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Premier Investments (ASX:PMV) share price on watch after record profit result

Smiggle Investor presentation 2019
Image source: Investor Presentation 2019

The Premier Investments Limited (ASX: PMV) share price will be one to watch this morning following the release of its full year results for FY 2020.

How did Premier Investments perform in FY 2020?

For the 12 months ended 25 July 2020, the retail conglomerate posted a 2.1% decline in revenue to $1.25 billion.

This was due largely to store closures during the pandemic and offset slightly by a 48.8% jump in online sales to a record of $220.4 million. The Peter Alexander brand also delivered record sales, up 16.3% to $288.2 million for the year.

It was thanks partly to its higher margin online sales that Premier Investments was able to grow its earnings strongly during the 12 months despite its overall sales decline. The company recorded an impressive 29% increase in net profit after tax to $137.75 million.

This allowed the board to declare a fully franked final dividend of 36 cents per share, down slightly from 37 cents per share a year earlier. However, this brought its full year dividend to 70 cents per share, which was flat year on year.

Wage subsidies

Premier Investments advised that it became eligible for $68.7 million of global wage subsidies across seven countries during FY 2020, of which $49 million was received as of 25 July 2020.

Of the total amount, $35.5 million was passed directly through to eligible employees unable to work.

Circling back to its dividend, the Premier Investments board revealed that it considered the impact of wage subsidies on its profit and cash position. However, it determined that the net global government subsidies received were not required for the payment of the final dividend.

Smiggle closures

Management notes that the impact of COVID-19 was particularly severe on the Smiggle business.

In light of this and to ensure Smiggle is best placed to rebound and grow post-COVID-19, management is making some big changes.

It intends to close the final four Smiggle stores in Hong Kong by the end of October. Up to 55 Smiggle stores out of 131 in the UK will be closed this financial year. Management intends to impair 100% of its UK assets, as well as those in Hong Kong, Singapore, Malaysia, and Ireland.

It will now focus on investing in Smiggle’s highly profitable global online presence.

Outlook

Due to the uncertain economic environment, no guidance was given for the year ahead.

However, management believes the company is extremely well placed. This is thanks to its seven strong brands, fully integrated and highly profitable online channel, strong balance sheet, and high calibre board and management team.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Premier Investments Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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