REG - JD Sports Fashion - Half Yearly Report <Origin Href="QuoteRef">JD.L</Origin> - Part 2
16/09/2015 07:01
- Part 2: For the preceding part double click ID:nRSP1676Za
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 31 January 2015.
Risks and uncertainties
The Board has considered the risks and uncertainties for the remaining 26 week
period to 30 January 2016 and determined that the risks presented in the
Annual Report and Accounts 2015, noted below, remain relevant:
Omnichannel
· Damage to reputation of brands
· Protection of intellectual property
· Retail property factors
· 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
· Health and safety
· Foreign exchange risk
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.
Prior period re-presentation
In accordance with IFRS 5 ('Non-current Assets Held for Sale and Discontinued
Operations'), the results of Bank Fashion Limited ('Bank') are presented as a
discontinued activity for the 52 weeks to 31 January 2015 as Bank was a
separate major line of business. The Consolidated Income Statement for the 26
weeks to 2 August 2014 has consequently been re-presented to show the results
of Bank separately from the continuing operations of the Group.
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 were adjusted to better reflect the way that product is
held out for sale in the Group's core retail businesses. The adjustment was:
· The creation of a new segment 'Sports Fashion' reflecting the fact that
the Group's core retail operations present and sell the major international
Sports Brands as Fashion thereby creating a natural continuum between Sports
and Fashion. All businesses previously allocated to the individual Sports and
Fashion segments have been incorporated in this new segment.
The Group's revised 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, JD Sports Fashion Germany GmbH, JD Sports Fashion SRL, 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 £54,000,000 (2014: £77,000,000) and
liabilities for taxation of £14,003,000 (2014: £9,683,000) 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 1
August 2015 is reported below:
Income statement
Sports Fashion£000 Outdoor£000 Continuing Operations£000 Discontinued Operations£000 Total£000
Gross revenue 741,779 68,260 810,039 - 810,039
Intersegment revenue (138) - (138) - (138)
Revenue 741,641 68,260 809,901 - 809,901
Operating profit / (loss) before exceptional items 52,068 (4,490) 47,578 - 47,578
Exceptional items (1,564) (294) (1,858) - (1,858)
Operating profit / (loss) 50,504 (4,784) 45,720 - 45,720
Financial income 206 - 206
Financial expenses (1,218) - (1,218)
Profit / (loss) before tax 44,708 - 44,708
Income tax (expense) / credit (10,294) - (10,294)
Profit / (loss) for the period 34,414 - 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
The comparative segmental results (re-presented) for the 26 weeks to 2 August
2014 are as follows:
Income statement (re-presented)
Sports Fashion£000 Outdoor£000 Continuing Operations£000 Discontinued Operations£000 Total£000
Gross revenue 608,803 61,530 670,333 51,196 721,529
Intersegment revenue (79) - (79) - (79)
Revenue 608,724 61,530 670,254 51,196 721,450
Operating profit / (loss) before exceptional items 32,079 (5,611) 26,468 (5,471) 20,997
Exceptional items (1,364) (406) (1,770) (1,770) (3,540)
Operating profit / (loss) 30,715 (6,017) 24,698 (7,241) 17,457
Financial income 389 - 389
Financial expenses (1,338) (54) (1,392)
Profit / (loss) before tax 23,749 (7,295) 16,454
Income tax (expense) / credit (5,455) 1,656 (3,799)
Profit / (loss) for the period 18,294 (5,639) 12,655
Total assets and liabilities
Sports Fashion£000 Outdoor£000 Unallocated£000 Eliminations£000 Total£000
Total assets 688,027 85,792 - (89,973) 683,846
Total liabilities (297,306) (114,180) (86,683) 89,973 (408,196)
Total segment net assets / (liabilities) 390,721 (28,388) (86,683) - 275,650
Geographical Information
The Group's operations are located in the UK, Republic of Ireland, France,
Spain, Germany, the Netherlands, Italy, 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 1 August 2015 26 weeks to 2 August 2014
Continuing Discontinued Total Continuing Discontinued Total
£000 £000 £000 £000 £000 £000
UK 621,646 - 621,646 524,336 50,930 575,266
Europe 176,413 - 176,413 136,905 145 137,050
Rest of world 11,842 - 11,842 9,013 121 9,134
809,901 - 809,901 670,254 51,196 721,450
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 1 August 2015 £000 As at 2 August 2014 £000
UK 209,867 206,867
Europe 95,571 78,168
Rest of world 185 243
305,623 285,278
3. Exceptional Items
26 weeks to 1 August2015£000 26 weeks to 2 August2014(re-presented - see note 1) £000 52 weeks to 31 January2015£000
Loss on disposal of non-current assets (1) 225 322 986
Impairment of non-current assets (2) 682 571 983
Onerous lease provision (3) 951 877 2,498
Selling and distribution expenses - exceptional 1,858 1,770 4,467
Impairment of intangible assets (4) - - 5,060
Administrative expenses - exceptional - - 5,060
Exceptionals - continuing operations 1,858 1,770 9,527
Exceptionals - discontinued operations (see note 7) - 1,770 8,088
1,858 3,540 17,615
(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) Relates to the impairment in the period to 31 January 2015 of the
goodwill arising in prior years on the acquisition of Blacks Outdoor Retail
Limited, the goodwill arising in prior years on the acquisition of Kukri
Sports Limited, the Kukri brand name and the Ark fascia name
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 1 August
2015 is based on the profit from continuing operations for the period
attributable to equity holders of the parent of £34,293,000 (26 weeks to 2
August 2014: continuing operations £18,248,000; 52 weeks to 31 January 2015:
continuing operations £68,461,000).
