Asda’s statutory profits topped £1bn last year, according to newly filed accounts, as the group benefited from a one-off gain of almost £400m on property sales.
Accounts for Asda Group filed at Companies House show the supermarket’s statutory profits jumped from £368.8m to £1bn in 2021, boosted by increased underlying profitability and one-off asset sales.
Asda, purchased for £6.8bn by the Issa brothers and TDR Capital in February 2021, previously announced operating profits for the year were up 42% to £693.1m, predominantly due to a cut in Covid-related costs as total sales edged up 0.5% to £20.4bn.
The full accounts show Asda also benefited from booking a £395m profit from the sale and leaseback of 27 warehouse properties to the US private equity firm Blackstone for £1.7bn.
The transaction, which was part of the financing package to purchase the retailer, saw a huge profit on the sale of properties with a book value of £497.5m.
The remaining gain of £783m has been deferred as a reduction to the “right-of-use asset” relating to the leaseback. Taking this into account, Asda has seen a rise in right of use assets of £406.6m and lease liabilities of £1.18bn.
It is understood Asda will pay around £68m a year to continue to use the assets, which has already resulted in a rise in annual financing costs from £67m to £114m, as lease interest payments rose to £32.8m to £99.3m after the deal.
In October, Moody’s downgraded Asda to Ba3 – three notches below investment grade – due to worries over its leverage after it scrapped the planned sale of its forecourts to EG Group and instead issued debt.
Moody’s said at the time its actions reflected an “increase in leverage” that was also driven by “higher lease liabilities from the sale and lease back of the distribution assets divestiture than previously factored-in Moody’s assumptions”.
Asda told The Grocer: “Asda remains comfortable with the overall leverage.”
Asda’s tax payments for the year fell from £100.4m in 2021 to a tax credit of £2m, due to previously deferred tax credits.
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