Annual Report 2009

Asat26April2009theGroupoperatedoutof359

storesintheUnitedKingdom(excludingNorthern

Ireland).ThemajorityofstorestradeundertheSports

Direct.comfascia.TheGrouphasacquiredanumber

ofretailbusinessesoverthepastfewyears,andsome

storesstilltradeundertheLillywhites,McGurks,

Exsports,GilesportsandHargreavesfascias.Field&

Trekstorestradeundertheirownfascia.

TheGroup’sUKstores(otherthanField&Trek)

supplyawiderangeofcompetitivelypricedsportsand

leisureequipment,clothing,footwearandaccessories,

underamixofGroupownedbrands,suchasDunlop,

SlazengerandLonsdale,licensedinbrandssuchas

Umbro,andwellknownthirdpartybrandsincluding

adidas,Nike,ReebokandPuma.Asignicant

proportionoftherevenueinthestoresisderivedfrom

thesaleoftheGroupownedandlicensedinbranded

products,whichallowstheretailbusinesstogenerate

highermargins,whilstatthesametimedifferentiating

theGroup’sstoresfromitscompetitors,bothinterms

oftherangeofproductsonsaleandthecompetitive

pricesatwhichtheyareoffered.

Field&Trekoperatesoutof16storesintheUK,

sellingawiderangeofcampingandoutdoor

equipment,waterproofclothingandfootwear,

includingleadingbrandssuchasBerghaus,Merrell

andSalomon.TheacquisitionofField&Trekgave

theGroupanentryintotheoutdoormarket,which

hadbeenidentiedasastrategicopportunityforthe

Group,andthathasbeenstrengthenedfollowingthe

acquisitionofUniversalCyclesbytheintroductionofa

rangeofcycleproductsinbothstoresandonline.

TheGrouphasretailinterestsoutsidetheUKand

hasaexibleapproachtoentryintomarkets.These

interestsincludewhollyownedretailoutlets(in

Belgium,Holland,LuxemburgandSlovenia),joint

ventureswithotherretailers(suchasinNorthern

IrelandandtheRepublicofIreland)storeswithin

anotherretailer’sstore(asinCyprus)andlicence

agreementsasinSouthAfricaandtheMiddleEast.

TheGroup’sportfolioofsportsandleisurebrands

includesDunlop,Slazenger,Kangol,Karrimor,

Lonsdale,EverlastandAntigua.Aspreviously

mentionedtheGroup’sRetaildivisionsellsproducts

undertheseGroupbrandsinitsstores,andtheBrands

divisionexploitsthebrandsthroughitswholesaleand

licensingbusinesses.

TheBrandsdivisionwholesalebusinesssellsthe

brands’coreproducts,suchasDunloptennisrackets

andSlazengertennisballs,towholesalecustomers

throughouttheworld,obtainingfarwiderdistribution

fortheseproductsthanwouldbethecaseiftheir

salewasrestrictedtoGroupstores.Thewholesale

businessalsowholesaleschildrenswearandother

clothing.Thelicensingbusinesslicensesthird

partiestoapplyGroupownedbrandstonon-core

productsmanufacturedanddistributedbythosethird

parties,andthirdpartiesarecurrentlylicensedin

differentproductareasinover100countries.The

Brandsdivisioniscloselyinvolvedinthedevelopment

oflicensedproductsandmonitorslicenseesand

theirmanufacturerstoensureproductqualityand

presentationandconsistencywiththeappropriate

brandstrategy.

TheBrandsdivisioncontinuetosponsoravariety

ofprestigiouseventsandretainabaseofglobally

recognisedtalentedsportsmenandwomen.The

ofcialtennisballsupplieragreementswithThe

WimbledonChampionshipsandRoland-Garrosarethe

foremostoftheseagreements.Dunlop’sprofessional

tennistourteamcontinuestogrowwithJamesBlake

beingtheGroup’shighestrankedplayer.Cricketers

PaulCollingwoodandMattPrioraresponsoredby

SlazengerwhilstLeeWestwoodandDarrenClarke

continuetowearDunlopapparelinmajorgolf

tournamentsacrosstheworld.Othersportssuchas

badmintonandsquashalsoprovideopportunitiesof

interestforCarltonandDunloprespectively.

Sports Direct is the UK’s leading sports retailer by revenue and operating proﬁt, and the

owner of a signiﬁcant number of internationally recognised sports and leisure brands.

Financial Highlights

• Grouprevenueup8.6%to£1,367m(2008:£1,260m)

• UnderlyingEBITDAdown8.9%to£136.8m(2008:£150.2m)

• Underlyingprotbeforetaxdown20.1%to£68.2m(2008:£85.4m)

Reportedprotbeforetaxdown91%to£10.7m(2008:£118.9m)aftercurrency

exchangeandnon-cashadjustments

• Underlyingearningspersharedown7.5%to7.93p(2008:8.57p)

• Groupgrossmargindecreasedby280basispointsto40.8%(2008:43.6%)

UKretailgrossmarginsdownto42.5%(2008:45.7%)atoncurrencyneutral

basis

• Netdebtatyearend£431.3m

Operatingcomfortablywithinbankingcovenants

Targettoreducedebtbelow£400minthe2009/10nancialyear

• UKRetaillike-for-likegrosscontribution:+2.5%

• TheBoarddecidednottorecommendanaldividend

Operational highlights

• UKRetailclearmarketleader

Salesexceeded£1bn

Consolidatingpositionthroughincreasingproductrangeandavailability,

controllingcosts,improvingsourcing,supplychainefcienciesand

strengtheningthirdpartybrandrelationships

• Successfullyexpandedinternationalretail

Openedsevennewstores

• Brandsdivisiongoodprogress

Growthinbrandslicensing–41newlicencessignedduringtheyear

FurtherconsolidationofBrandsdivisionmanagementinShirebrook

CONTENTS

CHAIRMAN’S STATEMENT

CHIEF EXECUTIVE’S REPORT AND BUSINESS REVIEW

FINANCIAL REVIEW

BOARD OF DIRECTORS

DIRECTORS’ REPORT

CORPORATE GOVERNANCE REPORT

DIRECTORS’ REMUNERATION REPORT

DIRECTORS’ RESPONSIBILITIES

CORPORATE AND SOCIAL RESPONSIBILITY REPORT

FINANCIAL STATEMENTS

SHAREHOLDER INFORMATION

In a very challenging market environment, the Group’s relentless focus on the

basics of retailing has resulted in the delivery of what are very creditable, solid

results. We grew sales in both Retail and Brands divisions, and while we have

seen a decline in gross margin and a corresponding drop in underlying EBITDA,

that was caused almost entirely by the fall in the value of the pound.

We maintained our position as the UK’s leading sports retailer by continuing

to implement our back to basics strategy – offering the most comprehensive

product range, ensuring stock availability, closely controlling costs and

making efﬁciencies where possible. During the year the Group developed its

relationships further with our third party brand suppliers, many who have

ofﬁces within our head ofﬁce at Shirebrook.

We improved stock control and sourcing within International Retail. We were

very pleased with the Group’s ability to sign an agreement, produce the goods

and roll out branded areas in 121 stores in China within a four month period

from start to ﬁnish.

During the year we opened 27 stores in the UK (excluding Northern Ireland),

nine stores in the Republic of Ireland and Northern Ireland through Heatons,

and seven stores in Europe; including our ﬁrst stores in Cyprus.

The Group continued to consolidate the Brands division management at

Shirebrook. Licensing remains the key driver of growth within the division, and

we signed 41 new licence deals during the year.

The Board has decided not to recommend the payment of a ﬁnal dividend this

year as we believe reducing debt should be our priority. We will continue to keep

this under review.

OUR STRATEGY FOR GROWTH

We have established an excellent platform for growth, which we will build on

with our proposed EBITDA related share bonus scheme, of which there are

more details on page 24.

Our priorities going forward are to:

• Continue to strengthen our position in our core UK market

• Continue to develop our international store portfolio

• Maintain our brand market leading positions

• Reduce debt with a target of achieving below £400m in the 2009-10

ﬁnancial year

Finally I wish to pay tribute to the hard work of all our people, from my

colleagues on the Board to our people in the stores, and thank them for all their

endeavours.

Simon Bentley

Acting Non-Executive Chairman

16 July 2009

Simon Bentley

Acting Non-Executive Chairman

CHAIRMAN’S STATEMENT

Chairman’s Statement

Sports Direct International PLC Annual Report 2009 3

Dave Forsey

Chief Executive

OVERVIEW OF FINANCIAL PERFORMANCE

In the 52 weeks ended 26 April 2009 (the Year), Group revenue was up 8.6% at

£1,367m compared with revenue of £1,260m for the 52 weeks ended 27 April

2008. At constant exchange rates the increase was 5.1%. UK Retail sales were

up 5.1% and broke through £1bn again to £1,006m (2008: £958m). Adjusted for

acquisitions and disposals of subsidiaries, UK Retail sales in 2009 increased by

9.2%.

The Group strengthened revenues in other core business segments.

International retail sales were up 32.3% to £102.3m (2008: £77.3m); on a

currency neutral basis the increase was 12.6%. Brands division revenue rose

19.7% to £230.5m (2008:£192.6m); 4.7% on a currency neutral basis. Within the

division, wholesale revenues were up 18.7% to £203.6m (2008: £171.5m) and

licensing revenues were up 27.5% to £26.9m (2008: £21.1m), both reﬂecting

the full year impact of acquisitions in the prior year including Everlast, and the

effect of a stronger US dollar.

Group gross margin in the Year fell by 280 basis points from 43.6% to 40.8%. In

the Retail division margin fell by 300 basis points to 41.3% (2008: 44.3%). The

main contributor to the fall in margin was UK Retail where margin fell to 42.5%

(2008: 45.7%) as a result of the adverse movement of the US dollar and the

challenging trading environment in the UK. Had the pound/dollar exchange rate

remained at 2008 levels, gross margin in UK Retail would have been maintained

at 45.7%.

Gross margin fell in the Brands division from 40.2% to 38.3%, due to the

pressure on margins in the wholesale business in an increasingly competitive

global market.

Administration costs include a realised exchange proﬁt of £14.2m compared

to a proﬁt of £3.5m in the preceding year. The fair value adjustment on forward

foreign exchange contracts required under IFRS is included in ﬁnance income

(2008:costs) and this unrealised proﬁt amounted to £12.6m as opposed to

a £5.2m loss in 2008. These amounts are excluded from the deﬁnition of

Underlying proﬁt before tax and Underlying EBITDA used in the business and as

reported here. The Group’s holding of forward foreign exchange contracts has

greatly reduced during the Year, reducing an element of potential volatility in

reported proﬁt, and we expect the holding to continue at or below the current

low level in 2009/10.

Group Underlying EBITDA for the Year fell 8.9% to £136.8m (2008: £150.2m) and

Group Underlying proﬁt before tax fell 20.2% to £68.2m (2008: £85.4m), in both

cases due to the decreases in margin.

There is a signiﬁcant difference between Underlying and the lower reported

proﬁts before tax. Underlying proﬁts before tax (and Underlying EBITDA) exclude

exceptional items, which decreased proﬁt by £30.5m, realised exchange proﬁt/

loss and IFRS revaluation of foreign currency contracts, which increased

2009 proﬁts by £14.2m and £12.6m respectively, a £1.8m loss on fair value

adjustments within associated undertakings and a £52.1m non-cash loss in

the recorded value of investments previously provided for through equity and

now charged to the Income Statement as a result of the derecognition of the

investment for accounting purposes.

EBITDA PBT

£m £m

Reported 151.0 10.7

Realised FX Proﬁt (14.2) (14.2)

IAS 39 FX Fair Value adjustment on

forward currency contracts - (12.6)

Proﬁt on disposal of listed investments - (1.0)

Derecognition of investments held

by KSF - 53.1

Exceptional items - 30.5

Fair value adjustment within

associates - 1.7

Underlying 136.8 68.2

Capital expenditure in the Year amounted to £37.8m (2008: £128.8m). This

included acquisitions of retail property, plant and equipment, including £6.4m

(2008: £90.6m) on freehold property.

The Group continues to operate comfortably within it banking covenants. Our

facilities are in place until April 2011 and we will commence discussions with

our banks during the 2009-10 ﬁnancial year.

Mindful that the ﬁnancial markets remain difﬁcult, we consider it is prudent that

debt reduction should be priority. We are therefore targeting to reduce levels to

below £400m by April 2010, which will be achieved by:

• Growing EBITDA

• Working capital turning positive by the year end, as we reduce inventory

levels through the year

• Targeting a reduced level of capital expenditure, in the region of £20m, in

the current year

• Further reductions in ﬁnancing costs as a result of ongoing low interest

rates (and the reduction in debt)

• Saving the cost of the ﬁnal dividend

Net debt at year end decreased to £431.3m (2008: £465.2m), £20.3m of the

reduction resulted from the accounting treatment of the arrangements with

Kaupthing Singer and Friedlander (see page 11).

CHIEF EXECUTIVE’S REPORT AND BUSINESS REVIEW

None of the home nations qualiﬁed for the Euro 2008 football championships.

Undoubtedly sales in 2008-09, particularly in the ﬁrst half, were signiﬁcantly

affected by that lack of home nations’ participation in a major international

football competition.

Gross margin in the division during the Year was adversely affected by the

weakness of the pound against the US dollar. Margin in the division fell from

44.3% to 41.3% in the Year, and in the UK from 45.7% to 42.5%, with the

greatest fall in margin coming in the second half of the Year. Almost all the

Group branded goods that we sell in our stores are bought in US dollars, and

we calculate the cost price of these goods in sterling by applying the average

exchange rate for the year. Had the pound/dollar exchange rate remained at

2008 levels gross margin in UK Retail would have been 45.7%. We expect the

percentage margins in 2009-10 to remain at similar levels to the actual level in

2008-09.

UK Retail like-for-like gross contribution increased by 2.5% over the 12 month

period. This is the ﬁrst time we have reported this KPI.

Underlying costs in UK Retail were closely controlled, rising by only 0.7% in the

Year, in spite of signiﬁcant increases in the cost of energy, the minimum wage,

an increase in ﬂoor space and a rise in sales of just over 5%.

During the Year the Ofﬁce of Fair Trading (OFT) investigated our acquisition

of stores from JJB Sports, and concluded that in ﬁve locations they raised

some concerns. We are currently working with the OFT to agree undertakings

regarding divestment of ﬁve stores.

International Retail revenue for the 52 weeks was up 32.3% to £102.3m (2008:

£77.3m). On a currency neutral basis the sales increase was 12.6%. We

opened seven new stores across Europe in the period, in line with our plans for

developing our international store portfolio, and trading has been satisfactory in

those new stores.

International Retail grew gross margin by 170 basis points, largely due to

improved stock control and sourcing.

By July 2008 trial branded areas within stores had been opened in 121 of the

larger ITAT stores in China, stocked with a bespoke product range designed

and manufactured for the Chinese market. We were extremely pleased with

the execution of the roll out and merchandising of the branded areas and

feedback was that the product range was well received by consumers. We

were in discussions with ITAT management concerning the development of the

business, and some issues were proving difﬁcult to resolve, but ITAT has very

recently been acquired by one of its largest suppliers, and those discussions are

now on hold. Accordingly, we consider it prudent to make a provision against the

cost of ﬁxtures, ﬁttings and stock currently held in China.

Our internet retail business continues to grow strongly, albeit from a low base,

and we continue to build systems and fulﬁlment capability within our Shirebrook

facility.

STORE PORTFOLIO

As of 26 April 2009, we operated 359 stores in the UK (excluding Northern

Ireland), a total retail sales space of circa 3.5m sq ft (2008: circa 3.4m sq ft).

Through the Group’s 42.5% shareholding in the Heatons chain, it has products in

eight stores in Northern Ireland and 22 stores in the Republic of Ireland.

We closed a net 16 stores in the year, with 27 new Sports Direct stores opened

in the UK including three relocations. All new stores are operating under the

sportsdirect.com fascia. We closed or disposed of 40 stores (excluding the three

relocations) which were typically smaller non-core stores.

We have rigorous criteria that must be satisﬁed before any new store opening or

acquisition is agreed, and we will continue to apply them. We are now targeting

circa between 10 and 15 new core stores in the UK excluding Northern Ireland

this year.

Internationally, as at 26 April 2009 we operated 43 stores in Belgium, 13 in

Slovenia, four in Holland, two in Cyprus and one in Luxembourg. The stores in

Belgium, Holland, Luxembourg and Slovenia are wholly owned by the Group,

and those in Cyprus are within a store under an agreement with a local retailer.

We continue with our strategy to identify partners in new territories whilst

continuing to expand our operations in the countries where we currently trade.

Chief Executive’s Report & Business Review

REVIEW BY BUSINESS SEGMENT

52 weeks ended

26 April 2009

52 weeks ended

27 April 2008 Change

(£’m) (£’m) %

Retail Revenue:

UK Retail 1,006.5 957.7

UK wholesale and other 28 31.9

International Retail 102.3 77.3

Total 1,136.8 1,066.9 +6.6

Cost of sales (667.5) (594.7)

Gross margin 469.3 472.2

Gross margin percentage 41.3% 44.3%

Brands Revenue:

Wholesale 203.6 171.5

Licensing 26.9 21.1

Total 230.5 192.6 +19.7

Cost of sales (142.2) (115.1)

Gross margin 88.3 77.5

Gross margin percentage 38.3% 40.2%

BUSINESS REVIEW

Despite tough economic conditions, revenue grew in both the Retail and

Brands divisions, but underlying EBITDA fell notwithstanding good cost control

across the Group, almost entirely due to the strengthening of the US dollar. We

continue to focus our efforts on UK Retail, where our attention to the basics of

retailing leaves us well positioned for growth.

RETAIL DIVISION

The Group’s retail businesses performed strongly in a very difﬁcult economic

environment. Our retail model, offering considerable value to our customers,

proved as resilient as we expected it to be both in the UK and internationally.

We focused on back to basics, offering the customer the most comprehensive

range and the best product availability, and reducing our costs wherever

possible, By way of example, in our Corporate and Social Responsibility Report

we describe some of the steps that we took to reduce our energy consumption

at a time when energy costs were increasing signiﬁcantly. We continued to

review our store portfolio carefully, looking at the performance of each store

and ways of maximising it, and examined rigorously every proposal to open

or acquire a retail outlet. We continued to develop our store layout, and to

incentivise our store staff in ways that encourage better performance. Our

“state-of-the-art” national distribution centre at Shirebrook continued to deliver

efﬁciencies.

Sales in the division rose by 6.6% (10.3% excluding the impact of prior year

disposals), and in the UK by 5.1% (9.2% excluding prior year disposals). In the

second half of the Year sales growth accelerated due to both the impact of

new store openings, the attractiveness of our offer compared with that of our

competitors, and product availability.

We continued to work well with our major third party brand suppliers. Nike,

Umbro, adidas, Reebok and Puma all have their own ofﬁces in our Shirebrook

head ofﬁce, and that enables us to work very closely with them on a day to day

basis.

During the Year we strengthened our running category, through our partnership

with Sweatshop and the creation of a “she runs he runs” section within our UK

stores.

CHIEF EXECUTIVE’S REPORT AND BUSINESS REVIEW CONTINUED

Sports Direct International PLC Annual Report 2009 5

BRANDS DIVISION

Total Brands revenue was up 19.7% to £230.5m (2008: £192.6m) up 4.7% on a

currency neutral basis.

Within this, wholesale revenue was up 18.7% to £203.6m (2008: £171.5m).

Revenue from licensing was up 27.5% to £26.9m (2008: £21.1m).

Gross margin decreased to 38.3% from 40.2%, due to the need to remain

competitive in a number of markets in order to retain market share in a difﬁcult

trading environment.

The consolidation of the Brands division management into Shirebrook

continued, and costs were tightly controlled as systems and controls were

standardised. Payroll costs in the division reduced signiﬁcantly.

Growth in the licensing business remains the preferred avenue for development

of the Brands business outside the UK and 41 new licensing agreements were

signed during the Year with a minimum guaranteed contract value of 60m US

dollars over their terms, including licences in the United States for Donnay

rackets and golf, Lonsdale boxing equipment, Dunlop sports apparel and Kangol

clothing.

The business continues to sponsor and receive endorsements from leading

players and tournaments including Slazenger’s 107th year as the ofﬁcial ball

supplier for the Wimbledon championships, sponsorship of Paul Collingwood,

England’s captain at the ICC World Twenty20 cricket competition, and the

England mens and womens national hockey teams.

During the Year we greatly expanded our cycle category following the acquisition

of Universal Cycles, and launched our online cycle business, cyclesdirect.com.

We also acquired the 20% minority shareholding in Lonsdale Sports not

previously owned by the Group.

During the Year we made a number of small brands acquisitions such as

Golddigga.

Operating costs increased in the division due to the full year inclusion of

acquisitions such as Everlast, and the impact of the weak pound on non-sterling

costs when translated into sterling.

STRATEGIC INVESTMENTS

During the Year we reduced our strategic investments in other related

businesses. We still believe that in the right circumstances taking strategic

investments is beneﬁcial for the Group, and the Board will continue to evaluate

opportunities. However strategic investments compete with other priorities,

including debt reduction, for cash, and it is unlikely that further signiﬁcant

investments will be made in the short term. In addition, as explained in the

Financial Review on page 11, we have for accounting purposes derecognised the

strategic investments held through arrangements with Kaupthing Singer and

Friedlander.

CONTRACTS ESSENTIAL TO THE BUSINESS OF THE GROUP

The Group has long established relationships with Nike and adidas, the major

suppliers of third party branded sporting goods, particularly footwear, and

considers that continued supplies from these companies is critical to the

business of the Group.

MAIN TRENDS AND FACTORS LIKELY TO AFFECT THE FUTURE DEVELOPMENT

AND PERFORMANCE OF THE GROUP’S BUSINESSES

The Group’s retail businesses will undoubtedly be affected by the economic

climate and changes in it. Changes in interest rates and exchange rates affect

the businesses directly, and consumer conﬁdence and spending is affected by a

wide range of factors including employment, tax and interest rates, house prices

and the general ‘feel good factor’, most if not all of which the Group cannot

inﬂuence.

The above factors also inﬂuence and impact on our many retail competitors,

who may also be affected by other matters relating to the general economic

climate, such as the availability of ﬁnance, and also our suppliers may react

differently to the changing economic environment.

All of the above apply equally to our Brands businesses, both wholesale and

retail. Reduction in customer demand is reﬂected in the wholesaling and

licensing business, as orders and royalties are affected. Moreover, in difﬁcult

economic times suppliers come under increasing pressure to reduce their

prices to their customers, and all suppliers run the risk of their customers

ceasing to trade, reducing demands for their products. Difﬁcult economic

times also sometimes make it difﬁcult for suppliers to obtain credit insurance

in respect of some customers, leaving the supplier with a difﬁcult question of

whether or not to supply and, if they do, with the attendant risk of bad debts.

We have later in this report commented on risks and uncertainties that relate

to the Group’s businesses, and while we manage risks to reduce, where

possible, the likelihood of their occurring and their impact if they do, they are

factors that could inﬂuence the Group or part of it.

We anticipate that the football World Cup in 2010 will be a major opportunity

for the UK Retail business, but given the likely launch of new football strips

in March - a month later than in previous years - it’s impact (subject to

qualiﬁcation of the home nations – and in particular England) will come later

in the calendar year than hitherto, and will be largely reﬂected in the 2010–11

ﬁnancial year.

As previously commented, the Group’s holding of forward foreign exchange

contracts has greatly reduced during the Year, reducing an element of

potential volatility in reported proﬁt, and we expect the holding to continue at

or below the current low level in 2009–10.

ENVIRONMENTAL MATTERS

A review of the assessment of the Group’s impact on the environment, is

included in the Corporate Social Responsibility Report on page 29.

EMPLOYEES

The hard work and loyalty of our employees are key to our success, and we

intend to motivate them and enable them to share in the Group’s success by

seeking shareholder approval at the AGM for a new bonus scheme.

The bonus scheme is intended to drive underlying EBITDA, and to motivate

and help improve retention of key employees, to encourage those employees

participation in the shares of the Company and to align the interests of those

employees and shareholders.

All permanent UK employees in UK Retail, Brands and Head Ofﬁce with at

least one year’s service at the beginning of 2009/10 will participate. The

scheme will replace, where relevant, existing annual bonus schemes, but not

workplace based schemes. The bonus targets are stretch targets, and are net

of scheme costs.

The bonus is in two stages. The ﬁrst bonus is 25% of base pay in shares at

£1.00 per share. The ﬁrst bonus target is Underlying EBITDA of £155m in

2009-10. The ﬁrst bonus will vest two years after the EBITDA target of £155m

is reached, and is subject to continuous employment until then.

The second bonus is 75% of base pay in shares at £1.25 per share. The second

stage of the bonus is conditional upon the ﬁrst bonus target being met in

2009-10, and the second bonus targets are Underlying EBITDA of £195m in

2010-2011, and Underlying EBITDA/Net Debt ratio of 2 or less at the end of

2010-11. The shares vest, subject to continuous employment until then, 2

years after the second bonus targets are met.

SHIREBROOK CAMPUS

The Group continues to invest in infrastructure, and the process of

consolidating the Brands business, including acquired businesses, at

Shirebrook continues.

RISKS AND UNCERTAINTIES RELATING TO THE GROUP’S BUSINESS

Risks are an inherent part of the business world. The Group has identiﬁed

the following factors as potential risks to, and uncertainties concerning, the

successful operation of its business.

SUPPLY CHAIN

Any disruption or other adverse event affecting the Group’s relationship with

any of its major manufacturers or suppliers, or a failure to replace any of its

major manufacturers or suppliers on commercially reasonable terms, could

have an adverse effect on the Group’s business, operating proﬁt or overall

ﬁnancial condition.

FOREIGN EXCHANGE RISK

The Group operates internationally and is exposed to foreign exchange risk

arising from various currency exposures, primarily with respect to the US

dollar and Euro.

Foreign exchange risk arises when future commercial transactions or

recognised assets or liabilities are denominated in a currency that is not the

entity’s functional currency, as exchange rates move. As explained above,

in the Group’s case, the majority of contracts relating to the sourcing of

Group branded goods are denominated in US dollars, and a strengthening

of the dollar or a weakening of the pound sterling makes those goods more

expensive.

Chief Executive’s Report & Business Review

CHIEF EXECUTIVE’S REPORT AND BUSINESS REVIEW CONTINUED

Sports Direct International PLC Annual Report 2009 7

The Group historically hedged the risk of currency movements using forward

purchases of foreign currency, but has determined to reduce that hedging

signiﬁcantly.

The Group also holds assets overseas in local currency, and these assets are

revalued in accordance with currency movements. This currency risk is not

hedged.

INTEREST RATE RISK

The Group has net borrowings, which are principally at ﬂoating interest rates

linked to bank base rates or LIBOR. The Group does not use interest rate

ﬁnancial instruments to hedge its exposure to interest rate movements.

CREDIT RISK

The Group could have a credit risk if credit evaluations were not performed

on all customers requiring credit over a certain amount. The Group does not

require collateral in respect of ﬁnancial assets.

FUNDING AND LIQUIDITY RISK

Funding and liquidity for the Group’s operations are provided through bank

loans, overdrafts and shareholders funds. The object is to maintain sufﬁcient

funding and liquidity for the Group’s requirements, but the availability of

adequate cash resources from bank facilities and achieving continuity of

funding in the current ﬁnancial climate could be a risk to the Group in future

years.

INVESTMENT RISK

The Group also holds shares in publicly listed companies and ﬂuctuations in

their share prices will have a ﬁnancial impact on the business results.

RELIANCE ON NON UK MANUFACTURERS

The Group is reliant on manufacturers in developing countries as the

majority of the Group’s products are sourced from outside the UK. The Group

is therefore subject to the risks associated with international trade and

transport as well as those relating to exposure to different legal and other

standards.

PENSIONS

Some subsidiaries in the Group make contributions to certain occupational

deﬁned beneﬁts pension schemes. An increase in the Schemes funding needs

or changes to obligations in respect of the schemes could have an adverse

impact on the Group’s business.

MARKET FORCES

The sports retail industry is highly competitive and the Group currently

competes at national and local levels with a wide variety of retailers of varying

sizes who may have competitive advantages, and new competitors may enter

the market. Such competition continues to place pressure on the Group’s

pricing strategy, margins and proﬁtability.

OPERATIONAL

Any signiﬁcant disruption to the operations of the Group, divisional head

ofﬁces and the national distribution centre at Shirebrook, or interruption to

the smooth running of the Group’s ﬂeet of vehicles, might signiﬁcantly impact

its ability to manage its operations, distribute products to its stores and

maintain its supply chain.

Any long term interruption of the Group’s IT systems would have a signiﬁcant

impact on the Group’s operation, particularly in the Retail division.

BUSINESS CONTINUITY AND ACTS OF TERRORISM

The majority of the Group’s revenue is derived from the UK and accordingly

any terrorist attacks, armed conﬂicts or government actions within the UK

could result in a signiﬁcant reduction in consumer conﬁdence, which would in

turn have an adverse affect on sales in stores.

LEGAL

The Group’s trade marks, patents, designs and other intellectual property

rights are central to the value of the Group brands. Third parties may try to

challenge the ownership or counterfeit the Group’s intellectual property. The

Group may need to resort to litigation in the future to enforce its intellectual

property rights and any litigation could result in substantial costs and a

diversion of resources. The Group believes that its licensees, suppliers,

agents and distributors are in material compliance with employment,

environmental and other laws. The violation, or allegations of a violation, of

such laws or regulations, by any of the Group’s licensees, suppliers, agents

or distributors, could lead to adverse publicity and a decline in public demand

for the Group’s products, or require the Group to incur expenditure or make

changes to its supply chain and other business arrangements to ensure

compliance.

SALES

The Group’s retail businesses are subject to seasonal peaks. The incidence

and participation in major sporting events will have a particular impact on the

UK Retail business. Prolonged unseasonal weather conditions or temporary

severe weather during peak trading seasons could also have a material

adverse effect on the Group’s businesses.

CONSUMERS

The Group’s success and sales are dependent, in part, on the strength and

reputation of the brands it sells, and are subject to consumers’ perceptions of

the Group and of its products, which can fall out of favour. Adverse publicity

concerning any of the Group brands or manufacturers or suppliers could lead

to substantial erosion in the reputation of, or value associated with, the Group.

RESEARCH AND DEVELOPMENT

The Group’s success depends on the strength of the Group brands and, to

a lesser extent, the licensed-in brands. The Group’s efforts to continually

develop or obtain brands in a timely manner or at all may be unsuccessful.

MANAGEMENT AND MITIGATION OF RISK

The identiﬁcation and management of risk is a continuous process, and

the Group’s system of internal controls and the Group’s business continuity

programmes are key elements of that. The Group maintains a system of

controls to manage the business and to protect its assets. We continue to

invest in people, systems and in IT to manage the Group’s operations and its

ﬁnances effectively and efﬁciently.

The Group has a credit policy in place and the exposure to risk is monitored

on an ongoing basis. Credit evaluations are performed on all customers

requiring credit over a certain amount, and concentration of credit risk is

managed. Investment of cash surplus, borrowings and derivative investments

are made through banks and companies which have credit ratings and

investment criteria approved by the Board.

The Group’s follows policies of forging long term relationships with suppliers

and of utilising two leading supply chain companies to procure much of

the Group’s own branded goods is described on page 29 in the Corporate

and Social Responsibility Report. Many risks relating to the supply chain,

reliance on non-UK suppliers, and to the reputation of the Group’s brands are

managed and mitigated by the implementation of those policies.