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 1 August 2015 was therefore 194,646,632 (26 weeks to 2 August
2014: 194,646,632; 52 weeks to 31 January 2015: 194,646,632), calculated as
follows:
26 weeks to 1 August2015 26 weeks to 2 August 2014 52 weeks to 31 January2015
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 from continuing operations 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 26 weeks to 52 weeks to
1 August 2 August 31 January
2015 2014 2015
£000 (re-presented) £000
£000
Profit for the period from continuing operations attributable to equity holders of the parent 34,293 18,248 68,461
Exceptional items excluding loss on disposal of non-current assets 1,633 1,448 8,541
Tax relating to exceptional items 312 293 (1,309)
Profit for the period from continuing operations attributable to equity holders of the parent excluding exceptional items 36,238 19,989 75,693
Adjusted basic and diluted earnings per ordinary share from continuing operations 18.62p 10.27p 38.89p
Adjusted basic and diluted earnings per ordinary share from continuing
operations
18.62p
10.27p
38.89p
5. Acquisitions
Current period acquisitions
During the period, the Group has increased its shareholding in a non wholly
owned subsidiary. The transaction was not material.
Prior period acquisitions
Mainline Menswear Limited
On 21 March 2014, the Group acquired 80% of the issued share capital of
Mainline Menswear Holdings Limited for cash consideration of £10,924,000 with
additional consideration of up to £500,000 payable after 30 November 2014 if
certain performance criteria were achieved. At acquisition, management
believed that Mainline Menswear was on course to meet the performance criteria
for the maximum contingent consideration to be payable and therefore the fair
value of this contingent consideration at this time was £500,000. The deferred
consideration was subsequently paid in full in February 2015. Mainline
Menswear is primarily an online niche retailer of premium branded Men's
apparel and footwear.
The period in which measurement adjustments could be made has now closed on
this acquisition and the final goodwill calculation is summarised below:
Book value£000 Measurementadjustments£000 Fair value at 1 August 2015£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 7,363
Consideration paid - satisfied in cash 11,424
The intangible asset acquired represents the fair value of the 'Mainline'
fascia name. The Board believes that the excess of consideration paid over the
fair value of the net identifiable assets of £7,363,000 is best considered as
goodwill on acquisition representing employee expertise and anticipated future
operating synergies.
No measurement adjustments have been made to the fair values in the 26 week
period ended 1 August 2015.
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.
No measurement adjustments have been made to the fair values in the 26 week
period ended 1 August 2015.
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.
No measurement adjustments have been made to the fair values in the 26 week
period ended 1 August 2015.
5. Disposals
Disposal of 100% of the Issued Ordinary Share Capital of Bank Fashion Limited
On 25 November 2014, the Group disposed of its 100% shareholding in Bank
Fashion Limited to Huk 57 Limited (a subsidiary of Hilco Capital Limited) for
a total consideration of £18.15m. The total cash payment comprised £1 for the
entire share capital of Bank Fashion Limited and £18.15m which repaid a
substantial part of the intercompany receivable balance of £28.25m. JD Sports
Fashion Plc has recorded a provision of £10.1m against the remaining balance.
The assets and liabilities related to Bank Fashion Limited form a disposal
group. Bank Fashion Limited has been treated as a discontinued operation as at
31 January 2015 as its fashionwear business offering represented a significant
line of business (see note 7).
Financial information related to the disposal is set out below:
£000
Consideration received 18,150
Less: carrying value of net assets disposed of (20,506)
Less: fascia name disposed of (5,481)
Plus: deferred tax on fascia name 1,519
Loss on disposal (6,318)
Net cashflow on disposal:
Consideration received 18,150
Less: cash and cash equivalents disposed of -
Net cash inflow from disposal 18,150
6. Discontinued operations
Results of Discontinued Operation
26 weeks to 2 August 2014£000 52 weeks to 31 January 2015£000
Revenue 51,196 83,441
Expenses - normal (56,667) (91,273)
Expenses - exceptional (1,770) (1,770)
Net interest expense (54) (74)
Results from operating activities (7,295) (9,676)
Income tax 1,656 210
Results from operating activities, net of tax (5,639) (9,466)
Loss on sale of discontinued operation - exceptional - (6,318)
Loss for the period (5,639) (15,784)
Basic loss per ordinary share (2.90)p (8.11)p
Diluted loss per ordinary share (2.90)p (8.11)p
Effect of Disposal on the Financial Position of the Group
52 weeks to 31 January2015£000
Property, plant and equipment (9,266)
Inventories (18,371)
Trade and other receivables (4,198)
Income tax assets (21)
Deferred tax assets (873)
Trade and other payables 10,624
Provisions 1,599
Net assets (20,506)
Fascia name (5,481)
Deferred tax on fascia name 1,519
Net fascia name disposed of on divestment of subsidiary (3,962)
Consideration received, satisfied in cash 18,150
Cash and cash equivalents disposed of -
Net cash inflow 18,150
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 early October 2015. 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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