Unaudited Preliminary Results
Sports Direct International Plc
24 July 2007
Sports Direct International plc ("Sports Direct" or "the Company")
Unaudited Preliminary Results
Sports Direct International plc, the UK's leading sports retailer, announces its
Preliminary Results for the 52 week period ended on 29th April 2007.
Financial highlights
• Revenue up 12.8% to £1.35bn
• EBITDA pre exceptional items up 31.8% to £191m*
• Underlying profit before tax up 38.3% to £151m
• Group margin up 600 basis points to 44.3%
• Capital investment of £61.6m
• Net debt at year end of £38.1m
• Marketable securities held £75m as at year end
• Underlying earnings per share up 40.4% to 14.0p
Group Operational highlights
• Operating profit growth across all divisions
• Continued store roll-out in the UK and internationally
• Further development and consolidation of head office and distribution
campus at Shirebrook
• Acquisitions of Original Shoe Company, Streetwise and Kangol
• Acquired Sportsdirect.com domain name
• IPO on London Stock Exchange
Recent highlights
• $182.3m merger agreement with Everlast
• Acquired 60% of Field & Trek for £5m
• Acquired freehold retail sites and London office for total of £76m
• Middle East licensing agreement
• Dividend of 1.03p per share payable on 31st July 2007
• Decision to exercise powers to buy back own shares and place them into
treasury
• Decision to seek shareholder approval to acquire freehold properties
from Mike Ashley
Dave Forsey, Chief Executive of Sports Direct, said:
"These are a good set of results in which EBITDA pre exceptional items is in
line with the expectations we set during the IPO process.
"The first three months of the current financial year have been exceptionally
difficult with the unprecedented weather conditions having an immediate impact
on sales.
"Despite this, and at this early stage in the financial year, due to the
underlying strength of the business and its model, the Board believes there
should be limited growth in EBITDA pre exceptions from the £191m reported today
in the current financial year."
*EBITDA of £191m includes a property transaction profit of £14.7m
For further information please contact:
Sports Direct International plc
Dave Forsey, Chief Executive
Bob Mellors, Group Finance Director Telephone: 0870 333 9400
Financial Dynamics
Jonathon Brill/Andrew Dowler/Ben Foster Telephone: 0207 831 3113
About Sports Direct International plc
Sports Direct is the UK's leading sports retailer by revenue and operating
profit. As at 29 April 2007, the group operated out of 462 stores, of which 414
are located in the UK (excluding Northern Ireland), 33 in Belgium, 11 in
Slovenia, 4 in Holland. In addition, through its 42.5% shareholding in the
Heatons chain, Sports Direct has 13 (3 in Northern Ireland and 10 in Eire). The
majority of the Group's stores trade under the Sports World fascia, although the
Sports Direct.com has been used on most new stores since the
www.sportsdirect.com domain name was acquired in April 2006. The group has also
acquired a number of retail businesses over the last few years and therefore
continues to trade under the following fascias; Exsports, Lillywhites, McGurks,
Gilesports, Hargreaves, Streetwise and Original Shoe Company.
In addition to retailing third party brands including Nike, adidas, Reebok and
Umbro, the Group owns a portfolio of internationally recognised sports and
leisure brands, including Antigua, Dunlop, Kangol, Karrimor, Lonsdale and
Slazenger, which are sold in its own stores and through third-party retailers
and licensees.
Sports Direct targets a broad customer base and differentiates itself from its
competitors through its reputation as a price leader in the sports retail
sector. The Group's successful business model - leveraging Sports Direct's
retail and brand expertise to enhance margins and cash flow - has been a key
contributor to its rapid growth. Strategic retail add-on acquisitions -
including Hargreaves, Gilesports and Streetwise and the stand-alone Original
Shoe Company chain - have contributed to the development of Sports Direct as one
of the largest sports retailers in Europe.
OPERATIONAL REVIEW
In the 52 weeks ended 29 April 2007, the Group achieved sales growth of 12.8%
taking total revenue to £1.35 billion. Group margins strengthened to 44.3% so
allowing a growth in EBITDA pre exceptional items to £191 million and in
underlying profit before tax to £151 million. Underlying earnings per share
were up 40.4% to 14.0 pence. In accordance with the statements made at the time
of the IPO, a dividend of 1.03p per share, totalling £7.4m, will be paid on 31
July 2007 to shareholders who were on the register on 30 June 2007.
Review by business segment
52 weeks 53 weeks
ended ended
29 April 30 April
2007 2006
£m £m %
Retail
Revenue:
UK retail 1,069.7 943.8
UK wholesale and other 41.5 14.8
International retail 64.0 52.7
______ ______
Total retail revenue 1,175.2 1,011.3 +16.2
Cost of sales (654.9) (631.8)
______ ______
Gross margin 520.3 379.5
Gross margin percentage 44.3% 37.5%
Brands
Revenue:
Wholesale 154.5 169.2
Licensing 17.4 14.2
______ ______
Total brands revenue 171.9 183.4 -6.3
Cost of sales (96.0) (106.2)
______ ______
Gross margin 75.9 77.2
Gross margin percentage 44.1% 42.1%
Retail commentary
Sports Direct's growth over many years has enabled it to build a strong,
market-leading position. The group is now able to benefit from this purchasing
power and the strength of its group brands. This manifests itself in the value
that we pass onto customers.
In May 2006, we acquired the Original Shoe Company ('OSC'). OSC stores are
principally located on the high street, with a concentration in Scotland and the
North of England. Following market analysis and discussions with our leading
3rd party brands, we believe that, with OSC, there is the opportunity to develop
a different store concept as premium outlets with higher specifications selling
highly fashionable products. This concept would target customer groups who do
not regularly visit Sports World stores. We believe that there is the potential
for 250 OSC stores in the UK. In addition, the other retail acquisition of
Streetwise has been fully integrated.
As at 29th April 2007, the group operated out of 462 stores, of which 414 are
located in the UK (excluding Northern Ireland), 33 in Belgium, 11 in Slovenia
and 4 in Holland. In addition, through its 42.5% shareholding in the Heatons
chain, Sports Direct has 13 (3 in Northern Ireland and 10 in Eire). The
majority of the Group's stores trade under the Sports World fascia, although the
Sports Direct.com has been used on most new stores since the
www.sportsdirect.com domain name was acquired in April 2006. The group has also
acquired a number of retail businesses over the last few years and therefore
continues to trade under the following fascias; Exsports, Lillywhites, McGurks,
Gilesports, Hargreaves, Streetwise and Original Shoe Company.
We took our first steps into the Dutch market with the opening of four sites.
Our international retail operations are continuing to develop as we place the
same emphasis on margin growth.
Brand Division
Brands revenue fell overall, largely due to the loss of sales of golf balls
following the closure of the golf ball factory in the USA, but licensing income
grew by 22.5%, and licensing continues to be the main driver of growth within
the brand division. We continue to invest in sponsorship and marketing around
the core values of each brand. We are also looking to consolidate our UK-based
brand businesses into the Shirebrook campus.
The Brands Division has recently concluded an agreement with Dubai based company
Retail Corp that will see Lillywhites and Sports Direct stores open throughout
the Middle East region and the Republic of South Africa.
The agreement, gives retail corp exclusive rights to open Lillywhites and Sports
Direct stores within their designated territory of UAE, Kingdom of Saudi Arabia,
Kuwait, Qatar, Bahrain, Oman, Egypt and the Republic of South Africa.
Carrying IBML and proprietary brands, a minimum of 15 stores are due to be
opened during the 25-year contract, with the total number expected to reach 25.
Of these, 18 are planned to open by 2010. This is particularly exciting for
South Africa as it coincides with the country's hosting of the 2010 FIFA World
Cup.
The stores will range from 900 to 1600m2 with the use of Lillywhites or Sports
Direct facia determined by the consumer profile in each location. Retail Corp
is also committed to allocate significant shop space to IBML brands. Initially
products will be sourced from Shirebrook, but this will move to direct supply
from the Far East in time.
Shirebrook Campus
As expected the remaining functions in Dunstable were transferred during March
and April 2007 to the new facility at Shirebrook. Also transferred in the period
between January 2007 and April 2007 were the head office and support functions
for both Original Shoe Company and Streetwise. All UK retail functions now
operate out of the Shirebrook campus and we are hoping to consolidate as many of
the Brands business units as possible during the current financial year.
Shirebrook will enhance our operational efficiency and accommodate growth for
the next decade.
Supply chain including sourcing
Another key strength of the business is the sourcing capability. The group has
long standing relationships with suppliers who concentrate on product
development, design, quality control and factory procurement. Members of the
team are regularly in Shirebrook liaising with the group's designers and buyers
to improve information flow and commercial decision making.
