Interim Results
Sports Direct International Plc
19 December 2007
19th December 2007
Sports Direct International plc
("Sports Direct", "the Group" or "the Company")
Interim Results
For the 26 weeks to 28 October 2007
Group Highlights
• Group revenue down 7.1% to £668.1m
- UK retail sales affected by unprecedented weather conditions
• Underlying EBITDA down 16.0% to £83.6m (1)
• Underlying profit before tax down 35.2% to £52.0m (1) (2)
• Group margin up 220 basis points to 43.3%
- Gross margin percentage strengthened across all divisions
• Strategic stakes increased from £75.4m to £364.5m
- Investments in adidas, Amer (sold after period end) and Umbro
• Acquisitions of Everlast, providing significant platform for US
growth; and Field & Trek
• Middle East licensing agreement in place and progressing
• Continued store roll-out in the UK and internationally
• Capital investment of £120m
- Acquired freehold retail sites and other property interests for £102.5m
• Further development and consolidation of head office and distribution campus
at Shirebrook
• Interim dividend 2.06p per share
(1) Underlying operating profit, underlying profit before taxation and
underlying EBITDA exclude £57.9m (2007 H1: £16.9m) of realised losses on forward
currency contracts, and exceptional items of £nil (2007 H1: £4.2m).
(2) Underlying profit before taxation also excludes a gain of £27.1m (2007 H1:
£2.5m) relating to the IAS 39 fair value adjustment on forward currency
contracts.
Dave Forsey, Chief Executive said:
"The results reflect a very challenging UK market and the comparative period
last year including the football World Cup. These also demonstrate the
resilience of our business under such pressures from external factors. We
remain determined to adapt our strategy, consolidate our market leading position
and develop our strong brand portfolio to drive long-term growth."
Sports Direct International plc
Dave Forsey, Chief Executive
Bob Mellors, Group Finance Director T: 0870 333 9400
Financial Dynamics
Jonathon Brill/Andrew Dowler/Ben Foster T: 0207 831 3113
Chairman's Statement
I am pleased to have been appointed as acting Chairman of the Sports Direct
Board since June in what has been a challenging period for the UK retail sector
and the Group.
Board Changes
The Group was pleased to announce on 25 October 2007 the appointment of Malcolm
Dalgleish and Dave Singleton as independent non-executive directors. Both
appointments took effect immediately and are part of the Group's ongoing
commitment to comply with corporate governance best practice.
Malcolm Dalgleish is currently Head of Retail in the Europe, Middle East and
Africa area at CB Richard Ellis ("CBRE"). In 2005 CBRE acquired Dalgleish, the
leading retail real estate services specialist in the UK, which was founded by
Malcolm in 1979 and of which he was the principal shareholder.
Dave Singleton spent 25 years with Reebok International Limited. He stepped
down in April 2007 having helped to successfully integrate Reebok following its
acquisition by adidas Group in January 2006. For eight years he was Vice
President Northern Europe Region & UK and from 2003 he was Senior Vice President
Europe, Middle East & Africa. Dave has an extensive senior management record
and brings valuable experience of international sports brand operations.
The Group also announced that Chris Bulmer stepped down from her role as an
independent non-executive director.
We are continuing to work with an executive search company to strengthen the
Board with non-executive appointments. We will update the market as
appropriate.
Dividend
The Board has resolved to pay an interim dividend of 2.06p per share on 30 April
2008 to shareholders on the register on 28 March 2008. We intend in the future
to introduce a dividend reinvestment programme in time for the Interim dividend.
Simon Bentley
Acting non-executive Chairman
19 December 2007
Chief Executive and Finance Director's Review
Overview of Financial Performance
In the 26 weeks ended 28 October 2007 ("2008 H1"), Group revenue was down 7.1%
at £668.1m compared with revenues of £719.1m for the 26 weeks ended 29 October
2006 ("2007 H1"). UK retail revenue for the six month period fell by £77m
compared with the corresponding period last year.
Underlying EBITDA for the period was £83.6m. This is 16% lower than the
corresponding period last year.
Gross margins for the Group were strengthened, and increased to 43.3% from
41.1%, driven primarily by an improvement in the UK retail gross margin to 45.3%
from 42.4%.
Foreign exchange charges to the Income Statement for the half year were £30.8m,
up £16.4m on the same period last year. This comprised £57.9m in administration
costs which was partly offset by a gain of £27.1m in finance income.
Capital expenditure amounted to £120.0m (2007 H1: £42.7m). This included
acquisitions of property, plant and equipment, including £77.1m on new and
refurbished stores, and £31.9m on a freehold office London.
Underlying profit before tax fell from £80.3m to £52.0m.
Financial Performance by Business Segment
2008 H1 2007 H1 Change
(£'m) (£'m) %
----------------------------------------------------------------------------------------------------------------------
Retail
Revenue:
UK retail 518.4 595.1
UK wholesale and property 23.2 8.3
International retail 38.5 33.6
----------------------------------------------------------------------------------------------------------------------
Total retail revenue 580.1 637.0 (8.9)
----------------------------------------------------------------------------------------------------------------------
Cost of sales (327.7) (372.9)
Gross margin 252.4 264.1
Gross margin percentage 43.5% 41.4%
----------------------------------------------------------------------------------------------------------------------
Brands
Revenue:
Wholesale 77.5 75.4
Licensing 10.5 6.7
----------------------------------------------------------------------------------------------------------------------
Total brands revenue 88.0 82.1 +7.1
Cost of sales (51.1) (50.4)
----------------------------------------------------------------------------------------------------------------------
Gross margin 36.9 31.7
Gross margin percentage 41.9% 38.6%
Business Review
It has been an exceptionally challenging trading environment for the UK sports
retail sector, with the wettest May to July since records were first kept in
1776, and the worst flooding in the UK for 60 years. 2008 H1 has been the most
difficult trading period in our history.
However, we believe our strategy remains the right one for the business. We
continued to invest in the business organically and through acquisitions,
consolidating our leading UK retail market position and increasing the long-term
value of our brand portfolio.
Retail division
Total retail revenue was down 8.9% to £580.1m (2007 H1: £637.0m). UK retail
revenue, which contributes to the majority of retail revenue, was down 12.9% to
£518.4m (2007 H1: £595.1m). This was impacted by the poor Summer weather
conditions, along with tough comparatives following the 2006 FIFA World Cup.
There was no comparable event in 2007.
On 22 November 2007 we announced that England failing to qualify for the
European Championship 2008 will have a material impact on the business. The
last time England failed to qualify for a major football tournament was in 1994,
when the business was significantly smaller and less focussed on football
related merchandise than it is now.
Umbro has stated that it will now manufacture only one million new replica
England away shirts rather than three million it had originally planned. In
addition, we expect sales of other products such as home shirts, shorts, socks,
training wear, non-Umbro England products, flags, etc. to be significantly
reduced, plus there will be an impact due to the lack of related footfall.
Although it is difficult to estimate the impact precisely, our initial
assessment is that this will impact EBITDA in the full 2008 calendar year by
circa £50m (with a range of £30m to £70m) split broadly evenly over financial
years 2007/2008 and 2008/2009.
We grew sales in the other two segments of our retail division. UK wholesale
and property revenue was up 179.5% to £23.2m (2007 H1: £8.3m) due to the
incidence of property transactions, including £10m which had no gain or loss
(2007 H1: no property transactions). International retail revenue was up 14.5%
to £38.5m (2007 H1: £33.6m). In the period we opened two new stores in Belgium,
and a further three in Slovenia.
In spite of the discounting of stock, we strengthened the total retail division
margin from 41.4% to 43.5%, driven primarily by an improvement in the UK retail
gross margin to 45.3% from 42.4%. 2008 H2 UK retail margin growth is likely to
continue but at a reduced rate.
On 12 July 2007, we acquired a 60% strategic stake in Field & Trek for £5.1m.
This is in line with the Group's plans to enter the outdoor leisure market. We
hold an option for five years to acquire the remaining 40% for a further £5.0m.
We have also acquired the remaining 20% of Sport 2000 Slovenia, the number two
Slovenian sports retailer. Post period end, we announced the sale of our
interest in Original Shoe Company Limited for £5m.
