Preliminary Results

RNS Number : 3659K

Sports Direct International Plc

14 July 2011

 



14^th July 2011

Sports Direct International plc

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

Preliminary Results

For the 52 weeks to 24 April 2011

	52 weeks ended 24 April 2011	52 weeks ended 25 April 2010	Change %
	£m	£m
Group revenue	1,599	1,452	+10.2%
UK Retail	1,245	1,118	+11.3%
International Retail	132.3	119.9	+10.3%
Brands	187.7	190.5	-1.5%
Group gross margin	41.2%	40.6%	+60 bps
UK Retail	41.9%	41.3%	+60 bps
Underlying EBITDA(1)	200.4	160.4	+24.9%
Underlying profit before tax (PBT) (1) (2)	135.5	102.1	+32.7%
Reported profit before tax	118.8	119.5	-0.6%
Underlying earnings per share(1) (2)	16.83p	12.39.p	+35.9%
Reported earnings per share	14.80p	15.73p	-5.9%

 Key highlights

·      EBITDA growth across UK Retail, International Retail and Brands

·      Substantially reduced net debt by 52.3% to £148.9m (2010: £311.9m)

-    Net debt to underlying EBITDA of 0.74 times

·       Confirmed second year of Employee Bonus Share Scheme targets been met; colleagues will receive shares in summer 2012 and summer 2013

·      UK Retail like-for-like gross contribution increased by 6.6%

·      Refinanced bank facilities until 2014

·       Strengthened our UK market leading position, continued international expansion and pursued our long-term focus on developing our licensing business within the Brands division

·       First year of Nike Academy, training nearly 1,000 employees

·      No final dividend

(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

Dave Forsey, Chief Executive, said:

"This has been an excellent year of growth for the Group in what has been a challenging retail environment.  Key to this growth has been the success of our employee bonus share scheme, which we introduced to focus the whole Group on our ambitious growth targets. 

"The strength of our business model means that we are very well positioned for the challenges and targets for the future. Our progress since the year end is in line with management expectations and we are confident of reaching our current year target of underlying EBITDA."

Sports Direct International plc Dave Forsey, Chief Executive Bob Mellors, Group Finance Director	T:  0845 164 1730
Financial Dynamics Jonathon Brill            Caroline Stewart Alex Beagley	T:  0207 831 3113

Chairman's Statement

The Group delivered a strong operational and financial performance in what continues to be a tough market environment. Growth has been achieved across all key financial measures with revenue and EBITDA growing impressively and debt reduced. Our customers have backed our industry leading position on both price and quality all of which positions us well for the future.

We strive for improvement in every aspect of our business. In this regard, we continue to improve the quality of our stores; invest in staff training and expand our range of products. We are in continual dialogue with our major brand suppliers to obtain a broader range of their product. We believe, due to our discounting pricing policy, this would allow more consumers to have access to these goods.

Employee bonus share scheme

Central to the success of the Group over the last few years has been the highly motivating Employee Bonus Share Scheme. I am delighted with today's results which I feel sure are in some part due to this scheme. Having hit this year's underlying EBITDA targets, we are able to reward our qualifying employees with share payouts in both 2012 and 2013. This will make a meaningful difference to over 2,000 of our valued people. We are determined they will continue to benefit from the Group's success as we look to extend this scheme in future years.  

I would like to thank, on behalf of the Board, all of our staff for their substantial contribution to our success.

Board

We have strengthened the Board during the year by appointing Charles McCreevy as a Non-Executive Director. His experience in business and as European Commissioner for Internal Markets and Services will be a great asset to Sports Direct. In addition, post the period end, we appointed Claire Jenkins as a Non-Executive Director. Claire's experience in corporate governance and corporate affairs will be invaluable. We have an excellent independent team in place for the benefit of all our shareholders.

Dividend

The Board has determined not to pay a dividend at this point; it will keep the payment of dividends under review.

Investigations

In October 2010 the Serious Fraud Office concluded its investigations into Sports Direct and JJB Sports PLC, bringing no charges against the Company or individuals within it. We are pleased this lengthy investigation has come to an end and that Sports Direct was, as management have always believed, absolved of any wrongdoing. The OFT enquiry, with which we continue to cooperate, is still ongoing.

Keith Hellawell

Non-Executive Chairman

14 July 2011

chief executive's report and business review

Overview of financial performance

I am pleased to be able to report another year of strong underlying profit growth for Sports Direct, in a consumer environment that remains one of the toughest we have ever seen. The resilience and flexibility of our business model, coupled with our high speed of execution, continues to add significant value to our operations by providing customers with an unrivalled depth and breadth of product choice at the best available prices, across all categories and in all stores and online for serious sportsmen and women.

With a number of new stores opened during the year in the UK and Europe, we are taking our offer to an ever increasing customer base which is responding positively to stronger in-store marketing and promotional initiatives.  We are proud of our reputation for quality and have continued to strengthen our position as the clear market leader in the UK sports retail sector.

We are very pleased to report that our UK like-for like gross contribution increased by 6.6% over the 12 month period.

I am especially pleased that we can again advise our employees that we have met this year's underlying EBITDA targets for the Bonus Share Scheme that covered the 2010 and 2011 financial years. As a result of attaining both years' targets they will be sharing in the Group's success by receiving Sports Direct shares in both 2012 and 2013. These were ambitious stretch targets of £155m in 2010 and £195m in 2011 where we actually attained £160.4m and £200.4m.  We thank our colleagues for all their efforts to achieve these results.

Due to the success of the Bonus Share Scheme in 2010 and 2011, and the fact that it underpinned the Group's performance over the past two years, the Company will be launching a four year scheme covering the 2012, 2013, 2014 and 2015 financial years and this is explained in more detail later in this report.

Group

In the 52 weeks ended 24 April 2011 ("the Year") we increased Group revenue 10.2% to a record £1,599m compared with revenue of £1,452m for the 52 weeks ended 25 April 2010. The increase was due to a strong performance in the Retail division where revenues rose 11.9% to £1,412m (2010: £1,261m). The Brands division revenues decreased in line with management's strategy and expectations by 1.5% to £187.7m (2010: £190.5m).

Group gross margin in the Year increased by 60 basis points from 40.6% to 41.2%. Retail division margin increased by 40 basis points to 41.2% (2010: 40.8%), while Brands division margin increased 250 basis points to 41.4% (2010: 38.9%). Group operating costs increased 6.6% to £459.4m (2010: £431.0m). Retail division operating costs were well controlled and increased by only 7.6% in the Year, despite an increase in floor space of 2% and a rise in sales of just under 12%. 

Brands division operating costs were up 1.5% to £55.1m (2010: £54.2m) due to an increase in spend on advertising, promotion and sponsorship as part of the Group's on-going investment in internationally recognised brands. Also included within Group operating costs is a £10.6m (2010: £10.8m) charge in respect of the Employee Bonus Share Scheme and Executive Share Scheme. This charge has been taken centrally and, except in note 4 to the accounts, is not reflected in divisional (Retail and Brands) numbers in this report. 

We grew Group underlying EBITDA for the Year by 24.9% to £200.4m (2010: £160.4m). Within this underlying EBITDA, the Retail division increased 24.4% to £188.4m (2010: £151.4m) and the Brands division increased 14.1% to £22.6m (2010: £19.8m).

Group underlying profit before tax increased 32.7% to £135.5m (2010: £102.1m), as a result of the £40.0m increase in EBITDA together with a £5.0m reduction in interest payable and a £12.6m increase in depreciation. Underlying EPS for the Year increased by 35.9% to 16.83p (2010: 12.39p).

In July 2010, we stated that we would aim to reduce debt levels to a range of between one and 1.5 times underlying EBITDA by April 2011. We reported in December that we had made strong progress in respect of this and were ahead of schedule with net debt decreasing to £233.6m (25 April 2010: £311.9m), which was 1.2 times historic rolling underlying EBITDA. We are pleased to report that we have reduced net debt over the Year by 52.3% to £148.9m (2010: £311.9m). This equates to 0.74 times historic rolling underlying EBITDA. This was achieved by:

• growing underlying EBITDA from £160.4m to £200.4m

• limiting the increase in capital expenditure to 13% to £22.0m

• reducing financing costs by £5.0m as a result of on-going low interest rates and lower level of debt

• continuing to save the cost of dividends

Review by business segment

	52 weeks ended 24 April 2011 (£'m)	52 weeks ended 25 April 2010 (£'m)		Change %
Retail
Revenue:
UK Retail	1,244.5	1,117.7		11.3
UK Wholesale and other	34.7	23.5		47.7
International Retail	132.3	119.9		10.3
Total retail revenue	1,411.5	1,261.1		11.9
Cost of sales	(830.3)	(746.1)		11.3
Gross margin	581.2	515.0		12.9
Gross margin percentage	41.2	%	40.8	%

52 weeks ended 24 April 2011 (£'m)

52 weeks ended 25 April 2010 (£'m)

Change %

Brands

Revenue:
Wholesale	162.0	167.3		-3.2
Licensing	25.7	23.2		10.8
Total brands revenue	187.7	190.5		-1.5
Cost of sales	(110.0)	(116.4)		5.5
Gross margin	77.7	74.1		4.9
Gross margin percentage	41.4	%	38.9	%

In spite of a difficult trading environment, our strategy of focusing on our core strengths, increasing efficiencies and controlling costs, delivered another strong performance.

UK Retail

UK Retail revenue growth continues to be primarily driven by our retail and logistics skills - providing the widest choice of the best products at the best prices with universal availability.

UK Retail sales were up 11.3% to £1,245m (2010: £1,118m).

There were no major acquisitions or disposals within UK Retail during the Year. Since the year end, we have acquired 80% stakes in USC and Cruise Clothing for a total cash consideration of £7m and committed to a £20m working capital facility. Sales in the second half of the Year were up 12.9% to £600.2m (2010: £531.7m) against strong comparatives. The sales increase in the second half of the Year was better than expected, while, in line with expectations, gross margin for the second half of the Year reduced to 40.2% (2010: 40.9%) as we deliberately absorbed the increase in VAT and ran selected price promotions. Gross margin for the Year increased by 60 basis points to 41.9% (2010: 41.3%).