Strategy
The Group is looking to grow profitability across all its divisions. This will
be driven by attempting to leverage the following:
Organic growth - through sales and margin growth and by widening the product
offer into new categories. Also by enhancing supply chain efficiencies,
especially utilising the new distribution facility at Shirebrook.
New space development - through the addition of approximately 40 new stores in
the UK during FY08, under the Sports Direct fascia. Also we continually appraise
all stores in the portfolio, including the more recently acquired stores, to
maximise the retail performance.
We intend to start an initial trial of three health and fitness clubs which will
include a retail element with a full Sports Direct offer. This initiative is
still at a very early stage and we will provide a further update when the trial
has progressed further.
Acquisitions - through continued retail and brand acquisitions.
The group is always looking to add complementary brands to its portfolio
especially where we can identify potential growth across retail, wholesale and
licensing. These acquisitions may also take us into new product categories not
previously catered for within the portfolio.
Strategic stakes, are held to help develop deeper relationships with our other
company brands and can relate to both retail and brand opportunities.
Investments are made where management believe there is strategic value and
there could be possible commercial advantages.
International expansion - driven by entry into new territories utilising our
existing companies, joint ventures with partners in new territories and through
licensing deals with retail partners.
Share buyback
The Board has decided, subject to market conditions to exercise its powers to
buy back its own shares and place them into treasury, thus increasing the
earnings of the remaining shares.
Freehold Property
The Board has decided to seek shareholder approval at the AGM to acquire from
Mike Ashley 35 freehold properties from which the group companies trade or has
offices as part of its new policy of owning the freehold interest in properties
where appropriate, and in order to avoid any future conflict of interest.
Current Trading and Outlook
The first three months of the current financial year have been exceptionally
difficult with the unprecedented weather conditions having an immediate impact
on sales.
Despite this, and at this early stage in the financial year, due to the
underlying strength of the business and its model, the Board believes there
should be limited growth in EBITDA pre exceptionals from the £191m reported
today in the current financial year.
Dave Forsey
Chief Executive
FINANCIAL REVIEW
Basis of reporting
The financial statements for the Sports Direct International plc group for the
52 weeks ended 29 April 2007 are presented in accordance with International
Financial Reporting Standards as adopted by the EU (IFRS). They are the first
financial statements prepared under IFRS and accordingly they take account of
the requirements and options in IFRS 1, " First-time Adoption of International
Financial Reporting Standards", as they relate to the comparative financial
information for the 53 weeks ended 30 April 2006.
In March 2007, the Company acquired 100 per cent of the ordinary shares of
Sports World International Limited, Brands Holdings Limited, International Brand
Management Limited and CDS Holdings SA through a combination of cash, non cash
and ordinary share issues. This transaction has been accounted for under the
principles of merger accounting and reverse acquisition accounting and the
consolidated financial statements of the Company represents a continuation of
the financial statements of Sports World International Limited, Brands Holdings
Limited, International Brand Management Limited and CDS Holdings SA and their
subsidiaries.
Summary results
52 weeks 53 weeks
ended ended
29 April 30 April
2007 2006
£m £m %
Revenue 1,347.1 1,194.7 +12.8
EBITDA pre exceptionals 190.6 144.6 +31.8
Operating profit pre exceptionals 152.7 108.1 +41.3
Reported profit before taxation (after exceptionals) 60.5 96.3 - 37.2
pence per share pence per share
Basic EPS 8.18 15.32 -46.6
Underlying EPS 14.03 9.99 +40.4
Profit, pre exceptionals is used by management as a key measure of profitability
within the Group. It is defined as profit for the period excluding certain
exceptional items. The Directors believe that EBITDA pre exceptionals and
operating profit pre exceptionals provide additional useful information for
shareholders on the underlying performance of the business, and is consistent
with how business performance is measured internally. They are not recognised
profit measures under IFRS and may not be directly comparable with "adjusted"
profit measures used by other companies.
EBITDA is earnings before investment income, finance income and finance costs,
tax, depreciation and amortisation and therefore includes share of profit of
associated undertakings and joint ventures of £3.4m (2006: £3.4m). EBITDA pre
exceptionals is calculated as EBITDA before exceptional items, operating profit
pre exceptionals is calculated as operating profit before exceptional items and
profit after tax pre exceptionals is defined as profit after tax before the post
tax effect of exceptional items and losses on the year end revaluation of
forward foreign currency contracts in accordance with IFRS.
The comparative period covers 53 weeks and the effect of the additional week was
to add £12.6m to revenue and £1.3m to operating profit. Amounts in this report
have not been adjusted to remove the 53rd week from 2006.
Revenue and margin
Revenue 52 weeks 53 weeks
ended ended
29 April 30 April
2007 2006
£m £m %
Retail
UK retail 1,069.7 943.8 +13.3
UK wholesale and other 41.5 14.8 +180.4
International retail 64.0 52.7 +21.4
Total retail 1,175.2 1,011.3 +16.2
Brands
Wholesale 154.5 169.2 -8.7
Licensing 17.4 14.2 +22.5
Total brands 171.9 183.4 -6.3
Total revenue 1,347.1 1,194.7 +12.8
Overall revenue grew by 12.8%.
Retail revenue grew by 16.2%. The UK accounted for 94.6% of retail with the
balance in Belgium, The Netherlands and Slovenia.
Brands revenue fell by 6.3% overall. Licensing income increased by 22.5%. The
reduction in wholesale revenue of 8.7% is primarily due to the loss of sales to
third parties of golf balls following the closure of the manufacturing facility
in the USA.
Retail margins in the UK increased from 37.5% to 44.3%. The most significant
component being the improvement in price in the second half of the year. The
weakness of the dollar accounted for about 20% of margin improvement and about
a further 30% came from efficiencies associated with the new distribution centre
in Shirebrook, such as reduced stock loss through improved security and less
write down of stock because such reductions are identified and implemented
quicker and are therefore of less significant value.
UK wholesale and other includes income on property transactions which is not
regarded as being exceptional or non recurring totalling £14.7m.
Brands margins increased from 42.1% to 44.1% as a result of the reduction in
lower margin wholesale business and the increase in high margin licensing
income.
Selling, distribution and administration costs
Selling, distribution and administration costs increased as a percentage of
revenue. This was a result of costs in the acquired companies and a realised
foreign exchange loss of £24 million compared to a profit of £16 million in the
previous period.
The centralised distribution, IT and head office facility in Shirebrook was
opened in March 2006 and the final move from Dunstable was completed in April
2007. We have continued to see the benefit of the move through increased
operational efficiencies through decreased stock handling costs. It is expected
that the Shirebrook centre will provide the space to support the expansion of
the group for many years to come.
We continue to protect our brand rights whenever they are threatened. Provision
is made in these accounts for action the outcome of which may not be in our
favour.
Exceptional operating costs and revenues
Exceptional operating costs and revenues in the 52 weeks ended 29 April 2007
comprised:
52 weeks 53 weeks
ended ended
29 April 30 April
2007 2006
£m £m
Costs relating to Admission 0.6 -
Past performance bonuses including National Insurance 56.4 -
Legal claims 6.0 -
Profit on disposal of certain retail concessions (4.2) -
Reorganisation costs - 3.4
______ ______
58.8 3.4
______ ______
______ ______
Finance income and costs
52 weeks 53 weeks
ended ended
29 April 30 April
2007 2006
£m £m
Finance income:
Bank interest receivable 0.7 0.8
Other interest receivable 0.6 0.7
Expected return on pension plan assets 2.1 1.9
_______ _______
3.4 3.4
Finance costs:
Interest on bank loans and overdrafts (7.0) (4.0)
Interest on other loans (0.9) (2.2)
Interest on retirement benefit obligations (2.5) (2.1)
Fair value adjustment to forward foreign exchange contracts (31.7) (9.5)
________ _______
(42.1) (17.8)
The loss on the fair valuing of forward foreign exchange contracts arises under
IFRS as a result of marking to market at the year end those contracts held to
hedge the Group's currency risk.
Taxation
The effective tax rate on profit before tax for the 52 weeks ended 29 April 2007
was 38.6% (2006: 32.7%). The increase is due to the tax impact of the unremitted
earnings of an associate and the greater impact in percentage terms of prior
year underprovisions and non deductible items.
Earnings
52 weeks 53 weeks
ended ended
29 April 30 April
2007 2006
p per share p per share %
Basic EPS 8.18 15.32 -46.6
Underlying EPS 14.03 9.99 +40.4
Basic earnings per share is calculated by dividing the earnings attributable to
ordinary shareholders by the weighted average number of ordinary shares
outstanding during the year. The comparative weighted average number of shares
has been adjusted for the impact of reverse acquisition accounting methodology
adopted.
