REG - JD Sports Fashion - JD Sports Fashion Plc Interim Results
22/09/2022 07:00
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RNS Number : 2267A JD Sports Fashion Plc 22 September 2022
22 September 2022
JD SPORTS FASHION PLC
UNAUDITED INTERIM RESULTS
FOR THE 26 WEEKS TO 30 JULY 2022
JD Sports Fashion Plc (the 'Group'), the leading retailer of sports, fashion
and outdoor brands, today announces its interim results for the 26 weeks ended
30 July 2022 (comparative figures are shown for the 26-week period ended 31
July 2021).
IFRS 16 Proforma IAS 17*
2022 2021 2022 2021
£m £m £m £m
Revenue 4,418.1 3,885.8 4,418.1 3,885.8
Gross profit % 48.5% 48.5% 48.5% 48.5%
Operating profit 332.9 396.8 305.4 380.0
Net interest expense (34.6) (32.2) (2.5) (3.4)
Profit before tax 298.3 364.6 302.9 376.6
Basic earnings per ordinary share (a) 3.58p 4.44p 3.66p 4.67p
Total dividend payable per ordinary share 0.13p -
Alternative Performance Measures (b)
EBITDA before exceptional items 727.4 746.4 504.7 554.3
Depreciation / amortisation (309.3) (274.7) (114.1) (99.4)
Operating profit (before exceptional items) 418.1 471.7 390.6 454.9
Net interest expense (34.6) (32.2) (2.5) (3.4)
Profit before tax and exceptional items 383.5 439.5 388.1 451.5
Exceptional items (see note 3) (85.2) (74.9) (85.2) (74.9)
Profit before tax 298.3 364.6 302.9 376.6
Adjusted earnings per ordinary share (a) 5.23p 5.83p 5.32p 6.07p
Net cash at period end (c) 1,013.1 995.1
a) The prior year has been restated to reflect the 5:1 share split which
was approved by shareholders at a General Meeting on 26 November 2021
b) Further detail setting out the background to the Alternative
Performance Measures and a reconciliation to statutory measures is provided
after the Chief Financial Officer's Statement. In addition, throughout this
release '*' indicates the first instance of other Alternative Performance
Measures which are also explained after the Chief Financial Officer's and are
reconciled to the statutory measures
c) Net cash consists of cash and cash equivalents less interest-bearing
loans and borrowings
Group Highlights
· Result for the first half at the top end of the Board's
expectations with profit before tax and exceptional items of £383.5 million
(2021: £439.5 million) which includes:
o Continued robust performance in the sports fashion retail fascias in the
UK and Republic of Ireland which delivered a profit before tax and exceptional
items for the first half of £153.0 million (2021: £174.2 million)
o A return to profit in the sports fashion retail fascias in Europe which
contributed to a profit before tax and exceptional items for the first half of
£57.1 million (2021: loss of £7.2 million)
o A profit for the sports fashion retail fascias in North America of £130.4
million (2021: £245.5 million) with the performance in the period reflecting,
as expected, the non-comparability of trading conditions in the United States
as a result of the Federal fiscal stimulus in the prior year and the supply
chain challenges of certain international brands which has led to reduced
availability of key footwear styles, particularly in the first quarter
· Total revenue growth in organic retail businesses* of 5% with
this level of growth continuing in the second half to date including a return
to growth in the United States
· International development of JD continues to progress positively:
o 51 net new JD stores opened across Europe including a first store in
Hungary with the first store in Greece due to open shortly
o 101 stores now trading as JD in the United States with a flagship store
in Chicago due to open in the second half
o Four JD stores in Indonesia and two JD stores in Israel opened under
Joint Venture arrangements in the period meaning that the core JD fascia now
has a retail presence in 27 countries
o Further progress in Australia with three new stores opened in the period
and a first store in Adelaide opened subsequently
· Interim dividend of 0.13p per ordinary share proposed (2021: nil;
2020: nil; 2019: 0.06p restated to reflect the 5:1 share split approved in
November 2021) with the return to more normalised trading justifying the
return to a more normalised phasing of dividend payments
· The Board maintains its view that the headline profit before tax
and exceptional items for the year end 28 January 2023 will be in line with
the record performance for the year ended 29 January 2022
· Key financial information of the two business segments is
tabulated below:
Period to 30 July 2022
Sports Fashion Outdoor Unallocated Total
£m £m £m £m
Revenue 4,143.4 274.7 - 4,418.1
Gross profit % 49.0% 42.2% - 48.5%
Operating profit 327.5 5.4 - 332.9
Net interest expense(1) (30.7) (1.4) (2.5) (34.6)
Profit / (loss) before tax 296.8 4.0 (2.5) 298.3
Alternative Performance Measures
Operating profit before exceptional items 412.7 5.4 - 418.1
Net interest expense(1) (30.7) (1.4) (2.5) (34.6)
Profit / (loss) before tax and exceptional items 382.0 4.0 (2.5) 383.5
Exceptional items (85.2) - - (85.2)
Profit / (loss) before tax 296.8 4.0 (2.5) 298.3
(1) The Group considers that certain net funding costs are cross-divisional in
nature and cannot be allocated between the segments on a meaningful basis.
Period to 31 July 2021
Sports Fashion Outdoor Unallocated Total
£m £m £m £m
Revenue 3,650.6 235.2 - 3,885.8
Gross profit % 48.8% 44.3% - 48.5%
Operating profit 384.9 11.9 - 396.8
Net interest expense (27.7) (1.1) (3.4) (32.2)
Profit / (loss) before tax 357.2 10.8 (3.4) 364.6
Alternative Performance Measures
Operating profit before exceptional items 459.8 11.9 - 471.7
Net interest expense(1) (27.7) (1.1) (3.4) (32.2)
Profit / (loss) before tax and exceptional items 432.1 10.8 (3.4) 439.5
Exceptional items (74.9) - - (74.9)
Profit / (loss) before tax 357.2 10.8 (3.4) 364.6
Andrew Higginson, Non-Executive Chair, said:
"Whilst this has been a period of transition for the Board, it is reassuring
that this has not impacted the financial performance of the Group which
continues to deliver strong results with a profit before tax and exceptional
items in the first half of £383.5 million (2021: £439.5 million). With this
year expected to follow a more normalised trading pattern, this result is at
the top end of our expectations for the first half demonstrating the ongoing
resilience of our global proposition and the strength of our consumer
engagement.
"The progress that the Group is making in its global markets is reflected by
the fact that total sales in the Group's organic retail businesses were 5%
ahead of the prior year. This performance is very encouraging, as
notwithstanding the non-comparability of trading conditions in the United
States, the Group has also faced numerous other challenges in the period
including the well-publicised shortage of supply from a number of the
international brands and the challenging global macro-economic situation.
"JD continues to be the partner of choice for many international brands who
see our premium fascias as the natural home for their latest ranges and
freshest new styles. Our relationship with these brands and our access to
product is as strong as it ever has been.
"We are delighted to welcome Régis Schultz to the Group as Chief Executive
Officer. Régis has now commenced in the role with his induction into the
Group, including introductions with key business leads and international brand
partners, at an advanced stage. We firmly believe that Régis has the right
characteristics and experience to lead the Group on the next phase of its
journey.
"We continue to be reassured by the ongoing resilience in the Group's
performance with trade to date through the second half following a similar
trend to the first half with total sales in the Group's organic retail
businesses tracking around 8% ahead of the prior year after six weeks.
"Whilst the overall performance continues to be encouraging and the result for
the half year was at the upper end of the Board's expectations, it must also
be recognised that the most material trading periods lie ahead. Given the
widespread macro-economic uncertainty, inflationary pressures and the
potential for further disruption to the supply chain with industrial action a
continuing risk in many markets, it is inevitable that we remain cautious
about trading through the remainder of the second half. Despite this, the
Board maintains its view, at this point, that the headline profit before tax
and exceptional items for the year ending 28 January 2023 will be in line with
the record performance for the year ended 29 January 2022."
Enquiries:
JD Sports Fashion
Plc
Tel: 0161 767 1000
Andrew Higginson, Non-Executive Chair
Régis Schultz, Chief Executive Officer
Kath Smith, Interim Chief Executive Officer
Neil Greenhalgh, Chief Financial Officer
Investec Bank Plc
Tel:
0207 597 5075
David Flin
Peel Hunt LLP
Tel: 0207 418 8869
Dan Webster
FGS
Global
Tel: 0207 251 3801
Rollo Head
Jenny Davey
James Thompson
Chair's Statement
Introduction
Whilst this has been a period of transition for the Board it is reassuring
that this has not impacted the financial performance of the Group which
continues to deliver strong results with a profit before tax and exceptional
items in the first half of £383.5 million (2021: £439.5 million). With this
year expected to follow a more normalised trading pattern, this result is at
the top end of our expectations for the first half demonstrating the ongoing
resilience of our global proposition and the strength of our consumer
engagement.
As expected, the result is lower than the prior year principally reflecting
the non-comparability of the result in North America with our businesses in
the United States experiencing a significant one-off benefit last year from
the fiscal stimulus made available by the Federal Government to boost the
economy, as previously highlighted.
The progress that the Group is making in its global markets is reflected by
the fact that total sales in the Group's organic retail businesses were 5%
ahead of the prior year. This performance is very encouraging, as
notwithstanding the non-comparability of trading conditions in the United
States, the Group has also faced numerous other challenges in the period
including the well-publicised shortage of supply from a number of the
international brands and the challenging global macro-economic situation.
JD continues to be the partner of choice for many international brands who see
our premium fascias as the natural home for their latest ranges and freshest
new styles. Our relationship with these brands and our access to product is as
strong as it ever has been. We continue to deepen our relationships with our
brand partners to help create new, richer and more engaging experiences for
consumers going forward.
The result also bears testimony to the skills, resilience and positive
attitude of the colleagues in our businesses who have not let the leadership
changes deviate their laser focus on the consumer and our proposition. I would
also like to express my gratitude for the leadership provided by Helen Ashton,
as Interim Chair, and Kath Smith, as Interim CEO, after Peter Cowgill left the
Group.
Whilst I only joined the Board in July, it has been evident in my short time
with the Group that JD has an extremely robust proposition that is capable of
thriving across multiple geographies and can do so in testing financial
environments. This confidence comes from seeing up close how JD consistently
adheres to a number of core entrepreneurial principles:
· A relentless commitment to be an authoritative and trustworthy
source of style and fashion inspiration by understanding better than anyone
what is relevant to the sports fashion focused and 'street' consumer
· Creating sector-leading physical retail environments and
leading-edge digital technologies which are scalable across multiple
territories and are adaptable to dynamic consumer expectations
· Providing inspiration to a demanding consumer who, regardless of
wider global events or macro-economics, retain their dreams and aspirations
and are reluctant to give up the things most important to them
· Curating a highly differentiated product assortment which heroes
the urban uniform and has breadth, newness and exclusivity at its heart
· Utilising the extensive skills, knowledge and experience in our
colleagues to transfer the JD DNA into new markets and deliver globally
consistent standards
It is my responsibility as Chair to ensure that the Board is set up to make
the governance infrastructure more professional whilst allowing the
entrepreneurial flair to flourish. In doing so, JD will have the right
foundations from which to progress positively and I look forward to working
with our new CEO to take advantage of the ongoing development opportunities.
Board Developments
Recruitment of New CEO
We are delighted to welcome Régis Schultz to the Group as Chief Executive
Officer. Régis has now commenced in the role with his induction into the
Group at an advanced stage, including introductions with key business leads
and international brand partners. We firmly believe that Régis has the right
characteristics and experience to lead the Group through the next phase of its
journey. In particular, we believe that his expertise of retailing in Asia and
the Middle East combined with his ability to drive transformational change
through digitalisation, perfectly complement the existing skills both in the
Board and the wider senior leadership team.
Régis has joined the Group at the optimum time as it starts its build up to
the crucial peak trading season at the end of the year. Régis will work
closely with the operational teams in this period, enhancing his overall
knowledge of the Group's operations whilst simultaneously also giving our
teams the opportunity to learn from his international executional expertise.
The knowledge that he gains in this period will be key in helping him shape
his vision for the continued international development of our brands and the
further enhancement of our already market-leading multichannel customer
experience.
Kath Smith will shortly step back from her role as Interim CEO and will return
to her former role as the Senior Independent Non-Executive Director. I thank
her for her support during the transition period.
Other Board Updates
Suzi Williams, who joined the Board on 16 May 2022, has now taken up the role
of Remuneration Committee Chair whilst I have been appointed as Chair of the
Nominations Committee.
I am also taking the opportunity to review the mix of skills and experience on
the Board and am assessing if there are any gaps. We will not hesitate to
strengthen the Board further if we believe that new Board members could
positively contribute to the global development and momentum of the Group.
Finally, I am pleased that we have been able to reach an amicable and
constructive way forward with Peter Cowgill covering the next three years.
Peter has hugely valuable experience, built over 18 years, which we do not
want to lose and both Régis Schultz and I are delighted that we will be able
to benefit from his unparalleled knowledge and experience over this period.
The arrangement that we have agreed, which includes both a binding set of new
and enhanced restrictive covenants for a two-year period and a consultancy
agreement for an expected period of three years, will help ensure a seamless
handover and best protects the Group's commercial interests.
Governance Update
Working with external advisors, the Group continues to make good progress on
the initial short-term intensive programme of works to address the priority
issues on governance and regulatory compliance matters. Further, after the
completion of a Control, Risk and Compliance Target Operating Model review,
the Board has now agreed a detailed plan and resource requirements assessment
for a programme of works which will ensure compliance with the various
regulatory obligations and greater conformity with the Corporate Governance
Code. The Board firmly believes that the 15 to 18 month timeline, which it has
adopted for this programme, is appropriate for JD as it will ensure that these
changes have the opportunity to become fully embedded in the day-to-day
operations and culture of the business without constraining the commercial
flexibility and quick decision making that have been instrumental in our
recent success.
Update on Footasylum Limited ('Footasylum')
The process to sell Footasylum and its associated subsidiaries to Aurelius
Group formally completed on 5 August 2022 with consideration of £37.5 million
received. The Competition and Markets Authority has subsequently confirmed
that its investigation into the merger has been closed.
Dividends
Given the return to more normalised trading, the Board believes that it is
appropriate to return to a more normalised phasing of dividend payments with
approximately one-third of the anticipated annual dividend paid as an interim
dividend after the first half. Accordingly, after careful consideration, the
Board proposes paying an interim dividend of 0.13p (2021: nil). This dividend
will be paid on 6 January 2023 to shareholders on the register at 9 December
2022. We continue to believe that it is in the longer term interests of all
shareholders to keep dividend growth restrained so as to maximise the
available funding for our ongoing growth opportunities.
Outlook
We continue to be reassured by the ongoing resilience in the Group's
performance with trade to date through the second half following a similar
trend to the first half with total sales in the Group's organic retail
businesses tracking around 8% ahead of the prior year after six weeks. This
includes an encouraging return to positive trading in the United States. Trade
in the UK, principally online, initially softened in August and early
September with customers understandably slower to transition into heavier
weight Autumn product whilst the weather remained relatively warm and dry.
