TIDMJD.
RNS Number : 1814S
JD Sports Fashion Plc
07 July 2020
7 July 2020
JD SPORTS FASHION PLC
FINAL RESULTS
FOR THE 52 WEEKSED 1 FEBRUARY 2020
JD Sports Fashion Plc (the 'Group'), a leading retailer of
sports, fashion and outdoor brands, today announces its Final
Results for the 52 weeks ended 1 February 2020 (2019: 52 weeks
ended 2 February 2019).
Impact of IFRS 16 Transition 2020 2019
Proforma Adjustment IFRS 16 IAS 17
IAS 17
GBPm GBPm GBPm GBPm
Revenue 6,110.8 - 6,110.8 4,717.8
Gross profit % 47.0% - 47.0% 47.5%
EBITDA before exceptional
items* 623.6 356.2 979.8 488.4
Depreciation / amortisation (151.8) (311.1) (462.9) (126.9)
-------------- --------------- -------- --------
Operating profit before
exceptional items* 471.8 45.1 516.9 361.5
Net interest expense (6.2) (71.9) (78.1) (6.3)
-------------- ---------------
Profit before tax and exceptional
items* 465.6 (26.8) 438.8 355.2
Exceptional items (90.3) - (90.3) (15.3)
-------------- --------------- -------- --------
Profit before tax 375.3 (26.8) 348.5 339.9
-------------- ---------------
Basic earnings per ordinary
share 27.44p (2.15)p 25.29p 26.90p
Adjusted earnings per ordinary
share* 36.41p (2.15)p 34.26p 28.44p
Total dividend payable per
ordinary share 0.28p - 0.28p 1.71p
Net cash at period end (a) 429.9 - 429.9 125.2
-------------- ---------------
a) Net cash consists of cash and cash equivalents less interest-bearing loans and borrowings
b) Throughout this release '*' indicates the first instance of a
term defined and is explained in the Glossary at the end of these
preliminary results
Group Highlights
-- Record result to 1 February 2020 with very strong consumer
demand for JD's multi-channel proposition:
a) Revenue increased by 30% to GBP6,110.8 million (2019:
GBP4,717.8 million) with strong total like for like sales* growth
in global Sports Fashion fascias of 12% including highly
encouraging growth of more than 10% in the core* UK and Republic of
Ireland Sports Fashion fascias
b) Group EBITDA before exceptional items on a comparable
accounting basis* increased by 28% to GBP623.6 million (2019:
GBP488.4 million) and profit before tax and exceptional items on a
comparable accounting basis increased by more than GBP110 million
to GBP465.6 million (2019: GBP355.2 million)
c) Reported profit before tax increased by 3% to GBP348.5
million (2019: GBP339.9 million), after net adjustments of GBP26.8
million following transition to IFRS 16 'Leases' and non-cash
exceptional items of GBP90.3 million
-- Further international development of JD in the year with:
a) Net increase of 52 JD stores across mainland Europe
b) Net increase of 18 JD stores in the Asia Pacific region
c) JD store base in the United States increased to 11 stores
with the first flagship store in Times Square, New York,
anticipated to open later in the summer
-- Encouraging performance in the United States with operating
profit before exceptional items on a comparable accounting basis of
GBP97.9 million (2019: GBP26.6 million for the 33 weeks post
acquisition) driven by:
a) Like for like sales growth for the proforma 52 week period
across the combined Finish Line branded stores and website of
9%
b) Gross margin increased to 42.9% (proforma 52 weeks to 2 February 2019: 42.2%)
-- Net cash at the end of the period, being the high point of
the working capital cycle, of GBP429.9 million (2019: GBP125.2
million)
-- Key financial information of the two business segments is tabulated below:
Period to 1 February 2020
Sports Fashion Outdoor Unall(2) Total
IFRS 16 IAS 17 IFRS 16 IAS 17 IFRS 16 IAS 17
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Revenue 5,696.8 5,696.8 414.0 414.0 - 6,110.8 6,110.8
-------- -------- --------- --------- --------- -------- --------
Gross profit % 47.4% 47.4% 41.9% 41.9% - 47.0% 47.0%
-------- -------- --------- --------- --------- -------- --------
EBITDA before
exceptional items 952.4 629.6 27.4 (6.0) - 979.8 623.6
Depreciation (413.8) (132.0) (39.2) (9.9) - (453.0) (141.9)
Amortisation(1) (5.4) (5.4) (4.5) (4.5) - (9.9) (9.9)
-------- -------- --------- --------- --------- -------- --------
Operating profit
/ (loss) before
exceptional items 533.2 492.2 (16.3) (20.4) - 516.9 471.8
Net interest expense (64.7) - (7.2) - (6.2) (78.1) (6.2)
-------- -------- --------- --------- --------- -------- --------
Profit/ (loss)
before tax and
exceptional items 468.5 492.2 (23.5) (20.4) (6.2) 438.8 465.6
Exceptional items (40.6) (40.6) (49.7) (49.7) - (90.3) (90.3)
-------- -------- --------- --------- --------- -------- --------
Profit/ (loss)
before tax 427.9 451.6 (73.2) (70.1) (6.2) 348.5 375.3
-------- -------- --------- --------- --------- -------- --------
(1) This is a non-trading charge relating to the amortisation of
various fascia names and brand names which arise consequent to the
accounting of acquisitions made over a number of years. These
charges are as follows:
-- Sports Fashion: GBP5.4 million (2019: GBP7.5 million)
-- Outdoor: GBP4.5 million (2019: GBP4.5 million)
(2) The Group considers that net funding costs are cross
divisional in nature and cannot be allocated between the segments
on a meaningful basis.
Period to 2 February 2019
Sports Fashion
IAS 17 Outdoor Unall Total
IAS 17 IAS 17 IAS 17
GBPm GBPm GBPm GBPm
Revenue 4,296.4 421.4 - 4,717.8
--------------- ---------- --------- ---------
Gross profit % 48.0% 42.5% - 47.5%
--------------- ---------- --------- ---------
EBITDA before exceptional
items 478.4 10.0 - 488.4
Depreciation (105.1) (9.8) - (114.9)
Amortisation (7.5) (4.5) - (12.0)
--------------- ---------- --------- ---------
Operating profit / (loss)
before exceptional items 365.8 (4.3) - 361.5
Net interest expense - - (6.3) (6.3)
--------------- ---------- --------- ---------
Profit/ (loss) before
tax and exceptional items 365.8 (4.3) (6.3) 355.2
Exceptional items (13.7) (1.6) - (15.3)
--------------- ---------- --------- ---------
Profit/ (loss) before
tax 352.1 (5.9) (6.3) 339.9
--------------- ---------- --------- ---------
Update on COVID-19
-- COVID-19 continues to affect our commercial operations and
will have a material impact on the Group's results for the period
to 30 January 2021:
Period of Store Closures
a) Italy was the first country to experience closures on 11
March 2020, quickly followed by a number of other markets across
Western Europe and the United States
b) By 23 March 2020 we had a full closure of our retail
portfolio in 14 countries representing more than 98% of the Group's
physical store estate
c) Online trading remained open in most territories and has
delivered a very resilient performance during the closure period
and beyond with consumers clearly still attracted to JD's premium
multi-branded proposition
d) Further mitigation provided through public sector support in
various territories together with internal 'self-help'
initiatives
Period since Re-opening
e) Stores began to re-open in some countries from the end of
April with the majority of the Group's stores now trading again
f) Initial footfall has been weaker in malls and shopping
centres, particularly in Northern Europe at weekends, as consumers
remain nervous about the risks associated with densely occupied
enclosed spaces
g) Stores operating in line with local legislation on social
distancing and personal protective equipment
h) Reduced footfall partially offset by stronger conversion with
consumers currently less inclined to browse
Peter Cowgill, Executive Chairman, said:
"Whilst COVID-19 has constrained our short term progress, it is
important that we do not lose sight of the core retail standards
and commercial disciplines which have underpinned our longer term
growth to date. JD has a market leading multi-channel proposition
which maximises its consumer relevance and reach by creating, and
then maintaining, a deep emotional connection with its consumers
who see JD as an authoritative and trustworthy source of style and
fashion inspiration with influences drawn from both sport and
music.
"This proposition remains extremely robust and, in that regard,
I am pleased to report that it was another year of significant
progress for the Group with global revenues increasing by 30% to
GBP6,110.8 million (2019: GBP4,717.8 million) and the headline
profit before tax and exceptional items increasing by a further 24%
to GBP438.8 million (2019: GBP355.2 million). This represented
another record result for the Group.
"We were encouraged by the continued positive trading in the
early weeks of the year prior to the emergence of COVID-19 and we
firmly believe that we are well placed to regain our previous
momentum. Looking longer term, there is inevitably considerable
uncertainty as to what the effect of COVID-19 will be on consumer
behaviour and footfall with future store investments highly
dependent on rental realism and lease flexibility. Ultimately,
however, we remain confident that we have a market leading
multi-channel proposition which has the necessary flexibility and
agility to prosper within a retail environment that may see
profound and permanent structural change."
Enquiries:
JD Sports Fashion Plc Tel: 0161 767
1000
Peter Cowgill, Executive Chairman
Neil Greenhalgh, Chief Financial Officer
Jennifer Iveson, Investor Relations
MHP Communications Tel: 0203 128
8193
Andrew Jaques
Giles Robinson
Charles Hirst
Catherine Chapman
Executive Chairman's Statement
Group Developments and Progress
Introduction
Whilst COVID-19 has constrained our short term progress, it is
important that we do not lose sight of the core retail standards
and commercial disciplines which have underpinned our longer term
growth to date. JD has a market leading multi-channel proposition
which maximises its consumer relevance and reach by creating, and
then maintaining, a deep emotional connection with its consumers
who see JD as an authoritative and trustworthy source of style and
fashion inspiration with influences drawn from both sport and
music.
This proposition remains extremely robust and, in that regard, I
am pleased to report that it was another year of significant
progress for the Group with global revenues increasing by 30% to
GBP6,110.8 million (2019: GBP4,717.8 million) and the headline
profit before tax and exceptional items increasing by a further 24%
to GBP438.8 million (2019: GBP355.2 million). This represented
another record result for the Group.
This result also reflects the application of IFRS 16 'Leases'
for the first time. The Group has adopted the modified
retrospective transition approach to this new accounting standard,
with the result to 2 February 2019, which reflected the application
of IAS 17 'Leases', not requiring restatement. On a consistent
accounting basis, the proforma headline profit before tax and
exceptional items to 1 February 2020 under IAS 17 'Leases' would
have been GBP465.6 million being GBP110.4 million higher than last
year and GBP26.8 million higher than that reported under IFRS 16
'Leases'.
