Sports Direct profits rise as it shrugs off Belgian tax bill

The sports and leisure giant, which owns a growing stable of retailers including Flannels, House of Fraser, Game and Jack Wills, said reported pre-tax profit surged 160% to £193.4m in the 26 weeks to October 27, driven by the performance of its “premium lifestyle” businesses.

Sports Direct’s bottom line was also boosted by the £84.9m sale and leaseback of its Shirebrook headquarters.

Underlying EBITDA advanced 21.8% to £181.2m but grew at a slower rate of 15.1% after stripping out the impact of new acquisitions and currency movements.

Group revenue increased 14% to £2bn during the six-month period, with sales from premium brands Flannels and House of Fraser improving 79.2% to £282.6m.

However, stripping out the impact of acquisitions and currency movements, group sales were down 6.4%.

Sales made through its core UK sports retail division climbed 6.2% to £1.2bn.

Sports Direct chair David Daly sought to allay investors’ fears over the €674m (£560m) tax bill from Belgian authorities that shocked the market in the summer.

Daly said: “We continue to maintain that the Belgian tax issue will not lead to material liabilities and we are committed to finding a resolution as soon as possible.”

Sports Direct added that it has “fully engaged” with the Belgian tax authority over the issue and warned that the body is “satisfied that VAT has been correctly accounted” based on the information it has received so far.

The review is expected to be completed “early in the new year”.

Daly hailed Sports Direct’s “impressive” half-year figures and insisted its “elevation” strategy to improve its stores and stock more upmarket brands through Flannels and House of Fraser remained “the right plan” for the future.

In a departure from founder Mike Ashley’s ‘pile it high, sell it cheap’ philosophy, Daly said its strategy was “driving higher margins with less units” sold.

Sports Direct also said it was starting to see “green shoots of recovery” in House of Fraser – a business that Ashley warned earlier this year had “terminal” problems.

Daly said Sports Direct was “bringing new disciplines, experience and skills” into the group which were “helping the turnaround” and insisted that its vision for Frasers would “prove to be a vital and successful part of the group”.

Earlier this year, Sports Direct International revealed plans to change its company name to Frasers as part of its ongoing shift upmarket.

Sports Direct had been due to lift the lid on the first refitted Frasers store in Glasgow last month, but the launch has been delayed.

It said, however, that it was on course to complete its store elevation plan within its core Sports Direct business by the end of the financial year.