- Group sales up 4.2% on a currency neutral basis for the 26 weeks to October 23
- Underlying profit before tax down 57% to £71.6m
- Gross margin has deteriorated as a result of the devaluation of the pound
- Sports Direct buying corporate plane for $51.1m
- Herbert Monteith appointed interim head of finance
- David Brayshaw appointed to the board as new non-executive director
Sports Direct has reported sinking profits in a “tough” half year, as its failure to hedge in the aftermath of the referendum hits the business.
The scandal-hit retailer has reported plunging underlying pre-tax profit, down 57% to £71.6m in the 26 weeks to October 23.
It said reported pre-tax profit fell 25.1% to £140.2m, and EBITDA decreased 33.5% to £145.3m.
Sports Direct put this down to the flattened value of the pound since the Brexit vote.
Founder Mike Ashley, who took over at the helm following David Forsey’s resignation earlier this year, admitted that the hit has been worsened by the company’s failure to hedge against the fall in sterling in the immediate aftermath of the referendum.
He said: “Our results have been affected by the significant deterioration in exchange rates, and our assessment of our risk relating to our stock levels and European stores performance.”
Following the subsequent departure of acting chief financial officer Matt Pearson, Sports Direct has temporarily appointed Herbert Monteith – a long-standing member of its finance team – to the role of interim head of finance. It has been without a permanent finance chief for three years.
The retailer has also appointed commercial banker David Brayshaw to the board as a new non-executive director.
It also revealed plans to buying a “corporate” aeroplane for $51.1m.
Sports Direct also attributed falling profits to increased investment in its people, “strategic” property moves and “onerous leases” at its international arm.
On a currency neutral basis and excluding the impact of acquisitions, group sales were up 4.2% and UK sports retail sales increased 5.6%.
Sports Direct has been mired in controversy over its use of zero-hours contracts and allegations of poor working conditions at its Shirebrook warehouse. It has been attempting to repair its tarnished reputation by improving corporate governance.
Today, the retailer said its employees are its number one priority.
Ashley said: “What matters most to me is how tough the last year has been for the people who work at Sports Direct. Our people have once again found themselves in the spotlight through no fault of their own, yet they remain hardworking and loyal.
“It is for this reason that my immediate priority will be to protect the people at Sports Direct.”
The billionaire tycoon has pledged to underwrite the value of the share awards relating to its 2011 Share Scheme, which are vesting in September 2017.
Sports Direct expects the existing strategic challenges and currency headwinds to continue to adversely impact financial performance over the medium term.
However, Ashley said: “We continue to elevate our sports retail proposition for our key third party brand partners and customers, as we progress towards our medium to long term goal of becoming the ‘Selfridges’ of sports retail.”
Earlier this week, it was revealed that Ashley is being sued by a former Merrill Lynch banker, who claims the bank quit as corporate broker over share deal concerns.