Last checked at 22 Sep 2009 07:00
22 September 2009
JD SPORTS FASHION PLC
INTERIM RESULTS
FOR THE TWENTY SIX WEEKS TO 1 AUGUST 2009
JD Sports Fashion Plc (the "Group"), the leading retailer of sport and athletic inspired fashion apparel and footwear, today announces its Interim Results for the 26 weeks ended 1 August 2009 (comparative figures are shown for the 26 week period ended 2 August 2008):
RESULTS
| 2009 £000 | 2008 £000 | % Change | |||
| Revenue | 323,993 | 298,952 | +8.4% | ||
| Gross profit % | 48.0% | 48.2% | |||
| Operating profit (before exceptional items) | 14,360 | 13,040 | +10.1% | ||
| Share of results of joint venture before exceptional items (net of tax) | 47 | (245) | |||
| Net financial expenses | (204) | (392) | |||
| Profit before tax and exceptional items | 14,203 | 12,403 | +14.5% | ||
| Exceptional items | (3,228) | (3,287) | |||
| Share of exceptional items of joint venture (net of tax) (a) | (847) | - | |||
| Profit before tax | 10,128 | 9,116 | +11.1% | ||
| Basic earnings per ordinary share | 14.35p | 12.45p | +15.3% | ||
| Adjusted basic earnings per ordinary share (see note 6) | 18.97p | 15.50p | +22.4% | ||
| Interim dividend payable per ordinary share | 3.30p | 3.10p | +6.5% | ||
| Net cash at end of period (see note 8) (b) | 5,938 | 3,439 |
a) The share of exceptional items of joint venture consists entirely of unrealised losses on foreign exchange contracts.
b) Net cash consists of cash and cash equivalents together with interest bearing loans and borrowings, loan notes and finance lease and hire purchase contracts.
HIGHLIGHTS
Total Group revenue increased by 8.4% in the period and by 0.7% on a like for like basis (0.3% Sports Fascias; 3.1% Fashion Fascias).
Gross margin maintained at 48.2% excluding newly acquired businesses.
Group profit before tax and exceptional items increased by 14.5% to £14.2 million (2008: £12.4 million).
Total Group like for like sales for six weeks to 12 September 2009 up 0.8%.
Interim dividend increased by 6.5% to 3.30p (2008: 3.10p).
Acquisition of Chausport, the French retailer of sports footwear, creates a foothold in a new and sizeable European market.
Acquisition of Kooga Rugby Limited, combined with that of Canterbury Europe Limited since the period end, means that JD now owns two important rugby brand businesses which further diversify the Group's interests.
Peter Cowgill, Executive Chairman, said:
"The positive performance of the Group has enabled us to continue with our substantial store refurbishment programme and to open five new Sports stores and five new Fashion stores. It also means that we are able to continue to look positively at the many acquisition opportunities available in our retail markets and related areas as they arise.
"The Sports Fascias remain the core of Group profitability. Their strength lies in our unique blend of sports and fashion brands, the strong brand relationships which allow us to develop exclusive products, and our exclusive own brands and superior visual merchandising. We believe these strengths will benefit us as we look to further develop the potential in the Chausport business in 2010.
"Trading since the period end has continued to be satisfactory with like for like sales for the Group in the six week period to 12 September up by 0.8%. Sports Retail is up by 1.3% (flat excluding the influence of Eid over the latter half of that period) although Fashion Retail is down by 2.4%. The like for like sales performance in the balance of the year will be measured against weaker comparatives in October and November last year but with challenging conditions for the consumer continuing, the result for the full year remains very dependent on the sales and margin performance in December and January.
"Nevertheless, the Board believes that the Group is well positioned to deliver on market expectations."
Enquiries:
JD Sports Fashion Plc Tel: 0161 767 1000
Peter Cowgill, Executive Chairman
Barry Bown, Chief Executive
Brian Small, Finance Director
Hogarth Partnership Limited Tel: 020 7357 9477Andrew Jaques
Barnaby FryIan Payne
EXECUTIVE CHAIRMAN'S STATEMENT
INTRODUCTION
The six months ended 1 August 2009 have seen considerable developments in the Group, not just in the Sports Retail business, where we acquired Chausport SA and its 78 stores in France on 19 May 2009, but also with the acquisition of Kooga Rugby Limited on 3 July 2009.
We have also continued to enhance our multi-channel business with Bank Fashion going online for the first time and Topgrade launching their combined catalogue and online discounted brand business, getthelabel.com. As a result of these positive developments, the Group is now presenting results for three operating segments:
Sports Retail comprising JD, Size? and Chausport
Fashion Retail comprising Bank and Scotts
Wholesale comprising Topgrade (including getthelabel.com), Nicholas Deakins, and Kooga
The 26 week period to 1 August 2009 saw like for like sales improvement in both Retail segments with Sports being +0.3% and Fashion being +3.1% (Bank +2.5%, Scotts +4.2%) making the Group +0.7%. This has resulted in a further improvement in Group results for the period relative to last year although a decline in like for like sales performance in the last two months of the half year means we continue to be cautious about the outlook for the balance of this year.
The positive performance of the Group has enabled us to continue with our substantial store refurbishment programme and to open five new Sports stores and five new Fashion stores (including one transferred from Scotts to Bank). It also means that we are able to continue to look positively at the many acquisition opportunities available in our retail markets and related areas as they arise. Immediately after the period end the key trading assets and global brand rights to Canterbury of New Zealand, the world famous heritage rugby brand, were acquired.
