REG - Sports Direct Intl. - Half-year Report <Origin Href="QuoteRef">SPD.L</Origin> - Part 3
08/12/2016 07:55
- Part 3: For the preceding part double click ID:nRSH2616Rb
(102,665)
Taxation on items taken to comprehensive income - - - 1,711 - 1,711 - 1,711
Translation differences - group - 70,810 - - - 70,810 - 70,810
Total comprehensive income - 70,810 - (17,268) (83,172) (29,630) 981 (28,649)
At 23 October 2016 (69,382) 97,650 (33,726) 1,458,295 (115,989) 1,336,848 (1,835) 1,335,013
The Company holds 46,719,593 ordinary shares in Treasury (FY16 H1: 42,137,508). The foreign currency translation reserve is
used to record exchange differences arising from the translation of the financial statements of foreign subsidiaries and
associates.
At 23 October 2016, the Sports Direct Employee Benefit Trust held 5,728,418 shares.
The credit for the share based payment charge does not equal the charge per the income statement as it excludes amounts
recognised in the balance sheet in relation to the expected national insurance contributions for the shares.
NOTES TO THE FINANCIAL INFORMATION FOR THE 26 WEEKS ENDED 23 OCTOBER 2016
1.
General information and basis of preparation
The results for the first half of the financial year have not been audited and are prepared on the basis of the accounting
policies set out in the Group's 2016 Annual Report and Financial Statements. The financial information in the Group's
Annual Report and Financial Statements is prepared in accordance with International Financial Reporting Standards as
adopted by the European Union ("IFRS").The Interim Results have been prepared in accordance with International Accounting
Standard (IAS) 34 - "Interim Financial Reporting" as endorsed by the European Union and the Disclosure and Transparency
Rules of the Financial Conduct Authority (DTR). The principal accounting policies have remained unchanged from the prior
financial information for the 52 weeks ended 24 April 2016. This consolidated financial information for the period does not
constitute statutory financial statements within the meaning of s434 of the Companies Act 2006.
The summary of results for the 52 weeks ended 24 April 2016 is an extract from the published Annual Report and Financial
Statements which have been reported on by the Group's auditors and delivered to the Registrar of Companies. The audit
report was unqualified and did not contain a statement under s498 (2) or s498 (3) of the Companies Act 2006.
2. Segmental analysis
Operating segments
Management have determined to present its segmental disclosures in a different way to that previously reported. Following
our recent interaction with the Conduct Committee of the FRC in relation to this matter, and recognising the potential
impact of Brexit on the economic characteristics of the countries we trade in through our European retail operations, and
reconsidering the prolonged challenges this business is facing and the impact on long term financial performance
expectations this will have, we have now presented our International Sports Retail Stores segment separately from UK Sports
Retail. We continue to monitor the impacts of Brexit, and the continued uncertainties this has brought relating to the
political and economic environments, and market and currency volatility in the countries we operate in. European countries
have been identified as operating segments and have been aggregated into a single operating segment as permitted under IFRS
8. The decision to aggregate these segments was based on the fact that they each have similar economic characteristics,
similar long term financial performance expectations, and are similar in each of the following respects:
· The nature of the products
· The type or class of customer for the products; and
· The methods used to distribute the products
In accordance with paragraph 12 of IFRS 8 the Group's operating segments have been aggregated into the following reportable
segments:
1. UK Sports Retail - includes the results of the UK retail network of sports stores along with related websites;
2. International Retail - includes the results International retail network of sports stores;
3. Premium Lifestyle - includes the results of the premium retail businesses such as USC, Cruise and Flannels; and
4. Brands - includes the results of the Group's portfolio of internationally recognised brands such as Everlast,
Lonsdale, Dunlop and Slazenger.
The comparative information for the period ended 25 October 2015 has been restated.
Information regarding the Group's reportable segments for the period ended 23 October 2016, as well as a reconciliation of
reported profit for the period to underlying EBITDA, is presented below:
Segmental information for the 26 weeks ended 23 October 2016:
Retail Brands
UK Sports Retail International Sports Retail Premium Lifestyle Total Retail Total Eliminations Total
£'000 £'000 £'000 £'000 £'000 £'000
Sales to external customers 1,111,160 330,159 83,411 1,524,730 112,968 - 1,637,698
Sales to other segments - - - - 22,283 (22,283) -
Revenue 1,111,160 330,159 83,411 1,524,730 135,251 (22,283) 1,637,698
Gross profit 453,223 131,028 33,517 617,768 44,252 - 662,020
Operating profit/(loss) before foreign exchange and exceptional items 96,106 (31,479) (3,449) 61,178 14,140 - 75,318
Operating Profit 115,148 (43,434) (3,127) 68,587 11,414 - 80,001
Investment income 146,324
Investment costs (26,122)
Finance income 4
Finance costs (60,020)
Share of profits of associated undertakings and joint ventures -
Profit before taxation 140,187
Taxation (46,741)
Profit for the period 93,446
Reconciliation of operating profit to underlying EBITDA for the 26 week period ending 23 October 2016.
