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Sports Direct strides forward

RESULTS: A good World Cup helps Sports Direct to a record-breaking performance
December 20, 2010

Newcastle United owner Mike Ashley still owns a large chunk of shares in Sports Direct, but it's an investment that is currently proving far less troublesome than his involvement in the iconic Tyneside football club.

IC TIP: Hold at 150p

Sales at the sportswear retailer powered ahead, thanks in no small part to the boost from the World Cup over the summer, culminating in the group's strongest ever trading day when England took on the US. UK retail sales climbed nearly 10 per cent, and were a key driver in the 40 per cent increase in underlying pre-tax profits.

However, analysts did express concern at the lacklustre international retail growth. Overseas sales increased just 4.6 per cent to £66.5m, or 9 per cent on a constant currency basis - that represents just 8 per cent of group sales - despite a 4.1 per cent increase in the international side's selling space. Wholesale revenues slipped, too, but that reflected a managed shift to more profitable licensing business, which lifted gross margins in the branded division by 350 basis points to 40.8 per cent.

Broker Altium Securities expects adjusted pre-tax profits of £137.2m and EPS of 18p in the year to April 2011 (from £104.8m and 13.8p last year).

SPORTS DIRECT INTERNATIONAL (SPD)

ORD PRICE:150pMARKET VALUE:£863m
TOUCH:150-151p12-MONTH HIGH:155pLOW: 90p
DIVIDEND YIELD:nilPE RATIO:7
NET ASSET VALUE:56p*NET DEBT:73%

Half-year to 24 OctTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
200975757.86.85nil
201082010012.2nil
% change+8+73+78-

*Includes intangible assets of £214m, or 37p a share

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