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Mike Ashley's Frasers plans more 'digital elevation' investment after profits hit by coronavirus lockdown

Last updated: 09:39 20 Aug 2020 BST, First published: 07:36 20 Aug 2020 BST

Frasers Group PLC -

Frasers Group PLC (LON:FRAS) said it intends to invest at least £100mln in its ‘digital elevation strategy’ after underlying profits rose in what boss Mike Ashley said was the most challenging year in its history.  

The FTSE 250 sports retailer and House of Fraser owner will focus the new investment on its more upmarket Flannels chain and “an enhanced customer experience”, as well as supporting growth across its online channels. 

Results for the 52-week period to April 26, 2020, which were delayed for the second year in a row, showed group revenue increased by 7% to just under £4bn.

On an organic basis, which excludes acquisitions and currency swings, sales were down 12.6%, with like-for-like sales in core UK sports retail falling 6.6%, mostly caused by shops being temporarily shuttered during the coronavirus (COVID-19) lockdown.

The growth came mostly from the newer focus on ‘premium lifestyle’, which increased 34.9% as new Flannels stores opened and acquisitions were made of Jack Wills and Sofa.com, with a new 10% investment in Hugo Boss made post-period-end.

Frasers’ reported a 20% fall in profit before tax to £143.5mln, which under the new IFRS 16 accounting rules excluded an £84.9mln gain on the sale and leaseback of its infamous Shirebrook distribution centre. Underlying profits (EBITDA) rose 5% to £302.1mln.

Net debt decreased to £366mln from £378.5mln, with underlying free cash flow remaining solid at £263.1mln.

“With digital transformation now at the forefront, the successful reopening of our stores after the Covid-19 lockdown and continuing strong web performance, we are confident in achieving between a 10% and 30% improvement in underlying EBITDA during FY21,” the company said in the results statement. 

The shares surged 17% on Thursday morning to 357.65p, now only 22% lower since the start of the year having been down 58% in early April.

Analysts at Peel Hunt said: “The numbers were skewed a bit by acquisitions, but on the face of it this looks like a strong print from Frasers. Covid-19 obviously held things back in March/April, but to hold EBITDA is a good effort and better than we had expected.”

They added “The outlook statement is very upbeat given the external conditions, which implies a strong start to the year,” with the 10-30% EBITDA growth “a long way ahead of our numbers”.

   --Adds shares and broker comment--

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