Online revenue continues to be a growing element of the division and we continue
to look at opportunities to develop this revenue stream for the business.
Brands division
Total brands revenue was up 7.1% to £88.0m (2007 H1: £82.1m). Within this,
wholesale revenue was up 2.8% to £77.5m (2007 H1: £75.4m). Revenue from
licensing was up 56.7% to £10.5m (2007 H1: £6.7m), driven by the acquisition of
Everlast in September 2007 and the licensing agreement signed with Dubai based
company Retail Corp. This will establish Lillywhites and Sports Direct stores
throughout the Middle East region and the Republic of South Africa. By the end
of 2008, we expect 10 stores to have been opened in South Africa, all of which
will carry most of our Group brands. This will ensure Sports Direct has a
presence in the market ahead of the 2010 FIFA World Cup being held there.
Gross margins increased from 38.6% to 41.9% due to the increase in high margin
licensing income.
During the period, the Group acquired the Everlast boxing brand for
approximately £80.4m. Everlast is a leading US boxing and apparel brand which
fits strategically with Sports Direct's existing brand portfolio. Importantly,
this acquisition provides a significant platform in the US market. Since the
date of acquisition to the period end, Everlast contributed £4.1m to brand
revenue. We also acquired the minority interest in Smith and Brooks.
Operating costs have increased in the division due to the inclusion of Everlast
from its acquisition in September, along with the closure of the Dunlop
Slazenger offices in Wakefield, and their subsequent integration into the
Shirebrook operation.
Store portfolio
As at 28 October 2007, the Group operated 478 stores, of which 425 were located
in the UK (excluding Northern Ireland), 35 in Belgium, 14 in Slovenia and four
in Holland. In addition, through its 42.5% shareholding in the Heatons chain,
Sports Direct has three stores in Northern Ireland and 12 stores in the Republic
of Ireland.
In the period, 22 new Sports Direct stores were opened in the UK, with 5
relocations. This represented a net increase of 17 new core stores in 2008 H1.
As part of the Group's ongoing portfolio management, we disposed of 23 smaller
non-core stores in the period, excluding the 5 relocations.
At the period end, the 425 UK retail stores total square footage was circa. 3.3m
square feet.
Since the period end, we have opened a net of 11 new core stores in the UK, plus
completed 2 relocations. We have disposed of a further 3 smaller non-core
stores.
When evaluating new sites, and reviewing existing locations, Sports Direct sets
rigorous selection criteria. The Group is now targeting to open between 35-40
new core stores in the current financial year. Looking forward, and against a
backdrop of a general consumer slowdown, we are targeting a similar number of
new core stores for the next financial year.
We now have over 100 sportsdirect.com fascias in the UK alone and the rebranding
project is continuing.
The Company previously announced it would be seeking shareholder approval to
purchase freehold properties from Mike Ashley. The difficulties associated with
that have not been resolved, therefore the Company will no longer be seeking
shareholder approval for this.
Strategy
In spite of the tough UK retail backdrop, in the period we strengthened our
Group gross margins by 220 basis points to 43.3% (2007 H1: 41.1%). We achieved
this by increasing the value of products and delivering continued efficiencies
from the state-of-the-art distribution centre in Shirebrook. Gross margin also
benefited from the lower average dollar exchange rate in the period.
Maintaining efficient operating margins, subject to the appropriate balance
between margins and revenues, remains a key management focus for the Group.
Core to our business model is building stakes in other companies which we
believe will provide us with a strategic and commercial advantage. At 28
October 2007, the Group held investments in adidas, Amer Sports, Blacks Leisure,
JD Sports and Umbro.
Post period end, on 30 October 2007, the Group acquired further shares in Umbro,
taking our holding to 29.9%. On 7 November 2007 the Group disposed of its
entire holding in Amer Sports Corporation for a consideration of £117.8m.
Outlook
As previously stated, the UK retail business will be impacted by England's
failure to qualify for next year's European Championships. This will be partly
mitigated, however, by performances in the International retail and Brands
businesses, where management is targeting 6-8% underlying EBITDA growth in
2007/8 and 2008/9. Therefore we remain confident of exceeding current
underlying EBITDA expectations for 2007/8.
Financial Review
Underlying EBITDA for the period was £83.6 million, compared to £99.5 million in
the corresponding period last year.
The Directors believe that underlying EBITDA and underlying earnings provides
the most useful information for shareholders on the underlying performance of
the business, 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 share of profit of
associated undertakings and joint ventures of £2.3m (2007 H1: £0.8m). Underlying
EBITDA is calculated as EBITDA before exceptional items, and non trading items
including realised foreign exchange losses.
Selling, distribution and administration costs
Selling, distribution and administration costs increased as a percentage of
revenue as it includes the costs of the acquired companies and a realised
foreign exchange loss of £57.9m compared to a loss of £16.9m in the comparative
period.
The Group manages the impact of currency movements through the use of forward
fixed rate currency purchase contracts. The Company's policy, consistently
applied, is to hold or hedge up to four years (with a minimum of one year) on
anticipated purchases in foreign currency.
The exchange loss of £57.9m included in administration costs has arisen from:
a) accepting dollars at the contracted rate; and
b) the translation of dollars and dollar denominated assets at the period
end rate.
The exchange gain of £27.1m included in finance income substantially represents
the reversal of the provision made (under IFRS) for the forward contracts at 29
April 2007 in anticipation of the loss realised in the accounts to 28 October
2007.
The sterling exchange rate with the US dollar at 29 April 2007 was $1.998 and
$2.053 at 28 October 2007.
At today's rates this profit and loss impact is all but reversed.
Finance income
2008 H1 2007 H1
(£'m) (£'m)
---------------------------------------------------------------------------------------------------------
Finance income:
Bank interest receivable 0.6 0.2
Other interest receivable - 0.3
Expected return on pension plan assets 1.1 1.1
Fair value adjustment to forward foreign exchange contracts 27.1 2.5
---------------------------------------------------------------------------------------------------------
28.8 4.1
=========================================================================================================
The profit on the fair valuing of forward foreign exchange contracts arises
under IFRS as a result of marking to market at the period end those contracts
held to hedge the Group's currency risk, and reversal of the provision made in
previous periods.
Finance costs
2008 H1 2007 H1
(£'m) (£'m)
--------------------------------------------------------------------------------------------------------------------
Finance costs:
Interest on bank loans and overdrafts 11.2 2.5
Interest on other loans 3.8 0.6
Interest on retirement benefit obligations 1.1 1.1
Fair value adjustment to forward foreign exchange contracts - -
--------------------------------------------------------------------------------------------------------------------
16.1 4.2
====================================================================================================================
Taxation
The effective tax rate on profit before tax for 2008 H1 was 38.5% (2007 H1:
32.3%). The increase is due to the magnitude of non-deductible expenditure
forming a greater proportion of profit before taxation than in the prior period
(as a result of the reduced profit before taxation).
Earnings
2008 H1 2007 H1 % Change
p per share p per share
--------------------------------------------------------------------------------------------------------------------
Basic EPS 1.88 11.54 (83.7)
Underlying EPS 5.71 7.57 (24.6)
Basic earnings per share ("EPS") is calculated by dividing the earnings
attributable to ordinary shareholders by the weighted average number of ordinary
shares outstanding during the financial period.
The underlying earnings per share reflects the underlying performance of the
business compared with the prior year and is calculated by dividing underlying
earnings after tax by the number of shares in issue at the year end. It is not
a recognised profit measure under IFRS and may not be directly comparable with
"adjusted" profit measures used by other companies.
The items adjusted for arriving at the underlying profit are as follows:
2008 H1 2007 H1
(£'m) (£'m)
--------------------------------------------------------------------------------------------------------------------
Profit after tax: 13.0 47.4
Post tax effect of
Exceptional items:
Profit on disposal of certain retail concessions - (2.9)
Realised loss on forward foreign exchange contracts 40.5 11.8
Fair value adjustment to forward foreign exchange contracts (19.0) (1.8)
Underlying profit after tax 34.5 54.5
--------------------------------------------------------------------------------------------------------------------
To assist comparability, underlying EPS for 2007 H1 is based the listing share
capital of 720 million shares.
If the share buyback had not taken place the underlying EPS would be 5.18p
instead of 5.71p.
