Market report: Debenhams loses fans as pension worries emerge

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Concerns that a black hole has emerged in the pension scheme at Debenhams sent the embattled department store group’s shareholders heading for the exit today.

Morgan Stanley, one of the few investment banks backing the shares to rise, urged clients to stop piling in today as it cut its rating to equalweight.

Analyst Geoff Ruddell suggested that Debenhams’ annual results next week will be “routine from an operating perspective”.

However, he was more concerned by its growing pension problem, despite having reported a £26 million pension surplus a year ago.

“Recent movements in bond yields lead us to believe that the scheme’s liabilities may have increased by more than £300 million over the past 12 months and that, as a result, the company may disclose a net pension deficit of more than £200 million,” Ruddell said.

The bearish comments and downgrade caused the shares to tumble 2p, or 3.6%, to 53.2p. They have now fallen by 36% in 12 months.

The market started the week on the back foot, with the FTSE 100 falling 42.79 points to 6970.76.

The slide came as Federal Reserve chairman Janet Yellen said that repairing the US economy after the financial crisis may require more aggressive action.

Her hint of letting inflation run beyond the US central bank’s 2% target lifted the dollar, but damped demand for equities.

Royal Bank of Scotland, off 2.4p at 170.4p, missed out on a rise from rival state-backed lender Lloyds Banking Group, which gained 0.22p to 52.65p, after more IT problems on Friday which prevented customers from using their debit cards.

Equipment hire firm Ashtead continued to slide, off another 17p to 1298p. Investors were buoyed by a trading update on Thursday, but have since decided to offload the shares.

The sell-off of Domino’s Pizza continued as the pizza delivery firm, which has lost 14% since last week’s trading statement, fell 10.9p further to 319.5p.

On AIM, Utilitywise, the utility management consultancy, improved 5.53p to 131.4p as it was chosen by Asda to help cut the cost of running equipment such as refrigerators.

EPE Special Opportunities, an investment firm managed by private equity firm EPIC, surged 33p, or 17%, to 224p after it sold half its stake in LED lighting business Luceco, which floated with a £209 million valuation today.

The listing saw EPIC pocket around £50 million. It invested £4.3 million in 2005 for a near-50% stake, meaning it has made 25 times its money in 11 years.

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October 17, 2016 |
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