The underlying earnings per share reflects the underlying performance of the
business compared with the prior year and is calculated by dividing underlying
earnings after tax by the number of shares in issue at the year end. It is not
a recognised profit measure under IFRS and may not be directly comparable with "
adjusted" profit measures used by other companies.
The items adjusted for in arriving at the underlying profit are as follows:
52 weeks 53 weeks
ended ended
29 April 30 April
2007 2006
£m £m
Profit after tax 37.1 64.9
Post tax effect of
Exceptional items:
Costs relating to Admission 0.4 -
Past performance bonuses including National Insurance 39.5 -
P legal claim 4.2 -
Profit on disposal of certain retail concessions (2.9)
Reorganisation costs - 2.3
Fair value adjustment to forward foreign exchange contracts 22.2 6.7
________ ________
Underlying profit after tax 100.5 73.9
________ ________
Dividends
No dividends were paid during the year. A dividend of 1.03p per share,
totalling £7.42m, will be paid on 31 July 2007 to shareholders on the register
on 30 June 2007.
Capital expenditure
Expenditure, including acquisitions, on property, plant and equipment amounted
to £61.6m (2006: £75.6m). This related to over £50m on new and refurbished
stores, with the balance covering further spend at Shirebrook, other plant and
equipment and IT hardware.
Acquisitions
The Group spent £20.2m on acquisitions during the 52 weeks ended 29 April 2007.
The principal acquisitions related to Kangol, Original Shoe Company and
Streetwise. The net assets acquired have been analysed and separate intangible
assets and the residual goodwill recognised as appropriate in accordance with
IFRS3: Business Combinations As part of the acquisition, the brand name "
Streetwise", recognised on acquisition at £1.4m, has been impaired in full as we
intend to re-badge the stores acquired in the short to medium term as the
opportunities to do so arise.
Cash flow and net debt
Out of net operating cash flow of £175.4m (2006: £61.3m), in addition to the
amount invested in capital expenditure and acquisitions, the Group invested
£67.2m (2006: £13.3m) in strategic stakes. Net debt fell from £53.5m at 30
April 2006 to £38.1m at 29 April 2007. Taking into account the inclusion of
marketable securities (available for sale financial assets) there was no net
debt at the date of the IPO and at 29 April 2007.
The analysis of debt at 29 April 2007 was as follows:
29 April 30 April
2007 2006
£m £m
Cash - sterling 26.6 8.7
Cash - US dollars 147.0 27.6
Cash - Euros 4.6 10.3
Cash - others 3.6 2.3
____ ____
181.8 48.9
Borrowings - sterling (201.8) (97.4)
Borrowings - other (18.1) (5.0)
____ ____
Net debt (38.1) (53.5)
Market value of marketable securities 75.4 15.3
_____ _____
Net liquidity/(indebtedness) 37.3 (38.2)
Reconciliation of movement in equity
Total equity movement is as follows:
52 weeks ended 52 weeks ended
29 April 29 April
2007 2007
£m £m
Total equity at 30 April 2006 291.2
Profit for the 52 weeks ended 29 April 2007 37.1
Items taken directly to equity:
Exchange differences on translation of foreign operations 0.1
Actuarial (losses)/gains on defined benefit pension schemes (0.5)
Fair value adjustment in respect of available-for-sale (7.1)
financial assets
Tax on items taken directly to equity 2.3
______
(5.2)
Movement in equity issued:
Capital issued 969.0
Reverse combination reserve (987.4)
Share issue costs (23.5)
______
(41.9)
Dividends (0.4)
_______
Total equity at 29 April 2007 280.8
_______
Pensions
The Group operates a number of closed defined benefit schemes in the Dunlop
Slazenger companies. The net deficit in these schemes fell from £15.2m at 30
April 2006 to £14.0m at 29 April 2007.
Strategic investments
The Group has, from time to time, taken strategic stakes in other companies. At
29 April 2007, the Group held investments in Blacks Leisure and JD Sports.
Changes in the value of these investments are recognised directly in equity in
accordance with IFRS.
Financial risks, systems and controls
The principal financial risks the Group faces are:
• Movement in interest rates on borrowings. The Group has not
historically hedged this risk.
• Movement in currency exchange rates. A significant amount of the
Group's purchases are in US dollars. The Group hedges the risk of such
movements by using forward purchases of foreign currency Certain of the Group's
assets are held overseas in local currency and are revalued in accordance with
currency movements. This currency risk is not hedged.
• Funding and liquidity for the Group's operations are provided through
bank loans and shareholders' funds. The objective is to maintain sufficient
funding and liquidity for the Group's requirements.
The Group maintains a system of controls to manage the business and to protect
its assets. We continue to invest in people, systems and in IT to manage the
Group's operations and its finance effectively and efficiently.
Post balance sheet events
Since 29 April 2007, the Group has:
• Built a strategic stake in Amer Sports, a company listed on the Finnish
stock exchange.
• Increased its credit facilities.
• Entered into a merger agreement with Everlast, a company listed on
NASDAQ.
• Acquired 60% of the issued share capital of Field & Trek.
• Acquired freehold properties for retail stores, health clubs and a
London head office.
• Decided, subject to market conditions, to exercise its powers to buy
back its own shares and place them into treasury, thus increasing the earning of
the remaining shares
At the forthcoming Annual General Meeting the Board proposes to put a resolution
to members to:
• Approve the acquisition from Mike Ashley of freehold properties
occupied by the Group, in order to avoid any future potential conflict of
interests.
Bob Mellors
Finance Director
24 July 2007
UNAUDITED CONSOLIDATED INCOME STATEMENT FOR THE 52 WEEKS ENDED 29 APRIL 2007
52 weeks 53 weeks
ended ended
29 April 30 April
2007 2006
Notes £'000 £'000
Continuing operations:
Revenue 2 1,347,144 1,194,736
Cost of sales (751,003) (738,057)
Gross profit 596,141 456,679
Selling, distribution and administrative expenses (445,198) (351,622)
Other operating income 1,783 3,044
Exceptional items 3 (58,826) (3,368)
Operating profit 2 93,900 104,733
Investment income 1,790 2,624
Finance income 4 3,449 3,387
Finance costs 5 (42,081) (17,832)
Share of profit/(loss) of associated undertakings and joint ventures 3,422 3,406
Profit before taxation 60,480 96,318
Taxation (23,360) (31,448)
Profit for the period 2 37,120 64,870
Equity holders of the Group 37,671 62,886
Minority interests 15 (551) 1,984
Profit for the period 2 37,120 64,870
Earnings per share from total and continuing operations attributable to the equity shareholders
Pence per share Pence per share
Basic earnings per share 6 8.18 15.32
Diluted earnings per share 6 8.18 15.32
UNAUDITED CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE
FOR THE 52 WEEKS ENDED 29 APRIL 2007
52 weeks 53 weeks
ended ended
29 April 30 April
2007 2006
Notes £'000 £'000
Exchange differences on translation of foreign operations 11 110 (947)
Actuarial (losses)/gains on defined benefit pension schemes (456) 1,226
Fair value adjustment in respect of available-for-sale financial assets (7,106) 2,011
Taxation on items taken directly to equity 2,268 (974)
Income and expense recognised directly in equity (5,184) 1,316
Profit for the period 2 37,120 64,870
Total income and expense recognised in the period 31,936 66,186
Equity holders of the Group 32,487 64,202
Minority interests 15 (551) 1,984
31,936 66,186
UNAUDITED CONSOLIDATED BALANCE SHEET AS AT 29 APRIL 2007
29 April 30 April
2007 2006
Notes £'000 £'000
ASSETS
Non-current assets
Property, plant and equipment 224,463 205,122
Intangible assets 87,981 49,364
Investments in associated undertakings and joint ventures 21,988 18,408
Available-for-sale financial assets 75,447 15,338
Deferred tax assets 31,925 14,106
441,804 302,338
Current assets
Inventories 231,383 219,065
Trade and other receivables 88,615 98,021
Cash and cash equivalents 181,808 48,875
501,806 365,961
TOTAL ASSETS 943,610 668,299
EQUITY AND LIABILITIES
Share capital 7 72,000 1,000
Share premium 8 874,300 -
Permanent contribution to capital 9 50 -
Capital redemption reserve 10 50
Foreign currency translation reserve 11 (837) (947)
Merger reserve 12 - 43
Reverse combination reserve 13 (987,312) -
Retained earnings 14 317,708 285,711
275,959 285,807
Minority interests 15 4,845 5,396
Total equity 280,804 291,203
Non-current liabilities
Other payables 2,408 1,032
Borrowings 16 1,935 2,628
Retirement benefit obligations 14,032 15,179
Deferred tax liabilities 18,586 13,115
Provisions 23,821 23,092
60,782 55,046
Current liabilities
Derivative financial liabilities 42,463 10,798
Trade and other payables 309,944 194,084
Borrowings 16 217,996 99,782
Current tax liabilities 31,621 17,386
602,024 322,050
Total liabilities 662,806 377,096
TOTAL EQUITY AND LIABILITIES 943,610 668,299
CONSOLIDATED CASH FLOW STATEMENT FOR THE 52 WEEKS ENDED 29 APRIL 2007
52 weeks 53 weeks
ended ended
29 April 30 April
2007 2006
Notes £'000 £'000
Cash inflow from operating activities 18 199,261 85,933
Income taxes paid (23,886) (24,635)
Net cash inflow from operating activities 175,375 61,298
Cash flow from investing activities
Proceeds on disposal of property, plant and equipment 10,120 4,767
Purchase of joint venture (238) (7,368)
Purchase of subsidiaries, net of cash acquired 17 (22,747) (13,234)
Purchase of intangible assets (2,978) (1,965)
Purchase of property, plant and equipment (54,797) (70,302)
Purchase of listed investments (67,215) (13,327)
Investment income received 1,790 2,624
Net cash outflow from investing activities (136,065) (98,805)
Cash flow from financing activities
Finance income received 1,339 1,528
Finance costs paid (7,948) (6,195)
Net repayments of borrowings (6,583) (123)
Proceeds from share issues 928,850 -
Purchase of a certain percentage of previous owner's equity investment (928,800) -
Share issue costs (9,762) -
Equity dividend paid (380) -
Net cash outflow from financing activities (23,284) (4,790)
Net increase/(decrease) in cash and cash equivalents including 16,026 (42,297)
overdrafts
Cash and cash equivalents including overdrafts at beginning of period (41,055) 1,242
Cash and cash equivalents including overdrafts at the period end (25,029) (41,055)
NOTES TO THE PRELIMINARY ANNOUNCEMENT FOR THE 52 WEEKS ENDED 29 APRIL 2007
1 Basis of preparation
The consolidated financial information disclosed in this preliminary
announcement for the 52 weeks ended 29 April 2007 has been prepared on the basis
of the accounting policies set out in the Group's 2007 Annual Report and
Financial Statements. The financial information has been prepared in accordance
with the Listing Rules of the Financial Services Authority.