Dividends
A dividend of 1.03p per share in respect of the year ended 29 April 2007,
totalling £7.42m, was paid on 31 July 2007 to shareholders on the register at 29
June 2007.
The Board has resolved to pay on 30 April 2008 a dividend of 2.06p per share to
shareholders on the register on 28 March 2008.
Capital expenditure
Expenditure, including acquisition of property, plant and equipment, amounted to
£120.0m (2007 H1: £42.7m). This related to £77.1m on new and refurbished
stores, and £31.9m on a freehold office in New Cavendish Street, London, part of
which the Group will occupy as its London office. The remaining spend related
to Shirebrook, other plant and equipment and IT hardware.
Acquisitions
The Group spent £96.8m on acquisitions during 2008 H1. The principal
acquisitions related to Everlast and Field & Trek. The net assets acquired have
been analysed and separate intangible assets and the residual goodwill
recognised as appropriate in accordance with IFRS3: Business Combinations.
Strategic investments
The Group has, from time to time, taken strategic stakes in other companies. At
28 October 2007, the Group held investments in adidas, Amer Sports, Blacks
Leisure, JD Sports and Umbro. Changes in the value of these investments are
recognised directly in equity in accordance with IFRS.
2008 H1
(£'m)
---------------------------------------------------------------------------------------------------------------
Total available-for-sale investments at 29 April 2007 75.4
Additions in the period 334.4
Disposal proceeds in the period (66.5)
Profit on disposals in the period 1.7
Fair value adjustment in respect of available-for-sale financial assets 19.5
---------------------------------------------------------------------------------------------------------------
Total available-for-sale investments at 28 October 2007 364.5
===============================================================================================================
The respective shareholdings at 28 October 2007 and 17 December 2007 were as
follows:
At 28 October 2007 At 17 December 2007
Shares 'm Holding Shares 'm Holding
----------------------------------------------------------------------------------------------------------------------
Blacks Leisure Group 12.503 29.36% 12.728 29.89%
Umbro 21.974 15.04% 43.678 29.90%
Amer Sports Corporation 8.769 12.16% - -
John David Group 4.903 10.16% 5.305 10.99%
adidas AG 5.031 2.47% 1.0 0.49%
----------------------------------------------------------------------------------------------------------------------
Share buyback
The Group spent £162.3m on share purchases during the period: 72,000,000 shares
are now held in treasury. The weighted average number of shares for the period
was 691,176,000 and the number of shares in issue at the end of the period,
excluding treasury shares, was 604,452,368.
Cash flow and net debt
In addition to the share buyback and the amounts invested in capital expenditure
and acquisitions, the Group invested a net £267.9m in strategic stakes. Net
debt increased from £38.1m at 29 April 2007 to £795.9m at 28 October 2007.
Taking into account the inclusion of marketable securities (available for sale
financial assets) the net debt at 28 October 2007 was £431.4m.
The analysis of debt at 28 October 2007 was as follows:
2008 H1 2007 H1
(£'m) (£'m)
-------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents 17.6 181.8
Borrowings (813.5) (219.9)
Net debt (795.9) (38.1)
Market value of marketable securities 364.5 75.4
-------------------------------------------------------------------------------------------------------------------
Net (indebtedness)/liquidity (431.4) 37.3
===================================================================================================================
2008 H1
(£'m)
------------------------------------------------------------------------------------------------------------------
Net debt at 29 April 2007 (38.1)
Acquisition of subsidiaries including Everlast & Field & Trek (96.8)
Net cost of listed investments (267.9)
Property (120.0)
Working capital including payment of IPO costs (103.4)
Share buyback (162.3)
Dividends paid (7.4)
------------------------------------------------------------------------------------------------------------------
Net debt at 28 October 2007 (795.9)
==================================================================================================================
Reconciliation of movement in equity
Total equity movement is as follows:
2008 H1
(£'m)
------------------------------------------------------------------------------------------------------------------
Total equity at 29 April 2007 280.8
Profit after tax for the 26 weeks ended 28 October 2007 13.0
Items taken directly to equity:
Actuarial gain on pension 0.3
Fair value adjustment in respect of available-for-sale financial assets 19.5
Tax on items taken directly to equity (5.9)
13.9
Movement in equity issues:
Share buyback (162.3)
Minority interests eliminated on acquisitions (2.2)
(164.5)
Dividends (7.4)
------------------------------------------------------------------------------------------------------------------
Total equity at 28 October 2007 135.8
==================================================================================================================
Pensions
The Group operates a number of closed defined benefit schemes in the Dunlop
Slazenger companies. The net deficit in these schemes decreased from £14.0m at
29 April 2007 to £13.4m at 28 October 2007.
Financial risks, systems and controls
The principal financial risks the Group faces are:
• Movement in interest rates on borrowings. The Group has not historically
hedged this risk.
• Movement in currency exchange rates. A significant amount of the Group's
purchases are in US dollars. The Group hedges the risk of such movements by
using forward purchases of foreign currency. Certain of the Group's assets
are held overseas in local currency and are revalued in accordance with
currency movements. This currency risk is not hedged.
Funding and liquidity for the Group's operations are provided through bank loans
and overdraft facilities and shareholders' funds. The objective is to maintain
sufficient funding and liquidity for the Group's requirements.
The Group maintains a system of controls to manage the business and to protect
its assets. We continue to invest in people, systems and in IT to manage the
Group's operations and its finance effectively and efficiently.
Dave Forsey / Bob Mellors
Chief Executive / Finance Director
19 December 2007
INDEPENDENT REVIEW REPORT TO SPORTS DIRECT INTERNATIONAL PLC
Introduction
We have been engaged by the company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 28
October 2007 which comprises Consolidated income statement, Consolidated
statement of recognised income and expenses, Consolidated balance sheet,
Consolidated cash flow statement and the related notes. We have read the other
information 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 in accordance with guidance contained
in APB Statements of Standards for Reporting Accountants "International Standard
on Review Engagements (UK and Ireland) 2410". Our review work has been
undertaken so that we might state to the company those matters we are required
to state to them in a 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 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 Services Authority.
As disclosed in note 1, the annual financial statements of the group are
prepared in accordance with IFRSs 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 to the Company 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'' issued by the Auditing
Practices Board for use in the United Kingdom. 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 six months ended 28 October 2007 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 Services Authority.
Grant Thornton UK LLP
Chartered accountants
London
19 December 2007
UNAUDITED CONSOLIDATED INCOME STATEMENT FOR THE 26 WEEKS ENDED 28 OCTOBER 2007
26 weeks 26 weeks 52 weeks
ended ended ended
28 October 29 October 29 April
2007 2006 2007
__________ _________ _____________
Notes £'000 £'000 £'000
Continuing operations:
Revenue 2 668,112 719,116 1,347,144
Cost of sales (378,855) (423,237) (751,003)
__________ _________ _____________
Gross profit 289,257 295,879 596,141
Selling, distribution and administrative expenses (229,042) (216,219) (421,655)
Loss on forward foreign exchange contracts (57,924) (16,864) (23,543)
Other operating income 1,707 2,257 1,783
Exceptional items 3 - 4,160 (58,826)
__________ _________ _____________
Operating profit 2 3,998 69,213 93,900
Investment income 2,203 225 1,790
Finance income 28,792 4,130 3,449
Finance costs (16,136) (4,245) (42,081)
Share of profit of associated undertakings and joint ventures 2,355 822 3,422
__________ _________ _____________
Profit before taxation 21,212 70,145 60,480
Taxation 4 (8,172) (22,675) (23,360)
__________ _________ _____________
Profit for the period 2 13,040 47,470 37,120
========== ========= =============
Equity holders of the Group 17 12,962 47,370 37,671
Minority interests 78 100 (551)
__________ _________ _____________
Profit for the period 2 13,040 47,470 37,120
========== ========= =============
Earnings per share from total and continuing operations attributable to the equity shareholders
Pence per Pence per Pence per
share share share
__________ _________ _____________
Basic earnings per share 5 1.88 11.54 8.18
Diluted earnings per share 5 1.88 11.54 8.18
__________ _________ _____________
The accompanying notes form part of this financial report.
