TIDMJD.
RNS Number : 6345L
JD Sports Fashion Plc
14 September 2021
14 September 2021
JD SPORTS FASHION PLC
UNAUDITED INTERIM RESULTS
FOR THE TWENTY SIX WEEKS TO 31 JULY 2021
JD Sports Fashion Plc (the 'Group'), the leading retailer of
sports, fashion and outdoor brands, today announces its interim
results for the 26 weeks ended 31 July 2021 (comparative figures
are shown for the 26 week period ended 1 August 2020).
IFRS 16 Proforma IAS 17
2021 2020 2021 2020
GBPm GBPm GBPm GBPm
Revenue 3,885.8 2,544.9 3,885.8 2,544.9
Gross profit % 48.5% 45.6% 48.5% 45.6%
EBITDA* 746.4 337.0 554.3 148.9
Depreciation / amortisation (274.7) (241.6) (99.4) (73.2)
-------- -------- -------- --------
Operating profit (before
exceptional items)* 471.7 95.4 454.9 75.7
Net interest expense (32.2) (33.5) (3.4) (2.9)
-------- --------
Profit before tax and exceptional
items* 439.5 61.9 451.5 72.8
Exceptional items (74.9) (20.4) (74.9) (27.9)
-------- -------- -------- --------
Profit before tax 364.6 41.5 376.6 44.9
-------- --------
Basic earnings per ordinary
share 22.19p 3.85p 23.35p 4.08p
Adjusted earnings per ordinary
share* 29.16p 6.09p 30.33p 6.32p
Interim dividend payable - - - -
per ordinary share
Net cash at period end (b) 995.1 764.9 995.1 764.9
-------- --------
a) Throughout this release '*' indicates the first instance of
an alternative performance measure which is explained at the end of
these interim results.
b) Net cash consists of cash and cash equivalents together with
interest-bearing loans and borrowings.
Group Highlights
-- Record result for the first half with profit before tax and
exceptional items of GBP439.5 million (2020: GBP61.9 million; 2019:
GBP158.6 million) including significant contributions from:
o United States where the aggregate profit before tax and
exceptional items increased to GBP245.0 million (2020: GBP73.4
million; 2019: GBP35.7 million) which includes a total contribution
of GBP72.9 million from the recently acquired Shoe Palace and DTLR
businesses. All of the Group's businesses have successfully
capitalised on the favourable trading conditions provided by a
second round of fiscal stimulus from the Federal Government
o JD business in the core UK and Republic of Ireland market
where the profit before tax and exceptional items increased to
GBP170.8 million (2020: GBP52.0 million; 2019: GBP114.9 million)
with a strong retention of sales through digital channels in the
first quarter whilst the stores were temporarily closed, combined
with strong pent-up demand after reopening
-- Significant acquisitions in the period include:
o DTLR which enhances the Group's exposure to key consumer
demographics in the highly important East Coast market in the
United States
o Marketing Investment Group in Poland to give the Group a
presence in Eastern Europe for the first time
-- International development of JD in other markets continues to
progress positively, although the pace of new stores has been
impacted by the ongoing restrictions on construction and fit out
works in certain markets:
o 21 new JD stores opened across Western Europe
o Six new JD stores in the Asia Pacific region with four new
stores in Australia and two stores in Thailand
o 66 stores now trading as JD in the United States
-- Outdoor returned to profitability delivering a profit before
tax and exceptional items of GBP10.8 million (2020: loss of GBP16.8
million)
-- Commenced a major programme to enhance the logistics network
across the UK and Western Europe with long term leases being
progressed on two new major facilities:
o Derby (UK): 515,000 sqft facility which will be dedicated to
the fulfilment of online orders for JD in the UK with initial go
live anticipated by Autumn 2022 and full operational use in early
2023
o Heerlen (the Netherlands): 620,000 sqft facility which will
process substantially all of the volume required for stores and
online orders in Western Europe with initial go live anticipated by
Autumn 2023 and full operational use by mid-2024
-- No interim dividend declared, with a potentially larger full
year dividend subject to the performance of the Group over the full
year, taking into account the consequences of any potential further
restrictions on trading
-- Forecast outturn headline profit before tax for the full year of at least GBP750 million
-- Key financial information of the two business segments is tabulated below:
Period to 31 July 2021
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 3,650.6 3,650.6 235.2 235.2 - 3,885.8 3,885.8
-------- -------- -------- ------- --------- -------- --------
Gross profit
% 48.8% 48.8% 44.3% 44.3% - 48.5% 48.5%
-------- -------- -------- ------- --------- -------- --------
EBITDA 722.2 538.1 24.2 16.2 - 746.4 554.3
Depreciation (245.2) (77.3) (10.6) (3.2) - (255.8) (80.5)
Amortisation(1) (17.2) (17.2) (1.7) (1.7) - (18.9) (18.9)
-------- -------- -------- ------- --------- -------- --------
Operating profit 459.8 443.6 11.9 11.3 - 471.7 454.9
Net interest
expense (27.7) - (1.1) - (3.4) (32.2) (3.4)
-------- -------- -------- ------- --------- -------- --------
Profit / (loss)
before tax and
exceptional items 432.1 443.6 10.8 11.3 (3.4) 439.5 451.5
Exceptional items (74.9) (74.9) - - - (74.9) (74.9)
-------- -------- -------- ------- --------- -------- --------
Profit / (loss)
before tax 357.2 368.7 10.8 11.3 (3.4) 364.6 376.6
-------- -------- -------- ------- --------- -------- --------
(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.
(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 1 August 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 2,402.4 2,402.4 142.5 142.5 - 2,544.9 2,544.9
-------- -------- -------- ------- --------- -------- --------
Gross profit
% 45.9% 45.9% 40.5% 40.5% - 45.6% 45.6%
-------- -------- -------- ------- --------- -------- --------
EBITDA 333.1 157.8 3.9 (8.9) - 337.0 148.9
Depreciation (220.8) (65.3) (16.9) (4.0) - (237.7) (69.3)
Amortisation(1) (2.9) (2.9) (1.0) (1.0) - (3.9) (3.9)
-------- -------- -------- ------- --------- -------- --------
Operating profit
/ (loss) 109.4 89.6 (14.0) (13.9) - 95.4 75.7
Net interest
expense (27.8) - (2.8) - (2.9) (33.5) (2.9)
-------- -------- -------- ------- --------- -------- --------
Profit / (loss)
before tax and
exceptional items 81.6 89.6 (16.8) (13.9) (2.9) 61.9 72.8
Exceptional items - - (20.4) (27.9) - (20.4) (27.9)
-------- -------- -------- ------- --------- -------- --------
Profit / (loss)
before tax 81.6 89.6 (37.2) (41.8) (2.9) 41.5 44.9
-------- -------- -------- ------- --------- -------- --------
Peter Cowgill, Executive Chairman, said:
"The Group continues to demonstrate outstanding resilience in
the face of numerous challenges arising from the continued
prevalence of the COVID-19 pandemic in many countries, widespread
strain on international logistics and other supply chain
challenges, materially lower levels of footfall into stores in many
countries after reopening and the ongoing administrative and cost
consequences resulting from the loss of tariff free, frictionless
trade with the European Union. Given these challenges, the record
result that the Group has delivered in the first half with a profit
before tax and exceptional items of GBP439.5 million (2020: GBP61.9
million; 2019: GBP158.6 million) is extremely encouraging.
"It is most reassuring that the core JD business in the UK and
Republic of Ireland performed strongly in the first half delivering
a profit before tax and exceptional items of GBP170.8 million
(2020: GBP52.0 million; 2019: GBP114.9 million). This result also
includes a particularly strong performance from the Group's banners
in the United States which have delivered a combined profit before
tax and exceptional items of GBP245.0 million (2020: GBP73.4
million; 2019: GBP35.7 million).
"Ultimately, the Group is at the pinnacle of the global sports
fashion industry with consumers instinctively knowing that our
retail propositions focus on their fashion desires and aspirations
in both footwear and apparel, with an agile multichannel ecosystem
delivering the highest standards of retail execution and consumer
experience. This is respected by the international brands who
regularly call JD out as a premier global strategic partner.
"We remain absolutely confident that our inherent strengths in
retail dynamics and operations provide us with a robust platform to
make further progress.
"At this time, we are generally encouraged by our performance in
the first few weeks of the second half although retail footfall
remains comparatively weak in many countries. Assuming a prudent
but realistic set of assumptions for the peak trading period ahead
which take into account the absence of stimulus in the United
States for the second half of the year, in addition to current
industry-wide supply chain challenges, we presently anticipate
delivering a headline profit before tax for the full year of at
least GBP750 million.
"The JD brand is increasingly recognised on a global basis and
this result bears testimony to the underlying strength of our
business. I would like to express my sincere thanks and gratitude
to everyone in all of our Group businesses for their remarkable
contribution in delivering these excellent results during such a
challenging period."
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
Peter Hewer
Charles Hirst
Catherine Chapman
EXECUTIVE CHAIRMAN'S STATEMENT
Group Developments
Introduction
The Group continues to demonstrate outstanding resilience in the
face of numerous challenges arising from the continued prevalence
of the COVID-19 pandemic in many countries, widespread strain on
international logistics and other supply chain challenges,
materially lower levels of footfall into stores in many countries
after reopening and the ongoing administrative and cost
consequences resulting from the loss of tariff free, frictionless
trade with the European Union. Given these challenges, the record
result that the Group has delivered in the first half with a profit
before tax and exceptional items of GBP439.5 million (2020: GBP61.9
million; 2019: GBP158.6 million) is extremely encouraging.
The JD brand is increasingly recognised on a global basis and
this result bears testimony to the underlying strength of our
business. I would like to express my sincere thanks and gratitude
to everyone in all of our Group businesses for their remarkable
contribution in delivering these excellent results during such a
challenging period.
It is most reassuring that the core JD business in the UK and
Republic of Ireland performed strongly in the first half delivering
a profit before tax and exceptional items of GBP170.8 million
(2020: GBP52.0 million; 2019: GBP114.9 million). The deep
connection that JD has built with its consumers in its core market
over a number of years means that consumers are comfortable
interacting with the business through any channel. However, the
successful leveraging of that connection in a period when the
demand has been shifting between channels, often with little
notice, has only been achieved because JD has built an agile
operational infrastructure and has a highly motivated and
experienced team who continually rise to the challenge.
This result also includes a particularly strong performance from
the Group's banners in the United States which have delivered a
combined profit before tax and exceptional items of GBP245.0
million (2020: GBP73.4 million; 2019: GBP35.7 million). This
includes a total contribution of GBP72.9 million from the recently
acquired Shoe Palace and DTLR businesses. Consistent with other
national retailers in the United States, our businesses benefitted
significantly, between mid-March and mid-July, from the fiscal
stimulus made available by the Federal Government. Somewhat
uniquely, the Federal Government supported its economy through
direct payments to individuals which created a short term and very
favourable trading environment with substantial like for like
growth in stores in this four month period, when compared to 2019,
which was the most recent trading period not to be impacted by the
pandemic.
Whilst we recognise the positive impact of the fiscal stimulus
in the United States, there was still significant competition for
the consumers' dollars. The reason why we performed so well in this
period is that we have world class fascias and management teams who
understand the aspirations and expectations of their specific
consumer base, who in turn trust us to curate a product proposition
that delivers to their needs. It is clear that the United States is
becoming an increasingly important territory for the Group with
progression and evolution in this country having a major impact
both on the Group's overall performance and its standing with the
international brands. In this regard, we are pleased to report
further positive developments for the JD fascia in the United
States with 66 stores now trading as JD with seven new stores
complemented by the conversion of 10 former Finish Line stores. We
are encouraged by the sales and margin uplift that we have seen to
date on these conversions and it is our intention to convert
approximately 25 further Finish Line stores to JD in the second
half of the financial year.
Ultimately, the Group is at the pinnacle of the global sports
fashion industry with consumers instinctively knowing that our
retail propositions focus on their fashion desires and aspirations
in both footwear and apparel, with an agile multichannel ecosystem
delivering the highest standards of retail execution and consumer
experience. This is respected by the international brands who
regularly call JD out as a premier global strategic partner.
Significant M&A Transactions
The Group has either completed or exchanged contracts on a
number of acquisitions and other investments in the period, which
look to either expand the geographical reach of its core premium
sports fashion operations or widen the category offer to include
other products which are relevant to a style conscious
consumer.
80s Casual Classics Limited ('80s Casual Classics')
The acquisition of 80s Casual Classics completed on 2 March 2021
with an initial 70% holding acquired for cash consideration of
GBP14.9 million. Founded in 1993, 80s Casual Classics is an online
retailer of heritage and original clothing inspired by the British
subculture of the 70s, 80s and 90s. It offers a unique product mix
and experience to consumers who look on the much loved classics and
genres from the past decades including Indie, Manchester, Rave and
various other dance cultures with fond nostalgia. 80s Casual
Classics work closely with customers and brands in the re-launch of
classic lines collaborating with Ellesse, Fila, Sergio Tacchini and
other brands in supplying quality heritage releases and fresh
releases based on past styling.
DTLR Villa LLC ('DTLR')
The acquisition of 100% of DTLR completed on 17 March 2021 for
cash consideration of $504.4 million. At completion, DTLR, which is
based in Baltimore, Maryland, had 247 stores trading primarily as
DTLR across 19 states principally in urban areas across the North
and East of the United States. DTLR has the support of the
international brands to expand its store base further in these
markets.
It is our current intention to maintain JD / Finish Line, Shoe
Palace and DTLR as separate fascias as there is little crossover in
locations and they all have their own unique DNA which comes from
their retail style and the rich connection with their consumer
base. There may, however, be opportunities to enhance our
collective operational effectiveness and further enhance the
consumer experience in the United States by operating
collaboratively in certain areas. Accordingly, DTLR has now been
transferred to the same sub-group as Finish Line, JD and Shoe
Palace. It was always JD's intention for DTLR to be part of this
sub-group but the requirement for speed and certainty of execution
on the original transaction meant that it was more appropriate for
the Group to initially acquire DTLR directly.
Marketing Investment Group S.A. ('MIG')
The acquisition of MIG completed on 30 April 2021 with an
initial 60% holding acquired for total consideration of 344.7
million Polish Zloty ('PLN') of which 8.5 million PLN has been
deferred subject to customary closing conditions and is expected to
be paid in 2022. At completion, MIG, which is based in Krakow,
Poland, had 410 stores trading principally as either Sizeer, which
is a premium multi-branded fascia not too dissimilar to JD, or 50
Style, which is a multi-branded volume retail concept with lower
price points. Whilst the majority of the stores are located in
Poland, the Company has also been expanding its reach beyond Poland
in recent years and now has stores in a total of nine countries
across Central and Eastern Europe. Since completion, Sizeer has
further expanded its store base with additional new stores in
Bulgaria and Romania.
This acquisition also provides the Group with an infrastructure
and management team for the development of JD in Central and
Eastern Europe with the first store in Poland currently expected to
open in the first half of next year.
Deporvillage SL ('Deporvillage')
On 25 June 2021, Iberian Sports Retail Group SL ('ISRG'), the
Group's existing intermediate holding company in Spain, exchanged
contracts on the conditional acquisition of Deporvillage which is
based in Manresa, Catalonia. ISRG is a leading operator in the
sporting goods market across Iberia through its Sprinter and Sport
Zone fascias with the acquisition of Deporvillage giving additional
depth and expertise in the key categories of cycling, running and
outdoor. The transaction was subject to certain conditions,
principally relating to anti-trust clearance, with formal
completion taking place on 3 August 2021. Total maximum cash
consideration for the acquisition of an initial 80% holding is
EUR140.4 million of which EUR40.4 million has been deferred and
will be paid contingent on achieving certain future performance
criteria.
Update on Footasylum
The Competition and Markets Authority ('CMA') announced in its
Provisional Report on 2 September 2021 that it was again minded to
prohibit the Group's acquisition of Footasylum.
We are very disappointed by this decision as we firmly believed
that we had provided compelling evidence to the CMA in its
re-examination of the transaction of how the COVID-19 pandemic has
materially changed the market for the retailing of international
sports brands. In particular, the Group demonstrated very clearly
to the CMA how, by causing a structural shift in favour of online
shopping, COVID-19 has empowered and accelerated the Direct to
Consumer strategies of the international brands as evidenced in
their recent public statements.
The Group finds it surprising that these key facts have changed
so substantially but the CMA's provisional conclusion has not. In
particular, the Group does not understand how the CMA can now
acknowledge that JD has no incentive to deteriorate the price,
quality, range and service offered at JD after the merger, but then
still find that JD would find it commercially rational to worsen
the Footasylum retail offer, given that both consumers and brand
proprietors expect retailers of premium brands to maintain high
standards in retail execution and consumer engagement.
The CMA's findings are, however, provisional and JD remains
committed to its transaction goal of improving Footasylum's
resources, access to product and differentiated customer
proposition. JD will continue to make its case strongly to the CMA
before it releases its Final Report, due in October 2021.
Sports Fashion
UK and Republic of Ireland
JD & Size?
There was robust consumer demand in our core UK and Republic of
Ireland market throughout the period. During the closure period in
the Spring approximately 90% of the combined store and online
revenues from 2019, which was the last time we traded free from
restrictions, were retained through solely digital channels. This
represented an improvement on the prior year when the sales
retention relative to 2019 was approximately 70% and is a
reflection of the enhanced flexibility that we have built into our
operational infrastructure in the last year.
There was some pent-up demand when the stores reopened with
footfall initially broadly at 2019 levels. However, with conversion
significantly ahead of 2019, this resulted in an exceptional like
for like growth in stores through April and May, when measured
against 2019, of more than 30%. These footfall levels were
relatively short lived though with traffic into stores over June
and July typically 20% lower than 2019. However, the higher levels
of conversion have remained and so, consequently, the stores have
continued to trade positively over the last two months of the
period with like for like growth relative to 2019 of more than 5%.
Revenues through digital channels remain at elevated levels as
compared to the period prior to the pandemic with sales in the
trading websites representing approximately 30% of total sales
since the stores reopened. Prior to the pandemic, sales through
digital channels represented approximately 22% of total sales and
there is no reason to expect that they will drop back to these
historic levels.
We continue to take opportunities to invest in our retail estate
where it will further enhance our consumer proposition with a net
increase of five stores in the period, which included a store in
the new St James Quarter in Edinburgh.
Premium Fashion
As with the core JD fascia, there was a high level of sales
retention in the period whilst the stores were temporarily closed.
Measured against 2019, around 85% of sales were retained in this
period through digital channels, which was approximately 20% higher
than the first closure period in Spring 2020.
Since reopening, the trends have been broadly similar to those
in JD with significant initial pent-up demand driving like for like
growth in stores through April and May of more than 15% compared to
2019. Again, as with JD, the performance slowed in the last two
months of the period with lower footfall through the Summer
although higher conversion has ensured that trade in stores is in
line with previous levels.
Gyms
Gyms in England were permitted to reopen on 12 April with gyms
in Scotland and Wales following on 26 April and 3 May respectively.
A number of restrictions were placed on gyms initially, including
constraints on capacity and a prohibition on group classes and the
use of saunas. These restrictions have all now been lifted.
After opening a further five gyms in the period, the Group now
operates from 74 sites with 54 sites trading as JD, including 19
which formerly operated under the Xercise4less ('X4L') banner. A
further 20 sites were still bannered as X4L at the period end, of
which eight are now in the process of being converted to JD. The
conversions from X4L, which see significant investment in the
fabric of the gym and the installation of new equipment, have
received a very positive reaction with average membership numbers
across the 19 converted sites to date increasing by more than
20%.
Europe
JD & Size?
The COVID-19 pandemic and the loss of tariff free, frictionless
trade with the European Union have combined to create a challenging
operational environment. The most significant disruption was seen
in the principal Northern Europe markets of France, Germany and the
Netherlands where stores were forced to close fully for a number of
weeks. Elsewhere, there was not the same outright closure period in
our principal Southern Europe markets of Spain and Italy with
trading restrictions implemented on a regional basis. However, when
the stores in these markets were permitted to operate, the levels
of footfall were significantly lower than pre-pandemic levels with
restrictions on customer capacity and trading hours.
All markets are currently trading normally with the last market
to reopen being Germany where the stores did not reopen fully until
mid-June. We are particularly encouraged by the initial performance
after reopening in France, Italy and the Netherlands where stronger
conversion has offset lower footfall resulting in like for like
growth in stores, compared to 2019, of more than 10%. More
recently, the performance in Iberia has also begun to step up
consistent with the progressive re-emergence of tourism across
Spain and Portugal.
In those Northern Europe markets which suffered full closures,
the average retention of sales solely through digital channels in
the closure period was around 80% (2020: 60%) with overall growth
in digital sales across Europe for the period, when compared to
2019, of more than 150%. Whilst the Group is actively engaged in a
number of projects to expand its European logistics infrastructure,
online orders in the period were largely fulfilled from the Group's
principal Kingsway warehouse with incremental costs of around GBP20
million arising from the additional administration and duty costs
that now exist consequent to the UK's new trading arrangements with
the European Union. From a longer term perspective though, it is
encouraging that there is a broadening base of consumers in Europe
who are comfortable engaging with JD through any channel.
The current operational challenges are very much temporary in
nature and we retain our belief in the long term opportunity across
Europe. Accordingly, we remain committed to expanding our physical
retail presence in Europe with a headline target of opening one
store per week on average. Restrictions placed on construction
activity in a number of markets constrained the number of stores
that we were able to open during the first half, although we have
opened 14 net new stores to date.
Sprinter & Sport Zone
As with JD, our Sprinter stores in Spain were largely able to
remain open throughout the period although, periodically, there
were restrictions placed on them in terms of trading hours or
customer capacity. There was a strong performance in key active
sports categories with COVID-19 proving to be a catalyst for many
consumers to increase their participation in sports and
fitness.
The Sport Zone stores in Portugal were closed in the first
quarter and reopened in May. The improvement in performance of the
business under the Sprinter management team has continued in the
period.
Asia Pacific
Trading restrictions have impacted all of our markets in the
Asia Pacific region at some stage of the period with ongoing
closures currently in the principal Australian markets of Victoria
and New South Wales. Prior to the recent closures in Australia, our
overall position in the country had strengthened further with the
opening of a further four stores. There are now 34 JD stores in
Australia with fitting out of the first store in New Zealand, at
Sylvia Park in Auckland, also now completed although the opening
has been delayed following the re-introduction of COVID-19 related
restrictions in the Auckland area.
North America
The stores in the United States have largely traded free from
any restrictions in the first half with all of our businesses
benefitting from an exceptional, but temporary, boost to trading
from the second round of stimulus introduced by the Federal
Government. As with the first round of stimulus in the prior year,
this economic support was given directly to individuals, focussing
on lower earning members of the population.
Finish Line & JD
Given the focus of the stimulus, it is not surprising that it
has primarily been the physical stores which have been the
beneficiary of the additional trading with strong like for like
growth in stores between March and June compared to 2019. During
this period, the participation of sales from digital channels
dropped from the pre-pandemic level of around 30% to 25%. The
benefit of the stimulus has now started to subside with the recent
sales performance more in line with the performance in prior years
and online participation back around the 30% level.
As with the first round of stimulus in the prior year, this
strong demand has resulted in sector-wide lower inventory levels
and, consequently, there was significantly less promotional
activity in the first half than previous years with a notable
increase in gross margins.
There were 66 stores trading as JD at the end of the period with
seven new stores complementing the conversion of a further 10
former Finish Line stores. We are pleased with the sales uplift
that we have seen to date in the converted stores and we intend to
convert approximately 25 further Finish Line stores to JD in the
second half although the exact number will depend on the receipt of
timely planning consent. We remain confident in the potential for
JD in the United States with sales from apparel ranges continuing
to gain momentum and the flagship store in Times Square enhancing
both our recognition and our reputation with consumers and our
brand partners.
Shoe Palace
The Shoe Palace business has also performed well in the
favourable trading environment provided by the Federal stimulus
with store sales, which historically have represented more than 90%
of total sales, compared to the same proforma period in 2019 and
total gross margins increasing by 1.9%.
At acquisition in December 2020, the business had 167 stores
with one small store closed during the period. Shoe Palace has the
support of the international brands to open additional stores
focussing on the Spanish speaking communities on the West Coast and
in the Southern border states.
DTLR
Completion of the acquisition on 17 March 2021 coincided with
the introduction of the Federal stimulus with DTLR's core consumer
very representative of the demographic that was the target of the
support. As with our other fascias in the United States, it was the
stores which were the main beneficiary with like for like sales in
physical retail growing by more than 40% compared to the same
proforma period in 2019 and a significant increase in gross
margins.
At acquisition in March 2021, the business had 247 stores with
three new stores opening and three stores closing before the period
end. DTLR also has the support of the international brands to open
additional stores in future years focussing on their core markets
in the North and East of the United States.
Size?
During the period, the Group opened its first Group fascia store
in Canada with a new Size? store on Queen Street West in Toronto.
This has been complemented by the launch of a Size? trading website
in the country. We also anticipate opening the first JD store in
Canada during the second half.
