Frasers shares jump 16 per cent on growth forecast despite profit hit
Shares in Mike Ashley’s Frasers Group jumped 16 per cent this morning after it said it expected growth of up to 30 per cent this year, despite profit falling one-fifth in the year to April.
Frasers, which was formerly called Sports Direct, released its preliminary results today, a week after they were scheduled to come out. It was the second year running they have been delayed.
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The group said it had suffered a torrid time during coronavirus. But it said it had reopened its stores and its online business was doing well.
The figures
Reported profit before tax tumbled 19.9 per cent to £143.5min the year ending 26 April. That was down from £179.2m a year earlier.
Yet revenue rose 6.9 per cent across the year to £3.96bn from £3.7bn in 2019. This was largely due to a 34.9 per cent revenue jump in “premium lifestyle”, thanks to the opening of new shops and the purchase of Jack Wills and Sofa.com.
Frasers said its online business had performed “extremely well” during the pandemic.
The fall in profit took Frasers Group’s reported basic earnings per share down 14.4 per cent to 18.5p, however.
Its underlying free cash flow slipped 3.7 per cent to £263.1m. Although this was before capital expenditure was taken into account.
Frasers’ net debt rose 3.3 per cent to £366min the year through April. That was up from £378.5m a year earlier.
Why it’s interesting
Never one to shy away from controversy, it was a rocky 12 months or so for Frasers Group boss Mike Ashley.
Ashley lobbied the government to keep his shops open in March and April, arguing they were “essential”. He later apologised for “mistakes” in his reaction to Covid-19.
Before that, auditors Grant Thornton quit the group after 12 years in September. Frasers has faced ongoing criticism over its corporate governance.
Yet investors reacted well to Frasers’ full-year results, with shares climbing to 359.4p. The group said it was well placed for the future and forecast growth of up to 30 per cent this financial year.
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What Frasers Group said
David Daly, non-executive chair, said the 12 months would “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,” he said. “And, just as we were feeling more confident of getting some clarity and stability, the Covid-19 crisis arrived.”
Yet he said that “during the time our stores were closed, our online business performed extremely well”.
Frasers said it would invest over £100m in its online businesses. “With a particular focus on Flannels and an enhanced customer experience, this investment will be integral in supporting the continued growth of our online channels,” it said.