REG - Sports Direct Intl. - Final Results <Origin Href="QuoteRef">SPD.L</Origin> - Part 1

FrasersAnnouncement

16/07/2015 15:35

RNS Number : 1855T
Sports Direct International Plc
16 July 2015
16 July 2015
Sports Direct International plc
Preliminary Results for the Year ended 26 April 2015
Sports Retail gross margin up 170 basis points; Group Underlying EBITDA up 15.7% 

Year ended 
26 April 2015
Year ended 
27 April 2014
Change 
(%)

m
m

Group revenue
2,833
2,706
4.7%
Sports Retail
2,399
2,274
5.5%
Premium Lifestyle
208
214
-3.0%
Brands
226
218
4.1%
Group gross margin
43.8%
42.7%
110 bps
Sports Retail gross margin
44.6%
42.9%
170 bps
Underlying EBITDA (pre share scheme costs)
383.2
331.1
15.7%
Underlying profit before tax (PBT)(1)
 300.3
 249.3
20.5%
Reported profit before tax
313.4
239.5
30.9%
Underlying earnings per share (EPS)(1)
38.9p
32.1p
21.2%
Reported earnings per share
40.6p
30.8p
31.8%
Net debt
59.7
212.0
(71.8%)
Key highlights
 Sports Retail gross margin increased by 170 bps to 44.6%
 Group underlying EBITDA increased by 15.7% to 383.2m(1)
 Underlying profit before tax up 20.5% to 300.3m (1)
 Underlying free cash generation of 301.8m(2)
 Sports Retail like-for-like stores gross contribution increased by 7.4% (FY14: 10.5%)(3)
 Continued roll-out of large format city centre stores
 Successful UK launch of Click and Collect in FY15 H2
 Record EBITDA achieved v. 4th year Share Scheme target
 Net debt decreased to 59.7m(4)
Dave Forsey, Chief Executive, said:
"The Group has delivered another solid set of results in spite of challenging trading conditions including the adverse impact on performance during the period of England's early departure from the FIFA World Cup in Brazil and unseasonably mild weather during Autumn, reducing footfall.
"However, with our ongoing focus on providing customers with exceptional quality and unbeatable value, we have continued to grow Group revenues and EBITDA and have succeeded in surpassing our fourth and final EBITDA target under the 2011 Share Scheme. The first of these awards will vest with participants in September 2015 and the second in September 2017. We owe our continued success to the commitment and hard work of those participants and we are delighted that we are able to reward them in this way.
"Trading since the period end has been in line with management expectations and will continue to be driven by improvements in product range and availability, optimisation of both our in-store and web offerings, the introduction of Click and Collect in the UK and further investment in our store portfolio." 
(1)
Underlying EBITDA, underlying profit before taxation and underlying EPS exclude realised foreign exchange gains/losses in selling and administration costs, exceptional costs and the profit/loss on sale of strategic investments. Underlying EBITDA also excludes the Share Scheme charges.
(2)
Underlying free cash generation is defined as operating cash flow before working capital, made up of underlying EBITDA (before Share Scheme costs) plus realised foreign exchange gains and losses, less corporation tax paid. 
(3)
Excludes contribution in EAG and SIG as the prior year comparative is not a full year. 
(4)
Net debt is borrowings less cash held 
Sports Direct International plc
Dave Forsey, Chief Executive
Matt Pearson, Acting Chief Financial Officer
T: 0344 245 9200
Powerscourt
Rory Godson
Victoria Palmer-Moore
Lisa Kavanagh
T: 0207 250 1446


CHAIRMAN'S STATEMENT
I am pleased to report the Group has once again achieved another solid result, delivering growth in both Group revenues and EBITDA.
EXPANSION
The construction of Phase Three of our Shirebrook campus expansion is now well underway. It consists of an additional warehouse and office facility, spanning a c.700,000 sq. ft. footprint. Occupancy of the first warehouse area is about to commence, with population of the remaining areas of the warehouse planned for later in 2015, on schedule. We have also commenced work on an additional retail unit and training centre at our Shirebrook campus, with completion anticipated for late 2015. The expansions will have a range of benefits for the Group, including an improved environment for staff training.
Our Oxford Street store has now been open for over 12 months and has been well-received by both customers and suppliers. The property, which was the former HMV Flagship store, allows us to trade over four floors, with c.50,000 sq. ft. of retail space. Our Glasgow City Centre store has undergone an extension of approximately 28,000 sq. ft., more than doubling its previous footprint and we have collaborated with Under Armour to offer our customers an exceptional shopping environment. We have also recently acquired the freehold of the c. 50,000 sq. ft. former Primark store in Leeds, which is expected to open this summer.
We are confident in the success of the format used in the stores, which we intend to roll out further.
Our fitness division now has 27 fully operational gyms across England. During the year the Group purchased 25 former LA Fitness gyms, and developed an additional two gyms with separate retail premises, ensuring that customers can purchase their everyday gym essentials on site. 
STRATEGIC INVESTMENTS
Strategic investments are an integral part of the Board strategy to explore new opportunities to bring our product to market. 
The Group enhanced its relationship with Debenhams during the year with the purchase of an additional strategic investment in the business, increasing our beneficial interest from 6.6% to 15.0% at the year end date of 26 April 2015, which has subsequently reduced since the year end to 10.5%. We are currently trialling four concessions within Debenhams stores. 
SHARE SCHEMES
I am pleased to confirm that we have achieved the final Adjusted Underlying EBITDA target under the 2011 Share Scheme and Executive Share Scheme. We hope to reward participating employees under the 2011 Share Scheme for their loyalty and motivation by way of share awards. The first award under the 2011 Share Scheme is due to vest later in 2015, which will distribute c.5m shares to c.2,000 participating employees. The Group's Share Schemes are some of the most generous schemes in the country, and are key tools in motivation and retention.
To the extent that a significant number of participating employees elect to sell some or all of their shares, whilst the Company has no obligation to buy back the shares, the Board will consider a number of options open to it, including whether to: (i) implement an on-market buy back of shares pursuant to the authority given by shareholders at the Company's AGM in 2014; or (ii) fund the Company's Employee Benefit Trust so as to allow it to acquire shares in the market to replace those shares transferred to participating employees pursuant to the vesting. 
As part of our strategy to closely align the interests of our team with those of our shareholders, the 2015 Share Scheme was approved by shareholders at a General Meeting in July 2014. The vesting of awards under the 2015 Share Scheme is conditional upon the achievement by the Group of four demanding EBITDA targets, which span between FY16 and FY19. The awards will vest in 2019 and 2021, subject to successful completion of all four targets, and other specific performance conditions. The Executive Deputy Chairman, Mike Ashley, withdrew from the scheme during FY15. Mike remains fully committed to the achievement of the Scheme's targets, but would like the focus to be on ensuring that the Scheme aligns with the wider Sports Direct team, and therefore chose to remove himself from the Scheme.
As we enter FY16 it is clear, and also understood by the market, that planned acquisitions in FY15 did not fully materialise. Following its recent review the Board now recommends to shareholders a revised FY16 Adjusted Underlying EBITDA target of 420m, rather than the existing target of 480m which is now considered to be unreasonably challenging. This compares to the Underlying EBITDA of 383m achieved in FY15. All other targets for the further three years of the Scheme remain the same. The Board will continue to review the robustness of the 2015 Share Scheme on an annual basis.
THE BOARD
During July 2014, it was announced that Charles McCreevy, a Non-Executive Director of the Group, would not be standing for re-election at the 2014 AGM. Charlie, who had spent over three years with the Group, had extensive all-round business knowledge, with particular relevance to Competition Regulations. I would like to thank him for his valuable contribution to the Board. We are in the process of appointing a replacement and hope to make an announcement within the near future.
I am delighted to welcome Matt Pearson to the Board in the position as Acting Chief Financial Officer. Matt joined the business over eight years ago and since then has gained an in depth knowledge of the finances of the Group. Matt has been leading our Group Finance Team for several years and is therefore perfectly placed to take on the additional responsibilities of this role.
CASUAL WORKERS
Much of the comment regarding the Group's use of zero hour contracts has been unfounded and inaccurate. We comply fully with all legal requirements which relate to casual workers, including sick pay, holiday pay, and freedom to gain other employment. Casual workers also participate in general incentive schemes. 
DIVIDEND
The Board has decided not to propose a dividend in relation to FY15. The Board remains of the opinion that it is in the best interests of the Group and its shareholders to preserve financial flexibility, facilitating the pursuit of potential acquisitions and other growth opportunities. The payment of dividends remains under review in future years.
CONCLUSION
Despite ongoing challenging market conditions, and the weather, we yet again exceeded our targets in FY15. Such success, year on year, is a testament to the hard work and dedication of all our workforce for which the Board thank and congratulate them.
Dr. Keith Hellawell. QPM
Non-Executive Chairman
16 July 2015 


