Overview
3
Highlights
“ Record result with
headline profit before
tax and exceptional
items of £244.8 million.”
Peter Cowgill
Multichannel:
14%
Wholesale:
7%
Rest of
the world:
2%
Europe:
28%
UK:
70%
Retail Stores:
79%
Annual Report & Accounts 2017 Highlights
Revenue
2013
2014
2015
2016
2017
Profit before tax and exceptional items*
£1,258.9m
2013
£1,216.4m
2014
£1,522.3m
2015
£1,821.7m
2016
£2,378.7m
2017
£60.5m
£82.0m
£100.0m
£157.1m
£244.8m
Profit before tax
Total dividend payable per ordinary share
2013
2014
2015
2016
2017
£55.1m
2013
£76.8m
2014
£90.5m
2015
£131.6m
2016
£238.4m
2017
Basic earnings per ordinary share
Adjusted basic earnings per ordinary share*
2013
2014
2015
2016
2017
3.99p
2013
5.82p
2014
7.03p
2015
10.03p
2016
18.38p
2017
1.32p
1.36p
1.41p
1.48p
1.55p
4.43p
6.16p
7.78p
12.27p
19.04p
Net assets
Net cash
2013
2014
2015
2016
2017
£251.8m
2013
£272.8m
2014
£310.0m
2015
£400.8m
2016
£578.8m
2017
£45.6m
£45.3m
£84.2m
£209.4m
£213.6m
Throughout the Annual Report ‘*’ indicates the first instance of a term defined and explained in the Glossary on page 176.
5
OverviewOverview Milestones
April 2016
On 28 April 2016, the Group
acquired via its 50% subsidiary
in Malaysia, JD Sports Fashion
SDN BHD, 20 multi-brand
Sports Fashion stores and a
trading website which trade
as Sports Empire, Revolution
and The Marathon Shop.
July 2016
On 1 July 2016, the Group
acquired 12 stores in Portugal
through the acquisition of
80% of the issued share capital
of SportIberica Sociedade de
Artigos de Desporto, S.A.
These stores have now been
converted to the JD fascia
giving the Group its first
stores in Portugal.
June 2016
JD was the official sponsor
of the Soccer Aid event, which
took place at Manchester
United’s Old Trafford.
JD were the exclusive retailers
of the Wales and Northern
Ireland kits for the UEFA
Euro 2016.
August 2016
On 26 August 2016, the
Group acquired 80% of the
issued share capital of Next
Athleisure Pty Limited.
Next Athleisure Pty Limited
operates 32 stores and a
trading website in Australia
under the Glue and Superglue
retail banners.
A new flagship style JD store
was opened at Rue Neuve in
Brussels.
Annual Report & Accounts 2017 Milestones
November 2016
JD Group won the
“Business of the Year”
award at the Manchester
Evening News Business
Awards.
A new flagship style store
was opened at Hohestrasse
in Cologne, which at 13,600
sq.ft is now our largest
JD store in mainland Europe.
On 27 November 2016,
the Group acquired Go
Outdoors. Go Outdoors is
a nationwide omnichannel
retailer catering for the
outdoor enthusiast and
specialist alike with 58
stores across the UK at
acquisition, the majority
of which are situated in
out of town retail parks.
March 2017
JD Sports Fashion Plc
received the Company of
the Year award at the PWC
PLC Awards 2016.
JD Sports Fashion Plc won
the Retailer of the Year award
at the Retail Week Awards.
Go Outdoors’ OEX range of
affordable tents, sleeping
bags, clothes and accessories
won the Own Brand Range
or Product of the Year
in the same awards.
December 2016
JD’s second flagship style
store on Oxford Street, the
busiest shopping street in
Europe, opened.
JD Gyms were crowned as
winners of the Budget Gym
of the Year for the second
consecutive year.
7
OverviewOverview Annual Report & Accounts 2017
Who We Are
The Group has almost
1,300 stores across a
number of retail fascias
and is proud of the fact
that it always provides
its customers with the
latest products from
the very best brands.
The Group embraces
the latest online and
instore digital technology
providing it with a truly
multichannel, international
platform for future growth.
Overview
JD, West One, London, UK
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Annual Report & Accounts 2017
Who We Are
JD, Rue Neuve, Brussels, Belgium
JD, Pavilion, Kuala Lumpur, Malaysia
Overview
JD, Hohestrasse, Cologne, Germany
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Annual Report & Accounts 2017
Who We Are
Size? Carnaby Street, London, UK
Scotts, The Trafford Centre, Manchester, UK
Overview
Tessuti, The Trafford Centre, Manchester, UK
13
OverviewOverview Annual Report & Accounts 2017
Who We Are
Chausport, Rennes Alma, Rennes, France
Sprinter, Vaguada Shopping Centre, Madrid, Spain
Overview
Perry, Kalverstraat, Amsterdam, The Netherlands
Aktiesport, Zuidplein Shopping Mall, Rotterdam, The Netherlands
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Annual Report & Accounts 2017
Who We Are
Blacks, Tottenham Court Road, London, UK
Go Outdoors, Milton Keynes, UK
Established in 1981
with a single store in the
North West of England,
JD Sports Fashion Plc
is a leading international
multichannel retailer of
sports, fashion and
outdoor brands.
17
OverviewOverview Annual Report & Accounts 2017
Who We Are
JD is acknowledged as the leading specialist multiple retailer of fashionable branded and own brand sports and
casual wear in the UK and Republic of Ireland combining globally recognised brands such as Nike, adidas and
The North Face with strong own brand labels such as Pink Soda, Supply & Demand and The Duffer of St George.
JD continues to increase its presence in the European market with additional stores in all of our existing
territories complemented by a multi-store acquisition in Portugal. The first JD store outside of Europe opened in
Kuala Lumpur, Malaysia in January 2016 with two further stores in the year to January 2017. JD is increasing its
international presence with its first store in Australia due to open in Spring 2017.
Established in 2000, Size? specialises in supplying
the finest products from the best brands in footwear,
apparel and accessories. Initially set up to trial edgier
product collections before introducing them to the
mass market through the JD fascia, the Size? offer has
since grown to include its own roster of highly
sought-after worldwide exclusive product releases.
Outside of the UK and Republic of Ireland, Size?
now has stores in Denmark, France, Germany, Italy,
the Netherlands and Spain.
Footpatrol is London’s best-known destination sneaker
store, with a history in supplying the most exclusive
footwear. It has been at the heart of supplying the
sneaker fraternity with the most desirable footwear,
apparel and accessories. Specialising in new and
classic sneakers, limited editions, Japanese exclusives
and rare deadstock, Footpatrol is based in the heart of
Soho on Berwick Street.
Overview
Who We Are
Chausport operates throughout France retailing
leading international footwear brands such as adidas,
Nike and Timberland together with brands more
specific to the local market such as Le Coq Sportif.
Sprinter is one of the leading sports retailers in Spain
selling footwear, apparel, accessories and equipment
for a wide range of sports as well as lifestyle casual
wear and childrenswear. Their offer includes both
international sports brands and successful own brands.
Sports Unlimited Retail operates in the Netherlands
under the Perry Sport and Aktiesport fascias.
Aktiesport is the largest sports retail business in the
Netherlands selling a host of familiar brands such as
Nike, adidas, Under Armour and Reebok. Perry Sport
sells a large array of product types, operating
simultaneously in the sports fashion, sports
equipment and outdoor sectors.
Next Athleisure operates 32 stores and a trading
website in Australia under the Glue and Superglue
retail banners. Glue and Superglue stores offer
cutting-edge youth fashion from international and
local brands such as Denham, Ivy Park, Nude Lucy
and Superga with a blend of contemporary, ageless,
vintage and modern styles as well as the classics
across menswear, womenswear, shoes and accessories.
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Who We Are
Scotts retails fashion and sport led brands with
authority to older, more affluent male consumers
largely beyond school age, stocking brands such
as EA7, Lacoste, Fred Perry, adidas Originals and
Pretty Green.
