Sports Direct warns of €674m tax bill; House of Fraser issues 'terminal'
Thrice-delayed numbers reveal 6% fall in underlying earnings
Retailer says CFO to stand down in September
Updated : 18:40
Sports Direct finally revealed in after-hours trading that core earnings fell 6%, chief financial officer Jon Kempster was leaving the company, the Belgian tax authorities are demanding €674m and House of Fraser's problems are “terminal”.
Having thrice delayed the publication of results, which saw shares in the retailer all almost 4%, Sports Direct said group revenue had risen 10.2% to £3.7bn. Excluding acquisitions and on a currency neutral basis, revenue decreased by 1.9%
Underlying earnings before interest, tax, depreciation and amortisation fell to £287.8m from £306.1m a year earlier. Excluding House of Fraser, underlying EBITDA grew 10.9% to £339.4m.
Reported profit before tax was £179.2m, up 193.3% from £61.1m (restated from £77.5m) largely due to an £85.4m impairment of the company's investment in High Street retailer Debenhams in the previous year.
The company also said that problems at House of Fraser, which it acquired during the year, were “nothing short of terminal in nature”.
“Serious under investment in stores and appropriate support services, excessive and unsustainable outsourcing and financing, and selling brands to their Chinese parent shortly before administration are just some of the many problems faced,” said chief executive Mike Ashley in a statement.
At the bottom of the statement, the company revealed it had been given a bill of €674m, including 200% penalties and interest by the Belgian tax authorities after an audit.
They authorities had also asked for more information in relation to the tax treatment of goods being moved intra-group throughout the EU via Belgium.
"The payment notice is not a formal tax assessment but a 'proces verbal' whereby the group will enter a fiscal mediation in order to respond to the tax authorities questions and provide them with documentation," Sports Direct said.
"Accordingly, there could be no immediate recovery action. Sports Direct will investigate further...accordingly management believe... that it is less than probable that material VAT and penalties will be due in Belgium as result of the tax audit.