Comparison of JD Sports and Sports Direct Financial Statements

Introduction

The purpose of this financial report is to analyze, compare and evaluate the financial statements of JD Sports Fashion PLC with its competitor Sports Direct International PLC which are the most successful sports brand retailer firms in UK. The study uses Ratio analysis, Horizontal and Vertical Analysis to evaluate and compare the company performances based on the last five years[1] financial information. The evaluation and comparison of these two firms to understand the performance and implication of potential investments shows that JD Sports PLC is recommended for potential investments as the firm is performing well when compared to Sports Direct PLC.

Summary of JD Sports PLC

JD Sports is a sports fashion retail company based in Greater Manchester, UK .Started with one store in 1981, the firm has grown up and currently has 800 stores. From year 2001, the firm started expanding its business with acquisition strategy. In year 2001, the firm entered in to other European markets with the acquisition of champion sports[2](JDPLC, 2017). JD Sports is also an official sponsor of numerous association football teams[3] (JDPLC, 2017).Recent acquisition of ‘Go Outdoor’ for 112M GBP has bought thee firm more reputation (Reuters, 2016) .Over the past 3 decades many players entered the industry and the competition has been increased. Sports Direct PLC and WH Smith PLC are the major competitors for JD Sports(Morningstar, 2017a).Despite of extreme competition, the firm has made a Net profit of 178.9 Million GBP with a Growth rate of 83.25%. Below is the key financial information of JD Sports[4]

                                                                                                     

Source :(Morningstar, 2017d)

Summary of Sports Direct International PLC

Sports Direct PLC is a sports goods retailer based in Maidenhead, UK. The firm was established in 1982 and currently operating 670 stores worldwide. In year 2000, the firm started expanding its operations to other parts of Europe. It entered Belgium by forming a Joint Venture with 22 local stores (SportsDirectPLC, 2017).The firm is successful and operated at high Revenue till 2013. However, the legal breach on Employee conditions in the year 2013 has badly affected the firm reputation. In August 2016, the firm admitted breaking the law and agreed to pay the unlawfully with help wages of about 1Million GBP to the affected workers(BBC, 2016). In year 2017, the firm has reported Net Profit of 229 Million GBP (17.13% decline in profit) [5]

Source :(Morningstar, 2017h)

Above is the key financial information of the firm.

Evaluation of Financial Statements : A Comparitive Analysis

This section provides the analysis, evaluation and comparison of Income Statement, Balance Sheet[6] using Horizontal, Vertical and Ratio Analysis.

Horizontal and Vertical Analysis (Bamber and Parry, 2014)

1. Income Statement Analysis

JD Sports

Below table provides Horizontal and Vertical Analysis over the 5 year period[7].The firm has reported a good growth in Revenue and net profits over the years. In 2017, the firm has reported a significant revenue growth rate of 30.58% which is 19.67% in 2016.This inurn boosted the Operating and Net Profit Growth rates which is 80.06% and 83.25% respectively.

Source:(Morningstar, 2017d)

Evaluation:

The growth in profit is majorly due to the growth on Revenue over the years. From the vertical analysis, it is clear that there are no significant changes in the cost of revenue margin over the years. However, the operating expense margin is in decreasing trend from 44.48% to 38.91% [8] which mean that the firm is controlling its expenses with respect to revenue[9].The decline in the operating expense margin has boosted the operating income and Net income margins.

Sports Direct

Over the 5 year period[10] , the firm has reported inconsistent Revenue Growth. Growth in Gross Profit, Operating Profit and Net Profit are in declining trend

Source:(Morningstar, 2017h)

Evaluation:

The decline in Profit Growth is mainly due to the growth in cost proportional to revenue growth. In 2017, the growth in cost of sales (18.24%) is more than the Revenue Growth (11.24%).Also, the operating expenses growth is inconsistent (majorly increasing) which resulted in the negative net profit growth in year 2017.Vertical analysis shows that the cost of revenue margin and operating expenses margin is very high resulting in low operating income and Net profit margins

Comparative analysis

Above evaluation of the firms shows that JD sports achieved good profit growth and margin by controlling the expenses (operating expense margin) whereas Sports Direct failed to achieve the profit growth as its revenue growth is inconsistent and operating expense margin and cost of sales margin are out of control

2. Balance Sheet Analysis

JD Sports

Below table provides the Horizontal and Vertical Analysis over the 5 year period[11].The firm has reported a steady growth of assets over the 5 year period. Total assets has a growth rate of 44.99% in 2017 which is 16.08% in 2016.There is an decrease in Liability growth from year 2014 to 2016 which is a good sign for the firm. However, in 2017 the firm reported a Liability growth of 53.27%. There is a steady growth in the Stockholder Equity over the 5 year period. The firm reported Equity growth of 44.41% in 2017 which is 16.08% in 2016

Source: (Morningstar, 2017b)

Evaluation:

As discussed, there is an significant growth in Assets in 2017.However, the growth is mainly due to the growth in prepaid expenses and inventories[12] which mean that the firm is purchasing more inventory. Also, PPE[13] is also grown significantly which means the firm is investing much in PPE. This made the decline in the growth of cash[14]. The increase in Liability growth in 2017 is due to the capital leases. Increase in Stock holder equity growth is a good sign for the firm and it is due to the increase in the retained earnings growth

