Sports Retail gross margin up 130 basis points; Group Underlying EBITDA up 10.8%

Transcription

1 11 December Interim Results for the to 26 October Sports Retail gross margin up 130 basis points; Group Underlying EBITDA up 10.8% FY15 H1 FY14 H1 m m Group revenue 1, , % Sports Retail (1) 1, , % Premium Lifestyle % Brands % Group gross profit % Group gross margin 44.0% 43.1% +90 bps Sports Retail 44.5% 43.2% +130 bps Underlying EBITDA (pre share scheme costs) (2) % Underlying profit before tax (PBT) (3) % Reported profit before tax % Underlying earnings per share (3) 20.8p 19.0p +9.5% Reported earnings per share 19.4p 18.6p +4.1% Key highlights Sports Retail gross margin increased by 130 basis points to 44.5% Group underlying EBITDA increased by 10.8% to 203.1m Underlying profit before tax up 9.8% to 160.6m Underlying free cash generation of 161.5m (4) Oxford Street store re-located in May Roll-out of large format city centre stores 29 new license agreements signed with contracted minimum royalties of $12m over the life of the agreements Continued investment in inventory and strategic stakes while maintaining a strong balance sheet Net debt decreased to 186.5m from 212.0m (27 April ) (5) Dave Forsey, Chief Executive of Sports Direct International plc said: The results for the six months were solid considering the adverse impact on performance during the period of England s early departure from the FIFA World Cup in Brazil and the unseasonably mild weather during Autumn reducing footfall. However, the continued growth in Group revenues and EBITDA is testament to the hard work of our colleagues and our continued focus on providing customers with exceptional quality and unbeatable value. We are delighted that their contribution will again be recognised under the 2011 Employee Bonus Share Scheme 25% of which is expected to vest with eligible employees in September Trading since the period end has been in line with management expectations and while we retain the ability to invest in margin, inventory and Group marketing to deliver long-term sustainable growth, we remain confident of achieving at least our full year internal underlying EBITDA target of 360m, before the charge for the Employee Bonus Share Schemes. (1) (2) Includes Wholesale and Other revenue, previously only included in Group revenue Underlying EBITDA, underlying profit before taxation and underlying EPS exclude realised foreign exchange gains/losses in selling and administration costs, exceptional costs and the profit/loss on sale of strategic investments. Underlying EBITDA also excludes the Employee Bonus Share Scheme charges. (3) Underlying profit before taxation and underlying EPS also exclude profits/losses relating to the IAS 39 fair value adjustment on forward currency contracts in finance income/costs, but includes the Employee Bonus Share Scheme charges. (4) Underlying free cash generation is defined as operating cashflow before working capital, made up of underlying EBITDA before Employee Bonus Share Scheme costs, plus realised foreign exchange gains and losses, less corporation tax paid. (5) Net debt is borrowings less cash held 1

2 Sports Direct International plc Dave Forsey, Chief Executive Jeff Blue, Director, Strategic Development T: Powerscourt Rory Godson Victoria Palmer-Moore Greg Lawless T:

3 Chairman s Statement While the Group has not been immune to recent challenges in the retail sector and England s disappointing performance at the FIFA World Cup, the Group has achieved a 6.5% increase in revenue and a 10.8% increase in underlying EBITDA. Developments and acquisitions The Group has continued its expansion in Europe, opening a further eight stores. The re-branding of stores in Austria to the Sportsdirect.com fascia continues and we opened our first Sportsdirect.com store in the Baltics. In the first half of the year the Group increased its investment in Debenhams with the purchase of an additional strategic stake in the business. We are currently trialling four concessions within Debenhams stores. The Group has also acquired interests in Tesco and the online retailer MySale during the period. I am pleased also to announce that the Group has now established Sportsdirect Fitness.com, following the acquisition of 18 former LA Fitness gyms. We have commenced building work on a new 20,000 sq. ft. dry gym and an adjoining 40,000 sq. ft. retail space in Aintree which will be fully open by the end of and another two similar units in St Helens and Keighley are expected to be operational in early Employee Bonus Share Schemes The Group s Employee Bonus Share Scheme continues to underpin our results. We are certain of achieving the FY15 EBITDA target and I look forward to seeing the vesting of this scheme in 2015 and I am also pleased to note that a new 2015 Bonus Share Scheme under which eligible employees and the Executive Directors would be able to participate subject to satisfactory personal performance and achievement of EBITDA targets for the years FY16 to FY19 was approved at a General Meeting on 2 July. The Board In July, Charles McCreevy, Non-Executive Director of the Group, announced his intention not to stand for re-election at the Company s Annual General Meeting. Charles spent over three years at Sports Direct and his skills and experience have been invaluable in this time. On behalf of the Board I would like to thank Charles for his contribution to the business. Our search for a new Finance Director and a replacement for Charles remains ongoing. We are undertaking a thorough process to ensure we appoint the most suitable candidate. Overall We continue to provide our customers with exceptional quality and unbeatable value, ever mindful of the financial challenges in the broader economy. I wish to thank all of our employees and other stakeholders for their continued support and the contribution they make to the Group s ongoing success. Keith Hellawell Non-Executive Chairman 11 December 3

