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Sports Direct Intl. (SPD)

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Thursday 10 December, 2015

Sports Direct Intl.

Half Yearly Report

RNS Number : 5870I
Sports Direct International Plc
10 December 2015
 



 

 

SPORTS DIRECT INTERNATIONAL PLC

 

 

10 December 2015

Interim Results for the 26 weeks to 25 October 2015

 

Sports Retail gross margin up 110 basis points; Group Underlying EBITDA up 7.6%

 

FY16 H1

FY15 H1

Change

£m

£m

Group revenue

1,434

1,433

+0.1%

Sports Retail

1,234

1,231

+0.2%

Premium Lifestyle

88

100

-12.2%

Brands

113

102

+10.2%

Group gross margin

44.9%

44.0%

+90 bps

Sports Retail

45.6%

44.5%

+110 bps

Underlying EBITDA (pre share scheme costs) (1)

218.5

203.1

+7.6%

Underlying profit before tax (PBT) (1)(2)

166.4

160.6

+3.6%

Reported profit before tax

187.3

149.7

+25.1%

Underlying earnings per share (1)(2)

21.8

20.8p

+4.8%

Reported earnings per share

24.5p

19.4p

+26.3%

 

 

Key highlights

 

·      Sports Retail revenue increased by 2.5% on a currency neutral basis (3)

·      Sports Retail gross margin increased by 110 basis points to 45.6%

·      Sports Retail gross profit increased by 5.2% on a currency neutral basis

·      Group underlying EBITDA increased by 7.6% to £218.5m

·      Underlying profit before tax up 3.6% to £166.4m

·      Underlying free cash generation of £175.1m (4) 

·      Net debt decreased to £20.3m (£59.7m at 26 April 2015) (5)

·      Continued roll-out of large format city centre stores

·      Latest phase of ongoing Shirebrook campus development now complete

·      Agreed to acquire remaining 50% of Heatons, our Irish associated company

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

 

 

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

 

"The Group has delivered another excellent set of results particularly given the strong comparable sales generated in the build up to the FIFA 2014 World Cup and after a generally mixed summer for the retail sector.

 

"Within Sports Retail our commitment to upgrading our store portfolio continues to deliver gross margin growth and is a significant contributor to our strong EBITDA result. We continue to innovate, refine and improve our customer proposition. In line with this strategy, during the period we opened new larger format stores in Leeds and Plymouth and combined gym and retail spaces in St Helens and Newport.

 

"Trading since the period end has been in line with management's 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 the 2015 Share Scheme's revised underlying EBITDA target of £420m.

 

"We look forward to 2016 with confidence ahead of the Olympic Games in Rio de Janeiro and the 2016 European Football Championships in which England, Wales, Northern Ireland and the Republic of Ireland will be competing."

 

(1)

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 Share Scheme charges.

 

(2)

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 Share Scheme charges.

 

(3)

Sales and margin increases on a currency neutral basis are calculated by revaluing the division's foreign currency denominated sales at the prior year average exchange rate for the period.

 

(4)

Underlying free cash generation is defined as operating cashflow before working capital, made up of underlying EBITDA before 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

Matt Pearson, Acting Chief Financial Officer

 

T:  0344 245 9200

 

 

Powerscourt

Rory Godson

Peter Ogden

Lisa Kavanagh

T:  0207 250 1446

 



Chairman's Statement

 

The group is pleased with the improved performance across all of our three divisions. This is a particularly impressive achievement in the context of disappointing summer weather and a comparative period which included the 2014 FIFA World Cup.

 

Developments and acquisitions

 

I am pleased to announce that the latest phase in our Shirebrook campus development, the construction of an additional c.700,000 sq. ft. warehouse and office facility, has now been completed. These developments will have a range of benefits for the Group, including enhanced online capacity and an improved office and training environment for our employees. We are also now able to offer additional office space for our brand partners.

 

In the UK we have increased our store portfolio by 15 stores and have continued our planned roll-out of large format stores with the opening of new stores in Leeds and Plymouth. We also opened five further concessions within Debenhams stores during the period.

 

Across Europe we have opened further stores across the Baltics under the SPORTSDIRECT.com fascia and plan to continue the investment in key categories, replicating our UK city centre store format in collaboration with key international brands. We will increase our European presence further with the acquisition of an additional stake in our Irish associated company, Heatons. Competition clearance for this transaction has now been obtained and we expect to complete the purchase of the remainder of the business by the end of April 2016.

 

During the period our Fitness division has also grown with the addition of combined gym and retail spaces in St Helens and Newport and we continue to identify other future potential combined gym and retail opportunities.

 

Workforce

 

Rewarding our staff for good performance is central to the way we do business. I am therefore delighted to note that the first vesting of the 2011 Share Scheme took place in September 2015, with c. 2,000 participating employees receiving over four million shares.

 

A further c.15 million shares are expected to vest under this scheme in September 2017 to a deserving c. 2,500 participating employees.

 

The Group's Share Schemes and the resulting incentivisation of our team have been pivotal in the Group's success over the past few years and we believe this strategy will continue to drive growth in the future. The Group remains confident of achieving its first revised Adjusted Underlying EBITDA target under the 2015 Share Scheme of £420m.

 

Our casual workers are also an integral component of our workforce. To be clear, no warehouse workers are on 'zero hour' contracts, all have contracted hours with the agencies. In retail, casual workers find the flexibility offered by these arrangements very useful. We comply fully with all applicable legal requirements and will continue to keep these under review.

 

Update following Annual General Meeting

 

A number of issues were raised by shareholders at our AGM which we have addressed, for example the inconvenience experienced by some warehouse workers from the logistics of the security process when exiting the warehouse.  Following a review the process has been streamlined which has led to a reduction in waiting time.