chief executive's report and business review
Summary of Results

Year ended 
26 April 2015
Year ended 
27 April 2014
Change


(m)
(m)
%

Revenue
2,832.6
2,706.0
4.7

Underlying EBITDA
383.2
331.1
15.7

Underlying profit before tax
300.3
249.3
20.5

Reported profit before tax 
313.4
239.5
30.9


Pence per share
Pence per share


Underlying EPS
38.9
32.1
21.2

Reported EPS
40.6
30.8
31.8

The Directors believe that underlying EBITDA, underlying profit before tax and underlying earnings per share 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 and amortisation and, therefore, 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.
Overview of financial performance
I am pleased to report that, despite the adverse impact on performance of England's early departure from last year's FIFA World Cup in Brazil and the unseasonably mild weather during Autumn reducing footfall, the Group has, yet again, succeeded in delivering another solid set of results.
The group has achieved another year of revenue and profit growth in a challenging retail environment, driven by continued expansion both in the UK and across Europe. During the year we have increased our store portfolio in the UK by 23 stores and have added a further nine stores to our European store portfolio. We have also continued to develop large city centre format stores.
We have also established a Fitness Division in the year, Sportsdirect Fitness.com, comprising 27 gyms including two combined gym and retail sites.
I am delighted to announce that the Group has now met the final target under the 2011 Share Scheme. The first award under this scheme is due to vest later in 2015 and will reward over c.2,000 participating employees for their hard work and dedication. The Group's continued success truly re-iterates how important the Share Schemes have been in motivating participants to work towards a shared goal.
Group
Group revenue increased by 4.7% to 2,832.6m in the year. This was primarily due to the Sports Retail division, where we grew revenues by 5.5%. Premium Lifestyle revenue fell by 3.0%, largely due to the closure of loss-making stores in the period.
Group gross margin in the year increased by 110 basis points from 42.7% to 43.8%. Sports Retail division gross margin increased by 170 basis points to 44.6% (FY14: 42.9%), while Brands division gross margin decreased to 40.3% (FY14: 43.1%).
Group operating costs increased 4.2% to 860.5m (FY14: 826.1m). We continue to balance revenues and gross margin, while maintaining a tight focus on operating costs and as a result grew Group underlying EBITDA (pre-scheme costs) for the year by 15.7% to 383.2m (FY14: 331.1m). Within this underlying EBITDA, we increased the Retail division EBITDA by 16.0% to 349.1m (FY14: 300.9m) while the Brands division EBITDA increased by 12.9% to 34.1m (FY14: 30.2m).
Excluded from underlying EBITDA is an 10.1m (FY14: 11.9m) charge in respect of the 2009 and 2011 Share Schemes. This charge has been taken centrally and, except in note 4 to the Annual Report, is not reflected in the divisional (Retail and Brands) numbers in this report. 
For the year, Group underlying profit before tax increased 20.5% to 300.3m, primarily as a result of the 52.1m increase in EBITDA (pre-scheme costs). Underlying EPS for the year increased by 21.2% to 38.9p (FY14: 32.1p). 
Net debt at 26 April 2015 was 59.7m (27 April 2014: 212.0m), which is 0.16 times reported EBITDA (27 April 2014: 0.66 times). Reported EBITDA includes realised foreign exchange gains/losses in selling and administration costs and the Share Scheme charges.
Review by business segment

Year ended
26 April 2015 
(m)
Year ended
27 April 2014 
(m)
Change
%

Retail




Revenue:




Sports Retail
2,398.6
2,274.4
5.5

Premium Lifestyle
207.6
214.1
-3.0

Total retail revenue
2,606.2
2,488.5
4.7






Cost of sales
(1,456.6)
(1,427.3)
2.1






Gross profit
1,149.6
1,061.2
8.3

Gross margin percentage
44.1
42.6
150 bps







Year ended
26 April 2015 
(m)
Year ended
27 April 2014 
(m)
Change
%

Brands




Revenue:




