It's unsurprising to see a number of retailers blaming uncertainty around the referendum on the United Kingdom's membership of the European Union for sluggish trading. In its results statement, Sports Direct's (SPD) managers were reluctant to leap aboard the Brexit bandwagon. Its latest set of annual results revealed strong sales growth at its retail and brands divisions, which helped offset a 12.7 per cent slump in 'premium lifestyle' sales. Trading in the months leading up to the vote had been broadly in line with expectations. While the uncertainty in wake of the result could weigh on consumer confidence, management reminded investors that all UK retailers face a number of "structural difficulties", including low high street footfall and the introduction of the new national living wage.
On that note, operating costs rose 5.3 per cent at Sports Direct last year due to the introduction of higher staff wages, a new warehouse in Shirebrook and the integration of acquisitions. Not forgetting a £7.1m charge in respect of the 2011 share scheme, this led to a 0.5 per cent dip in cash profit to £381m and an 8.4 per cent fall in underlying pre-tax profit to £275m.
All in all, the results looked like a fairly mixed bag, although the numbers came in comfortably ahead of analysts' expectations, which sent the share price up on their release. Broker Peel Hunt had expected sales in the region of £2.8bn and adjusted pre-tax profit of £264m. Sports Direct's bosses aren't satisfied, though. Chairman Keith Hellawell labelled the performance disappointing, citing the PR storm that has engulfed the business since the end of 2015. He also firmly denied rumours that founder Mike Ashley has intentions to take the company private.
Crucially, there are concerns about Sports Direct's exposure to weaker sterling this year. Bosses admitted the material changes to currency translation is "likely to impact US dollar purchases" the company makes, and thus profitability, for which Sports Direct is not hedged for the 2017 financial year and beyond.
Liberum expects pre-tax profit of £208m for the year to April 2017, giving EPS of 26.2p, compared with £275m and 34.5p in FY2016.
| SPORTS DIRECT (SPD) | ||||
|---|---|---|---|---|
| ORD PRICE: | 290p | MARKET VALUE: | £1.74bn | |
| TOUCH: | 289.6-290.4p | 12-MONTH HIGH: | 821p | LOW: 274p |
| DIVIDEND YIELD: | nil | PE RATIO: | 6 | |
| NET ASSET VALUE: | 231p | NET DEBT: | 7% | |
| Year to 24 Apr | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2012 | 1.84 | 151 | 18.7 | nil |
| 2013 | 2.19 | 207 | 26.6 | nil |
| 2014 | 2.71 | 239 | 30.8 | nil |
| 2015 | 2.83 | 313 | 40.6 | nil |
| 2016 | 2.90 | 362 | 46.8 | nil |
| % change | +3 | +15 | +15 | - |
