REG - JD Sports Fashion - Year-End Announcement
17/05/2023 07:17
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RNS Number : 6480Z JD Sports Fashion Plc 17 May 2023
17 May 2023
JD SPORTS FASHION PLC
UNAUDITED PRELIMINARY RESULTS
FOR THE 52 WEEKS ENDED 28 JANUARY 2023
JD Sports Fashion Plc (the 'Group'), the leading global Sports Fashion
retailer, today announces its Unaudited Preliminary Results for the 52 weeks
ended 28 January 2023 (2022: 52 weeks ended 29 January 2022).
Record result with clear strategy for future growth
2023 2022
(unaudited)
£m £m
Revenue 10,125.0 8,563.0
Gross profit % 47.8% 49.1%
Performance Highlights ((a))
EBITDA before adjusted items* 1,696.9 1,606.8
Depreciation / amortisation (636.6) (593.1)
Operating profit (before adjusted items)* 1,060.3 1,013.7
Net interest expense (68.9) (66.5)
Profit before tax and adjusted items* 991.4 947.2
Adjusted items (see note 3)* (550.5) (292.5)
Profit before tax 440.9 654.7
Net cash at period end ((b)) 1,469.3 1,185.9
Statutory Measures
Operating profit 509.8 721.2
Net interest expense (68.9) (66.5)
Profit before tax 440.9 654.7
Basic earnings per ordinary share 2.76p 7.17p
Adjusted earnings per ordinary share* 13.39p 12.84p
Total dividend payable per ordinary share 0.80p 0.35p
a) 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 use of other alternative performance measures which
are also explained after the Chief Financial Officer's Statement and are
reconciled to the statutory measures
b) Net cash consists of cash and cash equivalents less interest-bearing
loans and borrowings
Andrew Higginson, Chair, said:
"In July 2022 I had the great privilege of being appointed the Chair of the JD
Group. This followed the departure of Peter Cowgill who had led the business
so successfully for the previous 18 years. I found a business that had a
strong leadership team, committed staff and a supportive majority shareholder
in Pentland. The business was in tune with its customers, respected by its
branded suppliers, was trading strongly and had a significant number of
opportunities for growth ahead of it.
"This has been another period of excellent progress for the Group with a
profit before tax and adjusted items* for the 52 week period ended 28 January
2023 of £991.4 million (52 week period ended 29 January 2022: £947.2
million). This is a record result for the Group and I must pay tribute to the
skills, resilience and positive attitude of the colleagues in our businesses
who have not let the leadership changes distract from their focus on the
consumer and our offer. The total charge for the adjusted items* was £550.5
million (2022: £292.5 million) which principally relates to a non-cash
movement in the present value of future put and call options held with
minority shareholders in certain subsidiary businesses, impairments of
intangible assets on acquisitions in prior periods and losses incurred in
divesting our non-core branded fashion businesses. Consequently, the profit
before tax was £440.9 million (2022: £654.7 million).
"The progress that the Group is making in its global markets is reflected by
the fact that organic sales at constant exchange rates* were 12% ahead of the
prior period with a significant strengthening in trade through the second half
of the period, particularly in North America, as the supply of product from a
number of the international brands normalised. We are pleased with the
positive progress that we are making in North America and it is our intention
to accelerate the rollout of JD in this important market as we believe it will
deliver long term sustainable benefits.
"JD continues to be the partner of choice for many international brands who
see our premium fascias as the natural global home for their latest ranges and
freshest new styles. The announcement in September 2022 that JD was Nike's
first European retail partner for its connected partnership, designed to
enhance the shopping experience of customers through access to an additional
range of Nike member-exclusive products and experiences, is proof that our
relationship with these brands and our access to product is stronger than
ever.
"The Group is reassured with trading to date in the new financial period with
growth in organic sales at constant exchange rates* of more than 15% after 13
weeks. This performance is further evidence that consumers worldwide are more
attracted than ever to JD's differentiated proposition with its
attention-grabbing in-store experience, breadth in the range of brands and
availability of key styles.
"Whilst we are encouraged by the resilient nature of the consumer demand in
the current period to date, we remain conscious of the headwinds that prevail
at this time including the general global macro-economic and geopolitical
situation. Against this backdrop, assuming current exchange rates, we expect
that the Group's headline profit before tax and adjusted items* for the 53
week period ending 3 February 2024 will be in line with the current average
consensus expectations of £1.03 billion."
Group Highlights
· Régis Schultz joined the Group as Chief Executive Officer with a
vision for a new and distinct chapter in the growth story of JD presented to
both the market and colleagues in February 2023. Key objectives for the next
five years include:
o Double digit revenue growth on average per annum
o Double digit market share in key regions
o Double digit operating margin
o Cash generation from operating activities of £1 billion per annum with
the priority for cash being reinvestment in growth including increased capital
expenditure of £500 million to £600 million per annum with 50% to 60% of
annual spend focused on store expansion in underpenetrated markets with 250 to
350 new JD stores per annum
· Record result for the 52 week period ended 28 January 2023 with
profit before tax and adjusted items* of £991.4 million (52 week period ended
29 January 2022: £947.2 million) with the global premium Sports Fashion
retail fascias delivering a combined profit before tax and adjusted items* of
£827.6 million (2022: £774.4 million)
· Profit before tax of £440.9 million (2022: £654.7 million)
includes a total charge for adjusted items* of £550.5 million (2022: £292.5
million) which principally relates to a non-cash movement in the present value
of future put and call options held with minority shareholders in certain
subsidiary businesses and losses incurred in divesting our non-core branded
fashion businesses
· Organic sales at constant exchange rates* 12% ahead of the prior
period with a significant strengthening in trade through the second half of
the period, particularly in North America, as the supply of product from a
number of the international brands normalised
· International development of JD continues to progress positively:
o 138 stores now trading as JD in North America with the new stores in the
period including a flagship store in Chicago
o 58 net new JD stores opened across Europe including first stores in
Hungary, Lithuania and Greece
o Seven JD stores in Indonesia and six JD stores in Israel opened under
Joint Venture arrangements in the period meaning that the core JD fascia now
has a retail presence in 28 countries with the rollout of JD to be accelerated
in line with the "JD Brand First" strategy
· Board and governance strengthened with the appointment of
additional Non-Executive Directors and the creation of a new Disclosure
Committee
· Net cash balance at the end of the period, being the peak of the
cash cycle, of £1,469.3 million (2022: £1,185.9 million) to power the
ongoing development opportunities
· An enhanced final dividend of 0.67p (2022: 0.35p) bringing the
total dividend payable for the period to 0.80p (2022: 0.35p) per ordinary
share which returns the dividend cover*, when measured relative to the
adjusted earnings per ordinary share*, to the levels paid in the period prior
to the COVID-19 pandemic (2019: 0.34p - restated)
· The Group continues to make excellent progress on its
environmental and sustainable sourcing work programmes with external
recognition of this from the award of an A- grade by the CDP for both Climate
Change and Water Security and the classification of the Group as 'low risk' by
Sustainalytics, one of the world's leading independent ESG research and
analytics businesses
· Key financial information of the two business segments is
tabulated below:
52 week period to 28 January 2023 (unaudited)
Sports Fashion Outdoor Unallocated Total
£m £m £m £m
Revenue 9,560.6 564.4 - 10,125.0
Gross profit % 48.1% 42.2% - 47.8%
Performance Highlights
Operating profit before adjusted items* 1,043.5 16.8 - 1,060.3
Net interest expense(1) (66.1) (2.8) - (68.9)
Profit before tax and adjusted items* 977.4 14.0 - 991.4
Adjusted items* (510.7) (39.8) - (550.5)
Profit / (loss) before tax 466.7 (25.8) - 440.9
Statutory Measures
Operating profit / (loss) 532.8 (23.0) - 509.8
Net interest expense(1) (66.1) (2.8) - (68.9)
Profit / (loss) before tax 466.7 (25.8) - 440.9
(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.
52 week period to 29 January 2022
Sports Fashion Outdoor Unallocated Total
£m £m £m £m
Revenue 8,049.6 513.4 - 8,563.0
Gross profit % 49.5% 43.9% - 49.1%
Performance Highlights
Operating profit before adjusted items* 985.5 28.2 - 1,013.7
Net interest expense(1) (57.2) (2.3) (7.0) (66.5)
Profit / (loss) before tax and adjusted items* 928.3 25.9 (7.0) 947.2
Adjusted items* (292.5) - - (292.5)
Profit / (loss) before tax 635.8 25.9 (7.0) 654.7
Statutory Measures
Operating profit 693.0 28.2 - 721.2
Net interest expense(1) (57.2) (2.3) (7.0) (66.5)
Profit / (loss) before tax 635.8 25.9 (7.0) 654.7
( )
(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.
Enquiries:
JD Sports Fashion Plc
Tel:
0161 767 1000
Andrew Higginson, Non-Executive Chair
Régis Schultz, Chief Executive Officer
Neil Greenhalgh, Chief Financial Officer
Alison Lees, Director of Investor Relations & Treasury
Investec Bank
Plc
Tel: 0207 597 5970
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
In July 2022 I had the great privilege of being appointed the Chair of the JD
Group. This followed the departure of Peter Cowgill who had led the business
so successfully for the previous 18 years. I found a business that had a
strong leadership team, committed staff and a supportive majority shareholder
in Pentland. The business was in tune with its customers, respected by its
branded suppliers, was trading strongly and had a significant number of
opportunities for growth ahead of it. Before going any further, it is
important to thank Peter and his team for developing such a great business.
The challenges that the business faced were also clear. There was a
significant "governance deficit" in a listed business of JD's size. Starting
with the combination of Chair and CEO roles, the business had not raised
standards of Governance to the expected norms of a FTSE 100 business. The
Non-Executive Directors, whilst bringing much relevant experience, had a lack
of Plc experience.
In many ways, the business, which is highly profitable and with significant
net cash, was well controlled and conservatively managed. However, it relied
too heavily on a few key individuals and on informal controls which were more
appropriate for a smaller business. The sort of formal Board oversight and
detailed scrutiny that would be normal in a business of this scale were not
always present.
When I joined the business, work had already begun on reforming and improving
the Governance framework. Helen Ashton, in her role as Chair of the Audit and
Risk Committee, deserves our particular thanks; as does Kath Smith, Senior
Independent Director, who stepped in as acting CEO for a crucial four month
period after Peter's departure. We have made further strong progress on
Governance this year, against the additional challenge of a mandatory rotation
of auditors, although there is still plenty to do to embed a change of culture
around the new controls framework.
The success of the business had afforded many opportunities to grow. However,
the strategy outside of the JD Brand had become a little opaque and was in
need of some clarification.
In September 2022, the arrival of our new CEO, Régis Schultz led to a
reappraisal of this strategy and a narrowing of the business focus. We have
subsequently disposed of a number of Fashion businesses and are concentrating
our resources on fewer initiatives. There has also been a simplification in
the organisation of the business with the number of direct reports into the
CEO reduced from over 30.
We are now starting the next, and distinct chapter in the growth story of JD.
The business is in fine health, with a brand and proposition that is clearly
loved by consumers, and with the financial resources to deliver further
expansion in underpenetrated and strategically important markets.
JD continues to be the partner of choice for many international brands who see
our premium fascias as the natural global home for their latest ranges and
freshest new styles. The announcement in September 2022 that JD was Nike's
first European retail partner for its connected partnership, designed to
enhance the shopping experience of customers through access to an additional
range of Nike member-exclusive products and experiences, is proof that our
relationship with these brands and our access to product is stronger than
ever. The ambitious growth plans that we announced in our Capital Markets
Event on 2 February 2023 are underpinned by the availability of additional
product from these brands.
JD's success over a number of years has come from a relentless focus on
ensuring that, at all times, our fascias deliver a compelling and
differentiated proposition to the consumer with an attention-grabbing theatre
both in stores and online and a product and brand mix that is emotionally
engaging, exclusive and continually evolving.
The challenge for the Board is to deliver a step change in the governance
framework and culture within the business, whilst allowing the entrepreneurial
flair to flourish. In doing so, JD will have the right foundations from which
to progress and support our new CEO and his Executive team.
Financial Summary
This has been another period of excellent progress for the Group with a profit
before tax and adjusted items* for the 52 week period ended 28 January 2023 of
£991.4 million (52 week period ended 29 January 2022: £947.2 million). This
is a record result for the Group and I must pay tribute to the skills,
resilience and positive attitude of the colleagues in our businesses who have
not let the leadership changes distract from their focus on the consumer and
our offer. The total charge for the adjusted items* was £550.5 million (2022:
£292.5 million) which principally relates to a non-cash movement in the
present value of future put and call options held by minority shareholders in
certain subsidiary businesses, impairments of intangible assets on
acquisitions in prior periods and losses incurred in divesting our non-core
branded fashion businesses. Consequently, the profit before tax was £440.9
million (2022: £654.7 million).
The progress that the Group is making in its global markets is reflected by
the fact that organic sales at constant exchange rates* were 12% ahead of the
prior period with a significant strengthening in trade through the second half
of the period, particularly in North America, as the supply of product from a
number of the international brands normalised. We are pleased with the
positive progress that we are making in North America and it is our intention
to accelerate the rollout of JD in this important market as we believe it will
deliver long term sustainable benefits.
Board Developments
Recruitment of New CEO
We were delighted to welcome Régis Schultz to the Group in September 2022 as
Chief Executive Officer. 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 global retailing,
including in Asia and the Middle East, combined with his ability to drive
transformational change through an omnichannel approach to retail, perfectly
complement the existing skills both in the Board and the wider Senior
Leadership team.
Since joining the Group, Régis has spent time with the local teams in all of
our principal markets to enhance his knowledge of the Group's global
operations. The knowledge that he gained in this period was 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. His vision for a new and distinct chapter in the growth story of
JD was subsequently presented to both the market and our colleagues in
February 2023 with four key themes:
· JD Brand First: Our priority is the development of JD and we
intend to accelerate the store opening programme in most of our markets
including speeding up the conversion of the Finish Line stores to JD in the
United States. We will extend our footprint in underpenetrated markets through
both organic growth and acquisition with franchising an opportunity in certain
new markets. Whilst we will be accelerating the rollout of the JD stores,
there will be no compromises to the disciplined process that we follow. All
stores will still be subject to rigorous financial assessment prior to leases
being committed and the fitting out of those stores to be carried out to our
usual high standards.
· Importance of Complementary Concepts: JD's proposition is capable
of operating at scale in multiple markets. However, it is important to
recognise that JD is not necessarily the right banner in all situations. For
example, the market in the United States is more segmented between malls and
neighbourhoods than Europe and so our neighbourhood community fascias of Shoe
Palace and DTLR ensure that the Group has a proposition for all consumers.
Further, our elevated Size? and Footpatrol banners are critical in providing
valuable market intelligence through seeding new trends and ranges which can
then be scaled through JD. We will strengthen the offers in all of our
complementary fascias and expand them where appropriate in their markets.
· Beyond Physical Retail: JD has expanded both its physical and
digital channels successfully in recent years but the two channels are not as
integrated as they could be. The technology investments that we are making,
including loyalty, will make our proposition more omnichannel and give us a
single view of the customer. Further, we firmly believe that JD, as a brand,
has a deep relationship of trust with its consumers and that this relationship
can be extended into other categories to create a lifestyle ecosystem of
relevant products and services. We have already started to do this through the
rollout of JD Gyms but we believe that this can be extended to other
categories such as gaming and music, potentially through third party
partnerships.
· People, Partners & Communities: We want to be the best
partner for the brands, the best partner for the communities where we operate
and provide our colleagues with the best opportunities to develop their
individual careers and to support them in achieving their ambitions.
Other Board Updates
During the period, Neil Greenhalgh informed the Board that he wished to step
down from his role as Chief Financial Officer, a role he has filled since
November 2018. We have identified a permanent successor for this important
role with Dominic Platt who is currently the Chief Financial Officer at BGL
Group Limited and has formerly held a number of senior finance roles at Darty
Plc. Neil will leave the Group later in the summer, and I would like to thank
him for the significant part that he has played in the development of the
Group over the last 19 years.
Since joining the Board, together with the Nominations Committee, I have taken
the opportunity to review the mix of skills and experience on the Board. In
this regard, we were pleased to announce the appointment of Ian Dyson,
currently Chair of Currys Plc who joined the Board on 9 March 2023. In
addition, Angela Luger, formerly CEO of N Brown Group Plc and Darren Shapland,
currently Chair of Topps Tiles Plc will join the Board as of 1 June 2023. All
of our new Non-Executive Directors have a strong track record across consumer
facing industries and bring much needed Plc experience.
