Mike Ashley’s Frasers feels lift from takeover spree
Mike Ashley’s Frasers Group has seen its profit jump as it pushes ahead with a turnaround plan and launches a spree of takeover bids for foreign retailers.
The fashion group, which owns Sports Direct and Flannels, said its recent takeover bids and moves to build stakes in rivals are bolstering its balance sheet amid a “challenging environment”.
The FTSE 250 firm saw revenue jump by eight per cent to £5.3bn in the year to the end of April, as pre-tax profit grew by 39 per cent to £528m.
The group recently snapped up South African sporting goods firm Holdsport and Norwegian sports retailer XXL.
“Leveraging the strength of our UK Sport business and brand relationships, international expansion has become a powerful growth engine for the Group and a key pillar of our long-term strategy,” the firm said.
£50m from stakes in takeover targets
Frasers stepped up its takeover efforts in recent weeks with a £1.7bn bid for German fashion house Hugo Boss and a £166m play for Australian shoe firm Accent.
The group had been building up stakes in these companies ahead of its bids. These positions added £50m to adjusted profit in the last year, Frasers said.
The modest four per cent premium offered by the group’s bid for Hugo Boss had raised suspicions among analysts that the firm was not seeking full control of the luxury brand.
Frasers seemed to fuel this view on Thursday, saying that “increasing its investment in Hugo Boss will create value” for its shareholders.
The group added that it “remains supportive” of Hugo Boss’ existing leadership in its “pursuit of their sustainable growth strategy whilst continuing to build brand equity”.
‘Tough trading conditions’
The firm declined to provide investors with forward-looking financial guidance because of the uncertainty around these takeover attempts.
Alongside Frasers’ plays for rival brands, the company said it is working to “elevate” its existing suite of fashion names, which includes Everlast, Slazenger, Karrimor and Jack Wills.
The fashion firm said its turnaround strategy is “going from strength to strength”. It is piling investment into its high street stores, including a new flagship Sports Direct store in Liverpool.
But the company said it “continued to feel the impact of tough trading conditions, subdued consumer confidence and industry-wide excess inventory levels” at the start of this financial year.
Frasers shares slipped by three per cent to 737p on Thursday’s market open, though the stock remained up 10 per cent in the year to date.