Preliminary Results

RNS Number : 0016I

Sports Direct International Plc

19 July 2012

 



19 July 2012

Sports Direct International plc

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

Preliminary Results

For the 53 weeks to 29 April 2012

The Financial Year ended 29th April 2012 was a 53 week year.  In order to make a comparison to last year,  all references to financial performance in respect of the income statement, cash flow and business reviews are stated on, or reconciled to, a proforma 52-week basis unless otherwise specified.

	53 weeks ended 29 April 2012	Pro Forma 52 weeks 2012	52 weeks ended 24 April 2011	52 week Change %
	£m	£m	£m
Group revenue	1,836	1,807	1,599	+13.0
UK Sports Retail	1,368	1,342	1,245	+7.8
International Retail	157	154	132	+16.6
Premium Lifestyle	74	74	-	-
Brands	196	196	188	+4.3
Group gross margin	40.5%	40.5%	41.2%
UK Sports Retail	41.0%	41.0%	41.9%
Underlying EBITDA(1)	240.5	235.7	211.0	+11.7
Underlying EBITDA excl. Premium Lifestyle	248.3	243.5	211.0	+15.4
Underlying profit before tax (PBT) (1) (2)	152.6	149.1	135.5	+10.0
Underlying PBT excl. Premium Lifestyle	162.1	159.0	135.5	+17.3
Reported profit before tax	151.5	148.0	118.8	+24.5
Reported PBT excl. Premium Lifestyle	161.0	157.9	118.8	+32.9
Underlying earnings per share(1) (2)	19.19p	18.74p	16.83p	+11.4
Underlying EPS excl. Premium Lifestyle	20.37p	19.93p	16.83p	+18.4
Reported earnings per share	18.68p	18.24p	14.80p	+23.2

Key highlights

·      52 week Group Revenue up 13.0% to £1,807m with growth across all divisions against tough comparatives

·      Strong growth in online sales of 82% - now representing 11.6% of total Sports Retail sales (2011: 7.0%)

·      52 week underlying Group EBITDA ⁽¹⁾ excluding Premium Lifestyle: £244m (2011: £211m), including Premium Lifestyle: £236m

·      First target for the 2011 Employee Bonus Share Scheme met

·      Underlying free cash generation of £192m

·      Further reduction in level of debt - Net debt / EBITDA ratio of 0.68 times⁽³⁾

·      Creation of Premium Lifestyle division

·      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, the profit/loss on sale of strategic investments and the Bonus Schemes' charge. 2011 has been restated from £200.4m to £211.0m.
(2) (3)	Underlying profit before taxation and underlying EPS also exclude profits/losses relating to the IAS 39 fair value adjustment on forward currency contracts in financing income/costs, but includes the Bonus Schemes' charge. Calculated using net debt as at 29 April 2012 and 52 week reported EBITDA

Dave Forsey, Chief Executive, said:

"Our position as the consumers' champion, offering an unrivalled depth and breadth of product choice at the best available prices, delivered a record Sports Retail performance.  We achieved record revenues and growth across all divisions. 

"Our colleagues have worked hard during the year and, as a result, we have exceeded the first underlying EBITDA target of £215m (before the charge for the bonus share scheme) and the "super stretch" target of £225m.  Also, those staff eligible for the 2009 Bonus Share Scheme will be receiving their first share awards in August 2012, with the remainder of their shares vesting in August 2013.

"Trading since the period end has remained in line with management's expectations where increased investment in margin has been funded by stronger retail sales.  In spite of the low expectations surrounding England's participation in Euro 2012 and the unseasonal weather our core divisions are performing well.  Excitement is building towards the Olympics and we continue to target our 2013 "super stretch" underlying EBITDA objective of £270m (before the charge for the bonus share schemes).  We are very excited about the London Olympics that begin next week and we wish all Great British athletes the very best of luck."

Sports Direct International plc Dave Forsey, Chief Executive Bob Mellors, Group Finance Director	T:  0845 164 1730
FTI Consulting Jonathon Brill            Alex Beagley Georgia Mann	T:  0207 831 3113

Chairman's Statement

I am delighted to report the Group's strong operational and financial performance.  Growth has been achieved across the business with revenue and EBITDA growing impressively.  The Group has continued to deliver strong cash generation and our balance sheet remains solid.  Our industry leading position, as the consumers' champion offering unmatched range of products at the best available prices, ensures we are well placed for the future.

We are constantly improving our business; enhancing the quality of our stores, investing in staff training and expanding our range of products.  

We are particularly pleased with the growth of our online business.  We have already announced the construction of an additional 1m square feet of warehousing at our Shirebrook headquarters to cater for the increased demand and are actively exploring ways to improve and extend customer interface with our systems. 

Our newly created Premium Lifestyle division is already benefitting from our systems and processes, and although it will take some time to fully integrate these businesses, we are targeting returning them to profit in FY2013.

Our investment in our Brands division gives us the means to expand our licensing business and gain a greater share of specific, if sometimes, niche markets.

Employee bonus share scheme

The Employee Bonus Share Scheme has been a great motivator across the Group.  I believe this to be a pre-eminent reward scheme in the UK, and am looking forward to August 2012 when c.2,000 of our staff will receive their share awards as the first part of the 2009 Employee Bonus Share Scheme vests.  I am also very pleased that these results show that we have achieved the first EBITDA target in the 2011 Bonus Share Scheme, which covers the four full years 2012-15.

On behalf of the Board I should like to thank all of our staff for their substantial contribution to our success.

Super-stretch bonus share scheme

As the Company achieved the super-stretch FY12 Group underlying EBITDA target, first announced in December 2011, we shall be seeking shareholder approval at the 2012 Annual General Meeting for a Super-Stretch Executive Bonus Share Scheme ("Super-Stretch Scheme") for Mike Ashley, the Company's Executive Deputy Chairman.

As announced in April 2012, the Board increased the underlying EBITDA targets for this Super-Stretch Scheme in light of the Company's strong performance.  The terms of the Super-Stretch Scheme are:

·      Mr Ashley will be granted eight million shares, which will vest in 2018, if two performance criteria are met:

o  the Company meets very stretching Group underlying EBITDA (before all bonus schemes' costs) targets in each and all of the following three years; and

o  the Company's net debt/EBITDA ratio is at 1.5x or less in FY15.

The new targets for Group underlying EBITDA (before the schemes' costs) are:

·      FY13: £270m (2011 Employee Bonus Share Scheme: £250m)

·      FY14: £290m (2011 Employee Bonus Share Scheme: £260m)

·      FY15: £340m (2011 Employee Bonus Share Scheme: £300m)

Dividend

When deliberating on whether to make a dividend payment in respect of the Year, the Board assessed a variety of potential investment opportunities and the Company's financial performance.  Although FY2012 results and cash flow performance were ahead of management's expectations as at December 2011, which means the balance sheet is stronger than originally expected, there are a number of inorganic growth opportunities under review.  This being the case, the Board believes that it is in shareholders' best interests for the Company to maintain maximum flexibility in the near term and therefore it has decided not to return any cash at this time.

Conclusion

On behalf of the Board, I conclude by thanking all our employees for their substantial contribution to our success which has been achieved in an extremely tough global economic and retail environment.

Keith Hellawell

Non-Executive Chairman

19 July 2012

chief executive's report and business review

Overview of financial performance

I am pleased to be able to report another year of strong profit growth for Sports Direct, in a consumer environment that remains very tough.  The resilience and flexibility of our business model 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.  We constantly review and improve our stores to provide a fresh and exciting retail environment for our customers.