Our further progress has resulted in a 14.5% improvement in profit before tax and exceptional items to £14.2 million (2008: £12.4 million). This profit includes the Group's share of the Focus joint venture operating profit (before exceptional items) of £47,000 (2008: loss of £245,000).
Group operating profit (before exceptional items) increased by 10.1% to £14.4 million (2008: £13.0 million).
Profit before tax in the period was £10.1 million (2008: £9.1 million) after a net exceptional charge of £3.2 million (2008: £3.3 million). The profit before tax is also stated after the Group's share of the exceptional charge from the Focus joint venture of £847,000 (2008: £nil) reflecting the movement in the fair value of foreign exchange instruments from the previous year end.
Profit for the period after taxation was £6.9 million (2008: £6.1 million).
SPORTS RETAIL
Sports Retail has again seen an improvement in its profitability with operating profit before exceptional items increased from £16.2 million to £17.2 million. Sports Retail remains the core of Group profitability. Its strength lies in its unique blend of sports and fashion brands, its strong brand relationships which allow us to develop exclusive products, and its exclusive own brands and superior visual merchandising. We believe these strengths will benefit us as we look to further develop the potential in the Chausport business in 2010.
In the first half of this year we completed 12 store refurbishments in the UK at a cost of £4.5 million and by the year end this number will have increased to around 21 at an estimated cost of £8.8 million. We expect this programme to slow down next year in the UK as we have now achieved a much more consistent quality, look and feel for all of our stores.
FASHION RETAIL
Fashion Retail has seen a reduction in operating losses before exceptional items from £3.3 million to £2.7 million. Although both fascias did reduce their operating losses, gross margin at exit remains around 300 basis points behind our target in both fascias, making the performance improvement so far this year less than anticipated. Scotts also continues to experience profitability issues with its legacy store portfolio.
We remain optimistic that Bank will develop into a successful national chain. We opened three new Bank stores in the period (including one transferred from Scotts) with a further two having opened since. We anticipate we will open at least six more new Bank stores before the end of the financial year.
WHOLESALE
The Wholesale business comprises Topgrade (including getthelabel.com), Nicholas Deakins and our newly acquired rugby businesses, Kooga and Canterbury, the latter of which was acquired after the period end. Wholesale made a loss in the period primarily from the marketing cost invested in launching getthelabel.com. This business was launched in February and we anticipate that it could take three years before it has sufficient critical mass to deliver profits to the Group. This is not unusual in new online businesses and we remain optimistic about the long term profitability of this venture.
The rugby businesses are active in both codes and are managed from premises close to Manchester. We are encouraged by the level of interest in both brands and by the potential for Canterbury as a lifestyle apparel brand in the UK and overseas. We will run the Canterbury business in the UK and Ireland and then the global brand rights which we have will usually be exploited further afield by local distributors providing us with a royalty income stream.
GROUP PERFORMANCE
Revenue, gross margin and overheads
Total Group revenue increased by 8.4% in the period to £324.0 million (2008; £299.0 million) and by 0.7% on a like for like basis.
Revenue increased by 0.3% on a like for like basis in the Sports Fascias and by 3.1% in the Fashion Fascias (Bank +2.5%, Scotts +4.2%).
Group gross margin declined in the period from 48.2% to 48.0%, principally as a result of the lower margin of 39.9% achieved on £9.3 million of sales within Chausport.
Operating profits and results
Group operating profit (before exceptional items) increased to £14.4 million (2008: £13.0 million). The Group operating profit margin (before exceptional items) for the first half of the year has therefore been maintained at 4.4%.
Exceptional items (excluding share of exceptional items in the joint venture) decreased slightly to £3.2 million (2008: £3.3 million) and Group operating profit rose by £1.4 million to £11.1 million (2008: £9.7 million).
The exceptional items comprise:
| £m | |
| Onerous lease provision | 1.8 |
| Loss on disposal of non-current assets | 1.3 |
| Impairment of fixed assets in loss making stores | 0.1 |
| Total | 3.2 |
The onerous lease provision costs primarily relate to properties out of which we do not currently trade but where we remain responsible for the property costs. In the current retail property market, it is proving increasingly difficult to dispose of these properties either to another retailer or to return them to the landlord. The loss on disposal is broadly cash neutral with the premia payable on disposing of properties in the UK businesses offset by premia received by Chausport. Consequently, the charge in the period relates to the write off of assets on disposal.
Group profit before tax in the period was £10.1 million (2008: £9.1 million).
Working capital and cash
Net cash at 1 August 2009 was £5.9 million.
Inventories have increased to £73.8 million at 1 August 2009 from £67.0 million at 2 August 2008. The rise is principally due to the acquired Chausport and Kooga businesses. Trade creditors continue to be paid to terms to maximise settlement discounts.
