Interim Results for the 26 weeks to 26 October 14

RNS Number : 4503Z
Sports Direct International Plc
11 December 2014
 



 

11 December 2014

Interim Results for the 26 weeks to 26 October 2014

 

Sports Retail gross margin up 130 basis points; Group Underlying EBITDA up 10.8%

 

 

 

 
FY15 H1
FY14 H1
 
 
£m
£m
 
Group revenue
1,432.9
1,345.1
+6.5%
Sports Retail (1)
1,230.9
1,136.1
+8.3%
Premium Lifestyle
99.9
102.8
-2.8%
Brands
102.1
106.2
-3.9%
Group gross profit
630.2
579.8
+8.7%
Group gross margin
44.0%
43.1%
+90 bps
Sports Retail
44.5%
43.2%
+130 bps
Underlying EBITDA (pre share scheme costs) (2)
203.1
183.3
+10.8%
Underlying profit before tax (PBT)(3)
160.6
146.2
+9.8%
Reported profit before tax
149.7
143.1
+4.6%
Underlying earnings per share (3)
20.8p
19.0p
+9.5%
Reported earnings per share
19.4p
18.6p
+4.1%

 

Key highlights

 

·      Sports Retail gross margin increased by 130 basis points to 44.5%

·      Group underlying EBITDA increased by 10.8% to £203.1m

·      Underlying profit before tax up 9.8% to £160.6m

·      Underlying free cash generation of £161.5m (4)

·      Oxford Street store re-located in May 2014

·      Roll-out of large format city centre stores

·      29 new license agreements signed with contracted minimum royalties of $12m over the life of the agreements

·      Continued investment in inventory and strategic stakes while maintaining a strong balance sheet

·      Net debt decreased to £186.5m from £212.0m (27 April 2014) (5)

 

 

Dave Forsey, Chief Executive of Sports Direct International plc said:

 

"The results for the six months were solid considering the adverse impact on performance during the period of England's early departure from the FIFA World Cup in Brazil and the unseasonably mild weather during Autumn reducing footfall.

 

"However, the continued growth in Group revenues and EBITDA is testament to the hard work of our colleagues and our continued focus on providing customers with exceptional quality and unbeatable value. We are delighted that their contribution will again be recognised under the 2011 Employee Bonus Share Scheme - 25% of which is expected to vest with eligible employees in September 2015.

 

"Trading since the period end has been in line with management expectations and while we retain the ability to invest in margin, inventory and Group marketing to deliver long-term sustainable growth, we remain confident of achieving at least our full year internal underlying EBITDA target of £360m, before the charge for the Employee Bonus Share Schemes."

 

(1)

 

(2)

Includes Wholesale and Other revenue, previously only included in Group revenue

 

Underlying EBITDA, underlying profit before taxation and underlying EPS exclude realised foreign exchange gains/losses in selling and administration costs, exceptional costs and the profit/loss on sale of strategic investments. Underlying EBITDA also excludes the Employee Bonus Share Scheme charges.

 

(3)

Underlying profit before taxation and underlying EPS also exclude profits/losses relating to the IAS 39 fair value adjustment on forward currency contracts in finance income/costs, but includes the Employee Bonus Share Scheme charges.

 

(4)

Underlying free cash generation is defined as operating cashflow before working capital, made up of underlying EBITDA before Employee Bonus Share Scheme costs, plus realised foreign exchange gains and losses, less corporation tax paid.



(5)

Net debt is borrowings less cash held





Sports Direct International plc

Dave Forsey, Chief Executive

Jeff Blue, Director, Strategic Development

 

T:  0845 129 9200

 



 

Powerscourt

Rory Godson

Victoria Palmer-Moore

Greg Lawless

 

T:  0207 250 1446

 



 

Chairman's Statement

 

While the Group has not been immune to recent challenges in the retail sector and England's disappointing performance at the FIFA World Cup, the Group has achieved a 6.5% increase in revenue and a 10.8% increase in underlying EBITDA.

 

Developments and acquisitions

The Group has continued its expansion in Europe, opening a further eight stores. The re-branding of stores in Austria to the Sportsdirect.com fascia continues and we opened our first Sportsdirect.com store in the Baltics.

 

In the first half of the year the Group increased its investment in Debenhams with the purchase of an additional strategic stake in the business. We are currently trialling four concessions within Debenhams stores. The Group has also acquired interests in Tesco and the online retailer MySale during the period.

 

I am pleased also to announce that the Group has now established Sportsdirect Fitness.com, following the acquisition of 18 former LA Fitness gyms. We have commenced building work on a new 20,000 sq. ft. dry gym and an adjoining 40,000 sq. ft. retail space in Aintree which will be fully open by the end of 2014 and another two similar units in St Helens and Keighley are expected to be operational in early 2015.

 

Employee Bonus Share Schemes

The Group's Employee Bonus Share Scheme continues to underpin our results. We are certain of achieving the FY15 EBITDA target and I look forward to seeing the vesting of this scheme in 2015 and 2017.

 

I am also pleased to note that a new 2015 Bonus Share Scheme under which eligible employees and the Executive Directors would be able to participate subject to satisfactory personal performance and achievement of EBITDA targets for the years FY16 to FY19 was approved at a General Meeting on 2 July 2014.

 

The Board

In July, Charles McCreevy, Non-Executive Director of the Group, announced his intention not to stand for re-election at the Company's Annual General Meeting. Charles spent over three years at Sports Direct and his skills and experience have been invaluable in this time. On behalf of the Board I would like to thank Charles for his contribution to the business.

 

Our search for a new Finance Director and a replacement for Charles remains ongoing. We are undertaking a thorough process to ensure we appoint the most suitable candidate.

 

Overall

We continue to provide our customers with exceptional quality and unbeatable value, ever mindful of the financial challenges in the broader economy.  

 

I wish to thank all of our employees and other stakeholders for their continued support and the contribution they make to the Group's ongoing success.

 

Keith Hellawell

Non-Executive Chairman

11 December 2014

 

 

 

 



Overview of Financial Performance

 

Summary of Results


26 Weeks ended

26 October 2014

26 Weeks ended

27 October 2013

Change



(£m)

(£m)

%


Revenue

1,432.9

1,345.1

+6.5


Underlying EBITDA

203.1

183.3

+10.8


Underlying profit before tax

160.6

146.2

+9.8


Reported profit before tax

149.7

143.1

+4.6



Pence per share

Pence per share



Underlying EPS(1)

20.8

19.0

+9.5


Reported EPS(2)

19.4

18.6

+4.1


(1) and (2)  Based on 592.3 million and 578.5 million ordinary shares outstanding in FY15 H1 and FY14 H1, respectively

 

Basis of reporting

 

The financial statements for the Group for the 26 weeks ended 26 October 2014 are presented in accordance with International Accounting Standard (IAS) 34 - Interim Financial Reporting which has been adopted for use in the EU (IFRS).

 

The Directors believe that underlying EBITDA, underlying profit before tax and underlying earnings per share provide more useful information for shareholders on the underlying performance of the business than the reported numbers and are consistent with how business performance is measured internally. They are not recognised profit measures under IFRS and may not be directly comparable with "adjusted" profit measures used by other companies.