Elsewhere, Suzi Williams, who joined the Board on 16 May 2022, has taken up
the role of Remuneration Committee Chair and Helen Ashton has been appointed
Chair of our newly formed Disclosure Committee whilst I have been appointed as
Chair of the Nominations Committee.
Finally, I am pleased that we were able to reach an amicable and constructive
way forward with Peter Cowgill as he has an unparalleled knowledge, built over
18 years, which we did not want to lose. The arrangement that we have agreed
includes a binding set of new and enhanced restrictive covenants for a
two-year period to September 2024 and a consultancy agreement for a three-year
period to September 2025.
Buy or Sell Notice re Iberian Sports Retail Group, S.L. ('ISRG')
Following the receipt of a formal buy / sell notice from Balaiko Firaja
Invest, S.L. and Sonae Holdings, S.A. (together the 'Minority Parties'), who
collectively hold 49.98% of Iberian Sports Retail Group, S.L. ('ISRG'), the
Group is now engaged in formal discussions with the Minority Parties with
regards to the future ownership structure of ISRG, including its shareholding
in the JD businesses across Iberia. There are three possible outcomes from
this process although it is expected to be later in the summer before there is
clarity as to which outcome will be progressed by the parties:
· The Group acquires the 49.98% holding in ISRG currently held by
the Minority Parties.
· The Minority Parties acquire the Group's 50.02% holding in ISRG
and the Group simultaneously acquires the Minority Parties interest in JD
across Iberia. This would result in the divestment of the Sprinter, Sport
Zone, Deporvillage and Bodytone businesses in Iberia together with the
Sprinter, Aktiesport and Perry Sport businesses in the Netherlands.
· No change to existing shareholdings.
Governance and Assurance
Governance Update
As previously advised, a number of issues were identified in the prior period
around the Group's compliance with both its regulatory obligations and the UK
Corporate Governance Code. The Board subsequently undertook a Control, Risk
and Compliance Target Operating Model review, the outcome of which was a
programme of works to deliver greater formalisation in governance systems,
risk management recording, the documentation and appraisal of internal
controls and the mechanisms for reporting relevant matters to the regulatory
authorities.
Working with external advisors, the Group continues to make good progress on
this programme and the Board reaffirms its commitment to making the necessary
resource available, internal and external, to deliver this programme and
ensure that these changes become fully embedded in the day-to-day operations
of the Group. In this regard, additional resource has already been engaged in
the key areas of Assurance, Risk and Legal. The Board believes that it is on
track to deliver the first phase of this programme by early 2024 although
there will be continuous evolution through longer term initiatives even after
the current initial project is completed.
Update on Cyber Security
On 30 January 2023, the Group announced that it had been the target of a cyber
incident which resulted in the unauthorised access to a system that contained
customer data relating to some online orders placed between November 2018 and
October 2020. Whilst the affected data was limited, the Group took the
necessary immediate steps to investigate and respond to the incident,
including working with leading cyber security experts. The Group also engaged
with the relevant authorities, including the UK's Information Commissioner's
Office ('ICO'), as appropriate.
The ICO have now formally advised that they will not be taking any enforcement
action in respect of this incident although they have highlighted several
areas where they believe JD needs to demonstrate improvement. The Group is
committed to addressing these recommendations at pace. At this stage, no other
regulatory body has indicated that it intends to take any enforcement action
although the Group is aware that not all of the relevant regulators have
concluded their investigations. The Group will continue to co-operate fully
with the relevant global regulatory bodies, including the ICO, on all
appropriate matters.
This particular incident, whilst limited in extent and quickly contained, has
highlighted the need for the Group to enhance its security control over the
technology estate. In this regard, the Group has appointed Boston Consulting
Group who will work with best-in-class suppliers to design key tactical and
strategic solutions for an efficient and better-integrated cyber vendor
ecosystem. We are confident that this multi-vendor approach is the best
solution to deliver outcomes at pace whilst ensuring value for money. In
addition, the Group has now appointed an interim Chief Information Security
Officer ('CISO') with the recruitment of both a permanent CISO and a Chief
Information Technology Officer ('CITO') ongoing.
Change of Auditor
KPMG LLP has acted as auditor to the Company since its flotation in 1996. They
have been in office in a period of tremendous growth and rapid global
expansion for the Group and I would like to thank all the staff in the various
offices around the world who have worked on the Group's audit over the years.
Subject to approval by shareholders at the forthcoming Annual General Meeting,
I am pleased to report that Deloitte LLP will take over as auditor to the
Group for the results to 3 February 2024. On behalf of the Board, I would like
to formally welcome the team from Deloitte to the Group and I look forward to
working with them.
Dividends
The Board proposes paying a final dividend of 0.67p (2022: 0.35p) bringing the
total dividend payable for the 52 week period ended 28 January 2023 to 0.80p
(52 week period ended 29 January 2022: 0.35p) per ordinary share. Whilst this
is a significant increase on the prior period, the Board believes that it is
appropriate as it returns the dividend cover*, when measured relative to the
adjusted earnings per ordinary share*, to the levels paid in the period prior
to the COVID-19 pandemic (2019: 0.34p - restated). Subject to shareholder
approval at our AGM, the proposed final dividend will be paid on 4 August 2023
to all shareholders on the register at 7 July 2023. As we indicated in our
Capital Markets Event, we continue to believe that it is in the longer term
interests of all shareholders to prioritise the available funding for our
ongoing development opportunities including investing in both stores and
infrastructure as well as potential acquisitions.
The adjusted earnings per ordinary share* has increased by 4.3% to 13.39p
(2022: 12.84p).
The basic earnings per ordinary share has decreased by 61.5% to 2.76p (2022:
7.17p).
Outlook
The Group is reassured with trading to date in the new financial period with
growth in organic sales at constant exchange rates* of more than 15% after 13
weeks. This performance is further evidence that consumers worldwide are more
attracted than ever to JD's differentiated proposition with its
attention-grabbing in-store experience, breadth in the range of brands and
availability of key styles.
Whilst we are encouraged by the resilient nature of the consumer demand in the
current period to date, we remain conscious of the headwinds that prevail at
this time including the general global macro-economic and geopolitical
situation. Against this backdrop, assuming current exchange rates, we expect
that the Group's headline profit before tax and adjusted items* for the 53
week period ending 3 February 2024 will be in line with the current average
consensus expectations of £1.03 billion.
Our next scheduled update will take place upon the announcement of our Interim
Results. We will confirm a date for these results in due course.
Andrew Higginson
Chair
17 May 2023
Chief Executive Officer's Statement
I am very pleased to report that the Group continues to make excellent
progress with the Group headline profit before tax and adjusted items*
increasing by a further 5% to £991.4 million (2022: £947.2 million). To
further increase the Group's profitability when the first half was impacted by
the well-publicised international supply chain challenges, which resulted in
the reduced availability of certain key footwear styles, gives me great
confidence in both the strength of our market leading sports fashion
proposition and the expertise of our colleagues.
Since joining the Group in September 2022, I have undertaken a full strategic
review of the Group with the results of this presented at a Capital Markets
Event on 2 February 2023. I have described this as a new and distinct chapter
in the growth story of JD and, like any new chapter, there will be some
changes. I concluded at an early stage that the branded fashion businesses
within our Sports Fashion segment, whilst attractive, were not integral to the
development of our core sports fashion proposition and so we have subsequently
divested a number of businesses in this area. The costs of this exercise
together with costs associated with closing our South Korea business, other
impairments on prior period acquisitions and movements in the present value of
put and call options resulted in adjusted items* for the 52 week period ending
28 January 2023 of £550.5 million (52 week period ending 29 January 2022:
£292.5 million). Consequently, the Group profit before tax decreased to
£440.9 million (2022: £654.7 million).
The JD fascia has an outstanding reputation with both consumers and our
international brand partners and we are convinced that the most significant
opportunities lie in the continued international development of this business.
I also recognise the importance of having complementary fascias which leverage
the JD concept and so, for example, we will also be investing in our seeder
concepts of Size? And Footpatrol and looking to strengthen our community
fascias of Shoe Palace and DTLR.
Sports Fashion
UK and Republic of Ireland
We are encouraged by another robust performance in the premium Sports Fashion
retail fascias in the UK and Republic of Ireland which delivered a profit
before tax and adjusted items (excluding IP charges)* of £356.2 million
(2022: £386.4 million). It should be recognised that this period's result
includes a full annual charge for business rates whereas, in the prior period,
business rates were only fully payable from July when the UK Government
withdrew its COVID-19 related rates relief support programme. This performance
was underpinned by resilient consumer demand with growth in organic sales at
constant exchange rates* compared to the prior period of 12% with this revenue
growth accelerating through the second half of the period.
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 and a relocation at Fosse Park in Leicester, which is one of the
biggest out of town retail parks in the UK, demonstrating our ongoing
commitment to continue raising standards in the retail of premium sports
fashion 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 444 stores at the period end (2022: 436). 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, our non-core branded fashion businesses including Tessuti, Giulio
and Mainline Menswear delivered a total profit before tax and adjusted items*
of £19.7 million (2022: £33.9 million) which included £7.0 million (2022:
£19.6 million) from the businesses which have now been divested (including
Footasylum).
Europe
We are also pleased by the recovery that we have seen in our premium Sports
Fashion businesses in Europe with our combined businesses delivering a profit
before tax and adjusted items (excluding IP charges)* of £92.6 million (2022:
£29.2 million). Clearly the stores being open for the full period has been
very beneficial in driving an improved performance with growth in organic
sales at constant exchange rates* compared to the prior period of 34%.
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 the Group expanding its warehouse footprint in
Southern Belgium and Northern France. Longer term, the Group has now taken
possession of the 620,000 sqft facility in Heerlen with initial fitting out of
the site ongoing. Fulfilment to stores from this facility is still expected to
commence in the first half of 2024.
We firmly believe in the long-term opportunity for JD in Europe and we remain
committed to expanding our physical retail presence in all markets at pace. A
net 58 new JD stores opened in the period across the continent which included
the conversion of 23 stores which formerly traded as Chausport in France.
Working in conjunction with the MIG team, there were 12 new stores in Eastern
Europe, including the first JD stores in Hungary and Lithuania. Further,
working with the Cosmos team, the Group opened its first JD store in Greece in
the period with a second store in Greece and our first store in Cyprus also
opened by this team in the new financial period. The JD team in Europe is also
managing the joint venture in Israel with six stores opened in the period and
one further store opened to date in the new financial period.
Elsewhere, our other fascias, which include our businesses focused on the
Sporting Goods market, continue to adapt their businesses as appropriate for
their markets with a net 10 new stores for the combined Sprinter and Sport
Zone businesses in Iberia and a net nine new Cosmos stores across Greece and
Cyprus. The MIG team in Eastern Europe opened their first Sizeer stores in
Bosnia, Croatia, Serbia and Slovenia although these were offset by closures of
both Sizeer stores and the lower price point 50 Style stores in other markets,
particularly Poland. There were also a net 12 closures for the Perry Sport and
Aktiesport businesses in the Netherlands. As with our premium Sports Fashion
fascias, these businesses benefitted from the stores being open for the full
period with the profit before tax and adjusted items* increasing to £60.8
million (2022: £51.3 million).
Recently, I was delighted to announce that we had entered into exclusive
negotiations on the potential acquisition of the Courir business in Europe.
Based in Paris, this business has 313 stores across six countries in Europe.
Courir operates a differentiated proposition to JD with its product mix, brand
strategies and store designs directed more towards female consumers. In this
regard, it perfectly complements JD and is capable of being rolled out
internationally alongside JD. We would anticipate that this acquisition will
formally close later in the year after a mandatory consultation process with
the Courir works council and an anti-trust review. In addition, we have also
been successful in our bid to acquire nine stores in France which are
currently trading as Gap. These stores, which will all be converted to JD,
will significantly enhance our presence in key city centre locations,
particularly in Paris.
North America
This was very much a year of 'two halves' with the performance in the first
half, particularly the first quarter, negatively impacted 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, particularly in the first
half, as footwear represents more than 80% of total sales which is the highest
proportion of any of our markets. However, we are very encouraged by the fact
that trading improved rapidly through the second half as the availability
recovered and so, over the full period, there was growth in organic sales at
constant exchange rates* compared to the prior period of 5%. North America
remains our most significant market in premium Sports Fashion in terms of
revenues.
Given the trading challenges in the first half of the period, we are very
pleased that profitability has largely been maintained at the prior period
levels with our premium Sports Fashion businesses delivering a profit before
tax and adjusted items (excluding IP charges)* of £317.1 million (2022:
£322.2 million).
The roll-out of the JD fascia continues at pace with 138 stores (2022: 89
stores) trading as JD at the end of the period, which includes 10 stores
(2022: two stores) in Canada. There are also two stores (2022: one store)
trading as Size? In Canada. The net 41 new stores for JD in the United States
in the period included 24 locations where Finish Line previously traded with
15 direct conversions of the same space and a further nine stores relocated to
facilitate JD opening in a site which is either more appropriately sized or is
in a location which attracts higher levels of footfall. In addition, JD opened
its second flagship store in the United States with a store on State Street in
Chicago.
Looking ahead, it is our intention to accelerate the roll out of the JD fascia
in North America with a target to deliver an additional 500 to 600 JD stores
over the next five years. These new stores will come from both new stores and
the conversion of the remaining standalone Finish Line stores with 392 stores
trading under this banner as at 28 January 2023 (2022: 427 stores).
The Shoe Palace and DTLR businesses also continue to make progress in their
markets with seven new Shoe Palace stores and a net two new DTLR stores opened
in the period. These fascias continue to perform an important complementary
role with their focus on consumers that are more neighbourhood based.
Elsewhere, it remains our intention to retain the Finish Line name as a
concession in the Macy's department stores with a product offer which is more
focused on families. As with our premium businesses, there were short term
trading challenges in the first half of the period but the performance
improved through the second half. Ultimately, as with our premium fascias, the
profitability was largely maintained with these concessions delivering a
profit before tax and adjusted items* of £44.7 million (2022: £45.4
million). Whilst the terms of our contract with Macy's permit us to close a
number of concessions each year, our enhanced confidence in this part of the
business is reflected by the fact that the number of concession that we
operate has been maintained at 289 stores with two openings and two closures.
Asia Pacific
The Group continues to make good progress in the Asia Pacific region with our
premium Sports Fashion businesses delivering a profit before tax and adjusted
items (excluding IP charges)* of £61.7 million (2022: £36.6 million) with
growth in organic sales at constant exchange rates* compared to the prior
period of 36%.
The principal reason for the strength of this performance is a continued
excellent performance in Australia where we have opened an additional seven
stores in the period bringing the total at the end of the period to 47 stores
(2022: 40 stores). Our management team in Australia is also responsible for
our operations in New Zealand where we have made a very encouraging start with
three stores now trading (2022: one store).
Elsewhere, other markets, particularly Malaysia and Thailand have seen a
strong recovery with footfall progressively returning to pre COVID-19 levels
after three years of trading restrictions. However, we have now decided to
exit South Korea as a market with a wind-down of our operations ongoing. This
was a difficult decision as we recognise that many people had invested a
significant amount of time to try and make JD a success in that market.
However, the onset of COVID-19 three years ago and the subsequent loss of
tourism into the country had a very detrimental impact on our development and,
whilst the challenges of COVID-19 continue to ease, this market was slower to
recover than other countries in the region.
Elsewhere, working with our joint venture partner, PT Erajaya Swasembada Tb,
there were seven stores trading in Indonesia at the end of the period with one
further opening to date in the new financial period.
Gyms
Our consumer surveys tell us that, whilst our consumers love the JD stores and
our retail experience, they also love the JD brand itself. The JD Gyms are the
first example of how this relationship between the brand and its consumers can
be extended beyond physical retail into other relevant categories with our
market-leading, premium low-cost gyms proposition providing an environment and
motivating atmosphere in which all participants can achieve their fitness
goals.
After opening a further net five gyms in the period, the Group had 79 sites in
the UK at the end of the period with 75 sites trading as JD and four sites
still bannered as X4L, of which one has subsequently closed in the new
financial period. We have a strong pipeline of opportunities for our gyms
business and would expect to open at least a similar number of new gyms in the
UK in the current financial period.
The Group also has a further eight gyms operating under the Gymnation name in
the United Arab Emirates. Given the lack of JD physical retail presence in the
Middle East then there are no plans currently to convert these gyms to JD and
the business will continue to expand in its markets using the Gymnation name.
