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  • Mitre June 17

Sports Direct results

Sports Direct International Plc signalled that it was unlikely to pursue its policy of building up stakes in Greater Manchester-based rivals JD Sports Fashion and JJB Sports Plc.

Announcing its annual results on Thursday 16 July, Mansfield-based Sports Direct said it had reduced its stakes “in other related businesses” during the year.

It added: “We still believe that in the right circumstances taking strategic investments is beneficial for the group, and the board will continue to evaluate opportunities.

“However strategic investments compete with other priorities, including debt reduction, for cash, and it is unlikely that further significant investments will be made in the short term.”

Sports Direct, whose majority shareholder Mike Ashley controversially loaned £1.5m to Sir David Jones before he became JJB Sports chairman, has raised eyebrows by buying shares in and trading stores with its rivals. It is currently in talks with the Office of Fair Trading, which wants it to sell five stores which it acquired from JJB last year.

In the year to April 26, pre-tax profits at Sports Direct slumped dramatically to £10.6m from £118m due to a £53m loss on some of the company's financial investments which were held by Icelandic bank Kaupthing Singer & Friedlander (KSF) which also provided finance for the purchases.

Sports Direct explained in a note to the accounts: “KSF went into administration and we are in dispute with the administrators concerning the ownership of the shares they hold.”

Although it believes it still owns the shares, the company has concluded that it may not directly ‘control' them for accounting purposes and has therefore been forced to take a hit on the profit and loss account.

Group revenue up 8.6 per cent to £1.36bn and the company said its value model was proving resilient in the downturn.

UK retail sales, where it competes directly with Wigan-based JJB Sports, were up 5.1 per cent but margins fell to 42.5 per cent from 45.7 per cent.

The bulk of the decrease came in the second half as the weakness of the pound took its toll on the business, which buys almost all its branded goods priced in US dollars.

Sports Direct said that if the pound/dollar exchange rate remained at 2008 levels, gross margin in UK Retail would have been 45.7 per cent. It said it expected 2009/10 margins to be similar to the actual level in 2008/09.

Sports Direct said it was scrapping its final dividend as it sought it reduce its net debt from £431.3m to under £400m.

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