Briscoe to pay back $11.5m wage subsidy after 'strong sales'
Friday, 16 October 2020
Briscoe Group, which has come under fire for holding on to an $11.5 million wage subsidy while paying a dividend to shareholders, will return the money to the Government as trading picks up at its homeware and sports goods stores.
“Sales momentum we saw leading into our half year results has continued into the third quarter,” chairman Dame Rosanne Meo said.
“Whilst we were unquestionably eligible for the first round of wage subsidy, our recent trading performance has given the board confidence to repay the subsidy in full,” Meo said.
The retailer, which owns the Briscoes Homeware, Rebel Sport, and Living & Giving chains, was among New Zealand stock exchange companies criticised by University of Auckland accounting professor Jilnaught Wong this month for taking advantage of the system when they were profitable and paid dividends.
**READ MORE:
* The Warehouse Group posts $44.5m profit after $67.7m wage subsidy
* Accounting professor singles out NZX companies which 'morally' shouldn't have taken wage subsidy
**
Fellow listed retailers The Warehouse Group and Hallenstein Glasson have retained their wage subsidies.
To access the wage subsidy employers had to have experienced a 30 per cent revenue drop over a month between January and June 9, compared with the same month in 2019 and that decline had to be related to Covid-19.
Last week, Briscoe shareholder Michael Gousmett said he was appalled by Briscoe’s decision to hold on to the subsidy. He committed to paying his dividend to Women's Refuge and encouraged others to follow his lead and donate the money to charity.
In March, Briscoe cancelled its final dividend to shareholders, worth a total $28 million, citing “unprecedented levels of uncertainty” due to Covid-19, as it was forced to shut its stores during lockdown.
Meo said the first quarter was “incredibly tough”, as sales slumped 36 per cent, but “very promising signs” started emerging in the second quarter. The retailer posted a 1.3 per cent decline in after-tax profit to $28m for the six months to July 30, including the benefit of the wage subsidy.
It announced a $20.3m dividend payment to shareholders from those profits with Briscoe managing director Rod Duke, who owns 78 per cent of the retailer, pocketing a $15.6m dividend.
“He owns those shares, and he has worked hard over many, many years to get them,” Meo said.
“Nor would I, as chair of a publicly listed company, expect him not to be taking the dividend to which he is entitled.”
Duke didn’t participate in board discussions about dividends, she said.
Public criticism was not the basis for the board’s decision to return the subsidy, she said.
“Of course you are mindful of that. You can’t ignore criticism like that. But our responsibility had to be to our people, that’s our shareholders and the people right through the shop floor,” she said.
Continued strong recovery through the third quarter to October 25, and reduced likelihood of another alert level 4 lockdown of all stores had given the retailer enough confidence to repay the wage subsidy, Meo said.
The board would continue to closely monitor the trading environment, she said.
“We are certainly not out of the woods but we are in good shape,” Meo said.
Briscoe is heading into its fourth quarter, which typically accounts for 35 per cent of annual sales.
”Based on what we have been achieving, we are pretty optimistic about it,” she said.
The company’s shares edged lower in late afternoon trading Friday, down 0.5 per cent to $3.95.
None of Briscoe’s around 2000 staff have lost their jobs due to the Covid-19 disruptions, and no stores were permanently closed.
That contrasts with The Warehouse Group, which on Thursday confirmed a $44.5m annual profit after it claimed $67.8m through the wage subsidy scheme, laid off hundreds of staff and cut back hours for others.
The group, which operates The Warehouse, Warehouse Stationery, Noel Leeming and Torpedo7, has faced criticism from unions and Prime Minister Jacinda Ardern who said she was “angry” at the company for continuing with restructuring and redundancies while getting the subsidy.
The Warehouse Group didn’t pay a final dividend, and said the subsidy was needed to maintain its workforce during lockdown.
Retirement village operator Summerset was also criticised by Wong for claiming the wage subsidy, which he said “was not in the spirit of the law”.
“Morally they shouldn’t have taken it,” he said.
Summerset declined to comment on whether it planned to return the subsidy, while Hallenstein Glasson didn’t respond to a request for comment.