Sports Direct profits hit by sterling collapse but Ashley still buys jet
Profits at scandal-hit Sports Direct have taken a hammering following the collapse in sterling - but it has not stopped billionaire owner Mike Ashley splashing out on a new corporate jet.
The retailer said that underlying earnings plunged 33.5% to £145.3 million in the first half of the year, slumping even further on a pre-tax basis, by 57% to £71.6 million.
The group, which has endured a long list of controversies over the past months, compounded its PR problems by failing to hedge against the fall in the value of the pound in the immediate aftermath of the EU referendum.
Mr Ashley said: "The last six months have been tough for our people and performance. Our UK Sports Retail business continues to be the engine of Sports Direct, but our results have been affected by the significant deterioration in exchange rates, and our assessment of our risk relating to our stock levels and European stores performance."
The company said revenue rose 14% to £1.6 billion, but warned of a challenging environment which the firm expects to continue into the "foreseeable future".
Nevertheless, the half year results also reveal that, in order to "facilitate efficiencies", Sports Direct will be taking delivery of a corporate plane in the coming weeks at a cost of £40 million. This adds to a helicopter which is already used by "senior management, employees and our business partners on a regular basis".
The news comes after a string of controversies for the firm which has seen Mr Ashley hauled before MPs to be grilled over working conditions, the company host a tumultuous "open day" at its headquarters, and its chief executive Dave Forsey quit - only to be replaced by Mr Ashley.
Mr Ashley sought to address the shambolic year through the trading statement, claiming again that he would like Sports Direct to become the "Selfridges of sports retail".
"What matters most to me is how tough the last year has been for the people who work at Sports Direct. Our people have once again found themselves in the spotlight through no fault of their own, yet they remain hard-working and loyal.
"It is for this reason that my immediate priority will be to protect the people at Sports Direct," he said.
But chairman Keith Hellawell, a former police chief, lashed out at what he called an "extreme" campaign against the company and said it was affecting performance.
"I have no doubt that the extreme political, union and media campaign waged against this company has not only damaged its reputation and influenced our customers, it has impacted negatively on the morale of our people. I begin to question whether this intense scrutiny is all ethically motivated."
He also made overtures to one of the firm's tormentors, Labour MP Iain Wright, who is heading up a parliamentary inquiry into the retailer. Mr Wright has been offered the "opportunity to attend Shirebrook to meet with a representative sample of 500 of our workforce in order to get a balanced view of life at the company".
The invitation comes after MPs said in November that they had discovered an undercover recording device during an unannounced visit to the Derbyshire warehouse.
Despite the Financial Reporting Council announcing an investigation into Sports Direct over the retailer' s relationship with a firm owned by the tycoon's brother, the company said it has entered into an agreement with Double Take Limited, in which Matilda Ashley, Mike Ashley's daughter, is a director.
Double Take will license Sports Direct exclusive rights to the cosmetic brand Sport.
Referring to the controversy over working practices at its warehouse in Shirebrook - where it was revealed that some employees were paid below the national minimum wage - the company said staff morale has suffered.
Sports Direct added that demand from workers to move from zero-hours contracts to full employment is "low", but it is exploring arrangements which "may prove more attractive".
The retailer has also been condemned by shareholders over its corporate governance practices. To this end, the company has announced the appointment of a new non-executive director, David Brayshaw.
A former banker, Mr Brayshaw has held jobs at the likes of Barclays, HSBC and Citigroup.
Shares in Sports Direct slumped 8% in morning trading.
George Salmon, equity analyst at Hargreaves Lansdown, said: "In addition to a new plane to go with the corporate helicopter, Mike Ashley is spending £300 million on the group's store estate.
"He's also moving the focus away from discounts and towards higher quality promotion of desirable brands, evidenced by new deals with Nike and Adidas. Success here could change things, but for now conditions remain challenging and profits have again been revised downwards."
Meanwhile, the retailer will now have to disclose details on the performance of its international stores when reporting results following a separate Financial Reporting Council probe.