Online revenue has increased by 97% from £48.6m to £95.7m in the last 12 months and represented 7.7% of total UK Retail sales (2010: 4.5%). We remain focused on developing this revenue stream further. Order fulfilment and state-of-the-art 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 331 of UK store fascia's now branded SPORTSDIRECT.com.

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 in the autumn of 2010, which again led to a strong increase in sales and web traffic.  We continued with our TV campaigns throughout autumn 2010 into spring 2011 and intend to carry on for the rest of summer and into autumn 2011.

As we stated in December, 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 England versus 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 grew 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 boosted our full Year results by £15m-£20m at EBITDA level.

UK Retail like-for-like gross contribution increased by 6.6% over the 12 month period, marking the third consecutive year of growth in this KPI. The previous years were 3.4% in 2010 and 2.5% in 2009. UK Retail like-for-like contribution is defined as the percentage change in the successive 12 month period. A like-for-like store is one that has been trading for the full 12 months in both periods and has not been affected by a significant change, such as a major refit. The number of stores included in this year's comparison has decreased from 325 to 290 due to the Group's refit programme undertaken during the Year. This KPI does not include online sales. Operating costs increased 7.7% to £348.3m (2010: £323.5m) in spite of the UK minimum wage increase, an increase in floor space and a rise in sales of just over 11%. Store wages as a percentage of sales was 8.6% (2010: 9.3%) which demonstrates the continued progress in cost control.

Underlying EBITDA for UK Retail was £175.5m (2010: £138.7m). This increase was driven by a £61.3m increase in gross margin (including wholesale), offset by a £24.8m increase in operating costs.

The Group's retail businesses performed strongly in a continuingly difficult economic environment. Our retail model, offering outstanding value to our customers, proved as resilient as we expected it to be, both in the UK and internationally. We believe that this business model, which provides flexibility with total control and enables high speed of execution, is the best approach both in the current and for future economic environments. Throughout the Year, we continued to focus on our fundamental approach of offering the customer the most comprehensive product range and the best availability while reducing our costs wherever possible.

Our store portfolio remains constantly under review with the performance of each store and ways of maximising performance being regularly examined. This is why we have closed more than 70 stores since 2008 as our portfolio continues to evolve. We increased our period end square footage to 3.8m square feet.

As reported last year, the Nike Training Academy and extended National Training facility at the Shirebrook site is now fully operational and has seen 1,350 employees attend brand training sessions throughout the Year. 997 employees attained Nike undergraduate level and 227 of these attained graduate status. The Nike online training programme, SKU (Sports Knowledge Underground) has seen 95% completion by our store employees. Our goal is still to have the best trained and most knowledgeable staff in UK sports retail.  

The Group's Shirebrook store's net sales area increased from 18,000 sq. ft. to 25,000 sq. ft. The store remains the blueprint for our programme of updating our core stores across the UK. Capital expenditure for this refit programme is included in the expected Group capital expenditure for FY12 of approximately £40m (2010: £22.0m). The programme includes the creation of specialist areas where whole categories are merchandised together. The Group continues to invest in infrastructure in Shirebrook and the extension of the National Distribution Centre is due to be completed by autumn 2012.

We continued to work well with our major third party brand suppliers. Nike, Umbro, adidas, Reebok and Puma all have their own offices in our Shirebrook head office which enables us to work very closely with them on a day to day basis. 

We continued to build on our store-in-store concept and our way of approaching specialist areas is to collaborate with partners where we can grow their standalone business. Since taking the stake in Brasher Leisure Ltd, trading as "Sweatshop", in 2007, we have continued to roll out the SheRunsHeRuns dedicated sales areas in our core stores. Another example is with Soccer Scene @ the Boot Room. This category is also managed from our Shirebrook headquarters and the roll out of the Boot Room is largely complete throughout our core store portfolio.

UK Store Portfolio	As at 24 April 2011	As at 25 April 2010
Core	306	300
Non-core	87	87
Total	393	387
Core openings	11	9
Non-core openings	11	25
Core closed	5	1
Non-core closed	11	5
SPORTSDIRECT.com fascia	331	306
Field & Trek fascia	19	19
Lillywhites fascia	2	3
Other fascia (Gilesports, Hargreaves etc.)	41	59
Area (sq. ft.)	3.8m	3.7m

In the 12 months to 24 April 2011, 66 rent reviews have been agreed on stores. The average increase in rent was 3.54% (0.79% annual equivalent). There are currently 55 rent reviews outstanding with a further 40 falling due in 2011-12.

For a number of years, our UK Retail division has occupied 32 stores and 2 offices owned by Mike Ashley, the Group's major shareholder, under the terms of a five year lease dated March 2007. We stated in last year's Annual Report that the Company would discuss with Mr Ashley the purchase of properties owned by him and from which the company trades. The Board (excluding Mr Ashley because of his material interest) believes that the purchase of these properties is in the best interest of the Company. Having reached an agreement a circular to shareholders and a resolution for our AGM have been prepared which, if approved, would allow the Company to purchase this portfolio of properties.

In the current financial Year, we are targeting to open between 15 and 20 new core stores including relocations in the UK, excluding Northern Ireland. We have already opened seven in the first quarter, including two relocations.

International Retail

International Retail sales were up 10.3% to £132.3m (2010: £119.9m). On a currency neutral basis, the increase was 14.7%

International Retail gross margin fell by 50 basis points to 43.5% primarily due to an extensive stock clearance programme in the new Portuguese stores in the last quarter.

We have introduced an International Retail like-for-like stores gross contribution figure. This will be using the same criteria that we have established for UK Retail. In the year to 24^th April 2011, we have seen an 8.5% increase in International Retail like-for-like gross contribution. The number of stores included in this metric is 50.

Operating costs within International Retail increased by 6.8% to £45.4m (2010: £42.5m). The increase was less than the £4.9m increase in gross margin and, together with a £1.8m decrease in income from associates, resulted in an increase in underlying EBITDA of 1.6% to £12.9m (2010: £12.7m).

Excluding income from associates (Heatons), International Retail underlying EBITDA increased by 19.6%.

The Group has a 50% shareholding in the Heatons chain. There are 13 Sports Direct stores in Northern Ireland and 26 sports stores in the Republic of Ireland.

International Retail store portfolio	24 April 2011	25 April 2010
Belgium	44	44
Slovenia	14	12
Portugal	10	-
Netherlands	4	4
Cyprus	4	3
France	2	1
Luxembourg	1	1
Total	79	65
Area sq. ft.	778k	649k

All of the above stores are operated by companies wholly owned by the Group, except Portugal. As stated in December, we plan to accelerate the growth of our international operations. As a result, we opened seven new stores in Europe, including three relocations and our second store in France. As at 24 April 2011, International Retail operated from a total retail sales space of c.778,000 sq. ft. (2010: 649,000 sq. ft.)

In Portugal, we are pleased to report that the integration programme across the ten stores has been successfully completed in just six months, when this process would normally take between 12 and 18 months. We acquired 15 stores as part of the portfolio; closed six; opened one; while two stores have undergone major refits. All stores are now operating under the SPORTSDIRECT.com fascia. Importantly, with all of our new and existing stores in Europe, local management are working hard to ensure that all stores are working towards the operational efficiencies and standards that exist across the UK portfolio.

We continue with our strategy to identify partners in new territories while continuing to expand our operations in the countries where we currently trade. We are looking in particular to further expand our operations in the French and Iberian Peninsula and have targeted at least nine new stores; three in France, two in the Netherlands, and one each in Cyprus, Malta, Slovenia and Belgium in the Year.

Brands

Brands total revenue reduced 1.5% to £187.7m (2010: £190.5.m), driven by our deliberate strategy to change some of our sales from wholesale to licensing.

Wholesale revenues were down 3.2% to £162.0m (2010: £167.3m), in line with this strategy to focus on contribution rather than revenue, while concentrating on streamlining our sales mix. Brands gross margin improved by 250 basis points to 41.4% (2010: 38.9%), reflecting the improved mix of sales and an improvement in wholesale gross margin to 32.1% (2010: 30.4%).

The market for our Wholesale businesses in the UK, Europe and the US remain challenging and the customer base has been restructured to eliminate unprofitable business.

Licensing revenues were up 10.8% to £25.7m (2010: £23.2m) which was in line with our expectations.

During the Year, we signed 95 new licence agreements, covering multiple brands and product categories, with minimum contracted values of $86m over the terms of the agreements. We also restructured the Everlast master license for clothing in Europe. Management are currently targeting for license income to achieve a Compound Average Growth Rate (CAGR) of 10% and reach at least $60m by April 2015.

Longer term, we still regard licensing as the key driver for the Brands division profitability and growth of the business. The main growth areas are expected to be Asia Pacific and the Americas.

Operating costs increased by 1.5% to £55.1m (2010: £54.2m), as we continue to invest in our portfolio of world class brands. As a result of this investment, our advertising and promotional spend increased by 18.7% to £16m.

Underlying EBITDA increased 14.1% to £22.6m (2010: £19.8m) as the increase in costs of £0.8m was less than the increase in gross profit of £3.5m. Underlying EBITDA represented 88% of licensing income in the Year, and it is our aim to increase this proportion to 100% by the end of our 2012 financial year.

Cash flow in the division was strong with tight working capital management resulting in a reduction in debtors of £6.2m.

The business continues to sponsor and receive endorsements from leading players and tournaments including Slazenger's 108th year as the official ball supplier for the Wimbledon championships. We believe this to be one of the longest continuous sponsorship arrangements anywhere in the world.

