* Sees core annual earnings 5 to 15% higher
* HY core earnings grow 22% to 181.2 mln stg
* Investors approve name change to Frasers Group
* Shares jump almost 30%
(Adds line on House of Fraser stores)
By Sarah Young
LONDON, Dec 16 (Reuters) - Sports Direct forecast
core earnings growth of as much as 15% this financial year
helped by a nascent turnaround at department store House of
Fraser, as investors backed a plan to change the group's name to
Frasers Group Plc.
Problems integrating House of Fraser, which Sports Direct
bought out of administration last year, have dragged on the
group's earnings, with founder, CEO and controlling shareholder
Mike Ashley saying previously that the 90 million pound ($115.47
million) purchase may have been a mistake.
For the 12 months to April 26 2020, Sports Direct said it
expects underlying core earnings (EBITDA) to grow between 5% and
15% to between 356 million pounds and 390 million pounds from
the 339 million pounds it made in the previous year.
Shares in the company soared by almost 30%, hitting their
highest in nearly four years.
Sports Direct had declined to give forward-looking guidance
in July, blaming the uncertain impact of House of Fraser on its
bottom line.
But on Monday it said it had stemmed losses at the
department store chain by rectifying mistakes made by its
previous management, cutting costs and changing the product mix
to one that generated higher margins.
"We are starting to see the green shoots of recovery as we
continue to integrate the business into the group,"
non-executive chairman David Daly said in a statement.
The company said that despite the improving performance, a
number of House of Fraser stores were financially unsustainable
and some were likely to shut.
PREDICTABLE MARKET
Liberum analysts called the first half-results very strong
and said that given the outlook, Sports Direct's market
capitalisation was too low.
The group's name change, which is expected to take effect
later on Monday, reflects a wider retail offering which includes
new Frasers luxury lifestyle stores.
Losses in the premium unit, which in addition to House of
Fraser includes upmarket fashion store Flannels, narrowed to 5.6
million pounds in the half year to Oct. 27 from 29 million
pounds a year earlier.
A 71% rise in earnings in its European retail business also
helped boost half-year results.
Sports Direct said the clear outcome of Britain's
parliamentary election last week would make the market more
predictable, while cost savings at the group, which has recently
added Game Digital UK, Evans Cycles and Sofa.com to its
portfolio, would help boost profits.
Underlying earnings (EBITDA) including acquisitions for
first half rose 22% from a year earlier to 181.2 million pounds.
The group repeated its belief that it would not be on the
hook for any "material liabilities" from a 674 million euro bill
from Belgium's tax authorities and that it was seeking a
resolution as soon as possible.
Some 62% of Sports Direct is owned by Ashley, who also owns
Premier League soccer club Newcastle United. His relationship
with investors has been rocky recently after a series of
missteps over corporate governance and employment.
($1 = 0.7794 pounds)
(Reporting by Sarah Young; editing by Kate Holton, Kirsten
Donovan)