UK Sports Retail International Lifestyle Brands Total
£'000 £'000 £'000 £'000 £'000
Operating profit 115,148 (43,434) (3,127) 11,414 80,001
Depreciation 41,721 19,445 1,489 992 63,647
Amortisation 418 1,316 1,534 1,926 5,194
Reported EBITDA 157,287 (22,673) (104) 14,332 148,842
Charges for the Share Scheme 1,189 - - - 1,189
Exceptional items 2,844 1,379 - 9,664 13,887
Realised FX Loss (21,886) 10,576 (322) (6,938) (18,570)
Underlying EBITDA (pre-scheme costs) 139,434 (10,718) (426) 17,058 145,348
Sales to other segments are priced at cost plus a 10% mark-up.
Segmental information for the 26 weeks ended 25 October 2015 (restated):
Retail
UK Sports Retail International Sports Stores Premium Lifestyle Total Retail Brands Total Eliminations Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Sales to external customers 1,034,741 198,777 87,686 1,321,204 112,464 - 1,433,668
Sales to other segments - - - - 15,796 (15,796) -
Revenue 1,034,741 198,777 87,686 1,321,204 128,260 (15,796) 1,433,668
Gross profit 472,069 90,242 36,190 598,501 45,016 - 643,517
Operating profit/(loss) before foreign exchange and exceptional items 164,443 (7,330) (6,617) 150,496 14,512 - 165,008
Operating Profit 158,119 (23,484) (20,381) 114,254 17,021 131,275
Investment income 54,808
Finance income 1,676
Finance costs (2,046)
Share of profits of associated undertakings and joint ventures 1,539
Profit before taxation 187,252
Taxation (39,771)
Profit for the period 147,481
Reconciliation of operating profit to underlying EBITDA for the 26 week period ending 25 October 2015.
UK Sports Retail International Lifestyle Brands Total
£'000 £'000 £'000 £'000 £'000
Operating profit 158,119 (23,484) (20,381) 17,021 131,275
Depreciation 27,709 7,942 1,056 962 37,669
Amortisation 624 48 742 1,622 3,036
Impairment 262 25 - - 287
Share of profit of associated undertakings (258) 1,797 - - 1,539
Reported EBITDA 186,456 (13,672) (18,583) 19,605 173,806
Charges for the Share Scheme 10,911 - - - 10,911
Exceptional items (8,397) 18,873 13,583 - 24,059
Realised FX Loss 14,721 (2,719) 181 (2,509) 9,674
Underlying EBITDA (pre-scheme costs) 203,691 2,482 (4,819) 17,096 218,450
Sales to other segments are priced at cost plus a 10% mark-up.
Segmental information for the 52 weeks ended 24 April 2016:
This information is available in the 2016 annual report.
3. Exceptional items
26 weeks 26 weeks 52 weeks ended24 April 2016 (£'000)
ended23 October 2016(£'000) ended25 October 2015(£'000)
Profit on disposal of freehold property - 12,197 13,541
Impairment, accelerated depreciation and amortisation (13,887) (32,456) (58,544)
Provision against receivables and other - (3,800) (5,756)
(13,887) (24,059) (50,759)
The impairment relates to the write down of certain non-core brands which are no longer considered to have value to the
Group.
4. Investment income
26 weeks 26 weeks 52 weeks ended24 April 2016 (£'000)
ended23 October 2016(£'000) ended25 October 2015(£'000)
Profit on disposal of available-for-sale financial assets 145,825 - 135,576
Dividend income from investments 499 1,238 1,619
Fair value gain on derivative instruments - 53,570 10,953
146,324 54,808 148,148
The gain on disposal of listed investments mainly relates to the profit on disposal of JD Sports shares in the period.
