How should we take the latest set of numbers from beleaguered retailer Sports Direct (SPD)? Well, the share price fell 8 per cent on their release, so that gives us a clue. Analysts expected these figures to be rough: currency headwinds, corporate governance controversies and issues with suppliers have all played their part. But - in the words of broker Peel Hunt - the 'fly in the ointment' was the margin drop, which was 450 basis points at group level. That doesn't just highlight the group's insufficient hedging policies regarding weak sterling, but points to other issues to do with slow-moving stock and onerous lease obligations tied up with the European stores. Underlying cash profit fell by just over a third to £145m. As a result of these problems - and specifically the need to take a more "tailored approach" to the European business - the second half isn't expected to get much better.
Shareholders can thank the Financial Reporting Council (FRC) for greater visibility. Sports Direct is now providing specific commentary and segmental performance regarding its international division, following a discussion with the FRC, whose Financial Reporting Review Panel highlighted the lack of prior such commentary in findings released on the results day. The matter is now closed.
It seems there isn't much to report on how Sports Direct is dealing with its governance issues, either. Press reports leading up to these half-year results suggested the company was due to reveal two new high-profile appointments, but investors were forced to make do with just one new non-executive director: David Brayshaw. There is some suggestion that Mr Brayshaw is in line to take over as chairman come the New Year. Chief executive Dave Forsey and chief financial officer Matt Pearson both quit their respective roles following the company's last annual meeting. While the finance job remains up for grabs, founding father Mike Ashley has taken the top job.
Analysts at broker Liberum expect pre-tax profit of £128m for the year ending April 2017, giving EPS of 16.1p, compared with £275m and 34.5p in FY2016.
| SPORTS DIRECT (SPD) | ||||
|---|---|---|---|---|
| ORD PRICE: | 290p | MARKET VALUE: | £1.72bn | |
| TOUCH: | 290-291p | 12-MONTH HIGH: | 690p | LOW: 251p |
| DIVIDEND YIELD: | nil | PE RATIO: | 8 | |
| NET ASSET VALUE: | 225p | NET DEBT: | 5% | |
| Half-year to 23 Oct | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2015 | 1.43 | 187 | 24.5 | nil |
| 2016 | 1.64 | 140 | 15.6 | nil |
| % change | +14 | -25 | -36 | - |
