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Sports Direct profits fall a whopping 91 per cent

It certainly seems to be raining shit on Newcastle at the moment. Not only do they prepare themselves for the forthcoming Championship season with an uncertain management team, a restless squad and a dreadful away strip, but owner Mike Ashley has taken a fiscal pounding thanks to his underperforming sportswear chain.

Sports Direct, the company in which the rotund businessman owns a 71 per cent share, has suffered a 91 per cent fall in pre-tax profits. Earnings fell from £118.9m to £10.7m this year, even though revenues topped £1bn and sales were up 5.1 per cent.

The huge downturn is a result of the collapse of Icelandic bank Kaupthing Singer & Friedlander (KSF) - the very same organisation that ruined former West Ham owner Bjorgolfur Gudmundsson. The collapse caused the sports retailer to write-off a staggering £53.1 million of shares, which is an awful lot of hoodies and baseball caps. The Times explains:

The write-down arose because the shares were held on Sports Direct’s behalf by KSF, and partly financed by the now stricken Icelandic bank. When KSF went into administration on October of last year, the shares it bought on behalf of Mr Ashley were frozen.

Sports Direct said it was “in dispute” with KSF’s administrators, Ernst & Young, as to the true ownership of the shares. But, while that battle continues, the retailer said that it had to take account the fact that it did not have full control over the shareholdings.

Sports Direct finished the financial year with a net debt of £431m, and shareholders were delighted to hear that their final dividend has been scrapped in order to save £21m.

While the fall in profits is devastating news for Mr Ashley, it could be viewed as positive news for the Toon Army. With so few pennies lining his coffers, the maligned owner could be forced to accept a much lower offer for the club in the very near future…

Posted: July 16th, 2009 by admin |