Interim Results

RNS Number : 4193T

Sports Direct International Plc

13 December 2012

 



13^th December 2012

Sports Direct International plc

("Sports Direct", "the Group" or "the Company")

Interim Results

For the 26 weeks to 28 October 2012

	2013 H1	2012 H1
	£m	£m
Group revenue	1,088.9	888.6	+22.5%
UK Sports Retail(1)	796.9	674.7	+18.1%
International Retail	90.6	81.3	+11.4%
Premium Lifestyle	56.1	22.4	+150.4%
Brands	106.9	92.4	+15.7%
Group gross margin	41.2%	41.5%	-30 bps
UK Sports Retail	42.3%	42.2%	+10 bps
Underlying EBITDA (pre share schemes costs)(2)	163.2	139.2	+17.2%
Underlying profit before tax (PBT) (2) (3)	125.1	99.0	+26.4%
Reported profit before tax	125.2	100.3	+24.8%
Underlying earnings per share(2) (3)	16.05p	12.38p	+29.6%
Reported earnings per share	16.07p	12.54p	+28.1%

Key highlights

·      Group Revenue up 22.5% to £1,088.9m with significant growth across all divisions

·      Sports online sales growth of 54% - now representing 12.5% of total Sports Retail sales (2012 H1: 9.5%)

·      Group Underlying EBITDA up 17.2% to £163.2m (2012 H1: £139.2m)

·      Underlying free cash generation of £143m

·      Opened in four new European countries

·      Acquisition of the Flannels Group for the Premium Lifestyle division

·      Invested in inventory and acquisitions while maintaining a strong balance sheet

·      Phase 2 of the Shirebrook expansion now fully operational

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

"The first half has been another record period for Sports Direct with the London 2012 Olympics and Paralympics playing a significant part in the Group's strong results. There is no doubt that Team GB's outstanding performance has helped increase the awareness and popularity of sport across the UK, and that we have maintained our position as the consumers' champion.

"The Group continues to deliver growth across its divisions and we have maintained our investment in margin, inventory and extra group marketing, while also investing for future growth, particularly in our International and e-Commerce divisions.

"As stated in October, the Board remains confident of reaching our full year targeted underlying EBITDA of £270m (before the charge for the Bonus Share Schemes)."

The Company will report its Q3 Interim Management Statement on Thursday 21^st February 2013.

(1)	Excluding revenue from the 20 stores acquired from JJB Sports plc during the period
(2)	Underlying EBITDA, underlying profit before taxation and underlying EPS excludes 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 bonus share scheme charge
(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 financing income/costs, but includes the bonus share scheme charge

Sports Direct International plc Dave Forsey, Chief Executive Bob Mellors, Group Finance Director	T:  0845 164 9229
FTI Consulting Jonathon Brill Alex Beagley	T:  0207 831 3113

Georgia Mann

Chairman's Statement

I am delighted to report the Group's strong operational and financial performance.  Growth has been achieved across the business with revenue and underlying EBITDA growing impressively.  The Group has continued to deliver strong cash generation and our balance sheet remains solid.  Our industry leading position, as the consumers' champion offering an unmatched range of products at the best available prices, ensures we are well placed for the future.

Significant developments in 2013 H1

We grew Group revenue 22.5%, and underlying Group EBITDA (pre share schemes costs) by 17.2%.  This performance was driven by our focus on constantly improving our core performance - enhancing the quality of our stores, investing in staff training and expanding our range of products - and further expansion into newer areas, assisted by the Euro 2012Championship and the London Olympics.

Our online business has developed significantly, growing sales by 54% (which now represents 12.5% of total Sports Retail revenue in the period), and the second phase of the expansion of our National Distribution Centre in Shirebrook has now been completed, with phase three due to commence in FY 2014.

In the first quarter, we acquired the Flannels Group ("Flannels"), a valuable addition to our Premium Lifestyle division alongside Cruise, Van Mildert and USC.  In the second quarter we purchased key assets from the administrators of JJB Sports plc ("JJB"). The Group acquired 20 stores, substantially all of the stock of the business and the Slazenger Golf brand licenses, as well as JJB's Freehold property in Wigan.

Employee Bonus Share Scheme

The Employee Bonus Share Scheme - which we believe is one of the most wide-reaching share schemes in operation in the UK - continues to aid staff retention and motivation, with the first vesting of the 2009 Scheme rewarding 1,750 employees in August 2012.  The second vesting is due in August 2013. If all four stretch EBITDA targets through to FY 2015 are met, assuming no employee departures, the 2011 scheme will reward c.3,000 employees.  We have already met the FY 2012 target and are confident of achieving the same in FY 2013.

Super-Stretch Bonus Share Scheme

Following feedback from shareholders, the Board withdrew the resolution proposing this scheme from the agenda of the Company's AGM in September 2012.  Although a clear majority of shareholders had submitted proxies in favour of this resolution, it was clear to the Board that a significant minority of shareholders had some concerns regarding certain aspects of the scheme.  The Board remains committed to implementing a Scheme to recognise the ongoing substantial and essential contribution of Mike Ashley (who receives no remuneration), and, as such, the Board is reviewing shareholders' feedback. In addition, in light of the Company's continued strong performance, the Board is minded to increase the key underlying Super-Stretch EBITDA targets for the next two financial years (2014: from £290m to £310m / 2015: from £340m to £360m).

Dividend

The Board has decided not to pay a dividend in respect of the half-year, as it believes it is in shareholders' best interests to maintain maximum flexibility at this time.

Thank you

On behalf of the Board, I should like to thank all of our staff for their substantial contribution to our success.  Without their commitment and professionalism, we would not be continuing to deliver such strong results.

Keith Hellawell

Non-Executive Chairman

13 December 2012

Overview of Financial Performance

Basis of reporting

The financial statements for the Group for the 26 weeks ended 28 October 2012 are presented in accordance with International Accounting Standard (IAS) 34 - Interim Financial Reporting as adopted by the EU (IFRS).

Summary of results

	26 weeks ended 28 October 2012 (£'m)	26 weeks ended 23 October 2011 (£'m)	Change %
Revenue	1,088.9	888.6	22.5
Underlying EBITDA (pre share scheme costs)	163.2	139.2	17.2
Underlying Profit before Tax	125.1	99.0	26.4
Reported Profit before Tax	125.2	100.3	24.8
	Pence per Share	Pence per Share
Basic EPS	16.07	12.54	28.1
Underlying EPS	16.05	12.38	29.6

The Directors believe that underlying EBITDA, underlying profit before tax and underlying earnings per share provide the most useful information for shareholders on the underlying performance of the business, 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.

