TIDMSPD
RNS Number : 1855T
Sports Direct International Plc
16 July 2015
16 July 2015
Sports Direct International plc
Preliminary Results for the Year ended 26 April 2015
Sports Retail gross margin up 170 basis points; Group Underlying
EBITDA up 15.7%
Year ended Year ended Change
26 April 2015 27 April 2014 (%)
GBPm GBPm
Group revenue 2,833 2,706 4.7%
Sports Retail 2,399 2,274 5.5%
Premium Lifestyle 208 214 -3.0%
Brands 226 218 4.1%
Group gross margin 43.8% 42.7% 110 bps
Sports Retail gross margin 44.6% 42.9% 170 bps
Underlying EBITDA (pre share
scheme costs) 383.2 331.1 15.7%
Underlying profit before
tax (PBT) (1) 300.3 249.3 20.5%
Reported profit before tax 313.4 239.5 30.9%
Underlying earnings per
share (EPS) (1) 38.9p 32.1p 21.2%
Reported earnings per share 40.6p 30.8p 31.8%
Net debt 59.7 212.0 (71.8%)
Key highlights
-- Sports Retail gross margin increased by 170 bps to 44.6%
-- Group underlying EBITDA increased by 15.7% to GBP383.2m(1)
-- Underlying profit before tax up 20.5% to GBP300.3m (1)
-- Underlying free cash generation of GBP301.8m(2)
-- Sports Retail like-for-like stores gross contribution increased by 7.4% (FY14: 10.5%)(3)
-- Continued roll-out of large format city centre stores
-- Successful UK launch of Click and Collect in FY15 H2
-- Record EBITDA achieved v. 4th year Share Scheme target
-- Net debt decreased to GBP59.7m(4)
Dave Forsey, Chief Executive, said:
"The Group has delivered another solid set of results in spite
of challenging trading conditions including the adverse impact on
performance during the period of England's early departure from the
FIFA World Cup in Brazil and unseasonably mild weather during
Autumn, reducing footfall.
"However, with our ongoing focus on providing customers with
exceptional quality and unbeatable value, we have continued to grow
Group revenues and EBITDA and have succeeded in surpassing our
fourth and final EBITDA target under the 2011 Share Scheme. The
first of these awards will vest with participants in September 2015
and the second in September 2017. We owe our continued success to
the commitment and hard work of those participants and we are
delighted that we are able to reward them in this way.
"Trading since the period end has been in line with management
expectations and will continue to be driven by improvements in
product range and availability, optimisation of both our in-store
and web offerings, the introduction of Click and Collect in the UK
and further investment in our store portfolio."
(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 free cash generation is defined as operating cash flow before working capital,
made up of underlying EBITDA (before Share Scheme costs) plus realised foreign exchange gains
and losses, less corporation tax paid.
(3) Excludes contribution in EAG and SIG as the prior year comparative is not a full year.
(4) Net debt is borrowings less cash held
Sports Direct International plc T: 0344 245 9200
Dave Forsey, Chief Executive
Matt Pearson, Acting Chief Financial Officer
Powerscourt T: 0207 250 1446
Rory Godson
Victoria Palmer-Moore
Lisa Kavanagh
CHAIRMAN'S STATEMENT
I am pleased to report the Group has once again achieved another
solid result, delivering growth in both Group revenues and
EBITDA.
EXPANSION
The construction of Phase Three of our Shirebrook campus
expansion is now well underway. It consists of an additional
warehouse and office facility, spanning a c.700,000 sq. ft.
footprint. Occupancy of the first warehouse area is about to
commence, with population of the remaining areas of the warehouse
planned for later in 2015, on schedule. We have also commenced work
on an additional retail unit and training centre at our Shirebrook
campus, with completion anticipated for late 2015. The expansions
will have a range of benefits for the Group, including an improved
environment for staff training.
Our Oxford Street store has now been open for over 12 months and
has been well-received by both customers and suppliers. The
property, which was the former HMV Flagship store, allows us to
trade over four floors, with c.50,000 sq. ft. of retail space. Our
Glasgow City Centre store has undergone an extension of
approximately 28,000 sq. ft., more than doubling its previous
footprint and we have collaborated with Under Armour to offer our
customers an exceptional shopping environment. We have also
recently acquired the freehold of the c. 50,000 sq. ft. former
Primark store in Leeds, which is expected to open this summer.
We are confident in the success of the format used in the
stores, which we intend to roll out further.
Our fitness division now has 27 fully operational gyms across
England. During the year the Group purchased 25 former LA Fitness
gyms, and developed an additional two gyms with separate retail
premises, ensuring that customers can purchase their everyday gym
essentials on site.
STRATEGIC INVESTMENTS
Strategic investments are an integral part of the Board strategy
to explore new opportunities to bring our product to market.
The Group enhanced its relationship with Debenhams during the
year with the purchase of an additional strategic investment in the
business, increasing our beneficial interest from 6.6% to 15.0% at
the year end date of 26 April 2015, which has subsequently reduced
since the year end to 10.5%. We are currently trialling four
concessions within Debenhams stores.
SHARE SCHEMES
I am pleased to confirm that we have achieved the final Adjusted
Underlying EBITDA target under the 2011 Share Scheme and Executive
Share Scheme. We hope to reward participating employees under the
2011 Share Scheme for their loyalty and motivation by way of share
awards. The first award under the 2011 Share Scheme is due to vest
later in 2015, which will distribute c.5m shares to c.2,000
participating employees. The Group's Share Schemes are some of the
most generous schemes in the country, and are key tools in
motivation and retention.
To the extent that a significant number of participating
employees elect to sell some or all of their shares, whilst the
Company has no obligation to buy back the shares, the Board will
consider a number of options open to it, including whether to: (i)
implement an on-market buy back of shares pursuant to the authority
given by shareholders at the Company's AGM in 2014; or (ii) fund
the Company's Employee Benefit Trust so as to allow it to acquire
shares in the market to replace those shares transferred to
participating employees pursuant to the vesting.
As part of our strategy to closely align the interests of our
team with those of our shareholders, the 2015 Share Scheme was
approved by shareholders at a General Meeting in July 2014. The
vesting of awards under the 2015 Share Scheme is conditional upon
the achievement by the Group of four demanding EBITDA targets,
which span between FY16 and FY19. The awards will vest in 2019 and
2021, subject to successful completion of all four targets, and
other specific performance conditions. The Executive Deputy
Chairman, Mike Ashley, withdrew from the scheme during FY15. Mike
remains fully committed to the achievement of the Scheme's targets,
but would like the focus to be on ensuring that the Scheme aligns
with the wider Sports Direct team, and therefore chose to remove
himself from the Scheme.
As we enter FY16 it is clear, and also understood by the market,
that planned acquisitions in FY15 did not fully materialise.
Following its recent review the Board now recommends to
shareholders a revised FY16 Adjusted Underlying EBITDA target of
GBP420m, rather than the existing target of GBP480m which is now
considered to be unreasonably challenging. This compares to the
Underlying EBITDA of GBP383m achieved in FY15. All other targets
for the further three years of the Scheme remain the same. The
Board will continue to review the robustness of the 2015 Share
Scheme on an annual basis.
THE BOARD
During July 2014, it was announced that Charles McCreevy, a
Non-Executive Director of the Group, would not be standing for
re-election at the 2014 AGM. Charlie, who had spent over three
years with the Group, had extensive all-round business knowledge,
with particular relevance to Competition Regulations. I would like
to thank him for his valuable contribution to the Board. We are in
the process of appointing a replacement and hope to make an
announcement within the near future.
I am delighted to welcome Matt Pearson to the Board in the
position as Acting Chief Financial Officer. Matt joined the
business over eight years ago and since then has gained an in depth
knowledge of the finances of the Group. Matt has been leading our
Group Finance Team for several years and is therefore perfectly
placed to take on the additional responsibilities of this role.
CASUAL WORKERS
Much of the comment regarding the Group's use of zero hour
contracts has been unfounded and inaccurate. We comply fully with
all legal requirements which relate to casual workers, including
sick pay, holiday pay, and freedom to gain other employment. Casual
workers also participate in general incentive schemes.
DIVIDEND
The Board has decided not to propose a dividend in relation to
FY15. The Board remains of the opinion that it is in the best
interests of the Group and its shareholders to preserve financial
flexibility, facilitating the pursuit of potential acquisitions and
other growth opportunities. The payment of dividends remains under
review in future years.
