JD Sports Regulatory News (JD.)

13 September 2016

JD SPORTS FASHION PLC

INTERIM RESULTS

FOR THE TWENTY SIX WEEKS TO 30 JULY 2016

JD Sports Fashion Plc (the "Group"), the leading retailer of sports, fashion and outdoor brands, today announces its Interim Results for the 26 weeks ended 30 July 2016 (comparative figures are shown for the 26 week period ended 1 August 2015).

(a) Net cash consists of cash and cash equivalents together with other borrowings from bank loans, other loans and finance leases.

Group Highlights

· Another record result for the half year with Group profit before tax and exceptional items increased by a further 66%

· Further strong like for like sales growth

· International development continues with:

a) Net increase of 20 stores in existing fascias across Europe

b) Notable complementary acquisitions in the Netherlands and Portugal in the six month period

· Pleasing progress in Outdoors with continued evolution of the proposition

· Sales, gross margin and operating profit / (loss) before exceptional items of the two business segments are tabulated below:

· Interim dividend increased by 4.2% from 1.20p to 1.25p with cash retained in the Group to maximise the available funding for our ongoing growth opportunities

Peter Cowgill, Executive Chairman, said:

"I am delighted to report that this has been another period of excellent progress for the Group with a record profit before tax and exceptional items of £77.4 million. Given that last year's result was in itself a record for our Group then to increase this by a further 66% has exceeded reasonable expectations.

"The favourable trends for athletic inspired footwear and apparel in Europe have continued into this year. We are very much at the centre of this market with our success being a positive consequence of the investments we have made over a number of years to develop the JD retail concept.

"Notwithstanding the demanding comparatives going forward following the strong revenue growth in the previous three years, the positive nature of trading in the second half to date is encouraging."

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

Gina Bell

Executive Chairman's Statement

Introduction

I am delighted to report that this has been another period of excellent progress for the Group with a record profit before tax and exceptional items of £77.4 million (2015: £46.6 million). Given that last year's result was in itself a record for our Group then to increase this by a further 66% has exceeded reasonable expectations.

The favourable trends for athletic inspired footwear and apparel in Europe have continued into this year. We are very much at the centre of this market with our success being a positive consequence of the investments we have made over a number of years to develop the JD retail concept. However, we are very conscious that the market for sports and fashion brands can change quickly and so we continue to invest in visual merchandising, retail theatre and creative marketing as we believe that it is JD's market leading standards in these areas that make it an attractive outlet to many brands. Our international expansion is also viewed positively by our key suppliers and garners their support for us in many ways. Although the UK's vote to leave the European Union means that there will be some uncertainties over the next two or three years, we have no doubt that we have the support of our brand partners to continue our expansion in Europe and beyond.

Our Outdoor businesses have made encouraging progress in the first half as we see the positive benefits from actions previously taken to simplify the operational leadership, evolve the offer and drive higher merchandising standards. We are confident that we are creating an Outdoor business that has a proposition which is capable of trading more effectively all year round.

Sports Fashion

Sports Fashion has had an exceptional first half with operating profits (before exceptional items) increasing by a further 53% to £79.9 million (2015: £52.1 million). Given the tough comparatives provided by the strong performance in the three previous years then we are particularly pleased with a further increase in the like for like store sales in these fascias of approximately 10%. Whilst it would be unreasonable to expect organic growth to continue at these levels, JD does have a very strong base from which to exploit ongoing opportunities both in its core UK market and, increasingly, internationally.

Chausport and Sprinter have also both benefitted from the favourable market trends and have traded positively in the period. Elsewhere, we continue to be pleased with the progress in the premium brand multichannel fashion businesses of Tessuti and Scotts.

There has been further progression in Europe during the period with new stores in several of our existing territories complemented by two multi-store acquisitions. In March, we acquired the trade and store assets of the Aktiesport and Perry Sport retail fascias in the Netherlands from the trustee in bankruptcy of Unlimited Sports Group BV. As is usual in distressed situations, our initial focus has been to stabilise the business with particular emphasis on dealing with a fragmented acquisition stock position, reversing any discontinuity in supply and determining the optimal future store portfolio. Given the acquired stock position and the lead times on ordering product, we would not expect the Perry and Aktie stores to make a positive contribution in the current year. In July, we acquired 12 stores in Portugal which previously traded as The Athlete's Foot. These stores will be converted to JD in the second half.

We anticipate the opening of additional JD stores across Europe in the remainder of the year, including the opening of flagship style stores on Rue Neuve in Brussels and Hohe Strasse in Cologne. Elsewhere, we are also currently refurbishing the flagship Perry Sport store on Kalverstraat in Amsterdam.

Further afield, we have expanded our presence in Malaysia with the acquisition from our JD joint venture partner (Stream Enterprises) of 20 small multi-brand stores trading as Sports Empire, Revolution and The Marathon Shop. Since the period end we have also acquired Next Athleisure in Australia which has 32 stores trading as Glue. This business and its management will provide the platform to open JD in Australia.

