TIDMSPD
RNS Number : 2999Z
Sports Direct International Plc
14 December 2017
14 December 2017
Interim Results for the 26 weeks to 29 October 2017 ("FY18
H1")
FY18 H1 FY17 H1 Change
-------------------------------------- -------- -------- ---------
GBPm GBPm %
Group revenue 1,714.6 1,637.7 +4.7
UK Sports Retail (1) 1,142.3 1,153.7 -1.0
International Sports Retail stores 343.5 330.2 +4.0
US Retail 63.9 - -
Premium Lifestyle 67.7 40.9 +65.5
Brands 97.2 112.9 -13.9
Group gross margin 38.6% 40.4% -180 bps
UK Sports Retail (2) 39.4% 40.2% -80 bps
International Sports Retail 40.8% 39.7% +110 bps
US Retail (3) 38.5% - -
Underlying EBITDA (4) 156.1 145.3 +7.4
Underlying profit before tax (4)(5) 88.0 71.6 +22.9
Reported profit before tax 45.8 140.2 -67.3
Underlying earnings per share (4)(5) 11.3p 8.5p +32.9
Reported earnings per share 4.9p 15.6p -68.6
Underlying free cash generation 150.9 129.5 +16.5
Net debt (8) 471.7 182.1 +159.0
-------------------------------------- -------- -------- ---------
Key highlights
-- Group revenue increased by 4.7%. Excluding acquisitions,
disposals and on a currency neutral basis, revenue increased by
1.2%
-- UK Sports Retail revenue fell 1.0% due to reduced online
promotional activity and store closures as part of the continued
elevation of the portfolio
-- International Sports Retail fell 0.8% on a currency neutral basis(6)
-- US Retail acquired in May 2017, revenue was GBP63.9m
-- Group underlying EBITDA up 7.4% to GBP156.1m
-- Underlying profit before tax up 22.9% to GBP88.0m
-- Underlying free cash generation of GBP150.9m (7)
-- Net Debt has increased to GBP471.7m from GBP182.1m as at 30
April 2017. This is due to continued long term investment in
strategic relationships, the high street elevation strategy and the
share buyback programme.
-- Due to increasing customer expectations for new product,
inventory provisions have increased to GBP133.9m (FY17 H1:
GBP122.7m, FY17: GBP98.4m). We currently expect inventory
provisions to remain consistent relative to inventory levels.
Mike Ashley, Chief Executive of Sports Direct International plc,
said:
"Our high street elevation strategy is currently delivering
spectacular trading performance within our flagship stores. We
intend to open between 10 and 20 new flagship stores next year.
"Whilst our reported profit before tax has been impacted by fair
value adjustments and transitional factors such as the disposal of
assets in FY17; our underlying profit before tax remains healthy.
We will continue to invest for the long-term and our net debt has
increased in line with management expectations.
"We continue to anticipate that growth in underlying EBITDA
during FY18 will be within our forecast range of 5% to 15%."
(1) Total UK Sports Retail revenue, including wholesale and other.
(2) Retail and online only, excludes wholesale and other.
(3) US Retail margin excludes GBP17.5m of losses due to acquisition accounting adjustments. See
note 12 to the financial information for further details on the Bob's Stores and Eastern Mountain
Sports acquisition.
(4) Underlying EBITDA, underlying profit before taxation (PBT) and underlying earnings per share
(EPS) exclude realised foreign exchange gains/losses in selling and administration costs,
exceptional costs, profit/loss on sale of properties and the profit/loss on sale of strategic
investments. Underlying EBITDA also excludes the Share Scheme charges.
(5) Underlying PBT 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.
(6) Sales and margin increases on a currency neutral basis are calculated by revaluing the division's
foreign currency denominated sales at the prior period average exchange rate for the period.
(7) 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.
(8) Net debt is borrowings less cash held. GBP182.1m is net debt as at 30 April 2017, as at 23
October 2016, net debt was GBP71.9m. See note 8 of the Financial information.
Sports Direct International plc T: 0344 245 9200
Jon Kempster, Chief Financial Officer
Cameron Olsen, Company Secretary
KBA PR T: 0207 734 9995
Keith Bishop
CHAIRMAN'S STATEMENT
Overview
FY18 H1 has seen the Company continue to make good progress in
elevating our retail proposition on the high street and elsewhere
in order to deliver an enhanced offering to customers. I am pleased
to report that the Company remains on course to deliver an increase
in underlying earnings in line with our forecast in July. This is a
significant achievement and I would like to thank all our people at
Sports Direct for their continued hard work and loyalty. Over the
half year, underlying EBITDA was up +7.4% to GBP156.1m due to
healthy trading and reduced costs. Underlying PBT was up +22.9% to
GBP88.0m; and the Group generated free cash flow of GBP150.9m. As a
result of investing in our long-term strategy requirements, our net
debt increased in line with management expectations from GBP182.1m
as at 30 April 2017 to GBP471.7m at 29 October 2017.
Strategy and Strategic Priorities
The elevation of our retail proposition remains a key objective.
A crucial driver of this over the long-term continues to be our
high street elevation strategy via the active management of our
property portfolio. This is facilitating our continued transition
towards a new generation of stores and FY18 H1 saw us open new
flagship stores in a number of key retail locations. This is
enabling us to fulfil our commitment to developing elevated sports
and lifestyle space, whilst working closely with our third party
brand partners to ensure greater integration of key products.
Our People and Our Practices
The Board remains fully committed to ensuring that our people
are treated with dignity and respect. I am confident the
improvements we have made over the last 18 months have made a
positive difference. However, we will continue to monitor our
working practices on a rolling basis in order to avoid complacency.
In September, bonuses worth GBP43m were paid to eligible employees
when 11.1m ordinary shares were acquired by almost 2,000
participants in the Company's share schemes. The Board hopes to
launch a new share scheme at an appropriate time in the future, and
the Company is also examining other methods of rewarding staff. As
stated in our Annual Report 2017, the Company pays other awards and
incentives to staff that total approximately GBP19m per annum.
These incentives are on top of normal wages, which are banded above
National Minimum Wage (and for those aged 25 or over are above
statutory National Living Wage). As previously stated on many
occasions, Sports Direct continues to meet all of its obligations
to pay holiday pay and statutory sick pay to permanent and casual
staff.
Workers' Representative
We are very proud to be one of the first public companies in the
UK to embrace the idea of having a workers' representative on the
Board. The Sports Direct Workers' Representative, Alex Balacki (who
was elected by staff in April) has attended all meetings of the
Board during FY18 H1. The Board has accepted a number of
recommendations from Alex, and we will be providing an update in
due course. Alex is part of the Sports Direct team that will be
meeting with key stakeholders going forward. He also took part in a
Q & A session with shareholders at our AGM in September, and I
would like to thank him for his valuable contribution. Alex is the
first person to fill this important role, the scope of which
continues to develop and evolve. To this end, and following
consultations with staff, we envisage that the inaugural period
during which Alex is in the role will be extended by an additional
year (which will then be followed by a new staff election).
Banking Facility
Sports Direct recently announced that we have entered into a new
Revolving Credit Facility ("RCF"). The RCF is valid for four years
(with a one year extension option), and it will provide the Group
with access to borrowings of up to GBP907.5m. As announced on 21
November 2017, the Company anticipates that due to our ongoing High
Street Elevation Strategy, it is likely that we will seek via an
accordion arrangement to increase this facility to GBP1
billion.
John Ashley and General Meeting
The Board trusts that shareholders will welcome the steps taken
to reassure them that John Ashley did not benefit inappropriately
from being the brother of majority shareholder Mike Ashley. In
fact, John was actually disadvantaged by approximately GBP11m after
he forewent bonuses that he would have received if he were treated
equally to other executives who helped to build the Company (as
outlined in our RNS of 24 November 2017).
By voluntarily abstaining from voting on this issue, the Board
has provided the Company's independent shareholders the opportunity
to determine whether or not to make a retrospective payment to John
Ashley. The Board notes that independent shareholders voted against
making this payment at yesterday's General Meeting. The Board
respects the views of the Company's independent shareholders, and
considers all these matters to be closed. We now intend to move
on.
Strategic Investments
In October we were pleased to announce that the Group has
appointed Liam Rowley in the new role of Head of Strategic
Investments. Liam is a former equity research analyst with
experience in banking and investment funds; and he brings
additional corporate expertise to Sports Direct. He will oversee
and manage our strategic stakes, with a view to delivering benefits
to our customers, broadening or enhancing our commercial
relationships and retail channels, selectively growing our market
share, and/or further diversifying our operations.
Currency
The Group manages the volatility of currency movements through
the use of forward and option instruments. We have now hedged our
forecast requirements for FY19.
Investing in the High Street
Finally, I would like to extend my thanks to the many councils
and local authorities who have recently extended a warm welcome
towards our long-term investment in key retail locations. Our
elevation strategy is not only providing jobs in these communities
and boosting local economies, but it is also helping to sustain the
high street as a much-loved destination for customers. The coming
year will see us open flagship stores in important locations such
as Leicester, Watford and Thurrock; and we anticipate the strategy
will create over 200 new jobs in these areas. We look forward to
working closely with communities in these areas and in other
locations in order to deliver a truly impressive retail
experience.
Dr Keith Hellawell, QPM
Non-Executive Chairman
14 December 2017
Overview of Financial Performance
Summary of Results
26 Weeks ended 26 Weeks ended
29 October 23 October
2017 2016 Change
---------------- --------------- -------
(GBPm) (GBPm) %
Revenue 1,714.6 1,637.7 +4.7
Underlying EBITDA 156.1 145.3 +7.4
Underlying profit before
tax 88.0 71.6 +22.9
Reported profit before
tax 45.8 140.2 -67.3
Pence per share Pence per
share
Underlying EPS (1) 11.3 8.5 +32.9
Reported EPS (1) 4.9 15.6 -68.6
(1) Based on 532.9 million and 591.6 million ordinary shares
outstanding in FY18 H1 and FY17 H1, respectively.
