Dave Forsey Chief Executive 19 July 2012 - Sports Direct International

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78 / FINANCIAL STATEMENTS AND NOTES notes to the Financial Statements For the 53 weeks ended 29 April 2012 2. Critical accounting estimates and judgements Continued Useful economic life of intangible assets For intangible assets which have a finite life, the directors revisit their estimate of useful economic life at each period end and revise accordingly. Licences and trade marks typically have a life of between 10 and 15 years. Identification and valuation of acquired intangible assets On acquisition, each material separable intangible asset is identified and valued by the directors with assistance from a professional third party. Any such calculation is judgemental in nature as it is based on a valuation methodology. Brand valuations are typically valued using the relief from royalty valuation methodology. The nature and carrying amounts of these assets are set out in Note 15. Provision for obsolete, slow moving or defective inventories The directors have applied their knowledge and experience of the sports retail industry in determining the level and rates of provisioning required in calculating the appropriate inventory carrying values. The nature and carrying amounts are set out in Note 18. Financial position of retirement benefit plans The net defined benefit pension plan assets or liabilities are recognised in the Group’s balance sheet. The determination of the financial position requires assumptions to be made regarding inter alia future salary increases, mortality, discount rates and inflation. The key assumptions made in relation to the pension plan are set out in Note 24. 3. Financial risk management The Group’s current activities result in the following financial risks and set out below are management’s responses to those risks in order to minimise any resulting adverse effects on the Group’s financial performance. Foreign exchange risk The Group is exposed to foreign exchange risk principally via: a. Transactional exposure from the cost of future purchases of goods for resale, where those purchases are denominated in a currency other than the functional currency of the purchasing company. Transactional exposures that could significantly impact the income statement are hedged. These exposures are hedged via forward foreign currency contracts which are designated as cash flow hedges. The notional and fair value of these contracts is shown in Note 27. b. Net investment exposure, from the fair value of net investments outside the UK. The Group hedges its international investments via foreign currency transactions and borrowings in matching currencies. Provision for dilapidations and onerous lease contracts The basis of the estimation of the provisioning for dilapidations and onerous lease contracts is detailed in the provision accounting policy and Note 26. Estimates and judgements are continually evaluated and are based on historical experience, external advice and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Provision for costs relating to regulatory enquiries and other legal disputes Provision has been made for legal costs incurred in the current and previous period relating to ongoing regulatory enquiries and other legal disputes. Calculation of Bonus Share Scheme charge A share-based payment charge is recognised in respect of share awards based on the Directors’ best estimate of the number of shares that will vest. The charge is calculated based on the fair value on the grant date, which is deemed to be the date on which the entity and counterparty reached a shared understanding of the scheme. The key details in respect of the share scheme charges are set out in Note 21. c. Loans to non-UK subsidiaries. These are hedged via foreign currency transactions and borrowings in matching currencies, which are not formally designated as hedges, as gains and losses on hedges and hedged loans will naturally offset. Interest rate risk The Group has net borrowings, which are principally at floating interest rates linked to bank base rates or LIBOR. The Group does not use interest rate financial instruments to hedge its exposure to interest rate movements. The Group regularly monitors and reacts accordingly to any exposure to fluctuations in interest rates and the impact on its monetary assets and liabilities. Credit risk The directors have a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. Credit evaluations are performed on all customers requiring credit over a certain amount. The Group does not require collateral in respect of financial assets.