CONCLUSION
Despite ongoing challenging market conditions, and the weather,
we yet again exceeded our targets in FY15. Such success, year on
year, is a testament to the hard work and dedication of all our
workforce for which the Board thank and congratulate them.
Dr. Keith Hellawell. QPM
Non-Executive Chairman
16 July 2015
chief executive's report and business review
Summary of Results
Year ended Year ended
26 April 27 April
2015 2014 Change
----------- ----------- -------
(GBPm) (GBPm) %
Revenue 2,832.6 2,706.0 4.7
Underlying EBITDA 383.2 331.1 15.7
Underlying profit before
tax 300.3 249.3 20.5
Reported profit before
tax 313.4 239.5 30.9
Pence per Pence per
share share
Underlying EPS 38.9 32.1 21.2
Reported EPS 40.6 30.8 31.8
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.
Overview of financial performance
I am pleased to report that, despite the adverse impact on
performance of England's early departure from last year's FIFA
World Cup in Brazil and the unseasonably mild weather during Autumn
reducing footfall, the Group has, yet again, succeeded in
delivering another solid set of results.
The group has achieved another year of revenue and profit growth
in a challenging retail environment, driven by continued expansion
both in the UK and across Europe. During the year we have increased
our store portfolio in the UK by 23 stores and have added a further
nine stores to our European store portfolio. We have also continued
to develop large city centre format stores.
We have also established a Fitness Division in the year,
Sportsdirect Fitness.com, comprising 27 gyms including two combined
gym and retail sites.
I am delighted to announce that the Group has now met the final
target under the 2011 Share Scheme. The first award under this
scheme is due to vest later in 2015 and will reward over c.2,000
participating employees for their hard work and dedication. The
Group's continued success truly re-iterates how important the Share
Schemes have been in motivating participants to work towards a
shared goal.
Group
Group revenue increased by 4.7% to GBP2,832.6m in the year. This
was primarily due to the Sports Retail division, where we grew
revenues by 5.5%. Premium Lifestyle revenue fell by 3.0%, largely
due to the closure of loss-making stores in the period.
Group gross margin in the year increased by 110 basis points
from 42.7% to 43.8%. Sports Retail division gross margin increased
by 170 basis points to 44.6% (FY14: 42.9%), while Brands division
gross margin decreased to 40.3% (FY14: 43.1%).
Group operating costs increased 4.2% to GBP860.5m (FY14:
GBP826.1m). We continue to balance revenues and gross margin, while
maintaining a tight focus on operating costs and as a result grew
Group underlying EBITDA (pre-scheme costs) for the year by 15.7% to
GBP383.2m (FY14: GBP331.1m). Within this underlying EBITDA, we
increased the Retail division EBITDA by 16.0% to GBP349.1m (FY14:
GBP300.9m) while the Brands division EBITDA increased by 12.9% to
GBP34.1m (FY14: GBP30.2m).
Excluded from underlying EBITDA is an GBP10.1m (FY14: GBP11.9m)
charge in respect of the 2009 and 2011 Share Schemes. This charge
has been taken centrally and, except in note 4 to the Annual
Report, is not reflected in the divisional (Retail and Brands)
numbers in this report.
For the year, Group underlying profit before tax increased 20.5%
to GBP300.3m, primarily as a result of the GBP52.1m increase in
EBITDA (pre-scheme costs). Underlying EPS for the year increased by
21.2% to 38.9p (FY14: 32.1p).
Net debt at 26 April 2015 was GBP59.7m (27 April 2014:
GBP212.0m), which is 0.16 times reported EBITDA (27 April 2014:
0.66 times). Reported EBITDA includes realised foreign exchange
gains/losses in selling and administration costs and the Share
Scheme charges.
Review by business segment
Year ended Year ended Change
26 April 2015 27 April 2014 %
(GBPm) (GBPm)
------------------------ --------------- ----------------- ---------
Retail
Revenue:
Sports Retail 2,398.6 2,274.4 5.5
Premium Lifestyle 207.6 214.1 -3.0
Total retail revenue 2,606.2 2,488.5 4.7
------------------------ --------------- ----------------- ---------
Cost of sales (1,456.6) (1,427.3) 2.1
------------------------ --------------- ----------------- ---------
Gross profit 1,149.6 1,061.2 8.3
Gross margin percentage 44.1 42.6 150 bps
Year ended Year ended Change
26 April 2015 27 April 2014
(GBPm) (GBPm) %
Brands
Revenue:
Wholesale 193.3 185.2 4.4
Licensing 33.1 32.3 2.5
------------------------ -------------- -------------- -------- ---
Total brands revenue 226.4 217.5 4.1
Cost of sales (135.2) (123.8) 9.2
------------------------ -------------- -------------- -------- ---
Gross profit 91.2 93.7 -2.7
Gross margin percentage 40.3 43.1 -280 bps
Sports Retail
Sports Retail revenue has grown in the period as we continue to
invest in product range and availability, increasing the proportion
of 'better' and 'best' Group branded products, optimise both our
in-store and web offerings and further invest in our store
portfolio.
Sports Retail sales grew 5.5% to GBP2,398.6m (FY14:
GBP2,274.4m), driven largely by growth in the UK, offset by a weak
Winter sports season across Europe and adverse foreign currency
movements. Sports Retail gross margin for the year increased by 170
basis points to 44.6% (FY14: 42.9%).This increase is primarily
attributable to on-going investment in our 'better and best'
product ranges, further enhanced by efficiencies gained by our
strong supply chain disciplines.
Sales in the second half of the year were up 2.6% to GBP1,167.6m
(FY14 H2: GBP1,138.3m). Gross margins for the second half of the
year improved to 44.6% (FY14 H2: 42.5%).
Sports Retail like-for-like gross contribution, which excludes
online, increased by 7.4%(1) , marking the sixth consecutive year
of growth in this KPI (FY14: +10.5% / FY13: +10.6% / FY12: +0.7% /
FY11: +6.8% / FY10: +3.7%). Sports Retail like-for-like
contribution is defined as the percentage change in gross
contribution in the successive 12-month period. A like-for-like
store is one that has been trading for the full 12 months in both
periods and has not been affected by a significant change, such as
a major refurbishment. The number of stores included in this year's
KPI is 432 (FY14: 339).
Sports Retail operating costs increased by 9.0% in the year to
GBP715.2m (FY14: GBP656.3m) compared to a 5.5% increase in sales
and a 9.7% increase in gross profit due to the full year impact of
proportionally higher costs in our recently acquired European
businesses. Operating costs in H2 increased by 4.6% to GBP361.4m
(FY14 H2: GBP345.5m) compared to a 2.6% increase in sales and a
7.7% increase in gross profit.
Store wages were up 13.1% in the year to GBP239.2m (FY14:
GBP211.4m) but as a percentage of sales increased only to 10.0%
(FY14: 9.3%) due to the annualised effect of new store openings
combined with the full year impact of proportionally higher costs
in our recently acquired European businesses and reduced sales due
to a difficult winter sports season in Europe. Sports Retail store
premises costs increased by 9.5% to GBP211.0m (FY14: GBP192.7m),
due to investment in new stores and the full year effect of
comparatively higher costs in our new European businesses. Other
operating costs were up 14.2% to GBP280.8m (FY14: GBP246.6m),
increasing as a percentage of sales to 11.7% (FY14: 10.8%) due to
costs in our recently established Fitness division.
The currency impact on operating costs of the change in the
Euro: Sterling exchange in our European businesses was a gain of
GBP15.7m (FY14: a cost of GBP5.6m).
Underlying EBITDA for Sports Retail was GBP356.8m (FY14:
GBP321.3m), an increase of 11.0% for the year. This increase was
driven by a GBP94.2m increase in gross profit due to the growth in
store contribution and online sales, offset by the GBP59.0m
increase in operating costs.
The Group's retail businesses performed strongly in a difficult
economic environment. Our retail model, offering outstanding value
to our customers, remains resilient, both in the UK and
internationally. Throughout the year, we continued to focus on
offering our customers the most comprehensive product range, the
best availability and value while minimising operating costs as a
percentage of gross sales.
