View from City Road: GUS solid as an ice-block

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The Independent Online
GONE are the days when Great Universal Stores offered a bottle of bubbly to the first investment analyst to phone on the day of its annual results. These days analysts call the secretive retail company in vain, getting neither champagne, nor much information, nor in some cases their calls returned. Gussie's relationship with the City is frigid. In February, a meeting with institutions at its adviser SG Warburg descended into acrimonious heckling from investors fed up with the stonewalling.

Still, the stock market liked what it saw yesterday, marking the widely traded non- voting 'A' shares up 43p to pounds 14.48. Pre-tax profits of pounds 459.2m for the year to 31 March were a little above expectations. A final dividend of 27 1/4p makes a total of 40p, up 6.7 per cent. And unaudited trading profits for the first two months of the new financial year are 'slightly ahead' of last time. Dull but reliable GUS looks set for its 46th year of unblemished earnings growth.

During the year the home shopping division recouped some lost market share, lifting trading profits from pounds 185m to pounds 195.5m. The Burberrys and Scotch House shops recovered well after the Gulf war dented the first half. Their contribution rose from pounds 29.1m to pounds 32.3m. However, profits from the finance and business information division fell from pounds 140.8m to pounds 139.3m.

Higher rents from some of GUS's investment portfolio of 1,200 high street shops and offices lifted the property contribution from pounds 59.1m to pounds 62.2m. But lower values wiped another 2 per cent from the value of the portfolio, after a 15 per cent devaluation last time. The balance sheet is rock solid: shareholders funds are pounds 3.04bn, borrowings are nil and the cash pile has grown from pounds 474m to pounds 590m. (GUS would not have suffered much if the Bundesbank had put a rocket under British interest rates yesterday.) Pre-tax profits this year of pounds 465-pounds 470m put GUS on a multiple of less than 12, still one of the lowest-rated companies in the stores sector. Its preparedness to buy its own shares helps put a floor on the price. But until it makes friendlier overtures to the City, which wants to see the 'A' shares enfranchised, it is unlikely to be re-rated. A bonus issue to shrink the unwieldy, off-putting share price would be a welcome start. Hold.