With new stores opened during the year in the UK and Europe, we are proud of our reputation for quality.  We have continued to strengthen our position as the clear market leader in the UK sports retail sector and we are very pleased to report that we increased our UK 52 week like-for like gross contribution by 0.7%, in spite of the challenging environment and tough comparatives.

We have established a strong online presence, delivering rapid growth in the Year.  Critically, our online sales benefit from our UK market leading position on the high street and from our established systems and processes, while our retail stores continue to perform strongly. 

Furthermore, we have broadened our consumer offering with the creation of our Premium Lifestyle division which includes our acquisitions of the USC, Cruise and Van Mildert retail fascias.  We also announced, post the period end, the acquisition of Flannels Group Limited, which will join the Premium Lifestyle division.  We have high expectations that this exclusive offering will benefit from our strong supply chain and provide a high-quality customer experience.

Due to the success of our 2009 Bonus Share Scheme, in 2011 the Company launched a new four year scheme covering the full years 2012 to 2015 with challenging underlying EBITDA targets of £215m, £250m, £260m and £300m.  We are pleased to confirm that the first of these targets has been achieved and thank our colleagues for all their efforts this year.  Both of these schemes have helped introduce and maintain a substantially lower level of employee turnover than before the scheme.  This August will see the first part of the 2009 Bonus Share Scheme vest and we look forward to seeing our dedicated colleagues well rewarded for their hard work.

Group

The Financial Year ended 29th April 2012 was a 53 week year.  In order to make a comparison to last year,  all references to financial performance in respect of the income statement, cash flow and business reviews are stated on, or reconciled to, a proforma 52-week basis unless otherwise specified.

For the Year we increased Group Revenue 13.0% to £1,807m.  This was in the main due to the total Retail division, where we grew revenues by 14.0%, including a 8.7% growth in total Sports Retail coupled with the addition of the new Premium Lifestyle division, which contributed £74m.

Group gross margin in the Year decreased by 70 basis points from 41.2% to 40.5%.  Total Sports Retail division margin decreased by 90 basis points to 41.0% (2011: 41.9%), while Brands division margin fell slightly to 41.2% (2011: 41.4%).

Including the additional £40.4m of costs of the Premium Lifestyle division, Group operating costs increased 12.5% to £516.9m (2011: £459.4m). Excluding Premium Lifestyle, Group operating costs increased by only 3.7%.  Sports Retail division operating costs (excluding Premium Lifestyle and the partial release of the onerous lease provision) were well controlled and increased by only 2.0% in the Year, despite a rise in sales of 8.7%.  Brands division operating costs were up just 1.3% to £55.8m (2011: £55.1m) despite an increase in spend on advertising and sponsorship, including a £2m win payment to golfer Darren Clarke for winning the Open Championship in July 2011, reflecting a reduction in locations and tight cost control.

Reflecting the success of our approach - balancing revenues and gross margin, while maintaining a tight focus on operating costs - we grew Group underlying EBITDA (pre-scheme costs) for the Year by 11.7% to £235.7m (2011: £211.0m).  Within this underlying EBITDA, we increased the Total Retail division EBITDA by 11.8% to £210.7m (2011: £188.4m) and the Brands division EBITDA by 10.6% to £25.0m (2011: £22.6m).

Included within Group operating costs is a £20.7m (2011: £10.6m) charge in respect of the 2009 and 2011 Employee Bonus Share Schemes and Executive Bonus Share Schemes.  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.  Underlying EBITDA, after this charge, is £215.0m.

For the Year, Group underlying Profit before Tax increased 10.0% to £149.1m, as a result of the £24.7m increase in (pre-scheme costs) EBITDA, offset by the £10.1m increase in Bonus Share scheme costs and a £2.3m decrease in Investment Income.  Underlying PBT, excluding the loss arising from the new Premium Lifestyle business, was £159.0m. Underlying EPS for the Year increased by 11.4% to 18.74p (2011: 16.83p).

In April 2011 we reported that Net Debt had reduced to 0.74 times reported EBITDA*.  Net debt at 29 April 2012 was £145.2m (24 April 2011: £148.9m).  This is 0.68 times reported EBITDA and comfortably within the parameters targeted in 2010.  This achievement is despite the investment of £131m in properties and £26.2m in acquisitions and reflects the strong cash generative ability of the Group.

* Reported EBITDA includes realised foreign exchange gains/losses in selling and administration costs and the Bonus Schemes' charge.

Review by business segment

	53 weeks ended 29 April 2012 (£'m)	Pro Forma 52 weeks 2012 (£'m)	52 weeks ended 24 April 2011 (£'m)		52 week Change%
Retail
Revenue:
UK Retail	1,368.2	1,342.4	1,244.5		7.9
UK Wholesale and other	41.2	41.2	34.7		18.7
Premium Lifestyle	73.5	73.5	-		-
International Retail	157.0	154.2	132.3		16.6
Total retail revenue	1,639.9	1,611.3	1,411.5		14.2
Cost of sales	(976.4)	(959.6)	(830.3)		15.6
Gross profit	663.5	651.7	581.2		12.1
Gross margin percentage	40.5	40.5		41.2

53 weeks ended 29 April 2012 (£'m)

Pro Forma 52 weeks 2012 (£'m)

52 weeks ended 24 April 2011 (£'m)

52 week Change %

Brands

Revenue:
Wholesale	168.5	168.5	162.0		4.0
Licensing	27.4	27.4	25.7		6.6
Total brands revenue	195.9	195.9	187.7		4.4
Cost of sales	(115.1)	(115.1)	(110.0)		4.6
Gross margin	80.8	80.8	77.7		4.0
Gross margin percentage	41.2	41.2	%	41.4	%

UK Sports Retail

UK Sports 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.

52 week UK Sports Retail sales were up 7.9% to £1,342m (2011: £1,245m), an excellent performance against a World Cup comparative year.

Sales in the second half of the Year were up 11.2% to £667.7m (2011 H2: £600.2m).  Gross margins for the second half of the Year worsened slightly to 39.7% (2011 H2: 40.2%) reflecting our investment in margin and our focus on contribution (balancing revenues and gross margin).  Gross margin for the year decreased by 90 basis points to 41.0% (2011: 41.9%).

Online revenue has increased by 81.8% from £95.7m to £174.0m in the Year and represented 11.6% of total Sports Retail sales (2011: 7.0%).  We remain focused on developing this revenue stream further.  Order fulfilment and information technology solutions are developed in-house with full back-up support from our National Distribution Centre resources in Shirebrook, Derbyshire.  The website has benefited from the increased recognition of the online brand with 351 of UK store fascia now branded SPORTSDIRECT.com.

UK Sports Retail 52 week like-for-like gross contribution increased by 0.7%, marking the third consecutive year of growth in this KPI and an excellent performance against last year's World Cup comparative (2011: 6.6% / 2010: 3.4%).  UK Sports Retail like-for-like contribution is defined as the percentage change in contribution in the successive 12 month period, adjusted to remove the impact of the 53 week year.  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 remained at 290. This KPI does not include online sales.

Operating costs decreased by 1.1% to £344.5m (2011: £348.3m).  Store wages were flat, and as a percentage of sales remained at 8.6% (2011: 8.6%) which demonstrates the continued progress in cost control.  Sports Retail premises costs fell by 2.9% as a result of the continuous process of relocations and renegotiations.  Other operating costs were up 10.3% to £117m (2011: £106m) which is due to increased warehouse and storage costs.  The significant part of the increase is due to the expansion of the Shirebrook National Distribution Centre and eCommerce growth.  The costs were reduced by a partial release of the onerous lease provision of £6m due to the unwinding of discount and closure of stores.

