S
P
O
R
T
S
D
R
E
C
T
I
I
I
N
T
E
R
N
A
T
O
N
A
L
P
L
C
ANNUAL REPORT AND ACCOUNTS 2018
AT A GLANCE
Founded as a single store in 1982, Sports Direct International plc (Sports Direct, the Group or
the Company) is today the UK’s largest sporting goods retailer by revenue. The Group operates
a diversified portfolio of sports, fitness, fashion and lifestyle fascias in over 20 countries. We
have approx. 26,500 staff across five business segments: UK Sports Retail, European Sports
Retail, Premium Lifestyle, Rest of World Retail, and Wholesale & Licensing (formerly Brands). Our
business strategy is to invest in our people, our business, and our key third party brand partners,
in order to elevate our retail proposition across all our channels to attain new levels of excellence.
OUR
The Group aspires to be an international leader in sports, lifestyle, and luxury apparel retail, by
offering our customers a dynamic range of iconic brands.
We value our people, our customers, our shareholders and our third party brand partners - and
we strive to adopt good practices in all our corporate dealings.
We are committed to treating all people with dignity and respect. We endeavour to offer
customers an innovative and unrivalled retail experience. We aim to deliver shareholder value
over the medium to long term, whilst adopting accounting principles that are conservative,
consistent and simple.
OUR
The Group was listed as a public company in 2007. Since then we have contributed the following
to the UK economy:
• Contributed approx. £465m in UK Corporation Tax
• Created 5,100 new jobs in the UK (where we currently have 17,700 directly engaged staff)
• Paid approx. £230m in staff share bonuses
• Paid approx. £120m in sales commission to retail staff
INTRODUCTION
3
SPORTS DIRECT - ANNUAL REPORT 2018 CONTENTS
1 - HIGHLIGHTS & OVERVIEW
Strategic Highlights ...................................................................................................................... 007
Financial Highlights ...................................................................................................................... 008
Brand Highlights ........................................................................................................................... 012
People Highlights ......................................................................................................................... 014
Elevation Highlights ...................................................................................................................... 017
2 - STRATEGIC REPORT
Chairman’s Statement .................................................................................................................. 052
Our Business ................................................................................................................................ 055
Workers' Representative's Report ................................................................................................ 059
Chief Executive’s Report and Business Review ........................................................................... 060
Financial Review ........................................................................................................................... 070
Corporate Social Responsibility Report ........................................................................................ 077
Risks and Uncertainties Relating to the Group’s Business .......................................................... 087
3 - GOVERNANCE
The Board ..................................................................................................................................... 094
Directors' Report .......................................................................................................................... 096
Corporate Governance Report ...................................................................................................... 102
Directors' Remuneration Report ................................................................................................... 115
Directors' Responsibilities ............................................................................................................ 129
Viability Statement ....................................................................................................................... 130
4
4 - GROUP FINANCIAL STATEMENTS
Independent Auditor’s Report to the Members of Sports Direct International plc ...................... 131
Consolidated Income Statement .................................................................................................. 142
Consolidated Statement of Comprehensive Income .................................................................... 143
Consolidated Balance Sheet ......................................................................................................... 144
Consolidated Cash Flow Statement ............................................................................................. 145
Consolidated Statement of Changes in Equity ............................................................................. 146
Notes to the Financial Statements ............................................................................................... 148
5 - COMPANY FINANCIAL STATEMENTS
Company Balance Sheet .............................................................................................................. 206
Company Statement of Changes in Equity .................................................................................. 207
Notes to the Company Financial Statements ............................................................................... 208
6 - GROUP INFORMATION
Consolidated five year record ....................................................................................................... 213
Company directory ....................................................................................................................... 214
Shareholder information ............................................................................................................... 215
CONTENTS
5
SPORTS DIRECT - ANNUAL REPORT 2018 6
STRATEGIC
A new generation of stores and elevation across all channels to enhance
the customer journey
The elevation of our multi-channel retail proposition remains a key strategic objective. To this
end, we are improving the customer experience at every step of the journey.
We aim to deliver an unrivalled range, availability and quality of products – both third party
brands and Group branded products – with different customer value propositions across our
sports, lifestyle and premium fascias.
The elevation strategy continues to enhance and improve our stores and all our digital
operations, our product offering, and our marketing channels. This is vital to strengthen our
relationships with our key third party brand partners, to deliver benefits for consumers, and to
drive the Group’s long-term profitability.
The active management of our property portfolio remains a critical enabler of the strategy, as
it facilitates the development of elevated retail space required by third party brands. This is a
five to ten year programme, which as previously stated will see us invest approx. £1.0bn in
property assets (i.e. approx. £300m per annum for the first two to four years).
During FY18, we have continued to roll out a new generation of stores. These include large
format flagship-style megastores in strategic retail locations that may include one or more of
the Group's fascias on a single site, plus a fitness gym where appropriate.
"I am particularly pleased that Sports Direct has not only been named
among the ten companies with the most improved reputation in the
UK, but also that we were ranked among the top five in an index of
international retailers*.
I’m pleased that our Underlying EBITDA has come in at the top end of
our expected range at £306.1m as we indicated this time last year, and
also that the underlying profit after tax has increased substantially to
£104.9m.”
Mike Ashley
Chief Executive
HIGHLIGHTS & OVERVIEW
*
R
e
p
u
t
a
t
i
o
n
I
n
s
t
i
t
u
t
e
,
A
p
r
i
l
2
0
1
8
/
I
n
t
e
r
n
a
t
i
o
n
a
l
i
s
a
t
i
o
n
R
e
t
a
i
l
I
n
d
e
x
,
J
u
n
e
2
0
1
8
7
SPORTS DIRECT - ANNUAL REPORT 2018
FINANCIAL
• Group revenue increased by 3.5%(1)
Excluding acquisitions, disposals, 53rd week, and on a currency neutral basis,
revenue increased by 0.7%
• UK Sports Retail revenue decreased by 2.0%(1)
Excluding acquisitions, disposals and 53rd week, revenue decreased by 0.3%
UK Sports Retail like-for-like stores gross contribution was down 0.6%(2)
• European Sports Retail (formerly International Retail) revenue decreased by 0.1%(1)
Currency neutral, excluding acquisitions and 53rd week, revenue decreased by 3.2%
European Sports Retail (formerly International Retail) like-for-like stores gross contribution
was down 2.0%(2)
• Premium Lifestyle Retail revenue increased by 42.7%, due to an increased store portfolio and
online sales
• Group gross margin decreased to 39.7% from 41.0%, due to acquisition accounting as a result of
the acquisition of Bob’s Stores and Eastern Mountain Sports, and increased inventory provisions
• Group underlying EBITDA(3) increased by 12.2% To £306.1m
• Strong free cash flow (pre-capex) up to £326.2m increased from £257.4m in the prior year(4)
• Reported Profit before tax was £77.5m, down 72.5% from £281.6m largely due to:
an £85.4m impact from our Debenhams strategic investment due to current year fair value
adjustments mitigated to some extent by investment income
prior year investment income from the sale of JD Sports shares and disposal of the
Dunlop brand
• Underlying Profit before tax increased by 34.5% to £152.9m
• Reported earnings per share fell by 88.3% to 4.6p
Underlying basic earnings per share increased by 74.6% to 19.9p(3)
• Reported profit after tax was £27.6m down 88.1% from £231.7m
Underlying profit after tax was £104.9m
The reported tax charge is impacted by non-deductible investment costs in the current year
and non-taxable investment income in the prior year
• Net debt increased to £397.1m (£182.1m at 30 April 2017)(5), due to the purchase of own shares,
strategic investments and investment in property set against a strong free cash flow
•
Invested £140.0m in property assets as we execute our strategic priority to elevate our
sports retail proposition
(1) Headline growth includes the 53rd week in the prior year
(2) Figure is on a 52 week currency neutral basis and with a consistent year on year inventory provision used
(3) Underlying EBITDA, underlying Profit before taxation and underlying EPS exclude realised foreign exchange gains/losses in selling and administration costs,
exceptional costs, and the profit / loss on disposal of subsidiaries, strategic investments and properties. Underlying EBITDA also excludes the Share Scheme charges
(4) Underlying free cash generation is defined as operating cash flow before working capital, made up of underlying EBITDA (before Share Scheme costs) plus realised
foreign exchange gains and losses, less corporation tax paid
(5) Net debt is borrowings less cash and cash equivalents held
8
FY14
FY15
FY16
FY17
FY18
FY14
FY15
FY16
FY17
FY18
FY14
FY15
FY16
GROUP REVENUE
+11.7%
£2,706.0m
£2,832.6m
£2,904.3m
£3,245.3m
REPORTED PBT
-72.5%
239.5
313.4
361.8
281.6
FY14
FY15
FY16
FY17
£3,359.5m
FY18
77.5
0000
1000
1000
2000
2000
3000
3000
4000
4000
5000
5000
000
100
200
300
400
500
UNDERLYING EBITDA
+12.2%
UNDERLYING EPS
-74.6%
£331.1m
£383.2m
£381.4m
FY14
FY15
FY16
32.1
38.9
35.5
£272.7m
FY17
11.4
£306.1m
FY18
19.9
000
100
200
300
400
500
00
10
20
30
40
50
UNDERLYING PBT
+34.6%
REPORTED EPS
-88.3%
£249.3m
£300.3m
£275.2m
FY14
FY15
FY16
FY17
30.8
40.6
46.8
39.4
FY17
£113.6m
FY18
£152.9m
FY18
4.6
000
100
200
300
400
500
00
10
20
30
40
50
" DURING FY18, WE HAVE SEEN GROWTH IN UNDERLYING EBITDA
OF 12.2%. THE ELEVATION STRATEGY CONTINUES TO EXCEED
EXPECTATIONS. AS THE PROPERTY PIPELINE AND BRAND
RELATIONSHIPS ACCELERATE, WE ARE CONFIDENT IN ACHIEVING
BETWEEN A 5% AND 15% IMPROVEMENT IN UNDERLYING EBITDA
FOR THE COMING FINANCIAL PERIOD."
Michael Murray
Head of Elevation
9
SPORTS DIRECT - ANNUAL REPORT 2018
U
K
S
P
O
R
T
S
R
E
T
A
I
L
64.9% Total Group Revenue
£2,181.5m
Down 2.0%
UK Sports Retail includes core sports retail
store operations in the UK, plus all the Group’s
sports retail online business globally, the Fitness
Division, and the Group’s Shirebrook campus
operations, as well as the Heatons Northern
Ireland stores.
Our store footprint is significant, with approx.
494 stores plus additional concessions across
the UK, totalling approx. 5.4m sq. ft. in retail
space. The majority of stores are operated under
the SPORTSDIRECT.COM and USC fascias.
EUROPEAN SPORTS RETAIL
19.0% Total Group Revenue
£637.2m
Down 0.1%
European Sports Retail (formerly International
Sports Retail) includes all the Group’s sports
retail stores, management and operations in
Europe including the Group’s European
distribution centres in Belgium and Austria,
with 253 stores and approx. 3.9m sq. ft. of
retail space.
During FY18, management continued to evolve
the Group’s approach to its European stores
over the medium term and work to further tailor
the Group’s customer value propositions to our
local markets.
R
E
S
T
O
F
W
O
R
L
D
R
E
T
A
I
L
5.7% Total Group Revenue
£192.4m
Rest of World Retail includes sports and
outdoor retail stores in the US under
the Bob’s Stores and Eastern Mountain
Sports fascias and their corresponding
e-commerce offerings. It also includes the
Group’s retail stores in Malaysia under the
Sports Direct fascia and its corresponding
e-commerce offering.
10
4.8% Total Group Revenue
£162.1m
Up 42.7%
The Group’s Premium Lifestyle division offers a broad range
of clothing, footwear and accessories from leading global
contemporary and luxury retail brands through our fascias in
the UK: Flannels, Cruise and van mildert. Each fascia operates
as a multi-brand premium retail destination, and is focused on
providing fashion conscious shoppers with high-end and on
trend products.
The segment is supported by our Group-wide centralised
commercial and support functions, giving the benefit of scale
and operating efficiencies to each fascia. The segment is a
significant part of the Group’s new generation retail concept
and as such, in certain locations, Premium and Lifestyle stores
are co-located alongside our Sports retail stores to benefit from
increased customer footfall and operating synergies.
5.6% Total Group Revenue
£186.3m
Down 22.7%
The Wholesale & Licensing (formerly Brands) segment operates
our globally renowned heritage group brands, and our
wholesale, licensing and distribution relationships across the
world, as well as our partnerships with third party brands that
we license-in to sell certain products.
The Group's own brands are managed both individually and
centrally within this segment. This unique, integrated approach
to brand management leverages the expertise of our people,
encourages innovation, and ensures consistency.
The Group placed a strong focus during the year on its core UK
and European Sports Retail business, in order to prioritise the
continued development of our relationships with our key third
party brand partners, as we elevate our sports retail proposition.
I
P
R
E
M
U
M
L
I
F
E
S
T
Y
L
E
W
H
O
L
E
S
A
L
E
&
L
I
C
E
N
S
N
G
I
(
F
O
R
M
E
R
L
Y
B
R
A
N
D
S
)
HIGHLIGHTS & OVERVIEW
11
SPORTS DIRECT - ANNUAL REPORT 2018
BRAND
Strengthening relationships with our
third party brand partners to offer a
greater range of choice
The Group continues to work closely with our
key third party brand partners, such as adidas,
Nike, Puma and Under Armour. The elevated
retail space within our new generation stores,
along with our enhanced social and digital
platforms, opens the door for brands to use
their expertise to connect with our consumers.
This is strengthening our commercial
relationships and enables brand partners to
adopt a marketing approach that is consistent
across all our channels. Crucially, it also enables
the Group to increase the range choice available
to customers to include a dynamic mix of good,
better and best product.
For example, at our Half Year presentation
in December we were pleased to give an
overview of how our key suppliers are providing
increased support for our elevated stores across
all categories. In addition to offering good,
better and best product in the football category,
we are also enhancing the fashion-led apparel
in our USC fascia within megastores.
We are also focused on working closely
with our third party brand partners towards
increasing the range of choice in sports retail
across other categories, including women's,
young athletes, and running. This included
welcoming Asics into our new generation stores
in early 2018.
Meanwhile, the Group continues to make
good progress towards building significant
relationships with luxury fashion brands that sit
comfortably within the premium environment
provided by our Flannels fascia.
12
"WE HAVE FULL SUPPORT
FROM 3RD PARTY BRANDS.
THIS IS ENABLING US TO
FURTHER ENHANCE OUR
OFFERING TO CUSTOMERS
THROUGH OUR BRAND
RELATIONSHIPS."
Michael Murray
Head of Elevation
HIGHLIGHTS & OVERVIEW
13
SPORTS DIRECT - ANNUAL REPORT 2018 PEOPLE
Working together towards a bright
future for all
Sports Direct owes its success to the great
people who work here - and when our people are
strong our business is strong.
We are committed to treating all staff in
a manner that is dignified and respectful,
regardless of age, gender or ethnicity. We are
also proud to be one of the first public companies
in the UK to embrace the idea of introducing a
Workers' Representative who attends meetings
of the Board.
During FY18, company shares worth
approximately £45.5m were vested to eligible
employees in our staff share bonus scheme. We
also have generous commission arrangements in
place and other incentives that enable our people
to benefit fairly from the business.
It remains our policy to pay all our people at rates
that are above statutory wage bands in the UK,
and we strive to also be a responsible employer
internationally. We place a strong emphasis on
staff training and career development, whilst also
constantly striving to attract new talent.
You can read more about how we are working
towards a bright future for our people in the
‘Our Business’ section of the Strategic
Report and also within our Corporate Social
Responsibility Report.
14
" AS SOMEBODY WHO ORIGINALLY
STARTED WITH THE COMPANY AS
A CASUAL SALES ASSISTANT WHEN
I WAS IN MY TEENS, I KNOW FIRST
HAND WHAT A GREAT CONTRIBUTION
STAFF MAKE TOWARDS THE
SUCCESS OF THE BUSINESS."
Alex Balacki
Workers' Representative to the Board
15
SPORTS DIRECT - ANNUAL REPORT 2018 16
ELEVATION
Connecting with customers and
unveiling our latest concept for the
future of retail
Today's consumers rightly demand a retail
experience of the highest standard, not just
in store but also across all platforms. We also
recognise that the customer journey is just
as likely to begin on social media or through
digital channels, as it is on the high street.
For this reason we are elevating across all
areas to ensure that we can connect with
consumers with one voice across all channels.
This includes working diligently with our third
party brand partners to constantly improve our
offering to customers.
Our focus is on presenting an unrivalled range,
availability and quality of products – both
third party brands and Group branded
products. This includes different customer
value propositions across our sports, lifestyle
and premium fascias.
This is reflected in our marketing, online and
in our new generation of stores - the latest
concept of which was recently unveiled at our
new 100,000 sq. ft. flagship store in Thurrock.
This includes a SportsDirect.com store, a USC
fashion store and an adjacent luxury Flannels
store. The customer experience is further
boosted by the inclusion of an Everlast
fitness gym.
Further examples of our elevation initiatives are
contained on the following pages.
HIGHLIGHTS & OVERVIEW
17
SPORTS DIRECT - ANNUAL REPORT 2018 18
"WE ARE WORKING TO CREATE
THE ULTIMATE SHOPPING
DESTINATION FOR THE LIFESTYLE
CONSUMER, SPANNING FOOTBALL
BOOTS ALL THE WAY TO LUXURY
FASHION. THE PREMIUM SPACE
WE HAVE DEVELOPED AT
THURROCK ENABLES US TO GIVE
CUSTOMERS A COMPELLING AND
DIVERSE OPPORTUNITY TO SHOP."
Mike Murray
Head of Elevation
Flagships
19
SPORTS DIRECT - ANNUAL REPORT 2018 H
G
U
O
R
O
B
S
E
L
D
D
I
M
"THURROCK IS A LEAP FORWARD
FOR THE INDUSTRY"
- NIKE
20
E
L
A
S
E
L
O
H
W
O
N
S
E
R
E
H
T
"
'
L
L
A
B
T
O
O
F
N
I
R
E
N
T
R
A
P
I
T
N
O
P
N
O
,
G
N
I
L
L
E
P
M
O
C
I
S
H
T
N
A
H
T
T
N
E
T
N
O
C
E
R
O
M
G
N
T
A
E
R
C
I
"
!
W
O
N
T
H
G
R
I
S
A
D
D
A
I
-
FLAGSHIP STORES
21
SPORTS DIRECT - ANNUAL REPORT 2018
L
L
A
B
T
O
O
F
22
PRODUCT ELEVATION
23
SPORTS DIRECT - ANNUAL REPORT 2018 Our USC streetwear and
fashion fascia has been
re-positioned as 'US
Collective' for our store
in Thurrock. It includes a
new brand-edit featuring
leading labels such
as Champion, Tommy
Hilfiger and Diesel.
Our aim is to offer a retail
destination with a social and
creative focus. A home for you
and your tribe, where you can
shop together but still leave as
an individual!
24
U
S
C
25
SPORTS DIRECT - ANNUAL REPORT 2018
26
E
V
E
R
L
A
S
T
The experiential appeal of our flagship stores to customers is
greatly enhanced at a number of sites by the inclusion of our
Everlast-branded fitness gyms. These are fully equipped with
state-of-the-art cardio and resistance-training equipment,
along with dedicated areas for fitness classes.
At Everlast, we believe that greatness lies within. We currently operate six of
these branded gyms, the most recent to open in July 18 being at Thurrock - with
additional gyms coming soon at Leicester and Glasgow Fort.
Our 20,000 sq. ft. Everlast gym in Shirebrook (pictured at the top of the adjacent
page) has proved popular with staff at our national distribution centre, as well as
being widely-used by the local community. In addition to our Everlast sites, we
operate 26 gyms under our Sports Direct Fitness fascia.
Fascias
27
SPORTS DIRECT - ANNUAL REPORT 2018
FLANNELS INTERIOR IMAGES
28
FLANNELS INTERIOR IMAGES
Our luxury Flannels fascia
is a key component of our
elevation strategy, and we
continue to roll out new
stores on a regular basis.
Our focus is to create a
high-end retail environment
that offers fashion-
conscious consumers the
very best of luxury brands.
To this end, we look forward to
opening a new Flannels national
flagship store in Oxford Street in
London in 2019, which will further
enhance the profile of the fascia as
a premium destination for luxury
apparel.
29
SPORTS DIRECT - ANNUAL REPORT 2018
30
OUR LUXURY
FLANNELS STORES
ARE FITTED TO AN
EXCEPTIONALLY
HIGH STANDARD
FASCIAS
31
SPORTS DIRECT - ANNUAL REPORT 2018 OXFORD STREET UPDATE
Our new global headquarters at
Academy House opened in 2018 at
a freehold site in Oxford Street in
London, which we acquired two years
ago for £113.6m.
Situated in a premium location close to the
new Crossrail link at Tottenham Court Road, the
building has been refitted to a high standard with
office space for 200 staff along with function
facilities. The lower floors of the building will host
our Flannels flagship store due to open in 2019.
32
SPORTS DIRECT - ANNUAL REPORT 2018
NEW OFFICES
33
33
SPORTS DIRECT - ANNUAL REPORT 2018 SD THURROCK OR OXFORD STREET INTERIOR
34
OPERATIONS
A
C
A
D
E
M
Y
K
T
C
H
E
N
I
NEW OFFICES
35
SPORTS DIRECT - ANNUAL REPORT 2018
SOCIAL / DIGITAL
36
SOCIAL
We are enhancing our social channels across key categories to connect with consumers
through compelling and entertaining content. We strive to create social feeds with their
own unique style and tone of voice, in order to maximise our engagement rates, which
exceed the average. Our proof of concept began with SDFOOTBALL (Sports Direct
Football), and was followed by bespoke channels with specialist content for SDRUNNING,
SDTRAINING and USC.
23.8%
INDUSTRY AVERAGE 1.66%
RECORD BREAKING INSTAGRAM
ENGAGEMENT RATE
CUSTOMER JOURNEY
37
SPORTS DIRECT - ANNUAL REPORT 2018 HOMEPAGE
38
HOMEPAGE
BRAND
ALICIA BARRETT:
WITH ADIDAS FOR
SDRUNNING
3K FOLLOWERS
KIERAN TRIPPIER:
ACCESS TO
ENGLAND'S TOP
PERFORMER AT
THE WORLD CUP
571K FOLLOWERS
MO SALAH:
EXCLUSIVE 1 YEAR
PARTNERSHIP WITH
SDFOOTBALL & ADIDAS
25M FOLLOWERS
TRENT ALEXANDER-ARNOLD:
WITH UNDER ARMOUR
FOR SDTRAINING
1.1M FOLLOWERS
RELATIONSHIPS
CUSTOMER JOURNEY
39
SPORTS DIRECT - ANNUAL REPORT 2018 TOP
OLD
2018
BRAND
NIKE
PRODUCT
MAGISTA ONDA II
PRICE
£59.99 RRP
RANKING BY BRANDS
ENTRY
CONSUMER RATING
MEDIUM
FOOTBALL
PRICE
£230 RRP
BRAND
NIKE
PRODUCT
PHANTOM ELITE DF
RANKING BY BRANDS
STATEMENT
CONSUMER RATING
VERY BEST
40
2018
OLD
BRAND
NIKE
PRODUCT
EPIC REACT
PRICE
£129.95 RRP
RANKING BY BRANDS
STATEMENT
CONSUMER RATING
BEST
BRAND
NIKE
PRODUCT
FLEX EXPERIENCE
PRICE
£59.99 RRP
RANKING BY BRANDS
ENTRY
CONSUMER RATING
MEDIUM
R
U
N
N
N
G
I
PRODUCT ELEVATION
41
SPORTS DIRECT - ANNUAL REPORT 2018 42
THE PREDATOR IS BACK! ADIDAS
RELAUNCHED THE PREDATOR BOOT WITH
SDFOOTBALL AT AN EVENT HOSTED IN
LONDON, PUTTING SOCIAL INFLUENCERS
THROUGH THEIR PACES BY USING
ACTORS TO DELIVER AN INTENSE AND
IMMERSIVE EXPERIENCE. WE FOLLOWED
UP WITH THE COLD BLOODED CAMPAIGN
- RELEASING ‘YUNG PREDS’, A SHORT
FILM INSPIRED BY THE UNDERGROUND
FOOTBALL SCENE.
43
SPORTS DIRECT - ANNUAL REPORT 2018 44
WE CELEBRATED THE LAUNCH OF THE
PUMA FUTURE AND PUMA ONE BOOTS
WITH A YOUTUBE CAMPAIGN THAT
HIGHLIGHTED THE LINKS BETWEEN
FOOTBALL AND THE COMPUTER GAME,
FORTNITE. THIS COINCIDED WITH THE
WORLD CUP AND SAW US ENGAGE WITH
USERS VIA EPISODES OF A PREDICTION
FORMAT KNOWN AS THE 'FORTNITE
FOOTBALL CHALLENGE'.
3RD PARTY CAMPAIGNS
45
SPORTS DIRECT - ANNUAL REPORT 2018 46
CR7 CHAPTER 5 - CUT TO BRILLIANCE.
THIS CAMPAIGN WAS A SIGNATURE
STATEMENT BY SDFOOTBALL. WE FLIPPED
PRODUCT LAUNCHES ON THEIR HEAD
WITH COMPELLING DIGITAL CONTENT
AND AN EYE-CATCHING CONTEMPORARY
TV CAMPAIGN. WE ALSO LAUNCHED
A GUEST TEST SERIES HOSTED ON
YOUTUBE, WHICH BROKE A SNAPCHAT
RECORD FOR THE LONGEST AVERAGE
VIEWING TIME FROM A SPONSORED POST
WORLDWIDE.
47
SPORTS DIRECT - ANNUAL REPORT 2018 48
WE TEAMED UP WITH UNDER ARMOUR
TO LAUNCH THE SDTRAINING
CATEGORY. THIS CAMPAIGN SHOWS
THE DEVELOPMENT OF OUR BRAND
RELATIONSHIPS, ESTABLISHING ACCESS
TO LIVERPOOL AND ENGLAND DEFENDER
TRENT ALEXANDER-ARNOLD - PUTTING
HIM THROUGH HIS PACES IN THE GYM,
PREPARING FOR THE CHAMPIONS
LEAGUE FINAL.
3RD PARTY CAMPAIGNS
49
SPORTS DIRECT - ANNUAL REPORT 2018 50
#FIVE BY RIO FERDINAND. WE COLLABORATED WITH
ENGLAND AND MANCHESTER UNITED LEGEND RIO
FERDINAND TO CO-LAUNCH THE ICONIC APPAREL
BRAND, FIVE.
THE FIVE COLLECTION - NAMED AFTER RIO'S FAMOUS
SHIRT NUMBER AT UNITED - AIMS TO INSPIRE THE NEXT
GENERATION OF YOUNG ATHLETES TO ACHIEVE
GREATNESS. THE COLLECTION INCLUDES LIFESTYLE AND
PERFOMANCE CLOTHING AVAILABLE EXCLUSIVELY
THROUGH SPORTS DIRECT.
51
SPORTS DIRECT - ANNUAL REPORT 2018 CHAIRMAN'S STATEMENT
OVERVIEW
FY18 has seen the Group continue to make good progress in elevating our retail proposition in order to deliver
enhanced levels of excellence to our customers. Our new generation of flagship stores continue to out-perform our
expectations, and I would like to thank all our people for their loyalty and hard work.
I am very pleased that our results have come in at the top end of the expectation that Mike Ashley mentioned in his
outlook statement last year. We have consistently used Underlying EBITDA as one of our Alternative Performance
Measures, this has increased 12.2% year on year. FY18 Underlying Profit before tax was up 34.5% to £152.9m, largely
as a result of maintaining a strong trading performance in the UK as we undergo the strategic shift to the elevated
store and online offering, whilst starting to see the benefits of increased efficiencies in the UK and Europe. There have
been improvements in the currency hedging rates used year on year as well as the advantage of a strong Euro for the
European divisional results.
In terms of statutory reporting, our Profit before taxation has reduced by 72.5%, which arises predominantly from the
profit on the sale of the Dunlop business and the profit on the sale of JD Sports shares included in the results for the
prior period and the recognition of the net losses on our strategic investment in Debenhams in the current period.
During the year, the Group generated free cash flow of £326.2m, and undertook capital expenditure of £213.4m,
including £140.0m on property acquisitions. Net debt increased from £182.1m to £397.1m as a result of overall
investment in our elevation strategy and an increased spend on our strategic investments. The Group continues to
maintain substantial financial resources and a strong balance sheet.
ELEVATION STRATEGY AND STRATEGIC PRIORITIES
The enhancement of our retail proposition, on the high street and elsewhere, continues to be a strategic priority. In
line with this, our multi-channel elevation strategy is a key driver towards achieving our long to medium term goal
of delivering an unrivalled multi-brand offering to customers across sport, lifestyle and fashion. This strategy began
on the high street with the active management of our property portfolio, which is seeing us continue to open a
new generation of stores. These include regional flagship stores with multiple fascias in key retail locations. This is
enabling us to work closely with our third party brand partners to ensure greater integration of key products within
improved retail space. The elevation strategy further encompasses how we connect with the consumer across all our
channels, including social, digital and in store. It is also creating opportunities for staff and it aims to increase value for
shareholders in the long term.
OUR PEOPLE AND OUR PRACTICES
As always, the wellbeing of our people is a priority consideration, and the Board is committed to treating all staff with
dignity and respect. During FY18 we completed an organisational development programme to give staff improved
visibility over career options within the Group. This has resulted in an improved system for staff appraisals. This activity
included a review of staff wages at all levels of the Company within the UK, in order to ensure that our people continue
to be rewarded for their loyalty. I can confirm that all staff, including casual workers, continue to be paid hourly rates
above the levels set by the National Minimum Wage (or above the new Statutory National Living Wage if aged over
25). In addition, the Company pays commission and other rewards to staff worth approx. £20m per annum. Eligible
employees participating in the Company share bonus scheme received shares worth £45.5m in FY18. The Company
continues to meet its obligation to ensure staff in the UK, including casual workers, receive holiday pay on an accrued
basis and statutory sick pay. Further details of our arrangements for staff are set out in the Our Business section
on pages 55 to 58 and 77 to 86 of the Corporate Social Responsibility Report including details of a new proactive
occupational health programme, entitled SD Wellbeing, which offers support to staff via a range of measures.
52
THIRD PARTY BRAND PARTNERS
Our elevation strategy is seeing us open bigger and better stores, which enables us to strengthen our relationships
with third party brands. The result is that we are able to offer a greater range of choice, including as time goes on,
more premium product lines. We are working with our suppliers towards our elevated stores offering good, better and
best products across all categories. FY18 has seen us continue to strengthen our relationships with leading third party
brands, including adidas, Nike, Puma and Under Armour.
BOARD AND SENIOR MANAGEMENT
I am pleased to report that the role of Michael Murray has broadened to include overseeing the execution of the
Company's elevation strategy on behalf of the Board. In addition to his duties in relation to property, Michael has
therefore been assigned to the role of Head of Elevation. Michael continues to be engaged on a consultancy basis. I
would like to thank him for his additional input, and we have made a provision of £5.0m for services to the end of FY18
towards payments due under our previously disclosed agreement with him. Under this agreement, an independent
property valuation takes place, in order to establish the value created by Michael for the Group.
We are pleased to have appointed Jon Kempster as Chief Financial Officer and Executive Director on 11 September
2017 and David Daly as Non-Executive Director and member of the audit committee on 2 October 2017. Jon brings to
Sports Direct a wealth of public company experience in multinational organisations across multiple sectors. David has
30 years’ international experience in the sporting goods industry working for Nike until his retirement in 2015, most
recently as Senior Director for Nike’s Club and Federation Business based in Amsterdam.
The Company has continued to strengthen its senior management team, and I am pleased to announce that Chris
Wootton has been promoted to the role of Deputy Chief Financial Officer. As previously stated during the period,
Liam Rowley joined us last October as Head of Strategic Investments. I am confident that this pool of new talent will
be of great benefit to the Company. In relation to the composition of the Board we are committed to meeting gender
diversity targets. We are currently interviewing a number of female candidates to join the Board as Non-Executive
Directors, and female candidates are being encouraged to apply to become our next Workers' Representative to the
Board. Women hold approx. 35% of senior leadership roles at Sports Direct, ahead of the Hampton Alexander target
of 33% of women in senior leadership by 2020 and our average gender pay gap is approx. 6.3%, which is below the
current national average of 18.4%.
STRATEGIC INVESTMENTS
Strategic investments are a key part of the Group’s overall strategy. In a challenging retail market, we believe
innovative strategic partnerships will help to differentiate our offering and enhance the consumer experience by
giving us ways to extend our reach into new retail channels and geographies. During the year we have progressed
our strategy through our investment in Game Digital with the potential to develop Belong eSports arenas, and our
increased interest in Debenhams. The appointment of Liam Rowley has brought enhanced focus on aligning our
strategic investments with our medium to long term goals.
CORPORATE GOVERNANCE
The Board trusts that shareholders will welcome the steps taken in FY18 to reassure them that John Ashley did
not benefit inappropriately from being the brother of majority shareholder Mike Ashley. In fact, John was actually
disadvantaged by approximately £11m after he forewent bonuses that he would have received if he were treated
equally to other executives who helped to build the Company (as announced on 24 November 2017). By voluntarily
abstaining from voting on this issue, the Board has provided the Company's independent shareholders the opportunity
to determine whether or not to make a retrospective payment to John Ashley. The Board notes that independent
shareholders voted against making this payment at the General Meeting held in December 2017. The Board respects
the views of the Company's independent shareholders and considers all these matters to be closed.
53
STRATEGIC REPORTSPORTS DIRECT - ANNUAL REPORT 2018 CHAIRMAN'S STATEMENT
Continued
CAPITAL MANAGEMENT
In November 2017 we announced that we have entered into a new Revolving Credit Facility ("RCF"). The RCF is valid
for four years (with a one year extension option), and provides the Group with access to borrowings of up to £907.5m.
This has now been increased to £913.5m. We very much appreciate the ongoing support of our banking partners. Net
debt to Reported EBITDA is currently 1.1 times.
The Board has decided not to pay a dividend this year. We will continue to keep this under review in future periods.
The Board ensures that sufficient capital is retained within the Group to meet its strategic objectives.
We continued to conduct our Share Buyback Programme during the period, pursuant to the authority granted to us at
the 2017 AGM. During the period to 29 April 2018 the Company has purchased 37,105,027 ordinary shares at a cost of
£113.9m (excluding purchasing costs) and representing 5.8% of the issued share capital. The number of shares held in
treasury by the Company at the end of the period was 103,633,049 representing 16.2% of the issued share capital. No
shares have been disposed of by the Company.
As at 18 July 2018 the Company has not purchased any further shares under the Share buyback programme. No
shares have been disposed of by the Company to this date.
The Group has invested £140.0m in FY18 in property assets (FY17: £317.0m), which brings our elevation strategy
spend to £562.0m, consistent with our two to four year estimate.
OUR ACHIEVEMENTS AND OUR VALUES
Finally, I would like to say how pleased I was that our year-end in April coincided with publication of an announcement
by the Reputation Institute, which named Sports Direct as among the ten UK companies with the biggest reputation
improvements during 2017 to 2018. In June 2018, the Company was also ranked ahead of companies like Apple
and John Lewis in an index of international retailers, which was published by Loqate GBG in partnership with Planet
Retail RNG and Retail Week Connect. Whilst there is no room for complacency, it is refreshing to see this independent
recognition of the work we have undertaken to ensure that our working practices and corporate governance are
aligned with our values. I note that various commentators in the past have sought to portray Mike Ashley as a so-
called 'pantomime villain’. However, since Mike became Chief Executive, the Company has initiated a process of
transformation to the benefit of all stakeholders. This has seen dynamic implementation of our elevation strategy led
by Michael Murray.
Dr. Keith Hellawell QPM
Non-Executive Chairman
18 July 2018
54
OUR BUSINESS
Founded by Mike Ashley as a single Store in Maidenhead in 1982, Sports Direct International plc today operates a
diversified portfolio of sports, fitness, fashion, and lifestyle fascias. The Group's approximately 26,500 people work
together with our suppliers and our third party brand partners to serve customers in over 20 countries. The Group
aspires to be an international leader in sports, lifestyle, and luxury retail by offering our customers a dynamic range
of iconic brands. The Board is committed to treating all people with dignity and respect. We value our people, our
customers, our shareholders - and we strive to adopt good practices in our corporate dealings. We aim to deliver
shareholder value over the medium to long term, whilst adopting accounting principles that are conservative,
consistent and simple.
BUSINESS MODEL
Our business model is focused on delivering an unrivalled range, availability and quality of products – both third party
brand and Group branded products. This includes different customer value propositions across our Sports Retail and
Premium Lifestyle fascias. To this end, we are elevating across all channels to enhance the customer journey at every
step of the way.
The Group's business model is explained in greater detail below. This includes an outline of our fascias and retail
channels, our elevation strategy including the management of our property portfolio, our people, our third party brand
partners and our centralised support functions and Group brands.
BUSINESS STRUCTURE
The Group is structured across five business segments: UK Sports Retail, European Sports Retail (formerly International
Retail), Premium Lifestyle, Rest of World Retail and Wholesale & Licensing (formerly Brands).
In UK Sports Retail, we offer a complete range of sporting apparel, footwear and equipment through our predominant
fascia, SPORTSDIRECT.COM. This segment includes our lifestyle fascia USC. Our current forward-looking view is that
the majority of our offering to customers must include leading third party brands. The elevation of our sports retail
proposition is key to ensure we are fully aligned with the future directions and ambitions of these brand partners. The
UK Sports Retail segment also includes our fitness division, which currently consists of 31 gyms.
In European Sports Retail, we are evolving our customer proposition in line with the elevation strategy, while also
seeking to increasingly tailor our proposition to the local markets where we operate. These include the Republic of
Ireland and continental Europe.
In Rest of World Retail, at the beginning of FY18 we acquired 49 stores trading as Bob's Stores and Eastern Mountain
Sports. We also have 30 stores trading as SPORTSDIRECT.COM in Malaysia.
In Premium Lifestyle, we are developing the Group's premium offering, which primarily consists of the Flannels
fascia, along with Cruise and van mildert. We aim to offer fashion-conscious consumers a luxurious, multi-brand retail
destination with high-end and on-trend products. This is a core component of the elevation strategy and includes the
provision of a new flagship Flannels store on Oxford Street in London which is anticipated to open in 2019.
In Wholesale & Licensing, the Group retains a portfolio of world famous heritage brands, which we offer via our
fascias, and also wholesale and license to partners internationally. Our own brands include Karrimor, Slazenger and
Everlast. The Group is also proud to have a number of sporting and entertainment personalities as ambassadors, as
well as supporting sporting events and venues.
MULTI-CHANNEL ELEVATION STRATEGY
Our elevation strategy continues to work towards improving our offering to customers across all of our channels,
including marketing, social media, product, digital and in-store. This aims to enable the Company, along with our third
party brand partners, to connect with customers via a consistent voice across multiple platforms, including online,
mobile, and on the high street. This strategy enables our stores and our online operations to complement each other.
55
STRATEGIC REPORTSPORTS DIRECT - ANNUAL REPORT 2018 OUR BUSINESS
Continued
The websites for each of our core fascias in the UK, including SportsDirect.com, USC.co.uk and Flannels.com, have
undergone significant enhancements in order to facilitate optimum appeal to consumers. Our product offering across
these core fascias - both in store and online - aims to create a compelling shopping experience in key categories that
include, among others, Football, Women’s, Kids, Running, Lifestyle, Fashion and Luxury.
We offer product across a range of price points, including good, better and best. This enables us to offer more
premium product, which is net-new to the business. For example, prior to the commencement of our elevation
strategy, the Company typically offered football boots from adidas and Nike at price-points ranging from £39.99 to
£59.99. We have since broadened our offering to also include adidas and Nike football boots typically priced between
£199.99 and £249.99 or above. This gives consumers a greater range of choice for those who wish to shop for
premium products, whilst still retaining our original entry-level and standard product offerings.
FY18 has also seen considerable enhancements to our mobile apps for customers. This activity, combined with
innovative marketing initiatives, recently resulted in the mobile app for SportsDirect.com trending at No1 in the Apple
app store shopping category during the closing stages of the World Cup, ahead of tech companies such as Amazon
and eBay.
A NEW GENERATION OF STORES
Our elevated stores typically include exceptional visual merchandising and are led by third party branded areas. This
new generation of stores includes regional flagship megastores, which are typically larger format stores in strategic
retail locations. These can be situated on the high street in prime retail shopping areas, or in out of town shopping
destinations. Flagship megastores typically include an extensive sports-category offering, and may have more than one
fascia on the same site, including adjacent Premium Lifestyle stores and / or a branded fitness gym. The creation of
these retail destinations enhances appeal to customers and generates operating synergies.
In order to increase the Group’s ability to secure strategic retail locations that are commercially viable, our Property
Division alongside senior management has the flexibility to invest in freehold properties and development projects,
which can span vacant buildings, development land or re-development projects and multi-tenanted schemes or
properties. To ensure an efficient transition and reduce non-trading space, the Group seeks to align store openings
with existing lease expiries where possible. This wide-ranging but controlled brief ensures the Group is able to roll out
our plans while efficiently transitioning the store portfolio.
An example of our latest concept of a new generation store is our newly opened 100,000 sq. ft. flagship megastore
at Thurrock in Essex. The site includes a SPORTSDIRECT.COM store, a new-look USC store and a Flannels store. The
customer experience will be further enhanced via the potential inclusion of an eSports Belong Arena in association
with Game Digital and an Everlast-branded fitness gym.
Further details of our property strategies and our current property portfolio are included within the Chief Executive’s
Report and Business Review.
OUR PEOPLE
It is the Group's policy to treat all our people with dignity and respect. The Sports Direct family consists of approx.
26,500 staff, who work together across all areas of the business. We are proud that Sports Direct International plc is
one of the first public companies in the UK to introduce an elected Workers' Representative who attends meetings of
the Board (see details below).
Remuneration & Rewards
Our policy is to foster a reward-based culture that enables our staff to share in the success of the Group. During FY18,
our share bonus scheme vested approx. 11.6 million shares worth approx. £45.5 million, which were shared by approx.
2,000 eligible participating employees as the final tranche of a scheme that was launched in 2011. The Company also
completed a wage review in the UK to ensure that all staff continue to be fairly rewarded across all salary bands.
56
The wage review was part of a wider organisational development review, which also resulted in an improved system
for staff appraisals and new measures to ensure staff have greater visibility over career opportunities throughout
the Group. It is Company policy to pay above the statutory National Minimum Wage, including rates that are above
the statutory National Living Wage for those over 25 years of age in the UK. In addition to this, the Company pays
awards and incentives of approx. £20 million annually, from which both permanent and casual staff can benefit.
The Board continues to work towards developing long-term incentive schemes that align the interests of our people
and shareholders. The Company’s approach to remuneration and its Remuneration Policy is discussed further in our
Corporate Social Responsibility Report.
Workers' Representative
The Sports Direct Workers’ Representative is Alex Balacki, a Store Manager who originally joined the Company
14 years ago as a Casual Sales Assistant. Alex was elected in April 2017 by staff and will serve for a two-year
period, following which a replacement representative will take up the role. The Workers' Representative is free to
speak on behalf of the Group's workforce at all scheduled meetings of the Board in order to facilitate a healthy and
constructive dialogue. Alex also attends regular meetings with senior management, and he is involved in a number of
important projects. These have included contributing to the Company's wage review and organisational development
programme, and providing assistance with monitoring the Company's arrangements for casual staff.
Staff engagement
In addition to the Workers Representative, the Company also routinely has a rolling dialogue with staff via an initiative
called ‘Your Company, Your Voice.' This is a system whereby staff are able to raise any issues of their choosing via
a number of different routes, both physical and digital. This feedback is passed to senior management and is also
available to the Workers' Representative. We have a Listening Group that consists of staff drawn from the warehouse
in Shirebrook. Management attend periodic meetings, during which there is an open forum (including for matters
raised by agency workers). This aims to ensure early visibility of problems and facilitate solutions. Staff from the
Listening Group also sit on the staff Health & Safety Committee which is attended by the Group Head of Health and
Safety. We are pleased to report that our people have embraced a pro-active culture in this area, which has resulted in
100 extra staff achieving first aid certification after volunteering for training from our new Warehouse Training Officer.
The Company is also registered with the British Safety Council.
Casual workers
We continue to strive to ensure our arrangements for casual staff are fair and equitable. We have taken steps to
promote stability for this group by ensuring changes to scheduled hours by the Company are kept to a minimum.
In accordance with relevant regulatory requirements, our casual workers are entitled to accrued holiday leave and
statutory sick pay. Our research found that in common with surveys by other companies, the vast majority of our
casual workers wish to remain on flexible arrangements.
Retail Trust
The Company is an active member of the Retail Trust, which enjoys the patronage of Her Majesty the Queen. The Retail
Trust is the leading wellbeing charity for the retail industry and it offers a friendly ear to staff across the business who
wish to seek advice about welfare issues from independent experts.
Wellbeing Service
During FY18, the Company appointed a Wellbeing Co-ordinator and launched a health and wellbeing service for staff
in conjunction with the Public Health Team from Derbyshire County Council and the Retail Trust. Staff are able to raise
any health concerns with the Wellbeing Co-ordinator and obtain free advice on health matters such as cessation of
smoking, weight loss and improved sleep. We also have plans to offer staff free health 'MOT' checks. For those that
choose to take part, these will include checks in conjunction with local health services for BMI, blood pressure and
cholesterol levels. We also host a Chaplaincy Service in Shirebrook that offers confidential help and advice.
57
STRATEGIC REPORTSPORTS DIRECT - ANNUAL REPORT 2018 OUR BUSINESS
Continued
Training and development
We strive to offer staff the tools to achieve their personal development goals through training and other means. It
should be noted that the majority of Store Managers are promoted from within, and over a third of them started as
Casual Sales Assistants. We have an existing purpose-built training centre at our campus in Shirebrook, which is
dedicated to ensuring our people have appropriate opportunities to develop their skills and progress their careers
within the Group. During FY18, we have continued to strengthen the product training that we provide in conjunction
with third party brands. Further details of our staff training programmes are contained in our Corporate Social
Responsibility Report.
OUR THIRD PARTY BRAND PARTNERS
We work with our leading third party global brand partners and provide significant prominence for these specialists
with our customers across all our platforms.
Our third party and Group brands are managed by central brand and marketing teams. This centralised structure
significantly benefits the Group by enabling the individual brands to participate in Group buying and sourcing;
aggregated supplier relationships and enhanced supply chain disciplines; Group stock monitoring and replenishment;
and more inspired and harmonious visual merchandising in-store.
58
WORKERS' REPRESENTATIVE'S REPORT
Working for a bright future for our people
A MESSAGE TO STAFF FROM ALEX BALACKI*, WORKERS' REPRESENTATIVE AT SPORTS
DIRECT
One year ago I had the honour of being elected by the people who work at Sports Direct to represent staff at meetings
of the Board of Directors.
As somebody who originally started with the company as a Casual Sales Assistant when I was in my teens, I know first
hand what a great contribution staff make towards the success of business.
An important part of my role today is helping to make sure that our casual sales staff are treated with the same respect
that I received when I was finding my way as a young Saturday worker.
I've spent a huge amount of time listening to my fellow members of staff in different stores and in other parts of the
business up and down the country.
Like me, the vast majority are proud to work at Sports Direct - and we're pleased the company is doing well at a time
when sadly so many other retailers are struggling.
Over the last 12 months, I've attended every meeting of the Board, and I've also regularly met face to face with senior
management, including Mike Ashley.
I contributed to the Company's wage review, which saw wage bands being adjusted to keep them competitive and fair.
I can also confirm that there are improved measures in place to ensure that any changes in scheduled hours for casual
staff are monitored at head office to ensure fairness.
I also regularly read and reply to contributions to our staff feedback initiative, 'Your Company, Your Voice’. Two
subjects that are constantly raised by our people are requests for improved staff discounts on products sold by the
company, plus better uniforms.
I've therefore raised the subject of discounts with the Board and as a result I am pleased to report that the company is
now trialling an enhanced scheme that we hope to make available to staff later in the year. Plans for new uniforms are
also being fast-tracked.
Finally, I'd like to thank everybody who voted for me - I'll do my best to keep working towards a bright future.
Kind regards
Alex
* Alex Balacki has been with the company since 2004. In addition to being elected as Workers' Representative in 2017/18, he is a Store Manager in the West Country.
59
STRATEGIC REPORTSPORTS DIRECT - ANNUAL REPORT 2018
CHIEF EXECUTIVE'S REPORT AND
BUSINESS REVIEW
KEY PERFORMANCE INDICATORS
The Board manages the Group’s performance by reviewing a number of Key Performance Indicators (KPIs). The KPIs
are discussed in this Chief Executive’s Report and Business Review, the Financial Review, and the Corporate Social
Responsibility Report. The table below represents a summary of the Group’s KPIs.
52 weeks ended
29 April 2018
53 weeks ended
30 April 2017
Pro forma 52 weeks
April 2017
52 weeks ended
24 April 2016
FINANCIAL KPIs
Group revenue
£3,359.5m
£3,245.3m
£3,199.9m
£2,904.3m
Underlying EBITDA(1)
£306.1m
£272.7m
Sports Retail gross margin(2)
Underlying basic earnings per
share(3)
Free cash flow
Net debt
NON-FINANCIAL KPIs
No. of Sports Retail stores(4)
Workforce turnover
40.8%
19.9p
326.2m
397.1m
826
23.0%
41.6%
11.4p
257.2m
182.1m
802
17.4%
£268.3m
41.6%
£381.4m
44.6%
35.5p
309.1m
99.7m
792
22.0%
Packaging recycling(5)
13,757 tonnes
13,226 tonnes
10,710 tonnes
(1) The method for calculating underlying EBITDA is set out in the Financial Review.
(2) Sports Retail margin is shown after adjustments for stock provisions and hedging revaluations
(3) The method for calculating underlying basic earnings per share is set out in the Financial Review.
(4) Excluding associates and stores in the Baltic states that trade under fascias other than SPORTLAND or SPORTSDIRECT.com. and other niche fascias. Includes USC fascia.
(5) Cardboard and plastic recycling
Group Revenue
The Board considers that this measurement is a key indicator of the Group’s growth.
Underlying EBITDA
Underlying EBITDA shows how well the Group is managing its trading and operational efficiency and therefore the
overall performance of the Group.
Sports Retail gross margin
The Board considers that this measurement is a key indicator of the Group’s trading profitability.
Underlying basic earnings per share
Underlying basic EPS is a measure of total shareholder return and ultimately an indicator to our shareholders of the
success of our elevation strategy.
Free cash flow
Free cash flow is considered to be an important indicator for the business of the cash available for investment in the
elevation strategy.
Net debt
Net debt is an indicator of both the Group’s investment in the elevation strategy and its covenant headroom which is a
key component of the Group’s going concern considerations.
60
No. of Sports Retail stores
The Board considers that this measurement is an indicator of the Group’s growth, the Group’s elevation strategy is
replacing older stores and often this can result in the closure of two or three stores to be replaced by one larger new
generation store.
Workforce turnover
The Board considers that this measurement is a key indicator of the contentment of our people.
Packaging recycling
The Board considers that this measurement is a key indicator of our impact and commitment to the best environmental
practices.
Like-for-like sales
The Board does not consider like-for-like sales to be a KPI while the Elevation Strategy is being undertaken, but it is
considered a used metric for business use.
PERFORMANCE OVERVIEW
Group revenue increased by 3.5% to £3,359.5m in the year. UK Sports Retail decreased by 2.0% to £2,181.5m, which
includes USC fascia sales. European Sports Retail decreased by 0.1% to £637.2m including Heatons Republic of
Ireland. Premium Lifestyle revenue increased by 42.7%, with revenue in the Wholesale & Licensing division down
22.7%. Rest of World Retail revenue was £192.4m.
Group gross margin in the year decreased by 130 basis points from 41.0% to 39.7%. This was largely due to
acquisition accounting as a result of the purchase of the trade and assets of Bob’s Stores and Eastern Mountain
Sports and increased inventory provisions as all divisions invested in more significant product offerings. UK Sports
Retail margin was down slightly at 40.8% (2017: 41.1%) while European Sports Retail decreased 250 basis points from
43.3% to 40.8%. Premium Lifestyle’s gross margin decreased by 190 basis points from 35.2% to 33.3%. Rest of World
Retail margin was 30.0%, which includes acquisition adjustments.
Group operating costs decreased by 3.6% to £1,020.3m (FY17: £1,058.7m), largely as a result of non-recurrence
of such significant provisioning as in FY17, as well as increased efficiencies through a degree of automation in the
warehouse and rationalisation in continental Europe. See Financial Review for reconciliation of Group operating costs
to selling, distribution & administrative expenses.
As a result, Group underlying EBITDA (pre-Share Scheme costs) for the year was up 12.2% to £306.1m (FY17:
£272.7m). UK Sports Retail underlying EBITDA was up 6.5% to £277.9m while European Sports Retail underlying
EBITDA was a profit of £14.0m from a prior year loss of £22.0m. Premium Lifestyle underlying EBITDA was up 43.2%
to £6.3m from £4.4m, Rest of World Retail was a loss of £22.3m and Wholesale & Licensing underlying EBITDA
increased to £30.2m from £26.4m.
The depreciation and amortisation charges have decreased by 5.7% to £139.4m (FY17: £147.9m) as the prior year
included revisions to accounting estimates of useful economic lives of assets.
Group underlying Profit before tax increased 34.5% to £152.9m (2017: £113.7m), due to the higher EBITDA, favourable
realised FX and lower depreciation and amortisation charges. Underlying basic EPS for the year increased by 74.6% to
19.9p (FY17: 11.4p).
The Group generated free cash flow during the year of £326.2m, up from £257.4m in the prior year, and net debt
increased by £215.0m to £397.1m at year end, mainly as a result of the acquisition of freehold properties, strategic
investments and the continuation of the share buyback programme. Net debt currently stands at 1.1 times reported
EBITDA (30 April 2017: 0.6 times).
