Sports Direct International (SDI), the leading British sports retailer and wholesaler, lifted its sales by 13.2 percent to £267.6 million (€328.2m-$434.2m) in the nine weeks ended on March 25. The company's trading update further showed a 13.5 percent rise in gross profit to £99.8 million (€122.4m-$161.9m).
The sales increase was driven by SDI's retail unit, which saw its sales advance by 16.1 percent to £232.6 million (€285.3m-$377.4m) for the nine weeks, driven by improving U.K. sales, particularly online. The gross profit of the retail unit jumped by 15.1 percent to £85.4 million (€104.7m-$138.6m), excluding the fashion stores acquired by SDI.
Since the performance was ahead of the management's expectations, it suggested an upgraded “super-stretch” bonus for Mike Ashley, SDI's founder and largest shareholder: He could be granted eight million shares, two million more than in the previous scheme, if the company met ambitious underlying Ebitda targets for each of the next three years.
Worth about £23.5 million (€28.8m-$38.1m) at the current share price, and to be released in 2018, the shares would be attributed to Ashley if SDI's Ebitda reached £270 million (€331.2m-$438.1m) before financial charges for the full fiscal year 2013, £290 million (€355.7m-$470.5m) for the second year, and £340 million (€417m-$551.7m) for the following year. The company's net debt to equity ratio would have to stand at 1.5 times or less for the fiscal year 2015.
The upgrade is to be submitted to the approval of SDI's shareholders in September. It comes after SDI confirmed a few weeks ago that it would reach the target set at £215 million (€263.7m-$348.9m) for its Ebitda in the fiscal year ending on April 29 for its employee bonus scheme, and an initial “super-stretch” target of £225 million (€276m-$365.1m) in Ebitda.
The achievement will see more than 2,000 employees receiving 25 percent of their salary in shares this summer and another 75 percent of their salary in the summer of 2013. This amounts to an average of 5,000 shares this year and another 12,000 shares next year. At the current share price, these 17,000 shares amount to a bonus worth an average of almost exactly £50,000 (€61,327-$81,130) – provided the relevant employees are still in employment at the time. The upgrades suggested for Mike Ashley do not apply for other employees.
The founder and executive deputy chairman of Sports Direct already owns a stake of just below 70 percent in the company, which is currently worth nearly £1.2 billion (€1.47bn-$1.9bn). The company points out that Ashley has not received any salary since it went public in 2007, although he has been deeply involved in its management.
The proposal is not exactly aligned with the restraint currently advised in some corporate quarters – then again, SDI said the extra amount that attributed to Ashley would make little difference to his personal wealth and should therefore chiefly be regarded as a stimulant for the entire company. Ashley pledged not to vote on the proposal at the general assembly. The company will announce its preliminary results for the year to April 29 on July 19.