Underlying EBITDA for UK Sports Retail was £207.7m (2011: £175.5m), an increase of 18.4%.  This increase was driven by a £28.9m increase in gross profit (including wholesale) due to the growth in online sales and the £3.8m decrease 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 provides flexibility and control that enables high speed of execution.  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.

The Nike Training Academy and our state of the art National Training Facility in Shirebrook have been busy providing specialist training environments in Footwear, Running, Football, Women's Sportswear and SKUs.  As at 29 April 2012, 252 employees had progressed to Nike Graduate level with 64 undertaking post graduate training.  In addition to Nike, we work closely with adidas and Puma to support instore initiatives.

Access to the National Training Facility has now been expanded to improve other areas of the business.  It has enabled the successful integration of USC into our operational systems, with 40 USC managers attending residential programmes.  International Retail teams from France, Portugal, Holland, Belgium, Iceland and Hungary have attended training programmes to ensure standardised service delivery across our operations.

The Group continues to invest in infrastructure in Shirebrook and our exciting expansion plans for our National Distribution Centre are on target to be completed by autumn 2012, which will more than treble the size of our facilities to over two million square feet.   We have completed Phase 2, the 400 thousand square foot extension to our existing Distribution Centre, and the remaining development, Phase 3, a one million square foot distribution centre solely for our online offering, will commence soon. 

We have continued to invest in Group marketing, including TV and press campaigns during key sales periods and promotions.  In the year we produced two million catalogues which were 50% bigger than last year.

Our relationships with our major third party brand suppliers remain strong.  Nike Group, adidas Group 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 continue to build on our store-in-store concepts: the SoccerScene@theBootroom concept has completed its roll out throughout our core stores while the SheRunsHeRuns concept continues to be developed further, and the first 'Fightzone' opened in our key Lillywhites store.

Our store portfolio remains constantly under review with the performance of each store and ways of maximising performance being regularly examined.  As a result, we have closed 78 stores since 2008 as our portfolio continues to evolve.  We increased our period end square footage to c.3.9m square feet (2011: c.3.8m).  During the year we refurbished 21 stores and relocated eight stores, constantly improving the store appearance and providing a fresh and exciting retail environment.  In addition, we upgraded our Carnaby Street store to provide a flagship Soccer Scene experience in Central London.

Store Portfolio	As at 29 April 2012	As at 24 April 2011
Core	305	306
Non-core	90	87
Total	395	393
Core openings	12	11
Non-core openings	6	11
Core closed	13	5
Non-core closed	3	11
SPORTSDIRECT.com fascia	351	331
Field & Trek fascia	17	19
Lillywhites fascia	1	2
Other fascia (Gilesports, Hargreaves etc.)	26	41
Area (sq. ft)	3.9m	3.8m

In the 12 months to 29 April 2012, 42 rent reviews have been agreed on stores.  The average increase in rent was 1.7% (0.34% annual equivalent).  There are currently 54 rent reviews outstanding with a further 34 falling due in 2012-13.  Our lease expiry profile over all core stores (excluding Lillywhites Piccadilly) is now just 6.8 years, allowing a huge amount of flexibility within our portfolio to meet the difficulties of the current market place and the challenge from online.

In the 2011 Preliminary Results statement, it was announced that the Company intended to purchase properties from Mike Ashley, the Group's major shareholder.  This purchase was recommended by the Board (excluding Mr Ashley because of his material interest) and approved by the shareholders at the 2011 AGM.  Consequently the Group purchased a portfolio of 32 properties in April 2012 at a total cost of £86.8m.  As a result of this purchase, the Group expects to reduce rental costs and increase rental income to enhance EBITDA and EPS.

In the current financial year, we are targeting to open 20 new stores and close 20 stores, of which 10 would be relocations and 10 identifying new areas.  We have already opened eight in the first quarter, including two relocations, and closed six stores.

UK Retail - Premium Lifestyle

During the year, UK Retail created a Premium Lifestyle division with the acquisition of 100% stakes in USC and Van Mildert and an 80% stake in Cruise clothing.  These were for a total cash consideration of £7m and commitment to a £20m working capital facility.  At 29 April 2012, the Premium Lifestyle division traded from 67 stores under the Cruise, Van Mildert, USC and Tucci fascias.  Post the period end, we acquired Flannels Group Limited, which currently has six stores, and it has joined the Premium Lifestyle division. 

The results reported in the Financial Year 2012 are for nine months of trading for USC and Cruise and two months for Van Mildert.  Sales were £73.5m with gross margins of 44.3%.  Onerous leases and dilapidations charged in the year were £4.4m and the division made an EBITDA loss of £7.8m.

During the year there has been a complete review and assessment of these businesses and new stock management systems were put in place in USC in early 2012.  In the current year we expect to see improved trading from remodelled and upgraded stores with the division taking advantage of the Sports Direct distribution and replenishment model.  Access to the online eCommerce portal will enable a multichannel approach.  As a result of these changes, we expect the Premium Lifestyle division to return an EBITDA level profit in the financial year to April 2013.

International Retail

International Retail sales were up 16.6% to £154.2m (2011: £132.3m).  On a currency neutral basis, the increase was 15.5%.

International Retail gross margin decreased in the 52 week year by 10 basis points to 43.4%.  International Retail 52 week like-for-like stores gross contribution figure increased by 0.1% during the year (2011: 8.6%).  There were 46 stores included in this metric, consisting of core stores that have been open for the full 12 months in both periods, adjusted for the 53 week year.

Operating costs within International Retail increased by 22.2% to £55.5m (2011: £45.4m) due to the increased stores numbers and a corresponding 15% increase in floor space.  

As expected, the second half of the year was much improved on the same period in the previous year; EBITDA in the second half of financial year 2012 was 61% higher at £3.7m (2011: £2.3m).

Excluding income from associates (Heatons), International Retail underlying EBITDA reduced by 5.7% to £11.5m (2011: £12.2m). This reduction, along with a £1.4m decrease in income from associates, resulted in a decrease in underlying EBITDA of 16.4% to £10.8m (2011: £12.9m).

The Group has a 50% shareholding in the Heatons chain which operates 13 Sports Direct stores in Northern Ireland and 26 sports stores in the Republic of Ireland.  Since the year end we have opened a new store in Iceland with a joint venture partner.

All of the below stores are operated by companies wholly owned by the Group, except Portugal, where the Group owns 50.1%.  As part of the accelerated growth programme, we opened nine new stores in Europe, including four in Portugal and three in France.  As at 29 April 2012, International Retail operated from a total retail sales space of c.895,000 sq. ft (2011: c.778,000 sq. ft).

International Retail store portfolio	29 April 2012	24 April 2011
Belgium	43	44
Slovenia	14	14
Portugal	13	10
Netherlands	6	4
Cyprus	6	4
France	5	2
Luxembourg	1	1
Total	88	79
Area sq. ft	895k	778k

Note: Excluding Heatons

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 sports stores.

We continue with our strategy to identify partners in new territories while continuing to expand our operations in the countries where we currently trade.    For FY13, we are targeting 10 to 15 new stores and three to five new territories.  In the first quarter, we have already opened six new stores in Hungary, Belgium, Slovenia and France.  We have closed a store in both Belgium and Cyprus.

