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Last Updated: Wednesday, 25 May, 2005, 10:06 GMT 11:06 UK
GUS to demerge stake in Burberry
Burberry model
GUS is to let Burberry walk on its own
Retail and business services group GUS is to demerge its 66% stake in fashion chain Burberry later this year, as part of a wider plan to break itself up.

GUS said its share in Burberry - worth more than 1bn ($1.8bn) - would be given to its existing shareholders.

They in turn will be free to either sell or keep the Burberry shares. The announcement came as GUS revealed a modest rise in annual profits.

Bottom line pre-tax annual profits were 693m, up from 692m previously.

Break-up 'logical'

GUS, which also owns the Argos general stores group, home improvements chain Homebase, and financial services group Experian, said there was "no strategic logic" in maintaining all the subsidiary companies within the same group.

Argos delivery lorry
There are three very different businesses and there's no overwhelming strategic reason why they should be in the same holding group
Analyst Simon Proctor

A break up is expected to help create more focused companies and generate greater value for GUS shareholders, a move analysts have long called for.

Although GUS intends to remove itself from Burberry by the end of this year, it did not give a timetable or mechanism for the separation of Experian and the Argos Retail Group, which comprises of Argos and Homebase.

It said this was dependent upon the health of the UK retail market, and with GUS also saying on Wednesday that consumer spending had slowed sharply, it looks unlikely to rush into separating Argos Retail Group from Experian.

"It isn't a time to have the ARG (Argos Retail Group) management team distracted," said GUS chief executive John Peace.

The announced separations follow GUS's review of its businesses, which started in May last year.

"There are three very different businesses and there's no overwhelming strategic reason why they should be in the same holding group," said Simon Proctor at broker Charles Stanley.

Price fixing

GUS's annual profits for the year to 31 March were hit by a number of one-off costs, including 16.2m to cover a fine Argos received from the Office of Fair Trading.

Burberry bag in classic Burberry check
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Argos' fine was in connection with the fixing of prices for children's toys and games.

Excluding 207m in amortisation of goodwill, and exceptional items such as the one-off Argos fine, GUS's annual pre-tax profits came in at 910m, a 10% increase on the year before.

Total group wide annual sales were up 3%, from 7.5bn to 7.8bn.

Annual sales at the Argos stores were up 8% to 3.7bn, while those at Homebase increased by 7% to 1.6bn.

Sales at Burberry, which were released separately by the clothing retailer on Tuesday, were ahead by 10% to 715m.

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