Shares in Alexon, the fashion retailer, jumped on Friday after it said it had placed its ailing Bay Trading subsidiary into administration.

Alexon shares rose nearly 54 per cent to 50p in afternoon London trading as investors bet that the move would help remove a considerable drag on the group’s performance.

In its full-year 2008 results on Wednesday, the company said that its core brands, including Dash, Minuet and Alex & Co, had performed respectably, generating operating profits of £10.1m, compared with £14m a year earlier.

But Bay Trading lost £7.2m and like-for-like sales fell 16 per cent over the same period. Management blamed intense competition and the costs of discounting old stock.

Alexon, whose brands include Dash and Ann Harvey, said it would appoint Deloitte as administrators in the next few days with the aim of finding a buyer for the unit.

Jane McNally, chief executive of Alexon since June 2008, said the company could no longer afford to support Bay Trading.

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Euler Hermes, a credit insurer, on Thursday withdrew credit insurance from Alexon’s suppliers, prompted by indications that the company’s auditors were about to issue a qualification to its accounts regarding Bay Trading.

“We just couldn’t afford to put the rest of the group at risk,” Ms McNally said. “For the group this [move] is probably a good thing in pure profit terms.”

Bay Trading, which Alexon purchased in 1999, has 268 stores in the UK and Europe and employs about 1,000 staff.

Bay Trading is the latest of a number of Alexon’s units that have tottered to the brink of collapse in the last three years following a series of ill-fated acquisitions under the previous management.

In 2006 Alexon offloaded Dolcis, a shoe store chain which eventually collapsed into administration in January 2008, and other recent failures include Mandolin and Style Mensware.

They have continued to haunt Alexon. Clauses forcing Alexon to pick up the tab for a number of those companies property leases resulted in £17.1m of provisions in 2008.

This week has been a turbulent one for Alexon. On Tuesday the company’s shares jumped 16.2 per cent on news that it had received and rejected a takeover approach only for the shares to tumble and then recover after its results.

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