Debenhams marked down despite rise in profits

Investors marked department store retailer Debenhams down after its chief executive Rob Templeman indicated that its near-term trading outlook was "broadly neutral". Its shares have fallen 1.7%, or 1.35p, to 77.05p in the wake of its earnings results for the 26 weeks to February, which saw profit before tax and exceptionals at £123.6m, up 18.6% on the same period a year earlier. Seymour Pierce upgraded its 2010/11 pre-tax profit forecasts from £135m to £145m and made similar revisions for the following year. Yet the broker is maintaining its "hold" rating and its analyst, Freddie George, remains downbeat over the company's earnings prospects: "Underlying earnings growth was pedestrian and is to remain so over the next two years. In addition, the own-label range has, in our view, been expanded far enough – consumers still want brands and the balance sheet remains highly leveraged, despite a recent capital-raising programme." George has forecast net debt at £500m at the end of August, which is still well down from the almost £1bn of debt on its balance sheet in June 2008. Although the profit was above the market's expectations of about £116m, it was helped by the removal of one-off costs, including £10.1m for restructuring the Republic of Ireland business. Sales for the period were up 12% to just under £1.2bn, although much of this was due to new stores. Sales based on the same number of stores in each period were up only 0.3%. The FTSE 100 Index is down 16 points, or 0.27%, at 5,761.9.