Revenue and margin

	26 weeks ended 28 October 2012 (£'m)	26 weeks ended 23 October 2011 (£'m)		Change %
Retail
Revenue:
UK Sports Retail (1)	796.9	674.7		+18.1
Premium Lifestyle	56.1	22.4		+150.4
UK wholesale and other (2)	38.4	17.8		+115.7
International Retail	90.6	81.3		+11.4
Total retail revenue	982.0	796.2		+23.3
Cost of sales	(579.4)	(465.2)
Gross margin	402.6	331.0		+21.6
Gross margin percentage	41.0	%	41.6	%

Brands
Revenue:
Wholesale	92.3	79.3		16.4
Licensing	14.6	13.1		11.5
Total Brands revenue	106.9	92.4		15.7
Cost of sales	(60.9)	(54.9)
Gross margin	46.0	37.5		+22.7
Gross margin percentage	43.0	%	40.6	%

(1)   H1 2012 has been restated to split out Premium Lifestyle

(2)   Including £17.2m of revenue from the 20 stores acquired from JJB Sports plc (see note 10). These sales will be included in UK Wholesale and other until the clearance of acquired stock is complete and the fascia is changed to Sportsdirect.com.   

Business Review

Overview

In the first half, we have delivered strong results in line with management's expectations.  In the 26 weeks ended 28 October 2012 ("2013 H1"), Group revenues were up 22.5% to £1,088.9m compared with £888.6m for the 26 weeks ended 23 October 2011 ("2012 H1").  2013 H1 benefited from England's participation in Euro 2012, the London Olympics and Paralympics and an excellent 'back to school' period. The revenue uplift was supported by increases across all our divisions.  UK Sports Retail was up 18.1%, International Retail increased 11.4% and the Brands division was up 15.7% (including an 11.5% increase in licensing).

Retail division revenues have also been boosted by an 54% increase in online revenues and the full year effect of the creation of the Premium Lifestyle division. 

Gross margin for the Group decreased 30 basis points to 41.2% (2012 H1: 41.5%) as a result of our continued investment in lowering prices and providing value to our customers.  The growth in revenue and profitability has been underpinned by the employee bonus share scheme.

Net debt increasedin the period by 10.3% to £160.3m (29 April 2012: £145.2m), which is 0.6 times historic rolling underlying EBITDA (2012 H1: 0.53 times) due to the Group's investments in inventory and acquisitions.

Sports Retail division

UK Sports Retail revenues increased 18.1% to £796.9m (2012 H1: £674.7m). This increase was supported by strong growth in online sales, up 54% to £110.5m, representing 12.5% of total Sports Retail sales (2012 H1: 9.5%). We continue to invest in our customer offering and experience to ensure this trend continues.  Although included within UK Sports Retail, we believe reporting online revenues as a percentage of both UK and International Sports Retail sales (excluding wholesale and other) is the most appropriate approach, as the online revenue includes some sales from outside the UK.

During the period, the retail division margin decreased 60 basis points to 41.0% (2012 H1: 41.6%) mainly due to the reduced margin in 20 former JJB stores acquired in September, which is included in wholesale and other.  UK Sports Retail margin was steady at 42.3% (2012 H1: 42.2%) while the International Retail gross margin increased 50 basis points to 44.4% (2012 H1: 43.9%). 

UK Sports Retail's operating costs increased by 20.2% in 2013 H1, compared to the 18.1% increase in revenue, including costs associated with the 20 former JJB stores. This increase is mainly due to increased labour costs arising from additional warehouse capacity. As a result, we grew UK Sports Retail underlying EBITDA by 16.9% to £143.5m (2012 H1: £122.8m).

At period end, the Group had 398 stores in the UK (excluding Northern Ireland), a total of circa 4.0m sq ft (2012 H1: circa 3.9m sq ft).  These are divided between 313 core and 85 non-core stores and we have a clear, focused strategy to enhance our varied store portfolio.  Central to this is our flexibility and ability to move quickly where we identify store opportunities.  We are still targeting a total of between 15 to 20 core store openings in the UK this year, having opened 14 new core stores, including four that were relocated and closed six core stores in the period. 

In September, we acquired key trading assets from the Administrator of JJB for a cash consideration of £24.0m. The Group acquired 20 stores, substantially all of the stock in the business, the JJB website and the Slazenger Golf brand licenses, as well as JJB's freehold property in Wigan.

We are constantly updating and expanding our product ranges. During the period the Group acquired Used Tackle Ltd, a retail chain with a full fishing product range that is now available through the SportsDirect.com website, with celebrity endorsement from Robson Green.

Through the Group's shareholding in the Heatons chain, sports products are retailed within 13 stores in Northern Ireland and 26 stores in the Republic of Ireland. The Group's share of Heatons operating result moved from a £1.0m loss to a £0.2m profit in the period.

International Retail revenues increased 11.4% to £90.6m (2012 H1: £81.3m), which in local currency represented an increase of 22.6%.  This was driven by a 20.0% increase in retail space through new store openings. The local management teams are able to leverage the stock control benefits of our UK-developed proprietary IT and operating systems.

The Group's strategy remains to expand our International Retail operations into all 17 countries that have adopted the Euro currency within five years, and we continue to deliver progress on this.  We will also consider opportunities in Europe that are outside the Eurozone.  In the period, we remained on schedule with our international store opening programme having opened three stores in Belgium, two in Portugal, , two in Hungary, two in Slovakia, and one each in Slovenia, France, Luxembourg and the Czech Republic. We have also entered into a joint venture which opened our first Icelandic store in May.

International Retail's operating costs increased 16.7%, compared to a 11.4% increase in revenue.  The proportional increase in costs is attributable to investment into the infrastructure as well as training and new store set up costs. Excluding associates, International Retail underlying EBITDA decreased by 1.2% to £8.0m (2012 H1: £8.1m).

Online order fulfilment and information technology solutions continued to be developed in-house with full back-up support from our national distribution centre resources in Shirebrook. Phase 2 of the Shirebrook expansion is now fully operational and a link between the existing and new warehouse is in progress to maximise efficiencies. Phase 3, the one million square feet new warehouse, is targeted for commencement in FY2014.

Premium Lifestyle Division

Our Premium Lifestyle division now includes USC, Cruise, Van Mildert and the recently acquired Flannels fascia. Sales in the period were £56.1m (2012 H1: £22.4m) with gross margins of 43.0%. Although loss making in 2013 H1, we have been pleased with the progress made in the division, and expect it to report an EBITDA profit for the full year.

Brands division

Brands total revenue increased 15.7% to £106.9m (2012 H1: £92.4m).

Wholesale revenues were up 16.4% to £92.3m (2012 H1: £79.3m) due to the acquisition of Firetrap at the end of FY2012 and growth in our US wholesale units. Excluding Firetrap, wholesale revenues were down 0.5%. Brands gross margin increased by 240 basis points to 43% (2012 H1: 40.6%). Wholesale gross margin increased 320 basis points to 34.0% (2012 H1: 30.8%).

Licensing revenues were up 11.5% to £14.6m (2012 H1: £13.1m). Our focus on licensing has contributed to this growth in the first half, having signed 56 new contracts with contracted minimum royalties of $19.5m over the life of the contracts.