 

EBITDA is earnings before investment income, finance income and finance costs, tax, depreciation and amortisation and, therefore, includes the Group's share of profit from associated undertakings and joint ventures. Underlying EBITDA is calculated as EBITDA before the impact of foreign exchange, any exceptional or other non-trading items and costs relating to the Employee Bonus Share Schemes.

 

Revenue and margin

 


26 weeks ended

26 October 2014

(£'m)

26 weeks ended

27 October 2013

(£'m)

Change

 

%

Retail




Revenue:




Sports Retail

1,230.9

1,136.1

+8.3

Premium Lifestyle

99.9

102.8

(2.8)

Total retail revenue

1,330.8

1,238.9

+7.4









Total Retail Cost of sales

(744.3)

(703.6)

+5.8











Total Retail gross margin

586.5


535.3


+9.6

Gross margin percentage

44.1%


43.2%


+90bps







 

Brands




Revenue:




Wholesale

86.8

90.8

(4.4)

Licensing

15.3

15.4

(0.6)

Total Brands revenue

102.1

106.2

(3.9)





Cost of sales

(58.4)

(61.7)

(5.3)





Brands gross margin

43.7

44.5

(1.8)

Brands gross margin percentage

 

 

42.8%


41.9%


+90 bps

 

Business Review

 

Overview

 

In the 26 weeks ended 26 October 2014 ("FY15 H1"), Group revenues were up 6.5% to £1,432.9m compared with £1,345.1m for the 26 weeks ended 27 October 2013 ("FY14 H1").  

 

Sports Retail revenue increased 8.3%, benefiting from an 11.1% increase in online revenues.

 

Revenue in the Brands division decreased by 3.9% due to a decline in wholesale sales as we update our wholesale business model.

 

Gross margin for the Group increased 90 basis points to 44.0% (FY14 H1: 43.1%) as a result of the continued broadening of our product range and on-going investment in Group Brands.  The continued growth in revenue and profitability is also attributable to the success of the Employee Bonus Share Scheme.

 

Net debt decreasedin the period by 12.0% to £186.5m (27 April 2014: £212.0m), which is 0.5 times LTM EBITDA(1) (FY14 H1: 0.6 times).

 

Sports Retail division

 

Sports Retail revenues increased 8.3% to £1,230.9m (FY14 H1: £1,136.1m).  This increase was supported by further growth in online sales, up 11.1% to £176.4m. We remain focused on building a profitable online business which complements our existing store-based offering. Since the period end, 'click and collect' has been trialled in c. 400 Sports Direct stores in the UK. We continue to invest in our customer offering, including product range and availability, to ensure this growth trend continues.  During the period, the Sports Retail division gross margin increased 130 basis points to 44.5% (FY14 H1: 43.2%), benefiting from a higher proportion of 'better' and 'best' Group branded product.

 

Sports Retail's operating costs increased by 13.9% in FY15 H1, compared to an increase of 8.3% in revenue and an 11.6% increase in gross profit due to a full year impact and proportionally higher costs in our recently acquired European businesses.  As a result, we grew Sports Retail underlying EBITDA by 8.1% to £195.8m (FY14 H1: £181.2m).

 

At period end, the Group had 434 stores in the UK (excluding Northern Ireland), with a total of c. 4.5m sq. ft.(2) (FY14 H1: c. 4.2m sq. ft.) and an average remaining lease expiry of 5.0 years (excluding Lillywhites Piccadilly).  We continue to adopt a pro-active approach to managing our store portfolio, with the ability to move quickly, as opportunities arise. We are still targeting a total of between 30 and 40 store openings in the UK this year, having opened 18 new stores in the period, including five relocations. We have also opened four concessions currently being trialled within Debenhams stores in the period.

 

During the period we re-located our Oxford Street store to the c. 50,000 sq. ft. former HMV store and are currently undertaking works on a c. 30,000 sq. ft. extension of our Glasgow store, which is due to be completed in Spring 2015. We have also now commenced work on Phase 3 of our Shirebrook campus, which will see a 650,000 sq. ft. extension added to the existing warehouse and office facility, with completion expected in late 2015.

 

Across Europe we have closed four stores in Austria, opened two new stores in Poland and one store in each of Estonia, Portugal, France, Cyprus, Hungary and the Czech Republic. We have also commenced the integration of our Austrian business, with the conversion of 13 Sports Experts stores and five Eybl stores in Austria to the Sportsdirect.com fascia. During the period, we also increased our shareholding in the Icelandic joint venture from 25% to 40%.

 

Through the Group's shareholding in the Heatons chain, sports products are retailed within 15 stores in Northern Ireland and 26 stores in the Republic of Ireland.  The Group's share of Heatons operating result was a £1.5m profit (FY14 H1: £0.7m profit).

 

During the period we established a new fitness division, Sportsdirect Fitness.com, with the purchase of 18 gyms from LA Fitness. Works are also underway to build a 60,000 sq. ft. combined gym and sports retail concept in Aintree, which is expected to be fully open by the end of December 2014. Similar sites are also currently being developed in St Helens and Keighley which we anticipate opening early in 2015.

 

Premium Lifestyle division

 

Sales in the period were down by 2.8% to £99.9m (FY14 H1: £102.8m), largely due to the closure of loss-making USC and former Republic stores since the prior year. Gross margin reduced to 38.4% (FY14 H1: 43.0%), due to stock clearance activity in the period.

 

While supply from major third party brands remains challenging, brands acquired as part of the Republic transaction, e.g. Soulcal, continue to perform well at USC. Growth at Cruise, Flannels and Van Mildert also reflects the Group's buying disciplines and online expertise.

 

Operating costs reduced by 17.6% to £46.2m (FY14 H1: £56.1m) as we begin to benefit from the closure of 20 loss-making USC and former Republic stores since the prior year and the consolidation of back-office functions.

 

Premium Lifestyle EBITDA losses decreased in FY15 H1 to £7.8m (FY14 H1: £11.9m loss).

 

 

Brands division

 

Brands division total revenue decreased 3.9% to £102.1m (FY14 H1: £106.2m).  Wholesale revenues were down 4.4% to £86.8m (FY14 H1: £90.8m) as we continue to update our wholesale business model.

 

Brands gross margin increased by 90 basis points to 42.8% (FY14 H1: 41.9%).  Wholesale gross margins increased 70 basis points to 32.7% (FY14 H1: 32.0%), due to a reduction in stock clearance activity.

 

Licensing revenues in FY15 H1 were down 0.6% to £15.3m (FY14 H1: £15.4m). Our strategic focus remains on delivering further growth in licensing revenues, having signed 29 new license agreements in the first half of the year with contracted minimum royalties of $12m over the life of the contracts.

 

Brands operating costs decreased by 5.3% to £28.7m (FY14 H1: £30.3m) in the period, benefiting from the previous year's consolidation of UK wholesale businesses, while maintaining investment in key Group brands at similar levels to previous years.

 

Underlying EBITDA in the division increased 7.9% to £15.1m (FY14 H1 £14.0m) due to the reduction in operating costs.

