Sports Direct Intl plc Preliminary Results FY18
19 July 2018
Preliminary Results for the Period ended 29 April 2018
|
|
52 weeks to 29 April 2018 |
53 weeks to 30 April 2017 |
Change (%) |
|
|
£m |
£m |
|
|
Group revenue |
3,359.5 |
3,245.3 |
3.5 |
|
UK Sports Retail |
2,181.5 |
2,225.0 |
(2.0) |
|
European Sports Retail |
637.2 |
637.9 |
(0.1) |
|
Rest of World Retail |
192.4 |
27.7 |
594.6 |
|
Premium Lifestyle |
162.1 |
113.6 |
42.7 |
|
Wholesale & licensing |
186.3 |
241.1 |
(22.7) |
|
Group gross margin |
39.7 |
41.0 |
-130 bps |
|
Sports Retail gross margin |
40.8 |
41.6 |
-80 bps |
|
Underlying EBITDA (pre share scheme costs) (3) |
306.1 |
272.7 |
12.2 |
|
|
|
|
|
|
Reported profit before tax |
77.5 |
281.6 |
(72.5) |
|
Underlying profit before tax (PBT) (3) |
152.9 |
113.7 |
34.5 |
|
|
|
|
|
|
Reported profit after tax |
27.6 |
231.7 |
(88.1) |
|
Underlying profit after tax |
104.9 |
66.5 |
57.7 |
|
|
|
|
|
|
Reported basic earnings per share |
4.6p |
39.4p |
(88.3) |
|
Underlying basic earnings per share (EPS) (3) |
19.9p |
11.4p |
74.6 |
|
|
|
|
|
|
Free cash flow (4) |
326.2 |
257.4 |
26.7 |
|
Net debt (5) |
397.1 |
182.1 |
118.1 |
· Group revenue increased by 3.5%(1)
• Excluding acquisitions, disposals, 53rd week, and on a currency neutral basis, revenue increased by 0.7%
· UK Sports Retail revenue decreased by 2.0%(1)
• Excluding acquisitions, disposals and 53rd week, revenue decreased by 0.3%
• UK Sports Retail like-for-like stores gross contribution was down 0.6%(2)
· European Sports Retail revenue decreased by 0.1%(1)
• Currency neutral, excluding acquisitions and 53rd week, revenue decreased by 3.2%
• European Sports Retail like-for-like stores gross contribution was down 2.0%(2)
· Premium Lifestyle Retail revenue increased by 42.7%, due to an increased store portfolio and online sales
· Group gross margin decreased to 39.7% from 41.0%, due to acquisition accounting as a result of the acquisition of Bob's Stores and Eastern Mountain Sports, and increased inventory provisions.
· Strong free cash flow (pre-capex) up to £326.2m increased from £257.4m in the prior year(4)
· Reported profit before tax was £77.5m, down 72.5% from £281.6m largely due to:
• an £85.4m impact from our Debenhams strategic investment due to current year fair value adjustments mitigated to some extent by investment income
• prior year investment income from the sale of JD Sports shares and disposal of the Dunlop brand
· Reported earnings per share fell by 88.3% to 4.6p
• Underlying basic earnings per share increased by 74.6% to 19.9p(3)
· Reported profit after tax was £27.6m
• Underlying profit after tax was £104.9m
• The reported tax charge is impacted by non-deductible investment costs in the current year and non-taxable investment income in the prior year
· Net debt increased to £397.1m (£182.1m at 30 April 2017)(5), due to the purchase of own shares, strategic investments and investment in property set against a strong free cash flow
· Invested £140.0m (FY17: £317.0m) in property assets as we execute our strategic priority to elevate our sports retail proposition
(1) Headline growth includes the 53rd week in the prior year, acquisitions and disposals
(2) Figure is on a 52 week currency neutral basis and with a consistent year on year inventory provision used
(3) Underlying EBITDA, underlying profit before taxation and underlying basic EPS exclude realised foreign exchange gains/losses in selling and administration costs, exceptional costs, and the profit / loss on disposal of subsidiaries, strategic investments and properties. Underlying EBITDA also excludes the Share Scheme charges. Underlying profit before taxation also excludes fair value adjustments on foreign exchange contracts
(4) Free cash flow is defined as operating cash flow after working capital, made up of underlying EBITDA (before Share Scheme costs) plus realised foreign exchange gains and losses, less corporation tax paid and movements in working capital, but pre-capex
(5) Net debt is borrowings less cash and cash equivalents held
Mike Ashley, Chief Executive, said:
"I am particularly pleased that Sports Direct has not only been named
among the ten companies with the most improved reputation in the UK, but also that we were ranked among the top five in an index of international retailers*.
I'm pleased that our Underlying EBITDA has come in at the top end of our expected range at £306.1m as we indicated this time last year, and also that the underlying profit after tax has increased substantially to £104.9m."
Michael Murray, Head of Elevation, said:
"During FY18, we have seen growth in Underlying EBITDA of 12.2%. The elevation strategy continues to exceed expectations.
As the property pipeline and brand relationships accelerate, we are confident in achieving between a 5% and 15% improvement in Underlying EBITDA for the coming financial period."
*Reputation Institute / The Internationalisation Index
|
Sports Direct International plc Mike Ashley, Chief Executive
|
T: 0344 245 9200 |
|
KBA PR Keith Bishop
|
T: 0207 734 9995 |
CHAIRMAN'S STATEMENT
OVERVIEW
FY18 has seen the Group continue to make good progress in elevating our retail proposition in order to deliver enhanced levels of excellence to our customers. Our new generation of flagship stores continue to out-perform our expectations, and I would like to thank all our people for their loyalty and hard work.
I am very pleased that our results have come in at the top end of the expectation that Mike Ashley mentioned in his outlook statement last year. We have consistently used Underlying EBITDA as one of our Alternative Performance Measures, this has increased 12.2% year on year. FY18 Underlying Profit before tax was up 34.5% to £152.9m, largely as a result of maintaining a strong trading performance in the UK as we undergo the strategic shift to the elevated store and online offering, whilst starting to see the benefits of increased efficiencies in the UK and Europe. There have been improvements in the currency hedging rates used year on year as well as the advantage of a strong Euro for the European divisional results.
In terms of statutory reporting, our profit before taxation has reduced by 72.5%, which arises predominantly from the profit on sale of the Dunlop business and the profit on the sale of JD Sports shares included in the results for the prior period and the recognition of the net losses on our strategic investment in Debenhams in the current period.
During the year, the Group generated free cash flow of £326.2m, and undertook capital expenditure of £213.4m, including £140.0m on property acquisitions. Net Debt increased from £182.1m to £397.1m as a result of overall investment in our elevation strategy and an increased spend on our strategic investments. The Group continues to maintain substantial financial resources and a strong balance sheet.
ELEVATION STRATEGY AND STRATEGIC PRIORITIES
The enhancement of our retail proposition, on the high street and elsewhere, continues to be a strategic priority. In line with this, our multi-channel elevation strategy is a key driver towards achieving our long to medium term goal of delivering an unrivalled multi-brand offering to customers across sport, lifestyle and fashion. This strategy began on the high street with the active management of our property portfolio, which is seeing us continue to open a new generation of stores. These include regional flagship stores with multiple fascias in key retail locations. This is enabling us to work closely with our third party brand partners to ensure greater integration of key products within improved retail space. The elevation strategy further encompasses how we connect with the consumer across all our channels, including social, digital and in store. It is also creating opportunities for staff and it aims to increase value for shareholders in the long term.
OUR PEOPLE AND OUR PRACTICES
As always, the wellbeing of our people is a priority consideration, and the Board is committed to treating all staff with dignity and respect. During FY18 we completed an organisational development programme to give staff improved visibility over career options within the Group. This has resulted in an improved system for staff appraisals. This activity included a review of staff wages at all levels of the Company within the UK, in order to ensure that our people continue to be rewarded for their loyalty. I can confirm that all staff, including casual workers, continue to be paid hourly rates above the levels set by the National Minimum Wage (or above the new Statutory National Living Wage if aged over 25). In addition, the Company pays commission and other rewards to staff worth approx. £20m per annum. Eligible employees participating in the Company share bonus scheme received shares worth £45.5m in FY18. The Company continues to meet its obligation to ensure staff in the UK, including casual workers, receive holiday pay on an accrued basis and statutory sick pay. Further details of our arrangements for staff are set out in the People Highlights section of the forthcoming Annual Report including a new proactive occupational health programme, entitled SD Wellbeing, which offers support to staff via a range of measures.
THIRD PARTY BRAND PARTNERS
Our elevation strategy is seeing us open bigger and better stores, which enables us to strengthen our relationships with third party brands. The result is that we are able to offer a greater range of choice, including as time goes on, more premium product lines. We are working with our suppliers towards our elevated stores offering good, better and best products across all categories. FY18 has seen us continue to strengthen our relationships with leading third party brands, including adidas, Nike, Puma and Under Armour.
BOARD AND SENIOR MANAGEMENT
I am pleased to report that the role of Michael Murray has broadened to include overseeing the execution of the Company's elevation strategy on behalf of the Board. In addition to his duties in relation to property, Michael has therefore been assigned to the role of Head of Elevation. Michael continues to be engaged on a consultancy basis. I would like to thank him for his additional input, and we have made a provision of £5.0m for services to the end of FY18 towards payments due under our previously disclosed agreement with him. Under this agreement, an independent property valuation takes place, in order to establish the value created by Michael for the Group.
We are pleased to have appointed Jon Kempster as Chief Financial Officer ("CFO") and Executive Director on 11 September 2017 and David Daly as Non-Executive Director and member of the audit committee on 2 October 2017. Jon brings to Sports Direct a wealth of public company experience in multinational organisations across multiple sectors. David has 30 years' international experience in the sporting goods industry working for Nike until his retirement in 2015, most recently as Senior Director for Nike's Club and Federation Business based in Amsterdam.
The Company has continued to strengthen its senior management team, and I am pleased to announce that Chris Wootton has been promoted to the role of Deputy Chief Financial Officer. As previously stated during the period, Liam Rowley joined us last October as Head of Strategic Investments. I am confident that this pool of new talent will be of great benefit to the Company. In relation to the composition of the Board we are committed to meeting gender diversity targets. We are currently interviewing a number of female candidates to join the Board as Non-Executive Directors, and female candidates are being encouraged to apply to become our next Workers' Representative to the Board. Women hold approx. 35% of senior leadership roles at Sports Direct, ahead of the Hampton Alexander target of 33% of women in senior leadership by 2020 and our average gender pay gap is approx. 6.3%, which is below the current national average of 18.4%.
STRATEGIC INVESTMENTS
Strategic investments are a key part of the Group's overall strategy. In a challenging retail market, we believe innovative strategic partnerships will help to differentiate our offering and enhance the consumer experience by giving us ways to extend our reach into new retail channels and geographies. During the year we have progressed our strategy through our investment in Game Digital with the potential to develop Belong e-sports arenas, and our increased interest in Debenhams. The appointment of Liam Rowley has brought enhanced focus on aligning our strategic investments with our medium to long term goals.
CORPORATE GOVERNANCE
The Board trusts that shareholders will welcome the steps taken in FY18 to reassure them that John Ashley did not benefit inappropriately from being the brother of majority shareholder Mike Ashley. In fact, John was actually disadvantaged by approximately £11m after he forewent bonuses that he would have received if he were treated equally to other executives who helped to build the Company (as announced on 24 November 2017). By voluntarily abstaining from voting on this issue, the Board has provided the Company's independent shareholders the opportunity to determine whether or not to make a retrospective payment to John Ashley. The Board notes that independent shareholders voted against making this payment at the General Meeting held in December 2017. The Board respects the views of the Company's independent shareholders and considers all these matters to be closed.
CAPITAL MANAGEMENT
In November 2017 we announced that we have entered into a new Revolving Credit Facility ("RCF"). The RCF is valid for four years (with a one year extension option), and provides the Group with access to borrowings of up to £907.5m. This has now been increased to £913.5m. We very much appreciate the ongoing support of our banking partners. Net debt to reported EBITDA is currently 1.1 times.