 

The Board

 

Following the departure of Charles McCreevy last year, our search for an additional Non-Executive Director remains ongoing. We are undertaking a thorough process to ensure we appoint the most suitable candidate.

 

Overall

 

In spite of a challenging market and disappointing weather conditions, we have yet again succeeded in achieving growth across all key areas.

 

We owe a great deal to the continued commitment of our colleagues and the ongoing support of our stakeholders, without whom this achievement would not be possible. On behalf of the Board I would like to thank them for their hard work and dedication.

 

 

Keith Hellawell

Non-Executive Chairman

10 December 2015 

 

 



Overview of Financial Performance

 

Summary of Results


26 Weeks ended

25 October 2015

26 Weeks ended

26 October 2014

Change



(£m)

(£m)

%


Revenue

1,433.7

1,432.9

+0.1


Underlying EBITDA

218.5

203.1

+7.6


Underlying profit before tax

166.4

160.6

+3.6


Reported profit before tax

187.3

149.7

+25.1



Pence per share

Pence per share



Underlying EPS(1)

21.8

20.8

+4.8


Reported EPS(2)

24.5

19.4

+26.3


(1) and (2)  Based on 592.4 million and 592.3 million ordinary shares outstanding in FY16 H1 and FY15 H1, respectively

 

Basis of reporting

 

The financial statements for the Group for the 26 weeks ended 25 October 2015 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 Share Schemes.

 

Revenue and margin

 


26 weeks ended

25 October 2015

(£'m)

26 weeks ended

26 October 2014

(£'m)

Change

 

%

Retail




Revenue:




Sports Retail  

                                     1,233.5

1,230.9

+0.2

Premium Lifestyle

87.7

99.9

-12.2

Total retail revenue

1,321.2

1,330.8

-0.7









Total Retail Cost of sales

(722.7)

(744.3)

+2.9







Total Retail gross margin

598.5


586.5


+2.0

Gross margin percentage

45.3%


44.1%


+120bps

 

Brands




Revenue:




Wholesale

96.5

86.8

+11.2

Licensing

16.0

15.3

+4.6

Total Brands revenue

112.5

102.1

+10.2





Cost of sales

(67.5)

(58.4)

+15.6





Brands gross margin

45.0

43.7

+3.0

Brands gross margin percentage

40.0%

42.8%

-280 bps

 

 

 

 

Business Review

 

Overview

 

In the 26 weeks ended 25 October 2015 ("FY16 H1"), Group revenues were up 2.0% on a currency neutral basis to £1,433.7m compared with £1,432.9m for the 26 weeks ended 26 October 2014 ("FY15 H1").  

 

Sports Retail revenue increased by 2.5% on a currency neutral basis and revenue in the Brands division increased by 10.2% to £113m (FY15 H1: £102m), due to growth in Europe and the US. Premium lifestyle revenue was down 12.2% largely due to the closure of a number of USC stores during the period.

 

Gross margin for the Group increased 90 basis points to 44.9% (FY15 H1: 44.0%) 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 Share Schemes.

 

Net debt decreased in the period by 66.0% to £20.3m (26 April 2015: £59.7m), which is 0.1 times LTM EBITDA(1) (FY15 H1: 0.5 times).

 

Sports Retail division

 

Our Sports Retail division achieved sales growth of 2.5% on a currency neutral basis against a comparative which included the impact of the FIFA World Cup in Brazil.  During the period, gross margin increased 110 basis points to 45.6% (FY15 H1: 44.5%), benefiting from a higher proportion of 'better' and 'best' Group branded products. Gross profit on a currency neutral basis increased by 5.2%.

 

Sports Retail's operating costs increased by 1.0% in FY16 H1 due to the rationalisation of our recently acquired International businesses.  As a result, we grew Sports Retail underlying EBITDA by 5.5% to £206.5m (FY15 H1: £195.8m).

 

At period end, the Group had 455 stores in the UK (excluding Northern Ireland), with a total of c. 5.0m sq. ft.(2) (FY15 H1: c. 4.5m sq. ft.).  We continue to invest in our current store portfolio with the aim of moving to larger and better configured space wherever possible and in the period have re-located both our Leeds and Plymouth stores to significantly larger sites. Our new Leeds store, formerly a Primark, now offers an impressive c. 50,000 sq.ft. of retail space over four floors. We are constantly improving visual merchandising and, in collaboration with key brands, are working towards the introduction of more specialist performance areas within our stores, such as football, running, outdoor and fitness.

 

We are still targeting a total of between 30-40 store openings in the UK this year, having opened 28 new stores in the period, including nine relocations, and closing 13. We also opened five further concessions within Debenhams stores during the period bringing this total to nine including one footwear only concession in Oxford Street.

 

We have completed the latest phase of our continued works on the expansion of our Shirebrook campus and have recently taken occupation of a new c. 700,000 sq. ft. warehouse and office facility.

 

Online sales continue to grow, driven by enhancements made in the prior year including the introduction of 'click and collect', a guest checkout and improvements in language and currency conversion on our European sites. Since the year end we have expedited product searches and enhanced our platform for mobile and tablet devices. We have also increased our online offering, with a greater range of products and sizes, further increasing sales. Online remains profitable for the Group and we continue to develop our platform in order to exploit this opportunity further.

