Sports Direct delays results, warns on guidance
Sports Direct said it was delaying the publication of its preliminary results as it pointed to the "complexities" of integrating House of Fraser and warned that the guidance given back in December could be "materially" affected.
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The company will now publish the results - which were originally due this Thursday - between 26 July and 23 August.
It pinned the blame on the complexities of integrating the House of Fraser business it purchased last year and the current uncertainty over the future trading performance of this business. It also pointed to the "increased regulatory scrutiny" of auditors and audits including the FRC review of Grant Thornton's audit of its financial statements for the period to 29 April 2018.
As a result, Sports Direct has had to compile more information than in previous years for the audit of the period ended 28 April 2019, it said. Grant Thornton has also required additional time to complete its audit work leading to the delay in the publication of the results.
The retailer added that increased regulatory scrutiny is leading to longer lead times generally for the completion of audits.
"Sports Direct believes its accounts and their audit to be at an advanced stage. However there are a number of key areas to conclude on which could materially affect the guidance given in Sports Direct's announcement of 13 December 2018.
"Sports Direct would note that its core principles in regards to its financial statements are to be conservative, consistent and simple. This is an important element for the company and is even more relevant in an uncertain economic environment for UK retail generally."
In its interim results in December 2018, the company said it expected operating profits to grow between 5% and 15% excluding House of Fraser, and to be behind the previous year’s results including HoF.
At 0940 BST, the shares were down 11.3% at 233.75p.
Neil Wilson, chief market analyst at Markets.com, said: "Looking to the earnings, top line growth is expected to rise but profits are seen weaker as the cost of acquisitions weighs. Since reporting an 27% decline in underlying profits in the first half we’ve not heard a peep from Sports Direct on performance.
"The delay in delivering the annual results does not sit well with investors, who must be nervous about what it means. It seems likely it’s been a tough ride in the core Sports Direct retail division, whilst acquisitions have added nothing but increased costs."
Russ Mould, investment director at AJ Bell, said: "Traditionally a company delaying publication of its financial results has been a bad sign. It has often involved said company finding problems in their accounts and issuing a profit warning.
"In Sports Direct’s case, the delay to its results may not necessarily be bad news. There has been a growing trend this year for auditors to take longer to sign off the accounts, principally because they are under increasing pressure to make sure they don’t miss any nasty items and to ensure the audit is done properly.
"It stems from a succession of companies revealing major accounting flaws in recent years with auditors having initially failed to spot the issues. BHS and Patisserie are two examples where problems were originally missed.
"The Financial Reporting Council last week found that none of the big four auditors – EY, KPMG, Deloitte and PWC, met its 90% target of audits being assessed as good quality. A quarter of assessed audits were found to be below an acceptable standard.
"Sports Direct has blamed its delay on complexities with integrating House of Fraser into the group, uncertainty as to the future trading performance of this business, and increased regulatory scrutiny of auditors.
"Photo-Me last week delayed the publication of its accounts to give its auditor more time to complete its work. And in June Superdry delayed its results by a week so it could have more time to calculate an impairment provision as part of restructuring work."