STORE PORTFOLIO
Group store numbers in the UK and Ireland increased in the period from 437 to 438 with the total retail square footage in these countries increasing from 1,310,000 sq ft to 1,317,000 sq ft. The split between Sport and Fashion Retail in the UK and Ireland is as follows:
Sport Retail
| No. of stores | Retail ('000 sq ft) | |
| At 31 January 2009 | 345 | 1,105 |
| New stores | 5 | 12 |
| Closures | (7) | (13) |
| Remeasures (1) | - | (17) |
| At 1 August 2009 | 343 | 1,087 |
Fashion Retail
| No. of stores | Retail ('000 sq ft) | |
| At 31 January 2009 | 92 | 205 |
| New stores (2) | 4 | 8 |
| Closures | (1) | (1) |
| Remeasures (1) | - | 18 |
| At 1 August 2009 | 95 | 230 |
(1) Following several years of extensive refurbishment activity, the retail area in the stores has been remeasured with a number of minor amendments made to reflect the actual current trading area
(2) In addition, one store (Beckton) was transferred from Scotts to Bank
Furthermore, following the closure of two small loss making stores prior to the period end, Chausport now operates out of 76 stores in France with 78,000 retail square feet.
DIVIDENDS AND EARNINGS PER ORDINARY SHARE
The Board has decided to pay an interim dividend of 3.30p per ordinary share, which represents an increase of 6.5% over the prior year (2008: 3.10p). The Board believes that the level of increase in the total dividend for the year should be determined after the year end as the results are so dependent on Christmas trading. Whilst the Board intends to continue with a progressive dividend policy, it also wishes to retain funding flexibility in the business to continue to allow it to make strategic acquisitions and capital investments as such opportunities arise.
The dividend will be paid on 8 January 2010 to shareholders on the register as at close of business on 4 December 2009. A scrip dividend alternative will not be offered.
The adjusted basic earnings per ordinary share before exceptional items are 18.97p (2008: 15.50p).
The basic earnings per ordinary share are 14.35p (2008: 12.45p).
EMPLOYEES
We could not produce positive results and manage the development of the Group without the industry and talent of our many colleagues throughout the business. The Board extends its thanks to all involved.
CURRENT TRADING AND OUTLOOK
Trading since the period end has continued to be satisfactory with like for like sales for the Group in the six week period to 12 September up by 0.8%. Sports Retail is up by 1.3% (flat excluding the influence of Eid over the latter half of that period) although Fashion Retail is down by 2.4%. The like for like sales performance in the balance of the year will be measured against weaker comparatives in October and November last year but with challenging conditions for the consumer continuing, the result for the full year remains very dependent on the sales and margin performance in December and January.
Nevertheless, the Board believes that the Group is well positioned to deliver on market expectations.
Peter Cowgill
Executive Chairman
22 September 2009
CONDENSED CONSOLIDATED INCOME STATEMENT
for the 26 weeks ended 1 August 2009
| Note | 26 weeks to 1 August 2009 £000 | 26 weeks to 2 August 2008 £000 | 52 weeks to 31 January 2009 £000 | |
| revenue | 323,993 | 298,952 | 670,855 | |
| Cost of sales | (168,539) | (154,931) | (340,309) | |
| gross profit | 155,454 | 144,021 | 330,546 | |
| Selling and distribution expenses - normal | (131,714) | (122,600) | (256,315) | |
| Selling and distribution expenses - exceptional | 3 | (3,228) | (1,242) | (8,201) |
| Selling and distribution expenses | (134,942) | (123,842) | (264,516) | |
| Administrative expenses - normal | (10,799) | (8,915) | (20,867) | |
| Administrative expenses - exceptional | 3 | - | (2,045) | (8,122) |
| Administrative expenses | (10,799) | (10,960) | (28,989) | |
| Other operating income | 1,419 | 534 | 1,109 | |
| operating profit | 11,132 | 9,753 | 38,150 | |
| Before exceptional items | 14,360 | 13,040 | 54,473 | |
| Exceptional items | 3 | (3,228) | (3,287) | (16,323) |
| operating profit | 11,132 | 9,753 | 38,150 | |
| Share of results of joint venture before exceptional items (net of tax) | 47 | (245) | (166) | |
| Share of exceptional items (net of tax) | (847) | - | 914 | |
| Share of results of joint venture | (800) | (245) | 748 | |
| Financial income | 114 | 227 | 529 | |
| Financial expenses | (318) | (619) | (1,210) | |
| profit before tax | 10,128 | 9,116 | 38,217 | |
| Income tax expense | 4 | (3,241) | (3,008) | (13,707) |
| profit for the period | 6,887 | 6,108 | 24,510 | |
| Attributable to equity holders of the parent | 6,984 | 6,010 | 24,379 | |
| Attributable to minority interest | (97) | 98 | 131 | |
| Basic and diluted earnings per ordinary share | 6 | 14.35p | 12.45p | 50.49p |
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the 26 weeks ended 1 August 2009
| 26 weeks to 1 August 2009 £000 | 26 weeks to 2 August 2008 £000 | 52 weeks to 31 January 2009 £000 | ||
| profit for the period | 6,887 | 6,108 | 24,510 | |
| Other comprehensive income: | ||||
| Exchange differences on translation of foreign operations | (598) | - | 4 | |
| Revaluation of available for sale investment | 4,824 | - | - | |
| total comprehensive income for the period (net of tax) | 11,113 | 6,108 | 24,514 | |