5. Investment costs
26 weeks 26 weeks 52 weeks ended24 April 2016 (£'000)
ended23 October 2016(£'000) ended25 October 2015 (£'000)
Fair value loss on derivative instruments (26,122) - -
(26,122) - -
6. Finance costs
26 weeks 26 weeks 52 weeks ended24 April 2016 (£'000)
ended23 October 2016 (£'000) ended25 October 2015(£'000)
Interest on bank loans and overdrafts 3,713 1,751 7,512
Interest on other loans and finance leases 383 156 592
Interest on retirement benefit obligations 108 139 426
Fair value adjustment to forward foreign exchange contracts (1) 55,816 - 6,800
60,020 2,046 15,330
(1) The fair value adjustment to written currency option contracts relates to movement between the fair values of the
written options that do not qualify for hedge accounting.
7. Earnings per share
For diluted earnings per share, the weighted average number of shares, 591,605,484 (FY16 H1: 592,409,163), is adjusted to
assume conversion of all dilutive potential ordinary shares under the Group's share schemes, being 16,667,000 (FY16 H1:
38,000,000) to give the diluted weighted average number of shares of 608,272,484 (FY16 H1: 630,409,163).
The number of dilutive ordinary shares under the Group's share schemes has been calculated on a weighted average basis to
take account of any shares that vested during the period.
Basic and diluted earnings per share
26 weeks 26 weeks 26 weeks 26 weeks 52 weeks 52 weeks
ended ended ended ended ended ended
23 October 23 October 25 October 25 October 24 April 26 April
2016 2016 2015 2015 2016 2016
Basic £'000 Diluted £'000 Basic £'000 Diluted £'000 Basic £'000 Diluted £'000
Profit for the period attributable to the equity holders of the Group 92,465 92,465 145,424 145,424 277,415 277,415
Number in thousands Number in thousands Number in thousands
Weighted average number of shares 591,605 608,272 592,409 630,409 592,573 610,240
Pence per share Pence per share Pence per share
Earnings per share 15.6 15.2 24.5 23.1 46.8 45.5
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. 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 realised
foreign exchange in selling and administration costs, the IAS 39 fair value adjustment on derivative financial instruments
in finance income/costs, exceptional costs and the profit/loss on sale of strategic investments.
26 weeks 26 weeks 26 weeks 26 weeks 52 weeks 52 weeks
ended ended ended ended ended ended
23 October 23 October 25 October 25 October 24 April 24 April
2016 2016 2015 2015 2016 2016
Basic £'000 Diluted £'000 Basic £'000 Diluted £'000 Basic £'000 Diluted £'000
Profit for the period 92,465 92,465 145,424 145,424 277,415 277,415
Post tax adjustments to profit for the period for the following exceptional items:
Realised (gain)/loss on forward foreign exchange contracts (14,856) (14,856) 7,546 7,546 1,813 1,813
Fair value adjustment to forward foreign exchange contracts 44,653 44,653 (1,053) (1,053) 5,243 5,243
Fair value adjustment to derivative financial instruments 18,498 18,498 - - (8,445) (8,445)
Profit on disposal of listed investments (114,260) (114,260) (48,892) (48,892) (104,529) (104,529)
Profit on disposal of property - - (9,546) (9,546) (10,440) (10,440)
Impairment of fixed assets - - - - 4,438 4,438
Impairment of goodwill 11,110 11,110 287 287 - -
Impairment and accelerated depreciation and amortisation - - 32,456 32,456 45,137 45,137
Provision against receivables - - 2,964 2,964 - -
Write off of deferred tax assets 10,761 10,761 - - - -
Effect of reduced tax rate on deferred tax 1,736 1,736 - - - -
Underlying profit for the period 50,107 50,107 129,186 129,186 210,632 210,632
Number in thousands Number in thousands Number in thousands
Weighted average number of shares 591,605 608,272 592,409 630,409 592,573 610,240
Pence per share Pence per share Pence per share
Underlying earnings per share 8.5 8.2 21.8 20.5 35.5 34.5
8. Financial Instruments
(a) Financial assets and liabilities by category
The carrying values of financial assets and liabilities, which are principally denominated in Sterling or US dollars, were
as follows:
Loans andreceivables(£'000) Assets at fairvalue throughprofit and loss(£'000) Available for salefinancial assets(£'000) Non-financial assets(£'000) Total(£'000)
Assets at 23 October 2016
Property, plant and equipment - - - 833,648 833,648
Intangible assets - - - 216,352 216,352
Investments in associated undertakings and joint ventures - - - 18,422 18,422
Available-for-sale financial assets - - 73,016 - 73,016
Deferred tax assets - - - 71,996 71,996
Inventories - - - 716,255 716,255
Derivative financial assets - 51,519 - - 51,519
Trade and other receivables 290,808 - - - 290,808
Cash and cash equivalents 187,976 - - - 187,976
478,784 51,519 73,016 1,856,673 2,459,992
Assets at 24 April 2016
Property, plant and equipment - - - 585,876 585,876
