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| Sports Direct warns of 'terminal' House of Fraser problems and €674m tax bill | |
| (32 minutes later) | |
| Mike Ashley’s Sports Direct expressed regret at buying a “terminal” House of Fraser and could not predict profits for the year ahead as it revealed it had been landed this week with a surprise €674m tax bill from the Belgian authorities. | Mike Ashley’s Sports Direct expressed regret at buying a “terminal” House of Fraser and could not predict profits for the year ahead as it revealed it had been landed this week with a surprise €674m tax bill from the Belgian authorities. |
| The retail group said its finance director John Kempster would be stepping down in September, the third senior departure in recent weeks, after a shambolic day in which it postponed publication of its already delayed annual results several times. | The retail group said its finance director John Kempster would be stepping down in September, the third senior departure in recent weeks, after a shambolic day in which it postponed publication of its already delayed annual results several times. |
| In a lengthy and often ranting statement, Sports Direct said it feared House of Fraser problems were “nothing short of terminal in nature” as it reported an operating loss of £54.6m, worse than analysts had expected, at the ailing department store chain. | In a lengthy and often ranting statement, Sports Direct said it feared House of Fraser problems were “nothing short of terminal in nature” as it reported an operating loss of £54.6m, worse than analysts had expected, at the ailing department store chain. |
| The FTSE listed company’s results were originally due to be released on 18 July, only to be postponed as Sports Direct wrestled with a string of factors it said had made the results more complicated and might also force it to change its financial forecasts. | The FTSE listed company’s results were originally due to be released on 18 July, only to be postponed as Sports Direct wrestled with a string of factors it said had made the results more complicated and might also force it to change its financial forecasts. |
| It blamed the complexities of its House of Fraser takeover, recent volatile trading conditions and tighter regulatory scrutiny of its auditor, Grant Thornton, due to its role in the Patisserie Valerie collapse. | It blamed the complexities of its House of Fraser takeover, recent volatile trading conditions and tighter regulatory scrutiny of its auditor, Grant Thornton, due to its role in the Patisserie Valerie collapse. |
| Sports Direct also made the shock announcement that Belgian tax authorities had issued the company with a hefty tax bill, including interest, on Thursday. The retailer said it hoped to respond to requests for information from Belgium and it was “less than probable that material VAT and penalties” would be due. | Sports Direct also made the shock announcement that Belgian tax authorities had issued the company with a hefty tax bill, including interest, on Thursday. The retailer said it hoped to respond to requests for information from Belgium and it was “less than probable that material VAT and penalties” would be due. |
| It round off an entirely bizarre day for the company. On Wednesday the company promised to release its results at 7am on Friday. However, the results did not materialise and the City received no communication about the delay until less than an hour before a planned 9.30am meeting for investors and press at Sports Direct’s London head office. | It round off an entirely bizarre day for the company. On Wednesday the company promised to release its results at 7am on Friday. However, the results did not materialise and the City received no communication about the delay until less than an hour before a planned 9.30am meeting for investors and press at Sports Direct’s London head office. |
| At that point the company admitted it was “still finalising” the figures and expected them to be published by noon. “Apologies for any inconvenience,” it said in an email. | At that point the company admitted it was “still finalising” the figures and expected them to be published by noon. “Apologies for any inconvenience,” it said in an email. |
| When midday came, Sports Direct released a statement saying it was “currently still finalising our preliminary results”, and would provide a further update at 2pm. But at about 2.20pm, it said there would be a further delay until 4pm. The results were finally published after 5pm, when markets had already closed. | When midday came, Sports Direct released a statement saying it was “currently still finalising our preliminary results”, and would provide a further update at 2pm. But at about 2.20pm, it said there would be a further delay until 4pm. The results were finally published after 5pm, when markets had already closed. |
| The UK Listing Authority, the stock market regulator, is understood to be alert to the series of delays. While there may be concerns about communication with the investors, Sports Direct has until the end of August to release its annual results under stock market rules. | The UK Listing Authority, the stock market regulator, is understood to be alert to the series of delays. While there may be concerns about communication with the investors, Sports Direct has until the end of August to release its annual results under stock market rules. |
