17 April 2018                                                     

 

JD SPORTS FASHION PLC

PRELIMINARY RESULTS

FOR THE 53 WEEKS ENDED 3 FEBRUARY 2018

 

 

JD Sports Fashion Plc (the "Group"), a leading retailer of sports, fashion and outdoor brands, today announces its Preliminary Results for the 53 weeks ended 3 February 2018 (2017: 52 weeks ended 28 January 2017).

 

 

	2018	2017	% Change
	£m	£m
Revenue	3,161.4	2,378.7	+33%
Gross profit %	48.4%	48.9%
Operating profit (before exceptional items)*	308.8	246.2	+25%
Net interest expense	(1.4)	(1.4)
Profit before tax and exceptional items*	307.4	244.8	+26%
Exceptional items	(12.9)	(6.4)
Profit before tax	294.5	238.4	+24%
Basic earnings per ordinary share	23.83p	18.38p
Adjusted earnings per ordinary share*	25.15p	19.04p
Total dividend payable per ordinary share	1.63p	1.55p
Net cash at period end (a)	309.7	213.6

 

a)   Net cash consists of cash and cash equivalents less interest-bearing loans and borrowings

b)   Throughout this release '*' indicates first instance of a term defined and explained in the Glossary at the end of these preliminary results

 

Group Highlights

 

·      Record result with headline profit before tax and exceptional items of £307.4 million (2017: £244.8 million).

 

·      Profit before tax increased by 24% to £294.5 million (2017: £238.4 million).

 

·      Further growth in LFL* store sales of 3% complemented by growth in LFL website sales in excess of 30%.

 

·      International development of the JD fascia continues:

 

•      Net increase of 56 stores (2017: 54 stores) for the JD fascia across Europe

•      A further nine JD stores opened in the Asia Pacific region in the year (2017: two stores) including the first stores in Australia

•      Subsequently opened the first JD store in South Korea

 

·      Encouraging performance in Outdoor with an EBITDA*, including a full year of Go Outdoors for the first time, of £23.0 million (2017: £7.0 million).

 

·      Period end net cash of £309.7 million (2017: £213.6 million) after funding nearly £100 million of additional capital expenditure in the year (2018: £186.6 million and 2017: £88.0 million) with increased investment in retail stores and investments in warehouse infrastructure to facilitate further growth.

 

 

·      Terms agreed which, subject to shareholder approval on both sides, will result in the acquisition of The Finish Line Inc. ('Finish Line') business in the United States. At the time of signing the merger agreement, Finish Line had 931 branded stores (including 375 branded concessions in Macy's department stores) with a further 188 unbranded concessions in Macy's department stores.

 

·      Revenue, gross margin and operating profit before exceptional items of the two business segments are tabulated below:

 

Period to 3 February 2018	Sports Fashion £m		Outdoor £m		Total £m
Revenue	2,745.0		416.4		3,161.4
Gross margin %	49.2%		43.5%		48.4%
EBITDA*	362.2		23.0		385.2
Depreciation / amortisation1	(62.2)		(14.2)		(76.4)
Operating profit before exceptional items	300.0		8.8		308.8

 

¹ Depreciation / amortisation in Outdoor includes a non-trading amortisation charge of £4.5 million of which £3.7 million is in relation to the value of Go Outdoors fascia name and various associated brand names which arises consequent to the accounting for the acquisition of the business in the prior year. The value attributable to the fascia name on acquisition was £59.1 million which is being amortised over 20 years and the value attributed to the brands was £7.6 million which is being amortised over 10 years.

 

Period to 28 January 2017	Sports Fashion £m		Outdoor £m		Total £m
Revenue	2,180.6		198.1		2,378.7
Gross margin %	49.4%		43.7%		48.9%
EBITDA*	301.6		7.0		308.6
Depreciation / amortisation	(56.6)		(5.8)		(62.4)
Operating profit before exceptional items	245.0		1.2		246.2

·      Final dividend payable increased by 5.4% to 1.37p (2017: 1.30p) bringing the total dividends payable for the year to 1.63p (2017: 1.55p) per ordinary share, an increase of 5.2%.

Peter Cowgill, Executive Chairman, said:

 

" I am delighted to report that this has been another period of significant progress for the Group with headline profit before tax and exceptional items increasing by a further 26% to £307.4 million (2017: £244.8 million). This is an excellent result demonstrating our capacity for continuing growth in both existing and new markets, and the strength of our offer in store and online.

 

"After delivering a headline profit of £100 million for the first time in the year to January 2015, the headline profit has increased by more than £200 million over the subsequent three years, a rise in excess of 200%. This sustained growth could not have been achieved without a relentless and ongoing focus on a number of key principles which ensure we remain the undisputed consumer destination of choice for sport lifestyle footwear and apparel.

 

"The investments we have made over a number of years in developing our multichannel proposition and driving improved buying, merchandising and retail discipline have ultimately led to the creation of a world class sports fashion business which combines the best of physical and digital retail on an increasingly global scale.

 

"We are very encouraged by the progress that we are making internationally and we continue to look for further opportunities to bring our dynamic multichannel proposition to new markets around the world with the support of our key brands.

 

"The commitment of our employees is crucial to our success and I would like to thank everyone in our businesses for their support in delivering another set of excellent results. Their talent and energy is at the heart of our success and we remain committed to giving all our colleagues a quality work experience which is challenging yet rewarding.

 

"The Board remains confident in the robustness and international potential of the JD proposition and is excited by the major developments ahead."

 

 

Enquiries:

 

JD Sports Fashion Plc                                                                                                     Tel:  0161 767 1000

Peter Cowgill, Executive Chairman

Brian Small, Chief Financial Officer

 

MHP Communications                                                                                                    Tel:  0203 128 8100

Andrew Jaques

Barnaby Fry

Charles Hirst

 

 

Executive Chairman's Statement

 

Introduction

 

I am delighted to report that this has been another period of significant progress for the Group with headline profit before tax and exceptional items increasing by a further 26% to £307.4 million (2017: £244.8 million). This is an excellent result demonstrating our capacity for continuing growth   in both existing and new markets, and the strength of our offer in store and online.

 

After delivering a headline profit of £100 million for the first time in the year to January 2015, the headline profit has increased by more than £200 million over the subsequent three years, a rise in excess of 200%. This sustained growth could not have been achieved without a relentless and ongoing focus on a number of key principles which ensure we remain the undisputed consumer destination of choice for sport lifestyle footwear and apparel:

 

·      Providing a best-in-class multibrand experience with breadth, newness and exclusivity in our offer which is consistent across all channels and in an expanding network of international markets

·      Satisfying a demanding digital-first consumer with innovative technology which can be rapidly evolved to react to dynamic consumer expectations

·      Developing a multichannel infrastructure which provides consumers in multiple territories with access to a universal stock pool and enables them to shop with us in the channel and at the time of their choice

·      Delivering an enhanced brand proposition

·      Being first to market with new styles

·      Continually investing in sector-leading physical retail environments

 

The focus on these principles and the investments we have made over a number of years in developing our multichannel proposition and driving improved buying, merchandising and retail disciplines have ultimately led to the creation of a world class sports fashion business which combines the best of physical and digital retail on an increasingly global scale. The JD fascia operates with the same high standards in each of its markets and we believe that this consistency of operation across a large international retail footprint, complemented by a comprehensive range of multi-currency and local language transactional websites, is an attractive proposition for premium third party brands. An evolving brand offer ensures that our carefully curated proposition is always on trend.

 

Our core* UK and Ireland Sports Fashion fascias continue to provide the foundation for our success. Whilst acknowledging the increased distribution of aspirational athletic inspired footwear and apparel in these markets, we remain committed to giving consumers a digitally integrated multibrand experience where the product offering retains a high degree of exclusivity. In recent years we have enhanced the differentiation in our proposition and elevated the brand offer with the highest standards of visual merchandising, retail theatre and digital integration.

 

There has also been further significant progression internationally for the JD fascia with a net increase of 65 stores, of which 56 were in Europe. We remain confident in our ability to exploit the opportunities that exist for the JD fascia in European markets and we would expect to maintain significant expansionary momentum there in the new financial year. Indeed, subsequent to the period end we have extended our reach with the opening of our first store in Finland at the Itis Centre in Helsinki which is one of the largest shopping malls in the Nordic countries. This has been complemented by the launch of a transactional website. Further afield, we have opened four further new JD stores in Malaysia during the period and we have also successfully launched the JD fascia in Australia both online and in stores, with five stores trading at the period end.

 

In September 2017 we announced the acquisition of an initial 15% of the multibranded Hot-T fascia in South Korea which, after the period end, has been increased to 50% at a cost of £8 million. Working with our local partner, Shoemarker Inc, we are engaged on a programme of works to convert these stores to JD with the first JD store very recently opened in Gangnam, Seoul.

 

We are very encouraged by the progress that we are making internationally and we continue to look for further opportunities to bring our dynamic multichannel proposition to new markets around the world with the support of our key brands. One such market is the United States which is the largest global market for sport lifestyle footwear and apparel and where, very recently, we announced the exchange of contracts for the acquisition of The Finish Line business which, at the date of signing the merger agreement, had 556 of its own stores across 44 states complemented by a transactional website and a total of 563 concession stores, of which 375 are branded as Finish Line, within Macy's department stores. Ultimate completion of this transaction will depend on approval from the shareholders of both businesses, a process that we do not expect to be completed until nearer the end of the first half. The transaction will also be subject to an antitrust review under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. Based on an agreed price of $13.50 per share, the consideration payable will be approximately $558 million plus costs. We believe this acquisition will be transformational for the business in terms of its international relevance with both consumers and the principal brands.

 

Away from the core JD fascia, we continue to make selected investments where they provide strategic benefits or strengthen our position in an existing market or territory. In this regard, we have completed the acquisition of the Sport Zone business in Iberia and the Canary Islands which complements our existing strong Sprinter business and gives us a significantly enhanced sports performance presence across Iberia with an estimated combined turnover in excess of €450 million and a footprint of more than 300 stores.

 

The acquisition of Go Outdoors in the prior year was approved unconditionally in the first half of this year by the Competition and Markets Authority. During this review phase, our businesses had to operate independently and whilst we continue to maintain separate functional teams, there is increased communication and co-ordination between the management teams on strategy and purchasing decisions. Overall, we are very pleased with the progress being made in the Outdoor fascias with our businesses performing strongly through the winter months.

 

We continue to make very significant investments in logistics across the Group to support our ongoing expansion. Works are now substantially complete on the project to expand the internal use of the Group's principal Kingsway warehouse site. The base build of the new 352,000 square feet leased extension to this facility has also now been completed with the site handed over for internal fitting out. In total, the Group has invested a total of £24 million in the year on these expansionary developments at Kingsway with an estimated £30 million of spend, including further significant investment on automation equipment, required to complete the project to extend the site, the majority of which will be incurred in the new financial year. Works are also ongoing on fitting out the new warehouse in Alicante, Spain, which was acquired in the year at a total cost of approximately €15.5 million. The fitting out of this site, including the construction of a separate building for a mini-load system, is expected to cost around €25 million of which approximately €21 million has been incurred to date. Elsewhere, a smaller scale project to expand our logistics capabilities in Australia to facilitate anticipated further growth, both in stores and online, of the JD fascia is also ongoing.

 

Sports Fashion

 

Sports Fashion has had another exceptional year with operating profits (before exceptional items) increasing by 22% to £300.0 million (2017: £245.0 million). After double digit like for like growth in our Sports Fashion stores in each of the three preceding years and with a relative lack of new footwear models from the principal brands in the second half of the year, we are pleased with the further like for like growth in stores in the year of 3% across our combined fascias with a particularly strong performance from the JD fascia in Europe.

 

This growth in stores was complemented by growth online in excess of 30%   on a pan-European basis. We are particularly pleased with the development of our international websites which are becoming increasingly significant in scale and we would expect further significant trading progress from these websites in the new financial year as we leverage the benefits from previous investments to create a consistent multichannel ecosystem with all territories having access to a universal stock pool.

 

We have opened a net 56 stores in mainland Europe during the year with new stores in most of our existing European territories. We expect to maintain the current momentum on store openings for JD in mainland Europe through the new financial year with approximately one new store opening per week on average. We have also recently opened our first store in Finland and whilst we continue to investigate options to open organically in other territories, this will be subject to the stores meeting our usual stringent financial criteria.

 

Our non JD fascias in Europe have delivered another positive result although the result in the largest of these businesses, Sprinter, has been negatively impacted by one off charges of £4.1 million associated with the ongoing relocation of the logistics operations to a new and more appropriately sized warehouse in Alicante. This site has the capacity to service 450 stores initially with land available for further development if necessary. We are pleased to have extended the reach of Sprinter in Spain with the acquisition of the Sport Zone business in Iberia and the Canary Islands which is very complementary to Sprinter although there will be a drag on profitability in the short term until we start to leverage the synergies of this combination. This process has already started with the Sprinter management team having taken on operational responsibility for the Sport Zone stores in Spain. We are confident that there will be further benefits over the longer term in sourcing and other commercial operations. Our secondary fascia in France, Chausport, which is typically located in smaller retail space and is more biased to footwear than JD, had a strong first half but a more difficult second half reflecting the lack of new footwear styles available to it. Meanwhile, in Sports Unlimited Retail in the Netherlands, the process to reduce the Perry Sport   and Aktiesport store portfolios to a sustainable size and to trade through the excess and disjointed stock from our acquisition in the previous year has been completed. This process inevitably impacted on the financial performance in the year but it has left the business more appropriately positioned to deliver positive results in the future.

 

Further afield, we are pleased with our continued progress in Malaysia with seven JD stores trading in the country at the end of the year and a further two stores opened subsequently. At the year end, we also had five stores trading as JD in Australia with two stores in each of the Sydney Metropolitan area and Melbourne and one in Gold Coast. Two further stores have opened subsequently with a third store in the Sydney area at the Macquarie Shopping Centre and a third store in the Melbourne area from the conversion of the Glue store at Doncaster. Our initial performance in these markets is encouraging and it has given us the confidence to investigate options in other territories. Indeed, very recently, we have opened our first store in South Korea by converting the Hot-T store in Gangnam, Seoul. We would anticipate further progress in these markets in the current financial year.

 

Our principal premium Fashion businesses, Scotts and Tessuti, together with Mainline Menswear, are an important part of our Group and we continue to invest in both the stores and multichannel infrastructure to elevate the customer and brand experience. Elsewhere, we are looking to deliver consistency in our overall proposition in this sector by consolidating the activities of some of our smaller businesses.

 

We continue to be pleased with the development of our gyms business which offers a cutting edge fitness experience on an excellent value for money basis. We had 13 gyms open at the end of the year with a further five opened subsequently. Our bespoke mix of the industry's leading fitness equipment and an exciting range of classes has been well received by both customers and the wider fitness industry.

 

Given the relative weakness of sterling after the Brexit vote and the impact that this had on cost prices then we are pleased to have maintained the overall gross margin in Sports Fashion at a level similar to that in the previous year. Keeping a high proportion of exclusivity in the offer in the core JD fascia helps to maintain margins. We would hope that sterling has now stabilised against other currencies although we would not expect this to lead to any significant margin improvement in the short term.

 

Outdoor

 

The Outdoor fascias have made encouraging progress in the year with composite like for like growth of 3% in stores and in excess of 30% online.   Our teams have worked hard to improve their propositions and deliver offers which are appealing and relevant to their consumers all year round. It is pleasing that this effort is having positive results.

 

The overall segment operating profit before exceptional items was £8.8 million (2017: £1.2 million). This result is stated after a non-trading amortisation charge of £3.7 million (2017: £nil) which represents the start of the amortisation of the value of the intangible assets on the fascia and various brand names which were created on the consolidation of the acquisition of Go Outdoors last year.

 

We continue to plan for further integration of the enlarged Outdoor business. We believe that the availability of product in the Go Outdoors stores can be enhanced by more regular deliveries of stock from central warehousing leveraging off the existing JD logistics and transport infrastructure. It is our current intention to transfer the Go Outdoors stock into the Group's principal warehouse at Kingsway sometime during the next year.

 

 

Financial Summary

 

Revenue, gross margin and overheads

 

Total revenue increased by 33% in the year to £3,161.4 million (2017: £2,378.7 million). Like for like store sales for the 53 week period across all Group fascias, including those in Europe, increased by a further 3%, which was a pleasing performance given the double digit growth seen in each of the three previous years. The overall like for like growth including online was 7%.

