Asda declared a £2.1 billion dividend the year after being bought by the billionaire Issa brothers, accounts published today show, as the pair sought to juggle debts around their sprawling retail and petrol forecourt empire.
The supermarket declared the dividend to its parent company Bellis Finco, owned by the Issas and private equite firm TDR Capital, in September last year, despite a more-than 80% drop in pre-tax profits to £197.8 million in 2022.
In its accounts Asda said of the dividend: “The intercompany payable was settled by transferring intercompany receivables.
“There were no cash payments made.”
The dividend, which contributed to a reduction in Asda’s assets of around £1.8 billion, has helped the Issa brothers manage their steep debt burdens, made worse by rising central bank interest rates. The Asda deal received approval from the competition regulator in June 2021, at which point they took ownership of the supermarket from US retail giant Walmart.
The pair’s forecourts business EG Group said earlier this month it was able to cut debts by 41% through a combination of the sale of the bulk of its UK business to Asda, as well as a number of sale and leaseback deals involving property in the US. It has also extended the maturity date on a number of loans totalling $6.1 billion.
Co-founder Zuber Issa said: “The Group continued to make good progress with its deleveraging strategy... to put in place a sustainable long-term capital structure.”
In May, the brothers finalised plans to merge the UK operations of petrol forecourt business EG Group with Asda in a £2.3 billion deal.
EG said the deal with Asda was expected to reduce total net debt from $9,801m in March 2023 to $5.4 billion post-merger.
Chair Stuart Rose told reporters that the primary purpose of the deal was to expand Asda’s operations but “if as a consequence you’ve also got the opportunity to deleverage then what’s the problem with that?”
Asda’s revenues for 2022 stood at £24.5 billion, broadly flat on last year as the firm clung on to its 12% share of the UK grocery market despite fierce competition from the likes of budget supermarkets Lidl and Aldi.
Profits fell from more than £1 billion to below £200 million, which Asda said was down to a combination of “significant inflation across the cost base” as well as a £189 million investment in a new IT system to replace one introduced by its previous owner, Walmart.
Asda also said it had increased its revolving debt facility from £500 million to £657 million.
An Asda spokesperson said: “Asda Group Limited accounts for the financial year ending December 2022 show that a number of intercompany balances were transferred to the parent company of ASDA Group Limited.
“This was part of an exercise to settle intercompany balances between different group companies during the year within the Bellis Finco plc group of companies. These were all non-cash transactions and no cash dividends were paid by ASDA or Bellis Finco plc.”