The consolidated financial information for the 52 weeks ended 29 April 2007 does
not constitute the full financial statements of the Group within the meaning of
section 240 of the Companies Act 1985. The consolidated financial information is
extracted from the Group's financial statements. Those financial statements
have not yet been delivered to the Registrar nor have the auditors reported on
them.
The Company was incorporated on 21 December 2006 and in March 2007 acquired one
hundred per cent of the ordinary shares of Sports World International Limited,
Brands Holdings Limited, International Brand Management Limited and CDS Holdings
SA (the "Continuing Business Entities") through a combination of cash, non cash
assets and ordinary share issues.
Prior to this transaction M J W Ashley personally controlled each of the
Continuing Business Entities and by virtue of his controlling shareholding in
Sports Direct International plc, M J W Ashley continues to control the
Continuing Business Entities. As common control transactions are outside the
scope of IFRS 3: Business Combinations the directors have, as required by IAS 8:
Accounting Policies, Changes in Accounting Estimates and Errors, used their
judgement in developing and applying an accounting policy which reflects the
economic substance of the transaction to account for the Continuing Business
Entities.
The directors consider the principles of merger accounting to be appropriate to
account for the combination of Brands Holdings Limited, International Brand
Management Limited and CDS Holdings SA with the Company. As a result Brands
Holdings Limited, International Brand Management Limited and CDS Holdings SA are
presented as if they have legally been a group of companies since the 25 April
2005 following the merger accounting principles set out below:
• the assets and liabilities of Brands Holdings Limited, International
Brand Management Limited and CDS Holdings SA are recorded at book value;
• intangible assets and contingent liabilities are recognised only to
the extent that they were recognised by the acquiree in accordance with
applicable IFRS; and
• no goodwill is recorded.
The combination of Sports World International Limited with the Company is also a
common control transaction which falls outside of the scope of IFRS 3: Business
Combinations. Again the directors have used their judgement in developing and
applying an accounting policy which reflects the economic substance of the
transaction. The directors consider the guidance contained within IFRS 3:
Business Combinations in relation to reverse acquisitions to be appropriate in
these circumstances and as a result the principles of reverse acquisition
accounting have been applied with Sports World International Limited identified
as the acquirer.
Under the principles of reverse acquisitions, the cost of the acquisition is
measured at the fair value of the notional number of equity instruments that
would have been issued by the subsidiaries to the parent in order to provide the
resulting one hundred per cent ownership in Sports World International Limited.
The net assets of the parent are restated to fair value in the consolidated
financial information and the goodwill (if any) is calculated based on the
difference between the cost of acquisition and the restated net assets of the
parent. The deemed cost of the acquisition was £50,000 and no goodwill was
created on the reverse acquisition of the Company by Sports World International
Limited.
The share capital and premium reported in the consolidated balance sheet is
required to be that of the legal parent. However, it is also a requirement that
the total of the issued equity instruments of the consolidated Group should
reflect that of the legal subsidiaries plus the cost of the acquisition. To
achieve this, a reverse combination reserve is created, being the difference
between the required total of the Group's equity instruments and the reported
equity of the legal parent. The reported consolidated retained earnings are the
consolidated retained earnings of the legal subsidiaries plus those of the legal
parent subsequent to the reverse combination.
NOTES TO THE PRELIMINARY ANNOUNCEMENT FOR THE 52 WEEKS ENDED 29 APRIL 2007
(CONTINUED)
1 Basis of preparation (continued)
This consolidated financial information therefore represents a continuation of
the financial information of Brands Holdings Limited, International Brand
Management Limited, CDS Holdings SA and Sports World International Limited with
the Company as the reporting entity. Comparatives for the 53 weeks ended for 30
April 2006 relate solely to the Continuing Business Entities. The consolidated
financial information for the 52 weeks ended 29 April 2007 is the first
consolidated financial information prepared by the Group in accordance with
IFRS. As such, they take account of the requirements and options in IFRS 1:
First-time Adoption of International Financial Reporting Standards, as they
relate to the comparative financial information for the 53 weeks ended 30 April
2006 included therein. The Group's transition date to IFRS was 25 April 2005.
In preparing these consolidated financial information the Group has elected to
apply certain exemptions available under IFRS 1, which are as follows:
• the Group has deemed cumulative translation differences for foreign
operations to be zero at the date of transition. Any gains and losses or
subsequent disposals of foreign operations will not therefore include
translation differences arising prior to the transition date;
• IFRS 3 - Business Combinations is applied from 25 April 2005 and not
retrospectively to earlier business combinations;
• The effect of translation differences arising on fair value
adjustments and goodwill in business combinations is not applied retrospectively
before 25 April 2005 thereby treating the goodwill and fair value adjustments as
assets of the Company as opposed to the entities acquired by the Company; and
• all cumulative actuarial gains and losses in respect of the Group's
defined benefit pension scheme which have been recognised in equity under UK
GAAP have continued to be recognised in equity at the transition date.
The consolidated financial information have been prepared in accordance with
IFRS (including International Accounting Standards ("IAS")) and International
Financial Reporting Interpretations Committee ("IFRIC") interpretations and with
those parts of the Companies Act 1985 applicable to companies reporting under
accounting standards as adopted for use in the EU. The consolidated financial
information have been prepared under the historical cost convention, as modified
to include fair valuation of financial assets and derivative financial
instruments with borrowings recognised initially at fair value, net of
transaction costs incurred, and subsequently at amortised cost as required by
IFRS.
NOTES TO THE PRELIMINARY ANNOUNCEMENT FOR THE 52 WEEKS ENDED 29 APRIL 2007
(CONTINUED)
2 Segmental analysis
Primary reporting format - business segments
For management purposes, the Group is organised into and reports its performance
between two business segments, Retail and Brands. The Retail business segment
comprises the retail network of stores and the Brands business segment comprises
the identification, acquisition, development and trading of a portfolio of
internationally recognised sports and leisure brands.
