Sports Direct first half profit jumps 25%

Sports Direct International posted a 25% jump in first half pre-tax profit on flat revenue thanks in part to the continued roll-out of large format city stores.

For the 26 weeks to 25 October, pre-tax profit came in at £187.3m from £149.7 on revenue of £1.4bn, up just 0.1% from the same period last year, which was boosted by the World Cup.

The company’s founder, Mark Ashley, disposed of 5m shares in JD Sports during the period and the sale contributed to investment income of £54.8m, which helped to lift profit at the retailer.

Underlying pre-tax profit was up 3.6% to £166.4m and the group said gross sports retail margin gained 110 basis points to 45.6%.

Group underlying earnings before interest, taxes, depreciation and amortisation rose 7.6% to £218.5m and Sports Direct attributed this to its commitment to upgrading the store portfolio in Sports Retail, which it said continues to deliver gross margin growth.

During the period, it opened new larger format stores in Leeds and Plymouth and combined gym and retail spaces in St Helens and Newport.

Chief executive Dave 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.

"We look forward to 2016 with confidence ahead of the Olympic Games in Rio de Janeiro and the 2016 European Football Championships in which England, Wales, Northern Ireland and the Republic of Ireland will be competing."

The company said trading since the end of the period has been in line with expectations and it remains confident of achieving its first revised adjusted EBITDA target under the 2015 share scheme of £420m.

The sports clothing retailer was also in focus after The Guardian reported that some of its temporary workers were getting paid less than the minimum wage.

An investigation by the paper revealed that many of the company’s warehouse staff were being paid an effective rate of about £6.50 an hour against the statutory rate of £6.70, which could be saving the firm millions of pounds a year at the expense of some of its workers.

At 0957 GMT, shares in the company were down 13.6% to 575p.

Cantor Fitzgerald cut its price target on the stock to 700p from 760p, saying the results were “a little behind the curve” with disappointing retail sales countered by better-than-expected gross margins.