61
STRATEGIC REPORTSPORTS DIRECT - ANNUAL REPORT 2018 CHIEF EXECUTIVE'S REPORT AND BUSINESS REVIEW
Continued
REVIEW BY BUSINESS SEGMENT
The UK Retail division now includes the USC fascia sales, margin and costs. Premium Lifestyle includes the Flannels,
Cruise and van mildert fascias. European Retail includes continental Europe and Republic of Ireland retail stores.
Rest of World Retail includes US and Asia retail results. These segments best show the operational activity of the
Group, with the UK entrepreneurial hub serving both the UK and European markets as part of our Brexit preparations,
and the US and Malaysian activity taking advantage of the Group’s strong supply chain relationships. Therefore, all
comparatives have been restated.
UK SPORTS RETAIL
The UK Sports Retail segment includes all of the Group’s sports retail store operations in the UK and Northern Ireland,
all of the Group’s Sports Online business (excluding Bob’s and Eastern Mountain Sports), the Group’s Fitness Division
and the Group’s Shirebrook campus operations. It also includes the USC fascia, previously in Premium Lifestyle, and
accordingly the prior year comparatives have been restated. UK Sports Retail is the main driver of the Group and
accounts for 64.9% of Group revenue.
UK Sports Retail Revenue
Cost of Sales
Gross Profit
Gross Margin %
52 weeks ended
29 April 2018
(£’m)
53 weeks ended
30 April 2017
(£’m) restated
Pro forma 52
weeks April 2017
(£’m) restated
2,181.5
(1,290.7)
890.8
40.8
2,225.0
(1,309.5)
915.5
41.1
2,188.4
(1,289.7)
898.7
41.1
Revenue fell 2.0% to £2,181.5m, excluding the impact of the 53rd week in the prior year, revenue fell 0.3%.
UK Sports Retail gross margin for the second half of the year increased to 42.0% (FY17 H2: 41.6%) largely due to the
prior year adverse impact of the US dollar exchange rate and increased inventory and other trade related provisions.
The foreign currency effect on margin for FY19 is expected to improve based on USD forecast purchases for FY19
being hedged at 1.36.
Operating expenses decreased by 7.8%. Store wages were down on the prior year at £174.9m (FY17: £178.1m) and
as a percentage of store sales it decreased marginally to 10.4% (FY17: 10.5%). Overheads decreased as the prior year
contained increased legal charges and provisioning for bad debts, onerous leases and dispute settlement. There were
also increased efficiencies in the warehouse through a degree of automation and the change in the store portfolio.
Underlying EBITDA for UK Sports Retail was £277.9m (FY17: £261.0m), an increase of 6.5% for the year.
62
UK SPORTS STORE PORTFOLIO
England
Scotland
Wales
Northern Ireland
Isle of Man
USC
Total
Opened
Closed
Area (sq. ft.)
29 April 2018
30 April 2017
374
388
36
29
16
1
38
494
13
(32)
37
27
16
-
45
513
15
(20)
approx. 5.4m
approx. 5.2m
EUROPEAN SPORTS RETAIL
European Sports Retail contains the Sports Retail stores in Continental Europe and the Republic of Ireland. Retail sales
made in Malaysia have been moved to Rest of World Retail and the prior year has been restated.
European Sports Retail Revenue
Cost of Sales
Gross Profit
Gross Profit %
52 weeks ended
29 April 2018
(£’m)
53 weeks ended
30 April 2017
(£’m) restated
Pro forma 52
weeks April 2017
(£’m) restated
637.2
(377.1)
260.1
40.8
637.9
(361.8)
276.1
43.3
630.9
(358.1)
272.8
43.2
Revenue fell 0.1% to £637.2m. Excluding the impact of the 53rd week and on a currency neutral basis, European
Sports Retail revenue decreased by 3.2% largely due to changes in the store portfolio.
European Sports Retail gross margin for the second half of the year decreased to 40.9% (FY17 H2: 46.6%) due to
increases in stock provisions and shrinkage adjustments. The majority of forecast USD/EUR purchases are hedged in
FY19 at USD/EUR 1.16 (see note 29).
Operating expenses decreased by 17.4%, to £246.6m (FY17: £298.5m). Store wages in the year were down to £100.4m
(FY17: £113.4m) and as a percentage of sales it reduced to 15.7% (FY17: 17.8%). In the current year, provisions were
made for onerous leases in poorly performing stores of £9.0m (FY17: £39.7m).
All of the following stores are operated by companies wholly owned by the Group, except Estonia, Latvia and Lithuania
where the Group owns 60.0%. During the year, the Group increased its shareholding in the Iceland entity to 100%.
63
STRATEGIC REPORTSPORTS DIRECT - ANNUAL REPORT 2018
CHIEF EXECUTIVE'S REPORT AND BUSINESS REVIEW
Continued
EUROPEAN SPORTS STORE PORTFOLIO(1)
29 April 2018
30 April 2017
36
32
28
27
18
17
17
16
14
10
8
6
6
6
5
2
2
2
1
253
5
(17)
-
1
39
32
36
26
16
17
16
16
15
10
11
6
6
6
6
2
2
2
-
264
21
(17)
4
-
approx. 3.9m
approx. 3.9m
Belgium
Republic of Ireland(2)
Austria
Estonia(1)
Latvia(1)
Portugal
Lithuania(1)
Poland
Slovenia
Czech Republic
Hungary
Holland
Cyprus
Slovakia
France
Germany
Luxembourg
Spain
Iceland
Total
Opened
Closed
Converted
Acquired
Area (sq. ft.)
(1) Includes only stores with SPORTSDIRECT.com and SPORTLAND fascias
(2) Excluding Heatons fasica stores
64
REST OF WORLD RETAIL
Rest of World Retail includes sports stores in Malaysia trading under the SPORTSDIRECT.COM fascia which continued
to expand with 5 stores opened. Sales are now £33.1m with gross margins of 45.7%.
Revenue
Cost of sales
Gross Profit
Gross Margin %
52 weeks ended
29 April 2018
(£’m)
53 weeks ended
30 April 2017
(£’m)
Pro forma 52
weeks April 2017
(£’m)
192.4
(134.6)
57.8
30.0
27.7
(16.5)
11.2
40.4
27.2
(16.2)
11.0
40.4
In May 2017 the Group acquired the Bob's Stores and Eastern Mountain Sports retail chains in the US. As anticipated
by the Board, Bob's and Eastern Mountain Sports has made a trading loss in year one as Sports Direct Group systems,
processes and management are implemented. We expect implementation challenges to continue in year two.
Rest of World sales were £192.4m for the year. Gross margin was 30.0% which includes acquisition revaluation
impacts. Underlying EBITDA loss was £22.3m.
There are currently 49 stores in the US. In Malaysia the Group has 30 stores which are 51.0% owned by the Group.
Malaysia
Bob's Stores
Eastern Mountain Sports
29 April 2018
30 April 2017
30
30
19
79
25
-
-
25
Area (sq. ft.)
approx. 1.5m
approx. 0.3m
PREMIUM LIFESTYLE
During the year, results from USC fascias have been re-categorised to UK Retail since this better matches the
trading characteristics of the elevated sports and general lifestyle brands. Therefore Premium Lifestyle now consists
of Flannels, Cruise and van mildert fascia stores and corresponding web sales. The prior year numbers have been
restated.
Revenue
Cost of sales
Gross Profit
Gross Margin %
52 weeks ended
29 April 2018
(£’m)
53 weeks ended
30 April 2017
(£’m) restated
Pro forma 52
weeks April 2017
(£’m) restated
162.1
(108.2)
53.9
33.3
113.6
(73.6)
40.0
35.2
111.8
(72.6)
39.2
35.1
Premium Lifestyle sales increased by 42.7% to £162.1m (FY17: £113.6m restated), mostly due to new Flannels stores
and increased web sales. The Premium Lifestyle gross margin for the year decreased by 190 basis points to 33.3%
(FY17: 35.2%), largely due to an increase in stock provisions and customer demand for the latest products.
65
STRATEGIC REPORTSPORTS DIRECT - ANNUAL REPORT 2018
CHIEF EXECUTIVE'S REPORT AND BUSINESS REVIEW
Continued
Premium Lifestyle operating costs increased by 33.7% to £47.6m (FY17: £35.6m restated) due to the increase in
Flannels fascia stores.
As a result, Underlying EBITDA grew 43.2% to £6.3m (FY17: £4.4m).
At the year end, the Premium Lifestyle division traded from stores under three main fascias.
Flannels
Cruise
van mildert
Total
Area (sq. ft.)
29 April 2018
30 April 2017
21
10
3
34
13
10
5
28
approx. 0.35m
approx. 0.25m
WHOLESALE & LICENSING (formerly Brands)
The portfolio of Group brands includes a wide variety of world-famous sport and lifestyle brands. The Group’s Sports
Retail division sells products under these brands in its stores, and the Wholesale & Licensing division sells the brands
through its wholesale and licensing activities. The Wholesale & Licensing division continues to sponsor a variety of
prestigious events and retains a variety of globally-recognised, high-profile celebrities and sporting professionals as
brand ambassadors.
In March 2017, the division disposed of the Dunlop brand and related wholesale and licensing activity.
Wholesale
Licensing
Total Revenue
Cost of Sales
Gross Profit
Gross Margin %
52 weeks ended
29 April 2018
(£’m)
53 weeks ended
30 April 2017
(£’m)
Pro forma 52 weeks
April 2017
(£’m)
154.3
32.0
186.3
(113.8)
72.5
38.9
201.4
39.7
241.1
(153.3)
87.8
36.4
-
-
-
-
-
-
The 53rd week has no material impact on wholesale or licensing sales.
Wholesale & Licensing total revenue decreased by 22.7% to £186.3m (FY17: £241.1m). Wholesale revenues were
down 23.4% to £154.3m (FY17: £201.4m), mainly due to the disposal of the Dunlop related activity. Trading in the US
market was in line with expectations and now represents approx. 54% of total wholesale sales.
Total gross margin increased by 250 basis points to 38.9% (FY17: 36.4%). Wholesale gross margins increased 230
basis points to 26.2% (FY17: 23.9%) mainly due to the impact of accruals made in the prior year relating to historic
import costs.
Licensing revenues in the year were down 19.4% to £32.0m (FY17: £39.7m). During the year we signed 28 new licence
agreements and renewed several existing licenses, covering multiple brands, product categories and geographies, with
minimum contracted values of $30.0m over the life of the agreements. The decrease is due to the Dunlop disposal,
which included the transfer of 96 licenses. On a like-for-like basis licensing has maintained its underlying level.
66
Operating costs decreased by 31.1% to £42.3m (FY17: £61.4m) due to the disposal of the Dunlop activity and non-
recurring bad debt provisions in the prior year. Underlying EBITDA increased by 14.4% to £30.2m (FY17: £26.4m),
mainly as a result of the non-recurring accruals made in relation to historic import costs in the prior year.
PROPERTY REVIEW
The impact of our elevation strategy continues to see the rollout of a new generation of stores. During FY18, we
opened a total of 15 of these new generation stores, of which 5 were regional flagship-style stores, consisting of
multiple fascias on a single site. Post year end we have opened Thurrock, bringing the total number of flagships to 19.
The concept for our flagship stores is constantly evolving based on feedback from customers and our third party
brand partners. The latest example of this is at Thurrock, where there is a strong emphasis on creating a compelling
experience for shoppers, offering a diverse product range from football boots all the way to luxury fashion. The site
includes a SportsDirect.com sports store, a USC fashion store, a Flannels luxury apparel store, and a state-of-the-art
Everlast gym.
The store includes innovative use of technology. This includes high-pixel video merchandising displays and interactive
elements for customers, such as a facility to record a 360-degree gif when trying on a new outfit. Experiential
enhancements include recharge areas for men and women, an urban-inspired kids zone with selfie mirror, plus plans
for an eSports arena.
The estate strategy remains unchanged from the previous financial period, transitioning from smaller stores into larger
new generation stores. Over the past three years a significant pipeline of new large format stores has been built,
allowing a phased delivery over the coming years.
The high street has come under the spotlight over the course of the year due to the headwinds facing the sector.
Due to the changing landscape we have made fewer store acquisitions than in previous financial years as repricing
comes further into effect. This restructuring of the retail property sector has opened greater opportunities to enhance
our store portfolio across the Group fascias. We will continue to make prudent investment into freehold property to
advance the repositioning of the Group’s transition into large format stores. We have received good support from local
councils and communities for our commitment to physical retail.
A significant milestone for the Group was the opening of the London Office headquarters situated on Oxford Street at
the beginning of FY19 having acquired the freehold in FY17.
Store Portfolio – Sports Stores – UK incl. Northern Ireland
The Group is currently operating 374 stores in England, 36 in Scotland, 29 in Wales and 16 in Northern Ireland, along
with 38 other fascias including USC. This represents a net reduction of 19 stores over the period as a result of 13
openings and 32 closures. Despite the net reduction in stores the total sales area has increased to approx. 5.4m sq. ft.
Of the 32 closures, 8 were linked to relocations to new generation stores.
Of the new store openings, strategic locations to highlight include new generation stores at Sheffield Meadowhall,
Hull, Middlesbrough, Darlington and Isle of Man. With the exception of Sheffield Meadowhall all of these are held on a
Freehold or Long Leasehold basis. Each of these stores includes a lifestyle offering having incorporated a USC section.
The new Isle of Man store is a new market for Sports Direct with all trade being entirely incremental.
In Northern Ireland during FY18 the 10 Heatons/Sports Direct dual-fascia stores acquired at the time of the Heatons
acquisition have been converted to the Sports Direct new generation store format. The remaining 6 standalone Sports
Direct stores are part of a pipeline for future development and investment.
67
STRATEGIC REPORTSPORTS DIRECT - ANNUAL REPORT 2018 CHIEF EXECUTIVE'S REPORT AND BUSINESS REVIEW
Continued
Sports Direct Forecast Openings UK FY19
The Group forecasts that there will be in the region of 10-20 new generation Sports stores over the coming financial
year in the UK and ROI, the majority of which will include the new USC concept.
For our luxury fascia, Flannels, we anticipate 6-12 new stores over the coming financial year.
Store Portfolio Europe - Republic of Ireland
The ongoing investment programme by the Group in Ireland has also seen the development of 2 new generation
Sports Direct stores during FY18, one being the flagship store in Dublin. The Group has also invested extensively in
the Heatons ROI existing store network through the conversion of 16 out of the 29 dual-fascia Heatons / Sports Direct
stores. The Group operates in 32 locations across ROI, 5 of which are standalone Sports Direct stores. An additional 12
stores are stand alone Heatons fascia.
Our investment in stores continues to be well-received by our colleagues, local customers and third party brands.
As previously advised and as can be seen to date we remain committed to roll out more of the new generation store
format with a particular focus on flagship stores across Ireland.
The Group forecasts that there will be in the region of 3 - 5 new generation Sports stores over the coming financial
year in ROI, the majority of which will include the new USC concept.
Store Portfolio Europe – Continental
The Group continues to operate sports stores in 18 countries in Europe.
• 221 Sports retail stores in Europe, a reduction of 12 from the previous financial year
•
•
•
•
Total sq ft at approx. 3.2m of all sports fascias in Europe (including Eybl, Disport, Sportsworld etc)
5 openings in 4 different countries in FY18, 1 of which was a relocation
17 closures in 7 different countries of non-performing stores and where impacted by relocation
Iceland store included, which is now a fully owned member of the Group
Store Portfolio – Rest of World
•
•
30 stores in Malaysia, including 5 openings in the year
49 stores in the USA, with the acquisition of Bob’s Stores / Eastern Mountain Sports completed
Store Portfolio – Premium Lifestyle
The Group continues to enhance and develop the Flannels concept and we are working in partnership with Milan
based P+P studios on store development, including the upcoming flagship store on Oxford street due to open in 2019.
The Group now operates 21 Flannels stores, 10 Cruise stores and 3 van mildert stores – a total of 34 stores within the
Premium Lifestyle division.
Freehold / Long Leasehold Property Purchases
The property investment programme remained an important focus of the Group over FY18. A total of 10 acquisitions
were completed in the UK amounting to a combined purchase price of £123.7m. This is a reduction from the previous
financial year due to the strong pipeline of stores already created and changing market conditions shifting pricing. A
further two properties were acquired in the EU, amounting to £16.3m.
Disposals of property assets that were considered non-core to the Group were also completed. Further property
disposals will be made over the next financial year where appropriate.
68
The property acquisition programme will continue throughout the next financial year with an outlook to spend approx.
£300m dependent on appropriate market conditions.
CONTRACTS ESSENTIAL TO THE BUSINESS OF THE GROUP
The Group has long-established relationships with Nike and adidas, the major suppliers of third party branded sporting
goods, and considers that continued supplies from these companies are critical to the business of the Group.
ENVIRONMENTAL MATTERS
The Corporate Social Responsibility Report is on pages 77 to 86 and an assessment of the Group’s impact on the
environment is included in this report.
Mike Ashley
Chief Executive
18 July 2018
69
STRATEGIC REPORTSPORTS DIRECT - ANNUAL REPORT 2018 FINANCIAL REVIEW
The Financial Statements for the Group for the 52 weeks ended 29 April 2018 are presented in accordance with
International Financial Reporting Standards (IFRS) as adopted by the EU.
SUMMARY OF RESULTS
Revenue
Underlying EBITDA
Reported Profit before taxation
Underlying Profit before tax
Reported basic EPS
Underlying basic EPS
52 weeks ended
29 April 2018
(£’m)
53 weeks ended
30 April 2017
(£’m)
3,359.5
3,245.3
306.1
77.5
152.9
272.7
281.6
113.7
Pence per share
Pence per share
4.6
19.9
39.4
11.4
The Directors believe that underlying EBITDA, underlying Profit before tax and underlying basic EPS provide more
useful information for shareholders on the underlying performance of the business than the reported numbers and are
consistent with how business performance is measured internally. They are not recognised profit measures under IFRS
and may not be directly comparable with “adjusted” profit measures used by other companies.
EBITDA is earnings before investment income, finance income and finance costs, tax, depreciation, amortisation
and impairment. It includes the Group’s share of profit from associated undertakings and joint ventures. Underlying
EBITDA is calculated as EBITDA before the impact of foreign exchange, any exceptional or other non-trading items and
costs relating to the Share Schemes.
EBITDA AND PROFIT BEFORE TAX
Operating profit
Depreciation, amortisation and impairment
Share of (loss) / profit of associated undertakings (excl.
FV adjustments)
Reported
Share scheme
Profit on disposal of subsidiary
Exceptional items
Profit on sale of properties
Net investment costs / (income)
Realised FX (gain) / loss
Fair value adjustment on foreign exchange contracts
Underlying
52 weeks ended
29 April 2018
53 weeks ended
30 April 2017
EBITDA (£’m)
PBT (£’m)
EBITDA (£’m)
PBT (£’m)
217.0
139.4
(8.7)
347.7
(6.0)
-
4.8
(16.3)
-
(24.1)
-
306.1
-
-
-
77.5
-
-
4.8
(16.3)
93.3
(24.1)
17.7
152.9
160.1
147.9
0.9
308.9
2.8
(79.9)
17.3
-
-
23.6
-
272.7
-
-
-
281.6
-
(79.9)
17.3
-
(110.7)
23.7
(18.3)
113.7
70
GROUP OPERATING COSTS
Group operating costs
Depreciation, amortisation and impairment
Bonus share scheme
Realised FX (gain) / loss
Operating income
52 weeks ended
29 April 2018
(£’m)
53 weeks ended
30 April 2017
(£’m)
1,020.3
139.4
(6.0)
(24.1)
26.5
1,058.7
147.9
2.8
23.7
22.5
Selling, distribution & administration costs
1,156.1
1,255.6
Group operating costs for the purposes of management reporting:
i. Excludes depreciation, amortisation and impairments, share scheme charges and realised FX losses; and
ii. Includes other operating income.
FOREIGN EXCHANGE AND TREASURY
The Group reports its results in GBP, but trades internationally and is therefore exposed to currency fluctuations on
currency cash flows in various ways. These include purchasing inventory from overseas suppliers, making sales in
currencies other than GBP and holding overseas assets in other currencies. The Board mitigate the cash flow risks
associated with these fluctuations with the careful use of currency hedging using forwards and options.
The Group uses forward contracts that qualify for hedge accounting in two main ways – to hedge highly probable
Euro sales income and US dollar stock purchases. This introduces a level of certainty into the Group’s planning and
forecasting process. During the period the Group entered into vanilla foreign exchange US dollar forwards totalling
$1,440m. Management have reviewed detailed forecasts and the growth assumptions within them, and are satisfied
that the forecasts meet the criteria as being highly probable forecast transactions.
As at 29 April 2018, the Group had the following forward contracts that qualified for Hedge Accounting under IAS39
Financial Instruments, meaning that fluctuations in the value of the contracts before maturity are recognised in the
Hedging Reserve through Other Comprehensive Income. After maturity, the sales and purchases are then valued at the
Hedge rate.
Currency
EUR / GBP
AUD / GBP
USD / GBP
USD / EUR
Hedging against
Currency value
Timing
Rates
Euro sales
EUR 1,320m
FY19 – FY21
1.069 – 1.190
Australian dollar sales
AUD 16m
FY19 – FY20
1.690 – 1.740
USD stock purchases
USD 1,440m
FY19 – FY20
1.360 – 1.430
USD stock purchases
USD 270m
FY19 – FY21
1.160 – 1.320
The Group also uses currency options for more flexibility against cash flows that are less than highly probable and
therefore do not qualify for hedge accounting under IAS39 Financial Instruments. The fair value movements before
maturity are recognised in the Income Statement.
71
STRATEGIC REPORTSPORTS DIRECT - ANNUAL REPORT 2018 FINANCIAL REVIEW
Continued
The Group has the following currency options and unhedged forwards:
Currency
EUR / GBP
AUD / GBP
USD / EUR
Expected use
Currency value
Timing
Rates
Euro sales
EUR 1,320m
FY19 – FY21
1.069 – 1.190
Australian dollar sales
AUD 16m
FY19 – FY20
1.690 – 1.740
USD stock purchases
USD 150m
FY19 – FY21
1.160 – 1.210
The Group is proactive in managing its currency requirements, the SD Treasury team work closely with senior
management to understand the Group’s plans and forecasts and appropriately discuss and understand financial
products with reputable financial institutions including those within the Group Revolving Credit Facility. This
information is then used to implement suitable currency products to align with the Groups strategies and forecasts.
Regular reviews are performed by the SD Treasury team alongside senior management to ensure the continued
appropriateness of the currency hedging in place, and where suitable either implementing additional strategies and/or
restructuring existing approaches in conjunction with our financial institution partners.
Given the potential impact of commodity prices on raw material costs, the Group may hedge certain input costs,
including cotton, crude oil and electricity.
TAXATION
The effective tax rate on Profit before tax in FY18 was 64.4% (FY17: 17.7%). This is due to the impact of current year
investment losses that are not tax deductible and prior year adjustments. The prior year rate reflects the impact of
items that qualify for substantial shareholder relief. The underlying effective tax rate remains at approx. 31%, this
reflects the impact of the increase in freehold property and related disallowable depreciation.
EARNINGS
Reported EPS (Basic)
Underlying EPS (Basic)
52 weeks ended
29 April 2018
(pence per share)
53 weeks ended
30 April 2017
(pence per share)
4.6
19.9
39.4
11.4
Change (%)
(88.3)
74.6
Weighted average number of shares (actual)
527,793,623
583,501,473
Basic earnings per share (EPS) is calculated by dividing the earnings attributable to ordinary shareholders by the
weighted average number of ordinary shares outstanding during the actual financial period. Shares held in Treasury
and the Employee Benefit Trust are excluded from this figure.
The underlying basic EPS reflects the underlying performance of the business compared with the prior year and is
calculated using the weighted average number of shares. It is not a recognised profit measure under IFRS and may not
be directly comparable with “adjusted” profit measures used by other companies.
72
The items adjusted for arriving at the underlying profit after tax and minority interests is as follows:
Profit after tax
Post tax effect of adjustment items:
Loss / (profit) on disposal of listed investments
Fair value adjustment to forward foreign exchange contracts
Fair value adjustment to derivative financial instruments
Realised (gain) / loss on forward foreign exchange contracts
Profit on disposal of freehold properties
Impairment and accelerated depreciation and amortisation
Write off of deferred tax assets
Profit on disposal of subsidiary
Underlying profit after tax
52 weeks ended
29 April 2018
(£’m)
53 weeks ended
30 April 2017
(£’m)
24.5
229.9
3.6
13.8
89.6
(18.7)
(12.9)
5.0
-
-
104.9
(141.5)
(14.3)
24.0
18.5
-
17.3
12.5
(79.9)
66.5
DIVIDENDS
The Board has decided not to pay a dividend in relation to FY18. The Board remains of the opinion that it is in the best
interests of the Group and its shareholders to preserve financial flexibility, facilitating future investments and other
growth opportunities. The payment of dividends remains under review.
CAPITAL EXPENDITURE
During the period, capital expenditure amounted to £213.4m (FY17: £419.5m), which includes £140.0m on properties
(FY17: £317.0m).
STRATEGIC INVESTMENTS
Strategic investments are an integral part of the Group’s overall strategy. Against a backdrop of a challenged retail
market, we believe innovative strategic partnerships will help to differentiate our offer and enhance the consumer
experience. We look for ways to extend our reach into new retail channels and geographies, as well as selectively grow
our market share. We maintain an active dialogue with the management teams of each of our investments, continually
looking to explore new ways of working together. Given the breadth of our business, the strategic benefits can be
varied and extensive.
During FY18 we made good progress on several opportunities, highlighting the strength of our strategic investments
approach. In February 2018, we announced an exciting collaboration agreement with GAME Digital plc comprising a
£20 million working capital facility and a £35 million capital expenditure facility, which GAME may utilise to fund the
venues envisaged under the collaboration agreement, including the costs for new venues and ongoing development
of the BELONG website and its related tournament management system. The Group owns a 25.4% stake in GAME
Digital. The agreement covers the rollout of BELONG and GAME Retail stores, including plans to enter into concession
agreements with Sports Direct. BELONG is GAME Digital's competitive gaming and eSports experience centred around
physical 'arenas', bringing both casual and competitive gaming to communities nationwide, in city and town centres
and in major shopping centres. As part of the agreement, the Group acquired a 50% interest in the rights of BELONG
intellectual property for a cash consideration of £3.2m, and a 50% profit share of future profits of BELONG.
73
STRATEGIC REPORTSPORTS DIRECT - ANNUAL REPORT 2018
FINANCIAL REVIEW
Continued
In March 2018, we began exploring possibilities for commercial supply arrangements with Express Gifts, a subsidiary
of Findel plc. The Group holds 29.9% of Findel plc. Certain licenced menswear ranges have been included within the
Express Gifts’ Studio.co.uk Spring/Summer season and we will evaluate their success in the coming months. We
are also considering access to other Sports Direct owned brands in future seasons. As part of the discussions, the
Board of Findel agreed that Liam Rowley, Head of Strategic Investments at Sports Direct, would attend Findel Board
meetings as an observer. This role does not enable Liam Rowley to make or influence strategic decisions and he is
excluded from certain sensitive and confidential matters as well as those that may cause a conflict of interest.
During the period, the Group increased its total direct and indirect holding in Debenhams plc to 29.7% of issued
share capital. We continue to operate several concessions within Debenhams stores and explore mutually beneficial
opportunities across all channels. During the period the Group recognised a loss of £98.1m in the Income Statement in
relation to the reduction in value of Debenhams plc.
The Group also holds a direct interest in Goals Soccer Centres plc representing 18.9% of issued share capital; French
Connection Group plc, representing 27% of issued share capital; MySale Group plc, representing 4.8% of issued
share capital; and, House of Fraser Limited representing 11.1% of the issued share capital. The Group also holds an
economic interest at the year-end in Iconix Brand Group Inc. of 8.9%. In March 2018, JD Sports Fashion plc launched a
takeover offer for The Finish Line Inc., of which the Group held a 19.3% economic interest at the year end. Subsequent
to the year end, JD Sports Fashion plc completed their takeover of The Finish Line Inc. and Sports Direct International
plc disposed of its remaining economic interest.
The Group continues to hold various other interests, none of which represent more than 5.0% of the voting power of
the investee.
The fair value of the contracts for difference and options are recognised in Derivative Financial Assets or Liabilities on
the Group Balance Sheet, with the movement in fair value recorded in the Income Statement.
ACQUISITIONS
During the year, the Group completed the acquisition of the US retail chains operating under Bob’s Stores and Eastern
Mountain Sports. We also acquired the remaining shareholdings of Lovells Sports (Holdings) Ltd and Brasher Leisure
Ltd (trading as Sweatshop), both of which were previously Associates of the Group.
RELATED PARTIES
MM Prop Consultancy Ltd, a company owned and controlled by Michael Murray (domestic partner of Anna Ashley,
daughter of Mike Ashley), continues to provide property consultancy services to the Group. MM Prop Consultancy Ltd
is primarily tasked with finding and negotiating the acquisition of new sites in the UK, Europe and rest of the world for
both our larger format stores and our combined retail and gym units but it also provides advice to the Company’s in-
house property team in relation to existing sites in the UK, Europe and rest of the world.
MM Prop Consultancy Ltd fees are linked directly to value creation which is determined by the Company's non-
executive directors who independently review performance bi-annually with a view to determining, at their absolute
and sole discretion, the quantum of the percentage payable. Under the terms of the agreement with MM Prop
Consultancy Ltd no fees are payable until the earliest of 30 September 2018 so that the Company’s independent non-
executive directors have a sufficient amount of time to assess performance.
During the period, independent valuations were collated as an initial stage in confirming the value created (through
disposals and properties still held) by MM Prop Consultancy Limited. The Group’s non-executive directors agreed 25%
of the final agreed value created would be paid to MM Prop Consultancy Ltd based on these independent valuations
of selected sites subject to the agreement. The value created had not been determined and approved by the non-
executive directors as at period end or at the date of signing this Annual Report and accounts.
74
The freehold acquisition program is a cornerstone of the elevation strategy and has proven to be extraordinarily
successful. With a strong ongoing pipeline and with original expectations exceeded, Michael Murray has waived a
portion of his fee and settled on 20% of the final agreed value created.
Based on IAS 37 Provisions, Contingent Liabilities and Contingent Assets we have provided for the most reliable
estimate of the amount expected to be paid to MM Prop Consultancy Ltd being £5.0m to the end of FY18.
Michael Murray is now considered to be a related party in the context of IAS 24 Related Party Disclosures. This is due
to the increased scope of his role within the Group in the second half of the financial period, as he became Head of
Elevation in 2018, defining him as key management personnel.
COMMERCIAL ARRANGEMENTS
The Group has commercial arrangements in place with IBSL Consultancy Limited. Management has considered
whether a related party relationship exists and concluded that Justin Barnes, a director of IBSL Consultancy Limited,
and/or IBSL Consultancy Limited are acting in an advisory capacity only and are not performing key management
functions that would indicate a related party relationship. Management decisions are made solely by the management
of the Group.
Justin Barnes is a director of a number of companies in the Mash Group of which Mike Ashley is the sole shareholder
of the ultimate parent of the group, Mash Holdings Limited. No payments made to Justin Barnes or IBSL Consultancy
Limited in relation to services provided to subsidiaries of Mash Holdings Limited relate to services provided by IBSL
Consultancy Limited or Justin Barnes to the Group.
During FY17, the Company had arrangements in place with Barlin Delivery Limited, a company owned by John Ashley
(the brother of Mike Ashley). This arrangement ceased as at 30 April 2017. There were no commercial transactions
between the Group and Barlin in the year ended 29 April 2018.
In December 2017, there was a vote by independent shareholders against a retrospective payment of £11m to John
Ashley for executive bonuses forgone.
CASH FLOW AND NET DEBT
Net debt increased by £215.0m from £182.1m at 30 April 2017 to £397.1m at 29 April 2018. Based largely on the
increase in net debt, interest on bank loans and overdrafts increased to £9.4m (FY17: £2.5m).
The analysis of debt at 29 April 2018 was as follows:
Cash and cash equivalents
Borrowings
Net debt
29 April 2018
(£’m)
30 April 2017
(£’m)
360.0
(757.1)
(397.1)
204.7
(386.8)
(182.1)
The Revolving Credit Facility of £913.5m is available until November 2021 (with a one year extension option) and is not
secured against any of the Group’s assets.
The Group continues to operate well within its banking covenants and the Board remains comfortable with the Group’s
available headroom.
75
STRATEGIC REPORTSPORTS DIRECT - ANNUAL REPORT 2018 FINANCIAL REVIEW
Continued
CASH FLOW
Total movement is as follows:
Underlying EBITDA
Realised profit/(loss) on forward foreign exchange contracts
Taxes paid
Movement in inventory
Working capital and other(1)
Underlying free cash flow
Invested in:-
Purchase of own shares
Acquisitions (including debt)(1)
Deposit for acquisition(1)
Proceeds on disposal of subsidiary
Purchase of listed investments
Net proceeds from investments
Net capital expenditure
Exchange movement on cash balances
Investment income
Finance costs and other financing activities
Increase in net debt
52 weeks ended
29 April 2018
(£’m)
53 weeks ended
30 April 2017
(£’m)
306.1
24.0
(45.2)
(119.6)
160.9
326.2
(155.4)
(3.1)
-
-
(287.1)
20.9
(144.4)
4.1
34.4
(10.6)
(215.0)
272.7
(23.7)
(75.3)
15.0
68.7
257.4
(109.8)
(22.6)
(81.2)
109.5
(24.7)
190.2
(417.1)
17.7
0.5
(2.3)
(82.4)
(1) the funds used for the Bob’s and Eastern Mountain Sports acquisition were transferred to escrow during FY17 and were therefore recognised in Receivables at the FY17 year
end. The acquisition completed on 18 May 2017.
Jon Kempster
Chief Financial Officer
18 July 2018
76
CORPORATE SOCIAL
RESPONSIBILITY REPORT
Corporate Responsibility is central to our vision to be a leading international sports and lifestyle retailer. Our
established Corporate Responsibility framework focuses on five key areas: Human Resources, Health and Safety,
Customers, the Community and the Environment. Sports Direct has developed Key Performance Indicators (KPIs) to
ensure we deliver on our commitments. These KPIs are discussed further in this Corporate Social Responsibility Report
and in the Chief Executive’s Report and Business Review and the Financial Review, and are based solely on our UK
operations, unless expressly stated.
HUMAN RESOURCES (HR)
The Group employs and engages approx. 26,500 people, and our people are what make the Sports Direct Group such a
success.
The Board is committed to ensuring that all of our people have the opportunity to be inspired, stimulated, motivated,
and empowered. We believe that it takes every single team member to make a difference and drive performance, and
we are committed to the development and rewarding of our people to enable the Group to achieve its future growth
plans.
The Group’s approach is focused on continual development to nurture our people towards their full potential and to
enable our teams to promote from within wherever possible, rewarding staff and retaining people and investment in
talent.
The Group has several policies and systems in place to ensure staff welfare is monitored and maintained. In support of
these policies and systems, communication with our people occurs via Group news emails, letters, staff portal / staff
app and the intranet, as well as through briefings by direct managers and through the Group’s training programmes.
Our HR department is also represented at the meetings of the Listening Group and Health & Safety Committee for
the Shirebrook campus, and is consulted and kept abreast of any issues, comments or suggestions through the ‘Your
Company, Your Voice’ portal for both Shirebrook and Retail.
ATTRACTION AND RETENTION
As a Group, we like to train and retain our staff to ensure that valuable knowledge remains within the Group. The
Group uses a number of incentives to retain our people, including regularly holding employee appraisals, to identify
the areas where we, as an employer, can improve. We find that regular appraisals also highlight the knowledge gaps
which our employees have, and allows us to offer staff training which will develop their understanding.
During FY18, 23.0% of our UK salaried staff left the Group, an increase from 17.4% in FY17. As expected, this figure
increased after the remaining 2011 Share Scheme vesting period.
Store Manager stability with Sports Direct is currently sitting at 84.3%, this is a decrease of 0.7% on the FY17 figure.
Assistant Manager and Footwear Manager stability currently sit at 82.9% and 89.1% respectively, which is an increase
of 2.5% and a decrease of 0.3% across the positions.
SALARIED STAFF TURNOVER SINCE FY14
• FY14 - 19%
• FY15 - 19%
• FY16 - 22%
• FY17 - 17%
• FY18 - 23%
77
STRATEGIC REPORTSPORTS DIRECT - ANNUAL REPORT 2018 CORPORATE SOCIAL RESPONSIBILITY REPORT
Continued
PERFORMANCE AND REWARD
Since their introduction in 2009, share schemes have been a major tool used to attract and retain employees. Vests in
2012, 2013, 2015 and 2017 have seen participants benefit from bonuses in excess of £230m. We believe that this high
performance, high reward culture has been a major contributory factor towards our successes to date. Due to current
economic and currency uncertainty, the Company has decided not to introduce a new share scheme at the present
time but will look to do so at the right time in the future.
The 2009 and 2011 share schemes have now successfully achieved all of their targets, and as a result no more shares
will be granted under the schemes.
During FY18, participants in the 2011 Share Scheme were offered the opportunity to vest their final tranches of shares.
At this time the Company guaranteed a minimum price of £3 per share for all shares vested, increasing to £4 per share
if kept in the scheme for a further 12 months. The guaranteed minimums were designed to offer some protection to
share scheme participants from the recent volatility of the share price.
During FY18, 11.6m of shares worth £45.5m relating to the 2011 Bonus Share Scheme have vested, with 1,123,173
shares remaining.
The targets under the 2011 Share Scheme were:
• 2012: Underlying EBITDA of £215m - Achieved
• 2013: Underlying EBITDA of £250m - Achieved
• 2014: Underlying EBITDA of £260m - Achieved
• 2015: Underlying EBITDA of £300m - Achieved
The 2015 Share Scheme failed to achieve the first EBITDA Target and as a result, during FY16 the Scheme lapsed.
During FY18 the Board have continued to look towards creating a long-term incentive scheme that will be both
beneficial and rewarding for all parties concerned. This is an area which remains ongoing and is high on the Board
agenda. The Board are committed to rewarding our people for their dedication to the Company and we are hopeful
that a suitable incentive scheme can be achieved once we are comfortable that the targets set will be both stretching
and achievable.
DIVERSITY AND INCLUSION
Diversity within the Group is essential, and we believe this plays an important role in a successful business. At all times
we try to ensure that our people meet the diversity, cultures and values of our varied customer base. We endeavour to
provide equality of opportunity and will not tolerate discrimination on grounds of gender identity, sexual orientation,
race, nationality, religion, age, disability or any other grounds.
People who have a first language other than English have an important role to play at Sports Direct and it is our aim
to be inclusive. We offer the opportunity to improve the skills to participate and be successful at work, at home and
as citizens by providing free English language lessons to support people who have a first language other than English.
Since introducing the lessons in January 2017 over 1,200 staff have attended. Five levels are available for each
member of the team to work through including Business English which all nationalities attend including British. A
selection of those who attended the classes have used their new found skills to secure new roles within various Head
Office positions such as Customer Service, Buying and the Translation Team.
Our senior leadership team is currently comprised of approx. 35% females. Three of our senior executive positions:
Head of Global Operations, Head of HR and UK Group Financial Controller are held by females. As positions become
available the necessary level of consideration will be given to ensuring diversity within the team. Approximately 50%
of our overall workforce is female. We aim to ensure that both male and female candidates are provided with equal
opportunities to apply for and work in all positions across the Group.
78
BREAKDOWN OF GENDER DIVERSITY
Directors
Other senior managers
All UK workforce
Male
6
639
7,277
Female
-
246
6,856
GENDER PAY GAP
Our Gender pay gap report was published in April 2018. The average gender pay gap across the group was 6.3%,
which we note is below the current national average of 18.4%. We recognise there is a difference in total earnings
between female and male employees when bonuses are taken into account and we are continuing to explore and
implement methods that will establish enhanced processes and training tools for our employees and engaged workers
to achieve maximum earning potential through our various bonus and commission schemes.
For information on diversity on the Board please see the Nomination committee report on page 113.
APPRAISALS
During FY18 the Group implemented a new approach to its Appraisal Programme across both Retail and Head Office.
All heads of department collaborated to revamp the existing measures with something innovative, modern and
role specific. The aim of this exercise was to make it easier to identify training needs, manage performance and set
achievable and role specific objectives, giving staff clear career direction and an opportunity to showcase their skills
whilst highlighting areas of improvement. It has been well received and we will continue to evolve the project to suit
the needs of the Group and to the benefit of its people.
PAY REVIEW
During FY18 a pay review of all UK staff was conducted and pay increases implemented where appropriate. The aim of
the pay review was to bring wages in line with our competitors making us an employer of choice to appeal to external
talent as well as improve the retention of our skilled and valued people.
TALENT AND CAPABILITY DEVELOPMENT
KEY HIGHLIGHTS:
Total workforce: approx. 26,500
Hours invested in training: approx. 60,000
Apprenticeships
The Apprenticeship Levy was introduced in April 2017. We currently have a number of apprentices across the group
studying towards accredited qualifications on subjects ranging from Data Analysis, Team Leader, Advanced &
Professional Diploma in Accounting, Network Engineer and Project Management.
Placement Years
We offer an opportunity for undergraduates to spend a year gaining valuable work experience during their time at
University. Year placements offer the chance to:
• Advance skills like team working, project management and organisational skills.
• Learn about implementing roles with real responsibility and challenges which increase the likelihood of
successful employment after University by gaining the skills graduate employers are looking for.
79
STRATEGIC REPORTSPORTS DIRECT - ANNUAL REPORT 2018 CORPORATE SOCIAL RESPONSIBILITY REPORT
Continued
STAFF TRAINING AND DEVELOPMENT
TRAINING & DEVELOPMENT
The aim of our Staff Training and Development department is to nurture our people to enable them to deliver the
requirements of the Group and its customers. Our goal is to give every staff member from all fascias of the business,
the opportunity to be inspired, developed, motivated and empowered to increase their impact within the business. In
the past year, we invested approx. 60,000 hours in training and development. We believe this commitment to ensuring
our teams have the knowledge they need to perform at the highest level is paramount to the continued success of the
business.
We have launched an organisational development programme to give our people visibility over career opportunities
within the Group. We also strive to offer staff the tools to achieve their personal development goals through training
and other means. The majority of Store Managers are promoted from within and over a third of them started as casual
sales staff.
We have an existing purpose-built training centre at our campus in Shirebrook, which is dedicated to ensuring our
people have appropriate opportunities to develop their skills and progress their careers within the Group. During the
year we have enhanced our welcome programme for new retail staff and continued to strengthen the product training
that we provide in conjunction with third party brands.
Across all fascias, we remain focused on the need to proactively develop our teams’ competence base and leadership
capabilities in order to meet the rapidly changing requirements of the Group. We offer a varied portfolio of training
courses for our people, the majority of which are hosted in our own facilities. The Training and Development portfolio
continues to grow across the following areas:
• Brand and Product Knowledge
• Customer Service Training
•
•
•
•
•
• Free English Lessons (Adult ESOL)
E-Learning
‘Home Grown’ Talent Management
Management Training
Apprenticeships
Placement Years
We continue to believe in the integration between coaching, organisational development and performance
management to support any new initiative or change to improve efficiency within Sports Direct.
MODERN SLAVERY ACT 2015 (“MSA”)
The Company aims to respect all people and is committed to equal treatment. We have long recognised the reality that
modern slavery is an ongoing challenge which virtually all organisations, especially those dealing in consumer goods,
will continue to face. We remain committed to addressing this risk. Ultimately we strive to ensure that no slavery or
human trafficking takes place within our business or supply chain. We have policies in place aimed at proactively
identifying and mitigating the risks. These policies aim to send a clear message that we will not tolerate this kind of
behaviour.
We also have a range of tools in place including videos and literature to educate staff about their rights and a number
of alternative channels (including an internal telephone hotline, physical comments boxes on site and the third party
Retail Trust hotline) for reporting any concerns confidentially. We continue to review and develop our staff training,
monitoring processes and evaluation of outcomes and work with relevant employment agencies.
80
If we find, or suspect, that any organisations or individuals are participating in modern slavery we will take immediate
action so that our standards and values are maintained. Accordingly we have a policy of reporting any suspicious
activity to the police (which has historically assisted in successful convictions).
Our section 54 MSA statement can be found on our website www.sportsdirectplc.com.
HEALTH AND SAFETY
As the Group continues to grow there has been increased focus on creating a consistent method of implementing
Health and Safety measures and evaluating the Group’s safety performance. Policies are implemented, in conjunction
with legal standards, to protect our staff and customers. During FY18, the Head of Health & Safety and the team
have undertaken a full review of its Health and Safety policies and procedures. The introduction of the bespoke online
Accident/Incident reporting system has resulted in improved accident reporting/investigation and accident trend
analysis.
The Group’s Reporting of Injuries, Disease and Dangerous Occurrences Report (RIDDOR) rate has reduced
significantly in FY18 when compared to FY17. This has been achieved by accuracy of the reporting process. Improved
communication and handling of incidents along with a more robust investigation process has also assisted.
All RIDDOR incidents are recorded and are reportable to the Local Authority. The Health & Safety team meet the
Derbyshire authority with responsibility for Shirebrook on a quarterly basis and work closely with other authorities
when required. All accidents and incidents are investigated in a timely manner.
In relation to the UK workforce, the number of accidents recorded involving the warehouse workforce as at April 2018
was down when compared to April 2017. In the previous year the most frequent type of incidents involved the use of
stillages and cages. The newly formatted induction handbook and training review has had a positive impact on this.
Going forward, improved supervisor training and selection will support the momentum of the Group’s standards and
performance.
The number of accidents recorded involving the store, office and distribution workforce in the UK increased in FY18
compared with FY17. An increase was to be anticipated with the introduction of the bespoke online Accident/Incident
reporting system in November 2016. Reporting is now more accurate and timely, allowing us to take any necessary
actions and secure evidence more efficiently. In FY19 we will have a direct comparison of reported accidents through
the online system.
The Company is a corporate member of the British Safety Council and we attend a quarterly Retail Health & Safety
forum facilitated by Oris, this promotes the sharing of ideas and solutions. The Head of Health and Safety has now
been nominated as the new Deputy Chairman of the forum.
The Company has recently employed a Wellbeing Officer based in the warehouse and Head Office to promote physical
and mental health programmes within the workplace and link with local community projects.
Over the course of the year there were no environmental prosecutions or work-related fatalities.
81
STRATEGIC REPORTSPORTS DIRECT - ANNUAL REPORT 2018 CORPORATE SOCIAL RESPONSIBILITY REPORT
Continued
HEALTH AND SAFETY TRAINING
We take reasonable steps to train each relevant company within the Group to the appropriate standards applicable in
each requisite country. Shirebrook Head Office is now a registered training centre for First Aid and Health & Safety,
with Qualsafe and the British Safety Council respectively. Our Health & Safety Training Officer recently left the business
but we have successfully recruited a replacement who will join us in July 2018. In association with EuroSafe Safety
Schemes in Procurement (SSIP), all contractors are now required to register as a ‘safe contractor’ prior to undertaking
any works within the business. This is extended to store maintenance and projects along with the Shirebrook Campus
and Head Office.
Training courses are regularly offered and staff are encouraged to learn essential Health and Safety techniques. A
revised staff Induction, Refresher training and Handbook are ongoing within our stores, along with revised task
based Risk Assessments and Safe Systems of Work. The Warehouse teams have also undertaken similar reviews and
implemented improved documentation and standards. Supervisors and section leaders within the warehouse have
received training in Supervising Health & Safety level 2 validated by Qualsafe. All contractors are now required to
complete a site induction before they will be given access to complete any works within the Shirebrook Campus or
Head Office.
The Regional Health & Safety Officers have received additional training and education regarding delivery of Fire
Risk Assessments in association with the British Association of Fire Engineers (BAFE) and Evac Chair training. They
have also been enrolled into an a National Compliance & Risk Qualifications (NCRQ) course to enhance their existing
knowledge and Health & Safety qualifications. Since the last report this team has an additional part time member who
supports stores within Central London. All new or refurbished stores receive a visit from the relevant Health & Safety
officer prior to opening and existing stores are visited using a priority based schedule.
The team at Head Office is always on hand to visit and assist stores with Health and Safety issues, assess incidents
and report relevant matters to RIDDOR. All potentially serious incidents are escalated to the senior team and any other
relevant parties by the Head of Health & Safety, with a weekly follow up meeting. All audits, inspections and fire risk
assessments have been centralised and are electronically completed so they can be retained automatically.
Additional resource has been allocated to the team dedicated to dealing with accident related claims and complaints.
The introduction of the Accident / Incident reporting has assisted the team to become more proactive investigating
incidents and building claims defensibility where necessary. This allows direct follow up and initiation of the
investigation process and evidence gathering i.e. CCTV, witness statements, service records etc.
Accidents involving staff or customers are reported to the Board regularly, as are any legal claims that arise from these.
CUSTOMERS
Customer service is at the forefront of our business. We aim to provide customers with an enjoyable experience both
in-store and online and ensure all our products are safe and fit for purpose.
Regular external customer experience visits are undertaken in our stores and gyms to identify areas for improvement
and also to recognise staff providing exceptional customer service.
Monitoring customer satisfaction and responding to queries is a continuous process. All written complaints are
recorded, including an analysis of the nature of the complaint so that trends can be assessed and appropriate action
taken.
We are continuously working to improve customer service at all levels within the Group from the retail stores, to Head
Office and our website.
82
SUPPLY CHAIN
We are committed to responsible business practices in our business and supply chain.
We recognise the potential risks associated with an international supply chain such as ours and we continue to take
steps to assess and try to control these risks.
One way in which we do so is through our continuing policy of using two key "gateway" suppliers based in Singapore
and South Korea for Group branded products. The Group recognises the value in building long term relationships with
its suppliers and has worked closely with its two key suppliers for a number of years, over which time the suppliers
have demonstrated that they share the Group's values in upholding responsible business practices. Our longstanding
relationship with these key suppliers enables the Group to have an increased level of visibility and control over its
supply chain.
We have a zero tolerance approach to modern slavery and human trafficking and aim to ensure as far as possible
that our suppliers comply with these values. This includes notifying our key suppliers of our Anti-Slavery and Human
Trafficking Policy, which sets out the high standards expected of our suppliers.
Our key suppliers are also required to provide warranties that their businesses (including any persons associated
with them) have not been convicted of, or been the subject of any investigation by a governmental, administrative or
regulatory body regarding any offence involving slavery or human trafficking.
Our key suppliers are also required (amongst other things) to comply with auditing obligations and to provide annual
reports setting out the steps they have taken to ensure that slavery and human trafficking are not taking place in their
businesses or supply chains.
We also work with a number of household name third party brand suppliers who have their own published approach
to supply chain management, which we monitor.
We comply with an internationally recognised list of chemicals that are banned for use in fabrics. Both supply chain
companies conduct random tests on fabric which are then taken to a recognised laboratory for quality testing and to
ensure that banned chemicals are not being used
We continue with our policy of supporting ethically sourced fur products in our retail stores.
COMMUNITY INVOLVEMENT
The Group engages at various levels with the local communities in which we operate, and in relation to our Shirebrook
campus we continue to actively work with Shirebrook Forward NG20 working group, which aims to help Shirebrook
retain its breadth of services, local support functions and community spirit. Our 500 seat auditorium is utilised
throughout the year for local community events. Local community organisations such as county and local council
groups make use of the facility free of charge. The Group supported a number of local charities and organisations
through the year primarily through the donation of sporting equipment and clothing and sponsorship by our brands.
83
STRATEGIC REPORTSPORTS DIRECT - ANNUAL REPORT 2018
CORPORATE SOCIAL RESPONSIBILITY REPORT
Continued
PROTECTING OUR ENVIRONMENT
We are consistently pro-active in ensuring we make a positive contribution to the environment. Our goal is to foster
partnerships that will enhance our local economy using environmental improvements that create cleaner, safer
neighbourhoods.
This happens in a number of different ways.
Our trucks are back loaded with recyclable waste when they are making deliveries to our stores. This is supported by
an onsite recycling centre which ensures we facilitate the recycling of circa 95% of our cardboard.
We are currently a triple A producer of waste KLN’s (Cardboard) which means that we produce clean, high density
bales, of a constant quality and quantity loaded correctly into either of two permanently located stand 40ft containers
for export and one permanently located stand trailer going to a local paper mill.
Plastic
The recycling of plastic has transformed into a totally separate baling operation using four new HSM v press balers
handling plastic only. This change has stopped end of bale contamination. Previously, we would have used the
downtime available on the cardboard balers. Currently the plastic we produce on site is of a high grade.
Metal
We recycle our metal through a partnership with two local companies. They supply 40 yard bins located at the south
end of the warehouse which we load with scrap metal that is generated from either Shirebrook or our retail stores. We
are now actively sub-sorting different grades where possible to facilitate a faster more efficient process and a greater
rebate.
Transport
The Group has reduced the number of its trucks on the road by approximately 20% to 80. The Group’s fleet is
continuing to be replaced with more environmentally friendly trucks meeting Euro 6 standard. Due to more efficient
usage of trucks, including training drivers to drive as efficiently as possible to maximise fuel usage, the Group used
375,000 litres less fuel in FY18 than the prior year.
Energy Efficiency
All our newer retail stores are equipped with smart meters to monitor energy usage. This is managed centrally thus
ensuring a consistent measurement across our retail footprint. We have embarked on a significant energy reduction
programme culminating in the delivery of our very efficient Warehouse C. This has been supplemented with a number
of pilot projects to create further energy saving opportunities.
We recognise that we have a responsibility to manage the impact our business has on the environment and we
are committed to reducing this both now and in the future. We continue to comply with the Government’s Carbon
Reduction Commitment and have identified key areas where we can make a difference, in particular energy usage in
our stores, transport and waste management.
