chausport
R
Contents
Summary of Key Performance Indicators
Chairman’s Statement
Financial and Risk Review
Property and Stores Review
Corporate and Social Responsibility
The Board
Directors’ Report
Corporate Governance Report
Directors’ Remuneration Report
Statement of Directors’ Responsibilities
Independent Auditor’s Report
Consolidated Income Statement
Group and Company Consolidated Statement
of Comprehensive Income
Group and Company Consolidated Statement
of Financial Position
Group and Company Consolidated Statement
of Changes in Equity
Group and Company Consolidated Statement
of Cash Flows
Notes to the Consolidated Financial Statements
Five Year Record
Financial Calendar
Shareholder Information
3
4
10
13
14
21
22
25
30
36
39
41
41
42
43
44
45
83
84
84
1
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
52 weeks to
30 January 2010
£000
769,785
49.3%
67,294
67,391
(4,986)
62,308
61,393
88.16p
93.64p
18.00p
60,465
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
%
Change
+15
+24
+26
+63
+61
+75
+29
+50
• Total revenue increased by £98.9 million to £769.8 million (2009: £670.9 million) including £48.1 million from the acquired businesses
• Like for like revenue increased by 2.5% (Sports Fascias 2.3%; Fashion Fascias 3.6%)
• Gross margin maintained at 49.3% with improvement in like for like margin from 49.3% to 49.8% diluted by a lower margin in the acquired businesses
• Group profit before tax and exceptional items up 26% to £67.4 million (2009: £53.6 million)
• Profit before tax up 61% to £61.4 million (2009: £38.2 million)
• Net cash position at the period end increased to £60.5 million (2009: £23.5 million)
• Expenditure on acquisitions and associated asset purchases increased significantly to £15.8 million (2009: £1.4 million)
• Key strategic acquisitions made in the year included Chausport in France for £7.9 million and the Canterbury of New Zealand companies in the UK,
New Zealand (51% interest), Australia, USA, and Hong Kong for £7.0 million
• Final dividend payable increased by 65% to 14.7p (2009: 8.9p) bringing the total dividends payable for the year up to 18.0p (2009: 12.0p),
an increase of 50%
769.8
670.9
592.2
530.6
490.3
2006
2007
2008
2009
2010
10.9
2007
11.7
2008
2006
60.5
23.5
25.1
16.6
67.4
53.6
43.4
2009
2010
2006
2007
2008
2009
2010
Revenue (£m)
Net (debt)/cash (£m)
Profit before tax and exceptional items (£m)
3
Chairman’s Statement
Introduction
The year ended 30 January 2010 has been the sixth successive year
of good progress in revenue and profitability for the Group. During the
period, we have improved our profit before tax and exceptional items
by 26% to £67.4 million (2009: £53.6 million). This follows increases
of 24%, 73% and 51% in the previous three years and such sustained
performance, in the face of less than favourable economic conditions and
exchange rates, reflects the strength and uniqueness of our brand and
fascia offers as well as the strength of our management teams.
Group profit before tax has increased by 61% in the year to £61.4 million
(2009: £38.2 million) and Group profit after tax has increased by 74% to
£42.7 million (2009: £24.5 million).
Group operating profit (before exceptional items and joint venture
results) for the year was up 24% to £67.3 million (2009: £54.5 million)
and comprises a Sports Fascias’ profit of £64.1 million (2009: £54.2
million), a Fashion Fascias’ profit of £3.3 million (2009: £0.2 million) and a
Distribution companies loss of £0.1 million (2009: profit of £0.1 million).
The year end net cash position has risen to £60.5 million (2009: £23.5
million) and the Group retains £70 million of committed rolling credit
and working capital facilities. The Board wishes to retain the funding
capability to further develop the Group operationally and by acquisition
and this will be taken into account when new facilities are negotiated in
the next year. Confidence arising from the cash position and the sustained
period of results improvement and balance sheet strengthening has
enabled the Board to propose an increase in the level of the dividend
with a final proposed dividend increase of 65% to 14.7p (2009: 8.9p)
bringing the total dividends payable for the year to 18.0p (2009: 12.0p),
an increase of 50% following on from the 41% increase last year.
Acquisitions
The Group is very well funded currently and has a Sports Fashion retail
offer which provides the consumer with a unique mix of sports and
fashion brands in both apparel and footwear including licensed and our
own brands such as Mckenzie and Carbrini. The strength of this offering
gives our retail model the potential to be replicated in other countries.
On 19 May 2009 we acquired the French retailer Chausport for £7.9
million including fees. In addition, we inherited net debt of £1.7 million.
Chausport is based near Lille and is primarily a retailer of sports
shoes. With only 75 small stores nearly all located outside the largest
conurbations, we see opportunities for growth in France. We expect
to introduce progressive access to JD brands, exclusive product and
supplier terms over the next two years. The acquisition contributed £27.7
million of revenue and £0.7 million of operating profit in the period from
acquisition to 30 January 2010.
On 4 August 2009 we acquired the key trading assets and trade of
Canterbury Europe Limited along with the global rights to the world
famous heritage rugby brands of ‘Canterbury’ and ‘Canterbury of New
Zealand’. The brand, goodwill and fixed assets, along with a Hong Kong
based distribution company, were acquired for £6.7 million including fees.
The required elements of the remaining inventory were also purchased
for £4.3 million. The Canterbury brand was established in New Zealand
over 100 years ago and has become the world’s foremost rugby brand,
distributing both technical and lifestyle footwear, apparel and accessories
and with scope for product and distribution extension.
On 24 November 2009, the Group took further steps to control the
global distribution of the Canterbury brands by purchasing the key assets
of the USA distribution company for Canterbury (Sail City Apparel
Limited in liquidation) for £0.4 million. On 23 December 2009, we also
acquired 100% of the Australian distribution company (Canterbury
International (Australia) Pty Limited) and 51% of the New Zealand
distribution company (Canterbury of New Zealand Limited) for £0.3
million including fees. A £0.8 million debt to a minority shareholder
was assumed with these transactions. The results to date of all these
operations are summarised in this statement within the Distribution
segment commentary.
Two other acquisitions were completed in the period. Kooga Rugby
Limited, based in Rochdale, was acquired for a nominal sum on 3 July
2009. Duffer of St George Limited, a fashion brand company, whose
brand ‘The Duffer of St George’ is now used as an own brand in the JD
stores, was acquired for £0.9 million on 24 November 2009.
Sports Fascias
The Sports Fascias’ total revenue increased by 10% during the period to
£615.5 million (2009: £559.2 million), including post-acquisition revenue
from newly acquired Chausport of £27.7 million. Like for like sales in the
retail Sports Fascias for the year were up 2.3% (2009: 3.3%).
The Sports Fascias’ results reported last year included those of Topgrade
but given the development of the Group over the last year we have
split the operations into three segments with the additional one being
Distribution. This now includes Topgrade which previously diluted the
margin in the Sports Fascias. Under this new segmental presentation,
the gross margin in the Sports Fascias rose from 50.5% to 50.6%. We
are particularly pleased with this gross margin performance given
uncertainties over the impact of sterling weakness at the start of the year
and attribute this to further improvement in the management of terminal
stocks, continued strength in our own brands, and the benefits to us from
competitor failures and weaknesses.
As a result of improved margin and continuing enhancement of the store
portfolio and its efficiencies, the operating profit (before exceptional items)
of the Sports Fascias rose to £64.1 million (2009: £54.2 million) in the
year, including a contribution of £0.7 million from Chausport.
The programme of store development has continued with 12 new JD
and 2 Size? store openings and 17 major store refurbishments (15 JD,
1 Chausport and 1 Size?). This substantial refurbishment programme
started in 2007 and will continue. 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. 17 Sports Fascias stores were closed
in the period including 3 smaller Chausport stores and 2 JD stores which
were transferred to Bank.
Fashion Fascias
The Fashion Fascias are Bank and Scotts. The results of Deakins were
previously included with those of the Fashion Fascias but are now
included in those of the Distribution segment.
The Bank Fascia stores sell largely branded fashion to both males and
females, predominantly for the teenage to mid twenties category. Bank is
expected to be the core of future Fashion Fascias’ growth. In the year the
store portfolio grew from 54 stores to 65 stores, still based predominantly
in the North and the Midlands. Total revenue in the year was £82.8 million
(2009: £66.5 million), up 4.7% organically (2009: +9.5%). Operating profit
(before exceptional items) was £3.0 million (2009: £1.2 million). The
Board remains confident that there is a significant opportunity to grow
operating margin in this Fascia through better stock management, own
brand development and disciplined store rollout. Gross margin achieved
in the year was 48.4% (2009: 46.1%).
Operating profits
Operating profit (before exceptional items) increased by £12.8 million
to £67.3 million (2009: £54.5 million), a 24% increase on last year which
follows a 24% rise in the previous year. Group operating margin (before
exceptional items) has therefore increased by a further 0.6% to 8.7%
(2009: 8.1%).
The Scotts Fascia stores sell branded fashion to younger males and
there were 38 stores at the year end, again, largely in the North and the
Midlands. Total revenue in the year was £31.8 million (2009: £32.0 million)
and the operating profit (before exceptional items) was £0.3 million (2009
loss: £1.0 million), helped by an achieved gross margin of 47.4% (2009:
45.2%) and efficiencies achieved through prior year store rationalisation.
Like for like sales rose by 1.2% (2009: +5.1%). The start to the new year
has been relatively disappointing and consequently we have very recently
strengthened the management team.
Distribution
Topgrade (which is 51% owned) is now one of the two major parts of the
Distribution segment. It was bought with the intention of adding a new
business selling sports and fashion brands at discounted prices through
catalogues and online, complementing its existing end of line wholesaling
operation. This has been launched as Get The Label (www.getthelabel.
com) in the current year and has made a very encouraging start which
has continued in the new year. It is not expected to be profitable this year
or next and total revenues for Topgrade of £19.7 million (2009: £12.6
million) and an operating loss of £0.4 million (2009 profit: £0.1 million)
were in line with our expectations.
The second major part of the Distribution segment is the newly acquired
UK and overseas Canterbury operations which contributed revenue of
£15.4 million and an operating profit of £0.1 million in the short periods
they have been part of the Group. Canterbury’s prospects have already
been outlined earlier in this statement under Acquisitions.
The other parts of the Distribution segment are Kooga Rugby (which
is also referred to under Acquisitions) and Deakins, the predominantly
fashion footwear brand, which continues to break even on a low turnover
with both group companies and external customers.
Joint Venture
Our 49% owned joint venture, Focus Brands Limited, is involved in the
design, sourcing and distribution of footwear and apparel both for own
brand and under license brands for both group and external customers.
Our share of operating results for the year was an operating profit before
exceptional items of £0.5 million (2009 loss: £0.2 million).
Group Performance
Revenue
Total revenue increased by 14.7% in the year to £769.8 million (2009:
£670.9 million) principally as a result of three factors: the Group’s positive
like for like sales performance of 2.5%, net store openings and £48.1
million of sales from newly acquired operations.
Gross margin
The improved gross margin performance in the UK and Ireland retail
fascias has been commented on earlier in this statement. It is only the
lower margins realised in Chausport and the Distribution segment,
combined with the increased sales in this segment, which have resulted
in overall group gross margin being held at 49.3%.
Following a decrease in the exceptional items to £5.0 million (2009: £16.3
million), Group operating profit rose significantly from £38.2 million to
£62.3 million.
The exceptional items (excluding share of exceptional items in joint
venture) comprise:
Impairment of goodwill in Scotts store portfolio
Loss on disposal of fixed assets
Onerous lease provision
Impairment of fixed assets in underperforming stores
Profit on disposal of investment in JJB Sports Plc
Total exceptional charge
£m
2.6
2.2
3.9
0.4
(4.1)
5.0
The share of exceptional items of joint venture (Focus Brands) consists
primarily of the reversal of an unrealised gain on exchange contracts
booked in the year to 31 January 2009 under IAS 39 ‘Financial
Instruments: Recognition and Measurement’.
Working Capital and Financing
Net financing costs have decreased from £0.7 million to £0.4 million,
principally as a result of lower utilisation of debt facilities combined with
lower cost of debt.
Year end net cash of £60.5 million represented a £37.0 million
improvement on the position at January 2009 (£23.5 million). This net
cash balance has been achieved after expenditure on acquisitions and
associated asset purchases in the year (excluding the investment in JJB
Sports Plc) totalling £15.8 million (2009: £1.4 million). Net proceeds from
the disposal of the investment in JJB Sports Plc after allowing for a full
participation in the placing and rights issue were £6.1 million.
Net capital expenditure including disposal costs and premia received
decreased in the year to £23.0 million (2009: £30.1 million) with capital
expenditure excluding disposal costs decreasing by £5.9 million to £22.9
million (2009: £28.8 million). This decrease does not mean that the
Group is reducing its investment programme and is more a function of
the timing of projects. Accordingly, the Board would expect the capital
expenditure in the year to January 2011 to exceed the amount spent in
the year to January 2010 with significant investment in both the Bank
and Chausport fascias. The decrease in capital expenditure was focused
on the Sports Fascias where the spend reduced by £8.7 million to £14.9
million with expenditure increasing in the Fashion Fascias by £2.4 million
to £7.4 million reflecting the investment in the Bank Fashion chain. The
capital expenditure in the year included £10.2 million on new stores
and £10.8 million on refurbishments (including the transfer of 3 stores
between fascias).
Working capital remains well controlled and suppliers continue to be paid
to agreed terms and settlement discounts are taken whenever due.
4
5
The adjusted earnings per ordinary share before exceptional items were
93.64p (2009: 72.33p).
The basic earnings per ordinary share were 88.16p (2009: 50.49p).
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.
Current Trading and Outlook
Trading in the 10 weeks to 10 April 2010 has been encouraging with UK
and Ireland retail like for like sales up 2.0% (Sports Fascias 3.0%; Fashion
Fascias -3.5%) on an underlying basis taking into account the change
in the timing of Easter and school holidays. Although like for like sales
are lower, the performance of the Fashion Fascias has benefitted from
a 2% improvement in gross margin in the same period. Chausport has
started the year well. It is too early in the year to report on progress in the
Distribution business. We recognise the increasing challenges of strong
comparatives and the current economic and fiscal threats to consumers’
expenditure. A further update will be made in our Interim Management
Statement in June.
The Board remains focused on continuing to deliver operational and
financial progress for the Group over the long term. Opportunities
for profit growth overseas, the rollout of our principal Fashion Fascia,
development of our differentiated and own brand proposition, and
growth in our Distribution business all help to reduce threats to Group
profitability and give us the opportunity to maintain the positive
momentum in our business.
Peter Cowgill
Executive Chairman
14 April 2010
Chairman’s Statement (continued)
Store Portfolio
We have made a further significant investment in the store portfolio during
the year with expenditure on both new stores and refurbishments of
existing space. We have also continued to rationalise our store portfolio
wherever possible but, with the current economic climate impacting
heavily on retail property occupancy levels, it has become much more
difficult to dispose of underperforming and/or duplicate stores.
There has been no net increase in the number of JD & Size? stores
with 14 new stores offset by 12 closures and the transfer of 2 stores to
Bank. However, there has been a net addition of 11 stores to the Bank
Fascia with 14 store openings (including the 2 transferred from JD and 1
transferred from Scotts) offset by the closure of 3 stores.
We have refurbished a total of 22 stores (including transfers of space
between fascias) in the year. This means that over the last three years we
have opened a total of 67 stores and refurbished a further 94 stores.
During the year we also acquired Chausport SA. On acquisition,
Chausport had 78 small stores, in premium locations, in town centres
and shopping centres across France. Three loss making stores were
subsequently disposed in the period after acquisition.
During the year, store numbers (excluding trading websites) moved
as follows:
Sports Fascias
JD & Size?
‘000
sq ft
Units
Chausport
Total
‘000
sq ft
-
80
-
-
(2)
-
78
Units
-
78
-
-
(3)
-
75
345 1,105
-
14
(2)
(12)
-
-
47
(9)
(26)
(17)
345 1,100
Units
‘000
sq ft
345 1,105
80
78
47
14
(9)
(2)
(28)
(15)
(17)
-
420 1,178
Start of year
Acquisitions
New stores
Transfers
Closures
Remeasures
Close of year
Fashion Fascias
Bank
Scotts
Total
‘000
sq ft
119
35
11
(6)
17
176
‘000
sq ft
86
2
(2)
(1)
-
85
‘000
sq ft
205
37
9
(7)
17
261
Units
92
13
2
(4)
-
103
Units
38
2
(1)
(1)
-
38
Units
54
11
3
(3)
-
65
Start of year
New stores
Transfers
Closures
Remeasures
Close of year
Dividends and Earnings per Share
The Board proposes paying a final dividend of 14.70p (2009: 8.90p)
bringing the total dividend payable for the year to 18.00p (2009: 12.00p)
per ordinary share. The proposed final dividend will be paid on 2 August
2010 to all shareholders on the register at 7 May 2010. The final dividend
has been increased by 65% with total dividends payable for the year
increased by 50%. This follows a 41% increase in the full year dividend in
the prior year.
6
7
“We have
improved
our profit
before tax and
exceptional
items in the
year by 26% to
£67.4 million.”
8
9
Financial and Risk Review
Introduction
Profit before tax increased by £23.2 million to £61.4 million in the year.
This improvement was achieved through:
• Continued sales growth, both organic and from net new space opened,
in both the Sports and Fashion Retail Fascias
• Better overall store contribution levels
• A reduction of £11.3 million in the charge for exceptional items
principally from an accounting profit on the disposal of the investment
in JJB Sports Plc of £4.1 million, which was a significant reversal of the
impairment charge of £6.1 million recognised on this investment at 31
January 2009
Taxation
The effective rate of tax on profit has decreased by 5.5% to 30.4%. In
the year to 31 January 2009 the impairment charge of £6.1 million on
the investment in JJB Sports Plc, was not a realised loss and so did
not qualify for tax relief, adding 4.6% to the effective rate. However, the
exceptional accounting profit of £4.1 million in the current year from
partially reversing this impairment on disposal is not taxable, thereby
reducing the effective rate in the current year by 1.8%.