 

In Europe we opened a further 11 stores across five different countries and closed three stores in two countries. In central Europe we have closed two stores in Austria and one store in Belgium and have opened six stores in Hungary and one in Poland. In the Baltic states we have opened two stores in Lithuania and one store in both Latvia and Estonia under the SPORTSDIRECT.com fascia and have continued to invest in upgrading the existing stores trading under the SPORTLAND fascia. During the period the Group impaired the goodwill relating to the acquisition of our Austrian subsidiary due to its recent trading being below expectations. Converting the former Eybl megastores is taking longer than expected and the lost revenue in certain categories is also proving harder to replace than expected.

 

Through the Group's 50% shareholding in the Heatons chain, products are retailed within 44 stores in the Republic of Ireland and 15 stores in Northern Ireland, of which 37 operate a sports department and five are standalone sports stores.  The Group's share of Heatons operating result was a £1.8m profit (FY15 H1: £1.5m profit).

 

Prior to the period end the Group entered into an agreement to purchase an additional stake in our existing Irish associated company, Heatons, subject to obtaining merger clearance from the Irish Competition and Consumer Protection Commission. On 13 November 2015 competition clearance was obtained for this purchase and we expect to complete the purchase of the remainder of the business by the end of April 2016. The incremental EBITDA derived from the acquisition of Heatons in the period will not be counted towards the Group's FY15 revised Underlying EBITDA target under the 2015 Share Scheme of £420m.

 

 

(1)

LTM EBITDA is the last twelve months historic underlying EBITDA

(2)

This implies a range between 4.75m sq. ft. - 5.25m sq. ft.

 

 

 

The Group plans a substantial investment in the Heatons store portfolio over the coming years as it believes that the current sports offering, while competitive, can be improved significantly.

 

In August we expanded our Fitness business with the opening of a gym within our existing retail store in St Helens and will shortly open an additional combined gym and retail space in Newport. Membership in our Aintree and newly opened gyms continues to grow, exceeding expectations. We have also completed a controlled refurbishment plan across the former LA Fitness sites purchased in the prior year.

 

 

Premium Lifestyle division

 

Sales in the period were down by 12.2% to £87.7m (FY15 H1: £99.9m), largely due to the closure of loss-making USC stores since the prior period. Gross margin increased to 41.3% (FY15 H1: 38.4%), due to reduced stock clearance activity in the period and improved buying disciplines.

 

We continue to strengthen our relationships with key third party suppliers and have introduced several new brands in the period. Growth at Cruise, Flannels and Van Mildert also reflects the Group's buying disciplines and online expertise.

 

Operating costs reduced by 10.6% to £41.3m (FY15 H1: £46.2m) as a result of the rationalisation of the Republic and USC businesses in the prior year.

 

Premium Lifestyle EBITDA losses decreased in FY16 H1 to £5.1m (FY15 H1: £7.8m loss).

 

Brands division

 

Brands division total revenue increased by 10.2% to £112.5m (FY15 H1: £102.1m).  Wholesale revenues were up 11.2% to £96.5m (FY15 H1: £86.8m) due to growth in both Europe and the US.

 

Brands gross margin decreased by 280 basis points to 40.0% (FY15 H1: 42.8%).  Wholesale gross margins decreased 260 basis points to 30.1% (FY15 H1: 32.7%), due to the impact of the movement of the USD exchange rate and increased stock clearance activity.

 

Licensing revenues in FY16 H1 increased 4.6% to £16.0m (FY15 H1: £15.3m). Our strategic focus remains on delivering further growth in licensing revenues, having signed 23 new license agreements in the first half of the year with contracted minimum royalties of $9.8m over the life of the contracts.

 

Brands operating costs decreased by 2.8% to £27.9m (FY15 H1: £28.7m) in the period, benefiting largely from continued integration efficiencies across Europe, while investment in key Group brands was maintained at similar levels to previous years.

 

As a result, underlying EBITDA in the division increased 13.2% to £17.1m (FY15 H1 £15.1m).

 

Outlook

 

Trading since the period end has been in line with management's expectations, and underpins the 2015 Share Scheme's revised FY16 Underlying EBITDA target of £420m. The Group's performance continues to benefit from a number of factors including investment in product range and availability, with an increased emphasis on 'better' and 'best' Group branded products and the optimisation of our in-store and web offer. We also continue to invest in our store portfolio, with the roll-out of further large format city centre stores.

 

 

Dave Forsey

Chief Executive

 

10 December 2015

 

 



Reconciliation of reported to underlying results



           EBITDA

     PBT


Note

FY16 H1

FY15 H1

FY16 H1

FY15 H1



£m

£m

£m

£m

Operating profit


131.3

168.8









Depreciation


37.7

29.0



Amortisation


3.0

3.9



Impairment


0.3

-



Share of profit/(loss) of associated undertakings


1.5

1.7















Reported EBITDA/PBT (inc. scheme costs)


173.8

203.4

187.3

149.7







Realised FX loss


9.7

7.7

9.7

7.7

IAS 39 foreign exchange fair value adjustment on forward currency contracts


-

-

(1.3)

(6.0)

(Gain)/loss on disposal of listed investments and fair value movement on derivative agreements

4

-

-

(53.6)

23.3

Exceptional items

3

24.1

(14.1)

24.1

(14.1)

Impairment


-

-

0.3

-

Share scheme charge


10.9

6.1

-

-













Underlying (pre-scheme costs)


218.5

203.1

166.4

160.6

 

 

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

 

 

Underlying EBITDA by Business Segment

 


FY16 H1

FY15 H1



£m

£m






Sports Retail

206.5

195.8

5.5%

Premium Lifestyle

(5.1)

(7.8)

(34.6%)

Brands

17.1

15.1

13.2%





Group Underlying EBITDA

218.5

203.1

7.6%





 

Foreign exchange

 

The Group manages the impact of currency movements through the use of forward fixed rate currency contracts. The Group's policy is to hold or hedge up to five years of anticipated purchases in foreign currency.

