19th Dec 2007 07:02
Sports Direct International Plc19 December 2007 19th December 2007 Sports Direct International plc ("Sports Direct", "the Group" or "the Company") Interim Results For the 26 weeks to 28 October 2007 Group Highlights • Group revenue down 7.1% to £668.1m - UK retail sales affected by unprecedented weather conditions • Underlying EBITDA down 16.0% to £83.6m (1) • Underlying profit before tax down 35.2% to £52.0m (1) (2) • Group margin up 220 basis points to 43.3% - Gross margin percentage strengthened across all divisions • Strategic stakes increased from £75.4m to £364.5m - Investments in adidas, Amer (sold after period end) and Umbro • Acquisitions of Everlast, providing significant platform for US growth; and Field & Trek • Middle East licensing agreement in place and progressing • Continued store roll-out in the UK and internationally • Capital investment of £120m - Acquired freehold retail sites and other property interests for £102.5m • Further development and consolidation of head office and distribution campus at Shirebrook • Interim dividend 2.06p per share (1) Underlying operating profit, underlying profit before taxation andunderlying EBITDA exclude £57.9m (2007 H1: £16.9m) of realised losses on forwardcurrency contracts, and exceptional items of £nil (2007 H1: £4.2m). (2) Underlying profit before taxation also excludes a gain of £27.1m (2007 H1:£2.5m) relating to the IAS 39 fair value adjustment on forward currencycontracts. Dave Forsey, Chief Executive said: "The results reflect a very challenging UK market and the comparative periodlast year including the football World Cup. These also demonstrate theresilience of our business under such pressures from external factors. Weremain determined to adapt our strategy, consolidate our market leading positionand develop our strong brand portfolio to drive long-term growth." Sports Direct International plcDave Forsey, Chief ExecutiveBob Mellors, Group Finance Director T: 0870 333 9400 Financial DynamicsJonathon Brill/Andrew Dowler/Ben Foster T: 0207 831 3113 Chairman's Statement I am pleased to have been appointed as acting Chairman of the Sports DirectBoard since June in what has been a challenging period for the UK retail sectorand the Group. Board Changes The Group was pleased to announce on 25 October 2007 the appointment of MalcolmDalgleish and Dave Singleton as independent non-executive directors. Bothappointments took effect immediately and are part of the Group's ongoingcommitment to comply with corporate governance best practice. Malcolm Dalgleish is currently Head of Retail in the Europe, Middle East andAfrica area at CB Richard Ellis ("CBRE"). In 2005 CBRE acquired Dalgleish, theleading retail real estate services specialist in the UK, which was founded byMalcolm in 1979 and of which he was the principal shareholder. Dave Singleton spent 25 years with Reebok International Limited. He steppeddown in April 2007 having helped to successfully integrate Reebok following itsacquisition by adidas Group in January 2006. For eight years he was VicePresident Northern Europe Region & UK and from 2003 he was Senior Vice PresidentEurope, Middle East & Africa. Dave has an extensive senior management recordand brings valuable experience of international sports brand operations. The Group also announced that Chris Bulmer stepped down from her role as anindependent non-executive director. We are continuing to work with an executive search company to strengthen theBoard with non-executive appointments. We will update the market asappropriate. Dividend The Board has resolved to pay an interim dividend of 2.06p per share on 30 April2008 to shareholders on the register on 28 March 2008. We intend in the futureto introduce a dividend reinvestment programme in time for the Interim dividend. Simon BentleyActing non-executive Chairman19 December 2007 Chief Executive and Finance Director's Review Overview of Financial Performance In the 26 weeks ended 28 October 2007 ("2008 H1"), Group revenue was down 7.1%at £668.1m compared with revenues of £719.1m for the 26 weeks ended 29 October2006 ("2007 H1"). UK retail revenue for the six month period fell by £77mcompared with the corresponding period last year. Underlying EBITDA for the period was £83.6m. This is 16% lower than thecorresponding period last year. Gross margins for the Group were strengthened, and increased to 43.3% from41.1%, driven primarily by an improvement in the UK retail gross margin to 45.3%from 42.4%. Foreign exchange charges to the Income Statement for the half year were £30.8m,up £16.4m on the same period last year. This comprised £57.9m in administrationcosts which was partly offset by a gain of £27.1m in finance income. Capital expenditure amounted to £120.0m (2007 H1: £42.7m). This includedacquisitions of property, plant and equipment, including £77.1m on new andrefurbished stores, and £31.9m on a freehold office London. Underlying profit before tax fell from £80.3m to £52.0m. Financial Performance by Business Segment 2008 H1 2007 H1 Change (£'m) (£'m) %----------------------------------------------------------------------------------------------------------------------RetailRevenue:UK retail 518.4 595.1UK wholesale and property 23.2 8.3International retail 38.5 33.6----------------------------------------------------------------------------------------------------------------------Total retail revenue 580.1 637.0 (8.9)----------------------------------------------------------------------------------------------------------------------Cost of sales (327.7) (372.9) Gross margin 252.4 264.1Gross margin percentage 43.5% 41.4%---------------------------------------------------------------------------------------------------------------------- BrandsRevenue:Wholesale 77.5 75.4Licensing 10.5 6.7----------------------------------------------------------------------------------------------------------------------Total brands revenue 88.0 82.1 +7.1 Cost of sales (51.1) (50.4)----------------------------------------------------------------------------------------------------------------------Gross margin 36.9 31.7Gross margin percentage 41.9% 38.6% Business Review It has been an exceptionally challenging trading environment for the UK sportsretail sector, with the wettest May to July since records were first kept in1776, and the worst flooding in the UK for 60 years. 2008 H1 has been the mostdifficult trading period in our history. However, we believe our strategy remains the right one for the business. Wecontinued to invest in the business organically and through acquisitions,consolidating our leading UK retail market position and increasing the long-termvalue of our brand portfolio. Retail division Total retail revenue was down 8.9% to £580.1m (2007 H1: £637.0m). UK retailrevenue, which contributes to the majority of retail revenue, was down 12.9% to£518.4m (2007 H1: £595.1m). This was impacted by the poor Summer weatherconditions, along with tough comparatives following the 2006 FIFA World Cup.There was no comparable event in 2007. On 22 November 2007 we announced that England failing to qualify for theEuropean Championship 2008 will have a material impact on the business. Thelast time England failed to qualify for a major football tournament was in 1994,when the business was significantly smaller and less focussed on footballrelated merchandise than it is now. Umbro has stated that it will now manufacture only one million new replicaEngland away shirts rather than three million it had originally planned. Inaddition, we expect sales of other products such as home shirts, shorts, socks,training wear, non-Umbro England products, flags, etc. to be significantlyreduced, plus there will be an impact due to the lack of related footfall.Although it is difficult to estimate the impact precisely, our initialassessment is that this will impact EBITDA in the full 2008 calendar year bycirca £50m (with a range of £30m to £70m) split broadly evenly over financialyears 2007/2008 and 2008/2009. We grew sales in the other two segments of our retail division. UK wholesaleand property revenue was up 179.5% to £23.2m (2007 H1: £8.3m) due to theincidence of property transactions, including £10m which had no gain or loss(2007 H1: no property transactions). International retail revenue was up 14.5%to £38.5m (2007 H1: £33.6m). In the period we opened two new stores in Belgium,and a further three in Slovenia. In spite of the discounting of stock, we strengthened the total retail divisionmargin from 41.4% to 43.5%, driven primarily by an improvement in the UK retailgross margin to 45.3% from 42.4%. 