 

Outlook

 

Trading since the period end has been in line with management's expectations.  The Group's performance continues to be driven by: (i) investment in product range and availability; (ii) optimisation of in-store and web product offer; and (iii) the growing proportion of 'better' and 'best' Group branded products in key categories.

 

The Board remains confident of achieving at least our full year internal underlying EBITDA target of £360m, before the Employee Bonus Share Scheme charges. Looking to FY16, we remain confident that our continued focus on providing customers with exceptional quality and unbeatable value will deliver another year of profitable growth.

 

 

Dave Forsey

Chief Executive

11 December 2014

 

 

 

 

(1)

LTM EBITDA is the last twelve months historic underlying EBITDA

(2)

Due to differing methodologies, this implies a range between 4.25m sq. ft. - 4.75m sq. ft.

 



Reconciliation of reported to underlying results


           EBITDA

     PBT


FY15 H1

FY14 H1

FY15 H1

FY14 H1


£m

£m

£m

£m

Operating profit

168.8

147.5








Depreciation

29.0

25.1



Amortisation

3.9

3.3



Share of profit/(loss) of associated undertakings

1.7

0.7



Bonus share scheme charge

6.1

6.0








Reported EBITDA/PBT

209.5

182.6

149.7

143.1






Realised FX loss/(profit)

7.7

0.7

7.7

0.7

IAS 39 foreign exchange fair value adjustment on forward currency contracts

-

-

(6.0)

2.3

Fair value adjustment to derivative financial instruments

-

-

23.3

-

Exceptional items

(14.1)

-

(14.1)

 

-

 






Underlying

203.1

183.3

160.6

146.2

 

 

Fair value adjustment to derivative financial instruments represents the movement in fair value of equity options in the period.

 

 

Underlying EBITDA by Business Segment

 


FY15 H1

FY14 H1



£m

£m






Sports Retail

195.8

181.2

8.1%

Premium Lifestyle

(7.8)

(11.9)

(34.5%)

Brands

15.1

14.0

7.9%





Group Underlying EBITDA

203.1

183.3

10.8%





 

Foreign exchange

 

A number of the forward foreign exchange contracts outstanding at 26 October 2014 qualify for hedge accounting and the fair value gain on these contracts of £50.5m has been recognised in Other Comprehensive Income.  At period end, the Group had £675m of US Dollar contracts, sufficient to cover all purchases in UK Sports Retail until the end of the FY16 financial year.  These hedged contracts are at an average rate of $1.69.  The sterling exchange rate with the US dollar at 27 April 2014 was $1.680 and $1.609 at 26 October 2014.

 

Taxation

 

The effective tax rate on profit before tax for FY15 H1 was 23.0% (FY14 H1: 25.0%).  The difference between the prevailing corporate tax rate of 21% and the effective rate reflects depreciation on non-qualifying assets.

 

Strategic investments

 

The Group continued to hold an 11.8% shareholding in JD Sports and Fashion plc and on 2 October 2014 acquired a further 4.60% stake in Debenhams. Including the Group's stake in Highland Group Holdings Limited (House of Fraser), the fair value of the Group's holdings at 26 October 2014 was £142.9m (27 April 2014: £116.5m).  The movement in the fair value of the shares held has been recognised directly in Other Comprehensive Income.

 

The value of the investment in Highland Group Holdings Limited was £11.1m at the period end (FY14: £11.1m) and its valuation will vary depending on the performance of the Highland Group.

 

In June 2014, the Group acquired an interest in 7,251,065 shares in MySale Group plc, representing 4.8% of the issued share capital of MySale.

 

In September 2014, the Group entered into a derivative agreement referencing 23,000,000 shares in Tesco Plc, representing 0.3% of the issued share capital of Tesco.

 

In October 2014 the Group acquired 56,381,164 shares in Debenhams plc for £33.2m, representing 4.6% of the issued share capital of Debenhams. This stake was sold in November 2014 and the Group entered into a derivative agreement referencing 74,185,742 Debenhams shares, equivalent to 6.1% of the issued share capital of Debenhams. Along with the existing derivative agreement entered into in January 2014, these investments represent a 12.7% interest in Debenhams' ordinary shares.

 

The fair value of equity derivative agreements is included within the derivative financial liabilities balance of £30.7m.

 

 

Cash flow and net debt

 

On 25 November 2014 the Group utilised the accordion option under its £688m working capital facility. As a result, the working capital facility has been increased from £688m to £738m. The facility is available until September 2018 and is not secured against any of the Group's fixed assets.

 

The Group also has a £250m working capital facility with Mike Ashley which can be drawn down on request.  This facility was agreed at market terms at its inception and is not secured against any fixed assets. At the period end no balance was due.

 

The Group continues to operate well within its banking covenants and the Board remains comfortable with the Group's available headroom.

 

Net debt decreased during the period to £186.5m (27 April 2014: £212.0m), which is 0.5 times the last twelve months historic underlying EBITDA (FY14 H1: 0.6 times)

 

Capital expenditure amounted to £26.7m (FY14 H1: £31.8m), including £1.6m (FY14 H1: £10.3m) of freehold property.  The Group expects FY15 capital expenditure to be c. £90m, including expenditure on phase 3 of the Shirebrook campus.

 

The analysis of net debt at 26 October 2014 and at 27 April 2014 is as follows:

 


At 26 October 2014

At 27 April 2014


£m

£m

Cash and cash equivalents

106.1

151.0

Borrowings

(292.6)

(363.0)

Net debt

(186.5)

(212.0)

 

Cash Flow

 


26 weeks ended

 26 October 2014

£m

26 weeks ended

 27 October 2013

£m




Underlying EBITDA (pre share scheme costs)

203.1

183.3

Realised profit on forward foreign exchange contracts

(7.7)

(0.6)

Taxes paid

(33.9)

(35.8)




Underlying free cash flow

161.5

146.9




Invested In:



Working capital



Inventory

(89.6)

(49.3)

Receivables, Payables & Other

(2.2)

31.8

Acquisitions (including debt)

(2.3)

(124.1)

Purchase of listed investments

(33.2)

-

Investment income received

1.3

1.3

Capital expenditure

(26.7)

(31.8)

Disposal of freehold property

21.1

-

Finance costs and other financing activities

(4.4)

(4.1)

Net  decrease/(increase) in net debt

25.5

(29.3)

 

 

Employee Bonus Share Schemes

 

Management believes that the Employee Bonus Share Schemes have been instrumental in the strength of the Group's ongoing performance.

 

The 2011 Employee Bonus Share Scheme is a four year scheme based upon achieving underlying EBITDA (before the costs of the scheme) of £215m in FY12, £250m in FY13, £260m in FY14 and £300m in FY15 coupled with the individual employee's satisfactory personal performance.  The scheme requires that all targets are met before the shares vest.  Approximately 5m shares will vest in the summer of 2015 and another 19m shares (including the Executive Bonus Share Scheme) in the summer of 2017.

 

The remaining target for Group underlying EBITDA (before Employee Bonus Share Scheme costs) is:

 

-       FY15: £300m

 

The success of the scheme is demonstrated by ongoing improvements in operational and financial performance including various internal KPIs since the scheme's introduction.  These KPIs include energy consumption, pay versus turnover, stock loss and staff retention.

