Interim Results

RNS Number : 0581Y

Sports Direct International Plc

16 December 2010

 



16^th December 2010

Sports Direct International plc

("Sports Direct", "the Group" or "the Company")

Interim Results

For the 26 weeks to 24 October 2010

	2011 H1	2010 H1
	£m	£m
Group revenue	819.9	756.9	+8.3%
UK Retail	644.3	586.0	+9.9%
International Retail	66.5	63.6	+4.6%
Brands	90.6	95.1	-4.7%
Group gross margin	42.6%	40.7%	+190 bps
UK Retail	43.4%	41.6%	+180 bps
Underlying EBITDA(1)	131.3	99.1	+32.5%
Underlying profit before tax (PBT) (1) (2)	100.7	71.9	+40.0%
Reported profit before tax (3)	100.0	57.8	+73.0%
Underlying earnings per share(1) (2)	12.23p	8.52p	+43.5%
Reported earnings per share	12.15p	6.85p	+77.4%

Key highlights

·  EBITDA growth across UK Retail, International Retail and Brands

·  Reduced net debt by 25.1% to £233.6m (at 25 April 2010 net debt was £311.9m):

-  Net debt to rolling 12 month underlying EBITDA of 1.2 times

·  Nike training academy opened in Shirebrook July 2010

·  International Retail continue to open new stores and enter new markets

·  Brands division signed 42 new licensing deals

·  No interim dividend

Dave Forsey, Chief Executive said:

"The group has continued to perform strongly during the first eight months of this financial year, achieving excellent profit growth across all three main divisions. The initiatives we have been working on have clearly under-pinned this performance. Looking ahead and anticipating a tough start to the New Year we are confident of reaching our current year target of underlying EBITDA of £205m, which is £195m after scheme costs and will trigger the employee bonus share scheme awards."

(1)	Underlying EBITDA, underlying profit before taxation and underlying EPS excludes realised foreign exchange gains/losses in selling and administration costs, exceptional costs and the profit/loss on sale of strategic investments
(2)	Underlying profit before taxation and underlying EPS also exclude profits/losses relating to the IAS 39 fair value adjustment on forward currency contracts in financing income/costs
(3)	Reported profit before tax includes the impact of foreign exchange, profit/loss on sale and derecognition of strategic investments and exceptional costs.

Sports Direct International plc Dave Forsey, Chief Executive Bob Mellors, Group Finance Director	T:  0845 129 9229
Financial Dynamics Jonathon Brill Caroline Stewart Alex Beagley	T:  0207 831 3113

Chairman's Statement

This has been another record first half for the Group. The financial results have delivered continued revenue growth, strong EBITDA growth across all three divisions and significant reduction in debt. This has been underpinned by the development of some exciting strategic initiatives. 

With the wider economic conditions continuing to impact the retail sector as a whole, these results are all the more pleasing and again demonstrate how robust our business model is, offering the most comprehensive range and exceptional value to our consumers.

In the period, we were delighted to open the Nike Academy at Shirebrook. This is the first time Nike has entered such a partnership anywhere in the world and we are proud to be able to train our staff in such world class facilities in close partnership with Nike.

Employee bonus share scheme

There is no doubt that the bonus share scheme introduced to our colleagues last year has helped us to achieve these strong results. We are currently on track to reach our £205m underlying EBITDA target for the end of this financial year so I would like to thank, on behalf of the Board, all of our staff for their continued hard work.

Net debt

In July 2009, we outlined our debt reduction strategy to reduce debt levels to below £400m by April 2010. We succeeded in achieving this goal and have continued to focus our efforts on this strategy and as a result, net debt was down to £233.6m at the end of the first half.

Board

I would like to take this opportunity to thank Malcolm Dalgleish, who stood down from the Board as a non executive Director in September, for all of his time and contribution. A process has begun to find a replacement.

Dividend

The Board has determined not to pay an interim dividend; it will keep the payment of dividends under review.

Investigations

We were pleased to receive confirmation from the Serious Fraud Office in October that its investigation into Sports Direct International plc and JJB Sports plc had been completed and that no charges were to be brought against the companies or any companies within their corporate groups.  The SFO continues to investigate individuals. 

The Office of Fair Trading's investigation into the sports goods retail sector is ongoing. We have not been provided with details of any allegations relating to SDI. We are therefore unable to comment further. SDI continues to cooperate fully with the OFT.

Keith Hellawell

Non-Executive Chairman

16 December 2010

Chief Executive's Review

Overview of Financial Performance

In the 26 weeks ended 24 October 2010 ("2011 H1"), Group revenues were up 8.3% at £819.9m compared with revenues of £756.9m for the 26 weeks ended 25 October 2009 ("2010 H1").

UK Retail revenues were up 9.9% to £644.3m (2010 H1: £586.0m). International Retail revenues increased 4.6% to £66.5m (2010 H1: £63.6m), which in local currency represented an increase of 9.0%. The Brands division revenues were down 4.7% to £90.6m (2010 H1: £95.1m) including licensing, where revenues were up 7.0% to £12.3m.

Gross margin for the Group increased 190 basis points to 42.6% (2010 H1: 40.7%). The retail division margin increased 160 basis points to 42.8% (2010 H1: 41.2%). UK Retail margin was 43.4% (2010 H1: 41.6%) and the International Retail gross margin increased 290 basis points to 46.3% (2010 H1: 43.4%). While revenues in the Brands division were lower, gross margin increased 350 basis points to 40.8% (2010 H1: 37.3%) predominantly due to a greater proportion of licensing revenue in the period.

Underlying EBITDA for the period increased 32.5% to £131.3m (2010 H1: £99.1m), after a charge of £5.3m relating to the bonus share scheme. This charge has been taken centrally and, except in note 2 to the accounts, is not reflected in divisional (Retail and Brands) numbers in this report. Within this underlying EBITDA, UK Retail increased 33.3% to £114.1m (2010 H1: £85.6m), International Retail excluding associates increased 35.1% to £10.0m (2010 H1: £7.4m) and the Brands division increased 28.3% to £11.8m (2010 H1: £9.2m). The Group's share of profit of associated undertakings fell 66.7% to £0.5m. The Underlying profit before tax increased 40.0% to £100.7m (2010 H1: £71.9m).

In our preliminary results in July it was reported that we were targeting to reduce debt levels to a range of between one and 1.5 times underlying EBITDA by April 2011. We have made strong progress in respect of this in the half year and are ahead of schedule with net debt decreasing during the period to £233.6m (25 April 2010: £311.9m), which is 1.2 times historic rolling underlying EBITDA.

The Group continued to apply hedge accounting in respect of certain forward contracts in the period and as a result foreign currency fluctuations within the income statement have been greatly reduced. The effective element of any gain or loss from remeasuring the derivative instrument is recognised directly in other comprehensive income.

The foreign exchange loss recognised in the income statement for the half year was £0.6m (2010 H1: £15.4m loss). This is net of a £0.5m realised exchange gain included in administration costs (2010 H1: £43.9m loss). The revaluation of forward exchange contracts not accounted for as hedged contracts (as required under IFRS) is included in finance costs, and this unrealised loss amounted to £1.1m (2010 H1: £28.5m profit). These amounts are excluded from the definition of underlying profit used in the business and as reported here. No exceptional items were incurred in 2011 H1.