Excluding exceptional items, the effective tax rate has increased slightly
from 29.6% to 30.6% primarily due to the movement of the tax charge
in respect of prior periods. Excluding both exceptional items and prior
year adjustments, the effective core tax rate has decreased from 31.0%
to 30.2%. This core effective tax rate 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 by 75% from 50.49p to
88.16p. However, the Directors consider the adjusted earnings per share
to be a more appropriate measure of the Group’s earnings performance
since 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 29% from 72.33p to 93.64p.
Dividends
A final cash dividend of 14.70p per share is proposed, which if approved,
would represent an increase of 65% on the final dividend from the prior
year. Added to the interim dividend of 3.30p per share, this takes the full
year dividend to 18.00p, which is an increase of 50% on the prior year.
The full year dividend has therefore grown by over 110% in 2 years. The
dividend is covered 4.9 times by basic earnings per share and 5.2 times by
the adjusted earnings per share.
Net Cash
The year end net cash position has increased by £37.0 million to £60.5
million after a total of £15.8 million was spent in the year on acquisitions
and purchasing the Canterbury brand name. The continued improvement
in the net cash position should enable the Group to take advantage of
strategic and store portfolio opportunities where appropriate. It is also
enabling us to proceed with confidence with a project to centralise all our
warehousing for retail in Greater Manchester and to increase dividends
substantially this year.
The net cash position has continued to benefit from improved controls
over stocks in the retail fascias. Trade creditors continue to be paid to
terms to maximise settlement discounts with the period end creditor days
being 36 (2009: 32).
Treasury Facilities
A five year £70 million bank syndicated facility was agreed in October
2006 which includes a £60 million revolving credit facility. This facility
is committed until 18 October 2011 and details of its currently very
favourable terms are included in note 21 to the accounts. This facility
contains no fixed repayment element. Although the Group has sought
to remove the quarterly peaks in the drawndown 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 drawdowns continues to be best suited to the
specific fluctuating borrowing requirements of the business. This facility
has been used to fund the investments and capital expenditure in the year,
with no other Group 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
rates, but at present do not consider a long term interest rate hedge to
be necessary given that the facility is not used during substantial periods
of the year. This position is reviewed regularly, along with the level of
facility required.
The Directors are mindful that the current facility expires in October 2011
and have already started to engage with a number of banks to discuss
a replacement facility. Given the increased cost of having access to a
facility, but not utilising it, the Board will consider reducing the facility in
the future, but will only do so if a flexible facility can be agreed where
additional funds can be accessed for major investments.
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.
Following acquisition of the Canterbury and Kooga businesses, the
Group’s forecast requirement for US Dollars in the period to January 2011
is $73 million. Cover is now in place for 2010 for $56 million meaning
that the Group is currently exposed on exchange rate movements for
$17 million of the current year’s estimated requirement. This exposure
is concentrated in the second half of the year and there is no hedging in
place yet for calendar year 2011.
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.
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. This then ensures that
knowledge of the Group’s differentiated product offering is not lost,
thereby enhancing customer service.
Brian Small
Group Finance Director
14 April 2010
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 opened 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 realises store performance is unsatisfactory it
approaches the 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. However assigning the lease or finding a
sub-tenant is not without risk 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 core retail 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 cause excess inventories that are difficult to liquidate.
IT
The Group relies on its IT systems and networks and those of the banks
and the credit card companies to service its retail customers all year
round. The principal legacy enterprise system is heavily reliant on a very
limited number of key development staff. This risk is being mitigated by
improving documentation of the system and increasing the development
team. At some time in the future the risk could be further mitigated by
moving to third party enterprise systems but not without additional risk
and additional cost.
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
have had to cut back on non-essential spending. The Group seeks to
manage this risk by offering a highly desirable and competitively priced
product range, which is differentiated to that of the Group’s competitors.
10
11
Property and Stores Review
UK and Ireland
A further significant investment has been made in the store portfolio
during the year, both in new stores and major refurbishments of existing
space. 27 new stores opened in the period (14 Sports Fascias stores and
13 Fashion Fascias stores) and 22 major refurbishments were carried
out (3 of which involved transfers of space between fascias). This means
that over the last three years we have opened a total of 67 stores and
refurbished a further 94 stores. As a consequence, approximately 36%
of the UK and Ireland store portfolio as at 30 January 2010 has a store
fit which is less than three years old. We believe that the modern and
fashionable environment which we provide in our stores is appealing
to our customers and has a positive impact on financial performance.
The 14 new Sports Fascias stores included 9 stores in new locations
(including 2 Size? stores) with the remaining 5 being replacement of
existing space. Included within the replacement stores is a major new
store at Meadowhall which has been fitted out with a new store design.
The initial performance of this store has been promising. We therefore
intend to use this new fit out in future new stores and refurbishments in
other major shopping malls and city centres. We have opened 3 new
Sports Fascias stores in the UK and Ireland to date in the current period
and anticipate that we will open approximately 15 stores over the full year
of which 4 will be replacements of existing space. We anticipate that
we will close approximately 10 Sports Fascias stores during the period
including the 4 which will be closed for replacements.
The 13 new Fashion Fascias stores included 11 new Bank stores. There
will be a further significant investment in this fascia in the current period
and we anticipate that we will open a similar number of stores again.
One new Bank store has already been opened to date in the current
period. We believe that Bank gives the Group the opportunity to develop
our presence in the young aspirational fashion sector and consequently
provide a platform for growth. Ultimately, we believe that the store model
and product offer from Bank can support a portfolio across the UK and
Ireland in excess of 100 stores. In addition, 2 new Scotts stores opened in
the period. We do not currently plan to open a significant number of new
Scotts stores in the future.
The 22 major refurbishments included:
• Extensive refurbishments of the JD stores in Kingston, Milton Keynes,
Merry Hill and Birmingham Fort
• Conversion of 3 existing stores (2 ex JD and 1 ex Scotts) to the
Bank Fascia
• Refurbishments of 2 existing JD stores (Bolton and Milton Keynes)
where space has been carved out for a separate Fashion Fascia store
thereby increasing densities from existing space
The performance from stores which have been refurbished continues to
be pleasing with sales growth in refurbished stores exceeding the average
store growth across all stores by more than 10%. This performance
justifies continued significant investment in refurbishments and so it is
likely that we will refurbish a similar number of stores in the current year.
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,
however, closed a further 19 underperforming and/or duplicate stores
during the year (15 Sports Fascias stores and 4 Fashion Fascias stores).
One Scotts store has closed to date in the current period.
France
During the year we acquired Chausport SA who are primarily a retailer
of sports footwear in France. This strategic acquisition gives the Group
the opportunity for future growth by entering a new and sizeable
European market outside of its established base in the UK and Ireland.
On acquisition, Chausport had 78 small stores in a mixture of town
centres and out of town shopping centres. Three loss making stores have
been subsequently disposed of in the period after acquisition. Chausport
has historically not been well represented in the major conurbations, as
the business has often been unable to pay the high level of key money
which is necessary to secure access to these locations. The future
strategy for France will involve trialling the JD fascia in a number of
major cities and shopping malls whilst maintaining the Chausport fascia
in the smaller regional towns and shopping centres where it is well
established.
In the current year we intend to open approximately 10 new stores in
France and refurbish/relocate a similar number. It is expected that at least
2 stores will have the JD fascia and store design. The remaining stores
will be fascia’d as Chausport using a fit which the management team have
developed internally over the last two years. This internal fit was used
prior to the acquisition in two relocations where Chausport had moved
into larger space within existing centres. The performance of these stores
has been promising, so the management team are confident that it is right
to roll this fit out in future Chausport stores. However the biggest progress
in the performance of the French operations will come from improving
the product offer and gross margins.
As with the UK and Ireland portfolio, stores will be closed where
necessary. It is intended that at least 5 stores will be closed during the
period although some of these will relate to relocations of Chausport
stores into larger and better space.
Store Portfolio
The store portfolio for the Group at 30 January 2010 and 31 January
2009 can be analysed as follows:
Sports Fascias
No. Stores
‘000 sq ft
JD
Chausport
Size
First Sport
Nike
Other Fascias
Total
2010
315
75
17
8
2
3
420
2009
314
-
15
10
2
4
345
2010
1,048
78
23
22
3
4
1,178
2009
1,048
-
21
28
3
5
1,105
Fashion Fascias
No. Stores
‘000 sq ft
Bank
Scotts
Total
2010
65
38
103
2009
54
38
92
2010
176
85
261
2009
119
86
205
Group Total
523
437
1,439
1,310
13
Corporate and Social Responsibility
The Group recognises that it has a 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.
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’.
UK and Ireland Retail Businesses
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 both countries.
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.
Training
The Group recognises that training for all levels of staff is vital as
it provides a mechanism for increasing morale and improving staff
retention. This 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:
No. of courses
in year
Length of
course
No. of people on
each course
New management
induction
Training academy for
new managers
Regional workshops for
junior management
18
3
60
1 week
12 weeks
1 day
15
17
8
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.
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. 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 impact of its operations particularly
with regards to:
• Ensuring efficient use of energy and other materials
• Minimising waste by recycling wherever possible
• Ensuring compliance with relevant legislation and codes of
best practice
The Group gives full and fair consideration to applications for
employment by people who are disabled, to continue whenever possible
the development of staff who become disabled and to provide equal
opportunities for the career development of disabled employees. It is also
Group policy to provide opportunities for the large number of people
seeking flexible or part time hours.
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
a pleasant ambient temperature. However, the Group accepts that all
the businesses within it must be responsible in their energy usage and
associated carbon emissions.
Communication
The number and geographic dispersion of the Group’s operating
locations make it difficult, but essential, to communicate effectively with
employees. A written communication ‘People 1st’ goes out to staff on a
quarterly basis. This publication is primarily designed to communicate,
share and celebrate success within the retail environment.
14
15
Corporate and Social Responsibility (continued)
Energy (continued)
To that end, the Group maintains a Carbon Management Programme
(‘CMP’) which aims to:
The Group is committed to investing in the necessary resources to help
achieve its targets on reducing carbon emissions, with the following works
planned for 2010:
• Ensure there is an accurate baseline for consumption by working with
• Expanding the CMP to widen the awareness campaign, through better
electricity suppliers to ensure that bills reflect actual usage
training, improved communication and reporting
• Improve understanding of the drivers and timing of usage by investing
in ‘smart’ electricity meters. This has been achieved in approximately
300 of the Group’s stores. Combined with the stores where accurate
and timely usage data is already received, this means that in excess
of 90% of the UK and Republic of Ireland electricity consumption
is automatically measured every 30 minutes. In addition to 100%
accurate billing for 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 is being reduced through
additional training and investment in 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
• Pursue a multi-disciplined approach to the CMP to ensure all business
activities are aware of their impact on energy consumption
Under the current rules of the statutory Carbon Reduction Commitment
Energy Efficiency scheme (‘CRC’), the Group’s submission to the
Environment Agency will be aggregated with that of Pentland Group
Plc who are the Group’s ultimate holding company (see note 33). The
Group is therefore working with Pentland Group Plc on ensuring an
efficient and effective transfer into the new emissions trading scheme
which was introduced in April 2010, as part of the CRC. From an internal
Group perspective, however, the Group 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 in respect of locations in the UK and Republic of
Ireland that have been present for the full year for both years. As this is a
like for like comparison, the 2009 data has been updated to reflect store
openings and disposals in the current year:
Energy Usage – Electricity (MWh)
Energy Usage – Natural Gas (MWh)
Total Energy Usage (MWh)
Carbon Footprint (Tonnes CO2)
2010
46,653
3,629
50,282
25,742
2009
48,559
4,496
53,055
26,930
%
Change
-4
-19
-5
-4
The Group has pledged to reduce its energy usage from these levels 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 again invested heavily in the period to 30 January 2010
in replacing inefficient air conditioning systems. A further 44 stores
now have systems with market leading technologies which consume
less energy whilst providing an appropriate 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 29
January 2011.
• Continue the air conditioning replacement programme
• Increase analysis and reporting of data provided by smart meters
• Run lighting trials to reduce the electricity required in stores
• Gain the Carbon Trust Standard Award for JD Sports stores
The Group is also aware of the need to purchase energy competitively
from sustainable sources wherever possible. As a result, the Group has
continued with the Airtricity electricity supply contract in Northern
Ireland and Republic of Ireland, who source 100% of their electricity
from renewable sources. The Company has also agreed a contract with
British Gas in the UK (except Northern Ireland) to supply electricity
from Good Quality Combined Heat and Power (‘GQCHP’) sources. This
means the UK and Ireland businesses now get 71% of all their electricity
from sustainable sources.
Recycling
Wherever possible, cardboard (the major packaging constituent) is taken
back to the Group’s 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 245.5 tonnes (2009:
193.1 tonnes).
The Group also continues to recycle paper and other office consumables
wherever possible. This recycling is split into four 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 1,540 trees (2009: 1,120)
• Wood and metal waste is separated at our main distribution centres to
further reduce our waste to landfill liabilities
• 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 duffle bags, which are generally reused by customers many
times. However, the Group is aware of the environmental impact of
plastic bags and has 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 relatively short life span
In addition, the Group uses paper-based bags rather than plastic bags in
its stores in the Republic of Ireland.
16
17
Corporate and Social Responsibility (continued)
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 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 their activities are in line with the Ethical
Trade Initiative Base Code. This code covers areas such as health and
safety, fire procedures and maternity pay provisions. The Group’s buying
and own brand staff 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 suppliers who, through the supplier
contract, are required to agree to the Group’s 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 skills base. Examples of
this include:
• Donations of footwear to In Kind Direct, a charity which distributes
new goods to voluntary organisations working in the UK and overseas
• Donations to ‘Riders For Health’ in Africa who are working to make
sure all health workers in Africa have access to reliable transportation
so they can reach the most isolated people with regular and predictable
health care
• Donations to The Marina Dalglish Appeal to improve cancer treatment
facilities in Liverpool
• Donations to The Elifar Foundation Challenge, which aims to help
improve the quality of life of profoundly disabled children and young
adults through the funding of specialist equipment
• Donations to The Seashell Trust, a charity which operates a school,
college and an adult residential home for people with severe and
complex learning disabilities
• Sponsorship and donation of kit to local junior sports clubs
Acquired Businesses
The Group has made a number of acquisitions in recent years both in
the UK and around the world. The Group acknowledges the need to
implement the high standards which the core UK and Ireland businesses
already work to on a Group-wide basis.
Our experience to date is that the recently acquired businesses do
operate to similar standards.
18
19
The Board
Peter Cowgill
Executive Chairman and Chairman of the Nomination
Committee aged 57
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
Group Finance Director aged 53
Brian was appointed Finance Director 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 an accountant with Price Waterhouse in 1981.
Colin Archer
Non-Executive Director, Chairman of the Audit and Remuneration
Committees and member of the Nomination Committee aged 68
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 an 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 Nomination Committees aged 47
Chris was appointed to the Board in May 2003. He is a marketing
specialist with his own public relations and marketing agency. He is also
Chief Executive of Sports Tours International Limited. Chris has over 20
years media experience in newspapers, commercial radio and sport.
20
21
Directors’ Report
The Directors present their annual report and the audited financial
statements of JD Sports Fashion Plc (the ‘Company’) and its subsidiaries
(together referrred to as the ‘Group’) for the 52 week period ended 30
January 2010.
Principal Activities and Business Review
The principal activity of the Group is the retail and distribution of sport
and athletic inspired fashion, footwear, apparel and accessories.
In accordance with the Companies Act 2006, 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 and 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
as follows:
• Summary of Key Performance Indicators (page 3)
• Chairman’s Statement (pages 4 to 7)
• Financial and Risk Review (pages 10 to 11)
• Property and Stores Review (page 13)
• Corporate and Social Responsibility (pages 14 to 18)
All the information set out in those sections is incorporated by reference
into, and is deemed to form part of, this report.
The Corporate Governance Report (pages 25 to 28) and the Directors’
Remuneration Report (pages 30 to 34) are incorporated by reference into,
and are deemed to form part of, this report.
As at the date of this report, no important events affecting the business
of the Group have occurred since 30 January 2010.
Results
Revenue for the 52 week period ended 30 January 2010 was £769.8
million and profit before tax was £61.4 million compared with £670.9
million and £38.2 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 14.70p per ordinary share
(2009: 8.90p), which together with the interim dividend of 3.30p per
ordinary share (2009: 3.10p) makes the total dividend payable for the year
18.00p (2009: 12.00p).
Share Capital
As at 30 January 2010 the Company’s authorised share capital was
£3,107,500 divided into 62,150,000 ordinary shares of 5p each.
As at 30 January 2010 the Company’s issued share capital was
£2,433,083 comprising 48,661,658 ordinary shares of 5p each.
Shareholder and Voting Rights
All members who hold ordinary shares are entitled to attend and vote
at the Company’s Annual General Meeting. On a show of hands at a
general meeting, every member present in person or by proxy shall have
one vote and, on a poll, every member present in person or by proxy
shall have one vote for every ordinary share they hold. Subject to 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.
Restrictions on Transfer of Shares
The restrictions on the transfer of shares in the Company are as follows:
• The Board may, in 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), or which is in favour of more than four
persons jointly or which is in relation to more than one class of share
• Certain restrictions may, from time to time, be imposed by laws and
regulations (for example, insider trading laws)
• Restrictions apply pursuant to the Listing Rules of the Financial
Services Authority whereby Directors and certain of the Group’s
employees require prior approval to deal in the Company’s 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.
Authority to Purchase Own Shares
A resolution was passed at the 2009 Annual General Meeting giving
Directors authority to buy back ordinary shares up to a maximum of 10%
of the total issued ordinary share capital of the Company. As at the date
of this report no shares have been purchased under this authority.