However, the performance has improved again in the most recent weeks.
The Group also continues to take necessary action to mitigate the current cost
pressures with ongoing initiatives including maximising productive hours in
stores and our warehouse facilities, improving energy efficiency at all our
sites and delivering savings on consumable items.
Whilst the overall performance continues to be encouraging and the result for
the half year was at the upper end of the Board's expectations, it must also
be recognised that the most material trading periods lie ahead. Given the
widespread macro-economic uncertainty, inflationary pressures and the
potential for further disruption to the supply chain with industrial action a
continuing risk in many markets, it is inevitable that we remain cautious
about trading through the remainder of the second half. Despite this, the
Board maintains its view, at this point, that the headline profit before tax
and exceptional items for the year end 28 January 2023 will be in line with
the record performance for the year ended 29 January 2022.
We intend to provide an update on trading in early January after our key
Christmas trading period.
Andrew Higginson
Non-Executive Chair
22 September 2022
Chief Executive Officer's Statement
As expected and guided, the profit before tax and exceptional items of £383.5
million is lower than the record set in the previous year of £439.5 million.
This is principally due to a reduction in profit before tax and exceptional
items of £115.1 million across our combined businesses in North America,
which benefitted significantly in the prior year from the temporary fiscal
stimulus which the Federal Government made available to the lower earning
demographic. This means that the rest of the Group's businesses actually
increased their contribution in the period as compared to last year by £59.1
million which is a reflection of the continuing positive momentum in our
global markets.
Sports Fashion
UK and Republic of Ireland
We are encouraged by another robust performance in the sports fashion retail
fascias in the UK and Republic of Ireland which delivered a profit before tax
and exceptional items for the first half of £153.0 million (2021: £174.2
million). It should be recognised that the stores only re-opened from the
middle of April in the prior year with full business rates only payable from
July.
We are reassured by the resilient nature of the consumer demand across all our
fascias with total revenue growth in the JD fascia compared to the prior year
of approximately 7% with this business in particular performing strongly
through the summer months benefitting from the increased demand for
international holidays.
The UK and Republic of Ireland is the most mature market for the JD and Size
fascias with developments such as the new flagship store at the Metrocentre in
Newcastle demonstrating our ongoing commitment to continue raising standards
of excellence in multichannel retailing. It is our belief that the integration
of innovative digital technology into a vibrant retail theatre increases the
attractiveness and desirability of our premium product ranges. The UK and
Republic of Ireland is also the market where the JD and Size fascias have the
greatest density of stores relative to the population with 440 stores at the
period end (2021: 428). We maintain our belief that the store base at its
current scale contributes positively to our development as it raises brand
awareness, provides consumers with an opportunity to physically see and try
the product, and enables us to offer multiple delivery points.
Elsewhere, we are pleased with the performance in our fashion businesses
including Tessuti, Giulio and Mainline Menswear. More recently, Tessuti has
opened its new global flagship store in Liverpool. With more than 21,000 sqft
of retail space, this store sets new standards in the retailing of premium
fashion brands combining classic design with the latest digital technology.
Europe
We are also encouraged by the recovery that we have seen in our businesses in
Europe with our combined businesses delivering a profit before tax and
exceptional items for the first half of £57.1 million (2021: loss of £7.2
million). Clearly the stores being open for the full period has been very
beneficial in driving an improved performance with total revenue growth in the
JD fascia of more than 30% compared to the prior year.
The performance of JD in Europe is also benefitting from actions that we have
taken to enhance our service proposition. This includes investing in local
logistics capabilities with approximately 90% of product for JD stores in
Western Europe now supplied by our warehouses in Southern Belgium and Northern
France. Elsewhere, construction of the larger facility in Heerlen is ongoing
with fulfilment from this facility expected to commence in the first half of
2024.
The operational challenges which we faced in Europe through the COVID-19
period were temporary in nature and have not changed our view on the long-term
opportunity for JD across the continent. Accordingly, we remain committed to
expanding our physical retail presence in Europe at pace with a net 51 new JD
stores open in the period which includes nine new stores in Eastern Europe
which have been opened by the MIG team and the conversion of 22 stores which
formerly traded as Chausport in France. Working with the Cosmos team, the
Group will open its first JD store in Greece imminently with a store at the
Smart Park shopping mall in Athens. The JD team in Europe is also managing the
joint venture in Israel with two stores opened in the period and three further
stores anticipated to open through the second half.
Elsewhere, our other fascias, which includes our businesses focused on the
Sporting Goods market, continue to progress with five additional new stores in
the period across Iberia. The trial in the Netherlands which saw former Perry
Sport stores being converted to the Sprinter fascia has now been extended with
a further two stores converted in the period. The initial results from this
trial, which allows us to present an enhanced offer in key active sports
categories such as running and cycling, are encouraging and it is our
intention to extend this trial into other stores in the second half.
North America
It is not possible to directly compare the performance of our businesses in
North America year-on-year without taking into consideration the absence of
Federal fiscal stimulus this year in the United States. Further, the
performance in the first half was also negatively impacted, particularly in
the first quarter, by the well-publicised international supply chain
challenges which resulted in the reduced availability of certain key footwear
styles. These supply chain challenges were felt most acutely in North America
as footwear represents more than 80% of total sales which is the highest of
any of our markets.
Whilst these factors have combined to negatively impact the performance as
compared to the previous year, the profit before tax and exceptional items of
£130.4 million (2021: £245.5 million) is in line with our expectations. It
is also encouraging that gross margins have largely been maintained at the
prior year levels with an overall gross margin across our businesses of 49.4%
(2021: 49.7%). Ultimately, our progress in this market can also be measured by
the fact that the profit before tax and exceptional items solely in the JD /
Finish Line business of £63.1 million is significantly ahead of the £35.7
million result achieved in the same period in 2019, which is the most relevant
comparable period prior to the COVID-19 pandemic.
The improvement in product availability in the second quarter is reflected in
the trading which improved progressively through the period. This improvement
in availability and trading has continued into the second half with our
businesses trading positively through the first six weeks.
We are very pleased with the ongoing strategic developments across our
businesses in North America which we believe will deliver sustainable
long-term benefits. This includes the ongoing roll-out of the JD fascia which,
at the end of the period, traded from 107 stores (2021: 66 stores), including
six stores (2021: one store) in Canada. These new store developments for JD
include a number of relocations where we have taken the opportunity to
relocate an existing Finish Line store to a site which is either more
appropriately sized or is in a location which attracts higher levels of
footfall. The new stores for JD in the period include the opening of a first
store in a street location with a store in the Bronx area of New York. JD will
open its second flagship store in the United States later in the Autumn with a
store on State Street in Chicago. Our businesses are also continuing to make
progress on a number of projects which will enhance both our collective
operational effectiveness and the consumer experience.
Asia Pacific
The Group continues to make progress in the Asia Pacific region with our
businesses delivering a combined profit before tax and exceptional items for
the first half of £29.3 million (2021: £13.6 million) representing a margin
of 15.5% of sales (2021: 9.6%).
Our most significant market in this region continues to be Australia where, a
further three new stores were opened in the first half, bringing the total to
43 stores at the end of the period (2021: 35 stores). A further two stores
have opened subsequently which includes the Group's first store in Adelaide.
We anticipate further openings in Australia through the second half as JD
continues to gain momentum in the country. Further, after an encouraging start
at the store in Auckland, our management team in Australia is also looking to
expand the footprint of JD in New Zealand with two new stores expected to open
in the second half.
Elsewhere, working with our joint venture partner, PT Erajaya Swasembada Tb,
the Group has now opened four stores in Indonesia with further openings
anticipated through the second half.
Gyms
After opening a further three gyms in the period, the Group had 77 sites in
the UK at the end of the period with 66 sites trading as JD and a further 11
sites still bannered as X4L. It remains our expectation that the majority of
these sites will be converted to JD and retained longer term. As would be
expected, our gyms with their premium look and feel, including saunas, have a
higher utility cost relative to sales as compared to our retail businesses
with our management team very focused on driving through a number of
initiatives which will reduce the electricity usage without impacting the
members' experience. We are pleased with the early results from this exercise.
We are also encouraged by the early performance of our GymNation business in
the United Arab Emirates with seven gyms currently open and a strong pipeline
of future openings including Downtown Dubai and Sharjah.
During the period we broadened our leisure interests with the acquisition of
60% of Total Swimming Holdings Limited ('Swim!') for initial cash
consideration of £11.1 million with additional consideration of up to £4.0
million payable if certain targets and performance criteria are achieved.
Swim! was founded by former Olympic swimmers Steve Parry, Rebecca Adlington
and Adrian Turner to make swimming more accessible and is the first multi-site
operator of dedicated children's 'learn to swim' centres in the UK with seven
sites operating at the end of the period.
Financial Performance
The challenges that we have faced in the period in North America should not
detract from what has been an excellent period for our Sports Fashion
businesses overall with these businesses delivering a profit before tax and
exceptional items of £382.0 million (2021: £432.1 million).
This result was heavily influenced by a very positive performance from the
retail fascias in the UK and Republic of Ireland which, again, was the most
profitable territory with a profit before tax and exceptional items across the
combined retail fascias of £153.0 million (2021: £174.2 million) with this
result including additional costs of £20 million compared to last year
consequent to the return to full business rates in the UK. There was also a
pleasing recovery for our businesses in Europe which delivered a profit before
tax and exceptional items of £57.1 million (2021: loss of £7.2 million). As
expected, the retail fascias in North America could not match the record
result of the previous year, although the combined profit before tax and
exceptional items of £130.4 million (2021: £245.5 million), which represents
a margin of 10.1% (2021: 18.1%), is still extremely encouraging given the
context of the supply chain challenges in the period.
Overall gross margins within Sports Fashion at 49.0% are broadly consistent
with the previous year (2021: 48.8%). Within this, the combined gross margin
for the businesses in North America was 49.4% (2021: 49.7%). This is
reassuring as it means that there is no indication that this market is
returning to historic levels of promotional activity.
After recognising exceptional items in the period of £85.2 million (2021:
£74.9 million) principally relating to a net increase of £40.2 million
(2021: £59.1 million) in the fair value of the liabilities in respect of the
Group's various future put options, the profit before tax in Sports Fashion
was £296.8 million (2021: £357.2 million).
Outdoor
This has been another period of revenue growth in our Outdoor businesses with
total revenues increasing by 16.8% compared to the prior year. Whilst people
may have had more international travel options than the prior year, it is
clear that spending time outdoors more locally remains popular for many people
who recognise the physical and mental health benefits that it provides. In
particular, our businesses are seeing a strong demand for activity-based
categories such as Fishing and Cycling with the Group benefitting from its
recent investments in these areas. Further, the demand for Outdoor Living
categories to support people on their camping trips, has also remained at
elevated levels. However, the exceptionally dry and warm weather throughout
the UK through the Summer period has depressed the sale of higher price and
higher margin apparel ranges, particularly waterproofs.
We continue to invest in all of our fascias with a new Go Outdoors store
opened in Bury and the relocation of our stores in Swindon, Gateshead and
Derby. We have also opened our first two Wheelbase cycling concessions in the
Go Outdoors stores at Coventry and Stockton. In addition, we have enhanced our
position as an authoritative nationwide retailer in the fishing and equestrian
categories with Fishing Republic concessions now in more than 50 Go Outdoors
stores and Naylors Equestrian concessions in seven stores.
Financial Performance
Whilst revenues have increased the activity-based categories that have grown
deliver lower gross margins which is reflected in overall gross margins
reducing by 2.1% to 42.2% (2021: 44.3%). Consequently, the profit before
exceptional items reduced to £4.0 million (2021: £10.8 million). We firmly
believe that this reduction in profit is a consequence of the unseasonal
weather through the Summer and it is not a true reflection of the substantial
progress that we are making in this sector. Consequently, we remain confident
in our longer-term prospects and we continue to work on initiatives which
enhance the resilience of our proposition.
There were no exceptional items in the period (2021: £nil) which means that
the profit before tax in Outdoor was also £4.0 million (2021: £10.8
million).
Logistics Developments
UK and Republic of Ireland
Fitting out of the new 515,000 sqft facility in Derby, which will be used
exclusively to fulfil online orders for JD in the UK is progressing, with
fulfilment from the site expected to commence in Q1 of 2023. Approximately
£33 million has been invested at this site to date with the full cost of this
initial development expected to rise to approximately £70 million by the
middle of 2023. There is additional space at the site for a further phase of
works should that be necessary which we would expect to cost approximately a
further £21 million, although we are not committed to this yet.
To bridge the capacity gap ahead of Derby opening, Clipper Logistics Plc will
continue to provide a range of logistics operations, including warehousing and
e-fulfilment, on a temporary basis from its site at Sherburn, Leeds until
Summer 2023.
Western Europe
Construction of the 620,000 sqft facility in Heerlen, South-East Netherlands,
is ongoing with this site scheduled to be handed over later this year for
initial fitting out and operational use anticipated for mid-2024. We
anticipate incurring up to €20 million of capex at this site in the period
from handover to the end of the year with the total cost over the life of the
project to bring the site into full operational use in 2024 estimated at €95
million.
In the meantime, we have expanded our base of smaller facilities in Southern
Belgium and Northern France so that we can further increase the amount of
product which is fulfilled to locations in Western Europe both for stores and
online. Currently, approximately 90% of store deliveries and 15% of online
orders are being fulfilled out of these facilities.
North America
Our Shoe Palace business in California is also now fully operational with its
new 512,000 sqft facility in Morgan Hill, San Jose. This facility, which has
the capacity to serve approximately 400 stores was designed to exceed the
requirements under Title 24 of the California Building Standards Code with the
rooftop solar photovoltaic panels generating electricity equivalent to 96% of
the power required by the site. Having a facility of this scale on the West
Coast is clearly a significant advantage as we work towards a more integrated
logistics network in the United States.
People
It is a great testament to the strength and quality of the people at every
level in our businesses that we have been able to consistently deliver
outstanding results over a number of years. Our continued strength is
principally due to their talent, energy and commitment and we thank everybody
involved across the Group for their part in delivering these excellent
results.
We firmly believe that the continued international development of our retail
businesses provides significant personal development opportunities, both
temporary and permanent, and is a major reason why people are attracted to,
and stay with, our business. We remain committed to giving all our colleagues
a quality work experience which is challenging yet rewarding.
Régis Schultz / Kath Smith
Chief Executive Officer / Interim Chief Executive Officer
22 September 2022
Chief Financial Officer's Statement
Financial Performance
Revenue and Gross Margin
This period was the first time since 2019 that all of our businesses have
traded free from restrictions. Whilst this was a positive to revenues through
the period in many countries, particularly in Europe, this was offset by lower
revenues in the United States where the lack of fiscal stimulus to the economy
meant a return to more normal trading with our businesses not having the same
favourable conditions as the prior year.
