CORDER’S COLUMN: Aurum off the block

WatchPro managing editor Rob Corder.WatchPro managing editor Rob Corder.

I last sat down for a ‘Big Interview’ with Aurum Holdings CEO Brian Duffy on September 8 this year. The interview was scheduled to appear in the October edition of WatchPro, but I was asked to hold it because, I assumed, a deal to sell the group was about to be announced.

Be under no illusion, the sale of the business was imminent early in September. Previous conversations about a potential sale had elicited guarded answers. There was no such equivocation on September 8. It was reasonable to expect a deal would be done before the end of the year.

Mr Duffy spoke about how the price of Aurum was being discussed in the context of the UK’s post-Brexit boom for luxury watches and how the acquisition of Mayor’s in America might affect the valuation.

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Asked whether he saw Aurum being bought by another jewellery and watch business, another private equity investor, or whether it could be listed on the stock exchange, Mr Duffy replied: “All options are open”.

Which all begs the question, what happened to bring the sale process to an abrupt halt? The official line is that Aurum’s owner Apollo Global Management sees sufficient growth potential that it is happy to hold onto the business for now.

We may never know what brought an end to the sale of Aurum this month. These things are not uncommon in the world of private equity businesses buying and selling companies. Ultimately, a sale will only happen if a buyer and seller are both happy with a price. This point was clearly not reached on this occasion.

If Aurum Holdings continues to grow, particularly in the United States, Apollo will no doubt receive improved offers in the future. In the mean time, the company is operationally profitable, even it if is carrying eye-watering levels of debt (creditors totalled £200 million in May 2016) because of massive investment in building and upgrading stores.

Aurum is extremely well-run, despite the distraction this year of selling the business. Sales rose in the 12 months to April 30 2017 by 25% to £565 million. Year-on-year growth this summer has slowed, but sales are still rising. July growth was in the low single digits this year, but August was double digits up, Mr Duffy told WatchPro.

It is also better positioned to benefit from current industry trends than any other British group. It is the biggest Rolex retailer, which is the UK’s fastest-growing brand. It is the biggest online retailer, and online is outperforming the market. It is number one in airports, and over-weight in central London, the powerhouse of growth for the whole UK.

I doubt anybody who has worked so hard for a sale this year will be delighted that it has fallen through, but the news will be welcome to Aurum’s employees and watch brand partners who are as keen as ever to get on with the job.

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