| Attributable to equity holders of the parent | 11,210 | 6,010 | 24,383 | |
| Attributable to minority interest | (97) | 98 | 131 |
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 1 August 2009
| Note | As at 1 August 2009 £000 | As at 2 August 2008 Restated -see note 1 £000 | As at 31 January 2009 £000 | |||
| assets | ||||||
| Intangible assets | 43,544 | 43,070 | 42,890 | |||
| Property, plant and equipment | 65,133 | 58,430 | 62,668 | |||
| Investment property | 4,077 | 4,126 | 4,102 | |||
| Other receivables | 13,807 | 5,091 | 5,459 | |||
| Equity accounted investment in joint venture | 308 | 115 | 1,108 | |||
| total non-current assets | 126,869 | 110,832 | 116,227 | |||
| Available for sale investments | 6,877 | - | 2,053 | |||
| Inventories | 73,794 | 66,994 | 58,287 | |||
| Trade and other receivables | 28,381 | 19,488 | 20,453 | |||
| Cash and cash equivalents | 8 | 7,832 | 3,640 | 23,538 | ||
| total current assets | 116,884 | 90,122 | 104,331 | |||
| total assets | 243,753 | 200,954 | 220,558 | |||
| liabilities | ||||||
| Interest-bearing loans and borrowings | 8 | (914) | (118) | (83) | ||
| Trade and other payables | (100,369) | (89,972) | (80,073) | |||
| Provisions | (2,783) | (1,898) | (2,859) | |||
| Income tax liabilities | (3,570) | (4,905) | (8,395) | |||
| total current liabilities | (107,636) | (96,893) | (91,410) | |||
| Interest-bearing loans and borrowings | 8 | (980) | (83) | - | ||
| Other payables | (18,243) | (13,384) | (19,690) | |||
| Provisions | (5,765) | (3,944) | (5,310) | |||
| Deferred tax liabilities | (578) | (647) | (379) | |||
| total non-current liabilities | (25,566) | (18,058) | (25,379) | |||
| total liabilities | (133,202) | (114,951) | (116,789) | |||
| total assets less total liabilities | 110,551 | 86,003 | 103,769 | |||
| capital and reserves | ||||||
| Issued ordinary share capital | 2,433 | 2,413 | 2,433 | |||
| Share premium | 11,659 | 10,823 | 11,659 | |||
| Retained earnings | 91,031 | 71,505 | 88,378 | |||
| Other reserves | 4,230 | - | 4 | |||
| total equity attributable to equity holders of the parent | 109,353 | 84,741 | 102,474 | |||
| Minority interest | 1,198 | 1,262 | 1,295 | |||
| Total equity | 110,551 | 86,003 | 103,769 |
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the 26 weeks ended 1 August 2009
| Ordinary share capital £000 | Share premium £000 | Retained earnings £000 | Foreign currency translation reserve £000 | Fair value reserve £000 | Total equity attributable to equity holders of the Parent £000 | |
| Balance at 2 February 2008 | 2,413 | 10,823 | 68,391 | - | - | 81,627 |
| profit for the period | - | - | 6,010 | - | - | 6,010 |
| total comprehensive income for the period | - | - | 6,010 | - | - | 6,010 |
| Dividends to shareholders | - | - | (2,896) | - | - | (2,896) |
| Balance at 2 August 2008 | 2,413 | 10,823 | 71,505 | - | - | 84,741 |
| (continued) | Total equity attributable to equity holders of the Parent £000 | Minority interest £000 | Total equity £000 | |
| Balance at 2 February 2008 | 81,627 | 1,164 | 82,791 | |
| profit for the period | 6,010 | 98 | 6,108 | |
| total comprehensive income for the period | 6,010 | 98 | 6,108 | |
| Dividends to shareholders | (2,896) | - | (2,896) | |
| Balance at 2 August 2008 | 84,741 | 1,262 | 86,003 |
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (continued)
for the 26 weeks ended 1 August 2009
| Ordinary share capital £000 | Share premium £000 | Retained earnings £000 | Foreign currency translation reserve £000 | Fair value reserve £000 | Total equity attributable to equity holders of the Parent £000 | |
| Balance at 31 January 2009 | 2,433 | 11,659 | 88,378 | 4 | - | 102,474 |
| profit for the period | - | - | 6,984 | - | - | 6,984 |
| Other comprehensive income: | ||||||
| Exchange differences on translation of foreign operations | - | - | - | (598) | - | (598) |
| Revaluation of available for sale investments | - | - | - | - | 4,824 | 4,824 |
| total comprehensive income for the period | - | - | 6,984 | (598) | 4,824 | 11,210 |
| Dividends to shareholders | - | - | (4,331) | - | - | (4,331) |
| Balance at 1 August 2009 | 2,433 | 11,659 | 91,031 | (594) | 4,824 | 109,353 |
| (continued) | Total equity attributable to equity holders of the Parent £000 | Minority interest £000 | Total equity £000 | |
| Balance at 31 January 2009 | 102,474 | 1,295 | 103,769 | |
| profit for the period | 6,984 | (97) | 6,887 | |
| Other comprehensive income: | ||||
| Exchange differences on translation of foreign operations | (598) | - | (598) | |
| Revaluation of available for sale investments | 4,824 | - | 4,824 | |
| total comprehensive income for the period | 11,210 | (97) | 11,113 | |
| Dividends to shareholders | (4,331) | - | (4,331) | |
| Balance at 1 August 2009 | 109,353 | 1,198 | 110,551 |
CONDENSED CONSOLIDATED STATEMENT OF CASHFLOWS
for the 26 weeks ended 1 August 2009
| Note | 26 weeks to 1 August 2009 £000 | 26 weeks to 2 August 2008 £000 | 52 weeks to 31 January 2009 £000 | |||
| cash flows from operating activities | ||||||
| Profit for the period | 6,887 | 6,108 | 24,510 | |||
| Share of results of joint venture | 800 | 245 | (748) | |||
| Income tax expense | 4 | 3,241 | 3,008 | 13,707 | ||
| Financial expenses | 318 | 619 | 1,210 | |||
| Financial income | (114) | (227) | (529) | |||
| Depreciation and amortisation of non-current assets | 7,436 | 6,441 | 14,332 | |||