| Shares in the company fell by nearly 4% to 234pas Neil Wilson, an analyst at Markets.com, described the latest delay as a “total and utter shambles”. | Shares in the company fell by nearly 4% to 234pas Neil Wilson, an analyst at Markets.com, described the latest delay as a “total and utter shambles”. |
| “Above all [the latest delay] betrays a total disregard for shareholders. It not only raises questions about the haphazard way in which the investor relations and finance teams are run, but also could suggest a material problem with the numbers,” he said. “Additionally, it raises a question about whether Ashley will ultimately take the company private.” | “Above all [the latest delay] betrays a total disregard for shareholders. It not only raises questions about the haphazard way in which the investor relations and finance teams are run, but also could suggest a material problem with the numbers,” he said. “Additionally, it raises a question about whether Ashley will ultimately take the company private.” |
| Analysts at Berenberg suggested the biggest risk indicated by the delay was that Grant Thornton had failed to complete – or were possibly refusing to sign off – the accounts. | Analysts at Berenberg suggested the biggest risk indicated by the delay was that Grant Thornton had failed to complete – or were possibly refusing to sign off – the accounts. |
| Shareholder advisory group Pirc called on Sports Direct to provide shareholders with “an explanation of what has happened”. It added that Grant Thornton should consider providing its own separate statement on the matter. | Shareholder advisory group Pirc called on Sports Direct to provide shareholders with “an explanation of what has happened”. It added that Grant Thornton should consider providing its own separate statement on the matter. |
| On 24 July, when Sports Direct announced it would be publishing its results on Friday, the company said its audit was at an advanced stage but not yet complete. | On 24 July, when Sports Direct announced it would be publishing its results on Friday, the company said its audit was at an advanced stage but not yet complete. |
| Shares in the retail group, controlled by the Newcastle United owner Mike Ashley, fell nearly 10% last week to 238p, their lowest level this year, as analysts suggested the company was struggling to cope with a string of acquisitions made in the past 18 months. | Shares in the retail group, controlled by the Newcastle United owner Mike Ashley, fell nearly 10% last week to 238p, their lowest level this year, as analysts suggested the company was struggling to cope with a string of acquisitions made in the past 18 months. |
| Some analysts fear Ashley and his team have taken on too much, having bought Evans Cycles, the furniture business Sofa.com, Game Digital and House of Fraser. | Some analysts fear Ashley and his team have taken on too much, having bought Evans Cycles, the furniture business Sofa.com, Game Digital and House of Fraser. |
| It also became involved in a bitter, and ultimately unsuccessful, battle for control of Debenhams. Ashley is also embroiled in a bust-up with Goals Soccer Centre, the five-a-side pitch operator whose shares dived after the company admitted it had underpaid VAT. | It also became involved in a bitter, and ultimately unsuccessful, battle for control of Debenhams. Ashley is also embroiled in a bust-up with Goals Soccer Centre, the five-a-side pitch operator whose shares dived after the company admitted it had underpaid VAT. |
| As it struggles to finalise a plan for the ailing House of Fraser, Sports Direct has also been struck by the departure of several key executives including Ashley’s long-term lieutenant Karen Byers. | As it struggles to finalise a plan for the ailing House of Fraser, Sports Direct has also been struck by the departure of several key executives including Ashley’s long-term lieutenant Karen Byers. |
| Sports Direct said in December that underlying profits would rise by 5-15%, taking them to between about £321m and £352m. But it admitted profits would fall once the effect of House of Fraser was included. Analysts expected House of Fraser to lose about £50m for the year. A number of key brands have exited the chain while Ashley has filled gaps on the shop floor with discounted Sports Direct brands such as Lonsdale. | Sports Direct said in December that underlying profits would rise by 5-15%, taking them to between about £321m and £352m. But it admitted profits would fall once the effect of House of Fraser was included. Analysts expected House of Fraser to lose about £50m for the year. A number of key brands have exited the chain while Ashley has filled gaps on the shop floor with discounted Sports Direct brands such as Lonsdale. |
| In the results Sports Direct said underlying profits rose 5% to £142.3m in the year to the end of April, the bottom end of expectations. | In the results Sports Direct said underlying profits rose 5% to £142.3m in the year to the end of April, the bottom end of expectations. |
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