Close monitoring of the market, competitors, the economy, consumer

conﬁdence, participation in major sporting events, the weather, companies

in which the Group holds strategic stakes, the behaviour of licensees, and

of possible infringement of intellectual property, and the development of

contingency plans and rapid response to changing circumstances manages

and does much to mitigate the risks caused by these factors.

The Group maintains close contact with its bank and will address the renewal

of its facilities in 2009/10.

The business continuity programme addresses the risk of disruption to

the Shirebrook campus. Accordingly the Board is conﬁdent that as far as is

practical the risks and uncertainties that face the Group are being monitored

and managed and that where required appropriate action is being taken.

CHIEF EXECUTIVE’S REPORT AND BUSINESS REVIEW CONTINUED

Chief Executive’s Report & Business Review

KEY PERFORMANCE INDICATORS

The Board monitors the performance of the Group by reference to a number

of key performance indicators (KPIs), which are discussed fully in this Chief

Executive’s Report and Business Review, and also in the Financial Review,

and in the Corporate and Social Responsibility Report on pages 9 to 12 and 28

to 30 respectively. The most important of these KPIs are:

52 weeks ended

26 April 2009

52 weeks ended

27 April 2008

Financial KPIs

Group revenue £1,367m £1,260m

Underlying EBITDA

(1)

£136.8m £150.2m

UK Retail gross margin 42.5% 45.7%

UK Retail like-for-like stores

gross contribution

(2)

+2.5% -

Underlying earnings per share

(3)

7.93p 8.57p

Non Financial KPIs

No. of core stores

(4)

292 272

Customer complaints %

change

(5)

-7.49% -

Employee turnover

(6)

29.0% 38.4%

Cardboard recycling 6,007 tonnes 5,558 tonnes

(1) The way in which Underlying EBITDA is calculated is set out in the Financial Review on page 9.

(2) Like-for-like gross contribution for UK Retail is percentage change in successive 12 month periods.

Like-for-like gross contribution is adjusted to eliminate the impact of foreign currency movements. A like-

for-like store is one that has been trading for the full 12 months in both periods, and has not been affected by

a signiﬁcant change such as a reﬁt. Store gross contribution is the excess of sales revenue (net of VAT) over

the cost of goods sold. The gross contribution would only be adjusted if a signiﬁcant promotion affected the

comparison. This is the ﬁrst year that this KPI has been reported.

(3) The way in which Underlying earnings per share is calculated is set out in the Financial Review on

page 10.

(4) A core store is a store acquired and ﬁtted out by the Group or otherwise so designated.

(5) The monitoring of customer complaints is described in the Corporate and Social Responsibility Report

on page 28. Records containing complaints received prior to the beginning of 2007-08 were not retained, and

accordingly annual percentage change in customer complaints in 2008 is not available.

(6) Employee turnover was affected in both the Year and in 2007-08 by the relocation of head ofﬁce, retail and

brand support functions, and warehousing and distribution activities to Shirebrook throughout these periods.

OUR STRATEGY FOR GROWTH

We will focus on growing the core UK Retail business by continuing to

drive efﬁciencies and deliver outstanding value to our customers. We have

established an excellent platform for growth, which we will build on with our

proposed EBITDA related share bonus scheme.

In order to develop our store portfolio, both in the UK and internationally, we

will continue to evaluate opportunities and will take them when we believe

there is quantiﬁable and signiﬁcant beneﬁt in doing so.

We have learned valuable lessons in China that we will be able to apply both

there and in other parts of the world.

Outside the UK our brands business will focus on licensing opportunities and

continue to restructuring of the wholesale businesses. We will continue to

invest in our Brands through advertising and promise to spend and develop

grass roots initiatives.

We believe that making acquisitions and taking strategic investments in

other related businesses is beneﬁcial for the Group, and we will continue to

evaluate opportunities while, for the time being, being mindful of the priority

to reduce debt.

OUTLOOK FOR THE CURRENT YEAR

The Board is conﬁdent that our initiatives and hard work across all areas of

the Group leaves us well positioned for the next phase of growth. Accordingly,

at current exchange rates, we are expecting Underlying EBITDA to be at least

£140m this ﬁnancial year.

Dave Forsey

Chief Executive

16 July 2009

Sports Direct International PLC Annual Report 2009 9

REVENUE AND MARGIN

52 weeks ended

26 April 2009

52 weeks ended

27 April 2008 Change

(£’m) (£’m) %

Retail revenue:

UK Retail 1,006.5 957.7 +5.1

UK wholesale and property 28.0 31.9 -12.2

International Retail 102.3 77.3 +32.3

Total 1,136.8 1,066.9 +6.6

Brands Revenue:

Wholesale 203.6 171.5 +18.7

Licensing 26.9 21.1 +27.5

Total 230.5 192.6 +19.7

Total revenue 1,367.3 1,259.5 +8.6

Total Group revenue increased by 8.6%.

Retail revenue increased by 6.6%. The UK accounted for 91.0% of total retail

revenues with the balance in continental European stores.

UK wholesale and other includes income on property transactions which is

not regarded as being exceptional or non recurring totalling £Nil at no margin

(2008: £10.5m at no margin).

Retail margins in the UK decreased from 45.7% to 42.5%.

Our representation in both parts of Ireland is covered by Heatons, in which we

have a 42.5% interest, the results of which are reported as an associate.

Brands revenue increased by 19.7%, including the full year effect of prior year

acquisitions such as Everlast. Licensing income increased by 27.5%, with an

increase in wholesale revenue of 18.7%. The contribution made by Everlast in

the year for revenue and proﬁt after taxation amounted to £35.9m and £4.4m

respectively.

Brands margins decreased from 40.2% to 38.3%.

SELLING, DISTRIBUTION AND ADMINISTRATION COSTS

Selling, distribution and administration costs for the Group decreased as a

percentage of revenue. This was as a result of the cost and efﬁciency savings

offsetting inﬂation.

FOREIGN EXCHANGE

The Group manages the impact of currency movements through the use of

forward ﬁxed rate currency purchase and sales contracts. The Group’s policy

has been to hold or hedge up to four years (with generally a minimum of one

year) on anticipated purchases in foreign currency. During the Year the holding

of forward purchase contracts has been signiﬁcantly reduced.

The exchange gain of £14.2m (2008: £3.5m gain) included in administration

costs have arisen from:

a) accepting dollars and Euros at the contracted rate; and

b) the translation of dollars and Euro denominated assets and

liabilities at the period end rate or date of realisation

The exchange gain of £12.6m (2008: £5.2m loss) included in ﬁnance income

substantially represents the reduction in the mark-to-market provision made

(under IFRS) for the forward contracts at 26 April 2009 in anticipation of the loss

which may be realised in the accounts to 25 April 2010.

The sterling exchange rate with the US dollar at 27 April 2008 was $1.986 and

$1.471 at 26 April 2009.

FINANCIAL REVIEW

BASIS OF REPORTING

The ﬁnancial statements for the Group for the 52 weeks ended 26 April 2009

are presented in accordance with International Financial Reporting Standards

(IFRS) as adopted by the EU.

52 weeks ended

26 April 2009

52 weeks ended

27 April 2008 Change

(£’m) (£’m) %

Revenue: 1,367.3 1,259.5 +8.6

Underlying EBITDA 136.8 150.2 -8.9

Underlying proﬁt before tax 68.2 85.4 -20.2

Reported proﬁt before

taxation 10.7 118.9 -91.0

Pence per share Pence per share

Basic EPS (2.79) 12.23 -122.8

Underlying EPS 7.93 8.57 -7.5

The directors believe that Underlying EBITDA, Underlying proﬁt before tax

and Underlying earnings per share provide more useful information for

shareholders on the underlying performance of the business than the reported

numbers and are consistent with how business performance is measured

internally. They are not recognised proﬁt measures under IFRS and may not be

directly comparable with “adjusted” proﬁt measures used by other companies.

EBITDA is earnings before investment income, ﬁnance income and ﬁnance

costs, tax, depreciation and amortisation and therefore includes the Group’s

share of proﬁt of associated undertakings and joint ventures. Underlying

EBITDA is calculated as EBITDA before the impact of foreign exchange, and any

exceptional and other non-trading items.

Bob Mellors

Group Finance Director

Financial Review

FINANCIAL REVIEW CONTINUED

EARNINGS

52 weeks ended

26 April 2009

52 weeks ended

27 April 2008 Change

pence per share pence per share %

Basic EPS (2.79) 12.23 -122.8

Underlying EPS 7.93 8.57 -7.5

Weighted average number

of shares (actual) 568,452,000 639,010,000 -11.0

Basic earnings per share (EPS) is calculated by dividing the earnings

attributable to ordinary shareholders by the weighted average number of

ordinary shares outstanding during the actual ﬁnancial period.

The Underlying EPS reﬂects the underlying performance of the business

compared with the prior year and is calculated using the weighted average

number of shares. It is not a recognised proﬁt measure under IFRS and may

not be directly comparable with “adjusted” proﬁt measures used by other

companies.

The items adjusted for arriving at the Underlying proﬁt are as follows:

52 weeks ended

26 April 2009

52 weeks ended

27 April 2008

(£’m) (£’m)

(Loss)/proﬁt after tax: (15.8) 78.1

Post tax effect of Exceptional items:

(Loss)/proﬁt on disposal of listed

investments net of interest (1.0) (24.6)

Derecognition of listed investments 53.2 -

Fair value adjustment to forward

foreign exchange contracts (8.5) 3.6

Realised proﬁt on forward foreign

exchange contracts (9.6) (2.4)

Impairment of freehold property 15.6 -

Impairment of intangible assets 10.0 -

Fair value adjustment within

associated undertakings 1.2

Underlying proﬁt after tax 45.1 54.7

DIVIDENDS

A ﬁnal dividend of 2.44p per share (totalling £13.87m), in respect of the year

ended 27 April 2008, was paid on 31 October 2008 to shareholders on the

An interim dividend of 1.22p per share (totalling £6.94m), in respect of the year

ended 26 April 2009, was paid on 30 April 2009 to shareholders on the register

at 3 April 2009.

CAPITAL EXPENDITURE

Capital expenditure amounted to £37.8m (2008: £128.8m). This included £6.4m

(2008: £90.6m) on freehold property. The prior year includes a freehold ofﬁce

in London was acquired for £31.9m and the purchase of freehold stores. The

remaining balance includes intangibles such as licenses.

ACQUISITIONS

The Group spent £6.6m on acquisitions during the Year. The principal acquisition

was the remaining 20% of share capital in Lonsdale Sports which was not

previously owned by the Group. This has been accounted for as a movement

between minority interests and goodwill.

EXCEPTIONAL OPERATING COSTS AND REVENUES

52 weeks ended

26 April 2009

52 weeks ended

27 April 2008

(£’m) (£’m)

Impairment of intangible assets 14.8 -

Impairment of freehold property 15.7 -

30.5

The impairment of freehold property was recognised to reﬂect the fall in market

values of commercial property in the last year.

The impairment of intangible assets was recognised to reﬂect an increase in

discount rate to reﬂect speciﬁc risk factors and a softening in sales growth as a

result of the economic climate.

FINANCE INCOME

52 weeks ended

26 April 2009

52 weeks ended

27 April 2008

(£’m) (£’m)

Bank interest receivable 1.2 3.1

Expected return on pension plan

assets 2.1 2.3

Fair value adjustment to forward

foreign exchange contracts 12.6 -

15.9 5.4

The proﬁt on the fair valuing of forward foreign exchange contracts arises under

IFRS as a result of marking to market at the period end those contracts held to

hedge the Group’s currency risk.

FINANCE COSTS

52 weeks ended

26 April 2009

52 weeks ended

27 April 2008

(£’m) (£’m)

Interest on bank loans and overdrafts (20.0) (33.0)

Interest on other loans (1.1) (4.5)

Interest on retirement beneﬁt

obligations (2.5) (2.3)

Fair value adjustment to forward

foreign exchange contracts - (5.2)

(23.6) (45.0)

The fall in interest payable is a result of the reduction in interest rates during

the year and a lower average level of debt compared with the prior year.

TAXATION

The effective tax rate on proﬁt before tax for 2009 was 245.6% (2008: 34.6%).

This rate reﬂects tax relief being unavailable on the derecognition of listed

investments and the impairment of freehold property, as well as depreciation

on non-qualifying assets and the non-relievable losses in certain overseas

subsidiaries. Excluding the impact of the derecognition of listed investments

and the impairment of freehold property, the effective rate would be 32.9%.

Sports Direct International PLC Annual Report 2009 11

STRATEGIC INVESTMENTS

During the Year the Group held investments in Amer Sports, Blacks Leisure,

JD Sports and JJB Sports. Changes in the value of these shares are recognised

directly in equity, while for Contracts for Difference they are recognised in the

Income Statement, in accordance with IFRS.

26 April 2009

(£’m)

Total available for sale investments at 27 April 2008 65.7

Additions in the period 4.9

Disposal proceeds in the period (12.8)

Proﬁt taken to the income statement 2.4

Fair value adjustments taken through equity (28.6)

Derecognition of shares held by KSF (26.1)

Total available for sale investments at 26 April 2009 5.5

We have previously reported that our strategic stakes were held by Kaupthing

Singer & Friedlander (KSF) and partly ﬁnanced by them. On 8 October 2008

KSF went into administration and we are in dispute with the administrators

concerning the ownership of the shares they hold. We have now concluded

that, while we continue to maintain that the shares are ours and should be

delivered to us, we may not “control” the shares for accounting purposes. We

have therefore treated them in the accounts as having been derecognised. Doing

so has no impact on net assets as the value of the shares (£26.1m) has been

replaced by a reduction in creditors (£20.3m owed to KSF) and the creation of a

£5.9m debtor. It has however, had a signiﬁcant impact on reported proﬁt as the

loss in value of the Black’s shareholding which was previously charged to the

statement of recognised income and expense has now been taken to the Income

Statement.

The respective shareholdings at 26 April 2009 and 27 April 2008 (not reﬂecting

the derecognition for accounting purposes) were as follows:

At 26 April 2009 At 27 April 2008

‘m Holding

Blacks

Leisure Group 12.728 29.85% 12.728 29.85%

Amer Sports Corporation 1.066 1.48% 1.066 1.48%

JD Sports Fashion 6.475 13.31% 5.955 12.34

adidas AG - - 0.398 0.02%

JJB Sports 11.944 4.76% - -

Other - - - -

CASH FLOW AND NET DEBT

In addition to the amounts invested in capital expenditure and acquisitions,

the Group received a net £8.9m cash inﬂow from the purchase and disposal of

strategic investments. Net debt decreased to £431.3m at 26 April 2009 from

£465.2m at 27 April 2008. £20.3m of the reduction in Net Debt resulted from the

derecognition of the loan used to ﬁnance strategic investments held by KSF.

The analysis of debt at 26 April 2009 was as follows:

At 26 April 2009 At 27 April 2008

(£’m) (£’m)

Cash and cash equivalents 32.4 25.4

Borrowings (463.7) (490.6)

Net debt (431.3) (465.2)

Financial Review

CASH FLOW

Total movement is as follows:

At 26 April 2009 At 27 April 2008

(£’m) (£’m)

Underlying EBITDA 136.8 150.2

Realised proﬁt on forward foreign

exchange contracts 14.2 3.5

Taxes paid (25.3) (37.7)

Free cash ﬂow 125.7 116.0

Invested in:-

Working capital and other (31.5) (90.5)

Acquisitions (including debt) (6.6) (120.1)

Net proceeds from investments 8.9 45.5

Reduction in KSF debt 20.3 -

Net capital expenditure (34.8) (132.4)

Share buy back programme - (201.5)

Equity dividend paid (25.6) (7.4)

Finance costs and other ﬁnancing

activities (22.5) (36.7)

Decrease/(increase) in net debt 33.9 (427.1)

RECONCILIATION OF MOVEMENT IN EQUITY

Total equity movement is as follows:

(£’m)

Total equity at 27 April 2008 128.4

Loss after tax for the 52 weeks ended 26 April 2009 (15.8)

Items taken directly to equity:

Exchange differences on translation of foreign

operations (44.6)

Actuarial loss on pension (0.4)

Fair value adjustment in respect of available-for-

sale ﬁnancial assets (28.6)

Transfer of historic losses on available-for-sale

ﬁnancial assets 53.2

Tax on items taken directly to equity (6.9)

Movement in equity issues:

Movement in Minority interests -

Dividends paid/declared (20.8)

Total equity at 26 April 2009 153.7

PENSIONS

The Group operates a number of closed deﬁned beneﬁt schemes in the Dunlop

Slazenger companies. The net deﬁcit in these schemes increased from £11.7m

at 27 April 2008 to £12.4m at 26 April 2009.

Bob Mellors

Finance Director

16 July 2009

Sports Direct International PLC Annual Report 2009 13

BOARD OF DIRECTORS

Simon Bentley

Acting Non-Executive

Chairman

Mike Ashley

Executive Deputy Chairman

Dave Forsey

Chief Executive

Bob Mellors

Group Finance Director

Malcolm Dalgleish

Non-Executive Director

David Singleton

Senior Independent

Non-Executive Director

Simon Bentley (aged 54) was appointed to the board on 2 March 2007 and Acting Chairman on

31 May 2007. He is also Chairman of the Audit Committee and a member of the Remuneration

Committee. As Acting Chairman he chairs the Nominations Committee. Simon qualiﬁed as

a chartered accountant in 1980 and in 1987 joined Blacks Leisure Group plc where he was

Chairman and Chief Executive for 12 years until 2002. Simon chairs and is on the board of a

range of companies and organisations. Among these, he is Deputy Chairman of the solicitors

Mishcon de Reya and a Senior Trustee of The Leadership Trust. He is the Chairman of hair

product brand Umberto Giannini and the hotelier Maypole Group Plc. He has lengthy experience

of the sporting goods industry and is a Director of the UK’s leading ﬁve-a-side football centre

operator, Powerleague.

Dave Singleton (aged 58) joined the Board on 25 October 2007. Dave spent 25 years with Reebok

International Limited. He stepped down in April 2007 having helped to successfully integrate

Reebok following its acquisition by adidas Group in January 2006. For eight years he was

Vice President Northern Europe Region & UK and since 2003 he was Senior Vice President

Europe, Middle East & Africa. Dave has an extensive senior management record and brings

valuable experience of international sports brand operations. He is Chairman of the Board’s

Remuneration Committee and a member of the Board’s Audit and Nomination Committees. He

is also a director of Bolton Lads & Girls Club.

Bob Mellors (aged 59) has been the Group’s Finance Director since 2004. A graduate in

economics, he qualiﬁed with PriceWaterhouseCoopers in London before joining Eacott Worrall,

where Sports Direct became a client in 1982. He was managing partner and head of corporate

ﬁnance at Eacott Worrall before joining the business.

Dave Forsey (aged 43) has been with the business for over 24 years, during which he has acquired

signiﬁcant knowledge and experience. He is Chief Executive and has overall responsibility for

the business.

Malcolm Dalgleish (57) joined the Board on 25 October 2007. Malcolm is currently head of

retail in the Europe, Middle East and Africa area at CB Richard Ellis. In 2005 CBRE acquired

Dalgleish - the leading retail real estate services specialist in the UK, which Malcolm founded in

1979 and of which he was the principal shareholder. Malcolm is a member of the Board’s Audit,

Nomination and Remuneration Committee.

Mike Ashley (aged 44) established the business of the Group on leaving school in 1982 and was

the sole owner of the business until the Company’s listing in March 2007. Mike is the Executive

Deputy Chairman and is responsible for formulating the vision and strategy of the Company.

Mike is a member of the Board’s Nomination Committee.

DIRECTORS’ REPORT

The Group’s forecast and projections, taking account of reasonably possible

changes in trading performance, show that the Group should be able to operate

within the level of the current facility. The Group will open renewal negotiations

with the bank during 2009/10 and has at this stage not sought any written

commitments that the facility will be renewed. However, the Group regularly

holds discussions with its bankers about its present and future borrowing needs

and no matters have been drawn to its attention to suggest that renewal may

not be forthcoming on acceptable terms.

After making enquiries, the directors have a reasonable expectation that the

Company and the Group have adequate resources to continue in operational

existence for the foreseeable future. Accordingly, they continue to adopt the

going concern basic in preparing the Annual Report and Accounts.

APPROPRIATIONS

An interim dividend of 1.22p per share was paid to shareholders on the register

at 30 April 2009.

GROUP STRUCTURE AND OPERATIONS

During the Year the Group acquired the 20% of Lonsdale Sports Limited not

already owned by the Group and disposed of Streetwise Sports Limited.

SHARE CAPITAL

The authorised share capital of the Company is £100,000,000 divided into

999,500,010 ordinary shares of 10p each and 499,990 redeemable preference

shares of 10p each.

The ordinary shares have all the rights that usually attach to such ordinary

shares, including the right to receive dividends (if paid or declared), to receive

notice and attend and vote at meetings of shareholders and (subject to what is

said below concerning redeemable preference shares) to receive a share of the

assets of the Company on any winding up.

The redeemable preference shares do not carry any right to receive a dividend

or to participate in any distribution of the proﬁts or assets of the Company, or

to vote at meetings of shareholders, but holders of redeemable preference

shares have the right to receive notice and attend meetings of shareholders

and on any winding up of the Company the redeemable preference shares are

redeemed at par in priority to any distribution to the holders of ordinary shares.

No redeemable preference shares are in issue.

640,452,369 ordinary shares of 10p are in issue and fully paid of which

64,000,000 are currently held in Treasury. On 16 September 2008, 8,000,000

shares were sold from Treasury to the Sports Direct International plc Employee

Beneﬁt Trust (the EBT).

Grants in respect of 4,397,128 shares have been made under the Performance

Share Plan, which is described in the Directors Remuneration Report on pages

23 to 24. The Trustee of the EBT has agreed to use shares held by them to

satisfy awards that vest under that plan.

TRANSFER OF SHARES

A member may transfer all or any of his certiﬁcated shares by an instrument of

transfer in any usual form or in any other form which the Board may approve.

An instrument of transfer shall be signed by or on behalf of the transferor and,

unless the share is fully paid, by or on behalf of the transferee. An instrument of

transfer need not be under seal.

The Board may, in its absolute discretion, refuse to register the transfer of a

certiﬁcated share which is not a fully paid share, provided that the refusal does

not prevent dealings in shares in the Company from taking place on an open and

proper basis.

The Board may also refuse to register the transfer of a certiﬁcated share unless

the instrument of transfer:

• is lodged, duly stamped (if stampable), at the registered ofﬁce of the

Company, or at another place appointed by the Board, accompanied by the

certiﬁcate for the share to which it relates and such other evidence as the

Board may reasonably require to show the right of the transferor to make

the transfer;

• is in respect of one class of share only, and

• is in favour of not more than four persons.

The directors of Sports Direct International plc present their annual report to

shareholders, together with the audited consolidated ﬁnancial statements for

the Company and its subsidiaries for the 52 weeks ended 26 April 2009 (the

Year).

This document contains a number of forward-looking statements relating to

the Company and its subsidiaries (the Group) with respect to, amongst others,

the following: ﬁnancial conditions; results of operations; economic conditions

in which the Group operates; the business of the Group and future beneﬁts

of the current management plans and objectives. The Group considers any

statements that are not historical facts as “forward-looking statements”. They

relate to events and trends that are subject to risks and uncertainties that could

cause the actual results and ﬁnancial position of the Group to differ materially

from the information presented in the relevant forward-looking statement.

When used in this document the words “estimate”, “project”, “intend”, “aim”,

“believe”, “expect”, “should”, and similar expressions, as they relate to the

Group and the management of it, are intended to identify such forward-looking

statements. Readers are cautioned not to place undue reliance on the forward-

looking statements which speak only as at the date of this document. Neither

the directors nor any member of the Group undertake any obligation publicly to

update or revise any of the forward-looking statements, whether as a result of

new information, future events or otherwise, save in respect of any requirement

under applicable laws, the Listing Rules, and other regulations.

PRINCIPAL ACTIVITIES

The principal activities of the Group during the Year were:

• Retailing of sports and leisure clothing, footwear and equipment;

• Wholesale distribution and sale of sports and leisure clothing, footwear

and equipment under Group owned or licensed brands; and

• Licensing of Group brands.

Further information on the Group’s principal activities is set out in About Sports

Direct International plc at the front of this document and in the Chief Executive’s

Report and Business Review on pages 3 to 8.

RESULTS FOR THE YEAR

The trading results for the Year and the Group’s ﬁnancial position as at the

end of the Year are shown in the attached Financial Statements, and discussed

further in the Chief Executive’s Report and Business Review and in the Financial

Review on pages 3 to 8 and 9 to 12 respectively.

BUSINESS REVIEW AND FUTURE DEVELOPMENTS

The statutory Business Review required by the Companies Act 2006 (the 2006

Act) is included in the Chief Executive’s Report and Business Review, and in

the Corporate and Social Responsibility Report on pages 3 to 8 and 28 to 30

respectively. A review of Group activities during the Year, together with the

factors likely to affect its future development, performance and conditions, is

included in the Chief Executive’s Report and Business Review on pages

4 to 8. The ﬁnancial position of the Group, its cash ﬂow, liquidity position and

borrowing facilities are described in the Financial Review on pages 9 to 12. The

Chief Executive’s Report and Business Review also describes on page 6 and

7 the principal risks and uncertainties that face the Group, and note 3 to the

Financial Statements includes the Group’s objectives, policies and processes for

managing its capital, its principal ﬁnancial risk management objectives, details

of its ﬁnancial instruments and hedging activities and its exposure to credit

risk and liquidity risk. Details of the Group’s Key Performance Indicators by

reference to which the development, performance and position of the business

can be measured effectively are stated in the Chief Executive’s Report and

Business Review on page 8.

The Corporate and Social Responsibility Report on pages 28 to 30 reports on

environmental matters, including the impact of the Group’s businesses on the

environment, the Group’s employees, and on social and community issues.

GOING CONCERN

As highlighted in note 25 to the Financial Statements, the Group ﬁnances its day

to day working capital requirements and has made investments and conducted

a share buy-back programme in the past, using a facility with the Bank of

Scotland that is due for renewal in April 2011. The current economic conditions

however, create some uncertainty in the economy and particularly in respect

of the exchange rate between sterling and the US dollar which impacts on the

cost of the Group’s products manufactured in the Far East, and the availability of

bank ﬁnance in the foreseeable future.

Directors’ Report

Sports Direct International PLC Annual Report 2009 15

THE COMPANY’S POWER TO PURCHASE SHARES

At the Company’s Annual General Meeting on 10 September 2008 the Company

was generally and unconditionally authorised to make market purchases (within

the meaning of section 163(3) of the 1985 Act) of ordinary shares of 10p each in

the Company subject to the following conditions:

• the maximum aggregate number of ordinary shares authorised to be

purchased is 57,645,236, representing 10% of the Company’s issued

ordinary share capital;

• the minimum price (exclusive of expenses) which may be paid for an

ordinary share is 10p (being the nominal value of an ordinary share);

• the maximum price (exclusive of expenses) which may be paid for each

ordinary share is the higher of: (i) an amount equal to 105% of the average

of the middle market quotations for the Ordinary Shares as derived

from the London Stock Exchange Daily Ofﬁcial List of the ﬁve business

days immediately preceding the day on which the share is contracted

to be purchased; and (ii) an amount equal to the higher of the price of

the last independent trade of an ordinary share and the highest current

independent bid for an ordinary share as derived from the London Stock

Exchange Trading System.

The above authority expires at the close of the next Annual General Meeting

of the Company, but at that meeting a similar authority will be sought from

shareholders.

SHAREHOLDERS

No shareholder enjoys any special control rights, and, except as set out above

and below, there are no restrictions in the transfer of shares or of voting rights.

Mike Ashley and the Company have entered into a Relationship Agreement,

pursuant to which Mike Ashley undertook to the Company that, for so long as he

is entitled to exercise, or to control the exercise of, 15% or more of the rights to

vote at general meetings of the Company, he will;

• conduct all transactions and relationships with any member of the Group

on arm’s length terms and on a normal commercial basis and with the

approval of the non-executive directors;

• exercise his voting rights or other rights in support of the Company

being managed in accordance with the Listing Rules and the principles

of good governance set out in the Combined Code and not exercise any of

his voting or other rights and powers to procure any amendment to the

Articles of Association of the Company;

• other than through his interest in the Company, not have any interest in

any business which sell sports apparel and equipment subject to certain

rights, after notiﬁcation to the Company, to acquire any such interest

of less than 20% of the business concerned, and certain other limited

exceptions, without receiving the prior approval of the non-executive

directors;

• and not solicit for employment or employ any senior employee of the

Company.

As at 16 July 2009, the following party had a signiﬁcant direct or indirect share

holding in the shares of the company:

Number of

shares held

Percentage of issued

ordinary share capital

with voting rights held

Nature

of holding

MASH Holdings Limited 410,400,000 71.2% Direct

MASH Holdings Limited is wholly owned by Mike Ashley.

SUPPLIERS

It is the policy of the Group to agree appropriate terms and conditions for its

transactions with suppliers (ranging from standard written terms to individually

negotiated contracts) and for payment to be made in accordance with these

terms, provided the supplier has complied with its obligations.

The number of days purchases outstanding for the Group’s UK operations as 26

April 2009 was 36 days (2008: 27 days).

The Board may refuse to register a transfer of shares in the Company by a

person if those shares represent at least a 0.25% interest in the Company’s

shares or any class thereof and if, in respect of those shares, such person has

been served with a restriction notice after failure (whether by such person or

by another) to provide the Company with information concerning interests in

those shares required to be provided under the Companies Act 2006 (the 2006

Act), unless (i) the transfer is an approved transfer (as deﬁned in the Articles of

Association of the Company), (ii) the member is not himself in default as regards

supplying the information required and certiﬁes that no person in default as

regards supplying such information is interested in any of the shares the subject

of the transfer, or (iii) the transfer of the shares is required to be registered by

the Uncertiﬁcated Securities Regulations 2001.

If the Board refuses to register a transfer of a share in certiﬁcated form, it will

send the transferee notice of its refusal within two months after the date on

which the instrument of transfer was lodged with the Company. No fee may be

charged for the registration of any instrument of transfer or other document

relating to or affecting the title to a share.

POWERS TO ISSUE SHARES

At the Company’s Annual General Meeting on 10 September 2008:

• the directors of the Company were generally and unconditionally

authorised pursuant to section 80 of the Companies Act 1985 (the 1985

Act), in substitution for all prior authorities conferred upon them, but

without prejudice to any allotments made pursuant to the terms of such

authorities, to exercise all the powers of the Company to allot relevant

securities (within the meaning of that section) up to an aggregate nominal

amount of £19,215,078 for the period expiring (unless previously revoked,

varied or renewed) at the conclusion of the next Annual General Meeting

of the Company save that the Company may, before such expiry make an

offer or agreement which would or might require relevant securities to be

allotted after such expiry and the directors may allot relevant securities

in pursuance of such an offer or agreement as if the authority had not

expired;

• the directors were empowered to allot equity securities (within the

meaning of section 94 of the 1985 Act) for cash, pursuant to the general

authorities described above in substitution for all prior powers conferred

upon the Board but without prejudice to any allotments made pursuant to

the terms of such powers, as if section 89(1) of the 1985 Act did not apply

to any such allotment, such power being limited to:

i) the allotment of equity securities in connection with an issue in

favour of holders of ordinary shares in the capital of the Company

in proportion (as nearly as may be) to their existing holdings of

ordinary shares but subject to such exclusions or other

arrangements as the directors deem necessary or expedient in

relation to fractional entitlements or any legal or practical problems

under the laws of any territory, or the requirements of any

regulatory body or stock exchange; and

ii) the allotment of equity securities for cash (otherwise than as

described in (i) above) up to an aggregate amount equal to 5% of

the then issued and unconditionally allotted share capital of the

Company provided always that such power expires (unless

previously revoked, varied or renewed) at the conclusion of the next

Annual General Meeting of the Company, save that the Company

may, before the end of such period, make an offer or agreement

which would or might require equity securities to be allotted after

expiry of this authority and the directors may allot equity securities

in pursuance of such an offer or agreement as if this power had not

expired.