| Impairment of intangible assets | - | - | 2,045 | |||
| Impairment of non-current assets | 105 | 2,045 | 2,225 | |||
| Impairment of available for sale investment | - | - | 6,077 | |||
| Loss on disposal of non-current assets | 3 | 1,286 | 1,242 | 2,976 | ||
| Exchange differences on translation | 220 | - | (399) | |||
| (Increase)/decrease in inventories | (8,464) | (8,764) | (57) | |||
| (Increase)/decrease in trade and other receivables | (5,409) | (2,717) | (3,832) | |||
| Increase in trade and other payables and provisions | 4,614 | 7,637 | 9,513 | |||
| Interest paid | (318) | (619) | (1,210) | |||
| Income taxes paid | (7,902) | (8,088) | (15,572) | |||
| net cash from operating activities | 2,700 | 6,930 | 54,248 | |||
| cash flows from investing activities | ||||||
| Interest received | 114 | 144 | 529 | |||
| Proceeds from sale of non-current assets | 313 | 5 | 23 | |||
| Disposal costs of non-current assets | (248) | (636) | (1,271) | |||
| Acquisition of property, plant and equipment | (9,331) | (13,257) | (28,019) | |||
| Acquisition of non- current other receivables | - | (194) | (810) | |||
| Cash consideration of acquisitions net of cash acquired | (7,298) | (1,289) | (1,310) | |||
| Acquisition of available for sale investment | - | - | (8,130) | |||
| net cash used in investing activities | (16,450) | (15,227) | (38,988) | |||
| cash flows from financing activities | ||||||
| Repayment of interest-bearing loans and borrowings | (1,956) | - | (99) | |||
| Payment of finance lease and similar hire purchase contracts | - | (32) | (56) | |||
| Dividends paid | - | - | (3,536) | |||
| net cash used in financing activities | (1,956) | (32) | (3,691) | |||
| net (decrease)/increase in cash and cash equivalents | (15,706) | (8,329) | 11,569 |
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 period ended 1 August 2009 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 Services Authority and was authorised for issue by the Board of Directors on 22 September 2009.
The half-year financial report is prepared in accordance with the EU endorsed standard IAS 34 'Interim Financial Reporting'. The comparative figures for the 52 week period to 31 January 2009 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 237(2) or (3) of the Companies Act 1985.
The information contained in the half-year financial report for the 26 week period to 1 August 2009 and 2 August 2008 is unaudited.
As required by the Disclosure and Transparency Rules of the UK's Financial Services 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 31 January 2009, except for the policies stated below:
CHANGES IN ACCOUNTING POLICY
The Group applies IAS 1 "Presentation of Financial Statements" (2007) which became effective as of 1 January 2009. As a result, the Group presents in the consolidated statement of changes in equity all owner changes in equity, whereas all non-owner changes in equity are presented in the consolidated statement of comprehensive income. This presentation has been applied in these consolidated interim financial statements as of and for the 26 week period to 1 August 2009. Comparative information has also been restated and there has been no significant impact on the presentation of the financial statements.
As of 1 February 2009 the Group determines and presents operating segments based on the information that internally is provided to the Executive Chairman, who is the Group's chief operating decision maker. This change in accounting policy is due to the adoption of IFRS 8 "Operating Segments". The adoption of IFRS 8 has made no significant impact on the presentation of 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 31 January 2009.
1. BASIS OF PREPARATION (continued)
GOING CONCERN
The Board has considered the risks and uncertainties for the remaining 26 week period to 30 January 2010 and determined that the risks presented in the Annual Report and Accounts 2009, noted below, remain relevant:
Damage to reputation and brands;
Property factors;
Seasonality;
Economic factors; and
Personnel.
A major variable, and therefore risk, to the Group's financial performance for the balance 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.
As at 1 August 2009, the Group has net cash balances (cash net of debt) of £5,938,000 and undrawn committed borrowing facilities of £61,000,000. As a consequence, the Directors believe that the Group is well placed to manage its business risks successfully despite the current uncertain economic outlook.
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.
PRIOR PERIOD RESTATEMENT
The comparative Condensed Statement of Financial Position as at 2 August 2009 has been restated to reflect the completion in the period to 31 January 2009 of initial accounting in respect of the acquisitions of Bank Fashion Limited and Topgrade Sportswear Limited made in the period to 2 February 2008. Adjustments made to the provisional calculation of the fair value of assets and liabilities acquired have resulted in an increase to goodwill of £863,000 and an increase in minority interests of £107,000. The fair value of assets and liabilities acquired remain unchanged from those disclosed in the Annual Report and Accounts 2009.
2. SEGMENTAL ANALYSIS
The Group has adopted IFRS 8 Operating Segments for the current period. 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.