During the period we broadened our leisure interests with the acquisition of
60% of Total Swimming Holdings Limited and its subsidiaries, which includes
Swim!, the first multi-site operator of dedicated children's 'learn to swim'
centres in the UK with 10 sites operating at the end of the period. Initial
cash consideration of £11.1 million has been paid with additional
consideration of up to £4.0 million potentially payable if certain targets
and future performance criteria are achieved. As at the date of this report
contingent consideration of £2.0 million was considered potentially payable.
Financial Performance
This has been another excellent period for our Sports Fashion businesses with
these businesses delivering a profit before tax and adjusted items* of £977.4
million (2022: £928.3 million).
This result was largely driven by the enduring strength of our premium Sports
Fashion fascias which delivered an aggregate profit before tax and adjusted
items* of £827.6 million (2022: £774.4 million) largely as a consequence of
the post pandemic recovery that we saw across our businesses in Europe.
Overall gross margin in Sports Fashion decreased slightly to 48.1% (2022:
49.5%) largely due to the return of some promotional activity in North America
as the supply chain normalised together with some short term promotional
activity in the Fashion fascias which have now largely been divested.
After recognising aggregate adjusted items* in the period of £510.7 million
(2022: £292.5 million) relating to the loss on disposal of the fashion
businesses together with costs associated with closing our South Korea
business, other impairments on prior period acquisitions and movements in the
present value of put and call options, the profit before tax in Sports Fashion
was £466.7 million (2022: £635.8 million).
Outdoor
This has been another period of revenue growth in our Outdoor businesses with
growth in organic sales at constant exchange rates* compared to the prior
period of 4%. It is clear that, whilst international travel has now fully
reopened, spending time outdoors remains popular with people appreciating the
physical and mental health benefits that it provides. In particular, our
businesses saw a strong demand throughout the period for activity-based
categories such as fishing, cycling and camping. However, the exceptionally
dry and warm weather in the UK through the key Summer period depressed the
sale of the higher margin apparel and footwear ranges.
We continue to invest in all of our fascias with the store developments in the
period including new Go Outdoors stores in Bury and Launceston and the
relocation of our stores in Swindon, Gateshead and Derby. We have also
extended our trial of Go Outdoors on the High Street with the conversion of an
additional 13 stores which previously traded as either Blacks or Millets. In
addition, we have enhanced Go Outdoors' position as an authoritative
nationwide retailer in the key activity-based categories of cycling, fishing
and equestrian with two new Wheelbase cycling concessions in the stores at
Coventry and Stockton to complement the Fishing Republic concessions which are
now in more than 50 stores and the Naylors Equestrian concessions which are
now 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 1.7% to 42.2% (2022: 43.9%). Consequently, the profit before tax
and adjusted items* reduced to £14.0 million (2022: £25.9 million). We are
confident that we are still making progress in this sector but we accept that
there is still work to do on sharpening the proposition so that it is has
greater year round relevance and is less reliant on particular weather events.
There were adjusted items* in the period relating to impairments on prior
period acquisitions which totalled £39.8 million (2022: £nil) which means
that the loss before tax in Outdoor was £25.8 million (2022: profit before
tax of £25.9 million).
Logistics Developments
UK and Republic of Ireland
The proportion of online orders for UK customers that are being fulfilled from
the 515,000 sqft facility in Derby continues to increase with this site
expected to fulfil the majority of UK online orders by the time of the peak
period later in the year. Approximately £65 million has been invested at this
site to date, of which £55 million was incurred this financial period, with
the full cost of this initial development expected to rise to approximately
£70 million by the middle of 2023.
As previously indicated, we expect to have exited the temporary e-fulfilment
facility at Sherburn, Leeds, which was operated by Clipper Logistics Plc, by
the end of Summer 2023.
Europe
Initial fitting out of the 620,000 sqft facility in Heerlen, South-East
Netherlands, has now commenced after the site was formally handed over in
March 2023. This was later than originally anticipated and so the capex
incurred to the end of January 2023 was only €5 million. At this stage, we
would still expect that the total cost over the life of the project to bring
the site into full operational use will be approximately €95 million with
the shipping of products to stores expected to commence in the first half of
2024 to be followed by the fulfilment of online orders later in that year.
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 locally for JD in Western Europe. Currently, more
than 60% of deliveries to JD stores and 40% of online orders from JD customers
in Western Europe are being fulfilled out of these facilities with the rest
processed from the UK.
Elsewhere in Europe, the shipping of product to JD stores in Eastern Europe
and Greece is integrated into the infrastructures of MIG and Cosmos
respectively. The majority of JD online orders in these markets are also
fulfilled locally.
North America
Our businesses continue to make progress on a number of infrastructure
projects which will enhance both our collective operational effectiveness and
the consumer experience. This includes a project to install automation
equipment at Shoe Palace's new 512,000 sqft warehouse facility in Morgan Hill,
California. We anticipate that this project will cost approximately $70
million with a planned go live in early 2025.
People
In my relatively short time with the Group I have been able to visit all of
our principal locations and I have seen first-hand that we have talent, energy
and commitment at every level in our businesses. I know the strength of
engagement that we have with our people and it is pleasing that this has been
recognised externally with JD voted as the best company for "Ability to
Attract, Develop and Retain Top Talent" in the 2022 study of Britain's Most
Admired Companies. In the same study, JD was also awarded the overall sector
prize for "Retailers - Broadline & Home".
I have now completed a full review of our organisational structure with clear
principles of responsibility and well defined spans of control to help lay the
foundation for our future success. I have already begun to communicate these
changes which include structuring our operations by brand with global business
unit Managing Directors. In this regard, I can confirm that Michael Armstrong,
formerly the Group Buying Director, has been appointed as the JD Global
Managing Director. By definition, the width of the product offer in JD means
that Michael will continue to oversee all key brand relationships. We are also
supporting our global business units through the creation of centres of
excellence which will have specific measurable KPIs that are closely aligned
to our business priorities. We will recruit additional resource where it is
necessary to help deliver our growth plans.
I am absolutely committed to giving all of our colleagues a quality work
experience which is challenging yet rewarding and I look forward to working
with all of our teams in writing the next distinct chapter in the growth story
of JD.
Régis Schultz
Chief Executive Officer
17 May 2023
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 COVID-19 related restrictions. This was a positive to
revenues in many countries, particularly in Europe, although revenues in the
United States were depressed in the first half as a result of reduced
availability of certain key footwear styles.
Ultimately, total revenue for the Group for the 52 week period ended 28
January 2023 increased to £10,125.0 million (52 week period ended 29 January
2022: £8,563.0 million) with growth in organic sales at constant exchange
rates* compared to the prior period of 12%.
Total gross margin for the period has reduced slightly to 47.8% (2022: 49.1%)
with the return to normalised stock levels in North America through the second
half of the period leading to the return of some promotional activity
consistent with expectations. Encouragingly, gross margins are ahead of the
levels prior to the pandemic (2020: 47.0%) which is a fair reflection of the
underlying progress that the Group has made on managing the overall levels of
markdown and promotional activity across our global businesses.
Profit Before Tax
Profit before tax and adjusted items* was 5% higher than the prior period at
£991.4 million (2022: £947.2 million). This is a record result for the Group
with a particularly strong performance through the second half of the period
as the supply of key footwear styles normalised. This represents 9.8% of
revenues (2022: 11.1%) which, whilst lower than last year, is more
representative of what the Group would expect to deliver in a normalised
trading environment free from government fiscal support and other
interventions. It is also consistent with the targets that we set out in our
recent Capital Markets Event.
As a result of the increase in the adjusted items* to £550.5 million (2022:
£292.5 million), the Group profit before tax decreased to £440.9 million
(2022: £654.7 million).
We are particularly encouraged with the performance of our premium Sports
Fashion fascias in North America where, notwithstanding the trading challenges
in the first half of the period, the profitability has largely been maintained
at the prior period levels with these businesses delivering a profit before
tax and adjusted items (excluding IP charges)* of £317.1 million (2022:
£322.2 million). After recognising intergroup recharges for the use of the JD
intellectual property of £23.7 million (2022: £24.6 million) and adjusted
items* of £303.9 million (2022: £239.7 million), which principally relates
to a non-cash movement in the present value of future put and call options
held with the minority shareholders of Genesis Topco Inc which is the
intermediate holding company for our businesses in the United States, the loss
before tax in the premium Sports Fashion fascias in North America was £10.5
million (2022: profit before tax £57.9 million).
We are also particularly encouraged by the post-pandemic recovery of our
premium Sports Fashion fascias in Europe which delivered a profit before tax
and adjusted items (excluding IP charges)* of £92.6 million (2022: £29.2
million). After recognising intergroup recharges for the use of the JD
intellectual property of £51.6 million (2022: £20.6 million) and a credit
for adjusted items* of £0.3 million (2022: credit of £1.1 million), the
profit before tax in the premium Sports Fashion fascias in Europe was £41.3
million (2022: £9.7 million).
Total operating costs in the period before adjusted items* were £3,812.9
million which represented 37.7% of revenue (2022: £3,221.5 million being
37.6% of revenue) with the increase in costs reflecting the end of the support
programmes that various governments put in place to support corporates through
the COVID-19 pandemic.
There were adjusted items* in the period of £550.5 million (2022: £292.5
million) relating to the loss incurred on the divestment of our non-core UK
fashion businesses, costs associated with closing our South Korea business,
movements in the present value of put and call options and other impairments
on prior period acquisitions:
2023 2022
(unaudited)
£m £m
Impairments of intangible assets and investments (1) 137.2 -
Items that are unusual in nature or outside of the normal course of business:
Movement in present value of put and call options (2) 296.2 292.7
Insurance settlement for DTLR (3) - (16.6)
Items as a result of acquisitions, divestments, major business changes or
restructuring:
Divestment and restructuring (4) 129.6 16.4
Deferred consideration release (5) (12.5) -
Administrative expenses - adjusted items* 550.5 292.5
1. The impairment in the current period primarily relates to the
impairment of goodwill and fascia name arising on the acquisition of
Deporvillage (£24.7 million), Hairburst (£21.6 million), Leisure Lakes
(£21.1 million), Wheelbase (£18.7 million), Bodytone (£12.4 million), Missy
Empire (£10.2 million), Livestock (£7.1 million), Wellgosh (£1.0 million),
Oi Polloi (£0.7 million) and Philip Browne (£0.1 million). In addition there
is an impairment charge for the investment in Gym King of £19.6 million.
2. Movement in the present value of the liabilities in respect of put
and call options as re-measured at each reporting date (£295.0 million),
comprising Genesis Topco Inc charge of £280.8 million (2022: charge of
£258.7 million), Iberian Sports Retail Group charge of £19.6 million (2022:
charge of £31.6 million), Marketing Investment Group S.A: a charge of £0.5
million (2022: charge of £1.7 million) and a credit of £5.9 million (2022:
charge of £0.7 million) in relation to the other put and call options held by
non-controlling interests. Also included is a charge of £1.2 million relating
to an element of put and call option agreements that have been treated as a
long term employee benefit under IAS 19.
3. Insurance settlement proceeds in the prior period 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 in Note 5.
4. The divestment and restructuring charge relates to the divestment
of UK-based non-core fashion business assets (£106.7 million) and Footasylum
(£14.8 million) plus the closure costs associated with JD's announced
withdrawal from the South Korean market in the current period (£8.1 million)
being business restructuring costs of £2.1 million and a charge of £6.0
million in relation to the impairment of non-current assets. (2022: The impact
of 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 £10.9 million).
5. Acquisition related release of deferred consideration for Leisure
Lakes (£10.5 million) and Total Swimming Holdings Limited (£2.0 million).
Cash and Working Capital
The strong performance in the period is reflected in the cash generation with
the net cash balance at the end of the period increasing to £1,469.3 million
(2022: £1,185.9 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 after the first quarter, and increased
investment in capital expenditure as we expand our geographical footprint
further, to enhance the consumer proposition and upgrade our operational
infrastructure.
Inventories, net of provisions, across the Group at the end of the period were
£1,466.4 million (2022: £989.4 million). Within this, inventories, net of
provisions, in our businesses in North America increased to $581.7 million
(2022: $262.9 million) as the flow of product reverted to normal levels.
Forward cover in the core JD business in the UK / Europe at the end of the
period was 10 weeks which was broadly consistent with the prior period (2022:
nine weeks) with a continual focus on robust stock management disciplines.
Gross capital expenditure* (excluding disposal costs) increased to £359.3
million (2022: £247.9 million) with the primary focus of our capital
expenditure continuing to be our physical retail fascias* where spend in the
period was £213.4 million (2022: £124.0 million). The increased investment
that the Group is making in its logistics infrastructure is reflected in the
fact that spend on capital expenditure on logistics* increased to £80.8
million (2022: £33.5 million). Consistent with the messaging in our recent
Capital Markets Event, our growth plans over the next five years will be
powered by an increase in the spend on capital expenditure with an annual
spend of up to £600 million per annum with 50% to 60% of this investment
dedicated to growing our store base in underpenetrated markets.
Earnings per Ordinary Share
The basic earnings per ordinary share decreased to 2.76p (2022: 7.17p)
consistent with the reduction in the Group profit before tax.
The adjusted* earnings per ordinary share increased to 13.39p (2022: 12.84p).
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 in this
area are receiving the external recognition that we believe they deserve with
Sustainalytics, one of the world's leading independent ESG research and
analytics businesses, classifying JD as 'low risk' and placing it in the top
5% of a list of more than 500 global retail businesses.
Progress in the period on environmental and sustainable sourcing can be
consolidated into three main pillars:
Reducing the Impact of Climate Change
· Endorsement of the Group's strategy for climate-related risk
assessment was verified via the award of 'A-' grades in December 2022 by the
CDP for both Climate Change and Water Security which are both three grades
above our sector average
· The Group achieved its target of 100% renewable energy use for
operationally controlled stores* across the UK, Republic of Ireland and
Western Europe by the end of the reporting period
· The Group completed a number of projects to further reduce its
future carbon emissions:
o Retrofitted low wattage LED lights across 25 stores and gyms
o Installed solar panels at three Go Outdoors stores, the Go Outdoors
Distribution Centre in Middlewich, UK and the Shoe Palace Distribution Centre
in Morgan Hills, California
o Enhanced the control of the electrical systems at a further 140 sites
through the installation of Building Management Systems ('BMS') with the
electricity usage at more than 500 sites now monitored and controlled via BMS
systems
o Proof of concept completed on Voltage Optimisation technology
o Alternative water systems deployed across 62 gyms
o Additional Electric Vehicle changepoints installed at key office and
warehouse locations
· A key supply chain partner transitioned to a 100% renewable
energy tariff and installed solar panels at its manufacturing site, reducing
the carbon footprint of the famous JD duffle bag
Sustainable Sourcing
· Regular engagement with our largest third-party brands,
monitoring their progress to attain global leadership for sustainable product
innovation
· 'Better Cotton' usage in our private label business now stands at
over 98%
· All private label garment transit bags are now made using post
industrial waste making them 100% recycled and 100% recyclable
· Sustainability awareness extended through the #IAMSUSTAINABLE
online training courses which are now available in 11 countries across the
Group with region specific content and language to maximise relevance and
colleague engagement
Circular Economy and Recycling
· Participation in Textiles 2030 has supported the delivery of a
multi-fascia collaboration on circular business models and customer awareness
initiatives. Our first module, Circularity In Business, involved an extensive
working group designing a Take Back Scheme for tents within our Outdoor
business where we look to repair and return tents to the original customer for
further use. For previously returned stock we inspect and repair these tents
and, where possible, make them available as 'pre-loved' resale items in
selected stores. We have also successfully inspected and repaired over 600
cycles, which have been resold via two dedicated stores
· For the third successive year we retained our 'Zero Waste to
Landfill' accreditation at our Kingsway warehouse. Further, our Group Head
Office in Bury, UK, and ISRG Head Office and Logistics Centre in Alicante,
Spain have also achieved this accreditation
· Our store and Distribution Centre asset take back programme
enabled the recovery and reuse of over 14 tonnes of hangers and 236 tonnes of
plastic totes
Store Portfolio (unaudited)
During the period, store numbers have moved as follows:
Period Start New Stores Transfers Net Disposed Closures Period End
Premium Sports Fashion
UK & Republic of Ireland 436 16 4 - (12) 444
Europe 377 52 23 - (17) 435
Asia Pacific 79 15 - - (6) 88
North America 931 52 - - (28) 955
1,823 135 27 - (63) 1,922
Other Fascias
UK & Republic of Ireland (1) 151 10 (4) (75) (12) 70
Europe 889 66 (23) - (82) 850
Asia Pacific 2 6 - - - 8
North America 289 2 - - (2) 289
1,331 84 (27) (75) (96) 1,217
Total Sports Fashion 3,154 219 - (75) (159) 3,139
Total Outdoor 248 11 - - (8) 251
Total Group 3,402 230 - (75) (167) 3,390
1) Net disposed in the period consists of:
a. Acquisition of one store trading as Philip Browne Menswear on 10
May 2022
b. Disposal of 62 stores trading as Footasylum on 5 August 2022
c. Disposal of five stores trading as Base Childrenswear on 16
December 2022
d. Disposal of five stores trading as Kids Cavern on 16 December 2022
e. Disposal of three stores trading as Pretty Green on 16 December
2022
f. Disposal of one store trading as Watch Shop on 16 December 2022
The 70 stores at the end of the period includes 62 stores which were disposed
shortly after the period end on 7 February 2023:
a. 38 stores trading as Tessuti (incl Xile Clothing)
b. 16 stores trading as Scotts
c. Five stores trading as Choice
d. Two stores trading as Giulio
e. One store trading as Cricket
In addition, the Group now has 13 JD stores operating under joint venture
arrangements with partners in Indonesia and Israel as follows:
Period Start New Stores Period End
Indonesia - 7 7
Israel - 6 6
- 13 13
After opening a total of six gyms in the period, the Group had a total of 87
gyms at the end of the period across the UK and United Arab Emirates ('UAE').