 

 

Going concern

 

The Group finances its day to day working capital requirements using a £738m facility with 13 financial institutions that is due for renewal in September 2018.

 

The Group's earnings forecast, taking account of reasonable changes in trading performance and expected capital expenditure requirements, show that the Group continues to operate well within its existing bank facilities.

 

The Directors have thoroughly reviewed the Group's performance and position relating to historical results, current trading, forecast performance, cash reserves and financing arrangements.  Additionally, the Directors have also considered the Group's reliance upon its key stakeholders, including customers and suppliers and found no over reliance on any particular stakeholder.  The Directors are therefore confident that the Group will continue in operational existence for the foreseeable future.  On this basis, the Directors continue to adopt the going concern basis for the preparation of the interim financial statements.

 

 

Risks, systems and controls

 

The Board believes that the principal risks and uncertainties for the remaining six months of the current financial year are:

 

Disruption or other adverse events affecting the Group's relationship with any of its key brands or brand suppliers which could have an adverse effect on the Group's business.



The possibility of a deterioration of the economy both in the UK and worldwide and a reduction in consumer confidence and retail spending, which could impact on the performance of the business.

 

Funding and liquidity for the Group's operations are provided through bank loans, overdraft facilities and shareholders' funds.  

 

The Group maintains a system of controls to manage the business and to protect its assets.  We continue to invest in people, systems and IT to manage the Group's operations and to ensure that the Group is financed effectively and efficiently.

 

 

Directors' Responsibility Statement

 

We confirm that to the best of our knowledge:

The condensed set of financial statements has been prepared in accordance with IAS 34 'Interim Financial Reporting' as adopted by the EU;



The interim management report includes a fair review of the information required by:

 

a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events during the first 26 weeks of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining 26 weeks of the year; and

 

b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first 26 weeks of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.

 

Amounts due to and from related parties are disclosed in note 9.

 

With the exception of Charles McCreevy who did not stand for re-election at the Company's Annual General Meeting, the directors of Sports Direct International plc are listed in the Group's 2014 Annual Report and Financial Statements.

 

On behalf of the Board

 

Dave Forsey

Chief Executive

 

11 December 2014



 

INDEPENDENT REVIEW REPORT TO THE MEMBERS OF SPORTS DIRECT INTERNATIONAL PLC

FOR THE 26 WEEKS ENDED 26 OCTOBER 2014

 

Introduction

 

We have reviewed the condensed set of financial statements in the half-yearly financial report of Sports Direct International plc for the 26 weeks ended 26 October 2014 which comprises the Consolidated income statement, the Consolidated statement of comprehensive income, the Consolidated balance sheet, the Consolidated cash flow statement, the Consolidated statement of changes in equity and the related notes.  We have read the other information (the Chairman's statement, the Overview of Financial Performance and the Group highlights) contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

 

This report is made solely to the company's members, as a body, in accordance with International Standard on Review Engagements (UK and Ireland) 2410, ''Review of Interim Financial Information Performed by the Independent Auditor of the Entity''.  Our review work has been undertaken so that we might state to the company those matters we are required to state to them in an independent review report and for no other purpose.  To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, and the company's members as a body, for our review work, for this report, or for the conclusion we have formed.

 

Directors' Responsibilities

 

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

 

As disclosed in note 1, the annual financial statements of the group are prepared in accordance with IFRS as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, ''Interim Financial Reporting,'' as adopted by the European Union.

 

Our Responsibility

 

Our responsibility is to express a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

 

Scope of Review

 

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, ''Review of Interim Financial Information Performed by the Independent Auditor of the Entity''. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

 

Conclusion

 

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the 26 weeks ended 26 October 2014 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

 

 

 

 

 

Grant Thornton UK LLP

Auditor

London

11 December 2014



 

UNAUDITED CONSOLIDATED INCOME STATEMENT FOR THE 26 WEEKS ENDED 26 OCTOBER 2014

 

 








26 weeks
ended
   26 October

 2014

 

26 weeks
ended
   27 October

 2013

 

52 weeks
ended
27 April
2014

 


Notes

£'000

£'000

£'000

Continuing operations:





Revenue

2

1,432,898

1,345,102

2,705,958

Cost of sales


(802,681)

(765,272)

(1,551,036)






Gross profit


630,217

579,830

1,154,922

Selling, distribution and administrative expenses


(479,690)

(439,067)

(908,843)

Other operating income


4,134

6,811

8,583

Exceptional items

3

14,149

-

(5,531)






Operating profit

2

168,810

147,574

249,131






Investment income


1,263

1,271

7,017

Finance income


6,343

1,446

891

Finance costs

4

(28,327)

(7,903)

(19,853)

Share of profit of associated undertakings and joint ventures


1,643

676

2,266






Profit before taxation


149,732

143,064

239,452

Taxation


(34,438)

(35,766)

(59,839)






Profit for the period

2

115,294

107,298

179,613






Attributable to:





Equity holders of the Group


114,629

107,559

180,245

Non-controlling interests


665

(261)

(632)






Profit for the period

2

115,294

107,298

179,613

 

 

Earnings per share from total and continuing operations attributable to the equity shareholders

 



Pence per share

Pence per share

 

Pence per share

 






Basic earnings per share

5

19.4

18.6

30.8

Diluted earnings per share

5

18.6

17.4

29.2

Underlying basic earnings per share

5

20.8

19.0

32.1






 

The accompanying notes form an integral part of this interim financial report.



 

UNAUDITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE 26 WEEKS ENDED 26 OCTOBER 2014

 








26 weeks
ended
26 October

2014

 

26 weeks
ended
27 October

2013

 

52 weeks
ended
27 April
2014

 


Notes

£'000

£'000

£'000






Profit for the period

2

115,294

107,298

179,613






Other comprehensive income










Items that will not be reclassified subsequently to profit or loss





Actuarial (losses)/gains on defined benefit pension schemes


(1,304)

4,589

3,860

Taxation on items not reclassified


274

(1,087)

(698)






Items that will be reclassified subsequently to profit or loss





Exchange differences on translation of foreign operations


13,465

(14,768)

(33,118)

Exchange differences on hedged contracts - recognised in the period


26,860

(7,593)

(3,737)

Exchange differences on hedged contracts - reclassification in the period


23,623

(8,907)

(17,909)

Fair value adjustment in respect of available for sale financial assets


(6,783)

17,903

57,373

Taxation on items subsequently reclassified


(10,601)

-

(4,170)

Other comprehensive income for the period, net of tax


45,534

(9,863)

1,601






Total comprehensive income for the period


160,828

97,435

181,214






Attributable to:





Equity holders of the Parent


160,163

97,696

181,846

Non-controlling interests


665

(261)

(632)








160,828

97,435

181,214

 

The accompanying notes form an integral part of this interim financial report.

