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Sports Direct has reported a 27% fall in profits for the half-year period ending 28 October as it counts the cost of its acquisition of embattled department store chain House of Fraser.
During the period, the company that also owns USC, Flannels, and Evans Cycles reported underlying profit before tax of £64.4m, down 26.8% from £88m the previous year. Sports Direct said House of Fraser had notched up a loss of £31.5m since it was acquired in August for £90m.
This is despite group revenue having increased by 4.5% to £1.79bn, with House of Fraser’s revenue since the acquisition totalling £70.1m. The group also said it had injected £70m into the department store’s supply chain.
Chief executive of Sports Direct Mike Ashley said excluding House of Fraser he anticipates Sports Direct will be “within our previously communicated underlying EBITDA growth range of 5-15% by year-end”, however added that including House of Fraser it is expected to be “behind last year’s result”. Ashley also admitted that he faced “significant challenges” turning around its fortunes.
He said: “During the reporting period we acquired the trade and assets of House of Fraser and I would like to welcome my new colleagues to the Sports Direct Group. I have made my views clear that I believe the previous House of Fraser senior management team traded the business whilst it was insolvent for a long time, this means we have significant challenges ahead in turning House of Fraser around.
“However, I genuinely believe we have acquired a fantastic opportunity and with the efforts of Sports Direct and House of Fraser teams, and the support of the brands, local councils and landlords, we can turn House of Fraser into the Harrods of the High Street.
He added: “Outside of the House of Fraser acquisition the Sports Direct Group has had another successful period reporting a 15.5% growth in underlying EBITDA to £180.3m. This is impressive in the context of the current struggles in the high street and shows our elevation strategy continues to go from strength to strength.”