4 Overview of Financial Performance Summary of Results 26 Weeks 26 Weeks 26 October 27 October 2013 Change ( m) ( m) % Revenue 1, , Underlying EBITDA Underlying profit before tax Reported profit before tax Pence per share Pence per share Underlying EPS (1) Reported EPS (2) (1) and (2) Based on million and million ordinary shares outstanding in FY15 H1 and FY14 H1, respectively Basis of reporting The financial statements for the Group for the 26 October are presented in accordance with International Accounting Standard (IAS) 34 Interim Financial Reporting which has been adopted for use in the EU (IFRS). The Directors believe that underlying EBITDA, underlying profit before tax and underlying earnings per share provide more useful information for shareholders on the underlying performance of the business than the reported numbers and are consistent with how business performance is measured internally. They are not recognised profit 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 the Group s share of profit from associated undertakings and joint ventures. Underlying EBITDA is calculated as EBITDA before the impact of foreign exchange, any exceptional or other non-trading items and costs relating to the Employee Bonus Share Schemes. Revenue and margin 26 October ( m) 27 October 2013 ( m) Change % Retail Revenue: Sports Retail 1, , Premium Lifestyle (2.8) Total retail revenue 1, , Total Retail Cost of sales (744.3) (703.6) +5.8 Total Retail gross margin Gross margin percentage 44.1% 43.2% +90bps Brands Revenue: Wholesale (4.4) Licensing (0.6) Total Brands revenue (3.9) Cost of sales (58.4) (61.7) (5.3) Brands gross margin (1.8) Brands gross margin percentage 42.8 % 41.9% +90 bps 4

5 Business Review Overview In the 26 October ( FY15 H1 ), Group revenues were up 6.5% to 1,432.9m compared with 1,345.1m for the 27 October 2013 ( FY14 H1 ). Sports Retail revenue increased 8.3%, benefiting from an 11.1% increase in online revenues. Revenue in the Brands division decreased by 3.9% due to a decline in wholesale sales as we update our wholesale business model. Gross margin for the Group increased 90 basis points to 44.0% (FY14 H1: 43.1%) as a result of the continued broadening of our product range and on-going investment in Group Brands. The continued growth in revenue and profitability is also attributable to the success of the Employee Bonus Share Scheme. Net debt decreased in the period by 12.0% to 186.5m (27 April : 212.0m), which is 0.5 times LTM EBITDA (1) (FY14 H1: 0.6 times). Sports Retail division Sports Retail revenues increased 8.3% to 1,230.9m (FY14 H1: 1,136.1m). This increase was supported by further growth in online sales, up 11.1% to 176.4m. We remain focused on building a profitable online business which complements our existing store-based offering. Since the period end, click and collect has been trialled in c. 400 Sports Direct stores in the UK. We continue to invest in our customer offering, including product range and availability, to ensure this growth trend continues. During the period, the Sports Retail division gross margin increased 130 basis points to 44.5% (FY14 H1: 43.2%), benefiting from a higher proportion of better and best Group branded product. Sports Retail s operating costs increased by 13.9% in FY15 H1, compared to an increase of 8.3% in revenue and an 11.6% increase in gross profit due to a full year impact and proportionally higher costs in our recently acquired European businesses. As a result, we grew Sports Retail underlying EBITDA by 8.1% to 195.8m (FY14 H1: 181.2m). At period end, the Group had 434 stores in the UK (excluding Northern Ireland), with a total of c. 4.5m sq. ft. (2) (FY14 H1: c. 4.2m sq. ft.) and an average remaining lease expiry of 5.0 years (excluding Lillywhites Piccadilly). We continue to adopt a pro-active approach to managing our store portfolio, with the ability to move quickly, as opportunities arise. We are still targeting a total of between 30 and 40 store openings in the UK this year, having opened 18 new stores in the period, including five relocations. We have also opened four concessions currently being trialled within Debenhams stores in the period. During the period we re-located our Oxford Street store to the c. 50,000 sq. ft. former HMV store and are currently undertaking works on a c. 30,000 sq. ft. extension of our Glasgow store, which is due to be completed in Spring We have also now commenced work on Phase 3 of our Shirebrook campus, which will see a 650,000 sq. ft. extension added to the existing warehouse and office facility, with completion expected in late Across Europe we have closed four stores in Austria, opened two new stores in Poland and one store in each of Estonia, Portugal, France, Cyprus, Hungary and the Czech Republic. We have also commenced the integration of our Austrian business, with the conversion of 13 Sports Experts stores and five Eybl stores in Austria to the Sportsdirect.com fascia. During the period, we also increased our shareholding in the Icelandic joint venture from 25% to 40%. Through the Group s shareholding in the Heatons chain, sports products are retailed within 15 stores in Northern Ireland and 26 stores in the Republic of Ireland. The Group s share of Heatons operating result was a 1.5m profit (FY14 H1: 0.7m profit). During the period we established a new fitness division, Sportsdirect Fitness.com, with the purchase of 18 gyms from LA Fitness. Works are also underway to build a 60,000 sq. ft. combined gym and sports retail concept in Aintree, which is expected to be fully open by the end of December. Similar sites are also currently being developed in St Helens and Keighley which we anticipate opening early in Premium Lifestyle division Sales in the period were down by 2.8% to 99.9m (FY14 H1: 102.8m), largely due to the closure of loss-making USC and former Republic stores since the prior year. Gross margin reduced to 38.4% (FY14 H1: 43.0%), due to stock clearance activity in the period. While supply from major third party brands remains challenging, brands acquired as part of the Republic transaction, e.g. Soulcal, continue to perform well at USC. Growth at Cruise, Flannels and Van Mildert also reflects the Group s buying disciplines and online expertise. Operating costs reduced by 17.6% to 46.2m (FY14 H1: 56.1m) as we begin to benefit from the closure of 20 loss-making USC and former Republic stores since the prior year and the consolidation of back-office functions. Premium Lifestyle EBITDA losses decreased in FY15 H1 to 7.8m (FY14 H1: 11.9m loss). 5