Wholesale
193.3 
185.2 
4.4

Licensing
33.1
32.3
2.5

Total brands revenue
226.4
217.5
4.1






Cost of sales
(135.2)
(123.8)
9.2






Gross profit
91.2
93.7
-2.7

Gross margin percentage
40.3
43.1
-280 bps

Sports Retail
Sports Retail revenue has grown in the period as we continue to invest in product range and availability, increasing the proportion of 'better' and 'best' Group branded products, optimise both our in-store and web offerings and further invest in our store portfolio. 
Sports Retail sales grew 5.5% to 2,398.6m (FY14: 2,274.4m), driven largely by growth in the UK, offset by a weak Winter sports season across Europe and adverse foreign currency movements. Sports Retail gross margin for the year increased by 170 basis points to 44.6% (FY14: 42.9%).This increase is primarily attributable to on-going investment in our 'better and best' product ranges, further enhanced by efficiencies gained by our strong supply chain disciplines. 
Sales in the second half of the year were up 2.6% to 1,167.6m (FY14 H2: 1,138.3m). Gross margins for the second half of the year improved to 44.6% (FY14 H2: 42.5%). 
Sports Retail like-for-like gross contribution, which excludes online, increased by 7.4%(1), marking the sixth consecutive year of growth in this KPI (FY14: +10.5% / FY13: +10.6% / FY12: +0.7% / FY11: +6.8% / FY10: +3.7%). Sports Retail like-for-like contribution is defined as the percentage change in gross contribution in the successive 12-month period. A like-for-like store is one that has been trading for the full 12 months in both periods and has not been affected by a significant change, such as a major refurbishment. The number of stores included in this year's KPI is 432 (FY14: 339).
Sports Retail operating costs increased by 9.0% in the year to 715.2m (FY14: 656.3m) compared to a 5.5% increase in sales and a 9.7% increase in gross profit due to the full year impact of proportionally higher costs in our recently acquired European businesses. Operating costs in H2 increased by 4.6% to 361.4m (FY14 H2: 345.5m) compared to a 2.6% increase in sales and a 7.7% increase in gross profit.
Store wages were up 13.1% in the year to 239.2m (FY14: 211.4m) but as a percentage of sales increased only to 10.0% (FY14: 9.3%) due to the annualised effect of new store openings combined with the full year impact of proportionally higher costs in our recently acquired European businesses and reduced sales due to a difficult winter sports season in Europe. Sports Retail store premises costs increased by 9.5% to 211.0m (FY14: 192.7m), due to investment in new stores and the full year effect of comparatively higher costs in our new European businesses. Other operating costs were up 14.2% to 280.8m (FY14: 246.6m), increasing as a percentage of sales to 11.7% (FY14: 10.8%) due to costs in our recently established Fitness division.
The currency impact on operating costs of the change in the Euro: Sterling exchange in our European businesses was a gain of 15.7m (FY14: a cost of 5.6m).
Underlying EBITDA for Sports Retail was 356.8m (FY14: 321.3m), an increase of 11.0% for the year. This increase was driven by a 94.2m increase in gross profit due to the growth in store contribution and online sales, offset by the 59.0m increase in operating costs.
The Group's retail businesses performed strongly in a difficult economic environment. Our retail model, offering outstanding value to our customers, remains resilient, both in the UK and internationally. Throughout the year, we continued to focus on offering our customers the most comprehensive product range, the best availability and value while minimising operating costs as a percentage of gross sales.
Online revenue has increased by 14.4% from 335.4m to 383.8m in the year, driven largely by the successful launch of Click and Collect in the UK during the second half of the year, which now accounts for over 20% of all UK online orders. This performance is exceptional considering we charge 4.99 for this service. Online sales represented 16.5% of Sports Retail sales (FY14: 15.1%), excluding wholesale sales. 
Our mobile site continues to drive sales and was recently ranked in the top four retailers in the FTSE 100 in terms of mobile website performance, according to a recent study released by The Search Agency (2). Mobile traffic now accounts for over 50% of all online visits. We have also re-designed our checkout, introducing a guest checkout option and streamlining the checkout process.
We have worked hard to improve the customer experience in Europe, widening the language and currency conversion options on our sites for non-English speaking countries and going forward plan to introduce dedicated websites for our European businesses and additional payment methods including Ideal, Giro and Sofort. 
Following successful trials during the year, customers are now able to purchase and redeem gift cards online. We are also working towards the introduction of a fast pay check out system, allowing customers to purchase a large number of products in small number of clicks.
The division has continued to expand, with the development of Sportsdirect Fitness.com, comprising 25 standalone former LA Fitness gyms and an additional two new build combined retail and gym spaces. A further two gyms in St Helens and Dundee are planned for early autumn 2015. Membership continues to grow and we have already surpassed our full year targets. 
We have continued to invest in employee training, with a key focus this year on our "Home Grown" Talent Management programme, Customer Service Training and Management Induction. During the year over 58,000 hours were invested into training and developing our employees. A great deal of this training took place at our Training Academy on our Shirebrook campus, which is the only training centre in the world supported by both Nike and Puma. We are committed to the continued development of our employees, always aiming to promote internally wherever possible, and during the year ran our first Graduate Recruitment Programme, 'Talent Bank', where graduates were placed in our Finance and Ecommerce teams for eight week summer placements and offered the opportunity to compete for a permanent role, with the best being rewarded.
Phase Three of the development of ourNational Distribution Centre in Shirebrook, the construction of an additional c.700,000 sq. ft. footprint warehouse and office facility, is now well underway, with completion scheduled for late 2015.
We have worked hard to enhance and invest in our store portfolio during the year, with a particular focus on larger city centre stores. During the year we re-located our Oxford Street store to the c.50,000,sq. ft. former HMV store and have completed a c.28,000 sq. ft. extension of our Glasgow store, which includes a store in store concept area with Under Armour. We have recently also acquired the freehold of the former Primark store in Leeds. Works are currently underway on this four floor, c. 50,000 sq. ft. store which is due to open this Summer.
During the year we opened 39 stores in the UK, closing 16 and have opened an additional 16 stores in Europe, closing seven. Twelve out of the sixteen UK closures were relocations into larger and better configured space. 428 of the UK store fascia are now branded SPORTSDIRECT.com, an increase of 27 from last year (FY14: 401).
Period end square-footage increased to c.4.75m sq. ft (3). (FY14: c.4.5m) in the UK and remained at c. 3.0m sq. ft. (4) (FY14: c.3.0m sq. ft.) across the rest of Europe. 


UK Stores
Store Portfolio
As at 26 April 2015
As at 27 April 2014



Stores at Year End
440
417



Opened
39
32
Closed
16
11



SPORTSDIRECT.com fascia
428
401
Other
13
17
Area (sq. ft.)
c.4.75m (3)
c.4.5m



In the 52 weeks to 26 April 2015, rent reviews have been agreed on 33 stores, of which 26 stores were agreed at nil increase. Of the remaining seven stores the average increase in rent was 13.87%, giving a total average increase over the 33 stores of 2.88% (0.57% annual equivalent). There are currently 52 rent reviews outstanding with a further 42 falling due in FY16. Our lease expiry profile over all leasehold stores (excluding Lillywhites Piccadilly) is now 4.6 years, including 37 stores with contractual expiries or break dates within the next 12 months. This significant amount of flexibility within our portfolio allows us to continue to monitor and adapt our format to the rapidly changing multi-channel environment.
In the current financial year, we are targeting to open between 30 and 40 stores, c.30% of which are expected to be relocations. We are also targeting to re-fit c.300,000 sq. ft. of retail space across the UK.
International Stores
Store Portfolio
26 April 2015
27 April 2014



Austria
46
52
Belgium
43
44
Estonia *
24
20
Latvia *
13
13
Lithuania *
12
12
Portugal
17
15
Slovenia
15
15
Poland
10
7
France
7
6
Czech Republic
6
4
Holland
6
6
Cyprus
6
5
Hungary
5
4
Slovakia
4
3
Germany
3
3
Luxembourg
2
2
Spain
1
1
Switzerland
1
-



Total
221
212
Note: Excluding Republic of Ireland & Iceland


*Includes only stores with SPORTLAND or SPORTSDIRECT.com fascias
All of the above stores are operated by companies wholly owned by the Group, except Portugal, where the Group owns 50.1% and Estonia, Latvia and Lithuania where the Group owns 60.0%. During the year we have expanded our European store portfolio by nine stores and have entered one new country. As a result we are now active in 20 countries across Europe including the Republic of Ireland and Iceland.
In Austria, we have continued to relocate and upgrade the former Sports Experts stores which had been previously re-branded to the SPORTSDIRECT.com fascia. Over the coming year we will re-brand key Mega stores to the Lillywhites fascia, replicating our UK city centre store format across the re-branded stores in collaboration with key international brands such as Salomon. 
In the Baltic states we have already opened two stores in Estonia under the SPORTSDIRECT.com fascia and plan to open two further stores in Lithuania and one store in Latvia under the SPORTSDIRECT.com fascia. We have also continued to invest in re-locating and re-fitting the stores trading under the SPORTLAND fascia.
Our strategy remains to identify partners in new territories while continuing to expand our operations in the countries where we currently trade. For FY16, we are targeting to open between 20 and 30 new stores across seven countries.
The Group has a 50% shareholding in the Heatons chain which operates 15 Sports Direct stores in Northern Ireland and 27 sports stores in the Republic of Ireland. We also own a 40% shareholding in the Sports Direct business in Iceland.
Local management continue to work hard to ensure that all new and existing stores in Europe are committed to striving towards the operational efficiencies and standards that exist across our UK sports stores.
(1) Excluding EAG and SIG as the prior year comparative is not a full year
(2) The Search Agency UK's Mobile Experience Scorecard: FTSE 100 Companies - 
http://go.thesearchagency.com/mobile-experience-scorecard-ftse-100-2015
(3) Due to differing methodologies, this implies a range between 4.5m sq. ft. - 5.0m sq. ft.
(4) Due to differing methodologies, this implies a range between 2.5m sq. ft. - 3.5m sq. ft.
Premium Lifestyle
Premium Lifestyle sales decreased 3.0% to 207.6m (FY14: 214.1m), due to the closure of loss-making stores in the year. Premium Lifestyle gross margin for the year decreased by 150 basis points to 38.8% (FY14: 40.3%) due to online clearance of legacy stock in the year.
Premium Lifestyle operating costs decreased by 17.3% to 88.2m (FY14: 106.7m) due to the continued rationalisation of the USC and Republic businesses and synergies gained by the consolidation of key head office functions in Flannels.com, Cruise and Van Mildert and the integration of the distribution function.
The Underlying EBITDA loss for Premium Lifestyle decreased to 7.7m (FY14: 20.4m loss) as we began to see the benefit of the re-structuring of Republic in the prior year and rationalisation of the other businesses. We will see further benefits of this in the coming year. 
Online revenue in the division increased in the year, driven largely improvements in stock availability and system improvements. We saw the benefit of the integration of the division's eCommerce platforms with the Group's IT systems and the launch of the Flannels.com and USC mobile platforms in the prior year. We also successfully launched Click and Collect in USC during the year and over 15% of all USC online orders are now delivered via Click and Collect.
We continue to strengthen our relationships with key third party suppliers.
At the year end, the Premium Lifestyle division traded from 103 stores under four main fascias:
Store Portfolio
As at 26 April 2015
As at 27 April 2014
USC
66
90
Cruise
10
10
Van Mildert
10
9
Flannels.com
8
8
Other
9
9