Brands operating costs increased by 25.2% to £32.3m (2012 H1: £25.8m) in the period but £7.5m of this increase was related to Firetrap. The comparative period in the prior year included a £2m sponsorship payment to Darren Clarke.

Underlying EBITDA in the division increased 17.1% to £13.7m (2012 H1 £11.7m) due to the higher wholesale margin and licensing.

Outlook

Since the end of the half year, sales have remained strong - and we continue to invest in margin, inventory and extra group marketing. In Q3 we re-launched our website, and our sales through this improved platform in the past few weeks have been encouraging.

The Board remains confident of reaching our 2013 full year targeted underlying EBITDA of £270m (before schemes costs) we announced in April. Looking out into 2014, we are confident that our strategy will continue to deliver growth, underpinned by our strengthened market position, albeit that next year's results will not benefit from any football championships or significant sporting events.

Dave Forsey

Chief Executive

13 December 2012

Bob Mellors

Finance Director

13 December 2012

Reconciliation of reported to underlying results

	EBITDA		PBT
	2013 H1	2012 H1	2013 H1	2012 H1
	£m	£m	£m	£m
Operating profit	130.6	101.3
Depreciation	22.7	27.6
Amortisation	2.4	1.9
Exceptional items		(1.7)
Share of profit of associated undertakings	(0.3)	(1.1)
Bonus share scheme charge	11.1	9.1
Reported EBITDA/PBT	166.5	137.1	125.2	100.3
Realised FX (profit)/loss	(3.3)	2.1	(3.3)	2.1
IAS 39 FX fair value adjustment on forward currency contracts	-	-	3.6	(1.8)
Fair value adjustments within associates	-	-	(0.4)	-
Exceptional items	-	-	-	(1.6)
Underlying	163.2	139.2	125.1	99.0

Underlying EBITDA for the period increased 17.2% to £163.2m (2012 H1: £139.2m), before a charge of £11.1m relating to the bonus share schemes.  This charge has been taken centrally and, except in note 2 to the accounts, is not reflected in divisional (Retail and Brands) numbers in this report.  Within this underlying EBITDA, UK Sports Retail increased 16.9% to £143.5m (2012 H1: £122.8m excluding Premium Lifestyle), International Retail excluding associates decreased 1.2% to £8.0m (2012 H1: £8.1m) and the Brands division increased 17.1% to £13.7m (2012 H1: £11.7m).  The Group's share of operating profits of associated undertakings decreased to a £0.1m loss before a fair value profit adjustment of £0.4m.  The Underlying profit before tax increased 26.4% to £125.1m (2012 H1: £99.0m).

Foreign exchange

The Group continued to apply hedge accounting in respect of certain forward contracts in the period.  The effective portion of any gain or loss from re-measuring the derivative instrument is recognised directly in other comprehensive income.

The foreign exchange gain recognised in the income statement for the half year was £0.1m (2012 H1: £0.3m loss).  This is net of a £3.3m realised exchange gain included in administration costs (2012 H1: £2.1m loss).  The revaluation of forward exchange contracts not accounted for as hedged contracts (as required under IFRS) is included in finance income, and this unrealised loss amounted to £3.6m (2012 H1: £1.8m gain).  These amounts are excluded from the definition of underlying profit used in the business and as reported here.

The exchange gain of £3.3m included in administration costs has arisen from:

(a)	accepting dollars and euros at the contracted rate; and
(b)	the translation of dollars and dollar denominated assets and liabilities at the period end rate.

The exchange loss of £3.6m (2012 H1: £1.8m gain) included in finance costs substantially represents the reversal of the asset created (under IFRS) for the forward contracts not designated for hedge accounting at 29 April 2012.

A number of the forward contracts outstanding at 28 October 2012 qualify for hedge accounting and the fair value profit on these contracts of £0.5m has been credited to equity through the Consolidated Statement of Comprehensive Income.  The Group has sufficient US Dollar contracts to cover all purchases in UK Retail for the 2013 financial year and the first quarter of the 2014 financial year. These hedged contracts are at an average rate of $1.617.

The sterling exchange rate with the US dollar at 29 April 2012 was $1.626 and $1.610 at 28 October 2012.

Finance costs

		26 weeks ended 28 October 2012		26 weeks ended 23 October 2011
	(£'m)		(£'m)
Interest on bank loans and overdrafts	(3.2)		(2.4)
Interest on other loans	(0.3)		(0.5)
Interest on retirement benefit obligations	(1.2)		(1.3)
Fair value adjustment to forward foreign currency contracts	(3.6)		-
	(8.3)		(4.2)

Due to the acquisition of properties in 2012 and investment in inventory, the average banking facility usage has been higher for 2013 H1 compared to 2012 H1 and the interest charge has been correspondingly higher.

Taxation

The effective tax rate on profit before tax for 2013 H1 was 27.0% (2012 H1: 29.0%).  This effective rate reflects depreciation on non-qualifying assets and the non-relievable losses in certain overseas subsidiaries.

Earnings

	26 weeks ended 28 October 2012 Pence per share	26 weeks ended 23 October 2011 Pence per share	Change %
Basic EPS	16.07	12.54	28.1
Underlying EPS	16.05	12.38	29.6
Weighted Average number of shares	568,834,514	568,552,369

Basic earnings per share (EPS) is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the actual financial period.

The underlying EPS reflects the underlying performance of the business compared with the prior period and is calculated using the weighted average number of shares.  It is not a recognised profit measure under IFRS and may not be directly comparable with "adjusted" profit measures used by other companies.

The items adjusted for arriving at the underlying profit are as follows:

	26 weeks ended 28 October 2012 (£'m)	26 weeks ended 23 October 2011 (£'m)
Profit after tax:	91.4	71.3
Post tax effect of
Realised loss on forward foreign exchange contracts	(3.3)	1.5
Fair value adjustment to forward foreign exchange contracts	3.6	(1.2)
Fair value adjustment in associate undertakings	(0.4)	-
Profit on disposal of intangible assets	-	(1.2)
Underlying profit after tax	91.3	70.4

Cash flow and net debt

We have a £220m committed working capital facility with ten financial institutions that is available until 7 March 2014 and a £50m committed working capital facility with Barclays Bank plc that is available until 27 August 2013.  The Company continues to operate well within its banking covenants and the Board remains comfortable with the Company's available headroom.

Net debt increased during the period to £160.3m (29 April 2012: £145.2m), which is 0.6 times 12 month historic rolling underlying EBITDA, largely reflecting an increase in inventory. This increase is mainly in UK Retail, required to support the growth in Sports Retail internet sales and in Premium Lifestyle, in International Retail as a result of the increased number of stores and in Brands (particularly within Firetrap).

Net capital expenditure amounted to £26.9m (2012 H1: £17.1m).  £1.6m of freehold property was acquired in the period (2012 H1: £2.6m).  We are targeting capital expenditure for the full year to be around £50m and for 2014 to be a similar figure.

