Mike Ashley’s Frasers (FRAS) has warned it may take a further accounting hit of over £200 million due to Covid restrictions, double its previous estimate provided in late February.

While disappointing, shares in the Sports Direct-to-House of Fraser owner rose 0.9% to 501.5p on optimism over the reopening of vast swathes of its estate from 12 April, when non-essential retailers are allowed to welcome back customers in England and Wales.

FURTHER RESTRICTIONS ‘ALMOST CERTAIN’

In a brief statement, Frasers said it notes ‘the continuing government and government advisor pronouncements regarding third waves and normality being “some way off”, meaning further restrictions are in our view almost certain.

‘We also note the Covid-19 affected experiences, estimates, and judgements from other leading retailers’, said Frasers.

Consequently, Ashley’s retail empire anticipates making ‘material’ non-cash write-downs to freehold properties, other property, plant & equipment, and IFRS 16 Right of Use Assets which could be ‘in excess of £200 million’.

They will scar Frasers’ results for the year ending April 2021 and follow on from pandemic-related impairments taken in the first half results.

Ashley, whose sprawling empire includes Game Digital, Flannels, Jack Wills and Evans Cycles, a designated ‘essential retailer’ that has remained open during the pandemic, has been scouting for further deals during the crisis.

He expressed interest in collapsed department store Debenhams as well as Peacocks, though administrators have reportedly found Frasers’ offers too low to accept.

PEACOCKS PURSUIT ‘REPEATEDLY FRUSTRATED’

Earlier this week, Frasers expressed frustration after it was reportedly not provided key financial information on Peacocks after it submitted an expression of interest in the beleaguered retailer, which was ultimately bought by out of administration by a consortium backed by Peacocks’ former chief operating officer Steve Simpson.

Frasers confirmed it had lodged an expression of interest in Peacocks but was ‘repeatedly frustrated’ by administrator FRP Advisory’s ‘unwillingness to engage substantively or to provide key financial information’.

With its advisors, Frasers ‘actively participated’ in discussions with FRP Advisory and representatives of the secured creditor, Edinburgh Woollen Mill.

However, ‘at no point in the discussions were the secured creditor or the Joint Administrators prepared to allow Frasers Group the same access to key stakeholders and information as the purported purchaser was allowed’, complained Frasers.

‘The actions of the secured creditor and the Joint Administrators made it virtually impossible for Frasers Group or any other third party to provide a credible alternative to the purported sale to the connected party.’

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Issue Date: 09 Apr 2021