In prior years, segment information reported externally was analysed on the basis of categories of product sold by the Group (Sport or Fashion). However, 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 as follows:
Sports retail
Fashion retail
Wholesale businesses
Segmental operating profit represents the profit earned by each segment before financial expenses, financial income, the share of results of joint venture and taxation. Certain central administrative costs including Director's salaries are included within the Group's core 'Sports retail' result. This is consistent with the results as reported to the Group's 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 products and customers is not appropriate.
Information regarding the Group's operating segments for the 26 weeks to 1 August 2009 is reported below.
| INCOME STATEMENT | Sports retail £000 | Fashion retail £000 | Wholesale £000 | Eliminations £000 | Total £000 |
| revenue | 270,042 | 44,768 | 10,043 | (860) | 323,993 |
| Operating profit/(loss) before financing and exceptional items | 17,244 | (2,763) | (466) | 345 | 14,360 |
| Exceptional items | (2,509) | (730) | 11 | - | (3,228) |
| operating profit/(loss) | 14,735 | (3,493) | (455) | 345 | 11,132 |
| Share of results of joint venture | (800) | ||||
| Financial income | 114 | ||||
| Financial expenses | (318) | ||||
| profit before tax | 10,128 | ||||
| Income tax expense | (3,241) | ||||
| Profit for the period | 6,887 |
Eliminations include the reversal of inter-segment trade and other consolidation entries. 2. SEGMENTAL ANALYSIS (continued)
The comparative segmental results for the 26 weeks to 1 August 2008 is shown below. Comparative information has been restated to conform to the requirements of IFRS 8.
| INCOME STATEMENT | Sports retail £000 | Fashion retail £000 | Wholesale £000 | Eliminations £000 | Total £000 |
| revenue | 252,262 | 40,333 | 6,862 | (505) | 298,952 |
| Operating profit/(loss) before financing and exceptional items | 16,180 | (3,319) | 209 | (30) | 13,040 |
| Exceptional items | (2,993) | (294) | - | - | (3,287) |
| operating profit/(loss) | 13,187 | (3,613) | 209 | (30) | 9,753 |
| Share of results of joint venture | (245) | ||||
| Financial income | 227 | ||||
| Financial expenses | (619) | ||||
| profit before tax | 9,116 | ||||
| Income tax expense | (3,008) | ||||
| Profit for the period | 6,108 |
The following is an analysis of the Group's assets by operating segment:
| TOTAL ASSETS | As at 1 August 2009 £000 | As at 31 January 2009 £000 | |
| Sports retail | 166,036 | 148,704 | |
| Fashion retail | 48,026 | 48,119 | |
| Wholesale | 13,483 | 6,727 | |
| Total segment assets | 227,545 | 203,550 | |
| Unallocated | 16,208 | 17,008 | |
| Total assets | 243,753 | 220,558 |
For the purposes of monitoring segment performance and allocating resources between segments, the chief operating decision maker monitors the tangible, intangible and financial assets attributable to each segment. All assets are allocated to reportable segments with the exception of investments in joint ventures, tax assets and elements of goodwill.
3. EXCEPTIONAL ITEMS
| 26 weeks to 1 August 2009 £000 | 26 weeks to 2 August 2008 £000 | 52 weeks to 31 January 2009 £000 | ||||
| Loss on disposal of non-current assets | 1,286 | 1,242 | 2,976 | |||
| Onerous lease provision | 1,837 | - | 3,000 | |||
| Impairment of non-current assets | 105 | - | 2,225 | |||
| Selling and distribution expenses - exceptional | 3,228 | 1,242 | 8,201 | |||
| Impairment of intangible assets | - | 2,045 | 2,045 | |||
| Impairment of available for sale investment | - | - | 6,077 | |||
| Administrative expenses - exceptional | - | 2,045 | 8,122 | |||
| 3,228 | 3,287 | 16,323 |
4. INCOME TAX EXPENSE
| 26 weeks to 1 August 2009 £000 | 26 weeks to 2 August 2008 £000 | 52 weeks to 31 January 2009 £000 | ||||
| Current tax | ||||||
| UK corporation tax at 28.0% (2008: 28.3%) | 3,030 | 3,388 | 14,167 | |||
| Adjustment relating to prior periods | 12 | - | 25 | |||
| Total current tax charge | 3,042 | 3,388 | 14,192 | |||
| Deferred tax | ||||||
| Deferred tax (origination and reversal of temporary differences) | 199 | (380) | 87 | |||
| Adjustments relating to prior periods | - | - | (572) | |||
| Total deferred tax charge/(credit) | 199 | (380) | (485) | |||
| Income tax expense | 3,241 | 3,008 | 13,707 |
5. DIVIDENDS
After the balance sheet date the following dividends were proposed by the Directors. The dividends were not provided for at the balance sheet date.
