House of Fraser woes delay release of Sports Direct results

By

Sandra Halliday

Published
Jul 15, 2019

Sports Direct said on Monday that its preliminary annual results, which were due for release this Thursday, could now be delayed and will be published at some point between July 26 and August 23. 

The postponement comes on the back of “the complexities of the integration into the company of the House of Fraser business, and the current uncertainty as to the future trading performance of this business.”

It’s also been affected by “the increased regulatory scrutiny of auditors and audits including the FRC review of Grant Thornton's audit of the financial statements of Sports Direct for the period ended 29 April 2018.”

The official stock exchange announcement followed earlier reports that said the retail giant’s profits could have fallen by up to 20% in the latest year.

The company made £152 million in pre-tax profits in the previous year and though revenues are expected to have risen slightly in the latest period, there have been reports that pre-tax profits could be at low as £122 million.

And the reason? As the statement above makes clear, the house of Fraser acquisition has been a problem.

The company paid around £90 million for House of Fraser and a bit more than that for the freehold of one of its key shops, Frasers in Glasgow. But it has continuing lease issues around many other stores and despite claims that HoF would be turned into “the Harrods of the high street,” the turnaround has been a long time coming. The company isn't out of the woods yet, despite the well-publicised problems at rival Debenhams on which it could have capitalised had it been at full strength.

And talking of Debenhams, let's not forget the almost 30% stake (once worth tens of millions of pounds) that Sports Direct held in that company before its administration filing and that it has now lost, leading to ongoing legal action on its part.

Referring to the issues that it stated for the delay in publishing its results, on Monday the group said “these factors have led to a need for the company to compile more information than in previous years for the audit of [the] period ended 28 April 2019, and [it] has therefore impacted on preparations for and responses to increased challenges in connection with this audit. Grant Thornton has also required additional time to complete its audit work for the period.”

It added that it “believes its accounts and their audit to be at an advanced stage. However there are a number of key areas to conclude on, which could materially affect the guidance given in Sports Direct's announcement of 13 December 2018. Sports Direct would note that its core principles in regards to its financial statements are to be conservative, consistent and simple. This is an important element for the company and is even more relevant in an uncertain economic environment for UK retail generally.”