Day of chaos as Sports Direct reveals it owes £605m to Belgian authorities
Shirebrook based Sports Direct finally published its results late on Friday afternoon after a day or chaos and confusion which saw its finance boss step down and the company’s profits plunge by 9%.
The firm released its results just before 5.20pm on Friday 26 July. They showed that underlying profit after tax for the year to 28 April had dropped to £91.5m.
This was on the back of group revenue increasing by 10.2% to £3.7bn over the period.
In a long and rambling missive, Sports Direct also revealed that it has been hit with a £605m tax bill from Belgium, meanwhile Mike Ashley says he regrets buying House of Fraser and that there should be drug tests for CEOs and CFOs of listed companies.
Meanwhile, Sports Direct finance boss Jon Kempster is to step down from his role to “pursue other interests”.
The news comes after a bizarre day for Sports Direct in which the company yet again failed to publish its annual results.
Kempster will hand over to Chris Wootton who will be promoted from deputy chief financial officer to CFO on 12 September.
David Daly, chair of Sports Direct, said: “The Board appreciates Jon’s contributions and wishes him well in his future endeavours.”
Mike Ashley on:
Debenhams: “We have significant concerns regarding the terms on which Debenhams engaged in discussions with Sports Direct from February 2019 onwards and what the true purpose of those arrangements and discussions was. If as we believe there was a plan to hand the business over to the new owners then that raises serious questions about their motivations.
“We have been similarly critical of the role of Debenhams’ advisors during the relevant period. We note that we understand tens of millions of pounds were paid by Debenhams to those advisors at a time when cash was at a premium – indeed, significant proportions of the funding obtained during the relevant period simply went to pay those advisors’ fees. The relevant lawyers, accountants, and other advisors must have well known what was happening and supported the process. They should be held responsible too.”
House of Fraser: “On a scale out of 5, with 1 being very bad and 5 being very good, House of Fraser is a 1, albeit we are trying very hard to turn the business around this will not be quick and it will not be easy. Even though we do believe there could be a bright future for House of Fraser, and indeed have publicised our Frasers vision which we are very excited about, if we had the gift of hindsight we might have made a different decision in August 2018.
“In conclusion, unscrupulous and/or incompetent management have in this case, and in others within the retail market been shown to be largely untouchable by authorities or stakeholders.”
Auditors: “There have also been inaccurate reports that Sports Directs 2018 year end accounts were being investigated, we reiterate that it was the audit of the financial statements by Grant Thornton and not the preparation of accounts by Sports Direct that were being reviewed, not investigated, by the Audit Quality Review Team. We would also note that FRC’s Audit Quality Review team review on rotation which is a normal part of their procedures and we understand the Sports Direct audit has not been picked for any other reason.”
The retail market: “To illustrate how serious the situation is on the High Street, alongside the almost weekly administrations, CVAs, frauds, and profit warnings, the British Retail Consortium showed May 2019 as the worst on record. The Sports Direct Group is not immune to this and indeed if not for the Elevation Strategy we implemented in recent years we would be looking at significant problems in the future. None-the-less, our UK store contribution likes are down 1.6% and we would expect these to be some of the rosier figures from the High Street. Myself and other voices in the retail sector have already noted loudly and clearly some of the measures that should be undertaken to help save high streets, these include an extra tax on online and reform of the business rates regime.”
Regulators: “We have also noted to the FCA that we believe that there should be a voluntary drug test for CEOs and CFOs of listed companies. Having such undisclosed personal issues could lead to blackmail and force CEOs and CFOs to make decisions based on saving their own skin and potentially reducing shareholder value.”
