GEORGE DAVIES is to stay on at per una, acting as chairman from next July, after cutting a new deal with Marks & Spencer.

Stuart Rose, chief executive of the high street giant, is understood to have negotiated a deal to persuade Mr Davies, the creator of the per una brand, to continue to work with M&S despite his resignation last month.

The financial terms of the deal are not known, but it is believed that Mr Davies will continue on a similar level of remuneration to his present salary, but work only two days a week from July.

Confirmation of M&S's agreement with Mr Davis came as Britain’s biggest clothing retailer posted first-half results showing a continued recovery in its profit growth. But the firm cautioned that trading conditions on the High Street remain tough.

Mr Davies said yesterday: "I am delighted to be carrying on at Marks & Spencer. I believe in the brand. My target is to build per una into a £1 billion brand."

Mr Davies received £125 million last year when M&S bought the per una business from him as part of its defence against Philip Green’s £9.1 billion takeover plan.

There had been fears that Mr Davies, who launched the Next and George at Asda retail brands, would leave to set up a rival chain. He applied to register "GIV E" as a trade mark in August and had approached retail executives to lead a new business, despite a non-compete clause that would have prevented him from setting up a clothing chain until 2007.

M&S was thought to have been preparing for the departure of as many as 20 staff from per una, one of the best-performing parts of the business, after Mr Davies’s resignation. Mr Davies’s wife and daughters have key roles with per una and many staff and suppliers are loyal supporters who have worked with him for many years. It is not known whether his daughter Melanie Davies and Andrea White, per una’s finance director, who also resigned last month, will stay with the company.

M&S said today that pretax profits, stated for the first time under IFRS accounting rules, came in at £308 million, up 19 per cent compared with a restated £258 million a year ago. Analysts polled by Reuters on average expected a bottom line of £305 million.

M&S shares have risen 14 per cent in the past month as the company revealed improved sales because of better ranges and a strong advertising drive. Yesterday the shares closed at 435¼p, comfortably ahead of the benchmark 400p a share offered to shareholders by Mr Green.

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