Reconciliation of reported to underlying results

	EBITDA		PBT
	2011	2010	2011	2010
	£m	£m	£m	£m
Operating profit	101.7	31.4
Depreciation	28.3	20.9
Amortisation	1.3	1.4
Share of profit of associated undertakings	0.5	1.5
Reported EBITDA/PBT	131.8	55.2	100.0	57.8
Realised FX (profit)/loss	(0.5)	43.9	(0.5)	43.9
IAS 39 FX fair value adjustment on forward currency contracts	-	-	1.2	(28.5)
Profit on disposal of listed investments	-	-	-	(1.3)
Underlying	131.3	99.1	100.7	71.9

Review by Business Segment

	26 weeks ended 24 October 2010 (£'m)	26 weeks ended 25 October 2009 (£'m)		Change %
Retail
Revenue:
UK Retail	644.3	586.0		9.9
UK wholesale and other	18.5	12.2		51.6
International Retail	66.5	63.6		4.6
Total retail revenue	729.3	661.8		10.2
Cost of sales	(417.1)	(389.1)
Gross margin	312.2	272.7
Gross margin percentage	42.8	%	41.2	%

Brands
Revenue:
Wholesale	78.3	83.6		(6.3)
Licensing	12.3	11.5		7.0
Total Brands revenue	90.6	95.1		(4.7)
Cost of sales	(53.6)	(59.6)
Gross margin	37.0	35.5
Gross margin percentage	40.8	%	37.3	%

Business Review

Our strategy to focus on our core strengths, increasing efficiencies and controlling costs, delivered another strong performance.

Retail division

UK Retail revenues growth was mainly driven by the impact of the World Cup and strong online sales.

UK Retail gross margin increased to 43.4% (2010 H1: 41.6%).

We will continue to report the like-for-like percentage change in store contribution for UK Retail on an annual basis.

Trade in the build up to the World Cup was as strong as expected, culminating in the strongest trading day that the Company has ever experienced on the day of the USA match. We continue to offer the most comprehensive range of England branded products and this was the first FIFA World Cup for the online store and both traffic and sales have grown significantly. Unfortunately, the period during the tournament was less successful and sales correlated with the poor performance of the England team and the negative mood this created amongst fans and consumers. The negative impact of clearing excess stock offset some of the positive pre-tournament trade, but we estimate that overall the tournament has boosted these results by £15m-£20m at EBITDA level.

During the period we have further developed our specialist area collaborations, both as stand alone units and as concessions within our core stores. Specialist areas include Football with Soccer Scene; Running with SheRunsHeRuns; Outdoor with Field and Trek; and Golf with European Golf.

Online revenue continues to grow strongly and we will look at opportunities to develop this revenue stream further. Order fulfilment and information technology solutions are developed in-house with full back-up support from our national distribution centre resources in Shirebrook, Derbyshire. The website has benefited from the increased recognition of the online brand with 316 of UK store fascias now branded SPORTSDIRECT.com. Online sales represented 6.0% of total UK Retail sales (2010 H1: 3.0%). Between March and June 2010, we ran our first television advertising campaign. We saw a subsequent increase in both product specific and new customer web traffic. A second campaign was launched this autumn, which again led to a strong increase in sales and web traffic.

We were delighted to achieve a notable first with the creation of a purpose-built Nike Training Academy at the Shirebrook site. This is the first time Nike has entered into such a partnership with a retail partner anywhere in the world. We are proud to host such a magnificent facility which had its first open day on 21 July 2010 for up to 300 of our national retail team. The Academy demonstrates our commitment to develop our training of staff in close partnership with our key third party brands. We plan to have all permanent sales staff attend a technical training session in the Academy within 12 months of its opening as part of their on-going training and personal development. Our goal is to have the best trained and most knowledgeable staff in the UK sports retail sector.

Our ongoing commitment to maintaining control on labour costs and all operating expenses meant UK Retail's actual operating costs grew by only 5.0% on 2010 H1, compared to the 9.9% increase in revenue. As a result, we grew UK Retail underlying EBITDA by 33.3%.

International Retail revenue grew by 9.0% on a currency neutral basis, through a 4.1% increase in retail space and increased sales at existing stores. This division utilises the same basic retail skills as the UK, adapted by local management for local market requirements. In addition, these local management teams are able to leverage the stock control benefits of our UK-developed proprietary IT and operating systems.

Reflecting our ongoing focus on efficiency, International Retail's operating costs increased 3.0%, although on a local currency basis these costs increased by 7.3%.

Excluding associates, we grew International Retail underlying EBITDA by 35.1%.

Store portfolio

As of 24 October 2010, we operated 394 stores in the UK (excluding Northern Ireland), a total of circa 3.8m sq ft (2010 H1: circa 3.6m sq ft). These are divided between 304 core and 90 non-core stores. Through the Group's shareholding in the Heatons chain, it has sports products within 13 stores in Northern Ireland and 25 stores in the Republic of Ireland.

We have a clear, focused strategy to enhance our varied store portfolio. We are still targeting a total of between 10 and 15 new core stores in the UK this year, taking a selective approach to the best opportunities and 15-20 in the next financial year.

Internationally, as at 24 October 2010 we operated through 44 stores in Belgium, 13 in Slovenia, 4 in Holland, 4 in Cyprus, 1 in France and 1 in Luxembourg. We continue with our strategy to identify partners in new territories while continuing to expand our operations in the countries where we currently trade.

Since the half year end we have acquired a 51% stake in the third largest sports retailer in Portugal, who operates 15 stores. We are planning to open four new stores in the Paris region during calendar 2011. Plans are in place to expand our International Retail operations into all 17 countries that have adopted the Euro within five years.

Brands division

The reduction in Brands revenues was driven by the anticipated decline in wholesale revenues, as we continue to shift the focus of this division to higher-margin licensing. In the first half, we have already signed 42 new contracts with contracted minimum royalties of $46m over the life of the contracts.

The improvement in Brands gross margin reflects the higher proportion of licensing revenues and a higher gross margin in the wholesale business. 

Advertising and promotional spend increased in the period.

Critically, the shift away from wholesale enables us to achieve significant operating cost savings. In 2011 H1, we achieved a £1.4m reduction in Brands operating costs while maintaining investment behind our brands. As a result, even though revenues were down, we increased this division's underlying EBITDA by 28.3% to £11.8m (2010 H1: £9.2m). Underlying EBITDA now represents 96% of licensing income, and it is our aim to increase this proportion to 100% by the end of the current financial year.

Net Debt

We have a committed working capital facility that has been reduced from £400m to £275m and is available until 30 April 2011. The Company continues to operate well within its bank covenants and the Board remains comfortable with the Company's available headroom.

In our preliminary results in July it was reported that we were targeting to reduce debt levels to a range of between one and 1.5 times underlying EBITDA by April 2011. We have made strong progress in respect of this in the half year and are ahead of schedule with net debt decreasing during the period to £233.6m (25 April 2010: £311.9m), which is 1.2 times historic rolling underlying EBITDA.

As we anticipated in July, the decrease in debt has been achieved by:

·              Growing EBITDA - up by 32.5%

·              Reducing the level of capital expenditure - down by 9% on the previous half year

·              Reduction in financing costs - down by 49% on the previous half year

Net Capital expenditure amounted to £12.6m (2010 H1: £13.8m). £1.5m of freehold property was acquired in the period (2010 H1: £Nil).  We are targeting capital expenditure for the full year to be less than £30m and for the full year 2012 to be nearer £40m.

Strategic Investments

The value of the Group's investments has increased from £52m to £53m during the period, due to an increase in the market value of investments held.

Employee bonus share scheme

We believe that the bonus share scheme has played an important role in delivering this strong performance.

We propose to continue the principles of this Bonus Share Scheme for FY12 and FY13 with stretch underlying EBITDA targets of £215m and £250m respectively before the cost of the scheme. A potential bonus to eligible employees of up to one year's salary: weighted 25% for FY12 and 75% for FY13. Both targets have to be met and employment conditions satisfied. This will be converted into shares at £1.50 per share before the shares vest in 2015 up to a maximum of 20 million shares.

Principal risks and uncertainties for the remaining six months of the year

The Board believes that the principal risks and uncertainties for the remaining six months of the year are the possibility of a further deterioration of the economy both in the UK and worldwide and a further reduction in consumer confidence and retail spending, beyond that currently expected, which would impact on the performance of the business, and the financial risks identified in the annual report.