Directors’ Interests
The interests of the Directors who held office at 30 January 2010
and their connected persons in the Company’s ordinary shares are
shown below:
P Cowgill
B Bown
B Small
C Archer
Ordinary shares of 5p each
30 January 2010
410,236
5,676
21,750
19,121
456,783
31 January 2009
410,236
5,676
17,750
19,121
452,783
There has been no change in the interests of the Directors or their
connected persons between 30 January 2010 and the date of this report.
Substantial Interests in Share Capital
As at 13 April 2010 the Company has been advised of the following
significant holdings in its ordinary share capital pursuant to the Disclosure
and Transparency Rules:
Pentland Group Plc
Sports World International Ltd
Aberforth Funds
Number of
ordinary shares
27,963,722
5,775,255
4,711,740
%
57.47
11.87
9.68
Directors
The names and roles of the current Directors together with brief
biographical details are given on page 21. The Directors are responsible
for the management of the business of the Company and, subject to law
and the Company’s Articles of Association, the Directors may exercise
all of the powers of the Company and may delegate their power and
discretion to committees.
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.
Creditors Payment Policy
For all trade creditors, it is the Group policy to:
• Agree 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
Peter Cowgill and Barry Bown retire by rotation at the forthcoming
Annual General Meeting and both are eligible for re-election.
The average number of days taken to pay trade creditors by the Group at
the period end was 36 (2009: 32).
The number of directors at any one point in time shall not be less
than two.
Amendment of the Company’s Articles of Association
The Company’s Articles of Association may only be amended by a
special resolution at a general meeting of shareholders.
The Group does not follow any code or statement on payment practice.
Auditor
In accordance with Section 489 of Companies Act 2006 a resolution is
to be proposed at the Annual General Meeting for the re-appointment of
KPMG Audit Plc as auditor of the Company.
Changes to the Articles of Association are being proposed at this year’s
AGM to reflect principally the changes imposed by the Companies
(Shareholders’ Rights) Regulations 2009 and the Companies Act 2006.
Explanatory notes in relation to these changes are included in the Notice
of Annual General Meeting that accompanies this report.
Change of Control – Significant Agreements
In the event of a change of control of the Company, the Company and
the lenders of the £70 million bank syndicated facility shall enter into an
agreement 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 communicates with its employees through the Company
magazine ‘People 1st’, via the Company’s intranet and notice boards.
Views of employees are sought 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 significant
organisational changes.
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
Going Concern
After making enquiries, the Directors have a reasonable expectation
that the Company, and the Group as a whole, has adequate resources
to continue in operational existence for the foreseeable future. For
this reason, the financial statements have been prepared on a going
concern basis.
Annual General Meeting (AGM)
Notice of the Company’s AGM to be held at 1.00pm on 9 June 2010 at
Hollinsbrook Way, Pilsworth, Bury, Lancashire, BL9 8RR incorporating
explanatory notes of the resolutions to be proposed at the meeting is
enclosed, together with a form of proxy. A copy of the Notice of AGM is
available on the Company’s website www.jdplc.com.
The Group’s employee remuneration strategy is set out in the
Remuneration Report.
By order of the Board of Directors
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. Recruitment, promotion and
the availability of training are based on the suitability of any applicant for
the job 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.
Donations
During the financial year ended 30 January 2010 the Group did not make
any political donations (2009: £nil) and made charitable donations of
£54,000 (2009: £29,500). Of the charitable donations, £37,000 was for
donation of footwear to In Kind Direct, a charity which distributes new
goods to voluntary organisations working in the UK and overseas.
Jane Brisley
Company Secretary
14 April 2010
22
23
Corporate Governance Report
Combined Code
The Board is committed to high standards of corporate governance.
This report sets out how the Company has applied the main principles
set out in the Combined Code on Corporate Governance published by
the Financial Reporting Council in June 2008 (‘the Code’) and the extent
to which the Company has complied with the provisions of the Code.
The Board
The Board consists of five directors: an Executive Chairman, two other
Executive Directors and two Non-Executive Directors. The name,
position and brief profile of each Director is set out on page 21.
Both Non-Executive Directors are considered to be independent by the
Board. The Board believes that the two independent Non-Executive
Directors have provided ample guidance to the Board and perform an
effective role in challenging the Executive Directors when appropriate.
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. The Board considers that its composition
during the year had the necessary balance of Executive and Non-
Executive Directors providing the desired blend of skills, experience and
judgement appropriate for the needs of the Group’s business and overall
effectiveness of the Board. None of the Directors have served for more
than three years without having been re-elected by shareholders.
Colin Archer is the senior independent Non-Executive Director.
The Board considers that all the Directors are able to devote sufficient
time to their duties as Directors of the Company. The brief biographical
detail on page 21 includes details of the Chairman’s other directorships
of listed companies. The Board is satisfied that these appointments do
not conflict with the Chairman’s ability to carry out his role effectively for
the Group.
Board operation
The Board is responsible for the direction, management and performance
of the Company. The Board met eight times during the year under review.
Directors’ attendance at Board and Committee meetings is set out in the
table below. The Board is responsible for providing effective leadership
and promoting success of the Group.
The Board has a formal schedule of matters reserved specifically to it
for decisions which include major strategic matters, approval of financial
statements, acquisitions and disposals and significant capital projects.
The Board delegates certain powers to a number of committees.
Board papers are circulated to Directors prior to Board meetings which
include up-to-date financial information, reports from the Executive
Directors and papers on major issues for consideration by the Board.
Since the year end the Board has adopted updated Terms of Reference
for its three committees. In addition, the Board has formalised its
procedure for Directors to obtain independent professional advice.
All Board members have full access to the Company Secretary,
appointed since the year end, who is a fully admitted solicitor and attends
all Board and Committee meetings. The Company Secretary is tasked
with providing advice to the Board on Corporate Governance matters.
The appointment and removal of the Company Secretary is a matter for
the Board as a whole to determine.
All newly appointed Directors will receive a tailored induction when they
join the Board or a Committee. Relevant training can be arranged as and
when deemed appropriate.
The Board is small and performance evaluation has been conducted on
an informal basis during the year through dialogue between the Directors.
The Board intends to put a formal evaluation process in place during the
current financial year.
The Company, through its majority shareholder Pentland Group Plc,
maintains appropriate Directors and Officers liability insurance.
Attendance at Board and Committee meetings
Board
Meetings
Remuneration
Committee
Audit
Committee
Number of meetings
in year
P Cowgill
B Bown
B Small
C Archer
C Bird
8
8
8
8
8
8
1
1
-
1
1
1
3
3
-
3
3
3
The Nomination Committee did not meet during the year.
Peter Cowgill and Brian Small attended all committee meetings at the
invitation of the members of those committees.
Conflicts of interest
The Company’s Articles of Association permit the Board to consider and,
if it sees fit, to authorise situations where a Director has an interest that
conflicts, or possibly could conflict, with the interests of the Company.
The Board considers that the procedures it has in place for reporting and
considering conflicts of interest are effective.
Board Committees
There are three principal Board Committees to which the Board has
delegated certain of its responsibilities. The terms of reference for all
three Committees have been updated since the year end. They are
available for inspection on request and will shortly be available on the
Company’s corporate website www.jdplc.com.
Audit Committee
The Audit Committee currently comprises the two independent Non-
Executive Directors, Colin Archer (Chairman) and Chris Bird. The
Committee’s principal duties are to review draft annual and interim
financial statements prior to being submitted to the Board, reviewing
the effectiveness of the Group’s system of internal control and risk
management and to review the work of the external auditor.
The Audit Committee met three times in the year with the external
auditor attending each meeting.
24
25
Corporate Governance Report (continued)
Audit Committee (continued)
In the year the Audit Committee discharged its responsibilities by:
structure with clear operating procedures, lines of responsibility, delegated
authority to executive management and a comprehensive financial
reporting process.
• Reviewing the Group’s draft financial statements and interim results
statement prior to Board approval and reviewing the external auditor’s
detailed reports thereon
Key features of the Group’s system of internal control and risk
management are:
• Reviewing the Group’s 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
• Reviewing and approving the audit fee and reviewing non-audit fees
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. During the year the Group has appointed other
accountancy firms to provide non-audit services
• Reviewing the external auditor’s plan for the audit of the Group’s
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 is also responsible for ensuring that appropriate
arrangements are in place for employees to be able to raise matters of
possible impropriety in confidence.
The Audit Committee keeps under review the relationship between
the Group and external auditor and, having considered the external
auditor’s performance during their period in office, recommends their
reappointment.
Remuneration Committee
The Remuneration Committee currently comprises the two
independent Non-Executive Directors, Colin Archer (Chairman) and
Chris Bird. The Committee’s principal duties are to determine overall
Group remuneration policy and specifically Executive Directors and
senior executives.
The Committee met once during the year.
Further details about Directors’ remuneration are set out in the Directors’
Remuneration Report on pages 30 to 34.
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 under review.
Internal Control
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 accords with the Turnbull guidance.
The Board, in conjunction with the Audit Committee, has full
responsibility 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 Board has established a well-defined organisation
• Identification and monitoring of the business risks facing the Group,
with major risks identified and reported to the Audit Committee and
the Board
• Detailed appraisal and authorisation procedures for capital investment
• 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
allowing management to monitor business activities and major
risks and the progress towards financial objectives in the short and
medium term
• Monitoring of store procedures and the reporting and investigation of
suspected fraudulent activities
• Reconciliation and checking of all cash and stock balances and
investigation of any material differences
In addition, the Audit Committee receives reports from the external
auditor in relation to the financial statements and the Group’s system of
internal controls.
The Board has reviewed the effectiveness 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 integration of the recently acquired businesses into the Group’s
system of internal controls is underway.
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 periodically. 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 Company does not have a separate internal audit function as the
Board considers this unnecessary due to the robust control environment
and culture in the business. This is reviewed annually.
The responsibility for internal control procedures within joint ventures
rests with the senior management of those operations. The Company
monitors its investment in such ventures and exerts influence through
Board representation.
Shareholder Relations
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.
26
27
Corporate Governance Report (continued)
Shareholder Relations (continued)
External brokers’ reports on the Group are circulated to the Board
for consideration. In addition, the Non-Executive Directors attend
results presentations and analyst and institutional investor meetings
whenever possible.
The AGM is 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 Directors maintain an active dialogue with the Company’s larger
shareholders to enhance understanding of their respective objectives.
In addition, the Company 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 usual channels of Executive Chairman, Chief Executive or
Group Finance Director have failed to resolve, or for which such contact
is inappropriate.
Compliance with the Combined Code
The Directors consider that during the year under review and to the date
of this report, the Company complied with the Combined Code except
as follows:
A.2.1 - During the year under review the Board did not have a formal
statement on the division of responsibilities of the Executive Chairman
and Chief Executive although it believes these have been understood for
the last six successful years. In the period from the year end to the date of
publication of this Annual Report, the Board has adopted such a written
statement.
This report was approved by the Board and signed on its behalf by:
Jane Brisley
Company Secretary
14 April 2010
28
29
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 2006. 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 9 June 2010.
Unaudited Information
Remuneration Committee
The Remuneration Committee (the ‘Committee’) comprises both
independent Non-Executive Directors, being Chris Bird and myself
(Colin Archer) 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 takes
independent advice on executive compensation and incentives from
PricewaterhouseCoopers’ Remuneration Consultancy Practice if
significant changes to remuneration policy and arrangements are being
made during the period. PricewaterhouseCoopers provided no other
services to the Company in the period.
The Committee is formally constituted with written terms of reference,
which are available to shareholders by writing to the Company Secretary.
The Committee has met once during the year under review with each
member attending the meeting.
Policy
The remuneration policy of the Committee is aimed at attracting,
motivating and retaining executives of the necessary calibre required to
execute the Group’s business strategy and enhance shareholder value.
The Committee believes the remuneration of Executive Directors should
provide an appropriate balance between fixed and performance related
elements. Further details of the remuneration policy are set out below.
The Remuneration Committee keeps the remuneration policy under
review to ensure it accords with good practice and aligns the interests
of the Directors with those of shareholders. The Committee believes this
policy remains appropriate for the forthcoming year.
Components of Remuneration
The main components of the current remuneration package are:
Base salary
The policy of the Committee is to set base salaries for the Executive
Directors around the median or lower 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 PricewaterhouseCoopers
• The need for salaries to be competitive
• The performance of the individual Executive Director and their
contribution to the performance of the business
• Experience and responsibilities of each Executive Director
• Pay and conditions throughout the Group
In line with the remuneration policy, the salaries of the Executive Directors
are reviewed annually. For the Executive Chairman, the salary reflects
his personal contribution to the turnaround of the Group since his
appointment in March 2004 and ongoing strategic development of the
Group. For the Chief Executive and Finance Director the salary takes into
account their performance, the market and continued development in their
respective roles.
With effect from 1 April 2010, the salaries for the Executive Directors have
been increased as follows:
Executive
Director
P Cowgill
B Bown
B Small
Previous
salary
£000
410
293
186
New
salary
£000
423
302
192
Percentage
increase
3%
3%
3%
Position against
comparator
group
Median
Lower Quartile
Lower Quartile
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 not utilised
in the period to 30 January 2010 although the performance was again
considerably above market expectations at the start of the year.
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 the 2008 report which was
subsequently approved at the Annual General Meeting held on 26 June
2008. There have been no changes to the structure of the SRP since.
Retention
element
£000
3,000
500
500
4,000
Performance
element
£000
-
500
500
1,000
Paid
March 2008
March 2009
March 2010
Total
The amounts shown are non-pensionable.
Performance
element
based on
Total
performance to
£000
3,000
-
1,000 31 January 2009
1,000 30 January 2010
5,000
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 was payable on the achievement of
pre-determined profit targets in line with market expectations. The final
amount of £500,000 has been recognised in the Consolidated Income
Statement for the period ended 30 January 2010 on the basis of the
Group achieving performance targets for this period.
The final payment from the SRP has now been made and the Committee
is considering a suitable subsequent package to retain the services of the
Executive Chairman and his fellow Executive Directors in the longer term
during the current year.
Cash based Long Term Incentive Plan
In 2008, the Committee proposed the introduction of a cash based Long
Term Incentive Plan (‘LTIP’) in order to:
• Provide the Committee with the necessary mechanism with
which to retain the Executive Directors who are critical to driving
shareholder value
The following table outlines the structure of the LTIP:
Performance to
Payable
Amount payable:
P Cowgill
B Bown
B Small
Other key executives
1st Award
30 January 2010
March 2010
£000
2nd Award
29 January 2011
March 2011
£000
400
350
250
1,500
2,500
450
394
281
1,625
2,750
The 1st award was paid out in March 2010 as the Group had achieved
the required average headline earnings* of £40 million over the three year
period ending 30 January 2010.
The 2nd award will 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
(including the share of exceptional items of the joint venture).
An amount of £1,750,000 has been recognised in the Consolidated
Income Statement for the period ended 30 January 2010 (2009:
£1,750,000) being the final one-third of the 1st award payable (2009:
one-third) and one-third of the 2nd award payable (2009: one-third).
These amounts are consistent with the vesting profile of a three year
performance period.
• Provide the Executive Directors with the opportunity to earn
Any payments made under the scheme will be non-pensionable.
competitive rewards which was previously severely restricted by the
absence of any long-term incentive plan
• Align the Executive Directors’ interests more closely with those of
the shareholders
• Focus the Executive Directors on sustaining and improving the long-
term financial performance of the Group and reward them appropriately
for doing so
• Ensure a more appropriate balance in the Executives Directors’
compensation between fixed and performance elements
The proposed LTIP was subsequently approved by shareholders at the
Annual General Meeting held on 26 June 2008 and consisted of two
separate awards that would pay out in cash after two and three years
respectively, subject to continued employment and meeting performance
targets which would 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.
The Board will be proposing the approval of a further cash based LTIP
during the year with awards to be paid out, subject to achievement of
appropriate targets, in March 2013.
Other benefits
The Company makes contributions into individual personal pension
schemes for Barry Bown and Brian 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.
30
31
Directors’ Remuneration Report (continued)
TSR is calculated for each financial year end relative to the base date
of 31 January 2005 by taking the percentage change of the market
price over the relevant period, re-investing any dividends at the
ex-dividend rate.
400.00
300.00
%
200.00
100.00
0
2005
2006
2007
2008
2009
2010
JD Sports Fashion Plc
FTSE All Share General Retailers Index
Service Contracts
Details of the contracts currently in place for Executive Directors are
as follows:
Date of contract
20 February 2009
10 March 2004
16 March 2004
Notice period
(months)
12
12
12
Unexpired term
Rolling 12 months
Rolling 12 months
Rolling 12 months
B Bown
B Small
P Cowgill
Each service contract includes provision for compensation commitments
in the event of early termination. For each of the Executives, these
commitments 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.
Directors retiring by rotation at the next Annual General Meeting are
shown in the Directors’ Report on page 23.
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 £72,500 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.
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 considers 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.
32
33
Directors’ Remuneration Report (continued)
Audited Information
Individual Directors’ Emoluments
Directors’ salaries and benefits charged in the period to 30 January
2010 are set out below together with comparatives for the period to 31
January 2009.
Salary and
fees
£000
410
293
186
38
28
955
Benefits
excluding
pensions
£000
1
1
21
-
-
23
Annual
performance
related bonus
£000
410
293
186
-
-
889
Special
retention
payment
£000
500
-
-
-
-
500
P Cowgill
B Bown (i)
B Small
C Archer
C Bird
2010
Total
£000
1,321
587
393
38
28
2,367
2009
Total
£000
1,295
869
381
36
27
2,608
2010
Pensions
costs
£000
-
22
22
-
-
44
2009
Pensions
costs
£000
-
22
21
-
-
43
(i) Remuneration for Barry Bown in 2009 included a one off bonus of
£300,000 to remove the previously preferential terms of his compensation
in the event of the early termination of his contract. This one-off payment
was not pensionable.