Brands

Brands total revenue increased 4.4% to £195.9m (2011: £187.7m).

Wholesale revenues were up 4.0% to £168.5m (2011: £162.0m), driven by strong performances in our North American businesses.  Brands gross margin decreased by 20 basis points to 41.2% (2011: 41.4%).  Wholesale gross margin fell to 31.7% (2011: 32.1%) reflecting the challenging price driven environments in the UK and Europe.

Licensing revenues were up 6.6% to £27.4m (2011: £25.7m).

During the year, we signed 67 new licence agreements, covering multiple brands and product categories, with minimum contracted values of $94m over the terms of the agreements.

We acquired the remaining worldwide rights to the No Fear brand (previously owned 50%) and remain on course for licence income to achieve a Compound Average Growth Rate (CAGR) of 11% and reach at least $60m by April 2015.

The division acquired the Intellectual Property and certain assets of Firetrap and Full Circle from administration in February 2012.

Longer term, we still regard licensing as the key driver for the Brands division profitability and for the overall growth of the business.  The main growth areas are expected to be Asia Pacific and the Americas which should offset tougher trading in the UK and Europe.

Operating costs increased by only 1.3% to £55.8m (2011: £55.1m), notwithstanding a slight increase in advertising and promotional costs as the benefits of previous cost reductions are reflected in a lower cost base.  Increased promotional costs included the Darren Clarke £2m bonus for winning the Open Championship in July 2011.

Underlying EBITDA increased 10.6% to £25.0m (2011: £22.6m) due to higher wholesale sales and increased licence income.  Underlying EBITDA represented 91% of licensing income in the Year (2011: 88%), continuing to move towards our target of increasing this proportion to 100%.

Cash flow in the division was strong with tight working capital management resulting in a reduction in debtors of £7.3m. Inventory remained flat versus 2011.

We continue to focus on developing world class products that are endorsed by leading athletes on the field of play.  Notably in 2012 we teamed up with one of Britain's most successful athletes of all time, James Cracknell, as our Karrimor brand ambassador.  James has been putting Karrimor equipment to the test on location in Africa, America and Brazil and he will continue to test Karrimor in some of the world's harshest environments.

Outlook

Trading since the period end has remained in line with management's expectations where increased investment in margin has been funded by stronger retail sales.  In spite of the low expectations surrounding England's participation in Euro 2012 and the unseasonal weather our core divisions are performing well.  Excitement is building towards the Olympics and we continue to target our 2013 "super stretch" underlying EBITDA objective of £270m, (before the charge for the bonus share schemes). 

Key Performance Indicators

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

	53 weeks ended 29 April 2012	Pro Forma (2) 52 weeks 2012	52 weeks ended 24 April 2011
Financial KPIs
Group revenue	£1,835.8m	£1,807.2m	£1,599.2m
Underlying EBITDA (1)	£240.5m	£235.7m	£211.0m
UK Sports Retail gross margin	41.0%	41.0%	41.9%
UK Sports Retail like-for-like stores gross contribution (3)	+0.7%	+0.7%	+6.6%
Underlying earnings per share (4)	19.19p	18.74p	16.83p
Non Financial KPIs
No. of core stores (5)	305		306
Employee turnover	17.0%		16.9%
Cardboard recycling	6,622 tonnes		6,237 tonnes

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

⁽²⁾ The income statement has been restated to provide a 52 week Pro Forma set of results

⁽³⁾ UK Sports Retail like-for-like contribution is defined as the percentage change in contribution in the successive 12 month period, adjusted to remove the impact of the 53 week year.  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.

⁽⁴⁾ The way in which underlying earnings per share is calculated is set out in the Financial Review.

⁽⁵⁾ A core store is a store acquired and fitted out by the Group or otherwise so designated.

Employees

In no small measure, the progress we continue to make is down to the dedication and expertise of over 18,000 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 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 Scheme is also aligned with the Group's business plan.

The 2009 Bonus Share Scheme was in two stages.  The first element is an award of shares, at £1.00 per share, to the value of 25% of base pay.  The first bonus target was underlying EBITDA of £155m in 2009-10 and was achieved in that year.  The first award of up to 8m shares will vest for eligible employees in August 2012.

The second element is an award of shares, at £1.25 per share, to the value of 75% of base pay.  This 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 an underlying Net Debt / EBITDA ratio of two or less at the end of 2010-11.  All these targets were achieved in that year.  The shares vest, subject to continuous employment until then, in August 2013.

We launched the 2011 Bonus Share Scheme this year to follow on from the previous scheme.  It is 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 22m shares).

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.

Dave Forsey

Chief Executive

19 July 2012

FINANCIAL REVIEW

The financial statements for the Group for the 53 weeks ended 29 April 2012 are presented in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU.  In order to make a comparison to last year,  all references to financial performance in respect of the income statement, cash flow and business reviews are stated on, or reconciled to, a proforma 52-week basis unless otherwise specified.

Summary of results

	53 weeks ended 29 April 2012	Pro forma  52 week 2012	52 weeks ended 24 April 2011		52 week Change
	(£'m)	(£'m)	(£'m)		%
Revenue	1,835.8	1,807.2	1,599.2	+13.0
Underlying EBITDA	240.5	235.7	211.0	+11.7
Underlying profit before tax	152.6	149.1	135.5	+10.0
Reported profit before taxation	151.5	148.0	118.8	+24.6
	Pence per share		Pence per share
Reported EPS	18.68	18.24	14.80	+23.2
Underlying EPS	19.19	18.74	16.83	+11.4

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

EBITDA is earnings before investment income, finance income and finance costs, tax, depreciation and amortisation and, therefore, includes the Group's share of profit 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 and Profit Before Tax

	EBITDA	PBT
	£m	£m
Operating profit - 53 weeks	158.8
Depreciation	58.1
Impairment	2.5
Amortisation	4.7
Exceptional items	(5.6)
Share of profit of associated undertakings	(0.7)
Reported - 53 weeks	217.8	151.5
Bonus share scheme	20.7
Realised FX Loss	2.0	2.0
IAS 39 FX fair value adjustment on forward currency contracts	-	(3.6)
Other investment income	-	7.1
Impairment	-	2.5
Exceptional items	-	(5.6)
Fair value adjustment within associates	-	(1.3)
Underlying - 53 weeks	240.5	152.6
Less pro forma 53rd week	(4.8)	(3.5)
Underlying - 52 weeks	235.7	149.1
Premium Lifestyle	7.8	9.5
Underlying Excluding Premium Lifestyle	243.5	158.6

Underlying 52 week profit before tax excludes exceptional items and impairments, which increased profit by £3.1m, realised exchange profit/loss and IFRS revaluation of foreign currency contracts, which decreased 2012 profits by £2.0m and increased profit by £3.6m respectively and a £1.3m gain on fair value adjustments within associated undertakings.

Revenue and margin

	53 weeks ended 29 April 2012	Pro forma 52 week 2012	52 weeks ended 24 April 2011	Change
	(£'m)	(£'m)	(£'m)	%
Retail Revenue:
UK Retail	1,368.2	1,342.4	1,244.5	+7.9
UK Wholesale and other	41.2	41.2	34.7	+18.7
Premium Lifestyle	73.5	73.5	-
International Retail	157.0	154.2	132.3	+16.6
Total	1,639.9	1,611.3	1,411.5	+14.0
Brands Revenue:
Wholesale	168.5	168.5	162.0	+4.0
Licensing	27.4	27.4	25.7	+6.6
Total	195.9	195.9	187.7	+4.4
Total revenue	1,835.8	1,807.2	1,599.2	+13.0

For the 52 week Year, Group Revenue increased by 13.0%.  Total Retail revenue in the Year increased by 14.0%, partly due to the purchase of the Premium Lifestyle division. Excluding Premium Lifestyle, Retail revenue increased by 8.7%. The UK accounted for 90.4% of total retail revenues with the balance in continental European stores.