Outlook

We anticipate the general retail environment in the first few months of 2011 to be tough. However trading since the end of October has continued to perform in line with management expectations. Our customers are responding well to our in store and online offer based around our breadth of range and best-in-class value proposition. As a result, we remain confident of reaching our current year target of underlying EBITDA of £205m (£195m after scheme costs) which will trigger the employee bonus share scheme awards.

Dave Forsey

Chief Executive

16 December 2010

Financial Review

Basis of reporting

The financial statements for the Group for the 26 weeks ended 24 October 2010 are presented in accordance with International Financial Reporting Standards as adopted by the EU (IFRS).

Summary of results

	26 weeks ended 24 October 2010 (£'m)	26 weeks ended 25 October 2009 (£'m)	Change %
Revenue	819.9	756.9	8.3
Underlying EBITDA	131.3	99.1	32.5
Underlying Profit before Tax	100.7	71.9	40.0
Reported Profit before Tax	100.0	57.8	73.0
	Pence per Share	Pence per Share
Basic EPS	12.15	6.85	77.4
Underlying EPS	12.23	8.52	43.5
Weighted Average number of Shares (million)	568	568

Underlying EBITDA for the period was £131.3 million, compared to £99.1 million in the corresponding period last year.

The Directors believe that underlying EBITDA, underlying profit before tax and underlying earnings per share provide 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 the Group's share of profit of associated undertakings and joint ventures. Underlying EBITDA is calculated as EBITDA before exceptional items, profit/loss on sale of strategic investments and realised profits/losses on foreign exchange.

Revenue and margin

Revenue	26 weeks ended 24 October 2010 (£'m)	26 weeks ended 25 October 2009 (£'m)	Change %
Retail
UK Retail	644.3	586.0	9.9
UK wholesale and other	18.5	12.2	51.6
International Retail	66.5	63.6	4.6
Total retail revenue	729.3	661.8	10.2

Brands
Wholesale	78.3	83.6	(6.3)
Licensing	12.3	11.5	7.0
Total Brands revenue	90.6	95.1	(4.7)

Total Group revenues increased 8.3%.

Retail revenues increased 10.2%. The UK accounted for 90.9% of total retail revenues with the balance in Continental European stores.

Retail gross margin in the UK increased from 41.6% to 43.4%.

Selling and distribution costs have always been closely monitored. Labour costs are geared to financial performance with flexible staffing schedules, and initiatives to drive costs from the business have been effective, including reductions in energy consumption.

Our representation in both parts of Ireland is covered by Heatons, in which we have an interest, the results of which are reported as an associate.

Brands revenues decreased 4.7%. Licensing income increased 7.0%, with wholesale revenues down 6.3%.

Brands gross margin increased from 37.3% to 40.8%.

Foreign exchange

The Group manages some of the impact of currency movements through the use of forward fixed rate currency purchase and sales contracts. The Group's policy is to hold or hedge some anticipated purchases in foreign currency. The group adopts hedge accounting in respect of certain contracts and as a result foreign currency fluctuations within the income statement have been greatly reduced. The effective element of any gain or loss from remeasuring the derivative instrument is recognised in Other Comprehensive Income.

The exchange gain of £0.5m included in administration costs has arisen from:

(a)	accepting dollars and euros at the contracted rate; and
(b)	the translation of dollars and dollar denominated assets and liabilities at the period end rate.

The exchange loss of £1.1m (2010 H1: £28.5m gain) included in finance costs substantially represents the reversal of the asset created (under IFRS) for the forward contracts not designated for hedge accounting at 25 April 2010.

The sterling exchange rate with the US dollar at 25 April 2010 was $1.538 and $1.569 at 24 October 2010.

The sterling exchange rate with the Euro at 25 April 2010 was €1.149 and €1.125 at 24 October 2010.

Finance income

	26 weeks ended 24 October 2010	26 weeks ended 25 October 2009
	(£'m)	(£'m)
Bank interest receivable	0.3	0.4
Expected return on pension plan assets	1.0	0.8
Fair value adjustment to forward foreign exchange contracts	-	28.5
	1.3	29.7

Finance costs

		26 weeks ended 24 October 2010		26 weeks ended 25 October 2009
			(£'m)		(£'m)
	Interest on bank loans and overdrafts		(2.8)		(4.5)
	Interest on other loans		(0.2)		(0.4)
	Interest on retirement benefit obligations		(1.3)		(1.2)
	Fair value adjustment to forward foreign currency contracts		(1.1)		-
			(5.4)		(6.1)

Loan and overdraft costs are directly linked to the base rate. As such, currently, we are benefitting from the current low base rate.

Taxation

The effective tax rate on profit before tax for 2011 H1 was 31.0% (2010 H1: 32.5%). This rate reflects depreciation on non-qualifying assets and the non-relievable losses in certain overseas subsidiaries.

Earnings

	26 weeks ended 24 October 2010 Pence per share	26 weeks ended 25 October 2009 Pence per share	Change %
Basic EPS	12.15	6.85	77.4
Underlying EPS	12.23	8.52	43.5
Weighted Average number of shares	568,502,369	568,452,369

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 actual financial period.

The underlying EPS reflects the underlying performance of the business compared with the prior period and is calculated using the weighted average number of shares. 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:

	26 weeks ended 24 October 2010 (£'m)	26 weeks ended 25 October 2009 (£'m)
Profit after tax:	69.1	38.9
Post tax effect of
Realised loss on forward foreign exchange contracts	(0.3)	29.7
Fair value adjustment to forward foreign exchange contracts	0.7	(19.2)
Profit on disposal of listed investments	-	(0.9)
Underlying profit after tax	69.5	48.5

Capital expenditure

Net expenditure, including the acquisition of property, plant and equipment, amounted to £12.6m (2010 H1: £13.8m). £1.5m of freehold properties were acquired in the period (2010 H1: £Nil).

Strategic investments

Changes in the value of these investments are recognised directly in equity in accordance with IFRS.

	24 October 2010 (£'m)
Total available-for-sale investments at 25 April 2010	51.6
Revaluation through equity	1.3
Total available-for-sale investments at 25 October 2010	52.9

We reported in the April 2010 Annual Report and Financial statements the current status of the appeal by Kaupthing Singer & Friedlander (KSF) in respect of the court judgement handed down on 13 May 2010. This judgement determined that the Group had acquired a beneficial interest in 12,153,071 ordinary shares in Blacks Leisure and 5,775,255 ordinary shares in JD Sports on 8 October 2008. This acquisition was reflected in the financial statements.

The Administrator of KSF appealed the decision. This does not impact Sports Direct's ownership of the shares however were KSF to be successful in their appeal, then Sports Direct would be required to pay the administrator an amount of c. £14.7m, which is currently held in escrow and included in other debtors.  This amount represents the difference in value of the shares between 8 October 2008 and 21 February 2010. There has been no change in situation during the period to 24 October 2010 or to the date of this Interim Report.

We also reported that the Group had submitted a claim with the administration for the shares in Amer Sports, Blacks and JD that were not in KSF's possession and also for the dividends and Group funds held by KSF. This amounts to approximately £9.1m in total and the latest information from the Administrator suggests a distribution of around 75%. To date we have received £3.2m and the remainder of the claim is included in other debtors.

The respective shareholdings at 24 October 2010 were as follows:

	At 24 October 2010
	Shares 'm	Holding
Blacks Leisure Group	12.153	14.46%
John David Group	5.775	11.87%

Cash flow and net debt

Net debt decreased from £311.9m at 25 April 2010 to £233.6m at 24 October 2010.

