REG - JD Sports Fashion - Half Yearly Report <Origin Href="QuoteRef">JD.L</Origin> - Part 2
29/10/2014 12:23
- Part 2: For the preceding part double click ID:nRSQ8640Ra
Cash at bank and in hand 76,797 3,562 13,331 - 93,690
Overdrafts (4,754) - (40) - (4,794)
Cash and cash equivalents 72,043 3,562 13,291 - 88,896
Interest bearing loans and borrowings:
Bank loans (288) - 52 - (236)
Syndicated bank facility (26,000) - (51,000) - (77,000)
Finance lease liabilities (72) - (61) - (133)
Other loans (407) - 32 - (375)
Total interest bearing loans and borrowings (26,767) - (50,977) - (77,744)
45,276 3,562 (37,686) - 11,152
1. Basis of Preparation
JD Sports Fashion Plc (the 'Company') is a company incorporated and domiciled
in the United Kingdom. The half year financial report for the 26 week period
to 2 August 2014 represents that of the Company and its subsidiaries (together
referred to as the 'Group').
This half year financial report is an interim management report as required by
DTR 4.2.3 of the Disclosure and Transparency Rules of the UK's Financial
Conduct Authority and was authorised for issue by the Board of Directors on 17
September 2014.
The condensed set of financial statements included in this half yearly
financial report has been prepared in accordance with IAS 34 'Interim
Financial Reporting' as adopted by the EU. The annual financial statements of
the Group are prepared in accordance with IFRS's as adopted by the EU. The
comparative figures for the 52 week period to 1 February 2014 are not the
Group's statutory accounts for that financial year. Those accounts have been
reported on by the Group's Auditor and delivered to the Registrar of
Companies. The Report of the Auditor was (i) unqualified, (ii) did not include
a reference to any matters to which the Auditor drew attention by way of
emphasis without qualifying their report, and (iii) did not contain a
statement under section 498 of the Companies Act 2006.
The information contained in the half year financial report for the 26 week
period to 2 August 2014 and 3 August 2013 has been reviewed and the
independent review report for the 26 week period to 2 August 2014 is set out
in the half yearly financial report.
As required by the Disclosure and Transparency Rules of the UK's Financial
Conduct Authority, the half year financial report has been prepared by
applying the same accounting policies and presentation that were applied in
the preparation of the Company's published consolidated financial statements
for the 52 week period to 1 February 2014.
The following amendments to accounting standards and interpretations, issued
by the International Accounting Standards Board (IASB), have been adopted for
the first time by the Group in the period with no significant impact on its
consolidated results or financial position:
· IFRS 10 'Consolidated Financial Statements'
· IFRS 11 'Joint Arrangements'
· IFRS 12 'Disclosure of Interests in Other Entities'
· Amendments to IFRS 10, IFRS 11 and IFRS 12
· IAS 27 'Separate Financial Statements (2011 revised)'
· IAS 28 'Investments in Associates and Joint Ventures (2011 revised)'
· Amendments to IAS 32 'Offsetting Financial Assets and Financial
Liabilities'
· Amendments to IAS 36 'Recoverable amount disclosures for non-financial
assets'
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 1 February 2014.
Risks and uncertainties
The Board has considered the risks and uncertainties for the remaining 26 week
period to 31 January 2015 and determined that the risks presented in the
Annual Report and Accounts 2014, noted below, remain relevant:
Omnichannel
· Damage to reputation of brands
· Protection of intellectual property
· Retail property factors
1. Basis of Preparation (continued)
· Seasonality of sales
· Economic factors
· Reliance on non-UK manufacturers
Consistency of infrastructure
· Reliance on legacy IT systems
· Consolidation of warehouse operations
· Retention of key personnel
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. In the previous period the
reportable segments have been adjusted to reflect the streamlining of the
Group's businesses into three main operating divisions. This has resulted in
those businesses that were previously allocated to the Distribution segment
now being allocated to the Sport and Fashion segments based on the nature of
the products they supply. The Group's revised reportable segments under IFRS 8
are therefore as follows:
· Sport - 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, JD Sports Fashion Germany GmbH, ActivInstinct 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) and Source Lab Limited.
· Fashion - includes the results of Bank Fashion 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 'Sport' 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.