103
126



Brands
The Group's brand portfolio includes a wide variety of world-famous sport, fashion and lifestyle brands. The Group's Retail division sells products under these Group brands in its stores, and the Brands division exploits the brands through its wholesale and licensing activities. The Brands division continues to sponsor a variety of prestigious events and retains a variety of globally-recognised, high-profile sportsmen and women as brand ambassadors.
Brands division total revenue increased by 4.1% to 226.4m (FY14: 217.5m). Wholesale revenues were up 4.4% to 193.3m (FY14: 185.2m), including growth in the challenging UK market. Trading in the US market was in line with expectations and continues to represent c. 40% of total wholesale sales.
Brands gross margin decreased by 280 basis points to 40.3% (FY14: 43.1%). Wholesale gross margins fell 310 basis points to 30.1% (FY14: 33.2%) largely due to a shift in the sales mix towards lower margin lines. 
Licensing revenues in the year were up 2.5% to 33.1m (FY14: 32.3m). During the year we signed 58 new licence agreements, covering multiple brands, product categories and geographies, with minimum contracted values of $25.0m over the life of the agreements. At 26 April 2015, the Group has 401 license agreements worldwide(1), across 264 licensees, with contracted minimums of $305m over the remaining life of the agreements.
Longer term, we still regard licensing as the key driver of Brands division profitability and central to the overall growth of the Brands business. The key growth areas are expected to include Australasia and Asia Pacific with the acquisition of the Dunlop & Slazenger brands in the region during the year. This combined with growth in the Americas should compensate for a more challenging licensing landscape in the UK and Europe, as Sports Retail continues to expand in these territories. 
Operating costs decreased by 9.7% to 57.0m (FY14: 63.1m) benefiting from the consolidation of our back office functions in the prior year. As a result of cost savings, underlying EBITDA increased by 12.9% to 34.1m (FY14: 30.2m).
We continue to focus on developing world-class products that are endorsed by leading athletes on the field of play and expect to spend between 10 and 20m on advertising and promotional costs in the coming year.
(1) Includes consolidation of agreements signed in prior years
Outlook
Trading since the year end has been in line with management's expectations, and underpins the 2015 Bonus Share Scheme's revised FY16 Underlying EBITDA target of 420m. The Group's performance continues to benefit from a number of factors including investment in product range and availability, with an increased emphasis on 'better' and 'best' Group branded products and the optimisation of our in-store and web offer, enhanced by the introduction of Click and Collect in the UK. We also continue to invest in our store portfolio, with the roll-out of further large format city centre stores.
Key Performance Indicators
The Board monitors the performance of the Group by reference to a number of key performance indicators (KPIs), which are discussed in this Chief Executive's Report and in the Financial Review. The most important of these KPIs are:
52 weeks ended
26 April 2015
52 weeks ended
27 April 2014
52 weeks ended
28 April 2013




Financial KPIs



Group revenue
2,832.6m
2,706.0m
2,185.6m
Underlying EBITDA (1)
383.2m
331.1m
287.9m
Sports Retail gross margin 
44.6%
42.9%
40.3%
Sports Retail like-for-like stores gross contribution (2)
+7.4%
+10.5%
+10.6%
Online revenue as a percentage of total Sports Retail revenue (3)
16.5%
15.1%
15.0%
Underlying earnings per share (4)
38.9p
32.1p
26.9p
Non-financial KPIs



No. of Sports Retail stores (5)
661
629
498
Workforce turnover 
18.7%
19.2%
15.5%
Cardboard recycling
 9,526 tonnes
 9,230 tonnes
8,893 tonnes




(1) The method for calculating underlying EBITDA is set out in the Financial Review.
(2) Sports Retail like-for-like contribution is defined as the percentage change in gross contribution in the successive 12 month period. A like-for-like store is one that has been trading for the full 12 months in both periods and has not been affected by a significant change, such as a major refurbishment. Excludes contribution in EAG and SIG as the prior year comparative is not a full year
(3) Excludes wholesale revenue 
(4)The method for calculating underlying earnings per share is set out in the Financial Review
(5) Excluding associates and stores in the Baltics states that trade under fascias other than SPORTLAND or SPORTSDIRECT.com


Workforce
The success of the Group has largely been created by our c.27,000 strong workforce, whose dedication and commitment has been sustained over many years. Their enthusiasm and 'one team' attitude has assisted the Group to succeed where many other retailers have failed. The Board are extremely grateful for the time that our workforce has taken to develop their skills and expertise. We promote staff training wherever possible to enable them to be the best that they can be. 
The 2009 and 2011 Share Schemes have been fundamental tools in the motivation and incentivisation of participating employees. Under the 2009 Share Scheme, c.27m shares vested with those participants. Subject to satisfactory personal performance, a further c.21m shares are expected to vest under the 2011 Share Scheme.
The 2011 Share Scheme Adjusted Underlying EBITDA targets (before scheme costs) relate to performance between FY12 and FY15. All four targets have now been met, and subject to the individual employee's satisfactory personal performance, the shares are due to vest in 2015 and 2017. Under the 2011 Share Scheme participating employees are eligible for awards on a pro-rata basis depending on their length of service with the Group. Awards under the scheme are granted at either 100%, 75%, 50% or 25% of the participant's annual base pay. Subject to the service criteria being fulfilled,c.5m shares are due to vest in 2015 and c.16m shares are due to vest in 2017.
An additional three million shares are due to vest with our Executive Director and two members of senior management in 2017 under the Executive Share Scheme, subject to performance criteria being fulfilled. The Executive Share Scheme performance targets mirror those to be applied to awards under the 2011 Share Scheme.
As a result of the successes of previous schemes, the 2015 Share Scheme has been devised to encourage further outstanding employee performance for those who are invited to participate. The scheme will provide for the grant of nil-cost options over up to 25m shares. The vestings are dependent on stretching performance criteria spanning between FY16 and FY19. With original EBITDA targets (before scheme costs) of 480m for FY16, 570m for FY17, 650m for FY18 and 750m for FY19, the scheme has the potential to not only motivate participants, but also to create a further substantial increase in shareholder value.
The Group intends to propose an amendment to the FY16 Adjusted Underlying EBITDA target under the 2015 Share Scheme, which will be reduced from 480m to 420m. All other targets for the further three years of the scheme remain the same. This change will be put to shareholders as an ordinary resolution at the Company's AGM in September 2015.
Our strategy for growth
The Group's strategic focus is to continue to deliver sustainable long-term growth. 
Within the UK Retail business this strategy includes proactive management of our store portfolio to further reduce costs and increase sales areas so that we can expand our product offering. This is illustrated by our recent store openings in Glasgow and Oxford Street, a model which we plan to replicate in other major markets.
The Group also intends to invest in store refurbishment and merchandising in order to provide our customers with an enhanced customer experience. The on-going collaboration with Under Armour in the UK and European brands such as Salomon for our in-store concepts, including the new Oxford Street store, is a further example of this strategy.
Our international expansion strategy remains focused on Europe. This includes identifying and working with strong local partners, which can assist the Group to expand in new territories, while we continue to expand our operations in those countries where we currently trade. We believe there is a significant opportunity to introduce the key elements of our successful business model across Europe. This strategy includes the introduction of our sourcing, buying and operational expertise in new markets, whilst also leveraging our Group brand portfolio.
Online remains a significant growth opportunity for the Group. The launch of UK Click and Collect in the year in both Sports Direct and USC has driven a significant increase in online sales, and we now plan to continue to roll this out across the other Group websites. Further opportunities to grow this business include the launch of a loyalty scheme for customers including annual fixed price delivery options and the development of dedicated websites and improved payment options across Europe. We also plan to introduce a fast pay check out system which will streamline the checkout process.
In order to re-enforce the heritage and authenticity of its brands, the Brands division will continue to develop core wholesale product for international brands such as Dunlop, Slazenger and Everlast. Going forward, the Brands division will focus on further expansion of its licensing activities in North America, Australasia and Asia Pacific, leveraging the global appeal of our leading brands. This will increase the global presence and international appeal of our Group brands.
We believe that acquisitions and strategic investments in related businesses are beneficial to the Group and we will continue to evaluate such opportunities as they arise. The Group maintains significant financial and strategic flexibility in order to ensure that it is able to pursue such opportunities from a position of strength.
Dave Forsey
Chief Executive
16 July 2015


