SPORTS DIRECT

(https://www.ft.com/content/42dcd91f-0dfd-3627-adc7-41cfd5837003)
JUNE 8, 2017
Sports Direct has added to its portfolio of US investments, increasing its stakes in a footwear retailer and a brand licensing company The British chain run by billionaire founder Mike Ashley now has an economic interest equivalent to 13.25 per cent of Iconix, owns a range of niche clothing brands including Artful Dodger and London Fog. It also holds the equivalent of 18.85 per cent of Indiana-based Finish Line, which operates 660 sportswear stores across the US, according to a regulatory filing issued on Wednesday afternoon. Some Sports Direct shareholders have privately expressed unease at the retailer’s march into the US, a country that has humbled British retail giants including Tesco and Marks and Spencer. Sports Direct said the “main rationale for these stakes is to allow Sports Direct to hopefully build a relationship and develop commercial partnerships with the relevant parties”. Both investments are held through derivative contracts.

https://www.ft.com/content/f2435854-3be4-11e7-ac89-b01cc67cfeec

Sports Direct makes about one-third of its revenue from its 233 stores outside the UK, but its overseas expansions have not always gone smoothly. Analysts have said a 2013 move into Austria was met with scepticism from local consumers, who preferred high-end brands to Mr Ashley’s offerings, which are typically made in Far Eastern factories and stamped with in-house brands such as Everlast and Karrimor

APRIL 22, 2017
https://www.ft.com/content/e80a2af8-26a3-11e7-a34a-538b4cb30025
Eastern Outfitters
it would pay $101m to take the company out of Chapter 11 bankruptcy proceedings. It is a bold move in a country where at least two retailers have entered bankruptcy this month alone

Mr Ashley’s overseas forays have so far met with mixed success; his investments in the Baltics have gone well but ventures in Austria have been less lucrative. And although he is no stranger to buying distressed assets, it is not generally easy for shareholders to tell how well they have subsequently recovered. Republic, a 116-store UK fashion chain bought out of administration in 2013, now forms just one part of Sports Direct’s premium brands business.
https://www.ft.com/content/7571f3c4-031a-11e7-ace0-1ce02ef0def9

the company entered what bankers said appeared to be a derivatives contract designed to allow the retailer to keep some of the upside from any sterling recovery while shielding against further falls. But that plan went awry in October, when the pound lost 6.1 per cent in two minutes of stormy Asian trading that stripped away the protection that Sports Direct had belatedly put in place, and triggered a £15m profit warning. Mr Ashley has previously used financial instruments such as options and “contracts for difference” to acquire economic interests in rival retailers such as Debenhams and Findel. In December, chairman Keith Hellawell, who has remained in post thanks to the backing of Mr Ashley, blamed an “extreme political, union and media campaign waged against this company” for damaging Sports Direct’s reputation and influencing its customers.

a list of bad news

MASH Holdings Limited holds an interest in 26,492,540 ordinary shares of the issuer (representing 4.90% of the voting rights of the issuer). 

MASH Beta Limited, a controlled undertaking of MASH Holdings Limited, holds an interest in 303,507,460 ordinary shares of the issuer (representing 56.18% of the voting rights of the issuer).

In aggregate, MASH Holdings Limited and MASH Beta Limited hold interests in 330,000,000 ordinary shares of the issuer (representing 61.09% of the voting rights of the issuer).

MASH Holdings Limited is wholly owned by Mike Ashley.
From 60% to 61% (total direct and indirect)

Mike Ashley’s Sports Direct has snapped up an 11 per cent stake in French Connection, making the sporting goods group the second-largest shareholder in the struggling UK fashion retailer.

Total shares:593M; 1.63B

The maximum number of shares that may be purchased under the Programme will be 86,324,793 ordinary shares, being the maximum number of shares that may be purchased under the authority granted to the Company by shareholders at the Company’s annual general meeting on 7 September 2016 less the total number of shares purchased under that authority to date. The aggregate purchase price of all shares acquired under the Programme will be no greater than £258,974,379. [about 15%]

