Mike Ashley’s retail empire Frasers Group has warned investors of a potential £100m hit to his property portfolio, as the lockdown restrictions on the high street continue.
The group owns a raft of businesses across the UK and beyond, including Flannels, House of Fraser, Sports Direct, Evans Cycles, as well as buildings containing other retail businesses.
Following the Government’s publication of the 68-page roadmap out of lockdown, however, the Newcastle United owner’s firm issued a short note on the stock market, saying it anticipates making sizeable impairments.
The “cautious” approach to easing lockdown, as announced by Prime Minister Boris Johnson, would see non-essential shops in England only reopen in almost seven weeks, on April 12 at the earliest.
The company said: “Further to the announcement by the Government on 22 February 2021 of details on the potential reopening of non-essential stores in England on 12 April 2021, Frasers Group currently anticipates making material accounting impairments to freehold properties, other Property, Plant & 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 £100m.
“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.”
Last December the firm issued a profit warning, after pandemic measures forced many of its stores to close once more.
Frasers Group told shareholders it was unlikely to achieve the 20% to 30% profits boost it had previously publicised.
That warning came after interim results showed pre-tax profits had risen by 17.6% to £106.1m in the half-year to the end of October.
Mr 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.
Helen Dickinson, chief executive of the British Retail Consortium (BRC), said: “The cost of lost sales to non-food stores during lockdown is now over £22bn and counting.
“Every day that a shop remains closed increases the chances that it will never open again – costing jobs and damaging local communities.
“Non-essential shops are ready to reopen and have been investing hundreds of millions on making themselves Covid-secure.
“Government should remain flexible and allow non-essential retail to reopen as soon as the data suggests it is safe to do so.”