Segment information about the business segments is presented below:
Segmental information for the 52 weeks ended 29 April 2007:
Retail Brands Elimi- Total
nations
UK UK UK total International Total Wholesale Licensing Total
retail wholesale & retail
other
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Sales 1,069,667 41,525* 1,111,192 64,018 1,175,210 154,484 17,450 171,934 - 1,347,144
to
external
customers
Sales to - 11,235 11,235 - 11,235 12,523 - 12,523 (23,758) -
other
segments
Revenue 1,069,667 52,760 1,122,427 64,018 1,186,445 167,007 17,450 184,457 (23,758) 1,347,144
Gross 498,101 22,173 520,274 75,867 - 596,141
profit
Operating 131,762 1,264 133,026 19,700 - 152,726
profit
before
exceptional
items
Operating 81,790 1,264 83,054 10,846 - 93,900
profit
Investment 1,790
income
Finance 3,449
income
Finance (42,081)
costs
Share of 3,422
profits of
associated
undertakings
and
joint
ventures
Profit
before 60,480
taxation
Taxation (23,360)
Profit 37,120
for the
period
* Includes £14.7 million in relation to property transactions.
Sales to other segments are priced at cost plus a 10% mark-up.
Other segment items included in the income statement for the 52 weeks ended 29
April 2007:
Retail Brands Total
£'000 £'000 £'000
Depreciation 29,022 1,882 30,904
Amortisation - 3,584 3,584
Information regarding segment assets and liabilities as at 29 April 2007 and
capital expenditure for the 52 weeks then ended:
Retail Brands Eliminations Total
£'000 £'000 £'000 £'000
Investments in associated undertakings and joint ventures 14,847 7,141 - 21,988
Other assets 984,598 265,434 (328,410) 921,622
Total assets 999,445 272,575 (328,410) 943,610
Total liabilities (744,811) (246,405) 328,410 (662,806)
Tangible asset additions 57,732 3,875 - 61,607
Intangible asset additions 20,756 21,445 - 42,201
Total capital expenditure 78,488 25,320 - 103,808
NOTES TO THE PRELIMINARY ANNOUNCEMENT FOR THE 52 WEEKS ENDED 29 APRIL 2007
(CONTINUED)
2 Segmental analysis (continued)
Segmental information for the 53 weeks ended 30 April 2006:
Retail Brands Eliminations Total
UK UK UK total International Total Wholesale Licensing Total
retail wholesale retail
& other
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Sales 943,841 14,792 958,633 52,664 1,011,297 169,193 14,246 183,439 - 1,194,736
to
external
customers
Sales - 10,649 10,649 - 10,649 19,711 - 19,711 (30,360) -
to
other
segments
Revenue 943,841 25,441 969,282 52,664 1,021,946 188,904 14,246 203,150 (30,360) 1,194,736
Gross 363,508 15,951 379,459 77,220 - 456,679
profit
Operating 89,173 926 90,099 18,002 - 108,101
profit
before
exceptional
items
Operating 85,805 926 86,731 18,002 - 104,733
profit
Investment 2,624
income
Finance 3,387
income
Finance (17,832)
costs
Share 3,406
of
profits
of
associated
undertakings
and
joint
ventures
Profit 96,318
before
taxation
Taxation
(31,448)
Profit 64,870
for
the
period
Sales to other segments are priced at cost plus a 10% mark-up.
Other segment items included in the income statement for the 53 weeks ended 30
April 2006:
Retail Brands Total
£'000 £'000 £'000
Depreciation 28,375 3,790 32,165
Amortisation - 968 968
Information regarding segment assets and liabilities as at 30 April 2006 and
capital expenditure for the 53 weeks then ended:
Retail Brands Eliminations Total
£'000 £'000 £'000 £'000
Investments in associated undertakings and joint ventures 11,379 7,029 - 18,408
Other assets 534,375 212,599 (97,083) 649,891
Total assets 545,754 219,628 (97,083) 668,299
Total liabilities (279,266) (194,913) 97,083 (377,096)
Tangible asset additions 74,072 1,484 - 75,556
Intangible asset additions 2,718 2,988 - 5,706
Total capital expenditure 76,790 4,472 - 81,262
NOTES TO THE PRELIMINARY ANNOUNCEMENT FOR THE 52 WEEKS ENDED 29 APRIL 2007
(CONTINUED)
2 Segmental analysis (continued)
Secondary reporting format - geographic segments
The Group operates in two geographic segments, UK and Non-UK. These geographic
segments are the basis on which the Group reports its secondary segment
information, as presented below:
Segmental information for the 52 weeks ended 29 April 2007:
UK Non-UK Unallocated Eliminations Total
£'000 £'000 £'000 £'000 £'000
Segmental revenue from external customers 1,178,528 192,374 - (23,758) 1,347,144
Total capital expenditure 94,873 8,935 - - 103,808
Segmental assets 1,112,957 133,532 25,531 (328,410) 943,610
Segmental information for the 53 weeks ended 30 April 2006:
UK Non-UK Unallocated Eliminations Total
£'000 £'000 £'000 £'000 £'000
Segmental revenue from external customers 1,040,369 184,727 - (30,360) 1,194,736
Total capital expenditure 73,565 4,138 3,559 - 81,262
Segmental assets 601,146 116,175 48,061 (97,083) 668,299
3 Exceptional items
52 weeks 53 weeks
ended ended
29 April 30 April
2007 2006
£'000 £'000
Reorganisation costs - 3,368
Costs relating to admission to the London Stock Exchange 586 -
Past performance bonuses including national insurance 56,400 -
Profit on disposal of certain retail concessions(1) (4,160) -
Legal claims 6,000 -
58,826 3,368
In May 2006, the Group disposed of its Hargreaves airport concessions.
NOTES TO THE PRELIMINARY ANNOUNCEMENT FOR THE 52 WEEKS ENDED 29 APRIL 2007
(CONTINUED)
4 Finance income
52 weeks 53 weeks
ended ended
29 April 30 April
2007 2006
£'000 £'000
Bank interest receivable 709 796
Other interest receivable 630 732
Expected return on pension plan assets 2,110 1,859
3,449 3,387
5 Finance costs
52 weeks 53 weeks
ended ended
29 April 30 April
2007 2006
£'000 £'000
Interest on bank loans and overdrafts 7,024 3,977
Interest on other loans and finance leases 924 2,217
Interest on retirement benefit obligations 2,468 2,132
Fair value adjustment to forward foreign exchange contracts 31,665 9,506
42,081 17,832
The fair value adjustment to forward foreign exchange contracts relates to
adverse differences between the nominal value of forward foreign currency
contracts and their fair value at each period end.
NOTES TO THE PRELIMINARY ANNOUNCEMENT FOR THE 52 WEEKS ENDED 29 APRIL 2007
(CONTINUED)
6 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 by the weighted average number of ordinary shares
outstanding during the year. The comparative weighted average number of shares
has been adjusted for the impact of the application of the principles of reverse
acquisition accounting as set out in note 1, Basis of Preparation.
Share awards granted during the period were anti-dilutive as at 29 April 2007 as
the exercise price exceeded the average market price of the Company's shares
during the period from when the share awards were granted to 29 April 2007. As
a result share awards are not taken into account when determining the weighted
average number of ordinary shares in issue during the period and therefore the
basic and diluted earnings per share are the same.
Basic and diluted earnings per share
52 weeks 52 weeks 53 weeks 53 weeks
ended ended ended ended
29 April 29 April 30 April 30 April
2007 2007 2006 2006
Basic Diluted Basic Diluted
£'000 £'000 £'000 £'000
Profit for the period 37,671 37,671 62,886 62,886
Number in thousands Number in thousands
Weighted average number of shares 460,582 460,582 410,400 410,400
Pence per share Pence per share
Earnings per share 8.18 8.18 15.32 15.32
Underlying earnings per share
The underlying earnings per share reflects the underlying performance of the
business compared with the prior year and is calculated by dividing underlying
earnings by the shares in issue at the period end. Underlying earnings is used
by management as a measure of profitability within the Group. Underlying
earnings is defined as profit for the period attributable to equity holders of
the parent for each financial period but excluding the post tax effect of
certain exceptional items.
The Directors believe that the underlying earnings before exceptional items and
underlying earnings per share measures provide additional useful information for
shareholders on the underlying performance of the business, and are consistent
with how business performance is measured internally. Underlying earnings is not
a recognised profit measure under IFRS and may not be directly comparable with "
adjusted" profit measures used by other companies.