The analysis of debt at 28 October 2012 and at 29 April 2012 was as follows:

	At 28 October 2012	At 29 April 2012
Cash and cash equivalents	97.5	78.7
Borrowings	(257.8)	(223.9)
Net debt	(160.3)	(145.2)

Cash Flow

	26 weeks ended  28 October 2012 (£'m)	27 weeks ended  29 April 2012 (£'m)	26 weeks ended 23 October 2011 (£'m)
Underlying EBITDA (pre share scheme costs)	163.2	101.3	139.2
Realised profit/loss on forward foreign exchange contracts	3.2	0.1	(2.1)
Taxes paid	(23.8)	(19.6)	(21.7)
Free cash flow	142.6	81.8	115.4
Invested In:
Working capital
Inventory	(106.5)	(15.2)	(65.0)
Receivables, Payables & Other	33.0	26.0	22.5
Acquisitions (including debt)	(33.8)	(7.1)	(19.1)
Net proceeds from investments	1.2	0.7	0.6
Capital expenditure	(26.9)	(114.4)	(17.1)
Purchase of own shares	(21.7)	-	-
Finance costs and other financing activities	(3.0)	(2.7)	(2.7)
Net (increase) / decrease in net debt	(15.1)	(30.9)	34.6

Employee Bonus Share Schemes

We believe that the employee bonus share schemes have played an important role in delivering this strong performance.

The 2011 Bonus Share Scheme is a four year scheme based upon achieving underlying EBITDA before the costs of the scheme of £215m in 2012, £250m in 2013, £260m in 2014 and £300m in 2015 coupled with the individual employee's satisfactory personal performance.  The scheme requires that all targets are met before the shares vest.  The vesting periods will be summer 2015 (approximately 6m shares) and summer 2017 (approximately 22m shares including the Executive Bonus Share schemes).

The targets for Group underlying EBITDA (before the 2011 Schemes' costs) are:

-       FY13: £250m

-       FY14: £260m

-       FY15: £300m

The impact of the scheme is illustrated by marked improvements in financial performance and several internal KPI's since the introduction of the scheme.  These include energy consumption, pay versus turnover, stock loss and staff retention.

Super-Stretch Bonus Share Scheme

Following feedback from shareholders, the Board withdrew the resolution proposing this Scheme from the agenda of the Company's AGM in September 2012.  Although a clear majority of shareholders had submitted proxies in favour of this resolution, it was clear to the Board that a significant minority of shareholders had some concerns regarding certain aspects of the Scheme which the Board wishes to address.  The key concerns were that the Scheme as drafted initially (a) was open to other executives (even though the Board's intention was that practically it was a Scheme specifically intended to recognise and reward Mike Ashley's direct contribution to the Company's success), and (b) it only had two performance criteria (underlying EBITDA targets for 2013, 2014 and 2015, and a closing net debt/underlying EBITDA ratio as at 25^th April 2015.  The Board remains committed to implementing a Scheme to recognise the ongoing substantial and essential contribution of Mike Ashley (who receives no remuneration), and, as such, the Board is reviewing this feedback, and is seeking to deal with these concerns. 

The Board is considering proposing a new Super-Stretch Bonus Scheme which, in addition to underlying EBITDA and net debt/underlying EBITDA ratio targets, would include profit before tax targets and an underpin and assessment of the Company's comparative EPS performance. The financial targets would relate to the performance of the Company's current core operations. This Scheme would be specific to Mike Ashley. In addition, in light of the Company's continued strong performance, the Board is minded to increase the key Super-Stretch underlying EBITDA targets for the next two financial years (2014: from £290m to £310m / 2015: from £340m to £360m, reflecting a total additional EBITDA of £130m versus the 2011 Employee Bonus Share Scheme), with a potential award of 10m shares, which would vest in 2018 provided all performance targets are met.

Dilution

Shareholders have previously approved an overall dilution limit for the Company's share plans of 15% of the issues ordinary share capital in any 10 year period. As the Company operates its share schemes for the benefit of a wide class of employees, this overall dilution limit is considered appropriate to provide the Company with sufficient flexibility to continue to operate share schemes on the desired wide basis. The current maximum dilution that would arise from 100% vesting of all currently approved schemes is as follows:

·      1.3% for the existing Executive Bonus Share Schemes in which the Executive Directors (other than Mike Ashley) and select senior executives participate (well within the best practice limit of 5% in any 10 year period for discretionary executive plans); and

·      9.0% for the existing Employee Bonus Share Schemes. Some 3,000 participate in these plans currently. This figure assumes no reduction in shares vested as a result of employee departures.

The dilution under the possible Super-Stretch Bonus Share Scheme would be a further 0.5% (assuming that 7m shares currently held by the Employee Benefit Trust, which were purchased from employees - and so do not count towards the dilution limits - would be used to satisfy this potential award). As such, total potential dilution under all Executive share plans would, at 1.8%, remain within the best practice limit.

Going concern

As highlighted in note 8, the Group finances its day to day working capital requirements, using a £220m facility with 10 financial institutions that is due for renewal in March 2014 and a £50m facility with Barclays that is due for renewal in August 2013. The current economic conditions create some uncertainty in the economy and the availability of bank finance in the foreseeable future.

The Group's forecast and projections, taking account of reasonably possible changes in trading performance and expected capital expenditure, show that the Group should be able to operate within the level of the current facility.

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 year are.

•	Disruption or other adverse events affecting the Group's relationship with any of its key brands or brand suppliers could have an adverse effect on the Group's business.
•	The possibility of a further deterioration of the economy both in the UK and worldwide and a further reduction in consumer confidence and retail spending, beyond that currently expected, which would impact on the performance of the business.

Funding and liquidity for the Group's operations are provided through bank loans and overdraft facilities and shareholders' funds.  The objective is to maintain sufficient funding and liquidity for the Group's requirements.

The Group maintains a system of controls to manage the business and to protect its assets.  We continue to invest in people, systems and in IT to manage the Group's operations and its finance 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 12.

The directors of Sports Direct International plc are listed in the Group's 2012 Annual Report and Financial Statements.

On behalf of the Board

Dave Forsey

Chief Executive

Bob Mellors

Finance Director

13 December 2012

INDEPENDENT REVIEW REPORT TO THE MEMBERS OF SPORTS DIRECT INTERNATIONAL PLC

FOR THE 26 WEEKS ENDED 28 OCTOBER 2012

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 28 October 2012 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 Services 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 28 October 2012 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 Services Authority.