Sports Direct

Over the 5 year period[15], the firm has reported an inconsistent growth in Assets .The firm has reported 3.77% Asset growth where as it is 33.05% in 2016.Growth in liabilities also shows an inconsistent trend. The firm has reported high long term debt in year 2016 and 2017.Equity growth is in declining trend from year 2015 to 2017.The firm reported negative equity growth[16] in 2017

Source: (Morningstar, 2017f)

Evaluation:

Decrease in Asset Growth in 2017 is mainly due to the decrease in Long term assets, Inventory and Short term Investments. Even though there is decrease in inventory, thee total cash available has negative growth of “-6.43%” .The firm is investing more in Properties which resulted in +ve Growth of non-current assets and –ve growth of current assets. The decline in Liability growth is mainly due to the decline in Account Payable. The equity growth has been declined in 22017 mainly due to the decline in retained earnings growth and increase in comprehensive income.

Comparative analysis

Above evaluation of the firms shows that there is a steady growth of Assets and Equity for JD sports whereas the growth is declining for Sports direct. Over all, JD Sports is managing their assets and equity better than Sports direct. In case of Liabilities, JD Sports has increase in Liability growth only in 2017.Over all 5 year trend shows that JD Sports is well managing their liabilities when compared to Sports direct.

Ratio analysis  (Atrill and McLaney, 2006)

Source: (Morningstar, 2017e)

Return on Capital Employed (ROCE):

JD Sports

Overall Trend: Increasing except in 2014[17]

Evaluation:

• Slight decline of ROCE in 2014

Reason:  Growth in Stake Holder Capital and Non-Current Liabilities > Growth in         Operating Profit (high operating expense margin)

• Increase from year 2014 to 2017[18]

Reason:

Decrease in Operating Expense Margin resulting in increase in operating income

Implication:  Increasing trend in ROCE is a good sign for the firm as more investors will show interest to invest in the firm.

Sports Direct

Overall Trend: Decreasing except in 2014

Evaluation: Increase in Cost of revenue margin for year 2017[19]

• Increase in Operating expenses margin over the years
• Operating profit Growth < Equity and Non-Current liability

Comparative Analysis

ROCE for JD Sports is high as well as in increasing trend when compared to Sports Direct. This gives the investors more confidence as they can get the high consistent returns for their investments.

1. Operating Profit Margin:

JD Sports

Overall Trend :  Increasing

Evaluation:

As explained earlier, operating expense margin is reduced due to which the operating profit margin has been increased

Implication

This shows the firms efficiency and effectiveness in cost control

Sports Direct

Overall Trend: Declining Except in 2015

Evaluation:

• Increase in Operating expenses margin from year 2013 to 2017[20]
• Increase in Cost of sales margin in 2017

Comparative Analysis:

Evaluation shows that JD Sports has reduced the operating expnses margin wheras sports direct failed to control its costs and expenses due to which the operating profit margin has been declined

2. Gearing Ratio:

JD Sports:

Overall Trend: Decreasing except in 2017

Evaluation:

• Non-Current Liability Growth is relatively low when compared to Equity Growth[21] from 2013 to 2016
• However in 2017, the long term debt has been increased from 0.2 Million GBP to 2 Million GBP (884.76% Growth) [22]which results in the increasing in the Gearing ratio.

Sports Direct:

Overall Trend : Increasing except in 2014

Evaluation:

• In 2014, the decrease in the long term debt has resulted in the decrease in the Gearing[23]
• From 2015 to 2017, the ratio is in increasing trend as the long term debt and other long term liabilities has increased over these years. On the other hand, Growth in Stock holder Equity is relatively low when compared to growth in non-current liabilities. In 2017 , the firm reported negative equity growth which resulted in further increase in Gearing[24]

Comparative Analysis:

Evaluation shows that the Gearing for JD Sports is not only in decreasing trend, the values of Gearing is also pretty much lower when compared to Sports direct .This will make the investors attract towards JD Sports as it involves less risk in investing in JD when compared to Sports Direct.

3. Interest Cover

JD Sports:

Overall Trend : Increasing

Evaluation:

As discussed in earlier ratios, the firm is mostly dependent on Shareholder equity than borrowings or Debts. So, Interest payable is very less when compared to operating profit. Also, the firm is maximizing the Operating profit margin by reducing the operating expense margin

Sports Direct:

Overall Trend : Inconsistent

Evaluation:

In 2014, 2015 there is an increase in the interest cover as the interest expenses of the firm is low since the non-current liabilities are low. However, the interest cover in 2016 and 2017 has been declined since the operating profit margin is declined due to the increase in operating expense margin and cost of revenue margin

Comparative Analysis:

Above Graph shows that JD Sports Interest cover is not only in increasing trend but the interest coverage times is much higher than Sports Direct. It is a good sign for JD sports since the banks will lend the money as the firm has high capacity to repay the loans. At the same time, investors will also be attracted as the risk of investments is low when compared to Sports direct.