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
30 January 2010 in respect of the LTIP. The amounts recognised comprise
the final one-third of the amount proposed for the 1st award, based on
Group performance in the final year of the three year vesting period and
one-third of the 2nd award based on Group performance in the second
year of the three year vesting period. The first award was paid in March
2010, as the Group had achieved the required average headline earnings
of £40 million over the three year period ending 30 January 2010. The
second award will be payable in March 2011 subject to the Group meeting
the performance conditions as detailed on page 31.
2010
£000
283
248
177
708
2009
£000
283
248
177
708
P Cowgill
B Bown
B Small
This report has been prepared on behalf of the Board.
Colin Archer
Chairman of the Remuneration Committee
14 April 2010
34
35
Statement of Directors’ Responsibilities in Respect of the Annual
Report and the Financial Statements
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.
Under company law the Directors must not approve the financial
statements unless they are satisfied that they give a true and fair view
of the state of affairs of the Group and Parent Company and of their
profit or loss for that period. 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
Responsibility Statement
Each of the Directors whose names and positions are set out on page 21
confirms that, to the best of their knowledge:
• The Financial Statements, prepared in accordance with the applicable
set of accounting standards, give a true and fair view of the assets,
liabilities, financial position and profit or loss of the Company and the
undertakings included in the consolidation taken as a whole
• The Directors’ Report includes a fair review of the development and
performance of the business and the position of the Company and the
undertakings included in the consolidation taken as a whole, together
with a description of the principal risks and uncertainties that they face
By order of the Board
• 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
Brian Small
Group Finance Director
14 April 2010
The Directors are responsible for keeping adequate accounting records
that are sufficient to show and explain the Parent Company’s transactions
and 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 2006. 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 Report that complies with that law and
those regulations.
The Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Group’s websites.
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 financial statements of JD Sports Fashion Plc for
the year ended 30 January 2010, which comprise the Consolidated
Income Statement, Consolidated and Parent Company Statement of
Comprehensive Income, Consolidated and Parent Company Statement
of Financial Position, Consolidated and Parent Company Statement of
Cash Flows, Consolidated and Parent Company Statement of Changes
in Equity and the related notes set out on pages 45 to 82. The financial
reporting framework that has been applied in their preparation is
applicable law and International Financial Reporting Standards (IFRSs)
as adopted by the EU and, as regards the Parent Company financial
statements, as applied in accordance with the provisions of the
Companies Act 2006.
This report is made solely to the Company's members, as a body, in
accordance with Chapter 3 of Part 16 of the Companies Act 2006. 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 auditors
As explained more fully in the Statement of Directors' Responsibilities
set out on page 36, the Directors are responsible for the preparation
of the financial statements and for being satisfied that they give a true
and fair view. Our responsibility is to audit the financial statements in
accordance with applicable law and International Standards on Auditing
(UK and Ireland). Those standards require us to comply with the Auditing
Practices Board's (APB's) Ethical Standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements is provided
on the APB's website at www.frc.org.uk/apb/scope/UKP.
Opinion on financial statements
In our opinion:
• The financial statements give a true and fair view of the state of the
Group's and of the Parent Company's affairs as at 30 January 2010 and
of the Group's and the Parent Company’s profit for the year then ended
• The Group financial statements have been properly prepared in
accordance with IFRSs as adopted by the EU
• The Parent Company financial statements have been properly prepared
in accordance with IFRSs as adopted by the EU and as applied in
accordance with the provisions of the Companies Act 2006
• The financial statements have been prepared in accordance with the
requirements of the Companies Act 2006 and, as regards the Group
financial statements, Article 4 of the IAS Regulation
Opinion on other matters prescribed by the
Companies Act 2006
In our opinion:
• The part of the Directors' Remuneration Report to be audited has
been properly prepared in accordance with the Companies Act 2006
• The information given in the Directors' Report for the financial year
for which the financial statements are prepared is consistent with the
financial statements
Matters on which we are required to report
by exception
We have nothing to report in respect of the following:
Under the Companies Act 2006 we are required to report to you if, in
our opinion:
• Adequate accounting records have not been kept by the Parent
Company, or returns adequate for our audit have not been received
from branches not visited by us
• The Parent Company financial statements and the part of the
Directors' Remuneration Report to be audited are not in agreement
with the accounting records and returns
• Certain disclosures of Directors' remuneration specified by law are
not made
• We have not received all the information and explanations we require
for our audit
Under the Listing Rules we are required to review:
• The Directors' statement, set out on page 23, in relation to
going concern
• The part of the Corporate Governance Report relating to the
Company's compliance with the nine provisions of the
June 2008 Combined Code specified for our review
Stuart Burdass (Senior Statutory Auditor)
For and on behalf of:
KPMG Audit Plc
Chartered Accountants
St James’ Square
Manchester
M2 6DS
14 April 2010
38
39
40
Consolidated Income Statement
For the 52 weeks ended 30 January 2010
52 weeks to
30 January 2010
£000
52 weeks to
30 January 2010
£000
52 weeks to
31 January 2009
£000
52 weeks to
31 January 2009
£000
Note
(256,315)
(8,201)
(20,867)
(8,122)
(288,462)
(6,458)
(26,051)
1,472
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 income tax)
Share of exceptional items (net of income 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
10
10
769,785
(390,248)
379,537
(294,920)
(24,579)
2,270
62,308
67,294
(4,986)
62,308
539
(1,012)
(473)
385
(827)
61,393
(18,647)
42,746
42,900
(154)
88.16p
88.16p
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
Consolidated Statement of Comprehensive Income
For the 52 weeks ended 30 January 2010
Profit for the period
Other comprehensive income:
Exchange differences on translation of foreign operations
Total other comprehensive income for the period
Total comprehensive income and expense for the period
(net of income tax)
Attributable to equity holders of the parent
Attributable to minority interest
GROUP
COMPANY
52 weeks to
30 January 2010
£000
52 weeks to
31 January 2009
£000
52 weeks to
30 January 2010
£000
52 weeks to
31 January 2009
£000
42,746
24,510
41,314
25,801
(248)
(248)
42,498
42,652
(154)
4
4
24,514
24,383
131
-
-
41,314
41,314
-
-
-
25,801
25,801
-
41
Consolidated Statement of Financial Position
As at 30 January 2010
Consolidated Statement of Changes in Equity
For the 52 weeks ended 30 January 2010
GROUP
As at
30 January 2010
£000
As at
31 January 2009
£000
COMPANY
As at
30 January 2010
£000
As at
31 January 2009
£000
Note
GROUP
Ordinary share
capital
£000
Share
premium
£000
Retained
earnings
£000
Foreign
currency
translation
reserve
£000
Total equity
attributable to
equity holders
of the parent
£000
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
11
12
13
14
15
16
25
17
18
19
20
21
23
24
21
23
24
25
50,121
67,434
4,053
13,232
635
-
-
42,890
62,668
4,102
5,459
1,108
-
-
135,475
116,227
-
74,569
31,657
64,524
170,750
306,225
(2,712)
(115,742)
(2,920)
(10,789)
(132,163)
(1,347)
(24,050)
(7,395)
(748)
(33,540)
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)
19,395
47,445
4,053
3,787
-
7,864
610
83,154
-
44,125
77,380
56,954
178,459
261,613
-
(78,294)
(1,942)
(9,917)
(90,153)
-
(23,464)
(5,804)
-
(29,268)
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)
(165,703)
(116,789)
(119,421)
(100,144)
Total assets less total liabilities
140,522
103,769
142,192
106,815
2,433
11,659
125,341
(244)
2,433
11,659
88,378
4
2,433
11,659
128,100
-
2,433
11,659
92,723
-
Capital and reserves
Issued ordinary share capital
Share premium
Retained earnings
Other reserves
Total equity attributable to equity holders
of the parent
Minority interest
Total equity
Balance at 2 February 2008
2,413
10,823
68,391
Profit for the period
Other comprehensive income:
Exchange differences on translation
of foreign operations
Total other comprehensive income
Total comprehensive income for
the period
Dividends to equity holders
Shares issued in the period
-
-
-
-
-
20
-
-
-
-
-
836
24,379
-
-
24,379
(4,392)
-
Balance at 31 January 2009
2,433
11,659
88,378
Profit for the period
Other comprehensive income:
Exchange differences on translation
of foreign operations
Total other comprehensive income
Total comprehensive income for
the period
Dividends to equity holders
Acquisition of minority interest
-
-
-
-
-
-
-
-
-
-
-
-
42,900
-
-
42,900
(5,937)
-
-
-
4
4
4
-
-
4
-
(248)
(248)
(248)
-
-
Minority
interest
£000
1,164
131
-
-
131
-
-
Total
equity
£000
82,791
24,510
4
4
24,514
(4,392)
856
81,627
24,379
4
4
24,383
(4,392)
856
102,474
1,295
103,769
42,900
(154)
42,746
(248)
(248)
42,652
(5,937)
-
-
-
(154)
-
192
(248)
(248)
42,498
(5,937)
192
Balance at 30 January 2010
2,433
11,659
125,341
(244)
139,189
1,333
140,522
COMPANY
Balance at 2 February 2008
Profit for the period
Total comprehensive income for the period
Dividends to equity holders
Shares issued in the period
Ordinary share
capital
£000
Share
premium
£000
Retained
earnings
£000
Total
equity
£000
2,413
10,823
71,314
84,550
-
-
-
20
-
-
-
836
25,801
25,801
25,801
(4,392)
-
25,801
(4,392)
856
139,189
102,474
142,192
106,815
Profit for the period
1,333
1,295
-
-
140,522
103,769
142,192
106,815
Total comprehensive income for the period
Dividends to equity holders
-
-
-
-
-
-
41,314
41,314
41,314
(5,937)
41,314
(5,937)
Balance at 30 January 2010
2,433
11,659
128,100
142,192
Balance at 31 January 2009
2,433
11,659
92,723
106,815
These financial statements were approved by the Board of Directors on 14 April 2010 and were signed on its behalf by:
B Bown
B Small
Directors
Registered number: 1888425
42
43
Consolidated Statement of Cash Flows
For the 52 weeks ended 30 January 2010
GROUP
COMPANY
52 weeks to
30 January 2010
£000
52 weeks to
31 January 2009
£000
52 weeks to
30 January 2010
£000
52 weeks to
31 January 2009
£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
Impairment of intangible assets
Impairment of non-current assets
Impairment of investment
Impairment of available for sale investments
Profit on disposal of available for sale investments
Loss on disposal of non-current assets
(Increase)/decrease in inventories
Increase in trade and other receivables
Increase in trade and other payables
Interest paid
Income taxes paid
Net cash from operating activities
Cash flows from investing activities
Overdrafts acquired with acquisitions
Interest received
Proceeds from sale of non-current assets
Disposal costs of non-current assets
Acquisition of intangible assets
Acquisition of property, plant and equipment
Acquisition of non-current other receivables
Cash consideration of acquisitions
Cash acquired with acquisitions
Acquisition of available for sale investment
Proceeds from disposal of available for sale investment
Third party loan repayments
Loan repayments received from 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
Shares issued in the period
Dividends paid
Net cash used in financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning
of the period
Cash and cash equivalents at the end of the period
15
9
8
7
4
4
16
4
4
4
30
11
12
11
11
17
17
14
27
30
30
30
42,746
473
18,647
827
(385)
17,863
(49)
2,617
408
-
-
(4,089)
2,148
(6,062)
(8,179)
25,326
(827)
(15,848)
75,616
(1,129)
385
532
(644)
(6,672)
(21,472)
(1,429)
(9,100)
2,273
(9,990)
16,132
80
1,750
(29,284)
(1,836)
-
-
(5,937)
(7,773)
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)
(1,370)
60
(8,130)
-
-
-
(38,988)
(99)
(56)
856
(4,392)
(3,691)
41,314
-
17,740
675
(549)
13,274
-
-
105
3,470
-
(4,089)
1,525
(1,114)
(23,597)
17,743
(675)
(16,089)
49,733
-
549
2
(359)
-
(13,122)
(665)
(4,666)
-
(9,990)
16,132
80
1,750
(10,289)
(83)
-
-
(5,937)
(6,020)
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)
-
856
(4,392)
(3,619)
38,559
11,569
33,424
14,187
23,538
62,097
11,969
23,538
23,530
56,954
9,343
23,530
Notes to the Consolidated Financial Statements (continued)
1. Significant accounting policies
JD Sports Fashion Plc, (the 'Company') is a company incorporated and domiciled in the United Kingdom. The financial statements for the 52 week period
ended 30 January 2010 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 14 April 2010.
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 30 January 2010.
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 s408 of the Companies Act 2006 not to present its individual income statement
and related notes.
The following adopted accounting standards and interpretations, issued by the International Accounting Standards Board (IASB), have been adopted for the
first time by the Group in the 52 weeks ended 30 January 2010 with no significant impact on its consolidated results or financial position:
•
•
•
Determination of operating segments - as of 1 January 2009 the Group has adopted IFRS 8, 'Operating Segments'. The new accounting policy in
respect of segment operating disclosures has led to a change in the number and/or definition of segments previously presented on the basis that the
information disclosed is consistent to that provided to the Chief Operating Decision Maker (see note 2 for further details)
Presentation of financial statements - the Group has applied revised IAS 1 'Presentation of Financial Statements', which became effective as of 1
January 2009. Comparative information has been re-presented so that it is also in conformity with the revised standard. Since the change in accounting
policy only impacts presentation aspects there is no impact on the Group’s net cash flows, financial position, total comprehensive income or earnings
per share
Amendments to IAS 31 'Interests in Joint Ventures' and IFRS 7 'Financial Instruments: Disclosures' have been applied by the Group to enhance
disclosure. This has had no impact on the Group’s net cash flows, financial position, total comprehensive income or earnings per share
The following revisions to IFRS will be applicable in future periods, subject to endorsement where applicable:
•
•
Revised IFRS 3 'Business Combinations', amendments to IAS 38 'Intangible Assets' and amendments to IAS 27 'Consolidated and Separate Financial
Statements' are applicable for 2010. These standards will affect the future accounting for acquisitions and transactions with non-controlling interests.
There will be no retrospective impact
IFRS 9 'Financial Instruments' is applicable from 2013. If endorsed, this standard will simplify the classification of financial assets for measurement
purposes, but is not anticipated to have a significant impact on the financial statements
The Group does not consider that any other standards, amendments or interpretations issued by the IASB, but not yet applicable, will have a significant
impact on the financial statements.
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.
As at 30 January 2010, the Group had net cash balances of £60,465,000 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.
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.
44
45
Notes to the Consolidated Financial Statements (continued)
Notes to the Consolidated Financial Statements (continued)
1. Significant accounting policies (continued)
1. Significant accounting policies (continued)
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.
I.
Goodwill (continued)
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 distribution companies acquired. 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 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.
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 Consolidated Statement of Financial Position 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
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 instalments 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 instalments so as to give a constant charge on the outstanding obligation.
All other leases are accounted for as operating leases and the rental costs 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 life 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 - 4 years on a straight line basis
5 - 7 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.
II.
Other intangible assets
Other intangible assets represent brand licences, brand names 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.
Brand names acquired, are initially stated at fair value less accumulated amortisation and impairment losses. The useful economic life of each
purchased brand name is considered to be finite. Amortisation of brand names is charged to the Consolidated Income Statement over 10 years on a
straight line basis.
Separately identifiable fascia names acquired, are initially stated at fair value less accumulated 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.
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 Consolidated Statement of Comprehensive Income and recycled into the
Consolidated 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 in the Group’s Statement of Financial Position when the Group becomes a party to the contractual
provisions of the instrument. Financial assets are derecognised when the contractual rights to the cash flows 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.
Non-current other receivables
I.
Key money
Monies paid in certain countries to give access to retail locations are capitalised within non-current assets. These assets are not depreciated but will be
impaired if evidence exists that the market value is less than the historic cost. Gains/losses on key money from the subsequent disposal of these retail
locations are recognised in the Consolidated Income Statement.
II. Deposits
Money paid in certain countries as deposits to store landlords as protection against non-payment of rent, is capitalised within non-current assets.
A provision for the impairment of these deposits is established when there is objective evidence that the landlord will not repay the deposit in full.
III. Legal fees
The fair value is based on an external valuation prepared by persons having the appropriate professional qualification and experience.
Legal fees and other costs associated with the acquisition of a leasehold interest are capitalised as other receivables within non-current assets.
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. When the excess is negative (negative goodwill),
it is recognised immediately in the Consolidated Income Statement as an exceptional item.
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.
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 are included as a
component of cash and cash equivalents for the purpose of the Consolidated Statement of Cash Flows, as these are used as an integral part of the Group’s
cash management.
Net cash/interest-bearing borrowings
Net cash consists of cash and cash equivalents together with other borrowings from bank loans and overdrafts, other loans, loan notes, finance leases and
similar hire purchase contracts.
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.
46
47
Notes to the Consolidated Financial Statements (continued)
Notes to the Consolidated Financial Statements (continued)
1. Significant accounting policies (continued)
Trade and other payables
Trade and other payables are non-interest-bearing and are stated at their cost.
Foreign currency translation
Transactions denominated in foreign currencies are translated into sterling at the exchange rate prevailing on the date of the transaction. Monetary assets and
liabilities denominated in foreign currencies are translated into sterling at the rate of exchange at the reporting date. Exchange differences in monetary items
are recognised in the Consolidated Income Statement.
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 reporting 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.
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.
Interest rate swaps are recognised at fair value in the Consolidated Statement of Financial Position 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 reporting date, taking into account current interest rates and the respective risk profiles of the swap counterparties.
1. Significant accounting policies (continued)
Income tax expense
Tax on the profit or loss for the year comprises current and deferred tax.
I. Current income tax
Current income tax expense is calculated using the tax rates which have been enacted or substantively enacted by the reporting date, adjusted for any
tax paid in respect of prior years.
II.
