Contents
Summary of Key Performance Indicators 3
Chairman’s Statement 4
Financial and Risk Review 10
Property and Stores Review 12
Corporate and Social Responsibility 14
The Board 18
Directors’ Report 20
Corporate Governance 22
Directors’ Remuneration Report 29
Directors’ Responsibility Statement 36
Independent Auditor’s Report 38
Consolidated Income Statement 41
Group and Company Statement of Recognised Income and Expense 41
Group and Company Balance Sheets 42
Group and Company Cash Flow Statements 43
Notes to the Financial Statements 44
Five Year Record 77
Financial Calendar 78
Shareholder Information 78
Summary of Key
Performance Indicators
Revenue
Gross profit %
Operating profit (before exceptional items)
Profit before tax and exceptional items
Exceptional items
Operating profit
Profit before tax
Basic earnings per ordinary share
Adjusted basic earnings per ordinary share
Total dividend payable per ordinary share
Net cash at end of year
Business Highlights
• Total revenue increased by 13.3% in the year and by 3.9% on a like for like basis (Sports Fascias 3.3%;
Fashion Fascias 7.9%)
• Gross margin improved marginally from 49.2% to 49.3%
• Group profit before tax and exceptional items up 24% to £53.6 million (2008: £43.4 million)
• Profit before tax up 9% to £38.2 million (2008: £35.0 million)
• Net cash position at the period end increased to £23.5 million (2008: £11.7 million) even after
an increase in capital expenditure (including disposal costs) to £30.1 million (2008: £21.0 million)
and acquisitions, investments and associated asset purchases in the year totaling £9.4 million
(2008: £31.3 million)
• Exceptional items (excluding share of exceptional items of joint venture) of £16.3 million principally
from non-property related matters concerning the impairment of the investment in JJB Sports
Plc and the write off of the remaining goodwill from the acquisition of the Hargreaves airports
stores portfolio combined with a provision for stores returning under privity of contract following
failed assignments
• Final dividend payable increased by 48.0% to 8.9p (2008: 6.0p) bringing the total dividends payable
for the year up to 12.0p (2008: 8.5p), an increase of 41.0%
52 weeks to
31 January 2009
£000
670,855
49.3%
54,473
53,626
(16,323)
38,150
38,217
50.49p
72.33p
12.00p
23,455
53 weeks to
2 February 2008
Restated
£000
592,240
49.2%
44,019
43,407
(8,404)
35,615
35,003
48.79p
57.05p
8.50p
11,731
53.6
43.4
670.9
592.2
530.6
471.7
490.3
23.5
25.1
10.9
11.7
16.6
12.9
2005
2006
2007
2008
2009
2007
2008
2009
2005
2006
2007
2008
2009
(13.2)
2006
(30.8)
2005
2
Revenue (£m)
Net (debt)/cash (£m)
Profit before tax and
exceptional items (£m)
3
Chairman’s Statement
Introduction
The year ended 31 January 2009 has been the fifth successive year of
good progress in revenue and profitability for the Group. We have improved
our profit before tax and exceptional items by 24% in the year to £53.6
million (2008: £43.4 million). This follows increases of 73% and 51% in the
previous two years.
Group profit before tax has increased by 9% in the year to £38.2 million
(2008: £35.0 million) and Group profit after tax has increased by 4% to
£24.5 million (2008: £23.6 million).
Group operating profit (before exceptional items) for the year was up 24%
to £54.5 million (2008: £44.0 million) and comprises a Sports Fascias profit
of £54.3 million (2008: £45.6 million) and a Fashion Fascias profit of £0.2
million (2008: loss of £1.6 million).
The year end cash position has risen to £23.5 million (2008: £11.7 million)
and the Group retains £70 million of committed rolling credit and working
capital facilities. The new year has commenced satisfactorily and the Board
wishes to retain the funding capability to develop the Group operationally
and by acquisition. Nevertheless, after a sustained period of results
improvement and balance sheet strengthening, the Board has decided
to propose an increase in the level of the dividend with a final proposed
dividend of 8.9p bringing the total dividends payable for the year to 12.0p
(2008: 8.5p), an increase of 41%.
Acquisitions
On 11 April 2008 the Group acquired 100% of the issued share capital
of Nicholas Deakins Limited (‘Deakins’) for a cash consideration of £1.4
million including fees. Deakins is a small business in the design, sourcing
and wholesale of Deakins branded and own brand fashion products,
principally footwear. The customers include JD Sports, Scotts and Bank as
well as third parties. Its results are consolidated with those of the Fashion
Fascias and its external revenue is less than £1 million.
Sports Fascias
The Sports Fascias’ total revenue increased by 5.0% during the period to
£571.8 million (2008: £544.4 million), including revenue from Topgrade
Sportswear of £12.6 million (2008: £2.6 million in 12 weeks), an end of
line wholesaler acquired in November 2007. Like for like sales in the retail
Sports Fascias for the year were up 3.3%. Gross margin was unchanged at
49.8%, but included in this was dilution of 60 basis points from Topgrade’s
end of line wholesale business.
The performance of our principal Sports Fascias, JD and Size, has
continued to be strong during the last year as a result of the current
management team’s continuing and consistent strategy over the last five
years of eliminating underperforming stores, improving gross margins and
reducing terminal stocks. We continue to see the benefits of better stock
management coming from investment in merchandise planning systems
and staff.
In addition, the Group has continued its programme of store development
with 16 new JD and 2 Size store openings and 32 store refurbishments.
This substantial refurbishment programme started in 2007 and will continue
at a slower pace through 2009. The store refurbishments often result in full
store closures for a number of weeks but we expect this to be justified by
their subsequent performance. 18 stores were closed in the period including
one which was transferred to the Fashion Fascias.
Topgrade made a negligible contribution to the operating profits of the
Sports Fascias in both periods. It was bought with the intention of adding
to its existing operation a new business selling sports and fashion brands at
discounted prices through catalogues and online. This has been launched
as Get The Label (www.GetTheLabel.com) after the year end.
Fashion Fascias
The Fashion Fascias now incorporate Bank, Scotts and Deakins. With the
exception of Deakins, they are all now based at the Group’s head office
in Bury.
The Bank Fascia stores sell largely branded fashion to both males and
females, predominantly from teenage to mid twenties. They were acquired
in December 2007 and represent the largest part of the Fashion Fascias.
There are now 54 stores based predominantly in the North and Midlands.
The business’s commercial team remains autonomous but Bank now
benefits from the Group’s central support functions and systems including
its more service oriented distribution service. Revenue in the year was
£66.5 million (2008: £13.3 million in 8 weeks), up 9.5% organically.
Operating profit (before exceptional items) was £1.2 million (2008: £0.4
million). The Board remains confident that there is a significant opportunity
to grow profitability in this Fascia through enhanced margins, better stock
management and store rollout.
The Scotts Fascia sells branded fashion to younger males and had 38
stores at year end, again largely in the North and Midlands. Revenue in
the year was £32.0 million (2008: £34.5 million) and the operating loss
(before exceptional items) was reduced to £1.0 million (2008: £2.0 million),
helped by a 1.3% improvement in gross margin and efficiencies achieved
through prior year store rationalisation. Like for like sales rose by 5.1%.
Further progress to profitability has therefore been made in the year and it
is believed that improvements in the offer and stock management will lead
to Fascia profitability. There are still a few underperforming stores which
ideally would be disposed of.
Deakins contributed less than £1 million of external revenue and a
negligible operating loss since its acquisition on 11 April 2008.
The future success of the Fashion Fascias is very dependent on improving
gross margin from this year’s level of 46.2%.
Group Performance
Revenue
Total revenue increased by 13.3% in the year to £670.9 million (2008:
£592.2 million) as a result of the Group’s positive like for like sales
performance of 3.9%, combined with a full year’s revenue from the Bank
and Topgrade acquisitions made in the prior year as well as a small
contribution from the newly acquired Deakins.
Gross margin
Group gross margin improved marginally to 49.3% (2008: 49.2%). In the
light of dilution from both Topgrade and Deakins, this was a satisfactory
performance but the best opportunities for future margin enhancement now
exist in the Fashion Fascias.
Overheads
Selling, distribution and administration overheads (excluding exceptional
items) reduced to 41.3% of sales (2008: 42.0%) driven by store efficiencies
and performance. Certain central overheads including buying and
merchandising, own brand design, marketing and IT costs have risen at well
above inflationary levels during the past year and to date this investment
has helped us to achieve better results. The Board believes that if a
continuing return is not being made then overhead can be cut back and
also that distribution efficiency can be increased over time.
Operating profits and results
Operating profit (before exceptional items) increased by £10.5 million to
£54.5 million (2008: £44.0 million), a 24% increase on last year. Group
operating margin (before exceptional items) has therefore increased to 8.1%
(2008: 7.4%).
Following an increase in the exceptional items to £16.3 million (2008:
£8.4 million), Group operating profit rose slightly from £35.6 million to
£38.2 million.
The exceptional items (excluding share of exceptional items in joint
venture) comprise:
Impairment of investment in JJB Sports Plc
Impairment of goodwill in Hargreaves airport portfolio
Impairment of fixed assets in underperforming stores
Loss on disposal of fixed assets
Onerous lease provision for stores returning under privity
Total exceptional charge
£m
6.1
2.0
2.2
3.0
3.0
16.3
The investment in 9.98% of the issued voting share capital of JJB Sports
Plc made in November 2008 was made at 32.25p per share. The shares
have been written down to their quoted value of 8.00p per share at 31
January 2009.
The share of exceptional items of joint venture (Focus Brands) consists
entirely of an unrealised gain on exchange contracts for settlement of
supplier invoices in the 2009/10 year.
Working Capital and Financing
Net financing costs have increased from £0.5 million to £0.7 million,
principally as a result of the acquisition of Bank in December 2007.
Year end net cash of £23.5 million represented a £11.8m improvement on
the position at January 2008 (£11.7 million). This net cash balance has been
achieved after expenditure on acquisitions, investments and associated
asset purchases in the year totalling £9.4 million (2008: £31.3 million) and
net capital expenditure (including disposal costs) of £30.1 million (2008:
£21.0 million). Capital expenditure before disposal costs was £28.8 million
(2008: £19.8 million) being £23.8 million in the Sports Fascias and £5.0
million in the Fashion Fascias. The capital expenditure in the year included
£11.8 million on new stores and £14.6 million on refurbishments.
Working capital remains well controlled and suppliers continue to be paid
to agreed terms and settlement discounts are taken whenever due.
4
5
Chairman’s Statement
continued
Store Portfolio
We have continued to rationalise our store portfolio but, with the current
economic climate impacting heavily on retail property occupancy levels, it
has become much more difficult to dispose of stores. We have nevertheless
closed a further 22 underperforming and/or duplicate stores during the
year. We have also opened 27 new sites.
During the year, store numbers (excluding trading websites) moved as
follows:
Employees
The Group’s excellent results would not have been possible without the
support of a dedicated workforce for which the Board is very grateful.
We are committed to continue increasing training and other support to
enhance both their career prospects and our own customer service.
Sports Fascias
Start of year
New stores
Closures
Transfer To Fashion
Close of year
Fashion Fascias
Start of year
New Stores
Closures
Transfer From Sport
Close of year
Peter Cowgill
Executive Chairman
8 April 2009
Units
345
18
(17)
(1)
345
‘000 sq ft
1,089
65
(47)
(2)
1,105
Units
87
9
(5)
1
92
‘000 sq ft
191
19
(7)
2
205
Dividends and Earnings Per Ordinary Share
The Board proposes paying a final dividend of 8.90p (2008: 6.00p) bringing
the total dividend payable for the year to 12.00p (2008: 8.50p) per ordinary
share. The proposed final dividend will be paid on 3 August 2009 to all
shareholders on the register at 8 May 2009. The final dividend has been
increased by 48% with total dividends payable for the year increased by
41%. This follows an 18% increase in the full year dividend in the prior year.
The adjusted earnings per ordinary share before exceptional items was
72.33p (2008: 57.05p).
The basic earnings per ordinary share was 50.49p (2008: 48.79p).
Current Trading and Outlook
Against the backdrop of current market and economic conditions,
trading in the 9 weeks to 4 April 2009 has been encouraging with Group
like for like sales up 0.3% (Sports Fascias -0.2%; Fashion Fascias +3.6%)
despite last year’s figures including the complete Easter trading period.
A further update will be made in our Interim Management Statement on
8 June 2009.
The Sports Fascias’ strong performance in recent years with regards to like
for like sales and gross margins means that further improvement in these
areas is increasingly challenging. Nevertheless the new year has started
satisfactorily and we have a well differentiated proposition. The Board
remains focused on continuing to deliver operational and financial progress
for the Group.
6
7
‘This has been the fifth
successive year of good
progress in revenue and
profitability for the Group’
8
9
Financial and Risk Review
Introduction
Profit before tax increased by £3.2 million to £38.2 million in the year.
This improvement was achieved through:
• Continued organic sales growth
• A further small increase in gross margin
• Improved cost ratios from store efficiencies
Taxation
The effective rate of tax on profit has increased from 32.6% to 35.9%.
This increase is principally due to the impairment of the investment in JJB
Sports Plc, which did not qualify for tax relief as it is not a realised loss.
Excluding exceptional items, the effective tax rate has fallen from 30.3%
to 29.6%. The effective tax rate excluding exceptional items continues to
be above the standard rate due to the depreciation of non-current assets
which do not qualify for any form of capital allowances.
Earnings Per Share
The basic earnings per share has increased from 48.79p to 50.49p.
The Directors consider the adjusted earnings per share to be a more
appropriate measure of the Group’s earnings performance however, as it
excludes the post tax effect of exceptional items other than the loss on
disposal of non-current assets. The adjusted earnings per share increased
by 27% from 57.05p to 72.33p.
Dividends
A final cash dividend of 8.90p per share is proposed which, if approved,
would represent an increase of 48% on the final dividend from the prior
year. Added to the interim dividend of 3.10p per share, this takes the full
year dividend to 12.00p, which is an increase of 41% on the prior year.
Net Cash
The year end net cash position has increased by £11.8 million to £23.5
million after acquisitions and investments totalling £9.4 million and an
increase in capital expenditure before disposal costs from £19.8 million
to £28.8 million. The continued improvement in the net cash position
should enable the Group to take advantage of strategic and store portfolio
opportunities where appropriate.
The net cash position has continued to benefit from tight controls over
stocks. Trade creditors are paid to terms to maximise settlement discounts
with the period end creditor days being 32 (2008: 33).
Treasury Facilities
A five year £70.0 million bank syndicated facility was agreed in October 2006.
This facility is committed until 18 October 2011 and details of its terms are
included in note 21 to the accounts. The facility is entirely revolver based
and contains no fixed repayment element. Although the Group is seeking to
remove the quarterly peaks in the drawdown facilities through the payment
of store rents on a monthly basis wherever possible, without additional cost,
the cash flows are still cyclical in nature, particularly around the trading
peak at Christmas. Accordingly, the Directors believe that a revolving
facility with monthly drawdowns continues to be best suited to the specific
fluctuating lending requirements of the business. This facility has been used
to fund the investments and capital expenditure in the year, with no other
facilities put in place.
Interest rate hedging has not been put in place on the current facility.
The Directors continue to be mindful of the potential volatility in base
10
rates, but at present do not consider a long term interest rate hedge to be
necessary given that the facility is not used during certain periods of the
year. This position is reviewed regularly however, along with the level of
facility requirements.
The Group’s principal foreign exchange exposure continues to be on
the sourcing of own brand merchandise from the Far East which usually
has to be paid for in US Dollars. A buying rate is set at the start of the
buying season (typically six to nine months before product is delivered to
stores). At this point, the Group aims to protect the anticipated US Dollar
requirement at rates at, or above, the buying rate through appropriate
foreign exchange instruments. The Group is currently exposed to
movements in currency rates on $10.0 million of its US Dollar requirement
for the year.
Risk Factors
Any business undertaking will involve some risk with many risk factors
common to any business no matter what segment it operates in. The
Directors acknowledge however that certain risks and uncertainties are
more specific to the Group and the markets in which its businesses operate.
The principal risk factors are assessed below:
Damage to reputation of brands
The Group is heavily dependent on the brands it sells being desirable
to the customer. As such, the Group is exposed to potential events or
circumstances, which could give rise to liability claims and/or reputational
damage. These events may or may not be under the Group’s control.
The Group also needs its brands to maintain their design and marketing
prominence.
The Group works with suppliers to ensure that the products being
sourced satisfy increasingly stringent laws and regulations governing
issues of health and safety, packaging and labelling and other social and
environmental factors.
The Group also seeks to ensure it is not overly reliant on a small number of
brands by offering a stable of brands which is constantly evolving.
Property factors
The retail landscape has seen significant changes in recent years with a
number of new developments either already opened or in the pipeline and
a high volume of retail units becoming vacant. The Group can be exposed
where it has committed itself to a long lease in a location which, as a
result of a more recent retail development, is no longer as attractive to the
customer so suffers from reduced footfall. Wherever possible, the Group
will seek either to take out new leases for a period not exceeding 10 years
or to negotiate lease breaks, thereby limiting this potential exposure and
affording the Group increased flexibility to respond to such changes.
When the Group becomes aware of a new development, a review is
undertaken to establish the possible impact on existing stores in the area.
If appropriate, the Group would then work with landlords to agree a
surrender of the lease. Where this is not possible, the Group would seek
to assign the lease or sublet it to another retailer. In many cases, this
necessitates the payment of an incentive to the other retailer. Assigning
the lease or finding a sub-tenant is not without risk however, because if
the other retailer fails then the liability to pay the rent usually reverts to the
head lessee.
The Group is mindful of current economic factors and the higher volume
of vacant units available as a consequence of a number of retailers going
out of business. This has an impact on the Group’s ability to dispose of
its own surplus premises and increases the risk that previously assigned or
sublet leases will revert to the Group.
Seasonality
The Group’s business is highly seasonal. Historically, the Group’s most
important trading period in terms of sales, profitability and cash flow has
been the Christmas season. Lower than expected performance in this
period may have an adverse impact on results for the full year which may
result in excess inventories which are difficult to liquidate.
Economic factors
As with other retailers, the demand for the Group’s products is influenced
by a number of economic factors, notably interest rates, the availability of
consumer credit, employment levels and ultimately, disposable incomes.
This is particularly relevant at the current time, where many consumers are
cutting back on non-essential spending. The Group seeks to manage this
risk by offering a highly desirable product range which is differentiated to
that of the Group’s competitors at competitive prices.
Personnel
The success of the Group is partly dependent upon the continued service
of its key management personnel and upon its ability to attract, motivate
and retain suitably qualified employees. To help achieve this continued
service, the Group has competitive reward packages for all head office
and retail staff.
The Group also has a long established and substantial training function
which seeks to develop training for all levels of retail staff and thereby
increase morale and improve staff retention. The retention of staff ensures
that knowledge of the Group’s differentiated product offering is not lost
thereby enhancing customer service.
Brian Small
Group Finance Director
8 April 2009
11
Property and Stores Review
We have increased our investment in the store portfolio substantially in
the current year with additional expenditure on both new stores and
refurbishments of existing space.
Refurbishments
The 43 refurbishments in the year included:
• Extensive refurbishments of the JD stores in Metro Centre and Bluewater
• Extensive refurbishment of the flagship JD store in Dublin
• Conversion of two existing stores (one ex JD and one ex Scotts) to the
Bank Fascia
• Refurbishments of two existing JD stores (Bury and Cardiff) where
space has been carved out for a separate Fashion fascia store thereby
increasing utilisation and densities from existing space
The refurbishment programme will continue in the current year although it
is likely that we will refurbish less than 30 stores in the period as we focus
resource on the store opening programme for Bank.
We have also continued to rationalise our store portfolio but, with the
current economic climate impacting heavily on retail property occupancy
levels, it has become much more difficult to dispose of stores. We have
nevertheless closed a further 22 underperforming and/or duplicate stores
during the year (17 Sports Fascias stores and 5 Fashion Fascia stores).
A further three Sports Fascia stores have closed in the year to date.
