Sports Direct shares surge despite profit plunge

Sports Direct agency on 'collision course' with MPs

25 August

Sports Direct's largest agency contractor is on a "collision course" with MPs after "declining to amend evidence it gave at a parliamentary hearing", says The Times.

Employment agency Transline was questioned by politicians during the joint pensions and business select committees' inquiry into working practices at Sport's Direct's Shirebrook warehouse, which contracts a large number of staff from the company.

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The business committee chairman, Iain Wright MP, said the firm gave "woefully poor and, in some cases, incorrect evidence" and that responses to questions had been "shown to be false".

It was given two weeks to "clarify any potentially misleading evidence as a matter of urgency".

Transline has submitted a response denying the claims and explaining why it believes the testimony was not misleading. MPs could find the company in contempt of parliament if they do not believe the explanation.

At issue are claims that do not even relate to Sports Direct - the reason Transline's finance director, Jenny Hardy, and chief executive, Chris Kirby, were hauled before the committee in June in the first place.

Hardy told MPs the company had supplied workers to a pizza factory under a Gangmasters Licensing Authority (GLA) licence, but that this had lapsed through an administrative error.

"However, though the GLA confirmed that after the licence had lapsed, the authority added that Transline's application to secure a new licence had been refused," says Recruiter magazine.

MPs were highly critical of the company's treatment of Sports Direct workers, including aggressive pay docking and a controversial "six strikes" disciplinary system, and said the firm lacks even a "basic understanding of employment law and practices".

Along with Sports Direct itself, Transline will have to pay its share of a £1m back-pay deal to workers who were effectively paid less than the minimum wage as a result of the working practices.

Contempt of parliament charges are rare and the penalties obscure. The last time the law was used against a non-MP was in 1956, when "Sir John Junor of the Sunday Express was led by the serjeant at arms to the bar of the House of Commons to receive a formal rebuke from the Speaker".

Regulator 'looking into' Sports Direct's family affairs

23 August

Sports Direct and its auditor Grant Thornton could yet face formal regulatory scrutiny of controversial dealings with founder Mike Ashley's family.

Accountancy watchdog the Financial Reporting Council is "understood to be looking into" a deal between the sportswear retailer and Barlin Delivery, which is controlled by Ashley's brother, John, reports The Guardian.

The Financial Times revealed earlier this week that Barlin is officially charged with handling the delivery of items sold to non-UK customers through Sports Direct's 33 international websites.

The deal, which has not been disclosed in Sports Direct's annual reports as a "related party transaction", is said to yield Barlin a profit of £300,000 a year, around twice the salary of Sports Direct's chief executive, David Forsey.

Barlin's registered office is a detached house in Cleethorpes, Lincolnshire, and it has no delivery vans or drivers, distributing instead through logistics firms such as DHL. John Ashley was head of IT at Sports Direct until 2014 and is co-director of Barlin, which was set up in 2015.

The Financial Reporting Council has not launched formal proceedings and will only do so if it found evidence of wrongdoing.

However, Sports Direct said both it and Grant Thornton were "comfortable that there was no related party disclosure required in Sports Direct’s historic accounts".

The company said it "took professional advice" over how to handle its logistics and that the "result of this exercise was to set up a company outside the group in order to deliver some of the services required in the successful running of an internet operation".

It added: "Barlin arranges all international deliveries, including dealing with the courier companies, with undelivered packages and returns."

Questions might be raised on this account of Barlin's role. The FT cites an example of an Irish customer who complained regarding his delivery and was dealt with directly by Sports Direct, which issued a refund.

Under the Financial Reporting Council's code, companies only need to disclose related transactions based on the "substance… and not merely the legal form" of a relationship. So the issue could rest on how material the deal is deemed.

International sales are said to make up around six per cent of Sport Direct's £2.9bn annual revenue.

Mike Ashley has courted controversy on family ties before, when he put his daughter's boyfriend, Michael Murray, a 26-year-old former nightclub promoter, in charge of a £250m property expansion programme. Murray is only paid based on the "value" he generates and at the complete discretion of the board.

Sports Direct under fresh fire over family deals

22 August

Mike Ashley is under attack once more over the close family ties at the heart of his Sports Direct business empire.

The controversy relates to international sales payments made to a small delivery service company controlled by Ashley's brother, John.

According to a Financial Times investigation, Barlin Delivery receives a portion of the value of every order made online to one of Sports Direct's 33 global websites.

Overseas revenues account for around six per cent of the company's total £2.9bn annual takings. Barlin, which has its registered office in a detached house in a cul-de-sac in Cleethorpes, Lincolnshire, is said to make a profit of around £300,000 a year.

