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Sports Direct's solid results fail to impress

SPORTS Direct International has posted another solid set of financial results but the update failed to impress the City with shares sliding 13%.

successful: Mike Ashley, right, founded the company that has bought Republic's branches. Picture: Getty Images
successful: Mike Ashley, right, founded the company that has bought Republic's branches. Picture: Getty Images

The group - which owns retailers Sports Direct, USC and Cruise as well as brands such as Slazenger and Dunlop - reported its half-year underlying pre-tax profits increased 17% from £125.1 million to £146.2m.

Revenue grew more than 23% from £1.1 billion to in excess of £1.34bn in the six months to October 27 with the cost of sales rising from £640.3m to £765.3m.

The core UK sports division grew revenue 13.4% to £903.3m, the international arm was up 30.8% on a like-for-like basis to £118.5m with the premium lifestyle section of more upmarket fashion stores rising 83.2% to £102.8m as it was boosted by the acquisition of Republic branches from administration.

The company said 43 former Republic shops had been converted to the USC brand, which it bought from Sir Tom Hunter's West Coast Capital last year, in the trading period.

More recently added international operations in Austria, Germany and the Baltic states took in £87.7m of revenue in the period.

The brands division was the only one to report a drop with the 0.7% decline in revenue to £106.2m attributed to selling more Firetrap branded goods through the group's own stores rather than wholesale channels.

The sports retail arm was said to have been boosted by a 43% increase in online transactions The group, founded by Newcastle United owner Mike Ashley who also has a stake in Rangers, said its net debt increased from £154m to £183.3m mainly because of the acquisitions in Europe.

The results means Sports Direct staff remain on course to hit targets that would see many receiving shares worth thousands of pounds.

A vesting of a 2009 bonus scheme in August this year saw around 1800 people sharing 19 million shares.

It was also confirmed finance director Bob Mellors plans to retire at the end of December on health grounds.

Sir Tom Hunter, who sold Cruise to Sports Direct last year, bought a stake in Sports Direct International last year paying around £1m for 392,156 shares.

At last night's closing price of 674p, which was down 97p on the day, that stake was worth £2.6m.

Oriel Securities said: "Solid delivery from Sports Direct but the rhetoric on current trading is not as bullish as usual and we are shaving forecasts (admittedly from the top of the range).

"The shares' momentum is unlikely to persist given the inline nature of the results."

Freddie George, at Cantor Fitzgerald, said the stock was due a period of "consolidation" and added: "Over the medium term, the company will continue to broaden its ranges to include tangential sporting categories, football, running, fishing and swimming.

"It will also look to enhance its stable of brands, which now cover a broad spectrum of the sports and street-wear market, appealing to all age groups and demographics.

"The most significant opportunity, in our view, though continues to be the development of the company's on-line platform as the company endeavours to be the 'category killer' sportswear and sports product site."

Sports Direct said it was unlikely to stock Chelsea kits next season after adidas reviewed its distribution strategy.

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