UK’s Sports Direct delayed financial results reveal £605m tax bill from Belgium

Shares in the company fell after its results were delayed for a second time on Friday

FILE PHOTO: Mike Ashley, founder and majority shareholder of sportwear retailer Sports Direct, arrives at the company's AGM, at the company's headquarters in Shirebrook, Britain, September 7, 2016. REUTERS/Darren Staples/File Photo
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Mike Ashley’s Sports Direct delayed financial results revealed it has been issued with a £605m tax bill from Belgium.

The results were first due on July 18, but were delayed until July 26, with the company citing complexities related to its takeover of British retail chain House of Fraser.

On Friday their release was delayed a second time by a further 10 hours.

They revealed core earnings were down by 6 per cent and the firm said it regretted buying House of Fraser.

Sports Direct said: "On a scale out of 5, with 1 being very bad and 5 being very good, House of Fraser is a 1.

"If we had the gift of hindsight we might have made a different decision in August 2018."

The group said on Friday it made underlying earnings before interest, tax, depreciation and amortisation (EBITDA) of £287.8 million pounds ($356.4 million) in the year to April 28.

Excluding House of Fraser, underlying EBITDA rose 10.9 per cent to £339.4 million pounds - within the guidance Sports Direct issued in December of a 5 per cent to 15 per cent improvement.

The results statement also revealed Sports Direct had received a £605 million payment notice from the Belgian tax authorities.

Sports Direct said the notice is not a formal tax assessment but a "process verbal" whereby the group will enter a mediation in order to respond to the authorities' questions and provide them with documentation.

It said it believed that it is "less than probable" that material VAT (sales tax) and penalties will be due in Belgium as result of the audit.

Sports Direct's results were originally due on July 18, but the company and its auditor Grant Thornton needed more time to prepare the accounts.

They were re-scheduled for 0600 GMT on Friday but, after further delays, not released until 1620 GMT.

The group also said its finance chief Jon Kempster would step down in September.

Some 62 per cent of the group's equity is owned by Mr Ashley, its founder and chief executive, who also owns Premier League soccer club Newcastle United. Its shares have fallen 44 per cent over the last year.

The results delay is the latest in a long list of missteps by Sports Direct and Ashley that have severely tested the firm's relationship with investors.

They have been critical of its corporate governance and employment practices.

Last year Ashley said he had been "stabbed in the back" by investors who had failed to support his board.

Since Sports Direct floated in 2007, there has been periodic speculation that Ashley might take the firm private.

Analysts have been critical of the delays. "This is no way to run a public company," independent retail analyst Nick Bubb told Reuters, while Neil Wilson, chief market analyst for Markets.com, told the BBC the delays were "a total and utter shambles".

Mr Ashley, who has the controlling share of Sports Direct, has overseen a several acquisitions over the last 18 months, including Evans Cycles, House of Fraser and Sofa.com.

Sports Direct bought House of Fraser out of administration last year for £90 million (Dh 411m).

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