24th Jul 2007 07:01
Sports Direct International Plc24 July 2007 Sports Direct International plc ("Sports Direct" or "the Company") Unaudited Preliminary Results Sports Direct International plc, the UK's leading sports retailer, announces its Preliminary Results for the 52 week period ended on 29th April 2007. Financial highlights • Revenue up 12.8% to £1.35bn • EBITDA pre exceptional items up 31.8% to £191m* • Underlying profit before tax up 38.3% to £151m • Group margin up 600 basis points to 44.3% • Capital investment of £61.6m • Net debt at year end of £38.1m • Marketable securities held £75m as at year end • Underlying earnings per share up 40.4% to 14.0p Group Operational highlights • Operating profit growth across all divisions • Continued store roll-out in the UK and internationally • Further development and consolidation of head office and distribution campus at Shirebrook • Acquisitions of Original Shoe Company, Streetwise and Kangol • Acquired Sportsdirect.com domain name • IPO on London Stock Exchange Recent highlights • $182.3m merger agreement with Everlast • Acquired 60% of Field & Trek for £5m • Acquired freehold retail sites and London office for total of £76m • Middle East licensing agreement • Dividend of 1.03p per share payable on 31st July 2007 • Decision to exercise powers to buy back own shares and place them into treasury • Decision to seek shareholder approval to acquire freehold properties from Mike Ashley Dave Forsey, Chief Executive of Sports Direct, said: "These are a good set of results in which EBITDA pre exceptional items is inline with the expectations we set during the IPO process. "The first three months of the current financial year have been exceptionallydifficult with the unprecedented weather conditions having an immediate impacton sales. "Despite this, and at this early stage in the financial year, due to theunderlying strength of the business and its model, the Board believes thereshould be limited growth in EBITDA pre exceptions from the £191m reported todayin the current financial year." *EBITDA of £191m includes a property transaction profit of £14.7m For further information please contact: Sports Direct International plcDave Forsey, Chief ExecutiveBob Mellors, Group Finance Director Telephone: 0870 333 9400 Financial DynamicsJonathon Brill/Andrew Dowler/Ben Foster Telephone: 0207 831 3113 About Sports Direct International plc Sports Direct is the UK's leading sports retailer by revenue and operatingprofit. As at 29 April 2007, the group operated out of 462 stores, of which 414are located in the UK (excluding Northern Ireland), 33 in Belgium, 11 inSlovenia, 4 in Holland. In addition, through its 42.5% shareholding in theHeatons chain, Sports Direct has 13 (3 in Northern Ireland and 10 in Eire). Themajority of the Group's stores trade under the Sports World fascia, although theSports Direct.com has been used on most new stores since thewww.sportsdirect.com domain name was acquired in April 2006. The group has alsoacquired a number of retail businesses over the last few years and thereforecontinues to trade under the following fascias; Exsports, Lillywhites, McGurks,Gilesports, Hargreaves, Streetwise and Original Shoe Company. In addition to retailing third party brands including Nike, adidas, Reebok andUmbro, the Group owns a portfolio of internationally recognised sports andleisure brands, including Antigua, Dunlop, Kangol, Karrimor, Lonsdale andSlazenger, which are sold in its own stores and through third-party retailersand licensees. Sports Direct targets a broad customer base and differentiates itself from itscompetitors through its reputation as a price leader in the sports retailsector. The Group's successful business model - leveraging Sports Direct'sretail and brand expertise to enhance margins and cash flow - has been a keycontributor to its rapid growth. Strategic retail add-on acquisitions -including Hargreaves, Gilesports and Streetwise and the stand-alone OriginalShoe Company chain - have contributed to the development of Sports Direct as oneof the largest sports retailers in Europe. OPERATIONAL REVIEW In the 52 weeks ended 29 April 2007, the Group achieved sales growth of 12.8%taking total revenue to £1.35 billion. Group margins strengthened to 44.3% soallowing a growth in EBITDA pre exceptional items to £191 million and inunderlying profit before tax to £151 million. Underlying earnings per sharewere up 40.4% to 14.0 pence. In accordance with the statements made at the timeof the IPO, a dividend of 1.03p per share, totalling £7.4m, will be paid on 31July 2007 to shareholders who were on the register on 30 June 2007. Review by business segment 52 weeks 53 weeks ended ended 29 April 30 April 2007 2006 £m £m %Retail Revenue:UK retail 1,069.7 943.8UK wholesale and other 41.5 14.8International retail 64.0 52.7 ______ ______Total retail revenue 1,175.2 1,011.3 +16.2 Cost of sales (654.9) (631.8) ______ ______Gross margin 520.3 379.5Gross margin percentage 44.3% 37.5% Brands Revenue:Wholesale 154.5 169.2Licensing 17.4 14.2 ______ ______Total brands revenue 171.9 183.4 -6.3 Cost of sales (96.0) (106.2) ______ ______ Gross margin 75.9 77.2Gross margin percentage 44.1% 42.1% Retail commentary Sports Direct's growth over many years has enabled it to build a strong,market-leading position. The group is now able to benefit from this purchasingpower and the strength of its group brands. This manifests itself in the valuethat we pass onto customers. In May 2006, we acquired the Original Shoe Company ('OSC'). OSC stores areprincipally located on the high street, with a concentration in Scotland and theNorth of England. Following market analysis and discussions with our leading3rd party brands, we believe that, with OSC, there is the opportunity to developa different store concept as premium outlets with higher specifications sellinghighly fashionable products. This concept would target customer groups who donot regularly visit Sports World stores. We believe that there is the potentialfor 250 OSC stores in the UK. In addition, the other retail acquisition ofStreetwise has been fully integrated. As at 29th April 2007, the group operated out of 462 stores, of which 414 arelocated in the UK (excluding Northern Ireland), 33 in Belgium, 11 in Sloveniaand 4 in Holland. In addition, through its 42.5% shareholding in the Heatonschain, Sports Direct has 13 (3 in Northern Ireland and 10 in Eire). Themajority of the Group's stores trade under the Sports World fascia, although theSports Direct.com has been used on most new stores since thewww.sportsdirect.com domain name was acquired in April 2006. The group has alsoacquired a number of retail businesses over the last few years and thereforecontinues to trade under the following fascias; Exsports, Lillywhites, McGurks,Gilesports, Hargreaves, Streetwise and Original Shoe Company. We took our first steps into the Dutch market with the opening of four sites.Our international retail operations are continuing to develop as we place thesame emphasis on margin growth. Brand Division Brands revenue fell overall, largely due to the loss of sales of golf ballsfollowing the closure of the golf ball factory in the USA, but licensing incomegrew by 22.5%, and licensing continues to be the main driver of growth withinthe brand division. We continue to invest in sponsorship and marketing aroundthe core values of each brand. We are also looking to consolidate our UK-basedbrand businesses into the Shirebrook campus. The Brands Division has recently concluded an agreement with Dubai based companyRetail Corp that will see Lillywhites and Sports Direct stores open throughoutthe Middle East region and the Republic of South Africa. The agreement, gives retail corp exclusive rights to open Lillywhites and SportsDirect stores within their designated territory of UAE, Kingdom of Saudi Arabia,Kuwait, Qatar, Bahrain, Oman, Egypt and the Republic of South Africa. Carrying IBML and proprietary brands, a minimum of 15 stores are due to beopened during the 25-year contract, with the total number expected to reach 25.Of these, 18 are planned to open by 2010. This is particularly exciting forSouth Africa as it coincides with the country's hosting of the 2010 FIFA WorldCup. The stores will range from 900 to 1600m2 with the use of Lillywhites or