Image courtesy of House of Fraser
Frasers Group says it expects “further restrictions” on the way it trades as a result of Covid-19 - taking the cost of the pandemic on its business to more than £320m in its current financial year.
Frasers Group says it is working on the assumption that there will be “further restrictions” on the way it trades – even after stores reopen next week – raising the prospect that it expects stores to close again. The group is raising the likely cost of Covid to its business by £100m as a result, doubling its estimate for the cost of Covid to its business to £200m in the second half of its financial year. That’s on top of a first half write down of £124.9m. That adds up to a bill of at least £324.9m for its predominantly high-street based business in its current financial year, which runs until late April.
The update comes as the retail group is currently calculating the extent to which Covid-19 restrictions are likely to affect the value of its assets, including both owned and leased stores. In March it said it might need to close shops in response to “disappointing” levels of business rates relief announced in the budget.
The retailer says in a stockmarket update today: “Frasers Group is continuing to assess the Covid-19 potential impact on asset values. In our ongoing assessment we note the continuing government and government advisor pronouncements regarding ‘third waves’ and normality being ‘some way off’, meaning further restrictions are in our view almost certain.
“We also note the Covid-19 affected experiences, estimates and judgements from other leading retailers.
“Consequently, Frasers Group currently anticipates making material accounting non-cash impairments to freehold properties, other property, plan and equipment and IFTS 16 right of use assets which could be in excess of £200m. Any such impairment would be in addition to impairments included in the half-year results announced on 10 December 2020.”
Frasers Group is particularly reliant on high street sales, having expanded in recent years through a strategy of buying ailing multichannel retailers out of administration. In 2018 it bought department store House of Fraser and Evans cycles out of administration, before going on in 2019 to buy Game and Jack Wills. In the first half of its year, however, its write down of the value of its assets was offset by a 17.6% rise in pre-tax profits, despite a 7.4% fall in sales.
Game and Evans Cycles are Top50 retailers in the latest RXUK Top500 research, while House of Fraser and Jack Wills are ranked Top100, and its original Sports Direct business is a Top250 retailer.
via https://AiUpNow.com April 9, 2021 at 08:59AM by Chloe Rigby, Khareem Sudlow,
