Sports Direct posts 23 percent growth in underlying PBT

Sports Direct Group revenue was up 4.7 percent to 1,714.6 million pounds (2,303 million dollars), which the company said was aided by favourable euro exchange rates and the acquisition of Bob's Stores and Eastern Mountain Sports during the period, offset by store closures as part of the continued elevation of the portfolio. Group underlying PBT for the period also increased by 22.9 percent to 88 million pounds (118 million dollars) and underlying EPS increased by 32.9 percent to 11.3p. Reported profit before tax decreased by 67.3 percent to 45.8 million pounds (61 million dollars) and reported EPS similarly decreased by 68.6 percent to 4.9p.

Commenting on the interim first half results, Mike Ashley, Chief Executive of Sports Direct International said in a statement: "Our high street elevation strategy is currently delivering spectacular trading performance within our flagship stores. We intend to open between 10 and 20 new flagship stores next year. We continue to anticipate that growth in underlying EBITDA during FY18 will be within our forecast range of 5 percent to 15 percent."

Highlights of Sport Direct’s H1 results

Excluding acquisitions, the Dunlop disposal and on a currency neutral basis, group revenue was up 1.2 percent. Gross margin for the period decreased 180 basis points to 38.6 percent due to the impact of increased stock provisions and continued impact of the USD exchange rate. Group operating costs decreased by 3.9 percent to 496.5 million pounds (666 million dollars). Excluding acquisitions and disposals and currency neutral, operating costs were down 3.5 percent. As a result, the company said, group underlying EBITDA increased by 7.4 percent to 156.1 million pounds (210 million dollars).

UK sports retail sales, the company added, fell by 1.4 percent due to reduced online promotional activity and store closures as part of the continued elevation of the portfolio. Retail gross margin decreased by 80 basis points to 39.4 percent. The international sports retail division includes the group's sports retail store management and operations outside of the UK, including the group's European distribution centres in Belgium and Austria, but excludes the new acquisition in the US. International sports retail achieved sales growth of 4 percent due to the translation of sales at an improved EUR/GBP exchange rate. On a currency neutral basis, revenue decreased by 0.8 percent, mainly due to store closures.

International sports retail underlying EBITDA increased to 15.6 million pounds (21 million dollars) against 10.7 million pounds (14 million dollars) loss in the same period last year.

Sports Direct completes Bob’s Stores and Eastern Mountain Sports acquisition

On May 18, 2017, the group completed the acquisition of the trade and assets of Bob's Stores and Eastern Mountain Sports in the US. This retail chain, the company said, consists of 49 retail stores and will provide Sports Direct with a footprint in US bricks-and-mortar retail and a platform from which to grow US on-line sales. US retail's underlying EBITDA is made up of 5.5 million pounds (7 million dollars) of trading losses as group processes and strategies are implemented, and 17.5 million pounds (24 million dollars) of losses relating to fair value accounting adjustments and accounting policy alignments.

The group's premium lifestyle division includes the group's premium lifestyle fascias in the UK: Flannels.com, Cruise and van mildert along with their ecommerce sites. Sales in the period were up by 65.5 percent to 67.7 million pounds (91 million dollars) due to the increased sales through the Flannels.com website and new stores. Gross margin decreased to 31.8 percent. Operating costs increased by 34.2 percent due to new Flannels stores. As a result, underlying EBITDA reduced from 0.9 million pounds (1.2 million dollars) to 0.7 million pounds (0.9 million dollars).

The brands division operating heritage group brands, wholesale and licensing relationships across the world, as well as our partnerships with third party brands saw total revenue decrease by 13.9 percent to 97.2 million pounds (130 million dollars). Wholesale revenues were down 15.7 percent to 80.6 million pounds (108 million dollars). Licensing revenues in decreased 4 percent to 16.6 million pounds (22 million dollars). Underlying EBITDA in the division increased to 17.3 million pounds (23 million dollars) during the period under review.

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