Ultimately, total revenue for the Group for the first half increased to
£4,418.1 million (2021: £3,885.8 million). Total revenues in the Group's
organic retail businesses, being those businesses which were part of the Group
throughout the previous financial year, were 5% ahead of the prior year.
Given that stores were temporarily closed in many markets in the prior year,
it would not be meaningful to present like-for-like sales on a one-year basis.
However, it is possible to consider like-for-like sales on a three year basis,
to measure against the period before the emergence of the COVID-19 pandemic,
with revenues increasing by more than 25% over this period.
Total gross margin for the first half has remained constant at 48.5% (2021:
48.5%). Encouragingly, gross margins have largely been maintained at the prior
year levels across our businesses in North America with an overall gross
margin of 49.4% (2021: 49.7%).
Profit Before Tax
Profit before tax and exceptional items was lower than the prior period at
£383.5 million (2021: £439.5 million). However, this result is entirely
consistent with the more normalised trading patterns that the Group would
expect to see in the current year as the world emerges from the COVID-19
pandemic with up to 40% of annual profits generated in the first half of the
year.
As expected, our businesses in North America saw a reduction in profit in the
period, consequent to both the lack of fiscal stimulus and the shortage of
supply from some of the major international brands, with these businesses
delivering an aggregate profit before tax and exceptional items of £130.4
million (2021: £245.5 million). This implies that our other global businesses
increased their profit before tax and exceptional items by 30.5% to £253.1
million (2021: £194.0 million) which is a reflection of the positive progress
that the Group continues to make in its markets.
There were exceptional items in the period of £85.2 million (2021: £74.9
million) principally from the movement in the fair value of the liabilities in
respect of future put and call options:
2022 2021
£m £m
Movement in fair value of put and call options (1) 40.2 59.1
Impairment of non-current assets (2) 36.5 -
Impairment of assets held-for-sale (3) 8.5 -
Restructuring of Spodis (4) - 15.8
Total exceptional charge 85.2 74.9
1. Movement in the fair value of the liabilities in respect of the put and
call options on Genesis Topco Inc £28.7 million (2021: £65.0 million),
Iberian Sports Retail Group £16.8 million (2021: credit of £7.7 million),
Other credit of £5.3 million (2021: charge of £1.8 million). The movement in
the fair value of the put option liabilities is presented as exceptional as it
is a significant item that is outside of the normal course of business.
2. The impairment constitutes a charge of £10.2 million in respect of the
goodwill and fascia name arising in the prior year on the acquisition of Missy
Empire, £12.7 million in respect of the partial impairment of the goodwill
arising in the prior year on the acquisition of Hairburst and £13.6 million
in respect of the partial impairment of the investment in the Joint Venture,
Gym King. The impairment is presented as exceptional as it is a significant
item that is outside of the normal course of business.
3. Impairment recognised in order to present the assets held-for-sale in
respect of Footasylum Limited at the lower of carrying value and fair value
less costs to sell in accordance with IFRS 5. This item is presented as
exceptional as the divestment of Footasylum Limited is non-recurring.
4. The impact consequent to the restructuring of Spodis SA in the prior
period including a charge of £5.5 million in relation to the impairment of
tangible assets and business restructuring costs of £10.3 million. This item
is presented as exceptional as it is related to a non-recurring restructuring
project.
Group profit before tax ultimately decreased to £298.3 million (2021: £364.6
million).
Proforma Results Under IAS 17 'Leases'
On a proforma basis under IAS 17 'Leases', the headline profit before tax and
exceptional items to 30 July 2022 for the Group would have been £4.6 million
higher at £388.1 million (2021: £12.0 million higher at £451.5 million).
After exceptional items totalling £85.2 million (2021: £74.9 million), the
profit before tax on the same proforma basis would have been £302.9 million
(2021: £376.6 million).
Cash and Working Capital
The net cash balance at the end of the period was broadly consistent with the
prior year at £1,013.1 million (2021: £995.1 million).
Our capacity to generate cash in our retail operations remains as strong as
ever. However, the net cash in the period has been impacted by a general
restocking of our businesses in North America, as the supply from the
international brands normalised through the second quarter, and increased
investment in capital expenditure as we expand our geographical footprint,
further enhance the consumer proposition and upgrade our operational
infrastructure.
Net inventories across the Group at the end of the period were £1,428.5
million (2021: £996.7 million). Within this, inventories in our businesses in
North America increased to £379.7 million (2021: £207.7 million) as the flow
of product reverted to normal levels. Forward cover in our core Finish Line /
JD business at the end of the period of 13 weeks was higher than the prior
year (2021: nine weeks) but was broadly in line with the cover in the core JD
business in the UK / Europe of 12 weeks (2021: 12 weeks) with a continual
focus on robust stock management disciplines.
Gross capital expenditure* (excluding disposal costs) increased to £156.6
million (2021: £83.5 million) with the primary focus of our capital
expenditure continuing to be our physical retail fascias where spend in the
period was £81.5 million (2021: £42.0 million). Given that we expect
substantial investment on the new warehouses at Derby and Heerlen in the
second half, we would expect the overall spend through the second half to be
higher than that in the first half and would now anticipate that capital
expenditure for the full year will be in the range of £325 million to £375
million (52 weeks to 29 January 2022: £247.9 million).
Earnings per Ordinary Share
The basic earnings per ordinary share decreased by 19.4% to 3.58p (2021:
4.44p) consistent with the reduction in the Group profit before tax.
The adjusted* earnings per ordinary share decreased to 5.23p (2021: 5.83p).
Environmental and Sustainable Sourcing Update
The Group continues to make excellent progress with its environmental and
sustainable sourcing work programmes. We are pleased that our efforts are
increasingly being recognised externally with Sustainalytics, one of the
world's leading independent ESG research and analytics businesses, recently
giving JD a risk score that placed it 17(th) in a list of 458 global retail
businesses.
Elsewhere, we continue to consolidate our efforts on environmental and social
efforts into three main pillars:
· Reducing the impact of climate change
· Sustainable sourcing
· Circular economy and recycling
Progress to date this year on these pillars includes the following:
· In line with the commitment that we made in 2019, we are on track
to have 100% renewable energy use across our business in Western Europe by the
end of this year
· 'Better Cotton' usage in our private label business now stands at
98.5%
· We have implemented a new 'Environmental Performance Evaluation'
Policy and Standards with an objective to improve environmental performance in
the supply chain through an eight-stage process which is designed to support
our private label suppliers in improving the environmental standards of their
operations
· Our updated corporate website provides full disclosures and
transparency on:
o Sustainable product mapping
o Audit standards, supplier mapping, and case studies demonstrating progress
towards the United Nations Sustainable Development Goals
· Our Head Office in Bury has joined our principal warehouse at
Kingsway, Rochdale in being recognised as a 'zero waste to landfill' facility
Store Portfolio
During the period, store numbers have moved as follows:
Period Start New Stores Transfers Acquired Closures Period End
Premium Sports
UK & Republic of Ireland 436 10 - - (6) 440
Europe 377 32 22 - (3) 428
Asia Pacific 79 5 - - (2) 82
North America 931 14 - - (8) 937
1,823 61 22 - (19) 1,887
Other Fascias
UK & Republic of Ireland (i) 151 5 - 1 (11) 146
Europe 889 28 (22) - (36) 859
Asia Pacific 2 4 - - - 6
North America 289 - - - (1) 288
1,331 37 (22) 1 (48) 1,299
Total Sports Fashion 3,154 98 - 1 (67) 3,186
Total Outdoor 248 9 - - (7) 250
Total Group 3,402 107 - 1 (74) 3,436
(i) Includes 62 stores trading as Footasylum (2021: 67 stores)
which were subsequently disposed on 5 August 2022
In addition, the Group now has six JD stores operating under joint venture
arrangements with partners in Indonesia and Israel as follows:
Period Start New Stores Period End
Indonesia - 4 4
Israel - 2 2
- 6 6
After opening a further three gyms in the period, the Group had 77 gym sites
in the UK at the end of the period (66 sites trading as JD and 11 sites still
bannered as X4L). Further, following the acquisition of Total Swimming
Holdings in May 2022, the Group also had seven Swim! sites in the UK (see Note
5).
Neil Greenhalgh
Chief Financial Officer
22 September 2022
Alternative Performance Measures (terms are listed in alphabetical order)
The Directors measure the performance of the Group based on a range of
financial measures, including measures not recognised by International
Accounting Standards ('IAS') in conformity with the requirements of the
Companies Act 2006 and in accordance with UK-adopted International Accounting
Standards. These alternative performance measures may not be directly
comparable with other companies' alternative performance measures and the
Directors do not intend these to be a substitute for, or superior to, IFRS
measures. The Directors believe that these alternative performance measures
assist in providing additional useful information on the trading performance
of the Group. Alternative Performance Measures are also used to enhance the
comparability of information between reporting periods, by adjusting for
exceptional items. Exceptional items are disclosed separately when they are
considered unusual in nature and not reflective of the trading performance and
profitability of the Group. The separate reporting of exceptional items, which
are presented as exceptional within the relevant category in the Consolidated
Income Statement, helps provide an indication of the Group's trading
performance. An explanation as to why items have been classified as
Exceptional is given in Note 3.
Adjusted earnings per share
The calculation of basic earnings per share is detailed in Note 4. Adjusted
basic earnings per ordinary share has 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. A reconciliation
between basic earnings per share and adjusted earnings per share is shown
below:
26 weeks to 26 weeks to 52 weeks to
30 July 31 July 29 January
2022 2021 2022
Basic earnings per share 3.58p 4.44p 7.17p
Exceptional items 1.65p 1.45p 5.66p
Tax relating to exceptional items - (0.06p) 0.01p
Adjusted earnings per share 5.23p 5.83p 12.84p
EBITDA before exceptional items
Earnings before interest, tax, depreciation and amortisation.
26 weeks to 26 weeks to 52 weeks to
30 July 31 July 29 January
2022 2021 2022
£m £m £m
Profit for the period 216.3 276.8 459.6
Addback:
Financial expenses 35.7 32.7 67.9
Income tax expense 82.0 87.8 195.1
Depreciation, amortisation and impairment of non-current assets 309.3 274.7 593.1
Exceptional items (see note 3) 85.2 74.9 292.5
Deduct:
Financial income (1.1) (0.5) (1.4)
EBITDA before exceptional items 727.4 746.4 1,606.8
Gross capital expenditure
26 weeks to 26 weeks to 52 weeks to
30 July 31 July 29 January
2022 2021 2022
£m £m £m
Investment in software 11.0 4.5 14.9
Acquisition of property, plant and equipment 139.9 77.7 227.3
Acquisition of non-current other assets 5.7 1.3 5.7
Total gross capital expenditure 156.6 83.5 247.9
Alternative Performance Measures (continued)
LFL (Like-for-Like) sales
The percentage change in the year-on-year sales, removing the impact of new
store openings and closures in the current or previous financial year. This
metric enables the performance of the retail stores to be measured on a
consistent year-on-year basis and is a common term used in the industry.
Net cash / (debt)
Net cash / (debt) consists of cash and cash equivalents together with
interest-bearing loans and borrowings. This measure is a good indication of
the strength of the Group's Balance Sheet position and is widely used by
credit rating agencies. A reconciliation of net cash / (debt) is provided in
the Analysis of Net Cash included after the Condensed Consolidated Statement
of Cashflows.
Operating profit before exceptional items
A reconciliation between operating profit and exceptional items can be found
in the Consolidated Income Statement.
Organic retail businesses
Being those retail businesses which were subsidiaries at 30 January 2021 and
so have been consolidated throughout the whole of the previous financial year
and the period to date in the current financial year.
Profit before tax and exceptional items
A reconciliation between profit before tax and profit before tax and
exceptional items is as follows:
26 weeks to 26 weeks to 52 weeks to
30 July 31 July 29 January
2022 2021 2022
£m £m £m
Profit before tax 298.3 364.6 654.7
Exceptional items 85.2 74.9 292.5
Profit before tax and exceptional items 383.5 439.5 947.2
Proforma IAS 17
The Group presents results on a proforma basis with rents recognised under the
provisions of IAS 17 'Leases' as opposed to IFRS 16 'Leases' as this is
consistent with the financial information used to inform business decisions
and investment appraisals. Certain management incentives are also linked to
the results on this basis.
A reconciliation from the IFRS 16 headline profit before tax and exceptional
items to the proforma IAS 17 headline profit before tax and exceptional items
is as follows:
26 weeks to 26 weeks to 52 weeks to
30 July 31 July 29 January
2022 2021 2022
£m £m £m
Headline profit before tax and exceptional items (IFRS 16) 383.5 439.5 947.2
Addback:
Depreciation and impairment of the Right-of-Use assets under IFRS 16 195.2 175.3 361.3
Lease interest expense 32.1 28.8 59.5
Deduct:
Lease costs expensed to the income statement under IAS 17 (222.7) (192.1) (410.1)
Headline profit before tax and exceptional items (Proforma IAS 17) 388.1 451.5 957.9
Condensed Consolidated Income Statement
For the 26 weeks to 30 July 2022
26 weeks to 26 weeks to 52 weeks to
30 July 31 July 29 January 2022
2022 2021 £m
Note £m £m
Revenue 4,418.1 3,885.8 8,563.0
Cost of sales (2,277.5) (2,000.6) (4,355.0)
Gross profit 2,140.6 1,885.2 4,208.0
Selling and distribution expenses - normal (1,496.5) (1,206.7) (2,808.1)
Administrative expenses - normal (241.8) (220.1) (413.4)
Administrative expenses - exceptional 3 (85.2) (74.9) (292.5)
Other operating income 15.8 13.3 27.2
Operating profit 332.9 396.8 721.2
Before exceptional items 418.1 471.7 1,013.7
Exceptional items 3 (85.2) (74.9) (292.5)
Operating profit 332.9 396.8 721.2
Financial income 1.1 0.5 1.4
Financial expenses (35.7) (32.7) (67.9)
Profit before tax 298.3 364.6 654.7
Income tax expense (82.0) (87.8) (195.1)
Profit for the period 216.3 276.8 459.6
Attributable to equity holders of the parent 184.5 228.7 369.7
Attributable to non-controlling interest 31.8 48.1 89.9
Basic earnings per ordinary share* 4 3.58p 4.44p 7.17p
Diluted earnings per ordinary share* 4 3.58p 4.44p 7.17p
* Basic and diluted earnings per share have been restated for the 26 weeks to
31 July 2021 following a share sub-division in the year ended 29 January 2022.
Further details can be found in Note 4.