UNAUDITED CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE
FOR THE 26 WEEKS ENDED 28 OCTOBER 2007
26 weeks 26 weeks 52 weeks
ended ended 29 ended
28 October October 29 April
2007 2006 2007
__________ _________ __________
Notes £'000 £'000 £'000
Exchange differences on translation of foreign operations (32) 2,047 110
Actuarial gains/(losses) on defined benefit pension schemes 292 (2,286) (456)
Fair value adjustment in respect of available-for-sale financial 19,494 6,249 (7,106)
assets
Taxation on items taken directly to equity (5,848) (1,188) 2,268
__________ _________ __________
Income and expense recognised directly in equity 13,906 4,822 (5,184)
Profit for the period 2 13,040 47,470 37,120
__________ _________ __________
Total income and expense recognised in the period 26,946 52,292 31,936
========== ========= ==========
Equity holders of the Group 26,868 52,192 32,487
Minority interests 78 100 (551)
__________ _________ __________
26,946 52,292 31,936
========== ========= ==========
The accompanying notes form part of this financial report.
UNAUDITED CONSOLIDATED BALANCE SHEET AS AT 28 OCTOBER 2007
28 October 29 October 29 April
2007 2006 2007
__________ _________ ________
Notes £'000 £'000 £'000
ASSETS
Non-current assets
Property, plant and equipment 7 317,446 230,805 224,463
Intangible assets 197,361 65,391 87,981
Investments in associated undertakings and joint ventures 23,058 20,448 21,988
Available-for-sale financial assets 8 364,518 70,976 75,447
Deferred tax assets 31,925 13,516 31,925
__________ _________ ________
934,308 401,136 441,804
__________ _________ ________
Current assets
Inventories 227,800 209,419 231,383
Trade and other receivables 99,938 107,370 88,615
Cash and cash equivalents 17,563 23,405 181,808
__________ _________ ________
345,301 340,194 501,806
__________ _________ ________
TOTAL ASSETS 1,279,609 741,330 943,610
========== ========= ========
EQUITY AND LIABILITIES
Share capital 9 72,000 1,000 72,000
Share premium 10 874,300 - 874,300
Treasury shares 11 (162,348) - -
Permanent contribution to capital 12 50 - 50
Capital redemption reserve 13 50 - 50
Foreign currency translation reserve 14 (869) (2,994) (837)
Merger reserve 15 - 43 -
Reverse combination reserve 16 (987,312) - (987,312)
Retained earnings 17 337,192 335,656 317,708
__________ _________ ________
133,063 333,705 275,959
Minority interests 18 2,723 4,595 4,845
__________ _________ ________
Total equity 135,786 338,300 280,804
__________ _________ ________
Non-current liabilities
Other payables 1,174 1,121 2,408
Borrowings 19 8,586 1,673 1,935
Retirement benefit obligations 13,443 14,871 14,032
Deferred tax liabilities 43,291 18,568 18,586
Provisions 29,646 25,187 23,821
__________ _________ ________
96,140 61,420 60,782
__________ _________ ________
Current liabilities
Derivative financial liabilities 15,342 8,270 42,463
Trade and other payables 212,596 189,298 309,944
Borrowings 19 804,850 114,723 217,996
Current tax liabilities 14,895 29,319 31,621
__________ _________ ________
1,047,683 341,610 602,024
__________ _________ ________
Total liabilities 1,143,823 403,030 662,806
__________ _________ ________
TOTAL EQUITY AND LIABILITIES 1,279,609 741,330 943,610
========== ========= ========
UNAUDITED CONSOLIDATED CASH FLOW STATEMENT FOR THE 26 WEEKS ENDED 28 OCTOBER 2007
26 weeks 26 weeks 52 weeks
ended ended ended
28 October 29 October 29 April
2007 2006 2007
__________ _________ ________
Notes £'000
Cash (outflow)/inflow from operating activities 21 (68,042) 67,386 199,261
Income taxes paid (22,542) (9,642) (23,886)
__________ _________ ________
Net cash (outflow)/inflow from operating activities (90,584) 57,744 175,375
__________ _________ ________
Cash flow from investing activities
Proceeds on disposal of property, plant and equipment 12,965 4,989 10,120
Proceeds on disposal of listed investments 66,524 - -
Dividends received from associates 1,189 879 -
Purchase of joint venture, net of cash acquired - - (238)
Purchase of subsidiaries, net of cash acquired (96,809) (15,786) (22,747)
Purchase of intangible assets (518) (2,588) (2,978)
Purchase of property, plant and equipment (120,007) (35,112) (54,797)
Purchase of listed investments (334,410) (49,389) (67,215)
Investment income received 512 - 1,790
__________ _________ ________
Net cash outflow from investing activities (470,554) (97,007) (136,065)
__________ _________ ________
Cash flow from financing activities
Finance income received 550 714 1,339
Finance costs paid (14,980) (2,989) (7,948)
Net (repayments of)/increase in borrowings (7,420) 1,313 (6,583)
Proceeds from share issues - - 928,800
Purchase of a certain percentage of previous owner's equity - - (928,800)
investment
Share issue costs - - (9,712)
Equity dividend paid (7,416) (200) (380)
Purchase of own shares (162,348) - -
__________ _________ ________
Net cash outflow from financing activities (191,614) (1,162) (23,284)
__________ _________ ________
Net (decrease)/increase in cash and cash equivalents (752,752) (40,425) 16,026
including overdrafts
Cash and cash equivalents including overdrafts at beginning (25,029) (41,055) (41,055)
of period
__________ _________ ________
Cash and cash equivalents including overdrafts at the (777,781) (81,480) (25,029)
period end
========== ========= ========
The accompanying notes form part of this financial report.
NOTES TO THE FINANCIAL INFORMATION FOR THE 26 WEEKS ENDED 28 OCTOBER 2007
1 General information and basis of preparation
The results for the first half of the financial year have not been audited and
are prepared on the basis of the accounting policies set out in the Group's 2007
Annual Report and Financial Statements. The financial information has been
prepared in accordance with the Disclosure and Transparency rules of the
Financial Services Authority (DTR) and with International Accounting Standard
(IAS) 34 - 'Interim Financial Reporting' as endorsed by the European Union. This
consolidated financial information for the period does not constitute statutory
financial statements within the meaning of s240 of the Companies Act 1985.
The summary of results for the 52 weeks ended 29 April 2007 is an extract 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 s237(2) or s237(3)
of the Companies Act 1985.
Change in accounting policies
In the current financial accounting period, the group will adopt International
Financial Reporting Standard 7 'Financial instruments: Disclosures' (IFRS 7) for
the first time. As IFRS 7 is a disclosure standard, there is no impact of that
change in accounting policy on these Interim financial statements. Full details
of the change will be disclosed in the Annual report and Financial statements
for the 52 weeks to 27 April 2008.
Principal risks and uncertainties
The principal risks and uncertainties which could impact the Group's long-term
performance remain those identified on pages 54 of the Group's 2007 Annual
Report and Financial Statements. The Chief Executive and Finance Director's
Review in this half yearly financial report includes a commentary of the primary
uncertainties affecting the Group for the remaining six months of the year.
Statement of directors' responsibilities
The directors' confirm that this half yearly financial report has been prepared
in accordance with IAS 34 as adopted by the European Union, and includes a fair
review of the information required by DTR 4.2.7 and DTR 4.2.8.
The directors of Sports Direct International plc are listed in the Group's 2007
Annual Report and Financial Statements, with the exception of the following
changes in the period: Chris Bulmer resigned on 25 October 2007, and Malcolm
Dalgleish and Dave Singleton were appointed on 25 October 2007.
NOTES TO THE FINANCIAL INFORMATION FOR THE 26 WEEKS ENDED 28 OCTOBER 2007
(CONTINUED)
2 Segmental analysis
Primary reporting format - business segments
For management purposes, the Group is organised into and reports its performance
between two business segments, Retail and Brands. The Retail business segment
comprises the retail network of stores and the Brands business segment comprises
the identification, acquisition, development and trading of a portfolio of
internationally recognised sports and leisure brands.