Gross margin in UK Sports Retail reduced from 41.9% to 41.0%.

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 increased by 4.4%.  Within this, Licensing income increased by 6.6%, with an increase in wholesale revenue of 4.0%. 

Brands overall margins decreased slightly from 41.4% to 41.2%.

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 six months) of anticipated purchases in foreign currency.

The exchange loss of £2.0m (2011: £0.3 gain) included in administration costs has 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 gain of £3.6m (2011: £1.6m loss) included in finance income substantially represents the reduction in the mark-to-market provision made (under IFRS) for the unhedged forward contracts at 24 April 2011.  A number of the forward contracts outstanding at 29 April 2012 qualify for hedge accounting and the fair value loss on these contracts of £1.3m 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 2013 financial year. These hedged contracts are at an average rate of 1.620. 

The Sterling exchange rate with the US dollar was $1.650 at 24 April 2011 and $1.626 at 29 April 2012.

Exceptional items

	53 weeks ended 29 April 2012	Pro forma 52 week 2012	52 weeks ended 24 April 2011
	(£'m)	(£'m)	(£'m)
Profit on sale of intangible assets	1.6	1.6	0.9
Release of regulatory cost provisions	2.3	2.3	-
Lease surrender incentive	0.7	0.7	-
Disposal of disposal of property	1.0	1.0	-
Provision for the cost of legal disputes	-	-	(3.1)

5.6

5.6

(2.2)

As we previously stated, the Office of Fair Trading and the Serious Fraud Office have concluded their investigation and absolved the Company and any individuals from any wrong doing.  The legal fees incurred by the Group in relation to these matters has accumulated to £4.7m.

Finance income

	53 weeks ended 29 April 2012	Pro forma 52 week 2012	52 weeks ended 24 April 2011
	(£'m)	(£'m)	(£'m)
Bank interest receivable	0.6	0.6	0.4
Expected return on pension plan assets	2.3	2.3	2.2
Fair value adjustment to forward foreign exchange contracts	3.5	3.5	-

6.4

6.4

2.6

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 that do not qualify for hedge accounting.

Finance costs

	53 weeks ended 29 April 2012	Pro forma 52 week 2012	52 weeks ended 24 April 2011
	(£'m)	(£'m)	(£'m)
Interest on bank loans and overdrafts	(5.7)	(5.6)	(4.3)
Interest on other loans	(0.3)	(0.3)	(0.4)
Interest on retirement benefit obligations	(2.5)	(2.5)	(2.6)
Fair value adjustment to forward foreign exchange contracts	-		(1.6)

(8.5)

(8.4)

(8.9)

The rise in interest payable is a result of the operation of the full year's impact of a new revolving credit facility.

Taxation

The effective tax rate on profit before tax for 2012  was 30.3% (2011: 29.9%).  This rate reflects depreciation on non-qualifying assets.  Excluding the impact of non-recurring items, the effective rate of taxation for the year would be 29.0% (2011: 31.0%).

Earnings

	53 weeks ended 24 April 2012	Pro forma 52 week 2012	52 weeks ended 24 April 2011	Change
	pence per share	pence per share	pence per share	%
Reported EPS (Basic)	18.68	18.24	14.80	+23.2
Underlying EPS	19.19	18.74	16.83	+11.4
Weighted average number of shares (actual)	568,591,000	568,591,000	568,552,000

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 and minority interests is as follows:

	Period ended 29 April 2012	52 weeks ended 24 April 2011
	(£'m)	(£'m)
Profit after tax	106.2	84.2
Post tax effect of Exceptional items:
Other investment income	7.1	8.4
Write back of provision for regulatory enquiry costs	(1.6)	-
Impairment of goodwill	1.8	-
Disposal of Freehold properties	(1.2)	-
Legal dispute	-	2.2
Fair value adjustment to forward foreign exchange contracts	(2.5)	1.2
Realised (profit)/loss on forward foreign exchange contracts	1.4	(0.3)
Profit on sale of intangible assets	(1.2)	(0.6)
Fair value adjustment within associated undertakings	(0.9)	0.6
Underlying profit after tax - 53 weeks	109.1	95.7
Less pro forma week 53	(2.5)
Underlying profit after tax - 52 weeks	106.6

Dividends

In December 2011, the Board stated that while there were several potential investment opportunities available which could accelerate the Company's underlying growth prospects it would be inappropriate to reinstate regular annual dividends in the near term.  The Board committed to keep under constant review the balance sheet in light of resources and existing investment plans and that it would look to evaluate alternative methods of returning cash to shareholders when appropriate.  In the February IMS, the Board confirmed that, in light of the strong performance to that point, it would review the dividend policy at the end of the Year.

Although the FY2012 results and cash flow performance were ahead of management's expectations as at December 2011, which means the balance sheet is stronger than originally expected, there are a number of investment opportunities under review.  This being the case, the Board believes that it is in shareholders' best interests for the Company to maintain maximum flexibility in the near term and therefore it has decided not to return any cash at this time.

The Board remains committed to keeping this policy under review.

Capital expenditure

Capital expenditure amounted to £131.0m (2011: £22.0m) which includes the purchase of freehold property from Mike Ashley for £86.8m, as well as expenditure on licences which are included in intangible assets.

Acquisitions

The Group made acquisitions during the year, creating a new Premium Lifestyle retail division which includes  USC, Cruise and Van Mildert.  The Group also purchased Firetrap as an addition to the Brands division and gained control of the worldwide rights to the No Fear brand.

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.

	29 April 2012 (£'m)
Total available for sale investments at 24 April 2011	53.1
Additions	0.5
Revaluation through equity	(7.0)
Total available for sale investments at 29 April 2012	46.6

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 £53.2m into the income statement in the year ended 26 April 2009.  £47.3m of this loss was in relation to the Group's shareholding in Blacks Leisure Group Plc ("Blacks").

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 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 and 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 and the remaining claim in the administration.  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.  In total the Group paid £6.6m to acquire 12.153m shares in Blacks.  The Group subsequently purchased a further 5.750m shares on 25 July 2011.On 9 January 2012 JD Sports announced that it had acquired the trade and assets of Blacks from its administrators. Existing shareholders did not receive any distribution from the administration and so the Group has written off the original cost of its investment in Blacks. This resulted in a transfer of historic losses, previously recognised in the statement of comprehensive income, of £7.1m into the income statement in the year.

The respective shareholdings at 29 April 2012 and 24 April 2011 were as follows:

		At 29 April 2012			At 24 April 2011
		Shares 'm	Holding		Shares 'm	Holding
Blacks Leisure Group		-	-%		12.153	14.50%
JD Sports Fashion		5.775	11.87%		5.775	11.87%

Cash flow and net debt

Net debt decreased by £3.7m from £148.9m at 24 April 2011 to £145.2m at 29 April 2012.

