Mike Ashley’s stake in Sports Direct tumbles by more than £83m as the firm is forced to delay results over House of Fraser ‘disarray’
- Sports Direct said that uncertainty over House Of Fraser’s future trading performance was partly to blame for the delay
- Sports Direct bought the ailing department store for £90 million last year
- But it appears Ashley may have bitten off more than he can chew
Mike Ashley’s stake in Sports Direct tumbled by more than £83 million after the clothing company admitted it would be late in publishing its accounts
Mike Ashley’s stake in Sports Direct tumbled by more than £83 million after the clothing company admitted it would be late in publishing its accounts.
In an update which alarmed investors, Sports Direct said that uncertainty over House Of Fraser’s future trading performance was partly to blame for the delay.
Sports Direct bought the ailing department store for £90 million last year as Ashley expanded his vast retail empire, but it appears the tycoon may have bitten off more than he can chew.
The complexities of integrating House Of Fraser into Sports Direct, the company said, meant its audited results were taking much longer to compile than usual.
In yet another blow for investors, Sports Direct added that its final results could be much lower than it forecast in December. Even then, Ashley had described trading as ‘unbelievably bad’.
Russ Mould, investment director at AJ Bell, said: ‘This implies that trading in the core retail business has also disappointed.’
It comes after a buying spree by Sports Direct which has seen it snap up Evans Cycles out of administration and scoop furniture website Sofa for a nominal sum in addition to the House Of Fraser deal.
Led by Walsall-born 54-year-old Ashley, the company is also mid-way through a bid to take video games retailer Game Digital off the stock market. A separate bid to gain control of Debenhams fell through.
Mould warned this acquisition drive may have stopped Sports Direct from focusing on what really matters.
He said: ‘It will stoke concerns that Sports Direct’s strategy to supplement organic growth with an acquisition spree is serving as a distraction to management and overstretching the key teams at a time when the core business offers more than enough challenges.’
Peel Hunt analysts also said that the delay suggests the company is having problems digesting Ashley’s takeover bonanza. Analysts at the broker said in a statement: ‘House Of Fraser is clearly in a degree of disarray.
‘It would appear the finance department is understaffed to cope with the array of acquisitions, and we are also concerned about the direction of the core business.’
Sports Direct also blamed its auditor, Grant Thornton, for delaying the publication of its results. The auditor has brought in more internal checks since it was slammed for mistakes at Patisserie Valerie, which went bust this year after discovering a £94 million black hole in its accounts.
Shares in the Sports Direct business slumped 9.6 per cent, or 25.2p, to close at 238.2p last night – their lowest level this year
Just last week, passport picture booth company Photo-Me International said its accounts would also be postponed due to Grant Thornton’s extra scrutiny. The Financial Reporting Council watchdog is also scrutinising Grant Thornton’s audit of Sports Direct’s results from last year.
Ashley, who was once a competitive squash player but founded Sports Direct in Maidenhead in 1982 after succumbing to an injury, is renowned for his unconventional business methods.
During a court hearing it was claimed that after holding a boozy meeting in a pub, and challenging subordinates to a drinking competition, the billionaire vomited into a fireplace.
He has also come under fire for employing family members on lucrative contracts. He hired his daughter’s partner, former nightclub promoter Michael Murray, in a consultancy role which saw him earn £5 million in 2018.
Shares in the Sports Direct business slumped 9.6 per cent, or 25.2p, to close at 238.2p last night – their lowest level this year. And while most investors were fleeing the company, one new shareholder emerged.
Coltrane Asset Management, the hedge fund which scuppered the rescue of outsourcer Interserve, has revealed it now owns a 3.3 per cent stake in the Sports Direct empire. Coltrane upped its stake in the group last Thursday, taking it over the 3 per cent threshold where it must reveal its interest.
The New York hedge fund made millions from the collapse of Carillion in January 2018, after betting that the troubled construction firm’s shares would tumble.