The Board has decided not to pay a dividend this year. We will continue to keep this under review in future periods. The Board ensures that sufficient capital is retained within the Group to meet its strategic objectives.
We continued to conduct our Share Buyback Programme during the period, pursuant to the authority granted to us at the 2017 AGM. During the period to 29 April 2018 the Company has purchased 37,105,027 ordinary shares at a cost of £113.9m (excluding purchasing costs) and representing 5.8% of the issued share capital. The number of shares held in treasury by the Company at the end of the period was 103,633,049 representing 16.2% of the issued share capital. No shares have been disposed of by the Company.
As at 18 July 2018 the Company has not purchased any further shares under the Share buyback programme. No shares have been disposed of by the Company to this date.
The Group has invested £140.0m in FY18 in property assets (FY17: £317.0m), which brings our elevation strategy spend to £562.0m, consistent with our two to four year estimate.
OUR ACHIEVEMENTS AND OUR VALUES
Finally, I would like to say how pleased I was that our year-end in April coincided with publication of an announcement by the Reputation Institute, which named Sports Direct as among the ten UK companies with the biggest reputation improvements during 2017 to 2018. In June 2018, the Company was also ranked ahead of companies like Apple and John Lewis in an index of international retailers, which was published by Loqate GBG in partnership with Planet Retail RNG and Retail Week Connect. Whilst there is no room for complacency, it is refreshing to see this independent recognition of the work we have undertaken to ensure that our working practices and corporate governance are aligned with our values. I note that various commentators in the past have sought to portray Mike Ashley as a so-called 'pantomime villain'. However, since Mike became Chief Executive, the Company has initiated a process of transformation to the benefit of all stakeholders. This has seen dynamic implementation of our elevation strategy led by Michael Murray.
Dr. Keith Hellawell. QPM
Non-Executive Chairman
18 July 2018
CHIEF EXECUTIVE'S REPORT AND BUSINESS REVIEW
PERFORMANCE
OVERVIEW
Group revenue increased by 3.5% to £3,359.5m in the year. UK Sports Retail decreased by 2.0% to £2,181.5m, which includes USC fascia sales. European Sports Retail decreased by 0.1% to £637.2m including Heatons Republic of Ireland. Premium Lifestyle revenue increased by 42.7%, with revenue in Wholesale & Licensing division down 22.7%. Rest of World Retail revenue was £192.4m.
Group gross margin in the year decreased by 130 basis points from 41.0% to 39.7%. This was largely due to acquisition accounting as a result of the purchase of the trade and assets of Bob's Stores and Eastern Mountain Sports, and increased inventory provisions as all divisions invested in more significant product offerings. UK Sports Retail margin was down slightly at 40.8% (2017: 41.1%) while European Sports Retail decreased 250 basis points from 43.3% to 40.8%. Premium Lifestyle's gross margin decreased by 190 basis points from 35.2% to 33.3%. Rest of World Retail margin was 30.0%, which includes acquisition adjustments.
Group operating costs decreased by 3.6% to £1,020.3m (FY17: £1,058.7m), largely as a result of non-recurrence of such significant provisioning as in FY17, as well as increased efficiencies through a degree of automation in the warehouse and rationalisation in continental Europe. See Financial Review for reconciliation of Group operating costs to selling, distribution & administrative expenses.
As a result, Group underlying EBITDA (pre-Share Scheme costs) for the year was up 12.2% to £306.1m (FY17: £272.7m). UK Sports Retail underlying EBITDA was up 6.5% to £277.9m while European Sports Retail underlying EBITDA was a profit of £14.0m from a prior year loss of £22.0m. Premium Lifestyle underlying EBITDA was up 43.2% to £6.3m from £4.4m, Rest of World Retail was a loss of £22.3m and Wholesale & Licensing underlying EBITDA increased to £30.2m from £26.4m.
The depreciation and amortisation charge has decreased by 5.7% to £139.4m (FY17: £147.9m) as the prior year included revisions to accounting estimates of useful economic lives of assets.
Group underlying profit before tax increased 34.5% to £152.9m (2017: £113.7m), due to the higher EBITDA, favourable realised FX and lower depreciation and amortisation charges. Underlying basic EPS for the year increased by 74.6% to 19.9p (FY17: 11.4p).
The Group generated free cash flow during the year of £326.2m, up from £257.4m in the prior year, and net debt increased by £215.0m to £397.1m at year end, mainly as a result of the acquisition of freehold properties, strategic investments and the continuation of the share buyback programme. Net debt currently stands at 1.1 times reported EBITDA (30 April 2017: 0.6 times).
REVIEW BY BUSINESS SEGMENT
The UK Retail division now includes the USC fascia sales, margin and costs. Premium Lifestyle includes the Flannels, Cruise and van mildert fascias. European Retail includes continental Europe and Republic of Ireland retail stores. Rest of World Retail includes US and Asia Retail results. These segments best show the operational activity of the Group, with the UK entrepreneurial hub serving both the UK and European markets as part of our Brexit preparations, and the US and Malaysian activity taking advantage of the Group's strong supply chain relationships. Therefore, all comparatives have been restated.
UK SPORTS RETAIL
The UK Sports Retail segment includes all of the Group's sports retail store operations in the UK and Northern Ireland, all of the Group's Sports Online business (excluding Bob's and Eastern Mountain Sports), the Group's Fitness Division and the Group's Shirebrook campus operations. It also includes the USC fascia, previously in Premium Lifestyle, and accordingly the prior year comparatives have been restated. UK Sports Retail is the main driver of the Group and accounts for 64.9% of Group revenue.
|
|
52 weeks ended |
53 weeks ended |
Pro forma 52 weeks |
|
|
29 April 2018 (£'m) |
30 April 2017 (£'m) restated |
April 2017 (£'m) restated |
|
|
|
|
|
|
UK Sports Retail Revenue |
2,181.5 |
2,225.0 |
2,188.4 |
|
Cost of Sales |
(1,290.7) |
(1,309.5) |
(1,289.7) |
|
Gross Profit |
890.8 |
915.5 |
898.7 |
|
Gross Margin % |
40.8 |
41.1 |
41.1 |
Revenue fell 2.0% to £2,181.5m, excluding the impact of the 53rd week in the prior year, revenue fell 0.3%.
UK Sports Retail gross margin for the second half of the year increased to 42.0% (FY17 H2: 41.6%) largely due to the prior year adverse impact of the US dollar exchange rate and increased inventory and other trade related provisions. The foreign currency effect on margin for FY19 is expected to improve based on USD forecast purchases for FY19 being hedged at 1.36.
Operating expenses decreased by 7.8%. Store wages were down on the prior year at £174.9m (FY17: £178.1m) and as a percentage of store sales decreased marginally to 10.4% (FY17: 10.5%). Overheads decreased as the prior year contained increased legal charges and provisioning for bad debts, onerous leases and dispute settlement. There were also increased efficiencies in the warehouse through a degree of automation and the change in the store portfolio.
Underlying EBITDA for UK Sports Retail was £277.9m (FY17: £261.0m), an increase of 6.5% for the year.
UK SPORTS STORE PORTFOLIO
|
|
29 April 2018 |
30 April 2017 |
|
England |
374 |
388 |
|
Scotland |
36 |
37 |
|
Wales |
29 |
27 |
|
Northern Ireland |
16 |
16 |
|
Isle of Man |
1 |
- |
|
USC |
38 |
45 |
|
Total |
494 |
513 |
|
Opened |
13 |
15 |
|
Closed |
(32) |
(20) |
|
Area (sq. ft.) |
approx. 5.4m |
approx. 5.2m |
EUROPEAN SPORTS RETAIL
European Sports Retail contains the Sports Retail stores in Continental Europe and the Republic of Ireland. Retail sales made in Malaysia have been moved to Rest of World Retail and the prior year has been restated.
|
|
52 weeks ended |
53 weeks ended |
Pro forma 52 weeks |
|
|
29 April 2018 (£'m) |
30 April 2017 (£'m) restated |
April 2017 (£'m) restated |
|
European Sports Retail Revenue |
637.2 |
637.9 |
630.9 |
|
Cost of Sales |
(377.1) |
(361.8) |
(358.1) |
|
Gross Profit |
260.1 |
276.1 |
272.8 |
|
Gross Profit % |
40.8 |
43.3 |
43.2 |
Revenue fell 0.1% to £637.2m. Excluding the impact of the 53rd week, European Sports Retail revenue growth was down 3.2% on a currency neutral basis, largely due to changes in the store portfolio.
European Sports Retail gross margin for the second half of the year decreased to 40.9% (FY17 H2: 46.6%) due to increases in stock provisions and shrinkage adjustments. The majority of forecast USD/EUR purchases are hedged in FY19 at USD/EUR 1.16.
Operating expenses decreased by 17.4%, to £246.6m (FY17: £298.5m). Store wages in the year were down to £100.4m (FY17: £113.4m) and as a percentage of sales reduced to 15.7% (FY17: 17.8%). In the current year, provisions were made for onerous leases in poorly performing stores of £9.0m (FY17: £39.7m).
All of the following stores are operated by companies wholly owned by the Group, except Estonia, Latvia and Lithuania where the Group owns 60.0%. During the year, the Group increased its shareholding in the Iceland entity to 100%.
EUROPEAN SPORTS STORE PORTFOLIO(1)
|
|
29 April 2018 |
30 April 2017 |
|
Belgium |
36 |
39 |
|
Republic of Ireland(2] |
32 |
32 |
|
Austria |
28 |
36 |
|
Estonia(1) |
27 |
26 |
|
Latvia(1) |
18 |
16 |
|
Portugal |
17 |
17 |
|
Lithuania(1) |
17 |
16 |
|
Poland |
16 |
16 |
|
Slovenia |
14 |
15 |
|
Czech Republic |
10 |
10 |
|
Hungary |
8 |
11 |
|
Holland |
6 |
6 |
|
Cyprus |
6 |
6 |
|
Slovakia |
6 |
6 |
|
France |
5 |
6 |
|
Germany |
2 |
2 |
|
Luxembourg |
2 |
2 |
|
Spain |
2 |
2 |
|
Iceland |
1 |
- |
|
Total |
253 |
264 |
|
Opened |
5 |
21 |
|
Closed |
(17) |
(17) |
|
Converted |
- |
4 |
|
Acquired |
1 |
- |
|
Area (sq. ft.) |
approx. 3.9m |
approx. 3.9m |
(1) Includes only stores with SPORTSDIRECT.com and SPORTLAND fascias
(2) Excluding Heatons fasica stores
REST OF WORLD RETAIL
Rest of World Retail includes sports stores in Malaysia trading under the SPORTSDIRECT.COM fascia which continued to expand with 5 stores opened. Sales are now £33.1m with gross margins of 45.7%.
|
|
52 weeks ended |
53 weeks ended |
Pro forma 52 weeks |
|
|
29 April 2018 (£'m) |
30 April 2017 (£'m) |
April 2017 (£'m) |
|
Revenue |
192.4 |
27.7 |
27.2 |
|
Cost of sales |
(134.6) |
(16.5) |
(16.2) |
|
Gross Profit |
57.8 |
11.2 |
11.0 |
|
Gross Margin % |
30.0 |
40.4 |
40.4 |
In May 2017 the Group acquired the Bobs Stores and Eastern Mountain Sports retail chains in the US. As anticipated by the Board, Bobs and Eastern Mountain Sports has made a trading loss in year one as Sports Direct Group systems, processes and management are implemented. We expect implementation challenges to continue in year two.
Rest of World sales were £192.4m for the year. Gross margin was 30.0% which includes acquisition revaluation impacts. Underlying EBITDA loss was £22.3m.