2. Segmental Analysis (continued)
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 £77,000,000 (2013: £23,500,000) and
liabilities for taxation of £9,683,000 (2013: £8,772,000) 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 Sport) 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 2
August 2014 is reported below:
Income statement
Sport£000 Fashion£000 Outdoor £000 Unallocated£000 Total£000
Gross revenue 577,379 83,404 61,530 - 722,313
Intersegment revenue (551) (312) - - (863)
Revenue 576,828 83,092 61,530 - 721,450
Operating profit / (loss) before exceptional items 34,834 (8,226) (5,611) - 20,997
Exceptional items (1,182) (1,952) (406) - (3,540)
Operating profit / (loss) 33,652 (10,178) (6,017) - 17,457
Financial income 389
Financial expenses (1,392)
Profit before tax 16,454
Income tax expense (3,799)
Profit for the period 12,655
Total assets and liabilities
Sport£000 Fashion£000 Outdoor£000 Unallocated£000 Eliminations£000 Total£000
Total assets 661,604 80,849 85,792 - (144,399) 683,846
Total liabilities (259,530) (92,202) (114,180) (86,683) 144,399 (408,196)
Total segment net assets / (liabilities) 402,074 (11,353) (28,388) (86,683) - 275,650
2. Segmental Analysis (continued)
The comparative segmental results (restated) for the 26 weeks to 3 August 2013
are as follows:
Income statement
Sport£000 Fashion£000 Outdoor£000 Unallocated£000 Total£000
Gross revenue 452,431 73,030 43,072 - 568,533
Intersegment revenue (667) (496) - - (1,163)
Revenue 451,764 72,534 43,072 - 567,370
Operating profit / (loss) before exceptional items 26,059 (6,796) (8,871) - 10,392
Exceptional items (1,947) (478) (1,482) - (3,907)
Operating profit / (loss) 24,112 (7,274) (10,353) - 6,485
Financial income 292
Financial expenses (690)
Profit before tax 6,087
Income tax expense (1,591)
Profit for the period 4,496
Total assets and liabilities
Sport£000 Fashion£000 Outdoor£000 Unallocated£000 Eliminations£000 Total£000
Total assets 514,063 81,677 55,969 - (109,586) 542,123
Total liabilities (209,146) (84,171) (80,367) (32,272) 109,586 (296,370)
Total segment net assets / (liabilities) 304,917 (2,494) (24,398) (32,272) - 245,753
2. Segmental Analysis (continued)
Geographical Information
The Group's operations are located in the UK, Republic of Ireland, France,
Spain, Holland, Germany, 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.
Revenue
26 weeks to 2 August 2014£000 26 weeks to 3 August 2013 £000
UK 575,266 466,728
Europe 137,050 94,371
Rest of world 9,134 6,271
721,450 567,370
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:
Non-current assets As at 2 August 2014 £000 As at 3 August 2013 £000
UK 206,867 184,552
Europe 78,168 69,960
Rest of world 243 164
285,278 254,676
3. Exceptional Items
26 weeks to 2 August2014£000 26 weeks to 3 August2013 £000 52 weeks to 1 February2014£000
Loss on disposal of non-current assets (1) 322 374 1,017
Impairment of non-current assets (2) 571 225 1,942
Onerous lease provision (3) 2,647 919 1,087
Reorganisation of the warehouse operations (4) - 189 589
Business restructuring (5) - 2,200 2,675
Selling and distribution expenses - exceptional 3,540 3,907 7,310
Impairment of intangible assets (6) - - 11,839
Administrative expenses - exceptional - - 11,839
3,540 3,907 19,149
(1) Relates to the excess of net book value of property, plant and equipment
and non-current other assets disposed over proceeds received
(2) Relates to property, plant and equipment and non-current other assets in
cash-generating units which are generating a negative cash contribution, where
it is considered that this position cannot be recovered
(3) Relates to the net movement in the provision for onerous property leases
on trading and non-trading stores
(4) In the prior periods the exceptional items relate to the reorganisation
of the warehouse operations consisting of the provision of onerous property
leases, redundancy costs and dilapidations at the vacated premises
(5) In the prior periods the exceptional items relate to the restructuring of
the Blacks and Champion businesses following acquisition for relocation of the
warehouse and head office operations, the closure of Frank Harrison Limited (a
subsidiary of Kukri Sports Limited) following the decision to wind down this
separate business and the restructuring of the Kooga business following a
decision to relocate the previous head office and warehouse
(6) Relates to the impairment in the period to 1 February 2014 of the
goodwill arising on the acquisition of Pink Soda Limited (formerly Bank Stores
Holdings Limited) in which the trading subsidiary, Bank Fashion Limited, is
held
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 2 August
2014 is based on the profit for the period attributable to equity holders of
the parent of £12,609,000 (26 weeks to 3 August 2013: £4,957,000; 52 weeks to
1 February 2014: £40,158,000).
An Ordinary Resolution was passed at the Annual General Meeting, effective 30
June 2014, resulting in a share split whereby four Ordinary shares were issued
for each Ordinary share. In accordance with IAS 33, the number of shares
outstanding before the event has been adjusted for the proportionate change as
if the event had occurred at the beginning of the earliest period presented.