Condensed Consolidated Statement of Comprehensive Income
For the 26 weeks to 30 July 2022
26 weeks to 26 weeks to 52 weeks to
30 July 31 July 29 January 2022
2022 2021 £m
£m £m
459.6
Profit for the period 216.3 276.8
Other comprehensive income:
Items that may be classified subsequently to the
Consolidated Income Statement:
Exchange differences on translation of foreign operations 133.0 (33.3) (34.9)
Total other comprehensive income for the period 133.0 (33.3) (34.9)
Total comprehensive income and expense for the period (net of income tax)
349.3 243.5 424.7
Attributable to equity holders of the parent 290.6 212.8 357.3
Attributable to non-controlling interest 58.7 30.7 67.4
Condensed Consolidated Statement of Financial Position
As at 30 July 2022
As at As at As at
30 July 2022 31 July 29 January
£m
2021 2022
£m £m
Assets
Intangible assets 1,614.8 1,208.5 1,473.6
Property, plant and equipment 776.0 627.3 688.5
Right-of-use assets 2,075.1 1,963.5 2,032.6
Other assets 62.0 56.8 57.0
Investments in associates and joint ventures 42.1 59.0 56.2
Loans to associates and joint ventures 4.4 - -
Forward contract asset 3.9 - 2.5
Deferred tax assets 69.9 21.0 81.7
Total non-current assets 4,648.2 3,936.1 4,392.1
Inventories 1,428.5 996.7 989.4
Right of return assets 17.3 - 12.5
Trade and other receivables 314.7 214.7 202.9
Income tax receivables - - 0.6
Assets held-for-sale 165.7 - 157.1
Cash and cash equivalents 1,137.9 1,304.7 1,314.0
Total current assets 3,064.1 2,516.1 2,676.5
Total assets 7,712.3 6,452.2 7,068.6
Liabilities
Interest-bearing loans and borrowings (83.0) (275.3) (72.6)
Lease liabilities (395.8) (291.6) (379.0)
Trade and other payables (1,406.9) (1,243.7) (1,279.5)
Liabilities directly associated with assets held-for-sale (139.2) - (142.6)
Provisions (13.0) (0.6) (13.2)
Income tax liabilities (4.3) (5.2) -
Total current liabilities (2,042.2) (1,816.4) (1,886.9)
Interest-bearing loans and borrowings (41.8) (34.3) (55.5)
Lease liabilities (1,903.4) (1,863.4) (1,863.9)
Other payables (916.4) (493.8) (775.4)
Provisions (22.7) (4.6) (19.9)
Deferred tax liabilities (124.6) (62.0) (127.4)
Total non-current liabilities (3,008.9) (2,458.1) (2,842.1)
Total liabilities (5,051.1) (4,274.5) (4,729.0)
Total assets less total liabilities 2,661.2 2,177.7 2,339.6
Condensed Consolidated Statement of Financial Position (continued)
As at 30 July 2022
As at As at As at
30 July 31 July 29 January
2022
£m 2021 2022
£m £m
Capital and reserves
Issued ordinary share capital 2.5 2.5 2.5
Share premium 467.5 467.5 467.5
Retained earnings 2,076.8 1,769.6 1,910.6
Other reserves (359.5) (418.2) (454.6)
Total equity attributable to equity holders of the parent 2,187.3 1,821.4 1,926.0
Non-controlling interest 473.9 356.3 413.6
Total equity 2,661.2 2.177.7 2,339.6
Condensed Consolidated Statement of Changes in Equity
For the 26 weeks to 30 July 2022
Total Equity Attributable To Equity Holders
Of The Parent
Share-based Payment Reserve Foreign Currency Translation Reserve £m £m
Ordinary £m
Share Capital Share Premium £m Retained Earnings Other Equity
£m £m £m
Balance at 29 January 2022 2.5 467.5 1,910.6 (414.5) 0.1 (40.2) 1,926.0
Profit for the period - - 184.5 - - - 184.5
Other comprehensive income:
Exchange differences on translation of foreign operations - - - - - 106.1 106.1
Total other comprehensive income - - - - - 106.1 106.1
Total comprehensive income for the period - - 184.5 - - 106.1 290.6
Dividends to equity holders - - (18.3) - - - (18.3)
Put options held by non-controlling interest - - - (10.9) - - (10.9)
Share-based payment charge - - - - (0.1) - (0.1)
Non-controlling interest arising on acquisition - - - - - - -
Balance at 30 July 2022 2.5 467.5 2,076.8 (425.4) - 65.9 2,187.3
Total Equity
Attributable To Non-
Equity Holders Controlling Total
Of The Parent Interest Equity
£m £m £m
Balance at 29 January 2022 1,926.0 413.6 2,339.6
Profit for the period 184.5 31.8 216.3
Other comprehensive income:
Exchange differences on translation of foreign operations 106.1 26.9 133.0
Total other comprehensive income 106.1 26.9 133.0
Total comprehensive income for the period 290.6 58.7 349.3
Dividends to equity holders (18.3) - (18.3)
Put options held by non-controlling interest (10.9) - (10.9)
Share-based payment charge (0.1) - (0.1)
Non-controlling interest arising on acquisition - 1.6 1.6
Balance at 30 July 2022 2,187.3 473.9 2,661.2
Condensed Consolidated Statement of Changes in Equity (continued)
For the 26 weeks to 31 July 2021
Total Equity Attributable To Equity Holders
Of The Parent
Foreign Currency Translation Reserve £m £m
Ordinary
Share Capital Share Premium £m Retained Earnings Other Equity
£m £m £m
Balance at 30 January 2021 2.4 11.7 1,560.8 (308.4) (27.8) 1,238.7
Profit for the period - - 228.7 - - 228.7
Other comprehensive income:
Exchange differences on translation of foreign operations - - - - (15.9) (15.9)
Total other comprehensive income - - - - (15.9) (15.9)
Total comprehensive income for the period - - 228.7 - (15.9) 212.8
Dividends to equity holders - - (14.9) - - (14.9)
Put options held by non-controlling interest - - - (66.1) - (66.1)
Share capital issued 1 (#_ftn1) 0.1 455.8 - - - 455.9
Divestment of non-controlling interest - - (5.0) - - (5.0)
Non-controlling interest arising on acquisition - - - - - -
Balance at 31 July 2021 2.5 467.5 1,769.6 (374.5) (43.7) 1,821.4
Total Equity
Attributable To Non-
Equity Holders Controlling Total
Of The Parent Interest Equity
£m £m £m
Balance at 30 January 2021 1,238.7 257.7 1,496.4
Profit for the period 228.7 48.1 276.8
Other comprehensive income:
Exchange differences on translation of foreign operations (15.9) (17.4) (33.3)
Total other comprehensive income (15.9) (17.4) (33.3)
Total comprehensive income for the period 212.8 30.7 243.5
Dividends to equity holders (14.9) (1.8) (16.7)
Put options held by non-controlling interest (66.1) - (66.1)
Share capital issued 455.9 - 455.9
Divestment of non-controlling interest (5.0) 48.0 43.0
Non-controlling interest arising on acquisition - 21.7 21.7
Balance at 31 July 2021 1,821.4 356.3 2,177.7
Condensed Consolidated Statement of Cash Flows
For the 26 weeks ended 30 July 2022
26 weeks to 26 weeks to 52 weeks to
30 July
31 July 29 January 2022
2022
2021 £m
£m
£m
Cash flows from operating activities
Profit for the period 216.3 276.8 459.6
Income tax expense 82.0 87.8 195.1
Financial expenses 35.7 32.7 67.9
Financial income (1.1) (0.5) (1.4)
Depreciation and amortisation of non-current assets 309.1 265.1 579.9
Forex losses / (gains) on monetary assets and liabilities 9.5 (3.1) (2.1)
Impairment of other intangibles and non-current assets (non-exceptional) 0.2 9.6 13.2
Loss on disposal of non-current assets 2.2 1.5 3.5
Other exceptional items 3 48.7 69.4 287.0
Impairment of goodwill and fascia names (exceptional) 3 22.9 - -
Impairment of non-current assets (exceptional) 3 13.6 5.5 5.5
Share of profit of equity-accounted investees, net of tax (0.8) (1.4) (3.2)
Increase in inventories (401.0) (79.2) (31.8)
Increase in trade and other receivables (103.4) (62.1) (69.3)
Increase in trade and other payables 43.2 3.5 75.0
Interest paid (3.6) (3.9) (8.4)
Lease interest (32.1) (28.8) (59.5)
Income taxes paid (71.6) (111.0) (244.1)
169.8 461.9
Net cash from operating activities 1,266.9
Cash flows from investing activities
Interest received 1.1 0.5 1.4
Proceeds from sale of non-current assets 4.5 2.4 7.8
Investment in software (11.0) (4.5) (14.9)
Acquisition of property, plant and equipment (139.9) (77.7) (227.3)
Acquisition of non-current other assets (5.7) (1.3) (5.7)
Acquisition of other intangible assets (76.2) - (5.2)
Draw down of brand licence liability 76.2 - -
Draw down of finance lease liabilities 4.1 1.5 5.4
Dividends received from equity-accounted investees 3.0 - 6.9
Acquisition of subsidiaries, net of cash acquired (11.6) (375.1) (616.5)
(155.5) (454.2)
Net cash used in investing activities (848.1)
Cash flows from financing activities
Repayment of interest-bearing loans and borrowings (21.7) (207.5) (513.3)
Draw down of interest-bearing loans and borrowings 12.5 176.3 303.7
Repayment of finance lease liabilities (2.8) (2.5) (6.1)
Repayment of lease liabilities (191.0) (163.2) (350.1)
Proceeds received from issue of shares - 455.9 455.9
Divestment of non-controlling interests - 43.0 43.0
Equity dividends paid - - (14.9)
Dividends paid to non-controlling interest in subsidiaries (0.2) (1.8) (1.8)
Net cash (used in) / provided by financing activities (203.2) 300.2 (83.6)
Condensed Consolidated Statement of Cash Flows (continued)
For the 26 weeks ended 30 July 2022
26 weeks to 30 July 26 weeks to 52 weeks to
2022 31 July 29 January 2022
£m 2021 £m
£m
Net (decrease) / increase in cash and cash equivalents (188.9) 307.9 335.2
1,280.4 948.7
Cash and cash equivalents at the beginning of the period
948.7
Foreign exchange gains / (losses) on cash and cash equivalents 4.6 2.4
(3.5)
1,096.1 1,259.0
Cash and cash equivalents at the end of the period 1,280.4
Analysis of Net Cash
As at 30 July 2022
At On At
29 January acquisition of subsidiaries Non-cash movements £m 30 July
2022 £m Cash flow 2022
£m £m £m
Cash at bank and in hand 1,314.0 1.1 (181.8) 4.6 1,137.9
Overdrafts (33.6) - (8.2) - (41.8)
Cash and cash equivalents 1,280.4 1.1 (190.0) 4.6 1,096.1
Interest-bearing loans and borrowings:
Bank loans (94.5) - 9.2 2.3 (83.0)
Net cash / (financial debt) before lease liabilities 1,185.9 1.1 (180.8) 6.9 1,013.1
Lease liabilities (2,242.9) (6.7) 189.7 (239.3) (2,299.2)
Net cash / (debt) (1,057.0) (5.6) 8.9 (232.4) (1,286.1)
1. Basis of Preparation
JD Sports Fashion Plc (the 'Company') is a company incorporated and domiciled
in the United Kingdom. The unaudited half year financial report for the 26
week period to 30 July 2022 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 22
September 2022.
The condensed set of financial statements included in this half year financial
report has been prepared in accordance with IAS 34 'Interim Financial
Reporting'. The annual financial statements of the Group are prepared in
accordance with International Accounting Standards ('IAS') in conformity with
the requirements of the Companies Act 2006 and in accordance with UK-adopted
International Accounting Standards. The comparative figures for the 52 week
period to 29 January 2022 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 30 July 2022 and 31 July 2021 has been reviewed and the independent
review report for the 26 week period to 30 July 2022 is set out in the half
year 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 29 January 2022.
Adoption of New and Revised Standards
The Group continues to monitor the potential impact of other new standards and
interpretations which have been or may be endorsed and require adoption by the
Group in future reporting periods. 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.
Alternative Performance Measures
The Directors measure the performance of the Group based on a range of
financial measures, including measures not recognised by International
Accounting Standards ('IAS') in conformity with the requirements of the
Companies Act 2006. These alternative performance measures may not be directly
comparable with other companies' alternative performance measures and the
Directors do not intend these to be a substitute for, or superior to, IFRS
measures. The Directors believe that these alternative performance measures
assist in providing additional useful information on the trading performance
of the Group.
Alternative Performance Measures are also used to enhance the comparability of
information between reporting periods, by adjusting for exceptional items.
Exceptional items are disclosed separately when they are considered unusual in
nature and not reflective of the trading performance and profitability of the
Group. The separate reporting of exceptional items, which are presented as
exceptional within the relevant category in the Consolidated Income Statement,
helps provide an indication of the Group's trading performance. An explanation
as to why items have been classified as Exceptional is given in Note 3.
1. Basis of Preparation (continued)
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 29 January 2022 with the exception of the estimation uncertainty relating
to the determination of the fair value of assets and liabilities on the
acquisition of DTLR which was applicable to the 52 week period to 29 January
2022.
Other Accounting Estimates
Impairment of Goodwill
Goodwill arising on acquisition is allocated to groups of cash-generating
units ('Group CGUs'), that are expected to benefit from the synergies of the
business combination from which goodwill arose, being portfolios of stores or
individual businesses. The cash-generating units used to monitor goodwill and
test it for impairment are therefore the store portfolios and individual
businesses rather than individual stores, as the cash flows of individual
stores are not considered to be independent. These cash-generating units are
referred to as Group CGUs. The recoverable amounts of these Group CGUs are
determined based on value-in-use calculations.
Shoe Palace CGU £593.3 million (29 January 2022: £546.7 million)
The value-in-use calculation shows headroom of £60.3 million (January 2022:
£39.9 million). Marginal changes to the assumptions could eliminate the
headroom and cause the carrying value of the Group CGU to exceed its
recoverable amount. The following further sensitivities were performed which
were considered to be reasonably possible changes in the key assumptions:
· -If the pre-tax discount rate increased by 1% with all other
assumptions remaining unchanged, this would result in an impairment of £6.6
million representing 1.1% of the carrying value of the Group CGU (January
2022: £19.2 million representing 3.5% of the carrying value of the Group
CGU).
· Reducing the short-term and long-term growth rate by 1% with all
other assumptions remaining unchanged would result in an impairment of £5.2
million representing 0.9% of the carrying value of the Group CGU (January
2022: £18.1 million representing 3.3% of the carrying value of the Group
CGU).
· Reducing the forecast gross profit margin rate by 1% with all
other assumptions remaining unchanged would not result in an impairment but
would reduce the headroom to £24.8 million representing 4.2% of the carrying
value of the Group CGU (January 2022: £8.1 million representing 1.5% of the
carrying value of the Group CGU).
Deporvillage CGU £148.9 million (29 January 2022: £136.4 million)
Deporvillage was acquired on 3 August 2021. A value-in-use calculation
prepared for the period ended 30 July 2022 which shows headroom of £1.5
million. Marginal changes to the assumptions could eliminate the headroom and
cause the carrying value of the Group CGU to exceed its recoverable amount.
