JD Sports Regulatory News (JD.)

17 September 2014

JD SPORTS FASHION PLC

INTERIM RESULTS

FOR THE TWENTY SIX WEEKS TO 2 AUGUST 2014

JD Sports Fashion Plc (the 'Group'), the leading retailer and distributor of branded sportswear, fashionwear and outdoor clothing and equipment, today announces its Interim Results for the 26 weeks ended 2 August 2014 (comparative figures are shown for the 26 week period ended 3 August 2013).

Results

(a) The prior year has been restated to reflect the 4:1 share split which was approved by shareholders at the Annual General Meeting on 26 June 2014.

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

Highlights

· Record result for the half year with group profit before tax and exceptional items doubled

· Positive momentum in the Sports fascias in all territories with like for like store sales growth across the combined European fascias of 13%

· Continued progress in Outdoor with like for like store sales growth of 12%

· Further management focus concentrated on Fashion fascias

· Strong like for like comparatives in the Sports fascias in the second half

· Interim dividend increased by 3.4% from 1.1125p to 1.1500p

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

Peter Cowgill, Executive Chairman, said:

"The Group has delivered record results for the first half with encouraging progress in the principal areas of the business, notably our UK and European Sports fascias. I am also pleased with the positive progress in our Outdoor business, particularly since the move to our central facilities was only completed in July last year. Fashion continues to disappoint, albeit trading more positively in the second quarter. The second half of the year is traditionally stronger for the Fashion fascias.

"Our Sports operations continue to provide the engine for profit growth and cash generation in the Group and will therefore continue to be the primary focus of investment.

"The Board recognises the demanding comparatives of the second half of the last financial year, particularly in the core UK and Ireland Sports fascias where like for like sales increased by 11.2%, as well as our significant dependence on Christmas trading but following the robust performance of the business in the first half believes that the Group is well positioned to deliver results towards the upper end of current market expectations."

Enquiries:

JD Sports Fashion Plc Tel: 0161 767 1000

Peter Cowgill, Executive Chairman

Brian Small, Finance Director

MHP Communications Tel: 020 3128 8100

Andrew Jaques

Barnaby Fry

Jack Holden

Jennifer Iveson

Executive Chairman's Statement

Introduction

The Group has delivered record results for the first half with encouraging progress in the principal areas of the business, notably our UK and European Sports fascias. I am also pleased with the positive progress in our Outdoor business, particularly since the move to our central facilities was only completed in July last year. Fashion continues to disappoint, albeit trading more positively in the second quarter. The second half of the year is traditionally stronger for the Fashion fascias.

Our Sports operations continue to provide the engine for profit growth and cash generation in the Group and will therefore continue to be the primary focus of investment. We are now confident that our unique model of exclusive product presented with the highest standards of visual merchandising can be successful in a wider geography. During the period, we converted the 10 Isico stores in Germany to the JD fascia and are pleased with the initial performance in this territory. We have subsequently opened a further two stores in this country and have increased our critical mass elsewhere with additional stores in the period in both France and the Netherlands. There will be further openings in all of our international territories in the second half.

As anticipated, the combined Blacks and Millets business has continued to progress after the major restructuring activity of the previous year which was necessary to give the business a stable platform on which to develop. During the period we have made two small acquisitions which have been integrated into the Blacks and Millets organisation and systems to complement our existing offering. These were:

· 14 stores trading as Oswald Bailey. These stores have provided additional geographical coverage in the South of England for our Millets offering which focuses on apparel, footwear and camping equipment for families and the more casual outdoor consumer.

· The Ultimate Outdoors business in the North of England. This business had three stores in Skipton, Lancaster and Keswick. The offer in these stores is a logical fit with the offer in the Blacks fascia.

We have subsequently opened a new concept 'Ultimate Outdoors' store in Preston where we have combined our Outdoor offerings in a larger space. As the name suggests, we believe that this fascia and website can be the destination of choice for any Outdoor consumer as it provides easy access to our full Outdoor offer, both technical and casual.