SportsDirect facia determined by the consumer profile in each location. Retail Corpis also committed to allocate significant shop space to IBML brands. Initiallyproducts will be sourced from Shirebrook, but this will move to direct supplyfrom the Far East in time. Shirebrook Campus As expected the remaining functions in Dunstable were transferred during Marchand April 2007 to the new facility at Shirebrook. Also transferred in the periodbetween January 2007 and April 2007 were the head office and support functionsfor both Original Shoe Company and Streetwise. All UK retail functions nowoperate out of the Shirebrook campus and we are hoping to consolidate as many ofthe Brands business units as possible during the current financial year.Shirebrook will enhance our operational efficiency and accommodate growth forthe next decade. Supply chain including sourcing Another key strength of the business is the sourcing capability. The group haslong standing relationships with suppliers who concentrate on productdevelopment, design, quality control and factory procurement. Members of theteam are regularly in Shirebrook liaising with the group's designers and buyersto improve information flow and commercial decision making. Strategy The Group is looking to grow profitability across all its divisions. This willbe driven by attempting to leverage the following: Organic growth - through sales and margin growth and by widening the productoffer into new categories. Also by enhancing supply chain efficiencies,especially utilising the new distribution facility at Shirebrook. New space development - through the addition of approximately 40 new stores inthe UK during FY08, under the Sports Direct fascia. Also we continually appraiseall stores in the portfolio, including the more recently acquired stores, tomaximise the retail performance. We intend to start an initial trial of three health and fitness clubs which willinclude a retail element with a full Sports Direct offer. This initiative isstill at a very early stage and we will provide a further update when the trialhas progressed further. Acquisitions - through continued retail and brand acquisitions. The group is always looking to add complementary brands to its portfolioespecially where we can identify potential growth across retail, wholesale andlicensing. These acquisitions may also take us into new product categories notpreviously catered for within the portfolio. Strategic stakes, are held to help develop deeper relationships with our othercompany brands and can relate to both retail and brand opportunities.Investments are made where management believe there is strategic value andthere could be possible commercial advantages. International expansion - driven by entry into new territories utilising ourexisting companies, joint ventures with partners in new territories and throughlicensing deals with retail partners. Share buyback The Board has decided, subject to market conditions to exercise its powers tobuy back its own shares and place them into treasury, thus increasing theearnings of the remaining shares. Freehold Property The Board has decided to seek shareholder approval at the AGM to acquire fromMike Ashley 35 freehold properties from which the group companies trade or hasoffices as part of its new policy of owning the freehold interest in propertieswhere appropriate, and in order to avoid any future conflict of interest. Current Trading and Outlook The first three months of the current financial year have been exceptionallydifficult with the unprecedented weather conditions having an immediate impacton sales. Despite this, and at this early stage in the financial year, due to theunderlying strength of the business and its model, the Board believes thereshould be limited growth in EBITDA pre exceptionals from the £191m reportedtoday in the current financial year. Dave Forsey Chief Executive FINANCIAL REVIEW Basis of reporting The financial statements for the Sports Direct International plc group for the52 weeks ended 29 April 2007 are presented in accordance with InternationalFinancial Reporting Standards as adopted by the EU (IFRS). They are the firstfinancial statements prepared under IFRS and accordingly they take account ofthe requirements and options in IFRS 1, " First-time Adoption of InternationalFinancial Reporting Standards", as they relate to the comparative financialinformation for the 53 weeks ended 30 April 2006. In March 2007, the Company acquired 100 per cent of the ordinary shares ofSports World International Limited, Brands Holdings Limited, International BrandManagement Limited and CDS Holdings SA through a combination of cash, non cashand ordinary share issues. This transaction has been accounted for under theprinciples of merger accounting and reverse acquisition accounting and theconsolidated financial statements of the Company represents a continuation ofthe financial statements of Sports World International Limited, Brands HoldingsLimited, International Brand Management Limited and CDS Holdings SA and theirsubsidiaries. Summary results 52 weeks 53 weeks ended ended 29 April 30 April 2007 2006 £m £m %Revenue 1,347.1 1,194.7 +12.8 EBITDA pre exceptionals 190.6 144.6 +31.8Operating profit pre exceptionals 152.7 108.1 +41.3Reported profit before taxation (after exceptionals) 60.5 96.3 - 37.2 pence per share pence per share Basic EPS 8.18 15.32 -46.6Underlying EPS 14.03 9.99 +40.4 Profit, pre exceptionals is used by management as a key measure of profitabilitywithin the Group. It is defined as profit for the period excluding certainexceptional items. The Directors believe that EBITDA pre exceptionals andoperating profit pre exceptionals provide additional useful information forshareholders on the underlying performance of the business, and is consistentwith how business performance is measured internally. They are not recognisedprofit measures under IFRS and may not be directly 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 £3.4m (2006: £3.4m). EBITDA preexceptionals is calculated as EBITDA before exceptional items, operating profitpre exceptionals is calculated as operating profit before exceptional items andprofit after tax pre exceptionals is defined as profit after tax before the posttax effect of exceptional items and losses on the year end revaluation offorward foreign currency contracts in accordance with IFRS. The comparative period covers 53 weeks and the effect of the additional week wasto add £12.6m to revenue and £1.3m to operating profit. Amounts in this reporthave not been adjusted to remove the 53rd week from 2006. Revenue and margin Revenue 52 weeks 53 weeks ended ended 29 April 30 April 2007 2006 £m £m %Retail UK retail 1,069.7 943.8 +13.3UK wholesale and other 41.5 14.8 +180.4International retail 64.0 52.7 +21.4 Total retail 1,175.2 1,011.3 +16.2 Brands Wholesale 154.5 169.2 -8.7Licensing 17.4 14.2 +22.5 Total brands 171.9 183.4 -6.3 Total revenue 1,347.1 1,194.7 +12.8 Overall revenue grew by 12.8%. Retail revenue grew by 16.2%. The UK accounted for 94.6% of retail with thebalance in Belgium, The Netherlands and Slovenia. Brands revenue fell by 6.3% overall. Licensing income increased by 22.5%. Thereduction in wholesale revenue of 8.7% is primarily due to the loss of sales tothird parties of golf balls following the closure of the manufacturing facilityin the USA. Retail margins in the UK increased from 37.5% to 44.3%. The most significantcomponent being the improvement in price in the second half of the year. Theweakness of the dollar accounted for about 20% of margin improvement and abouta further 30% came from efficiencies associated with the new distribution centrein Shirebrook, such as reduced stock loss through improved security and lesswrite down of stock because such reductions are identified and implementedquicker and are therefore of less significant value. UK wholesale and other includes income on property transactions which is notregarded as being exceptional or non recurring totalling £14.7m. Brands margins increased from 42.1% to 44.1% as a result of the reduction inlower margin wholesale business and the increase in high margin licensingincome. Selling, distribution and administration costs Selling, distribution and administration costs increased as a percentage ofrevenue. This was a result