The Premier Investments Limited (ASX: PMV) share price could be a mover today after it announced it was going to return jobkeeper.
Why the change of heart for Premier?
A number of businesses decided to hand back its jobkeeper payments to the ATO after seeing a rapid recovery of profit.
However, Premier Investments was one of the ones that had decided to hang onto the money. It acknowledged that it had received a net benefit of $15.6 million of ‘jobkeeper 1’. Premier said it would set that money aside to utilise it to fund the wages of employees who may be stood down under future COVID-19 lockdowns.
Since then, there have been short lockdowns in both Queensland an Western Australia. Premier said it used those jobkeeper funds to pay staff their contracted hours whilst unable to work.
However, the retail ASX share said that after the lockdowns, there has been increased trading from the combined states to fully offset the costs of supporting the teams through the lockdowns. Therefore, Premier said those jobkeeper funds were not needed to support staff.
The return of the cash
The Premier board said that when looking at this outcome, as well as the success of the management of COVID-19 by the federal and state governments, it is appropriate to refund the $15.6 million to the ATO.
Premier acknowledged that the jobkeeper initiative has been fundamental in Australia’s world leading economic growth during this global health crisis, which is why consumer confidence and employment growth is so high.
Profit expectations
After accounting for the repayment, Premier said it’s confident to meet the current market consensus of Premier Retail EBIT (pre AASB-16) of $318 million (EBIT explained).
My thoughts on this
Premier Investments didn’t have to return the money, but I think it was the right thing to do. It’s seeing enormous profit growth. EBIT rose by 88.5% to $237.8 million and statutory net profit grew by 88.9% to $118.2 million in the FY21 half year result. Australia probably wouldn’t be in such a good position without the jobkeeper scheme.
It’s encouraging to see that Premier Investments is expecting to meet guidance even without those jobkeeper funds. I think it’s one of the better ASX dividend shares to keep an eye on.