Frasers Group PLC — Interim / Quarterly Report 2016

Dec 10, 2015

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RNS Number : 5870I

Sports Direct International Plc

10 December 2015

SPORTS DIRECT INTERNATIONAL PLC

10 December 2015

Interim Results for the 26 weeks to 25 October 2015

Sports Retail gross margin up 110 basis points; Group Underlying EBITDA up 7.6%

	FY16 H1	FY15 H1	Change
	£m	£m
Group revenue	1,434	1,433	+0.1%
Sports Retail	1,234	1,231	+0.2%
Premium Lifestyle	88	100	-12.2%
Brands	113	102	+10.2%
Group gross margin	44.9%	44.0%	+90 bps
Sports Retail	45.6%	44.5%	+110 bps
Underlying EBITDA (pre share scheme costs) (1)	218.5	203.1	+7.6%
Underlying profit before tax (PBT) (1)(2)	166.4	160.6	+3.6%
Reported profit before tax	187.3	149.7	+25.1%
Underlying earnings per share (1)(2)	21.8	20.8p	+4.8%
Reported earnings per share	24.5p	19.4p	+26.3%

Key highlights

·      Sports Retail revenue increased by 2.5% on a currency neutral basis (3)

·      Sports Retail gross margin increased by 110 basis points to 45.6%

·      Sports Retail gross profit increased by 5.2% on a currency neutral basis

·      Group underlying EBITDA increased by 7.6% to £218.5m

·      Underlying profit before tax up 3.6% to £166.4m

·      Underlying free cash generation of £175.1m (4) 

·      Net debt decreased to £20.3m (£59.7m at 26 April 2015) (5)

·      Continued roll-out of large format city centre stores

·      Latest phase of ongoing Shirebrook campus development now complete

·      Agreed to acquire remaining 50% of Heatons, our Irish associated company

·      Continued investment in inventory and strategic stakes while maintaining a strong balance sheet

Dave Forsey, Chief Executive of Sports Direct International plc said:

"The Group has delivered another excellent set of results particularly given the strong comparable sales generated in the build up to the FIFA 2014 World Cup and after a generally mixed summer for the retail sector.

"Within Sports Retail our commitment to upgrading our store portfolio continues to deliver gross margin growth and is a significant contributor to our strong EBITDA result. We continue to innovate, refine and improve our customer proposition. In line with this strategy, during the period we opened new larger format stores in Leeds and Plymouth and combined gym and retail spaces in St Helens and Newport.

"Trading since the period end has been in line with management's expectations and, while we retain the ability to invest in margin, inventory and group marketing to deliver long-term sustainable growth, we remain confident of achieving the 2015 Share Scheme's revised underlying EBITDA target of £420m.

"We look forward to 2016 with confidence ahead of the Olympic Games in Rio de Janeiro and the 2016 European Football Championships in which England, Wales, Northern Ireland and the Republic of Ireland will be competing."

(1)	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 sale of strategic investments. Underlying EBITDA also excludes the Share Scheme charges.
(2)	Underlying profit before taxation and underlying EPS also exclude profits/losses relating to the IAS 39 fair value adjustment on forward currency contracts in finance income/costs, but includes the Share Scheme charges.
(3)	Sales and margin increases on a currency neutral basis are calculated by revaluing the division's foreign currency denominated sales at the prior year average exchange rate for the period.
(4)	Underlying free cash generation is defined as operating cashflow 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 held.
Sports Direct International plc Dave Forsey, Chief Executive Matt Pearson, Acting Chief Financial Officer		T:  0344 245 9200
Powerscourt Rory Godson Peter Ogden Lisa Kavanagh		T:  0207 250 1446

Chairman's Statement

The group is pleased with the improved performance across all of our three divisions. This is a particularly impressive achievement in the context of disappointing summer weather and a comparative period which included the 2014 FIFA World Cup.

Developments and acquisitions

I am pleased to announce that the latest phase in our Shirebrook campus development, the construction of an additional c.700,000 sq. ft. warehouse and office facility, has now been completed. These developments will have a range of benefits for the Group, including enhanced online capacity and an improved office and training environment for our employees. We are also now able to offer additional office space for our brand partners.

In the UK we have increased our store portfolio by 15 stores and have continued our planned roll-out of large format stores with the opening of new stores in Leeds and Plymouth. We also opened five further concessions within Debenhams stores during the period.

Across Europe we have opened further stores across the Baltics under the SPORTSDIRECT.com fascia and plan to continue the investment in key categories, replicating our UK city centre store format in collaboration with key international brands. We will increase our European presence further with the acquisition of an additional stake in our Irish associated company, Heatons. Competition clearance for this transaction has now been obtained and we expect to complete the purchase of the remainder of the business by the end of April 2016.

During the period our Fitness division has also grown with the addition of combined gym and retail spaces in St Helens and Newport and we continue to identify other future potential combined gym and retail opportunities.

Workforce

Rewarding our staff for good performance is central to the way we do business. I am therefore delighted to note that the first vesting of the 2011 Share Scheme took place in September 2015, with c. 2,000 participating employees receiving over four million shares.

A further c.15 million shares are expected to vest under this scheme in September 2017 to a deserving c. 2,500 participating employees.

The Group's Share Schemes and the resulting incentivisation of our team have been pivotal in the Group's success over the past few years and we believe this strategy will continue to drive growth in the future. The Group remains confident of achieving its first revised Adjusted Underlying EBITDA target under the 2015 Share Scheme of £420m.

Our casual workers are also an integral component of our workforce. To be clear, no warehouse workers are on 'zero hour' contracts, all have contracted hours with the agencies. In retail, casual workers find the flexibility offered by these arrangements very useful. We comply fully with all applicable legal requirements and will continue to keep these under review.

Update following Annual General Meeting

A number of issues were raised by shareholders at our AGM which we have addressed, for example the inconvenience experienced by some warehouse workers from the logistics of the security process when exiting the warehouse.  Following a review the process has been streamlined which has led to a reduction in waiting time.

The Board

Following the departure of Charles McCreevy last year, our search for an additional Non-Executive Director remains ongoing. We are undertaking a thorough process to ensure we appoint the most suitable candidate.

Overall

In spite of a challenging market and disappointing weather conditions, we have yet again succeeded in achieving growth across all key areas.

We owe a great deal to the continued commitment of our colleagues and the ongoing support of our stakeholders, without whom this achievement would not be possible. On behalf of the Board I would like to thank them for their hard work and dedication.

Keith Hellawell

Non-Executive Chairman

10 December 2015 

Overview of Financial Performance

Summary of Results

	26 Weeks ended 25 October 2015	26 Weeks ended 26 October 2014	Change
	(£m)	(£m)	%
Revenue	1,433.7	1,432.9	+0.1
Underlying EBITDA	218.5	203.1	+7.6
Underlying profit before tax	166.4	160.6	+3.6
Reported profit before tax	187.3	149.7	+25.1
	Pence per share	Pence per share
Underlying EPS(1)	21.8	20.8	+4.8
Reported EPS(2)	24.5	19.4	+26.3

(1) and (2)  Based on 592.4 million and 592.3 million ordinary shares outstanding in FY16 H1 and FY15 H1, respectively

Basis of reporting

The financial statements for the Group for the 26 weeks ended 25 October 2015 are presented in accordance with International Accounting Standard (IAS) 34 - Interim Financial Reporting which has been adopted for use in the EU (IFRS).

The Directors believe that underlying EBITDA, underlying profit before tax and underlying earnings per share 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 and amortisation and, therefore, 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.

Revenue and margin

	26 weeks ended 25 October 2015 (£'m)	26 weeks ended 26 October 2014 (£'m)		Change %
Retail
Revenue:
Sports Retail	1,233.5	1,230.9		+0.2
Premium Lifestyle	87.7	99.9		-12.2
Total retail revenue	1,321.2	1,330.8		-0.7
Total Retail Cost of sales	(722.7)	(744.3)		+2.9
Total Retail gross margin	598.5		586.5		+2.0
Gross margin percentage	45.3%		44.1%		+120bps

Brands
Revenue:
Wholesale	96.5	86.8	+11.2
Licensing	16.0	15.3	+4.6
Total Brands revenue	112.5	102.1	+10.2
Cost of sales	(67.5)	(58.4)	+15.6
Brands gross margin	45.0	43.7	+3.0
Brands gross margin percentage	40.0%	42.8%	-280 bps

Business Review

Overview

In the 26 weeks ended 25 October 2015 ("FY16 H1"), Group revenues were up 2.0% on a currency neutral basis to £1,433.7m compared with £1,432.9m for the 26 weeks ended 26 October 2014 ("FY15 H1").  

Sports Retail revenue increased by 2.5% on a currency neutral basis and revenue in the Brands division increased by 10.2% to £113m (FY15 H1: £102m), due to growth in Europe and the US. Premium lifestyle revenue was down 12.2% largely due to the closure of a number of USC stores during the period.

Gross margin for the Group increased 90 basis points to 44.9% (FY15 H1: 44.0%) as a result of the continued broadening of our product range and on-going investment in Group Brands.  The continued growth in revenue and profitability is also attributable to the success of the Share Schemes.

Net debt decreased in the period by 66.0% to £20.3m (26 April 2015: £59.7m), which is 0.1 times LTM EBITDA(1) (FY15 H1: 0.5 times).

Sports Retail division

Our Sports Retail division achieved sales growth of 2.5% on a currency neutral basis against a comparative which included the impact of the FIFA World Cup in Brazil.  During the period, gross margin increased 110 basis points to 45.6% (FY15 H1: 44.5%), benefiting from a higher proportion of 'better' and 'best' Group branded products. Gross profit on a currency neutral basis increased by 5.2%.

Sports Retail's operating costs increased by 1.0% in FY16 H1 due to the rationalisation of our recently acquired International businesses.  As a result, we grew Sports Retail underlying EBITDA by 5.5% to £206.5m (FY15 H1: £195.8m).

At period end, the Group had 455 stores in the UK (excluding Northern Ireland), with a total of c. 5.0m sq. ft.(2) (FY15 H1: c. 4.5m sq. ft.).  We continue to invest in our current store portfolio with the aim of moving to larger and better configured space wherever possible and in the period have re-located both our Leeds and Plymouth stores to significantly larger sites. Our new Leeds store, formerly a Primark, now offers an impressive c. 50,000 sq.ft. of retail space over four floors. We are constantly improving visual merchandising and, in collaboration with key brands, are working towards the introduction of more specialist performance areas within our stores, such as football, running, outdoor and fitness.

We are still targeting a total of between 30-40 store openings in the UK this year, having opened 28 new stores in the period, including nine relocations, and closing 13. We also opened five further concessions within Debenhams stores during the period bringing this total to nine including one footwear only concession in Oxford Street.

We have completed the latest phase of our continued works on the expansion of our Shirebrook campus and have recently taken occupation of a new c. 700,000 sq. ft. warehouse and office facility.

Online sales continue to grow, driven by enhancements made in the prior year including the introduction of 'click and collect', a guest checkout and improvements in language and currency conversion on our European sites. Since the year end we have expedited product searches and enhanced our platform for mobile and tablet devices. We have also increased our online offering, with a greater range of products and sizes, further increasing sales. Online remains profitable for the Group and we continue to develop our platform in order to exploit this opportunity further.

In Europe we opened a further 11 stores across five different countries and closed three stores in two countries. In central Europe we have closed two stores in Austria and one store in Belgium and have opened six stores in Hungary and one in Poland. In the Baltic states we have opened two stores in Lithuania and one store in both Latvia and Estonia under the SPORTSDIRECT.com fascia and have continued to invest in upgrading the existing stores trading under the SPORTLAND fascia. During the period the Group impaired the goodwill relating to the acquisition of our Austrian subsidiary due to its recent trading being below expectations. Converting the former Eybl megastores is taking longer than expected and the lost revenue in certain categories is also proving harder to replace than expected.

Through the Group's 50% shareholding in the Heatons chain, products are retailed within 44 stores in the Republic of Ireland and 15 stores in Northern Ireland, of which 37 operate a sports department and five are standalone sports stores.  The Group's share of Heatons operating result was a £1.8m profit (FY15 H1: £1.5m profit).

Prior to the period end the Group entered into an agreement to purchase an additional stake in our existing Irish associated company, Heatons, subject to obtaining merger clearance from the Irish Competition and Consumer Protection Commission. On 13 November 2015 competition clearance was obtained for this purchase and we expect to complete the purchase of the remainder of the business by the end of April 2016. The incremental EBITDA derived from the acquisition of Heatons in the period will not be counted towards the Group's FY15 revised Underlying EBITDA target under the 2015 Share Scheme of £420m.

(1)	LTM EBITDA is the last twelve months historic underlying EBITDA
(2)	This implies a range between 4.75m sq. ft. - 5.25m sq. ft.

The Group plans a substantial investment in the Heatons store portfolio over the coming years as it believes that the current sports offering, while competitive, can be improved significantly.

In August we expanded our Fitness business with the opening of a gym within our existing retail store in St Helens and will shortly open an additional combined gym and retail space in Newport. Membership in our Aintree and newly opened gyms continues to grow, exceeding expectations. We have also completed a controlled refurbishment plan across the former LA Fitness sites purchased in the prior year.

Premium Lifestyle division

Sales in the period were down by 12.2% to £87.7m (FY15 H1: £99.9m), largely due to the closure of loss-making USC stores since the prior period. Gross margin increased to 41.3% (FY15 H1: 38.4%), due to reduced stock clearance activity in the period and improved buying disciplines.

We continue to strengthen our relationships with key third party suppliers and have introduced several new brands in the period. Growth at Cruise, Flannels and Van Mildert also reflects the Group's buying disciplines and online expertise.

Operating costs reduced by 10.6% to £41.3m (FY15 H1: £46.2m) as a result of the rationalisation of the Republic and USC businesses in the prior year.

Premium Lifestyle EBITDA losses decreased in FY16 H1 to £5.1m (FY15 H1: £7.8m loss).

Brands division

Brands division total revenue increased by 10.2% to £112.5m (FY15 H1: £102.1m).  Wholesale revenues were up 11.2% to £96.5m (FY15 H1: £86.8m) due to growth in both Europe and the US.

Brands gross margin decreased by 280 basis points to 40.0% (FY15 H1: 42.8%).  Wholesale gross margins decreased 260 basis points to 30.1% (FY15 H1: 32.7%), due to the impact of the movement of the USD exchange rate and increased stock clearance activity.

Licensing revenues in FY16 H1 increased 4.6% to £16.0m (FY15 H1: £15.3m). Our strategic focus remains on delivering further growth in licensing revenues, having signed 23 new license agreements in the first half of the year with contracted minimum royalties of $9.8m over the life of the contracts.

Brands operating costs decreased by 2.8% to £27.9m (FY15 H1: £28.7m) in the period, benefiting largely from continued integration efficiencies across Europe, while investment in key Group brands was maintained at similar levels to previous years.

As a result, underlying EBITDA in the division increased 13.2% to £17.1m (FY15 H1 £15.1m).

Outlook

Trading since the period end has been in line with management's expectations, and underpins the 2015 Share Scheme's revised FY16 Underlying EBITDA target of £420m. The Group's performance continues to benefit from a number of factors including investment in product range and availability, with an increased emphasis on 'better' and 'best' Group branded products and the optimisation of our in-store and web offer. We also continue to invest in our store portfolio, with the roll-out of further large format city centre stores.

Dave Forsey

Chief Executive

10 December 2015

Reconciliation of reported to underlying results

		EBITDA		PBT
	Note	FY16 H1	FY15 H1	FY16 H1	FY15 H1
		£m	£m	£m	£m
Operating profit		131.3	168.8
Depreciation		37.7	29.0
Amortisation		3.0	3.9
Impairment		0.3	-
Share of profit/(loss) of associated undertakings		1.5	1.7
Reported EBITDA/PBT (inc. scheme costs)		173.8	203.4	187.3	149.7
Realised FX loss		9.7	7.7	9.7	7.7
IAS 39 foreign exchange fair value adjustment on forward currency contracts		-	-	(1.3)	(6.0)
(Gain)/loss on disposal of listed investments and fair value movement on derivative agreements	4	-	-	(53.6)	23.3
Exceptional items	3	24.1	(14.1)	24.1	(14.1)
Impairment		-	-	0.3	-
Share scheme charge		10.9	6.1	-	-
Underlying (pre-scheme costs)		218.5	203.1	166.4	160.6

Fair value adjustment to derivative financial instruments represents the movement in fair value of equity options in the period.

Underlying EBITDA by Business Segment

	FY16 H1	FY15 H1
	£m	£m
Sports Retail	206.5	195.8	5.5%
Premium Lifestyle	(5.1)	(7.8)	(34.6%)
Brands	17.1	15.1	13.2%
Group Underlying EBITDA	218.5	203.1	7.6%

Foreign exchange

The Group manages the impact of currency movements through the use of forward fixed rate currency contracts. The Group's policy is to hold or hedge up to five years of anticipated purchases in foreign currency.

A number of the forward foreign exchange contracts outstanding at 25 October 2015 qualify for hedge accounting.  The sterling exchange rate with the US dollar at 26 April 2015 was $1.502 and $1.532 at 25 October 2015.

Taxation

The effective underlying tax rate on profit before tax for FY16 H1 was 21.3% (FY15 H1: 23.0%). The underlying effective tax rate for FY16 H1 was 22.0% (2015 H1: 22.9%). The difference between the prevailing corporate tax rate of 20% and the effective rate reflects depreciation on non-qualifying assets.

Strategic investments

The Group acquired 16,385,983 shares in Findel plc during the period and on 25 October 2015 held shares representing 18.96% of the issued share capital of Findel plc.

The Group disposed of 5,000,000 shares in JD Sports during the period and on 25 October 2015 held shares representing 9.1% of the issued share capital.

As at 25 October 2015 the Group had an interest in 10.5% of Debenhams' ordinary share capital.

The Group continues to hold an interest in 7,251,065 shares in MySale Group plc, representing 4.8% of the issued share capital.

The fair value of the Group's holdings at 25 October 2015 was £212.7m (26 April 2015: £140.8m).  The movement in the fair value of the shares held has been recognised directly in Other Comprehensive Income. A reconciliation of movements in the period is included below:

	£m
Fair value at 26 April 2015	140.8
Additions	36.8
Disposals	(9.1)
Fair value movements in the period	44.2
Fair value at 25 October 2015	212.7

These stakes allow us to develop a relationship and potentially develop commercial partnerships with the relevant party and assist in building relationships with key suppliers and brands.

The fair value of equity derivative agreements is included within the derivative financial assets balance of £62.8m.

Cash flow and net debt

On 25 November 2014 the Group utilised the accordion option under its working capital facility. As a result, the working capital facility has been increased from £738m at the year end to £758m. The facility is available until September 2018 and is not secured against any of the Group's fixed assets.

The Group also has a £250m working capital facility with Mike Ashley which can be drawn down on request.  This facility was agreed at market terms at its inception and is not secured against any fixed assets. At the period end no balance was due.

The Group continues to operate well within its banking covenants and the Board remains comfortable with the Group's available headroom.

Net debt decreased during the period to £20.3m (26 April 2015: £59.7m), which is 0.1 times the last 12 months historic underlying EBITDA (FY15 H1: 0.5 times)

Capital expenditure amounted to £92.3m (FY15 H1: £26.7m), including works done on the expansion of our Shirebrook campus and £39.7m (FY15 H1: £1.6m) of freehold properties.  The Group expects FY16 capital expenditure to be c. £150m, including freehold property acquisitions and further works on the Shirebrook campus. During the period the Group also sold a freehold property for £44.0m.

The analysis of net debt at 25 October 2015 and at 26 April 2015 is as follows:

	At 25 October 2015	At 26 April 2015
	£m	£m
Cash and cash equivalents	163.3	78.3
Borrowings	(183.6)	(138.0)
Net debt	(20.3)	(59.7)

Cash Flow

	26 weeks ended  25 October 2015 £m	26 weeks ended  26 October 2014 £m
Underlying EBITDA (pre share scheme costs)	218.5	203.1
Realised loss on forward foreign exchange contracts	(9.7)	(7.7)
Taxes paid	(33.7)	(33.9)
Underlying free cash flow	175.1	161.5
Invested In:
Working capital
Inventory	(116.0)	(89.6)
Receivables, Payables & Other	17.7	(2.2)
Acquisitions (including debt)	(9.2)	(2.3)
Net (purchase of)/proceeds from investments	19.4	(33.2)
Investment income received	2.1	1.3
Capital expenditure	(92.3)	(26.7)
Disposal of freehold property	44.0	21.1
Finance costs and other financing activities	(1.4)	(4.4)
Net  decrease/(increase) in net debt	39.4	25.5

Share Schemes

Management believes that the Share Schemes have been instrumental in the strength of the Group's ongoing performance.

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.  All of the above targets have now been met and 4m shares vested in September 2015. Another 18m shares (including the Executive Share Scheme) are due to vest in the summer of 2017, subject to the individual participating employee's continued satisfactory personal performance.

The 2015 Share Scheme is a four year scheme based upon achieving an underlying EBITDA target (before the costs of the scheme) of £420m in FY16 and further targets in FY17, FY18 and FY19 coupled with the individual participating employee's satisfactory personal performance. The scheme requires that all targets are met before the shares vest. Up to 25m shares are available to vest over two vestings in 2019 and 2021.

The success of the scheme is demonstrated by ongoing improvements in operational and financial performance including various internal KPIs since the scheme's introduction.

Going concern

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 September 2018, 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, show that the Group should be able to operate within the level of the current facility.

Additionally, the Directors have also considered the Group's reliance upon its key stakeholders, including customers and suppliers and found no over reliance on any particular stakeholder.  The Directors are therefore confident that the Group will continue in operational existence for the foreseeable future.  On this basis, the Directors continue to adopt the going concern basis for the preparation of the interim financial statements.

Risks, systems and controls

The Board believes that the principal risks and uncertainties for the remaining six months of the current financial year are:

•	Disruption or other adverse events affecting the Group's relationship with any of its key brands or brand suppliers which could have an adverse effect on the Group's business.
•	The possibility of a deterioration of the economy both in the UK and worldwide and a reduction in consumer confidence and retail spending, which could impact on the performance of the business.

Funding and liquidity for the Group's operations are provided through bank loans, overdraft facilities and shareholders' funds.  

The Group maintains a system of controls to manage the business and to protect its assets.  We continue to invest in people, systems and IT to manage the Group's operations and to ensure that the Group is financed effectively and efficiently.

Directors' Responsibility Statement

We confirm that to the best of our knowledge:

•	The condensed set of financial statements has been prepared in accordance with IAS 34 'Interim Financial Reporting' as adopted by the EU;
•	The interim management report includes a fair review of the information required by:

a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events during the first 26 weeks of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining 26 weeks of the year; and

b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first 26 weeks of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.

No material related party transactions have taken place in the first six months of the current financial year that have materially affected the financial position or performance of the Group during that period and there have been no changes in related party transactions described in the last annual report that could have a material effect on the financial position or performance of the Group in the current period.

The directors of Sports Direct International plc are listed in the Group's 2015 Annual Report and Financial Statements.

On behalf of the Board

Dave Forsey

Chief Executive

10 December 2015

INDEPENDENT REVIEW REPORT TO THE MEMBERS OF SPORTS DIRECT INTERNATIONAL PLC

FOR THE 26 WEEKS ENDED 25 October 2015

Introduction

We have reviewed the condensed set of financial statements in the half-yearly financial report of Sports Direct International plc for the 26 weeks ended 25 October 2015 which comprises the Consolidated income statement, the Consolidated statement of comprehensive income, the Consolidated statement of financial position, the Consolidated cash flow statement, the Consolidated statement of changes in equity and the related notes.  We have read the other information (the Chairman's statement, the Overview of Financial Performance and the Group highlights) contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the company's members, as a body, in accordance with International Standard on Review Engagements (UK and Ireland) 2410, ''Review of Interim Financial Information Performed by the Independent Auditor of the Entity''.  Our review work has been undertaken so that we might state to the company those matters we are required to state to them in an independent review 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 review work, for this report, or for the conclusion we have formed.

Directors' Responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

As disclosed in note 1, the annual financial statements of the group are prepared in accordance with IFRS as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, ''Interim Financial Reporting,'' as adopted by the European Union.

Our Responsibility

Our responsibility is to express a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of Review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, ''Review of Interim Financial Information Performed by the Independent Auditor of the Entity''. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the 26 weeks ended 25 October 2015 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

Grant Thornton UK LLP

Auditor

London

10 December 2015

UNAUDITED CONSOLIDATED INCOME STATEMENT FOR THE 26 WEEKS ENDED 25 OCTOBER 2015

		26 weeks ended    25 October  2015	26 weeks ended       26 October  2014	52 weeks ended 26 April 2015
	Notes	£'000	£'000	£'000
Continuing operations:
Revenue	2	1,433,668	1,432,898	2,832,560
Cost of sales		(790,151)	(802,681)	(1,591,748)
Gross profit		643,517	630,217	1,240,812
Selling, distribution and administrative expenses		(492,405)	(479,690)	(950,526)
Other operating income		4,222	4,134	8,345
Exceptional items	3	(24,059)	14,149	(3,050)
Operating profit	2	131,275	168,810	295,581
Investment income	4	54,808	1,263	14,104
Finance income		1,676	6,343	8,289
Finance costs	5	(2,046)	(28,327)	(7,487)
Share of profit of associated undertakings and joint ventures		1,539	1,643	2,959
Profit before taxation		187,252	149,732	313,446
Taxation		(39,771)	(34,438)	(72,093)
Profit for the period	2	147,481	115,294	241,353
Attributable to:
Equity holders of the Group		145,424	114,629	240,397
Non-controlling interests		2,057	665	956
Profit for the period	2	147,481	115,294	241,353

Earnings per share from total and continuing operations attributable to the equity shareholders

		Pence per share	Pence per share	Pence per share
Basic earnings per share	6	24.5	19.4	40.6
Diluted earnings per share	6	23.1	18.6	39.0
Underlying basic earnings per share	6	21.8	20.8	38.9

The accompanying notes form an integral part of this interim financial report.

UNAUDITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE 26 WEEKS ENDED 25 OCTOBER 2015

		26 weeks ended    25 October  2015	26 weeks ended       26 October  2014	52 weeks ended 26 April 2015
	Notes	£'000	£'000	£'000
Profit for the period	2	147,481	115,294	241,353
Other comprehensive income
Items that will not be reclassified subsequently to profit or loss
Actuarial gains/(losses) on defined benefit pension schemes		2,055	(1,304)	(2,493)
Taxation on items not reclassified		(432)	274	524
Items that will be reclassified subsequently to profit or loss
Exchange differences on translation of foreign operations		(12,122)	13,465	9,156
Exchange differences on hedged contracts - recognised in the period		(6,852)	26,860	77,181
Exchange differences on hedged contracts - reclassification in the period		(31,931)	23,623	7,240
Fair value adjustment in respect of available for sale financial assets		44,240	(6,783)	21,893
Taxation on items subsequently reclassified		8,125	(10,601)	(17,728)
Other comprehensive income for the period, net of tax		3,083	45,534	95,773
Total comprehensive income for the period		150,564	160,828	337,126
Attributable to:
Equity holders of the Parent		148,507	160,163	336,170
Non-controlling interests		2,057	665	956
		150,564	160,828	337,126

The accompanying notes form an integral part of this interim financial report.

UNAUDITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 25 OCTOBER 2015

		25 October  2015	26 October  2014	26 April 2015
	Notes	£'000	£'000	£'000
ASSETS
Non-current assets
Property, plant and equipment		443,375	406,251	422,742
Intangible assets		216,554	255,337	255,364
Investments in associated undertakings and joint ventures		48,121	45,692	38,133
Available-for-sale financial assets		212,743	142,883	140,795
Deferred tax assets		43,748	25,359	38,352
		964,541	875,522	895,386
Current assets
Inventories		633,058	655,081	517,054
Trade and other receivables		212,663	165,960	190,726
Derivative financial assets		62,849	49,758	92,199
Cash and cash equivalents		163,308	106,103	78,318
		1,071,878	976,902	878,297
TOTAL ASSETS		2,036,419	1,852,424	1,773,683
EQUITY AND LIABILITIES
Share capital		64,060	64,060	64,060
Share premium		874,300	874,300	874,300
Treasury shares		(56,234)	(56,234)	(56,234)
Permanent contribution to capital		50	50	50
Capital redemption reserve		8,005	8,005	8,005
Foreign currency translation reserve		2,314	18,745	14,436
Reverse combination reserve		(987,312)	(987,312)	(987,312)
Own share reserve		(33,726)	(13,251)	(13,251)
Hedging reserve		40,013	44,858	78,796
Retained earnings		1,380,031	1,030,689	1,181,511
		1,291,501	983,910	1,164,361
Non-controlling interests		(1,175)	(2,873)	(2,810)
Total equity		1,290,326	981,037	1,161,551
Non-current liabilities
Borrowings	7	182,812	283,622	136,849
Retirement benefit obligations		11,718	15,497	14,869
Deferred tax liabilities		38,092	30,726	40,088
Provisions		45,834	36,886	37,705
		278,456	366,731	229,511
Current liabilities
Derivative financial liabilities		7,081	30,696	5,629
Trade and other payables		422,193	434,017	340,936
Borrowings	7	814	8,932	1,204
Current tax liabilities		37,549	31,011	34,852
		467,637	504,656	382,621
Total liabilities		746,093	871,387	612,132
TOTAL EQUITY AND LIABILITIES		2,036,419	1,852,424	1,773,683

The accompanying notes form an integral part of this interim financial report.

UNAUDITED CONSOLIDATED CASH FLOW STATEMENT FOR THE 26 WEEKS ENDED 25 OCTOBER 2015

		26 weeks ended 25 October 2015	26 weeks ended 26 October 2014	52 weeks ended 26 April 2015
	Notes	£'000	£'000	£'000
Cash inflow from operating activities	8	110,613	103,718	314,662
Income taxes paid		(33,735)	(33,902)	(77,710)
Net cash inflow from operating activities		76,878	69,816	236,952
Cash flow from investing activities
Proceeds on disposal of property, plant and equipment		44,000	21,150	21,150
Proceeds on disposal of listed investments		56,367	-	51,695
Purchase of associate, net of cash acquired		(9,218)	(2,300)	(50)
Purchase of subsidiaries, net of cash acquired		-	(172)	(3,847)
Purchase of intangible assets		(29)	(3)	(2,937)
Purchase of property, plant and equipment		(92,230)	(26,715)	(97,342)
Purchase of listed investments		(36,988)	(33,162)	(50,415)
Investment income received		2,050	1,277	2,883
Finance income received		326	335	987
Net cash outflow from investing activities		(35,722)	(39,590)	(77,876)
Cash flow from financing activities
Finance costs paid		(1,739)	(4,712)	(6,845)
Borrowings drawn down		117,182	51,336	126,989
Borrowings repaid		(71,258)	(118,730)	(346,997)
Net cash outflow from financing activities		44,185	(72,106)	(226,853)
Net increase / (decrease) in cash and cash equivalents including overdrafts		85,341	(41,880)	(67,777)
Cash and cash equivalents including overdrafts at beginning of period		77,505	145,282	145,282
Cash and cash equivalents including overdrafts at the period end		162,846	103,402	77,505

The accompanying notes form an integral part of this interim financial report.

The purchase of associates above mainly relates to the acquisition of a stake in Four (Holdings) Limited.

UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE 26 WEEKS ENDED 25 OCTOBER 2015

	Treasury shares	Foreign currency translation	Own share reserve	Retained earnings	Other reserves	Total attributable to owners of the parent	Non-controlling interests	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 27 April 2014	(56,234)	5,280	(13,251)	931,819	(46,522)	821,092	(3,538)	817,554
Share-based payments	-	-	-	2,655	-	2,655	-	2,655
Transactions with owners	-	-	-	2,655	-	2,655	-	2,655
Profit for the financial period	-	-	-	114,629	-	114,629	665	115,294
Cashflow hedges  - recognised in the period	-	-	-	-	26,860	26,860	-	26,860
- reclassification	-	-	-	-	23,623	23,623	-	23,623
Actuarial gains on defined benefit pension schemes	-	-	-	(1,304)	-	(1,304)	-	(1,304)
Fair value adjustment in respect of available for sale financial assets	-	-	-	(6,783)	-	(6,783)	-	(6,783)
Taxation on items taken to comprehensive income	-	-	-	(10,327)	-	(10,327)	-	(10,327)
Translation differences - group	-	13,465	-	-	-	13,465	-	13,465
Total comprehensive income	-	13,465	-	96,215	50,483	160,163	665	160,828
At 26 October 2014	(56,234)	18,745	(13,251)	1,030,689	3,961	983,910	(2,873)	981,037