of costs in the acquired companies and a realisedforeign exchange loss of £24 million compared to a profit of £16 million in theprevious period. The centralised distribution, IT and head office facility in Shirebrook wasopened in March 2006 and the final move from Dunstable was completed in April2007. We have continued to see the benefit of the move through increasedoperational efficiencies through decreased stock handling costs. It is expectedthat the Shirebrook centre will provide the space to support the expansion ofthe group for many years to come. We continue to protect our brand rights whenever they are threatened. Provisionis made in these accounts for action the outcome of which may not be in ourfavour. Exceptional operating costs and revenues Exceptional operating costs and revenues in the 52 weeks ended 29 April 2007comprised: 52 weeks 53 weeks ended ended 29 April 30 April 2007 2006 £m £m Costs relating to Admission 0.6 -Past performance bonuses including National Insurance 56.4 -Legal claims 6.0 -Profit on disposal of certain retail concessions (4.2) -Reorganisation costs - 3.4 ______ ______ 58.8 3.4 ______ ______ ______ ______ Finance income and costs 52 weeks 53 weeks ended ended 29 April 30 April 2007 2006 £m £m Finance income:Bank interest receivable 0.7 0.8Other interest receivable 0.6 0.7Expected return on pension plan assets 2.1 1.9 _______ _______ 3.4 3.4 Finance costs:Interest on bank loans and overdrafts (7.0) (4.0)Interest on other loans (0.9) (2.2)Interest on retirement benefit obligations (2.5) (2.1)Fair value adjustment to forward foreign exchange contracts (31.7) (9.5) ________ _______ (42.1) (17.8) The loss on the fair valuing of forward foreign exchange contracts arises underIFRS as a result of marking to market at the year end those contracts held tohedge the Group's currency risk. Taxation The effective tax rate on profit before tax for the 52 weeks ended 29 April 2007was 38.6% (2006: 32.7%). The increase is due to the tax impact of the unremittedearnings of an associate and the greater impact in percentage terms of prioryear underprovisions and non deductible items. Earnings 52 weeks 53 weeks ended ended 29 April 30 April 2007 2006 p per share p per share % Basic EPS 8.18 15.32 -46.6Underlying EPS 14.03 9.99 +40.4 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 methodologyadopted. 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 in arriving at the underlying profit are as follows: 52 weeks 53 weeks ended ended 29 April 30 April 2007 2006 £m £mProfit after tax 37.1 64.9Post tax effect ofExceptional items: Costs relating to Admission 0.4 -Past performance bonuses including National Insurance 39.5 -P legal claim 4.2 -Profit on disposal of certain retail concessions (2.9) Reorganisation costs - 2.3Fair value adjustment to forward foreign exchange contracts 22.2 6.7 ________ ________ Underlying profit after tax 100.5 73.9 ________ ________ Dividends No dividends were paid during the year. A dividend of 1.03p per share,totalling £7.42m, will be paid on 31 July 2007 to shareholders on the registeron 30 June 2007. Capital expenditure Expenditure, including acquisitions, on property, plant and equipment amountedto £61.6m (2006: £75.6m). This related to over £50m on new and refurbishedstores, with the balance covering further spend at Shirebrook, other plant andequipment and IT hardware. Acquisitions The Group spent £20.2m on acquisitions during the 52 weeks ended 29 April 2007.The principal acquisitions related to Kangol, Original Shoe Company andStreetwise. The net assets acquired have been analysed and separate intangibleassets and the residual goodwill recognised as appropriate in accordance withIFRS3: Business Combinations As part of the acquisition, the brand name "Streetwise", recognised on acquisition at £1.4m, has been impaired in full as weintend to re-badge the stores acquired in the short to medium term as theopportunities to do so arise. Cash flow and net debt Out of net operating cash flow of £175.4m (2006: £61.3m), in addition to theamount invested in capital expenditure and acquisitions, the Group invested£67.2m (2006: £13.3m) in strategic stakes. Net debt fell from £53.5m at 30April 2006 to £38.1m at 29 April 2007. Taking into account the inclusion ofmarketable securities (available for sale financial assets) there was no netdebt at the date of the IPO and at 29 April 2007. The analysis of debt at 29 April 2007 was as follows: 29 April 30 April 2007 2006 £m £m Cash - sterling 26.6 8.7Cash - US dollars 147.0 27.6Cash - Euros 4.6 10.3Cash - others 3.6 2.3 ____ ____ 181.8 48.9 Borrowings - sterling (201.8) (97.4)Borrowings - other (18.1) (5.0) ____ ____Net debt (38.1) (53.5) Market value of marketable securities 75.4 15.3 _____ _____Net liquidity/(indebtedness) 37.3 (38.2) Reconciliation of movement in equity Total equity movement is as follows: 52 weeks ended 52 weeks ended 29 April 29 April 2007 2007 £m £m Total equity at 30 April 2006 291.2 Profit for the 52 weeks ended 29 April 2007 37.1 Items taken directly to equity:Exchange differences on translation of foreign operations 0.1Actuarial (losses)/gains on defined benefit pension schemes (0.5)Fair value adjustment in respect of available-for-sale (7.1)financial assetsTax on items taken directly to equity 2.3 ______ (5.2)Movement in equity issued:Capital issued 969.0Reverse combination reserve (987.4)Share issue costs (23.5) ______ (41.9)Dividends (0.4) _______Total equity at 29 April 2007 280.8 _______ Pensions The Group operates a number of closed defined benefit schemes in the DunlopSlazenger companies. The net deficit in these schemes fell from £15.2m at 30April 2006 to £14.0m at 29 April 2007. Strategic investments The Group has, from time to time, taken strategic stakes in other companies. At29 April 2007, the Group held investments in Blacks Leisure and JD Sports.Changes in the value of these investments are recognised directly in equity inaccordance with IFRS. Financial risks, systems and controls The principal financial risks the Group faces are: • Movement in interest rates on borrowings. The Group has nothistorically hedged this risk. • Movement in currency exchange rates. A significant amount of theGroup's purchases are in US dollars. The Group hedges the risk of suchmovements by using forward purchases of foreign currency Certain of the Group'sassets are held overseas in local currency and are revalued in accordance withcurrency movements. This currency risk is not hedged. • Funding and liquidity for the Group's operations are provided throughbank loans and shareholders' funds. The objective is to maintain sufficientfunding 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. Post balance sheet events Since 29 April 2007, the Group has: • Built a strategic stake in Amer Sports, a company listed on the Finnishstock exchange. • Increased its credit facilities. • Entered into a merger agreement with Everlast, a company listed onNASDAQ. • Acquired 60% of the issued share capital of Field & Trek. • Acquired freehold properties for retail stores, health clubs and aLondon head office. • Decided, subject to market conditions, to exercise its powers to buyback its own shares and place them into treasury, thus increasing the earning ofthe remaining shares At the forthcoming Annual General Meeting the Board proposes to put a resolutionto members to: • Approve the acquisition from Mike Ashley of freehold propertiesoccupied by the Group, in order to avoid any future potential conflict ofinterests. Bob Mellors Finance Director 24 July 2007 UNAUDITED CONSOLIDATED INCOME STATEMENT FOR THE 52 WEEKS ENDED 29 APRIL 2007 52 weeks 53 weeks ended ended 29 April 30 April 2007 2006 Notes £'000 £'000Continuing operations:Revenue 2 1,347,144 1,194,736Cost of sales (751,003) (738,057) Gross profit 596,141 456,679Selling, distribution and administrative expenses (445,198) (351,622)Other operating income 1,783 3,044Exceptional items 3 (58,826) (3,368) Operating profit 2 93,900 104,733Investment income 1,790 2,624Finance income 4 3,449 3,387Finance costs 5 (42,081) (17,832)Share of profit/(loss) of associated undertakings and joint ventures 3,422 3,406 Profit before taxation 60,480 96,318Taxation (23,360) (31,448) Profit for the period 2 37,120 64,870 Equity holders of the Group 37,671 62,886Minority interests 