6 Brands division Brands division total revenue decreased 3.9% to 102.1m (FY14 H1: 106.2m). Wholesale revenues were down 4.4% to 86.8m (FY14 H1: 90.8m) as we continue to update our wholesale business model. Brands gross margin increased by 90 basis points to 42.8% (FY14 H1: 41.9%). Wholesale gross margins increased 70 basis points to 32.7% (FY14 H1: 32.0%), due to a reduction in stock clearance activity. Licensing revenues in FY15 H1 were down 0.6% to 15.3m (FY14 H1: 15.4m). Our strategic focus remains on delivering further growth in licensing revenues, having signed 29 new license agreements in the first half of the year with contracted minimum royalties of $12m over the life of the contracts. Brands operating costs decreased by 5.3% to 28.7m (FY14 H1: 30.3m) in the period, benefiting from the previous year s consolidation of UK wholesale businesses, while maintaining investment in key Group brands at similar levels to previous years. Underlying EBITDA in the division increased 7.9% to 15.1m (FY14 H1 14.0m) due to the reduction in operating costs. Outlook Trading since the period end has been in line with management s expectations. The Group s performance continues to be driven by: (i) investment in product range and availability; (ii) optimisation of in-store and web product offer; and (iii) the growing proportion of better and best Group branded products in key categories. The Board remains confident of achieving at least our full year internal underlying EBITDA target of 360m, before the Employee Bonus Share Scheme charges. Looking to FY16, we remain confident that our continued focus on providing customers with exceptional quality and unbeatable value will deliver another year of profitable growth. Dave Forsey Chief Executive 11 December (1) LTM EBITDA is the last twelve months historic underlying EBITDA (2) Due to differing methodologies, this implies a range between 4.25m sq. ft. 4.75m sq. ft. 6

7 Reconciliation of reported to underlying results EBITDA PBT FY15 H1 FY14 H1 FY15 H1 FY14 H1 m m m m Operating profit Depreciation Amortisation Share of profit/(loss) of associated undertakings Bonus share scheme charge Reported EBITDA/PBT Realised FX loss/(profit) IAS 39 foreign exchange fair value adjustment on - - (6.0) 2.3 forward currency contracts Fair value adjustment to derivative financial instruments Exceptional items (14.1) - (14.1) - Underlying Fair value adjustment to derivative financial instruments represents the movement in fair value of equity options in the period. Underlying EBITDA by Business Segment FY15 H1 FY14 H1 m m Sports Retail % Premium Lifestyle (7.8) (11.9) (34.5%) Brands % Group Underlying EBITDA % Foreign exchange A number of the forward foreign exchange contracts outstanding at 26 October qualify for hedge accounting and the fair value gain on these contracts of 50.5m has been recognised in Other Comprehensive Income. At period end, the Group had 675m of US Dollar contracts, sufficient to cover all purchases in UK Sports Retail until the end of the FY16 financial year. These hedged contracts are at an average rate of $1.69. The sterling exchange rate with the US dollar at 27 April was $1.680 and $1.609 at 26 October. Taxation The effective tax rate on profit before tax for FY15 H1 was 23.0% (FY14 H1: 25.0%). The difference between the prevailing corporate tax rate of 21% and the effective rate reflects depreciation on non-qualifying assets. Strategic investments The Group continued to hold an 11.8% shareholding in JD Sports and Fashion plc and on 2 October acquired a further 4.60% stake in Debenhams. Including the Group s stake in Highland Group Holdings Limited (House of Fraser), the fair value of the Group's holdings at 26 October was 142.9m (27 April : 116.5m). The movement in the fair value of the shares held has been recognised directly in Other Comprehensive Income. The value of the investment in Highland Group Holdings Limited was 11.1m at the period end (FY14: 11.1m) and its valuation will vary depending on the performance of the Highland Group. In June, the Group acquired an interest in 7,251,065 shares in MySale Group plc, representing 4.8% of the issued share capital of MySale. In September, the Group entered into a derivative agreement referencing 23,000,000 shares in Tesco Plc, representing 0.3% of the issued share capital of Tesco. In October the Group acquired 56,381,164 shares in Debenhams plc for 33.2m, representing 4.6% of the issued share capital of Debenhams. This stake was sold in November and the Group entered into a derivative agreement referencing 7

