7th Jul 2016 13:30
LONDON (Alliance News) - Sports Direct International PLC Thursday said profit grew more than 15% in its last financial year but warned the volatility in the retail sector and the uncertainty caused by the EU referendum will "drag on consumer confidence" over the short to medium term.
Sports Direct shares were up 2.6% to 286.00 pence per share on Thursday afternoon.
The FTSE 250-listed sports retailer reported pretax profit of GBP361.8 million in the financial year to April 24, a significant increase from the GBP313.5 million profit booked a year earlier as revenue experienced a lift to GBP2.90 billion from GBP2.83 billion.
Sports Retail reported a 3.9% lift in revenue during the year, which Sports Direct said was largely as a result of its acquisition of Irish clothing and homeware department store Heatons, whilst Brands increased revenue by 2.3%. However, the Premium Lifestyle unit reported a fall in revenue of almost 13% due to the closure of loss-making stores.
Although gross profit rose broadly in line with the lift in revenue, with the margin 0.4% higher year-on-year, Sports Direct booked exceptional items totalling GBP50.8 million compared to only GBP3.1 million the year before and a GBP2.4 million foreign exchange loss that was not present last year.
Selling, distribution and administrative costs were also higher year-on-year at GBP1.01 billion from GBP950.5 million a year earlier.
Those higher costs pushed the operating profit down to GBP223.2 million from GBP295.6 million, but Sports Direct booked investment income of GBP148.1 million compared to only GBP14.1 million last year to help push the pretax profit up.
On an underlying basis, which excludes certain items, Sports Direct said pretax profit was down 8.4% year-on-year to GBP275.2 million from GBP300.3 million.
Adjusted earnings before interest, tax, depreciation and amortisation of GBP381.4 million was also down on the GBP383.2 million made the year before, which Sports Direct said was "disappointing". The figure was at the lower end of its GBP380 million to GBP420 million target, which was lowered in January from GBP420 million due to a deterioration of trading conditions on the high street and unseasonal weather in the second half of the year.
Net debt at the end of the year stood at GBP99.6 million, a huge rise from the GBP59.7 million reported at the end of the previous year.
No dividend has been proposed, with Sports Direct stating it will continue to preserve financial flexibility, facilitating future investments and other growth opportunities. The dividend remains under review.
"Trading since the start of May and leading up to the EU referendum was broadly in line with management expectations albeit with the continued volatility seen in the wider retail sector. Since the EU vote we expect the current political uncertainty, and potential weakness in the UK's short to medium term economic outlook, is likely to act as a continuing drag on consumer confidence," said the company.
"When combined with the structural difficulties for UK retailers, including high street footfall, and our exposure to the weakness of the pound against the US dollar, these factors make the current outlook for the 2017 financial year somewhat uncertain and therefore hard to predict," the company added.
Sports Direct added that in response to repeated press speculation about his intentions with regards to his shareholding, founder and Vice Chairman Mike Ashley has confirmed to the board of directors that he has no current intention of taking the company private.
Rumours had circulated earlier in the year that Ashley, who owns 59% of the company, was intending to make an offer to buy out other shareholders.
By Joshua Warner; [email protected]; @JoshAlliance and Karolina Kaminska; [email protected] @KarolinaAllNews
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