There are currently 49 stores in the US. In Malaysia the Group has 30 stores which are 51.0% owned by the Group.
|
|
29 April 2018 |
30 April 2017 |
|
Malaysia |
30 |
25 |
|
Bobs Stores |
30 |
- |
|
Eastern Mountain Sports |
19 |
- |
|
|
79 |
25 |
|
Area (sq. ft.) |
approx. 1.5m |
approx. 0.3m |
PREMIUM LIFESTYLE
During the year, results from USC fascias have been re-categorised to UK Retail since this better matches the trading characteristics of the elevated sports and general lifestyle brands. Therefore Premium Lifestyle now consists of Flannels, Cruise and van mildert fascia stores and corresponding web sales. The prior year numbers have been restated.
|
|
52 weeks ended |
53 weeks ended |
Pro forma 52 weeks |
|
|
29 April 2018 (£'m) |
30 April 2017 (£'m) restated |
April 2017 (£'m) restated |
|
Revenue |
162.1 |
113.6 |
111.8 |
|
Cost of sales |
(108.2) |
(73.6) |
(72.6) |
|
Gross Profit |
53.9 |
40.0 |
39.2 |
|
Gross Margin % |
33.3 |
35.2 |
35.1 |
Premium Lifestyle sales increased by 42.7% to £162.1m (FY17: £113.6m restated), mostly due to new Flannels stores and increased web sales. The Premium Lifestyle gross margin for the year decreased by 190 basis points to 33.3% (FY17: 35.2%), largely due to an increase in stock provisions and customer demand for the latest products.
Premium Lifestyle operating costs increased by 33.7% to £47.6m (FY17: £35.6m restated) due to the increase in Flannels fascia stores.
As a result, Underlying EBITDA grew 43.2% to £6.3m (FY17: £4.4m).
At the year end, the Premium Lifestyle division traded from stores under three main fascias.
|
|
29 April 2018 |
30 April 2017 |
|
Flannels |
21 |
13 |
|
Cruise |
10 |
10 |
|
van mildert |
3 |
5 |
|
Total |
34 |
28 |
|
Area (sq. ft.) |
approx. 0.35m |
approx. 0.25m |
WHOLESALE & LICENSING (formerly Brands)
The portfolio of Group brands includes a wide variety of world-famous sport and lifestyle brands. The Group's Sports Retail division sells products under these brands in its stores, and the Wholesale & Licensing division sells the brands through its wholesale and licensing activities. The Wholesale & Licensing division continues to sponsor a variety of prestigious events and retains a variety of globally-recognised, high-profile celebrities and sporting professionals as brand ambassadors.
In March 2017, the division disposed of the Dunlop brand and related wholesale and licensing activity.
|
|
52 weeks ended |
53 weeks ended |
Pro forma 52 weeks |
|
|
29 April 2018 (£'m) |
30 April 2017 (£'m) |
April 2017 (£'m) |
|
Wholesale |
154.3 |
201.4 |
- |
|
Licensing |
32.0 |
39.7 |
- |
|
Total Revenue |
186.3 |
241.1 |
- |
|
Cost of Sales |
(113.8) |
(153.3) |
- |
|
Gross Profit |
72.5 |
87.8 |
- |
|
Gross Margin % |
38.9 |
36.4 |
- |
The 53rd week has no material impact on wholesale or licensing sales.
Wholesale & Licensing total revenue decreased by 22.7% to £186.3m (FY17: £241.1m). Wholesale revenues were down 23.4% to £154.3m (FY17: £201.4m), mainly due to the disposal of the Dunlop related activity. Trading in the US market was in line with expectations and now represents approx. 54% of total wholesale sales.
Total gross margin increased by 250 basis points to 38.9% (FY17: 36.4%). Wholesale gross margins increased 230 basis points to 26.2% (FY17: 23.9%) mainly due to the impact of accruals made in the prior year relating to historic import costs.
Licensing revenues in the year were down 19.4% to £32.0m (FY17: £39.7m). During the year we signed 28 new licence agreements and renewed several existing licensees, covering multiple brands, product categories and geographies, with minimum contracted values of $30.0m over the life of the agreements. The decrease is due to the Dunlop disposal, which included the transfer of 96 licenses. On a like-for-like basis licensing has maintained its underlying level.
Operating costs decreased by 31.1% to £42.3m (FY17: £61.4m) due to the disposal of the Dunlop activity and non-recurring bad debt provisions in the prior year. Underlying EBITDA increased by 14.4% to £30.2m (FY17: £26.4m), mainly as a result of the non-recurring accruals made in relation to historic import costs in the prior year.
MULTI-CHANNEL ELEVATION STRATEGY
Our elevation strategy continues to work towards improving our offering to customers across all of our channels, including marketing, social media, product, digital and in-store.
This aims to enable the Company, along with our third party brand partners, to connect with customers via a consistent voice across multiple platforms, including online, mobile, and on the high street. This strategy enables our stores and our online operations to complement each other.
The websites for each of our core fascias in the UK, including SportsDirect.com, USC.co.uk and Flannels.com, have undergone significant enhancements in order to facilitate optimum appeal to consumers.
Our product offering across these core fascias - both in store and online - aims to create a compelling shopping experience in key categories that include, among others, Football, Women's, Kids, Running, Lifestyle, Fashion and Luxury.
We offer product across a range of price points, including good, better and best. This enables us to offer more premium product, which is net-new to the business. For example, prior to the commencement of our elevation strategy, the Company typically offered football boots from adidas and Nike at price-points ranging from £39.99 to £59.99. We have since broadened our offering to also include adidas and Nike football boots typically priced between £199.99 and £249.99 or above. This gives consumers a greater range of choice for those who wish to shop for premium products, whilst still retaining our original entry-level and standard product offerings.
FY18 has also seen considerable enhancements to our mobile apps for customers. This activity, combined with innovative marketing initiatives, recently resulted in the mobile app for SportsDirect.com trending at No1 in the Apple app store shopping category during the closing stages of the World Cup, ahead of tech companies such as Amazon and eBay.
PROPERTY REVIEW
The impact of our elevation strategy continues to see the rollout of a new generation of stores. During FY18, we opened a total of 15 of these new generation stores, of which 5 were regional flagship-style stores, consisting of multiple fascias on a single site. Post year end we have opened Thurrock, bringing the total number of flagships to 19.
The concept for our flagship stores is constantly evolving based on feedback from customers and our third party brand partners. The latest example of this is at Thurrock, where there is a strong emphasis on creating a compelling experience for shoppers, offering a diverse product range from football boots all the way to luxury fashion. The site includes a SportsDirect.com sports store, a USC fashion store, a Flannels luxury apparel store, and a state-of-the-art Everlast gym.
The store includes innovative use of technology. This includes high-pixel video merchandising displays and interactive elements for customers, such as a facility to record a 360-degree gif when trying on a new outfit. Experiential enhancements include recharge areas for men and women, an urban-inspired kids zone with selfie mirror, plus plans for an e-sports arena.
The estate strategy remains unchanged from the previous financial period, transitioning from smaller stores into larger new generation stores. Over the past three years a significant pipeline of new large format stores has been built, allowing a phased delivery over the coming years.
The high street has come under the spotlight over the course of the year due to the headwinds facing the sector. Due to the changing landscape we have made fewer store acquisitions than in previous financial years as repricing comes further into effect. This restructuring of the retail property sector has opened greater opportunities to enhance our store portfolio across the Group fascias. We will continue to make prudent investment into freehold property to advance the repositioning of the Group's transition into large format stores. We have received good support from local councils and communities for our commitment to physical retail.
A significant milestone for the Group was the opening of the London Office headquarters situated on Oxford Street at the beginning of FY19 having acquired the freehold in FY17.
Store Portfolio - Sports Stores - UK incl. Northern Ireland
The Group is currently operating 374 stores in England, 36 in Scotland, 29 in Wales and 16 in Northern Ireland, along with 38 other fascia including USC. This represents a net reduction of 19 stores over the period as a result of 13 openings and 32 closures. Despite the net reduction in stores the total sales area has increased to approx. 5.4m sq. ft.
Of the 32 closures, 8 were linked to relocations to new generation stores.
Of the new store openings, strategic locations to highlight include new generation stores at Sheffield Meadowhall, Hull, Middlesbrough, Darlington and Isle of Man. With the exception of Sheffield Meadowhall all of these are held on a Freehold or Long Leasehold basis. Each of these stores includes a lifestyle offering having incorporated a USC section.
The new Isle of Man store is a new market for Sports Direct with all trade being entirely incremental.
In Northern Ireland during FY18 the 10 Heatons/Sports Direct dual-fascia stores acquired at the time of the Heatons acquisition have been converted to the Sports Direct new generation store format. The remaining 6 standalone Sports Direct stores are part of a pipeline for future development and investment.
Sports Direct Forecast Openings UK FY19
The Group forecasts that there will be in the region of 10-20 new generation Sports stores over the coming financial year in the UK and ROI, the majority of which will include the new USC concept.
For our luxury fascia, Flannels we anticipate 6-12 new stores over the coming financial year.
Store Portfolio Europe - Republic of Ireland
The ongoing investment programme by the Group in Ireland has also seen the development of 2 new generation Sports Direct stores during FY18, one being the flagship in Dublin. The Group has also invested extensively in the Heatons ROI existing store network through the conversion of 16 out of the 29 dual-fascia Heatons / Sports Direct stores. The Group operates in 32 locations across ROI, 5 of which are standalone Sports Direct stores. An additional 12 stores are stand alone Heatons fascia.
Our investment in stores continues to be well-received by our colleagues, local customers and third party brands.
As previously advised and as can be seen to date we remain committed to roll out more of the new generation store format with a particular focus on flagship stores across Ireland.
The Group forecasts that there will be in the region of 3 - 5 new generation Sports stores over the coming financial year in ROI, the majority of which will include the new USC concept.
Store Portfolio Europe - Continental
The Group continues to operate sports stores in 18 countries in Europe.
· 221 Sports retail stores in Europe, a reduction of 12 from the previous financial year
· Total sq ft at approx. 3.2m of all sports fascias in Europe (including Eybl, Disport, Sportsworld etc)
· 5 openings in 4 different countries in FY18, 1 of which was a relocation
· 17 closures in 7 different countries of non performing stores and where impacted by relocation
· Iceland store included, which is now a fully owned member of the Group
Store Portfolio - Rest of World
· 30 stores in Malaysia, including 5 openings in the year
· 49 stores in the USA, with the acquisition of Bob's Stores / Eastern Mountain Sports completed
Store Portfolio - Premium Lifestyle
The Group continues to enhance and develop the Flannels concept and we are working in partnership with Milan based P+P studios on store development, including the upcoming flagship store on Oxford street due to open in 2019.
The Group now operates 21 Flannels stores, 10 Cruise stores and 3 van mildert stores - a total of 34 stores within the Luxury division.
Freehold / Long Leasehold Property Purchases
The property investment programme remained an important focus of the Group over FY18. A total of 10 acquisitions were completed in the UK amounting to a combined purchase price of £123.7m. This is a reduction from the previous financial year due to the strong pipeline of stores already created and changing market conditions shifting pricing. A further two properties were acquired in the EU, amounting to £16.3m.
Disposals of property assets that were considered non-core to the Group were also completed. Further property disposals will be made over the next financial year where appropriate.
The property acquisition programme will continue throughout the next financial year with an outlook to spend approx. £300m dependent on appropriate market conditions.
Mike Ashley
Chief Executive
19 July 2018
FINANCIAL REVIEW
The Financial Statements for the Group for the 52 weeks ended 29 April 2018 are presented in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU.
SUMMARY OF RESULTS
|
|
52 weeks ended |
53 weeks ended |
|
|
29 April 2018 (£'m) |
30 April 2017 (£'m) |
|
Revenue |
3,359.5 |
3,245.3 |
|
Underlying EBITDA |
306.1 |
272.7 |
|
Reported Profit Before Taxation |
77.5 |
281.6 |
|
Underlying Profit Before Tax |
152.9 |
113.7 |
|
|
|
|
|
|
Pence per share |
Pence per share |
|
Reported basic EPS |
4.6 |
39.4 |
|
Underlying basic EPS |
19.9 |
11.4 |
The Directors believe that underlying EBITDA, underlying profit before tax and underlying basic EPS 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, amortisation and impairment. It includes the Group's share of profit from associated undertakings and joint ventures. Underlying EBITDA is calculated as EBITDA before the impact of foreign exchange, any exceptional or other non-trading items and costs relating to the Share Schemes.