Key Performance Indicators

The Board monitors the performance of the Group by reference to a number of key performance indicators (KPI's), which are discussed in this Chief Executive's Report, and also in the Financial Review. The most important of these KPI's are:

	52 weeks ended 24 April 2011	52 weeks ended 25 April 2010
Financial KPIs
Group revenue	£1,599.2m	£1,451.6m
Underlying EBITDA (1)	£200.4m	£160.4m
UK Retail gross margin	41.9%	41.3%
UK Retail like-for-like stores gross contribution (2)	+6.6%	+3.4%
Underlying earnings per share (3)	16.83p	12.39p
Non Financial KPIs
No. of core stores (4)	306	300
Customer complaints % change	+3.6%	+4.0%
Employee turnover	16.9%	17.4%
Cardboard recycling	6,237 tonnes	5,847 tonnes

(1) The way in which Underlying EBITDA is calculated is set out in the Financial Review.

(2) Like-for-like gross contribution for UK Retail is the percentage change in successive 12 month periods. Like-for-like gross contribution is adjusted to eliminate the impact of foreign currency movements. A like-for-like store is one that has been trading for the full 12 months in both periods, and has not been affected by a significant change such as a major refit. Store gross contribution is the excess of sales revenue (net of VAT) over the cost of goods sold. This KPI excludes online sales revenue. The gross contribution would only be adjusted if a significant promotion affected the comparison.

(3) The way in which Underlying earnings per share is calculated is set out in the Financial Review.

(4) A core store is a store acquired and fitted out by the Group or otherwise so designated.

Contracts essential to the business of the Group

The Group has long established relationships with Nike and adidas, the major suppliers of third party branded sporting goods, particularly footwear, and considers that continued supplies from these companies is critical to the business of the Group.

Main trends and factors likely to affect the future development and performance of the Group's businesses

The Group's retail businesses will undoubtedly be affected by the economic climate and changes therein. Movements in interest rates and exchange rates affect the businesses directly and consumer confidence and spending is affected by a wide range of factors including employment, tax and interest rates, house prices and the general 'feel good factor', factors beyond the Group's influence. We were relieved that the Government had given plenty of warning that the VAT increase to 20% would not take place until 4 January 2011.

All of the above apply equally to our Brands businesses, both wholesale and licensing. Reduction in customer demand is reflected in the wholesaling and licensing business, as orders and royalties are affected. Moreover, in difficult economic times, suppliers come under increasing pressure to reduce their prices to their customers and all suppliers run the risk of their customers ceasing to trade, reducing demand for their products. Difficult economic conditions can also make it difficult for suppliers to obtain credit insurance in respect of some customers, leaving the supplier with a difficult question of whether or not to supply and, if they do, with the attendant risk of bad debts.

Later in this report, we comment on risks and uncertainties that relate to the Group's businesses and while we manage to reduce risks, where possible, the likelihood of their occurring and their impact if they do, are factors that could influence the Group or part of it.

The Group is now applying hedge accounting, which is in line with other major retailers. This reduces an element of potential volatility in reported profit.

Employees

In no small measure, the progress we continue to make is down to the dedication and expertise of over 17,000 staff throughout the business. I am delighted to take this opportunity to thank everyone in the team for their outstanding contribution and I look forward to working with them towards our further growth and success.

We have incentivised employees by enabling them to share in the Group's success through the 2009 Bonus Share Scheme. The Bonus Share Scheme is focused on underlying EBITDA and is designed to motivate colleagues, help improve retention of key employees and to align the interests of employees and shareholders. The share scheme is also aligned with the Group's business plan.

The bonus is in two stages. The first bonus is 25% of base pay in shares of £1.00 per share. The first bonus target was underlying EBITDA of £155m in 2009-10 and was achieved in that Year. The first bonus will vest in 2012.

The second bonus is 75% of base pay in shares of £1.25 per share. The second stage of the bonus was conditional upon the first bonus target being met in 2009-10, attaining underlying EBITDA of £195m in 2010-2011, and underlying EBITDA /Net Debt ratio of two or less at the end of 2010-11. All these targets were achieved in the Year.  The shares vest, subject to continuous employment until 2013.

We will be launching the 2011 Bonus Share Scheme this Year to follow on from the previous scheme. It will be a four year scheme based upon achieving underlying EBITDA before the costs of the scheme of £215m in 2012, £250m in 2013, £260m in 2014 and £300m in 2015 coupled with the individual employee's satisfactory personal performance. The scheme requires that all targets are met before the shares will vest. The vesting periods will be summer 2015 (approximately 8m shares) and summer 2017 (approximately 26m shares).

Risks and uncertainties relating to the Group's business

The identification and management of risk is a continuous process, and the Group's system of internal controls and the Group's business continuity programmes are key elements of that. The Group maintains a system of controls to manage the business and to protect its assets.  Close monitoring of the market, competitors, the economy, consumer confidence, participation in major sporting events, the weather, companies in which the Group holds strategic stakes, the behaviour of licensees, and of possible infringement of intellectual property, and the development of contingency plans and rapid response to changing circumstances manages and does much to mitigate the risks caused by these factors.  We continue to invest in people, systems and in IT to manage the Group's operations and its finances effectively and efficiently.

Risks are an inherent part of the business world. The Group has identified the following factors as potential risks to, and uncertainties concerning, the successful operation of its business.

Supply chain and key suppliers

Any disruption or other adverse event affecting the Group's relationship with any of its major manufacturers or key brands or brand suppliers, or a failure to replace any of its major manufacturers or suppliers on commercially reasonable terms, could have an adverse effect on the Group's business, operating profit or overall financial condition.

The Group is reliant on manufacturers in developing countries as the majority of the Group's products are sourced from outside the UK. The Group is therefore subject to the risks associated with international trade and transport as well as those relating to exposure to different legal and other standards.

The Group follows policies of forging long term relationships with suppliers and of utilising two leading supply chain companies to procure much of the Group's own branded goods. This close relationship brings a better understanding of the supplier's resources enabling the Group to react quickly to changes in the international supply market.

The Group requires suppliers to sign up to the Group's Code of Ethics/Supply Policy which enables the Group to monitor and benchmark the supplier's performance.  It allows the Group to carry out inspections of premises to ensure compliance with our codes for continuity and quality of supply.

Many risks relating to the supply chain, reliance on non-UK suppliers, and to the reputation of the Group's brands are managed and mitigated by the implementation of those policies.

Treasury and financial risk

The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the US dollar and the Euro. 

Foreign exchange risk arises when future commercial transactions or recognised assets or liabilities are denominated in a currency that is not the entity's functional currency, as exchange rates move. 

In the Group's case, the majority of foreign exchange contracts relating to the sourcing of Group branded goods are denominated in US dollars, and a strengthening of the dollar or a weakening of the pound sterling makes those goods more expensive. The Group seeks to mitigate the expenses and FX fluctuations by hedging via forward foreign currency contracts which are designated as cash flow hedges.

The Group also holds assets overseas in local currency, and these assets are revalued in accordance with currency movements. This currency risk is not hedged.

The Group has net borrowings, which are principally at floating interest rates linked to bank base rates or LIBOR.  The Group is cash generative and is now targeting its debt levels to mitigate any such risk and currently has debt levels of less than 1 x underlying EBITDA.

Credit and liquidity risk

The Group, primarily through its Brands division, could have a credit risk if credit evaluations were not performed on all customers requiring credit over a certain amount.  The Group does not require collateral in respect of financial assets.  Our key suppliers also face credit risk and as such the Group regularly assesses the viability of its suppliers and ensures there are plans to source from alternative businesses should key suppliers fail.

Rigorous procedures are in place to mitigate this credit risk.  The Group has a credit policy in place and the exposure to risk is monitored on an on-going basis. Credit evaluations are performed on all customers requiring credit over a certain amount, and concentration of credit risk is managed. Investment of cash surplus, borrowings and derivative investments are made  through banks and companies which have credit ratings and investment criteria approved by the Board.

Funding and liquidity for the Group's operations are provided through bank loans, overdrafts and shareholders' funds. The object is to maintain sufficient funding and liquidity for the Group's requirements, but the availability of adequate cash resources from bank facilities and achieving continuity of funding in the current financial climate could be a risk to the Group in future years.  Again the Group mitigates this risk by keeping debt levels low and the current facility has been renewed with a club of 10 banks, thereby spreading the risk.

Investment risk

The Group also holds shares in publicly listed companies and fluctuations in their share prices will have a financial impact on the business results.  The Group has chosen to limit further purchases of public listed company shares in order to reduce the potential risk to the business, although current investments are in known business sectors and are not deemed to be in volatile companies.

Pensions

Some subsidiaries in the Group make contributions to certain occupational defined benefits pension schemes.  An increase in the Scheme's funding needs or changes to obligations in respect of the schemes could have an adverse impact on its business.

Although the Group is unable to mitigate any change in legislation regarding contributions, the schemes are historical and closed to new entrants.  The Group does not intend to enter into any further final salary arrangements going forward.

Market forces

The sports retail industry is highly competitive and the Group currently competes at national and local levels with a wide variety of retailers of varying sizes who may have competitive advantages, and new competitors may enter the market. Such competition continues to place pressure on the Group's pricing strategy, margins and profitability.

Operational

Any significant disruption to the operations of the Group, divisional head offices and the National Distribution Centre at Shirebrook, or interruption to the smooth running of the Group's fleet of vehicles, might significantly impact its ability to manage its operations, distribute products to its stores and maintain its supply chain.

Any long term interruption of the Group's IT systems would have a significant impact on the Group's operation, particularly in the Retail division.  As explained below the Group's business continuity programme addresses these operational risks.

Business continuity and acts of terrorism

The majority of the Group's revenue is derived from the UK and accordingly any terrorist attacks, armed conflicts or government actions within the UK could result in a significant reduction in consumer confidence, which would in turn have an adverse affect on sales in stores.

The business continuity programme addresses the risk of disruption to the Shirebrook campus. Accordingly the Board is confident that as far as is practical the risks and uncertainties that face the Group are being monitored and managed and that where required appropriate action is being taken.

Legal

The Group's trade marks, patents, designs and other intellectual property rights are central to the value of the Group's brands. Third parties may try to challenge the ownership or counterfeit the Group's intellectual property.  The Group may need to resort to litigation in the future to enforce its intellectual property rights and any litigation could result in substantial costs and a diversion of resources.

