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Debenhams – when is a downgrade not a downgrade? When PR spinners Brunswick do Satan’s work

By Tom Winnifrith | Tuesday 11 September 2018

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

After a share price slump yesterday on media speculation of widespread store closures and other nasties, Debenhams (DEB) has had to put out a trading statement and its use of language shows evil PR spinners Brunswick earning their fat fees as they do Satan’s work, dressing up a profits warning as nothing of the sort.

So we are told:

Debenhams will issue preliminary results (for the year to Sept 3)  on 25 October 2018. Subject to audit, we expect to report pre-exceptional pre-tax profit for FY2018 of around GBP33m, within the current market range of GBP31m to GBP36.5m(1) , and EBITDA of around GBP157m. Consistent with our focus on managing cost and cash generation, we anticipate year end net debt will be approximately GBP320m, in line with guidance.


 Now you note that the debt figure is compared to guidance (that being an RNS dated 19 June whereas the PTP is compared not to guidance ( that being the June trading statement) but to a range of analysts forecasts. Why is that? Well that is because the “guidance” issued on June 19 was much higher, Debenhams stating that it had:

reassessed our expectations for the balance of the year and now expect pre-tax profit for FY2018 to be in the range of £35m-£40m, with EBITDA in the range £160-£165m. This compares with current market PBT consensus of £50.3m

So in other words this is an official profits warning – guidance has been reduced again.  Mysteriously, although there have been no RNS statements ( which is how price sensitive information is meant to be disclosed to all and sundry) analysts following Debenhams seem already to have moved their numbers down dramatically so that almost all were already well below the previous guidance from just 12 weeks ago.  I wonder how that happened.

The net result is that Debenhams is able to say that a profit of £33 million is  bang on consensus forecasts.

Since it is inconceivable that anyone from Debenhams or Brunswick nudged analysts to move their forecasts down without an RNS one just must mark this up as an example of a raft of happy coincidences meeting a herd mentality. And thus Brunswick can spin the trading statement as meeting consensus when in fact it is a material downgrade of official guidance.

The City is a transparent place and a level playing field for all is it not?

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