| 26 weeks to 1 August 2009 £000 | 26 weeks to 2 August 2008 £000 | 52 weeks to 31 January 2009 £000 | ||||
| 3.30p per ordinary share (2 August 2008: 3.10p, 31 January 2009: 8.90p) | 1,606 | 1,496 | 4,331 |
DIVIDENDS ON ISSUED ORDINARY SHARE CAPITAL
| 26 weeks to 1 August 2009 £000 | 26 weeks to 2 August 2008 £000 | 52 weeks to 31 January 2009 £000 | ||||
| Final dividend of 8.90p (2008: 6.00p) per qualifying ordinary share approved in respect of prior period, but not recognised as a liability in that period | 4,331 | 2,896 | 2,896 | |||
| Interim dividend of 3.10p per qualifying ordinary share paid in respect of 52 week period ended 31 January 2009 | - | - | 1,496 | |||
| 4,331 | 2,896 | 4,392 |
6. EARNINGS PER ORDINARY SHARE
BASIC AND DILUTED EARNINGS PER ORDINARY SHARE
The calculation of basic and diluted earnings per ordinary share for the 26 weeks to 1 August 2009 is based on the profit for the period attributable to equity holders of the parent of £6,984,000 (26 weeks to 2 August 2008: £6,010,000; 52 weeks to 31 January 2009: £24,379,000) and a weighted average number of ordinary shares outstanding during the 26 weeks ended 1 August 2009 of 48,661,658 (26 weeks to 2 August 2008: 48,263,434; 52 weeks to 31 January 2009: 48,287,502) calculated as follows:
| 26 weeks to 1 August 2009 | 26 weeks to 2 August 2008 | 53 weeks to 31 January 2009 | ||||
| Issued ordinary shares at beginning of period | 48,661,658 | 48,263,434 | 48,263,434 | |||
| Issued ordinary shares at end of period | 48,661,658 | 48,263,434 | 48,661,658 | |||
| Weighted average number of ordinary shares during the period - basic and diluted | 48,661,658 | 48,263,434 | 48,287,502 |
ADJUSTED BASIC AND DILUTED EARNINGS PER ORDINARY SHARE
Adjusted basic and diluted earnings per ordinary share have been based on the profit for the period attributable to equity holders of the parent for each financial period but excluding the post tax effect of certain exceptional items. The Directors consider that this gives a more meaningful measure of the underlying performance of the Group.
| 26 weeks to 1 August 2009 £000 | 26 weeks to 2 August 2008 £000 | 52 weeks to 31 January 2009 £000 | ||||
| Profit for the period attributable to equity holders of the parent | 6,984 | 6,010 | 24,379 | |||
| Exceptional items excluding loss on disposal of non-current assets | 1,942 | 2,045 | 13,347 | |||
| Tax relating to relevant exceptional items | (543) | (573) | (1,885) | |||
| Share of exceptional items of joint venture (net of tax) | 847 | - | (914) | |||
| Profit for the period attributable to equity holders of the parent excluding exceptional items | 9,230 | 7,482 | 34,927 | |||
| Adjusted basic and diluted earnings per ordinary share | 18.97p | 15.50p | 72.33p |
7. ACQUISTIONS
ACQUISITION OF CHAUSPORT SA
On 19 May 2009, the Group acquired 100% of the entire issued share capital of Chausport SA for a cash consideration of £7,211,000 (€8.0 million) together with associated fees of £696,000. Chausport SA is a French retailer with 78 stores in premium locations in town centres and shopping centres across France.
The provisional goodwill calculation is summarised below:
| Book value £000 | Fair value adjustments £000 | Provisional Fair value £000 | |
| Acquiree's net assets at the acquisition date: | |||
| Property, plant & equipment | 1,637 | (79) | 1,558 |
| Non-current other receivables | 6,581 | 2,697 | 9,278 |
| Inventories | 6,282 | (512) | 5,770 |
| Trade and other receivables | 1,350 | - | 1,350 |
| Cash and cash equivalents | 639 | - | 639 |
| Interest bearing loans and borrowings | (2,318) | - | (2,318) |
| Trade and other payables | (8,335) | - | (8,335) |
| Income tax liabilities | (35) | - | (35) |
| Net identifiable assets | 5,801 | 2,106 | 7,907 |
| Goodwill on acquisition | - | ||
| Consideration paid - satisfied in cash | 7,907 |
Non-current other receivables comprise landlord deposits and leasehold interests in stores which were held at historic cost.
Included in the result for the 26 week period to 1 August 2009 is revenue of £9,275,000 and a profit before tax of £9,000 in respect of Chausport SA.
7. ACQUISITIONS (continued)
ACQUISITION OF KOOGA RUGBY LIMITED
On 3 July 2009, the Group acquired 100% of the entire issued share capital of Kooga Rugby Limited for a consideration of £1 together with associated fees of £30,000. Kooga Rugby Limited is involved in the design, sourcing and wholesale of rugby apparel, footwear and accessories and is sole kit supplier to a number of professional rugby union and rugby league clubs.
The provisional goodwill calculation is summarised below:
| Book value £000 | Fair value adjustments £000 | Provisional Fair value £000 | |
| Acquiree's net liabilities at the acquisition date: | |||
| Intangible assets | 262 | 191 | 453 |
| Property, plant & equipment | 347 | (211) | 136 |
| Inventories | 1,450 | (178) | 1,272 |
| Trade and other receivables | 1,956 | (758) | 1,198 |
| Cash and cash equivalents | - | - | - |
| Interest bearing loans and borrowings | (4,824) | 3,375 | (1,449) |
| Trade and other payables | (1,937) | (25) | (1,962) |
| Net identifiable liabilities | (2,746) | 2,394 | (352) |
| Goodwill on acquisition | 382 | ||
| Consideration paid - satisfied in cash | 30 |
Fair value adjustments include a reduction of £3,375,000 in interest bearing loans and borrowings following an agreement with the lender.