Online revenue has increased by 14.4% from GBP335.4m to
GBP383.8m in the year, driven largely by the successful launch of
Click and Collect in the UK during the second half of the year,
which now accounts for over 20% of all UK online orders. This
performance is exceptional considering we charge GBP4.99 for this
service. Online sales represented 16.5% of Sports Retail sales
(FY14: 15.1%), excluding wholesale sales.
Our mobile site continues to drive sales and was recently ranked
in the top four retailers in the FTSE 100 in terms of mobile
website performance, according to a recent study released by The
Search Agency (2) . Mobile traffic now accounts for over 50% of all
online visits. We have also re-designed our checkout, introducing a
guest checkout option and streamlining the checkout process.
We have worked hard to improve the customer experience in
Europe, widening the language and currency conversion options on
our sites for non-English speaking countries and going forward plan
to introduce dedicated websites for our European businesses and
additional payment methods including Ideal, Giro and Sofort.
Following successful trials during the year, customers are now
able to purchase and redeem gift cards online. We are also working
towards the introduction of a fast pay check out system, allowing
customers to purchase a large number of products in small number of
clicks.
The division has continued to expand, with the development of
Sportsdirect Fitness.com, comprising 25 standalone former LA
Fitness gyms and an additional two new build combined retail and
gym spaces. A further two gyms in St Helens and Dundee are planned
for early autumn 2015. Membership continues to grow and we have
already surpassed our full year targets.
We have continued to invest in employee training, with a key
focus this year on our "Home Grown" Talent Management programme,
Customer Service Training and Management Induction. During the year
over 58,000 hours were invested into training and developing our
employees. A great deal of this training took place at our Training
Academy on our Shirebrook campus, which is the only training centre
in the world supported by both Nike and Puma. We are committed to
the continued development of our employees, always aiming to
promote internally wherever possible, and during the year ran our
first Graduate Recruitment Programme, 'Talent Bank', where
graduates were placed in our Finance and Ecommerce teams for eight
week summer placements and offered the opportunity to compete for a
permanent role, with the best being rewarded.
Phase Three of the development of our National Distribution
Centre in Shirebrook, the construction of an additional c.700,000
sq. ft. footprint warehouse and office facility, is now well
underway, with completion scheduled for late 2015.
We have worked hard to enhance and invest in our store portfolio
during the year, with a particular focus on larger city centre
stores. During the year we re-located our Oxford Street store to
the c.50,000,sq. ft. former HMV store and have completed a c.28,000
sq. ft. extension of our Glasgow store, which includes a store in
store concept area with Under Armour. We have recently also
acquired the freehold of the former Primark store in Leeds. Works
are currently underway on this four floor, c. 50,000 sq. ft. store
which is due to open this Summer.
During the year we opened 39 stores in the UK, closing 16 and
have opened an additional 16 stores in Europe, closing seven.
Twelve out of the sixteen UK closures were relocations into larger
and better configured space. 428 of the UK store fascia are now
branded SPORTSDIRECT.com, an increase of 27 from last year (FY14:
401).
Period end square-footage increased to c.4.75m sq. ft (3) .
(FY14: c.4.5m) in the UK and remained at c. 3.0m sq. ft. (4) (FY14:
c.3.0m sq. ft.) across the rest of Europe.
UK Stores
Store Portfolio As at 26 As at 27
April 2015 April 2014
Stores at Year End 440 417
Opened 39 32
Closed 16 11
SPORTSDIRECT.com fascia 428 401
Other 13 17
Area (sq. ft.) c.4.75m (3) c.4.5m
In the 52 weeks to 26 April 2015, rent reviews have been agreed
on 33 stores, of which 26 stores were agreed at nil increase. Of
the remaining seven stores the average increase in rent was 13.87%,
giving a total average increase over the 33 stores of 2.88% (0.57%
annual equivalent). There are currently 52 rent reviews outstanding
with a further 42 falling due in FY16. Our lease expiry profile
over all leasehold stores (excluding Lillywhites Piccadilly) is now
4.6 years, including 37 stores with contractual expiries or break
dates within the next 12 months. This significant amount of
flexibility within our portfolio allows us to continue to monitor
and adapt our format to the rapidly changing multi-channel
environment.
In the current financial year, we are targeting to open between
30 and 40 stores, c.30% of which are expected to be relocations. We
are also targeting to re-fit c.300,000 sq. ft. of retail space
across the UK.
International Stores
Store Portfolio 26 April 2015 27 April 2014
Austria 46 52
Belgium 43 44
Estonia * 24 20
Latvia (*) 13 13
Lithuania (*) 12 12
Portugal 17 15
Slovenia 15 15
Poland 10 7
France 7 6
Czech Republic 6 4
Holland 6 6
Cyprus 6 5
Hungary 5 4
Slovakia 4 3
Germany 3 3
Luxembourg 2 2
Spain 1 1
Switzerland 1 -
Total 221 212
Note: Excluding Republic
of Ireland & Iceland
*Includes only stores with SPORTLAND or SPORTSDIRECT.com
fascias
All of the above stores are operated by companies wholly owned
by the Group, except Portugal, where the Group owns 50.1% and
Estonia, Latvia and Lithuania where the Group owns 60.0%. During
the year we have expanded our European store portfolio by nine
stores and have entered one new country. As a result we are now
active in 20 countries across Europe including the Republic of
Ireland and Iceland.
In Austria, we have continued to relocate and upgrade the former
Sports Experts stores which had been previously re-branded to the
SPORTSDIRECT.com fascia. Over the coming year we will re-brand key
Mega stores to the Lillywhites fascia, replicating our UK city
centre store format across the re-branded stores in collaboration
with key international brands such as Salomon.
In the Baltic states we have already opened two stores in
Estonia under the SPORTSDIRECT.com fascia and plan to open two
further stores in Lithuania and one store in Latvia under the
SPORTSDIRECT.com fascia. We have also continued to invest in
re-locating and re-fitting the stores trading under the SPORTLAND
fascia.
Our strategy remains to identify partners in new territories
while continuing to expand our operations in the countries where we
currently trade. For FY16, we are targeting to open between 20 and
30 new stores across seven countries.
The Group has a 50% shareholding in the Heatons chain which
operates 15 Sports Direct stores in Northern Ireland and 27 sports
stores in the Republic of Ireland. We also own a 40% shareholding
in the Sports Direct business in Iceland.
Local management continue to work hard to ensure that all new
and existing stores in Europe are committed to striving towards the
operational efficiencies and standards that exist across our UK
sports stores.
(1) Excluding EAG and SIG as the prior year comparative is not a
full year
(2) The Search Agency UK's Mobile Experience Scorecard: FTSE 100
Companies -
http://go.thesearchagency.com/mobile-experience-scorecard-ftse-100-2015
(3) Due to differing methodologies, this implies a range between
4.5m sq. ft. - 5.0m sq. ft.
(4) Due to differing methodologies, this implies a range between
2.5m sq. ft. - 3.5m sq. ft.
Premium Lifestyle
Premium Lifestyle sales decreased 3.0% to GBP207.6m (FY14:
GBP214.1m), due to the closure of loss-making stores in the year.
Premium Lifestyle gross margin for the year decreased by 150 basis
points to 38.8% (FY14: 40.3%) due to online clearance of legacy
stock in the year.
Premium Lifestyle operating costs decreased by 17.3% to GBP88.2m
(FY14: GBP106.7m) due to the continued rationalisation of the USC
and Republic businesses and synergies gained by the consolidation
of key head office functions in Flannels.com, Cruise and Van
Mildert and the integration of the distribution function.
The Underlying EBITDA loss for Premium Lifestyle decreased to
GBP7.7m (FY14: GBP20.4m loss) as we began to see the benefit of the
re-structuring of Republic in the prior year and rationalisation of
the other businesses. We will see further benefits of this in the
coming year.
Online revenue in the division increased in the year, driven
largely improvements in stock availability and system improvements.
We saw the benefit of the integration of the division's eCommerce
platforms with the Group's IT systems and the launch of the
Flannels.com and USC mobile platforms in the prior year. We also
successfully launched Click and Collect in USC during the year and
over 15% of all USC online orders are now delivered via Click and
Collect.
We continue to strengthen our relationships with key third party
suppliers.
