Ashley needs a good hand to repair his troubled house of cards

As I See It: Terry Murden

What a difference a year makes. Mike Ashley was hailed as the saviour of the high street when the majority shareholder in Sports Direct shelled out £90 million this time last year to rescue the failed House of Fraser chain. Adding the department stores to a growing retail empire flew in the face of the sector’s decline as Mr Ashley claimed he could turn Frasers into the Harrod’s of the North.

Last Friday’s much-delayed results were not only an exercise in how not to behave as a listed company, they were accompanied by shocking announcements that came as a shock even to the firm’s advisers. It is understood that auditor Grant Thornton was only told of a £605m tax bill from the Belgian authorities hours before the results were finally published.

Investors were reminded why their relationship with Mr Ashley has always been one of mutual distrust as they were served a farcical series of statements saying the results would be issued later that day. When they finally arrived at about 5.15pm the numbers became the least interesting part of the presentation. Mr Ashley attacked the board and advisers of Debenhams, in which he has a big stake, revealing that tens of millions of pounds were paid by the company to its advisers at a time when cash was at a premium.

He criticised the previous board of House of Fraser and made demands for all PLC CEOs and CFOs to undergo voluntary drug testing. He accused the previous chairman of House of Fraser, Frank Slevin of being an example of City greed and excess.

The big concern for investors and Sports Direct’s workforce, including those at the Jenners’ stores in Scotland, was Mr Ashley’s statement that Frasers’ problems are “terminal” and with the “gift of hindsight we might have made a different decision in August 2018.” Some House of Fraser locations are still failing to make money despite currently paying zero rent and more closures are expected.

Analysts have had the weekend to scrutinise the numbers and look behind Mr Ashley’s statements, and concerns are now emerging over how the group is structured with some questioning whether its flat management style, which has successfully steered a discount finely focused retail chain, is up to the task of running a much more complex department store business with its multiple lines, in-store concessions and personal services.

John Colley at Warwick Business School said investors will have expected disappointing results after they were delayed, but few could have imagined anything on this scale.

Amid the thousands of words published on Friday, Sports Direct did provide a glimmer of hope, stating that “we do believe there could be a bright future for House of Fraser, and indeed have publicised our Frasers vision which we are very excited about”. It may partly explain why the fall in the shares on Friday was limited to 3.9%.

However, fixing its own business rather than acquiring everyone else’s problems now seems to be the order of the day.