Sports Direct defies retail gloom – and it could net Mike Ashley £12m

Sports Direct said is was holding back its dividend payment despite a robust set of half-year results in order to fund “potential investment opportunities”.

The group recently upped its stake in Blacks to 22 per cent and is thought to be the most likely buyer for the loss-making outdoor retailer, which is struggling under debts of £36 million.

Newcastle United football club owner Ashley, who netted £929m in a single day in February 2007 after floating the business he founded, still owns 71 per cent of Sports Direct. He is the chain’s executive deputy chairman, a role for which he receives no pay.

The board said it wished to remedy that situation by offering Ashley a further six million shares – worth £12m at current prices – for his “substantial contribution” if the company meets a series of ambitious profit targets.

The retailer, which puts its success down to its generous staff incentive scheme, will need to up its game another notch if Ashley is to reap his reward.

Yesterday it reported that underlying earnings before tax and other deductions rose 2 per cent to £139.2m in the 26 weeks to 23 October, putting it on track for a full-year haul of £215m.

That is a key milestone for the staff bonus scheme, which has already seen some 2,000 staff receive average share payouts worth more than £40,000, but the group must make £225m this year and hit further stretching targets over the following two years for Ashley’s bonus to pay out.

Sports Direct, whose businesses also includes Sports World and Lillywhites stores and brands like Karrimor, Donnay and Slazenger, put in consistently strong performances in recent months, despite the storm ripping through the high street.

Its UK retail revenues increased 8.2 per cent to £697.1m after the firm won market share from struggling rival JJB Sports. Overall revenues grew 8.4 per cent to £888.6m. Chief executive Dave Forsey said: “This strong performance yet again demonstrates the success of our unique and resilient business model, and was delivered against both a tough Fifa World Cup comparison last year and an especially fragile consumer environment.

“We believe our employee bonus share schemes continues to underpin our performance.”

Earlier this year the group made a move up market by buying Sir Tom Hunter’s designer clothing chains USC and Cruise for £7m.

Although Sports Direct would not comment on a possible bid for Blacks, analyst Freddie George at Seymour Pierce said the chairman’s comment that the firm was considering potential investment opportunities presumably included a bid for the outdoor retailer.

George viewed that as a cause for concern and cut his price target for the shares from 240p to 200p as a result. But he said Sports Direct “could well be one of the winners in 2012”.

“The company will be a major beneficiary of the forthcoming Olympics and European Championships in a difficult year,” he said.