A major driver in the improved result is the inclusion, for the
first time, of a full year contribution from the combined Finish
Line and JD businesses in the United States. We are pleased with
our progress here with these businesses delivering an operating
profit of GBP94.2 million (GBP97.9 million on a proforma basis
under IAS 17 'Leases') (2019: GBP26.6 million for the 33 week
period post acquisition).
JD (UK and Republic of Ireland)
In normal market conditions, consumer demand for the JD
proposition in our core markets remained very strong with the total
like for like sales growth of more than 10% which we reported for
the first half, continuing through the rest of the year. This was a
good performance given the well-publicised multiple retail
challenges in the UK even before the COVID-19 outbreak and the
tough comparatives from our growth over a number of years.
We have always believed that the retail estate for JD in the UK
and Republic of Ireland provides positive benefits in terms of
brand awareness, the customer's desire to see, handle and try the
product, and our ability to provide convenience through multiple
delivery points. However, given the clear uncertainty on future
levels of footfall, particularly if social distancing remains an
ongoing requirement, it is inevitable that maintaining a large
nationwide physical retail presence will require greater
flexibility in property leases.
JD (International)
The JD fascia made further significant progress in its
international markets with a net increase of 76 stores in the
year:
-- Europe: JD enjoyed another year of double digit growth in
like for like sales, both in stores and online, complemented by a
net increase of 52 stores with new stores in most of our existing
territories together with our first JD store in Austria meaning
that JD now has a presence in 11 countries across Europe.
Our previously stated ambition of opening one store on average
per week across Europe reflected a world before the COVID-19
outbreak. With restricted movement and activity across the majority
of the territories, the fit-out programme was largely halted for a
number of weeks. Footfall has been subdued in many countries in
Europe after re-opening and, whilst this has partially been
mitigated by improved conversion, we have decided to delay a number
of projects that were planned for this year whilst we assess the
post re-opening performance. It is also entirely feasible that some
projects may not proceed under the current lease terms.
Consequently, we expect that the number of openings this year will
be significantly reduced. However, it is still our intention to
open a flagship style store on the key street of Rue de Rivoli in
the centre of Paris later in the summer.
-- Asia Pacific: There was a net increase of 18 stores in the
period with additional stores in all of our territories. We are
particularly encouraged by further positive developments in
Australia where, after opening our first JD store in April 2017, we
are now firmly established with 24 stores and a full operational
infrastructure. The Glue business, which we acquired in 2016, no
longer provided any strategic benefit to the ongoing development of
JD and was disposed of during the year. Elsewhere, there was
another positive performance in Malaysia and we have doubled our
presence in both Singapore and Thailand with four stores now
trading in each country. In South Korea, we have increased our
store base from 16 stores to 19 stores.
-- North America: At the end of the year the JD presence in the
United States had increased to 11 stores with one new store at
Lincolnwood (Chicago) complemented by the conversion of a further
five existing Finish Line stores. Two of the conversions, Mall of
America (Minnesota) and Deerbrook Mall (Houston) were 'full'
conversions with the installation of the full JD retail systems
across all product categories. The remaining three stores, Mall of
Georgia (Atlanta), Cumberland Mall (Atlanta) and Roosevelt Field
(New York) were 'lite' conversions with the installation of
fixtures for apparel and changes to the signage with the existing
Finish Line footwear systems largely retained. These 'lite'
conversions, which require less non-trading time and can be
delivered with substantially less capital investment, provide a
more flexible framework to develop JD and are appropriate to the
current trading environment.
We have a clear vision to develop JD in the major metropolitan
markets with more than 70 additional existing Finish Line stores
considered as being suitable for conversion to JD of which six have
already been converted in the year to date in the 'lite' style. It
is our current intention that the majority of the remainder will be
converted over the next two years although the exact timings for
these works will need to be flexed according to the specific
factors and any ongoing restrictions at each location. At the
instruction of the local authorities, and as a consequence of
COVID-19, we also had to pause work on the fit out of our flagship
store in Times Square, New York. We have now been able to
re-commence on site and would currently expect this store to be
open by the end of the summer. This store will be an important
milestone in our development, significantly enhancing our presence
and standing with both consumers and our brand partners in the
United States.
After the period end, we completed the acquisition of
Onepointfive Ventures Limited in Canada which consists of four
stores trading as Livestock and a website trading as Deadstock.
Based in Vancouver, this business and its management team will
provide the platform to develop JD in Canada.
Other Fascias
Away from JD, there were positive developments in our other
Sports Fashion businesses in the year:
-- Sprinter & Sport Zone (Iberia): The process to integrate
the Sport Zone businesses in Portugal and the Canary Islands into
the Sprinter operational infrastructure, and to trade through the
excess and disjointed stock from our acquisition, has now
completed. The Sport Zone stores in the Canary Islands have been
converted to the Sprinter banner although we will retain the Sport
Zone name in Portugal where there is considerable customer
goodwill. Whilst Iberia, and particularly Spain, has been one of
the regions most impacted by the COVID-19 outbreak, we firmly
believe that our combined Sprinter and Sport Zone proposition,
which has a greater emphasis on active sport participation and
fitness, are emerging in a robust position with their operations
already structured appropriately for the future.
-- Finish Line (United States): We believe that the Finish Line
fascia appeals to a different core demographic to JD and so we will
need both banners longer term if we are to have flexibility in our
consumer reach and appeal. Finish Line is an important fascia in
our Group and we are pleased with the developments in its first
full year as a subsidiary and the progress against the key
commercial pillars which we identified previously as providing the
foundation for a sustained improvement in the performance over the
longer term:
1. Improving sales densities: Prior to our acquisition, sales of
apparel represented approximately 5% of total sales. We believe
there is an opportunity to increase this both in stores and online,
although some investment is needed in additional relevant fixtures
and in-store marketing to ensure that the apparel offer is
presented with authority. This investment is ongoing with seven
stores given a full refurbishment in the year to Finish Line's
'Store of Now' concept and a further 60 stores refurbished in a
'lite' style with the installation of relevant additional fixtures.
Work on further refurbishments was paused as a result of the
COVID-19 outbreak although these will recommence in due course. We
are encouraged by the early trends on footfall in the United States
in the immediate period after re-opening with consumers seemingly
more confident to return to malls than in Europe.
2. Improving product margins: We continue to make progress on
managing markdown and improving buying disciplines with product
margins across the combined stand-alone stores and Macy's
concessions increasing by 0.7% compared to the proforma equivalent
52-week period in the prior year.
3. Exiting underperforming stores: In addition to converting
five former Finish Line stores to JD, we also exited 17
underperforming Finish Line stores in the year as we continued the
process of rightsizing the retail estate. The store portfolio is
under constant review with decisions on the future strategy of each
store made on a case by case basis taking into account a number of
factors including the cost of the property, occupancy rate in the
specific mall and trends on both sales and footfall. There was also
a further reduction in the number of Macy's branded concessions
with a net decrease of 54 branded concessions in the year. This
includes a number of locations which were a consequence of the
closure of the Macy's host store.
Elsewhere, we continue to be encouraged by the positive
developments in our Premium Fashion and Gyms businesses. At the end
of the period, we had 30 gyms across the UK with a membership base
of approximately 158,000 members.
Footasylum
In April 2019 we acquired the Footasylum business for cash
consideration of GBP86.0 million with the Group also assuming net
debt of approximately GBP7.8 million. At acquisition, Footasylum
had 69 stores across the UK complemented by a well-regarded trading
website.
This transaction was reviewed by the Competition and Markets
Authority ('CMA') which announced in its Final Report on 6 May 2020
that it had decided to prohibit the merger and that, consequently,
the Group would be required to fully divest its investment. The
Group fundamentally disagrees with the conclusion reached by the
CMA, as it fails to take proper account of the dynamic and rapidly
evolving competitive landscape in which the Group operates, which
has changed materially in the period since the acquisition was
completed.
We are currently in negotiations with the CMA as to how the
divestment process will be conducted and monitored. Further, having
considered the CMA's decision carefully we firmly believe that we
are justified in making an application for Judicial Review to the
Competition Appeal Tribunal. This procedure will run in parallel
with the CMA's divestment process. In the meantime, we continue to
observe the CMA's ongoing enforcement order which obliges us to
operate the Footasylum business separately.
Outdoor
This has been a challenging period for our Outdoor businesses
overall, with an improved result in the Blacks and Tiso businesses
overshadowed by a significant loss in the larger Go Outdoors
business. This business underwent significant change in the period
with the transition of store fulfilment to a central warehouse
model in the first half of the year and then the closure, later in
the year, of its principal office in Sheffield. Both of these
actions were more disruptive to the operations of the business in
the year than anticipated.
We believed that we had substantially resolved these operational
issues by the end of the financial year and that Go Outdoors was
then more appropriately structured operationally. However, the
onset of COVID-19 has added a new material challenge to trading as
the business is more sensitive to reductions in footfall compared
to other Outdoor fascias in the Group, with a disproportionate
reliance on physical store sales which, historically, have
represented more than 90% of total revenues. Unfortunately, as has
been widely reported, reduced consumer confidence and the
requirement to maintain social distancing in stores have resulted
in levels of footfall not returning to pre-lockdown levels.
The current trading risk then brings into sharper focus the
operating costs of the business, in particular the inflexible terms
of the property leases in Go Outdoors. The stores have an average
remaining period to lease expiry of approximately 10 years with
upwards only rent reviews, many of which are fixed at rates above
inflation regardless of the market rent in the location, combined
with onerous requirements to correct historic property
dilapidations.
Given the potential for Go Outdoors to remain loss making for
the foreseeable future, the Group considered a number of
alternative strategic options which included engaging advisers in
May 2020 to market the business to a number of parties. In the
absence of a suitable offer, the Board decided that it was not in
the best interests of the wider Group, and its shareholders, to
provide continued financial support to Go Outdoors in its existing
form and so Go Outdoors entered into administration on 23 June
2020.
The Group then reacquired the trade and assets for a cash
consideration of GBP56.5 million which returns to the Group as
partial repayment against its historic indebtedness, a transaction
approved in advance by the independent Pre Pack Pool, and now
occupies the stores under licence from the Administrator. The Group
continues to determine an appropriate store base for the longer
term and has already commenced negotiations with landlords for new
leases with terms which are structured more appropriately. The
Group believes that the approach it has taken has delivered the
best result for creditors, with the Group committing to honouring
liabilities with regards to branded stock suppliers, employees,
HMRC taxation liabilities, customer returns and historic gift card
sales. Further, all pre -- existing Go Outdoors employees
transferred across to the new business with their previous terms
and conditions of employment preserved.