The following further sensitivities were performed which were considered to be
reasonably possible changes in the key assumptions:
· If the pre-tax discount rate increased by 1% with all other
assumptions remaining unchanged, this would result in an impairment of £16.4
million representing 11.0% of the carrying value of the Group CGU.
· Reducing the short-term growth rate by 5% and the long-term
growth rate by 1% with all other assumptions remaining unchanged would result
in an impairment of £30.4 million representing 20.4% of the carrying value of
the Group CGU.
· Reducing the forecast gross profit margin rate by 1% with all
other assumptions remaining unchanged would result in an impairment of £17.7
million representing 11.9% of the carrying value of the Group CGU.
As disclosed above, whilst the value-in-use calculations do not currently
calculate an impairment, the models are sensitive to changes in the
assumptions and will be updated as part of the annual impairment review for
the financial period ending 28 January 2023.
1. Basis of Preparation (continued)
Risks and Uncertainties
The Board has considered the risks and uncertainties for the remaining 26 week
period to 28 January 2023 and determined that the risks presented in the
Annual Report and Accounts 2022 noted below, remain relevant:
· Strategic risk
· Supply chain
· Intellectual property
· Environmental
· Social - human rights, labour standards and responsibility
· Health and safety
· Governance - anti-corruption, risk management, regulatory and
compliance
· Retail property factors
· IT systems
· Cyber security
· COVID-19
· Personnel
· Treasury and financial
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
Chair's statement included within this half year financial report.
Going Concern
The financial statements are prepared on a going concern basis, which the
Directors believe to be appropriate for the following reasons.
At 30 July 2022, the Group had net cash balances of £1,013.1 million (29
January 2022: £1,185.9 million) with available committed UK borrowing
facilities of £700 million (29 January 2022: £700 million) of which £nil
(29 January 2022: £nil) has been drawn down and US facilities of
approximately $300 million of which $nil was drawn down (29 January 2022:
$nil). These facilities are subject to certain covenants. With a UK facility
of £700 million available up to 6 November 2026 and a US facility of
approximately $300 million available up until 24 September 2026, the Directors
believe that the Group is well placed to manage its business risks
successfully despite the current uncertain economic outlook.
The Directors have prepared cash flow forecasts for the Group covering a
period of at least 12 months from the date of approval of these financial
statements, which indicate that the Group will be able to operate within the
level of its agreed facilities and covenant compliance. The Directors have
prepared severe but plausible downside scenarios which cover the same period
as the base case, including specific consideration of a range of impacts that
could arise from geopolitical tensions and the actual and potential impact on
supply chains, inflationary cost pressures and business interruption impacting
the availability of stock from the Group's key Sports Fashion suppliers, as
well as the recovery from the COVID-19 pandemic. These scenarios included
applying inflationary cost pressure assumptions and a 20% reduction in sales.
As part of this analysis, mitigating actions within the Group's control,
should these severe but plausible scenarios occur, have also been considered.
These forecast cash flows indicate that there remains sufficient headroom for
the Group to operate within the committed facilities and to comply with all
relevant banking covenants during the forecast period.
The Directors have considered all of the factors noted above, including the
inherent uncertainty in forecasting the impact of geopolitical tensions and
COVID-19 pandemic, and are confident that the Group has adequate resources to
continue to meet all liabilities as and when they fall due for a period of at
least 12 months from the date of approval of these financial statements.
Accordingly, the financial statements have been prepared on a going concern
basis.
Other Accounting Policies
Government Support
Government support is recognised in the Consolidated Financial Statements when
it can be reliably measured, which the Group considers to be on receipt.
During the year ended 29 January 2022, in accordance with IAS 20 'Government
Grants', furlough income received by the Group's UK subsidiaries of £24.4
million (26 week period ended 31 July 2021: £24.4 million) and £7.5 million
received by the Group's international subsidiaries (26 week period ended 31
July 2021: £5.5 million) was shown as a deduction from employed staff costs.
Further, £31.0 million of rates relief received by the Group's UK
subsidiaries has been shown as a deduction from selling and distribution costs
(26 week period ended 31 July 2021: £28.3 million).
During the period ended 30 July 2022, the Group repaid the £24.4 million of
furlough income that it received from the UK Government in the year ended 29
January 2022. The repayment was accrued for as at 29 January 2022 and was
shown as an expense within employed staff costs in that financial year.
2. Segmental Analysis
IFRS 8 'Operating Segments' requires the Group's 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 Chair
of JD Sports Fashion Plc.
Information reported to the Chief Operating Decision Maker is focused on the
nature of the businesses within the Group.
The Group's operating and reportable segments under IFRS 8 are Sports Fashion
and Outdoor. In accordance with IFRS 8.12, we have aggregated several
operating segments with similar economic characteristics into a larger Sports
Fashion operating segment and concluded that, in doing so, the aggregation is
still consistent with the core principles of IFRS 8.
When aggregating the operating segments into the larger Sports Fashion
operating segment, we have primarily taken into consideration:
- IFRS 8.12.a the nature of products or services;
- IFRS 8.12.c type or class of customer; and
- IFRS 8.12.d the methods used to distribute their products.
The entities included in the Sports Fashion operating segment have similar
characteristics as well-established, leading
retailers or wholesalers of footwear, apparel and accessories from a mix of
international sports fashion brands and private labels. When determining what
to include within the Sports Fashion segment, we have considered that the
fascias all target a similar demographic in terms of both age range and an
aspiration to achieve a certain style, whether the product is to be used for
lifestyle wear or active sports participation. The entities typically have
similar economic characteristics in terms of sales metrics, long-term average
gross margins, levels of capital investment and operating cash flows. The
Outdoor segment differs from the Sports Fashion segment in that Outdoor is
focused on retailing specialist apparel, footwear and technical products for
outdoor pursuits. Further, the Outdoor segment typically appeals to an older
and/or family-oriented demographic as compared with the younger and more
style-focused demographic targeted by the Sports Fashion businesses.
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 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
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.
The Board considers that certain items are cross-divisional in nature and
cannot be allocated between the segments on a meaningful basis. Certain 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 £nil (2021: £176.3
million), a deferred tax asset of £69.9 million (2021: £21.0 million), a
deferred tax liability of £124.6 million (2021: £62.0 million) and an income
tax liability of £4.3 million (2021: £5.2 million) 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 draw 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. Inter-segment transactions are undertaken in
the ordinary course of business on arm's length terms.
2. Segmental Analysis (continued)
Business Segments
Information regarding the Group's operating segments for the 26 weeks to 30
July 2022 is reported below:
Income statement
Sports
Fashion Outdoor Unallocated Total
£m £m £m £m
Revenue 4,143.4 274.7 - 4,418.1
Operating profit before exceptional items 412.7 5.4 - 418.1
Exceptional items (85.2) - - (85.2)
Operating profit 327.5 5.4 - 332.9
Financial income - - 1.1 1.1
Financial expenses (30.7) (1.4) (3.6) (35.7)
Profit / (loss) before tax 296.8 4.0 (2.5) 298.3
Income tax expense (82.0)
Profit for the period 216.3
Total assets and liabilities
Sports Fashion Outdoor Unallocated Eliminations Total
£m £m £m £m £m
Total assets 7,195.6 483.1 69.9 (36.3) 7,712.3
Total liabilities (4,690.9) (267.6) (128.9) 36.3 (5,051.1)
Total segment net assets / (liabilities) 2,504.7 215.5 (59.0) - 2,661.2
2. Segmental Analysis (continued)
The comparative segmental results for the 26 weeks to 31 July 2021 are as
follows:
Income statement
Sports
Fashion Outdoor Unallocated Total
£m £m £m £m
Revenue 3,650.6 235.2 - 3,885.8
Operating profit before exceptional items 459.8 11.9 - 471.7
Exceptional items (74.9) - - (74.9)
Operating profit 384.9 11.9 - 396.8
Financial income - - 0.5 0.5
Financial expenses (27.7) (1.1) (3.9) (32.7)
Profit / (loss) before tax 357.2 10.8 (3.4) 364.6
Income tax expense (87.8)
Profit for the period 276.8
Total assets and liabilities
Sports Fashion Outdoor Unallocated Eliminations Total
£m £m £m £m £m
Total assets 6,201.1 375.7 21.0 (145.6) 6,452.2
Total liabilities (3,824.8) (351.8) (243.5) 145.6 (4,274.5)
Total segment net assets / (liabilities) 2,376.3 23.9 (222.5) - 2,177.7
2. Segmental Analysis (continued)
Geographical Information
The Group's operations are located in the UK, Australia, Austria, Belgium,
Bosnia and Herzegovina, Bulgaria, Canada, Croatia, Cyprus, Czech Republic,
Denmark, Dubai, Estonia, Finland, France, Germany, Greece, Hong Kong, Hungary,
India, Indonesia, Israel, Italy, Latvia, Lithuania, Malaysia, the Netherlands,
New Zealand, Poland, Portugal, the Republic of Ireland ('ROI'), Romania,
Serbia, Singapore, Slovakia, Slovenia, South Korea, Spain and the Canary
Islands, Sweden, Thailand and the US.
Revenue analysis
The following table provides analysis of the Group's revenue by geographical
market, irrespective of the origin of the goods / services:
26 weeks to 26 weeks to
30 July 31 July
2022 2021
£m £m
UK & ROI 1,748.0 1,458.9
Europe 1,152.5 908.0
North America 1,300.4 1,357.3
Rest of world 217.2 161.6
4,418.1 3,885.8
The revenue from any individual country, with the exception of the UK and the
US, is not more than 10% of the Group's total revenue.
The following table provides analysis of the Group's revenue by product type:
26 weeks to 26 weeks to
30 July 31 July
2022 2021
£m £m
Footwear 2,397.3 2,255.2
Apparel 1,533.1 1,311.6
Accessories 270.0 176.7
Other 217.7 142.3
4,418.1 3,885.8
The following is an analysis of the carrying amount of segmental non-current
assets by the geographical area in which the assets are located. Taxation is
treated as unallocated, reflecting the nature of the Group's tax group.
26 weeks to 26 weeks to
30 July 31 July
2022 2021
£m £m
UK & ROI 1,296.1 1,111.2
Europe 1,373.7 1,135.0
North America 1,758.8 1,553.2
Rest of world 149.7 115.7
Unallocated 69.9 21.0
4,648.2 3,936.1
3. Exceptional Items
The Group exercises judgement in assessing whether items should be classified
as exceptional. This assessment covers the nature of the item, cause of
occurrence and scale of impact of that item on the reported performance. In
determining whether an item should be presented as exceptional, the Group
considers items which are significant because of either their size or their
nature, and which are non-recurring. In order for an item to be presented as
exceptional, it should typically meet at least one of the following criteria:
- It is a significant item, which may cross more than one accounting period.
- It has been directly incurred as a result of either an acquisition or a
divestment, or arises from a major business change or restructuring programme.
- It is unusual in nature or outside the normal course of business.
The separate reporting of items, which are presented as exceptional within the
relevant category in the Consolidated Income Statement, helps provide an
indication of the Group's trading performance in the normal course of
business.
26 weeks to 26 weeks to 52 weeks to
30 July 31 July 29 January
2022 2021 2022
£m £m £m
Movement in fair value of put and call options (1) 40.2 59.1 292.7
Impairment of non-current assets (2) 36.5 - -
Impairment of assets held-for-sale (3) 8.5 - -
Restructuring of Spodis (4) - 15.8 16.4
Insurance settlement for DTLR (5) - - (16.6)
Administrative expenses - exceptional 85.2 74.9 292.5
(1) Movement in the fair value of the liabilities in respect of the put and
call options on Genesis Topco Inc £28.7 million (2021: £65.0 million),
Iberian Sports Retail Group £16.8 million (2021: credit of £7.7 million),
Other credit of £5.3 million (2021: charge of £1.8 million). The movement in
the fair value of the put option liabilities is presented as exceptional as it
is a significant item that is outside of the normal course of business.
(2) The impairment constitutes a charge of £10.2 million in respect of the
goodwill and fascia name arising in the prior year on the acquisition of Missy
Empire, £12.7 million in respect of the partial impairment of the goodwill
arising in the prior year on the acquisition of Hairburst and £13.6 million
in respect of the partial impairment of the investment in the Joint Venture,
Gym King. The impairment is presented as exceptional as it is a significant
item that is outside of the normal course of business.
(3) Impairment recognised in order to present the Footasylum assets
held-for-sale at the lower of carrying value and fair value less costs to sell
in accordance with IFRS 5. This item is presented as exceptional as it is
related to a non-recurring divestment of a subsidiary.
(4) The impact consequent to the restructuring of Spodis SA in the prior
period including a charge of £5.5 million in relation to the impairment of
tangible assets and business restructuring costs of £10.3 million (29 January
2022: £10.9 million). This item is presented as exceptional as it is related
to a non-recurring restructuring project.
(5) Insurance settlement proceeds related to a pre-acquisition claim for
business interruption by DTLR Villa LLC. As the claim was a contingent asset
at the date of acquisition, this was not recognised in the assets acquired in
the fair value table noted in Note 5. These insurance proceeds are presented
as exceptional as they are unusual in nature and are outside of the normal
course of business.
4. Earnings per Ordinary Share
Basic and Adjusted Earnings per Ordinary Share
On 3 February 2021, JD Sports Fashion Plc completed the placing of new
ordinary shares in the capital of the Company. A total of 58,393,989 new
ordinary shares were issued, increasing the total ordinary shares in issue to
1,031,627,149. The shares were placed at an issue price of 795 pence per share
with a par value of 25 pence leading to share capital of £0.1 million and
share premium of £455.8 million being recognised on issue (this is net of
£8.3 million of costs incurred).
Following an ordinary resolution on 30 November 2021, a share split occurred
whereby five 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 calculation of basic earnings per ordinary share at 30 July 2022 is based
on the profit for the period attributable to equity holders of the parent of
£184.5 million (26 weeks to 31 July 2021: £228.7 million; 52 weeks to 29
January 2022: £369.7 million) and a weighted average number of ordinary
shares outstanding during the 26 week period ended 30 July 2022 of
5,158,135,745 (26 weeks to 31 July 2021 of 5,158,135,745 restated; 52 weeks to
29 January 2022 of 5,158,135,745).
Adjusted basic 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 26 weeks to 52 weeks to
30 July 31 July 29 January
2022 2021 2022
Number Number Number
millions millions millions
Issued ordinary shares at beginning of period (restated) 5,158.1 4,866.2 4,866.2
Ordinary shares issued on 3 February 2021 (restated) - 291.9 291.9
Issued ordinary shares at end of period 5,158.1 5,158.1 5,158.1
26 weeks to 26 weeks to 52 weeks to
30 July 31 July 29 January
2022 2021 2022
Note £m £m £m
Profit for the period attributable to equity holders of the parent 184.5 228.7 369.7
Exceptional items 3 85.2 74.9 292.5
Tax relating to exceptional items (0.1) (3.0) 0.3
Profit for the period attributable to equity holders of the parent excluding
exceptional items
269.6 300.6 662.5
Basic earnings per ordinary share (restated) 3.58p 4.44p 7.17p
Adjusted earnings per ordinary share (restated) 5.23p 5.83p 12.84p
4. Earnings per Ordinary Share (continued)
Diluted Earnings per Ordinary Share
Diluted earnings per ordinary share is 3.58p (31 July 2021: 4.44p restated, 29
January 2022: 7.17p). Diluted adjusted earnings per share is 5.23p (31 July
2021: 5.83p restated, 29 January 2022: 12.84p).