2008 H2 UK retail margin growth is likely tocontinue but at a reduced rate. On 12 July 2007, we acquired a 60% strategic stake in Field & Trek for £5.1m.This is in line with the Group's plans to enter the outdoor leisure market. Wehold an option for five years to acquire the remaining 40% for a further £5.0m.We have also acquired the remaining 20% of Sport 2000 Slovenia, the number twoSlovenian sports retailer. Post period end, we announced the sale of ourinterest in Original Shoe Company Limited for £5m. Online revenue continues to be a growing element of the division and we continueto look at opportunities to develop this revenue stream for the business. Brands division Total brands revenue was up 7.1% to £88.0m (2007 H1: £82.1m). Within this,wholesale revenue was up 2.8% to £77.5m (2007 H1: £75.4m). Revenue fromlicensing was up 56.7% to £10.5m (2007 H1: £6.7m), driven by the acquisition ofEverlast in September 2007 and the licensing agreement signed with Dubai basedcompany Retail Corp. This will establish Lillywhites and Sports Direct storesthroughout the Middle East region and the Republic of South Africa. By the endof 2008, we expect 10 stores to have been opened in South Africa, all of whichwill carry most of our Group brands. This will ensure Sports Direct has apresence in the market ahead of the 2010 FIFA World Cup being held there. Gross margins increased from 38.6% to 41.9% due to the increase in high marginlicensing income. During the period, the Group acquired the Everlast boxing brand forapproximately £80.4m. Everlast is a leading US boxing and apparel brand whichfits strategically with Sports Direct's existing brand portfolio. Importantly,this acquisition provides a significant platform in the US market. Since thedate of acquisition to the period end, Everlast contributed £4.1m to brandrevenue. We also acquired the minority interest in Smith and Brooks. Operating costs have increased in the division due to the inclusion of Everlastfrom its acquisition in September, along with the closure of the DunlopSlazenger offices in Wakefield, and their subsequent integration into theShirebrook operation. Store portfolio As at 28 October 2007, the Group operated 478 stores, of which 425 were locatedin the UK (excluding Northern Ireland), 35 in Belgium, 14 in Slovenia and fourin Holland. In addition, through its 42.5% shareholding in the Heatons chain,Sports Direct has three stores in Northern Ireland and 12 stores in the Republicof Ireland. In the period, 22 new Sports Direct stores were opened in the UK, with 5relocations. This represented a net increase of 17 new core stores in 2008 H1.As part of the Group's ongoing portfolio management, we disposed of 23 smallernon-core stores in the period, excluding the 5 relocations. At the period end, the 425 UK retail stores total square footage was circa. 3.3msquare feet. Since the period end, we have opened a net of 11 new core stores in the UK, pluscompleted 2 relocations. We have disposed of a further 3 smaller non-corestores. When evaluating new sites, and reviewing existing locations, Sports Direct setsrigorous selection criteria. The Group is now targeting to open between 35-40new core stores in the current financial year. Looking forward, and against abackdrop of a general consumer slowdown, we are targeting a similar number ofnew core stores for the next financial year. We now have over 100 sportsdirect.com fascias in the UK alone and the rebrandingproject is continuing. The Company previously announced it would be seeking shareholder approval topurchase freehold properties from Mike Ashley. The difficulties associated withthat have not been resolved, therefore the Company will no longer be seekingshareholder approval for this. Strategy In spite of the tough UK retail backdrop, in the period we strengthened ourGroup gross margins by 220 basis points to 43.3% (2007 H1: 41.1%). We achievedthis by increasing the value of products and delivering continued efficienciesfrom the state-of-the-art distribution centre in Shirebrook. Gross margin alsobenefited from the lower average dollar exchange rate in the period.Maintaining efficient operating margins, subject to the appropriate balancebetween margins and revenues, remains a key management focus for the Group. Core to our business model is building stakes in other companies which webelieve will provide us with a strategic and commercial advantage. At 28October 2007, the Group held investments in adidas, Amer Sports, Blacks Leisure,JD Sports and Umbro. Post period end, on 30 October 2007, the Group acquired further shares in Umbro,taking our holding to 29.9%. On 7 November 2007 the Group disposed of itsentire holding in Amer Sports Corporation for a consideration of £117.8m. Outlook As previously stated, the UK retail business will be impacted by England'sfailure to qualify for next year's European Championships. This will be partlymitigated, however, by performances in the International retail and Brandsbusinesses, where management is targeting 6-8% underlying EBITDA growth in 2007/8 and 2008/9. Therefore we remain confident of exceeding current underlying EBITDA expectations for 2007/8. Financial Review Underlying EBITDA for the period was £83.6 million, compared to £99.5 million inthe corresponding period last year. The Directors believe that underlying EBITDA and underlying earnings providesthe most useful information for shareholders on the underlying performance ofthe business, and are consistent with how business performance is measuredinternally. They are not recognised profit measures under IFRS and may not bedirectly comparable with "adjusted" profit measures used by other companies. EBITDA is earnings before investment income, finance income and finance costs,tax, depreciation and amortisation and therefore includes share of profit ofassociated undertakings and joint ventures of £2.3m (2007 H1: £0.8m). UnderlyingEBITDA is calculated as EBITDA before exceptional items, and non trading itemsincluding realised foreign exchange losses. Selling, distribution and administration costs Selling, distribution and administration costs increased as a percentage ofrevenue as it includes the costs of the acquired companies and a realisedforeign exchange loss of £57.9m compared to a loss of £16.9m in the comparativeperiod. The Group manages the impact of currency movements through the use of forwardfixed rate currency purchase contracts. The Company's policy, consistentlyapplied, is to hold or hedge up to four years (with a minimum of one year) onanticipated purchases in foreign currency. The exchange loss of £57.9m included in administration costs has arisen from: a) accepting dollars at the contracted rate; and b) the translation of dollars and dollar denominated assets at the period end rate. The exchange gain of £27.1m included in finance income substantially representsthe reversal of the provision made (under IFRS) for the forward contracts at 29April 2007 in anticipation of the loss realised in the accounts to 28 October2007. The sterling exchange rate with the US dollar at 29 April 2007 was $1.998 and$2.053 at 28 October 2007. At today's rates this profit and loss impact is all but reversed. Finance income 2008 H1 2007 H1 (£'m) (£'m)---------------------------------------------------------------------------------------------------------Finance income:Bank interest receivable 0.6 0.2Other interest receivable - 0.3Expected return on pension plan assets 1.1 1.1Fair value adjustment to forward foreign exchange contracts 27.1 2.5--------------------------------------------------------------------------------------------------------- 28.8 4.1========================================================================================================= The profit on the fair valuing of forward foreign exchange contracts arisesunder IFRS as a result of marking to market at the period end those contractsheld to hedge the Group's currency risk, and reversal of the provision made inprevious periods. Finance costs 2008 H1 2007 H1 (£'m) (£'m)--------------------------------------------------------------------------------------------------------------------Finance costs:Interest on bank loans and overdrafts 11.2 2.5Interest on other loans 3.8 0.6Interest on retirement benefit obligations 1.1 1.1Fair value adjustment to forward foreign exchange contracts - --------------------------------------------------------------------------------------------------------------------- 16.1 4.2==================================================================================================================== Taxation The effective tax rate on profit before tax for 2008 H1 was 38.5% (2007 H1:32.3%). The increase is due to the magnitude of non-deductible expenditureforming a greater proportion of profit before taxation than in the prior period(as a result of the reduced profit before taxation). Earnings 2008 H1 2007 H1 % Change p per share p per share--------------------------------------------------------------------------------------------------------------------Basic EPS 1.88 11.54 (83.7)Underlying EPS 5.71 7.57 (24.6) Basic earnings per share ("EPS") is calculated by dividing the earningsattributable to ordinary shareholders by the weighted average number of ordinaryshares outstanding during the financial period. The underlying earnings per share reflects the underlying performance of thebusiness compared with the prior year and is calculated by dividing underlyingearnings after tax by the number of shares in issue at the year end. It is nota recognised profit measure under IFRS and may not be directly comparable with "adjusted" profit