We believe that the restructuring of Go Outdoors will correct
fundamental historic structural weaknesses in the business and,
whilst we regret that there will inevitably be some limited store
closures in future months, we are pleased that it will protect the
maximum number of jobs possible. A greater future integration of
the Outdoor businesses, with Blacks and Go Outdoors having access
to common merchandising systems and shared commercial resources
will provide a robust, effective and cost efficient platform for
longer term developments.
Supply Chain Developments
The 352,000 sqft extension to our Kingsway facility in Rochdale
was commissioned in Autumn 2019. We initially only picked a limited
quantity of product from the new automation equipment through the
autumn and winter peak season to allow the new system and processes
to stabilise. The intention then was for the volumes picked through
this new extension to accelerate from the New Year, thereby
reducing the pressure on our legacy automation equipment where
picking capacity has consistently been constrained at lower levels
than was originally expected.
With the onset of COVID-19, and the requirement for social
distancing, we have had to reduce the maximum number of people that
we can have on site at Kingsway at any one time. While these
restrictions have started to be relaxed, we need to mitigate the
risk of these measures being tightened again which could constrain
our operation through the peak trading period later in the year.
Accordingly, there is an ongoing programme of modifications to
ensure that we can continue to operate safely and effectively in
this situation. These include making a number of structural
improvements to remove bottlenecks in the operation, including the
provision of additional communal welfare facilities. We are also
introducing additional shift patterns to reduce the number of
people entering / exiting the site at any time.
Elsewhere, we have also now opened an 80,000 sqft warehouse in
Belgium which, with mezzanines, has an internal footprint of
approximately 280,000 sqft. This site, which has now started to
receive stocks and is fulfilling product to some European stores,
will provide us with a number of learnings which we can use to
shape our longer term European supply chain strategy. In addition,
it will also help us mitigate some of the potential additional duty
costs which may arise from January 2021 if we exit the current
transition period with the EU without an appropriate trade
agreement.
Sports Fashion
Whilst our global Sports Fashion businesses are inevitably
suffering currently from the adverse impacts of the COVID-19
outbreak, we should recognise that fundamentally they have robust
propositions and strong foundations from which to recover. We
firmly believe that the relevance of our Sports Fashion fascias to
consumers will not be diminished by the current situation, although
it will inevitably slow our momentum this year.
The fundamental strength and foundations of our Sports Fashion
businesses are reflected in their performance last year, with
profit before tax and exceptional items increasing by a further 28%
to GBP468.5 million (2019: GBP365.8 million). On a consistent
accounting basis, the proforma headline profit before tax and
exceptional items to 1 February 2020 under IAS 17 'Leases' would
have been GBP492.2 million, being GBP23.7 million higher than that
reported under IFRS 16 'Leases'.
Like for like store sales across our global Sports Fashion
fascias (excluding Finish Line) increased by 8% with total like for
like sales, including online, growing by 12%. All regions for the
JD fascia delivered like for like growth in the year although we
are particularly encouraged by the performance in our core UK and
Republic of Ireland and Europe markets where total like for like
sales (including online) grew by more than 10%.
The combined Finish Line and JD business in the United States
contributed an operating profit of GBP94.2 million (GBP97.9 million
on a proforma basis under IAS 17 'Leases') in its first full year
as part of the Group (2019: GBP26.6 million for the 33 week period
post acquisition). On a proforma basis, compared to the same 52
week period in the prior year, total like for like sales for the
combined Finish Line stores and website (excluding Macy's
concessions) grew by 9%. We remain satisfied with the progression
on gross margin in the Finish Line business which increased over
the period to 42.9% (proforma 52 weeks to 2 February 2019:
42.2%).
Elsewhere, having completed the transfer of the Sport Zone
operations into the Sprinter infrastructure in the first half of
the year, we are encouraged by the positive developments in our
businesses in Iberia. Over the full year, our combined businesses
contributed a profit of GBP20.7 million (GBP23.3 million on a
proforma basis under IAS 17 'Leases') (2019: GBP1.4 million).
Having already restructured the operations, these businesses have a
solid platform for future recovery as the operational restrictions
are lifted.
The overall gross margin in Sports Fashion reduced to 47.4%
(2019: 48.0%) largely due to the inclusion of the lower margin
Finish Line business for the full period. It is inevitable that
there will be some gross margin sacrifice in the new year with
additional promotional activity required to clear seasonally
non-relevant apparel stocks in stores as they are re-opened
combined with a delayed launch calendar as the international brands
realign stocks and production schedules. We aim to end the current
financial year with stock normalised thereby allowing for a return
to our core commercial disciplines of maximising sellthrough and
limiting markdown.
After recognising exceptional items in the period of GBP40.6
million (2019: GBP13.7 million) relating to the movement in the
fair value of put and call options and the costs associated with
transferring the stocks and operations of Sport Zone into the
Sprinter infrastructure, the profit before tax in Sports Fashion
was GBP427.9 million (GBP451.6 million on a proforma basis under
IAS 17 'Lease') (2019: GBP352.1 million).
Outdoor
It has been a year of transition and challenges in Outdoor with
the Go Outdoors business, in particular, experiencing a number of
integration issues in the project to transition store replenishment
to being fulfilled entirely from a central warehouse.
The overall loss before tax and exceptional items increased to
GBP23.5 million (GBP20.4 million on a proforma basis under IAS 17
'Leases') (2019: GBP4.3 million). The impact from the challenges in
Go Outdoors are clearly reflected in the fact that the loss before
tax and exceptional items in this specific business increased
significantly to GBP23.8 million (loss of GBP20.0 million on a
proforma basis under IAS 17 'Leases') (2019: loss of GBP2.2
million).
In recognition of the fact that, even before the COVID-19
outbreak, the recovery in Go Outdoors to normal levels of
profitability was likely to go beyond this financial year, we
recognised an exceptional charge of GBP42.5 million (2019: GBPnil)
in relation to the impairment of the goodwill arising in previous
years on the acquisition of the Go Outdoors business. A partial
impairment of GBP20.7 million (2019: GBPnil) was recognised in the
first half of the year at which point the Group believed that the
disruption consequent to the integration issues associated with the
transition of fulfilment to the new warehouse were resolved. After
further disruption in the business from the closure of the
principal office in Sheffield, an additional charge of GBP21.8
million (2019: GBPnil) was recognised in the second half. We also
recognised an exceptional charge of GBP7.2 million (2019: GBP1.6
million) for costs arising on the integration and consolidation of
the principal IT systems, warehousing and other infrastructure.
Outdoor continues to have relevance as it provides the Group
with additional third party brand touch points which we may
subsequently be able to leverage elsewhere in the Group. However,
given the inherently lower sales densities and lower gross margins
in Outdoor on the sale of third party brands, this requires a
proposition that is relevant all year round delivered from a store
base with an efficient cost structure complemented by a strong
online presence. Our confidence and belief in our approach comes
from the fact that the Blacks and Millets business, which is more
advanced on its journey to deliver an all year round proposition
and has an online participation in excess of 30%, has reversed its
loss of the previous year with a profit of GBP1.3 million (GBP0.3
million on a proforma basis under IAS 17 'Leases') (2019: loss of
GBP1.3 million).
The overall gross margin in Outdoor reduced slightly to 41.9%
(2019: 42.5%) largely driven by additional promotional activity in
Go Outdoors in the first half of the year when the impact of the
integration issues was greatest. Encouragingly though, the gross
margin in the Blacks and Millets business improved by 1% to 43.6%
(2019: 42.6%).
After recognising the exceptional items of GBP49.7 million
(2019: GBP1.6 million), the loss before tax in Outdoor was GBP73.2
million (loss of GBP70.1 million on a proforma basis under IAS 17
'Lease') (2019: loss of GBP5.9 million).
Financial Summary
Revenue, Gross Margin and Overheads
Total revenue increased by nearly 30% in the year to GBP6,110.8
million (2019: GBP4,717.8 million). This includes GBP1,601.5
million of revenue from Finish Line and JD in the United States
(2019: GBP956.6 million for the 33 week period post acquisition)
and GBP215.9 million (2019: GBPnil) from Footasylum in the 39 week
period after it was acquired. Like for like store sales for the 52
week period across all Group fascias which were a member of the
Group for the full year in both years increased by 6% with the
total like for like growth including online for the same businesses
increasing by 10%.
As expected, total gross margin in the year of 47.0% was
slightly behind the prior year (2019: 47.5%) from the inclusion of
a full year of the lower margin Finish Line business in the United
States.
Profit Before Tax
Profit before tax and exceptional items increased by 24% to
GBP438.8 million (2019: GBP355.2 million). On a consistent
accounting basis, the proforma headline profit before tax and
exceptional items to 1 February 2020 under IAS 17 'Leases' would
have been GBP465.6 million.
The profit before tax and exceptional items includes a profit of
GBP94.2 million (GBP97.9 million on a proforma basis under IAS 17
'Leases') in relation to the combined Finish Line and JD business
in the United States in its first full half year as part of the
Group (2019: GBP26.6 million for the 33 week period post
acquisition).
There were exceptional items in the year of GBP90.3 million
(2019: GBP15.3 million) primarily from the non-cash impairment of
intangible assets arising on the acquisition of Go Outdoors and the
movement in the fair value of put and call options. These
exceptional items comprised:
2020 2019
GBPm GBPm
Impairment of goodwill and fascia names (1) 43.1 8.1
Movement in fair value of put and call options
(2) 31.4 5.6
Integration of Outdoor systems and warehousing
(3) 7.2 1.6
Integration of Sport Zone into Sprinter infrastructure 8.6 -
(4)
------ ------
Total exceptional charge 90.3 15.3
====== ======
1. The impairment in the current period relates to the
impairment of the goodwill arising in prior years on the
acquisition of Go Outdoors Topco Limited and Choice Limited.
2. Movement in the fair value of the liabilities in respect of the put and call options.
3. Costs arising from the integration and consolidation of the
principal IT systems, warehousing and other infrastructure in Go
Outdoors.
4. Costs associated with transferring the stocks and other
operations of Sport Zone into the Sprinter infrastructure.
Group profit before tax ultimately increased by 3% to GBP348.5
million (2019: GBP339.9 million). On a consistent accounting basis,
the Group profit before tax under IAS 17 'Leases' would have been
GBP375.3 million.
Cash and Working Capital
We have significantly increased our net cash position at the end
of the period to GBP429.9 million (2019: GBP125.2 million)
illustrating, yet again, the forceful combination of our capacity
to generate cash in our retail operations and a continual focus on
robust stock management disciplines.