The authorities expire at the close of the next Annual General Meeting of the

Company, but a contract to allot shares under these authorities may be made

prior to the expiry of the authority and concluded in whole or part after the

Annual General Meeting, and at that meeting similar authorities will be sought

from shareholders.

DIRECTORS’ REPORT CONTINUED

CONTRACTS ESSENTIAL TO THE BUSINESS OF THE COMPANY

The Chief Executive’s Report and Business Review sets out on page 5

information about persons with whom the Company has contractual or other

arrangements which are essential or material to the business of the Group.

TAKEOVERS

The directors do not believe there are any signiﬁcant contracts that may change

in the event of a successful takeover of the Company. Details of the impact of

any successful takeover of the Company on directors’ bonus and share schemes

are set out in the Directors’ Remuneration Report on pages 23 and 24. Executive

Directors’ service contracts and non-executive directors’ appointment letters

contain no speciﬁc provisions relating to any takeover of the Company.

EMPLOYEE SHARE SCHEMES

Details of the Performance Share Plan and share awards made thereunder are

set out in the Directors’ Remuneration Report on pages 23 and 24, and on page

26. No performance period has yet been completed under that plan. At the next

Annual General Meeting of the Company the Company intends to seek approval

of the establishment of the Bonus Share Scheme details of which are set out in

the Directors Remuneration Report on page 24.

EMPLOYEE INVOLVEMENT

The Group employs 16,650 employees. Those employees are fundamental to the

future success of the Group. The Group communicates with its people through

a wide variety of channels, including brieﬁngs held at Head Ofﬁce, information

transmitted through line managers, and an Employee Forum at the Head

Ofﬁce and National Distribution Centre at Shirebrook, and the Company’s open

management style encourages employees to develop and to contribute to the

development of the business.

All UK permanent employees of the Group in UK Retail, Brands and Head

Ofﬁce will participate in the proposed new Bonus Share Scheme if approved at

the Annual General Meeting. The scheme is intended to motivate and provide

those employees with a direct and substantial link between Group performance

and their remuneration, and encourage employee participation in the Group.

The proposed new Bonus Share Scheme will operate in addition to the current

workplace bonus schemes, which are directly related to speciﬁc workplace

performance.

The Group has entered into an agreement with the trade union Unite in respect

of collective bargaining of the pay, hours and holidays of certain groups of

employees at the Group’s National Distribution Centre at Shirebrook.

Further information on relationships with employees can be found in the

Corporate and Social Responsibility Report on page 28.

EQUAL OPPORTUNITIES

The Group’s policy for its employees and for all applicants for employment is to

ﬁt the abilities and aptitude of each individual to an appropriate job, irrespective

of gender, race, religion or belief, sexual orientation, age, disability or ethnic

origin. The Company and other Group companies will not tolerate discrimination

in any form. Applications for employment by disabled persons are given full and

fair consideration for all vacancies in accordance with their particular aptitudes

and abilities. The Group does all that is practicable to meet its responsibilities

towards the training and employment of disabled people, and to ensure that

training, career development and promotion opportunities are available to all

employees. The Group makes every effort to provide continuity of employment

in the same or similar job where an employee becomes disabled including

offering retraining in order that the employees employment within the Group

may continue.

RESEARCH AND DEVELOPMENT

The Group designs clothing and some footwear for sale in stores and has

arrangements with suppliers for the research and development of goods for the

Brands division.

LAND AND BUILDINGS

The directors have reviewed the land and buildings owned by the Group and

have concluded that the market value of those properties is less than the

balance sheet amounts, and have accordingly impaired those amounts.

CHARITABLE AND POLITICAL DONATIONS

During the Year, the Group made charitable donations of £50,000 (2008:

£10,000) to the Retail Trust, the principal charity of the retail sector. No political

donations were made (2008: nil).

DIRECTORS

Directors who served during the year were:

Date of appointment

Mike Ashley 21 December 2006

Simon Bentley 02 March 2007

Malcolm Dalgleish 25 October 2007

Dave Forsey 08 February 2007

Bob Mellors 21 December 2006

Dave Singleton 25 October 2007

The provisions in the Company’s Articles for the appointment, retirement after

appointment by the Board and by rotation, and standing for reappointment are

described in the Corporate Governance Report on page 18.

Details of directors, their roles, responsibilities, achievements and signiﬁcant

external commitments are set out on page 13 and, in respect of directors

standing for reappointment, in the Annual General Meeting Notice, which is sent

to shareholders with this report.

The Board believes that each director standing for reappointment continues to

demonstrate commitment, is an effective member of the Board, and contributes

to the balance of skills, knowledge and experience identiﬁed by the Board as

being required. The Board is satisﬁed that the Acting Chairman is not precluded

from devoting sufﬁcient time to his duties to the Company by reason of his other

commitments. The Board recommends reappointment of the directors standing

for reappointment.

Information on service contracts and details of the interests of the directors and

their families in the share capital of the Company at 26 April 2009 and at the

date of this report is shown in the Directors’ Remuneration Report on pages 24

and 26 respectively. Copies of the service contracts of executive directors and

of the appointment letters of the Acting Chairman and non-executive directors

are available for inspection at the Company’s registered ofﬁce during normal

business hours and at the Annual General Meeting.

No director has a directorship in common or other signiﬁcant links with any

other director (except in the case of executive directors holding directorships of

subsidiary companies of the Company).

DIRECTORS CONFLICTS OF INTEREST

The Board has put in place procedures to deal with directors’ conﬂicts of

interest. During the Year the Board reviewed and, where appropriate, approved

certain situational conﬂicts of interest that were reported to it by directors,

and a register of those situational conﬂicts is maintained and reviewed.

Also during the Year the Board noted any transactional conﬂicts of interest

concerning directors that arose and were declared. No director took part in the

discussion or determination of any matter in respect of which he had disclosed

a transactional conﬂict of interest.

DEEDS OF INDEMNITY

The Company has entered into deeds of indemnity for the beneﬁt of each

director of the Company and for the beneﬁt of each person who was a director

during the Year, in respect of liabilities to which they may become liable in their

capacity as director of the Company and of any company in the Group. These

indemnities are qualifying third part indemnity provisions within the meaning

given to that term by Sections 234 and 235 of the 2006 Act, and all these

indemnities remain in force.

ANNUAL GENERAL MEETING

The Annual General Meeting of the Company will be held on 9 September 2009

at Unit D, Brook Park East, Shirebrook, NG20 8RY. The meeting will commence

at 3.00 pm. The Board encourages shareholders to attend and participate in the

meeting.

Directors’ Report

Sports Direct International PLC Annual Report 2009 17

AUDITORS

Grant Thornton UK LLP has expressed a willingness to continue in ofﬁce. In

accordance with section 489 (4) of the Companies Act 2006, resolutions to

reappoint Grant Thornton UK LLP as auditors and to authorise the directors to

determine their remuneration will be proposed at the Annual General Meeting.

AUDIT INFORMATION

The directors who held ofﬁce at the date of approval of this Directors’

Report conﬁrm that, so far as they are each aware, there is no relevant audit

information of which the Company’s auditors are unaware, and that each

director has taken all the steps that he or she ought to have taken as a director

to make him or herself aware of any relevant audit information and to establish

the Company’s auditors are aware of that information.

By Order of the Board

Michael Oliver

Secretary

16 July 2009

CORPORATE GOVERNANCE

The Board of directors of the Company is committed to maintaining high

standards of corporate governance and to managing the affairs of the Group

in accordance with the provisions of the Listing Rules and of the Combined

Code on Corporate Governance, issued by the Financial Reporting Council in

June 2008 (the “Combined Code”). A copy of the Combined Code is available

on the Financial Reporting Council’s website at www.frc.org.uk. The Board has

reviewed the Company’s corporate governance processes and policies, and

has concluded that during the 52 weeks ended 26 April 2009 (the “Year”) the

Company complied with the provisions of the Combined Code except as set out

below.

The Combined Code (code provision A3.2) recommends that at least half

of the Board of directors of a UK listed company, excluding the Chairman,

should be comprised of non-executive directors determined by the Board

to be independent in character and judgement and free from relationships

or circumstances which may affect, or could appear to affect, the director’s

judgment. During the Year the Board was made up of the Acting Chairman,

three executive directors and two independent non-executive directors.

Accordingly during the Year the Company did not comply with this provision of

the Combined Code in this regard.

The Combined Code also provides (code provisions B2.1 and C3.1) that each

of the Remuneration and Audit Committees of the Board should comprise of

at least three independent non-executive directors. The Code also provides

that, in respect of the Remuneration Committee, the Company Chairman may

also be a member, but not chair, the Committee if he or she was considered

independent on appointment as Chairman. During the Year these committees

comprised two independent non executive directors and the Acting Chairman.

Accordingly during the Year the Company did not comply with these provisions of

the Combined Code.

The Combined Code provides (code provision A.4.1) that the majority of the

members of the Nomination Committee should be independent non-executive

directors. During the Year the Committee comprised the Acting Chairman,

the Executive Deputy Chairman and two non-executive directors. Accordingly

during the Year the Company did not comply with this provision of the Combined

Code. Since the end of the Year Mike Ashley has ceased to be a member of the

Nomination Committee, and the structure of this Committee is now compliant

with the provisions of the Combined Code.

The Company has in the past used recruitment consultants to search for a

Chairman and for additional independent non-executive directors and the

Nomination Committee has approved job descriptions for those roles, which

for the Chairman includes an assessment of the time commitment expected,

always recognising the need for availability in the event of major activity.

The Board currently believes, however, that the Board and its committees

as currently constituted are working well, and that in a period of challenging

economic conditions it would be difﬁcult to recruit an appropriate person to be

either the Chairman or an independent non executive director of the Company.

Accordingly, while the Board intends when practicable to appoint a further

independent non-executive director to the Board and to both of the

Remuneration and Audit committees, which would bring the Company into

compliance with all the provisions of the Combined Code, no steps are currently

being taken to achieve that. The Nomination Committee and the Board will,

however, keep the position under review.

THE BOARD

During the Year the Board comprised a non- executive Acting Chairman, three

executive directors, and two non-executive directors. The names and short

biographies of the Acting Chairman and other directors are set out on page 13.

The non-executive directors are considered by the Board to be independent.

The Acting Chairman, Simon Bentley was considered by the Board to be

independent on appointment. The Board considers that an independent director

is one who is independent in character and judgment, and where there are

no circumstances that are likely to affect, or could appear to affect, his or her

judgement. Relationships or circumstances that could affect judgement include

having been an employee of the Company or of any Group company during the

past ﬁve years, having had a material business relationship or having been a

partner, shareholder, director or senior employee of a body with a material

business relationship with the Company or any Group company in the past three

years, receiving remuneration from the Company other than directors’ fees,

participating in any share option or bonus schemes or in a Company pension

scheme, having had close family ties with any of the Company’s advisors,

directors or senior employees, having cross directorships or signiﬁcant links

with any other director, representing a signiﬁcant shareholder, or serving on the

Board for more than nine years.

Dave Singleton has been appointed the Senior Independent Non-Executive

Director and is available to shareholders if they have concerns which have failed

to be resolved through the normal channels of Acting Chairman, Executive

Deputy Chairman, Chief Executive, or Group Finance director, or for which such

channels are inappropriate.

The Company has entered into a Relationship Agreement with Mike Ashley, the

Executive Deputy Chairman, whose wholly owned company, MASH Holdings Ltd

currently holds approximately 71.2% of the issued share capital of the Company

(excluding treasury shares), which agreement is described in the Directors’

Report on page 15.

Given the structure of the Board and the terms of the Relationship Agreement,

the Board believes that no individual or small group of individuals can dominate

the Board’s decision making.

The Board has established a Nomination Committee to ensure a formal,

rigorous and transparent procedure for the appointment of new directors to

the Board. The composition of that Committee and a description of its terms of

reference are set out on page 20.

Details of executive directors’ service contracts and of the Acting Chairman’s

and the non-executive directors’ appointment letters are given on page 24.

Copies of service contracts and of appointment letters are available for

inspection at the Company’s registered ofﬁce during normal business hours and

at the Annual General Meeting.

Executive directors normally retire on reaching the age determined by the Board

from time to time as the retirement age for executive directors.

Non-executive directors are appointed for an initial term of three years from

the Annual General Meeting following their joining the Board, and, subject to

performance, there is an expectation of reappointment for a further period of

three years. Exceptionally a non-executive director may be invited to serve for a

further and ﬁnal three year term. Non-executive directors’ fees are determined

by the Board in the absence of the non-executive directors other than the

Chairman.

All directors appointed by the Board are appointed after consideration of the

recommendations of the Nomination Committee, and those so appointed

must stand for reappointment at the following Annual General Meeting. Every

director must retire at least once every three years, and in addition at least

one third of the continuing members of the Board must retire by rotation each

year. Retiring directors may seek reappointment if willing and eligible to do

so and if so recommended by the Nomination Committee. The Chairman will,

when proposing the reappointment of a director, conﬁrm that following formal

performance evaluation, the director’s performance continues to be effective

and he or she continues to demonstrate commitment to the role.

This year Simon Bentley and Bob Mellors are retiring by rotation and are

seeking reappointment.

The Board has adopted a formal process for the performance evaluation of the

Board, its committees and individual directors. Every year each director has an

opportunity to express his or her views on the organisation and operation of the

Board and its committees, their effectiveness and contribution to the business,

and on any other matter they consider relevant. These views are expressed

in response to a questionnaire prepared and circulated by the Secretary, who

holds the comments of individual directors in conﬁdence. The results of these

questionnaires are consolidated and reported to the Chairman and, in so far as

they relate to the Chairman, to the Senior Independent Non-Executive Director,

and, in so far as they relate to the Board as a whole or to any of its committees

to the Board as a whole. Given the current small size of the Board, the Board

does not consider the use of independent consultants appropriate or useful.

In addition the Chairman will meet with individual directors privately at least

once in every year, to review the contribution of that director to the Board and

his or her development needs. The Chairman will meet with the non-executive

directors as a group and in the absence of any executive directors at least twice

a year, and as part of the Board Evaluation Programme the non-executive

directors, led by the Senior Independent Non-Executive Director, will review

the performance of the Chairman, having taken account of the views of the

executive directors.

The Board and the Nomination Committee will consider the output from

the evaluation programme in their evaluation of the skills, knowledge and

experience of the Board, and in formulating development plans.

CORPORATE GOVERNANCE REPORT

Corporate Governance Report

Sports Direct International PLC Annual Report 2009 19

The Board provides corporate governance training for those directors appointed

to the Board for whom it is their ﬁrst appointment to a listed company board,

and provides a tailored induction programme for all directors on appointment. In

addition the Board is made aware of material changes to laws and regulations

affecting the Group’s business from time to time. All directors have access to

the advice and services of the Company Secretary, and each director and each

board committee may take independent professional advice at the Company’s

expense, subject to prior notiﬁcation to the other non-executive directors and

the Company Secretary. The Company maintains appropriate directors and

ofﬁcers insurance.

The division of responsibilities between the Chairman, the Executive Deputy

Chairman and the Chief Executive is in writing and has been agreed by the

Board. The Chairman is responsible for leadership of the Board, for ensuring

its effectiveness, and for ensuring that all directors are able to play a full part

in the activities of the Company. He ensures effective communication with

shareholders, and that the Board has an understanding of the views of major

investors. The Chairman is available to provide advice and support to members

of the executive team. The Executive Deputy Chairman is an ambassador for

the Company, and takes the lead in the strategic development of the Company,

formulating the vision and strategy in conjunction with the Chief Executive. The

Chief Executive is responsible for leading the management team, the running of

the Group’s business, for the delivery of the strategy approved by the Board, and

for implementing speciﬁc decisions made by the Board. No one individual has

unfettered power of decision.

The Board currently plans to meet on a pre-planned basis six times during each

year, including a strategy meeting, and meets on other occasions as required.

During the Year the Board met on nine occasions.

The Board is collectively responsible for the success of the Company, and has a

programme to enable it to discharge its responsibility of providing effective and

entrepreneurial leadership to the Company within a framework of prudent and

effective controls. An agenda is established for each meeting, and appropriate

documentation is provided to directors in advance of them. For regular meetings

the agenda will include reports from the Chief Executive and the Group Finance

Director, reports on the performance of the business and current trading,

reports on meetings with investors, reports from committees of the Board and

speciﬁc proposals where the approval of the Board is sought. Presentations are

also given on business or strategic issues where appropriate, and the Board will

consider at least annually the strategy for the Group. Minutes of the meetings

of committees of the Board are circulated to all members of the Board, unless

a conﬂict of interest arises, to enable all directors to have oversight of those

matters delegated to committees, and copies of analysts’ reports and brokers’

notes are provided to directors.

Attendance by directors at Board and Board committee meetings during the

Year and the total number of meetings that they could have attended are set

out in the table below. All directors attended all meetings of the Board and of

committees of the Board of which they were members unless prevented from

doing so by prior commitments.

Board

Meetings

Audit

Committee

Meetings

Remuneration

Committee

Meetings

Nomination

Committee

Meetings

Mike Ashley 9/9 - - 1/1

Simon Bentley 9/9 3/3 4/4 1/1

Malcolm Dalgleish 7/9 2/3 3/4 0/1

Dave Forsey 9/9 - - -

Bob Mellors 9/9 - - -

Dave Singleton 9/9 3/3 4/4 1/1

The Board has a formal schedule of matters reserved for decision by it. Matters

so reserved include the approval of the strategic plan and long-term objectives

of the Group, the annual budget and the allocation of resources to achieve

that budget, decisions relating to unbudgeted expenditure over certain limits,

signiﬁcant acquisitions, disposals and joint ventures, other material contracts,

changes to the corporate structure of the Group, the appointment and removal

of the Company Secretary, approval of accounting policies and practices

and approval of the annual report. The Board delegates management of the

businesses of the Group to the executive management, and delegates speciﬁc

responsibilities to Board committees.

The Board believes that the appointment of executive directors to be non-

executive directors of other listed companies beneﬁts the Group, through the

additional experience and knowledge gained by such an appointment, and

accordingly, executive directors are permitted to accept one such appointment

where no conﬂict of interest arises, and to retain the fees received. Currently

none of the executive directors holds such an appointment.

All non-executive directors disclose to the Board prior to appointment their

signiﬁcant other commitments and they are required to notify and have notiﬁed

any changes to or additional commitments from time to time. Simon Bentley,

the Acting Chairman, is deputy Chairman of the solicitors Mishcon De Reya,

a senior trustee of the Leadership Trust, Chairman of the hair product brand

Umberto Giannini and the hotelier Maypole Group plc. He is also a director of

Powerleague. The Board is satisﬁed that Simon Bentley meets his obligations

to the Company. All non-executive directors are available to meet with major

investors.

The Company Secretary is an employee of the Company and is the secretary

of all Board committees, and fulﬁls the responsibilities required of him by the

Combined Code.

BOARD COMMITTEES

There are three principal Board Committees, all of which have written terms of

reference. Summaries of the terms of reference and details of the membership

of committees are set out below. Copies of the terms of reference are available

from the Company Secretary and on the Company’s website. Only members of

each Committee are entitled to attend the meetings of committees, although

each Committee may invite other directors, managers and advisors to attend

and have done so. Membership of Board Committees will be regularly reviewed.

Given the current size of the Board, and the terms of reference, all

non-executive directors are members of every Board committee. It is, however,

the Board’s intention that, when the number of independent non-executive

directors appointed to the Board permits, the chairman of the Remuneration

Committee will not serve on the Audit Committee, and vice versa. The Board is

satisﬁed that currently no one director exercises a disproportionate inﬂuence.

Attendance at meetings of committees is set out on the opposite page.

AUDIT COMMITTEE

Directors who served on the Committee during the Year were:

• Simon Bentley (Chairman)

• Malcolm Dalgleish

• Dave Singleton

The Chairman of the Committee is a Chartered Accountant, and has recent and

relevant ﬁnancial experience.

The Committee met on three occasions during the Year.

The Committee’s programme is pre-planned to ensure that each aspect of its

responsibilities is discharged as part of an annual cycle during the Company’s

ﬁnancial year. The main responsibilities of the Audit Committee are:

• Assisting the Board with the discharge of its responsibilities in relation to

internal and external audits and controls.

• Monitoring the ﬁnancial reporting process and the integrity and clarity of

the Group’s ﬁnancial statements, including making recommendations on

judgments they contain and the ﬁnancial reporting process.

• Agreeing the scope of the annual audit and the annual audit plan and

monitoring the same.

• Reviewing and monitoring the independence of the external auditors and

relationships with them and in particular agreeing and monitoring the

extent of the non audit work that may be undertaken by external auditors.

• Advising on the appointment, reappointment and removal of external

auditors.

• Reviewing accounting and ﬁnancial reporting policies, terms of

engagement and remuneration of the external auditors, and any changes

thereto, and the method of accounting for unusual transactions.

• Reviewing and monitoring the effectiveness of the internal control and risk

management policies and systems in place within the Group and ensuring

that appropriate arrangements are in place under which employees can

raise concerns about possible ﬁnancial or other impropriety which are

then appropriately investigated.

During the Year the Committee considered the matters that fell within its area

of responsibility above, and in particular the arrangements for monitoring the

effectiveness of internal controls, and also considered the current economic

climate and its likely impact on the Group:

The Audit Committee will normally meet not less than three times a year.

The external auditors attend meetings of the Committee, other than when

their appointment is being reviewed. The Group Finance Director also attends

as appropriate. The Committee will meet with the auditors in the absence of

executive management at least twice a year.

The Audit Committee considers annually the reappointment of the auditors and

their remuneration, and makes recommendations to the Board, and the auditors

are reappointed each year at the Annual General Meeting. The Committee will

consider the level of service provided by the auditors and their independence

annually.

The Committee has approved a policy on the engagement of the external

auditors for non-audit work, in order to ensure that the objectivity of the

auditors’ opinion on the Group’s ﬁnancial statements is not or may not be seen

to be impaired, and has established a process to monitor compliance with that

policy.

The policy identiﬁed three categories of potential work. Firstly, those tasks

that the auditors may not provide, as to do so would represent a real threat

to independence. That work includes the preparation of accounting entries or

ﬁnancial statements, IT systems design and implementation, management of

projects and tax planning where the outcome would have a material impact on

the ﬁnancial statements or where the outcome is dependent upon accounting

treatment.

Secondly, types of work that the auditors may undertake with the consent of

the Chairman of the Audit Committee. Included in this category are certain

corporate ﬁnance services, acquisition due diligence, management consultancy

and secondment of staff other than for the preparation of accounting entries or

ﬁnancial statements.

Thirdly, there are services that the auditors may provide as the work is clearly

audit related and there is no potential threat to independence, including

regulatory reporting and acting as reporting accountants. The Company is

satisﬁed that its policy falls within the requirements of the Auditing Practices

Board.

Every engagement of the auditors for non-audit work is to be reported to the

next meeting of the Committee.

The Combined Code recommends that the Audit Committee is made up of at

least three non-executive directors, independent in character and judgement

and free from any relationship or circumstance which may, could or would be

likely to, or appear to, affect their judgement. The Audit Committee currently

consists of only two independent non-executive directors and the Acting

Chairman, but the Company intends when appropriate to appoint additional

independent non-executive directors to the Board, following which a further

independent non-executive director will also be appointed a member of the

Audit Committee, and the Committee’s structure will then comply with the

recommendation set out in the Combined Code.

REMUNERATION COMMITTEE

Directors who served on the Committee during the Year were:

• Dave Singleton (Chairman)

• Simon Bentley

• Malcolm Dalgleish

The main responsibilities of the Remuneration Committee are to:

• Determine the Company’s policy on executive remuneration, including the

design of bonus schemes, and targets and payments made thereunder.

• Determine the levels of remuneration for the Chairman and each of the

executive directors.

• Monitor the remuneration of senior management and make

recommendations in respect of thereof.

• Agree any compensation for loss of ofﬁce of any executive director.

The Committee met on four occasions during the Year.

During the Year the Committee reviewed directors and senior managers

remuneration arrangements, and considered bonus schemes, and in particular

the proposed Bonus Share Scheme, approval of which will be sought at

the Annual General Meeting of the Company in September. The Committee

considered directors’ salaries and determined not to increase them. The

Committee decided whether any payments were due to executive directors

under the 2007-08 Annual Bonus Scheme, and decided not to operate an Annual

Bonus Scheme for executive directors for 2009-10 if the proposed Bonus Share

Scheme was approved and implemented. The Committee also reviewed the

Performance Share Plan and its performance measures and made awards

thereunder to executive directors and to certain senior managers.

A report on the remuneration of directors appears on pages 22 to 26. The

Combined Code recommends that the Remuneration Committee is made up of

at least three non-executive directors, independent in character and judgement

and free from any relationship or circumstance which may, could or would be

likely to, or appear to, affect their judgement. The Committee currently consists

of only two independent non-executive directors and the Acting Chairman.

The Company intends to appoint when appropriate additional independent

non-executive directors to the Board following which a further independent non-

executive director will be appointed a member of the Remuneration Committee,

and the Committee’s structure will then comply with the recommendations set

out in the Combined Code.

NOMINATION COMMITTEE

Members of the Nomination Committee during the Year were:

• Simon Bentley (Chairman)

• Mike Ashley

• Malcolm Dalgleish

• Dave Singleton

The Committee met on one occasion during the Year.

The main responsibilities of the Board Nomination Committee are to:

• Review the Board’s structure.

• Review the composition and make up of the Board, including evaluating

the balance of skills, knowledge and experience of the members of the

Board.

• Give consideration to succession planning for directors.

• Prepare a description of the role and capabilities required for any Board

appointment including that of Chairman.

• Make recommendations to the Board concerning the standing for

reappointment of directors.

• Identify potential candidates to be appointed as directors, and make

recommendations to the Board as the need may arise.

The Nomination Committee also determines succession plans for the Chairman

and the Chief Executive, who will not be present at meetings when such matters

are being discussed.

The Nomination Committee will meet at least once a year and will also meet

when appropriate.

During the Year the Committee considered the desirability of appointing a

Chairman and a further non-executive director or directors, and also considered

the standing for reappointment of directors retiring by rotation.

Dave Forsey, as Chief Executive, will normally attend meetings of the

Nomination Committee, save where the Nomination Committee is dealing with

matters relating to him or with the appointment of his successor.

The Combined Code recommends that a majority of the Nomination Committee

be non-executive directors, independent in character and judgement and free

from any relationship or circumstance which may, could or would be likely to, or

appear to, affect their judgement.

The Committee currently consists of the Acting Chairman, and two independent

non-executive directors and accordingly the Committee’s structure now

complies with the recommendations set out in the Combined Code.

CORPORATE GOVERNANCE REPORT CONTINUED

Corporate Governance Report

Sports Direct International PLC Annual Report 2009 21

SHARE DEALING CODE

The Company has a code of securities dealings in relation to its shares and

other securities which is based on, and is at least as rigorous as, the Model

Code as published in the Listing Rules. The code applies to the directors and to

other appropriate employees of the Group.

INTERNAL CONTROLS AND RISK MANAGEMENT

The directors have overall responsibility for the Group’s system of internal

control and risk management for reviewing their effectiveness. The systems

of internal control and risk management are designed to manage, rather than

eliminate, the risk of failing to achieve business objectives. Such a system can,

however, provide only reasonable, and not absolute, assurance against material

misstatement or loss.

Members of the Board have responsibility for monitoring the conduct and

operations of individual businesses within the Group. This includes the review

and approval of business strategies and plans, the setting of key business

performance targets and the analysis of risk. The executive management

responsible for each business is accountable for the conduct and performance

of their business within agreed strategies.

Business plans and budgets for each business include ﬁnancial and strategic

targets against which performance is monitored. Monitoring includes the

examination of and changes to rolling annual and quarterly forecasts, monthly

measurement of actual achievement against key performance targets and

plans, and weekly reviews of performance.

The Group has clear procedures for the approval and control of expenditure.

Strategic investment decisions involving both capital and revenue expenditure

are subject to formal detailed appraisal and review according to approval levels

set by the Board. Operating expenditure is controlled within each business

with approval levels for such expenditure being determined by the individual

businesses.

The Group has a formal whistle blowing policy for employees who wish to raise

any issues or concerns relating to the Company’s or Group’s activities on a

conﬁdential basis.

Executive management is responsible for the identiﬁcation, evaluation and

management of the signiﬁcant risks applicable to their areas of business and

for the development of a disaster mitigation and recovery programme.

The Group operates a Retail Support Unit which provides strong operational

internal audit services in the retail division, and there are procedures in place in

the Brands division to monitor and control licensees.

The Board Audit Committee assists the Board in fulﬁlling its oversight

responsibilities, reviewing the reporting of ﬁnancial and non-ﬁnancial

information to shareholders and the audit process, satisfying itself that

appropriate systems of internal control and risk management are in place and

are serving to identify and manage risk. The auditors attend all meetings of

the Audit Committee, save for those parts of any meeting when the Committee

reviews the performance of the auditors and when the Committee is having

separate discussions with the Group Finance Director.

With the exception of Heatons, the Groups only material associate, the Group’s

system of internal control and risk management and its effectiveness is

monitored and reviewed by the Board, the Audit Committee and management,

and the Board believes that the Group has maintained throughout the Year

and up to the date of approval of the annual report and accounts an effective

embedded system of internal control and has complied with the Turnbull

guidance.

SOCIAL, ENVIRONMENTAL AND ETHICAL MATTERS

The Group has for many years, recognised the beneﬁts that accrue from

responsible employment, environmental and community policies. Details

of the Group’s activities in this area are set out in the Corporate and Social

Responsibility Report on pages 28 to 30.

DIRECTORS’ REMUNERATION REPORT

This report has been prepared in accordance with the requirements of

Regulation II and Schedule 8 of the Large and Medium-sized Companies and

Groups (Accounts and Reports) Regulations 2008 (the Regulations) and of the

Combined Code on Corporate Governance 2008 (“the Combined Code”).

UNAUDITED INFORMATION

THE REMUNERATION COMMITTEE

During the 52 weeks ended 26 April 2009 (the Year), the members of the

Remuneration Committee (the Committee), were:

• Dave Singleton (Chairman)

• Simon Bentley

• Malcolm Dalgleish

Dave Singleton and Malcolm Dalgleish are independent non-executive directors.

Simon Bentley was an independent non-executive director on his appointment

as Acting Chairman.

The main responsibilities of the Committee are summarised in the Corporate

Governance Report on page 20.

ADVISERS

The Committee has appointed Towers Perrin to provide it with independent

advice in determining the appropriate remuneration, including bonus schemes,

and other terms and conditions of employment of directors, and to assist it in

the review of remuneration policies and practices throughout the Group.

Towers Perrin has, with the consent of the Committee, assisted the Company

in the past by providing market data and advice in connection with the

remuneration of senior managers. The Committee is conscious of the need to

ensure that no conﬂict of interest arises as a result of Towers Perrin advising

both it and the Company, but believes that the beneﬁts of consistent advice

outweighs the possible problems that could arise from these arrangements.

