The FY20 trading statement confirms underlying PBT estimates before potential further bad debts due to the COVID-19 pandemic. Trading in the core retail business is reassuring. Near term, Studio looks relatively well placed given it is trading when others are not, mark-down risk on clothing is relatively low versus competitors, its value-based offer may become more attractive as consumer incomes fall and its key trading period is towards the end of the year. We withdraw our forecasts for FY21 given the wider economic uncertainty including potentially higher bad debts.
Studio Retail Group GGroup<Company name> |
Confirming expectations for FY20; FY21 unclear |
FY20 trading update |
Retail |
27 April 2020 |
Share price performance
Business description
Analysts
Studio Retail Group is a research client of Edison Investment Research Limited |
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The FY20 trading statement confirms underlying PBT estimates before potential further bad debts due to the COVID-19 pandemic. Trading in the core retail business is reassuring. Near term, Studio looks relatively well placed given it is trading when others are not, mark-down risk on clothing is relatively low versus competitors, its value-based offer may become more attractive as consumer incomes fall and its key trading period is towards the end of the year. We withdraw our forecasts for FY21 given the wider economic uncertainty including potentially higher bad debts.
Year end |
Revenue (£m) |
PBT* (£m) |
EPS* |
DPS |
PE |
Yield |
03/18 |
479.6 |
26.8 |
25.9 |
0.0 |
7.3 |
N/A |
03/19 |
506.8 |
28.8 |
26.5 |
0.0 |
7.2 |
N/A |
03/20e |
534.5 |
30.7 |
29.6 |
0.0 |
6.4 |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
In H220, which includes the peak trading period to Christmas, revenue for the retail business, Studio (84% of revenue), grew by 5% to give annual growth of c 3%. We were forecasting 7% growth for FY20, so trading in the less-important Q4 slowed after a very strong Q3, as indicated at the interims. Underlying PBT for FY20 will be in the middle of the current consensus, in line with our forecast, before any additional bad debts that may follow the economic downturn due to COVID-19.
Current trading in Studio is good, with revenue ahead of the prior year despite the lockdown. Education (c 14% of revenue) is more challenged, with demand down by 70–80%, but staff cost savings will mitigate some of the shortfall.
The proposed sale of Education for £35m net (£50m gross) proceeds has been delayed a little, most likely completing in August due to schools being closed and the lockdown, making it more difficult for the CMA to complete the review. Meanwhile, management believes it has sufficient liquidity to meet near-term requirements.
Due to uncertainty from COVID-19, management is unable to provide guidance for FY21. The results for FY20 will be published later than the traditional early June date, mostly due to the practicalities of completing an audit while in lockdown.
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Research: Investment Companies
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