REG - JD Sports Fashion - Half-year Report <Origin Href="QuoteRef">JD.L</Origin> - Part 2
13/09/2016 07:05
- Part 2: For the preceding part double click ID:nRSM6205Ja
implications of IFRS 16 on the Group's consolidated results and financial
position.
The Group does not consider that any other standards, amendments or
interpretations issued by the IASB, but not yet applicable, will have a
significant impact on the financial statements.
Use of estimates and judgements
The preparation of interim financial statements requires management to make
judgements, estimates and assumptions that affect the application of policies
and reported amounts of assets and liabilities, income and expenses. The
estimates and associated assumptions are based on historical experience and
various other factors that are believed to be reasonable under the
circumstances, the results of which form the basis of making the judgements
about carrying values of assets and liabilities that are not readily apparent
from other sources. Actual results may differ from these estimates.
In preparing these condensed consolidated interim financial statements, the
significant judgements made by management in applying the Group's accounting
policies and the key sources of estimation uncertainty were the same as those
that applied to the consolidated financial statements for the 52 week period
to 30 January 2016.
Risks and uncertainties
The Board has considered the risks and uncertainties for the remaining 26 week
period to 28 January 2017 and determined that the risks presented in the
Annual Report and Accounts 2016, noted below, remain relevant:
Omnichannel
· Key suppliers and brands
· Protection of intellectual property
· Retail property factors
· Seasonality of sales
· Economic factors
· Reliance on non-UK manufacturers
Consistency of infrastructure
· Reliance on IT systems
· Reliance on a consolidated warehouse
· Retention of key personnel
· Health and safety
· Foreign exchange risk
· Regulatory and compliance
A major variable, and therefore risk, to the Group's financial performance for
the remainder of the financial period is the sales and margin performance in
the retail fascias, particularly in December and January. Further comment on
this and other risks and uncertainties faced by the Group is provided in the
Executive Chairman's statement included within this half year report.
After making enquiries, the Directors have a reasonable expectation that the
Company and the Group have adequate resources to continue in operational
existence for the foreseeable future. Accordingly, they continue to adopt the
going concern basis in preparing the financial statements.
2. Segmental Analysis
IFRS 8 requires operating segments to be identified on the basis of internal
reports about components of the Group that are regularly reviewed by the Chief
Operating Decision Maker to allocate resources to the segments and to assess
their performance. The Chief Operating Decision Maker is considered to be the
Executive Chairman of JD Sports Fashion Plc.
Information reported to the Chief Operating Decision Maker is focused more on
the nature of the businesses within the Group. The Group's reportable segments
under IFRS 8 are therefore as follows:
· Sports Fashion - includes the results of JD Sports Fashion Plc, John
David Sports Fashion (Ireland) Limited, Spodis SA, Champion Sports Ireland, JD
Sprinter Holdings 2010 SL (including subsidiary companies), JD Sports Fashion
BV, Sports Unlimited Retail BV, JD Sports Fashion Germany GmbH, JD Sports
Fashion SRL, JD Sports Fashion Belgium BVBA, JD Sports Fashion Sweden AB, JD
Sports Fashion Denmark ApS, JD Sports Fashion SDN BHD, Size GmbH,
ActivInstinct Limited, JD Gyms Limited, Duffer of St George Limited, Topgrade
Sportswear Limited, Kooga Rugby Limited, Focus Brands Limited (including
subsidiary companies), Kukri Sports Limited (including global subsidiary
companies), Source Lab Limited, R.D. Scott Limited, Tessuti Group Limited
(including subsidiary companies), Nicholas Deakins Limited, Cloggs Online
Limited, Ark Fashion Limited and Mainline Menswear Limited.
· Outdoor - includes the results of Blacks Outdoor Retail Limited and
Tiso Group Limited (including subsidiary companies).
The Chief Operating Decision Maker receives and reviews segmental operating
profit. Certain central administrative costs including Group Directors'
salaries are included within the Group's core 'Sports Fashion' result. This is
consistent with the results as reported to the Chief Operating Decision
Maker.
IFRS 8 requires disclosure of information regarding revenue from major
products and customers. The majority of the Group's revenue is derived from
the retail of a wide range of apparel, footwear and accessories to the general
public. As such, the disclosure of revenues from major customers is not
appropriate. Disclosure of revenue from major product groups is not provided
at this time due to the cost involved to develop a reliable product split on a
same category basis across all companies in the Group.
Intersegment transactions are undertaken in the ordinary course of business on
arm's length terms.
