If this is its plan House of Fraser is a lost cause

The Sunday Telegraph - Money & Business - - Business - Ben Mar­low

Ev­ery now and then, jour­nal­ists ob­tain doc­u­ments that shed pre­cious light on a con­tro­ver­sial or a high-pro­file sit­u­a­tion. Such mo­ments are gold dust. It al­lows us to re­port the facts, to cut through all the spin and re­veal what is re­ally go­ing on. Last week was one of those in­stances when I re­ceived a 23-page pre­sen­ta­tion that House of Fraser had put to­gether for its in­vestors. The file was es­sen­tially a beg­ging let­ter – House of Fraser is on the brink of in­sol­vency and ap­proval is needed from its share­hold­ers and bond­hold­ers for a com­pre­hen­sive re­struc­tur­ing plan de­signed to save it from the scrap heap.

The doc­u­ment made grim read­ing. There were the usual ex­cuses from strug­gling re­tail­ers about how shop­ping habits had changed dra­mat­i­cally. It blamed Brexit, ma­jor cost pres­sures from the Na­tional Liv­ing Wage and busi­ness rates, and the need to step up in­vest­ment in its stores.

And it laid bare the chain’s pre­car­i­ous fi­nances and poor trad­ing fig­ures in black and white, mak­ing it plainly ob­vi­ous that its prospects are far worse than the com­pany has been let­ting on pub­licly. Like-for-like sales down; turnover fall­ing; an­nual prof­its half what they were; a non-ex­is­tent dig­i­tal strat­egy; and a com­pany liv­ing on reg­u­lar hand­outs from its own­ers.

Man­age­ment’s so­lu­tion is the same as ev­ery other trou­bled re­tailer right now: a com­pany vol­un­tary ar­range­ment, which con­tro­ver­sially al­lows it to ditch strug­gling stores. CVAS are the high street sur­vival tool du jour. House of Fraser wants to jet­ti­son roughly half its es­tate – a move that will trig­ger 6,000 job losses and leave scores of towns with yet an­other big empty prop­erty un­likely to be filled.

Yet re­mark­ably, be­yond the store clo­sure pro­gramme, there doesn’t seem to be much of a plan. In­stead, there is an as­sort­ment of vague and of­ten em­bar­rass­ing state­ments: “Be­come the an­ti­dote to the is­sues of the high street” and “fo­cus on be­ing a fab­u­lous re­tailer”. If this is the grand plan for sur­vival then it may as well give up now. The cur­rent crop of se­nior man­agers are clue­less in the face of se­vere tech­no­log­i­cal dis­rup­tion.

House of Fraser boss Alex Wil­liamson called it one of the chain’s most im­por­tant days. If the plan fails, House of Fraser will almost cer­tainly dis­ap­pear from the high street. A yes vote will se­cure yet an­other in­jec­tion of funds but I doubt it will be more than a stay of ex­e­cu­tion.

‘Be­yond the store clo­sure pro­gramme, there doesn’t seem to be much of a plan’

Pit­falls of sub­prime lend­ing

Now does not seem like the best time to be float­ing a sub­prime lender on the stock mar­ket. Af­ter a crackdown on pay­day loans, fol­lowed by a squeeze on doorstep lend­ing, the FCA has in­di­cated that a broader crackdown on the sub­prime mar­ket could come.

This means Amigo Loans, which pro­vides credit of up to £10,000 to those with bad credit his­to­ries pro­vided pay­ments are guar­an­teed by a friend or fam­ily mem­ber, is po­ten­tially in the fir­ing line.

Yet James Be­n­amor, the brains be­hind the firm and its ma­jor share­holder, is plan­ning to take it public in the com­ing weeks.

He owns 85pc of the com­pany, which is ex­pected to fetch a value of £500m, crys­tallis­ing a for­tune of more than £400m.

When you’re charg­ing in­ter­est rates of nearly 50pc to peo­ple who have been frozen out of the high street lend­ing mar­ket, a wind­fall of such pro­por­tions is un­likely to pass the taste test. Apart from an ap­pear­ance on Chan­nel Four’s

The Se­cret Mil­lion­aire a decade ago, 41-year-old Be­n­amor has largely man­aged to main­tain a low pro­file. Not for much longer I sus­pect.

Casualty of anti-plas­tic back­lash

It doesn’t take a ge­nius to work out that plas­tics man­u­fac­tur­ing isn’t the best line of work to be in right now. Thanks to the ground­break­ing work of BBC se­ries Blue Planet, many of the most toxic and dam­ag­ing plas­tics face ex­tinc­tion.

Still, you’ve got to feel sorry for RPC, the FTSE 250 pack­ag­ing sup­plier. Af­ter an im­pres­sive ride, its shares crashed 12pc last week over fears it would fall foul of gov­ern­ment and EU pledges to stamp out sin­gle-use plas­tic prod­ucts.

An­a­lysts have pointed out that RPC does not make any of the items cov­ered by a ban, but that hasn’t calmed in­vestor nerves. Yet City sources say big US ri­vals are fully aware of the dis­tinc­tion and have al­ready be­gun cir­cling. RPC has been a huge Bri­tish suc­cess story. Let’s hope it sur­vives an un­for­tu­nate blip.

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