	Treasury shares	Foreign currency translation	Own share reserve	Retained earnings	Other reserves	Total attributable to owners of the parent	Non-controlling interests	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 26 April 2015	(56,234)	14,436	(13,251)	1,181,511	37,899	1,164,361	(2,810)	1,161,551
Share-based payments	-	-	-	6,482	-	6,482	-	6,482
Vesting of Share-based payments	-	-	8,963	(8,963)	-	-	-	-
Current tax on share schemes	-	-	-	5,407	-	5,407	-	5,407
Deferred Tax on share schemes	-	-	-	(3,818)	-	(3,818)	-	(3,818)
Purchase of own shares	-	-	(29,438)	-	-	(29,438)	-	(29,438)
Non-controlling Interest - acquisition							(422)	(422)
Transactions with owners	-	-	(20,475)	(892)	-	(21,367)	(422)	(21,789)
Profit for the financial period	-	-	-	145,424	-	145,424	2,057	147,481
Dividends received	-	-	-	-	-	-	-	-
Cashflow hedges  - recognised in the period	-	-	-	-	(6,852)	(6,852)	-	(6,852)
- reclassification	-	-	-	-	(31,931)	(31,931)	-	(31,931)
Actuarial losses on defined benefit pension schemes	-	-	-	2,055	-	2,055	-	2,055
Fair value adjustment in respect of available for sale financial assets	-	-	-	44,240	-	44,240	-	44,240
Taxation on items taken to comprehensive income	-	-	-	7,693	-	7,693	-	7,693
Translation differences - group	-	(12,122)	-	-	-	(12,122)	-	(12,122)
Total comprehensive income	-	(12,122)	-	199,412	(38,783)	148,507	2,057	150,564
At 25 October 2015	(56,234)	2,314	(33,726)	1,380,031	(884)	1,291,501	(1,175)	1,290,326

The Company holds 42,137,508 ordinary shares in Treasury. The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements of foreign subsidiaries and associates.

At 25 October 2015, the Sports Direct Employee Benefit Trust held 5,728,418 shares.

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.

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 Appleby Trust (Jersey) Limited as Trustee of the Sports Direct Employee Benefit Trust (the "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. The Trustee has purchased these Shares in order to help meet future obligations arising under the Company's share schemes.

NOTES TO THE FINANCIAL INFORMATION FOR THE 26 WEEKS ENDED 25 OCTOBER 2015

1. General information and basis of preparation

The results for the first half of the financial year have not been audited and are prepared on the basis of the accounting policies set out in the Group's 2015 Annual Report and Financial Statements. The financial information in the Group's Annual Report and Financial Statements is prepared in accordance with International Financial Reporting Standards as adopted by the European Union ("IFRS").The Interim Results have been prepared in accordance with International Accounting Standard (IAS) 34 - "Interim Financial Reporting" as endorsed by the European Union and the Disclosure and Transparency Rules of the Financial Conduct Authority (DTR). The principal accounting policies have remained unchanged from the prior financial information for the 52 weeks ended 26 April 2015. This consolidated financial information for the period does not constitute statutory financial statements within the meaning of s434 of the Companies Act 2006.

The financial statements for the parent company for the financial period ended 26 April 2015 were prepared in accordance with applicable accounting standards (being those accepted within the UK, i.e. UK GAAP) and under the historical cost convention. Following the publication of FRS 100 'Application of Financial Reporting Requirements' by the Financial Reporting Council the Company is required to change its accounting framework for its financial year ending 25 April 2016 and now has a choice between adopting full EU IFRS or FRS 102 (Reduced Disclosure Framework).

The company intends to report (on a non-consolidated basis only) under FRS102 Reduced Disclosure Framework. The Group financial statements are prepared in accordance with EU IFRS and in future periods the Company will continue to report on a consolidated basis under EU IFRS. Shareholder approval to adopt FRS102 is not required, however shareholders holding 5% or more of the issued share capital of the Company may object to the adoption of FRS102. If you have any queries regarding the Company's adoption of FRS102 or would like to object to the use of FRS102 in the Company only financial statements please contact the Company Secretary in writing at the Company's registered office at Unit A, Brook Park East, Shirebrook, NG20 8RY within 28 days of the date of announcement of these Interim Results.

The summary of results for the 52 weeks ended 26 April 2015 is an extract from the published Annual Report and Financial Statements which have been reported on by the Group's auditors and delivered to the Registrar of Companies. The audit report was unqualified and did not contain a statement under s498 (2) or s498 (3) of the Companies Act 2006.

2. Segmental analysis 

Operating segments 

In accordance with paragraph 12 of IFRS 8 the Group's operating segments have been aggregated into the following reportable segments:

1.     Sports Retail - includes the results of the UK and International retail network of sports stores along with related websites;

2.     Premium Lifestyle - includes the results of the premium retail businesses such as USC, Cruise and Flannels; and

3.     Brands - includes the results of the Group's portfolio of internationally recognised brands such as Everlast, Lonsdale, Dunlop and Slazenger.

Information regarding the Group's reportable segments for the period ended 25 October 2015, as well as a reconciliation of reported profit for the period to underlying EBITDA, is presented below:

Segmental information for the 26 weeks ended 25 October 2015:

		Retail			Brands
	Sports Retail	Premium Lifestyle	Total Retail		Total	Eliminations	Total
	£'000	£'000	£'000		£'000	£'000	£'000
Sales to external customers	1,233,518	87,686	1,321,204		112,464	-	1,433,668
Sales to other segments	-	-	-		15,796	(15,796)	-
Revenue	1,233,518	87,686		1,321,204	128,260	(15,796)	1,433,668
Gross profit	562,311	36,190	598,501		45,016	-	643,517
Operating profit/(loss) before foreign exchange and exceptional items	157,113	(6,617)	150,496		14,512	-	165,008
Operating Profit	134,635	(20,381)	114,254		17,021	-	131,275

Investment income										54,808
Finance income										1,676
Finance costs										(2,046)
Share of profits of associated undertakings and joint ventures										1,539
Profit before taxation										187,252
Taxation										(39,771)
Profit for the period										147,481

Reconciliation of operating profit to underlying EBITDA for the 26 week period ending 25 October 2015.