With the exception of Scotts, our Fashion fascias, and notably Bank, have had a difficult half, in which early weak store like for like sales improved to a marginal decline of 1% cumulatively by the end of the period. The management team believe that the initiatives they have embarked upon during the period to boost online sales, improve merchandise management and reduce onerous property costs have provided the framework to deliver an improved second half performance. We are also reducing the costs in the business both in stores and centrally wherever possible.

Sport

Sport has had an excellent first half with operating profits (before exceptional items) increased to £34.8 million (2013: £26.1 million) with positive momentum in all of the territories in which we operate. All of our Sport fascias have benefitted in the period from the trends for branded athletic footwear seen over the last 12 months.

Sport continues to be the focus of investment for the Group and, whilst international development is a key priority, we remain totally committed to developing the JD fascia in the UK and Ireland as well. During the period we also refurbished our flagship store in the Trafford Centre which reopened at the end of August. We believe that this store is an important step forward for our already high standards of visual merchandising and retail theatre and in our embracing of the latest multichannel technology.

We are pleased with the progression that we have seen in all of our international businesses.

We have increased our presence in France and after opening a further four JD stores we had 21 stores open at the end of the period. Two of the new stores were in the Paris metropolitan area where we now have substantial critical mass. We have also opened a second store in Marseille and extended our existing store in Lyon. Subject to property availability, we will open up to five further stores in France in the second half. Chausport has also performed well in the first half. The clear separation of responsibilities between the different fascias in France has enabled local management to focus on delivering product suitable to their core demographic.

The timing of the availability of suitable property has meant that we have not been able to expand the JD presence in Spain during the period. However, we believe that we could open up to two new stores in the Madrid area in the second half giving us additional critical mass in this city. We continue to look at opportunities in other major conurbations. We are encouraged by the performance of the JD fascia in the country. We continue to be very pleased with the performance of the Sprinter business. The Sprinter management team have developed a very agile store model and flexible supply chain which enables them to react quickly to property opportunities which arise. Sprinter continues to expand outside of its traditional heartlands and during the period the business opened its first store in Catalonia.

We are encouraged by the early performance of our stores in Holland. The stores which we acquired initially were concentrated in smaller regional towns and cities. However, the successful start which we have had in Rotterdam, where we opened in a prime footfall location in December 2013, gave us the confidence to open in other major retail destinations. As a result, during the period we expanded our presence in the country by opening a store in Den Haag.

We are also pleased with the initial performance of our stores in Germany. The Isico stores which we acquired in July 2013 have now all been converted to the JD fascia and we are pleased with the customer reactions to both the change of name and our product offer. We opened two small new stores in the period.

We have also now launched country specific JD websites in each of the international territories where we have a retail presence. This enables us to give the customer in these territories a truly multichannel retail experience. In addition, the introduction of kiosks in smaller stores enables customers to access a range wider than the physical stores can support.

Fashion

The operating loss (before exceptional items) in Fashion increased in the period from £6.8 million to £8.2 million. This includes £0.7m of pre-opening costs associated with our new 'Open' fascia. Scotts has performed well in the first half and its branded fashion authority remains popular with its core demographic.

We believe Bank is capable of delivering an improvement in results from this half. The Autumn / Winter season represents the first full season in which Gwynn Milligan, who was appointed as Managing Director in Summer 2013, has had a full influence on the product selection. From a property perspective, one underperforming store has already closed in the second half and we anticipate that a further two stores will be closed before the year end. Some rent reductions have also recently been obtained. Ultimately, the performance in the second half will provide a measurement of the progress being made in this turnaround.

Outdoor

The operating loss in Outdoor has reduced from £8.9 million to £5.6 million with considerable progress made in Blacks and Millets. Tiso, which was acquired in November 2013, made a small loss in the period which was in line with our expectations.