The Board consider that certain items are cross divisional in nature and
cannot be allocated between the segments on a meaningful basis. Net funding
costs and taxation are treated as unallocated reflecting the nature of the
Group's syndicated borrowing facilities and its tax group. Drawdowns from the
Group's syndicated borrowing facility of £7,143,000 (2015: £54,000,000) and
liabilities for taxation of £17,665,000 (2015: £14,003,000) are included
within the unallocated segment.
Each segment is shown net of intercompany transactions and balances within
that segment. The eliminations remove intercompany transactions and balances
between different segments which primarily relate to the net down of long term
loans and short term working capital funding provided by JD Sports Fashion Plc
(within Sports Fashion) to other companies in the Group, and intercompany
trading between companies in different segments.
Operating Segments
Information regarding the Group's operating segments for the 26 weeks to 30
July 2016 is reported below:
Income statement
Sports Fashion£000 Outdoor£000 Total£000
Gross revenue 897,478 73,087 970,565
Intersegment revenue - - -
Revenue 897,478 73,087 970,565
Operating profit / (loss) before exceptional items 79,902 (2,252) 77,650
Exceptional items - - -
Operating profit / (loss) 79,902 (2,252) 77,650
Financial income 391
Financial expenses (630)
Profit before tax 77,411
Income tax expense (17,392)
Profit for the period 60,019
Total assets and liabilities
Sports Fashion£000 Outdoor£000 Unallocated£000 Eliminations£000 Total£000
Total assets 922,700 68,717 159 (72,616) 918,960
Total liabilities (397,457) (109,045) (24,967) 72,616 (458,853)
Total segment net assets / (liabilities) 525,243 (40,328) (24,808) - 460,107
The comparative segmental results for the 26 weeks to 1 August 2015 are as
follows:
Income statement
Sports Fashion£000 Outdoor£000 Total£000
Gross revenue 741,779 68,260 810,039
Intersegment revenue (138) - (138)
Revenue 741,641 68,260 809,901
Operating profit / (loss) before exceptional items 52,068 (4,490) 47,578
Exceptional items (1,564) (294) (1,858)
Operating profit / (loss) 50,504 (4,784) 45,720
Financial income 206
Financial expenses (1,218)
Profit before tax 44,708
Income tax expense (10,294)
Profit for the period 34,414
Total assets and liabilities
Sports Fashion£000 Outdoor£000 Unallocated£000 Eliminations £000 Total £000
Total assets 766,227 85,845 - (84,118) 767,954
Total liabilities (331,521) (123,148) (68,002) 84,118 (438,553)
Total segment net assets / (liabilities) 434,706 (37,303) (68,002) - 329,401
Geographical Information
The Group's operations are located in the UK, Republic of Ireland, France,
Spain, Germany, the Netherlands, Italy, Sweden, Denmark, Belgium, Portugal,
Malaysia, Australia, New Zealand, Canada, Dubai, Singapore and Hong Kong.
The following table provides analysis of the Group's revenue by geographical
market, irrespective of the origin of the goods / services:
26 weeks to 30 July 2016£000 26 weeks to 1 August 2015£000
UK 712,056 621,646
Europe 244,973 176,413
Rest of world 13,536 11,842
970,565 809,901
The revenue from any individual country, with the exception of the UK, is not
more than 10% of the Group's total revenue.
The following is an analysis of the carrying amount of segmental non-current
assets by the geographical area in which the assets are located:
As at 30 July 2016 £000 As at 1 August 2015 £000
UK 169,766 209,867
Europe 110,332 95,571
Rest of world 1,972 185
282,070 305,623
3. Exceptional Items
26 weeks to 30 July2016£000 26 weeks to 1 August2015 £000 52 weeks to 30 January2016£000
Property related exceptional costs - 1,858 -
Selling and distribution expenses - exceptional - 1,858 -
Impairment of goodwill, brands and fascia names (1) - - 10,600
Termination of project to replace core IT systems (2) - - 14,896
Administrative expenses - exceptional - - 25,496
- 1,858 25,496
(1) Relates to the impairment in the period to 30 January 2016 of the
goodwill arising in prior years on the acquisition of ActivInstinct Limited, a
partial impairment of the Blacks fascia name and the impairment of several
other goodwill and fascia name balances which were not significant.
(2) One off exceptional charge writing off costs to 30 January 2016 including
certain other related costs.
These selling and distribution expenses and administrative expenses are
exceptional items as they are, in aggregate, material in size and / or unusual
or infrequent in nature.