8 74,185,742 Debenhams shares, equivalent to 6.1% of the issued share capital of Debenhams. Along with the existing derivative agreement entered into in January, these investments represent a 12.7% interest in Debenhams' ordinary shares. The fair value of equity derivative agreements is included within the derivative financial liabilities balance of 30.7m. Cash flow and net debt On 25 November the Group utilised the accordion option under its 688m working capital facility. As a result, the working capital facility has been increased from 688m to 738m. The facility is available until September 2018 and is not secured against any of the Group s fixed assets. The Group also has a 250m working capital facility with Mike Ashley which can be drawn down on request. This facility was agreed at market terms at its inception and is not secured against any fixed assets. At the period end no balance was due. The Group continues to operate well within its banking covenants and the Board remains comfortable with the Group s available headroom. Net debt decreased during the period to 186.5m (27 April : 212.0m), which is 0.5 times the last twelve months historic underlying EBITDA (FY14 H1: 0.6 times) Capital expenditure amounted to 26.7m (FY14 H1: 31.8m), including 1.6m (FY14 H1: 10.3m) of freehold property. The Group expects FY15 capital expenditure to be c. 90m, including expenditure on phase 3 of the Shirebrook campus. The analysis of net debt at 26 October and at 27 April is as follows: At 26 October At 27 April m m Cash and cash equivalents Borrowings (292.6) (363.0) Net debt (186.5) (212.0) Cash Flow 26 October m 27 October 2013 m Underlying EBITDA (pre share scheme costs) Realised profit on forward foreign exchange contracts (7.7) (0.6) Taxes paid (33.9) (35.8) Underlying free cash flow Invested In: Working capital Inventory (89.6) (49.3) Receivables, Payables & Other (2.2) 31.8 Acquisitions (including debt) (2.3) (124.1) Purchase of listed investments (33.2) - Investment income received Capital expenditure (26.7) (31.8) Disposal of freehold property Finance costs and other financing activities (4.4) (4.1) Net decrease/(increase) in net debt 25.5 (29.3) Employee Bonus Share Schemes Management believes that the Employee Bonus Share Schemes have been instrumental in the strength of the Group s ongoing performance. The 2011 Employee Bonus Share Scheme is a four year scheme based upon achieving underlying EBITDA (before the costs of the scheme) of 215m in FY12, 250m in FY13, 260m in FY14 and 300m in FY15 coupled with the individual employee s satisfactory personal performance. The scheme requires that all targets are met before the shares vest. Approximately 5m shares will vest in the summer of 2015 and another 19m shares (including the Executive Bonus Share Scheme) in the summer of The remaining target for Group underlying EBITDA (before Employee Bonus Share Scheme costs) is: - FY15: 300m 8

9 The success of the scheme is demonstrated by ongoing improvements in operational and financial performance including various internal KPIs since the scheme s introduction. These KPIs include energy consumption, pay versus turnover, stock loss and staff retention. Going concern The Group finances its day to day working capital requirements using a 738m facility with 13 financial institutions that is due for renewal in September The Group s earnings forecast, taking account of reasonable changes in trading performance and expected capital expenditure requirements, show that the Group continues to operate well within its existing bank facilities. The Directors have thoroughly reviewed the Group s performance and position relating to historical results, current trading, forecast performance, cash reserves and financing arrangements. Additionally, the Directors have also considered the Group s reliance upon its key stakeholders, including customers and suppliers and found no over reliance on any particular stakeholder. The Directors are therefore confident that the Group will continue in operational existence for the foreseeable future. On this basis, the Directors continue to adopt the going concern basis for the preparation of the interim financial statements. Risks, systems and controls The Board believes that the principal risks and uncertainties for the remaining six months of the current financial year are: Disruption or other adverse events affecting the Group s relationship with any of its key brands or brand suppliers which could have an adverse effect on the Group s business. The possibility of a deterioration of the economy both in the UK and worldwide and a reduction in consumer confidence and retail spending, which could impact on the performance of the business. Funding and liquidity for the Group s operations are provided through bank loans, overdraft facilities and shareholders funds. The Group maintains a system of controls to manage the business and to protect its assets. We continue to invest in people, systems and IT to manage the Group s operations and to ensure that the Group is financed effectively and efficiently. Directors' Responsibility Statement We confirm that to the best of our knowledge: The condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU; The interim management report includes a fair review of the information required by: a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events during the first of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining of the year; and b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first 26 weeks of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so. Amounts due to and from related parties are disclosed in note 9. With the exception of Charles McCreevy who did not stand for re-election at the Company s Annual General Meeting, the directors of Sports Direct International plc are listed in the Group s Annual Report and Financial Statements. On behalf of the Board Dave Forsey Chief Executive 11 December 9

10 INDEPENDENT REVIEW REPORT TO THE MEMBERS OF SPORTS DIRECT INTERNATIONAL PLC FOR THE 26 WEEKS ENDED 26 OCTOBER Introduction We have reviewed the condensed set of financial statements in the half-yearly financial report of Sports Direct International plc for the 26 October which comprises the Consolidated income statement, the Consolidated statement of comprehensive income, the Consolidated balance sheet, the Consolidated cash flow statement, the Consolidated statement of changes in equity and the related notes. We have read the other information (the Chairman s statement, the Overview of Financial Performance and the Group highlights) contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements. This report is made solely to the company s members, as a body, in accordance with International Standard on Review Engagements (UK and Ireland) 2410, Review of Interim Financial Information Performed by the Independent Auditor of the Entity. Our review work has been undertaken so that we might state to the company those matters we are required to state to them in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, and the company s members as a body, for our review work, for this report, or for the conclusion we have formed. Directors Responsibilities The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom s Financial Conduct Authority. As disclosed in note 1, the annual financial statements of the group are prepared in accordance with IFRS as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting, as adopted by the European Union. Our Responsibility Our responsibility is to express a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review. Scope of Review We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, Review of Interim Financial Information Performed by the Independent Auditor of the Entity. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Conclusion Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the 26 October is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom s Financial Conduct Authority. Grant Thornton UK LLP Auditor London 11 December 10