Grant Thornton UK LLP

Chartered Accountants

London

13 December 2012

UNAUDITED CONSOLIDATED INCOME STATEMENT FOR THE 26 WEEKS ENDED 28 OCTOBER 2012

		26 weeks ended    28 October  2012	26 weeks ended    23 October  2011	53 weeks ended 29 April 2012
	Notes	£'000	£'000	£'000
Continuing operations:
Revenue	2	1,088,938	888,637	1,835,756
Cost of sales		(640,339)	(520,119)	(1,091,480)
Gross profit		448,599	368,518	744,276
Selling, distribution and administrative expenses		(321,171)	(271,103)	(596,383)
Other operating income		3,133	2,208	5,283
Exceptional items	3	-	1,705	5,619
Operating profit	2	130,561	101,328	158,795
Investment income		1,224	1,109	(5,800)
Finance income	4	1,393	3,212	6,426
Finance costs	5	(8,265)	(4,251)	(8,481)
Share of profit/(loss) of associated undertakings and joint ventures		287	(1,061)	558
Profit before taxation		125,200	100,337	151,498
Taxation	6	(33,804)	(29,098)	(45,867)
Profit for the period	2	91,396	71,239	105,631
Attributable to:
Equity holders of the Group		91,409	71,296	106,198
Non-controlling interests		(13)	(57)	(567)
Profit for the period	2	91,396	71,239	105,631

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	7	16.07	12.54	18.68
Diluted earnings per share	7	14.73	11.17	16.70
Underlying basic earnings per share		16.05	12.38	19.19

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

UNAUDITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE 26 WEEKS ENDED 28 OCTOBER 2012

		26 weeks ended 28 October 2012	26 weeks ended 23 October 2011	53 weeks ended 29 April 2012
	Notes	£'000	£'000	£'000
Profit for the period	2	91,396	71,239	105,631
Other comprehensive income
Exchange differences on translation of foreign operations		561	(3,934)	(2,301)
Exchange differences on hedged contracts - recognised in the period		1,322	677	(1,305)
Exchange differences on hedged contracts - reclassification in the period		(785)	11,568	8,086
Actuarial losses on defined benefit pension schemes		(3,508)	(1,010)	(5,501)
Fair value adjustment in respect of available-for-sale financial assets		(3,320)	(4,824)	(6,986)
Transfer of historic losses on available-for-sale financial assets		-	-	7,146
Taxation on items taken directly to other comprehensive income		797	1,254	1,483
Total comprehensive income for the period		86,463	74,970	106,253
Attributable to:
Equity holders of the Parent		86,476	75,027	106,820
Non-controlling interests		(13)	(57)	(567)
		86,463	74,970	106,253

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

UNAUDITED CONSOLIDATED BALANCE SHEET AS AT 28 OCTOBER 2012

		28 October 2012	23 October 2011	29 April 2012
	Notes	£'000	£'000	£'000
ASSETS
Non-current assets
Property, plant and equipment		330,598	234,534	313,023
Intangible assets		231,131	216,786	225,150
Investments in associated undertakings and joint ventures		28,622	30,132	29,470
Available-for-sale financial assets		43,314	48,796	46,634
Deferred tax assets		35,511	12,761	32,625
		669,176	543,009	646,902
Current assets
Inventories		441,680	297,153	316,800
Trade and other receivables		118,444	86,579	83,877
Derivative financial assets	9	1,282	8,044	5,926
Cash and cash equivalents		97,503	87,931	78,674
		658,909	479,707	485,277
TOTAL ASSETS		1,328,085	1,022,716	1,132,179
EQUITY AND LIABILITIES
Share capital		64,060	64,060	64,060
Share premium		874,300	874,300	874,300
Treasury shares		(56,234)	(85,088)	(55,839)
Permanent contribution to capital		50	50	50
Capital redemption reserve		8,005	8,005	8,005
Foreign currency translation reserve		26,523	24,329	25,962
Reverse combination reserve		(987,312)	(987,312)	(987,312)
Own share reserve		(64,375)	(6,094)	(57,684)
Hedging reserve		954	-	417
Retained earnings		684,879	522,566	600,431
		550,850	414,816	472,390
Non-controlling interests		(328)	1,651	(505)
Total equity		550,522	416,467	471,885
Non-current liabilities
Borrowings	8	251,340	183,496	214,587
Retirement benefit obligations		21,693	16,184	19,318
Deferred tax liabilities		22,862	31,419	25,789
Provisions		55,060	55,306	62,889
		350,955	286,405	322,583
Current liabilities
Derivative financial liabilities	9	-	-	1,570
Trade and other payables		373,932	265,638	282,819
Borrowings	8	6,434	18,830	9,303
Current tax liabilities		46,242	35,376	44,019
		426,608	319,844	337,711
Total liabilities		773,563	606,249	660,294
TOTAL EQUITY AND LIABILITIES		1,328,085	1,022,716	1,132,179

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

UNAUDITED CONSOLIDATED CASH FLOW STATEMENT FOR THE 26 WEEKS ENDED 28 OCTOBER 2012

		26 weeks ended 28 October 2012	26 weeks ended 23 October 2011	53 weeks ended 29 April 2012
	Notes	£'000	£'000	£'000
Cash inflow from operating activities	11	93,100	94,609	206,679
Income taxes paid		(23,843)	(21,665)	(41,253)
Net cash inflow from operating activities		69,257	72,944	165,426
Cash flow from investing activities
Proceeds on disposal of property, plant and equipment		1,463	888	1,320
Purchase of subsidiaries, net of cash acquired		(33,738)	(19,079)	(26,214)
Purchase of associate undertakings		(96)	-	-
Purchase of intangible assets		(134)	-	(2,921)
Purchase of property, plant and equipment		(28,278)	(18,029)	(129,402)
Purchase of listed investments		-	(523)	(523)
Investment income received		1,224	1,109	1,346
Net cash outflow from investing activities		(59,559)	(35,634)	(156,394)
Cash flow from financing activities
Finance income received		424	1,429	590
Finance costs paid		(3,435)	(4,251)	(5,955)
Net increase in / (repayment of) borrowings		36,698	(11,803)	17,126
Purchase of own shares		(21,742)	-	-
Proceeds from share issues		-	5	5
Net cash inflow/(outflow) from financing activities		11,945	(14,620)	11,766
Net increase in cash and cash equivalents including overdrafts		21,643	22,690	20,798
Cash and cash equivalents including overdrafts at beginning of period		69,435	48,637	48,637
Cash and cash equivalents including overdrafts at the period end		91,078	71,327	69,435

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

UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE 26 WEEKS ENDED 28 OCTOBER 2012