Intangible assets - - - 208,569 208,569
Investments in associated undertakings - - - 16,635 16,635
Available-for-sale financial assets - - 193,355 - 193,355
Deferred tax assets - - - 43,984 43,984
Inventories - - - 702,158 702,158
Derivative financial assets - 82,527 - - 82,527
Trade and other receivables 292,589 - - - 292,589
Cash and cash equivalents 234,163 - - - 234,163
526,752 82,527 193,355 1,557,222 2,359,856
Assets at 25 October 2015
Property, plant and equipment - - - 443,375 443,375
Intangible assets - - - 216,554 216,554
Investments in associated undertakings and joint ventures - - - 48,121 48,121
Available-for-sale financial assets - - 212,743 - 212,743
Deferred tax assets - - - 43,748 43,748
Inventories - - - 633,058 633,058
Derivative financial assets - 62,849 - - 62,849
Trade and other receivables 68,530 - - 144,133 212,663
Cash and cash equivalents 163,308 - - - 163,308
231,838 62,849 212,743 1,528,989 2,036,419
Loans and payables(£'000) Liabilities at fair value through profit and loss(£'000) Non-financial liabilities(£'000) Total(£'000)
Liabilities at 23 October 2016
Non-current borrowings 259,839 - - 259,839
Retirement benefit obligations - - 21,621 21,621
Deferred tax liabilities - - 20,433 20,433
Provisions - - 85,151 85,151
Derivative financial liabilities - 206,652 - 206,652
Trade and other payables 181,132 - 272,818 453,950
Current borrowings 118 - - 118
Current tax liabilities - - 77,215 77,215
441,089 206,652 477,238 1,124,979
Liabilities at 24 April 2016
Non-current borrowings 333,063 - - 333,063
Retirement benefit obligations - - 13,065 13,065
Deferred tax liabilities - - 21,590 21,590
Provisions - - 66,802 66,802
Derivative financial liabilities - 61,704 - 61,704
Trade and other payables 219,001 - 207,740 426,741
Current borrowings 769 - - 769
Current tax liabilities - - 51,394 51,394
552,833 61,704 360,591 975,128
Liabilities at 25 October 2015
Non-current borrowings 182,812 - - 182,812
Retirement benefit obligations - - 11,718 11,718
Deferred tax liabilities - - 38,092 38,092
Provisions - - 45,834 45,834
Derivative financial liabilities - 7,081 - 7,081
Trade and other payables 200,275 - 221,918 422,193
Current borrowings 814 - - 814
Current tax liabilities - - 37,549 37,549
383,901 7,081 355,111 746,093
Carrying values do not materially differ from fair value.
Fair value hierarchy
The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation
technique:
• Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities;
• Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are
observable, either directly or indirectly; and
• Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based
on observable market data.
As at 23 October 2016, the only financial instruments held at fair value were Derivative financial assets and liabilities,
which are classified as Level 2 except for Contracts for differences which are classified as Level 1, and
Available-for-sale financial assets, which are classified as Level 1 except for House of Fraser (UK & Ireland) Ltd
(previously Highland Group Holdings) and put options, which is classified as Level 3. House of Fraser Ltd is held at
management's estimate of the fair value of the enterprise based on publicly available data. A 1% increase in profitability
for the company would result in a £0.3m increase in value. Inputs for this calculation include EBITDA and an EBITDA
multiple
Available for sale financial assets & contracts for difference are valued with reference to the publicly available share
price.
The valuation of Derivative financial assets and liabilities is performed using an option valuation model, based on the
market data available at the balance sheet date, depending on whether the instrument is a foreign exchange or an equity
derivative. The equity valuation model output is the result of a number of inputs including, the terms of the option, the
share price, interest rates, the volatility of the underlying stock, and dividends paid by the underlying company. The
volatility of the underlying stock is a significant input into the valuation model. Volatility is considered an
unobservable input. Changing one or more of the unobservable inputs, for example the volatility of the underlying stock, in
the valuation of the option, to reflect reasonably possible alternative assumptions, would not change the fair value
significantly.
The Group has a put option referencing listed company shares. To the extent that the market price of these shares is less
than an agreed price on expiry of the put option, the Group has the right to settle the put option by acquiring ordinary
shares. If the market price of the shares is greater than an agreed price on expiry of the put option the counterparty will
not exercise the option and the group will receive the premium.