EBITDA AND PROFIT BEFORE TAX
|
|
52 weeks ended 29 April 2018 |
53 weeks ended 30 April 2017 |
||
|
|
EBITDA (£'m) |
PBT (£'m) |
EBITDA (£'m) |
PBT (£'m) |
|
Operating profit |
217.0 |
- |
160.1 |
- |
|
Depreciation, amortisation and impairment |
139.4 |
- |
147.9 |
- |
|
Share of (loss) / profit of associated undertakings (excl. FV adjustments) |
(8.7) |
- |
0.9 |
- |
|
Reported |
347.7 |
77.5 |
308.9 |
281.6 |
|
Share scheme |
(6.0) |
- |
2.8 |
- |
|
Profit on disposal of subsidiary |
- |
- |
(79.9) |
(79.9) |
|
Exceptional items |
4.8 |
4.8 |
17.3 |
17.3 |
|
Profit on sale of properties |
(16.3) |
(16.3) |
- |
- |
|
Net investment costs / (income) |
- |
93.3 |
- |
(110.7) |
|
Realised FX (gain) / loss |
(24.1) |
(24.1) |
23.6 |
23.7 |
|
Fair value adjustment on foreign exchange contracts |
- |
17.7 |
- |
(18.3) |
|
Underlying |
306.1 |
152.9 |
272.7 |
113.7 |
GROUP OPERATING COSTS
|
|
52 weeks ended 29 April 2018 (£'m) |
53 weeks ended 30 April 2017 (£'m) |
|
Group Operating costs |
1,020.3 |
1,058.7 |
|
Depreciation, amortisation and impairment |
139.4 |
147.9 |
|
Bonus share scheme |
(6.0) |
2.8 |
|
Realised FX (gain) / loss |
(24.1) |
23.7 |
|
Operating income |
26.5 |
22.5 |
|
Selling, distribution & administration costs |
1,156.1 |
1,255.6 |
Group operating costs for the purposes of management reporting:
(i) Excludes depreciation, amortisation and impairments, share scheme charges and realised FX losses; and
(ii) Includes other operating income.
Foreign exchange and treasury
The Group reports its results in GBP, but trades internationally and is therefore exposed to currency fluctuations on currency cash flows in various ways. These include purchasing inventory from overseas suppliers, making sales in currencies other than GBP and holding overseas assets in other currencies. The Board mitigate the cash flow risks associated with these fluctuations with the careful use of currency hedging using forwards and options.
The Group uses forward contracts that qualify for hedge accounting in two main ways - to hedge highly probable Euro sales income and US dollar stock purchases. This introduces a level of certainty into the Group's planning and forecasting process. During the period the Group entered into vanilla foreign exchange US dollar forwards totalling $1,440m. Management have reviewed detailed forecasts and the growth assumptions within them, and are satisfied that the forecasts meet the criteria as being highly probable forecast transactions.
As at 29 April 2018, the Group had the following forward contracts that qualified for Hedge Accounting under IAS 39, meaning that fluctuations in the value of the contracts before maturity are recognised in the Hedging Reserve through Other Comprehensive Income. After maturity, the sales and purchases are then valued at the Hedge rate.
|
Currency |
Hedging against |
Currency value |
Timing |
Rates |
|
|
|
|
|
|
|
EUR / GBP |
Euro sales |
EUR 1,320m |
FY19 - FY21 |
1.069 - 1.190 |
|
AUD / GBP |
Australian dollar sales |
AUD 16m |
FY19 - FY20 |
1.690 - 1.740 |
|
USD / GBP |
USD stock purchases |
USD 1,440m |
FY19 - FY20 |
1.360 - 1.430 |
|
USD / EUR |
USD stock purchases |
USD 270m |
FY19 - FY21 |
1.160 - 1.320 |
The Group also uses currency options for more flexibility against cash flows that are less than highly probable and therefore do not qualify for hedge accounting under IAS 39 Financial Instruments. The fair valuations before maturity are recognised in the Income Statement.
The Group has the following currency options and unhedged forwards:
|
Currency |
Expected use |
Currency value |
Timing |
Rates |
|
|
|
|
|
|
|
EUR / GBP |
Euro sales |
EUR 1,620m |
FY19 - FY21 |
1.069 - 1.190 |
|
AUD / GBP |
Australian dollar sales |
AUD 16m |
FY19 - FY20 |
1.690 - 1.740 |
|
USD / EUR |
USD stock purchases |
USD 150m |
FY19 - FY21 |
1.160 - 1.210 |
The Group is proactive in managing its currency requirements, the SD Treasury team work closely with senior management to understand the Group's plans and forecasts and appropriately discuss and understand financial products with reputable financial institutions including those within the Group Revolving Credit Facility. This information is then used to implement suitable currency products to align with the Groups strategies and forecasts.
Regular reviews are performed by the SD Treasury team alongside senior management to ensure the continued appropriateness of the currency hedging in place, and where suitable either implementing additional strategies and/or restructuring existing approaches in conjunction with our financial institution partners.
Given the potential impact of commodity prices on raw material costs, the Group may hedge certain input costs, including cotton, crude oil and electricity.
TAXATION
The effective tax rate on profit before tax in FY18 was 64.4% (FY17: 17.7%). This is due the impact of current year investment losses not tax deductible and prior year adjustments. The prior year rate reflects the impact of items that qualify for substantial shareholder relief. The underlying effective tax rate remains at approx. 31%, this reflects the impact of the increase in freehold property and related disallowable depreciation.
EARNINGS
|
|
52 weeks ended |
53 weeks ended |
|
|
|
29 April 2018 (pence per share) |
30 April 2017 (pence per share) |
Change (%) |
|
Reported EPS (Basic) |
4.6 |
39.4 |
(88.3) |
|
Underlying EPS (Basic) |
19.9 |
11.4 |
74.6 |
|
Weighted average number of shares (actual) |
527,793,623 |
583,501,473 |
|
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. Shares held in Treasury and the Employee Benefit Trust are excluded from this figure.
The underlying basic 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:
|
|
52 weeks ended |
53 weeks ended |
|
|
29 April 2018 (£'m) |
30 April 2017 (£'m) |
|
Profit after tax |
24.5 |
229.9 |
|
Post tax effect of adjustment items: |
|
|
|
Loss / (profit) on disposal of listed investments |
3.6 |
(141.5) |
|
Fair value adjustment to forward foreign exchange contracts |
13.8 |
(14.3) |
|
Fair value adjustment to derivative financial instruments |
89.6 |
24.0 |
|
Realised (gain)/loss on forward foreign exchange contracts |
(18.7) |
18.5 |
|
Profit on disposal of freehold properties |
(12.9) |
- |
|
Impairment and accelerated depreciation and amortisation |
5.0 |
17.3 |
|
Write off of deferred tax assets |
- |
12.5 |
|
Profit on disposal of subsidiary |
- |
(79.9) |
|
Underlying profit after tax |
104.9 |
66.5 |
DIVIDENDS
The Board has decided not to pay a dividend in relation to FY18. The Board remains of the opinion that it is in the best interests of the Group and its shareholders to preserve financial flexibility, facilitating future investments and other growth opportunities. The payment of dividends remains under review.
CAPITAL EXPENDITURE
During the period, capital expenditure amounted to £213.4m (FY17: £419.5m), which includes £140.0m on properties (FY17: £317.0m).
STRATEGIC INVESTMENTS
Strategic investments are an integral part of the Group's overall strategy. Against a backdrop of a challenged retail market, we believe innovative strategic partnerships will help to differentiate our offer and enhance the consumer experience. We look for ways to extend our reach into new retail channels and geographies, as well as selectively grow our market share. We maintain an active dialogue with the management teams of each of our investments, continually looking to explore new ways of working together. Given the breadth of our business, the strategic benefits can be varied and extensive.
During FY18 we made good progress on several opportunities, highlighting the strength of our strategic investments approach. In February 2018, we announced an exciting collaboration agreement with GAME Digital plc comprising a £20 million working capital facility and a £35 million capital expenditure facility, which GAME may utilise to fund the Venues envisaged under the collaboration agreement, including the costs for new Venues and ongoing development of the BELONG website and its related tournament management system. The Group owns a 25.4% stake in GAME Digital. The agreement covers the rollout of BELONG and GAME Retail stores, including plans to enter into concession agreements with Sports Direct. BELONG is GAME Digital's competitive gaming and esports experience centred around physical 'arenas', bringing both casual and competitive gaming to communities nationwide, in city and town centres and in major shopping centres. As part of the agreement, the Group acquired a 50% interest in the rights of BELONG intellectual property for cash consideration of £3.2m, and a 50% profit share of future profits of BELONG.
In March 2018, we began exploring possibilities for commercial supply arrangements with Express Gifts, a subsidiary of Findel plc. The Group holds 29.9% of Findel plc. Certain licenced menswear ranges have been included within the Express Gifts' Studio.co.uk Spring/Summer season and we will evaluate their success in the coming months. We are also considering access to other Sports Direct owned brands in future seasons. As part of the discussions, the Board of Findel agreed that Liam Rowley, Head of Strategic Investments at Sports Direct, would attend Findel Board meetings as an observer. This role does not enable Liam Rowley to make or influence strategic decisions and he is excluded from certain sensitive and confidential matters as well as those that may cause a conflict of interest.
During the period, the Group increased its total direct and indirect holding in Debenhams plc to 29.7% of issued share capital. We continue to operate several concessions within Debenhams stores and explore mutually beneficial opportunities across all channels. During the period the Group recognised a loss of £98.1m in the Income Statement in relation to the reduction in value of Debenhams plc.
The Group also holds a direct interest in Goals Soccer Centres plc representing 18.9% of issue share capital; French Connection Group plc, representing 27% of issued share capital; MySale Group plc, representing 4.8% of issued share capital; and, House of Fraser Limited representing 11.1% of the issued share capital. The Group also holds an economic interest at the year-end in Iconix Brand Group Inc. of 8.9%. In March 2018, JD Sports plc launched a takeover offer for The Finish Line Inc., of which the Group held a 19.3% economic interest at the year end. Subsequent to the year end, JD Sports plc completed their takeover of The Finish Line Inc. and Sports Direct disposed of their remaining economic interest.
The Group continues to hold various other interests, none of which represent more than 5.0% of the voting power of the investee.
The fair value of the contracts for difference and options are recognised in Derivative Financial Assets or Liabilities on the Group Balance Sheet, with the movement in fair value recorded in the Income Statement.
ACQUISITIONS
During the year, the Group completed the acquisition of the US retail chains operating under Bob's Stores and Eastern Mountain Sports. We also acquired the remaining shareholdings of Lovells Sports (Holdings) Ltd and Brasher Leisure Ltd (trading as Sweatshop), both of which were previously Associates of the Group.
RELATED PARTIES
MM Prop Consultancy Ltd, a company owned and controlled by Michael Murray (domestic partner of Anna Ashley, daughter of Mike Ashley), continues to provide property consultancy services to the Group. MM Prop Consultancy Ltd is primarily tasked with finding and negotiating the acquisition of new sites in the UK, Europe and rest of the world for both our larger format stores and our combined retail and gym units but it also provides advice to the Company's in-house property team in relation to existing sites in the UK, Europe and rest of the world.
MM Prop Consultancy Ltd fees are linked directly to value creation which is determined by the Company's non-executive directors who independently review performance bi-annually with a view to determining, at their absolute and sole discretion, the quantum of the percentage payable. Under the terms of the agreement with MM Prop Consultancy Ltd no fees are payable until the earliest of 30 September 2018 so that the Company's independent non-executive directors have a sufficient amount of time to assess performance.
