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Mike Ashley's Sports Direct says it sees earnings growth ahead of potential investor revolt at AGM

Last updated: 13:03 12 Sep 2018 BST, First published: 07:40 12 Sep 2018 BST

Sports Direct
Sports Direct agreed to buy House of Fraser for £90mln in August

Sports Direct International PLC (LON:SPD) said on Wednesday it expects annual earnings growth of up to 15% ahead of the retailer’s annual general meeting where chief executive Mike Ashley faces a shareholder revolt.

In a brief trading update, the sportswear company said trading is in line with its expectations of reaching an increase in underlying earnings (EBITDA) of between 5% and 15% for the current financial year, excluding the recent acquisition of House of Fraser..

READ: Mike Ashley’s end-game uncertain after Sports Direct’s £90mln acquisition of House of Fraser

Sports Direct agreed to buy House of Fraser for £90mln in August after the department store chain went into administration following collapsed talks with creditors

Ashley, the founder and majority owner of Sports Direct, said on Wednesday: "Our strategy to transform House of Fraser into the Harrods of the High Street will be a game changer."

Potential investor revolt as chairman quits

In mid-morning, the company announced that its chairman, Keith Hellawell, would step down and be replaced by non-executive director David Daly.

The move follows pressure from three shareholder advisory groups, Pensions & Investment Research Consultants (Pirc), Institutional Shareholder Services, and Glass Lewis & Co, who had been advising investors to vote against Hellawell’s re-election, citing concerns over employment practices and poor corporate governance.

Hellawell survived a previous attempt to oust him last year when he won the backing of only 53% of Sports Direct’s independent shareholders but was protected by Ashley, who owns the majority stake.

Ashley himself is also facing a potential revolt at the AGM in London later on Wednesday, where the same three groups are urging a vote against his re-election as chief executive over similar grievances.

READ: Sports Direct chairman Keith Hellawell narrowly survives shareholder revolt

“(Ashley’s) position on the board and level of shareholding raises significant concerns about his influence on the board and whether the other directors can objectively challenge and influence the board’s decision-making process,” Pirc said.

However, Ashely won’t be present to hear any protests as Sports Direct has said he would not attend the meeting due to “overriding demands for his time”.

Concerns about working practices and corporate governance

In 2016, the retailer came under fire in a report by British lawmakers that criticised “appalling working practices at both the Sports Direct shops and warehouses”.

Pirc has described Sports Direct’s response to the report as “insufficient”.

The group has also raised concerns over the role of Michael Murray, the partner of Ashley’s daughter, who holds the role of “head of elevation” and provides property consultancy services to Sports Direct.

Other corporate governance issues previously highlighted include the decision to buy a £40mln corporate jet and entering into a make-up licensing agreement with Ashley’s daughter.

-- Adds chairman resignation --

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