Deferred tax
Deferred tax is recognised in respect of 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
•
• Differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future
The initial recognition of assets or liabilities that affect neither accounting nor taxable profit
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 reporting 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.
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, a collection of stores
where the cash flows are not independent or an individual distribution business. 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.
Hedging 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.
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.
Provisions
A provision is recognised in the Consolidated Statement of Financial Position 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.
Within the onerous contracts provision, management make provisions where the expected benefits to be derived from a contract are lower than the
unavoidable cost of meeting the obligations under that contract.
Revenue
Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods and services provided in the
normal course of business, net of discounts and sales related taxes.
In the case of goods sold through the retail stores, revenue is recognised when goods are sold and the title has passed, less provision for returns. Accumulated
experience is used to estimate and provide for such returns at the time of the sale. Retail sales are usually in cash, by debit card or by credit card.
Exceptional items
Items that are, in aggregate, material in size and 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
Impairment of available for sale investments
Loss/(profit) on disposal of available for sale investments
Financial income
Financial income comprises interest receivable on funds invested. Financial income is recognised in the Consolidated Income Statement on an effective
interest method.
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.
48
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 distribution companies acquired. See note 11 for further disclosure on impairment of goodwill and review of the key
assumptions used.
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 and
further disclosure on impairment of other intangible assets with indefinite lives including review of the key assumptions used.
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.
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 sublet 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 contracted rent.
49
Notes to the Consolidated Financial Statements (continued)
Notes to the Consolidated Financial Statements (continued)
1. Significant accounting policies (continued)
Critical accounting estimates and judgements (continued)
VI. Onerous contract provisions
The Group makes a provision for specific onerous contracts where there is a shortfall between the anticipated revenues and costs pertaining to those
contracts. 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.
2. Segmental analysis
2. Segmental analysis (continued)
Business segments
Information regarding the Group’s operating segments for the 52 weeks to 30 January 2010 is reported below:
Income statement
Gross revenue
Intersegment revenue
Revenue
Sport retail
£000
Fashion retail
£000
Distribution
£000
Total
£000
615,507
(1,225)
114,640
(394)
42,551
(1,294)
772,698
(2,913)
614,282
114,246
41,257
769,785
The Group has adopted IFRS 8 'Operating Segments' for the current period. IFRS 8 requires operating segments to be identified on the basis of internal
reports about components of the Group that are regularly reviewed by the Chief Operating Decision Maker to allocate resources to the segments and to
assess their performance. The Chief Operating Decision Maker is considered to be the Executive Chairman of JD Sports Fashion Plc.
Operating profit/(loss) before financing and exceptional items
Exceptional items
In prior years, segment information reported externally was analysed on the basis of the categories of product sold by the Group (Sport or Fashion).
However, information reported to the Chief Operating Decision Maker is focused more on the nature of the businesses within the Group which has
changed significantly in the current year, due to the acquisition of a number of distribution businesses. The Group’s reportable segments under IFRS 8
are therefore as follows:
•
Sport retail - includes the results of the sport retail trading companies JD Sports Fashion Plc, John David Sports Fashion (Ireland) Limited,
Chausport SA and Duffer of St George Limited
• Fashion retail - includes the results of the fashion retail trading companies Bank Fashion Limited and RD Scott Limited
•
Distribution businesses - includes the results of the distribution companies Topgrade Sportswear Limited, Nicholas Deakins Limited, Canterbury
Limited (including global subsidiary companies) and Kooga Rugby Limited
Operating profit/(loss)
Share of results of joint venture
Financial income
Financial expenses
Profit before tax
Income tax expense
Profit for the period
64,125
(642)
63,483
3,333
(4,355)
(1,022)
(164)
11
(153)
67,294
(4,986)
62,308
(473)
385
(827)
61,393
(18,647)
42,746
The Chief Operating Decision Maker receives and reviews segmental operating profit. Certain central administrative costs including Group Directors'
salaries are included within the Group’s core ‘Sport retail’ result. This is consistent with the results as reported to the Chief Operating Decision Maker.
Total assets and liabilities
Sport retail
£000
Fashion retail
£000
Distribution
£000
Unallocated
£000
Eliminations
£000
Total
£000
IFRS 8 requires disclosure of information regarding revenue from major products and customers. The majority of the Group's revenue is derived from
the retail of a wide range of apparel, footwear and accessories to the general public. As such, the disclosure of revenues from major products and
customers is not appropriate.
Total assets
Total liabilities
264,394
51,180
40,572
635
(50,556)
306,225
(112,618)
(51,561)
(40,543)
(11,537)
50,556
(165,703)
Intersegment transactions are undertaken in the ordinary course of business on arms length terms.
Total segment net assets/(liabilities)
151,776
(381)
29
(10,902)
-
140,522
The Board consider that certain items are cross divisional in nature and cannot be allocated between the segments on a meaningful basis. The share
of results of joint venture is presented as unallocated in the following tables, as this entity has trading relationships with companies in all of the three
segments. An asset of £635,000 (2009: £1,108,000) for the equity accounted investment in joint venture is included within the unallocated segment. Net
funding costs and taxation are treated as unallocated reflecting the nature of the Group’s syndicated borrowing facilities and its tax group. A liability of
£11,537,000 (2009: £8,774,000) for taxation is included within the unallocated segment.
Each segment is shown net of intercompany transactions and balances within that segment. The eliminations remove intercompany transactions and
balances between different segments which primarily relate to the net down of long term loans and short term working capital funding provided by JD
Sports Fashion Plc (within Sport retail) to other companies in the Group, and intercompany trading between companies in different segments.
Other segment information
Capital expenditure:
Property, plant and equipment
Non-current other receivables
Goodwill on acquisition
Brands on acquisition
Brands purchased
Available for sale investment
Depreciation, amortisation and impairments:
Depreciation and amortisation of non-current assets
Impairment of intangible assets
Impairment of non-current assets
Sport retail
£000
Fashion retail
£000
Distribution
£000
Total
£000
13,517
1,424
-
2,042
-
9,990
14,067
-
105
7,383
5
-
-
-
-
3,279
2,617
303
572
-
1,443
453
6,672
-
517
-
-
21,472
1,429
1,443
2,495
6,672
9,990
17,863
2,617
408
50
51
Notes to the Consolidated Financial Statements (continued)
Notes to the Consolidated Financial Statements (continued)
2. Segmental analysis (continued)
2. Segmental analysis (continued)
Geographical information
The Group's operations are located in the UK, Republic of Ireland, France, Australia, New Zealand, United States of America and Hong Kong.
The following table provides analysis of the Group's revenue by geographical market, irrespective of the origin of the goods/services:
Revenue
UK
Europe
Rest of world
The revenue from any individual country, with the exception of the UK, is not more than 10% of the Group's total revenue.
The following is an analysis of the carrying amount of segmental non-current assets, excluding investments in joint ventures £635,000 (2009:
£1,108,000) and other financial assets £922,000 (2009: £2,629,000), by the geographical area in which the assets are located:
Non-current assets
UK
Europe
Rest of world
2010
£000
120,322
13,311
285
133,918
52 weeks to
30 January 2010
£000
52 weeks to
31 January 2009
£000
722,221
45,094
2,470
769,785
657,052
13,803
-
670,855
2009
£000
109,725
2,765
-
112,490
Business segments (continued)
The comparative segmental results for the 52 weeks to 31 January 2009 are as follows:
Income statement
Gross revenue
Intersegment revenue
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 retail
£000
Fashion retail
£000
Distribution
£000
Total
£000
559,209
-
559,209
54,159
(14,204)
39,955
98,518
-
98,518
233
(2,119)
(1,886)
14,819
(1,691)
672,546
(1,691)
13,128
670,855
81
-
81
54,473
(16,323)
38,150
748
529
(1,210)
38,217
(13,707)
24,510
Total assets and liabilities
Sport retail
£000
Fashion retail
£000
Distribution
£000
Unallocated
£000
Eliminations
£000
Total
£000
Total assets
Total liabilities
194,272
48,006
7,482
1,108
(30,310)
220,558
(86,388)
(47,947)
(3,990)
(8,774)
30,310
(116,789)
Total segment net assets/(liabilities)
107,884
59
3,492
(7,666)
-
103,769
Other segment information
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 retail
£000
Fashion retail
£000
Distribution
£000
Total
£000
22,830
810
-
8,130
11,576
2,045
798
6,077
5,015
-
864
-
2,669
-
1,427
-
174
-
-
-
87
-
-
-
28,019
810
864
8,130
14,332
2,045
2,225
6,077
52
53
Notes to the Consolidated Financial Statements (continued)
Notes to the Consolidated Financial Statements (continued)
3. Profit before tax
5.
Remuneration of Directors
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
Intangible assets (see note 4)
Other non-current assets
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
Provision to write down inventories to net realisable value
Profit before tax is stated after crediting:
Rents receivable and other income from property
Sundry income
Foreign exchange gain recognised
52 weeks to
30 January 2010
£000
52 weeks to
31 January 2009
£000
106
105
30
108
11
16,660
-
49
762
392
407
2,617
1
-
75,751
1,459
827
892
1,378
572
103
61
21
69
5
13,898
23
49
362
371
2,225
2,045
106
6,077
70,807
1,253
1,475
811
298
698
Directors’ emoluments:
As Non-Executive directors
As Executive Directors
Pension contributions
52 weeks to
30 January 2010
£000
52 weeks to
31 January 2009
£000
66
3,011
44
3,121
63
3,253
43
3,359
The remuneration of the Executive Directors includes retention and contract renegotiation payments totalling £500,000 (2009: £800,000) and provision
for future LTIP payments of £708,000 (2009: £708,000). Further information on Directors’ emoluments is shown in the Directors' Remuneration Report
on page 30.
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:
GROUP
Sales and distribution
Administration
Full time equivalents
The aggregate payroll costs of these persons were as follows:
GROUP
2010
10,081
253
10,334
6,128
2009
9,498
201
9,699
5,737
52 weeks to
30 January 2010
£000
52 weeks to
31 January 2009
£000
107,464
8,010
809
116,283
95,351
6,617
474
102,442
In addition, fees of £25,000 (2009: £20,000) 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.
Non-current other receivables comprises key money, store deposits and legal fees associated with the acquisition of leasehold interests (see note 14).
Wages and salaries
Social security costs
Other pension costs (see note 29)
4.
Exceptional items
Loss on disposal of non-current assets
Impairment of non-current assets
Onerous lease provision
Selling and distribution expenses - exceptional
Impairment of intangible assets
Impairment of available for sale investments
Profit on disposal of available for sale investments
Administrative expenses - exceptional
Total
54
52 weeks to
30 January 2010
£000
52 weeks to
31 January 2009
£000
Note
2,148
408
3,902
6,458
2,617
-
(4,089)
(1,472)
4,986
2,976
2,225
3,000
8,201
2,045
6,077
-
8,122
16,323
11
17
17
In the opinion of the Board, the key management as defined under IAS 24 'Related Party Disclosures' are the five Executive and Non-Executive
Directors (2009: five). Full disclosure of the Directors' remuneration is given in the Directors' Remuneration Report on page 30.
Company
The average number of persons employed by the Company (including Directors) during the period, analysed by category, was as follows:
COMPANY
Sales and distribution
Administration
Full time equivalents
The aggregate payroll costs of these persons were as follows:
COMPANY
Wages and salaries
Social security costs
Other pension costs
2010
7,875
207
8,082
4,706
2009
7,835
181
8,016
4,621
52 weeks to
30 January 2010
£000
52 weeks to
31 January 2009
£000
80,718
5,372
449
86,539
78,813
5,426
381
84,620
55
Notes to the Consolidated Financial Statements (continued)
Notes to the Consolidated Financial Statements (continued)
7.
Financial income
10. Earnings per ordinary share
Bank interest
Other interest
8.
Financial expenses
On bank loans and overdrafts
Amortisation of facility costs
Finance charges payable in respect of finance lease and similar hire purchase contracts
Other interest
52 weeks to
30 January 2010
£000
52 weeks to
31 January 2009
£000
240
145
385
323
206
529
52 weeks to
30 January 2010
£000
52 weeks to
31 January 2009
£000
511
160
-
156
827
1,153
56
1
-
1,210
The deferred costs of setting up the Group's £70,000,000 revolving bank facility (see note 21) have been fully amortised, as the facility, which expires in
October 2011, is currently being renegotiated.
9.
Income tax expense
Current tax
UK corporation tax at 28.0% (2009: 28.3%)
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 charge/(credit) (see note 25)
Income tax expense
Reconciliation of income tax expense
Profit before tax multiplied by the standard rate of corporation tax in the UK of 28.0% (2009: 28.3%)
Effects of:
Expenses not deductible
Depreciation and impairment of non-qualifying non-current assets (including brand names arising on
consolidation)
Loss on disposal of non-qualifying non-current assets
(Reversal)/provision for non-qualifying impairment of available for sale investments
Effect of overseas tax rates
Loss/(profit) from joint venture - after tax result included
Non-qualifying impairment of goodwill on consolidation
Losses not previously recognised within deferred tax
Other differences
Adjustments to tax charge in respect of prior periods
Income tax expense
56
52 weeks to
30 January 2010
£000
52 weeks to
31 January 2009
£000
18,125
148
18,273
254
120
374
14,167
25
14,192
87
(572)
(485)
18,647
13,707
52 weeks to
30 January 2010
£000
52 weeks to
31 January 2009
£000
17,190
259
936
267
(1,145)
(48)
132
733
(95)
150
268
10,828
262
945
516
1,722
(66)
(212)
-
-
259
(547)
18,647
13,707
Basic and diluted earnings per ordinary share
The calculation of basic and diluted earnings per ordinary share at 30 January 2010 is based on the profit for the period attributable to equity holders of
the parent of £42,900,000 (2009: £24,379,000) and a weighted average number of ordinary shares outstanding during the 52 weeks ended 30 January
2010 of 48,661,658 (2009: 48,287,502).
Issued ordinary shares at beginning of period
Issued ordinary shares at end of period
52 weeks to
30 January 2010
52 weeks to
31 January 2009
48,661,658
48,661,658
48,263,434
48,661,658
Weighted average number of ordinary shares during the period - basic and diluted
48,661,658
48,287,502
Adjusted basic and diluted earnings per ordinary share
Adjusted basic and diluted earnings per ordinary share have been based on the profit for the period attributable to equity holders of the parent for each
financial period but excluding the post tax effect of certain exceptional items. The Directors consider that this gives a more meaningful measure of the
underlying performance of the Group.
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 income tax)
Profit for the period attributable to equity holders of the parent excluding exceptional items
Adjusted basic and diluted earnings per ordinary share
Note
4
15
42,900
2,838
(1,184)
1,012
45,566
93.64p
52 weeks to
30 January 2010
£000
52 weeks to
31 January 2009
£000
11. Intangible assets
GROUP
Cost or valuation
At 2 February 2008
Acquisitions
At 31 January 2009
Acquisitions
At 30 January 2010
Amortisation and impairment
At 2 February 2008
Charge for the period
Impairment
At 31 January 2009
Charge for the period
Impairment
At 30 January 2010
Net book value
At 30 January 2010
At 31 January 2009
At 2 February 2008
Goodwill
£000
Brand licence
£000
Brand names
£000
Fascia name
£000
39,940
864
40,804
1,443
42,247
5,207
-
2,045
7,252
-
2,617
9,869
32,378
33,552
34,733
4,279
-
4,279
-
4,279
60
362
-
422
362
-
784
3,495
3,857
4,219
-
-
-
9,167
9,167
-
-
-
-
400
-
400
8,767
-
-
5,481
-
5,481
-
5,481
-
-
-
-
-
-
-
5,481
5,481
5,481
24,379
13,347
(1,885)
(914)
34,927
72.33p
Total
£000
49,700
864
50,564
10,610
61,174
5,267
362
2,045
7,674
762
2,617
11,053
50,121
42,890
44,433
57
Notes to the Consolidated Financial Statements (continued)
Notes to the Consolidated Financial Statements (continued)
11. Intangible assets (continued)
11. Intangible assets (continued)
Goodwill impairment
The impairment in the period relates to the residual goodwill on the acquisition of the entire issued share capital of RD Scott Limited in 2004. An
initial impairment of £2,000,000 was recognised in January 2007. Although the performance of the business has improved since this point, it has not
progressed sufficiently to justify carrying the remaining goodwill and so, accordingly, the Board believes the remaining balance of £2,617,000 should be
impaired.
The impairment in the prior period related 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 reflected disappointing trade since acquisition.
Brand licence
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.
Brand names
Brand names comprise the following:
I. Canterbury brand name
On 4 August 2009 the Group acquired the global rights to the rugby brands ‘Canterbury’ and ‘Canterbury of New Zealand’ for £6,672,000. This brand
name is being amortised over a period of 10 years. At 30 January 2010, the net book value of this brand was £6,339,000. Amortisation of this intangible
is included within administrative expenses in the Consolidated Income Statement.
II. Kooga brand name
On 3 July 2009, the Group acquired 100% of the issued ordinary share capital of Kooga Rugby Limited. Included in the net assets at acquisition was
the global rights to the Kooga brand name (excluding Australia). This has been valued at £453,000 which is being amortised over a period of 10 years.
At 30 January 2010, the net book value of this brand was £427,000. Amortisation of this intangible is included within administrative expenses in the
Consolidated Income Statement.
III. Duffer of St George brand name
On 24 November 2009 , the Group acquired 100% of the issued ordinary share capital of Duffer of St George Limited. Included in the net assets at
acquisition was the global rights to the Duffer of St George brand name. This has been valued at £2,042,000 which is being amortised over a period of
10 years. At 30 January 2010, the net book value of this brand was £2,001,000. Amortisation of this intangible is included within administrative expenses
in the Consolidated Income Statement.
