20th Aug 2020 09:16
(Alliance News) - Frasers Group PLC on Thursday said the 2020 financial year will be remembered as "the most challenging year in the history of the company" due to the uncertainties posed by Brexit and Covid-19.
The retailer saw pretax profit for the financial year ended April 26 fell 20% to GBP143.5 million from GBP179.2 million a year prior.
Revenue rose 6.9% to GBP3.96 billion from GBP3.70 billion year on year. This increase was driven by premium lifestyle sales, which increased by 35% to GBP722.0 million from GBP535.4 million a year prior, as well as by European retail, which increased by 16% to GBP697.7 million, from GBP599.8 million year on year.
However, selling, distribution and administrative expenses rose 11% to GBP1.56 billion from GBP1.41 billion the year before.
Non-Executive Chair David Daly said: "The 2020 financial year will likely be remembered as the most challenging year in the history of the company. The political uncertainty around Brexit had been with us for far too long and, just as we were feeling more confident of getting some clarity and stability, the Covid-19 crisis arrived which will continue to have an impact on the economy and our business beyond the 2020 financial year."
The company has decided not to pay a final dividend as it wants to preserve financial flexibility for future investments and other growth opportunities.
Going forward, Frasers plans to invest more than GBP100 million into its digital expansion, with a particular focus on its subsidiary Flannels and an "enhanced customer experience". The company said that this investment will be integral in supporting the continued growth of its online channels.
The company said: "With digital transformation now at the forefront, the successful reopening of our stores after the Covid-19 lockdown and continuing strong web performance, we are confident in achieving between a 10% and 30% improvement in underlying earnings before interest, tax, depreciation and amortisation during the current financial year."
Daly added that the company continues to follow the "further demise" of Debenhams PLC, which is on the brink of liquidation, and of which Frasers owns nearly a third of its shares.
Debenhams, which has 124 stores and employs a reported 14,000 staff across the UK, collapsed into administration about four months ago and announced plans to axe 2,500 jobs throughout its stores and warehouses earlier this month.
"Our offers of help were repeatedly disregarded and it is scandalous that this business has now been in administration twice. To date and to our knowledge, there seems to be a lack of political or regulatory interest in investigating the impact on shareholders in the initial administration, and now in the second administration we expect that further stakeholders will suffer," Daly said.
He added: "We are opposed, however, by certain entities which placed Debenhams into administration. If their opposition is successful, Debenhams will be dissolved, meaning that no investigation can be carried out."
Looking ahead for Frasers, Daly said: "The Covid-19 impact has created uncertainty, and we consider that it will be some time before the country and indeed the world recovers. However, Frasers Group itself has always taken a long-term approach to its strategy and this has helped us, and will continue to help us, through these unprecedented times. We believe our business is strong as is our balance sheet. We will continue with the elevation strategy and the expansion of the new store format supported by our talented and loyal staff and we consider we are well placed for the future."
Mike Ashley, chief executive officer and 63.5%-owner of Frasers, added: "The new concept has been well received by landlords and coupled with the changing market conditions is creating further opportunities to grow the pipeline of new elevated stores." He said the strategy, involving creating destination stores, is being applied across the company's Sports Direct, GAME Digital and Evans Cycle brands.
Frasers shares were up 15% at 351.14 pence each on Thursday morning in London.
By Greg Roxburgh; [email protected]
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