The analysis of debt at 29 April 2012 was as follows:

	At 24 April 2012	At 24 April 2011
	(£'m)	(£'m)
Cash and cash equivalents	69.4	48.6
Borrowings	(214.6)	(197.5)
Net debt	(145.2)	(148.9)

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 29 April 2012	At 24 April 2011
	(£'m)	(£'m)
Underlying 52 week EBITDA	235.7	211.0
Realised (loss)/profit on forward foreign exchange contracts	(2.0)	0.3
Taxes paid	(41.3)	(27.3)
Underlying 52 week Free cash flow	192.4	184.0
Pro forma 53rd week Underlying EBITDA	4.8	-

Invested in:-

Working capital and other	(31.8)	4.7
Acquisitions (including debt)	(26.2)	-
Net purchase of investments	0.8	-
Net capital expenditure	(131.0)	(21.0)
Finance costs and other financing activities	(5.3)	(4.7)

Decrease in net debt

3.7

163.0

Reconciliation of movement in equity

Total equity movement is as follows:

	29 April 2012 (£'m)
Total equity at 24 April 2011	331.1
Profit after tax for the 52 weeks	103.1
Profit after tax for the 53rd week	2.5
Share-based payment	20.7
Deferred tax on share schemes	14.2

Items taken directly to equity:

Exchange differences on translation of foreign operations	(2.3)
Exchange differences on hedged contracts - recognised in the period	(1.3)
Exchange differences on hedged contracts - reclassified and reported in net profit	8.0
Fair value adjustment in respect of available for sale financial assets	0.2
Actuarial loss on pension	(5.5)
Tax on items taken directly to equity	1.5

Movement in equity issues:

Movement in non controlling interests

(0.3)

Total equity at 29 April 2012

327.0

471.9

Pensions

The Group operates a number of closed defined benefit schemes in the Dunlop Slazenger companies. The net deficit in these schemes increased from £16.2m at 24 April 2011 to £19.3m at 29 April 2012.

Bob Mellors

Finance Director

19 July 2012

CONSOLIDATED INCOME STATEMENT FOR THE 53 WEEKS ENDED 29 APRIL 2012

		53 weeks ended 29 April 2012	52 weeks ended 24 April 2011
	Notes	£'000	£'000
Revenue	2	1,835,756	1,599,237
Cost of sales		(1,091,480)	(940,330)
Gross profit		744,276	658,907
Selling, distribution and administrative expenses		(596,383)	(527,273)
Other operating income		5,283	5,289
Exceptional items	3	5,619	(2,252)
Operating profit	2	158,795	134,671
Other investment costs		(5,800)	(9,481)
Finance income		6,426	2,560
Finance costs		(8,481)	(8,953)
Share of profit/(loss) of associated undertakings and joint ventures		558	(8)
Profit before taxation		151,498	118,789
Taxation	4	(45,867)	(35,566)
Profit for the period	2	105,631	83,223
Attributable to:
Equity holders of the Group		106,198	84,173
Non-controlling interest		(567)	(950)
Profit for the period	2	105,631	83,223

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

		Pence per share	Pence per share
Basic earnings per share		18.68	14.80
Diluted earnings per share		16.70	13.93
Underlying Basic earnings per share		19.19	16.83

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 53 WEEKS ENDED 29 APRIL 2012

		53 weeks ended 29 April 2012	52 weeks ended 24 April 2011
	Notes	£'000	£'000
Profit for the period	2	105,631	83,223
Other comprehensive income
Exchange differences on translation of foreign operations		(2,301)	(7,665)
Exchange differences on hedged contracts - recognised in the period		(1,305)	(4,801)
Exchange differences on hedged contracts - reclassified and reported in net profit		8,086	(13,100)
Actuarial (losses)/gains on defined benefit pension schemes		(5,501)	2,077
Fair value adjustment in respect of available-for-sale financial assets		(6,986)	1,531
Transfer of historic losses on available-for-sale financial assets		7,146	-
Taxation on items recognised in other comprehensive income		1,483	4,276
Total comprehensive income for the period		106,253	65,541
Attributable to:
Equity holders of the Group		106,820	66,491
Non-controlling interest		(567)	(950)
		106,253	65,541

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

CONSOLIDATED BALANCE SHEET AS AT 29 APRIL 2012

		29 April 2012	24 April 2011
	Notes	£'000	£'000
ASSETS
Non-current assets
Property, plant and equipment		313,023	236,097
Intangible assets		225,150	205,050
Investments in associated undertakings and joint ventures		29,470	38,347
Available-for-sale financial assets		46,634	53,097
Deferred tax assets		32,625	13,443
		646,902	546,034
Current assets
Inventories		316,800	217,938
Trade and other receivables		83,877	91,705
Derivative financial assets		5,926	-
Cash and cash equivalents		78,674	60,513
		485,277	370,156
TOTAL ASSETS		1,132,179	916,190
EQUITY AND LIABILITIES
Share capital		64,060	64,055
Share premium		874,300	874,300
Treasury shares reserve		(55,839)	(85,088)
Permanent contribution to capital		50	50
Capital redemption reserve		8,005	8,005
Foreign currency translation reserve		25,962	28,263
Reverse combination reserve		(987,312)	(987,312)
Own share reserve		(57,684)	(6,094)
Hedging reserve		417	(6,364)
Retained earnings		600,431	440,931
		472,390	330,746
Non-controlling interests		(505)	389
Total equity		471,885	331,135
Non-current liabilities
Borrowings	7	214,587	196,182
Retirement benefit obligations		19,318	16,186
Deferred tax liabilities	4	25,789	28,238
Provisions		62,889	58,277
		322,583	298,883
Current liabilities
Derivative financial liabilities		1,570	5,984
Trade and other payables		282,819	234,851
Borrowings	7	9,303	13,219
Current tax liabilities	4	44,019	32,118
		337,711	286,172
Total liabilities		660,294	585,055
TOTAL EQUITY AND LIABILITIES		1,132,179	916,190

The accompanying accounting policies and notes form part of these financial statements. The financial statements were approved by the Board on 19 July 2012 and were signed on its behalf by:

Bob Mellors

Director

CONSOLIDATED CASH FLOW STATEMENT FOR THE 53 WEEKS ENDED 29 APRIL 2012

		53 weeks ended 29 April 2012	52 weeks ended 24 April 2011
	Notes	£'000	£'000
Cash inflow from operating activities	8	206,679	211,582
Income taxes paid		(41,253)	(27,324)
Net cash inflow from operating activities		165,426	184,258
Cash flow from investing activities
Proceeds on disposal of property, plant and equipment		1,320	954
Purchase of subsidiaries, net of cash acquired		(26,214)	-
Proceeds on disposal of subsidiaries		-	1,034
Purchase of intangible assets		(2,921)	(1,498)
Purchase of property, plant and equipment		(129,402)	(20,451)
Purchase of listed investments		(523)	-
Finance income received		590	2,560
Investment income received		1,346	3,362
Net cash outflow from investing activities		(155,804)	(14,039)
Cash flow from financing activities
Finance costs paid		(5,955)	(7,222)
Increase in borrowings		17,126	190,899
Proceeds from share issues		5	5
Net cash inflow from financing activities		11,176	183,682
Net increase in cash and cash equivalents including overdrafts		20,798	353,901
Cash and cash equivalents including overdrafts at beginning of period		48,637	(305,264)
Cash and cash equivalents including overdrafts at the period end		69,435	48,637

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

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE 53 WEEKS ENDED 29 APRIL 2012