Segment information about the business segments is presented below:
Segmental information for the 26 weeks ended 28 October 2007:
Retail Brands Eliminations Total
________________________________________ _________________________ ____________ _______
UK UK UK Inter- Total Whole- Licen- Total
retail whole- total national sale sing
sale retail
&
other
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
________ ______ ________ _______ _______ ______ ______ _______ ____________ _______
Sales to external 518,397 23,248 541,645 38,514 580,159 77,530 10,423 87,953 - 668,112
customers
Sales to other segments - 1,418 1,418 - 1,418 3,818 - 3,818 (5,236) -
________ ______ ________ _______ _______ ______ ______ _______ ____________ _______
Revenue 518,397 24,666 543,063 38,514 581,577 81,348 10,423 91,771 (5,236) 668,112
======== ====== ======== ======= ======= ====== ====== ======= ============ =======
Gross profit 236,018 16,351 252,369 36,888 - 289,257
======== ======= ======= ======= ============ =======
Operating profit before 54,281 1,643 55,924 5,998 - 61,922
foreign exchange and
exceptional items
======== ======= ======= ======= ============ =======
Operating profit 3,998
Investment income 2,203
Finance income 28,792
Finance costs (16,136)
Share of profits of 2,355
associated undertakings
and joint ventures
_______
Profit before taxation 21,212
Taxation (8,172)
_______
Profit for the period 13,040
=======
Sales to other segments are priced at cost.
Other segment items included in the income statement for the 26 weeks ended 28
October 2007:
Retail Brands Total
_______ _________ ________
£'000 £'000 £'000
Depreciation 17,989 694 18,683
Amortisation 16 646 662
======= ========== =========
Information regarding segment assets and liabilities as at 28 October 2007 and
capital expenditure for the 26 weeks then ended:
Retail Brands Eliminations Total
______ ______ ____________ _____
£'000 £'000 £'000 £'000
Investments in associated undertakings and joint 15,604 7,454 - 23,058
ventures
Other assets 1,167,293 378,278 (289,020) 1,256,551
______ ______ ____________ _____
Total assets 1,182,897 385,732 (289,020) 1,279,609
====== ====== ============ =====
Total liabilities (1,080,335) (352,508) 289,020 (1,143,823)
====== ====== ============ =====
Tangible asset additions 120,282 3,928 - 124,210
Intangible asset additions 1,319 57,783 - 59,102
______ ______ ____________ _____
Total capital expenditure 121,601 61,711 - 183,312
====== ====== ============ =====
NOTES TO THE FINANCIAL INFORMATION FOR THE 26 WEEKS ENDED 28 OCTOBER 2007
(CONTINUED)
2 Segmental analysis (continued)
Segmental information for the 26 weeks ended 29 October 2006:
Retail Brands Eliminations Total
________________________________________________ ____________________________ ____________ _______
UK UK UK total Inter- Total Whole Licen- Total
retail whole national -sale sing
-sale retail
&
other
________ ______ ________ _______ _______ ______ ______ _______ ____________ _______
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Sales to 595,088 8,329 603,417 33,558 636,975 75,382 6,759 82,141 - 719,116
external
customers
Sales to - 4,782 4,782 - 4,782 7,110 - 7,110 (11,892) -
other
segments
________ ______ ________ _______ _______ ______ ______ _______ ____________ _______
Revenue 595,088 13,111 608,199 33,558 641,757 82,492 6,759 89,251 (11,892) 719,116
======== ====== ======== ======= ======= ====== ====== ======= ============ =======
Gross profit 252,010 12,126 264,136 31,743 - 295,879
======== ======= ======= ======= ============ =======
Operating 74,409 1,762 76,171 5,746 - 81,917
profit
before
foreign
exchange and
exceptional
items
======== ======= ======= ======= ============ =======
Operating 69,213
profit
Investment 225
income
Finance 4,130
income
Finance (4,245)
costs
Share of 822
profits of
associated
undertakings
and joint
ventures
_______
Profit 70,145
before
taxation
Taxation (22,675)
_______
Profit for 47,470
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 26 weeks ended
29 October 2006:
Retail Brands Total
________ ______ ________
£'000 £'000 £'000
Depreciation 15,065 927 15,992
Amortisation - 787 787
========= ======= =========
Information regarding segment assets and liabilities as at 29 October 2006 and
capital expenditure for the 26 weeks then ended:
Retail Brands Eliminations Total
_______ ________ ____________ ________
£'000 £'000 £'000 £'000
Investments in associated undertakings and joint 13,146 7,302 - 20,448
ventures
Other assets 636,483 202,563 (118,164) 720,882
_______ ________ ____________ ________
Total assets 649,629 209,865 (118,164) 741,330
======= ========== ============ ========
Total liabilities (344,708) (176,486) 118,164 (403,030)
======= ========== ============ ========
Tangible asset additions 37,680 5,035 - 42,715
Intangible asset additions 3,290 16,839 - 20,129
_______ ________ ____________ ________
Total capital expenditure 40,970 21,874 - 62,844
======= ========== ============ ========
NOTES TO THE FINANCIAL INFORMATION FOR THE 26 WEEKS ENDED 28 OCTOBER 2007
(CONTINUED)
2 Segmental analysis (continued)
Segmental information for the 52 weeks ended 29 April 2007:
Retail Brands Eliminations Total
_________________________________________________ ________________________ ____________ _______
UK UK UK Inter- Total Whole- Licen- Total
retail whole- total national sale sing
sale retail
&
other
________ ______ ________ _______ _______ ______ ______ _______ ____________ _______
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Sales to external 1,069,667 41,525(1) 1,111,192 64,018 1,175,210 154,484 17,450 171,934 - 1,347,144
customers
Sales to other - 11,235 11,235 - 11,235 12,523 - 12,523 (23,758) -
segments
________ ______ ________ _______ _______ ______ ______ _______ ____________ _______
Revenue 1,069,667 52,760 1,122,427 64,018 1,186,445 167,007 17,450 184,457 (23,758) 1,347,144
======== ====== ======== ======= ======= ====== ====== ======= ============ =======
Gross profit 498,101 22,173 520,274 75,867 - 596,141
======== ======= ======= ======= ============ =======
Operating profit 155,305 1,264 156,569 19,700 - 176,269
before foreign
exchange and
exceptional items
======== ======= ======= ======= ============ =======
Operating profit 93,900
Investment income 1,790
Finance income 3,449
Finance costs (42,081)
Share of profits of 3,422
associated
undertakings and
joint ventures
_______
Profit before 60,480
taxation
Taxation (23,360)
_______
Profit for the period 37,120
=======
(1) Includes £14.7 million in relation to property transactions income.
Sales to other segments are priced at cost plus a 10% mark-up.
Other segment items included in the income statement for the 52 weeks ended
29 April 2007:
Retail Brands Total
________ ______ ________
£'000 £'000 £'000
Depreciation 29,022 1,882 30,904
Amortisation - 3,584 3,584
========= ======= =========
Information regarding segment assets and liabilities as at 29 April 2007 and
capital expenditure for the 52 weeks then ended:
Retail Brands Eliminations Total
_______ ________ ____________ ________
£'000 £'000 £'000 £'000
Investments in associated undertakings and joint 14,847 7,141 - 21,988
ventures
Other assets 984,598 265,434 (328,410) 921,622
_______ ________ ____________ ________
Total assets 999,445 272,575 (328,410) 943,610
======= ========== ============ ========
Total liabilities (744,811) (246,405) 328,410 (662,806)
======= ========== ============ ========
Tangible asset additions 57,732 3,875 - 61,607
Intangible asset additions 20,756 21,445 - 42,201
_______ ________ ____________ ________
Total capital expenditure 78,488 25,320 - 103,808
======= ========== ============ ========
NOTES TO THE FINANCIAL INFORMATION FOR THE 26 WEEKS ENDED 28 OCTOBER 2007
(CONTINUED)
2 Segmental analysis (continued)
Secondary reporting format - geographic segments
The Group operates in two geographic segments, UK and Non-UK. These geographic
segments are the basis on which the Group reports its secondary segment
information, as presented below:
Segmental information for the 26 weeks ended 28 October 2007::
UK Non-UK Unallocated Eliminations Total
_______ _______ ___________ ____________ _______
£'000 £'000 £'000 £'000 £'000
Segmental revenue from external customers 574,481 99,007 - (5,376) 668,112
======= ======= =========== ============ =======
Total capital expenditure 117,869 65,443 - - 183,312
======= ======= =========== ============ =======
Segmental assets 1,380,054 188,575 - (289,020) 1,279,609
======= ======= =========== ============ =======
Segmental information for the 26 weeks ended 29 October 2006:
UK Non-UK Unallocated Eliminations Total
_______ _______ ___________ ____________ _______
£'000 £'000 £'000 £'000 £'000
Segmental revenue from external customers 636,402 94,606 - (11,892) 719,116
======= ======= =========== ============ =======
Total capital expenditure 40,594 5,411 16,839 - 62,844
======= ======= =========== ============ =======
Segmental assets 679,433 127,430 52,631 (118,164) 741,330
======= ======= =========== ============ =======
Segmental information for the 52 weeks ended 29 April 2007:
UK Non-UK Unallocated Eliminations Total
_______ _______ ___________ ____________ _______
£'000 £'000 £'000 £'000 £'000
Segmental revenue from external customers 1,178,528 192,374 - (23,758) 1,347,144
======= ======= =========== ============ =======
Total capital expenditure 94,873 8,935 - - 103,808
======= ======= =========== ============ =======
Segmental assets 1,112,957 133,532 25,531 (328,410) 943,610
======= ======= =========== ============ =======
3 Exceptional items
26 weeks 26 weeks 52 weeks
ended ended ended
28 October 29 October 29 April
2007 2006 2007
________ ______ ________
£'000 £'000 £'000
Costs relating to admission to the London Stock Exchange - - 586
Past performance bonuses including national insurance - - 56,400
Profit on disposal of certain retail concessions(1) - (4,160) (4,160)
Legal claims - - 6,000
________ ______ ________
- (4,160) 58,826
======== ====== ========
(1) In May 2006, the Group disposed of its Hargreaves airport concessions.