At the year end, the Premium Lifestyle division traded from 103
stores under four main fascias:
Store Portfolio As at 26 As at 27
April 2015 April 2014
USC 66 90
Cruise 10 10
Van Mildert 10 9
Flannels.com 8 8
Other 9 9
103 126
Brands
The Group's brand portfolio includes a wide variety of
world-famous sport, fashion and lifestyle brands. The Group's
Retail division sells products under these Group brands in its
stores, and the Brands division exploits the brands through its
wholesale and licensing activities. The Brands division continues
to sponsor a variety of prestigious events and retains a variety of
globally-recognised, high-profile sportsmen and women as brand
ambassadors.
Brands division total revenue increased by 4.1% to GBP226.4m
(FY14: GBP217.5m). Wholesale revenues were up 4.4% to GBP193.3m
(FY14: GBP185.2m), including growth in the challenging UK market.
Trading in the US market was in line with expectations and
continues to represent c. 40% of total wholesale sales.
Brands gross margin decreased by 280 basis points to 40.3%
(FY14: 43.1%). Wholesale gross margins fell 310 basis points to
30.1% (FY14: 33.2%) largely due to a shift in the sales mix towards
lower margin lines.
Licensing revenues in the year were up 2.5% to GBP33.1m (FY14:
GBP32.3m). During the year we signed 58 new licence agreements,
covering multiple brands, product categories and geographies, with
minimum contracted values of $25.0m over the life of the
agreements. At 26 April 2015, the Group has 401 license agreements
worldwide(1) , across 264 licensees, with contracted minimums of
$305m over the remaining life of the agreements.
Longer term, we still regard licensing as the key driver of
Brands division profitability and central to the overall growth of
the Brands business. The key growth areas are expected to include
Australasia and Asia Pacific with the acquisition of the Dunlop
& Slazenger brands in the region during the year. This combined
with growth in the Americas should compensate for a more
challenging licensing landscape in the UK and Europe, as Sports
Retail continues to expand in these territories.
Operating costs decreased by 9.7% to GBP57.0m (FY14: GBP63.1m)
benefiting from the consolidation of our back office functions in
the prior year. As a result of cost savings, underlying EBITDA
increased by 12.9% to GBP34.1m (FY14: GBP30.2m).
We continue to focus on developing world-class products that are
endorsed by leading athletes on the field of play and expect to
spend between GBP10 and GBP20m on advertising and promotional costs
in the coming year.
(1) Includes consolidation of agreements signed in prior years
Outlook
Trading since the year end has been in line with management's
expectations, and underpins the 2015 Bonus Share Scheme's revised
FY16 Underlying EBITDA target of GBP420m. 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, enhanced by the introduction of Click
and Collect in the UK. We also continue to invest in our store
portfolio, with the roll-out of further large format city centre
stores.
Key Performance Indicators
The Board monitors the performance of the Group by reference to
a number of key performance indicators (KPIs), which are discussed
in this Chief Executive's Report and in the Financial Review. The
most important of these KPIs are:
52 weeks 52 weeks 52 weeks
ended ended ended
26 April 27 April 28 April
2015 2014 2013
Financial KPIs
Group revenue GBP2,832.6m GBP2,706.0m GBP2,185.6m
Underlying EBITDA (1) GBP383.2m GBP331.1m GBP287.9m
Sports Retail gross margin 44.6% 42.9% 40.3%
Sports Retail like-for-like
stores gross contribution
(2) +7.4% +10.5% +10.6%
Online revenue as a percentage
of total Sports Retail revenue
(3) 16.5% 15.1% 15.0%
Underlying earnings per
share (4) 38.9p 32.1p 26.9p
Non-financial KPIs
No. of Sports Retail stores
(5) 661 629 498
Workforce turnover 18.7% 19.2% 15.5%
Cardboard recycling 9,526 tonnes 9,230 tonnes 8,893 tonnes
(1) The method for calculating underlying EBITDA is set out in
the Financial Review.
(2) Sports Retail like-for-like contribution is defined as the
percentage change in gross contribution in the successive 12 month
period. A like-for-like store is one that has been trading for the
full 12 months in both periods and has not been affected by a
significant change, such as a major refurbishment. Excludes
contribution in EAG and SIG as the prior year comparative is not a
full year
(3) Excludes wholesale revenue
(4) The method for calculating underlying earnings per share is
set out in the Financial Review
(5) Excluding associates and stores in the Baltics states that
trade under fascias other than SPORTLAND or SPORTSDIRECT.com
Workforce
The success of the Group has largely been created by our
c.27,000 strong workforce, whose dedication and commitment has been
sustained over many years. Their enthusiasm and 'one team' attitude
has assisted the Group to succeed where many other retailers have
failed. The Board are extremely grateful for the time that our
workforce has taken to develop their skills and expertise. We
promote staff training wherever possible to enable them to be the
best that they can be.
The 2009 and 2011 Share Schemes have been fundamental tools in
the motivation and incentivisation of participating employees.
Under the 2009 Share Scheme, c.27m shares vested with those
participants. Subject to satisfactory personal performance, a
further c.21m shares are expected to vest under the 2011 Share
Scheme.
The 2011 Share Scheme Adjusted Underlying EBITDA targets (before
scheme costs) relate to performance between FY12 and FY15. All four
targets have now been met, and subject to the individual employee's
satisfactory personal performance, the shares are due to vest in
2015 and 2017. Under the 2011 Share Scheme participating employees
are eligible for awards on a pro-rata basis depending on their
length of service with the Group. Awards under the scheme are
granted at either 100%, 75%, 50% or 25% of the participant's annual
base pay. Subject to the service criteria being fulfilled,c.5m
shares are due to vest in 2015 and c.16m shares are due to vest in
2017.
An additional three million shares are due to vest with our
Executive Director and two members of senior management in 2017
under the Executive Share Scheme, subject to performance criteria
being fulfilled. The Executive Share Scheme performance targets
mirror those to be applied to awards under the 2011 Share
Scheme.
As a result of the successes of previous schemes, the 2015 Share
Scheme has been devised to encourage further outstanding employee
performance for those who are invited to participate. The scheme
will provide for the grant of nil-cost options over up to 25m
shares. The vestings are dependent on stretching performance
criteria spanning between FY16 and FY19. With original EBITDA
targets (before scheme costs) of GBP480m for FY16, GBP570m for
FY17, GBP650m for FY18 and GBP750m for FY19, the scheme has the
potential to not only motivate participants, but also to create a
further substantial increase in shareholder value.
The Group intends to propose an amendment to the FY16 Adjusted
Underlying EBITDA target under the 2015 Share Scheme, which will be
reduced from GBP480m to GBP420m. All other targets for the further
three years of the scheme remain the same. This change will be put
to shareholders as an ordinary resolution at the Company's AGM in
September 2015.
Our strategy for growth
The Group's strategic focus is to continue to deliver
sustainable long-term growth.
Within the UK Retail business this strategy includes proactive
management of our store portfolio to further reduce costs and
increase sales areas so that we can expand our product offering.
This is illustrated by our recent store openings in Glasgow and
Oxford Street, a model which we plan to replicate in other major
markets.
The Group also intends to invest in store refurbishment and
merchandising in order to provide our customers with an enhanced
customer experience. The on-going collaboration with Under Armour
in the UK and European brands such as Salomon for our in-store
concepts, including the new Oxford Street store, is a further
example of this strategy.
Our international expansion strategy remains focused on Europe.
This includes identifying and working with strong local partners,
which can assist the Group to expand in new territories, while we
continue to expand our operations in those countries where we
currently trade. We believe there is a significant opportunity to
introduce the key elements of our successful business model across
Europe. This strategy includes the introduction of our sourcing,
buying and operational expertise in new markets, whilst also
leveraging our Group brand portfolio.
Online remains a significant growth opportunity for the Group.
The launch of UK Click and Collect in the year in both Sports
Direct and USC has driven a significant increase in online sales,
and we now plan to continue to roll this out across the other Group
websites. Further opportunities to grow this business include the
launch of a loyalty scheme for customers including annual fixed
price delivery options and the development of dedicated websites
and improved payment options across Europe. We also plan to
introduce a fast pay check out system which will streamline the
checkout process.
In order to re-enforce the heritage and authenticity of its
brands, the Brands division will continue to develop core wholesale
product for international brands such as Dunlop, Slazenger and
Everlast. Going forward, the Brands division will focus on further
expansion of its licensing activities in North America, Australasia
and Asia Pacific, leveraging the global appeal of our leading
brands. This will increase the global presence and international
appeal of our Group brands.
