THOUSANDS of Sports Direct workers will share in a £150 million bonus scheme after the retailer yesterday posted a surge in profits, but also cut current year targets after admitting expansion plans had fallen short.
Employees eligible for the award will receive the first tranche of shares in September, although the scheme only applies to 2,000 of the retailer’s 27,000-strong workforce.
It comes after the group met the last of a series of targets set under a 2011 bonus plan, as underlying earnings rose 15.7 per cent to £383.2m for the year ended 26 April. Pre-tax profits rose 30.9 per cent to £313.4m.
Chief executive Dave Forsey said the “solid set of results” came despite performance being hit by England’s early exit from the World Cup and mild weather in the autumn reducing footfall at stores.
But the group – which is controlled by Newcastle United owner Mike Ashley – admitted that during the year “planned acquisitions… did not materialise”.
Sports Direct bosses have now decided that a target under the bonus scheme for underlying earnings of £480m in 2015-16 was “unreasonably challenging” and cut it to £420m.
The retailer has been criticised over its employment practices for casual workers, though chairman Keith Hellawell said “much of the comment regarding the group’s use of zero hours contracts has been unfounded and inaccurate”.
He added: “We comply fully with all legal requirements which relate to casual workers, including sick pay, holiday pay, and freedom to gain other employment. Casual workers also participate in general incentive schemes.”
Hellawell said the group’s share bonus schemes were among the most generous in the country and were “key tools in motivation and retention”.
The first award under the 2011 scheme will vest in September, giving around five million shares to some 2,000 employees, currently worth around £36m – or on average £18,000 each.
A further 16 million are due to vest in 2017. At the current share price the total stock to vest in both tranches is worth more than £150m.
Participating employees are eligible for awards on a “pro-rata” basis depending on their length of service with the group.
Forsey said: “We owe our continued success to the commitment and hard work of those participants and we are delighted that we are able to reward them in this way.”
Meanwhile an additional three million shares are to be shared by the group’s executive director and two other members of senior management in 2017.
During the year, Sports Direct saw revenues rise 4.7 per cent to £2.8 billion mainly due to its sports retail sales which were led higher by the performance in the UK – where the number of stores grew by 23 to 440. Same-store sales in sports retail grew by 7.4 per cent, a slowdown from last year’s 10.4 per cent. Online revenue grew 14.4 per cent, driven by the launch of click-and-collect in the UK.
Tony Shiret, an analyst at BESI Research, said: “Overall we believe these were good results. We retain our ‘buy’ recommendation based on the combination of long-term scale prospects and improving profitability across the existing group.
“We note that the company’s cash flow characteristics are likely to give rise to net cash balances of over £100m this year in the absence of acquisition activity.
“This allows it significant acquisition capacity. The prospect of meaningful acquisitions should allow investors to get a more tangible feel for how the long-term growth path will develop.”