Basis of reporting
The financial statements for the Group for the 26 weeks ended 29
October 2017 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 PBT and
underlying EPS 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" or
"alternative" 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, underlying profit before
taxation (PBT) and underlying earnings per share (EPS) exclude
realised foreign exchange gains/losses in selling and
administration costs, exceptional costs, profit/loss on sale of
properties and the profit/loss on sale of strategic investments.
Underlying EBITDA also excludes the Share Scheme charges.
Reconciliations are given in the financial review.
Business Review
Overview of FY18 H1 financial performance
Group revenue was up 4.7% to GBP1,714.6m, aided by favourable
Euro exchange rates and the acquisition of Bob's Stores and Eastern
Mountain Sports during the period. This was offset by store
closures as part of the continued elevation of the portfolio.
Excluding this acquisition, the Dunlop disposal and on a currency
neutral basis, Group revenue was up 1.2%.
Gross margin for the Group decreased 180 basis points to 38.6%
(FY17 H1: 40.4%) due to the impact of increased stock provisions
and continued impact of the USD exchange rate. As at 29 October
2017, the Group had hedged its forecast FY18 USD purchases in the
UK at USD/GBP 1.31.
During the period, Group operating costs decreased by 3.9% to
GBP496.5m (FY17 H1: GBP516.7m). Excluding acquisitions and
disposals and currency neutral, operating costs were down 3.5%.
This is largely due to prior period onerous lease provisions and
the closure of loss making stores in Europe.
As a result, Group underlying EBITDA increased by 7.4% to
GBP156.1m.
In FY18 H1, depreciation and amortisation decreased by 7.0% to
GBP64.0m. Group underlying PBT increased by 22.9% to GBP88.0m (FY17
H1: GBP71.6m). Underlying EPS increased by 32.9% to 11.3p.
Reported profit before tax decreased by 67.3% to GBP45.8m. The
prior period included a profit of GBP119.7m relating to the sale of
JD Sports plc shares. Reported EPS similarly decreased by 68.6% to
4.9p.
The Group generated underlying free cash flow of GBP150.9m
during the period, up from GBP129.5m in the prior period as a
result of the increase in Underlying EBITDA, aided by a gain on
exchange differences in the period. FY18 H1 capital expenditure
amounted to GBP99.9m, purchases of listed investments were
GBP131.6m and purchases of own shares including the share scheme
vesting were GBP133.7m.
On 21 November 17 the Group announced that it had entered into a
new Revolving Credit Facility which is valid for a minimum of four
years with access to borrowings of up to GBP907.5m with an
accordion option to bring the total to GBP1 billion. This replaced
the previous Revolving Credit Facility.
Net Debt which increased to GBP471.7m at the period end
(GBP182.1m at 30 April 2017), equating to 1.6 times LTM EBITDA(1)
(FY17 H1: 0.2 times on net debt of GBP71.9m).
(1) LTM EBITDA is the last twelve months historic underlying EBITDA.
UK Sports Retail financial performance
Due to changes in the way the business is managed, the revenue,
margin and EBITDA relating to the USC fascia have been moved from
Premium Lifestyle to the UK Retail division. This better reflects
the nature of the USC trade and the separate sales locations of the
Premium Lifestyle businesses. Accordingly, the prior period has
been restated to include GBP42.5m of sales, GBP17.1m of margin and
GBP18.4m of overheads.
26 weeks ended 26 weeks ended Change
29 October 2017 23 October 2016
(GBPm) (GBPm) %
----------------------------------- ---------------- ---------------- --------
Retail (1)
Revenue 1,120.3 1,135.7 -1.4
Cost of Sales (678.9) (678.8) -
----------------------------------- ---------------- ---------------- --------
Gross Profit (1) 441.4 456.9 -3.4
Gross Margin % 39.4% 40.2%
Wholesale and Other Gross Profit 12.8 13.4 -4.5
Operating costs (300.2) (332.3) -9.7
Associates (8.5) - -
----------------------------------- ---------------- ---------------- --------
UK Sports Retail Underlying EBITDA 145.5 138.0 +5.4
The UK Sports Retail segment includes all of the Group's sports
retail and USC store and web operations in the UK, all of the
Group's Sports Online business, the Group's Fitness Division, and
the Group's Shirebrook campus operations, as well as the Heatons
Northern Ireland stores. UK Sports Retail is the main driver of the
Group trading performance and accounts for over 65% of Group
revenue.
Store Portfolio As at 29 As at 23 As at 30
October 2017 October 2016 April 2017
Stores at period end 507 519 513
Opened 7 4 21
Closed 13 8 31
Area (sq. ft.) c.5.4m* c.5.3m* c.5.3m*
*This implies a range between 5.0m sq.ft. - 5.5m sq.ft.
Heatons N.I. and USC stores are included within the above.
UK Sports Retail sales fell by 1.4%(1) , mainly due to reduced
online promotional activity and store closures as part of the
continued elevation of the portfolio.
During the period, UK Sports Retail gross margin decreased by 80
basis points to 39.4% (FY17 H1: 40.2%)(1) . This was primarily the
result of additional stock provisions and the continued adverse USD
rate.
UK Sports Retail's operating costs decreased by 9.7% to
GBP300.2m (FY17 H1: GBP332.3m), partly due to leased store closures
as part of the elevation strategy. The prior period included
increased provisions for the outcome of potential claims against
the Group.
The loss on Associates largely relates to the trade losses and
impairment of the Group's investment in Brasher Leisure, and other
associate losses.
UK Sports Retail underlying EBITDA increased by 5.4% to
GBP145.5m (FY17 H1: GBP138.0m).
(1) Retail and online only, excludes wholesale and other.
International Sports Retail financial performance
26 weeks ended 26 weeks ended Change
29 October 2017 23 October 2016
(GBPm) (GBPm) %
---------------------------------------------- ---------------- ---------------- --------
Revenue 343.5 330.2 +4.0
Cost of Sales (203.4) (199.2) +2.1
Gross Profit 140.1 131.0 +6.9%
Gross Margin % 40.8% 39.7%
Operating costs (124.5) (141.7) -12.1
International Sports Retail Underlying EBITDA 15.6 (10.7) -
The International Sports Retail division includes the Group's
sports retail store management and operations outside of the UK,
including the Group's European distribution centres in Belgium and
Austria, but excludes the new acquisition in the US. International
Sports Retail accounts for over 20% of Group revenue.
All of the following stores are operated by companies wholly
owned by the Group, except Estonia, Latvia and Lithuania where the
Group owns 60.0% and Malaysia where the Group owns 51.0%.
Store Portfolio - Europe As at 29 October As at 23 October As at 30 April
(1) 2017 2016 2017
-------------------------- ----------------- ----------------- ---------------
Republic of Ireland
(2) 33 29 32
Malaysia 30 23 25
Belgium 38 41 39
Austria 30 39 36
Estonia (3) 27 26 26
Lithuania (3) 16 16 16
Latvia (3) 17 15 16
Portugal 17 17 17
Poland 16 16 16
Slovenia 15 15 15
Hungary 9 13 11
Czech Republic 10 9 10
France 5 7 6
Cyprus 6 6 6
Holland 6 6 6
Slovakia 6 6 6
Germany 2 3 2
Luxembourg 2 2 2
Spain 2 2 2
Total 287 291 289
(1) Excluding Iceland
(2) Excludes Heatons fascia stores
(3) Includes only stores with SPORTSDIRECT.com and Sportland fascias
In addition to the above we operate 14 standalone Heatons stores
in the Republic of Ireland and one store owned by an associate in
Iceland.
International Sports Retail achieved sales growth of 4.0%,
largely due to the translation of sales at an improved EUR/GBP
exchange rate. On a currency neutral basis, International Sports
Retail revenue decreased by 0.8%, mainly due to store closures.
During the period, gross margin increased by 110 basis points to
40.8% (FY17 H1: 39.7%), largely due to improvements in the Republic
of Ireland because of better product mix. Forecast USD purchases
for the remainder of FY18 are hedged at USD/EUR 1.11 which reduces
the impact of currency volatility on margins.
International Sports Retail's operating costs decreased by 12.1%
in FY18 H1 due to the closure of loss making stores and onerous
lease provisions of GBP15.6m in the prior period. On a currency
neutral basis, International Sports Retail's operating costs
decreased by 16.2%.
International Sports Retail underlying EBITDA increased to
GBP15.6m (FY17 H1: GBP10.7m loss).
US Retail financial performance
On 18 May 2017, the Group completed the acquisition of the trade
and assets of Bob's Stores and Eastern Mountain Sports in the US.
This retail chain consists of 49 retail stores and will provide
Sports Direct with a footprint in US bricks-and-mortar retail and a
platform from which to grow US on-line sales.
26 weeks ended
29 October 2017
(GBPm)
---------------------------- ----------------
Revenue 63.9
Cost of Sales (56.8)
Gross Profit 7.1
Gross Margin % 11.1%
Operating costs (30.1)
US Retail Underlying EBITDA (23.0)
US Retail's underlying EBITDA is made up of GBP5.5m of trading
losses as group processes and strategies are implemented, and
GBP17.5m of losses relating to fair value accounting adjustments
and accounting policy alignments. See note 12 to the financial
statements for further details on the acquisition.
Premium Lifestyle financial performance
26 weeks ended 26 weeks ended Change
29 October 2017 23 October 2016
(GBPm) (GBPm) %
------------------------------------ ---------------- ---------------- --------
Revenue 67.7 40.9 +65.5
Cost of Sales (46.2) (24.5) +88.6
Gross Profit 21.5 16.4 +31.1
Gross Margin % 31.8% 40.1%
Operating costs (20.8) (15.5) +34.2
Premium Lifestyle Underlying EBITDA 0.7 0.9 -22.2
The Group's Premium Lifestyle division includes the Group's
premium lifestyle fascias in the UK: Flannels.com, Cruise and van
mildert along with their ecommerce sites. Due to a change in the
way the business operates, USC results are now included in UK
retail, therefore the prior period has been restated. Accordingly,
the prior period has been restated to exclude GBP42.5m of sales,
GBP17.1m of margin and GBP18.4m of overheads.