Period Start New Sites Transfers Period End
Gyms
JD (UK) 63 5 7 75
X4L (UK) 11 - (7) 4
Gymnation (UAE) 7 1 - 8
81 6 - 87
Further, following the acquisition of Total Swimming Holdings in May 2022, the
Group now has 10 Swim! sites in the UK.
Neil Greenhalgh
Chief Financial Officer
17 May 2023
Alternative Performance Measures (terms 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 excluding adjusted
items (see below). The Group's operating and reportable segments under IFRS 8
are Sports Fashion and Outdoor, however, more granular information is provided
within these Alternative Performance Measures which the Directors believe will
further enhance the readers understanding of the Group.
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 adjusted items. A reconciliation
between basic earnings per share and adjusted earnings per share is shown
below:
2023 2022
(unaudited)
Basic earnings per share 2.76p 7.17p
Adjusted items 10.67p 5.66p
Tax relating to adjusted items (0.04p) 0.01p
Adjusted earnings per ordinary share 13.39p 12.84p
Adjusted Items
For the financial period ended 28 January 2023, the Group has used the term
'adjusted items' as opposed to 'exceptional items' as used in previous
financial periods and the definitions of adjusted items have also been
updated. These updates are intended to provide greater clarity over what is
classified as an adjusted item and, by being more specific in terms of
defining adjusted items, results in the provision of more relevant information
with greater comparability between financial periods. This change has only
affected the presentation of the items within the Adjusted Items note, the
balances in the prior period remain unchanged.
The Group exercises judgement in assessing whether items should be classified
as adjusted items. 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 adjusted, the Group
considers items which are significant because of either their size or their
nature. In order for an item to be presented as adjusted, it should typically
meet at least one of the following criteria:
· Impairments of intangible assets and investments recognised on
acquisition.
· It is unusual in nature or outside the normal course of business
(for example, the movement in the present value of put and call options).
· Items directly incurred as a result of either an acquisition or a
divestment, or arising from a major business change or restructuring
programme.
The separate reporting of items, which are presented as adjusted items within
the relevant category in the Consolidated Income Statement, helps provide an
indication of the Group's trading performance. An explanation as to why
individual items have been classified as adjusted is given in Note 3.
Dividend Cover
Being the number of times that the full period dividend is covered by the
adjusted earnings per ordinary share.
2023 2022 2021 2020 2019
(unaudited)
Adjusted earnings per ordinary share (pence) 13.39 12.84 6.44 6.85 5.69
Full period dividend per share (pence) 0.80 0.35 0.29 0.06 0.34
Dividend cover 16.74 36.69 22.21 114.17 16.74
Alternative Performance Measures (continued)
EBITDA Before Adjusted Items
Earnings before interest, tax, depreciation, amortisation and adjusted items.
2023 2022
(unaudited) £m
£m
Profit for the period 226.7 459.6
Addback:
Financial expenses 77.3 67.9
Income tax expense 214.2 195.1
Depreciation, amortisation and impairment of non-current assets 636.6 593.1
Adjusted items (see note 3) 550.5 292.5
Deduct:
Financial income (8.4) (1.4)
EBITDA before adjusted items 1,696.9 1,606.8
Energy Use from Operationally Controlled Stores
Operationally controlled sites are defined as stores for which the Group
management team is able to make changes or decisions to energy supply and
services without breaching existing contracts or requiring landlord consent.
Gross Capital Expenditure
2023 2022
(unaudited) £m
£m
Investment in software 19.9 14.9
Acquisition of property, plant and equipment 326.6 227.3
Acquisition of non-current other assets 12.8 5.7
Total gross capital expenditure 359.3 247.9
An alternative presentation of this is as follows:
2023 2022
(unaudited) £m
£m
Investment in physical retail fascias 213.4 124.0
Investment in logistics infrastructure 80.8 33.5
Investment in technology and other 65.1 90.4
Total gross capital expenditure 359.3 247.9
Like-for-Like (LFL) 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 period. 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 on
page 32.
Operating Costs Before Adjusted Items
2023 2022
(unaudited) £m
£m
Selling and distribution expenses 3,315.6 2,808.1
Administrative expenses - normal 497.3 413.4
Total operating costs before adjusted items 3,812.9 3,221.5
Alternative Performance Measures (continued)
Operating Profit Before Adjusted Items
A reconciliation between operating profit and adjusted items can be found in
the Consolidated Income Statement.
Organic Revenue Growth at Constant Exchange Rates
One of the key measures of performance is the growth in revenues between
reporting periods. Historically, the Group has considered the growth in
revenues on a Like for Like basis which removes the impact of new store
openings and closures in the current or previous financial period. However,
revenues in the 52 week periods to 30 January 2021 and 29 January 2022 were
impacted by COVID-19 related trading restrictions, particularly in stores.
Consequently, the consideration of revenues on a like for like basis has
lacked context and so the Group has, instead, considered the revenue
performance on a basis which aggregates stores and websites. Acquisitions and
disposals, including the annualisation impact of acquisitions or disposals in
the previous period, are excluded to ensure that the growth which is reported
reflects the same period of ownership in both reporting periods.
Organic sales growth at constant exchange rates for each operating segment is
calculated as follows for the 52 week period ended 28 January 2023
(unaudited):
Revenue 2022 Revenue 2022 Acquisitions, Disposals & Annualisations Organic Growth Revenue 2023 Organic Growth %
Actual Re-translated Actual Actual Actual
(1) (2) (3) (4)
£m £m £m £m £m %
Sports Fashion
(Reportable Segment)
Premium Retail Fascias
UK & ROI 2,318.1 2,318.3 - 279.2 2,597.5 +12%
Europe 1,024.3 1,024.2 10.7 350.9 1,385.8 +34%
Asia Pacific 300.8 312.7 6.1 112.1 430.9 +36%
North America 2,341.9 2,624.2 93.4 128.0 2,845.6 +5%
Other Retail Fascias
UK & ROI 649.4 649.4 (158.6) 29.6 520.4 +5%
Europe 916.2 914.0 185.5 80.2 1,179.7 +9%
Asia Pacific 0.4 0.4 0.4 1.4 2.2 +350%
North America 249.9 280.1 - 0.6 280.7 +0%
Non-Retail Businesses 248.6 249.3 46.0 22.5 317.8 +9%
Total Sports Fashion 8,049.6 8,372.6 183.5 1,004.5 9,560.6 +12%
Outdoor (Reportable Segment)
Total Outdoor 513.4 513.4 28.1 22.9 564.4 +4%
TOTAL GROUP 8,563.0 8,886.0 211.6 1,027.4 10,125.0 +12%
1) Being revenues in the 52 week period to 29 January 2022 re-translated
at the average exchange rate in the 52 week period to 28 January 2023
2) Being the net impact of acquisitions and disposals made in the period
and the annualisation of acquisitions made in the prior period
3) Being revenue growth for the same period of ownership in both periods
4) Being organic revenue growth in the 52 week period to 28 January 2023
as a % of the revenues for the 52 week period to 29 January 2022 (as
re-translated for current period exchange rates)
Alternative Performance Measures (continued)
The comparison table for the 52 week period to 29 January 2022 is presented
below:
Revenue 2021 Revenue 2021 Acquisitions, Disposals & Annualisations Organic Growth Revenue 2022 Organic Growth %
Actual Re-translated Actual Actual Actual
(1) (2) (3) (4)
£m £m £m £m £m %
Sports Fashion
(Reportable Segment)
Premium Retail Fascias
UK & ROI 1,810.1 1,803.7 - 514.4 2,318.1 +29%
Europe 792.2 759.7 0.1 264.5 1,024.3 +35%
Asia Pacific 259.6 255.6 6.1 39.1 300.8 +15%
North America 1,534.7 1,438.3 736.7 166.9 2,341.9 +12%
Other Retail Fascias
UK & ROI 467.6 467.3 104.9 77.2 649.4 +17%
Europe 544.4 521.8 268.6 125.8 916.2 +24%
Asia Pacific - - 0.4 - 0.4 -
North America 235.7 221.0 - 28.9 249.9 +13%
Non-Retail Businesses 163.7 163.7 12.3 72.6 248.6 +44%
Total Sports Fashion 5,808.0 5,631.1 1,129.1 1,289.4 8,049.6 +23%
Outdoor (Reportable Segment)
Total Outdoor 359.3 359.3 9.1 145.0 513.4 +40%
TOTAL GROUP 6,167.3 5,990.4 1,138.2 1,434.4 8,563.0 +24%
1) Being revenues in the 52 week period to 30 January 2021 re-translated
at the average exchange rate in the 52 week period to 29 January 2022
2) Being the net impact of acquisitions and disposals made in the period
and the annualisation of acquisitions made in the prior period
3) Being revenue growth for the same period of ownership in both periods
4) Being organic revenue growth in the 52 week period to 29 January 2022
as a % of the revenues for the 52 week period to 30 January 2021 (as
re-translated for current period exchange rates).
Profit Before Tax and Adjusted Items
A reconciliation between profit before tax and profit before tax and adjusted
items is as follows:
2023 2022
(unaudited)
£m £m
Profit before tax 440.9 654.7
Adjusted items 550.5 292.5
Profit before tax and adjusted items 991.4 947.2
Alternative Performance Measures (continued)
The profit before tax and adjusted items for each operating segment is
calculated as follows:
52 Weeks to 28 January 2023 (unaudited)
Profit before tax and adjusted items
Excluding IP (1) Total Adjusted items Profit before tax
IP (1)
£m £m £m £m £m
Sports Fashion
(Reportable Segment)
Premium Retail Fascias
UK & ROI 356.2 83.6 439.8 (129.4) 310.4
Europe 92.6 (51.6) 41.0 0.3 41.3
Asia Pacific 61.7 (8.3) 53.4 (8.2) 45.2
North America 317.1 (23.7) 293.4 (303.9) (10.5)
Sub-total Premium Retail Fascias 827.6 - 827.6 (441.2) 386.4
Other Retail Fascias
UK & ROI - Continuing 12.7 - 12.7 (3.7) 9.0
UK & ROI - Divested (2) 7.0 - 7.0 (16.2) (9.2)
Europe 60.8 - 60.8 (38.7) 22.1
Asia Pacific 0.2 - 0.2 - 0.2
North America 44.7 - 44.7 - 44.7
Sub-total Other Retail Fascias 125.4 - 125.4 (58.6) 66.8
Other Businesses 24.4 - 24.4 (10.9) 13.5
Total Sports Fashion 977.4 - 977.4 (510.7) 466.7
Outdoor (Reportable Segment)
Total Outdoor 14.0 - 14.0 (39.8) (25.8)
Unallocated
Net Interest Expense - - - - -
991.4 - 991.4 (550.5) 440.9
1) Being the intergroup charge for the use of the JD intellectual
property which is legally owned by JD Sports Fashion Plc in the UK. This
results in net income in the premium Sports Fashion retail fascias in the
United Kingdom and Republic of Ireland which is offset by a charge in the
international premium Sports Fashion retail fascias. The Group reports the
performance of its operating segments excluding the impact of this intergroup
charge as this provides an indication of the operating segments' underlying
trading performance.
2) Being:
a. Divested 5 August 2022: Footasylum Limited
b. Divested 16 December 2022: Base Childrenswear Limited (80% equity
interest), Dantra Limited (75% equity interest), PG2019 Limited (100% equity
interest), Prevu Studio Limited (100% equity interest), Nicholas Deakins
Limited (100% equity interest), Uggbugg Fashion Limited - including its
subsidiary Missy Empire Limited (51% equity interest), Clothingsites Holdings
Limited - including its subsidiaries Clothingsites.co.uk Limited and Old Brown
Bag Clothing Limited (100% equity interest) and WHCO Limited - including its
subsidiaries: The Watch Shop Holdings Limited and Watch Shop Logistics Limited
(100% equity interest)
c. Divested 6 February 2023: Rascal Clothing Limited (75% equity
interest) following the exercise of a pre-emption right by one of the founders
d. Divested 7 February 2023: Tessuti Limited (87.5% equity interest) -
including its subsidiaries Choice Limited and Giulio Limited, R.D.Scott
Limited (100% equity interest) and Catchbest Limited (80% equity interest) to
Frasers Group Plc as per the terms of the transaction agreed on 16 December
2022
e. Divested 2 March 2023: Topgrade Sportswear Holdings Limited (80%
equity interest) to Frasers Group Plc as per the terms of the transaction
agreed on 16 December 2022
Alternative Performance Measures (continued)
52 Weeks to 29 January 2022
Profit before tax and adjusted items
Excluding IP (1) Total Adjusted items Profit before tax
IP (1)
£m £m £m £m £m
Sports Fashion
(Reportable Segment)
Premium Retail Fascias
UK & ROI 386.4 50.9 437.3 - 437.3
Europe 29.2 (20.6) 8.6 1.1 9.7
Asia Pacific 36.6 (5.7) 30.9 - 30.9
North America 322.2 (24.6) 297.6 (239.7) 57.9
Sub-total Premium Retail Fascias 774.4 - 774.4 (238.6) 535.8
Other Retail Fascias
UK & ROI - Continuing 14.3 - 14.3 0.1 14.4
UK & ROI - Divested (2) 19.6 - 19.6 (2.6) 17.0
Europe 51.3 - 51.3 (51.2) 0.1
Asia Pacific - - - - -
North America 45.4 - 45.4 - 45.4
Sub-total Other Retail Fascias 130.6 - 130.6 (53.7) 76.9
Other Businesses 23.3 - 23.3 (0.2) 23.1
Total Sports Fashion 928.3 - 928.3 (292.5) 635.8
Outdoor (Reportable Segment)
Total Outdoor 25.9 - 25.9 - 25.9
Unallocated
Net Interest Expense (7.0) - (7.0) - (7.0)
947.2 - 947.2 (292.5) 654.7
1) Being the intergroup charge for the use of the JD intellectual
property which is legally owned by JD Sports Fashion Plc in the UK. This
results in net income in the premium Sports Fashion retail fascias in the
United Kingdom and Republic of Ireland which is offset by a charge in the
international premium Sports Fashion retail fascias. The Group reports the
performance of its operating segments excluding the impact of this intergroup
charge as this provides an indication of the operating segments' underlying
trading performance.
