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Jun 2, 2010
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New Look profit up, no plans yet to revive IPO

By
Reuters
Published
Jun 2, 2010

LONDON (Reuters) - British budget fashion retailer New Look has no plans to relaunch its stock market flotation in the near future amid an uncertain economic environment for consumers, it said on Wednesday 2 June.

New Look
Photo: www.newlook.com

However the group, which in February postponed a planned stock market return due to volatile financial markets, said it was confident of gaining market share as cash-strapped shoppers snap up its fast-changing, cut-priced fashions from wedge wellies to Grecian tops.

Underlying operating profit rose 18 percent to 163 million pounds ($237 million) in the year ended March 27 and New Look said it took custom from more expensive rivals like Marks & Spencer and Next to become Britain's second-biggest womenswear chain.

"We appointed banks in the run up to the postponement and those banks still sit there. But there's nobody doing any specific work for us on an IPO because we clearly don't think at this stage that the market is right," Chief Executive Carl McPhail told reporters.

Asked whether that might change later this year, McPhail said: "If there is an opportunity, then we don't rule anything in or anything out."

New Look, taken private in 2004 by private equity firms Apax

and Permira, said in February it hoped to raise around 650 million pounds in a flotation to reduce its more than 1 billion pounds of borrowings.

But investors were wary of the plan, particularly after department store chain Debenhams returned to the stock market in 2007 laden with debt and saw its shares plunge.

Analyst Matthew McEachran at brokerage Singer said New Look's results compared favorably to listed rivals, with the 18 percent rise in underlying profit outstripping increases of 1.5 percent at M&S, 4 percent at Debenhams and 9.4 percent at Next.

New Look, which runs over 1,000 stores in 13 countries, booked an exceptional cost of 10 million pounds, including fees related to the aborted flotation.

EXPANDING IN A TOUGH MARKET

Sales at stores open at least a year climbed 1.2 percent, including a 5 percent rise in Britain, boosted by demand for maxi dresses, wedge heels and leggings and mirroring strong growth at budget rivals like Primark and Matalan.

Underlying international sales, however, dropped 12 percent, hit by particularly weak trading in France and Ireland.

New Look was cautious about the consumer outlook, joining the chorus of retailers warning that steps to cut government borrowing, such as higher taxes and public spending cuts, might hit demand in the months ahead.

McPhail said he was resigned to an increase in VAT sales tax to 20 percent from 17.5 percent in Britain's June 22 emergency budget, but urged the government not to implement it until next year, saying an earlier move would be an operational nightmare.

Despite the tough economic backdrop, New Look said it would continue to open new stores. It plans to add around 200,000 square feet of selling space in Britain in the coming year and up to 150,000 abroad, including franchised stores.

Finance Director Alastair Miller said capital spending would be around 90 million pounds in the 2010-11 financial year.

Net debt fell around 30 million pounds to just over 1 billion and Miller said he expected a similar, or slightly bigger, decline this financial year. Net debt as a multiple of earnings before interest, tax, depreciation and amortization (EBITDA) had fallen to 4.1 from 4.9, he added.

(Editing by Michael Shields and David Holmes)

($1=.6883 Pound)

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