	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 25 April 2010	(85,088)	40,633	(6,094)	338,251	(29,370)	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
Cash flow hedges
- recognised in the period	-	-	-	-	(4,801)	(4,801)	-	(4,801)
- reclassified and reported in net profit	-	-	-	-	(13,100)	(13,100)	-	(13,100)
Actuarial losses 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)	-	92,057	(17,901)	61,786	(950)	60,836
At 24 April 2011	(85,088)	28,263	(6,094)	(440,931	(47,266))	330,746	389	331,135
Issue of ordinary shares	-	-	-	-	5	5	-	5
Share-based payments	-	-	-	20,643	-	20,643	-	20,643
Taxation on items taken to comprehensive income	-	-	-	14,176	-	14,176	-	14,176
Non-controlling interests - acquisitions	-	-	-	-	-	-	(327)	(327)
Transactions with owners	-	-	-	34,819	5	34,824	(327)	34,497
Profit for the financial period	-	-	-	106,198	-	106,198	(567)	105,631
Other comprehensive income
Market value of shares transferred to EBT	51,590		(51,590)	-	-	-	-	-
Difference between original cost and market value of shares transferred to EBT	(22,341)	-	-	22,341	-	-	-	-
Cash flow hedges
- recognised in the period	-	-	-	-	(1,305)	(1,305)	-	(1,305)
- reclassified and reported in net profit	-	-	-	-	8,086	8,086	-	8,086
Actuarial losses on defined benefit pension schemes	-	-	-	(5,501)	-	(5,501)	-	(5,501)
Fair value adjustment in respect of available-for-sale financial assets	-	-	-	160	-	160	-	160
Taxation	-	-	-	1,483	-	1,483	-	1,483
Translation differences - Group	-	80	-	-	-	80	-	80
Translation differences - associates	-	(2,381)	-	-	-	(2,381)	-	(2,381)
Total comprehensive income for the period	29,249	(2,301)	(51,590)	124,681	6,781	106,820	(567)	106,253
At 29 April 2012	(55,839)	25,962	(57,684)	600,431	(40,480)	472,390	(505)	471,885

The Company holds 42,000,000 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 financial information, which comprises the consolidated income statement, consolidated statement of comprehensive income, consolidated balance sheet, consolidate cash flow statement and related notes, does not constitute full accounts within the meaning of s435 (1) and (2) of the Companies Act 2006. The auditors have reported on the Group's statutory accounts for the periods ended 29 April 2012 and 24 April 2011, which do not contain any statement under s498 of the Companies Act and are unqualified. The statutory accounts for the period ended 24 April 2011 have been delivered to the Registrar of Companies and the statutory accounts for the period ended 29 April 2012 will be filed with the Registrar in due course.

2. Segmental analysis

Operating segments

The chief operating decision maker has been identified as the executive directors. The executive directors review the Group's internal reporting in order to assess performance and allocate resources, across each operating segment. The operating segments are Retail and Brands which are reported in a manner consistent with the internal reporting to the executive directors.

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 53 weeks ended 29 April 2012:  

		Retail			Brands	Eliminations	Total
		UK total	International retail	Total	Total
		£'000	£'000	£'000	£'000	£'000	£'000
Sales to external customers		1,482,834	157,003	1,639,837	195,919	-	1,835,756
Sales to other segments		-	-	-	3,291	(3,291)
Revenue		1,482,834	157,003	1,639,837	199,210	(3,291)	1,835,756
Gross profit		595,338	68,115	663,453	80,823	-	744,276
Operating profit before foreign exchange and al items		132,637	4,229	136,866	18,325	-	155,191
Operating profit		131,297	4,029	135,326	23,469		158,795
Other investment costs							(5,800)
Finance income							6,426
Finance costs							(8,481)
Share of profits of associated undertakings and joint ventures							558
Profit before taxation							151,498
Taxation							(45,867)
Profit for the period							105,631

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

Other segment items included in the income statement for the 53 weeks ended 29 April 2012:

	Retail	Brands	Total
	£'000	£'000	£'000
Depreciation	55,713	2,439	58,152
Amortisation	80	4,278	4,358
Impairment	2,473	-	2,473

Information regarding segment assets and liabilities as at 29 April 2012 and capital expenditure for the 53 weeks then ended: 

	Retail	Brands	Eliminations	Total
	£'000	£'000	£'000	£'000
Investments in associated undertakings and joint ventures	29,277	193	-	29,470
Other assets	953,268	246,690	(97,249)	1,102,709
Total assets	982,545	246,883	(97,249)	1,132,179
Total liabilities	(572,822)	(184,721)	97,249	(660,294)
Tangible asset additions	133,759	1,327	-	135,086
Intangible asset additions	-	23,114	-	23,114
Total capital expenditure	133,759	24,441	-	158,200

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	57,652	581,197	77,710	-	658,907
Operating profit before foreign exchange and exceptional items	113,105	5,618	118,723	17,856	-	136,579
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 profits 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	(86,740)	877,843
Total assets	760,587	242,343	(86,740)	916,190
Total liabilities	(479,956)	(191,839)	(86,740)	(585,055)
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

Geographic information

Segmental information for the 53 weeks ended 29 April 2012:
	UK	Non-UK	Eliminations	Total
	£'000	£'000	£'000	£'000
Segmental revenue from external customers	1,528,493	307,263		1,835,756
Total capital expenditure	148,285	9,915		158,200
Segmental assets	941,162	288,266	(97,249)	1,132,179

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	760,587	242,343	(86,740)	916,190

3. Exceptional items

	53 weeks ended 29 April 2012	52 weeks ended 24 April 2011
	£'000	£'000
Profit/ (loss) on disposal of intangible assets	1,624	(876)
Release of provision for costs relating to regulatory enquiries	2,309	-
Provision for legal costs		(3,128)
Profit on disposal of leasehold property (lease surrender premium)	724	-
Profit on disposal of freehold property	962	-
	5,619	(2,252)
	-	-

4. Taxation

The effective tax rate on profit before tax for 2012  was 30.3% (2011: 29.9%). This rate reflects depreciation on non-qualifying assets. Excluding the impact of non-recurring items, the effective rate of taxation for the year would be 29.0% (2011: 31.0%).

5. 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, 568,591,423 (2011: 568,552,000), is adjusted to assume conversion of all dilutive potential ordinary shares under the Group's bonus share schemes, being 67,161,036 (2011: 35,528,449), to give the diluted weighted average number of shares of 635,752,459 (2011 604,080,818:).

Basic and diluted earnings per share

	53 weeks ended 29 April 2012	53 weeks ended 29 April 2012	52 weeks ended 24 April 2011	52 weeks ended 24 April 2011
	Basic £'000	Diluted £'000	Basic £'000	Diluted £'000
Profit for the period	106,198	106,198	84,173	84,173
	Number in thousands		Number in thousands
Weighted average number of shares	568,591	635,752	568,552	604,081
	Pence per share		Pence per share
Earnings per share	18.68	16.70	14.80	13.93

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.