15 (551) 1,984 Profit for the period 2 37,120 64,870 Earnings per share from total and continuing operations attributable to the equity shareholders Pence per share Pence per share Basic earnings per share 6 8.18 15.32Diluted earnings per share 6 8.18 15.32 UNAUDITED CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE FOR THE 52 WEEKS ENDED 29 APRIL 2007 52 weeks 53 weeks ended ended 29 April 30 April 2007 2006 Notes £'000 £'000 Exchange differences on translation of foreign operations 11 110 (947)Actuarial (losses)/gains on defined benefit pension schemes (456) 1,226Fair value adjustment in respect of available-for-sale financial assets (7,106) 2,011Taxation on items taken directly to equity 2,268 (974) Income and expense recognised directly in equity (5,184) 1,316Profit for the period 2 37,120 64,870 Total income and expense recognised in the period 31,936 66,186 Equity holders of the Group 32,487 64,202Minority interests 15 (551) 1,984 31,936 66,186 UNAUDITED CONSOLIDATED BALANCE SHEET AS AT 29 APRIL 2007 29 April 30 April 2007 2006 Notes £'000 £'000ASSETSNon-current assetsProperty, plant and equipment 224,463 205,122Intangible assets 87,981 49,364Investments in associated undertakings and joint ventures 21,988 18,408Available-for-sale financial assets 75,447 15,338Deferred tax assets 31,925 14,106 441,804 302,338 Current assetsInventories 231,383 219,065Trade and other receivables 88,615 98,021Cash and cash equivalents 181,808 48,875 501,806 365,961 TOTAL ASSETS 943,610 668,299 EQUITY AND LIABILITIESShare capital 7 72,000 1,000Share premium 8 874,300 -Permanent contribution to capital 9 50 -Capital redemption reserve 10 50Foreign currency translation reserve 11 (837) (947)Merger reserve 12 - 43Reverse combination reserve 13 (987,312) -Retained earnings 14 317,708 285,711 275,959 285,807Minority interests 15 4,845 5,396 Total equity 280,804 291,203 Non-current liabilitiesOther payables 2,408 1,032Borrowings 16 1,935 2,628Retirement benefit obligations 14,032 15,179Deferred tax liabilities 18,586 13,115Provisions 23,821 23,092 60,782 55,046 Current liabilitiesDerivative financial liabilities 42,463 10,798Trade and other payables 309,944 194,084Borrowings 16 217,996 99,782Current tax liabilities 31,621 17,386 602,024 322,050 Total liabilities 662,806 377,096 TOTAL EQUITY AND LIABILITIES 943,610 668,299 CONSOLIDATED CASH FLOW STATEMENT FOR THE 52 WEEKS ENDED 29 APRIL 2007 52 weeks 53 weeks ended ended 29 April 30 April 2007 2006 Notes £'000 £'000 Cash inflow from operating activities 18 199,261 85,933Income taxes paid (23,886) (24,635) Net cash inflow from operating activities 175,375 61,298 Cash flow from investing activitiesProceeds on disposal of property, plant and equipment 10,120 4,767Purchase of joint venture (238) (7,368)Purchase of subsidiaries, net of cash acquired 17 (22,747) (13,234)Purchase of intangible assets (2,978) (1,965)Purchase of property, plant and equipment (54,797) (70,302)Purchase of listed investments (67,215) (13,327)Investment income received 1,790 2,624 Net cash outflow from investing activities (136,065) (98,805) Cash flow from financing activitiesFinance income received 1,339 1,528Finance costs paid (7,948) (6,195)Net repayments of borrowings (6,583) (123)Proceeds from share issues 928,850 -Purchase of a certain percentage of previous owner's equity investment (928,800) -Share issue costs (9,762) -Equity dividend paid (380) - Net cash outflow from financing activities (23,284) (4,790) Net increase/(decrease) in cash and cash equivalents including 16,026 (42,297)overdraftsCash and cash equivalents including overdrafts at beginning of period (41,055) 1,242 Cash and cash equivalents including overdrafts at the period end (25,029) (41,055) NOTES TO THE PRELIMINARY ANNOUNCEMENT FOR THE 52 WEEKS ENDED 29 APRIL 2007 1 Basis of preparation The consolidated financial information disclosed in this preliminaryannouncement for the 52 weeks ended 29 April 2007 has been prepared on the basisof the accounting policies set out in the Group's 2007 Annual Report andFinancial Statements. The financial information has been prepared in accordancewith the Listing Rules of the Financial Services Authority. The consolidated financial information for the 52 weeks ended 29 April 2007 doesnot constitute the full financial statements of the Group within the meaning ofsection 240 of the Companies Act 1985. The consolidated financial information isextracted from the Group's financial statements. Those financial statementshave not yet been delivered to the Registrar nor have the auditors reported onthem. The Company was incorporated on 21 December 2006 and in March 2007 acquired onehundred per cent of the ordinary shares of Sports World International Limited,Brands Holdings Limited, International Brand Management Limited and CDS HoldingsSA (the "Continuing Business Entities") through a combination of cash, non cashassets and ordinary share issues. Prior to this transaction M J W Ashley personally controlled each of theContinuing Business Entities and by virtue of his controlling shareholding inSports Direct International plc, M J W Ashley continues to control theContinuing Business Entities. As common control transactions are outside thescope of IFRS 3: Business Combinations the directors have, as required by IAS 8:Accounting Policies, Changes in Accounting Estimates and Errors, used theirjudgement in developing and applying an accounting policy which reflects theeconomic substance of the transaction to account for the Continuing BusinessEntities. The directors consider the principles of merger accounting to be appropriate toaccount for the combination of Brands Holdings Limited, International BrandManagement Limited and CDS Holdings SA with the Company. As a result BrandsHoldings Limited, International Brand Management Limited and CDS Holdings SA arepresented as if they have legally been a group of companies since the 25 April2005 following the merger accounting principles set out below: • the assets and liabilities of Brands Holdings Limited, InternationalBrand Management Limited and CDS Holdings SA are recorded at book value; • intangible assets and contingent liabilities are recognised only tothe extent that they were recognised by the acquiree in accordance withapplicable IFRS; and • no goodwill is recorded. The combination of Sports World International Limited with the Company is also acommon control transaction which falls outside of the scope of IFRS 3: BusinessCombinations. Again the directors have used their judgement in developing andapplying an accounting policy which reflects the economic substance of thetransaction. The directors consider the guidance contained within IFRS 3:Business Combinations in relation to reverse acquisitions to be appropriate inthese circumstances and as a result the principles of reverse acquisitionaccounting have been applied with Sports World International Limited identifiedas the acquirer. Under the principles of reverse acquisitions, the cost of the acquisition ismeasured at the fair value of the notional number of equity instruments thatwould have been issued by the subsidiaries to the parent in order to provide theresulting one hundred per cent ownership in Sports World International Limited.The net assets of the parent are restated to fair value in the consolidatedfinancial information and the goodwill (if any) is calculated based on thedifference between the cost of acquisition and the restated net assets of theparent. The deemed cost of the acquisition was £50,000 and no goodwill wascreated on the reverse acquisition of the Company by Sports World InternationalLimited. The share capital and premium reported in the consolidated balance sheet isrequired to be that of the legal parent. However, it is also a requirement thatthe total of the issued equity instruments of the consolidated Group shouldreflect that of the legal subsidiaries plus the cost of the acquisition. Toachieve this, a reverse combination reserve is created, being the differencebetween the required total of the Group's equity instruments and the reportedequity of the legal parent. The reported consolidated retained earnings are theconsolidated retained earnings of the legal subsidiaries plus those of the legalparent subsequent to the reverse combination. NOTES TO THE PRELIMINARY