The group reports promising results despite difficult market conditions
Sports Direct (SPD) delivers early Christmas present to investors
- Group reports 52% rise in underlying profits before tax, due to improvements at House of Fraser's premium lifestyle brand and European Retail divisions
- Proceeds from disposals sees group reduce net debt figure to £254mn from £505mn reported in H1 2019
- Market welcomed results with shares rising 10% in early trading
- Outlook remains positive with underlying earnings for the full year forecasted to grow by 5-15%
- Recommendation: we don’t currently have a view on the stock, however for contrarian investors looking to gain exposure to the retail sector; shares would be suitable for investors willing accept medium-high risk.
Overall, these results are extremely promising for a group operating in a difficult market environment and one that has suffered well publicised controversy in recent years. Despite expenditure set to increase in the second half as the group completes a final bullet payment for House of Fraser, free cash flows remain strong which will help offset some of the cost impact. At the same time, seasonality issues are being addressed and it is no surprise investors are excited at this prospect. Improved margins and a more diversified product base should help boost the group and could be a fresh pillar for growth moving into the future.
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