A summary of the terms of reference of Towers Perrin in their role as

independent advisors to the Committee are set out on the Company’s website

and are available upon request from the Company Secretary.

Dave Forsey, the Chief Executive, Bob Mellors, the Group Finance Director, and

Mike Ashley, the Executive Deputy Chairman have also advised or materially

assisted the Committee when requested.

REMUNERATION POLICY

The Committee has endorsed the provisions of Section 1B of the Combined

Code, and has had those provisions in mind when determining remuneration

policies for the past, current and future years. Policies and practice in respect

of remuneration inevitably evolve over time and, while it is currently believed

that the policies described in this report will apply in future years, they will be

subject to regular review.

The Group operates in a highly competitive retail environment, and the

Committee seeks to ensure that the level and form of remuneration is

sufﬁcient to attract, retain and motivate directors and senior managers of the

quality and talent required to run the Group successfully. In order to maintain

the Group’s historic focus on growth, the Committee has adopted a strongly

performance based remuneration policy for executive directors, under which

a large proportion of their remuneration will be dependent upon the Group’s

performance, and paid in shares.

Basic salaries for executive directors other than Mike Ashley have been set at

a level well below the median level for a business of the size and complexity

of the Group. The maximum payment under the annual bonus plan during the

Year was 100% of salary, and the Performance Share Plan permits annual

grants of up to four times salary. The maximum payment under the proposed

Bonus Share Scheme, described below, is shares having a market value of

approximately 100% of salary, deferred for 2 years. If the establishment of the

Bonus Share Scheme is approved then it will replace the Annual Bonus Scheme

during the term of the Bonus Share Scheme.

If the Committee were to change its policy on basic salaries, then it would

revisit the salary multiple for grants under the Performance Share Plan, and the

Committee’s remuneration policy set out above will not necessarily apply to any

new appointment to the Board.

Mike Ashley has agreed that he will not receive a salary for his role as Executive

Deputy Chairman, nor does he participate in the Performance Share Plan, and

he will not participate in the Bonus Share Scheme if approved.

Executive directors do not participate in a company pension arrangement in

respect of which the Company makes a ﬁnancial contribution, and do not have

the use of a company car or other similar beneﬁts often available to executive

directors. Towers Perrin has advised the Committee that in aggregate the total

remuneration of Dave Forsey and Bob Mellors is well below median.

The Committee intends to establish and thereafter maintain contact with

major shareholders and representative groups where appropriate concerning

remuneration matters.

The expected value of a four times salary award under the Performance

Share Plan is approximately 170% of salary. Accordingly, if the Company’s

performance meets target levels, disregarding the proposed Bonus Share

Scheme, performance related pay in 2009-10 is likely to account for

approximately 70% of Dave Forsey and Bob Mellors’ total remuneration, and

at upper quartile performance, performance related pay would account for

approximately 85% of total remuneration, depending in each case on share

price improvement during the relevant performance period. The expected

value of the Bonus Share Scheme, if approved, is approximately 100% of salary

over four years. If target level performance under that and other schemes is

reached in 2009-10 then performance related pay in that year is likely to account

for approximately 66% of Dave Forsey and Bob Mellors total remuneration

and at upper quartile performance related pay would account for 81% of total

remuneration depending upon share price performance.

The Committee is at all times mindful of the Company’s social, ethical and

environmental responsibilities, and is satisﬁed that current remuneration

arrangements do not inadvertently encourage irresponsible behaviour.

REMUNERATION POLICIES AND KEY ELEMENTS OF REMUNERATION

The Committee has reviewed the salaries, other remuneration and other

employment conditions of senior and middle managers throughout the Group,

and has taken them into account in considering directors salaries, bonus

awards and the creation of new bonus schemes in order to create a sense of

common purpose and sharing of success. The Performance Share Plan has

been extended to certain senior managers and the proposed Bonus Share

Scheme will apply to all UK permanent employees of the Group in the UK

Retail, Brands and Head Ofﬁce on the same basis, including applying the same

percentage of salary, irrespective of seniority.

Executive directors’ remuneration and the remuneration of other key senior

management during the Year comprised:

• Basic Salary

• Annual Bonus Scheme

• Performance Share Plan

• Pension

Subject to approval of the Bonus Share Scheme at the Annual General Meeting,

it is intended that in 2009-10 executive directors’ remuneration will comprise

the Bonus Share Scheme and the elements listed above other than the Annual

Bonus Scheme.

BASIC SALARY

Basic salaries are reviewed annually, but the ﬁrst review post the Admission of

the Company to the ofﬁcial list and to trading on the London Stock Exchange

on 2 March 2007 (Admission) did not take place until April 2008. There was no

increase in executive directors’ salaries on that review and in April 2009 the

Committee decided again not to alter executive directors’ salaries. Executive

directors’ salaries have now been at the same level since 2002.

ANNUAL BONUS SCHEME

The Annual Bonus Scheme rewards executive directors for achieving

challenging business performance targets, chosen at the beginning of the

period for their relevance in driving the short term performance of the Group

towards the achievement of strategic goals. In the Year the maximum bonus

payable to Dave Forsey and Bob Mellors was 100% of salary, and one half of the

bonus was to be paid if both target sales and target EBITDA were achieved, and

the remainder of the bonus would be paid if target sales are achieved and if a

stretch target EBITDA is achieved, with no intermediate payments. Performance

was such that no bonus was paid in respect of the Year.

The Committee has determined that, if the proposed Bonus Share Scheme is

approved at the Company’s Annual General Meeting in September 2009 and

implemented with effect from the beginning of the current ﬁnancial year, then

no Annual Bonus Scheme will be operated for executive directors while the

Bonus Share Scheme is being operated. Mike Ashley did not participate in the

Annual Bonus Scheme for the Year, and will not participate in the proposed

Bonus Share Scheme.

Directors’ Remuneration Report

Sports Direct International PLC Annual Report 2009 23

THE PERFORMANCE SHARE PLAN

The Performance Share Plan was adopted on 11 February 2007, and provides

a direct link between executive directors’ remuneration and the return to

shareholders.

The maximum number of shares that an executive director may acquire

pursuant to share awards granted to him in any ﬁnancial year may not have an

aggregate market value, as measured at the date of grant, exceeding 400% of

his annual basic salary. Market value for this purpose is based on the closing

middle market quotation for a share as derived from the Daily Ofﬁcial List of the

London Stock Exchange for the dealing day immediately preceding the date of

grant.

On 5 April 2007, during the 42-day period following Admission, share awards

were granted to each of Dave Forsey and Bob Mellors relating to 400% of their

basic salary. No awards were made during the 2007-08 ﬁnancial year as the

performance period for any awards that would have been made during that year

would have ended at the same time as the awards made on 5 April 2007. Awards

under the Plan relating to 400% of basic salary were made to Dave Forsey and

Bob Mellors on 16 July 2008.

Share awards under the Performance Share Plan are subject to performance

conditions imposed by the Committee at the time of grant. The extent to which

the performance conditions are satisﬁed will determine how many (if any) of the

shares each executive director is entitled to receive. Performance conditions

are not capable of being retested, so that any proportion of a share award which

does not vest on the normal vesting date will lapse.

The Committee determined in respect of the ﬁrst grants made under the plan

that the vesting of 50% of the awards would be subject to a performance target

based on the earnings per share (“EPS”) growth of the Company over the

designated performance period. The remaining 50% of the awards are subject

to a performance target based on the Company’s total shareholder return

(“TSR”) over the same performance period when compared against a group of

comparator companies. The Committee applied the same targets for the grants

made in 2008.

The performance period for grants under the Performance Share Plan will

usually be the three consecutive ﬁnancial years commencing with the ﬁnancial

year in which the option or award is granted, but for the initial awards following

Admission, the performance period runs from the date of grant to 25 April 2010

(the end of the 2009-10 ﬁnancial year).

EPS was chosen as a performance measure because it is an absolute measure

of real Group performance.

The Committee chose TSR as a performance measure because it compares

the actual returns to shareholders with the actual returns to shareholders

in a comparator group of companies, thus providing a relative measure of

performance. The Committee believes that the combination of absolute and

relative measure is the best way to align the interest of the director with the

actual return to shareholders, and that the targets reﬂect the history of growth

in the Company’s businesses and are challenging but achievable.

EPS growth over the ﬁrst performance period will be calculated by reference

to the EPS as derived from the pro forma accounts prepared for the 26 week

period to 29 October 2006, EPS growth for subsequent performance periods will

be calculated by reference to EPS stated in the appropriate published accounts.

For the purpose of the Performance Share Plan, EPS means the diluted

earnings per ordinary share of the Company calculated in accordance with IAS

33 Earnings Per Share or any modiﬁcation or replacement to that standard with

which the Company is obliged to comply provided that the Committee has the

power (after consultation with the auditors) to adjust the EPS ﬁgure to arrive at

a ﬁgure which reﬂects underlying business performance of the Group and also

to take such steps as necessary to ensure that relevant accounting standards

are applied on a consistent basis.

The number of shares that will vest under the EPS tranche of each award will be

determined as follows:

EPS Growth Percentage of shares in EPS tranche that vest

Below 19% per annum 0

19% per annum (“Threshold”) 25

24% per annum (“Target”) 50

29% per annum (“Stretch”) 100

Shares comprised in the EPS tranche will vest on a straight-line basis for

performance between Threshold and Target and between Target and Stretch.

TSR means, in relation to a share in the Company or an ordinary share in a

company in the comparator group in a performance period, the aggregate of

the increase above or decrease below the average market value of such a share

at the beginning of the relevant performance period and the aggregate value of

dividends paid in that performance period (excluding any tax credit), where each

such dividend is deemed to have been reinvested in the shares of each relevant

company from the date of payment of the dividend to the last day of the

performance period.

The initial comparator group of companies comprised the following companies:

• Marks & Spencer plc

• Kingﬁsher plc

• Next Group plc

• Home Retail Group plc

• DSG International plc

• The Carphone Warehouse Group plc

• Signet Group plc

• Kesa Electrical plc

• Debenhams plc

• N Brown Group plc

• Galiform plc

• Carpetright plc

• Halfords Group plc

• W H Smith plc

• JJB Sports plc

• HMV Group plc

• JD Sports Fashion Plc

• Blacks Leisure Group plc

• Mothercare plc

Mothercare plc has replaced Umbro plc in the comparator group following its

acquisition by Nike and subsequent delisting. The Committee will keep the

comparator group under review and will, if and when it considers appropriate,

include additional companies to replace any of the existing comparator group

that are no longer appropriate or listed.

TSR was calculated for the ﬁrst grants made in the 42 days following Admission

using average market value of shares in each company in the comparator group

over the 20 dealing days immediately following Admission. For subsequent

grants TSR is calculated using the average value of shares of companies in the

comparator group on the last day of the ﬁnancial year.

The percentage of the shares comprised in the TSR tranche that vest will be

determined by reference to the Company’s TSR ranking within the comparator

group at the end of the performance period as follows:

TSR Ranking Percentage of shares in TSR tranche that vest

Upper quartile 100

Median 25

Below median 0

Shares comprised in the TSR tranche will vest on a straight-line basis for

performance between median and upper quartile.

The Committee may amend the performance conditions if an event occurs that

causes it reasonably to consider that the original performance conditions are no

longer, without alteration, a fair measure of performance, provided that the

amended conditions are at least as challenging as the original performance

conditions. Any such amendment will be disclosed in the directors’

remuneration report following the amendment.

During the Year the Committee reviewed the performance conditions and

business performance to date against those conditions, and determined that,

for the time being, they were satisﬁed that the conditions remained appropriate.

The Committee may, however, set different performance conditions for future

awards.

Subject to satisfaction of applicable performance conditions, awards will vest at

the end of the performance period and vested share awards will be released to

participants automatically as soon as practicable after the date the shares vest.

Share awards may normally only vest if the executive director remains in

employment with the Group. If a participant leaves employment before the

vesting date, the share awards will normally lapse. However, if the reason

for leaving is injury, disability, ill-health, the sale of the business or company

in which the executive director is employed, or any other reason, at the

Committee’s discretion, a participant’s awards will not lapse and will vest on the

original vesting date to the extent the performance conditions have been met.

DIRECTORS’ REMUNERATION REPORT CONTINUED

The number of shares which are released or capable of exercise will be pro-

rated to reﬂect the proportion of the performance period the participant was

actually employed unless the Committee determines otherwise. In the event of

a participant’s death, a share award may be released to or exercised by their

personal representatives.

In the event of a takeover, scheme of arrangement (other than a scheme

to create a new holding company for the Company having substantially the

same shareholders as the Company) or voluntary winding-up of the Company,

share awards will vest following such an event to the extent the performance

conditions have been met but on a time pro-rated basis. Share awards may also

by agreement, be exchanged for equivalent share awards or options over shares

in the acquiring company.

The Committee has determined that, upon the vesting of any award, a

participant will receive additional shares representing the gross value of

dividends as if they had been paid on those shares and reinvested during the

performance period.

The Company reviews awards under the Performance Share Plan in terms

of their effect on dilution limits, and seeks to comply with the dilution limits

recommended by the Association of British Insurers for such plans. At the end

of the Year the Company was within those limits.

The Company has established a discretionary trust to acquire and hold, or to

enter into agreements to procure the delivery of shares required to satisfy share

awards granted under the Performance Share Plan.

THE PROPOSED BONUS SHARE SCHEME

The scheme is intended to motivate and help improve the retention of

employees, to encourage employee participation in the shares of the Company,

to align the interests of employees and shareholders, and to drive Underlying

EBITDA.

All permanent UK employees in UK Retail, Brands and Head Ofﬁce with not less

than one years service at the beginning 2009-10 will participate, irrespective

of seniority. The scheme will replace, where relevant, existing annual bonus

schemes, but not workplace based schemes. More details of the scheme are

given in the notice calling the 2009 Annual General Meeting of the Company.

The bonus is in two stages. The ﬁrst bonus is 25% of base pay in shares at a

notional share price of £1.00 per share. The bonus target is Underlying EBITDA

of £155m in 2009-10.

The ﬁrst bonus will vest two years after the EBITDA target of £155m is reached,

and is subject to continuous employment until then.

The second bonus is 75% of base pay in shares at a notional share price of £1.25

per share. The second stage of the bonus is conditional upon the ﬁrst bonus

target being met in 2009-10, and the second bonus targets are:

• Underlying EBITDA of £195m in 2010-2011, and

• Underlying EBITDA/Net Debt ratio of 2 or less at the end of 2010-11

The second bonus will vest, subject to continuous employment until then, 2

years after the second bonus target is met.

The performance conditions have to be satisﬁed after taking account of scheme

costs. They are stretch targets, requiring an increase in Underlying EBITDA

(before scheme costs) of approximately £26m (19.0%) and £66m (48.2%)

respectively.

The Committee (which will administer the scheme) will adjust reported

underlying Group EBITDA each year during which the scheme is running for the

purpose of the scheme to ensure consistency in the calculation of underlying

EBITDA and to ensure that underlying EBITDA is a fair comparison year by

year, for example, by eliminating the impact of acquisitions where the cost of

acquisitions is not reﬂected in underlying EBITDA.

Underlying EBITDA is as deﬁned on page 9 and is not at constant foreign

currency exchange rates.

The Committee believes that the scheme will drive performance in the short

to medium term, encourage retention and align the interest of employees and

shareholders. The Committee chose underlying EBITDA as the performance

measure as it is the prime measure that the Company uses internally

to measure performance and the Committee believes best reﬂects the

performance of the business, and the Net Debt to underlying EBITDA ratio

target to ensure that EBITDA was not enhanced by additional borrowing.

PENSION

Executive directors are entitled to participate in a stakeholder pension scheme

to which the Company makes no contribution.

SHARE OWNERSHIP POLICY

The Committee believes it to be important that executive directors have a

signiﬁcant holding in the capital of the Company. During the year Simon Bentley

purchased 250,000 shares, Malcolm Dalgleish purchased 80,694 shares, and

Dave Singleton increased his shareholding to 153,621 shares.

CONTRACTS OF SERVICE

On 11 February 2007, each executive director entered into a new service

agreement with the Company. The agreements became effective on Admission.

These contracts reﬂect the Committee’s policy on the duration of Executive

Directors service contracts and on notice periods and termination payments.

Each executive director’s employment is terminable by either party on 12

months’ written notice. The Company may elect to terminate the employment of

Dave Forsey and/or Bob Mellors by making a payment in lieu of notice equal to

the basic salary that the director would have received during the notice period

or, if notice has already been given, during the remainder thereof.

The Company may elect to pay any payment in lieu of notice by monthly

instalments during the outstanding notice periods, and if the director obtains

alternative employment or provides services pursuant to a consultancy

agreement while such payments are being made (the director being obliged

to use his best efforts to obtain such employment), each instalment falling

due after the commencement of such employment or provision of services

is reduced by one twelfth of the annual remuneration or fees received by the

director in respect of that alternative employment or consultancy.

Any entitlement to beneﬁts under any share related incentive scheme are

determined in accordance with the rules of that scheme.

Each executive director’s service contract automatically terminates on the date

that the director reaches such age as is determined by the Board from time to

time as the retirement age for executive directors.

The non-executive directors have each entered into a letter of appointment

with the Company, which became effective in the case of Simon Bentley,

on Admission, and in the case of Malcolm Dalgleish and Dave Singleton on

execution. Details of the letters of appointment are set out below:

Position

Annual fee

£’000

Date of letter of

appointment

Simon Bentley

(1)

Acting Chairman 144 11/02/2007

Malcolm Dalgleish Non-Executive Director 50 25/10/2007

Dave Singleton

(2)

Non-Executive Director 50 25/10/2007

(1) Simon Bentley received an annual fee of £40,000 per annum prior to appointment as Acting

Chairman. He currently receives an annual fee of £144,000 as Acting Chairman

(2) Dave Singleton received an additional £10,000 in respect of additional work and research

Non-executive directors do not and are not entitled to participate in any bonus

or share scheme.

Each non executive director’s appointment (other than the Chairman) is for an

initial period that expires on the date of the Company’s ﬁrst Annual General

Meeting after appointment. The appointment of each of Malcolm Dalgleish

and Dave Singleton was renewed at the AGM on 10 September 2008 and will

continue for a term of three years from then and then terminate unless renewed

prior to the expiry of that term.

Notwithstanding renewal for a three year term, the appointment of each of

Simon Bentley and Malcolm Dalgleish and Dave Singleton and the appointment

of Simon Bentley may be terminated at any time by either party on one months’

written notice.

Each of the appointments of the non-executive directors may also be terminated

in accordance with the Articles of Association of the Company, and immediately

in certain prescribed circumstances (including the bankruptcy of the non-

executive director).

In addition to the annual directors fees of £40,000 per annum referred to above,

prior to his appointment as Acting Chairman Simon Bentley was entitled to a fee

of £10,000 per annum as Chairman of the Audit Committee.

Non-executive directors are subject to conﬁdentiality undertakings without

limitation in time. Non-executive directors are not entitled to receive any

compensation on the termination of their appointment.

Directors’ Remuneration Report

Sports Direct International PLC Annual Report 2009 25

NON-EXECUTIVE DIRECTORSHIPS

The Board recognises that executive directors may be invited to become non-

executive directors of other companies, and that the experience and knowledge

gained as a result of such appointments are of beneﬁt to the Company.

Accordingly, the Board has agreed that the executive directors may accept one

such appointment, and retain any fees payable in respect thereof, subject to

there being no conﬂict of interest. No executive director currently holds any

such appointment.

PERFORMANCE GRAPH

The following graph, required by the Regulations, shows the Company’s

total shareholder return since Admission against that of the FTSE 250 index

(excluding investment trusts). The Committee considered this an appropriate

index against which to compare the Company’s performance as it is widely

accepted as a national measure and includes the companies that investors are

likely to consider alternative investments.

Historical TSR Performance

Growth in the Value of a Hypothetical £100 holding since Flotation up to Year End FTSE mid 250 excluding

Investment Trusts Comparison Based on Spot Values

SERVICE CONTRACTS

The Executive Directors’ service contracts are summarised in the following table

Name Contract date

Unexpired term/

notice period Proper law

Mike Ashley 11/02/2007 12 Months England & Wales

Dave Forsey 11/02/2007 12 Months England & Wales

Bob Mellors 11/02/2007 12 Months England & Wales

AUDITED INFORMATION

AUDITORS’ REPORT

The auditors are required to report on the information contained in the following

section of this report, other than in respect of directors’ shareholding.

DIRECTORS REMUNERATION 2009

The following pages set out an analysis of directors’ emoluments and annual

bonus, entitlements under the Performance Share Plan and shareholdings.

DIRECTORS’ EMOLUMENTS

An analysis of directors’ emoluments relating to salary and directors

fees, annual bonus and other beneﬁts (other than entitlements under the

Performance Share Plan and in respect of pensions) for the 52 weeks to 26 April

2009 (the Year) is set out below:

£000

Salaries

and fees Bonus

Other

beneﬁts Total 2009 Total 2008

Mike Ashley - - - -

Simon Bentley 144 - - 144 128

Chris Bulmer - - 24

Malcolm Dalgleish 50 - - 50 26

Dave Forsey 150 - - 150 150

Bob Mellors 150 - - 150 150

David Richardson - - 12

Dave Singleton 60 - - 60 26

Total 554 554 516

The aggregate of directors’ emoluments in the Year was £554,000: (2007-08: £515,333).

BASIC SALARY

The basic salaries of executive directors at the Year end and at 16 July 2009 (the

latest practicable date before the printing of this report) were as shown below:

At 26 April 2009 at 16 July 2009

At 26 April 2009 At 10 July 2009

Mike Ashley - -

Dave Forsey £150,000 £150,000

Bob Mellors £150,000 £150,000

ANNUAL BONUS SCHEME

Performance against business targets during the Year was such that no annual

bonus was earned by executive directors participating in the Annual Bonus

Scheme.

£140

£120

£100

£80

£60

£40

£20

£0

V A L U E O F H Y P O T H E T I C A L £ 1 0 0 H O L D I N G

FTSE 250 ex Investment Trusts

Sports Direct

27-Feb-07 29-Apr-07

DATE

26-Apr-0927-Apr-08

PERFORMANCE SHARE PLAN

Share awards under the Performance Share Plan were made to certain of the

executive directors as shown below:

Date of

award

Maximum

receivable

at 27 April

2008 (1)

awarded

during

the

Year

vested

during

the

Year

Maximum

receivable

at 26 April

2009

Market

Value per

share on

date of

award

Earliest

date of

vesting (2)

Dave

Forsey

5/04/2007 223,256 - - 223,256 268.75p 25/04/2010

16/07/2008 987,654 - 987,654 60.75p 25/04/2011

TOTAL 1,210,910

Bob

Mellors 5/04/2007 223,256 - - 223,256 268.75p 25/04/2010

16/07/2008 987,654 - 987,654 60.75p 25/04/2011

TOTAL 1,210,910

(1) The number of shares is the maximum number of shares that could be receivable by the

director if the performance conditions, outlined on pages 23 and 24, are fully met.

(2) The “Earliest Date of Vesting” is the end of the relevant performance period. The outcome for

that period and the number of awards that vest will not be known until July of the appropriate

year.

No share awards were made in 2007/08 as awards under the Performance

Share Plan were made in April 2007 (during the 42 days following Admission)

and the performance period for those awards ends at the same time as the

performance period for any awards that may have been made during that Year.

DIRECTORS’ SHAREHOLDINGS

The beneﬁcial interests of the directors in ofﬁce on 26 April 2009 and of their

families in both cases at the beginning of the Year, or at the date of appointment

if later, and at the end of the Year in the share capital of the Company are shown

below:

Ordinary Shares

27 April 2008

Ordinary Shares

26 April 2009

and 16 July 2009

Mike Ashley 410,400,000 410,400,000

Simon Bentley - 250,000

Malcolm Dalgleish 75,000 80,694

Dave Forsey 1,000,000 1,000,000

Bob Mellors 1,000,000 1,000,000

Dave Singleton 3,621 153,621

PENSION CONTRIBUTIONS

The Company made no contributions to directors’ money purchase pension

schemes during the year.

Dave Singleton

Chairman of the Board Remuneration Committee

16 July 2009

DIRECTORS’ REMUNERATION REPORT CONTINUED

Directors’ Remuneration Report

Sports Direct International PLC Annual Report 2009 27

DIRECTORS’ RESPONSIBILITIES

The directors are responsible for preparing the Annual Report and the

Company and Group ﬁnancial statements in accordance with applicable law and

regulations.

Company law requires the directors to prepare ﬁnancial statements for each

ﬁnancial year which give a true and fair view of the state of affairs of the

Company and the Group as at the end of the ﬁnancial period and of the proﬁts

or loss of the Group for that period. Under that law the directors are required

to prepare the Group ﬁnancial statements in accordance with International

Financial Reporting Standards as adopted by the European Union (IFRSs)

The directors have elected to prepare the Company ﬁnancial statements in

accordance with United Kingdom Generally Accepted Accounting Practices (UK

GAAP).

In preparing each of the Company and Group ﬁnancial statements, the directors

are required to:

• select suitable accounting policies and then apply them consistently;

• make judgements and estimates that are reasonable and prudent;

• for the Group ﬁnancial statements, state whether applicable IFRSs have

been followed, subject to any material departures disclosed and explained

in the ﬁnancial statement;

• for the Company ﬁnancial statements, state whether applicable UK

Accounting Standards have been followed, subject to any material

departures disclosed and explained in the ﬁnancial statements; and

• prepare the ﬁnancial statements on the going concerns basis unless it is

inappropriate to presume that the Company and Group will continue in

business.

The directors are responsible for keeping proper accounting records that

disclose with reasonable accuracy the ﬁnancial position of the Company and

the Group and enable them to ensure that the ﬁnancial statements comply with

the Companies Act 2006 and Article 4 of the IAS Regulation. They have general

responsibility for the system of internal control, taking such steps as are

reasonably open to them to safeguard the assets of the Company and the Group

and to prevent and detect fraud and other irregularities.

Under applicable law and regulations, the directors are also responsible for

preparing a Directors’ Report, Directors’ Remuneration Report and Corporate

Governance Report that comply with that law and those regulations.

In so far as the directors are aware:

• there is no relevant audit information of which the Company’s auditors are

unaware; and

• the directors have taken all steps that they ought to have taken to make

themselves aware of any relevant audit information and to establish that

the auditors are aware of that information.

The directors are responsible for the maintenance and integrity of the corporate

and ﬁnancial information included on the company’s website. Legislation in the

UK governing the preparation and dissemination of ﬁnancial statements may

differ from legislation in other jurisdictions.

RESPONSIBILITY STATEMENT

To the best of my knowledge:

(a) the ﬁnancial statements, prepared in accordance with the

applicable set of accounting standards, give a true and fair view of

the assets, liabilities, ﬁnancial position and proﬁt of the Company

and of the undertakings included in the consolidation taken as a

whole;

and

(b) the management report includes a fair review of the development

and performance of the business and the position of the Company

and the undertakings included in the consolidation taken as a whole,

together with a description of the principal risks and uncertainties

that they face.

By Order of the Board

Dave Forsey

Chief Executive

Bob Mellors

Group Finance Director

16 July 2009

DIRECTORS’ RESPONSIBILITIES AND RESPONSIBILITY STATEMENT

The Board recognises the importance of balancing the interests of all its key

stakeholders, including customers, employees, shareholders, suppliers and the

communities in which it operates. A formal Corporate and Social Responsibility

policy was adopted last year and the Board is committed to applying and

developing this policy at every level of the business.

Last year we reported that the focus of our CSR activities were in ﬁve key areas,

Employees Health and Safety, Customers, the Environment and the Community,

and this remains the case. The Group has developed Key Performance

Indicators (KPIs) in respect of these areas, which are further discussed in this

report and in the Chief Executive’s Report and Business Review on Page 8.

These KPIs are based solely on our UK operations.

This report examines each key area in turn, reviewing the current situation, the

facts, ﬁgures and our successes to date, and the opportunities for the present

year and for the future.

EMPLOYEES

The Group currently employ 15,900 people in the UK and 750 elsewhere in the

world. As the business continues to grow it is the skill and enthusiasm of these

employees that are key to its success.

In the UK 93% of our people work in our stores and in store management. 5%

of the UK workforce work at our Shirebrook campus, of which 3.8% work in

our National Distribution Centre, and 1.2% in the Group Head Ofﬁce, Finance,

Buying, Brands, Retail and IT departments. Of our UK Workforce 58% are male

and 42% female.

Employee retention is one of our key KPIs. This Year 29.0% of our UK employees

left the business; the vast majority of them were from our stores.

Retention of employees is extremely important both in terms of retaining

expertise, and as a measure of employee satisfaction, and the Board receives a

monthly report on the turnover of employees.

The Group believes in rewarding employees with fair salaries together with

the opportunity to earn additional pay in the form of bonuses. We monitor our

rates of pay against national statistics on an annual basis. We believe that

performance based rewards are beneﬁcial to the business and foster greater

employee involvement in it, and this policy starts at the Board and ﬂows down to

all levels of the business. The Bonus Share Scheme, described in the Directors’

Remuneration Report on page 24, is intended to motivate further the Group’s UK

permanent employees in UK Retail, Brands and Head Ofﬁce, provide them with a

direct and substantial link between Group performance and their remuneration,

and encourage employee participation in the shares of the Group.

Last year the Staff Forum was established in Shirebrook, comprising elected

representatives from across departments and representatives of management.

The Forum meets monthly and discussions cover issues ranging from pay,

holidays and hours, to health and safety, working conditions, equipment

needs and developments in and the performance of the business. The

Forum encourages open discussion and a Board member will attend at least

once a year. Minutes of the Forum’s meetings are posted on notice boards

and representatives are encouraged to seek and reﬂect the views of their

constituents.

The Group recognises the right of employees to membership of a trade union

and has entered into an agreement with the trade union Unite in respect of

collective bargaining of pay, hours of work and holidays of certain groups of

employees in the National Distribution Centre.

The Group is committed to the equal treatment of its employees and has formal

policies in place that are reviewed on a regular basis. The Equal Opportunity and

Diversity policies ensure that employees are treated as individuals, fairly and

with respect providing fair and equal opportunities to employees regardless of

age, gender, ethnicity, social background, religion, disability or sexuality.

Every effort is made to provide disabled people with equal opportunities for

work, training and promotion. Applications for employment by disabled persons

are given full and fair consideration for all vacancies in accordance with their

particular aptitudes. Where an existing employee becomes disabled the

business makes every effort to provide continued employment in the same or

similar job or by offering retraining in order that the employee’s employment

within the Group may continue.

We continually review and update all our policies and procedures. The employee

handbook is being updated and will be distributed to all employees during 2010.

The Group places great importance in the training and development of

employees. We want them to be able to perform their duties to the best of their

abilities while wanting to retain these skills within the business.

Comprehensive induction training for managers and area managers takes place

at Shirebrook covering health and safety, environmental awareness, customer

service and the day to day running of a retail unit. During the Year 200 managers

and assistant managers attended this training, compared to 171 last year.

Each retail unit ensures that all its employees receive induction training. The

Group’s training strategy is to train managers who are then tasked to ensure

that all their employees receive training that is tailored to the circumstances of

their own business unit. We monitor how well training is being ﬁltered down into

the workplace by undertaking surveys of our store employees.

Last year it was reported that a management training programme covering

interview skills, effective communication, people skills and employment law

would be introduced during 2008, which it was. During the Year 113 employees

attended the programme and it is expected that the number of attendees will

increase in coming years.

The Group, as reported last year, has introduced refresher training as part of a

rolling programme, to ensure that all employees reinforce their existing skills

and update their knowledge and practices.