During the year, the Group also further extended its principal
syndicated bank facility. This facility now has a total commitment
of GBP700 million, expiring on 6 November 2024. This facility was
undrawn at the period end (2019: GBP30 million drawn down). The
Group's second principal bank facility is a syndicated Asset Based
Lending Facility in the United States which has a maximum revolving
advance amount of $300 million and expires on 18 June 2023. This
facility was also not drawn down at the period end (2019: $50
million drawn down).
During the year, the primary focus of our capital expenditure
continued to be our retail fascias with the investment in the year
on property fit outs broadly consistent with the prior year levels
at GBP99.6 million (2019: GBP106.9 million). Within this, the
investment on the international businesses increased significantly
to GBP84.1 million (2019: GBP59.2 million) reflecting the
increasingly international focus of our developments. The
international investment included GBP20.4 million (2019: GBP12.0
million) in the United States. Elsewhere, the programme of works to
fit out the 352,000 sqft extension to our Kingsway warehouse
facility is now nearing completion with total investment in the
year at the site of GBP12.2 million (2019: GBP36.1 million).
Net stocks at the end of the year were GBP811.8 million (2019:
GBP 763.8 million) with the increase principally as a result of
stocks in Footasylum of GBP34.2 million following the acquisition
of the business during the year. We maintain a robust approach to
stock management with continuous intense monitoring of very
detailed metrics across all our businesses. We are particularly
encouraged by the improved stock management and disciplines in
Finish Line as, notwithstanding the fact that additional stocks are
required for both the development of JD and to expand our textiles
offer, net stocks across our combined businesses in the United
States have reduced to GBP201.6 million (2019: GBP210.7
million).
Store Portfolio
During the period, store numbers have moved as follows:
Sports Fashion Fascias
JD JD JD JD JD Fash'n Other Other Fin.Lin Fin.Line
US & UK e (Macy's)
(Store UK & Europe AsiaPac Size Size Europe AsiaPac (own) (iii) Total
Nos.) ROI (ii)
(i)
Period
start 390 252 46 5 41 734 84 438 33 529 349 2,167
New stores 14 49 18 1 - 82 5 11 - 1 1 100
Transfers - 7 2 5 (2) 12 2 (7) (2) (5) - -
Acquired - - - - - - 73 - - - - 73
Closures (2) (4) (2) - (2) (10) (11) (15) (29) (17) (55) (137)
------ -------- --------- --- ------ ------ ------- -------- ---------- -------- --------- -------
Period
end 402 304 64 11 37 818 153 427 2 508 295 2,203
------ -------- --------- --- ------ ------ ------- -------- ---------- -------- --------- -------
(i) Chausport (France), Sprinter (Spain), Sport Zone (Portugal,
Spain & Canary Islands) and Perry Sport / Aktiesport
(Netherlands)
(ii) Hot-T (South Korea) and Glue (Australia) - disposal of Glue
business completed 9 August 2019
(iii) Being Finish Line branded concessions within Macy's department stores only
In addition, there were 30 JD branded Gyms at the period end
after seven openings in the year.
Outdoor Fascias
Ultimate Go Go Outdoors
(Store Nos.) Blacks Millets Outdoors Tiso Outdoors Fishing Total
Period start 56 99 6 14 64 14 253
New stores 1 3 - - 2 2 8
Transfers - (1) - - 1 - -
Closures - (4) - (1) - (11) (16)
Period end 57 97 6 13 67 5 245
--------- ---------- ---------- ------- ---------- ------------ --------
Dividends and Earnings per Share
As previously announced, given the current highly unusual
circumstances, the Board believes that it is in the best interests
of shareholders if the Group maintains its cash reserves and so,
accordingly, it does not believe that it is appropriate to pay a
final dividend (2019: 1.44p). It is the Board's current intention
that we would look to resume dividend payments when conditions
allow, although it is important that we maintain flexibility around
the timing and quantum of this commitment. Regardless, we continue
to believe that it is in the longer term interests of all
shareholders to keep future dividend growth restrained so as to
maximise the available funding for our ongoing development
opportunities.
The adjusted earnings per ordinary share before exceptional
items increased by 20% to 34.26p (2019: 28.44p). On a consistent
accounting basis, the adjusted earnings per ordinary share were
36.41p.
The basic earnings per ordinary share decreased slightly by 6%
to 25.29p (2019: 26.90p). On a consistent accounting basis, the
basic earnings per ordinary increased by 2% to 27.44p.
Brexit
The UK has now left the EU and is in a transition period to 31
December 2020. At this stage, the exact nature of the UK's future
relationship with the EU beyond the end of this transition period
is uncertain and so we remain cognisant of the potential adverse
consequences on supply chains, tariffs, exchange rates and consumer
demand.
The new warehouse in Belgium, which has now started to receive
stocks and is fulfilling deliveries to some European stores, will
help us mitigate some of the potential additional duty costs which
may arise from January 2021 if the UK exits the current transition
period with the EU without an appropriate trade agreement. It will
also provide us with a number of learnings which we can use to
shape our longer term European supply chain strategy.
People
The commitment of colleagues at all levels has been crucial in
our increasingly global development and I would like to thank
everyone in our businesses for their contribution in delivering
another set of excellent results. Our colleagues have had to face a
unique, and potentially life changing, challenge through the new
financial year and their response to this has been inspirational. I
can assure them that their safety, and that of our consumers, has
been and will always be our number one priority. I look forward to
the point when the situation normalises and we are able to resume
our progression giving our colleagues the opportunities to develop
their individual careers and achieve their personal ambitions.
On behalf of the Board, I would also like to thank the Senior
Management team in the Group who have joined us in accepting
ongoing voluntary salary reductions of at least 25%. The payment of
bonuses and other contractual incentive payments, due or arising in
respect of individual and Group performance in the year ended 1
February 2020, have also been deferred. It is the intention of the
Board and Remuneration Committee that these will be paid at some
point with the timing of these payments reflecting the evidence of
our actual post re-opening performance and the projected cashflows
of the Group.
The Group is absolutely committed to promoting policies which
ensure that colleagues and customers are treated equally regardless
of ethnic or social origin, race, gender, sexual orientation,
disability or age. The tragic death of George Floyd has affected us
all and we strongly agree that #blacklivesmatter. We acknowledge
the urgent need for change to eradicate not just racism but all
forms of discrimination in society and we recognise that, as a
global business, we have a responsibility to play a full part in
this process. We will collaborate with our teams around the world
to achieve this objective.
Impact of COVID-19
We suffered our first full country closure on 11 March 2020 when
we closed all of our stores in Italy. Over the subsequent two weeks
we then closed all of our stores in a further 13 countries
including the United States where all our stores were closed by 20
March 2020 and the UK, where all our stores were closed by 23 March
2020. Across these 14 countries, this represented a closure of
approximately 98% of the Group's total physical store estate.
Our trading websites continued to accept and fulfil orders in
most of these territories in the closure period which was
important, as not only did it enable us to continue to turn stock
and generate cash, but it also ensured that we retained engagement
and relevance with consumers. Not surprisingly, we saw a very
strong performance online in the store closure period and, while
these levels of growth may reduce with time, it is perhaps
inevitable that there will be some level of permanent transfer from
physical retail to online as a consequence of COVID-19. To
accommodate this possibility, we have now invested further in our
principal warehouse at Kingsway, Rochdale, giving us the
flexibility in our operational infrastructure to deal with the
additional volumes online effectively and efficiently.
Whilst the majority of stores have now re-opened, it is very
clear that footfall in stores will remain uncertain for the
foreseeable future. Social distancing measures have a
disproportionate effect in smaller space, particularly for fascias
like JD which attract high levels of footfall over concentrated
periods of time such as weekends and school holidays. This
concentration of footfall has historically been most evident in
major malls and city centres and it is these locations which are
likely to see the biggest impact relative to historical levels if
social distancing measures continue to operate in some form,
particularly through the peak period later in the year. However, in
terms of our core UK market, a significant nationwide presence in
both High Streets and Out of Town Retail Parks does provide
consumers with an alternative location if they wish to avoid
enclosed spaces. Recognising that rents effectively buy footfall,
we will continue to push for greater correlation between levels of
footfall and rents payable across our physical retail estate.
Current Trading and Outlook
Only a relatively short period of time has elapsed since the
re-opening of stores in our core market. This, combined with the
continued uncertainty around the recovery of footfall and the
application of social distancing measures across many of our
territories, means that it is too early to extrapolate this
performance and give meaningful guidance for profits in the current
year. However, we were encouraged by the continued positive trading
in the early weeks of the year prior to the emergence of COVID-19
and we firmly believe that we are well placed to regain our
previous momentum.
We are confident that JD's premium multi-brand proposition
retains its consumer appeal. We continually challenge ourselves to
advance this proposition and transform all aspects of the customer
journey through innovation in consumer awareness, engagement and
retail theatre; an evolving and often exclusive premium brand
selection which is underpinned by authenticity; and investment in
new technologies in stores, online and within our operational
infrastructure. By maintaining these standards and principles, we
are confident that we will have the right foundations for future
positive developments.
Looking longer term, there is inevitably considerable
uncertainty as to what the effect of COVID-19 will be on consumer
behaviour and footfall with future store investments highly
dependent on rental realism and lease flexibility. Ultimately,
however, we remain confident that we have a market leading
multi-channel proposition which has the necessary flexibility and
agility to prosper within a retail environment that may see
profound and permanent structural change.
Our next scheduled update will take place upon the announcement
of our Interim Results which are scheduled for 8 September
2020.
