Bookstore owner RedGroup may float before Christmas after strong earnings

Speculation is growing that Melbourne-based bookstore owner RedGroup may follow the lead of Myer and Kathmandu by listing on the Australian Securities Exchange before Christmas after the company posted impressive results.

RedGroup, which owns the Angus & Robertson chain in Australia, the Borders chain in Australia, New Zealand and Singapore, and the Whitcoulls chain in New Zealand, is currently owned by private company Private Equity Partners, which is believed to be keen to offload the business.

The company’s results have heightened speculation of a pre-Christmas float.

RedGroup posted a 52% increase in revenue for 2008-09 to $685 million, although revenue was boosted by integration of the Borders chain, which RedGroup bought in June 2008 from the US-based Borders Group Inc.

However, RedGroup’s increase in earnings before interest, tax, deprecation and ammortisation was impressive, with earnings more the tripling from $14.1 million to $42.4 million.

Executive Chairman Rod Walker said in a statement he was pleased with the operational strength of the brands.

“The group now has diversity and a strong position in the market. We also have a great team in place from the store level right up through the support office.”

While Walker has refused to comment on PEP’s exit strategy, the push to float before Christmas may have been affected by the market’s reaction to yesterday’s Myer float, when the department store chain’s shares fell 8.5% from issue price to finish the day at $3.75.

Kathmandu, RedGroup and another retailer tipped to float before Christmas, sports store owner Ascendia Retail Group (which owns Rebel Sports and the A-Mart All Sports chains) will all need to consider investor appetite for retail companies in the current uncertain environment.