We believe that acquisitions and strategic investments in
related businesses are beneficial to the Group and we will continue
to evaluate such opportunities as they arise. The Group maintains
significant financial and strategic flexibility in order to ensure
that it is able to pursue such opportunities from a position of
strength.
Dave Forsey
Chief Executive
16 July 2015
FINANCIAL REVIEW
The financial statements for the Group for the year ended 26
April 2015 are presented in accordance with International Financial
Reporting Standards (IFRS) as adopted by the EU.
EBITDA and Profit Before Tax
EBITDA PBT
GBPm GBPm
-------------------------------------------- ------- -------
Operating profit 295.6
Depreciation, amortisation and impairment 67.8
Share of profit of associated undertakings
(excl. FV adjustments) 3.0
Reported 366.4 313.4
Share scheme 10.1 -
Exceptional items 3.0 3.0
Profit on disposal of investments - (12.6)
Realised FX loss 3.7 3.7
IAS 39 FX fair value adjustment to forward
currency contracts - (7.2)
Underlying 383.2 300.3
-------------------------------------------- ------- -------
Underlying 52-week FY15 profit before tax excludes:
(i) exceptional items which decreased profit by GBP3.0m;
(ii) profit on disposal of investments which increased profit by GBP12.6m;
(iii) realised foreign exchange losses which decreased profit by GBP3.7m; and
(iv) IFRS revaluation of foreign currency contracts which increased profit by GBP7.2m.
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 between zero and five years of anticipated
purchases in foreign currency.
The realised exchange loss of GBP3.7m (FY14: GBP1.8m gain)
included in administration costs has arisen from:
a) accepting Dollars and Euros at the contracted rate; and
b) the translation of Dollar and Euro denominated assets and
liabilities at the period end rate or date of realisation.
The exchange gain of GBP7.3m (FY14: GBP11.2m loss) included in
finance income / costs substantially represents the reduction in
the mark-to-market liability made (under IFRS) for the Group's
unhedged forward contracts as at 26 April 2015. A number of the
forward contracts outstanding at 26 April 2015 qualify for hedge
accounting and the fair value gain on these contracts has been
credited to equity through the Consolidated Statement of
Comprehensive Income. The Group has sufficient USD/GBP contracts to
cover all purchases in UK Retail for FY16. The Sterling exchange
rate with the US dollar was $1.680 at 27 April 2014 and $1.502 at
26 April 2015.
Given the potential impact of commodity prices on raw material
costs, the Group may hedge certain input costs, including cotton,
crude oil and electricity.
Finance costs
Year ended Year ended
26 April 2015 27 April 2014
--------------- ---------------
(GBPm) (GBPm)
Interest on bank loans and overdrafts (6.7) (7.5)
Interest on other loans (0.2) (0.6)
Interest on retirement benefit obligations (0.6) (0.6)
Fair value adjustment to forward foreign
exchange contracts - (11.2)
--------------- ---------------
(7.5) (19.9)
=============== ===============
The decrease in interest payable is a result of the decreased
use of the revolving credit facility and repayment of debt
inherited from acquired companies.
The prior year loss on the fair value of forward foreign
exchange contracts arose under IFRS as a result of marking to
market at the period end those contracts that do not qualify for
hedge accounting.
Exceptional items
Year ended Year ended
26 April 2015 27 April 2014
--------------- ---------------
(GBPm) (GBPm)
Profit on sale of freehold properties 10.3 -
Impairment and accelerated depreciation
and amortisation (13.3) (5.5)
(3.0) (5.5)
=============== ===============
The impairment and accelerated depreciation and amortisation
relates to a change in the estimated useful life of certain
tangible and intangible assets and impairment against goodwill in
the year.
The profit on sale of freehold property includes the sale of a
freehold warehouse for GBP21.2m, realising a profit of
GBP11.3m.
Taxation
The effective tax rate on profit before tax in FY15 was 23.0%
(FY14: 25.0%). This rate reflects depreciation on non-qualifying
assets and overseas earnings being taxed at a higher rate.
Earnings
Year ended Year ended
26 April 2015 27 April 2014 Change
---------------- ---------------- -------
pence per share pence per share %
Reported EPS (Basic) 40.6 30.8 31.8
Underlying EPS 38.9 32.1 21.2
Weighted average number
of shares (actual) 592,294,371 585,513,537
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. Shares held in Treasury and the Employee Benefit
Trust are excluded from this figure.
The underlying EPS reflects the underlying performance of the
business compared with the prior year 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 after
tax and minority interests is as follows:
Year ended Year ended
26 April 27 April 2014
2015
(GBPm) (GBPm)
Profit after tax 240.4 180.2
Post tax effect of adjustment items:
Profit on disposal of listed investments (2.8) (4.0)
Impairment of goodwill - 0.3
Fair value adjustment to forward foreign exchange
contracts (12.5) 8.4
Realised loss/(gain) on forward foreign exchange
contracts 2.9 (1.4)
Profit on disposal of freehold properties (7.9) -
Impairment and accelerated depreciation and
amortisation 10.2 4.1
--------------------------------------------------- ----------- ---------------
Underlying profit after tax 230.3 187.6
=================================================== =========== ===============
Dividends
The Board has decided not to propose a dividend in relation to
FY15. The board feels that it remains in the best interests of the
Group to preserve financial flexibility, facilitating the pursuit
of potential acquisitions and other growth opportunities. The
payment of dividends remains under review in future years.
Capital expenditure
During the year, capital expenditure amounted to GBP100.3m
(FY14: GBP69.1m), which includes expenditure on licences within
intangible assets and construction of our Shirebrook warehouse.
Acquisitions
The Group made a number of small acquisitions during the year
including the purchase of twenty-five former LA Fitness gyms.
Strategic investments
During the year the Group disposed of c. 1.5m shares in JD
Sports Fashion plc but at the year end continued to hold an 11.09%
stake in JD Sports. The fair value of the Group's holdings at 26
April 2015 was GBP140.8m (27 April 2014: GBP104.9m). The movement
in the fair value of the shares held has been recognised directly
in Other Comprehensive Income.
In June 2014, the Group acquired an interest in c.7 million
shares in MySale Group plc, representing 4.8% of the issued share
capital of MySale.
In September 2014, the Group entered into a derivative agreement
referencing 23,000,000 shares in Tesco Plc, representing 0.3% of
the issued share capital of Tesco.
In October 2014 the Group acquired c. 56 million shares in
Debenhams plc for GBP33.2m, representing 4.6% of the issued share
capital of Debenhams. This stake was sold in November 2014 and the
Group entered into a derivative agreement referencing c. 74 million
Debenhams shares, equivalent to 6.1% of the issued share capital of
Debenhams.
On 23 January 2015 the Group terminated an existing Debenhams
derivative agreement entered into in January 2014 and at the same
time, entered into a new derivative agreement referencing c. 128
million ordinary shares of Debenhams (representing 10.5% of the
issued share capital of Debenhams).
As at 26 April 2015 the Group had an interest in 15.0% interest
in Debenhams' ordinary shares.
These stakes allow us to develop a relationship and develop
commercial partnerships with the relevant retailers 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 GBP92.2m.
Cash flow and net debt
Net debt decreased by GBP152.3m from GBP212.0m at 27 April 2014
to GBP59.7m at 26 April 2015.
The analysis of debt at 26 April 2015 was as follows:
At 26 April At 27 April
2015 2014
(GBPm) (GBPm)
Cash and cash equivalents 78.3 151.0
Borrowings (138.0) (363.0)
Net debt (59.7) (212.0)
=========================== ============ ============
On 25 November 2014 the Group utilised the accordion option
under its GBP688m working capital facility. As a result, the
working capital facility has been increased from GBP688m to
GBP738m. The facility is available until September 2018 and is not
secured against any of the Group's fixed assets.
The Group also has a GBP250m 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 year 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.