measures used by other companies. The items adjusted for arriving at the underlying profit are as follows: 2008 H1 2007 H1 (£'m) (£'m)--------------------------------------------------------------------------------------------------------------------Profit after tax: 13.0 47.4Post tax effect ofExceptional items: Profit on disposal of certain retail concessions - (2.9)Realised loss on forward foreign exchange contracts 40.5 11.8Fair value adjustment to forward foreign exchange contracts (19.0) (1.8)Underlying profit after tax 34.5 54.5-------------------------------------------------------------------------------------------------------------------- To assist comparability, underlying EPS for 2007 H1 is based the listing sharecapital of 720 million shares. If the share buyback had not taken place the underlying EPS would be 5.18pinstead of 5.71p. Dividends A dividend of 1.03p per share in respect of the year ended 29 April 2007,totalling £7.42m, was paid on 31 July 2007 to shareholders on the register at 29June 2007. The Board has resolved to pay on 30 April 2008 a dividend of 2.06p per share toshareholders on the register on 28 March 2008. Capital expenditure Expenditure, including acquisition of property, plant and equipment, amounted to£120.0m (2007 H1: £42.7m). This related to £77.1m on new and refurbishedstores, and £31.9m on a freehold office in New Cavendish Street, London, part ofwhich the Group will occupy as its London office. The remaining spend relatedto Shirebrook, other plant and equipment and IT hardware. Acquisitions The Group spent £96.8m on acquisitions during 2008 H1. The principalacquisitions related to Everlast and Field & Trek. The net assets acquired havebeen analysed and separate intangible assets and the residual goodwillrecognised as appropriate in accordance with IFRS3: Business Combinations. Strategic investments The Group has, from time to time, taken strategic stakes in other companies. At28 October 2007, the Group held investments in adidas, Amer Sports, BlacksLeisure, JD Sports and Umbro. Changes in the value of these investments arerecognised directly in equity in accordance with IFRS. 2008 H1 (£'m)---------------------------------------------------------------------------------------------------------------Total available-for-sale investments at 29 April 2007 75.4 Additions in the period 334.4 Disposal proceeds in the period (66.5) Profit on disposals in the period 1.7 Fair value adjustment in respect of available-for-sale financial assets 19.5---------------------------------------------------------------------------------------------------------------Total available-for-sale investments at 28 October 2007 364.5=============================================================================================================== The respective shareholdings at 28 October 2007 and 17 December 2007 were asfollows: At 28 October 2007 At 17 December 2007 Shares 'm Holding Shares 'm Holding----------------------------------------------------------------------------------------------------------------------Blacks Leisure Group 12.503 29.36% 12.728 29.89%Umbro 21.974 15.04% 43.678 29.90%Amer Sports Corporation 8.769 12.16% - -John David Group 4.903 10.16% 5.305 10.99%adidas AG 5.031 2.47% 1.0 0.49%---------------------------------------------------------------------------------------------------------------------- Share buyback The Group spent £162.3m on share purchases during the period: 72,000,000 sharesare now held in treasury. The weighted average number of shares for the periodwas 691,176,000 and the number of shares in issue at the end of the period,excluding treasury shares, was 604,452,368. Cash flow and net debt In addition to the share buyback and the amounts invested in capital expenditureand acquisitions, the Group invested a net £267.9m in strategic stakes. Netdebt increased from £38.1m at 29 April 2007 to £795.9m at 28 October 2007.Taking into account the inclusion of marketable securities (available for salefinancial assets) the net debt at 28 October 2007 was £431.4m. The analysis of debt at 28 October 2007 was as follows: 2008 H1 2007 H1 (£'m) (£'m)-------------------------------------------------------------------------------------------------------------------Cash and cash equivalents 17.6 181.8 Borrowings (813.5) (219.9) Net debt (795.9) (38.1) Market value of marketable securities 364.5 75.4-------------------------------------------------------------------------------------------------------------------Net (indebtedness)/liquidity (431.4) 37.3=================================================================================================================== 2008 H1 (£'m)------------------------------------------------------------------------------------------------------------------Net debt at 29 April 2007 (38.1) Acquisition of subsidiaries including Everlast & Field & Trek (96.8) Net cost of listed investments (267.9) Property (120.0) Working capital including payment of IPO costs (103.4) Share buyback (162.3) Dividends paid (7.4)------------------------------------------------------------------------------------------------------------------Net debt at 28 October 2007 (795.9)================================================================================================================== Reconciliation of movement in equity Total equity movement is as follows: 2008 H1 (£'m)------------------------------------------------------------------------------------------------------------------Total equity at 29 April 2007 280.8 Profit after tax for the 26 weeks ended 28 October 2007 13.0 Items taken directly to equity:Actuarial gain on pension 0.3Fair value adjustment in respect of available-for-sale financial assets 19.5Tax on items taken directly to equity (5.9) 13.9Movement in equity issues:Share buyback (162.3)Minority interests eliminated on acquisitions (2.2) (164.5) Dividends (7.4)------------------------------------------------------------------------------------------------------------------Total equity at 28 October 2007 135.8================================================================================================================== Pensions The Group operates a number of closed defined benefit schemes in the DunlopSlazenger companies. The net deficit in these schemes decreased from £14.0m at29 April 2007 to £13.4m at 28 October 2007. Financial risks, systems and controls The principal financial risks the Group faces are: • Movement in interest rates on borrowings. The Group has not historically hedged this risk. • Movement in currency exchange rates. A significant amount of the Group's purchases are in US dollars. The Group hedges the risk of such movements by using forward purchases of foreign currency. Certain of the Group's assets are held overseas in local currency and are revalued in accordance with currency movements. This currency risk is not hedged. Funding and liquidity for the Group's operations are provided through bank loansand overdraft facilities and shareholders' funds. The objective is to maintainsufficient funding and liquidity for the Group's requirements. The Group maintains a system of controls to manage the business and to protectits assets. We continue to invest in people, systems and in IT to manage theGroup's operations and its finance effectively and efficiently. Dave Forsey / Bob MellorsChief Executive / Finance Director 19 December 2007 INDEPENDENT REVIEW REPORT TO SPORTS DIRECT INTERNATIONAL PLC Introduction We have been engaged by the company to review the condensed set of financialstatements in the half-yearly financial report for the six months ended 28October 2007 which comprises Consolidated income statement, Consolidatedstatement of recognised income and expenses, Consolidated balance sheet,Consolidated cash flow statement and the related notes. We have read the otherinformation contained in the half-yearly financial report and considered whetherit contains any apparent misstatements or material inconsistencies with theinformation in the condensed set of financial statements. This report is made solely to the company in accordance with guidance containedin APB Statements of Standards for Reporting Accountants "International Standardon Review Engagements (UK and Ireland) 2410". Our review work has beenundertaken so that we might state to the company those matters we are requiredto state to them in a review report and for no other purpose. To the fullestextent permitted by law, we do not accept or assume responsibility to anyoneother than the company for our review work, for this report, or for theconclusion we have formed. Directors' Responsibilities The half-yearly financial report is the responsibility of, and has been approvedby, the directors. The directors are responsible for preparing the half-yearlyfinancial report in accordance with the Disclosure and Transparency Rules of theUnited Kingdom's Financial Services Authority. As disclosed in note 1, the annual financial statements of the group areprepared in accordance with IFRSs as adopted by the European Union. Thecondensed set of financial statements included in