It's certainly raining heavily on Mike Ashley in his Sports Direct business.
First half year profits fell 41% from £97.7m to £47.8m.
Faced also by an investigation by the Office of Fair Trading and the Serious Fraud Office for "attempts to dampen competition in the Sports Retail market".
Don't suppose Ashley is in any mood to be splashing lots of money on Premier League footballers at the moment.
Sports Direct cuts debt and raises forecasts
By Adam Jones
Published: December 10 2009 09:42 | Last updated: December 10 2009 19:42
Sports Direct International saw its first-half pre-tax profits fall 41 per cent but said that good progress had been made in reducing its borrowings.
The UK’s leading sportswear retailer, which is being investigated by the Office of Fair Trading and the Serious Fraud Office, also said that underlying earnings for the full year would be better than it had previously forecast.
EDITOR’S CHOICE
JP Sports offloads JJB stake - Dec-09OFT raids JJB and Sports Direct - Sep-10In depth: UK retail results - Jan-10Shares in the group, which has suspended dividend payments to reduce debt, fell by 6.9p to close at 99.1p.
For the 26 weeks to October 25, Sports Direct reported sales of £756.9m, an increase of 10 per cent on the figure it posted in the first half of its previous financial year. Sales were partly aided by a 5-6 per cent increase in selling space at its stores.
Pre-tax profit fell from £97.7m to £57.8m. The group said that this had been distorted by the impact of exchange rate fluctuations on hedging arrangements. It added that profit had risen 39 per cent when this factor, along with profits from the disposal of listed investments, was excluded.
Net debt fell to £362m ($589m) at the end of the first half, down from £431.3m at April 26 and below the £400m the group had quoted as a year-end target.
Its borrowings are expected to be at a similar level at the end of its financial year, it added.
The company also said that it now expected underlying earnings before interest, tax, depreciation and amortisation to be at least £155m for the full year, an advance on the £150m it had been forecasting.
Sports Direct is poised to receive a boost from the England football team’s participation in the 2010 World Cup, which is expected to drive sales of replica shirts.
Dave Forsey, chief executive, said that most of the financial impact would be felt in the first quarter of its 2010-11 financial year.
The OFT and SFO raided the offices of Sports Direct in September. Sports Direct said at the time that it concerned a “suspected overarching agreement to dampen competition in the sports retail market”.
Rival JJB Sports has won conditional immunity from any financial punishment that the OFT might apply over the matter after approaching the watchdog with information.
Sports Direct declined to comment further on the issue, beyond saying that it continued to comply with the OFT and SFO probe, as well as with a Competition Commission investigation into its purchase of 31 stores from JJB.
● FT Comment
Earnings upgrades aside, Thursday’s news that JJB had taken another step in its rehabilitation with the appointment of a new chief executive suggests that sportswear competition may get tougher. The OFT and SFO probes are a clearer obstacle to buying Sports Direct shares, which trade on a forward p/e of 8.2 according to joint house broker Singer’s forecast, a hefty discount to its sector average of about 13. In the words of Oriel Securities – which has a “buy” recommendation on the stock – these are not shares for widows or orphans
http://www.ft.com/cms/s/0/3c7edeb6-e55d-11de-81b4-00144feab49a.html
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