Argos to demerge from GUS
GUS offset a 9% fall in annual profits today by revealing the separation of its retail business Argos from credit-checking arm Experian would take place in October.
The group expects to raise about £800m (€1.2bn) through the issue of shares in Experian following the demerger, which will see Experian and the Argos Retail Group (ARG) separately listed in London.
The announcement came as GUS posted fall in pre-tax profits from £910m (€1.33bn) to £829m (€1.22bn) for the year to March 31, following the demerger of luxury goods brand Burberry last year and the sale of South African retail business Lewis and Dutch home shopping firm Wehkamp.
Profits for the year were hit by a weak second half at Homebase where a price-cutting drive failed to woo customers as weakness in the home improvement market deepened.
Sales at Homebase fell slightly last year from £1.58bn (€2.32m) to £1.56bn (€2.29m) but softer margins as a result of lower prices meant profits tumbled from £113.8m (€166.9m) to £51.8m (€75.96m).
Catalogue firm Argos performed slightly better with sales up from £3.65bn (€5.35m) to £3.89bn (€5.70m) although profits fell from £320m (€469.23m) to £291m (€426.76m).
GUS blamed the “difficult UK retail environment” but said both Argos and Homebase outperformed their markets.
The fall in earnings at the struggling retail ar was cushioned by record profits at Experian – up 29% to £416.6m (€611m) on the back of a 27% hike in sales.
Much of Experian’s business is generated in the United States and following the demerger Experian shares will be listed on the London Stock Exchange but report in US dollars.
Nottingham-based Experian, which is best known for its credit checking service, provides the software and systems to run all aspects of card and loan processing for a large number of providers in the UK.
GUS chief executive John Peace said: “Experian generated record profits in 2006 reflecting the strength of its portfolio by product, by region and by market.
“ARG continued to outperform it markets while investing in key initiatives.
“Although we remain cautious about the UK retail market in the short term, we are confident that both ARG and Experian have clear strategies for growth in the medium and longer term.”