Financial Performance
The fundamental strength of our businesses is reflected in the
fact that, despite the challenges of further temporary store
closures in many markets, we are able to report a record result in
Sports Fashion for the first half with a profit before tax and
exceptional items of GBP432.1 million (2020: GBP81.6 million). On a
proforma basis under IAS 17 'Leases' the profit before tax and
exceptional items would have been GBP443.6 million (2020: GBP89.6
million).
The United States was again the Group's most profitable
territory with a combined profit before tax and exceptional items
across the three businesses of GBP245.0 million (2020: GBP73.4
million for Finish Line alone) which included excellent
contributions of GBP36.8 million for the full 26 week period from
Shoe Palace and GBP36.1 million for the part period post
acquisition from DTLR. The exceptional progress that we have made
in our original Finish Line business in the three years since the
acquisition completed in June 2018 is reflected in the fact that
Finish Line increased its profit before tax and exceptional items
for the first half by more than 130% to GBP172.1 million (2020:
GBP73.4 million). Elsewhere, our core JD business in the UK and
Republic of Ireland also delivered a record result for the first
half with a profit before tax and exceptional items of GBP170.8
million (2020: GBP52.0 million).
Overall gross margins increased within Sports Fashion by 2.9%.
This is largely due to a stronger margin in the United States with
the strong demand from the fiscal stimulus resulting in lower
levels of promotional activity in the overall market compared to
previous years.
After recognising exceptional items in the period of GBP74.9
million (2020: GBPnil) principally relating to a net increase in
the fair value of the liabilities in respect of the Group's various
future put and call options combined with costs associated with a
restructuring of the Chausport business in France, the profit
before tax in Sports Fashion was GBP357.2 million (2020: GBP81.6
million).
Outdoor
Our Outdoor businesses have had a much improved first half
capitalising on the current strong demand for outdoor living and
cycling categories, with an elevated demand currently for holidays
in the UK combined with a general recognition of the physical and
mental health benefits that come from spending time outdoors.
Whilst we are encouraged by our performance in the period, we do
recognise that the current popularity of domestic holidays may be
temporary although, by no means did our businesses achieve their
full potential in the period, with supply chain delays negatively
impacting the performance of certain seasonal categories combined
with insufficient global production capacity to meet current strong
demand for bikes and cycling related accessories.
Elsewhere our programme of works to enhance the profile of
certain categories such as fishing and equestrian has gained
momentum with the opening of 16 additional Fishing Republic
concessions in key locations combined with the opening of the first
Naylors equestrian concession in Kidderminster.
Financial Performance
The positive progress in the Outdoor businesses is reflected in
the fact that, even though the majority of stores were closed
through the first quarter, there were record revenues in Outdoor in
the first half with total sales of GBP235.2 million (2020: GBP142.5
million). Further, previous work to enhance the operational
integration of the businesses through common merchandising systems
and shared commercial resources has also now started to pay
dividends with overall gross margins increasing by 3.8%.
The combination of revenue and margin progression meant that
Outdoor returned to profitability in the period delivering a profit
before exceptional items of GBP10.8 million (2020: loss of GBP16.8
million). There were no exceptional items in the period (2020:
charge of GBP20.4 million) which means that the profit before tax
in Outdoor was also GBP10.8 million (2020: loss of GBP37.2
million).
Supply Chain Developments & Brexit
UK
The warehouse at Kingsway, Rochdale has been the Group's primary
facility for the UK and Europe since 2012 and, even allowing for a
programme of continual investments, some of the original equipment,
which was largely focussed on the picking of product for stores,
will start to approach the end of its natural useful life over the
next few years. A programme of works to update this equipment would
require sections of the facility to be effectively decommissioned
for periods of time. However, as sales from online channels are
likely to remain at the current elevated levels and the processing
of large quantities of small volume orders for online is very space
intensive, we have concluded that there is insufficient spare
capacity at the site, particularly at peak periods, to accommodate
an upgrade programme without risking service levels. We are also
mindful that the activity in our warehouses may be constrained for
some time yet through the requirement to operate with some form of
social distancing.
Consequently, the Group has concluded that it needs additional
warehousing capacity in the UK which can be dedicated to the
fulfilment of online orders. In the short term, this additional
capacity will be provided by Clipper Logistics Plc who are
providing a range of logistics operations, including warehousing
and e-fulfilment. This is presently considered to be a temporary
solution though and the Group has now exchanged contracts on a long
term lease on a new 515,000 sqft facility in Derby which will be
used exclusively to fulfil online orders in the UK. This facility,
which is being constructed to the latest environmental standards
including rainwater harvesting and electric vehicle (EV) charging
infrastructure, is scheduled to be handed over for fitting out
later this year. Detailed selection programmes for warehouse
management systems and specialist automation equipment for
processing large volumes of online orders are underway with initial
go live anticipated for the site by Autumn 2022 although it will be
early 2023 before the site is fully operational.
We would currently estimate capital investment of approximately
GBP70 million on the new site in Derby over the next two years to
deliver this initial programme of works of which approximately
GBP35 million is expected to be incurred in this financial year.
The Kingsway facility will then largely focus on the provision of
product to the JD stores in the UK although it will also have spare
capacity to fulfil online orders for the JD fascia in the UK at
peak periods.
Western Europe (including the Republic of Ireland)
The terms of the UK's trading agreement with the European Union
mean that we no longer enjoy tariff free frictionless trading with
our former European partners. As a consequence, we are now
incurring some duties on the transfer of goods from the UK into EU
countries. There is also a significantly enhanced administrative
burden and whilst our operational systems have been configured to
sort stocks as required by the Customs Authorities and to produce
the necessary documentation in the right format, this does not
guarantee that goods flow freely into the EU, with an unexpectedly
high proportion of trailers stopped at the border for detailed
manual checking. This can add several days on to delivery timelines
but, until a particular trailer is pulled for inspection, we do not
know which specific deliveries will be impacted.
We have been able to reduce our exposure to the adverse
consequences of Brexit through our 80,000 sqft third party
warehouse in Southern Belgium which opened in Autumn 2020 and is
functioning very effectively. This site is already receiving stocks
and fulfilling a large proportion of the core ranges and fastest
moving lines required for stores in Mainland Europe. However, it
does not provide a solution for online orders. Therefore, to
complement this facility in Southern Belgium, we have now signed a
short term lease on a 115,000 sqft facility which is located in
Lille, Northern France which will be dedicated to processing online
orders for a number of countries across Mainland Europe. The fit
out of this site and installation of Group systems has now
commenced with customer orders beginning to be fulfilled from this
site ahead of the peak trading period.
As our business in Western Europe increases in scale and
complexity, we are looking to build a cost effective, service
orientated supply network which can support business growth both in
stores and online. The first stage of this is a larger permanent
facility which will have the capacity to process substantially all
of the volume required for our stores and online orders in Western
Europe. In this regard, we are currently finalising legal contracts
for the lease of a 620,000 sqft facility in Heerlen, South East
Netherlands. Construction of this facility has now commenced with
the site scheduled to be handed over in the second half of 2022 for
initial fitting out. We would hope to begin fulfilling from this
site on a small scale manual basis in the second half of 2023
although the current long lead times on the supply of warehouse
automation equipment means that it will likely be mid-2024 before a
more automated solution is available and the site is fully
operational. We currently estimate that capital expenditure of
approximately GBP100 million will be incurred before Summer 2024 to
bring the site into full operational use with the majority of this
spend being incurred in the period between Summer 2022 and Summer
2024.
Longer term, this facility will likely be complemented by
smaller regional hubs near major urban areas to further enhance the
service and delivery options to consumers.
Elsewhere, our new 65,000 sqft warehouse near Dublin will begin
receiving stock from suppliers shortly which will facilitate the
supply of product to stores and fulfilment of online orders in the
Republic of Ireland ahead of the peak trading period.
Financial Performance
Revenue and Gross Margin
Whilst there were further periods of temporary store closures in
many markets, the financial impact of COVID-19 was less severe than
the prior year with stores in some markets, including the United
States, largely trading free from restrictions. Ultimately, total
revenue for the Group for the first half increased to GBP3,885.8
million (2020: GBP2,544.9 million) with a number of recently
acquired businesses included in the first half results for the
first time:
-- Shoe Palace (completed 14 December 2020): Revenues of
GBP204.8 million for the full 26 week period
-- DTLR (completed 17 March 2021): Revenues of GBP192.5 million
for the part period post acquisition
-- MIG (completed 30 April 2021): Revenues of GBP64.5 million
for the part period post acquisition
Elsewhere, the impact of the fiscal stimulus in the United
States is reflected in the fact that revenues in the Group's
pre-existing Finish Line business increased by GBP127.8 million to
GBP953.3 million (2020: GBP825.5 million). There was also a very
robust performance from the core JD business in the UK and Republic
of Ireland where revenues increased by GBP323.1 million to
GBP1,008.3 million (2020: GBP685.2 million). Given the temporary
closure periods in both this year and the prior year, it would not
be meaningful to present sales on a like for like basis.
Total gross margin for the first half increased strongly to
48.5% (2020: 45.6%) largely due to a stronger margin in the United
States where gross margins increased significantly to 49.7% (2020:
44.5%) with strong demand consequent to the Federal fiscal stimulus
driving lower levels of promotional activity in the overall market
compared to previous years.
Profit Before Tax
There was a record result for the first half with profit before
tax and exceptional items increasing to GBP439.5 million (2020:
GBP61.9 million). This included contributions for the first time
from:
-- Shoe Palace (completed 14 December 2020): Profit of GBP36.8
million for the full 26 week period
-- DTLR (completed 17 March 2021): Profit of GBP36.1 million for
the part period post acquisition
-- MIG (completed 30 April 2021): Profit of GBP7.4 million for
the part period post acquisition
Elsewhere, Finish Line increased its profit before tax and
exceptional items for the first half by more than 130% to GBP172.1
million (2020: GBP73.4 million) with the core JD business in the UK
and Republic of Ireland also delivering a record result for the
first half with a profit before tax and exceptional items of
GBP170.8 million (2020: GBP52.0 million).
There were exceptional items in the period of GBP74.9 million
(2020: GBP20.4 million) principally from the movement in the fair
value of the liabilities in respect of future put and call
options:
2021 2020
GBPm GBPm
Movement in fair value of put and 59.1 -
call options (1)
Restructuring of Spodis SA (2) 15.8 -
Restructuring of Go Outdoors (3) - 20.4
Total exceptional charge 74.9 20.4
====== ======
1. Movement in the fair value of the liabilities in respect of
the put and call options (Genesis Holdings Inc: Charge of GBP65.0m,
Other: Credit of GBP5.9 million). The increase in the fair value of
the put and call options attributable to the Genesis Holdings Inc.
put option liability is as a direct result of the transfer of DTLR
into the Genesis sub-group.
2. The impact consequent to the restructuring of Spodis SA in
the period including a charge of GBP5.5 million in relation to the
impairment of tangible assets and business restructuring costs of
GBP10.3 million.
3. The net impact consequent to the restructuring of Go Outdoors
in the prior year including a charge of GBP33.3 million in relation
to the impairment of intangible assets, a charge of GBP4.9 million
in relation to the impairment of leasehold improvements and a
credit of GBP17.8 million in relation to the extinguishment of
lease commitments (the credit in relation to the extinguishment of
lease commitments under IAS 17 'Leases' was GBP10.3 million).
Group profit before tax ultimately increased to GBP364.6 million
(2020: GBP41.5 million).
Proforma Results Under IAS17 'Leases'
On a proforma basis under IAS 17 'Leases', the headline profit
before tax and exceptional items to 31 July 2021 for the Group
would have been GBP12.0 million higher at GBP451.5 million (2020:
GBP10.9 million higher at GBP72.8 million). After exceptional items
totalling GBP74.9 million (2020: GBP27.9 million), the profit
before tax on the same proforma basis would have been GBP376.6
million (2020: GBP44.9 million).
Cash and Working Capital
The net cash balance at the end of the period was GBP995.1
million (2020: GBP764.9 million) which is stated net of GBP15.8
million ($21.9 million) due to be paid to the Mersho Brothers by
December 2021, with no conditionality or dependence on performance
criteria, in relation to deferred consideration on the acquisition
of Shoe Palace.
This net cash position reflects both the very strong cash
generation in the United States and the UK consequent to the strong
trading in these countries through the first half and the net
proceeds, after costs, of GBP455.9 million from the placing of
58,393,989 new ordinary shares on 3 February 2021. The Group
continues to use its very strong cash resources to fund its
development opportunities with cash consideration paid on completed
acquisitions in the new year to date (net of cash acquired) of
GBP375.1 million (2020: GBP32.0 million).
