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Chairman denies accusations over conditions

‘Rewarding staff is key to our business’ – Sports Direct boss

Sports Direct google maps KirkcaldySports Direct chairman Keith Hellawell responded to criticism of the retailer’s working practices by saying the company rewarded good performance.

The firm, headed by billionaire Mike Ashley, has faced a number of criticisms over what were claimed “workhouse” conditions at its main warehouse. Sports Direct said the report in a newspaper contained a number of inaccuracies.

Mr Hellawell said today: “Rewarding our staff for good performance is central to the way we do business.

“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.”

He said 2,000 participating employees received more than four million shares and that incentivising employees has been “pivotal in the group’s success over the past few years.

“We believe this strategy will continue to drive growth in the future.”

In October, Sports Direct’s chief executive David Forsey appeared in court accused of failing to give 30 days’ notice for redundancies at its subsidiary USC in Ayrshire.

He pleaded not guilty and is scheduled to go on trial in the new year.

Unveiling half-year figures today, Mr Forsey 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.”

Russ Mould, investment director at AJ Bell, said:  “Stock markets are rarely pleased when a company’s full-year earnings forecast relies on a strong second half after a mixed first-one and today’s 13% share price plunge in Sports Direct at the opening is a perfect example.

“Although boss Dave Forsey left the FTSE 100’s firms profit guidance of £420 million in EBITDA (earnings before interest tax depreciation and amortisation) unchanged, a reported first-half pre-tax profit figure of £187 million undershot the analyst consensus estimate by some 8% as group sales disappointed by coming in flat.

“Coming after the bald trading statement at the AGM in September, the market has taken the numbers badly, especially the sales figure, which shows just how difficult conditions for retailers remain, despite the boost lower oil and petrol prices should have given to consumers.

“Management is already looking forward to the 2016 Rio Olympics and UEFA European Football Championships as a possible boost but the 2014 FIFA World Cup showed these events do not always go to plan.

 “At 581p, based on consensus analyst forecasts for around 49p in earnings per share for the year to June 2017, the stock trades on a forward price/earnings ratio of about 12 times, a discount to the broader UK market. Such a discount feels about right, given the lack of top line growth, lingering governance concerns and also the influence on trading of unpredictable events such as the weather or sports competitions.”

Key highlights

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

·      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  

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

·      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

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