this half-yearly financialreport has been prepared in accordance with International Accounting Standard34, ''Interim Financial Reporting,'' as adopted by the European Union. Our Responsibility Our responsibility is to express to the Company a conclusion on the condensedset of financial statements in the half-yearly financial report based on ourreview. Scope of Review We conducted our review in accordance with International Standard on ReviewEngagements (UK and Ireland) 2410, ''Review of Interim Financial InformationPerformed by the Independent Auditor of the Entity'' issued by the AuditingPractices Board for use in the United Kingdom. A review of interim financialinformation consists of making enquiries, primarily of persons responsible forfinancial and accounting matters, and applying analytical and other reviewprocedures. A review is substantially less in scope than an audit conducted inaccordance with International Standards on Auditing (UK and Ireland) andconsequently does not enable us to obtain assurance that we would become awareof all significant matters that might be identified in an audit. Accordingly, wedo not express an audit opinion. Conclusion Based on our review, nothing has come to our attention that causes us to believethat the condensed set of financial statements in the half-yearly financialreport for the six months ended 28 October 2007 is not prepared, in all materialrespects, in accordance with International Accounting Standard 34 as adopted bythe European Union and the Disclosure and Transparency Rules of the UnitedKingdom's Financial Services Authority. Grant Thornton UK LLPChartered accountantsLondon 19 December 2007 UNAUDITED CONSOLIDATED INCOME STATEMENT FOR THE 26 WEEKS ENDED 28 OCTOBER 2007 26 weeks 26 weeks 52 weeks ended ended ended 28 October 29 October 29 April 2007 2006 2007 __________ _________ _____________ Notes £'000 £'000 £'000Continuing operations: Revenue 2 668,112 719,116 1,347,144Cost of sales (378,855) (423,237) (751,003) __________ _________ _____________Gross profit 289,257 295,879 596,141Selling, distribution and administrative expenses (229,042) (216,219) (421,655)Loss on forward foreign exchange contracts (57,924) (16,864) (23,543)Other operating income 1,707 2,257 1,783Exceptional items 3 - 4,160 (58,826) __________ _________ _____________Operating profit 2 3,998 69,213 93,900Investment income 2,203 225 1,790Finance income 28,792 4,130 3,449Finance costs (16,136) (4,245) (42,081)Share of profit of associated undertakings and joint ventures 2,355 822 3,422 __________ _________ _____________ Profit before taxation 21,212 70,145 60,480Taxation 4 (8,172) (22,675) (23,360) __________ _________ _____________ Profit for the period 2 13,040 47,470 37,120 ========== ========= ============= Equity holders of the Group 17 12,962 47,370 37,671Minority interests 78 100 (551) __________ _________ _____________Profit for the period 2 13,040 47,470 37,120 ========== ========= ============= Earnings per share from total and continuing operations attributable to the equity shareholders Pence per Pence per Pence per share share share __________ _________ _____________ Basic earnings per share 5 1.88 11.54 8.18Diluted earnings per share 5 1.88 11.54 8.18 __________ _________ _____________ The accompanying notes form part of this financial report. UNAUDITED CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSEFOR THE 26 WEEKS ENDED 28 OCTOBER 2007 26 weeks 26 weeks 52 weeks ended ended 29 ended 28 October October 29 April 2007 2006 2007 __________ _________ __________ Notes £'000 £'000 £'000 Exchange differences on translation of foreign operations (32) 2,047 110Actuarial gains/(losses) on defined benefit pension schemes 292 (2,286) (456)Fair value adjustment in respect of available-for-sale financial 19,494 6,249 (7,106)assets Taxation on items taken directly to equity (5,848) (1,188) 2,268 __________ _________ __________ Income and expense recognised directly in equity 13,906 4,822 (5,184)Profit for the period 2 13,040 47,470 37,120 __________ _________ __________ Total income and expense recognised in the period 26,946 52,292 31,936 ========== ========= ========== Equity holders of the Group 26,868 52,192 32,487Minority interests 78 100 (551) __________ _________ __________ 26,946 52,292 31,936 ========== ========= ========== The accompanying notes form part of this financial report. UNAUDITED CONSOLIDATED BALANCE SHEET AS AT 28 OCTOBER 2007 28 October 29 October 29 April 2007 2006 2007 __________ _________ ________ Notes £'000 £'000 £'000ASSETS Non-current assets Property, plant and equipment 7 317,446 230,805 224,463Intangible assets 197,361 65,391 87,981Investments in associated undertakings and joint ventures 23,058 20,448 21,988Available-for-sale financial assets 8 364,518 70,976 75,447Deferred tax assets 31,925 13,516 31,925 __________ _________ ________ 934,308 401,136 441,804 __________ _________ ________ Current assets Inventories 227,800 209,419 231,383Trade and other receivables 99,938 107,370 88,615Cash and cash equivalents 17,563 23,405 181,808 __________ _________ ________ 345,301 340,194 501,806 __________ _________ ________ TOTAL ASSETS 1,279,609 741,330 943,610 ========== ========= ======== EQUITY AND LIABILITIES Share capital 9 72,000 1,000 72,000Share premium 10 874,300 - 874,300Treasury shares 11 (162,348) - -Permanent contribution to capital 12 50 - 50Capital redemption reserve 13 50 - 50Foreign currency translation reserve 14 (869) (2,994) (837)Merger reserve 15 - 43 -Reverse combination reserve 16 (987,312) - (987,312)Retained earnings 17 337,192 335,656 317,708 __________ _________ ________ 133,063 333,705 275,959Minority interests 18 2,723 4,595 4,845 __________ _________ ________ Total equity 135,786 338,300 280,804 __________ _________ ________ Non-current liabilities Other payables 1,174 1,121 2,408Borrowings 19 8,586 1,673 1,935Retirement benefit obligations 13,443 14,871 14,032Deferred tax liabilities 43,291 18,568 18,586Provisions 29,646 25,187 23,821 __________ _________ ________ 96,140 61,420 60,782 __________ _________ ________ Current liabilities Derivative financial liabilities 15,342 8,270 42,463Trade and other payables 212,596 189,298 309,944Borrowings 19 804,850 114,723 217,996Current tax liabilities 14,895 29,319 31,621 __________ _________ ________ 1,047,683 341,610 602,024 __________ _________ ________ Total liabilities 1,143,823 403,030 662,806 __________ _________ ________ TOTAL EQUITY AND LIABILITIES 1,279,609 741,330 943,610 ========== ========= ======== UNAUDITED CONSOLIDATED CASH FLOW STATEMENT FOR THE 26 WEEKS ENDED 28 OCTOBER 2007 26 weeks 26 weeks 52 weeks ended ended ended 28 October 29 October 29 April 2007 2006 2007 __________ _________ ________ Notes £'000 Cash (outflow)/inflow from operating activities 21 (68,042) 67,386 199,261Income taxes paid (22,542) (9,642) (23,886) __________ _________ ________ Net cash (outflow)/inflow from operating activities (90,584) 57,744 175,375 __________ _________ ________ Cash flow from investing activities Proceeds on disposal of property, plant and equipment 12,965 4,989 10,120Proceeds on disposal of listed investments 66,524 - -Dividends received from associates 1,189 879 -Purchase of joint venture, net of cash acquired - - (238)Purchase of subsidiaries, net of cash acquired (96,809) (15,786) (22,747)Purchase of intangible assets (518) (2,588) (2,978)Purchase of property, plant and equipment (120,007) (35,112) (54,797)Purchase of listed investments (334,410) (49,389) (67,215)Investment income received 512 - 1,790 __________ _________ ________ Net cash outflow from investing activities (470,554) (97,007) (136,065) __________ _________ ________ Cash flow from financing activities Finance income received 550 714 1,339Finance costs paid (14,980) (2,989) (7,948)Net (repayments of)/increase in borrowings (7,420) 1,313 (6,583)Proceeds from share issues - - 928,800Purchase of a certain percentage of previous owner's equity - - (928,800)investment Share issue costs - - (9,712)Equity dividend paid (7,416) (200) (380)Purchase of own shares (162,348) - - __________ _________ ________ Net cash outflow from financing activities (191,614) (1,162) (23,284) __________ _________ ________ Net (decrease)/increase in cash and cash equivalents (752,752) (40,425) 16,026including overdrafts Cash and cash equivalents including overdrafts at beginning (25,029) (41,055) (41,055)of period __________ _________ ________ Cash and cash equivalents including overdrafts at the (777,781) (81,480) (25,029)period end ========== ========= ======== The accompanying notes form part of this financial report. NOTES TO THE FINANCIAL INFORMATION FOR THE 26 WEEKS ENDED 28 OCTOBER 2007 1 General information and basis of preparation The results for the first half of the financial year have not been audited andare prepared on the basis of the accounting policies set out in the Group's 2007Annual Report and Financial Statements. The financial information has beenprepared in accordance with the Disclosure and Transparency rules of theFinancial Services Authority (DTR) and with International Accounting Standard(IAS) 34 - 