The overall gross margin in Sports Fashion is slightly higher than the previous year reflecting the impact of the stronger euro on JD's euro denominated businesses and continuing low markdown levels. The weakening of sterling against the US dollar after the Brexit vote may cause some headwinds on margin in 2017 but we are reasonably well placed to mitigate these.

Outdoor

We have continued to make encouraging progress in Outdoor in the first half, with total operating losses (before exceptional items) reduced to £2.3 million (2015: £4.5 million). The first half has traditionally been the weaker period for these fascias and so we are pleased that our team's efforts to improve the Spring/Summer proposition have had positive results. We will look to build on this next year.

There has been a small improvement in margin as we start to see the benefits of aligning the merchandising and commercial disciplines of the Outdoor team with the core JD team. More material improvement in margin will be a core deliverable over the longer term and will require brand support, particularly in terms of enhanced levels of product differentiation.

Group Performance

Revenue and Gross Margin

Total Group revenue increased by 20% in the period to £970.6 million (2015: £809.9 million). Like for like sales for the 26 week period across all Group fascias, including those in Europe, increased by approximately 10% which was another exceptional performance given the growth seen in previous years.

Total gross margin of 48.1% was 0.7% higher than the prior year (2015: 47.4%) with an ongoing focus across all fascias on minimising markdown combined with a positive impact from exchange rate movements in JD's euro denominated business. The overall margin has improved again in Outdoor but progress on this is limited at this stage.

Operating Profit

Operating profit (before exceptional items) for the period has increased by 63% to £77.6 million (2015: £47.6 million) following an exceptional performance in our Sports Fashion fascias and an encouraging reduction in losses in Outdoor.

There were no exceptional charges in the period (2015: £1.9 million).

Cash

Strong cash generation from the ongoing trading in our core retail fascias together has meant that we ended the first half with a net cash balance in excess of £200 million providing the Group with a very strong base from which to fund future expansion investment. The period end net cash balance also benefitted from timing related savings on gross capital expenditure (excluding disposals) which has decreased by £20.3 million to £27.4 million (2015: £47.7 million). Our continuing commitment to enhancing our retail proposition, developing our overseas businesses and improving our operational infrastructure means that we expect the gross capital expenditure for the full financial year to be approximately £100 million (2016: £83.5 million).

Prior to the end of the financial year we anticipate commencing a further major project to increase the operational capacity and flexibility of our existing Kingsway warehouse by extending the mezzanine floors and installing additional automation equipment. We anticipate that this project will cost approximately £18 million although the majority of this will be incurred in the financial year to January 2018.

In addition, we will continue to use our cash resources to make selected acquisitions and investments where they benefit our strategic development.

Store Portfolio

During the period, store numbers have moved as follows:

Sports Fashion Fascias

(a) Being all stores in all territories with nine stores open in mainland Europe at the period end including Madrid which opened in March 2016

(b) Being the Perry Sport and Aktiesport stores in Sports Unlimited Retail BV

(c) The acquired stores include 12 stores in Portugal currently trading as The Athlete's Foot which are due to be converted to JD in the second half and the 20 multi-brand stores acquired from our joint venture partner in Malaysia

In addition, there were six JD branded Gyms at the period end with new gyms in the period at Rochdale and Washington complementing the existing gyms in Coventry, Hull, Liverpool and Preston. Gyms in Leeds and Wigan are scheduled to open in September.

Outdoor Fascias

Dividends and Earnings per Ordinary Share

The Board proposes paying an interim dividend of 1.25p (2015: 1.20p) per ordinary share, an increase of 4.2%. Given the positive return that we are seeing from our investments in the core JD fascia, we believe it continues to be in the longer term interests of all shareholders to keep dividend growth restrained so as to maximise the available funding for our ongoing growth opportunities. This dividend will be paid on 6 January 2017 to shareholders on the register as at close of business on 2 December 2016.

The adjusted earnings per ordinary share before exceptional items have increased by 60% to 29.83p (2015: 18.62p).

The basic earnings per ordinary share have increased by 69% to 29.83p (2015: 17.62p).

People

We could not have delivered these excellent results without the expertise, energy and passion of everyone connected with our businesses. On behalf of the whole Board, I thank everybody involved.

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

Current Trading and Outlook

Given the importance of Christmas in the context of the overall result, we do not believe that it is appropriate to issue an update on trading since the period end. However, notwithstanding the demanding comparatives going forward following the strong revenue growth in the previous three years, the positive nature of trading in the second half to date is encouraging.

We will provide an update on trading in early January after our key Christmas trading period.

Peter Cowgill

Executive Chairman

13 September 2016

Condensed Consolidated Income Statement

For the 26 weeks to 30 July 2016

Condensed Consolidated Statement of Comprehensive Income

For the 26 weeks to 30 July 2016

Condensed Consolidated Statement of Financial Position

As at 30 July 2016

Condensed Consolidated Statement of Changes in Equity

For the 26 weeks to 30 July 2016

Condensed Consolidated Statement of Changes in Equity (continued)

For the 26 weeks to 1 August 2015

Condensed Consolidated Statement of Cash Flows

Analysis of Net Cash

1. Basis of Preparation

JD Sports Fashion Plc (the 'Company') is a company incorporated and domiciled in the United Kingdom. The half year financial report for the 26 week period to 30 July 2016 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 13 September 2016.