We are continuously aiming to reduce our carbon footprint. The single most significant element is electricity, which
makes up 81% of the footprint. The carbon footprint spread across all UK sites is detailed in the chart below:
84
CARBON FOOTPRINT ANALYSIS 1 APRIL 2017 - 31 MARCH 2018
Electricity 81%
Diesel 10%
Other 9%
The growth of our Company has increased the number of our stores and therefore the absolute GHG emissions. Our
chosen intensity ratio of electricity-related emissions per £m revenue has decreased by 10% due to the reduced CRC
factors and efficiencies.
GREENHOUSE GAS (GHG) EMISSIONS REPORTING
Reporting period(1)
1 April 2017 - 31 March 2018
Baseline year(2)
FY15
Consolidation approach
Operational control
Boundary summary
All entities and facilities either owned or under operational control were included. Emissions from
air conditioning and refrigeration units are excluded due to the cost of data collection. These are
expected to be a negligible % of scope 1 emissions.
Consistency with Financial
Statements
Other than the emissions declared for the period 1 April 2017 – 31 March 2018 to be in line with
the CRC Energy Efficiency Scheme, there are no inconsistencies with Financial Statements.
Emission factor data source
DEFRA (May 2013)
Assessment methodology
The Greenhouse Gas Protocol and ISO 14064-1 (2006). We have used the 2016 UK Government’s
GHG conversion factors.
Materiality threshold
Materiality was set at Group level at 5%, with all facilities estimated to contribute >0.5% of total
emissions included.
Intensity ratio
Emissions per £m revenue
(1) The emissions declared are for the period 1 April 2017 – 31 March 2018 to be in line with the CRC Energy Efficiency Scheme.
(2) As we have full comparative information for all energy sources for the Group, we have set the baseline year as 2015.
Scope 1 GHG emissions are calculated based on the purchased quantities of commercial fuels using published
emission factors. Scope 2 GHG emissions are primarily calculated from metered electricity consumption and published
emission factors.
CO2 equivalent factors are used which ensures we have reported on all of the emission sources required under the
Companies Act 2006 Regulations.
Year
Scope 1 CO2e emissions
Scope 2 CO2e emissions
Total Scope 1 and Scope 2 CO2e emissions (Tonnes)
CO2e Emissions (Tonnes/£m)
CO2e Emissions vs Turnover Index (2015: 100)
2018
13,754
102,827
116,581
34.7
75.3
2017
12,624
112,692
125,316
38.7
84.0
85
STRATEGIC REPORTSPORTS DIRECT - ANNUAL REPORT 2018 CORPORATE SOCIAL RESPONSIBILITY REPORT
Continued
WASTE REDUCTION
We are actively reducing the amount of waste we send to landfill and segregate waste to ensure that we recycle as
much as possible.
THIS YEAR WE RECYCLED:
• 6,278 units of electrical equipment (2017: 5,548 units)
• 120 tonnes of waste paper (2017: 607 tonnes)
• 12,931 tonnes of cardboard (2017: 12,203 tonnes)
• 360 tonnes of metal (2017: 384 tonnes)
• 826 tonnes of plastic (2017: 1,023 tonnes)
All stores now use biodegradable carrier bags and provide the option of a “bag for life”. This is actively promoted in-
store through high levels of staff engagement.
We remain committed to minimising waste and improving energy efficiency across our stores and will continue to
explore new ways in which to do this.
ANTI-CORRUPTION AND ANTI-BRIBERY
The Group has an Anti-Bribery and Corruption policy in place, which was originally created following the introduction
of the UK Bribery Act. As a result of the Act, all policies and procedures were reviewed to ensure that they complied
with the Act and measures are in place to prevent staff being offered and/or accepting bribes. We have a zero
tolerance approach to bribery and corruption at Sports Direct, and encourage our people to speak up if they have
concerns that bribery or fraud is taking place.
WHISTLE-BLOWING
There is an approved whistle-blowing policy within the Group, which was reviewed and updated by the Board in
September 2017. The policy was established to be utilised by our people who wish to raise any issues or concerns
relating to the Group’s activities, and all matters are discussed on a confidential basis.
The Board intends to continue reviewing its policies and procedures, particularly those relating to anti-corruption and
anti-bribery as well as environmental, human rights and social matters, to help ensure that the outcomes of such
policies are aligned with and further enhance the Group’s values.
Mike Ashley
Chief Executive
18 July 2018
86
RISKS AND UNCERTAINTIES RELATING
TO THE GROUP’S BUSINESS
INTERNAL CONTROLS AND RISK MANAGEMENT
The Board has a responsibility to govern the Group in the interest of its shareholders. A specialist management team of
Directors and senior management highlight risks as and when they become apparent. The team then in turn assists the
Board in devising controls to minimise the Group’s exposure.
THE GROUP’S APPROACH TO RISK
The identification and management of risk is a continuous process, and the Group’s system of internal controls and
the business continuity programmes are key elements of that. The Group maintains a system of controls to manage
the business and to protect its assets with the development of contingency plans and rapid response to changing
circumstances and does much to mitigate the risks facing the Group. The Group continues to invest in people, systems
and in IT to manage the Group’s operations and its finances effectively and efficiently.
1. RISKS ARE IDENTIFIED
2. RISKS ARE EVALUATED
3. ACTION IS TAKEN TO MANAGE, MITIGATE AND MONITOR THE RISKS
4. PRACTICES ARE REVIEWED TO LIMIT THE RISK
The specialist management teams are responsible for the identification, analysis, evaluation and mitigation of the
significant risks applicable to their areas of business. The teams meet regularly to discuss the identified risks, and how
these should be reviewed and monitored.
The Board ensures that the appropriate arrangements are in place under which staff can raise concerns about
possible financial or other impropriety, which are then appropriately investigated. The Board is assisted by the Audit
Committee in fulfilling its overview responsibilities, reviewing the reporting of financial and non-financial information
to shareholders and the audit process, and satisfying itself that appropriate systems of internal control and risk
management are in place and are serving to identify and manage risk.
The Group operates a Retail Support Unit which provides strong operational internal audit services in the Retail
division, and there are procedures in place in the Wholesale & Licensing (formerly Brands) division to monitor and
control licensees. These are complemented by an outsourced internal audit process currently performed by PKF
Cooper Parry.
The Group’s system of internal control and risk management and its effectiveness is monitored and reviewed by the
Board, the Audit Committee and senior management. The Board believes that the Group has maintained an effective
embedded system of internal control and has complied with the FRC’s Risk Guidance throughout the year, and up to
the date of approval of the Annual Report and Accounts.
The systems of internal control and risk management are designed to manage, rather than eliminate, the risk of failing
to achieve business objectives.
RISK POLICIES AND PROCEDURES
Business plans and budgets for each business include financial and strategic targets against which performance is
monitored. Monitoring includes the examination of and changes to rolling annual and quarterly forecasts, monthly
measurement of actual achievement against key performance targets and plans, and weekly reviews of performance.
The Group has clear procedures for the approval and control of expenditure. Strategic investment decisions involving
both capital and revenue expenditure are subject to a formal detailed appraisal and review according to approval levels
set by the Board. Operating expenditure is controlled within each business with approval levels for such expenditure
being determined by the individual businesses.
87
STRATEGIC REPORTSPORTS DIRECT - ANNUAL REPORT 2018 RISKS AND UNCERTAINTIES RELATING TO THE GROUP’S BUSINESS
Continued
There is an approved whistle-blowing policy within the Group. The policy was established to be utilised by staff who
wish to raise any issues or concerns relating to the Group’s activities, and all matters are discussed on a confidential
basis.
KEY RISKS
Control Environment
The Group’s operating procedures include a comprehensive system for reporting information to the Board including:
• assessment of three years of strategy plans for business development;
• creation and assessment of legal policies; and
•
review of the Group at each Board meeting, focusing on potential new risks (such as key changes in the
market).
CONTROL PROCEDURES
Detailed operational procedures have been developed for each of the Group’s operating businesses that embody key
controls. The implications of changes in law and regulations are taken into account within these procedures.
FINANCIAL REPORTING PROCESS
The Group has in place internal control and risk management systems in relation to the Group’s financial reporting
process and the Group’s process for the preparation of consolidated accounts. These include clearly defined lines
of accountability and delegation of authority, policies and procedures that cover financial planning and reporting,
preparing consolidated accounts, capital expenditure, project governance and information security. The finance
function has suitably qualified and experienced personnel to carry out the financial reporting process effectively.
The Audit Committee is responsible for overseeing and monitoring these processes, which are designed to ensure that
the Group complies with relevant regulatory reporting and filing provisions. As at the end of the period covered by this
report, the Audit Committee, with the participation of the Executive Directors, evaluated the effectiveness of the design
and operation of disclosure controls and procedures to ensure that information required to be disclosed in financial
reports is recorded, processed, summarised and reported within specified time periods.
PRINCIPAL RISKS AFFECTING THE GROUP
The Group has identified the following factors as potential risks to, and uncertainties concerning, the successful
operation of its business. The Group is, however, exposed to a wider range of risks than discussed below but these are
the principal risks that have recently been discussed by the Board and Audit Committee and are of primary concern.
• MARKET FORCES
The Group operates in a highly competitive retail industry and currently competes at international, national and
local levels with a wide variety of retailers.
Risk: A severe recession or downturn in the markets we operate in, especially the UK, could impact revenue and
profits of the Group.
Mitigation: The Group is part way through an elevation strategy that focuses on providing the customer with
an enhanced shopping experience across the Group fascias, namely SPORTSDIRECT.COM, USC and Flannels.
The Group has a strong property portfolio and continues to strengthen this by relocating and improving stores to
enhance the customer experience and adapt to market conditions. This has greatly improved the products made
available by the key third party Brand partners which provide a resilience to the business and places it in a good
position to weather any periods of weak demand. A number of key brands are owned by the Group, providing an
internal level of control and certainty on margins. There is also significant investment and focus on innovating our
e-commerce offering.
88
• TREASURY AND FINANCIAL RISK
The Group operates internationally. The majority of foreign contracts relating to the sourcing and sales of Group
branded goods are denominated in US Dollars and the Euro, thus leaving exposure to foreign exchange risk.
a. Risk: The Group is exposed to foreign exchange risk arising from various currency exposures and a
strengthening of the US Dollar or a weakening of the Pound making goods more expensive. There is also a
potential exposure in relation to the Euro forward sales contracts and written option arrangements that the
Group is party to. Adverse movements on the sterling/Euro exchange rate could impact group profitability.
Foreign exchange risk arises when future commercial transactions or recognised assets or liabilities are
denominated in a currency that is not the entity’s functional currency, as exchange rates move. This could
significantly reduce profitability.
Mitigation: The Group seeks to mitigate the foreign exchange fluctuations by hedging via forward foreign currency
contracts which are designated as cash flow hedges. Forecast sterling/euro requirements are currently hedged up
to the end of FY21 at rates of between 1.069 and 1.19. The sterling/dollar exchange requirement is fully hedged
up to the end of FY20 at rates from 1.36 to 1.43. The Group also holds assets overseas in local currency, and these
assets are revalued in accordance with currency movements. This currency risk is not hedged.
b.
Risk: The Group is exposed to interest rate risk due to its borrowings at floating interest rates.
Mitigation: The Group is cash generative and maintains appropriate debt levels to mitigate interest rate risk and
at year end has debt levels of less than 1.5x underlying EBITDA. We will continue to review the requirement for
interest rate hedging.
• BREXIT
The Group operates internationally and specifically throughout mainland Europe. The Group fulfils European
internet sales currently from the Shirebrook operation. We maintain inventory across the Europe wide retail
operation as if it is one holding and as such regularly move inventory between stores in different European
countries. We have also benefitted operationally from the availability of mainland European staff who work in our
warehouse and store network.
Risk: The UK is due to leave the EU in March 2019 and a transition period is then expected to last until December
2020. A period of heightened economic uncertainty could reduce consumer confidence, holding back spending
decisions and tightening financial conditions by creating extra risk thus impacting on the cost of finance and
reducing its availability. The terms of the eventual Brexit may influence the cost of labour, the ability to move goods
as easily as we currently can and thus impose operational challenges and costs which we will have to manage.
Mitigation: While we are unable to fully protect the Group from what is potentially a completely new economic
landscape, we have some elements which help to protect us with a network of warehouses across Mainland
Europe which can assist in providing the most efficient stock management once the customs and duty landscape
is fully understood. We have been investing in some partial automation for the Shirebrook warehouse operations
to make efficiencies and improve productivity on internet fulfilment orders and help mitigate any potential staffing
shortfall after Brexit. Brexit is regularly discussed at Board meetings.
89
STRATEGIC REPORTSPORTS DIRECT - ANNUAL REPORT 2018 RISKS AND UNCERTAINTIES RELATING TO THE GROUP’S BUSINESS
Continued
• SUPPLY CHAIN
The Group operates internationally so is reliant on the successful distribution of goods from when they are
distributed by the manufacturer to when they are sold in the stores. The Group is reliant on manufacturers based
overseas as the majority of the Group’s products are sourced from outside the UK.
Risk: The Group is subject to the risks associated with international trade and transport as well as those relating
to exposure to different legal and other standards. Particular risks include worker strikes, failure to meet minimum
code of conduct standards, and transport delays for products which could all cause substantial difficulties.
Disasters in or around the factories of our suppliers could bring negative media attention to the Group.
Mitigation: The Group requires all suppliers to sign up to the Group’s Code of Conduct/Supply Policy which
enables the Group to monitor and benchmark the performance of the supplier. Many risks relating to the supply
chain, reliance on non-UK suppliers, and to the reputation of the Group’s brands are managed and mitigated by
the implementation of these policies. Strong service level agreements and maintaining relationships with all parties
involved in the supply chain also mitigate these risks.
• KEY SUPPLIERS
The Group is reliant on good relationships with its major manufacturers, key brands and brand suppliers.
Risk: A failure to replace any of its major manufacturers or suppliers on commercially reasonable terms could
have an adverse effect on the Group’s business, operating profit or overall financial condition. It may mean that
customers shop elsewhere if stores cannot supply the required product.
Mitigation: The Group follows policies of forging long-term relationships with suppliers and of utilising two leading
supply chain companies to procure much of the Group’s own branded goods. This close relationship brings a
better understanding of the supplier’s resources enabling the Group to react quickly to changes in the international
supply market. Lengthy contracts are often used by the Group to ensure that key manufacturers are aware of our
commitment to them. The elevation strategy is forging stronger relationships with key Brand partners as we perfect
our merchandising of their products in our new generation stores. This is enabling us to get a wider product range
than we have had historically.
• CREDIT AND LIQUIDITY RISK
The Group, primarily the Group Wholesale & Licensing division, provides credit to some of its customers. Funding
and liquidity for the Group’s operations are provided through bank loans, overdrafts and shareholders’ funds.
Risk: The Group could have a credit risk if customers were unable to make payments for products purchased on
credit. The Group’s objective is to maintain sufficient funding and liquidity for its requirements, but the availability
of adequate cash resources from bank facilities and achieving continuity of funding in the current financial climate
could be a risk to the Group in future years. The purchase of strategic acquisitions and investments to strengthen
and compliment the Group may be hindered. Relationships with suppliers could break down if we are unable to pay
them in line with our contractual obligations.
Mitigation: The Group’s key suppliers also face credit risks and as such the Group regularly assesses the viability
of its suppliers and ensures there are plans to source from alternative businesses should key suppliers fail. Rigorous
procedures are in place to mitigate this credit risk. The Group has a credit policy in place and the exposure to risk
is monitored on an on-going basis. Investment of cash surplus, borrowings and derivative investments are made
through banks and companies which have credit ratings and investment criteria approved by the Board. The Group
refinanced its main credit facility in November 2017 and is operating comfortably within it, expiry is November
2021 with an option to extend a further year.
90
• TAXATION
The Group operates internationally and in a wide range of jurisdictions and is therefore subject to tax risk across its
operations.
Risk: The Group is subject to varying degrees of tax risk in relation to its international trading activities, both
in the UK and overseas. These include duty and VAT in relation to its overseas supply chain (both internal and
external) and sales taxes in relation to online sales made to overseas customers from the UK. The Group is also
subject to transfer pricing regulations relating to trading relationships and transactions between Group companies.
Tax regimes differ country by country and the Group’s overseas subsidiaries are subject to local tax compliance
requirements and tax enquiries from the local tax authorities.
Mitigation: Group level tax risks are monitored by the Group finance function, with support from external tax
advisors as required. On-going compliance with local tax regulations is maintained through a combination of
local finance teams, central oversight from the Group finance function, and the use of external tax advisors in key
jurisdictions. The Group takes a proactive approach to engaging with the tax authorities across its business. Key tax
risks are monitored and discussed at Board level, with appropriate actions agreed and implemented.
• SUCCESSION PLANNING
Key individuals within the Group have such a level of knowledge and experience of the business which makes them
essential to continue to further the interests of the Group.
Risk: Natural disaster, illness, injury, or the sudden resignation of key individuals could mean key people are no
longer available to manage the Group, and this could result in a change to the operations and strategic direction of
the Group.
Mitigation: Our departments work together to develop their understanding of each department and of the Group.
Senior managers work at ground level to help to assess the strengths within their teams and to offer development
opportunities where appropriate. This can be of assistance when considering the suitability of internal candidates
for vacancies. Our structured talent management programmes, and specialist masterclasses, encourage internal
progression within the Group. Executive development is important to us and we aim to promote internally rather
than recruit external individuals who are unknown to the Group.
The Nomination Committee reviews the succession plan of the Group, and discusses who would take over roles if
key team members were to leave.
• OPERATIONAL
The Group is reliant on the Head Office and National Distribution Centre at its Shirebrook Campus operating
without disruption, along with the uninterrupted running of the Group’s fleet of vehicles. The majority of the
Group’s revenue is derived from the UK.
Risk: Any disruption to the Head Office, National Distribution Centre or the fleet of vehicles might significantly
impact the Group’s ability to manage its operations, distribute products to its stores and maintain its supply chain.
Any long-term interruption of the Group’s IT systems would have a significant impact on the Group’s operation,
particularly in the Sports Retail divisions. Terrorist attacks, armed conflicts, government actions or adverse weather
affecting the road networks within the UK could result in a significant reduction in consumer confidence, which
would in turn have an adverse effect on sales in stores.
Mitigation: The Group has a strong business continuity plan that is regularly reviewed to address operational risks.
The Head Office and National Distribution Centre has been extended so that there is additional room for storage
and workers, for future business needs and in case of disaster. The Board is confident that as far as it is practical,
the risks and uncertainties that face the Group are being monitored and managed and that, where required,
appropriate action is being taken.
91
STRATEGIC REPORTSPORTS DIRECT - ANNUAL REPORT 2018 RISKS AND UNCERTAINTIES RELATING TO THE GROUP’S BUSINESS
Continued
• CYBER FAILURES AND ATTACKS
Online sales and advertising are key to the Group’s strategy going forward. However, cyber-attacks are becoming
more sophisticated and frequent, commanding headlines and causing loss of customers’ trust.
Risk: Reputational implications if the attack is reported to the media, including a loss of sales whilst the site
is down, and longer term loss of sales through the deterioration of customer confidence. Loss of competitive
advantage against market competitors and the new GDPR (General Data Protection Regulation) regulations will
enable overseeing bodies to enforce sizeable sanctions and penalties.
Mitigation: The Group has a strategy and processes in place which relate to our IT security posture. The recent
establishment of a Group IT Security Officer role and ongoing work with internal and external parties enable us
to continuously monitor our systems to ensure that they are sufficiently strong to deal with ever increasing cyber
risks. We have invested and continue to invest in systems to protect our sites, data and customers. This investment
spans several new security initiatives, including; new security tools, external penetration testing and employee
IT security awareness training. Recent implementation of the GDPR (General Data Protection Regulation) which
seeks to create a harmonised data protection law framework across the EU and aims to give back to data subjects
control of their personal data, whilst imposing strict rules on those hosting and processing this data anywhere in
the world, has been an opportunity to review and enhance in some cases the way in which we use and store data.
The Group’s IT is independently audited by outside agencies on an annual basis to challenge and test our defences.
Our existing strategies are under constant review to ensure we are protecting ourselves and fully utilising new
technologies where those technologies could assist.
• HEALTH AND SAFETY
Health and Safety is key across all areas of the Group. Policies are implemented, in conjunction with legal
standards, to protect our staff and customers. These have been subject to a detailed review and updated where
necessary.
Risk: Potential injuries, distress and fatalities could result from a failure to establish and maintain safe
environments. Lack of competence in health and safety reporting could lead to legal claims which are difficult to
defend.
Mitigation: We take reasonable steps to train all relevant employees within the Group to the appropriate standards
applicable in each country. Shirebrook Head Office is now a registered training centre for First Aid and Health &
Safety, with Qualsafe and the British Safety Council respectively. We have recruited a Health & Safety Training
Officer and additional Health & Safety Officer based within Head Office. The Regional Health & Safety Officers have
received additional training and education regarding delivery of Fire Risk Assessments and Evac Chair training.
Training courses are regularly offered, and staff are encouraged to learn essential Health and Safety techniques. A
revised staff induction, refresher training and handbook has been introduced within our stores, along with revised
task based risk assessments and safe Systems of Work. The Warehouse teams have also undertaken similar
reviews and implemented improved documentation and standards.
The team at our Head Office is always on hand to visit and assist stores with Health and Safety issues, assess
incidents and report relevant matters to the Health and Safety Executive via the Reporting of Injuries, Disease and
Dangerous Occurrences Report (RIDDOR). We have a team of employees dedicated solely to dealing with claims
and complaints. The introduction of a bespoke online Accident/Incident reporting system in November 2016
has assisted the team to become more proactive investigating incidents and building claims defensibility where
necessary. Accidents involving staff or customers are reported to the Board regularly, as are any legal claims that
arise from these. The Board considers ways to reduce the number of claims.
92
• LEGAL
The Group’s trade marks, patents, designs and other intellectual property rights are central to the value of the
Group’s Brands.
Risk: The Group currently believes that its licensees, suppliers, agents and distributors are in material compliance
with employment, environmental and other laws. The violation, or allegations of a violation, of such laws or
regulations, by any of the Group’s licensees, suppliers, agents or distributors, could lead to adverse publicity and a
decline in public demand for the Group’s products, or require the Group to incur expenditure or make changes to
its supply chain and other business arrangements to ensure compliance. The Group may need to resort to litigation
in the future to enforce its intellectual property rights and any litigation could result in substantial costs and a
diversion of resources. Third parties may try to challenge the ownership of or counterfeit the Group’s intellectual
property.
Mitigation: The Group has an in-house legal team who have knowledge of a variety of legal areas that apply to the
Group. This in-house expertise is vital in mitigating such issues. The legal team work closely with external advisors
to assist with, and gain knowledge on, matters outside their areas of expertise.
The Group’s legal advisors actively monitor trade mark applications by other companies, as well as the inventory of
rival retailers, to ensure that our rights are not infringed and where these are infringed, to take appropriate action.
The legal team carefully draft contractual agreements to ensure that documentation is clear and legally binding.
Standard templates and key points are shared so that processes are streamlined and legal spend is reduced.
• SALES
The Group’s retail businesses are subject to seasonal peaks.
Risk: Prolonged unseasonal weather conditions or temporary severe weather during peak trading seasons could
have a material adverse effect on the Group’s businesses. The Group is dependent upon the store portfolio and
consumers’ spending habits.
Mitigation: Although unable to mitigate environmental conditions, the Group monitors inventory levels through
sales forecasting to manage peaks in demand and we have years of trading profiles which assist in this regard. Our
team keep ahead of the trends, conducting market research on our customers and monitoring our competitors.
Sophisticated ordering systems ensure that items which sell well in particular areas will be restocked. Our strong
relationship with suppliers ensures that we are able to source key items at short notice, should this be required.
93
STRATEGIC REPORTSPORTS DIRECT - ANNUAL REPORT 2018 THE BOARD
DR KEITH HELLAWELL QPM
Non-Executive Chairman, Chairman of the Nomination Committee
Appointed: 24 November 2009
Committees: Nomination and Remuneration Committees
Previous roles: Prior to joining the team at Sports Direct International plc, Dr Hellawell spent over 40 years in public
sector management being a former Chief Constable of two British police forces. While working directly for the Prime
Minister between 1998 and 2002 he wrote and coordinated the United Kingdom national and international anti-drugs
policy. Dr Hellawell has been involved in the private sector since 1998 when he joined Evans of Leeds, a fully listed
property company. Since then he has served on the Boards of both Dalkia plc and Sterience Limited, subsidiaries of the
French company Veolia Env. He was Non-Executive Chairman of Goldshield Group plc, a marketing-led pharmaceutical
and consumer health company, from May 2006 to its sale in December 2009. He has held a number of other Non-
Executive Board positions in private companies in sectors such as vehicle manufacturing and IT.
Present roles: Dr Hellawell is currently a Non-Executive Director of Mortice plc, a Singapore-based facilities
management company, a Director of the Super League team Huddersfield Giants and Non-Executive Chairman of
Smart Witness Limited, a leading designer, manufacturer, and supplier of in-vehicle cameras, recorders, and software.
He also runs his own management and training consultancy company. There have been no changes to Dr Hellawell's
significant commitments outside the Company during FY18.
Key skills and experiences: Dr Hellawell has worked in both the public and private sector for over 50 years. Throughout
this time he has built up a wealth of experience which he brings to the Group to ensure the successful and effective
operation of the Board.
MIKE ASHLEY
Chief Executive
Appointed: 1982 (founder)
Previous roles: Mike established the business of the Group on leaving school in 1982 and was the sole owner until
the Group’s listing in March 2007. He was Executive Deputy Chairman prior to being appointed Chief Executive in
September 2016.
Key skills and experiences: Mike was the founder of the Group and has the necessary skills for formulating the
vision and commercial strategy of the Group. With over 30 years in the sports retail business with Sports Direct he is
invaluable to the Group.
JON KEMPSTER
Chief Financial Officer
Appointed: 11 September 2017
Previous roles: Jon has been a listed plc Finance Director for most of his career. He was previously Finance Director of
Wincanton plc, Delta plc, Low & Bonar plc, Linden plc, fii plc and of AIM listed Utilitywise plc.
Present roles: Jon is a director of JVM Ltd, a private group who have exclusive dealerships to sell construction
equipment in Russia. Jon is also a Non-Executive Director of Redcentric plc, an AIM listed IT managed services
provider and a Trustee of the Delta Pension Plan.
Key skills and experiences: Jon is a Chartered Accountant and has extensive experience working in listed company
environments.
94
SIMON BENTLEY
Senior Independent Non-Executive Director, Chairman of the Audit Committee
Appointed: 2 March 2007
Committees: Audit, Nomination and Remuneration Committees
Previous roles: Simon qualified as a Chartered Accountant in 1980 and in 1987 joined Blacks Leisure Group plc where
he was Chairman and Chief Executive for 12 years.
Present roles: Simon chairs and is on the board of a range of companies and organisations. Among these, he is
Chairman of the hair brand Umberto Giannini, is the principal owner and Chairman of the leading mobile ATM operator
Cash on the Move, is a Supervisory Board Director of Global Home, a designer and manufacturer of indoor furniture for
retailers, based in Vietnam, and is Chairman of Yad Vashem UK Foundation.
Key skills and experiences: He has lengthy experience of the sporting goods industry, and has the recent and relevant
financial experience and accounting background necessary to be Chairman of the Audit Committee.
DAVID DALY
Non-Executive Director
Appointed: 2 October 2017
Committees: Audit, Nomination and Remuneration Committees
Previous roles: David has held a number of positions during a 30 year international career with Nike, focussing on
the football industry. He started in a sales role in 1986 and retired in 2015 as a Senior Director for Nike’s Club and
Federation business, responsible for global merchandising business for all of Nike’s leading Soccer Clubs.
Present roles: David is a Non-Executive Director of Fulham Football Club.
Key skills and experiences: David has strong international experience in marketing and merchandising in the sports
industry.
DAVID BRAYSHAW
Non-Executive Director, Chairman of the Remuneration Committee
Appointed: 8 December 2016
Committees: Audit, Nomination and Remuneration Committees
Previous roles: David is a very experienced senior investment and commercial banker. He has over 30 years’ experience
with organisations such as Barclays Capital, HSBC, Citigroup and Pilkington plc.
Key skills and experiences: David graduated from Oxford in 1975 with a Masters of Arts in Chemistry. He has spent a
long career in the field of corporate financing for a number of major financial institutions, and completed time as the
Group Treasurer of Pilkington plc.
95
GOVERNANCESPORTS DIRECT - ANNUAL REPORT 2018 DIRECTORS' REPORT
The Directors of Sports Direct International plc present their Annual Report and Accounts for the period ended
29 April 2018.
PRINCIPAL ACTIVITIES AND BUSINESS REVIEW
The Chief Executive’s Report and Business Review on pages 60 to 69 provides a detailed review of the Group’s current
activities and potential future developments together with factors likely to affect future development, performance and
conditions. There is also a table of the principal risks and uncertainties likely to affect the Group on pages 87 to 93. The
financial position of the Group, its cash flow, liquidity position and borrowing facilities are described in the Financial
Review on pages 70 to 76. The Corporate Social Responsibility Report on pages 77 to 86 reports on environmental
matters, including the impact of the Group’s businesses on the environment, the Group’s workforce, and on social and
community issues.
The principal activities of the Group during the period were:
retailing of sports and leisure clothing, footwear and equipment, lifestyle and luxury apparel;
•
• wholesale distribution and sale of sports and leisure clothing, footwear and equipment, lifestyle and luxury
apparel under Group-owned or licensed brands; and
licensing of Group Brands.
•
Further information on the Group’s principal activities is set out in the front of this document and in the Chief
Executive’s Report and Business Review on pages 60 to 69.
RESULTS FOR THE PERIOD AND DIVIDENDS
Revenue for the 52 weeks ended 29 April 2018 was £3,359.5m and Profit before tax was £77.5m compared with
£3,245.3m and £281.6m in the prior period. The trading results for the period and the Group’s financial position as
at the end of the year are shown in the attached Financial Statements, and discussed further in the Chief Executive’s
Report and Business Review and in the Financial Review on pages 60 to 69 and 70 to 76 respectively.
The Board has decided not to propose a dividend in relation to FY18. The Board remains of the opinion that it is in the
best interests of the Group and its shareholders to preserve financial flexibility, facilitating future investments and other
growth opportunities. The payment of dividends remains under review.
SHARE CAPITAL AND CONTROL
As at 18 July 2018, there are 640,602,369 ordinary shares of 10p in issue and fully paid, of which 103,633,049 were
held in treasury. As at the period end there were 103,633,049 ordinary shares held in treasury.
Further information regarding the Group’s issued share capital can be found on pages 177 to 178 of the Financial
Statements.
Details of our Share Schemes are also set out on pages 177 to 178.
There are no specific restrictions on the transfer of shares, which are governed both by the general provisions of the
Articles of Association and prevailing legislation.
The Directors are not aware of any agreements between holders of the Company’s shares that may result in
restrictions on the transfer of securities or on voting rights.
The Directors were authorised to allot shares in the capital of the Group up to an aggregate nominal amount
of £17,652,965.20 (being approximately one third of the then issued share capital) for the period expiring at 12
September 2018, the date of the 2018 AGM.
96
In line with guidance from the Association of British Insurers the Company was also granted authority to issue a
further third of the issued share capital to a nominal amount of £35,305,930.20 in connection with a rights issue.
An authority to allot shares up to a maximum nominal value of £2,647,944.80 (being approximately 5% of the then
issued share capital) as if statutory pre-emption rights did not apply, was also approved. In addition, the Directors
were granted a further authority to allot up to a maximum nominal value of £2,647,944.80 (being approximately 5%
of the then issued capital) as if statutory pre-emption rights did not apply when such allotment was for the purposes
of financing (or refinancing, if the power is used within six months of the original transaction) a transaction which the
Board determined to be an acquisition or other capital investment of a kind contemplated by the Pre-emption Group’s
Statement of Principles on disapplying Pre-emption Rights.
The authorities expire at the close of the next AGM of the Company, but a contract to allot shares under these
authorities may be made prior to the expiry of the authority and concluded in whole or part after the AGM, and at that
meeting other authorities will be sought from shareholders.
The Group was authorised to make market purchase of ordinary shares of 10p each in the Company of up to a
maximum aggregate number of 79,385,385 representing 14.99% of the Company’s issued ordinary share capital at the
2017 AGM. The above authority expires at the close of the next AGM of the Company.
During the period to 29 April 2018 the Company has purchased 37,105,027 ordinary shares at a cost of £113,846,000
(excluding purchasing costs) and representing 5.8% of the issued share capital. The maximum number of shares held
in treasury by the Company during the period was 103,633,049 representing 16.2% of the issued share capital. No
shares have been disposed of by the Company.
As at 18 July 2018 the Company has not purchased any additional ordinary shares and no shares have been disposed
of by the Company to this date.
SHAREHOLDERS
No shareholder enjoys any special control rights, and, except as set out below, there are no restrictions in the transfer
of shares or of voting rights.
As a controlling shareholder Mike Ashley has entered into a written and legally binding Relationship Agreement with
the Company. This agreement ensures that the controlling shareholder complies with the independence provisions set
out in Listing Rule 6.1.4D. Under the terms of the Agreement Mike Ashley undertook that, for so long as he is entitled
to exercise, or to control the exercise of, 15% or more of the rights to vote at general meetings of the Company, he will;
• conduct all transactions and relationships with any member of the Group on arm’s length terms and on a
normal commercial basis;
• exercise his voting rights or other rights in support of the Company being managed in accordance with the
Listing Rules and the principles of good governance set out in the UK Corporate Governance Code and not
exercise any of his voting or other rights and powers to procure any amendment to the Articles of Association of
the Company; and
• other than through his interest in the Company, not have any interest in any business which sells sports apparel
and equipment, subject to certain rights, after notification to the Company, to acquire any such interest of less
than 20% of the business concerned, and certain other limited exceptions, without receiving the prior approval
of the Non-Executive Directors; and not solicit for employment or employ any senior employee of the Company.
The Company has complied with this Agreement’s independence provisions during the period and, as far as the
Company is aware, the controlling shareholder and his associates have also complied with them.
97
GOVERNANCESPORTS DIRECT - ANNUAL REPORT 2018 DIRECTORS' REPORT
Continued
As at 29 April 2018, the Company had been advised that the following parties had an interest in 3% or more of the
issued share capital of the Company pursuant to Rule 5 of the Disclosure Guidance and Transparency Rules (DTR);
Number of shares held
Percentage of issued
Ordinary share capital with
voting rights held
Nature of holding
Mike Ashley(1)
Odey Asset Management LLP(2)
Phoenix Asset Management Partners
Limited(3)
330,000,000
28,001,702
18,119,748
61.0%
4.98%
3.03%
Indirect
Direct
Direct
(1) Mike Ashley holds the shares through two companies, namely MASH Beta Limited and MASH Holdings Limited, which hold 303,507,460 ordinary shares (56.11% of the
issued ordinary share capital of the Company) and 26,492,540 ordinary shares (4.9% of the issued ordinary share capital of the Company) respectively.
(2) These figures are as at 6 April 2017, being the last date on which the Company was notified of a change in the percentage of shares.
(3) These figures are as at 11 July 2016 being the last date on which the Company was notified of a change in the percentage of shares.
Between 29 April 2018 and 18 July 2018 (being the latest practicable date prior to the publication of this report), the
Company has not been advised of any further interests in 3% or more of the issued share capital of the Company
pursuant to Rule 5 of the DTRs.
ARTICLES OF ASSOCIATION
The Company’s Articles of Association may only be amended by special resolution at a general meeting of
shareholders. Subject to applicable law and the Company’s Articles of Association, the Directors may exercise all
powers of the Company.
TAKEOVERS
The Directors do not believe that there are any significant contracts that may change in the event of a successful
takeover of the Company. Details of the impact of any successful takeover of the Group on the Directors’ bonus and
share schemes are set out in the Director’s Remuneration Report on pages 115 to 128.
SHARE SCHEMES
Details of the Executive Share Scheme is set out in the Directors’ Remuneration Report on pages 115 to 128 and
details of the Share Scheme for participating employees on page 78 of the Corporate Social Responsibility Report.
STAFF INVOLVEMENT
The Group currently has approx. 26,500 strong workforce in its stores, offices and warehouses.
The workforce is notified of announcements and major changes in the business via Company news emails and our
intranet, as well as information being transmitted through line managers. The Company has elected a Workers’
Representative who attends all Board meetings and provides feedback from employees to the Board. The Company
also has the “Your Company, Your Voice” scheme which enables staff to raise issues of concern via suggestion boxes.
The contributions are read by senior management and the Workers’ Representative who provides the Board with an
overview and replies to staff if appropriate. A selection of questions received and answers given by management are
displayed in communal areas for staff. The Company also operates a “Listening group” where representatives from the
warehouse meet with members of senior management to provide feedback on the operation of the warehouse.
Training programmes and induction courses provide the workforce with opportunities to keep up to date with the latest
developments of the Group. Our employee conferences offer attendees an opportunity to mix with teams with which
they wouldn’t ordinarily mix, to learn about the Group’s aspirations, and to keep up to date with the latest changes
in the Group. These conferences are full day events and also have a range of activities tailored to the specific area in
which each individual works.
98
Further information on relationships with our people can be found in the Corporate Social Responsibility Report on
pages 77 to 86 and on pages 55 to 58 of Our Business review.
DIVERSITY AND EQUAL OPPORTUNITIES
The Group’s recruitment policy is to match the capabilities and talents of each applicant to the appropriate job. Factors
such as gender, race, religion or belief, sexual orientation, age, disability or ethnic origin should be ignored and any
decision which is made with regard to candidates should be irrespective of these. Discrimination in any form will not
be tolerated under any circumstances within the Group.
Applications for employment by disabled persons are given full and fair consideration for all vacancies, and are
assessed in accordance with their particular skills and abilities.
The Group endeavours to meet its responsibilities towards the training and employment of disabled people, and to
ensure that training, career development and promotion opportunities are available to all.
The Group makes every effort to provide continuity of employment when our people become disabled. Attempts are
made in every circumstance to provide employment, whether this involves adapting the current job role and remaining
in the same job, or moving to a more appropriate job role. Job retraining and job adaptation are just two examples
of how the Group works in the interests of its workforce to promote equal opportunities in order that an individual’s
employment within the Group may continue. The Group values the knowledge and expertise that our people have
gained throughout their time with us, and therefore does not wish to lose valued members of staff.
With the aim of restoring a balance of female representation on our Board, we are in the process of interviewing a
number of female candidates for non-executive directorships.
Further information on our approach to diversity can be found in the Corporate Social Responsibility Report on pages
78 to 79.
RESEARCH AND DEVELOPMENT
The Group designs clothing and some footwear for sale in stores and has arrangements with suppliers for the research
and development of goods.
CHARITABLE AND POLITICAL DONATIONS
During the year, the Group made charitable donations of £66k (2017: £117k) in the UK. No political donations were
made (2017: nil). There have been a number of further donations of sporting equipment made to worthy causes.
DIRECTORS
Details of current Directors, dates of appointment, their roles, responsibilities and significant external commitments are
set out on pages 94 to 95. David Daly joined the Board as a Non-Executive Director with effect from 2 October 2017.
Jon Kempster joined the Board as Chief Financial Officer on 11 September 2017. Claire Jenkins resigned as a Director
on 3 May 2017 and Dave Singleton resigned as a Director on 6 September 2017.
Although the Company’s Articles of Association require retirement by rotation of one third of Directors each year, the
Group complies with the 2016 UK Corporate Governance Code and at each AGM all of the Directors will retire and
stand for reappointment.
Information on service contracts and details of the interests of the Directors and their persons closely associated
(PCAs) in the share capital of the Company at 29 April 2018 and at the date of this report is shown in the Directors’
Remuneration Report on pages 115 to 128.
99
GOVERNANCESPORTS DIRECT - ANNUAL REPORT 2018 DIRECTORS' REPORT
Continued
Copies of the service contracts of Executive Directors and of the appointment letters of the Chairman and Non-
Executive Directors are available for inspection at the Company’s registered office during normal business hours and at
the AGM.
No Director has a directorship in common or other significant links with any other Director.
DIRECTORS’ CONFLICTS OF INTEREST
The Board has formal procedures to deal with Directors’ conflicts of interest. During the year the Board reviewed
and, where appropriate, approved certain situational conflicts of interest that were reported to it by Directors, and a
record of those situational conflicts is maintained and reviewed. The Board noted any transactional conflicts of interest
concerning Directors that arose and were declared. No Director took part in the discussion or determination of any
matter in respect of which he had disclosed a transactional conflict of interest.
DIRECTORS’ INDEMNITIES
The Group has granted the Directors with Qualifying Third Party Indemnity provisions within the meaning given to the
term by Sections 234 and 235 of the Companies Act 2006. This is in respect of liabilities to which they may become
liable in their capacity as Director of the Company and of any company within the Group. Such indemnities were in
force throughout the financial year and will remain in force.
SPORTS DIRECT EMPLOYEE BENEFIT TRUST
We note that the Trustees of the Sports Direct Employee Benefit Trust have waived their right to receive dividends on
the ordinary shares comprised in the trust fund. No dividends were paid by the Company for the period ended 29 April
2018.
DISCLOSURES REQUIRED UNDER UK LISTING RULE 9.8.4
The information required by Listing Rule 9.8.4 is set out in the table below:-
Applicable sub-paragraph within LR 9.8.4
Disclosure provided
(1) Interest capitalised by the Group
(2) Publication of unaudited financial information
(3) Requirement deleted from the Listing Rules
(4) Details of long-term incentive schemes only involving a
director
(5) Waiver of emoluments by a Director
(6) Waiver of future emoluments by a Director
(7) Non pro-rata allotments for cash (issuer)
(8) Non pro-rata allotments for cash (major subsidiaries)
(9) Parent participation in a placing by a listed subsidiary
(10) Contracts of significance
(11) Provision of services by a controlling shareholder
(12) Shareholder waivers of dividends
(13) Shareholder waivers of future dividends
(14) Agreements with controlling shareholders
N/A
N/A
-
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Page 122
Page 100
N/A
Page 97
GREENHOUSE GAS EMISSIONS
See page 85.
100
ANNUAL GENERAL MEETING
The 2018 AGM will be held on 12 September 2018 at Academy House, 36 Poland St, London, W1F 7LU. The meeting
will commence at 11:00am. The Board encourages shareholders to attend and participate in the meeting.
GOING CONCERN
The Group’s business activities, together with the factors likely to affect its future development, performance and
position are set out in the Chief Executive's Report and Business Review on pages 60 to 69.
The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in the
Financial Review on pages 70 to 76. In addition, the Financial Statements include the Group’s objectives, policies and
processes for managing its capital; its financial risk management objectives; details of its financial instruments and
hedging activities; and its exposures to credit risk and liquidity risk.
The Group is profitable, highly cash generative and has considerable financial resources. The Group is able to operate
comfortably within its banking facilities and covenants, which run until November 2021, and is well placed to take
advantage of strategic opportunities as they arise.
As a consequence, the Directors believe that the Group is well placed to manage its business risks successfully despite
the continued uncertain economic outlook.
The Group’s forecasts and projections, taking account of reasonable possible changes in trading performance, and its
exposure to foreign currency movements in respect of future purchases in US Dollars, and the forward contracts and
written options entered into to sell Euros, show that the Group should be able to operate within the level of the current
facility.
Having thoroughly reviewed the Group’s performance and having made suitable enquiries, the Directors are confident
that the Group has adequate resources to remain in operational existence for the foreseeable future. On this basis, the
Directors continue to adopt the going concern basis for the preparation of the Annual Report and Financial Statements.
ACCOUNTABILITY AND AUDIT
A statement by the Auditor can be found on page 139 to 140 detailing their reporting responsibilities. The Directors
fulfil their responsibilities and these are set out in the responsibility statement on page 129.
AUDITOR
I would like to draw your attention to the fact that we are part way through the process of undertaking an audit tender.
In order to achieve an efficient and orderly handover, our current intention is to ask our shareholders to approve re-
appointment of Grant Thornton for one further year at the AGM. In accordance with Section 489(4) of the Companies
Act 2006, resolutions to determine remuneration are to be agreed at the AGM.
POST BALANCE SHEET EVENTS
See note 40 of the Annual Accounts.
By Order of the Board
Cameron Olsen
Company Secretary
18 July 2018
101
GOVERNANCESPORTS DIRECT - ANNUAL REPORT 2018 CORPORATE GOVERNANCE REPORT
CHAIRMAN’S INTRODUCTION
I am pleased to introduce the Corporate Governance Report, which confirms that for the year ended 29 April 2018, the
Group has complied with the 2016 UK Corporate Governance Code.
The Board is diligent in its responsibilities in this area and will continue to develop and refine its approach to deliver
best practices.
Our Board and senior management team lead by example to provide a strong corporate governance framework which
is distilled throughout our business and processes. The Company has established an executive corporate governance
group. Members of senior management including the Company Secretary, the Chief Executive and the Chief
Financial Officer meet to discuss issues including people, finance, risk, regulatory and legal matters and stakeholder
engagement. Board members are provided with copies of the minutes of these meetings.
Sports Direct will continue to invest and make decisions in the long term interest of our customers, people and
shareholders. Our ambition is to continue to create shareholder value in a volatile trading environment underpinned by
a robust approach to governance.
Keith Hellawell
Chairman
18 July 2018
COMPLIANCE WITH THE UK CORPORATE GOVERNANCE CODE
The Group complied throughout the year under review with the provisions set out in the 2016 UK Corporate
Governance Code (the “Code”) which is the version of the Code that applies to FY18. A copy of the Code is available at
www.frc.org.uk. The sections below detail how the Group has complied with the Code.
Disclosures in relation to DTR 7.2.6 (share capital) and DTR 7.2.8 (diversity) are set out on pages 96 to 99.
A LEADERSHIP
A1 THE ROLE OF THE BOARD
The Board is responsible for overseeing the long term success of the Group and for setting and overseeing the
execution of the business strategy in accordance with our stated aims of delivering value for customers, people and
shareholders.
The Board has a formal schedule of regular meetings where it approves major decisions, and utilises its expertise to
advise and influence the business. The Board will meet on other occasions as and when the business demands. During
FY18 the Board met eight times. The Board is also available to advise on other issues which arise day to day.
A detailed agenda is established for each scheduled meeting, and appropriate documentation is provided to Directors
in advance of the meeting. Regular Board meetings provide an agenda that will include reports from the Chief
Executive, reports on the performance of the business and current trading, and specific proposals where the approval
of the Board is sought. The Board will monitor and question performance and review anticipated results. Areas
discussed include strategic investments, the elevation strategy, capital expenditure, Brexit and treasury. The Board
has also received updates throughout the year on topical matters such as GDPR and the gender pay gap. The Board
receives reports from the Workers’ Representative who is in attendance at all scheduled Board meetings.
Presentations are also given on business or strategic issues where appropriate, and the Board will consider at least
annually the strategy for the Group. Minutes of the meetings from Committees of the Board are circulated to all
members of the Board, unless a conflict of interest arises, to enable all Directors to have oversight of those matters
delegated to Committees. Copies of analysts’ reports and brokers’ notes are also provided to Directors.
102
There are three Board committees, namely, the Audit Committee, the Remuneration Committee and the Nomination
Committee. The committees are governed by terms of reference which provide details of matters delegated to each
committee. The terms of reference are available on the Company’s website.
Matters Reserved for the Board
There is a formal schedule of matters that require Board approval, they are matters that could have significant
strategic, financial or reputational effects on the Group as a whole. These were reviewed in FY18 and include:
• Setting of budgets
• Setting of the company’s values and standards
• Approval of strategic aims and objectives
• Approval of acquisitions and disposals
• Appointments and removal of Board members
• Succession planning
• Overall responsibility for internal control and risk management as described on pages 87 to 93
Attendance at Board and Committee meetings
Attendance by Directors at Board and Committee meetings during the year and the total number of meetings that they
could have attended are set out in the table below. All Directors attended all meetings of the Board and Committees
of the Board of which they were members unless prevented from doing so by prior commitments. The meetings
which took place throughout the year were a mixture of both scheduled meetings, general matters, and unscheduled
meetings, for more urgent matters.
Board Meetings:
Scheduled
Board Meetings:
Unscheduled
Audit Committee
Meetings
Remuneration
Committee
Meetings
Nomination
Committee
Meetings
Keith Hellawell
Mike Ashley(1)
Simon Bentley(2)
David Brayshaw
David Daly(3)
Claire Jenkins(4)
Jon Kempster(5)
Dave Singleton(6)
6/6
5/6
4/6
6/6
3/3
-
3/3
3/3
2/2
2/2
2/2
2/2
1/2
-
2/2
-
-
-
2/3
3/3
2/2
-
-
1/1
3/3
-
2/3
3/3
1/1
-
-
1/1
2/2
-
2/2
2/2
1/1
-
-
-
(1) Mike Ashley did not attend one scheduled Board meeting, with the prior permission of the Board due to competing demands for his time in other areas of the business.
(2) Simon Bentley was unable to attend two scheduled Board meetings due to medical reasons.
(3) Meetings attended by David Daly following his appointment on 2 October 2017
(4) Claire Jenkins resigned from the Board prior to any Board or committee meetings being held during FY18.
(5) Meetings attended by Jon Kempster following his appointment on 11 September 2017
(6) Meetings attended by Dave Singleton until his resignation on 6 September 2017
Note: A number of Audit Committee, Remuneration Committee and Nomination Committee meetings were attended by Board members who were not members of the
Committees. The Board members concerned attended these meetings at the invitation of the Committee members.
Directors and Officers Liability Insurance
Appropriate insurance cover is maintained by the Company in respect of its Directors and Officers.
A2 DIVISION OF RESPONSIBLITIES
The division of responsibilities between the Non-Executive Chairman and the Chief Executive is in writing and was
reviewed and agreed by the Board in FY18. However, they work closely together to ensure effective decision making
and the successful delivery of the Group’s strategy.
103
GOVERNANCESPORTS DIRECT - ANNUAL REPORT 2018 CORPORATE GOVERNANCE REPORT
Continued
The Company has entered into a Relationship Agreement with Chief Executive Mike Ashley, whose wholly-owned
companies, MASH Holdings Limited and MASH Beta Limited, currently hold approximately 4.9% and 56.11%
respectively of the issued share capital of the Company (excluding treasury shares) as at 18 July 2018. This agreement
is described in the Directors’ Report on page 97.
The Chief Executive is responsible for the running of the Group’s business for the delivery of the strategy for the Group,
leading the management team and implementing specific decisions made by the Board to help meet shareholder
expectations. He also takes the lead in strategic development, by formulating the vision and strategy for the Group.
The Chief Executive reports to each Board meeting on all material matters affecting the Group’s performance. No one
individual has unfettered power of decision.
Given the structure of the Board, the fact that the Chairman and Chief Executive roles are fulfilled by two separate
individuals and the terms of the Relationship Agreement with Mike Ashley, the Board believes that no individual or
small group of individuals can disproportionately influence the Board’s decision making.
A3 THE CHAIRMAN
The Chairman leads the Board, ensuring constructive communications between Board members and that all Directors
are able to play a full part in the activities of the Company. He is responsible for setting Board agendas and ensuring
that Board meetings are effective and that all directors receive accurate, timely and clear information.
The Chairman officiates effective communication with shareholders and ensures that the Board understands the
views of major investors, and is available to provide advice and support to members of the Executive team. Upon his
appointment the Chairman met the independence criteria set out in section B.1.1 of the Code.
A4 THE NON-EXECUTIVE DIRECTORS
There are currently three independent Non-Executive Directors. The role of the Non-Executive Directors is to
understand the Group in its entirety and constructively challenge strategy and management performance, set
Executive remuneration levels and ensure an appropriate succession planning strategy is in place. They must also
ensure they are satisfied with the accuracy of financial information and that thorough risk management processes are
in place.
The Non-Executive Directors have excellent experience from a wide range of sectors. The Non-Executive Directors
assist the Board with issues such as governance, internal control, remuneration and risk management.
Simon Bentley is the Senior Independent Non-Executive Director. He supports the Chairman and Non-Executive
Directors and is available to shareholders if they have concerns.
There were a number of meetings throughout the year which were solely for Non-Executive Directors and the
Chairman. Meetings also took place which were attended by Non-Executive Directors without the Chairman. The
performance of the Chairman was appraised during one of these meetings and led by the Senior Independent Non-
Executive Director, Simon Bentley.
B EFFECTIVENESS
B1 COMPOSITION OF THE BOARD
The Board consists of the Non-Executive Chairman, Keith Hellawell, the Chief Executive, Mike Ashley, the Chief
Financial Officer, Jon Kempster, and three further independent Non-Executive Directors. The names, skills and short
profiles of each member of the Board, together with details of membership of Board committees are set out on pages
94 to 95. Each year the Board considers the independence of each Non-Executive Director in accordance with the
Code. The most recent review did not highlight any Directors who lacked independence.
104
The Board continues to support our longest serving Non-Executive Director, Simon Bentley, who has been a Board
member since 2007. The Board greatly values Simon’s experience and his strong contribution to debate. In supporting
Simon, the Board has taken full account of the Code’s requirements to consider carefully a Non-Executive Director’s
independence where that Director has served on the Board for more than nine years from the date of their first
election. The Board is of the view that Simon continues to be independent, that there are no issues likely to affect his
independent judgement and that he is not financially dependent upon the fee he receives from the Company.
B2 APPOINTMENTS TO THE BOARD
The Company has a Nomination Committee comprised of all the Non-Executive Directors and Chaired by the Chairman
of the Board. The Nomination Committee is responsible for regularly reviewing the structure, size and composition
(including the skills, knowledge experience and diversity) of the Board and make recommendations to the Board with
regard to any changes. It is also responsible for identifying and nominating, for the approval of the Board, candidates
to fill Board vacancies.
The work of the Nomination Committee is described on pages 113 to 114.
Non-Executive Directors (with the exception of the Chairman whose agreement continues until terminated in
accordance with its terms) are appointed for an initial term of three years. All directors are subject to annual re-
election.