We opened a total of 27 new stores in the year (18 Sports Fascias stores
and 9 Fashion Fascias stores) and refurbished a total of 43 stores. This
means that over the last two years we have opened a total of 40 stores
and refurbished a further 72 stores. As a consequence, in excess of 30%
of the retail space as at 31 January 2009 has a store fit which is less than
two years old. We believe that the modern and fashionable environment in
our stores drives footfall and is a significant factor in our achievement of a
positive financial performance.
New Stores
The 18 new Sports Fascias stores included 11 stores in new locations
(including two Size stores) with the remaining seven being replacement of
existing space. We anticipate that we will open fewer new Sports Fascias
stores in the current year although we will continue to take opportunities
wherever they occur. We have opened three new Sports Fascias stores in
the year to date.
The nine new Fashion Fascias stores included six new Bank stores.
Investment in this fascia will increase in the current year and we anticipate
that we will open up to 20 new Bank stores of which one is already
open. We believe that Bank gives the Group the opportunity to develop
our presence in the young aspirational fashion sector and consequently
provides a platform for meaningful growth. Ultimately, we believe that the
store model and brand offer from Bank can support a portfolio across the
UK and Ireland in excess of 100 stores.
In addition, we opened three new Scotts stores in the period. We still
plan to maintain Bank and Scotts as separate fascias although we do not
currently expect to open a significant number of new Scotts stores in the
near future.
The store portfolio at 31 January 2009 and 2 February 2008 can be
analysed as follows:
Sports Fascias
No. Stores
JD
Size
First Sport
Nike
Other Fascias
Total
2009
314
15
10
2
4
345
2008
303
13
12
7
10
345
Fashion Fascias
No. Stores
Bank
Scotts
Lacoste (i)
Ath
Total
2009
54
38
-
-
92
2008
47
36
3
1
87
Retail (000 sq ft)
2008
2009
1,013
1,048
19
21
36
28
10
3
11
5
1,089
1,105
Retail (000 sq ft)
2008
2009
104
119
80
86
4
-
3
-
191
205
Group Total
437
432
1,310
1,280
(i) Includes two stores from the acquisition of Bank.
12
13
Corporate and
Social Responsibility
The Group recognises that it has a social responsibility to ensure its business is carried out in a way
that ensures high standards of environmental and human behaviour. With the help and co-operation of
all employees, the Group endeavours to comply with all relevant laws in order to meet that duty and
responsibility wherever it operates. The major contributions of the Group in this respect are detailed
below.
Employment
The Group is a large equal opportunities employer and a large training organisation providing direct
employment and career development to thousands of people across the UK and Republic of Ireland.
The Group employs large numbers of school leavers and university graduates and participates regularly
in work experience schemes with schools and colleges across the country.
Training
The Group recognises that training for all levels of retail staff is vital as it provides a mechanism for
increasing morale and improving staff retention. The retention of staff ensures that knowledge of the
Group’s differentiated product offering is not lost thereby enhancing customer service.
Retail staff at all levels in all of the Group’s Retail fascias are encouraged to seek development and
progression ultimately up to management level with training provided by the Group’s long established
and substantial training function. Training is given in three main areas:
New management induction
Training academy for
new managers
Regional workshops for
junior management
No. of courses
in year
20
Length
of course
5 days
No. of people
on each course
12
3
12 weeks
100
1 day
20
12
Equal opportunities
The Group is committed to promoting policies which are designed to ensure that employees and those
who seek to work for the Group are treated equally regardless of sex, marital status, creed, colour, race
or ethnic origin.
The Group gives full and fair consideration to applications for employment by people who are disabled,
to continue wherever possible the employment of staff who become disabled and to provide equal
opportunities for the career development of disabled employees. It is also the Group’s policy to provide
opportunities for the large number of people seeking flexible or part-time hours.
Communication
The number and geographical dispersion of the Group’s operating locations make it difficult, but
essential, to communicate effectively with employees. A written communication “People 1st” goes to
all staff on a quarterly basis. This communication is primarily designed to communicate, share and
celebrate success within the retail environment.
Outside of this formal quarterly process, communication with retail staff is primarily achieved through
the management in the regional and area operational structures. In addition, formal communications
informing all employees of the financial performance of the Group are issued on a regular basis by the
Group’s Human Resources Department in the form of ‘Team Briefs’.
14
15
Corporate and Social Responsibility
continued
Health and Safety
The Group acknowledges that it has a responsibility to provide a safe and
healthy environment for all its employees, customers, contractors and
other visitors. The Group therefore has a dedicated Health and Safety
team headed by an experienced manager who has worked in health and
safety roles for a period in excess of 10 years. The Health and Safety team
co-ordinates all training in this area, carries out risk assessments and ensures
that safe working practices and equipment are used throughout the Group.
Each retail unit has its own individually prepared health and safety
file which is made available to those who need information to assist
in maintenance, alterations, construction or demolition work. These
individual files document the satisfactory testing of electrical circuits,
emergency lighting, fire alarms and gas compliance. Where appropriate,
these files also contain the details of any surveys for Asbestos Containing
Materials (‘ACMs’) and whether any baselines have been established for the
management of potential ACMs.
The Group has also retained the services of a third party facilities
management company (Gleeds Facilities Management). They provide a
helpdesk for stores to ring if they have any property issues which need
attention. This ensures that issues are resolved promptly and efficiently
thereby maintaining the safe environment within the stores.
Environmental
The Group recognises the importance of protecting our environment for
future generations and is committed to carrying out its activities with due
consideration for the environmental impacts of its operations particularly
with regards to:
• Ensuring efficient use of energy and other materials
• Minimising waste with recycling wherever possible
• Ensuring compliance with relevant legislation and codes of best practice
Energy
It is the Group’s aim to give customers an enjoyable retail experience with
goods presented in an environment that is both well lit and has an ambient
temperature. However, the Group accepts that all the businesses within the
Group must be responsible in their energy usage and associated carbon
emissions.
To that end, the Group has introduced a Carbon Management Program
(‘CMP’) with the initial aims being:
• Ensure there is an accurate baseline for consumption by working with the
electricity suppliers to ensure that billings reflect actual usage
• Improve understanding of what drives usage and when it occurs in the
day by investing in ‘smart’ electricity meters in 148 of the Group’s largest
stores. Combined with the stores where accurate and timely usage data
is already received, this means that in excess of 60% of the Group’s
electricity consumption is automatically measured every 30 minutes. In
addition to 100% accurate billing on these stores, analysis of the data has
also shown that usage in non-trading periods is higher than would have
been expected. The usage in these periods will be driven down through
additional training and investment on small scale building management
systems where appropriate
• Enhance staff awareness through training at store level thereby ensuring
that retail staff understand that they have a key role in the CMP
Under the current rules of the Statutory Carbon Reduction Commitment
(‘CRC’), the Group’s submission to DEFRA will be aggregated with that
of Pentland Group Plc who are the ultimate holding company (see note
33). Therefore, the Group are working with Pentland Group plc to ensure
that there will be an efficient and effective transfer into the new emissions
trading scheme which will be introduced in April 2010 as part of the CRC.
However, from an internal Group perspective, the Finance Director will
carry the responsibility for the entry and subsequent reporting on targets in
the first phase of the CRC to 2013.
The Group is committed to using and subsequently reporting on
appropriate KPIs with regards to energy usage. Accordingly, the Group can
report the following:
Energy Usage – Electricity (MWh)
Energy Usage – Natural Gas (MWh)
Total Energy Usage (MWh)
Carbon Footprint (Tonnes CO2)
2009
49,592
5,270
54,862
33,557
The Group has pledged to reduce its carbon emissions by 3% year on
year on a ‘like for like’ basis until the end of the scheme. This target and
the associated operating standards that drive this target apply to all the
Group’s businesses.
The Group has invested heavily in the period to 31 January 2009 in
replacing inefficient air conditioning systems in over 40 stores with market
leading technologies which use less energy whilst providing an ambient
temperature for staff and visitors. This replacement programme is ongoing
and it is anticipated that a similar number of works will be carried out in
the period to 30 January 2010.
The Group is committed to invest in the necessary resources to help
achieve its targets on reducing carbon emissions with the following works
planned for 2009:
• Expand the CMP to widen the awareness campaign through better
training, improved communication and reporting
• Continue the roll out of smart electricity meters across the store portfolio
• Continue the air conditioning replacement programme
• Increase analysis and reporting of data provided by Smart Meters
The Group is also aware of the need to seek energy from sustainable
sources wherever possible. As a result, the Group has recently awarded the
contract to supply its electricity to 20 locations across Northern Ireland and
Republic of Ireland to Airtricity who source 79% of their electricity from
renewable sources.
Recycling
Wherever possible, cardboard (the major packaging constituent) is taken
back to the distribution centres. The cardboard is then baled and passed to
recycling businesses for reprocessing. During the year, the Group increased
its recycling of cardboard to 193.1 tonnes (2008: 176.6 tonnes).
The Group also continues to recycle paper and other office consumables
wherever possible. This recycling is split into three main elements:
• General paper waste is collected by a recycling business
• Confidential paper waste is shredded on collection by a recycling
business. This business provides a ‘Certificate of Environmental
Accomplishment’ which states that the shredded paper, which was
collected in the year, was the equivalent of 1,123 trees. This represents a
significant increase from the prior year figure of 497 trees
• Photocopier and printer toners (laser and ink) are collected and recycled
for charity by Environmental Business Products Limited
Plastic bags
Approximately 40% of the bags issued by the Group are high quality
drawstring bags, which are generally reused by customers many times.
However, the Group is aware of the environmental impact from plastic bags
and have sought to minimise any impact through the following measures:
• The bags are made from 33% recycled material
• The bags contain an Oxo-biodegradable additive, which means that they
degrade totally over a very short life span
In addition, the Group uses paper based bags rather than plastic bags in its
stores in the Republic of Ireland.
Ethical Labour Considerations
The Group seeks to provide its customers with high quality and value
merchandise from manufacturers who can demonstrate compliance with
internationally accepted good practice in terms of employment and
environmental policies.
The Group cares about the labour standards in its global supply chain and
expects its suppliers to have similar ethical concerns. Prior to any orders
being placed, all new suppliers must complete the Group’s risk assessment
form to ensure that the supplier’s activities are in line with the Ethical Trade
Initiative Base Code. This code covers areas such as health & safety, fire
procedures and maternity pay provisions. The Group’s buyers audit the
accuracy of the responses when visiting the factories concerned.
On occasions, it is not possible to visit the factories directly and the Group
has to rely on the good faith of the suppliers who, through the supplier
contract, are required to agree to the JD code of conduct which includes a
specific policy on ‘Employment Standards for Suppliers’.
General Social Responsibility
The Group seeks to be involved in the community where it can make an
appropriate contribution from its resources and skill base. Examples of this
include:
• JD Versus Cancer
• Donations to ‘Riders For Health’ in Africa
• Sponsorship of the 2008 Multiple Sclerosis Society MS Life Conference
• Sponsorship and donations of kit to local junior sports clubs
16
17
The Board
Peter Cowgill
Executive Chairman and Chairman of the Nominations
Committee aged 56
Peter was appointed Executive Chairman in March 2004.
He was previously Finance Director of the Group until his
resignation in June 2001. Since then he has been a partner in
Cowgill Holloway Chartered Accountants. He is a
Non-Executive Director of a number of private companies
and Non-Executive Chairman of United Carpets Plc and
MBL Group Plc.
Barry Bown
Chief Executive aged 48
Barry joined the Board in 2000 and has been with JD Sports
Fashion Plc since 1984. He held the positions of Head
of Retail, Head of Buying and Merchandising and Chief
Operating Officer prior to his appointment as Chief Executive
in 2000.
Brian Small
Finance Director aged 52
Brian was appointed Finance Director and Company
Secretary in January 2004. Immediately prior to his
appointment, he was Operations Finance Director at Intercare
Group Plc and has also been Finance Director of a number of
other companies. He qualified as a Chartered Accountant with
Price Waterhouse in 1981.
Colin Archer
Non-Executive Director, Chairman of Audit and
Remuneration Committees and member of the
Nominations Committee aged 67
Colin was appointed a Non-Executive Director in November
2001. He has over 40 years experience in the banking and
financial arenas, having previously been Assistant Corporate
Director with Barclays Bank Plc. He is also a member of the
Chartered Institute of Bankers.
Chris Bird
Non-Executive Director, member of Audit,
Remuneration and Nominations Committees aged 46
Chris was appointed to the Board in May 2003. He is
a marketing specialist with his own public relations and
marketing agency. Chris has over 20 years media experience in
newspapers, commercial radio and sport.
18
19
Directors’ Report
The Directors present their annual report and the audited financial
statements for the 52 week period ended 31 January 2009.
Principal Activities and Business Review
The principal activity of the Group continues to be the retail of sports and
leisure wear.
A review of the business, providing a comprehensive analysis of the main
trends and factors likely to affect the development, performance and
position of the business, including environmental, employee, social and
community issues together with the Group’s Key Performance Indicators
and a description of the principal risks and uncertainties facing the business
is detailed on pages 3 to 17 as follows:
• Summary of Key Performance Indicators (page 3)
• Chairman’s Statement (pages 4 to 6)
• Financial and Risk Review (page 10 to 11)
• Property and Stores Review (page 12 to 13)
• Corporate and Social Responsibility (pages 14 to 17)
Results
Revenue for the 52 week period ended 31 January 2009 was £670.9 million
and profit before tax £38.2 million compared with £592.2 million and £35.0
million respectively in the previous financial year. The Consolidated Income
Statement is set out on page 41.
Proposed Dividend
The Directors recommend a final dividend of 8.90p per ordinary share
(2008: 6.00p), which together with the interim dividend of 3.10p per
ordinary share (2008: 2.50p) makes the total dividend payable for the year
12.00p (2008: 8.50p).
If approved at the next Annual General Meeting, the dividend will be paid
on 3 August 2009 to shareholders on the register at the close of business
on 8 May 2009.
Directors
The names of the current directors of the Company and their biographical
details are given on page 18. Mr C Archer retires by rotation at the next
Annual General Meeting and is eligible for re-election.
Structure of Share Capital
As at 31 January 2009, the Company’s authorised share capital of
£3,107,500 comprised 62,150,000 ordinary shares of 5p each.
As at 31 January 2009, the Company’s issued share capital of £2,433,083
comprised 48,661,658 ordinary shares of 5p each.
Rights and Obligations of Ordinary Shares
On a show of hands at a general meeting, every holder of ordinary
shares present in person or by proxy and entitled to vote, shall have
one vote and on a poll, every member present in person or by proxy
and entitled to vote, shall have one vote for every ordinary share held.
Subject to the relevant statutory provisions, and the Company’s Articles of
Association, holders of ordinary shares are entitled to a dividend where
declared or paid out of profits available for such purposes. Subject to the
relevant statutory provisions and the Company’s Articles of Association, on
a return of capital on a winding-up, holders of ordinary shares are entitled
to participate in such a return equally in proportion to their shareholding.
20
Restrictions on Transfer of Securities
The restrictions on the transfer of shares in the Company are as follows:
• The Board may, in its absolute discretion, refuse to register any transfer
of shares, which are not fully paid up (but not so as to prevent dealings
in listed shares from taking place)
• The Board may also refuse to register any transfer of shares unless it is
in respect of only one class of share and it is lodged at the place where
the register of members is kept, accompanied by a relevant certificate
or such other evidence as the Board may reasonably require to show the
right of the transferor to make the transfer
• The Board may refuse to register an allotment or transfer of shares in
favour of more than four persons jointly
• Certain restrictions may from time to time, be imposed by laws and
regulations (for example, insider trading laws)
• Restrictions may be imposed pursuant to the Listing Rules of the
Financial Services Authority whereby certain of the Group’s employees
require the Company’s approval to deal in shares
The Company is not aware of any arrangement between its shareholders
that may result in restrictions on the transfer of shares and/or voting rights.
Directors’ Interests
The interests of the Directors who held office at 31 January 2009 and their
immediate families in the Company’s shares are shown below:
P Cowgill
B Bown
B Small
C Archer
Ordinary shares of 5p each
31 January 2009
410,263
5,676
17,750
19,121
452,810
2 February 2008
410,263
5,676
13,750
18,850
448,539
With the exception of the interests in the Company’s shares held by
B Bown and his immediate family, all of the holdings shown above
represent beneficial interests.
There has been no change in Directors’ interests since the period-end.
Substantial Interests in Share Capital
As at 30 March 2009, the Company has been advised by the following
companies of notifiable interests in its ordinary share capital:
Pentland Group Plc
Sports World International Ltd
Aberforth Partners
Number of
ordinary shares
27,963,722
6,385,255
5,718,440
%
57.47
13.12
11.75
Restrictions on Voting Deadlines
The notice of any general meeting shall specify the deadline for exercising
voting rights and appointing a proxy or proxies to vote in relation to
resolutions to be proposed at the general meeting.
Appointment and Replacement of Directors
The Company may by ordinary resolution appoint a person who is willing
to act as a director, either to fill a vacancy or as an addition to the existing
Board. Any director so appointed shall hold office only until the dissolution
of the first AGM of the Company following appointment unless they are
re-elected during such meeting.
At each AGM of the Company, any director who was elected or last
re-elected at or before the AGM held in the third calendar year before
the then current calendar year must retire by rotation and such further
Directors must retire by rotation so that in total not less than one-third
of the Directors retire by rotation each year. A retiring director is eligible
for re-election.
The number of directors at any point in time shall not be less than two.
Amendment of the Company’s Articles of Association
The Companies Articles of Association may only be amended by a special
resolution at a general meeting of shareholders.
At the 2008 AGM, a special resolution was passed to make amendments
to the existing Articles of Association primarily to accommodate the
provisions of the Companies Act 2006.
Powers of the Directors
The Directors are responsible for the management of the business of
the Company and may exercise all powers of the Company subject to
applicable legislation and regulation and the Memorandum and Articles
of Association.
A resolution was passed at the 2008 AGM giving the Directors authority
to buy back ordinary shares up to a maximum of 10% of the total issued
ordinary share capital of the Company. Any shares purchased under such
authority would be cancelled. No shares have been purchased to date
under this authority.
Change of Control – Significant Agreements
In the event of a change of control of the Company, the Company and
the lenders of the £70.0 million bank syndicated facility shall enter into
negotiations to determine how to continue the facility. If no agreement
is reached within 20 business days of the date of change in control,
the lenders may, by giving not less than 10 business days notice to the
Company, cancel the facility and declare all outstanding loans, together
with accrued interest and all other amounts accrued, immediately due
and payable.
Employees
The Group is committed to promote equal opportunities in employment
regardless of employees’ or potential employees’ sex, marital status,
creed, colour, race, ethnic origin or disability. This commitment applies
in respect of all terms and conditions of employment. Recruitment,
promotion and the availability of training are based on the suitability of any
applicant and full and fair consideration is always given to disabled persons
in such circumstances.
Should an employee become disabled during his or her employment by
the Group, every effort is made to continue employment and training
within their existing capacity wherever practicable, or failing that, in some
alternative suitable capacity.
The Group has continued throughout the year to provide employees
with relevant information and to seek their views on matters of common
concern. Priority is given to ensuring that employees are aware of all
significant matters affecting the Group’s performance and of any significant
organisational changes.
Donations
During the period the Group made charitable donations of £29,500
(2008: £21,700). No political donations were made in the period (2008: £nil).
Creditors Payment Policy
For all trade creditors, it is the Group’s policy to:
• Agree the terms of payment at the start of business with the supplier
• Ensure that suppliers are aware of the terms of payment
• Pay in accordance with its contractual and other legal obligations
The average number of days taken to pay trade creditors by the Group
at the period end was 32 (2008: 33).
The Group does not follow any code or statement on payment practice.
Auditor
In accordance with Section 384 of the Companies Act 1985, a resolution is
to be proposed at the Annual General Meeting for the re-appointment
of KPMG Audit Plc as auditor of the Company.
