GUS sees mixed results at both divisions ahead of demerger

Stores and credit information group GUS reported mixed results from its two divisions yesterday, ahead of its planned demerger in October.

The retail division, which controls Argos and Homebase, recorded better than expected first-quarter sales at the 660-strong Argos chain, with like-for-like sales up 7%, driven by demand for flat-panel televisions ahead of the World Cup.

The performance of Argos took even the company by surprise. "We were surprised the quarter was quite as strong as it was and we gained market share," said GUS finance director David Tyler.

However, electrical goods such as televisions and set-top boxes generate only thin profit margins, and the gain made from the extra sales was "substantially offset" by lower gross margins, said the company.

Homebase, with 300 stores, continued to suffer from the severe downturn in the DIY market, and like-for-like sales in the three months to the end of June were down 5%, with paint and core DIY lines among the worst performers. However, fewer promotions had improved margins.

Mr Tyler said Homebase was testing an installation service for kitchen and bathroom buyers as householders shun DIY in favour of hiring tradesmen to get home improvements done. Rival B&Q is also rolling out these so called DFY or "do it for you" services and is also experimenting with offering decorators to paint and hang wallpaper.

GUS maintains that Homebase will perform well when the home improvement market improves, but Mr Tyler admitted yesterday: "It is difficult to see any ray of light in the DIY market at the moment."

The Experian credit information group, which offers services ranging from credit checking to email marketing, reported sales up 21% on last year's levels, at constant exchange rates. The bulk of the business is in the US, where sales were up 26% - with 17% coming from a series of recent bolt-on acquisitions. GUS said list and data sales were the weakest areas while the strongest growth came from emailing and research services.

Outside the US, Experian sales were ahead 15%, with the UK delivering "robust" growth.

Mr Tyler said: "Experian has had another really good performance. People are spending more and more time on the web buying and researching, which means more of our clients are spending more money on advertising to them."

Last week GUS, which is valued at nearly £9bn, revealed that it had received a number of potential bid approaches for the two businesses, but that it had rejected them all.

Mr Tyler refused to say whether any of the potential buyers had since come back with better offers.

"We are very clearly on a path here to give our two businesses to our shareholders ... that's our plan and that's what we expect to happen."

Details of the demerger are due within the next month. After the split, both businesses will be FTSE 100 companies.