	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 24 April 2011	(85,088)	28,263	(6,094)	440,931	(47,266)	330,746	389	331,135
Issue of ordinary shares	-	-	-	-	5	5	-	5
Share-based payments	-	-	-	9,038	-	9,038	-	9,038
Non-controlling interest - acquisition	-	-	-	-	-	-	1,319	1,319
Transactions with owners	-	-	-	9,038	5	9,043	1,319	10,362
Profit for the financial period	-	-	-	71,296	-	71,296	(57)	71,239
Cashflow hedges  - recognised in the period	-	-	-	677	-	677	-	677
- reclassification	-	-	-	11,568	-	11,568	-	11,568
Actuarial losses on defined benefit pension schemes	-	-	-	(1,010)	-	(1,010)	-	(1,010)
Fair value adjustment in respect of available for sale financial assets	-	-	-	(4,824)	-	(4,824)	-	(4,824)
Taxation on items taken to comprehensive income	-	-	-	1,254	-	1,254	-	1,254
Translation differences - group	-	(3,733)	-	-	-	(3,733)	-	(3,733)
Translation differences - associates	-	(201)	-	-	-	(201)	-	(201)
Total comprehensive income	-	(3,934)	-	78,961	-	75,027	(57)	74,970
At 23 October 2011	(85,088)	24,329	(6,094)	528,930	(47,261)	414,816	1,651	416,467
Share-based payments	-	-	-	11,605	-	11,605	-	11,605
Deferred Tax on share schemes	-	-	-	14,176	-	14,176	-	14,176
Non-controlling interest - acquisition	-	-	-	-	-	-	(1,646)	(1,646)
Transactions with owners	-	-	-	25,781	-	25,781	(1,646)	24,135
Profit for the financial period	-	-	-	34,902	-	34,902	(510)	34,392
Market value of shares transferred to EBT	51,590	-	(51,590)	-	-	-	-	-
Difference between original cost and market value of shares transferred to the EBT	(22,341)	-	-	22,341	-	-	-	-
Cashflow hedges  - recognised in the period	-	-	-	(677)	(1,305)	(1,982)	-	(1,982)
- reclassification	-	-	-	(11,568)	8,086	(3,482)	-	(3,482)
Actuarial losses on defined benefit pension schemes	-	-	-	(4,491)	-	(4,491)	-	(4,491)
Fair value adjustment in respect of available for sale financial assets	-	-	-	4,984	-	4,984	-	4,984
Taxation on items taken to comprehensive income	-	-	-	229	-	229	-	229
Translation differences - group	-	3,813	-	-	-	3,813	-	3,813
Translation differences - associates	-	(2,180)	-	-	-	(2,180)	-	(2,180)
Total comprehensive income	29,249	1,633	(51,590)	45,720	6,781	31,793	(2,156)	29,637
At 29 April 2012	(55,839)	25,962	(57,684)	600,431	(40,480)	472,390	(505)	471,885
Share-based payments	-	-	-	4,595	-	4,595	-	4,595
Vesting of share awards	-	-	14,656	(14,656)	-	-	-	-
Current tax on share schemes	-	-	-	3,667	-	3,667	-	3,667
Deferred tax on share schemes				5,464	-	5,464	-	5,464
Cost of shares acquired	(395)	-	-	-	-	(395)	-	(395)
Purchase of own shares	-	-	(21,347)	-	-	(21,347)	-	(21,347)
Non-controlling interest - acquisition	-	-	-	-	-	-	190	190
Transactions with owners	(395)	-	(6,691)	(930)	-	(8,016)	190	(7,826)
Profit for the financial period	-	-		91,409	-	91,409	(13)	91,396
Cashflow hedges    - recognised in the period	-	-	-	-	1,322	1,322	-	1,322
- reclassified in the period				-	(785)	(785)	-	(785)
Actuarial losses on defined benefit pension schemes	-	-	-	(3,508)	-	(3,508)	-	(3,508)
Fair value adjustment in respect of available for sale financial assets	-	-	-	(3,320)	-	(3,320)	-	(3,320)
Taxation on items taken to comprehensive income	-	-	-	797	-	797	-	797
Translation differences - group	-	1,705	-		-	1,705	-	1,705
Translation differences - associates	-	(1,144)	-		-	(1,144)	-	(1,144)
Total comprehensive income	-	561	-	85,378	537	86,476	(13)	86,463
At 28 October 2012	(56,234)	26,523	(64,375)	684,879	(39,943)	550,850	(328)	550,522

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.

On 6 August, Appleby Trust (Jersey) Limited as trustee of the Sports Direct Employee Benefit Trust (the "Trust") purchased 7,115,754 ordinary shares at a price of 300.00 pence per share, representing all the ordinary shares which the Sports Direct employees elected to sell on vesting of their awards under the 2009 Bonus Share Scheme (the "Share Scheme"). A further 506,245 shares vested and were distributed to relevant staff.

NOTES TO THE FINANCIAL INFORMATION FOR THE 26 WEEKS ENDED 28 OCTOBER 2011

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 2012 Annual Report and Financial Statements. The financial information has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority (DTR) and with International Accounting Standard (IAS) 34 - "Interim Financial Reporting" as endorsed by the European Union. The principal accounting policies have remained unchanged from the prior financial information for the 53 weeks ended 29 April 2012. 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 53 weeks ended 29 April 2012 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.

Principal risks and uncertainties

The principal risks and uncertainties which could impact the Group's long-term performance remain those identified on page 30 of the Group's 2012 Annual Report and Financial Statements. The Chief Executive and Finance Director's Review in this half-yearly financial report includes a commentary of the principal risks and uncertainties affecting the Group for the remaining six months of the year.

                 2. Segmental analysis

Operating segments 

For management purposes the Group is organised into, and reports its performance between, two operating segments; Retail and Brands. The Retail operating segment comprises the retail network of stores and the Brands operating segment comprises the identification, acquisition, development and trading of a portfolio of internationally recognised sports and leisure brands.

Segment information about the operating segments is presented below:

Segmental information for the 26 weeks ended 28 October 2012:

	Retail			Brands
	UK Sports Retail	Lifestyle & Other	International retail	Total Retail	Total	Eliminations	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Sales to external customers	796,999	94,455*	90,611	982,065	106,873	-	1,088,938
Sales to other segments	-	-	3,971	3,971	15,952	(19,923)	-
Revenue	796,999	94,455	94,582	986,036	122,825	(19,923)	1,088,938
Gross profit	336,974	25,416	40,217	402,607	45,992	-	448,599
Operating profit before foreign exchange and exceptional items	119,601	(1,217)	3,940	122,324	11,071	-	133,395

Operating profit										130,561
Investment income										1,224
Finance income										1,393
Finance costs										(8,265)
Share of profits of associated undertakings and joint ventures										287
Profit before taxation										125,200
Taxation										(33,804)
Profit for the period										91,396

*including sale of £17.9m of JJB stock.

Sales to other segments are priced at cost plus a 10% mark-up. UK Retail operating profit is stated after a £11.1m charge for the Bonus Share Scheme.

Other segment items included in the income statement for the 26 weeks ended 28 October 2012:

	Retail	Brands	Total
	£'000	£'000	£'000
Depreciation	21,537	1,115	22,652
Amortisation	156	2,243	2,399

Segmental information for the 26 weeks ended 23 October 2011:

	Retail			Brands
	UK Sports Retail	Lifestyle & Other	International retail	Total Retail	Total	Eliminations	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Sales to external customers	674,645	40,219	81,306	796,170	92,467	-	888,637
Sales to other segments	-	-	-		1,450	(1,450)	-
Revenue	674,645	40,219	81,306	796,170	93,917	(1,450)	888,637
Gross profit	285,026	10,350	35,679	331,055	37,463	-	368,518
Operating profit before foreign exchange and exceptional items	91,372	(3,185)	4,581	92,768	9,005		101,773

Operating profit										101,328
Investment income										1,109
Finance income										3,212
Finance costs										(4,251)
Share of profits of associated undertakings and joint ventures										(1,061)
Profit before taxation										100,337
Taxation										(29,098)
Profit for the period										71,239

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

UK Retail operating profit is stated after a £9.0m charge for the Bonus Share Scheme.

