The Investment column: GUS may be back in fashion
Friday 18 June 1999
GUS was silent throughout the fall, giving rumourmongers the chance to suggest that the results might contain warnings on current trading. In the event, however, the results could mark a turning point in sentiment towards GUS and bring stability to the stock and the group's valuation.
The principal reason for GUS's volatility is its status - as chairman Lord Wolfson of Sunningdale describes the group - as a conglomerate. With activities home and abroad spanning Argos, home shopping, Burberry, finance and property, there is considerable potential for bad news and worrying economic data to hit the stock.
But the diversified portfolio should not blind investors to the growth potential of the two main operations - the Experian consumer data business and the UK home shopping businesses.
The market warmed yesterday to continued progress at Experian - essentially a collection of sophisticated databases - which grew profits in each division and each region, and overall by 36 per cent to pounds 192m. Most of the growth came from the acquisition of Metromail in the US, but underlaying profits were 13 per cent up. Although Lord Wolfson admits there are few opportunities to grow Experian by acquisition, its role in driving GUS's returns is far from over. Seventy per cent of sales are in the US, and GUS now plans to expand in the rest of the world through partnerships with local players. The potential of this is considerable - establishing a rival database set would not only be very expensive, but impossible to do quickly.
The outlook for the UK retail arm is also positive. After a long silence, GUS has at last revealed its plans - accompanied by a timetable - for Argos. It is combining its catalogues into a single format and rolling out home shopping following successful trials. Argos Additions, a fashion catalogue, is to be launched in August, followed by a shopping service on digital TV.
There are still some niggles. A turnaround at the troubled Burberry is still some way off, and the South African businesses have suffered falling demand. The property portfolio doesn't really fit. In time, perhaps Lord Wolfson will sell these off, leaving a group with two strong businesses ripe for a value-enhancing demerger.
Analysts expect pre-tax profits of about pounds 540m and earnings of 40.6p this year. On sum-of-the-parts valuations, many estimate that the shares are worth about 800p; yesterday they closed up 33.5p at 654p. Lukewarm statements on current trading held back the rise, but investors should exploit the buying opportunity.
- 1 Germanwings crash: Police make 'significant discovery' at home of co-pilot Andreas Lubitz
- 3 Zayn Malik already working on solo material, just days after quitting One Direction
- 4 The West has it totally wrong on Lee Kuan Yew
- 5 #FreeTheNipple: Women in Iceland bare breasts in solidarity with trolled student
Nigel Farage brands LGBT activists 'filth' and 'scum' and accuses them of scaring away his children after they invade his local pub
Ukip supporters are 55 or older, white and socially conservative, finds British Social Attitudes Report
JK Rowling responds to fan tweeting she 'can't see' Dumbledore being gay
Russia threatens Denmark with nuclear weapons if it tries to join Nato defence shield
Jeremy Clarkson sacked live: Alan Yentob 'wouldn't rule out' ex Top Gear host's BBC return
Germanwings plane crash live: Andreas Guenter Lubitz intentionally crashed flight 9525 into the Alps in act of mass murder and suicide – latest
iJobs Money & Business
Negotiable: Recruitment Genius: To provide a prompt, friendly and efficient se...
Negotiable: Recruitment Genius: You will be the first point of contact for all...
£18000 - £24000 per annum + benefits: Ashdown Group: HR, Payroll & Benefits Of...
£35000 - £38000 per annum + benefits : Ashdown Group: A highly successful, int...