It doesn’t seem that long ago that the City had had enough of Mike Ashley and Sports Direct (LSE: SPD). After its flotation in 2007 at 300p per share, concerns about how the group was run saw the share price slide below 40p by the end of the following year.
It’s fair to say that Ashley has had the last laugh, though. The company’s “pile them high and sell them cheap” philosophy, while hoovering up brands on the cheap, has certainly delivered. Its latest full-year results, released earlier today, showed sales climbing 21% to £2.2bn, while profits surged an even more impressive 40% to £207m.
Although Sports Direct shares didn’t regain the 300p mark until last Spring, now they trade at more than double that level. Following these results this morning, they gained 5% to stand at 630p, valuing the retailer at £3.7bn.
Sports success
As Sports Direct points out, the last year has been a bumper year for British sport, with successes in many different fields of play. However, the company is also extending its reach into Europe and now has stores in 10 countries (the majority are in Belgium, Slovenia and Portugal), and is active in a total 19 countries altogether.
Online has also been a big growth area, with the proportion of online sales increasing from 12% to 15% over the past year. This is one reason why Sports Direct has been able to drive sales forward over the course of the last 12 months, despite its store count remaining at around 400 and floor space at about four million square feet.
Staff set for a big payout, too
There will also be another big payout of shares to staff under its Employee Bonus Share Scheme, which will reward an estimated 2,000 of Sports Direct employees who have been with the company for five years or more. At the time the plan was set up, the share price was set at 125p, less than a fifth of its current level.
Mike Ashley’s somewhat more controversial bonus scheme looks to be on ice, though, with the Super Stretch Scheme being withdrawn so that the group can “review various options with regard to remunerating Mike Ashley in light of the passage of time since first considering this Scheme”.
Sports Direct is not a share for income investors, though. Again, the company has declined to pay an annual dividend, for the fourth year in a row, in order to retain financial flexibility should any acquisition opportunities arise. On a P/E of 23, based on these latest profits, the shares certainly aren’t cheap right now.
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> Stuart does not own any share mentioned in this article.