11 UNAUDITED CONSOLIDATED INCOME STATEMENT FOR THE 26 WEEKS ENDED 26 OCTOBER 26 October 27 October weeks 27 April Notes Continuing operations: Revenue 2 1,432,898 1,345,102 2,705,958 Cost of sales (802,681) (765,272) (1,551,036) Gross profit 630, ,830 1,154,922 Selling, distribution and administrative expenses (479,690) (439,067) (908,843) Other operating income 4,134 6,811 8,583 Exceptional items 3 14,149 - (5,531) Operating profit 2 168, , ,131 Investment income 1,263 1,271 7,017 Finance income 6,343 1, Finance costs 4 (28,327) (7,903) (19,853) Share of profit of associated undertakings and joint ventures 1, ,266 Profit before taxation 149, , ,452 Taxation (34,438) (35,766) (59,839) Profit for the period 2 115, , ,613 Attributable to: Equity holders of the Group 114, , ,245 Non-controlling interests 665 (261) (632) Profit for the period 2 115, , ,613 Earnings per share from total and continuing operations attributable to the equity shareholders Pence per share Pence per share Pence per share Basic earnings per share Diluted earnings per share Underlying basic earnings per share The accompanying notes form an integral part of this interim financial report. 11

12 UNAUDITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE 26 WEEKS ENDED 26 OCTOBER 26 October 27 October weeks 27 April Notes Profit for the period 2 115, , ,613 Other comprehensive income Items that will not be reclassified subsequently to profit or loss Actuarial (losses)/gains on defined benefit pension schemes (1,304) 4,589 3,860 Taxation on items not reclassified 274 (1,087) (698) Items that will be reclassified subsequently to profit or loss Exchange differences on translation of foreign operations 13,465 (14,768) (33,118) Exchange differences on hedged contracts recognised in the period 26,860 (7,593) (3,737) Exchange differences on hedged contracts reclassification in the period 23,623 (8,907) (17,909) Fair value adjustment in respect of available for sale financial assets (6,783) 17,903 57,373 Taxation on items subsequently reclassified (10,601) - (4,170) Other comprehensive income for the period, net of tax 45,534 (9,863) 1,601 Total comprehensive income for the period 160,828 97, ,214 Attributable to: Equity holders of the Parent 160,163 97, ,846 Non-controlling interests 665 (261) (632) 160,828 97, ,214 The accompanying notes form an integral part of this interim financial report. 12

13 UNAUDITED CONSOLIDATED BALANCE SHEET AS AT 26 OCTOBER 26 October 27 October April ASSETS Non-current assets Notes Property, plant and equipment 406, , ,361 Intangible assets 255, , ,109 Investments in associated undertakings and joint ventures 45,692 32,842 41,763 Available-for-sale financial assets 142,883 66, ,504 Deferred tax assets 25,359 28,839 31, , , ,867 Current assets Inventories 655, , ,479 Trade and other receivables 165, , ,014 Derivative financial assets 49,758 7,819 4,355 Cash and cash equivalents 106, , , , , ,872 TOTAL ASSETS 1,852,424 1,679,255 1,700,739 EQUITY AND LIABILITIES Share capital 64,060 64,060 64,060 Share premium 874, , ,300 Treasury shares (56,234) (56,234) (56,234) Permanent contribution to capital Capital redemption reserve 8,005 8,005 8,005 Foreign currency translation reserve 18,745 23,630 5,280 Reverse combination reserve (987,312) (987,312) (987,312) Own share reserve (13,251) (13,251) (13,251) Hedging reserve 44,858 (479) (5,625) Retained earnings 1,030, , , , , ,092 Non-controlling interests (2,873) (12,312) (3,538) Total equity 981, , ,554 Non-current liabilities Borrowings 6 283, ,530 6,764 Retirement benefit obligations 15,497 15,899 15,350 Deferred tax liabilities 30,726 23,100 24,046 Provisions 36,886 35,108 37,780 Current liabilities 366, ,637 83,940 Derivative financial liabilities 30,696 8,638 18,665 Trade and other payables 434, , ,019 Borrowings 6 8,932 10, ,226 Current tax liabilities 31,011 24,565 32, , , ,245 Total liabilities 871, , ,185 TOTAL EQUITY AND LIABILITIES 1,852,424 1,679,255 1,700,739 The accompanying notes form an integral part of this interim financial report. 13