Net inventories at the end of the period were GBP996.7 million
(2020: GBP764.7 million) which includes GBP155.9 million of
inventories in businesses which have been acquired since 1 August
2020. Period end inventories in the combined Finish Line and JD
business in the United States of $175.5 million were approximately
8% lower than the previous year (2020: $191.3 million) but
approximately 5% higher than the previous year end (January 2021:
$167.7 million). As with other retailers in the United States, we
did experience some minor delays during the period in receiving
product due to delays at ports, but this has not constrained the
overall financial performance with the flow of product into the
business through the period keeping pace with the strong
demand.
Gross capital expenditure (excluding disposal costs) increased
to GBP83.5 million (2020: GBP52.3 million) with fewer restrictions
on construction activity, including the fitting out of stores. The
primary focus of our capital expenditure remains our physical
retail fascias with a spend in the period of GBP42.0 million (2020:
GBP33.8 million). Including initial spend on the new warehouses at
Derby and Heerlen, we now anticipate that capital expenditure for
the full year will be in the range of GBP200 million to GBP225
million (52 weeks to 30 January 2021: GBP132.0 million).
Dividends and Earnings per Ordinary Share
The Board is cognisant that the Group has delivered an excellent
result for the first half and that the Group's international
operations, particularly those in the United States, have made a
very significant contribution to this profitability and so,
ordinarily, the Board would be recommending the payment of an
interim dividend. However, the Board also recognises the potential
for further restrictions on trading through the usual peak trading
period prior to Christmas.
After careful consideration, the Board has decided that it is
not appropriate to pay an interim dividend. However, the Board will
consider paying a larger final dividend although a final decision
on this will be subject to the performance of the Group over the
full year to 29 January 2022, taking into account the consequences
of any potential further restrictions on trading.
Store Portfolio
During the period, store numbers have moved as follows:
Sports Fashion
Period New Stores Transfers Acquired Closures Period
Start End
UK & Republic of
Ireland
JD 400 6 - - (1) 405
Size? 23 - - - - 23
Fashion 154 3 - 3 (7) 153
UK & Republic of
Ireland 577 9 - 3 (8) 581
------- ----------- ---------- --------- --------- -------
Europe
JD 335 21 - - (7) 349
Size? 10 - - - (1) 9
Other Europe (i) 431 9 - 410 (16) 834
Europe 776 30 - 410 (24) 1,192
------- ----------- ---------- --------- --------- -------
North America
JD 49 7 10 - - 66
Finish Line: Own 464 - (10) - (8) 446
Finish Line: Macy's 290 - - - - 290
Shoe Palace (ii) 167 - - - (1) 166
DTLR Villa - 3 - 247 (3) 247
Livestock 4 - - - - 4
Size? - 1 - - - 1
North America 974 11 - 247 (12) 1,220
------- ----------- ---------- --------- --------- -------
Asia Pacific
JD 69 6 - - (2) 73
Total Sports Fashion 2,396 56 - 660 (46) 3,066
------- ----------- ---------- --------- --------- -------
(i) Chausport (France), Sprinter (Spain & Canary Islands), Sport Zone (Portugal), Perry Sport / Aktiesport (the Netherlands) and Marketing Investment Group S. A. (Central and Eastern Europe)
(ii) Includes four stores trading as Nice Kicks
Outdoor
Period New Stores Closures Period
Start End
Blacks 57 - (1) 56
Millets 93 - - 93
Ultimate Outdoors 5 - (1) 4
Tiso 13 - - 13
Go Outdoors 66 - - 66
Go Fishing 3 - - 3
Naylors 3 - - 3
------- ----------- --------- -------
Total Outdoor 240 - (2) 238
------- ----------- --------- -------
People
We continue to be indebted to all of our teams in our different
territories for their positive attitude in embracing the new ways
of working required as a consequence of COVID-19. Whilst the
Group's stores in Europe and North America are largely trading
without restrictions at this time, the current situation in parts
of Asia and Australia, combined with the delay to the opening of
the Group's first store in New Zealand, reminds us that the
challenges and risks associated with COVID-19 have not gone away.
The Board reaffirms that the safety of our colleagues and our
consumers has been and will always be our number one priority.
Kickstart Scheme
The Group is working closely with the UK Government as a
national partner on its Kickstart scheme which aims to provide
employment opportunities for young people who were previously on
Universal Credit and who faced significant barriers to employment
as a result of the pandemic. Under this scheme, the Group is
committed to recruiting approximately 1,200 young people who will
join the Group for an initial period of six months during which
time they gain vital skills and experience and it is our hope that
many will then stay with our business longer term and take
advantage of the many career development opportunities that are
available within the Group. We are very proud to be working with
the Department of Work and Pensions and The Prince's Trust on this
positive initiative which has attracted national media attention
and has also been publicly supported by Anthony Joshua through his
social media channels.
Governance Matters
Board Composition
Andrew Leslie and Martin Davies, who was also the Senior
Independent Non-Executive Director on the Board, stepped down from
the Board during the period and we thank them both for their valued
contribution to the Group over several years. Andy Rubin, Deputy
Chairman of Pentland Group Ltd, also stepped down and was replaced
by Andy Long who is also an Executive Director of Pentland Group
Ltd.
The Board is making significant progress in its process to
recruit additional Non-Executive Directors including the
appointment of an appropriately experienced Chair of the Audit
Committee. When considering candidates, the Board is mindful that
the blend of skills and experience should reflect not just the
increased market capitalisation of the Group but also, critically,
an ability to positively contribute to the global development and
momentum. In this regard, the Group is delighted that Bert Hoyt,
who for many years, prior to his recent retirement, was Head of
Europe for Nike, has joined the Board with effect from 8 September
2021. His experience with international brand operations will be
invaluable to the Group as it continues to enhance its global
position. The Board also wishes to state that it fully supports the
initiatives driven by the Hampton-Alexander Review and the Parker
Review and acknowledges the need to create additional diversity
within its membership.
In addition, the Board has confirmed that it is intending to
divide the current joint role of Executive Chairman and Chief
Executive Officer before the next Annual General Meeting. This
process has my full support and I remain absolutely committed to
the Group.
Audit Tender
The Group has now concluded its tender process on the
appointment of a new external auditor to replace KPMG LLP with
Deloitte LLP providing the most compelling global proposal.
Shareholders have already approved the re-appointment of KPMG to
report on the results to 29 January 2022 and, subject to approval
by shareholders at the 2022 Annual General Meeting, KPMG will also
report on the results to 28 January 2023. Thereafter, it is the
Board's intention to recommend the appointment of Deloitte to
shareholders at the 2023 Annual General Meeting with Deloitte's
first report to members being on the results to 3 February
2024.
Current Trading and Outlook
We remain absolutely confident that our inherent strengths in
retail dynamics and operations provide us with a robust platform to
make further progress. However, the unique nature of the trading
seen in the year to date, particularly in the United States, means
that it is not appropriate to use an extrapolation of the first
half results as the basis for guiding future performance. Further,
we remain cautious about both the potential for further
restrictions on trading through the usual peak trading period prior
to Christmas.
At this time, we are generally encouraged by our performance in
the first few weeks of the second half although retail footfall
remains comparatively weak in many countries. Assuming a prudent
but realistic set of assumptions for the peak trading period ahead
which take into account the absence of stimulus in the United
States for the second half of the year, in addition to current
industry-wide supply chain challenges, we presently anticipate
delivering a headline profit before tax for the full year of at
least GBP750 million.
We next intend to provide an update on trading in early January
after our key Christmas trading period.
Peter Cowgill
Executive Chairman
14 September 2021
Condensed Consolidated Income Statement
For the 26 weeks to 31 July 2021
26 weeks 26 weeks 52 weeks
to to to
31 July 1 August 30 January
Note 2021 2020 2021
GBPm GBPm GBPm
Revenue 3,885.8 2,544.9 6,167.3
Cost of sales (2,000.6) (1,383.4) (3,205.7)
----------- ----------- -------------
Gross profit 1,885.2 1,161.5 2,961.6
Selling and distribution expenses
- normal (1,206.7) (913.0) (2,126.4)
Administrative expenses - normal (220.1) (164.9) (381.2)
Administrative expenses - exceptional 3 (74.9) (20.4) (97.3)
Other operating income 13.3 11.8 28.3
----------- ----------- -------------
Operating profit 396.8 75.0 385.0
Before exceptional items 471.7 95.4 482.3
Exceptional items 3 (74.9) (20.4) (97.3)
--------------------------------------- ------- ----------- ----------- -------------
Operating profit 396.8 75.0 385.0
Financial income 0.5 0.7 1.5
Financial expenses (32.7) (34.2) (62.5)
----------- ----------- -------------
Profit before tax 364.6 41.5 324.0
Income tax expense (87.8) (14.4) (94.8)
----------- ----------- -------------
Profit for the period 276.8 27.1 229.2
----------- ----------- -------------
Attributable to equity holders
of the parent 228.7 37.5 224.3
Attributable to non-controlling
interest 48.1 (10.4) 4.9
Basic earnings per ordinary
share 4 22.19p 3.85p 23.05p
----------- ----------- -------------
Diluted earnings per ordinary
share 4 22.19p 3.85p 23.05p
----------- ----------- -------------
Condensed Consolidated Statement of Comprehensive Income
For the 26 weeks to 31 July 2021
26 weeks 26 weeks 52 weeks
to to to
31 July 1 August 30 January
2021 2020 2021
GBPm GBPm GBPm
Profit for the period 276.8 27.1 229.2
Other comprehensive income:
Items that may be classified subsequently
to the
Consolidated Income Statement:
Exchange differences on translation
of foreign operations (33.3) 25.5 (20.0)
Total other comprehensive income
for the period (33.3) 25.5 (20.0)
------------------------------------------- ----------- ----------- -------------
Total comprehensive income and expense
for the period (net of income tax) 243.5 52.6 209.2
------------------------------------------- ----------- ----------- -------------
Attributable to equity holders of
the parent 212.8 58.5 200.7
Attributable to non-controlling interest 30.7 (5.9) 8.5
------------------------------------------- ----------- ----------- -------------
Condensed Consolidated Statement of Financial Position
As at 31 July 2021
As at As at As at
31 July 1 August 30 January
2021 2020 2021
GBPm GBPm GBPm
Assets
Intangible assets 1,208.5 404.6 819.7
Property, plant and equipment 2,590.8 2,243.5 2,316.4
Other assets 56.8 62.9 63.2
Investment in associate 59.0 2.6 2.7
Deferred tax assets 21.0 - 40.6
Total non-current assets 3,936.1 2,713.6 3,242.6
---------------------------------------- ---------- ----------- -------------
Inventories 996.7 764.7 813.7
Trade and other receivables 214.7 193.8 141.2
Cash and cash equivalents 1,304.7 1,078.1 964.4
Total current assets 2,516.1 2,036.6 1,919.3
---------------------------------------- ---------- ----------- -------------
Total assets 6,452.2 4,750.2 5,161.9
---------------------------------------- ---------- ----------- -------------
Liabilities
Interest-bearing loans and
borrowings (275.3) (251.6) (120.9)
Lease liabilities (291.6) (273.4) (301.8)
Trade and other payables (1,243.7) (1,171.8) (1,102.0)
Provisions (0.6) - (0.7)
Income tax liabilities (5.2) (24.1) (29.5)
Total current liabilities (1,816.4) (1,720.9) (1,554.9)
---------------------------------------- ---------- ----------- -------------
Interest-bearing loans and
borrowings (34.3) (61.6) (48.1)
Lease liabilities (1,863.4) (1,517.7) (1,628.0)
Other payables (493.8) (99.1) (374.4)
Provisions (4.6) - (5.1)
Deferred tax liabilities (62.0) (9.8) (55.0)
---------------------------------------- ---------- ----------- -------------
Total non-current liabilities (2,458.1) (1,688.2) (2,110.6)
---------------------------------------- ---------- ----------- -------------
Total liabilities (4,274.5) (3,409.1) (3,665.5)
---------------------------------------- ---------- ----------- -------------
Total assets less total liabilities 2,177.7 1,341.1 1,496.4
---------------------------------------- ---------- ----------- -------------
Capital and reserves
Issued ordinary share capital 2.5 2.4 2.4
Share premium 467.5 11.7 11.7
Retained earnings 1,769.6 1,283.2 1,560.8
Other reserves (418.2) (19.6) (336.2)
---------------------------------------- ---------- ----------- -------------
Total equity attributable
to equity holders of the
parent 1,821.4 1,277.7 1,238.7
---------------------------------------- ---------- ----------- -------------
Non-controlling interest 356.3 63.4 257.7
---------------------------------------- ---------- ----------- -------------