The analysis of debt at 24 October 2010 and at 25 April 2010 was as follows:

	At 24 October 2010	At 25 April 2010
Cash and cash equivalents	17.0	25.1
Borrowings	(250.6)	(337.0)
Net debt	(233.6)	(311.9)

Cash Flow

	26 weeks ended  24 October 2010 (£'m)	26 weeks ended  25 April 2010 (£'m)	26 weeks ended 25 October 2009 (£'m)
Underlying EBITDA	131.3	61.3	99.1
Realised profit/loss on forward foreign exchange contracts	0.5	4.1	(43.9)
Taxes paid	(14.3)	(12.1)	(22.6)
Free cash flow	117.5	53.3	32.6
Invested In:-
Working capital
Inventory	(52.7)	6.4	37.1
Debtors, Creditors & Other	27.1	19.1	17.9
Acquisitions (including debt)	-	(3.3)	-
Net proceeds from/ (investment in) investments	1.9	(16.4)	8.1
Capital expenditure	(12.6)	(5.0)	(13.8)
Equity dividend paid	-	-	(6.9)
Finance costs and other financing activities	(2.9)	(4.0)	(5.7)
Net decrease in net debt	78.3	50.1	69.3

Reconciliation of movement in equity

Total equity movement is as follows:

	26 weeks ended 24 October 2010 (£'m)
Total equity at 25 April 2010	259.7
Profit after tax for the 26 weeks ended 24 October 2010	69.0
Share based payment	5.3
Items taken directly to equity:
Actuarial loss on pension fund	-
Exchange differences on hedged contracts - recognised in the period	(8.1)
Exchange differences on hedged contracts - reclassification through equity	(1.6)
Exchange differences on translation of foreign operations	(3.5)
Fair value adjustment in respect of available-for-sale financial assets	1.3
Tax on items taken directly to equity	(0.3)
	(12.2)
Total equity at 24 October 2010	321.8

Pensions

The Group operates a number of closed defined benefit schemes in the Dunlop Slazenger Group of companies. The net deficit in these schemes decreased from £19.7m at 25 April 2010 to £19.2m at 24 October 2010.

Going Concern

As highlighted in note 14, the Group finances its day to day working capital requirements and has made investments and conducted a share buy-back programme in the past, using a facility with the Bank of Scotland that is due for renewal in April 2011.

The Group's forecast and projections, taking account of reasonably possible changes in trading performance, show that the Group should be able to operate within the level of the current facility. The Group has opened negotiations with bankers and at this stage has not sought any written commitments. No matter has been drawn to its attention to suggest that a facility would not be made available to the Group on acceptable terms. Indeed, the Directors expect an adequate facility to be made available on acceptable terms.

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 financial statements.

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 some of the risks of such movements by using forward purchases of foreign currency. Certain of the Group's assets are held overseas in local currency and UK assets and liabilities are revalued in accordance with currency movements. This currency risk is not hedged.
•	The possibility of a further deterioration of the economy both in the UK and worldwide and a further reduction in consumer confidence and retail spending, beyond that currently expected, which would impact on the performance of the business.

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.

Bob Mellors

Finance Director

16 December 2010

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 26 weeks 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 26 weeks 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 18.

The directors of Sports Direct International plc are listed in the Group's 2010 Annual Report and Financial Statements.

On behalf of the Board

Dave Forsey

Chief Executive

Bob Mellors

Finance Director

16 December 2010

INDEPENDENT REVIEW REPORT TO SPORTS DIRECT INTERNATIONAL PLC

FOR THE 26 WEEKS ENDED 24 OCTOBER 2010

Introduction

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the 26 weeks ended 24 October 2010 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 Chief Executive's Review, the Financial Review 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 in accordance with guidance contained in 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 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 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 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 26 weeks ended 24 October 2010 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

16 December 2010

UNAUDITED CONSOLIDATED INCOME STATEMENT FOR THE 26 WEEKS ENDED 24 OCTOBER 2010

		26 weeks ended    24 October 2010	26 weeks ended    25 October 2009	52 weeks ended 25 April 2010
	Notes	£'000	£'000	£'000
Continuing operations:
Revenue	2	819,888	756,898	1,451,621
Cost of sales		(470,641)	(448,557)	(862,490)
Gross profit		349,247	308,341	589,131
Selling, distribution and administrative expenses		(250,544)	(234,187)	(484,864)
Profit/(loss) on forward foreign exchange contracts		464	(43,936)	(39,747)
Other operating income		2,471	1,196	3,493
Exceptional items		-	-	(9,986)
Operating profit	2	101,638	31,414	58,027
Investment income	3	1,883	1,355	24,653
Finance income	4	1,321	29,683	40,150
Finance costs	5	(5,384)	(6,077)	(10,528)
Share of profit of associated undertakings and joint ventures		549	1,434	7,200
Profit before taxation		100,007	57,809	119,502
Taxation	6	(31,002)	(18,789)	(30,286)
Profit for the period	2	69,005	39,020	89,216
Attributable to:
Equity holders of the Group		69,086	38,930	89,433
Non-controlling interests		(81)	90	(217)
Profit for the period	2	69,005	39,020	89,216

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	7	12.15	6.85	15.73
Diluted earnings per share	7	11.43	6.46	14.76

The accompanying notes form an integral part of this financial report.

UNAUDITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE 26 WEEKS ENDED 24 OCTOBER 2010

		26 weeks ended 24 October 2010	26 weeks ended 25 October 2009	52 weeks ended 25 April 2010
	Notes	£'000	£'000	£'000
Profit for the period	2	69,005	39,020	89,216
Other comprehensive income
Exchange differences on translation of foreign operations		(3,446)	(20,704)	(7,947)
(Losses)/gains on hedged contracts - recognised in the period		(1,617)	-	10,942
(Losses)/gains on hedged contracts - reclassification in the period		(8,056)	-	-
Actuarial losses on defined benefit pension schemes	15	(53)	(9,300)	(8,184)
Fair value adjustment in respect of available-for-sale financial assets	11	1,294	1,224	13,704
Taxation on items taken directly to other comprehensive income		(362)	(348)	(838)
Total comprehensive income for the period		56,765	9,892	96,893
Attributable to:
Equity holders of the Parent		56,846	9,802	97,110
Non-controlling interests		(81)	90	(217)
		56,765	9,892	96,893

The accompanying notes form an integral part of this financial report.

UNAUDITED CONSOLIDATED BALANCE SHEET AS AT 24 OCTOBER 2010

		24 October 2010	25 October 2009	25 April 2010
	Notes	£'000	£'000	£'000
ASSETS
Non-current assets
Property, plant and equipment	9	257,249	289,408	270,918
Intangible assets	10	213,905	209,732	216,944
Investments in associated undertakings and joint ventures		39,105	31,420	38,742
Available-for-sale financial assets	11	52,860	-	51,566
Deferred tax assets		9,839	6,098	10,101
		572,958	536,658	588,271
Current assets
Inventories		271,486	225,211	218,803
Trade and other receivables		112,365	107,570	114,533
Derivative financial assets	16	2,866	-	13,648
Cash and cash equivalents		17,045	26,514	25,121
		403,762	359,295	372,105
TOTAL ASSETS		976,720	895,953	960,376
EQUITY AND LIABILITIES
Share capital	12	64,055	64,045	64,050
Share premium	13	874,300	874,300	874,300
Treasury shares		(85,088)	(85,088)	(85,088)
Permanent contribution to capital	13	50	50	50
Capital redemption reserve	13	8,005	8,005	8,005
Foreign currency translation reserve		37,187	27,876	40,633
Reverse combination reserve	13	(987,312)	(987,312)	(987,312)
Own share reserve		(6,094)	(6,094)	(6,094)
Retained earnings		415,405	264,470	349,788
		320,508	160,252	258,332
Non-controlling interests		1,302	3,222	1,383
Total equity		321,810	163,474	259,715
Non-current liabilities
Other payables		2,099	2,196	2,345
Borrowings	14	2,762	4,093	3,352
Retirement benefit obligations	15	19,213	21,115	19,739
Deferred tax liabilities		34,957	32,229	35,946
Provisions		48,705	37,896	45,598
		107,736	97,529	106,980
Current liabilities
Derivative financial liabilities	16	-	6,522	-
Trade and other payables		262,732	227,815	240,664
Borrowings	14	247,908	384,448	333,659
Current tax liabilities		36,534	16,165	19,358
		547,174	634,950	593,681
Total liabilities		654,910	732,479	700,661
TOTAL EQUITY AND LIABILITIES		976,720	895,953	960,376

The accompanying notes form an integral part of this financial report.

