// Frasers Group CFO Chris Wootton reiterates warning that House of Frasers stores will close unless business rates overhauled
// Wootton made the warning at Frasers Group’s virtual AGM today, during which Mike Ashley remained silent
// Shareholders were due to vote on a £100m staff bonus scheme as well as the reelection of executives
Frasers Group has reiterated a warning that a number of House of Fraser stores will be forced to shut down unless the government reforms the business rates system.
Speaking at the company’s AGM today, chief financial officer Chris Wootton said the business rates scheme needed to be “fit for purpose”.
Retail stores were given a holiday in business rates payments this financial year, but in April 2021 the system will restart with payments based on valuations from 2015.
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Frasers Group has said current valuations fail to account for a slump in property values and called for the next revaluation to be pushed forward from 2023.
“We believe the government should be working very hard to address the business rates crisis,” Wootton said.
“We have House of Fraser stores that even though they pay zero rent, still lose money – largely because of [business] rates.
“Unfortunately, a number of House of Fraser stores will have to close, unless the government gets on with making the business rates system fit for purpose.”
Frasers Group majority owner Mike Ashley had previously warned of House of Fraser store closures before the coronavirus pandemic escalated to what it is today.
In December last year, he said the current business rates system was “broken and unworkable”.
Ashley himself remained silent during the mostly-virtual 25 minute AGM at Frasers Group’s headquarters in Shirebrook, Derbyshire earlier today, during which shareholders were expected to also vote on a staff bonus scheme worth potentially more than £100 million.
It followed a tumultuous summer which saw the company hit by enforced store closures, after facing scorn over appeals to the government that Sports Direct outlets should remain open with essential status.
Frasers Group said its new bonus scheme would be open to the “vast majority” of its 30,000 workers, who will receive either cash or share awards.
However, the payout would only be triggered if shares more than double in value within the next four years to at least £10 and for a sustained period.
Wootton told shareholders that it was a “challenging target but achievable” following progress in the company’s “elevation strategy”.
City analysts expressed scepticism over Frasers Group’s £10 share price target.
“There’s an enormously higher profit base that they’re alluding to to get to £10 a share,” Peel Hunt retail expert Jonathan Pritchard said.
“I’m all ears as to the road map of how to get to £10.”
Shares in Frasers Group closed at 360.8p on Tuesday.
Investors in the company were also due to vote on the re-election of its bosses at AGM.
However, Ashley and chairman David Daly have faced opposition from major shareholder advisory firm Pirc, which advised investors to vote against Ashley’s re-election after allegations that Frasers Group had asked staff to work during furlough.
Pirc said this was “representative of a corporate culture that does not meet best practice standards with regard to the treatment of employees”.
During the meeting, Wootton said the company was “confident” that it followed the rules regarding furlough and has since discussed the matter with HMRC.
Pirc said it was also opposing Daly’s re-election on allegations that there was a lack of action over increasing ethnic and cultural diversity in the boardroom and for not setting up a sustainability committee.
However, Pirc has given the staff bonus scheme the thumbs-up, citing the fact it was “open to all employees on an equal basis and has a strong participation rate”.
Frasers Group last made a bonus scheme payout to employees in 2017 when it shared a £43 million pot between 2000 staff.
The scheme is dependent on employee length of service, with those having worked at the group for four years or more potentially in line for a cash bonus worth up to four weeks’ salary.
The so-called Fearless 1000 would be entitled to possible share payouts, with the top 10 performers receiving awards worth a possible £1 million while the remainder could pick up shares worth between £50,000 and £500,000.
The scheme will not include Frasers Group’s directors and consultants.
Frasers Group’s full-year results in August showed revenues for the year to April 26 rose 6.9 per cent to £3.96 billion, but pre-tax profits were down 12.9 per cent to £101 million.
with PA Wires