During the period, independent valuations were collated as an initial stage in confirming the value created (through disposals and properties still held) by MM Prop Consultancy Limited. The Group's non-executive directors agreed 25% of the final agreed value created would be paid to MM Prop Consultancy Ltd based on these independent valuations of selected sites subject to the agreement. The value created had not been determined and approved by the non-executive directors as at period end or at the date of signing this Annual Report and accounts.
The freehold acquisition program is a cornerstone of the elevation strategy and has proven to be extraordinarily successful. With a strong ongoing pipeline, and with original expectations exceeded, Michael Murray has waived a portion of his fee and settled on 20% of the final agreed value created.
Based on IAS 37 Provisions, Contingent Liabilities and Contingent Assets we have provided for the most reliable estimate of the amount expected to be paid to MM Prop Consultancy Ltd being £5.0m to the end of FY18.
Michael Murray is now considered to be a related party in the context of IAS 24 Related Party Disclosures. This is due to the increased scope of his role within the Group in the second half of the financial period, as he became Head of Elevation in 2018, defining him as key management personnel.
COMMERCIAL ARRANGEMENTS
The Group has commercial arrangements in place with IBSL Consultancy Limited. Management has considered whether a related party relationship exists and concluded that Justin Barnes, a director of IBSL, and/or IBSL Consultancy Limited are acting in an advisory capacity only and are not performing key management functions that would indicate a related party relationship. Management decisions are made solely by the management of the Group.
Justin Barnes is a director of a number of companies in the MASH Group. No payments made to Justin Barnes or IBSL in relation to services provided to subsidiaries of MASH relate to services provided by IBSL or Justin Barnes to the Group.
During FY17, the Company had arrangements in place with Barlin Delivery Limited, a company owned by John Ashley (the brother of Mike Ashley). This arrangement ceased as at 30 April 2017. There were no commercial transactions between the Group and Barlin in the year ended April 2018.
In December 2017, there was a vote by independent shareholders against a retrospective payment of £11m to John Ashley for executive bonuses forgone.
CASH FLOW AND NET DEBT
Net debt increased by £215.0m from £182.1m at 30 April 2017 to £397.1m at 29 April 2018. Based largely on the increase in net debt, interest on bank loans and overdrafts increased to £9.4m (FY17: £2.5m).
The analysis of debt at 29 April 2018 was as follows:
|
|
29 April 2018 (£'m) |
30 April 2017 (£'m) |
|
Cash and cash equivalents |
360.0 |
204.7 |
|
Borrowings |
(757.1) |
(386.8) |
|
Net debt |
(397.1) |
(182.1) |
The Revolving Credit Facility of £913.5m is available until November 2021 (with a one year extension option) and is not secured against any of the Group's assets.
The Group continues to operate well within its banking covenants and the Board remains comfortable with the Group's available headroom.
CASH FLOW
Total movement is as follows:
|
|
29 April 2018 (£'m) |
30 April 2017 (£'m) |
|
Underlying EBITDA |
306.1 |
272.7 |
|
Realised profit/(loss) on forward foreign exchange contracts |
24.0 |
(23.7) |
|
Taxes paid |
(45.2) |
(75.3) |
|
Movement in inventory |
(119.6) |
15.0 |
|
Working capital and other (1) |
160.9 |
68.7 |
|
Free cash flow |
326.2 |
257.4 |
|
Invested in:- |
|
|
|
Purchase of own shares |
(155.4) |
(109.8) |
|
Acquisitions (including debt) |
(3.1) |
(22.6) |
|
Deposit for acquisition (Bobs) (1) |
- |
(81.2) |
|
Proceeds on disposal of subsidiary |
- |
109.5 |
|
Purchase of listed investments |
(287.1) |
(24.7) |
|
Net proceeds from investments |
20.9 |
190.2 |
|
Net capital expenditure |
(144.4) |
(417.1) |
|
Exchange movement on cash balances |
4.1 |
17.7 |
|
Investment income |
34.4 |
0.5 |
|
Finance costs and other financing activities |
(10.6) |
(2.3) |
|
Increase in net debt |
(215.0) |
(82.4) |
(1) the funds used for the Bob's and Eastern Mountain Sports acquisition were transferred to escrow during FY17 and were therefore recognised in Receivables at the FY17 year end. The acquisition completed on 18 May 2017.
Jon Kempster
Chief Financial Officer
18 July 2018
CONSOLIDATED INCOME STATEMENT
For the 52 weeks ended 29 April 2018
|
|
|
52 weeks ended |
53 weeks ended |
|
|
Note |
29 April 2018 (£m) |
30 April 2017 (£m) |
|
Revenue |
2 |
3,359.5 |
3,245.3 |
|
Cost of sales |
|
(2,024.4) |
(1,914.7) |
|
Gross profit |
|
1,335.1 |
1,330.6 |
|
Selling, distribution and administrative expenses |
|
(1,156.1) |
(1,255.6) |
|
Other operating income |
|
26.5 |
22.5 |
|
Exceptional items |
3 |
(4.8) |
(17.3) |
|
Profit on sale of properties |
|
16.3 |
- |
|
Profit on disposal of subsidiary |
|
- |
79.9 |
|
Operating profit |
2 |
217.0 |
160.1 |
|
Investment income |
4 |
25.7 |
162.5 |
|
Investment costs |
5 |
(119.0) |
(51.2) |
|
Finance income |
|
3.4 |
18.8 |
|
Finance costs |
|
(40.9) |
(9.4) |
|
Share of profit of associated undertakings |
|
(8.7) |
0.8 |
|
Profit before taxation |
|
77.5 |
281.6 |
|
Taxation |
6 |
(49.9) |
(49.9) |
|
Profit for the period |
2 |
27.6 |
231.7 |
ATTRIBUTABLE TO:
|
Equity holders of the Group |
|
24.5 |
229.9 |
|
Non-controlling interests |
|
3.1 |
1.8 |
|
Profit for the period |
2 |
27.6 |
231.7 |
EARNINGS PER SHARE ATTRIBUTABLE TO THE EQUITY SHAREHOLDERS
|
|
|
Pence per share |
Pence per share |
|
Basic earnings per share |
7 |
4.6 |
39.4 |
|
Diluted earnings per share |
7 |
4.6 |
38.3 |
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 29 April 2018
|
|
|
52 Weeks Ended |
53 weeks ended |
|
|
Note |
29 April 2018 (£m) |
30 April 2017 (£m) |
|
Profit for the period |
2 |
27.6 |
231.7 |
|
OTHER COMPREHENSIVE INCOME |
|||
|
ITEMS THAT WILL NOT BE RECLASSIFIED SUBSEQUENTLY TO PROFIT OR LOSS |
|||
|
Actuarial losses on defined benefit pension schemes |
|
-
|
(8.8)
|
|
Taxation on items recognised in other comprehensive income |
|
- |
1.7 |
|
ITEMS THAT WILL BE RECLASSIFIED SUBSEQUENTLY TO PROFIT OR LOSS |
|||
|
Exchange differences on translation of foreign operations |
|
(0.9) |
50.3 |
|
Exchange differences on hedged contracts - recognised in the period |
|
(49.9) |
(31.3) |
|
Exchange differences on hedged contracts - reclassified and reported in sales |
|
15.5 |
8.7 |
|
Exchange differences on hedged contracts - reclassified and reported in cost of sales |
|
0.6 |
(18.2) |
|
Exchange differences on hedged contracts - taxation taken to reserves |
|
6.9 |
7.7 |
|
Fair value adjustment in respect of available-for-sale financial assets - recognised in the period |
|
(26.1) |
23.7 |
|
Fair value adjustment in respect of available-for-sale financial assets - reclassified in the period |
|
47.9 |
(129.3) |
|
Fair value adjustment in respect of available-for-sale financial assets - taxation |
|
- |
(1.8) |
|
OTHER COMPREHENSIVE COST FOR THE PERIOD, NET OF TAX |
|
(6.0) |
(97.3) |
|
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD |
|
21.6 |
134.4 |
|
|
|
|
|
|
ATTRIBUTABLE TO:
|
|
|
|
|
Equity holders of the Group |
|
18.5 |
132.6 |
|
Non-controlling interest |
|
3.1 |
1.8 |
|
|
|
21.6 |
134.4 |
The accompanying accounting policies and notes form part of these Financial Statements.
CONSOLIDATED BALANCE SHEET
At 29 April 2018
|
|
Note |
29 April 2018 (£m) |
30 April 2017 Restated (£m) |
|
ASSETS - NON-CURRENT |
|
|
|
|
Property, plant and equipment |
|
878.4 |
842.0 |
|
Investment properties |
|
23.7 |
23.1 |
|
Intangible assets |
|
181.3 |
185.7 |
|
Investments in associated undertakings |
|
6.2 |
26.4 |
|
Available-for-sale financial assets |
|
249.8 |
63.9 |
|
Deferred tax assets |
|
24.9 |
33.7 |
|
|
|
1,364.3 |
1,174.8 |
|
ASSETS - CURRENT |
|
|
|
|
Inventories |
|
873.4 |
674.2 |
|
Trade and other receivables |
|
234.8 |
352.1 |
|
Derivative financial assets |
|
17.1 |
43.0 |
|
Cash and cash equivalents |
|
360.0 |
204.7 |
|
|
|
1,485.3 |
1,274.0 |
|
TOTAL ASSETS |
|
2,849.6 |
2,448.8 |
|
|
|
|
|
|
EQUITY AND LIABILITIES |
|
|
|
|
Share capital |
|
64.1 |
64.1 |
|
Share premium |
|
874.3 |
874.3 |
|
Treasury shares reserve |
|
(290.0) |
(329.5) |
|
Permanent contribution to capital |
|
0.1 |
0.1 |
|
Capital redemption reserve |
|
8.0 |
8.0 |
|
Foreign currency translation reserve |
|
76.2 |
77.1 |
|
Reverse combination reserve |
|
(987.3) |
(987.3) |
|
Own share reserve |
|
(69.0) |
(33.7) |
|
Hedging reserve |
|
(51.9) |
(25.1) |
|
Retained earnings |
|
1,588.0 |
1,591.0 |
|
Issued capital and reserves attributable to owners of the parent |
|
1,212.5 |
1,239.0 |
|
Non-controlling interests |
|
1.7 |
(0.7) |
|
TOTAL EQUITY |
|
1,214.2 |
1,238.3 |
|
|
|
|
|
|
LIABILITIES - NON-CURRENT |
|
|
|
|
Borrowings |
8 |
757.1 |
317.3 |
|
Retirement benefit obligations |
|
1.9 |
3.4 |
|
Deferred tax liabilities |
|
10.4 |
18.7 |
|
Provisions |
|
156.9 |
130.2 |
|
|
|
926.3 |
469.6 |
|
|
|
|
|
|
LIABILITIES - CURRENT |
|
|
|
|
Derivative financial liabilities |
|
93.1 |
75.2 |
|
Trade and other payables |
|
606.5 |
584.9 |
|
Borrowings |
|
- |
69.5 |
|
Current tax liabilities |
|
9.5 |
11.3 |
|
|
|
709.1 |
740.9 |
|
TOTAL LIABILITIES |
|
1,635.4 |
1,210.5 |
|
TOTAL EQUITY AND LIABILITIES |
|
2,849.6 |
2,448.8 |
The accompanying accounting policies and notes form part of these Financial Statements. The Financial Statements were approved by the Board on 18 July 2018 and were signed on its behalf by:
Mike Ashley
Chief Executive
Company number: 06035106
CONSOLIDATED CASH FLOW STATEMENT
For the 52 weeks ended 29 April 2018
|
|
|
52 weeks ended |
53 weeks ended |
|
|
Note |
29 April 2018 (£m) |
30 April 2017 (£m) |
|
CASH INFLOW FROM OPERATING ACTIVITIES |
9 |
371.3 |
332.7 |
|
Income taxes paid |
|
(45.1) |
(75.3) |
|
Net cash inflow from operating activities |
|
326.2 |
257.4 |
CASH FLOW FROM INVESTING ACTIVITIES
|
Proceeds on disposal of property, plant and equipment |