UNAUDITED CONSOLIDATED CASH FLOW STATEMENT FOR THE 26 WEEKS ENDED 24 OCTOBER 2010

		26 weeks ended 24 October 2010	26 weeks ended 25 October 2009	52 weeks ended 25 April 2010
	Notes	£'000	£'000	£'000
Cash inflow from operating activities	17	106,143	108,865	199,476
Income taxes paid		(14,255)	(22,558)	(34,838)
Net cash inflow from operating activities		91,888	86,307	164,638
Cash flow from investing activities
Proceeds on disposal of property, plant and equipment		361	25	624
Proceeds on disposal of listed investments		-	8,041	8,040
Purchase of subsidiaries, net of cash acquired		-	-	(3,330)
Purchase of intangible assets		(1,036)	(3,283)	(2,586)
Purchase of property, plant and equipment		(11,882)	(10,501)	(16,792)
Purchase of listed investments		-	-	(16,301)
Investment income received		1,883	1,250	1,723
Net cash outflow from investing activities		(10,674)	(4,468)	(28,622)
Cash flow from financing activities
Finance income received		1,321	400	806
Finance costs paid		(4,275)	(6,077)	(10,528)
Net repayments of borrowings		(2,217)	(7,321)	(14,303)
Proceeds from share issues		5	-	5
Equity dividend paid	8	-	(6,935)	(6,935)
Net cash outflow from financing activities		(5,166)	(19,933)	(30,955)
Net increase in cash and cash equivalents including overdrafts		76,048	61,906	105,061
Cash and cash equivalents including overdrafts at beginning of period		(305,264)	(410,325)	(410,325)
Cash and cash equivalents including overdrafts at the period end		(229,216)	(348,419)	(305,264)

The accompanying notes form an integral part of this financial report.

UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE 26 WEEKS ENDED 24 OCTOBER 2010

	Treasury shares	Foreign currency translation	Own share reserve	Retained earnings	Other reserves (Note 13)	Sub- total	Non-controlling interests	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 26 April 2009	(85,088)	48,580	(6,094)	233,964	(40,912)	150,450	3,232	153,682
Profit for the financial period	-	-	-	38,930	-	38,930	(10)	38,920
Other comprehensive income
Income recognised directly in equity	-	-	-	(8,424)	-	(8,424)	-	(8,424)
Translation differences - group	-	(19,561)	-	-	-	(19,561)	-	(19,561)
Translation differences - associates	-	(1,143)	-	-	-	(1,143)	-	(1,143)
Total comprehensive income for the period	-	(20,704)	-	30,506	-	9,802	(10)	9,792
At 25 October 2009	(85,088)	27,876	(6,094)	264,470	(40,912)	160,252	3,222	163,474
Issue of ordinary shares	-	-	-	-	5	5	-	5
Share-based payments	-	-	-	10,767	-	10,767	-	10,767
Minority interests - acquisitions	-	-	-	-	-	-	(1,632)	(1,632)
Transactions with owners	-	-	-	10,767	5	10,772	(1,632)	9,140
Profit for the financial period	-	-	-	50,503	-	50,503	(207)	50,296
Other comprehensive income
Income recognised directly in equity	-	-	-	24,048	-	24,048	-	24,048
Translation differences - group	-	11,701	-	-	-	11,701	-	11,701
Translation differences - associates	-	1,056	-	-	-	1,056	-	1,056
Total comprehensive income for the period	-	12,757	-	74,551	-	87,308	(207)	87,101
At 25 April 2010	(85,088)	40,633	(6,094)	349,788	(40,907)	258,332	1,383	259,715
Issue of ordinary shares	-	-	-	-	5	5	-	5
Share-based payments	-	-	-	5,325	-	5,325	-	5,325
Transactions with owners	-	-	-	5,325	5	5,330	-	5,330
Profit for the financial period	-	-	-	69,086	-	69,086	(81)	69,005
Other comprehensive income
Income recognised directly in equity	-	-	-	(8,794)	-	(8,794)	-	(8,794)
Translation differences - group	-	(3,260)	-	-	-	(3,260)	-	(3,260)
Translation differences - associates	-	(186)	-	-	-	(186)	-	(186)
Total comprehensive income for the period	-	(3,446)	-	60,292	-	56,846	(81)	56,765
At 24 October 2010	(85,088)	37,187	(6,094)	415,405	(40,902)	320,508	1,302	321,810

The Company holds 64,000,000 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.

NOTES TO THE FINANCIAL INFORMATION FOR THE 26 WEEKS ENDED 24 OCTOBER 2010

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 2010 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. The principal accounting policies have remained unchanged from the prior financial information for the 52 weeks ended April 2010. This consolidated financial information for the period does not constitute statutory financial statements within the meaning of s434 of the Companies Act 2006.

The summary of results for the 52 weeks ended 25 April 2010 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 2006.

Principal risks and uncertainties

The principal risks and uncertainties which could impact the Group's long-term performance remain those identified on page 18 of the Group's 2010 Annual Report and Financial Statements. The Chief Executive and Finance Director's Review in this half-yearly financial report includes a commentary of the principal risks and uncertainties affecting the Group for the remaining six months of the year.

2. Segmental analysis

Operating  segments 

For management purposes the Group is organised into, and reports its performance between, two operating 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 operating segments is presented below:

Segmental information for the 26 weeks ended 24 October 2010:

	Retail					Brands			Eliminations	Total
	UK Retail	UK wholesale & other	UK total	International retail	Total	Wholesale	Licensing	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Sales to external customers	644,238	18,506	662,744	66,543	729,287	78,337	12,264	90,601	-	819,888
Sales to other segments	-	2,274	2,274	-	2,274	2,049	-	2,049	(4,323)	-
Revenue	644,238	20,780	665,018	66,543	731,561	80,386	12,264	92,650	(4,323)	819,888
Gross profit			281,511	30,779	312,290			36,957	-	349,247
Operating profit before foreign exchange and exceptional items			84,673	6,879	91,552			9,622	-	101,174
Operating profit										101,638
Investment income										1,883
Finance income										1,321
Finance costs										(5,384)
Share of profits of associated undertakings and joint ventures										549
Profit before taxation										100,007
Taxation										(31,002)
Profit for the period										69,005

 Sales to other segments are priced at cost plus a 10% mark-up.

UK Retail costs include a £5.3m charge for the Bonus Share Scheme.

Other segment items included in the income statement for the 26 weeks ended 24 October 2010:

	Retail	Brands	Total
	£'000	£'000	£'000
Depreciation	27,120	1,167	28,287
Amortisation	182	1,095	1,277

Information regarding segment assets and liabilities as at 24 October 2010 and capital expenditure for the 26 weeks then ended:

	Retail	Brands	Eliminations	Total
	£'000	£'000	£'000	£'000
Investments in associated undertakings and joint ventures	31,860	7,245	-	39,105
Other assets	790,179	249,538	(102,102)	937,615
Total assets	822,039	256,783	(102,102)	976,720
Total liabilities	(549,789)	(207,223)	102,102	(654,910)
Tangible asset additions	11,287	595	-	11,882
Intangible asset additions	602	434	-	1,036
Total capital expenditure	11,889	1,029	-	12,918

Segmental information for the 26 weeks ended 25 October 2009:

	Retail					Brands			Eliminations	Total
	UK Retail	UK wholesale & other	UK total	International retail	Total	Wholesale	Licensing	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Sales to external customers	585,925	12,246	598,171	63,584	661,755	83,609	11,534	95,143	-	756,898
Sales to other segments	-	2,274	2,274	104	2,378	8,381	-	8,381	(10,759)	-
Revenue	585,925	14,520	600,445	63,688	664,133	91,990	11,534	103,524	(10,759)	756,898
Gross profit			245,026	27,605	272,631			35,710	-	308,341
Operating profit before foreign exchange and exceptional items			64,281	4,100	68,381			6,969	-	75,350
Operating profit										31,414
Investment income										1,355
Finance income										29,683
Finance costs										(6,077)
Share of profits of associated undertakings and joint ventures										1,434
Profit before taxation										57,809
Taxation										(18,789)
Profit for the period										39,020

 Sales to other segments are priced at cost plus a 10% mark-up.

UK Retail costs include a £4.7m charge for the Bonus Share Scheme.

Other segment items included in the income statement for the 26 weeks ended 25 October 2009:

	Retail	Brands	Total
	£'000	£'000	£'000
Depreciation	19,754	1,094	20,848
Amortisation	192	1,241	1,433

Information regarding segment assets and liabilities as at 25 October 2009 and capital expenditure for the 26 weeks then ended:

	Retail	Brands	Eliminations	Total
	£'000	£'000	£'000	£'000
Investments in associated undertakings and joint ventures	24,122	7,298	-	31,420
Other assets	724,642	253,684	(113,793)	864,533
Total assets	748,764	260,982	(113,793)	895,953
Total liabilities	(603,725)	(242,547)	113,793	(732,479)
Tangible asset additions	10,393	108	-	10,501
Intangible asset additions	832	2,451	-	3,283
Total capital expenditure	11,225	2,559	-	13,784

Segmental information for the 52 weeks ended 25 April 2010:

	Retail					Brands			Eliminations	Total
	UK Retail	UK wholesale & other	UK total	International retail	Total	Wholesale	Licensing	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Sales to external customers	1,117,674	23,519	1,141,193	119,918	1,261,111	167,292	23,218	190,510	-	1,451,621
Sales to other segments	-	2,274	2,274	136	2,410	3,673	-	3,673	(6,083)	-
Revenue	1,117,674	25,793	1,143,467	120,054	1,263,521	170,965	23,218	194,183	(6,083)	1,451,621
Gross profit			462,365	52,716	515,081			74,050	-	589,131
Operating profit before foreign exchange and exceptional items			88,998	3,535	92,533			15,227	-	107,760
Operating profit			41,722	3,472	45,194			12,833		58,027
Other investment income										24,513
Dividend income from investments										140
Finance income										40,150
Finance costs										(10,528)
Share of profits of associated undertakings and joint ventures										7,200
Profit before taxation										119,502
Taxation										(30,286)
Profit for the period										89,216

Sales to other segments are priced at cost plus a 10% mark-up.

UK Retail costs include a £10.8m charge for the Bonus Share Scheme.

Other segment items included in the income statement for the 52 weeks ended 25 April 2010:

	Retail	Brands	Total
	£'000	£'000	£'000
Depreciation	45,208	2,240	47,448
Amortisation	434	2,463	2,897

Information regarding segment assets and liabilities as at 25 April 2010 and capital expenditure for the 52 weeks then ended:

	Retail	Brands	Eliminations	Total
	£'000	£'000	£'000	£'000
Investments in associated undertakings and joint ventures	31,445	7,297	-	38,742
Other assets	784,056	245,392	(107,814)	921,634
Total assets	815,501	252,689	(107,814)	960,376
Total liabilities	(604,785)	(203,690)	107,814	(700,661)
Tangible asset additions	16,572	220	-	16,792
Intangible asset additions	837	1,749	-	2,586
Total capital expenditure	17,409	1,969	-	19,378

Geographic segments

The Group operates in two geographic segments; UK and Non-UK. These geographic segments are presented below:

Segmental information for the 26 weeks ended 24 October 2010:
	UK	Non-UK	Eliminations	Total
	£'000	£'000	£'000	£'000
Segmental revenue from external customers	681,003	138,885	-	819,888
Total capital expenditure	9,914	3,004	-	12,918
Segmental assets	829,798	249,024	(102,102)	976,720
Segmental information for the 26 weeks ended 25 October 2009:
	UK	Non-UK	Eliminations	Total
	£'000	£'000	£'000	£'000
Segmental revenue from external customers	622,384	134,514	-	756,898
Total capital expenditure	11,231	2,553	-	13,784
Segmental assets	763,475	246,271	(113,793)	895,953
Segmental information for the 52 weeks ended 25 April 2010:
	UK	Non-UK	Eliminations	Total
	£'000	£'000	£'000	£'000
Segmental revenue from external customers	1,182,650	268,971	-	1,451,621
Total capital expenditure	15,156	4,222	-	19,378
Segmental assets	823,204	244,986	(107,814)	960,376

3. Investment income 

	26 weeks ended 24 October 2010	26 weeks ended 25 October 2009	52 weeks ended 25 April 2010
	£'000	£'000	£'000
Fair value gain on financial assets	-	-	16,858
Fair value of additional claim in administration	-	-	6,300
Profit on disposal of available-for-sale financial assets	-	1,355	1,355
Dividend income from investments	1,883	-	140
	1,883	1,355	24,653

4. Finance income

	26 weeks ended 24 October 2010	26 weeks ended 25 October 2009	52 weeks ended 25 April 2010
	£'000	£'000	£'000
Bank interest receivable	272	312	502
Other interest receivable	-	88	304
Expected return on pension plan assets (Note 15)	1,049	812	1,645
Fair value adjustment to forward foreign exchange contracts	-	28,471	37,699
	1,321	29,683	40,150

5. Finance costs

	26 weeks ended 25 October 2010	26 weeks ended 25 October 2009	52 weeks ended 25 April 2010
	£'000	£'000	£'000
Interest on bank loans and overdrafts	2,755	4,544	8,056
Interest on other loans and finance leases	243	388	169
Interest on retirement benefit obligations (Note 15)	1,277	1,145	2,303
Fair value adjustment to forward foreign exchange contracts not designated for hedge accounting	1,109	-	-
	5,384	6,077	10,528

6. Taxation

The tax charge on profit before tax (excluding the impact of exceptional items) has been calculated using an estimated effective annual rate of 31.0% (2010: 32.5%).  This leaves an estimated tax charge of £31.0m for the 26 weeks ended 24 October 2010 (£18.8m for the 26 weeks ended 25 October 2009).

7. Earnings per share

Basic and diluted earnings per share

	26 weeks ended 24 October 2010	26 weeks ended 24 October 2010	26 weeks ended 25 October 2009	26 weeks ended 25 October 2009	52 weeks ended 25 April 2010	52 weeks ended 25 April 2010
	Basic £'000	Diluted £'000	Basic £'000	Diluted £'000	Basic £'000	Diluted £'000
Profit for the period	69,086	69,086	38,930	38,930	89,433	89,433
	Number in thousands		Number in thousands		Number in thousands
Weighted average number of shares	568,502	604,460	568,452	603,098	568,455	605,803
	Pence per share		Pence per share		Pence per share
Earnings per share	12.15	11.43	6.85	6.46	15.73	14.76

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 forward currency contracts in finance income/costs, exceptional costs and the profit/loss on sale and derecognition 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 weeks ended 24 October 2010		26 weeks ended 24 October 2010	26 weeks ended 25 October 2009	26 weeks ended 25 October 2009	52 weeks ended 25 April 2010	52 weeks ended 25 April 2010
	Basic £'000		Diluted £'000	Basic £'000	Diluted £'000	Basic £'000	Diluted £'000
Profit for the period	69,086		69,086	38,930	38,930	89,433	89,433
Post tax adjustments to profit for the period for the following exceptional items:
Realised loss/(gain) on forward foreign exchange contracts	(320)		(320)	29,657	29,657	28,618	28,618
Fair value adjustment to forward foreign exchange contracts	765		765	(19,218)	(19,218)	(27,143)	(27,143)
Other investment income	-		-	(915)	(915)	(24,133)	(24,133)
Provision for costs incurred relating to regulatory enquiries	-		-	-	-	5,616	5,616
Excess of fair value of assets acquired over consideration	-		-	-	-	(2,774)	(2,774)
Provision for legal disputes	-		-	-	-	1,574	1,574
Fair value adjustments within associated undertakings	-		-	-	-	(769)	(769)
Underlying profit for the period	69,531		69,531	48,454	48,454	70,422	70,422
	Number in thousands			Number in thousands		Number in thousands
Weighted average number of shares	568,502		604,510	568,452	603,098	568,455	605,803
	Pence per share			Pence per share		Pence per share
Earnings per share	12.23		11.50	8.52	8.03	12.39	11.62

8. Dividends

No dividends were declared or paid in the current period (2010: £6.8m paid).