The Group believes that its licensees, suppliers, agents and distributors are in material compliance with employment, environmental and other laws. The violation, or allegations of a violation, of such laws or regulations, by any of the Group's licensees, suppliers, agents or distributors, could lead to adverse publicity and a decline in public demand for the Group's products, or require the Group to incur expenditure or make changes to its supply chain and other business arrangements to ensure compliance.

The Group has an in house specialist trade mark and license legal department that administers all registrations and regulations.  This in house expertise is vital in mitigating any or all such issues.

Sales

The Group's retail businesses are subject to seasonal peaks. The incidence and participation in major sporting events will have a particular impact on the UK Retail business. Prolonged unseasonal weather conditions or temporary severe weather during peak trading seasons could also have a material adverse effect on the Group's businesses.  We are dependent upon our store portfolio and consumers' spending habits.  Although unable to mitigate environmental conditions we are able to influence our retail portfolio and therefore constantly monitor development of stores and we aim to increase our square footage through viable new retail space.  By monitoring our stock levels correctly through sales forecasting we can manage the peaks in demand and trading profiles can be predicted.

Consumers

The Group's success and sales are dependent, in part, on the strength and reputation of the brands it sells, and are subject to consumers' perceptions of the Group and of its products, which can fall out of favour. Adverse publicity concerning any of the Group's brands or manufacturers or suppliers could lead to substantial erosion in the reputation of, or value associated with, the Group. Our dedicated legal department monitors usage of the Group's own brands to ensure they are used in the correct manner to maintain reputation.

Environmental

Environmental disasters such as volcanic ash clouds have highlighted how it is impossible to predict how an environmental occurrence will affect businesses. 

The Group constantly updates systems to mitigate any delay or loss of goods in transit or the absence of any employee or large numbers of employees that may or may not be altered by acts of nature.

Research and development

The Group's success depends on the strength of the Group's brands and, to a lesser extent, the licensed-in brands. The Group's efforts to continually develop or obtain brands in a timely manner or at all may be unsuccessful.

Our strategy for growth

The Group's primary financial strategy is to continue to deliver sustainable long term growth. Our focus remains strongly on growing the core UK Retail business by continuing to drive efficiencies and deliver the unrivalled value for money which our growing customer base has come to expect, while developing our offering in specialist sports categories. We have established an excellent platform for growth which we will build on with our proposed EBITDA related share bonus scheme.

Outside the UK, our Brands business will focus on licensing opportunities and will continue to restructure the wholesale businesses. We will continue to invest in our brands through advertising and promotion.

We believe that acquisitions and strategic investments in other related businesses are beneficial to the Group and we will continue to evaluate opportunities as they arise.

Outlook

The strength of our business model means that we are very well positioned for the challenges and targets for the next four years. Our progress since the year end is in line with management expectations and we are confident of reaching our current year target of underlying EBITDA of £215m before scheme costs.

Dave Forsey

Chief Executive

14 July 2011

Financial Review

The financial statements for the Group for the 52 weeks ended 24 April 2011 are presented in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU.

Summary of results

	52 weeks ended 24 April 2011	52 weeks ended 25 April 2010		Change
	(£'m)	(£'m)		%
Revenue	1,599.2	1,451.6	+10.1
Underlying EBITDA	200.4	160.4	+24.9
Underlying profit before tax	135.5	102.1	+32.7
Reported profit before taxation	118.8	119.5	-0.6
	Pence per share	Pence per share
Reported EPS	14.80	15.73	-5.9
Underlying EPS	16.83	12.39	+35.9

The directors believe that underlying EBITDA, underlying profit before tax and underlying earnings per share provide the more useful information for shareholders on the underlying performance of the business than the reported numbers and are consistent with how business performance is measured internally. They are not recognised profit measures under IFRS and may not be directly comparable with "adjusted" profit measures used by other companies.

EBITDA is earnings before investment income, finance income and finance costs, tax, depreciation and amortisation and, therefore, includes the Group's share of profit of associated undertakings and joint ventures.  Underlying EBITDA is calculated as EBITDA before the impact of foreign exchange, and any exceptional and other non-trading items.

EBITDA

	EBITDA	PBT
	£m	£m
Operating profit	134.6
Depreciation	59.9
Amortisation	3.0
Exceptional items	2.3
Share of profit of associated undertakings	0.9
Reported	200.7	118.8
Realised FX Profit	(0.3)	(0.3)
IAS 39 FX fair value adjustment on forward currency contracts	-	1.6
Other investment income	-	12.2
Exceptional items	-	2.3
Fair value adjustment within associates	-	0.9
Underlying	200.4	135.5

There is a significant difference between underlying and the lower reported profit before tax. Underlying profits before tax (and underlying EBITDA) exclude exceptional items, which decreased profit by £2.3m, realised exchange profit/loss and IFRS revaluation of foreign currency contracts, which increased 2011 profits by £0.3m and decreased profit by £1.6m respectively and a £0.9m loss on fair value adjustments within associated undertakings.

Revenue and margin

	52 weeks ended 24 April 2011	52 weeks ended 25 April 2010	Change
	(£'m)	(£'m)	%
Retail Revenue:
UK Retail	1,244.5	1,117.7	+11.3
UK wholesale and other	34.7	23.5	+47.7
International Retail	132.3	119.9	+10.3
Total	1,411.5	1,261.1	+11.9
Brands Revenue:
Wholesale	162.0	167.3	-3.2
Licensing	25.7	23.2	+10.8
Total	187.7	190.5	-1.5
Total revenue	1,599.2	1,451.6	+10.2

Total Group revenue increased by 10.2%. 

Retail revenue increased by 11.9%. The UK accounted for 90.6% of total retail revenues with the balance in continental European stores.

Retail margins in the UK increased from 41.3% to 41.9%.

Our representation in both parts of Ireland is covered by Heatons, in which we have a 50.0% interest, the results of which continue to be reported as an associate. 

Brands revenue decreased by 1.5%. Licensing income increased by 10.8%, with a decrease in wholesale revenue of 3.2%. 

Brands margins increased from 38.9% to 41.4%.

Selling, distribution and administration costs

Selling, distribution and administration costs for the Group decreased as a percentage of revenue. This was as a result of cost and efficiency savings offsetting inflation.

Foreign exchange

The Group manages the impact of currency movements through the use of forward fixed rate currency purchase and sales contracts. The Company's policy has been to hold or hedge up to four years (with generally a minimum of one year) of anticipated purchases in foreign currency.

The exchange gain of £0.3m (2010: £39.8 loss) included in administration costs have arisen from:

a) accepting Dollars and Euros at the contracted rate; and

b) the translation of Dollars and Euro denominated assets and liabilities at the period end rate

or date of realisation.

The exchange loss of £1.6m (2010: £37.7m gain) included in finance income substantially represents the reduction in the mark-to-market provision made (under IFRS) for the forward contracts at 25 April 2010. A number of the forward contracts outstanding at 24 April 2011 qualify for hedge accounting and the fair value loss on these contracts of £4.8m has been debited to equity through the Consolidated Statement of Comprehensive Income.  The Group has sufficient US Dollar contracts to cover all purchases in UK Retail for the 2012 financial year. These hedged contracts are at an average rate of 1.617. 

The Sterling exchange rate with the US dollar was $1.538 at 25 April 2010 and $1.650 at 24 April 2011.

Exceptional items

	52 weeks ended 24 April 2011	52 weeks ended 25 April 2010
	(£'m)	(£'m)
Profit on disposal of intangible assets	(0.9)	-
Provision for legal costs relating to regulatory enquiries	-	7.8
Provision for the cost of legal disputes	3.1	2.2

2.2

10.0

Finance income

	52 weeks ended 24 April 2011	52 weeks ended 25 April 2010
	(£'m)	(£'m)
Bank interest receivable	0.4	0.5
Other interest receivable	-	0.3
Expected return on pension plan assets	2.2	1.6
Fair value adjustment to forward foreign exchange contracts	-	37.7

2.6

40.1

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 not designated as cash flow hedges.

Finance costs

	52 weeks ended 24 April 2011	52 weeks ended 25 April 2010
	(£'m)	(£'m)
Interest on bank loans and overdrafts	(4.3)	(8.0)
Interest on other loans	(0.4)	(0.2)
Interest on retirement benefit obligations	(2.6)	(2.3)
Fair value adjustment to forward foreign exchange contracts	(1.6)	-

(8.9)

(10.5)

The fall in interest payable is a result of the reduction in interest rates and borrowings during the Year.

Taxation

The effective tax rate on profit before tax for 2011 was 29.9% (2010: 25.3%). This prior year rate reflects depreciation on non-qualifying assets and the non-relievable losses in certain overseas subsidiaries.

Excluding the impact of non-recurring items, the effective rate of taxation for the year would be 31.0% (2010: 31.4%).

Earnings

	52 weeks ended 24 April 2011	52 weeks ended 25 April 2010	Change
	pence per share	pence per share	%
Reported EPS (Basic)	14.80	15.73	-5.9
Underlying EPS	16.83	12.39	+35.9
Weighted average number of shares (actual)	568,552,000	568,455,000

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 year 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 after tax is as follows:

	52 weeks ended 24 April 2011	52 weeks ended 25 April 2010
	(£'m)	(£'m)
Profit after tax:	84.2	89.4
Post tax effect of Exceptional items:
Other investment income	8.4	(24.1)
Costs relating to regulatory enquiries	-	5.6
Excess of fair value of assets acquired over consideration	-	(2.8)
Legal dispute	2.2	1.6
Fair value adjustment to forward foreign exchange contracts	1.2	(27.1)
Realised (profit)/loss on forward foreign exchange contracts	(0.3)	28.6
Profit on sale of intangible assets	(0.6)	-
Fair value adjustment within associated undertakings	0.6	(0.8)
Underlying profit after tax	95.7	70.4

Dividends

The Board has determined not to pay a dividend at this point; it will keep the payment of dividends under review.

Capital expenditure

Capital expenditure amounted to £22.0m (2010: £19.4m) and includes expenditure on licenses, which is included in intangible assets.