|
69.0 |
2.4 |
|
Proceeds on disposal of listed investments |
|
20.9 |
190.2 |
|
Proceeds on disposal of subsidiary |
|
- |
109.5 |
|
Purchase of associate, net of cash acquired |
|
- |
(9.0) |
|
Cash acquired through / (purchase) of subsidiaries |
|
8.2 |
(8.1) |
|
Purchase of property, plant and equipment |
|
(204.2) |
(413.5) |
|
Purchase of investment properties |
|
(5.0) |
(6.0) |
|
Purchase of intangible assets |
|
(4.1) |
- |
|
Purchase of listed investments |
|
(287.1) |
(24.7) |
|
Prepayment of business combination consideration held in escrow |
|
- |
(81.2) |
|
Investment income received |
|
34.2 |
0.5 |
|
Finance income received |
|
3.4 |
0.5 |
|
Net cash outflow from investing activities |
|
(364.7) |
(239.4) |
CASH FLOW FROM FINANCING ACTIVITIES
|
Exercise of option over non-controlling interests |
|
(11.3) |
(5.5) |
|
Finance costs paid |
|
(14.0) |
(2.8) |
|
Borrowings drawn down |
|
782.9 |
328.0 |
|
Borrowings repaid |
|
(343.0) |
(344.1) |
|
Purchase of own shares |
|
(155.4) |
(109.8) |
|
Net cash outflow from financing activities |
|
259.2 |
(134.2) |
|
|
|
|
|
|
Net increase / (decrease) in cash and cash equivalents including overdrafts |
|
220.7 |
(116.2) |
|
Exchange movement on cash balances |
|
4.1 |
17.7 |
|
Cash and cash equivalents including overdrafts at beginning of period |
|
135.2 |
233.7 |
|
Cash and cash equivalents including overdrafts at the period end |
|
360.0 |
135.2 |
The accompanying accounting policies and notes form part of these Financial Statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the 52 weeks ended 29 April 2018
|
|
Treasury Shares (£m) |
Foreign currency translation (£m) |
Own share Reserve (£m) |
Retained Earnings (£m) |
Other Reserves (£m) |
Total attributable to owners of parent (£m) |
Non-controlling Interests (£m)
|
Total (£m) |
|
At 24 April 2016 |
(56.2) |
26.8 |
(33.7) |
1,482.3 |
(32.8) |
1,386.4 |
(1.7) |
1,384.7 |
|
Credit to equity for share-based payment |
- |
- |
- |
1.9 |
- |
1.9 |
- |
1.9 |
|
Deferred tax on share schemes |
- |
- |
- |
(1.3) |
- |
(1.3) |
- |
(1.3) |
|
Purchase of own shares |
(109.8) |
- |
- |
- |
- |
(109.8) |
- |
(109.8) |
|
Fair valuation of share buyback |
(163.5) |
- |
- |
- |
- |
(163.5) |
- |
(163.5) |
|
Non-controlling interests - acquisitions |
- |
- |
- |
(7.3) |
- |
(7.3) |
(0.8) |
(8.1) |
|
Transactions with owners |
(273.3) |
- |
- |
(6.7) |
- |
(280.0) |
(0.8) |
(280.8) |
|
Profit for the financial period |
- |
- |
- |
229.9 |
- |
229.9 |
1.8 |
231.7 |
|
OTHER COMPREHENSIVE INCOME |
||||||||
|
Cash flow hedges - recognised in the period |
- |
- |
- |
- |
(31.3) |
(31.3) |
- |
(31.3) |
|
Cash flow hedges - reclassified and reported in sales |
- |
- |
- |
- |
8.7 |
8.7 |
- |
8.7 |
|
Cash flow hedges - reclassified and reported in cost of sales |
- |
- |
- |
- |
(18.2) |
(18.2) |
- |
(18.2) |
|
Cash flow hedges - taxation |
- |
- |
- |
- |
7.7 |
7.7 |
- |
7.7 |
|
Actuarial losses on defined benefit pension schemes |
- |
- |
- |
(8.8) |
- |
(8.8) |
- |
(8.8) |
|
Fair value adjustment in respect of available-for-sale financial assets - recognised |
- |
- |
- |
23.7 |
- |
23.7 |
- |
23.7 |
|
Fair value adjustment in respect of available-for-sale financial assets - reclassified |
- |
- |
- |
(129.3) |
- |
(129.3) |
- |
(129.3) |
|
Taxation |
- |
- |
- |
(0.1) |
- |
(0.1) |
- |
(0.1) |
|
Translation differences - Group |
- |
50.3 |
- |
- |
- |
50.3 |
- |
50.3 |
|
Total comprehensive income for the period |
- |
50.3 |
- |
115.4 |
(33.1) |
132.6 |
1.8 |
134.4 |
|
|
|
|
|
|
|
|
|
|
|
At 30 April 2017 |
(329.5) |
77.1 |
(33.7) |
1,591.0 |
(65.9) |
1,239.0 |
(0.7) |
1,238.3 |
|
Credit to equity for share-based payment |
- |
- |
57.3 |
(57.3) |
- |
- |
- |
- |
|
Current tax on share scheme vesting |
- |
- |
- |
4.8 |
- |
4.8 |
- |
4.8 |
|
Deferred tax on share schemes |
- |
- |
- |
(7.9) |
- |
(7.9) |
- |
(7.9) |
|
Transfer of shares from Treasury to Own Share reserve |
29.9 |
- |
(51.0) |
21.1 |
- |
- |
- |
- |
|
Purchase of own shares |
(113.9) |
- |
(41.6) |
- |
- |
(155.5) |
- |
(155.5) |
|
Reversal of FY17 fair valuation of share buyback contractual obligation |
163.5 |
- |
- |
- |
- |
163.5 |
- |
163.5 |
|
Fair valuation of share buyback contractual obligation |
(40.0) |
- |
- |
- |
- |
(40.0) |
- |
(40.0) |
|
Non-controlling interests - acquisitions |
- |
- |
- |
(10.0) |
- |
(10.0) |
(0.7) |
(10.7) |
|
Transactions with owners |
39.5 |
- |
(35.3) |
(49.3) |
- |
(45.1) |
(0.7) |
(45.8) |
|
Profit for the financial period |
- |
- |
- |
24.5 |
- |
24.5 |
3.1 |
27.6 |
|
OTHER COMPREHENSIVE INCOME |
||||||||
|
Cash flow hedges - recognised in the period |
- |
- |
- |
- |
(49.8) |
(49.8) |
- |
(49.8) |
|
Cash flow hedges - reclassified and reported in sales |
- |
- |
- |
- |
15.5 |
15.5 |
- |
15.5 |
|
Cash flow hedges - reclassified and reported in cost of sales |
- |
- |
- |
- |
0.6 |
0.6 |
- |
0.6 |
|
Cash flow hedges - taxation |
- |
- |
- |
- |
6.9 |
6.9 |
- |
6.9 |
|
Fair value adjustment in respect of available-for-sale financial assets - recognised |
- |
- |
- |
(26.1) |
- |
(26.1) |
- |
(26.1) |
|
Fair value adjustment in respect of available-for-sale financial assets - reclassified to P&L |
- |
- |
- |
47.9 |
- |
47.9 |
- |
47.9 |
|
Taxation |
- |
- |
- |
- |
- |
- |
- |
- |
|
Translation differences - Group |
- |
(0.9) |
- |
- |
- |
(0.9) |
- |
(0.9) |
|
Total comprehensive income for the period |
- |
(0.9) |
- |
46.3 |
(26.8) |
18.6 |
3.1 |
21.7 |
|
|
|
|
|
|
|
|
|
|
|
At 29 April 2018 |
(290.0) |
76.2 |
(69.0) |
1,588.0 |
(92.7) |
1,212.5 |
1.7 |
1,214.2 |
1. ACCOUNTING POLICIES
The financial information, which comprises the consolidated income statement, consolidated statement of comprehensive income, consolidated balance sheet, consolidated cash flow statement, consolidated statement of changes in equity 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 each of the period ended 29 April 2018 and 30 April 2017 which do not contain any statement under s498 of the Companies Act 2006 and are unqualified. The statutory accounts for the year ended 30 April 2017 have been delivered to the Registrar of Companies and the statutory accounts for the year ended 29 April 2018 will be filed with the registrar in due course.
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 Interpretations Committee ("IFRSiC") 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 period ended 30 April 2017 financial statements have been restated following a review by management into the recognition of an element of Loaded-on-Board inventory. In 2017 an element of Loaded-on-Board inventory was incorrectly classified within other debtors instead of inventory. A prior period adjustment has been made to correct the prior period balance sheet resulting in an increase to inventory of £45.0m and a decrease to other debtors of £45.0m. There has been no impact to basic or diluted earnings per share, profit for the period, total comprehensive income or net assets.
The funds used for the Bobs and Eastern Mountain Sports acquisition were transferred to escrow during FY17 were reported in Receivables in the prior year. The acquisition completed on 18 May 2017 and the prior year has therefore been restated to recognise the transfer on the face of the Cash Flow, therefore Receivables has been restated.
2. SEGMENTAL ANALYSIS
Management have determined to present its segmental disclosures consistently with the presentation in the 2017 Annual Report with the exception that the USC fascia has been included within UK Sports Retail and our Asia based retail activities have been moved from European Retail (formerly International Retail) to Rest of World Retail. This is due to management's assessment of the operating characteristics of USC and the Asia based retail activities. Management consider operationally that the UK and EU Sports Retail divisions are run as one business unit in terms of allocating resources and assessing performance. However, under IFRS 8 we have not at this reporting date met the required criteria with enough certainty to move back to an aggregated reporting segment. We will continually keep this under review at subsequent reporting dates. We continue to monitor the impacts of Brexit, and the continued uncertainties this has brought relating to the political and economic environments, and market and currency volatility in the countries we operate in. European countries have been identified as operating segments and have been aggregated into a single operating segment as permitted under IFRS 8. The decision to aggregate these segments was based on the fact that they each have similar economic characteristics, similar long term financial performance expectations, and are similar in each of the following respects:
• The nature of the products
• The type or class of customer for the products; and
• The methods used to distribute the products
In accordance with paragraph 12 of IFRS 8 the Group's operating segments have been aggregated into the following reportable segments:
1. UK Sports Retail - includes the results of the UK retail network of sports stores and USC stores and concessions, along with related websites;
2. European Retail (formerly International Retail) - includes the results of the European retail network of sports stores;
3. Rest of World Retail - includes the results of the US and Asia based retail activities;
4. Premium Lifestyle - includes the results of the premium and lifestyle retail businesses such as Flannels, Cruise and van mildert;
and
5. Wholesale & Licensing (formerly Brands) - includes the results of the Group's portfolio of internationally recognised brands such as Everlast, Lonsdale and Slazenger.
The comparative information for the period ended 30 April 2017 has been restated to include the results of USC in UK Retail and Malaysia in Rest of World Retail. Accordingly, the prior period has been restated to adjust £88.6m of sales, £36.1m of margin and £40.8m of overheads to UK Retail, and £27.7m of sales, £11.2m of margin and £8.3m of costs to Rest of World Retail.