Sports Direct is required to transfer cash collateral to cover its obligations under the Put Option. The amount of
collateral required during the life of the Put Option can increase or decrease by reference to the underlying market price
of the shares.
26 weeks 26 weeks 52 weeks
ended ended ended
23 October 25 October 24 April
2016 2015 2016
£'000 £'000 £'000
Opening fair value of put options 7,576 10,470 10,470
Disposal during the year - (4,470) (4,470)
Movement recognised in profit & loss (22,778) 1,520 1,576
Closing fair value of put options (15,202) 7,520 7,576
9. Cash inflows from operating activities
26 weeks 26 weeks 52 weeks
ended ended ended
23 October 25 October 24 April
2016 2015 2016
£'000 £'000 £'000
Profit before taxation 140,187 187,252 361,807
Net finance costs 60,016 370 11,968
Net other investment income (120,202) (54,808) (148,148)
Share of profit of associated undertakings and joint ventures - (1,539) (2,449)
Operating profit 80,001 131,275 223,178
Depreciation 63,647 37,669 89,206
Amortisation charge 5,194 3,036 6,379
Impairment 13,887 32,743 58,544
Profit on disposal of intangibles - 9 27
Profit on disposal of property, plant and equipment - (12,239) (13,541)
Defined benefit pension plan current service cost - 14 13
Defined benefit pension plan employer contributions (1,350) (675) (2,708)
Share based payments 1,189 10,911 7,077
Operating cash inflow before changes in working capital 162,568 202,743 368,175
Increase in receivables 1,684 (21,703) (97,039)
(Increase in inventories (14,098) (116,004) (155,385)
Increase / (decrease) in payables 54,968 45,577 19,837
Cash inflows from operating activities 205,122 110,613 135,589
Included within the movement in receivables are amounts held as collateral against equity derivatives.
10. Related party transactions
The Group has taken advantage of the exemptions contained within IAS 24 - "Related Party Disclosures" from the requirement
to disclose transactions between Group companies as these have been eliminated on consolidation.
All related party transactions were undertaken on an arm's length basis and were made in the ordinary course of business.
26 weeks ended 23 October 2016:
Related party Relationship Sales£'000s Purchases£'000s Trade and other receivables£'000s Trade and other payables£'000s
The Flannels Group Ltd Subsidiary 8,440 10,176 3,345 9,073
Brasher Leisure Ltd Associate 5,693 580 8,143 62
Mash Holdings Ltd Parent company 2 - 2 -
MST Sports Subsidiary 7 - 13,949 -
NDS EHF Associate 1,448 - - -
Rangers Retail Ltd Associate 886 - 123 -
Sondico Professional Ltd Subsidiary 1,115 - 3,990 -
Sportland International Group A.S Subsidiary 39 - 14,668 -
Newcastle United Football Club Connected persons 709 - 197 -
Heaven or Hell Ltd Subsidiary 749 64 2,958 385
Queensdown Associates Ltd Associate 17 - 1,418 -
An agreement has been entered into with Double Take Limited, a company owned by Mash Holdings Limited in which Matilda
Ashley, Mike Ashley's daughter, is a director. Under the agreement Double Take licences the Group the exclusive rights to
the cosmetic brand SPORT FX. No royalties or other fees are payable to Double Take for these rights until September 2019
at the earliest, when this fee arrangement will be reviewed on a going forwards basis. It should be noted that the Group
(rather than Double Take) owns the rights to SPORT FX for clothing, footwear and sports equipment.
26 weeks ended 25 October 2015:
Related party Relationship Sales£'000s Purchases£'000s Trade and other receivables£'000s Trade and other payables£'000s
The Flannels Group Ltd Subsidiary 5,627 7,614 4,838 7,589
Heatons Associate 14,221 - 1,818 -
Brasher Leisure Ltd Associate 5,814 808 1,583 -
Mash Holdings Ltd Parent company 54 - 54 -
MST Sports Subsidiary - - 8,636 -
NDS EHF Associate - - - -
Rangers Retail Ltd Associate 1,221 - 201 -
Sondico Professional Ltd Subsidiary 266 - 2,699 -
Sportland International Group A.S Subsidiary 57 - 14,670 -
Newcastle United Football Club Connected persons 709 - 197 -
Heaven or Hell Ltd Subsidiary 749 64 2,958 -
Queensdown Associates Ltd Associate 17 - 1,418 -
This information is provided by RNS
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