// Frasers Group says non-essential retailers reopening April 12 is likely to hit them with a non-cash impairment in excess of £100m
// It also warned of impairments to freehold properties, other property, plant & equipment and right of use assets
// It comes after Frasers Group issued a rare profit warning in December
Frasers Group has said it could take a hit in excess of £100 million due to the Covid-19 lockdown on non-essential retailers lasting until April 12.
Prime Minister Boris Johnson announced his road map to reopening the economy yesterday, including plans that stores – including Frasers Group’s portfolio of House of Fraser, Sports Direct, Jack Wills and Game – could welcome back customers by the spring.
However, the Mike Ashley-owned firm said the continued lockdown is likely to hit its accounts, with impairments to freehold properties, other property, plant and equipment and right of use assets.
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In a statement to the stock exchange, Frasers Group said it “currently anticipates making material accounting impairments to freehold properties, other property, plant and equipment, and IFRS 16 ‘Right of Use Assets’.”
“Given the length of this current lockdown, potential systemic changes to consumer behaviour, and the risk of further restrictions in future, we believe this non-cash impairment could be in excess of £100 million,” it added.
“Any such impairment would be in addition to impairments included in the half year results announced on 10 December 2020 and is expected to be included, subject to audit, with the company’s results for the financial year ending April 2021.”
Back in December Frasers Group issued a rare profit warning, saying previously published guidance of a 20 per cent to 30 per cent boost in profits this year was unlikely to be achieved.
Tier 4 rules in some parts of England and Scotland, as well as national lockdowns in Wales and Northern Ireland, introduced at the time forced non-essential retailers to close.
This followed by a full national lockdown shortly after.
The majority of Frasers Group’s retail portfolio fell into the “non-essential” category, although his Evans Cycles fascia has been allowed to remain open.
Prior to the profit warning, the firm revealed that pre-tax profits rose by 17.6 per cent to £106.1 million in the half year to the end of October.
The retail giant said it had benefited from the business rates holiday, although revenues fell 7.6 per cent to £1.89 billion due to the six weeks of store closures in the first lockdown. Excluding acquisitions, revenues fell 12.6 per cent.
Ashley’s retail empire is the first to comment publicly on the route out of lockdown and will add pressure to Chancellor Rishi Sunak to offer a new round of funding and support at the Budget next week.
with PA Wires
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