Segmental information for the 52 weeks ended 29 April 2018:
|
|
|
|
|
|
Retail (£m) |
Wholesale & Licensing (£m) |
Eliminations (£m) |
Total (£m) |
|
|
UK Sports Retail |
European Sports Retail |
Rest of World Retail |
Premium Lifestyle |
Total |
|
|
|
|
Sales to external customers |
2,181.5 |
637.2 |
192.4 |
162.1 |
3,173.2 |
186.3 |
- |
3,359.5 |
|
Sales to other segments |
- |
- |
- |
- |
- |
12.7 |
(12.7) |
- |
|
Revenue |
2,181.5 |
637.2 |
192.4 |
162.1 |
3,173.2 |
199.0 |
(12.7) |
3,359.5 |
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
890.8 |
260.1 |
57.8 |
53.9 |
1,262.6 |
72.5 |
- |
1,335.1 |
|
Operating profit/(loss) before foreign exchange and exceptional items |
197.2 |
(20.5) |
(25.5) |
3.4 |
154.6 |
26.9 |
- |
181.5 |
|
Operating profit/(loss) |
238.6 |
(18.8) |
(27.3) |
3.5 |
196.0 |
21.0 |
- |
217.0 |
|
Other investment income |
|
|
|
|
|
|
|
25.7 |
|
Investment costs |
|
|
|
|
|
|
|
(119.0) |
|
Finance income |
|
|
|
|
|
|
|
3.4 |
|
Finance costs |
|
|
|
|
|
|
|
(40.9) |
|
Share of profits of associated undertakings |
|
|
|
|
|
|
|
(8.7) |
|
Profit before taxation |
|
|
|
|
|
|
|
77.5 |
|
Taxation |
|
|
|
|
|
|
|
(49.9) |
|
Profit for the period |
|
|
|
|
|
|
|
27.6 |
Sales to other segments are priced at cost plus a 10% mark-up.
Other segment items included in the income statement for the 52 weeks ended 29 April 2018:
|
|
|
|
|
|
Retail (£m) |
Wholesale & Licensing (£m) |
Total (£m) |
|
|
UK Sports Retail (£m) |
European Sports Retail (£m) |
Rest of World Retail (£m) |
Premium Lifestyle (£m) |
Total (£m) |
|
|
|
Depreciation |
93.4 |
34.0 |
3.2 |
2.8 |
133.4 |
1.2 |
134.6 |
|
Amortisation |
2.8 |
- |
- |
- |
2.8 |
2.0 |
4.8 |
Information regarding segment assets and liabilities as at 29 April 2018 and capital expenditure for the 52 weeks then ended:
|
|
UK Sports Retail (£m) |
European Sports Retail (£m) |
Rest of World Retail (£m) |
Premium Lifestyle (£m)
|
Wholesale & Licensing (£m)
|
Eliminations (£m) |
Total (£m)
|
|
Investments in associated undertakings |
6.2 |
- |
- |
- |
- |
- |
6.2 |
|
Other assets |
2,552.4 |
448.1 |
115.3 |
10.2 |
354.0 |
(636.7) |
2,843.3 |
|
Total assets |
2,558.7 |
448.1 |
115.3 |
10.2 |
354.0 |
(636.7) |
2,849.6 |
|
Total liabilities |
(1,387.9) |
(601.4) |
(160.3) |
(29.2) |
(93.3) |
636.7 |
(1,635.4) |
|
Tangible asset additions |
180.7 |
20.5 |
9.9 |
5.9 |
- |
- |
217.0 |
|
Intangible asset additions |
13.7 |
- |
- |
- |
0.9 |
- |
14.6 |
|
Total capital expenditure |
194.4 |
20.5 |
9.9 |
5.9 |
0.9 |
- |
231.6 |
Segmental information for the 53 weeks ended 30 April 2017 (restated):
|
|
|
|
|
|
Retail (£m) |
Wholesale & Licensing (£m) |
Eliminations (£m) |
Total (£m) |
|
|
UK Sports Retail (£m) |
European Sports Retail (£m) |
Rest of World Retail (£m) |
Premium Lifestyle (£m) |
Total |
|
|
|
|
Sales to external customers |
2,225.0 |
637.9 |
27.7 |
113.6 |
3,004.2 |
241.1 |
- |
3,245.3 |
|
Sales to other segments |
- |
- |
- |
- |
- |
30.1 |
(30.1) |
- |
|
Revenue |
2,225.0 |
637.9 |
27.7 |
113.6 |
3,004.2 |
271.2 |
(30.1) |
3,245.3 |
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
915.5 |
276.1 |
11.2 |
40.0 |
1,242.8 |
87.8 |
- |
1,330.6 |
|
Operating profit /(loss) before foreign exchange and exceptional items |
161.0 |
(63.8) |
1.9 |
1.6 |
100.7 |
20.5 |
- |
121.2 |
|
Operating profit /(loss) |
151.7 |
(71.1) |
1.9 |
1.5 |
84.0 |
76.1 |
- |
160.1 |
|
Other investment income |
|
|
|
|
|
|
|
111.3 |
|
Finance income |
|
|
|
|
|
|
|
18.8 |
|
Finance costs |
|
|
|
|
|
|
|
(9.4) |
|
Share of profits of associated undertakings |
|
|
|
|
|
|
|
0.8
|
|
Profit before taxation |
|
|
|
|
|
|
|
281.6 |
|
Taxation |
|
|
|
|
|
|
|
(49.9) |
|
Profit for the period |
|
|
|
|
|
|
|
231.7 |
Other segment items included in the income statement for the 53 weeks ended 30 April 2017:
|
|
|
|
|
|
Retail (£m) |
Wholesale & Licensing (£m) |
Total (£m) |
|
|
UK Sports Retail (£m) |
European Sports Retail (£m) |
Rest of World Retail (£m) |
Premium Lifestyle (£m) |
Total
|
|
|
|
Depreciation |
95.0 |
40.2 |
1.0 |
2.2 |
138.4 |
2.2 |
140.6 |
|
Amortisation |
2.5 |
1.1 |
- |
- |
3.6 |
3.7 |
7.3 |
Information regarding segment assets and liabilities as at 30 April 2017 and capital expenditure for the 53 weeks then ended (restated):
|
|
UK Sports Retail (£m) |
European Sports Retail (£m) |
Rest of World Retail (£m) |
Premium Lifestyle (£m) |
Wholesale & Licensing (£m) |
Eliminations (£m) |
Total (£m) |
|
Investments in associated undertakings and joint ventures |
25.8 |
0.6 |
- |
- |
- |
- |
26.4 |
|
Other assets |
2,201.5 |
356.0 |
18.1 |
12.1 |
357.6 |
(522.9) |
2,422.4 |
|
Total assets |
2,227.3 |
356.6 |
18.1 |
12.1 |
357.6 |
(522.9) |
2,448.8 |
|
Total liabilities |
(1,059.4) |
(518.5) |
(20.1) |
(13.7)
|
(121.7) |
522.9 |
(1,210.5) |
|
Tangible asset additions |
399.5 |
13.3 |
1.3 |
3.0 |
2.4 |
- |
419.5 |
|
Intangible asset additions |
2.3 |
- |
- |
- |
5.1 |
- |
7.4 |
|
Total capital expenditure |
401.8 |
13.3 |
1.3 |
3.0 |
7.5 |
- |
426.9 |
GEOGRAPHIC INFORMATION
Segmental information for the 52 weeks ended 29 April 2018
|
|
UK (£m) |
Non-UK (£m) |
Eliminations (£m) |
Total (£m) |
|
Segmental revenue from external customers |
2,408.8 |
950.7 |
- |
3,359.5 |
|
Total capital expenditure |
201.2 |
30.4 |
- |
231.6 |
|
Non-current segmental assets* |
761.3 |
328.3 |
- |
1,089.6 |
|
Total segmental assets |
2,706.2 |
762.7 |
(619.3) |
2,849.6 |
*Excludes deferred tax and financial instruments.
Segmental information for the 53 weeks ended 30 April 2017:
|
|
UK (£m) |
Non-UK (£m) |
Eliminations (£m) |
Total (£m) |
|
Segmental revenue from external customers |
2,408.6 |
836.7 |
- |
3,245.3 |
|
Total capital expenditure |
410.1 |
16.8 |
- |
426.9 |
|
Non-current segmental assets* |
738.9 |
338.3 |
- |
1,077.2 |
|
Total segmental assets |
2,350.4 |
573.6 |
(475.2) |
2,448.8 |
*Excludes deferred tax and financial instruments.
Material non-current segmental assets - by non-UK country
|
|
USA (£m) |
Belgium (£m) |
Austria (£m) |
Estonia (£m) |
ROI (£m) |
|
FY18 |
164.2 |
19.0 |
57.0 |
13.9 |
58.8 |
|
FY17 |
164.2 |
32.6 |
64.0 |
15.2 |
58.2 |
The following table reconciles the reported operating profit to the underlying EBITDA as it is one of the main measures used by the Chief Operating Decision Maker when reviewing performance:
Reconciliation of operating profit to underlying EBITDA for the 52 week period ended 29 April 2018:
|
|
UK Sports Retail (£m) |
European Sports Retail (£m) |
Rest of World Retail (£m) |
Premium Lifestyle (£m) |
Wholesale & Licensing (£m) |
Total (£m) |
|
Operating profit / (loss) |
238.6 |
(18.8) |
(27.3) |
3.5 |
21.0 |
217.0 |
|
Depreciation |
93.3 |
34.1 |
3.2 |
2.8 |
1.2 |
134.6 |
|
Amortisation |
2.8 |
- |
- |
- |
2.0 |
4.8 |
|
Share of profit of associated undertakings |
(9.2) |
0.5 |
- |
- |
- |
(8.7) |
|
Reported EBITDA |
325.5 |
15.8 |
(24.1) |
6.3 |
24.2 |
347.7 |
|
Bonus share scheme |
(6.0) |
- |
- |
- |
- |
(6.0) |
|
Profit on sale of properties |
(16.3) |
- |
- |
- |
- |
(16.3) |
|
Exceptional items |
1.8 |
(0.7) |
- |
- |
3.7 |
4.8 |
|
Realised FX (gain) / loss |
(27.1) |
(1.1) |
1.8 |
- |
2.3 |
(24.1) |
|
Underlying EBITDA |
277.9 |
14.0 |
(22.3) |
6.3 |
30.2 |
306.1 |
Reconciliation of operating profit to underlying EBITDA for the 53 week period ended 30 April 2017:
|
|
Sports Retail (£m) |
European Sports Retail (£m) |
Rest of World Retail (£m) |
Premium Lifestyle (£m) |
Wholesale & Licensing (£m) |
Total (£m) |
|
Operating profit / (loss) |
151.1 |
(71.1) |
1.9 |
2.1 |
76.1 |
160.1 |
|
Depreciation |
95.0 |
40.2 |
1.0 |
2.2 |
2.2 |
140.6 |
|
Amortisation |
2.5 |
1.1 |
- |
- |
3.7 |
7.3 |
|
Share of profit of associated undertakings |
0.4 |
0.4 |
- |
- |
- |
0.8 |
|
Reported EBITDA |
249.0 |
(29.4) |
2.9 |
4.3 |
82.0 |
308.8 |
|
Charges for the share scheme |
2.8 |
- |
- |
- |
- |
2.8 |
|
Disposal of subsidiary |
- |
- |
- |
- |
(79.9) |
(79.9) |
|
Exceptional items |
3.0 |
4.5 |
- |
0.1 |
9.7 |
17.3 |
|
Realised FX loss |
6.2 |
2.9 |
- |
- |
14.6 |
23.7 |
|
Underlying EBITDA |
261.0 |
(22.0) |
2.9 |
4.4 |
26.4 |
272.7 |
3. EXCEPTIONAL ITEMS
|
|
52 weeks ended |
53 weeks ended |
|
|
29 April 2018 (£m) |
30 April 2017 (£m) |
|
Impairments |
(4.8) |
(17.3) |
The impairment mainly relates to a review of the business and the valuation of own brands and goodwill that are no longer considered core brands, in line with the elevation of retail management strategy.
4. INVESTMENT INCOME
|
|
52 weeks ended |
53 weeks ended |
|
|
29 April 2018 (£m) |
30 April 2017 (£m) |
|
Profit on disposal of available-for-sale financial assets and equity derivative financial instruments |
6.9 |
156.5
|
|
Fair value gain on equity derivative financial instruments |
8.4 |
5.5 |
|
Dividend income from investments |
10.4 |
0.5 |
|
|
25.7 |
162.5 |
The profit on disposal of available-for-sale financial assets and equity derivative financial instruments mainly relates to the sale of strategic investments. In FY17 this mainly related to the profit on disposal of JD Sports Fashion plc shares in the period.