Included in the result for the 26 week period to 1 August 2009 is revenue of £200,000 and a loss before tax of £182,000 in respect of Kooga Rugby Limited.
Had the acquisitions of Chausport SA and Kooga Rugby Limited been effected at 1 February 2009, the revenue and profit before tax of the Group for the 26 week period to 1 August 2009 would have been £331,411,000 and £8,405,000 respectively.
8. ANALYSIS OF NET DEBT
| At 31 January 2009 £000 | On acquisition of subsidiary £000 | Cashflow £000 | At 1 August 2009 £000 | |
| Bank balances and cash floats | 23,538 | 639 | (16,345) | 7,832 |
| Cash and cash equivalents | 23,538 | 639 | (16,345) | 7,832 |
| Interest-bearing loans and borrowings: | ||||
| Bank loans and overdrafts | - | (3,142) | 1,331 | (1,811) |
| Other loans | - | (625) | 625 | - |
| Loan notes | (83) | - | - | (83) |
| 23,455 | (3,128) | (14,389) | 5,938 |
Subsequent to the 26 week period to 1 August 2009, the Group has acquired the key trading assets and trade of Canterbury Europe Limited (in administration) along with the global rights to the heritage rugby brands 'Canterbury' and 'Canterbury of New Zealand'. The total cash consideration paid amounted to £6,650,000 (including fees). Separately, stock with a value of £4,289,000 was also acquired.
10. RELATED PARTY TRANSACTIONS AND BALANCES
RELATED PARTY - PENTLAND GROUP PLC
Pentland Group Plc owns 57.5% (2008: 57%) of the issued ordinary share capital of JD Sports Fashion Plc.
| Value of transactions 26 weeks to 1 August 2009 £000 | Receivable / (Payable) at 1 August 2009 £000 | Value of transactions 26 weeks to 2 August 2008 £000 | Receivable / (Payable) at 2 August 2008 £000 | ||
| Purchase of inventory for retail | (11,410) | - | (12,604) | - | |
| Other income | 198 | - | - | - | |
| Payments (gross including VAT) | (12,248) | - | (12,780) | - | |
| Receipts (gross including VAT) | 192 | - | - | - | |
| Trade payables (gross including VAT) | - | (2,016) | - | (3,323) |
RELATED PARTY - FOCUS BRANDS LIMITED
The Company owns 49% of the issued ordinary share capital of Focus Brands Limited.
| Value of transactions 26 weeks to 1 August 2009 £000 | Receivable / (Payable) at 1 August 2009 £000 | Value of transactions 26 weeks to 2 August 2008 £000 | Receivable / (Payable) at 2 August 2008 £000 | ||
| Purchase of inventory for retail | (1,770) | - | (2,990) | - | |
| Rental income | 184 | - | 158 | - | |
| Interest income | 27 | - | 83 | - | |
| Payments (gross including VAT) | (1,994) | - | (2,825) | - | |
| Trade payables (gross including VAT) | - | (43) | - | (652) | |
| Loan notes receivable | - | 2,657 | - | 2,563 |
11. CONTINGENT LIABILITY
The Group formerly provided a guarantee on an interest bearing loan in Focus Brands Limited. This guarantee was provided in conjunction with other shareholders on a several basis with each shareholder guaranteeing the loan in line with their relative shareholding. As at 1 August 2009, the Group's contingent liability on this loan was £nil (2008: £1,846,000).
12. HALF-YEAR REPORT
The half-year report will be posted to all shareholders in mid October. Additional copies are available on application to the Company Secretary, JD Sports Fashion Plc, Hollinsbrook Way, Pilsworth, Bury, Lancashire, BL9 8RR, or can be downloaded from our website: www.jdplc.com.
RESPONSIBILITY STATEMENT
We confirm that to the best of our knowledge:
The condensed set of financial statements has been prepared in accordance with IAS 34 'Interim Financial Reporting' as adopted by the EU;
The interim management report includes a fair review of the information required by:
a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of principal risks and uncertainties for the remaining six months of the year; and
b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.
By order of the Board
Brian Small
Group Finance Director
22 September 2009
INDEPENDENT REVIEW REPORT TO JD SPORTS FASHION PLC
INTRODUCTION
We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the 26 week period ended 1 August 2009 which comprises the Condensed Consolidated Income Statement, the Condensed Statement of Comprehensive Income, the Consolidated Statement of Financial Position, the Condensed Consolidated Statement of Changes in Equity, the Consolidated Statement of Cashflows and the related explanatory notes. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
This report is made solely to the Company in accordance with the terms of our engagement to assist the Company in meeting the requirements of the Disclosure and Transparency Rules ('the DTR') of the UK's Financial Services Authority ('the UK FSA'). Our review has been undertaken so that we might state to the Company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company for our review work, for this report, or for the conclusions we have reached.
DIRECTORS' RESPONSIBILITIES
The half-yearly financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the half-yearly financial report in accordance with the DTR of the UK FSA.
As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the EU. 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.
OUR RESPONSIBILITY
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.
SCOPE OF REVIEW
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
CONCLUSION
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the 26-week period ended 1 August 2009 is not prepared, in all material respects, in accordance with IAS 34 as adopted by the EU and the DTR of the UK FSA.
Stuart Burdass
For and on behalf of:
KPMG Audit PlcChartered Accountants
Manchester22 September 2009