Disclosure of Information to the Auditor
Each person who is a director at the date of approval of this report
confirms that:
• So far as he is aware, there is no relevant audit information of which
the Company’s auditor is unaware
• Each director has taken all the steps that he ought to have taken as a
director to make himself aware of any relevant audit information and to
establish that the Company’s auditor is aware of that information
Annual General Meeting
Notice of the Annual General Meeting to be held at 1.00pm on 25
June 2009 at Hollinsbrook Way, Pilsworth, Bury, Lancashire BL9 8RR
incorporating explanatory notes of the resolutions to be proposed at the
meeting is enclosed. A Form of Proxy is also enclosed.
By order of the Board of Directors
B Small
Secretary
8 April 2009
Hollinsbrook Way
Pilsworth, Bury
Lancashire BL9 8RR
21
Corporate Governance
The Group recognises the importance of corporate governance and supports the principles of
corporate governance set out in Section 1 of the June 2006 FRC Combined Code on Corporate
Governance (‘the Code’).
The Board has adopted core values and group standards which set out the behaviours expected of
staff in their dealings with shareholders, customers, colleagues, suppliers and other stakeholders of the
Group. One of the core values communicated within the Group is a belief that the highest standard of
integrity is essential in business.
The Group has complied throughout the year with the provisions of the Code.
Board Composition, Meetings and Committees
The Board of Directors carries the ultimate responsibility for the conduct
of the business.
The Board consists of two non-executive directors, both of whom are independent under the
Code, and three executive directors. Brief profiles of each director and their positions are set out
on page 18. It is the Board’s view that all directors are able to bring independent judgement to bear
on Board matters and individual directors possess a wide variety of skills and experience.
The composition of the Board is kept under review and changes are made when appropriate and in
the best interests of the Group. There have been no changes to the membership of the Board since the
last Annual Report was published.
Mr C Archer is the recognised senior independent non-executive director. The Board believes that the
two non-executives have provided ample guidance to and control over the three executive directors in a
demanding period for a small capitalisation listed Group.
None of the Directors have served for more than three years without having been re-elected by the
shareholders. The Board held nine Board Meetings in the year including those convened to discuss and
sanction the acquisition in the period and to approve the Annual Report and Accounts. Board papers
including reports from the Chief Executive and Group Finance Director as well as reports from the
Operations, Property and Loss Control Directors (who are not on the main Board but who attend the
meetings as required) are circulated in advance of each meeting.
All of the Directors have access to the Company Secretary and a procedure exists for directors,
in the furtherance of their duties, to take independent professional advice if necessary, at the
Group’s expense.
The three principal Board Committees to which responsibilities are delegated are as follows:
Remuneration Committee
The Remuneration Committee currently comprises the two independent non-executive directors,
Mr C Archer (Chairman) and Mr C Bird. The Board sets the terms of reference for the
Remuneration Committee.
The Committee’s principal duties are to assist the Board in determining the Group’s policy on executive
directors’ remuneration and to determine specific individual remuneration packages for senior
executives, including the executive directors, on behalf of the Board. During the process, individual
performance is assessed.
The Committee met three times during the year.
The Committee took independent advice on executive compensation and incentives from
PricewaterhouseCoopers LLP (‘PwC’) (formerly Halliwell Consulting) during the period.
22
23
Corporate Governance
continued
Audit Committee
The Audit Committee currently comprises the two independent
non-executive directors, Mr C Archer (Chairman) and Mr C Bird.
The Board sets the terms of reference for the Audit Committee. The
Committee’s principal duties are to review published financial statements,
monitor financial accounting procedures and policies and to review the
appointment and fees of the Auditor.
The Audit Committee met three times in the year with the Auditor
attending each meeting.
In the year the Audit Committee discharged its responsibilities by:
• Reviewing the Group’s draft financial statements and interim results
statement prior to Board approval and reviewing the external auditor’s
detailed reports thereon
• Reviewing the Group’s pre-close Christmas trading update
announcement prior to release
• Reviewing the appropriateness of the Group’s accounting policies
• Reviewing regularly the potential impact on the Group’s financial
statements of certain matters such as impairments of fixed asset
values and proposed International Accounting Standards
Directors’ Remuneration
The Directors’ Report on Remuneration and Related Matters is set out on
pages 29 to 34.
Directors’ Responsibilities
General
The Board’s main roles are to create value to shareholders, to provide
entrepreneurial leadership of the Group, to approve the Group’s strategic
objectives and to ensure that the necessary financial and other resources
are made available to enable them to meet those objectives.
Specific
The specific responsibilities reserved to the Board include:
• Setting Group strategy and approving an annual budget and
medium-term projections
• Reviewing operational and financial performance
• Approving major acquisitions, divestments and capital expenditure
• Reviewing the Group’s systems of internal control and risk management
• Ensuring that appropriate management development and succession
plans are in place
• Reviewing and approving the audit fee and reviewing non-audit fees
• Reviewing the environmental and health and safety performance of
payable to the Group’s external auditor. In reviewing the non-audit fees,
the Committee also considers the independence of the external auditor
and whether its engagement to supply non-audit services is appropriate
the Group
• Approving appointments to the Board of Directors and of the
Company Secretary
• Reviewing the external auditor’s plan for the audit of the Group’s
• Approving policies relating to directors’ remuneration and the
severance of directors’ contracts
• Ensuring that a satisfactory dialogue takes place with shareholders
Insurance
The Company has appropriate insurance in place in respect of legal
action against the Directors.
financial statements, key risks of misstatement in the financial statements,
confirmations of auditor independence and the proposed audit fee,
and approving the terms of engagement for the audit
The Audit Committee also monitors the Group’s whistle blowing
procedures ensuring that appropriate arrangements are in place for
employees to be able to raise matters of possible impropriety in confidence,
with suitable subsequent follow-up action. An alternative reporting channel
exists whereby perceived wrongdoing may be reported via telephone,
anonymously if necessary.
Nomination Committee
The Nomination Committee currently comprises the Chairman and the
two independent non-executive directors. The Nomination Committee has
not been required to meet in the period.
Board and Committee attendance
The attendance record of individual directors at Board and committee
meetings is detailed below:
Board Remuneration
Audit
Committee Committee
Number of meetings
in year
P Cowgill
B Bown
B Small
C Archer
C Bird
Meetings
9
9
8
9
9
9
3
3
-
3
3
3
3
3
-
3
3
3
P Cowgill and B Small attended all the committee meetings at the invitation
of the non-executive directors.
24
25
Corporate Governance
continued
Internal Control and Audit
Following publication of ‘Internal Control: Guidance for Directors on
the Combined Code’ (the Turnbull guidance), the Board confirms that
there is an ongoing process for identifying, evaluating and managing the
significant risks faced by the Group. This process has been in place for the
year under review and up to the date of approval of the annual report and
accounts, and is regularly reviewed by the Board and accords with the
Turnbull guidance.
The Directors are responsible for the Group’s system of internal
controls and monitoring their effectiveness. However, such a system is
designed to manage rather than eliminate the risk of failure to achieve
business objectives, and can only provide reasonable and not absolute
assurance against material misstatement. The Directors have established
an organisation structure with clear operating procedures, lines of
responsibility, delegated authority to executive management and a
comprehensive financial reporting process. In particular there are clear
procedures for the following:
• Identification and monitoring of the business risks facing the Group,
with major risks identified and reported to the Audit Committee and
the Board
• Capital investment, with detailed appraisal and authorisation procedures
• Prompt preparation of comprehensive monthly management accounts
providing relevant, reliable and up-to-date information. These allow for
comparison with budget and previous year’s results. Significant variances
from approved budgets are investigated as appropriate
• Preparation of comprehensive annual profit and cash flow budgets
Shareholder Relations
In fulfilment of the Chairman’s obligations under the new Combined
Code, the Chairman gives feedback to the Board on issues raised by major
shareholders. This is supplemented by twice yearly formal feedback to the
Board on meetings between management, analysts and investors which
seeks to convey the financial market’s perception of the Group.
External brokers’ reports on the Group are also circulated to all directors.
In addition, the non-executive directors attend results presentations
and analyst and institutional investor meetings whenever possible.
The Annual General Meeting (‘AGM’) is normally attended by all directors,
and shareholders are invited to ask questions during the meeting and to
meet with directors after the formal proceedings have ended. At the AGM
the level of proxies lodged on each resolution is announced to the meeting
after the show of hands for that resolution.
The Group has frequent discussions with larger shareholders on a range
of issues affecting its performance. These include meetings following the
announcement of the annual results with the Group’s largest shareholders
on an individual basis. In addition, the Group responds to individual ad
hoc requests for discussions from significant shareholders. The senior
independent non-executive director is available to shareholders if they
have concerns which the normal channels of Chairman, Chief Executive
or Group Finance Director have failed to resolve or for which such contact
is inappropriate.
allowing management to monitor business activities and major risks and
the progress towards financial objectives in the short and medium term
All major shareholders are given the opportunity to meet any new
non-executive directors on appointment.
Going Concern
After making enquiries, the Directors have a reasonable expectation that
the Group has adequate resources to continue in operational existence for
the foreseeable future. For this reason, they continue to adopt the going
concern basis in preparing the financial statements.
• Monitoring of store procedures and the reporting and resolution of
suspected fraudulent activities
• Reconciliation and checking of all cash and stock balances and
investigation of any material differences
The Board has reviewed the effectiveness of internal controls by reviewing
reports covering the testing of internal controls. In establishing the system
of internal control the Directors have regard to the materiality of relevant
risks, the likelihood of a loss being incurred and costs of control. It follows,
therefore, that the system of internal control can only provide a reasonable,
and not absolute, assurance against the risk of material misstatement
or loss.
The scope of internal audit work performed is determined by the Board
in conjunction with the Loss Control Director who reports directly to the
Board every month. The primary focus has continued to be on security
and minimisation of unauthorised losses in the business using a team of
appropriately experienced employees.
The Board has decided not to employ a full time internal audit function
as there is a robust control environment and culture in the business.
On this basis, the costs of such a function are not considered to be either
necessary or justified.
The responsibility for internal control procedures with joint ventures rests
with the senior management of those operations. The Company monitors
its investments and exerts influence through Board representation.
26
27
Directors’ Remuneration Report
This report sets out the remuneration policy operated by the Group in respect of the executive
directors, together with disclosures on Directors’ remuneration required by The Directors’
Remuneration Report Regulations 2002 (‘the Regulations’). The Auditor is required to report on the
‘auditable’ part of this Report and to state whether, in their opinion, that part of the Report has been
properly prepared in accordance with the Companies Act 1985 (as amended by the Regulations). The
Report is therefore divided into separate sections for audited and unaudited information.
The Board have reviewed the Group’s compliance with the Combined Code (‘the Code’) on
remuneration related matters. It is the opinion of the Board that the Group complied with all
remuneration related aspects of the Code during the year.
The Report will be put to shareholders for approval at the Annual General Meeting on 25 June 2009.
Unaudited Information
Remuneration Committee
The Remuneration Committee (the ‘Committee’) comprises both independent Non Executive
Directors, being Mr C Bird and myself as Chairman of the Committee.
The Committee assists the Board in determining the Group’s policy on executive directors’
remuneration and determines the specific remuneration packages for senior executives, including the
Executive Directors, on behalf of the Board. When the Committee is considering matters concerning
key executives below Board level, advice is sought from the Executive Directors. The Committee also
took independent advice on executive compensation and incentives from PricewaterhouseCoopers
LLP (‘PwC’) (formerly Halliwell Consulting) during the period. PwC provided no other services to the
Company in the period.
The Committee is formally constituted with written Terms of Reference, a copy of which is available to
shareholders by writing to the Company Secretary.
The Committee has met threee times during the last year with each member attending all the meetings.
Policy
The policy of the Committee is to attract, motivate and retain executives of the necessary calibre
required to shape and execute the Group’s business strategy and enhance shareholder value over both
the short and long term. In addition, the policy is to provide executives with the opportunity to earn
exceptional levels of reward provided that performance is exceptional.
The key principles behind the Committee’s policy for 2009 and 2010 are:
• To maintain a competitive package of total compensation, commensurate with comparable packages
available with similar retailers
• To make a significant percentage of potential maximum reward conditional on short and long term
performance
• To link reward to the satisfaction of targeted objectives which are the main drivers of value creation
• To be sensitive in determining Executive Directors’ remuneration to pay and conditions in the Group
and the wider economic environment
• To have the flexibility to reward executives for exceptional performance or to address specific issues
in relation to the retention and motivation of key executives
28
29
Directors’ Remuneration Report
continued
Components of Remuneration
The main components of the current remuneration package are:
subsequently approved at the Annual General Meeting held on 26 June
2008. There have been no changes to the structure of the SRP in the year.
The following table outlines the structure of the LTIP:
Base salary
The policy of the Committee is to set base salaries for the Executive
Directors between the lower or median quartile when compared to UK
quoted retailers with similar corporate attributes to those of the Group.
Factors taken into account by the Committee when determining base
salary levels are:
• Objective research based on a review of the remuneration in comparable
retail companies carried out by PwC
• The performance of the individual executive director and their
Paid / Payable
Total
March 2008 March 2009 March 2010
£000
£000
500
4,000
500 (ii) 1,000
5,000
£000
500
500 (i)
£000
3,000
-
3,000
1,000
1,000
Retention element
Performance element
Total
(i) Based on performance in the period ending 31 January 2009
(ii) Based on performance in the period ending 30 January 2010
contribution to the performance of the business
The amounts shown above are non-pensionable.
• Experience and responsibilities of each executive director
• Pay and conditions throughout the Group and the wider economic
environment
In line with the remuneration policy, the salaries of the Executive Directors
are reviewed annually.
With effect from 1 April 2009, the salaries for the executive directors have
been increased as follows:
Executive
director
Peter Cowgill
Barry Bown
Brian Small (i)
Previous
salary
salary
£398,475 £410,430
£284,625 £293,165
£180,950 £186,380
New Percentage
increase
3%
3%
3%
Position against
comparator
group
Median
Lower Quartile
Lower Quartile
(i) The previous salary for Mr B Small reflected a £5,000 increase awarded
during the period to 31 January 2009, over and above that which was
disclosed in the prior period remuneration report. This increase in salary
was backdated to 1 April 2008 to reflect his additional responsibilities.
Annual bonus
The level of payout for annual bonus is based on the achievement of
challenging EPS targets. The Committee reviews these targets at the
beginning and end of each financial year to ensure that they remain fair
and challenging and are appropriate to the current market conditions and
position of the Company.
Whilst the normal maximum bonus potential is 100% of salary, the
Remuneration Committee retains the discretion to pay bonuses above that
level for exceptional performance. This discretion was utilised in 2008 but
not in 2009.
Special retention payment
In the year to 2 February 2008, the Company faced a real retention risk
in relation to the Executive Chairman. It was the strong belief of the
Committee that it was crucial to the continued growth of the Company
that the services of the Executive Chairman were secured in the short to
medium term. As a result, the Committee introduced a Special Retention
Payment (‘SRP’) for the Executive Chairman to ensure that he was
retained to focus on driving shareholder value for the foreseeable future.
The structure of the SRP was disclosed in my report last year which was
The retention element of £4,000,000 was recognised in full in the
Consolidated Income Statement for the period ended 2 February 2008.
The performance related element is payable on the achievement of pre-
determined profit targets in line with market expectations. An amount of
£500,000 has been recognised in the Consolidated Income Statement for
the period ended 31 January 2009 on the basis of the Group achieving
performance targets for this period. The remaining £500,000 will be
recognised in the Consolidated Income Statement in the period ended
January 2010 assuming the applicable target for that period is also
achieved.
The Committee intends to review the remuneration and retention
arrangements for the Executive Chairman during the current year.
Cash based Long Term Incentive Plan
The shareholders approved the introduction of the JD Sports Fashion Plc
2008 Long Term Incentive Plan (‘LTIP’) at the Annual General Meeting
held on 26 June 2008. The objective of the LTIP is to:
• Provide the Committee with the necessary mechanism with which to
retain the Executives who are critical to driving shareholder value
• Provide the Executives with the opportunity to earn competitive rewards
which was previously severely restricted by the absence of any long-term
incentive plan
• Align the Executives’ interests more closely with those of the
shareholders
• Focus the Executives on sustaining and improving the long-term
financial performance of the Company and reward them appropriately
for doing so
• Ensure a more appropriate balance in the Executives’ compensation
between fixed and performance elements
The LTIP consists of two separate awards that pay out in cash after two
and three years respectively, subject to continued employment and meeting
stretching performance targets which drive the creation of shareholder
value. The Committee gave considerable thought as to whether the
awards should pay out in cash or shares and decided that given the
current shareholder structure and the lack of a large free float, the delivery
mechanism should be in cash.
Performance to
Payable
Amount Payable:
Peter Cowgill
Barry Bown
Brian Small
Other Key Executives
1st Award
2nd Award
30 January 2010 29 January 2011
March 2011
March 2010
£400,000
£350,000
£250,000
£1,500,000
£2,500,000
£450,000
£393,750
£281,250
£1,625,000
£2,750,000
The 1st award would be paid out in March 2010 subject to the Group
achieving average headline earnings* of £40 million over the three year
period ending 30 January 2010.
The 2nd award would be paid out in March 2011 subject to the Group
achieving average headline earnings of £44 million (40% of payout) and
£48 million (100% of payout) over the three year period ending 29 January
2011.
* Headline earnings are defined as profit before tax and exceptional items.
An amount of £1,750,000 has been recognised in the Consolidated Income
Statement for the period ended 31 January 2009 (2008: £833,000) being
one-third of the 1st award payable (2008: one-third) and one-third of the
2nd award payable (2008: nil). These amounts are consistent with the
vesting profile of a three year performance period.
Any payments made under the scheme will be non-pensionable.
Other benefits
The Company makes contributions into individual personal pension
schemes for Mr B Bown and Mr B Small at a defined percentage of salary,
excluding bonus and other forms of remuneration.
Other benefits vary from director to director and include entitlement to
a fully expensed car, private health care for the executive director and
immediate family and life assurance to provide cover equal to four times the
executive director’s salary. Car benefits have been calculated in accordance
with HM Revenue and Customs scale charges.
The Committee actively reviews the levels of benefit received to ensure
that they remain competitive in the UK quoted environment.
Service Contracts
Details of the contracts currently in place for executive directors are
as follows:
Date of Contract Notice Period Unexpired Term
(Months)
Barry Bown
Brian Small
Peter Cowgill
20 February 2009
10 March 2004
16 March 2004
12 Rolling 12 months
12 Rolling 12 months
12 Rolling 12 months
Each service contract includes provision for compensation commitments
in the event of early termination. For each of the Executives, these
commitments now do not exceed one year’s salary and benefits.
Each service contract expires upon the director reaching the age of 65
(subject to re-election by shareholders).
The Committee consider these levels of compensation for loss of office
appropriate in light of the levels of basic salary provided and prevailing
market conditions.
In the event of gross misconduct, the Company may terminate the service
contract of an executive director immediately and with no liability to make
further payments other than in respect of amounts accrued at the date of
termination.
During the period ended 31 January 2009, the Committee have sought
to align the previously preferential terms of compensation in the event
of early termination of the contract of Mr B Bown to those of the other
executive directors. As a consequence, in the event of the early termination
of his appointment, Mr B Bown is no longer entitled to an additional
£170,000 (net of PAYE and NIC) over and above an amount equal to
12-months salary and benefits.
Principally, in consideration for this change in his contract the Committee
agreed that a one off bonus payment be made to Mr B Bown for an
amount of £300,000. This one off payment is non-pensionable and was
recognised in full in the Consolidated Income Statement for the period
ended 31 January 2009. All other benefits within his contract of service
remained unchanged.
Directors retiring by rotation at the next Annual General Meeting are shown
in the Directors’ Report on page 20.
During the year, Peter Cowgill also served as Non-Executive Chairman of
United Carpets Group Plc and MBL Group Plc and has retained earnings
of £121,041 in respect of these offices.
Non-Executive Directors
The Non-Executive Directors have entered into letters of appointment
with the Company for a fixed period of 12 months which are renewable by
the Board and the non-executive director, and are terminable by the non-
executive director or Company on not less than three months’ notice.
Their remuneration is determined by the Board taking into account the
scope and nature of their duties and market rates. The Non-Executive
Directors do not participate in the Company’s incentive arrangements and
no pension contributions are made in respect of them. Details of their fees
are set out in the audited information on page 34.
30
31
Directors’ Remuneration Report
continued
Total Shareholder Return
The following graph shows the Total Shareholder Return (‘TSR’) of the Group in comparison to the
FTSE All Share General Retailers Index over the past five years. The Committee consider the FTSE
All Share General Retailers Index a relevant index for total shareholder return comparison disclosure
required under the Regulations as the index represents the broad range of UK quoted retailers.
TSR is calculated for each financial year end relative to the base date of 31 January 2004 by taking
the percentage change of the market price over the relevant period, re-investing any dividends at the
ex-dividend rate.
Total Shareholders Return from 31 January 2004
%
140
120
100
80
60
40
20
0
-20
-40
-60
-80
-100
2004
2005
2006
2007
2008
2009
FTSE All Share General Retailers Index
JD Sports Fashion Plc
32
33
Directors’ Remuneration Report
continued
Audited Information
Individual Directors’ Emoluments
Directors’ salaries and benefits charged in the period to 31 January
2009 are set out below together with comparatives for the period to
2 February 2008.
Annual
Benefits performance
related
bonus
£000
398
285
181
-
-
864
excluding
pensions
£000
1
1
21
-
-
23
Salary
and fees
£000
396
283
179
36
27
921
P Cowgill
B Bown
B Small
C Archer
C Bird
Special
retention
payment
£000
500
-
-
-
-
500
Contract
renegotiation
payment
£000
-
300
-
-
-
300
2009
Total
£000
1,295
869
381
36
27
2,608
2008
2009
2008 Pensions Pensions
costs
costs
Total
£000
£000
£000
4,819
-
-
21
22
597
20
21
386
35
-
-
26
-
-
41
43
5,863
The pension contributions represent amounts payable to defined
contribution pension schemes.
Cash Based Long Term Incentive Plan
In addition, the following amounts have been provided in the period ended
31 January 2009 in respect of the LTIP. The amounts recognised comprise
one third of the amount proposed for the 1st award based on Group
performance in the second year of the three year vesting period and one
third of the 2nd award based on Group performance in the first year of the
three year vesting period. The first award is payable in March 2010 subject
to the Group meeting the performance conditions as detailed on page 31.
2009
£000
283
248
177
708
2008
£000
133
117
83
333
P Cowgill
B Bown
B Small
On behalf of the Remuneration Committee
Colin Archer
Chairman of the Remuneration Committee
8 April 2009
34
35
Directors’ Responsibility Statement
Responsibility Statement
We confirm that to the best of our knowledge:
• the financial statements, prepared in accordance with IFRSs as adopted
by the EU, give a true and fair view of the assets, liabilities, financial
position and profit of the Parent Company and Group; and
• the management report, comprising the chairman’s statement, financial
and risk review, property and stores review and directors’ report, includes
a fair review of the development and performance of the business and the
position of the Parent Company and Group, together with a description
of the principal risks and uncertainties that they face.
By order of the Board
Brian Small
Group Finance Director
8 April 2009
Responsibilities of Directors
The Directors are responsible for preparing the Annual Report and the
Group and Parent Company financial statements in accordance with
applicable law and regulations.
Company law requires the Directors to prepare Group and Parent
Company financial statements for each financial year. Under that law
they are required to prepare the Group financial statements in accordance
with IFRSs as adopted by the EU and applicable law and have elected
to prepare the Parent Company financial statements on the same basis.
The Group and Parent Company financial statements are required by law
and IFRSs as adopted by the EU to present fairly the financial position of
the Group and the Parent Company and the performance for that period;
the Companies Act 1985 provides in relation to such financial statements
that references in the relevant part of that Act to financial statements giving
a true and fair view are references to their achieving a fair presentation.
In preparing each of the Group and Parent Company financial statements,
the Directors are required to:
• Select suitable accounting policies and then apply them consistently
• Make judgments and estimates that are reasonable and prudent
• State whether they have been prepared in accordance with IFRSs as
adopted by the EU
• Prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the Group and the Parent Company will
continue in business
The Directors are responsible for keeping proper accounting records that
disclose with reasonable accuracy at any time the financial position of the
Parent Company and enable them to ensure that its financial statements
comply with the Companies Act 1985. They have general responsibility for
taking such steps as are reasonably open to them to safeguard the assets
of the Group and to prevent and detect fraud and other irregularities.
Under applicable law and regulations, the Directors are also responsible
for preparing a Directors’ Report, Directors’ Remuneration Report
and Corporate Governance Statement that comply with that law and
those regulations.
The Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Company’s website.
Legislation in the UK governing the preparation and dissemination of
financial statements may differ from legislation in other jurisdictions.
36
37
Independent Auditor’s Report to the
Members of JD Sports Fashion Plc
We have audited the Group and Parent Company financial statements
(the ‘financial statements’) of JD Sports Fashion Plc for the 52 week
period ended 31 January 2009 which comprise the Consolidated Income
Statement, the Group and Parent Company Balance Sheets, the Group and
Parent Company Cash Flow Statements, the Group and Parent Company
Statements of Recognised Income and Expense, and the related notes.
These financial statements have been prepared under the accounting
policies set out therein. We have also audited the information in the
Directors’ Remuneration Report that is described as having been audited.
This report is made solely to the Company’s members, as a body, in
accordance with section 235 of the Companies Act 1985. Our audit work
has been undertaken so that we might state to the Company’s members
those matters we are required to state to them in an auditor’s 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 and the
Company’s members as a body, for our audit work, for this report, or for the
opinions we have formed.
Respective Responsibilities of Directors and Auditor
The Directors’ responsibilities for preparing the Annual Report, the
Directors’ Remuneration Report and the financial statements in accordance
with applicable law and International Financial Reporting Standards
(IFRSs) as adopted by the EU are set out in the Statement of Directors’
Responsibilities on page 36.
Our responsibility is to audit the financial statements and the part of the
Directors’ Remuneration Report to be audited in accordance with relevant
legal and regulatory requirements and International Standards on Auditing
(UK and Ireland).
We report to you our opinion as to whether the financial statements give
a true and fair view and whether the financial statements and the part
of the Directors’ Remuneration Report to be audited have been properly
prepared in accordance with the Companies Act 1985 and, as regards
the Group financial statements, Article 4 of the IAS Regulation. We also
report to you whether in our opinion the information given in the Directors’
Report is consistent with the financial statements. The information given
in the Directors’ Report includes that specific information presented in the
Summary of Key Performance Indicators, Chairman’s Statement, Financial
and Risk Review, Property and Stores Review and Corporate and Social
Responsibility pages that is cross-referenced from the Principal Activities
and Business Review section of the Directors’ Report.
In addition we report to you if, in our opinion, the Company has not kept
proper accounting records, if we have not received all the information and
explanations we require for our audit, or if information specified by law
regarding directors’ remuneration and other transactions is not disclosed.
We review whether the Corporate Governance Statement reflects the
Company’s compliance with the nine provisions of the 2006 Combined
Code specified for our review by the Listing Rules of the Financial Services
Authority, and we report if it does not. We are not required to consider
whether the Board’s statements on internal control cover all risks and
controls, or form an opinion on the effectiveness of the Group’s corporate
governance procedures or its risk and control procedures.
We read the other information contained in the Annual Report and
consider whether it is consistent with the audited financial statements.
We consider the implications for our report if we become aware of any
apparent misstatements or material inconsistencies with the financial
statements. Our responsibilities do not extend to any other information.
Basis of Audit Opinion
We conducted our audit in accordance with International Standards on
Auditing (UK and Ireland) issued by the Auditing Practices Board. An audit
includes examination, on a test basis, of evidence relevant to the amounts
and disclosures in the financial statements and the part of the Directors’
Remuneration Report to be audited. It also includes an assessment of
the significant estimates and judgments made by the Directors in the
preparation of the financial statements, and of whether the accounting
policies are appropriate to the Group’s and Company’s circumstances,
consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information
and explanations which we considered necessary in order to provide
us with sufficient evidence to give reasonable assurance that the financial
statements and the part of the Directors’ Remuneration Report to
be audited are free from material misstatement, whether caused by
fraud or other irregularity or error. In forming our opinion we also
evaluated the overall adequacy of the presentation of information in the
financial statements and the part of the Directors’ Remuneration Report
to be audited.
Opinion
In our opinion:
• the Group financial statements give a true and fair view, in accordance
with IFRSs as adopted by the EU, of the state of the Group’s affairs as
at 31 January 2009 and of its profit for the period then ended;
• the Parent company financial statements give a true and fair view,
in accordance with IFRSs as adopted by the EU as applied in
accordance with the provisions of the Companies Act 1985,
of the state of the Parent Company’s affairs as at 31
January 2009;
• the financial statements and the part of the
Directors’ Remuneration Report to be audited
have been properly prepared in accordance
with the Companies Act 1985 and, as
regards the Group financial statements,
Article 4 of the IAS Regulation; and
• the information given in the Directors’
Report is consistent with the
financial statements.
KPMG Audit Plc
Chartered Accountants
Registered Auditor
Preston
8 April 2009
38
39
Consolidated Income Statement
For the 52 weeks ended 31 January 2009
52 weeks to
31 January 2009
£000
Note
52 weeks to
31 January 2009
£000
53 weeks to
2 February 2008
Restated -
see note 1
£000
53 weeks to
2 February 2008
Restated -
see note 1
£000
(256,315)
(8,201)
(20,867)
(8,122)
Revenue
Cost of sales
Gross profit
Selling and distribution expenses - normal
Selling and distribution expenses - exceptional
Selling and distribution expenses
Administrative expenses - normal
Administrative expenses - exceptional
Administrative expenses
Other operating income
Operating profit
Before exceptional items
Exceptional items
Operating profit
Share of results of joint venture before
exceptional items (net of tax)
Share of exceptional items (net of tax)
Share of results of joint venture
Financial income
Financial expenses
Profit before tax
Income tax expense
Profit for the period
Attributable to equity holders of the parent
Attributable to minority interest
Basic earnings per ordinary share
Diluted earnings per ordinary share
4
4
4
15
15
15
7
8
3
9
26
10
10
670,855
(340,309)
330,546
(264,516)
(28,989)
1,109
38,150
54,473
(16,323)
38,150
(166)
914
748
529
(1,210)
38,217
(13,707)
24,510
24,379
131
50.49p
50.49p
(225,994)
(8,404)
(22,500)
-
592,240
(300,813)
291,427
(234,398)
(22,500)
1,086
35,615
44,019
(8,404)
35,615
(145)
-
(145)
297
(764)
35,003
(11,416)
23,587
23,549
38
48.79p
48.79p
Statement of Recognised
Income and Expense
For the 52 weeks ended 31 January 2009
GROUP
COMPANY
52 weeks ended
31 January 2009
£000
53 weeks ended
2 February 2008
£000
52 weeks ended
31 January 2009
£000
53 weeks ended
2 February 2008
£000
Profit for the period
Exchange differences on translation of foreign operations
Total recognised income and expense
for the period
Attributable to equity holders of the parent
Attributable to minority interest
24,510
4
24,514
24,383
131
23,587
-
23,587
23,549
38
25,801
-
25,801
25,801
-
24,387
-
24,387
24,387
-
41
40
Balance Sheets
As at 31 January 2009
Cash Flow Statements
For the 52 weeks ended 31 January 2009
GROUP
COMPANY
As at
31 January 2009
£000
Note
As at
2 February 2008
Restated -
see note 1
£000
As at
31 January 2009
£000
As at
2 February 2008
£000
11
12
13
14
15
16
25
17
18
19
20
21
23
24
21
23
24
25
26
26
26
26
42,890
62,668
4,102
5,459
1,108
-
-
44,433
52,713
4,151
5,025
360
-
-
116,227
106,682
2,053
58,287
20,453
23,538
104,331
220,558
(83)
(80,073)
(2,859)
(8,395)
(91,410)
-
(19,690)
(5,310)
(379)
(25,379)
-
58,040
16,251
11,969
86,260
192,942
(155)
(80,875)
(1,893)
(9,716)
(92,639)
(83)
(11,839)
(4,726)
(864)
(17,512)
19,757
48,073
4,102
5,227
-
6,668
571
84,398
2,053
43,011
53,967
23,530
122,561
206,959
(83)
(64,584)
(2,492)
(8,419)
(75,578)
-
(20,567)
(3,999)
-
(24,566)
(116,789)
(110,151)
(100,144)
103,769
82,791
106,815
2,433
11,659
89,677
103,769
102,474
1,295
103,769
2,413
10,823
69,555
82,791
81,627
1,164
82,791
2,433
11,659
92,723
106,815
106,815
-
106,815
22,164
39,678
4,151
4,801
-
5,298
-
76,092
-
45,172
47,809
9,343
102,324
178,416
(83)
(62,177)
(1,438)
(8,485)
(72,183)
(83)
(17,939)
(3,351)
(310)
(21,683)
(93,866)
84,550
2,413
10,823
71,314
84,550
84,550
-
84,550
Assets
Intangible assets
Property, plant and equipment
Investment property
Other receivables
Equity accounted investment in joint venture
Investments
Deferred tax assets
Total non-current assets
Available for sale investments
Inventories
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
Liabilities
Interest bearing loans and borrowings
Trade and other payables
Provisions
Income tax liabilities
Total current liabilities
Interest bearing loans and borrowings
Other payables
Provisions
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Total assets less total liabilities
Capital and reserves
Issued ordinary share capital
Share premium
Retained earnings
Total equity
Attributable to equity holders of the parent
Attributable to minority interest
Total equity
These financial statements were approved by the Board of Directors on 8 April 2009 and were signed on its behalf by:
B Bown
B Small
Directors
GROUP
COMPANY
52 weeks to
31 January 2009
£000
53 weeks to
2 February 2008
£000
52 weeks to
31 January 2009
£000
53 weeks to
2 February 2008
£000
Note
Cash flows from operating activities
Profit for the period
Share of results of joint venture
Income tax expense
Financial expenses
Financial income
Depreciation and amortisation of non-current assets
Exchange differences on translation of non-current assets
Impairment of intangible assets
Impairment of non-current assets
Impairment of available for sale investments
Loss on disposal of non-current assets
(Increase)/decrease in inventories
(Increase)/decrease in trade and other receivables
Increase in trade and other payables and provisions
Interest paid
Income taxes paid
Net cash from operating activities
Cash flows from investing activities
Interest received
Proceeds from sale of non-current assets
Proceeds from group asset transfer
Disposal costs of non-current assets
Acquisition of intangible assets
Acquisition of property, plant and equipment
Acquisition of investment property
Acquisition of non-current other receivables
Cash consideration of acquisitions net of cash acquired
Acquisition of available for sale investment
Investment in joint venture
Amounts loaned to joint venture
Net cash used in investing activities
Cash flows from financing activities
Repayment of interest bearing loans and borrowings
Payment of finance lease and similar hire purchase contracts
Dividends paid
Net cash used in financing activities
15
9
8
7
4
4
4
4
11
12
13
11
15
30
30
24,510
(748)
13,707
1,210
(529)
14,332
(399)
2,045
2,225
6,077
2,976
(57)
(3,832)
9,513
(1,210)
(15,572)
54,248
529
23
-
(1,271)
-
(28,019)
-
(810)
(1,310)
(8,130)
-
-
(38,988)
(99)
(56)
(3,536)
(3,691)
23,587
145
11,416
764
(297)
12,421
-
-
2,535
-
3,015
2,955
1,396
6,877
(764)
(7,619)
56,431
297
1,257
-
(2,432)
(4,279)
(19,407)
(4,160)
(389)
(1,135)
-
(505)
(2,479)
(33,232)
(18,917)
(19)
(3,524)
(22,460)
25,801
-
13,961
1,064
(526)
11,228
-
2,045
328
6,077
2,180
2,161
(6,308)
7,627
(1,064)
(14,908)
49,666
526
5
-
(847)
-
(21,337)
-
(707)
(1,370)
(8,130)
-
-
(31,860)
(83)
-
(3,536)
(3,619)
Net increase/(decrease) in cash and cash equivalents
30
11,569
739
14,187
24,387
-
11,605
887
(320)
10,848
-
-
1,499
-
2,766
1,109
(24,660)
11,805
(887)
(7,777)
31,262
320
1,168
2,339
(2,123)
(4,279)
(18,284)
(4,160)
(373)
(1,323)
-
(505)
(2,479)
(29,699)
(121)
-
(3,524)
(3,645)
(2,082)
Cash and cash equivalents at
the beginning of the period
Cash and cash equivalents
at the end of the period
30
30
11,969
11,230
9,343
11,425
23,538
11,969
23,530
9,343
42
43
Notes to the Financial Statements
Notes to the Financial Statements
1. Significant accounting policies
JD Sports Fashion Plc, formerly 'The John David Group Plc', (the 'Company') is a company incorporated and domiciled in the United Kingdom. The financial
statements for the 52 week period ended 31 January 2009 represent those of the Company and its subsidiaries (together referred to as the 'Group'). The Parent
Company financial statements present information about the Company as a separate entity and not about its group.
The financial statements were authorised for issue by the Board of Directors on 8 April 2009.
Basis of preparation
European Union (‘EU LAW’) law (IAS Regulation EC 1606/2002) requires that the financial statements of the Group are prepared and approved in accordance
with International Financial Reporting Standards as adopted by the EU (‘adopted IFRSs’). The financial statements have been prepared on the basis of the
requirements of adopted IFRSs that are endorsed by the EU and effective at 31 January 2009.
The Company has chosen to present its own results under adopted IFRSs and by publishing the Company financial statements here, with the Group financial
statements, the Company is taking advantage of the exemption in s230 of the Companies Act 1985 not to present its individual income statement and related
notes.
The following adopted IFRSs, which will have an impact for the Group, were available for early adoption but have not been applied in these financial statements:
continued
1. Significant accounting policies (continued)
II. Joint ventures
Joint ventures are entities over which the Group has joint control based on a contractual arrangement. The results and assets and liabilities of joint ventures are
incorporated in the consolidated financial statements using the equity method of accounting. Investments in joint ventures are carried in the balance sheet at
cost and adjusted for post-acquisition changes in the Group's share of the net assets. Losses of the joint venture in excess of the Group's interest in it are not
recognised.
III. Transactions eliminated on consolidation
Intragroup balances, and any unrealised income and expenses arising from intragroup transactions, are eliminated in preparing the consolidated financial
statements.
Property, plant and equipment
I.
Owned assets
Items of property, plant and equipment are stated at cost less accumulated depreciation and impairment losses.
Where parts of an item of property, plant and equipment have different useful economic lives, they are accounted for as separate items.
II. Leased assets
•
•
IFRS8 'Operating Segments' applicable for financial periods commencing on or after 1 January 2009. This requires that entities adopt the 'management
approach' to reporting the financial performance of its operating segments. It is concerned with disclosures only and, as such, will have no impact on the
Consolidated Income Statement or Group and Company Balance Sheets
IAS1 '(Revised) Presentation of Financial Statements' applicable for financial periods commencing on or after 1 January 2009. The standard requires a change
in the format and presentation of the Group's primary statements but will have no impact on reported profits or equity
Assets funded through finance leases and similar hire purchase contracts are capitalised as property, plant and equipment where the Group assumes
substantially all of the risks and rewards of ownership. Upon initial recognition, the leased asset is measured at the lower of its fair value and the present value
of the minimum lease payments. Future installments under such leases, net of financing costs, are included within interest bearing loans and borrowings.
Rental payments are apportioned between the finance element, which is included in finance costs, and the capital element which reduces the outstanding
obligation for future installments so as to give a constant charge on the outstanding obligation.
All other standards and interpretations that are available for early adoption have no impact for the Group.
The financial statements are presented in pounds sterling, rounded to the nearest thousand.
The financial statements have been prepared under the historical cost convention, as modified for financial assets and liabilities (including derivative instruments) at
fair value through the Consolidated Income Statement.
The preparation of financial statements in conformity with adopted IFRSs 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.
The judgements, estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which
the estimate is revised and in any future periods affected.
The accounting policies set out below have unless otherwise stated been applied consistently to all periods present in these financial statements and have been
applied consistently by all Group entities.
