Dec 17, 2008
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Sports Direct says on track to meet FY hopes

Dec 17, 2008

* H1 underlying EBITDA 89.8 mln pounds

* H1 div cut to 1.22 pence

* Says "back to basics" strategy working

* Says comfortable with FY EBITDA hopes of 135 mln pounds

* Shares up 10.5 pct at 1015 GMT

(Adds detail, CEO, analyst comment, updates shares)

By James Davey

LONDON (Reuters) - Britain's biggest sporting goods retailer Sports Direct International Plc posted a better-than-expected 7.4 percent increase in first-half underlying earnings and said it was on track to meet market expectations for the full-year.

"With the economic situation and trading environment likely to remain extremely difficult, our back to basics strategy is working for us," Chief Executive Dave Forsey said on Wednesday.

"The board remains comfortable with underlying EBITDA (earnings before interest, tax, depreciation and amortisation) expectations of 135 million pounds ($210.2 million) for the full year [to end-April] 2009," he added. In the previous year Sports Direct made 150 million pounds.

But the company, 71 percent-owned by Newcastle United soccer club owner Mike Ashley, cut its interim dividend payout by 41 percent to 1.22 pence and flagged a 19 percent cut for the full-year.

Shares in the group rose 10.5 percent after it said it made underlying EBITDA of 89.8 million pounds for the 26 weeks to Oct. 26, compared to analyst forecasts of about 82 million pounds and 83.6 million pounds in the same period last year.

Sports Direct, which owns Sports World and Lillywhites stores as well as brands such as Slazenger, Lonsdale and Dunlop, said group revenue increased 2.9 percent to 687.7 million pounds, while its profit margin increased 10 basis points to 43.4 percent.

Forsey said the group had traded in line with expectations since the end of October.

The group said it was benefiting from better relationships with third party brands, such as Nike, Adidas and Umbro, supply chain efficiencies and tight control of costs and stocks.

The group ended the period with net debt up 2.8 percent to 478.3 million pounds but said it continued to operate well within its bank covenants.

Philip Dorgan, analyst at Panmure Gordon, said the interim results represented "A small step on the road to the restoration of credibility."

"The company professes itself to be happy with consensus EBITDA of 135 million pounds (we are on 112 million) but, given that depreciation and amortisation rose by 25 percent, then it is really flagging a 20 percent fall in EBIT for the year."

Sports Direct floated at 300 pence in Feb. 2007 but has since issued three profit warnings. Its share price has lost 88 percent since and it is still without a permanent chairman 18 months after David Richardson quit, having decided he could not work with Ashley, who made 929 million pounds from the float.

In October Sports Direct disclosed a 22 percent interest in struggling rival JJB Sports . It also holds stakes in JD Sports Fashion Plc and Blacks Leisure Group Plc .

The group said on Wednesday it had written down the value of its holdings by 27 million pounds.

Forsey declined to comment on Sports Direct's intentions regarding JJB. At 1015 GMT shares in the group were up 3.75 pence at 39.5 pence, valuing the business at 222 million pounds.

(Reporting by James Davey; Editing by Hans Peters and Victoria Bryan)

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