14 UNAUDITED CONSOLIDATED CASH FLOW STATEMENT FOR THE 26 WEEKS ENDED 26 OCTOBER 26 October 27 October weeks 27 April Notes Cash inflow from operating activities 8 103, , ,785 Income taxes paid (33,902) (35,827) (55,730) Net cash inflow from operating activities 69, , ,055 Cash flow from investing activities Proceeds on disposal of property, plant and equipment 21, Proceeds on disposal of listed investments ,394 Purchase of associate, net of cash acquired (2,300) - (8,000) Purchase of subsidiaries, net of cash acquired (172) (16,485) (15,407) Purchase of intangible assets (3) (162) (1,827) Purchase of property, plant and equipment (26,715) (31,610) (67,304) Purchase of listed investments (33,162) - (55,467) Investment income received 1,277 1,271 1,604 Finance income received Net cash outflow from investing activities (39,590) (46,986) (96,116) Cash flow from financing activities Finance costs paid (4,712) (4,409) (8,111) Borrowings drawn down 51, , ,910 Borrowings repaid (118,730) (247,408) (348,452) Exercise of option over non-controlling interests - (11,678) Net cash outflow from financing activities (72,106) (69,624) (67,331) Net (decrease) / increase in cash and cash equivalents including overdrafts (41,880) 12,574 3,608 Cash and cash equivalents including overdrafts at beginning of period 145, , ,674 Cash and cash equivalents including overdrafts at the period end 103, , ,282 The accompanying notes form an integral part of this interim financial report. 14

15 At 28 April 2013 (56,234) 38,398 (64,375) 752,018 (24,876) 644,931 (254) 644,677 Share-based payments ,000-1,000-1,000 Vesting of Share-based payments ,124 (51,124) Current Tax on share schemes ,362-30,362-30,362 Deferred Tax on share schemes (14,890) - (14,890) - (14,890) Non-controlling interest - acquisition (11,645) (11,645) Non-controlling interest - disposal (152) (152) Transactions with owners ,124 (34,652) - 16,472 (11,797) 4,675 Profit for the financial period , ,559 (261) 107,298 Cashflow hedges recognised in the period (7,593) (7,593) - (7,593) reclassification (8,907) (8,907) - (8,907) Actuarial gains on defined benefit pension schemes ,589-4,589-4,589 Fair value adjustment in respect of available for sale financial assets ,903-17,903-17,903 Taxation on items taken to comprehensive income (1,087) - (1,087) - (1,087) Translation differences group - (14,768) (14,768) - (14,768) Total comprehensive income - (14,768) - 128,964 (16,500) 97,696 (261) 97,435 At 27 October 2013 (56,234) 23,630 (13,251) 846,330 (41,376) 759,099 (12,312) 746,787 UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE 26 WEEKS ENDED 26 OCTOBER Treasury shares Foreign currency translation Own share reserve Retained earnings Other reserves Subtotal Noncontrolling interests Total Treasury shares Foreign currency translation Own share reserve Retained earnings Other reserves Subtotal Noncontrolling interests Total At 27 April (56,234) 5,280 (13,251) 931,819 (46,522) 821,092 (3,538) 817,554 Share-based payments ,655-2,655-2,265 Transactions with owners ,655-2,655-2,655 Profit for the financial period , , ,294 Cashflow hedges recognised in the period ,860 26,860-26,860 reclassification ,623 23,623-23,623 Actuarial gains on defined benefit pension schemes (1,304) - (1,304) - (1,304) Fair value adjustment in respect of available for sale financial assets (6,783) - (6,783) - (6,783) Taxation on items taken to comprehensive income (10,327) - (10,327) - (10,327) Translation differences group - 13, ,465-13,465 Total comprehensive income - 13,465-96,215 50, , ,828 At 26 October (56,234) 18,745 (13,251) 1,030,689 3, ,910 (2,873) 981,037 The Company holds 42,137,508 ordinary shares in Treasury. The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements of foreign subsidiaries and associates. At 26 October, the Sports Direct Employee Benefit Trust held 6,070,490 shares. The credit for the share based payment charge does not equal the charge per the income statement as it excludes amounts recognised in the balance sheet in relation to the expected national insurance contributions for the shares and a transfer of accrued national insurance contributions in respect of previous years charges which had previously been recognised in equity. The amount transferred is not material to the interim financial statements. 15

16 NOTES TO THE FINANCIAL INFORMATION FOR THE 26 WEEKS ENDED 26 OCTOBER 1. General information and basis of preparation The results for the first half of the financial year have not been audited and are prepared on the basis of the accounting policies set out in the Group's Annual Report and Financial Statements. The financial information in the Group s Annual Report and Financial Statements is prepared in accordance with International Financial Reporting Standards as adopted by the European Union ( IFRS ).The Interim Results have been prepared in accordance with International Accounting Standard (IAS) 34 - "Interim Financial Reporting" as endorsed by the European Union and the Disclosure and Transparency Rules of the Financial Conduct Authority (DTR). The principal accounting policies have remained unchanged from the prior financial information for the 52 weeks 27 April. This consolidated financial information for the period does not constitute statutory financial statements within the meaning of s434 of the Companies Act The summary of results for the 52 weeks 27 April is an extract from the published Annual Report and Financial Statements which have been reported on by the Group s auditors and delivered to the Registrar of Companies. The audit report was unqualified and did not contain a statement under s498 (2) or s498 (3) of the Companies Act Segmental analysis Operating segments IFRS 8 - Operating Segments requires the Group s segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the Chief Operating Decision Maker to assess performance and allocate resources across each operating segment. The Chief Operating Decision Maker has been identified as the Executive Directors and the operating segments are identified as the store fascia or brand, in line with the internal reporting to the Executive Directors. Sales and gross profit for each operating segment, as well as underlying EBITDA, are the main measures used by the Executive Directors to assess performance. In accordance with paragraph 12 of IFRS 8 the Group s operating segments have been aggregated into the following reportable segments: 1. Sports Retail includes the results of the UK and International retail network of sports stores along with related websites; 2. Premium Lifestyle includes the results of the premium retail businesses such as Cruise, Flannels, USC and Van Mildert; and 3. Brands includes the results of the Group s portfolio of internationally recognised brands such as Everlast, Lonsdale, Dunlop and Slazenger. The basis of the reportable segments changed in the Annual Report, reflecting changes that have been made to internal reports used to assess performance and allocate resources across each operating segment. UK Sports Retail and International Sports Retail were previously reported as separate segments. These have now been aggregated to form the reportable segment: Sports Retail. The prior year disclosures have been restated to reflect this change. Information regarding the Group s reportable segments for the period 26 October, as well as a reconciliation of reported profit for the period to underlying EBITDA, is presented below: Segmental information for the 26 October : Retail Brands Sports Premium Total Eliminations Retail Lifestyle Retail Total Total Sales to external customers 1,230,886 99,926 1,330, ,086-1,432,898 Sales to other segments ,247 (13,259) - Revenue 1,230,898 99,926 1,330, ,333 (13,259) 1,432,898 Gross profit 548,080 38, ,508 43, ,217 Operating profit/(loss) before foreign exchange and exceptional items 160,577 (9,445) 151,132 11, ,377 Operating Profit 166,855 (9,508) 157,347 11, ,810 Investment income 1,263 Finance income 6,343 16