Fascia name
The fascia name of £5,481,000 represents the fair value of the ‘Bank’ fascia name acquired as part of the acquisition of Bank Stores Holdings Limited
and its subsidiaries during the period ended 2 February 2008. 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, including the ongoing investment in
new stores
COMPANY
Cost or valuation
At 2 February 2008, 31 January 2009 and 30 January 2010
Goodwill
£000
Brand licence
£000
Total
£000
19,945
4,279
24,224
Amortisation and impairment
At 2 February 2008
Charge for the period
Impairment
At 31 January 2009
Charge for the period
At 30 January 2010
Net book value
At 30 January 2010
At 31 January 2009
At 2 February 2008
2,000
-
2,045
4,045
-
4,045
15,900
15,900
17,945
60
362
-
422
362
784
3,495
3,857
4,219
2,060
362
2,045
4,467
362
4,829
19,395
19,757
22,164
Acquisitions
A number of acquisitions have been made in the period. Provisional fair values are disclosed below, where the acquisitions are within the 12 month
hindsight period.
Acquisition of Chausport SA
On 19 May 2009, the Group (via its new subsidiary JD Sports Fashion (France) SAS) acquired 100% of the issued share capital of Chausport SA for a
cash consideration of £7,211,000 (€8,000,000) together with associated fees of £696,000. Chausport SA is a French retailer with 78 stores in premium
locations in town centres and shopping centres across France.
The provisional goodwill calculation is summarised below:
Acquiree’s net assets at the acquisition date:
Property, plant & equipment
Non-current other receivables
Inventories
Trade and other receivables
Cash and cash equivalents
Interest bearing loans and borrowings
Trade and other payables
Net identifiable assets
Goodwill on acquisition
Consideration paid – satisfied in cash
Book value
£000
Fair value
adjustments
£000
Provisional
fair value at
30 January 2010
£000
1,637
6,581
6,282
1,350
639
(2,318)
(8,370)
5,801
(79)
2,697
(512)
-
-
-
-
2,106
1,558
9,278
5,770
1,350
639
(2,318)
(8,370)
7,907
-
7,907
Non-current other receivables comprise landlord deposits and key money, which gives Chausport SA the right to occupy certain retail locations.
Included in the result for the 52 week period to 30 January 2010 is revenue of £27,678,000 and a profit before tax of £692,000 in respect of
Chausport SA.
Acquisition of Kooga Rugby Limited
On 3 July 2009, the Group acquired 100% of the issued share capital of Kooga Rugby Limited for a consideration of £1 together with associated fees of
£30,000. Kooga Rugby Limited is involved in the design, sourcing and wholesale of rugby apparel, footwear and accessories and is sole kit supplier to a
number of professional rugby union and rugby league clubs.
The provisional goodwill calculation is summarised below:
Acquiree’s net liabilities at the acquisition date:
Intangible assets
Property, plant & equipment
Inventories
Trade and other receivables
Interest bearing loans and borrowings
Trade and other payables
Provisions
Net identifiable (liabilities)/assets
Goodwill on acquisition
Consideration paid – satisfied in cash
Book value
£000
Fair value
adjustments
£000
Provisional
fair value at
30 January 2010
£000
262
347
1,450
1,956
(4,824)
(1,937)
-
(2,746)
191
(245)
(368)
(938)
3,375
(98)
(584)
1,333
453
102
1,082
1,018
(1,449)
(2,035)
(584)
(1,413)
1,443
30
Fair value adjustments include a reduction of £3,375,000 in interest-bearing loans and borrowings following an agreement with the lender.
The Board believe that the excess of consideration paid over net identifiable liabilities is best considered as goodwill on acquisition, representing
customer loyalty and employee expertise. The Kooga brand has been identified as a separate intangible asset and has been valued using the '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. This amount is included in intangible assets as a brand name.
58
59
Notes to the Consolidated Financial Statements (continued)
11. Intangible assets (continued)
Acquisition of Kooga Rugby Limited (continued)
Included in the result for the 52 week period to 30 January 2010 is revenue of £4,986,000 and a profit before tax of £145,000 in respect of Kooga
Rugby Limited.
Canterbury Limited
On 4 August 2009, the Group (via its new subsidiary Canterbury Limited) acquired the global rights to the rugby brands 'Canterbury' and 'Canterbury of
New Zealand' from Canterbury Europe Limited (in administration) for a cash consideration of £6,672,000. Inventory with a value of £4,289,000 was also
acquired. The book value of the assets acquired is considered to be the fair value and no goodwill arose on the acquisition.
Canterbury Limited holds the brand names 'Canterbury' and 'Canterbury of New Zealand' and receives third party global royalties in relation to these
brands. Included in the result for the 52 week period to 30 January 2010 is revenue of £nil and a loss before tax of £21,000 in respect of the company
Canterbury Limited
Canterbury of New Zealand Limited
Canterbury Limited is the parent company of Canterbury of New Zealand Limited, a newly incorporated company domiciled in the UK, which trades
the Canterbury brand in Europe.
Included in the result for the 52 week period to 30 January 2010 is revenue of £12,960,000 and a profit before tax of £19,000 in respect of Canterbury
of New Zealand Limited.
Canterbury International (Far East) Limited
On 4 August 2009, Canterbury Limited acquired 100% of the issued share capital of Canterbury International (Far East) Limited for a cash
consideration of £1. The provisional fair value of the assets and liabilities acquired was £1. No goodwill arose on this acquisition.
Included in the result for the 52 week period to 30 January 2010 is revenue of £319,000 and a loss before tax of £67,000 in respect of Canterbury
International (Far East) Limited.
Canterbury (North America) LLC
On 24 November 2009, Canterbury Limited (via its new subsidiary Canterbury (North America) LLC) acquired the key trading assets from Sail City
Apparel Limited (in liquidation). The total cash consideration paid was £442,000 which included inventory with a value of £392,000 with associated fees
of £50,000. The book value of the assets acquired is considered to be the fair value and no goodwill arose on the acquisition.
Included in the result for the 52 week period to 30 January 2010 is revenue of £439,000 and a profit before tax of £40,000 in respect of Canterbury
(North America) LLC.
Acquisition of Canterbury International (Australia) Pty Limited
On 23 December 2009, Canterbury Limited acquired 100% of the issued ordinary share capital of Canterbury International (Australia) Pty Limited
for a cash consideration of £2 together with associated fees of £100,000. Canterbury International (Australia) Pty Limited operates the Canterbury brand
in Australia.
Notes to the Consolidated Financial Statements (continued)
11. Intangible assets (continued)
Acquisition of Canterbury of New Zealand Limited
On 23 December 2009, Canterbury Limited acquired 51% of the issued ordinary share capital of Canterbury of New Zealand Limited for a cash
consideration of £1 together with associated fees of £200,000. Canterbury of New Zealand Limited operates the Canterbury brand in New Zealand.
The provisional goodwill calculation 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
Intercompany loan
Shareholder loan
Net identifiable assets/(liabilities)
Non-controlling interest (49%)
Goodwill on acquisition
Consideration paid - satisfied in cash
Book value
£000
Fair value
adjustments
£000
Provisional
fair value at
30 January 2010
£000
123
1,681
1,346
504
(966)
(8)
(794)
(763)
1,123
(550)
-
(180)
(90)
-
(484)
-
23
-
(731)
358
123
1,501
1,256
504
(1,450)
(8)
(771)
(763)
392
(192)
-
200
Canterbury Limited and the vendors of Canterbury of New Zealand Limited have agreed a put and call option whereby Canterbury Limited may
acquire the remaining 49% of the issued share capital of Canterbury of New Zealand Limited. This option is exercisable by either party on the third
anniversary of the completion of this initial transaction and on each anniversary thereafter.
Included in the result for the 52 week period to 30 January 2010 is revenue of £502,000 and a profit before tax of £30,000 in respect of Canterbury of
New Zealand Limited.
Acquisition of Duffer of St George Limited
On 24 November 2009, the Group acquired 100% of the issued share capital of Duffer of St George Limited for a cash consideration of £863,000.
Duffer of St George Limited owns the global rights to the brand name 'The Duffer of St George'.
The provisional goodwill calculation is summarised below:
The provisional goodwill calculation 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
Intercompany loan
Net identifiable (liabilities)/assets
Goodwill on acquisition
Consideration paid - satisfied in cash
Book value
£000
Fair value
adjustments
£000
Provisional
fair value at
30 January 2010
£000
144
1,866
1,175
918
(3,037)
(7,105)
(6,039)
-
-
-
-
(349)
6,488
6,139
144
1,866
1,175
918
(3,386)
(617)
100
-
100
Acquiree’s net assets at the acquisition date:
Intangible assets
Trade and other receivables
Cash and cash equivalents
Intercompany loan
Deferred tax asset
Net identifiable (liabilities)/assets
Goodwill on acquisition
Consideration paid - satisfied in cash
Book value
£000
Fair value
adjustments
£000
Provisional
fair value at
30 January 2010
£000
1,151
220
212
(1,616)
5
(28)
891
-
-
-
-
891
2,042
220
212
(1,616)
5
863
-
863
Fair value adjustments include a reduction of £6,488,000 in intercompany loans following an agreement with the lender.
Included in the result for the 52 week period to 30 January 2010 is revenue of £1,210,000 and a profit before tax of £84,000 in respect of Canterbury
International (Australia) Pty Limited.
Included in the result for the 52 week period 30 January 2010 is revenue of £nil and a loss before tax of £55,000 in respect of Duffer of St George
Limited.
Full year impact of acquisitions
Had the acquisition of Chausport SA, Kooga Rugby Limited, Canterbury International (Far East) Limited, Canterbury International (Australia) Pty
Limited, Canterbury of New Zealand Limited and Duffer of St George Limited been effected at 1 February 2009, the revenue and profit before tax
of the Group for the year ended 30 January 2010 would have been £793,355,000 and £58,294,000 respectively. The full year effect of the acquisitions
reduces the profit before tax due to an onerous contract in Canterbury International (Australia) Pty Limited that has since been terminated.
60
61
Notes to the Consolidated Financial Statements (continued)
Notes to the Consolidated Financial Statements (continued)
11. Intangible assets (continued)
11. Intangible assets (continued)
Prior period acquisition of Nicholas Deakins Limited
On 11 April 2008, the Group acquired 100% of the 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.
During the 12 month period following acquisition, no hindsight adjustments have been made to the provisional fair values of the net assets of Nicholas
Deakins Limited as at the acquisition date.
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
Book and fair
value at
30 January 2010
£'000
3
190
520
60
(215)
(51)
(1)
506
864
1,370
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 either the store portfolios or
distribution businesses acquired. 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 carrying amount of goodwill by CGU is shown below:
Allsports store portfolio
RD Scott store portfolio
First Sport store portfolio
Bank store portfolio
Topgrade Sportswear Limited
Nicholas Deakins Limited
Kooga Rugby Limited
GROUP
COMPANY
2010
£000
924
-
14,976
14,154
17
864
1,443
32,378
2009
£000
924
2,617
14,976
14,154
17
864
-
33,552
2010
£000
924
-
14,976
-
-
-
-
15,900
2009
£000
924
-
14,976
-
-
-
-
15,900
Based on the value-in-use calculation performed in the period, impairment charges of £2,617,000 have been recognised in the Consolidated Income
Statement in the period. This relates entirely to goodwill on the RD Scott store portfolio.
The key assumptions used for value-in-use calculations are set out below:
• In relation to the Allsports 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% (2009:
2.0%) which is a prudent estimate of the growth based on past experience
• In relation to the RD Scott store portfolio, the cash flow projections were based on actual operating results together with financial forecasts approved by the
Board covering a five year period. These forecasts assumed flat business performance (2009: 2.0% sales growth)
• In relation to Nicholas Deakins Limited and Kooga Rugby Limited the cash flow 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. Cash flows beyond this five year period are extrapolated using a growth rate of 2.0% (2009: 2.0%) which is a prudent estimate of growth based
on past experience
• The discount rate of 12.7% (2009: 12.7%) 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% (2009: 15.0%) 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 (2009: same).
Impairment tests for intangible assets with definite lives
Intangible assets with definite lives are tested annually for impairment by comparing the recoverable amount of brand names to their carrying value.
The recoverable amount of brand 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%
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 a one year Board approved forecast, and subsequent sales projections assume an annual growth of
2.0% over the remaining life of the brand. For the Brand Licence the Group has used a discount rate of 9.9% (2009: 9.9%) to reflect the risks specific
to the assets, for which future cash flow estimates have not been adjusted. Projected future sales are based on a two year Board approved forecast and
subsequent sales projections assume an annual growth of 5% over the remaining licence period.
12. Property, plant and equipment
GROUP
Improvements to
short leasehold
properties
£000
Computer
equipment
£000
Fixtures and
fittings
£000
Motor
vehicles
£000
Cost
At 2 February 2008
Additions
Disposals
Exchange differences
On acquisition of subsidiaries
At 31 January 2009
Additions
Disposals
Exchange differences
On acquisition of subsidiaries
At 30 January 2010
Depreciation and impairment
At 2 February 2008
Charge for period
Impairments
Disposals
Exchange differences
At 31 January 2009
Charge for period
Impairments
Disposals
Exchange differences
At 30 January 2010
Net book value
At 30 January 2010
At 31 January 2009
At 2 February 2008
13,661
2,617
(1,406)
66
-
14,938
2,172
(1,145)
48
144
16,157
8,033
1,065
243
(1,096)
9
8,254
1,212
37
(938)
14
8,579
7,578
6,684
5,628
9,626
1,706
(185)
5
1
11,153
1,445
(1,123)
(14)
212
11,673
6,736
1,629
57
(171)
4
8,255
1,604
11
(1,118)
(10)
8,742
2,931
2,898
2,890
97,624
23,610
(12,132)
391
2
109,495
17,823
(8,897)
19
1,571
120,011
53,670
10,772
1,819
(9,694)
62
56,629
13,784
359
(7,508)
(71)
63,193
56,818
52,866
43,954
308
86
(96)
-
-
298
32
(200)
-
-
130
67
84
-
(73)
-
78
60
-
(115)
-
23
107
220
241
Total
£000
121,219
28,019
(13,819)
462
3
135,884
21,472
(11,365)
53
1,927
147,971
68,506
13,550
2,119
(11,034)
75
73,216
16,660
407
(9,679)
(67)
80,537
67,434
62,668
52,713
Impairment charges of £407,000 (2009: £2,119,000) 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 cannot 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.
62
63
Notes to the Consolidated Financial Statements (continued)
Notes to the Consolidated Financial Statements (continued)
12. Property, plant and equipment (continued)
14. Other non-current receivables
COMPANY
Cost
At 2 February 2008
Additions
Disposals
At 31 January 2009
Additions
Disposals
At 30 January 2010
Depreciation and impairment
At 2 February 2008
Charge for period
Impairments
Disposals
At 31 January 2009
Charge for period
Impairments
Disposals
At 30 January 2010
Net book value
At 30 January 2010
At 31 January 2009
At 2 February 2008
Improvements to
short leasehold
properties
£000
Computer
equipment
£000
Fixture
and fittings
£000
Motor
vehicles
£000
11,810
2,079
(1,309)
12,580
1,199
(989)
12,790
7,607
817
33
(1,058)
7,399
935
24
(809)
7,549
5,241
5,181
4,203
8,924
1,136
(168)
9,892
801
(85)
10,608
6,253
1,340
4
(162)
7,435
1,083
3
(84)
8,437
2,171
2,457
2,671
81,403
18,122
(10,250)
89,275
11,115
(6,520)
93,870
48,722
8,284
267
(8,344)
48,929
10,453
76
(5,549)
53,909
39,961
40,346
32,681
189
-
(23)
166
7
(15)
158
66
30
-
(19)
77
22
-
(13)
86
72
89
123
13. Investment property
GROUP AND COMPANY
Cost
At 2 February 2008, 31 January 2009 and 30 January 2010
Depreciation and impairment
At 2 February 2008
Charge for period
At 31 January 2009
Charge for period
At 30 January 2010
Net book value
At 30 January 2010
At 31 January 2009
At 2 February 2008
Total
£000
102,326
21,337
(11,750)
111,913
13,122
(7,609)
117,426
62,648
10,471
304
(9,583)
63,840
12,493
103
(6,455)
69,981
47,445
48,073
39,678
£000
4,160
9
49
58
49
107
4,053
4,102
4,151
Based on an external valuation, the fair value of investment property as at 30 January 2010 was £3,400,000 (2009: £3,600,000).
Management do not consider the investment property to be impaired as the rental income over the life of the lease until December 2023 supports the
carrying value.
Loan notes receivable from joint venture
Key money
Deposits
Legal fees
GROUP
COMPANY
2010
£000
922
8,553
659
3,098
13,232
2009
£000
2,629
-
-
2,830
5,459
2010
£000
922
-
-
2,865
3,787
2009
£000
2,629
-
-
2,598
5,227
The loan notes receivable from the joint venture earn interest at bank base lending rates plus a margin of 1.5%. £1,750,000 was repaid in the year
(2009: £nil). 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 30
January 2010, as the balance has been repaid in full after the year end.
Key money represents monies paid in certain countries to give access to retail locations.
Deposits represent money paid in certain countries to store landlords as protection against non-payment of rent.
Legal fees represents legal fees and other costs associated with the acquisition of leasehold interests.
Impairment losses of £1,000 (2009: £106,000) 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
£12,400,000. As at 30 January 2010, the Board do not consider it probable that further consideration will be paid. Accordingly, no further liability has
been recognised as at the reporting 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 Consolidated Statement of Financial Position 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
30 January 2010
£000
31 January 2009
£000
486
4,641
(4,492)
-
635
607
5,675
(5,158)
(16)
1,108
The Group's share of the revenue generated by the joint venture in the period was £11,774,000 (2009: £13,043,000).
The amount included in the Consolidated Income Statement in relation to the joint venture is as follows:
52 weeks to
30 January 2010
52 weeks to
31 January 2009
Before
exceptionals
£000
Exceptionals
£000
After
exceptionals
£000
Before
exceptionals
£000
Exceptionals
£000
After
exceptionals
£000
Share of result before tax
Tax
Share of result after tax
740
(201)
539
(1,406)
394
(1,012)
(666)
193
(473)
(155)
(11)
(166)
1,270
(356)
914
1,115
(367)
748
As at 30 January 2010, the Group had loan notes receivable from Focus Brands Limited, including accrued interest thereon, to the value of £922,000
(2009: £2,629,000).
