GUS ponders restructuring with sale of Experian

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The Independent Online

Retail group GUS, which controls Argos and the Burberry luxury goods brand, hinted it may spin off its Experian financial information division yesterday as it unveiled plans to seek a partial stock market flotation of its South African retail business.

The moves represent a continuation of the restructuring of the GUS conglomerate under chief executive John Peace. On Tuesday the group sold its home shopping catalogue division to Littlewoods for £590m. This followed December's £900m acquisition of the Homebase DIY chain and the partial flotation of the Burberry luxury goods brand in July.

Sir Victor Blank, GUS's chairman, said: "Our priority since 2000 has been to focus on fewer businesses which operate in growth markets."

John Peace said he had an "open mind" on the shape GUS would take. Of Experian, which would be valued at around £3.5bn, he said the business was "not fully understood" by the investment community. "We have to judge, over time, whether it makes sense to get the value from Experian by an IPO or other means," he said. "But one thing we learned with Burberry is that it can be very distracting for the business."

Analysts welcomed the possibility of a demerger or float of Experian, which derives two thirds of its profits from North America. Nick Bubb at Evolution Beeson Gregory said: "Experian doesn't fit, so in a year's time it will be demerged. And thank God for that."

However, another analyst commented: "They are quite clear about looking at ways of crystallising value but Experian does still have some logic within the group due to the credit element within Homebase and Argos."

Mr Peace said Experian would remain part of GUS in the short term. "We have no current plans to float off Experian," he said.

The South African retail business will be floated on the Johannesburg stock exchange in 2004. GUS, which will float around half the equity, said it would be worth £150m-£250m.

The business includes 400 stores operating under the Lewis furniture and furnishings brand and 45 Best Electric outlets. The stores were bought in 1946 by former GUS chairman Isaac Wolfson. The division made operating profits of £31.8m on sales of £114m last year with much of the proceeds coming from the credit terms offered to customers.

David Tyler, GUS's finance director said the company was likely to sell all the equity in the business over the longer term and Nick Hawkins at Merrill Lynch said: "It may be small in a group context, but further disposals will be welcomed by investors, we believe."

The comments came as GUS reported a 16 per cent rise in underlying profits to £642m for the year, excluding the £139m profit from the sale of 22.5 per cent of Burberry and a £229m charge on the sale of the home shopping business.

The Argos catalogue shopping business was again the star performer with profits jumping to £238m from £204m the year before. Like for like sales rose by 7 per cent.

Experian, which specialises in credit checking and other financial database information, saw profits rise to £256m from £224m the previous year.

Mr Peace also said GUS had no plans to reduce its holding in Burberry which reported strong results last week.

Terry Duddy, the head of the Argos retail group said Homebase had traded without hiccups during the crucial Easter period and that no problems had surfaced since the deal. He said retail disciplines would be improved and around 35-40 more mezzanine floors added this year costing £35m. A trial of smaller stores will be expanded and direct sourcing of goods increased from the current 8 per cent of sales to a target of 30 per cent which will improve margins, enabling the company to lower some prices.

GUS shares closed 11p higher at 639p.