LONDON: Sports Direct founder Mike Ashley said buying House of Fraser may have been a mistake for the British sporting goods retailer, in a delayed results statement that also warned it could face a 674 million euro bill from Belgium’s tax authority.
Problems integrating the House of Fraser department store business, which Sports Direct purchased out of administration for £90 million ($111.5 million) last August, dragged down the group’s annual core earnings by 6 per cent.
It said on Friday it was not giving guidance for its new 2019-20 year because House of Fraser had led to significant uncertainty as to the future profitability of the entire group. It warned investors to be wary of analysts’ forecasts.
Adding to its troubles, the very last paragraph of Sports Direct’s 44-page results statement also revealed it had received on Thursday a 674 million euro ($750.03 million) “payment notice” from the Belgian tax authorities.
It said the body had requested information in relation to, amongst other things, the tax treatment of goods being moved intra-group throughout the European Union via Belgium.
Sports Direct said it will enter mediation to respond to the authority’s questions and provide it with documents.
“Management believe... that it is less than probable that material VAT and penalties will be due in Belgium as result of the tax audit,” it said.
Sports Direct made underlying earnings before interest, tax, depreciation and amortisation (EBITDA) of £287.8 million in the year to April 28. Revenue increased 10.2 per cent to £63.7 billion.
But excluding House of Fraser, underlying EBITDA rose 10.9 per cent to £339.4 million — within the guidance Sports Direct issued in December of a 5 per cent to 15 per cent improvement. — Reuters
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