Dave Forsey, chief executive of Sports Direct (SPD), attributed much of the retailer's progress in the six months to October to the "hard work of our colleagues". This may be more sincere than the usual soundbites directed at employees in company reports. Much of Sports Direct's success can be apportioned to its generous bonus scheme for employees, which motivates staff to deliver top-notch customer service.
Once again, the group remains on track to achieve a full-year underlying cash profit target of £360m. It made £203m of this in the first half - up 11 per cent year on year as the gross margin improved. Trading was decent, especially in light of the problems affecting the wider retail sector. In the sports retail division, which accounted for 86 per cent of group sales, revenue rose 8 per cent to £1.2bn, driven by 11 per cent growth in online sales.
This offset declines in the much smaller Premium Lifestyle and Brands divisions. Sales in the former dipped, largely down to the closure of loss-making USC and former Republic stores, but losses narrowed to £7.8m thanks to lower operating costs. Brands revenue fell, but again lower costs lifted profit by 8 per cent to £15.1m. Sports Direct has signed 29 new licence agreements with contracted minimum royalties of $12m over the life of the agreements.
The group continued to expand across Europe. It has diversified into fitness, acquiring 18 gyms from LA Fitness. It's also building a gym and sports retail centre in Aintree, due to open this month. There was a £23.3m charge on its stakes in Debenhams (DEB) - in which it is trialling four concessions - and Tesco (TSC), whose shares are among the year's worst blue-chip performers. The group also has an 11.8 per cent shareholding in JD Sports (JD.), owns part of House of Fraser, and in June acquired a 4.8 per cent stake in newly listed flash sale operator MySale (MYSL).
Broker Cantor Fitzgerald expects pre-tax profit of £290m for the full year and EPS of 35p.
| SPORTS DIRECT (SPD) | ||||
|---|---|---|---|---|
| ORD PRICE: | 661p | MARKET VALUE: | £4bn | |
| TOUCH: | 661-661p | 12-MONTH HIGH: | 924p | LOW:559 |
| DIVIDEND YIELD: | nil | PE RATIO: | 21 | |
| NET ASSET VALUE: | 164p* | NET DEBT: | 19% | |
| Half-year to 26 Oct | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2013 | 1.35 | 143.1 | 18.6 | nil |
| 2014 | 1.43 | 149.7 | 19.4 | nil |
| % change | +6 | +5 | +4 | - |
Ex-div: na Payment: na *Includes intangible assets of £255m, or 43p a share | ||||