 

A number of the forward foreign exchange contracts outstanding at 25 October 2015 qualify for hedge accounting.  The sterling exchange rate with the US dollar at 26 April 2015 was $1.502 and $1.532 at 25 October 2015.

 

 

Taxation

 

The effective underlying tax rate on profit before tax for FY16 H1 was 21.3% (FY15 H1: 23.0%). The underlying effective tax rate for FY16 H1 was 22.0% (2015 H1: 22.9%). The difference between the prevailing corporate tax rate of 20% and the effective rate reflects depreciation on non-qualifying assets.

 

 

Strategic investments

 

The Group acquired 16,385,983 shares in Findel plc during the period and on 25 October 2015 held shares representing 18.96% of the issued share capital of Findel plc.

 

The Group disposed of 5,000,000 shares in JD Sports during the period and on 25 October 2015 held shares representing 9.1% of the issued share capital.

 

As at 25 October 2015 the Group had an interest in 10.5% of Debenhams' ordinary share capital.

 

The Group continues to hold an interest in 7,251,065 shares in MySale Group plc, representing 4.8% of the issued share capital.

 

The fair value of the Group's holdings at 25 October 2015 was £212.7m (26 April 2015: £140.8m).  The movement in the fair value of the shares held has been recognised directly in Other Comprehensive Income. A reconciliation of movements in the period is included below:

 


£m

Fair value at 26 April 2015

140.8

Additions

36.8

Disposals

(9.1)

Fair value movements in the period

44.2



Fair value at 25 October 2015

212.7

  

 

These stakes allow us to develop a relationship and potentially develop commercial partnerships with the relevant party and assist in building relationships with key suppliers and brands.

 

The fair value of equity derivative agreements is included within the derivative financial assets balance of £62.8m.

 

 

Cash flow and net debt

 

On 25 November 2014 the Group utilised the accordion option under its working capital facility. As a result, the working capital facility has been increased from £738m at the year end to £758m. 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 £20.3m (26 April 2015: £59.7m), which is 0.1 times the last 12 months historic underlying EBITDA (FY15 H1: 0.5 times)

 

Capital expenditure amounted to £92.3m (FY15 H1: £26.7m), including works done on the expansion of our Shirebrook campus and £39.7m (FY15 H1: £1.6m) of freehold properties.  The Group expects FY16 capital expenditure to be c. £150m, including freehold property acquisitions and further works on the Shirebrook campus. During the period the Group also sold a freehold property for £44.0m.

 

The analysis of net debt at 25 October 2015 and at 26 April 2015 is as follows:

 


At 25 October 2015

At 26 April 2015


£m

£m

Cash and cash equivalents

163.3

78.3

Borrowings

(183.6)

(138.0)

Net debt

(20.3)

(59.7)

 

Cash Flow

 


26 weeks ended

 25 October 2015

£m

26 weeks ended

 26 October 2014

£m




Underlying EBITDA (pre share scheme costs)

218.5

203.1

Realised loss on forward foreign exchange contracts

(9.7)

(7.7)

Taxes paid

(33.7)

(33.9)




Underlying free cash flow

175.1

161.5




Invested In:

Working capital

Inventory

(116.0)

(89.6)

Receivables, Payables & Other

17.7

(2.2)

Acquisitions (including debt)

(9.2)

(2.3)

Net (purchase of)/proceeds from investments

19.4

(33.2)

Investment income received

2.1

1.3

Capital expenditure

(92.3)

(26.7)

Disposal of freehold property

44.0

21.1

Finance costs and other financing activities

(1.4)

(4.4)

Net  decrease/(increase) in net debt

39.4

25.5

 

 

Share Schemes

 

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

 

The 2011 Share Scheme was 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 participating employee's satisfactory personal performance.  All of the above targets have now been met and 4m shares vested in September 2015. Another 18m shares (including the Executive Share Scheme) are due to vest in the summer of 2017, subject to the individual participating employee's continued satisfactory personal performance.

 

The 2015 Share Scheme is a four year scheme based upon achieving an underlying EBITDA target (before the costs of the scheme) of £420m in FY16 and further targets in FY17, FY18 and FY19 coupled with the individual participating employee's satisfactory personal performance. The scheme requires that all targets are met before the shares vest. Up to 25m shares are available to vest over two vestings in 2019 and 2021.

 

The success of the scheme is demonstrated by ongoing improvements in operational and financial performance including various internal KPIs since the scheme's introduction.

 

 

Going concern

 

The Group is profitable, highly cash generative and has considerable financial resources. The Group is able to operate comfortably within its banking facilities and covenants, which run until September 2018, and is well placed to take advantage of strategic opportunities as they arise.

 

As a consequence, the Directors believe that the Group is well placed to manage its business risks successfully despite the continued uncertain economic outlook. The Group's forecasts and projections, taking account of reasonable possible changes in

trading performance, show that the Group should be able to operate within the level of the current facility.

 

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.

 

No material related party transactions have taken place in the first six months of the current financial year that have materially affected the financial position or performance of the Group during that period and there have been no changes in related party transactions described in the last annual report that could have a material effect on the financial position or performance of the Group in the current period.

 

The directors of Sports Direct International plc are listed in the Group's 2015 Annual Report and Financial Statements.

