Sports Direct International Plc Shakes Off The England Effect

The well-oiled retail machine that is Sports Direct (LSE: SPD) continues to do the business. Its latest full-year results, released this morning, showed a 16% increase in profits to £240m. This was despite a tough comparative year that included the UEFA European Championships and the 2012 London Olympics.

What’s more, the England football team’s blink-and-you-missed-it appearance at the World Cup doesn’t seem to be holding back the company’s recent trading performance. Sports Direct said “overall trading since the year end (30 April) has been in line with management’s expectations, with some stronger weeks offset by England’s disappointing World Cup matches”.

It added that “consistent with previous guidance, we continue to target underlying EBITDA (before share scheme costs) of £360m for the current period”. Hitting this figure would result in a 9% increase on the £330m produced in the year just completed. That said, Sports Direct has beaten its targets for this measure in recent years, and will no doubt be looking to do the same again.

Bonus, bonus, bonus


Sports Direct is pretty famous for the generosity of its bonus schemes — both for its staff and also for majority shareholder Mike Ashley. The 2009 scheme saw 19 million shares dished out to around 2,000 employees, and the 2011 scheme looks set to pay out handsomely over the next few years when it vests.

After numerous attempts, Sports Direct won shareholder backing for the 2015 version of the scheme earlier this month. Despite this, the company revealed yesterday that Mike Ashley would no longer participate, and it looks like this may mean additional shares could be available for Sports Direct’s employees instead.

The figures for the latest bonus scheme reflect the company’s lofty ambitions, with the FY2019 EBITDA target of £750m being significantly more than double the £330m produced for FY2014.

The acquisition trail

Although Sports Direct has been posting impressive growth figures of late, it is still declining to pay a dividend. Instead it remains intent on expanding its empire across Europe, with recent store acquisitions in Austria and the Baltic states of Estonia, Latvia and Lithuania. Sports Direct now has around 250 stores across Europe, versus just over 400 here in the UK.

Sports Direct will likely continue to hover up brands closer to home as well, and it recently took a 5% stake in Phillip Green’s MySale shortly after it joined AIM last month.

Sports Direct shares were down 10p at 703.5p in early morning trade, putting them on a historic P/E ratio of some 22 times. Although the shares are trading considerably lower than their recent peak of 925p, they certainly aren’t bargain basement right now.

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Stuart Watson has no position in any shares mentioned. The Motley Fool has no position in any of the shares mentioned.