During the Year a training programme providing specialist training for those

employees responsible for the footwear departments within stores was

launched in order to raise the standards of service given to customers in this

area. Other speciﬁc training manuals on rackets, cricket and golf have been

rolled out on the company intranet to ensure that all employees improve their

knowledge in these areas.

All National Distribution Centre employees are given appropriate training on

joining on health and safety matters, communication, and relevant aspects of

employment law. English is not the ﬁrst language of many of these employees,

and the Group acknowledges that as it recruits from a diverse talent pool the

needs of these employees must be addressed. Accordingly, training often

involves the use of interpreters, and training materials, policy documents and

building signage are usually in multiple languages.

The Group promotes and fosters a culture of personal development for all.

The Group’s policy is to always look for internal promotion before external

recruitment.

HEALTH AND SAFETY

The Group is committed to appropriate standards of health and safety

performance. The Board has ultimate responsibility for Group health and safety

performance, and receives a monthly report on reportable accidents. The Chief

Executive has speciﬁc responsibility for health and safety and is the Chairman

of the Health and Safety Committee, which meets at least four times a year and

considers legislation, monitors accidents and seeks improvements in health and

safety matters throughout the businesses.

There were no environmental prosecutions or work related fatalities in the

business during 2008/09. During the Year 1,397 (2008:1,561) accidents across

the Group were reported to Head Ofﬁce, and of these 45 (2008:38) were

reportable to the Health and Safety Executive. Most accidents were slips, trips

and minor lacerations that occurred within the stores. As reported last year,

greater emphasis on health and safety training within the business has lead to

increased awareness of reporting procedures and recording of incidents under

health and safety legislation.

Training is undertaken in house by a team of qualiﬁed and experienced health

and safety ofﬁcers. Going forward the health and safety team will continue to

train store employees and monitor health and safety standards.

CUSTOMERS

The Group aims to ensure that all its customers enjoy a quality customer service

and that they are provided with products that are safe and ﬁt for purpose. The

business recognises that customers have diverse needs and works constantly

towards meeting them.

Monitoring customer satisfaction and responding to correspondence is a

continuous process. Customer Service teams collate management information

on service levels and this is circulated to the Board on a monthly basis. All

written complaints are recorded, including an analysis of the nature of the

complaint so that trends can be assessed and appropriate action taken. This

Year 4,820 complaints were logged with our customer service team, a reduction

of 7.49% on last year. The Group is constantly working on ways to improve

customer service at all levels within the Company from the retail stores, head

ofﬁce and through our website.

CORPORATE AND SOCIAL RESPONSIBILITY REPORT

Corporate and Social Responsibility Report

Sports Direct International PLC Annual Report 2009 29

During 2008/09 a customer service handbook and returns guide was issued to

all stores to strengthen and build upon the customer service training that all

employees undertake.

Our aim for the future is to also offer our customers an online customer

comment form that can be dealt with entirely electronically. This will reduce the

time it takes for our customers to contact us and receive a response thereby

increasing our service levels, whilst reducing the print and postage costs for

both the Group and customers. We are also integrating the store and website

customer service functions to reduce costs and increase expertise available to

handle the complaints process.

ENVIRONMENT

As a Group we are aware that our operations impact the environment in a

number of ways and it is our responsibility to manage effectively the areas

we have direct control over while attempting to inﬂuence the actions of other

areas that are outside of our control. We seek to reduce the negative impact

the Group has on the environment while working towards compliance with the

Government’s Carbon Reduction Commitment. Building upon investigations

last year we have identiﬁed property, in particular energy usage in our stores,

transport and waste management at both our Shirebrook and in stores as areas,

where we can make a difference.

The Group is committed to reducing its carbon footprint. Our network of 359

stores is the largest user of energy in the Group and therefore the biggest

contributor to CO

emissions.

As reported last year the Group in conjunction with an external consultancy

monitor the daily usage of energy in a number of stores in the UK Retail

business and the Shirebrook campus. During the Year the number of stores

being constantly and remotely monitored has increased from 150 to 188. Poorly

performing stores are identiﬁed and steps taken to reduce wastage, and lessons

learnt applied across the store portfolio. During the Year the UK Retail business

and Shirebrook used 99GWh of electricity, a 8.54% decrease on the previous

year’s consumption. The target reduction was 10% (which was not achieved)

but the shop ﬂoor square footage in UK retail had increased by 134,403 square

feet. Night time consumption decreased by 14%, beating the target of 7%. The

year on year reduction has been achieved through a back to basics approach,

improved energy awareness and good housekeeping. A bonus scheme is in

place for all store managers, of which energy consumption reduction is a key

performance measure.

The second biggest contributor to our C0

emission is the ﬂeet of vehicles that

service the stores. We have 143 commercial vehicles travelling approximately

5.5 million miles per year using 3 million litres of diesel. The ﬂeet has recently

been updated so that all the vehicles are all Euro V emission compliant, and

considerable effort is made to minimise mileage covered.

The business has made further progress with its recycling and reducing the

amount of waste that is put into landﬁll.

Where possible we recycle electrical waste, ink toners, redundant IT equipment

and light bulbs. This Year we recycled 1,148 (2008:1,648) units of electrical

equipment, the reduction being largely due to the decrease in number of stores

as a consequence of the disposal of Original Shoe Company, and the completion

of the integration of acquired stores.

The Group recycles waste paper, cardboard, metal, and plastic. During the Year

40 tonnes of waste paper, 6,007 tonnes of cardboard, 33 tonnes of metal and

469 tonnes of plastic were recycled. 90% of the recycled plastic had been back

ﬁlled from stores. Where possible we also recycle the wood that we collect at

our distribution centre. In the past all wood was sold for recycling, but it has

now been determined to be cost effective to repair pallets, and a programme of

repair will begin in 2009/10.

We work hard to reduce the amount of waste going to landﬁll and during the

Year this reduced to 1,333 tonnes from 1,400 tonnes in 2008.

Since 2006 we have reused clothes hangers within stores, only returning a

hanger to our distribution centre for disposal when damaged. Through our

employees concerted efforts we have reduced the number of hangers purchased

to under 2,700 hangers per store for 2008/09 (2007/08: 4,200), reusing over

600,000 hangers during the Year.

The Group has always kept its transit packaging to a minimum by the use of

metal roll cages. Each product is individually picked and packed into the roll

cage for onward movement to the stores. Only in exceptional circumstances are

plastic bags used to transport products.

An increasing number of our stores return their cardboard and plastic waste

to Shirebrook where it is recycled. We are conducting an in-depth review of

how our remaining store waste is disposed of and how it can be reduced and

recycled.

As reported last year all stores now use biodegradable carrier bags and provide

the option of a bag for life.

Our aim for the coming years are to improve year on year the amount of waste

that is recycled and reduce the amount of waste we send to landﬁll.

COMMUNITY

We recognise that consumers and stakeholders are becoming increasingly

interested in where we source our products.

The Group continues to procure merchandise from manufacturers who can

show that they uphold ethical employment and trading practices. The Group

has a Code of Ethics that it requires every supplier to adhere to. Amongst

other matters the Code provides for fair treatment of workers and their wages,

non-use of child labour, safe and healthy systems of work and no use of illegal

means or materials in the production of goods.

The Group has worked for many years with two leading supply chain companies

in Singapore and in South Korea to procure much of its own brand goods. The

Group believes that using their local knowledge, expertise and experience,

beneﬁts the business and the communities in which they operate more

effectively than would be the case if the Group carried on its own procurement

activities in those countries. Both companies have the highest social and

business ethics codes which match our Code of Ethics, and one adheres to the

Social Accountability 8000 (SA8000) Code.

The Group relies on those supply chain companies to inspect all suppliers and

manufacturers premises. Between them they have over 100 employees that

are based within each manufacturing unit for 2 to 3 days per week. Frequent

inspections are carried out randomly at short notice to ensure that the goods

meet the Group’s quality standards as well as assessing continued compliance

with SA8000 and the Group’s Code of Ethics. The Group complies with an

internationally recognised list of chemicals that are banned for use in fabrics.

The supply chain companies conduct random tests on fabric which are then

taken to a recognised laboratory for quality testing and to check that these

banned chemicals are not being used.

The Group has forged long term relationships with suppliers who have

demonstrated that their work practices are consistent with the Group’s

standards. Approximately 40% of the Group’s current suppliers have been

working with Group companies for 10 years or more and they comply with ISO

9001 standards.

In the UK, Sports Direct is the ofﬁcial sportswear partner of Cancer Research

UK’s Race For Life.

The Group endeavours to promote the participation in a wide range of sporting

activities primarily for children that would not normally have access to the

expertise or equipment needed for the sport.

The Group supports grassroots development programmes for squash and

badminton in Manchester. To date in squash, as a result of Dunlop’s provision

of sporting equipment including rackets and balls, over 70 primary schools

and approximately 1,300 children aged 6-10 have been able to participate in

the sport. In addition, over 100 children with disabilities have also had the

chance to try the sport using the equipment supplied by Dunlop. Approximately

20 qualiﬁed coaches are also supported by Dunlop to deliver the various

development programmes in place, with a total of £20,000 of product donated

throughout the Year.

Carlton, the Group’s specialist badminton brand has provided over 30 primary

schools with equipment, including rackets and shuttlecocks, helping over

500 children take part in the sport. In addition, a further 250 children aged

between 6-16 years have also participated in the sport as part of holiday camps

supported by sporting equipment totalling £10,000 provided by Carlton.

Slazenger are the exclusive cricket equipment supplier to the country’s most

recognised grassroots cricket development programme, ‘Chance to Shine’,

which is run through the English Cricket Boards charitable arm, the Cricket

Foundation. ‘Chance to Shine’ is a national campaign delivered through

individual projects throughout England and Wales. Each project provides a

structured coaching and competition programme for a group of schools that

would not normally have the chance to participate in the sport. The schools

are supported by professional qualiﬁed coaches, who are speciﬁcally trained

to work in a school environment, and the programme provides equipment and

training for teachers. In 2008/09, ‘Chance to Shine’ delivered 300 projects

involving 300 cricket clubs throughout 2,000 schools. The programme expands

each year through an additional 100 clubs and 600 schools and, subject to

funding, will ultimately reach one third of all primary and secondary schools and

support two million young people, initially, over a ten-year period. To date, over

226,000 children have beneﬁtted from the programme by receiving over 56,000

hours of coaching and discounted cricket equipment to the value of £130,000

has been supplied by Slazenger to enable the programme to run successfully.

Dunlop, through its support of The Dunlop Table-Tennis Masters Event, is also

contributing to the improvement in the lives of over 8,000 young people every

week in secondary schools. It is also with Dunlop’s support that the event

organizers Greenhouse, are able to organize activities that beneﬁt these young

people, helping them develop positive life skills through sport and performing

arts in areas of social deprivation.

In addition, Dunlop’s global “D Squad” talent support programme continues

to increase participation and performance levels of the most talented

juniors in tennis from around the world. Over 600 children world-wide are

continuing to beneﬁt from the programme. The Group also continues to supply

the International Tennis Federation with tennis equipment to their Junior

Development programme which promotes tournaments for young people aged

between 14-18 years in Central America, the Caribbean, South America, Eastern

Europe, Africa, Asia and the Paciﬁc regions.

In the United States, Everlast one of the Group’s specialist boxing brands

support numerous initiatives. Everlast assists in running the New York Golden

Gloves, the most prestigious amateur boxing tournament in the country by

providing products such as gloves and personal protective equipment. This is a

grassroots initiative that beneﬁts men and women age 16-34 as they compete in

amateur boxing and around 900 boxers compete each year. Everlast supported

this programme by supplying $20,000 worth of equipment each year.

USA Boxing is a non-proﬁt, national governing body of amateur Olympic-style

boxing, and is the United States’ member organization of the International

Amateur Boxing Association (AIBA). Everlast assists USA Boxing with the

provision of a mixture of boxing related product to a value of $60,000. This helps

the men’s, women’s, and junior Olympic boxing programs whose primary ages

are 14-34 years, as well as coaches and ofﬁcials.

The National Police Athletics/Activities Leagues, Inc (PAL) aim is to help

prevent juvenile crime and violence by providing civic, athletic, recreational

and educational opportunities and resources to PAL Chapters. Everlast is the

Ofﬁcial boxing partner of the National PAL and provides equipment and apparel

for their annual boxing tournament and National PAL boxing team. Everlast has

also assisted in the development of additional youth programs, and new Chapter

openings.

The Breast Cancer Research Foundation (BCRF) is dedicated to ﬁnding a cure

for breast cancer by funding clinical and genetic research. The foundation

beneﬁts women of all ages who have been affected by the disease as well as

women who may be at risk in their lifetime. Everlast donates to the BCRF a

proportion of the retail price of every pink hand wrap, pink training gloves and

key chains sold.

The Edwards Family Foundation was formed in 2001 with the intention of

providing holidays to less fortunate children. Everlast routinely donates over

$5,000 in product, and supplies athletes to attend their charity beneﬁts.

The Dr. Theodore Atlas Foundation was formed by world renown boxing trainer

Teddy Atlas, The Atlas foundation provides ﬁnancial assistance for medical bills

to beneﬁt lower income families in need. Everlast provides a $10,000 annual

product donation, as well as an additional $1,000 educational scholarship.

CORPORATE AND SOCIAL RESPONSIBILITY REPORT CONTINUED

Corporate and Social Responsibility Report

Sports Direct International PLC Annual Report 2009 31

FINANCIAL STATEMENTS

REPORT OF THE INDEPENDENT AUDITOR TO THE MEMBERS OF SPORTS DIRECT INTERNATIONAL PLC 32

CONSOLIDATED INCOME STATEMENT 33

CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE 34

CONSOLIDATED BALANCE SHEET 35

CONSOLIDATED CASH FLOW STATEMENT 36

NOTES TO THE FINANCIAL STATEMENTS 37

REPORT OF THE INDEPENDENT AUDITOR TO THE MEMBERS OF SPORTS DIRECT INTERNATIONAL PLC 67

COMPANY BALANCE SHEET 68

NOTES TO THE COMPANY FINANCIAL STATEMENTS 69

CONSOLIDATED 5 YEAR RECORD 72

SHAREHOLDER INFORMATION 73

NOTES 74

REPORT OF THE INDEPENDENT AUDITOR TO THE MEMBERS OF SPORTS DIRECT INTERNATIONAL PLC

We have audited the group ﬁnancial statements of Sports Direct International plc for the 52 week period to 26 April 2009 which comprise, the consolidated income

statement, the consolidated statement of recognised income and expense, the consolidated balance sheet, the consolidated cash ﬂow statement and notes 1 to 39. The

ﬁnancial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the

European Union.

This report is made solely to the company’s members, as a body, in accordance with Sections 495, 496 and 497 of the Companies Act 2006. Our audit work has been

undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the

fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work,

for this report, or for the opinions we have formed.

Respective responsibilities of directors and auditors

As explained more fully in the Directors’ Responsibilities Statement, the directors are responsible for the preparation of the group ﬁnancial statements and for being

satisﬁed that they give a true and fair view. Our responsibility is to audit the group ﬁnancial statements in accordance with applicable law and International Standards on

Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s (APB’s) Ethical Standards for Auditors.

Scope of the audit of the ﬁnancial statements

A description of the scope of an audit of ﬁnancial statements is provided on the APB’s web-site at www.frc.org.uk/apb/scope/UKP.

Opinion on ﬁnancial statements

In our opinion the group ﬁnancial statements:

• give a true and fair view of the state of the group’s affairs as at 26 April 2009 and of its loss for the 52 week period then ended;

• have been properly prepared in accordance with IFRSs as adopted by the European Union; and

• have been prepared in accordance with the requirements of the Companies Act 2006 and Article 4 of the IAS Regulation.

Opinion on other matters prescribed by the Companies Act 2006

• In our opinion the information given in the Directors’ Report for the 52 week period to 26 April 2009 for which the ﬁnancial statements are prepared is consistent

with the ﬁnancial statements.

Matters on which we are required to report by exception

We have nothing to report in respect of the following:

Under the Companies Act 2006 we are required to report to you if, in our opinion:

• certain disclosures of directors’ remuneration speciﬁed by law are not made; or

• we have not received all the information and explanations we require for our audit.

Under the Listing Rules we are required to review:

• the directors’ statement, set out on page 14, in relation to going concern; and

• the part of the Corporate Governance Statement relating to the company’s compliance with the nine provisions of the 2006 Combined Code speciﬁed for our review.

Other matters

We have reported separately on the parent company ﬁnancial statements of Sports Direct International plc for the 52 week period to 26 April 2009 and the information in

the Directors’ Remuneration Report that is described as having been audited.

David Miller

Senior Statutory Auditor

for and on behalf of Grant Thornton UK LLP, Registered Auditor, Chartered Accountants

London

16 July 2009

Financial Statements

CONSOLIDATED INCOME STATEMENT FOR THE 52 WEEKS ENDED 26 APRIL 2009

52 weeks ended

26 April 2009

52 weeks ended

27 April 2008

Notes £’000 £’000

Continuing operations:

Revenue

1,4 1,367,321 1,259,510

Cost of sales

(809,685) (709,809)

Gross proﬁt

557,636 549,701

Selling, distribution and administrative expenses

(463,297) (444,109)

Other operating income

5 4,004 4,023

Exceptional items

6 (30,514) -

Operating proﬁt

4, 7 67,829 109,615

Proﬁt on disposal of available-for-sale ﬁnancial assets

9 1,035 41,367

Transfer of historic losses on available-for-sale ﬁnancial assets

9 (53,156) -

Dividend income from investments

9 172 2,507

Finance income

10 15,927 5,370

Finance costs

11 (23,633) (45,006)

Share of proﬁt/(loss) of associated undertakings and joint ventures

16 2,482 5,020

Proﬁt before taxation

10,656 118,873

Taxation

12 (26,164) (41,126)

(Loss)/proﬁt for the period

(15,508) 77,747

Attributable to:

Equity holders of the Group

22 (15,838) 78,182

Minority interests

24 330 (435)

(Loss)/proﬁt for the period

4 (15,508) 77,747

Earnings per share from total and continuing operations attributable to the equity shareholders

Pence per

Basic earnings per share

13 (2.79) 12.23

Diluted earnings per share

13 (2.79) 12.23

The accompanying accounting policies and notes form part of these ﬁnancial statements.

Sports Direct International PLC Annual Report 2009 33

CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE FOR THE 52 WEEKS ENDED 26 APRIL 2009

52 weeks ended

26 April 2009

52 weeks ended

27 April 2008

Notes £’000 £’000

Exchange differences on translation of foreign operations

22 44,654 4,763

Actuarial (losses)/gains on deﬁned beneﬁt pension schemes

26 (449) 1,683

Fair value adjustment in respect of available-for-sale ﬁnancial assets

17 (28,586) (20,571)

Transfer of historic losses on available-for-sale ﬁnancial assets

17 53,156 -

Taxation on items taken directly to equity

27 (6,849) 5,760

Income and expense recognised directly in equity

61,926 (8,365)

(Loss)/proﬁt for the period

4 (15,508) 77,747

Total income and expense recognised in the period

46,418 69,382

Attributable to:

Equity holders of the Group

46,088 69,817

Minority interests

330 (435)

46,418 69,382

The accompanying accounting policies and notes form part of these ﬁnancial statements.

Financial Statements

52 weeks ended

26 April 2009

52 weeks ended

27 April 2008

Notes £’000 £’000

ASSETS

Non-current assets

Property, plant and equipment 14 295,795 322,792

Intangible assets 15 221,958 185,010

Investments in associated undertakings and joint ventures 16 32,379 28,452

Available-for-sale ﬁnancial assets 17 5,467 65,714

Deferred tax assets 27 15,468 29,110

571,067 631,078

Current assets

Inventories 18 262,263 218,763

Trade and other receivables 19 111,932 94,481

Deferred tax assets 20 32,358 25,418

406,553 338,662

TOTAL ASSETS

977,620 969,740

EQUITY AND LIABILITIES

Share capital 21 64,045 64,045

Share premium 23 874,300 874,300

Treasury Shares reserve 22 (85,083) (201,483)

Permanent contribution to capital 23 50 50

Capital redemption reserve 23 8,005 8,005

Foreign currency translation reserve 22 48,580 3,926

Reverse combination reserve 23 (987,312) (987,312)

Own share reserve 22 (6,094) -

Retained earnings 22 233,964 363,636

150,450 125,167

Minority interests 24 3,232 3,242

Total equity

153,682 128,409

Non-current liabilities

Other payables 2,656 2,829

Borrowings 25 4,173 14,255

Derivative ﬁnancial liabilities 29 - 14,744

Retirement beneﬁt obligations 26 12,324 11,705

Deferred tax liabilities 27 33,490 26,422

Provisions 28 36,419 22,910

89,602 92,865

Current liabilities

Derivative ﬁnancial liabilities 29 34,993 32,894

Trade and other payables 30 209,739 207,598

Borrowings 25 458,899 476,400

Current tax liabilities 30,705 31,574

734,336 748,466

Total liabilities

823,938 841,331

TOTAL EQUITY AND LIABILITIES

977,620 969,740

The accompanying accounting policies and notes form part of these ﬁnancial statements. The ﬁnancial statements were approved by the Board on 16 July 2009 and were

signed on its behalf by:

Bob Mellors

Director

CONSOLIDATED BALANCE SHEET AS AT 26 APRIL 2009

Sports Direct International PLC Annual Report 2009 35

CONSOLIDATED CASH FLOW STATEMENT FOR THE 52 WEEKS ENDED 26 APRIL 2009

52 weeks ended

26 April 2009

52 weeks ended

27 April 2008

Notes £’000 £’000

Cash inﬂow from operating activities

32 117,470 59,519

Income taxes paid

(25,305) (37,638)

Net cash inﬂow from operating activities

92,165 21,881

Cash ﬂow from investing activities

Proceeds on disposal of property, plant and equipment

3,002 9,924

Proceeds on disposal of listed investments

13,807 595,921

Derecognition of listed investments

20,298 -

Proceeds on disposal of subsidiary

- 5,000

Purchase of subsidiaries, net of cash acquired

31 (6,608) (108,188)

Purchase of intangible assets

(3,958) (657)

Purchase of property, plant and equipment

(33,872) (128,180)

Purchase of listed investments

(4,887) (565,392)

Investment income received

2,088 3,696

Net cash outﬂow from investing activities

(10,130) (187,876)

Cash ﬂow from ﬁnancing activities

Finance income received

1,161 3,104

Finance costs paid

(23,633) (39,831)

Increase in/(repayments of) borrowings

1,745 (9,403)

Equity dividend paid

(25,580) (7,416)

Purchase of treasury shares

- (201,483)

Net cash outﬂow from ﬁnancing activities

(46,307) (255,029)

Net increase/(decrease) in cash and cash equivalents including overdrafts

35,728 (421,024)

Cash and cash equivalents including overdrafts at beginning of period

(446,053) (25,029)

Cash and cash equivalents including overdrafts at the period end

20 (410,325) (446,053)

The accompanying accounting policies and notes form part of these ﬁnancial statements.

Financial Statements

NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 APRIL 2009

1. ACCOUNTING POLICIES

The consolidated ﬁnancial statements of Sports Direct International Plc (the

“Company”) and its subsidiaries (together the “Group”) have been prepared in

accordance with International Financial Reporting Standards as adopted by the

European Union (“IFRS”).

No new IFRSs, International Financial Reporting Interpretations Committee

(IFRIC) interpretations and amendments have been adopted in the ﬁnancial

statements.

Basis of preparation

The consolidated ﬁnancial statements have been prepared in accordance

with IFRS as adopted for use in the European Union (including International

Accounting Standards (“IAS”) and International Financial Reporting

Interpretations Committee (“IFRIC”) interpretations) and with those parts of the

Companies Act 2006 applicable to companies reporting under IFRS as adopted

for use in the European Union. The consolidated ﬁnancial statements have

been prepared under the historical cost convention, as modiﬁed to include fair

valuation of ﬁnancial assets and derivative ﬁnancial instruments.

Consolidation

The consolidated ﬁnancial statements consolidate the revenues, costs, assets,

liabilities and cash ﬂows of the Company and its subsidiaries, being those

entities in relation to which the Company has the power to govern the ﬁnancial

and operating policies, generally achieved by a share of more than 50% of the

voting rights.

On acquisition, the assets and liabilities and contingent liabilities of a subsidiary

are measured at their fair values at the date of acquisition. Any excess of the

cost of acquisition over the fair values of the identiﬁable net assets acquired is

recognised as goodwill. Any deﬁciency of the cost of acquisition below the fair

values of the identiﬁable net assets acquired is credited to the consolidated

income statement in the period of acquisition. The interest of minority

shareholders is stated at the minority’s proportion of the fair values of the

assets and liabilities and contingent liabilities recognised.

The results of subsidiaries acquired or disposed of during the year are included

in the consolidated income statement from the effective date of acquisition or up

to the effective date of disposal, as appropriate.

Inter-company transactions, balances and unrealised gains and losses on

transactions between Group companies are eliminated.

Associates and joint ventures

Associates are entities over which the Group has signiﬁcant inﬂuence but not

control, generally accompanied by a share of between 20% and 50% of the

voting rights.

A joint venture is an entity in which the Group holds an interest on a long

term basis and which is jointly controlled by the Group and one or more other

ventures under a contractual agreement.

The Group’s share of the results of associates and joint ventures is included

in the Group’s consolidated income statement using the equity method of

accounting. Investments in associates and joint ventures are carried in the

Group’s consolidated balance sheet at cost plus post acquisition changes in the

Group’s share of the net assets of the associates, less any impairment in value.

The carrying values of investments in associates and joint ventures include

acquired goodwill.

If the Group’s share of losses in an associate or joint venture equals or exceeds

its investment in the associate or joint venture, the Group does not recognise

further losses, unless it has incurred obligations to do so or made payments on

behalf of the associate or joint venture.

Unrealised gains arising from transactions with associates and joint ventures

are eliminated to the extent of the Group’s interest in the entity.

Investments

For available-for-sale investments (except for contracts for difference), gains

and losses arising from changes in fair value are recognised directly in equity

through the statement of recognised income and expense, until the security is

disposed or derecognised at which time the cumulative gain or loss previously

recognised in equity is included in the consolidated income statement for

the period. If an available-for-sale investment is determined to be impaired,

the cumulative loss previously recognised in equity is included in the income

statement for the period.

Contracts for difference are a type of ﬁnancial instrument and therefore

gains and losses arising from changes in fair value of these investments are

recognised directly in the income statement.

Goodwill

Goodwill arising on consolidation is recognised as an asset and reviewed for

impairment at least annually or when a change in circumstances or situation

indicates that the goodwill has suffered an impairment loss. Any impairment

is recognised immediately in the income statement. Gains and losses on the

disposal of a business include the amount of goodwill relating to that business.

When the minority interests of an existing subsidiary are acquired the carrying

value of the minority interests in the balance sheet is eliminated. The excess of

consideration over the carrying value of the minority interests is recognised in

the balance sheet as goodwill and is not amortised.

Other intangible assets

Brands, trade marks and licences that are internally generated are not recorded

on the balance sheet. Acquired brands, trade marks and licences are initially

carried on the balance sheet at cost. The fair value of brands, trade marks and

licences that are acquired by virtue of a business combination is determined at

the date of acquisition and is subsequently assessed as being the deemed cost

to the Group.

No amortisation is charged on brands, trade marks or perpetual/renewable

licences with an indeﬁnite life as the Group believes that the value of these

brands and trade marks can be maintained indeﬁnitely. The Group carries out

an impairment review on the intangible assets, at least annually, or when a

change in circumstances or situation indicates that those brands have suffered

an impairment loss. Impairment is measured by comparing the carrying

amount of the intangible asset as part of the cash generating unit (CGU) with the

recoverable amount of the CGU, that is, the higher of its fair value less costs to

sell and its value in use. Value in use is calculated by discounting the expected

future cash ﬂows, using a discount rate based on an estimate of the rate that

the market would expect on an investment of comparable risk.

Amortisation is provided on brands, trade marks and licences with a deﬁnite

life over their useful economic lives of 10 to 15 years and is accounted for within

the selling, distribution and administrative expenses category within the income

statement.

Property, plant and equipment

Property, plant and equipment are stated at historical cost less depreciation

less any recognised impairment losses. Cost includes expenditure that

is directly attributable to the acquisition or construction of these items.

Subsequent costs are included in the asset’s carrying amount only when it is

probable that future economic beneﬁts associated with the item will ﬂow to the

Group and the costs can be measured reliably. All other costs, including repairs

and maintenance costs, are charged to the income statement in the period in

which they are incurred.

Depreciation is provided on all property, plant and equipment other than

freehold land and is calculated on a reducing balance basis or straight-

line basis, whichever is deemed by the directors to be more appropriate, to

allocate cost less assessed residual value, other than assets in the course of

construction, over the estimated useful lives, as follows:

Freehold buildings - 2% per annum

Leasehold property - over the term of the lease

Plant and equipment - between 5% and 33% per annum

The assets’ useful lives and residual values are reviewed and, if appropriate,

adjusted at each balance sheet date.

The gain or loss arising on disposal or scrapping of an asset is determined as

the difference between the sales proceeds, net of selling costs, and the carrying

amount of the asset and is recognised in the income statement.

Impairment of assets other than goodwill and intangible assets with an

indeﬁnite life

At each balance sheet date, the directors review the carrying amounts of the

Group’s tangible and intangible assets, other than goodwill and intangible

assets with an indeﬁnite life, to determine whether there is any indication that

those assets have suffered an impairment loss. If any such indication exists, the

recoverable amount of the asset is estimated in order to determine the extent

of the impairment loss, if any. Where the asset does not generate cash ﬂows

that are independent from other assets, the Group estimates the recoverable

amount of the cashgenerating unit to which the asset belongs.

Recoverable amount is the higher of fair value less costs to sell and value in

use. In assessing value in use, the estimated future cash ﬂows are discounted

to their present value using a pre-tax discount rate that reﬂects current market

assessments of the time value of money and the risks speciﬁc to the asset for

which the estimates of future cash ﬂows have not been adjusted.

Sports Direct International PLC Annual Report 2009 37

1. ACCOUNTING POLICIES CONTINUED

If the recoverable amount of an asset (or cash generating unit) is estimated

to be less than its carrying amount, the carrying amount of the asset (cash

generating unit) is reduced to its recoverable amount. An impairment loss is

recognised as an expense immediately, unless the relevant asset is carried at a

revalued amount, in which case the impairment loss is treated as a revaluation

decrease.

Impairment losses recognised for cash generating units, to which goodwill has

been allocated, are credited initially to the carrying amount of goodwill. Any

remaining impairment loss is charged pro rata to the other assets in the cash

generating unit.

Where an impairment loss subsequently reverses, the carrying amount of

the asset (cash generating unit) is increased to the revised estimate of its

recoverable amount, but so that the increased carrying amount does not exceed

the carrying amount that would have been determined had no impairment loss

been recognised for the asset (cash generating unit) in prior periods. A reversal

of an impairment loss is recognised in the income statement immediately.

Revenue recognition

Revenue is measured at the fair value of the consideration received or

receivable and represents amounts receivable for goods and services provided

in the normal course of business, net of discounts and sales related taxes.

In the case of goods sold through retail stores, revenue is recognised when

goods are sold to the customer, less provision for returns. Accumulated

experience is used to estimate and provide for such returns at the time of the

sale. Retail sales are usually in cash, by debit card or by credit card.

In the case of income generated from trade marks and licences, revenue is

recognised on an accruals basis in accordance with the relevant agreements or

on a transactional basis when revenue is linked to sale or purchase volumes.