Store Portfolio As at 29 October As at 23 As at 30
2017 October 2016 April 2017
Flannels.com 16 12 13
Cruise 10 10 10
van mildert 4 7 5
Other - 5 -
30 34 28
Sales in the period were up by 65.5% to GBP67.7m (FY17 H1:
GBP40.9m), largely due to the increased sales through the
Flannels.com website and new stores.
Gross margin decreased to 31.8% (FY17 H1: 40.1%), due to an
increase in stock provisions and customer demand for the latest
products.
Operating costs increased by 34.2% to GBP20.8m (FY17 H1:
GBP15.5m) due to new Flannels stores.
As a result, Premium Lifestyle underlying EBITDA reduced from
GBP0.9m to GBP0.7m.
Brands financial performance
26 weeks ended 26 weeks ended Change
29 October 2017 23 October 2016
(GBPm) (GBPm) %
------------------------- ---------------- ---------------- --------
Wholesale revenue 80.6 95.6 -15.7
Licensing revenue 16.6 17.3 -4.0
------------------------- ---------------- ---------------- --------
Total Revenue 97.2 112.9 -13.9
Cost of Sales (59.1) (68.6) -13.8
Gross Profit 38.1 44.3 -14.0
Wholesale Margin % 26.7% 28.2%
Gross Margin % 39.2% 39.2%
Operating costs (20.8) (27.2) -23.5
Brands Underlying EBITDA 17.3 17.1 1.2
The Brands division operates our globally renowned heritage
Group Brands, and our wholesale and licensing relationships across
the world, as well as our partnerships with third party brands that
we license-in to sell in Sports Retail and Premium Lifestyle
divisions.
Brands division total revenue decreased by 13.9% to GBP97.2m
(FY17 H1: GBP112.9m). Wholesale revenues were down 15.7% to
GBP80.6m (FY17 H1: GBP95.6m), mainly due to the disposal of the
Dunlop wholesale activity in March 2017.
Licensing revenues in FY17 H1 decreased 4.0% to GBP16.6m (FY17
H1: GBP17.3m). Our strategic focus remains on delivering further
growth in licensing revenues and during the half year, 11 new
agreements were signed across 5 new licensees, and the Group
renewed some licensees, with total minimums of $5m over the life of
the contracts. In total, the Group has 308 active licensing
agreements, across 227 licensees, with minimum revenues of $209m
over the remaining contract lifetimes.
Wholesale gross margin decreased by 150 bps to 26.7% (FY17 H1:
28.2%) due to changes in the product mix resulting from the removal
of Dunlop meaning a higher proportion of lower margin direct
delivery sales. Brands total gross margin was maintained at 39.2%
(FY17 H1: 39.2%).
Brands operating costs decreased by 23.5% to GBP20.8m (FY17 H1:
GBP27.2m) in the period, as a result of the removal of the Dunlop
overheads. We expect investment in key Group Brands to be
maintained at similar levels to those of previous years.
As a result, underlying EBITDA in the division increased to
GBP17.3m (FY17 H1 GBP17.1m).
Currency exposure
-- 42 months of cover in place on GBP/EUR sales - a mix of
forwards and options gives between EUR1.3bn and EUR3.2bn cover
-- 18 months of cover in place on USD/GBP - a mix of forwards
and options gives between $1.1bn and $1.4bn cover
-- 30 months of cover in place on EUR/USD - a mix of forwards
and options gives between $0.4bn and $0.5bn cover
Mike Ashley
Chief Executive
14 December 2017
Reconciliation of reported to underlying results
EBITDA PBT
Note FY18 H1 FY17 H1 FY18 FY17 H1
H1
GBPm GBPm GBPm GBPm
Operating profit 127.4 80.0
Depreciation 62.1 63.6
Amortisation 1.9 5.2
Share of loss of associated (8.5) -
undertakings
Reported EBITDA/PBT 182.9 148.8 45.8 140.2
Realised FX gain (15.1) (18.6) (15.1) (18.6)
IAS 39 foreign exchange fair
value adjustment on unhedged
forward and options currency
contracts 7 - - 36.3 55.8
Loss/(gain) on disposal of
listed investments and fair
value movement on derivative
agreements 4,5 - - 32.7 (119.7)
Exceptional items 3 5.0 13.9 5.0 13.9
Profit on disposal of properties (16.7) - (16.7) -
Share scheme charge - 1.2 - -
Underlying EBITDA/PBT 156.1 145.3 88.0 71.6
Fair value movement in derivative agreements represents the
movement in fair value of equity options in the period.
Reconciliation of selling, distribution and administration costs
to operating costs
FY18 H1 FY17 H1
GBPm GBPm
Selling, distribution and administrative
expenses 556.0 576.1
Depreciation and amortisation (64.0) (68.8)
Bonus share scheme - (1.1)
Realised FX loss 15.1 18.5
Operating income (10.7) (8.0)
-------- --------
Operating expenses 496.4 516.7
Underlying EBITDA by Business Segment
FY18 H1 FY17 H1 Change
GBPm GBPm %
UK Sports Retail 145.5 138.0 +5.4
International Sports Retail 15.6 (10.7) -
US Retail * (23.0) - -
Premium Lifestyle 0.7 0.9 -22.2
Brands 17.3 17.1 +1.2
Group Underlying EBITDA 156.1 145.3 +7.4
*US Retail's underlying EBITDA is made up of GBP5.5m of trading
losses as group processes and strategies are implemented, and
GBP17.5m of losses relating to fair value accounting adjustments
and accounting policy alignments.
Foreign exchange
The Group manages the impact of currency movements through the
use of forward fixed rate currency purchase and sales contracts and
written option contracts. The Group's strategy is to hold or hedge
up to five years of anticipated Euro denominated on-line sales and
Euro and US dollar purchases. Both forwards and options are used as
part of our overall risk management strategy, but only forward
contracts are used as part of our hedging strategy. This hedging
strategy has been approved by the board. The group has an ongoing
requirement to purchase USD and to sell Euros, and therefore these
option arrangements have a direct relationship to the Group's
future business needs. Should the Group wish to mitigate its
potential losses on options, or reassess its potential additional
currency requirements, these can be closed out unilaterally.
As at 29 October 2017 the Group was party to EUR1,290m of Euro
sale forward contracts that qualify for hedge accounting and
EUR1,950m of forwards and written option contracts that do not.
The forward contracts will be covered by our forecast Euro
denominated on-line and international sales over the 42-month
period of cover in place. We consider these forecasts to be highly
probable. Sales that we make over and above the covered amount, and
existing surplus Euros within the business will mitigate the risk
associated with the written options.
If sterling depreciates by 10% against the Euro (by reference to
October 2017 rates), a fair value loss of approximately GBP7.4m
would be recognised in the income statement in relation to these
option contracts and unhedged forwards.
As at 29 October 2017 the Group was party to $525m of USD
purchase forward contracts that qualify for hedge accounting and
$285m of options that do not. The forward contracts are to cover
our forecast USD purchases for FY18. Any purchases over and above
that level will mitigate the risk associated with the options.
If sterling depreciates by 10% against the USD (by reference to
October 2017 rates), a fair value loss of approximately GBP1.7m
would be recognised in the income statement in relation to these
option contracts.
The realised exchange gain of GBP15.1m (FY17 H1: GBP18.6m gain)
included in administration costs has arisen from the translation of
Dollar and Euro denominated assets and liabilities at the period
end rate or date of realisation.
The exchange loss of GBP36.3m (FY16 H1: GBP55.8m) included in
finance costs substantially represents the increase in the
mark-to-market liability made for the Group's unhedged forward and
written option contracts as at 29 October 2017. The majority of the
forward contracts outstanding at 29 October 2017 qualify for hedge
accounting and the fair value loss on these contracts has been
debited to equity through the Consolidated Statement of
Comprehensive Income.
The Sterling exchange rate with the US Dollar was $1.294 at 30
April 2017 and $1.313 at 29 October 2017. The sterling exchange
rate with the Euro was EUR1.188 at 30 April 2017 and EUR1.13 at 29
October 2017.
The fair value of outstanding foreign exchange contracts (hedged
and unhedged) are included within the derivative financial assets
balance of GBP6.8m (FY17: GBP43.0m) and derivative financial
liability balance of GBP158.3m (FY17: 75.2m).
Given the potential impact of commodity prices on raw material
costs, the Group may hedge certain input costs, including cotton,
crude oil and electricity.
Taxation
The effective tax rate on profit before tax for FY18 H1 was
37.3% (FY17 H1: 33.3%). The underlying effective tax rate for FY18
H1 was 27.7% (FY17 H1: 28.8%). The difference between the
prevailing corporate tax rate of 19% and the effective rate
reflects depreciation on non-qualifying assets and differences in
overseas tax rates. We expect the full year underlying effective
tax rate to be broadly similar.
Strategic investments
The Group holds various strategic investments which 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. Direct holdings are
accounted for as Available for Sale Financial Assets and indirect
holdings as Derivative Financial Assets or Liabilities. See Areas
of judgement and estimation.
Key investments as at the period ended 29 October 2017 are a
40.59% interest in The Finish Line Inc via direct (8.08%) and
indirect stakes (32.51%), a direct holding of 29.9% in Findel plc,
a 27.26% holding in French Connection via direct (27.03%) and
indirect stakes (0.23%), a 25.75% direct holding in Game Digital
plc and a 11.11% interest in House of Fraser Ltd. We have reviewed
the nature of the investments held and do not consider at this
stage that the Group is able to exercise significant influence over
the activities of the investee companies in the context of IAS
28.
