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Don McCarthy could leave HoF by July as Sanpower deal nears completion

House of Fraser chairman Don McCarthy could leave the department store chain as early as July, depending on when the sale to Chinese group Sanpower’s Nanjing Cenbest subsidiary is completed.

McCarthy, who has been chairman for eight years since the Highland consortium takeover in 2006, owns around 20% of the company. Sanpower-owned Nanjing Cenbest confirmed last week that it had signed a definitive agreement to acquire 89% of the business. The remainder is being kept by Sports Direct.

McCarthy will stay on until completion, which is expected to take place at most in four months but more likely in the next two. A spokeswoman said it was too early to discuss possible replacements, but confirmed that all other management, including chief executive John King, would remain.

The business is also still recruiting a replacement for executive director Allan Winstanley, who left for De Bijenkorf in March.

It is thought that Sanpower will not seek influence on the 61-store UK business, but could do so as HoF expands internationally, particularly in Greater China and the rest of Asia. HoF launched its first international store in Abu Dhabi last autumn.

It is not known what the plans are for McCarthy, who also quit his chairmanship of jewellery business Aurum in December 2012.

He confirmed his plans to leave HoF this week as the business reported its highest-ever gross profit – up £26.8m to £430.6m – in the year to January 25.

Like-for-like sales rose 3.6% to £1.2bn, with online sales rocketing 41% and now representing 12.2% of turnover. Adjusted EBITDA rose £60.2m, up 8.3% on 2013.

HoF’s own brands – which include Linea, Label Lab and Army & Navy – saw sales growth of 13%. Cash margins were up 20%. During the year, the business launched an Italian-inspired men’s formalwear collection called Corsivo.

Net debt has been reduced by £25.8m to £131.m, and the pension deficit was more than halved from £46.9m to £20.6m.

The figures are unaudited, with full results due out on April 29.

According to HoF, the first 11 weeks of 2014 have continued this momentum, with sales up 3.3% to April 12.

Chief executive John King said: “We are pleased to report another new record level of sales and gross profit for the year and a further improvement in the group’s earnings. The improved performance has been driven by the continued success of our key strategic pillars.”

He added: “Following the recent announcements, the management team and I are really looking forward to working closely with Nanjing Cenbest and the wider Sanpower group to enable House of Fraser to further develop the business domestically and internationally.”

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