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Shares in Mike Ashley's Sports Direct drop as profits plunge 69%
Thomas Colson
Shares in retail giant Sports Direct were down 11% on Thursday morning after it released a first-half results statement which disguised plummeting profits.
The group claimed "spectacular" trading performance but analyst Michael van Dulken said reported profits fell an eye-watering 69% after adjustments.
LONDON — Shares in retail giant Sports Direct were down up to 11% on Thursday morning after it released a first-half results statement which disguised plummeting profits.
The budget sportswear chain, owned by billionaire Mike Ashley, claimed a "spectacular trading performance" with profits up 23% in the six months to 29 October and revenues up 4.7%, implying healthy margin expansion.
But Michael van Dulken, analyst at Accendo Markets, said those figures are only true "once you adjust for all manner of things," including, but not limited to, "excluding gains from FX moves and property sales, and ignoring more significant losses from fair value adjustments to unhedged FX forwards and options contracts, losses on strategic investments, and fair value movements on derivatives."
Once those adjustments are factored in, reported profits fell 69%, van Dulken said.
Shares were down 7.12% at 10.00 a.m. GMT:
Markets Insider
Nicholas Hyett, equity analyst and fund manager Hargreaves Lansdown, said the firm was hampered by poor governance practices and said the group's new-format stores had not shown the "spectacular" trading performance claimed by Ashley.
"Sports Direct’s corporate governance practices continue to attract headlines for all the wrong reasons, with independent shareholders rejecting an £11m payment to Mike Ashley’s brother on Wednesday," he said.
"Unfortunately, the lack of transparency also stretches to the "Selfridges of Sport" initiative. Mike Ashley has described trading at the new format stores as "spectacular," but it’s difficult to see evidence of that in the numbers. Improved profits are being driven by cost cuts rather than sales growth – which is actually negative in the UK."
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