New Look fears takeover

A cautious update on current trading today from New Look has sparked fears that founder Tom Singh may delay or even abandon his plans for a £700 million takeover of the group.

Singh, who founded the fashion firm 30 years ago, raised his indicative offer from 330p a share to 348p last month after the retailer's independent directors said they would not allow his private equity backers - Permira and Apax Partners - access to the books. At that level, the Singh family stake of 28% is valued at £195 million.

Reporting a 7.3% increase in first-half profits today, group chief executive Stephen Sunnucks said: "We have been encouraged by the positive response to our autumn/winter ranges, but trading conditions have been generally more difficult in the last few weeks."

He added: "Overall we are making good progress with our strategy, which remains firmly on track."

Total UK sales for the eight weeks to 22 November were up by 10%, but the like-for-like figure was down by 0.8% and gross margins also fell by 1.9%. The group said this was due largely to the planned reinstatement of the mid-season sale. The encouraging start to the autumn season continued through to early November but Sunnucks said it has been offset by weaker trading in recent weeks, reflecting the more difficult market conditions.

Profits for the 26 weeks to 27 September rose from £44.9 million to £48.2 million before tax, on sales 6.2% ahead at £334.5 million. The fall in like-for-like sales was 3.6%, following an 8.7% rise in the corresponding period of the previous year.

Margins advanced by 0.9 points and the interim dividend is raised by 9.1% to 3p a share.

New Look's executive team, led by Sunnucks, is working with Singh on the bid and due diligence is continuing. But today's cautious trading update looks set to increase speculation that a formal bid may not now be forthcoming, although any decision is likely to put off until after the all-important Christmas trading period.

Singh, who is said to be supportive of the current management's strategy, has said he plans to take a more "hands on" role at New

Look if he is successful in his bid. He is a non-executive director and consultant to the group, having switched from a full-time role at the firm two and a half years ago.

A bid would reduce the family stake in New Look, allowing them to cash in on part of their substantial investment.