Tessuti’s vision is to become the first choice retailer
for branded premium menswear fashion in the UK.
The current stores offer customers a strong mix of
brands including Hugo Boss, Ralph Lauren Polo,
Canada Goose and Stone Island.
Cloggs is an online niche retailer of premium branded
footwear. Cloggs also has three stores in Shrewsbury,
York and Newcastle.
Mainline Menswear is an online niche retailer of
premium branded men’s apparel and footwear,
stocking brands such as Armani, Hugo Boss
and Ralph Lauren.
Annual Report & Accounts 2017 Who We Are
Getthelabel.com is an online and catalogue business
which offers customers significant savings on branded
fashion and footwear.
JD Gyms offer exceptional fitness facilities in nine
prime city centre locations. JD Gyms have the latest
gym equipment and workout techniques, providing a
whole host of effective fitness classes and unrivalled
onsite support and advice. The JD Gym at Liverpool
was announced as the ‘Best Budget Gym’ at the
National Fitness Awards in 2016, the second
consecutive year that JD Gyms has won this
prestigious award.
Kooga Rugby operates within the UK as a direct to
retail business. Kooga also provides licenses for the
use of the brand in domestic and international
markets to distributors of rugby apparel, equipment,
team wear and leisurewear ranges.
Kukri Sports is an international sportswear
manufacturer supplying bespoke teamwear to many
leading schools, colleges and universities. In addition,
Kukri is sole kit supplier to a number of high profile
professional teams and will once again be the official
kit supplier to Team England for the 2018
Commonwealth Games.
21
OverviewOverview Who We Are
Focus are involved in the design, sourcing and
distribution of footwear and apparel both for own
brand and licensed brands, such as Peter Werth,
Fly 53, Ecko, Ellesse, and Voi Footwear, for both
Group and external customers.
Source Lab is a football license business in the UK
working with some of the biggest and best known
names in world football, designing, sourcing and
distributing mono branded apparel as well as supplying
club retail operations. Source Lab has an impressive
license portfolio which includes Chelsea, Arsenal,
Manchester City, Tottenham, Liverpool and Barcelona.
Nicholas Deakins was launched in 1991 and is firmly
established as one of the UK’s leading footwear
and clothing lifestyle brands with a reputation for
innovative, original design and quality manufacture.
Nicholas Deakins celebrated their 25th Anniversary
in September 2016.
Blacks is a long established retailer of specialist
outdoor apparel, footwear and equipment. Trading
online and from approximately 60 stores, Blacks
primarily stock more technical products from
premium brands such as Berghaus and The North
Face helping Outdoor participants, from weekend
family users to more avid explorers, reach their
goals, no matter how high.
Annual Report & Accounts 2017 Who We Are
Trading from approximately 100 stores, Millets supply
a more casual outdoor customer who seeks value for
money, providing for a wide range of recreational
activities, such as walking or leisure camping with an
emphasis on strong own brands, such as Peter Storm
and Eurohike.
Ultimate Outdoors is the ultimate destination for
the outdoor consumer offering high quality and
technical product from the biggest names in
outdoors at the best prices. There are now
seven Ultimate Outdoors stores.
GO Outdoors was acquired in November 2016.
GO focuses on innovation and value, helping people
to step into the outdoors whether it’s to go walking,
camping, cycling or fishing. From unique product
areas to strong own brands such as Hi-Gear, North
Ridge and Freedom Trail, GO is constantly looking
for fresh ideas to keep things fun. In March 2017,
GO’s OEX range was awarded the best own brand
range of the year at the Retail Week awards.
Tiso is Scotland’s leading outdoor retailer with
unrivalled product ranges catering for those who
take the outdoors a bit more seriously. There are 15
stores, including four Alpine Bikes stores and one
George Fisher store based in Keswick in the heart
of the English Lake District.
23
OverviewOverview Where We Are
“ JD’s continued strength in
its core markets is increasingly
being complemented by
momentum in our international
development.”
Peter Cowgill
Sports Fashion Fascias – Number of Stores
JD UK & ROI 2016
2017
361
369
JD Europe*
JD Asia
Size?
Sub total
JD & size?
Chausport
Sprinter
SUR
Australia
Other**
Total
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
0
0
103
157
1
3
36
37
72
75
104
119
164
32
59
94
Sports Fashion Fascias – 000 SQ FT
501
566
736
1,050
000
SQ FT
JD UK
& ROI
JD
Europe*
JD
Asia
SIZE?
Sub-total
JD & size?
Chausport
Sprinter
SUR
Australia
Other**
Total
2016
1,371
222
4
2017
1,429
386
19
63
65
1,660
1,899
81
83
973
-
-
144
2,858
1,069
836
130
245
4,262
Annual Report & Accounts 2017
Where We Are
60
59
99
99
Outdoor Fascias – Number of Stores
Blacks
Millets
Tiso
2016
2017
2016
2017
2016
2017
Go Outdoors 2016
2017
0
Other
Total
2016
2017
2016
2017
16
15
58
7
7
Outdoor Fascias – 000 SQ FT
182
238
000 SQ FT
Blacks
Millets
Tiso
Go Outdoors
Other
2016
2017
207
204
205
199
97
94
-
1,699
163
163
Total
672
2,359
25
OverviewOverview
Annual Report & Accounts 2017
Group Portfolio
Our vision and passion
helps continually
build upon our proud
heritage to set class
leading standards
across all imagery
and communications.
Overview
Overview
UNDISPUTED
KING OF TRAINERS
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UNDISPUTED
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Annual Report & Accounts 2017
Executive Chairman’s Statement
Introduction
This has been another period of very significant
progress for the Group with the headline profit
before tax and exceptional items increased by 56%
to £244.8 million (2016: £157.1 million). Over a three
year period the result has improved by more than 190%
which is an outstanding performance and provides the
Group with a robust platform for further development.
The foundation of this success remains our core*
Sports Fashion
fascias where JD’s continued
strength in its core markets is increasingly being
complemented by momentum in our international
development, with a net increase of 54 JD stores
across mainland Europe during the year. We firmly
believe that our approach of presenting a unique
and often exclusive sports and fashion premium
brand offer in a truly multichannel environment,
where innovative digital technology is integrated
into a vibrant retail theatre, continues to increase
the attractiveness and desirability of our product
ranges. These factors provide our stores with a real
point of difference for both consumers and our branded
supplier partners.
We are fully aware that athletic inspired footwear
and apparel has been on trend throughout Europe
for a number of seasons. However, whilst this tailwind
has clearly had a positive influence, the key to our
success in recent years has been the way that we
have leveraged these favourable market conditions
with our strengthening profitability, a payback for
the investments we have made over a number of
years to develop the JD retail concept and strengthen
our core commercial practices. We continue to invest
in these areas, particularly visual merchandising
systems, in-store environment and creative marketing
as we believe that it is JD’s market leading standards
in these areas that resonate with an increasing
number of brands. Having flexibility in our brand line up
is critical and enables us to maintain a trend appropriate
assortment.
foreseeable
Although the UK’s vote to leave the European Union
means that there will be some uncertainties for the
immediately
international
expansion will remain a clear strategic focus. There
is an ongoing process to strengthen and build the
management
team and other core operational
infrastructure to support an expansion over a wider
geography.
future, our
In November we acquired the Go Outdoors business
for cash consideration of £112.3 million with the Group
also assuming net debt of approximately £11.4 million.
Go Outdoors had 58 stores across the UK at acquisition,
the majority of which are in destination locations
outside city centres, and was a compelling opportunity
for a number of reasons:
• It is active in a range of categories where the Group
has either no presence or only a limited presence,
including cycling
• Its out of town destination format is complementary
to the high street model of Blacks and Millets
in
• Go Outdoors has considerable expertise
developing consumer engagement through
its
membership scheme and we believe that there are
opportunities to enhance this further by drawing
on JD’s expertise in multichannel retail
The acquisition of Go Outdoors is currently under
review by the Competition and Markets Authority
which has issued the Group with an enforcement
order which obliges us to operate the Go Outdoors
business separately to our pre-existing Outdoors
businesses until they have completed their review.