Revenue from property related transactions is recognised when the relevant

service is provided.

Exceptional items

The Group presents as exceptional items on the face of the income statement

those signiﬁcant items of income and expense which, because of their size,

nature and infrequency of the events giving rise to them, merit separate

presentation to allow shareholders to understand better the elements of

ﬁnancial performance in the year, so as to facilitate comparison with prior

periods to assess trends in ﬁnancial performance more readily.

Interest income

Interest income is accrued on a time basis, by reference to the principal

outstanding and at the effective interest rate applicable, which is the rate that

exactly discounts estimated future cash receipts through the expected life of the

ﬁnancial asset to that asset’s net carrying amount.

Government grants and similar income

Income from government grants and similar income such as landlord

contributions and inducements that compensate the Group for the cost of an

asset are recognised in the balance sheet as a deduction in arriving at the

carrying amount of the related asset. This is considered to reﬂect the true cost

of the asset to the Group. The amount is recognised in the consolidated income

statement over the life of the depreciable asset by way of a reduced depreciation

charge. To date the Group has not received government grants in compensation

for expenses charged in the consolidated income statement.

Foreign currencies

The presentational currency of the Group is Sterling. Foreign currency

transactions are translated into Sterling using the exchange rates prevailing on

the dates of the transactions. Exchange differences arising on the settlement

of monetary items, and on the retranslation of monetary items, are included

in the income statement for the period. Exchange differences arising on

the retranslation of non-monetary items carried at fair value are included

in the income statement for the period except for differences arising on the

retranslation of non-monetary items in respect of which gains and losses which

are recognised directly in equity. For such non-monetary items, any exchange

component of that gain or loss is also recognised directly in equity. Monetary

assets and liabilities denominated in foreign currencies are translated at the

rate of exchange ruling at the balance sheet date. All differences are taken to

the income statement.

On consolidation, the assets and liabilities of foreign operations which have a

functional currency other than Sterling are translated into Sterling at foreign

exchange rates ruling at the balance sheet date. The revenues and expenses

of these subsidiary undertakings are translated at average rates applicable

in the period. All resulting exchange differences are recognised as a separate

component of equity.

When a foreign operation is sold, combined exchange differences that have been

recognised as a separate component of equity are recognised in the income

statement as part of the gain or loss on disposal.

In order to mitigate its exposure to certain foreign exchange risks, the Group

enters into forward contracts (See Chief Executive’s report).

Inventories

Inventories are valued at lower of cost and net realisable value. Cost includes

the purchase price of the manufactured products, materials, direct labour,

transport costs and a proportion of applicable overheads. Cost is calculated

using FIFO (ﬁrst in, ﬁrst out). Net realisable value is based on the estimated

selling price less all estimated selling costs.

Loans and receivables

Loans and receivables are recognised initially at fair value and subsequently

measured at amortised cost under the effective interest method less provision

for impairment. Provision for impairment is established when there is objective

evidence that the Group will not be able to collect amounts due according to the

original terms of the receivable. The amount of the impairment is the difference

between the asset’s carrying amount and the present value of the estimated

future cash ﬂows, discounted at the original effective interest rate.

Cash and cash equivalents

Cash and cash equivalents comprise cash in hand and on demand deposits held

with banks.

Trade and other payables

Trade and other payables are initially measured at fair value, and are

subsequently measured at amortised cost, using the effective interest method.

Deferred taxation

Deferred taxation is calculated using the liability method, on temporary

differences arising between the tax bases of assets and liabilities and their

carrying amounts in the consolidated ﬁnancial statements. However, if the

deferred tax arises from the initial recognition of goodwill or initial recognition

of an asset or liability in a transaction other than a business combination that

at the time of the transaction affects neither accounting nor taxable proﬁt or

loss, it is not accounted for. Deferred tax on temporary differences associated

with shares in subsidiaries and joint ventures is not provided if reversal of

these temporary differences can be controlled by the Group and it is probable

that reversal will not occur in the foreseeable future. In addition, tax losses

available to be carried forward as well as other income tax credits to the Group

are assessed for recognition as deferred tax assets. Deferred tax is determined

using tax rates and laws that have been enacted (or substantially enacted) by

the balance sheet date and are expected to apply when the related deferred tax

asset is realised or the deferred tax liability is settled.

Deferred tax liabilities are provided in full.

Deferred tax assets are recognised to the extent that it is probable that future

taxable proﬁts will be available against which the temporary differences can be

utilised.

Changes in deferred tax assets or liabilities are recognised as a component of

tax expense in the income statement, except where they relate to items that are

charged or credited directly to equity in which case the related deferred tax is

also charged or credited directly to equity.

Pensions

The Group operates pension plans for the beneﬁt of certain employees,

including both deﬁned contribution and deﬁned beneﬁt plans.

In relation to its deﬁned contribution plans, the Group makes contributions to

independently administered plans, the contributions being recognised as an

expense when they fall due. The Group has no legal or constructive obligation to

make any further payments to the plans other than the contributions due.

In relation to its deﬁned beneﬁt schemes, the Group recognises in its balance

sheet the present value of its deﬁned beneﬁt obligations less the fair value

of plan assets. The current service cost is charged against operating proﬁt.

Interest on the scheme liabilities is included in ﬁnance costs and the expected

return on scheme assets is included in ﬁnance income.

The deﬁned beneﬁt obligation is calculated at each period end by independent

actuaries using the projected unit credit method. The present value of the

obligation is determined by discounting the estimated future cash outﬂows

using interest rates of high quality corporate bonds that are denominated

in the currency in which the beneﬁts will be paid and which have terms to

maturity approximating the terms of the related pension liabilities. Actuarial

gains and losses arising from experience adjustments and changes in actuarial

assumptions are reﬂected in the statement of recognised income and expense

in the period in which they arise.

NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 APRIL 2009 CONTINUED

Financial Statements

Borrowings and borrowing costs

Borrowings are recognised initially at fair value, net of transaction costs

incurred, and subsequently at amortised cost. Any difference between the

proceeds (net of transaction costs) and the redemption value is recognised in

the income statement over the period of the borrowings using the effective

interest method.

Borrowings are classiﬁed as current liabilities unless the Group has an

unconditional right to defer settlement of the liability for at least 12 months

from the balance sheet date.

Borrowing costs, being interest and other costs incurred in connection with the

servicing of borrowings, are recognised as an expense when incurred.

Provisions

A provision is recognised when the Group has a present legal or constructive

obligation as a result of a past event, it is probable that an outﬂow of resources

will be required to settle the obligation and a reliable estimate can be made of

the amount of the obligation.

The Group provides for dilapidations costs following advice from chartered

surveyors and previous experience of exit costs. The estimated cost of fulﬁlling

the leasehold dilapidations obligations is discounted to present value and

analysed between non-capital and capital components. The capital element

is recognised as a decommissioning cost and depreciated over the life of the

asset. The non-capital element is taken to the income statement in the ﬁrst year

of the lease where the cost it represents is of no lasting beneﬁt to the Group

or its landlord. ‘Wear and tear’ costs are expensed to the income statement.

Provisions for onerous lease contracts are recognised when the Group believes

the unavoidable costs of meeting the lease obligations exceed the economic

beneﬁts expected to be received under the lease.

Leases

Leases of property, plant and equipment where the Group has substantially all

the risks and rewards of ownership are classiﬁed as ﬁnance leases. Finance

leases are capitalised at the lease’s inception at the lower of the fair value of

the leased asset and the present value of the minimum lease payments. Each

lease payment is allocated between the liability and ﬁnance charges so as to

achieve a constant rate on the ﬁnance balance outstanding. The asset subject to

the ﬁnance lease is depreciated over the shorter of its useful life and the lease

term. The corresponding rental obligations, net of ﬁnance charges, are included

as a liability.

Leases of property, plant and equipment where the Group does not have

substantially all the risks and rewards of ownership are classiﬁed as operating

leases. Payments made under operating leases are charged to the income

statement on a straight-line basis over the lease term. Incentives provided by

the lessor are credited to the income statement on a straight-line basis over the

minimum lease term.

Rental income from operating leases where the Group acts as a lessor is

recognised on a straight-line basis over the term of the relevant lease.

Derivative ﬁnancial instruments

The most signiﬁcant exposure to foreign exchange ﬂuctuations relates to

purchases made in foreign currencies, principally the US dollar. The Group’s

policy is to reduce substantially the risk associated with purchases denominated

in foreign currencies by using forward ﬁxed rate currency purchase contracts,

taking into account any foreign currency cash ﬂows. The foreign exchange

contracts do not meet the criteria for treatment as an effective hedge and

accordingly any gain or loss is recognised immediately in the income statement.

Derivative ﬁnancial instruments are measured at fair value. Gains or losses on

derivative ﬁnancial instruments related to ﬁnancing activities are included in

ﬁnance costs when recognised in the income statement.

Treasury Shares

The purchase price of the Group’s own shares that it acquires is recognised

as ‘Treasury Shares’ within equity. The difference between the market value

and the average purchase price of shares sold out of Treasury is transferred to

retained earnings.

Employee Beneﬁt Trust

The cost of shares acquired by the Sports Direct Employee Beneﬁt Trust is

recognised within ‘Own share reserve’ in equity.

Share-based payments

The Group issues equity-settled share-based payments to certain directors

and employees. These are measured at fair value at the date of grant which is

expensed to the consolidated income statement on a straight-line basis over the

vesting period, based on the Group’s estimate of shares that will eventually vest.

Fair value is measured by use of a Monte Carlo method. The expected life

used in the model has been adjusted, based on management’s best estimate,

for the effects of non-transferability, exercise restrictions, and behavioural

considerations. No share-based payment charge was recognised for the 52

weeks ended 26 April 2009 as the directors did not consider it material to the

Group’s ﬁnancial results or position.

Equity instruments

An equity instrument is any contract that evidences a residual interest in the

assets of the Group after deducting all of its liabilities. Equity instruments

issued by the Group are recorded at the proceeds received, net of any direct

issue costs.

Dividends

Dividends are recognised as a liability in the Group’s ﬁnancial statements and

as a deduction from equity in the period in which the dividends are declared.

Where such dividends are proposed subject to the approval of shareholders,

the dividends are regarded as declared once shareholder approval has been

obtained.

International Financial Reporting Standards (“Standards”) in issue but not yet

effective

At the date of authorisation of these consolidated ﬁnancial statements, the

International Accounting Standards Board (“IASB”) and International Financial

Reporting Interpretations Committee (“IFRIC”) have issued the following

standards and interpretations which are effective for annual accounting

periods beginning on or after the stated effective date. These standards and

interpretations are not effective for and have not been applied in the preparation

of the consolidated ﬁnancial statements:

• IAS 1 Presentation of Financial Statements (revised 2007) (effective 1

January 2009)

• IAS 23 Borrowing Costs (revised 2007) (effective 1 January 2009)

• Amendment to IAS 32 Financial Instruments: Presentation and IAS 1

Presentation of Financial Statements - Puttable Financial Instruments

and Obligations Arising on Liquidation (effective 1 January 2009)

• IAS 27 Consolidated and Separate Financial Statements (revised 2008)

(effective 1 July 2009)

• Amendment to IFRS 2 Share-based Payment - Vesting Conditions and

Cancellations (effective 1 January 2009)

• Amendments to IFRS 1 First-time Adoption of International Financial

Reporting Standards and IAS 27 Consolidated and Separate Financial

Statements - Costs of Investment in a Subsidiary, Jointly Controlled Entity

or Associate (effective 1 January 2009)

• Improvements to IFRSs (effective 1 January 2009 other than certain

amendments effective 1 July 2009)

• IFRS 3 Business Combinations (revised 2008) (effective 1 July 2009)

• IFRS 8 Operating Segments (effective 1 January 2009)

• IFRIC 12 Service Concession Arrangements (effective 1 January 2008)

• IFRIC 13 Customer Loyalty Programmes (effective 1 July 2008)

• IFRIC 14 IAS 19 - The Limit on a Deﬁned Beneﬁt Asset, Minimum Funding

Requirements and their Interaction (effective 1 January 2008)

• IFRIC 15 Agreements for the Construction of Real Estate (effective 1

January 2009)

• IFRIC 16 Hedges of a Net Investment in a Foreign Operation (effective 1

October 2008)

The directors anticipate the adoption of IAS 1 will have a signiﬁcant impact

on the presentation of primary statements. The adoptions of the other stated

standards and interpretations in future periods are not expected to have a

material impact on the net assets or results of the Group.

Sports Direct International PLC Annual Report 2009 39

2. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

The critical accounting estimates and judgements made by the Group regarding

the future or other key sources of estimation, uncertainty and judgement that

may have a signiﬁcant risk of giving rise to a material adjustment to the carrying

values of assets and liabilities within the next ﬁnancial year are:

Impairment of goodwill

The calculation for considering the impairment of the carrying amount of

goodwill requires a comparison of the present value of the cash generating

units to which the goodwill has been allocated, to the value of goodwill in the

balance sheet. The calculation of present values requires an estimation of the

future cash ﬂows expected to arise from the cash generating units and the

selection of a suitable discount rate. The key assumptions made in relation to

the impairment review of goodwill are set out in Note 15.

Impairment of other intangible assets

The calculation for considering the impairment of the carrying amount of other

intangible assets with an indeﬁnite life, speciﬁcally brands, trade marks and

licences, requires a comparison of the present value of the cash generating

units to the value of the other intangible assets in the balance sheet. The

calculation of present value requires an estimation of the future cash ﬂows

expected to arise from the other intangible assets and the selection of a suitable

discount rate. The key assumptions made in relation to the impairment review

of goodwill are set out in Note 15.

Useful economic life of intangible assets

For intangible assets which have a ﬁnite life, the directors revisit their estimate

of useful economic life at each period end and revise accordingly. Licences and

trade marks typically have a life of between 10 and 12 years.

Identiﬁcation and valuation of acquired intangible assets

On acquisition, each material separable intangible asset is identiﬁed and valued

by the directors with assistance from a professional third party. Any such

calculation is judgmental in nature as it is based on a valuation methodology.

Brand valuations are typically valued using the relief from royalty valuation

methodology.

The nature and carrying amounts of these assets are set out in Note 15.

Provision for obsolete, slow moving or defective inventories

The directors have applied their knowledge and experience of the sports

retail industry in determining the level and rates of provisioning required in

calculating the appropriate inventory carrying values. The nature and carrying

amounts are set out in Note 18.

Financial position of retirement beneﬁt plans

The net deﬁned beneﬁt pension plan assets or liabilities are recognised in the

Group’s balance sheet. The determination of the ﬁnancial position requires

assumptions to be made regarding inter alia future salary increases, mortality,

discount rates and inﬂation. The key assumptions made in relation to the

pension plan are set out in Note 26.

Provision for dilapidations and onerous lease contracts

The basis of the estimation of the provisioning for dilapidations and onerous

lease contracts is detailed in the provision accounting policy and Note 28.

Estimates and judgments are continually evaluated and are based on historical

experience, external advice and other factors, including expectations of future

events that are believed to be reasonable under the circumstances.

3. FINANCIAL RISK MANAGEMENT

The Group’s current activities result in the following ﬁnancial risks and

management’s responses to those risks in order to minimise any resulting

adverse effects on the Group’s ﬁnancial performance.

Foreign exchange risk

The Group operates internationally and is exposed to foreign exchange risk

arising from various currency exposures, primarily with respect to the US dollar

and Euro. Foreign exchange risk arises from future commercial transactions,

recognised assets and liabilities and net investment in foreign operations.

Management has set up a policy to require group companies to manage their

foreign exchange risk against their functional currency. To manage their foreign

exchange risk arising from future commercial transactions and recognised

assets and liabilities, entities in the Group use forward foreign exchange

contracts, transacted with group treasury. Foreign exchange risk arises

when future commercial transactions or recognised assets or liabilities are

denominated in a currency that is not the entity’s functional currency.

Interest rate risk

The Group has net borrowings, which are principally at ﬂoating interest rates

linked to bank base rates or LIBOR. The Group does not use interest rate

ﬁnancial instruments to hedge its exposure to interest rate movements. The

Group regularly monitors and reacts accordingly to any exposure to ﬂuctuations

in interest rates and the impact on its monetary assets and liabilities.

Credit risk

The directors have a credit policy in place and the exposure to credit risk

is monitored on an ongoing basis. Credit evaluations are performed on all

customers requiring credit over a certain amount. The Group does not require

collateral in respect of ﬁnancial assets.

At each balance sheet date, there were no signiﬁcant concentrations of credit

risk. The maximum exposure to credit risk is represented by the carrying

amount of each ﬁnancial asset in the balance sheet.

Investments of cash surpluses, borrowings and derivative instruments are made

through banks and companies which must fulﬁl credit rating and investment

criteria approved by the Board.

Liquidity risk

The availability of adequate cash resources is managed by the Group through

utilisation of its revolving bank and other facilities together with equity and

retained proﬁts thereby achieving continuity of funding and short-term ﬂexibility.

Capital management

A description of the Group’s objectives, policies and processes for managing

capital are included in the ﬁnancial review on page 25 of this report.

NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 APRIL 2009 CONTINUED

Financial Statements

4. SEGMENTAL ANALYSIS

Primary reporting format — business segments

For management purposes, the Group is organised into and reports its performance between two business segments, Retail and Brands. The Retail business

segment comprises the retail network of stores and the Brands business segment comprises the identiﬁcation, acquisition, development and trading of a portfolio of

internationally recognised sports and leisure brands.

Segment information about the business segments is presented below:

Segmental information for the 52 weeks ended 26 April 2009:

Retail Brands Eliminations Total

UK retail

wholesale &

other UK total

International

Retail Total Wholesale Licensing Total

£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000

Sales to external

customers 1,006,462 28,019 1,034,481 102,329 1,136,810 203,566 26,945 230,511 - 1,367,321

Sales to other

segments - 2,274 2,274 361 2,635 18,248 - 18,248 (20,883) -

Revenue 1,006,462 30,293 1,036,755 102,690 1,139,445 221,814 26,945 248,759 (20,883) 1,367,321

Gross proﬁt 424,677 44,625 469,302 88,334 - 557,636

Operating proﬁt before

foreign exchange and

exceptional items 69,810 2,098 71,908 12,194 - 84,102

Operating proﬁt 58,186 2,521 60,707 7,122 - 67,829

Proﬁt on disposal of

available-for-sale

ﬁnancial assets

1,035

Transfer of historic losses on

available-for-sale ﬁnancial

assets

(53,156)

Investment income 172

Finance income 15,927

Finance costs (23,633)

Share of proﬁts of

associated undertakings

and joint ventures 2,482

Proﬁt before taxation 10,656

Taxation (26,164)

Loss for the period (15,508)

Sales to other segments are priced at cost plus a 10% mark-up.

Other segment items included in the income statement for the 52 weeks ended 26 April 2009:

Retail Brands Total

£’000 £’000 £’000

Depreciation

43,230 2,312 45,542

Amortisation

388 2,556 2,944

Impairment

21,262 9,252 30,514

Information regarding segment assets and liabilities as at 26 April 2009 and capital expenditure for the 52 weeks then ended:

Retail Brands Eliminations Total

£’000 £’000 £’000 £’000

Investments in associated undertakings and joint ventures

24,970 7,409 - 32,379

Other assets

780,938 481,001 (316,698) 945,241

Total assets

805,908 488,410 (316,698) 977,620

Total liabilities

(734,906) (405,730) 316,698 (823,938)

Tangible asset additions

33,343 529 - 33,872

Intangible asset additions

2,837 1,121 - 3,958

Total capital expenditure

36,180 1,650 - 37,830

Sports Direct International PLC Annual Report 2009 41

4. SEGMENTAL ANALYSIS CONTINUED

Segmental information for the 52 weeks ended 27 April 2008:

Retail Brands Eliminations Total

UK retail

wholesale

& other

UK total

International

Retail

Total Wholesale Licensing Total

£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000

Sales to external

customers

957,652 31,956* 989,608 77,257 1,066,865 171,558 21,087 192,645 - 1,259,510

Sales to other

segments

- 1,662 1,662 - 1,662 6,841 568 7,409 (9,071) -

Revenue

957,652 33,618 991,270 77,257 1,068,527 178,399 21,655 200,054 (9,701) 1,259,510

Gross proﬁt

439,741 32,382 472,123 77,578 - 549,701

Operating proﬁt before

foreign exchange and

exceptional items 93,169 2,035 95,204 10,950 - 106,154

Operating proﬁt

96,408 1,897 98,305 11,310 - 109,615

Proﬁt on disposal of

available-for-sale

ﬁnancial assets

41,367

Investment income

2,507

Finance income

5,370

Finance costs

(45,006)

Share of proﬁts of

associated undertakings

and joint ventures 5,020

Proﬁt before taxation

118,873

Taxation

(41,126)

Proﬁt for the period

77,747

* Includes £10.5 million in relation to property transactions income at nil margin.

Sales to other segments are priced at cost plus a 10% mark-up.

Other segment items included in the income statement for the 52 weeks ended 27 April 2008:

Retail Brands Total

£’000 £’000 £’000

Depreciation

33,869 1,714 35,583

Amortisation

210 1,813 2,023

Impairment

- 1,394 1,394

Information regarding segment assets and liabilities as at 27 April 2008 and capital expenditure for the 52 weeks then ended:

Retail Brands Eliminations Total

£’000 £’000 £’000 £’000

Investments in associated undertakings and joint ventures

21,040 7,412 - 28,452

Other assets

837,708 391,916 (288,336) 941,288

Total assets

858,748 399,328 (288,336) 969,740

Total liabilities

(726,064) (363,037) 247,770 (841,331)

Tangible asset additions

126,223 1,957 - 128,180

Intangible asset additions

406 251 - 657

Total capital expenditure

126,629 2,208 - 128,837

NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 APRIL 2009 CONTINUED

Financial Statements

Secondary reporting format — geographic segments

The Group operates in two geographic segments, UK and Non-UK. These geographic segments are the basis on which the Group reports its secondary segment

information, as presented below:

Segmental information for the 52 weeks ended 26 April 2009:

UK Non-UK Unallocated Eliminations Total

£’000 £’000 £’000 £’000 £’000

Segmental revenue from external customers

1,101,960 265,361 - - 1,367,321

Total capital expenditure

29,263 8,567 - - 37,830

Segmental assets

1,011,497 282,821 - (316,968) 977,620

Segmental information for the 52 weeks ended 27 April 2008:

UK Non-UK Unallocated Eliminations Total

£’000 £’000 £’000 £’000 £’000

Segmental revenue from external customers

1,047,717 220,864 - (9,071) 1,259,510

Total capital expenditure

117,964 10,873 - - 128,837

Segmental assets

1,027,686 230,390 - (288,336) 969,740

5. OTHER OPERATING INCOME

52 weeks ended

26 April 2009

52 weeks ended

27 April 2008

£’000 £’000

Rent receivable

3,157 2,744

Other

847 1,279

4,004 4,023

6. EXCEPTIONAL ITEMS

52 weeks ended

26 April 2009

52 weeks ended

27 April 2008

£’000 £’000

Impairment of intangible assets (note15)

14,832 -

Impairment of freehold property (note14)

15,682 -

30,514 -

7. OPERATING PROFIT

Operating proﬁt for the period is stated after charging/(crediting):

52 weeks ended

26 April 2009

52 weeks ended

27 April 2008

£’000 £’000

Foreign exchange gains

(1)

(14,241) (3,461)

Depreciation of property, plant and equipment

- Owned assets

45,533 35,332

- Assets held on ﬁnance leases

9 251

Amortisation of intangible assets

2,944 2,023

Operating lease rentals

- Land and buildings

97,954 94,985

- Other

679 701

(1) Included within this amount for 2008 is a foreign exchange gain of £15,428,000 on disposal of available-for-sale ﬁnancial assets.

Sports Direct International PLC Annual Report 2009 43

7. OPERATING PROFIT CONTINUED

Services provided by the Group’s auditor

For the 52 weeks ended 26 April 2009 the remuneration of the auditors, Grant Thornton UK LLP and associated ﬁrms, was as detailed below:

52 weeks ended

26 April 2009

52 weeks ended

27 April 2008

£’000 £’000

Audit of the Company’s and the consolidated ﬁnancial statements

140 140

Audit of subsidiary companies’ ﬁnancial statements

710 589

Other services provided pursuant to legislation

- -

Other services relating to taxation

228 344

Services relating to corporate ﬁnance transactions

- 267

All other services

32 21

8. EMPLOYEE COSTS

The average monthly number of employees, including Executive Directors, employed by the Group during the period was:

52 weeks ended

26 April 2009

52 weeks ended

27 April 2008

Number Number

Retail stores

7,791 8,057

Distribution, administration and other

2,609 2,917

10,400 10,974

The aggregate payroll costs of the employees, including executive directors, were as follows:

52 weeks ended

26 April 2009

52 weeks ended

27 April 2008

£’000 £’000

Wages and salaries

144,317 137,665

Social security costs

10,874 10,332

Pension costs

531 376

155,722 148,373

Aggregate emoluments of the directors of the Company are summarised below.

52 weeks ended

26 April 2009

52 weeks ended

27 April 2008

£’000 £’000

Aggregate emoluments

554 516

Further details of directors’ remuneration are given in the Directors Remuneration report on pages 38 to 43.

Details of certain key management remuneration are given in note 36.

9. AVAILABLE-FOR-SALE FINANCIAL ASSETS

52 weeks ended

26 April 2009

52 weeks ended

27 April 2008

£’000 £’000

Loss/Proﬁt on disposal of available-for-sale ﬁnancial assets (Note 17)

(1)

1,035 41,367

Transfer of historic losses on available-for-sale ﬁnancial assets (Note 17)

(53,156) -

Dividend income from investments

172 2,507

(1) The proﬁt for 2008 relates to the disposal of strategic stakes in Amer Sports Corp., adidas A.G and Umbro PLC.

NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 APRIL 2009 CONTINUED

Financial Statements

10. FINANCE INCOME

52 weeks ended

26 April 2009

52 weeks ended

27 April 2008

£’000 £’000

Bank interest receivable

1,161 3,068

Other interest receivable

- 36

Expected return on pension plan assets (Note 26)

2,121 2,266

Fair value adjustment to forward foreign exchange contracts (Note 29)

(1)

12,645 -

15,927 5,370

(1) The fair value adjustment to forward foreign exchange contracts relates to adverse differences between the fair value of forward foreign currency contracts from one period end to the next.

11. FINANCE COSTS

52 weeks ended

26 April 2009

52 weeks ended

27 April 2008

£’000 £’000

Interest on bank loans and overdrafts

19,980 32,955

Interest on other loans and ﬁnance leases

1,147 4,559

Expected return on pension plan assets (Note 26)

2,506 2,317

Fair value adjustment to forward foreign exchange contracts (Note 29)

(1)

- 5,175

23,633 45,006

(1) The fair value adjustment to forward foreign exchange contracts relates to adverse differences between the fair value of forward foreign currency contracts from one period end to the next.

12. TAXATION

52 weeks ended

26 April 2009

52 weeks ended

27 April 2008

£’000 £’000

Current tax

31,280 40,588

Adjustment in respect of prior periods

(6,844) (2,251)

24,436 38,337

Deferred tax (Note 27)

1,728 2,789

26,164 41,126

Tax reconciliation

Proﬁt before taxation

10,656 118,873

Taxation at the standard rate of tax in the UK of 28% (2008: 28%)

2,983 33,284

Tax effects of:

Expenses not deductible for tax purposes

8,156 3,418

Impact of tax losses and other short-term temporary differences not recognised in deferred tax

1,050 2,613

Deferred tax recognised in respect of unremitted earnings from an associate

- (965)

Unrelieved foreign tax

536 90

Derecognition of listed investments

14,884 -

Other tax adjustments

267 2,127

Effect of change in UK rate from 30% to 28%

- 2,810

Adjustments in respect of prior periods - Current tax

(6,844) (2,251)

Adjustments in respect of prior periods - Deferred tax

5,132 -

26,164 41,126

Sports Direct International PLC Annual Report 2009 45

13. EARNINGS PER SHARE FROM TOTAL AND CONTINUING OPERATIONS ATTRIBUTABLE TO THE EQUITY SHAREHOLDERS

Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding

during the year.

Share awards granted during the period were anti-dilutive as at 26 April 2009 as the exercise price exceeded the average market price of the Company’s shares during

the period from when the share awards were granted to 26 April 2009. As a result share awards are not taken into account when determining the weighted average

number of ordinary shares in issue during the period and therefore the basic and diluted earnings per share are the same.

Basic and diluted earnings per share

52 weeks ended

26 April 2009

52 weeks ended

26 April 2009

52 weeks ended

27 April 2008

52 weeks ended

27 April 2008

Basic £’000 Diluted £’000 Basic £’000 Diluted £’000

(Loss)/proﬁt for the period

(15,838) (15,838) 78,182 78,182

Number in thousands Number in thousands

Weighted average number of shares

568,452 568,452 639,010 639,010

Pence per share Pence per share

Earnings per share

(2.79) (2.79) 12.23 12.23

Underlying earnings per share

The underlying earnings per share reﬂects the underlying performance of the business compared with the prior year and is calculated by dividing underlying earnings by

the weighted average number of shares for the period. Underlying earnings is used by management as a measure of proﬁtability within the Group. Underlying earnings

is deﬁned as proﬁt for the period attributable to equity holders of the parent for each ﬁnancial period but excluding the post tax effect of certain exceptional items.

The directors believe that the underlying earnings before exceptional items and underlying earnings per share measures provide additional useful information for

shareholders on the underlying performance of the business, and are consistent with how business performance is measured internally. Underlying earnings is not a

recognised proﬁt measure under IFRS and may not be directly comparable with “adjusted” proﬁt measures used by other companies.

52 weeks ended

26 April 2009

52 weeks ended

26 April 2009

52 weeks ended

27 April 2008

52 weeks ended

27 April 2008

Basic £’000 Diluted £’000 Basic £’000 Diluted £’000

(Loss)/proﬁt for the period

(15,838) (15,838) 78,182 78,182

Post tax adjustments to proﬁt for the period for the following exceptional items:

Realised gain on forward exchange contracts

(9,556) (9,556) (2,423) (2,423)

Fair value adjustment to forward foreign exchange contracts

(8,485) (8,485) 3,623 3,623

Proﬁt on disposal of listed investments (Not tax deductible)

(1,035) (1,035) (24,648) (24,648)

Derecognition of listed investments (Not tax deductible)

53,156 53,156 - -

Impairment of freehold property (Not tax deductible)

15,682 15,682 - -

Impairment of intangible assets

9,952 9,952 - -

Fair value adjustments within associated undertakings

1,194 1,194 - -

Underlying proﬁt for the period

45,070 45,070 54,734 54,734

Number in thousands Number in thousands

Weighted average number of shares

568,452 568,452 639,010 639,010

Pence per share Pence per share

Earnings per share

7.93 7.93 8.57 8.57

NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 APRIL 2009 CONTINUED

Financial Statements

14. PROPERTY, PLANT AND EQUIPMENT

Freehold land

and buildings

Long

leasehold

property

Short

leasehold

property

Plant and

equipment Total

£’000 £’000 £’000 £’000 £’000

Cost

At 29 April 2007

29,856 11,312 97,553 235,668 374,389

Exchange differences

15 - 145 2,283 2,443

Additions through business combinations

10,090 - 50 3,791 13,931

Additions

80,548 534 7,543 39,555 128,180

Eliminated on disposals

(3,274) (906) (4,321) (9,723) (18,224)

At 27 April 2008

117,235 10,940 100,970 271,574 500,719

Exchange differences

157 95 1,803 3,685 5,740

Additions

6,675 27 7,687 19,483 33,872

Eliminated on disposals

(470) (2) (2,239) (2,519) (5,230)

At 26 April 2009

123,597 11,060 108,221 292,223 535,101

Accumulated depreciation and impairment

At 29 April 2007

(4,710) (3,680) (28,963) (112,573) (149,926)

Exchange differences

27 (1) - (589) (563)

Charge for the period

(4,067) (8) (6,453) (25,055) (35,583)

Eliminated on disposals

736 48 1,799 5,562 8,145

At 27 April 2008

(8,014) (3,641) (33,617) (132,655) (177,927)

Exchange differences

(56) - (374) (1,953) (2,383)

Charge for the period

(2,994) (309) (8,577) (33,662) (45,542)

Eliminated on disposals

35 - 2,193 - 2,228

Impairment charge

(15,682) - - - (15,682)

At 26 April 2009

(26,711) (3,950) (40,375) (168,270) (239,306)

Net book amount

At 26 April 2009

96,886 7,110 67,846 123,953 295,795

At 27 April 2008

109,221 7,299 67,353 138,919 322,792

Finance leased assets included in the above net book values

At 26 April 2009

- - - - -

At 27 April 2008

- - - 581 581

In the ﬁgures for the 52 week period ended 27 April 2008 an amount of £3,596,000 has been transferred from ‘Additions’ to ‘Additions through business combinations’ as it

was incorrectly classiﬁed in the prior year.

Within freehold land and buildings cost as at 26 April 2009 is £1,488,000 (2008: £1,613,000) of capital grants received from the East Midlands Development Agency. The

Group is subject to the following principal conditions of the grant being met for a period, which is at the discretion of the East Midlands Development Agency, of ﬁve years

after the ﬁrst grant instalment was made on 26 April 2006 or 18 months after the last grant instalment was made on 29 April 2007 (“conditional period”):

• The Group remains solvent.

• The Group does not cease to own, or for a period of at least three months does not cease to use the relevant premises for which the grant was provided or its

related assets.

• The Group employs at least 507 permanent full-time employees or equivalent at the relevant premises.

• The Group employs in total at least 1,171 employees at the relevant premises.

If the Group fails to adhere to any of the above conditions during the conditional period the East Midlands Development Agency may demand full repayment of the grant.

An impairment of £15,682,000 was recognised in the Retail segment to reﬂect the fall in market value of commercial property during the year and this is shown within

Exceptional items.

Sports Direct International PLC Annual Report 2009 47

NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 APRIL 2009 CONTINUED

15. INTANGIBLE ASSETS

Goodwill

Trademarks

and licences Brands Total

£’000 £’000 £’000 £’000

Cost

At 29 April 2007

58,590 18,343 15,600 92,533

Arising on business combinations

53,167 - - 53,167

Additions through business combinations

- 3,089 56,146 59,235

Other additions

- 657 - 657

Disposals

(7,658) (155) (4,800) (12,613)

At 27 April 2008

104,099 21,934 66,946 192,979

Arising on business combinations

11,908 - - 11,908

Additions through business combinations (Note 31)

- - 440 440

Other additions

- 3,404 554 3,958

Disposals

(5,410) (2,892) - (8,302)

Exchange cost adjustment

17,620 1,024 20,006 38,650

At 26 April 2009

128,217 23,470 87,946 239,633

Amortisation and impairment

At 29 April 2007

- (3,152) (1,400) (4,552)

Amortisation Charge

- (2,023) - (2,023)

Impairment Charge

(1,394) - - (1,394)

At 27 April 2008

(1,394) (5,175) (1,400) (7,969)

Amortisation Charge

- (2,944) - (2,944)

Impairment Charge

(13,932) - (900) (14,832)

Disposals

5,409 2,697 - 8,106

Exchange adjustment

- (36) - (36)

At 26 April 2009

(9,917) (5,458) (2,300) (17,675)

Net book amount

At 26 April 2009

118,300 18,012 85,646 221,958

At 27 April 2008

102,705 16,759 65,546 185,010

Amortisation is charged to selling, distribution and administrative expenses in the Consolidated Income Statement. In the current year impairments have been

recognised in exceptional items in the Consolidated Income Statement.

The carrying value of those goodwill and brands that are considered to have an indeﬁnite life are allocated to cash generating units as follows:

Goodwill Brands

£’000 £’000

Retail

13,809 834

Brands

104,491 84,812

118,300 85,646

The Group tests the carrying amount of goodwill and assets with an indeﬁnite life annually for impairment or more frequently if there are indications that their carrying

value might be impaired. The carrying amounts of other intangible assets are reviewed for impairment if there is an indication of impairment.

Impairment is calculated by comparing the carrying amounts to the value in use derived from discounted cash ﬂow projections for the cash generating units (CGU) to

which the intangible assets are allocated.

Financial Statements

Value in use calculations are based on 5 year management forecasts with a terminal growth rate applied thereafter, representing managements estimate of the long

term growth rate of the sector served by the CGU’s.

The key assumptions, which are equally applicable to each CGU, in the cash ﬂow projections used to support the carrying amount of goodwill and intangibles with

indeﬁnite lives as at 26 April 2009 were as follows:

Retail and Brands (with the exception of Everlast)

• Annual sales growth for the ﬁrst ﬁve years of between 5% and 6% depending on the constituent elements of the CGU, followed by terminal sales growth of 2%.

• Gross margin of between 30% and 47% depending on the constituent elements of the CGU.

• Annual maintenance expenditure of between £Nil and £1.0m per annum depending on the individual entity’s circumstances.

• Discount rates are estimated at a risk adjusted pre-tax weighted average cost of capital of 9.4%.

Everlast

• Annual sales growth of 10% for the ﬁrst 5 years followed by terminal sales growth of 5%, reﬂecting speciﬁc plans for the business.

• Gross margin and capital expenditure within the Retail and Brands range.

• Discount rates are estimated at a risk adjusted pre-tax weighted average cost of capital of 12.8%.

The key assumptions are based on management’s historical experience and future plans for each CGU.

With the exception of Everlast, a reasonably possible change in any key assumption would not cause the carrying value of any unit to exceed its recoverable amount.

For Everlast the reasonably possible changes in assumptions would have the following impact:

• Reducing the risk speciﬁc discount rate of 12.8% to the Group’s weighted average cost of capital of 9.4% would result in no impairment and the value of goodwill

would exceed its carrying value by £126m.

• Changing the risk speciﬁc discount rate by 1% would result in a change of valuation of £19m.

• A change of 1% in the forcasted terminal growth rate would result in a change of valuation of £14m.

The intangible assets that have an indeﬁnite life are brands and trading names and are considered to have an indeﬁnite life on the grounds of the proven longevity of the

brands and trading names and the Group’s commitment to maintaining those brands.

An impairment charge of £14,832,000 was recognised, mainly due to an increase in discount rates to reﬂect speciﬁc risk factors and a decrease in forecast sales growth

as a result of the tough economic climate.

16. INVESTMENTS IN ASSOCIATED UNDERTAKINGS AND JOINT VENTURES

The Group uses the equity method of accounting for associates and joint ventures. The following table shows the aggregate movement in the Group’s investment in

associates and joint ventures:

Associates Joint ventures Total

£’000 £’000 £’000

At 29 April 2007 14,847 7,141 21,988

Exchange differences 2,165 - 2,165

Additions 468 - 468

Share of proﬁt 4,942 78 5,020

Dividend paid (1,189) - (1,189)

At 27 April 2008 21,233 7,219 28,452

Exchange differences 3,361 - 3,361

Share of proﬁt 2,235 247 2,482

Dividend paid (1,666) (250) (1,916)

At 26 April 2009 25,163 7,216 32,379

Associates

The Group has a 42.5% interest in Warrnambool, a private unlimited company incorporated in the Republic of Ireland which is the ultimate parent undertaking of Heatons

which is a private unlimited company. The business activity of Heatons is that of household, sporting and leisure goods retail. Heatons operates in the Republic of

Ireland and Northern Ireland.

Sports Direct International PLC Annual Report 2009 49

16. INVESTMENTS IN ASSOCIATED UNDERTAKINGS AND JOINT VENTURES CONTINUED

The Group’s share of associates’ assets, liabilities and income statement, which is included in the consolidated ﬁnancial statements, is as follows:

26 April 2009 27 April 2008

£’000 £’000

Share of non-current assets

44,555 31,436

Share of current assets

18,686 13,553

Share of non current liabilities

(13,954) (8,784)

Share of current liabilities

(24,124) (14,972)

25,163 21,233

52 weeks ended

26 April 2009

52 weeks ended

27 April 2008

£’000 £’000

Income

77,610 65,871

Expenses

(74,553) (59,963)

Proﬁt before tax

3,057 5,908

Taxation

(822) (966)

Proﬁt for the period

2,235 4,942

Heatons has a coterminous year end with the Group. There are no signiﬁcant restrictions on the ability of associated undertakings to transfer funds to the parent, other

than those imposed by legal requirements.

Joint Ventures

The Group’s joint ventures are:

Country of incorporation

Percentage of

issued share capital held Nature of business

No Fear International Limited*

England 50 Brand licensing

PBF International Limited*

England 50 Brand licensing

*Held by an immediate subsidiary.

All joint venture undertakings operate in their country of incorporation.

The Group’s share of its joint ventures’ assets, liabilities and income statement, which is included in the consolidated ﬁnancial statements, is as follows:

26 April 2009 27 April 2008

£’000 £’000

Share of non-current assets

5,860 6,260

Share of current assets

3,048 2,529

Share of non-current liabilities

- -

Share of current liabilities

(1,692) (1,570)

7,216 7,219

52 weeks ended

26 April 2009

52 weeks ended

27 April 2008

£’000 £’000

Income

3,290 3,697

Expenses

(3,141) (3,527)

Proﬁt before taxation

149 170

Taxation

98 (92)

Proﬁt for the period

247 78

NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 APRIL 2009 CONTINUED

Financial Statements

17. AVAILABLE-FOR-SALE FINANCIAL ASSETS

26 April 2009 27 April 2008

£’000 £’000

Available-for-sale ﬁnancial assets

5,467 65,714

The fair value of the available-for-sale investments is based on bid quoted market prices at the balance sheet date.

The following table shows the aggregate movement in the Group’s ﬁnancial assets during the year:

26 April 2009 27 April 2008

£’000 £’000

At beginning of period

65,714 75,447

Additions

4,887 565,392

Disposals

(12,772) (554,554)

Derecognition of investments held with KSF

(26,219) -

Revaluation through the income statement

2,443 -

Revaluation through equity

(28,586) (20,571)

At end of period

5,467 65,714

We have previously reported that our strategic stake were held by Kaupthing Singer & Freidlander (KSF) and partly ﬁnanced by them. On 8 October 2008, KSF went

into administration and we are in dispute with the administrators concerning the ownership of the shares they hold. We now have concluded that, while we continue

to maintain that the shares are ours and should be delivered to us, we may not “control” the shares for accounting purposes. We have therefore treated them in the

accounts as having been derecognised. Doing so has no impact on net assets as the value of the shares (£26,219,000) has been replaced by a derecognition of a liability

(£20,298,000 owed to KSF) and the recognition of a £5,921,000 debtor. This derecognition has resulted in the transfer of historic losses, previously recognised in the

statement of recognised income and expense, of £53,156,000 into the income statement.

The ﬁnancial assets at 26 April 2009 relate to strategic investments held of between 1.5% and 29.9% in share capital or contracts for difference (including shares held

by KSF). The directors do not consider that they have signiﬁcant inﬂuence over the ﬁnancial and operating policies of the investees as they have no representation on

the Board of directors, have no participation in policy-making processes, including participation in decisions about dividends or other distributions, have no material

transactions with the investees and do not interchange any managerial personnel.

The Group has one investment in excess of 20% of share capital, that being 29.9% (2008: 29.9%) of the ordinary share capital of Blacks Leisure Group plc, a company

incorporated in England and Wales. The aggregate of its share capital and reserves and proﬁt for the years ended 28 February 2009 and 28 February 2008 are as follows:

28 February

2009

28 February

2008 Restated

£’000 £’000

Aggregate share capital and reserves

68,971 83,432

Loss after taxation

(14,761) (6,051)

18. INVENTORIES

26 April 2009 27 April 2008

£’000 £’000

Raw materials

4,238 3,640

Work in progress

828 1,234

Goods for resale

257,197 213,889

262,263 218,763

The following inventory costs have been recognised in cost of sales:

52 weeks ended

26 April 2009

52 weeks ended

27 April 2008

£’000 £’000

Cost of inventories recognised as an expense

805,589 706,244

£3,601,000 of stock held at the end of the year in China has been fully written off and recognised as a cost in Retail cost of sales.

Sports Direct International PLC Annual Report 2009 51

19. TRADE AND OTHER RECEIVABLES

26 April 2009 27 April 2008

£’000 £’000

Trade receivables

60,985 64,396

Amounts owed by related undertakings

534 303

Other debtors

17,958 6,596

Prepayments and accrued income

32,455 23,186

111,932 94,481

The Directors consider that the carrying amount of trade and other receivables approximates to their fair value. The maximum exposure to credit risk at the reporting date

is the carrying value of each class of asset above.

Ageing of trade receivables:

26 April 2009 27 April 2008

£’000 £’000

Current

47,875 42,500

0-30 days past due

4,569 7,823

30-60 days past due

1,805 4,675

60-90 days past due

1,084 1,743

Over 90 days past due

5,652 7,655

60,985 64,396

The movement in the bad debt provision can be analysed as follows:

52 weeks ended

26 April 2009

52 weeks ended

27 April 2008

£’000 £’000

Opening position

4,483 4,167

Amounts charged to the income statement

3,071 840

Amounts written off as uncollectible

(245) (447)

Amounts recovered during the year

(14) (77)

Closing position

7,295 4,483

The Group has no signiﬁcant concentration of credit risk, with exposure spread over a large number of customers. These bad debt provisions/charges have been determined

by reference to past default experience and knowledge of the individual circumstances of certain receivables.

20. CASH AND CASH EQUIVALENTS

26 April 2009 27 April 2008

£’000 £’000

Cash in bank and in hand — Sterling

12,287 8,451

Cash in bank and in hand — US dollars

10,812 3,891

Cash in bank and in hand — Euros

9,040 9,259

Cash in bank and in hand — other

219 3,817

32,358 25,418

Bank overdraft (Note 25)

(442,683) (471,471)

Cash and cash equivalents including overdrafts at period end

(410,325) (446,053)

NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 APRIL 2009 CONTINUED

Financial Statements

21. SHARE CAPITAL

26 April 2009 27 April 2008

£’000 £’000

Authorised

999,500,010 ordinary shares of 10p each

99,950 99,950

499,990 redeemable preference shares of 10p each

50 50

100,000 100,000

Allotted, called up and fully paid

640,452,369 (2008: 640,452,369) ordinary shares of 10p each

64,045 64,045

Share Capital

At 27 April 2008

64,045 72,000

Shares cancelled (Note 23)

- (7,955)

At 26 April 2009

64,045 64,045

Share options

The Performance Share Plan

Performance Share Plan, which was approved by the shareholders on 11 February 2007, the Board may make share awards in respect of the ordinary shares in the

Company to executive directors based on a percentage of salary and subject to performance conditions. The extent to which the awards vest is based on earnings per

share growth and total shareholders return over a period of three ﬁnancial years. Further details are set out in the Remuneration Report on page 23.

The ﬁrst awards of 446,512 shares were granted on 5 April 2007 at an exercise price of 268.75p.

The second awards of 1,975,308 shares were granted on 16 July 2008 at an average price of 60.75p

The third awards of 1,975,308 shares were granted on 13 January 2009 at an average price of 54.00p

No share-based payment charge was recognised in respect of these share awards for the 52 weeks ended 26 April 2009 as the directors did not consider it material to the

Group’s ﬁnancial results or position.

22. RESERVES

Treasury shares

Foreign

currency

translation

Own share

reserve

Retained

earnings Other reserves Total

£’000 £’000 £’000 £’000 £’000 £’000

At 29 April 2007 - (837) - 317,708 (40,912) 275,959

Expense recognised directly in equity - - - (13,128) - (13,128)

Proﬁt for the ﬁnancial period - - - 78,182 - 78,182

Dividends - - - (19,126) - (19,126)

Cost of shares acquired (201,483) - - - - (201,483)

Translation differences – group - 2,598 - - - 2,598

Translation differences - associates - 2,165 - - - 2,165

At 27 April 2008 (201,483) 3,926 - 363,636 (40,912) 125,167

Income recognised directly in equity - - - 17,272 - 17,272

Loss for the ﬁnancial period - - - (15,838) - (15,838)

Dividends - - - (20,805) - (20,805)

Treasury shares cancelled 105,759 - - (105,759) - -

Market value of shares transferred to EBT 6,094 - (6,094) - - -

Difference between original cost and market value

of shares transferred to EBT 4,542 - - (4,542) - -

Translation differences - group - 41,293 - - - 41,293

Translation differences - associates - 3,361 - - - 3,361

At 26 April 2009 (85,088) 48,580 (6,094) 233,964 (40,912) 150,450

Sports Direct International PLC Annual Report 2009 53

22. RESERVES CONTINUED

Between 24 July 2007 and 11 March 2008 the Group acquired 151,547,631 of its own shares for total consideration of £201,483,000, with the purchase price ranging

between £0.95 and £1.50.

Between 12 October 2007 and 14 March 2008 the Group cancelled 79,547,631 shares purchased in the market under the share re-purchase programme. The average

purchase price of the shares cancelled was £1.3295 and hence a transfer from Treasury shares to Retained earnings of £105,759,000 was processed.

On 16 September 2008 the Group sold 8,000,000 ordinary shares of 10 pence each from Treasury to the newly formed Sports Direct Employee Beneﬁt Trust, an employee

share scheme within the meaning of Section 1166 of the Companies Act 2006, at the market value of 76.17 pence per share. These shares are shown within the Own

share reserve. The difference between the market value and the average original purchase price of 132.95 pence per share has been transferred to retained earnings.

Following the above transaction the Company now holds 64,000,000 ordinary shares in Treasury.

The foreign currency translation reserve is used to record exchange differences arising from the translation of the ﬁnancial statements of foreign subsidiaries and

associates.

The ﬁnal dividend for 2008 of £13,870,000 (2.44p) was paid on 31 October 2008 and the interim dividend for 2009 of £6,935,000 (1.22p) was paid on 30 April 2009.

23. OTHER RESERVES

Share capital Share premium

Permanent

contribution to

capital

Capital

redemption

reserve

Reverse

combination

reserve Other reserves

£’000 £’000 £’000 £’000 £’000 £’000

At 29 April 2007 72,000 874,300 50 50 (987,312) (40,912)

Shares cancelled (7,955) - - 7,955 - -

At 27 April 2008 and 26 April 2009 64,045 874,300 50 8,005 (987,312) (40,912)

The share premium account is used to record the excess proceeds over nominal value on the issue of shares.

MJW Ashley made a £50,000 cash payment to the Company as a permanent contribution to capital on 8 February 2007 under a deed of capital contribution.

The capital redemption reserve arose on the redemption of the Company’s redeemable preference shares of 10p each at par on 2 March 2007.

Between 5 October 2007 and 11 March 2008 the Group cancelled 79,547,631 of shares acquired as part of the share buy back programme.

The reverse combination reserve exists as a result of the adoption of the principles of reverse acquisition accounting in accounting for the group restructuring which

occured on 2 March 2007 and 29 March 2007 between the Company and Sports World International Limited, Brands Holding Limited, International Brand Management

Limited and CDS Holdings SA with Sports World International Limited as the acquirer.

24. MINORITY INTERESTS

26 April 2009 27 April 2008

£’000 £’000

At 27 April 2008 3,242 4,845

Share of proﬁt/(loss) for the period 330 (435)

Acquisitions (340) (1,668)

Disposals - 500

At 26 April 2009 3,232 3,242

NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 APRIL 2009 CONTINUED

Financial Statements

25. BORROWINGS

26 April 2009 27 April 2008

£’000 £’000

Non-current:

Bank and other loans 4,090 13,641

Obligations under ﬁnance leases 623 614

4,713 14,255

Current:

Bank overdrafts 442,683 471,471

Bank and other loans 16,216 4,704

Obligations under ﬁnance leases - 225

458,899 476,400

Total borrowings:

Bank overdrafts 442,683 471,471

Bank and other loans 20,306 18,345

Obligations under ﬁnance leases 623 839

463,612 490,655

The maturity of the Group’s total borrowings other than bank overdrafts is as follows:

26 April 2009 27 April 2008

£’000 £’000

Borrowings are repayable as follows:

Within one year 19,629 8,197

Between one and two years 354 8,576

Between two and ﬁve years 613 900

After ﬁve years 333 1,511

20,929 19,184

Borrowings — Sterling 2,580 4,665

Borrowings — Other 18,349 14,519

20,929 19,184

Loans are all on commercial variable rates of interest ranging between 0.6% and 1.75% over the base rate of the country within which the borrowing entity resides.

On 25 October 2007, six members of the Group, Sports Direct International plc, SportsDirect.com Retail Limited, Lillywhites Limited, Brands Holdings Limited, Dunlop

Slazenger Group Limited and Smith and Brooks Holdings Limited (the “Borrowers”) entered into a committed working capital facility agreement with The Governor and

Company of the Bank of Scotland (the “Working Capital Facility”). The Working Capital Facility is available to any of the Borrowers and may be drawn to an aggregate

limit of £500 million. It is capable of being utilised by way of cash advances, letters of credit, guarantees, bonds and/or currency borrowings. The Working Capital Facility

is available until 30 April 2011. Each Borrower is required to observe certain covenants, including undertakings relating to delivery of ﬁnancial statements, and certain

negative covenants, including in relation to creation of security and disposal of assets. The Working Capital Facility is secured by a debenture from each of the Borrowers

and a composite guarantee from each of the non-dormant subsidiaries of SportsDirect.com Retail Limited.

We have previously reported that our strategic stake were held by Kaupthing Singer & Freidlander (KSF) and partly ﬁnanced by them. On 8 October 2008, KSF went

into administration and we are in dispute with the administrators concerning the ownership of the shares they hold. We now have concluded that, while we continue

to maintain that the shares are ours and should be delivered to us, we may not “control” the shares for accounting purposes. We have therefore treated them in the

accounts as having been derecognised. Doing so has no impact on net assets as the value of the shares (£26,219,000) has been replaced by a reduction in creditors

(£20,298,000 owed to KSF) and the recognition of a £5,921,000 receivable. This derecognition has resulted in the transfer of historic losses, previously recognised in

reserves of £53,156,000 into the income statement.

The Group has a £50m working capital facility with Mike Ashley which can be drawn down on request.

The carrying amounts and fair value of the borrowings are not materially different.

Sports Direct International PLC Annual Report 2009 55

26. RETIREMENT BENEFIT OBLIGATIONS

The Group’s deﬁned beneﬁt pension obligations relate to Dunlop Slazenger Group Holdings Limited (“DSGHL”), which was acquired on 28 January 2004. DSGHL operates

a number of plans worldwide, the largest of which is of the funded deﬁned beneﬁt type. The Scheme is closed to new members.

The amounts for the current and previous four periods following the acquisition of DSGHL are as follows:

26 April 2009 27 April 2008 29 April 2007 30 April 2006 24 April 2005

£’000 £’000 £’000 £’000 £’000

Total fair value of plan assets 27,440 32,706 36,419 32,829 28,720

Present value of plan liabilities (39,764) (44,411) (50,451) (48,008) (44,945)

Net plan obligations (12,324) (11,705) (14,032) (15,179) (16,225)

Experience adjustments on plan liabilities 5,887 4,652 (1,620) (1,354) (2,156)

Experience adjustments on plan assets (6,336) (2,969) 1,164 257 3,382

The cumulative amount of actuarial gains and losses recognised in the statement of recognised income and expense as at 26 April 2009 was an actuarial gain of

£907,000 (2008: actuarial gain of £1,356,000).

There were no unrecognised actuarial gains or losses or past service costs as at 27 April 2008 or 26 April 2009.

Amounts recognised in the income statement are as follows:

52 weeks ended

26 April 2009

52 weeks ended

27 April 2008

£’000 £’000

Current service cost 19 69

Interest on retirement beneﬁt obligations 2,506 2,317

Expected return on plan assets (2,121) (2,266)

404 120

The current service cost is included within cost of sales. The interest on retirement beneﬁt obligations and the expected return on plan assets are included within ﬁnance

costs and ﬁnance income, respectively.

Amounts recognised in the statement of recognised income and expense are as follows:

52 weeks ended

26 April 2009

52 weeks ended

27 April 2008

£’000 £’000

Actual less expected return on assets (6,336) (2,969)

Actuarial gains relating to plan liabilities 5,887 4,652

(449) 1,683

The actual return on plan assets for the 52 weeks ended 26 April 2009 was a loss of £4,215,000 (2008: loss of £703,000).

The movements in the fair value of plan assets are as follows:

52 weeks ended

26 April 2009

52 weeks ended

27 April 2008

£’000 £’000

At the start of the period 32,706 36,419

Expected return on plan assets 2,121 2,266

Actuarial losses (6,336) (2,969)

Employer contributions 1,382 1,111

Employee contributions 118 56

Beneﬁts paid out (2,551) (4,177)

At the end of the period 27,440 32,706

The Group expects to contribute £1,263,000 to its deﬁned beneﬁt pension plans for the 52 weeks ended 25 April 2010.

NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 APRIL 2009 CONTINUED

Financial Statements

The assumptions used to determine the expected return on assets reﬂects the underlying asset allocation at each period end. The plan asset mix and the expected

returns on the assets are as follows:

52 weeks ended

26 April 2009

52 weeks ended

27 April 2008

£’000 £’000

Equities 14,974 19,109

Bonds 12,249 13,391

Cash and other 217 206

27,440 32,706

Equities 7.8% 8.0%

Bonds 4.8% 4.9%

Cash and other 5.0% 5.0%

The overall expected rate of return on the Scheme’s assets has been derived by considering the expected rate of return on each major asset class of investments at the

start of the year and weighting these rates of return by the proportion of the total investments that the class represents at the start of the year.

The principal assumptions underlying the actuarial assessments of the present value of the plan liabilities are:

26 April 2009 27 April 2008

% %

Inﬂation rate 2.9 3.5

Future salary increases n/a n/a

Future pension increases 2.8 3.4

Discount rate 6.9 6.5

Mortality assumptions:

26 April 2009 27 April 2008

% %

Life expectancy at 65 at period end:

Future pensioners – male 87.2 87.2

Future pensioners – female 90.0 90.0

Current pensioners – male 86.4 86.4

Current pensioners – female 89.4 89.4

The movements in the present value of the plan liabilities are as follows:

52 weeks ended

26 April 2009

52 weeks ended

27 April 2008

£’000 £’000

At the start of the period (44,411) (50,451)

Current service cost (19) (69)

Interest cost (2,506) (2,317)

Actuarial gains 5,887 4,652

Employee contributions (118) (56)

Beneﬁts paid out 2,551 4,177

Exchange gain (1,148) (347)

At the end of the period (39,764) (44,411)

Sports Direct International PLC Annual Report 2009 57

26. RETIREMENT BENEFIT OBLIGATIONS CONTINUED

The net movements in the net present value of the plan liabilities were as follows:

52 weeks ended

26 April 2009

52 weeks ended

27 April 2008

£’000 £’000

Net liability at the start of the period (11,705) (14,032)

Movement in fair value of plan assets (5,266) (3,713)

Movements in the present value of the plan liabilities 4,647 6,040

Net liability at the end of the period (12,324) (11,705)

In addition to the amounts recognised in relation to the deﬁned beneﬁt retirement plans, amounts of £95,000 and £121,000 have been recognised in the income statement

in the periods ended 27 April 2008 and 26 April 2009 respectively in relation to deﬁned contribution retirement beneﬁt plans.

27. DEFERRED TAX ASSET AND LIABILITIES

Accounts

depreciation

exceeding tax

depreciation

Tax

losses

recoverable

Pension

plan

liabilities

Unremitted

earnings from

an associate

Other

temporary

differences

Recognised on

acquisitions Total

£’000 £’000 £’000 £’000 £’000 £’000 £’000

At 29 April 2007 (9,661) 4,379 3,414 (4,244) (4,681) 24,132 13,339

(Charged)/credited to the income statement 3,865 (2,485) 1,023 682 - (4,984) (1,899)

Effect of reducing tax rate 644 (292) (228) 283 312 (1,609) (890)

Credited to the statement of recognised

income and expense

- - - - - 5,760 5,760

Acquisitions (494) - - - (13,128) - (13,622)

At 27 April 2008 (5,646) 1,602 4,209 (3,279) (17,497) 23,299 2,688

Charged to the income statement 1,364 (127) 108 - 3,701 (6,774) (1,728)

Credited to the statement of recognised

income and expense

- - - - - (6,849) (6,849)

Foreign exchange adjustments - - - - (5,731) - (5,731)

Acquisitions - - - - (6,402) - (6,402)

At 26 April 2009 (4,282) 1,475 4,317 (3,279) (25,929) 9,676 (18,022)

26 April 2009 27 April 2008

£’000 £’000

Deferred tax assets 15,468 29,110

Deferred tax liabilities (33,490) (26,422)

Net deferred tax balance (18,022) 2,688

Deferred tax assets are recognised for tax losses recoverable and pension plan liabilities to the extent that realisation of the related tax beneﬁt is probable on the basis of

the Group’s current expectations of future taxable proﬁts.

28. PROVISIONS

Dilapidations

Onerous

contracts Total

£’000 £’000 £’000

At 27 April 2008 18,584 4,326 22,910

Amounts provided 5,193 10,882 16,075

Amounts utilised (1,742) (651) (2,393)

Amounts reversed (168) (5) (173)

At 26 April 2009 21,867 14,552 36,419

NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 APRIL 2009 CONTINUED

Financial Statements

The dilapidations provision is the best estimate of the present value of expenditure expected to be incurred by the Group in order to restore its leasehold premises to the

condition required under the lease agreements at the end of the lease discounted at 7% per annum. The provision is expected to be utilised over the period to the end of

each speciﬁc lease.

The provision in respect of onerous lease contracts represents the net cost of fulﬁlling the Group’s obligations over the terms of these contracts discounted at 7% per

annum. The provision is expected to be utilised over the period to the end of each speciﬁc lease.

The unwinding of the discount on provision passes through the income statement.