B3 COMMITMENT
Non-Executive Directors are required to disclose prior appointments and other significant commitments to the Board
and are required to inform the Board of any changes to or additional commitments. Details of the Non-Executive
Directors’ external appointments can be found on pages 94 to 95.
Before accepting new appointments, Non-Executive Directors are required to obtain approval from the Chairman, and
the Chairman requires the approval of the whole Board. It is essential that no appointment causes a conflict of interest
or impacts on the Non-Executive Directors’ commitment and time spent with the Group in their existing appointment.
The time specified in Non-Executive Directors’ letters of appointments, to be committed to the role was reviewed by
the Nomination Committee in FY18 and deemed to be appropriate.
Details of Executive Directors’ service contracts, and of the Chairman’s and the Non-Executive Directors’ appointment
letters, are given on pages 122 to 123. Copies of service contracts and of appointment letters are available for
inspection at the Company’s registered office during normal business hours and at the AGM.
Neither of the Executive Directors hold a directorship of another FTSE 100 company.
B4 DEVELOPMENT
All newly appointed Directors are provided with an induction programme which is tailored to their existing skills and
experience and includes warehouse and store visits, legal update on directors duties and one on ones with members
of the senior management team. The Board is informed of any material changes to governance, laws and regulations
affecting the Group’s business.
Directors are provided with details of relevant training courses and training needs are reviewed by the Chairman during
the annual Board evaluation process.
B5 INFORMATION AND SUPPORT
All Directors have access to the advice and services of the Company Secretary, and each Director and each Board
Committee may take independent professional advice at the Company’s expense, subject to prior notification to the
other Non-Executive Directors and the Company Secretary.
105
GOVERNANCESPORTS DIRECT - ANNUAL REPORT 2018 CORPORATE GOVERNANCE REPORT
Continued
The Company Secretary has responsibility for advising the Board on corporate governance matters and during FY18
reports have been provided to the Board on the FRC’s reform of the UK Corporate Governance Code and the new
governance code for Large Private Companies. Training was also provided on directors’ duties, relevant Listing Rules
obligations and the Market Abuse Regulations.
B6 EVALUATION
The practices and processes of the Board and its committees are evaluated on a yearly basis. Following evaluations
the feedback obtained is considered and the Board act on the issues which have been raised. The most recent Board
evaluation in FY18 was conducted internally using a questionnaire. The Directors believe that the Board and its
committees are working effectively.
The last external evaluation of the Board was undertaken in FY17 by NJMD Corporate Services Limited (“NJMD”).
NJMD are an independent consultancy specialising in board performance evaluation and have no connection to the
Company other than undertaking the external board evaluation in 2014.
The Non-Executive Directors led by Simon Bentley, as the Senior Independent Non-Executive Director, have reviewed
the performance of the Chairman taking into account the views of Executive Directors. All directors’ performance is
reviewed by the Chairman to ensure their performance remains effective and that they are committed to the role.
B7 EXECUTIVE AND NON-EXECUTIVE DIRECTORS - RE-ELECTION
The Board has determined that all Directors seeking re-appointment, and recommended by the Nomination
Committee, must put themselves forward for re-election at the 2018 AGM to comply with the Code. All Directors
appointed by the Board during the year after consideration of the recommendations of the Nomination Committee
must stand for election at the AGM following their appointment.
C ACCOUNTABILITY
C1 FINANCIAL AND BUSINESS REPORTING
It is the responsibility of the Directors to ensure that the accounts are prepared and submitted. Having assessed the
current Annual Report, along with the accounts, the Directors confirm that, taken as a whole, they are fair, balanced
and understandable. The Directors also confirm that these documents provide the necessary information in order for
shareholders to assess the Group’s performance, business model and strategy. Details of the business model and
strategy are contained in the Strategic Report on pages 52 to 87.
The going concern statement provided by the Directors is on page 101 of the Directors Report. The independent
auditor’s report is set out on pages 131 to 141.
C2 RISK MANAGEMENT AND INTERNAL CONTROL
The Board has carried out a robust assessment of the principal risks facing the Group. Details of these risks are set out
on pages 87 to 93. The Board has reviewed the Company’s risk management and internal control systems during FY18
and consider them to be effective.
C3 AUDIT COMMITTEE AND AUDITORS
The Company has an Audit Committee comprised of all the independent Non-Executive Directors and Chaired by the
Senior Independent Non-Executive Director. The Audit Committee report on pages 107 to 112 details how the Group
has complied with Section C3 of the Code relating to Audit Committees.
D REMUNERATION
The Company has a Remuneration Committee comprised of all the Non-Executive Directors and the Chairman of the
Board. David Brayshaw is the Chair. The Remuneration report on pages 115 to 128 details how the Company has
complied with Section D of the Code relating to the Remuneration Committee.
106
E RELATIONS WITH SHAREHOLDERS
E1 DIALOGUE WITH SHAREHOLDERS
Upon his appointment, the Chief Financial Officer met with a number of major shareholders and analysts together with
the then newly appointed Head of Strategic Investments. The Senior Independent Non-Executive Director and Chief
Financial Officer have also met with shareholders throughout the year to discuss the Group’s strategy and performance
and on occasions specifically the Group Audit. The Company has undertaken collective face-to-face briefings for
analysts and investors on announcement of the half year and annual results.
E2 CONSTRUCTIVE USE OF THE AGM
Directors are available at and following general meetings when shareholders have the opportunity to ask questions
on the business of the meeting. The Company Secretary, the Company’s auditors and the Registrars are in attendance
at general meetings to assist with any queries shareholders may have. The Notice of AGM and related papers are
sent to shareholders a minimum of 20 working days before the meeting. For other general meetings the Notice and
accompanying paperwork is sent out a minimum of fourteen working days in advance.
AUDIT COMMITTEE
AUDIT COMMITTEE REPORT 2018
Dear Shareholder,
I am pleased to present the Audit Committee Report for the 52 weeks ended 29 April 2018.
The Committee has an important role to play in effective reporting to our stakeholders and ensuring high standards
of quality and effectiveness in the external audit process. It is also responsible for reviewing and monitoring the
effectiveness of internal control and risk management policies and systems. This report provides an overview of:
• The membership of the Committee and how often it has met during the year;
• The main responsibilities of the Committee;
• What the Committee has done during the year;
• How the Committee has assessed the effectiveness of the external auditors, including ensuring their
independence;
• The Committee’s opinion on the Annual Report when viewed as a whole; and
• The Board’s view of the Committee’s own effectiveness and what is planned for 2019.
I would like to draw your attention to the fact that we are part way through the process of undertaking an audit tender
process. In order to achieve an efficient and orderly handover, our current intention is to ask our shareholders to
approve re-appointment of Grant Thornton for one further year at the AGM. We intend to announce our proposed new
auditors later this year on conclusion of the tender process, who will therefore be in place for the year ended April
2020.
MEMBERSHIP
I am Chairman of the Committee and the other members are David Daly and David Brayshaw. Biographical details of
each Committee member are set out in the Directors’ profiles on pages 94 to 95 of this Annual Report.
As Chairman of the Committee and Senior Independent Non-Executive Director I am satisfied that the Committee’s
membership includes directors with recent and relevant financial experience and competence in accounting and that
the Committee as a whole has competence relevant to the retail sector in which the Group operates.
107
GOVERNANCESPORTS DIRECT - ANNUAL REPORT 2018 CORPORATE GOVERNANCE REPORT
Continued
MEETINGS
The Committee met three times during the year. Non-Committee members of the Board and the management team,
including Mike Ashley and Jon Kempster, have attended Committee meetings during the year at my invitation so
that they can keep the Committee informed of important developments in the business and the risk and control
environment. The attendance of members of the Executive management team at these meetings also helps to
reinforce a strong culture of risk management within the business.
Our external auditors, Grant Thornton UK LLP, attended all Committee meetings during the year. After the Committee
meetings the Committee members met with Grant Thornton without any of the Non-Committee members of the
Board or Executive management team present. In my capacity as Chairman of the Committee, I also met with Philip
Westerman, the lead audit partner at Grant Thornton, on three additional occasions during the year as part of the
Committee’s assessment of Grant Thornton’s effectiveness as our external auditors. Further details of this assessment
are set out below.
THE MAIN RESPONSIBILITIES OF THE AUDIT COMMITTEE INCLUDE:
• Assisting the Board with the discharge of its responsibilities in relation to internal and external audits and
controls;
• Considering and making recommendations to the Board on the reappointment of the external auditors;
• Agreeing the nature and scope of the external audit and monitoring the same;
• Monitoring the external audit, including reviewing the results of the external audit and its independence,
objectivity, effectiveness, and reviewing and agreeing the external auditor’s fee;
• Agreeing and monitoring the extent of the non-audit work that may be undertaken by the external auditors;
• Monitoring and making judgements and recommendations on the Group’s financial reporting processes and
the integrity and clarity of the Group’s financial statements as well as any formal announcements relating to the
Group’s financial performance and reviewing significant financial reporting judgments contained in them;
• Reviewing and monitoring the effectiveness of the Group’s internal financial control systems and internal control
and risk management systems, including a review of the activities of the internal audit function;
• Reviewing arrangements by which staff may, in confidence, raise concerns about any improprieties in matters
•
of financial reporting;
Informing the Board of the outcome of the audit and explaining how the audit contributed to the integrity of the
financial report and what the role of the committee was in that process; and
• Reporting to the Board on how the Committee has discharged its responsibilities during the year.
WHAT HAS THE COMMITTEE DONE DURING THE YEAR?
During the year, and as further described below, the Committee has:
• Monitored the effectiveness of the Group’s internal controls, particularly in light of the current macroeconomic
climate and its likely impact on the Group;
• Assessed the effectiveness of the external audit process and considered the reappointment of Grant Thornton
as external auditors for 2019;
• Reviewed Group accounting policies, presentations and the financial statements;
• Advised the Board on its interactions with the Financial Reporting Council’s Corporate Reporting Review Team,
as further described below; and
• Together with the Board, considered the Committee’s own effectiveness.
INTERNAL CONTROLS
As one of the fastest growing retailers, with rapidly expanding overseas and online operations, the Group has many
complex operational risks to manage. Information on the Group’s approach to internal control and risk management is
set out in the Strategic Report on pages 87 to 93 of this Annual Report.
108
Central to the Group’s system of internal controls has been the work undertaken by its Retail Support Unit. The Retail
Support Unit conducts internal audits across the Group’s retail operations each year, providing internal assurance in
relation to the efficacy of the Group’s controls over the operational procedures and systems which generate and report
trading data for the purposes of compiling the Group’s financial statements.
In the prior year there were various changes to the Executive management team and the decision was made to
suspend certain activities including the continuation of BDO as internal auditor. Following the appointment of Jon
Kempster as the new Group Chief Financial Officer and Chris Wootton as his Deputy we have re-commenced some
internal audit activity to run alongside the Retail Support Unit. This was recommenced towards the back end of the
financial year and was performed by PKF Cooper Parry. We intend to continue to build on this programme in the
current year and will look to complement third party work with the recruitment of a dedicated internal resource.
The Committee focused on a number of significant areas of internal control during the year, including:
• Stock valuation and the calculation of associated provisions;
• Management of foreign currency exposures;
• Property investment in elevated stores formats;
• Property and the systems in place to ensure onerous lease provisions are recognised on a timely basis;
• External banking arrangements;
• The preparation and review of management accounts;
• Monitoring and reporting procedures in relation to budget variance;
In addition to the above the Group has seen the introduction of the General Data Protection Regulation (GDPR) recently
with substantial work undertaken by an internal project team, assisted by an external consultancy. In my role as
Chairman of the Committee I saw that this was an important project and also very interesting and challenging as it
touched on all areas of the business. It has helped me understand the data use within the business and the actions
undertaken to ensure compliance is a positive addition to the overall control environment.
The Committee remains of the view that the Group’s internal controls continue to be effective.
EXTERNAL AUDITORS
Our current external auditors, Grant Thornton, have been in place since the listing in February 2007.
To maintain the objectivity of the audit process, the external auditors are required to rotate audit partners for the Group
audit every five years. The current lead audit partner at Grant Thornton, Philip Westerman, has been in place for five
years.
On an annual basis, the Committee considers the appointment or reappointment (as applicable) of the external auditors
and their remuneration and makes recommendations to the Board. The auditors are then proposed for appointment or
reappointment (as applicable) each year at the AGM.
In making its recommendations to the Board, the Committee considers a number of factors relating to the level of
service provided by the external auditors and their independence. These include:
• The quality and scope of the planning of the external audit in assessing risks and how the external auditors have
planned to evolve the audit plan to respond to changes in the business;
• The quality and timeliness of reports provided to the Committee and the Board by the external auditors during
the year;
• The level of understanding that the external auditors have demonstrated in relation to the Group’s businesses
and the retail sector;
• The objectivity of the external auditors’ views on the internal controls around the Group and the robustness of
challenge and findings on areas which require management judgement;
• The contents of any external reports or regulatory statements published in respect of the external auditor; and
109
GOVERNANCESPORTS DIRECT - ANNUAL REPORT 2018 CORPORATE GOVERNANCE REPORT
Continued
• The nature and scope of non-audit services provided by the external auditors and the level of fees charged for
these services.
The FRC’s Revised Ethical Standard for audit engagements came into effect on 17 June 2016. It is applicable for
accounting periods commencing on or after this date. For Sports Direct, this is therefore applicable for the first time for
this financial period commencing 1 May 2017.
A number of services historically provided to the Group by Grant Thornton are now prohibited under the Revised
Ethical Standard, including any tax-related work. The Committee carefully reviewed the Revised Ethical Standard in
conjunction with Grant Thornton and the provision of all services that are now prohibited ceased with effect from 1
May 2017.
The Committee has agreed that, in the future, any proposed non-audit services by the external auditors will continue
to require express pre-approval by the Committee to ensure that the requirements of the Revised Ethical Standard are
complied with.
Overall, following its detailed assessment and discussions with Grant Thornton, the Committee believes that Grant
Thornton’s independence, the objectivity of the external audit and the effectiveness of the audit process is safeguarded
and remains strong and that high standards for external audit have been maintained. This is evident to the Committee
in Grant Thornton’s robust internal processes, their continuing challenge, their focused reporting and their discussions
with both management and the Committee.
The Committee has therefore concluded that Grant Thornton remain effective as external auditors and has
recommended to the Board that its current intention is for Grant Thornton be reappointed as the Group’s external
auditors for the 2019 financial year.
Non-audit fees charged by Grant Thornton for its UK services during the year were nil. This compares to UK audit fees
of £0.8m and other assurance fees of £0.1m.
In addition, member firms of Grant Thornton’s international network provided audit and non-audit services to the
Group with fees for non-audit services totalling £0.1m. These non-audit services related primarily to tax compliance
and advisory services. The tax services were not prohibited under FRC 5.167R as they were in respect of non-EU
entities. Fees for international audit services were £0.4m.
More detail on fees charged by Grant Thornton is included in note 8 to the financial statements contained on page 166
of this Annual Report.
The Committee concluded that, due to the nature of the work and the safeguards in place, the provision of non-audit
work did not compromise the independence or objectivity of Grant Thornton as the Group’s external auditors. The
Committee was also satisfied that it was in the interests of the Group to be provided with these non-audit services
from the external auditors because of Grant Thornton’s deep understanding of the business and expertise in the
relevant areas.
Phil Westerman had reached the end of his five year term, and we have requested his term be extended by one year to
cover the FY19 audit. We have made the FRC aware of our intentions and have consulted with our major shareholders
over the extension of his term, who have been supportive of this, subject to the necessary procedures to ensure this
remains compliant with the Ethical Standard requirements.
REVIEWED ACCOUNTING POLICIES, PRESENTATIONS AND THE FINANCIAL STATEMENTS
The Board has asked the Committee to advise it on whether the Annual Report and Accounts, taken as a whole, are
fair, balanced and understandable and provide the information necessary for shareholders to assess the Group’s
position, performance, business model and strategy.
110
The Committee has reviewed the process for preparing this Annual Report, in order to assess whether other
information contained in this Annual Report is consistent with the Group’s financial statements for the 52 weeks ended
29 April 2018. This process has included the following key elements:
• Review of new regulations and reporting requirements with external advisers to identify additional information
and disclosures that may be appropriate (for example, in relation to the FRC’s Revised Ethical Standard, referred
to above);
• Preparation of a detailed timetable and allocation of drafting responsibility to relevant internal teams with review
by an appropriate senior manager;
• Provision of an explanation of the requirement for the Annual Report and Accounts, taken as a whole, to be fair,
balanced and understandable, to those with drafting responsibility;
• Monitoring of the integrity of the financial statements and other information provided to shareholders to ensure
they represented a clear and accurate assessment of the Group’s financial position and performance;
• Review of significant financial reporting issues and judgements contained in the financial statements;
• Review of all sections of the Annual Report by relevant external advisers;
• Review by the senior manager working group responsible for the Annual Report process;
•
• Overall review of the contents of the Annual Report and substantiation of why it provides a fair, balanced and
Interim progress review of process and Annual Report content with the Committee; and
understandable view of the year under review.
The Audit Committee also considered a number of areas arising during the audit including consideration of the
accounting treatment for the Debenhams strategic investment.
The Committee has reviewed this Annual Report and Accounts and has advised the Board that it considers them, taken
as a whole, to be fair, balanced and understandable.
FINANCIAL REPORTING
The Committee’s review of this year’s interim and full year financial statements focused on the following areas of
significance:
• Revenue recognition accounting policies;
• Adequacy of inventory provisioning and assumptions inherent in the provision calculation;
• Acquisitions in the year, accounting, control and recoverability of any year end receivables to controlled entities
and investments;
• Foreign currency impact on trading and eligibility for hedge accounting of forward currency contracts, financial
instruments and hedging strategy;
• Control considerations and whether the Group has significant influence over investments and associates
• Completeness and disclosure of related party and other commercial relationships; and
• Quality of systems and management override of controls.
REVIEW OF THE COMMITTEE’S EFFECTIVENESS
As advised in my report last year, we stated the need to focus on succession planning, both in relation to its own
membership and also those members of the Board and management team with responsibility for the quality and
effectiveness of the Group’s financial reporting and external audit process, as well as its internal controls and risk
management.
111
GOVERNANCESPORTS DIRECT - ANNUAL REPORT 2018 CORPORATE GOVERNANCE REPORT
Continued
In the year under review Jon Kempster has joined the Group as Chief Finanical Officer, Chris Wootton has been
promoted to the Deputy Chief Financial Officer role, having joined the Group in the previous financial year. The Group
finance function has been invested in more widely with the addition of other very capable accountants. Alistair Stewart
joins us from RSM (formerly Baker Tilly) as Chris' replacement as Chief Accountant. I am also pleased to announce that
Katie Smith has been promoted internally to UK Group Financial Controller. As such I see the finance function is better
placed today to cope with the ever-increasing demands placed upon it to support the group in its growth aspirations.
The constitution of the Committee has changed with the addition of David Daly.
Simon Bentley
Chairman of the Audit Committee and Senior Independent
Non-Executive Director
REMUNERATION COMMITTEE
Biographical details of each member are shown in the Board of Directors’ profiles on pages 94 to 95.
The Remuneration Committee consists of Non-Executive Directors who are considered independent and the Chairman.
The purpose of the Committee is to assist the Board to ensure that Executive and Non-Executive Directors receive
appropriate levels of pay and benefits. A key priority is to ensure that remuneration policy is aligned with strategy
to achieve the long-term success of the Group. The Committee ensures that it complies with the requirements
of regulatory and governance bodies including the UK Corporate Governance Code while meeting stakeholder,
shareholder and staff expectations.
THE RESPONSIBILITIES OF THE REMUNERATION COMMITTEE INCLUDE:
• Determining the Company’s Policy on Executive remuneration, including the design of bonus schemes and
targets, share schemes when appropriate, together with payments under them;
• Determining the level of remuneration of the Chairman and each of the Executive Directors;
• Monitoring the remuneration of senior management and making recommendations in that respect;
• Agreeing any compensation for loss of office of any Executive Director; and
• Ensuring that the Company’s Remuneration Policy remains fit for purpose and takes note of the continuing
enhancements proposed by regulatory bodies.
The Remuneration Committee meets at least three times a year and met on three occasions during FY18.
WHAT HAS THE COMMITTEE DONE DURING THE YEAR?
• Worked on the Share Scheme, including announcements;
• Reviewed and approved the Company’s Remuneration policy;
• Considered the introduction of a new employee share scheme;
• Reviewed the Company’s Gender Pay Gap Report; and
• Reviewed and approved the Directors’ Remuneration Report contained on pages 115 to 128.
Full details of Directors’ remuneration can be found in the Remuneration Report on pages 115 to 128.
David Brayshaw
Chairman of the Remuneration Committee
18 July 2018
112
NOMINATION COMMITTEE
In my role as Chairman of the Nomination Committee, I ensure that the Board remains competent, balanced and
effective in order to meet the needs of the Group. These goals are achieved in a number of ways, including monitoring
the succession of the Board, reviewing its performance and identifying and nominating suitable candidates to fill Board
vacancies.
Biographical details of each member are shown in the Board of Directors’ profiles on pages 94 to 95.
The Nomination Committee will usually meet twice a year and will also meet when appropriate. The Committee met
formally on two occasions during FY18. A number of informal discussions also took place. All of the Nomination
Committee members are Non-Executive Directors and with the exception of the Chairman, are considered to be
independent. See page 105 regarding Simon Bentley‘s independence.
THE RESPONSIBILITIES OF THE NOMINATION COMMITTEE INCLUDE:
• Reviewing the leadership needs of the Group, looking at both Executives and Non-Executives;
• Reviewing the composition, structure and size of the Board, and making recommendations to the Board of
adjustments that are deemed necessary having regard to diversity, skills, knowledge and experience;
• Reviewing the time required to be spent by Non-Executive Directors;
•
Identifying and nominating, for the approval of the Board, candidates to fill Board vacancies as and when they
arise;
• Giving consideration to succession planning for Directors, taking into account the challenges and opportunities
facing the Group and the skills and expertise therefore needed on the Board;
• Formally documenting the appointment of Directors; and
•
Identifying potential candidates for senior posts, and making recommendations to the Board as and when
necessary.
The Nomination Committee also determines succession plans for the Chairman and the Chief Executive who are not
present at meetings when the matter is discussed. Succession plans are reviewed by the Nomination Committee at
least once a year.
WHAT HAS THE COMMITTEE DONE DURING THE YEAR?
Board nominations
The Committee follows a formal, rigorous and transparent procedure for the appointment of new Directors to the
Board. The Committee has considered and recommended the re-appointment of all directors, following consideration
of their effectiveness and commitment.
The Committee led the process for recruiting and recommending the appointment of Jon Kempster as Chief Financial
Officer. The Committee used Taurus London to identify Jon as a suitable candidate for the role. Taurus London is a
division of Liberum Capital Limited, who are also the Company’s brokers. The Committee also recommended the
appointment of David Daly. David was known to the Group through his former role as Sales Director with Nike, one
of the Company’s key suppliers. However, he had had no direct relationship with the Group since 2011 and retired
from Nike in 2015. He was interviewed by the Chairman and Claire Jenkins, Non-Executive Director, neither of whom
had any prior relationship with David. The Committee therefore considered that he was independent and that his
experience of brands and retail would be an asset to the Board.
Composition of the Board
The Committee has reviewed the composition of the Board and has concluded that it would benefit from the addition
of a non-executive with international exposure, and experience of luxury brands to assist its objective of elevation.
The Company is actively seeking applications from female candidates to fulfil this role and is currently interviewing a
number of candidates.
113
GOVERNANCESPORTS DIRECT - ANNUAL REPORT 2018 CORPORATE GOVERNANCE REPORT
Continued
Diversity and inclusion
The Group’s policy on diversity was considered by the Committee in FY18 and is currently being revised in line with
best practice. Following the resignation of Claire Jenkins, during FY18 the Company has no female directors on the
Board. The committee has taken steps to address this and during the period a number of female candidates have
been interviewed for the Non-Executive Director roles. Our senior leadership team is currently comprised of approx.
35% females. Three of our senior executive positions, Head of Global Operations, Head of HR and UK Group Financial
Controller are held by females, and approx 50% of our overall workforce is female. Further details on diversity and
inclusion are set out in in the Corporate Social Responsibility Section on page 78.
Review of Terms of Reference
The committee has reviewed its terms of reference in FY18 and concluded that no further amendments need to be
made.
Dr Keith Hellawell QPM
Chairman of the Nomination Committee
18 July 2018
114
DIRECTORS’ REMUNERATION REPORT
Dear Shareholder,
As the new Chair of Sports Direct’s Remuneration Committee (the “Committee”) I am pleased to present our
Remuneration Report for the period ended 29 April 2018, for which we will be seeking your approval at our AGM in
September 2018. In line with the applicable legislation, separate approvals will be sought for: (1) the proposed new
Directors’ Remuneration Policy on a binding basis; and (2) the remainder of the Remuneration Report on an advisory
basis.
I would like to thank out-going Chair Dave Singleton for his contribution to the Committee in the period up to his
retirement from the Board and the Committee in September 2017. I am pleased to welcome Dave Daly to the team,
who joined the Committee in April 2018.
The Remuneration Committee consists of Non-Executive Directors who are considered independent and the Chairman
of the Board. The purpose of the Committee, as previously outlined, is to assist the Board to ensure that Executive
Directors and Senior Executives receive appropriate levels of pay and benefits.
A key priority is to ensure that our remuneration policy is aligned with strategy to achieve the long-term success of the
Group. The Committee ensures that it complies with the applicable regulatory requirements including, but not limited
to, the UK Corporate Governance Code (“Code”), whilst meeting stakeholder, shareholder and staff expectations.
In line with recent suggestions for revisions to the Code we reiterate our commitment to including the following key
objectives:
• Clarity
•
•
•
•
•
Simplicity
Predictability
Proportionality;
Risks and behaviours; and
Alignment to Culture
TOTAL REMUNERATION
The Committee considers that the current remuneration arrangements promote the long-term success of the Company
within an appropriate risk framework and are suitably aligned to the Company’s objective of delivering long term
sustainable growth.
REMUNERATION POLICY CHANGES
The Company’s current directors’ remuneration policy (the “Remuneration Policy”) reaches the end of its three year life
at the AGM on 12 September 2018. We shall be seeking shareholder approval for a revised Remuneration Policy at the
2018 AGM.
A key consideration in relation to the new Remuneration Policy has been the Company’s long term incentive
arrangements, both for Executive Directors and the wider workforce. During FY18 the Committee has continued to
consider the introduction of a new employee share scheme that appropriately aligns Executive Directors’ interests with
the interests of shareholders in bringing consistent long-term profitable growth to the Company, and intends to seek
shareholder approval in the near future for a new share scheme, referred to in the Directors’ Remuneration Report as
the “Future Share Scheme”. When we seek approval for the Future Share Scheme, we will also seek approval for the
grant of awards under it to the Company’s Executive Directors.
The Company will not grant any additional awards under the Executive Share Scheme, which was approved by
shareholders in 2010, to any Executive Director.
The Committee has reviewed the current Remuneration Policy and proposes a small number of minor changes.
115
GOVERNANCESPORTS DIRECT - ANNUAL REPORT 2018 DIRECTORS’ REMUNERATION REPORT
Continued
The majority of these are summarised in the Future Policy Table on pages 118 to 120, with consequential changes also
having been made to other areas of the Remuneration Policy. Reflecting that we will seek approval for the Future Share
Scheme in due course and that we will not grant any additional awards under the Executive Share Scheme, we have
removed the Long-Term Incentive Pay section from the Remuneration Policy for which we will seek approval at the
2018 AGM. This means that, as under the current Remuneration Policy, Executive Directors (other than Mike Ashley)
may earn a bonus of up to 200% of salary in respect of any financial year, reflecting that our Executive Directors are
not currently eligible to earn any variable remuneration; but we would review the bonus arrangements as part of any
revised Remuneration Policy for which shareholder approval was sought in connection with the introduction of the
Future Share Scheme.
The Remuneration Policy will also include provision for any bonus in excess of 100% of salary to be deferred into
shares for two years. However, recognising the level at which salaries are currently set, the Committee will retain
discretion not to implement deferral (or to require deferral of a smaller amount) if the salary for the period in respect
of which the bonus was earned is not commensurate with salaries paid by other companies of a similar size and
complexity as the Company.
Our business model has not changed since shareholder approval of the current Remuneration Policy in 2015 and we
believe that the structure of the current Remuneration Policy continues to be the right one for the Company and its
shareholders. It remains aligned to the Company’s performance, with shareholder interests and with the Company’s
strategy, objectives and business model. Therefore, we believe the minor changes proposed ensure that the future
Remuneration Policy remains fit for purpose and supports the long-term success of the business.
BOARD CHANGES
During financial year 2018, Jon Kempster joined the board as Chief Financial Officer. The Committee determined his
remuneration package in line with the existing shareholder approved directors’ remuneration policy. Mr Kempster’s
salary has been set at the level of £150,000 consistent with the salaries that have applied for all executive directors,
other than Mike Ashley who does not currently receive a salary, since 2002. In line with the existing policy, Mr
Kempster was not eligible to earn a bonus for FY18 and was not granted any share scheme or other long term
incentive award.
FY18 PERFORMANCE RELATED REMUNERATION AND APPROACH TO EXECUTIVE
DIRECTOR’S REMUNERATION FOR FY19
No Executive Director was eligible to earn a bonus in respect of FY18 and no Executive Director has any outstanding
award under any share scheme or other long term incentive scheme.
Our proposed approach to Executive Directors’ remuneration in respect of FY19 is summarised on pages 125 to 126.
WORKFORCE REWARD
As we discussed in our last Annual Report and Accounts, we introduced a minimum share value guarantee of £3 to
eligible employees on the vesting of the final tranche of shares under the 2011 Share Scheme in September 2017,
rising to £4 for those who elect to defer the vesting of their share awards until September 2018. The Company was
pleased to report in September 2017 that c.£40m of shares were acquired by just under 2,000 eligible employees,
and that those participants were able to benefit from the market price of the shares being above the £3 minimum
guarantee at that time.
As noted above, during FY18 the Committee has continued to consider the introduction of a new employee share
scheme that appropriately aligns Executive Directors’ interests with the interests of shareholders in bringing consistent
long-term profitable growth to the Company, and proposes to seek shareholder approval for the Future Share Scheme
in the near future.
116
It is worth reminding shareholders that in addition to share schemes, the Company operates other bonus and incentive
awards for its workforce. By way of recent examples, in FY16 our UK retail workers received a total of £19m in
bonus and incentive awards, and this figure increased to £20m in FY17. In FY18 this figure was £20m. A significant
proportion of these other bonus and incentive awards were paid to our casual retail workers.
The Remuneration Committee meets several times a year, with three formal meetings and a number of ad hoc
meetings held in FY18.
A full report on the remuneration of Directors appears on pages 124 to 128.
RESPONSIBILITIES OF THE COMMITTEE
• Determining the Company’s policy on Executive remuneration, including the design of bonus schemes and
targets, share schemes when appropriate, together with payments under them
• Determining the level of remuneration of the Chairman and each of the Executive Directors
• Monitoring the remuneration of senior management and making recommendations in that respect
• Agreeing any compensation for loss of office of any Executive Director
Ensuring that the Company’s Remuneration Policy remains fit for purpose and takes note of the continuing
enhancements proposed by regulatory bodies. We are currently examining suggested enhancements to the UK
Corporate Governance Code in this regard and will adopt those that we believe are appropriate to our business.
David Brayshaw
Chair of the Remuneration Committee
18 July 2018
DIRECTORS’ REMUNERATION POLICY
This part of the report sets out the Company’s proposed Directors’ Remuneration Policy which, subject to shareholder
approval, shall take binding effect from the date of the 2018 AGM and remain valid until the 2021 AGM. The proposed
Policy is determined by the Committee, and key changes to elements of the current Remuneration Policy, which
was approved by shareholders at the 2015 AGM and expires at the 2018 AGM, have been highlighted for ease. As
explained in the statement from the Chair of the Remuneration Committee, the provisions of the old Remuneration
Policy relating to long term incentives have also been removed. However, the Remuneration Committee continues to
consider the introduction of a new employee share scheme that appropriately aligns Executive Directors’ interests with
the interests of shareholders in bringing consistent long-term profitable growth to the Company, and intends to seek
shareholder approval for the Future Share Scheme in the near future. Consequential changes have been made as to
reflect the changes to the Remuneration Policy.
117
GOVERNANCESPORTS DIRECT - ANNUAL REPORT 2018 DIRECTORS’ REMUNERATION REPORT
Continued
FUTURE POLICY TABLE
The table below describes each of the elements of the remuneration package for the Executive Directors.
ELEMENT OF REMUNERATION: BASE SALARY
PURPOSE / LINK TO STRATEGY
Fixed element of the remuneration package, where the balance of fixed and variable remuneration is aligned to the
commercial strategy of long-term profitable growth and reflects the Company remuneration philosophy of gearing
reward to performance with a sharing of risk between Executive Directors and shareholders.
OPERATION
Base salaries are normally reviewed annually and have not been increased since 2002. Mike Ashley does not
currently receive a salary for his role.
MAXIMUM
Although salaries for Executive Directors (other than Mike Ashley, who does not currently receive a salary) have
been set at £150,000 since 2002, the Committee retains discretion to set salaries at a level commensurate with
other companies of a similar size and complexity as the Company.
PERFORMANCE MEASURES
Not applicable.
CHANGES TO POLICY APPROVED AT THE 2015 AGM
No change, other than the removal of references to the arrangements for the Company’s former interim Chief
Financial Officer.
ELEMENT OF REMUNERATION: BENEFITS
PURPOSE / LINK TO STRATEGY
With the exception of a 20% staff discount on products purchased from the Group’s retail stores, which is available
to Executive Directors other than Mike Ashley, no additional benefits are available to Executive Directors. The same
level of staff discount is available to all staff.
OPERATION
The current Executive Directors do not receive any benefits other than the staff discount, which is not available for
Mike Ashley.
Benefits may be provided in line with market practice to recruit a new Executive Director taking into account
individual circumstances. Such benefits may include relocation expenses.
MAXIMUM
Although the Remuneration Committee has not set an absolute maximum level of benefits Executive Directors may
receive, the Company retains discretion to set benefits at a level which the Remuneration Committee considers
appropriate against the market and to support the on-going strategy of the Company.
PERFORMANCE MEASURES
Not applicable.
CHANGES TO POLICY APPROVED AT THE 2015 AGM
No change, other than the availability of a 20% staff discount on purchases of products from the Group’s retail
stores and removal of references to the Executive Share Scheme.
118
ELEMENT OF REMUNERATION: RETIREMENT BENEFITS
PURPOSE / LINK TO STRATEGY
Provide post-employment benefits to recruit and retain individuals of the calibre required for the business.
OPERATION
The Executive Directors are entitled to participate in a stakeholder pension scheme on the same basis as other
employees.
MAXIMUM
The current maximum employer contribution to the stakeholder pension scheme is 2%, rising to 3% from April 2019.
The Committee may increase employer contribution rates to reflect changes in the auto enrolment employer
contribution rates.
The Company retains the discretion to set retirement benefits (including pension contributions and/or a salary
supplement in lieu of a pension contribution) for any Executive Directors in accordance with the Committee’s
approach to recruitment remuneration, as described on pages 121 to 122.
The maximum bonus that an Executive Director may earn shall be 200% of salary in respect of any financial year.
PERFORMANCE MEASURES
Not applicable.
CHANGES TO POLICY APPROVED AT THE 2015 AGM
Maximum employer contribution has increased to 2%, and will rise to 3% in April 2019, reflecting changes in the
auto-enrolment employer contribution rates. Discretion is retained to reflect any subsequent increases in those
rates.
ELEMENT OF REMUNERATION: ANNUAL BONUS
PURPOSE / LINK TO STRATEGY
Rewards the Executive Director for performance which supports the group’s strategy and performance in role.
OPERATION
Executive Directors, other than Mike Ashley, may earn a bonus. Any bonus earned in excess of 100% of salary may
be deferred into shares for a period of two years, unless the amount to be deferred would be less than £10,000.
However, if, in the opinion of the Committee, the Executive Director’s salary for the period in respect of which the
bonus was earned is not commensurate with salaries paid by other companies of a similar size and complexity to
the Company, the Committee may decide not to require any deferral (or to require deferral of a smaller amount). The
Committee also has discretion not to require deferral if the amount to be deferred would be less than £10,000.
Any bonus paid would be subject to clawback for a period of 3 years following its determination in the event of
gross misconduct, material misstatement of the Company’s financial statements or corporate failure.
MAXIMUM
The maximum bonus that an Executive Director may earn shall be 200% of salary in respect of any financial year.
PERFORMANCE MEASURES
Any bonus opportunity shall be assessed against one or more metrics determined by the Committee and linked
to the Company’s strategy and/or the performance of the Executive Director in role, with the weighting between
the metrics determined by the Committee if relevant. Bonuses will be determined between 0% and 100% of the
maximum opportunity based on the Committee’s assessment of the applicable metrics.
119
GOVERNANCESPORTS DIRECT - ANNUAL REPORT 2018 DIRECTORS’ REMUNERATION REPORT
Continued
CHANGES TO POLICY APPROVED AT THE 2015 AGM
The deferral mechanism for any bonus earned in excess of 100% of salary.
Note that the ability to earn up to 200% of salary reflects (i) the Policy approved at the 2015 AGM which provided
that an Executive Director may be awarded an annual incentive opportunity of up to 200% of salary per annum, until
such time as he or she participates in the 2015 Share Scheme, and (ii) the fact that the 2015 Share Scheme lapsed
in FY16 and the Executive Share Scheme is no longer in use. The Company will review the bonus arrangements
as part of any revised Remuneration Policy for which shareholder approval is sought in connection with the
introduction of the Future Share Scheme.
The table below sets out an overview of the approach to remuneration for the Chairman and Non-Executive Directors.
PURPOSE / LINK
TO STRATEGY
Chairman and Non-
Executive Director
fees
Provide an
appropriate reward
to attract and retain
Directors of the
calibre required for
the business.
APPROACH OF THE COMPANY
The Committee’s Remuneration Policy in respect of the Non-Executive Directors is to pay annual fees which
reflect the responsibilities and duties placed upon them, while also having regard to market practice.
Non-Executive Directors receive a fixed annual fee. The maximum aggregate amount of annual fees
payable to all Non-Executive Directors shall not exceed the £500,000 limit set in the Company’s articles
of association. Non-Executive Directors are not currently entitled to any additional fees for their roles as
committee members, committee chairs, or the Senior Independent Non-Executive Director.
Non-Executive Directors do not participate in any bonus or share schemes.
Non-Executive Directors may be eligible for benefits such as the use of secretarial support, travel costs or
other benefits that may be appropriate.
EXPLANATION OF PERFORMANCE MEASURES CHOSEN
Any bonus opportunity would be subject to performance metrics determined by the Committee and linked to the
Company’s strategy and/or the performance of the Executive Director in role. The metrics and performance against
them would be disclosed in the Directors’ Remuneration Report in which payment of the bonus was disclosed,
or if later when they were no longer considered commercially sensitive. Any performance measure may be varied
or substituted by the Committee if an event occurs which causes the Committee to determine that it would be
appropriate to do so; the rationale for any such variation or substitution would be given in the next Directors’
Remuneration Report.
EXPLANATION OF DIFFERENCES IN REMUNERATION POLICY FOR OTHER EMPLOYEES
The Company has a large number of employees with different responsibilities and differing levels of seniority. Reward
policies for employees other than Executive Directors are determined by reference to grade, role, performance and
other relevant factors. The Committee engages with the wider workforce on the remuneration policy through the
Employers’ Representative on the Board, whose feedback and views are sought by the Committee. The Committee
has reviewed the salaries, other remuneration and other employment conditions of senior and middle managers
throughout the Group, and has taken them into account in considering Directors’ salaries and the creation of new
incentive schemes in order to create a sense of common purpose and sharing of success. Indeed, in order to reflect
the Company’s “One Team” ethos, the 2015 Share Scheme (which lapsed in FY16) had applied to awards granted to
both Executives and employees determined by the Board as eligible who meet the qualifying conditions as determined
and agreed by the Committee and the Board on the same basis (including the performance conditions), and it is
proposed that the Future Share Scheme would apply on the same basis.
120
ILLUSTRATIONS OF APPLICATION OF REMUNERATION POLICY
The charts below set out an illustration of the policy for FY19 in line with the future policy table above. The
charts provide an illustration of the total remuneration opportunity that could arise under three different levels of
performance. No chart is included for Mike Ashley, who does not receive any remuneration from the Company.
As the proposed Remuneration Policy does not currently include any long term incentive scheme, no such scheme is
included in the chart. Although the Committee has yet to determine whether Jon Kempster should be eligible to earn
a bonus in respect of FY19, for the purposes of the chart it is assumed that he will be eligible to earn a bonus of up to
200% of salary.
JON KEMPSTER
500.0
400.0
300.0
200.0
100.0
0.0
150.0
153.0
200%
153.0
Minimum Performance
Performance in line with expectations
Maximum performance
For the purposes of the chart, the following assumptions have been made.
Minimum
remuneration
Performance in line
with expectations
Maximum
remuneration
FIXED PAY
Base salary of £150,000.
BONUS
No bonus earned.
An employer pension contribution of 2% of salary.
No benefits (as no benefits are currently proposed
to be provided to the Executive Directors in FY19
other than the staff discount, which, in the opinion
of the Committee, cannot be reflected in these
charts as its value depends upon the value of the
Executive Director’s purchase).
No bonus earned because in the opinion of the
Committee, the performance metrics will be set
such that any bonus earned would require the
achievement of stretch performance.
A bonus of 200% of salary is earned.
APPROACH TO RECRUITMENT REMUNERATION
When agreeing a remuneration package for the appointment of a new Executive Director, the Committee will apply the
following principles:
•
•
•
the package will be sufficient to attract the calibre of Director required to deliver the Company’s strategy;
the Committee will seek to ensure that no more is paid than is necessary; and
in the next Annual Report on remuneration, the Committee will explain to shareholders the rationale for the
arrangements implemented.
The Committee will ordinarily seek to implement the remuneration package in accordance with the elements referred
to in the policy table on pages 118 to 120. The Committee retains discretion to make appropriate remuneration
decisions outside that policy to meet the individual circumstances of the recruitment, subject to the limits and
parameters of this recruitment remuneration section of the Directors’ Remuneration Report.
121
GOVERNANCESPORTS DIRECT - ANNUAL REPORT 2018
DIRECTORS’ REMUNERATION REPORT
Continued
ELEMENT APPROACH
Base salary and
benefits
Retirement benefits
Aligned with the policy set out in the policy table on page 118.
Typically aligned with the policy set out in the policy table on page 119 although the Committee may
provide for up to 20% of salary to be paid to a pension arrangement or paid as a supplement to base salary
in lieu of a pension arrangement until the new Executive Director participates in a long term incentive
scheme.
Variable
remuneration
Until such time as the newly appointed Executive Director participates in the Future Share Scheme, he
or she may be awarded an annual or longer-term cash incentive opportunity of up to 200% of salary per
annum. The Committee may vary the application of deferral to any annual bonus opportunity to reflect the
circumstances of the recruitment.
Maximum variable
remuneration
The maximum level of variable remuneration that may be awarded to a new Executive Director is until
such time as he or she participates in the Future Share Scheme, an annual or longer-term cash incentive
opportunity of up to 200% of salary per annum.
The value of any buy-out arrangements (described below) does not count towards the maximum.
Compensation
for forfeited
arrangements
The Committee may make awards on hiring an external candidate to buy-out the remuneration
arrangements forfeited on leaving a previous employer. In doing so, the Committee will have regard to
relevant factors including any performance conditions attached to such arrangements (and whether such
conditions were achieved), the form of those arrangements (e.g. cash or shares) and the timeframe of such
arrangements.
While such awards are excluded from the maximum level of variable remuneration referred to below, the
Committee’s intention is that the value awarded would be no higher than the expected value of the forfeited
arrangements. Buy-out awards will be subject to forfeiture or clawback on early departure, with 100% being
subject to forfeiture if the Executive departs within 12 months of joining, and a sliding scale down to 50% if
the departure occurs within 12 and 24 months of joining, at the Committee’s discretion.
Relocation costs
If necessary, the Company will pay appropriate relocation costs. The Committee will seek to ensure that no
more is paid than is necessary.
Any share awards referred to in this section will be granted as far as possible under the Company’s existing share
schemes. If necessary and subject, where relevant, to the limits referred to above, awards may be granted outside
existing share plans as permitted under the Listing Rules, which allow for the grant of awards to facilitate, in unusual
circumstances, the recruitment of an Executive Director.
Where a position is filled internally, any on-going remuneration obligations or outstanding variable pay elements shall
be allowed to continue according to their subsisting terms.
The remuneration package for a newly appointed Non-Executive Director would normally be in line with the policy set
out in the future policy table above for Non-Executive Directors.
SERVICE CONTRACTS AND POLICY ON PAYMENTS FOR LOSS OF OFFICE
The Company’s policy is for Executive Directors to be employed on the terms of service contracts which may be
terminated by either the Company or the Executive Director on the giving of not less than 12 months’ notice.
EXECUTIVE DIRECTORS
Details of each current service contract are set out below:
CONTRACT DATE
UNEXPIRED TERM / NOTICE
PERIOD
GOVERNING LAW
Mike Ashley
Jon Kempster
11/02/2007
18/07/2018
12 months^
6 months*
England & Wales
England & Wales
^The Company may terminate Mike Ashley’s service contract by giving 6 months’ notice if he is unable to perform his duties for over 120 days in any consecutive 12 months.
*Notice may not be given to terminate Mr Kempster’s service contract before 31 March 2019.
122
The principles on which the determination of payments for loss of office will be approached are summarised below:
Payment in lieu of
notice
The Company may terminate an Executive Director’s employment with immediate effect by making a
payment in lieu of notice consisting of basic salary (but excluding any bonus, commission, benefits or
holiday entitlement) during the notice period.
Annual bonus
Other payments
The Company may either (i) pay the payment in lieu of notice in a lump sum or (ii) in its discretion, pay
the amount in equal monthly instalments during the notice period, with such instalment payments to be
reduced in the event that the Executive Director obtains alternative income within the notice period.
Mike Ashley does not receive any salary or contractual benefits, and his service contract does not provide
for a payment in lieu of notice.
Whether to award a bonus in full or in part in the event of a termination of employment would be at the
discretion of the Committee on an individual basis and dependent on a number of factors, including the
circumstances of the Executive Director’s departure and his contribution to the business during the bonus
period in question. Typically bonus amounts would be pro-rated for time in service to termination. Any
bonus in respect of the year of termination or preceding year which would otherwise be deferred into
shares may be paid wholly in cash at the election of the Committee.
Any deferred bonus would typically continue in the event of termination (other than on dismissal for cause)
and be released to the Executive Director at the end of the originally anticipated deferral period, although
the Committee has discretion to release the amount sooner in appropriate circumstances.
The Remuneration Committee reserves the right to make additional exit payments where such payments are
made in good faith in discharge of an existing legal obligation (or by way of damages for breach of such an
obligation) or by way of settlement or compromise of any claim arising in connection with the termination
of a Director’s office or employment. In appropriate circumstances, payments may also be made in respect
of legal fees. Were the Company to make an award on recruitment of an Executive Director to buy out
remuneration arrangements forfeited on leaving a previous employer then the leaver provisions for that
award would be determined at the time of grant. A payment may also be made in respect of accrued but
untaken holiday.
NON-EXECUTIVE DIRECTORS
The Non-Executive Directors enter into an agreement with the Group for a period of three years, other than the
Chairman whose agreement continues until terminated in accordance with its terms. The appointments of the Non-
Executive Directors may be terminated by either party on one month’s written notice and in accordance with the
Articles of Association of the Company. Termination would be immediate in certain circumstances (including the
bankruptcy of the Non-Executive Director).
Non-Executive Directors do not and are not entitled to participate in any bonus or share scheme.
Non-Executive Directors are subject to confidentiality undertakings without limitation in time. Non-Executive Directors
are not entitled to receive any compensation on the termination of their appointment.
Details of the letters of appointment are set out below:
POSITION
DATE OF LETTER OF APPOINTMENT
Keith Hellawell
Simon Bentley
David Brayshaw
David Daly
Non-Executive Chairman
Non-Executive Director
11 April 2018
15 July 2014
Non-Executive Director
8 December 2016
Non-Executive Director
11 July 2017
Copies of the service contracts of Executive Directors and of the appointment letters of the Chairman and Non-
Executive Directors are available for inspection at the Company’s registered office during normal business hours and at
the AGM.
123
GOVERNANCESPORTS DIRECT - ANNUAL REPORT 2018
DIRECTORS’ REMUNERATION REPORT
Continued
PAYMENTS OUTSIDE THE POLICY IN THIS REPORT
The Committee retains discretion to make any remuneration payment or payment for loss of office outside the policy in
this report:
• where the terms of the payment were agreed before the policy came into effect;
• where the terms of the payment were agreed at a time when the relevant individual was not a Director of
the Company and, in the opinion of the Committee, the payment was not in consideration of the individual
becoming a Director of the Company; or
to satisfy contractual commitments made under legacy remuneration arrangements.
•
For these purposes, “payment” includes the satisfaction of awards of variable remuneration and, in relation to an
award over shares, the terms of the payment are “agreed” at the time the award is granted.
STATEMENT OF CONSIDERATION OF SHAREHOLDER VIEWS
The Committee consults major shareholders and representative groups where appropriate concerning remuneration
matters.
ANNUAL REPORT ON REMUNERATION
This part of the Directors’ Remuneration Report sets out the actual payments made by the Company to its Directors
with respect to the period ended 29 April 2018 and how our Directors’ Remuneration Policy will be applied in the year
commencing 29 April 2018.
SINGLE FIGURE TABLE (AUDITED)
The aggregate remuneration provided to individuals who have served as Directors in the period ended 29 April 2018 is
set out below, along with the aggregate remuneration provided to individuals who have served as Directors during the
prior financial year.
Director
Salaries and
fees
Other benefits
Bonus
Long-term
incentives
Pension
Total
FY18
FY17
FY18
FY17
FY18
FY17
FY18
FY17
FY18
FY17
FY18
FY17
£000
£000
£000
£000
£000
£000
£000
£000
£000
£000
£000
£000
EXECUTIVE
Mike Ashley
Jon Kempster(1)
NON-EXECUTIVE
-
84
-
N/A
Keith Hellawell
155
155
Simon Bentley
David Brayshaw(2)
David Daly(3)
Dave Singleton(4)
Claire Jenkins(5)
50
50
25
22
-
50
20
N/A
50
50
-
-
-
-
-
-
-
-
-
N/A
-
-
-
N/A
-
-
-
-
-
-
-
-
-
-
-
N/A
-
-
-
N/A
-
-
-
-
-
-
-
-
-
-
-
N/A
-
-
-
N/A
-
-
-
-
-
-
-
-
-
-
-
N/A
-
-
-
N/A
-
-
-
84
-
N/A
155
155
50
50
25
22
-
50
20
N/A
50
50
(1) Jon Kempster’s remuneration for FY18 as set out in the above table is his remuneration for the period from the date of his appointment to the end of FY18.
(2) David Brayshaw’s remuneration for FY17 as set out in the above table is his remuneration for the period from the date of his appointment to the end of FY17.
(3) David Daly’s remuneration for FY18 as set out in the above table is his remuneration for the period from the date of his appointment to the end of FY18.
(4) Dave Singleton’s remuneration for FY18 as set out in the above table is his remuneration for the period from 30 April 2017 until 6 September 2018 when he ceased to be a
Non-Executive Director. No payment was made to Mr Singleton following his resignation.
(5) Claire Jenkins remuneration for FY18 as set out in the above table is her remuneration for the period from 30 April 2017 until 4 May 2018 when she ceased to be a Non-
Executive Director. No payment was made to Ms Jenkins following her resignation.
124
NOTES TO THE SINGLE FIGURE TABLE AND IMPLEMENTATION OF POLICY IN THE YEAR
ENDING 28 APRIL 2019
BASE SALARY AND FEES
Base salaries are normally reviewed annually. In the review in FY18 the Committee decided not to alter Jon Kempster’s
salary, and has also decided not to increase Jon Kempster’s salary in FY19, which is in line with salaries for the
Group’s Executive Directors (other than Mike Ashley) since 2002. Base salaries are set at a level well below the lower
quartile for a business of the size and complexity of the Group.
Mike Ashley does not receive a salary for his role.
Fees for Non-Executive Directors are normally reviewed annually. In the review in FY18 fees were not increased and
had not previously been increased since 2007. The Company’s approach to the fees for Non-Executive Directors for
FY19 is yet to be finalised, but will be subject to the proposed new Remuneration Policy set out in pages 117 to 124.
ANNUAL BONUS SCHEME
The Committee has yet to determine whether Jon Kempster should be eligible to earn a bonus in respect of FY19. If
he is eligible to earn such a bonus, any amount earned shall be determined by reference to one or more performance
metrics determined by the Committee and linked to the Company’s strategy and/or Mr Kempster’s performance in role.
Any such bonus shall be of up to 200% of salary, and any bonus earned in excess of 100% of salary may be subject to
deferral.
Mike Ashley shall not be eligible to earn a bonus in respect of FY19.
LONG TERM INCENTIVES
Mike Ashley is not eligible to be granted awards under the Executive Share Scheme, and no award will be granted to
Jon Kempster under the Executive Share Scheme in FY19.
The Committee is actively considering the introduction of a new share scheme to replace the 2015 Share Scheme
which lapsed in FY16, and intends to consult with shareholders on the terms of the new scheme once details have
been further developed.
DIRECTORATE CHANGES
Jon Kempster was appointed Chief Financial Officer with effect from 11 September 2017. The Committee determined
his remuneration package in line with the existing shareholder approved directors’ remuneration policy. Mr Kempster’s
salary was set at the level of £150,000 consistent with the salaries that have applied for all executive directors, other
than Mike Ashley who does not currently receive a salary, since 2002. In line with the existing policy, Mr Kempster was
not eligible to earn a bonus for FY18 and was not granted any share scheme or other long term incentive award.