 

On behalf of the Board

 

Dave Forsey

Chief Executive

 

10 December 2015



 

INDEPENDENT REVIEW REPORT TO THE MEMBERS OF SPORTS DIRECT INTERNATIONAL PLC

FOR THE 26 WEEKS ENDED 25 October 2015

 

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 25 October 2015 which comprises the Consolidated income statement, the Consolidated statement of comprehensive income, the Consolidated statement of financial position, 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 25 October 2015 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

10 December 2015



 

UNAUDITED CONSOLIDATED INCOME STATEMENT FOR THE 26 WEEKS ENDED 25 OCTOBER 2015

 

 








26 weeks
ended
   25 October

 2015

 

26 weeks
ended
      26 October

 2014

 

52 weeks
ended
26 April
2015

 


Notes

£'000

£'000

£'000

Continuing operations:





Revenue

2

1,433,668

1,432,898

2,832,560

Cost of sales


(790,151)

(802,681)

(1,591,748)






Gross profit


643,517

630,217

1,240,812

Selling, distribution and administrative expenses


(492,405)

(479,690)

(950,526)

Other operating income


4,222

4,134

8,345

Exceptional items

3

(24,059)

14,149

(3,050)






Operating profit

2

131,275

168,810

295,581






Investment income

4

54,808

1,263

14,104

Finance income


1,676

6,343

8,289

Finance costs

5

(2,046)

(28,327)

(7,487)

Share of profit of associated undertakings and joint ventures


1,539

1,643

2,959






Profit before taxation


187,252

149,732

313,446

Taxation


(39,771)

(34,438)

(72,093)






Profit for the period

2

147,481

115,294

241,353






Attributable to:





Equity holders of the Group


145,424

114,629

240,397

Non-controlling interests


2,057

665

956






Profit for the period

2

147,481

115,294

241,353

 

 

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

6

24.5

19.4

40.6

Diluted earnings per share

6

23.1

18.6

39.0

Underlying basic earnings per share

6

21.8

20.8

38.9






 

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



 

UNAUDITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE 26 WEEKS ENDED 25 OCTOBER 2015

 







26 weeks
ended
   25 October

 2015

 

26 weeks
ended
      26 October

 2014

 

52 weeks
ended
26 April
2015

 


Notes

£'000

£'000

£'000






Profit for the period

2

147,481

115,294

241,353






Other comprehensive income










Items that will not be reclassified subsequently to profit or loss





Actuarial gains/(losses) on defined benefit pension schemes


2,055

(1,304)

(2,493)

Taxation on items not reclassified


(432)

274

524






Items that will be reclassified subsequently to profit or loss





Exchange differences on translation of foreign operations


(12,122)

13,465

9,156

Exchange differences on hedged contracts - recognised in the period


(6,852)

26,860

77,181

Exchange differences on hedged contracts - reclassification in the period


(31,931)

23,623

7,240

Fair value adjustment in respect of available for sale financial assets


44,240

(6,783)

21,893

Taxation on items subsequently reclassified


8,125

(10,601)

(17,728)

Other comprehensive income for the period, net of tax


3,083

45,534

95,773






Total comprehensive income for the period


150,564

160,828

337,126






Attributable to:





Equity holders of the Parent


148,507

160,163

336,170

Non-controlling interests


2,057

665

956








150,564

160,828

337,126

 

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

 



UNAUDITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 25 OCTOBER 2015

 



   25 October

 2015

 


      26 October

 2014

 


26 April
2015

 


Notes

£'000

£'000

£'000

ASSETS





Non-current assets





Property, plant and equipment


443,375

406,251

422,742

Intangible assets


216,554

255,337

255,364

Investments in associated undertakings and joint ventures


48,121

45,692

38,133

Available-for-sale financial assets


212,743

142,883

140,795

Deferred tax assets


43,748

25,359

38,352








964,541

875,522

895,386






Current assets





Inventories


633,058

655,081

517,054

Trade and other receivables


212,663

165,960

190,726

Derivative financial assets


62,849

49,758

92,199

Cash and cash equivalents


163,308

106,103

78,318








1,071,878

976,902

878,297






TOTAL ASSETS


2,036,419

1,852,424

1,773,683






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


2,314

18,745

14,436

Reverse combination reserve


(987,312)

(987,312)

(987,312)

Own share reserve


(33,726)

(13,251)

(13,251)

Hedging reserve


40,013

44,858

78,796

Retained earnings


1,380,031

1,030,689

1,181,511








1,291,501

983,910

1,164,361

Non-controlling interests


(1,175)

(2,873)

(2,810)






Total equity


1,290,326

981,037

1,161,551






Non-current liabilities





Borrowings

7

182,812

283,622

136,849

Retirement benefit obligations


11,718

15,497

14,869

Deferred tax liabilities


38,092

30,726

40,088

Provisions


45,834

36,886

37,705








278,456

366,731

229,511






Current liabilities





Derivative financial liabilities


7,081

30,696

5,629

Trade and other payables


422,193

434,017

340,936

Borrowings

7

814

8,932

1,204

Current tax liabilities


37,549

31,011

34,852








467,637

504,656

382,621






Total liabilities


746,093

871,387

612,132






TOTAL EQUITY AND LIABILITIES


2,036,419

1,852,424

1,773,683

 

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



 

UNAUDITED CONSOLIDATED CASH FLOW STATEMENT FOR THE 26 WEEKS ENDED 25 OCTOBER 2015

 








26 weeks
ended
25 October 2015

 

26 weeks
ended
26 October 2014

 

52 weeks
ended
26 April
2015

 


Notes

£'000

£'000

£'000






Cash inflow from operating activities

8

110,613

103,718

314,662

Income taxes paid


(33,735)

(33,902)

(77,710)