Cash flow
Total movement is as follows:
At 26 April At 27 April
2015 2014
(GBPm) (GBPm)
Underlying 52 week EBITDA 383.2 331.1
Realised (loss)/profit on forward foreign
exchange contracts (3.7) 1.8
Taxes paid (77.7) (55.7)
------------------------------------------- ------------ ------------
Underlying free cash flow 301.8 277.2
Invested in:-
Working capital and other (64.8) (110.1)
Purchase of own shares - -
Acquisitions (including debt) (3.8) (144.2)
Net proceeds from/(purchase of) investments 4.1 (4.6)
Net capital expenditure (79.1) (69.1)
Finance costs and other financing activities (5.9) (7.2)
Decrease / (increase) in net debt 152.3 (58.0)
=================================== ====== =======
The increase in working capital is partly to support the growth
of Sports Retail and the online business and partly due to the
timing of payments around year end.
Pensions
The Group operates a number of closed defined benefit schemes in
the Dunlop Slazenger companies. The net deficit in these schemes
decreased from GBP15.4m at 27 April 2014 to GBP14.9m at 26 April
2015.
Matt Pearson
Acting Chief Financial Officer
16 July 2015
CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 26 APRIL
2015
Year ended Year ended
26 April 27 April
2015 2014
Notes GBP'000 GBP'000
Revenue 2 2,832,560 2,705,958
Cost of sales (1,591,748) (1,551,036)
Gross profit 1,240,812 1,154,922
Selling, distribution and administrative expenses (950,526) (908,843)
Other operating income 8,345 8,583
Exceptional items 3 (3,050) (5,531)
Operating profit 2 295,581 249,131
Other investment income 14,104 7,017
Finance income 8,289 891
Finance costs (7,487) (19,853)
Share of profit of associated undertakings and joint ventures 2,959 2,266
Profit before taxation 313,446 239,452
Taxation 4 (72,093) (59,839)
Profit for the period 2 241,353 179,613
Attributable to:
Equity holders of the Group 240,397 180,245
Non-controlling interest 956 (632)
Profit for the period 2 241,353 179,613
Earnings per share attributable to the equity shareholders
Pence per
share Pence per share
Basic earnings per share 5 40.6 30.8
Diluted earnings per share 5 39.0 29.2
Underlying basic earnings per share 5 38.9 32.1
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR
ENDED 26 APRIL 2015
Year ended Year ended
26 April 27 April
2015 2014
Notes GBP'000 GBP'000
Profit for the period 2 241,353 179,613
Other comprehensive income
Items that will not be reclassified subsequently to profit
or loss
Actuarial (losses) / gains on defined benefit pension
schemes (2,493) 3,860
Taxation on items recognised in other comprehensive income 524 (698)
Items that will be reclassified subsequently to profit
or loss
Exchange differences on translation of foreign operations 9,156 (33,118)
Exchange differences on hedged contracts - recognised
in the period 77,181 (3,737)
Exchange differences on hedged contracts - reclassified
and reported in net profit 7,240 (17,909)
Fair value adjustment in respect of available-for-sale
financial assets 21,893 57,373
Taxation on items recognised in other comprehensive income (17,728) (4,170)
Other comprehensive income for the period, net of tax 95,773 1,601
Total comprehensive income for the period 337,126 181,214
Attributable to:
Equity holders of the Group 336,170 181,846
Non-controlling interest 956 (632)
337,126 181,214
CONSOLIDATED BALANCE SHEET AS AT 26 APRIL 2015
26 April 27 April
2015 2014
Notes GBP'000 GBP'000
ASSETS
Non-current assets
Property, plant and equipment 422,742 412,361
Intangible assets 255,364 255,109
Investments in associated undertakings and joint ventures 38,133 41,763
Available-for-sale financial assets 140,795 116,504
Deferred tax assets 38,352 31,130
895,386 856,867
Current assets
Inventories 517,054 565,479
Trade and other receivables 190,726 123,014
Derivative financial assets 92,199 4,355
Cash and cash equivalents 78,318 151,024
878,297 843,872
TOTAL ASSETS 1,773,683 1,700,739
EQUITY AND LIABILITIES
Share capital 64,060 64,060
Share premium 874,300 874,300
Treasury shares reserve (56,234) (56,234)
Permanent contribution to capital 50 50
Capital redemption reserve 8,005 8,005
Foreign currency translation reserve 14,436 5,280
Reverse combination reserve (987,312) (987,312)
Own share reserve (13,251) (13,251)
Hedging reserve 78,796 (5,625)
Retained earnings 1,181,511 931,819
1,164,361 821,092
Non-controlling interests (2,810) (3,538)
Total equity 1,161,551 817,554
Non-current liabilities
Borrowings 6 136,849 6,764
Retirement benefit obligations 14,869 15,350
Deferred tax liabilities 40,088 24,046
Provisions 37,705 37,780
229,511 83,940
Current liabilities
Derivative financial liabilities 5,629 18,665
Trade and other payables 340,936 392,019
Borrowings 6 1,204 356,226
Current tax liabilities 34,852 32,335
382,621 799,245
Total liabilities 612,132 883,185
TOTAL EQUITY AND LIABILITIES 1,773,683 1,700,739
CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 26 APRIL
2015
Year Year
ended ended
26 April 27 April
2015 2014
Notes GBP'000 GBP'000
Cash inflow from operating activities 7 314,362 222,785
Income taxes paid (77,710) (55,730)
Net cash inflow from operating activities 236,952 167,055
Cash flow from investing activities
Proceeds on disposal of property, plant and equipment 21,150 -
Proceeds on disposal of listed investments 51,695 49,394
Purchase of associate, net of cash acquired (50) (8,000)
Purchase of subsidiaries, net of cash acquired (3,847) (15,407)
Purchase of intangible assets (2,937) (1,827)
Purchase of property, plant and equipment (97,342) (67,304)
Purchase of listed investments (50,415) (55,467)
Investment income received 2,883 1,604
Finance income received 987 891
Net cash outflow from investing activities (77,876) (96,116)
Cash flow from financing activities
Finance costs paid (6,845) (8,111)
Borrowings drawn down 126,989 300,910
Borrowings repaid (346,997) (348,452)
Exercise of option over non-controlling interests - (11,678)
Net cash outflow from financing activities (226,853) (67,331)
Net increase in cash and cash equivalents including overdrafts (67,777) 3,608
Cash and cash equivalents including overdrafts at beginning of period 145,282 141,674
Cash and cash equivalents including overdrafts at the period end 77,505 145,282
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED
26 APRIL 2015
Foreign
Treasury currency Own share Retained Other Non-controlling
shares translation reserve earnings reserves Sub-total interests Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 28 April 2013 (56,234) 38,398 (64,375) 752,018 (24,876) 644,931 (254) 644,677
Vesting of share -
based
payments - - 51,124 (51,124) - - - -
Current tax on
share schemes - - - 25,500 - 25,500 - 25,500
Deferred tax on
share schemes - - - (11,215) - (11,215) - (11,215)
Non-controlling
interests
- acquisitions - - - - - - (10,513) (10,513)
Exercise of option
over
non-controlling
interest - - - (19,970) - (19,970) 7,861 (12,109)
-------- ----------- --------- ----------- --------- ----------- --------------- ---------
Transactions with
owners - - 51,124 (56,809) - (5,685) (2,652) (8,337)
-------- ----------- --------- ----------- --------- ----------- --------------- ---------
Profit for the
financial
period - - - 180,245 - 180,245 (632) 179,613
Other comprehensive
income
Cash flow hedges
- recognised in the
period - - - - (3,737) (3,737) - (3,737)
- reclassified and
reported
in net profit - - - - (17,909) (17,909) - (17,909)
Actuarial losses on
defined
benefit pension
schemes - - - 3,860 - 3,860 - 3,860
Fair value
adjustment in
respect of
available-for-sale
financial assets - - - 57,373 - 57,373 - 57,373
Taxation (4,868) (4,868) (4,868)
Translation
differences
- Group - (32,498) - - - (32,498) - (32,498)
Translation
differences
- associates - (620) - - - (620) - (620)
-------- ----------- --------- ----------- --------- ----------- --------------- ---------
Total comprehensive
income
for the period - (33,118) - 236,610 (21,646) 181,846 (632) 181,214
At 27 April 2014 (56,234) 5,280 (13,251) 931,819 (46,522) 821,092 (3,538) 817,554
Credit to equity
for Share-based
payment - - - 5,833 - 5,833 - 5,833
Deferred tax on
share schemes - - - 1,266 - 1,266 - 1,266
Non-controlling
interests
- acquisitions - - - - - - 384 384
Transactions with
owners - - - 7,099 - 7,099 384 7,483
-------- ----------- --------- ----------- --------- ----------- --------------- ---------
Profit for the
financial
period - - - 240,397 - 240,397 956 241,353
Dividends received - - - - - - (612) (612)
Other comprehensive
income
Cash flow hedges
- recognised in the
period - - - - 77,181 77,181 - 77,181
- reclassified and
reported
in net profit - - - - 7,240 7,240 - 7,240
Actuarial losses on
defined
benefit pension
schemes - - - (2,493) - (2,493) - (2,493)
Fair value
adjustment in
respect of
available-for-sale
financial assets - - - 21,893 - 21,893 - 21,893
Taxation (17,204) (17,204) (17,204)
Translation
differences
- Group - 13,783 - - - 13,783 - 13,783
Translation
differences
- associates - (4,627) - - - (4,627) - (4,627)
-------- ----------- --------- ----------- --------- ----------- --------------- ---------
Total comprehensive
income
for the period - 9,156 - 242,593 84,421 336,170 344 336,514
At 26 April 2015 (56,234) 14,436 (13,251) 1,181,511 37,899 1,164,361 (2,810) 1,161,551
1. Accounting policies
The financial information, which comprises the consolidated
income statement, consolidated statement of comprehensive income,
consolidated balance sheet, consolidated cash flow statement,
consolidated statement of changes in equity and related notes, does
not constitute full accounts within the meaning of s435 (1) and (2)
of the Companies Act 2006. The auditors have reported on the
Group's statutory accounts for the each of the years ended 26 April
2015 and 27 April 2014 which do not contain any statement under
s498 of the Companies Act 2006 and are unqualified. The statutory
accounts for the year ended 27 April 2014 have been delivered to
the Registrar of Companies and the statutory accounts for the year
ended 26 April 2015 will be filed with the registrar in due
course.