	53 weeks ended 29 April 2012	53 weeks ended 29 April 2012	52 weeks ended 24 April 2011	52 weeks ended 24 April 2011
	Basic £'000	Diluted £'000	Basic £'000	Diluted £'000
Profit for the period	106,198	106,198	84,173	84,173
Post tax adjustments to profit for the period for the following non-trading items:
Realised gain/(loss) on forward exchange contracts	1,431	1,431	(237)	(237)
Fair value adjustment to forward foreign exchange contracts	(2,527)	(2,527)	1,194	1,194
Other investment (costs)/income	7,146	7,146	8,397	8,397
Release of provision relating to regulatory enquiries	(1,639)	(1,639)	-	-
Provision for legal costs	-	-	2,158	2,158
Profit on sale of intangible assets	(1,153)	(1,153)	(604)	(604)
Profit on disposal of property	(1,197)	(1,197)	-	-
Fair value adjustments within associated undertakings	(929)	(929)	623	623
Impairment of goodwill	1,756	1,756	-	-
Underlying profit for the period	109,086	109,086	95,704	95,704
	Number in thousands		Number in thousands
Weighted average number of shares	568,591	635,752	568,552	604,081
	Pence per share		Pence per share
Earnings per share	19.19	17.16	16.83	15.84

6. Other reserves

	Share capital	Share premium	Permanent contribution to capital	Capital redemption reserve	Reverse combination reserve	Hedging reserve	Total Other reserves
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 25 April 2010	64,050	874,300	50	8,005	(987,312)	11,537	(29,370)
Issue of ordinary shares	5	-	-	-	-	-	5
Cash flow hedges
- recognised in the period	-	-	-	-	-	(4,801)	(4,801)
- reclassified and reported in net profit	-	-	-	-	-	(13,100)	(13,100)
At 24 April 2011	64,055	874,300	50	8,005	(987,312)	(6,364)	(47,266)
Issue of ordinary shares	5	-	-	-	-	-	5
Cash flow hedges
- recognised in the period	-	-	-	-	-	(1,305)	(1,305)
- reclassified and reported in net profit						8,086	8,086
At 29 April 2012	64,060	874,300	50	8,005	(987,312)	417	(40,480)

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

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. 

7. Borrowings

	29 April 2012	24 April 2011
	£'000	£'000
Non-current:
Bank and other loans	213,758	194,917
Obligations under finance leases	829	1,265
	214,587	196,182
Current:
Bank overdrafts	9,239	11,876
Bank and other loans	51	1,335
Obligations under finance leases	13	8
	9,303	13,219
Total borrowings:
Bank overdrafts	9,239	11,876
Bank and other loans	213,809	196,252
Obligations under finance leases	842	1,273
	223,890	209,401

	29 April 2012	24 April 2011
	£'000	£'000
Borrowings - Sterling	178,516	157,772
Borrowings - Other	36,135	39,753
	214,651	197,525

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, 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.  This facility was agreed at market terms at its inception.

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

Net debt at 29 April 2012 was £145.2m (24 April 2011: £148.9m).

8. Cash inflow from operating activities

	53 weeks ended 29 April 2012	52 weeks ended 24 April 2011
	£'000	£'000
Profit before taxation	151,498	118,789
Net finance costs	2,055	6,393
Other investment costs	5,800	9,481
Share of loss/(profit) of associated undertakings and joint ventures	(558)	8
Operating profit	158,795	134,671
Depreciation	58,152	59,946
Amortisation	4,358	2,952
Impairment	2,473	-
Loss/(profit) on disposal of intangibles	1,679	(10)
Defined benefit pension plan current service cost	7	-
Defined benefit pension plan employer contributions	(2,559)	(1,865)
Share based payments	20,643	10,623
Operating cash inflow before changes in working capital	243,548	206,317
Decrease in receivables	17,707	10,658
(Increase)/decrease in inventories	(80,179)	865
Increase/(decrease) in payables	25,603	(6,258)
Cash inflow from operating activities	206,679	211,582

9. Post balance sheet events

No material post balance sheet events occurred after 29 April 2012 to the date of this Annual Report.

10. Related party transactions

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

The Group has taken advantage of the exemptions contained within IAS 24 - Related Party Disclosures from the requirement to disclose transactions between Group companies as these have been eliminated on consolidation.  

52 weeks ended 24 April 2011 Related party	Relationship	Sales	Purchases	Trade and other receivables	Trade and other payables
		£'000	£'000	£'000	£'000
Heatons	Associate	22,789	-	4,425	-
No Fear International Limited	Joint venture	-	-	5,384	(1,197)
Brasher Leisure Limited	Associate	80	(678)	25	(117)

Mike Ashley leases certain properties to various companies in the Group which are operated as retail and distribution premises. A commercial rent is charged in respect of these leases.

53 weeks ended 29 April 2012 Related party	Relationship	Sales	Purchases	Trade and other receivables	Trade and other payables
		£'000	£'000	£'000	£'000
Heatons	Associate	23,812	29	5,242	-
Brasher Leisure Limited	Associate	58	633	4	25

During the year Mike Ashley leased certain properties to various companies in the Group which were operated as retail and distribution premises. A commercial rent was charged in respect of these leases. On 20 April 2012 the Group acquired 32 properties from Mike Ashley for consideration of £86.8m. The Independent Directors of the Group considered the transaction to be at a fair and reasonable price and in the best interests of the Group.

Key Management Compensation	29 April 2012	24 April 2011
	£'000	£'000
Salaries and short-term benefits	815,304	797,075
Share-based payments	1,081,460	612,904
Total	1,896,764	1,409,979

11. Acquisitions

Details of principal acquisitions for the 53 weeks ended 29 April 2012 are set out below.

(i) 8 July 2011	Acquired 80% of the ordinary share capital of West Coast Capital (USC) Limited and 80% of the ordinary share capital of Cruise Clothing Limited. Total cash consideration was £7.5m.
(ii) 25 July 2011	Acquired the remaining 50% of the ordinary shares of No Fear International Limited for a cash consideration of £6.9m, taking the cumulative holding to 100%.
(iii) 17 January 2012	Acquired the remaining 20% of share capital in West Coast Capital (USC) Limited for nil consideration.
(iv) 17 February 2012	Acquired 100% of the ordinary share capital of Delima Limited for nil cash consideration.
(v) 16 March 2012	Acquired the Firetrap brand and certain other assets from World Design and Trade Co. Limited for total consideration of £6.5m.

The aggregate fair value of consideration paid, assets and liabilities acquired and resulting goodwill in respect of the above acquisitions is detailed below.

	Total
	£'000
Cash consideration	20,875
Less: fair value of net assets acquired	(10,380)
Goodwill	10,495

The goodwill is attributable to the premium paid to strengthen the Group's existing business segments of retail and brand, which is in line with the Group's strategy.

Legal fees relating to the above acquisitions of £500,000 were expensed through the income statement during the year.

None of the acquisitions are considered to be individually material.

The asset values at acquisition are detailed below:

	Carrying values at acquisition	Provisional fair value adjustment	Fair value of net assets acquired
	£'000	£'000	£'000
Property, plant and equipment	8,552	(2,868)	5,684
Intangible assets	16,685	(4,381)	12,304
Inventories	18,683	-	18,683
Trade and other receivables	9,879	-	9,879
Cash and cash equivalents	(5,339)	-	(5,339)
Trade and other payables	(17,697)	-	(17,697)
Provisions	-	(5,471)	(5,471)
Minority interests	(7,663)	-	(7,663)
	23,100	(12,270)	10,380

Cash flows arising from the acquisitions are as follows:  

	29 April 2012
	£'000
Cash consideration	20,875
Bank overdraft acquired	5,339
Net cash outflow in the cash flow statement	26,214

£77,989,000 of revenue, £11,164,000 of operating loss and £11,258,000 of loss before tax has been included within the Group's financial statements for the period in respect of the above acquired entities since the dates of acquisition.

Had the above acquisitions been included from the start of the period, £100,983,000 of revenue, £17,852,000 of operating loss and £17,946,000 of loss after tax would have been included in the Group's financial statements.

 

END

 

 

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