Peter Cowgill
Executive Chairman
7 July 2020
Consolidated Income Statement
For the 52 weeks ended 1 February 2020
52 weeks to 52 weeks to
1 February 2020 2 February 2019
Note GBPm GBPm
Revenue 6,110.8 4,717.8
Cost of sales (3,236.0) (2,474.5)
------------------ ------------------
Gross profit 2,874.8 2,243.3
Selling and distribution expenses
- normal (2,020.2) (1,632.9)
Administrative expenses - normal (348.6) (253.6)
Administrative expenses - exceptional (90.3) (15.3)
Other operating income 10.9 4.7
Operating profit 426.6 346.2
Before exceptional items 516.9 361.5
Exceptional items 3 (90.3) (15.3)
------------------
Operating profit 426.6 346.2
Financial income 1.7 1.2
Financial expenses (79.8) (7.5)
------------------ ------------------
Profit before tax 348.5 339.9
Income tax expense (97.8) (75.7)
Profit for the period 250.7 264.2
------------------ ------------------
Attributable to equity holders
of the parent 246.1 261.8
Attributable to non-controlling
interest 4.6 2.4
Basic earnings per ordinary share 4 25.29p 26.90p
------------------ ------------------
Diluted earnings per ordinary
share 4 25.29p 26.90p
------------------ ------------------
Consolidated Statement of Comprehensive Income
For the 52 weeks ended 1 February 2020
52 weeks to
1 February 52 weeks to
2020 2 February 2019
GBPm GBPm
Profit for the period 250.7 264.2
Other comprehensive income:
Items that may be classified subsequently
to the Consolidated Income Statement:
Exchange differences on translation
of foreign operations (21.5) (0.8)
Total other comprehensive income for
the period (21.5) (0.8)
------------ -----------------
Total comprehensive income and expense
for the period
(net of income tax) 229.2 263.4
------------ -----------------
Attributable to equity holders of the
parent 227.2 260.0
Attributable to non-controlling interest 2.0 3.4
------------ -----------------
Consolidated Statement of Financial Position
As at 1 February 2020
As at As at
1 February 2 February
2020 2019
GBPm GBPm
Assets
Intangible assets 413.7 394.3
Property, plant and equipment 2,420.1 539.8
Other assets 47.9 79.1
Investment in associate 2.6 0.1
Total non-current assets 2,884.3 1,013.3
------------------------- --------------
Inventories 811.8 763.8
Trade and other receivables 183.9 177.2
Cash and cash equivalents 465.9 251.2
------------------------- --------------
Total current assets 1,461.6 1,192.2
------------------------- --------------
Total assets 4,345.9 2,205.5
------------------------- --------------
Liabilities
Interest-bearing loans and borrowings (20.4) (63.8)
Lease Liabilities (285.0) -
Trade and other payables (900.7) (808.1)
Provisions - (1.3)
Income tax liabilities (34.3) (27.3)
------------------------- --------------
Total current liabilities (1,240.4) (900.5)
------------------------- --------------
Interest-bearing loans and borrowings (15.6) (62.2)
Lease Liabilities (1,707.7) -
Other payables (80.5) (153.8)
Provisions - (1.2)
Deferred tax liabilities (12.5) (11.0)
------------------------- --------------
Total non-current liabilities (1,816.3) (228.2)
------------------------- --------------
Total liabilities (3,056.7) (1,128.7)
------------------------- --------------
Total assets less total liabilities 1,289.2 1,076.8
------------------------- --------------
Capital and reserves
Issued ordinary share capital 2.4 2.4
Share premium 11.7 11.7
Retained earnings 1,245.7 1,016.3
Other reserves (40.6) (21.6)
Total equity attributable to equity holders
of the parent 1,219.2 1,008.8
Non-controlling interest 70.0 68.0
------------------------- --------------
Total equity 1,289.2 1,076.8
------------------------- --------------
Consolidated Statement of Changes in Equity
For the 52 weeks ended 1 February 2020
Total Equity
Attributable
Foreign to Equity
Ordinary Currency Holders
Share Share Retained Other Translation of The
Capital Premium Earnings Equity Reserve Parent
GBPm GBPm GBPm GBPm GBPm GBPm
Balance at 3 February
2018 2.4 11.7 773.6 (33.8) 16.5 770.4
Profit for the period - - 261.8 - - 261.8
Other comprehensive
income:
Exchange differences
on translation of foreign
operations - - - - (1.8) (1.8)
Total other comprehensive
income - - - - (1.8) (1.8)
---- ---------- ----------- --------- -------------- --------------
Total comprehensive
income for the period - - 261.8 - (1.8) 260.0
Dividends to equity
holders - - (15.9) - - (15.9)
Put options held by
non-controlling interest - - - (2.5) - (2.5)
Acquisition of non-controlling
interest - - (4.1) - - (4.1)
Divestment of non-controlling
interest - - 0.9 - - 0.9
Non-controlling interest - - - - - -
arising on acquisition
Shared Capital Issued - - - - - -
Balance at 2 February
2019 2.4 11.7 1,016.3 (36.3) 14.7 1,008.8
Profit for the period - - 246.1 - - 246.1
Other comprehensive
income:
Exchange differences
on translation of foreign
operations - - - - (18.9) (18.9)
---- ---------- ----------- --------- -------------- --------------
Total other comprehensive
income - - - - (18.9) (18.9)
---- ---------- ----------- --------- -------------- --------------
Total comprehensive
income for the period - - 246.1 - (18.9) 227.2
Dividends to equity
holders - - (16.7) - - (16.7)
Put options held by
non-controlling interest - - - (0.1) - (0.1)
Acquisition of non-controlling - - - - - -
interest
Divestment of non-controlling - - - - - -
interest
Non-controlling interest - - - - - -
arising on acquisition
Share capital issued - - - - - -
Balance at 1 February
2020 2.4 11.7 1,245.7 (36.4) (4.2) 1,219.2
---- ---------- ----------- --------- -------------- --------------
Consolidated Statement of Changes in Equity (continued)
For the 52 weeks ended 1 February 2020
Total Equity
Attributable Non-Controlling
to Equity Interest Total
Holders GBPm Equity
of The Parent GBPm
GBPm
Balance at 3 February
2018 770.4 63.9 834.3
Profit for the period 261.8 2.4 264.2
Other comprehensive income:
Exchange differences on
translation of foreign
operations (1.8) 1.0 (0.8)
Total other comprehensive
income (1.8) 1.0 (0.8)
-------- ------------------ ---------
Total comprehensive income
for the period 260.0 3.4 263.4
Dividends to equity holders (15.9) (0.7) (16.6)
Put options held by non-controlling
interest (2.5) - (2.5)
Acquisition of non-controlling
interest (4.1) (5.2) (9.3)
Divestment of non-controlling
interest 0.9 0.4 1.3
Non-controlling interest
arising on acquisition - (0.2) (0.2)
Share capital issued - 6.4 6.4
Balance at 2 February
2019 1,008.8 68.0 1,076.8
Profit for the period 246.1 4.6 250.7
Other comprehensive income:
Exchange differences on
translation of foreign
operations (18.9) (2.6) (21.5)
-------- ------------------ ---------
Total other comprehensive
income (18.9) (2.6) (21.5)
-------- ------------------ ---------
Total comprehensive income
for the period 227.2 2.0 229.2
Dividends to equity holders (16.7) (1.3) (18.0)
Put options held by non-controlling
interest (0.1) - (0.1)
Acquisition of non-controlling - - -
interest
Divestment of non-controlling - - -
interest
Non-controlling interest
arising on acquisition - 1.3 1.3
Share capital issued - - -
Balance at 1 February
2020 1,219.2 70.0 1,289.2
-------- ------------------ ---------
Consolidated Statement of Cash Flows
For the 52 weeks ended 1 February 2020
52 weeks to 52 weeks to
1 February 2 February
2020 2019
GBPm GBPm
Cash flows from operating activities
Profit for the period 250.7 264.2
Income tax expense 97.8 75.7
Financial expenses 79.8 7.5
Financial income (1.7) (1.2)
Depreciation and amortisation of non-current
assets 450.0 115.0
Forex losses on monetary assets and liabilities 9.9 2.5
Impairment of other intangibles and non-current
assets 12.9 11.9
Loss on disposal of non-current assets 6.3 2.0
Other exceptional items 47.2 7.2
Impairment of goodwill and fascia names 43.1 8.1
Increase in inventories (9.5) (26.2)
Increase in trade and other receivables (13.0) (22.5)
Increase in trade and other payables 58.1 21.2
Interest paid (7.9) (7.5)
Lease interest (71.9) -
Income taxes paid (97.8) (80.3)
------------ ------------
Net cash from operating activities 854.0 377.6
------------ ------------
Cash flows from investing activities
Interest received 1.7 1.2
Proceeds from sale of non-current assets 3.1 1.0
Investment in software development (23.2) (12.3)
Acquisition of property, plant and equipment (147.2) (173.6)
Acquisition of non-current other assets (6.8) (5.1)
Acquisition of subsidiaries, net of cash
acquired (89.3) (362.0)
Net cash used in investing activities (261.7) (550.8)
------------ ------------
Cash flows from financing activities
Draw down / (repayment) of interest-bearing
loans and borrowings (88.6) 82.1
Repayment of lease liabilities (264.8) -
Repayment of finance lease liabilities - (1.5)
Draw down of finance lease liabilities - 5.8
Subsidiary shares issued in the period - 6.4
Equity dividends paid (16.7) (15.9)
Dividends paid to non-controlling interest
in subsidiaries (1.3) (0.7)
------------ ------------
Net cash (used in) / from financing activities (371.4) 76.2
------------ ------------
Net increase / (decrease) in cash and
cash equivalents 220.9 (97.0)
Cash and cash equivalents at the beginning
of the period 237.7 334.6
Foreign exchange gains on cash and cash
equivalents 1.7 0.1
------------ ------------
Cash and cash equivalents at the end
of the period 460.3 237.7
------------ ------------
Analysis of Net Cash
As at 1 February 2020
At 2 Non- At 1
February On acquisition Cash cash February
2019 of subsidiaries flow movements 2020
GBPm GBPm GBPm GBPm GBPm
Cash at bank and in hand 251.2 7.8 205.2 1.7 465.9
Overdrafts (13.5) - 7.9 - (5.6)
----------- ------------------ ------- ------------ -------------
Cash and cash equivalents 237.7 7.8 213.1 1.7 460.3
Interest-bearing loans
and borrowings:
Bank loans (74.4) (15.7) 59.3 1.1 (29.7)
Syndicated bank facility (30.0) - 30.0 - -
Finance lease liabilities (8.1) - - 8.1 -
Other loans - - (0.7) - (0.7)
----------- ------------------ ------- ------------ -------------
Net cash / (financial
debt) 125.2 (7.9) 301.7 10.9 429.9
Lease liabilities - - 264.8 (2,257.5) (1,992.7)
----------- ------------------ ------- ------------ -------------
Net debt 125.2 (7.9) 566.5 (2,246.6) (1,562.8)
----------- ------------------ ------- ------------ -------------
1. Basis of Preparation
Adoption of New and Revised Standards
The Group continues to monitor the potential impact of other new
standards and interpretations which have been or may be endorsed
and require adoption by the Group in future reporting periods.
IFRS 16
IFRS 16 'Leases' is effective for all accounting periods
beginning on or after 1 January 2019. The adoption of IFRS 16 means
that lease agreements will give rise to both a right-of-use asset
and a lease liability for future lease payables. The right-of-use
asset will be depreciated on a straight-line basis over the life of
the lease. Interest will be recognised on the lease liability,
resulting in a higher interest expense in the earlier years of the
lease term. The total expense recognised in the Income Statement
over the life of the lease will be unaffected by the new standard.
However, IFRS 16 results in the timing of lease expense recognition
being accelerated for leases which would be currently accounted for
as operating leases.