NOTES TO THE PRELIMINARY ANNOUNCEMENT FOR THE 52 WEEKS ENDED 29 APRIL 2007
(CONTINUED)
6 Earnings per share (continued)
Underlying earnings per share (continued)
52 weeks 52 weeks 53 weeks 53 weeks
ended ended ended ended
29 April 29 April 30 April 30 April
2007 2007 2006 2006
Basic Diluted Basic Diluted
£'000 £'000 £'000 £'000
Profit for the period 37,671 37,671 62,886 62,886
Post tax adjustments to profit for the period for the following
exceptional items:
Costs relating to admission to the London Stock Exchange 410 410 - -
Past performance bonuses including national insurance 39,480 39,480 - -
Fair value adjustment to forward foreign exchange contracts 22,166 22,166 6,654 6,654
Profit on disposal of certain retail concessions (2,912) (2,912) - -
Reorganisation costs - - 2,358 2,358
Legal claims 4,200 4,200 - -
Underlying profit for the period 101,015 101,015 71,898 71,898
Number in thousands Number in thousands
Shares in issue at the period end 720,000 720,000 720,000 720,000
Pence per share Pence per share
Earnings per share 14.03 14.03 9.99 9.99
NOTES TO THE PRELIMINARY ANNOUNCEMENT FOR THE 52 WEEKS ENDED 29 APRIL 2007
(CONTINUED)
7 Share capital
29 April 30 April
2007 2006
£'000 £'000
Authorised
999,500,010 ordinary shares of 10p each (2006: 1,000,000 ordinary shares of £1 each) 99,950 1,000
499,990 redeemable preference shares of 10p each (2006: nil) 50 -
100,000 1,000
Allotted, called up and fully paid
720,000,010 ordinary shares of 10p each (2006: 1,000,000 ordinary shares of £1 each) 72,000 1,000
Consistent with the principle of reverse acquisition accounting, as described in
note 1 Basis of preparation, the issued share capital shown above at 29 April
2007 is that of the Company with the comparative issued share capital being that
of Sports World International Limited.
The following share issues and redemptions were made by the Company since its
incorporation:
No. of
Date No. of redeemable
ordinary preference
shares shares
21 December 2006 - on incorporation 10 -
8 February 2007 - ordinary share issue - 499,990
2 March 2007 - ordinary share issue 673,560,000 -
2 March 2007 - redemption of redeemable preference shares - (499,990)
29 March 2007 - ordinary share issue 46,440,000 -
720,000,010 -
The Company was incorporated on 21 December 2006 with an authorised share
capital of £1,000, divided into 10,000 ordinary shares of 10p each, of which 10
ordinary shares were issued at par at the date of incorporation.
On 8 February 2007, the authorised share capital of the Company was increased to
£50,000 by the creation of 490,000 new ordinary shares of 10p each.
On 8 February 2007, the authorised share capital of the Company was reorganised
into 499,990 redeemable preference shares of 10p each and 10 ordinary shares of
10p each.
On 8 February 2007, the Company issued 499,990 redeemable preference shares at
par.
On 26 February 2007, the authorised share capital of the Company was increased
from £50,000 to £100,000,000 by the creation of 999,500,000 new ordinary shares
of 10p each.
On 2 March 2007, the Company was admitted to the Official List and to trading on
the London Stock Exchange and issued 309,600,000 ordinary shares at £3 per
share, giving rise to share premium of £897,840,000. The cash proceeds from
this share issue were used to acquire a certain percentage of the previous
owner's equity investment in Sports World International Limited.
NOTES TO THE PRELIMINARY ANNOUNCEMENT FOR THE 52 WEEKS ENDED 29 APRIL 2007
(CONTINUED)
7 Share capital (continued)
On 2 March 2007, the Company issued 326,304,000 ordinary shares at £3 per share
in exchange for 478,210 ordinary shares of £1 each in Sports World International
Limited. No share premium arose as the directors applied the merger relief
provisions available under the Companies Act 1985.
On 2 March 2007, the Company issued 37,656,000 ordinary shares at £3 per share
in exchange for the entire ordinary share capital of £1 each of Brands Holdings
Limited, International Brand Management Limited and CDS Holdings SA. No share
premium arose as the directors applied the merger relief provisions available
under the Companies Act 1985.
On 2 March 2007, the Company redeemed its 499,990 redeemable preference shares
of 10p each at par.
On 29 March 2007, the Company issued 46,440,000 ordinary shares at £3 per share
in exchange for 68,060 ordinary shares of £1 each in Sports World International
Limited. No share premium arose as the directors applied the merger relief
provisions available under the Companies Act 1985.
Share options
The Performance Share Plan
Under the terms of the Performance Share Plan, which was approved by the
shareholders on 11 February 2007, the Board may offer options to purchase
ordinary shares in the Company to executive directors, based on a percentage of
salary and subject to performance conditions. The extent to which the awards
vest is based on earnings per share growth and total shareholders return over a
period of three financial years.
The first awards of 446,512 shares were granted on 5 April 2007 at an exercise
price of 268.75p.
No share-based payment charge was recognised in respect of these share awards
for the 52 weeks ended 29 April 2007 as the directors did not consider it
material to the Group's financial results or position.
NOTES TO THE PRELIMINARY ANNOUNCEMENT FOR THE 52 WEEKS ENDED 29 APRIL 2007
(CONTINUED)
8 Share premium
29 April 30 April
2007 2006
£'000 £'000
At 1 May 2006 - -
Shares issued 897,840 -
Share issue costs (23,540) -
At 29 April 2007 874,300 -
The share premium account is used to record the excess proceeds over nominal
value on the issue of shares.
9 Permanent contribution to capital
29 April 30 April
2007 2006
£'000 £'000
At 1 May 2006 - -
Permanent contribution to capital in the period 50 -
At 29 April 2007 50 -
M J W Ashley made a £50,000 cash payment to the Company as a permanent
contribution to capital on 8 February 2007 under a deed of capital contribution.
10 Capital redemption reserve
29 April 30 April
2007 2006
£'000 £'000
At 1 May 2006 - -
Redemption of redeemable preference shares 50 -
At 29 April 2007 50 -
The capital redemption reserve arose on the redemption of the Company's
redeemable preference shares of 10p each at par on 2 March 2007.
11 Foreign currency translation reserve
29 April 30 April
2007 2006
£'000 £'000
At 1 May 2006 (947) -
Translation differences - Group 190 (1,125)
Translation differences - associates (80) 178
At 29 April 2007 (837) (947)
The foreign currency translation reserve is used to record exchange differences
arising from the translation of the financial statements of foreign subsidiaries
and associates.
NOTES TO THE PRELIMINARY ANNOUNCEMENT FOR THE 52 WEEKS ENDED 29 APRIL 2007
(CONTINUED)
12 Merger reserve
29 April 30 April
2007 2006
£'000 £'000
At 1 May 2006 43 43
Release of merger reserve on group reorganisation (43) -
At 29 April 2007 - 43
The merger reserve of £43,000 represents the nominal value of the share capital
of Brands Holdings Limited, International Brand Management Limited and CDS
Holdings SA following their merger with Sports World International Limited as at
25 April 2005.
13 Reverse combination reserve
29 April 30 April
2007 2006
£'000 £'000
At 1 May 2006 - -
Reverse acquisition accounting on group reorganisation (987,355) -
Release of merger reserve on group reorganisation 43 -
At 29 April 2007 (987,312) -
The reverse combination reserve exists as a result of the adoption of the
principles of reverse acquisition accounting, see note 1 Basis of preparation,
in accounting for the group restructuring which occurred on 2 March 2007 and 29
March 2007 between the Company and Sports World International Limited, Brands
Holdings Limited, International Brand Management Limited and CDS Holdings SA
with Sports World International Limited as the acquirer.
14 Retained earnings
29 April 30 April
2007 2006
£'000 £'000
At 1 May 2006 285,711 220,562
(Expense)/income recognised directly in equity (5,294) 2,263
Profit for the financial period 37,671 62,886
Dividends (380) -
At 29 April 2007 317,708 285,711
15 Minority interests
29 April 30 April
2007 2006
£'000 £'000
At 1 May 2006 5,396 3,412
Share of (loss)/profit for the period (551) 1,984
At 29 April 2007 4,845 5,396
NOTES TO THE PRELIMINARY ANNOUNCEMENT FOR THE 52 WEEKS ENDED 29 APRIL 2007
(CONTINUED)
16 Borrowings
29 April 30 April
2007 2006
£'000 £'000
Non-current:
Bank and other loans 1,844 2,628
Obligations under finance leases 91 -
1,935 2,628
Current:
Bank overdrafts 206,837 89,930
Bank and other loans 10,463 9,852
Obligations under finance leases 696 -
217,996 99,782
Total borrowings:
Bank overdrafts 206,837 89,930
Bank and other loans 12,307 12,480
Obligations under finance leases 787 -
219,931 102,410
The maturity of the Group's bank and other loan borrowings other than overdrafts
is as follows:
29 April 30 April
2007 2006
£'000 £'000
Borrowings are repayable as follows:
Within one year 11,159 9,852
Between one and two years 922 908
Between two and five years 924 1,720
After five years 89 -
13,094 12,480
Borrowings - Sterling 4,231 7,435
Borrowings - Other 8,863 5,045
13,094 12,480
Loans and overdrafts are all on commercial variable rates of interest ranging
between 0.6% and 2.5% over the base rate of the country within which the
borrowing entity resides.