9. Property, plant and equipment

	Freehold land and buildings	Long leasehold property	Short leasehold property	Plant and equipment	Total
	£'000	£'000	£'000	£'000	£'000
Cost
At 25 April 2010	124,368	11,328	108,899	313,222	557,817
Exchange differences	50	15	-	217	282
Additions	1,528	194	1,802	10,742	14,266
Eliminated on disposals	(75)	-	(1,276)	(5,004)	(6,355)
At 24 October 2010	125,871	11,537	109,425	319,177	566,010
Accumulated depreciation and impairment
At 25 April 2010	(29,433)	(4,532)	(51,111)	(201,823)	(286,899)
Exchange differences	(13)	(1)	-	159	145
Charge for the period	(2,042)	(161)	(5,941)	(20,143)	(28,287)
Eliminated on disposals	-	-	1,276	5,004	6,280
At 24 October 2010	(31,488)	(4,694)	(55,776)	(216,803)	(308,761)
Net book amount
At 24 October 2010	94,383	6,843	53,649	102,374	257,249
At 25 April 2010	94,935	6,796	57,788	111,399	270,918

The carrying value of properties previously impaired has been reviewed at the balance sheet date and no further impairment or permanent reversal was considered to have occurred.

10. Intangible assets

	Goodwill	Trade marks and licences	Brands	Total
	£'000	£'000	£'000	£'000
Cost
At 25 April 2010	126,208	30,640	80,536	237,384
Exchange differences	(1,247)	39	(1,514)	(2,722)
Other additions	-	1,036	-	1,036
At 24 October 2010	124,961	31,715	79,022	235,698

	Goodwill	Trade marks and licences	Brands	Total
	£'000	£'000	£'000	£'000
Amortisation and impairment
At 25 April 2010	(9,917)	(8,223)	(2,300)	(20,440)
Amortisation charge	-	(1,277)	-	(1,277)
Exchange differences	-	(76)	-	(76)
At 24 October 2010	(9,917)	(9,576)	(2,300)	(21,793)
Net book amount
At 24 October 2010	115,044	22,139	76,722	213,905
At 25 April 2010	116,291	22,417	78,236	216,944

Amortisation and impairments are both charged to selling, distribution and administrative expenses in the Consolidated Income Statement.

The carrying value of those goodwill and brands that are considered to have an indefinite life are allocated to cash-generating units as follows:

	Goodwill	Brands
	£'000	£'000
Retail	14,330	825
Brands	100,714	75,897
	115,044	76,722

The Group tests the carrying amount of goodwill and assets with an indefinite life annually for impairment or more frequently if there are indications that their carrying value might be impaired. The carrying amounts of other intangible assets are reviewed for impairment if there is an indication of impairment.

Impairment is calculated by comparing the carrying amounts to the value in use derived from discounted cash flow projections for the cash generating units to which the intangible assets are allocated.

11. Available-for-sale financial assets

	24 October 2010	25 October 2009	25 April 2010
	£'000	£'000	£'000
Available-for-sale financial assets	52,860	-	51,566

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: 

	25 October 2010	25 October 2009	25 April 2010
	£'000	£'000	£'000
At beginning of period	51,566	5,467	5,467
Additions	-	-	22,222
Disposals	-	(6,691)	(6,685)
Revaluation through the income statement	-	1,224	16,858
Revaluation through other comprehensive income	1,294	-	13,704
At end of period	52,860	-	51,566

We reported in the April 2010 Annual Report and Financial statements the current status of the appeal by Kaupthing Singer & Friedlander (KSF) in respect of the court judgement handed down on 13 May 2010. This judgement determined that the Group had acquired a beneficial interest in 12,153,071 ordinary shares in Blacks Leisure and 5,775,255 ordinary shares in JD Sports on 8 October 2008. This acquisition was reflected in the financial statements.

The Administrator of KSF appealed the decision. This does not impact Sports Direct's ownership of the shares however were KSF to be successful in their appeal, then Sports Direct would be required to pay an amount of c. £14.7m, which is currently held in escrow and included in other debtors.  This amount represents the difference in value of the shares between 8 October 2008 and 21 February 2010. There has been no change in situation during the period to 24 October 2010 or to the date of this Interim Report.

We also reported that the Group had submitted a claim with the administration for the shares in Amer Sports, Blacks and JD that were not in KSF's possession and also for the dividends and Group funds held by KSF. This amounts to approximately £9.1m in total and the latest information from the Administrator suggests a distribution of around 75%. To date we have received £3.2m and the remainder of the claim is included in other debtors.

12. Share capital

	24 October 2010
	£'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
640,552,369 ordinary shares of 10p each	64,055

13. Other reserves

	Share capital	Share premium	Permanent contribution to capital	Capital redemption reserve	Reverse combination reserve	Other reserves
	£'000	£'000	£'000	£'000	£'000	£'000
At 25 April 2010	64,050	874,300	50	8,005	(987,312)	(40,907)
Shares issued	5	-	-	-	-	5
At 24 October 2010	64,055	874,300	50	8,005	(987,312)	(40,902)

The share premium account is used to record the excess proceeds over nominal value on the issue of shares.

14. Borrowings

	24 October 2010	25 October 2009	25 April 2010
	£'000	£'000	£'000
Non-current:
Bank and other loans	2,228	3,498	2,789
Obligations under finance leases	534	595	563
	2,762	4,093	3,352
Current:
Bank overdrafts	246,261	374,933	330,385
Bank and other loans	1,642	9,495	3,274
Obligations under finance leases	5	20	-
	247,908	384,448	333,659
Total borrowings:
Bank overdrafts	246,261	374,933	330,385
Bank and other loans	3,870	12,993	6,063
Obligations under finance leases	539	615	563
	250,670	388,541	337,011

The maturity of the Group's bank and other loan borrowings other than overdrafts is as follows:

	24 October 2010	25 October 2009	25 April 2010
	£'000	£'000	£'000
Borrowings are repayable as follows:
Within one year	1,647	9,515	3,274
Between one and two years	2,386	3,609	2,976
Between two and five years	376	363	188
After five years	-	121	188
	4,409	13,608	6,626
Borrowings - Sterling	-	2,379	1,890
Borrowings - Other	4,409	11,229	4,736
	4,409	13,608	6,626

Loans are all on commercial variable rates of interest ranging between 0.6% and 1.5% over the base rate of the country within which the borrowing entity resides.

The working capital facility was progressively reduced at the request of the Group taking the aggregate limit to £275 million.

The Group continues to operate comfortably within its banking facilities and covenants. Our facilities are in place until April 2011 and we continue discussions with our banks.

The Group has a £50m arms length working capital facility with Mike Ashley which can be drawn down on request.

The carrying amounts and fair value of the borrowings are not materially different.

Net debt at 24 October 2010 was £233.6 million.

15. Retirement benefit obligations

The Group's defined benefit pension obligations relate to Dunlop Slazenger Group Holdings Limited ("DSGHL"), which was acquired on 28 January 2004. DSGHL operates a number of plans worldwide, the largest of which is of the funded defined benefit type. The Scheme is closed to new members.