'Interim Financial Reporting' as endorsed by the European Union. Thisconsolidated financial information for the period does not constitute statutoryfinancial statements within the meaning of s240 of the Companies Act 1985. The summary of results for the 52 weeks ended 29 April 2007 is an extract fromthe published Annual Report and Financial Statements which have been reported onby the Group's auditors and delivered to the Registrar of Companies. The auditreport was unqualified and did not contain a statement under s237(2) or s237(3)of the Companies Act 1985. Change in accounting policies In the current financial accounting period, the group will adopt InternationalFinancial Reporting Standard 7 'Financial instruments: Disclosures' (IFRS 7) forthe first time. As IFRS 7 is a disclosure standard, there is no impact of thatchange in accounting policy on these Interim financial statements. Full detailsof the change will be disclosed in the Annual report and Financial statementsfor the 52 weeks to 27 April 2008. Principal risks and uncertainties The principal risks and uncertainties which could impact the Group's long-termperformance remain those identified on pages 54 of the Group's 2007 AnnualReport and Financial Statements. The Chief Executive and Finance Director'sReview in this half yearly financial report includes a commentary of the primaryuncertainties affecting the Group for the remaining six months of the year. Statement of directors' responsibilities The directors' confirm that this half yearly financial report has been preparedin accordance with IAS 34 as adopted by the European Union, and includes a fairreview of the information required by DTR 4.2.7 and DTR 4.2.8. The directors of Sports Direct International plc are listed in the Group's 2007Annual Report and Financial Statements, with the exception of the followingchanges in the period: Chris Bulmer resigned on 25 October 2007, and MalcolmDalgleish and Dave Singleton were appointed on 25 October 2007. NOTES TO THE FINANCIAL INFORMATION FOR THE 26 WEEKS ENDED 28 OCTOBER 2007(CONTINUED) 2 Segmental analysis Primary reporting format - business segments For management purposes, the Group is organised into and reports its performancebetween two business segments, Retail and Brands. The Retail business segmentcomprises the retail network of stores and the Brands business segment comprisesthe identification, acquisition, development and trading of a portfolio ofinternationally recognised sports and leisure brands. Segment information about the business segments is presented below: Segmental information for the 26 weeks ended 28 October 2007: Retail Brands Eliminations Total ________________________________________ _________________________ ____________ _______ UK UK UK Inter- Total Whole- Licen- Total retail whole- total national sale sing sale retail & other £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 ________ ______ ________ _______ _______ ______ ______ _______ ____________ _______Sales to external 518,397 23,248 541,645 38,514 580,159 77,530 10,423 87,953 - 668,112customers Sales to other segments - 1,418 1,418 - 1,418 3,818 - 3,818 (5,236) - ________ ______ ________ _______ _______ ______ ______ _______ ____________ _______ Revenue 518,397 24,666 543,063 38,514 581,577 81,348 10,423 91,771 (5,236) 668,112 ======== ====== ======== ======= ======= ====== ====== ======= ============ ======= Gross profit 236,018 16,351 252,369 36,888 - 289,257 ======== ======= ======= ======= ============ ======= Operating profit before 54,281 1,643 55,924 5,998 - 61,922foreign exchange and exceptional items ======== ======= ======= ======= ============ ======= Operating profit 3,998Investment income 2,203Finance income 28,792Finance costs (16,136)Share of profits of 2,355associated undertakings and joint ventures _______ Profit before taxation 21,212Taxation (8,172) _______ Profit for the period 13,040 ======= Sales to other segments are priced at cost. Other segment items included in the income statement for the 26 weeks ended 28October 2007: Retail Brands Total _______ _________ ________ £'000 £'000 £'000Depreciation 17,989 694 18,683Amortisation 16 646 662 ======= ========== ========= Information regarding segment assets and liabilities as at 28 October 2007 andcapital expenditure for the 26 weeks then ended: Retail Brands Eliminations Total ______ ______ ____________ _____ £'000 £'000 £'000 £'000Investments in associated undertakings and joint 15,604 7,454 - 23,058ventures Other assets 1,167,293 378,278 (289,020) 1,256,551 ______ ______ ____________ _____ Total assets 1,182,897 385,732 (289,020) 1,279,609 ====== ====== ============ ===== Total liabilities (1,080,335) (352,508) 289,020 (1,143,823) ====== ====== ============ ===== Tangible asset additions 120,282 3,928 - 124,210Intangible asset additions 1,319 57,783 - 59,102 ______ ______ ____________ _____ Total capital expenditure 121,601 61,711 - 183,312 ====== ====== ============ ===== NOTES TO THE FINANCIAL INFORMATION FOR THE 26 WEEKS ENDED 28 OCTOBER 2007(CONTINUED) 2 Segmental analysis (continued) Segmental information for the 26 weeks ended 29 October 2006: Retail Brands Eliminations Total ________________________________________________ ____________________________ ____________ _______ UK UK UK total Inter- Total Whole Licen- Total retail whole national -sale sing -sale retail & other ________ ______ ________ _______ _______ ______ ______ _______ ____________ _______ £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000Sales to 595,088 8,329 603,417 33,558 636,975 75,382 6,759 82,141 - 719,116external customers Sales to - 4,782 4,782 - 4,782 7,110 - 7,110 (11,892) -other segments ________ ______ ________ _______ _______ ______ ______ _______ ____________ _______ Revenue 595,088 13,111 608,199 33,558 641,757 82,492 6,759 89,251 (11,892) 719,116 ======== ====== ======== ======= ======= ====== ====== ======= ============ ======= Gross profit 252,010 12,126 264,136 31,743 - 295,879 ======== ======= ======= ======= ============ ======= Operating 74,409 1,762 76,171 5,746 - 81,917profit before foreign exchange and exceptional items ======== ======= ======= ======= ============ ======= Operating 69,213profit Investment 225income Finance 4,130income Finance (4,245)costs Share of 822profits of associated undertakings and joint ventures _______ Profit 70,145before taxation Taxation (22,675) _______ Profit for 47,470the period ======= Sales to other segments are priced at cost plus a 10% mark-up. Other segment items included in the income statement for the 26 weeks ended29 October 2006: Retail Brands Total ________ ______ ________ £'000 £'000 £'000Depreciation 15,065 927 15,992Amortisation - 787 787 ========= ======= ========= Information regarding segment assets and liabilities as at 29 October 2006 andcapital expenditure for the 26 weeks then ended: Retail Brands Eliminations Total _______ ________ ____________ ________ £'000 £'000 £'000 £'000Investments in associated undertakings and joint 13,146 7,302 - 20,448ventures Other assets 636,483 202,563 (118,164) 720,882 _______ ________ ____________ ________ Total assets 649,629 209,865 (118,164) 741,330 ======= ========== ============ ======== Total liabilities (344,708) (176,486) 118,164 (403,030) ======= ========== ============ ======== Tangible asset additions 37,680 5,035 - 42,715Intangible asset additions 3,290 16,839 - 20,129 _______ ________ ____________ ________ Total capital expenditure 40,970 21,874 - 62,844 ======= ========== ============ ======== NOTES TO THE FINANCIAL INFORMATION FOR THE 26 WEEKS ENDED 28 OCTOBER 2007(CONTINUED) 2 Segmental analysis (continued) Segmental information for the 52 weeks ended 29 April 2007: Retail Brands Eliminations Total _________________________________________________ ________________________ ____________ _______ UK UK UK Inter- Total Whole- Licen- Total retail whole- total national sale sing sale retail & other ________ ______ ________ _______ _______ ______ ______ _______ ____________ _______ £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000Sales to external 1,069,667 41,525(1) 1,111,192 64,018 1,175,210 154,484 17,450 171,934 - 1,347,144customers Sales to other - 11,235 11,235 - 11,235 12,523 - 12,523 (23,758) -segments ________ ______ ________ _______ _______ ______ ______ _______ ____________ _______Revenue 1,069,667 52,760 1,122,427 64,018 1,186,445 167,007 17,450 184,457 (23,758) 1,347,144 ======== ====== ======== ======= ======= ====== ====== ======= ============ ======= Gross profit 498,101 22,173 520,274 75,867 - 596,141 ======== ======= ======= ======= ============ ======= Operating profit 155,305 1,264 156,569 19,700 - 176,269before foreign exchange and exceptional items ======== ======= ======= ======= ============ =======Operating profit 93,900Investment income 1,790Finance income 3,449Finance costs (42,081)Share of profits of 3,422associated undertakings and joint ventures _______ Profit before 60,480taxation Taxation (23,360) _______ Profit for the period 37,120 ======= (1) Includes £14.7 million in relation to property transactions income. Sales to other segments are priced at