4. Working Capital Cycle (WCC)

JD Sports:

Overall Trend : Increasing

Evaluation:

As discussed earlier, the firm is holding inventory for more days which made the increase in WCC .Even though the firm is managing to reduce the receivable period[25], due to the increase in inventory days and decrease in payable days made the increase in WCC

Sports Direct:

Overall Trend : Increasing except in 2017

Evaluation: From 2013 to 2016, the WCC is increasing due to the increase in inventory days and receivable periods. However, in 2017, the Inventory turnover period and Trade receivable period has been decreased due to which resulted in the decrease in WCC

Comparative Analysis:

Lower WCC is good for a business. Even though the trend is increasing for both the firms, WCC for JD Sports is relatively lower when compared to Sports Direct.

5. Diluted Earnings Per Share:

JD Sports:

Overall Trend : Increasing

Evaluation:

• No change in number of shares from 2013 to 2017[26].So, the increase in EPS is due to the increase in Net Profits. This shows that every share of the common stock earns 18 pence of the Net profit in 2017.The increase in EPS is good for the firm

Sports Direct:

Overall Trend : Increasing except in 2017

Evaluation: Number of shares from 2013 to 2017 has been reduced. The firm has a decline in EPS in 2017 since the Net Profits has been declined in 2017 (Negative Growth Rate). Due to the decrease in shares and increase in profits, the EPS has increased from 2013 to 2016.

Comparative Analysis:

The above graph shows that EPS for sports direct is higher than JD Sports which is a good sign for Sports direct. However, considering the decline in EPS for Sports direct in 2017 and decrease in the number of shares over the years, it will be better to look in to other ratios before investing in Sports Direct

6. Price Earnings Ratio:

JD SPORTS

Overall Trend : Inconsistent

Evaluation: In 2017, the firm PE ratio is 19.5 which means the market value of the share is 19.5 times higher than the erearnings per share. Current industry average of PE ratio is 20.15 which is close to JD Sports PE

Sports Direct:

Overall Trend : Decreasing except in 2014

The PE ratio in 2017 is 4.01 which mean the market value per share is 4.01 times higher than the EPS. Even though it looks beneficial for the investor, the PE ratio is well behind the industry average which is 20.15

Comparative Analysis:

From the above evaluations, it is clear that the PE ratio of JD Sports is close to industry average whereas Sports direct is well behind the Industry average. So, the investor can be confident to invest in JD Sports

7. Dividend Payout Ratio:

JD Sports

Overall Trend: Declining

Payout ratio is in decreasing trend which means the company is reducing the proportion of earnings to pay as dividends. The firm is increasing the Dividend year by year but the raise in Dividend is not proportional to raise in earnings. This might be due to the fact that firm is using its profits for investment activities [27]

Sports Direct

Sports direct is not issuing any dividends from year 2013.So, there is no payout ratio for the firm.

Comparative Analysis

Dividend is a signal to the investors about the company performance. Since JD Sports is issuing dividends, the investors will be attracted towards this firm as Sport direct is not issuing any dividends

8. Liquidity Ratio

JD Sports: Quick ratio for the firm is in inconsistent trend. There is about 50% difference in current and quick ratios which mean that the firm is holding high inventory. Quick ratio of the firm is 0.68 which is above industry average 0.58

Sports Direct: Current ratio is almost double the quick ratio which means the firm is holding high inventory. Quick ratio of the firm is 0.87 which is above industry average 0.58

Comparatively both the firms have the quick ratio above the industry average. So, it doesn’t make much difference between the two firms

Conclusion:

Overall, JD Sports is more attractive than Sport direct. Major ratios like Profitability, Long-term solvency and Investment ratios show that JD Sports is performing better than Sports Direct. The horizontal and vertical analysis also derived the same conclusion. One of the limitations of ratio analysis is that they do not reflect the current[28] and future expansion plans of the businesses. This is especially true in case of investment ratios. There is no dividend pay our ratio for Sports Direct since the firm is not paying any dividends but the cash flow statement of sports direct shows that the firm is doing investments in PPE[29] due to which it may not be able to pay the dividends. However, JD Sports is well balancing its investments and dividends. So, it can be recommended to a potential investor to invest in JD Sports when compared to Sports Direct

Appendix

1. JD Sports Fashion PLC Income Statement

JD SPORTS FASHION PLC  (JD.) CashFlowFlag INCOME STATEMENT
Fiscal year ends in January. GBP in thousands except per share data.	2013-01	2014-01	2015-01	2016-01	2017-01
Revenue	1258892	1330578	1522253	1821652	2378694
Cost of revenue	645404	685448	782703	937431	1215053
Gross profit	613488	645130	739550	884221	1163641
Sales, General and administrative	559940	587671	638302	752057	919244
Other operating expenses			9527		6419
Total operating expenses	559940	587671	647829	752057	925663
Operating income	53548	57459	91721	132164	237978
Interest Expense	1503	1597	2601	1933	1937
Other income (expense)	3072	1988	1376	1400	2327
Income before income taxes	55117	57850	90496	131631	238368
Provision for income taxes	13875	16364	20741	31001	53788
Minority interest	2456	1328	1294	2996	5666
Other income	2456	1328	1294	2996	5666
Net income from continuing operations	41242	41486	69755	100630	184580
Net income from discontinuing ops			-15784
Other	-2456	-1328	-1294	-2996	-5666
Net income	38786	40158	52677	97634	178914
Net income available to common shareholders	38786	40158	52677	97634	178914
Earnings per share
Basic	0.04	0.04	0.05	0.1	0.18
Diluted	0.04	0.04	0.05	0.1	0.18
Weighted average shares outstanding
Basic	973233	973233	973233	973233	973233
Diluted	973233	973233	973233	973233	973233
EBITDA	86948	93800	138338	182342	302675
No.Of Employees	10430	10508	11198	12602	16218
Dividends	12408	12871	13260	13820	14501
Dividends/Share(Pence)	1.274926	1.322499	1.362469	1.420009	1.489982
Market Value Per share (http://www.jdplc.com/investor-relations/share-price.aspx)(Pence)	153	329	100	228	351