We are complying and assisting fully with this process
in order that it can be completed in the most timely and
efficient manner.
Dividends and Earnings Per Share
The Board proposes paying a final dividend of 1.30p
(2016 restated: 1.24p) bringing the total dividend
payable for the year to 1.55p (2016 restated: 1.48p)
increase of 4.7%. The
per ordinary share, an
proposed final dividend will be paid on 31 July 2017
to all shareholders on the register at 23 June 2017.
We believe that this level of dividend strikes a fair
balance for shareholders with appropriate capital
facilitate ongoing developments,
retained
particularly investment in the international Sports
Fashion fascias, which will drive success for the Group,
and therefore increased benefits to shareholders,
over the longer term.
to
The adjusted earnings per ordinary share before
exceptional items have increased by 55% to 19.04p
(2016 restated: 12.27p).
The basic earnings per ordinary share have increased
by 83% to 18.38p (2016 restated: 10.03p).
Annual Report & Accounts 2017
Overview
Overview
Executive Chairman’s Statement (continued)
Board Effectiveness
As Executive Chairman, I am responsible for the
leadership of the Board and ensuring its effectiveness
in all aspects of its role. The Board is then responsible
for the Group’s strategic development, review of
performance against the business objectives, overseeing
risk and maintaining effective corporate governance
including health and safety, environmental, social and
ethical matters.
People
It is a great testament to the strength and quality
of the people at every level in our businesses that
we have been able to consistently deliver outstanding
results over a number of years. Our continued strength
is principally due to their talent, energy and commitment
and I thank everybody involved across the Group for
delivering these excellent results.
importance of our people, we were
Given the
greatly disappointed to be the subject of allegations
made in late 2016 about working practices in our
Kingsway warehouse, a sophisticated, efficient and
fast growing facility which we are very proud of.
As the wellbeing of all staff is a key priority for the
Group and it is an area where we strive continually to
improve performance, the Board appointed Deloitte
to conduct an independent review of the allegations
made. That review has now been completed and
Deloitte’s conclusion was that the allegations did
not
represent a balanced characterisation of
working practices at Kingsway. As before, we remain
committed to continually reviewing and implementing
improvements in day to day procedures there.
Current Trading and Outlook
Whilst we must recognise that there are external
influences which may impact the latter part of the
year, notably inflationary pressures arising from Brexit,
the Board remains confident in the robustness of the
JD proposition and believes that the Group is well
positioned for further profitable growth.
Given the significant shift in the timing of Easter
this year, it is not relevant at this time to report any
comparative current year trading figures.
Our next scheduled update will be the announcement
of our Interim Results on 12 September 2017.
Peter Cowgill
Executive Chairman
10 April 2017
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Strategic
Report
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53
Business Model
Retail
Key Inputs
• International brands
• Own brands
• Supply chain
• Technology and IT infrastructure
• Third party logistics
Key Commercial Activities
• Retail
• Buying
• Merchandising
• Marketing
• Multichannel
• Property
• Distribution
• Providing customers with exclusive ranges
from the best brands in sports fashion
and outdoor
• Market leading online and instore
digital technology
• World class standards of visual
merchandising and retail theatre
Revenue Channels
• Stores
• Instore devices
• Store collection or home delivery
• Desktop, tablet and mobile optimised websites
• Apps
Annual Report & Accounts 2017 Our Strategy
Introduction
The Group’s principal JD fascia has long been established
as a leading retailer of branded and own brand sports
fashion apparel and footwear in the UK and Ireland. The
JD fascia is also now firmly established in mainland
Europe with new stores in all of our existing territories
complemented by a multi-store acquisition in Portugal
with these stores now converted to the JD format.
Further afield, we have expanded the JD presence in
Malaysia and our acquisition in the year of Next Athleisure
in Australia will provide the platform to open JD in
Australia during the course of the new financial year.
Building our reach for the principal JD fascia in, and
beyond Europe, not only gives us significant potential
for growth but it also cements the strong supplier
relationships required to constantly bring in new and
exclusive products and to market them collaboratively.
Stores
We are engaged in omnichannel retail and we continue to
invest considerable time and financial resources in our
retail property portfolio. Increasingly, developments in
the Sports Fashion fascias are focused overseas with the
Group in the early stages of expansion outside of Europe.
We believe that the combination of a largely exclusive
product offering, presented in a well fitted store with
world class standards of retail theatre, are major drivers
of footfall to our stores.
During the year, we have continued to develop our new
flagship concept with new stores in Brussels, Cologne
and a second store on Oxford Street. These stores are
enhanced by the latest innovations in digital technology
and take our already market leading standards of visual
merchandising to a new level.
We will sustain the market position of the principal JD
fascia through ongoing investment in the retail store
portfolio, development and nurture of global branded
supplier relationships, and the acquisition of brands and
retailers which we can develop and exploit to ensure our
overall product offers remain uniquely appealing and our
stores retain a vibrant atmosphere.
Elsewhere, we have expanded our overall Sports Fashion
offering with three multi-store acquisitions of which two
were outside of Europe as the Group increases its global
reach. In Europe, we acquired the Perry Sport and
Aktiesport businesses which operate independently
from JD in the Netherlands. Further afield, we have
expanded our presence in Malaysia with the acquisition
from our JD joint venture partner (Stream Enterprises) of
20 small multi-brand stores trading as Sports Empire,
Revolution and The Marathon Shop and the acquisition
of Next Athleisure in Australia giving us 32 stores trading
as Glue and Superglue.
Our core business strength is branded retail and our
customers are either sports fashion or outdoor oriented.
Where we use own brands we will seek to present them
as complementary to third party brands. We seek to
build strong market positions which we will always seek
to sustain and defend. We maintain these positions by
constantly adding to our brand roster and endeavouring
to be the partner of choice to as many brands as possible
with as much exclusive product as possible.
Any business in the Group which we invest in will have
relevance to our core strength and all businesses in the
Group need to be capable of enhanced profitability in
the medium term. Our ultimate objective is to deliver
long term sustainable earnings growth to enhance total
through share price
(‘TSR’)
shareholder
performance and dividends, whilst retaining our financial
capability to invest in the growth and the sustainability of
our propositions. Recent TSR performance is shown in
the graph within the Remuneration Report on page 93.
returns
In working towards our objectives we aim to act
always in a responsible and ethical manner with all our
stakeholders including suppliers, employees and, of
course, our customers.
The movements in store numbers and square footage at
the start and end of the period are documented in the
‘Where We Are’ section on page 24.
Multichannel
Multichannel activity has continued to grow significantly
over the last 12 months as we continuously strengthen
each of our channels and focus on delivering a seamless
shopping experience for our customers. The strength of
our multichannel offer continues to differentiate us in
the market place, is highly regarded by our key global
brand partners and is very popular with our customers.
We remain focused on ensuring our customers choose
to shop with us, irrespective of which channels they
choose to shop in and across.
In the UK, we have again seen significant growth in
online sales, principally driven by our continued
investment and strengthening of our mobile and apps
offer. Our digital and social media channels continue to
be important destinations for our customers and there
has been substantial growth in sales from our instore
digital devices (kiosks, web tills and iPads), both through
increased adoption of existing ones by customers and
through the roll out of additional devices. These enable
customers to order products from the website but pay
in cash, access extended ranges not available in the
store and access our full warehouse stock inventory.
Overseas, JD now has a local language and local
currency multichannel offer in Belgium, Denmark,
Ireland, Italy, France, Germany, Malaysia, the Netherlands,
Spain and Sweden.
In 2017 we will continue our focus on optimising our
digital channels profitably, improving the customer
experience, enhancing our multichannel proposition,
exploiting group synergies and rolling out our
multichannel offer internationally.
Multichannel sales represented 13.2% (2016: 10.4%) of
total fascia sales in the core JD fascia across the core
markets of the UK and Republic of Ireland, excluding
kiosk sales.
5555
Strategic ReportStrategic Report Our Strategy (continued)
Infrastructure and Resources
Our most important resources are our people. We are
a large equal opportunities employer and we are
particularly proud of our training resources. We provide
direct employment and career development to
thousands of people, including large numbers of recent
school leavers and graduates. We believe retention of
our best staff is crucial to the success of our business
as it preserves the DNA of each business.
We continue to invest in our central distribution facility
(Kingsway) in Rochdale to handle further growth in
volumes. Internal infrastructure works commenced in
January 2017 to expand the existing facility whilst
construction work on a 352,000 sqft. footprint
extension commenced in March 2017. This facility will
be available for full use in 2019.
Financial Key Performance Indicators
Note
2017
£000
2016
£000
2,378,694
1,821,652
48.9%
239,793
246,212
48.5%
133,406
158,902
%
Change
+31%
+80%
+55%
244,787
157,127
+56%
238,368
18.38p
131,631
10.03p
+81%
Revenue
Gross profit %
Operating profit
Operating profit
(before exceptional items)*
Profit before tax and
exceptional items
Profit before tax
Basic earnings per
ordinary share (b)
Number of items processed by Kingsway
Distribution Centre
Period ended
28 January 2017
Period ended
30 January 2016
66.40m
59.58m
Adjusted basic earnings per
ordinary share (b)
Total dividend payable per ordinary
share (b)
10
19.04p
12.27p
1.55p
1.48p
Net cash at end of period (a)
28
213,600
209,421
importance of protecting our
We recognise the
environment and are committed to carrying out
all our activities with due consideration for their
environmental impact, particularly with regard to
ensuring efficient use of energy and other resources
and materials, minimising waste by recycling wherever
possible and ensuring compliance with relevant
legislation and codes of best practice. See also our
Corporate Responsibility Report on pages 66 to 73.
The risks faced by the Group and our mitigation
plans are reported separately on pages 57 to 59.
a)
b)
Net cash consists of cash and cash equivalents together with
loans and borrowings.
interest-bearing
The prior year has been restated to reflect the 5:1 share split which was approved
by shareholders at a General Meeting on 24 November 2016.
On behalf of the Board
Peter Cowgill
Executive Chairman
10 April 2017
Annual Report & Accounts 2017
Principal Risks
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:
Risk and Impact
Mitigating Activities
Key Suppliers and Brands
The retail fascias offer a proposition that contains a mixture of third party and own brand product.
The Group maintains and is dependent on long term supplier relationships whose loss could adversely impact
results.
The retail fascias are heavily dependent on the products and the brands themselves being desirable to the
customer if the revenue streams are to grow. Therefore, the Group needs all of its third party and own brands,
including brands licensed exclusively to it, to maintain their design and marketing prominence to sustain
that desirability.
The Group is also subject to the distribution policies operated by some third party brands both in terms
of the fascias which can sell the ranges and, more specifically, the individual towns or retail centres.
Intellectual Property
The Group seeks to ensure it is not too reliant on a small number of athletic brands by constantly
adding new brands to its offer and by offering a stable of evolving own brands.
Where possible, the Group’s retail fascias also work in partnership with the third party brands in
their business on the design of bespoke product which is then exclusive to the Group’s fascias.
Further, the Group continues to actively seek additional brands which
license exclusively.
it can either own or
The Group’s trademarks and other intellectual property rights are critical in maintaining the value of the
Group’s own brands. Ensuring that the Group’s businesses can use these brands exclusively is critical in
providing a point of differentiation to our customers and without this exclusivity we believe that footfall into
the stores, visits to our websites and ultimately conversion of these visits into revenues would all be reduced.
The Group works with third party organisations to ensure that the Group’s intellectual property is registered
in all relevant territories. The Group also has a well-established Profit Protection team which actively works
to prevent counterfeit product being passed off as legitimate.
Retail 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 leading to reduced footfall
and potentially lower sales volumes.
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 in its Sports Fashion fascias 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.
Economic Factors
Wherever possible, the Group will seek a number of protections when agreeing to new property leases:
•
•
•
•
New leases taken out for a maximum period of 10 years.
Break option part way through the lease.
Capped rent reviews.
Rents which flex with turnover in the store.
When the Group determines that the current store performance is unsatisfactory then an assessment
is made on whether the Group wants to continue trading in that location. If it does then the landlord is
approached to see whether we can reach an agreement on a reduction in the rent or a change to a turnover
based rent.
If it is considered that the best solution is to exit the store completely then the landlord is approached with
a view to a complete surrender of the lease. If this is not possible then the Group would alternatively seek
to assign the lease or sublet it to another retailer. The Group is mindful of general economic factors and the
already wide availability of retail units’ consequent to the bankruptcy of other retail businesses.
Assigning the lease or finding a sub-tenant is not without risk because if the incoming retailer fails then
the liability to pay the rent usually reverts to the head lessee. The Group monitors the financial condition of
the assignees closely for evidence that the possibility of a store returning is more than remote and makes
a provision for the return of stores if this risk looks probable. The Board reviews the list of assigned leases
regularly and is comfortable that appropriate provisions have been made where there is a probable risk of
the store returning to the Group under privity of contract and, other than as disclosed in note 21, they are not
aware of any other stores where there is a possible risk of these stores returning.
The business monitors stock levels and manages the peaks in demand constantly with regular sales re-
forecasting.
As with other retailers and distributors into retail businesses, 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.
The Group seeks to manage this risk by offering a highly desirable and competitively priced product
range, which is highly differentiated from that of the Group’s competitors.
5757
57
Strategic ReportStrategic Report Principal Risks (continued)
Risk and Impact
Brexit
Mitigating Activities
Following the UK’s vote to leave the EU in June 2016, the UK’s future trading relationship with the remaining
members of the EU is uncertain. In particular, it is possible that the UK may face tariffs when trading with
the EU and lose access to other Free Trade Agreements (‘FTAs’) that it currently benefits from by being part
of the EU.
The majority of the Group’s retail stores across Europe are supplied with stock by the Group’s principal
warehouse at Kingsway, Rochdale. Consequently, the current business model requires access to these
European markets and various FTAs to be maintained at no worse than current levels.
Further, Brexit has had a negative impact on the rate at which the Group can source goods which are priced
or sourced in US Dollars and Euros.
There are options to mitigate this risk but they come at a price with additional significant fixed costs,
a requirement for suppliers to take action and likely operational inefficiencies. However, the Group is
developing a comprehensive strategy to mitigate the risks posed by Brexit including:
•
•
•
Investigating options on customs warehousing.
Working with branded suppliers to review the trading terms with which our retail businesses are supplied.
Investigating options on a separate European hub.
As per page 63, the Group aims to protect the anticipated US Dollar requirement at rates at, or above,
the buying rate through appropriate foreign exchange instruments.
Consequently, Brexit and its associated risks will remain high on the Board's Agenda as the changes
to be negotiated become clearer.
Reliance on Non-UK Manufacturers
The majority of both third party branded product and the Group’s own branded product is sourced outside of
the UK. The Group is therefore exposed to the risks associated with international trade and transport as well
as different legal systems and operating standards. Whilst the Group can manage the risk in the supply chain
on its own and licensed products, it has little control over the supply chain within the third party brands. As
such, the Group is exposed to events which may not be under its control.
The Group works with its 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.
Compliance is monitored by the Group’s Head of Quality and Ethics who has extensive experience in
this area.
Adequate levels of stock are maintained to cover short periods of supply delay.
IT Systems
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 enterprise system continues to be ideally suited to the operations of the business but it has
historically been reliant on a limited number of key development staff.
Cyber Security
Cyber-crime is constantly evolving and is a risk in all of our markets. A cyber-attack or a breach of information
security may result in the short term loss of revenue and diverted resources and there is the risk of a longer
term negative impact on customer confidence and the Group’s reputation.
Warehouse Operations
Stock is held in the Group’s warehouse in Rochdale. Having the stock in one location with increased
automation in the picking process has brought significant benefits in terms of capacity, product availability,
quicker deliveries to our European stores and reduced transport costs. However, there is an increased risk to
store replenishment and multichannel fulfilment from both equipment and system failure, together with the
inherent risk of having all the stock in one location.
Personnel
The success of the Group is dependent upon the continued service of its key management personnel and
upon its ability to attract, motivate and retain suitably qualified employees.
The IT team continues to be strengthened. Further, a bespoke training scheme is in place to train already
highly skilled IT operatives in the operating system behind the core ERP system.
Any long term interruption in the availability of the core enterprise system would have a significant impact
on the retail businesses. The Group manages this risk by housing the principal IT servers in a third party
location which has a mirror back up available should the primary servers or links fail.
The Group continues to invest in protecting our sites and customer data from exposure to cyber-attacks.
There have also been improvements made in how we handle data across the group with focus on training
and awareness for staff and improved policies, procedures and strategies in place to monitor our systems.
There has been focus on encryption, network security, access controls, perimeter defence, data protection
and a review of information handling by all parties.
The Group has worked with its insurers on a conceptual Business Continuity Plan which came into effect
when the warehouse became operational.
In addition, there is a full support contract with our automation equipment providers which includes a 24/7
presence from a qualified engineer thereby enabling immediate attention to any equipment issues.
An extension to the facility at Kingsway is currently under construction. Whilst it is an extension rather than a
separate building, there will be a two hour fire resistance wall between the two operations.
To help achieve this continued service, the Group has competitive reward packages for all staff.
More specifically for the retail businesses, the Group also has a long established and substantial training
function which seeks to develop training for all levels of retail employees 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.
The Board regularly considers the actions required to ensure there is succession planning for all key roles.
Annual Report & Accounts 2017 Principal Risks (continued)
Risk and Impact
Health and Safety
Mitigating Activities
The health and safety of our customers and employees is of the utmost importance. Policies are implemented
in conjunction with training programmes to protect our employees and customers. Personal injuries, distress
and fatalities could result from a failure to establish and maintain safe environments.
Treasury and Financial
The Group is exposed to fluctuations in foreign exchange rates.
Branded product for the JD fascia throughout Europe is purchased by JD Sports Fashion Plc which is the main
UK trading business. This business then sells to the international businesses in their local currencies. Given
the current geographical location of the Group’s stores this results in an increasingly significant Sterling / Euro
exposure in the UK trading business for the Euros which are remitted back for stock purchases.
There is also exposure in relation to Sterling / US Dollar consequent to the sourcing of own brand merchandise,
where suppliers are located principally in the Far East or Indian Sub-Continent. Strengthening of the US Dollar
relative to Sterling makes product sourced in this currency more expensive thus reducing profitability.
Regulatory and Compliance
The Group operates in an environment regulated by legislation, codes and standards including, but not
limited to, listing rules, trading standards, advertising, product quality, carbon emission reporting, bribery,
corruption and data protection rules.
The Group recognises that failure to comply with these may result in financial or reputational damage to
the business.
There is a comprehensive induction and training programme for all staff covering Health and Safety issues.
The Group Health and Safety Committee meets on a quarterly basis, is chaired by the Group Health and
Safety Manager and includes as its attendees the Group Company Secretary and Group Property Director. The
Group Health and Safety Manager appraises the Board of material issues and incidents on a periodic basis.
Targets are set by the Board to enable measurement of performance.
Performance against targets, incidents, and legal claims that arise are reported to the Board.
The Group also works closely with its principal insurers who undertake regular risk reviews both in the store
portfolio and in the main central warehouse. The distribution centre commission an annual independent
Health & Safety audit with the British Safety Council and in 2016 achieved a 4 star status.
The Group encourages its own brand suppliers to quote in Euros where possible thus creating a natural
hedge against the Euros remitted from the international businesses. The surplus Euros are also used to fund
the international store developments thus alleviating the need for local third party financing. Any surplus
Euros are converted back to sterling with hedging now put in place for approximately 75% of the anticipated
surplus. This leaves some Euros available should the Group need to move quickly to take advantage of an
acquisition or other investment opportunity. Discussions continue with senior management at the major
international brands on how the risk on Sterling / Euro volatility from the centralisation of product buying
can be shared fairly between the parties.
The Group sets a buying rate for the purchase of own brand 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, using a variety of instruments, whereby the
minimum exchange rate on the purchase of dollars is guaranteed. The Group typically looks to protect up to
90% of the US dollar requirement for the following year.
The Group actively monitors adherence to its existing regulatory requirements and has a number of internal
policies and standards to ensure compliance where appropriate.
The Group provides training where required and operates a confidential whistleblowing hotline for
colleagues to raise concerns in confidence.
The Group expects all suppliers to comply with its Conditions of Supply which clearly sets out its expectations
of its suppliers and includes a Code of Conduct which all suppliers must adhere to.
Brian Small
Chief Financial Officer
10 April 2017
5959
59
Strategic ReportStrategic Report
Business Review
Sports Fashion
Sports Fashion has had an exceptional year with
operating profits (before exceptional items) increasing
by 50% to £245.0 million (2016: £162.9 million). Like for
like store sales growth in the period across our
European fascias (excluding those businesses acquired
in the year) was over 10% which was very pleasing
given the strong like for like growth achieved in the
previous three years. It would be unreasonable to
expect like for like sales growth to be maintained at this
level for a further year although we are confident of our
ability to exploit the opportunities that continue to
exist domestically and, increasingly, internationally.
There has been further progress in Europe during the
period with new stores in all of our existing territories,
including larger space flagship stores in Cologne and
Brussels, complemented by two acquisitions:
• In March we acquired the trade and store assets of
the Aktiesport and Perry Sport retail fascias in the
Netherlands from the trustee in bankruptcy of
Unlimited Sports Group BV. Our initial focus has
been to stabilise the distressed position by trading
through a disjointed stock position, recommencing
the supply chain, determining the optimal future
store portfolio and rationalising an unsustainable
operational infrastructure. Significant progress has
been made in all of these areas, although it is very
much an ongoing exercise and we would not expect
these fascias, which are complementary rather than
a competitor to the JD fascia, to make a significant
contribution in the current financial year. We have
begun to address the previous underinvestment in
the store portfolio with a major refurbishment of the
Perry Sport store on Kalverstraat in Amsterdam and
a new store for Aktiesport in the Zuidplein Shopping
Centre in Rotterdam.
• In July we acquired 12 stores in Portugal which
previously traded as The Athlete’s Foot. These stores
have now been converted to JD.
Elsewhere in Europe, our Chausport and Sprinter
businesses have also both benefitted from the
continuation of the favourable market trends and have
traded positively in the period. We have also recently
agreed a Memorandum of Understanding with Sonae
– SGPS, SA. This sets out the basis for the creation of an
Iberian Sports Retail Group combining the Group’s
existing businesses in Spain and Portugal with the
Sport Zone business of Sonae, which is one of the
largest sports retailers in the region.
Further afield, we expanded our presence in Malaysia
during the period with two additional JD stores in Kuala
Lumpur and a fourth store, also in Kuala Lumpur,
opened after the year end. These are complemented by
the acquisition from our joint venture partner (Stream
Enterprises) of 20 small multi-brand stores trading as
Sports Empire, Revolution and The Marathon Shop.
We have also acquired 32 stores trading as Glue and
Superglue in Australia. This business and its management
will provide the platform to open JD in Australia with
development works ongoing for the first store which
will be at the Melbourne Central Shopping Centre. This
store will open in Spring 2017 and we anticipate further
openings elsewhere in Australia during the year.