64
65
Notes to the Consolidated Financial Statements (continued)
Notes to the Consolidated Financial Statements (continued)
16. Investments
COMPANY
Cost
At 2 February 2008
Additions
At 31 January 2009
Additions
At 30 January 2010
Impairment
At 2 February 2008 and 31 January 2009
Impairments
At 30 January 2010
Net book value
At 30 January 2010
At 31 January 2009
At 2 February 2008
The impairment in the period relates to the investment in RD Scott Limited (see note 11).
The additions to investments in the year comprise the following. All are 100% owned:
COMPANY
JD Sports Fashion (France) SAS
Kooga Rugby Limited
Duffer of St George Limited
Canterbury Limited
Total additions
A full list of subsidiaries and jointly controlled entities is shown in note 34.
17. Available for sale investments
GROUP AND COMPANY
Cost
As at 2 February 2008
Additions
As at 31 January 2009
Additions from rights issue and placing
Disposals
As at 30 January 2010
Fair value
As at 2 February 2008
Additions
Impairments
As at 31 January 2009
Additions from rights issue and placing
Proceeds on disposal net of fees paid
Gain on disposal
As at 30 January 2010
£000
7,298
1,370
8,668
4,666
13,334
(2,000)
(3,470)
(5,470)
7,864
6,668
5,298
£000
3,773
30
863
-
4,666
£000
-
8,130
8,130
9,990
(18,120)
-
-
8,130
(6,077)
2,053
9,990
(16,132)
4,089
-
The available for sale investments represent investments in listed equity securities. The Group held a non-strategic investment of 9.99% in JJB Sports Plc
until 9 December 2009 when it disposed of 65,018,098 ordinary shares for 25p a share, giving a realised loss on disposal of £1,988,000. With the impairment
recognised in the prior year of £6,077,000 this has resulted in an exceptional gain in the period to 30 January 2010 of £4,089,000.
66
18. Inventories
Finished goods and goods for resale
GROUP
COMPANY
2010
£000
74,569
2009
£000
58,287
2010
£000
44,125
The cost of inventories recognised as expenses and included in cost of sales for the 52 weeks ended 30 January 2010 was £393,694,000
(2009: £345,416,000).
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
Past due 30-60 days
Past 60 days
COMPANY
Not past due
Past due 30-60 days
Past 60 days
GROUP
COMPANY
2010
£000
10,535
2,179
18,943
-
31,657
2009
£000
2,503
2,550
15,400
-
20,453
Gross
£000
5,634
2,571
3,246
11,451
Gross
£000
151
146
123
420
2010
Provision
£000
(25)
(123)
(768)
(916)
2010
Provision
£000
-
(26)
(82)
(108)
Net
£000
5,609
2,448
2,478
10,535
Net
£000
151
120
41
312
Gross
£000
1,405
409
877
2,691
Gross
£000
200
102
399
701
2010
£000
312
876
12,003
64,189
77,380
2009
Provision
£000
-
(36)
(152)
(188)
2009
Provision
£000
-
-
-
-
2009
£000
43,011
2009
£000
701
2,527
11,057
39,682
53,967
Net
£000
1,405
373
725
2,503
Net
£000
200
102
399
701
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 2 February 2008
Released
On acquisition of subsidiaries
Utilised
At 31 January 2009
Created
Released
On acquisition of subsidiaries
Utilised
At 30 January 2010
GROUP
£000
COMPANY
£000
227
(25)
4
(18)
188
241
(105)
661
(69)
916
6
-
-
(6)
-
108
-
-
-
108
67
Notes to the Consolidated Financial Statements (continued)
Notes to the Consolidated Financial Statements (continued)
19. Trade and other receivables (continued)
The other classes within trade and other receivables do not contain impaired assets.
Included within prepayments and accrued income for the Group and Company is £nil (2009: £160,000) in relation to deferred costs incurred in setting up
the current bank facility (see note 21).
21. Interest-bearing loans and borrowings (continued)
Loan notes
The maturity of the loan notes is as follows:
20. Cash and cash equivalents
Bank balances and cash floats
21. Interest-bearing loans and borrowings
Current liabilities
Bank loans and overdrafts
Loan notes
Non-current liabilities
Bank loans and overdrafts
Other loans
GROUP
COMPANY
2010
£000
64,524
2009
£000
23,538
2010
£000
56,954
2009
£000
23,530
GROUP
COMPANY
2010
£000
2,712
-
2,712
600
747
1,347
2009
£000
2010
£000
2009
£000
-
83
83
-
-
-
-
-
-
-
-
-
-
83
83
-
-
-
The following 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.
Bank facilities
The Group has a £70,000,000 revolving facility in the UK 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% (2009: 0.75%). The commitment fee on the undrawn element of the facility is 45% of the applicable margin rate.
Within one year
GROUP
COMPANY
2010
£000
-
-
2009
£000
83
83
2010
£000
-
-
2009
£000
83
83
Other loans
The Group has a loan payable to Herald Island Limited, the minority shareholder of Canterbury of New Zealand Limited, which was acquired in the
period. The loan attracts interest at 3.0% above the Group’s cost of funds and is repayable on exercise of the put and call option (see note 11).
The maturity of the other loans is as follows:
Between one and five years
22. Financial instruments
GROUP
COMPANY
2010
£000
747
747
2009
£000
-
-
2010
£000
-
-
2009
£000
-
-
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 ‘Non-current other receivables’ in the Consolidated Statement of
Financial Position.
Cash and cash equivalents comprise short-term cash deposits with major United Kingdom and European clearing banks earning 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:
At 30 January 2010, there were no amounts drawndown on this facility (2009: £nil).
Bank balances and cash floats
Bank loans and overdrafts
The following Group companies have overdraft facilities which are repayable on demand:
• Topgrade Sportswear Limited £2,000,000 (2009: £2,000,000)
• Nicholas Deakins Limited £600,000 (2009: £600,000)
• Chausport SA €2,450,000
Further information on guarantees provided by the Company is disclosed in note 22.
Sterling
Euros
US Dollars
Australian Dollars
New Zealand Dollars
Other
Included within bank loans and overdrafts are term loans within Chausport SA which have been taken out to fund the refurbishment of specific stores.
The interest rates range from 5.10% to 6.50% and are secured on the fixtures in those particular stores.
Included in trade and other receivables are the following foreign currency denominated receivables:
The maturity of the bank loans and overdrafts is as follows:
Within one year
Between one and five years
GROUP
COMPANY
2010
£000
2,712
600
3,312
2009
£000
-
-
-
2010
£000
-
-
-
2009
£000
-
-
-
Euros
US Dollars
Australian Dollars
New Zealand Dollars
Other
GROUP
COMPANY
2010
£000
1,107
294
1,653
1,219
378
2009
£000
-
-
-
-
-
2010
£000
-
-
-
-
-
GROUP
COMPANY
2010
£000
64,524
58,887
3,933
762
514
399
29
64,524
2009
£000
23,538
21,341
1,288
909
-
-
-
23,538
2010
£000
56,954
56,071
383
500
-
-
-
56,954
2009
£000
23,530
22,312
361
857
-
-
-
23,530
2009
£000
-
-
-
-
-
68
69
Notes to the Consolidated Financial Statements (continued)
Notes to the Consolidated Financial Statements (continued)
22. Financial instruments (continued)
22. Financial instruments (continued)
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’.
The currency profile of interest-bearing loans and borrowings is shown below:
Interest bearing loans and borrowings
Sterling
Euros
New Zealand Dollars
GROUP
COMPANY
2010
£000
4,059
1,567
1,745
747
4,059
2009
£000
83
83
-
-
83
2010
£000
-
-
-
-
-
Included in trade and other payables are the following foreign currency denominated payables:
Euros
US Dollars
Australian Dollars
New Zealand Dollars
Other
GROUP
COMPANY
2010
£000
4,419
1,153
1,850
333
202
2009
£000
105
87
-
-
-
2010
£000
336
87
-
-
-
2009
£000
83
83
-
-
83
2009
£000
105
87
-
-
-
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. There are no concentrations of risk in the period to 30 January 2010.
Interest rate risk
The Group finances its operations by a mixture of retained profits and bank borrowings. The Group’s borrowings are at floating rates, partially hedged by
floating rate interest on deposits, reflecting the seasonality of its cash flow. 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 Group's syndicated facility is not drawn down at certain times of the year, the Board did not consider that an interest rate swap on the floating rate
facility was necessary in the period to 30 January 2010. The net fair value of swap liabilities at 30 January 2010 was £nil (2009: £nil).
The Group has potential bank floating rate financial liabilities on the £70,000,000 revolving credit facility, together with overdraft facilities in subsidiary
companies (see note 21). There were no drawdowns from the revolving credit facility at 30 January 2010 (2009: £nil) thereby minimising the Group's
interest rate risk at the year end. 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% (2009: 0.75%).
As at 30 January 2010 and 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 £2,000 (2009: £37,000). This assumes that all other variables remain unchanged. Calculations are performed on the same basis as the
prior year. There is no impact on equity with the 1% change in interest rates.
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 in each country 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 local currency/US Dollar
contracts whereby the minimum exchange rate on the purchase of dollars is guaranteed.
As at 30 January 2010, options have been entered into to protect approximately 77% of the US Dollar requirement for the period to January 2011.
The balance of the US Dollar requirement for the period will be satisfied at spot rates. Hedge accounting is not applied.
As at 30 January 2010, the fair value of these instruments was an asset of £605,000 (2009: asset of £885,000) which has been included within current
assets in both years.
Foreign currency risk (continued)
A 10% strengthening of sterling relative to the following currencies as at the reporting date would have reduced profit before tax and equity as follows:
Euros
US Dollars
Australian Dollars
New Zealand Dollars
Other
Profit before tax
Equity
2010
£000
357
69
47
36
3
512
2009
£000
114
82
-
-
-
196
2010
£000
357
69
47
36
3
512
2009
£000
114
82
-
-
-
196
A 10% weakening of sterling relative to the following currencies as at the reporting date would have increased profit before tax and equity as follows:
Euros
US Dollars
Australian Dollars
New Zealand Dollars
Other
Profit before tax
Equity
2010
£000
392
76
52
40
3
563
2009
£000
126
90
-
-
-
216
2010
£000
392
76
52
40
3
563
2009
£000
126
90
-
-
-
216
Calculations are performed on the same basis as the prior year and the method assumes that all other variables remain unchanged.
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 reporting date there were no significant
concentrations of credit risk and receivables which are not impaired are believed to be recoverable.
The Group considers its maximum exposure to credit risk to be equivalent to total trade and other receivables of £31,657,000 (2009: £20,453,000) and
cash and cash equivalents of £64,524,000 (2009: £23,538,000).
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 are overdrawn. As at 30 January 2010, the value of these guarantees was £1,567,000 (2009:
£1,976,000).
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. The Board review 13 week and annual cash flow forecasts each month.
Information about the maturity of the Group's financial liabilities is disclosed in note 21.
As at 30 January 2010, there are undrawn committed facilities with a maturity profile as follows:
Expiring in more than one year but no more than two years
Expiring in more than two years but no more than three years
The commitment fee on these facilities is 0.34% (2009: 0.34%).
2010
£000
70,000
-
70,000
2009
£000
-
70,000
70,000
70
71
Notes to the Consolidated Financial Statements (continued)
Notes to the Consolidated Financial Statements (continued)
22. Financial instruments (continued)
24. Provisions
Fair values
The fair values together with the carrying amounts shown in the Consolidated Statement of Financial Position as at 30 January 2010 are as follows:
GROUP
COMPANY
Carrying amount
2010
£000
Note
Fair value
2010
£000
Carrying amount
2010
£000
Fair value
2010
£000
Trade and other receivables
Cash and cash equivalents
Interest bearing loans and borrowing - current
Interest bearing loans and borrowing - non-current
Trade and other payables - current
Trade and other payables - non-current
19
20
21
21
23
23
31,657
64,524
(2,712)
(1,347)
(115,742)
(24,050)
31,657
64,524
(2,712)
(1,347)
(115,742)
(24,050)
Unrecognised gains/(losses)
The comparatives at 31 January 2009 are as follows:
(47,670)
(47,670)
-
77,380
56,954
-
-
(78,294)
(23,464)
32,576
77,380
56,954
-
-
(78,294)
(23,464)
32,576
-
GROUP
COMPANY
Carrying amount
2009
£000
Note
Fair value
2009
£000
Carrying amount
2009
£000
Fair value
2009
£000
Available for sale investments
Trade and other receivables
Cash and cash equivalents
Interest bearing loans and borrowing - current
Trade and other payables - current
Trade and other payables - non-current
17
19
20
21
23
23
Unrecognised gains
2,053
20,453
23,538
(83)
(80,073)
(19,690)
(53,802)
2,053
20,453
23,538
(81)
(80,073)
(19,690)
(53,800)
2
2,053
53,967
23,530
(83)
(64,584)
(20,567)
(5,684)
2,053
53,967
23,530
(81)
(64,584)
(20,567)
(5,682)
2
In the opinion of the Board, the fair value of the Group's financial assets and liabilities as at 30 January 2010 and 31 January 2009 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:
Loan notes
The interest-bearing loans and borrowings as at 31 January 2009 represent loan notes. These have been discounted at a rate of 2.25%.
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.
I.
II.
23. Trade and other payables
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
72
GROUP
COMPANY
2010
£000
52,268
49,265
14,209
-
115,742
24,050
-
24,050
2009
£000
34,837
36,562
8,674
-
80,073
19,690
-
19,690
2010
£000
38,828
31,086
8,380
-
78,294
16,882
6,582
23,464
2009
£000
29,824
28,145
6,570
45
64,584
13,985
6,582
20,567
The provisions for onerous property leases represent anticipated minimum contractual lease costs less potential sublease income for vacant properties.
For loss making 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 the Group's weighted average of capital of 12.7% (2009: 12.7%) (see note 11).
Within the onerous contracts provision, management have recognised that the expected benefits to be derived from a contract are lower than
the unavoidable cost of meeting the obligations under the contract. The provisions have been made to the extent that the contracts are deemed
to be onerous.
GROUP
Balance at 31 January 2009
Provisions created during the period
Provisions released during the period
Provisions acquired during the period
Provisions utilised during the period
Balance at 30 January 2010
Provisions have been analysed between current and non-current as follows:
GROUP
Current
Non-current
COMPANY
Balance at 31 January 2009
Provisions created during the period
Provisions released during the period
Provisions utilised during the period
Balance at 30 January 2010
Provisions have been analysed between current and non-current as follows:
COMPANY
Current
Non-current
Onerous
property leases
£000
Onerous
contracts
£000
8,169
6,434
(2,532)
-
(2,340)
9,731
-
-
-
584
-
584
2010
£000
2,920
7,395
10,315
2010
£000
1,942
5,804
7,746
Total
£000
8,169
6,434
(2,532)
584
(2,340)
10,315
2009
£000
2,859
5,310
8,169
Onerous
property leases
£000
6,491
5,017
(1,912)
(1,850)
7,746
2009
£000
2,492
3,999
6,491
73
Notes to the Consolidated Financial Statements (continued)
Notes to the Consolidated Financial Statements (continued)
25. Deferred tax assets and liabilities
Recognised deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the following:
GROUP
Property, plant and equipment
Chargeable gains held over/rolled over
General accruals
Tax losses
Tax (assets)/liabilities
Assets
2010
£000
-
-
-
(724)
(724)
Assets
2009
£000
Liabilities
2010
£000
Liabilities
2009
£000
-
-
-
(487)
(487)
330
332
810
-
1,472
77
332
457
-
866
Net
2010
£000
330
332
810
(724)
748
Net
2009
£000
77
332
457
(487)
379
26. Capital and reserves
Issued ordinary share capital
GROUP AND COMPANY
At 31 January 2009 and at 30 January 2010
Number of
ordinary shares
thousands
Ordinary
share capital
£000
48,661
2,433
The total number of authorised ordinary shares was 62,150,000 (2009: 62,150,000) with a par value of 5p per share (2009: 5p per share). All issued
shares are fully paid.
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.
Deferred tax assets on losses of AUS $16,598,000 within Canterbury International (Australia) Pty Limited and losses of £4,463,000 within Kooga Rugby
Limited have not been recognised on the grounds that there is no certainty that these losses can be utilised.
Full disclosure on the rights attached to shares is provided in the Directors' Report on page 22.
Movement in deferred tax during the period
GROUP
Balance at 2 February 2008
Recognised in income
Balance at 31 January 2009
On acquisition
Recognised in income
Balance at 30 January 2010
Property, plant and
equipment
£000
Chargeable gains
held over/rolled
over
£000
Lease variations
and other items
£000
2,620
(2,543)
77
-
253
330
332
-
332
-
-
332
(1,938)
2,395
457
-
353
810
Tax losses
£000
(150)
(337)
(487)
(5)
(232)
(724)
Recognised deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the following:
COMPANY
Property, plant and equipment
Chargeable gains held over/rolled over
General accruals
Tax (assets)/liabilities
Movement in deferred tax during the period
COMPANY
Balance at 2 February 2008
Recognised in income
Balance at 31 January 2009
Recognised in income
Balance at 30 January 2010
Assets
2010
£000
(95)
-
(847)
(942)
Assets
2009
£000
-
-
(1,079)
(1,079)
Liabilities
2010
£000
Liabilities
2009
£000
-
332
-
332
176
332
-
508
Net
2010
£000
(95)
332
(847)
(610)
Property, plant and
equipment
£000
Chargeable gains
held over/rolled
over
£000
Lease variations
and other items
£000
1,278
(1,102)
176
(271)
(95)
332
-
332
-
332
(1,300)
221
(1,079)
232
(847)
Total
£000
864
(485)
379
(5)
374
748
Net
2009
£000
176
332
(1,079)
(571)
Total
£000
310
(881)
(571)
(39)
(610)
At 30 January 2010 the Group has no recognised deferred income tax liability (2009: £nil) in respect of taxes that would be payable on the unremitted
earnings of certain subsidiaries. As at 30 January 2010 the unrecognised gross temporary differences in respect of reserves of overseas subsidiaries is
£705,000. No deferred income tax liability has been recognised in respect of this temporary timing difference due to the foreign profits exemption, the
availability of double tax relief and the ability to control the remittance of earnings.