17 Finance costs (28,327) Share of profits of associated undertakings and joint ventures 1,643 Profit before taxation 149,732 Taxation (34,438) Profit for the period 115,294 Reconciliation of operating profit to underlying EBITDA for the 26 week period ending 26 October. Sports Premium Brands Total Retail Lifestyle Operating profit/(loss) 166,855 (9,508) 11, ,810 Depreciation 26,791 1, ,060 Amortisation ,852 3,953 Share of profit/(loss) of associated 1, ,643 undertakings Charges for the Bonus Share Schemes 6, ,057 Reported EBITDA 202,053 (7,864) 15, ,523 Exceptional items (14,149) - - (14,149) Realised FX (Gain)/Loss 7, ,716 Underlying EBITDA 195,775 (7,801) 15, ,090 Sales to other segments are priced at cost plus a 10% mark-up. Other segment items included in the income statement for the 26 October : Sports Premium Brands Total Retail Lifestyle Depreciation 26,791 1, ,060 Amortisation and impairment ,852 3,953 Information regarding segment assets and liabilities as at 26 October : Retail Brands Eliminations Total Sports Retail Premium Lifestyle Investments in associated undertakings and joint venture 46,055 - (363) - 45,692 Other assets 1,810,388 99, ,157 (305,127) 1,806,731 Total assets 1,856,443 99, ,794 (305,127) 1,852,424 Total liabilities (942,320) (133,674) (100,520) 305,127 (871,387) Segmental information for the 27 October 2013: Retail Brands Sports Retail Premium Lifestyle Total Retail Total Eliminations Total Sales to external customers 1,136, ,843 1,238, ,215-1,345,10 2 Sales to other segments 8,455-8,455 14,737 (23,192) - 17

18 Revenue 1,144, ,843 1,247, ,952 (23,192) 1,345,10 2 Gross profit 491,128 44, ,307 44, ,830 Operating profit/(loss) before foreign exchange and exceptional items 150,870 (13,668) 137,202 11,017 - Operating Profit 150,327 (13,615) 136,712 10, , ,57 4 Investment income 1,271 Finance income 1,446 Finance costs (7,903) Share of profits of associated undertakings and joint ventures 676 Profit before taxation 143,064 Taxation (35,766) Profit for the period 107,298 Reconciliation of operating profit to underlying EBITDA for the 26 week period ending 27 October 2013: Sports Premium Brands Total Retail Lifestyle Operating profit/(loss) 150,327 (13,615) 10, ,574 Depreciation 22,789 1, ,104 Impairment Amortisation ,319 3,131 Share of profit/(loss) of associated undertakings (223) 676 Charges for the Bonus Share Schemes 6, ,018 Reported EBITDA 180,634 (11,823) 13, ,636 Realised FX Loss / (Gain) 543 (53) Underlying EBITDA 181,177 (11,876) 13, ,281 Sales to other segments are priced at cost plus a 10% mark-up. Other segment items included in the income statement for the 27 October 2013: Sports Retail Premium Lifestyle Brands Total Depreciation 22,789 1, ,104 Amortisation and impairment ,319 3,264 Information regarding segment assets and liabilities as at 27 October 2013: Retail Brands Eliminations Total Sports Retail Premium Lifestyle Investments in associated undertakings and joint ventures 33,065 - (223) - 32,842 Other assets 1,545,079 30, ,616 (111,516) 1,646,41 3 1,679,25 Total assets 1,578,144 30, ,393 (111,516) 5 18