File: SPD 2016-annual-report-accounts – flattened.pdf

Each year Sports Direct’s c.29,000 people work together
Sports Retail like-for-like stores gross contribution decreased by 0.8% (FY15: increased by 7.4%)
Underlying earnings per share decreased by 8.7% to 35.5p
Net debt increased to £99.6m (£59.7m at 26 April 2015)
The Group has delivered a disappointing full year financial performance, impacted primarily by a tough trading environment in the second half across our Sports Retail businesses.
COMPLETED THE ACQUISITION OF REMAINING 50% OF THE HEATONS IRISH BUSINESS
In the UK, we also operate 30 fitness gyms, of which three are combined with retail destinations, as we seek to enhance and broaden our customer offer.
totalling c.8.25m sq. ft. in retail space.
700 stores and concessions
leading global contemporary and luxury retail brands through our fascias in the UK: Flannels, USC, Cruise and van mildert
PREMIUM LIFESTYLE 6% Total Revenue £181.2m Down 12.7%
decision of the Chief Executive, Dave Forsey, to forego the vesting of 1m shares due to him in September 2017 under the Executive Share Scheme;this decision is very much reflective of the Executive Directors sharing risk with shareholders and taking responsibility for results that fell short of their expectation.
it is with regret that I note that we did not achieve the FY16 EBITDA target of £420m in relation to the Group’s 2015 Share Scheme for eligible employees.
strategic investment interest in Debenhams Retail plc
Mike Ashley has confirmed to the Board that he has no current intention of taking the Company private
high performance and high reward culture
Our values are: operating as one team; planning for success; striving to lead and energise others; doing things the right way; creating a good impression; wowing our customers; and, delivering results.
Our Group Brands include Karrimor, Slazenger, Dunlop and Everlast
Sports Retail like-for-like stores  gross contribution (2) -0.8% +7.4% +10.5% [16-15-14]
During the year we completed the acquisition of the remainder of the Heatons business in Northern Ireland and the Republic of Ireland for consideration of €48.0m.
we also acquired a standalone gym in West London to add to our Fitness Division.
The depreciation charge has increased by 41.0% to £95.6m (FY15: £67.8m) due to the acquisition of the controlling interest in Heatons and increased investment in our store portfolio.
The Group generated underlying free cash flow during the year of £309.1m, up from £301.8m in the prior year, and net debt increased by £39.9m to £99.6m at year end as a result of investment in inventory, freehold property and the acquisition of Heatons. Net debt currently stands at 0.31 times reported EBITDA (26 April 2015: 0.16 timesArea (sq. ft)(3) c.8.25m c.7.75m
Underlying EPS 35.5 38.9
exceptional items which decreased profit by £50.8m; (ii) investment income which increased profit by £146.5m


During the year, capital expenditure amounted to £207.1m (FY15: £100.3m), which includes £115.3m on freeholds and construction costs relating to our Shirebrook warehouse.
During the year the Group disposed of c.11.6m shares in JD Sports Fashion plc. At the year-end the Group held a 5.4% stake in JD Sports Fashion plc.
During the year the Group acquired 16.4m shares and an economic interest in Findel plc and disposed of 1.5m shares during the year.  At the year-end the Group held a stake of 29.9% in Findel plc.
In January 2016 the Group acquired c.2m shares (including an economic interest) in Dicks Sporting Goods Inc., representing c.2% of the issued share capital of Dicks Sporting Goods Inc.
The fair value of equity derivative agreements is included within the derivative financial assets balance of £82.5m.
All above percentage holdings are inclusive of economic interests held through contracts for difference.

 it had utilised its £250m loan facility (MALF) with Mike Ashley/Mash Holdings Limited. The rate of interest payable on this facility was c.50% lower than that payable on the RCF
During FY16 22.0% of our UK salaried staff left the Group, an increase from 18.7% in FY15
Store Manager stability with Sports Direct is currently sitting at 80.4%, this is a decrease of 12% on the FY15 figure. Assistant Manager and Footwear Manager stability currently sit at 79.8% and 83.5% respectively, which is a decrease of 6% and 7% across the positions.

The Group was authorised to make market purchases of ordinary shares of 10p each in the Company of up to a maximum aggregate number 59,846,486 representing 10% of the Company’s issued ordinary share capital at the 2015 AGM. The above authority expires at the close of the next AGM of the Company.

Mike Ashley (1) 330,000,000 55.14%

Executive Directors must now hold a minimum shareholding of 50,000 while they remain employed by the Company

Dave Forsey 50,000

Weighted average number of shares (actual) 592, 573,254; 592, 294,371

 PROPERTY, PLANT AND EQUIPMENT 585M; Among them: Freehold land and buildings: 358M; Plant and equipment: 156M

 

The profit on disposal of available-for-sale financial assets mainly relates to the profit on disposal of JD Sports Fashion plc shares in  the period.

During the year the Group disposed of c.11.6m shares in JD Sports Fashion plc but at the year-end continued to hold a 5.10% stake in JD Sports Fashion plc ordinary shares.

During the year the Group disposed of all 5.3m shares in Debenhams plc as at 24 April 2016 the Group had a direct interest of nil% in Debenhams’ ordinary shares.

In September 2015 the Group acquired 16.4m shares in Findel plc for representing 18.96% of the issued share capital of Findel plc with disposals during the year of 1.5m shares, at the year-end the Group held a direct stake of 17.22%.

In February 2016 the Group acquired 2.0m shares in Dicks Sporting Goods Inc. representing 2.22% of the issues share capital of Dicks Sporting Goods Inc and disposed of 1m shares during the year. At the year end the Group held a direct interest of 1.11%.

The fair value of the Group’s holdings at 24 April 2016 was £193.4m (26 April 2015: £140.8m). The movement in the fair value of the shares held has been recognised directly in Other Comprehensive Income.

These stakes allow us to develop relationships and commercial partnerships with the relevant retailers and assist in building relationships with key suppliers and brands.

The fair value of equity derivative agreements is included within the derivative financial assets balance of £82.5m.

acquisition of the remaining 50% of the Heatons group Total consideration was €47,950,000 (£35,251,000).

Net cash outflow in the cash flow statement 24,013
Profit before tax 3,90
£935,000 of legal costs relating to the acquisition were expensed in FY16.

On 25 April 2016, the Group purchased a property on Oxford Street for a total £108,000,000