The Group’s business activities, together with the factors likely to affect its future development, performance and position are set out in the Chairman’s Statement
and Financial and Risk Review on pages 4 and 10 respectively. In addition, details of financial instruments and exposures to interest rate, foreign currency, credit
and liquidity risks are outlined in note 22.
All other leases are accounted for as operating leases and the rental charges are charged to the Consolidated Income Statement on a straight line basis over the
life of the lease.
Legal fees and other costs associated with the acquisition of a leasehold interest are capitalised as other receivables within non-current assets.
These costs are amortised over the life of the lease.
Lease incentives are credited to the Consolidated Income Statement on a straight line basis over the life of the lease.
III. Depreciation
Depreciation is charged to the Consolidated Income Statement over the estimated useful lives of each part of an item of property, plant and equipment. The
estimated useful economic lives are as follows:
• Long leasehold properties
• Improvements to short leasehold properties
• Computer equipment
• Fixtures and fittings
• Motor vehicles
2% per annum on a straight line basis
life of lease on a straight line basis
3 - 6 years on a straight line basis
7 - 10 years, or length of lease if shorter, on a straight line basis
25% per annum on a reducing balance basis
Investment property
Investment property, which is property held to earn rentals, is stated at cost less accumulated depreciation and impairment losses. Investment property is
depreciated over a period of 50 years on a straight-line basis, with the exception of freehold land, which is not depreciated. The Group has elected not to revalue
investment property annually but to disclose the fair value in the Consolidated Financial Statements.
As at 31 January 2009, the Group has net cash balances of £23,455,000 and undrawn committed borrowing facilities of £70,000,000. As a consequence, the
Directors believe that the Group is well placed to manage its business risks successfully despite the current uncertain economic outlook.
The fair value is based on an external valuation prepared by persons having the appropriate professional qualification and experience.
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 shown in the Consolidated Income Statement for the 53 week period ended 2 February 2008 has been restated to reclassify certain costs totalling
£3,274,000 from administrative to selling and distribution expenses. Management consider the revised presentation to be a better reflection of the nature of these
costs. In addition, the comparative Group Balance Sheet as at 2 February 2008, has been restated to reflect the completion during the period of initial accounting
in respect of acquisitions made in the prior period. Adjustments made to the provisional calculation of the fair value of assets and liabilities acquired amount to
£3,080,000. This has resulted in an increase to goodwill of £3,062,000 and a reduction in minority interests of £18,000. The impact of these adjustments on the net
assets acquired is shown in note 11.
Basis of consolidation
Subsidiaries
I.
Subsidiaries are entities controlled by the Group. Control exists when the Group has the power to govern the financial and operating policies of an entity so as
to obtain benefits from its activities. In assessing control, potential voting rights that are presently exercisable are taken into account.
The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control
ceases. Minority interests in the net assets of consolidated subsidiaries are identified separately from the equity attributable to holders of the parent. Minority
interests consist of the amount of those interests at the date that control commences and the minority's share of changes in equity subsequent to that date.
Intangible assets
Goodwill
I.
All business combinations are accounted for by applying the purchase method. Goodwill represents amounts arising on acquisition of subsidiaries. In respect
of business acquisitions that have occurred since 1 February 2004, goodwill represents the difference between the cost of the acquisition and the net fair value
of the identifiable assets, liabilities and contingent liabilities of the acquiree.
In respect of acquisitions prior to this date, goodwill is included on the basis of its deemed cost, which represents the amount recorded under previous GAAP.
The classification and accounting treatment of business combinations that occurred prior to 1 February 2004 has not been reconsidered in preparing the
Group’s opening adopted IFRS balance sheet at 1 February 2004.
Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to cash-generating units (CGUs) and is tested annually for impairment.
The CGUs used are the store portfolios and wholesale companies acquired through acquisitions. The recoverable amount is compared to the carrying amount
of the CGU including goodwill. The recoverable amount of a CGU is determined based on value-in-use calculations.
Negative goodwill arising on an acquisition is recognised immediately in the Consolidated Income Statement.
44
45
Notes to the Financial Statements
continued
1. Significant accounting policies (continued)
II. Other intangible assets
Other intangible assets represent brand licences and purchased fascia names. Brand licences are stated at cost less accumulated amortisation and impairment
losses. Amortisation of brand licences is charged to the Consolidated Income Statement over the term to the licence expiry on a straight-line basis.
Notes to the Financial Statements
continued
1. Significant accounting policies (continued)
Derivative financial instruments are recognised initially at fair value and remeasured at each period end. The gain or loss on remeasurement to fair value is
recognised immediately in the Consolidated Income Statement. However, where derivatives qualify for hedge accounting, recognition of any resultant gain or loss
depends on the nature of the item being hedged.
Separately identifiable fascia names acquired on acquisition are initially stated at fair value and thereafter at cost less accumulated amortisation and impairment
losses. The useful economic life of each purchased fascia name is considered separately. Where the Directors believe that there is no foreseeable limit to the period
over which the asset is expected to generate a net cash flow, the specific fascia name is not amortised but is subject to annual impairment reviews.
Interest rate swaps are recognised at fair value in the balance sheet with movements in fair value recognised in the Consolidated Income Statement for the period.
The fair value of interest rate swaps is the estimated amount that the Group would receive or pay to terminate the swap at the balance sheet date, taking into
account current interest rates and the respective risk profiles of the swap counterparties.
Investments in subsidiary undertakings and joint ventures
In the Company’s accounts all investments in subsidiary undertakings and joint ventures are stated at cost less provisions for impairment losses.
Available for sale investments
Available for sale investments comprise investments in listed equity shares that are traded in an active market. Available for sale financial assets are measured at fair
value with fair value gains or losses recognised directly in equity through the statement of recognised income and expense and recycled into the income statement
on sale or impairment of the asset. A significant or prolonged decline in market value is deemed to be objective evidence of impairment. At this point, the
cumulative gain or loss previously recognised in equity is recognised in profit or loss for the period. Transaction costs that are directly attributable to the acquisition
of available for sale investments are added to the fair value on initial recognition.
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is based on the weighted average principle. Provisions are made for obsolescence, mark
downs and shrinkage.
Financial instruments
Financial assets and financial liabilities are recognised on the Group’s balance sheet when the Group becomes a party to the contractual provisions of the
instrument. Financial assets are derecognised when the contractual rights to the cashflows from the financial assets expire or are transferred. Financial liabilities are
derecognised when the obligation specified in the contract is discharged, cancelled or expires.
Trade receivables
Trade receivables are recognised at amortised cost less impairment losses. A provision for the impairment of trade receivables is established when there is objective
evidence that the Group will not be able to collect all amounts due according to the original terms. Significant financial difficulties of the debtor, probability that the
debtor will enter bankruptcy or financial reorganisation and default or delinquency in payments are considered indicators that the trade receivable is impaired. The
movement in the provision is recognised in the Consolidated Income Statement.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits with an original maturity of three months or less. Bank overdrafts that are repayable on
demand are included as a component of cash and cash equivalents for the purpose of the Cash Flow Statement, as these are used as an integral part of the
Group’s cash management.
Hedging
Hedge of monetary assets and liabilities
Where a derivative financial instrument is used to hedge the foreign exchange exposure of a recognised monetary asset or liability, no hedge accounting is applied
and any gain or loss on the hedging instrument is recognised in the Consolidated Income Statement.
Provisions
A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a past event, it is more likely than not that
an outflow of economic benefits will be required to settle the obligation and the obligation can be estimated reliably.
Within the onerous lease provision, management have provided against the minimum contractual lease cost less potential sublease income for vacant stores. For
loss making trading stores, provision is made to the extent that the lease is deemed to be onerous.
Revenue
Revenue represents the amounts receivable by the Group for goods supplied to customers net of discounts, returns and VAT. Revenue is recognised when goods
are sold and title has passed.
Exceptional items
Items that are material in size, unusual or infrequent in nature are included within operating profit and disclosed separately as exceptional items in the Consolidated
Income Statement.
The separate reporting of exceptional items, which are presented as exceptional within the relevant category in the Consolidated Income Statement, helps provide
an indication of the Group’s underlying business performance. The principal items which will be included as exceptional items are:
• Loss/(profit) on the disposal of non-current assets
• Provision for rentals on onerous property leases
Impairment of property, plant and equipment
•
Impairment of non-current other receivables
•
•
Impairment of intangible assets
• The cost of significant restructuring and incremental integration costs following acquisition
Net cash/interest bearing borrowings
Net cash consists of cash and cash equivalents together with other borrowings from bank loans, other loans, loan notes, finance leases and similar hire purchase
contracts.
Financial income
Financial income comprises interest receivable on funds invested. Financial income is recognised in the Consolidated Income Statement on an effective interest
method.
Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs. Following the initial recognition, interest-bearing borrowings are
stated at amortised cost with any difference between cost and redemption value being recognised in the Consolidated Income Statement over the period of the
borrowings on an effective interest basis.
Financial expenses
Financial expenses comprise interest payable on interest-bearing loans and borrowings. Financial expenses are recognised in the Consolidated Income Statement
on an effective interest method.
Trade and other payables
Trade and other payables are non-interest bearing and are stated at their cost.
Income tax expense
Tax on the profit or loss for the year comprises current and deferred tax.
Foreign currency translation
Transactions denominated in foreign currencies are translated into sterling at the exchange rate prevailing on the date of the transaction.
I.
Current income tax
Current income tax expense is calculated using the tax rates which have been enacted or substantively enacted by the balance sheet date, adjusted for any tax
paid in respect of prior years.
Monetary assets and liabilities denominated in foreign currencies are translated into sterling at the rate of exchange at the balance sheet date.
Exchange differences in monetary items are recognised in the Consolidated Income Statement.
II. Deferred taxation
Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date
of the transaction.
On consolidation, the assets and liabilities of the Group's overseas operations are translated into sterling at the rate of exchange at the balance sheet date. Income
and expenses are translated at the average exchange rate for the accounting period.
Derivative financial instruments
The Group uses derivative financial instruments to hedge its exposure to foreign exchange and interest rate risks arising from operational, financing and investment
activities. In accordance with its treasury policy, the Group does not hold or issue derivative financial instruments for trading purposes. However, derivatives that do
not qualify for hedge accounting are accounted for as trading instruments.
Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for:
• Goodwill not deductible for tax purposes
• The initial recognition of assets or liabilities that affect neither accounting nor taxable profit
• Differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future
The amount of deferred tax provided is based on the expected realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted
or substantively enacted by the balance sheet date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised.
Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised.
46
47
Notes to the Financial Statements
continued
1. Significant accounting policies (continued)
Notes to the Financial Statements
continued
2.
Segmental analysis
Impairment
The carrying amounts of the Group’s assets other than inventories and deferred tax assets are reviewed annually to determine whether there is any indication of
impairment. An impairment review is performed on individual cash generating units (CGUs), being principally individual stores or a collection of stores where
the cash flows are not independent. If any such impairment exists then the asset’s recoverable amount is estimated. Impairment losses are recognised in the
Consolidated Income Statement.
Impairment losses in respect of goodwill are not reversed.
Pensions
The Group operates defined contribution pension schemes, the assets of which are held separately from those of the Group in independently administered funds.
Obligations for contributions to the defined contribution schemes are recognised as an expense in the Consolidated Income Statement when incurred.
Critical accounting estimates and judgements
The preparation of financial statements in conformity with adopted IFRSs 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. The judgements,
estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are discussed below:
I.
Impairment of goodwill
The Group is required to test whether goodwill has suffered any impairment. The recoverable amounts of cash generating units have been determined based
on value-in-use calculations. The use of this method requires the estimation of future cash flows expected to arise from the continuing operation of the cash
generating unit and the choice of a suitable discount rate in order to calculate the present value. The cash generating units used are the store portfolios and
wholesale companies acquired through acquisitions.
II. Impairment of property, plant and equipment and non-current other receivables
Property, plant and equipment and non-current other receivables are reviewed for impairment if events or changes in circumstances indicate that the carrying
amount of an asset or a cash generating unit is not recoverable. The recoverable amount is the greater of the fair value less costs to sell and value in use.
III. Impairment of other intangible assets with indefinite lives
The Group is required to test whether other intangible assets with an indefinite useful economic life have suffered any impairment. The recoverable amount
of these assets is based on the estimation of future sales and the choice of a suitable royalty and discount rate in order to calculate the present value. Note 11
provides further detail of the judgements made by the Board in determining that the lives of acquired fascia names are indefinite.
The Group manages its business activities through two Divisions - Sport and Fashion. Revenue and costs for the 52 weeks ended 31 January 2009 are
readily identifiable for each segment.
The Divisional results for the 52 weeks to 31 January 2009 are as follows:
INCOME STATEMENT
Revenue
Operating profit before financing and exceptional items
Exceptional items
Operating profit/(loss)
Share of results of joint venture
Financial income
Financial expenses
Profit before tax
Income tax expense
Profit for the period
Sport
£000
571,814
54,261
(14,204)
40,057
Fashion
£000
Total
£000
99,041
670,855
212
(2,119)
(1,907)
54,473
(16,323)
38,150
748
529
(1,210)
38,217
(13,707)
24,510
The Board consider that the share of results of joint venture and net funding costs are cross divisional in nature and cannot be allocated between the
Divisions on a meaningful basis.
BALANCE SHEET
Total assets
Total liabilities
Sport
£000
153,867
(88,298)
Fashion
£000
49,683
(19,716)
Unallocated
£000
Total
£000
17,008
220,558
(8,775)
(116,789 )
Unallocated assets and liabilities relate to items which are cross divisional including interest in joint venture, tax and elements of goodwill.
IV. Provisions to write inventories down to net realisable value
The Group makes provisions for obsolescence, mark downs and shrinkage based on historical experiences and management estimates of future events.
OTHER SEGMENT INFORMATION
V.
Onerous property lease provisions
The Group makes a provision for onerous property leases on specific stores based on the anticipated future cash outflows relating to the contractual lease cost
less potential sublease income. The estimation of sublease income is based on historical experience and knowledge of the retail property market in the area
around each specific property. Significant assumptions and judgements are used in making these estimates and changes in assumptions and future events could
cause the value of these provisions to change. This would include sub-let premises becoming vacant, the liquidation of an assignee resulting in a property
reverting to the Group or closing an uneconomic store and subletting at below passing rent.
Capital expenditure:
Property, plant and equipment
Non-current other receivables
Goodwill on acquisition
Available for sale investments
Depreciation, amortisation and impairments:
Depreciation and amortisation of non-current assets
Impairment of intangible assets
Impairment of non-current assets
Impairment of available for sale investments
Sport
£000
23,003
810
-
8,130
11,667
2,045
799
6,077
Fashion
£000
5,016
-
864
-
2,665
-
1,426
-
Total
£000
28,019
810
864
8,130
14,332
2,045
2,225
6,077
The operations and assets of the Group are located almost entirely in the United Kingdom. Accordingly, no geographical analysis is presented.
48
49
Notes to the Financial Statements
Notes to the Financial Statements
continued
2.
Segmental analysis (continued)
The comparative divisional results for the 53 weeks to 2 February 2008 are as follows:
INCOME STATEMENT
Revenue
Operating profit/(loss) before financing and exceptional items
Exceptional items
Sport
£000
544,372
45,615
(8,574)
37,041
Operating profit/(loss)
Share of results of joint venture
Financial income
Financial expenses
Profit before tax
Income tax expense
Profit for the period
BALANCE SHEET
Total assets
Total liabilities
Sport
£000
127,586
(80,891)
Fashion
£000
49,096
(18,680)
Fashion
£000
Total
£000
47,868
592,240
(1,596)
170
(1,426)
Unallocated
£000
44,019
(8,404)
35,615
(145)
297
(764)
35,003
(11,416)
23,587
Total
£000
16,260
192,942
(10,580)
(110,151)
continued
3.
Profit before tax
Profit before tax is stated after charging:
Auditor’s remuneration:
Fees payable to the Company's auditor for the audit of the Company's annual accounts
Fees payable to the Company's auditor and its associates for other services:
The audit of the Company's subsidiaries pursuant to legislation
Other services pursuant to legislation
Tax services
All other services
Depreciation and amortisation of non-current assets:
Depreciation of property, plant and equipment
Owned
Held under finance lease and similar hire purchase contracts
Depreciation of investment property - owned
Amortisation of intangible assets
Amortisation of non-current other receivables - owned
Impairments of non-current assets:
Property, plant and equipment (see note 4)
Intangible assets (see note 4)
Other non-current assets (see note 4)
Impairments of current assets:
Available for sale investments (see note 4)
Rentals payable under non-cancellable operating leases for:
Land and buildings
Other - plant and equipment
Unallocated assets and liabilities relate to items which are cross divisional including interest in joint venture, tax and elements of goodwill.
Provision to write down inventories to net realisable value
52 weeks to
31 January 2009
£000
53 weeks to
2 February 2008
£000
103
61
21
69
5
13,527
23
49
362
371
2,119
2,045
106
6,077
70,807
1,253
1,475
811
298
698
106
42
51
27
20
11,674
155
9
60
523
2,535
-
-
-
67,332
923
216
1,087
-
525
OTHER SEGMENT INFORMATION
Capital expenditure:
Property, plant and equipment
Investment property
Non-current other receivables
Goodwill on acquisition
Other intangible assets
Depreciation, amortisation and impairments:
Depreciation and amortisation of non-current assets
Impairment of non-current assets
Sport
£000
18,491
4,160
373
17
4,279
10,918
1,500
Fashion
£000
916
-
16
14,154
5,481
1,503
1,035
Total
£000
19,407
4,160
389
14,171
9,760
12,421
2,535
The operations and assets of the Group are located almost entirely in the United Kingdom. Accordingly, no geographical analysis is presented.
Profit before tax is stated after crediting:
Rents receivable and other income from property
Sundry income
Foreign exchange gain recognised
In addition, fees of £20,000 (2008: £40,000) were incurred and paid by Pentland Group Plc (see note 33) in relation to the non-coterminous audit of the
Group for the purpose of inclusion in their consolidated financial statements. The Group also incurred fees of £nil (2008: £35,000) in respect of tax and
accounting advice provided by the Company's auditor, which is included in the cost of acquisitions in the period (see note 11).
Non-current other receivables comprises legal fees and other costs associated with the acquisition of leasehold interests (see note 14).
4.
Exceptional items
Note
52 weeks to
31 January 2009
£000
53 weeks to
2 February 2008
£000
Loss on disposal of non-current assets
Impairment of non-current assets
Onerous lease provision for stores returning under privity
Lease variation costs (i)
Selling and distribution expenses - exceptional
Impairment of intangible assets
Impairment of available for sale investments
Administrative expenses - exceptional
11
17
(i) Lease variation costs represent the costs of varying onerous leases to create a break option.
2,976
2,225
3,000
-
8,201
2,045
6,077
8,122
3,015
2,535
-
2,854
8,404
-
-
-
16,323
8,404
50
51
Notes to the Financial Statements
Notes to the Financial Statements
continued
5.
Remuneration of directors
Directors’ emoluments:
As non-executive directors
As executive directors
Pension contributions
52 weeks to
31 January 2009
£000
53 weeks to
2 February 2008
£000
63
3,253
43
3,359
61
6,135
41
6,237
continued
6.
Staff numbers and costs (continued)
The aggregate payroll costs of these persons were as follows:
Wages and salaries
Social security costs
Other pension costs
The remuneration of the executive directors includes retention and contract renegotiation payments totalling £800,000 (2008: £4,000,000) and provision
for future LTIP payments of £708,000 (2008: £333,000). Further information on directors’ emoluments is shown in the Directors' Remuneration Report
on page 29.
7.
Financial income
6.
Staff numbers and costs
Group
The average number of persons employed by the Group (including directors) during the period, analysed by category, was as follows:
Sales and distribution
Administration
Full time equivalents
2009
9,498
201
9,699
5,737
2008
8,459
168
8,627
4,951
Bank interest
Other interest
8.
Financial expenses
Average staff numbers for the 53 week period to 2 February 2008 (Group and Company) have been re-analysed between administration and sales and
distribution on a consistent basis to the restatement of operating costs in the Income Statement comparative (see note 1).