On a cash flow basis, the impact of transition to IFRS 16 is
GBPnil and adoption of the standard will have no impact on the
commercial operations of the business.
Transition:
As previously disclosed, the Group has adopted the modified
retrospective transition approach, where the initial asset values
will be equal to the present value of the future lease payments as
at the date of transition.
The Group has also applied the following practical
expedients:
-- To grandfather the definition of a lease on transition
-- To rely on a previous assessment of whether leases are
onerous in accordance with IAS 37 immediately before the date of
initial application as an alternative to performing an impairment
review
-- To apply a single discount rate to a portfolio of leases with
reasonably similar characteristics
The Group has also applied the recognition exemption for short
term leases and leases of low-value items.
Impact on the financial statements:
On transition the opening balances for the Consolidated
Statement of Financial Position has been adjusted for the right-of
use asset of approximately GBP2.0 billion, with corresponding lease
liabilities of approximately GBP2.0 billion. As a result of
applying IFRS 16 for the 52 weeks to 1 February 2020, in relation
to the leases initially classified as operating leases, the Group
has recognised GBP1.8 billion of right-of-use asset and GBP2.0
billion of lease liabilities.
The most significant lease liabilities relate to property.
The impact on the Consolidated Income Statement reflects an
increase to operating profit of approximately GBP45.1 million as
the pre-IFRS 16 rental charge is replaced by a lower depreciation
charge. Profit before tax decreased by GBP26.8 million as a result
of an increase in the interest charge of GBP71.9 million.
There is no impact on cash flows, although the presentation of
the Cash Flow Statement has changed significantly, with an increase
in net cash inflows from operating activities being offset by an
increase in net cash outflows from financing activities (interest
paid).
Other
The Group does not consider that any other standards, amendments
or interpretations issued by the IASB, but not yet applicable, will
have a significant impact on the financial statements.
Alternative performance measures
The Directors measure the performance of the Group based on a
range of financial measures, including measures not recognised by
EU-adopted IFRS. 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 underlying performance of the
Group. Alternative performance measures are also used to enhance
the comparability of information between reporting periods, by
adjusting for exceptional items, which could distort the
understanding of the performance for the year. Further information
can be found in the Glossary at the end of these results. Terms are
listed in alphabetical order.
Use of 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 disclosed below are those which have a significant
risk of causing a material adjustment to the carrying amount of
assets and liabilities.
The transaction to acquire Footasylum Plc was reviewed by the
Competition and Markets Authority ('CMA') who announced in its
Final Report on 6th May 2020 that they were prohibiting the merger
and that, consequently, they required the Group to fully divest its
investment. The Group are currently in negotiations with the CMA as
to how the disposal process will be conducted and monitored and
have also made a claim for Judicial Review to the Competition
Appeal Tribunal. Consequently, a t the date of this announcement,
the exact nature and timing of the disposal process is unknown and
the Group may not recover the carrying value as part of this
disposal.
The Group holds Put Options over part of the remaining Minority
Interest in Iberian Sport Retail Group, these options are required
to be fair valued at each accounting period date. A valuation has
been performed by management using an EBITDA multiple, a suitable
discount rate and approved forecasts. The valuation is considerably
higher than the previous year which is primarily due to
substantially better trading performance.
In initially applying IFRS16 Leases, the Group has applied
judgement to determine the lease term for certain lease contracts
in which the Group is a lessee that either have no specified end
date, or where the Group continues to occupy the property despite
the contractual lease end date having passed. In determining the
lease term, the Group takes into consideration its commercial
strategy on a store by store basis and the future intentions of the
Group regarding the duration of continuing occupation of the
property. For lease contracts falling into these parameters, the
associated lease liability is calculated at the present value of
the minimum lease payments over the estimated lease term,
discounted at the group's incremental cost of borrowing. A
corresponding right of use asset is also recognised.
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 Executive Chairman of JD Sports Fashion Plc.
Information reported to the Chief Operating Decision Maker is
focussed on the nature of the businesses within the Group. The
Group's operating and reportable segments under IFRS 8 are
therefore Sports Fashion and Outdoor.
The Chief Operating Decision Maker receives and reviews
segmental operating profit. Certain central administrative costs
including Group Directors' salaries are included within the Group's
core Sports Fashion result. This is consistent with the results as
reported to the Chief Operating Decision Maker.
IFRS 8 requires disclosure of information regarding revenue from
major products and customers. The majority of the Group's revenue
is derived from the retail of a wide range of apparel, footwear and
accessories to the general public. As such, the disclosure of
revenues from major customers is not appropriate. Disclosure of
revenue from major product groups is not provided at this time due
to the cost involved to develop a reliable product split on a same
category basis across all companies in the Group.
Intersegment transactions are undertaken in the ordinary course
of business on arm's length terms.
The Board consider that certain items are cross divisional in
nature and cannot be allocated between the segments on a meaningful
basis. Net funding costs and taxation are treated as unallocated
reflecting the nature of the Group's syndicated borrowing
facilities and its tax group. A deferred tax liability of GBP12.5
million (2019: GBP11.0 million) and an income tax liability of
GBP34.3 million (2019: GBP27.3 million) are included within the
unallocated segment. During the year, there has been a draw down on
the syndicated bank facility of GBPnil(2019: GBP30.0 million). This
has been treated as unallocated.
Each segment is shown net of intercompany transactions and
balances within that segment. The eliminations remove intercompany
transactions and balances between different segments which
primarily relate to the net down of long term loans and short term
working capital funding provided by JD Sports Fashion Plc (within
Sports Fashion) to other companies in the Group, and intercompany
trading between companies in different segments .
Business segments
Information regarding the Group's reportable operating segments
for the 52 weeks to 1 February 2020 is shown below:
Income statement
Sports
Fashion Outdoor Unallocated Total
GBPm GBPm GBPm GBPm
Gross revenue 5,696.8 414.0 - 6,110.8
Intersegment revenue - - - -
--------- --------------- -------------- --------
Revenue 5,696.8 414.0 - 6,110.8
--------- --------------- -------------- --------
Operating profit / (loss)
before exceptional items 533.2 (16.3) - 516.9
Exceptional items (40.6) (49.7) - (90.3)
--------- --------------- -------------- --------
Operating profit / (loss) 492.6 (66.0) - 426.6
Financial income - - 1.7 1.7
Financial expenses (64.7) (7.2) (7.9) (79.8)
--------- --------------- -------------- --------
Profit before tax 427.9 (73.2) (6.2) 348.5
Income tax expense (97.8)
--------- --------------- -------------- --------
Profit for the period 250.7
--------- --------------- -------------- --------
Total assets and liabilities
Sports Fashion Outdoor Unallocated Eliminations Total
GBPm GBPm GBPm GBPm GBPm
Total assets 4,047.7 411.7 - (113.5) 4,345.9
Total liabilities (2,723.5) (393.9) (52.8) 113.5 (3,056.7)
--------------- ---------- ------------ ------------- --------------
Total segment net
assets / (liabilities) 1,324.2 17.8 (52.8) - 1,289.2
--------------- ---------- ------------ ------------- --------------
Other segment information
Sports Fashion Outdoor Total
GBPm GBPm GBPm
Capital expenditure:
Software development 23.2 - 23.2
Property, plant and equipment 138.4 8.8 147.2
Right of use 408.5 9.6 418.1
Non-current other assets 6.8 - 6.8
--------------- -------- ------
Depreciation, amortisation and impairments:
Depreciation and amortisation of
non-current assets 132.3 14.4 146.7
Depreciation and amortisation of
right of use assets 274.9 28.4 303.3
Impairment of intangible assets
(exceptional items) 0.6 42.5 43.1
Impairment of non-current assets
(non-exceptional items) 5.0 - 5.0
Impairment of right of use assets 7.0 0.8 7.8
--------------- -------- ------
The comparative segmental results for the 52 weeks to 2 February
2019 are as follows:
Income statement
Sports Fashion
GBPm Outdoor Unallocated Total
GBPm GBPm GBPm
Gross revenue 4,296.4 421.4 - 4,717.8
--------------- ---------- -------------- --------
Operating profit before
exceptional items 365.8 (4.3) - 361.5
Exceptional items (13.7) (1.6) - (15.3)
--------------- ---------- -------------- --------
Operating profit 352.1 (5.9) - 346.2
Financial income - - 1.2 1.2
Financial expenses - - (7.5) (7.5)
--------------- ---------- -------------- --------
Profit before tax 352.1 (5.9) (6.3) 339.9
Income tax expense (75.7)
--------------- ---------- -------------- --------
Profit for the period 264.2
--------------- ---------- -------------- --------
Total assets and liabilities
Sports Fashion Outdoor Unallocated Eliminations Total
GBPm GBPm GBPm GBPm GBPm
Total assets 2,039.2 255.9 - (89.6) 2,205.5
Total liabilities (978.5) (171.5) (68.3) 89.6 (1,128.7)
--------------- -------- ------------ ------------- ----------
Total segment net
assets / (liabilities) 1,060.7 84.4 (68.3) - 1,076.8
--------------- -------- ------------ ------------- ----------
Other segment information
Sports Fashion Outdoor Total
GBPm GBPm GBPm
Capital expenditure:
Software development 12.3 - 12.3
Property, plant and equipment 159.7 13.9 173.6
Non-current other assets 5.1 - 5.1
Depreciation, amortisation and impairments:
Depreciation and amortisation of
non-current assets 101.4 13.6 115.0
Impairment of intangible assets
(exceptional) 8.1 - 8.1
Impairment of non-current assets
(non-exceptional) 11.2 0.7 11.9
--------------- -------- ------
Geographical Information
The Group's operations are located in the UK, Australia,
Austria, Belgium, Canada, Denmark, Dubai, Finland, France, Germany,
Hong Kong, India, Italy, Malaysia, the Netherlands, New Zealand,
Portugal, Republic of Ireland, Singapore, South Korea, Spain and
the Canary Islands, Sweden, Thailand and the United States of
America.
The following table provides analysis of the Group's revenue by
geographical market, irrespective of the origin of the goods /
services:
2020 2019
GBPm GBPm
UK 2,599.2 2,137.9
Europe 1,619.2 1,368.6
United States 1,611.0 967.3
Rest of world 281.4 244.0
-------- --------
6,110.8 4,717.8
-------- --------
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 is an analysis of the carrying amount of segmental
non-current assets by the geographical area in which the assets are
located:
2020 2019
GBPm GBPm
UK 1,296.2 391.6
Europe 979.2 323.3
United States 497.4 258.2
Rest of world 111.5 40.2
-------- --------
2,884.3 1,013.3
-------- --------
3. Exceptional items
52 weeks to 52 weeks to
1 February 2 February
2020 2019 GBPm
GBPm
Impairment of goodwill and fascia names
(1) 43.1 8.1
Movement in fair value of put and call
options (2) 31.4 5.6
Integration of Outdoor systems and warehousing
(3) 7.2 1.6
Integration of Sport Zone into Sprinter 8.6 -
infrastructure (4)
------------ ------------
Administrative expenses - exceptional 90.3 15.3
Total exceptional items 90.3 15.3
------------ ------------
(1) The impairment in the current period relates to the
impairment of the goodwill arising in prior years on the
acquisition of Go Outdoors Topco Limited and Choice Limited.
(2) Movement in the fair value of the liabilities in respect of
the put and call options.
(3) Costs arising from the integration and consolidation of the
principal IT systems, warehousing and other infrastructure in Go
Outdoors Limited.
(4) Costs associated with transferring the stocks and other
operations of Sport Zone into the Sprinter infrastructure.
Items (1) and (2) are exceptional items as they are not
considered to be reflective of the underlying trading performance
of the Group. Item (3) and (4) are presented as an exceptional item
as these costs relate to one off projects.
4. Earnings per ordinary share
Basic and diluted earnings per ordinary share
The calculation of basic and diluted earnings per ordinary share
at 1 February 2020 is based on the profit for the period
attributable to equity holders of the parent of GBP246.1 million
(2019: GBP261.8 million) and a weighted average number of ordinary
shares outstanding during the 52 week period ended 1 February 2020
of 973,233,160 (2019: 973,233,160).
52 weeks to 52 weeks
1 February to
2020 2 February
2019
Issued ordinary shares at beginning and
end of period 973,233,160 973,233,160
------------ ----------------
Adjusted basic and diluted earnings per ordinary share
Adjusted basic and diluted earnings per ordinary share have been
based on the profit for the period attributable to equity holders
of the parent for each financial period but excluding the post-tax
effect of certain exceptional items. The Directors consider that
this gives a more useful measure of the underlying performance of
the Group.
52 weeks 52 weeks
to to
1 February 2 February
Note 2020 2019
GBPm GBPm
Profit for the period attributable to
equity holders of the parent 246.1 261.8
Exceptional items excluding loss on disposal
of non-current assets 3 90.3 15.3
Tax relating to exceptional items (3.0) (0.3)
Profit for the period attributable to
equity holders of the parent excluding
exceptional items 333.4 276.8
------------ ----------------
Basic and diluted earnings per ordinary
share 25.29 p 26.90p
------------ ----------------
Adjusted basic and diluted earnings per
ordinary share 34.26 p 28.44p
-------- -------
5. Acquisitions
Current period acquisitions
Footasylum Plc ('Footasylum')
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
80.5m shares (in addition to the 19.5m 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.
Footasylum is a UK-based fashion retailer founded in 2005
focusing on the footwear and apparel market. The company operates a
multi-channel model which combines a store estate of 69 stores in a
variety of high street, mall and retail park locations in cities
and towns throughout Great Britain, with a strong online platform
and a recently launched wholesale arm for distributing its own
brand ranges via a network of partners.
Included within the provisional fair value of the net
identifiable assets on acquisition is an intangible asset of
GBP34.3 million representing the Footasylum fascia name and an
intangible asset of GBP3.0 million for Footasylum exclusive brands.
The Board believes the excess of cash consideration paid over the
net identifiable assets on acquisition of GBP27.3 million is best
considered as goodwill representing future operating synergies.
Provisional
Measurement fair value
Book value adjustments as at
GBPm GBPm 1 February
2020
GBPm
Acquiree's net assets at acquisition
date:
Intangible assets - 37.3 37.3
Property, plant & equipment 29.1 (3.5) 25.6
Right of use assets 100.4 - 100.4
Inventories 39.6 - 39.6
Cash and cash equivalents 5.7 - 5.7
Trade and other receivables 19.4 - 19.4
Deferred tax assets / (liabilities) 0.2 (6.3) (6.1)
Trade and other payables - current (42.0) - (42.0)
Trade and other payables - non-current (0.2) - (0.2)
Lease liabilities (107.5) - (107.5)
Interest bearing loans and borrowings (13.5) - (13.5)
Net identifiable assets 31.2 27.5 58.7
------------- -------------- --------------
Goodwill on acquisition 27.3
------------- -------------- --------------
Consideration paid - satisfied in
cash 86.0
------------- -------------- --------------
Given that this transaction was reviewed by the Competition and
Markets Authority ('CMA'), the directors of the company have had to
assess whether or not the Group had control over Footasylum. In
making their judgement, the Board considered the Group's ability to
direct the relevant activities of Footasylum during the
investigation period. Ultimately, after careful consideration, the
Board concluded that the Group had control and, accordingly,
Footasylum should be consolidated from the date of acquisition. The
CMA subsequently announced in its Final Report on 6th May 2020 that
they were prohibiting the merger and that, consequently, they
required the Group to fully divest its investment. The Group are
currently in negotiations with the CMA as to how the disposal
process will be conducted and monitored and have also made a claim
for Judicial Review to the Competition Appeal Tribunal.
Consequently, at the date of this announcement, the exact nature
and timing of the disposal process is unknown and the Group may not
recover the carrying value as part of this disposal.
Included in the 52 week period ended 1 February 2020 is revenue
of GBP215.9 million and a profit before tax of GBP1.7 million in
respect of Footasylum.
Rascal Clothing Limited
On 5 February 2019, the Group acquired 50% of the issued share
capital of Rascal Clothing Limited ('Rascal') for cash
consideration of GBP2.5 million with additional consideration of up
to GBP1.0 million payable if certain performance criteria were
achieved. Rascal is a wholesaler and online retailer of sports
inspired leisurewear. At acquisition, management believed that
Rascal was on course to meet the performance criteria for the
maximum contingent consideration to be payable and therefore the
fair value of the contingent consideration at this time was GBP1.0
million.
The Group has the ability to direct the relevant activities of
Rascal Clothing and there are restrictions on the existing
shareholders via a shareholder agreement. Accordingly, the Board
have concluded that the Group has control and that Rascal Clothing
should be consolidated from the date of acquisition.
The Board believes that the excess of consideration paid over
the net assets on acquisition of GBP2.2 million is best considered
as goodwill on acquisition representing future operating
synergies.
Included in the 52 week period ended 1 February 2020 is revenue
of GBP4.4 million and a profit before tax of GBP0.6 million in
respect of Rascal Clothing Limited.
PG2019 Limited ('Pretty Green')
On 4 April 2019, the Group acquired, via its 100% subsidiary
PG2019 Limited, the trading assets and trade of Pretty Green
Limited (in administration), the boutique men's clothing brand,
from its administrator. The acquisition included the business,
brand, website and wholesale business as well as a flagship store
in Manchester. Cash consideration of GBP1.5 million was paid on
completion with the Group also assuming a further GBP1.8 million of
debt.
Included within the provisional fair value of the net
identifiable assets on acquisition is an intangible asset of GBP1.0
million representing the Pretty Green fascia name and an intangible
asset of GBP0.7 million representing the Pretty Green brand name.
The Board believes the excess of cash consideration paid over the
net identifiable assets on acquisition of GBP2.7 million is best
considered as goodwill representing future operating synergies.
Included in the 52 week period ended 1 February 2020 is revenue
of GBP13.5 million and a profit before tax of GBP1.7 million in
respect of PG2019 Limited.
Giulio Fashion Limited
On 30 April 2019, the Group acquired 80% of the issued share
capital of Giulio Fashion Limited including two wholly owned
subsidiaries, Giulio Limited (a trading company) and Giulio Woman
Limited (a dormant company) for cash consideration of GBP3.0m. The
acquisition included put and call options over the remaining stores
exercisable after 3 years.
The Board believes the excess of cash consideration paid over
the net identifiable assets on acquisition of GBP2.7 million is
best considered as goodwill representing future operating
synergies.
Included in the 52 week period ended 1 February 2020 is revenue
of GBP5.6 million and a profit before tax of GBP0.2 million in
respect of Giulio Fashion Limited.
Other acquisitions
During the period, the Group made several small acquisitions,
these transactions were not material.
Full year impact of acquisitions
Had the acquisitions of the entities listed above been effected
at 3 February 2019, the revenue and profit before tax
of the Group for the 52 week period to 1 February 2020 would
have been GBP6.2 billion and GBP349.2 million respectively.
Acquisition costs
Acquisition related costs amounting to GBP7.4 million
(Footasylum Plc GBP7.3 million, other acquisitions GBP0.1
million)
have been excluded from the consideration transferred and have
been recognised as an expense in the year, within
administrative expenses in the Consolidated Income
Statement.
Prior period acquisitions
The Finish Line, Inc.
On 18 June 2018, the Group acquired 100% of the issued share
capital of The Finish Line, Inc. ('Finish Line') for cash
consideration of $558 million (GBP400.5 million).
Finish Line is one of the largest retailers of premium
multi-branded athletic footwear, apparel and accessories in the
United States ('US'), the largest sportswear market in the world.
At acquisition, Finish Line traded from 556 Finish Line branded
retail stores across 44 US states and Puerto Rico in addition to a
well-established multichannel offering. Finish Line is also the
exclusive retailer of athletic shoes, both in-store and online for
Macy's, one of the US' premier retailers, operating 375 branded and
more than 150 small unbranded concessions within Macy's stores at
acquisition.
Included within the fair value of the net identifiable assets on
acquisition is an intangible asset of GBP70.6 million, representing
the Finish Line fascia name. The Board believed that the excess of
consideration paid over the net assets on acquisition of GBP98.5
million was best considered as goodwill on acquisition representing
future operating synergies. The goodwill calculation is summarised
below:
Measurement Fair value
Book value adjustments at
GBPm GBPm 1 February
2020
GBPm
Acquiree's net assets at acquisition
date:
Intangible assets 16.9 70.6 87.5
Property, plant & equipment 76.5 4.9 81.4
Inventories 261.6 (5.8) 255.8
Cash and cash equivalents 50.9 - 50.9
Trade and other receivables 38.6 - 38.6
Income tax liabilities (1.5) - (1.5)
Deferred tax assets / (liabilities) 7.0 (11.5) (4.5)
Trade and other payables - current (135.9) (16.8) (152.7)
Trade and other payables - non-current (40.2) (13.3) (53.5)
Net identifiable assets 273.9 28.1 302.0
------------- -------------- -------------
Goodwill on acquisition 98.5
------------- -------------- -------------
Consideration paid - satisfied in
cash 400.5
------------- -------------- -------------
No measurement adjustments have been made to the fair value
during the 52 week period ended 1 February 2020 and the period in
which measurement adjustments could be made has now closed on this
acquisition.