Total equity 2,177.7 1,341.1 1,496.4
---------------------------------------- ---------- ----------- -------------
Condensed Consolidated Statement of Changes in Equity
For the 26 weeks to 31 July 2021
Total Equity
Attributable
Foreign To Equity
Ordinary Currency Holders
Share Share Premium Retained Other Translation Of The Parent
Capital GBPm Earnings Equity Reserve GBPm
GBPm GBPm GBPm GBPm
Balance at 30 January
2021 2.4 11.7 1,560.8 (308.4) (27.8) 1,238.7
Profit for the period - - 228.7 - - 228.7
Other comprehensive
income:
Exchange differences
on translation of
foreign operations - - - - (15.9) (15.9)
Total other comprehensive
income - - - - (15.9) (15.9)
----------------------------- ----------- ---------------- ----------- --------- -------------- ----------------
Total comprehensive
income for the period - - 228.7 - (15.9) 212.8
Dividends to equity
holders - - (14.9) - - (14.9)
Put options held
by non-controlling
interest - - - (66.1) - (66.1)
Share capital issued
[1] 0.1 455.8 - - - 455.9
Divestment of
non-controlling
interest - - (5.0) - - (5.0)
Balance at 31 July
2021 2.5 467.5 1,769.6 (374.5) (43.7) 1,821.4
----------------------------- ----------- ---------------- ----------- --------- -------------- ----------------
Total Equity
Attributable To Non-
Equity Holders Controlling Total
Of The Parent Interest Equity
GBPm GBPm GBPm
Balance at 30 January 2021 1,238.7 257.7 1,496.4
Profit for the period 228.7 48.1 276.8
Other comprehensive income:
Exchange differences on translation
of foreign operations (15.9) (17.4) (33.3)
Total other comprehensive income (15.9) (17.4) (33.3)
----------------------------------------- -------- -------------- ---------
Total comprehensive income for the
period 212.8 30.7 243.5
Dividends to equity holders (14.9) (1.8) (16.7)
Put options held by non-controlling
interest (66.1) - (66.1)
Share capital issued 455.9 - 455.9
Divestment of non-controlling interest (5.0) 48.0 43.0
Non-controlling interest arising
on acquisition - 21.7 21.7
Balance at 31 July 2021 1,821.4 356.3 2,177.7
----------------------------------------- -------- -------------- ---------
Condensed Consolidated Statement of Changes in Equity
(continued)
For the 26 weeks to 1 August 2020
Total Equity
Attributable
Foreign To Equity
Ordinary Currency Holders
Share Share Premium Retained Other Translation Of The Parent
Capital GBPm Earnings Equity Reserve GBPm
GBPm GBPm GBPm GBPm
Balance at 1 February
2020 2.4 11.7 1,245.7 (36.4) (4.2) 1,219.2
Profit for the period - - 37.5 - - 37.5
Other comprehensive
income:
Exchange differences
on translation of
foreign operations - - - - 21.0 21.0
Total other comprehensive
income - - - - 21.0 21.0
--------------------------- ----------- ---------------- ----------- --------- -------------- ----------------
Total comprehensive
income for the period - - 37.5 - 21.0 58.5
Dividends to equity - - - - - -
holders
Non-controlling
interest arising - - - - - -
on acquisition
Balance at 1 August
2020 2.4 11.7 1,283.2 (36.4) 16.8 1,277.7
--------------------------- ----------- ---------------- ----------- --------- -------------- ----------------
Total Equity
Attributable To Non-
Equity Holders Controlling Total
Of The Parent Interest Equity
GBPm GBPm GBPm
Balance at 1 February 2020 1,219.2 70.0 1,289.2
Profit for the period 37.5 (10.4) 27.1
Other comprehensive income:
Exchange differences on translation
of foreign operations 21.0 4.5 25.5
Total other comprehensive income 21.0 4.5 25.5
-------------------------------------- -------- -------------- ---------
Total comprehensive income for the
period 58.5 (5.9) 52.6
Dividends to equity holders - (1.0) (1.0)
Non-controlling interest arising
on acquisition - 0.3 0.3
Balance at 1 August 2020 1,277.7 63.4 1,341.1
-------------------------------------- -------- -------------- ---------
Condensed Consolidated Statement of Cash Flows
For the 26 weeks ended 31 July 2021
26 weeks 26 weeks 52 weeks
to 31 July to to
2021 1 August 30 January
GBPm 2020 2021
GBPm GBPm
Cash flows from operating activities
Profit for the period 276.8 27.1 229.2
Income tax expense 87.8 14.4 94.8
Financial expenses 32.7 34.2 62.5
Financial income (0.5) (0.7) (1.5)
Depreciation and amortisation of
non-current assets 265.1 241.6 499.2
Forex (gains) / losses on monetary
assets and liabilities (3.1) 17.1 3.6
Impairment of other intangibles
and non-current assets (non-exceptional) 9.6 - 8.7
Loss on disposal of non-current
assets 1.5 0.2 1.2
Other exceptional items 3 69.4 (17.8) 2.9
Impairment of goodwill and fascia
names (exceptional) 33 - 33.3 89.5
Impairment of property, plant and
equipment (exceptional) 33 5.5 4.9 4.9
Share of profit of equity-accounted (1.4) - -
investees, net of tax
(Increase) / decrease in inventories (79.2) 57.7 63.5
(Increase) / decrease in trade and
other receivables (62.1) (36.1) 46.2
Increase in trade and other payables 2.5 248.6 150.8
Interest paid (3.9) (3.6) (7.6)
Lease interest (28.8) (30.6) (54.9)
Income taxes paid (111.0) (27.2) (130.4)
----------------------------------------------- --- ------------ ---------- ------------
Net cash from operating activities 460.9 563.1 1,062.6
----------------------------------------------- --- ------------ ---------- ------------
Cash flows from investing activities
Interest received 0.5 0.7 1.5
Proceeds from sale of non-current
assets 2.4 0.4 2.1
Investment in software development (5.8) (8.9) (19.1)
Acquisition of property, plant and
equipment (77.7) (41.5) (105.2)
Acquisition of non-current other
assets - (1.9) (7.7)
Acquisition of subsidiaries, net
of cash acquired (375.1) (32.0) (206.3)
Net cash used in investing activities (455.7) (83.2) (334.7)
----------------------------------------------- --- ------------ ---------- ------------
Cash flows from financing activities
(Repayment) / drawdown of interest-bearing
loans and borrowings (207.5) 269.1 51.6
Repayment of lease liabilities (163.2) (146.2) (285.2)
Drawdown of syndicated banking facility 176.3 - -
Subsidiary shares issued in the
period - - 0.3
Proceeds received from issue of 455.9 - -
shares
Acquisition and divestment of non-controlling
interests 43.0 - (5.2)
Dividends paid to non-controlling
interest in subsidiaries (1.8) (1.0) (1.2)
----------------------------------------------- --- ------------ -------------- ------------
Net cash provided by / (used in)
financing activities 302.7 121.9 (239.7)
----------------------------------------------- --- ------------ -------------- ------------
Net increase in cash and cash equivalents 307.9 601.8 488.2
Cash and cash equivalents at the
beginning of the period 948.7 460.3 460.3
Foreign exchange gains on cash and
cash equivalents 2.4 6.7 0.2
----------------------------------------------- --- ------------ -------------- ------------
Cash and cash equivalents at the
end of the period 1,259.0 1,068.8 948.7
----------------------------------------------- --- ------------ -------------- ------------
Analysis of Net Cash
As at 31 July 2021
At On At
30 January acquisition Non-cash 31 July
2021 of subsidiaries Cashflow movements 2021
GBPm GBPm GBPm GBPm GBPm
Cash at bank and in hand 964.4 120.5 217.4 2.4 1,304.7
Overdrafts (15.7) (23.2) (6.8) - (45.7)
------------ ----------------- ----------- ------------ ------------
Cash and cash equivalents 948.7 97.3 210.6 2.4 1,259.0
------------ ----------------- ----------- ------------ ------------
Interest bearing loans
and borrowings:
Bank loans (84.4) (140.3) 155.5 (1.5) (70.7)
Syndicated bank facility - - (176.3) - (176.3)
Other loans (68.9) - 52.0 - (16.9)
Net cash / (financial
debt) 795.4 (43.0) 241.8 0.9 995.1
------------ ----------------- ----------- ------------ ------------
Lease liabilities (1,929.8) (207.9) 163.2 (180.5) (2,155.0)
------------ ----------------- ----------- ------------ ------------
Net debt (1,134.4) (250.9) 405.0 (179.6) (1,159.9)
------------ ----------------- ----------- ------------ ------------
1. Basis of Preparation
JD Sports Fashion Plc (the 'Company') is a company incorporated
and domiciled in the United Kingdom. The unaudited half year
financial report for the 26 week period to 31 July 2021 represents
that of the Company and its subsidiaries (together referred to as
'the Group').
This half year financial report is an interim management report
as required by DTR 4.2.3 of the Disclosure and Transparency Rules
of the UK's Financial Conduct Authority and was authorised for
issue by the Board of Directors on 14 September 2021.
The condensed set of financial statements included in this half
year financial report has been prepared in accordance with IAS 34
'Interim Financial Reporting'. The annual financial statements of
the Group are prepared in accordance with international financial
reporting standards ('IFRS's') adopted pursuant to Regulation (EC)
No 1606/2002 as it applies in the European Union. The comparative
figures for the 52 week period to 30 January 2021 are not the
Group's statutory accounts for that financial year. Those accounts
have been reported on by the Group's Auditor and delivered to the
Registrar of Companies. The Report of the Auditor was (i)
unqualified, (ii) did not include a reference to any matters to
which the Auditor drew attention by way of emphasis without
qualifying their report, and (iii) did not contain a statement
under section 498 of the Companies Act 2006.
The information contained in the half year financial report for
the 26 week period to 31 July 2021 and 1 August 2020 has been
reviewed and the independent review report for the 26 week period
to 31 July 2021 is set out in the half year financial report.
As required by the Disclosure and Transparency Rules of the UK's
Financial Conduct Authority, the half year financial report has
been prepared by applying the same accounting policies and
presentation that were applied in the preparation of the Company's
published consolidated financial statements for the 52 week period
to 30 January 2021.
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.
Amendment to IFRS 16 'Leases' COVID-19 Related Rent
Concessions
This amendment to IFRS 16 provided an accounting policy choice
for lessees where a COVID-19 related rent concession had been
received or granted from a landlord. The Group has elected not to
account for COVID-19 related rent concessions under the amendment
effective from 1 June 2020. The Group instead continues to
remeasure right of use assets and lease liabilities following the
lease modification definitions within IFRS 16 as originally issued,
recalculating using a revised discount rate where applicable.
The Group does not consider that any other standards, amendments
or interpretations issued by the IASB, but not yet applicable, will
have a significant impact on the financial statements.
Alternative Performance Measures
The Directors measure the performance of the Group based on a
range of financial measures, including measures not recognised by
international financial reporting standards (IFRS's) adopted
pursuant to Regulation (EC) No 1606/2002 as it applies in the
European Union. 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 period. Further
information can be found at the end of these interim results.
Use of Estimates and Judgements
The preparation of interim financial statements requires
management to make judgements, estimates and assumptions that
affect the application of policies and reported amounts of assets
and liabilities, income and expenses. The estimates and associated
assumptions are based on historical experience and various other
factors that are believed to be reasonable under the circumstances,
the results of which form the basis of making the judgements about
carrying values of assets and liabilities that are not readily
apparent from other sources. Actual results may differ from these
estimates.
1. Basis of Preparation (continued)
In preparing these condensed consolidated interim financial
statements, the significant judgements made by management in
applying the Group's accounting policies and the key sources of
estimation uncertainty were the same as those that applied to the
consolidated financial statements for the 52 week period to 30
January 2021 with one exception. The estimation uncertainty
relating to the determination of the fair value of assets and
liabilities on the acquisition of Shoe Palace in the 52 week period
to 30 January 2021 was replaced with the following source of
estimation uncertainty:
Determination of the Fair Value of Assets and Liabilities on
Acquisition
Included within critical accounting policies in the current year
is the valuation of the intangible assets recognised as part of the
acquisition of DTLR (see Note 5). The estimates used in the
valuation of the intangible assets are considered to have a
significant risk of causing a material misstatement, specifically;
the estimation of future cash flows, the useful economic life of
the asset, the selection of suitable royalty relief rates and the
selection of a suitable discount rate.
The key assumption used by management in the valuation of the
fascia name was the royalty rate. The royalty rate assumption used
in the valuation was estimated based on published comparable
licence fees in the sports fashion market and a calculation of the
expected return on assets of the DTLR business. If the royalty rate
used in the valuation was 1% higher or lower, this would lead to a
change in the fascia name valuation of plus or minus GBP25.4
million. 1% was determined to be a reasonable royalty rate
sensitivity by comparing the royalty rate used to publicly
disclosed licensing transactions related to the retail of
sportswear and footwear.
