Sports Direct Share News (SPD)

(ShareCast News) - If a halving of first-half profits was not enough to perturb investors, Sports Direct has announced the acquisition of a corporate jet for $51.1m and a new deal with one of founder Mike Ashley's children.For the 26 weeks to 23 October, underlying profit before tax fell 57% to £71.6m as the sports retailer's disastrous currency hedge and property depreciation cancelled out a £14.2% rise in revenues to £1.6bn.With margins crushed from close to 45% to just over 40% and UK margins falling 610 basis points due to the previous lack of a currency hedge, the FTSE 250 company has guided to EBITDA "around the bottom of the range" implied in October's announcement of £265m-£285m.After a re-appraisal of the European business, where there was an increase in onerous lease provisions Europe of £15.6m, in combination with the weak currency situation, the company expects a "sustained weak performance" from this business over the medium term.The core UK sports retail arm grew sales more than 7%, while international sales surged 66%, premium lifestyle brands such as Flannels and USC declined 5%, while the brands business containing Lonsdale, Dunlop and Slazenger was roughly flat.Reported PBT shrank 25% to £140.2m and reported earnings per share by 36% to 15.6%, while the board decided not to propose a dividend and said it was "prudent to pause" from actively pursuing strategic acquisitions and investments.However, Ashley has splashed out $51m on the purchase of a corporate jet to add to the existing company helicopter and fleet of corporate vehicles as it will "facilitate efficiencies relating to the use of management time and the pursuit of the group's strategic priorities".He has also struck a deal with Double Take, a beauty company run by his youngest daughter, Matilda, and owned by Ashley senior, whereby the retailer has licensing the rights to a beauty brand called Sports FX.Ashley, who reiterated that he had "no current intention" to take the company private, said the last six months had been "tough for our people and performance", with results affected by the significant deterioration in exchange rates, and "our assessment of our risk relating to our stock levels and European stores performance"."We continue to elevate our sports retail proposition for our key third party brand partners and customers, as we progress towards our medium to long term goal of becoming the 'Selfridges' of sports retail. We are changing our retail channels for customers in the UK, and we will be changing our approach to our customers in Europe, which will take time."Analysts at Canaccord Genuity said the acquisition of a corporate jet "sums up the situation where the utilisation of cash in the business is unlikely, in our view, to create shareholder value".They said gross margins were worse than they expected, down 450 basis points, a function of sterling weakness, though applauded the focus on fixing the core business pausing of acquisitions and investments.Shares in Sports Direct, which topped 900p two years ago, were down 8.5% on Thursday to 287.8p, though still well above July's all-time low.Analyst Neil Wilson at ETX Capital said the company had capped a grim year with "a very bad set of figures and an unrivalled ability to make the headlines for all the wrong reasons and blame everyone else for its problems"."With underlying profit before tax down 57% at £71.6m, shareholders will be scratching their heads as to why a £40m private jet seems appropriate," he said, with "few signs of an improvement coming soon"."That downbeat note near the top of the results suggests worse figures could be to come in 2017, which may explain the scale of today's share price drop."George Salmon at Hargreaves Lansdown added that while the tone of the update was "conciliatory to its staff, describing them as its number one priority...However, the availability of the group's new $50m corporate plane for staff hire is probably of little interest to the vast majority".Salmon also drew attention to the "eye-catching" 610bps fall in UK margins, primarily driven by adverse currency movements over the half as the sharp drop in sterling crushed the then-unhedged group's buying position, though he noted hedges are now in place for 2017 ."In addition to a new plane to go with the corporate helicopter, Mike Ashley is spending £300m on the group's store estate. He's also moving the focus away from discounts and towards higher quality promotion of desirable brands, evidenced by new deals with Nike and Adidas. Success here could change things, but for now conditions remain challenging and profits have again been revised downwards."