LONDON: Sports Direct International Plc plunged after the UK retailer reported an unexpected tax bill of almost US$750 million and deepening woes at its House of Fraser department-store chain, along with the departure of its financial chief.
The litany of problems, including a fall in full-year profit, rekindled investors’ concerns about corporate governance at the sporting-goods retailer.
The shares fell as much as 28% early Monday in London, the most since their 2007 listing, paring losses to 7.7% at 8.55am.
The report from billionaire Mike Ashley’s flagship company came Friday after markets closed in London, more than 10 hours after it was expected.
It had already been postponed nearly two weeks to allow more time to compile the information. Chief financial officer Jon Kempster will step down, the company said, to be replaced by deputy CFO Chris Wootton.
Kempster “came in during a transitionary period and his knowledge and experience has helped to guide the group through this stage in its development,” according to the statement.
Retailers across the UK are closing stores and scaling back as merchants have been hit by the shift to online shopping and consumer uncertainty over Brexit.
Investors have been concerned that Ashley, the retailer’s colourful founder and CEO, has been too occupied with trying to buy smaller downtown chains like Debenhams, which he’s now battling in court.
Underlying earnings before interest, taxes, depreciation and amortisation fell 6% to 288 million pounds (US$320 million), the company said.
House of Fraser, the ailing department-store chain Ashley acquired last year, had a loss of 52 million pounds for the year. Without that impact, group earnings would have grown, the company said.
“Buying House of Fraser was like buying a broken-down car at the end of the road,” Ashley said at a press conference. “In the short term, I regret it. In the medium term, the jury’s still out, and in the long term, I’d like to think we’re hopeful.”
The company plans to close a number of House of Fraser stores this year, he said.
The company didn’t pay a dividend during the year and said it won’t declare a final dividend. Sports Direct said it will buy back 30 million pounds worth of shares through Sept 10.
Sports Direct also said it received a payment notice for 674 million euros (US$749 million) after an audit of its taxes in Belgium. The company will enter mediation to respond to authorities, according to the statement.
Meanwhile, if new M&A openings arise, Ashley said the company would consider them, despite recent troubles.
“If opportunities come along, even without bandwidth, we’ll probably be over-brave and still do them,” he said. “It’s in our DNA.”