NOTES TO THE PRELIMINARY ANNOUNCEMENT FOR THE 52 WEEKS ENDED 29 APRIL 2007
(CONTINUED)
17 Acquisitions
Details of principal acquisitions for the 52 weeks ended 29 April 2007 are set
out below.
Date of acquisition Percentage Nature of
of equity activity
acquired
Focus Golf Systems Inc 4 May 2006 100 Wholesale
Original Shoe Company Limited 5 May 20061) 100 Retail
Dunlop International Limited 1 July 2006 100 Licensing
PBF International Limited 13 July 2006 50 Wholesale
Antigua Enterprises Inc 6 October 2006(2) 5 Wholesale
Kangol Group Limited 13 October 2006 100 Licensing
Streetwise Sports Company Limited 8 December 2006 100 Retail
Sports Direct Netherlands BV 28 December 2006 100 Retail
E Walters UK Limited 11 February 2007 100 Wholesale
(1) A further tranche of shares in Original Shoe Company Limited was
acquired on 7 June 2006.
(2) This was an additional acquisition which takes the cumulative holding
to 65%.
The aggregate fair value of consideration paid, assets and liabilities acquired
and resulting goodwill in respect of the above acquisitions is detailed below.
Total
£'000
Cash consideration including costs 20,190
Less: fair value of net assets acquired (847)
Goodwill 19,343
The goodwill is attributable to the premium paid to strengthen the Group's
existing business segments of retail and brands, which is in line with the
Group's strategy.
Carrying values Fair value Fair value
at acquisition adjustment of net
assets
acquired
£'000 £'000 £'000
Property, plant and equipment 10,078 (3,268) 6,810
Intangible assets 4,280 15,600 19,880
Inventories 14,812 - 14,812
Trade and other receivables 6,790 - 6,790
Cash and cash equivalents (2,557) - (2,557)
Borrowings (7,197) - (7,197)
Trade and other payables (26,325) - (26,325)
Deferred tax liability (1) (4,680) (4,681)
Provisions - (6,685) (6,685)
(120) 967 847
Separately identifiable intangible assets, primarily representing intellectual
property acquired, amounting to £15,600,000 (deferred tax liability thereon
totalling £4,680,000) were recognised as a fair value adjustment on acquisition.
Dilapidations and onerous lease provisions totalling £6,685,000 were recognised
as a fair value adjustment on acquisition.
NOTES TO THE PRELIMINARY ANNOUNCEMENT FOR THE 52 WEEKS ENDED 29 APRIL 2007
(CONTINUED)
17 Acquisitions (continued)
£65,541,000 of revenue and £7,320,000 of operating profit has been included
within the Group's financial information for the period in respect of the above
acquired entities since their dates of acquisition.
If the above acquired entities had been acquired at the beginning of the period
£93,615,000 of revenue and £12,984,000 of operating profit would have been
included within the Group's financial information.
Cash flows arising from acquisitions are as follows:
29 April
2007
£'000
Cash consideration 20,190
Bank overdraft acquired 2,557
Net cash outflow in the cash flow statement 22,747
18 Cash inflow from operating activities
52 weeks 53 weeks
ended ended
29 April 30 April
2007 2006
£'000 £'000
Profit before taxation 60,480 96,318
Net finance costs 38,632 14,445
Investment income (1,790) (2,624)
Share of profit of associated undertakings and joint ventures (3,422) (3,406)
Operating profit 93,900 104,733
Depreciation 30,904 32,165
Amortisation charge 3,584 968
Excess of fair value on acquisition over consideration - (570)
Profit on disposal of property, plant and equipment - (159)
Defined benefit pension plan current service cost 175 331
Defined benefit pension plan employer contributions (2,136) (424)
Operating cash inflow before changes in working capital 126,427 137,044
Decrease/(increase) in receivables 16,196 (17,972)
Decrease/(increase) in inventories 2,494 (51,295)
Increase in payables 54,144 18,156
Cash inflow from operating activities 199,261 85,933
19 Dividends
A dividend of 1.03p per share has been declared and approved and will be paid on
31 July 2007 to shareholders on the register on 29 June 2007.
NOTES TO THE PRELIMINARY ANNOUNCEMENT FOR THE 52 WEEKS ENDED 29 APRIL 2007
(CONTINUED)
20 Reconciliation of net assets and profit under UK GAAP to IFRS
As explained in Note 1: Accounting Policies the Group did not legally exist
prior to March 2007. To properly reflect the substance of the combination of
Sports World International Limited, Brands Holdings Limited, International Brand
Management Limited and CDS Holdings SA (the "Continuing Business Entities") the
directors have followed the principles of merger and reverse acquisition
accounting to present the results, position and cash flows of the Continuing
Business Entities as if it had always existed. As a direct consequence there
was no requirement historically for the directors to prepare and file UK GAAP
consolidated financial statements for the Continuing Business Entities. For
reasons of transparency the directors present below equity, net asset and profit
reconciliations from previously unpublished UK GAAP financial information to
IFRS as re-presented in IAS 1 format:
Reconciliation of equity at 25 April 2005
IFRS transition adjustments
UK GAAP 25 IFRS
April 2005 25 April 2005
1 2 3
£'000 £'000 £'000 £'000 £'000
ASSETS
Non-current assets
Intangible assets 44,626 - - - 44,626
Property, plant and equipment 165,728 - - - 165,728
Investments in associated undertakings 7,456 - - - 7,456
Deferred tax asset 7,801 388 - - 8,189
225,611 388 - - 225,999
Current assets
Inventories 158,712 - - - 158,712
Trade and other receivables 76,848 - - - 76,848
Cash and cash equivalents 21,393 - - - 21,393
256,953 - - - 256,953
TOTAL ASSETS 482,564 388 - - 482,952
NOTES TO THE PRELIMINARY ANNOUNCEMENT FOR THE 52 WEEKS ENDED 29 APRIL 2007
(CONTINUED)
20 Reconciliation of net assets and profit under UK GAAP to IFRS
(continued)
Reconciliation of equity at 25 April 2005 (continued)
IFRS transition adjustments
UK GAAP 25 IFRS
April 2005 25 April
2005
1 2 3
£'000 £'000 £'000 £'000 £'000
EQUITY AND LIABILITIES
Equity attributable to equity holders of the
Company
Share capital 1,000 - - - 1,000
Merger reserve 43 - - - 43
Retained earnings 223,259 (904) 449 (2,242) 220,562
224,302 (904) 449 (2,242) 221,605
Minority interests 3,412 - - - 3,412
Total equity 227,714 (904) 449 (2,242) 225,017
Non current liabilities
Provisions 20,352 - - - 20,352
Borrowings 4,132 - (641) - 3,491
Other payables 240 - - - 240
Retirement benefit obligations 16,170 - - - 16,170
Deferred tax liabilities 5,458 - 192 2,242 7,892
46,352 - (449) 2,242 48,145
NOTES TO THE PRELIMINARY ANNOUNCEMENT FOR THE 52 WEEKS ENDED 29 APRIL 2007
(CONTINUED)
20 Reconciliation of net assets and profit under UK GAAP to IFRS
(continued)
Reconciliation of equity at 25 April 2005 (continued)
IFRS transition adjustments
UK GAAP 25 IFRS
April 2005 25 April 2005
1 2 3
£'000 £'000 £'000 £'000 £'000
Current liabilities
Derivative financial liabilities - 1,292 - - 1,292
Trade and other payables 170,591 - - - 170,591
Borrowings 29,005 - - - 29,005
Current tax liabilities 8,902 - - - 8,902
208,498 1,292 - - 209,790
Total liabilities 254,850 1,292 (449) 2,242 257,935
TOTAL EQUITY AND LIABILITIES 482,564 388 - - 482,952
1. The Group has not taken advantage of the exemption under IFRS 1
of not restating its comparatives in respect of IAS 32, 'Financial Instruments:
Presentation' and IAS 39, 'Financial Instruments: Recognition and Measurement'.
This transitional adjustment is to fair value account as at the balance sheet
date in respect of forward foreign currency purchase contracts held by the Group
resulting in a derivative financial liability being recognised.