 

Total gross margin in the year of 48.4% was slightly behind the prior year (2017: 48.9%) with the inclusion of a full year from Go Outdoors increasing the relative participation of the lower margin Outdoor businesses in the overall Group result.

 

Operating profits and results

 

Operating profit (before exceptional items) increased substantially by £62.6 million to £308.8 million (2017: £246.2 million) driven by another very strong performance in Sports Fashion together with encouraging growth in Outdoor including a full year contribution from Go Outdoors for the first time. Operating profit (before exceptional items) has now increased by more than 200% over the last three financial years (2015: £102.2 million).

 

There were exceptional items in the year of £12.9 million (2017: £6.4 million) primarily from the non-cash impairment of certain intangible assets.

 

The exceptional items comprised:

 

	2018	2017
	£m	£m
Non-cash impairment of intangible assets (1)	11.6	6.4
Movement in fair value of put and call options (2)	1.3	-
Total exceptional charge	12.9	6.4

 

1.   The charge in the period to 3 February 2018 relates to the non-cash impairment of the fascia name balance arising in prior years on the acquisition of Next Athleisure Pty Limited and JD Sports Fashion SDN BHD and the impairment of goodwill arising in prior years on the acquisition of Tiso Group Limited. The charge in the period to 28 January 2017 relates to the non-cash impairment of the fascia name balance arising in prior years on the acquisition of ActivInstinct Limited, the fascia name arising in the year on the acquisition of Aspecto Holdings Limited and Infinities Retail Group Holdings Limited and the impairment of the goodwill arising in the year on the acquisition of 2Squared Agency Limited.

2.   Movement in the fair value of the liabilities in respect of the put options on Source Lab Limited and JD Sports Fashion Germany GmbH and the Sportiberica call option.

 

Group profit before tax in the year ultimately increased by 24% to £294.5 million (2017: £238.4 million).

 

Working Capital and Cash

 

Strong cash generation from the ongoing trading in our core retail fascias has meant that we ended the year with a net cash balance in excess of £300 million for the first time.   The positive cash position provides the Group with a strong financial foundation for potential acquisitions, investment in our infrastructure for future growth and our ongoing retail developments, both in the UK and internationally.   The growth of 37% in net stocks to £478.0 million (2017: £348.0 million) is consistent with the growth in sales and we maintain our robust approach to stock management.

 

Acquisition and other investments

The net cash consideration on acquisitions in the year, net of cash acquired, was £24.9 million (2017: £138.6 million). Subject to approval from shareholders of both businesses, we would anticipate completing the major acquisition of The Finish Line business in the United States in the first half of the current year and we will also continue to make other selected acquisitions and investments where they benefit our strategic development.  

 

Capital expenditure

Gross capital expenditure (excluding disposal costs) has increased significantly to £186.6 million (2017: £88.0 million).  A large proportion of this increase has come from investments made to increase warehousing capacity and to provide certainty on office accommodation in the UK and Spain:

 

·      UK: We have spent a further £24.5 million (2017: £3.7 million) at the Kingsway site. Works to expand the internal use of the initial warehouse are now substantially complete with initial fitting out of the 352,000 sqft extension ongoing. We estimate that further expenditure of up to £30 million is required to complete the fitting out of the leased extension, including automation equipment, the majority of which will be incurred in the current year. We currently expect to have the first areas in the extension available for operational use before Christmas. In addition, we have secured the land and buildings at the site of our existing Group Head Office in Bury at a cost of £12.6 million. This will remain our base for the foreseeable future.

·      Spain: A total of €39.5million (2017: €nil) has been incurred to date on the acquisition and subsequent fitting out of a new warehouse and head office in Alicante for our Sprinter business. We estimate that a further €4million is required to complete the fit out of this facility, including automation equipment, with operational testing underway ahead of the site being commissioned during the summer.

 

Elsewhere, the primary focus of our capital expenditure remains our international retail expansion with the spend in the year on property fit outs increasing by £15.7 million to £79.7 million (2017: £64.0 million). This includes £38.6 million (2017: £35.7 million) of expenditure in retail stores outside the JD fascia's core UK and Ireland domain. We have also spent a further £12.2 million (2017: £5.4 million) on our developing gyms business. There was also an increase in the spend on key money and other store related long term deposits to £10.9 million (2017: £6.0 million) reflecting the increased scale of the Group's international operations.

 

We anticipate that expenditure in the current financial year will be maintained at a similar level overall with a reduction in expenditure on warehouse infrastructure offset by additional investment in our retail fascias reflecting our focus on international development and the increased number of territories that the Group operates in.

 

Store Portfolio

 

During the period, store numbers have moved as follows:

 

Sports Fashion Fascias                                                                                

 

(Store Nos.)	JD UK & ROI	JD Europe	JD AsiaPac	Size	JD & Size	Fash'n UK	Other France  (i)	Other Iberia (ii)	Other Neth (iii)	Other  AsiaPac (iv)	Total
Period start	369	157	3	37	566	74	75	119	164	52	1,050
New stores	36	59	8	2	105	11	5	9	-	1	131
Transfers	1	1	1	-	3	(2)	-	(1)	-	(1)	(1)
Acquired	-	-	-	-	-	4	-	138	-	23	165
Closures	(21)	(4)	-	(1)	(26)	(10)	(1)	-	(63)	(8)	(108)
Period end	385	213	12	38	648	77	79	265	101	67	1,237
(000 Sq Ft)
Period start	1,429	386	19	65	1,899	165	83	1,069	836	210	4,262
New stores	159	154	30	2	345	33	8	58	-	8	452
Extensions	24	3	3	-	30	-	-	-	-	3	33
Transfers	1	4	4	-	9	(3)	-	(3)	-	(4)	(1)
Acquired	-	-	-	-	-	7	-	1,126	-	102	1,235
Closures	(88)	(6)	-	(2)	(96)	(23)	(2)	-	(119)	(35)	(275)
Remeasure	-	-	-	(5)	(5)	-	-	(103)	-	-	(108)
Period end	1,525	541	56	60	2,182	179	89	2,147	717	284	5,598

 

(i)         Chausport

(ii)         Sprinter in Spain and Sport Zone in Portugal, Spain and Canary Islands

(iii)        Perry Sport and Aktiesport

(iv)        Glue (Australia), Stream Fascias (Malaysia) and Hot-T (South Korea)

 

In addition, there were 13 JD branded Gyms at the period end after five openings in the year with a further five gyms opened to date in the current financial year.

 

 

Outdoor Fascias

     

(Store Nos.)	Blacks	Millets	Ultimate Outdoors	Tiso	Go  Outdoors	Total
Period start	59	99	7	15	58	238
New stores	2	5	-	-	2	9
Transfers	(2)	3	-	-	-	1
Closures	(2)	(7)	-	(2)	-	(11)
Period end	57	100	7	13	60	237
(000 Sq Ft)
Period start	204	199	163	94	1,699	2,359
New stores	17	11	-	-	54	82
Extensions	-	5	-	-	-	5
Transfers	(5)	6	-	-	-	1
Closures	(8)	(10)	-	(6)	-	(24)
Remeasure	(2)	-	(1)	-	41	38
Period end	206	211	162	88	1,794	2,461

                                                                   

 

Dividends and Earnings per Share

 

The Board proposes paying a final dividend of 1.37p (2017: 1.30p) bringing the total dividend payable for the year to 1.63p (2017: 1.55p) per ordinary share, an increase of 5.2%. Subject to shareholder approval at our AGM, the proposed final dividend will be paid on 6 August 2018 to all shareholders on the register at 29 June 2018. We continue to believe that it is in the longer term interests of all shareholders to keep dividend growth restrained so as to maximise the available funding for our ongoing development opportunities, including our potential major acquisition in the United States.

 

The adjusted earnings per ordinary share before exceptional items have increased by 32% to 25.15p (2017: 19.04p).

 

The basic earnings per ordinary share have increased by 30% to 23.83p (2017: 18.38p).

 

People

 

The commitment of our employees is crucial to our success and I would like to thank everyone in our businesses for their support in delivering another set of excellent results. Their talent and energy is at the heart of our success and we remain committed to giving all our colleagues a quality work experience which is challenging yet rewarding. We firmly believe that our ongoing international expansion provides significant personal development opportunities, both temporary and permanent, and is a major reason why people are attracted to our business.