NOTES TO THE FINANCIAL INFORMATION FOR THE 26 WEEKS ENDED 28 OCTOBER 2007
(CONTINUED)
4 Taxation
The tax charge on profit before tax, excluding the impact of exceptional items
has been calculated using an estimated effective annual rate of 38.5% (2006:
32.3%). Including tax on exceptional items, this leaves an estimated tax charge
of £8.2m for the 26 weeks ended 28 October 2007 (£22.7m for the 26 weeks ended
29 October 2006).
5 Earnings per share
Basic earnings per share is calculated by dividing the earnings attributable to
ordinary shareholders by the weighted average number of ordinary shares
outstanding during the year. The comparative weighted average number of shares
has been adjusted for the impact of reverse acquisition accounting.
Share awards granted during the period were anti-dilutive as at 28 October 2007
as the exercise price exceeded the average market price of the Company's shares
during the period from when the share awards were granted to 28 October 2007. As
a result share awards are not taken into account when determining the weighted
average number of ordinary shares in issue during the period and therefore the
basic and diluted earnings per share are the same.
Basic and diluted earnings per share
26 weeks 26 weeks 26 weeks 26 weeks 52 weeks 52 weeks
ended ended ended ended ended ended
28 October 28 October 29 October 29 October 29 April 29 April
2007 2007 2006 2006 2007 2007
__________ __________ __________ __________ ________ ________
Basic Diluted Basic Diluted Basic Diluted
£'000 £'000 £'000 £'000 £'000 £'000
Profit for the period 12,962 12,962 47,370 47,370 37,671 37,671
Number in thousands Number in thousands Number in thousands
Weighted average number of shares 691,176 691,176 410,400 410,400 460,582 460,582
Pence per share Pence per share Pence per share
Earnings per share 1.88 1.88 11.54 11.54 8.18 8.18
==== ==== ===== ===== ==== ====
Underlying earnings per share
The underlying earnings per share reflects the underlying performance of the
business compared with the prior year and is calculated by dividing underlying
earnings by the shares in issue at the period end. 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
certain exceptional items.
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.
NOTES TO THE FINANCIAL INFORMATION FOR THE 26 WEEKS ENDED 28 OCTOBER 2007
(CONTINUED)
5 Earnings per share (continued)
Underlying earnings per share(continued)
26 weeks 26 weeks 26 weeks 26 weeks 52 weeks 52 weeks
ended ended ended ended ended ended
28 October 28 October 29 October 29 October 29 April 29 April
2007 2007 2006 2006 2007 2007
__________ __________ __________ __________ ________ ________
Basic Diluted Basic Diluted Basic Diluted
£'000 £'000 £'000 £'000 £'000 £'000
Profit for the period 12,962 12,962 47,370 47,370 37,671 37,671
Post tax adjustments to profit for
the period for the following
exceptional items:
Costs relating to admission to the - - - - 410 410
London Stock Exchange
Past performance bonuses including - - - - 39,480 39,480
national insurance
Realised loss on forward foreign 40,547 40,547 11,807 11,807 16,480 16,480
exchange contracts
Fair value adjustment to forward (18,985) (18,985) (1,770) (1,770) 22,166 22,166
foreign exchange contracts
Profit on disposal of certain retail - - (2,912) (2,912) (2,912) (2,912)
concessions
Reorganisation costs - - - - - -
Leofelis legal claim - - - - 4,200 4,200
__________ __________ __________ __________ ________ ________
Underlying profit for the period 34,524 34,524 54,495 54,495 117,495 117,495
__________ __________ __________ __________ ________ ________
Number in thousands Number in thousands Number in thousands
Shares in issue at the period end 604,452 604,452 720,000* 720,000* 720,000 720,000
Pence per share Pence per share Pence per share
Earnings per share 5.71 5.71 7.57 7.57 16.32 16.32
==== ==== ===== ===== ==== ====
*To assist comparability the number of shares used for 29 October 2006 is the
720,000,000 that would have been in issue had the listing and admission to the
London Stock Exchange taken place as at this date.
6 Dividends
An interim dividend of 1.03p per share in respect of 2006-07 was paid on 31 July
2007 to shareholders on the register on 29 June 2007. No final dividend was
paid.
NOTES TO THE FINANCIAL INFORMATION FOR THE 26 WEEKS ENDED 28 OCTOBER 2007
(CONTINUED)
7 Property, plant and equipment
Freehold Long Short Plant and Total
land and leasehold leasehold equipment
buildings property property
______ _______ ________ _________ _______
£'000 £'000 £'000 £'000 £'000
Cost
At 29 April 2007 29,856 11,312 97,553 235,668 374,389
Exchange differences (33) - - 1,191 1,158
Additions through business combinations 372 - 50 3,781 4,203
Additions 85,731 534 15,461 18,281 120,007
Eliminated on disposals (3,652) (1,859) (7,627) (10,099) (23,237)
______ _______ ________ _________ _______
At 28 October 2007 112,274 9,987 105,437 248,822 476,520
====== ======= ======== ========= =======
Accumulated depreciation
As at 29 April 2007 (4,710) (3,680) (28,963) (112,573) (149,926)
Exchange differences 38 - - (448) (410)
Charge for the period (1,814) (6) (3,921) (12,942) (18,683)
Eliminated on disposals 1,479 457 951 7,058 9,945
______ _______ ________ _________ _______
At 28 October 2007 (5,007) (3,229) (31,933) (118,905) (159,074)
====== ======= ======== ========= =======
Net book amount
At 28 October 2007 107,267 6,758 73,504 129,917 317,446
====== ======= ======== ========= =======
At 29 April 2007 25,146 7,632 68,590 123,095 224,463
====== ======= ======== ========= =======
Finance leased assets included in the above
net book values
At 28 October 2007 - - - 658 658
====== ======= ======== ========= =======
At 29 April 2007 - - - 1,059 1,059
====== ======= ======== ========= =======
NOTES TO THE FINANCIAL INFORMATION FOR THE 26 WEEKS ENDED 28 OCTOBER 2007
(CONTINUED)
7 Property, plant and equipment (continued)
Included within freehold land and buildings cost as at 28 October 2007 is
£1,636,000 (29 April 2007: £1,749,000) of capital grants received from the East
Midlands Development Agency. The Group is subject to the following principal
conditions of the grant being met for a period, which is at the discretion of
the East Midlands Development Agency, of five years after the first grant
instalment was made on 28 April 2006 or 18 months after the last grant
instalment was made on 29 April 2007 ("conditional period"):
• The Group remains solvent.