 Source :(Morningstar, 2017d)

2. JD Sports Fashion PLC Balance Statement

JD SPORTS FASHION PLC  (JD.) CashFlowFlag BALANCE SHEET
Fiscal year ends in January. GBP in thousands except per share data.	2013-01	2014-01	2015-01	2016-01	2017-01
Assets
Cash and cash equivalents	53484	76797	121317	215996	247560
Total cash	53484	76797	121317	215996	247560
Inventories	146569	186116	225020	238324	348007
Prepaid expenses	37962	45366	37738	30486	45527
Other current assets	18799	21600	16184	25889	73075
Total current assets	256814	329879	400259	510695	714169
Land	23959	12120	12674	17185
Fixtures and equipment	221121	245410	259421	301150	379900
Other properties		20872	19050	22787	61375
Property and equipment, at cost	245080	278402	291145	341122	441275
Accumulated Depreciation	-115979	-136828	-143211	-167805	-205513
Property, plant and equipment, net	129101	141574	147934	173317	235762
Goodwill	54176	78776	86139	83944	130627
Intangible assets	41848	25554	14936	-10333	60275
Deferred income taxes				482
Other long-term assets	20568	23802	32402	33191	38103
Total non-current assets	245693	269706	281411	280601	464767
Total assets	502507	599585	681670	791296	1178936
Liabilities and stockholders’ equity
Short-term debt	7108	30933	36685	6257	30928
Capital leases	49	37	28	44	503
Accounts payable	97084	128510	124590	122638	165003
Taxes payable	35693	35216	46203	57470	92159
Other current liabilities	72815	90955	119242	161745	246563
Total current liabilities	212749	285651	326748	348154	535156
Long-term debt	684	516	339	210	2068
Capital leases	7	35	35	64	461
Deferred taxes liabilities	3852	4283	1804		8192
Minority interest	13934	13074	13502	18405	26592
Other long-term liabilities	33458	36260	42753	42043	54217
Total non-current liabilities	51935	54168	58433	60722	91530
Total liabilities	264684	339819	385181	408876	626686
Common stock		2433	2433	2433	2433
Additional paid-in capital	11659	11659	11659	11659	11659
Retained earnings	230572	257744	297161	378898	543268
Accumulated other comprehensive income	-4408	-12070	-14764	-10570	-5110
Total stockholders’ equity	237823	259766	296489	382420	552250
Total liabilities and stockholders’ equity	502507	599585	681670	791296	1178936

Source :(Morningstar, 2017b)

3. JD Sports Fashion PLC Cash Flow Statement

JD SPORTS FASHION PLC  (JD.) Statement of  CASH FLOW
Fiscal year ends in January. GBP in thousands except per share data.	2013-01	2014-01	2015-01	2016-01	2017-01
Cash Flows From Operating Activities
Deferred income taxes		16364	20531	31001	53788
Inventory	-23551	-29372	-54696	-13304	-21240
Other working capital	-18295	10969	53857	55785	39301
Other non-cash items	76574	79234	96070	152532	207412
Net cash provided by operating activities	34728	77195	115762	226014	279261
Cash Flows From Investing Activities
Investments in property, plant, and equipment	-43671	-43575	-63048	-72765	-84115
Property, plant, and equipment reductions	977	557	705	1145	2431
Acquisitions, net	11969	-17213	9027		-138568
Purchases of intangibles	-5540	-4609	-7152	-4401	-3843
Other investing charges	645	575	657	-5955	767
Net cash used for investing activities	-35620	-64265	-59811	-81976	-223328
Cash Flows From Financing Activities
Short-term borrowing	-245
Long-term debt issued		26000	5000
Long-term debt repayment		-129	-291	-31191	-3133
Repurchases of treasury stock					-14815
Cash dividends paid	-12408	-12871	-13260	-13820	-14501
Other financing activities	-971	-105	-72	-75	-804
Net cash provided by (used for) financing activities	-13624	12895	-8623	-45086	-33253
Effect of exchange rate changes	-867	-10	-3674	-4790	1796
Net change in cash	-15383	25815	43654	94162	24476
Cash at beginning of period	61611	46228	72043	115697	209859
Cash at end of period	46228	72043	115697	209859	234335
Free Cash Flow
Operating cash flow	34728	77195	115762	226014	279261
Capital expenditure	-49211	-48184	-70200	-77166	-87958
Free cash flow	-14483	29011	45562	148848	191303
Supplemental schedule of cash flow data