We are pleased with the positive performance in our
principal fashion businesses, in particular Tessuti, which
is gaining momentum and regional presence following
the acquisition of stores which traded as Infinities,
Aspecto, ML Clothing and Xile. Mainline Menswear,
which is an online retailer of premium fashion brands,
has also performed exceptionally well with the Scotts
business maintaining
its profitability after strong
growth in the previous year. We would anticipate
further positive developments in our Fashion businesses
in the current financial year as we build on our previous
investments to create strong relationships with the
major global premium brands.
The customers in our core JD fascia are extremely
digitally aware with a high propensity to use social
media in their purchasing decisions. Consequently,
we continue to invest heavily in creating a technology
rich multichannel environment which not only provides
the customer with information about the product but
also helps increase the desire to purchase. This digitally
integrated approach gives positive benefits to our
stores as well as our trading websites with online sales
now representing 13.2% of total fascia sales (2016:
10.4%) in JD’s principal UK and Ireland market.
The overall gross margin in Sports Fashion is slightly
higher than the previous year reflecting continuing low
markdown levels and the impact of the stronger Euro
on JD’s Euro denominated businesses where product is
sourced and distributed from the UK. The weakening of
sterling against the US Dollar after the Brexit vote will
cause some headwinds on margin in 2017 but, working
with our global brand partners, we believe we are in a
reasonable position to mitigate against these.
Annual Report & Accounts 2017 Business Review (continued)
Outdoor
The Outdoor fascias have made encouraging progress
in the year delivering an operating profit for the first
time with an overall segment operating profit before
exceptional items of £1.2m (2016: loss of £4.0 million).
The result in the Blacks and Millets business has
improved as we see the positive benefits from actions
taken previously to simplify the operational leadership,
improve the camping offer and reduce the level of
markdowns. The smaller Tiso business, which operates
largely in Scotland, has also delivered a positive result
and having dealt with a number of
legacy
underperforming stores now has a better platform
from which to develop.
Go Outdoors, which we acquired towards the end of
the year, has not had a material impact on the current
year results. We are confident that this acquisition will
enhance our overall Outdoor offer in the longer term
although investment in core operational infrastructure,
principally IT and Logistics, will be required to enable
the business to reach its full potential. We also believe
that there will be opportunities for the Go Outdoors
business to leverage from the Group’s strength and
considerable experience in merchandising management.
Margins were improved over the full year with reduced
levels of discounting although these were negated
slightly by lower margins in the Go Outdoor business.
We continually strive for further improvements in
margins but the breadth of supply from the key
Outdoor brands
into the market and the wide
availability of vertically sourced product from both
specialist and non-specialist retailers means that
Outdoor will inevitably remain a competitive sector.
Peter Cowgill
Executive Chairman
10 April 2017
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61
Strategic ReportStrategic Report Financial Review
Revenue, Gross Margin and Overheads
Total revenue increased by 31% in the year to £2,378.7
million (2016: £1,821.7 million). Like for like store sales
for the 52 week period across all Group fascias,
including those in Europe, increased by a further 10%,
which was another exceptional performance given the
growth seen in previous years.
Working Capital and Cash
The net cash balance at the end of the year was £213.6
million (2016: £209.4 million) with the expansionary
investments, comprising both acquisitions and capital
expenditure, funded by strong cash generation from
the ongoing trading in our core retail fascias combined
with an ongoing focus on robust stock management
disciplines.
Total gross margin in the year of 48.9% was slightly
ahead of the prior year (2016: 48.5%). Both segments
saw improved margins with Sports Fashion increased
to 49.4% (2016: 49.0%) and Outdoor increased to
43.7% (2016: 43.3%).
Cash consideration on acquisitions in the year, net
of cash acquired, was £138.6m (2016: £nil). We will
continue to make selected acquisitions and investments
where they benefit our strategic development.
Operating Profits and Results
Operating profit (before exceptional items) increased
substantially by £87.3 million to £246.2 million (2016:
£158.9 million) driven by a very strong performance in
Sports Fashion with Outdoor delivering a profit for the
first time. Operating profit (before exceptional items)
has now increased by approximately 140% over the last
two financial years (2015: £102.2 million).
There were exceptional items in the year of £6.4 million
(2016: £25.5 million) from the impairment of certain
intangible assets.
The exceptional items comprised:
Non-cash impairment of intangible assets (1)
Termination of project to replace core IT systems (2)
Total exceptional charge
2017
£m
6.4
-
6.4
2016
£m
10.6
14.9
25.5
1. The charge in the period to 28 January 2017
relates to the impairment of the fascia name balance
arising
in prior years on the acquisition of
ActivInstinct Limited, the fascia name arising in the
year on the acquisition of Aspecto Holdings Limited
and Infinities Retail Group Holdings Limited and the
impairment of the goodwill arising in the year on the
acquisition of 2Squared Agency Limited. The charge
in the period to 30 January 2016 relates to the
impairment of the goodwill arising in prior years on
the acquisition of ActivInstinct Limited, a partial
impairment of the Blacks fascia name and the
impairment of other goodwill and fascia name
balances which were not significant.
2. One off exceptional charge in the period to 30
January 2016 writing off costs incurred on a
terminated IT project.
Group profit before tax in the year ultimately increased
by 81% to £238.4 million (2016: £131.6 million).
Gross capital expenditure (excluding disposal costs)
increased by £4.5 million to £88.0 million (2016: £83.5
million). The primary focus of our capital expenditure
remains our retail fascias with the spend in the year
increasing by £12.3 million to £64.0 million (2016: £51.7
million). International expansion now accounts for
more than 50% of this spend with capital expenditure
in our retail fascias outside of our core UK and Ireland
markets increased by £9.7 million to £35.7 million
(2016: £26.0 million). Given our focus on international
development and the increased number of territories
that the Group operates in, we would anticipate a
significant increase in the expenditure on our retail
fascias in the new financial year.
Elsewhere, we have now commenced a project to
expand our internal use of the existing Kingsway
warehouse site. This will be completed later in this
financial year with a
total projected cost of
approximately £20 million. Work will also commence
shortly on the construction of a 352,000 sqft. extension
to the Kingsway facility with the site scheduled to be
handed over in Spring 2018. The subsequent cost that
the Group will incur for the initial phase of fitting out
this site, including automation equipment, has been
estimated at up to £42 million although the majority
of this spend will be incurred in the financial year to
2 February 2019.
Taxation
We are committed to paying our fair share of tax
to build a successful and sustainable business. Our
approach to responsible tax management is to pay the
correct amount of tax
jurisdictions
and on time. The tax we pay reflects the underlying
commercial transactions across our business and given
the focus of our activities in the UK, it is only right that
this is where the majority of our tax is paid. The total
amount paid in the UK across the various taxes (including
local authority business rates) in the year to 28 January
2017 was £198.6 million (2016: £163.7 million).
in the right
Annual Report & Accounts 2017 Financial Review (continued)
The effective rate of tax on profit from continuing
operations has decreased from 23.6% to 22.6% primarily
due to the continuing reduction in the UK tax rate and
prior year adjustments. Excluding both exceptional
items and prior year adjustments from the tax charge,
the effective core rate* from continuing activities has
increased from 21.4% to 21.8%. This core effective rate
continues to be above the standard rate due to
depreciation of non-current assets which do not qualify
for tax relief and overseas subsidiaries generally being
subject to higher rates of corporation tax than the UK.
Earnings per Share
The basic earnings per share (restated for the 5:1 share
split completed on 24 November 2016) has increased
by 83% from 10.03p to 18.38p. However, the Directors
consider the adjusted earnings per share to be a more
appropriate measure of the Group’s underlying earnings
performance since it excludes the post-tax effect of
exceptional items (other than the loss on disposal of
non-current assets). The strong trading performance
in the year is reflected in the fact that the adjusted
earnings per share has increased by 55% from 12.27p to
19.04p.