Claire Jenkins resigned as a Director with effect from 4 May 2017 and Dave Singleton resigned as a Director with
effect from 6 September 2017. Neither Ms Jenkins nor Mr Singleton received any payment for loss of office during the
period ended 29 April 2018 or will receive any such payment in the future.
SHAREHOLDING GUIDELINES AND TOTAL SHAREHOLDINGS OF DIRECTORS
The Board believes it is important that Executive Directors have a significant holding in the capital of the Company. In
FY14 the Committee reassessed the shareholding guidelines for Executive Directors and determined that the Executive
Directors must hold a minimum shareholding of 50,000 shares while employed by the Company.
125
GOVERNANCESPORTS DIRECT - ANNUAL REPORT 2018 DIRECTORS’ REMUNERATION REPORT
Continued
The beneficial interests of the Directors who served during the year and of their Persons Closely Associated in both
cases at the beginning of the financial year, or at the date of appointment if later, and at the end of the financial year,
or at the date of resignation if earlier, in the share capital of the Company are shown below:
Directors as at 29 April 2018
Mike Ashley
Jon Kempster
Simon Bentley
Keith Hellawell(2)
David Brayshaw
David Daly
Former Directors
Dave Singleton(4)
Claire Jenkins(5)
Ordinary Shares 29 April2018 of
if earlier the date of resignation
Ordinary Shares 30 April 2017 of
if earlier the date of resignation
330,000,000
330,000,000
-(1)
10,000
50,000
10,276
11,007
42,000
21,725
-(1)
10,000
50,000
10,276
-(3)
42,000
21,725
(1) Jon Kempster was appointed as a Director on 11 September 2017. He is expected to acquire the minimum number of shares over a reasonable time period to be determined
by the Committee during FY19.
(2) These shares are held in the name of Keith Hellawell, as well as his wife.
(3) David Daly was appointed as a Director on 2 October 2017.
(4) David Singleton resigned with effect from 6 September 2017.
(5) Claire Jenkins resigned with effect from 4 May 2017.
There has been no change to the interests reported above between 29 April 2018 and 18 July 2018. The Company did
not receive any notifications under DTR 5 between 29 April 2018 and 18 July 2018.
Neither Jon Kempster nor Mike Ashley currently participates in any share scheme arrangement. Therefore, there are no
outstanding share scheme interests held by any Director of the Company.
PERFORMANCE GRAPH AND TABLE
The following graph shows the Company’s performance measured by the Total Shareholder Return compared with the
performance of the FTSE 100 and FTSE 250 Index (excluding investment trusts).
Sports Direct International plc
FTSE 250 x Investment Trusts
FTSE 100
£1200
£1000
£800
£600
£400
£200
£0
126
26/04/09
25/04/10
24/04/11
29/04/12
28/04/13
27/04/14
26/04/15
24/04/16
30/04/17
29/04/18
The Committee considered these as appropriate indices against which to compare the Company’s performance. They
are widely accepted as national measures and include the companies that investors are likely to consider alternative
investments.
The table below shows details of the total remuneration and performance-related pay for the Company’s Chief
Executive Officer over the last nine financial years.
Total remuneration
Executive Share Scheme as a % of
maximum opportunity
FY18
FY17 – Mike Ashley(1)
FY17 – Dave Forsey(2)
FY16
FY15
FY14
FY13
FY12
FY11
FY10
Nil
Nil
£62,500
£150,000
£150,000(3)
£150,000
£150,000
£150,000
£6,620,000(4)
£150,000
N/A
N/A
N/A
N/A
0%(3)
N/A
N/A
N/A
100%
N/A
(1) Mike Ashley was appointed as CEO with effect from 22 September 2016.
(2) Dave Forsey resigned with effect from 22 September 2016. His total remuneration is his remuneration earned in the period from 25 April 2016 until the date his resignation
took effect.
(3) The figures for FY15 reflect Dave Forsey’s decision on 6 June 2016 to forego an award over 1 million shares which would otherwise have been due to vest on 6 September
2017.
(4) For these purposes the total remuneration in FY11 includes the value of Dave Forsey’s award over 1 million shares that vested on 15 August 2013 subject to the satisfaction of
a performance condition based on EBITDA in FY11. For these purposes, the value of a share is £6.47 being the closing price of a share on that date.
CEO PAY INCREASE IN RELATION TO ALL EMPLOYEES
The table below sets out in relation to salary, taxable benefits and annual bonus the percentage increase in pay for
the Company’s Chief Executive compared to the average increase between the same periods for the Group’s UK Head
Office employees, which the Committee believes is the most appropriate comparator group. The percentages shown
relate to the amounts for FY18 as compared to the amounts for FY17 in each case for Mike Ashley, who was Chief
Executive Officer for approximately seven months of FY17 and all of FY18.
Element of remuneration
Mike Ashley / % change
UK head office employee
average / % change
Salary
0% (Mike Ashley does not receive a salary)
Taxable benefits
Annual bonus
0% (no taxable benefits were provided to Mike Ashley in
either year)
0% (no annual bonus arrangement was operated for Mike
Ashley in either year)
5.5%
(1.0)%
11.0%
RELATIVE IMPORTANCE OF SPEND ON PAY
The table below sets out the Group’s distributions to shareholders by way of dividends and share buybacks,
investment (calculated as set out below) and total Group-wide expenditure on pay for all staff (as reported in the
audited Financial Statements for FY18 and FY17) and the Company’s share price (calculated as at the close of business
on the last day of FY18 and FY17).
127
GOVERNANCESPORTS DIRECT - ANNUAL REPORT 2018
DIRECTORS’ REMUNERATION REPORT
Continued
FY18
FY17
% CHANGE
Distributions to shareholders by way of dividend and share buyback
£114,146,336
£108,689,056
5.0%
Investment*
£431,650,000
£407,192,000
6.0%
Group-wide expenditure on pay for all employees
£393,357,000
£386,717,000
1.7%
Share price (pence)
405.8**
306.8**
32.3%
*Comprises of increases in working capital, acquisitions and capital expenditure in the year as the Board believes these to be the most relevant measures of the Group’s
investment in future growth.
**For these purposes, the share price for FY18 and the share price for FY17 is calculated at the close of business on 27 April 2018 and 28 April 2017 respectively, being the last
working days prior to the year ends.
CONSIDERATION BY THE DIRECTORS OF MATTERS RELATING TO DIRECTORS’
REMUNERATION
MEMBERSHIP
During FY18 the Committee consisted of David Brayshaw, Simon Bentley, David Daly, Dave Singleton and Claire
Jenkins, who are independent Non-Executive Directors, and Keith Hellawell, who is the Non-Executive Chairman. Dave
Singleton was Chair of the Committee until his retirement from the Board following the conclusion of the 2017 AGM,
at which point David Brayshaw was appointed Chair of the Committee. Claire Jenkins resigned from the Board and the
Committee on 4 May 2017, David Daly joined the Committee in April 2018.
The role and main responsibilities of the Committee are detailed in the Corporate Governance Report on page 112.
Attendance at the meetings held during the year is detailed on page 103.
The members of the Committee have no personal financial interest, other than as shareholders, in the matters to be
decided, no actual or potential conflicts of interest arising from other Directorships and no day-to-day operational
responsibility within the Company.
ADVISERS TO THE COMMITTEE
Mike Ashley, the Chief Executive, and Jon Kempster, the Chief Financial Officer, have advised or materially assisted
the Committee throughout FY18 when requested. Executive Directors are not present during, nor do they take part in,
discussions in respect of matters relating directly to their own remuneration.
SHAREHOLDER VOTING
The following table sets out actual voting in respect of the resolution to approve the Directors’ Remuneration Report
for the year ended 30 April 2017 at the 2017 AGM and the resolution to approve the Directors’ Remuneration Policy at
the 2015 AGM.
Directors’ Remuneration Report
for the year ended 30 April 2017
Votes for
% for
Votes
against
% against
Total votes
cast
Votes
withheld
454,984,951
99.89
502,902
0.11
455,487,853
2,242
Directors’ Remuneration Policy
426,150,848
81.4
97,167,282
18.6
523,318,130
1,825,428
David Brayshaw
Chair of the Remuneration Committee
18 July 2018
128
DIRECTORS’ RESPONSIBILITIES
STATEMENT
The Directors are responsible for preparing the Annual Report, the Remuneration Report and the Company and Group
Financial Statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare Financial Statements for each financial year. Under that law the
Directors are required to prepare the Group Financial Statements in accordance with International Financial Reporting
Standards (IFRSs) as adopted by the European Union.
The Directors have elected to prepare the Company Financial Statements in accordance with United Kingdom
Generally Accepted Accounting Practices (UK GAAP) including FRS 102.
Under company law the Directors must not approve the Financial Statements unless they are satisfied that they give
a true and fair view of the state of affairs and profit or loss of the Company and Group for that period. In preparing the
Financial Statements the Directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and estimates that are reasonable and prudent;
•
for the Group Financial Statements, state whether the applicable IFRSs have been followed, subject to any
material departures disclosed and explained in the Financial Statements;
for the Company Financial Statements, state whether the applicable UK Accounting Standards have been
followed, subject to any material departures disclosed and explained in the Financial Statements; and
•
• prepare the Financial Statements on the going concern basis unless it is inappropriate to presume that the
Company and Group will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the
Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and
enable them to ensure that the Financial Statements, and the Remuneration Report, comply with the Companies Act
2006 and Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Company and
hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors confirm that:
• so far as each Director is aware, there is no relevant audit information of which the Company’s auditors are
•
unaware; and
the Directors have taken all steps that they ought to have taken to make themselves aware of any relevant audit
information and to establish that the auditors are aware of that information.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on
the Company’s website. Legislation in the United Kingdom governing the preparation and dissemination of Financial
Statements may differ from legislation in other jurisdictions.
To the best of our knowledge:
a. the Annual Report, including the strategic report, prepared in accordance with the applicable set of accounting
standards, gives a true and fair view of the assets, liabilities, financial position and profit of the Company and of
the undertakings included in the consolidation taken as a whole;
and
b. the management report includes a fair review of the development and performance of the business and the
position of the Company and the undertakings included in the consolidation taken as a whole, together with a
description of the principal risks and uncertainties that they face.
The Board has reviewed the Annual Report and has confirmed it is fair, balanced and understandable.
On behalf of the Board
Jon Kempster
Chief Financial Officer
18 July 2018
129
GOVERNANCESPORTS DIRECT - ANNUAL REPORT 2018 VIABILITY STATEMENT
The UK Corporate Governance code requires the Board to express its view of the long-term viability of the Group and
assess the Company’s prospects, capital management and key risks.
Accordingly, the Board has carried out a thorough and robust assessment of the risks, including stress testing
its resilience to threats to its business model, future performance, liquidity and the risks identified in the Risk &
Uncertainties section of this report, which can be found on pages 87 to 93 together with the steps the Company has
taken to mitigate them.
The Board chose to review these over a three-year period as this best reflects the budgeting and planning process of
the Company and the expected timescales for strategy implementation.
In relation to each viability related risk the Board has:
MARKET FORCES
•
tested the business model’s resilience to changes in the Retail market and responses to variability in sales and
margins
TREASURY & FINANCIAL RISK
•
•
reviewed the Revolving Credit Facility and its suitability for the Group’s cash flow cycle and liquidity
requirements
reviewed the Group hedging strategy
BREXIT
•
reviewed the proposal for post-Brexit operations and adaptions to the business model
SUPPLY CHAIN
•
reviewed the arrangements with key suppliers
The Board has reviewed the Group modelling of the impact of each risk and stress testing of the risk mitigation
proposals, with regard to both income and profitability, and net debt impact.
The Group has a £913.5m banking facility in place until November 2021 (with a one year extension option) with a
syndicate of institutions. The Group has consistently created a strong free cash flow from underlying trading and has
an appropriate hedging strategy to meet currency risks.
Based on the Board’s assessment, the Directors have a reasonable expectation that the Group will be able to continue
operating and be able to meet its liabilities as they fall due over the three-year period assessed, assuming no major
changes in its relationship with key suppliers.
The Strategic Report was approved by the Board on 18 July 2018, and signed on its behalf by:
Jon Kempster
Chief Financial Officer
130
INDEPENDENT AUDITOR’S REPORT TO THE
MEMBERS OF SPORTS DIRECT INTERNATIONAL PLC
OUR OPINION ON THE FINANCIAL STATEMENTS IS UNMODIFIED
We have audited the financial statements of Sports Direct International plc (the ‘parent company’) and its
subsidiaries (the ‘Group’) for the 52-week period ended 29 April 2018, which comprise the Consolidated
Income Statement, the Consolidated Statement of Comprehensive Income, the Consolidated Balance Sheet,
the Consolidated Cash Flow Statement, the Consolidated Statement of Changes in Equity, the parent Company
Balance Sheet, the parent Company Statement of Changes in Equity and notes to the Group and parent
financial statements, including a summary of significant accounting policies. The financial reporting framework
that has been applied in the preparation of the Group financial statements is applicable law and International
Financial Reporting Standards (IFRSs) as adopted by the European Union. The financial reporting framework
that has been applied in the preparation of the parent company financial statements is applicable law and
United Kingdom Accounting Standards, including Financial Reporting Standard 102 ‘The Financial Reporting
Standard applicable in the UK and Republic of Ireland’ (United Kingdom Generally Accepted Accounting
Practice).
In our opinion:
•
•
•
•
the financial statements give a true and fair view of the state of the Group’s and of the parent company’s
affairs as at 29 April 2018 and of the Group’s profit for the period then ended;
the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the
European Union;
the parent company financial statements have been properly prepared in accordance with United
Kingdom Generally Accepted Accounting Practice; and
the financial statements have been prepared in accordance with the requirements of the Companies Act
2006 and, as regards the Group financial statements, Article 4 of the IAS Regulation.
BASIS FOR OPINION
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law.
Our responsibilities under those standards are further described in the ‘Auditor’s responsibilities for the audit of the
financial statements’ section of our report. We are independent of the Group and the parent company in accordance
with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s
Ethical Standard as applied to listed public interest entities, and we have fulfilled our other ethical responsibilities in
accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate
to provide a basis for our opinion.
WHO WE ARE REPORTING TO
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those
matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted
by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as
a body, for our audit work, for this report, or for the opinions we have formed.
131
GROUP FINANCIAL STATEMENTSSPORTS DIRECT - ANNUAL REPORT 2018 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF SPORTS DIRECT
INTERNATIONAL PLC Continued
CONCLUSIONS RELATING TO PRINCIPAL RISKS, GOING CONCERN AND
VIABILITY STATEMENT
We have nothing to report in respect of the following information in the annual report, in relation to which the ISAs
(UK) require us to report to you whether we have anything material to add or draw attention to:
•
•
•
the disclosures in the annual report set out on pages 87 to 93 that describe the principal risks and explain how
they are being managed or mitigated;
the directors’ confirmation, set out on page 129 of the annual report that they have carried out a robust
assessment of the principal risks facing the Group, including those that would threaten its business model,
future performance, solvency or liquidity;
the directors’ statement, set out on page 101 of the financial statements about whether the directors considered
it appropriate to adopt the going concern basis of accounting in preparing the financial statements and the
directors’ identification of any material uncertainties to the Group’s and the parent company’s ability to continue
to do so over a period of at least twelve months from the date of approval of the financial statements;
• whether the directors’ statement relating to going concern required under the Listing Rules in accordance with
•
Listing Rule 9.8.6R(3) is materially inconsistent with our knowledge obtained in the audit; or
the directors’ explanation, set out on page 130 of the annual report as to how they have assessed the prospects
of the Group, over what period they have done so and why they consider that period to be appropriate, and their
statement as to whether they have a reasonable expectation that the Group will be able to continue in operation
and meet its liabilities as they fall due over the period of their assessment, including any related disclosures
drawing attention to any necessary qualifications or assumptions.
OVERVIEW OF OUR AUDIT APPROACH
• Overall materiality: £10.5m, which represents 3.5% of the Group's underlying1 earnings before interest,
tax, depreciation and amortisation (underlying EBITDA).
• Key audit matters were identified for the Group as:
- revenue recognition,
- carrying value of inventory,
- acquisition accounting,
- accounting for foreign currency forward contracts and option arrangements, and
- control considerations.
• The following key audit matter was identified for the Group and parent company:
- related party disclosures.
• Full scope audit procedures have been performed on the financial statements of Sports Direct
International plc and on the financial information of the main trading company within the UK Sports
Retail division, Sportsdirect.com Retail Limited.
• Targeted audit procedures have been performed over the financial information of components in the
Premium Lifestyle Division (which includes Cruise Clothing Limited, The Flannels Group Limited and Van
Mildert (Lifestyle) Limited), Wareshop2 Limited, Republic.com Retail Limited, SDI Property Limited and
overseas components in the United States of America, Austria, Belgium, Ireland and Estonia.
• Analytical audit procedures have been performed on all other entities across the Group.
(1) Underlying EBITDA excludes realised foreign exchange gains/losses in selling and administration costs, exceptional costs, profit/loss on disposal of subsidiaries, strategic
investments and properties. Underlying EBITDA also excludes the Share Scheme charges.
132
KEY AUDIT MATTERS
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the
financial statements of the current period and include the most significant assessed risks of material misstatement
(whether or not due to fraud) that we identified. These matters included those that had the greatest effect on: the
overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These
matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these matters.
KEY AUDIT MATTER – GROUP
HOW THE MATTER WAS ADDRESSED IN THE
AUDIT – GROUP
REVENUE RECOGNITION
Our audit work included, but was not restricted to:
Revenue is recognised in accordance with the Group's accounting policy
and International Accounting Standard (IAS) 18: Revenue. The majority
of Group revenue is recorded through Electronic Point of Sale (EPOS)
transactions.
Key to the appropriate recognition of this revenue is the capture of the
EPOS data and the Group operates a control to ensure the completeness
and accuracy of this data as it is transferred into the accounting system.
Other material sources of revenue are from web sales, wholesale sales
and from licencing agreements for brands owned by the Group.
Under International Standard on Auditing (ISA) (UK and Ireland)
240 there is a presumption that there are risks of fraud in revenue
recognition. The revenue recorded by the Group is also one of the key
determinants of Group underlying EBITDA, which is the primary financial
Key Performance Indicator (KPI) for the Group. Therefore, we identified
revenue recognition as a significant risk, which was one of the most
significant assessed risks of material misstatement.
This risk is unchanged from the prior period.
• determining whether revenue is recorded in the accounting
system consistent with the accounting policy and considering the
appropriateness of that policy;
• checking the accounting entries for a sample of retail transactions
and identifying entries not derived from EPOS transactions for further
investigation;
• testing, on a sample basis, that licencing and wholesale sales are
recognised appropriately by checking to underlying arrangements
(licencing), or subsequent cash receipts (wholesale);
• testing the completeness and accuracy of the EPOS data from tills
through to head office;
• testing a sample of sales transactions in stores to till reports and cash
banked;
• testing the reconciliation of internet sales receipts in total to cash
received; and
• analytically reviewing sales trends at an individual store level and
by product type to identify trends and variances that would require
further substantive testing.
KEY OBSERVATIONS
Based on our audit work we did not identify any material instances of
revenue not being recognised in accordance with stated accounting
policies.
133
GROUP FINANCIAL STATEMENTSSPORTS DIRECT - ANNUAL REPORT 2018 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF SPORTS DIRECT
INTERNATIONAL PLC Continued
KEY AUDIT MATTER – GROUP
HOW THE MATTER WAS ADDRESSED IN THE
AUDIT – GROUP
CARRYING VALUE OF INVENTORY
Our audit work included, but was not restricted to:
The carrying value of inventory is stated net of provisions for obsolete or
slow moving inventory. Management’s methodology calculates provision
levels by applying an approach based on risk assessments covering
seasonal inventory, Group brands, inventory type, and expected sale
coverage.
We identified the carrying value of inventory as a significant risk because
of the complexity of this calculation and the judgement and assumptions
applied by management in assessing the amount of provision required
to record inventory at the lower of cost and net realisable value. We
therefore identified carrying value of inventory as a significant risk,
which was one of the most significant assessed risks of material
misstatement.
This risk is unchanged from the prior period.
• testing the underlying inventory provision model used for
mathematical accuracy by re-performing the calculations;
• considering the appropriateness and consistency of the underlying
assumptions within the model;
• challenging management’s assessment of the assumptions applied,
and reviewing the reports management use to verify the ongoing
appropriateness of provision levels;
• testing the selling price of a sample of inventory sold post period end
against its carrying value; and
• challenging key estimates and judgements in management’s overall
inventory provision risk assessment paper.
The Group's accounting policy on inventories is shown in note 1 and
related disclosures are included in note 21. The Audit Committee
identified the carrying value of inventory as an area of significance in its
report on page 111, where the Committee also described the action that
it has taken to address this area.
KEY OBSERVATIONS
Based on our audit work, we are satisfied that the judgements made and
assumptions used by management in determining the carrying value of
inventory were balanced and supported by the evidence obtained from
our testing.
ACQUISITION ACCOUNTING
Our audit work included, but was not restricted to:
In May 2017, the Group completed the acquisition of the trade and
assets of US based Bob’s Stores and Eastern Mountain Sports.
• obtaining and assessing management’s acquisition accounting paper
in relation to the acquisition;
We identified the acquisition of Bob’s and Eastern Mountain Stores
as a risk because of the size of the acquisition and the judgement and
assumptions applied by management in assessing the fair value of
the assets and liabilities acquired and any identified intangibles. We
therefore identified acquisition accounting as a significant risk, which
was one of the most significant assessed risks of material misstatement.
This risk is new in the period due to the size and nature of the
transaction.
• obtaining the asset purchase agreement and agreeing consideration
paid to bank statements;
• performing an onsite visit in the US and verifying significant balances
on the acquisition balance sheet;
• considering and challenging the assumptions underpinning fair value
adjustments;
• recalculating areas where there has been a change in accounting
policy to align with the Group policies; and
• assessing whether the disclosures in the financial statements in
relation to acquisition accounting were compliant with IFRS 3,
Business Combinations.
The Group's accounting policy on acquisitions is shown in note 1
and related disclosures are included in note 31. The Audit Committee
identified the acquisition of Bob’s and Eastern Mountain Sports as an
area of significance in its report on page 111 where the Committee also
described the action that it has taken to address this area.
KEY OBSERVATIONS
Based on our audit work, we are satisfied that the judgements made
and assumptions used by management in determining the fair value of
assets and liabilities on acquisition are supported by evidence obtained
from our testing.
134
KEY AUDIT MATTER – GROUP
ACCOUNTING FOR FOREIGN CURRENCY FORWARD
CONTRACTS AND OPTION ARRANGEMENTS
The Group has a number of forward currency contracts and option
arrangements that are classified as derivative financial instruments and
are accounted for under IAS 39: Financial instruments: Recognition and
Measurement.
We have identified accounting for forward currency contracts as a
significant risk for the current period audit due to the quantum of
instruments entered into in the current and prior periods and the total
number of open contracts at the period end.
The potential accounting treatment of the fair value movements in
the instruments has a significant impact on the consolidated income
statement and consolidated statement of other comprehensive income.
The long-term nature of these instruments could have a material impact
on the future results of the Group. We therefore identified accounting for
foreign currency forward contracts as a significant risk, which was one
of the most significant assessed risks of material misstatement.
This risk is unchanged from the prior period.
HOW THE MATTER WAS ADDRESSED IN THE
AUDIT – GROUP
Our audit work included, but was not restricted to:
• obtaining the documentation of hedging strategy and risk
management objectives;
• obtaining details of foreign exchange contracts from banking
institutions and agreeing those instruments held to management's
hedge effectiveness assessment;
• comparison of the banks’ valuations to management’s external
valuations and investigating any significant differences;
• testing the calculations prepared by management to confirm the
hedging arrangements remained effective in accordance with the
requirement of IAS 39;
• obtaining and confirming that the hedge designation documentation
was compliant with the IAS 39 requirements for new relationships
entered into in the year
• challenging management forecasts to ensure that the ‘highly
probable’ criteria was met for a sample of hedged relationships.
The Group's accounting policy on forward currency contracts is shown
in note 29 and related disclosures are included in note 37 and in the
strategic report. The Audit Committee identified the accounting for
forward currency contracts and option arrangements as a risk in its
report on page 111, where the Committee also described the action that
it has taken to address this risk.
KEY OBSERVATIONS
Based on our audit work, we concluded that foreign currency forward
contracts have been accounted for in accordance with IAS 39.
CONTROL CONSIDERATIONS
Our audit work included, but was not restricted to:
The Group has a number of associates and investments which have
continued to increase across the period.
We have control considerations as a risk because of the judgement
involved in assessing whether control or significant influence exists and
the impact this could have on the financial statements. We therefore
identified control considerations as a significant risk, which was one of
the most significant assessed risks of material misstatement.
This risk is new in the current period, due to the increased strategic
investments activity during the period.
• assessing the accounting for associated undertakings and
investments against the relevant accounting standards, including IAS
28 and IAS 39;
• considering and challenging management’s paper setting out the
requirements of within IFRS 10 and the requirement to consolidate
companies under the control of the Group;
• understanding and challenging management’s reasons where
significant influence does not exist and where associate accounting
has not been applied; and
• obtaining sufficient and appropriate audit evidence to support the
rebuttal of presumed significant influence for holdings of over 20%, as
required by IAS 28, Investments in Associates; and
• challenging the disclosures of judgements applied by management on
the application of the standards within the financial statements.
The Group's accounting policy on accounting for associates, investments
and options is shown in note 1 and related disclosures are included in
note 37. The Audit Committee identified this as an area of significance in
its report on page 111,
KEY OBSERVATIONS
Based on our audit work, we are satisfied that the judgements and
assumptions used by management in determining whether control
or significant influence exists was balanced and did not identify any
material misstatements.
135
GROUP FINANCIAL STATEMENTSSPORTS DIRECT - ANNUAL REPORT 2018 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF SPORTS DIRECT
INTERNATIONAL PLC Continued
KEY AUDIT MATTER – GROUP AND PARENT
COMPANY
HOW THE MATTER WAS ADDRESSED IN THE
AUDIT – GROUP AND PARENT COMPANY
RELATED PARTY DISCLOSURES
Our audit work included, but was not restricted to:
The objective of IAS 24: Related Party Disclosures is to ensure the
financial statements draw attention to the possibility that the financial
position and financial performance of the Group and parent company
may have been affected by the existence of related party transactions.
We have identified related party disclosures as a significant risk for
the current period audit given that this has the potential to impact the
assessment of the Group and parent company operations by users of the
financial statements. There has also historically been significant media
and regulator interest in the Group and parent company. We therefore
identified related party disclosures as a significant risk, which was one of
the most significant assessed risks of material misstatement.
• updating our knowledge of related party relationships through
enquiries of management, review of board meeting minutes and
searches of company information databases;
• obtaining management’s related party paper including workings for
disclosures in the annual report;
• performing searches for related party transactions on the Group's
accounting records using data interrogation software and comparing
to those identified by the Group and parent company;
• obtaining supporting documentation for a sample of related party
transactions; and
This risk is unchanged from the prior period.
• challenging disclosures of related party relationships and transactions
in the financial statements to assess their completeness and accuracy.
The Group and parent company related party disclosures are included
in note 37. The Audit Committee identified related parties as an area
of significance in its report on page 111, where the Committee also
described the action that it has taken to address this area.
KEY OBSERVATIONS
Based on our audit work, the related party disclosures in the financial
statements are complete in all material respects.
OUR APPLICATION OF MATERIALITY
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the
economic decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality in
determining the nature, timing and extent of our audit work and in evaluating the results of that work.
Materiality was determined as follows:
MATERIALITY MEASURE
GROUP
PARENT
Financial statements as a whole
£10.5m, which is 3.5% of the Group’s
underlying earnings before interest, tax,
depreciation and amortisation (underlying
EBITDA). This benchmark is considered the
most appropriate because this is the measure
against which the performance of the Group is
measured both internally and externally.
Materiality for the current period is higher
than the level that we determined for the
53-week period ended 30 April 2017 to reflect
increased underlying EBITDA in the current
period as a result of stronger performance.
The measurement percentage used of 3.5%
remains unchanged from the prior period.
£7.9m, which is 1% of the company’s total
assets, capped at 75% of group materiality.
This benchmark is considered the most
appropriate because the parent company is a
holding company with minimal transactional
activity.
Materiality for the current period is similar to
the level that we determined for the 53-week
period ended 30 April 2017.
Performance materiality used to drive the
extent of our testing
Specific materiality
75% of financial statement materiality.
75% of financial statement materiality.
We also determine a lower level of specific
materiality for certain areas such as directors’
remuneration and related party transactions.
We also determine a lower level of specific
materiality for certain areas such as directors’
remuneration and related party transactions.
Communication of misstatements to the audit
committee
£500,000 and misstatements below that
threshold that, in our view, warrant reporting
on qualitative grounds.
£375,000 and misstatements below that
threshold that, in our view, warrant reporting
on qualitative grounds.
136
The graph below illustrates how performance materiality interacts with our overall materiality and the tolerance for
potential uncorrected misstatements.
Overall materiality - group
Overall materiality - parent
25%
25%
Tolerance for potential
uncorrected mistatements
Performance materiality
75%
75%
AN OVERVIEW OF THE SCOPE OF OUR AUDIT
Our audit approach was based on a thorough understanding of the Group's business and is risk based, and in
particular included:
• Continuing to evolve our audit approach, which resulted in advanced audit procedures during the interim review
(period 6) and January 2018 (period 9). Our procedures focused on revenue occurrence testing, obtaining
the updated inventory provision, challenging the updated dilapidations model, testing of property, plant and
equipment additions, testing of available-for-sale financial assets and an assessment of the accounting for
forward currency contracts;
• An onsite visit to the US in March 2018 to finalise our audit work in respect of the acquisition of the trade and
assets of US based Bob’s Stores and Eastern Mountain Sports and gain a better understanding of the acquired
businesses;
• Evaluation by the Group audit team of identified components to assess the significance of each component and
to determine the planned audit response based on a measure of materiality.
• For those components that were evaluated as significant, either a full-scope or targeted audit approach was
taken based on their relative materiality to the Group and our assessment of the audit risk. For significant
components requiring a full-scope approach, we evaluated controls over the financial reporting systems
identified as part of our risk assessment and addressed critical accounting matters. We then undertook
substantive testing on significant transactions and material account balances;
In order to address the audit areas described above and identified during our planning procedures, we
performed a full-scope audit of the financial statements of the parent company, Sports Direct International plc
and on the financial information of the main trading company within the UK Sports Retail division, SportsDirect.
com Retail Limited. The operations that were subject to full-scope audit procedures made up 54% of
consolidated revenues and 95% of underlying EBITDA;
•
• Targeted audit procedures have been performed over the Premium Lifestyle Division (which includes Cruise
Clothing Limited, The Flannels Group Limited and Van Mildert (Lifestyle) Limited), Wareshop2 Limited, Republic.
com Retail Limited, SDI Property Limited and overseas components in the United States of America, Austria,
Belgium, Ireland and Estonia;
• The operations that were subject to targeted audit procedures made up 46% of consolidated revenues and 2%
of underlying EBITDA;
• The remaining operations of the Group were subject to analytical procedures over the balance sheet and income
statements of the relevant entities with a focus on applicable risks identified above and the significance to the
Group’s results and financial position; and
137
GROUP FINANCIAL STATEMENTSSPORTS DIRECT - ANNUAL REPORT 2018 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF SPORTS DIRECT
INTERNATIONAL PLC Continued
• Where the audit work was performed by component auditors, we determined the level of involvement we
needed to have in their audit work at those reporting units to be able to conclude whether sufficient, appropriate
audit evidence had been obtained as a basis for our opinion on the Group financial statements as a whole.
Detailed audit instructions were issued to the component auditors where a targeted audit approach had been
identified. The audit instructions detailed the significant risks to be addressed through the audit procedures and
indicated the information we required to be reported back to the Group audit team. We were involved in the
planning of the audit work for overseas components and performed site visits to component auditor locations
in Austria and Ireland, which included a review of the audit work performed by the component auditors. Where
the component auditors of components subject to a targeted approach were not visited, a review of audit
working papers was conducted remotely. The Group audit team communicated with all component auditors
throughout the planning, fieldwork and concluding stages of their audit work.
The chart below demonstrates the coverage of audit procedures:
Revenue
4%
Underlying EBITDA
2% 3%
46%
50%
Comprehensive
Targeted
Analytical
Comprehensive
Targeted
Analytical
95%
OTHER INFORMATION
The directors are responsible for the other information. The other information comprises the information included in
the annual report set out on pages 1 to 130, other than the financial statements and our auditor’s report thereon. Our
opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly
stated in our report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing
so, consider whether the other information is materially inconsistent with the financial statements or our knowledge
obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies
or apparent material misstatements, we are required to determine whether there is a material misstatement in the
financial statements or a material misstatement of the other information. If, based on the work we have performed, we
conclude that there is a material misstatement of the other information, we are required to report that fact.
We have nothing to report in this regard.
138
In this context, we also have nothing to report in regard to our responsibility to specifically address the following
items in the other information and to report as uncorrected material misstatements of the other information where we
conclude that those items meet the following conditions:
• Fair, balanced and understandable set out on page 129 – the statement given by the directors that they consider
the annual report and financial statements taken as a whole is fair, balanced and understandable and provides
the information necessary for shareholders to assess the Group’s performance, business model and strategy, is
materially inconsistent with our knowledge obtained in the audit; or
• Audit committee reporting set out on page 108 – the section describing the work of the audit committee does
not appropriately address matters communicated by us to the audit committee; or
• Directors’ statement of compliance with the UK Corporate Governance Code set out on page 102 – the parts
of the directors’ statement required under the Listing Rules relating to the company’s compliance with the UK
Corporate Governance Code containing provisions specified for review by the auditor in accordance with Listing
Rule 9.8.10R(2) do not properly disclose a departure from a relevant provision of the UK Corporate Governance
Code.
OUR OPINIONS ON OTHER MATTERS PRESCRIBED BY THE COMPANIES ACT 2006
ARE UNMODIFIED
In our opinion, the part of the directors’ remuneration report to be audited has been properly prepared in
accordance with the Companies Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
•
•
•
the information given in the Strategic Report and the Directors’ Report for the financial year for which the
financial statements are prepared is consistent with the financial statements and those reports have been
prepared in accordance with applicable legal requirements;
the information about internal control and risk management systems in relation to financial reporting
processes and about share capital structures, given in compliance with rules 7.2.5 and 7.2.6 in the
Disclosure Rules and Transparency Rules sourcebook made by the Financial Conduct Authority (the FCA
Rules), is consistent with the financial statements and has been prepared in accordance with applicable
legal requirements; and
information about the company’s corporate governance code and practices and about its administrative,
management and supervisory bodies and their committees complies with rules 7.2.2, 7.2.3 and 7.2.7 of
the FCA Rules.
MATTERS ON WHICH WE ARE REQUIRED TO REPORT UNDER THE COMPANIES ACT 2006
In the light of the knowledge and understanding of the Group and the parent company and its environment obtained in
the course of the audit, we have not identified material misstatements in:
•
•
the Strategic Report or the Directors’ Report; or
the information about internal control and risk management systems in relation to financial reporting processes
and about share capital structures, given in compliance with rules 7.2.5 and 7.2.6 of the FCA Rules.
139
GROUP FINANCIAL STATEMENTSSPORTS DIRECT - ANNUAL REPORT 2018 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF SPORTS DIRECT
INTERNATIONAL PLC Continued
MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY EXCEPTION
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us
to report to you if, in our opinion:
• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have
•
not been received from branches not visited by us; or
the parent company financial statements and the part of the directors’ remuneration report to be audited are not
in agreement with the accounting records and returns; or
• certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit; or
• a corporate governance statement has not been prepared by the parent company.
RESPONSIBILITIES OF DIRECTORS FOR THE FINANCIAL STATEMENTS
As explained more fully in the directors’ responsibilities statement set out on page 129, the directors are responsible
for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such
internal control as the directors determine is necessary to enable the preparation of financial statements that are free
from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Group’s and the parent company’s
ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going
concern basis of accounting unless the directors either intend to liquidate the Group or the parent company or to cease
operations, or have no realistic alternative but to do so.
AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance
with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error
and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial statements.
We are responsible for obtaining reasonable assurance that the financial statements taken as a whole are free from
material misstatement, whether caused by fraud or error. Owing to the inherent limitations of an audit, there is an
unavoidable risk that material misstatements of the financial statements may not be detected, even though the audit is
properly planned and performed in accordance with the ISAs (UK). Our audit approach is a risk-based approach and is
explained more fully in the ‘An overview of the scope of our audit’ section of our audit report
A further description of our responsibilities for the audit of the financial statements is located on the Financial
Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s
report.
140
OTHER MATTERS WHICH WE ARE REQUIRED TO ADDRESS
Following the recommendation of the audit committee, we were appointed by the board of directors on 10 February
2007 to audit the financial statements for the period ended 29 April 2007 and subsequent financial periods.
The period of total uninterrupted engagement as auditor is 12 years, covering the 52-week period ended 29 April 2007
to the 52-week period ended 29 April 2018.
The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the Group or the parent company
and we remain independent of the Group and the parent company in conducting our audit.
Our audit opinion is consistent with the additional report to the audit committee.
Philip Westerman
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
London
18 July 2018
141
GROUP FINANCIAL STATEMENTSSPORTS DIRECT - ANNUAL REPORT 2018 CONSOLIDATED INCOME STATEMENT
For the 52 weeks ended 29 April 2018
Revenue
Cost of sales
Gross profit
Selling, distribution and administrative expenses
Other operating income
Exceptional items
Profit on sale of properties
Profit on disposal of subsidiary
Operating profit
Investment income
Investment costs
Finance income
Finance costs
Share of (loss) / profit of associated undertakings
Profit before taxation
Taxation
Profit for the period
ATTRIBUTABLE TO:
Equity holders of the Group
Non-controlling interests
Profit for the period
EARNINGS PER SHARE ATTRIBUTABLE TO THE EQUITY SHAREHOLDERS
Basic earnings per share
Diluted earnings per share
Note
1, 4
5
6
7
32
4, 8
10
11
12
13
19
14
4
4
15
15
52 weeks ended
29 April 2018
(£m)
53 weeks ended
30 April 2017
(£m)
3,359.5
(2,024.4)
1,335.1
(1,156.1)
26.5
(4.8)
16.3
-
217.0
25.7
(119.0)
3.4
(40.9)
(8.7)
77.5
(49.9)
27.6
24.5
3.1
27.6
3,245.3
(1,914.7)
1,330.6
(1,255.6)
22.5
(17.3)
-
79.9
160.1
162.5
(51.2)
18.8
(9.4)
0.8
281.6
(49.9)
231.7
229.9
1.8
231.7
Pence per share
Pence per share
4.6
4.6
39.4
38.3
The consolidated income statement has been prepared on the basis that all operations are continuing.
The accompanying accounting policies and notes form part of these Financial Statements.
142
CONSOLIDATED STATEMENT OF
COMPREHENSIVE INCOME
For the 52 weeks ended 29 April 2018
Profit for the period
OTHER COMPREHENSIVE INCOME
ITEMS THAT WILL NOT BE RECLASSIFIED SUBSEQUENTLY TO PROFIT OR LOSS
Actuarial losses on defined benefit pension schemes
Taxation on items recognised in other comprehensive income
ITEMS THAT WILL BE RECLASSIFIED SUBSEQUENTLY TO PROFIT OR LOSS
Exchange differences on translation of foreign operations
Exchange differences on hedged contracts - recognised in the period
Exchange differences on hedged contracts - reclassified and reported in sales
Exchange differences on hedged contracts - reclassified and reported in cost of sales
Exchange differences on hedged contracts – taxation taken to reserves
Fair value adjustment in respect of available-for-sale financial assets – recognised in the period
Fair value adjustment in respect of available-for-sale financial assets – reclassified in the period
Fair value adjustment in respect of available-for-sale financial assets – reclassified to Income
Statement
Fair value adjustment in respect of available-for-sale financial assets – taxation
OTHER COMPREHENSIVE COST FOR THE PERIOD, NET OF TAX
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD
29
29
29
20
20
ATTRIBUTABLE TO:
Equity holders of the Group
Non-controlling interest
The accompanying accounting policies and notes form part of these Financial Statements.
Note
52 weeks ended
29 April 2018
(£m)
53 weeks ended
30 April 2017
(£m)
4
27.6
231.7
-
-
(0.9)
(49.9)
15.5
0.6
6.9
(26.1)
-
47.9
-
(6.0)
21.6
18.5
3.1
21.6
(8.8)
1.7
50.3
(31.3)
8.7
(18.2)
7.7
23.7
(129.3)
-
(1.8)
(97.3)
134.4
132.6
1.8
134.4
143
GROUP FINANCIAL STATEMENTSSPORTS DIRECT - ANNUAL REPORT 2018
CONSOLIDATED BALANCE SHEET
At 29 April 2018
ASSETS - NON-CURRENT
Property, plant and equipment
Investment properties
Intangible assets
Investments in associated undertakings
Available-for-sale financial assets
Deferred tax assets
ASSETS – CURRENT
Inventories
Trade and other receivables
Derivative financial assets
Cash and cash equivalents
TOTAL ASSETS
EQUITY AND LIABILITIES
Share capital
Share premium
Treasury shares reserve
Permanent contribution to capital
Capital redemption reserve
Foreign currency translation reserve
Reverse combination reserve
Own share reserve
Hedging reserve
Retained earnings
Issued capital and reserves attributable to owners of the parent
Non-controlling interests
TOTAL EQUITY
LIABILITIES - NON-CURRENT
Borrowings
Retirement benefit obligations
Deferred tax liabilities
Provisions
LIABILITIES – CURRENT
Derivative financial liabilities
Trade and other payables
Borrowings
Current tax liabilities
TOTAL LIABILITIES
TOTAL EQUITY AND LIABILITIES
Note
29 April 2018
(£m)
30 April 2017
Restated
(£m)
16
17
18
19
20
27
21
22
29
23
24
25
25
25
25
25
26
27
28
29
30
26
878.4
23.7
181.3
6.2
249.8
24.9
842.0
23.1
185.7
26.4
63.9
33.7
1,364.3
1,174.8
873.4
234.8
17.1
360.0
1,485.3
2,849.6
64.1
874.3
(290.0)
0.1
8.0
76.2
(987.3)
(69.0)
(51.9)
1,588.0
1,212.5
1.7
1,214.2
757.1
1.9
10.4
156.9
926.3
93.1
606.5
-
9.5
709.1
1,635.4
2,849.6
674.2
352.1
43.0
204.7
1,274.0
2,448.8
64.1
874.3
(329.5)
0.1
8.0
77.1
(987.3)
(33.7)
(25.1)
1,591.0
1,239.0
(0.7)
1,238.3
317.3
3.4
18.7
130.2
469.6
75.2
584.9
69.5
11.3
740.9
1,210.5
2,448.8
The accompanying accounting policies and notes form part of these Financial Statements. The Financial Statements
were approved by the Board on 18 July 2018 and were signed on its behalf by:
Jon Kempster
Chief Financial Officer
Company number: 06035106
144
CONSOLIDATED CASH FLOW STATEMENT
For the 52 weeks ended 29 April 2018
CASH INFLOW FROM OPERATING ACTIVITIES
Income taxes paid
NET CASH INFLOW FROM OPERATING ACTIVITIES
CASH FLOW FROM INVESTING ACTIVITIES
Proceeds on disposal of property, plant and equipment
Proceeds on disposal of listed investments
Proceeds on disposal of subsidiary
Purchase of associate, net of cash acquired
Cash acquired through / (purchase) of subsidiaries
Purchase of property, plant and equipment
Purchase of investment properties
Purchase of intangible assets
Purchase of listed investments
Prepayment of business combination consideration held in escrow
Investment income received
Finance income received
Note
33
32
19
31
16
17
18
20
33
52 weeks ended
29 April 2018
(£m)
53 weeks ended
30 April 2017
Restated (£m)
371.3
(45.1)
326.2
69.0
20.9
-
-
8.2
332.7
(75.3)
257.4
2.4
190.2
109.5
(9.0)
(8.1)
(204.2)
(413.5)
(5.0)
(4.1)
(287.1)
-
34.2
3.4
(6.0)
-
(24.7)
(81.2)
0.5
0.5
NET CASH OUTFLOW FROM INVESTING ACTIVITIES
(364.7)
(239.4)
CASH FLOW FROM FINANCING ACTIVITIES
Exercise of option over non-controlling interests
Finance costs paid
Borrowings drawn down
Borrowings repaid
Purchase of own shares
NET CASH INFLOW / (OUTFLOW) FROM FINANCING ACTIVITIES
NET INCREASE / (DECREASE) IN CASH AND CASH EQUIVALENTS INCLUDING
OVERDRAFTS
Exchange movement on cash balances
CASH AND CASH EQUIVALENTS INCLUDING OVERDRAFTS AT BEGINNING OF PERIOD
CASH AND CASH EQUIVALENTS INCLUDING OVERDRAFTS AT THE PERIOD END
23
The accompanying accounting policies and notes form part of these Financial Statements.
(11.3)
(14.0)
782.9
(343.0)
(155.4)
259.2
220.7
4.1
135.2
360.0
(5.5)
(2.8)
328.0
(344.1)
(109.8)
(134.2)
(116.2)
17.7
233.7
135.2
145
GROUP FINANCIAL STATEMENTSSPORTS DIRECT - ANNUAL REPORT 2018 CONSOLIDATED STATEMENT OF
CHANGES IN EQUITY
For the 52 weeks ended 29 April 2018
Treasury
Shares
(£m)
Foreign
currency
translation
(£m)
Own share
Reserve
(£m)
Retained
Earnings
(£m)
Other
(£m)
Total
attributable
to owners
of parent
(£m)
Non-
controlling
Interests
(£m)
Total
(£m)
At 24 April 2016
(56.2)
26.8
(33.7)
1,482.3
(32.8)
1,386.4
(1.7)
1,384.7
Credit to equity for share-based payment
Deferred tax on share schemes
Purchase of own shares
-
-
(109.8)
Fair valuation of share buyback contractual obligation
(163.5)
Non-controlling interests - acquisitions
Transactions with owners
Profit for the financial period
OTHER COMPREHENSIVE INCOME
Cash flow hedges - recognised in the period
Cash flow hedges - reclassified and reported in sales
Cash flow hedges - reclassified and reported in cost
of sales
Cash flow hedges - taxation
Actuarial losses on defined benefit pension schemes
Fair value adjustment in respect of available-for-sale
financial assets - recognised
Fair value adjustment in respect of available-for-sale
financial assets – reclassified
Taxation
Translation differences - Group
Total comprehensive income for the period
-
(273.3)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
50.3
50.3
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1.9
(1.3)
-
-
(7.3)
(6.7)
229.9
-
-
-
-
(8.8)
23.7
(129.3)
(0.1)
-
-
-
-
-
-
-
-
1.9
(1.3)
(109.8)
(163.5)
(7.3)
(280.0)
229.9
(31.3)
(31.3)
8.7
8.7
(18.2)
(18.2)
7.7
-
-
-
-
-
7.7
(8.8)
23.7
(129.3)
(0.1)
50.3
-
-
-
-
(0.8)
(0.8)
1.8
-
-
-
-
-
-
-
-
-
1.9
(1.3)
(109.8)
(163.5)
(8.1)
(280.8)
231.7
(31.3)
8.7
(18.2)
7.7
(8.8)
23.7
(129.3)
(0.1)
50.3
115.4
(33.1)
132.6
1.8
134.4
At 30 April 2017
(329.5)
77.1
(33.7)
1,591.0
(65.9)
1,239.0
(0.7)
1,238.3
Credit to equity for share-based payment
Current tax on share scheme vesting
Deferred tax on share schemes
Transfer of shares from Treasury to Own Share
reserve
Purchase of own shares
Reversal of FY17 fair valuation of share buyback
contractual obligation
-
-
-
29.9
(113.9)
163.5
Fair valuation of share buyback contractual obligation
(40.0)
Non-controlling interests - acquisitions
Transactions with owners
Profit for the financial period
OTHER COMPREHENSIVE INCOME
Cash flow hedges - recognised in the period
Cash flow hedges - reclassified and reported in sales
Cash flow hedges - reclassified and reported in cost
of sales
Cash flow hedges - taxation
Fair value adjustment in respect of available-for-sale
financial assets - recognised
Fair value adjustment in respect of available-for-sale
financial assets – reclassified to P&L
Taxation
Translation differences - Group
Total comprehensive income for the period
39.5
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(0.9)
(0.9)
57.3
(57.3)
-
-
(51.0)
(41.6)
-
-
-
(35.3)
-
-
-
-
-
-
-
-
-
-
4.8
(7.9)
21.1
-
-
-
(10.0)
(49.3)
24.5
-
-
-
-
(26.1)
47.9
-
-
-
-
-
-
-
-
-
-
-
-
(49.8)
15.5
0.6
6.9
-
-
-
-
-
4.8
(7.9)
-
(155.5)
163.5
(40.0)
(10.0)
(45.1)
24.5
(49.8)
15.5
0.6
6.9
(26.1)
47.9
-
(0.9)
18.6
-
-
-
-
-
-
-
(0.7)
(0.7)
3.1
-
-
-
-
-
-
-
-
3.1
-
4.8
(7.9)
-
(155.5)
163.5
(40.0)
(10.7)
(45.8)
27.6
(49.8)
15.5
0.6
6.9
(26.1)
47.9
-
(0.9)
21.7
46.3
(26.8)
At 29 April 2018
(290.0)
76.2
(69.0)
1,588.0
(92.7)
1,212.5
1.7
1,214.2
The accompanying accounting policies and notes form part of these Financial Statements.
146
The share premium account is used to record the excess proceeds over nominal value on the issue of shares. The
permanent contribution to capital relates to a cash payment of £50,000 to the Company on 8 February 2007 under a
deed of capital contribution. The capital redemption reserve arose on the redemption of the Company's redeemable
preference shares of 10p each at par on 2 March 2007. The own shares and treasury reserves represent the cost of
shares in Sports Direct International plc purchased in the market and held by Sports Direct International plc Employee
Benefit Trust to satisfy options under the Group's share scheme.
On 23 August 2017 the Company transferred 12,782,512 shares from Treasury Shares to the Own Share reserve in
order to satisfy the vesting of the Bonus Share Scheme. The shares were transferred into the Own share reserve at
market value on the day.
On 28 April 2017 the Company announced an irrevocable non-discretionary share buyback programme. In line with
IAS32 the Company recognised the full redemption amount of £163.5m in the FY17 accounts. In FY18 this fair value
was reversed and replaced with the actual value purchased under the programme of £113.9m.
The Company announced on 27 April 2018 that it has instructed Liberum Capital Limited in relation to an irrevocable
non-discretionary share buyback programme to purchase the Company’s shares during the closed period commencing
on 30 April 2018 and ending on 19 July 2018. In line with IAS32 Financial Instruments: Presentation the Company
recognised the full redemption amount of £40.0m which is considered to be immaterially different to the present
value at period end. If the contract expires without full delivery, the amount of the financial liability attributable to the
undelivered shares is reclassified to equity reversing the original recognition. As at 18 July 2018, nil shares have been
repurchased under the closed period share buyback programme.
147
GROUP FINANCIAL STATEMENTSSPORTS DIRECT - ANNUAL REPORT 2018 NOTES TO THE FINANCIAL
STATEMENTS For the 52 weeks ended 29 April 2018
1. ACCOUNTING POLICIES
The consolidated Financial Statements of Sports Direct International plc (the “Company”) and its subsidiaries (together
the “Group”) have been prepared in accordance with International Financial Reporting Standards as adopted by the
European Union (“IFRS”).
BASIS OF PREPARATION
The consolidated Financial Statements have been prepared in accordance with IFRS as adopted for use in the
European Union (including International Accounting Standards) (“IAS”) and International Financial Reporting
Standards Interpretations Committee (“IFRSIC”) and with those parts of the Companies Act 2006 applicable to
companies reporting under IFRS as adopted for use in the European Union. The consolidated Financial Statements
have been prepared under the historical cost convention, as modified to include fair valuation of certain financial assets
and derivative financial instruments.
The period ended 29 April 2017 financial statements have been restated following a review by management into
the recognition of an element of Loaded-on-Board inventory. In 2017 an element of Loaded-on-Board inventory was
incorrectly classified within other debtors instead of inventory. A prior period adjustment has been made to correct the
prior period balance sheet resulting in an increase to inventory of £45.0m and a decrease to other debtors of £45.0m.
There has been no impact to basic or diluted earnings per share, profit for the period, total comprehensive income or
net assets.
The funds used for the Bob's and Eastern Mountain Sports acquisition were transferred to escrow during FY17 and
were reported in Receivables in the prior year. The acquisition completed on 18 May 2017 and the prior year has
therefore been restated to recognise the transfer on the face of the Cash Flow, therefore movment in Receivables has
been restated.
CONSOLIDATION
The consolidated Financial Statements consolidate the revenues, costs, assets, liabilities and cash flows of the
Company and its subsidiaries, being those entities that the Group is considered to have control over. It will be
considered to have control when it has power over the entity, is exposed to or has rights to variable returns from the
entity and has the ability to use its power over the entity to affect the amount of the entity’s returns.
On acquisition, the assets and liabilities and contingent liabilities of a subsidiary are measured at their fair values at
the date of acquisition. Any excess of fair value of the consideration transferred over the fair values of the identifiable
net assets acquired is recognised as goodwill. Any deficiency of fair value of consideration transferred below the
fair values of the identifiable net assets acquired is credited to the consolidated income statement in the period of
acquisition. The non-controlling interest is stated at the non-controlling interest’s proportion of the fair values of the
assets, liabilities and contingent liabilities recognised. Costs incurred relating to acquisitions are expensed to the
income statement.
The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement
from the effective date of acquisition or up to the effective date of disposal, as appropriate.
