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Analysts were not expecting much from Sports Direct's results. After three profits warnings during its first year as a public company, underlying pre-tax profits - down by 51.1 per cent to £85m - were broadly in line with the latest downgraded forecasts.
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Yet its share price still hit a fresh low, partly because its dividend was lower than anticipated - although judging by its spiralling debt, the group couldn't really have offered much more. Over the past 12 months, borrowings increased 12-fold to £465m, as the group bought back £201m of shares while maintaining heavy capital expenditure as it opened new stores. The company also continued its overseas expansion, most notably in China and the US, where it recently acquired the legendary Everlast boxing brand.
Even so, reported profits soared, thanks largely to a £41m gain on the partial sale of its stakes in Amer sports, Adidas and Umbro. Broker Pali International has maintained its 2009 full-year EPS forecast at 9.3p.
SPORTS DIRECT INTERNATIONAL (SPD) |
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|---|---|---|---|---|
| ORD PRICE: | 62p | MARKET VALUE: | £352.4m | |
| TOUCH: | 62-63 | 12-MONTH HIGH: | 193p | LOW: 62p |
| DIVIDEND YIELD: | 7% | PE RATIO: | 5 | |
| NET ASSET VALUE: | 22p | NET DEBT: | 362% | |
| Year to 27 Apr | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2006 | 1.19 | 96.3 | 15.32 | nil |
| 2007 | 1.35 | 60.5 | 8.18 | 1.03 |
| 2008 | 1.26 | 118.9 | 12.23 | 4.50 |
| % change | -7 | +97 | +50 | +337 |
Ex-div: 1 Oct Payment: 31 Oct *Includes intangible assets of £185m, or 32p a share |
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These results were bad enough in themselves, but the lack of disclosure on current trading isn't helping the share price. Sports Direct does not intend to disclose like-for-like sales figures before next year, leaving investors in the dark at the worst possible time. Despite a 44 per cent fall since our last advice, the shares remain a sell.
Last IC view: Sell, 112p, 6 Feb 2008
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-IC-1.5.4a-prod - 31/10/2008 13:11:34 - carlos.princz