The calculation of diluted earnings per ordinary share at 30 July 2022 is
based on the profit for the period attributable to equity holders of the
parent of £184.5 million (26 weeks to 31 July 2021: £228.7 million; 52 weeks
to 29 January
2022: £369.7 million) and a weighted average number of ordinary shares
outstanding during the period after adjusting for the effects of all dilutive
potential ordinary shares calculated as follows:
26 weeks to 26 weeks to 52 weeks to
30 July 31 July 29 January
2022 2021 2022
Number Number Number
millions millions millions
Issued ordinary shares at end of period (restated) 5,158.2 5,158.1 5,158.1
Shares granted on 20 October 2021 under the JD Sports Fashion Plc LTIP 2021 - - 0.1
Issued ordinary shares at end of period 5,158.2 5,158.1 5,158.2
5. Acquisitions
Current Period Acquisitions - Non-Significant Acquisitions
Total Swimming Holdings Ltd
On 27 May 2022, JD Sports Fashion Plc completed, via its existing subsidiary
JD Sports Gyms Limited, the acquisition of 60% of the issued share capital of
Total Swimming Holdings Limited for an initial cash consideration of £11.1
million. Total Swimming Holdings was founded by former Olympic swimmers Steve
Parry, Rebecca Adlington and Adrian Turner to make swimming more accessible
and includes Swim!, the first multi-site operator of dedicated children's
'learn to swim' centres in the UK. The acquisition provides a broadening of
the Group's leisure interests, which now includes gyms and pools. Additional
deferred contingent consideration of up to £4.0 million is payable if certain
targets and performance criteria are achieved. The fair value of the
contingent consideration as at the acquisition date and as at 30 July 2022 was
determined to be £3.5 million.
Put and call options, to enable future exit opportunities for the management
team, have also been agreed and become exercisable from 2026 onwards. We
assessed the substance of the put option agreement, taking into account the
management leaver terms, and concluded that an element of the future option
payment is linked to continued future service and will be expensed on a
straight-line basis over the service period. A valuation of the remaining put
option liability has been performed using an earnings multiple, a suitable
discount rate and approved forecasts, and the initial liability of £4.2
million has been recognised with the corresponding entry to Other Equity in
accordance with the present value method of accounting. These options are
required to be fair valued at each accounting period date.
Included within the provisional fair value of the net identifiable assets on
acquisition is an intangible asset of £5.5 million representing the fascia
names acquired on acquisition and £1.1 million representing the customer
relationships. The Board believes that the excess of consideration paid over
net assets on acquisition of £12.4 million is best considered as goodwill on
acquisition representing the market position of the business, the assembled
workforce and the potential future growth opportunities from opening new sites
under the Swim! concept.
Included in the 26 week period ended 30 July 2022 is revenue of £3.2 million
and a profit before tax of £0.3 million in respect of Total Swimming
Holdings.
Other Acquisitions
During the period, the Group made one other small acquisition which was not
material.
5. Acquisitions (continued)
Current Period Acquisitions - Non-Significant Acquisitions (continued)
The aggregate impact of the non-significant acquisitions in the current period
is as follows, with further detail provided in the narrative on the previous
page:
Fair values acquired
£m
Acquiree's net assets at acquisition date:
Intangible assets 6.6
Property, plant & equipment 5.1
Right-of-use assets 6.7
Inventories 0.4
Cash and cash equivalents 1.1
Trade and other receivables 3.3
Trade and other payables (7.1)
Bank loans and overdrafts (3.8)
Deferred tax liability (1.6)
Lease liabilities (6.7)
Provisions (0.5)
Net identifiable assets 3.5
Non-controlling interest (various) (1.4)
Goodwill on acquisition 12.5
Consideration - satisfied in cash 11.1
Consideration - deferred 3.5
Total consideration 14.6
Full Year Impact of Acquisitions
Had the acquisitions of the entities acquired been effected at 30 January
2022, the revenue and profit before tax of the Group for the 26 week period to
30 July 2022 would have been £4.4 billion and £297.6 million respectively.
Acquisition Costs
Acquisition related costs amounting to £0.1 million 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.
5. Acquisitions (continued)
Prior Period Acquisitions - Significant
DTLR Villa LLC
Initial acquisition
On 17 March 2021, JD Sports Fashion Plc ('JD') acquired 100% of the issued
share capital of DTLR Villa LLC, via a wholly owned intermediate holding
company in the US. Total cash consideration was £305.2 million, split between
£117.9 million debt funding and £187.3 million equity funding. DTLR is based
in Baltimore, Maryland and is a hyperlocal athletic footwear and apparel
streetwear retailer operating from 247 stores across 19 states on acquisition.
The acquisition of DTLR, with its differentiated consumer proposition, will
enhance the Group's neighbourhood presence in the North and East of the US.
The existing DTLR management team has also reinvested a portion of its
proceeds back into DTLR in exchange for a new minority stake of 1.5%. Put and
call options, to enable future exit opportunities for the management team,
have also been agreed and become exercisable after a minimum period of three
years. A valuation of these put options has been performed using an earnings
multiple, a suitable discount rate and approved forecasts, and the initial
liability of £4.2 million was recognised with the corresponding entry to
Other Equity in accordance with the present value method of accounting. These
options are required to be fair valued at each accounting period date.
Included within the fair value of the net identifiable assets on acquisition
is an intangible asset of £101.6 million representing the DTLR fascia name
and an intangible asset of £3.8 million representing the customer
relationships arising from the loyalty scheme in place. The Board believes
that the excess of consideration paid over net assets on acquisition of
£212.0 million is best considered as goodwill on acquisition representing
future operating synergies.
The goodwill calculation is summarised on the next page. As at the date of
this report, the period in which measurement adjustments could be made has now
closed on this acquisition and no further fair value measurement adjustments
have been made.
Subsequent intra-group transfer
On 2 July 2021, JD completed the transfer of the intermediate Parent Company
and DTLR to Genesis Topco Inc ('Genesis'), which is an existing 80.0%
subsidiary based in the US and Parent Company of the sub-group which contains
Finish Line Inc. and the Shoe Palace Corporation. It was always the intention
for DTLR to be part of the Genesis sub-group, but the requirement for speed
and certainty of execution on the original transaction meant that it was more
appropriate for the Group to initially acquire DTLR directly. This transfer to
Genesis now brings all of the Group's businesses in the US into one sub-group,
which will enhance the future operational collaboration between them. However,
as the parent to Genesis, JD will continue to make strategic decisions
regarding the Company's future. The consideration payable by Genesis to JD in
relation to the transfer was the same as the total consideration paid by JD on
the original acquisition.
By virtue of the fact that JD only owns 80% of Genesis, JD effectively
disposed of a proportion of its investment in DTLR to the four Mersho Brothers
('the Mershos') who, with their 20% aggregate shareholding in Genesis, are
jointly a related party of JD. In order to maintain their shareholding in
Genesis at the current level, the Mershos invested their pro-rata element of
the equity consideration of $52.0 million into Genesis. This transfer took
place on an arm's length basis and reflects the net assets acquired as at the
original acquisition date of 17 March 2021.
5. Acquisitions (continued)
Prior Period Acquisitions - Significant (continued)
DTLR Villa LLC (continued)
Book value Measurement Fair value at
£m adjustments 17 March 2021
£m £m
Acquiree's net assets at acquisition date:
Intangible assets 43.7 62.9 106.6
Property, plant & equipment 53.7 (4.4) 49.3
Other non-current assets 0.5 (0.2) 0.3
Right-of-use assets - 139.9 139.9
Inventories 40.3 - 40.3
Cash and cash equivalents 95.2 - 95.2
Trade and other receivables 7.6 (3.3) 4.3
Income tax asset 0.4 - 0.4
Trade and other payables (37.6) (0.9) (38.5)
Bank loans and overdrafts (140.2) - (140.2)
Deferred tax liability (3.3) (21.2) (24.5)
Lease liabilities (11.8) (128.1) (139.9)
Net identifiable assets 48.5 44.7 93.2
Goodwill on acquisition 212.0
Total consideration 305.2
Included in the 52 week period ended 29 January 2022 was revenue of £382.8
million and a profit before tax of £63.9 million in respect of DTLR.
5. Acquisitions (continued)
Prior Period Acquisitions - Significant (continued)
Marketing Investment Group S.A.
On 30 April 2021, JD Sports Fashion Plc acquired 60% of the issued share
capital of Marketing Investment Group S.A. ('MIG') for total consideration of
£66.0 million. Total consideration comprised cash consideration of £63.6
million and £2.4 million of deferred consideration that is subject to
customary closing conditions and expected to be paid in 2022.
MIG operated 410 stores on acquisition along with the associated trading
websites in nine countries in Central and Eastern Europe. The acquisition of
MIG provided the platform to develop the JD fascia in Central and Eastern
Europe. The MIG team has been instrumental in the opening of the first JD
stores in Eastern Europe with stores in Poland, Romania and Hungary. We would
anticipate further openings for the JD fascia across Eastern Europe although
events in Ukraine do drive some caution.
Put and call options to enable future exit opportunities for the 40%
shareholders have also been agreed and become
exercisable after the year ending January 2025. A valuation of these put
options has been performed using an earnings multiple, a suitable discount
rate and approved forecasts, and the initial liability of £50.2 million was
recognised with the corresponding entry to Other Equity in accordance with the
present value method of accounting. These options are required to be fair
valued at each accounting period date.
Included within the fair value of the net identifiable assets on acquisition
is an intangible asset of £25.1 million representing the Sizeer fascia name
and an intangible asset of £4.1 million representing the 50 Style fascia
name. The Board believes that the excess of consideration paid over net assets
on acquisition of £41.4 million is best considered as goodwill on acquisition
representing future operating synergies. As at the date of this report, the
period in which measurement adjustments could be made has now closed on this
acquisition and no further fair value measurement adjustments have been made.
The goodwill calculation is summarised below:
Book value Measurement Fair value at
£m adjustments 30 April 2021
£m £m
Acquiree's net assets at acquisition date:
Intangible assets 2.6 29.2 31.8
Property, plant & equipment 16.6 - 16.6
Other non-current assets 1.1 - 1.1
Right-of-use assets - 66.2 66.2
Inventories 69.1 (1.9) 67.2
Cash and cash equivalents 6.5 - 6.5
Trade and other receivables 4.9 1.1 6.0
Income tax asset 0.1 - 0.1
Trade and other payables (58.6) 1.7 (56.9)
Bank loans and overdrafts (27.0) - (27.0)
Deferred tax asset / (liability) 1.0 (5.5) (4.5)
Lease liabilities - (66.2) (66.2)
Net identifiable assets 16.3 24.6 40.9
Non-controlling interest (40%) (6.5) (9.8) (16.3)
Goodwill on acquisition 41.4
Consideration - satisfied in cash 63.6
Consideration - deferred 2.4
Total consideration 66.0
Included in the 52 week period ended 29 January 2022 was revenue of £175.0
million and a profit before tax of £6.0 million in respect of MIG.
5. Acquisitions (continued)
Prior Period Acquisitions - Significant (continued)
Deporvillage S.L.
On 25 June 2021, Iberian Sports Retail Group S.L. ('ISRG'), the Group's
existing intermediate holding company in Spain, exchanged contracts on the
conditional acquisition of Deporvillage S.L. ('Deporvillage'), which is based
in Manresa, Catalonia. ISRG is a leading operator in the sporting goods market
across Iberia through its Sprinter and Sport Zone fascias with the acquisition
of Deporvillage, an online retailer of specialist sports equipment with
country specific websites in six European countries, giving additional depth
and expertise in the key categories of cycling, running and outdoor. The
transaction was subject to certain conditions, principally relating to
anti-trust clearance, with formal completion taking place on 3 August 2021.
Total maximum cash consideration for the acquisition of an initial 80% holding
was £119.6 million of which a maximum of £34.5 million was deferred and
contingent on achieving certain future performance criteria. As at the date of
the acquisition and the January 2022 year-end, the fair value of the
contingent consideration was determined to be £19.0 million. This was
subsequently paid in July 2022.
Put and call options to enable future exit opportunities for the 20%
shareholders have also been agreed and become exercisable from 2024 onwards. A
valuation of these put options has been performed using an earnings multiple,
a suitable discount rate and approved forecasts, and the initial liability of
£11.2 million was recognised with the corresponding entry to Other Equity in
accordance with the present value method of accounting. These options are
required to be fair valued at each accounting period date.
Included within the fair value of the net identifiable assets on acquisition
is an intangible asset of £38.8 million representing the Deporvillage online
fascia name and an intangible asset of £8.7 million representing the fair
value of the customer base. The Board believes that the excess of
consideration paid over net assets on acquisition of £70.4 million is best
considered as goodwill on acquisition representing future operating synergies.
As at the date of this report, the period in which measurement adjustments
could be made has now closed on this acquisition and no further fair value
measurement adjustments have been made. The goodwill calculation is summarised
below:
Book value Measurement Fair value at
£m adjustments 3 August 2021
£m £m
Acquiree's net assets at acquisition date:
Intangible assets 0.9 48.4 49.3
Property, plant & equipment 0.3 - 0.3
Right-of-use assets - 1.1 1.1
Inventories 28.6 - 28.6
Cash and cash equivalents 2.4 - 2.4
Trade and other receivables 4.7 - 4.7
Trade and other payables (29.3) - (29.3)
Bank loans and overdrafts (1.3) - (1.3)
Income tax liability (1.0) - (1.0)
Deferred tax asset / (liability) 0.6 (12.1) (11.5)
Lease liabilities - (1.1) (1.1)
Net identifiable assets 5.9 36.3 42.2
Non-controlling interest (20%) (1.2) (7.3) (8.5)
Goodwill on acquisition 70.4
Consideration - satisfied in cash 85.1
Consideration - deferred (settled in cash - July 2022) 19.0
Total consideration 104.1
Included in the 52 week period ended 29 January 2022 was revenue of £67.8
million and a profit before tax of £2.5 million in respect of Deporvillage.
5. Acquisitions (continued)
Prior Period Acquisitions - Significant (continued)
Cosmos Sport S.A.