		Total
		£'000
Operating profit		131,275
Depreciation		37,669
Amortisation		3,036
Impairment		287
Share of profit of associated undertakings		1,539
Reported EBITDA		173,806
Charges for the Share Scheme		10,911
Exceptional items		24,059
Realised FX Loss		9,674
Underlying EBITDA (pre-scheme costs)		218,450

Sales to other segments are priced at cost plus a 10% mark-up.

Segmental information for the 26 weeks ended 26 October 2014:

		Retail		Brands
	Sports Retail	Premium Lifestyle	Total Retail	Total	Eliminations	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Sales to external customers	1,230,886	99,926	1,330,812	102,086	-	1,432,898
Sales to other segments	12	-	12	13,247	(13,259)	-
Revenue	1,230,898	99,926	1,330,824	115,333	(13,259)	1,432,898
Gross profit	548,080	38,428	586,508	43,709	-	630,217
Operating profit before foreign exchange and exceptional items	160,577	(9,445)	151,132	11,245	-	162,377
Operating Profit	166,855	(9,508)	157,347	11,463	-	168,810

Investment income										1,263
Finance income										6,343
Finance costs										(28,327)
Share of profits of associated undertakings										1,643
Profit before taxation										149,732
Taxation										(34,438)
Profit for the period										115,294

Reconciliation of operating profit to underlying EBITDA for the 26 week period ending 26 October 2014:

	Total
	£'000
Operating profit	168,810
Depreciation	29,060
Amortisation	3,953
Share of loss of associated undertakings	1,643
Reported EBITDA	203,466
Charges for the Share Schemes	6,057
Exceptional items	(14,149)
Realised FX Gain	7,716
Underlying EBITDA	203,090

Sales to other segments are priced at cost plus a 10% mark-up.

Segmental information for the 52 weeks ended 26 April 2015:

This information is available in the 2015 annual report.

3. Exceptional items

	26 weeks ended 25 October 2015 (£'000)	26 weeks ended 26 October 2014 (£'000)	52 weeks ended 26 April 2015 (£'000)
Profit on disposal of freehold property	12,197	14,149	10,288
Impairment, accelerated depreciation and amortisation	(32,456)	-	(13,338)
Provision against receivables	(3,800)	-	-
	(24,059)	14,149	(3,050)

The profit on disposal of freehold property relates to the sale of a freehold property for £44m, realising a profit of £12.2m.

The impairment mainly relates to goodwill in our Austrian business, reported within our Sports Retail segment, due to recent trading being below expectations.

4. Investment income

	26 weeks ended 25 October 2015 (£'000)	26 weeks ended 26 October 2014 (£'000)	52 weeks ended 26 April 2015 (£'000)
Dividend income from investments	1,238	1,263	1,531
Gain on disposal of listed investments and derivative agreements	53,570	-	12,573
	54,808	1,263	14,104

The gain on disposal of listed investments and derivative agreements mainly relates to the profit on disposal of JD Sports shares in the period.

5. Finance costs

	26 weeks ended 25 October 2015 (£'000)	26 weeks  ended 26 October 2014 (£'000)	52 weeks ended 26 April 2015 (£'000)
Interest on bank loans and overdrafts	1,751	4,654	6,692
Interest on other loans and finance leases	156	233	153
Interest on retirement benefit obligations	139	178	642
Fair value adjustment to forward foreign exchange contracts (1)	-	23,262	-
	2,046	28,327	7,487

(1)   The fair value adjustment to derivative financial instruments relates to differences between the fair values of derivative financial instruments not designated for hedge accounting from one period end to the next. The majority of the fair value loss in the prior period relates to equity options.

6. Earnings per share

For diluted earnings per share, the weighted average number of shares, 592,409,163 (FY15 H1: 592,294,371), is adjusted to assume conversion of all dilutive potential ordinary shares under the Group's share schemes, being 38,000,000 (FY15 H1: 24,200,000) to give the diluted weighted average number of shares of 630,409,163 (FY15 H1: 616,494,371).

The number of dilutive ordinary shares under the Group's share schemes has been calculated on a weighted average basis to take account of any shares that vested during the period.

Basic and diluted earnings per share

	26 weeks ended 25 October 2015	26 weeks ended 25 October 2015	26 weeks ended 26 October 2014	26 weeks ended 26 October 2014	52 weeks ended 26 April 2015	52 weeks ended 26 April 2015
Basic £'000	Diluted £'000	Basic £'000	Diluted £'000	Basic £'000	Diluted £'000
Profit for the period attributable to the equity holders of the Group	145,424	145,424	114,629	114,629	240,397	240,397
	Number in thousands		Number in thousands		Number in thousands
Weighted average number of shares	592,409	630,409	592,294	616,494	592,294	616,494
	Pence per share		Pence per share		Pence per share
Earnings per share	24.5	23.1	19.4	18.6	40.6	39.0

Underlying earnings per share

The underlying earnings per share reflects the underlying performance of the business compared with the prior year and is calculated by dividing underlying earnings by the weighted average number of shares. 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 realised foreign exchange in selling and administration costs, the IAS 39 fair value adjustment on derivative financial instruments in finance income/costs, exceptional costs and the profit/loss on sale of strategic investments.

	26 weeks ended 25 October 2015	26 weeks ended 25 October 2015	26 weeks ended 26 October 2014	26 weeks ended 26 October 2014	52 weeks ended 26 April 2015	52 weeks ended 26 April 2015
	Basic £'000	Diluted £'000	Basic £'000	Diluted £'000	Basic £'000	Diluted £'000
Profit for the period	145,424	145,424	114,629	114,629	240,397	240,397
Post tax adjustments to profit for the period for the following exceptional items:
Realised loss/(gain) on forward foreign exchange contracts	7,546	7,546	5,941	5,941	2,862	2,862
Fair value adjustment to forward foreign exchange contracts	(1,053)	(1,053)	13,286	13,286	(12,472)	(12,472)
Profit on disposal of listed investments	(48,892)	(48,892)	-	-	(2,832)	(2,832)
Profit on disposal of freehold property	(9,546)	(9,546)	(10,895)	(10,895)	(7,921)	(7,921)
Impairment and accelerated depreciation and amortisation	287	287	-	-	-	-
Impairment of goodwill	32,456	32,456	-	-	10,270	10,270
Provision against receivables	2,964	2,964	-	-	-	-
Underlying profit for the period	129,186	129,186	122,961	122,961	230,304	230,304
	Number in thousands		Number in thousands		Number in thousands
Weighted average number of shares	592,409	630,409	592,294	616,494	592,294	616,494
	Pence per share		Pence per share		Pence per share
Underlying earnings per share	21.8	20.5	20.8	19.9	38.9	37.4

7. Financial Instruments

(a) Financial assets and liabilities by category

The carrying values of financial assets and liabilities, which are principally denominated in Sterling or US dollars, were as follows:

	Loans and receivables (£'000)	Assets at fair value through profit and loss (£'000)	Available for sale financial assets (£'000)	Non-financial assets (£'000)	Total (£'000)
Assets at 25 October 2015
Property, plant and equipment	-	-	-	443,375	443,375
Intangible assets	-	-	-	216,554	216,554
Investments in associated undertakings and joint ventures	-	-	-	48,121	48,121
Available-for-sale financial assets	-	-	212,743	-	212,743
Deferred tax assets	-	-	-	43,748	43,748
Inventories	-	-	-	633,058	633,058
Derivative financial assets	-	62,849	-	-	62,849
Trade and other receivables	68,530	-	-	144,133	212,663
Cash and cash equivalents	163,308	-	-	-	163,308
	231,838	62,849	212,743	1,528,989	2,036,419
Assets at 26 April 2015
Property, plant and equipment	-	-	-	422,742	422,742
Intangible assets	-	-	-	255,364	255,364
Investments in associated undertakings	-	-	-	38,133	38,133
Available-for-sale financial assets	-	-	140,795	-	140,795
Deferred tax assets	-	-	-	38,352	38,352
Inventories	-	-	-	517,054	517,054
Derivative financial assets	-	92,199	-	-	92,199
Trade and other receivables	65,335	-	-	125,391	190,726
Cash and cash equivalents	78,318	-	-	-	78,318
	143,653	92,199	140,795	1,397,036	1,773,683
Assets at 26 October 2014
Property, plant and equipment	-	-	-	406,251	406,251
Intangible assets	-	-	-	255,337	255,337
Investments in associated undertakings and joint ventures	-	-	-	45,692	45,692
Available-for-sale financial assets	-	-	142,883	-	142,883
Deferred tax assets	-	-	-	25,359	25,359
Inventories	-	-	-	655,081	655,081
Trade and other receivables	-	49,758	-	-	49,758
Derivative financial assets	56,012	-	-	109,948	165,960
Cash and cash equivalents	106,103	-	-	-	103,103
	162,115	49,758	142,883	1,497,668	1,852,424

	Loans and payables (£'000)	Liabilities at fair value through profit and loss (£'000)	Non-financial liabilities (£'000)	Total (£'000)
Liabilities at 25 October 2015
Non-current borrowings	182,812	-	-	182,812
Retirement benefit obligations	-	-	11,718	11,718
Deferred tax liabilities	-	-	38,092	38,092
Provisions	-	-	45,834	45,834
Derivative financial liabilities	-	7,081	-	7,081
Trade and other payables	200,275	-	221,918	422,193
Current borrowings	814	-	-	814
Current tax liabilities	-	-	37,549	37,549
	383,901	7,081-	355,111	746,093
Liabilities at 26 April 2015
Non-current borrowings	136,849	-	-	136,849
Retirement benefit obligations	-	-	14,869	14,869
Deferred tax liabilities	-	-	40,088	40,088
Provisions	-	-	37,705	37,705
Derivative financial liabilities	-	5,629	-	5,629
Trade and other payables	170,090	-	170,846	340,936
Current borrowings	1,204	-	-	1,204
Current tax liabilities	-	-	34,852	34,852
	308,143	5,629	298,360	612,132
Liabilities at 26 October 2014
Non-current borrowings	283,622	-	-	283,622
Retirement benefit obligations	-	-	15,497	15,497
Deferred tax liabilities	-	-	30,726	30,726
Provisions	-	-	36,886	36,886
Derivative financial liabilities	-	30,696	-	30,696
Trade and other payables	268,612	-	165,405	434,017
Current borrowings	8,932	-	-	8,932
Current tax liabilities	-	-	31,011	31,011
	561,166	30,696	279,525	871,387

Carrying values do not materially differ from fair value.

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.

As at 25 October 2015, the only financial instruments held at fair value were Derivative financial assets and liabilities, which are classified as Level 2, and Available-for-sale financial assets, which are classified as Level 1 except for Highland Group Holdings, which is classified as Level 3. Highland Group Holdings is held at management's estimate of fair value based on publicly available data, there has been no movement in fair value during the period.

The value of equity and foreign exchange derivatives is calculated using a proprietary option pricing model. The model output is the result of a number of inputs including, amongst other things, the terms of the option (strike price, time to expiry, etc.), the prevailing share price, interest rates, foreign exchange rates, the volatility of the underlying stock, and dividends paid by the underlying company.

The Group has entered into a number of put options referencing listed company shares. To the extent that the market price of these shares is less than an agreed price on expiry of the put option, the Group has the right to elect whether to settle the put option by acquiring ordinary shares or, by paying the cash settlement value of the put option. Sports Direct is required to transfer cash collateral to cover its obligations under the Put Option. The amount of collateral required during the life of the Put Option can increase or decrease by reference to the underlying market price of the shares. 

8. Cash inflows from operating activities

	26 weeks ended 25 October 2015	26 weeks ended 26 October 2014	52 weeks ended 27 April 2015
	£'000	£'000	£'000
Profit before taxation	187,252	149,732	313,446
Net finance costs	370	21,984	(802)
Other Investment income	(54,808)	(1,263)	(14,104)
Share of profit of associated undertakings and joint ventures	(1,539)	(1,643)	(2,959)
Operating profit	131,275	168,810	295,581
Depreciation	37,669	29,060	62,924
Amortisation charge	3,036	3,953	12,725
Impairment	32,743	-	5,314
Profit on disposal of intangibles	9	496	107
Profit on disposal of property, plant and equipment	(12,239)	-	-
Defined benefit pension plan current service cost	14	11	21
Defined benefit pension plan employer contributions	(675)	(1,360)	(2,718)
Share based payments	10,911	6,057	10,105
Operating cash inflow before changes in working capital	202,743	207,027	384,059
Increase in receivables	(21,703)	(42,634)	(66,368)
(Increase in inventories	(116,004)	(89,603)	49,320
Increase / (decrease) in payables	45,577	28,928	(52,349)
Cash inflows from operating activities	110,613	103,718	314,662

Included within the movement in receivables are amounts held as collateral against equity derivatives.

9. 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.

All related party transactions were undertaken on an arm's length basis and were made in the ordinary course of business.

10. Post balance sheet events 

Since the period end, merger clearance from the Irish Competition and Consumer Protection Commission has been obtained for the acquisition of an additional stake in our Irish joint venture partner, Heatons. The provisional value of assets and liabilities of the business at the date of acquisition are €161m and €75m respectively. The Group holds a put and call option to purchase the remainder of the business and expects to exercise this option before the year end.

This information is provided by RNS

The company news service from the London Stock Exchange

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