Net cash inflow from operating activities


76,878

69,816

236,952






Cash flow from investing activities





Proceeds on disposal of property, plant and equipment


44,000

21,150

21,150

Proceeds on disposal of listed investments


56,367

-

51,695

Purchase of associate, net of cash acquired


(9,218)

(2,300)

(50)

Purchase of subsidiaries, net of cash acquired


-

(172)

(3,847)

Purchase of intangible assets


(29)

(3)

(2,937)

Purchase of property, plant and equipment


(92,230)

(26,715)

(97,342)

Purchase of listed investments


(36,988)

(33,162)

(50,415)

Investment income received


2,050

1,277

2,883

Finance income received


326

335

987






Net cash outflow from investing activities


(35,722)

(39,590)

(77,876)






Cash flow from financing activities





Finance costs paid


(1,739)

(4,712)

(6,845)

Borrowings drawn down


117,182

51,336

126,989

Borrowings repaid


(71,258)

(118,730)

(346,997)






Net cash outflow from financing activities


44,185

(72,106)

(226,853)











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

overdrafts


85,341

(41,880)

(67,777)

Cash and cash equivalents including overdrafts at beginning of period


77,505

145,282

145,282






Cash and cash equivalents including overdrafts at the period end


162,846

103,402

77,505

 

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

 

 

The purchase of associates above mainly relates to the acquisition of a stake in Four (Holdings) Limited.

 



UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE 26 WEEKS ENDED 25 OCTOBER 2015






































Treasury

shares

Foreign

currency translation

Own

share reserve

Retained earnings

Other reserves

Total attributable to owners of the parent

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

-

2,655

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

 

 


Treasury

shares

Foreign

currency translation

Own

share reserve

Retained earnings

Other reserves

Total attributable to owners of the parent

Non-controlling interests

Total


£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000










At 26 April 2015

(56,234)

14,436

(13,251)

1,181,511

37,899

1,164,361

(2,810)

1,161,551

Share-based payments

-

-

-

6,482

-

6,482

-

6,482

Vesting of Share-based payments

-

-

8,963

(8,963)

-

-

-

-

Current tax on share schemes

-

-

-

5,407

-

5,407

-

5,407

Deferred Tax on share schemes

-

-

-

(3,818)

-

(3,818)

-

(3,818)

Purchase of own shares

-

-

(29,438)

-

-

(29,438)

-

(29,438)

Non-controlling Interest - acquisition







(422)

(422)

Transactions with owners

-

-

(20,475)

(892)

-

(21,367)

(422)

(21,789)

Profit for the financial period

-

-

-

145,424

-

145,424

2,057

147,481

Dividends received

-

-

-

-

-

-

-

-

Cashflow hedges

 - recognised in the period

-

-

-

-

(6,852)

(6,852)

-

(6,852)

 - reclassification

-

-

-

-

(31,931)

(31,931)

-

   (31,931)

Actuarial losses on defined benefit pension schemes

-

-

-

2,055

-

2,055

-

   2,055

Fair value adjustment in respect of available for sale financial assets

-

-

-

44,240

-

44,240

-

44,240

Taxation on items taken to comprehensive income

-

-

-

7,693

-

7,693

-

7,693

Translation differences - group

-

(12,122)

-

-

-

(12,122)

-

(12,122)

Total comprehensive income

-

(12,122)

-

199,412

(38,783)

148,507

2,057

150,564

At 25 October 2015

(56,234)

2,314

(33,726)

1,380,031

(884)

1,291,501

(1,175)

1,290,326

 

 

 

 

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 25 October 2015, the Sports Direct Employee Benefit Trust held 5,728,418 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.

 

On 7 September 2015 3,772,383 Shares sold by participants following exercise of awards under the Company's 2011 Share Scheme were acquired by Appleby Trust (Jersey) Limited as Trustee of the Sports Direct Employee Benefit Trust (the "Trustee"), with the acquisition being funded by a loan advanced by the Company. The Shares were acquired at a price of 781 pence per Share in an off-market transaction. The Trustee has purchased these Shares in order to help meet future obligations arising under the Company's share schemes.



NOTES TO THE FINANCIAL INFORMATION FOR THE 26 WEEKS ENDED 25 OCTOBER 2015

 

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 2015 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 26 April 2015. This consolidated financial information for the period does not constitute statutory financial statements within the meaning of s434 of the Companies Act 2006.

 

The financial statements for the parent company for the financial period ended 26 April 2015 were prepared in accordance with applicable accounting standards (being those accepted within the UK, i.e. UK GAAP) and under the historical cost convention. Following the publication of FRS 100 'Application of Financial Reporting Requirements' by the Financial Reporting Council the Company is required to change its accounting framework for its financial year ending 25 April 2016 and now has a choice between adopting full EU IFRS or FRS 102 (Reduced Disclosure Framework).

 

The company intends to report (on a non-consolidated basis only) under FRS102 Reduced Disclosure Framework. The Group financial statements are prepared in accordance with EU IFRS and in future periods the Company will continue to report on a consolidated basis under EU IFRS. Shareholder approval to adopt FRS102 is not required, however shareholders holding 5% or more of the issued share capital of the Company may object to the adoption of FRS102. If you have any queries regarding the Company's adoption of FRS102 or would like to object to the use of FRS102 in the Company only financial statements please contact the Company Secretary in writing at the Company's registered office at Unit A, Brook Park East, Shirebrook, NG20 8RY within 28 days of the date of announcement of these Interim Results.