 



UNAUDITED CONSOLIDATED BALANCE SHEET AS AT 26 OCTOBER 2014

 



26 October
2014

 

27 October
2013

 

27 April
2014

 


Notes

£'000

£'000

£'000

ASSETS





Non-current assets





Property, plant and equipment


406,251

421,981

412,361

Intangible assets


255,337

264,781

255,109

Investments in associated undertakings and joint ventures


45,692

32,842

41,763

Available-for-sale financial assets


142,883

66,084

116,504

Deferred tax assets


25,359

28,839

31,130








875,522

814,527

856,867






Current assets





Inventories


655,081

557,708

565,479

Trade and other receivables


165,960

134,696

123,014

Derivative financial assets


49,758

7,819

4,355

Cash and cash equivalents


106,103

164,505

151,024








976,902

864,728

843,872






TOTAL ASSETS


1,852,424

1,679,255

1,700,739






EQUITY AND LIABILITIES





Share capital


64,060

64,060

64,060

Share premium


874,300

874,300

874,300

Treasury shares


(56,234)

(56,234)

(56,234)

Permanent contribution to capital


50

50

50

Capital redemption reserve


8,005

8,005

8,005

Foreign currency translation reserve


18,745

23,630

5,280

Reverse combination reserve


(987,312)

(987,312)

(987,312)

Own share reserve


(13,251)

(13,251)

(13,251)

Hedging reserve


44,858

(479)

(5,625)

Retained earnings


1,030,689

846,330

931,819








983,910

759,099

821,092

Non-controlling interests


(2,873)

(12,312)

(3,538)






Total equity


981,037

746,787

817,554






Non-current liabilities





Borrowings

6

283,622

337,530

6,764

Retirement benefit obligations


15,497

15,899

15,350

Deferred tax liabilities


30,726

23,100

24,046

Provisions


36,886

35,108

37,780








366,731

411,637

83,940






Current liabilities





Derivative financial liabilities


30,696

8,638

18,665

Trade and other payables


434,017

477,352

392,019

Borrowings

6

8,932

10,276

356,226

Current tax liabilities


31,011

24,565

32,335








504,656

520,831

799,245






Total liabilities


871,387

932,468

883,185






TOTAL EQUITY AND LIABILITIES


1,852,424

1,679,255

1,700,739

The accompanying notes form an integral part of this interim financial report.



 

UNAUDITED CONSOLIDATED CASH FLOW STATEMENT FOR THE 26 WEEKS ENDED 26 OCTOBER 2014

 








26 weeks
ended
26 October 2014

 

26 weeks
ended
27 October 2013

 

52 weeks
ended
27 April
2014

 


Notes

£'000

£'000

£'000






Cash inflow from operating activities

8

103,718

165,011

222,785

Income taxes paid


(33,902)

(35,827)

(55,730)






Net cash inflow from operating activities


69,816

129,184

167,055






Cash flow from investing activities





Proceeds on disposal of property, plant and equipment


21,150

-

-

Proceeds on disposal of listed investments


-

-

49,394

Purchase of associate, net of cash acquired


(2,300)

-

(8,000)

Purchase of subsidiaries, net of cash acquired


(172)

(16,485)

(15,407)

Purchase of intangible assets


(3)

(162)

(1,827)

Purchase of property, plant and equipment


(26,715)

(31,610)

(67,304)

Purchase of listed investments


(33,162)

-

(55,467)

Investment income received


1,277

1,271

1,604

Finance income received


335

501

891






Net cash outflow from investing activities


(39,590)

(46,986)

(96,116)






Cash flow from financing activities





Finance costs paid


(4,712)

(4,409)

(8,111)

Borrowings drawn down


51,336

181,692

300,910

Borrowings repaid


(118,730)

(247,408)

(348,452)

Exercise of option over non-controlling interests



-

(11,678)






Net cash outflow from financing activities


(72,106)

(69,624)

(67,331)











Net (decrease) / increase in cash and cash equivalents including

overdrafts


(41,880)

12,574

3,608

Cash and cash equivalents including overdrafts at beginning of period


145,282

141,674

141,674






Cash and cash equivalents including overdrafts at the period end


103,402

154,248

145,282

 

The accompanying notes form an integral part of this interim financial report.



UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE 26 WEEKS ENDED 26 OCTOBER 2014


Treasury

shares

Foreign

currency translation

Own

share reserve

Retained earnings

Other reserves

Sub-

total

Non-controlling interests

Total


£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000










At 28 April 2013

(56,234)

38,398

(64,375)

752,018

(24,876)

644,931

(254)

644,677

Share-based payments

-

-

-

1,000

-

1,000

-

1,000

Vesting of Share-based payments

-

-

51,124

(51,124)

-

-

-

-

Current Tax on share schemes

-

-

-

30,362

-

30,362

-

30,362

Deferred Tax on share schemes

-

-

-

(14,890)

-

(14,890)

-

(14,890)

Non-controlling interest - acquisition

-

-

-

-

-

-

(11,645)

(11,645)

Non-controlling interest - disposal

-

-

-

-

-

-

(152)

(152)

Transactions with owners

-

-

51,124

(34,652)

-

16,472

(11,797)

4,675

Profit for the financial period

-

-

-

107,559

-

107,559

(261)

107,298

Cashflow hedges

 - recognised in the period

-

-

-

-

(7,593)

(7,593)

-

(7,593)

 - reclassification

-

-

-

-

(8,907)

(8,907)

-

 (8,907)

Actuarial gains on defined benefit pension schemes

-

-

-

4,589

-

4,589

-

4,589

Fair value adjustment in respect of available for sale financial assets

-

-

-

17,903

-

17,903

-

17,903

Taxation on items taken to comprehensive income

-

-

-

(1,087)

-

(1,087)

-

(1,087)

Translation differences - group

-

(14,768)

-

-

-

(14,768)

-

(14,768)

Total comprehensive income

-

(14,768)

-

128,964

(16,500)

97,696

(261)

97,435

At 27 October 2013

(56,234)

23,630

(13,251)

846,330

(41,376)

759,099

(12,312)

746,787




















Treasury

shares

Foreign

currency translation

Own

share reserve

Retained earnings

Other reserves

Sub-

total

Non-controlling interests

Total


£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000










At 27 April 2014

(56,234)

5,280

(13,251)

931,819

(46,522)

821,092

(3,538)

817,554

Share-based payments

-

-

-

2,655

-

2,655

-

2,265

Transactions with owners

-

-

-

2,655

-

2,655

-

2,655

Profit for the financial period

-

-

-

114,629

-

114,629

665

115,294

Cashflow hedges

 - recognised in the period

-

-

-

-

26,860

26,860

-

26,860

 - reclassification

-

-

-

-

23,623

23,623

-

 23,623

Actuarial gains on defined benefit pension schemes

-

-

-

(1,304)

-

(1,304)

-

(1,304)

Fair value adjustment in respect of available for sale financial assets

-

-

-

(6,783)

-

(6,783)

-

(6,783)

Taxation on items taken to comprehensive income

-

-

-

(10,327)

-

(10,327)

-

(10,327)

Translation differences - group

-

13,465

-

-

-

13,465

-

13,465

Total comprehensive income

-

13,465

-

96,215

50,483

160,163

665

160,828

At 26 October 2014

(56,234)

18,745

(13,251)

1,030,689

3,961

983,910

(2,873)

981,037

 

The Company holds 42,137,508 ordinary shares in Treasury. The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements of foreign subsidiaries and associates.

