Mike Ashley: Angel of the north

As Sports Direct staff celebrate £40,000 windfalls, the firm's founder Mike Ashley has seen his reputation in the City transformed from sinner to saint

AS HE strolled through the doors of Merrill Lynch's London headquarters at number 2 King Edward Street on Thursday morning, Sports Direct founder Mike Ashley was met by a long queue of grateful investors and enthusiastic analysts all vying for a chat with one of the few retail bosses who has any success to his name this year.

A meeting had been convened at the offices of the company's house brokers to trumpet the chain's 25 per cent jump in annual profits but as he did the rounds, meeting and greeting the Square Mile's influentials, Ashley would have been forgiven for feeling vindicated by some of those who once dismissed him as a "spiv" and "yob billionaire".

The once reclusive retail tycoon seemed relaxed and comfortable as he chatted through the chain's full-year results which will trigger the biggest staff share pay-out of its kind in the retail sector, earning each of its 2,000 employees shares worth an average of more than 40,000.

While he still peppered his conversation with colourful language to describe his rivals, and set out his ambition to kill off competitor JD Sports, the Newcastle United owner was clearly a changed character.

The upbeat and almost jovial atmosphere was a far cry from bruising encounters between Ashley and the City's scribblers in the early days of Sports Direct's life as a listed company.

The first 12 months after its Initial Public Offering (IPO) in February 2007 was, as one analyst put it, "more dramatic than an EastEnders plot line".

Ashley pocketed 930 million through floating 43 per cent of the chain he founded in 1982 but the shares fell 19p on the first day of trading.

A month later, Ashley sacked Tulchan, the PR firm which took the firm through its IPO. At its maiden results meeting in April 2007, Sports Direct was forced to issue its first profits warning.

In May of that year, the company parted company with its chairman David Richardson amid a dispute over the way the company was being run.

Five months later, came a second admission that the firm wouldn't hit targets, followed by the resignation in October 2007 of non-executive director Chris Bulmer.

A third profits warning was issued the following month after the England football team's failure to qualify for the 2008 European Championships - a heavy blow to Sports Direct, which had stocked up on replica England shirts.

While Ashley did his best to talk up the company throughout that rollercoaster year - he even insisted at one point that he'd "recommend my dead gran to buy stock" - it wasn't long before analysts were using terms such as "car crash" to describe the business. By December 2007, even the retail specialist at house broker Merrill Lynch was advising investors to sell Sports Direct holdings.

While the firm's performance left the Square Mile cold, one particular sore point was the management's poor communication with business journalists and its refusal in the early months to provide comparative figures - a move analysts interpreted as nothing short of "antagonism".

One particularly sceptical commentator lambasted Ashley in that first year as a "shoot-from-the-hip wheeler-dealer who makes it up as he goes along", while the firm's stock - which had lost more than half of its value within five months of the ill-fated flotation - was dismissed as having "less appeal than a second-hand jock strap".

Faced with a barrage of criticism, Ashley threw his own punches, cancelling at the last minute an investor day in September 2007 and calling investors "cry-babies".

He once even suggested that one of the Square Mile's leading analysts, Philip Dorgan of Panmure Gordon, was a "moron" because he didn't agree the figures in one of his research notes, while even the house brokers weren't spared and he laid into Merrill Lynch in a newspaper interview in December 2007 for not doing enough to communicate Sport Direct's business model before the ill-fated IPO.

Ashley's unpopularity in the City coincided with by a hail of abuse from the terraces at St James' Park. Ashley tried unsuccessfully to sell the club and became a hate figure for many fans due to his acrimonious relationship with Toon Army hero and former Newcastle player Kevin Keegan which eventually led to Keegan's bitter resignation in September 2008.

Ashley admitted in a rare interview that year that he had been advised against taking his children to watch the games amid fears the family would be assaulted.

But as he milled around the meeting with investors and analysts on Thursday, the past seemed like a distant memory as Ashley was feted for his success especially against such brutal trading conditions on the high street.

In the space of four years, he has been transformed from one of the Square Mile's greatest villains to the hero of the high street.

And most believe his success has only just begun. Earlier this month, he bought an 80 per cent stake in Scots retail entrepreneur Sir Tom Hunter's USC and Cruise clothing brands - for what many in the City saw as a bargain 7m - which gives the group a foothold in the still buoyant upmarket end of the retail market.

Ashley is bankrolling a 50m expansion of those two brands which will be supervised by Hunter, who stayed on as chairman of USC and Cruise.

Although the two brands will be run independently from the main Sports Direct business, many suspect this was just the first move in Ashley's plan to take down rival JD Sports, which targets the higher end of the sports fashion market compared to the bargain bucket approach of Sports Direct. Analysts also point to the potential offered by the large number of brands owned by the Sports Direct group - particularly overseas.

Freddie George, analyst with Seymour Pierce, who described last week's full-year profits as "excellent", said: "We continue to believe there is more recognition internally with the company of the value of the brands that can be widely marketed overseas including Lonsdale, Slazenger, Dunlop and Everlast."

He also expects the company to benefit from "keep fit" trends and sporting events next year such as the Olympics and European football championships in Poland and the Ukraine. George says the group has "significant potential to develop the business on the internet and overseas". However, many in the City admit that had they been forced to place a bet four years ago on which of the big three in the "incestuous" world of sports retailing would rise to the surface, they would not have backed Sports Direct over JJB or JD Sports. Nick Bubb, analyst with Arden Partners, said: "There was a concern that the stores were turning into a bazaar. They are to a certain extent but it seems to work for them."

A lot of emphasis has been placed in recent months on the struggles faced by JJB and the benefit Ashley's empire may have enjoyed courtesy of is flagging rival but analysts warn that this should not be overplayed. Bubb said: "It's a combination of the weakness of JJB and the focus of management in getting back to basics and the staff incentives."

One fund manager pointed out that Ashley has spent much more time on the business over the past 12-18 months, taking a step back from the high stakes stock market games that so riled analysts in the early days when he bought and sold stakes in companies such as Adidas and JJB.

He is also believed to have lost heavily in betting on HBOS shares in the days before the banking giant's collapse and takeover by Lloyds.

Ever since he decided against launching a takeover bid for Blacks Leisure last April amid reports that suppliers wouldn't want to deal with the outdoor specialist were it to be run by the tycoon known for his heavy discounting strategy, analysts have noted that Ashley has been more focused on his core Sports Direct business - and with notable results.

"I suspect he really needed to make some money again and so has spent a lot more time on the business over the last 12-18 months," said one fund manager.

"He lost quite a lot of money on Newcastle and has been a lot more inclined to get the business running again. The business has really benefited from that. He's a successful retailer and a shrewd operator."

While few were last week willing to go so far as to call Ashley a "reformed" character, it's clear that at last the businessman is getting some of the respect that his dealings with the City have long been lacking.He may seem like an unlikely candidate but Ashley is the high street's new darling and seems set to hold on to that crown for quite some time.

Investors have been ploughing into Sports Direct stock over the last 12 months - it has risen 127 per cent in a year - and while the share price is still some way off its IPO price of 300p, Ashley appears to have the Square Mile's backing.

As one analyst summed up: "He is very astute and knows what's happening in the market place and is able to react quickly."