• The Group does not cease to own, or for a period of at least three months
does not cease to use the relevant premises for which the grant was provided
or its related assets.
• The Group employs at least 507 permanent full-time employees or equivalent at
the relevant premises.
• The Group employs in total at least 1,171 employees at the relevant premises.
If the Group fails to adhere to any of the above conditions during the
conditional period the East Midlands Development Agency may demand full
repayment of the grant.
8 Available-for-sale financial assets
28 October 29 October 29 April
2007 2006 2007
________ __________ ________
£'000 £'000 £'000
Available-for-sale financial assets 364,518 70,976 75,447
======== ========== ========
The fair value of the listed available-for-sale investments is based on bid
quoted market prices at the balance sheet date.
The following table shows the aggregate movement in the Group's financial assets
during the period:
28 October 29 October 29 April
2007 2006 2007
________ __________ ________
£'000 £'000 £'000
At beginning of period 75,447 15,338 15,338
Additions 334,410 49,389 67,215
Disposals (64,833) - -
Revaluation through equity 19,494 6,249 (7,106)
________ __________ ________
At end of period 364,518 70,976 75,447
======== ========== ========
The financial assets at 28 October 2007 relate to strategic investments held of
between 2.5% and 29.3% of share capital. The Directors do not consider that they
have significant influence over the financial and operating policies of the
investees as they have no representation on the board of Directors, have no
participation in policy-making processes, including participation in decisions
about dividends or other distributions, have no material transactions with the
investees and do not interchange any managerial personnel.
NOTES TO THE FINANCIAL INFORMATION FOR THE 26 WEEKS ENDED 28 OCTOBER 2007
(CONTINUED)
8 Available-for-sale financial assets (continued)
The Group has one investment in excess of 20% of share capital, that being 29.3%
(29 April 2007: 29.3%) of the ordinary share capital of Blacks Leisure Group
plc, a company incorporated in England. The aggregate of its share capital and
reserves and profit for the periods ended 3 March 2007, 31 August 2006 and 29
February 2006 were as follows:
3 March 31 August 29 February
2007 2006 2006
________ __________ ________
£'000 £'000 £'000
Aggregate share capital and reserves 91,888 105,596 109,580
======== ========== ========
(Loss)/profit after taxation (12,624) 51 14,538
======== ========== ========
9 Share capital
28 October
2007
________
£'000
Authorised
999,500,010 ordinary shares of 10p each 99,950
499,990 redeemable preference shares of 10p each 50
________
100,000
========
Allotted, called up and fully paid
720,000,000 ordinary shares of 10p each 72,000
========
10 Share premium
28 October
2007
________
£'000
At 29 April 2007 and 28 October 2007 874,300
========
The share premium account is used to record the excess proceeds over nominal
value on the issue of shares.
11 Treasury shares
28 October
2007
________
£'000
At 29 April 2007 -
Treasury shares acquired 162,348
________
At 28 October 2007 162,348
========
Between 24 July 2007 and 26 October 2007 the Group acquired 115,547,632 of its
own shares for total consideration of £162,348,000, with the purchase price
ranging between £1.20 and £1.50. 43,547,632 of these shares are held for
cancellation.
NOTES TO THE FINANCIAL INFORMATION FOR THE 26 WEEKS ENDED 28 OCTOBER 2007
(CONTINUED)
12 Permanent contribution to capital
28 October
2007
________
£'000
At 29 April 2007 and 28 October 2007 50
========
13 Capital redemption reserve
28 October
2007
________
£'000
At 29 April 2007 and 28 October 2007 50
========
14 Foreign currency translation reserve
28 October
2007
________
£'000
At 29 April 2007 (837)
Translation differences - Group (157)
Translation differences - associates 125
________
At 28 October 2007 (869)
========
The foreign currency translation reserve is used to record exchange differences
arising from the translation of the financial statements of foreign subsidiaries
and associates.
15 Merger reserve
28 October
2007
________
£'000
At 29 April 2007 and 28 October 2007 -
========
16 Reverse combination reserve
28 October 2007
________
£'000
At 29 April 2007 and 28 October 2007 (987,312)
========
NOTES TO THE FINANCIAL INFORMATION FOR THE 26 WEEKS ENDED 28 OCTOBER 2007
(CONTINUED)
17 Retained earnings
28 October 2007
________
£'000
At 29 April 2007 317,708
Income recognised directly in equity 13,938
Profit for the financial period 12,962
Dividends (7,416)
________
At 28 October 2007 337,192
========
18 Minority interests
28 October 2007
________
£'000
At 29 April 2007 4,845
Share of (loss)/profit for the period 78
Acquisitions (2,214)
Disposals 14
________
At 28 October 2007 2,723
========
NOTES TO THE FINANCIAL INFORMATION FOR THE 26 WEEKS ENDED 28 OCTOBER 2007
(CONTINUED)
19 Borrowings
28 October 29 October 29 April
2007 2006 2007
_________ __________ ________
£'000 £'000 £'000
Non-current:
Bank and other loans 8,502 1,673 1,844
Obligations under finance leases 84 - 91
_________ __________ ________
8,586 1,673 1,935
_________ __________ ________
Current:
Bank overdrafts 795,344 104,971 206,837
Bank and other loans 9,158 9,752 10,463
Obligations under finance leases 348 - 696
_________ __________ ________
804,850 114,723 217,996
_________ __________ ________
Total borrowings:
Bank overdrafts 795,344 104,971 206,837
Bank and other loans 17,660 11,425 12,307
Obligations under finance leases 432 - 787
_________ __________ ________
813,436 116,396 219,931
========= ========== ========
The maturity of the Group's bank and other loan borrowings other than overdrafts
is as follows:
28 October 29 October 29 April
2007 2006 2007
_________ __________ ________
£'000 £'000 £'000
Borrowings are repayable as follows:
Within one year 9,506 9,752 11,159
Between one and two years 8,212 700 922
Between two and five years 127 973 924
After five years 247 - 89
_________ __________ ________
18,092 11,425 13,094
========= ========== ========
Borrowings - Sterling 1,529 6,286 4,231
Borrowings - Other 16,563 5,139 8,863
_________ __________ ________
18,092 11,425 13,094
========= ========== ========
Loans are all on commercial variable rates of interest ranging between 0.6% and
2.5% over the base rate of the country within which the borrowing entity
resides.
On 26 February 2007, four members of the Group, Sports World International
Limited, Lillywhites Limited, Dunlop Slazenger Group Limited and Smith & Brooks
Holdings Limited (the "Borrowers") entered into a committed working capital
facility agreement with The Governor and Company of the Bank of Scotland (the
"Working Capital Facility"). The Working Capital Facility is available to any of
the Borrowers and may be drawn to an aggregate limit of £600.0 million. It is
capable of being utilised by way of cash advances, letters of credit,
guarantees, bonds and/or currency borrowings. The Working Capital Facility is
available until 30 April 2009. Each Borrower is required to observe certain
covenants, including undertakings relating to delivery of financial statements,
and certain negative covenants, including in relation to creation of security
and disposal of assets. The Working Capital Facility is secured by a debenture
from each of the Borrowers and a composite guarantee from each of the
non-dormant subsidiaries of Sports World International Limited.
NOTES TO THE FINANCIAL INFORMATION FOR THE 26 WEEKS ENDED 28 OCTOBER 2007
(CONTINUED)
19 Borrowings (continued)
An agreement is in place with Kaupthing Singer and Friedlander whereby they
provide a credit facility which is secured against the market value of the
available for sale financial assets held by the Group. The credit facility limit
is determined by taking a specific percentage of the market value of each
individual security.
20 Acquisitions
Details of principal acquisitions for the 26 weeks ended 28 October 2007 are set
out below.
Date of acquisition Percentage Nature of
of equity activity
acquired
___________________ __________ ________
Field & Trek (UK) Limited 11 July 2007 60 Retail
Everlast 20 September 2007 100 Wholesale
Sport 2000 7 August 2007(1) 20 Retail
Smith and Brooks Holdings Limited 12 September 2007(1) 40 Wholesale
Sweatshop 18 October 2007 25 Retail
(1) This was an additional acquisition which takes the cumulative holding to
100%
The aggregate fair value of consideration paid, assets and liabilities acquired
and resulting goodwill in respect of the above acquisitions is detailed below.
