View from City Road: Fraser investors will need more information

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The Independent Online
Brian McGowan may not have had much success with his fishing rod, but few could have expected him to return to the quoted arena only seven weeks after he resigned from Williams. The fact that he chose the non-executive chairmanship of House of Fraser for his comeback is even more surprising.

He professes himself both excited by the prospect of preparing for the float and enthusiastic about the quality of the underlying businesses. He will need both in spades. The City may be bored by the propaganda war waged so assiduously against the Fayed brothers by Tiny Rowland since the 1985 takeover but, together with the damning Department of Trade and Industry report on the affair, it has ensured that the House of Fraser name is associated more with scandal than successful retailing.

Add to that the Fayeds' reluctance to reveal anything about the businesses, and Mr McGowan will have to work hard to convince investors that their money will be well invested.

Judging by the results announced yesterday, shoppers do not care about the controversy. A 70 per cent rise in operating profits in the year to January looks impressive against rivals such as Sears. That was largely due to cost-cutting, so there must be a question mark over whether such increases will continue.

Investors will want to see a more detailed breakdown of trading information before they can be confident such figures can be trusted. They will also want to know the level of debt that will be left with the group before they can value the business. Assuming debt is about pounds 45m for gearing of 13 per cent, the valuation would end up closer to the bottom of Mr McGowan's guide range of pounds 350m to pounds 550m.

Such questions may become academic if, as the parent company's hints suggest, Mr McGowan has merely been brought in to attract a bid for the whole group. The fish may not be safe yet.