Share price up by around 6% despite dire full year results, but pre-tax profits fell by 22% largely due to sterling fall – but revenue growth is more encouraging. Sports Direct is only for contrarian investors willing to accept a very high level of risk!

As Sports Direct publishes its full year results, Helal Miah, investment research analyst at The Share Centre, explains what they mean for investors.

As expected, Sports Direct's full year results were not pleasant for investors, capping another fairly disastrous year amid all the corporate and management scandals. Full year pre-tax profits fell by 22% to £272.7m, with management laying the blame on the company's exposure to currency movements, specifically sterling's plunge immediately after the Brexit vote and the rise in import costs, but also due to depreciation charges the group has made in relation to property investments and changes to the useful life of certain assets.

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There was expectation that profits this year would suffer so today's results were priced in, but the share price's reaction this morning, up by roughly 6%, suggests there are lots of positive takeaways. Group revenues still climbed by nearly 12% to £3bn, most of which was explained by its international expansion (and £'s translation effects) and its premium lifestyle brand (the so called 'Selfridges of sport') saw sales grow by 12% to just over £200m. While it has been mentioned that the UK retail environment is facing a tough time, today's retail sales figures from the group suggests it is managing the situation well.

They are implementing currency hedging strategies (unfortunately after the main event) which should in future keep costs less volatile, and the business is also restructuring. They have also been investing in other businesses, most notable recent investments include Game Digital and smaller sports retailers in the US and Portugal. Their forward looking statement was relatively encouraging showing that the new flagship stores were performing well and gave a forward guidance for before-tax growth of 5-15% in the next financial year.

However investors who held onto the shares over the years have suffered and today's modest rise will be little consolation. Coupled with the unconventional management style we also have a transition away from the lower end of the market which could potentially backfire in a tougher retail environment, where consumers' disposable incomes are being squeezed. Without resuming the dividend we still remain wary of the business and it is only for investors taking a contrarian approach and willing to accept a very high level of risk.

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