 

At 26 October 2014, the Sports Direct Employee Benefit Trust held 6,070,490 shares.

 

The credit for the share based payment charge does not equal the charge per the income statement as it excludes amounts recognised in the balance sheet in relation to the expected national insurance contributions for the shares and a transfer of accrued national insurance contributions in respect of previous years' charges which had previously been recognised in equity. The amount transferred is not material to the interim financial statements.



NOTES TO THE FINANCIAL INFORMATION FOR THE 26 WEEKS ENDED 26 OCTOBER 2014

 

1. General information and basis of preparation

The results for the first half of the financial year have not been audited and are prepared on the basis of the accounting policies set out in the Group's 2014 Annual Report and Financial Statements. The financial information in the Group's Annual Report and Financial Statements is prepared in accordance with International Financial Reporting Standards as adopted by the European Union ("IFRS").The Interim Results have been prepared in accordance with International Accounting Standard (IAS) 34 - "Interim Financial Reporting" as endorsed by the European Union and the Disclosure and Transparency Rules of the Financial Conduct Authority (DTR). The principal accounting policies have remained unchanged from the prior financial information for the 52 weeks ended 27 April 2014. This consolidated financial information for the period does not constitute statutory financial statements within the meaning of s434 of the Companies Act 2006.

 

The summary of results for the 52 weeks ended 27 April 2014 is an extract from the published Annual Report and Financial Statements which have been reported on by the Group's auditors and delivered to the Registrar of Companies. The audit report was unqualified and did not contain a statement under s498 (2) or s498 (3) of the Companies Act 2006.

 

2. Segmental analysis

Operating segments 

IFRS 8 - 'Operating Segments' requires the Group's segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the Chief Operating Decision Maker to assess performance and allocate resources across each operating segment.

 

The Chief Operating Decision Maker has been identified as the Executive Directors and the operating segments are identified as the store fascia or brand, in line with the internal reporting to the Executive Directors.

 

Sales and gross profit for each operating segment, as well as underlying EBITDA, are the main measures used by the Executive Directors to assess performance.

 

In accordance with paragraph 12 of IFRS 8 the Group's operating segments have been aggregated into the following reportable segments:

1.     Sports Retail - includes the results of the UK and International retail network of sports stores along with related websites;

2.     Premium Lifestyle - includes the results of the premium retail businesses such as Cruise, Flannels, USC and Van Mildert; and

3.     Brands - includes the results of the Group's portfolio of internationally recognised brands such as Everlast, Lonsdale, Dunlop and Slazenger.

 

The basis of the reportable segments changed in the 2014 Annual Report, reflecting changes that have been made to internal reports used to assess performance and allocate resources across each operating segment. UK Sports Retail and International Sports Retail were previously reported as separate segments. These have now been aggregated to form the reportable segment: Sports Retail. The prior year disclosures have been restated to reflect this change. Information regarding the Group's reportable segments for the period ended 26 October 2014, as well as a reconciliation of reported profit for the period to underlying EBITDA, is presented below:

 

Segmental information for the 26 weeks ended 26 October 2014:

 



Retail


Brands



       

Sports Retail

Premium Lifestyle

Total Retail

Total

Eliminations 

Total 


£'000

£'000

£'000

£'000

£'000

£'000

Sales to external customers

1,230,886

 

 

99,926

1,330,812

102,086

-

1,432,898

 

Sales to other segments

12

 

-

12

13,247

(13,259)

-








 

Revenue

1,230,898

 

99,926

1,330,824

115,333

(13,259)








Gross profit

548,080

 

38,428

586,508

43,779

-

630,217








Operating profit/(loss) before foreign exchange and exceptional items

160,577

 

(9,445)

151,132

11,245

-

162,377

Operating Profit

166,855

(9,508)

157,347

11,463

-

168,810

 

Investment income










 1,263

Finance income










6,343

Finance costs










(28,327)

Share of profits of associated undertakings and joint ventures










1,643












Profit before taxation










149,732

Taxation










(34,438)












Profit for the period










115,294












 

 

Reconciliation of operating profit to underlying EBITDA for the 26 week period ending 26 October 2014.

 



Sports Retail

Premium Lifestyle

Brands

Total


£'000

£'000

£'000

£'000






Operating profit/(loss)

166,855

(9,508)

11,463

168,810

Depreciation

26,791

1,300

969

29,060

Amortisation

757

344

2,852

3,953

Share of profit/(loss) of associated undertakings

1,593

-

50

1,643

Charges for the Bonus Share Schemes

6,057

-

-

6,057

Reported EBITDA

202,053

(7,864)

15,334

209,523






Exceptional items

(14,149)

-

-

(14,149)

Realised FX (Gain)/Loss

7,871

63

218

7,716






Underlying EBITDA

195,775

(7,801)

15,116

203,090

 

 

Sales to other segments are priced at cost plus a 10% mark-up.

Other segment items included in the income statement for the 26 weeks ended 26 October 2014:

 


Sports Retail

Premium Lifestyle

Brands

 

Total

 



£'000

£'000

£'000

Depreciation

26,791

1,300

969

29,060

Amortisation and impairment

757

344

2,852

3,953






 

Information regarding segment assets and liabilities as at 26 October 2014: 

 



Retail

Brands

Eliminations

Total


Sports

Retail

Premium Lifestyle





£'000

£'000

£'000

£'000

£'000

Investments in associated undertakings and joint

venture

46,055

-

(363)

-

45,692

Other assets

1,810,388

99,314

202,157

(305,127)

1,806,731

Total assets

1,856,443

99,314

201,794

(305,127)

1,852,424

Total liabilities

(942,320)

(133,674)

(100,520)

305,127

(871,387)

 

Segmental information for the 26 weeks ended 27 October 2013:

                                                                                                                                                       



Retail


Brands



       

Sports Retail

Premium Lifestyle

Total Retail

Total

Eliminations 

Total 


£'000

£'000

£'000

£'000

£'000

£'000

Sales to external customers

1,136,044

 

 

102,843

1,238,887

106,215

-

1,345,102

 

Sales to other segments

8,455

 

-

8,455

14,737

(23,192)

-








 

Revenue

1,144,499

 

102,843

1,247,342

120,952

(23,192)

1,345,102








Gross profit

491,128

 

44,179

535,307

44,523

-

579,830








Operating profit/(loss) before foreign exchange and exceptional items

150,870

 

 

(13,668)

137,202

11,017

-

148,219

Operating Profit

150,327

(13,615)

136,712

10,862


147,574

                                                                                                 

Investment income










1,271

Finance income










1,446

Finance costs










(7,903)

Share of profits of associated undertakings and joint ventures










676












Profit before taxation










143,064

Taxation










  (35,766)












Profit for the period










107,298












 

 

Reconciliation of operating profit to underlying EBITDA for the 26 week period ending 27 October 2013:

 


Sports Retail

Premium Lifestyle

Brands

Total


£'000

£'000

£'000

£'000






Operating profit/(loss)

150,327

(13,615)

10,862

147,574




Depreciation

22,789

1,448

867

25,104

Impairment

133

-

-

133

Amortisation

468

344

2,319

3,131

Share of profit/(loss) of associated undertakings

899

-

(223)

676

Charges for the Bonus Share Schemes

6,018

-

-

6,018

Reported EBITDA

180,634

(11,823)

13,825

182,636




Realised FX Loss / (Gain)

543

(53)

155

645






Underlying EBITDA

181,177

(11,876)

13,980

183,281

 

 

Sales to other segments are priced at cost plus a 10% mark-up.