The performance of Blacks and Millets has benefitted from the operational changes which we made in the previous year. The two fascias now have clear and distinct propositions. We believe that, where possible, consumers' decision making benefits from having access, both instore and online, to a broad product range both in terms of price points and technical specification as different products are designed for different performance levels. We believe that our new Ultimate Outdoors proposition provides the customer with this access and choice. To date we are still only trialling one store in Preston, together with a trading website, and it is too early to make an assessment of performance. However, we are looking at options to extend the store base subject to the availability of cost effective property in appropriate destinations.

The acquisition of Tiso has given us access to a number of new brands which were not previously available to the Blacks and Millets fascias and it is important that we continue to nurture these relationships. Tiso continues to trade with independent management and systems and its recent results are improving although the business is not expected to be profitable this year.

Group Performance

Revenue, gross margin and overheads

Total Group revenue increased by 27% in the period to £721.5 million (2013: £567.4 million).

Group gross margin decreased in the period from 48.8% to 47.6% principally for the following reasons:

· Sport - increased participation of lower margin sales online both in our existing fascias and in ActivInstinct, which we acquired in October 2013, combined with increased footwear participation in the total mix

· Fashion - increased provisions made against slow moving stocks

· Outdoor - impact of lower margin Tiso business

Selling and distribution overheads (excluding exceptional items) have reduced to 40.2% of revenue (2013: 42.8%) reflecting the fixed cost nature of the retail fascias, combined with the elimination of the duplicate warehouse costs that we experienced in the prior year before the closure of the Northampton facility.

Operating profits and results

Group operating profit (before exceptional items) for the period has more than doubled to £21.0 million (2013: £10.4 million) following an exceptional performance in our Sports fascias throughout Europe and a significant reduction in losses in Outdoor. We expect further progress in Outdoor in the second half.

There were net exceptional charges of £3.5 million in the period (2013: £3.9 million) principally from increased provisions for onerous property leases.

Group profit before tax in the period ultimately increased by £10.4 million to £16.5 million (2013: £6.1 million).

Working capital and cash

Period end net cash has reduced by £9.5 million to £11.2 million (2013: £20.7 million) principally from:

· Higher inventories and capital expenditure to drive growth in the Sports fascias, both domestically and internationally

· Improved stock availability in Outdoor ahead of the key Autumn season

· Capital expenditure in the period increased to £26.3 million (2013: £21.5 million) which includes a total of £6.4 million (2013: £2.5 million) in relation to ongoing projects in IT and Logistics to improve operational infrastructure

· Net cash cost of acquisitions in the period increased to £9.0 million (2013: £3.9 million)

Our continued confidence in the potential for JD internationally, combined with ongoing investment in our other fascias, ongoing investment in the new core Oracle ERP system, and completion of the works to increase our capabilities at Kingsway, means that overall capital expenditure will be significantly higher than the prior year.

We continue to pay suppliers according to terms and take settlement discount whenever it is available.

Store Portfolio

During the period, store numbers (excluding trading websites) have moved as follows:

Sports Fascias

1. Includes Champion stores in Republic of Ireland which are serviced and managed by the UK team but excludes Size store in Dublin

2. Excludes the Size store in Les Halles, Paris

3. Being all stores in all territories

4. Extension to existing store at Lyon Part Dieu

Fashion Fascias

5. Being the smaller fascias of Ark, Cloggs and Mainline Menswear

Outdoor

6. Includes 'original' Ultimate Outdoors stores acquired in February 2014

7. Includes the Oswald Bailey stores acquired in March 2014

8. Being the 'new format' Ultimate Outdoors store

Dividends and Earnings per Ordinary Share

The Board retains its confidence in the long term prospects of the Group and the robust performance of our Sports fascias in particular. Whilst we still have substantial financial resources within the Group, including access to the £155 million committed bank facility, we want to be able take advantage of strategic and organic opportunities in our key Sports markets when they arise. Against this background and with the key trading period still ahead of us we will pay an interim dividend of 1.1500p per ordinary share which represents an increase of 3.4% over the prior year (restated 2013: 1.1125p). 