There are no income tax consequences attached to the payment of dividends by the Group to its shareholders.
27. Dividends
After the reporting date the following dividends were proposed by the Directors. The dividends were not provided for at the reporting date.
14.70p per ordinary share (2009: 8.90p)
Dividends on issued ordinary share capital
Final dividend of 8.90p (2009: 6.00p) per qualifying ordinary share paid in respect
of prior period, but not recognised as a liability in that period
Interim dividend of 3.30p (2009: 3.10p) per qualifying ordinary share paid in
respect of current period
52 weeks to
30 January 2010
£000
52 weeks to
31 January 2009
£000
7,153
4,331
52 weeks to
30 January 2010
£000
52 weeks to
31 January 2009
£000
4,331
1,606
5,937
2,896
1,496
4,392
A scrip alternative was offered in respect of the interim dividend in the period to 31 January 2009 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 30 January 2010, the Group had entered into contracts to purchase property, plant and equipment as follows:
GROUP
Contracted
These commitments will be settled in the following financial period.
2010
£000
2,953
2009
£000
4,216
74
75
Notes to the Consolidated Financial Statements (continued)
Notes to the Consolidated Financial Statements (continued)
28. Commitments (continued)
28. Commitments (continued)
(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.
(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 30 January 2010 are as follows:
Undiscounted total future minimum rentals payable under non-cancellable operating leases are as follows:
COMPANY
GROUP
Within one year
Later than one year and not later than five years
After five years
Land and
buildings
2010
£000
76,106
256,313
238,778
571,197
Plant and
equipment
2010
£000
1,125
1,073
-
2,198
Land and
buildings
2009
£000
68,531
238,251
230,653
537,435
Plant and
equipment
2009
£000
902
865
-
1,767
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.
(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 30 January 2010 are as follows:
GROUP
Within one year
Later than one year and not later than five years
After five years
Company
(i) Capital commitments
As at 30 January 2010, the Company had entered into contracts to purchase property, plant and equipment as follows:
COMPANY
Contracted
2010
£000
623
1,868
2,531
5,022
2010
£000
2,217
2009
£000
639
2,224
3,322
6,185
2009
£000
3,664
These commitments will be settled in the following financial period.
(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:
COMPANY
Within one year
Later than one year and not later than five years
After five years
Land and
buildings
2010
£000
57,219
193,453
183,931
434,603
Plant and
equipment
2010
£000
789
729
-
1,518
Land and
buildings
2009
£000
52,222
178,284
161,336
391,842
Plant and
equipment
2009
£000
693
706
-
1,399
2010
£000
538
1,736
2,531
4,805
2009
£000
529
1,890
2,995
5,414
Within one year
Later than one year and not later than five years
After five years
29. Pension schemes
The Group only operates defined contribution pension schemes. The pension charge for the period represents contributions payable by the Group of
£765,000 (2009: £431,000) in respect of employees, and £44,000 (2009: £43,000) in respect of Directors. The amount owed to the schemes at the period
end was £125,000 (2009: £82,000).
30. Analysis of net cash
GROUP
Cash at bank and in hand
Overdrafts
Cash and cash equivalents
Interest bearing loans and borrowings:
Bank loans
Loan notes
Other loans
COMPANY
Cash at bank and in hand
Cash and cash equivalents
Interest bearing loans and borrowings:
Loan notes
At 31 January
2009
£000
On acquisition
of subsidiaries
£000
Cash flow
£000
At 30 January
2010
£000
23,538
-
23,538
-
(83)
-
2,273
(1,129)
1,144
(2,013)
-
(1,388)
38,713
(1,298)
37,415
1,128
83
641
64,524
(2,427)
62,097
(885)
-
(747)
23,455
(2,257)
39,267
60,465
At 31 January
2009
£000
23,530
23,530
Cash flow
£000
33,424
33,424
At 30 January
2010
£000
56,954
56,954
(83)
83
-
23,447
33,507
56,954
76
77
Notes to the Consolidated Financial Statements (continued)
Notes to the Consolidated Financial Statements (continued)
31. Related party transactions and balances
31. Related party transactions and balances (continued)
Transactions and balances with related parties during the period are shown below. Transactions were undertaken in the ordinary course of business on
an arms length basis. Outstanding balances are unsecured (unless otherwise stated) and will be settled in cash.
Pentland Group Plc owns 57.5% (2009: 57.5%) of the issued ordinary share capital of JD Sports Fashion Plc. The Group and Company made purchases
of inventory from Pentland Group Plc in the period and the other income represents marketing contributions received.
Focus Brands Limited is an entity jointly controlled by JD Sports Fashion Plc and the former shareholders of Focus Group Holdings Limited. JD Sports
Fashion Plc owns 49% of the issued share capital. JD Sports Fashion Plc has loan notes receivable from Focus Brands Limited (see note 14). The
Company and its subsidiaries made purchases from the Focus Group, the Company rents a property to this entity and the Company receives royalty
income in relation to the Sergio Tacchini licence (see note 11).
Transactions with related parties who are members of the Group
During the period, the Company entered into the following transactions with related parties who are members of the Group:
COMPANY
Bank Stores Holdings Limited
Sale of inventory
Canterbury of New Zealand Limited (UK)
Purchase of inventory
JD Sports Fashion (France) SAS
Interest income
Duffer of St George Limited
Interest income
John David Sports Fashion (Ireland) Limited
Sale of inventory
Other income
Kooga Rugby Limited
Purchase of inventory
Nicholas Deakins Limited
Purchase of inventory
RD Scott Limited
Purchase of inventory
Concession fee
Topgrade Sportswear Limited
Sale/(purchase) of inventory
Interest income
Income from
related parties
2010
£000
Expenditure with
related parties
2010
£000
Income from
related parties
2009
£000
Expenditure with
related parties
2009
£000
-
-
131
13
5,866
1,731
-
-
-
-
1,225
37
-
15
(100)
-
-
-
-
(19)
(250)
-
(162)
(101)
-
-
-
-
5,076
1,328
-
-
-
-
41
14
-
-
-
-
-
-
-
(284)
(178)
-
(161)
-
Transactions with related parties who are not members of the Group
During the period, the Group entered into the following transactions with related parties who are not members of the Group:
GROUP
Pentland Group Plc
Purchase of inventory
Other income
Focus Brands Limited
Interest income
Purchase of inventory
Rental income
Royalty income
Income from
related parties
2010
£000
Expenditure with
related parties
2010
£000
Income from
related parties
2009
£000
Expenditure with
related parties
2009
£000
-
351
43
-
319
104
(18,684)
-
-
(4,426)
-
-
-
157
150
-
319
170
(23,794)
-
-
(6,802)
-
-
At the end of the period, the following balances were outstanding with related parties who are not members of the Group:
GROUP
Pentland Group Plc
Trade payables
Focus Brands Limited
Loan notes receivable (including accrued interest)
Trade payables
Amounts owed by
related parties
2010
£000
Amounts owed to
related parties
2010
£000
Amounts owed by
related parties
2009
£000
Amounts owed to
related parties
2009
£000
-
(1,310)
-
(1,430)
922
-
-
(567)
2,629
-
-
(37)
During the period, the Company entered into the following transactions with related parties who are not members of the Group:
COMPANY
Pentland Group Plc
Purchase of inventory
Other income
Focus Brands Limited
Interest income
Purchase of inventory
Rental income
Royalty income
Income from
related parties
2010
£000
Expenditure with
related parties
2010
£000
Income from
related parties
2009
£000
Expenditure with
related parties
2009
£000
-
332
43
-
319
104
(17,096)
-
-
(2,429)
-
-
-
157
150
-
319
170
(21,192)
-
-
(5,316)
-
-
At the end of the period, the Company had the following balances outstanding with related parties who are not members of the Group:
COMPANY
Pentland Group Plc
Trade payables
Focus Brands Limited
Loan notes receivable (including accrued interest)
Trade payables
Amounts owed by
related parties
2010
£000
Amounts owed to
related parties
2010
£000
Amounts owed by
related parties
2009
£000
Amounts owed to
related parties
2009
£000
-
(1,292)
-
(1,216)
922
-
-
(27)
2,629
-
-
(37)
78
79
Notes to the Consolidated Financial Statements (continued)
Notes to the Consolidated Financial Statements (continued)
31. Related party transactions and balances (continued)
31. Related party transactions and balances (continued)
The secured loans from the Company to Canterbury Limited and Duffer of St George Limited are secured upon the intellectual property in these
companies. The loan to Canterbury Limited does not attract interest, whereas the loan to Duffer of St George Limited accrues interest at the UK base
rate plus a margin of 4.0%.
Other intercompany balances relates to recharges.
Trade receivables/payables relate to the sale and purchase of stock between the Company and its subsidiaries on arms length terms.
There have been no transactions in the year (2009: £nil) and there are no balances outstanding (2009: £nil) with the other subsidiary undertakings of the
Company, as listed in note 34.
32. Contingent liabilities
The Company has provided the following guarantees:
• Guarantee on the letter of credit facility in Focus Brands Limited. The contingent liability varies depending on the value of the letters of credit
outstanding at any point in time, but the maximum exposure on this guarantee is £1,000,000 (2009: £nil)
• Guarantees on the working capital facilities in both Topgrade Sportswear Limited and Nicholas Deakins Limited of £2,000,000 (2009: £2,000,000) and
£600,000 (2009: £600,000) respectively
• Guarantee capped at £2,500,000 in relation to the acquisition of Canterbury of New Zealand Limited under a kit supply and sponsorship agreement
with the Scottish Rugby Union Plc, which was entered into in January 2010
The Company formerly provided a guarantee on an interest-bearing loan in Focus Brands Limited. This guarantee was provided in conjunction with
other shareholders on a several basis with each shareholder guaranteeing the loan in line with their relative shareholding. As at 30 January 2010, the
Company’s contingent liability on this loan was £nil (2009: £497,000).
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 s408 of the Companies Act 2006 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 £41,314,000 (2009: £25,801,000).
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.
At the end of the period, the Company had the following balances outstanding with related parties who are members of the Group:
COMPANY
Athleisure Limited
Long term loan
Bank Stores Holdings Limited
Long term loan
Bank Fashion Limited
Working capital loan
Other intercompany balance
Canterbury Limited
Secured loan
Working capital loan
Canterbury of New Zealand Limited (UK)
Working capital loan
Trade payables
First Sport Limited
Long term loan
JD Sports Fashion (France) SAS
Long term loan
Chausport SA
Other intercompany balances
Duffer of St George Limited
Secured loan
John David Sports Fashion (Ireland) Limited
Trade receivables
Other intercompany balances
Kooga Rugby Limited
Long term loan (net of provision)
Working capital loan
Trade payables
Nicholas Deakins Limited
Trade payables
Income tax Group relief
Other intercompany balances
RD Scott Limited
Long term loan
Trade receivables/(payables)
Income tax Group relief
Topgrade Sportswear Limited
Working capital loan
Trade receivables/(payables)
Amounts owed by
related parties
2010
£000
Amounts owed to
related parties
2010
£000
Amounts owed by
related parties
2009
£000
Amounts owed to
related parties
2009
£000
6,638
15,341
-
32
6,500
2,587
6,456
-
-
-
-
-
-
-
-
(15)
-
(6,582)
4,129
726
1,514
285
4,034
1,499
1,806
-
-
-
122
8,694
51
-
4,008
4
-
-
-
-
-
-
-
(1)
-
-
-
-
(24)
(197)
-
-
6,638
18,500
537
52
-
-
-
-
-
-
-
-
698
2,520
-
-
-
-
-
30
9,352
16
-
1,814
77
-
-
-
-
-
-
-
-
(6,582)
-
-
-
-
-
-
-
-
(69)
(6)
-
-
(72)
(447)
-
(3)
Long term loans represent historic intercompany balances and initial investment in subsidiary undertakings to enable them to purchase other businesses.
These loans do not attract interest, with the exception of the loan to JD Sports Fashion (France) SAS, where interest is charged at the official French
government interest rate. This interest rate is variable and is reviewed quarterly.
Working capital loans represent short term financing provided by the Company to its subsidiaries. These loans do not attract interest, with the
exception of the loan to Topgrade Sportswear Limited which is not a wholly owned subsidiary. This loan attracts interest at the UK base rate plus a
margin of 1.0%.
80
81
Notes to the Consolidated Financial Statements (continued)
Five Year Record Consolidated Income Statement
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 30 January 2010.
Place of
registration
Nature of business and operation
Ownership
interest
Voting rights
interest
Name of subsidiary
John David Sports Fashion
(Ireland) Limited
JD Sports 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
JD Sports Fashion (France) SAS
Chausport SA*
Spodis SA*
Kooga Rugby Limited
Canterbury Limited
Canterbury of New Zealand Limited*
Canterbury International
(Far East) Limited*
Canterbury (North America) LLC*
Canterbury Cotton Oxford Limited*
Canterbury International (Australia) Pty
Limited*
Canterbury of New Zealand Limited*
Duffer of St George Limited
Open Fashion Limited
Ireland
Ireland
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
France
France
France
UK
UK
UK
Retailer of sports inspired footwear and apparel
Dormant
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
Distributor and on-line retailer of sports clothing and
footwear
Dormant
Dormant
Distributor of fashion footwear
Intermediate holding company
Intermediate holding company
Retailer of sports footwear and accessories
Distributor of rugby clothing and accessories
Intermediate holding company
Distributor of leisure wear and rugby apparel
Hong Kong
America
UK
Distributor of leisure wear and rugby apparel
Distributor of leisure wear and rugby apparel
Dormant
Australia
Distributor of leisure wear and rugby apparel
New Zealand Distributor of leisure wear and rugby apparel
Licensor of a fashion brand
UK
Dormant
UK
Name of jointly controlled entity
Focus Brands Limited
Focus Group Holdings Limited*
Focus International Limited*
Focus Sports & Leisure International
Limited*
Focus Italy Srl*
Focus Equipment Limited*
UK
UK
UK
UK
Italy
UK
*Indirect holding of the Company.
Intermediate holding company
Dormant
Distributor of sports clothing and footwear
Dormant
Dormant
Dormant
100%
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%
51%
100%
100%
49%
49%
49%
49%
49%
49%
100%
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%
51%
100%
100%
50%
50%
50%
50%
50%
50%
PREPARED UNDER ADOPTED IFRSs
52 weeks to
28 January 2006
£000
52 weeks to
27 January 2007
£000
53 weeks to
2 February 2008
£000
52 weeks to
31 January 2009
£000
52 weeks to
30 January 2010
£000
Revenue
Cost of sales
Gross profit
Selling and distribution expenses - normal
Selling and distribution expenses - exceptional
490,288
(263,608)
226,680
(192,730)
(11,206)
530,581
(278,331)
252,250
(209,270)
(3,799)
592,240
(300,813)
291,427
(225,994)
(8,404)
670,855
(340,309)
330,546
(256,315)
(8,201)
769,785
(390,248)
379,537
(288,462)
(6,458)
Selling and distribution expenses
(203,936)
(213,069)
(234,398)
(264,516)
(294,920)
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 result 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)
(15,438)
(1,777)
(17,215)
1,609
7,138
20,121
(12,983)
7,138
-
230
(3,718)
3,650
(1,302)
2,348
2,348
-
4.92p
25.32p
6.90p
(17,409)
(4,000)
(21,409)
1,730
19,502
27,301
(7,799)
19,502
-
177
(2,412)
17,267
(6,879)
10,388
10,388
-
21.52p
36.41p
7.20p
(22,500)
-
(22,500)
1,086
35,615
44,019
(8,404)
35,615
(145)
297
(764)
35,003
(11,416)
23,587
23,549
38
48.79p
57.05p
8.50p
(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
50.49p
72.33p
12.00p
(26,051)
1,472
(24,579)
2,270
62,308
67,294
(4,986)
62,308
(473)
385
(827)
61,393
(18,647)
42,746
42,900
(154)
88.16p
93.64p
18.00p
(i) Adjusted basic earnings per ordinary share is based on earnings excluding the post tax effect of certain exceptional items (see note 10).
(ii) Represents dividends declared for the year. Under adopted IFRSs dividends are only accrued when approved.
82
83
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
14 April 2010
7 May 2010
May 2010
9 June 2010
2 August 2010
September 2010
29 January 2011
April 2011
Shareholder Information
Registered office
JD Sports Fashion Plc
Hollinsbrook Way
Pilsworth
Bury
Lancashire BL9 8RR
Financial advisers
and stockbrokers
Investec
2 Gresham Street
London EC2V 7QP
Principal bankers
Barclays Bank Plc
43 High Street
Sutton
Surrey SM1 1DR
Solicitors
DLA Piper UK LLP
Princes Exchange
Princes Square
Leeds LS1 4BY
Company number
Registered in England
and Wales,
Number 1888425
Financial public relations
Hogarth
No 1 London Bridge
London SE2 9BG
Registrars
Equiniti Limited
Aspect House
Spencer Road
Lancing
West Sussex BN99 6DA
Auditor
KPMG Audit Plc
St James' Square
Manchester
M2 6DS
The Board wishes to express its thanks to the marketing department for the in-house production of this Annual Report and Accounts.
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.co.uk
www.bankfashion.co.uk
www.scottsonline.co.uk
www.getthelabel.com
www.chausport.com
www.canterbury.com
www.nicholasdeakins.com
Other websites
www.kooga-rugby.com
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