Companies: ADS    HOF    MNR   

Having recently rejected the advances of TBH Investments, department store operator House of Fraser has revealed a steady improvement in second half sales.

In its annual post Christmas trading update HoF (HOF) – recommended at 73p in the December/January issue of Growth Company Investor – reported a 2.2 per cent increase in like-for-like sales over the 19 weeks to 24 December.

Overall sales for the 49 weeks to 4 January were up 1.4 per cent and 2.6 per cent on a like-for-like for basis, the statement continued.

Though this level of growth appears rather modest gross margins for the 49-week period were said to be 20 basis points ahead of last year leaving management 'confident of a satisfactory trading outcome for the full year'.

Broker Seymour Pierce forecasts a slight reduction in profits before tax, from £22.8 million to £22 million, for the year to 25 January. News that HoF seems set to match these estimates drove the shares up 3 per cent to 86.25p, leaving them just 1.25p below a 6 month high of 87.5p.

Meanwhile, speculation surrounding HoF's future continues to mount. Earlier in week intense press speculation suggested management would soon meet with Tom Hunter, the Scottish retail entrepreneur behind TBH Investment's rejected 85p offer.

It had been suggested that Hunter, who holds a 4.7 per cent stake in HoF, was preparing to make an improved bid. But despite confirming that chief executive John Coleman had received 'an unsolicited telephone call' from Hunter, HoF pointed out its advisers have received no indication of an improved offer from the TBH camp.

Hunter's eventual aim is believed to be a merger of HoF and fellow department store Allders (ADR), itself currently subject to an approach from property group Minerva (MDS). Several press sources have reported that Hunter has taken a 7.5 per cent stake in Allders, in a bid to block Minerva's bid and force them into negotiations.

Amid all the speculation one thing remains certain. The HoF board has gone on record as stating that an offer of 85p 'does not reflect the value of the company's business'. If Hunter, or anyone else for that matter, is to wrest control of the business they will almost certainly have to bid more and a gradual improvement in trading is likely to lift the shares in any case.

If you followed out advice and bought in at 73p back in December keep holding.