 Source:(MorningStar, 2017c)

4. JD Sports Horizontal and Vertical Analysis table

JD SPORTS  INCOME STATEMENT
	Vertical Analysis(Margin)					Horizontal Analysis(Growth)
Fiscal year ends in January. Units in %	2013-01	2014-01	2015-01	2016-01	2017-01	2014-01	2015-01	2016-01	2017-01
Revenue	100.00	100.00	100.00	100.00	100.00	5.69	14.41	19.67	30.58
Cost of revenue	51.27	51.52	51.42	51.46	51.08	6.20	14.19	19.77	29.62
Gross profit	48.73	48.48	48.58	48.54	48.92	5.16	14.64	19.56	31.60
Total operating expenses	44.48	44.17	42.56	41.28	38.91	4.95	10.24	16.09	23.08
Operating income	4.25	4.32	6.03	7.26	10.00	7.30	59.63	44.09	80.06
Net income	3.08	3.02	3.46	5.36	7.52	3.54	31.17	85.34	83.25

 

JD SPORTS BALANCE SHEET
	Vertical Analysis(Margin)					Horizontal Analysis(Growth)
Fiscal year ends in January. Units in %	2013-01	2014-01	2015-01	2016-01	2017-01	2014-01	2015-01	2016-01	2017-01
Total cash	10.64	12.81	17.80	27.30	21.00	43.59	57.97	78.04	14.61
Inventories	29.17	31.04	33.01	30.12	29.52	26.98	20.90	5.91	46.02
Prepaid expenses	7.55	7.57	5.54	3.85	3.86	19.50	-16.81	-19.22	49.34
Total current assets	51.11	55.02	58.72	64.54	60.58	28.45	21.34	27.59	39.84
Total assets	100.00	100.00	100.00	100.00	100.00	19.32	13.69	16.08	48.99
Capital leases	0.01	0.01	0.00	0.01	0.04	-24.49	-24.32	57.14	1043.18
Capital leases	0.00	0.01	0.01	0.01	0.04	400.00	0.00	82.86	620.31
Total liabilities	52.67	56.68	56.51	51.67	53.16	28.39	13.35	6.15	53.27
Total stockholders’ equity	47.33	43.32	43.49	48.33	46.84	9.23	14.14	28.98	44.41

 

JD SPORTS CASH FLOW
	Horizontal Analysis(Growth)
Fiscal year ends in January. Units in %	2014-01	2015-01	2016-01	2017-01
Inventory	24.72	86.22	-75.68	59.65
Other working capital	-159.96	390.99	3.58	-29.55
Net cash provided by operating activities	122.28	49.96	95.24	23.56
Investments in property, plant, and equipment	-0.22	44.69	15.41	15.60
Property, plant, and equipment reductions	-42.99	26.57	62.41	112.31
Acquisitions, net	-243.81	-152.44	-100.00
Net cash used for investing activities	80.42	-6.93	37.06	172.43
Long-term debt issued		-80.77	-100.00
Long-term debt repayment		125.58	10618.56	-89.96
Cash dividends paid	3.73	3.02	4.22	4.93
Net cash provided by (used for) financing activities	-194.65	-166.87	422.86	-26.25

5. JD Sports Fashion PLC Ratio Analysis

Ratio Analysis	JD Sports					Formula
	2013	2014	2015	2016	2017
Profitability
Return on Shareholder Funds %	17.12	16.14	18.94	28.76	38.28	(Profit for the Year /Avg. (Ordinary Share capital+Reserves))*100
Return on Capital Employed (%)	20.53	19.04	27.43	33.12	43.79	(Operating Profit/Avg.(Share Capital+Reeserves+Non-Current Liabilities))*100
Gross Profit margin (%)	48.73	48.48	48.58	48.54	48.92	(Gross Profit/Sales Revenue)*100
Return on  Assets (%)	7.83	7.29	8.22	13.26	18.16	(Net Income/Avg.Total Assets) *100
Operating Profit margin (%)	4.25	4.32	6.03	7.26	10.00	(Operating Profit/Sales Revenue)*100
Leverage Or Long Term Solvency ratios
Gearing ratio (%)	17.92	17.25	16.46	13.70	14.22	(Long Term (non-current Liabilities)/Sharecapital+reserves+Non-Current Liabilities)*100
Debt to Assets	0.53	0.57	0.57	0.52	0.53	Total liabilities/Total Assets
Debt to Equity	1.11	1.31	1.30	1.07	1.13	Total Liabilities/Share Holders Equity
Interest Cover (times)	37.67	37.22	35.79	69.10	124.06	operating Profit/Interest Payabale
Efficiency Ratios
Avg.Inventory Turn Over period(days)	78.31	88.58	95.86	90.20	88.07	(Avg.Inventors Held/Cost of sales)*365
Avg. Settlement period for Trade Receivables(days)	4.37	3.87	3.31	2.64	2.86	(Avg. Trade Receivables/Credit Sales Revenue)*365
Avg. Settlement period for Trade Payables(days)	53.83	60.06	59.01	48.13	43.20	(Avg. Trade Payables/Credit Purchaes)*365
Working capital Cycle (Days)	28.85	32.39	40.16	44.71	47.73	(Avg.Inventory Turn Over period(days)+Avg. Settlement period for Trade Receivables(days)-Avg. Settlement period for Trade Payables(days))
Sales Revenue to Capital Employed(times)	4.34	4.24	4.29	4.11	3.69	Sales revenue/(Share Capital+Non -Current Liabilities)
Sales Revenue Per Employee	120.70	126.63	135.94	144.55	146.67	Sales revenue/No.of Employees
Investment Ratios
EPS(Pence)	4.00	4.00	5.00	10.00	18.00	Earnings available to Ordinary Shareholders/Number of Ordinary Shares in Issue
Price Earning Ratio(times)	38.25	82.25	20.00	22.80	19.50	Market Value Pershare/Earnings Per share
Dividend Yield(%)	0.83	0.40	1.36	0.62	0.42	(Dividend per share/Market Value per share) *100
Dividend Pay out Ratio(%)	35.90	30.20	27.60	16.20	11.80	(Dividends announced for the year/Earnings for the year avaialble for dividends)*100
Dividend cover ratio(times)	0.03	0.03	0.04	0.06	0.08	Earnings for the year avaialble for dividends/Dividends announced for the year
Liquidity Ratios
Current Ratio	1.21	1.15	1.23	1.47	1.33	Current Assets/Current Liabilities
Quick Ratio	0.52	0.50	0.54	0.78	0.68	(Current Assets-Inventory)/Current Liabilities
	0.46	0.45	0.50	0.74	0.64	(Current Assets-Inventory-Account Recievables)/Current Liabilities