On 21 October 2021, the Group acquired 80% of the issued share capital of
Cosmos Sport S.A. ('Cosmos') for cash
consideration of £65.0 million. At acquisition Cosmos operated 58 stores in
Greece and three in Cyprus under a variety of retail banners and associated
trading websites. The two main fascias are Cosmos, which is the core fascia of
the business and has an elevated sporting goods and lifestyle proposition, and
Sneaker 10, which has a more premium footwear offer.
Put and call options to enable future exit opportunities for the 20%
shareholders have also been agreed and become
exercisable from 2025 onwards. A valuation of these put options has been
performed using an earnings multiple, a suitable discount rate and approved
forecasts, and the initial liability of £10.0 million was recognised with the
corresponding entry to Other Equity in accordance with the present value
method of accounting. These options are required to be fair valued at each
accounting period date.
Included within the fair value of the net identifiable assets on acquisition
is an intangible asset of £9.1 million representing the Cosmos fascia name
and an intangible asset of £4.2 million representing the Sneaker 10 fascia
name. The Board believes that the excess of consideration paid over net assets
on acquisition of £39.5 million is best considered as goodwill on acquisition
representing future operating synergies. The goodwill calculation is
summarised below:
Provisional fair value at
Book value Measurement 21 October 2021
£m adjustments £m
£m
Acquiree's net assets at acquisition date:
Intangible assets - 13.3 13.3
Property, plant & equipment 14.0 - 14.0
Other non-current assets 1.0 - 1.0
Right-of-use assets - 38.2 38.2
Inventories 24.3 - 24.3
Cash and cash equivalents 13.2 - 13.2
Trade and other receivables 5.7 - 5.7
Income tax asset 0.3 - 0.3
Trade and other payables (27.9) - (27.9)
Bank loans and overdrafts (8.5) - (8.5)
Deferred tax liability (0.3) (3.2) (3.5)
Lease liabilities - (38.2) (38.2)
Net identifiable assets 21.8 10.1 31.9
Non-controlling interest (20%) (4.4) (2.0) (6.4)
Goodwill on acquisition 39.5
Total consideration 65.0
Included in the 52 week period ended 29 January 2022 was revenue of £26.0
million and a profit before tax of £0.9 million in respect of Cosmos.
5. Acquisitions (continued)
Prior Period Acquisitions - Other Acquisitions
The aggregate impact of the other acquisitions in the prior period is as
follows with further details provided in the narrative on the following
pages..
Fair values
acquired
£m
Acquiree's net assets at acquisition date:
Intangible assets 34.4
Property, plant & equipment 8.5
Other non-current assets 0.2
Right-of-use assets 26.3
Inventories 31.6
Cash and cash equivalents 35.3
Trade and other receivables 9.6
Trade and other payables (24.5)
Bank loans and overdrafts (6.2)
Income tax liabilities (4.4)
Deferred tax liabilities (6.6)
Lease liabilities (26.3)
Net identifiable assets 77.9
Non-controlling interest (various) (11.6)
Goodwill on acquisition 126.7
Total consideration (including £18.7 million deferred) 193.0
Included in the 52 week period ended 29 January 2022 was revenue of £61.9
million and a profit before tax of £4.4 million in respect of these
acquisitions.
80s Casual Classics Limited
On 2 March 2021, JD Sports Fashion Plc acquired 70% of the issued share
capital of 80s Casual Classics Limited ('80s CC') for cash consideration of
£15.4 million. 80s CC is predominantly an online retailer of retro and
original clothing from brands such as adidas and Sergio Tacchini, inspired by
the British subculture of the '70s, '80s and '90s. The acquisition included
put and call options over the remaining 30% of shares, exercisable in annual
tranches after a minimum period of three years.
Included within the fair value of the net identifiable assets on acquisition
is an intangible asset of £1.0 million representing the 80s CC fascia name.
The Board believes that the excess of consideration paid over net assets on
acquisition of £9.0 million is best considered as goodwill representing
future operating synergies. As at the date of this report, the period in which
measurement adjustments could be made has now closed on this acquisition and
no further fair value measurement adjustments have been made.
Included in the 52 week period ended 29 January 2022 was revenue of £13.0
million and a profit before tax of £3.9 million in respect of 80s Casual
Classics.
5. Acquisitions (continued)
Prior Period Acquisitions - Other Acquisitions (continued)
Uggbugg Fashion Limited
On 18 June 2021, JD Sports Fashion Plc acquired 51% of the issued share
capital of Uggbugg Fashion Limited, including a wholly owned subsidiary, Missy
Empire Limited (together 'Missy Empire'), for initial cash consideration of
£11.7 million. Additional consideration of up to £2.2 million was payable if
certain performance criteria were achieved. The fair value of the contingent
consideration as at the acquisition date and as at 29 January 2022 was
determined to be £nil.
Included within the fair value of the net identifiable assets on acquisition
is an intangible asset of £0.9 million representing the Missy Empire fascia
name. The Board believed that the excess of consideration paid over net assets
on acquisition of £9.6 million was best considered as goodwill on acquisition
representing future operating synergies. The net book value of these
intangible assets has been fully impaired during the period ended 30 July 2022
(see Note 3).
Put and call options over 9% of the remaining 49% shareholding have also been
agreed and become exercisable after the year ending January 2025. A valuation
of these put options has been performed using an earnings multiple, a suitable
discount rate and approved forecasts, and the initial liability of £1.4
million has been recognised with the corresponding entry to Other Equity in
accordance with the present value method of accounting. These options are
required to be fair valued at each accounting period date.
Included in the 52 week period ended 29 January 2022 was revenue of £6.2
million and a break even result in respect of Missy Empire.
The Watch Shop Holdings Limited and Watch Shop Logistics Ltd
On 18 June 2021, JD Sports Fashion Plc acquired 100% of the issued share
capital of The Watch Shop Holdings Limited and Watch Shop Logistics Ltd
(together 'WatchShop') via a wholly owned intermediate holding company. Total
cash consideration paid was £26.2 million. Contingent consideration is
payable subject to certain criteria being met. The fair value of the
contingent consideration as at the acquisition date and as at 29 January 2022
was determined to be £nil.
WatchShop is an online retailer of designer fashion watches from brands such
as Armani, Michael Kors and Hugo Boss. Included within the fair value of the
net identifiable assets on acquisition is an intangible asset of £2.5 million
representing the WatchShop fascia name. The Board believes that the excess of
consideration paid over net assets on acquisition of £10.6 million is best
considered as goodwill on acquisition representing future operating synergies.
Included in the 52 week period ended 29 January 2022 was revenue of £19.2
million and a loss before tax of £0.7 million in respect of WatchShop.
Bodytone International Sport S.L.
On 3 August 2021, ISRG, the Group's existing intermediate holding company in
Spain, acquired 50.1% of the issued share capital of Bodytone International
Sport S.L. ('Bodytone') for initial cash consideration of £8.9 million.
Additional consideration of up to £3.1 million is payable if certain
performance criteria are achieved and the fair value of this contingent
consideration as at the acquisition date and as at 29 January 2022 was
determined to be £2.9 million.
Based in Murcia in Spain, Bodytone manufactures and distributes professional
fitness equipment with a presence in over 40 countries worldwide. ISRG
believes that the acquisition of Bodytone will enhance its product categories
and improve its specialised sporting goods offer. Included within the fair
value of the net identifiable assets on acquisition is an intangible asset of
£4.9 million representing the Bodytone name. The Board believes that the
excess of consideration paid over net assets on acquisition of £8.8 million
is best considered as goodwill on acquisition representing future operating
synergies.
Put and call options over the remaining 49.9% shareholding have also been
agreed and become exercisable in tranches from 2024 onwards. A valuation of
these put options has been performed using an earnings multiple, a suitable
discount rate and approved forecasts, and the initial liability of £11.3
million has been recognised with the corresponding entry to Other Equity in
accordance with the present value method of accounting. These options are
required to be fair valued at each accounting period date.
Included in the 52 week period ended 29 January 2022 was revenue of £7.5
million and a profit before tax of £1.0 million in respect of Bodytone.
5. Acquisitions (continued)
Prior Period Acquisitions - Other Acquisitions (continued)
Hairburst Holding Group Limited
On 17 September 2021, JD Sports Fashion Plc acquired 75% of the issued share
capital of Hairburst Holding Group Limited, including three wholly owned
subsidiaries (together 'Hairburst') for cash consideration of £26.2 million.
Hairburst retails own label haircare products and vitamins via a direct to
consumer website and as a wholesaler both in the UK and internationally.
Included within the fair value of the net identifiable assets on acquisition
is an intangible asset of £6.6 million representing the Hairburst name. The
Board believed that the excess of consideration paid over net assets on
acquisition of £18.1 million was best considered as goodwill on acquisition
representing future operating synergies. An impairment of £12.7 million in
respect of the goodwill has been recognised during the period ended 30 July
2022 (see Note 3).
Put and call options over the remaining 25% shareholding have also been agreed
and become exercisable in tranches from 2025 onwards. A valuation of these put
options has been performed using an earnings multiple, a suitable discount
rate and approved forecasts, and the initial liability of £8.4 million has
been recognised with the corresponding entry to Other Equity in accordance
with the present value method of accounting. These options are required to be
fair valued at each accounting period date.
Included in the 52 week period ended 29 January 2022 was revenue of £6.3
million and a profit before tax of £0.1 million in respect of Hairburst.
Wheelbase Lakeland Limited
On 3 June 2021, JD Sports Fashion Plc exchanged contracts on the conditional
acquisition of 77.5% of the issued share capital of Wheelbase Lakeland Limited
('Wheelbase'). Completion of the acquisition was subject to obtaining consent
for the change in control from the Financial Conduct Authority. This was
obtained, the acquisition subsequently completed on 30 September 2021 and the
cash consideration paid was £22.2 million.
Operating from three stores on acquisition and a trading website, Wheelbase is
firmly established as one of the premier cycling retailers in the UK, and the
product offering centres on premium cycles and accessories from key brands
such as Cube, Cannondale, Trek and Specialized. Included within the fair value
of the net identifiable assets on acquisition is an intangible asset of £1.4
million representing the Wheelbase fascia name. The Board believes that the
excess of consideration paid over net assets on acquisition of £18.7 million
is best considered as goodwill on acquisition representing future operating
synergies.
Put and call options over the remaining 22.5% shareholding have also been
agreed and become exercisable in tranches from 2025 onwards. A valuation of
these put options has been performed using an earnings multiple, a suitable
discount rate and approved forecasts, and the initial liability of £4.0
million has been recognised with the corresponding entry to Other Equity in
accordance with the present value method of accounting. These options are
required to be fair valued at each accounting period date.
Included in the 52 week period ended 29 January 2022 was revenue of £4.0
million and a profit before tax of £0.2 million in respect of Wheelbase.
XLR8 Sports Limited
On 19 November 2021, JD Sports Fashion Plc acquired 100% of XLR8 Sports
Limited trading as Leisure Lakes Bikes ('Leisure Lakes') for initial cash
consideration of £25.6 million plus additional consideration up to a maximum
of £15.0 million if certain performance criteria are achieved. The fair value
of this contingent consideration as at the acquisition date and as at 29
January 2022 was determined to be £11.2 million.
Operating from 10 stores and a trading website, Leisure Lakes is considered to
be one of the leading omnichannel retailers of bicycles and bicycle parts,
equipment, clothing and accessories, and is a key partner for most of the
major brands including Trek, Cube and Specialized. Included within the fair
value of the net identifiable assets on acquisition is an intangible asset of
£2.5 million representing the Leisure Lakes fascia name. The Board believes
that the excess of consideration paid over net assets on acquisition of £25.9
million is best considered as goodwill on acquisition representing future
operating synergies.
Included in the 52 week period ended 29 January 2022 was revenue of £4.4
million and a loss before tax of £0.3 million in respect of Leisure Lakes.
5. Acquisitions (continued)
Prior period acquisitions - Other Acquisitions (continued)
GymNation
On 24 December 2021, the Group's existing subsidiary JD Sports Gyms Limited
('JD Gyms') acquired 100% of GymNation Limited and its 100% owned subsidiary
GymNation LLC (together 'GymNation') for cash consideration of $42.2 million
and contingent consideration of $6.1 million. Contingent consideration is
cash-settled and is linked to GymNation's future performance. It is initially
measured at fair value and is subsequently remeasured to fair value at each
reporting date until the contingency is settled. The fair value of contingent
consideration recognised at 29 January 2022 was $6.6 million (£4.9 million).
The maximum amount of the future payment is £75 million.
On 20 July 2022, a restructure of the GymNation sub-group was completed
resulting in the incorporation of GymNation Holding Limited. GymNation Holding
Limited has acquired 100% of the shares in GymNation LLC using monies loaned
from JD Gyms and GymNation founder management. As a result, the contingent
consideration recognised as at 29 January 2022 was replaced with a put and
call option liability and JD Gyms has diluted its share in GymNation and now
holds a 78.2% share of GymNation Holding Limited, with founder management
holding 21.8%. The put and call options, to enable future exit opportunities
for the management team, become exercisable from 2025 onwards. We assessed the
substance of the put option agreement, taking into account the management
leaver terms, and concluded that an element of the future option payment is
linked to continued future service and will be expensed on a straight-line
basis over the service period. A valuation of the remaining put option
liability has been performed using an earnings multiple, a suitable discount
rate and approved forecasts, and the initial liability of £6.4 million has
been recognised with the corresponding entry to Other Equity in accordance
with the present value method of accounting. These options are required to be
fair valued at each accounting period date.
GymNation is a chain of seven gyms in the UAE (six in Dubai and one in Abu
Dhabi). Included within the fair value of the net identifiable assets on
acquisition is an intangible asset of £7.9 million representing the GymNation
fascia name. The Board believes that the excess of consideration paid over net
assets on acquisition of £21.8 million is best considered as goodwill on
acquisition representing future operating synergies.
Included in the 52 week period ended 29 January 2022 was revenue of £1.3
million and a profit before tax of £0.2 million in respect of GymNation.
Other Acquisitions
During the period, the Group made one other small acquisition. This
transaction was not material.
Full Year Impact of Acquisitions
Had the acquisitions of the entities listed above been effected at 31 January
2021, the revenue and profit before tax of the Group for the 52 week period to
29 January 2022 would have been £8.9 billion and £666.1 million
respectively.
Acquisition Costs
Acquisition-related costs amounting to £7.9 million 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.
6. Assets Held-For-Sale
Transaction History
On 18 February 2019, JD Sports Fashion Plc acquired 19,579,964 Footasylum Plc
shares at prices between 50 pence and 75 pence per share, representing 18.7%
of the issued ordinary share capital. On 18 March 2019, in conjunction with
the Board of Footasylum Plc, JD Sports Fashion Plc announced the terms of an
offer to be made for the remaining 81.3% of the ordinary share capital of
Footasylum at a price of 82.5 pence per ordinary share. This offer was
declared unconditional in all respects on 12 April 2019 with acceptances
received for a total of 78,176,481 shares representing a further 74.8% of the
issued ordinary share capital. On 26 April 2019, the first bulk transfer was
made to acquire an additional 80.5 million shares (in addition to the 19.5
million already owned). The formal process to acquire the remaining Footasylum
shares (incl. the dissenting shareholders) was completed on 4 June 2019.
