Private equity-owned British supermarket chain ASDA shared unaudited financial results to its lenders behind closed doors in March, according to a Telegraph report.
The atypical move was due to delays in the publication of ASDA’s audited results after the group switched from auditor EY to rival KPMG.
EY resigned as ASDA’s auditor earlier this year, though the accountancy firm was said to have told ASDA of its resignation as early as July 2023.
According to the report, ASDA disclosed unaudited profits of £248 million from £25.6 billion of revenues in 2023.
This indicates a broad swing back to profitability for the private equity-owned supermarket, having penned £112 million of losses in 2022.
But the results also highlighted ASDA’s big debt burden. According to sources, the group’s earnings were impacted by £441 million of finance costs on its £4.2 billion debt pile.
ASDA’s debt burden has attracted scrutiny since offshore-based PE firm TDR Capital bought the chain through a joint venture with the Issa brothers in 2021.
The takeover was leveraged to the hilt; some £3.5 billion of debt was laden onto ASDA’s balance sheet to finance the £6.7 billion takeover, with asset disposals plugging the gap further.
It was Britain’s largest leveraged buyout in a decade, with the Issas and TDR completing the takeover with minimal equity.
At the start of 2023, ASDA had a worryingly high debt leverage of 4.2 times, though Moshin Issa said in December that had been reduced to 3.8 times “and that trajectory is to go down even further”.
It appears to be a common theme among TDR’s portfolio companies.
Earlier this week, Britain’s largest pub group Stonegate, which TDR took over in March 2020, warned that its £2.2 billion debt pile is putting “material uncertainty” around its ability to continue as a going concern.
The GMB union had flagged debt concerns at the group back in January, with the union stating: “Huge interest payments on TDR Capital’s debts have already resulted in cost pressures at ASDA, resulting in cuts in hours for staff, cutting corners on health and safety and a rise in a toxic culture of bullying and harassment.”
“The position with the Stonegate Pub Company’s finances is equally lacking in transparency, with the ultimate holding company based in the Cayman Islands,” stated Justin Bowden, GMB’s southern regional secretary.