4. Earnings per Ordinary Share
Basic and diluted earnings per ordinary share
The calculation of basic and diluted earnings per ordinary share at 30 July
2016 is based on the profit for the period attributable to equity holders of
the parent of £58,058,000 (26 weeks to 1 August 2015: £34,293,000; 52 weeks to
30 January 2016: £97,634,000).
The weighted average number of ordinary shares outstanding during the 26 weeks
to 30 July 2016 was 194,646,632 (26 weeks to 1 August 2015: 194,646,632; 52
weeks to 30 January 2016: 194,646,632), calculated as follows:
26 weeks to 30 July2016 26 weeks to 1 August2015 52 weeks to 30 January2016
Issued ordinary shares at beginning and end of period 194,646,632 194,646,632 194,646,632
Adjusted basic and diluted earnings per ordinary share
Adjusted basic and diluted earnings per ordinary share have been based on the
profit for the period attributable to equity holders of the parent for each
financial period but excluding the post-tax effect of certain exceptional
items. The Directors consider that this gives a more meaningful measure of the
underlying performance of the Group.
26 weeks to 30 July2016£000 26 weeks to 1 August2015£000 52 weeks to 30 January2016£000
Profit for the period attributable to equity holders of the parent 58,058 34,293 97,634
Exceptional items excluding loss on disposal of non-current assets - 1,633 25,496
Tax relating to exceptional items - 312 (3,737)
Profit for the period attributable to equity holders of the parent excluding exceptional items 58,058 36,238 119,393
Adjusted basic and diluted earnings per ordinary share 29.83p 18.62p 61.34p
5. Acquisitions
Current period acquisitions
Sports Unlimited Retail BV
On 20 March 2016, the Group acquired, via its newly incorporated subsidiary
Sports Unlimited Retail BV, the trading assets and trade of the Aktiesport and
Perry Sport fascias from the Trustee of Unlimited Sports Group BV which was
declared bankrupt by the court of Amsterdam on 23 February 2016. On
acquisition there were 187 stores and two trading websites.
The Board believes that the cash consideration of E26.5 million represents the
current best estimates of the fair value of the net assets acquired. The
provisional goodwill calculation is summarised below:
Book value£000 Measurementadjustments£000 Provisional fair value at 30 July 2016£000
Acquiree's net assets at acquisition date:
Property, plant & equipment 3,929 - 3,929
Inventories 23,330 1,608 24,938
Cash and cash equivalents 58 - 58
Trade and other payables (8,364) (1,608) (9,972)
Net identifiable assets 18,953 - 18,953
Goodwill on acquisition -
Consideration paid - satisfied in cash 18,953
Included in the 26 week period ended 30 July 2016 is revenue of £31,096,000
and a loss before tax of £2,944,000 in respect of Sports Unlimited Retail BV.
JD Sports Fashion SDN BHD
On 28 April 2016, the Group acquired via its 50% subsidiary in Malaysia, JD
Sports Fashion SDN BHD, 20 multi-brand Sports Fashion stores and a trading
website which currently trade as Sports Empire, Revolution and The Marathon
Shop from Runners World SDN BHD. JD Sports Fashion SDN BHD is an entity
controlled by the Group and therefore the results and financial position of
the entity are consolidated into the financial statements of the Group. The
cash consideration payable on this transaction was MYR 20.7 million.
The Board believes that the excess of cash consideration paid over net
identifiable assets on acquisition of MYR 4.9 million represents the fair
value of the Sports Empire, Revolution and The Marathon Shop fascia names. The
provisional goodwill calculation is summarised below:
Book value£000 Measurementadjustments£000 Provisionalfair value at 30 July 2016£000
Acquiree's net assets at acquisition date:
Intangible assets 823 - 823
Property, plant & equipment 356 - 356
Other non-current assets 249 - 249
Inventories 2,018 - 2,018
Net identifiable assets 3,446 - 3,446
Goodwill on acquisition -
Consideration paid - satisfied in cash 3,446
Included in the 26 week period ended 30 July 2016 is revenue of £2,848,000 and
a loss before tax of £32,000 in respect of JD Sports Fashion SDN BHD.
SportIberica Sociedade de Artigos de Desporto, S.A.
On 1 July 2016, the Group acquired, both directly and via its 50.1% owned
subsidiary JD Sprinter Holdings 2010 SL, an aggregate of 80% of the issued
share capital of SportIberica Sociedade de Artigos de Desporto S.A. for cash
consideration of E4.2 million with additional consideration of up to E0.5
million payable if certain criteria are met. At acquisition, management
believed that the criteria would be met for the maximum consideration to be
payable and therefore management believes that the fair value of the total
consideration at this time is E4.7 million.
SportIberica currently trades as The Athlete's Foot through 12 Sports Fashion
stores.