FINANCIAL REVIEW
The financial statements for the Group for the year ended 26 April 2015 are presented in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU.
EBITDA and Profit Before Tax

EBITDA
PBT

m
m



Operating profit 
295.6




Depreciation, amortisation and impairment
67.8

Share of profit of associated undertakings (excl. FV adjustments)
3.0




Reported 
366.4
313.4



Share scheme
10.1
-
Exceptional items
3.0
3.0
Profit on disposal of investments
-
(12.6)
Realised FX loss
3.7
3.7
IAS 39 FX fair value adjustment to forward currency contracts
-
(7.2)



Underlying 
383.2
300.3



Underlying 52-week FY15 profit before tax excludes:
(i) exceptional items which decreased profit by 3.0m;
(ii) profit on disposal of investments which increased profit by 12.6m;
(iii) realised foreign exchange losses which decreased profit by 3.7m; and
(iv) IFRS revaluation of foreign currency contracts which increased profit by 7.2m.
Foreign exchange
The Group manages the impact of currency movements through the use of forward fixed rate currency contracts. The Group's policy is to hold or hedge between zero and five years of anticipated purchases in foreign currency.
The realised exchange loss of 3.7m (FY14: 1.8m gain) included in administration costs has arisen from:
a) accepting Dollars and Euros at the contracted rate; and
b) the translation of Dollar and Euro denominated assets and liabilities at the period end rate or date of realisation.
The exchange gain of 7.3m (FY14: 11.2m loss) included in finance income / costs substantially represents the reduction in the mark-to-market liability made (under IFRS) for the Group's unhedged forward contracts as at 26 April 2015. A number of the forward contracts outstanding at 26 April 2015 qualify for hedge accounting and the fair value gain on these contracts has been credited to equity through the Consolidated Statement of Comprehensive Income. The Group has sufficient USD/GBP contracts to cover all purchases in UK Retail for FY16. The Sterling exchange rate with the US dollar was $1.680 at 27 April 2014 and $1.502 at 26 April 2015.
Given the potential impact of commodity prices on raw material costs, the Group may hedge certain input costs, including cotton, crude oil and electricity.
Finance costs

Year ended
26 April 2015
Year ended
27 April 2014

(m)
(m)
Interest on bank loans and overdrafts
(6.7)
(7.5)
Interest on other loans
(0.2)
(0.6)
Interest on retirement benefit obligations
(0.6)
(0.6)
Fair value adjustment to forward foreign exchange contracts
-
(11.2)

(7.5)
(19.9)
The decrease in interest payable is a result of the decreased use of the revolving credit facility and repayment of debt inherited from acquired companies. 
The prior year loss on the fair value of forward foreign exchange contracts arose under IFRS as a result of marking to market at the period end those contracts that do not qualify for hedge accounting.
Exceptional items

Year ended
26 April 2015
Year ended
27 April 2014

(m)
(m)
Profit on sale of freehold properties
10.3
-
Impairment and accelerated depreciation and amortisation
(13.3)
(5.5)

(3.0)
(5.5)
The impairment and accelerated depreciation and amortisation relates to a change in the estimated useful life of certain tangible and intangible assetsand impairment against goodwill in the year.
The profit on sale of freehold property includes the sale of a freehold warehouse for 21.2m, realising a profit of 11.3m.
Taxation
The effective tax rate on profit before tax in FY15 was 23.0% (FY14: 25.0%). This rate reflects depreciation on non-qualifying assets and overseas earnings being taxed at a higher rate.
Earnings

Year ended
26 April 2015
Year ended
27 April 2014
Change


pence per share
pence per share
%

Reported EPS (Basic)
40.6
30.8
31.8

Underlying EPS
38.9
32.1
21.2

Weighted average number of shares (actual)
592,294,371
585,513,537


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 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:

Year ended
26 April 2015
Year ended
27 April 2014

(m)
(m)
Profit after tax 
240.4
180.2
Post tax effect of adjustment items:


Profit on disposal of listed investments
(2.8)
(4.0)
Impairment of goodwill
-
0.3
Fair value adjustment to forward foreign exchange contracts
(12.5)
8.4
Realisedloss/(gain) on forward foreign exchange contracts
2.9
(1.4)
Profit on disposal of freehold properties
(7.9)
- 
Impairment and accelerated depreciation and amortisation
10.2
4.1
Underlying profit after tax
230.3
187.6
Dividends
The Board has decided not to propose a dividend in relation to FY15. The board feels that it remains in the best interests of the Group to preserve financial flexibility, facilitating the pursuit of potential acquisitions and other growth opportunities. The payment of dividends remains under review in future years.
Capital expenditure
During the year, capital expenditure amounted to 100.3m (FY14: 69.1m), which includes expenditure on licences within intangible assets and construction of our Shirebrook warehouse.
Acquisitions
The Group made a number of small acquisitions during the year including the purchase of twenty-five former LA Fitness gyms.
Strategic investments
During the year the Group disposed of c. 1.5m shares in JD Sports Fashion plc but at the year end continued to hold an 11.09% stake in JD Sports. The fair value of the Group's holdings at 26 April 2015 was 140.8m (27 April 2014: 104.9m). The movement in the fair value of the shares held has been recognised directly in Other Comprehensive Income.
In June 2014, the Group acquired an interest in c.7 million shares in MySale Group plc, representing 4.8% of the issued share capital of MySale.
In September 2014, the Group entered into a derivative agreement referencing 23,000,000 shares in Tesco Plc, representing 0.3% of the issued share capital of Tesco. 
In October 2014 the Group acquired c. 56 million shares in Debenhams plc for 33.2m, representing 4.6% of the issued share capital of Debenhams. This stake was sold in November 2014 and the Group entered into a derivative agreement referencing c. 74 million Debenhams shares, equivalent to 6.1% of the issued share capital of Debenhams. 
On 23 January 2015 the Group terminated an existing Debenhams derivative agreement entered into in January 2014 and at the same time, entered into a new derivative agreement referencing c. 128 million ordinary shares of Debenhams (representing 10.5% of the issued share capital of Debenhams).
As at 26 April 2015 the Group had an interest in 15.0% interest in Debenhams' ordinary shares.
These stakes allow us to develop a relationship and develop 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 92.2m.
Cash flow and net debt
Net debt decreased by 152.3m from 212.0m at 27 April 2014 to 59.7m at 26 April 2015.
The analysis of debt at 26 April 2015 was as follows:

At 26 April 2015
At 27 April 2014

(m)
(m)
Cash and cash equivalents
78.3
151.0
Borrowings
(138.0)
(363.0)



Net debt
(59.7)
(212.0)
On 25 November 2014 the Group utilised the accordion option under its 688m working capital facility. As a result, the working capital facility has been increased from 688m to 738m. The facility is available until September 2018 and is not secured against any of the Group's fixed assets.
The Group also has a 250m working capital facility with Mike Ashley which can be drawn down on request. This facility was agreed at market terms at its inception and is not secured against any fixed assets. At the year end no balance was due.
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:

At 26 April 2015
At 27 April 2014

(m)
(m)
Underlying 52 week EBITDA
383.2
331.1
Realised(loss)/profit on forward foreign exchange contracts
(3.7)
1.8
Taxes paid
(77.7)
(55.7)
Underlying free cash flow
301.8
277.2
Invested in:-
Working capital and other
(64.8)
(110.1)
Purchase of own shares
-
-
Acquisitions (including debt)
(3.8)
(144.2)
Net proceeds from/(purchase of) investments
4.1
(4.6)
Net capital expenditure
(79.1)
(69.1)
Finance costs and other financing activities
(5.9)
(7.2)
Decrease / (increase) in net debt
152.3
(58.0)
The increase in working capital is partly to support the growth of Sports Retail and the online business and partly due to the timing of payments around year end.
Pensions
The Group operates a number of closed defined benefit schemes in the Dunlop Slazenger companies. The net deficit in these schemes decreased from 15.4m at 27 April 2014 to 14.9m at 26 April 2015.
Matt Pearson
Acting Chief Financial Officer
16 July 2015 


CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 26 APRIL 2015


Year ended
26April
2015
Year ended
27April
2014

Notes
'000
'000




Revenue
2
2,832,560
2,705,958
Cost of sales

(1,591,748)
(1,551,036)


Gross profit

1,240,812
1,154,922
Selling, distribution and administrative expenses

(950,526)
(908,843)
Other operating income

8,345
8,583
Exceptional items 
3
(3,050)
(5,531)


Operating profit
2
295,581
249,131
Other investment income

14,104
7,017
Finance income

8,289
891
Finance costs

(7,487)
(19,853)
Share of profit of associated undertakings and joint ventures

2,959
2,266


Profit before taxation

313,446
239,452
Taxation
4
(72,093)
(59,839)


Profit for the period
2
241,353
179,613






Attributable to:



Equity holders of the Group

240,397
180,245
Non-controlling interest

956
(632)


Profit for the period
2
241,353
179,613


Earnings per share attributable to the equity shareholders






Pence per share
Pence per share




Basic earnings per share
5
40.6
30.8
Diluted earnings per share
5
39.0
29.2
Underlying basic earnings per share
5
38.9
32.1




CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 26 APRIL 2015






Year ended
26April
2015
Year ended
27April
2014

Notes
'000
'000




Profit for the period
2
241,353
179,613




Other comprehensive income







Items that will not be reclassified subsequently to profit or loss



Actuarial (losses) / gains on defined benefit pension schemes

(2,493)
3,860
Taxation on items recognised in other comprehensive income

524
(698)




Items that will be reclassified subsequently to profit or loss



Exchange differences on translation of foreign operations

9,156
(33,118)
Exchange differences on hedged contracts- recognised in the period

77,181
(3,737)
Exchange differences on hedged contracts - reclassified and reported in net profit

7,240
(17,909)
Fair value adjustment in respect of available-for-sale financial assets

21,893
57,373
Taxation on items recognised in other comprehensive income

(17,728)
(4,170)
Other comprehensive income for the period, net of tax

95,773
1,601






Total comprehensive income for the period

337,126
181,214


Attributable to:



Equity holders of the Group

336,170
181,846
Non-controlling interest

956
(632)




337,126
181,214




CONSOLIDATED BALANCE SHEET AS AT 26 APRIL 2015






26April
2015
27April
2014

Notes
'000
'000
ASSETS



Non-current assets



Property, plant and equipment

422,742
412,361
Intangible assets

255,364
255,109
Investments in associated undertakings and joint ventures

38,133
41,763
Available-for-sale financial assets

140,795
116,504
Deferred tax assets

38,352
31,130




895,386
856,867


Current assets



Inventories

517,054
565,479
Trade and other receivables

190,726
123,014
Derivative financial assets

92,199
4,355
Cash and cash equivalents

78,318
151,024




878,297
843,872


TOTAL ASSETS

1,773,683
1,700,739


EQUITY AND LIABILITIES



Share capital

64,060
64,060
Share premium

874,300
874,300
Treasury shares reserve

(56,234)
(56,234)
Permanent contribution to capital

50
50
Capital redemption reserve

8,005
8,005
Foreign currency translation reserve

14,436
5,280
Reverse combination reserve

(987,312)
(987,312)
Own share reserve

(13,251)
(13,251)
Hedging reserve

78,796
(5,625)
Retained earnings

1,181,511
931,819




1,164,361
821,092
Non-controlling interests

(2,810)
(3,538)


Total equity

1,161,551
817,554


Non-current liabilities



Borrowings
6
136,849
6,764
Retirement benefit obligations

14,869
15,350
Deferred tax liabilities

40,088
24,046
Provisions

37,705
37,780




229,511
83,940


Current liabilities



Derivative financial liabilities

5,629
18,665
Trade and other payables

340,936
392,019
Borrowings
6
1,204
356,226
Current tax liabilities

34,852
32,335




382,621
799,245


Total liabilities

612,132
883,185


TOTAL EQUITY AND LIABILITIES

1,773,683
1,700,739


CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 26APRIL 2015


Year
ended
26 April
2015
Year
ended
27 April
2014

Notes
'000
'000




Cash inflow from operating activities
7
314,362
222,785
Income taxes paid

(77,710)
(55,730)


Net cash inflow from operating activities

236,952
167,055


Cash flow from investing activities



Proceeds on disposal of property, plant and equipment

21,150
-
Proceeds on disposal of listed investments

51,695
49,394
Purchase of associate, net of cash acquired 

(50)
(8,000)
Purchase of subsidiaries, net of cash acquired

(3,847)
(15,407)
Purchase of intangible assets

(2,937)
(1,827)
Purchase of property, plant and equipment

(97,342)
(67,304)
Purchase of listed investments

(50,415)
(55,467)
Investment income received

2,883
1,604
Finance income received

987
891


Net cash outflow from investing activities

(77,876)
(96,116)


Cash flow from financing activities



Finance costs paid

(6,845)
(8,111)
Borrowings drawn down

126,989
300,910
Borrowings repaid

(346,997)
(348,452)
Exercise of option over non-controlling interests

-
(11,678)


Net cash outflow from financing activities

(226,853)
(67,331)






Net increase in cash and cash equivalents including overdrafts

(67,777)
3,608
Cash and cash equivalents including overdrafts at beginning of period