Acquisitions

The Group spent nil on acquisitions during the Year. 

Strategic investments

During the Year the Group held investments in Blacks Leisure Group plc and JD Sports and Fashion plc.  Changes in the value of these shares are recognised directly in equity in accordance with IFRS.

	24 April 2011 (£'m)
Total available for sale investments at 25 April 2010	51.6
Revaluation through equity	1.5
Total available for sale investments at 24 April 2011	53.1

We have previously reported that some of our strategic stakes were held by Kaupthing Singer & Friedlander (KSF) and partly financed by them. On 8 October 2008, KSF went into administration and we were in dispute with the administrators concerning the ownership of the shares they held. In the 2009 financial statements we concluded that we may not directly "control" the shares for accounting purposes and therefore treated them as having been derecognised. This derecognition resulted in the transfer of historic losses, previously recognised in the statement of comprehensive income, of £53,156,000 into the income statement in the year ended 26 April 2009.

On 21 February 2010 the Company entered into an agreement with the Administrator of KSF to acquire any rights which may be determined that they hold.

On 13 May 2010 the judgment of the court proceedings which commenced on 26 April 2010 was handed down. The court determined that the Group had acquired beneficial interest in 12,153,071 ordinary shares in Blacks Leisure and 5,775,255 in JD Sports on 8 October 2008. This acquisition was reflected in the 2010 financial statements. The judgement also resulted in the Group regaining control of the shares.

The administrator of KSF appealed the decision. SDI's ownership of the shares was no longer in dispute, but were KSF to be successful in an appeal then SDI would be required to pay an amount of c£14.7m, which was held in escrow and included in other debtors.

The Group submitted a claim to the administrators for the shares that are claimed to be owned by the Group in Amer Sports, Blacks Leisure Group plc and JD Sports plc, but were not in KSF possession. The Group also submitted a claim for the dividends on these shares and Group funds held by KSF. Accordingly, a receivable of £6.3m was  recognised.

On 18 October 2010 the Company received a distribution from the administrator of £3.2m, leaving a debtor due from the administrator of £3.1m.

On 2 March 2011 the Company entered into a settlement deed with the administrator. As part of the settlement deed the Company received £5.6m in full and final settlement of the amount held in escrow of £14.7m and the remaining claim in the administration of £3.1m. In effect the shortfall between the value of the debtors and the amount received is an increase in the consideration paid to acquire the shares on 21 February 2010.

The difference between the amount paid on 21 February 2010 and the market value on that date was originally credited to the income statement in line with IAS 39. Therefore the loss on settlement of £12.2m in the current year has been debited to the income statement.  

The respective shareholdings at 24 April 2011 and 25 April 2010 were as follows:

		At 24 April 2011			At 25 April 2010
		Shares 'm	Holding		Shares 'm	Holding
Blacks Leisure Group		12.153	14.50%		12.153	28.50%
JD Sports Fashion		5.775	11.87%		5.775	11.97%

On 24 May 2010, Blacks Leisure issued 39,281,011 new ordinary shares as part of a fundraising in which the Group did not participate. As a result, the Group's interest in 12.153m shares now represents 14.5% of Blacks' share capital.

Cash flow and net debt

Net debt decreased by £163.0m from £311.9m at 25 April 2010 to £148.9m at 24 April 2011.

The analysis of debt at 24 April 2011 was as follows:

	At 24 April 2011	At 25 April 2010
	(£'m)	(£'m)
Cash and cash equivalents	60.5	25.1
Borrowings	(209.4)	(337.0)
Net debt	(148.9)	(311.9)

The Group continues to operate comfortably within its banking facilities and covenants. Our facilities are in place until March 2014.

Cash flow

Total movement is as follows:

	At 24 April 2011	At 24 April 2010
	(£'m)	(£'m)
Underlying EBITDA	200.4	160.4
Realised (loss)/profit on forward foreign exchange contracts	0.3	(39.8)
Taxes paid	(27.3)	(34.7)
Free cash flow	173.4	85.9

Invested in:-

Working capital and other	14.3	80.5
Acquisitions (including debt)	-	(3.3)
Net purchase of investments	-	(8.3)
Net capital expenditure	(21.0)	(18.8)
Equity dividend paid	-	(6.9)
Finance costs and other financing activities	(4.7)	(9.7)

Decrease in net debt

163.0

119.4

Reconciliation of movement in equity

Total equity movement is as follows:

	24 April 2011 (£'m)
Total equity at 25 April 2010	259.7
Profit after tax for the 52 weeks ended 24 April 2011	84.2
Share-based payment	10.6

Items taken directly to equity:

	24 April 2011 (£'m)
Exchange differences on translation of foreign operations	(7.7)
Exchange differences on hedged contracts - recognised in the period	(4.8)
Exchange differences on hedged contracts - reclassification in the period	(13.1)
Actuarial loss on pension	2.1
Fair value adjustment in respect of available-for-sale financial assets	1.5
Tax on items taken directly to equity	4.3

Movement in equity issues:

Movement in non controlling interests

(1.0)

Total equity at 24 April 2011

327.0

335.8

Pensions

The Group operates a number of closed defined benefit schemes in the Dunlop Slazenger companies. The net deficit in these schemes decreased from £19.7m at 25 April 2010 to £16.2m at 24 April 2011.

Bob Mellors

Finance Director

14 July 2011

CONSOLIDATED INCOME STATEMENT FOR THE 52 WEEKS ENDED 24 APRIL 2011

		52 weeks ended 24 April 2011	52 weeks ended 25 April 2010
	Notes	£'000	£'000
Revenue	1,2	1,599,237	1,451,621
Cost of sales		(940,330)	(862,490)
Gross profit		658,907	589,131
Selling, distribution and administrative expenses		(527,273)	(524,611)
Other operating income		5,289	3,493
Exceptional items	3	(2,252)	(9,986)
Operating profit	2,4	134,671	58,027
Other investment (costs)/income	5	(9,481)	24,653
Finance income	6	2,560	40,150
Finance costs	7	(8,953)	(10,528)
Share of (loss)/profit of associated undertakings and joint ventures		(8)	7,200
Profit before taxation		118,789	119,502
Taxation	8	(35,566)	(30,286)
Profit for the period	2	83,223	89,216
Attributable to:
Equity holders of the Group		84,173	89,433
Non-controlling interest		(950)	(217)
Profit for the period	2	83,223	89,216

Earnings per share from total and continuing operations attributable to the equity shareholders

		Pence per share	Pence per share
Basic earnings per share	9	14.80	15.73
Diluted earnings per share	9	13.93	14.76
Underlying basic earnings per share	9	16.83	12.39

The Consolidated Income Statement has been prepared on the basis that all operations are continuing.

The accompanying accounting policies and notes form part of these financial statements.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE 52 WEEKS ENDED 24 APRIL 2011

		52 weeks ended 24 April 2011	52 weeks ended 25 April 2010
	Notes	£'000	£'000
Profit for the period	2	83,223	89,216
Other comprehensive income
Exchange differences on translation of foreign operations		(12,370)	(7,947)
Exchange differences on hedged contracts - recognised in the period	19	(4,801)	10,942
Exchange differences on hedged contracts - reclassification in the period	19	(13,100)	-
Actuarial gains/(losses) on defined benefit pension schemes		2,077	(8,184)
Fair value adjustment in respect of available-for-sale financial assets	12	1,531	13,704
Taxation on items recognised in other comprehensive income	17	4,276	(838)
Total comprehensive income for the period		60,836	96,893
Attributable to:
Equity holders of the Group		61,786	97,110
Non-controlling interest		(950)	(217)
		60,836	96,893

The accompanying accounting policies and notes form part of these financial statements.

CONSOLIDATED BALANCE SHEET AS AT 24 APRIL 2011

		24 April 2011	25 April 2010
	Notes	£'000	£'000
ASSETS
Non-current assets
Property, plant and equipment	10	236,097	270,918
Intangible assets	11	205,050	216,944
Investments in associated undertakings and joint ventures		38,347	38,742
Available-for-sale financial assets	12	53,097	51,566
Deferred tax assets	17	13,443	10,101
		546,034	588,271
Current assets
Inventories	13	217,938	218,803
Trade and other receivables		91,705	114,533
Derivative financial assets	19	-	13,648
Cash and cash equivalents		60,513	25,121
		370,156	372,105
TOTAL ASSETS		916,190	960,376
EQUITY AND LIABILITIES
Share capital	14	64,055	64,050
Share premium		874,300	874,300
Treasury shares reserve		(85,088)	(85,088)
Permanent contribution to capital		50	50
Capital redemption reserve		8,005	8,005
Foreign currency translation reserve		28,263	40,633
Reverse combination reserve		(987,312)	(987,312)
Own share reserve		(6,094)	(6,094)
Retained earnings		434,567	349,788
		330,746	258,332
Non-controlling interests		389	1,383
Total equity		331,135	259,715
Non-current liabilities
Other payables		-	2,345
Borrowings	16	196,182	3,352
Retirement benefit obligations		16,186	19,739
Deferred tax liabilities	17	28,238	35,946
Provisions	18	58,277	45,598
		298,883	106,980
Current liabilities
Derivative financial liabilities	19	5,984	-
Trade and other payables		234,851	240,664
Borrowings	16	13,219	333,659
Current tax liabilities		32,118	19,358
		286,172	593,681
Total liabilities		585,055	700,661
TOTAL EQUITY AND LIABILITIES		916,190	960,376

The accompanying accounting policies and notes form part of these financial statements. The financial statements were approved by the Board on 14 July 2011 and were signed on its behalf by:

Bob Mellors

Director

CONSOLIDATED CASH FLOW STATEMENT FOR THE 52 WEEKS ENDED 24 APRIL 2011

		52 weeks ended 24 April 2011	52 weeks ended 25 April 2010
	Notes	£'000	£'000
Cash inflow from operating activities	20	211,582	199,476
Income taxes paid		(27,324)	(34,838)
Net cash inflow from operating activities		184,258	164,638
Cash flow from investing activities
Proceeds on disposal of property, plant and equipment		954	624
Proceeds on disposal of listed investments		-	8,040
Purchase of subsidiaries, net of cash acquired		-	(3,330)
Proceeds on disposal of subsidiaries		1,034	-
Purchase of intangible assets		(1,498)	(2,586)
Purchase of property, plant and equipment		(20,451)	(16,792)
Purchase of listed investments		-	(16,301)
Investment income received		3,362	1,723
Net cash outflow from investing activities		(16,599)	(28,622)
Cash flow from financing activities
Finance income received		2,560	806
Finance costs paid		(7,222)	(10,528)
Increase in/(repayments of) borrowings		190,899	(14,303)
Proceeds from share issues		5	5
Equity dividend paid		-	(6,935)
Net cash inflow from financing activities		186,242	(30,955)
Net increase in cash and cash equivalents including overdrafts		353,901	105,061
Cash and cash equivalents including overdrafts at beginning of period		(305,264)	(410,325)
Cash and cash equivalents including overdrafts at the period end		48,637	(305,264)

The accompanying accounting policies and notes form part of these financial statements. 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE 52 WEEKS ENDED 24 APRIL 2011

	Treasury shares	Foreign currency translation	Own share reserve	Retained earnings	Other reserves	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
Issue of ordinary shares	-	-	-	-	5	5	-	5
Share-based payments	-	-	-	10,767	-	10,767	-	10,767
Non-controlling interests - acquisitions	-	-	-	-	-	-	(1,632)	(1,632)
Transactions with owners	-	-	-	10,767	5	10,772	(1,632)	9,140
Profit for the financial period	-	-	-	89,433	-	89,433	(217)	89,216
Other comprehensive income
Exchange differences on hedged contracts - recognised in the period	-	-	-	10,942	-	10,942	-	10,942
Actuarial losses on defined benefit pension schemes	-	-	-	(8,184)	-	(8,184)	-	(8,184)
Fair value adjustment in respect of available-for-sale financial assets	-	-	-	13,704	-	13,704	-	13,704
Taxation	-	-	-	(838)	-	(838)	-	(838)
Translation differences - Group	-	(7,860)	-	-	-	(7,860)	-	(7,860)
Translation differences - associates	-	(87)	-	-	-	(87)	-	(87)
Total comprehensive income for the period	-	(7,947)	-	94,115	10,942	97,110	(217)	96,893
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	-	-	-	10,623	-	10,623	-	10,623
Non-controlling interests - acquisitions	-	-	-	-	-	-	(44)	(44)
Transactions with owners	-	-	-	10,623	5	10,628	(44)	10,584
Profit for the financial period	-	-	-	84,173	-	84,173	(950)	83,223
Other comprehensive income
Exchange differences on hedged contracts - recognised in the period	-	-	-	(4,801)	-	(4,801)	-	(4,801)
Exchange differences on hedged contracts - reclassification	-	-	-	(13,100)	-	(13,100)	-	(13,100)
Actuarial gains on defined benefit pension schemes	-	-	-	2,077	-	2,077	-	2,077
Fair value adjustment in respect of available-for-sale financial assets	-	-	-	1,531	-	1,531	-	1,531
Taxation	-	-	-	4,276	-	4,276	-	4,276
Translation differences - Group	-	(12,656)	-	-	-	(12,656)	-	(12,656)
Translation differences - associates	-	286	-	-	-	286	-	286
Total comprehensive income for the period	-	(12,370)	-	74,156	-	61,786	(950)	60,836
At 24 April 2011	(85,088)	28,263	(6,094)	434,567	(40,902)	330,746	389	331,135

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.

The accompanying accounting policies and notes form part of these financial statements.

1. Accounting policies

The consolidated financial statements of Sports Direct International plc (the "Company") and its subsidiaries (together the "Group") have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union ("IFRS").

Basis of preparation

The consolidated financial statements have been prepared in accordance with IFRS as adopted for use in the European Union (including International Accounting Standards ("IAS") and International Financial Reporting Standards Committee ("IFRSC") interpretations) and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS as adopted for use in the European Union. The consolidated financial statements have been prepared under the historical cost convention, as modified to include fair valuation of certain financial assets and derivative financial instruments.

The Group has opted to adopt the 2010 Annual Improvements to IFRS early in respect of IAS 1. As such the analysis of other comprehensive income by item for each component of equity is disclosed within the notes to the financial statements rather than in the statement of changes in equity.

 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 business segments is presented below:

Segmental information for the 52 weeks ended 24 April 2011:

	Retail			Brands		Eliminations	Total
	UK total	International retail	Total	Total
	£'000	£'000	£'000		£'000	£'000	£'000
Sales to external customers	1,279,248	132,312	1,411,560		187,677	-	1,599,237
Sales to other segments	29	-	29		2,959	(2,988)	-
Revenue	1,279,277	132,312	1,411,589		190,636	(2,988)	1,599,237
Gross profit	523,545	57,614	581,159		77,710	-	658,869
Operating profit before foreign exchange and exceptional items	113,105	5,618	118,273		17,856	-	136,129
Operating profit	115,344	5,493	120,837		13,834	-	134,671
Other investment costs							(9,481)
Finance income							2,560
Finance costs							(8,953)
Share of loss of associated undertakings and joint ventures							(8)
Profit before taxation							118,789
Taxation							(35,566)
Profit for the period							83,223

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 24 April 2011:

	Retail	Brands	Total
	£'000	£'000	£'000
Depreciation	57,635	2,311	59,946
Amortisation	476	2,274	2,750
Impairment	-	202	202

Information regarding segment assets and liabilities as at 24 April 2011 and capital expenditure for the 52 weeks then ended: 

	Retail	Brands	Eliminations	Total
	£'000	£'000	£'000	£'000
Investments in associated undertakings and joint ventures	31,066	7,281	-	38,347
Other assets	729,521	235,062	(89,534)	875,049
Total assets	760,587	242,343	(89,534)	913,396
Total liabilities	(479,956)	(191,839)	89,534	(582,261)
Tangible asset additions	23,453	1,026	-	24,479
Intangible asset additions	1,304	201	-	1,505
Total capital expenditure	24,757	1,227	-	25,984

Segmental information for the 52 weeks ended 25 April 2010:   

	Retail				Brands	Eliminations	Total
	UK total		International retail	Total	Total
	£'000		£'000	£'000	£'000	£'000	£'000
Sales to external customers	1,141,193		119,918	1,261,111	190,510	-	1,451,621
Sales to other segments	2,274		136	2,410	3,673	(6,083)	-
Revenue	1,143,467		120,054	1,263,521	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.

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 information

Segmental information for the 52 weeks ended 24 April 2011:
	UK	Non-UK	Eliminations	Total
	£'000	£'000	£'000	£'000
Segmental revenue from external customers	1,316,646	282,591	-	1,599,237
Total capital expenditure	14,090	11,894	-	25,984
Segmental assets	759,283	243,647	(86,740)	916,190

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. Exceptional items

		52 weeks ended 24 April 2011	52 weeks ended 25 April 2010
		£'000	£'000
	Profit on disposal of intangible asset	(876)	-
	Provision for costs relating to regulatory enquiries	-	7,800
	Provision for cost of legal dispute	3,128	2,186
		2,252	9,986
		-	-

4. Operating profit

Operating profit for the period is stated after charging/(crediting):

	52 weeks ended 24 April 2011	52 weeks ended 25 April 2010
	£'000	£'000
Foreign exchange (gains)/losses	(344)	39,747
Depreciation of property, plant and equipment
- owned assets	59,946	47,448
Amortisation of intangible assets	2,750	2,897
Impairment of intangible assets	202	-
Operating lease rentals
- Land and buildings	100,822	95,756
- Other	460	730

5. Other investment (costs)/income 

	52 weeks ended 24 April 2011	52 weeks ended 25 April 2010
	£'000	£'000
Fair value (loss)/gain on financial assets (Note 12)	(12,170)	16,858
Fair value of additional claim in administration of KSF (Note 12)	-	6,300
Profit on disposal of available-for-sale financial assets (Note 12)	-	1,355
Dividend income from investments	2,689	140
	(9,481)	24,653

6. Finance income

	52 weeks ended 24 April 2011	52 weeks ended 25 April 2010
	£'000	£'000
Bank interest receivable	427	502
Other interest receivable	-	304
Expected return on pension plan assets	2,133	1,645
Fair value adjustment to forward foreign exchange contracts (1)	-	37,699
	2,560	40,150

The adoption of hedge accounting is the main driver behind the reduction in the magnitude of the fair value adjustment to forward foreign exchange contracts.

⁽¹⁾The fair value adjustment to forward foreign exchange contracts relates to differences between the fair value of forward foreign currency contracts from one period end to the next.  

7. Finance costs

	52 weeks ended 24 April 2011	52 weeks ended 25 April 2010
	£'000	£'000
Interest on bank loans and overdrafts	4,255	8,056
Interest on other loans and finance leases	403	169
Interest on retirement benefit obligations	2,564	2,303
Fair value adjustment to forward foreign exchange contracts (1)	1,731	-
	8,953	10,528

(1)  The fair value adjustment to forward foreign exchange contracts relates to differences between the fair value of forward foreign currency contracts from one period end to the next.  

8. Taxation

	52 weeks ended 24 April 2011	52 weeks ended 25 April 2010
	£'000	£'000
Current tax	50,645	26,758
Adjustment in respect of prior periods	(8,305)	(3,267)
	42,340	23,491
Deferred tax (Note 17)	(6,774)	6,795
	35,566	30,286
Tax reconciliation
Profit before taxation	118,789	119,502
Taxation at the standard rate of tax in the UK of 28% (2010: 28%)	32,261	33,461
Tax effects of:
Expenses not deductible for tax purposes	11,094	4,390
Impact of tax losses and other short-term temporary differences not recognised in deferred tax	(383)	651
Deferred tax recognised in respect of unremitted earnings from an associate	-	(3,070)
Unrelieved foreign tax	-	183
(Profit on)/De-recognition of listed investments	-	(6,484)
Other tax adjustments	398	675
Adjustments in respect of prior periods - Current tax	(8,305)	(3,267)
Adjustments in respect of prior periods - Deferred tax	501	3,747
	35,566	30,286

9. Earnings per share from total and continuing operations attributable to the equity shareholders

Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders of the parent by the weighted average number of ordinary shares outstanding during the year. 