ANNOUNCEMENT FOR THE 52 WEEKS ENDED 29 APRIL 2007(CONTINUED) 1 Basis of preparation (continued) This consolidated financial information therefore represents a continuation ofthe financial information of Brands Holdings Limited, International BrandManagement Limited, CDS Holdings SA and Sports World International Limited withthe Company as the reporting entity. Comparatives for the 53 weeks ended for 30April 2006 relate solely to the Continuing Business Entities. The consolidatedfinancial information for the 52 weeks ended 29 April 2007 is the firstconsolidated financial information prepared by the Group in accordance withIFRS. As such, they take account of the requirements and options in IFRS 1:First-time Adoption of International Financial Reporting Standards, as theyrelate to the comparative financial information for the 53 weeks ended 30 April2006 included therein. The Group's transition date to IFRS was 25 April 2005. In preparing these consolidated financial information the Group has elected toapply certain exemptions available under IFRS 1, which are as follows: • the Group has deemed cumulative translation differences for foreignoperations to be zero at the date of transition. Any gains and losses orsubsequent disposals of foreign operations will not therefore includetranslation differences arising prior to the transition date; • IFRS 3 - Business Combinations is applied from 25 April 2005 and notretrospectively to earlier business combinations; • The effect of translation differences arising on fair valueadjustments and goodwill in business combinations is not applied retrospectivelybefore 25 April 2005 thereby treating the goodwill and fair value adjustments asassets of the Company as opposed to the entities acquired by the Company; and • all cumulative actuarial gains and losses in respect of the Group'sdefined benefit pension scheme which have been recognised in equity under UKGAAP have continued to be recognised in equity at the transition date. The consolidated financial information have been prepared in accordance withIFRS (including International Accounting Standards ("IAS")) and InternationalFinancial Reporting Interpretations Committee ("IFRIC") interpretations and withthose parts of the Companies Act 1985 applicable to companies reporting underaccounting standards as adopted for use in the EU. The consolidated financialinformation have been prepared under the historical cost convention, as modifiedto include fair valuation of financial assets and derivative financialinstruments with borrowings recognised initially at fair value, net oftransaction costs incurred, and subsequently at amortised cost as required byIFRS. NOTES TO THE PRELIMINARY ANNOUNCEMENT FOR THE 52 WEEKS ENDED 29 APRIL 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 52 weeks ended 29 April 2007: Retail Brands Elimi- Total nations UK UK UK total International Total Wholesale Licensing Total retail wholesale & retail other £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000Sales 1,069,667 41,525* 1,111,192 64,018 1,175,210 154,484 17,450 171,934 - 1,347,144to external customersSales to - 11,235 11,235 - 11,235 12,523 - 12,523 (23,758) -other 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 498,101 22,173 520,274 75,867 - 596,141profit Operating 131,762 1,264 133,026 19,700 - 152,726profit before exceptional items Operating 81,790 1,264 83,054 10,846 - 93,900profit Investment 1,790income Finance 3,449income Finance (42,081)costs Share of 3,422profits of associated undertakingsand joint ventures Profit before 60,480taxation Taxation (23,360) Profit 37,120for the period * Includes £14.7 million in relation to property transactions. 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 ended 29April 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 ventures 14,847 7,141 - 21,988Other 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 PRELIMINARY ANNOUNCEMENT FOR THE 52 WEEKS ENDED 29 APRIL 2007(CONTINUED) 2 Segmental analysis (continued) Segmental information for the 53 weeks ended 30 April 2006: Retail Brands Eliminations Total UK UK UK total International Total Wholesale Licensing Total retail wholesale retail & other £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Sales 943,841 14,792 958,633 52,664 1,011,297 169,193 14,246 183,439 - 1,194,736to external customersSales - 10,649 10,649 - 10,649 19,711 - 19,711 (30,360) -to other segments Revenue 943,841 25,441 969,282 52,664 1,021,946 188,904 14,246 203,150 (30,360) 1,194,736 Gross 363,508 15,951 379,459 77,220 - 456,679profit Operating 89,173 926 90,099 18,002 - 108,101profit before exceptionalitems Operating 85,805 926 86,731 18,002 - 104,733profit Investment 2,624income Finance 3,387income Finance (17,832)costs Share 3,406of profits of associatedundertakings andjoint ventures Profit 96,318before taxationTaxation (31,448) Profit 64,870for the period Sales to other segments are priced at cost plus a 10% mark-up. Other segment items included in the income statement for the 53 weeks ended 30April 2006: Retail Brands Total £'000 £'000 £'000 Depreciation 28,375 3,790 32,165Amortisation - 968 968 Information regarding segment assets and liabilities as at 30 April 2006 andcapital expenditure for the 53 weeks then ended: Retail Brands Eliminations Total £'000 £'000 £'000 £'000 Investments in associated undertakings and joint ventures 11,379 7,029 - 18,408Other assets 534,375 212,599 (97,083) 649,891 Total assets 545,754 219,628 (97,083) 668,299 Total liabilities (279,266) (194,913) 97,083 (377,096) Tangible asset additions 74,072 1,484 - 75,556Intangible asset additions 2,718 2,988 - 5,706 Total capital expenditure 76,790 4,472 - 81,262 NOTES TO THE PRELIMINARY ANNOUNCEMENT FOR THE 52 WEEKS ENDED 29 APRIL 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 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 Segmental information for the 53 weeks ended 30 April 2006: UK Non-UK Unallocated Eliminations Total £'000 £'000 £'000 £'000 £'000 Segmental revenue from external customers 1,040,369 184,727 - (30,360) 1,194,736 Total capital expenditure 73,565 4,138 3,559 - 81,262 Segmental assets 601,146 116,175 48,061 (97,083) 668,299 3 Exceptional items 52 weeks 53 weeks ended ended 29 April 30 April 2007 2006 £'000 £'000 Reorganisation costs - 3,368Costs relating to admission to the London Stock Exchange 586 -Past performance bonuses including national insurance 56,400 -Profit on disposal of certain retail concessions(1) (4,160) -Legal claims 6,000 - 58,826 3,368 In May 2006, the Group disposed of its Hargreaves airport concessions. NOTES TO THE PRELIMINARY ANNOUNCEMENT FOR THE 52 WEEKS ENDED 29 APRIL 2007(CONTINUED) 4 Finance income 52 weeks 53 weeks ended ended 29 April 30 April 2007 2006 £'000 £'000 Bank interest receivable 709 796Other interest receivable 630 732Expected return on pension plan assets 2,110 1,859 3,449 3,387 5 Finance costs 52 weeks 53 weeks ended ended 29 April 30 April 2007 2006 £'000 £'000 Interest on bank loans and overdrafts 7,024 3,977Interest on other loans and finance leases 924 2,217Interest on retirement benefit obligations 2,468 2,132Fair value adjustment to forward foreign exchange contracts 31,665 9,506 42,081 17,832 The fair value adjustment to forward foreign exchange contracts relates toadverse differences between the nominal value of forward foreign currencycontracts and their fair value at each period end. NOTES TO THE PRELIMINARY ANNOUNCEMENT FOR THE 52 WEEKS ENDED 29 APRIL 2007(CONTINUED) 6 Earnings per share from total and continuing operationsattributable to the equity shareholders 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 the application of the principles of reverseacquisition accounting as set out in note 1, Basis of Preparation. Share awards granted during the period were anti-dilutive as at 29 April 2007 asthe exercise price exceeded the average market price of the Company's sharesduring the period from when the share awards were granted to 29 April 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 52 weeks 52 weeks 53 weeks 53 weeks ended ended ended ended 29 April 29 April 30 April 30 April 2007 2007 2006 2006 Basic Diluted Basic Diluted £'000 £'000 £'000 £'000 Profit for the period 37,671 37,671 62,886 62,886 Number in thousands Number in thousands Weighted average number of