The amounts for the current and previous four periods following the acquisition of DSGHL are as follows:

	24 October 2010	25 April 2010	26 April 2009	27 April 2008	29 April 2007
	£'000	£'000	£'000	£'000	£'000
Total fair value of plan assets	35,071	33,149	27,440	32,706	36,419
Present value of plan liabilities	(54,284)	(52,888)	(39,764)	(44,411)	(50,451)
Net plan obligations	(19,213)	(19,739)	(12,324)	(11,705)	(14,032)
Experience adjustments on plan liabilities	632	(12,645)	5,887	4,652	(1,620)
Experience adjustments on plan assets	(685)	4,461	(6,336)	(2,969)	1,164

The cumulative amount of actuarial gains and losses recognised in the statement of comprehensive income as at 24 October 2010 was an actuarial loss of £7,330,000 (25 April 2010: actuarial loss of £7,277,000).

There were no unrecognised actuarial gains or losses or past service costs as at 24 October 2010 or 25 April 2010.

Amounts recognised in the income statement are as follows:

	26 weeks ended 24 October 2010	52 weeks ended 25 April 2010
	£'000	£'000
Current service cost	3	12
Interest on retirement benefit obligations	1,277	2,303
Expected return on plan assets	(1,049)	(1,645)
	231	670

The current service cost is included within cost of sales. The interest on retirement benefit obligations and the expected return on plan assets are included within finance costs and finance income respectively.

Amounts recognised in the statement of comprehensive income are as follows:

	26 weeks ended 24 October 2010	52 weeks ended 25 April 2010
	£'000	£'000
Actual less expected return on assets	632	4,461
Actuarial losses relating to plan liabilities	(685)	(12,645)
	(53)	(8,184)

The actual return on plan assets for the 26 weeks ended 24 October 2010 was a profit of £1,681,000.

The movements in the fair value of plan assets are as follows:

	26 weeks ended 24 October 2010	52 weeks ended 25 April 2010
	£'000	£'000
At the start of the period	33,149	27,440
Expected return	1,049	1,645
Actuarial gain	632	4,461
Employer contributions	859	1,216
Employee contributions	9	15
Benefits paid out	(627)	(1,628)
At the end of the period	35,071	33,149

The Group expects to contribute £1,210,000 to its defined benefit pension plans for the 52 weeks ending 24 April 2011.

The principal assumptions underlying the actuarial assessments of the present value of the plan liabilities are:

	24 October 2010	25 April 2010
	%	%
Inflation rate	3.3	3.6
Future salary increases	n/a	n/a
Future pension increases	3.1	3.4
Discount rate	5.2	5.5

The movements in the present value of the plan liabilities are as follows:

	26 weeks ended 24 October 2010	52 weeks ended 25 April 2010
	£'000	£'000
At the start of the period	(52,888)	(39,764)
Current service cost	(3)	(12)
Interest cost	(1,277)	(2,303)
Actuarial loss	(685)	(12,645)
Employee contributions	(9)	(15)
Benefits paid out	627	1,628
Exchange (loss)/gain	(49)	223
At the end of the period	(54,284)	(52,888)

The net movements in the net present value of the plan liabilities were as follows:

	26 weeks ended 24 October 2010	52 weeks ended 25 April 2010
	£'000	£'000
Net liability at the start of the period	(19,739)	(12,324)
Movement in fair value of plan assets	1,922	5,709
Movements in the present value of the plan liabilities	(1,396)	(13,124)
Net liability at the end of the period	(19,213)	(19,739)

16. Financial instruments

(a) Derivatives: foreign currency forward purchase contracts

The most significant exposure to foreign exchange fluctuations relates to purchases made in foreign currencies, principally the US dollar. The Group's policy is to reduce substantially the risk associated with purchases denominated in foreign currencies by using forward fixed rate currency purchase contracts, taking into account any foreign currency cash flows. The Group does not hold or issue derivative financial instruments for trading purposes, however if derivatives do not qualify for hedge accounting they are accounted for as such and accordingly any gain or loss is recognised immediately in the income statement.

The carrying values of forward foreign currency purchase contracts were as follows:

	24 October 2010	25 October 2009	25 April 2010
	£'000	£'000	£'000
Fair value of derivative financial instruments - assets/(liabilities)	2,866	(6,522)	13,648

The sterling principal amounts of forward foreign currency purchase contracts and contracted forward rates were as follows:

	24 October 2010	25 October 2009	25 April 2010
	£'000	£'000	£'000
US dollar purchases	220,000	250,000	210,000
Contracted rates	1.53 - 1.65	1.51 - 1.66	1.53 - 1.68
US dollar sales	-	-	(50,000)
Contracted rates	-	-	1.54
Euro sales	(27,122)	(54,303)	(36,319)
Contracted rates	1.09 - 1.14	1.09 - 1.14	1.09 - 1.14
Euro purchases	871	-	-
Contracted rates	1.15	-	-

Forward foreign currency purchase and sale contracts generally have a maturity at inception of approximately 12 months.

(b) Sensitivity analysis

Foreign currency sensitivity analysis

The Group's principal foreign currency exposures are to US dollars and the Euro. The table below illustrates the hypothetical sensitivity of the Group's reported profit and equity to a 5% increase and decrease in the US dollar/Sterling and Euro/Sterling exchange rates at the balance sheet date, assuming all other variables remain unchanged. The figures have been calculated by comparing the fair values of outstanding foreign currency contracts at the current exchange rate to those if exchange rates moved as illustrated.

Positive figures represent an increase in profit or equity:

	Income statement					Equity
	24 October 2010	25 October 2009		25 April 2010		24 October 2010	25 October 2009		25 April 2010
	£'000	£'000		£'000		£'000	£'000		£'000
Sterling strengthens by 5%
US dollar	206	(19,004)		3,137		206	(19,004)		3,137
Euro	(302)	6,313		1,401		(302)	6,313		1,401
Sterling weakens by 5%
US dollar	(217)	19,954		(3,294)		(217)	19,954		(3,294)
Euro	317	(6,628)		(1,471)		317	(6,628)		(1,471)

17. Cash inflows from operating activities

	26 weeks ended 24 October 2010	26 weeks ended 25 October 2009	52 weeks ended 25 April 2010
	£'000	£'000	£'000
Profit before taxation	100,007	57,809	119,502
Net finance costs/(income)	4,063	(23,606)	(29,622)
Profit on disposal of available-for sale assets	-	(1,355)	(24,513)
Investment income	(1,883)	-	(140)
Share of profit of associated undertakings and joint ventures	(549)	(1,434)	(7,200)
Operating profit	101,638	31,414	58,027
Depreciation	28,287	20,848	47,448
Amortisation charge	1,277	1,433	2,897
Loss on disposal of intangibles	-	79	184
Defined benefit pension plan current service cost	3	121	670
Defined benefit pension plan employer contributions	(859)	(709)	(1,216)
Share based payments	5,325	4,742	10,767
Operating cash inflow before changes in working capital	135,671	57,928	118,777
Decrease/(increase) in receivables	2,168	4,362	(2,222)
(Increase)/decrease in inventories	(52,683)	37,052	43,460
Increase in payables	20,987	9,523	39,461
Cash inflows from operating activities	106,143	108,865	199,476

18. Related party transactions

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.

The Group entered into the following material transactions with related parties:

26 weeks ended 24 October 2010 Related party	Relationship	Sales	Purchases	Trade and other receivables	Trade and other payables
		£'000	£'000	£'000	£'000
Heatons	Associate	12,024	-	4,809	-
No Fear International Limited	Joint venture	-	-	293	(2,065)
PBF International Limited	Joint venture	-	(1,773)	661	-

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 £406,095, including pension contributions of £Nil.

26 weeks ended 25 October 2009 Related party	Relationship	Sales	Purchases	Trade and other receivables	Trade and other payables
		£'000	£'000	£'000	£'000
Heatons	Associate	12,324	-	4,063	-
No Fear International Limited	Joint venture	-	-	-	(1,970)
M J W Ashley	Director	-	-	-	(689)
PBF International Limited	Joint venture	-	-	550	-

No interest was charged by M J W Ashley's on his 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 £538,033, including pension contributions of £5,937.

19. 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.

20. Post balance sheet events

No material post balance sheet events have occurred after 24 October 2010 to the date of this Interim Report.

 

END

 

 

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