The consolidated financial statements have been prepared in
accordance with IFRS as adopted for use in the European Union
(including International Accounting Standards ("IAS") and
International Financial Reporting Standards Interpretations
Committee ("IFRSiC") interpretations) and with those parts of the
Companies Act 2006 applicable to companies reporting under IFRS as
adopted for use in the European Union. The consolidated financial
statements have been prepared under the historical cost convention,
as modified to include fair valuation of certain financial assets
and derivative financial instruments.
2. Segmental analysis
IFRS 8 - 'Operating Segments' requires the Group's segments to
be identified on the basis of internal reports about components of
the Group that are regularly reviewed by the Chief Operating
Decision Maker to assess performance and allocate resources across
each operating segment.
The Chief Operating Decision Maker has been identified as the
Executive Directors and the operating segments are identified as
the store fascia or brand, in line with the internal reporting to
the Executive Directors.
Sales and gross profit for each operating segment, as well as
underlying EBITDA, are the main measures used by the Executive
Directors to assess performance.
In accordance with paragraph 12 of IFRS 8 the Group's operating
segments have been aggregated into the following reportable
segments:
-- Sports Retail - includes the results of the UK and
International retail network of sports stores along with related
websites;
-- Premium Lifestyle - includes the results of the premium
retail businesses such as Republic, Cruise and USC; and
-- Brands - includes the results of the Group's portfolio of
internationally recognised brands such as Everlast, Lonsdale and
Dunlop.
Information regarding the Group's reportable segments for the
year ended 26 April 2015, as well as a reconciliation of reported
profit for the period to underlying EBITDA, is presented below:
Segmental information for the year ended 26 April 2015:
Retail Brands Eliminations Total
-------------------------------------------- --------- -------------- -----------
Sports
Retail Premium Lifestyle Retail Total Total
--------- ----------------- -------------- --------- -------------- -----------
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Sales to external customers 2,398,547 207,623 2,606,170 226,390 - 2,832,560
Sales to other segments - - - 25,480 (25,480) -
--------- ----------------- -------------- --------- -------------- -----------
Revenue 2,398,547 207,623 2,606,170 251,870 (25,480) 2,832,560
========= ================= ============== ========= ============== ===========
Gross profit 1,069,088 80,523 1,149,611 91,201 - 1,240,812
========= ================= ============== ========= ============== ===========
Operating profit before
foreign exchange and
exceptional items 285,534 (11,170) 274,364 27,984 ` 302,348
========= ================= ============== ========= ============== ===========
Operating profit 283,347 (11,278) 272,069 23,512 - 295,581
Investment income 14,104
Finance income 8,289
Finance costs (7,487)
Share of profits of
associated undertakings
and joint ventures 2,959
-----------
Profit before taxation 313,446
Taxation (72,093)
-----------
Profit for the period 241,353
-----------
Sales to other segments are priced at cost plus a 10%
mark-up.
Other segment items included in the income statement for the
year ended 26 April 2015:
Retail Brands Total
------------------------------------- -------- --------
Sports Retail Premium Total Brands Total
Lifestyle
-------------- ----------- -------- -------- --------
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Depreciation 57,855 2,543 60,398 2,026 62,424
Amortisation 548 687 1,235 4,122 5,357
Information regarding segment assets and liabilities as at 26
April 2015 and capital expenditure for the year then ended:
Retail Brands Eliminations Total
--------- ---------- ---------- -------------- -----------
Sports Premium
Retail Lifestyle
--------- ---------- ---------- -------------- -----------
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Investments in associated
undertakings and joint
venture 38,133 - - - 38,133
Other assets 1,688,779 24,446 190,772 (168,447) 1,735,550
--------- ---------- ---------- -------------- -----------
Total assets 1,726,912 24,446 190,772 (168,447) 1,773,683
========= ========== ========== ============== ===========
Total liabilities (646,836) (60,255) (73,488) 168,447 (612,132)
========= ========== ========== ============== ===========
Tangible asset additions 93,429 2,321 1,592 - 97,342
Intangible asset additions 108 - 2,829 - 2,937
--------- ---------- ---------- -------------- -----------
Total capital expenditure 93,537 2,321 4,421 - 100,279
========= ========== ========== ============== ===========
Segmental information for the year ended 27 April 2014:
Retail Brands Eliminations Total
-------------------------------------------- --------- -------------- -----------
Sports
Retail Premium Lifestyle Retail Total Total
--------- ----------------- -------------- --------- -------------- -----------
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Sales to external customers 2,274,365 214,066 2,488,431 217,527 - 2,705,958
Sales to other segments 203 - 203 29,938 (30,141) -
--------- ----------------- -------------- --------- -------------- -----------
Revenue 2,274,568 214,066 2,488,634 247,465 (30,141) 2,705,958
========= ================= ============== ========= ============== ===========
Gross profit 974,952 86,263 1,061,215 93,707 - 1,154,922
========= ================= ============== ========= ============== ===========
Operating profit before
foreign exchange and
exceptional items 254,736 (25,729) 229,007 23,825 - 252,832
========= ================= ============== ========= ============== ===========
Operating profit 251,762 (25,588) 226,174 22,957 - 249,131
Investment income 7,017
Finance income 891
Finance costs (19,853)
Share of profits of
associated undertakings
and joint ventures 2,266
-----------
Profit before taxation 239,452
Taxation (59,839)
-----------
Profit for the period 179,613
-----------
Sales to other segments are priced at cost plus a 10%
mark-up.
