The state of Sports Direct: key points from results statement

Sports Direct’s annual results statement is an extraordinary document, peppered with shock financial revelations, scathing attacks on financial advisers and stark warnings about the state of the high street. The idiosyncratic publication often descends into a rant by Mike Ashley, Sports Direct’s founder, controlling shareholder and chief executive. Here are some of the key points.

Belgian tax demand

The final paragraph in the results is the most explosive, revealing that on 25 July 2019, Sports Direct received a payment notice from the Belgian tax authorities for €674m (£605m). The amount included “200% penalties and interest” and the statement refers to a request for information from the Belgian taxman on “the tax treatment of goods being moved intra-group throughout the EU via Belgium”. Sports Direct says it will enter into a mediation process with the tax authorities and it is “less than probable” that it will have to pay penalties.

House of Fraser

The state of House of Fraser, bought out of administration in August, is laid bare. Ashley expresses regret about buying the business and warns that some of the chain’s problems are “nothing short of terminal in nature”. There is a warning that some of the group’s 54 stores may have to close, as Ashley praises landlords and local authorities for their efforts in trying to save branches. He adds, “we do believe there could be a bright future for House of Fraser” but then admits that, with hindsight, he wouldn’t have bought the business. “If we had the gift of hindsight we might have made a different decision in August 2018.”

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The statement explains at length the disappointment that a 29.9% stake in Debenhams was wiped out this year by the store collapsing into administration in April. Ashley describes an “unnecessary insolvency and … total destruction of shareholder value”. The statement accuses regulators, parliamentary committees and individual MPs of having “little or no will, or ability”, to hold any party to account for the department store’s failure.


Ashley says Sports Direct has been in touch with auditors in anticipation of putting out a tender for its auditing work, currently carried out by Grant Thornton. However, the big four accounting firms do not appear likely to take on Sports Direct’s work soon. The statement says: Deloitte is conflicted because it does the company’s tax compliance and advisory work; KPMG also believes it has conflicts of interest; EY has “some reluctance” because it ran the administration of House of Fraser; PwC has a “reluctance to engage” because of Sports Direct’s ownership structure.

UK retail

Ashley’s statement warns that the overall retail industry is in “dire straits” and cautions that company voluntary arrangements – a cost-cutting procedure – are being used “carte blanche” to penalise creditors and landlords, while leaving healthy retailers at a disadvantage. “The more successful retailers [are] subsidising the rotten ones,” he says.


Ashley argues that financial advisers are not regulated properly, particularly those that operate in the field of company restructurings. Advisers should be “named and shamed” for implementing strategies that wipe out stakeholders. He then urges the Financial Conduct Authority, the City watchdog, to offer voluntary drug tests for the CEOs and CFOs of listed companies in case they are blackmailed and make bad decisions. “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,” he says.

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Overall outlook for the group

The state of House of Fraser makes it impossible to forecast profitability, Ashley adds. “Our acquisition of House of Fraser … has led to significant uncertainty as to the future profitability of the group as a whole, albeit not impacting the going concern assessment of the group.” The statement is also gloomy about the core Sports Direct business, revealing that underlying profits slipped 4.7% to £264.7m. With so many variables at play, the company says it will not be issuing any profit guidance for next year, but some profit guidance may be issued at the company’s half-year results.



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