The Board believes that the excess of cash consideration paid over net
identifiable assets on acquisition of £1,422,000 is best considered as
goodwill on acquisition representing anticipated future operating synergies.
The provisional goodwill calculation is summarised below:
Book value£000 Measurementadjustments£000 Provisionalfair value at 30 July 2016£000
Acquiree's net assets at acquisition date:
Property, plant & equipment 183 - 183
Other non-current assets 42 - 42
Inventories 2,821 - 2,821
Cash 679 - 679
Trade and other receivables 866 - 866
Income tax assets 36 - 36
Trade and other payables (1,540) - (1,540)
Interest bearing loans and borrowings (705) - (705)
Net identifiable assets 2,382 - 2,382
Non-controlling interest (476) - (476)
Goodwill on acquisition 1,422
Consideration paid - satisfied in cash 2,971
Contingent consideration 357
Total consideration 3,328
Included in the 26 week period ended 30 July 2016 is revenue of £906,000 and a
profit before tax of £40,000 in respect of SportIberica Sociedade de Artigos
de Desporto, S.A.
Other acquisitions
During the period, the Group has made several small acquisitions, including
increasing its shareholding to 100% in two subsidiaries which were previously
non-wholly owned. These transactions were not material.
Half year impact of acquisitions
Had the acquisitions of Sports Unlimited Retail BV, JD Sports Fashion SDN BHD
and SportIberica been effected at 31 January 2016, the revenue and profit
before tax of the Group for the 26 week period to 30 July 2016 would have been
£991,169,000 and £75,191,000 respectively.
Acquisition costs
Acquisition related costs amounting to £241,000 (Sports Unlimited Retail BV:
£139,000; JD Sports Fashion SDN BHD: £68,000; and, SportIberica Sociedade de
Artigos de Desporto S.A: £34,000) have been excluded from the consideration
transferred and have been recognised as an expense in the year, within
administrative expenses in the Consolidated Income Statement.
Prior period acquisitions
During the prior period, the Group increased its shareholding in a non-wholly
owned subsidiary. The transaction was not material.
6. Subsequent Events
Next Athleisure Pty Limited
On 26 August 2016, the Group acquired, via its newly incorporated subsidiary
JD Sports Fashion Holdings Australia Pty, 80% of the issued ordinary share
capital of Next Athleisure Pty Limited for consideration of $6.6 million AUD.
Next Athleisure Pty Limited currently operates 32 stores and a trading website
in Australia under the Glue and Superglue retail banners.
The Board believes that the excess of cash consideration paid over net
identifiable assets on acquisition of £4,739,000 represents the fair value of
the 'Glue' and 'Superglue' fascia names. The provisional goodwill calculation
is summarised below:
Provisionalfair value at26 August 2016 £000
Acquiree's net assets at acquisition date:
Intangible assets 4,821
Property, plant & equipment 5,150
Other non-current assets 2
Inventories 9,428
Cash 471
Trade and other receivables 2,683
Income tax assets 159
Deferred tax assets 1,510
Trade and other payables (11,903)
Interest bearing loans and borrowings (7,998)
Net identifiable assets 4,323
Non-controlling interest (865)
Goodwill on acquisition -
Consideration paid - satisfied in cash 3,059
Consideration as loan to non-controlling interest 399
Total consideration 3,458
7. Half Year Report
As indicated in the 2012 Notice of Annual General Meeting, in line with many
other listed companies the company will no longer be issuing a hard copy of
the half year report. Instead, the Group has decided to make the half year
report available via the Company's website.
Accordingly the half year report will be available for downloading from
www.jdplc.com from mid October 2016. Paper based copies will be available on
application to the Company Secretary, JD Sports Fashion Plc, Hollinsbrook Way,
Pilsworth, Bury, Lancashire, BL9 8RR.
Disclaimer
This announcement contains certain forward-looking statements with respect to
the financial condition, results, operations and businesses of JD Sports
Fashion plc. These statements and forecasts involve risk and uncertainty
because they relate to events and depend on circumstances that will occur in
the future. There are a number of factors that could cause actual results or
developments to differ materially from those expressed or implied by these
forward-looking statements and forecasts.
This information is provided by RNS
The company news service from the London Stock ExchangeRecent news on JD Sports Fashion
See all newsREG - JD Sports Fashion - Directorate Change
AnnouncementREG - JD Sports Fashion - JD SPORTS PROPOSED ACQUISITION OF HIBBETT, INC.
AnnouncementREG - JD Sports Fashion - FY24 TRADING UPDATE
AnnouncementREG - JD Sports Fashion - Corporate Broker Appointment
AnnouncementREG - JD Sports Fashion - Director/PDMR Shareholding
Announcement