the resulting impact of significantly improving the Group's cash generation.