Source:(Morningstar, 2017e)

6. Sports Direct  PLC Income Statement

SPORTS DIRECT INTERNATIONAL PLC ADR  (SDISY) CashFlowFlag INCOME STATEMENT
Fiscal year ends in April. GBP in thousands except per share data.	2013-04	2014-04	2015-04	2016-04	2017-04
Revenue	2185580	2705958	2832560	2904325	3245300
Cost of revenue	1290822	1551036	1591748	1619681	1914700
Gross profit	894758	1154922	1240812	1284644	1330600
Sales, General and administrative	689578	908843	950526	1021844	1255600
Other operating expenses		5531	3050	50759	-62600
Total operating expenses	689578	914374	953576	1072603	1193000
Operating income	205180	240548	287236	212041	137600
Interest Expense	9642	8113	6845	8104	9100
Other income (expense)	11688	7017	33055	157870	153100
Income before income taxes	207226	239452	313446	361807	281600
Provision for income taxes	55569	59839	72093	82826	49900
Minority interest	61	-632	956	1566	1800
Other income	61	-632	956	1566	1800
Net income from continuing operations	151657	179613	241353	278981	231700
Other	-61	632	-956	-1566	-1800
Net income	151596	180245	240397	277415	229900
Net income available to common shareholders	151596	180245	240397	277415	229900
Earnings per share
Basic	0.53	0.61	0.81	0.94	0.79
Diluted	0.49	0.58	0.78	0.91	0.77
Weighted average shares outstanding
Basic	284486	292757	296147	296287	291751
Diluted	310412	309095	308247	305120	300084
EBITDA	269464	311360	395940	465511	438600
No.Of Employees	14076	17165	17207	18280	20480
Market Value Per share (http://www.sportsdirectplc.com/investor-relations/share-information/share-price-chart.aspx)(Pence)	446.60	779.5	604.5	383.3	308.8

Source:(Morningstar, 2017h)

7. Sports Direct PLC Balance Sheet

SPORTS DIRECT INTERNATIONAL PLC ADR  (SDISY) CashFlowFlag BALANCE SHEET
Fiscal year ends in April. GBP in thousands except per share data.	2013-04	2014-04	2015-04	2016-04	2017-04
Assets
Cash and cash equivalents	147375	151024	78318	340363	352700
Short-term investments	17965	4355	92199	82527	43000
Total cash	165340	155379	170517	422890	395700
Account Reeceivable(%)	3.58	3.58	3.68	2.3	1.6
Account Reeceivable	50427.27	60886.46	65271.53	54276.688	39180.8
Inventories	446962	565479	517054	702158	629200
Prepaid expenses	29326	35653	31781	25152	32100
Other current assets	66785	87361	158945	161237	217000
Total current assets	708413	843872	878297	1311437	1274000
Land		322356	323402	433564
Fixtures and equipment	387255	425892	470580	557173	608600
Other properties	357527	125273	130351	174986	884900
Property and equipment, at cost	744782	873521	924333	1165723	1493500
Accumulated Depreciation	-412746	-461160	-501591	-579847	-651500
Property, plant and equipment, net	332036	412361	422742	585876	842000
Goodwill	146938	165220	175808	173572	87900
Intangible assets	93482	89889	79556	34997	97800
Deferred income taxes	47952	31130	38352	43984	33700
Other long-term assets	79762	158267	178928	209990	113400
Total non-current assets	700170	856867	895386	1048419	1174800
Total assets	1408583	1700739	1773683	2359856	2448800
Liabilities and stockholders’ equity
Short-term debt	55753	356226	1204	769	69500
Accounts payable	169976	239463	170090	219001	133300
Taxes payable	79959	54565	66217	99333	80800
Other current liabilities	126601	148991	145110	221505	457300
Total current liabilities	432289	799245	382621	540608	740900
Long-term debt	245625	6764	136849	333063	317300
Capital leases	2
Deferred taxes liabilities	24978	24046	40088	21590	18700
Pensions and other benefits		15350	14869	13065	3400
Minority interest	-254	-3538	-2810	-1666	-700
Other long-term liabilities	61012	37780	37705	66802	130200
Total non-current liabilities	331363	80402	226701	432854	468900
Total liabilities	763652	879647	609322	973462	1209800
Common stock				64060	64100
Additional paid-in capital	874300	874300	874300	874300	874300
Retained earnings	752018	931819	1181511	1482331	1591000
Treasury stock	-120609
Accumulated other comprehensive income	-860778	-985027	-891450	-1034297	-1290400
Total stockholders’ equity	644931	821092	1164361	1386394	1239000
Total liabilities and stockholders’ equity	1408583	1700739	1773683	2359856	2448800