Everlast Field & Other Total
Trek
_________ _________ ________ _____
£'000 £'000 £'000 £'000
Cash consideration including costs 80,365 5,090 5,696 91,151
Less: fair value of net assets acquired (36,450) (1,060) (2,313) (39,823)
_________ _________ ________ _____
Goodwill 43,915 4,030 3,383 51,328
========= ======= ====== ========
The goodwill is attributable to the premium paid to strengthen the Group's
existing business segments of retail and brand, which is in line with the
Group's strategy.
Everlast
Carrying values Fair value Fair value
at acquisition adjustment of net
assets
acquired
_________ ________ _____
£'000 £'000 £'000
Property, plant and equipment 3,139 - 3,139
Intangible assets 14,640 42,690 57,330
Inventories 5,893 - 5,893
Trade and other receivables 10,287 - 10,287
Cash and cash equivalents (5,664) - (5,664)
Borrowings (11,685) - (11,685)
Trade and other payables (6,292) - (6,292)
Deferred tax liability (506) (16,052) (16,558)
_________ ________ _____
9,812 26,638 36,450
========= ======== =====
Separately identifiable intangible assets, primarily representing brands and
licensing agreements acquired, amounting to £57,330,000 (deferred tax liability
thereon totalling £16,052,000) were recognised as a fair value adjustment on
acquisition.
NOTES TO THE FINANCIAL INFORMATION FOR THE 26 WEEKS ENDED 28 OCTOBER 2007
(CONTINUED)
Acquisitions (continued)
£4,070,000 of revenue and £866,000 of operating profit has been included within
the Group's financial statements for the period in respect of the above acquired
entity since the date of acquisition.
If the above acquired entity had been acquired at the beginning of the period
£24,694,000 of revenue and £6,260,000 of operating profit would have been
included within the Group's financial statements.
Cash flows arising from acquisitions are as follows:
28 October
2007
__________
£'000
Cash consideration 80,365
Bank overdraft acquired 5,664
__________
Net cash outflow in the cash flow statement 86,029
The goodwill is attributable to the premium paid to strengthen the Group's
existing business segments of retail and brand, which is in line with the
Group's strategy.
The business combination accounting is provisional for Everlast due to the
proximity of the transaction to the period end.
Field and Trek (UK) Limited
Carrying values Fair value Fair value
at acquisition adjustment of net
assets
acquired
_____________ ___________ __________
£'000 £'000 £'000
Property, plant and equipment 322 - 322
Intangible assets - 1,254 1,254
Inventories 1,879 - 1,879
Trade and other receivables 460 - 460
Cash and cash equivalents 6 - 6
Borrowings (733) - (733)
Trade and other payables (1,673) - (1,673)
Deferred tax liability - (351) (351)
Minority interests (104) - (104)
_____________ ___________ __________
157 903 1,060
============= =========== ==========
Separately identifiable intangible assets, primarily representing trading names
acquired, amounting to £1,254,000 (deferred tax liability thereon totalling
£351,000) were recognised as a fair value adjustment on acquisition.
£3,463,000 of revenue and £490,000 of operating loss has been included within
the Group's financial statements for the period in respect of the above acquired
entity since the date of acquisition.
NOTES TO THE FINANCIAL INFORMATION FOR THE 26 WEEKS ENDED 28 OCTOBER 2007
(CONTINUED)
20 Acquisitions (continued)
If the above acquired entity had been acquired at the beginning of the period
£5,761,000 of revenue and £473,000 of operating loss would have been included
within the Group's financial statements.
Cash flows arising from acquisitions are as follows:
28 October
2007
______
£'000
Cash consideration 5,090
Cash acquired (6)
______
Net cash outflow in the cash flow statement 5,084
21 Cash inflows from operating activities
26 weeks 26 weeks 52 weeks
ended ended ended
28 October 29 October 29 April
2007 2006 2007
______ __________ ________
£'000 £'000 £'000
Profit before taxation 21,212 70,145 60,480
Net finance (income)/costs (12,656) 115 (38,632)
Investment income (2,203) (225) (1,790)
Share of profit of associated undertakings and joint ventures (2,355) (822) (3,422)
______ __________ ________
Operating profit 3,998 69,213 93,900
Depreciation 18,722 15,992 30,904
Amortisation charge 662 787 3,584
Loss on disposal of property, plant and equipment 275 53 -
Impairment of Goodwill 665 - -
Defined benefit pension plan current service cost 58 - 175
Defined benefit pension plan employer contributions (488) - (2,136)
Profit on sale of financial assets - (46) -
Profit on disposal of certain retail concessions - (4,160) -
______ __________ ________
Operating cash inflow before changes in working capital 23,892 81,839 126,427
Decrease/(increase) in receivables (576) (5,816) 16,196
Decrease/(increase) in inventories 11,355 17,613 2,494
(Decrease)/increase in payables (102,713) (26,250) 54,144
______ __________ ________
Cash (outflows)/inflows from operating activities (68,042) 67,386 199,261
====== ========== ========
22 Contingent assets and liabilities
As a matter of course the Group undertakes action in numerous parts of the world
to protect its trade mark registrations and in connection with the Group's
licensees. Such actions are usually resolved in the ordinary course of business.
The Group is, however, party to a dispute and has provided for an amount
representing the financial estimation of the potential loss if the outcome was
not to be in its favour. The Group believes that to provide further information
would be seriously prejudicial to the case.
NOTES TO THE FINANCIAL INFORMATION FOR THE 26 WEEKS ENDED 28 OCTOBER 2007
(CONTINUED)
23 Related party transactions
The Group entered into the following material transactions with related parties:
The Group has taken advantage of the exemptions contained within IAS 24 -
Related Party Disclosures from the requirement to disclose transactions between
Group companies as these have been eliminated on consolidation.
26 weeks ended 28 October 2007 Relationship Sales Purchases Trade Trade
and and
other other
Related party receivables payables
_____________ ____________ ______ __________ ___________ _________
£'000 £'000 £'000 £'000
Pan World Brands Limited Common control - - 441 -
Hickman Properties Limited Common control - - - -
Texline Manchester Common control - - - -
Heatons Associate 8,514 - 2,978 -
No Fear International Limited Joint venture - - 17 (1,037)
M J W Ashley Director - - - (526)
PBF International Limited Joint venture 194 (261) 1,407 (91)
Sopotnik Trade Associate 22 - 118 (31)
No interest was charged on M J W Ashley's director's account with the Group.
M J W Ashley leases certain properties to various companies in the Group which
are operated as retail and distribution premises. A commercial rent is charged
in respect of these leases.
During the period M J W Ashley loaned the Group £250m on arms length commercial
terms and this amount was repaid in full on 26th October 2007.
Compensation paid to key management of the Group was £481,528, including pension
contributions of £4,616.
26 weeks ended 29 October 2006 Relationship Sales Purchases Trade Trade
and and
other other
Related party receivables payables
_____________ ____________ ______ __________ ___________ _________
£'000 £'000 £'000 £'000
Pan World Brands Limited Common control 72 (287) 416 -
Hickman Properties Limited Common control - - 1 -
Texline Manchester Common control - - 107 -
Heatons Associate 7,992 - 2,016 -
No Fear International Limited Joint venture - - 433 (914)
M J W Ashley Director - - - (9,377)
No interest was charged on M J W Ashley's director's account with the Group.
M J W Ashley leases certain properties to various companies in the Group which
are operated as retail and distribution premises. A commercial rent is charged
in respect of these leases.
Compensation paid to key management of the Group was £561,788, including pension
contributions of £4,607.
NOTES TO THE FINANCIAL INFORMATION FOR THE 26 WEEKS ENDED 28 OCTOBER 2007
(CONTINUED)
24 Post balance sheet events
The following material post balance sheet events occurred after 28 October 2007
to the date of this Interim Report:
On 30 October 2007 the Group acquired 21,703,866 additional shares in Umbro PLC
for consideration of £42,574,000, taking the overall holding in Umbro to 29.9%
of the total issued share capital.
On 15 November 2007 the Group disposed of 8,768,759 shares in Amer Sports Corp
for consideration of £117,767,000, realising a profit of £11,233,000.
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