2. As per adjustment 1 above, the Group has fully adopted IAS 32
and IAS 39 and consequently has applied a fair value adjustment in respect of
interest free loans as at the date of transition to reflect the cost of the
interest free loans if interest rates were applied based on the borrowing
facilities available to the Group at the date of transition. The loans are
subsequently accounted for at amortised cost as required by IAS 39.
3. Deferred tax liability arising on unremitted earnings of an
associate in accordance with IAS 12 as the Group has no control over when
earnings are to be remitted back to the Group.
4.
NOTES TO THE PRELIMINARY ANNOUNCEMENT FOR THE 52 WEEKS ENDED 29 APRIL 2007
(CONTINUED)
20 Reconciliation of net assets and profit under UK GAAP to IFRS
(continued)
Reconciliation of equity at 30 April 2006
IFRS transition adjustments
UK GAAP 30 IFRS
April 2006 30 April 2006
1 2 3 4 5 6
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
ASSETS
Non-current assets
Property, plant and 205,122 - - - - - - 205,122
equipment
Intangible assets 43,685 5,109 570 - - - - 49,364
Investments in associated 18,408 - - - - - - 18,408
undertakings
Financial assets 13,327 - - - - 2,011 - 15,338
Deferred tax asset 10,868 - - 3,238 - - - 14,106
291,410 5,109 570 3,238 - 2,011 - 302,338
Current assets
Inventories 219,065 - - - - - - 219,065
Trade and other receivables 98,021 - - - - - - 98,021
Cash and cash equivalents 48,875 - - - - - - 48,875
365,961 - - - - - - 365,961
TOTAL ASSETS 657,371 5,109 570 3,238 - 2,011 - 668,299
NOTES TO THE PRELIMINARY ANNOUNCEMENT FOR THE 52 WEEKS ENDED 29 APRIL 2007
(CONTINUED)
20 Reconciliation of net assets and profit under UK GAAP to IFRS
(continued)
Reconciliation of equity at 30 April 2006 (continued)
IFRS transition adjustments
UK GAAP 30 IFRS
April 2006
30 April
2006
1 2 3 4 5 6
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
EQUITY AND LIABILITIES
Equity attributable to equity
holders of the Company
Share capital 1,000 - - - - - - 1,000
Foreign currency translation (947) - - - - - - (947)
reserve
Merger reserve 43 - - - - - - 43
Retained earnings 289,106 5,109 399 (7,560) 319 1,408 (3,070) 285,711
289,202 5,109 399 (7,560) 319 1,408 (3,070) 285,807
Minority interests 5,396 - - - - - - 5,396
Total equity 294,598 5,109 399 (7,560) 319 1,408 (3,070) 291,203
Non current liabilities
Borrowings 3,083 - - - (455) - - 2,628
Other payables 1,032 - - - - - - 1,032
Retirement benefit obligations 15,179 - - - - - - 15,179
Deferred tax liabilities 9,135 - 171 - 136 603 3,070 13,115
Provisions 23,092 - - - - - - 23,092
51,521 - 171 - (319) 603 3,070 55,046
NOTES TO THE PRELIMINARY ANNOUNCEMENT FOR THE 52 WEEKS ENDED 29 APRIL 2007
(CONTINUED)
20 Reconciliation of net assets and profit under UK GAAP to IFRS
(continued)
Reconciliation of equity at 30 April 2006 (continued)
IFRS transition adjustments
UK GAAP 30 IFRS
April 2006
30 April 2006
1 2 3 4 5 6
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Current
liabilities
Derivative - - - 10,798 - - - 10,798
financial
liabilities
Trade and other 194,084 - - - - - - 194,084
payables
Borrowings 99,782 - - - - - - 99,782
Current tax 17,386 - - - - - - 17,386
liabilities
311,252 - - 10,798 - - - 322,050
Total liabilities 362,773 - 171 10,798 (319) 603 3,070 377,096
TOTAL EQUITY AND 657,371 5,109 570 3,238 - 2,011 - 668,299
LIABILITIES
1. Under IFRS 3, goodwill is not amortised but instead subject to
annual impairment testing. Consequently, the goodwill balances were reviewed
for impairment at 24 April 2005 and 30 April 2006 and no impairment adjustments
were identified. The amortisation charge previously recognised under UK GAAP
has been reversed.
2. As per 1 above, write back of negative goodwill balance arising on
acquisitions as required by IFRS 3 and reclassified from negative goodwill
previously capitalised under UK GAAP.
3. The Group has not taken advantage of the exemption under IFRS 1 of
not restating its comparatives in respect of IAS 32 and IAS 39. This
transitional adjustment is to fair value account as at the balance sheet date in
respect of forward foreign currency purchase contracts held by the Group
resulting in a derivative financial liability being recognised.
4. As per adjustment 3 above, the Group has fully adopted IAS 32 and
IAS 39 and consequently has applied a fair value adjustment in respect of
interest free loans as at the date of transition to reflect the cost of the
interest free loans if interest rates were applied based on the borrowing
facilities available to the Group at the date of transition. The loans are
subsequently accounted for at amortised cost as required by IAS 39
5. The Group has applied a fair value adjustment in respect of
available-for-sale financial assets held as at 30 April 2006 in accordance with
IAS 39.
6. Deferred tax liability arising on unremitted earnings of an
associate in accordance with IAS 12 as the Group has no control over when
earnings are to be remitted back to the Group.
NOTES TO THE PRELIMINARY ANNOUNCEMENT FOR THE 52 WEEKS ENDED 29 APRIL 2007
(CONTINUED)
20 Reconciliation of net assets and profit under UK GAAP to IFRS
(continued)
Reconciliation of profit for the 52 weeks ended 30 April 2006
(continued)
IFRS transition adjustments
UK GAAP 53 IFRS 53 weeks
weeks ended 30 ended 30 April
April 2006 2006
1 2 3 4 5
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Revenue 1,194,736 - - - - - 1,194,736
Cost of sales (738,057) - - - - - (738,057)
Gross profit 456,679 - - - - - 456,679
Selling, distribution 570 - -
and administrative
expenses (357,301) 5,109 - (351,622)
Other operating income 3,044 - - - - - 3,044
Exeptional items (3,368) - - - - - (3,368)
Operating profit 99,054 5,109 570 - - - 104,733
Investment income 2,624 - - - - - 2,624
Finance income 3,387 - - - - - 3,387
Finance costs (8,140) - - (9,506) (186) - (17,832)
Share of profit of 3,406 - - - - - 3,406
associated undertakings
Profit before taxation 100,331 5,109 570 (9,506) (186) - 96,318
Taxation (33,357) - (171) 2,852 56 (828) (31,448)
Profit for the financial 66,974 5,109 399 (6,654) (130) (828) 64,870
year
Equity holders of Sports 64,990 5,109 399 (6,654) (130) (828) 62,886
Direct Group
Minority interest 1,984 - - - - - 1,984
Profit for the financial 66,974 5,109 399 (6,654) (130) (828) 64,870
year
NOTES TO THE PRELIMINARY ANNOUNCEMENT FOR THE 52 WEEKS ENDED 29 APRIL 2007
(CONTINUED)
20 Reconciliation of net assets and profit under UK GAAP to IFRS
(continued)
Reconciliation of profit for the 52 weeks ended 30 April 2006
(continued)
1. Under IFRS 3, goodwill is not amortised but instead
subject to annual impairment testing. Consequently, the goodwill balances were
reviewed for impairment at 24 April 2005 and 30 April 2006 and no impairment
adjustments were identified. The amortisation charge previously recognised
under UK GAAP has been reversed.
2. Under IFRS 3, negative goodwill should not be amortised.
Transitional adjustment to write back negative goodwill arising on acquisitions
as required by IFRS 3 and reclassified from negative goodwill previously
capitalised under UK GAAP.
3. The Group has not taken advantage of the exemption under
IFRS 1 of not restating its comparatives in respect of IAS 32 and IAS 39. This
transitional adjustment is to fair value account as at the balance sheet date in
respect of forward foreign currency purchase contracts held by the Group
resulting in a derivative financial liability being recognised.
4. As per adjustment 3 above, the Group has fully adopted IAS
32 and IAS 39 and consequently has applied a fair value adjustment in respect of
interest free loans as at the date of transition to reflect the cost of the
interest free loans if interest rates were applied based on the borrowing
facilities available to the Group at the date of transition. The loans are
subsequently accounted for at amortised cost as required by IAS 39.
5. Deferred tax liability arising on unremitted earnings of an
associate in accordance with IAS 12 as the Group has no control over when
earnings are to be remitted back to the Group.
Significant changes to the cash flow statement for the 53 weeks ended 30 April
2006
None of the adjustments arising from IFRS relates to cash and therefore there is
no impact on reported cash flows.
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