The Group holds indirect stakes of 17.59% and 13.09% in Goals
Soccer Centres plc and Iconix Brands Group Inc respectively, and
other small stakes in Dicks Sporting Goods Inc and Mysale Group
plc.
As at 29 October 2017, the Put Option put in place on 23 January
2015 referencing 128,927,113 ordinary shares of Debenhams (10.5% of
the share capital of Debenhams plc) started to expire. At the end
of the period, the Group held a direct holding of 12.64%, with
remaining indirect interests of 8.56% by way of options and CFDs.
At the date of this announcement, the indirect holding had
converted to physical shares.
The fair value of equity derivative agreements is included
within the derivative financial assets balance of GBP6.8m and
derivative financial liability balance of GBP158.3m.
Cash flow and net debt
The Group had a working capital facility of GBP788m as at 29
October 2017. On 21 November 2017, the Group announced that it had
entered immediately into a new Revolving Credit Facility of
GBP907.5m, which is valid for four years.
Net debt increased during the period to GBP471.7m (30 April
2017: GBP182.1m), which is 1.6 times the last 12 months historic
underlying EBITDA (FY17 H1: 0.2 times) and is in line with
management expectations.
Capital expenditure amounted to GBP99.9m (FY17 H1: GBP287.0m),
the prior period included the acquisition of the Oxford Street
site.
The analysis of net debt at 29 October 2017 and at 30 April 2017
is as follows:
At 29 October 2017 At 30 April 2017
-------------------------- ------------------ ------------------
GBPm GBPm
Cash and cash equivalents 113.2 204.7
Borrowings (584.9) (386.8)
Net debt (471.7) (182.1)
Cash Flow
26 weeks ended 26 weeks
29 October ended
2017 23 October
GBPm 2016
GBPm
----------------------------------------------------------- --------------- ------------
Underlying EBITDA (pre share scheme costs) 156.1 145.3
Realised gain on forward foreign exchange contracts 15.1 18.6
Taxes paid (20.3) (34.4)
----------------------------------------------------------- --------------- ------------
Underlying free cash flow 150.9 129.5
Invested In:
Working capital
Inventory (90.8) (14.1)
Receivables, deposits in respect of derivative
financial instruments, Payables and Other (11.4) 55.2
Acquisitions (including debt) (11.9) -
Purchase of listed investments (131.6) (18.6)
Net proceeds from investments - 179.1
Investment income received 0.8 0.5
Purchase of freehold properties (80.0) (261.0)
Other capital expenditure (19.9) (26.0)
Disposal of freehold property 42.2 -
Finance costs and other financing activities (4.3) (3.9)
Purchase of own shares (incl. vesting) (133.7) (13.1)
----------------------------------------------------------- --------------- ------------
Net decrease in net debt (289.7) 27.6
The cash consideration for the acquisition of Eastern Mountain
Sports and Bob's Stores was GBP81.2m and was transferred during the
previous period and was included in Receivables at FY17 year
end.
Areas of estimation and judgement
Key areas of estimation and management judgement that impact on
the presentation of the Group's reported results are as
follows:
1. Provision for obsolete, slow moving or defective inventories
- The Directors have applied their knowledge and experience of the
retail industry in determining the level and rates of provisioning
required in calculating the appropriate inventory carrying values.
Specific estimates and judgements applied in relation to assessing
the level of inventory provisions required are considered in
relation to key indicators.
2. Property related provisions - Property related estimates and
judgements are continually evaluated and are based on historical
experience, external advice and other factors, including
expectations of future events that are believed to be reasonable
under the circumstances. Where an onerous lease has been
identified, the assets dedicated to that store are also reviewed
for impairment.
3. Other accruals and provisions - Provisions are made for items
where the Group has identified a present legal or constructive
obligation arising as a result of a past event, it is probable that
an outflow of resources will be required to settle the obligation
and a reliable estimate can be made of the amount of the
obligation. Other provisions relate to management's best estimates
of provisions required for restructuring, employment, commercial,
legal and regulatory claims and ongoing non-UK tax enquiries. Where
applicable these are inclusive of any estimated penalties, interest
and legal costs, and are net of any associated recoverable
amounts.
4. Management determines whether a related party relationship
exists by assessing the nature of the relationship by reference to
the requirements of IAS 24, Related Parties. This is in order to
determine whether significant influence exists as a result of
control, shared directors or parent companies, or close family
relationships. The level at which one party may be expected to
influence the other is also considered for transactions involving
close family relationships. Where the Group are aware that
relationships exist that they do not consider meet the definition
of related parties, but believe that the arrangements will be of
interest to the users of the accounts, these are disclosed under
"Commercial Arrangements".
5. Management determines its operating segments with reference
to the Chief Operational Decision Maker's process for making key
decisions over allocation of resources to the segment and in
assessing a segments performance. This is based on:
a. The nature of the operation type and products sold
b. The type of class of customer targeted
c. Product distribution methods
Similar operations are amalgamated into operating segments for
the purposes of segmental reporting.
6. Control and significant influence over certain entities -
when assessing the level of control that management have over
certain entities, management will consider the various aspects that
allow management to influence decision making. These include the
level of direct share ownership, board membership, the level of
investment and funding and the ability of the Group to influence
operational and strategic decisions and effect its returns through
the exercise of such influence.
7. Acquisition accounting for Bob's Stores and Eastern Mountain
Sports - Management assesses the book values of identifiable assets
and liabilities acquired and compares them with estimated fair
values to determine if adjustments need to be made. The
calculations of fair value includes an assessment of estimated
cashflows associated with the acquired assets and liabilities.
8. Deferred tax assets and liabilities - Management assess the
likelihood of future tax liabilities and assets arising and
calculates the related deferred tax assets or liabilities according
to the expectation of tax losses being recoverable, capital
allowances claimable and the local tax jurisdictions
applicable.
Share Schemes
In September 2017, approximately 2000 employees became eligible
to vest awards of approximately 12m shares under the 2011 Employee
Bonus Share scheme. The Group believes that the Share Schemes have
been a key element to attract and motivate employees and the Board
is now working on suitable new incentive schemes and rewards.
Going concern
The Group is profitable, highly cash generative and has
considerable financial resources. The Group currently operates
comfortably within its banking facilities and covenants, which run
until November 2021.
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.
-- The Group operates internationally. The majority of foreign contracts relating to the sourcing
and sales of Group branded goods are denominated in US Dollars and the Euro, thus leaving
exposure to foreign exchange risk. Our approach to managing these risks is set out under foreign
exchange earlier in this statement.
-- The sports retail industry is highly competitive and the Group currently competes at international,
national and local levels with a wide variety of retailers of varying sizes who may have competitive
advantages. New competitors may enter the market.
The current Brexit negotiations and the related uncertainty generated is being closely monitored
by the Board. This could affect areas such as taxes, import processing, resourcing and currency
volatility.
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.
On behalf of the Board
Mike Ashley
Chief Executive
14 December 2017
INDEPENT REVIEW REPORT TO THE MEMBERS OF SPORTS DIRECT
INTERNATIONAL PLC
FOR THE 26 WEEKSED 29 OCTOBER 2017
Introduction
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report of
Sports Direct International plc for the 26 weeks ended 29 October
2017 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 contained in the
half-yearly financial report which comprise the Key highlights,
Chairman's statement, the Overview of Financial Performance 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 29
October 2017 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
Statutory Auditor, Chartered Accountants
London
14 December 2017
UNAUDITED CONSOLIDATED INCOME STATEMENT FOR THE 26 WEEKSED 29
OCTOBER 2017
26 weeks 26 weeks 53 weeks
ended ended ended
29 October 23 October 30 April
2017 2016 2017
--------------- --------------- -----------------
Notes GBPm GBPm GBPm
Continuing operations:
Revenue 2 1,714.6 1,637.7 3,245.3
Cost of sales (1,053.6) (975.7) (1,914.7)
--------------- --------------- -----------------
Gross profit 661.0 662.0 1,330.6
Selling, distribution and administrative expenses (556.0) (576.1) (1,255.6)
Other operating income 10.7 8.0 22.5
Exceptional items 3 (5.0) (13.9) (17.3)
Profit on disposal of properties 16.7 - -
Profit on disposal of subsidiary - - 79.9
Operating profit 2 127.4 80.0 160.1
--------------- --------------- -----------------
Investment income 4 0.2 146.3 162.5
Investment costs 5 (32.7) (26.1) (51.2)
Finance income 6 0.3 - 18.8
Finance costs 7 (40.9) (60.0) (9.4)
Share of (loss)/profit of associated undertakings and
joint ventures 9 (8.5) - 0.8
--------------- --------------- -----------------
Profit before taxation 45.8 140.2 281.6
Taxation (17.1) (46.8) (49.9)
--------------- --------------- -----------------
Profit for the period 2 28.7 93.4 231.7
--------------- --------------- -----------------
Attributable to:
Equity holders of the Group 26.0 92.4 229.9
Non-controlling interests 2.7 1.0 1.8
Profit for the period 2 28.7 93.4 231.7
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 8 4.9 15.6 39.4
Diluted earnings per share 8 4.9 15.2 38.3
Underlying basic earnings per share 8 11.3 8.5 11.4
Diluted underlying basic earnings per share 8 11.2 8.2 11.1
--------------- --------------- -----------------
The accompanying notes form an integral part of this interim
financial report.
UNAUDITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE 26 WEEKSED 29 OCTOBER 2017
26 weeks 26 weeks 53 weeks
ended ended ended
29 October 23 October 30 April
2017 2016 2017
----------- ----------- -----------
Notes GBPm GBPm GBPm
Profit for the period 2 28.7 93.4 231.7
Other comprehensive income
Items that will not be reclassified subsequently
to profit or loss
Actuarial losses on defined benefit pension
schemes - (8.8) (8.8)
Taxation on items not reclassified - 1.7 1.7
Items that will be reclassified subsequently
to profit or loss
Exchange differences on translation of
foreign operations 24.1 70.8 50.3
Exchange differences on hedged contracts
- recognised in the period (49.8) (91.5) (31.3)
Exchange differences on hedged contracts
- reclassified and reported in sales (0.5) (5.9) 8.7
Exchange differences on hedged contracts
- reclassified and reported in cost of
sales (1.4) - (18.2)
Exchange differences on hedged contracts
- taxation taken to reserves 8.8 14.2 7.7
Fair value adjustment in respect of available
for sale financial assets - recognised
in the period 7.0 26.7 23.7
Fair value adjustment in respect of available
for sale financial assets - reclassified
in the period - (129.2) (129.3)
Fair value adjustment in respect of available
for sale financial assets - taxation (1.2) - (1.8)
----------- ----------- -----------
Other comprehensive income for the period,
net of tax (13.0) (122.0) (97.3)
----------- ----------- -----------
Total comprehensive income for the period 15.7 (28.6) 134.4
----------- ----------- -----------
Attributable to:
Equity holders of the Parent 13.0 (29.6) 132.6
Non-controlling interests 2.7 1.0 1.8
----------- ----------- -----------
15.7 (28.6) 134.4
----------- ----------- -----------
The accompanying notes form an integral part of this interim
financial report.
UNAUDITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 29
OCTOBER 2017
29 October 23 October 30 April
2017 2016 2017
------------ ---------- ----------
Notes GBPm GBPm GBPm
ASSETS
Non-current assets
Property, plant and equipment 871.2 833.6 842.0
Investment properties 22.2 - 23.1
Intangible assets 180.3 216.4 185.7
Investments in associated undertakings
and joint ventures 18.2 18.4 26.4
Available for sale financial assets 11 191.4 73.0 63.9
Deferred tax assets 53.1 72.0 33.7
------------ ---------- ----------
1,336.4 1,213.4 1,174.8
------------ ---------- ----------
Current assets
Inventories 10 795.7 716.3 629.2
Trade and other receivables 454.1 290.8 397.1
Derivative financial assets 6.8 51.5 43.0
Cash and cash equivalents 121.4 188.0 204.7
------------ ---------- ----------
1,378.0 1,246.6 1,274.0
------------ ---------- ----------
TOTAL ASSETS 2,714.4 2,460.0 2,448.8
------------ ---------- ----------
EQUITY AND LIABILITIES
Share capital 64.1 64.1 64.1
Share premium 874.3 874.3 874.3
Treasury shares (230.4) (69.4) (329.5)
Permanent contribution to capital 0.1 0.1 0.1
Capital redemption reserve 8.0 8.0 8.0
Foreign currency translation reserve 101.2 97.6 77.1
Reverse combination reserve (987.3) (987.3) (987.3)
Own share reserve (69.0) (33.7) (33.7)
Hedging reserve (68.0) (75.2) (25.1)
Retained earnings 1,580.1 1,458.3 1,591.0
------------ ---------- ----------
1,273.1 1,336.8 1,239.0
Non-controlling interests 0.8 (1.8) (0.7)
(1,8
------------ ---------- ----------
Total equity 1,273.9 1,335.0 1,238.3
------------ ---------- ----------
Non-current liabilities
Borrowings 11 7.4 259.8 317.3
Retirement benefit obligations 1.9 21.6 3.4
Deferred tax liabilities 13.5 20.4 18.7
Provisions 127.0 85.2 130.2
------------ ---------- ----------
149.8 387.0 469.6
------------ ---------- ----------
Current liabilities
Derivative financial liabilities 158.3 206.7 75.2
Trade and other payables 520.8 454.0 584.9
Borrowings (1) 11 585.7 0.1 69.5
Current tax liabilities 25.9 77.2 11.3
------------ ---------- ----------
1,290.7 738.0 740.9
------------ ---------- ----------
Total liabilities 1,440.5 1,125.0 1,210.5
------------ ---------- ----------
TOTAL EQUITY AND LIABILITIES 2,714.4 2,460.0 2,448.8
------------ ---------- ----------
(1) Borrowings in Current Liabilities reflects the Revolving
Credit Facility (RCF) in place as at 29 October 2017 expiring in
September 2018. On 21 November 2017, the Group announced that it
had refinanced into a replacement RCF for GBP907.5m for a period of
four years.
The accompanying notes form an integral part of this interim
financial report.
UNAUDITED CONSOLIDATED CASH FLOW STATEMENT FOR THE 26 WEEKSED 29
OCTOBER 2017
26 weeks 26 weeks 53 weeks
ended ended ended
29 October 23 October 30 April
2017 2016 2017
----------- ----------- -----------
Notes GBPm GBPm GBPm
Cash inflow from operating activities 13 68.9 205.1 269.2
Income taxes paid (20.3) (34.4) (75.3)
----------- ----------- -----------
Net cash inflow from operating activities 48.6 170.7 193.9
----------- ----------- -----------
Cash flow from investing activities
Proceeds on disposal of property, plant
and equipment 42.2 - 2.4
Proceeds on disposal of listed investments - 179.1 190.2
Proceeds on disposal of subsidiary - - 109.5
Purchase of associate, net of cash acquired (0.6) - (9.0)
Purchase of subsidiaries, net of cash acquired - - (8.1)
Purchase of non-controlling interests (11.3) - (5.5)
Purchase of property, plant and equipment (99.9) (287.0) (413.5)
Purchase of investment properties - - (6.0)
Purchase of listed investments (131.6) (18.6) (24.7)
Investment income received 0.8 0.6 0.5
Finance income received 0.3 - 0.5
----------- ----------- -----------
Net cash outflow from investing activities (200.1) (125.9) (163.7)
----------- ----------- -----------
Cash flow from financing activities
Finance costs paid (4.5) (3.9) (2.8)
Borrowings drawn down 577.7 90.0 328.0
Borrowings repaid (310.0) (163.6) (344.1)
Purchase of own shares (133.7) (13.1) (109.8)
-----------
Net cash inflow / (outflow) from financing
activities 129.5 (90.6) (128.7)
----------- ----------- -----------
Net decrease in cash and cash equivalents
including
overdrafts (22.0) (45.8) (98.5)
Cash and cash equivalents including overdrafts
at beginning of period 135.2 233.7 233.7
----------- ----------- -----------
Cash and cash equivalents including overdrafts
at the period end 113.2 187.9 135.2
----------- ----------- -----------
The accompanying notes form an integral part of this interim
financial report.
UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE 26
WEEKSED 29 OCTOBER 2017
Total
attributable
Foreign Own to owners
Treasury currency share Retained Other of the Non-controlling
shares translation reserve earnings reserves parent interests Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At 24 April 2016 (56.2) 26.8 (33.7) 1,482.3 (32.8) 1,386.4 (1.7) 1,384.7
Share-based payments - - - 0.7 - 0.7 - 0.7
Deferred Tax on share
schemes - - - (2.2) - (2.2) - (2.2)
Purchase of own
shares (13.2) - - - - (13.2) - (13.2)
Changes to
non-controlling
Interest - - - (5.3) - (5.3) (1.1) (6.4)
-------- ------------ -------- --------- --------- ------------- --------------- -------
Transactions with
owners (13.2) - - (6.8) - (20.0) (1.1) (21.1)
-------- ------------ -------- --------- --------- ------------- --------------- -------
Other comprehensive
income:
Profit for the
financial
period - - - 92.4 - 92.4 1.0 93.4
Cash flow hedges
- recognised in the
period - - - - (91.5) (91.5) - (91.5)
- reclassification - - - - (5.9) (5.9) - (5.9)
- taxation - - - - 14.2 14.2 - 14.2
Actuarial losses on
defined
benefit pension
schemes - - - (8.8) - (8.8) - (8.8)
Taxation on items
taken
to comprehensive
income - - - 1.7 - 1.7 - 1.7
Fair value adjustment
in respect of
available
for sale financial
assets - - - (102.5) - (102.5) - (102.5)
Translation
differences
- group - 70.8 - - - 70.8 - 70.8
-------- ------------ -------- --------- --------- ------------- --------------- -------
Total comprehensive
income - 70.8 - (17.2) (83.2) (29.6) 1.0 (28.6)
At 23 October 2016 (69.4) 97.6 (33.7) 1,458.3 (116.0) 1,336.8 (1.8) 1,335.0
-------- ------------ -------- --------- --------- ------------- --------------- -------
Total
attributable
Foreign Own to owners
Treasury currency share Retained Other of the Non-controlling
shares translation reserve earnings reserves parent interests Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At 30 April 2017 (329.5) 77.1 (33.7) 1,591.0 (65.9) 1,239.0 (0.7) 1,238.3
Share-based
payments - - 56.3 (56.3) - - - -
Current Tax on
share
schemes - - - 4.8 - 4.8 - 4.8
Deferred tax on
share
schemes - - - (2.2) - (2.2) - (2.2)
Purchase of own
shares (94.3) - (39.4) - - (133.7) - (133.7)
FV of share
buyback reversal 163.5 - - - - 163.5 - 163.5
Changes to
non-controlling
Interest - - - (10.1) - (10.1) (1.2) (11.3)
-------- ------------ -------- ------------ --------- ------------- --------------- -------
Transactions with
owners 69.2 - 16.9 (63.8) - 22.3 (1.2) 21.1
-------- ------------ -------- ------------ --------- ------------- --------------- -------
Other
comprehensive
income:
Profit for the
financial
period - - - 26.0 - 26.0 2.7 28.7
Cash flow hedges
- recognised in
the
period - - - - (49.8) (49.8) - (49.8)
-
reclassification - - - - (1.9) (1.9) - (1.9)
- taxation - - - - 8.8 8.8 - 8.8
Fair value
adjustment
in respect of
available
for sale
financial assets - - - 7.0 - 7.0 - 7.0
Taxation on items
taken
to comprehensive
income - - - (1.2) - (1.2) - (1.2)
Market value of
shares
transferred to
the EBT - - (52.2) - - (52.2) - (52.2)
Difference between
cost
and MV of shares
transferred 29.9 - - 21.1 - 51.0 - 51.0
Translation
differences
- group - 24.1 - - - 24.1 - 24.1
-------- ------------ -------- ------------ --------- ------------- --------------- -------
Total
comprehensive
income 29.9 24.1 (52.2) 52.9 (42.9) 11.8 2.7 14.5
At 29 October 2017 (230.4) 101.2 (69.0) 1,580.1 (108.8) 1,273.1 0.8 1,273.9
-------- ------------ -------- ------------ --------- ------------- --------------- -------
The own shares, held by Sports Direct International plc Employee
Benefit Trust, and treasury reserves represent the cost of shares
in Sports Direct International plc purchased in the market and to
satisfy options under the Group's share scheme.
The Company holds 98,350,831 ordinary shares in Treasury (FY17
H1: 46,719,593, FY17: 79,310,534). At 29 October 2017, the Sports
Direct Employee Benefit Trust held 17,500,984 shares. During the
period, 12,782,512 shares were transferred from Treasury to the EBT
in the Own Share Reserve with the transfer reflected at market
value.
The foreign currency translation reserve is used to record
exchange differences arising from the translation of the financial
statements of foreign subsidiaries and associates.
NOTES TO THE FINANCIAL INFORMATION FOR THE 26 WEEKSED 29 OCTOBER
2017
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 2017 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 53 weeks
ended 30 April 2017. This consolidated financial information for
the period does not constitute statutory financial statements
within the meaning of s434 of the Companies Act 2006.
The summary of results for the 53 weeks ended 30 April 2017 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
Management have determined to present its segmental disclosures
consistently with the presentation in the 2017 Annual Report with
the exception that the USC fascia has been included within UK
Retail. This is due to management's assessment of the operating
characteristics of USC. Management consider operationally that the
UK and EU Sports Retail divisions are run as one business unit in
terms of allocating resources and assessing performance. However,
under IFRS 8 we have not at this reporting date met the required
criteria with enough certainty to move back to an aggregated
reporting segment. We will continually keep this under review at
subsequent reporting dates. We continue to monitor the impacts of
Brexit, and the continued uncertainties this has brought relating
to the political and economic environments, and market and currency
volatility in the countries we operate in. European countries have
been identified as operating segments and have been aggregated into
a single operating segment as permitted under IFRS 8. The decision
to aggregate these segments was based on the fact that they each
have similar economic characteristics, similar long term financial
performance expectations, and are similar in each of the following
respects:
-- The nature of the products
-- The type or class of customer for the products; and
-- The methods used to distribute the products
In accordance with paragraph 12 of IFRS 8 the Group's operating
segments have been aggregated into the following reportable
segments:
1. UK Sports Retail - includes the results of the UK retail
network of sports stores and USC stores and concessions, along with
related websites;
2. International Retail - includes the results of the
International retail network of sports stores but excludes retail
activities in the US;
3. US Retail - includes the results of US based retail activities;
4. Premium Lifestyle - includes the results of the premium
retail businesses such as Flannels, Cruise and van mildert; and
5. Brands - includes the results of the Group's portfolio of
internationally recognised brands such as Everlast, Lonsdale and
Slazenger.
The comparative information for the period ended 23 October 2016
has been restated to include the results of USC in UK Retail.
Accordingly, the prior period has been restated to adjust GBP42.5m
of sales, GBP17.1m of margin and GBP18.4m of overheads.
Information regarding the Group's reportable segments for the
period ended 29 October 2017, as well as a reconciliation of
reported profit for the period to underlying EBITDA, is presented
below:
Segmental information for the 26 weeks ended 29 October
2017:
Retail Brands
--------- ------------- --------- --------- ----------- ---------- -------------- --------
UK International Premium US
Sports Sports Retail Lifestyle Retail Total
Retail Retail Total Eliminations Total
--------- ------------- --------- --------- ----------- ---------- -------------- --------
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Sales to
external
customers 1,142.2 343.5 67.8 63.9 1,617.4 97.2 - 1,714.6
Sales to
other
segments - - - - 8.6 (8.6) -
--------- ------------- --------- --------- ----------- ---------- -------------- --------
Revenue 1,142.2 343.5 67.8 63.9 1,617.4 105.8 (8.6) 1,714.6
--------- ------------- --------- --------- ----------- ---------- -------------- --------
Gross profit 453.9 140.1 21.8 7.0 622.8 38.2 - 661.0
--------- ------------- --------- --------- ----------- ---------- -------------- --------
Operating
profit/(loss)
before foreign
exchange and
exceptional
items 116.2 (6.5) (0.3) (23.8) 85.6 15.0 - 100.6
--------- ------------- --------- --------- ----------- ---------- -------------- --------
Operating
Profit 147.1 (6.8) (0.3) (23.8) 116.2 11.2 - 127.4
--------- ------------- --------- --------- ----------- ---------- -------------- --------
Investment income 0.2
Investment costs (32.7)
Finance income 0.3
Finance costs (40.9)
Share of profits of associated undertakings
and joint ventures (8.5)
--------
Profit before taxation 45.8
Taxation (17.1)
--------
Profit for the period 28.7
--------
Reconciliation of operating profit to underlying EBITDA for the
26 week period ending 29 October 2017:
UK Sports International Lifestyle US Retail Brands Total
Retail
---------- -------------- ---------- ---------- ------- -------
GBPm GBPm GBPm GBPm GBPm GBPm
---------- -------------- ---------- ---------- ------- -------
Operating profit 147.1 (6.8) (0.3) (23.8) 11.2 127.4
Depreciation 37.8 21.9 1.0 0.8 0.6 62.1
Amortisation - 0.2 - - 1.7 1.9
Associates (8.5) - - - - (8.5)
---------- -------------- ---------- ---------- -------
Reported EBITDA 176.4 15.3 0.7 (23.0) 13.5 182.9
Exceptional items 1.8 - - - 3.2 5.0
Profit on disposal
of properties (16.7) - - - - (16.7)
Realised FX Loss (16.0) 0.3 - - 0.6 (15.1)
---------- -------------- ---------- ---------- -------
Underlying EBITDA
(pre-scheme costs) 145.5 15.6 0.7 (23.0) 17.3 156.1
---------- -------------- ---------- ---------- ------- -------
Sales to other segments are priced at cost plus a 10%
mark-up.
Segmental information for the 26 weeks ended 23 October 2016
(restated):
Retail
----------- -------------- ----------------- --------- -------- -------------- --------
UK Sports International Premium Lifestyle Total Brands
Retail Sports Stores Retail Total Eliminations Total
----------- -------------- ----------------- --------- -------- -------------- --------
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Sales to external
customers 1,153.7 330.2 40.9 1,524.8 112.9 - 1,637.7
Sales to other
segments - - - - 22.3 (22.3) -
----------- -------------- ----------------- --------- -------- -------------- --------
Revenue 1,153.7 330.2 40.9 1,524.8 135.2 (22.3) 1,637.7
----------- -------------- ----------------- --------- -------- -------------- --------
Gross profit 470.4 131.1 16.3 617.8 44.2 - 662.0
----------- -------------- ----------------- --------- -------- -------------- --------
Operating profit/(loss)
before foreign
exchange
and exceptional
items 94.6 (31.4) (2.1) 61.1 14.2 - 75.3
----------- -------------- ----------------- --------- -------- -------------- --------
Operating Profit 113.8 (43.4) (1.8) 68.6 11.4 - 80.0
----------- -------------- ----------------- --------- -------- -------------- --------
Investment income 146.3
Finance income (26.1)
Finance costs (60.0)
Share of profits
of associated
undertakings
and joint -
--------
Profit before taxation 140.2
Taxation (46.8)
--------
Profit for the period 93.4
--------
Reconciliation of operating profit to underlying EBITDA for the
26 week period ending 23 October 2016:
UK Sports International Lifestyle Brands Total
Retail
---------- -------------- ---------- ------- -------
GBPm GBPm GBPm GBPm GBPm
---------- -------------- ---------- ------- -------
Operating profit 113.8 (43.4) (1.8) 11.4 80.0
Depreciation 41.7 19.4 1.5 1.0 63.6
Amortisation 0.4 1.4 1.5 1.9 5.2
Reported EBITDA 155.9 (22.6) 1.2 14.3 148.8
Charges for the Share Scheme 1.2 - - - 1.2
Exceptional items 2.8 1.4 - 9.7 13.9
Realised FX Loss (21.9) 10.5 (0.3) (6.9) (18.6)
---------- -------------- ---------- -------
Underlying EBITDA (pre-scheme
costs) 138.0 (10.7) 0.9 17.1 145.3
---------- -------------- ---------- ------- -------
Sales to other segments are priced at cost plus a 10%
mark-up.
Segmental information for the 53 weeks ended 30 April 2017:
This information is available in the 2017 annual report.
3. Exceptional items
26 weeks 26 weeks 53 weeks
ended ended ended
29 October 23 October 30 April
2017 (GBPm) 2016 (GBPm) 2017 (GBPm)
------------- ------------- -------------
Impairment (5.0) (13.9) (17.3)
The impairment relates to the write down of certain non-core
brands which are no longer considered to have value to the
Group.
4. Investment income
26 weeks 26 weeks 53 weeks
ended ended ended
29 October 23 October 30 April
2017 (GBPm) 2016 (GBPm) 2017 (GBPm)
------------- ------------- -------------
Profit on disposal of available for
sale financial assets and equity derivative
financial instruments - 145.8 156.5
Dividend income from investments 0.2 0.5 0.5
Fair value gain on derivative instruments - - 5.5
0.2 146.3 162.5
The gain on disposal of listed investments mainly related to the
profit on disposal of JD Sports plc shares in the prior period.
