Few firms hit by pension deficits

The problems posed for publicly-quoted Irish companies by the pension fund deficits caused by falling stock markets are significantly less than in Britain and the US, according to a leading stockbroker.

Goodbody Stockbrokers estimates the net pension fund deficits of the companies on the ISEQ index at €1 billion or 2 per cent of their market capitalisation.

This compares with a forecast shortfall of 7 to 10 per cent in Britain and the US.

It found that the range of deficits of the various Irish public companies is wide as a percentage of their market capitalisation but the vast majority of firms fall between 0 and 6 per cent.

Goodbody analyst Mr Liam Igoe says this "is scarcely large enough to be an issue of concern and is most likely factored into share prices already".

However, Goodbody found that a number of companies stood out as having particularly high deficits.

These companies include Waterford Wedgwood and Glanbia, both of which were also identified in a report on the subject by Merrion Stockbrokers last year as having particularly sizeable deficits.

According to Goodbody, Waterford Wedgwood's pension fund deficit as a percentage of its share price stands at 28 per cent while Glanbia's is 19 per cent and Viridian's is also high at 18 per cent.

However, Mr Igoe notes that much of the concern about the deficits may already be factored into the share price of these companies.

By contrast, a number of Irish firms, particularly the ones to have arrived on the scene in recent years, face no pension fund deficit issue at all because they offer only defined contribution plans.

These include Northern Irish pharmaceutical group Galen, bookmaker Paddy Power, technology firms Riverdeep and Skillsoft and clinical trials group Icon.

Ryanair, Elan and Anglo Irish Bank are among the other firms on the ISEQ with a market capitalisation of more than €200 million for which pension fund deficits are not an issue.

The two main banks, AIB and Bank of Ireland, fall into the 0 to 6 per cent range with the former facing a deficit of 4 per cent of its share price while the latter's deficit is estimated at just 1 per cent.

However, Goodbody also noted that these deficits are very much "a long-term issue, of 20 years or more, requiring a long-term solution, the simplest of which would of course be a partial recovery in equity markets."