Sports Direct cleared by fraud watchdog in week it wins £220m financing
Thursday 10 March 2011
Sports Direct was given a clean bill of health by the Serious Fraud Office (SFO) yesterday, marking the latest inquiry to be dropped against the sportswear retailer.
In a further boost for Sports Direct, which is controlled by Newcastle United football club owner Mike Ashley, the sports equipment chain said it had secured a three-year £220m banking facility.
The retailer said that "no individuals connected to Sports Direct" were now under investigation by the SFO. The fraud watchdog said in October it would continue its investigation into individuals after clearing the retailer and JJB Sports, its troubled rival, at a corporate group level. Shares in Sports Direct jumped by 1.8p to 182p.
Matthew McEachran, an analyst at Singer Capital Markets, said: "Having already been given clearance as far as the company is concerned, this now concludes the saga and Sports Direct is no longer subject to investigation.
"This removes a potentially significant obstacle as far as the group's valuation is concerned and investors can now look ahead to the next two years of trading and growth initiatives with optimism. This includes the year to April 2013, which will be a double as far as sporting events is concerned, with both the Euro Championships and the London Olympics."
In March 2010, the Competition Commission also approved Sports Direct's acquisition of 31 stores from JJB Sports.
But Sports Direct and other retailers are still involved in a wider inquiry by the Office of Fair Trading into activities in the UK sports market.
Sports Direct said its new financing had the "normal associated banking covenants and the level of interest cost is dependent upon the group's level of borrowing and profitability". With its current level of debt, Sports Direct will pay an interest rate of 175 basis points over Libor, the interbank reference rate.
Dave Forsey, chief executive of Sports Direct, said: "The facility provides the group with ample funding to pursue its business and strategic objectives."
Sports Direct posted an 8.4 per cent rise in gross profit to £167m for the 13 weeks to 23 January. Total sales were up by 12.1 per cent to £416m over the period. Last month, Mr Forsey said its UK performance had continued to be "strong" since the end of January.
Sports Direct has benefited from the troubles of JJB Sports, which has been in trouble since September 2008. Last week, JJB unveiled its second company voluntary arrangement, an insolvency procedure, in as many years, through which it hopes to avoid collapse by offloading up to 89 stores.
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