The nine former Roches Stores shops made an operating loss of £400,000 (€575,325) in their first year under the control of Debenhams.

Operating profits in Debenhams at large fell 18.5 per cent to £194.1 million in the year to September, a period in which the former Roches business booked gross transactions of £153.4 million. This figure includes the concessionaire sales from retailers who lease shop space from the chain.

Having warned 12 months ago that Roches would not add a penny to its profits in the first year, Debenhams said yesterday that sales in the Roches outlets rose 7.1 per cent in the last fiscal year and said the Irish business was on track to improve its performance in the current year.

The group is reducing the level of concessionaire sales and reducing the differential between profit margins in the former Roches outlets and the chain at large. Concessionaire sales amounted to some 52 per cent of gross transactions last year, but that is forecast to fall to 42 per cent at the end of 2007 year and fall to 37 per cent in the fiscal year to September 2008.

Profit margins in the Roches' outlets were almost 30 per cent lower than Debenhams at large immediately after the deal, but the differential fell to less than 5 per cent early this year.

The chain took exceptional charges of £14.3 million last year for the integration of the Roches business.

Such charges comprised an accelerated depreciation charge of £6.3 million, redundancy costs of £4.6 million and £3.4 million in "other integration costs". Some of this expenditure relates to the closure of Debenhams first Irish store at the Jervis shopping centre, an outlet which will be taken over by Arnotts early in 2008.

Debenhams paid €29 million for Roches' business and more than €10 million for its stock in September last year. It also agreed to pay annual rents of almost €18 million for use of the store sites in a leaseback arrangement with the Roche family.

The former Roches business had earnings before interest tax depreciation and amortisation of £2.7 million in the period to September. The operating loss was recorded after a £3.1 million depreciation charge.

The chain's spokesman said the fiscal year was dominated by the conversion of Roches outlets to Debenhams' format, which caused some in-store disruption, and the introduction of more Debenhams' fashion lines.

"Roches is completely on track. It will make a very strong contribution going forward. As far as Debenhams is concerned, it's already exactly where we expected it to be," he said.

While gross transaction value in the chain at large rose 5.1 per cent to £2.3 billion, like-for-like sales fell 5 per cent.

Debenhams said like-for-like sales in the seven weeks to October 20th were up 2.1 per cent but said that excluded the Roches outlets.

Debenhams' shares, down 45 per cent this year, gained 0.25 of a penny to close in London at 103.75 pence.