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 operations. No representation is made that any of these statements, beliefs or opinions will come to pass. There are a number of 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. 2
GROUP HIGHLIGHTS
FY18 H1: GROUP HIGHLIGHTS FY18 H1 ∆ % / bps (£m) Group revenue increased by 1.2% on a currency neutral • basis excluding the impact of the acquisition of Bobs & Group revenue £1,714.6 4.7% disposal of Dunlop UK Sports Retail revenue £1,142.3 (1.0%) Underlying EBITDA increased by 7.4% International Sports Retail revenue £343.5 4.0% • US Retail revenue £63.9 - Underlying profit before tax increased by 22.9% • Premium Lifestyle revenue £67.7 65.5% Underlying free cash generation of £150.8m (FY17 H1: • Brands revenue £97.2 (13.9%) £129.5m) Group gross margin 38.6% (180 bps) Capital expenditure of £99.9m • UK Sports Retail 39.4% (80 bps) Net Debt increased to £471.7m from £182.1m at 30 • International Sports Retail 40.8% 113 bps April 2017: strategic stakes, own share purchase and cap ex 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%) 1. Underlying EBITDA, underlying profit before taxation and underlying EPS exclude realised foreign exchange gains/losses in selling and administration costs, exceptional 4 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.
FINANCIAL REVIEW
FY18 H1: GROUP REVENUE BRIDGE 1 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 • 6
FY18 H1: SPORTS RETAIL OVERVIEW REVENUE RETAIL GROSS MARGIN 1 On a currency neutral basis, retail revenue in: • UK Sports Retail gross margin reduced due to an • UK Sports Retail decreased by 1.0% increase in inventory provisions • International Sports Retail decreased by 0.8% • 7 1. Excludes wholesale sales.
FY18 H1: UK SPORTS RETAIL – OPERATING COSTS & UNDERLYING EBITDA £m FY18 H1 FY17 H1 Change (%) 93.6 94.5 (0.9)% Store Wages 95.9 99.8 (3.9)% Premises Costs 110.7 138.0 (19.8)% Other Retail Costs 300.2 332.3 (9.7)% UK Sports Retail – Operating Costs 154.0 138.0 11.6% UK Sports Retail – Underlying EBITDA, pre Associates (8.5)* - - Associates* 145.5 138.0 5.4% UK Sports Retail – Underlying EBITDA * Relates to Brasher Leisure (Sweatshop) and other associate losses 8
FY18 H1: INTERNATIONAL SPORTS RETAIL – OPERATING COSTS & UNDERLYING EBITDA £m FY18 H1 FY17 H1 Change (%) 53.5 55.2 (3.0)% Store Wages 37.4 38.9 (3.7)% Premises Costs 33.6 47.6 (29.6)% Other Retail Costs 124.5 141.7 (12.1)% International Sports Retail – Operating Costs 15.6 (11.4) - International Sports Retail – Underlying EBITDA, pre Associates • 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 9
FY18 H1: PREMIUM LIFESTYLE OVERVIEW REVENUE & GROSS MARGIN OPERATING COSTS & UNDERLYING EBITDA Change £m FY18 H1 FY17 H1 (%) 3.7 3.2 15.6% Store Wages 6.3 5.7 10.5% Premises Costs 10.8 6.6 63.6% Other Costs 20.8 15.5 34.2% Total Operating Costs 0.7 0.9 -22.2% Underlying EBITDA 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 10
FY18 H1: BRANDS OVERVIEW REVENUE OPERATING COSTS & UNDERLYING EBITDA FY18 FY17 Change £m H1 H1 (%) 6.6 11.1 (40.5)% Wages 4.0 5.4 (25.9)% Advertising & Promotion Other Costs 10.2 10.7 (4.7)% 20.8 27.2 (23.5)% Total Operating Costs 17.3 17.1 1.2% Underlying EBITDA Sales & overheads reduced due to the disposal of • Dunlop 11
FY18 H1: UNDERLYING EBITDA BRIDGE *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. 12
FY18 H1: SUMMARY UNDERLYING PBT / PAT / EPS FY18 FY17 £m H1 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 32.9% 11.3p 8.5p Underlying Diluted Earnings per Share 36.6% 11.2p 8.2p 13
FY18 H1: DEPRECIATION & AMORTISATION FY18 FY17 Change £m H1 H1 (%) 37.6 42.1 (10.7%) Total UK Sports Retail Total International Sports Retail 22.1 20.8 6.3% 0.8 - - US Retail 1.2 3.0 (60.0%) Premium Lifestyle 2.3 2.9 (20.7%) Brands 64.0 68.8 (7.0%) Total 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. 14
FY18 H1: CASH FLOW FY18 FY17 £m H1 H1 156.1 145.3 Underlying EBITDA 15.1 18.6 Realised profit on FX contracts (20.3) (34.4) Taxes paid 150.9 129.5 Underlying free cash flow Working capital (90.8) (14.1) Inventory (11.4) 55.2 Debtors/Creditors, other (11.9) - Acquisitions (including debt) - 160.5 Proceeds on disposal of investments (131.6) - Purchase of investments 0.8 0.5 Investment income (80.0) (261.0) Purchase of properties 42.2 - Proceeds from sale of properties (19.9) (26.0) Other capital expenditure (133.7) (13.1) Purchase of own shares (4.3) (3.9) Finance costs and other financing activities (289.7) 27.6 Decrease/(increase) in Net Debt* • Movement from year end 15 • The transfer of cash for the acquisition of Bobs occurred in FY17 H2
FY17: CAPITAL EXPENDITURE – SPORTS RETAIL FY18 FY17 UK Sports Retail, £m H1 H1 Property asset acquisitions & related development costs* 63.0 250.5 1.2 2.0 Shirebrook campus 1.4 6.6 New stores (leasehold) Refurbishment capex 8.8 1.1 4.4 7.7 Other 78.8 267.9 UK Sports Retail Capital Expenditure FY18 FY17 International Sports Retail, £m H1 H1 17.0 10.5 Property asset acquisitions & related development costs* - 3.7 New stores (leasehold) 1.5 1.3 Refurbishment capex - 0.8 Other 18.5 16.3 International Sports Retail Capital Expenditure *Total spend on new properties - £65.2m 16
FY18 H1: CAPITAL EXPENDITURE – PREMIUM LIFESTYLE, BRANDS & GROUP FY18 FY17 £m H1 H1 78.8 267.9 UK Sports Retail* 18.5 16.3 International Sports Retail 1.6 1.5 Premium Lifestyle 1.0 1.3 Brands 99.9 287.0 Gross Capital Expenditure (42.2) - Proceeds on disposal of fixed assets 57.7 287.0 Net Capital Expenditure *FY17 included the purchase of Oxford Street 17
FY18 H1: NET DEBT BRIDGE 18
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%. ” 20
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