Choice Limited
On 13 August 2018, the Group acquired, via its subsidiary
Tessuti Limited, 100% of the issued share capital of Choice Limited
for cash consideration of GBP4.0 million and 8.8% of the issued
share capital of Tessuti Limited with a fair value of GBP1.3
million. Choice Limited operates as a retailer of premium fashion
apparel and footwear with six stores and a trading website at
acquisition. Included within the fair value of the net identifiable
assets on acquisition is an intangible asset of GBP1.5 million,
representing the Choice fascia name. The Board believed that the
excess of consideration paid over the net identifiable assets on
acquisition of GBP3.0 million was best considered as goodwill on
acquisition representing future operating synergies.
No measurement adjustments have been made to the fair value
during the 52 week period ended 1 February 2020 and the period in
which measurement adjustments could be made has now closed on this
acquisition.
Other acquisitions
During the period, the Group made several small acquisitions,
these transactions were not material.
6. Subsequent Events
Onepointfive Ventures Limited trading as Livestock
("Livestock")
On 10 February 2020, the Group acquired 100% of the issued share
capital of Onepointfive Ventures Limited DBA Livestock
("Livestock") through a newly established Canadian holdco structure
(JDSF Holdings (Canada) Inc "Holdco"). Consideration was comprised
of GBP7.0 million in cash and 20% of the equity in Holdco.
Effectively, the Group acquired 80% of Livestock. Based in
Vancouver, this business and its management will provide the
platform to develop JD in Canada.
Included within the provisional fair value of the net
identifiable assets on acquisition is an intangible asset of GBP1.2
million, representing the "Livestock" fascia name. The Board
believes that the excess of consideration paid over net assets on
acquisition of GBP6.7 million is best considered as goodwill on
acquisition representing future operating synergies. The
provisional goodwill calculation is summarised below:
Provisional
Measurement fair value
Book value adjustments at
GBPm GBPm 1 February
2020
GBPm
Acquiree's net assets at acquisition
date:
Intangible assets - 1.2 1.2
Property, plant & equipment 0.4 - 0.4
Inventories 0.5 - 0.5
Cash and cash equivalents (0.8) - (0.8)
Trade and other receivables 0.1 - 0.1
Trade and other payables (0.4) - (0.4)
Deferred tax liability - (0.3) (0.3)
Corporation tax (0.3) - (0.3)
Net identifiable assets (0.5) 0.9 0.4
------------- -------------- --------------
Non-controlling interest 0.1 (0.2) (0.1)
Goodwill on acquisition 6.7
------------- -------------- --------------
Consideration paid - satisfied in
cash 7.0
------------- -------------- --------------
Footasylum Limited
The Competition and Markets Authority ('CMA') announced in its
Final Report on 6th May 2020 that they were prohibiting the merger
with Footasylum Limited and that, consequently, they required the
Group to fully divest its investment. The Group are currently in
negotiations with the CMA as to how the disposal process will be
conducted and monitored and have also made a claim for Judicial
Review to the Competition Appeal Tribunal. At the date of this
announcement, the exact nature and timing of the disposal process
is unknown and the Group may not recover the carrying value as part
of this disposal.
COVID-19
COVID-19 is a non-adjusting post balance sheet event for the
Group. The Group has considered the impact of COVID-19 as at the
date of signing these financial statements. As noted below, the key
area of impact is in regards to Go Outdoors Limited.
Go Outdoors Limited
The onset of COVID-19 in March 2020, and the subsequent
requirement to close all stores on 23 March 2020, presented Go
Outdoors Limited with a new significant trading challenge with the
Board ultimately deciding that it was not in the best interests of
the wider Group, and its shareholders, to provide continued
financial support to the company in its existing form.
Administrators were subsequently appointed to Go Outdoors Limited
on 23 June 2020.
Prior to making this decision, the Board considered a number of
strategic options for Go Outdoors Limited which included the
appointment of advisers in May 2020 to market the business for a
potential sale. The Board examined the offers made through the
marketing process together with the other options available to it
and has ultimately determined that, if fundamentally restructured,
Go would have a future in the Group. Consequently, the Group, via
its newly incorporated subsidiary JD Newco 1 Limited, subsequently
re-acquired the business and substantially all of the assets of Go
Outdoors Limited from its Administrators for consideration of
GBP56.5 million of which GBP55.2 million returns to the Group as
partial repayment against an intergroup receivable of GBP82.8
million. This proposal was reviewed and cleared in advance by the
independent Pre Pack Pool.
At the point of administration, Go Outdoors Limited operated 67
standalone stores and a trading website. The Group has taken an
initial 12 month licence with the Administrator at the previously
agreed rental payments (cancellable by store on a 2 week notice
period) such that it will continue to occupy all of the Go Outdoors
stores and, subject to agreeing new leases, it is the Group's
intention to retain the majority of the retail estate. It is also
the Group's intention to honour the principal historic liabilities
of the Go business including branded stock suppliers, HMRC
liabilities on taxation, customer returns, and gift cards. Further,
all pre-existing Go Outdoors employees have transferred across to
the new business with their previous terms and conditions of
employment preserved.
Included within the Group's Statement of Financial Position at 1
February 2020 were Goodwill of GBP1.9 million, Intangible assets
(Brand and Fascia name) of GBP50.2 million, Property, Plant and
Equipment of GBP32.3 million, Right of use assets of GBP153.8
million, Right of use liabilities of GBP167.6 million, current
assets of GBP69.7 million and current liabilities of GBP62.2
million. The net impact of the transaction is that the Group will
de-recognise the Right of use assets and associated liabilities and
record a net gain or loss.
Due to the proximity of the date of the transaction and the
signing of the financial statements, the directors have yet to
quantify all of the impairment and effects resulting from the
transaction. This will be presented in the announcement of the
Interim Results for the period to 1 August 2020.
7. IFRS 16 Leases
On transition to IFRS 16, the Group recognised a right-of-use
asset, including investment property, and lease liabilities,
recognising any differences in retained earnings. The impact on
transition is summarised below (not including the adjustment for
deferred income, initial direct costs and onerous leases).
Balance at
3 February
2019
GBPm
Right-of-use asset presented in property,
plant and equipment 2,007.8
Lease liabilities 2,007.8
Retained earnings impact -
-------------
Impacts for the period
Balance Balance at
at 1 February 3 February
2020 2019
GBPm GBPm
Property 1,849.7 1,891.3
Vehicles 4.4 3.8
----------------
Total right-of-use asset 1,854.1 1,895.1
---------------- -------------
The indicative impact of the adoption of IFRS 16 disclosed in
the pre-transition financial statements was a right-of-use asset of
approximately GBP1.8 billion, with corresponding lease liability of
GBP1.9 billion (after adjustments for deferred income). As a result
of the finalisation of the accounting judgement relating to the
estimated lease term on expired leases, an additional GBP0.1
billion has been calculated and added to both the right-of-use
asset and the corresponding lease liability.
Balance at
1 February
2020
GBPm
Current 285.0
Non-current 1,707.7
-------------
Total lease liabilities 1,992.7
-------------
8. Accounts
The financial information set out above does not constitute the
Group's statutory accounts for the 52 weeks ended 1 February 2020
or 52 weeks ended 2 February 2019 but is derived from those
accounts. Statutory accounts for the 52 weeks ended 2 February 2019
have been delivered to the Registrar of Companies, and those for
the 52 weeks to 1 February 2020 will be delivered in due course.
The auditor has reported on those accounts; their reports were (i)
unqualified, (ii) did not include a reference to any matters to
which the auditors 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.
Copies of full accounts will be sent to shareholders in due
course. Additional copies will be available from JD Sports Fashion
Plc, Hollinsbrook Way, Pilsworth, Bury, Lancashire, BL9 8RR or
online at www.jdplc.com
Glossary (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
EU-adopted IFRS. 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 underlying performance of the
Group.
Alternative Performance Measures are also used to enhance the
comparability of information between reporting periods, by
adjusting for exceptional items. Exceptional items are disclosed
separately as they are not considered reflective of the year on
year trading performance of the Group. The separate reporting of
exceptional items, which are presented as exceptional within the
relevant category in the Consolidated Income Statement, helps
provide an indication of the Group's underlying business
performance.
Adjusted earnings per share
The calculation of basic earnings per share is detailed in Note
3. Adjusted basic earnings per ordinary share has been based on the
profit for the period attributable to equity holders of the parent
for each financial period but excluding the post-tax effect of
certain exceptional items. A reconciliation between basic earnings
per share and adjusted earnings per share is shown below:
2020 2019
Basic earnings per share 25.29p 26.90p
Exceptional items excluding loss on disposal
of non-current assets 9.27p 1.57p
Tax relating to exceptional items (0.30p) (0.03p)
-------- --------
Adjusted earnings per ordinary share 34.26p 28.44p
-------- --------
Comparable accounting basis
Restating the performance for the period to 1 February 2020
using the accounting standards which were applicable for the period
to 2 February 2019; specifically, the re-calculation of property
lease costs under IAS 17 'Leases'.
Core
The Group's core Sports Fashion fascia is JD and the Group's
core market is the UK and Republic of Ireland.
EBITDA before exceptional items
Earnings before interest, tax, depreciation and
amortisation.
2020 2019
GBPm GBPm
Profit for the period 250.7 264.2
Addback:
Financial expenses 79.8 7.5
Income tax expense 97.8 75.7
Depreciation, amortisation and impairment
of non-current assets 462.9 126.9
Exceptional items 90.3 15.3
Deduct:
Financial income (1.7) (1.2)
------ ------
EBITDA before exceptional items 979.8 488.4
------ ------
LFL (Like for Like) sales
The percentage change in the year-on-year sales, removing the
impact of new store openings and closures in the current or
previous financial year .
Like for Like Sports Fashion businesses
The performance in the Sports Fashion segment excluding
acquisitions in the current financial year and the annualisation
period of businesses acquired in the previous financial year .
Net Cash
Net cash consists of cash and cash equivalents together with
interest-bearing loans and borrowings.
Operating profit before exceptional items
A reconciliation between operating profit and exceptional items
can be found in the Consolidated Income Statement.
Profit before tax and exceptional items
A reconciliation between profit before tax and profit before tax
and exceptional items is as follows:
2020 2019
GBPm GBPm
Profit before tax 348.5 339.9
Exceptional items 90.3 15.3
------ ------
Profit before tax and exceptional items 438.8 355.2
------ ------
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR RFMRTMTBMBAM
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July 07, 2020 02:00 ET (06:00 GMT)
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