145,282
141,674


Cash and cash equivalents including overdrafts at the period end

77,505
145,282




CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 26 APRIL 2015

Treasury shares
Foreign currency translation
Own share reserve
 Retained earnings
Other reserves
Sub-total
Non-controlling interests
Total

'000
'000
'000
'000
'000
'000
'000
'000









At 28 April 2013
(56,234)
38,398
(64,375)
752,018
(24,876)
644,931
(254)
644,677









Vesting of share - based payments
-
-
51,124
(51,124)
-
-
-
-
Current tax on share schemes
-
-
-
25,500
-
25,500
-
25,500
Deferred tax on share schemes
-
-
-
(11,215)
-
(11,215)
-
(11,215)
Non-controlling interests - acquisitions
-
-
-
-
-
-
(10,513)
(10,513)
Exercise of option over non-controlling interest
-
-
-
(19,970)
-
(19,970)
7,861
(12,109)
Transactions with owners
-
-
51,124
(56,809)
-
(5,685)
(2,652)
(8,337)
Profit for the financial period
-
-
-
180,245
-
180,245
(632)
179,613
Other comprehensive income








Cash flow hedges








- recognised in the period
-
-
-
-
(3,737)
(3,737)
-
(3,737)
- reclassified and reported in net profit
-
-
-
-
(17,909)
(17,909)
-
(17,909)
Actuarial losses on defined benefit pension schemes
-
-
-
3,860
-
3,860
-
3,860
Fair value adjustment in respect of available-for-sale financial assets
-
-
-
57,373
-
57,373
-
57,373
Taxation



(4,868)

(4,868)

(4,868)
Translation differences - Group
-
(32,498)
-
-
-
(32,498)
-
(32,498)
Translation differences - associates
-
(620)
-
-
-
(620)
-
(620)
Total comprehensive income for the period
-
(33,118)
-
236,610
(21,646)
181,846
(632)
181,214

At 27 April 2014
(56,234)
5,280
(13,251)
931,819
(46,522)
821,092
(3,538)
817,554









Credit to equity for Share-based payment
-
-
-
5,833
-
5,833
-
5,833
Deferred tax on share schemes
-
-
-
1,266
-
1,266
-
1,266
Non-controlling interests - acquisitions
-
-
-
-
-
-
384
384
Transactions with owners
-
-
-
7,099
-
7,099
384
7,483
Profit for the financial period
-
-
-
240,397
-
240,397
956
241,353
Dividends received
-
-
-
-
-
-
(612)
(612)
Other comprehensive income








Cash flow hedges








- recognised in the period
-
-
-
-
77,181
77,181
-
77,181
- reclassified and reported in net profit
-
-
-
-
7,240
7,240
-
7,240
Actuarial losses on defined benefit pension schemes
-
-
-
(2,493)
-
(2,493)
-
(2,493)
Fair value adjustment in respect of available-for-sale financial assets
-
-
-
21,893
-
21,893
-
21,893
Taxation



(17,204)

(17,204)

(17,204)
Translation differences - Group
-
13,783
-
-
-
13,783
-
13,783
Translation differences - associates
-
(4,627)
-
-
-
(4,627)
-
(4,627)
Total comprehensive income for the period
-
9,156
-
242,593
84,421
336,170
344
336,514

At 26 April 2015
(56,234)
14,436
(13,251)
1,181,511
37,899
1,164,361
(2,810)
1,161,551



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 years ended 26 April 2015 and 27 April 2014 which do not contain any statement under s498 of the Companies Act 2006 and are unqualified. The statutory accounts for the year ended 27 April 2014 have been delivered to the Registrar of Companies and the statutory accounts for the year ended 26 April 2015 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.
2. Segmental analysis
IFRS 8 - 'Operating Segments' requires the Group's segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the Chief Operating Decision Maker to assess performance and allocate resources across each operating segment.
The Chief Operating Decision Maker has been identified as the Executive Directors and the operating segments are identified as the store fascia or brand, in line with the internal reporting to the Executive Directors.
Sales and gross profit for each operating segment, as well as underlying EBITDA, are the main measures used by the Executive Directors to assess performance.
In accordance with paragraph 12 of IFRS 8 the Group's operating segments have been aggregated into the following reportable segments:
 Sports Retail - includes the results of the UK and International retail network of sports stores along with related websites;
 Premium Lifestyle - includes the results of the premium retail businesses such as Republic, Cruise and USC; and
 Brands - includes the results of the Group's portfolio of internationally recognised brands such as Everlast, Lonsdale and Dunlop.
Information regarding the Group's reportable segments for the year ended 26 April 2015, as well as a reconciliation of reported profit for the period to underlying EBITDA, is presented below:
Segmental information for the year ended 26 April 2015: 





Retail
Brands
Eliminations
Total

Sports Retail
Premium Lifestyle
Retail Total
Total



'000
'000
'000
'000
'000
'000







Sales to external customers
2,398,547
207,623
2,606,170
226,390
-
2,832,560
Sales to other segments
-
-
-
25,480
(25,480)
-
Revenue
2,398,547
207,623
2,606,170
251,870
(25,480)
2,832,560







Gross profit
1,069,088
80,523
1,149,611
91,201
-
1,240,812
Operating profit before foreign exchange and exceptional items
285,534
(11,170)
274,364
27,984
`
302,348
Operating profit
283,347
(11,278)
272,069
23,512
-
295,581
Investment income





14,104
Finance income





8,289
Finance costs





(7,487)
Share of profits of associated undertakings and joint ventures





2,959
Profit before taxation





313,446
Taxation





(72,093)
Profit for the period





241,353
Sales to other segments are priced at cost plus a 10% mark-up.
Other segment items included in the income statement for the year ended 26 April 2015:




Retail
Brands
Total

Sports Retail
Premium Lifestyle
Total
Brands
Total

'000
'000
'000
'000
'000
Depreciation
57,855
2,543
60,398
2,026
62,424
Amortisation
548
687
1,235
4,122
5,357
Information regarding segment assets and liabilities as at 26 April 2015 and capital expenditure for the year then ended:


Retail
Brands
Eliminations
Total

Sports
Retail
Premium Lifestyle




'000
'000
'000
'000
'000
Investments in associated undertakings and joint venture
38,133
-
-
-
38,133
Other assets
1,688,779
24,446
190,772
(168,447)
1,735,550
Total assets
1,726,912
24,446
190,772
(168,447)
1,773,683
Total liabilities
(646,836)
(60,255)
(73,488)
168,447
(612,132)
Tangible asset additions
93,429
2,321
1,592
-
97,342
Intangible asset additions
108
-
2,829
-
2,937
Total capital expenditure
93,537
2,321
4,421
-
100,279
Segmental information for the year ended 27 April 2014: 





Retail
Brands
Eliminations
Total

Sports Retail
Premium Lifestyle
Retail Total
Total



'000
'000
'000
'000
'000
'000







Sales to external customers
2,274,365
214,066
2,488,431
217,527
-
2,705,958
Sales to other segments
203
-
203
29,938
(30,141)
-
Revenue
2,274,568
214,066
2,488,634
247,465
(30,141)
2,705,958







Gross profit
974,952
86,263
1,061,215
93,707
-
1,154,922
Operating profit before foreign exchange and exceptional items
254,736
(25,729)
229,007
23,825
-
252,832
Operating profit
251,762
(25,588)
226,174
22,957
-
249,131
Investment income





7,017
Finance income





891
Finance costs





(19,853)
Share of profits of associated undertakings and joint ventures





2,266
Profit before taxation





239,452
Taxation





(59,839)
Profit for the period





179,613
Sales to other segments are priced at cost plus a 10% mark-up.
Other segment items included in the income statement for the year ended 27 April 2014:




Retail
Brands
Total

Sports Retail
Premium Lifestyle
Total
Brands
Total

'000
'000
'000
'000
'000
Depreciation
50,549
4,689
55,238
1,725
56,963
Amortisation
1,348
687
2,035
4,797
6,832
Impairment
-
-
-
284
284
Information regarding segment assets and liabilities as at 27 April 2014 and capital expenditure for the year then ended:


Retail
Brands
Eliminations
Total

Sports
Retail
Premium Lifestyle




'000
'000
'000
'000
'000
Investments in associated undertakings and joint venture
42,176
-
(413)
-
41,763
Other assets
1,609,024
96,601
183,103
(229,752)
1,658,976
Total assets
1,651,200
96,601
182,690
(229,752)
1,700,739
Total liabilities
(893,269)
(123,554)
(96,114)
229,752
(883,185)
Tangible asset additions
57,365
6,978
2,961
-
67,304
Intangible asset additions
259
-
1,568
-
1,827
Total capital expenditure
57,624
6,978
4,529
-
69,131
Geographic information 
Segmental information for the Year ended 26 April 2015:


UK
Non-UK
Eliminations
Total

'000
'000
'000
'000
Segmental revenue from external customers
2,252,360
580,200
-
2,832,560
Total capital expenditure
81,793
18,486
-
100,279
Segmental assets
1,564,864
377,266
(168,447)
1,773,683





Segmental information for the Year ended 27 April 2014:


UK
Non-UK
Eliminations
Total

'000
'000
'000
'000
Segmental revenue from external customers
2,063,724
642,234
-
2,705,958
Total capital expenditure
51,525
17,606
-
69,131
Segmental assets
1,526,405
404,086
(229,752) 
1,700,739
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 Year ending 26 April 2015.

Sports Retail
Premium Lifestyle
Brands
Total

'000
'000
'000
'000





Operating profit 
283,347
(11,278)
23,512
295,581





Depreciation
57,855
2,543
2,026
62,424
Amortisation
548
687
4,122
5,357
Share of profit/(loss) of associated undertakings
3,009
-
(50)
2,959





Reported 
344,759
(8,048)
29,610
366,321





Charges for the Share Schemes
10,110
-
-
10,110
Exceptional items
(3,395)
-
6,445
3,050
Realised FX Loss/(Gain) 
5,332
358
(1,973)
3,717





Underlying EBITDA
356,806
(7,690)
34,082
383,198


Reconciliation of operating profit to underlying EBITDA for the Year ending 27 April 2014.

Sports Retail
Premium Lifestyle
Brands
Total

'000
'000
'000
'000





Operating profit 
251,762
(25,588)
22,957
249,131





Depreciation
50,549
4,689
1,725
56,963
Impairment
-
-
284
284
Amortisation
1,348
687
4,797
6,832
Share of profit/(loss) of associated undertakings
2,679
-
(413)
2,266





Reported 
306,338
(20,212)
29,350
315,476





Charges for the Share Schemes
11,927
-
-
11,927
Exceptional items
5,531
-
-
5,531
Realised FX (Gain)/ Loss 
(2,557)
(141)
868
(1,830)





Underlying EBITDA
321,239
(20,353)
30,218
331,104
3. Exceptional items

Year ended
26April
2015
Year ended
27April
2014

'000
'000



Profit on sale of freehold property
10,288
-
Impairment and accelerated depreciation and amortisation 
(13,338)
(5,531)


(3,050)
(5,531)

-
-
The impairment and accelerated depreciation and amortisation relates to a change in the estimated useful life of certain tangible and intangible assets and impairment against goodwill in the year.
4. Taxation 
The effective tax rate on profit before tax for FY15was 23.0% (FY14: 25.0%). This rate reflects depreciation on non-qualifying assets and overseas earnings being taxed at a higher rate. 
5. 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, 592,294,371 (2014: 585,513,537), is adjusted to assume conversion of all dilutive potential ordinary shares under the Group's share schemes, being 24,200,000 (2014: 32,676,278), to give the diluted weighted average number of shares of 616,494,371 (2014: 618,189,815).


Basic and diluted earnings per share






Year ended
26April
2015
Year ended
26April
2015
Year ended
27April
2014
Year ended
27April
2014
Basic '000
Diluted 
'000
Basic 
'000
Diluted 
'000





Profit for the period
240,397
240,397
180,245
180,245




Number in thousands
Number in thousands





Weighted average number of shares
592,294
616,494
585,514
618,190




Pence per share
Pence per share





Earnings per share
40.6
39.0
30.8
29.2

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 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.
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. 

Year
ended
26April
2015
Year
ended
26April
2015
Year
ended
27April
2014
Year
ended
27April
2014

Basic 
'000
Diluted 
'000
Basic 
'000
Diluted 
'000





Profit for the period
240,397
240,397
180,245
180,245





Post tax adjustments to profit for the period for the following non-trading items:




Realised loss / (gain) on forward exchange contracts
2,862
2,862
(1,373)
(1,373)
Fair value adjustment to derivative financial instruments
(12,472)
(12,472)
8,395
8,395
(Profit on disposal of listed investments
(2,832)
(2,832)
(4,060)
(4,060)
Profit on sale of intangible assets
-
-
-
-
Profit on disposal of property
(7,921)
(7,921)







Impairment and accelerated depreciation and amortisation
10,270
10,270
4,432
4,432

Underlying profit for the period
230,304
230,304
187,639
187,639





Number in thousands
Number in thousands





Weighted average number of shares
592,294
616,494
585,514
618,190




Pence per share
Pence per share





Earnings per share
38.9
37.4
32.1
30.3

6. Borrowings 




26April
2015
27April
2014

'000
'000
Non-current:


Bank and other loans
136,849
6,764


136,849
6,764

Current:


Bank overdrafts
813
5,742
Bank and other loans
391
350,484


1,204
356,226

Total borrowings:


Bank overdrafts
813
5,742
Bank and other loans
137,240
357,248


138,053
362,990

An analysis of the Group's total borrowings other than bank overdrafts is as follows:





26April
2015
27April
2014

'000
'000



Borrowings - Sterling
95,808
240,731
Borrowings - Other
41,432
116,517


137,240
357,248

Loans are all at rates of interest ranging between 1.15% and 2.0% over the interbank rate of the country within which the borrowing entity resides.
On 28 May 2014 the company refinanced the above facilities and entered into a new committed, unsecured revolving facility agreement with thirteen financial institutions, with Barclays Bank plc acting as Agent. This revolving facility can be drawn to an aggregate limit of 738 million and is available until 27 September 2018.
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 26 April 2015 was 59.7m (27 April 2014: 212.0m).
7. Cash inflow from operating activities 




Year
ended
26April
2015
Year
ended
27April
2014

'000
'000



Profit before taxation
313,446
239,452
Net finance (income) / costs
(802)
18,962
Other investment income
(14,104)
(7,017)
Share of profits of associated undertakings and joint ventures
(2,959)
(2,266)

Operating profit
295,581
249,131
Depreciation
62,924
56,963
Amortisation
12,725
6,832
Impairment
5,314
5,815
Loss on disposal of intangibles
107
-
Defined benefit pension plan current service cost
21
22
Defined benefit pension plan employer contributions
(2,718)
(2,708)
Share-based payments
10,105
11,927

Operating cash inflow before changes in working capital
384,059
327,982
Increase in receivables
(66,368)
(18,241)
Decrease / (Increase) in inventories
49,320
(52,521)
Decrease in payables
(52,349)
(34,435)

Cash inflow from operating activities
314,362
222,785



8. Post balance sheet events
There were no material post balance sheet events after 26 April 2015 up to the date of signing of these accounts.

This information is provided by RNS
The company news service from the London Stock Exchange
  END
FR PKPDBBBKBOOD