 

The summary of results for the 52 weeks ended 26 April 2015 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 

 

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 USC, Cruise and Flannels; and

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

 

Information regarding the Group's reportable segments for the period ended 25 October 2015, as well as a reconciliation of reported profit for the period to underlying EBITDA, is presented below:

 

 

Segmental information for the 26 weeks ended 25 October 2015:

 

 

                                                                                                                                                       



Retail


Brands



       

Sports Retail

Premium Lifestyle

Total Retail

Total

Eliminations 

Total 


£'000

£'000

£'000

£'000

£'000

£'000








Sales to external customers

1,233,518

87,686

1,321,204

112,464

-

1,433,668

 

Sales to other segments

-

 

-

-

15,796

(15,796)

-















Revenue

1,233,518

87,686

1,321,204

128,260

(15,796)

1,433,668








Gross profit

562,311

36,190

598,501

45,016

-

643,517








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

157,113

 

(6,617)

150,496

14,512

-

165,008

Operating Profit

134,635

(20,381)

114,254

17,021

-

131,275

                                                                                                 

Investment income










54,808

Finance income










1,676

Finance costs










(2,046)

Share of profits of associated undertakings and joint ventures










1,539












Profit before taxation










187,252

Taxation










(39,771)











Profit for the period










147,481

 

 

 

Reconciliation of operating profit to underlying EBITDA for the 26 week period ending 25 October 2015.

 



Total



£'000




Operating profit

131,275

Depreciation

37,669

Amortisation

3,036

Impairment

287

Share of profit of associated undertakings

1,539

 

Reported EBITDA

 

173,806

Charges for the Share Scheme


10,911

Exceptional items


24,059

Realised FX Loss


9,674

Underlying EBITDA (pre-scheme costs)


218,450

 

 

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

 

 

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)

1,432,898








Gross profit

548,080

 

38,428

586,508

43,709

-

630,217








Operating profit 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










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:

 


Total


£'000



Operating profit

168,810



Depreciation

29,060

Amortisation

3,953

Share of loss of associated undertakings

1,643

Reported EBITDA

203,466



Charges for the Share Schemes 

6,057

Exceptional items

(14,149)

Realised FX Gain

7,716

Underlying EBITDA

203,090

 

 

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

 

 

Segmental information for the 52 weeks ended 26 April 2015:

 

This information is available in the 2015 annual report.

 

 

 

3. Exceptional items


26 weeks
ended

25 October 2015
(£'000)

26 weeks
ended

26 October 2014
(£'000)

52 weeks ended

26 April 2015 (£'000)

Profit on disposal of freehold property

12,197

14,149

10,288

Impairment, accelerated depreciation and amortisation

(32,456)

-

(13,338)

Provision against receivables

(3,800)

-

-


(24,059)

14,149

(3,050)

 

The profit on disposal of freehold property relates to the sale of a freehold property for £44m, realising a profit of £12.2m.

The impairment mainly relates to goodwill in our Austrian business, reported within our Sports Retail segment, due to recent trading being below expectations.

 

 

 

4. Investment income

 


26 weeks
ended

25 October 2015
(£'000)

26 weeks
ended

26 October 2014
(£'000)

52 weeks ended

26 April 2015 (£'000)

Dividend income from investments

1,238

1,263

1,531

Gain on disposal of listed investments and derivative agreements

53,570

-

12,573


54,808

1,263

14,104

 

 

The gain on disposal of listed investments and derivative agreements mainly relates to the profit on disposal of JD Sports shares in the period.

 

 

5. Finance costs


26 weeks
ended

25 October 2015
(£'000)

26 weeks
 ended

26 October 2014
(£'000)

52 weeks ended

26 April 2015 (£'000)

Interest on bank loans and overdrafts

1,751

4,654

6,692

Interest on other loans and finance leases

156

233

153

Interest on retirement benefit obligations

139

178

642

Fair value adjustment to forward foreign exchange contracts (1)

-

23,262

-


2,046

28,327

7,487

                                               

(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 prior period relates to equity options.

 

 

6. Earnings per share

 

For diluted earnings per share, the weighted average number of shares, 592,409,163 (FY15 H1: 592,294,371), is adjusted to assume conversion of all dilutive potential ordinary shares under the Group's share schemes, being 38,000,000 (FY15 H1: 24,200,000) to give the diluted weighted average number of shares of 630,409,163 (FY15 H1: 616,494,371).

 

The number of dilutive ordinary shares under the Group's 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
25 October
2015 

26 weeks
ended
25 October
2015 

26 weeks
ended
26 October
2014 

26 weeks
ended
26 October
2014 

52 weeks
ended
26 April
2015 

52 weeks
ended
26 April
2015 

Basic

£'000

Diluted

£'000

Basic

£'000

Diluted

£'000

Basic

£'000

Diluted

£'000








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

145,424

145,424

114,629

114,629

240,397

240,397







Number in thousands

Number in thousands

Number in thousands







Weighted average number of shares

592,409

630,409

592,294

616,494

592,294

616,494








Pence per share

Pence per share

Pence per share








Earnings per share

24.5

23.1

19.4

18.6

40.6

39.0

 

 

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.