ASSOCIATES
Associates are entities over which the Group has significant influence but not control, generally accompanied by a
share of between 20% and 50% of the voting rights.
The Group’s share of the results of associates is included in the Group’s consolidated income statement using the
equity method of accounting. Investments in associates are carried in the Group’s consolidated balance sheet at cost
plus post acquisition changes in the Group’s share of the net assets of the associates and joint ventures, less any
impairment in value. The carrying values of investments in associates include acquired goodwill.
148
If the Group’s share of losses in an associate equals or exceeds its investment in the associate, the Group does not
recognise further losses, unless it has incurred obligations to do so or made payments on behalf of the associate.
Unrealised gains arising from transactions with associates are eliminated to the extent of the Group’s interest in the
entity.
INVESTMENTS
Available-for-sale investments are initially recognised at fair value. Where fair value is different to cost, this is
recognised in the income statement on initial recognition. Subsequent gains and losses arising from changes in
fair value are recognised in the statement of other comprehensive income except for interest and dividend income,
impairment losses and foreign exchange losses on monetary assets, which are recognised in the income statement.
When the security is disposed of, de-recognised or is determined to be impaired, the cumulative gain or loss previously
recognised in other comprehensive income is reclassified from equity to the income statement as a reclassification
adjustment within other comprehensive income.
ACQUISITIONS
For business combinations achieved in stages, the Group remeasures its previously held equity interest in the
acquiree at its acquisition date fair value and recognises the resulting gain or loss, if any, in the income statement as
appropriate.
GOODWILL
Goodwill arising on consolidation is recognised as an asset and reviewed for impairment at least annually or when
a change in circumstances or situation indicates that the goodwill has suffered an impairment loss. The need for
impairment is tested by comparing the recoverable amount of the cash-generating unit (CGU) to the carrying value.
Any impairment is recognised immediately in the income statement. Impairment losses on goodwill are not reversed.
Gains and losses on the disposal of a business include the amount of goodwill relating to that business.
When the non-controlling interest of an existing subsidiary is acquired the carrying value of the non-controlling
interests in the balance sheet is eliminated. Any difference between the amount by which the non-controlling interest
is adjusted and the fair value of the consideration paid is recognised directly in equity.
OTHER INTANGIBLE ASSETS
Brands, trademarks and licences that are internally generated are not recorded on the balance sheet. Acquired
brands, trademarks and licences are initially carried on the balance sheet at cost. The fair value of brands, trademarks
and licences that are acquired by virtue of a business combination is determined at the date of acquisition and is
subsequently assessed as being the deemed cost to the Group.
Expenditure on advertising and promotional activities is recognised as an expense as incurred.
No amortisation is charged on those brands, trademarks or perpetual/renewable licences with an indefinite life as the
Group believes that the value of these brands and trademarks can be maintained indefinitely. The Group carries out
an impairment review of indefinite life intangibles, at least annually, or when a change in circumstances or situation
indicates that those intangibles have suffered an impairment loss. Impairment is measured by comparing the carrying
amount of the intangible asset as part of the CGU with the recoverable amount of the CGU, that is, the higher of its
fair value less costs to sell and its value in use. Value in use is calculated by using a pre-tax discount rate that reflects
current market assessments of the time value of money and the risks specific to the asset for which the estimates of
future cash flows have not been adjusted.
Amortisation is provided on other brands, trademarks and licences with a definite life on a straight line basis over their
useful economic lives of between 5 to 15 years and is accounted for within the selling, distribution and administrative
expenses category within the income statement.
149
GROUP FINANCIAL STATEMENTSSPORTS DIRECT - ANNUAL REPORT 2018 PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at historical cost less depreciation less any recognised impairment losses.
Cost includes expenditure that is directly attributable to the acquisition or construction of these items. Subsequent
costs are included in the asset’s carrying amount only when it is probable that future economic benefits associated
with the item will flow to the Group and the costs can be measured reliably.
All other costs, including repairs and maintenance costs, are charged to the income statement in the period in which
they are incurred.
Depreciation is provided on all property, plant and equipment other than freehold land and is calculated on a reducing
balance basis or straight-line basis, whichever is deemed by the directors to be more appropriate, to allocate cost less
assessed residual value, other than assets in the course of construction, over the estimated useful lives, as follows:
• Freehold buildings - between 4% and 10% per annum - straight line
• Leasehold improvements - 20% or over the term of the lease, whichever is shortest - straight line
• Plant and equipment - between 20% and 33% per annum - straight line
The assets’ useful lives and residual values are reviewed and, if appropriate, adjusted at each balance sheet date. The
gain or loss arising on disposal or scrapping of an asset is determined as the difference between the sales proceeds,
net of selling costs, and the carrying amount of the asset and is recognised in the income statement.
Property, plant and equipment where the carrying amount is recovered principally through a sales transaction and
where a sale is considered to be highly probable is stated at the lower of carrying value and fair value less costs to sell.
INVESTMENT PROPERTIES
Investment properties, which are defined as property held for rental income or capital appreciation, are initially
measured at cost being purchase price and directly attributable expenditure.
Subsequently investment properties are held at cost less accumulated depreciation and impairment losses. Investment
properties are depreciated over between 10 and 25 years other than the land element which is not depreciated.
Fair values of the investment properties are disclosed.
IMPAIRMENT OF ASSETS OTHER THAN GOODWILL AND INTANGIBLE ASSETS WITH AN INDEFINITE LIFE
At each balance sheet date, the Directors review the carrying amounts of the Group’s tangible and intangible assets,
other than goodwill and intangible assets with an indefinite life, to determine whether there is any indication that
those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset in its
current condition is estimated in order to determine the extent of the impairment loss, if any. Where the asset does not
generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the CGU
to which the asset belongs. With respect to property, plant and equipment, each store is considered to be a CGU and
where onerous leases are noted the assets of each individual store are individually assessed for impairment.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the
estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risks specific to the asset for which the estimates of future
cash flows have not been adjusted.
If the recoverable amount of an asset (or CGU) is estimated to be less than its carrying amount, the carrying amount
of the asset (CGU) is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately,
unless the relevant asset is carried at a re-valued amount, in which case the impairment loss is treated as a revaluation
decrease to the original historic cost and then as an expense.
150
NOTES TO THE FINANCIAL STATEMENTSFor the 52 weeks ended 29 April 2018Continued Impairment losses recognised for CGU’s to which goodwill has been allocated are credited initially to the carrying
amount of goodwill. Any remaining impairment loss is charged pro rata to the other assets in the CGU.
Equity investments are impaired when there is objective evidence of impairment which includes a significant or
prolonged decline in value.
Where an impairment loss subsequently reverses, the carrying amount of the asset (CGU) excluding goodwill, is
increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not
exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset
(CGU) in prior periods. A reversal of an impairment loss is recognised in the income statement immediately.
REVENUE RECOGNITION
Revenue is measured at the fair value of the consideration received, or receivable, and represents amounts receivable
for goods supplied, stated net of discounts, returns and value added taxes.
In the case of goods sold through retail stores, revenue is recognised at the point of sale of a product to the customer,
less provision for returns. Accumulated experience is used to estimate and provide for such returns at the time of the
sale. Retail sales are usually in cash, by debit card or by credit card.
In the case of goods sold on the internet, revenue is recognised at the point that the risks and rewards of the inventory
have passed to the customer, which is the point of delivery to the customer. Transactions are settled by credit card or
payment card. Provisions are made for internet credit notes based on the expected level of returns, which in turn is
based upon the historical rate of returns.
In the case of goods sold to other businesses via wholesale channels, revenue is recognised when the substantial risks
and rewards of ownership are transferred to the customer.
In the case of income generated from trademarks and licences, revenue is recognised on an accruals basis in
accordance with the relevant agreements or on a transactional basis when revenue is linked to sale or purchase
volumes.
In the case of gym membership fees that are received in advance, revenue is deferred and recognised in the period in
which the services are provided.
EXCEPTIONAL ITEMS
The Group presents exceptional items on the face of the income statement, those significant items of income and
expense which, because of their size, nature and infrequency of the events giving rise to them, merit separate
presentation to allow shareholders to understand better the elements of financial performance in the year, so as to
facilitate comparison with prior periods and assess trends in financial performance more readily.
INTEREST INCOME
Interest income is reported on an accruals basis using the effective interest method.
FOREIGN CURRENCIES
The presentational currency of the Group is sterling. The functional currency of the Company is also sterling. Foreign
currency transactions are translated into sterling using the exchange rates prevailing on the dates of the transactions.
Exchange differences of the Company arising on the settlement of monetary items, and on the retranslation of
monetary items, are included in the income statement for the period.
151
GROUP FINANCIAL STATEMENTSSPORTS DIRECT - ANNUAL REPORT 2018 Exchange differences arising on the retranslation of non-monetary items carried at fair value are included in the
income statement for the period except for differences arising on the retranslation of non-monetary items in respect of
which gains and losses are recognised in other comprehensive income. For such non-monetary items, any exchange
component of that gain or loss is also recognised directly in other comprehensive income. Monetary assets and
liabilities denominated in foreign currencies are translated at the rate of exchange ruling at the balance sheet date.
On consolidation, the assets and liabilities of foreign operations which have a functional currency other than sterling
are translated into sterling at foreign exchange rates ruling at the balance sheet date. The revenues and expenses
of these subsidiary undertakings are translated at average rates applicable in the period. All resulting exchange
differences are recognised in other comprehensive income and documented in a separate component of equity.
When a foreign operation is sold, the cumulative exchange differences that have been recognised as a separate
component of equity are reclassified from equity to the income statement when the disposal is recognised.
In order to mitigate its exposure to certain foreign exchange risks, the Group enters into forward contracts (see Chief
Executive’s Report and Business Review and the cash flow hedging accounting policy on pages 154 to 155).
INVENTORIES
Inventories are valued at the lower of cost and net realisable value. Cost includes the purchase price of the
manufactured products, materials, direct labour, transport costs and a proportion of applicable overheads. Cost is
calculated using the weighted average cost method. Net realisable value is based on the estimated selling price less all
estimated selling costs.
The Company receives trade discounts and rebates from suppliers based upon the volume of orders placed in a given
time window. Where there is sufficient certainty that a discount or rebate will be received in the future that relates to
historic purchases this is reflected in the cost of inventories.
LOANS AND RECEIVABLES
Loans and receivables are recognised initially at fair value plus transaction costs and subsequently measured
at amortised cost under the effective interest method less provision for impairment. Provision for impairment is
established when there is objective evidence that the Group will not be able to collect amounts due according to the
original terms of the receivable. The amount of the impairment is the difference between the asset’s carrying amount
and the present value of the estimated future cash flows, discounted at the original effective interest rate.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash in hand and deposits held on call, together with other short term highly liquid
investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of
changes in value.
TRADE AND OTHER PAYABLES
Trade and other payables are initially measured at fair value, and are subsequently measured at amortised cost, using
the effective interest method.
TAXATION
Tax expense comprises of current and deferred tax. Tax is recognised in the income statement, except to the extent it
relates to items recognised in other comprehensive income or directly in equity.
152
NOTES TO THE FINANCIAL STATEMENTSFor the 52 weeks ended 29 April 2018Continued Deferred taxation is calculated using the liability method, on temporary differences arising between the tax bases of
assets and liabilities and their carrying amounts in the consolidated Financial Statements. However, if the deferred tax
arises from the initial recognition of goodwill or initial recognition of an asset or liability in a transaction other than a
business combination that at the time of the transaction affects neither accounting nor taxable profit or loss, it is not
accounted for. Deferred tax on temporary differences associated with shares in subsidiaries is not provided if reversal
of these temporary differences can be controlled by the Group and it is probable that reversal will not occur in the
foreseeable future. In addition, tax losses available to be carried forward as well as other income tax credits to the
Group are assessed for recognition as deferred tax assets. Deferred tax is determined using tax rates and laws that
have been enacted (or substantively enacted) by the balance sheet date and are expected to apply when the related
deferred tax asset is realised or the deferred tax liability is settled.
Deferred tax liabilities are provided in full.
Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against
which the temporary differences can be utilised.
Changes in current and deferred tax assets or liabilities are recognised as a component of tax expense in the income
statement, except where they relate to items that are recorded in other comprehensive income or charged or credited
directly to equity in which case the related deferred tax is also charged to other comprehensive income or credited
directly to equity. Deferred tax assets and liabilities are not discounted.
BORROWINGS AND BORROWING COSTS
Borrowings are recognised initially at fair value, net of transaction costs incurred, and subsequently at amortised cost.
Any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income
statement over the period of the borrowings using the effective interest method.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the
liability for at least 12 months from the balance sheet date. Borrowing costs, being interest and other costs incurred in
connection with the servicing of borrowings, are recognised as an expense when incurred.
PROVISIONS
A provision is recognised when the Group has a present legal or constructive obligation as a result of a past event, it
is probable that an outflow of resources will be required to settle the obligation and a reliable estimate can be made of
the amount of the obligation.
The Group provides for its legal responsibility for dilapidation costs following advice from chartered surveyors and
previous experience of exit costs. The estimated cost of fulfilling the leasehold dilapidations obligations is discounted
to present value and analysed between non-capital and capital components. The capital element is depreciated over
the life of the asset. The non-capital element is taken to the income statement in the first year of the lease where the
cost it represents is of no lasting benefit to the Group or its landlord. ‘Wear and tear’ costs are expensed to the income
statement. Provisions for onerous lease contracts are recognised when the Group believes the unavoidable costs of
meeting the lease obligations exceed the economic benefits expected to be received under the lease.
Other provisions include management’s best estimate of restructuring, employment related costs, legal costs and
other claims. See also note 22 and note 28. The Group provides for bad debts that arise on outstanding receivables
balances.
153
GROUP FINANCIAL STATEMENTSSPORTS DIRECT - ANNUAL REPORT 2018 LEASES
Leases of property, plant and equipment where the Group has substantially all the risks and rewards of ownership
are classified as finance leases. Finance leases are capitalised at the lease’s inception at the lower of the fair value of
the leased asset and the present value of the minimum lease payments. Each lease payment is allocated between the
liability and finance charges so as to achieve a constant rate on the finance balance outstanding. The asset subject
to the finance lease is depreciated over the shorter of its useful life and the lease term. The corresponding rental
obligations, net of finance charges, are included as a liability.
Leases of property, plant and equipment where the Group does not have substantially all the risks and rewards of
ownership are classified as operating leases. Payments made under operating leases are charged to the income
statement on a straight-line basis over the lease term. Incentives provided by the lessor are credited to the income
statement on a straight-line basis over the lease term.
Contingent rental payments, above standard payments, are conditional on the Group’s operating performance derived
from the lease item, (e.g. turnover levels). These are expensed in the period in which they are incurred.
Rental income from operating leases where the Group acts as a lessor is recognised on a straight-line basis over the
term of the relevant lease.
DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGE ACCOUNTING
The most significant exposure to foreign exchange fluctuations relates to purchases and sales made in foreign
currencies, principally the US Dollar and Euro. The Group’s policy is to substantially reduce the risk associated with
purchases and sales denominated in foreign currencies by using forward fixed rate currency purchase contracts, taking
into account any foreign currency cash flows.
Derivative financial instruments are measured at fair value. Where derivatives do not qualify for hedge accounting, any
gains or losses on re-measurement are immediately recognised in the income statement. Where derivatives qualify for
hedge accounting, recognition of any resultant gain or loss depends on the nature of the hedge relationship and the
item being hedged.
In order to qualify for hedge accounting, the Group is required to document from inception the relationship between
the item being hedged and the hedging instrument. The Group is also required to document and demonstrate an
assessment of the relationship between the hedged item and the hedging instrument, which shows that the hedge will
be highly effective on an on-going basis. This effectiveness testing is performed at each reporting date to ensure that
the hedge remains highly effective.
Written option contracts do not qualify for hedge accounting and fair value movements are recognised directly in the
income statement.
CASH FLOW HEDGING
Derivative financial instruments are classified as cash flow hedges when they hedge the Group’s exposure to variability
in cash flows that are either attributable to a particular risk associated with a recognised asset or liability, or a highly
probable forecast transaction.
The effective element of any gain or loss from re-measuring the derivative instrument is recognised directly in other
comprehensive income.
The associated cumulative gain or loss is reclassified from other comprehensive income in the same period or
periods during which the hedged transaction affects the profit or loss. The classification of the effective portion when
recognised in the income statement is the same as the classification of the hedged transaction.
154
NOTES TO THE FINANCIAL STATEMENTSFor the 52 weeks ended 29 April 2018Continued Any element of the re-measurement of the derivative instrument which does not meet the criteria for an effective
hedge is recognised immediately in the income statement within finance income or costs. Hedge accounting is
discontinued when the hedging instrument expires or is sold, terminated or exercised, or no longer qualifies for
hedge accounting. At that point in time, any cumulative gain or loss on the hedging instrument recognised in equity
is retained in equity until the forecasted transaction occurs upon which the cumulative gain is reclassified from Other
Comprehensive Income to the Income Statement. If a hedged transaction is no longer expected to occur, the net
cumulative gain or loss recognised in other comprehensive income is reclassified from equity to the income statement
as a reclassification adjustment.
TREASURY SHARES
The purchase price of the Group’s own shares that it acquires is recognised as ‘Treasury shares’ within equity. When
shares are transferred out of treasury the difference between the market value and the average purchase price of
shares sold out of treasury is transferred to retained earnings.
EMPLOYEE BENEFIT TRUST
An Employee Benefit Trust has been established for the purposes of satisfying certain share-based awards. The Group
has ‘de-facto’ control over the special purpose entity. This Trust is fully consolidated within the accounts. The cost of
shares acquired by the Sports Direct Employee Benefit Trust is recognised within ‘Own Share reserve’ in equity.
SHARE-BASED PAYMENTS
The Group issues equity-settled share-based payments to certain Directors and employees. These are measured at fair
value at the date of grant, which is expensed to the consolidated income statement on a straight-line basis over the
vesting period, with the corresponding credit going to equity.
Non-market vesting conditions are not taken into account in determining grant date fair value. Instead, they are taken
into account by adjusting the number of equity instruments to vest.
Fair value is based on the market share price on the grant date. The expected staff numbers used in the model has
been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions, and
behavioural considerations.
For cash-settled share-based payment transactions, the Group measures the services received and the liability incurred
at the fair value of the liability. Until the liability is settled, the Group remeasures the fair value of the liability at the
end of each reporting period and at the date of settlement, with any changes in fair value recognised in the Income
Statement for the period.
The credit for the share based payment charge does not equal the charge per the income statement as it excludes
amounts recognised in the balance sheet in relation to the expected national insurance contributions for the shares.
EQUITY INSTRUMENTS
An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all
of its liabilities. Equity instruments issued by the Group are recorded at the proceeds received, net of any direct issue
costs.
DIVIDENDS
Dividends are recognised as a liability in the Group’s Financial Statements and as a deduction from equity in the period
in which the dividends are declared. Where such dividends are proposed subject to the approval of shareholders, the
dividends are regarded as declared once shareholder approval has been obtained.
155
GROUP FINANCIAL STATEMENTSSPORTS DIRECT - ANNUAL REPORT 2018 MATERIALITY
In preparing the Financial Statements, the Board considers both quantitative and qualitative factors in forming its
judgements, and related disclosures, and are mindful of the need to best serve the interests of its stakeholders and to
avoid unnecessary clutter borne of the disclosure of immaterial items.
In making this assessment the Board considers the nature of each item, as well as its size, in assessing whether any
disclosure omissions or misstatements could influence the decisions of users of the Financial Statements.
The Board has applied a typical materiality threshold of 5% of the underlying EBITDA, the Group’s primary profit
measure, in order to calculate materiality levels. For the Financial period ended 29 April 2018, the current period
EBITDA of £306.1m gives a materiality level for FY18 of £15.3m.
INTERNATIONAL FINANCIAL REPORTING STANDARDS (“STANDARDS”) IN ISSUE BUT NOT YET EFFECTIVE
At the date of authorisation of these consolidated Financial Statements, the International Accounting Standards Board
(“IASB”) and International Financial Reporting Standards Committee (“IFRSC”) have issued the following standards
and interpretations which are effective for annual accounting periods beginning on or after the stated effective date.
These standards and interpretations are not effective for, and have not been adopted early in the preparation of the
consolidated Financial Statements:
IFRS 9
IFRS 9 Financial Instruments (IASB effective date 1 January 2018) replaces IAS 39 Financial Instruments: Recognition
and Measurement. IFRS 9 introduces:
• New requirements which look to align hedge accounting more closely with entities’ risk management activities
• New requirements for the classification and measurement of financial assets and liabilities.
• A new impairment model for financial assets by applying the expected loss model
Management has identified the following areas that are expected to be most impacted by the application of IFRS 9:
- the classification and measurement of the Group’s financial assets. Management holds most financial assets to hold
and collect the associated cash flows and is currently assessing the underlying types of cash flows to classify financial
assets correctly. Management expects the majority of held-to-maturity (HTM) investments to continue to be accounted
for at amortised cost. However, a number of available-for-sale (AFS) investments and other financial assets are likely
to be measured at fair value through profit or loss as the cash flows are not solely payments of principal and interest,
unless management make an irrevocable election to measure them through other comprehensive income.
The Group has completed an assessment of the impact of IFRS 9 and it is expected that adoption will not have a
material impact on total comprehensive income or net assets.
IFRS 15
IFRS 15 Revenue from Contracts with Customers (IASB effective 1 January 2018) replaces IAS 18 Revenue and several
revenue related Interpretations. The Group has completed an assessment of the impact of IFRS 15 and it is expected
that adoption will not have a material impact on total comprehensive income or net assets. The majority of sales are
made direct either in store or online at standard prices and provisions are already held for expected levels of returns.
IFRS 16
IFRS 16 Leases (IASB effective 1 January 2019). The Group has performed an initial assessment of the impact of IFRS
16, but has not yet performed a detailed impact assessment. The Group will be required to recognise a right-of-use
asset and a lease liability for future lease commitments (excluding low value leases and leases less than 12 months) on
the Consolidated Balance Sheet. Within the Consolidated Income Statement IFRS 16 replaces straight line operating
lease rental charges with depreciation of the right-of-use assets and an interest charge on the lease liabilities.
156
NOTES TO THE FINANCIAL STATEMENTSFor the 52 weeks ended 29 April 2018Continued The options available upon adoption of IFRS 16 are modified retrospective and full retrospective. The Group plans
to use the modified retrospective approach which will result in in an adjustment to the opening balance of Retained
earnings, with no restatement of comparatives.
The full financial impact of the standard has not yet been completed, as a number of unknown factors will impact the
calculation of the liability such as discount rates, whether the practical expedients available on transition will be used
and the composition of the property portfolio is likely to be materially different at the time of adoption.
For current operating lease information see note 34.
2. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
The critical accounting estimates and judgements made by the Group regarding the future or other key sources of
estimation, uncertainty and judgement that may have a significant risk of giving rise to a material adjustment to the
carrying values of assets and liabilities within the next financial period are:
PROVISION FOR OBSOLETE, SLOW MOVING OR DEFECTIVE INVENTORIES
The Directors have applied their knowledge and experience of the retail industry in determining the level and rates
of provisioning required in calculating the appropriate inventory carrying values. Specific estimates and judgements
applied in relation to assessing the level of inventory provisions required are considered in relation to the following
areas:
1. Core inventory
2. Seasonal inventory lines – specifically seasons that have now finished
3. Third party versus own brand inventory
4. Ageing of inventory
5. Sports Retail or Premium Lifestyle
6. Local economic conditions
7. Divisional specific factors
8. Increased cost of inventory and lower margins with the devaluation of the pound
Estimates are then applied to the various categories of inventory to calculate an appropriate level of provision. These
estimates are formed using a combination of factors including historical experience, management’s knowledge of the
industry, group discounting and sales pricing protocols, and the overall assessment made by management of the risks
in relation to inventory. Management use a number of internally generated reports to monitor and continually re-assess
the adequacy and accuracy of the provisions made. The additional cost of repricing inventory and handling charges
are considered in arriving at the appropriate percentage provision. The Group revised its estimation methodology
in the period in relation to inventory provisioning, and now also includes Loaded-on-Board inventory in the overall
assessment of the provision, as it considers this inventory to also have some risk of obsolescence due to the factors
outlined above. The testing performed to check that the assumptions applied remain valid by management produces
a range of outcomes and the provision is set within this range. A 1% change in the total provision would impact
underlying EBITDA by approx. £10.4m.
PROPERTY RELATED PROVISIONS
Property related estimates and judgements are continually evaluated and are based on historical experience, external
advice and other factors, including expectations of future events that are believed to be reasonable under the
circumstances. Where an onerous lease has been identified, the assets dedicated to that store are also reviewed for
impairment.
157
GROUP FINANCIAL STATEMENTSSPORTS DIRECT - ANNUAL REPORT 2018 Specific assumptions which involve the use of estimates to determine the appropriate level of provision include:
1. Forecast sales in stores, reflecting historic and expected future performance
2. Forecast wages and direct store cost inflation
3. The impact to gross margins due to currency fluctuations
4. Impact of Elevation of Sports Retail strategy in the UK has been considered in determining future forecast
individual store performance
5. Planned store closures, relocations and re-brandings
6. Lease obligations calculated to the end of the lease or where applicable break clause, or earlier estimate of
expected exit date where this can be reliably estimated
Further information on the basis of the estimation of provisioning for dilapidations and onerous lease contracts is
detailed in the provisions accounting policy and note 28.
OTHER PROVISIONS
Provisions are made for items where the Group has identified a present legal or constructive obligation arising as a
result of a past event, it is probable that an outflow of resources will be required to settle the obligation and a reliable
estimate can be made of the amount of the obligation.
Other provisions relate to managements best estimates of provisions required for restructuring, employment,
commercial, legal and regulatory claims and ongoing non-UK tax enquiries. Where applicable these are inclusive of
any estimated penalties, interest and legal costs, and are net of any associated recoverable amounts. See note 28.
OTHER RECEIVABLES AND AMOUNTS OWED BY RELATED PARTIES
Other receivables and amounts owed by related parties are stated net of provision for any impairment. Management
have applied estimates in assessing the recoverability of working capital and loan advances made to investee
companies. Matters considered include the relevant financial strength of the underlying investee company to repay the
loans, the repayment period and underlying terms of the monies advanced, forecast performance of the underlying
borrower, and where relevant, the Group’s intentions for the companies to which monies have been advanced.
DETERMINING RELATED PARTY RELATIONSHIPS
Management determines whether a related party relationship exists by assessing the nature of the relationship by
reference to the requirements of IAS 24, Related Party Disclosures. This is in order to determine whether significant
influence exists as a result of control, shared directors or parent companies, or close family relationships. The level
at which one party may be expected to influence the other is also considered for transactions involving close family
relationships. Where the Group are aware that relationships exist that they do not consider to meet the definition of
related parties, but believe that the arrangements will be of interest to the users of the accounts, these are disclosed
under “Commercial Arrangements”. See note 38 for more details.
CONTROL AND SIGNIFICANT INFLUENCE OVER CERTAIN ENTITIES
Under IAS 28 Investments in Associates and Joint Ventures if an entity holds 20% or more of the voting power of the
investee, it is presumed that the entity has significant influence, unless it can clearly demonstrate that this is not the
case. The Group holds greater than 20% of the voting rights of Findel Plc, Debenhams Plc, French Connection Group
PLC and GAME Digital Plc, however management consider that the Group does not have significant influence over
these entities for combinations of the following reasons:
• The Group does not have any representation on the board of directors of the investee other than an SDI
representative having an observer role on the board of Findel Plc. Management have reviewed the terms of the
observer arrangement and have concluded that this does not give them the right to participate in or influence
the financial or operating decisions of Findel plc. Findel can terminate this arrangement at any time, and can
determine which parts of the Board meetings the representative can be present at and what information they
are given access to;
158
NOTES TO THE FINANCIAL STATEMENTSFor the 52 weeks ended 29 April 2018Continued • There is no participation in decision making and strategic processes, including participation in decisions about
dividends or other distributions;
• There have been no material transactions between the entity and its investee companies (with regards to the
collaboration and working capital agreements entered into with GAME Digital plc in FY18 which have been
evaluated and are not considered to represent material transactions);
• There has been no interchange of managerial personnel;
• No non-public essential technical management information is provided to the investee
In assessing the level of control that management have over certain entities, management will consider the various
aspects that allow management to influence decision making. This includes the level of share ownership, board
membership, the level of investment and funding and the ability of the Group to influence operational and strategic
decisions and effect its returns through the exercise of such influence.
CASH FLOW HEDGING
Under IAS 39 in order to achieve cash flow hedge accounting, forecast transactions (primarily Euro denominated sales
and US dollar denominated purchases) must be considered to be highly probable. The hedge must be expected to be
highly effective in achieving offsetting changes in cash flows attributable to the hedged risk. The forecast transaction
that is the subject of the hedge must be highly probable and must present an exposure to variations in cash flows
that could ultimately affect profit or loss. Management have reviewed the detailed forecasts and growth assumptions
within them, and are satisfied that forecasts in which the cash flow hedge accounting has been based meet the criteria
per IAS 39 as being highly probable forecast transactions. Should the forecast levels not pass the highly probable
test, any cumulative fair value gains and losses in relation to either the entire or the ineffective portion of the hedged
instrument would be taken to the Income Statement.
AVAILABLE-FOR-SALE FINANCIAL ASSETS
Available-for-sale financial assets are impaired when there is objective evidence of impairment which includes a
significant or prolonged decline in value. Judgement is exercised in determining whether either or both of these factors
are present.
DEFINING OPERATING SEGMENTS
Management determines its operating segments with reference to the Chief Operational Decision Maker’s process for
making key decisions over allocation of resources to the segment and in assessing a segments performance. This is
based on:
• The nature of the operation type and products sold
• The type of class of customer targeted
• Product distribution methods
Similar operations are amalgamated into operating segments for the purposes of segmental reporting. See also note 4.
159
GROUP FINANCIAL STATEMENTSSPORTS DIRECT - ANNUAL REPORT 2018 3. FINANCIAL RISK MANAGEMENT
The Group’s current activities result in the following financial risks and set out below are management’s responses to
those risks in order to minimise any resulting adverse effects on the Group’s financial performance.
FOREIGN EXCHANGE RISK
The Group is exposed to foreign exchange risk principally via:
a. Transactional exposure from the cost of future purchases of goods for resale, where those purchases are
denominated in a currency other than the functional currency of the purchasing company. Transactional
exposures that could significantly impact the income statement are hedged. These exposures are hedged via
forward foreign currency contracts which are designated as cash flow hedges. The notional and fair value of
these contracts is shown in note 29.
b. Transactional exposure from the sale of goods, where those sales are denominated in a currency other than
the functional currency of the selling company. Transactional exposures that could significantly impact the
income statement are hedged. These exposures are hedged via forward foreign currency contracts which are
designated as cash flow hedges. The notional and fair value of these contracts is shown in note 29.
c. Net investment exposure, from the fair value of net investments outside the UK. The Group hedges its
international investments via foreign currency transactions and borrowings in matching currencies.
d. Loans to non-UK subsidiaries. These are hedged via foreign currency transactions and borrowings in matching
currencies, which are not formally designated as hedges, as gains and losses on hedges and hedged loans will
naturally offset.
e. Exposures in respect of written options to sell Euros or buy USD as explained in the Financial Review. These are
not hedged and movements in fair value could significantly impact the Income Statement in future periods. See
note 29.
INTEREST RATE RISK
The Group has net borrowings, which are principally at floating interest rates linked to bank base rates or LIBOR. The
Group does not currently use interest rate financial instruments to hedge its exposure to interest rate movements. The
Group regularly monitors and reacts accordingly to any exposure to fluctuations in interest rates and the impact on its
monetary assets and liabilities.
CREDIT RISK
The Directors have a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. Credit
evaluations are performed on all customers requiring credit over a certain amount. The Group does not require
collateral in respect of financial assets.
At each balance sheet date, there were no significant concentrations of credit risk. The maximum exposure to credit
risk is represented by the carrying amount of each financial asset in the balance sheet.
Investments of cash surpluses, borrowings and derivative instruments are made through banks and companies which
must fulfil credit rating and investment criteria approved by the Board.
LIQUIDITY RISK
The availability of adequate cash resources is managed by the Group through utilisation of its revolving credit facilities
together with equity and retained profits thereby achieving continuity of funding and short-term flexibility.
PRICE RISK
The Group is exposed to price risk in respect of its available-for-sale financial assets (in relation to listed company
shares).
160
NOTES TO THE FINANCIAL STATEMENTSFor the 52 weeks ended 29 April 2018Continued The price risk relates to volatility in the market, and how other comprehensive income and equity would have been
affected by changes in market risk that were reasonably possible at the reporting date. If the quoted stock price for
these securities increased or decreased, other comprehensive income and equity would have changed. The listed
securities are classified as available-for-sale so there would be no effect on profit or loss unless any decline in fair value
below cost is determined to be an impairment.
The investments in listed equity securities are considered medium to long-term, strategic investments. In accordance
with the Group’s policies, no specific hedging activities are undertaken in relation to these investments.
CAPITAL MANAGEMENT
A description of the Group’s objectives, policies and processes for managing capital are included in note 29.
4. SEGMENTAL ANALYSIS
Management have determined to present its segmental disclosures consistently with the presentation in the 2017
Annual Report with the exception that the USC fascia has been included within UK Sports Retail and our Asia based
retail activities have been moved from European Retail (formerly International Retail) to Rest of World Retail. This is due
to management's assessment of the operating characteristics of USC and the Asia based retail activities. Management
consider operationally that the UK and EU Sports Retail divisions are run as one business unit in terms of allocating
resources and assessing performance. However, under IFRS 8 we have not at this reporting date met the required
criteria with enough certainty to move back to an aggregated reporting segment. We will continually keep this under
review at subsequent reporting dates. We continue to monitor the impacts of Brexit, and the continued uncertainties
this has brought relating to the political and economic environments, and market and currency volatility in the
countries we operate in. European countries have been identified as operating segments and have been aggregated
into a single operating segment as permitted under IFRS 8. The decision to aggregate these segments was based on
the fact that they each have similar economic characteristics, similar long term financial performance expectations,
and are similar in each of the following respects:
• The nature of the products
• The type or class of customer for the products; and
• The methods used to distribute the products
In accordance with paragraph 12 of IFRS 8 the Group’s operating segments have been aggregated into the following
reportable segments:
1. UK Sports Retail – includes the results of the UK retail network of sports stores and USC stores and
concessions, along with related websites;
2. European Retail (formerly International Retail) - includes the results of the European retail network of sports
stores;
3. Rest of World Retail – includes the results of the US and Asia based retail activities;
4. Premium Lifestyle – includes the results of the premium and lifestyle retail businesses and related websites such
as Flannels, Cruise and van mildert; and
5. Wholesale & Licensing (formerly Brands) – includes the results of the Group’s portfolio of internationally
recognised brands such as Everlast, Lonsdale and Slazenger.
The comparative information for the period ended 30 April 2017 has been restated to include the results of USC in UK
Sports Retail and Malaysia in Rest of World Retail. Accordingly, the prior period has been restated to adjust £88.6m
of sales, £36.1m of margin and £40.8m of overheads to UK Sports Retail, and £27.7m of sales, £11.2m of margin and
£8.3m of costs to Rest of World Retail.
Information regarding the Group’s reportable segments for the 52 weeks ended 29 April 2018, as well as a
reconciliation of reported profit for the period to underlying EBITDA, is presented on pages 162 to 165.
161
GROUP FINANCIAL STATEMENTSSPORTS DIRECT - ANNUAL REPORT 2018 Segmental information for the 52 weeks ended 29 April 2018:
UK Sports
Retail
(£m)
European
Sports Retail
(£m)
Rest of World
Retail
(£m)
Premium
Lifestyle
(£m)
Wholesale
& Licensing
(£m)
Retail
(£m)
Total
Eliminations
(£m)
Total
(£m)
Sales to external
customers
2,181.5
637.2
192.4
162.1
3,173.2
Sales to other segments
-
-
-
-
-
Revenue
2,181.5
637.2
192.4
162.1
3,173.2
Gross profit
890.8
260.1
57.8
53.9
1,262.6
Operating profit/(loss)
before foreign exchange
and exceptional items
197.2
(20.5)
(25.5)
Operating profit/(loss)
238.6
(18.8)
(27.3)
3.4
3.5
154.6
196.0
186.3
12.7
199.0
72.5
26.9
21.0
Other investment income
Investment costs
Finance income
Finance costs
Share of profits of
associated undertakings
Profit before taxation
Taxation
Profit for the period
-
3,359.5
(12.7)
(12.7)
-
-
-
-
3,359.5
1,335.1
181.5
217.0
25.7
(119.0)
3.4
(40.9)
(8.7)
77.5
(49.9)
27.6
Sales to other segments are priced at cost plus a 10% mark-up.
Other segment items included in the income statement for the 52 weeks ended 29 April 2018:
UK Sports
Retail
(£m)
European
Sports Retail
(£m)
Rest of World
Retail
(£m)
Premium
Lifestyle
(£m)
Wholesale
& Licensing
(£m)
Retail
(£m)
Total
Total
(£m)
Depreciation
Amortisation
93.4
2.8
34.0
-
3.2
-
2.8
-
133.4
2.8
1.2
2.0
134.6
4.8
Information regarding segment assets and liabilities as at 29 April 2018 and capital expenditure for the 52 weeks then
ended:
Investments in associated undertakings
Other assets
Total assets
Total liabilities
Tangible asset additions
Intangible asset additions
Total capital expenditure
UK Sports
Retail
(£m)
European
Sports Retail
(£m)
Rest of World
Retail
(£m)
Premium
Lifestyle
(£m)
Wholesale
& Licensing
(£m)
Eliminations
(£m)
Total
(£m)
6.2
2,552.5
2,558.7
-
448.1
448.1
-
115.3
115.3
-
10.2
10.2
(1,387.9)
(601.4)
(160.3)
(29.2)
180.7
13.7
194.4
20.5
-
20.5
9.9
-
9.9
5.9
-
5.9
-
-
6.2
354.0
354.0
(93.3)
-
0.9
0.9
(636.7)
(636.7)
2,843.4
2,849.6
636.7
(1,635.4)
-
-
-
217.0
14.6
231.6
162
NOTES TO THE FINANCIAL STATEMENTSFor the 52 weeks ended 29 April 2018Continued Segmental information for the 53 weeks ended 30 April 2017 (restated):
UK Sports
Retail
(£m)
European
Sports Retail
(£m)
Rest of World
Retail
(£m)
Premium
Lifestyle
(£m)
Wholesale
& Licensing
(£m)
Retail
(£m)
Total
Eliminations
(£m)
Total
(£m)
Sales to external
customers
2,225.0
637.9
Sales to other segments
-
-
Revenue
2,225.0
637.9
27.7
-
27.7
113.6
3,004.2
-
-
113.6
3,004.2
Gross profit
915.5
276.1
11.2
40.0
1,242.8
Operating profit /(loss)
before foreign exchange
and exceptional items
161.0
(63.8)
Operating profit /(loss)
151.7
(71.1)
1.9
1.9
1.6
1.5
100.7
84.0
241.1
30.1
271.2
87.8
20.5
76.1
Other investment income
Finance income
Finance costs
Share of profits of
associated undertakings
Profit before taxation
Taxation
Profit for the period
-
3,245.3
(30.1)
(30.1)
-
-
-
-
3,245.3
1,330.6
121.2
160.1
111.3
18.8
(9.4)
0.8
281.6
(49.9)
231.7
Other segment items included in the income statement for the 53 weeks ended 30 April 2017:
Depreciation
Amortisation
UK Sports
Retail
(£m)
European
Sports Retail
(£m)
Rest of World
Retail
(£m)
Premium
Lifestyle
(£m)
95.0
2.5
40.2
1.1
1.0
-
2.2
-
Retail
(£m)
Total
138.4
3.6
Wholesale
& Licensing
(£m)
Total
(£m)
2.2
3.7
140.6
7.3
Information regarding segment assets and liabilities as at 30 April 2017 and capital expenditure for the 53 weeks then
ended:
Investments in associated undertakings
and joint ventures
Other assets
Total assets
Total liabilities
Tangible asset additions
Intangible asset additions
Total capital expenditure
UK Sports
Retail
(£m)
European
Sports Retail
(£m)
Rest of World
Retail
(£m)
Premium
Lifestyle
(£m)
Wholesale
& Licensing
(£m)
Eliminations
(£m)
Total
(£m)
25.8
2,201.5
2,227.3
0.6
356.0
356.6
(1,059.4)
(518.5)
399.5
2.3
401.8
13.3
-
13.3
-
18.1
18.1
(20.1)
1.3
-
1.3
-
12.1
12.1
-
357.6
357.6
-
26.4
(522.9)
2,422.4
(522.9)
2,448.8
(13.7)
(121.7)
522.9
(1,210.5)
3.0
-
3.0
2.4
5.1
7.5
-
-
-
419.5
7.4
426.9
163
GROUP FINANCIAL STATEMENTSSPORTS DIRECT - ANNUAL REPORT 2018 GEOGRAPHIC INFORMATION
Segmental information for the 52 weeks ended 29 April 2018:
Segmental revenue from external customers
Total capital expenditure
Non-current segmental assets*
Total segmental assets
*Excludes deferred tax and financial instruments.
Segmental information for the 53 weeks ended 30 April 2017:
Segmental revenue from external customers
Total capital expenditure
Non-current segmental assets*
Total segmental assets
*Excludes deferred tax and financial instruments.
UK
(£m)
Non-UK
(£m)
Eliminations
(£m)
2,408.8
201.2
761.3
2,706.1
950.7
30.4
328.3
762.8
-
-
-
(619.3)
UK
(£m)
Non-UK
(£m)
Eliminations
(£m)
2,408.6
410.1
738.9
2,350.4
836.7
16.8
338.3
573.6
-
-
-
(475.2)
Total
(£m)
3,359.5
231.6
1,089.6
2,849.6
Total
(£m)
3,245.3
426.9
1,077.2
2,448.8
Material non-current segmental assets – by a non-UK country:
FY18
FY17
USA
(£m)
164.2
164.2
Belgium
(£m)
19.0
32.6
Austria
(£m)
57.0
64.0
Estonia
(£m)
13.9
15.2
ROI
(£m)
58.8
58.2
The following table reconciles the reported operating profit to the underlying EBITDA as it is one of the main measures
used by the Chief Operating Decision Maker when reviewing performance:
Reconciliation of operating profit to underlying EBITDA for the 52 week period ended 29 April 2018:
Operating profit / (loss)
Depreciation
Amortisation
Share of profit of associated undertakings
Reported EBITDA
Bonus share scheme
Profit on sale of properties
Exceptional items
Realised FX (gain) / loss
Underlying EBITDA
UK Sports
Retail
(£m)
European
Sports Retail
(£m)
Rest of World
Retail
(£m)
Premium
Lifestyle
(£m)
Wholesale
& Licensing
(£m)
238.6
93.3
2.8
(9.2)
325.5
(6.0)
(16.3)
1.8
(27.1)
277.9
(18.8)
34.1
-
0.5
15.8
-
-
(0.7)
(1.1)
14.0
(27.3)
3.2
-
-
(24.1)
-
-
-
1.8
(22.3)
3.5
2.8
-
-
6.3
-
-
-
-
6.3
21.0
1.2
2.0
-
24.2
-
-
3.7
2.3
30.2
Total
(£m)
217.0
134.6
4.8
(8.7)
347.7
(6.0)
(16.3)
4.8
(24.1)
306.1
164
NOTES TO THE FINANCIAL STATEMENTSFor the 52 weeks ended 29 April 2018Continued Reconciliation of operating profit to underlying EBITDA for the 53 week period ended 30 April 2017:
Operating profit / (loss)
Depreciation
Amortisation
Share of profit of associated undertakings
Reported EBITDA
Charges for the share scheme
Disposal of subsidiary
Exceptional items
Realised FX loss
Underlying EBITDA
5. OTHER OPERATING INCOME
Rent receivable
Other
Sports Retail
(£m)
European
Sports Retail
(£m)
Rest of World
Retail
(£m)
Premium
Lifestyle
(£m)
Wholesale
& Licensing
(£m)
151.1
95.0
2.5
0.4
(71.1)
40.2
1.1
0.4
249.0
(29.4)
2.8
-
3.0
6.2
-
-
4.5
2.9
1.9
1.0
-
-
2.9
-
-
-
-
261.0
(22.0)
2.9
2.1
2.2
-
-
4.3
-
-
0.1
-
4.4
76.1
2.2
3.7
-
82.0
-
(79.9)
9.7
14.6
26.4
Total
(£m)
160.1
140.6
7.3
0.8
308.8
2.8
(79.9)
17.3
23.7
272.7
52 weeks ended
29 April 2018
(£m)
53 weeks ended
30 April 2017
(£m)
17.9
8.6
26.5
12.3
10.2
22.5
Other operating income relates to lease surrender premiums, ad hoc income and sundry charges to third parties.
6. EXCEPTIONAL ITEMS
Impairments
52 weeks ended
29 April 2018
(£m)
53 weeks ended
30 April 2017
(£m)
(4.8)
(17.3)
The impairment mainly relates to a review of the business and the valuation of own brands and goodwill that are no
longer considered core brands, in line with the elevation of retail management strategy.
7. PROFIT ON SALE OF PROPERTIES
Profit on sale of properties
8. OPERATING PROFIT
Operating profit for the period is stated after charging:
Foreign exchange (losses) / gain
Depreciation of property, plant and equipment:
- owned assets
Amortisation of intangible assets
Operating Lease Rentals:
- Land and buildings
- Other
52 weeks ended
29 April 2018
(£m)
53 weeks ended
30 April 2017
(£m)
16.3
-
52 weeks ended
29 April 2018
(£m)
53 weeks ended
30 April 2017
(£m)
(24.1)
23.7
134.6
4.8
163.2
0.7
140.6
7.3
194.7
0.9
165
GROUP FINANCIAL STATEMENTSSPORTS DIRECT - ANNUAL REPORT 2018 SERVICES PROVIDED BY THE GROUP’S AUDITOR
For the 52 weeks ended 29 April 2018 the remuneration of the auditors, Grant Thornton UK LLP and associated firms,
was as detailed below:
AUDIT SERVICES
Audit of the Group and company
Audit of subsidiary companies
Audit related assurance services
NON-AUDIT SERVICES
Taxation compliance services
All other taxation advisory services
Services relating to corporate finance
52 weeks ended
29 April 2018
(£m)
53 weeks ended
30 April 2017
(£m)
0.8
0.4
0.1
0.1
-
-
0.8
0.6
0.1
0.3
2.5
1.3
An explanation of how auditor objectivity and independence is safeguarded when non-audit services are provided by
the auditors is set out in the Audit Committee Report on page 110.
9. PAYROLL COSTS
The average monthly number of employees, including Executive Directors, employed by the Group during the period
was:
Retail stores
Distribution, administration and other
52 weeks ended
29 April 2018
(£m)
53 weeks ended
30 April 2017
(£m)
13,730
3,829
17,559
13,620
3,725
17,345
The aggregate payroll costs of the employees, including Executive Directors, were as follows:
Wages and salaries
Social security costs
Pension costs
52 weeks ended
29 April 2018
(£m)
53 weeks ended
30 April 2017
(£m)
363.4
27.6
2.4
393.4
355.7
30.1
3.3
389.1
A share-based payment charge of nil (FY17: £2.8m) was recognised in respect of share awards during the year. This is
inclusive of the related charges for expected national insurance contributions.
Aggregate emoluments of the Directors of the Company are summarised below:
Aggregate emoluments
52 weeks ended
29 April 2018
(£m)
53 weeks ended
30 April 2017
(£m)
0.5
0.6
Further details of Directors’ remuneration are given in the Directors’ Remuneration Report on pages 115 to 128.
Details of key management remuneration are given in note 37.
166
NOTES TO THE FINANCIAL STATEMENTSFor the 52 weeks ended 29 April 2018Continued 10. INVESTMENT INCOME
Profit on disposal of available-for-sale financial assets and equity derivative financial instruments
Fair value gain on equity derivative financial instruments
Dividend income from investments
52 weeks ended
29 April 2018
(£m)
53 weeks ended
30 April 2017
(£m)
6.9
8.4
10.4
25.7
156.5
5.5
0.5
162.5
The profit on disposal of available-for-sale financial assets and equity derivative financial instruments mainly relates to
the sale of strategic investments. In FY17 this mainly related to the profit on disposal of JD Sports Fashion plc shares
in the period.
11. INVESTMENT COSTS
Loss on disposal of available-for-sale financial assets and equity derivative financial instruments
Fair value loss on equity derivative financial instruments
Fair value loss on available-for-sale financial assets reclassified from OCI
Impairment of available-for-sale financial assets
52 weeks ended
29 April 2018
(£m)
53 weeks ended
30 April 2017
(£m)
26.5
44.6
47.9
-
119.0
2.7
36.3
-
12.2
51.2
The majority of the loss on disposal of available-for-sale financial assets and equity derivative financial instruments of
£26.5m relates to the loss on disposal of Iconix Brand Group Inc and Goals Soccer plc.
The fair value loss on equity derivative financial instruments of £44.6m relates to Debenhams plc options and equity
derivative instruments. The fair value loss of £47.9m on available-for-sale-financial assets relates to the significant
movement on the Debenhams plc strategic investment between the purchase of the physical shareholding and the end
of the period.
The impairment of available-for-sale financial assets in FY17 mainly relates to House of Fraser Ltd.
12. FINANCE INCOME
Bank interest receivable
Other interest receivable
Fair value adjustment to unhedged foreign currency contracts
52 weeks ended
29 April 2018
(£m)
53 weeks ended
30 April 2017
(£m)
3.3
0.1
-
3.4
0.2
0.4
18.2
18.8
The fair value adjustment to forward and option foreign exchange contracts relates to differences between the fair
value of forward foreign currency contracts and written options that were not designated for hedge accounting from
one period end to the next.
167
GROUP FINANCIAL STATEMENTSSPORTS DIRECT - ANNUAL REPORT 2018 13. FINANCE COSTS
Interest on bank loans and overdrafts
Other interest and finance leases
Interest on retirement benefit obligations
Fair value adjustment to unhedged foreign currency contracts
52 weeks ended
29 April 2018
(£m)
53 weeks ended
30 April 2017
(£m)
9.5
13.5
0.2
17.7
40.9
2.5
6.6
0.3
-
9.4
The fair value adjustment to forward and option foreign exchange contracts relates to differences between the fair
value of forward foreign currency contracts and written options not designated for hedge accounting from one period
end to the next.
14. TAXATION
Current tax
Adjustment in respect of prior periods
Deferred tax (see note 27)
TAX RECONCILIATION
Profit before taxation
Taxation at the standard rate of tax in the UK of 19% (2017: 20%)
Tax effects of:
Non-taxable income
Expenses not deductible for tax purposes
Overseas tax losses
Other tax adjustments
Adjustments in respect of prior periods - Current tax
Change in deferred tax rate
Adjustments in respect of prior periods - Deferred tax
52 weeks ended
29 April 2018
(£m)
53 weeks ended
30 April 2017
(£m)
46.8
3.3
50.1
(0.2)
49.9
77.5
14.7
(4.4)
33.1
-
2.9
3.3
-
0.3
49.9
61.4
(20.6)
40.8
9.1
49.9
281.6
56.3
(37.1)
18.8
3.1
7.0
(20.6)
1.1
21.3
49.9
Non-taxable income in FY17 includes the disposal of subsidiaries and investments that qualify for Substantial
Shareholder Relief. Expenses not deductible for tax purposes include non-qualifying depreciation and goodwill
impairments.
15. EARNINGS PER SHARE FROM TOTAL AND CONTINUING OPERATIONS ATTRIBUTABLE
TO THE EQUITY SHAREHOLDERS
Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders of the parent by
the weighted average number of ordinary shares outstanding during the year.
For diluted earnings per share, the weighted average number of shares, 527,793,623 (2017: 583,501,473), is adjusted
to assume conversion of all dilutive potential ordinary shares under the Group’s Share Schemes, being 3,132,795
(2017: 16,667,000), to give the diluted weighted average number of shares of 530,926,418 (2017: 600,168,473).
168
NOTES TO THE FINANCIAL STATEMENTSFor the 52 weeks ended 29 April 2018Continued
BASIC AND DILUTED EARNINGS PER SHARE
Profit for the period
29 April 2018
Basic (£m)
24.5
52 weeks ended
29 April 2018
Diluted (£m)
24.5
30 April 2017
Basic (£m)
229.9
53 weeks ended
30 April 2017
Diluted (£m)
229.9
Number in thousands
Number in thousands
Weighted average number of shares
527,794
530,926
583,501
600,168
Pence per share
Pence per share
Earnings per share
4.6
4.6
39.4
38.3
UNDERLYING EARNINGS PER SHARE
The underlying earnings per share reflects the underlying performance of the business compared with the prior period
and is calculated by dividing underlying earnings by the weighted average number of shares for the period. Underlying
earnings is used by management as a measure of profitability within the Group. Underlying earnings is defined as
profit for the period attributable to equity holders of the parent for each financial period but excluding the post-tax
effect of certain non-trading items. Tax has been calculated with reference to the effective rate of tax for the Group.
The Directors believe that the underlying earnings before exceptional items and underlying earnings per share
measures provide additional useful information for shareholders on the underlying performance of the business, and
are consistent with how business performance is measured internally. Underlying earnings is not a recognised profit
measure under IFRS and may not be directly comparable with “adjusted” profit measures used by other companies.