The weighted average number of ordinary shares outstanding during the 26 weeks
to 2 August 2014 of 194,646,632 (26 weeks to 3 August 2013: 194,646,632; 52
weeks to 1 February 2014: 194,646,632) calculated as follows:
26 weeks to 2 August2014 26 weeks to 3 August 2013(restated) 52 weeks to 1 February2014(restated)
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 2 August2014£000 26 weeks to 3 August2013£000(restated) 52 weeks to 1 February2014£000(restated)
Profit for the period attributable to equity holders of the parent 12,609 4,957 40,158
Exceptional items excluding loss on disposal of non-current assets 3,218 3,533 18,132
Tax relating to exceptional items (743) (804) (1,296)
Profit for the period attributable to equity holders of the parent excluding exceptional items 15,084 7,686 56,994
Adjusted basic and diluted earnings per ordinary share 7.75p 3.95p 29.28p
5. Acquisitions
Current period acquisitions
Mainline Menswear Limited
On 21 March 2014, the Group acquired 80% of the issued share capital of
Mainline Menswear Holdings Limited for an initial cash consideration of
£10,842,000. Additional consideration of up to £500,000 is payable after 30
November 2014 only if certain performance criteria are achieved. Management
have considered the fair value of the contingent consideration to be £500,000
at the date of acquisition. Mainline Menswear is primarily an online niche
retailer of premium branded Men's apparel and footwear.
The provisional goodwill calculation is summarised below:
Book value£000 Measurementadjustments£000 Fair value at 2 August 2014£000
Acquiree's net assets at acquisition date:
Intangible assets - 843 843
Property, plant & equipment 52 - 52
Inventories 1,519 - 1,519
Cash 3,535 - 3,535
Trade and other receivables 60 - 60
Trade and other payables (692) - (692)
Income tax liabilities (62) - (62)
Deferred tax liabilities (10) (169) (179)
Net identifiable assets 4,402 674 5,076
Non-controlling interest (20%) (880) (135) (1,015)
Goodwill on acquisition 7,281
Consideration paid - satisfied in cash 10,842
Contingent consideration 500
Total consideration 11,342
Mainline Menswear is on course to meet the performance criteria for the
maximum contingent consideration to be payable and therefore the full amount
has been included in the acquisition accounting.
The intangible asset acquired represents the fair value of the 'Mainline'
fascia name. The Board believes that the excess of consideration paid over the
provisional fair value of the net identifiable assets of £7,281,000 is best
considered as goodwill on acquisition representing employee expertise and
anticipated future operating synergies.
Included in the 26 week period to 2 August 2014 is revenue of £2,883,000 and a
profit before tax of £747,000 in respect of Mainline Menswear Limited.
5. Acquisitions (continued)
Oswald Bailey
On 28 March 2014, the Group acquired, via its 100% owned subsidiary Blacks
Outdoor Retail Limited, the trade and assets of 14 stores (and 2 websites)
trading as Oswald Bailey for cash consideration of £851,000 which was equal to
the fair value of the net identifiable assets acquired. Oswald Bailey is a
retailer of outdoor footwear, apparel and equipment.
Included in the 26 week period to 2 August 2014 is revenue of £1,416,000 and a
loss before tax of £211,000 in respect of Oswald Bailey.
Ultimate Outdoors
On 3 February 2014, the Group acquired, via its 100% owned subsidiary Blacks
Outdoor Retail Limited, 100% of the entire issued share capital of Ultimate
Outdoors Limited for cash consideration of £835,000 which was equal to the
fair value of the net identifiable assets acquired.
Included in the 26 week period to 2 August 2014 is revenue of £178,000 and a
loss before tax of £83,000 in respect of Ultimate Outdoors Limited.
Half Year Impact Of Acquisitions
Had the acquisitions of Mainline Menswear Limited, Oswald Bailey and Ultimate
Outdoors Limited been effected at 1 February 2014, the revenue and profit
before tax of the Group for the 26 week period to 2 August 2014 would have
been £723,136,000 and £16,584,000 respectively.
Prior Period Acquisitions
Cloggs Online Limited
On 13 February 2013, the Group acquired, via its new 88% owned subsidiary
Cloggs Online Limited, the trade and assets of Cloggs (UK) Limited ('Cloggs')
from its Administrators for a total cash consideration of £579,000 which was
equal to the fair value of the net identifiable assets acquired. Cloggs is an
online niche retailer of premium branded footwear.
No measurement adjustments have been made to the fair values in the 26 week
period ended 2 August 2014.
Setpoint BV
On 1 May 2013, the Group acquired Setpoint RE BV for a cash consideration of
£1,280,000 (E1,600,000). Setpoint RE BV was established on 26 April 2013 with
its only asset being the leases of 15 stores which were transferred into it on
27 April 2013 from Setpoint BV who were looking to close down their retail
operations. Following a refit, 14 of these stores now trade under the JD
fascia with one store being handed back to the landlord.
The only asset acquired is the right to the leases, with a fair value of
£1,280,000 (E1,600,000). As the acquisition does not constitute a business
combination under IFRS 3, the Group has not applied acquisition accounting.
Ark Fashion Limited
On 28 June 2013, the Group acquired, via its new 70% owned subsidiary Ark
Fashion Limited, the trade and assets of Rett Retail Limited from its
Administrators for a total cash consideration of £1,138,000 which was equal to
the fair value of the net identifiable assets acquired. On acquisition, there
were nine stores trading as Ark in the North of England and the Midlands with
a separate trading website. Since acquisition three of the stores have been
closed.
No measurement adjustments have been made to the fair values in the 26 week
period ended 2 August 2014.
5. Acquisitions (continued)
Isico U.S.A. Sports Eric Isichei & Soehne oHG
On 1 July 2013, the Group acquired, via its new 85% subsidiary JD Sports
Fashion Germany GmbH, the trade and assets of Isico U.S.A. Sports Eric Isichei
& Soehne oHG ('Isico') for a cash consideration of £800,000 (E1,000,000). On
acquisition, Isico had 10 small stores primarily in Berlin but with a presence
also in Hamburg, Hannover and Frankfurt. These stores have been rebranded to
JD during 2014.
The Board believes that the excess of consideration paid over net identifiable
assets of £982,000 is best considered as goodwill on acquisition representing
employee expertise.
No measurement adjustments have been made to the fair values in the 26 week
period ended 2 August 2014.
ActivInstinct Limited
On 25 October 2013, the Group, via its new 81.2% subsidiary ActivInstinct
Holdings Limited acquired the issued share capital of ActivInstinct Limited
for a cash consideration of £9,175,000 with a maximum further payment of
£4,136,000 payable after 31 August 2014 depending on performance.
ActivInstinct is an online multi-sport retailer of premium, technical sporting
equipment.
ActivInstinct is on course to meet the performance criteria for the maximum
deferred consideration to be payable and therefore the full amount has been
included in the acquisition accounting.
Included within the provisional fair value of net identifiable assets on
acquisition is an intangible asset of £3,524,000 representing the
'ActivInstinct' fascia name. The Board believes that the excess of
consideration paid over the provisional fair value of the net identifiable
assets of £6,699,000 is best considered as goodwill on acquisition
representing employee expertise.
During the 26 week period ended 2 August 2014 an additional consideration of
£82,000 was paid regarding the final settlement of the working capital
position.
Tiso Group
On 11 November 2013, the Group acquired 60% of the issued share capital of
Tiso Group Limited for a cash contribution of £2,000,000 and have also
advanced £5,340,000 to allow it to settle an element of its indebtedness.
Tiso is a highly regarded retailer of Outdoor clothing, footwear and equipment
and has four fascias (Tiso, Alpine Bikes, Blues ski and George Fisher). On
acquisition, the Group was trading from 17 stores (all in Scotland except for
the George Fisher store) along with two trading websites.
Included within the provisional fair value of net identifiable assets on
acquisition is an intangible asset of £2,700,000 representing the 'Tiso',
'Alpine Bikes' and 'George Fisher' fascia names. The Board believes that the
excess of consideration paid over the provisional fair value of the net
identifiable assets of £3,280,000 is best considered as goodwill on
acquisition representing employee expertise.
No measurement adjustments have been made to the fair values in the 26 week
period ended 2 August 2014.
6. 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 early October 2014. 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
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