Sep 7, 2016
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Sports Direct's Ashley defies critics at stormy meeting

Sep 7, 2016

Mike Ashley, the billionaire founder and majority shareholder of troubled British retailer Sports Direct, came out fighting as he faced a storm of investor criticism at the company's annual meeting on Wednesday.

Mike Ashley

Ashley ignored calls for his chairman Keith Hellawell to step down, publicly clashed with one shareholder, angrily accusing her of not being "open and honest", and accused a representative from trade union Unite of "showboating".

Following months of criticism over the discount sportswear chain's employment practices, he told the Unite official: "It's probably your fault we're in this mess."

On Tuesday, Sports Direct published the results of a review that identified "serious shortcomings" in practices at its warehouse in Shirebrook, central England, where it employs thousands of agency workers.

The review undertaken by its legal adviser RPC followed publication of a report by lawmakers in July which said the company treated workers at Shirebrook "as commodities rather than human beings".

In response to Tuesday's report, Sports Direct pledged to engage with shareholders to improve corporate governance, appoint a worker's representative to its board and offer directly employed shop workers the option of switching to contracts that offer a guaranteed minimum amount of work.

But some investors don't feel the report went far enough.

"We believe that a full and independent review of governance at the company is required, along with a commitment to publish and act on the review’s conclusions and recommendations in the next twelve months," Euan Stirling of Standard Life, which owns 5.8 percent of Sports Direct's equity, told the meeting.

He said Standard Life had voted against Sports Direct's remuneration report and against the reappointment of all of its non-executive directors.

Several other investors, including Legal & General, have said they will oppose the re-election of Hellawell. Shareholder Royal London said his position was untenable.

But earlier, Sports Direct said it had rejected an offer by Hellawell to resign, and with Ashley owning 55 percent of the company's equity, he can vote down minority investors.

Hellawell told the meeting, held at Shirebrook, he would step down next year if he did not receive the backing of independent investors. He also said the firm was seeking to beef-up its board with new independent non-executive directors.

"We make no excuses. We are saying it needs to be better and we are determined to make it better," he told the meeting.

Sports Direct also warned 2016-17 profit was expected to fall 21 percent due to lower gross margins and higher operating costs, and said Ashley had no plans to take the company back into private ownership.

Its shares were down 9 percent at 318.4 pence by 1206 GMT, a 59 percent drop in the price in the last year.

Sports Direct said it expected underlying earnings for its financial year ending next April would amount to about 300 million pounds.

The group, which had previously not given a profit forecast for the year, made comparable earnings of 381.4 million pounds in the year ended April 24, 2016.

It said the forecast assumed sales growth of at least 9 percent, a gross margin fall of no more than 2.75 percentage points and a rise in operating costs of no more than 8 percent.

The firm said it remained unhedged on the sterling/dollar exchange rate, whose recent decline has made importing goods into Britain more expensive, with the policy under review.

It also said it could potentially spend more than 300 million pounds a year on property and development opportunities, using its own resources and a 788 million pounds bank facility.


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