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Frasers' shares jump as acquisitions fuel growth

The owner of Sports Direct has pledged £100m towards growing its digital strategy
August 20, 2020

Frasers Group (FRAS) shares rose by nearly a fifth after the Sports Direct owner revealed sales growth achieved in spite of coronavirus-enforced closures. The group, which expanded its portfolio this year with a host of acquisitions including Game and Jack Wills, admitted that its revenue would have fallen 12.6 per cent overall on a constant currencies basis without the spending spree. 

IC TIP: Sell at 362p

Frasers’ pre-tax profits were hampered by rising sales costs and administrative expenses. The group did benefit from raising £84.9m from the sale and leaseback of a distribution centre, and has pledged £100m towards building its online channels, in line with a general Covid-led acceleration towards ecommerce. The group is targeting underlying cash profits growth of between 10 and 30 per cent for 2021.

As we highlighted in our preview of these results, Frasers’ stock as a percentage of its turnover has been rising in recent years, which may suggest a need to clear some inventory. This level rose again to 30 per cent from 26 per cent last year.

Peel Hunt forecasts adjusted pre-tax profits of £124m and EPS of 19.6p for the year to April 2021, falling to £119m and 19p in FY2022.

FRASERS GROUP (FRAS)  
ORD PRICE:362pMARKET VALUE:£ 1.88bn
TOUCH:356-362p12-MONTH HIGH:536pLOW: 174p
DIVIDEND YIELD:NilPE RATIO:20
NET ASSET VALUE:244pNET DEBT:77%
Year to 26 AprTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20162.9036246.8nil
20173.2528239.4nil
20183.3661.13.8nil
20193.7017921.6nil
20203.9614418.5nil
% change+7-20-14-
Ex-div:na   
Payment:na