Footasylum
On 2 September 2021, the Competition and Markets Authority
('CMA') announced that it has again provisionally prohibited the
Group's acquisition of Footasylum Limited ('Footasylum'). As these
findings are provisional and the CMA Final Report is not due until
October 2021, the Group has not made any changes to the
presentation of Footasylum in these interim results.
Risks and Uncertainties
The Board has considered the risks and uncertainties for the
remaining 26 week period to 29 January 2022 and determined that the
risks presented in the Annual Report and Accounts 2021 noted below,
remain relevant:
-- Key suppliers and brands
-- Intellectual property
-- Warehouse operations
-- Environmental - climate change
-- Environmental - biodiversity, resources and water security
-- Social - human rights, labour standards and responsibility
-- Governance - anti-corruption, risk management, regulatory and compliance
-- Retail property factors
-- IT systems
-- Cyber security
-- COVID-19
-- Personnel
-- Treasury and financial
A major variable, and therefore risk, to the Group's financial
performance for the remainder of the financial period is the sales
and margin performance in the retail fascias, particularly in
December and January. Further comment on this and other risks and
uncertainties faced by the Group is provided in the Executive
Chairman's statement included within this half year financial
report.
Going Concern
The global COVID-19 pandemic has presented a series of
unprecedented challenges which have severely tested all aspects of
our business including our multichannel capabilities, the
robustness of our operational infrastructure and the resilience of
our colleagues. Whilst COVID-19 has inevitably constrained our
short term progress, we firmly believe that we have a robust
premium branded multichannel proposition with our loyal consumers
comfortable engaging with us through any channel.
The financial statements are prepared on a going concern basis,
which the Directors believe to be appropriate for the following
reasons.
At 31 July 2021, the Group had net cash balances of GBP995.1
million (30 January 2021: GBP795.4 million) with available
committed UK borrowing facilities of GBP700 million (30 January
2021: GBP700 million) of which GBP176.3 million (30 January 2021:
GBPnil) has been drawn down and US facilities of approximately $300
million of which $nil was drawn down (30 January 2021: $nil). These
facilities are subject to certain covenants. With a UK facility of
GBP700 million available up to 6 November 2024 and a US facility of
approximately $300 million available up until 18 June 2023, the
Directors believe that the Group is well placed to manage its
business risks successfully despite the current uncertain economic
outlook.
1. Basis of Preparation (continued)
The Directors have prepared cash flow forecasts for the Group
covering a period of at least 12 months from the date of approval
of the financial statements, which indicate that the Group will be
able to operate within the level of its agreed facilities and
covenant compliance. These forecasts include a number of
assumptions including gross profit margins and the response of
customers to transition from physical sales to online and vice
versa.
For the purposes of both Viability and Going Concern Reporting,
the Directors have prepared severe but plausible downside scenarios
which cover the same period as the base case, including specific
consideration of a range of impacts that could arise from the
continued COVID-19 pandemic. These scenarios included more
prolonged store closures, transition from physical sales to online
and disruptions to supply chain causing delays in receiving stock.
As part of this analysis, mitigating actions within the Group's
control should these severe but plausible scenarios occur have also
been considered. These forecast cash flows indicate that there
remains sufficient headroom for the Group to operate within the
committed facilities and to comply with all relevant banking
covenants during the forecast period.
The Directors have considered all of the factors noted above,
including the inherent uncertainty in forecasting the impact of the
COVID-19 pandemic, and are confident that the Group has adequate
resources to continue to meet all liabilities as and when they fall
due for a period of at least 12 months from the date of approval of
these financial statements. Accordingly, the financial statements
have been prepared on a going concern basis.
Other Accounting Policies
Payroll Support
Payroll support is recognised in the Consolidated Financial
Statements when it can be reliably measured which the Group
considers to be on receipt. In accordance with IAS 20 'Government
Grants', payroll support across the Group of GBP29.9 million has
been shown as a deduction from employed staff costs in the period
ended 31 July 2021.
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 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 considers that certain items are cross divisional in
nature and cannot be allocated between the segments on a meaningful
basis. Net funding costs and taxation are treated as unallocated
reflecting the nature of the Group's syndicated borrowing
facilities and its tax group. Drawdowns from the Group's syndicated
borrowing facility of GBP176.3 million (2020: GBP190.0 million) and
net liabilities for taxation of GBP46.2 million (2020: GBP33.9
million) are included within the unallocated segment.
Each segment is shown net of intercompany transactions and
balances within that segment. The eliminations remove intercompany
transactions and balances between different segments which
primarily relate to the net 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.
2. Segmental Analysis (continued)
Business Segments
Information regarding the Group's operating segments for the 26
weeks to 31 July 2021 is reported below:
Income statement
Sports
Fashion Outdoor Unallocated Total
GBPm GBPm GBPm GBPm
Revenue 3,650.6 235.2 - 3,885.8
Operating profit before
exceptional items 459.8 11.9 - 471.7
Exceptional items (74.9) - - (74.9)
--------- ---------- -------------- --------
Operating profit 384.9 11.9 - 396.8
Financial income - - 0.5 0.5
Financial expenses (27.7) (1.1) (3.9) (32.7)
--------- ---------- -------------- --------
Profit / (loss) before
tax 357.2 10.8 (3.4) 364.6
Income tax expense (87.8)
--------- ---------- -------------- --------
Profit for the period 276.8
--------- ---------- -------------- --------
Total assets and liabilities
Sports Fashion Outdoor Unallocated Eliminations Total
GBPm GBPm GBPm GBPm GBPm
Total assets 6,201.1 375.7 21.0 (145.6) 6,452.2
Total liabilities (3,824.8) (351.8) (243.5) 145.6 (4,274.5)
--------------- -------- ------------ ------------- ----------
Total segment net
assets / (liabilities) 2,376.3 23.9 (222.5) - 2,177.7
--------------- -------- ------------ ------------- ----------
2. Segmental Analysis (continued)
The comparative segmental results for the 26 weeks to 1 August
2020 are as follows:
Income statement
Sports
Fashion Outdoor Unallocated Total
GBPm GBPm GBPm GBPm
Revenue 2,402.4 142.5 - 2,544.9
Operating profit / (loss)
before exceptional items 109.4 (14.0) - 95.4
Exceptional items - (20.4) - (20.4)
--------- ---------- -------------- --------
Operating profit / (loss) 109.4 (34.4) - 75.0
Financial income - - 0.7 0.7
Financial expenses (27.8) (2.8) (3.6) (34.2)
--------- ---------- -------------- --------
Profit / (loss) before
tax 81.6 (37.2) (2.9) 41.5
Income tax expense (14.4)
--------- ---------- -------------- --------
Profit for the period 27.1
--------- ---------- -------------- --------
Total assets and liabilities
Sports Fashion Outdoor Unallocated Eliminations Total
GBPm GBPm GBPm GBPm GBPm
Total assets 4,572.0 268.3 - (90.1) 4,750.2
Total liabilities (3,068.7) (206.6) (223.9) 90.1 (3,409.1)
--------------- -------- ------------ ------------- ----------
Total segment net
assets / (liabilities) 1,503.3 61.7 (223.9) - 1,341.1
--------------- -------- ------------ ------------- ----------
2. Segmental Analysis (continued)
Geographical Information
The Group's operations are located in the UK, Australia,
Austria, Belgium, Bulgaria, Canada, the Czech Republic, Denmark,
Dubai, Estonia, Finland, France, Germany, Hong Kong, Hungary,
India, Italy, Latvia, Lithuania, Malaysia, the Netherlands, New
Zealand, Poland, Portugal, the Republic of Ireland, Romania,
Singapore, Slovakia, 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:
26 weeks to 26 weeks
31 July to
2021 1 August
GBPm 2020
GBPm
UK 1,458.9 963.2
Europe 908.0 622.5
United
States 1,357.3 834.3
Rest of
world 161.6 124.9
----------- ------------ ----------
3,885.8 2,544.9
--------- ------------ ----------
The revenue from any individual country, with the exception of
the UK and the US, is not more than 10% of the Group's total
revenue.
The following is an analysis of the carrying amount of segmental
non-current assets by the geographical area in which the assets are
located. Taxation is treated as unallocated, reflecting the nature
of the Group's tax group.
As at As at
31 July 1 August
2021 2020
GBPm GBPm
UK 1,111.2 1,089.4
Europe 1,135.0 1,040.7
United States 1,553.2 464.0
Rest of world 115.7 119.5
Unallocated 21.0 -
--------------- --------- ----------
3,936.1 2,713.6
--------------- --------- ----------
3. Exceptional Items
26 weeks 26 weeks 52 weeks
to to to
31 July 1 August 30 January
2021 2020 2021
GBPm GBPm GBPm
Impairment of goodwill and fascia
names (1) - - 56.2
Movement in fair value of put and
call options (2) 59.1 - 20.7
Restructuring of Spodis (3) 15.8 - -
Restructuring of Go Outdoors (4) - 20.4 20.4
Administrative expenses - exceptional 74.9 20.4 97.3
Total exceptional items 74.9 20.4 97.3
----------------------------------------- ----------- ----------- -------------
(1) The impairment in the prior period principally constitutes a
charge of GBP55.6 million relating to the impairment of the
goodwill and fascia name arising in prior years on the acquisition
of Footasylum.
(2) Movement in the fair value of the liabilities in respect of
the put and call options (Genesis Holdings Inc: Charge of GBP65.0m,
Other: Credit of GBP5.9 million). The increase in the fair value of
the put and call options attributable to the Genesis Holdings Inc.
put option liability is as a direct result of the transfer of DTLR
into the Genesis sub-group.
(3) The impact consequent to the restructuring of Spodis SA in
the period including a charge of GBP5.5 million in relation to the
impairment of tangible assets and business restructuring costs of
GBP10.3 million.
(4) The net impact consequent to the restructuring of Go
Outdoors in the prior period including a charge of GBP33.3 million
in relation to the impairment of intangible assets, a charge of
GBP4.9 million in relation to the impairment of leasehold
improvements and a credit of GBP17.8 million in relation to the
extinguishment of lease commitments. The credit in relation to
lease commitments under IAS 17 'Leases' was GBP10.3 million.
Items (1) and (2) are exceptional items as they are considered
unusual in nature and not reflective of the underlying trading and
profitability of the Group. Items (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 31 July 2021 is based on the profit for the period attributable
to equity holders of the parent of GBP228.7 million (26 weeks to 1
August 2020: GBP37.5 million; 52 weeks to 30 January 2021: GBP224.3
million).
On 3 February 2021 the Company completed the placing of
58,393,989 new ordinary shares. The admission of the Placing Shares
to trade on the main market took place on 8 February 2021. The
weighted average number of ordinary shares outstanding during the
26 weeks to 31 July 2021 was 1,030,664,611 (26 weeks to 1 August
2020: 973,233,160; 52 weeks to 30 January 2021: 973,233,160).
26 weeks 26 weeks 52 weeks
to to to
31 July 1 August 30 January
2021 2020 2021
Issued ordinary shares at beginning
period 973,233,160 973,233,160 973,233,160
Ordinary shares issued on 3 February 58,393,989 - -
2021
-------------- ------------ -------------
Issued ordinary shares at end
of period 1,031,627,149 973,233,160 973,233,160
-------------- ------------ -------------
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 meaningful measure of the underlying performance
of the Group.
26 weeks 26 weeks 52 weeks
to to to
31 July 1 August 30 January
2021 2020 2021
GBPm GBPm GBPm
Profit for the period attributable
to equity holders of the parent 228.7 37.5 224.3
Exceptional items excluding loss
on disposal of non-current assets 74.9 20.4 97.3
Tax relating to exceptional items (3.0) 1.4 (8.3)
Profit for the period attributable
to equity holders of the parent
excluding exceptional items 300.6 59.3 313.3
----------- ----------- -------------
Basic and diluted earnings per
ordinary share 22.19p 3.85p 23.05p
----------- ----------- -------------
Adjusted basic and diluted earnings
per ordinary share 29.16p 6.09p 32.19p
----------- ----------- -------------
5. Acquisitions
Current Period Acquisitions
80s Casual Classics Limited
On 2 March 2021, JD Sports Fashion Plc acquired 70% of the
issued share capital of 80s Casual Classics Limited ('80s CC') for
cash consideration of GBP14.9 million. 80s CC is predominantly an
online retailer of retro and original clothing from brands such as
adidas and Sergio Tacchini, inspired by the British subculture of
the 70s, 80s and 90s. The acquisition included put and call options
over the remaining 30% of shares, exercisable in annual tranches
after a minimum period of three years.
Included within the fair value of the net identifiable assets on
acquisition is an intangible asset of GBP1.0 million representing
the 80s CC fascia name. The Board believes that the excess of
consideration paid over net assets on acquisition of GBP8.5 million
is best considered as goodwill representing future operating
synergies.