shares 460,582 460,582 410,400 410,400 Pence per share Pence per share Earnings per share 8.18 8.18 15.32 15.32 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 PRELIMINARY ANNOUNCEMENT FOR THE 52 WEEKS ENDED 29 APRIL 2007(CONTINUED) 6 Earnings per share (continued) Underlying earnings per share (continued) 52 weeks 52 weeks 53 weeks 53 weeks ended ended ended ended 29 April 29 April 30 April 30 April 2007 2007 2006 2006 Basic Diluted Basic Diluted £'000 £'000 £'000 £'000 Profit for the period 37,671 37,671 62,886 62,886 Post tax adjustments to profit for the period for the followingexceptional items: Costs relating to admission to the London Stock Exchange 410 410 - -Past performance bonuses including national insurance 39,480 39,480 - -Fair value adjustment to forward foreign exchange contracts 22,166 22,166 6,654 6,654Profit on disposal of certain retail concessions (2,912) (2,912) - -Reorganisation costs - - 2,358 2,358Legal claims 4,200 4,200 - - Underlying profit for the period 101,015 101,015 71,898 71,898 Number in thousands Number in thousandsShares in issue at the period end 720,000 720,000 720,000 720,000 Pence per share Pence per share Earnings per share 14.03 14.03 9.99 9.99 NOTES TO THE PRELIMINARY ANNOUNCEMENT FOR THE 52 WEEKS ENDED 29 APRIL 2007(CONTINUED) 7 Share capital 29 April 30 April 2007 2006 £'000 £'000 Authorised999,500,010 ordinary shares of 10p each (2006: 1,000,000 ordinary shares of £1 each) 99,950 1,000499,990 redeemable preference shares of 10p each (2006: nil) 50 - 100,000 1,000 Allotted, called up and fully paid720,000,010 ordinary shares of 10p each (2006: 1,000,000 ordinary shares of £1 each) 72,000 1,000 Consistent with the principle of reverse acquisition accounting, as described innote 1 Basis of preparation, the issued share capital shown above at 29 April2007 is that of the Company with the comparative issued share capital being thatof Sports World International Limited. The following share issues and redemptions were made by the Company since itsincorporation: No. ofDate No. of redeemable ordinary preference shares shares 21 December 2006 - on incorporation 10 -8 February 2007 - ordinary share issue - 499,9902 March 2007 - ordinary share issue 673,560,000 -2 March 2007 - redemption of redeemable preference shares - (499,990)29 March 2007 - ordinary share issue 46,440,000 - 720,000,010 - The Company was incorporated on 21 December 2006 with an authorised sharecapital of £1,000, divided into 10,000 ordinary shares of 10p each, of which 10ordinary shares were issued at par at the date of incorporation. On 8 February 2007, the authorised share capital of the Company was increased to£50,000 by the creation of 490,000 new ordinary shares of 10p each. On 8 February 2007, the authorised share capital of the Company was reorganisedinto 499,990 redeemable preference shares of 10p each and 10 ordinary shares of10p each. On 8 February 2007, the Company issued 499,990 redeemable preference shares atpar. On 26 February 2007, the authorised share capital of the Company was increasedfrom £50,000 to £100,000,000 by the creation of 999,500,000 new ordinary sharesof 10p each. On 2 March 2007, the Company was admitted to the Official List and to trading onthe London Stock Exchange and issued 309,600,000 ordinary shares at £3 pershare, giving rise to share premium of £897,840,000. The cash proceeds fromthis share issue were used to acquire a certain percentage of the previousowner's equity investment in Sports World International Limited. NOTES TO THE PRELIMINARY ANNOUNCEMENT FOR THE 52 WEEKS ENDED 29 APRIL 2007(CONTINUED) 7 Share capital (continued) On 2 March 2007, the Company issued 326,304,000 ordinary shares at £3 per sharein exchange for 478,210 ordinary shares of £1 each in Sports World InternationalLimited. No share premium arose as the directors applied the merger reliefprovisions available under the Companies Act 1985. On 2 March 2007, the Company issued 37,656,000 ordinary shares at £3 per sharein exchange for the entire ordinary share capital of £1 each of Brands HoldingsLimited, International Brand Management Limited and CDS Holdings SA. No sharepremium arose as the directors applied the merger relief provisions availableunder the Companies Act 1985. On 2 March 2007, the Company redeemed its 499,990 redeemable preference sharesof 10p each at par. On 29 March 2007, the Company issued 46,440,000 ordinary shares at £3 per sharein exchange for 68,060 ordinary shares of £1 each in Sports World InternationalLimited. No share premium arose as the directors applied the merger reliefprovisions available under the Companies Act 1985. Share options The Performance Share Plan Under the terms of the Performance Share Plan, which was approved by theshareholders on 11 February 2007, the Board may offer options to purchaseordinary shares in the Company to executive directors, based on a percentage ofsalary and subject to performance conditions. The extent to which the awardsvest is based on earnings per share growth and total shareholders return over aperiod of three financial years. The first awards of 446,512 shares were granted on 5 April 2007 at an exerciseprice of 268.75p. No share-based payment charge was recognised in respect of these share awardsfor the 52 weeks ended 29 April 2007 as the directors did not consider itmaterial to the Group's financial results or position. NOTES TO THE PRELIMINARY ANNOUNCEMENT FOR THE 52 WEEKS ENDED 29 APRIL 2007(CONTINUED) 8 Share premium 29 April 30 April 2007 2006 £'000 £'000 At 1 May 2006 - -Shares issued 897,840 -Share issue costs (23,540) - At 29 April 2007 874,300 - The share premium account is used to record the excess proceeds over nominalvalue on the issue of shares. 9 Permanent contribution to capital 29 April 30 April 2007 2006 £'000 £'000 At 1 May 2006 - -Permanent contribution to capital in the period 50 - At 29 April 2007 50 - M J W Ashley made a £50,000 cash payment to the Company as a permanentcontribution to capital on 8 February 2007 under a deed of capital contribution. 10 Capital redemption reserve 29 April 30 April 2007 2006 £'000 £'000 At 1 May 2006 - -Redemption of redeemable preference shares 50 - At 29 April 2007 50 - The capital redemption reserve arose on the redemption of the Company'sredeemable preference shares of 10p each at par on 2 March 2007. 11 Foreign currency translation reserve 29 April 30 April 2007 2006 £'000 £'000 At 1 May 2006 (947) -Translation differences - Group 190 (1,125)Translation differences - associates (80) 178 At 29 April 2007 (837) (947) The foreign currency translation reserve is used to record exchange differencesarising from the translation of the financial statements of foreign subsidiariesand associates. NOTES TO THE PRELIMINARY ANNOUNCEMENT FOR THE 52 WEEKS ENDED 29 APRIL 2007(CONTINUED) 12 Merger reserve 29 April 30 April 2007 2006 £'000 £'000 At 1 May 2006 43 43Release of merger reserve on group reorganisation (43) - At 29 April 2007 - 43 The merger reserve of £43,000 represents the nominal value of the share capitalof Brands Holdings Limited, International Brand Management Limited and CDSHoldings SA following their merger with Sports World International Limited as at25 April 2005. 13 Reverse combination reserve 29 April 30 April 2007 2006 £'000 £'000 At 1 May 2006 - -Reverse acquisition accounting on group reorganisation (987,355) -Release of merger reserve on group reorganisation 43 - At 29 April 2007 (987,312) - The reverse combination reserve exists as a result of the adoption of theprinciples of reverse acquisition accounting, see note 1 Basis of preparation,in accounting for the group restructuring which occurred on 2 March 2007 and 29March 2007 between the Company and Sports World International Limited, BrandsHoldings Limited, International Brand Management Limited and CDS Holdings SAwith Sports World International Limited as the acquirer. 