The Australian business, by the name of Seasons Group, consists of a chain of eight supermarkets in the Brisbane area. Effective 7 May 2020, the group entered the Australian market through an investment in a 40 percent associate company that operates in the FMCG sector. Total purchase consideration for Sefalana’s investment in this business amounted to AUD 10.5 million (P83 million), which is considered its fair value.
Sefalana says the Australian market is accustomed to relatively long lease periods of 15-20 years and in accordance with IFRS 16 – Leases, the Right of Use Asset and related Lease Liabilities are therefore significant. “This results in a front-loaded depreciation and interest charge in the earlier years of the leases,” the group said in its results for the year ended 30 April 2021. As a consequence, Sefalana says the positive EBITDA of AUD 4.7m (P39 million) has been eroded by related lease charges. In the latter lease period however, the group cautions this is expected to unwind, such that the reported Profit Before Tax figures for this investment will grow significantly. “This is aligned to our intention to re-invest in that business for the first five years before dividends are declared to shareholders.”
Sefalana says the return on this investment will be seen in the medium to long term. “During the short term, our presence in the market is increasing as we move towards achieving our target of 12 stores which will provide the critical mass to optimize on economies of scale and profitability,” the group says. The Group’s share of losses, which includes once-off startup costs relating to this associate, amounted to P5.5 million for the year.