Footasylum was delisted on 16 May 2019 and converted from an unlisted Plc to a
private company on 19 September 2019.
Hold Separate Order and Consolidation
On 17 May 2019, JD Sports Fashion Plc received a 'hold separate' enforcement
order from the Competition and Markets Authority ('CMA') regarding the
Footasylum acquisition. In accordance with IFRS 10 'Consolidated Financial
Statements', an investor controls an investee when it is exposed, or has
rights, to variable returns from its involvement with the investee and has the
ability to affect those returns through its power over the investee. Whilst
this transaction was being reviewed by the CMA, the Directors of JD Sports
Fashion Plc assessed whether the Group had control over Footasylum and could
therefore consolidate the results of Footasylum. In making their judgement,
the Directors considered that there was a simultaneous exchange and completion
on the transaction and completion was not conditional on the outcome of the
CMA review. The risks and rewards ultimately rested with JD Sports Fashion Plc
as legal owner and there would be no pass through to the former shareholders.
This evidences that the Group had exposure, or rights, to variable returns
from its involvement with the investee. Further, the Group had the power of
veto over strategic decision making. After careful consideration, the
Directors concluded that the consolidation of Footasylum into the Group
financial statements from the date of acquisition was appropriate and was
disclosed as a judgement in the acquisition note in the financial statements
for the period ended 1 February 2020.
Held-For-Sale
On 4 November 2021, the final ruling from the CMA was that it had again
prohibited the Group's acquisition of Footasylum. The final CMA undertakings
were issued on 14 January 2022, which was effectively the start date for the
Footasylum sale process. As at 29 January 2022, Footasylum was classified as
held-for-sale as:
- the carrying amount of Footasylum was expected to be recovered through the
sale transaction;
- it was available for sale in its present condition;
- the Group had committed to sell Footasylum and this sale plan has been
initiated;
- Footasylum was being actively marketed at a price that is reasonable in
relation to its fair value; and
- there was an expectation that the sale process would be completed within six
months of the classification as held-
for-sale.
On 29 July 2022, JD Sports Fashion Plc exchanged contracts to sell Footasylum
and its associated subsidiaries to Aurelius Group ('Aurelius') for £37.5
million. The transaction subsequently completed on 5 August 2022. As the
transaction legally completed after the 30 July 2022 period end date, the
assets and liabilities of Footasylum continued to be classified as
held-for-sale as at 30 July 2022.
Assets and Liabilities of Footasylum Held-For-Sale
As at 30 July 2022, Footasylum was stated at the lower of its carrying value
(excluding cash and cash equivalents) and fair value less costs to sell in
accordance with IFRS 5. Cash and cash equivalents as at 30 July 2022 of £6.0
million (29 January 2022: £27.2 million) have been presented within the
Group's cash and cash equivalents.
6. Assets Held-For-Sale (continued)
26 weeks to 26 weeks to 52 weeks to
30 July 31 July 29 January
2022 2021 2022
£m £m £m
Intangible assets 6.7 - 4.7
Property, plant and equipment 26.9 - 25.2
Deferred tax assets 0.2 - 0.2
Right-of-use assets 71.0 - 78.5
Inventories 36.5 - 27.0
Trade and other receivables 27.9 - 21.5
Impairment recognised in accordance with IFRS 5 (3.5) - -
Assets held-for-sale 165.7 - 157.1
26 weeks to 26 weeks to 52 weeks to
30 July 31 July 29 January
2022 2021 2022
£m £m £m
Trade and other payables (63.4) - (57.5)
Lease liabilities (74.8) - (82.0)
Income tax liability (1.0) - (2.9)
Deferred tax liability - - (0.2)
Liabilities held-for-sale (139.2) - (142.6)
Discontinued Operations
The presentation of an operation as a discontinued operation is limited to a
component of an entity that either has been disposed of or is classified as
held-for-sale, and:
- represents a separate major line of business or geographic area of
operations;
- is part of a single co-ordinated plan to dispose of a separate major line of
business or geographic area of
operations, or is a subsidiary acquired exclusively with a view to
resale.
Whilst the disposal of Footasylum is significant for the Group, it is subject
to a single plan and can be distinguished
operationally and for financial reporting purposes, the disposal of Footasylum
should not be classified as a discontinued operation. This is because the
Group has other subsidiaries and operations within the Sports Fashion segment
in the UK, therefore Footasylum does not represent a separate major line of
business or geographic area for the Group. However, the Group is required to
disclose the impact of the disposal.
7. Provisions
A provision is recognised in the Consolidated Statement of Financial Position
when the Group has a present legal or
constructive obligation as a result of a past event, it is more likely than
not that an outflow of economic benefits will be
required to settle the obligation and the obligation can be estimated
reliably.
Property Provision
Within property provisions, management has provided for expected dilapidations
on stores and warehouses. This provision covers expected dilapidation costs
for any lease considered onerous, any related to stores recently closed,
stores which are planned to close or are at risk of closure and those under
contract but not currently in use. Management maintain all properties to a
high standard and carry out repairs whenever necessary during their tenure.
Therefore, if there is no risk of closure any provision would be minimal and
management do not consider it necessary to hold dilapidation provisions for
these properties.
Other Provisions
Included in other provisions is £2.0 million in respect of the CMA's ongoing
investigation into the sale of the Rangers FC branded replica football shirts.
This provision represents management's best estimate of the liability payable
in respect of this matter, including associated legal costs, based on the
information available to it at the date of approving these financial
statements which includes consideration of the provisional Statement of
Objections which the CMA issued on 7 June 2022. The CMA's findings are, at
this stage, only provisional and the Group continues to review them with its
advisors. The CMA will consider any representations that are made before
issuing its final findings and accordingly the amount to be settled could be
materially different to the amount provided. The CMA has not yet confirmed
when it will release its final decision on this matter but the Group currently
expects this to occur within 12 months of the date of approval of these
financial statements along with any related outflows.
The remaining balance in other provisions is made up of various other trade
provisions and legal costs. The provisions are estimated based on accumulated
experience, supplier communication and management approved forecasts.
Onerous Contract Provision
Within the onerous contracts provision, management has provided against the
minimum contractual cost for the remaining term on a non-cancellable logistics
services contract for the Azambuja warehouse in Portugal within the SportZone
division. The provision will be unwound over the remaining eight year period
ending 30 September 2030.
Property provision Other provisions Onerous contracts
£m £m £m Total
£m
Balance at 31 July 2021 - - 5.2 5.2
Provisions reclassified from accruals 11.2 14.2 - 25.4
Provisions released during the period (2.0) (6.7) - (8.7)
Provisions created during the period 9.4 5.0 - 14.4
Provisions utilised during the period (0.4) (2.7) (0.3) (3.4)
Foreign exchange variances - - 0.2 0.2
Balance at 29 January 2022 18.2 9.8 5.1 33.1
Provisions reclassified from accruals 0.7 - - 0.7
Provisions released during the period (0.2) - - (0.2)
Provisions created during the period 2.4 0.1 - 2.5
Provisions utilised during the period - (0.7) (0.3) (1.0)
Provisions acquired on acquisition 0.5 - - 0.5
Foreign exchange variances 0.1 0.1 (0.1) 0.1
Balance at 30 July 2022 21.7 9.3 4.7 35.7
7. Provisions (continued)
Provisions have been analysed between current and non-current as follows:
26 weeks to 26 weeks to 52 weeks to
30 July 31 July 29 January
2022 2021 2022
£m £m £m
Current 13.0 0.6 13.2
Non-current (due within 10 years) 22.7 4.6 19.9
Total provisions 35.7 5.2 33.1
8. Contingent Liabilities
It is inevitable that commercial claims and disputes may arise from time to
time during the course of the Group's business. If the risk of a financial
outflow arising from one of these disputes is more than remote but not
probable or cannot be measured reliably then the Group will disclose this
matter as a contingent liability. If the risk of a financial outflow is
considered probable and can be measured reliably then the Group would make a
provision for this matter.
Further, the activities of the Group are overseen by a number of regulators
around the world and, whilst the Group strives to ensure full compliance with
all its regulatory obligations, periodic reviews are inevitable which may
result in a financial penalty. If the risk of a financial penalty arising from
one of these reviews is more than remote but not probable or cannot be
measured reliably then the Group will disclose this matter as a contingent
liability. If the risk of a financial penalty is considered probable and can
be measured reliably then the Group would make a provision for this matter.
CMA Investigation
On 23 September 2021, the CMA launched an investigation under section 25 of
the Competition Act 1998 ('CA98') into suspected breaches of competition law
by Leicester City Football Club Limited and JD Sports Fashion Plc, together
with their affiliates. The Group continues to co-operate fully with the CMA.
The CMA has not reached a view as to whether there is sufficient evidence of
an infringement of competition law for it to issue a statement of objections
or, ultimately, an infringement decision, to any party under investigation.
Therefore, at this stage, it is not possible to determine with sufficient
certainty that a liability will ultimately arise. Indeed, not all cases result
in the CMA issuing a statement of objections or an infringement decision. The
CMA has indicated that it will publish a further update in September 2022.
9. Related Party Transactions and Balances
Transactions and balances with related parties during the period are shown
below. Transactions were undertaken in the ordinary course of business on an
arm's length basis. Outstanding balances are unsecured (unless otherwise
stated) and will be settled in cash.
Transactions with Related Parties Who Are Not Members of the Group
Pentland Group Limited
During the period, Pentland Group Limited owned 51.9% (2021: 51.9%) of the
issued ordinary share capital of JD Sports Fashion Plc. The Group made
purchases of inventory from Pentland Group Limited in the period and the Group
also sold inventory to Pentland Group Limited. The Group also paid royalty
costs to Pentland Group Limited for the use of a brand.
9. Related Party Transactions and Balances (continued)
During the period, the Group entered into the following transactions with
Pentland Group Limited:
Transactions with related parties Transactions Transactions with related parties
26 weeks to 30 July 2022 with related parties 52 weeks to 29 January 2022
£m 26 weeks to 31 July 2021 £m
£m
Sale of inventory 0.5 0.3 1.3
Purchase of inventory (14.2) (20.0) (48.7)
Royalty costs (8.1) (5.1) (6.2)
Other costs (0.7) (0.6) (0.9)
At the end of the period, the following balances were outstanding with
Pentland Group Limited:
Amounts owed to / by related parties Amounts owed to / by related parties Amounts owed to / by related parties
26 weeks to 30 July 2022 26 weeks to 31 July 2021 52 weeks to 29 January 2022
£m £m £m
Trade receivables - - 0.2
Trade payables (5.4) (7.8) (2.5)
Transactions with Associates and Joint Ventures
During the period, the Group entered into the following transactions with its
associates and joint ventures:
Transactions with related parties Transactions Transactions with related parties
26 weeks to 30 July 2022 with related parties 52 weeks to 29 January 2022
£m 26 weeks to 31 July 2021 £m
£m
Sale of inventory 0.2 - -
Purchase of inventory (5.1) (4.2) (12.5)
Dividends and distributions received 3.0 0.6 6.9
At the end of the period, the Group had the following balances outstanding
with its associates and joint ventures:
Amounts owed to / by related parties Amounts owed to / by related parties Amounts owed to / by related parties
26 weeks to 30 July 2022 26 weeks to 31 July 2021 52 weeks to 29 January 2022
£m £m £m
Trade receivables 0.2 - 0.2
Trade payables (0.4) (0.2) (0.3)
9. Related Party Transactions and Balances (continued)
Transactions with Directors
Other than the remuneration of Directors, there have been no other
transactions with Directors in the period (26 week period ended 31 July 2021:
£nil). £25,000 of invoices from Cowgill Holloway Business Recovery LLP in
respect of professional fees were accrued in the financial year ended 29
January 2022 and paid post year-end. Peter Cowgill was a Director of JD Sports
Fashion Plc until his departure on 25 May 2022. Peter was also indirectly a
member of Cowgill Holloway Business Recovery LLP through his membership of
Cowgill Holloway LLP. Peter Cowgill did not participate in any profit share
arrangement relating to either Cowgill Holloway LLP or Cowgill Holloway
Business Recovery LLP. In addition, Cowgill Holloway LLP (including member
firms of Cowgill Holloway LLP) has acted on behalf of certain vendors where
the Group has ultimately completed an acquisition. Where this has occurred,
there have been no monetary payments between the Group and Cowgill Holloway
LLP (including its member firms).
10. Subsequent Events
Footasylum
On 4 November 2021, the final ruling from the CMA was that it had again
prohibited the Group's acquisition of Footasylum. The final CMA undertakings
were issued on 14 January 2022, which was effectively the start date for the
Footasylum sale process. On 29 July 2022, JD Sports Fashion Plc exchanged
contracts to sell Footasylum and its associated subsidiaries to Aurelius Group
for £37.5 million. The transaction subsequently completed on 5 August 2022.
See Note 6 for further details.
Appointment of New Chief Executive Officer
On 2 August 2022, Régis Schultz was appointed as the Company's new Chief
Executive Officer, following an extensive executive global search process.
Régis joined on 5 September 2022 and Kath Smith has commenced a full handover
of her duties to Régis. After a short transitionary period, Kath will then
resume her former role as Senior Independent Director on the Board.
JD Sports Fashion Korea Inc
On 6 September 2022, JD Sports Fashion Plc ('JD') acquired 50% of the shares
in its existing subsidiary, JD Sports Fashion Korea Inc ('JD Korea') for cash
consideration of 26.1 billion KRW (£16.4 million). JD now owns 100% of the
share capital of JD Korea. In accordance with IFRS 10, JD had previously
assessed and concluded that it controlled JD Korea. As the acquisition of the
50% on 6 September 2022 does not result in a change of control, this will be
accounted for as an equity transaction.
Agreements with former Executive Chairman
On 21 September 2022, the Company reached an agreement with its former
Executive Chairman with respect to his departure from the business. Included
in this agreement are two new arrangements which are considered to be Related
Party Transactions under IAS24 'Related Party Disclosures'.
The first is a binding set of new and enhanced restrictive covenants for a
two-year period, replacing the very limited provisions in the previous
contract for which the former Executive Chairman will receive £3.5 million
over two years.
The second is a consultancy agreement for an expected period of three years
with £2 million to be paid which is to be phased over the life of the
agreement.
11. Half Year Report
The half year report will be available to download from www.jdplc.com
(http://www.jdplc.com) from mid-October 2022. 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.
1 (#_ftnref1) On 3 February 2021, JD Sports Fashion Plc completed the
placing of new ordinary shares in the capital of the Company. A total of
58,393,989 new ordinary shares were placed at an issue price of 795 pence per
share, raising proceeds of £455.9 million (net of £8.3 million share issue
costs).
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