For diluted earnings per share, the weighted average number of shares, 568,552,000 (2010: 568,455,000), is adjusted to assume conversion of all dilutive potential ordinary shares under the Group's bonus share schemes, being 35,528,449 (2010: 37,348,000), to give the diluted weighted average number of shares of 604,080,818 (2010: 605,803,000).

Basic and diluted earnings per share

	52 weeks ended 24 April 2011	52 weeks ended 24 April 2011	52 weeks   ended   25 April   2010	52 weeks ended 25 April 2010
	Basic £’000	Diluted £’000	Basic £’000	Diluted £’000
Profit for the period	84,173	84,173	89,433	89,433
	Number in thousands		Number in thousands
Weighted average number of shares	568,552	604,081	568,455	605,803
	Pence per share		Pence per share
Earnings per share	14.80	13.93	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 for the period.  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.

Underlying earnings per share (continued)

	52 weeks ended 24 April 2011	52 weeks ended 24 April 2011	52 weeks ended 25 April 2010	52 weeks ended 25 April 2010
	Basic £'000	Diluted £'000	Basic £'000	Diluted £'000
Profit for the period	84,173	84,173	89,433	89,433
Post tax adjustments to profit for the period for the following exceptional items:
Realised (gain)/loss on forward exchange contracts	(237)	(237)	28,618	28,618
Fair value adjustment to forward foreign exchange contracts	1,194	1,194	(27,143)	(27,143)
Other investment costs/(income)	8,397	8,397	(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	2,158	2,158	1,574	1,574
Profit on sale of intangible assets	(604)	(604)	-	-
Fair value adjustments within associated undertakings	623	623	(769)	(769)
Underlying profit for the period	95,704	95,704	70,422	70,422
	Number in thousands		Number in thousands
Weighted average number of shares	568,552	604,081	568,455	605,803
	Pence per share		Pence per share
Earnings per share	16.83	15.84	12.39	11.62

10. 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 26 April 2009	123,597	11,060	108,221	292,223	535,101
Exchange differences	230	65	24	6,787	7,106
Additions	541	203	1,237	14,811	16,792
Eliminated on disposals	-	-	(583)	(599)	(1,182)
At 25 April 2010	124,368	11,328	108,899	313,222	557,817
Exchange differences	33	10	-	362	405
Acquisitions	-	-	-	4,028	4,028
Additions	1,299	194	2,967	17,785	22,245
Eliminated on disposals	(75)	-	(1,799)	(8,278)	(10,152)
At 24 April 2011	125,625	11,532	110,067	327,119	574,343
Accumulated depreciation and impairment
At 26 April 2009	(26,711)	(3,950)	(40,375)	(168,270)	(239,306)
Exchange differences	(40)	14	197	(874)	(703)
Charge for the period	(2,682)	(596)	(11,491)	(32,679)	(47,448)
Eliminated on disposals	-	-	558	-	558
At 25 April 2010	(29,433)	(4,532)	(51,111)	(201,823)	(286,899)
Exchange differences	(9)	-	-	(114)	(123)
Charge for the period	(3,378)	(238)	(12,905)	(43,425)	(59,946)
Eliminated on disposals	-	-	1,799	6,923	8,722
At 24 April 2011	(32,820)	(4,770)	(62,217)	(238,439)	(338,246)
Net book amount
At 24 April 2011	92,805	6,762	47,850	88,680	236,097
At 25 April 2010	94,935	6,796	57,788	111,399	270,918

Assets held under finance leases have a Net book amount of Nil (2010:Nil)

11. Intangible assets

	Goodwill	Trade marks and licences	Brands	Total
	£'000	£'000	£'000	£'000
Cost
At 26 April 2009	128,217	23,470	87,946	239,633
Arising on business combinations	344	-	-	344
Additions through business combinations	521	-	-	521
Other additions	-	2,586	-	2,586
Disposals	-	(769)	-	(769)
Exchange adjustment	(2,874)	5,353	(7,410)	(4,931)
At 25 April 2010	126,208	30,640	80,536	237,384
Arising on business combinations	44	-	-	44
Additions through business combinations	-	7	-	7
Other additions	-	1,498	-	1,498
Disposals	(1,236)	-	-	(1,236)
Exchange adjustment	(4,283)	(2,888)	(2,197)	(9,368)
At 24 April 2011	120,733	29,257	78,339	228,329

	Goodwill	Trade marks and licences	Brands	Total
	£'000	£'000	£'000	£'000
Amortisation and impairment
At 26 April 2009	(9,917)	(5,458)	(2,300)	(17,675)
Amortisation Charge	-	(2,897)	-	(2,897)
Disposals	-	585	-	585
Exchange adjustment	-	(453)	-	(453)
At 25 April 2010	(9,917)	(8,223)	(2,300)	(20,440)
Amortisation Charge	-	(2,750)	-	(2,750)
Impairment	(202)	-	-	(202)
Disposals	202	-	-	202
Exchange adjustment	-	(89)	-	(89)
At 24 April 2011	(9,917)	(11,062)	(2,300)	(23,279)
Net book amount
At 24 April 2011	110,816	18,195	76,039	205,050
At 25 April 2010	116,291	22,417	78,236	216,944

Amortisation is charged to selling, distribution and administrative expenses in the Consolidated Income Statement.

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

	Goodwill	Brands
	£'000	£'000
Retail	13,340	834
Brands	97,476	75,205
	110,816	76,039

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 (CGU) to which the intangible assets are allocated.    

Value in use calculations are based on 5 year management forecasts with a terminal growth rate applied thereafter, representing management's estimate of the long term growth rate of the sector served by the CGU's.

The key assumptions, which are equally applicable to each CGU, in the cash flow projections used to support the carrying amount of goodwill and intangibles with indefinite lives as at 24 April 2011 were as follows:

Retail and Brands (with the exception of Everlast)

·      Annual sales growth for the first five years of between 0% and 7% depending on the constituent elements of the CGU, followed by terminal sales growth of 2-4%.

·      Gross margin of between 30% and 47% depending on the constituent elements of the CGU.

·      Annual maintenance expenditure of between £Nil and £1.0m per annum depending on the individual entity's circumstances.

·      Discount rates are estimated at a risk adjusted pre-tax weighted average cost of capital of between 13.8%.

Everlast

·      Annual sales growth of between 5% and 12% for the first five years followed by terminal sales growth of 5%, reflecting specific plans for the business.

·      Gross margin and capital expenditure within the Retail and Brands range.

·      Discount rates are estimated at a risk adjusted pre-tax weighted average cost of capital of 16.7%.

The key assumptions are based on management's historical experience and future plans for each CGU.

A reasonably possible change in any key assumption would not cause the carrying value of any CGU to exceed its recoverable amount.

The intangible assets that have an indefinite life are brands and trading names and are considered to have an indefinite life on the grounds of the proven longevity of the brands and trading names and the Group's commitment to maintaining those brands.

12. Available-for-sale financial assets

	24 April 2011	25 April 2010
	£'000	£'000
Available-for-sale financial assets	53,097	51,566

The fair value of the 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 year: 

	24 April 2011	25 April 2010
	£'000	£'000
At beginning of period	51,566	5,467
Additions	-	22,222
Disposals	-	(6,685)
Revaluation through the income statement	-	16,858
Revaluation through other comprehensive income	1,531	13,704
At end of period	53,097	51,566

We have previously reported that some of our strategic stakes were held by Kaupthing Singer & Friedlander (KSF) and partly financed by them. On 8 October 2008, KSF went into administration and we were in dispute with the administrators concerning the ownership of the shares they held. In the 2009 financial statements we concluded that we may not directly "control" the shares for accounting purposes and therefore treated them as having been derecognised. This derecognition resulted in the transfer of historic losses, previously recognised in the statement of comprehensive income, of £53,156,000 into the income statement in the year ended 26 April 2009.

On 21 February 2010 the Company entered into an agreement with the Administrator of KSF to acquire any rights which may be determined that they hold.

On 13 May 2010 the judgement of the court proceedings which commenced on 26 April 2010 was handed down. The court determined that the Group had acquired beneficial interest in 12,153,071 ordinary shares in Blacks Leisure and 5,775,255 in JD Sports on 8 October 2008. This acquisition was reflected in the 2010 financial statements. The judgement also resulted in the Group regaining control of the shares.

The administrator of KSF appealed the decision. SDI's ownership of the shares was no longer in dispute, but were KSF to be successful in an appeal then SDI would be required to pay an amount of c£14.7m, which was held in escrow following the 21 February 2010 agreement and included in other debtors in the 25 April 2010 financial statements.

The Group also submitted a claim to the administrators for the shares that are claimed to be owned by the Group in Amer Sports, Blacks Leisure Group plc and JD Sports plc, but were not in KSF possession. The Group also made a claim for the dividends on these shares and Group funds held by KSF. Accordingly, a receivable of £6.3m was  recognised.

On 18 October 2010 the Company received a distribution from the administrator of £3.2m, leaving a debtor due from the administrator of £3.1m.

On 2 March 2011, to avoid further legal fees and extending the matter further, the Company entered into a settlement deed with the administrator. As part of the settlement deed the Company received £5.6m in full and final settlement of the amount held in escrow of £14.7m and the remaining claim in the administration of £3.1m. In effect the shortfall between the value of the debtors and the amount received is an increase in the consideration paid to acquire the shares on 21 February 2010.

The difference between the amount paid on 21 February 2010 and the market value on that date was originally credited to the income statement in line with IAS 39. Therefore the loss on settlement of £12.2m in the current year has been debited to the income statement.  

The financial assets at 24 April 2011 relate to strategic investments held of between 11.87% and 14.5% in share capital.

At 24 April 2011 the Group had no investments in excess of 20% of share capital.