Other segment items included in the income statement for the 26 weeks ended 23 October 2011:

	Retail	Brands	Total
	£'000	£'000	£'000
Depreciation	26,483	1,087	27,570
Amortisation	167	1,683	1,850

Segmental information for the 53 weeks ended 29 April 2012:

This information is available in the 2012 annual report.

3. Exceptional items

	26 weeks ended 28 October 2012	26 weeks ended 23 October 2011	53 weeks ended 29 April 2012
	£'000	£'000	£'000
Profit on disposal of intangible asset	-	-	1,624
Release of provision for costs relating to regulatory enquiries	-	-	2,309
Profit on disposal of tangible asset	-	1,705	1,686
	-	1,705	5,619

4. Finance income

	26 weeks ended 28 October 2012	26 weeks ended 23 October 2011	53 weeks ended 29 April 2012
	£'000	£'000	£'000
Bank interest receivable	424	298	583
Other interest receivable	-	-	7
Expected return on pension plan assets	969	1,131	2,277
Fair value adjustment to forward foreign exchange contracts	-	1,783	3,559
	1,393	3,212	6,426

5. Finance costs

	26 weeks ended 28 October 2012	26 weeks ended 23 October 2011	53 weeks ended 24 April 2012
	£'000	£'000	£'000
Interest on bank loans and overdrafts	3,123	2,444	5,658
Interest on other loans and finance leases	312	532	297
Interest on retirement benefit obligations	1,219	1,275	2,526
Fair value adjustment to forward foreign exchange contracts not designated for hedge accounting	3,611	-	-
	8,265	4,251	8,481

6. Taxation

The tax charge on profit before tax (excluding the impact of exceptional items) has been calculated using an estimated effective annual rate of 27.0% (2012: 29.0%).  This results in an estimated tax charge of £33.8m for the 26 weeks ended 28 October 2012 (£29.1m for the 26 weeks ended 23 October 2011).

7. Earnings per share

For diluted earnings per share, the weighted average number of shares, 568,835,000 (2012 H1: 568,552,000), is adjusted to assume conversion of all dilutive potential ordinary shares under the Group's bonus share schemes, being 51,852,895 (2012 H1: 69,528,449 ). To give the diluted weighted average number of shares of 620,687,000 (2012 H1: 638,081,000).

Basic and diluted earnings per share

	26 weeks ended 28 October 2012	26 weeks ended 28 October 2012	26 weeks ended 23 October 2011	26 weeks ended 23 October 2011	53 weeks ended 29 April 2012	53 weeks ended 29 April 2012
	Basic £'000	Diluted £'000	Basic £'000	Diluted £'000	Basic £'000	Diluted £'000
Profit for the period attributable to the equity holders of the Group	91,409	91,409	71,296	71,296	106,198	106,198
	Number in thousands		Number in thousands		Number in thousands
Weighted average number of shares	568,835	620,688	568,552	638,081	568,591	635,752
	Pence per share		Pence per share		Pence per share
Earnings per share	16.07	14.73	12.54	11.17	18.68	16.70

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 forward currency contracts 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 28 October 2012	26 weeks ended 28 October 2012	26 weeks ended 23 October 2011	26 weeks ended 23 October 2011	53 weeks ended 29 April 2012	53 weeks ended 29 April 2012
	Basic £'000	Diluted £'000	Basic £'000	Diluted £'000	Basic £'000	Diluted £'000
Profit for the period	91,409	91,409	71,296	71,296	106,198	106,198
Post tax adjustments to profit for the period for the following exceptional items:
Realised (gain)/loss on forward foreign exchange contracts	(2,429)	(2,429)	1,480	1,480	1,431	1,431
Fair value adjustment to forward foreign exchange contracts	2,636	2,636	(1,230)	(1,230)	(2,527)	(2,527)
Other investment income	-	-	-	-	7,146	7,146
Release of provision  relating to regulatory enquiries	-	-	-	-	(1,639)	(1,639)
Profit on sale of intangible assets			(1,176)	(1,176)	(1,153)	(1,153)
Profit on disposal of property					(1,197)	(1,197)
Fair value adjustments within associated undertakings	(309)	(309)	-	-	(929)	(929)
Impairment of goodwill					1,756	1,756
Underlying profit for the period	91,307	91,307	70,370	70,370	109,086	109,086
	Number in thousands		Number in thousands		Number in thousands
Weighted average number of shares	568,835	620,687	568,522	638,081	568,591	635,752
	Pence per share		Pence per share		Pence per share
Earnings per share	16.05	14.71	12.38	11.03	19.19	17.16

8. Borrowings

	28 October 2012	23 October 2011	29 April 2012
	£'000	£'000	£'000
Non-current:
Bank and other loans	251,340	183,496	213,758
Obligations under finance leases	-	-	829
	251,340	183,496	214,587
Current:
Bank overdrafts	6,425	16,604	9,239
Bank and other loans	-	2,226	51
Obligations under finance leases	9	-	13
	6,434	18,830	9,303
Total borrowings:
Bank overdrafts	6,425	16,604	9,239
Bank and other loans	251,340	185,722	213,809
Obligations under finance leases	9	-	842
	257,774	202,326	223,890

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

	28 October 2012	23 October 2011	29 April 2012
Borrowings - Sterling	226,981	178,659	178,516
Borrowings - Other	24,368	7,063	36,135
	251,349	185,722	214,651

Loans are all on commercial variable rates of interest ranging between 1.5% and 2.0% over the interbank rate of the country within which the borrowing entity resides.

On 7 March 2011, Sports Direct International plc and certain subsidiaries (the "Borrowers") entered into a committed revolving facility agreement with ten financial institutions and with HSBC Bank plc acting as Agent (the "Revolving Facility").  The Revolving Facility is available to any of the Borrowers and may be drawn to an aggregate limit of £220 million.  It is capable of being utilised by way of cash advances and/or currency borrowings.  The Revolving Facility is available until 7 March 2014.  The Group is required to observe certain covenants, including undertakings relating to delivery of financial statements, and certain negative covenants, including in relation to creation of security and disposal of assets.  The Revolving Facility is unsecured.

On 27 September 2012 Sports Direct International plc and certain subsidiaries (the "Borrowers") entered into a committed revolving facility agreement with Barclays Bank plc. The Revolving Facility is available to any of the Borrowers and may be drawn to an aggregate limit of £50 million.  It is capable of being utilised by way of cash advances and/or currency borrowings. The Revolving Facility is available until 26 August 2013.