Dividends
A final cash dividend of 1.30p per share is proposed,
which if approved, would represent an increase of 4.8%
on the final dividend from the prior year. Added to the
interim dividend of 0.25p per share, this takes the full
year dividend to 1.55p, which is an increase of 4.7% on
the prior year. The prior year dividend per share has
been restated to reflect the 5:1 share split completed on
24 November 2016. We believe that this level of
dividend strikes a fair balance for shareholders with
appropriate capital retained to facilitate ongoing
developments, particularly investment in the international
Sports Fashion fascias, which will drive success for the
Group, and increased benefits to shareholders, over the
longer term.
Treasury Facilities
Interest rate hedging has not been put in place on the
current facility. The Directors continue to be mindful of
the potential for rises in UK base rates as the general
economic situation improves but, at present, given the
highly seasonal nature of the Group’s core cashflows,
they do not believe that a long term interest hedge is
appropriate. This position continues to be reviewed
regularly.
Working capital remains well controlled with suppliers
continuing to be paid to agreed terms and settlement
discounts taken whenever due.
Foreign Exchange Exposures
The Group has two principal foreign exchange
exposures:
1. The sourcing of own brand merchandise from either
the Far East or Indian Sub-Continent 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
exchange
rate
instruments. The Group’s forecast requirement for US
Dollars in the period to January 2018, including the
recently acquired Go Outdoors business, is now
$177million. Cover is in place for 2017 for $163.4 million
meaning that the Group is currently exposed on
exchange rate movements for $13.6 million of the
current year’s estimated requirement.
appropriate
through
foreign
2. The Group is also exposed to the movement in
the rate of the Euro from the sale of its UK sourced
stocks to its subsidiaries in Europe. However, the
Group has an element of a natural hedge on this
exposure as the Euros received for that stock are
then reinvested back in those European subsidiaries
to fund the development of both new stores and
refurbishments. The anticipated surplus over and
above the planned investment levels in the period to
January 2018, pre any potential acquisition activity
to be funded in Euros, is €155 million. Hedging
contracts are in place to sell €116 million meaning
that the Group is currently exposed on exchange
rate movements for €39 million of the current year’s
estimated surplus.
Brian Small
Chief Financial Officer
10 April 2017
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63
Strategic ReportStrategic Report Property and Stores Review
Sports Fashion
JD
The retail property strategy for the core JD fascia is
consistent across all of our territories. JD is a world
class retail fascia where the
latest retail digital
technology is integrated into a vibrant retail theatre
to give a truly multichannel experience. We strongly
believe that our approach increases the attractiveness
and desirability of our product to customers and
also helps protect the equity of our branded
supplier partners.
International expansion of the JD fascia remains a clear
strategic focus. During the year we have opened
additional stores in all existing European territories
including larger space stores in the new flagship style
in Cologne and Brussels. We also saw the opening of
our first JD stores in Portugal. Further afield, we opened
two further stores in Kuala Lumpur and we also
anticipate opening our first stores in Australia later in
the year. We are confident that our increasing credibility
with both major international landlords and property
agents will provide opportunities for further development
of the JD fascia in both existing and new territories.
The major property developments in each area were:
• UK & Republic of Ireland – 21 new stores were
opened in the period with 13 stores closed. The new
stores included Oxford Street in London where we
have opened a store in the West One shopping centre
by Bond Street tube station giving us our second
flagship style store on the busiest shopping street in
Europe. The openings included seven relocations in
towns or malls in the UK to a more appropriately
spaced store or a position of greater footfall.
Elsewhere, continuing with our strategy of ensuring
that we have sufficient space to present the full JD
offer in key locations, we have upsized four stores
being Meadowhall in Sheffield, the White Rose
Shopping Centre in Leeds, the White City Shopping
Centre in London and the Merryhill Shopping Centre
near Birmingham.
• Europe - JD continues to develop momentum in
Europe with a net increase of 54 stores. A total of
58 stores were opened in the year of which 46 were
across existing territories complemented by 12 stores
opening in Portugal subsequent to our acquisition of
the stores in the small acquired business formerly
trading as The Athlete’s Foot. The openings included
two flagship style stores at Rue Neuve in Brussels
and Hohestrasse in Cologne which, at 13,600 sq. ft,
is now our largest store in Europe. The former
Aktiesport store in the Zuidplein Shopping Centre
in Rotterdam was also converted to JD. Five stores
were closed in the year of which three were
relocations into larger space.
• Asia – JD’s presence in Malaysia has been enhanced
through the opening of two further new stores in
Kuala Lumpur, at Pavilion, which is presented in the
flagship style, and Sunway Velocity, complementing
the opening in the previous year at Sunway Pyramid.
During the year, we also concluded a transaction to
acquire 20 multi-brand Sports Fashion stores and a
trading website which currently trade as Sports
Empire, Revolution and The Marathon Shop from our
joint venture partners, Stream Enterprise SDN BHD.
There is no immediate intention to convert these
stores to JD.
• Australia – Development works are ongoing for
the first JD store in Australia which will be at the
Melbourne Central Shopping Centre. This store will
open in Spring 2017 and we anticipate further
openings elsewhere in Australia during the year.
Size?
This has been a year of consolidation for the Size?
fascia with no net increase in the number of stores.
We believe that Size? has the potential to be successful
internationally with the current focus being progression
in the major cities in Europe.
Chausport
We continue to support the development of the
Chausport fascia in locations which will not conflict with
JD’s expansion. Four stores have opened in the year
in smaller regional towns which are not appropriate for
JD at this time with one store closed. We anticipate a
similar level of development in the current financial year.
Sprinter
Sprinter continues to expand beyond its traditional
heartlands in the regions of Andalucía, Murcia and
Valencia. During the year we opened a further 16 stores
of which nine were outside those heartland regions,
including four in Catalonia and two in Madrid. The
average retail footprint of the stores opened in the
year was 6,800 sq. ft. which provides an effective
and efficient trading space for the Sprinter core offer.
Annual Report & Accounts 2017 Property and Stores Review (continued)
Perry Sport and Aktiesport
In March, we acquired the trade and store assets of
the Aktiesport and Perry Sport retail fascias in the
Netherlands from the trustee in bankruptcy of Unlimited
Sports Group BV. As is usual in these distressed situations,
the initial focus is to ‘right size’ and ‘right rent’ the store
portfolios. This process is ongoing with 23 of the original
187 stores closed to date.
A number of the Perry Sport and Aktiesport stores had
suffered from a lack of investment in the years prior to
bankruptcy. We have begun to address this with the first
refurbishment being a major refurbishment of the Perry
Sport store on Kalverstraat in Amsterdam which is one
of the busiest shopping streets in the Netherlands.
Elsewhere, we have also invested in a new store for
Aktiesport in the Zuidplein Shopping Centre in Rotterdam
with JD taking over the unit which Aktiesport previously
occupied.
Glue and Superglue
In August, we acquired 32 stores in Australia which trade
under the Glue and Superglue retail banners. These
stores are principally located in major shopping centres
in New South Wales, Victoria and Queensland. Prior to
our acquisition, the business had refurbished its store in
the Queen Victoria Building in the centre of Sydney in a
new style. We are encouraged by the initial performance
of this store.
Scotts
We continue to be satisfied by the performance of the
Scotts fascia although the specific timing of certain
property issues has meant that there was a net reduction
of two stores in the year. We will continue to support
investment in the fascia where it is justified.
Tessuti
The Tessuti company has seen a major expansion in its
store portfolio in the year with the business now having
38 stores, a net increase of 22 stores from January 2016.
This expansion has been focused in the North of England
and Scotland and has comprised organic store growth
together with the acquisition of stores which traded
as Infinities, Aspecto, ML Clothing and Xile. There is a
programme in place to rebrand all of the acquired stores
to the Tessuti fascia subject to the usual decision making
factors for properties of rent cost, retail footprint and
strength of footfall. New openings and conversions
in the premium branded Tessuti business are also
dependent on availability of third party brands in a
particular location.