Included in the 26 week period ended 31 July 2021 is revenue of
GBP6.0 million and a profit before tax of GBP1.8 million in respect
of 80s CC.
DTLR Villa LLC
Initial acquisition
On 17 March 2021, JD Sports Fashion Plc ('JD') acquired 100% of
the issued share capital of DTLR Villa LLC ('DTLR'), via a wholly
owned intermediate holding company in the United States. Total cash
paid was $504.4 million, split between $244.4 million debt funding
and $260.0 million equity funding, of which $88.2m was used to
repay external debt and legal fees.
DTLR is based in Baltimore, Maryland and is a hyperlocal
athletic footwear and apparel streetwear retailer operating from
247 stores across 19 states on acquisition. The acquisition of
DTLR, with its differentiated consumer proposition, will enhance
the Group's neighbourhood presence in the North and East of the
United States.
The existing DTLR management team has also reinvested a portion
of its proceeds back into DTLR in exchange for a new minority stake
of 1.5%. Put and call options, to enable future exit opportunities
for the management team, have also been agreed and become
exercisable after a minimum period of three years. A valuation of
these put options has been performed using an EBITDA multiple, a
suitable discount rate and approved forecasts and the initial
liability of GBP4.2 million has been recognised with the
corresponding entry to Other Equity in accordance with the present
value method of accounting. These options are required to be fair
valued at each accounting period date.
Included within the provisional fair value of the net
identifiable assets on acquisition is an intangible asset of
GBP101.6 million representing the DTLR fascia name and an
intangible asset of GBP3.5 million representing the customer
relationships arising from the loyalty scheme in place. The Board
believes that the excess of consideration paid over net assets on
acquisition of GBP202.2 million is best considered as goodwill on
acquisition representing future operating synergies. Due to the
proximity of the date of acquisition and the interim period end, it
has not been possible to present a final goodwill calculation or
the final fair values of the assets and liabilities acquired. The
provisional goodwill calculation is summarised on the next
page.
Subsequent intra-group transfer
On 2 July 2021, JD completed the transfer of the intermediate
parent company and DTLR to Genesis Topco Inc ('Genesis'), which is
an existing 80.0% subsidiary based in the United States and parent
company of the sub-group which contains the Finish Line Inc and the
Shoe Palace Corporation. It was always the intention for DTLR to be
part of the Genesis sub-group but the requirement for speed and
certainty of execution on the original transaction meant that it
was more appropriate for the Group to initially acquire DTLR
directly. This transfer to Genesis now brings all of the Group's
businesses in the United States into one sub-group which will
enhance the future operational collaboration between them. However,
as the parent to Genesis, JD will continue to make strategic
decisions regarding the Company's future. The consideration payable
by Genesis to JD in relation to the transfer is the same as the
total consideration paid by JD on the original acquisition.
By virtue of the fact that JD only owns 80% of Genesis, JD will
effectively be disposing of a proportion of its investment in DTLR
to the four Mersho Brothers ('the Mershos') who, with their 20%
aggregate shareholding in Genesis, are jointly a related party of
JD. In order to maintain their shareholding in Genesis at the
current level, the Mershos invested their pro-rata element of the
equity consideration of $52 million into Genesis. This transfer has
taken place on an arm's length basis and reflects the net assets
acquired as at the original acquisition date of 17 March 2021.
5. Acquisitions (continued)
Current period acquisitions (continued)
DTLR Villa LLC (continued)
Provisional
Measurement fair value
Book value adjustments at
GBPm GBPm 17 March 2021
GBPm
Acquiree's net assets at acquisition
date:
Intangible assets 43.7 62.9 106.6
Property, plant and equipment 53.7 (0.1) 53.6
Other non-current assets 0.5 (0.2) 0.3
Right of use assets - 139.9 139.9
Inventories 40.3 - 40.3
Cash and cash equivalents 95.2 - 95.2
Trade and other receivables 7.6 (3.3) 4.3
Trade and other payables (37.6) - (37.6)
Bank loans and overdrafts (140.2) - (140.2)
Deferred tax liability (3.3) (21.9) (25.2)
Lease liabilities (11.8) (128.1) (139.9)
Corporation tax 0.4 - 0.4
Net identifiable assets 48.5 49.2 97.7
------------- -------------- ----------------
Goodwill on acquisition 202.2
------------- -------------- ----------------
Consideration paid - satisfied in
cash 299.9
------------- -------------- ----------------
Included in the 26 week period ended 31 July 2021 is revenue of
GBP192.5 million and a profit before tax of GBP36.1 million in
respect of DTLR.
5. Acquisitions (continued)
Current period acquisitions (continued)
Marketing Investment Group S.A.
On 30 April 2021, JD Sports Fashion Plc acquired 60% of the
issued share capital of Marketing Investment Group S.A. ('MIG') for
total consideration of 344.7 million Polish Zloty ('PLN'). Total
consideration comprises 336.2 million PLN cash consideration and
8.5 million PLN of deferred consideration that is subject to
customary closing conditions and expected to be paid in 2022.
MIG operates 410 stores on acquisition along with the associated
trading websites in nine countries in Central and Eastern
Europe.
Put and call options to enable future exit opportunities for the
40% shareholders have also been agreed and become exercisable after
the year ended January 2025. A valuation of these put options has
been performed using an EBITDA multiple, a suitable discount rate
and approved forecasts and the initial liability of GBP50.2 million
has been recognised with the corresponding entry to Other Equity in
accordance with the present value method of accounting. These
options are required to be fair valued at each accounting period
date.
Included within the provisional fair value of the net
identifiable assets on acquisition is an intangible asset of
GBP25.1 million representing the Sizeer fascia name and an
intangible asset of GBP4.1 million representing the 50 Style fascia
name. The Board believes that the excess of consideration paid over
net assets on acquisition of GBP40.6 million is best considered as
goodwill on acquisition representing future operating synergies.
Due to the proximity of the date of acquisition and the interim
period end, it has not been possible to present a final goodwill
calculation or the final fair values of the assets and liabilities
acquired. The provisional goodwill calculation is summarised
below:
Provisional
Measurement fair value
Book value adjustments at
GBPm GBPm 30 April 2021
GBPm
Acquiree's net assets at acquisition
date:
Intangible assets 1.8 29.2 31.0
Property, plant and equipment 16.6 - 16.6
Other non-current assets 1.1 - 1.1
Right of use assets - 12.5 12.5
Inventories 69.1 (1.9) 67.2
Cash and cash equivalents 6.5 - 6.5
Trade and other receivables 4.9 1.1 6.0
Trade and other payables (57.7) 1.7 (56.0)
Bank loans and overdrafts (27.0) - (27.0)
Deferred tax asset / (liability) 1.0 (5.5) (4.5)
Lease liabilities - (12.5) (12.5)
Corporation tax 0.1 - 0.1
Net identifiable assets 16.4 24.6 41.0
------------- -------------- ----------------
Non-controlling interest (40%) (6.6) (9.8) (16.4)
Goodwill on acquisition 40.6
------------- -------------- ----------------
Consideration - satisfied in cash 63.6
Consideration - deferred 1.6
------------- -------------- ----------------
Total consideration 65.2
------------- -------------- ----------------
Included in the 26 week period ended 31 July 2021 is revenue of
GBP64.5 million and a profit before tax of GBP7.4 million in
respect of MIG.
5. Acquisitions (continued)
Current period acquisitions (continued)
Uggbugg Fashion Limited
On 18 June 2021, JD Sports Fashion Plc acquired 51% of the
issued share capital of Uggbugg Fashion Limited including a wholly
owned subsidiary Missy Empire Limited (together 'Missy Empire') for
initial cash consideration of GBP11.7 million. Additional
consideration of up to GBP2.2 million is payable if certain
performance criteria is achieved. Forecasts were provided at
acquisition which indicated that Missy Empire would meet the
performance criteria for the maximum contingent consideration to be
payable and therefore the provisional fair value of the contingent
consideration recognised on acquisition was GBP2.2 million. The
inherent uncertainty in forecasting during the COVID-19 pandemic
has been considered and it is the intention that the provisional
fair value of the contingent consideration will be reviewed and
updated as required for the financial period ending 29 January
2022.
Included within the provisional fair value of the net
identifiable assets on acquisition is an intangible asset of GBP2.3
million representing the Missy Empire fascia name. The Board
believes that the excess of consideration paid over net assets on
acquisition of GBP11.6 million is best considered as goodwill on
acquisition representing future operating synergies. Due to the
proximity of the date of acquisition and the interim period end, it
has not been possible to present a final goodwill calculation or
the final fair values of the assets and liabilities acquired.
Put and call options over 9% of the remaining 49% shareholding
have also been agreed and become exercisable after the year ending
January 2025. A valuation of these put options has been performed
using an EBITDA multiple, a suitable discount rate and approved
forecasts and the initial liability of GBP6.2 million has been
recognised with the corresponding entry to Other Equity in
accordance with the present value method of accounting. These
options are required to be fair valued at each accounting period
date.
Included in the 26 week period ended 31 July 2021 is revenue of
GBP1.2 million and a break even result in respect of Missy
Empire.
The Watch Shop Holdings Limited and Watch Shop Logistics Ltd
On 18 June 2021, JD Sports Fashion Plc acquired 100% of the
issued share capital of The Watch Shop Holdings Limited and Watch
Shop Logistics Ltd (together 'WatchShop') via a wholly owned
intermediate holding company. Total cash consideration paid was
GBP26.2 million. Contingent consideration is payable subject to
certain criteria being met. As at the date of acquisition, the
provisional fair value of the contingent consideration was
GBPnil.
Included within the provisional fair value of the net
identifiable assets on acquisition is an intangible asset of GBP2.5
million representing the WatchShop fascia name. The Board believes
that the excess of consideration paid over net assets on
acquisition of GBP10.3 million is best considered as goodwill on
acquisition representing future operating synergies. Due to the
proximity of the date of acquisition and the interim period end, it
has not been possible to present a final goodwill calculation or
the final fair values of the assets and liabilities acquired.
Included in the 26 week period ended 31 July 2021 is revenue of
GBP1.8 million and loss before tax of GBP0.1 million in respect of
WatchShop.
Other acquisitions
During the period, the Group made other acquisitions which were
not material.
Full year impact of acquisitions
Had the acquisitions of the entities listed above been effected
at 31 January 2021, the revenue and profit before tax of the Group
for the 26 week period to 31 July 2021 would have been GBP4.0
billion and GBP356.1 million respectively.
Acquisition costs
Acquisition related costs amounting to GBP5.6 million have been
excluded from the consideration transferred and have been
recognised as an expense in the year, within administrative
expenses in the Consolidated Income Statement.
5. Acquisitions (continued)
Prior period acquisitions
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 holding company
(JDSF Holdings (Canada) Inc.) ('Holdco'). Based in Vancouver, this
business and its management will provide the platform to develop JD
Group fascias in Canada.
Consideration was comprised of GBP7.0 million in cash, of which
GBP0.6 million was deferred as at the date of acquisition, plus 20%
of the equity in Holdco. The fair value of the 20% equity in Holdco
was GBP1.8 million. The deferred consideration of GBP0.6 million
was subsequently paid in June 2021.
Included within the 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 GBP8.4 million
is best considered as goodwill on acquisition representing future
operating synergies. No measurement adjustments have been made
during the 26 week period ended 31 July 2021 and the period in
which measurement adjustments could be made has now closed on this
acquisition. The goodwill calculation is summarised below:
Measurement Fair value
Book value adjustments at
GBPm GBPm 10 February
2020
GBPm
Acquiree's net assets at acquisition
date:
Intangible assets - 1.2 1.2
Property, plant and equipment 0.5 - 0.5
Right of use assets 0.5 - 0.5
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 (0.5) - (0.5)
Deferred tax liability - (0.3) (0.3)
Lease liabilities (0.5) - (0.5)
Corporation tax (0.3) - (0.3)
Net identifiable (liabilities) /
assets (0.5) 0.9 0.4
------------- -------------- --------------
Goodwill on acquisition 8.4
------------- -------------- --------------
Consideration - satisfied in cash 6.4
Consideration - fair value of shares 1.8
issued
Consideration - deferred (paid June 0.6
2021)
------------- -------------- --------------
Total consideration 8.8
------------- -------------- --------------
Included in the 52 week period ended 30 January 2021 was revenue
of GBP10.1 million and a profit before tax of GBP1.4 million in
respect of Livestock.
5. Acquisitions (continued)
Prior period acquisitions (continued)
X4L Gyms Limited
On 22 July 2020, X4L Gyms Limited, a 100% owned subsidiary of JD
Gyms Limited acquired certain assets of Wright Leisure Limited t/a
Xercise4less following the Group being placed into administration
on the same date.