The aggregate payroll costs of these persons were as follows:
On bank loans and overdrafts
Finance charges payable in respect of finance lease and similar hire purchase contracts
Wages and salaries
Social security costs
Other pension costs (see note 29)
52 weeks to
31 January 2009
£000
53 weeks to
2 February 2008
£000
95,351
6,617
474
102,442
83,890
5,601
374
89,865
In the opinion of the Board, the key management as defined under IAS24 'Related Party Disclosures' are the five executive and non-executive Directors
(2008: five). Full disclosure of the directors' remuneration is given in the Directors' Remuneration Report on page 29.
Company
The average number of persons employed by the Company (including directors) during the period, analysed by category, was as follows:
Sales and distribution
Administration
Full time equivalents
2009
7,835
181
8,016
4,621
2008
7,813
158
7,971
4,553
9.
Income tax expense
Current tax
UK corporation tax at 28.3% (2008: 30%)
Adjustment relating to prior periods
Total current tax charge
Deferred tax
Deferred tax (origination and reversal of temporary differences)
Adjustment relating to prior periods
Total deferred tax credit (see note 25)
Income tax expense
52 weeks to
31 January 2009
£000
53 weeks to
2 February 2008
£000
78,813
5,426
381
84,620
77,186
5,169
351
82,706
52 weeks to
31 January 2009
£000
53 weeks to
2 February 2008
£000
323
206
529
278
19
297
52 weeks to
31 January 2009
£000
53 weeks to
2 February 2008
£000
1,209
1
1,210
758
6
764
52 weeks to
31 January 2009
£000
53 weeks to
2 February 2008
£000
14,167
25
14,192
87
(572)
(485)
13,707
13,229
(251)
12,978
(544)
(1,018)
(1,562)
11,416
52
53
Notes to the Financial Statements
Notes to the Financial Statements
continued
9.
Income tax expense (continued)
Reconciliation of income tax expense
Profit before tax multiplied by the standard rate of corporation tax in the UK of 28.3% (2008: 30%)
Effects of:
Expenses not deductible
Depreciation and impairment of non-qualifying non-current assets
Loss on disposal of non-qualifying non-current assets
Non qualifying impairment of available for sale investments
Reduction in future tax rate
Effect of overseas tax rates
(Loss)/profit from joint venture - after tax result included
Other differences
Adjustments to tax charge in respect of prior periods
Income tax expense
52 weeks to
31 January 2009
£000
53 weeks to
2 February 2008
£000
10,828
262
945
516
1,722
-
(66)
(212)
259
(547)
13,707
10,501
306
1,451
586
-
3
(161)
44
(45)
(1,269)
11,416
The adjustment relating to prior periods represents a correction of the eligible/ineligible split in respect of non-current assets.
10.
Earnings per ordinary share
Basic and diluted earnings per ordinary share
The calculation of basic and diluted earnings per ordinary share at 31 January 2009 is based on the profit for the period attributable to equity holders of
the parent of £24,379,000 (2008: £23,549,000) and a weighted average number of ordinary shares outstanding during the 52 weeks ended 31 January
2009 of 48,287,502 (2008: 48,263,434), calculated as follows:
Issued ordinary shares at beginning of period
Issued ordinary shares at end of period
Weighted average number of ordinary shares during the period - basic and diluted
52 weeks to
31 January 2009
53 weeks to
2 February 2008
48,263,434
48,661,658
48,287,502
48,263,434
48,263,434
48,263,434
Adjusted basic and diluted earnings per ordinary share
Adjusted basic and diluted earnings per ordinary share has been based on the profit for the period attributable to equity holders of the parent for each
financial period but excluding the post tax effect of certain exceptional items. The Directors consider that this gives a more meaningful measure of the
underlying performance of the Group.
Profit for the period attributable to equity holders of the parent
Exceptional items excluding loss on disposal of non-current assets
Tax relating to exceptional items
Share of exceptional items of joint venture (net of tax)
Note
4
Profit for the period attributable to equity holders of the parent excluding exceptional items
Adjusted basic and diluted earnings per ordinary share
52 weeks to
31 January 2009
£000
53 weeks to
2 February 2008
£000
24,379
13,347
(1,885)
(914)
34,927
72.33p
23,549
5,389
(1,405)
-
27,533
57.05p
continued
11.
Intangible assets
GROUP
Cost or valuation
At 27 January 2007
Acquisitions
At 2 February 2008
Acquisitions
At 31 January 2009
Amortisation and impairment
At 27 January 2007
Charge for the period
At 2 February 2008
Charge for the period
Impairment
At 31 January 2009
Net book value
At 31 January 2009
At 2 February 2008
At 27 January 2007
Goodwill
£000
Brand Licence
£000
Fascia Name
£000
Total
£000
25,769
14,171
39,940
864
40,804
5,207
-
5,207
-
2,045
7,252
33,552
34,733
20,562
-
4,279
4,279
-
4,279
-
60
60
362
-
422
3,857
4,219
-
-
5,481
5,481
-
25,769
23,931
49,700
864
5,481
50,564
-
-
-
-
-
-
5,207
60
5,267
362
2,045
7,674
5,481
42,890
5,481
44,433
-
20,562
The impairment in the period relates to the residual goodwill on the acquisition of trade and certain assets of 14 stores in Airport locations from
Hargreaves (Sports) Limited in 2006, and reflects disappointing trade since acquisition.
The brand licence is a sub-licence to use the Sergio Tacchini brand in the UK until 2019. The original cost of £4,279,000 is being amortised on a
straight-line basis over the licence period. Amortisation of this intangible is included within cost of sales in the Consolidated Income Statement.
The fascia name of £5,481,000 represents the fair value of the ‘Bank’ fascia name acquired as part of the prior period acquisition of Bank Stores
Holdings Limited and its subsidiaries. The ‘Bank’ fascia name is not being amortised as management consider this asset to have an indefinite useful
economic life. Factors considered by the Board in determining that the useful life of the Bank fascia name is indefinite include:
• The strength of the Bank fascia name in the branded fashion sector
• The history of the fascia name and that of similar assets in the retail sector
• The commitment of the Group to continue to operate Bank stores separately for the foreseeable future
54
55
Notes to the Financial Statements
Notes to the Financial Statements
continued
11.
Intangible assets (continued)
COMPANY
Cost or valuation
At 27 January 2007
Acquisitions
At 2 February 2008 and 31 January 2009
Amortisation and impairment
At 27 January 2007
Charge for the period
At 2 February 2008
Charge for the period
Impairment
At 31 January 2009
Net book value
At 31 January 2009
At 2 February 2008
At 27 January 2007
Goodwill
£000
Brand Licence
£000
Total
£000
19,945
4,279
24,224
2,000
60
2,060
362
2,045
4,467
-
4,279
4,279
-
60
60
362
-
422
3,857
19,757
4,219
-
22,164
17,945
19,945
-
19,945
2,000
-
2,000
-
2,045
4,045
15,900
17,945
17,945
Acquisition of Nicholas Deakins Limited
On 11 April 2008, the Group acquired 100% of the entire issued share capital of Nicholas Deakins Limited for a cash consideration of £1,337,000
together with associated fees of £33,000. Nicholas Deakins Limited is involved in the design, sourcing and wholesale of own-label fashion footwear and
apparel.
The goodwill calculation is summarised below:
continued
11.
Intangible assets (continued)
Prior period acquisition of Topgrade Sportswear Limited
On 7 November 2007, the Group acquired a 51% share of Topgrade Sportswear Limited for a cash consideration of £1,020,000 together with
associated fees of £168,000. Topgrade Sportswear Limited is a wholesaler of sports and fashion related footwear, apparel and accessories.
During the 12-month period following acquisition, certain hindsight adjustments have been made to the provisional fair values of the net assets of
Topgrade Sportswear Limited as at the acquisition date, in accordance with IFRS3 ‘Business Combinations’. The revised calculation of goodwill is
summarised below:
Acquiree’s net assets at the acquisition date:
Property, plant & equipment
Inventories
Trade and other receivables
Cash and cash equivalents
Interest bearing loans and borrowings
Trade and other payables
Deferred tax (liabilities) / assets
Net identifiable assets
Minority interest
Goodwill on acquisition
Consideration paid – satisfied in cash
Book and provisional
fair value at
7 November 2007
£000
Fair value
adjustments
£000
Fair value at
31 January 2009
£000
191
2,005
1,115
189
(59)
(1,072)
(37)
2,332
(1,144)
-
1,188
(31)
(383)
437
-
(5)
(436)
383
(35)
18
17
-
160
1,622
1,552
189
(64)
(1,508)
346
2,297
(1,126)
17
1,188
Prior period acquisition of Bank Stores Holdings Limited
On 7 December 2007, the Group acquired the entire share capital of Bank Stores Holdings Limited for a cash consideration of £1 together with
associated fees of £135,000. Bank is a retailer of branded mens and womens fashion footwear, apparel and accessories.
Book and provisional
fair value
£000
During the 12-month period following acquisition, certain hindsight adjustments have been made to the provisional fair values of the consolidated net
assets of Bank Stores Holdings Limited and its subsidiaries as at the acquisition date, in accordance with IFRS3 ‘Business Combinations’. The revised
calculation of goodwill is summarised below:
Acquiree’s net assets at the acquisition date:
Property, plant & equipment
Inventories
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Income tax liabilities
Deferred tax liabilities
Net identifiable assets
Goodwill on acquisition
Consideration paid - satisfied in cash
3
190
520
60
(215)
(51)
(1)
506
864
1,370
The Board believe that the excess of consideration paid over net identifiable assets is best considered as goodwill on acquisition, representing non-
contractual customer loyalty, employee expertise and anticipated future operating synergies.
In the period after acquisition to 31 January 2009, Nicholas Deakins Limited generated turnover of £2,215,000 and an operating loss of £22,000.
If the acquisition of Nicholas Deakins Limited had been completed on 3 February 2008, Group revenues and operating profits would have been
£671,349,000 and £38,065,000 respectively.
Acquiree’s net liabilities at the acquisition date:
Intangible assets
Property, plant & equipment
Inventories
Trade and other receivables
Cash and cash equivalents
Interest bearing loans and borrowings
Trade and other payables
Provisions
Income tax liabilities
Deferred tax liabilities
Net identifiable liabilities
Goodwill on acquisition
Consideration paid – satisfied in cash
Provisional fair value at
2 February 2008
£000
Fair value
adjustments
£000
Fair value at
31 January 2009
£000
5,481
8,427
8,151
3,169
-
(18,796)
(15,913)
(1,117)
(376)
-
(10,974)
11,109
135
-
(878)
(246)
(85)
-
(16)
(50)
-
(569)
(1,201)
(3,045)
3,045
-
5,481
7,549
7,905
3,084
-
(18,812)
(15,963)
(1,117)
(945)
(1,201)
(14,019)
14,154
135
56
57
Notes to the Financial Statements
Notes to the Financial Statements
continued
11.
Intangible assets (continued)
Impairment tests for cash generating units containing goodwill
Goodwill is allocated to the Group’s cash generating units (CGUs) and tested annually for impairment. The CGUs used are the store portfolios and
wholesale companies acquired through acquisitions. The recoverable amount is compared to the carrying amount of the CGU including goodwill.
The recoverable amount of a CGU is determined based on value-in-use calculations. The CGUs for which the carrying amount of goodwill is deemed
significant are shown below:
Hargreaves airports store portfolio
Allsports store portfolio
RD Scott store portfolio
First Sport store portfolio
Bank store portfolio
Nicholas Deakins Limited
GROUP
COMPANY
2009
£000
-
924
2,617
14,976
14,154
864
33,535
2008
£000
2,045
924
2,617
14,976
14,154
-
34,716
2009
£000
-
924
-
14,976
-
-
15,900
2008
£000
2,045
924
-
14,976
-
-
17,945
Based on the value-in-use calculations performed in the year, impairment charges of £2,045,000 have been recognised in the Consolidated Income
Statement in the period. These relates entirely to goodwill on the Hargreaves airports store portfolio.
The key assumptions used for value-in-use calculations are set out below:
• In relation to the Allsports store portfolio, RD Scott store portfolio, Bank store portfolio and First Sport store portfolio, the cash flow projections are based
on actual operating results, together with financial forecasts and strategy plans approved by the Board covering a five year period. These forecasts and plans
are based on both past performance and expectations for future market development. Cash flows beyond this five year period are extrapolated using a
growth rate of 2.0% (2008: 2.0%) which is a prudent estimate of the growth based on past experience
• In relation to the Hargreaves airports store portfolio, the cash flow projections were based on actual operating results together with financial forecasts and
strategy plans for individual stores for the periods to the end of the individual concession agreements. These forecasts assumed annual growth of 2.0%
(2008: 2.0%). No assumption has been made on agreements being extended except where those extensions were agreed before 31 January 2009
• In relation to Nicholas Deakins Limited, the cashflow projections are based on actual divisional operating results together with financial forecasts and
strategy plans approved by the Board. These forecasts are based on both past performance and expectations for future development
• The discount rate of 12.7% (2008: 9.0%) is pre-tax and reflects the specific risks and costs of capital of the Group
• The Board believe that any foreseeable possible change in these assumptions would not cause the aggregate carrying amount to exceed the
recoverable amount
Impairment tests for intangible assets with indefinite lives
Intangible assets with indefinite lives are tested annually for impairment by comparing the recoverable amount of fascia names to their carrying value.
The recoverable value of individual fascia names is determined based on a ‘royalty relief ’ method of valuation, which takes projected future sales,
applies a royalty rate to them and discounts the projected future post tax royalties, to arrive at a net present value. The Group has used a discount rate
of 15.0% (2008: 12.5%) to reflect current market assessments of the time value of money and risks specific to the asset, for which the future cash flow
estimates have not been adjusted. Projected future sales are based on financial forecasts approved by the Board covering a five-year period. Subsequent
sales projections assume annual growth of 5.0% for a further five years and 0% growth thereafter (2008: same).
continued
12.
Property, plant and equipment
GROUP
Improvements to
short leasehold
properties
£000
Computer
equipment
£000
Fixtures and
fittings
£000
Motor
vehicles
£000
Cost
At 27 January 2007
Additions
Disposals
On acquisition of subsidiaries
At 2 February 2008
Additions
Disposals
Exchange differences
On acquisition of subsidiaries
At 31 January 2009
Depreciation and impairment
At 27 January 2007
Charge for period
Impairments
Disposals
At 2 February 2008
Charge for period
Impairments
Disposals
Exchange differences
At 31 January 2009
Net book value
At 31 January 2009
At 2 February 2008
At 27 January 2007
13,796
1,504
(2,341)
702
13,661
2,617
(1,406)
66
-
14,938
8,771
1,026
112
(1,876)
8,033
1,065
243
(1,096)
9
8,254
6,684
5,628
5,025
Total
£000
105,519
19,407
(11,416)
7,709
121,219
28,019
(13,819)
462
3
8,284
1,585
(290)
47
9,626
1,706
(185)
5
1
83,200
16,173
(8,609)
6,860
97,624
23,610
(12,132)
391
2
239
145
(176)
100
308
86
(96)
-
-
11,153
109,495
298
135,884
5,632
1,360
20
(276)
6,736
1,629
57
(171)
4
8,255
2,898
2,890
2,652
49,059
9,403
2,403
(7,195)
53,670
10,772
1,819
(9,694)
62
56,629
138
40
-
(111)
67
84
-
(73)
-
78
63,600
11,829
2,535
(9,458)
68,506
13,550
2,119
(11,034)
75
73,216
52,866
220
62,668
43,954
34,141
241
101
52,713
41,919
Included in the net book value of computer equipment is £nil (2008: £62,000), fixtures and fittings £nil (2008: £481,000) and motor vehicles £nil
(2008: £41,000) in respect of assets held under finance leases and similar hire purchase contracts. Depreciation for the period on these assets was
£nil (2008: £29,000), £nil (2008: £120,000) and £23,000 (2008: £6,000), respectively. The maturity of obligations under finance lease and similar hire
purchase contracts is included in note 21.
Impairment charges of £2,119,000 (2008: £2,535,000) relate to all classes of property, plant and equipment in cash generating units which are loss
making and where it is considered that the position can not be recovered as a result of a continuing deterioration in the performance in the particular
store. The cash generating units represent individual stores, or a collection of stores where the cash flows are not independent, with the loss based
on the specific revenue streams and costs attributable to those cash generating units. Assets in impaired stores are written down fully except where a
reasonable estimate may be made of their recoverable value, calculated as the greater of the fair value less costs to sell and value in use.
58
59
Notes to the Financial Statements
continued
12.
Property, plant and equipment (continued)
Notes to the Financial Statements
continued
14.
Other non-current receivables
COMPANY
Cost
At 27 January 2007
Additions
Disposals
Transfers to other
group companies
At 2 February 2008
Additions
Disposals
At 31 January 2009
Depreciation and impairment
At 27 January 2007
Charge for period
Impairments
Disposals
Transfers to other
group companies
At 2 February 2008
Charge for period
Impairments
Disposals
At 31 January 2009
Net book value
At 31 January 2009
At 2 February 2008
At 27 January 2007
13.
Investment property
Cost
At 27 January 2007
Additions
At 2 February 2008 and 31 January 2009
Depreciation and impairment
At 27 January 2007
Charge for period
At 2 February 2008
Charge for period
At 31 January 2009
Net book value
At 31 January 2009
At 2 February 2008
At 27 January 2007
Improvements to
short leasehold
properties
£000
Computer
equipment
£000
Fixtures and
fittings
£000
Motor
vehicles
£000
12,799
1,377
(1,935)
(431)
11,810
2,079
(1,309)
12,580
8,148
922
76
(1,484)
(55)
7,607
817
33
(1,058)
7,399
5,181
4,203
4,651
7,675
1,517
(228)
(40)
8,924
1,136
(168)
9,892
5,384
1,121
1
(219)
(34)
6,253
1,340
4
(162)
7,435
2,457
2,671
2,291
75,674
15,278
(7,273)
(2,276)
81,403
18,122
(10,250)
89,275
45,969
8,242
1,422
(5,900)
(1,011)
48,722
8,284
267
(8,344)
48,929
40,346
32,681
29,705
Total
£000
96,389
18,284
(9,600)
Loan notes receivable from joint venture
Other receivables
GROUP
COMPANY
2009
£000
2,629
2,830
5,459
2008
£000
2,479
2,546
5,025
2009
£000
2,629
2,598
2008
£000
2,479
2,322
5,227
4,801
241
112
(164)
-
(2,747)
189
-
(23)
166
149
28
-
(111)
-
66
30
-
(19)
77
89
123
92
102,326
21,337
(11,750)
111,913
59,650
10,313
1,499
(7,714)
(1,100)
62,648
10,471
304
(9,583)
63,840
48,073
39,678
36,739
GROUP AND COMPANY
£000
-
4,160
4,160
-
9
9
49
58
4,102
4,151
-
The loan notes receivable from the joint venture earn interest at bank base lending rates plus a margin of 1.5% and are repayable in full over a five-
year period ending in December 2012. The first repayment is due to be made in July 2011 of an amount equal to that which would have been repaid
cumulatively to July 2011 had repayments been made in equal quarterly installments over the full five-year period and will include accrued interest at
that time. The remaining balance will be paid in equal quarterly installments to December 2012.
The Board do not consider there to be any significant credit risk in respect of the loan notes receivable from the joint venture as at 31 January 2009.
Other receivables represent lease premia, legal fees and other costs associated with the acquisition of leasehold interests.
Impairment losses of £106,000 (2008: £86,000) have been recognised on other receivables in specific cash generating units which are loss making. The
methodology behind identifying loss making cash generating units is explained in note 12.
15.
Interest in joint venture
On 3 December 2007, the Group acquired 49% of the issued share capital of Focus Brands Limited for an initial cash consideration of £49,000 together
with associated fees of £456,000. Focus Brands Limited is a jointly controlled entity set up for the purposes of acquiring Focus Group Holdings Limited
and its subsidiary companies ('Focus Group'). The Focus Group is involved in the design, sourcing and distribution of branded and own brand footwear,
apparel and accessories. Focus Brands Limited is jointly controlled with the former shareholders of Focus Group Holdings Limited.
