UPDATE 3-Sports Direct axes dividend as profit falls

* FY underlying earnings 136.8 mln stg vs 150.2 mln

* Scrapping final div will save 14 mln stg

* Targets debt below 400 mln stg by end-April 2010

* Forecasts EBITDA of at least 140 mln stg in 2009/10

* Shares down 0.25 pence at 0953 GMT (Adds detail, CEO comments, shares)

By James Davey

LONDON, July 16 (Reuters) - Britain's biggest sporting goods retailer, Sports Direct (SPD.L), scrapped its final dividend to reduce its debt burden after full-year core earnings fell 9 percent, but forecast earnings would rise in 2009/10.

Chief Executive Dave Forsey told reporters on Thursday axing the dividend would save the group 14 million pounds ($23 million) and go some way to achieving its target of net debt below 400 million pounds by the end of April 2010.

The cut means billionaire Mike Ashley, who owns 71 percent of Sports Direct, will be nearly 10 million pounds poorer.

Ashley, who made 929 million pounds from Sports Direct's flotation in 2007, also owns Newcastle United soccer club. He is trying to sell the outfit, relegated from England's Premier League to the second-tier Championship in May, but is struggling to find a buyer for a reported 100 million pounds. [ID:nLC376130]

Shares in Sports Direct, which floated at 300 pence, were trading down 0.25 pence at 81.75 pence at 0953 GMT, valuing the business at 467 million pounds.

"The board is confident that our initiatives and hard work across all areas of the group leave us well positioned for the next phase of growth," said CEO Forsey.

Sports Direct, which trades from 359 stores in the UK and 63 overseas, made underlying earnings before interest, tax, depreciation and amortisation (EBITDA) of 136.8 million pounds in the year to April 26 2009, just beating its own guidance, and Forsey said that figure was expected to rise to "at least" 140 million pounds in the 2009/10 year.

STAFF BONUS SCHEME

A new bonus scheme was proposed that gives 25 percent of base pay in shares to all staff if underlying EBITDA of 155 million pounds is made in 2009/10, and 75 percent if 195 million pounds is made.

EBITDA was 150.2 million pounds in the year to April 2008.

Sports Direct's revenue increased 8.6 percent to 1.37 billion pounds but its gross margin fell 280 basis points to 40.8 percent, mainly due to the drop in the value of sterling.

Many UK retailers have struggled over the past year as consumers have reined in spending amid sliding house prices, rising unemployment and fears of a long-lasting recession.

Sports Direct, which owns Sports World and Lillywhites stores as well as brands such as Slazenger, Lonsdale and Dunlop, has fared better than most, benefiting from the problems of its main rival JJB Sports Plc (JJB.L), which came close to administration earlier this year. [ID:nLK370295]

Sports Direct, which ended the year with net debt of 431.3 million pounds, said it was operating within its banking covenants.

The group is still without a permanent chairman over two years after David Richardson quit, having decided he could not work with Ashley.

"The board is operating extremely well (with Simon Bentley as acting chairman), we are mindful of the Combined Code ... and we'll just keep it under review," said Forsey.

He declined to comment on a 1.5 million pounds loan Ashley made to JJB's executive chairman David Jones, which raised concerns Jones faced a conflict of interest. [ID:nL7713111]

(Editing by Mark Potter, John Stonestreet)