 

Given the growth opportunities available to the Group, particularly with respect to our international development, we will continue to look to strengthen our senior management team where appropriate.

 

Current Trading and Outlook

 

Given the significant change in the timing of Easter relative to last year, it is not relevant to issue any detailed update at this time on trading to date in the new financial year. However, at this early stage, we are satisfied with progress and remain confident about the prospects for the current financial year. Our next scheduled update will take place upon the announcement of our Interim Results which is scheduled for 11 September 2018.

 

The Board remains confident in the robustness and international potential of the JD proposition   and is excited by the major developments ahead.

 

 

Peter Cowgill

Executive Chairman

17 April 2018

 

 

Consolidated Income Statement

For the 53 weeks ended 3 February 2018

		Note		53 weeks to 3 February 2018 £m		52 weeks to 28 January 2017 £m
Revenue				3,161.4		2,378.7
Cost of sales				(1,629.8)		(1,215.1)
Gross profit				1,531.6		1,163.6
Selling and distribution expenses - normal				(1,080.5)		(813.0)
Administrative expenses - normal				(144.7)		(106.2)
Administrative expenses - exceptional				(12.9)		(6.4)
Other operating income				2.4		1.8
Operating profit				295.9		239.8
Before exceptional items				308.8		246.2
Exceptional items		2		(12.9)		(6.4)
Operating profit				295.9		239.8
Financial income				0.6		0.8
Financial expenses				(2.0)		(2.2)
Profit before tax				294.5		238.4
Income tax expense				(58.1)		(53.8)
Profit for the period				236.4		184.6
Attributable to equity holders of the parent				231.9		178.9
Attributable to non-controlling interest				4.5		5.7
Basic earnings per ordinary share		3		23.83p		18.38p
Diluted earnings per ordinary share		3		23.83p		18.38p

 

 

Consolidated Statement of Comprehensive Income

For the 53 weeks ended 3 February 2018

 

		53 weeks to 3 February 2018 £m		52 weeks to 28 January 2017 £m
Profit for the period		236.4		184.6
Other comprehensive income: Items that may be classified subsequently to the Consolidated Income Statement: Exchange differences on translation of foreign operations		6.4		22.6
Total other comprehensive income for the period		6.4		22.6
Total comprehensive income and expense for the period (net of income tax)		242.8		207.2
Attributable to equity holders of the parent		237.1		197.7
Attributable to non-controlling interest		5.7		9.5

 

 

Consolidated Statement of Financial Position

As at 3 February 2018

				As at 3 February 2018 £m		As at 28 January 2017 £m
Assets
Intangible assets				211.0		190.9
Property, plant and equipment				376.9		235.8
Other assets				66.5		38.1
Total non-current assets				654.4		464.8
Inventories				478.0		348.0
Trade and other receivables				146.3		118.5
Cash and cash equivalents				347.5		247.6
Total current assets				971.8		714.1
Total assets				1,626.2		1,178.9
Liabilities
Interest-bearing loans and borrowings				(26.8)		(31.5)
Trade and other payables				(623.2)		(469.1)
Provisions				(2.1)		(1.0)
Income tax liabilities				(30.2)		(33.6)
Total current liabilities				(682.3)		(535.2)
Interest-bearing loans and borrowings				(11.0)		(2.5)
Other payables				(91.5)		(53.2)
Provisions				(1.8)		(1.0)
Deferred tax liabilities				(5.3)		(8.2)
Total non-current liabilities				(109.6)		(64.9)
Total liabilities				(791.9)		(600.1)
Total assets less total liabilities				834.3		578.8
Capital and reserves
Issued ordinary share capital				2.4		2.4
Share premium				11.7		11.7
Retained earnings				773.6		543.3
Other reserves				(17.3)		(5.2)
Total equity attributable to equity holders of the parent				770.4		552.2
Non-controlling interest				63.9		26.6
Total equity				834.3		578.8

 

 

Consolidated Statement of Changes in Equity 

For the 53 weeks ended 3 February 2018

	Ordinary Share Capital £m		Share Premium £m	Retained Earnings £m	Treasury Reserve £m	Other  Equity £m	Foreign Currency Translation Reserve £m	Total Equity Attributable to Equity Holders  of The Parent £m
Balance at 30 January 2016		2.4	11.7	378.9	-	(3.1)	(7.5)	382.4
Profit for the period		-	-	178.9	-	-	-	178.9
Other comprehensive income:
Exchange differences on translation of foreign operations		-	-	-	-	-	18.8	18.8
Total other comprehensive income		-	-	-	-	-	18.8	18.8
Total comprehensive income for the period		-	-	178.9	-	-	18.8	197.7
Repurchase of share capital held as Treasury Shares		-	-	-	(15.9)	-	-	(15.9)
Dividends to equity holders		-	-	(14.5)	-	-	-	(14.5)
Put options held by non-controlling interest		-	-	(2.2)	-	2.5	-	0.3
Acquisition of non-controlling interest		-	-	2.1	-	-	-	2.1
Divestment of non-controlling interest		-	-	0.1	-	-	-	0.1
Balance at 28 January 2017		2.4	11.7	543.3	(15.9)	(0.6)	11.3	552.2
Profit for the period		-	-	231.9	-	-	-	231.9
Other comprehensive income:
Exchange differences on translation of foreign operations		-	-	-	-	-	5.2	5.2
Total other comprehensive income		-	-	-	-	-	5.2	5.2
Total comprehensive income for the period		-	-	231.9	-	-	5.2	237.1
Dividends to equity holders		-	-	(15.2)	-	-	-	(15.2)
Put options held by non-controlling interest		-	-	-	-	(33.2)	-	(33.2)
Acquisition of non-controlling interest		-	-	(0.3)	-	-	-	(0.3)
Divestment of non-controlling interest		-	-	13.9	15.9	-	-	29.8
Non-controlling interest arising on acquisition		-	-	-	-	-	-	-
Balance at 3 February 2018		2.4	11.7	773.6	-	(33.8)	16.5	770.4

 

Consolidated Statement of Changes in Equity (continued) 

For the 53 weeks ended 3 February 2018

 

	Total Equity Attributable to Equity Holders  of The Parent £m		Non-Controlling Interest £m	Total Equity £m
Balance at 30 January 2016		382.4	18.4	400.8
Profit for the period		178.9	5.7	184.6
Other comprehensive income:
Exchange differences on translation of foreign operations		18.8	3.8	22.6
Total other comprehensive income		18.8	3.8	22.6
Total comprehensive income for the period		197.7	9.5	207.2
Repurchase of share capital held as Treasury Shares		(15.9)	-	(15.9)
Dividends to equity holders		(14.5)	(0.7)	(15.2)
Put options held by non-controlling interest		0.3	-	0.3
Acquisition of non-controlling interest		2.1	(2.1)	-
Divestment of non-controlling interest		0.1	(0.1)	-
Non-controlling interest arising on acquisition		-	1.6	1.6
Balance at 28 January 2017		552.2	26.6	578.8
Profit for the period		231.9	4.5	236.4
Other comprehensive income:
Exchange differences on translation of foreign operations		5.2	1.2	6.4
Total other comprehensive income		5.2	1.2	6.4
Total comprehensive income for the period		237.1	5.7	242.8
Dividends to equity holders		(15.2)	(8.8)	(24.0)
Put options held by non-controlling interest		(33.2)	-	(33.2)
Acquisition of non-controlling interest		(0.3)	(0.9)	(1.2)
Divestment of non-controlling interest		29.8	25.7	55.5
Non-controlling interest arising on acquisition		-	15.6	15.6
Balance at 3 February 2018		770.4	63.9	834.3

 

 

 

 

 

