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Sports Direct profits crash

Sports Direct said pre-tax profits fell 35.2% to £52 million for the 26 weeks to October 28.

Group revenue slipped back 7.1% to £668.1m while retail sales fell back 12.9% to £518.4m because of unseasonal weather and tough comparatives against the World Cup in 2006. The company said that the first half had been the most difficult trading period in the company's history. EBITDA also dipped 16% to £83.6m.

However gross margin was up 220 basis points to 43.3%, primarily driven by improvements to the UK retail gross margin which rose from 42.4% to 45.3%.

Brand revenue also rose 7.1% to £88m, with wholesale revenue up 2.8% to £77.5m Licensing revenue was up 56.7% to £10.5m, driven by the acquisition of Everlast and the agreement signed with Dubai-based partner Retail Corp, which plans to open Lillywhites and Sports Direct stores in the Middle East.

Chief executive David Forsey said: "The results reflect a very challenging UK market and the comparative period last year including the football World Cup. These also demonstrate the resilience of our business under such pressures from external factors. We remain determined to adapt our strategy, consolidate our market leading position and develop our strong brand portfolio to drive long-term growth."

Sports Direct said it would continue to open between 35 and 40 stores a year. It already operates 478 stores.

The directors warned that England's failure to qualify for Euro 2008 would impact EBITDA by circa £50m next year. They added in a statement: "The UK retail business will be impacted by England's failure to qualify for next year's European Championships. This will be partly mitigated, however, by performances in the international retail and brands businesses, where management is targeting 6%-8% underlying EBITDA growth in 2007/08 and 2008/09. Therefore we remain confident of exceeding current EBITDA expectations for 2007/08."

This morning, Sports Direct deputy chairman and founder Mike Ashley is reported to have said he has no plans to take the company private for a "considerable time".

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