It wasn't in-house performance that forced Sports Direct International (SPD) to report a near 75 per cent drop in pre-tax profit in the year to April 2018. Instead, statutory numbers from the retail chain were dented by a sharp decline in the value of its investment in fellow retailer Debenhams (DEB). Strip that out (and last year's one-off gain made on the profits of its stake in successful peer JD Sports Fashion) and pre-tax profit actually rose by a third to £153m.
That figure still isn't a truly fair reflection of the underlying performance at the retail giant – favourable foreign exchange movements and lower depreciation and amortisation charges were a major contributor to the growth. Management can at least take credit for a 3.6 per cent decrease in operating costs, which helped spark a 12 per cent increase in adjusted cash profit. Meanwhile, free cash inflows jumped 27 per cent to £326m.
But the troubles of the UK high street are still evident at Sports Direct. Revenue growth was a touch shy of market expectations, largely due to a difficult domestic retail environment, which left UK retail sales trailing by 2 per cent. Gross margins also contracted from 41 per cent to 39.7 per cent due to the Bob's Stores and Eastern Mountain Sports acquisitions, and higher inventory provisions. Still, analysts at Liberum expect pre-tax profit of £162m for the year ending April 2019, giving EPS of 21p, compared with £153m and 19.8p in FY2018.
| SPORTS DIRECT (SPD) | ||||
| ORD PRICE: | 405p | MARKET VALUE: | £2.18bn | |
| TOUCH: | 405-408p | 12-MONTH HIGH: | 436p | LOW: 299p |
| DIVIDEND YIELD: | nil | PE RATIO: | 88 | |
| NET ASSET VALUE: | 226p | NET DEBT: | 33% | |
| Year to 29 Apr | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2014 | 2.71 | 239 | 30.8 | nil |
| 2015 | 2.83 | 313 | 40.6 | nil |
| 2016 | 2.90 | 362 | 46.8 | nil |
| 2017 | 3.25 | 282 | 39.4 | nil |
| 2018 | 3.36 | 77.5 | 4.6 | nil |
| % change | +4 | -72 | -88 | - |
| Ex-div: | na | |||
| Payment: | na |