14 Retained earnings 29 April 30 April 2007 2006 £'000 £'000 At 1 May 2006 285,711 220,562(Expense)/income recognised directly in equity (5,294) 2,263Profit for the financial period 37,671 62,886Dividends (380) - At 29 April 2007 317,708 285,711 15 Minority interests 29 April 30 April 2007 2006 £'000 £'000 At 1 May 2006 5,396 3,412Share of (loss)/profit for the period (551) 1,984 At 29 April 2007 4,845 5,396 NOTES TO THE PRELIMINARY ANNOUNCEMENT FOR THE 52 WEEKS ENDED 29 APRIL 2007(CONTINUED) 16 Borrowings 29 April 30 April 2007 2006 £'000 £'000Non-current:Bank and other loans 1,844 2,628Obligations under finance leases 91 - 1,935 2,628 Current:Bank overdrafts 206,837 89,930Bank and other loans 10,463 9,852Obligations under finance leases 696 - 217,996 99,782 Total borrowings:Bank overdrafts 206,837 89,930Bank and other loans 12,307 12,480Obligations under finance leases 787 - 219,931 102,410 The maturity of the Group's bank and other loan borrowings other than overdraftsis as follows: 29 April 30 April 2007 2006 £'000 £'000Borrowings are repayable as follows:Within one year 11,159 9,852Between one and two years 922 908Between two and five years 924 1,720After five years 89 - 13,094 12,480 Borrowings - Sterling 4,231 7,435Borrowings - Other 8,863 5,045 13,094 12,480 Loans and overdrafts are all on commercial variable rates of interest rangingbetween 0.6% and 2.5% over the base rate of the country within which theborrowing entity resides. NOTES TO THE PRELIMINARY ANNOUNCEMENT FOR THE 52 WEEKS ENDED 29 APRIL 2007(CONTINUED) 17 Acquisitions Details of principal acquisitions for the 52 weeks ended 29 April 2007 are setout below. Date of acquisition Percentage Nature of of equity activity acquiredFocus Golf Systems Inc 4 May 2006 100 WholesaleOriginal Shoe Company Limited 5 May 20061) 100 RetailDunlop International Limited 1 July 2006 100 LicensingPBF International Limited 13 July 2006 50 WholesaleAntigua Enterprises Inc 6 October 2006(2) 5 WholesaleKangol Group Limited 13 October 2006 100 LicensingStreetwise Sports Company Limited 8 December 2006 100 RetailSports Direct Netherlands BV 28 December 2006 100 RetailE Walters UK Limited 11 February 2007 100 Wholesale (1) A further tranche of shares in Original Shoe Company Limited wasacquired on 7 June 2006. (2) This was an additional acquisition which takes the cumulative holdingto 65%. The aggregate fair value of consideration paid, assets and liabilities acquiredand resulting goodwill in respect of the above acquisitions is detailed below. Total £'000 Cash consideration including costs 20,190Less: fair value of net assets acquired (847) Goodwill 19,343 The goodwill is attributable to the premium paid to strengthen the Group'sexisting business segments of retail and brands, which is in line with theGroup's strategy. Carrying values Fair value Fair value at acquisition adjustment of net assets acquired £'000 £'000 £'000 Property, plant and equipment 10,078 (3,268) 6,810Intangible assets 4,280 15,600 19,880Inventories 14,812 - 14,812Trade and other receivables 6,790 - 6,790Cash and cash equivalents (2,557) - (2,557)Borrowings (7,197) - (7,197)Trade and other payables (26,325) - (26,325)Deferred tax liability (1) (4,680) (4,681)Provisions - (6,685) (6,685) (120) 967 847 Separately identifiable intangible assets, primarily representing intellectualproperty acquired, amounting to £15,600,000 (deferred tax liability thereontotalling £4,680,000) were recognised as a fair value adjustment on acquisition. Dilapidations and onerous lease provisions totalling £6,685,000 were recognisedas a fair value adjustment on acquisition. NOTES TO THE PRELIMINARY ANNOUNCEMENT FOR THE 52 WEEKS ENDED 29 APRIL 2007(CONTINUED) 17 Acquisitions (continued) £65,541,000 of revenue and £7,320,000 of operating profit has been includedwithin the Group's financial information for the period in respect of the aboveacquired entities since their dates of acquisition. If the above acquired entities had been acquired at the beginning of the period£93,615,000 of revenue and £12,984,000 of operating profit would have beenincluded within the Group's financial information. Cash flows arising from acquisitions are as follows: 29 April 2007 £'000 Cash consideration 20,190Bank overdraft acquired 2,557 Net cash outflow in the cash flow statement 22,747 18 Cash inflow from operating activities 52 weeks 53 weeks ended ended 29 April 30 April 2007 2006 £'000 £'000 Profit before taxation 60,480 96,318Net finance costs 38,632 14,445Investment income (1,790) (2,624)Share of profit of associated undertakings and joint ventures (3,422) (3,406) Operating profit 93,900 104,733Depreciation 30,904 32,165Amortisation charge 3,584 968Excess of fair value on acquisition over consideration - (570)Profit on disposal of property, plant and equipment - (159)Defined benefit pension plan current service cost 175 331Defined benefit pension plan employer contributions (2,136) (424) Operating cash inflow before changes in working capital 126,427 137,044Decrease/(increase) in receivables 16,196 (17,972)Decrease/(increase) in inventories 2,494 (51,295)Increase in payables 54,144 18,156 Cash inflow from operating activities 199,261 85,933 19 Dividends A dividend of 1.03p per share has been declared and approved and will be paid on31 July 2007 to shareholders on the register on 29 June 2007. NOTES TO THE PRELIMINARY ANNOUNCEMENT FOR THE 52 WEEKS ENDED 29 APRIL 2007(CONTINUED) 20 Reconciliation of net assets and profit under UK GAAP to IFRS As explained in Note 1: Accounting Policies the Group did not legally existprior to March 2007. To properly reflect the substance of the combination ofSports World International Limited, Brands Holdings Limited, International BrandManagement Limited and CDS Holdings SA (the "Continuing Business Entities") thedirectors have followed the principles of merger and reverse acquisitionaccounting to present the results, position and cash flows of the ContinuingBusiness Entities as if it had always existed. As a direct consequence therewas no requirement historically for the directors to prepare and file UK GAAPconsolidated financial statements for the Continuing Business Entities. Forreasons of transparency the directors present below equity, net asset and profitreconciliations from previously unpublished UK GAAP financial information toIFRS as re-presented in IAS 1 format: Reconciliation of equity at 25 April 2005 IFRS transition adjustments UK GAAP 25 IFRS April 2005 25 April 2005 1 2 3 £'000 £'000 £'000 £'000 £'000ASSETSNon-current assetsIntangible assets 44,626 - - - 44,626Property, plant and equipment 165,728 - - - 165,728Investments in associated undertakings 7,456 - - - 7,456Deferred tax asset 7,801 388 - - 8,189 225,611 388 - - 225,999Current assetsInventories 158,712 - - - 158,712Trade and other receivables 76,848 - - - 76,848Cash and cash equivalents 21,393 - - - 21,393 256,953 - - - 256,953TOTAL ASSETS 482,564 388 - - 482,952 NOTES TO THE PRELIMINARY ANNOUNCEMENT FOR THE 52 WEEKS ENDED 29 APRIL 2007(CONTINUED) 20 Reconciliation of net assets and profit under UK GAAP to IFRS(continued) Reconciliation of equity at 25 April 2005 (continued) IFRS transition adjustments UK GAAP 25 IFRS April 2005 25 April 2005 1 2 3 £'000 £'000 £'000 £'000 £'000EQUITY AND LIABILITIESEquity attributable to equity holders of theCompanyShare capital 1,000 - - - 1,000Merger reserve 43 - - - 43Retained earnings 223,259 (904) 449 (2,242) 220,562 224,302 (904) 449 (2,242) 221,605Minority interests 3,412 - - - 3,412Total equity 227,714 (904) 449 (2,242) 225,017Non current liabilitiesProvisions 20,352 - - - 20,352Borrowings 4,132 - (641) - 3,491Other payables 240 - - - 240Retirement benefit obligations 16,170 - - - 16,170Deferred tax liabilities 5,458 - 192 2,242 7,892 46,352 - (449) 2,242 48,145 NOTES TO THE PRELIMINARY ANNOUNCEMENT FOR THE 52 WEEKS ENDED 29 APRIL 2007(CONTINUED) 20 Reconciliation of net assets and profit under UK GAAP to IFRS(continued) Reconciliation of equity at 25 April 2005 (continued) IFRS transition adjustments UK GAAP 25 IFRS April 2005 25 April 2005 1 2 3 £'000 £'000 £'000 £'000 £'000Current liabilitiesDerivative financial liabilities - 1,292 - - 1,292Trade and other payables 170,591 - - - 170,591Borrowings 29,005 - - - 29,005Current tax liabilities 8,902 - - - 8,902 208,498 1,292 - - 209,790Total liabilities 254,850 1,292 (449) 2,242 257,935TOTAL EQUITY AND LIABILITIES 482,564 388 - - 482,952 1. The Group has not taken advantage of the exemption under IFRS 1of not restating its comparatives in respect of IAS 32, 'Financial Instruments:Presentation' and IAS 39, 'Financial Instruments: Recognition and Measurement'.This transitional adjustment is to fair value account as at the balance sheetdate in respect of forward foreign currency purchase contracts held by the Groupresulting in a derivative financial liability being recognised. 