The company has no trucks nor does it employ any drivers; it merely acts as a broker, taking orders and commissioning deliveries through the logistics company DHL.

Barlin's arrangement is not disclosed in Sports Direct's annual reports. Typically, companies are obliged to reveal dealings with related parties but in this case, the company says auditor Grant Thornton declared it immaterial.

Sports Direct founder Ashley previously came under scrutiny when his daughter's boyfriend, Michael Murray, a former nightclub promoter, was placed in charge of the company's property dealings via a consultancy, a deal thought to be worth millions as Murray is entitled to 25 per cent of all "value" he creates in implementing a property expansion programme to which £250m has been allocated.

It all amounts to another series of damaging headlines ahead of what is likely to be Sports Direct's acrimonious annual meeting on 7 September, where tough questions about corporate governance are sure to take centre stage.

Shareholders are already mooting plans to vote against the re-election of chairman Keith Hellawell. Now City AM reports that an advocacy group is advising investors to vote against the re-election of Ashley to the board.

Neither action is guaranteed to stop the appointments going ahead, as the company only has to recognise votes on independent directors. It can also push appointments through in a second vote in which Ashley's controlling shares are taken into account.

Sports Direct tries to head off investor revolt

19 August

Sports Direct is trying to prevent an investor revolt at its annual shareholder meeting next month.

In a stock exchange announcement yesterday, the company announced it will publish a report into staff working conditions on 5 September, just two days ahead of the meeting, The Guardian reports.

It follows a long-running row about employment practices at its Shirebrook factory that were compared to a "Victorian workhouse" in a scathing report by MPS.

Sport Direct were criticised for its use of searches and pay-docking for lateness that resulted in staff effectively being paid less than the minimum wage. The company has agreed a back-pay deal worth £1m and could be fined double that amount.

The UK's largest union, Unite, had proposed a resolution at the shareholder meeting calling for a review into working conditions, including examining the case for introducing the voluntary living wage and bringing all agency staff on zero-hours contracts onto the full-time direct payroll.

However, Sports Direct has recommended investors reject the proposals as "duplicative of current and ongoing efforts of a similar nature".

Elsewhere, claims of poor corporate governance have led the company to announce it will commission an independent review of its board to report back by next April.

Chairman Keith Hellawell and chief executive Dave Forsey are expected to have votes cast against their re-election at next month's meeting, reports the Daily Telegraph, and under rule changes introduced in 2014, that could cause a headache for the firm.

Founder and deputy shareholder Mike Ashley holds a 55 per cent stake, but now independent directors must be approved by independent stakeholders. Last year, 28 per cent voted against Hellawell - and opposition has only grown since then.

It is questionable how much of an impact on sentiment the review pledge will have: shareholder representative group Manifest said Sports Direct had not disclosed the outcome of its last external evaluation, carried out in 2014.

Sports Direct faces £2m fine for minimum wage breaches

16 August

Sport Direct's travails over its minimum wage breaches may not be over - even after it agreed to pay back £1m to affected warehouse workers.

Writing in The Guardian, economics editor Larry Elliott says the retailer could face the ignominy of being "named and shamed" in a government list of minimum wage abusers, which is published regularly and last week contained the largest number of companies yet.

More significantly, the rebranded Department for Business, Energy and Industrial Strategy "has the power to fine the company £2m, double the amount it has agreed to pay its workers", says the journalist.

And it should "impose the maximum", he adds, partly because the deal with unions and HMRC only dates back to May 2012 and the firm "could have been required to pay more" but also because "the government needs to make an example of Sports Direct".

The company's minimum wage abuses included docking pay for staff clocking in a minute late and forcing them to undergo unpaid 15-minute searches at the end of shifts.

The company and its founder and deputy chairman, Mike Ashley, were also criticised in a report by MPs that cited evidence of "Victorian workhouse" conditions for staff at its Shirebrook warehouse.

Sports Direct is facing a resolution brought by the union Unite at its annual shareholder meeting next month that could force it to conduct a new review and consider upping pay to the voluntary living wage of £8.25 an hour.

The company has urged shareholders not to back the resolution, says the Guardian, and will hope its back-pay deal shows it is changing its ways.

Many big shareholders remain unconvinced, however, and the paper says they could vote en masses against the re-election of its chairman, Keith Hellawell, to "show that it is serious about reforming its governance".

Under listing rules, a majority of independent shareholders need to back Hellawell. Last year, 24 per cent of them rejected his re-appointment and large backers have hinted they'll revolt in even bigger numbers this time around.

Sports Direct bosses might still be able to force the issue at a second vote 90 days later, which would consider all shareholders including the majority interest of Ashley.