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Sports Direct fights on multiple fronts

The retailer had a busy festive period putting out fires on worker pay and governance, including a battle with Findel
January 4, 2016

Tidings of comfort and joy no doubt felt remote for apparel retailer Sports Direct (SPD) over the Christmas holidays. Instead of resting up after a challenging six months for the shares, the company has in a fortnight issued two combative statements and a third relating to the amount it pays its staff - something which has recently come under media scrutiny.

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To kick off the new year, it has sought to clarify the role of Michael Murray, identified in press reports as the boyfriend of founder Mike Ashley's daughter Anna. The company has said that while Mr Murray had been appointed to head up the company's property team, this was on a consultancy arrangement and that he was not paid a salary. It also said Mr Murray was not a director of any company within the Sports Direct Group and that his remuneration was based "solely on creating value". This performance is evaluated by the company's non-executive directors.

On New Year's Eve, the company announced it would pay its directly employed UK employees and "directly engaged casual workers" above the national minimum wage from the start of this year. It predicted this would cost roughly £10m on an annualised basis. The move came after a Guardian investigation which claimed temporary staff were effectively paid below the national minimum wage, partly as they had to undergo searches after their shifts during time they were not being paid. The company responded by stating that Mr Ashley would oversee a review of all agency workers' terms and conditions.

Just before Christmas the group also suffered a crushing defeat at the emergency general meeting of Findel (FDL), in which Sports Direct has a 17.5 per cent stake, having cut it from 19 per cent last month. Mr Ashley's business had proposed the appointment of Ben Gardener to Findel's board as a director to help provide the company with some extra "retail expertise" to the benefit of all shareholders.

 

Sports Direct's Christmas to forget

 

But major Findel shareholders including Schroders and Toscafund sided with Findel's board, which opposed the motion. Sports Direct expected both to support the appointment as they had met Mr Gardener prior to the proposal, and the company's agitation was clear to see. It said: "Findel should focus on trying to run its business more successfully and not reject offers of specialist assistance." It added Mr Gardener would have been a "positive addition to a board that Sports Direct believes has under-delivered for its shareholders".

This disagreement could be key as some analysts - including Liberum - have suggested Mr Ashley's business needs to acquire to meet its 2017 growth targets. Some had predicted Sports Direct could snap up Findel, or part of it, so all eyes will be on its next move.