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Comparison of JD Sports and Sports Direct Financial Statements

Info: 13408 words (54 pages) Dissertation
Published: 10th Dec 2019

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Tagged: AccountingFinanceBusiness Analysis

FINANCIAL STATEMENT ANALYSIS REPORT

COMPARISON BETWEEN JD SPORTS FASHION PLC AND SPORTS DIRECT INTERNATIONAL PLC

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

  1. 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

  1. 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.

  1. 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.

  1. 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.

  1. 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

  1. 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

  1. 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

  1. 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)

 

 

 

 

 

 

  1. 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)

 

  1. 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)

 

 

 

  1. 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

 

 

  1. 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)

 

  1. 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)

 

  1. 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)

 

  1. 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)

 

  1. 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

 

 

  1. 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)

 

 

 

 

 

 

 

References

 

ATRILL, P. & MCLANEY, E. J. 2006. Accounting and Finance for Non-specialists, Pearson Education.

BAMBER, M. & PARRY, S. 2014. Accounting and Finance for Managers: A Decision-making Approach, Kogan Page Publishers.

BBC. 2016. Sports Direct ‘to back-pay Derbyshire workers £1m’ [Online]. BBC Available: http://www.bbc.co.uk/news/uk-england-derbyshire-37085244 [Accessed 06-Dec-2017 2017].

JDPLC. 2017. History [Online]. Available: http://www.jdplc.com/company-information/history.aspx [Accessed 04-DEC-2017 2017].

MORNINGSTAR. 2017a. Industry Peers [Online]. Available: http://financials.morningstar.com/competitors/industry-peer.action?t=JD.&region=gbr&culture=en-US [Accessed 04-DEC-2017 2017].

MORNINGSTAR. 2017b. JD PLC balance-sheet [Online]. Available: http://financials.morningstar.com/balance-sheet/bs.html?t=JD.&region=gbr&culture=en-US [Accessed 04-Dec-2017 2017].

MORNINGSTAR. 2017c. JD PLC Cashflow [Online]. Available: http://financials.morningstar.com/cash-flow/cf.html?t=JD.&region=gbr&culture=en-US [Accessed 05-Dec-2017 2017].

MORNINGSTAR. 2017d. JD PLC income-statement [Online]. Available: http://financials.morningstar.com/income-statement/is.html?t=JD.&region=gbr&culture=en-US [Accessed 04-Dec-2017 2017].

MORNINGSTAR. 2017e. JD PLC Ratios [Online]. Available: http://financials.morningstar.com/ratios/r.html?t=JD.&region=gbr&culture=en-US [Accessed 05-Dec-2017 2017].

MORNINGSTAR. 2017f. Sports Direct Balance Sheet [Online]. Available: http://financials.morningstar.com/balance-sheet/bs.html?t=SDISY&region=usa&culture=en-US [Accessed 04-Dec-2017 2017].

MORNINGSTAR. 2017g. Sports Direct Cash Flow [Online]. Available: http://financials.morningstar.com/cash-flow/cf.html?t=SDISY&region=usa&culture=en-US [Accessed 04-Dec-2017 2017].

MORNINGSTAR. 2017h. Sports Direct Income Statement [Online]. Available: http://financials.morningstar.com/income-statement/is.html?t=SDISY&region=usa&culture=en-US [Accessed 04-Dec-2017 2017].

MORNINGSTAR. 2017i. Sports Direct Ratios [Online]. Available: http://financials.morningstar.com/ratios/r.html?t=SDISY&region=usa&culture=en-US [Accessed 04-Dec-2017 2017].

REUTERS. 2016. Britain’s JD Sports buys Go Outdoors for 112 million pounds. Reuters November 28, 2016.

SPORTSDIRECTPLC. 2017. Company History [Online]. Available: http://www.sportsdirectplc.com/about-us/company-history.aspx [Accessed 04-Dec-2017 2017].


[1] 2013 to 2017

[2] Which has 23 stores in Ireland and 50.1% shares of Sprinter which has 47 stores in Spain

[3] Bournemouth, Dunded United, Black pool etc

[4] See Appendix 1

[5] See Appendix 6

[6] Reported over the last five years 2013 to 2017

[7] See Appendix1 & 4 for detailed information

[8] From 2013 to 2017

[9] Operating expense margin

[10] See Appendix 6 &9 for detailed information

[11] See Appendix 2 & 4 for detailed information

[12] When compared to 2016

[13] Property, plant and equipment

[14] 78.04% in 2016 to 14.61% in 2017

[15] See Appendix 7&9 for detailed information

[16] -10.63%

[17] See Appendix 5 for more information on Ratio Analysis

[18] In 2017, the ROCE is 43.79% which mean for 1 pound of equity, the firm is generating 43 pence operating profit

[19] Refer to Appendix 6 for detailed information

[20] Refer to Appendix 6

[21],22 See Appendix 2 for detailed information

[22] Firm might have taken bank loan

[23] Refer Appendix 7 for detailed information

[24] Refer Appendix 7 for detailed information

[25] Refer Appendix 5 for detailed Information

[26] Refer Appendix 1 for detailed information

[27] Refer Appendix 2 and 3 for detailed information

[28] Since ratios is based on the financial information published months ago

[29] Plant ,Property and Equipment

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