29. FINANCIAL INSTRUMENTS

(a) Financial assets and liabilities by category

The carrying values of ﬁnancial assets and liabilities, which are principally denominated in Sterling or US dollars, were as follows:

Loans and

receivables

Available for

sale ﬁnancial

assets

Non-ﬁnancial

assets Total

Assets – 2009 £’000 £’000 £’000 £’000

Property, plant and equipment - - 295,795 295,795

Intangible assets - - 221,958 221,958

Investments in associated undertakings and joint ventures - - 32,379 32,379

Available-for-sale ﬁnancial assets - 5,467 - 5,467

Deferred tax assets - - 15,468 15,468

Inventories - - 262,263 262,263

Trade and other receivables 60,985 - 50,947 111,932

Cash and cash equivalents 32,358 - - 32,358

93,343 5,467 878,810 977,620

Assets - 2008 £’000 £’000 £’000 £’000

Property, plant and equipment - - 322,792 322,792

Intangible assets - - 185,010 185,010

Investments in associated undertakings and joint ventures - - 28,452 28,452

Available-for-sale ﬁnancial assets - 65,714 - 65,714

Deferred tax assets - - 29,110 29,110

Inventories - - 218,763 218,763

Trade and other receivables 64,396 - 30,085 94,481

Cash and cash equivalents 25,418 - - 25,418

89,814 65,714 814,212 969,740

Sports Direct International PLC Annual Report 2009 59

Loans and

payables

Liabilities

at fair value

through proﬁt

and loss

Non-ﬁnancial

liabilities Total

Liabilities – 2009 £’000 £’000 £’000 £’000

Other payables 2,656 - - 2,656

Non-current borrowings 4,713 - - 4,713

Retirement beneﬁt obligations - - 12,324 12,324

Deferred tax liabilities - - 33,490 33,490

Provisions - - 36,419 36,419

Derivative ﬁnancial liabilities (Current) - 34,993 - 34,993

Trade and other payables 106,962 - 102,777 209,739

Current borrowings 458,899 - - 458,899

Current tax liabilities 30,705 - - 30,705

603,935 34,993 185,010 823,938

Liabilities – 2008

Other payables 2,829 - - 2,829

Non-current borrowings 14,255 - - 14,255

Derivative ﬁnancial liabilities (Non-current) - 14,744 - 14,744

Retirement beneﬁt obligations - - 11,705 11,705

Deferred tax liabilities - - 26,422 26,422

Provisions - - 22,910 22,910

Derivative ﬁnancial liabilities (Current) - 32,894 - 32,894

Trade and other payables 87,123 - 120,475 207,598

Current borrowings 476,400 - - 476,400

Current tax liabilities 31,574 - - 31,574

612,181 47,638 181,512 841,331

Carrying values do not materially differ from fair value.

(b) Derivatives: foreign currency forward purchase contracts

The most signiﬁcant exposure to foreign exchange ﬂuctuations relates to purchases made in foreign currencies, principally the US dollar. The Group’s policy is to reduce

the risk associated with purchases denominated in foreign currencies by using forward ﬁxed rate currency purchase contracts, taking into account any foreign currency

cash ﬂows. The foreign exchange contracts do not meet the criteria for treatment as an effective hedge and accordingly any gain or loss is recognised immediately in the

income statement.

The carrying values of forward foreign currency purchase contracts were as follows:

26 April 2009 27 April 2008

£’000 £’000

Fair value of derivative ﬁnancial instruments - liabilities 34,993 47,638

NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 APRIL 2009 CONTINUED

Financial Statements

The sterling principal amounts of forward foreign currency purchase contracts and contracted forward rates were as follows:

26 April 2009 27 April 2008

£’000 £’000

US dollar purchases 350,000 1,081,668

Contracted rates 1.46-1.88 1.86 – 2.00

US dollar sales (250,000) (397,000)

Contracted rates 1.92-1.94 1.92-1.98

Euro sales (202,179) (259,716)

Contracted rates 1.08-1.40 1.25 – 1.40

Euro purchases 223,662 -

Contracted rates 1.12-1.12 -

Forward foreign currency purchase and sale contracts generally have a maturity at inception of approximately 12 months. At 26 April 2009 no purchase contracts and no

sale contracts had a maturity at inception of greater than 12 months (2008: £250 million of purchase contracts).

Foreign currency sensitivity analysis

The Group’s principal foreign currency exposures are to US dollars and the Euro. The table below illustrates the hypothetical sensitivity of the Group’s reported proﬁt and

equity to a 5% increase and decrease in the US dollar/Sterling and Euro/Sterling exchange rates at the year end date, assuming all other variables remain unchanged.

The ﬁgures have been calculated by comparing the fair values of outstanding foreign currency contracts at the current exchange rate to those if exchange rates moved as

illustrated.

Positive ﬁgures represent an increase in proﬁt or equity:

Income statement Equity

26 April 2009 27 April 2008 26 April 2009 27 April 2008

£’000 £’000 £’000 £’000

Sterling strengthens by 5%

US dollar (11,044) (32,603) (11,044) (32,603)

Euro 4,580 12,367 4,580 12,367

Sterling weakens by 5%

US dollar 11,596 34,233 11,596 34,233

Euro (4,809) (12,986) (4,809) (12,986)

Interest rate sensitivity analysis

The table below illustrates the hypothetical sensitivity of the Group’s reported proﬁt and equity to a 0.5% increase or decrease in interest rates, assuming all other

variables were unchanged.

The analysis has been prepared using the following assumptions:

• For ﬂoating rate assets and liabilities, the amount of asset or liability outstanding at the balance sheet date is assumed to have been outstanding for the whole year.

• Fixed rate ﬁnancial instruments that are carried at amortised cost are not subject to interest rate risk for the purpose of this analysis.

Positive ﬁgures represent an increase in proﬁt or equity.

Income statement Equity

26 April 2009 27 April 2008 26 April 2009 27 April 2008

£’000 £’000 £’000 £’000

Interest rate increase of 0.5% (2,420) (2,453) (2,240) (2,453)

Interest rate decrease of 0.5% 2,420 2,453 2,240 2,453

Sports Direct International PLC Annual Report 2009 61

(d) Liquidity risk

The table below shows the maturity analysis of the undiscounted remaining contractual cash ﬂows of the Group’s ﬁnancial liabilities:

2009 Less than 1 year 1 to 2 years 2 to 5 years Over 5 years Total

Bank loans and overdrafts 462,312 151 417 129 463,009

Obligations under ﬁnance leases - 207 214 214 635

Trade and other payables 106,962 - - - 106,692

Derivative ﬁnancial liabilities

Cash inﬂows (86,460) - - - (86,460)

Cash outﬂows 121,482 - - - 121,482

604,296 358 631 343 605,628

2008

Bank loans and overdrafts 479,443 8,460 1,069 1,794 490,766

Obligations under ﬁnance leases 225 628 - - 853

Trade and other payables 87,123 - - - 87,123

Derivative ﬁnancial liabilities

Cash inﬂows (1,316,151) (444,471) - - (1,760,622)

Cash outﬂows 1,342,355 449,989 - - 1,792,344

592,995 14,606 1,069 1,794 610,464

30. TRADE AND OTHER PAYABLES

26 April 2009 27 April 2008

£’000 £’000

Trade payables 106,962 87,123

Amounts owed to related undertakings 3,029 2,016

Other taxes including social security costs 5,055 13,660

Other payables 39,640 38,192

Accruals and deferred income(1) 55,053 66,607

209,739 207,598

The directors consider that the carrying amount of trade and other payables approximates to their fair value.

31. ACQUISITIONS

The Group made no major acquisitions in the 52 weeks ended 26 April 2009. The increase in goodwill is attributable to adjustments to fair value for prior year

acquisitions, minor acquisitions and the purchase of minority interests in existing subsidiaries.

The aggregate fair value of consideration paid, assets and liabilities acquired and resulting goodwill is detailed below.

Acquisitions

Purchase

of minority

interests Total

£’000 £’000 £’000

Cash consideration including costs 790 5,818 6,608

Add: fair value of net liabilities/(assets) acquired 6,013 (340) 5,673

Excess of fair value of assets over consideration - 192 192

Goodwill 6,803 5,670 12,473

The goodwill is attributable to the premium paid to strengthen the Group’s existing business segments of retail and brand, which is in line with the Group’s strategy.

NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 APRIL 2009 CONTINUED

Financial Statements

Adjustments to fair value for prior year acquisitions and minor acquisitions

Carrying values

at acquisition

Provisional

fair value

adjustment

Fair value of net

assets acquired

£’000 £’000 £’000

Intangible assets 450 - 450

Inventories 200 - 200

Trade and other receivables 113 - 113

Trade and other payables (374) - (374)

Deferred tax liability - (6,402) (6,402)

389 (6,402) (6,013)

The provisional acquisition accounting for Everlast has been adjusted to reﬂect the effective rate of taxation for this company at the point of acquisition. It is the Group’s

policy to make material adjustments and revisions retrospectively. The adjustment to deferred taxation has been processed through the current year.

Cash ﬂows arising from the acquisition are as follows:

26 April 2009

£’000

Cash consideration 790

Net cash outﬂow in the cash ﬂow statement 790

The goodwill is attributable to the premium paid to strengthen the Group’s existing business segments of retail and brand, which is in line with the Group’s strategy.

Purchase of minority interests

Date of acquisition Percentage of

equity acquired

Nature of

activity

Lonsdale Sport 23 December 2008

(1)

20 Wholesale

This was an additional acquisition which takes the cumulative holding up to 100%

Carrying values

at acquisition

£’000

Minority interests 340

340

Cash ﬂows arising from the acquisition are as follows:

26 April 2009

£’000

Cash consideration 5,818

Net cash outﬂow in the cash ﬂow statement 5,818

Sports Direct International PLC Annual Report 2009 63

32. CASH INFLOWS FROM OPERATING ACTIVITIES

52 weeks ended

26 April 2009

52 weeks ended

27 April 2008

£’000 £’000

Proﬁt before taxation 10,656 118,873

Net ﬁnance costs 7,706 39,636

Derecognition of available-for-sale ﬁnancial assets 53,156 -

Proﬁt on disposal of available-for-sale ﬁnancial assets (1,035) (41,367)

Investment income (172) (2,507)

Share of proﬁt of associated undertakings and joint ventures (2,482) (5,020)

Operating proﬁt 67,829 109,615

Depreciation 45,542 35,583

Amortisation charge 2,944 2,023

Impairment charge 30,514 1,394

Loss on disposal of intangibles 195 155

Loss on disposal of subsidiary undertakings 1 1,883

Deﬁned beneﬁt pension plan current service cost 395 69

Deﬁned beneﬁt pension plan employer contributions (1,225) (1,110)

Operating cash inﬂow before changes in working capital 146,195 149,612

(Increase)/decrease in receivables (9,788) 6,395

(Increase)/decrease in inventories (43,500) 23,511

Increase/(decrease) in payables 24,563 (119,999)

Cash inﬂows from operating activities 117,470 59,519

33. OPERATING LEASE ARRANGEMENTS

As at 26 April 2009 the Group had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:

26 April 2009 27 April 2008

£’000 £’000

Land and buildings

Within one year 74,997 73,902

In the second to ﬁfth years inclusive 271,461 276,695

After ﬁve years 364,245 387,053

710,703 737,650

The Group sub-lets certain stand-alone retail stores which are no longer operated by the Group. The property rental income earned during the 52 weeks ended 26 April

2009 was £3,157,000 (2008: £2,744,000).

As at 26 April 2009, the Group had contracts with sub-tenants for the following future minimum lease rentals:

26 April 2009 27 April 2008

£’000 £’000

Land and buildings

Within one year 6,307 3,458

In the second to ﬁfth years inclusive 17,991 7,901

After ﬁve years 24,240 6,356

48,538 17,715

NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 APRIL 2009 CONTINUED

Financial Statements

34. CAPITAL COMMITMENTS

The Group had no capital commitments as at 26 April 2009 (2008: £nil).

35. CONTINGENT ASSETS AND LIABILITIES

As a matter of course the Group undertakes action in numerous parts of the world to protect its trade mark registrations and in connection with the Group’s licensees.

Such actions are usually resolved in the ordinary course of business. The Group is, however, party to a dispute and since 2007 has provided for an amount representing

the ﬁnancial estimation of the potential loss if the outcome was not to be in its favour. The Group believes that to provide further information would be seriously

prejudicial to the case.

36. RELATED PARTY TRANSACTIONS

The Group entered into the following material transactions with related parties:

The Group has taken advantage of the exemptions contained within IAS 24 - Related Party Disclosures from the requirement to disclose transactions between group

companies as these have been eliminated on consolidation.

52 weeks ended 26 April 2009

Related party Relationship Sales Purchases

Trade and other

receivables

Trade and other

payables

£’000 £’000 £’000 £’000

Heatons Associate 11,732 - 2,655 -

No Fear International Limited Joint venture - - - (2,351)

Mike Ashley Director - - - (1,069)

Mike Ashley leases certain properties to various companies in the Group which are operated as retail and distribution premises. A commercial rent is charged in respect

of these leases.

During the period Mike Ashley loaned the Group £50million on arm’s length commercial terms and this amount was repaid in full on 17 April 2009.

Compensation paid to key management of the Group was £939,505, including pension contributions of £9,085.

52 weeks ended 27 April 2008

Related party Relationship Sales Purchases

Trade and other

receivables

Trade and other

payables

£’000 £’000 £’000 £’000

Pan World Brands Limited Common control - - 3 (17)

Heatons Associate 15,829 - 1,942 -

No Fear International Limited Joint venture - - 316 (1,468)

PBF International Limited Joint venture 189 (465) 910 -

Mike Ashley Director - - - (590)

Sopotnik Trade Doo Associate 23 - 83 -

Mike Ashley leases certain properties to various companies in the Group which are operated as retail and distribution premises. A commercial rent is charged in respect

of these leases.

On 10 July 2007 the Group sold an Augusta A109 S Grand Helicopter to Mike Ashley for €4,806,175 (£3,235,547) plus VAT. The helicopter had been purchased by the

Company for €4,600,000 in March 2006.

During the period Mike Ashley loaned the Group £250million on arm’s length commercial terms and this amount was repaid in full on 26 October 2007.

No interest was charged by Mike Ashley in respect of the amounts owed to him by the group.

Compensation paid to key management of the Group was £1,040,854, including pension contributions of £9,085.

Sports Direct International PLC Annual Report 2009 65

NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 APRIL 2009 CONTINUED

37. PRINCIPAL SUBSIDIARY UNDERTAKINGS

The principal subsidiary undertakings of the Company at 26 April 2009 were as follows:

Name

Country of

incorporation

Percentage of issued

share capital held Nature of business

Antigua Enterprises Inc* USA 78 Sporting and leisure goods wholesale and brand licensing

Brands & Fashion NV* Belgium 100 Brand management and licensing

Brands Inc Limited* England 100 Brand management and licensing

Brands Holdings Limited England 100 Brand management and licensing

CDS Holdings SA Belgium 100 Sporting and leisure goods retail

Donnay International SA* Belgium 100 Sporting and leisure goods wholesale and brand licensing

Dunlop Slazenger Group Limited* England 100 Sporting and leisure goods wholesale and brand licensing

Everlast Worldwide Inc.* USA 100 Sporting and leisure goods wholesale and brand licensing

E Walters UK Limited* England 100 Sporting and leisure goods wholesale and brand licensing

Field and Trek (UK) Limited* England 100 Sporting and leisure goods retail

International Brand Management Limited England 100 Brand management

Kangol Holdings Limited* England 100 Fashion and leisure goods wholesale and brand licensing

Karrimor Limited* England 100 Fashion and leisure goods wholesale and brand licensing

Lonsdale Boxing Limited* England 100 Fashion and leisure goods wholesale and brand licensing

Lonsdale Sports Limited* England 100 Sporting and leisure goods wholesale and brand licensing

Smith and Brooks Holdings Limited* England 100 Sporting and leisure goods wholesale and brand licensing

Sports Essentials Limited* England 100 Sporting and leisure goods wholesale and brand licensing

Sports World International Limited England 100 Sporting and leisure goods retail

Sports 2000 Sportne Trogovine Slovenia 100 Sporting and leisure goods retail

The Trademark Licensing Company Limited* England 100 Brand licensing

Universal Cycles Limited* England 86 Bicycle wholesaler

* Held by an intermediate subsidiary.

All subsidiaries have coterminous year ends.

All principal subsidiary undertakings operate in their country of incorporation.

A full list of the Group’s operating subsidiary undertakings will be annexed to the next Annual Return ﬁled at Companies House.

There are no signiﬁcant restrictions on the ability of the subsidiary undertakings to transfer funds to the parent, other than those imposed by the legal requirements.

38. ULTIMATE CONTROLLING PARTY

The Group is controlled by Mike Ashley through his 100% shareholding in MASH Holdings Limited, which has a 71% shareholding in the Company.

39. POST BALANCE SHEET EVENTS

No material post balance sheet events occurred after 26 April 2009 to the date of this Annual Report.

Financial Statements

REPORT OF THE INDEPENDENT AUDITOR TO THE MEMBERS OF SPORTS DIRECT INTERNATIONAL PLC

We have audited the parent company ﬁnancial statements of Sports Direct International plc for the 52 week period to 26 April 2009 which comprise the balance sheet and

related notes. The ﬁnancial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom

Generally Accepted Accounting Practice).

This report is made solely to the company’s members, as a body, in accordance with Sections 495, 496 and 497 of the Companies Act 2006. Our audit work has been

undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the

fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work,

for this report, or for the opinions we have formed.

Respective responsibilities of directors and auditors

As explained more fully in the Directors’ Responsibilities Statement, the directors are responsible for the preparation of the parent company ﬁnancial statements

and for being satisﬁed that they give a true and fair view. Our responsibility is to audit the parent company ﬁnancial statements in accordance with applicable law and

International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s (APB’s) Ethical Standards for Auditors.

Scope of the audit of the ﬁnancial statements

A description of the scope of an audit of ﬁnancial statements is provided on the APB’s web-site at www.frc.org.uk/apb/scope/UKP.

Opinion on ﬁnancial statements

In our opinion the parent company ﬁnancial statements:

• give a true and fair view of the state of the company’s affairs as at 26 April 2009;

• have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and

• have been prepared in accordance with the requirements of the Companies Act 2006.

Opinion on other matter prescribed by the Companies Act 2006

In our opinion:

• the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006; and

• the information given in the Directors’ Report for the ﬁnancial year for which the ﬁnancial statements are prepared is consistent with the parent company ﬁnancial

statements.

Matters on which we are required to report by exception

We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion::

• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us;

• the parent company ﬁnancial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with the accounting records and

returns; or

• certain disclosures of directors’ remuneration speciﬁed by law are not made; or

• we have not received all the information and explanations we require for our audit.

Other matters

We have reported separately on the group ﬁnancial statements of Sports Direct International plc for the 52 week period to 26 April 2009.

David Miller, Senior Statutory Auditor

for and on behalf of Grant Thornton UK LLP, Registered Auditor, Chartered Accountants

London

16 July 2009

Sports Direct International PLC Annual Report 2009 67

COMPANY BALANCE SHEET AS AT 26 APRIL 2009

Notes 2009 2008

£’000 £’000

Fixed assets

Investments 2 996,808 989,290

Current assets

Debtors 3 1,871 1,795

Cash at bank - 1,886

1,871 3,681

Creditors: amounts falling due within one year.

4 (22,932) (23,383)

Net current liabilities

(21,061) (19,702)

Creditors: amounts falling due in greater than one year

5 - (730)

Net assets

975,747 968,858

Capital and reserves

Called up share capital 6 64,045 64,045

Share premium 7 874,300 874,300

Treasury shares reserve 7 (85,088) (201,483)

Permanent contribution to capital 7 50 50

Capital redemption reserve 7 8,005 8,005

Own share reserve (6,094) -

Proﬁt and loss account 7 120,529 223,941

Shareholders’ funds

8 975,747 968,858

The accompanying accounting policies and notes form part of these ﬁnancial statements.

The ﬁnancial statements were approved by the Board on 16 July 2009 and were signed on its behalf by:

Bob Mellors

Director

Company Balance Sheet

NOTES TO THE COMPANY FINANCIAL STATEMENTS

1. ACCOUNTING POLICIES

These accounts have been prepared in accordance with applicable United Kingdom accounting standards. A summary of the more important accounting policies adopted

are described below.

Basis of accounting

The accounts have been prepared under the historical cost convention.

As permitted by Section 408 of the Companies Act 2006, a proﬁt and loss account of the Company is not presented. The Company’s proﬁt or the 52 week period 26 April

2009 was £27,694,000 (2008 £184,687,000 proﬁt).

Investments

Fixed asset investments are stated at cost less any provision for impairment.

Cost represents cash consideration or the amount of ordinary shares issued by the Company at nominal value after taking account of merger relief available under s612

of the Companies Act 2006 plus related acquisition costs capitalised at fair value.

Deferred taxation

Deferred tax is provided for on a full provision basis on all timing differences, which have arisen but not reversed at the balance sheet date. No timing differences are

recognised in respect of gains on sale of assets where those gains have been rolled over into replacement assets. A deferred tax asset is not recognised to the extent

that the transfer of economic beneﬁt in future is uncertain.

Deferred tax is calculated on a non-discounted basis at the tax rates that are expected to apply in the periods in which timing differences reverse, based on tax rates and

laws enacted or substantively enacted at the balance sheet date.

Foreign currencies

Items arising from transactions denominated in foreign currencies are translated at the rate of exchange ruling at the date of the transaction. At the balance sheet date

all monetary assets and liabilities denominated in foreign currencies are translated at the closing rate or at the rate of exchange at which the transaction is contracted to

be settled in the future. All exchange differences are dealt with in the proﬁt and loss account.

Dividends

Dividends on the Company’s ordinary shares are recognised as a liability in the Company’s ﬁnancial statements, and as a deduction from equity, in the period in which

the dividends are declared. Where such dividends are proposed subject to the approval of the Company’s shareholders, the dividends are only declared once shareholder

approval has been obtained.

Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all of its liabilities. Equity instruments issued by the

Company, with the exception of those accounted for via merger relief available under s612 of the Companies Act 2006, are recorded at the proceeds received, net of any

direct issue costs.

Income from group undertakings

Income from group undertakings is recognised when qualifying consideration is received from the group undertaking.

Related party transactions

The Company has taken advantage of the exemption in Financial Reporting Standard 8 from reporting related party transactions as its own Financial Statements are

presented together with its Consolidated Financial Statements.

Share-based payments

The Company has applied the requirements of FRS 20, “Share-based Payment”. The Company issues equity-settled share-based payments to certain directors and

employees of the Company and its subsidiaries. These are measured at fair value at the date of grant which is expensed to the consolidated income statement on a

straight-line basis over the vesting period, based on the Group’s estimate of shares that will eventually vest.

Fair value is measured by use of a Monte Carlo method. The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of

non-transferability, exercise restrictions, and behavioural considerations. No share-based payment charge was recognised for the 52 weeks ended 26 April 2009 as the

directors did not consider it material to the Group’s ﬁnancial results or position.

2. INVESTMENTS

2009

£’000

Shares in group undertakings:

As at 27 April 2008 989,290

Additions 7,518

As at 26 April 2009 996,808

None of the Company’s investments are listed.

The Company is the principal holding company of the Group. The principal subsidiary undertakings of the Company are set out in note 37 to the Group ﬁnancial

statements.

Sports Direct International PLC Annual Report 2009 69

3. DEBTORS

2009 2008

£’000 £’000

Amounts owed by group undertakings 598 -

Other debtors 1,273 -

Prepayments - 1,795

1,871 1,795

4. CREDITORS: amounts falling due in more than one year

2009 2008

£’000 £’000

Bank overdraft 164 -

Trade creditors 519 1,061

Amounts owed to group undertakings 14,429 11,322

Accruals 155 170

Other creditors 7,665 10,830

22,932 23,383

5. CREDITORS: amounts falling due within one year

2009 2008

£’000 £’000

Other creditors - 730

- 730

6. CALLED UP SHARE CAPITAL

2009 2008

£’000 £’000

Authorised

999,500,010 ordinary shares of 10p each 99,950 99,950

499,990 redeemable preference shares of 10p each 50 50

100,000 100,000

Called up and fully paid

640,452,369 (2008: 640,452,369) ordinary shares of 10p each 64,045 64,045

2009 2008

£’000 £’000

Share capital

At 27 April 2008 64,045 72,000

Shares cancelled (Note 7) - (7,955)

At 26 April 2009 64,045 64,045

NOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUED

Notes to the Company Financial Statements

7. RESERVES

Share premium

account

Treasury share

reserve

Permanent

contribution to

capital

Capital redemption

reserve Own share reserve

Proﬁt and loss

account

£’000 £’000 £’000 £’000 £’000 £’000

At 27 April 2008 874,300 (201,483) 50 8,005 - 223,941

Dividends paid - - - - - (20,805)

Treasury shares cancelled - 105,759 - - - (105,759)

Market value of shares transferred to EBT - 6,094 - - (6,094) -

Difference between original cost and Market value of shares

transferred to EBT - 4,542 - - - (4,542)

Proﬁt for the ﬁnancial period - - - - - 27,694

At 26 April 2009 874,300 (85,088) 50 8,005 (6,094) 120,529

Between 24 July 2007 and 11 March 2008 the Group acquired 151,547,631 of its own shares for total consideration of £200,480,929, with the purchase price ranging

between £0.95 and £1.50.

Between 12 October 2007 and 14 March 2008 the Group cancelled 79,547,631 shares purchased in the market under the share re-purchase programme. The average

purchase price of the shares cancelled was £1.3295 and hence a transfer from Treasury shares to Retained earnings of £105,759,000 was processed.

On 16 September 2008 the Group sold 8,000,000 ordinary shares of 10 pence each from Treasury to the newly formed Sports Direct Employee Beneﬁt Trust, an employee

share scheme within the meaning of Section 1166 of the Companies Act 2006, at the market value of 76.17 pence per share. The difference between the market value and

the average original purchase price of 132.95 pence per share has been transferred to retained earnings.

Following the above transaction the Company now holds 64,000,000 ordinary shares in Treasury.

The ﬁnal dividend for 2008 of £13,870,000 (2.44p) was paid on 31 October 2008 and the interim dividend for 2009 of £6,935,000 (1.22p) was paid on 30 April 2009.

8. RECONCILIATION OF MOVEMENT ON SHAREHOLDERS’ FUNDS

2009

£’000

Opening shareholders’ funds 968,858

Dividends declared (20,805)

Proﬁt for the ﬁnancial period 27,694

Closing shareholders’ funds 975,747

9. POST BALANCE SHEET EVENTS

No material post balance sheet events occurred after 26 April 2009 to the date of this Annual Report.

Sports Direct International PLC Annual Report 2009 71

IFRS IFRS IFRS IFRS UK GAAP

52 weeks ended

26 April 2009

52 weeks ended

27 April 2008

52 weeks ended

29 April 2007

52 weeks ended

30 April 2006

52 weeks ended

24 April 2005

£’000 £’000 £’000 £’000 £’000

Continuing operations:

Revenue 1,367,321 1,259,510 1,347,144 1,194,736 971,062

Cost of sales (809,685) (709,809) (751,003) (738,057) (589,225)

Gross proﬁt

557,636 549,701 596,141 456,679 381,837

Selling, distribution and administrative expenses (463,297) (444,109) (445,198) (351,622) (317,854)

Other operating income 4,004 4,023 1,783 3,044 1,263

Costs of admission to the London Stock Exchange - - (586) - -

Past performance bonuses - - (56,400) - -

Proﬁt on disposal of certain retail concessions - - 4,160 - -

Leofelis legal claim - - (6,000) - -

Reorganisation costs - - - (3,368) -

Proﬁt on disposal of intangible assets - - - - 10,000

Impairment of intangible ﬁxed assets (14,832) - - - (4,849)

Impairment of Freehold property (15,682) - - - -

_______ _______ _______ _______ _______

Exceptional items (30,514) - (58,826) (3,368) 5,151

Operating proﬁt

67,829 109,615 93,900 104,733 70,397

Investment income (51,949) 43,874 1,790 2,624 1,179

Finance income 15,927 5,370 3,449 3,387 3,873

Finance costs (23,633) (45,006) (42,081) (17,832) (4,497)

Share of proﬁt of associated undertakings and joint ventures 2,482 5,020 3,422 3,406 2,440

Proﬁt before taxation

10,656 118,873 60,480 96,318 73,392

Taxation (26,164) (41,126) (23,360) (31,448) (17,301)

Proﬁt for the period

(15,508) 77,747 37,120 64,870 56,091

Equity holders of the Group (15,838) 78,182 37,671 62,886 55,235

Minority interests 330 (435) (551) 1,984 856

Proﬁt for the period

(15,508) 77,747 37,120 64,870 56,091

Notes to the consolidated income statement ﬁve year record:

1. Information for the 52 weeks ended 26 April 2009, the 52 weeks ended 27 April 2008, 52 weeks ended 29 April 2007 and the 53 weeks ended 30 April 2006 is

presented under IFRS.

2. Information for the 52 weeks ended 24 April 2005 is presented under UK GAAP.

3. The ﬁve year record has been prepared on the same basis as the ﬁnancial statements for the 52 weeks ended 26 April 2009, as set out in Note 1, basis of

preparation, of the consolidated ﬁnancial statements. In particular, the principles of reverse acquisition accounting and merger accounting have been adopted.

CONSOLIDATED 5 YEAR RECORD UNAUDITED INCOME STATEMENT

Consolidated 5 Year Record

SHAREHOLDER INFORMATION

Registrar and transfer ofﬁce

Capita Registrars

Northern House

Woodsome Park

Fenay Bridge

Huddersﬁeld

HD8 0LA

Telephone 0870 162 3130

Company Secretary and registered ofﬁce

Michael Oliver

Sports Direct International plc

Unit A, Brook Park East

Shirebrook

NG20 8RY

Telephone 0870 333 9400

Sports Direct International plc is registered in England and Wales (No. 6035106)

Solicitors

Freshﬁelds Bruckhaus Derringer

65 Fleet Street

London

EC4Y 1HS

Brokers

Singer Capital Markets Ltd

One Hanover Street

London

W1S 1AX

Merrill Lynch International

Merrill Lynch Financial Centre

2 King Edward Street

London

EC1A 1HQ

Principal Bankers

Bank of Scotland

Corporate Banking

PO Box No 39900

Bishopsgate Exchange

London

EC2M 3YB

Auditors

Grant Thornton UK LLP

Grant Thornton House

Melton Street

Euston Square

London

NW1 2EP

Annual General Meeting

The Annual General Meeting of the Company will be held at 3.00pm on

Wednesday 9 September 2009 at Sports Direct International plc, The

Auditorium, Unit D, Brook Park East, Shirebrook, NG20 8RY. Each shareholder

is entitled to attend and vote at the meeting, the arrangements for which are

described in a separate notice.

Dividend Payments

An interim dividend of 1.44 pence per share was paid on 30 April 2009 to

shareholders on the register on 3 April 2009.

Results

For the year to 26 April 2010

Interim management statement: 9 September 2009

Half year results announced: 17 December 2009

Interim management statement: 9 February 2010

Preliminary announcement of full year results: July 2010

Annual report circulated July/August 2010

Shareholder helpline

The Sports Direct shareholder register is maintained by Capita Registrars

who are responsible for making dividend payments and updating the register,

including details of changes to shareholders’ addresses. If you have a query

about your shareholding in Sports Direct, you should contact Capita on:

Telephone: 0871 664 0300 calls cost 10p a minute plus network extras.

Address: Northern House, Woodsome Park, Fenay Bridge, Huddersﬁeld. HD8

0LA

Website: www.capitaregistrars.com

Website

The Sports Direct website at www.sportsdirect.com provides news and details of

the Company’s activities plus information for shareholders. The investor section

of the website contains real time share price data as well as the latest results

and announcements.

Unsolicited mail

The Company is obliged by law to make its share register publicly available and

as a consequence some shareholders may receive unsolicited mail, including

from unauthorised investment ﬁrms. For more information on unauthorised

investment ﬁrms targeting UK investors, visit the website of the Financial

Services Authority at www[email protected].uk.

If you wish to limit the amount of unsolicited mail you receive contact:

The Mailing Preference Service

FREEPOST 29

(Lon 20771)

London

W1E 0ZT

Telephone: 020 7291 3310

Fax 020 7323 4226

Email [email protected] or register on-line at www.mpsonline.org.uk

Sports Direct International PLC Annual Report 2009 73

Sports Direct International plc - Unit A, Brook Park East, Shirebrook, NG20 8RY. Tel: 0870 333 9400