Source:(Morningstar, 2017f)

8. Sports Direct PLC Cash Flow

SPORTS DIRECT INTERNATIONAL PLC ADR  (SDISY) Statement of  CASH FLOW
Fiscal year ends in April. GBP in thousands except per share data.	2013-04	2014-04	2015-04	2016-04	2017-04
Cash Flows From Operating Activities
Stock based compensation	22183	11927	10105	7077	2800
Inventory	-102026	-52521	49320	-155385	60000
Other working capital	-25561	-52676	-118717	-77202	-43400
Other non-cash items	219825	260325	296244	291218	174500
Net cash provided by operating activities	114421	167055	236952	65708	193900
Cash Flows From Investing Activities
Investments in property, plant, and equipment	-48247	-67304	-97342	-206977	-413500
Property, plant, and equipment reductions	79		21150	44000	2400
Acquisitions, net	-47037	-23407	-3897	-33091	92400
Purchases of investments		-55467	-50415	-89213	-30700
Sales/Maturities of investments		49394	51695	181342	190200
Purchases of intangibles	-2282	-1827	-2937	-124
Sales of intangibles	625
Other investing charges	2590	2495	3870	6140	-4500
Net cash used for investing activities	-94272	-96116	-77876	-97923	-163700
Cash Flows From Financing Activities
Long-term debt issued	404970	300910	126989	267390	328000
Long-term debt repayment	-323942	-348452	-346997	-71258	-344100
Repurchases of treasury stock	-21742				-109800
Other financing activities	-7196	-19789	-6845	-7720	-2800
Net cash provided by (used for) financing activities	52090	-67331	-226853	188412	-128700
Net change in cash	72239	3608	-67777	156197	-98500
Cash at beginning of period	69435	141674	145282	77505	233700
Cash at end of period	141674	145282	77505	233702	135200
Free Cash Flow
Operating cash flow	114421	167055	236952	65708	193900
Capital expenditure	-50529	-69131	-100279	-207101	-413500
Free cash flow	63892	97924	136673	-141393	-219600
Supplemental schedule of cash flow data

Source:(Morningstar, 2017g)

9. Sports Direct Horizontal and Vertical Analysis Table

SPORTS DIRECT INCOME STATEMENT
	Vertical Analysis(Margin)					Horizontal Analysis(Growth)
Fiscal year ends in April.Units in %	2013-04	2014-04	2015-04	2016-04	2017-04	2014-04	2015-04	2016-04	2017-04
Revenue	100.00	100.00	100.00	100.00	100.00	23.81	4.68	2.53	11.74
Cost of revenue	59.06	57.32	56.19	55.77	59.00	20.16	2.62	1.75	18.21
Gross profit	40.94	42.68	43.81	44.23	41.00	29.08	7.44	3.53	3.58
Total operating expenses	31.55	33.79	33.66	36.93	36.76	32.60	4.29	12.48	11.22
Operating income	9.39	8.89	10.14	7.30	4.24	17.24	19.41	-26.18	-35.11
Net income	6.94	6.66	8.49	9.55	7.08	18.90	33.37	15.40	-17.13

 

SPORTS DIRECT  BALANCE SHEET
	Vertical Analysis(Margin)					Horizontal Analysis(Growth)
Fiscal year ends in April.Units in %	2013-04	2014-04	2015-04	2016-04	2017-04	2014-04	2015-04	2016-04	2017-04
Short-term investments	1.28	0.26	5.20	3.50	1.76	-75.76	2017.08	-10.49	-47.90
Total cash	11.74	9.14	9.61	17.92	16.16	-6.02	9.74	148.00	-6.43
Inventories	31.73	33.25	29.15	29.75	25.69	26.52	-8.56	35.80	-10.39
Total current assets	50.29	49.62	49.52	55.57	52.03	19.12	4.08	49.32	-2.85
Goodwill	10.43	9.71	9.91	7.36	3.59	12.44	6.41	-1.27	-49.36
Intangible assets	6.64	5.29	4.49	1.48	3.99	-3.84	-11.50	-56.01	179.45
Other long-term assets	5.66	9.31	10.09	8.90	4.63	98.42	13.05	17.36	-46.00
Total non-current assets	49.71	50.38	50.48	44.43	47.97	22.38	4.50	17.09	12.05
Total assets	100.00	100.00	100.00	100.00	100.00	20.74	4.29	33.05	3.77
Total liabilities	54.21	51.72	34.35	41.25	49.40	15.19	-30.73	59.76	24.28
Total stockholders’ equity	45.79	48.28	65.65	58.75	50.60	27.31	41.81	19.07	-10.63