cost plus a 10% mark-up. Other segment items included in the income statement for the 52 weeks ended29 April 2007: Retail Brands Total ________ ______ ________ £'000 £'000 £'000Depreciation 29,022 1,882 30,904Amortisation - 3,584 3,584 ========= ======= ========= Information regarding segment assets and liabilities as at 29 April 2007 andcapital expenditure for the 52 weeks then ended: Retail Brands Eliminations Total _______ ________ ____________ ________ £'000 £'000 £'000 £'000Investments in associated undertakings and joint 14,847 7,141 - 21,988ventures Other assets 984,598 265,434 (328,410) 921,622 _______ ________ ____________ ________ Total assets 999,445 272,575 (328,410) 943,610 ======= ========== ============ ========Total liabilities (744,811) (246,405) 328,410 (662,806) ======= ========== ============ ======== Tangible asset additions 57,732 3,875 - 61,607Intangible asset additions 20,756 21,445 - 42,201 _______ ________ ____________ ________ Total capital expenditure 78,488 25,320 - 103,808 ======= ========== ============ ======== NOTES TO THE FINANCIAL INFORMATION FOR THE 26 WEEKS ENDED 28 OCTOBER 2007(CONTINUED) 2 Segmental analysis (continued) Secondary reporting format - geographic segments The Group operates in two geographic segments, UK and Non-UK. These geographicsegments are the basis on which the Group reports its secondary segmentinformation, as presented below: Segmental information for the 26 weeks ended 28 October 2007:: UK Non-UK Unallocated Eliminations Total _______ _______ ___________ ____________ _______ £'000 £'000 £'000 £'000 £'000 Segmental revenue from external customers 574,481 99,007 - (5,376) 668,112 ======= ======= =========== ============ =======Total capital expenditure 117,869 65,443 - - 183,312 ======= ======= =========== ============ ======= Segmental assets 1,380,054 188,575 - (289,020) 1,279,609 ======= ======= =========== ============ ======= Segmental information for the 26 weeks ended 29 October 2006: UK Non-UK Unallocated Eliminations Total _______ _______ ___________ ____________ _______ £'000 £'000 £'000 £'000 £'000 Segmental revenue from external customers 636,402 94,606 - (11,892) 719,116 ======= ======= =========== ============ =======Total capital expenditure 40,594 5,411 16,839 - 62,844 ======= ======= =========== ============ ======= Segmental assets 679,433 127,430 52,631 (118,164) 741,330 ======= ======= =========== ============ ======= Segmental information for the 52 weeks ended 29 April 2007: UK Non-UK Unallocated Eliminations Total _______ _______ ___________ ____________ _______ £'000 £'000 £'000 £'000 £'000 Segmental revenue from external customers 1,178,528 192,374 - (23,758) 1,347,144 ======= ======= =========== ============ =======Total capital expenditure 94,873 8,935 - - 103,808 ======= ======= =========== ============ =======Segmental assets 1,112,957 133,532 25,531 (328,410) 943,610 ======= ======= =========== ============ ======= 3 Exceptional items 26 weeks 26 weeks 52 weeks ended ended ended 28 October 29 October 29 April 2007 2006 2007 ________ ______ ________ £'000 £'000 £'000 Costs relating to admission to the London Stock Exchange - - 586Past performance bonuses including national insurance - - 56,400Profit on disposal of certain retail concessions(1) - (4,160) (4,160)Legal claims - - 6,000 ________ ______ ________ - (4,160) 58,826 ======== ====== ======== (1) In May 2006, the Group disposed of its Hargreaves airport concessions. NOTES TO THE FINANCIAL INFORMATION FOR THE 26 WEEKS ENDED 28 OCTOBER 2007(CONTINUED) 4 Taxation The tax charge on profit before tax, excluding the impact of exceptional itemshas been calculated using an estimated effective annual rate of 38.5% (2006:32.3%). Including tax on exceptional items, this leaves an estimated tax chargeof £8.2m for the 26 weeks ended 28 October 2007 (£22.7m for the 26 weeks ended29 October 2006). 5 Earnings per share Basic earnings per share is calculated by dividing the earnings attributable toordinary shareholders by the weighted average number of ordinary sharesoutstanding during the year. The comparative weighted average number of shareshas been adjusted for the impact of reverse acquisition accounting. Share awards granted during the period were anti-dilutive as at 28 October 2007as the exercise price exceeded the average market price of the Company's sharesduring the period from when the share awards were granted to 28 October 2007. Asa result share awards are not taken into account when determining the weightedaverage number of ordinary shares in issue during the period and therefore thebasic and diluted earnings per share are the same. Basic and diluted earnings per share 26 weeks 26 weeks 26 weeks 26 weeks 52 weeks 52 weeks ended ended ended ended ended ended 28 October 28 October 29 October 29 October 29 April 29 April 2007 2007 2006 2006 2007 2007 __________ __________ __________ __________ ________ ________ Basic Diluted Basic Diluted Basic Diluted £'000 £'000 £'000 £'000 £'000 £'000 Profit for the period 12,962 12,962 47,370 47,370 37,671 37,671 Number in thousands Number in thousands Number in thousands Weighted average number of shares 691,176 691,176 410,400 410,400 460,582 460,582 Pence per share Pence per share Pence per share Earnings per share 1.88 1.88 11.54 11.54 8.18 8.18 ==== ==== ===== ===== ==== ==== Underlying earnings per share The underlying earnings per share reflects the underlying performance of thebusiness compared with the prior year and is calculated by dividing underlyingearnings by the shares in issue at the period end. Underlying earnings is usedby management as a measure of profitability within the Group. Underlyingearnings is defined as profit for the period attributable to equity holders ofthe parent for each financial period but excluding the post tax effect ofcertain exceptional items. The Directors believe that the underlying earnings before exceptional items andunderlying earnings per share measures provide additional useful information forshareholders on the underlying performance of the business, and are consistentwith how business performance is measured internally. Underlying earnings is nota recognised profit measure under IFRS and may not be directly comparable with"adjusted" profit measures used by other companies. NOTES TO THE FINANCIAL INFORMATION FOR THE 26 WEEKS ENDED 28 OCTOBER 2007(CONTINUED) 5 Earnings per share (continued) Underlying earnings per share(continued) 26 weeks 26 weeks 26 weeks 26 weeks 52 weeks 52 weeks ended ended ended ended ended ended 28 October 28 October 29 October 29 October 29 April 29 April 2007 2007 2006 2006 2007 2007 __________ __________ __________ __________ ________ ________ Basic Diluted Basic Diluted Basic Diluted £'000 £'000 £'000 £'000 £'000 £'000 Profit for the period 12,962 12,962 47,370 47,370 37,671 37,671 Post tax adjustments to profit for the period for the following exceptional items: Costs relating to admission to the - - - - 410 410London Stock Exchange Past performance bonuses including - - - - 39,480 39,480national insurance Realised loss on forward foreign 40,547 40,547 11,807 11,807 16,480 16,480exchange contracts Fair value adjustment to forward (18,985) (18,985) (1,770) (1,770) 22,166 22,166foreign exchange contracts Profit on disposal of certain retail - - (2,912) (2,912) (2,912) (2,912)concessions Reorganisation costs - - - - - -Leofelis legal claim - - - - 4,200 4,200 __________ __________ __________ __________ ________ ________ Underlying profit for the period 34,524 34,524 54,495 54,495 117,495 117,495 __________ __________ __________ __________ ________ ________ Number in thousands Number in thousands Number in thousands Shares in issue at the period end 604,452 604,452 720,000* 720,000* 720,000 720,000 Pence per share Pence per share Pence per share Earnings per share 5.71 5.71 7.57 7.57 16.32 16.32 ==== ==== ===== ===== ==== ==== \* To assist comparability the number of shares used for 29 October 2006 is the720,000,000 that would have been in issue had the listing and admission to theLondon Stock Exchange taken place as at this date. 6 Dividends An interim dividend of 1.03p per share in respect of 2006-07 was paid on 31 July2007 to shareholders on the register on 29 June 2007. No final dividend waspaid. NOTES TO THE FINANCIAL INFORMATION FOR THE 26 WEEKS ENDED 28 OCTOBER 2007(CONTINUED) 7 Property, plant and equipment Freehold Long Short Plant and Total land and leasehold leasehold equipment buildings property property ______ _______ ________ _________ _______ £'000 £'000 £'000 £'000 £'000Cost At 29 April 2007 29,856 11,312 97,553 235,668 374,389Exchange differences (33) - - 1,191 1,158Additions through business combinations 372 - 50 3,781 4,203Additions 85,731 534 15,461 18,281 120,007Eliminated on disposals (3,652) (1,859) (7,627) (10,099) (23,237) ______ _______ ________ _________ _______ At 28 October 2007 112,274 9,987 105,437 248,822 476,520 ====== ======= ======== ========= ======= Accumulated depreciation As at 29 April 2007 (4,710) (3,680) (28,963) (112,573) (149,926)Exchange differences 38 - - (448) (410)Charge for the period (1,814) (6) (3,921) (12,942) (18,683)Eliminated on disposals 1,479 457 951 7,058 9,945 ______ _______ ________ _________ _______ At 28 October 2007 (5,007) (3,229) (31,933) (118,905) (159,074) ====== ======= ======== ========= ======= Net book amount At 28 October 2007 107,267 6,758 73,504 129,917 317,446 ====== ======= ======== ========= ======= At 29 April 2007 25,146 7,632 68,590 123,095 224,463 ====== ======= ======== ========= ======= Finance leased assets included in the above net book values At 28 October 2007 - - - 658 658 ====== ======= ======== ========= ======= At 29 April 2007 - - - 1,059 1,059 ====== ======= ======== ========= ======= NOTES TO THE FINANCIAL INFORMATION FOR THE 26 WEEKS ENDED 28 OCTOBER 2007(CONTINUED) 7 Property, plant and equipment (continued) Included within freehold land and buildings cost as at 28 October 2007 is£1,636,000 (29 April 2007: £1,749,000) of capital grants received from the EastMidlands Development Agency. The Group is subject to the following principalconditions of the grant being met for a period, which is at the discretion ofthe East Midlands Development Agency, of five years after the first grantinstalment was made on 28 April 2006 or 18 months after the last grantinstalment was made on 29 April 2007 ("conditional period"): • The Group remains solvent. • The Group does not cease to own, or for a period of at least three months does not cease to use the relevant premises for which the grant was provided or its related assets. • The Group employs at least 507 permanent full-time employees or equivalent at the relevant premises. • The Group employs in total at least 1,171 employees at the relevant premises. If the Group fails to adhere to any of the above conditions during theconditional period the East Midlands Development Agency may demand fullrepayment of the grant. 8 Available-for-sale financial assets 28 October 29 October 29 April 2007 2006 2007 ________ __________ ________ £'000 £'000 £'000 Available-for-sale financial assets 364,518 70,976 75,447 ======== ========== ======== The fair value of the listed available-for-sale investments is based on bidquoted market prices at the balance sheet date. The following table shows the aggregate movement in the Group's financial assetsduring the period: 28 October 29 October 29 April 2007 2006 2007 ________ __________ ________ £'000 £'000 £'000 At beginning of period 75,447 15,338 15,338Additions 334,410 49,389 67,215Disposals (64,833) - -Revaluation through equity 19,494 6,249 (7,106) ________ __________ ________ At end of period 364,518 70,976 75,447 ======== ========== ======== The financial assets at 28 October 2007 relate to strategic investments held ofbetween 2.5% and 29.3% of share capital. The Directors do not consider that theyhave significant influence over the financial and operating policies of theinvestees as they have no representation on the board of Directors, have noparticipation in policy-making processes, including participation in decisionsabout dividends or other distributions, have no material transactions with theinvestees and do not interchange any managerial personnel. NOTES TO THE FINANCIAL INFORMATION FOR THE 26 WEEKS ENDED 28 OCTOBER 2007(CONTINUED) 8 Available-for-sale financial assets (continued) The Group has one investment in excess of 20% of share capital, that being 29.3%(29 April 2007: 29.3%) of the ordinary share capital of Blacks Leisure Groupplc, a company incorporated in England. The aggregate of its share capital andreserves and profit for the periods ended 3 March 2007, 31 August 2006 and 29February 2006 were as follows: 3 March 31 August 29 February 2007 2006 2006 ________ __________ ________ £'000 £'000 £'000 Aggregate share capital and reserves 91,888 105,596 109,580 ======== ========== ======== (Loss)/profit after taxation (12,624) 51 14,538 ======== ========== ======== 9 Share capital 28 October 2007 ________ £'000 Authorised 999,500,010 ordinary shares of 10p each 99,950499,990 redeemable preference shares of 10p each 50 ________ 100,000 ======== Allotted, called up and fully paid 720,000,000 ordinary shares of 10p each 72,000 ======== 10 Share premium 28 October 2007 ________ £'000 At 29 April 2007 and 28 October 2007 874,300 ======== The share premium account is used to record the excess proceeds over nominalvalue on the issue of shares. 11 Treasury shares 28 October 2007 ________ £'000 At 29 April 2007 -Treasury shares acquired 162,348 ________ At 28 October 2007 162,348 ======== Between 24 July 2007 and 26 October 2007 the Group acquired 115,547,632 of itsown shares for total consideration of £162,348,000, with the purchase priceranging between £1.20 and £1.50. 43,547,632 of these shares are held forcancellation. NOTES TO THE FINANCIAL INFORMATION FOR THE 26 WEEKS ENDED 28 OCTOBER 2007(CONTINUED) 12 Permanent contribution to capital 28 October 2007 ________ £'000 At 29 April 2007 and 28 October 2007 50 ======== 13 Capital redemption reserve 28 October 2007 ________ £'000 At 29 April 2007 and 28 October 2007 50 ======== 14 Foreign currency translation reserve 28 October 2007 ________ £'000 At 29 April 2007 (837)Translation differences - Group (157)Translation differences - associates 125 ________At 28 October 2007 (869) ======== The foreign currency translation reserve is used to record exchange differencesarising from the translation of the financial statements of foreign subsidiariesand associates. 15 Merger reserve 28 October 2007 ________ £'000 At 29 April 2007 and 28 October 2007 - ======== 16 Reverse combination reserve 28 October 2007 ________ £'000 At 29 April 2007 and 28 October 2007 (987,312) ======== NOTES TO THE FINANCIAL INFORMATION FOR THE 26 WEEKS ENDED 28 OCTOBER 2007(CONTINUED) 17 Retained earnings 28 October 2007 ________ £'000 At 29 April 2007 317,708Income recognised directly in equity 13,938Profit for the financial period 12,962Dividends (7,416) ________ At 28 October 2007 337,192 ======== 18 Minority interests 28 October 2007 ________ £'000 At 29 April 2007 4,845Share of (loss)/profit for the period 78Acquisitions (2,214)Disposals 14 ________ At 28 October 2007 2,723 ======== NOTES TO THE FINANCIAL INFORMATION FOR THE 26 WEEKS ENDED 28 OCTOBER 2007(CONTINUED) 19 Borrowings 28 October 29 October 29 April 2007 2006 2007 _________ __________ ________ £'000 £'000 £'000Non-current: Bank and other loans 8,502 1,673 1,844Obligations under finance leases 84 - 91 _________ __________ ________ 8,586 1,673 1,935 _________ __________ ________ Current: Bank overdrafts 795,344 104,971 206,837Bank and other loans 9,158 9,752 10,463Obligations under finance leases 348 - 696 _________ __________ ________ 804,850 114,723 217,996 _________ __________ ________Total borrowings: Bank overdrafts 795,344 104,971 206,837Bank and other loans 17,660 11,425 12,307Obligations under finance leases 432 - 787 _________ __________ ________ 813,436 116,396 219,931 ========= ========== ======== The maturity of the Group's bank and other loan borrowings other than overdraftsis as follows: 28 October 29 October 29 April 2007 2006 2007 _________ __________ ________ £'000 £'000 £'000Borrowings are repayable as follows: Within one year 9,506 9,752 11,159Between one and two years 8,212 700 922Between two and five years 127 973 924After five years 247 - 89 _________ __________ ________ 18,092 11,425 13,094 ========= ========== ======== Borrowings - Sterling 1,529 6,286 4,231Borrowings - Other 16,563 5,139 8,863 _________ __________ ________ 18,092 11,425 13,094 ========= ========== ======== Loans are all on commercial variable rates of interest ranging between 0.6% and2.5% over the base rate of the country within which the borrowing entityresides. On 26 February 2007, four members of the Group, Sports World InternationalLimited, Lillywhites Limited, Dunlop Slazenger Group Limited and Smith & BrooksHoldings Limited (the "Borrowers") entered into a committed working capitalfacility agreement with The Governor and Company of the Bank of Scotland (the"Working Capital Facility"). The Working Capital Facility is available to any ofthe Borrowers and may be drawn to an aggregate limit of £600.0 million. It iscapable of being utilised by way of cash advances, letters of credit,guarantees, bonds and/or currency borrowings. The Working Capital Facility isavailable until 30 April 2009. Each Borrower is required to observe certaincovenants, including undertakings relating to delivery of financial statements,and certain negative covenants, including in relation to creation of securityand disposal of assets. The Working Capital Facility is secured by a debenturefrom each of the Borrowers and a composite guarantee from each of thenon-dormant subsidiaries of Sports World International Limited. NOTES TO THE FINANCIAL INFORMATION FOR THE 26 WEEKS ENDED 28 OCTOBER 2007(CONTINUED) 19 Borrowings (continued) An agreement is in place with Kaupthing Singer and Friedlander whereby theyprovide a credit facility which is secured against the market value of theavailable for sale financial assets held by the Group. The credit facility limitis determined by taking a specific percentage of the market value of eachindividual security. 