13. Inventories

	24 April 2011	25 April 2010
	£'000	£'000
Raw materials	3,290	3,773
Work in progress	653	1,129
Goods for resale	213,995	213,901
	217,938	218,803

The following inventory costs have been recognised in cost of sales:

	24 April 2011	25 April 2010
	£'000	£'000
Cost of inventories recognised as an expense	938,131	857,724

14. Share capital

	24 April 2011	25 April 2010
Authorised
999,500,010 ordinary shares of 10p each	99,950	99,950
499,990 redeemable preference shares of 10p each	50	50
	100,000	100,000
Allotted, called up and fully paid
640,552,369 (2010: 640,502,369) ordinary shares of 10p each	64,055	64,050

Share capital
At 25 April 2010	64,050	64,045
Issue of shares	5	5
At 24 April 2011	64,055	64,050

The Group holds 64,000,000 shares in Treasury

Contingent share awards

The Executive Bonus Share Scheme

Under the terms of the Executive Bonus Share Scheme, which was approved by Shareholders on 10 September 2010 and is a Revenue approved scheme, the Board may make share awards in respect of the ordinary shares in the company. Awards may be made to Executives and Persons Discharging Managerial Responsibilities over a fixed number of shares subject to performance conditions. The extent to which the awards will vest is based on whether the Group meets the Underlying EBITDA targets for the 2011 financial year.

An award of 4,073,036 shares was granted on 26 January 2011 to Executive management and two persons discharging managerial responsibilities at a share price of 164.3 pence and none of these shares have since lapsed. These shares will only vest if the performance conditions (continued employment) are met over the next three years.

The Bonus Share Scheme

Under the terms of the Bonus Share Scheme, which was approved by the shareholders on 9 September 2009, the Board may make share awards in respect of the ordinary shares in the Company to employees based on a percentage of salary and subject to performance conditions.  The extent to which the awards vest is based on the whether the Group meets underlying EBITDA targets for the 2010 and 2011 financial years.   

The first awards of 34,898,000 shares were granted on 14 October 2009 at an average price of 99.50p. At 24 April 2011 31,455,413 (25 April 2010: 33,358,000) awards were outstanding under the scheme, with the decrease in the year being attributable to leavers. These shares will only vest if the performance conditions (continued employment) are met over the next two years.

A share-based payment charge of £10,623,000 was recognised in respect of these share awards for the 52 weeks ended 24 April 2011, based on the directors' best estimate of the number of shares that will vest.

15. 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 26 April 2009	64,045	874,300	50	8,005	(987,312)	(40,912)
Issue of ordinary shares	5	-	-	-	-	5
Exchanged differences on hedged contracts	-	-	-	-	-	-
At 25 April 2010	64,050	874,300	50	8,005	(987,312)	(40,907)
Issue of ordinary shares	5	-	-	-	-	5
Exchanged differences on hedged contracts	-	-	-	-	-	-
At 24 April 2011	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.

Between 5 October 2007 and 11 March 2008 the Group cancelled 79,547,631 of shares acquired as part of the share buy back programme.

The reverse combination reserve exists as a result of the adoption of the principles of reverse acquisition accounting in accounting for the group restructuring which occurred on 2 March 2007 and 29 March 2007 between the Company and Sports World International Limited, Brands Holdings Limited, International Brand Management Limited and CDS Holdings SA with Sports World International Limited as the acquirer. 

16. Borrowings

	24 April 2011	25 April 2010
	£'000	£'000
Non-current:
Bank and other loans	194,917	2,789
Obligations under finance leases	1,265	563
	196,182	3,352
Current:
Bank overdrafts	11,876	330,385
Bank and other loans	1,335	3,274
Obligations under finance leases	8	-
	13,219	333,659
Total borrowings:
Bank overdrafts	11,876	330,385
Bank and other loans	196,252	6,063
Obligations under finance leases	1,273	563
	209,401	337,011

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

	24 April 2011	25 April 2010
	£'000	£'000
Borrowings are repayable as follows:
Within one year	1,343	3,274
Between one and two years	1,189	2,976
Between two and five years	194,641	188
After five years	352	188
	197,525	6,626
Borrowings - Sterling	157,772	1,890
Borrowings - Other	39,753	4,736
	197,525	6,626

Loans are all on commercial variable rates of interest ranging between 1.5% and 2.0% over the interbank rate of the country within which the borrowing entity resides.

On 7 March 2011, Sports Direct International plc and certain subsidiaries (the "Borrowers") entered into a committed revolving facility agreement with ten financial institutions and with HSBC bank PLC acting as Agent (the "Revolving Facility").  The Revolving Facility is available to any of the Borrowers and may be drawn to an aggregate limit of £220 million.  It is capable of being utilised by way of cash advances and/or currency borrowings.  The Revolving Facility is available until 6 March 2014.  The Group 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 Revolving Facility is unsecured.

The Group continues to operate comfortably within it's banking facilities and covenants.

The Group has a £50m 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 April 2011 was £148.9m (25 April 2010: £311.9m).

17. Deferred tax asset and liabilities

	Accounts depreciation exceeding tax depreciation	Tax losses recover- able	Pension plan liabilities	Unremitted earnings from an associate	Other temporary differences	Total
	£'000	£'000	£'000	£'000	£'000	£'000
At 26 April 2009	(4,282)	1,475	4,317	(3,279)	(16,253)	(18,022)
(Charged)/credited to the income statement	(1,922)	-	(1,016)	3,279	(7,136)	(6,795)
(Charged)/credited to the statement of comprehensive income	-	-	2,226	-	(3,064)	(838)
Foreign exchange adjustments	-	-	-	-	(190)	(190)
At 25 April 2010	(6,204)	1,475	5,527	-	(26,643)	(25,845)
Credited/(charged) to the income statement	2,458	(575)	(395)	-	5,286	6,774
Credited to the statement of comprehensive income	-	-	-	-	4,276	4,276
Foreign exchange adjustments	-	-	-	-	-	-
At 24 April 2011	(3,746)	900	5,132	-	(17,081)	(14,795)

	24 April 2011	25 April 2010
	£'000	£'000
Deferred tax assets	13,443	10,101
Deferred tax liabilities	(28,238)	(35,946)
Net deferred tax balance	(14,795)	(25,845)

Deferred tax assets are recognised for tax losses recoverable and pension plan liabilities to the extent that realisation of the related tax benefit is probable on the basis of the Group's current expectations of future taxable profits.

18. Provisions

	Dilapidations	Onerous contracts and other property costs	Total
	£'000	£'000	£'000
At 25 April 2010	24,593	21,005	45,598
Amounts provided	3,923	14,901	18,824
Amounts utilised	-	(497)	(497)
Amounts reversed	(495)	(5,153)	(5,648)
)122
At 24 April 2011	28,021	30,256	58,277

The dilapidations provision is the best estimate of the present value of expenditure expected to be incurred by the Group in order satisfy its obligations to restore its leasehold premises to the condition required under the lease agreements at the end of the lease discounted at 5% per annum. The provision is expected to be utilised over the period to the end of each specific lease.

The provision in respect of onerous lease contracts represents the net cost of fulfilling the Group's obligations over the terms of these contracts discounted at 5% per annum. The provision is expected to be utilised over the period to the end of each specific lease. A number of leases previously assigned to third party tenants have reverted to the Group this year, as the tough economic conditions have led to those third party tenants being unable to meet their commitments. Provision is also made for the strategic rationalisation of certain properties.

The unwinding of the discount on provision over time passes through the income statement.

19. Financial instruments

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 April 2011	25 April 2010
	£'000	£'000
Fair value of derivative financial instruments - (liabilities)/assets	(5,984)	13,648

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

	24 April 2011	25 April 2010
	£'000	£'000
US dollar purchases	320,000	210,000
Contracted rates	1.56-1.65	1.53-1.68
US dollar sales	-	(50,000)
Contracted rates	-	1.54
Euro sales	(33,451)	(36,319)
Contracted rates	1.13-1.14	1.09-1.14

At 24 April 2011 £320m of forward US dollar purchase contracts qualified for hedge accounting and the loss on fair valuation of these contracts of £17.9m has therefore been recognised in other comprehensive income. This amount is split between £4.8m recognised in the period and £13.1m reclassified in the period. The timing of the adoption of hedge accounting is the main reason for the magnitude of foreign exchange gains/(losses) reducing from a £39.7m gain to a £1.2m loss. 

Forward foreign currency purchase and sale contracts generally have a maturity at inception of approximately 12 months.  At 24 April 2011 £60m of purchase contracts and no sale contracts had a maturity at inception of greater than 12 months (2010: £Nil million of purchase contracts).

20. Cash inflow from operating activities

	52 weeks ended 24 April 2011	52 weeks ended 25 April 2010
	£'000	£'000
Profit before taxation	118,789	119,502
Net finance costs/(income)	6,393	(29,622)
Other investment costs/(income)	9,481	(24,653)
Share of loss/(profit) of associated undertakings and joint ventures	8	(7,200)
Operating profit	134,671	58,027
Depreciation	59,946	47,448
Amortisation charge	2,952	2,897
(Profit)/loss on disposal of intangibles	(10)	184
Defined benefit pension plan current service cost	-	670
Defined benefit pension plan employer contributions	(1,865)	(1,216)
Share based payments	10,623	10,767
Operating cash inflow before changes in working capital	206,317	118,777
Decrease/(increase) in receivables	10,658	(2,222)
Decrease in inventories	865	43,460
(Decrease)/Increase in payables	(6,258)	39,461
Cash inflow from operating activities	211,582	199,476

21. Post balance sheet events

On 6 July 2011 the Group acquired an 80% shareholding in West Coast Capital (USC) Ltd, a top young branded fashion business, and in  Cruise Clothing Ltd, one of the UK's leading independent luxury retailers, for a total cash consideration of £7.0m.

The acquisition will create a new Premium and Luxury Lifestyle division.

At the date of approval of these financial statements, the initial accounting for this business combination has yet to be finalised.

 

END

 

 

FR GGUGCMUPGUUC