2) Being:
a. Divested 5 August 2022: Footasylum Limited
b. Divested 16 December 2022: Base Childrenswear Limited (80% equity
interest), Dantra Limited (75% equity interest), PG2019 Limited (100% equity
interest), Prevu Studio Limited (100% equity interest), Nicholas Deakins
Limited (100% equity interest), Uggbugg Fashion Limited - including its
subsidiary Missy Empire Limited (51% equity interest), Clothingsites Holdings
Limited - including its subsidiaries Clothingsites.co.uk Limited and Old Brown
Bag Clothing Limited (100% equity interest) and WHCO Limited - including its
subsidiaries: The Watch Shop Holdings Limited Watch Shop Logistics Limited
(100% equity interest)
c. Divested 6 February 2023: Rascal Clothing Limited (75% equity
interest) following the exercise of a pre-emption right by one of the founders
d. Divested 7 February 2023: Tessuti Limited (87.5% equity interest) -
including its subsidiaries Choice Limited and Giulio Limited, R.D.Scott
Limited (100% equity interest) and Catchbest Limited (80% equity interest) to
Frasers Group Plc as per the terms of the transaction agreed on 16 December
2022
e. Divested 2 March 2023: Topgrade Sportswear Holdings Limited (80%
equity interest) to Frasers Group Plc as per the terms of the transaction
agreed on 16 December 2022
Consolidated Income Statement
For the 52 weeks ended 28 January 2023
52 weeks to 52 weeks to
28 January 2023 29 January 2022
Note (unaudited)
£m £m
Revenue 10,125.0 8,563.0
Cost of sales (5,285.3) (4,355.0)
Gross profit 4,839.7 4,208.0
Selling and distribution expenses (3,315.6) (2,808.1)
Administrative expenses - normal (497.3) (413.4)
Administrative expenses - adjusted (550.5) (292.5)
Other operating income 33.5 27.2
Operating profit 509.8 721.2
Before adjusted items 1,060.3 1,013.7
Adjusted items 3 (550.5) (292.5)
Operating profit 509.8 721.2
Financial income 8.4 1.4
Financial expenses (77.3) (67.9)
Profit before tax 440.9 654.7
Income tax expense (214.2) (195.1)
Profit for the period 226.7 459.6
Attributable to equity holders of the parent 142.5 369.7
Attributable to non-controlling interests 84.2 89.9
2.76p 7.17p
Basic earnings per ordinary share 4
2.76p 7.17p
Diluted earnings per ordinary share 4
Consolidated Statement of Comprehensive Income
For the 52 weeks ended 28 January 2023
52 weeks to 52 weeks to
28 January 2023 29 January 2022
(unaudited) £m
£m
226.7
Profit for the period 459.6
Other comprehensive income:
Items that may be classified subsequently to the Consolidated Income
Statement:
Exchange differences on translation of foreign operations 129.9 (34.9)
Total other comprehensive income for the period 129.9 (34.9)
Total comprehensive income and expense for the period 356.6
(net of income tax) 424.7
Attributable to equity holders of the parent 238.4 357.3
Attributable to non-controlling interests 118.2 67.4
Consolidated Statement of Financial Position
As at 28 January 2023
As at As at
28 January 2023 29 January 2022
(unaudited)
£m £m
Assets
Intangible assets 1,459.4 1,473.6
Property, plant and equipment 875.6 688.5
Right-of-use assets 2,137.0 2,032.6
Investments in associates and joint ventures 38.8 56.2
Other assets 56.9 57.0
Loans to associates and joint ventures 7.6 -
Forward contract asset 0.8 2.5
Deferred tax assets 12.9 81.7
Total non-current assets 4,589.0 4,392.1
Inventories 1,466.4 989.4
Right of return assets 15.2 12.5
Trade and other receivables 248.6 202.9
Income tax receivables - 0.6
Assets held-for-sale 123.0 157.1
Cash and cash equivalents 1,582.5 1,314.0
Total current assets 3,435.7 2,676.5
Total assets 8,024.7 7,068.6
Liabilities
Interest-bearing loans and borrowings (75.2) (72.6)
Lease liabilities (423.8) (379.0)
Trade and other payables (1,471.2) (1,279.5)
Liabilities directly associated with assets held-for-sale (165.6) (142.6)
Provisions (9.7) (13.2)
Income tax liabilities (17.5) -
Total current liabilities (2,163.0) (1,886.9)
Interest-bearing loans and borrowings (38.0) (55.5)
Lease liabilities (1,915.4) (1,863.9)
Put and call option liabilities (1,061.2) (764.8)
Other payables (102.4) (10.6)
Provisions (21.1) (19.9)
Deferred tax liabilities (90.2) (127.4)
Total non-current liabilities (3,228.3) (2,842.1)
Total liabilities (5,391.3) (4,729.0)
Total assets less total liabilities 2,633.4 2,339.6
Consolidated Statement of Financial Position (continued)
As at 28 January 2023
As at As at
28 January 2023 29 January 2022
(unaudited)
£m £m
Capital and reserves
Issued ordinary share capital 2.5 2.5
Share premium 467.5 467.5
Retained earnings 2,011.4 1,910.6
Other reserves (361.9) (454.6)
Total equity attributable to equity holders of the parent 2,119.5 1,926.0
Non-controlling interests 513.9 413.6
Total equity 2,633.4 2,339.6
Consolidated Statement of Changes in Equity
For the 52 weeks ended 28 January 2023
Share-based Payment Reserve Foreign Currency Translation Reserve Total Equity
£m £m Attributable to Equity Holders
Ordinary Share Retained Other of The Parent
Share Capital Premium Earnings Equity £m
£m £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 - - 369.7 - - - 369.7
Other comprehensive income:
Exchange differences on translation of foreign operations - - - - - (12.4) (12.4)
Total other comprehensive income - - - - - (12.4) (12.4)
Total comprehensive income for the period - - 369.7 - - (12.4) 357.3
Dividends to equity holders - - (14.9) - - - (14.9)
Put and call options held with non-controlling interests - - - (106.1) - - (106.1)
Share capital issued 0.1 455.8 - - - - 455.9
Acquisition of non-controlling interests - - 0.4 - - - 0.4
Divestment of non-controlling interests - - (5.4) - - - (5.4)
Share-based payment charge - - - - 0.1 - 0.1
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 - - 142.5 - - - 142.5
Other comprehensive income:
Exchange differences on translation of foreign operations - - - - - 95.9 95.9
- - - - - 95.9 95.9
Total other comprehensive income
Total comprehensive income for the period - - 142.5 - - 95.9 238.4
Dividends to equity holders - - (24.8) - - - (24.8)
Put and call options held with non-controlling interests - - - (19.1) - - (19.1)
Divestment of put options held by non-controlling interests - - - 4.5 - - 4.5
Lapsed put options held by non-controlling interests - - - 11.2 - - 11.2
Acquisition of non-controlling interests - - (16.9) - - - (16.9)
Share-based payment charge - - - - 0.2 - 0.2
Balance at 28 January 2023 2.5 467.5 2,011.4 (417.9) 0.3 55.7 2,119.5
(unaudited)
Consolidated Statement of Changes in Equity (continued)
For the 52 weeks ended 28 January 2023
Total Equity Attributable to Equity Holders
of The Parent Non-Controlling Interests Total
£m £m Equity
£m
Balance at 30 January 2021 1,238.7 257.7 1,496.4
Profit for the period 369.7 89.9 459.6
Other comprehensive income:
Exchange differences on translation of foreign operations (12.4) (22.5) (34.9)
Total other comprehensive income (12.4) (22.5) (34.9)
Total comprehensive income for the period 357.3 67.4 424.7
Dividends to equity holders (14.9) (1.8) (16.7)
Put and call options held with non-controlling interests (106.1) - (106.1)
Share capital issued 455.9 - 455.9
Acquisition of non-controlling interests 0.4 (0.5) (0.1)
Divestment of non-controlling interests (5.4) 48.0 42.6
Non-controlling interests arising on acquisition - 42.8 42.8
Share-based payment charge 0.1 - 0.1
Balance at 29 January 2022 1,926.0 413.6 2,339.6
Profit for the period 142.5 84.2 226.7
Other comprehensive income:
Exchange differences on translation of foreign operations 95.9 34.0 129.9
Total other comprehensive income 95.9 34.0 129.9
Total comprehensive income for the period 238.4 118.2 356.6
Dividends to equity holders (24.8) (2.8) (27.6)
Put and call options held with non-controlling interests (19.1) - (19.1)
Divestment of put options held by non-controlling interests 4.5 - 4.5
Lapsed put options held by non-controlling interests 11.2 - 11.2
Acquisition of non-controlling interests (16.9) (16.4) (33.3)
Divestment of non-controlling interests - (0.3) (0.3)
Non-controlling interests arising on acquisition - 1.6 1.6
Share-based payment charge 0.2 - 0.2
Balance at 28 January 2023 (unaudited) 2,119.5 513.9 2,633.4
Consolidated Statement of Cash Flows
For the 52 weeks ended 28 January 2023
52 weeks to 52 weeks to
28 January 2023 29 January 2022
(unaudited)
£m £m
Cash flows from operating activities
Profit for the period 226.7 459.6
Income tax expense 214.2 195.1
Financial expenses 77.3 67.9
Financial income (8.4) (1.4)
Depreciation and amortisation of non-current assets 633.2 579.9
Forex losses / (gains) on monetary assets and liabilities 2.5 (2.1)
Impairment of other intangibles and non-current assets (non-adjusted items) 3.4 13.2
Loss on disposal of non-current assets 5.1 3.5
Other adjusted items 407.3 287.0
Impairment of goodwill and fascia names (adjusted items) 117.6 -
Impairment of investments in associates and joint ventures (adjusted items) 19.6 -
Impairment of non-current assets (adjusted items) 6.0 5.5
Share of profit of equity-accounted investees, net of tax (4.9) (3.2)
Increase in inventories (501.3) (31.8)
Increase in trade and other receivables (42.2) (69.3)
Increase in trade and other payables 177.1 69.8
Interest paid (8.4) (8.4)
Lease interest (68.9) (59.5)
Income taxes paid (174.4) (244.1)
Net cash from operating activities 1,081.5 1,261.7
Cash flows from investing activities
Interest received 8.4 1.4
Proceeds from sale of non-current assets 11.5 7.8
Investment in software (19.9) (14.9)
Acquisition of property, plant and equipment (326.6) (227.3)
Acquisition of non-current other assets (12.8) (5.7)
Drawdown of finance lease liabilities 7.5 5.4
Dividends received from equity-accounted investees 3.4 6.9
Cash consideration of disposals (net of cash disposed) 59.6 -
Deferred consideration paid (29.2) -
Investments in associates and joint ventures (2.8) (57.2)
Acquisition of subsidiaries, net of cash acquired (20.0) (559.3)
Net cash used in investing activities (320.9) (842.9)
Cash flows from financing activities
Repayment of interest-bearing loans and borrowings (37.4) (513.3)
Drawdown of interest-bearing loans and borrowings 15.5 303.7
Repayment of lease liabilities (400.5) (356.2)
Proceeds received from issue of shares - 455.9
Divestment of non-controlling interests 0.1 43.1
Acquisition of non-controlling interests (29.3) (0.1)
Consolidated Statement of Cash Flows (continued)
For the 52 weeks ended 28 January 2023
52 weeks to 52 weeks to
28 January 29 January 2022
2023
(unaudited) £m
£m
Equity dividends paid (24.8) (14.9)
Dividends paid to non-controlling interests in subsidiaries (2.8) (1.8)
Net cash used in financing activities (479.2) (83.6)
Net increase in cash and cash equivalents 281.4 335.2
Cash and cash equivalents at the beginning of the period 1,280.4 948.7
Foreign exchange losses on cash and cash equivalents (12.9) (3.5)
Cash and cash equivalents at the end of the period 1,548.9 1,280.4
Analysis of Net Debt
As at 28 January 2023
At 29 Non- At 28
January On acquisition of subsidiaries Cash cash January
2022 (unaudited) flow movements 2023
£m (unaudited) (unaudited) (unaudited)
£m £m £m £m
Cash at bank and in hand 1,314.0 1.1 280.3 (12.9) 1,582.5
Overdrafts (33.6) - - - (33.6)
Cash and cash equivalents 1,280.4 1.1 280.3 (12.9) 1,548.9
Interest-bearing loans and borrowings:
Bank loans (94.5) (3.8) 21.9 (3.2) (79.6)
Net cash / (financial debt) before lease liabilities 1,185.9 (2.7) 302.2 (16.1) 1,469.3
Lease liabilities (2,242.9) (6.7) 393.0 (482.6) (2,339.2)
Net cash / (debt) (1,057.0) (9.4) 695.2 (498.7) (869.9)
1. Basis of Preparation
General Information
JD Sports Fashion Plc (the 'Company') is a company incorporated and domiciled
in the United Kingdom. The financial statements for the 52 week period ended
28 January 2023 represent those of the Company and its subsidiaries (together
referred to as the 'Group').
Accounts
The financial information set out above does not constitute the Group's
statutory accounts for the 52 weeks ended 28 January 2023 or 52 weeks ended 29
January 2022. The financial information for the 52 weeks ended 29 January 2022
is derived from the statutory accounts for the 52 weeks ended 29 January 2022
which have been delivered to the registrar of companies. The auditor has
reported on the 52 weeks ended 29 January 2022 accounts; their report 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 (2) or (3) of the
Companies Act 2006. The statutory accounts for the 52 weeks ended 28 January
2023 will be finalised on the basis of the financial information presented by
the directors in this preliminary announcement and will be delivered to the
registrar of companies in due course. Copies of full accounts will be also be
sent to shareholders by the end of May. Additional copies will be available
from JD Sports Fashion Plc, Hollinsbrook Way, Pilsworth, Bury, Lancashire, BL9
8RR or online at www.jdplc.com.
Basis of Preparation
The Group financial statements, from which these results have been extracted,
were prepared in accordance with UK-adopted International Accounting
Standards.
The financial statements are presented in Pounds Sterling, rounded to the
nearest tenth of a million. The financial statements have been prepared under
the historical cost convention, as modified for financial assets and
liabilities (including derivative instruments) at fair value through the
Consolidated Income Statement and also put and call options held by the
non-controlling interests.
The accounting policies set out below have, unless otherwise stated, been
applied consistently to all periods present in these financial statements and
have been applied consistently by all Group entities. The Group has changed
the presentation of certain items for the financial period ended 28 January
2023 by disaggregating elements of the Consolidated Income Statement and
Consolidated Statement of Financial Position. The primary aim of this was to
separate significant items and/or to facilitate the cross-referencing to other
disclosures within the financial statements. This includes, but is not limited
to, the share of profit of equity-accounted investees in the Consolidated
Income Statement and the put and call option liabilities and investments in
associates and joint ventures in the Consolidated Statement of Financial
Position.
Going Concern
The Directors have prepared the Group financial statements on a going concern
basis for the following reasons:
At 28 January 2023, the Group had net cash balances of £1,469.3 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 Group had net
cash balances of £1,127.2 million and £nil drawn down on the facilities as
at 5 May 2023.
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 unaudited
preliminary results, including specific consideration of a range of impacts
that could arise from geopolitical tensions and the actual and potential
impact on inflationary cost pressures. These forecasts indicate that the Group
will be able to operate within the level of its agreed facilities and covenant
compliance. For the purposes of Going Concern Reporting, 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 a significant business continuity event adversely impacting
one of the Group's main distribution centres and peak trading. Further, the
Directors have modelled the impact of a significant cyber-attack resulting in
a significant proportion of the Group's stores being unable to trade for a
period of one month, impacting the peak trading period of December 2023.
A reverse stress test has also been performed, which demonstrates that a
reduction in revenue of 50% is required for the Group to run out of cash and
be fully drawn down on the available facilities. This is not considered to be
plausible.
1. Basis of Preparation (continued)
Going Concern (continued)
As part of this analysis, mitigating actions within the Group's control,
should these severe but plausible scenarios occur, have also been considered,
including reductions in capital expenditure, discretionary spend and
dividends. The Directors have also considered the impact on the base case of
the post balance sheet event buy or sell notice re Iberian Sports Retail Group
S.L. as disclosed in Note 11. These forecast cash flows in the severe but
plausible downside scenario 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 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 unaudited preliminary results. Accordingly, the financial
statements have been prepared on a going concern basis.
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 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 accounting for adjusted items.
Adjusted 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 adjusted items, which are presented as
adjusted 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 adjusted is given in Note 3.
Further information can be found in the Alternative Performance Measures
section on page 19.
Adoption of New and Revised Standards
The following amendments to accounting standards and interpretations, issued
by the International Accounting Standards Board ('IASB'), have been adopted
for the first time by the Group in the period with no significant impact on
the consolidated results or financial position:
- Amendments to IFRS 3 'Business Combinations'.
- Amendments to IAS 16 'Property, Plant and Equipment'.
- Amendments to IAS 37 'Provisions, Contingent Liabilities and Contingent
Assets'.
- Amendments to IFRS 9 'Financial Instruments'.
Other
The Group continues to monitor the potential impact of other new standards and
interpretations which 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.
Critical Accounting Estimates and Judgements
The preparation of financial statements in conformity with adopted IFRSs
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. The estimates and judgements disclosed below are those which have a
significant risk of causing a material adjustment to the carrying amount of
assets and liabilities. All other accounting estimates and judgements are
disclosed within the relevant accounting policy in the notes to the financial
statements.