Consolidated Statement of Cash Flows

For the 53 weeks ended 3 February 2018

		53 weeks to 3 February 2018 £m		52 weeks to 28 January 2017 £m
Cash flows from operating activities
Profit for the period		236.4		184.6
Income tax expense		58.1		53.8
Financial expenses		2.0		2.2
Financial income		(0.6)		(0.8)
Depreciation and amortisation of non-current assets		71.3		62.4
Forex losses / (gains) on monetary assets and liabilities		2.2		(5.4)
Impairment of non-current assets		5.1		-
Loss on disposal of non-current assets		1.6		0.3
Other exceptional items		1.3		-
Impairment of intangible fixed assets		11.6		6.4
Increase in inventories		(79.0)		(21.2)
Increase in trade and other receivables		(22.1)		(4.6)
Increase in trade and other payables		110.7		43.9
Interest paid		(2.0)		(2.2)
Income taxes paid		(57.8)		(40.1)
Net cash from operating activities		338.8		279.3
Cash flows from investing activities
Interest received		0.6		0.8
Proceeds from sale of non-current assets		6.7		2.5
Investment in bespoke software development		(4.5)		(3.8)
Acquisition of property, plant and equipment		(169.3)		(77.3)
Acquisition of non-current other assets		(12.8)		(6.9)
Acquisition of subsidiaries, net of cash acquired		(24.9)		(138.6)
Net cash used in investing activities		(204.2)		(223.3)
Cash flows from financing activities
Repayment of interest-bearing loans and borrowings		(11.4)		(3.2)
Repayment of finance lease liabilities		(0.5)		(0.1)
Draw down of finance lease liabilities		3.3		-
Subsidiary shares repurchased and held as Treasury Shares		-		(14.8)
Equity dividends paid		(15.2)		(14.5)
Dividends paid to non-controlling interest in subsidiaries		(8.8)		(0.7)
Net cash used in financing activities		(32.6)		(33.3)
Net increase in cash and cash equivalents		102.0		22.7
Cash and cash equivalents at the beginning of the period		234.4		209.9
Foreign exchange (losses) / gains on cash and cash equivalents		(1.8)		1.8
Cash and cash equivalents at the end of the period		334.6		234.4

 

 

 

Analysis of Net Cash

As at 3 February 2018

 

	At 28 January 2017 £m	On acquisition of subsidiaries £m	Cash flow £m	Non- cash movements £m	At 3  February 2018 £m
Cash at bank and in hand	247.6	7.3	94.4	(1.8)	347.5
Overdrafts	(13.2)	-	0.3	-	(12.9)
Cash and cash equivalents	234.4	7.3	94.7	(1.8)	334.6
Interest-bearing loans and borrowings:
Bank loans	(19.1)	(12.7)	11.0	-	(20.8)
Finance lease liabilities	(1.0)	-	(2.8)	-	(3.8)
Other loans	(0.7)	-	0.4	-	(0.3)
	213.6	(5.4)	103.3	(1.8)	309.7

 

 

 

1.   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 focused on the nature of the businesses within the Group. The Group's operating and reportable segments under IFRS 8 are therefore as follows:

 

·      Sports Fashion - includes the results of JD Sports Fashion Plc, John David Sports Fashion (Ireland) Limited, Spodis SA, Champion Sports Ireland, Iberian Sports Retail Group SL (including subsidiary companies), JD Sports Fashion BV, Sports Unlimited Retail BV, JD Sports Fashion Germany GmbH, JD Sports Fashion SRL, JD Sports Fashion Belgium BVBA, JD Sports Fashion Sweden AB, JD Sports Fashion Denmark ApS, JD Sports Fashion SDN BHD, JD Sports Fashion Korea Inc, JD Sports Fashion India LLP, JD Sports Fashion Holdings Aus Pty (including subsidiary companies), Size GmbH, JD Gyms Limited, Duffer of St George Limited, Topgrade Sportswear Limited, Kooga Rugby Limited, Focus Brands Limited (including subsidiary companies), Kukri Sports Limited (including global subsidiary companies), Source Lab Limited, R.D. Scott Limited, Tessuti Group Limited (including subsidiary companies), Nicholas Deakins Limited, Cloggs Online Limited, Clothingsites.co.uk Limited, 2Squared Agency Limited, 2Squared Retail Limited, Mainline Menswear Limited, Hip Store Limited, Simon & Simon Fashion Limited and Dantra Limited.

·      Outdoor - includes the results of Blacks Outdoor Retail Limited, Tiso Group Limited (including subsidiary companies) and Go Outdoors Topco Limited (including subsidiary companies).

     

The Chief Operating Decision Maker receives and reviews segmental operating profit. Certain central administrative costs including Group Directors' salaries are included within the Group's core 'Sports Fashion' result. This is consistent with the results as reported to the Chief Operating Decision Maker.

 

IFRS 8 requires disclosure of information regarding revenue from major products and customers. The majority of the Group's revenue is derived from the retail of a wide range of apparel, footwear and accessories to the general public. As such, the disclosure of revenues from major customers is not appropriate. Disclosure of revenue from major product groups is not provided at this time due to the cost involved to develop a reliable product split on a same category basis across all companies in the Group.

 

Intersegment transactions are undertaken in the ordinary course of business on arm's length terms.

 

The Board consider that certain items are cross divisional in nature and cannot be allocated between the segments on a meaningful basis. Net funding costs and taxation are treated as unallocated reflecting the nature of the Group's syndicated borrowing facilities and its tax group. A deferred tax liability of £5.3 million (2017: £8.2 million) and an income tax liability of £30.2 million (2017: £33.6 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 .

 

 

Business Segments

 

Information regarding the Group's reportable operating segments for the 53 weeks to 3 February 2018 is shown below:

 

Income statement
			Sports Fashion £m	Outdoor £m	Total £m
Gross revenue			2,745.0	416.4	3,161.4
Intersegment revenue			-	-	-
Revenue			2,745.0	416.4	3,161.4
Operating profit before exceptional items			300.0	8.8	308.8
Exceptional items			(9.6)	(3.3)	(12.9)
Operating profit			290.4	5.5	295.9
Financial income					0.6
Financial expenses					(2.0)
Profit before tax					294.5
Income tax expense					(58.1)
Profit for the period					236.4

 

Total assets and liabilities
		Sports Fashion £m	Outdoor £m	Unallocated £m	Eliminations £m	Total £m
Total assets		1,446.4	257.3	-	(77.5)	1,626.2
Total liabilities		(667.6)	(166.3)	(35.5)	77.5	(791.9)
Total segment net assets / (liabilities)		778.8	91.0	(35.5)	-	834.3

 

 

 

Other segment information
	Sports Fashion £m	Outdoor £m	Total £m
Capital expenditure:
Software development	4.5	-	4.5
Property, plant and equipment	157.4	11.9	169.3
Non-current other assets	12.8	-	12.8
Depreciation, amortisation and impairments:
Depreciation and amortisation of non-current assets	58.7	12.6	71.3
Impairment of intangible assets (exceptional)	8.3	3.3	11.6
Impairment of non-current assets (non-exceptional)	3.5	1.6	5.1

The comparative segmental results for the 52 weeks to 28 January 2017 are as follows:

 

Income statement
				Sports Fashion £m	Outdoor £m	Total £m
Gross revenue				2,180.6	198.1	2,378.7
Intersegment revenue				-	-	-
Revenue				2,180.6	198.1	2,378.7
Operating profit before exceptional items				245.0	1.2	246.2
Exceptional items				(6.4)	-	(6.4)
Operating profit				238.6	1.2	239.8
Financial income						0.8
Financial expenses						(2.2)
Profit before tax						238.4
Income tax expense						(53.8)
Profit for the period						184.6

 

Total assets and liabilities
		Sports Fashion £m	Outdoor £m	Unallocated £m	Eliminations £m	Total £m
Total assets		994.5	256.0	-	(71.6)	1,178.9
Total liabilities		(463.4)	(166.5)	(41.8)	71.6	(600.1)
Total segment net assets / (liabilities)		531.1	89.5	(41.8)	-	578.8

 

 

 

 

Other segment information
	Sports Fashion £m	Outdoor £m	Total £m
Capital expenditure:
Software development	3.8	-	3.8
Property, plant and equipment	72.8	4.5	77.3
Non-current other assets	6.9	-	6.9
Depreciation, amortisation and impairments:
Depreciation and amortisation of non-current assets	57.4	5.0	62.4
Impairment of intangible assets (exceptional)	6.4	-	6.4
Impairment of non-current assets (non-exceptional)	(0.8)	0.8	-

 

 

Geographical Information

 

The Group's operations are located in the UK, Republic of Ireland, France, Spain, Germany, the Netherlands, Italy, Portugal, Sweden, Denmark, Belgium, Malaysia, South Korea, India, Australia, New Zealand, Canada, Dubai, Singapore and Hong Kong.