Other segment items included in the income statement for the 26 weeks ended 27 October 2013:

 


Sports Retail

 

Premium Lifestyle

Brands

 

Total

 


£'000

£'000

£'000

£'000

Depreciation

22,789

1,448

867

25,104

Amortisation and impairment

601

344

2,319

3,264






Information regarding segment assets and liabilities as at 27 October 2013: 

 


Retail

Brands

Eliminations

Total


Sports

Retail

Premium Lifestyle





£'000

£'000

£'000

£'000

£'000

Investments in associated undertakings and joint ventures

33,065

-

(223)

-

32,842

Other assets

1,545,079

30,234

182,616

(111,516)

1,646,413

Total assets

1,578,144

30,234

182,393

(111,516)

1,679,255

Total liabilities

(902,733)

(47,809)

(93,442)

111,516

(932,468)

 

Segmental information for the 52 weeks ended 27 April 2014:

 

This information is available in the 2014 annual report.

 

3. Exceptional items


26 weeks    ended

26 October 2014    (£'000)

26 weeks     ended

27 October 2013         (£'000)

52 weeks ended

27 April 2014 (£'000)

Profit on disposal of freehold property

14,149

-

-

Impairment of tangible assets

-

-

(5,531)


14,149

-

(5,531)

 

On 20 June 2014 the Group sold a Freehold Property for £21.2m and then entered into an agreement to lease the property back from the buyer.

 

4. Finance costs

 


26 weeks    ended

26 October 2014    (£'000)

26 weeks     ended

27 October 2013         (£'000)

52 weeks ended

27 April 2014 (£'000)

Interest on bank loans and overdrafts

4,654

4,409

7,513

Interest on other loans and finance leases

233

-

600

Interest on retirement benefit obligations

178

1,210

547

Fair value adjustment to derivative financial instruments (1)

23,262

2,284

11,193


28,327

7,903

19,853

 

(1)   The fair value adjustment to derivative financial instruments relates to differences between the fair values of derivative financial instruments not designated for hedge accounting from one period end to the next. The majority of the fair value loss in the current period relates to equity options.

 

5. Earnings per share

 

For diluted earnings per share, the weighted average number of shares, 592,294,371 (FY14 H1: 578,454,000), is adjusted to assume conversion of all dilutive potential ordinary shares under the Group's bonus share schemes, being 24,200,000 (FY14 H1: 40,736,000) to give the diluted weighted average number of shares of 616,494,371 (FY14 H1: 619,190,000).

 

The number of dilutive ordinary shares under the Group's bonus share schemes has been calculated on a weighted average basis to take account of any shares that vested during the period.



 

Basic and diluted earnings per share









26 weeks
ended
26 October
2014 

26 weeks
ended
26 October
2014 

26 weeks
ended
27 October
2013 

26 weeks
ended
27 October
2013 

52 weeks
ended
27 April
2014 

52 weeks
ended
27 April
2014

Basic

£'000

Diluted

£'000

Basic

£'000

Diluted

£'000

Basic

£'000

Diluted

£'000








Profit for the period attributable to the equity holders of the Group

114,629

114,629

107,559

107,559

180,245

180,245







Number in thousands

Number in thousands

Number in thousands







Weighted average number of shares

592,294

616,494

578,454

619,190

585,514

618,190








Pence per share

Pence per share

Pence per share








Earnings per share

19.4

18.6

18.6

17.4

30.8

29.2

 

Underlying earnings per share

 

The underlying earnings per share reflects the underlying performance of the business compared with the prior year and is calculated by dividing underlying earnings by the weighted average number of shares. Underlying earnings is used by management as a measure of profitability within the Group. Underlying earnings is defined as profit for the period attributable to equity holders of the parent for each financial period but excluding the post tax effect of realised foreign exchange in selling and administration costs, the IAS 39 fair value adjustment on derivative financial instruments in finance income/costs, exceptional costs and the profit/loss on sale of strategic investments.

 

The Directors believe that the underlying earnings before exceptional items and underlying earnings per share measures provide additional useful information for shareholders on the underlying performance of the business, and are consistent with how business performance is measured internally.  Underlying earnings is not a recognised profit measure under IFRS and may not be directly comparable with "adjusted" profit measures used by other companies.


26 weeks
ended
26 October
2014 

26 weeks
ended
26 October
2014 

26 weeks
ended
27 October
2013 

26 weeks
ended
27 October
2013 

52 weeks
ended
27 April
2014

52 weeks
ended
27 April
2014


Basic

£'000

Diluted

£'000

Basic

£'000

Diluted

£'000

Basic

£'000

Diluted

£'000








Profit for the period

114,629

114,629

107,559

107,559

180,245

180,245

Post tax adjustments to profit for the period for the following exceptional items:







Realised loss/(gain) on forward foreign exchange contracts

5,941

5,941

477

477

(1,373)

(1,373)

Fair value adjustment to forward foreign exchange contracts

13,286

13,286

1,690

1,690

8,395

8,395

Profit on disposal of listed investments

-

-

-

-

(4,060)

(4,060)

Profit on disposal of freehold property

(10,895)

(10,895)

-

-

-

-

Impairment of fixed assets

-

-

-

-

4,148

4,148

Impairment of goodwill

-

-

133

133

284

284















Underlying profit for the period

122,961

122,961

109,859

109,859

187,639

187,639









Number in thousands

 Number in thousands

Number in thousands








Weighted average number of shares

592,294

616,494

578,454

619,190

585,514

618,190








Pence per share

Pence per share

Pence per share








Earnings per share

20.8

19.9

19.0

17.7

32.1

30.3

 



6. Borrowings

 


26 October
2014 

27 October
2013 

27 April
2014 


£'000

£'000

£'000

Non-current:




Bank and other loans

283,622

337,530

6,764

Obligations under finance leases

-

-

-






283,622

337,530

6,764





Current:




Bank overdrafts

2,700

10,257

5,742

Bank and other loans

6,232

-

350,484

Obligations under finance leases

-

19

-






8,932

10,276

356,226





Total borrowings:




Bank overdrafts

2,700

10,257

5,742

Bank and other loans

289,854

337,530

357,248

Obligations under finance leases

-

19

-






292,554

347,806

362,990





The analysis of the Group's bank and other loan borrowings other than overdrafts is as follows:

 


26 October
2014

27 October
2013 

27 April
2014 

Borrowings - Sterling

221,427

250,602

240,731

Borrowings - Other

68,427

86,928

116,517






289,854

337,530

357,248





 



7. Financial Instruments

 

(a) Financial assets and liabilities by category

The carrying values of financial assets and liabilities, which are principally denominated in Sterling or US dollars, were as follows:

 


Loans and

receivables

(£'000)

 

Assets at fair

value through

profit and loss

(£'000)

Available for sale

financial assets

(£'000)

Non-financial assets

(£'000)

 

Total

(£'000)

 

Assets at 26 October 2014

Property, plant and equipment

-

-

-

406,251

406,251

Intangible assets

-

-

-

255,337

255,337

Investments in associated undertakings and joint ventures

-

-

-

45,692

45,692

Available-for-sale financial assets

-

-

142,883

-

142,883

Deferred tax assets

-

-

-

25,359

25,359

Inventories

-

-

-

655,081

655,081

Derivative financial assets

-

49,758

-

-

49,758

Trade and other receivables

56,012

-

-

109,948

165,960

Cash and cash equivalents

106,103

-

-

-

106,103


162,115

49,758

142,883

1,497,668

1,852,424


Assets at 27 April 2014

Property, plant and equipment

-

-

-

412,361

412,361

Intangible assets

-

-

-

255,109

255,109

Investments in associated undertakings and joint ventures

-

-

-

41,763

41,763

Available-for-sale financial assets

-

-

116,504

-

116,504

Deferred tax assets

-

-

-

31,130

31,130

Inventories

-

-

-

565,479

565,479

Trade and other receivables

60,851

-

-

62,163

123,014

Derivative financial assets

-

4,355

-

-

4,355

Cash and cash equivalents

151,024

-

-

-

151,024


211,875

4,355

116,504

1,368,005

1,700,739

 

Assets at 27 October 2013

Property, plant and equipment

-

-

-

421,981

421,981

Intangible assets

-

-

-

264,781

264,781

Investments in associated undertakings and joint ventures

-

-

-

32,842

32,842

Available-for-sale financial assets

-

-

66,084

-

66,084

Deferred tax assets

-

-

-

28,839

28,839

Inventories

-

-

-

557,708

557,708

Trade and other receivables

69,279

-

-

65,417

134,696

Derivative financial assets

-

7,819

-

-

7,819

Cash and cash equivalents

164,505

-

-

-

164,505


233,784

7,819

66,084

1,371,568

1,679,255

 



 


Loans and payables

(£'000)

Liabilities at fair value through profit and loss

(£'000)

Non-financial liabilities

(£'000)

Total

(£'000)

 

Liabilities at 26 October 2014





Non-current borrowings

283,622

-

-

283,622

Retirement benefit obligations

-

-

15,497

15,497

Deferred tax liabilities

-

-

30,726

30,726

Provisions

-

-

36,886

36,886

Derivative financial liabilities

-

30,696

-

30,696

Trade and other payables

268,612

-

165,405

434,017

Current borrowings

8,932

-

-

8,932

Current tax liabilities

-

-

31,011

31,011


561,166

30,696

279,525

871,387


Liabilities at 27 April 2014





Non-current borrowings

6,764

-

-

6,764

Retirement benefit obligations

-

-

15,350

15,350

Deferred tax liabilities

-

-

24,046

24,046

Provisions

-

-

37,780

37,780

Derivative financial liabilities

-

18,665

-

18,665

Trade and other payables

239,463

-

152,556

392,019

Current borrowings

356,226

-

-

356,226

Current tax liabilities

-

-

32,335

32,335


602,453

18,665

262,067

883,185






Liabilities at 27 October 2013





Non-current borrowings

337,530

-

-

337,530

Retirement benefit obligations

-

-

15,899

15,899

Deferred tax liabilities

-

-

23,100

23,100

Provisions

-

-

35,108

35,108

Derivative financial liabilities

-

8,638

-

8,638

Trade and other payables

248,449

-

228,903

477,352

Current borrowings

10,276

-

-

10,276

Current tax liabilities

-

-

24,565

24,565


596,255

8,638

327,575

932,468

 

Carrying values do not materially differ from fair value.

 

Fair value hierarchy

The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:

 

• Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities;

 

• Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly; and

 

• Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data.

 

As at 26 October 2014, the only financial instruments held at fair value were Derivative financial assets and liabilities, which are classified as Level 2, and Available-for-sale financial assets, which are classified as Level 1 except for Highland Group Holdings, which is classified as Level 3. Highland Group Holdings is held at management's estimate of fair value based on publicly available data.

 

The Group has entered into a number of put options referencing listed company shares. To the extent that the market price of these shares is less than an agreed price on expiry of the put option, the Group has the right to elect whether to settle the put option by acquiring ordinary shares or, by paying the cash settlement value of the put option. Sports Direct is required to transfer cash collateral to cover its obligations under the Put Option. The amount of collateral required during the life of the Put Option can increase or decrease by reference to the underlying market price of the shares. 



8. Cash inflows from operating activities

 


26 weeks
ended
26 October
2014 

26 weeks
ended
27 October
2013 

52 weeks
ended
27 April
2014 


£'000

£'000

£'000





Profit before taxation

149,732

143,064

239,452

Net finance costs

21,984

6,457

18,962

Other Investment income

(1,263)

(1,271)

(7,017)

Share of profit of associated undertakings and joint ventures

(1,643)

(676)

(2,266)





Operating profit

168,810

147,574

249,131

Depreciation

29,060

25,104

56,963

Amortisation charge

3,953

3,264

6,832

Loss on disposal of intangibles

-

-

5,815

Profit on disposal of intangibles

496

-

-

Defined benefit pension plan current service cost

11

6

22

Defined benefit pension plan employer contributions

(1,360)

(1,354)

(2,708)

Share based payments

6,057

6,018

11,927





Operating cash inflow before changes in working capital

207,027

180,612

327,982

Increase in receivables

(42,634)

(27,054)

(18,241)

Increase in inventories

(89,603)

(49,254)

(52,521)

Increase / (decrease) in payables

28,928

60,707

(34,435)





Cash inflows from operating activities

103,718

165,011

222,785

 

 

Included within the movement in debtors are amounts held as collateral against equity derivatives.

 

9. Related party transactions

The Group has taken advantage of the exemptions contained within IAS 24 - "Related Party Disclosures" from the requirement to disclose transactions between Group companies as these have been eliminated on consolidation.

The Group entered into the following material transactions with related parties:

26 weeks ended  26 October 2014

 

 

Related party

Relationship  

Sales

Purchases  

 

Trade and

other
receivables

Trade and

other
payables



£'000

£'000

£'000

£'000







Heatons

Associate

16,560

-

5,648

-

Brasher Leisure Limited

Associate

5,887

-

3,441

-

Rangers Retail Limited

Associate

2,487

-

398

-

Newcastle United Football Club

Connected persons

1,174

-

519

-

MST

Associate

337

-

4,939

-

The Group has a £250m working capital facility with Mike Ashley which can be drawn down on request.  This facility was agreed at market terms at its inception. This facility is not secured against any fixed assets.  On 6th October 2014 the Group made a drawdown of £40 million against this facility which was repaid in full on 20th October 2014. At the period end no balance was due.

 

26 weeks ended  27 October 2013

 

 

Related party

Relationship  

Sales

Purchases  

Trade and

other
receivables

Trade and

other
payables



£'000

£'000

£'000

£'000







Heatons

Associate

15,609

-

5,643

-

Brasher Leisure Limited

Associate

4,910

-

2,309

-

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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