 


26 weeks
ended
25 October
2015 

26 weeks
ended
25 October
2015 

26 weeks
ended
26 October
2014 

26 weeks
ended
26 October
2014 

52 weeks
ended
26 April
2015 

52 weeks
ended
26 April
2015 


Basic

£'000

Diluted

£'000

Basic

£'000

Diluted

£'000

Basic

£'000

Diluted

£'000








Profit for the period

145,424

145,424

114,629

114,629

240,397

240,397

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







Realised loss/(gain) on forward foreign exchange contracts

7,546

7,546

5,941

5,941

2,862

2,862

Fair value adjustment to forward foreign exchange contracts

(1,053)

(1,053)

13,286

13,286

(12,472)

(12,472)

Profit on disposal of listed investments

(48,892)

(48,892)

-

-

(2,832)

(2,832)

Profit on disposal of freehold property

(9,546)

(9,546)

(10,895)

(10,895)

(7,921)

(7,921)

Impairment and accelerated depreciation and amortisation

287

287

-

-

-

-

Impairment of goodwill

32,456

32,456

-

-

10,270

10,270

Provision against receivables

2,964

2,964

-

-

-

-















Underlying profit for the period

129,186

129,186

122,961

122,961

230,304

230,304









Number in thousands

 Number in thousands

Number in thousands








Weighted average number of shares

592,409

630,409

592,294

616,494

592,294

616,494








Pence per share

Pence per share

Pence per share








Underlying earnings per share

21.8

20.5

20.8

19.9

38.9

37.4








 







 

 

 

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 25 October 2015

Property, plant and equipment

-

-

-

443,375

443,375

Intangible assets

-

-

-

216,554

216,554

Investments in associated undertakings and joint ventures

-

-

-

48,121

48,121

Available-for-sale financial assets

-

-

212,743

-

212,743

Deferred tax assets

-

-

-

43,748

43,748

Inventories

-

-

-

633,058

633,058

Derivative financial assets

-

62,849

-

-

62,849

Trade and other receivables

68,530

-

-

144,133

212,663

Cash and cash equivalents

163,308

-

-

-

163,308


231,838

62,849

212,743

1,528,989

2,036,419


Assets at 26 April 2015

Property, plant and equipment

-

-

-

422,742

422,742

Intangible assets

-

-

-

255,364

255,364

Investments in associated undertakings

-

-

-

38,133

38,133

Available-for-sale financial assets

-

-

140,795

-

140,795

Deferred tax assets

-

-

-

38,352

38,352

Inventories

-

-

-

517,054

517,054

Derivative financial assets

-

92,199

-

-

92,199

Trade and other receivables

65,335

-

-

125,391

190,726

Cash and cash equivalents

78,318

-

-

-

78,318


143,653

92,199

140,795

1,397,036

1,773,683

 

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

Trade and other receivables

-

49,758

-

-

49,758

Derivative financial assets

56,012

-

-

109,948

165,960

Cash and cash equivalents

106,103

-

-

-

103,103


162,115

49,758

142,883

1,497,668

1,852,424

 

 

 


Loans and payables

(£'000)

Liabilities at fair value through profit and loss

(£'000)

Non-financial liabilities

(£'000)

Total

(£'000)

 

Liabilities at 25 October 2015





Non-current borrowings

182,812

-

-

182,812

Retirement benefit obligations

-

-

11,718

11,718

Deferred tax liabilities

-

-

38,092

38,092

Provisions

-

-

45,834

45,834

Derivative financial liabilities

-

7,081

-

7,081

Trade and other payables

200,275

-

221,918

422,193

Current borrowings

814

-

-

814

Current tax liabilities

-

-

37,549

37,549


383,901

7,081-

355,111

746,093


Liabilities at 26 April 2015





Non-current borrowings

136,849

-

-

136,849

Retirement benefit obligations

-

-

14,869

14,869

Deferred tax liabilities

-

-

40,088

40,088

Provisions

-

-

37,705

37,705

Derivative financial liabilities

-

5,629

-

5,629

Trade and other payables

170,090

-

170,846

340,936

Current borrowings

1,204

-

-

1,204

Current tax liabilities

-

-

34,852

34,852


308,143

5,629

298,360

612,132






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

 

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 25 October 2015, 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, there has been no movement in fair value during the period.

 

The value of equity and foreign exchange derivatives is calculated using a proprietary option pricing model. The model output is the result of a number of inputs including, amongst other things, the terms of the option (strike price, time to expiry, etc.), the prevailing share price, interest rates, foreign exchange rates, the volatility of the underlying stock, and dividends paid by the underlying company.

 

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
25 October
2015 

26 weeks
ended
26 October
2014 

52 weeks
ended
27 April
2015 


£'000

£'000

£'000





Profit before taxation

187,252

149,732

313,446

Net finance costs

370

21,984

(802)

Other Investment income

(54,808)

(1,263)

(14,104)

Share of profit of associated undertakings and joint ventures

(1,539)

(1,643)

(2,959)





Operating profit

131,275

168,810

295,581

Depreciation

37,669

29,060

62,924

Amortisation charge

3,036

3,953

12,725

Impairment

32,743

-

5,314

Profit on disposal of intangibles

9

496

107

Profit on disposal of property, plant and equipment

(12,239)

-

-

Defined benefit pension plan current service cost

14

11

21

Defined benefit pension plan employer contributions

(675)

(1,360)

(2,718)

Share based payments

10,911

6,057

10,105





Operating cash inflow before changes in working capital

202,743

207,027

384,059

Increase in receivables

(21,703)

(42,634)

(66,368)

(Increase in inventories

(116,004)

(89,603)

49,320

Increase / (decrease) in payables

45,577

28,928

(52,349)





Cash inflows from operating activities

110,613

103,718

314,662

 

 

Included within the movement in receivables 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.

 

All related party transactions were undertaken on an arm's length basis and were made in the ordinary course of business.

 

 

10. Post balance sheet events 

 

Since the period end, merger clearance from the Irish Competition and Consumer Protection Commission has been obtained for the acquisition of an additional stake in our Irish joint venture partner, Heatons. The provisional value of assets and liabilities of the business at the date of acquisition are €161m and €75m respectively. The Group holds a put and call option to purchase the remainder of the business and expects to exercise this option before the year end.


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