ANNUAL REPORT & ACCOUNTS 2019 - Sports Direct

ANNUAL REPORT & ACCOUNTS 2019

SPORTS DIRECT INTERNATIONAL PLC

AT A GLANCE

Founded as a single store in 1982, Sports Direct International plc (Sports Direct, the Group, the Business or the Company) is today the UK's largest sporting goods retailer by revenue. The Group operates a diversified portfolio of sports, fitness, fashion and lifestyle fascias in over 20 countries. We have approx. 29,400 staff across six business segments: UK Sports Retail, Premium Lifestyle, House of Fraser Retail, European Sports Retail, Rest of World Retail and Wholesale & Licensing. Our business strategy is to invest in our people, our business, and our key third party brand partners, in order to elevate our retail proposition across all our channels to attain new levels of excellence.

The Group aspires to be an international leader in sports, lifestyle, and luxury apparel retail, by offering our customers a dynamic range of iconic brands. We value our people, our customers, our shareholders and our third-party brand partners - and we strive to adopt good practices in all our corporate dealings. We are committed to treating all people with dignity and respect. We endeavour to offer customers an innovative and unrivalled retail experience. We aim to deliver shareholder value over the medium to long-term, whilst adopting accounting principles that are conservative, consistent and simple.

MISSION STATEMENT

`TO BECOME EUROPE'S LEADING ELEVATED SPORTING GOODS RETAILER.'

CONTENTS

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HIGHLIGHTS AND OVERVIEW

002

2 STRATEGIC REPORT

Chair's Statement 005 Our Business 008 Workers' Representatives' Report011 Chief Executive's Report and Business Review012 Financial Review028 Non-Financial Information032 Corporate Social Responsibility Report033 Risks and Uncertainties Relating to the Group's Business040

3 GOVERNANCE

The Board046 Directors' Report048 Corporate Governance Report054 Directors' Remuneration Report065 Directors' Responsibilities074 Viability Statement075

4 GROUP FINANCIAL STATEMENTS

Independent Auditor's Report to the Members of Sports Direct International plc076 Consolidated Income Statement088 Consolidated Statement of Comprehensive Income089 Consolidated Balance Sheet 090 Consolidated Cash Flow Statement091 Consolidated Statement of Changes in Equity092 Notes to the Financial Statements094

5 COMPANY FINANCIAL STATEMENTS

Company Balance Sheet160 Company Statement of Changes in Equity161 Notes to the Company Financial Statements162

6 GROUP INFORMATION

Consolidated Five Year Record 167 Company Directory168 Shareholder Information169

HIGHLIGHTS

? Group revenue increased by 10.2% Excluding acquisitions and on a currency neutral basis, revenue decreased by 1.9%

? UK Sports Retail revenue increased by 0.3% Excluding acquisitions, revenue decreased by 2.9% UK Sports Retail like-for-like stores gross contribution was down 1.6%(1)

? European Sports Retail revenue decreased by 5.9% Currency neutral revenue decreased by 5.5% European Sports Retail like-for-like stores gross contribution was up 0.9%(1)

? Premium Lifestyle Retail revenue increased by 26.3%, due to an increased store portfolio and online sales

? Group gross margin increased to 42.8% from 39.7%, largely due to price resetting, prior year increased inventory provisions and prior year acquisition accounting for Bob's Stores and Eastern Mountain Sports

? Group underlying EBITDA(2) decreased by 6.0% to ?287.8m Excluding House of Fraser, underlying EBITDA grew 10.9% to ?339.4m

? Free cash flow (pre-capex) down to ?273.3m compared to ?326.2m in the prior year(3)

? Reported profit before tax was ?179.2m, up 193.3% from ?61.1m (restated from ?77.5m) largely due to an ?85.4m impairment of our Debenhams strategic investment in the prior year

? Underlying profit before tax increased by 5.0% to ?143.3m from ?136.5m (restated from ?152.9m) Excluding current year and prior year acquisitions, underlying profit before tax increased by 50.7% to ?205.7m

? Reported earnings per share grew by 468.4% to 21.6p, from 3.8p (restated from 4.6p) Underlying basic earnings per share decreased by 7.9% to 17.6p(2)

? Reported profit after tax was ?116.0m up 400.0% from ?23.2m (restated from ?27.6m) Underlying profit after tax was ?91.5m (FY18: ?100.6m, restated from ?96.2m)

? Net debt decreased to ?378.5m (?397.1m at 29 April 2018)(4), with acquisitions and investment in property funded by a strong free cash flow

(1) Figure is on a 52 week currency neutral basis and with a consistent year on year inventory provision used. (2) Underlying EBITDA, underlying profit before taxation and underlying EPS exclude realised foreign exchange gains / losses in selling and administration costs, exceptional costs, and the profit / loss on disposal of

subsidiaries, strategic investments and properties. Underlying EBITDA also excludes Share Scheme charges. (3) Underlying free cash flow is defined as operating cash flow after working capital, made up of underlying EBITDA plus realised foreign exchange gains and losses, less corporation tax paid. (4) Net debt is borrowings less cash and cash equivalents held.

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Highlights & Overview

UK SPORTS RETAIL

59.2% Total Group Revenue ?2,187.3m Up 0.3% UK Sports Retail includes core sports retail store operations in the UK, plus all the Group's sports retail online business globally, the Fitness Division, the Group's Shirebrook campus operations, Heatons Northern Ireland stores, as well as the Evans Cycles business acquired in the year. Our store footprint is significant, with approx. 540 stores plus additional concessions across the UK, totalling approx. 5.6m sq. ft. in retail space. The majority of stores are operated under the and USC fascias.

PREMIUM LIFESTYLE

5.5% Total Group Revenue ?204.8m Up 26.3% The Group's Premium Lifestyle division offers a broad range of clothing, footwear and accessories from leading global contemporary and luxury retail brands through our fascias in the UK: Flannels, Cruise and van mildert. Each fascia operates as a multi-brand premium retail destination and is focused on providing fashion conscious shoppers with high-end and on trend products. The segment is supported by our Group-wide centralised commercial and support functions, giving the benefit of scale and operating efficiencies to each fascia. The segment is a significant part of the Group's new generation retail concept and as such, in certain locations, Premium and Lifestyle stores are co-located alongside our Sports retail stores to benefit from increased customer footfall and operating synergies.

HOUSE OF FRASER RETAIL

8.9% Total Group Revenue ?330.6m On 10 August 2018, the Group acquired the trade and assets of House of Fraser, including the brand, inventory, certain property, plant and equipment, the right to trade from 59 stores and all the staff. The acquisition of the Dundrum, ROI store completed in October 2018. The Group has spent the post-acquisition period working with staff, suppliers, concessionaires and landlords to create a viable business which we believe can be a core part of the elevation strategy of the Group in the medium to long-term. As at 28 April 2019, we are still operating out of 54 stores, totalling approx. 4.6m sq. ft. in retail space. The stores are operated under the Frasers and House of Fraser fascias.

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