SPORTS DIRECT CASH FLOW
	Horizontal Analysis(Growth)
Fiscal year ends in April.Units in %	2014-04	2015-04	2016-04	2017-04
Inventory	-48.52	-193.91	-415.05	-138.61
Other working capital	106.08	125.37	-34.97	-43.78
Net cash provided by operating activities	46.00	41.84	-72.27	195.09
Investments in property, plant, and equipment	39.50	44.63	112.63	99.78
Acquisitions, net	-50.24	-83.35	749.14	-379.23
Purchases of investments		-9.11	76.96	-65.59
Net cash used for investing activities	1.96	-18.98	25.74	67.17
Long-term debt issued	-25.70	-57.80	110.56	22.67
Long-term debt repayment	7.57	-0.42	-79.46	382.89
Net cash provided by (used for) financing activities	-229.26	236.92	-183.05	-168.31

10. Sports Direct PLC Ratio Analysis

Ratio Analysis	Formula	Sports Direct
		2013	2014	2015	2016	2017
Profitability
Return on Shareholder Funds %	(Profit for the Year /Avg. (Ordinary Share capital+Reserves))*100	27.14	24.59	24.22	21.75	17.51
Return on Capital Employed (%)	(Operating Profit/Avg.(Share Capital+Reeserves+Non-Current Liabilities))*100	20.23	25.62	25.06	13.21	7.80
Gross Profit margin (%)	(Gross Profit/Sales Revenue)*100	40.94	42.68	43.81	44.23	41.00
Return on  Assets (%)	(Net Income/Avg.Total Assets) *100	11.93	11.59	13.84	13.42	9.56
Operating Profit margin (%)	(Operating Profit/Sales Revenue)*100	9.39	8.89	10.14	7.30	4.24
Leverage Or Long Term Solvency ratios
Gearing ratio (%)	(Long Term (non-current Liabilities)/Sharecapital+reserves+Non-Current Liabilities)*100	33.94	8.92	16.30	23.79	27.45
Debt to Assets	Total liabilities/Total Assets	0.54	0.52	0.34	0.41	0.49
Debt to Equity	Total Liabilities/Share Holders Equity	1.18	1.07	0.52	0.70	0.98
Interest Cover (times)	operating Profit/Interest Payabale	22.49	30.51	46.79	45.65	31.95
Efficiency Ratios
Avg.Inventory Turn Over period(days)	(Avg.Inventors Held/Cost of sales)*365	107.98	119.13	124.12	137.38	126.90
Avg. Settlement period for Trade Receivables(days)	(Avg. Trade Receivables/Credit Sales Revenue)*365	7.89	7.50	8.13	7.52	5.27
Avg. Settlement period for Trade Payables(days)	(Avg. Trade Payables/Credit Purchaes)*365	46.01	48.18	46.96	43.84	33.58
Working capital Cycle (Days)	(Avg.Inventory Turn Over period(days)+Avg. Settlement period for Trade Receivables(days)-Avg. Settlement period for Trade Payables(days))	69.86	78.45	85.29	101.06	98.59
Sales Revenue to Capital Employed(times)	Sales revenue/(Share Capital+Non -Current Liabilities)	2.24	3.00	2.04	1.60	1.90
Sales Revenue Per Employee	Sales revenue/No.of Employees	155.27	157.64	164.62	158.88	158.46
Investment Ratios
EPS(Pence)	Earnings available to Ordinary Shareholders/Number of Ordinary Shares in Issue	48.00	58.00	78.00	91.00	77.00
Price Earning Ratio(times)	Market Value Pershare/Earnings Per share	9.30	13.44	7.75	4.21	4.01
Dividend Yield(%)	(Dividend per share/Market Value per share) *100	0.00	0.00	0.00	0.00	0.00
Dividend Pay out Ratio(%)	(Dividends announced for the year/Earnings for the year avaialble for dividends)*100	0.00	0.00	0.00	0.00	0.00
Dividend cover ratio(times)	Earnings for the year avaialble for dividends/Dividends announced for the year	NA	NA	NA	NA	NA
Liquidity Ratios
Current Ratio	Current Assets/Current Liabilities	1.64	1.06	2.30	2.43	1.72
Quick Ratio	(Current Assets-Inventory)/Current Liabilities	0.60	0.35	0.94	1.13	0.87
	(Current Assets-Inventory-Account Recievables)/Current Liabilities	0.49	0.27	0.77	1.03	0.82

Source:(Morningstar, 2017i)

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