5. Investment costs
26 weeks 26 weeks 53 weeks
ended ended ended
29 October 23 October 30 April
2017 (GBPm) 2016 (GBPm) 2017 (GBPm)
------------- ------------- -------------
Loss on disposal of available for sale
financial assets and equity derivative
financial instruments 1.2 - 2.7
Fair value loss on derivative financial
instruments 31.5 26.1 36.3
Impairment of available for sale financial
assets - - 12.2
------------- ------------- -------------
32.7 26.1 51.2
6. Finance income
26 weeks 26 weeks 53 weeks
ended ended ended
29 October 23 October 30 April
2017 (GBPm) 2016 (GBPm) 2017 (GBPm)
------------- ------------- -------------
Bank interest receivable 0.3 - 0.2
Other interest receivable - - 0.4
Fair value adjustment to unhedged foreign
currency contracts (1) - - 18.2
------------- ------------- -------------
0.3 - 18.8
([1]) The fair value adjustment to forward and option foreign
exchange contracts relates to differences between the fair value of
forward foreign currency contracts and written options not
designated for hedge accounting from one period to the next.
7. Finance costs
26 weeks 26 weeks 53 weeks
ended ended ended
29 October 23 October 30 April
2017 (GBPm) 2016 (GBPm) 2017 (GBPm)
------------- ------------- -------------
Interest on bank loans and overdrafts 3.8 3.7 2.5
Interest on other loans and finance
leases 0.8 0.4 6.6
Interest on retirement benefit obligations - 0.1 0.3
Fair value adjustment to forward foreign
exchange contracts (1) 36.3 55.8 -
------------- ------------- -------------
40.9 60.0 9.4
([1]) The fair value adjustment to forward and option foreign
exchange contracts relates to differences between the fair value of
forward foreign currency contracts and written options not
designated for hedge accounting from one period to the next.
8. Earnings per share
For diluted earnings per share, the weighted average number of
shares, 532,857,850 (FY17 H1: 591,605,484), is adjusted to assume
conversion of all dilutive potential ordinary shares under the
Group's share schemes, being 3,132,795 (FY17 H1: 16,667,000) to
give the diluted weighted average number of shares of 535,990,645
(FY17 H1: 608,272,484).
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 26 weeks 26 weeks 26 weeks 53 weeks 53 weeks
ended ended ended ended ended ended
29 October 29 October 23 October 23 October 30 April 30 April
2017 2017 2016 2016 2017 2017
----------- ----------- ----------- ----------- ---------- ---------
Basic Diluted Basic Diluted Basic Diluted
GBPm GBPm GBPm GBPm GBPm GBPm
Profit for the period attributable
to the equity holders of
the Group 26.0 26.0 92.4 92.4 229.9 229.9
Number in thousands Number in thousands Number in thousands
Weighted average number
of shares 532,858 535,991 591,605 608,272 583,501 600,168
Pence per share Pence per share Pence per share
Earnings per share 4.9 4.9 15.6 15.2 39.4 38.3
----------- ----------- ----------- ----------- ---------- ---------
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, profit/loss
on sale of properties and the profit/loss on sale of strategic
investments and subsidiaries.
26 weeks 26 weeks 26 weeks 26 weeks 53 weeks 53 weeks
ended ended ended ended ended ended
29 October 29 October 23 October 23 October 30 April 30 April
2017 2017 2016 2016 2017 2017
----------- ----------- ----------- ----------- ---------- ---------
Basic Diluted Basic Diluted Basic Diluted
GBPm GBPm GBPm GBPm GBPm GBPm
Profit for the period 26.0 26.0 92.4 92.4 229.9 229.9
Post tax adjustments to
profit for the period for
the following exceptional
items:
Realised (gain)/loss on
forward foreign exchange
contracts (11.7) (11.7) (14.8) (14.8) 18.5 18.5
Fair value adjustment to
forward foreign exchange
contracts 28.3 28.3 44.7 44.7 (14.3) (14.3)
Fair value adjustment to
derivative financial instruments 24.6 24.6 18.5 18.5 24.0 24.0
Loss/(gain) on disposal
of listed investments 1.2 1.2 (114.3) (114.3) (141.5) (141.5)
Profit on disposal of property (13.1) (13.1) - - - -
Profit on disposal of subsidiary - - - - (79.9) (79.9)
Impairment of intangible
assets 5.0 5.0 11.1 11.1 17.3 17.3
Write off of deferred tax
assets - - 10.8 10.8 12.5 12.5
Effect of reduced tax rate
on deferred tax - - 1.7 1.7 - -
----------- ----------- ----------- ----------- ---------- ---------
Underlying profit for the
period 60.3 60.3 50.1 50.1 66.5 66.5
----------- ----------- ----------- ----------- ---------- ---------
Number in thousands Number in thousands Number in thousands
Weighted average number
of shares 532,858 535,991 591,605 608,272 583,501 600,168
Pence per share Pence per share Pence per share
Underlying earnings per
share 11.3 11.2 8.5 8.2 11.4 11.1
----------- ----------- ----------- ----------- ---------- ---------
9. Investments in associated undertakings
The Group uses the equity method of accounting for associates
and joint ventures. The following table shows the aggregate
movement in the Group's investment in associates and joint
ventures:
Associates
(GBPm)
-----------
At 24 April 2016 16.6
Additions 9.0
Share of profit 0.8
-----------
At 30 April 2017 26.4
Additions 0.8
Dividends paid (0.5)
Share of loss (8.5)
-----------
At 29 October 2017 18.2
The loss on Associates in the period largely relates to the
trade losses and impairment of the Group's investment in Brasher
Leisure, and other associate losses.
10. Inventories
29 October 2017 30 April
2017
(GBPm) (GBPm)
Goods for resale 795.7 629.2
The following inventory costs have been recognised in cost of
sales:
26 weeks ended 26 weeks
ended
29 October 2017 23 October
2016
(GBPm) (GBPm)
Cost of inventories recognised as an expense 1,053.6 975.7
The directors have reviewed the opening and closing provisions
against inventory and have concluded that these are fairly stated.
Overall provisions have increased from GBP98.4m at 30 April 2017 to
GBP133.9m as at 29 October 2017.
11. Financial Instruments
(a) Financial assets and liabilities by category
The carrying values of financial assets and liabilities, which
are principally denominated in Sterling, Euros or US dollars, were
as follows:
Loans and Assets Available Non-financial Total
receivables at fair for sale assets (GBPm)
(GBPm) value through financial (GBPm)
profit assets
and loss (GBPm)
(GBPm)
------------- --------------- ----------- -------------- --------
Assets at 29 October 2017
Property, plant and equipment - - - 871.2 871.2
Investment properties - - - 22.2 22.2
Intangible assets - - - 180.3 180.3
Investments in associated
undertakings and joint ventures - - - 18.2 18.2
Available-for-sale financial
assets - - 191.4 - 191.4
Deferred tax assets - - - 53.1 53.1
Inventories - - - 795.7 795.7
Derivative financial assets - 6.8 - - 6.8
Trade and other receivables 145.7 - - 308.4 454.1
Cash and cash equivalents 121.4 - - - 121.4
------------- --------------- ----------- -------------- --------
267.1 6.8 191.4 2,249.1 2,714.4
------------- --------------- ----------- -------------- --------
Assets at 30 April 2017
Property, plant and equipment - - - 842.0 842.0
Investment properties - - - 23.1 23.1
Intangible assets - - - 185.7 185.7
Investments in associated
undertakings - - - 26.4 26.4
Available-for-sale financial
assets - - 63.9 - 63.9
Deferred tax assets - - - 33.7 33.7
Inventories - - - 629.2 629.2
Derivative financial assets - 43.0 - - 43.0
Trade and other receivables 397.1 - - - 397.1
Cash and cash equivalents 204.7 - - - 204.7
------------- --------------- ----------- -------------- --------
601.8 43.0 63.9 1,740.1 2,448.8
------------- --------------- ----------- -------------- --------
Assets at 23 October 2016
Property, plant and equipment - - - 833.6 833.6
Intangible assets - - - 216.4 216.4
Investments in associated
undertakings and joint ventures - - - 18.4 18.4
Available-for-sale financial
assets - - 73.0 - 73.0
Deferred tax assets - - - 72.0 72.0
Inventories - - - 716.3 716.3
Derivative financial assets - 51.5 - - 51.5
Trade and other receivables 290.8 - - - 290.8
Cash and cash equivalents 188.0 - - - 188.0
------------- --------------- ----------- -------------- --------
478.8 51.5 73.0 1,856.7 2,460.0
------------- --------------- ----------- -------------- --------
Loans and Liabilities Non-financial Total
payables at fair value liabilities (GBPm)
(GBPm) through profit (GBPm)
and loss
(GBPm)
Liabilities at 29 October 2017
Non-current borrowings 7.4 - - 7.4
Retirement benefit obligations - - 1.9 1.9
Deferred tax liabilities - - 13.5 13.5
Provisions - - 127.0 127.0
Derivative financial liabilities - 158.3 - 158.3
Trade and other payables 169.5 - 351.3 520.8
Current borrowings 585.7 - - 585.7
Current tax liabilities - - 25.9 25.9
---------- ---------------- -------------- --------
762.6 158.3 519.6 1,440.5
---------- ---------------- -------------- --------
Liabilities at 30 April 2017
Non-current borrowings 317.3 - - 317.3
Retirement benefit obligations - - 3.4 3.4
Deferred tax liabilities - - 18.7 18.7
Provisions - - 130.2 130.2
Derivative financial liabilities - 75.2 - 75.2
Fair value of share buyback - - 163.5 163.5
Trade and other payables 133.3 - 288.1 421.4
Current borrowings 69.5 - - 69.5
Current tax liabilities - - 11.3 11.3
---------- ---------------- -------------- --------
520.1 75.2 615.2 1,210.5
---------- ---------------- -------------- --------
Liabilities at 23 October 2016
Non-current borrowings 259.8 - - 259.8
Retirement benefit obligations - - 21.6 21.6
Deferred tax liabilities - - 20.4 20.4
Provisions - - 85.2 85.2
Derivative financial liabilities - 206.7 - 206.7
Trade and other payables 181.2 - 272.8 454.0
Current borrowings 0.1 - - 0.1
Current tax liabilities - - 77.2 77.2
---------- ---------------- -------------- --------
441.1 206.7 477.2 1,125.0
---------- ---------------- -------------- --------
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 29 October 2017, the only financial instruments held at
fair value were derivative financial assets and liabilities.