Other segment items included in the income statement for the
year ended 27 April 2014:
Retail Brands Total
------------------------------------- -------- --------
Sports Retail Premium Total Brands Total
Lifestyle
-------------- ----------- -------- -------- --------
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Depreciation 50,549 4,689 55,238 1,725 56,963
Amortisation 1,348 687 2,035 4,797 6,832
Impairment - - - 284 284
Information regarding segment assets and liabilities as at 27
April 2014 and capital expenditure for the year then ended:
Retail Brands Eliminations Total
--------- ---------- ---------- -------------- -----------
Sports Premium
Retail Lifestyle
--------- ---------- ---------- -------------- -----------
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Investments in associated
undertakings and joint
venture 42,176 - (413) - 41,763
Other assets 1,609,024 96,601 183,103 (229,752) 1,658,976
--------- ---------- ---------- -------------- -----------
Total assets 1,651,200 96,601 182,690 (229,752) 1,700,739
========= ========== ========== ============== ===========
Total liabilities (893,269) (123,554) (96,114) 229,752 (883,185)
========= ========== ========== ============== ===========
Tangible asset additions 57,365 6,978 2,961 - 67,304
Intangible asset additions 259 - 1,568 - 1,827
--------- ---------- ---------- -------------- -----------
Total capital expenditure 57,624 6,978 4,529 - 69,131
========= ========== ========== ============== ===========
Geographic information
Segmental information for the Year ended 26 April 2015:
UK Non-UK Eliminations Total
----------- --------- -------------- -------------
GBP'000 GBP'000 GBP'000 GBP'000
Segmental revenue from external customers 2,252,360 580,200 - 2,832,560
=========== ========= ============== =============
Total capital expenditure 81,793 18,486 - 100,279
=========== ========= ============== =============
Segmental assets 1,564,864 377,266 (168,447) 1,773,683
=========== ========= ============== =============
Segmental information for the Year ended 27 April 2014:
UK Non-UK Eliminations Total
----------- --------- -------------- -------------
GBP'000 GBP'000 GBP'000 GBP'000
Segmental revenue from external customers 2,063,724 642,234 - 2,705,958
=========== ========= ============== =============
Total capital expenditure 51,525 17,606 - 69,131
=========== ========= ============== =============
Segmental assets 1,526,405 404,086 (229,752) 1,700,739
=========== ========= ============== =============
The following table reconciles the reported operating profit to
the underlying EBITDA as it is one of the main measures used by the
chief operating decision maker when reviewing performance:
Reconciliation of operating profit to underlying EBITDA for the
Year ending 26 April 2015.
Sports Retail Premium Lifestyle Brands Total
-------------- ------------------ -------- --------
GBP'000 GBP'000 GBP'000 GBP'000
-------------- ------------------ -------- --------
Operating profit 283,347 (11,278) 23,512 295,581
Depreciation 57,855 2,543 2,026 62,424
Amortisation 548 687 4,122 5,357
Share of profit/(loss)
of associated undertakings 3,009 - (50) 2,959
Reported 344,759 (8,048) 29,610 366,321
Charges for the Share
Schemes 10,110 - - 10,110
Exceptional items (3,395) - 6,445 3,050
Realised FX Loss/(Gain) 5,332 358 (1,973) 3,717
Underlying EBITDA 356,806 (7,690) 34,082 383,198
-------------- ------------------ -------- --------
Reconciliation of operating profit to underlying EBITDA for the
Year ending 27 April 2014.
Sports Retail Premium Lifestyle Brands Total
-------------- ------------------ -------- --------
GBP'000 GBP'000 GBP'000 GBP'000
-------------- ------------------ -------- --------
Operating profit 251,762 (25,588) 22,957 249,131
Depreciation 50,549 4,689 1,725 56,963
Impairment - - 284 284
Amortisation 1,348 687 4,797 6,832
Share of profit/(loss)
of associated undertakings 2,679 - (413) 2,266
Reported 306,338 (20,212) 29,350 315,476
Charges for the Share
Schemes 11,927 - - 11,927
Exceptional items 5,531 - - 5,531
Realised FX (Gain)/ Loss (2,557) (141) 868 (1,830)
Underlying EBITDA 321,239 (20,353) 30,218 331,104
-------------- ------------------ -------- --------
3. Exceptional items
Year ended Year ended
26 April 27 April
2015 2014
GBP'000 GBP'000
Profit on sale of freehold property 10,288 -
Impairment and accelerated depreciation and amortisation (13,338) (5,531)
(3,050) (5,531)
- -
The impairment and accelerated depreciation and amortisation
relates to a change in the estimated useful life of certain
tangible and intangible assets and impairment against goodwill in
the year.
4. Taxation
The effective tax rate on profit before tax for FY15 was 23.0%
(FY14: 25.0%). This rate reflects depreciation on non-qualifying
assets and overseas earnings being taxed at a higher rate.
5. Earnings per share from total and continuing operations
attributable to the equity shareholders
Basic earnings per share is calculated by dividing the earnings
attributable to ordinary shareholders of the parent by the weighted
average number of ordinary shares outstanding during the year.
For diluted earnings per share, the weighted average number of
shares, 592,294,371 (2014: 585,513,537), is adjusted to assume
conversion of all dilutive potential ordinary shares under the
Group's share schemes, being 24,200,000 (2014: 32,676,278), to give
the diluted weighted average number of shares of 616,494,371 (2014:
618,189,815).
Basic and diluted earnings per share
Year ended Year ended Year ended Year ended
26 April 26 April 27 April 27 April
2015 2015 2014 2014
Diluted Basic Diluted
Basic GBP'000 GBP'000 GBP'000 GBP'000
Profit for the period 240,397 240,397 180,245 180,245
Number in thousands Number in thousands
Weighted average number of shares 592,294 616,494 585,514 618,190
Pence per share Pence per share
Earnings per share 40.6 39.0 30.8 29.2
Underlying earnings per share
The underlying earnings per share reflects the underlying
performance of the business compared with the prior year and is
calculated by dividing underlying earnings by the weighted average
number of shares for the period. 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 certain non-trading
items.
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.
Year Year Year Year
ended ended ended ended
26 April 26 April 27 April 27 April
2015 2015 2014 2014
Basic Diluted Basic Diluted
GBP'000 GBP'000 GBP'000 GBP'000
Profit for the period 240,397 240,397 180,245 180,245
Post tax adjustments to profit for the period for the following
non-trading items:
Realised loss / (gain) on forward exchange contracts 2,862 2,862 (1,373) (1,373)
Fair value adjustment to derivative financial instruments (12,472) (12,472) 8,395 8,395
(Profit on disposal of listed investments (2,832) (2,832) (4,060) (4,060)
Profit on sale of intangible assets - - - -
Profit on disposal of property (7,921) (7,921)
Impairment and accelerated depreciation and amortisation 10,270 10,270 4,432 4,432
Underlying profit for the period 230,304 230,304 187,639 187,639
Number in thousands Number in thousands
Weighted average number of shares 592,294 616,494 585,514 618,190
Pence per share Pence per share
Earnings per share 38.9 37.4 32.1 30.3
6. Borrowings
26 April 27 April
2015 2014
GBP'000 GBP'000
Non-current:
Bank and other loans 136,849 6,764
136,849 6,764
Current:
Bank overdrafts 813 5,742
Bank and other loans 391 350,484
1,204 356,226
Total borrowings:
Bank overdrafts 813 5,742
Bank and other loans 137,240 357,248
138,053 362,990
An analysis of the Group's total borrowings other than bank
overdrafts is as follows:
26 April 27 April
2015 2014
GBP'000 GBP'000
Borrowings - Sterling 95,808 240,731
Borrowings - Other 41,432 116,517
137,240 357,248
Loans are all at rates of interest ranging between 1.15% and
2.0% over the interbank rate of the country within which the
borrowing entity resides.
On 28 May 2014 the company refinanced the above facilities and
entered into a new committed, unsecured revolving facility
agreement with thirteen financial institutions, with Barclays Bank
plc acting as Agent. This revolving facility can be drawn to an
aggregate limit of GBP738 million and is available until 27
September 2018.
The Group continues to operate comfortably within its banking
facilities and covenants.
The carrying amounts and fair value of the borrowings are not
materially different.
Net debt at 26 April 2015 was GBP59.7m (27 April 2014:
GBP212.0m).
7. Cash inflow from operating activities
Year Year
ended ended
26 April 27 April
2015 2014
GBP'000 GBP'000
Profit before taxation 313,446 239,452
Net finance (income) / costs (802) 18,962
Other investment income (14,104) (7,017)
Share of profits of associated undertakings and joint ventures (2,959) (2,266)
Operating profit 295,581 249,131
Depreciation 62,924 56,963
Amortisation 12,725 6,832
Impairment 5,314 5,815
Loss on disposal of intangibles 107 -
Defined benefit pension plan current service cost 21 22
Defined benefit pension plan employer contributions (2,718) (2,708)
Share-based payments 10,105 11,927
Operating cash inflow before changes in working capital 384,059 327,982
Increase in receivables (66,368) (18,241)
Decrease / (Increase) in inventories 49,320 (52,521)
Decrease in payables (52,349) (34,435)
Cash inflow from operating activities 314,362 222,785
8. Post balance sheet events
There were no material post balance sheet events after 26 April
2015 up to the date of signing of these accounts.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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