19 Retail Brands Eliminations Total Sports Retail Premium Lifestyle Total liabilities (902,733) (47,809) (93,442) 111,516 (932,468) Segmental information for the 52 weeks 27 April : This information is available in the annual report. 3. Exceptional items 26 October 27 October weeks 27 April Profit on disposal of freehold property 14, Impairment of tangible assets - - (5,531) 14,149 - (5,531) On 20 June the Group sold a Freehold Property for 21.2m and then entered into an agreement to lease the property back from the buyer. 4. Finance costs 26 October 27 October weeks 27 April Interest on bank loans and overdrafts 4,654 4,409 7,513 Interest on other loans and finance leases Interest on retirement benefit obligations 178 1, Fair value adjustment to derivative financial instruments (1) 23,262 2,284 11,193 28,327 7,903 19,853 (1) The fair value adjustment to derivative financial instruments relates to differences between the fair values of derivative financial instruments not designated for hedge accounting from one period end to the next. The majority of the fair value loss in the current period relates to equity options. 5. Earnings per share For diluted earnings per share, the weighted average number of shares, 592,294,371 (FY14 H1: 578,454,000), is adjusted to assume conversion of all dilutive potential ordinary shares under the Group s bonus share schemes, being 24,200,000 (FY14 H1: 40,736,000) to give the diluted weighted average number of shares of 616,494,371 (FY14 H1: 619,190,000). The number of dilutive ordinary shares under the Group s bonus share schemes has been calculated on a weighted average basis to take account of any shares that vested during the period. Basic and diluted earnings per share 26 October 26 October 27 October October weeks 27 April 52 weeks 27 April 19

20 Basic 000 Diluted 000 Basic 000 Diluted 000 Basic 000 Diluted 000 Profit for the period attributable to the equity holders of the Group 114, , , , , ,245 Number in thousands Number in thousands Number in thousands Weighted average number of shares 592, , , , , ,190 Pence per share Pence per share Pence per share Earnings per share Underlying earnings per share The underlying earnings per share reflects the underlying performance of the business compared with the prior year and is calculated by dividing underlying earnings by the weighted average number of shares. Underlying earnings is used by management as a measure of profitability within the Group. Underlying earnings is defined as profit for the period attributable to equity holders of the parent for each financial period but excluding the post tax effect of realised foreign exchange in selling and administration costs, the IAS 39 fair value adjustment on derivative financial instruments in finance income/costs, exceptional costs and the profit/loss on sale of strategic investments. The Directors believe that the underlying earnings before exceptional items and underlying earnings per share measures provide additional useful information for shareholders on the underlying performance of the business, and are consistent with how business performance is measured internally. Underlying earnings is not a recognised profit measure under IFRS and may not be directly comparable with adjusted profit measures used by other companies. 26 October Basic October Diluted October 2013 Basic October 2013 Diluted weeks 27 April Basic weeks 27 April Diluted 000 Profit for the period 114, , , , , ,245 Post tax adjustments to profit for the period for the following exceptional items: Realised loss/(gain) on forward foreign exchange contracts 5,941 5, (1,373) (1,373) Fair value adjustment to forward foreign exchange contracts 13,286 13,286 1,690 1,690 8,395 8,395 Profit on disposal of listed investments (4,060) (4,060) Profit on disposal of freehold property (10,895) (10,895) Impairment of fixed assets ,148 4,148 Impairment of goodwill Underlying profit for the period 122, , , , , ,639 Number in thousands Number in thousands Number in thousands Weighted average number of shares 592, , , , , ,190 Pence per share Pence per share Pence per share Earnings per share Borrowings 26 October 27 October April Non-current: Bank and other loans 283, ,530 6,764 Obligations under finance leases , ,530 6,764 20

21 Current: Bank overdrafts 2,700 10,257 5,742 Bank and other loans 6, ,484 Obligations under finance leases ,932 10, ,226 Total borrowings: Bank overdrafts 2,700 10,257 5,742 Bank and other loans 289, , ,248 Obligations under finance leases The analysis of the Group s bank and other loan borrowings other than overdrafts is as follows: 292, , , October 27 October April Borrowings Sterling 221, , ,731 Borrowings Other 68,427 86, , , , ,248 21

22 7. Financial Instruments (a) Financial assets and liabilities by category The carrying values of financial assets and liabilities, which are principally denominated in Sterling or US dollars, were as follows: Loans and receivables Assets at fair value through profit and loss Available for sale financial assets Nonfinancial assets Total Assets at 26 October Property, plant and equipment , ,251 Intangible assets , ,337 Investments in associated undertakings and joint ventures ,692 45,692 Available-for-sale financial assets , ,883 Deferred tax assets ,359 25,359 Inventories , ,081 Derivative financial assets - 49, ,758 Trade and other receivables 56, , ,960 Cash and cash equivalents 106, , ,115 49, ,883 1,497,668 1,852,424 Assets at 27 April Property, plant and equipment , ,361 Intangible assets , ,109 Investments in associated undertakings and joint ventures ,763 41,763 Available-for-sale financial assets , ,504 Deferred tax assets ,130 31,130 Inventories , ,479 Trade and other receivables 60, , ,014 Derivative financial assets - 4, ,355 Cash and cash equivalents 151, , ,875 4, ,504 1,368,005 1,700,739 Assets at 27 October 2013 Property, plant and equipment , ,981 Intangible assets , ,781 Investments in associated undertakings and joint ventures ,842 32,842 Available-for-sale financial assets ,084-66,084 Deferred tax assets ,839 28,839 Inventories , ,708 Trade and other receivables 69, , ,696 Derivative financial assets - 7, ,819 Cash and cash equivalents 164, , ,784 7,819 66,084 1,371,568 1,679,255 22