Elevation: Delivering Our Strategy Sports Direct International Plc - - PowerPoint PPT Presentation

Elevation: Delivering Our Strategy

Sports Direct International Plc Interim Results FY18 H1 For 26 weeks ended 29 October 2017 14 December 2017

FORWARD LOOKING INFORMATION

This presentation may contain forward-looking statements, beliefs or opinions, including statements with respect to management's current views and expectations of future events, and the Company’s future financial condition and results of

• perations. No representation is made that any of these statements, beliefs or opinions will come to pass. There are a number
• f factors that could cause actual results and developments to differ materially from those expressed or implied by these

statements, beliefs or opinions. Forward-looking statements speak only as at the date of this presentation and the Company expressly disclaims any obligations or undertaking to release any update of, or revisions to, any forward-looking statements in this presentation. No statement in this presentation is intended to be a profit forecast. As a result, you are cautioned not to place any undue reliance on such forward-looking statements, beliefs or opinions.

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GROUP HIGHLIGHTS

FY18 H1: GROUP HIGHLIGHTS

• Group revenue increased by 1.2% on a currency neutral

basis excluding the impact of the acquisition of Bobs & disposal of Dunlop

• Underlying EBITDA increased by 7.4%
• Underlying profit before tax increased by 22.9%
• Underlying free cash generation of £150.8m (FY17 H1:

£129.5m)

• Capital expenditure of £99.9m
• Net Debt increased to £471.7m from £182.1m at 30

April 2017: strategic stakes, own share purchase and cap ex

4 1. Underlying EBITDA, underlying profit before taxation and underlying EPS exclude realised foreign exchange gains/losses in selling and administration costs, exceptional costs, profit/loss on disposal of properties, disposal of subsidiaries and the profit/loss on sale of strategic investments. Underlying EBITDA also excludes the Share Scheme charges.

FY18 H1 (£m) ∆ % / bps Group revenue £1,714.6 4.7% UK Sports Retail revenue £1,142.3 (1.0%) International Sports Retail revenue £343.5 4.0% US Retail revenue £63.9

• Premium Lifestyle revenue

£67.7 65.5% Brands revenue £97.2 (13.9%) Group gross margin 38.6% (180 bps) UK Sports Retail 39.4% (80 bps) International Sports Retail 40.8% 113 bps Underlying EBITDA £156.1 7.4% Underlying PBT £88.0 22.9% Underlying EPS 11.3p 32.9% Reported PBT £45.8 (67.3%) Reported EPS 4.9p (68.6%)

FINANCIAL REVIEW

FY18 H1: GROUP REVENUE BRIDGE

• Excluding acquisitions and disposals, Group revenue increased by 1.2% on a currency neutral basis
• US Retail – Bob’s stores & EMS acquired in May 2017
• Brands – disposal of Dunlop in the prior year

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REVENUE RETAIL GROSS MARGIN1

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• On a currency neutral basis, retail revenue in:
• UK Sports Retail decreased by 1.0%
• International Sports Retail decreased by 0.8%
• UK Sports Retail gross margin reduced due to an

increase in inventory provisions

FY18 H1: SPORTS RETAIL OVERVIEW

• 1. Excludes wholesale sales.

FY18 H1: UK SPORTS RETAIL – OPERATING COSTS & UNDERLYING EBITDA

£m FY18 H1 FY17 H1 Change (%) Store Wages 93.6 94.5 (0.9)% Premises Costs 95.9 99.8 (3.9)% Other Retail Costs 110.7 138.0 (19.8)% UK Sports Retail – Operating Costs 300.2 332.3 (9.7)% UK Sports Retail – Underlying EBITDA, pre Associates 154.0 138.0 11.6% Associates* (8.5)*

• UK Sports Retail – Underlying EBITDA

145.5 138.0 5.4%

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* Relates to Brasher Leisure (Sweatshop) and other associate losses

FY18 H1: INTERNATIONAL SPORTS RETAIL – OPERATING COSTS & UNDERLYING EBITDA

£m FY18 H1 FY17 H1 Change (%) Store Wages 53.5 55.2 (3.0)% Premises Costs 37.4 38.9 (3.7)% Other Retail Costs 33.6 47.6 (29.6)% International Sports Retail – Operating Costs 124.5 141.7 (12.1)% International Sports Retail – Underlying EBITDA, pre Associates 15.6 (11.4)

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• Store wages reduced due to improvements in store staff management and the closure of loss making

stores in Austria

• Premises costs also reduced due to Austrian store closures
• Other retail costs in the prior year included provisions for onerous leases in loss making stores of £15.6m

REVENUE & GROSS MARGIN OPERATING COSTS & UNDERLYING EBITDA

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• Revenue increased largely due to sales through the

Flannels.com website and new stores

• Gross margin % decreased due to an increase in stock

provisions and customer demand for the latest products

• Stores wages and premises costs increased due to

additional Flannels stores

FY18 H1: PREMIUM LIFESTYLE OVERVIEW

£m FY18 H1 FY17 H1 Change (%) Store Wages 3.7 3.2 15.6% Premises Costs 6.3 5.7 10.5% Other Costs 10.8 6.6 63.6% Total Operating Costs 20.8 15.5 34.2% Underlying EBITDA 0.7 0.9

