Sports Direct's Ashley defies critics at stormy meeting

SHIREBROOK, England (Reuters) - Mike Ashley, the billionaire majority owner of troubled British retailer Sports Direct, came out fighting at a stormy annual meeting on Wednesday, ignoring calls for his chairman to quit and clashing with the country’s biggest labour union.

Mike Ashley, founder and majority shareholder of sportwear retailer Sports Direct, arrives at the company's AGM, at the company's headquarters in Shirebrook, Britain, September 7, 2016. REUTERS/Darren Staples

With politicians condemning Sports Direct for “Victorian” working conditions and its stock down 60 percent in a year, independent shareholders targeted Chairman Keith Hellawell, with a majority of them failing to back his reappointment.

Ashley, the founder of the discount sportswear chain who still holds a 55 percent stake, repeatedly apologised for what he said were serious mistakes in the way staff were treated and vowed to rebuild the firm.

But an attempt at salvaging its image - by inviting journalists and the public to an annual meeting and a warehouse visit - quickly unravelled when he clashed with those attending.

Facing criticism over the way he ran his firm, he accused one shareholder of not being “open and honest” and told a representative of trade union Unite to stop “showboating”. He told the Unite official: “It’s probably your fault we’re in this mess.”

Ashley later told reporters he was sorry for what had happened. “Clearly I could have done a better job. I didn’t knowingly do it badly, I certainly didn’t deliberately do it badly. But I don’t want the headline ‘excuses’, I want the headline ‘sorry’.”

Recognisable to many Britons as the owner of Newcastle United football club, Ashley often shuns the sharp suits and carefully cultivated images of other top company bosses. When he demonstrated a security check at his warehouse on Wednesday he emptied his pockets, taking out a bundle of 50 pound notes.

Founded in 1982 on a quiet road in southeast England, Sports Direct has grown into a major force on British shopping streets, with discount offers luring shoppers into its 450 stores.

Having floated in 2007, the firm grew to a market valuation of 5.5 billion pounds in 2014. But that has fallen sharply this year after the Guardian newspaper revealed the firm had effectively paid some workers less than the minimum wage.

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On Tuesday, Sports Direct published the results of a review that identified “serious shortcomings” in practices at its warehouse in Shirebrook, central England, where it employs thousands of agency workers.

The review undertaken by its legal adviser RPC followed publication of a report by lawmakers in July which said the company treated workers at Shirebrook “as commodities rather than human beings”.

The firm has pledged to improve corporate governance, appoint a worker’s representative to its board and offer directly employed shop workers the option of switching to contracts that offer a guaranteed minimum amount of work.

But some investors don’t feel the report went far enough.

Euan Stirling of Standard Life, which owns 5.8 percent of Sports Direct’s equity, told the meeting he wanted a full and independent review of governance. He voted against the remuneration report and reappointment of non-executive directors.

“We are longstanding shareholders in the company and have engaged with senior executives and non-executives over many years, sadly to little effect,” he said.

Several other investors, including Legal & General, had said they would oppose the re-election of Hellawell. Shareholder Royal London said his position was untenable.

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Despite this, Sports Direct said it rejected an offer by Hellawell to resign, and with Ashley owning a controlling stake, he prevailed over minority investors.

“I have accepted the board’s request for me to stay,” Hellawell told reporters after the shareholder vote. “I will help this company improve and will be judged on my performance very clearly by the investors at the next AGM.”

Hellawell told the meeting, held at Shirebrook, he would step down next year if he did not receive the backing of independent investors. He also said the firm was seeking to beef-up its board with new independent non-executive directors.

To cap off a difficult day, Sports Direct also warned 2016-17 profit was expected to fall 21 percent due to lower gross margins and higher operating costs, and said Ashley had no plans to take the company back into private ownership.

Sports Direct said it expected underlying earnings for its financial year ending next April to come in around 300 million pounds. The group, which had previously not given a profit forecast, made comparable earnings of 381.4 million pounds in the year ended April 24, 2016.

Its shares closed down 9 percent at 319.3 pence, a 59 percent drop in the price in the last year.

The firm said it remained unhedged on the sterling/dollar exchange rate, whose recent decline has made importing goods into Britain more expensive, with the policy under review.

Writing by Kate Holton and James Davey; Editing by Mark Potter