The Group continues to operate comfortably within its banking facilities and covenants.

The Group has a £50m working capital facility with Mike Ashley which can be drawn down on request.

The carrying amounts and fair value of the borrowings are not materially different.

Net debt at 28 October 2012 was £160.3 million.

9. Financial instruments

(a) Derivatives: foreign currency forward purchase contracts

The most significant exposure to foreign exchange fluctuations relates to purchases made in foreign currencies, principally the US dollar. The Group's policy is to reduce substantially the risk associated with purchases denominated in foreign currencies by using forward fixed rate currency purchase contracts, taking into account any foreign currency cash flows. The Group does not hold or issue derivative financial instruments for trading purposes, however if derivatives do not qualify for hedge accounting they are accounted for as such and accordingly any gain or loss is recognised immediately in the income statement.

The carrying values of forward foreign currency purchase contracts were as follows:

	28 October 2012	23 October 2011	29 April 2012
	£'000	£'000	£'000
Fair value of derivative financial instruments - assets	1,282	8,044	4,356

The sterling principal amounts of forward foreign currency purchase contracts and contracted forward rates were as follows:

	28 October 2012	23 October 2011	29 April 2012
	£'000	£'000	£'000
US dollar purchases	150,000	180,000	371,986
Contracted rates	1.62	1.65	1.61 - 1.65
US dollar sales	-	(40,000)	(40,000)
Contracted rates	-	1.53-1.54	1.53-1.54
Euro sales	(3,538)	(31,703)	(24,678)
Contracted rates	1.13	1.13 - 1.14	1.13 - 1.14

10. Acquisitions

Details of principal acquisitions for the 26 weeks ended 28 October 2012 are set out below.

(i) 4 July 2012	Acquired 51% of the ordinary share capital of The Flannels Group Limited for cash consideration of £3.7m.
(ii) 14 September 2012	Acquired 100% of the ordinary share capital of Used Tackle Limited for cash consideration of £3.9m.
(iii) 1 October 2012	Acquired certain parts of the trade, assets and product brands from the administrators of JJB Sports plc ("JJB") for cash consideration of £24.0 million.

The aggregate fair value of consideration paid, assets and liabilities acquired and resulting goodwill in respect of the above acquisitions is detailed below.

	JJB	Other	Total
	£'000	£'000	£'000
Cash consideration	24,000	7,648	31,648
Less: fair value of net assets acquired	(24,000)	(2,322)	(26,322)
Goodwill	-	5,326	5,326

The goodwill is attributable to the premium paid to strengthen the Group's existing business segments of retail and brand, which is in line with the Group's strategy.

Costs of £250,000 relating to the above acquisitions were expensed through the income statement during the period.

None of the acquisitions included in 'other' above are considered to be individually material.

JJB

The asset values at acquisition are detailed below:

	Fair value of net assets acquired
	£'000
Property, plant and equipment	11,000
Intangible assets	1,000
Inventories	12,000
	24,000

Cash flows arising from the acquisitions are as follows:  

	28 October 2012
	£'000
Cash consideration	24,000
Cash acquired	-
Net cash outflow in the cash flow statement	24,000

£17.2m of revenue, £1.5 of operating loss and £1.5 of loss before tax has been included within the Group's financial statements for the period in respect of the above acquired operations since the acquisition. Had the above operations been included from the start of the period, the revenue for the Group would have been £1.1bn the operating profit would have been £128.5m and the profit after tax would have been £89.2m.

Other acquisitions

The asset values at acquisition are detailed below:

	Carrying values at acquisition	Provisional fair value adjustment	Fair value of net assets acquired
	£'000	£'000	£'000
Property, plant and equipment	3,087	-	3,087
Inventories	6,415	-	6,415
Trade and other receivables	1,772	-	1,772
Cash and cash equivalents	(2,090)	-	(2,090)
Trade and other payables	(6,425)	-	(6,425)
Deferred tax liabilities	(247)	-	(247)
Minority interests	(190)                        -	-	(190)
	2,322	-	2,322

Cash flows arising from the acquisitions are as follows:  

	28 October 2012
	£'000
Cash consideration	7,648
Overdraft / (cash) acquired	2,090
Net cash outflow in the cash flow statement	9,738

£6.1m of revenue, £164,000 of operating profit and £163,000 of profit before tax has been included within the Group's financial statements for the period in respect of the above acquired entities since the dates of acquisition. Had the above acquisitions been included from the start of the period, the revenue for the Group would have been £1.1bn, the operating profit would have been £131.9m and the profit after tax would have been £92.7m.

No acquisition costs were incurred in respect of these acquisitions.

11. Cash inflows from operating activities

	26 weeks ended 28 October 2012	26 weeks ended 23 October 2011	53 weeks ended 28 April 2012
	£'000	£'000	£'000
Profit before taxation	125,200	100,337	151,498
Net finance costs	6,872	1,039	2,055
Other Investment costs/( income)	(1,224)	(1,109)	5,800
Share of profit of associated undertakings and joint ventures	(287)	1,061	(558)
Operating profit	130,561	101,328	158,795
Depreciation	22,652	27,570	58,152
Amortisation charge	2,399	1,850	4,358
Loss/(profit) on disposal of intangibles	-	-	2,473
Loss on disposal of intangibles	-	-	1,679
Defined benefit pension plan current service cost	(13)	-	7
Defined benefit pension plan employer contributions	(1,354)	(1,205)	(2,559)
Share based payments	11,023	9,038	20,643
Operating cash inflow before changes in working capital	165,268	138,581	243,548
Decrease/(increase) in receivables	(30,795)	7,976	17,707
(Increase)/decrease in inventories	(106,465)	(65,023)	(80,179)
Increase in payables	65,092	13,075	25,603
Cash inflows from operating activities	93,100	94,609	206,679

12. 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  28 October 2012 Related party	Relationship	Sales	Purchases	Trade and other receivables	Trade and other payables
		£'000	£'000	£'000	£'000
Heatons	Associate	13,949	-	2,257	-
Brasher Leisure Limited	Associate	4,632	-	810	-

26 weeks ended  23 October 2011 Related party	Relationship	Sales	Purchases	Trade and other receivables	Trade and other payables
		£'000	£'000	£'000	£'000
Heatons	Associate	11,508	-	4,769	-
PBF International Limited	Joint venture	-	-	308	-

During the prior year, M J W Ashley leased certain properties to various companies in the Group which operated as retail and distribution premises. A commercial rent was charged in respect of these leases.

Key Management Compensation	28 October 2012	23 October 2011
	£'000	£'000
Salaries and short-term benefits	535,950	410,448
Share-based payments	552,287	552,287
Total	1,088,237	962,735

13. Contingent assets and liabilities

There were no material contingent assets or liabilities at the balance sheet date.

14. Post balance sheet events

No material post balance sheet events have occurred after 28 October 2012 to the date of this Interim Report.

 

END

 

 

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