52 weeks ended
29 April 2018
Diluted (£m)
Profit for the period
29 April 2018
Basic (£m)
24.5
Post tax adjustments to profit for the period for the following non-trading items:
Realised (profit) / loss on forward
exchange contracts
Fair value adjustment to forward
foreign exchange contracts
Fair value adjustment to derivative
financial instruments and AFS
investments
Loss / (profit) on disposal of listed
investments
Profit on disposal of property
Profit on disposal of subsidiary
Impairment
Write off of deferred tax assets
Underlying profit for the period
(18.7)
13.8
89.7
3.5
(12.9)
-
5.0
-
104.9
24.5
(18.7)
13.8
89.7
3.5
(12.9)
-
5.0
-
104.9
30 April 2017
Basic (£m)
229.9
53 weeks ended
30 April 2017
Diluted (£m)
229.9
18.5
(14.3)
24.0
18.5
(14.3)
24.0
(141.5)
(141.5)
-
(79.9)
17.3
12.5
66.5
-
(79.9)
17.3
12.5
66.5
Weighted average number of shares
527,794
530,926
583,501
600,168
Number in thousands
Number in thousands
Pence per share
Pence per share
Underlying earnings per share
19.9
19.8
11.4
11.1
169
GROUP FINANCIAL STATEMENTSSPORTS DIRECT - ANNUAL REPORT 2018
16. PROPERTY, PLANT AND EQUIPMENT
Freehold land and
buildings
(£m)
Long-term
Leasehold
(£m)
Short-term
leasehold
improvements
(£m)
Plant and
equipment
(£m)
COST
At 24 April 2016
Exchange differences
Transfers
Additions
Eliminated on disposals
At 30 April 2017
Exchange differences
Transfers
Acquisitions
Additions
Eliminated on disposals
At 29 April 2018
ACCUMULATED DEPRECIATION AND IMPAIRMENT
At 24 April 2016
Exchange differences
Transfers
Charge for the period
Eliminated on disposals
At 30 April 2017
Exchange differences
Transfers
Charge for the period
Eliminated on disposals
At 29 April 2018
NET BOOK VALUE
At 29 April 2018
At 30 April 2017
433.6
10.7
(40.9)
284.0
(10.6)
676.8
4.6
3.6
-
136.4
(51.2)
770.2
(74.8)
(2.8)
22.8
(40.9)
5.9
(89.8)
(0.7)
(2.3)
(39.8)
11.5
(121.1)
649.1
587.0
33.4
1.8
-
36.8
-
72.0
-
-
-
-
(8.4)
63.6
(6.3)
(0.1)
-
(7.3)
-
(13.7)
0.8
-
(4.3)
2.3
(14.9)
48.7
58.3
141.5
(0.5)
-
5.3
(10.2)
136.1
-
-
-
6.4
(2.1)
140.4
(97.5)
1.1
-
(11.5)
2.8
(105.1)
0.4
-
(9.6)
1.2
557.2
6.7
-
87.4
(42.7)
608.6
-
3.8
6.5
61.4
(18.5)
661.8
(401.2)
0.8
-
(79.9)
37.4
(442.9)
2.1
(2.4)
(77.9)
12.6
(113.1)
(508.5)
27.3
31.0
153.3
165.7
Total
(£m)
1,165.7
18.7
(40.9)
413.5
(63.5)
1,493.5
4.6
7.4
6.5
204.2
(80.2)
1,636.0
(579.8)
(1.0)
22.8
(139.6)
46.1
(651.5)
2.6
(4.7)
(131.6)
27.6
(757.6)
878.4
842.0
Included within freehold land and buildings are UK properties with a net book value of £nil for which sales contracts
have been exchanged but for which completion has not taken place at year end, carrying value is below fair value
based on selling price.
In FY17 the Group reviewed and revised the estimated useful economic lives of property, plant and equipment. The
impact on the income statement for the period ended 30 April 2017 of this revision to accounting estimates was an
additional depreciation charge of approximately £26.0m, the majority of which related to the European Sports Retail
(formerly International Sports Retail) segment.
170
NOTES TO THE FINANCIAL STATEMENTSFor the 52 weeks ended 29 April 2018Continued 17. INVESTMENT PROPERTIES
COST
As at 24 April 2016
Transfers
Additions
As at 30 April 2017
Transfers
Acquisitions
Additions
At 29 April 2018
ACCUMULATED DEPRECIATION AND IMPAIRMENT
At 24 April 2016
Transfers
Charge for the period
At 30 April 2017
Transfers
Charge for the period
At 29 April 2018
NET BOOK VALUE
At 29 April 2018
At 30 April 2017
Freehold Land and
Buildings
(£m)
-
40.9
6.0
46.9
(7.4)
1.3
5.0
45.8
-
(22.8)
(1.0)
(23.8)
4.7
(3.0)
(22.1)
23.7
23.1
The fair values of the Group’s investment properties as at 29 April 2018 were estimated as being materially in line with
carrying values. The valuations were calculated by the Group’s internal property team who are appropriately qualified
chartered surveyors and follow the applicable valuation methodology of the Royal Institute of Chartered Surveyors.
171
GROUP FINANCIAL STATEMENTSSPORTS DIRECT - ANNUAL REPORT 2018 18. INTANGIBLE ASSETS
COST
At 24 April 2016
Acquisitions
Written off
Disposals
Exchange adjustment
At 30 April 2017
Acquisitions
Additions
Disposals
Exchange adjustment
At 29 April 2018
AMORTISATION AND IMPAIRMENT
At 24 April 2016
Amortisation charge
Impairment
Written off
Disposals
Exchange adjustment
At 30 April 2017
Amortisation charge
Impairment
Disposals
Exchange adjustment
At 29 April 2018
NET BOOK VALUE
At 29 April 2018
At 30 April 2017
Goodwill
(£m)
Trademarks
and licences
(£m)
Brands
(£m)
Total
(£m)
173.6
-
-
(20.0)
7.7
161.3
-
-
(6.5)
(5.0)
149.8
69.9
7.4
(1.0)
(1.0)
0.2
75.5
10.5
4.1
(0.5)
0.1
89.7
(58.2)
(57.9)
-
(14.1)
-
-
(1.1)
(73.4)
-
(3.2)
6.5
0.6
(7.3)
(3.2)
1.0
1.3
(0.2)
(66.3)
(4.8)
(1.6)
0.5
0.7
(69.5)
(71.5)
81.2
-
-
(2.0)
9.4
88.6
-
-
(0.1)
(5.7)
82.8
-
-
-
-
-
-
-
-
-
-
-
-
80.3
87.9
18.2
9.2
82.8
88.6
324.7
7.4
(1.0)
(23.0)
17.3
325.4
10.5
4.1
(7.1)
(10.6)
322.3
(116.1)
(7.3)
(17.3)
1.0
1.3
(1.3)
(139.7)
(4.8)
(4.8)
7.0
1.3
(141.0)
181.3
185.7
Amortisation is charged to selling, distribution and administrative expenses in the consolidated income statement.
The carrying value of goodwill and brands that are considered to have an indefinite life are allocated to the Group’s
operating segments before aggregation. With the exception of Everlast, none of the individual cash-generating units
(CGUs) are considered material to goodwill or indefinite life intangibles (Brands). The carrying value of goodwill and
brands allocated to the Group’s CGUs (as aggregated except in the case of Everlast) is shown below:
29 April 2018
30 April 2017
Goodwill
(£m)
Brands
(£m)
Goodwill
(£m)
Brands
(£m)
5.4
14.3
60.6
80.3
-
1.9
80.9
82.8
7.7
25.8
54.4
87.9
-
2.4
86.2
88.6
European Sports Retail
Wholesale & Licencing (excl. Everlast)
Everlast
172
NOTES TO THE FINANCIAL STATEMENTSFor the 52 weeks ended 29 April 2018Continued The Group tests the carrying amount of goodwill and assets with an indefinite life annually for impairment or more
frequently if there are indications that their carrying value might be impaired. The carrying amounts of other intangible
assets are reviewed for impairment if there is an indication of impairment.
Impairment is calculated by comparing the carrying amounts to the value in use derived from discounted cash flow
projections for each CGU to which the intangible assets are allocated. A CGU is deemed to be an individual fascia or
brand and these have been grouped together into similar classes for the purpose of formulating operating segments as
reported in note 4. The recoverable amount of CGUs was £367.6m. Impairments of £5.0m have been recognised in the
period relating to brands that do not align with the elevation strategy.
Value in use calculations are based on five year management forecasts with a terminal growth rate applied thereafter,
representing management’s estimate of the long-term growth rate of the sector served by the CGUs.
The key assumptions, which are equally applicable to each CGU, in the cash flow projections used to support the
carrying amount of goodwill and intangibles with indefinite lives as at 29 April 2018 were as follows:
Terminal sales growth
Gross margin
Capital expenditure
Discount rates (Pre-tax)
UK Sports
Retail
European
Retail
Wholesale
& Licensing
(excl.Everlast)
Everlast
2%
2%
0%
2%
30%-40%
30%-40%
30%-40%
20%-30%
£0m - £0.5m £0m - £0.5m £0m - £0.5m £0m - £0.5m
6.2%
6.2%
6.2%
11.0%
The pre-tax Group Weighted Average Cost of Capital is used in Sports Retail, Premium Lifestyle and Wholesale &
Licensing (excl. Everlast) as these CGU’s are considered to have similar risk profiles. The pre-tax WACC is used as the
discount rate.
The key assumptions are based on management’s historical experience and future plans for each CGU.
A reasonably possible change in any key assumption would not cause the carrying value of any CGU to exceed its
recoverable amount.
The intangible assets that have an indefinite life are brands and trading names and are considered to have an
indefinite life on the grounds of the proven longevity of the brands and trading names and the Group’s commitment to
maintaining those brands.
All key assumptions are consistent with known external sources of information.
173
GROUP FINANCIAL STATEMENTSSPORTS DIRECT - ANNUAL REPORT 2018 NOTES TO THE FINANCIAL STATEMENTS
For the 52 weeks ended 29 April 2018
Continued
19. INVESTMENTS IN ASSOCIATED UNDERTAKINGS
The Group uses the equity method of accounting for associates and joint ventures. The following table shows the
aggregate movement in the Group’s investment in associates and joint ventures:
At 24 April 2016
Additions
Share of profit for the period
At 30 April 2017
Disposals
Dividends paid
Share of loss for the period
At 29 April 2018
Associates
(£m)
16.6
9.0
0.8
26.4
(10.4)
(1.1)
(8.7)
6.2
The majority of the balance as at 29 April 2018 relates to the Group’s 25% interest in Four (Holdings) Limited,
a company incorporated in England and Wales. The Four (Holdings) Limited principal activity is that of fashion
distributors and retailers. As at 29 April 2018 there were amounts due from Four (Holdings) Limited totalling £68.9m
(2017: 32.9m) (note 37).
The addition in FY17 relates to the acquisition of a 49% ownership in Lovells Sports (Holdings) Ltd, during FY18, the
remaining 51% was acquired meaning that Lovells Sports (Holdings) Ltd is now a subsidiary of the Group (see note
31). The Group also acquired the remaining 49% of Brasher Leisure Ltd, for £1.
The Group’s share of associates’ assets, liabilities and income statement, which is included in the consolidated
Financial Statements, is as follows:
Share of non-current assets
Share of current assets
Share of non-current liabilities
Share of current liabilities
Income
Expenses
(Loss) / profit before taxation
Taxation
(Loss) / profit for the period
20. AVAILABLE-FOR-SALE FINANCIAL ASSETS
Non-current assets
Available-for-sale financial assets
29 April 2018
(£m)
30 April 2017
(£m)
15.4
22.7
(17.1)
(14.8)
6.2
25.2
13.1
(1.5)
(10.4)
26.4
52 weeks ended
29 April 2018
(£m)
53 weeks ended
30 April 2017
(£m)
48.8
(57.1)
(8.3)
(0.4)
(8.7)
46.6
(45.2)
1.4
(0.6)
0.8
29 April 2018
(£m)
30 April 2017
(£m)
249.8
63.9
The fair value of the available-for-sale investments is based on bid quoted market prices at the balance sheet date or
where market prices are not available, at management’s estimate of fair value.
174
The following table shows the aggregate movement in the Group’s financial assets during the period:
At beginning of period
Additions
Disposals
Impairment
Revaluation through other comprehensive income – recognised in the period
Revaluation through other comprehensive income – reclassified in the period
At end of period
At the period ended 29 April 2018, the Group held direct interests in the following:
29 April 2018
(£m)
30 April 2017
(£m)
63.9
234.7
(22.7)
-
(26.1)
-
249.8
193.4
24.7
(36.4)
(12.2)
23.7
(129.3)
63.9
• A 29.9% (2017: 29.9%) interest in Findel plc
• A 29.7% interest in Debenhams plc, which was acquired during the period
• A 27.0% (2017: 11.16%) interest in French Connection plc
• A 25.4% interest in Game Digital plc, which was acquired during the period
• An 18.9% interest in Goals Soccer Centres plc, which was acquired during the period
• An 8.8% interest in Finish Line, Inc, which was acquired during the period
• Various other interests, none of which represent more than 5.0% of the voting power of the investee
These holdings have been assessed under IAS 28 Investments in Associates and categorised as available-for-sale
financial assets, as the Group does not consider them to be associates and therefore they are not accounted for on an
equity basis (see note 2).
The Group continues to hold a 11.1% direct interest in House of Fraser Limited, which is held at management’s
estimate of the fair value of the enterprise based on recoverability.
These investments allow us to develop relationships and commercial partnerships with the relevant retailers and assist
in building relationships with key suppliers & brands.
As at 29 April 2018 and 30 April 2017 the Group had no available-for-sale financial assets in excess of 29.9% of share
capital.
Available-for-sale financial assets are denominated in the following currencies:
Sterling
US Dollars
At end of period
21. INVENTORIES
Goods for resale
As reported in note 1, the prior period comparatives have been restated.
29 April 2018
(£m)
30 April 2017
(£m)
199.1
50.7
249.8
63.5
0.4
63.9
29 April 2018
(£m)
30 April 2017
Restated (£m)
873.4
674.2
175
GROUP FINANCIAL STATEMENTSSPORTS DIRECT - ANNUAL REPORT 2018 The following inventory costs have been recognised in cost of sales:
Cost of inventories recognised as an expense
29 April 2018
(£m)
30 April 2017
£m)
2,024.4
1,914.7
The directors have reviewed the opening and closing provisions against inventory and have concluded that these are
fairly stated. The Group has revised its estimates and assumptions for calculating inventory provisions at 29 April 2018.
Overall provisions have increased from £98.4m in FY17 to £162.2m as at 29 April 2018, changes in the provision are
recognised in cost of sales.
22. TRADE AND OTHER RECEIVABLES
Trade receivables
Deposits in respect of derivative financial instruments
Amounts owed by related parties (see note 37)
Other receivables
Prepayments
29 April 2018
(£m)
30 April 2017
Restated (£m)
35.0
57.1
70.3
21.3
51.1
234.8
39.3
148.0
40.9
91.8
32.1
352.1
The Directors consider that the carrying amount of trade and other receivables approximates to their fair value. The
maximum exposure to credit risk at the reporting date is the carrying value of each class of asset above, plus any cash
balances. As reported in note 1, the prior period has been restated.
In FY17, Other receivables includes amounts advanced for the acquisition of Bob’s Stores and Eastern Mountain
Sports from US Chapter 11 alongside working capital loans, which completed during FY18 (see note 31), this has been
accounted for under IFRS 3 Business Combinations, including an assessment of the fair value of consideration, assets,
liabilities and identified intangibles. Other receivables also include unremitted sales receipts.
Deposits in respect of derivative financial instruments are collateral to cover margin requirements for derivative
transactions held with counterparties. The collateral requirement changes with the market (which is dependent on
share price, interest rates and volatility) and further purchases / sales of underlying investments held.
Ageing of trade receivables:
Current
0-30 days past due
30-60 days past due
60-90 days past due
Over 90 days past due
The credit quality of assets neither past due nor impaired is considered to be good.
29 April 2018
(£m)
30 April 2017
(£m)
28.3
3.3
1.2
2.2
-
35.0
26.0
7.3
2.0
1.8
2.2
39.3
176
NOTES TO THE FINANCIAL STATEMENTSFor the 52 weeks ended 29 April 2018Continued The movement in the bad debt provision relating to trade and other receivables can be analysed as follows:
Opening position
Amounts charged to the income statement
Amounts written off as uncollectable
Amounts recovered during the period
Closing position
52 weeks ended
29 April 2018
(£m)
53 weeks ended
30 April 2017
(£m)
19.5
7.5
-
-
27.0
12.0
10.1
(1.1)
(1.5)
19.5
The Group has no significant concentration of credit risk, with exposure spread over a large number of customers.
These bad debt provisions / charges have been determined by reference to past default experience and knowledge of
the individual circumstances of certain receivables.
23. CASH AND CASH EQUIVALENTS
Cash in bank and in hand - Sterling
Cash in bank and in hand - US Dollars
Cash in bank and in hand - Euros
Cash in bank and in hand - Other
Bank overdraft (see note 26)
Cash and cash equivalents including overdrafts at period end
The bank overdraft is part of a Group cash pooling arrangement.
24. SHARE CAPITAL
AUTHORISED
999,500,010 ordinary shares of 10p each
ALLOTTED, CALLED UP AND FULLY PAID
640,602,369 (2017: 640,602,369) ordinary shares of 10p each
SHARE CAPITAL
At 30 April 2017 and 29 April 2018
29 April 2018
(£m)
30 April 2017
(£m)
112.0
131.8
109.4
6.8
360.0
-
360.0
53.5
25.9
122.4
2.9
204.7
(69.5)
135.2
29 April 2018
(£m)
30 April 2017
(£m)
100.0
100.0
64.1
64.1
64.1
64.1
The Group holds 103,633,049 shares in Treasury as at period end (FY17: 79,310,534) (see note 25).
CONTINGENT SHARE AWARDS
The Executive Share Scheme
Under the terms of the Executive Share Scheme, which was approved by Shareholders on 10 September 2010 and is a
HMRC approved scheme, the Board may make share awards in respect of the ordinary shares in the Company. Awards
may be made to Executives and Persons Discharging Managerial Responsibilities over a fixed number of shares subject
to performance conditions. Further details are set out in the Directors' Remuneration Report on pages 115 to 128.
177
GROUP FINANCIAL STATEMENTSSPORTS DIRECT - ANNUAL REPORT 2018 An award of 8,073,036 shares was granted on 10 September 2010 at a share price of 125.5 pence. 4m of these shares
have since vested and 2m have since lapsed. These shares will only vest if all conditions are met. No consideration is
payable in respect of these awards.
Share Schemes
The 2011 Share Scheme was a four year scheme based upon achieving underlying EBITDA (before the costs of
the scheme) of £215m in FY12, £250m in FY13, £260m in FY14 and £300m in FY15 coupled with the individual
participating employee’s satisfactory personal performance and continued employment. All of the above targets have
now been met meaning that c.11.6m shares vested in September 2017 and c.4m shares vested in September 2015.
Between 8 September 2017 and 27 April 2018, 10,585,162 shares sold by participants following exercise of awards
under the Company's 2011 Share Scheme were acquired by Estera Trust (Jersey) Limited, as Trustee of the Sports
Direct Employee Benefit Trust (Trustee), with the acquisition being funded by a loan advanced by the Company. The
Shares were acquired at prices of between 390 and 411 pence per share in off-market transactions.
On 7 September 2015 3,772,383 shares sold by participants following exercise of awards under the Company's 2011
Share Scheme were acquired by Estera Trust (Jersey) Limited, formerly known as Appleby Trust (Jersey) Limited, as
Trustee of the Sports Direct Employee Benefit Trust (Trustee), with the acquisition being funded by a loan advanced by
the Company. The Shares were acquired at a price of 781 pence per share in an off-market transaction.
A share-based payment charge of £nil (FY17: £2.9m) was recognised in respect of this cash settled award for the 52
weeks ended 29 April 2018, based on the Director’s best estimate of the number of awards that will be made. The
charge is calculated based on the fair value on the grant date, which is deemed to be the date on which the entity and
counterparty reached a shared understanding of the scheme.
25. OTHER RESERVES
At 24 April 2016
Cash flow hedges
- recognised in the period
- reclassified in the period and reported
in sales
- reclassified and reported in cost of sales
- taxation
At 30 April 2017
Cash flow hedges
- recognised in the period
- reclassified in the period and reported
in sales
- reclassified and reported in cost of sales
- taxation
At 29 April 2018
Share capital
(£m)
Share
premium
(£m)
Permanent
contribution
to capital
(£m)
Capital
redemption
reserve
(£m)
Reverse
combination
reserve
(£m)
Hedging
reserve
(£m)
Total other
Reserves
(£m)
64.1
874.3
0.1
8.0
(987.3)
8.0
(32.8)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
64.1
874.3
0.1
8.0
(987.3)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(31.3)
(31.3)
8.7
(18.2)
7.7
(25.1)
(49.8)
15.5
0.6
6.9
8.7
(18.2)
7.7
(65.9)
(49.8)
15.5
0.6
6.9
64.1
874.3
0.1
8.0
(987.3)
(51.9)
(92.7)
The share premium account is used to record the excess proceeds over nominal value on the issue of shares.
178
NOTES TO THE FINANCIAL STATEMENTSFor the 52 weeks ended 29 April 2018Continued The permanent contribution to capital relates to a cash payment of £50,000 to the Company on 8 February 2007 under
a deed of capital contribution.
The capital redemption reserve arose on the redemption of the Company’s redeemable preference shares of 10p each
at par on 2 March 2007.
The reverse combination reserve exists as a result of the adoption of the principles of reverse acquisition accounting in
accounting for the Group restructuring which occurred on 2 March 2007 and 29 March 2007 between the Company
and Sports World International Limited, Brands Holdings Limited, International Brand Management Limited and CDS
Holdings SA with Sports World International Limited as the acquirer.
The hedging reserve represents the cumulative amount of gains and losses on hedging instruments deemed effective
in cash flow hedges. The cumulative deferred gain or loss on the hedging instrument is recognised in the income
statement only when the hedged transaction impacts the income statement.
OTHER BALANCE SHEET RESERVES
The foreign currency translation reserve is used to record exchange differences arising from the translation of the
Financial Statements of foreign subsidiaries and associates.
The own shares and treasury shares reserve represent the cost of shares in Sports Direct International plc purchased
in the market and held by Sports Direct Employee Benefit Trust to satisfy options under the Group’s share options
scheme, see note 24.
26. BORROWINGS
NON-CURRENT:
Bank and other loans
CURRENT:
Bank overdrafts
Bank and other loans
TOTAL BORROWINGS:
Bank overdrafts
Bank and other loans
An analysis of the Group’s total borrowings other than bank overdrafts is as follows:
Borrowings — Sterling
Borrowings — Other
29 April 2018
(£m)
30 April 2017
(£m)
757.1
317.3
-
-
-
-
757.1
757.1
69.5
-
69.5
69.5
317.3
386.8
29 April 2018
(£m)
30 April 2017
(£m)
750.0
7.1
757.1
310.0
7.3
317.3
Loans are currently at a rate of interest of 1.4% over the interbank rate of the country within which the borrowing
entity resides.
179
GROUP FINANCIAL STATEMENTSSPORTS DIRECT - ANNUAL REPORT 2018 RECONCILIATION OF LIABILITIES ARISING FROM FINANCING ACTIVITIES
The changes in the Group’s liabilities arising from financing activities can be classified as follows:
At 24 April 2016
Cash-flows:
- Borrowings drawn down
- Borrowings repaid
Overdraft
At 30 April 2017
Cash-flows:
- Borrowings drawn down
- Borrowings repaid
Overdraft repaid
At 29 April 2018
Non-current
borrowings
(£m)
Current
borrowings
(£m)
Total
(£m)
333.1
0.8
333.9
328.0
(343.8)
-
317.3
782.8
(343.0)
-
(0.3)
69.0
69.5
-
-
-
(69.5)
757.1
-
328.0
(344.1)
69.0
386.8
782.8
(343.0)
(69.5)
757.1
The Group’s Working Capital Facility is at £913.5m (FY17: £788m). The facility is available until November 2021 (with a
one year option extension) and is not secured against any of the Group’s assets.
The Group continues to operate comfortably within its banking facilities and covenants.
The carrying amounts and fair value of the borrowings are not materially different.
Net debt at 29 April 2018 was £397.1m (30 April 2017: £182.1m).
27. DEFERRED TAX ASSET AND LIABILITIES
Accounts
depreciation
exceeding tax
depreciation
(£m)
Tax losses
recoverable
(£m)
Pension plan
liabilities
(£m)
Bonus share
scheme
(£m)
Forward
currency
contracts
(£m)
At 24 April 2016
Credited / (charged) to
the income statement
Credited / (charged) to
the statement of other
comprehensive income
Credited to hedging
reserve
Disposal
At 30 April 2017
Credited / (charged) to
the income statement
Charged to reserves
Credited to hedging
reserve
At 29 April 2018
14.7
3.6
-
-
-
18.3
(2.4)
-
-
15.9
14.0
(14.0)
-
-
-
-
4.1
-
-
4.1
2.6
-
1.7
-
(4.3)
-
-
-
-
-
9.3
0.6
(1.3)
-
-
8.6
1.7
(7.6)
-
2.7
180
FV of
Brands
(£m)
(21.4)
3.2
-
-
-
(18.2)
-
-
-
Other
temporary
differences
(£m)
3.2
(4.9)
(0.2)
-
-
(1.9)
(2.8)
-
-
(0.1)
2.4
-
5.9
-
8.2
(0.4)
-
6.9
14.7
(18.2)
(4.7)
Total
(£m)
22.3
(9.1)
0.2
5.9
(4.3)
15.0
0.2
(7.6)
6.9
14.5
NOTES TO THE FINANCIAL STATEMENTSFor the 52 weeks ended 29 April 2018Continued
Deferred tax assets
Deferred tax liabilities
Net deferred tax balance
29 April 2018
(£m)
30 April 2017
(£m)
24.9
(10.4)
14.5
33.7
(18.7)
15.0
The tax rates used to measure the deferred tax assets and liabilities were either 17% or 19% depending on when the
applicable asset / liability is expected to reverse, on the basis that these were the tax rates that were substantively
enacted at the balance sheet date.
Deferred tax assets are recognised to the extent that realisation of the related tax benefit is probable on the basis of
the Group’s current expectations of future taxable profits.
Included within other temporary differences is a deferred tax asset in relation to the Share Scheme and a deferred tax
liability recognised on other intangible assets upon acquisition.
The deferred tax effects of the acquisitions made in the year were considered and it was determined that there was no
material impact on the Group or the fair value of net assets acquired.
28. PROVISIONS
At 30 April 2017
Amounts provided
Amounts utilised / reclassified
Amounts reversed
At 29 April 2018
Property
related
(£m)
104.1
37.9
2.2
(13.3)
130.9
Other
(£m)
26.1
11.4
(11.5)
-
26.0
Total
(£m)
130.2
49.3
(9.3)
(13.3)
156.9
The property related provision contains the best estimate of the present value of expenditure expected to be incurred
by the Group in order to satisfy its obligations to restore its leasehold premises to the condition required under the
lease agreements at the end of the lease discounted at 5% per annum. The provision also contains provision in respect
of onerous lease contracts representing the net cost of fulfilling the Group’s obligations over the terms of these
contracts discounted at 5% per annum. The provision is expected to be utilised over the period to the end of each
specific lease. The unwinding of the discount on provision over time passes through the income statement.
During the period, onerous lease provisions were recognised due to an ongoing management review of the UK and
European store profile and strategy including current and anticipated freehold acquisitions, resulting in additional
provisions being made of £26.7m in the period. The balance of the charge relates to dilapidation provisions in respect
of UK stores.
Other provisions relate to provisions for restructuring and employment (non-retirement related) and management’s
best estimate of the potential impact of claims including legal, commercial and regulatory claims and ongoing non-UK
tax enquiries.
Other provisions include amounts in relation to MM Prop Consultancy Ltd, a company owned and controlled by
Michael Murray (domestic partner of Anna Ashley, daughter of Mike Ashley) - see note 37.
181
GROUP FINANCIAL STATEMENTSSPORTS DIRECT - ANNUAL REPORT 2018 29. FINANCIAL INSTRUMENTS
(a) FINANCIAL ASSETS AND LIABILITIES BY CATEGORY AND FAIR VALUE HIERARCHY
The fair value hierarchy of financial assets and liabilities, which are principally denominated in Sterling or US Dollars,
were as follows:
FINANCIAL ASSETS - 2018
Loans and receivables:
Trade and other receivables*
Cash and cash equivalents
Available-for-sale financial assets
Derivative financial assets (Assets at fair value through the profit and loss):
- Foreign forward purchase and sales contracts – Hedged
Derivative financial assets – contracts for difference
FINANCIAL LIABILITIES - 2018
Loans and payables:
Non-current borrowings
Trade and other payables**
Derivative financial liabilities (Liabilities at fair value through the profit and loss):
Foreign forward purchase and sales contracts – Hedged
Foreign forward and written options purchase and sales contracts –
Unhedged
Derivative financial liabilities – contracts for difference
Derivative financial liabilities – equity derivatives
*Prepayments of £51.1m are not included as a financial asset.
**Other taxes including social security costs of £58.4m are not included as a financial liability.
FINANCIAL ASSETS - 2017
Loans and receivables:
Trade and other receivables*
Cash and cash equivalents
Available-for-sale financial assets
Derivative financial assets (Assets at fair value through the profit and loss):
- Foreign forward purchase and sales contracts – Hedged
Foreign forward and written options purchase and sales contracts –
Unhedged
Derivative financial assets – contracts for difference
Derivative financial assets – equity derivatives
Level 1
(£m)
Level 2
(£m)
Level 3
(£m)
57.1
-
249.8
-
2.7
2.7
-
(40.0)
-
-
(4.3)
-
(4.3)
-
-
-
14.4
-
14.4
-
-
(34.3)
(53.2)
-
-
(87.5)
-
-
-
-
-
-
-
-
-
-
-
(1.3)
(1.3)
Level 1
(£m)
Level 2
(£m)
Level 3
(£m)
148.0
-
63.9
-
8.9
-
8.9
-
-
-
16.2
17.9
-
-
34.1
-
-
-
-
-
-
-
-
Other
(£m)
126.6
360.0
-
-
-
-
Total
(£m)
183.7
360.0
249.8
14.4
2.7
17.1
(757.1)
(508.1)
(757.1)
(548.1)
-
-
-
-
-
Other
(£m)
172.0
204.7
-
-
-
-
-
-
(34.3)
(53.2)
(4.3)
(1.3)
(93.1)
Total
(£m)
320.0
204.7
63.9
16.2
17.9
8.9
-
43.0
182
NOTES TO THE FINANCIAL STATEMENTSFor the 52 weeks ended 29 April 2018Continued FINANCIAL LIABILITIES - 2017
Loans and payables:
Non-current borrowings
Trade and other payables**
Current-borrowings
Derivative financial liabilities (Liabilities at fair value through the profit and loss):
Foreign forward purchase and sales contracts – Hedged
Foreign forward and written options purchase and sales contracts –
Unhedged
Derivative financial liabilities – contracts for difference
Derivative financial liabilities – equity derivatives
Other
*Prepayments of £32.1m are not included as a financial asset.
**Other taxes including social security costs of £69.5m are not included as a financial liability.
-
(163.5)
-
-
-
(3.8)
-
-
-
-
-
(9.7)
(46.1)
-
-
-
(3.8)
(55.8)
-
-
-
-
-
-
(15.4)
(0.2)
(15.6)
(317.3)
(351.9)
(69.5)
(317.3)
(515.4)
(69.5)
-
-
-
-
-
-
(9.7)
(46.1)
(3.8)
(15.4)
(0.2)
(75.2)
There is no difference between fair value and carrying value of the above financial instruments (2017: £nil).
FAIR VALUE HIERARCHY
The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by
valuation technique:
• Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities;
• Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are
observable, either directly or indirectly; and
• Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not
based on observable market data.
Contracts for difference are classified as Level 1 as the fair value is calculated using quoted prices for listed shares and
commodities at contract inception and the period end.
Foreign forward purchase and sales contracts and options are classified as Level 2 as the fair value is calculated using
models based on inputs which are observable directly or indirectly at the period end (these inputs include but are not
restricted to the following – maturity date, quoted forward/option prices).
Available-for-sale financial assets are classified as Level 1 as the fair value is calculated using quoted prices, except for
House of Fraser (UK & Ireland) Ltd (previously Highland Group Holdings) which is classified as Level 3. House of Fraser
Ltd is held at management’s estimate of the fair value of the enterprise based on publicly and non-publicly available
data, management’s assessment is that the fair value is £nil (2017: £nil)
Other equity derivatives are calculated using a model with inputs which are directly observable and inputs which are
not based on observable market data (this includes expected volatility from the shares historical prices). These are
therefore classified as Level 3.
There have been no transfers between fair value hierarchy levels during the year.
The fair value of equity derivative agreements are included within the derivative financial assets balance of £1.9m and
derivative financial liabilities balance of £5.6m. The derivative financial assets and derivative financial liabilities as at 29
April 2018 relate to strategic investments held of between 0.08% and 10.47% of investee share capital.
183
GROUP FINANCIAL STATEMENTSSPORTS DIRECT - ANNUAL REPORT 2018 Trade receivables/payables, amounts owed by/to related parties, other receivables/payables, cash and cash equivalents
and current/non-current borrowings are held at amortised cost.
The maximum exposure to credit risk as at 29 April 2018 is the fair value of the derivative assets in the Balance Sheet.
(b) DERIVATIVES: FOREIGN CURRENCY FORWARD PURCHASE CONTRACTS
The most significant exposure to foreign exchange fluctuations relates to purchases made in foreign currencies,
principally the US Dollar, and online sales in Euros and Australian dollars. The Group’s policy is to reduce substantially
the risk associated with foreign currency spot rates by using forward fixed rate currency purchase contracts, taking
into account any foreign currency cash flows. The Group does not hold or issue derivative financial instruments
for trading purposes, however if derivatives, including both forwards and written options, do not qualify for hedge
accounting they are accounted for as such and accordingly any gain or loss is recognised immediately in the income
statement.
The carrying values of the derivative financial instruments includes foreign currency purchase and sales contracts,
written currency options and equity derivative contracts:
The sterling principal amounts of hedged forward foreign currency purchase contracts and contracted forward rates
were as follows:
US Dollar purchases
Contracted rates USD / GBP
US Dollar purchases
Contracted rates USD / EUR
Euro sales
Contracted rates EUR / GBP
AUD sales
Contracted rates AUD / GBP
29 April 2018
(£m)
1,035.8
1.3600 – 1.4301
217.0
1.110 – 1.320
30 April 2017
(£m)
-
-
-
-
(1,177.0)
(777.3)
1.069 – 1.190
1.069 – 1.240
(9.1)
(12.5)
1.6896 – 1.74
1.6896 – 1.79
The sterling principal amounts of unhedged forward foreign currency purchase contracts and contracted forward rates
were as follows:
Euro Sales*
Contracted rates
29 April 2018
(£m)
30 April 2017
(£m)
-
-
(302.7)
1.09-1.24
*FY18 Value excludes SWAPS of 102.7M Euros (FY17:260.9m) which are required for cash management purposes only.
The sterling principal amounts of unhedged written currency option contracts and contracted rates were as follows:
US Dollar purchases
Contracted rates USD / EUR
- Euro sales
Contracted rates EUR / GBP
- AUD sales
Contracted rates AUD / GBP
29 April 2018
(£m)
30 April 2017
(£m)
126.1
1.110 – 1.210
-
-
(1,452.2)
(1,080.0)
1.069 – 1.190
1.069 – 1.09
(9.1)
(12.5)
1.6896 – 1.74
1.6896 – 1.79
At 29 April 2018 £1,186.1m of forward sales contracts and £1,252.8m of purchase contracts qualified for hedge
accounting and the loss on fair valuation of these contracts of £61.2m has therefore been recognised in other
comprehensive income.
184
NOTES TO THE FINANCIAL STATEMENTSFor the 52 weeks ended 29 April 2018Continued The loss on fair value of the written options and unhedged forward contracts of £15.4m has been included within
finance costs.
At 29 April 2018 £672.3m of hedged purchase contracts had a maturity at inception of greater than 12 months (FY17:
£nil of purchase contracts) and £821.0m of hedged sales had a maturity at inception of greater than 12 months (FY17:
£934.9m sales contracts).
At 29 April 2018 £nil of unhedged purchase contracts had a maturity at inception of greater than 12 months (2017: £nil
of purchase contracts) and £821.0m of unhedged sales had a maturity at inception of greater than 12 months (2017:
£1,395.2m sales contracts).
(c) SENSITIVITY ANALYSIS
The Group’s principal foreign currency exposures are to US Dollars and Euros. The table below illustrates the
hypothetical sensitivity of the Group’s reported profit and equity to a 10% increase and decrease in the US Dollar /
Sterling and Euro / Sterling exchange rates at the year-end date, assuming all other variables remain unchanged. The
figures have been calculated by comparing the fair values of outstanding foreign currency contracts at the current
exchange rate to those if exchange rates moved as illustrated. The income statement figures include the profit effect
of any relevant derivatives which are not in a designated cash flow hedge. The impact on US Dollar and Euro related
hedging instruments is included in equity.
Positive figures represent an increase in profit or equity:
Sterling strengthens by 10%
US Dollar
Euro
Sterling weakens by 10%
US Dollar
Euro
Income statement
29 April 2018
(£m)
30 April 2017
(£m)
29 April 2018
(£m)
Equity
30 April 2017
(£m)
0.2
0.6
(0.3)
(0.6)
33.5
4.0
(36.9)
(4.4)
0.3
0.6
0.3
0.6
39.0
0.8
(42.9)
(0.9)
INTEREST RATE SENSITIVITY ANALYSIS
The following table illustrates the hypothetical sensitivity of the Group’s reported profit and equity to a 0.5% increase
or decrease in interest rates, assuming all other variables were unchanged.
The analysis has been prepared using the following assumptions:
• For floating rate assets and liabilities, the amount of asset or liability outstanding at the balance sheet date is
assumed to have been outstanding for the whole year.
• Fixed rate financial instruments that are carried at amortised cost are not subject to interest rate risk for the
purpose of this analysis.
Positive figures represent an increase in profit or equity:
Interest rate increase of 0.5%
Interest rate decrease of 0.5%
Income statement
Equity
29 April 2018
(£m)
30 April 2017
(£m)
29 April 2018
(£m)
30 April 2017
(£m)
(3.8)
3.8
(1.9)
1.9
(3.8)
3.8
(1.9)
1.9
185
GROUP FINANCIAL STATEMENTSSPORTS DIRECT - ANNUAL REPORT 2018
(d) LIQUIDITY RISK
The table below shows the maturity analysis of the undiscounted remaining contractual cash flows of the Group’s non
derivative liabilities and foreign currency derivative financial instruments:
Less than 1 year
(£m)
1 to 2 years
(£m)
2 to 5 years
(£m)
Over 5 years
(£m)
Total (£m)
2018
Non derivative financial liabilities
Bank loans and overdrafts
Obligations under finance leases
Trade and other payables
Share buyback
Derivative financial instruments*
Cash inflows
Cash outflows
2017
Non derivative financial liabilities
Bank loans and overdrafts
Obligations under finance leases
Trade and other payables
Share buyback
Derivative financial instruments*
Cash inflows
Cash outflows
*Excludes contingent cash flows.
-
-
324.8
40.0
-
7.1
-
-
(1,743.4)
(1,638.4)
1,702.7
329.1
1,614.6
(16.7)
69.5
-
211.5
165.3
(148.5)
163.4
461.2
310.0
7.3
-
-
(343.4)
337.9
311.8
750.0
-
-
-
(755.1)
747.2
742.1
-
-
-
-
(598.1)
610.4
12.3
-
-
-
-
-
-
-
-
-
-
-
-
-
-
750.0
7.1
324.8
40.0
(4,136.9)
4,064.5
1,054.5
379.5
7.3
211.5
165.3
(1,090.0)
1,111.7
785.3
CAPITAL MANAGEMENT
The capital structure of the Group consists of equity attributable to the equity holders of the parent company,
comprising issued share capital, share premium, retained earnings and cash and borrowings.
It is the Group’s policy to maintain a strong capital base so as to maintain investor, creditor and market confidence and
to sustain the development of the business.
In respect of equity, the Board has decided that, in order to maximise flexibility in the near term with regards to a
number of inorganic growth opportunities under review, not to return any cash by way of a dividend at this time.
The Board is committed to keeping this policy under review and to looking to evaluate alternative methods of returning
cash to shareholders when appropriate.
The objective of the Share Scheme is to encourage employee share ownership and to link employee’s remuneration to
the performance of the Company. It is not designed as a means of managing capital.
In respect of cash and borrowings, the Board regularly monitors the ratio of net debt to underlying EBITDA, the
working capital requirements and forecasted cash flows however no minimum or maximum ratios are set. The ratio for
net debt to Reported EBITDA, excluding charges for the Share Schemes, is 1.1 (2017: 0.6). The objective is to keep this
figure below 3.0 (FY17: 3.0).
Based on this analysis, the Board determines the appropriate return to equity holders whilst ensuring sufficient capital
is retained within the Group to meet its strategic objectives, including but not limited to, acquisition opportunities.
186
NOTES TO THE FINANCIAL STATEMENTSFor the 52 weeks ended 29 April 2018Continued These capital management policies have remained unchanged from the prior year.
30. TRADE AND OTHER PAYABLES
Trade payables
Amounts owed to related undertakings
Other taxes including social security costs
Other payables
Fair value of share buy back
Accruals
29 April 2018
(£m)
30 April 2017
(£m)
228.6
0.7
58.4
96.0
40.0
182.8
606.5
133.3
0.4
69.5
50.6
163.5
167.6
584.9
The Directors consider that the carrying amount of trade and other payables approximates to their fair value. Included
in Other payables are amounts relating to stock in transit totalling £45.0m (FY17: £8.8m) due to the timing of the
period end.
Fair value of share buyback relates to the post year acquisition of own shares – see note 40.
31. ACQUISITIONS
On 18 May 2017 the Group took ownership of certain trade and assets of the businesses that traded as Bob's Stores
and Eastern Mountain Sports from Eastern Outfitters LLC which had filed for Chapter 11 in the US. Cash consideration
was paid in tranches over the initial Chapter 11 phase during the period to 30 April 2017, but control was not obtained
until US court approval was given for the trade and assets purchase, and Group management and processes began to
be implemented on 18 May 2017. The following table summarises the fair values of consideration paid for the trade
and assets of Bob's Stores and Eastern Mountain Sports, assets acquired, and the liabilities assumed.
Property, plant and equipment
Inventories
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Cash consideration
Cash acquired
Net cash outflow
Book value
(£m)
Fair value
adjustments
(£m)
Fair value of
net assets
acquired (£m)
9.7
55.6
10.2
9.9
(18.8)
66.6
(3.9)
19.0
1.0
-
(1.5)
14.6
5.8
74.6
11.2
9.9
(20.3)
81.2
81.2
(9.9)
71.3
Included in Group underlying EBITDA for the 52 week period to 29 April 2018 for the Bob's Stores and Eastern
Mountain Sports businesses is £9.2m of trading losses and £17.5m of losses arising as a result of the impact of fair
value adjustments.
On 17 August 2017, the Group acquired the remaining minority interest in The Flannels Group Ltd for £11.3m. This has
been accounted for as a minority acquisition, with the difference between brought forward minority interests and the
acquisition price flowing through Equity.
187
GROUP FINANCIAL STATEMENTSSPORTS DIRECT - ANNUAL REPORT 2018 The other principal acquisitions for the 52 weeks ended 29 April 2018 were:
i. On 6 Nov 2017, the Group acquired the remaining 51% of Brasher Leisure Ltd, which trades as Sweatshop,
for £1.
ii. On 16 March 2018, the Group acquired the remaining 51% of Lovells Sports (Holdings) Ltd, for £2.0m
iii. On 2 February 2018, the Group acquired the remaining 60% of Rhapsody Investments, which owns 100% of
NDS EHF, which has a Sports Direct fascia store in Iceland, for £2.5m.
iv. On 30 August 2017, the Group acquired assets to create Tri Yeovil UK Ltd, a triathlon specialist for £2.1m.
Cash consideration
Fair value of assets acquired
Goodwill
Acquisitions
(£m)
6.6
(6.6)
-
The asset and liability values at acquisition are detailed below. We have reviewed the fair value of the assets and
liabilities acquired, adjustments have been made to recognise the fair value of intangible assets.
Property, plant and equipment
Intangible assets
Stock
Cash & cash equivalents
Trade and other receivables
Trade and other payables
Minority interests
Cash consideration
Cash acquired
Net cash outflow in the cash flow statement
Fair value of
net assets
acquired
(£m)
2.0
10.5
5.1
4.8
2.1
(6.9)
(11.0)
6.6
Acquisitions
(£m)
6.6
(4.8)
1.8
Since the date of control, the following balances have been included within the Group’s Financial Statements for the
period.
Revenue
Operating loss
Loss before tax
Acquisitions
(£m)
181.6
33.1
33.1
Had the acquisitions been included from the start of the period, £3,376.0m of revenue, £215.7m of operating profit and
£72.9m of profit before tax would have been shown in the Group’s Financial Statements.
There were no contingent liabilities acquired as a result of the above transaction.
188
NOTES TO THE FINANCIAL STATEMENTSFor the 52 weeks ended 29 April 2018Continued 32. DISPOSALS
On 26 December 2016, the Group entered into a sale agreement for the Dunlop Brand and related wholesale and
licensing companies, which were part of the Wholeale & Licensing (formerly Brands Division). The disposal was
completed on 3 April 2017.
Property, plant & equipment NBV
Investments
Intangible assets
Inventories
Trade receivables
Bank & cash
Retirement benefit obligations
Trade payables
Gain on disposal
Total consideration
Net cash inflow arising on disposal
Less cash disposed of
Disposal
(£m)
2.1
0.9
20.4
14.0
13.4
6.1
(10.2)
(11.0)
35.7
79.9
115.6
Disposal
(£m)
115.6
(6.1)
109.5
The divestment of the Dunlop Business is in line with Sports Direct's elevation strategy.
33. CASH INFLOW FROM OPERATING ACTIVITIES
Profit before taxation
Net finance costs / (income)
Investment costs / (income)
Share of losses / (profits) of associated undertakings
Operating profit
Depreciation
Amortisation
Impairment
Profit on disposal of property, plant & equipment
Profit on disposal of subsidiary
Defined benefit pension plan employer contributions
Share-based payments
Operating cash inflow before changes in working capital
Increase in receivables(1)
(Increase) / decrease in inventories
Increase in payables
Cash inflows from operating activities
52 weeks ended 29
April 2018
(£m)
53 weeks ended 30
April 2017 Restated
(£m)
77.5
37.5
93.3
8.7
217.0
134.6
4.8
5.0
16.3
-
-
(6.0)
371.7
49.8
(119.6)
69.4
371.3
281.6
(9.4)
(111.3)
(0.8)
160.1
140.6
7.3
17.3
6.8
(79.9)
(2.4)
2.8
252.6
8.2
15.0
56.9
332.7
(1)The funds used for the Bob's and Eastern Mountain Sports acquisition were transferred to escrow during FY17 were reported in Receivables in the prior year. The acquisition
completed on 18 May 2017 and the prior year has therefore been restated to recognise the transfer on the face of the Cash Flow, meaning that movement in Receivables has been
restated. As reported in note 1, the prior year has been restated.
189
GROUP FINANCIAL STATEMENTSSPORTS DIRECT - ANNUAL REPORT 2018 34. OPERATING LEASE ARRANGEMENTS
As at 29 April 2018 the Group had outstanding commitments for future minimum lease payments under non-
cancellable operating leases, which fall due as follows:
LAND AND BUILDINGS
Within one year
In the second to fifth years inclusive
After five years
29 April 2018
(£m)
30 April 2017
(£m)
147.2
398.2
294.5
839.9
123.2
357.0
305.7
785.9
The leases have varying terms, escalation clauses and renewal rights. There are no clauses in relation to restrictions
concerning dividends, additional debt and further leasing within our portfolio. Contingent rents are payable on
certain store leases based on store revenue. For those leases that are turnover-related leases, the annual net lease
commitment is calculated using the estimated lease liability and any changes in the rental charge are accounted for
when known. Amounts of £5.7m (FY17: £6.6m) were charged to the income statement in relation to contingent rent.
The Group sub-lets certain stand-alone retail stores which are no longer operated by the Group. The property rental
income earned during the 52 weeks ended 29 April 2018 was £18.1m (FY17: £12.3m).
As at 29 April 2018, the Group had contracts with sub-tenants for the following future minimum lease rentals:
LAND AND BUILDINGS
Within one year
In the second to fifth years inclusive
After five years
29 April 2018
(£m)
30 April 2017
(£m)
13.8
30.2
11.5
55.5
12.3
33.5
13.5
59.3
35. CAPITAL COMMITMENTS
The Group had capital commitments of £19.3m as at 29 April 2018 (30 April 2017: £13.9m) mainly relating to
warehouse development and property acquisitions. See note 37 relating to facilities available to Game Digital plc.
36. CONTINGENT ASSETS AND LIABILITIES
There were no material contingent assets or liabilities at the balance sheet date.
190
NOTES TO THE FINANCIAL STATEMENTSFor the 52 weeks ended 29 April 2018Continued 37. RELATED PARTY TRANSACTIONS
The Group has taken advantage of the exemptions contained within IAS 24 - “Related Party Disclosures” from the
requirement to disclose transactions between Group companies as these have been eliminated on consolidation.
The Group entered into the following material transactions with related parties:
52 weeks ended 29 April 2018:
Relationship
Sales
(£m)
Purchases
(£m)
Trade
and other
receivables
(£m)
Trade
and other
payables
(£m)
RELATED PARTY
Brasher Leisure Limited
Four (Holdings) Limited(1)
Lovells Sports Ltd
Mike Ashley(2)(3)
Mash Holdings Limited
NDS EHF
Rangers Retail Limited
Subsidiary (acq. In year)
Associate
Subsidiary (acq. In year)
Director
Parent company
Associate
Associate
Newcastle United Football Club & St James Holdings
Limited
Connected persons
53 weeks ended 30 April 2017:
5.3
1.6
0.6
2.1
-
1.5
0.3
1.2
0.2
16.8
0.2
-
-
-
0.2
0.5
-
68.9
-
-
0.5
-
0.8
0.1
-
0.5
-
-
-
-
0.2
-
Relationship
Sales
(£m)
Purchases
(£m)
Trade
and other
receivables
(£m)
Trade
and other
payables
(£m)
RELATED PARTY
Brasher Leisure Limited
Four (Holdings) Limited(1)
Mike Ashley(2)(3)
Mash Holdings Limited
NDS EHF
Rangers Retail Limited
Associate
Associate
Director
Parent company
Associate
Associate
Newcastle United Football Club & St James Holdings
Limited
Connected persons
15.6
0.2
0.7
-
2.5
1.8
1.1
0.8
11.9
-
-
-
1.5
0.4
6.4
32.9
0.3
0.1
-
0.2
1.0
0.1
-
-
-
-
0.1
0.3
(1) The outstanding balance with Four Holdings reflects the funding related to Agent Provocateur. The purchases (2017: restated) in the period relate to inventory. Management
consider that the underlying results of Four Holdings supports the recoverability of the receivables balance. The results of Four (Holdings) Limited do not meet the thresholds
requiring more detailed disclosures under IFRS 12.
(2) Use of the company jet and helicopter are charged at commercial rates.
(3) The Group had a £6.0m liability as at 30 April 2017 in respect of a disputed historic claim. This was settled by the Group during the period and the Group was subsequently
reimbursed by Mike Ashley. As at the prior year end the Group anticipated settling this liability, and as such no related party disclosure was given in the 2017 financial statements.
Subsequent clarification of the matter resulted in agreement that the liability rested with Mike Ashley and therefore it was settled personally. The release of the prior year provision
has been included within current year administrative expenses. Interest accrued related to the claim of £3.0m was settled by the Group.
The Group has agreements with Rangers Retail Limited and Newcastle United Football Club, amongst other football
clubs, whereby the Group provides procurement and warehousing services on behalf of the club. Store sales are
received directly by the entities, for web sales a service fee is charged by the entities to the Group and Sales disclosed
above relate solely to goods bought from the Group. The agreement with Rangers Retail Limited ceased on 20 June
2017.
191
GROUP FINANCIAL STATEMENTSSPORTS DIRECT - ANNUAL REPORT 2018 An agreement has been entered into with Double Take Limited, a company owned by Mash Holdings Limited in
which Matilda Ashley, Mike Ashley’s daughter, is a director. Under the agreement, Double Take licences the Group
the exclusive rights to the cosmetic brand SPORT FX. No royalties or other fees are payable to Double Take for these
rights until September 2019 at the earliest, when this fee arrangement will be reviewed on a going forwards basis, no
provision is required in the financial statements. It should be noted that the Group (rather than Double Take) owns the
rights to SPORT FX for clothing, footwear and sports equipment.
The Group holds greater than 20% of the voting rights of Findel plc, Debenhams plc, French Connection Group plc
and GAME Digital plc. Findel plc, French Connection Group plc and GAME Digital plc have disclosed transactions with
SDI as a related party within their most recent Financial Statements. Transactions between Findel plc and the Group
related to normal commercial trading arrangements and are not considered material to the results of the Group. The
collaboration agreement and working capital facility provided to GAME Digital plc has been discussed on page 73 of
the annual report, the directors do not consider that this represents a material transaction.
The Group does not consider it has the power to participate in the financial and operating policy decisions of the
entities and so management do not consider the Group to be able to exert significant influence over these entities as
per IAS 28 Investments in Associates and Joint Ventures and IAS 24 Related Party Disclosures.
All related party transactions were undertaken on an arms-length basis.
KEY MANAGEMENT, EXECUTIVE AND NON-EXECUTIVE DIRECTOR COMPENSATION
Salaries and short-term benefits
Share-based payments
Total
29 April 2018
(£m)
30 April 2017
(£m)
1.1
-
1.1
1.4
0.7
2.1
MM Prop Consultancy Ltd, a company owned and controlled by Michael Murray (domestic partner of Anna Ashley,
daughter of Mike Ashley), continues to provide property consultancy services to the Group. MM Prop Consultancy Ltd
is primarily tasked with finding and negotiating the acquisition of new sites in the UK, Europe and rest of the world for
both our larger format stores and our combined retail and gym units but it also provides advice to the Company’s in-
house property team in relation to existing sites in the UK, Europe and rest of the world.
