Retail worries cast cloud over Monsoon's float

The pounds 350m flotation of Monsoon, the women's clothing retailer, could be heading for stormy weather as investors fight shy of a new issue in the unsettled retail sector. Nigel Cope, City Correspondent, asks whether it will be second time lucky for founder Peter Simon.

Fund managers have reacted coolly to the float's prospects, saying the company will struggle to secure the premium pricing its advisers are aiming for. They say Monsoon's abandonment of its float 18 months ago will count against it, as will the recent profits warning from Oasis Stores and downbeat messages about Christmas trading from other retailers. Investors will be looking for further clues from Burton's Christmas trading statement today.

Monsoon will not start its presentations to institutions until the pathfinder prospectus is published later this month. But fund managers contacted yesterday expressed concerns.

One said: "There have been quite a number of disagreeable floats and there could be a buyer's strike developing. Because the float was pulled before you tend to be naturally suspicious."

Another fund manager said Monsoon's prospects might be dented by the disastrous performance at Limelight, the kitchens and bedrooms group, where the company's founder sold a significant stake in the business. Monsoon is 96 per cent owned by its founder Peter Simon. He will net pounds 86m from the float.

One fund manager commented. "We will be looking at it very closely. I think it will be quite a difficult one to get away." Another said: "It will have a problems because of the Oasis warning but it depends on the price."

Few have any qualms about the company's trading record. But they question whether its high margins are sustainable and whether it is coming to the market at the wrong time in the cycle when discretionary spending is starting to be affected by higher interest rates.

A key factor in the pricing will be Monsoon's failed attempt to come to the market in summer 1996. The float was abandoned due to concerns over the ultimate beneficiaries of a Maltese-registered trust which owned two thirds of the business. The trust has since been disbanded.

Monsoon's brokers this time, NatWest Securities, say they hope to secure a valuation of pounds 350m, which would place the company on a historic multiple of around 20-times earnings. This is a premium to the market while fund managers and some analysts feel it should be priced at a discount.

Monsoon's trading in the run-up to Christmas is thought to have been solid while the winter sale is said to have started well.