20 Acquisitions Details of principal acquisitions for the 26 weeks ended 28 October 2007 are setout below. Date of acquisition Percentage Nature of of equity activity acquired ___________________ __________ ________ Field & Trek (UK) Limited 11 July 2007 60 RetailEverlast 20 September 2007 100 WholesaleSport 2000 7 August 2007(1) 20 RetailSmith and Brooks Holdings Limited 12 September 2007(1) 40 WholesaleSweatshop 18 October 2007 25 Retail (1) This was an additional acquisition which takes the cumulative holding to100% The aggregate fair value of consideration paid, assets and liabilities acquiredand resulting goodwill in respect of the above acquisitions is detailed below. Everlast Field & Other Total Trek _________ _________ ________ _____ £'000 £'000 £'000 £'000 Cash consideration including costs 80,365 5,090 5,696 91,151Less: fair value of net assets acquired (36,450) (1,060) (2,313) (39,823) _________ _________ ________ _____ Goodwill 43,915 4,030 3,383 51,328 ========= ======= ====== ======== The goodwill is attributable to the premium paid to strengthen the Group'sexisting business segments of retail and brand, which is in line with theGroup's strategy. Everlast Carrying values Fair value Fair value at acquisition adjustment of net assets acquired _________ ________ _____ £'000 £'000 £'000 Property, plant and equipment 3,139 - 3,139Intangible assets 14,640 42,690 57,330Inventories 5,893 - 5,893Trade and other receivables 10,287 - 10,287Cash and cash equivalents (5,664) - (5,664)Borrowings (11,685) - (11,685)Trade and other payables (6,292) - (6,292)Deferred tax liability (506) (16,052) (16,558) _________ ________ _____ 9,812 26,638 36,450 ========= ======== ===== Separately identifiable intangible assets, primarily representing brands andlicensing agreements acquired, amounting to £57,330,000 (deferred tax liabilitythereon totalling £16,052,000) were recognised as a fair value adjustment onacquisition. NOTES TO THE FINANCIAL INFORMATION FOR THE 26 WEEKS ENDED 28 OCTOBER 2007(CONTINUED) Acquisitions (continued) £4,070,000 of revenue and £866,000 of operating profit has been included withinthe Group's financial statements for the period in respect of the above acquiredentity since the date of acquisition. If the above acquired entity had been acquired at the beginning of the period£24,694,000 of revenue and £6,260,000 of operating profit would have beenincluded within the Group's financial statements. Cash flows arising from acquisitions are as follows: 28 October 2007 __________ £'000 Cash consideration 80,365Bank overdraft acquired 5,664 __________Net cash outflow in the cash flow statement 86,029 The goodwill is attributable to the premium paid to strengthen the Group'sexisting business segments of retail and brand, which is in line with theGroup's strategy. The business combination accounting is provisional for Everlast due to theproximity of the transaction to the period end. Field and Trek (UK) Limited Carrying values Fair value Fair value at acquisition adjustment of net assets acquired _____________ ___________ __________ £'000 £'000 £'000 Property, plant and equipment 322 - 322Intangible assets - 1,254 1,254Inventories 1,879 - 1,879Trade and other receivables 460 - 460Cash and cash equivalents 6 - 6Borrowings (733) - (733)Trade and other payables (1,673) - (1,673)Deferred tax liability - (351) (351)Minority interests (104) - (104) _____________ ___________ __________ 157 903 1,060 ============= =========== ========== Separately identifiable intangible assets, primarily representing trading namesacquired, amounting to £1,254,000 (deferred tax liability thereon totalling£351,000) were recognised as a fair value adjustment on acquisition. £3,463,000 of revenue and £490,000 of operating loss has been included withinthe Group's financial statements for the period in respect of the above acquiredentity since the date of acquisition. NOTES TO THE FINANCIAL INFORMATION FOR THE 26 WEEKS ENDED 28 OCTOBER 2007(CONTINUED) 20 Acquisitions (continued) If the above acquired entity had been acquired at the beginning of the period£5,761,000 of revenue and £473,000 of operating loss would have been includedwithin the Group's financial statements. Cash flows arising from acquisitions are as follows: 28 October 2007 ______ £'000 Cash consideration 5,090Cash acquired (6) ______ Net cash outflow in the cash flow statement 5,084 21 Cash inflows from operating activities 26 weeks 26 weeks 52 weeks ended ended ended 28 October 29 October 29 April 2007 2006 2007 ______ __________ ________ £'000 £'000 £'000 Profit before taxation 21,212 70,145 60,480Net finance (income)/costs (12,656) 115 (38,632)Investment income (2,203) (225) (1,790)Share of profit of associated undertakings and joint ventures (2,355) (822) (3,422) ______ __________ ________ Operating profit 3,998 69,213 93,900Depreciation 18,722 15,992 30,904Amortisation charge 662 787 3,584Loss on disposal of property, plant and equipment 275 53 -Impairment of Goodwill 665 - -Defined benefit pension plan current service cost 58 - 175Defined benefit pension plan employer contributions (488) - (2,136)Profit on sale of financial assets - (46) -Profit on disposal of certain retail concessions - (4,160) - ______ __________ ________Operating cash inflow before changes in working capital 23,892 81,839 126,427Decrease/(increase) in receivables (576) (5,816) 16,196Decrease/(increase) in inventories 11,355 17,613 2,494(Decrease)/increase in payables (102,713) (26,250) 54,144 ______ __________ ________Cash (outflows)/inflows from operating activities (68,042) 67,386 199,261 ====== ========== ======== 22 Contingent assets and liabilities As a matter of course the Group undertakes action in numerous parts of the worldto protect its trade mark registrations and in connection with the Group'slicensees. Such actions are usually resolved in the ordinary course of business.The Group is, however, party to a dispute and has provided for an amountrepresenting the financial estimation of the potential loss if the outcome wasnot to be in its favour. The Group believes that to provide further informationwould be seriously prejudicial to the case. NOTES TO THE FINANCIAL INFORMATION FOR THE 26 WEEKS ENDED 28 OCTOBER 2007(CONTINUED) 23 Related party transactions The Group entered into the following material transactions with related parties: The Group has taken advantage of the exemptions contained within IAS 24 -Related Party Disclosures from the requirement to disclose transactions betweenGroup companies as these have been eliminated on consolidation. 26 weeks ended 28 October 2007 Relationship Sales Purchases Trade Trade and and other otherRelated party receivables payables _____________ ____________ ______ __________ ___________ _________ £'000 £'000 £'000 £'000 Pan World Brands Limited Common control - - 441 -Hickman Properties Limited Common control - - - -Texline Manchester Common control - - - -Heatons Associate 8,514 - 2,978 -No Fear International Limited Joint venture - - 17 (1,037)M J W Ashley Director - - - (526)PBF International Limited Joint venture 194 (261) 1,407 (91)Sopotnik Trade Associate 22 - 118 (31) No interest was charged on M J W Ashley's director's account with the Group. M J W Ashley leases certain properties to various companies in the Group whichare operated as retail and distribution premises. A commercial rent is chargedin respect of these leases. During the period M J W Ashley loaned the Group £250m on arms length commercialterms and this amount was repaid in full on 26th October 2007. Compensation paid to key management of the Group was £481,528, including pensioncontributions of £4,616. 26 weeks ended 29 October 2006 Relationship Sales Purchases Trade Trade and and other otherRelated party receivables payables _____________ ____________ ______ __________ ___________ _________ £'000 £'000 £'000 £'000 Pan World Brands Limited Common control 72 (287) 416 -Hickman Properties Limited Common control - - 1 -Texline Manchester Common control - - 107 -Heatons Associate 7,992 - 2,016 -No Fear International Limited Joint venture - - 433 (914)M J W Ashley Director - - - (9,377) No interest was charged on M J W Ashley's director's account with the Group. M J W Ashley leases certain properties to various companies in the Group whichare operated as retail and distribution premises. A commercial rent is chargedin respect of these leases. Compensation paid to key management of the Group was £561,788, including pensioncontributions of £4,607. NOTES TO THE FINANCIAL INFORMATION FOR THE 26 WEEKS ENDED 28 OCTOBER 2007(CONTINUED) 24 Post balance sheet events The following material post balance sheet events occurred after 28 October 2007to the date of this Interim Report: On 30 October 2007 the Group acquired 21,703,866 additional shares in Umbro PLCfor consideration of £42,574,000, taking the overall holding in Umbro to 29.9%of the total issued share capital. On 15 November 2007 the Group disposed of 8,768,759 shares in Amer Sports Corpfor consideration of £117,767,000, realising a profit of £11,233,000. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Frasers Group