Contracts for difference are classified as Level 1 as the fair
value is calculated referencing quoted prices for listed shares and
commodities at contract inception and the period end.
Foreign forward purchase and sales contracts and options are
classified as Level 2 as the fair value is calculated using models
based on inputs which are observable directly or indirectly at the
period-end (these inputs include but are not restricted to the
following - maturity date, quoted forward/option prices).
Available-for-sale financial assets are classified as Level 1 as
the fair value is calculated using quoted prices, except for House
of Fraser (UK & Ireland) Ltd (previously Highland Group
Holdings) which is classified as Level 3. House of Fraser Ltd is
held at management's estimate of the fair value of the enterprise
based on publicly and non-publicly available data.
Other equity derivatives are calculated using a model with
inputs which are directly observable and inputs which are not based
on observable market data and are therefore classified as Level 3.
The valuations are calculated using an equity valuation model of
which the output is the result of a number of inputs including, the
terms of the option, the share price, interest rates, the
volatility of the underlying stock, and dividends paid by the
underlying company. The volatility of the underlying stock is a
significant input into the valuation model. Volatility is
considered an unobservable input. To the extent that the market
price of these shares is less than an agreed price on expiry of the
put options, the counterparty has the right to settle the put
option by selling the ordinary shares to the Group. If the market
price of the shares is greater than an agreed price on expiry of
the put option the counterparty will not exercise the option and
the group will receive the premium. Sports Direct is required to
transfer cash collateral to cover its obligations under put
options. The amount of collateral required during the life of the
put options can increase or decrease by reference to the underlying
market price of the shares.
26 weeks 26 weeks 53 weeks
ended ended ended
29 October 23 October 30 April
2017 2016 2017
GBPm GBPm GBPm
Opening fair value of equity put options (15.4) 7.6 7.6
Movement recognised in profit and loss (12.1) (22.8) (23.0)
-------------- ------------ ----------
Closing fair value of equity put options (27.5) (15.2) (15.4)
12. Acquisitions
On 18 May 2017 the group took ownership of certain trade and
assets of the businesses that traded as Bob's Stores and Eastern
Mountain Sports from Eastern Outfitters LLC which had filed for
Chapter 11 in the US. Cash consideration was paid in tranches over
the initial Chapter 11 phase during the period to 30 April 2017 but
control was not obtained until US court approval was given for the
trade and assets purchase, and group management and processes were
implemented on 18 May 2017. The following table summarises the
provisional fair values of consideration paid for the trade and
assets of Bob's Stores and Eastern Mountain Sports, assets
acquired, and the liabilities assumed.
Book value Fair value Fair value
GBPm adjustments of net assets
GBPm acquired
GBPm
Property, plant and equipment 9.7 (3.9) 5.8
Inventories 64.9 9.7 74.6
Trade and other receivables 10.2 1.0 11.2
Cash and cash equivalents 9.9 - 9.9
Trade and other payables (18.8) (1.5) (20.3)
----------- ------------- ---------------
75.9 5.3 81.2
Cash consideration 81.2
Cash acquired (9.9)
---------------
Net cash outflow 71.3
Included in Group underlying EBITDA for the 26 week period to 29
October 2017 for the Bob's Stores and Eastern Mountain Sports
businesses is GBP5.5m of trading losses and GBP17.5m of losses
relating to fair value accounting adjustments and accounting policy
alignments.
On 17 August 2017, the Group acquired the remaining minority
interest in The Flannels Group Ltd for GBP11.3m. This has been
accounted for as a minority acquisition, with the difference
between brought forward minority interests and the acquisition
price flowing through Equity.
13. Cash inflows from operating activities
26 weeks 26 weeks 53 weeks
ended ended ended
29 October 23 October 30 April
2017 2016 2017
------------- ----------- -----------
GBPm GBPm GBPm
Profit before taxation 45.8 140.2 281.6
Net finance (income)/costs 40.6 60.0 (9.4)
Net other investment (income)/costs 32.5 (120.2) (111.3)
Share of (loss)/profit of associated undertakings
and joint ventures 8.5 - (0.8)
------------- ----------- -----------
Operating profit 127.4 80.0 160.1
Depreciation 62.1 63.6 140.6
Amortisation charge 1.9 5.2 7.3
Impairment 5.0 13.9 17.3
Profit on disposal of property, plant and equipment 16.7 - 6.8
Disposal of subsidiary - - (79.9)
Defined benefit pension plan employer contributions (0.1) (1.4) (2.4)
Share based payments - 1.2 2.8
------------- ----------- -----------
Operating cash inflow before changes in working
capital 213.0 162.5 252.6
(Increase)/decrease in receivables (45.2) 1.7 (118.0)
(Increase)/decrease in inventories (90.8) (14.1) 60.0
(Decrease)/increase in payables (8.1) 55.0 74.6
------------- ----------- -----------
Cash inflows from operating activities 68.9 205.1 269.2
------------- ----------- -----------
Included within the movement in receivables are amounts held as
collateral against equity derivatives.
14. 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.
26 weeks ended 29 October 2017:
Related party Relationship Sales Purchases Trade and Trade and
GBPm GBPm other receivables other payables
GBPm GBPm
Brasher Leisure Ltd Associate 5.3 0.2 4.8 0.2
Four Holdings Ltd
(1) Associate 0.2 - 75.0 0.7
Mash Holdings Ltd Parent company - - 0.2 -
Mike Ashley (2)(3) Director 1.1 - 1.2 -
Rangers Retail Ltd Associate 0.6 0.3 0.1 -
Newcastle United Football Connected
Club persons 0.7 0.2 1.1 -
(1) The balance with Four Holdings reflects the funding related
to Agent Provocateur. Management consider that the underlying
results of Four Holdings supports the recoverability of the
receivables balance
(2) Charges for use of company jet and helicopter charged at
commercial rates
(3) The Group had a GBP6.0m liability as at 30 April 2017 in
respect of a disputed historic claim. This was settled by the Group
during the period and the Group was subsequently reimbursed by Mike
Ashley.
26 weeks ended 23 October 2016:
Related party Relationship Sales Purchases Trade and Trade and
GBPm GBPm other receivables other payables
GBPm GBPm
Brasher Leisure Ltd Associate 5.7 0.6 8.1 -
NDS EHF Associate 1.4 - - -
Rangers Retail Ltd Associate 0.9 - 0.1 -
Newcastle United Football Connected
Club persons 0.7 - 0.2 -
Queensdown Associates Associate
Ltd - - 1.4 -
An agreement has been entered into with Double Take Limited, a
company owned by Mash Holdings Limited in which Matilda Ashley,
Mike Ashley's daughter, is a director. Under the agreement Double
Take licences the Group the exclusive rights to the cosmetic brand
SPORT FX. No royalties or other fees are payable to Double Take for
these rights until September 2019 at the earliest, when this fee
arrangement will be reviewed on a going forwards basis.
15. Commercial arrangements
MM Prop Consultancy Ltd, a company owned and controlled by
Michael Murray (domestic partner of Anna Ashley, daughter of Mike
Ashley), continues to provide property consultancy services to the
group. MM Prop Consultancy Ltd is primarily tasked with finding and
negotiating the acquisition of new sites for both our larger format
stores and our combined retail and gym units but it also provides
advice to the Company's in-house property team in relation to
existing sites both in the UK and in Europe.
MM Prop Consultancy Ltd fees are linked directly to value
creation which is determined by the Company's non-executive
directors who independently review performance bi-annually with a
view to determining, at their absolute and sole discretion, the
quantum of the fee payable. Under the terms of the agreement with
MM Prop Consultancy Ltd no fees are payable until the earliest of
30th September 2018 so that the Company's independent non-executive
directors have a sufficient amount of time to assess
performance.
The Sports Direct Group has commercial arrangements in place
with IBSL Consultancy Limited. Management has considered whether a
related party relationship exists and concluded that Justin Barnes,
a director of IBSL, and/or IBSL Consultancy Limited are acting in
an advisory capacity only and are not performing key management
functions that would indicate a related party relationship.
Management decisions are made solely by the management of the
Group.
During FY17, the Company had arrangements in place with Barlin
Delivery Limited, a company owned by John Ashley (the brother of
Mike Ashley). This arrangement ceased as at 30 April 2017.
As noted in the Chairman's statement, there was a vote by
independent shareholders against a retrospective payment of GBP11m
to John Ashley for executive bonuses forgone.
16. Post balance sheet events
On 21 November 2017 the Group announced that it had entered into
a new Revolving Credit Facility ("RCF"). The RCF is valid for four
years (with a one year extension option) and it will provide the
Group with access to borrowings up to GBP907.5m. As announced on 21
November 2017, the Group anticipates that due to our ongoing High
Street Elevation Strategy, it is likely that we will seek via an
accordion arrangement to increase this facility to GBP1
billion.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR OKNDKBBDBCBD
(END) Dow Jones Newswires
December 14, 2017 02:01 ET (07:01 GMT)
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