Xercise4less is a UK-based value-gym chain with 50 operational
clubs at the date of administration. The Company offers
high-quality, low-cost contract and non-contract memberships to its
members from large operational facilities nationwide.
The Board believes that Xercise4Less further strengthens the
Group's presence in the growing UK fitness market with the
acquisition providing immediate reach to a wider membership base as
well as facilitating the Group's presence as a key player in the
market. Xercise4less is a well-established business with a wealth
of knowledge in the UK fitness market which the board believes will
be complementary to JD Gyms. The Board also believes that there
will be significant operational and strategic benefits from a
combination of the two businesses.
The Board believes the excess of cash consideration paid over
the net identifiable assets on acquisition of GBP14.2 million is
best considered as goodwill representing future operating
synergies.
No measurement adjustments have been made during the 26 week
period ended 31 July 2021 and the period in which measurement
adjustments could be made has now closed on this acquisition. The
goodwill calculation is summarised below:
Measurement Fair value
Book value adjustments at
GBPm GBPm 22 July 2020
GBPm
Acquiree's net assets at acquisition
date:
Intangible assets 16.3 (16.1) 0.2
Property, plant and equipment 7.8 4.4 12.2
Trade and other receivables 0.1 (0.1) -
Trade and other payables - (1.5) (1.5)
Deferred tax liability - (0.9) (0.9)
Net identifiable assets / (liabilities) 24.2 (14.2) 10.0
------------- -------------- ---------------
Goodwill on acquisition 14.2
------------- -------------- ---------------
Consideration paid - satisfied in
cash 24.2
------------- -------------- ---------------
Included in the 52 week period ended 30 January 2021 was revenue
of GBP8.1 million and a loss before tax of GBP3.3 million in
respect of X4L Gyms Limited.
5. Acquisitions (continued)
Prior period acquisitions (continued)
Shoe Palace Corporation and Nice Kicks LLC
On 14 December 2020, JD Sports Fashion Plc's wholly owned
intermediate holding company in the United States, Genesis
Holdings, acquired 100% of the issued shares in both the Shoe
Palace Corporation and the members' interests in Nice Kicks LLC
(together 'Shoe Palace'). Shoe Palace has an established retail
presence in California, Texas, Nevada, Arizona, Florida, Colorado,
New Mexico and Hawaii with 163 stores trading under the Shoe Palace
fascia and four stores trading as Nice Kicks at acquisition.
Total consideration for the acquisition was $672.9 million,
comprising $316.7 million of cash consideration (of which $100
million was deferred as at the date of acquisition) and $356.2
million, being the initial fair value of this equity in the
enlarged group in the United States calculated using an EBITDA
multiple and approved forecasts. Post acquisition, $78.1 million of
the deferred consideration has been settled to date with the
remaining $21.9 million due by December 2021.
Additionally, several put and call options, to enable future
exit opportunities for the minority interest have also been agreed,
which commence after the end of the financial year to 1 February
2025. A valuation of these put options has been performed using an
EBITDA multiple, a suitable discount rate and approved forecasts
and the initial liability of GBP261.6 million was recognised with
the corresponding entry to Other Equity in accordance with the
present access method of accounting. These options are required to
be fair valued at each accounting period date.
Included within the provisional fair value of the net
identifiable assets on acquisition is an intangible asset of
GBP105.8 million, representing the 'Shoe Palace' fascia name and an
intangible asset of GBP1.2 million, representing the 'Nice Kicks'
fascia name. The Board believes that the excess of consideration
paid over net assets on acquisition of GBP410.1 million is best
considered as goodwill on acquisition representing future operating
synergies. Due to the proximity of the date of the acquisition to
the financial year ended 30 January 2021, information was received
during the financial period ended 31 July 2021 which resulted in
changes to the measurement adjustments. The changes made were not
significant in nature or value, with updated values presented in
the table below:
Measurement Fair value
Book value adjustments at
GBPm GBPm 14 December
2020
GBPm
Acquiree's net assets at acquisition
date:
Intangible assets 0.2 107.0 107.2
Property, plant and equipment 22.7 1.3 24.0
Right of use assets 139.8 - 139.8
Other non-current assets 0.6 - 0.6
Inventories 49.7 6.7 56.4
Cash and cash equivalents 3.1 - 3.1
Bank loans and overdrafts (1.7) - (1.7)
Trade and other receivables 10.6 (2.1) 8.5
Trade and other payables - current (64.2) 6.4 (57.8)
Trade and other payables - non-current (9.5) 9.5 -
Deferred tax liability - (32.8) (32.8)
Lease liabilities (139.8) - (139.8)
Net identifiable assets 11.5 96.0 107.5
------------- -------------- --------------
Goodwill on acquisition 410.1
------------- -------------- --------------
Consideration - satisfied in cash 170.4
Consideration - fair value of shares 274.1
issued
Consideration - deferred 73.1
------------- -------------- --------------
Total consideration 517.6
------------- -------------- --------------
Included in the 52 week period ended 30 January 2021 was revenue
of GBP56.1 million and a profit before tax of GBP13.9 million in
respect of Shoe Palace.
5. Acquisitions (continued)
Prior period acquisitions (continued)
A Number of Names Limited
On 23 December 2020, the Group acquired 100% of the issued share
capital of A Number of Names Limited ('ANON'). ANON is primarily a
wholesale business with the licence to the Billionaire Boys Club
('BBC') brand in the UK, Europe, the Middle East, Africa, Russia,
Ukraine, Australia, Canada and certain other territories.
The total fair value of consideration recognised at 23 December
2020 was GBP5.5 million comprising GBP3.7 million of cash
consideration and GBP1.8 million of deferred consideration that is
contingent upon ANON meeting certain performance criteria. GBP1.8
million was deemed to be the fair value of the deferred
consideration based on management's judgement and best estimates as
at 23 December 2020. Due to the proximity of the date of the
acquisition to the financial year ended 30 January 2021,
information was received during the financial period ended 31 July
2021 which resulted in changes to the measurement adjustments. The
changes made were not significant in nature or value.
The Board believes the excess of consideration over the net
assets acquired of GBP2.7 million is best considered as goodwill on
acquisition representing future operating synergies.
Included in the 52 week period ended 30 January 2021 was revenue
of GBP0.2 million and a break even result before tax in respect of
ANON.
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 2 February 2020, the revenue and profit before tax of the Group
for the 52 week period to 30 January 2021 would have been GBP6.5
billion and GBP334.9 million respectively.
Acquisition costs
Acquisition related costs amounting to GBP4.0 million have been
excluded from the consideration transferred and were recognised as
an expense in the prior year, within administrative expenses in the
Consolidated Income Statement.
6. Half Year Report
The half year report will be available to download from
www.jdplc.com from mid-October 2021. Paper based copies will be
available on application to the Company Secretary, JD Sports
Fashion Plc, Hollinsbrook Way, Pilsworth, Bury, Lancashire, BL9
8RR.
7. Subsequent Events
Deporvillage SL
On 25 June 2021, Iberian Sports Retail Group SL ('ISRG'), the
Group's existing 50.02% intermediate holding company in Spain,
exchanged contracts on the conditional acquisition of 80% of the
issued shares in Deporvillage SL ('Deporvillage') which is based in
Manresa, Catalonia. Deporvillage is an online only retailer
focussing on the sale of specialist sports equipment principally
for cycling, running and outdoor. In the year to 31 December 2020,
Deporvillage generated revenues of EUR117.8 million and delivered a
profit before tax of EUR7.7 million. The gross assets at 31
December 2020 were EUR51.1 million.
Total maximum cash consideration for the acquisition of the
initial 80% holding in Deporvillage, subject to customary cash /
debt and working capital adjustments, is EUR140.4 million, of which
EUR40.4 million has been deferred and will be paid contingent on
the performance of the business to 31 December 2021. The cash
consideration is being funded from the Group's cash resources and
existing bank facilities. Additionally, a number of put and call
options, to enable future exit opportunities for the 20%
shareholders have also been agreed, which commence two years after
closing.
ISRG is a leading operator in the sporting goods market across
Iberia through its Sprinter and Sport Zone fascias with the
acquisition of Deporvillage giving additional depth and expertise
in the key categories of cycling, running and outdoor. The
transaction was subject to certain conditions, principally relating
to anti-trust clearance, with formal completion taking place on 3
August 2021. Due to the proximity of the date of the acquisition
and the date of this Interim Report, it is not possible to present
a goodwill calculation, or the fair values of the assets and
liabilities acquired. The goodwill calculation and fair value table
will be presented in the announcement of our Annual Results on 12
April 2022.
Footasylum
On 2 September 2021, the Competition and Markets Authority
('CMA') announced that it has again provisionally prohibited the
Group's acquisition of Footasylum Limited ('Footasylum'). The Group
nevertheless remains committed to its transaction goal of improving
Footasylum's resources, access to product and differentiated
customer proposition. These findings are provisional and we will
continue to make our case strongly to the CMA before it releases
its Final Report due in October 2021.
Disclaimer
This announcement contains certain forward-looking statements
with respect to the financial condition, results, operations and
businesses of JD Sports Fashion plc. These statements and forecasts
involve risk and uncertainty because they relate to events and
depend on circumstances that will occur in the future. There are a
number of factors that could cause actual results or developments
to differ materially from those expressed or implied by these
forward-looking statements and forecasts.
Alternative Performance Measures (terms are listed in
alphabetical order)
The Directors measure the performance of the Group based on a
range of financial measures, including measures not recognised by
international financial reporting standards ('IFRS's') adopted
pursuant to Regulation (EC) No 1606/2002 as it applies in the
European Union. 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 and diluted earnings per share is
detailed in Note 4. 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. A reconciliation between basic earnings per share and
adjusted earnings per share is shown below:
26 weeks 26 weeks 52 weeks
to to to
31 July 1 August 30 January
2021 2020 2021
Basic earnings per share 22.19p 3.85p 23.05p
Exceptional items excluding loss on
disposal of non-current
assets 7.26p 2.10p 10.00p
Tax relating to exceptional items (0.29p) 0.14p (0.86p)
----------- ----------- -------------
Adjusted earnings per share 29.16p 6.09p 32.19p
----------- ----------- -------------
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.
26 weeks 26 weeks 52 weeks
to to to
31 July 1 August 30 January
2021 2020 2021
GBPm GBPm GBPm
Profit for the period 276.8 27.1 229.2
Addback:
Financial expenses 32.7 34.2 62.5
Income tax expense 87.8 14.4 94.8
Depreciation, amortisation and impairment
of non-current assets 274.7 241.6 507.9
Exceptional items 74.9 20.4 97.3
Deduct:
Financial income (0.5) (0.7) (1.5)
--------- ---------- ------------
EBITDA before exceptional items 746.4 337.0 990.2
--------- ---------- ------------
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 .
Net Cash
Net cash consists of cash and cash equivalents together with
interest-bearing loans and borrowings.
Alternative Performance Measures (continued)
Operating profit before exceptional items
A reconciliation between operating profit and exceptional items
can be found in the Condensed Consolidated Income Statement.
Profit before tax and exceptional items (headline profit)
A reconciliation between profit before tax and profit before tax
and exceptional items is as follows:
26 weeks 26 weeks 52 weeks
to to to
31 July 1 August 30 January
2021 2020 2021
GBPm GBPm GBPm
Profit before tax 364.6 41.5 324.0
Exceptional items 74.9 20.4 97.3
--------- ---------- ------------
Profit before tax and exceptional items 439.5 61.9 421.3
--------- ---------- ------------
Proforma IAS 17
The Group presents results on a proforma basis with rents
recognised under the provisions of IAS 17 'Leases' as opposed to
IFRS 16 'Leases' so as to assist the user in the interpretation of
current performance when compared to previous years. Further,
certain management incentives are linked to the results on this
basis.
A reconciliation from the IFRS 16 headline profit before tax and
exceptional items to the proforma IAS 17 headline profit before tax
and exceptional items is as follows:
26 weeks 26 weeks 52 weeks
to to to
31 July 1 August 30 January
2021 2020 2021
Headline profit before tax and exceptional
items (IFRS 16) 439.5 61.9 421.3
Addback:
Depreciation and impairment of the Right
of Use asset under IFRS 16 175.3 168.4 324.8
Lease interest expense 28.8 30.6 54.9
Deduct:
Lease costs expensed to the income statement
under IAS 17 (192.1) (188.1) (340.9)
----------- ----------- -------------
Headline profit before tax and exceptional
items (Proforma IAS 17) 451.5 72.8 460.1
----------- ----------- -------------
[1] On 3 February 2021, JD Sports Fashion Plc completed the
placing of new ordinary shares in the capital of the Company. A
total of 58,393,989 new ordinary shares were placed at an issue
price of 795 pence per share, raising proceeds of GBP455.9 million
(net of GBP8.3 million share issue costs).
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