1. Basis of Preparation (continued)
Change in Critical Accounting Estimate - Material Put and Call Options
(Genesis Topco Inc Put and Call Option £801.1 million, ISRG Put Option
£138.6 million and MIG Put and Call Option £52.5million)
Put and call options are in place over all of the remaining non-controlling
interest shareholding in these subsidiaries and these options are required to
be measured at the present value of the exercise price and this is reassessed
at each period end.
Previous Accounting Estimate
In previous financial periods, the Group estimated the present value of the
exercise price of the put and call options using Board approved forecasts
multiplied by an earnings multiple. The option formula and multiple are stated
in the option agreements with the exception of the ISRG option which does not
have a multiple stated in the agreement. In the absence of a specified formula
or multiple, the Group estimated this based on current evidence in the Mergers
& Acquisitions market and our past experience of multiples paid for
similar businesses. These forecast cash flows were discounted using a discount
rate reflecting the current market assessment of the time value of money and
any specific risk premiums relevant to the individual businesses involved.
These discount rates were considered to be equivalent to the rates a market
participant would use.
Current Accounting Estimate
For the 52 week period ended 28 January 2023, a change in the accounting
estimation methodology was introduced using a third-party valuation expert to
independently determine the present value of the exercise price of the
material put and call options. The revised approach uses a Monte-Carlo
simulation model applying a geometric Brownian motion to project the share
price and arithmetic Brownian motion for the projection of EBITDA. This was
considered to be a more suitable method of valuation given how material the
put and call options are in terms of value and the Directors consider that
this statistical based approach better accounts for the variability in
assumptions and risk. Previously, the Group used a singular forecast model
whereby the risk was dealt with via the discount rate premia. The Monte-Carlo
model is considered to be more sophisticated in its simulation of historical
and forecast data and earnings volatility to assess potential impacts across a
wide range of future scenarios.
Change in Accounting Estimate
The change in accounting estimate has resulted in an increase to the total put
and call option liability for the three material put and call options in
relation to Genesis, MIG and ISRG of £170.6 million compared to the total put
and call option liability calculated using the previous accounting estimate of
£890.6 million as at 28 January 2023. The Group considers that the change in
accounting estimate was a result of a modification in estimating techniques,
rather than a change in policy and therefore is accounted for prospectively,
in accordance with IAS 8.
Other Accounting Judgements
Groups of Cash-Generating Units ('Group CGUs')
The cash-generating units used to monitor goodwill and test it for impairment
are the store portfolios and individual businesses. The cash-generating units
are referred to throughout the Annual Report as Group CGUs. Online sales
channels are included at a Group CGU level rather than allocating to
individual stores as these cashflows are not considered to be independent with
no reasonable basis of allocation. Corporate assets that contribute to the
future cash flows of more than one Group CGU are allocated to each Group CGU
on a pro-rata basis based on forecast turnover. This allocation method has
been applied consistently.
Other Accounting Estimates
Impairment of Goodwill and Other Intangible Assets
Goodwill is allocated to the 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. Other intangible assets arising on acquisition, such as fascia
names, brand names and customer relationships are also allocated to the Group
CGUs. The recoverable amount, including the portion of the corporate assets,
is compared with the carrying amount of the Group CGU including goodwill. The
recoverable amount of an asset or Group CGU is the greater of its value in use
and its fair value less costs of disposal. Value in use is based on the
estimated future cash flows, discounted to their present value using a pre-tax
discount rate that reflects current market assessments of the time value of
money and the risks specific to the asset or Group CGU. See Note 3 for further
information regarding the impairment of goodwill recognised during the period
ended 28 January 2023.
Impairment of Brand Licences
At each reporting date, the Group reviews the carrying amounts of its brand
licences to determine whether there is any indication of impairment. If any
such indication exists, then the asset's recoverable amount is estimated.
Impairment losses are recognised within administrative expenses in the
Consolidated Income Statement. The recoverable amount of brand licences is
determined based on value-in-use calculations. The use of this method requires
the estimation of future cash flows expected to arise from the continuing
operation of the relevant asset until the licence expiry date and the choice
of a suitable discount rate in order to calculate the present value.
1. Basis of Preparation (continued)
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. In
accordance with IAS 20 'Government Grants', £nil furlough income was received
by the Group's UK subsidiaries during the 52 week period ended 28 January 2023
(52 week period ended 29 January 2022: £24.4 million) and £nil income was
received by the Group's international subsidiaries (2022: £7.5 million).
Income received in the previous period has been shown as a deduction from
employed staff costs. Further, £nil rates relief was received by the Group's
UK subsidiaries during the period ended 28 January 2023 (2022: £31.0
million). Rates relief received in the previous period has been shown as a
deduction from selling and distribution costs. During the period, the Group's
international subsidiaries received £3.9 million of government support in
relation to rent charges (2022: £nil) which has been recognised within other
operating income. During the period ended 28 January 2023, the Group repaid
the £24.4 million of furlough income that it received from the UK Government
in the period ended 29 January 2022. The repayment was accrued for as at 29
January 2022 and was shown as an expense within employed staff costs.
Share-Based Payments
The Executive Directors receive an element of remuneration in the form of
share-based payments. Share based payments are measured at fair value at the
grant date which is determined by the share price on that date. The cost of
share-based payments is recognised as an expense, together with a
corresponding increase in equity, on a straight-line basis over the vesting
period of the awards. The amount recognised as an expense is adjusted to
reflect the number of awards for which the related service and non-market
performance conditions are expected to be met, such that the amount ultimately
recognised is based on the number of awards that meet the related service and
non-market performance conditions at the vesting date.
An Employee Benefit Trust ('EBT') has been established to facilitate the
acquisition of ordinary shares to fund share awards made to employees. The
assets and liabilities of the EBT have been included in the Group and Company
accounts. The assets of the EBT are held separately from those of the Company.
The Group consolidated statement of comprehensive income does not recognise
gains or losses on purchases or sales of own shares. The cost of shares
acquired by the EBT is recognised within equity. The Trustee of the EBT has
agreed to waive its rights to any and all dividends paid.
Assets held for sale and disposals
Non-current assets, or disposal groups comprising assets and liabilities, are
classified as held-for-sale if it is highly probable that they will be
recovered primarily through sale rather than through continuing use. Such
assets, or disposal groups, are generally measured at the lower of their
carrying amount and fair value less costs to sell. Any impairment loss on a
disposal group is allocated first to goodwill, and then to the remaining
assets and liabilities on a pro-rata basis, except that no loss is allocated
to inventories, financial assets, deferred tax assets or investment property,
which continue to be measured in accordance with the Group's other accounting
policies. Impairment losses on initial classification as held-for-sale and
subsequent gains and losses on remeasurement are recognised in profit or loss.
Once classified as held-for-sale, intangible assets and property, plant and
equipment are no longer amortised or depreciated. On disposal the balances are
derecognised and the profit or loss on disposal is recognised in the
Consolidated Income Statement as an adjusted item.
Provisions and Contingent Liabilities
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.
Climate Change
In preparing the financial statements, we have considered the potential impact
of climate change, primarily focusing on the non-current assets within the
Consolidated Statement of Financial Position:
- The property, plant and equipment and right-of-use assets have
relatively short useful lives and those longer life assets such as warehouses
and head offices are in locations that we would not expect to be physically
impacted by climate change. Further, the assets of the Group are
geographically spread, reducing the risk further.
- The Group assess the intangible assets for indicators of
impairment on an annual basis. As part of this assessment, the forecast cash
flows include capital expenditure budgets in relation to climate-related
investments such as solar or building management systems.
- The Group's investments in joint ventures and associates comprise
our equity investments. These businesses operate in the same sector as the
Group and have a similar asset profile. There are no indicators of a specific
climate-related material risk in relation to the investment in these
businesses.
- The other non-current assets were also reviewed and no risk was
identified.
In conclusion, there has been no material impact on the financial statements,
judgements or estimates as a result of climate change.
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 Chief Executive Officer 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 are treated as unallocated, reflecting the nature of the Group's
syndicated borrowing facilities.
The eliminations remove intercompany transactions and balances between
different segments which primarily relate to the net drawdown 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 reportable operating segments for the 52
weeks to 28 January 2023 is shown below:
Income statement (unaudited)
Sports
Fashion Outdoor Unallocated Total
£m £m £m £m
Gross revenue 9,560.9 564.1 - 10,125.0
Inter-segment revenue (0.3) 0.3 - -
Revenue 9,560.6 564.4 - 10,125.0
Gross profit % 48.1% 42.2% - 47.8%
Operating profit before adjusted items 1,043.5 16.8 - 1,060.3
Adjusted items (510.7) (39.8) - (550.5)
Operating profit / (loss) 532.8 (23.0) - 509.8
Financial income - - 8.4 8.4
Financial expenses (66.1) (2.8) (8.4) (77.3)
Profit / (loss) before tax 466.7 (25.8) - 440.9
Income tax expense (214.2)
Profit for the period 226.7
Sports Fashion Outdoor Eliminations Total
£m £m £m £m
Total assets 7,756.2 462.1 (193.6) 8,024.7
Total liabilities (5,185.2) (399.7) 193.6 (5,391.3)
Total segment net assets
(unaudited) 2,571.0 62.4 - 2,633.4
2. Segmental analysis (continued)
Other segment information (unaudited)
Sports Fashion Outdoor Total
£m £m £m
Capital expenditure:
Software development 19.9 - 19.9
Brand licences 78.4 - 78.4
Property, plant and equipment 305.6 21.0 326.6
Right-of-use assets 372.8 35.6 408.4
Non-current other assets 12.8 - 12.8
Depreciation, amortisation and impairments:
Amortisation of intangible assets 71.6 4.4 76.0
Depreciation of property, plant and equipment 154.1 7.9 162.0
Depreciation of right-of-use assets 372.2 23.0 395.2
Impairment of non-current assets (adjusted items) 83.8 39.8 123.6
Impairment of investment in associates and joint ventures (adjusted items) 19.6 - 19.6
Impairment of non-current assets (non-adjusted items) 3.4 - 3.4
The comparative segmental results for the 52 weeks to 29 January 2022 are as
follows:
Income statement
Sports
Fashion Outdoor Unallocated Total
£m £m £m £m
Gross revenue 8,049.7 513.3 - 8,563.0
Inter-segment revenue (0.1) 0.1 - -
Revenue 8,049.6 513.4 - 8,563.0
Gross profit % 49.5% 43.9% - 49.1%
Operating profit before adjusted items 985.5 28.2 - 1,013.7
Adjusted items (292.5) - - (292.5)
Operating profit 693.0 28.2 - 721.2
Financial income - - 1.4 1.4
Financial expenses (57.2) (2.3) (8.4) (67.9)
Profit / (loss) before tax 635.8 25.9 (7.0) 654.7
Income tax expense (195.1)
Profit for the period 459.6
2. Segmental analysis (continued)
Sports Fashion Outdoor Eliminations Total
(restated1) (restated1) £m £m
£m £m
Total assets 6,762.6 422.0 (116.0) 7,068.6
Total liabilities (4,517.8) (327.2) 116.0 (4,729.0)
Total segment net assets
2,244.8 94.8 - 2,339.6
(1) Certain prior period amounts have been reclassified for consistency with
the current period presentation. These reclassifications had no effect on the
reported results of operations. A presentational adjustment was made between
Unallocated, Sports Fashion and Outdoor, with amounts reported in the 2022
financial statements previously designated as Unallocated now designated to
either Sports Fashion or Outdoor. These items were a deferred tax asset of
£81.7 million, a deferred tax liability of £127.4 million and an income tax
receivable of £0.6 million.
Other segment information
Sports Fashion
£m Outdoor Total
£m £m
Capital expenditure:
Software development 14.9 - 14.9
Brand licences 5.2 - 5.2
Property, plant and equipment 221.8 5.5 227.3
Right-of-use assets 467.6 54.4 522.0
Non-current other assets 5.7 - 5.7
Depreciation, amortisation and impairments:
Amortisation of intangible assets 59.4 4.0 63.4
Depreciation of property, plant and equipment 149.3 8.9 158.2
Amortisation of non-current other assets 0.1 - 0.1
Depreciation of right-of-use assets 341.6 16.6 358.2
Impairment of non-current assets (adjusted items) 5.5 - 5.5
Impairment of non-current assets (non-adjusted items) 12.0 1.2 13.2
2. Segmental analysis (continued)
Geographical Information
The Group's operations are located in the UK, Andorra, Australia, Austria,
Belgium, Bosnia and Herzegovina, Bulgaria, Canada, Croatia, Cyprus, Czech
Republic, Denmark, 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, the UAE 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:
2023 2022
(unaudited)
£m £m
UK and ROI 3,826.7 3,578.5
Europe 2,659.9 2,046.7
North America 3,150.1 2,609.2
Rest of world 488.3 328.6
10,125.0 8,563.0
The revenue from any individual country, with the exception of the UK &
US, is not more than 10% of the Group's total revenue.
The following table provides analysis of the Group's revenue by channel:
2023 2022
(unaudited)
£m £m
Retail stores 7,345.6 5,668.5
Multichannel 2,460.8 2,623.1
Other (1) 318.6 271.4
10,125.0 8,563.0
(1) Other relates to revenue from leisure club memberships and wholesale
revenue.
The following table provides analysis of the Group's revenue by product type:
2023 2022
(unaudited)
£m £m
Footwear 5,471.4 4,590.4
Apparel 3,560.6 3,199.9
Accessories 629.6 540.6
Other (2) 463.4 232.1
10,125.0 8,563.0
(2) Other relates to revenue from sales of outdoor living equipment, delivery
income and revenue from leisure club memberships.
2. Segmental analysis (continued)
Non-current assets analysis
The following is an analysis of the carrying amount of segmental non-current
assets by the geographical area in which the assets are located.
2023 2022
(unaudited) (restated3)
£m £m
UK and ROI 1,222.2 1,239.8
Europe 1,449.5 1,348.1
North America 1,758.8 1,643.6
Rest of world 158.5 160.6
4,589.0 4,392.1
(3) Certain prior period amounts have been reclassified for consistency with
the current period presentation. These reclassifications had no effect on the
reported results of operations. A presentational adjustment was made between
Unallocated and the geographical areas listed above with the deferred tax
asset of £81.7 million reported in the 2022 financial statements previously
designated as Unallocated now designated to the appropriate geographical
area.
3. Adjusted items
52 weeks to 52 weeks to
28 January 29 January
2023 2022
(unaudited)
£m £m
Impairment of intangible assets and impairments (1) 137.2 -
Items that are unusual in nature or outside of the normal course of business:
Movement in present value of put and call options (2) 296.2 292.7
Insurance settlement for DTLR (3) - (16.6)
Items as a result of acquisitions, divestments, major business changes or
restructuring:
Divestment and restructuring (4) 129.6 16.4
Deferred consideration release (5) (12.5) -
Administrative expenses - adjusted items 550.5 292.5
1. The impairment in the current period primarily relates to the
impairment of goodwill and fascia name arising on the acquisition of
Deporvillage (£24.7 million), Hairburst (£21.6 million), Leisure Lakes
(£21.1 million), Wheelbase (£18.7 million), Bodytone (£12.4 million), Missy
Empire (£10.2 million), Livestock (£7.1 million), Wellgosh (£1.0 million),
Oi Polloi (£0.7 million) and Philip Browne (£0.1 million). In addition there
is an impairment charge for the investment in Gym King of £19.6 million.
2. Movement in the present value of the liabilities in respect of put
and call options as re-measured at each reporting date (£295.0 million),
comprising Genesis Topco Inc charge of £280.8 million (2022: charge of
£258.7 million), Iberian Sports Retail Group charge of £19.6 million (2022:
charge of £31.6 million), Marketing Investment Group S.A: a charge of £0.5
million (2022: charge of £1.7 million) and a credit of £5.9 million (2022:
charge of £0.7 million) in relation to the other put and call options held by
non-controlling interests. Also included is a charge of £1.2 million relating
to an element of put and call option agreements that have been treated as a
long-term employee benefit under IAS 19.
3. Insurance settlement proceeds in the prior period 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 in Note 5.
3. Adjusted items (continued)
4. The divestment and restructuring charge relates to the divestment
of UK-based non-core fashion business assets (£106.7 million) and Footasylum
(£14.8 million) plus the closure costs associated with JD's announced
withdrawal from the South Korean market in the current period (£8.1 million)
being business restructuring costs of £2.1 million and a charge of £6.0
million in relation to the impairment of non-current assets. (2022: The impact
of 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 £10.9 million).
5. Acquisition related release of contingent consideration for Leisure
Lakes (£10.5 million) and Total Swimming Holdings Limited (£2.0 million).