• 22.2%

REVENUE OPERATING COSTS & UNDERLYING EBITDA

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• Sales & overheads reduced due to the disposal of

Dunlop

FY18 H1: BRANDS OVERVIEW

£m FY18 H1 FY17 H1 Change (%) Wages 6.6 11.1 (40.5)% Advertising & Promotion 4.0 5.4 (25.9)% Other Costs 10.2 10.7 (4.7)% Total Operating Costs 20.8 27.2 (23.5)% Underlying EBITDA 17.3 17.1 1.2%

FY18 H1: UNDERLYING EBITDA BRIDGE

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*US Retail’s underlying EBITDA is made up of £5.5m of trading losses as group processes and strategies are implemented, and £17.5m of losses relating to fair value accounting policy alignments.

FY18 H1: SUMMARY UNDERLYING PBT / PAT / EPS

£m FY18 H1 FY17 H1 Change (%) Underlying EBITDA 156.1 145.3 7.4% Share Scheme Charge

• (1.1)
• Depreciation and amortisation

(64.0) (68.8) (7.0%) Interest (4.2) (4.2)

• Investment Income

0.1 0.4 (75.0%) Underlying Profit Before Tax 88.0 71.6 22.9% Underlying Taxation (25.0) (20.6) 21.4% Non-Controlling Interests (2.7) (0.9) 200.0 Underlying Profit After Tax 60.3 50.1 20.4% Number of Shares (millions) 532.9 591.6 (9.9%) Underlying Basic Earnings per Share

11.3p 8.5p

32.9% Underlying Diluted Earnings per Share

11.2p 8.2p

36.6%

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FY18 H1: DEPRECIATION & AMORTISATION

£m FY18 H1 FY17 H1 Change (%) Total UK Sports Retail 37.6 42.1 (10.7%) Total International Sports Retail 22.1 20.8 6.3% US Retail 0.8

• Premium Lifestyle

1.2 3.0 (60.0%) Brands 2.3 2.9 (20.7%) Total 64.0 68.8 (7.0%)

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UK Sports Retail depreciation and amortisation is down period on period due to one off accounting policy alignments and changes in estimated useful life in the prior period.

FY18 H1: CASH FLOW

£m FY18 H1 FY17 H1 Underlying EBITDA 156.1 145.3 Realised profit on FX contracts 15.1 18.6 Taxes paid (20.3) (34.4) Underlying free cash flow 150.9 129.5 Working capital Inventory (90.8) (14.1) Debtors/Creditors, other (11.4) 55.2 Acquisitions (including debt) (11.9)

• Proceeds on disposal of investments
• 160.5

Purchase of investments (131.6)

• Investment income

0.8 0.5 Purchase of properties (80.0) (261.0) Proceeds from sale of properties 42.2

• Other capital expenditure

(19.9) (26.0) Purchase of own shares (133.7) (13.1) Finance costs and other financing activities (4.3) (3.9) Decrease/(increase) in Net Debt* (289.7) 27.6

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• Movement from year end
• The transfer of cash for the acquisition of Bobs occurred in FY17 H2

FY17: CAPITAL EXPENDITURE – SPORTS RETAIL

UK Sports Retail, £m FY18 H1 FY17 H1 Property asset acquisitions & related development costs* 63.0 250.5 Shirebrook campus 1.2 2.0 New stores (leasehold) 1.4 6.6 Refurbishment capex 8.8 1.1 Other 4.4 7.7 UK Sports Retail Capital Expenditure 78.8 267.9

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*Total spend on new properties - £65.2m

International Sports Retail, £m FY18 H1 FY17 H1 Property asset acquisitions & related development costs* 17.0 10.5 New stores (leasehold)

• 3.7

Refurbishment capex 1.5 1.3 Other

• 0.8

International Sports Retail Capital Expenditure 18.5 16.3

FY18 H1: CAPITAL EXPENDITURE – PREMIUM LIFESTYLE, BRANDS & GROUP

£m FY18 H1 FY17 H1 UK Sports Retail* 78.8 267.9 International Sports Retail 18.5 16.3 Premium Lifestyle 1.6 1.5 Brands 1.0 1.3 Gross Capital Expenditure 99.9 287.0 Proceeds on disposal of fixed assets (42.2)

• Net Capital Expenditure

57.7 287.0

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*FY17 included the purchase of Oxford Street

FY18 H1: NET DEBT BRIDGE

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OUTLOOK

OUTLOOK

Mike Ashley, Chief Executive of Sports Direct International plc said: “Our high street elevation strategy is currently delivering spectacular trading performance within our flagship stores. We intend to open between 10 and 20 new flagship stores next year. “Whilst our reported profit before tax has been impacted by fair value adjustments and transitional factors such as the disposal of assets in FY17; our underlying profit before tax remains healthy. We will continue to invest for the long-term and our net debt has increased in line with management expectations. “We continue to anticipate that growth in underlying EBITDA during FY18 will be within our forecast range of 5% to 15%. ”

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