Sports Direct International PLC (LON:SPD) boss Mike Ashley has hit back at claims the sportswear retailer has a major influence over its strategic investment companies.
The sportswear retailer has strategic investments in a string of firms including Debenhams, House of Fraser, Game Digital and Findel.
READ: Sports Direct shares plunge as profits plummet after taking hit from Debenhams stake
On Thursday, it revealed full-year profits plunged 73% after taking a £85mln hit on its 29.7% stake in Debenhams, which has seen its shares fall more than 70% over the past year following a series of profit warnings.
Relationships with investee companies 'challenging', says Ashley
In a results presentation published on Friday, Ashley said one of Sports Direct’s biggest challenges this year end has been assessing its relationships with investee companies.
He said a number of these businesses, such as Game and Findel, consider Sports Direct to have a “significant influence over them by virtue of signalling us as a related party in their accounts”.
“I do not believe that we have significant influence over these companies. I do not believe they apply the core Sports Direct principles of being conservative, consistent and simple,” Ashely said.
“I want a show of hands of those people in this room that disagree that applying our core principles of being conservative, consistent and simple, and thus increasing our significant influence within these strategic investments would be a bad thing? I want to be crystal clear, if you disagree with this put your hands up?”
Ashley said the group will be contacting its strategic investment companies in the next few months and urging them to “adopt our core principles of being conservative, consistent and simple”. The retailer will provide an update at the first half results, Ashely said.
RBC ups target price on Sports Direct
Following the full year results, RBC Capital Markets maintained an ‘underperform’ rating on the stock but upped its price target to 360p from 325p due to an improved outlook for 2019 and lower net debt.
RBC said revenue was soft, inventories were higher and gross margin was weaker than expected. However, it noted that costs were lower due to provisioning for onerous leases and litigation and more automated warehousing.
"We think SPD should be able to deliver double-digit EBITDA growth in FY19 due to a good World Cup and as it is now well covered on dollar hedging, at circa $1.36 for FY19 and circa $1.41 for FY20 versus circa 1.30 for FY18.”