          

The following table provides analysis of the Group's revenue by geographical market, irrespective of the origin of the goods / services:

		2018 £m		2017 £m
UK		2,058.7		1,655.5
Europe		939.9		656.9
Rest of world		162.8		66.3
		3,161.4		2,378.7

 

The revenue from any individual country, with the exception of the UK, is not more than 10% of the Group's total revenue.

 

The following is an analysis of the carrying amount of segmental non-current assets by the geographical area in which the assets are located:

		2018 £m		2017 £m
UK		362.1		284.7
Europe		260.8		163.3
Rest of world		31.5		16.8
		654.4		464.8

 

 

2.   Exceptional items

 

		53 weeks to 3 February 2018 £m		52 weeks to 28 January 2017 £m
Impairment of goodwill and fascia names (1)		11.6		6.4
Movement in fair value of put and call options (2)		1.3		-
Administrative expenses - exceptional		12.9		6.4
Total Exceptional Items		12.9		6.4

 

 

1.   The charge in the period to 3 February 2018 relates to the non-cash impairment of the fascia name balance arising in prior years on the acquisition of Next Athleisure Pty Limited and JD Sports Fashion SDN BHD and the impairment of goodwill arising in prior years on the acquisition of Tiso Group Limited. The charge in the period to 28 January 2017 relates to the non-cash impairment of the fascia name balance arising in prior years on the acquisition of ActivInstinct Limited, the fascia name arising in the year on the acquisition of Aspecto Holdings Limited and Infinities Retail Group Holdings Limited and the impairment of the goodwill arising in the year on the acquisition of 2Squared Agency Limited.

2.   Movement in the fair value of the liabilities in respect of the put options on Source Lab Limited and JD Sports Fashion Germany GmbH and the Sportiberica call option.

 

These administrative expenses are exceptional items as they are, in aggregate, material in size and/or unusual or infrequent in nature.

 

 

3.   Earnings per ordinary share

 

Basic and diluted earnings per ordinary share

 

The calculation of basic and diluted earnings per ordinary share at 3 February 2018 is based on the profit for the period attributable to equity holders of the parent of £231.9 million (2017: £178.9 million) and a weighted average number of ordinary shares outstanding during the 53 week period ended 3 February 2018 of 973,233,160 (2017: 973,233,160).

 

An Ordinary Resolution was passed at the Annual General Meeting, effective 24 November 2016, resulting in a share split whereby five Ordinary shares were issued for each Ordinary share. In accordance with IAS 33, the number of shares outstanding before the event has been adjusted for the proportionate change as if the event had occurred at the beginning of the earliest period presented.

 

	53 weeks to 3 February 2018		52 weeks to 28 January  2017
Issued ordinary shares at beginning and end of period	973,233,160		973,233,160

 

 

Adjusted basic and diluted earnings per ordinary share

 

Adjusted basic and diluted earnings per ordinary share have been based on the profit for the period attributable to equity holders of the parent for each financial period but excluding the post-tax effect of certain exceptional items. The Directors consider that this gives a more meaningful measure of the underlying performance of the Group.

 

	Note	53 weeks to 3 February 2018 £m		52 weeks to 28 January 2017 £m
Profit for the period attributable to equity holders of the parent		231.9		178.9
Exceptional items excluding loss on disposal of non-current assets	2	12.9		6.4
Tax relating to exceptional items		-		-
Profit for the period attributable to equity holders of the parent excluding exceptional items		244.8		185.3
Adjusted basic and diluted earnings per ordinary share		25.15p		19.04p

 

 

 

 

 

4.   Acquisitions

 

Current period acquisitions

 

JD Sports Fashion Korea Inc

On 14 September 2017, the Group acquired an initial 15% of the issued ordinary share capital of J&S Partners Inc. for cash consideration of 8.1 billion South Korean Won (KRW). As part of the joint venture agreement, the Group has a call option, exercisable at the Group's discretion, to acquire a further 35% of the share capital. This was subsequently exercised on 13 April 2018.

 

J&S Partners Inc. subsequently changed its company name to JD Sports Fashion Korea Inc. and currently trades as the multibranded Hot-T fascia operating 23 stores and a trading website in South Korea. It is the Group's current intention to re-fascia the Hot-T stores as JD.

 

The period in which the call option could be exercised commenced in October 2017. The Group has concluded, in accordance with IFRS 10, the Group has 'deemed control' and therefore has the ability to control the entity from the point at which the Group had the right to exercise the option, being October 2017. The Group has therefore included the results of the entity in the consolidated financial statements of the Group.

 

The Board believes that the excess of cash consideration paid over the net identifiable assets on acquisition of £2.9 million is best considered as goodwill on acquisition representing anticipated future operating synergies. The provisional goodwill calculation is summarised below:

	Book value £m	Measurement adjustments £m	Provisional  fair value at  3 February 2018 £m
Acquiree's net assets at acquisition date:
Property, plant & equipment	4.8	(1.9)	2.9
Other non-current assets	13.9	-	13.9
Inventories	9.2	(0.4)	8.8
Trade and other receivables	0.5	-	0.5
Trade and other payables	(3.5)	-	(3.5)
Interest bearing loans and borrowings	(5.8)	-	(5.8)
Net identifiable assets	19.1	(2.3)	16.8
Non-controlling interest	(16.3)	2.0	(14.3)
Goodwill on acquisition			2.9
Consideration paid - satisfied in cash			5.4

 

 

Included in the 53 week period ended 3 February 2018 is revenue of £15.7 million and profit before tax of £0.4 million in respect of JD Sports Fashion South Korea.

 

 

SDSR - Sports Division SR, S.A. ('Sport Zone Portugal')

On 31 January 2018, JD Sports Fashion Plc completed the acquisition of Sport Zone Portugal resulting in the combination of its existing interests across Iberia with those of Sport Zone in Portugal, Spain and the Canary Islands.

 

The Group acquired, via its 50% subsidiary Iberian Sports Retail Group SL, 100% of the issued share capital of SDSR - Sports Division SR, S.A. ('Sport Zone Portugal') for cash consideration of £1.6 million and 30% of the issued share capital in Iberian Sports Retail Group SL with a fair value of £61.1 million. Included within the 30% of the issued share capital was the 24.95% of shares of Iberian Sports Retail Group SL that were held in the Treasury Reserve.

 

Sport Zone Portugal owns 100% of the issued share capital of Sport Zone Espana, Comercio de Articulos de Deporte S.A ('Sport Zone Spain') and 60% of the issued share capital of Sport Zone Canarias (SL) ('Sport Zone Canaries'). Sport Zone is a well-established and leading multi branded sports retailer in Portugal, with a presence in mainland Spain and the Canary Islands. With 138 stores in Iberia, Sport Zone offers a multisport product range with a wide apparel, footwear, accessories and equipment offering.

 

Included within the fair value of the net identifiable assets on acquisition are intangible assets of £13.1 million; £9.2 million representing the 'Sport Zone' fascia name and £3.9 million of Sport Zone exclusive brands.

 

The Board believes that the excess of consideration paid over the net assets on acquisition of £14.7 million is best considered as goodwill on acquisition representing anticipated future operating synergies. The provisional goodwill calculation is summarised below:

	Book value £m	Measurement adjustments £m	Provisional  fair value at 3 February 2018 £m
Acquiree's net assets at acquisition date:
Intangible assets	-	13.1	13.1
Property, plant & equipment	39.7	(6.2)	33.5
Other non-current assets	1.2	-	1.2
Inventories	43.0	(2.0)	41.0
Cash and cash equivalents	4.8	-	4.8
Trade and other receivables	5.0	-	5.0
Income tax assets	0.2	-	0.2
Deferred tax assets / (liabilities)	5.3	(7.5)	(2.2)
Trade and other payables - current	(38.1)	(1.9)	(40.0)
Trade and other payables - non current	(0.9)	-	(0.9)
Interest bearing loans and borrowings	(6.9)	-	(6.9)
Net identifiable assets	53.3	(4.5)	48.8
Non-controlling interest (40% of Sport Zone Canarias SL)	(0.9)	0.1	(0.8)
Goodwill on acquisition			14.7
Consideration paid - satisfied in cash			1.6
Consideration paid - fair value of shares in Iberian Sports Retail Group			61.1
Total consideration			62.7

Given the proximity of the acquisition to the financial year ended 3 February 2018, the results between acquisition and the financial year ended 3 February 2018 were not included in the results of the Group for the 53 week period ended 3 February 2018.

 

Ben Dunne Gyms (UK) Limited

On 28 December 2017, the Group acquired, via its 87.5% owned subsidiary JD Sports Gyms Limited, 100% of the issued ordinary share capital of Ben Dunne Gyms (UK) Limited for cash consideration of £1 assuming £2.0 million of net debt as part of the transaction. Following the acquisition, the company name was changed to JD Sports Gyms Acquisitions Limited. The Board believes that the excess of cash consideration paid over the net identifiable assets on acquisition of £1.0 million is best considered as goodwill representing future operating synergies.

 

Included in the 53 period ended 3 February 2018 is revenue of £0.1 million and a break even result before tax in respect of JD Sports Gyms Acquisitions Limited.

 

Dantra Limited ('Kids Cavern')

On 1 February 2018, the Group acquired 75% of the issued ordinary share capital of Dantra Limited for cash consideration of £6.3 million. Dantra Limited trades under the fascia name Kids Cavern from three stores and a trading website. The Board believes that the excess of cash consideration paid over the net identifiable assets on acquisition of £4.2 million is best considered as goodwill representing future operating synergies.

 

Given the proximity of the acquisition to the financial year ended 3 February 2018, the results between acquisition and the financial year ended 3 February 2018 were not included in the results of the Group for the 53 week period ended 3 February 2018.

 

Other Acquisitions

During the period, the Group has made several small acquisitions, including increasing its shareholding to 100% in two subsidiaries which were previously non-wholly owned. These transactions were not material.

 

Full Year Impact of Acquisitions

Had the acquisitions of the entities listed above been effected at 29 January 2017, the revenue and profit before tax of the Group for the 53 week period to 3 February 2018 would have been £3,362.8 million and £278.3 million respectively .

 

Acquisition Costs

Acquisition related costs amounting to £0.7 million (JD Sports Fashion Korea Inc £0.2 million, Sport Zone Group £0.4 million, other acquisitions £0.1 million (Ben Dunne Gyms Limited and Dantra Limited)) have been excluded from the consideration transferred and have been recognised as an expense in the year, within administrative expenses in the Consolidated Income Statement.

 

Prior period acquisitions

 

Sports Unlimited Retail BV

On 20 March 2016, the Group acquired, via its newly incorporated subsidiary Sports Unlimited Retail BV, the trading assets and trade of the Aktiesport and Perry Sport fascias from the Trustee of Unlimited Sports Group BV which was declared bankrupt by the court of Amsterdam on 23 February 2016. On acquisition there were 187 stores and two trading websites.

 

The period in which measurement adjustments could be made has now closed on this acquisition and the final goodwill calculation is summarised below:

	Book value £m	Measurement adjustments £m	Fair value at  3 February 2018 £m
Acquiree's net assets at acquisition date:
Property, plant & equipment	3.9	-	3.9
Inventories	23.4	5.2	28.6
Cash	0.1	-	0.1
Trade and other payables	(8.4)	(2.1)	(10.5)
Provisions	-	(3.1)	(3.1)
Net identifiable assets	19.0	-	19.0
Goodwill on acquisition			-
Consideration paid - satisfied in cash			19.0

 

The Board believes that the cash consideration of €26.5 million represents the best estimates of the fair value of the net assets acquired. No measurement adjustments have been made to the fair values during the 53 week period ended 3 February 2018.

 

 

JD Sports Fashion SDN BHD

On 28 April 2016, the Group acquired via its 50% subsidiary in Malaysia, JD Sports Fashion SDN BHD, 20 multibrand Sports Fashion stores and a trading website which trade as Sports Empire, Revolution and The Marathon Shop from Runners World SDN BHD. JD Sports Fashion SDN BHD is an entity controlled by the Group and therefore the results and financial position of the entity are consolidated into the financial statements of the Group. The cash consideration payable on this transaction was MYR 20.7 million.

 

The period in which measurement adjustments could be made has now closed on this acquisition and the final goodwill calculation is summarised below:

	Book value £m	Measurement adjustments £m	Fair value at  3 February 2018 £m
Acquiree's net assets at acquisition date:
Intangible assets	0.8	0.3	1.1
Property, plant & equipment	0.4	-	0.4
Other non-current assets	0.2	-	0.2
Inventories	2.0	-	2.0
Deferred tax liabilities	-	(0.3)	(0.3)
Net identifiable assets	3.4	-	3.4
Goodwill on acquisition			-
Consideration paid - satisfied in cash			3.4

 

The Board believes that the cash consideration of MYR 20.7 million represents the best estimates of the fair value of the net assets acquired. No measurement adjustments have been made to the fair values during the 53 week period ended 3 February 2018.

 

 

Sportiberica Sociedade de Artigos de Desporto, S. A.

On 1 July 2016, the Group acquired, both directly and via its 50.1% owned subsidiary Iberian Sports Retail Group SL, an aggregate of 80% of the issued share capital of Sportiberica Sociedade de Artigos de Desporto S.A ("Sportiberica") for cash consideration of €4.2 million with additional consideration of up to €0.5 million payable if certain criteria were met. At acquisition, management believed that the criteria would be met for the maximum consideration to be payable and the fair value of the total consideration at that time of €4.7 million was recognised. The actual amount of additional consideration paid in the period ended 3 February 2018 was €0.3 million reducing the total consideration paid to €4.5 million. This has been reflected in the table below.

 

The period in which measurement adjustments could be made has now closed on this acquisition and the final goodwill calculation is summarised below:

	Book value £m	Measurement adjustments £m	Fair value at  3 February 2018 £m
Acquiree's net assets at acquisition date:
Property, plant & equipment	0.2	0.1	0.3
Inventories	2.8	0.4	3.2
Cash	0.7	-	0.7
Trade and other receivables	0.9	(0.8)	0.1
Income tax assets	-	0.1	0.1
Trade and other payables	(1.5)	(0.2)	(1.7)
Interest bearing loans and borrowings	(0.7)	-	(0.7)
Net identifiable assets	2.4	(0.4)	2.0
Non-controlling interest	(0.5)	0.1	(0.4)
Goodwill on acquisition			1.6
Consideration paid - satisfied in cash			3.2

 

The Board believes that the excess of cash consideration paid over net identifiable assets on acquisition of £1.6 million is best considered as goodwill on acquisition representing anticipated future operating synergies. The measurement adjustments reflected in the table above were made to the fair values during the period ended 3 February 2018.

 

 

Next Athleisure Pty Limited

On 26 August 2016, the Group acquired, via its newly incorporated subsidiary JD Sports Fashion Holdings Australia Pty, 80% of the issued ordinary share capital of Next Athleisure Pty Limited for consideration of $6.6 million AUD and has also advanced $2.4 million AUD to allow it to settle an element of its indebtedness.

 

The period in which measurement adjustments could be made has now closed on this acquisition and the final goodwill calculation is summarised below:

	Book value £m	Measurement adjustments £m	Fair value at  3 February 2018 £m
Acquiree's net assets at acquisition date:
Intangible assets	4.8	2.8	7.6
Property, plant & equipment	5.2	0.6	5.8
Inventories	9.4	0.9	10.3
Cash	0.5	0.1	0.6
Trade and other receivables	2.7	0.1	2.8
Income tax assets	0.2	-	0.2
Deferred tax assets / (liabilities)	1.5	(2.1)	(0.6)
Trade and other payables	(11.9)	(1.1)	(13.0)
Interest bearing loans and borrowings	(8.0)	(0.8)	(8.8)
Net identifiable assets	4.4	0.5	4.9
Non-controlling interest	(0.9)	(0.1)	(1.0)
Goodwill on acquisition			-
Consideration paid - satisfied in cash			3.5
Consideration as loan owed to NCI			0.4
Total consideration			3.9

 

 

The Board believes that the cash consideration of $6.6 million represents the best estimates of the fair value of the net assets acquired. No measurement adjustments have been made to the fair values during the 53 week period ended 3 February 2018.

 

 

Go Outdoors Topco Limited

On 27 November 2016, the Group acquired 100% of the issued ordinary share capital of Go Outdoors Topco Limited ('Go Outdoors') for consideration of £112.3 million with the Group assuming net debt of £11.4 million as part of the transaction. Go Outdoors is a nationwide omnichannel retailer catering for the outdoor enthusiast and specialist alike with 58 stores across the UK at acquisition, the majority of which are situated in out of town retail parks.

 

Included within the fair value of net identifiable assets on acquisition are intangible assets of £66.7 million; £59.1 million representing the 'GO Outdoors' fascia name and £7.6 million of brands. The period in which measurement adjustments could be made has now closed on this acquisition and the final goodwill calculation is summarised below:

	Book value £m	Measurement adjustments £m	Fair value at  3 February 2018 £m
Acquiree's net assets at acquisition date:
Intangible assets	0.3	66.4	66.7
Property, plant & equipment	28.5	(2.5)	26.0
Inventories	40.4	-	40.4
Cash	8.8	-	8.8
Trade and other receivables	7.3	-	7.3
Income tax liabilities	(1.0)	-	(1.0)
Deferred tax liabilities	-	(11.3)	(11.3)
Trade and other payables	(48.2)	(0.6)	(48.8)
Interest bearing loans and borrowings	(20.2)	-	(20.2)
Net identifiable assets	15.9	52.0	67.9
Goodwill on acquisition			44.4
Consideration paid - satisfied in cash			112.3

 

 

The Board believes that the excess of cash consideration paid over net identifiable assets on acquisition of £44.4 million is best considered as goodwill on acquisition representing the strategic benefit of a larger Outdoor operation in the Group. No measurement adjustments have been made to the fair values during the 53 week period ended 3 February 2018.

 

Aspecto Holdings Limited

On 18 July 2016, the Group, via its new 100% subsidiary Napco 104 Limited acquired 100% of the entire issued share capital of Aspecto Holdings Limited for cash consideration of £1. The period in which measurement adjustments could be made has now closed on this acquisition and no measurement adjustments were made to the fair values during the period ended 3 February 2018. The Board believes that the cash consideration of £1 represents the current best estimates of the fair value of the net assets acquired.

 

On 21 August 2016, the trade and assets (with the exception of certain assets and liabilities) were hived up into Tessuti Limited, a 100% owned subsidiary of JD Sports Fashion Plc.

 

Infinities Retail Group Limited

On 12 September 2016, the Group, via its new 100% subsidiary Ensco 1157 Limited acquired 100% of the entire issued share capital of Infinities Retail Group Limited for cash consideration of £1. The period in which measurement adjustments could be made has now closed on this acquisition and no measurement adjustments were made to the fair values during the period ended 3 February 2018. The Board believes that the cash consideration of £1 represents the current best estimates of the fair value of the net assets acquired.

 

On 31 October 2016, the trade and assets (with the exception of certain assets and liabilities) were hived up into Tessuti Limited, a 100% owned subsidiary of JD Sports Fashion Plc.

 

Clothingsites.co.uk Limited

On 26 September 2016, the Group, via its new 100% subsidiary Ensco 1173 Limited acquired 100% of the entire issued share capital of Clothingsites.co.uk Limited for an initial cash consideration of £1. Clothingsites.co.uk Limited currently operates two trading websites, Woodhouse Clothing and Brown Bag Clothing. The period in which measurement adjustments could be made has now closed on this acquisition and no measurement adjustments were made to the fair values during the period ended 3 February 2018. The Board believes that the cash consideration of £1 represents the current best estimates of the fair value of the net assets acquired.

 

2Squared Agency Limited & 2Squared Retail Limited ('2Squared')

On 30 November 2016, the Group acquired 69% of the issued share capital of 2Squared Agency Limited and 51% of the issued share capital of 2Squared Retail Limited for cash consideration of £0.5 million. The Board believed that the excess of cash consideration paid over the net identifiable assets on acquisition of £1.0 million was best considered as goodwill representing future operating synergies. The goodwill was subsequently impaired during the financial period ended 28 January 2017. The period in which measurement adjustments could be made has now closed on this acquisition and no measurement adjustments were made to the fair values during the period ended 3 February 2018.

 

Other Acquisitions During the Prior Period

During the prior period, the Group increased its shareholding in three non-wholly owned subsidiaries. These transactions were not material.

 

5.   Subsequent Events

 

The Finish Line ("Finish Line")

On 25 March 2018 JD Sports Fashion Plc entered into a conditional acquisition agreement to acquire 100% of the issued share capital of The Finish Line, Inc. at a price of $13.50 per Finish Line share in cash, valuing Finish Line's total equity at approximately $558 million (approximately £396 million) (the "Acquisition").

 

Finish Line is one of the largest retailers of premium multibranded athletic footwear, apparel and accessories in the United States ("US"), the largest sportswear market in the world. Finish Line trades from 556 Finish Line branded retail stores across 44 US states and Puerto Rico in addition to a well-established multichannel offering. Finish Line is also the exclusive retailer of athletic shoes, both in store and online for Macy's, one of the US' premier retailers, operating 375 branded and 188 unbranded concessions within Macy's stores.

 

The Acquisition offers the Company the opportunity to expand its market leading elevated proposition into the most significant global market. It immediately gains the benefit of a significant physical and online retail presence and increases the importance of the Company to its major international brand partners. On completion of the Acquisition, the Company will focus on bringing JD's highly differentiated multichannel retail proposition to the US market.

 

The Acquisition agreement contains a number of conditions which must be satisfied by one or both of the parties prior to the closing of the Acquisition, including:

 

·      Approval by the Company's shareholders

·      The approval by the holders of a majority of the issued and outstanding Finish Line shares

·      The expiration of the 30 days' waiting period after the submission of anti-trust filings by both Finish Line and the Company under the US federal anti-trust laws, which must be filed no later than 10 business days from the signing of the Acquisition agreement, without any request for additional information being made by the US anti-trust authorities during such 30 days' period

·      The absence of a company material adverse effect in the period between the signing of the Acquisition agreement and the closing of the Acquisition

·      The continuing accuracy of a number of representations and warranties which are customary in a transaction of this nature

 

 

6.   Accounts

The financial information set out above does not constitute the Group's statutory accounts for the 53 weeks ended 3 February 2018 or 52 weeks ended 28 January 2017 but is derived from those accounts. Statutory accounts for the 52 weeks ended 28 January 2017 have been delivered to the Registrar of Companies, and those for the 53 weeks to 3 February 2018 will be delivered in due course. The auditor has reported on those accounts; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

Copies of full accounts will be sent to shareholders in due course. Additional copies will be available from JD Sports Fashion Plc, Hollinsbrook Way, Pilsworth, Bury, Lancashire, BL9 8RR or online at www.jdplc.com .

 

 

Glossary (terms 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 EU-adopted IFRS. These alternative performance measures may not be directly comparable with other companies' alternative performance measures and the Directors do not intend these to be a substitute for, or superior to, IFRS measures. The Directors believe that these alternative performance measures assist in providing additional useful information on the underlying performance of the Group. Alternative performance measures are also used to enhance the comparability of information between reporting periods, by adjusting for exceptional items, which could distort the understanding of the performance for the year. Terms are listed in alphabetical order.

 

Adjusted earnings per share

The calculation of basic earnings per share is detailed in Note 3. Adjusted basic earnings per ordinary share has been based on the profit for the period attributable to equity holders of the parent for each financial period but excluding the post-tax effect of certain exceptional items. A reconciliation between basic earnings per share and adjusted earnings per share is shown below:

 

	2018	2017
Basic earnings per share	23.83p	18.38p
Exceptional items excluding loss on disposal of non-current assets	1.32p	0.66p
Tax relating to exceptional items	-	-
Adjusted earnings per share	25.15p	19.04p

 

Core

The Group's core Sports Fashion fascia is JD and the Group's core market is the UK and Republic of Ireland.

 

EBITDA

Earnings before interest, tax, depreciation and amortisation.

	2018 £m	2017 £m
Profit for the period	236.4	184.6
Addback:
Financial expenses	2.0	2.2
Income tax expense	58.1	53.8
Depreciation, amortisation and impairment of non-current assets	76.4	62.4
Exceptional items	12.9	6.4
Deduct:
Financial income	(0.6)	(0.8)
EBITDA	385.2	308.6

 

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 .

 

Operating profit before exceptional items

A reconciliation between operating profit and exceptional items can be found in the Consolidated Income Statement.

 

Profit before tax and exceptional items

A reconciliation between profit before tax and profit before tax and exceptional items is as follows:

 

          

	2018	2017
	£m	£m
Profit before tax	294.5	238.4
Exceptional items	12.9	6.4
Profit before tax and exceptional items	307.4	244.8