Deferred consideration may be payable to the vendors in the event that the profit before amortisation and after tax of the Focus Group exceeds certain
thresholds in the period to 31 January 2013. The maximum total deferred consideration that could be payable to the vendors is approximately £12.4
million. As at 31 January 2009, the Board do not consider it probable that further consideration will be paid. Accordingly, no further liability has been
recognised as at the balance sheet date.
The results and assets and liabilities of the Focus Group are incorporated in the consolidated financial statements using the equity method
of accounting. The interest in the joint venture in the Group's balance sheet is based on the share of the net assets, which are as follows:
Non-current assets
Current assets
Current liabilities
Non-current liabilities
Total net assets
31 January 2009
£000
2 February 2008
£000
607
5,675
(5,158)
(16)
1,108
592
9,778
(4,381)
(5,629)
360
The amount included in the Consolidated Income Statement in relation to joint ventures is as follows:
52 weeks to
31 January 2009
53 weeks to
2 February 2008
Before
exceptionals
£000
Exceptionals
£000
After
exceptionals
£000
Before
exceptionals
£000
Exceptionals
£000
After
exceptionals
£000
£000
Revenue
13,043
-
13,043
Share of result before tax
Tax
Share of result after tax
(155)
(11)
(166)
1,270
(356)
914
1,115
(367)
748
3,142
(207)
62
(145)
-
-
-
-
3,142
(207)
62
(145)
As at 31 January 2009, the Group had loan notes receivable from Focus Brands Limited, including accrued interest thereon, to the value of £2,629,000
(2008: £2,479,000).
Based on an external valuation, the fair value of investment property as at 31 January 2009 was £3,600,000 (2008: £4,160,000).
60
61
Notes to the Financial Statements
Notes to the Financial Statements
continued
16.
Investments
COMPANY
Cost
At 27 January 2007
Additions
At 2 February 2008
Additions
At 31 January 2009
Impairment
At 27 January 2007 and 2 February 2008
Impairments
At 31 January 2009
Net book value
At 31 January 2009
At 2 February 2008
At 27 January 2007
Investments
£000
5,470
1,828
7,298
1,370
8,668
(2,000)
-
(2,000)
6,668
5,298
3,470
The addition to investments in the year comprises £1,370,000 on the acquisition of Nicholas Deakins Limited (100% owned). A full list of subsidiaries
and jointly controlled entities is shown in Note 34.
17.
Available for sale investments
Cost
As at 27 January 2007 and 2 February 2008
Additions
As at 31 January 2009
Fair value
As at 27 January 2007 and 2 February 2008
Additions
Impairments
As at 31 January 2009
GROUP
£000
COMPANY
£000
-
8,130
8,130
-
8,130
(6,077)
2,053
-
8,130
8,130
-
8,130
(6,077)
2,053
The available for sale investments represent investments in listed equity securities. The Group holds a strategic non-controlling interest of 9.98% in JJB
Sports Plc. These shares are classified as available for sale. The fair value of equity securities is based on quoted market prices.
continued
19.
Trade and other receivables
Current assets
Trade receivables
Other receivables
Prepayments and accrued income
Amounts owed by other Group companies
The ageing of trade receivables is detailed below:
GROUP
Not past due - 60 days
Past 60 days
GROUP COMPANY
Not past due - 60 days
Past 60 days
GROUP
2009
£000
2008
£000
COMPANY
2009
£000
2008
£000
2,503
2,550
15,400
-
20,453
Net
£000
1,778
725
2009
Provision
£000
(36)
(152)
(188)
2,503
2009
Provision
£000
-
-
-
Net
£000
302
399
701
Gross
£000
1,814
877
2,691
Gross
£000
302
399
701
2,150
167
13,934
-
16,251
Gross
£000
1,951
426
2,377
Gross
£000
584
40
624
701
2,527
11,057
39,682
618
5
10,657
36,529
53,967
47,809
2008
Provision
£000
-
(227)
(227)
2008
Provision
£000
-
(6)
(6)
Net
£000
1,951
199
2,150
Net
£000
584
34
618
The Board consider that the carrying amount of trade and other receivables approximate their fair value. Concentrations of credit risk with respect to
trade receivables are limited due to the majority of the Group’s customer base being large and unrelated. Therefore, no further credit risk provision is
required in excess of the normal provision for impairment losses, which has been calculated following individual assessments of credit quality based on
historic default rates and knowledge of debtor insolvency or other credit risk. Movement on this provision is shown below:
At 27 January 2007
On acquisition of subsidiaries
At 2 February 2008
Released
On acquisition of subsidiaries
Utilised
At 31 January 2009
GROUP
£000
COMPANY
£000
6
221
227
(25)
4
(18)
188
6
-
6
-
-
(6)
-
18.
Inventories
The other classes within trade and other receivables do not contain impaired assets.
GROUP
2009
£000
2008
£000
COMPANY
2009
£000
2008
£000
Included within prepayments and accrued income for the Group and Company is £160,000 (2008: £217,000) in relation to deferred costs incurred in
setting up the current bank facility (see note 21).
Finished goods and goods for resale
58,287
58,040
43,011
45,172
The cost of inventories recognised as expenses and included in cost of sales for the 52 weeks ended 31 January 2009 was £345,416,000
(2008: £303,092,000).
62
63
Notes to the Financial Statements
continued
20.
Cash and cash equivalents
Notes to the Financial Statements
continued
21.
Interest bearing loans and borrowings (continued)
Bank balances and cash floats
23,538
11,969
23,530
9,343
21.
Interest bearing loans and borrowings
Within one year
Between one and two years
GROUP
2009
£000
2008
£000
COMPANY
2009
£000
2008
£000
Loan notes
The maturity of the loan notes is as follows:
GROUP
2009
£000
2008
£000
83
-
83
99
83
182
COMPANY
2009
£000
83
-
83
2008
£000
83
83
166
Current liabilities
Obligations under finance leases and similar hire purchase contracts
Loan notes
Non-current liabilities
Loan notes
GROUP
2009
£000
2008
£000
COMPANY
2009
£000
2008
£000
-
83
83
-
56
99
155
83
-
83
83
-
-
83
83
83
The loan notes do not carry interest and are redeemable at par on 29 December 2009.
22.
Financial instruments
Financial assets
The Group’s financial assets are all categorised as loans and receivables. Loans and receivables are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market. The Group’s loans and receivables comprise ‘Trade and other receivables’, ‘Cash and
cash equivalents’ and ‘Loan notes receivable from joint venture’ included within ‘Other non-current receivables’ in the balance sheet.
The following note provides information about the contractual terms of the Group and Company’s interest bearing loans and borrowings.
For more information about the Group and Company’s exposure to interest rate risk, see note 22.
Cash and cash equivalents comprise short-term cash deposits with major United Kingdom and European clearing banks and earn floating rates of
interest based upon bank base rates or rates linked to LIBOR. The currency profile of cash and cash equivalents is shown below:
Bank facilities
The Group has a £70,000,000 revolving facility which expires on 18 October 2011. Under this facility, a maximum of 10 drawdowns may be outstanding
at any time with drawdowns made for a period of one, two, three or six months with interest currently payable at a rate of LIBOR plus a margin of
0.75% (2008: 0.75%). The commitment fee on the undrawn element of the facility is 45% of the applicable margin rate.
GROUP
Bank balances and cash floats
At 31 January 2009, there were no amounts drawndown on this facility (2008: £nil).
Finance leases and similar hire purchase contracts
The maturity of obligations under finance leases and similar hire purchase contracts is as follows:
Within one year
GROUP
COMPANY
2009
£000
-
2008
£000
56
2009
£000
-
2008
£000
-
Amounts owed under finance leases and similar hire purchase contracts are secured on the assets to which they relate with interest charged at rates of
10% to 21%. No new finance leases or similar hire purchase contracts were entered into in the period. All of the agreements in place as at 2 February
2008 were entered into by Topgrade Sportswear Limited prior to its acquisition by the Company on 7 November 2007.
Future minimum lease payments under finance leases and similar hire purchase contracts together with the value of the principle are as follows:
GROUP
Minimum lease
payments
2009
£000
Interest
2009
£000
Principal
2009
£000
Minimum lease
payments
2008
£000
Interest
2008
£000
Principal
2008
£000
Within one year
-
-
-
66
(10)
56
Sterling
Euros
US Dollars
COMPANY
Bank balances and cash floats
Sterling
Euros
US Dollars
2009
£000
23,538
21,341
1,288
909
23,538
2009
£000
23,530
22,312
361
857
23,530
2008
£000
11,969
6,218
5,067
684
11,969
2008
£000
9,343
3,833
4,826
684
9,343
Other financial assets are all denominated in sterling.
Financial liabilities
The Group’s financial liabilities are all categorised as other financial liabilities. Other financial liabilities are measured at amortised cost. The Group’s
other financial liabilities comprise ‘Interest bearing loans and borrowings’ and ‘Trade and other payables’.
Included in trade and other payables are £87,000 and £105,000 of US Dollar and Euro denominated payables respectively. All other financial liabilities
are denominated in Sterling
Risk management
The Group’s operations expose it to a variety of financial risks that include the effects of changes in exchange rates, interest rates, credit risk and
its liquidity position. The Group manages these risks through the use of derivative instruments, which are reviewed on a regular basis. Derivative
instruments are not entered into for speculative purposes.
Interest rate risk
The Group finances its operations by a mixture of retained profits and bank borrowings. Other than a small proportion of finance lease borrowing at
fixed interest rates, the Group’s borrowings are at floating rates, partially hedged by floating rate interest on deposits, reflecting the seasonality of its
cash flow.
64
65
Notes to the Financial Statements
Notes to the Financial Statements
continued
22.
Financial instruments (continued)
Interest rate risk therefore arises from bank borrowings. The Board regularly reviews the interest rate risk of the Group and uses interest rate swaps to
minimise exposure to interest rate fluctuations where appropriate. Given that the facility is not drawndown at certain times of the year, the Board did not
consider that an interest rate swap on the floating rate facility was necessary as at 31 January 2009. The net fair value of swap liabilities at 31 January
2009 was £nil (2008: £nil).
continued
22.
Financial instruments (continued)
As at 31 January 2009, there are undrawn committed facilities with a maturity profile as follows:
The Group has potential bank floating rate financial liabilities on the £70,000,000 revolving credit facility, although there were no drawdowns from
this facility at 31 January 2009 (2008: £nil). When drawdowns are made, the Group is exposed to cash flow interest risk with interest paid on its bank
floating rate liabilities at a rate of LIBOR plus a margin of 0.75% (2008: 0.75%).
Expiring in more than two years but no more than three years
Expiring in more than three years but no more than four years
2009
£000
70,000
-
70,000
2008
£000
-
70,000
70,000
The Group paid interest on its finance leases and similar hire purchase contracts at market interest rates. Although the rates varied between agreements,
the rates on each individual agreement were fixed for the whole term with the interest range being between 10% to 21% (see note 21). As at 31 January
2009, the Group has no liabilities in respect of finance lease or similar hire purchase contracts.
A change of 1% in the average interest rates during the year, applied to the average net cash/debt position of the Group during the period, would
change profit before tax by £37,000 (2008: £6,000). This assumes that all other variables remain unchanged. Calculations are performed on the same
basis as the prior year.
Foreign currency risk
The Group is exposed to foreign currency risk on sales and purchases that are denominated in a currency other than pound sterling. The currencies
giving rise to this risk are the Euro and US Dollar with sales made in Euros and purchases made in both Euros and US Dollars (principal exposure).
To protect its foreign currency position, the Group sets a buying rate for the purchase of goods in US Dollars at the start of the buying season (typically
six to nine months before the product actually starts to appear in the stores) and then enters into a number of Euro/Dollar and Sterling/Dollar
contracts whereby the minimum exchange rate on the purchase of dollars is guaranteed.
As at 31 January 2009, options have been entered into to protect approximately 70% of the US Dollar requirement for the period to January 2010.
The balance of the US Dollar requirement for the period will be satisfied at spot rates. Hedge accounting is not applied.
As at 31 January 2009, the fair value of these instruments was an asset of £885,000 (2008: liability of £347,000) which has been included within current
assets (2008: current liabilities).
A 10% strengthening of sterling relative to the Euro and the US Dollar as at the balance sheet date would have reduced profit before tax by £196,000
(2008: £523,000). A 10% weakening of sterling relative to the Euro and the US Dollar as at the balance sheet date would have increased profit before
tax by £216,000 (2008: £575,000). These figures assume that all other variables remain unchanged. Calculations are performed on the same basis as the
prior year.
Credit risk
Credit risk arises from the possibility of customers and counterparties failing to meet their obligations to the Group. Investments of cash surpluses,
borrowings and derivative instruments are made through major United Kingdom and European clearing banks, which must meet minimum credit
ratings as required by the Board.
All customers who wish to trade on credit terms are subject to credit verification procedures. Receivable balances are monitored on an ongoing
basis and provision is made for impairment where amounts are not thought to be recoverable (see note 19). At the balance sheet date there were no
significant concentrations of credit risk.
The Group considers it maximum exposure to credit risk to be equivalent to total trade and other receivables of £20,453,000 (2008: £16,251,000) and
cash and cash equivalents of £23,538,000 (2008: £11,969,000).
The Company has provided guarantees on banking facilities entered into by Topgrade Sportswear Limited and Nicholas Deakins Limited totalling
£2,000,000 and £600,000 respectively. In addition, the £70,000,000 revolving credit facility agreement encompasses cross guarantees between the
Company, RD Scott Limited, Bank Fashion Limited, Bank Stores Holdings Limited, Bank Stores Financing Limited, Athleisure Limited and First Sport
Limited to the extent to which any of these companies is overdrawn. As at 31 January 2009, the value of these guarantees was £1,976,000 (2008: £nil).
Liquidity risk
The Group manages its cash and borrowing requirement to minimise net interest expense, whilst ensuring that the Group has sufficient liquid resources
to meet the operating needs of the business. The forecast cash and borrowing profile of the Group is monitored on an ongoing basis, to ensure that
adequate headroom remains under committed borrowing facilities.
All of the Groups financial liabilities as at 31 January 2009 and 2 February 2008 have a contractual maturity date falling within a period of one year
from the balance sheet date.
The commitment fee on these facilities is 0.34% (2008: 0.34%).
Fair values
The fair values together with the carrying amounts shown in the balance sheet as at 31 January 2009 are as follows:
Available for sale investments
Trade and other receivables
Cash and cash equivalents
Loan notes
Trade and other payables - current
Trade and other payables - non-current
Unrecognised gains
The comparatives at 2 February 2008 are as follows:
Trade and other receivables
Cash and cash equivalents
Finance lease and similar hire purchase contracts
Loan notes
Trade and other payables - current
Trade and other payables - non-current
Note
17
19
20
21
23
23
Note
19
20
21
21
23
23
GROUP
COMPANY
Carrying amount
2009
£000
Fair value
2009
£000
Carrying amount
2009
£000
Fair value
2009
£000
2,053
20,453
23,538
(83)
(80,073)
(19,690)
2,053
20,453
23,538
(81)
(80,073)
(19,690)
2,053
53,967
23,530
(83)
(64,584)
(20,567)
2,053
53,967
23,530
(81)
(64,584)
(20,567)
(53,802)
(53,800)
(5,684)
(5,682)
2
2
GROUP
COMPANY
Carrying amount
2008
£000
Fair value
2008
£000
Carrying amount
2008
£000
Fair value
2008
£000
16,251
11,969
(56)
(182)
(80,875)
(11,839)
16,251
11,969
(56)
(168)
(80,875)
(11,839)
47,809
9,343
-
(166)
(62,177)
(17,939)
47,809
9,343
-
(152)
(62,177)
(17,939)
(64,732)
(64,718)
(23,130)
(23,116)
Unrecognised gains
14
14
In the opinion of the Board, the fair value of the Groups financial assets and liabilities as at 31 January 2009 and 2 February 2008 are not considered
materially different to that of the book value. On this basis, the carrying amounts have not been adjusted for the fair values.
Estimation of fair values
The major methods and assumptions used in estimating the fair values of financial instruments reflected in the table are as follows:
Finance lease and similar hire purchase contracts
The fair value is estimated as the present value of future cash flows, discounted at market rates for homogeneous lease agreements (7% - 10%).
The estimated fair value reflects changes in interest rates.
Loan notes
The loan notes have been discounted at a rate of 2.25% (2008: 6.0%).
Interest rate swap liabilities on unsecured bank loan
The fair value of the interest rate swap liabilities on the previous term loan facility is calculated on the discounted expected future interest
cash flows.
Trade and other receivables/payables
For trade and other receivables/payables (as adjusted for the fair value of the foreign exchange contracts), the notional amount is deemed
to reflect the fair value.
66
67
Notes to the Financial Statements
continued
23.
Trade and other payables
Notes to the Financial Statements
continued
25.
Deferred tax assets and liabilities (continued)
GROUP
2009
£000
2008
£000
COMPANY
2009
£000
2008
£000
Movement in deferred tax during the period
GROUP
Current liabilities
Trade payables
Other payables and accrued expenses
Other tax and social security costs
Amounts payable to other group companies
Non-current liabilities
Other payables and accrued expenses
Amounts payable to other group companies
34,837
36,562
8,674
-
33,868
36,785
10,222
-
29,824
28,145
6,570
45
26,018
28,963
7,196
-
80,073
80,875
64,584
62,177
19,690
-
11,839
-
13,985
6,582
11,357
6,582
19,690
11,839
20,567
17,939
24.
Provisions
Provisions relate to costs on onerous property leases and represent anticipated minimum contractual lease costs less potential sublease income for
vacant properties. For loss making trading stores, provision is made to the extent that the lease is deemed to be onerous. The provisions are discounted
where the effect is material. The discount rate used is 12.7% (2008: 9.0%) (see note 11).
GROUP
Balance at 2 February 2008
Provisions created during the period
Provisions released during the period
Provisions utilised during the period
Balance at 31 January 2009
COMPANY
Balance at 2 February 2008
Provisions created during the period
Provisions released during the period
Provisions utilised during the period
Balance at 31 January 2009
Current
£000
Non-current
£000
Total
£000
6,619
5,985
(2,985)
(1,450)
5,310
8,169
4,726
2,851
(2,267)
-
3,351
2,024
(1,376)
-
3,999
6,491
1,893
3,134
(718)
(1,450)
2,859
1,438
2,666
(533)
(1,079)
2,492
Balance at 27 January 2007
On acquisition
Recognised in income
Balance at 2 February 2008
Recognised in income
Balance at 31 January 2009
Property, plant
and equipment
Chargeable
gains held over/
rolled over
Lease variations
and other items
Tax losses
Total
1,049
1,510
61
2,620
(2,543)
77
1,160
-
(828)
332
-
332
(638)
(505)
(795)
(1,938)
2,395
457
-
(150)
-
(150)
(337)
1,571
855
(1,562)
864
(485)
(487)
379
Recognised deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the following:
COMPANY
Assets 2009
£000
Assets 2008
£000
Liabilities 2009
£000
Liabilities 2008
£000
Net 2009 Net 2008
£000
£000
Property, plant and equipment
Chargeable gains
held over/rolled over
Lease variations
General accruals
-
-
-
(1,079)
-
-
(470)
(830)
Tax (assets)/liabilities
(1,079)
(1,300)
176
332
-
-
508
1,278
332
-
-
1,610
176
1,278
332
-
(1,079)
332
(470)
(830)
(571)
310
Movement in deferred tax during the period
COMPANY
Property, plant
and equipment
Chargeable
gains held over/
rolled over
Lease variations
and other items
Current
£000
Non-current
£000
Total
£000
4,789
4,690
(1,909)
(1,079)
Balance at 27 January 2007
Recognised in income
Balance at 2 February 2008
Recognised in income
Balance at 31 January 2009
968
310
1,278
(1,102)
176
1,160
(828)
332
-
332
Total
1,490
(1,180)
310
(881)
(638)
(662)
(1,300)
221
(1,079)
(571)
25.