2. As per adjustment 1 above, the Group has fully adopted IAS 32and IAS 39 and consequently has applied a fair value adjustment in respect ofinterest free loans as at the date of transition to reflect the cost of theinterest free loans if interest rates were applied based on the borrowingfacilities available to the Group at the date of transition. The loans aresubsequently accounted for at amortised cost as required by IAS 39. 3. Deferred tax liability arising on unremitted earnings of anassociate in accordance with IAS 12 as the Group has no control over whenearnings are to be remitted back to the Group. 4. NOTES TO THE PRELIMINARY ANNOUNCEMENT FOR THE 52 WEEKS ENDED 29 APRIL 2007(CONTINUED) 20 Reconciliation of net assets and profit under UK GAAP to IFRS(continued) Reconciliation of equity at 30 April 2006 IFRS transition adjustments UK GAAP 30 IFRS April 2006 30 April 2006 1 2 3 4 5 6 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000ASSETSNon-current assetsProperty, plant and 205,122 - - - - - - 205,122equipmentIntangible assets 43,685 5,109 570 - - - - 49,364Investments in associated 18,408 - - - - - - 18,408undertakingsFinancial assets 13,327 - - - - 2,011 - 15,338Deferred tax asset 10,868 - - 3,238 - - - 14,106 291,410 5,109 570 3,238 - 2,011 - 302,338Current assetsInventories 219,065 - - - - - - 219,065Trade and other receivables 98,021 - - - - - - 98,021Cash and cash equivalents 48,875 - - - - - - 48,875 365,961 - - - - - - 365,961TOTAL ASSETS 657,371 5,109 570 3,238 - 2,011 - 668,299 NOTES TO THE PRELIMINARY ANNOUNCEMENT FOR THE 52 WEEKS ENDED 29 APRIL 2007(CONTINUED) 20 Reconciliation of net assets and profit under UK GAAP to IFRS(continued) Reconciliation of equity at 30 April 2006 (continued) IFRS transition adjustments UK GAAP 30 IFRS April 2006 30 April 2006 1 2 3 4 5 6 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000EQUITY AND LIABILITIESEquity attributable to equityholders of the CompanyShare capital 1,000 - - - - - - 1,000Foreign currency translation (947) - - - - - - (947)reserveMerger reserve 43 - - - - - - 43Retained earnings 289,106 5,109 399 (7,560) 319 1,408 (3,070) 285,711 289,202 5,109 399 (7,560) 319 1,408 (3,070) 285,807Minority interests 5,396 - - - - - - 5,396Total equity 294,598 5,109 399 (7,560) 319 1,408 (3,070) 291,203Non current liabilitiesBorrowings 3,083 - - - (455) - - 2,628Other payables 1,032 - - - - - - 1,032Retirement benefit obligations 15,179 - - - - - - 15,179Deferred tax liabilities 9,135 - 171 - 136 603 3,070 13,115Provisions 23,092 - - - - - - 23,092 51,521 - 171 - (319) 603 3,070 55,046 NOTES TO THE PRELIMINARY ANNOUNCEMENT FOR THE 52 WEEKS ENDED 29 APRIL 2007(CONTINUED) 20 Reconciliation of net assets and profit under UK GAAP to IFRS(continued) Reconciliation of equity at 30 April 2006 (continued) IFRS transition adjustments UK GAAP 30 IFRS April 2006 30 April 2006 1 2 3 4 5 6 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000CurrentliabilitiesDerivative - - - 10,798 - - - 10,798financialliabilitiesTrade and other 194,084 - - - - - - 194,084payablesBorrowings 99,782 - - - - - - 99,782Current tax 17,386 - - - - - - 17,386liabilities 311,252 - - 10,798 - - - 322,050Total liabilities 362,773 - 171 10,798 (319) 603 3,070 377,096TOTAL EQUITY AND 657,371 5,109 570 3,238 - 2,011 - 668,299LIABILITIES 1. Under IFRS 3, goodwill is not amortised but instead subject toannual impairment testing. Consequently, the goodwill balances were reviewedfor impairment at 24 April 2005 and 30 April 2006 and no impairment adjustmentswere identified. The amortisation charge previously recognised under UK GAAPhas been reversed. 2. As per 1 above, write back of negative goodwill balance arising onacquisitions as required by IFRS 3 and reclassified from negative goodwillpreviously capitalised under UK GAAP. 3. The Group has not taken advantage of the exemption under IFRS 1 ofnot restating its comparatives in respect of IAS 32 and IAS 39. Thistransitional adjustment is to fair value account as at the balance sheet date inrespect of forward foreign currency purchase contracts held by the Groupresulting in a derivative financial liability being recognised. 4. As per adjustment 3 above, the Group has fully adopted IAS 32 andIAS 39 and consequently has applied a fair value adjustment in respect ofinterest free loans as at the date of transition to reflect the cost of theinterest free loans if interest rates were applied based on the borrowingfacilities available to the Group at the date of transition. The loans aresubsequently accounted for at amortised cost as required by IAS 39 5. The Group has applied a fair value adjustment in respect ofavailable-for-sale financial assets held as at 30 April 2006 in accordance withIAS 39. 6. Deferred tax liability arising on unremitted earnings of anassociate in accordance with IAS 12 as the Group has no control over whenearnings are to be remitted back to the Group. NOTES TO THE PRELIMINARY ANNOUNCEMENT FOR THE 52 WEEKS ENDED 29 APRIL 2007(CONTINUED) 20 Reconciliation of net assets and profit under UK GAAP to IFRS(continued) Reconciliation of profit for the 52 weeks ended 30 April 2006(continued) IFRS transition adjustments UK GAAP 53 IFRS 53 weeks weeks ended 30 ended 30 April April 2006 2006 1 2 3 4 5 £'000 £'000 £'000 £'000 £'000 £'000 £'000Revenue 1,194,736 - - - - - 1,194,736Cost of sales (738,057) - - - - - (738,057)Gross profit 456,679 - - - - - 456,679Selling, distribution 570 - -and administrativeexpenses (357,301) 5,109 - (351,622)Other operating income 3,044 - - - - - 3,044Exeptional items (3,368) - - - - - (3,368)Operating profit 99,054 5,109 570 - - - 104,733Investment income 2,624 - - - - - 2,624Finance income 3,387 - - - - - 3,387Finance costs (8,140) - - (9,506) (186) - (17,832)Share of profit of 3,406 - - - - - 3,406associated undertakingsProfit before taxation 100,331 5,109 570 (9,506) (186) - 96,318Taxation (33,357) - (171) 2,852 56 (828) (31,448)Profit for the financial 66,974 5,109 399 (6,654) (130) (828) 64,870yearEquity holders of Sports 64,990 5,109 399 (6,654) (130) (828) 62,886Direct GroupMinority interest 1,984 - - - - - 1,984Profit for the financial 66,974 5,109 399 (6,654) (130) (828) 64,870year NOTES TO THE PRELIMINARY ANNOUNCEMENT FOR THE 52 WEEKS ENDED 29 APRIL 2007(CONTINUED) 20 Reconciliation of net assets and profit under UK GAAP to IFRS(continued) Reconciliation of profit for the 52 weeks ended 30 April 2006(continued) 1. Under IFRS 3, goodwill is not amortised but insteadsubject to annual impairment testing. Consequently, the goodwill balances werereviewed for impairment at 24 April 2005 and 30 April 2006 and no impairmentadjustments were identified. The amortisation charge previously recognisedunder UK GAAP has been reversed. 2. Under IFRS 3, negative goodwill should not be amortised.Transitional adjustment to write back negative goodwill arising on acquisitionsas required by IFRS 3 and reclassified from negative goodwill previouslycapitalised under UK GAAP. 3. The Group has not taken advantage of the exemption underIFRS 1 of not restating its comparatives in respect of IAS 32 and IAS 39. Thistransitional adjustment is to fair value account as at the balance sheet date inrespect of forward foreign currency purchase contracts held by the Groupresulting in a derivative financial liability being recognised. 4. As per adjustment 3 above, the Group has fully adopted IAS32 and IAS 39 and consequently has applied a fair value adjustment in respect ofinterest free loans as at the date of transition to reflect the cost of theinterest free loans if interest rates were applied based on the borrowingfacilities available to the Group at the date of transition. The loans aresubsequently accounted for at amortised cost as required by IAS 39. 5. Deferred tax liability arising on unremitted earnings of anassociate in accordance with IAS 12 as the Group has no control over whenearnings are to be remitted back to the Group. Significant changes to the cash flow statement for the 53 weeks ended 30 April2006 None of the adjustments arising from IFRS relates to cash and therefore there isno impact on reported cash flows. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Frasers Group