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 0.25 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 was
adjusted in the comparative period ended 29 January 2022 for the proportionate
change, as if the event had occurred at the beginning of the earliest period
presented. On 20 December 2022, JD Sports Fashion Plc completed the placing of
new ordinary shares in the Capital of the Company. A total of 25,000,000 new
ordinary shares were issued, increasing the total ordinary shares in issue to
5,183,135,745.
The calculation of basic earnings per ordinary share at 28 January 2023 is
based on the profit for the period attributable to equity holders of the
parent of £142.5 million (2022: £369.7 million) and a weighted average
number of ordinary shares outstanding during the 52 week period ended 28
January 2023 of 5,158,135,745 (2022: 5,158,135,745). Adjusted 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 adjusted items. The Directors consider that this
gives a more useful measure of the trading performance and profitability of
the Group.
52 weeks to 52 weeks to
28 January 29 January
2023 2022
(unaudited)
millions millions
Issued ordinary shares at beginning of period 5,158.1 4,866.2
Ordinary shares issued on 3 February 2021 - 291.9
Ordinary shares issued on 20 December 2022 25.0 -
Issued ordinary shares at end of period 5,183.1 5,158.1
52 weeks to 52 weeks to
28 January 29 January
2023 2022
Note (unaudited)
£m £m
Profit for the period attributable to equity holders of the parent 142.5 369.7
Adjusted items 3 550.5 292.5
Tax relating to adjusted items (2.4) 0.3
Profit for the period attributable to equity holders of the parent excluding
adjusted items
690.6 662.5
Adjusted earnings per ordinary share 13.39p 12.84p
Basic earnings per ordinary share 2.76p 7.17p
4. Earnings per ordinary share (continued)
52 weeks to 52 weeks to
28 January 2023 29 January
(unaudited) 2022
millions
millions
Weighted average number of ordinary shares at beginning of period 5,158.1 4,866.2
Effect of ordinary shares issued on 3 February 2021 - 291.9
Effect of ordinary shares issued on 20 December 2022 2.8 -
Effect of ordinary shares held by the JD Sports Employee Benefit Trust as (2.4) -
treasury shares 1
Weighted average number of ordinary shares at end of period (basic) 5,158.5 5,158.1
Diluted Earnings Per Ordinary Share
Diluted earnings per ordinary share is 2.76p (2022: 7.17p). Diluted adjusted
earnings per share is 13.39p (2022: 12.84p).
The calculation of diluted earnings per ordinary share at 28 January 2023 is
based on the profit for the period attributable
to equity holders of the parent of £142.5 million (2022: £369.7 million) and
a weighted average number of ordinary shares
outstanding during the period after adjusted for the effects of all dilutive
potential ordinary shares calculated as follows:
52 weeks to 52 weeks to
28 January 2023 29 January
(unaudited) 2022
millions
millions
Weighted average number of ordinary shares at beginning of period (diluted) 5,158.2 4,866.2
Effect of ordinary shares issued on 3 February 2021 - 291.9
Effect of shares granted on 20 October 2021 under the LTIP 2021 - 0.1
Effect of ordinary shares issued on 20 December 2022 2.8 -
Effect of ordinary shares held by the JD Sports Employee Benefit Trust as (2.4) -
treasury shares1
Weighted average number of ordinary shares at end of period (diluted) 5,158.6 5,158.2
5. Acquisitions
Current Period - Non-Significant Acquisitions
Fair values
acquired
(unaudited)
£m
Acquiree's net assets at acquisition date:
Intangible assets 6.6
Property, plant and equipment 19.3
Right-of-use assets 9.2
Inventories 0.4
Cash and cash equivalents 1.1
Trade and other receivables 3.3
Trade and other payables (11.6)
Bank loans and overdrafts (3.8)
Deferred tax liability (3.7)
Lease liabilities (6.7)
Provisions (0.5)
Net identifiable assets 13.6
Non-controlling interests (various) (1.6)
Goodwill on acquisition 12.6
Consideration - satisfied in cash 21.1
Consideration - deferred 3.5
Total consideration
24.6
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 was
payable if certain targets and performance criteria are achieved. The fair
value of the contingent consideration as at the acquisition date was
determined to be £3.5 million. During the financial period ended 28 January
2023, one of the performance criteria for receiving the deferred consideration
was not met. Since this was as a result of a post-acquisition event, the
release of £2.0 million of contingent consideration was taken through the
Consolidated Income Statement (Note 3). The fair value of the remaining
contingent consideration as at 28 January 2023 was determined to be £1.4
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
and call option liability has been performed using an earnings multiple, a
suitable discount rate and Board approved forecasts, and the initial liability
of £9.2 million has been recognised with the corresponding entry to Other
Equity in accordance with the present value method of accounting. The present
value of these options is required to be estimated at each accounting period
date.
5. Acquisitions (continued)
Included within the 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. 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 28 January 2023 is revenue of £15.4
million and a profit before tax of £0.1 million in respect of Total Swimming
Holdings.
Other Acquisitions
During the period, the Group made two other acquisitions which were not
material. The acquiree's net assets at acquisition related to these
acquisitions are also included in the fair value table above.
Full Period Impact of Acquisitions
Had the acquisitions of the entities acquired been affected at 30 January
2022, the revenue and profit before tax of the Group for the 52 week period to
28 January 2023 would have been £10.1 billion and £227.1 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
period, within administrative expenses in the Consolidated Income Statement.
Acquisition of Non-Controlling Interests
JD Sports Fashion Korea Inc
On 6 September 2022, JD Sports Fashion Plc acquired the remaining 50% of the
issued share capital in its existing subsidiary JD Sports Fashion Korea Inc
for a cash consideration of 26.1 billion KRW (£16.4 million). The Group now
owns 100% of the issued share capital of JD Sports Fashion Korea Inc. In
accordance with IFRS 10, the Group had previously assessed and concluded that
it controlled the subsidiary. As the acquisition on 6 September 2022 does not
result in a change of control, this has been accounted for as an equity
transaction.
During the period ended 28 January 2023, the Group announced that JD would be
withdrawing from the South Korean market (see Note 3 for details of the
provision for closure costs).
Deporvillage S.L.
On 14 October 2022, Iberian Sports Retail Group S.L. ('ISRG'), the Group's
existing intermediate holding company in Spain, acquired a further 18% of the
issued share capital in its existing subsidiary Deporvillage S.L. for a cash
consideration of €14.8 million (£12.9 million) and deferred consideration
of €5.0 million (£4.3 million) subject to the non-controlling interests
abiding by certain non-compete obligations. 50% of the deferred consideration
is due within one year of the completion date of 14 October 2022 with the
remaining 50% due on the second anniversary of the completion date. ISRG now
owns 98% of the issued share capital and the Group now owns an effective
shareholding of 49% of the issued share capital of Deporvillage S.L. In
accordance with IFRS 10, the Group had previously assessed and concluded that
it controlled the subsidiary. As the acquisition on 14 October 2022 does not
result in a change of control, this has been accounted for as an equity
transaction.
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,
enhances 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 from the date of acquisition. In the prior period, a valuation of these
put and call options was 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. The present value of
these options is required to be estimated 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)
Measurement Fair value at
Book value adjustments 17 March 2021
£m £m £m
Acquiree's net assets at acquisition date:
Intangible assets 43.7 62.9 106.6
Property, plant and 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 has been paid in February 2023.
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 JD stores in
Eastern Europe with JD stores now in Poland, Romania, Lithuania and Hungary.
Put and call options to enable future exit opportunities for the 40%
shareholders have also been agreed and become exercisable after the period
ending January 2025. In the prior period, a valuation of these put and call
options was 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. The present value of these options is required to
be estimated 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 and 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 (paid February 2023) 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 period-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 were also agreed and became exercisable from 2024 onwards. In the
prior period, a valuation of these put and call options was 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. The present value of these options was required to be estimated at
each accounting period date. During the period ended 28 January 2023, these
put and call options lapsed as a result of a further acquisition of 18% of the
issued share capital of Deporvillage by ISRG. Revised put and call options
over the remaining 2% are now held by the non-controlling interest
shareholders.
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. An impairment charge of £24.7 million
has been recognised during the period ended 28 January 2023 against the
intangibles recorded on acquisition The goodwill calculation is summarised
below:
Measurement Fair value at
3 August 2021
Book value adjustments
£m
£m £m
Acquiree's net assets at acquisition date:
Intangible assets 0.9 48.4 49.3
Property, plant and 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.
In the prior period, a valuation of these put and call options was 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. The present value of these options is required to be
estimated 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. 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:
Fair value at
Measurement 21 October
Book value adjustments 2021
£m £m £m
Acquiree's net assets at acquisition date:
Intangible assets - 13.3 13.3
Property, plant and equipment 14.0 - 14.0
Non-current other 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 and 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 interests (various) (11.6)
Goodwill on acquisition 126.7
Total consideration (including £18.7 million deferred) 193.0
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
was an intangible asset of £0.9 million representing the Missy Empire fascia
name. At the date of acquisition, 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.
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. An impairment charge of £10.2 million
has been recognised during the period ended 28 January 2023 against the
intangibles recorded on acquisition.
Put and call options over 9% of the remaining 49% shareholding were also
agreed and became exercisable after the period ending January 2025. In the
prior period, a valuation of these put and call options was performed using an
earnings multiple, a suitable discount rate and approved forecasts, and the
initial liability of £1.4 million was recognised with the corresponding entry
to Other Equity in accordance with the present value method of accounting. The
present value of these options was required to be estimated at each accounting
period date. On 16 December 2022, the Group announced its plan to simplify its
fashion branded offer and as a result disposed of Uggbugg Fashion Limited
including its subsidiary Missy Empire Limited (see Note 6). As a result of the
disposal, these put and call options lapsed and are no longer exercisable.
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. At the date of acquisition, the Board
believed that the excess of consideration paid over net assets on acquisition
of £10.6 million was 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.
On 16 December 2022, the Group announced its plan to simplify its fashion
branded offer and as a result disposed of The Watch Shop Holdings Limited
including its subsidiary Watch Shop Logistics Limited (see Note 6).
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 was 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. This was subsequently paid in November 2022.
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
was best considered as goodwill on acquisition representing future operating
5. Acquisitions (continued)
Bodytone International Sport S.L. (continued)
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. An impairment charge of
£12.4 million has been recognised during the period ended 28 January 2023
against the intangibles recorded on acquisition.
Put and call options over the remaining 49.9% shareholding were also agreed
and become exercisable in tranches from 2024 onwards. In the prior period, a
valuation of these put and call options was performed using an earnings
multiple, a suitable discount rate and approved forecasts, and the initial
liability of £11.3 million was recognised with the corresponding entry to
Other Equity in accordance with the present value method of accounting. The
present value of these options is required to be estimated 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.
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. 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.
An impairment charge £21.6 million has been recognised during the period
ended 28 January 2023 against the intangibles recorded on acquisition.
Put and call options over the remaining 25% shareholding have also been agreed
and become exercisable in tranches from 2025 onwards. In the prior period, a
valuation of these put and call options was performed using an earnings
multiple, a suitable discount rate and approved forecasts, and the initial
liability of £8.4 million was recognised with the corresponding entry to
Other Equity in accordance with the present value method of accounting. The
present value of these options is required to be estimated 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 was an intangible asset of £1.4
million representing the Wheelbase fascia name. The Board believed that the
excess of consideration paid over net assets on acquisition of £18.7 million
was 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. An impairment charge of
£18.7 million has been recognised during the period ended 28 January 2023
against the intangibles recorded on acquisition.
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 and call options was performed using an earnings multiple, a
suitable discount rate and approved forecasts, and the initial liability of
£4.0 million was recognised with the corresponding entry to Other Equity in
accordance with the present value method of accounting. The present value of
these options is required to be estimated 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.
5. Acquisitions (continued)
Prior period acquisitions - Other Acquisitions (continued)
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. During the 52 week period
ended 28 January 2023, £0.7 million of the contingent consideration was paid.
The fair value of the contingent consideration as at 28 January 2023 was
determined to be £nil and the remaining contingent consideration of £10.5
million was released to the Consolidated Income Statement.
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 was an intangible asset of
£2.5 million representing the Leisure Lakes fascia name. The Board believed
that the excess of consideration paid over net assets on acquisition of £25.9
million was 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. An impairment
charge of £21.1 million has been recognised during the period ended 28
January 2023 against the intangibles recorded on acquisition.
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.
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
(£31.4 million) and deferred consideration of $6.1 million (£4.5 million).
The deferred consideration was initially measured at fair value and
subsequently remeasured to fair value at each reporting date until settled.
The fair value of deferred consideration recognised at 29 January 2022 was
$6.6 million (£4.9 million). The maximum amount of the future payment was
£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. The proceeds of the sale of the
business by GymNation Limited were transferred back to the Group and GymNation
Limited is in the process of being wound down. As a result, the deferred
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 and call 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
and call option liability has been performed using an earnings multiple, a
suitable discount rate and approved forecasts, and the initial liability of
£8.9 million has been recognised with the corresponding entry to Other Equity
in accordance with the present value method of accounting. The present value
of these options is required to be estimated at each accounting period date.
At acquisition, GymNation was a chain of seven gyms in the UAE (six in Dubai
and one Abu Dhabi). Included within the fair value of the net identifiable
assets on acquisition was 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. 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 £1.3
million and a profit before tax of £0.2 million in respect of GymNation.
Other Prior Period Acquisitions
During the period, the Group made one other small acquisition. This
transaction was not material.
Full Period Impact of Prior Period 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.
Prior Period Acquisition Costs
Acquisition-related costs amounting to £7.9 million have been excluded from
the consideration transferred and were recognised as an expense in the prior
period, within administrative expenses in the Consolidated Income Statement.
6. Divestments
Footasylum
On 5 August 2022, the Group disposed of its 100% equity interest in Footasylum
and its associated subsidiaries to Aurelius Group for a cash consideration of
£37.5 million. The subsidiary was classified as held for sale in the 2022
consolidated financial statements (see Note 7). The consideration was received
fully in cash in 2022. At the date of disposal, the carrying amounts of
Footasylum's net assets were as follows:
As at
5 August 2022
(unaudited)
£m
Intangible assets 6.7
Property, plant and equipment 27.0
Right-of-use assets 79.1
Deferred tax assets 0.2
Total non-current assets 113.0
Inventories 36.4
Trade and other receivables 24.9
Cash and cash equivalents 6.0
Total current assets 67.3
Trade and other payables (24.7)
Other tax and social security (3.7)
Accruals and deferred income (19.1)
Borrowings (3.5)
Lease liabilities (15.6)
Income tax liabilities (1.0)
Total current liabilities (67.6)
Accruals and deferred income (5.6)
Lease liabilities (59.8)
Total non-current liabilities (65.4)
Total assets less total liabilities 47.3
Total consideration received in cash 37.5
Net assets disposed of (47.3)
Costs to sell (5.0)
Loss on disposal (14.8)
Total consideration received in cash 37.5
Cash and cash equivalents disposed of (6.0)
Net cash received 31.5
In the 26 weeks to 30 July 2022, an impairment of £8.5 million was 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. A
further £6.3 million loss has been recognised following the reversal of £8.3
million of right-of-use assets depreciation in order to cease depreciating
these assets at the point of classification as held-for-sale in accordance
with IFRS 5 and the release of a £2.0 million provision for costs to sell
that is no longer required. This resulted in a higher loss on disposal of the
assets of £14.8 million when compared to the impairment of £8.5 million
recognised in the 26 week period ended 30 July 2022.
6. Divestments (continued)
Other non-core fashion businesses
On 16 December 2022, the Group announced its plan to significantly simplify
its fashion branded offer through the divestment
of 15 UK-based non-core fashion businesses ('Divested Businesses') to Frasers
Group Plc ('Frasers'), for cash consideration of £44.5 million, in order to
focus more fully on the opportunities across the rest of the Group, in
particular the international and digital expansion of the Group's core premium
Sports Fashion fascias. Completion on the acquisition of shares in eight of
the Divested Businesses, and on the acquisition of all of the debt owing to JD
by the Divested Businesses, took place immediately on exchange. The initial
eight divested businesses were:
- Base Childrenswear Limited (80% equity interest);
- Dantra Limited (75% equity interest);
- PG2019 Limited (100% equity interest);
- Prevu Studio Limited (100% equity interest);
- Nicholas Deakins Limited (100% equity interest);
- Uggbugg Fashion Limited - including its subsidiary Missy Empire
Limited (51% equity interest);
- Clothingsites Holdings Limited - including its subsidiaries
Clothingsites.co.uk Limited and Old Brown Bag Clothing Limited (100% equity
interest); and
- WHCO Limited - including its subsidiaries The Watch Shop Holdings
Limited and Watch Shop Logistics Limited (100% equity interest).