Deferred tax assets and liabilities
Recognised deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the following:
GROUP
Assets 2009
£000
Assets 2008
£000
Liabilities 2009
£000
Liabilities 2008
£000
Net 2009 Net 2008
£000
£000
Property, plant and equipment
Chargeable gains
held over/rolled over
Lease variations
General accruals
Tax losses
Tax (assets)/liabilities
-
-
-
-
(487)
(487)
-
-
(603)
(1,335)
(150)
(2,088)
77
332
-
457
-
866
2,620
77
2,620
332
-
-
-
332
-
457
(487)
332
(603)
(1,335)
(150)
2,952
379
864
68
69
Notes to the Financial Statements
Notes to the Financial Statements
continued
27.
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.
continued
26.
Capital and reserves
Issued ordinary share capital
GROUP AND COMPANY
At 2 February 2008
Uptake of interim scrip dividend alternative
At 31 January 2009
Number of
ordinary shares
thousands
48,263
398
48,661
Ordinary
share capital
£000
2,413
20
2,433
8.90p per ordinary share (2008: 6.00p)
Dividends on issued ordinary share capital
The total number of authorised ordinary shares was 62,150,000 (2008: 62,150,000) with a par value of 5p per share (2008: 5p per share). All issued
shares are fully paid.
Reconciliation of movement in capital and reserves
GROUP
Ordinary
share capital
£000
Share
premium
£000
Retained
earnings
£000
Minority
interest
£000
Balance at 27 January 2007
Minority interest on acquisition
Total recognised income and expense
Dividends to shareholders (see note 27)
Balance at 2 February 2008
Shares issued in the period
Total recognised income and expense
Dividends to shareholders (see note 27)
2,413
-
-
-
2,413
20
-
-
10,823
-
-
-
10,823
836
-
-
48,366
-
23,549
(3,524)
68,391
-
24,383
(4,392)
-
1,126
38
-
1,164
-
131
-
Total
equity
£000
61,602
1,126
23,587
(3,524)
82,791
856
24,514
(4,392)
Balance at 31 January 2009
2,433
11,659
88,382
1,295
103,769
Reconciliation of movement in capital and reserves
COMPANY
Balance at 27 January 2007
Total recognised income and expense
Dividends to shareholders (see note 27)
Balance at 2 February 2008
Shares issued in the period
Total recognised income and expense
Dividends to shareholders (see note 27)
Ordinary
share capital
£000
Share
premium
£000
Retained
earnings
£000
2,413
-
-
2,413
20
-
-
10,823
-
-
10,823
836
-
-
50,451
24,387
(3,524)
71,314
-
25,801
(4,392)
Total
equity
£000
63,687
24,387
(3,524)
84,550
856
25,801
(4,392)
Balance at 31 January 2009
2,433
11,659
92,723
106,815
The capital structure of the Group consists of equity attributable to equity holders of the parent, comprising issued share capital, share premium and
retained earnings. The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future
development of the business. There were no changes to the Group’s approach to capital management during the period.
Full disclosure on the rights attached to shares is provided in the Directors' Report on page 20.
52 weeks to
31 January 2009
£000
53 weeks to
2 February 2008
£000
4,331
2,896
52 weeks to
31 January 2009
£000
53 weeks to
2 February 2008
£000
2,896
1,496
4,392
2,317
1,207
3,524
Final dividend of 6.00p (2008: 4.80p) per qualifying ordinary share paid in respect of prior period,
but not recognised as a liability in that period
Interim dividend of 3.10p (2008: 2.50p) per qualifying ordinary share paid in respect of current period
A scrip alternative was offered in respect of the interim dividend of 3.10p. As a result, a total of 398,224 new shares were issued, in lieu of the cash
dividend, with a reference share price of £2.15. The balance of £640,000 was paid out as a cash dividend.
28.
Commitments
Group
(i) Capital commitments
As at 31 January 2009, the Group had entered into contracts to purchase property, plant and equipment as follows:
Contracted
These commitments are expected to be settled in the following financial period.
2009
£000
4,216
2008
£000
4,072
(ii) Operating lease commitments
The Group leases various retail outlets, offices, warehouses, plant and equipment under non-cancellable operating lease agreements. The leases have
varying terms, escalation clauses and renewal rights.
Undiscounted total future minimum rentals payable under non-cancellable operating leases are as follows:
Within one year
Later than one year and not later than five years
After five years
Land and
buildings
2009
£000
68,531
238,251
230,653
537,435
Plant and
equipment
2009
£000
902
865
-
1,767
Land and
buildings
2008
£000
67,409
244,180
262,350
573,939
Plant and
equipment
2008
£000
818
820
-
1,638
The future minimum rentals payable on land and buildings represent the base rents that are due on each property. Certain properties have rents which
are partly dependent on turnover levels in the individual store concerned.
70
71
Notes to the Financial Statements
Notes to the Financial Statements
continued
28.
Commitments (continued)
(iii) Sublease receipts
The Group subleases various retail outlets under non-cancellable operating lease agreements. The leases have varying terms, escalation clauses and
renewal rights. The total future minimum operating sublease receipts expected to be received at 31 January 2009 are as follows:
continued
30.
Analysis of net cash
GROUP
Within one year
Later than one year and not later than five years
After five years
Company
(i) Capital commitments
As at 31 January 2009, the Company had entered into contracts to purchase property, plant and equipment as follows:
Contracted
These commitments are expected to be settled in the following financial period.
2009
£000
639
2,224
3,322
6,185
2009
£000
3,664
2008
£000
614
2,293
3,794
6,701
2008
£000
3,730
Cash at bank and in hand
Cash and cash equivalents
Interest bearing loans and borrowings:
Loan notes
Finance leases and similar hire purchase contracts
COMPANY
Cash at bank and in hand
Cash and cash equivalents
Interest bearing loans and borrowings:
Loan notes
(ii) Operating lease commitments
The Company leases various retail outlets, offices, warehouses, plant and equipment under non-cancellable operating lease agreements. The leases
have varying terms, escalation clauses and renewal rights.
Undiscounted total future minimum rentals payable under non-cancellable operating leases are as follows:
31.
Related party transactions and balances
At 2 February
2008
£000
On acquisition
of subsidiary
£000
11,969
11,969
(182)
(56)
11,731
60
60
-
-
60
Cash flow
£000
11,509
11,509
99
56
At 31 January
2009
£000
23,538
23,538
(83)
-
11,664
23,455
At 2 February
2008
£000
Cash flow
£000
At 31 January
2009
£000
9,343
14,187
9,343
14,187
23,530
23,530
(166)
83
(83)
9,177
14,270
23,447
Within one year
Later than one year and not later than five years
After five years
Land and
buildings
2009
£000
52,222
178,284
161,336
391,842
Plant and
equipment
2009
£000
693
706
-
1,399
Land and
buildings
2008
£000
51,686
184,865
186,821
423,372
Plant and
equipment
2008
£000
598
592
-
1,190
(iii) Sublease receipts
The Company subleases various retail outlets under non-cancellable operating lease agreements. The leases have varying terms, escalation clauses and
renewal rights. The total future minimum operating sublease receipts expected to be received at 31 January 2009 are as follows:
Within one year
Later than one year and not later than five years
After five years
29.
Pension schemes
2009
£000
529
1,890
2,995
5,414
2008
£000
535
1,994
3,414
5,943
The Group only operates defined contribution pension schemes. The pension charge for the period represents contributions payable by the Group of
£431,000 (2008: £333,000) in respect of employees, and £43,000 (2008: £41,000) in respect of directors. The amount owed to the schemes at the period
end was £82,000 (2008: £42,000).
Transactions and balances with related parties during the period are shown below. Transactions were undertaken in the ordinary course of business.
Outstanding balances are unsecured and will be settled in cash.
Related party - Pentland Group Plc
Pentland Group Plc owns 57.5% (2008: 57%) of the issued ordinary share capital of JD Sports Fashion Plc.
GROUP
Concession fee income
Purchases of inventory for retail
Other income
Payments (gross including VAT)
Receipts (gross including VAT)
Value of
transactions
2009
£000
(Payable)/
receivable at
period end
2009
£000
Value of
transactions
2008
£000
(Payable)/
receivable at
period end
2008
£000
-
(23,794)
157
(27,353)
180
-
-
-
-
-
(147)
(26,238)
203
(30,897)
239
-
-
-
-
-
Trade payables (gross including VAT)
-
(1,430)
-
(1,574)
COMPANY
Purchase of inventory for retail
Other income
Payments (gross including VAT)
Receipts (gross including VAT)
Value of
transactions
2009
£000
(Payable)/
receivable at
period end
2009
£000
Value of
transactions
2008
£000
(Payable)/
receivable at
period end
2008
£000
(21,192)
157
(24,173)
180
-
-
-
-
(23,930)
157
(27,953)
184
-
-
-
-
Trade payables (gross including VAT)
-
(1,216)
-
(1,315)
Unless otherwise stated the amounts above are stated net of VAT.
72
73
Notes to the Financial Statements
continued
Notes to the Financial Statements
continued
31.
Related party transactions and balances (continued)
31.
Related party transactions and balances (continued)
Related party - Athleisure Limited
COMPANY
Value of
transactions
2009
£000
(Payable)/
receivable at
period end
2009
£000
Value of
transactions
2008
£000
(Payable)/
receivable at
period end
2008
£000
Amounts owed to JD Sports Fashion Plc
-
6,638
-
6,638
Related party - RD Scott Limited
COMPANY
Purchase of inventory
Income tax group relief
Amounts owed to JD Sports Fashion Plc
Related party - JD Sports Fashion (Ireland) Limited
COMPANY
Sale of inventory
Other income
Store assets legally transferred to
John David Sports Fashion (Ireland) Limited
Amounts owed to JD Sports Fashion Plc
Value of
transactions
2009
£000
(Payable)/
receivable at
period end
2009
£000
Value of
transactions
2008
£000
(Payable)/
receivable at
period end
2008
£000
(178)
447
-
-
-
8,849
-
537
-
-
-
9,245
Value of
transactions
2009
£000
(Payable)/
receivable at
period end
2009
£000
Value of
transactions
2008
£000
(Payable)/
receivable at
period end
2008
£000
5,076
1,328
-
-
-
-
-
3,218
1,725
514
2,339
-
-
-
-
2,136
On 26 November 2007, the Company legally transferred the trade and assets of 5 stores to John David Sports Fashion (Ireland) Limited.
The consideration equated to the book value of the assets at this time.
Related party - Bank Stores Holdings Limited
COMPANY
Value of
transactions
2009
£000
(Payable)/
receivable at
period end
2009
£000
Value of
transactions
2008
£000
(Payable)/
receivable at
period end
2008
£000
Related party - Nicholas Deakins Limited
COMPANY
Purchase of inventory
Income tax group relief
Amounts owed by JD Sports Fashion Plc
Value of
transactions
2009
£000
(Payable)/
receivable at
period end
2009
£000
Value of
transactions
2008
£000
(Payable)/
receivable at
period end
2008
£000
(284)
6
-
-
-
(45)
-
-
-
-
-
-
The figures highlighted above for 2009 are based on the period post acquisition from 11 April 2008 to 31 January 2009.
Related party - Topgrade Sportswear Limited
COMPANY
Purchase of inventory
Sale of inventory
Interest income
Amounts loaned to Topgrade Sportswear Limited
Amounts owned to JD Sports Fashion Plc
Value of
transactions
2009
£000
(Payable)/
receivable at
period end
2009
£000
Value of
transactions
2008
£000
(Payable)/
receivable at
period end
2008
£000
(161)
41
14
1,800
-
-
-
-
-
1,888
-
-
-
-
-
-
-
-
-
-
The loan receivable from Topgrade Sportswear Limited attracts interest at UK base rates plus a margin of 1.0%.
Related party - Focus Brands Limited
GROUP
Purchase of inventory
Rental income
Interest income
Payments (gross including VAT)
Trade payables (gross including VAT)
Loan notes receivable (including accrued interest)
Value of
transactions
2009
£000
(Payable)/
receivable at
period end
2009
£000
Value of
transactions
2008
£000
(Payable)/
receivable at
period end
2008
£000
(6,802)
319
150
(7,597)
-
-
-
-
-
-
(37)
2,629
(714)
54
28
(1,475)
-
-
-
-
-
-
(123)
2,479
Value of
transactions
2009
£000
(Payable)/
receivable at
period end
2009
£000
Value of
transactions
2008
£000
(Payable)/
receivable at
period end
2008
£000
(5,316)
319
150
(5,962)
-
-
-
-
-
-
(37)
2,629
(708)
54
28
(1,448)
-
-
-
-
-
-
(124)
2,479
Sale of inventory
Amounts owed to JD Sports Fashion Plc
15
-
-
19,090
-
-
-
18,510
COMPANY
Purchase of inventory
Rental income
Interest income
Payments (gross including VAT)
Trade payables (gross including VAT)
Loan notes receivable (including accrued interest)
74
75
There have been no transactions in the year (2008: £nil) and there are no balances outstanding (2008: £nil) with the other subsidiary undertakings of the
Company, as listed in note 34.
Notes to the Financial Statements
continued
32.
Contingent liability
The Group has provided a guarantee on an interest bearing loan in Focus Brands Limited. This guarantee has been provided in conjunction with the
other shareholders on a several basis with each shareholder guaranteeing the loan in line with their relative shareholding. As at 31 January 2009, the
Group and Company's contingent liability on this loan was £497,000 (2008: £3,185,000).
33.
Ultimate parent company
The Company is a subsidiary undertaking of Pentland Group Plc which is also the ultimate parent company. Pentland Group Plc is incorporated in
England and Wales.
The largest group in which the results of the Company are consolidated is that headed by Pentland Group Plc. The results of Pentland Group Plc may
be obtained from Companies House, Crown Way, Cardiff, CF14 3UZ.
The Company has taken advantage of the exemption in s230 of the Companies Act 1985 not to present its individual income statement and related
notes. The total recognised income and expense for the parent included in these consolidated financial statements is £25,801,000 (2008: £24,387,000).
The Consolidated Financial Statements of JD Sports Fashion Plc are available to the public and may be obtained from The Company Secretary, JD
Sports Fashion Plc, Hollinsbrook Way, Pilsworth, Bury, BL9 8RR or online at www.jdplc.com.
34.
Principal subsidiary undertakings and jointly controlled entities
The following companies were the principal subsidiary undertakings and jointly controlled entities of JD Sports Fashion Plc at 31 January 2009.
Place of registration
Nature of business
and operation
Ownership
interest
Voting rights
interest
Name of subsidiary
John David Sports Fashion
(Ireland) Limited
John David Sports Limited
JD Sports Fashion Group Limited
JD Sports Limited
Athleisure Limited
First Sport Limited*
Allsports Retail Limited*
Allsports.co.uk Limited*
The Sports Shop (Fife) Limited*
Jog Shop Limited*
RD Scott Limited
Bank Stores Holdings Limited
Bank Stores Financing Limited*
Bank Fashion Limited*
Hoss Ventures Limited*
Hallco 1521 Limited
Topgrade Sportswear Limited*
Getthelabel.com Limited*
Topgrade Trading Limited*
Nicholas Deakins Limited
Name of jointly controlled entity
Ireland
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
Retailer of sports clothing and footwear
Dormant
Dormant
Dormant
Intermediate holding company
Dormant
Dormant
Dormant
Dormant
Dormant
Retailer of fashion clothing and footwear
Intermediate holding company
Intermediate holding company
Retailer of fashion clothing and footwear
Dormant
Intermediate holding company
Wholesaler of sports clothing and footwear
Dormant
Dormant
Wholesaler of fashion footwear
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
51%
51%
51%
51%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
51%
51%
51%
51%
100%
Focus Brands Limited
UK
Wholesaler of sports clothing and footwear
49%
50%
*Indirect holding of the Company.
Five Year Record
Consolidated income statements
52 weeks to
29 January 2005
£000
PREPARED UNDER ADOPTED IFRSs
52 weeks to
52 weeks to
28 January 2006 27 January 2007
£000
£000
53 weeks to
2 February 2008
Restated -
see note 1
£000
52 weeks to
31 January 2009
£000
REVENUE
Cost of sales
GROSS PROFIT
Selling and distribution
expenses - normal
Selling and distribution
expenses - exceptional
Selling and distribution
expenses
Administrative expenses
- normal
Administrative expenses
- exceptional
Administrative expenses
Other operating income
OPERATING PROFIT
Before exceptional items
Exceptional items
OPERATING PROFIT
BEFORE FINANCING AND SHARE
OF RESULTS OF JOINT VENTURE
Share of results of joint venture
Financial income
Financial expenses
PROFIT BEFORE TAX
Income tax expense
PROFIT FOR THE PERIOD
Attributable to equity holders
of the parent
Attributable to minority interest
BASIC EARNINGS PER
ORDINARY SHARE
ADJUSTED BASIC EARNINGS
PER ORDINARY SHARE (i)
DIVIDENDS PER
ORDINARY SHARE (ii)
471,656
(256,504)
490,288
(263,608)
530,581
(278,331)
592,240
(300,813)
670,855
(340,309)
215,152
226,680
252,250
291,427
330,546
(186,230)
(192,730)
(209,270)
(225,994)
(256,315)
(8,603)
(11,206)
(3,799)
(8,404)
(8,201)
(194,833)
(203,936)
(213,069)
(234,398)
(264,516)
(12,777)
(15,438)
(17,409)
(22,500)
(736)
(1,777)
(4,000)
-
(13,513)
(17,215)
(21,409)
(22,500)
953
7,759
17,098
(9,339)
7,759
-
304
(4,461)
3,602
(1,341)
2,261
2,261
-
1,609
7,138
20,121
(12,983)
7,138
-
230
(3,718)
3,650
(1,302)
2,348
2,348
-
1,730
19,502
27,301
(7,799)
19,502
-
177
(2,412)
17,267
(6,879)
10,388
10,388
-
1,086
35,615
44,019
(8,404)
35,615
(145)
297
(764)
35,003
(11,416)
23,587
23,549
38
(20,867)
(8,122)
(28,989)
1,109
38,150
54,473
(16,323)
38,150
748
529
(1,210)
38,217
(13,707)
24,510
24,379
131
4.81p
4.92p
21.52p
48.79p
50.49p
18.62p
25.32p
36.41p
57.05p
74.22p
6.60p
6.90p
7.20p
8.50p
12.00p
(i) Adjusted basic earnings per ordinary share is based on earnings before certain exceptional items and amortisation (see note 10).
(ii) Represents dividends declared for the year. Under Adopted IFRSs dividends are only accrued when approved.
76
77
Financial Calendar
Final Results Announced
Final Dividend Record Date
Financial Statements Published
Annual General Meeting
Final Dividend Payable
Interim Results Announced
Period End (52 Weeks)
Final Results Announced
8 April 2009
8 May 2009
May 2009
25 June 2009
3 August 2009
September 2009
30 January 2010
April 2010
Shareholder Information
Registered office
JD Sports Fashion Plc
Hollinsbrook Way
Pilsworth
Bury
Lancashire BL9 8RR
Company number
Registered in England
and Wales,
Number 1888425
Financial advisers
and stockbrokers
Investec
2 Gresham Street
London EC2V 7QP
Principal bankers
Barclays Bank Plc
43 High Street
Sutton
Surrey SM1 1DR
Financial public relations
Hogarth Partnership Limited
No 1 London Bridge
London SE2 9BG
Registrars
Equiniti Limited
Aspect House
Spencer Road
Lancing
West Sussex BN99 6DA
Solicitors
DLA Piper UK LLP
Princes Exchange
Princes Square
Leeds LS1 4BY
Auditor
KPMG Audit Plc
Edward VII Quay
Navigation Way
Ashton-on-Ribble
Preston
Lancashire PR2 2YF
The Board wishes to express its thanks to the marketing department for the in-house production of this Annual Report and Accounts.
78
79
80
JD Sports Fashion Plc
Hollinsbrook Way
Pilsworth
Bury
Lancashire BL9 8RR
Telephone 0161 767 1000
Facsimile 0161 767 1001
Corporate website
www.jdplc.com
Trading websites
www.jdsports.co.uk
www.size-online.co.uk
Other websites
www.bankfashion.co.uk
www.scottsonline.co.uk
Mixed Sources
Product group from well-managed
forests and recycled wood or fibre
www.fsc.org Cert no. XX-XXX_XXXXXX
© 1996 Forest Stewardship Council
81