MM Prop Consultancy Ltd fees are linked directly to value creation which is determined by the Company's non-
executive directors who independently review performance bi-annually with a view to determining, at their absolute
and sole discretion, the quantum of the percentage payable. Under the terms of the agreement with MM Prop
Consultancy Ltd no fees are payable until the earliest of 30 September 2018 so that the Company’s independent non-
executive directors have a sufficient amount of time to assess performance.
During the period, independent valuations were collated as an initial stage in confirming the value created (through
disposals and properties still held) by MM Prop Consultancy Limited. The Group’s non-executive directors agreed 25%
of the final agreed value created would be paid to MM Prop Consultancy Ltd based on these independent valuations
of selected sites subject to the agreement. The value created had not been determined and approved by the non-
executive directors as at period end or at the date of signing this Annual Report and accounts.
The freehold acquisition program is a cornerstone of the elevation strategy and has proven to be extraordinarily
successful. With a strong ongoing pipeline, and with original expectations exceeded, Michael Murray has waived a
portion of his fee and settled on 20% of the final agreed value created.
Based on IAS 37 Provisions, Contingent Liabilities and Contingent Assets we have provided for the most reliable
estimate of the amount expected to be paid to MM Prop Consultancy Ltd being £5.0m to the end of FY18.
192
NOTES TO THE FINANCIAL STATEMENTSFor the 52 weeks ended 29 April 2018Continued Michael Murray is now considered to be a related party in the context of IAS 24 Related Party Disclosures. This is due
to the increased scope of his role within the Group in the second half of the financial period, as he became Head of
Elevation in April 2018, defining him as key management personnel.
38. COMMERCIAL ARRANGEMENTS
The Group has commercial arrangements in place with IBSL Consultancy Ltd. Management has considered whether
a related party relationship exists and concluded that Justin Barnes, a director of IBSL Consultancy Ltd, and/or
IBSL Consultancy Ltd are acting in an advisory capacity only and are not performing key management functions
that would indicate a related party relationship. Management decisions are made solely by the management of the
Group. Justin Barnes is a director of a number of companies in the Mash Group. No payments made to Justin Barnes
or IBSL Consultancy Ltd in relation to services provided to subsidiaries of Mash relate to services provided by IBSL
Consultancy Ltd or Justin Barnes to the Group.
During FY17, the Company had arrangements in place with Barlin Delivery Limited, a company owned by John Ashley
(the brother of Mike Ashley). This arrangement ceased as at 30 April 2017. There were no commercial transactions
between the Group and Barlin in the period ended 29 April 2018.
In December 2017, there was a vote by independent shareholders against a retrospective payment of £11m to John
Ashley for executive bonuses forgone.
39. ULTIMATE CONTROLLING PARTY
The Group is controlled by Mike Ashley through his 100% shareholding in Mash Beta Limited and Mash Holdings
Limited, which own 303,507,460 (56.52% of the issued ordinary share capital of the Company) and 26,492,540 (4.93%
of the issued ordinary share capital of the Company) ordinary shares respectively at the period end.
40. POST BALANCE SHEET EVENTS
Subsequent to the year end, JD Sports plc completed their takeover of The Finish Line Inc. and Sports Direct disposed
of their remaining economic interest and received net proceeds from the sale of the physical shares of £45.2m.
The Company announced on 27 April 2018 that it has instructed Liberum Capital Limited in relation to an irrevocable
non-discretionary share buyback programme to purchase the Company’s shares during the closed period commencing
on 30 April 2018 and ending on 19 July 2018. In line with IAS 32 Financial Instruments: Presentation the Company
recognised the full redemption amount of £40.0m which is considered to be immaterially different to the present
value at year end. If the contract expires without full delivery, the amount of the financial liability attributable to the
undelivered shares is reclassified to equity reversing the original recognition. As at 18 July 2018, nil shares have been
repurchased under the closed period share buyback programme.
193
GROUP FINANCIAL STATEMENTSSPORTS DIRECT - ANNUAL REPORT 2018 41. SUBSIDIARY UNDERTAKINGS
The subsidiary undertakings of the Company at 29 April 2018 were as follows:
COUNTRY OF
INCORPORATION
COMPANY NUMBER
PERCENTAGE
OF ISSUED
SHARE
CAPITAL
HELD
NAME
5 Pointz Limited
Acre 653 Limited
Activator Brands Limited
Activator Products Limited
Active Apparel New Corp
AP Brands Holdings Ltd
Beauty Brand Management Limited
Bellatrix Associates Limited
Bellatrix Overseas Limited
Bellatrix Unlimited
Bob's Stores USA LLC
Brands & Fashion NV
Brands 001 Limited
Brands Africa Limited
Brands Holdings Limited*
England & Wales
England & Wales
England & Wales
England & Wales
United States
Malaysia
England & Wales
Isle of Man
Isle of Man
Isle of Man
United States
Belgium
England & Wales
England & Wales
England & Wales
6950214
4579745
5344658
4204611
3270168
4921-A
5258421
111671C
128827C
111670C
639085
0477-995-412
5347540
6836765
4087435
Brands Holdings Sponsorship Limited
England & Wales
10375418
Brands Inc Limited
Brasher Leisure Limited
BSL International Limited
England & Wales
England & Wales
England & Wales
3585719
999421
2800425
Cafico - Comercio de Artigos de Desportos S.A.
Portugal
503751804
Campri Limited
Carlton Shuttlecocks Limited
Carlton Sports Company Limited
CDS IP SA
Climber & Rambler Limited
Community Bug Limited
Cruise Clothing Limited
David Geoffrey & Associates (UK) Limited
Design Source Supply Limited
Dink Digital Holdings Limited
Dink Digital Limited
Direct Fishing Limited
Direct Golf IP Limited
Direct Golf Retail Limited
Donnay International N.V.
SC(ESOP) Limited
SC (Subco 2016) Ltd
SC Sports (SG) PTE LTD
SC (TrustCo 2016) Ltd
SDI Sports (SC 2016) Ltd
SDI Sports Group Americas Inc
194
England & Wales
England & Wales
England & Wales
5398677
480582
467686
Belgium
406461077
England & Wales
England & Wales
Scotland
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
Belgium
England & Wales
England & Wales
Singapore
England & Wales
England & Wales
United States
3938618
6260240
SC382991
670530
9636568
11143016
11072685
8203469
9911086
9825889
435392220
3408468
2030941
198203096N
3151573
429750
2047393
51
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
80
100
100
100
100
100
100
100
100
100
100
NOTES TO THE FINANCIAL STATEMENTSFor the 52 weeks ended 29 April 2018Continued Eastchance Limited
Epoch Properties Limited
Etail Services Limited
European Branded Clearance Company Limited
Everlast Australia Limited
Everlast Sports International Inc. Corp
Everlast Sports Mfg. Corp
Everlast World Boxing Headquarters Corporation
Everlast Worldwide Acquisitions Inc. United States
Everlast Worldwide Inc United States
Exsports Limited
Feniger And Blackburn Limited
Field & Trek (UK) Ltd
Field & Trek.Com Limited
Firetrap Limited
Forever Media Limited
Forever Models Limited
Forever Sports Limited
Freeshield Limited
Gaelic Boots Limited
Gelert IP Limited
Gelert Limited
Global Apparel (HK) Limited
Golddigga Brands Limited
Goudie Squash International Limited
Gradidges Limited
Graduate Clothing Limited
Gul IP Limited
Gul Watersports Limited
Heatons
Heatons (N.I.) Limited
Heatons Logistics Limited
Heatons Stores Limited
Heatons Sports Limited
Heaven or Hell Limited
Hong Kong
Jersey
England & Wales
England & Wales
England & Wales
United States
United States
United States
United States
United States
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
ROI
England & Wales
England & Wales
Hong Kong
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
Ireland
Northern Ireland
Northern Ireland
ROI
ROI
England & Wales
174348
74753
5146997
4359910
8103912
13-2811380
13-1804772
13-1804773
4379232
13-3672716
2779040
639594
5622577
3943377
6836684
8249185
9666349
9489811
6330786
520868
8576185
8576204
1330162
6636173
980461
278122
2511038
8612478
7589716
11229
NI035599
NI603177
509525
555623
5899282
HK Sports & Golf Aktiebolag
Sweden
556510-8189
Hot Tuna IP Limited
Hsports Limited
International Brand Management Limited*
James Lillywhites Limited
Kangol Holdings Limited
Kangol Limited
Kangol Trustees Limited
Karrimor Limited
Karrimor Japan Inc
Keith Bishop Public Relations Limited
Kensington Health Clubs Limited
England & Wales
Northern Ireland
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
6836792
NI628585
5142123
118840
3317738
3343793
3505512
5215974
Japan
0100-01-012128
England & Wales
England & Wales
7895641
6021489
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
91
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
91.5
51
100
195
GROUP FINANCIAL STATEMENTSSPORTS DIRECT - ANNUAL REPORT 2018 La Jolla (UK) Limited
Laneshift Limited
Lillywhites Limited
Litesome Sportswear Limited
Lonsdale Australia Limited
Lonsdale Boxing Limited
Lonsdale Sports Limited
Lovell Sports Limited
Lovell Sports (Holdings) Limited
MA Online Limited
Masters Holders Limited
Megavalue.com Limited
Megavaluedirect.com Limited
Megavalue Retail Limited
Midtown Ltd
Mississippi Manufacturing LLC
Mountain Sports LLC
Sports Direct MST Sdn Bhd
Muddyfox Limited
Muddyfox IP Limited
NDS ehf
Nevica IP Limited
Newco GT Limited
No Fear Brand Limited
No Fear International Limited
No Fear USA Limited
Oldco 10 Limited
Olympus Ventures Limited
OU Sportsdirect.com
Outdoor Sports Direct Limited
P W P Sportbase Limited
Paddle Sport Limited
POD Collection Services Limited
Propeller (U.K.) Limited
Puffa IP Limited
Queensberry Boxing IP Limited
Queensberry Rules Limited
Quickreply Limited
RR Rights Limited
Republic IP Limited
Republic.com Retail Limited
Rhapsody Investments (Europe) SA
Robinsons Country Leisure Limited
S&B Brands Limited
SD Equestrian Limited
SD Outdoor IP Limited
SD Outdoor Limited
196
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
5737550
6146743
290939
207867
7665885
3912303
4430781
4184358
9608995
China (PRC)
91440300597787503D
England & Wales
England & Wales
England & Wales
ROI
England & Wales
United States
United States
Malaysia
England & Wales
England & Wales
Iceland
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
Estonia
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
8787718
9544685
9545879
559110
9467997
3470413
6386224
925116-M
4187350
10246764
6301121760
6836778
10532537
5568043
5532482
7712470
5541144
3945752
12845837
2780756
1933891
6836690
9918495
2770207
England & Wales
10910124
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
Luxembourg
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
7929363
6723660
5904737
9210817
5635015
8248997
B21.60X
1204722
5635585
8692780
8560252
8560260
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
51
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
NOTES TO THE FINANCIAL STATEMENTSFor the 52 weeks ended 29 April 2018Continued SDB 2 S.A.
SDI (5P Holdings) Limited
SDI (Aberwystwyth) Limited
SDI (Acqco 2) Limited
SDI (Acqco 5) Limited
SDI (Acqco 13) Limited
SDI (Aintree) Limited
SDI (Ashford) Limited
SDI (Ashington) Limited
SDI (Ayr) Limited
SDI (Bangor) Limited
SDI (Barrow in Furness) Limited
SDI (Aberdeen) Limited
SDI (Beddgelert) Limited
SDI (Belfast) Limited
SDI (Berwick) Limited
SDI (Betws-y-Coed) Limited
SDI (Bexleyheath) Limited
SDI (Birkenhead) Limited
SDI (Bishop Auckland) Limited
SDI (Bridgwater) Limited
SDI (Brook EU) Limited
SDI (Brook ROW) Limited
SDI (Brook UK) Limited
SDI (Burton) Limited
SDI (Cardiff Flannels) Limited
SDI (Carlisle) Limited
SDI (Enfield) Limited
SDI (Chatham) Limited
SDI (China Online) Limited
SDI (Clacton) Limited
SDI (Clapham) Limited
SDI (Dundee) Limited
SDI (Colchester) Limited
SDI (Cork) Limited
SDI (Coventry) Limited
SDI (Romford) Limited
SDI (Darlington) Limited
SDI (Derry) Limited
SDI (Doncaster) Limited
SDI (Dunfermline) Limited
SDI (East Ham) Limited
SDI (East Kilbride) Limited
SDI (Doncaster Wheatley) Limited
SDI (Watford) Limited
SDI (Fulham) Limited
SDI (Gainsborough) Limited
Belgium
0848.964.388
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
10682050
2789996
10161656
10162904
10890849
3352462
7848460
7849231
5528267
5529705
7851574
8512592
8577551
9872471
2739957
6836673
England & Wales
9788372
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
7849198
3004246
7852061
9336830
9336806
9340379
8495632
10177359
7851959
10086209
6836679
10246762
7852078
10885672
9702004
5632790
11228017
9680128
10071547
10915193
9127160
9888670
8483679
9810378
6656368
6372181
6328505
7852037
6338907
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
197
GROUP FINANCIAL STATEMENTSSPORTS DIRECT - ANNUAL REPORT 2018 SDI (Galashiels) Limited
SDI (Glasgow Fort) Limited
SDI (Glasgow Ingram Street) Limited
SDI (Gloucester) Limited
SDI (Cardiff) Limited
SDI (Hastings) Limited
SDI (Hereford) Limited
SDI (Hofco) Limited
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
7852091
9861504
9925519
7852067
8972499
8625893
9888642
8319960
SDI (HoH Holdings) Limited
England & Wales
10161592
SDI (Hull) Limited
SDI (Ipswich) Limited
SDI (Isle of Man) Limited
SDI (Jersey Holding) Limited
SDI (Kingston) Limited
SDI (Derry) Limited
SDI (Uxbridge 2) Limited
SDI (Leicester) Limited
SDI (Plymouth Flannels) Limited
SDI (Manchester Denton) Limited
SDI (Bradford) Limited
SDI (Newcastle) Limited
SDI (Brixton) Limited
SDI (Keighley) Limited
SDI (Kendal) Limited
SDI (Kentish Town) Limited
SDI (Kidderminster) Limited
SDI (Kilmarnock) Limited
SDI (Kirkcaldy) Limited
SDI (Leeds) Limited
SDI (Lincoln) Limited
SDI (Liverpool) Limited
SDI (Livingston) Limited
SDI (Lowestoft) Limited
SDI (LSL Holdings) Limited
SDI (Luton) Limited
SDI (Manchester) Limited
SDI (Manchester Cheetham Hill) Limited
SDI (Market Road) Limited
SDI (Nassau Street) Limited
SDI (Neath) Limited
SDI (New Cavendish Street) Limited
SDI (Newark) Limited
SDI (Newport) Limited
SDI (Newton Abbot) Limited
SDI (NFSK) Limited
SDI (Northampton) Limited
SDI (Nuneaton) Limited
198
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
9638564
9788411
9901745
10177028
10915209
9127160
9127316
9127170
9127387
9127295
9127266
9127286
9127300
6260239
England & Wales
6338918
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
9901702
9203731
7853433
7852097
9293515
9625631
9888734
11227937
7852265
10161824
9680625
9888635
10100969
10799247
11227964
7853548
6306917
7853470
8679118
6836666
10919102
7852272
7852249
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
NOTES TO THE FINANCIAL STATEMENTSFor the 52 weeks ended 29 April 2018Continued SDI (Oswestry) Limited
SDI (Paisley) Limited
SDI (Penzance) Limited
SDI (Peterlee) Limited
SDI (Plymouth) Limited
SDI (Northwich) Limited
SDI (Preston) Limited
SDI (Propco 34) Limited
SDI (K Lynn) Limited
SDI (Oxford Street) Limited
SDI (Nottingham) Limited
SDI (Edinburgh) Limited
SDI (Newquay) Limited
SDI (Sunderland High Street) Limited
SDI (Salisbury) Limited
SDI (Ramsgate) Limited
SDI (Reading) Limited
SDI (Redcar) Limited
SDI (Rolle St) Limited
SDI (Rotherham) Limited
SDI (Scarborough) Limited
SDI (Hounslow) Limited
SDI (Scunthorpe) Limited
SDI (Slough) Limited
SDI (Widnes) Limited
SDI (Solihull) Limited
SDI (Southampton 2) Limited
SDI (Southampton) Limited
SDI (Southport) Limited
SDI (St Austell) Limited
SDI (St Helens) Limited
SDI (Stafford) Limited
SDI (Stoke Longton) Limited
SDI (Stoke Newington) Limited
SDI (Strabane) Limited
SDI (Streatham) Limited
SDI (Strood) Limited
SDI (Sunderland) Limited
SDI (Sutton) Limited
SDI (Swindon) Limited
SDI (Middlesbrough) Limited
SDI (Tallaght) Limited
SDI (Taunton) Limited
SDI (The Lion Hotel) Limited
SDI (Thurrock) Limited
Tri Yeovil UK Limited
SDI (Uxbridge) Limited
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
7852363
2933408
7852297
7852401
9470468
5656295
10915199
11331391
10073076
10046080
10100609
10100990
10089800
10107775
10107572
7852250
10422164
2731452
7852669
11227321
6328463
10086218
7852055
7852417
8576472
8612647
9665889
8512480
9888806
7852284
7852281
8568681
7853877
7852207
9890243
10066335
7852251
8755347
11228011
9888662
10081909
10915203
7852191
6836880
10089743
10680690
10177276
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
199
GROUP FINANCIAL STATEMENTSSPORTS DIRECT - ANNUAL REPORT 2018 SDI (Wakefield) Limited
SDI (Walsall) Limited
SDI (West Ealing) Limited
SDI (Weymouth) Limited
SDI (Wigan) IP Limited
SDI (Wigan) Retail Limited
SDI (Wishaw) Limited
SDI (Wolverhampton) Limited
SDI (Derby) Limited
SDI (Wrexham) Limited
SDI (Wythenshawe) Limited
SDI Aviation Limited*
SDI Fitness (Armagh) Limited
SDI Fitness (Atlas) Limited
SDI Fitness (Bedford) Limited
SDI Fitness (Belfast) Limited
SDI Fitness (Birmingham) Limited
SDI Fitness (Bury St Edmunds) Limited
SDI Fitness (Cambridge) Limited
SDI Fitness (Cheltenham) Limited
SDI Fitness (Chester) Limited
SDI Fitness (Colchester) Limited
SDI Fitness (Croydon) Limited
SDI Fitness (Dartry) Limited
SDI Fitness (Epsom) Limited
SDI Fitness (Fareham) Limited
SDI Fitness (Formby) Limited
SDI Fitness (Glasgow) Limited
SDI Fitness (Guildford) Limited
SDI Fitness (Hove) Limited
SDI Fitness (Huntingdon) Limited
SDI Fitness (Ivy) Limited
SDI Fitness (K Heath) Limited
SDI Fitness (K Lynn) Limited
SDI Fitness (Kettering) Limited
SDI Fitness (Lincoln City) Limited
SDI Fitness (Lincoln South West) Limited
SDI Fitness (Liverpool) Limited
SDI Fitness (Maidstone) Limited
SDI Fitness (Manchester) Limited
SDI Fitness (Milngavie) Limited
SDI Fitness (Newark) Limited
SDI Fitness (Northfield) Limited
SDI Fitness (Poole) Limited
SDI Fitness (Rugby) Limited
SDI Fitness (Sale) Limited
SDI Fitness (Salisbury) Limited
200
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
8483711
7852289
9798784
6716652
6835407
8208933
6656365
9788373
9310031
England & Wales
10915200
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
9659156
9633152
9038768
9749030
9038839
9038724
9038982
9038949
9038881
9039840
9038943
9039011
9039243
9039023
9039043
9039057
9039895
9038811
9039269
9039030
9039881
9753389
9039717
9039847
9039852
9039331
9039319
9039347
9039343
9039339
9039510
9039640
9039412
9039481
9039408
9039405
9039429
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
NOTES TO THE FINANCIAL STATEMENTSFor the 52 weeks ended 29 April 2018Continued SDI Four Limited
SDI Gift Card LLC
SDI Golf Limited
SDI Holdings USA inc
SDI Lifestyle Limited
SDI Newco N.10 Limited
SDI Newco No.2 Limited
SDI Newco No.5 Limited
SDI Newco Shire Limited
SDI Properties (USA) Inc.
SDI Properties (Wigan) Limited
SDI Property Limited*
SDI Property (Europe) B.V.
SDI Property US Limited
SDI Retail Services Limited
SDI Retailing Limited
SDI Shirebrook DC Limited
SDI Shirebrook Limited
SDI Shirebrook Shop Limited
SDI Sport London Limited
SDI Sports (East Ham) Limited
SDI Sports (Stoke) Limited
SDI Stores LLC
SDI.com Fitness Parent Limited*
SDIL S.A.
SDI USA LLC
Serverange Limited
Seven Strong Limited
Shelfco A1 Limited
Shelfco A2 Limited
Shelfco A3 Limited
SIA Sportland
SIA Sportsdirect.com
Ski and Outdoor Warehouse Limited
Slazengers Australia Limited
Slazenger Carlton (Holdings) Limited
Slazengers Limited
Smart Protein Limited
Smith & Brooks (Germany) Limited
Smith & Brooks (India) Limited
Smith & Brooks Limited
Smith And Brooks Group Limited
Smith And Brooks Holdings Limited
SNÖ Sport Vertriebs GmbH
Sondico IP Limited
Spinsort Limited
England & Wales
United States
England & Wales
United States
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
United States
England & Wales
England & Wales
Netherlands
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
United States
England & Wales
Belgium
United States
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
Latvia
Latvia
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
Austria
England & Wales
England & Wales
Sport Eybl & Sports Experts Logistikbetriebs GmbH
Austria
9719779
S6773735
9083512
6651201
8293614
8578776
8158699
9062747
8177495
535872
6836522
2767493
69042594
11323420
8143303
9283231
2963189
3016549
3018210
9848767
10259103
10163722
1240332
9082454
810.198.636
6385155
2997208
07756386
10686681
10687367
10687408
40003530961
40103932873
2917223
9217319
10463051
116000
8907509
5427463
2964528
2073720
4079331
4983573
272671 m
6546121
6029888
96024 m
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
60
51
100
100
100
100
100
100
100
100
100
100
100
100
100
100
201
GROUP FINANCIAL STATEMENTSSPORTS DIRECT - ANNUAL REPORT 2018 Sport Eybl Holding GmbH
Sportland Eestie A.S.
Sportland International Group A.S.
Sports Commission Limited
Sports Direct Brands Limited*
Sports Direct Holdings Limited*
Sportsdirect.com (Asia) Ltd
Sports Direct International Holdings Limited*
Sports Direct Retail Limited*
Sports Essentials Limited
Sports World International Limited
Sports World The Netherlands B.V.
Sportsdirect.com Austria GmbH
Sportsdirect.com Belgium S.A.
Sportsdirect.com Cyprus Limited
Sportsdirect.com Czech Republic s.r.o.
Sportsdirect.com Fitness Limited
Sportsdirect.com France
Sportsdirect.com Hungary Kft
Sportsdirect.com Immobilien GmbH
Sportsdirect.com Luxembourg
Sportsdirect.com Media Limited
Sportsdirect.com Pty Ltd Australia
Sportsdirect.com Poland S.P.Z.oo
Sportsdirect.com Retail (Europe) S.A.*
Sportsdirect.com Retail Limited*
Sportsdirect.com S.L.U. Spain
Sportsdirect.com Slovakia s.r.o.
Sportsdirect.com SLVN d.o.o.
Sportsdirect.com Switzerland A.G. Switzerland CHE-
SSG Sport GmbH (SSD)
Sterling Resources (Holdings) Limited
Sterling Resources Limited
Stirlings (Argyle Street) Limited
Straub Corporation Limited
Summercombe 167 Limited
SWImmo Eupen SA
Table Tennis Pro Europe Ltd
Talisway Limited
The Antigua Group Inc
The Cycling Bug Limited
The Running Bug Limited
The Flannels Group Limited
The Trademark Licensing Company Limited
Total Estates Limited
UAB Sportland LT
UAB Sportsdirect.com
202
Austria
Estonia
Estonia
England & Wales
England & Wales
England & Wales
Hong Kong
England & Wales
England & Wales
England & Wales
England & Wales
Netherlands
Austria
Belgium
Cyprus
Czech Republic
England & Wales
France
Hungary
Austria
Luxembourg
180095 x
10677712
10993195
4824491
6026039
6464317
1216339
6027131
6026013
4409470
6531266
34056291
309738 y
416.268.471
HE 230340
24268933
9028577
FR27379062813
01-09-986824
104151 p
2700 3200 297
England & Wales
9127526
Australia
Poland
Belgium
England & Wales
Spain
Slovakia
Slovenia
Switzerland
Germany
England & Wales
England & Wales
Scotland
England & Wales
England & Wales
Belgium
England & Wales
Hong Kong
United States
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
Lithuania
Lithuania
603 187 319
452610
458883046
3406347
B-86567880
47 240 458
1198157000
331.683.991
HRB 7134
4651701
1413254
SC088108
3003584
6217909
878673906
5003853
323181
0734679-4
7163983
7164014
2318510
4477829
4958214
135039836
304155613
100
60
60
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
51
51
NOTES TO THE FINANCIAL STATEMENTSFor the 52 weeks ended 29 April 2018Continued Universal Cycles Limited
UP Brands Limited
USA Pro IP Limited
USC IP Limited
USC.co.uk Retail Limited
Used Tackle Limited
Van Mildert (Lifestyle) Limited
Visionfigure Limited
Vinecomb Investments Holdings Limited
Vinecomb Investments Limited
Voodoo Dolls Brand Limited
Wareshop1 Limited
Wareshop2 Limited
Wareshop3 Limited
Warrnambool *
Waterline Angling Products Limited
West Coast Capital (HOFCO) Limited
Westminster Manufacturing LLC
Wildlaw Limited
William Sykes Limited
World of Service International Limited
World of Service Limited
Worthyfund Limited
Y.U.V. Limited
Yeomans Outdoors Limited
*Direct shareholdings held by SDI plc.
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
ROI
England & Wales
Scotland
United States
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
1339667
6521633
6497914
6836808
8617068
7989154
8319959
2951233
10161816
02206022
05323305
9870849
9870840
9870808
387014
2696374
SC437614
44358
4571678
123229
1202465
6020729
2955978
9350127
8058714
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Sports Direct International plc will provide a parental guarantee for the following United Kingdom incorporated
subsidiaries thus entitling them to exemption from statutory audit under section 479A of the Companies Act 2006.
COMPANY NAME
Direct Fishing Limited
Hot Tuna IP Limited
SD Equestrian Limited
SD Outdoor Limited
SDI (Aberdeen) Limited
COMPANY
NUMBER
COMPANY NAME
08203469
SDI (Nuneaton) Limited
06836792
SDI (Oswestry) Limited
08692780
SDI (Oxford Street) Limited
08560260
SDI (Paisley) Limited
08512592
SDI (Penzance) Limited
SDI (Aberwystwyth) Limited
02789996
SDI (Peterlee) Limited
SDI (Aintree) Limited
SDI (Ashford) Limited
SDI (Ashington) Limited
SDI (Ayr) Limited
SDI (Bangor) Limited
03352462
SDI (Plymouth Flannels) Limited
07848460
SDI (Plymouth) Limited
07849231
SDI (Ramsgate) Limited
05528267
SDI (Reading) Limited
05529705
SDI (Redcar) Limited
SDI (Barrow In Furness) Limited
07851574
SDI (Rolle St) Limited
SDI (Beddgelert) Limited
08577551
SDI (Romford) Limited
SDI (Belfast) Limited
SDI (Berwick) Limited
09872471
SDI (Salisbury) Ltd
02739957
SDI (Scarborough) Limited
COMPANY
NUMBER
07852249
07852363
10046080
02933408
07852297
07852401
09127387
09470468
07852250
10422164
02731452
07852669
10071547
10107572
06328463
203
GROUP FINANCIAL STATEMENTSSPORTS DIRECT - ANNUAL REPORT 2018 SDI (Betws-Y-Coed) Limited
06836673
SDI (Scunthorpe) Limited
SDI (Bexleyheath) Limited
SDI (Birkenhead) Limited
09788372
SDI (Slough) Limited
07849198
SDI (Solihull) Limited
SDI (Bishop Auckland) Limited
03004246
SDI (Southampton 2) Limited
SDI (Bridgwater) Limited
07852061
SDI (Southampton) Limited
SDI (Brixton) Limited
SDI (Burton) Limited
09127300
SDI (Southport) Limited
08495632
SDI (St Austell) Limited
SDI (Cardiff Flannels) Limited
10177359
SDI (St Helens) Limited
SDI (Carlisle) Limited
SDI (Chatham) Limited
SDI (Clacton) Limited
SDI (Colchester) Limited
SDI (Darlington) Limited
SDI (Doncaster) Limited
SDI (Dundee) Limited
SDI (Dunfermline) Limited
SDI (East Ham) Limited
SDI (East Kilbride) Limited
SDI (Edinburgh) Limited
SDI (Enfield) Limited
SDI (Fulham) Limited
07851959
SDI (Stafford) Limited
06836679
SDI (Stoke Longton) Limited
07852078
SDI (Stoke Newington) Limited
05632790
SDI (Strabane) Limited
10915193
SDI (Streatham) Limited
09888670
SDI (Strood) Limited
09702004
SDI (Sunderland High Street) Limited
08483679
SDI (Sunderland) Limited
09810378
SDI (Swindon) Limited
06656368
SDI (Tallaght) Limited
10100990
SDI (Taunton) Limited
10086209
SDI (Thurrock) Limited
07852037
SDI (Uxbridge 2) Limited
SDI (Gainsborough) Limited
06338907
SDI (Uxbridge) Limited
SDI (Galashiels) Limited
07852091
SDI (Wakefield) Limited
SDI (Glasgow Fort) Limited
09861504
SDI (Walsall) Limited
SDI (Glasgow Ingram Street) Limited
09925519
SDI (Watford) Limited
SDI (Gloucester) Limited
07852067
SDI (Weymouth) Limited
SDI (Hastings) Limited
SDI (Hereford) Limited
SDI (Hofco) Limited
08625893
SDI (Wishaw) Limited
09888642
SDI (Wolverhampton) Limited
08319960
SDI (Wythenshawe) Limited
SDI (Hoh Holdings) Limited
10161592
SDI Fitness (Bury St Edmunds) Limited
SDI (Hounslow) Limited
SDI (Hull) Limited
SDI (Isle Of Man) Limited
SDI (K Lynn) Limited
SDI (Keighley) Limited
SDI (Kendal) Limited
SDI (Kentish Town) Limited
SDI (Kidderminster) Limited
SDI (Kilmarnock) Limited
SDI (Kingston) Limited
SDI (Kirkcaldy) Limited
SDI (Leeds) Limited
SDI (Leicester) Limited
SDI (Liverpool) Limited
SDI (Lowestoft) Limited
10086218
SDI Fitness (Cheltenham) Limited
09638564
SDI Fitness (Colchester) Limited
09901745
SDI Fitness (Croydon) Limited
10073076
SDI Fitness (Epsom) Limited
06260239
SDI Fitness (Glasgow) Limited
06338918
SDI Fitness (Guildford) Limited
09901702
SDI Fitness (Hove) Limited
09203731
SDI Fitness (K Heath) Limited
07853433
SDI Fitness (K Lynn) Limited
10915209
SDI Fitness (Lincoln City) Limited
07852097
SDI Fitness (Lincoln South West) Limited
09293515
SDI Fitness (Liverpool) Limited
09127170
SDI Fitness (Manchester) Limited
09888734
SDI Fitness (Milngavie) Limited
07852265
SDI Fitness (Newark) Limited
SDI (Lsl Holdings) Limited
10161824
SDI Fitness (Northfield) Limited
SDI (Luton) Limited
09680625
SDI Fitness (Rugby) Limited
204
07852055
07852417
08612647
09665889
08512480
09888806
07852284
07852281
08568681
07853877
07852207
09890243
10066335
07852251
10107775
08755347
09888662
10915203
07852191
10089743
09127316
10177276
08483711
07852289
06328505
06716652
06656365
09788373
09659156
09038949
09039840
09039011
09039243
09039043
09038811
09039269
09039030
09039717
09039847
09039331
09039319
09039347
09039339
09039510
09039640
09039412
09039408
NOTES TO THE FINANCIAL STATEMENTSFor the 52 weeks ended 29 April 2018Continued SDI (Manchester Cheetham Hill) Limited
10100969
SDI Fitness (Sale) Limited
SDI (Manchester Denton) Limited
09127295
SDI Fitness (Salisbury) Limited
SDI (Market Road) Limited
10799247
SDI Four Limited
SDI (Middlesbrough) Limited
10081909
SDI Golf Limited
SDI (Nassau Street) Limited
11227964
SDI Properties (Wigan) Limited
SDI (Neath) Limited
07853548
SDI Property Limited
SDI (New Cavendish Street) Limited
06306917
SDI Sport London Limited
SDI (Newark) Limited
SDI (Newcastle) Limited
SDI (Newport) Limited
SDI (Newquay) Limited
07853470
SDI Sports (East Ham) Limited
09127286
SDI Sports (Stoke) Limited
08679118
Stirlings (Argyle Street) Limited
10089800
Vinecomb Investments Holdings Limited
SDI (Newton Abbot) Limited
06836666
Wareshop1 Limited
SDI (Northampton) Limited
SDI (Nottingham) Limited
07852272
Wareshop3 Limited
10100609
09039405
09039429
09719779
09083512
06836522
02767493
09848767
10259103
10163722
SC088108
10161816
09870849
09870808
205
GROUP FINANCIAL STATEMENTSSPORTS DIRECT - ANNUAL REPORT 2018 SPORTS DIRECT INTERNATIONAL PLC
COMPANY BALANCE SHEET
at 29 April 2018
FIXED ASSETS
Investments
CURRENT ASSETS
Receivables
Cash at bank and in hand
Creditors: amounts falling due within one year
Net current liabilities
NET ASSETS
CAPITAL AND RESERVES
Called up share capital
Share premium
Treasury shares reserve
Permanent contribution to capital
Capital redemption reserve
Own share reserve
Profit and loss account
Shareholders’ funds
Notes
As at
29 April 2018
(£m)
As at
30 April 2017
(£m)
2
3
4
6
1,370.1
1,179.9
67.4
40.7
108.1
(487.8)
(379.7)
990.4
155.2
0.2
155.4
(571.4)
(416.0)
763.9
64.1
874.3
64.1
874.3
(290.0)
(329.5)
0.1
8.0
(69.0)
402.9
990.4
0.1
8.0
(33.8)
180.7
763.9
Sports Direct International plc reported a profit after taxation for the 52 weeks ended 29 April 2018 of £235.7m (FY17:
£12.2m). This included a £335m dividend received from Sportsdirect.com Retail Ltd.
The accompanying accounting policies and notes form part of these Financial Statements.
The Financial Statements were approved by the Board on 18 July 2018 and were signed on its behalf by:
Jon Kempster
Chief Financial Officer
Company number: 06035106
206
COMPANY STATEMENT OF CHANGES
IN EQUITY
For the 52 weeks ended 29 April 2018
Called
up share
capital
(£m)
Share
premium
account
(£m)
Treasury
share
reserve
(£m)
Perm contn
to capital
(£m)
Capital
redemption
reserve
(£m)
Own share
reserve
(£m)
Profit
& Loss
account
(£m)
Total
(£m)
As at 24 April 2016
64.1
874.3
(56.2)
0.1
8.0
(33.7)
196.3
1,052.9
Profit for the financial period
Share-based payments
Share purchase
Fair valuation of share buyback
contractual obligation
-
-
-
-
-
-
-
-
-
-
(109.8)
(163.5)
-
-
-
-
-
-
-
-
-
(0.1)
-
-
As at 30 April 2017
64.1
874.3
(329.5)
0.1
8.0
(33.8)
Profit for the financial period
Fair valuation of available-for-
sale financial assets
Fair valuation of available-
for-sale financial assets –
reclassified
Share-based payments
Shares transferred
Share purchase
Reversal of prior year fair
valuation of share buyback
contractual obligation
Fair valuation of share buyback
contractual obligation
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
29.9
(113.9)
163.5
(40.0)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
57.3
(51.0)
(41.5)
-
-
12.2
1.4
12.2
1.3
(29.2)
(139.0)
-
(163.5)
180.7
235.7
(25.2)
763.9
235.7
(25.2)
47.9
47.9
(57.3)
21.1
-
-
-
-
-
(155.4)
163.5
(40.0)
As at 29 April 2018
64.1
874.3
(290.0)
0.1
8.0
(69.0)
402.9
990.4
The share premium account is used to record the excess proceeds over nominal value on the issue of shares. The
permanent contribution to capital relates to a cash payment of £50,000 to the Company on 8 February 2007 under a
deed of capital contribution. The capital redemption reserve arose on the redemption of the Company's redeemable
preference shares of 10p each at par on 2 March 2007. The own shares and treasury reserves represent the cost of
shares in Sports Direct International plc purchased in the market and held by Sports Direct International plc Employee
Benefit Trust to satisfy options under the Group's share scheme.
On 23 August 2017 the Company transferred 12,782,512 shares from Treasury Shares to the Own Share reserve in
order to satisfy the vesting of the Bonus Share Scheme. The shares were transferred into the Own share reserve at
market value on the day.
On 28 April 2017 the Company announced an irrevocable non-discretionary share buyback programme. In line with
IAS32 the Company recognised the full redemption amount of £163.5m in the FY17 accounts. In FY18 this fair value
was reversed and replaced with the actual value purchased under the programme of £113.9m.
The Company announced on 27 April 2018 that it has instructed Liberum Capital Limited in relation to an irrevocable
non-discretionary share buyback programme to purchase the Company’s shares during the closed period commencing
on 30 April 2018 and ending on 19 July 2018. In line with FRS 102 the Company recognised the full redemption
amount of £40.0m which is considered to be immaterially different to the present value at year end. If the contract
expires without full delivery, the amount of the financial liability attributable to the undelivered shares is reclassified to
equity reversing the original recognition. As at 18 July 2018, nil shares have been repurchased under the closed period
share buyback programme.
207
COMPANY FINANCIAL STATEMENTSSPORTS DIRECT - ANNUAL REPORT 2018 NOTES TO THE COMPANY FINANCIAL
STATEMENTS
For the 52 weeks ended 29 April 2018
1. ACCOUNTING POLICIES
ACCOUNTING POLICIES
These financial statements have been prepared in compliance with FRS 102 “The Financial Reporting Standard
applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.
The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts
in these financial statements are rounded to the nearest £m.
These accounts have been prepared in accordance with applicable United Kingdom accounting standards. A summary
of the material accounting policies adopted are described below.
BASIS OF ACCOUNTING
The accounts have been prepared under the historical cost basis except for the modification to a fair value basis for
certain financial instruments as specified in the accounting policies below.
These financial statements for the period ended 29 April 2018 are prepared in accordance with FRS 102, The Financial
Reporting Standard applicable in the UK and Republic of Ireland.
As permitted by Section 408 of the Companies Act 2006, a profit and loss account of the Company is not presented.
The Company’s profit after taxation for the 52 week period ended 29 April 2018 was £235.7m (2017: £12.2m).
As permitted by FRS 102 the company has taken advantage of the disclosure exemptions available under that standard
in relation to financial instruments, presentation of a cash flow statement, share-based payments, the aggregate
remuneration of key management personnel and related party transactions with other wholly-owned members of the
Group. Where required, equivalent disclosures are given in the group accounts of Sports Direct International plc.
INVESTMENTS
Fixed asset investments in subsidiaries, associates and joint ventures are shown at cost less provision for impairment.
The company has elected to designate listed investments as ‘available-for-sale’ financial assets as at the date of
transition. Under previous UK GAAP listed investments were held at cost less impairment. The company has elected to
follow the requirements of IAS 39, as permitted by FRS 102 Section 12, and the fair value from one period to another
being shown within the statement of other comprehensive income.
Available-for-sale investments are initially recognised at fair value. Where fair value is different to cost, this is
recognised in the income statement on initial recognition. Subsequent gains and losses arising from changes in
fair value are recognised in the statement of other comprehensive income. When the security is disposed of, de-
recognised or is determined to be impaired the cumulative gain or loss previously recognised in other comprehensive
income is reclassified from equity to the profit and loss account as a reclassification adjustment within other income.
Equity investments are impaired when there is objective evidence of impairment which includes a significant or
prolonged decline in value.
LOANS AND RECEIVABLES
Loans and receivables are recognised initially at fair value plus transaction costs less provision for impairment.
Provision for impairment is established when there is objective evidence that the company will not be able to collect
amounts due according to the original terms of the receivable.
TRADE AND OTHER PAYABLES
Trade and other payables are initially measured at fair value, and are subsequently measured at amortised cost, using
the effective interest method.
208
EMPLOYEE BENEFIT TRUST
An Employee Benefit Trust has been established for the purposes of satisfying certain share based awards. The Group
has ‘de facto’ control over the special purpose entity.
The cost of shares acquired by the Sports Direct Employee Benefit Trust is recognised within ‘own share-reserve’ in
equity.
DEFERRED TAXATION
Deferred tax is provided for on a full provision basis on all timing differences, which have arisen but not reversed at
the balance sheet date. No timing differences are recognised in respect of gains on sale of assets where those gains
have been rolled over into replacement assets. A deferred tax asset is not recognised to the extent that the transfer of
economic benefit in the future is more unlikely than not.
Deferred tax is calculated on a non-discounted basis at the tax rates that are expected to apply in the periods in which
timing differences reverse, based on tax rates and laws enacted or substantively enacted at the balance sheet date.
FOREIGN CURRENCIES
Transactions in foreign currencies are initially recorded in the entity’s functional currency by applying the spot
exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies
are retranslated at the rate of exchange ruling at the balance sheet date. All differences are taken to the profit and loss
account. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
DIVIDENDS
Dividends on the Company’s ordinary shares are recognised as a liability in the Company’s Financial Statements, and
as a deduction from equity, in the period in which the dividends are declared. Where such dividends are proposed
subject to the approval of the Company’s shareholders, the dividends are only declared once shareholder approval has
been obtained.
EQUITY INSTRUMENTS
An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all
of its liabilities. Equity instruments issued by the Company, with the exception of those accounted for via merger relief
available under Section 612 of the Companies Act 2006, are recorded at the proceeds received, net of any direct issue
costs.
INCOME FROM GROUP UNDERTAKINGS
Income from Group undertakings is recognised when qualifying consideration is received from the Group undertaking.
RELATED PARTY TRANSACTIONS
The Company has taken advantage of the exemption contained in FRS 102 and has therefore not disclosed
transactions or balances with wholly-owned subsidiaries which form part of the Group.
SHARE-BASED PAYMENTS
The Company issues equity-settled share-based payments to certain Directors and employees of the Company and its
subsidiaries.
The fair value of the share options on the date of the grant is charged to the profit and loss account over the
vesting period of the share option, based on the number of options which are expected to become exercisable. A
corresponding adjustment is made to equity. At each balance sheet date the company revises its estimates of the
number of options that are expected to become exercisable and recognises the impact of any revision of original
estimates in the profit and loss account.
209
COMPANY FINANCIAL STATEMENTSSPORTS DIRECT - ANNUAL REPORT 2018 NOTES TO THE COMPANY FINANCIAL STATEMENTS
For the 52 weeks ended 29 April 2018
Continued
The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of
non-transferability, exercise restrictions, and behavioural considerations. A share-based payment charge of £nil was
recognised for the 52 weeks ended 29 April 2018 based on the Directors’ best estimate of the number of shares that
will vest.
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
In the application of the company’s accounting policies, the directors are required to make judgements, estimates and
assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The
estimates and associated assumptions are based on historical experience and other factors that are considered to be
relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimate is revised, if the revision affects only that period, or in the period of the
revision and future periods.
The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount
of assets and liabilities are outlined below.
CRITICAL JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY CALCULATION OF SHARE
SCHEME CHARGE
A share based payment charge is recognised in respect of share awards based on the Directors’ best estimate of the
number of shares that will vest. The charge is calculated based on the fair value at the grant date, which is deemed to
be the date on which the entity and counterparty reached a shared understanding of the scheme.
AVAILABLE-FOR-SALE FINANCIAL ASSETS
Available-for-sale financial assets are impaired when there is objective evidence of impairment which includes a
significant or prolonged decline in value. Judgement is exercised in determining whether either or both of these factors
are present.
ASSUMPTIONS RELATING TO TAX
Management estimation is required to determine the amount of deferred tax assets or liabilities that can be
recognised, based upon likely timing and level of future taxable profits together with an assessment of the effect of
future tax planning strategies.
2. INVESTMENTS
Investments in subsidiaries
Available-for-sale financial assets
29 April 2018
(£m)
30 April 2017
(£m)
1,124.2
245.9
1,124.2
55.7
The fair value of the available-for-sale investments is based on bid quoted market prices at the balance sheet date or
where market prices are not available, at management’s best estimate.
Available-for-sale investments include various holdings including a 29.9% stake in Findel plc, a 29.7% stake in
Debenhams plc, a 27.04% stake in French Connection Group plc, a 25.44% stake in GAME Digital plc and an 18.92%
stake in Goals Soccer Centres plc.
The Company is the principal holding company of the Group. The principal subsidiary undertakings of the Company are
set out in note 41 of the Group Financial Statements.
210
3. RECEIVABLES
Amounts owed by Group undertakings
Derivative financial assets
Deposits in respect of derivative financial instruments
Prepayments
Deferred tax assets
29 April 2018
(£m)
30 April 2017
(£m)
0.7
1.9
57.1
4.4
3.3
67.4
4.4
-
148.1
1.0
1.7
155.2
Deposits in respect of derivative financial instruments are collateral to cover margin requirements for derivative
transactions held with counterparties. The collateral requirement changes with the market (which is dependent on
share price, interest rates and volatility) and further purchases / sales of underlying investments held.
4. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
Overdrafts
Trade creditors
Amounts owed to Group undertakings
Derivative financial liabilities
Corporation tax
Fair value of share buyback
Other creditors
29 April 2018
(£m)
30 April 2017
(£m)
-
0.5
440.8
5.6
0.3
40.0
0.6
487.8
69.5
0.3
331.3
6.5
-
163.5
0.3
571.4
For further details on the fair value of the share buyback instruction, see Statement of Changes in Equity.
5. DEFERRED TAX ASSETS
At 24 April 2016
Charged to the profit & loss account
At 30 April 2017
Credited to the profit & loss account
At 29 April 2018
Other temporary
differences
(3.7)
5.4
1.7
1.6
3.3
The tax rate used to measure the deferred tax assets and liabilities was 17.0% (2017: 17%-19%) on the basis that
these were the tax rates that were substantively enacted at the balance sheet date for the periods when the assets and
liabilities are expected to reverse.
211
COMPANY FINANCIAL STATEMENTSSPORTS DIRECT - ANNUAL REPORT 2018 NOTES TO THE COMPANY FINANCIAL STATEMENTS
For the 52 weeks ended 29 April 2018
Continued
6. CALLED UP SHARE CAPITAL
AUTHORISED
999,500,010 ordinary shares of 10p each
499,990 redeemable preference shares of 10p each
CALLED UP AND FULLY PAID
640,602,369 (2016: 640,602,369) ORDINARY SHARES OF 10p EACH
SHARE CAPITAL
At 30 April 2017 and 29 April 2018
29 April 2018
(£m)
30 April 2017
(£m)
100.0
-
100.0
64.1
64.1
100.0
-
100.0
64.1
64.1
The company holds 103,633,049 ordinary shares in treasury as at the period end date (FY17: 79,310,534).
7. POST BALANCE SHEET EVENTS
The Company announced on 27 April 2018 that it has instructed Liberum Capital Limited in relation to an irrevocable
non-discretionary share buyback programme to purchase the Company’s shares during the closed period commencing
on 30 April 2018 and ending on 19 July 2018. In line with FRS102 the Company recognised the full redemption
amount of £40.0m which is considered to be immaterially different to the present value at year end. If the contract
expires without full delivery, the amount of the financial liability attributable to the undelivered shares is reclassified to
equity reversing the original recognition. As at 19 July 2018, nil shares have been repurchased under the closed period
share buyback programme.
Subsequent to the year end, JD Sports Fashion plc completed their takeover of The Finish Line Inc. and Sports Direct
International plc disposed of their remaining economic interest and received net proceeds from the sale of the physical
shares of £45.2m.
212
CONSOLIDATED FIVE YEAR RECORD
Unaudited income statement
CONTINUING OPERATIONS:
Revenue
Cost of sales
Gross profit
Selling, distribution and administrative
expenses
Other operating income
Impairment and accelerated depreciation
Profit on disposal of property
Profit on disposal of subsidiary
Provision against receivable & other
Exceptional items
Operating profit
Investment (costs) / income
Finance income
Finance costs
Share of (loss) / profit of associated
undertakings and joint ventures
Profit before taxation
Taxation
Profit for the period
Equity holders of the Group
Non-controlling interests
Profit for the period
52 weeks ended
29 April 2018
(£m)
53 weeks ended
30 April 2017
(£m)
52 weeks ended
24 April 2016
(£m)
52 weeks ended
26 April 2015
(£m)
52 weeks ended
27 April 2014
(£m)
3,359.5
(2,024.4)
1,335.1
(1,156.1)
26.5
(4.8)
16.3
-
11.5
217.0
(93.3)
3.4
(40.9)
(8.7)
77.5
(49.9)
27.6
24.5
3.1
27.6
3,245.3
(1,914.7)
1,330.6
(1,255.6)
22.5
(17.3)
-
79.9
-
62.6
160.1
111.3
18.8
(9.4)
0.8
281.6
(49.9)
231.7
229.9
1.8
231.7
2,904.3
(1,619.7)
1,284.6
(1,021.8)
11.1
(58.5)
13.5
-
(5.7)
(50.7)
223.2
148.1
3.4
(15.3)
2.4
361.8
(82.8)
279.0
277.4
1.6
279.0
2,832.6
(1,591.8)
1,240.8
(950.5)
8.3
(13.3)
10.3
-
-
(3.0)
295.6
14.0
8.3
(7.5)
3.0
313.4
(72.0)
241.4
240.4
1.0
241.4
2,706.0
(1,551.1)
1,154.9
(908.8)
8.6
(5.6)
-
-
-
(5.6)
249.1
7.1
0.9
(19.9)
2.3
239.5
(59.9)
179.6
180.2
(0.6)
179.6
Notes to the consolidated income statement five year record:
1. All information is presented under IFRS.
2. The five year record has been prepared on the same basis as the Financial Statements for the 52 weeks ended 29
April 2018, as set out in note 1, basis of preparation, of the Consolidated Financial Statements.
213
COMPANY FINANCIAL STATEMENTSSPORTS DIRECT - ANNUAL REPORT 2018 COMPANY DIRECTORY
REGISTRAR AND TRANSFER OFFICE
Computershare Investor Services plc
The Pavilions
Bridgwater Road
Bristol
BS99 6ZZ
Telephone 0370 707 4030
COMPANY SECRETARY AND REGISTERED OFFICE
Sports Direct International plc
Unit A, Brook Park East
Shirebrook
NG20 8RY
Telephone 0344 245 9200
Sports Direct International plc is registered in England and Wales (No. 6035106)
SOLICITORS
Freshfields Bruckhaus Deringer
65 Fleet Street
London
EC4Y 1HS
BROKERS
Liberum Capital Limited
Ropemaker Place, Level 12
25 Ropemaker Street
London
EC2Y 9LY
PRINCIPAL BANKERS
Barclays Bank plc
5 The North Colonnade
Canary Wharf
London
E14 4BB
HSBC Bank plc
8 Canada Square
London
E14 5HQ
AUDITORS
Grant Thornton UK LLP
30, Finsbury Square
London
EC2A 1AG
214
SHAREHOLDER INFORMATION
ANNUAL GENERAL MEETING
The Annual General Meeting of the Company will be held at 11am on Wednesday 12 September 2018 at Academy
House, 36 Poland St, London, W1F 7LU. Each shareholder is entitled to attend and vote at the meeting, the
arrangements for which are described in a separate notice.
RESULTS
For the year to 28 April 2019:
• Half year results announced: 13 December 2018
• Preliminary announcement of full year results: 18 July 2019
• Annual Report circulated July / August 2019
SHAREHOLDER HELPLINE
The Sports Direct shareholder register is maintained by Computershare who are responsible for making dividend
payments and updating the register, including details of changes to shareholders’ addresses. If you have a query about
your shareholding in Sports Direct, you should contact Computershare’s Sports Direct Shareholder Helpline on: 0370
707 4030. Calls are charged at standard geographic rates, although network charges may vary.
Address: The Pavilions, Bridgwater Road, Bristol, BS99 6ZZ
Website: www.computershare.com
WEBSITE
The Sports Direct website at www.sportsdirectplc.com provides news and details of the Company's activities plus
information for shareholders and contains real time share price data as well as the latest results and announcements.
UNSOLICITED MAIL
The Company is obliged by law to make its share register publicly available and as a consequence some shareholders
may receive unsolicited mail, including from unauthorised investment firms.
For more information on unauthorised investment firms targeting UK investors, visit the website of the Financial
Conduct Authority at www.fca.org.uk
If you wish to limit the amount of unsolicited mail you receive contact:
The Mailing Preference Service
DMA House
70 Margaret Street
London
W1W 8SS
Telephone: 020 7291 3310
Fax: 020 7323 4226
Email: mps@dma.org.uk or register online at
www.mpsonline.org.uk
Sports Direct International plc
Unit A, Brook Park East, Shirebrook, NG20 8RY
0344 245 9200
www.sportsdirectplc.com
215
COMPANY FINANCIAL STATEMENTSSPORTS DIRECT - ANNUAL REPORT 2018 SPORTS DIRECT INTERNATIONAL PLC
UNIT A, BROOK PARK EAST, SHIREBROOK, NG20 8RY
0344 245 9200
www.sportsdirectplc.com