Sports Direct (lon:spd)
Sports Direct – It Is Not Our Fault!

Sports Direct Financials

ItemCurrent PeriodPrevious Period
Adjusted Earnings
Adjusted EBITDA
Statutory Profit£116m£23m
Adjusted Profit
Total Debt£826m£751m
Net Debt£378m£391m

Commentary History
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Sports Direct Share Price
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Title: Sports Direct – It Is Not Our Fault!
Company: SPD - Sports Direct
Share Price Then: 229p
Author: Ian Smith
Date: Sun 28 Jul 2019
Comments: Two things stood out for me in the latest Preliminary Results;

Firstly that revenue in the year to April 2019 is basically unchanged except for an additional £330 million added by House Of Fraser.

The House Of Fraser acquisition is reported as underlying EBITDA decreased by 6.0% to £287.8m, excluding House of Fraser, underlying EBITDA grew 10.9% to £339.4m. House Of Fraser is now a group company and cannot simply be discounted because the results were not good.

Secondly the almost petulant complaints over Debenhams, business rates and the way that Sports Direct are treated, there is so much of this that you need to read the report to see what I mean.

….We had tried to establish a dialogue with their Board for a long period of time….They were completely averse to any kind of serious engagement with us and during the restructuring process had ceded control to the highly paid advisors who were concentrating on delivering one result only….

and ...Sports Direct Group can move on bruised but unhindered..... seems a quite causal attitude to the loss which is reported elsewhere as being £150million, £85 million being written of last year.

There is also ….we call on the government to overhaul the antiquated rates system… and with regard to Goals …. however the foul mouthed tirade and aggressive posturing of Chris Mills to the Sports Direct representative..

The annual report mentions an “elevation strategy” as far as I can tell this means not devaluing brands by selling them cheaply in basic stores and the concerns that these brands have that this is still happening. …However, we believe that having carried out our part of the plan with best intent we have not yet been granted access to the premium product as quickly as we feel these stores deserve…, again “its not our fault”.

Despite Debenhams and HoF acquisitions continue, On 21 June 2019, the Company through its wholly owned subsidiary Retail Limited, completed the acquisition of Limited and subsidiaries for consideration of £1. I can see how sits comfortably in our wider plans for House of Fraser. sellings sofas in HoF may make sense, but I don't see the expertise in Sports Direct to directly manage the business. Nor does the brand have the credibilty of Slazenger, Karrimor etc where the name can be put onto generic products.

Surely you can’t keep buying businesses that are failing just because they are cheap.

I can see the sense in the group having a stronger presence in cycling, but the Evans name is not a household name and It is noticeable that many of the bicycle brands seem to have some sort of agreement that sees very little discounting.

For example look at Specialized on line and in local shops and they are usually all the same price for the current model year.

There has also been a sale and leaseback of On 21 June 2019, sold £120 million of space and took on a 15 year lease on it

Just to add to the woes there has been notice that there may be a €674m tax bill from the Belgian authorities, “less than probable” that they will pay penalties still suggests £200 million bill to me.

No dividend is being paid, continuing a confusing situation over the last couple of years.

I can’t help but feel that the Sports Direct brand is the profit making core and the group would be better of selling everything else and concentrating on developing and expanding that business.
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