At each balance sheet date, there were no significant concentrations of credit risk. The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the balance sheet. Investments of cash surpluses, borrowings and derivative instruments are made through banks and companies which must fulfil credit rating and investment criteria approved by the Board. 4. Segmental analysis Liquidity risk The availability of adequate cash resources is managed by the Group through utilisation of its revolving bank and other facilities together with equity and retained profits thereby achieving continuity of funding and short-term flexibility. Operating segments The chief operating decision maker has been identified as the executive directors. The executive directors review the Group’s internal reporting in order to assess performance and allocate resources, across each operating segment. The operating segments are Retail and Brands which are reported in a manner consistent with the internal reporting to the executive directors. The Retail business segment comprises the retail network of stores and the Brands business segment comprises the identification, acquisition, development and trading of a portfolio of internationally recognised sports and leisure brands. Segment information about the business segments is presented below. Segmental information for the 53 weeks ended 29 April 2012: UK total International Total Total Retail (£’000) Brands (£’000) Eliminations (£’000) Total (£’000) Sales to external customers 1,482,834 157,003 1,639,837 195,919 1,835,756 Sales to other segments - - - 3,291 (3,291) Revenue 1,482,834 157,003 1,639,837 199,210 (3,291) 1,835,756 Gross profit 595,338 68,115 663,453 80,823 - 744,276 Operating profit before foreign exchange and exceptional items 132,637 4,229 136,866 18,325 - 155,191 Operating profit 131,297 4,029 135,326 23,469 158,795 Other investment costs (5,800) Finance income 6,426 Finance costs (8,481) Share of loss of associated undertakings and joint ventures 558 Profit before taxation 151,498 Taxation (45,867) Profit for the period 105,631 Sales to other segments are priced at cost plus a 10% mark-up. 79
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Dave Forsey Chief Executive 19 July
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Sports Direct is the UK’s leading
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financial highlights The Financial
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Further expansion of the Internatio
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fascias As at 29 April 2012 the Gro
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Online revenue (£’m) FY09 15.1 F
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Firetrap The Group made acquisition
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onus share scheme key performance i
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Our Business Model The Group’s fi
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Key performance Indicators The Grou
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Review by business segment Retail R
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uk store portfolio 29 April 2012 24
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international store portfolio 29 Ap
Page 27 and 28: tennis cricket outdoor winter sport
Page 29 and 30: During the year we combined fashion
Page 31 and 32: 31 Eoin Morgan Slazenger Brand Amba
Page 33 and 34: Area Risk Mitigation Market Forces
Page 35 and 36: 35 Fernando Verdasco Dunlop Brand A
Page 37 and 38: 37 Lee Westwood and Darren Clarke D
Page 39 and 40: Ebitda and profit before tax EBITDA
Page 41 and 42: The items adjusted for arriving at
Page 43 and 44: Cash flow and net debt Net debt dec
Page 45 and 46: Simon Bentley (aged 57) Senior Inde
Page 47 and 48: Shareholders No shareholder enjoys
Page 49 and 50: Going concern The Group’s busines
Page 51 and 52: Presentations are also given on bus
Page 53 and 54: Audit Committee Attendance at meeti
Page 55 and 56: Code of securities dealing The Comp
Page 57 and 58: Executive Bonus Share Scheme The Ex
Page 59 and 60: Directors’ emoluments An analysis
Page 61 and 62: Corporate Responsibility Report Mee
Page 63 and 64: Environment The Group is aware that
Page 65 and 66: official T-Shirt retailer for Sport
Page 67 and 68: Independent auditor’s report to t
Page 69 and 70: consolidated statement of comprehen
Page 71 and 72: consolidated cash flow statement Fo
Page 73 and 74: notes to the Financial Statements F
Page 75 and 76: Government grants and similar incom
Page 77: Employee Benefit Trust The cost of
Page 81 and 82: Other segment items included in the
Page 83 and 84: 8. Employee costs The average month
Page 85 and 86: 13. Earnings per share from total a
Page 87 and 88: 15. Intangible assets Cost Goodwill
Page 89 and 90: Associates The business activity of
Page 91 and 92: The administrator of KSF appealed t
Page 93 and 94: Contingent share awards The Executi
Page 95 and 96: 24. Retirement benefit obligations
Page 97 and 98: The movements in the present value
Page 99 and 100: Loans and payables (£’000) Liabi
Page 101 and 102: Interest rate sensitivity analysis
Page 103 and 104: 30. Cash inflow from operating acti
Page 105 and 106: 35. principal subsidiary undertakin
Page 107 and 108: company balance sheet Fixed assets
Page 109 and 110: 2. Investments Shares in Group unde
Page 111 and 112: consolidated five year record Unaud
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Dave Forsey Chief Executive 19 July 2012 - Sports Direct International

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