The consideration was received fully in cash during the period. At the date of
disposal, the carrying amounts of the initial eight divested businesses net
assets were as follows:
As at
16 December 2022
(unaudited)
£m
Intangible assets 22.6
Property, plant and equipment 3.9
Right-of-use assets 6.5
Total non-current assets 33.0
Inventories 29.8
Trade and other receivables 8.5
Cash and cash equivalents 16.4
Total current assets 54.7
Trade and other payables (19.7)
Provisions (0.1)
Borrowings (11.6)
Lease liabilities (7.4)
Income tax liabilities (0.3)
Total current liabilities (39.1)
Other payables and accrued expenses (1.5)
Total non-current liabilities (1.5)
Total assets less total liabilities 47.1
Total consideration received in cash 44.5
Intercompany debt (86.0)
Net assets disposed of (47.1)
Costs to sell (0.6)
Impairment of assets held-for-sale (Note 7) (17.5)
Loss on disposal (106.7)
6. Divestments (continued)
Other non-core fashion businesses (continued)
Total consideration received in cash 44.5
Cash and cash equivalents disposed of (16.4)
Net cash received 28.1
The assets and liabilities of the remaining seven businesses were classified
as held-for-sale at 28 January 2023 (see Note 7). Subsequent to the period
end, on 7 February 2023, the Group completed the disposal of five of these
businesses.
- Tessuti Group Limited (100% equity interest) - including its
subsidiaries Tessuti Limited (87.5% equity interest), Tessuti (Ireland)
Limited (87.5% equity interest), Tessuti Retail Limited (100% equity
interest), Prima Designer Limited (100% equity interest);
- Choice Limited (87.5% equity interest) - including its subsidiary
Choice 33 Limited (87.5% equity interest);
- Giulio Limited (87.5% equity interest) - including its
subsidiaries Giulio Fashion Limited (87.5% equity interest), Giulio Woman
Limited (87.5% equity interest);
- R.D. Scott Limited (100% equity interest); and
- Catchbest Limited (80% equity interest).
Rascal Clothing Limited ('Rascal') was withdrawn from the transaction with
Frasers as one of the founders exercised a pre-emption right agreed as part of
the Group's acquisition of Rascal on 5 February 2019. The divestment of 75%
equity interest in Rascal completed on 6 February 2023.
On 2 March 2023, the Group completed the disposal of 80% equity interest in
Topgrade Sportwear Holdings Limited (including Topgrade Sportswear Limited and
GetTheLabel.com Limited) the final entity outstanding as part of the Frasers
transaction.
Impairment review of Divested Businesses
As at 29 January 2022, the Divested Businesses were still a key part of the
Group's strategy and, as part of our annual impairment review procedures, the
Group concluded that the assets of these businesses were not impaired. The
step change in the Group's strategy occurred in the second half of 2022/23
following a strategic review by the incoming Chief Executive Officer. The
Directors have therefore concluded that the assessment completed for the
period ended 29 January 2022 remains appropriate.
Divestment of other non-controlling interests
During the period ended 28 February 2023, JD Sports Fashion Plc divested 5% of
Kukri Sports Limited and 10% of JD Canary Islands Sports SL as a result of
options exercised by non-controlling interests in the subsidiaries. In
accordance with IFRS 10, the Group had previously assessed and concluded that
it controlled the subsidiaries. As the divestment does not result in a change
of control, this has been accounted for as an equity transaction.
7. Held-for-sale
Footasylum
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 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 have 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 critical accounting
judgement in the accounting policies.
Held-for-sale
On 4 November 2021, the final ruling from the CMA was to prohibit 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. Footasylum was classified as held-for-sale as at 29 January 2022 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 had
been initiated;
- Footasylum was being actively marketed at a price that was
reasonable in relation to its fair value; and
- there was an expectation that the sale process would be completed
within 12 months of the classification as held-for-sale.
7. Held-for-sale (continued)
Footasylum (continued)
Assets and Liabilities of Footasylum held-for-sale
As at 29 January 2022 and prior to disposal, 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 29 January 2022 of £27.2 million were presented within the Group's cash
and cash equivalents.
As at 28 January 2023 As at 29 January 2022
(unaudited) £m
£m
Intangible assets - 4.7
Property, plant and equipment - 25.2
Deferred tax assets - 0.2
Right-of-use assets - 78.5
Inventories - 27.0
Trade and other receivables - 21.5
Assets held-for-sale - 157.1
As at 28 January 2023 As at 29 January 2022
(unaudited) £m
£m
Trade and other payables - (57.5)
Lease liabilities - (82.0)
Income tax liability - (2.9)
Deferred tax liability - (0.2)
Liabilities held-for-sale - (142.6)
On 29 July 2022, JD Sports Fashion Plc exchanged contracts to sell Footasylum
and its associated subsidiaries to Aurelius Group for cash consideration of
£37.5 million. The transaction subsequently completed on 5 August 2022.
Non-core Fashion Businesses
On 16 December 2022, the Group announced its plan to significantly simplify
its fashion branded offer through the divestment of 15 UK-based non-core
fashion businesses to Frasers Group Plc in order to focus more fully on the
opportunities across the rest of the Group, in particular the international
and digital expansion of the Group's core premium Sports Fashion fascias.
At 28 January 2023, the sale of seven of the 15 businesses had not completed
and therefore were held-for-sale at the period end. In addition, the Group
agreed to the sale of Source Lab to its non-controlling interest pre period
end and this completed on 28 February 2023. Therefore this business was also
held-for-sale as at 28 January 2023.
The businesses have been classified as held-for-sale as at 28 January 2023 as:
- the carrying amount of the non-core fashion businesses will be
recovered through the sale transaction;
- the Group has committed to sell the businesses and this sale plan
has been initiated; and
- there is an expectation that the sale process would be completed
within 12 months of the classification as held-for-sale.
7. Held-for-sale (continued)
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; and
- 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.
The businesses disposed of during the period are subject to individual plans
and can be distinguished operationally and for financial reporting purposes.
However, the Group has other subsidiaries and operations within the Sports
Fashion segment in the UK, and therefore these disposals do not represent a
separate major line of business or geographic area for the Group. The disposal
of these entities should not be classified as discontinued operations but the
Group is required to disclose the impact of the disposal.
Assets and Liabilities of Non-Core Fashion Businesses Held-for-Sale
As at 28 January 2023, the non-core fashion businesses and Source Lab were
held at the lower of carrying value or fair value less costs to sell
(excluding cash and cash equivalents). A reconciliation is provided in the
table below. Cash and cash equivalents as at 28 January 2023 of £74.5 million
have been presented within the Group's cash and cash equivalents in accordance
with IFRS 5.
Non-core fashion businesses As at 28 January 2023
Source Lab (unaudited)
£m £m
£m
Intangible assets 9.2 - 9.2
Property, plant and equipment 17.1 0.1 17.2
Inventories 51.9 0.8 52.7
Trade and other receivables 11.9 1.2 13.1
Right-of-use assets 30.8 - 30.8
Assets held-for-sale 120.9 2.1 123.0
Non-core fashion businesses As at 28 January 2023
(unaudited) Source Lab (unaudited)
£m (unaudited) £m
£m
Trade and other payables (131.7) (1.4) (133.1)
Provisions (0.4) - (0.4)
Lease liabilities (32.1) - (32.1)
Liabilities held-for-sale (164.2) (1.4) (165.6)
Non-core fashion businesses As at 28 January 2023
Reconciliation to lower of fair value less costs to sell or carrying value (unaudited) Source Lab (unaudited)
£m (unaudited) £m
£m
Net (liabilities) / assets held-for-sale (43.3) 0.7 (42.6)
Cash and cash equivalents 72.2 2.3 74.5
Intercompany liabilities currently eliminating on consolidation (8.4) (1.5) (9.9)
Impairment to lower of fair value less costs to sell (17.5) - (17.5)
Cash consideration due to be received on completion 3.0 1.5 4.5
8. 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 the property provision, 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 maintains all
properties to a high standard and carry out repairs whenever necessary during
the Group's tenure. Therefore, if there is no risk of closure, any provision
would be minimal and management does not consider it necessary to hold
dilapidation provisions for these properties.
Other Provisions
Other provisions comprises 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 contract 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 seven year period
ending 30 September 2030.
Property provision Other provisions Onerous contract provision
£m Total
£m £m (unaudited)
£m
Balance at 30 January 2021 - - 5.8 5.8
Provisions reclassified from accruals 11.2 14.2 - 25.4
Provisions released during the period (2.0) (6.7) (0.7) (9.4)
Provisions created during the period 9.4 5.0 - 14.4
Provisions utilised during the period (0.4) (2.7) - (3.1)
Balance at 29 January 2022 18.2 9.8 5.1 33.1
Provisions reclassified from accruals 0.9 - - 0.9
Provisions acquired in the period 0.5 - - 0.5
Provisions transferred to held-for-sale (Note 7) (0.4) - - (0.4)
Provisions divested in the period (Note 6) (0.1) - - (0.1)
Provisions released during the period (1.5) (6.5) (0.8) (8.8)
Provisions created during the period 4.5 1.8 - 6.3
Provisions utilised during the period (0.7) - - (0.7)
Balance at 28 January 2023 21.4 5.1 4.3 30.8
Provisions have been analysed between current and non-current as follows:
2023 2022
(unaudited) £m
£m
Current 9.7 13.2
Non-current (within 10 years) 21.1 19.9
Total provisions 30.8 33.1
9. Contingent Liabilities
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 Competition and Markets Authority (CMA) launched an
investigation under section 25 of the Competition Act 1998 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 issued a statement of objections or 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.
The CMA has indicated that it will publish a further update in June 2023.
ICO Investigation
On 30 January 2023, the Group announced that it had been the target of a cyber
incident which resulted in the unauthorised access to a system that contained
customer data relating to some online orders placed between November 2018 and
October 2020. Whilst the affected data was limited, the Group took the
necessary immediate steps to investigate and respond to the incident,
including working with leading cyber security experts. The Group also engaged
with the relevant authorities, including the UK's Information Commissioner's
Office (ICO), as appropriate.
The ICO have now formally advised that they will not be taking any enforcement
action in respect of this incident although they have highlighted several
areas where they believe JD needs to demonstrate improvement. The Group is
committed to addressing these recommendations at pace. At this stage, no other
regulatory body has indicated that it intends to take any enforcement action
although the Group is aware that not all of the relevant regulators have
concluded their investigations. The Group will continue to co-operate fully
with the relevant global regulatory bodies, including the ICO, on all
appropriate matters.
10. Post Balance Sheet Events
Acquisitions and Divestments
Proposed acquisition of Group Courir
On 8 May 2023, the Group entered into exclusive negotiations with the owners
of Groupe Courir S.A.S ('Courir') with regards to the potential future
acquisition of 100% of the issued share capital of Courir for an enterprise
value of €520 million ('Transaction'). In accordance with French law, Courir
management will now commence consultation processes with its relevant employee
representative bodies prior to being able to enter into a binding sale and
purchase agreement for the Transaction. The Transaction will need to be
notified to the European Commission in accordance with European Union Law.
Completion of the acquisition is therefore conditional on receipt of merger
control approval. Given the potential timings associated with the consultation
and competition assessment processes, completion of the Transaction would not
be expected before the second half of 2023. After deducting net debt of €195
million, the amount payable at completion, subject to certain adjustments,
would be €325 million which would be funded through available cash
resources. The net debt of €195 million in Courir principally constitutes
existing funding lines of approximately €210 million which would be
refinanced at completion.
Based in France, Courir is a leading player in the European sports footwear
and apparel sector with 313 stores bannered as Courir across six countries in
Europe. In addition, there are a further 36 stores which trade under franchise
agreements as Courir in North West Africa, Middle East and French overseas
territories. Further, there are two stores which trade as Naked in Denmark
which is an elevated female sneaker business. At the Group's recent Capital
Markets Event, we emphasised the importance of 'Complementary Concepts' to
leverage our existing premium concepts, including JD. This proposed
acquisition is in line with that growth strategy as Courir operates stores
with a primary focus on a female consumer. The senior management team and
operational infrastructure of Courir would be retained and it is the intention
that Courir would maintain its identity and would run autonomously from JD's
French operations. Leveraging Courir's extensive knowledge in managing female
oriented stores would significantly broaden the capabilities and global
opportunities across the Group.
For the 52 week period ended 31 December 2022, Courir had consolidated
revenues of €609.8 million which included €100.3 million from the
combination of the sale of product on a commission basis to the affiliates and
other commission income from franchisees, a profit before interest and tax of
€47.4 million and gross assets of €678.4 million.
10. Post Balance Sheet Events (continued)
Buy or Sell Notice re Iberian Sports Retail Group, S.L. ('ISRG')
Following the receipt of a formal buy / sell notice from Balaiko Firaja
Invest, S.L. and Sonae Holdings, S.A. (together the 'Minority Parties'), who
collectively hold 49.98% of Iberian Sports Retail Group, S.L. ('ISRG'), the
Group is now engaged in formal discussions with the Minority Parties with
regards to the future ownership structure of ISRG, including the JD
shareholding held by ISRG. There are three possible outcomes from this process
although it is expected to be later in the summer before there is clarity as
to which outcome will be progressed by the parties:
· The Group acquires the 49.98% holding in ISRG currently held by
the Minority Parties.
· The Minority parties acquire the Group's 50.02% holding in ISRG
and the Group simultaneously acquires the Minority parties interest in JD
across Iberia. This would result in the divestment of the Sprinter, Sport
Zone, Deporvillage and Bodytone businesses in Iberia together with the
Sprinter, Aktiesport and Perry Sport businesses in the Netherlands. Based on
the indicative values for this outcome, there are no indicators of impairment
in respect of either the Group's investment in ISRG or its subsidiaries, or
the net assets included on consolidation in the financial statements of the
Group as at 28 January 2023.
· No change to existing shareholdings.
Divestment of non-core fashion businesses
Subsequent to the financial period end, the Group completed the sale of eight
non-core fashion businesses as follows:
· On 6 February 2023, the Group completed the sale of Rascal
Clothing Limited following the exercise of a pre-emption right by one of the
founders.
· On 7 February 2023, the Group formally completed the divestment
of Tessuti (including Xile), Scotts, Choice, Giulio and Cricket to Frasers
Group Plc as per the terms of the transaction agreed on 16 December 2022.
· On 28 February 2023, the Group completed the divestment of Source
Lab Limited to its non-controlling shareholder.
· On 2 March 2023, the Group formally completed the divestment of
Topgrade to Frasers Group Plc as per the terms of the transaction agreed on 16
December 2022.
Details of the sale of the seven businesses to Frasers Group Plc which
exchanged on 16 December 2022 are provided in Note 6 Divestments. The assets
and liabilities of these entities were classified as held-for-sale as at the
financial period end along with Source Lab Limited which was sold to its
non-controller shareholder after the financial period end (see Note 7).
Other acquisitions and divestments
Further, the Group has also completed the following, subsequent to the
financial period end:
· On 9 March 2023, the Group completed the divestment of
Woodlandslove Limited to Frasers Group Plc as a result of a
separate agreement to the sale of the businesses agreed on 16 December 2022.
· The Group has completed the acquisition of the remaining 40%
shareholding of Tiso Group Limited and its subsidiaries and the remaining 20%
shareholding of JD Sports Fashion Germany GmbH. The Group now owns 100% of
these entities. Further, the Group has also completed the acquisition of an
additional 1% of the share capital of JD Sports Gyms Limited. The Group now
owns 95% of JD Sports Gyms Limited. These transactions were not material.
Appointment of Non-Executive Directors
On 9 March 2023, the Group appointed Ian Dyson as a Non-Executive Director.
Ian will join the Audit & Risk Committee and the Remuneration Committee.
In addition, Angela Luger, formerly CEO of N Brown Group Plc and Darren
Shapland, currently Chair of Topps Tiles Plc will join the Board as of 1 June
2023. Angela will join the Remuneration Committee and Darren will join the
Audit & Risk Committee, with effect from the date of their appointment.
1 On 20 December 2022, a total of 25,000,000 ordinary shares of 0.05 pence
each were issued at par. The shares were delivered to the JD Sports Employee
Benefit Trust ('Trust') and were issued, in part to satisfy a buyout award due
to Régis Schultz, the Group's Chief Executive Officer with an effective date
of 5 September 2022. The remainder of the new shares shall be held by the
Trust in connection with the Long-Term Incentive Plan 2022.
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