There’s been plenty of writing down of retail assets over the past year or two, but precious little writing up.
So it was encouraging to see just that last week – perhaps indicating that things really are looking better for the stores sector.
The good news was buried in SVG Capital’s interim results. SVG is one of the biggest participants in private equity giant Permira’s funds and, of course, Permira has prominent retail interests. Although the valuation of SVG’s portfolio was down 5% in local currency as foreign exchange swings had an impact, there were some exceptions.
One of those exceptions was fast-fashion group New Look. SVG described the retailer as “the most notable” of a small number of write-ups.
SVG’s stake in New Look was written up by £8.7m to £20.4m “on the back of an increase in both earnings and public company comparable earning multiples used in the valuation”. Assuming similar increases in others’ stakes and the value of New Look has risen pretty impressively.
The rise prompts a couple of thoughts. The first is that many retailers adapted quickly and well to the downturn. New Look’s earnings improvement shows
it was one.
The second point is that rising valuations, assuming retail holds its own in what looks likely to be a turbulent 2010, bring closer the ability of private equity groups to exit and a new round of market activity as the best of the private groups float.
It may not be that soon, though. SVG reported that the next six to 12 months are likely to “remain fairly quiet in terms of private equity deal activity”. Similarly, “exit windows are likely to remain limited”.
But Dollar General’s proposed IPO in the US shows that the wheels are beginning to grind into motion. Perhaps in a few months’ time the chances of retailers such as New Look or Peacocks returning to market won’t look as far-fetched as they did not so long ago.
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