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Sports Direct profits rise as it cuts House of Fraser losses | Business

Sports Direct has said it expects to increase profits by up to 15% this year after reducing losses at House of Fraser.

Mike Ashley’s retail empire forecasts profits of up to £390.3m for the year to April 2020 after underlying pretax profits increased 58% to £101.8m in the first half. Losses almost halved to £15.9m at its premium lifestyle business, which includes House of Fraser, although the group plans to close more branches in the coming year.

The company shocked the City in July when it said it would not be able to estimate annual profits because of an unexpected €674m (£562m) Belgian tax bill and dire trading at House of Fraser, the department store chain it bought out of administration in 2018. Sports Direct is planning to formally change the chain’s name to Frasers at a shareholder meeting on Monday.

Sales for the half year to 27 October rose 14% to £2bn, largely as a result of the inclusion of House of Fraser and growth at Flannels, the group’s designer fashion chain. Excluding acquisitions, revenue at the core sports business fell 8.6%.

David Daly, the chairman of the group, said he believed its strategy of “elevating”, or moving towards more upmarket products and improved stores, was working.

He added: “We are hoping that the political waters will be calmer in the coming months which will allow us to move out of this period of market unpredictability. This will enable us to plan appropriately for the future which is critically important.”

The results were well received in the City, sending Sports Direct shares racing ahead by 17% to 420p. Four years ago they were trading at more than 800p.

Ashley said he expected to open five to 10 revamped House of Frasers stores under the Frasers name in the year ahead. However, he said more outlets would close as a number continued to be unprofitable despite paying no rent. Seven outlets have closed since Sports Direct acquired the chain in August last year, leaving 52.

Ashley called for urgent reform of the business rates regime, which he said “is clearly helping to kill much of what remains of the UK high street”. He said large stores were coming under particular pressure from the property-related tax.

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Sports Direct said it did not expect the potential Belgian bill to lead to “material liabilities” after the company brought in accountants from PricewaterhouseCoopers to carry out its own review. The company said it had now handed over all the required information to the Belgian tax authorities, which have said they expect to conclude a review of the main part of the bill – amounting to €491m – in the new year.

In a typically wide-ranging and long statement issued to the City on Monday morning, Ashley took aim at a string of targets including the former management of House of Fraser, Debenhams and Goals Soccer Centres, as well as Jeremy Corbyn and other MPs, regulators and advisory firms.

Sports Direct lost out when both Debenhams and Goals Soccer Centres were put into administration earlier this year, wiping out shareholders.

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