This dividend will be paid on 9 January 2015 to shareholders on the register as at close of business on 5 December 2014.

The adjusted basic earnings per ordinary share before exceptional items are 7.75p (restated 2013: 3.95p). The prior year has been restated to reflect the 4:1 share split which was approved by shareholders on 26 June 2014.

The basic earnings per ordinary share are 6.48p (restated 2013: 2.55p).

Employees

The exceptional performance in the period is a testament to the skills, energy, experience and professionalism of everyone involved in the business. Our Sports fascias, in particular, both in the UK and increasingly internationally, are world class in performance and continue to set high standards that we challenge our other businesses to match.

The Board would also like to thank Barry Bown for his valued and considerable contribution to the growth and progress of the business in the 30 years that he was with the Group. With the leadership role of the Executive Chairman having been in place since 2004, and the considerable development and strengthening of the senior leadership team over the past decade, there will be no immediate replacement of the role of Chief Executive Officer.

Current Trading and Outlook

The Board recognises the demanding comparatives of the second half of the last financial year, particularly in the core UK and Ireland Sports fascias where like for like sales increased by 11.2%, as well as our significant dependence on Christmas trading but following the robust performance of the business in the first half believes that the Group is well positioned to deliver results towards the upper end of current market expectations.

We will provide an update on trading in our Interim Management Statement which is due for release no later than 19 December 2014.

Peter Cowgill

Executive Chairman

17 September 2014Condensed Consolidated Income Statement

For the 26 weeks to 2 August 2014

Condensed Consolidated Statement of Comprehensive Income

For the 26 weeks to 2 August2014

Condensed Consolidated Statement of Financial Position

As at 2 August 2014

Condensed Consolidated Statement of Changes in Equity

For the 26 weeks to 2 August 2014

Condensed Consolidated Statement of Changes in Equity (continued)

For the 26 weeks to 3 August 2013

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 2 August 2014 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 17 September 2014.

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 1 February 2014 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 2 August 2014 and 3 August 2013 has been reviewed and the independent review report for the 26 week period to 2 August 2014 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 1 February 2014.

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:

· IFRS 10 'Consolidated Financial Statements'

· IFRS 11 'Joint Arrangements'

· IFRS 12 'Disclosure of Interests in Other Entities'

· Amendments to IFRS 10, IFRS 11 and IFRS 12

· IAS 27 'Separate Financial Statements (2011 revised)'

· IAS 28 'Investments in Associates and Joint Ventures (2011 revised)'

· Amendments to IAS 32 'Offsetting Financial Assets and Financial Liabilities'

· Amendments to IAS 36 'Recoverable amount disclosures for non-financial assets'

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 1 February 2014.

Risks and uncertainties

The Board has considered the risks and uncertainties for the remaining 26 week period to 31 January 2015 and determined that the risks presented in the Annual Report and Accounts 2014, noted below, remain relevant:

Omnichannel

· Damage to reputation of brands

· Protection of intellectual property

· Retail property factors

1. Basis of Preparation (continued)

· Seasonality of sales

· Economic factors

· Reliance on non-UK manufacturers

Consistency of infrastructure

· Reliance on legacy IT systems

· Consolidation of warehouse operations

· Retention of key personnel

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. In the previous period the reportable segments have been adjusted to reflect the streamlining of the Group's businesses into three main operating divisions. This has resulted in those businesses that were previously allocated to the Distribution segment now being allocated to the Sport and Fashion segments based on the nature of the products they supply. The Group's revised reportable segments under IFRS 8 are therefore as follows:

· Sport - 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, JD Sports Fashion Germany GmbH, ActivInstinct 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) and Source Lab Limited.

· Fashion - includes the results of Bank Fashion 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 'Sport' 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.

 2. Segmental Analysis (continued)

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 £77,000,000 (2013: £23,500,000) and liabilities for taxation of £9,683,000 (2013: £8,772,000) 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 Sport) 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 2 August 2014 is reported below:

Income statement