The condensed set of financial statements included in this half yearly financial report has been prepared in accordance with IAS 34 'Interim Financial Reporting' as adopted by the EU. The annual financial statements of the Group are prepared in accordance with IFRS's as adopted by the EU. The comparative figures for the 52 week period to 30 January 2016 are not the Group's statutory accounts for that financial year. Those accounts have been reported on by the Group's Auditor and delivered to the Registrar of Companies. The Report of the Auditor was (i) unqualified, (ii) did not include a reference to any matters to which the Auditor drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498 of the Companies Act 2006.

The information contained in the half year financial report for the 26 week period to 30 July 2016 and 1 August 2015 has been reviewed and the independent review report for the 26 week period to 30 July 2016 is set out in the half yearly 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 2016.

The following amendments to accounting standards and interpretations, issued by the International Accounting Standards Board (IASB), have been adopted for the first time by the Group in the period with no significant impact on its consolidated results or financial position:

· Annual Improvements to IFRSs - 2012 - 2014 Cycle

· Amendments to IAS 1 'Disclosure initiative'

· Amendments to IAS 16 and IAS 38 'Clarification of acceptable methods of depreciation and amortisation'

· Amendments to IAS 27 'Equity method in separate financial statements'

IFRS 9 'Financial Instruments' is expected to be applicable after 1 January 2018. If endorsed, this standard will simplify the classification of financial assets for measurement purposes, but it is not anticipated to have a significant impact on financial statements.

IFRS 16 'Leases' is expected to be applicable after 1 January 2019. If endorsed, this standard will significantly affect the presentation of the Group financial statements with all leases apart from short term leases being recognised as on-balance sheet finance leases with a corresponding liability being the present value of lease payments. The Group is currently considering the implications of IFRS 16 on the Group's consolidated results and financial position.

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.

Use of estimates and judgements

The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

In preparing these condensed consolidated interim financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the 52 week period to 30 January 2016.

Risks and uncertainties

The Board has considered the risks and uncertainties for the remaining 26 week period to 28 January 2017 and determined that the risks presented in the Annual Report and Accounts 2016, noted below, remain relevant:

Omnichannel

· Key suppliers and brands

· Protection of intellectual property

· Retail property factors

· Seasonality of sales

· Economic factors

· Reliance on non-UK manufacturers

Consistency of infrastructure

· Reliance on IT systems

· Reliance on a consolidated warehouse

· Retention of key personnel

· Health and safety

· Foreign exchange risk

· Regulatory and compliance

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 report.

After making enquiries, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the financial statements.

2. Segmental Analysis

IFRS 8 requires operating 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 more on the nature of the businesses within the Group. The Group's 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, JD Sprinter Holdings 2010 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, Size GmbH, ActivInstinct Limited, 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, Ark Fashion Limited and Mainline Menswear Limited.

· Outdoor - includes the results of Blacks Outdoor Retail Limited and Tiso Group 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. Drawdowns from the Group's syndicated borrowing facility of £7,143,000 (2015: £54,000,000) and liabilities for taxation of £17,665,000 (2015: £14,003,000) 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.

Operating Segments

Information regarding the Group's operating segments for the 26 weeks to 30 July 2016 is reported below:

The comparative segmental results for the 26 weeks to 1 August 2015 are as follows:

Geographical Information

The Group's operations are located in the UK, Republic of Ireland, France, Spain, Germany, the Netherlands, Italy, Sweden, Denmark, Belgium, Portugal, Malaysia, 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:

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:

3. Exceptional Items

(1) Relates to the impairment in the period to 30 January 2016 of the goodwill arising in prior years on the acquisition of ActivInstinct Limited, a partial impairment of the Blacks fascia name and the impairment of several other goodwill and fascia name balances which were not significant.

(2) One off exceptional charge writing off costs to 30 January 2016 including certain other related costs.

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

4. Earnings per Ordinary Share

Basic and diluted earnings per ordinary share

The calculation of basic and diluted earnings per ordinary share at 30 July 2016 is based on the profit for the period attributable to equity holders of the parent of £58,058,000 (26 weeks to 1 August 2015: £34,293,000; 52 weeks to 30 January 2016: £97,634,000).

The weighted average number of ordinary shares outstanding during the 26 weeks to 30 July 2016 was 194,646,632 (26 weeks to 1 August 2015: 194,646,632; 52 weeks to 30 January 2016: 194,646,632), calculated as follows:

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.

5. Acquisitions

Current 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 Board believes that the cash consideration of €26.5 million represents the current best estimates of the fair value of the net assets acquired. The provisional goodwill calculation is summarised below: