Sports Direct International PLC’s (LON:SPD) delayed results proved a “horror show” when released after the close on Friday as retail billionaire Mike Ashley’s firm revealed it had been landed this week with a surprise €674mln Belgian tax bill and said it could not predict profits for the year ahead from its House of Fraser acquisition.
The retailer also announced, separately, that its finance director Jon Kempster would be stepping down in September, the third senior departure in recent weeks. The group said Kempster would be handing over to Chris Wootton who will be promoted from Deputy Chief Financial Officer to CFO effective on 12 September 2019.
READ: Sports Direct warns profit drop could be bigger than feared as it delays annual results by up to five weeks
In a lengthy statement accompanying the numbers, Sports Direct said it feared problems at House of Fraser were “nothing short of terminal in nature” as it reported an operating loss of £54.6m, worse than analysts had expected, at the ailing department store chain.
The company’s results were originally due to be released on 18 July, only to be postponed as Sports Direct said they were more complicated and might force it to change its financial forecasts.
In a holding statement on Friday morning, saying the results would be published later in the day, the company simply said: “The accounts and audit are at an advanced stage and the results are expected to be within the guidance issued by the Company on 13 December 2018.”
It blamed the complexities of its House of Fraser takeover, recent volatile trading conditions and tighter regulatory scrutiny of its auditor, Grant Thornton, due to its role in the Patisserie Valerie collapse for the delay to publication.
In the results, Sports Direct said underlying pre-tax profit rose by 5% to £142.3mln in the year to the end of April, at the bottom end of expectations, although revenue increased by 10.2% to £3.7ln and the group’s Sports Retail gross margin rose to 42.4% from 40.8%.
It had said in December that underlying profits would rise by 5-15%, taking them to between about £321mln and £352mln
Belgian tax bill shock
Sports Direct also made the shock announcement that Belgian tax authorities had issued the company with a hefty tax bill, including interest, on Thursday.
The retailer said it hoped to respond to requests for information from Belgium and it was “less than probable that material VAT and penalties” would be due.
News that Sports Direct intends to commence a new £30mln share buy-back programme between 30 July and 10 September 2019 is unlikely to sweeten investors to all the bad news.
Commenting on all the numbers, Neil Wilson, senior market analyst at Markets.com said: “Horror show. No wonder it was delayed.
“It’s a House of Horrors more like. Every reason to regret buying House of Fraser now - such a shame as there were such high hopes.
“The cost burn from House of Fraser is huge. Core business not great. 2020 guidance abandoned. Belgian tax bill awful and out of left field. As bad as it could be. Investors will run for the hills.”
Sports Direct shares closed Friday nearly 4% lower at 229.80p.