5. INVESTMENT COSTS
|
|
52 weeks ended |
53 weeks ended |
|
|
29 April 2018 (£m) |
30 April 2017 (£m) |
|
Loss on disposal of available-for-sale financial assets and equity derivative financial instruments |
26.5 |
2.7 |
|
Fair value loss on equity derivative financial instruments |
44.6 |
36.3 |
|
Fair value loss available-for-sale financial assets reclassified from Other Comprehensive income |
47.9 |
- |
|
Impairment of available-for-sale financial assets |
- |
12.2 |
|
|
119.0 |
51.2 |
The majority of the loss on disposal of available-for-sale financial assets and equity derivative financial instruments of £26.5m relates to the loss on disposal of Iconix Brand Group Inc and Goals Soccer plc.
The fair value loss on equity derivative financial instruments of £44.6m relates to Debenhams plc options and equity derivative instruments. The fair value loss of £47.9m on available-for-sale-financial assets relates to the significant movement on the Debenhams plc strategic investment between purchase of the physical shareholding and the end of the period.
The impairment of available-for-sale financial assets in FY17 mainly relates to House of Fraser Ltd.
6. TAXATION
|
|
52 weeks ended |
53 weeks ended |
|
|
29 April 2018 (£m) |
30 April 2017 (£m) |
|
Current tax |
46.8 |
61.4 |
|
Adjustment in respect of prior periods |
3.3 |
(20.6) |
|
|
50.1 |
40.8 |
|
Deferred tax |
(0.2) |
9.1 |
|
|
49.9 |
49.9 |
|
TAX RECONCILIATION |
|
|
|
Profit before taxation |
77.5 |
281.6 |
|
Taxation at the standard rate of tax in the UK of 19% (2017: 20%) |
14.7 |
56.3 |
|
Tax effects of: |
|
|
|
Non-taxable income |
(4.4) |
(37.1) |
|
Expenses not deductible for tax purposes |
33.1 |
18.8 |
|
Overseas tax losses |
- |
3.1 |
|
Other tax adjustments |
2.9 |
7.0 |
|
Adjustments in respect of prior periods - Current tax |
3.3 |
(20.6) |
|
Change in deferred tax rate |
- |
1.1 |
|
Adjustments in respect of prior periods - Deferred tax |
0.3 |
21.3 |
|
|
49.9 |
49.9 |
Non-taxable income in FY17 includes the disposal of subsidiaries and investments that qualify for Substantial Shareholder Relief. Expenses not deductible for tax purposes include non-qualifying depreciation and goodwill impairments.
7. 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, 527,793,623 (2017: 583,501,473), is adjusted to assume conversion of all dilutive potential ordinary shares under the Group's Share Schemes, being 3,132,795 (2017: 16,667,000), to give the diluted weighted average number of shares of 530,926,418 (2017: 600,168,473).
BASIC AND DILUTED EARNINGS PER SHARE
|
|
52 weeks ended |
53 weeks ended |
||
|
|
29 April 2018 Basic (£m) |
29 April 2018 Diluted (£m) |
30 April 2017 Basic (£m) |
30 April 2017 Diluted (£m) |
|
Profit for the period |
24.5 |
24.5 |
229.9 |
229.9 |
|
|
Number in thousands |
Number in thousands |
||
|
Weighted average number of shares |
527,794 |
530,926 |
583,501 |
600,168 |
|
|
Pence per share |
Pence per share |
||
|
Earnings per share |
4.6 |
4.6 |
39.4 |
38.3 |
UNDERLYING BASIC EARNINGS PER SHARE
The underlying basic 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 non-trading items. Tax has been calculated with reference to the effective rate of tax for the Group.
The Directors believe that the underlying earnings before exceptional items and underlying basic 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.
|
|
52 weeks ended |
53 weeks ended |
||
|
|
29 April 2018 Basic (£m) |
29 April 2018 Diluted (£m) |
30 April 2017 Basic (£m) |
30 April 2017 Diluted (£m) |
|
Profit for the period |
24.5 |
24.5 |
229.9 |
229.9 |
|
Post tax adjustments to profit for the period for the following non-trading items: |
|
|
|
|
|
Realised (profit) / loss on forward exchange contracts |
(18.7) |
(18.7) |
18.5 |
18.5 |
|
Fair value adjustment to forward foreign exchange contracts |
13.8 |
13.8 |
(14.3) |
(14.3) |
|
Fair value adjustment to derivative financial instruments |
89.7 |
89.7 |
24.0 |
24.0 |
|
Loss / (profit) on disposal of listed investments |
3.5 |
3.5 |
(141.5) |
(141.5) |
|
Profit on disposal of property |
(12.9) |
(12.9) |
- |
- |
|
Profit on disposal of subsidiary |
- |
- |
(79.9) |
(79.9) |
|
Impairment |
5.0 |
5.0 |
17.3 |
17.3 |
|
Write off of deferred tax assets |
- |
- |
12.5 |
12.5 |
|
Underlying profit for the period |
104.9 |
104.9 |
66.5 |
66.5 |
|
|
Number in thousands |
Number in thousands |
||
|
Weighted average number of shares |
527,794 |
530,926 |
583,501 |
600,168 |
|
|
|
Pence per share |
|
Pence per share |
|
Underlying basic earnings per share |
19.9 |
19.8 |
11.4 |
11.1 |
8. BORROWINGS
|
|
29 April 2018 (£m) |
30 April 2017 (£m) |
|
NON-CURRENT: |
|
|
|
Bank and other loans |
757.1 |
317.3 |
|
|
|
|
|
CURRENT: |
|
|
|
Bank overdrafts |
- |
69.5 |
|
|
|
|
|
TOTAL BORROWINGS: |
|
|
|
Bank overdrafts |
- |
69.5 |
|
Bank and other loans |
757.1 |
317.3 |
|
|
757.1 |
386.8 |
An analysis of the Group's total borrowings other than bank overdrafts is as follows:
|
|
29 April 2018 (£m) |
30 April 2017 (£m) |
|
Borrowings - Sterling |
750.0 |
310.0 |
|
Borrowings - Other |
7.1 |
7.3 |
|
|
757.1 |
317.3 |
Loans are currently at a rate of interest of 1.4% over the interbank rate of the country within which the borrowing entity resides.
The Group's Working Capital Facility is at £913.5m (FY17: £788m). The facility is available until November 2021 (with a one year extension option) and is not secured against any of the Group's assets.
The Group continues to operate comfortably within its banking facilities and covenants.
The carrying amounts and fair value of the borrowings are not materially different.
Net debt at 29 April 2018 was £397.1m (30 April 2017: £182.1m).
9. ACQUSITIONS
On 18 May 2017 the group took ownership of certain trade and assets of the businesses that traded as Bob's Stores and Eastern Mountain Sports from Eastern Outfitters LLC which had filed for Chapter 11 in the US. Cash consideration was paid in tranches over the initial Chapter 11 phase during the period to 30 April 2017 but control was not obtained until US court approval was given for the trade and assets purchase, and group management and processes began to be implemented on 18 May 2017. The following table summarises the fair values of consideration paid for the trade and assets of Bob's Stores and Eastern Mountain Sports, assets acquired, and the liabilities assumed.
|
|
Book value (£m) |
Fair value adjustments (£m) |
Fair value of net assets acquired (£m) |
|
Property, plant and equipment |
9.7 |
(3.9) |
5.8 |
|
Inventories |
55.6 |
19.0 |
74.6 |
|
Trade and other receivables |
10.2 |
1.0 |
11.2 |
|
Cash and cash equivalents |
9.9 |
- |
9.9 |
|
Trade and other payables |
(18.8) |
(1.5) |
(20.3) |
|
|
66.6 |
14.6 |
81.2 |
|
|
|
|
|
|
Cash consideration |
|
|
81.2 |
|
Cash acquired |
|
|
(9.9) |
|
Net cash outflow |
|
|
71.3 |
Included in Group underlying EBITDA for the 52 week period to 29 April 2018 for the Bob's Stores and Eastern Mountain Sports businesses is £9.2m of trading losses and £17.5m of losses arising as a result of fair value accounting adjustments and accounting policy alignments.
On 17 August 2017, the Group acquired the remaining minority interest in The Flannels Group Ltd for £11.3m. This has been accounted for as a minority acquisition, with the difference between brought forward minority interests and the acquisition price flowing through Equity.
The other principal acquisitions for the 52 weeks ended 29 April 2018 were:
i. On the 6 Nov 2017, the Group acquired the remaining 51% of Brasher Leisure Ltd, which trades as Sweatshop, for £1.
ii. On 16 March 2018, the Group acquired the remaining 51% of Lovells Sports (Holdings) Ltd, for £2.0m.
iii. On 2 February 2018, the Group acquired the remaining 60% of Rhapsody Investments, which owns 100% of NDS EHF, which has a Sports Direct fasica store in Iceland, for £2.5m.
iv. On 30 August 2017, the Group acquired assets to create Tri Yeovil UK Ltd, a triathlon specialist for £2.1m.
|
|
Acquisitions (£m) |
|
Cash consideration |
6.6 |
|
Fair value of assets acquired |
(6.6) |
|
Goodwill |
- |
The asset and liability values at acquisition are detailed below. We have reviewed the fair value of the assets and liabilities acquired, adjustments have been made to recognise the fair value of intangible assets.
Since the date of control, the following balances have been included within the Group's financial statements for the period.
|
|
Acquisitions (£m) |
|
Revenue |
181.6 |
|
Operating loss |
33.1 |
|
Loss before tax |
33.1 |
Had the acquisitions been included from the start of the period, £3,376.0m of revenue, £209.7m of operating profit and £171.1m of profit before tax would have been shown in the Group's financial statements.
There were no contingent liabilities acquired as a result of the above transaction.
9. CASH INFLOW FROM OPERATING ACTIVITIES
|
|
52 weeks ended |
53 weeks ended Restated |
|
|
29 April 2018 (£m) |
30 April 2017 (£m) |
|
Profit before taxation |
77.5 |
281.6 |
|
Net finance costs / (income) |
37.5 |
(9.4) |
|
Investment costs / (income) |
93.3 |
(111.3) |
|
Share of losses / (profits) of associated undertakings |
8.7 |
(0.8) |
|
Operating profit |
217.0 |
160.1 |
|
Depreciation |
134.6 |
140.6 |
|
Amortisation |
4.8 |
7.3 |
|
Impairment |
5.0 |
17.3 |
|
Profit on disposal of property, plant & equipment |
16.3 |
6.8 |
|
Profit on disposal of subsidiary |
- |
(79.9) |
|
Defined benefit pension plan employer contributions |
- |
(2.4) |
|
Share-based payments |
- |
2.8 |
|
Operating cash inflow before changes in working capital |
377.7 |
252.6 |
|
Decrease / (Increase) in receivables (1) |
49.8 |
8.2 |
|
(Increase) / decrease in inventories |
(119.6) |
15.0 |
|
Increase in payables |
63.4 |
56.9 |
|
Cash inflows from operating activities |
371.3 |
332.7 |
(1) The funds used for the Bobs and Eastern Mountain Sports acquisition were transferred to escrow during FY17 and were reported in Receivables in the prior year. The acquisition completed on 18 May 2017 and the prior year has therefore been restated to recognise the transfer on the face of the Cash Flow, therefore Receivables has been restated.
10. POST BALANCE SHEET EVENTS
Subsequent to the year end, JD Sports PLC completed their takeover of The Finish Line Inc. and Sports Direct disposed of their remaining economic interest and received net proceeds from the sale of the physical shares of £45.2m.
The Company announced on 27 April 2018 that it has instructed Liberum Capital Limited in relation to an irrevocable non-discretionary share buyback programme to purchase the Company's shares during the closed period commencing on 30 April 2018 and ending on 18 July 2018. In line with IFRS 102 the Company recognised the full redemption amount of £40.0m which is considered to be immaterially different to the present value at year end. If the contract expires without full delivery, the amount of the financial liability attributable to the undelivered shares is reclassified to equity reversing the original recognition. As at 18 July 2018, nil shares have been repurchased under the closed period share buyback programme.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
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