The Week Ahead: Sports Direct to deliver annual results with updates due from Mothercare and SSE
- Credit: PA
The latest milestone for Sports Direct staff hoping for another shares windfall will be reached this week when the company presents its annual results.
Sports Direct, a retailer that is seldom far from the headlines, looks set to report another robust set of annual results on Thursday.
The City expects the sports chain, which has around 400 UK stores and operations in 19 countries in Europe, to post underlying earnings 13.6% higher at £327.1million for the year to April 14, on the back of good organic growth, acquisitions and rising online sales.
This means that the firm’s existing 2011 bonus scheme, which includes 3,000 staff, will have cleared targets for three of the four years it is due to run for. If full year underlying earnings hit £300m in 2015, shop floor staff will be awarded 34m shares in a payout worth an average £80,000 at today’s prices. A scheme last year awarded a typical worker shares worth £68,000.
Brokers at Jefferies said strong full-year results at Sports Direct, which also owns the Dunlop, Karrimor and Slazenger brands, will act as “a reminder of the group’s attractions” after an eventful few months.
A contentious bonus scheme for founder Mike Ashley, who holds a stake of around 58%, was voted through earlier this month even though it was rebuffed by major shareholding bodies including as Association of British Insurers.
The plan will grant 25m shares worth around £180m to Mr Ashley and 3,000 other employees if profits rise sharply over four years. Under this Sports Direct new bonus scheme underlying earnings will have to hit £480m in 2016, £570m in 2017, £650m in 2018 and £750m in 2019.
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During the year the group bought 51% of Austrian chain EAG and 60% of Sportland International Group in May, which operates in the Baltic region.
Brokers Jefferies said successful integration of these two businesses, which also have stores in Germany, “should provide a more meaningful international base to the group.”
Newly installed Mothercare boss Mark Newton-Jones will reveal his initial thoughts about the retailer’s prospects in the face of takeover attention when he presents first quarter figures on Thursday.
The board of the firm, which has 220 UK shops under the Mothercare and Early Learning Centre brands, recently turned Mr Newton-Jones’ interim chief executive appointment into a permanent role.
The company had been without a permanent chief executive after Simon Calver resigned in the wake of a profits warning due to poor Christmas trading.
Mr Newton-Jones, who joined the business in March, has said he will not complete his “root-and-branch” review of the business until the autumn.
Chairman Alan Parker said the former Shop Direct boss had the “qualities, experience and the enthusiasm” to turn the business around and was satisfied with the timetable the chief executive has laid out.
Mothercare has been closing stores and developing its internet offer as part of a long-running effort to turn its UK business around. In May it recorded UK losses of £21.5m after annual sales fell by 7.5%. The group’s franchised-based international arm is now seen as the growth engine of the business and with 1,221 stores in 59 countries accounting for more than 60% of worldwide space and sales. In May, the division’s resilient performance helped the group post a 61% rise in underlying profits to £9.5m. Analysts at Oriel forecasts that Mothercare will report a pre-tax profit up 15.7% to £11m this year.
Mothercare’s board has twice rejecting takeover approaches valued at 300p a share from Philadelphia-based Destination Maternity, which has more than 1,900 retail sites.
Patrick Butler, chief executive of broker Prime Wealth Group said Mothercare was “still stressed financially” but that shareholders should hope for a firm offer “significantly north of £3 a share”.
UK takeover rules mean that Destination Maternity faces a deadline of 5pm on July 30 to come back with a firm offer. However, the US firm’s resolve to pursue a deal was thrown into doubt last week when it posted a 5.5% drop in third-quarter sales to 134m US dollars (£78.2m).
SSE will reveal the impact of its self-imposed energy freeze when it delivers a first-quarter trading update on Thursday.
Britain’s second largest energy supplier, which has around 9m customers, froze prices in March until January 2016, after putting up gas and electricity bills by 8.2% in October.
This freeze came only a day before energy watchdog Ofgem called for an investigation by the Competition and Markets Authority into the UK energy market.
Ofgem had earlier criticised the effectiveness of competition in the industry, which was backed by political pressure and public outrage over rising energy prices. The probe could take two years, and energy firms say this uncertainty will be a bar to investment in the industry.
Annual operating profits at SSE dropped in May by 32.2% to £246m though the wider group saw adjusted pre-tax profits rise 9.6% to £1.55billion.
SSE said the price freeze would lower profits, but that it would “streamline” its business to cover the shortfall. The company has announced 500 cuts and shelved four planned offshore wind farms. As a result, it hopes to make annual cost savings of £100m.