Outdoor
Blacks, Millets and Ultimate Outdoors
Subsequent to our acquisition of the business in January
2012, we agreed short term leases with flexible break
clauses with landlords in a number of locations which
gave both parties the mutual ability to move quickly if
appropriate. Consequently, whilst this gives maximum
flexibility, it does mean that the Blacks and Millets store
portfolios continue to be in flux:
• Blacks: Three new stores were opened in the period
including a flagship store on Tottenham Court Road
in Central London. Four Blacks stores were closed in
the period including the store on Regent Street
in Central London.
• Millets: The Millets store portfolio has seen further
considerable change during the year with seven new
stores opened and seven stores closed in the year.
This included relocations in Keswick and Peterborough.
• Ultimate Outdoors: There has been no change to
the Ultimate Outdoors store portfolio in the year
although the former Kiddicare store at Southampton,
which has never traded, was surrendered to
the landlord.
Tiso
The underperforming Alpines Bike store in Glasgow was
closed in the year.
Go Outdoors
Go Outdoors had 58 stores across the UK at acquisition,
the majority of which are situated in out of town retail
parks. The Go Outdoors store portfolio will continue to
develop under its separate management although
property decisions will have to be appraised using
the same financial rigour with which stores in other
group fascias are appraised. JD will also assist the
Go Outdoors management team, where appropriate,
on lease negotiations with landlords.
For a complete table of store numbers see page 24 and 25.
Peter Cowgill
Executive Chairman
10 April 2017
6565
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Strategic ReportStrategic Report 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.
Developing Our People
At JD Sports Fashion Plc, we are committed to our
people across all levels and aim to provide all employees
with the tools to excel within their careers. To facilitate
this, learning and development solutions are tailored
and adjusted to meet the ever changing requirements
of a fast-paced, growing business.
Training and Development
Who Are Our People?
The Group is a large equal opportunities employer
that is committed to providing exceptional prospects
for its people to grow and develop within the business.
We invest heavily in attracting, recruiting and retaining
our people.
The Group has grown significantly since its birth in
1981 and during the financial year employed over
25,000 people, across all aspects of the business.
Internal progression and personal development are
fundamental values of JD Sports Fashion Plc and are
key to the future expansion of the Group, promoting
our core values and DNA throughout. The Group
promotes career development both in the UK and
internationally, employing large numbers of school
leavers and university graduates, within Retail, Head
Office and Distribution.
JD’s global expansion offers
its people multiple
opportunities across its ever growing international
territories. A variety of interesting positions usually
exist across a number of departments such as; Human
Resources, Finance, Buying, Merchandising, Property,
IT, e-Commerce and Retail.
Within Retail alone there are a number of roles, in
around 1,300 stores across all territories, such as team
members, store management and visual merchandisers,
working together to present the product range to
extremely high standards and provide unparalleled
service to customers.
Recruiting Our People
The Group continues to grow with over 100 new stores
opening during the year. Opportunities continue to
exist both domestically and internationally and so it is
likely that this rate of expansion will continue for the
foreseeable future driving an ongoing recruitment
requirement. Whilst the Group is committed to getting
the very best from its people, it also strives to ensure
that its recruits are of the highest standard.
recruitment personnel
for our Head
Dedicated
Office and Retail teams provide invaluable support
in arranging interviews, scouring CV databases and
advertising positions both internally and externally,
ensuring that the most suitable candidates are
sourced in the UK and internationally.
A high percentage of retail management within the
Group are recruited internally with great importance
being placed on employees being able to develop
within their roles. Part of the foundation of this tradition
of
the Group’s Trainee
Management Academy, designed to turn the most
promising junior managers of today into the senior
managers of tomorrow.
internal progression
is
In addition to the 194 Academy graduates currently
working in UK and Ireland retail, the Academy has also
provided a number of senior employees within the
business, including five Area Sales Managers and key
Head Office personnel. The Academy is continually
evolving to the needs of the Group and has also
produced 27 graduates from France, Spain and the
Netherlands, furthering its influence across the Group
internationally.
The Learning & Development team operates across all
Group fascias and territories, as well as Head Office and
the Distribution Centre. This function assesses the
needs of the business whilst designing and delivering
the necessary programmes to ensure operational
consistency throughout the Group, developing the
management skills of our people in order for them to
effectively manage the business.
An expanding International Learning & Development
team now sees a number of territories becoming
increasingly self-sufficient, whilst communicating the
Group’s core values across the globe.
In the period to January 2017, our Learning &
Development team delivered over 1,500 hours of
face-to-face training to circa 1,000 managers and
junior managers. This includes 594 hours of training
with the Academy, as well as an additional 704 hours of
our Management Induction course, hosted at our
Kingsway training suite along with 240 hours of Junior
Management Development
to
employees out in the filed.
training delivered
In addition to the amount of face-to-face training
provided, over 60 online learning modules (including
Equality, Diversity & Respect) have increased the reach
of our training materials more than ever.
As part of an employee’s career development plan,
individuals must complete various e-learning modules
at each stage of their career. Over 145,000 online
course modules were completed by JD employees
internationally in the period to January 2017.
Annual Report & Accounts 2017 Corporate and Social Responsibility (continued)
Engaging Our People
The Group sees employee engagement as a key
aspect of ensuring that our team remains motivated
and well-informed.
Our continually evolving Learning Management System
platform contains a complete
library of courses
accessible by any web-enabled device. This gives our
employees the opportunity to learn both in-store and
at home, using a blended learning approach that
includes videos and text-based materials which enable
the business to track our employees’ progress.
Our compulsory Management Induction course, held
at our Kingsway training suite, is tailored to provide
face-to-face operational and soft skills training to our
managers, helping them to develop them as individuals
and ensuring consistency across our stores.
To promote a broader awareness of the Group’s
activities our quarterly magazine, People 1st, is sent
to all stores and Head Offices. This contains articles
regarding new acquisitions and profiles of our
departments, stores and territories as well as coverage
of key business campaigns and awards ceremonies.
Our longstanding Employee of the Month programme
also provides regular rewards for our sales team
members, with a monthly winner from each of our
54 Areas receiving a certificate and a Gift Card.
Our People at Head Office
Ensuring that people have the right skills to do their
jobs effectively is the key focus of our Head Office
training team; this focus starts with a colleague’s
induction. In the Distribution Centre, for example, this
means that new colleagues spend the first period of
their career with one of the dedicated on-shift
instructors covering Health and Safety and on-the-job
training, before progressing to multi-skilling within
the operation.
Across both the Distribution Centre and Head Office
we work with a number of different training providers
to deliver the training needs for our teams to support
them in their roles. Internally, we are launching the
new Learning Academy in 2017 which comprises of
Management Essentials training to our Line Managers,
standalone open behavioural development workshops
and a 16 week Management Development Programme.
For our Senior Management teams we work with
specialists
in Leadership Development to design
bespoke programmes which include 1:1 executive
coaching, classroom modules and 360 degree
feedback.
Providing Opportunities for Our People
As
the Group expands both organically and
geographically, so do the opportunities for the people
we employ. New starters and existing personnel are
given the chance to grow with a company that is
continually seeking to take itself and its employees
to the next level. There are countless individuals who
began their careers in our stores as Sales Assistants
before either rising through the Retail ranks or pursuing
other careers within JD Sports Fashion Plc.
In recent years, acquisitions in the UK and internationally
have further enabled our employees to progress, with a
fluid transfer of talent across our many international
borders and fascias. To further enable this, the Group
has created an International Talent Pool, where talented
and willing personnel can register their interest in
working internationally.
Whether you see yourself as a store manager,
a marketing executive or at the forefront of exporting
our fantastic product to a new international territory,
JD is the place where you can make this happen.
Equality and Diversity
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 gender, marital status, sexual orientation,
age, race, religion, ethnic or social origin or disability.
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.
6767
Strategic ReportStrategic Report Corporate and Social Responsibility (continued)
A breakdown by gender of the number of employees
who were Directors of the Company, Senior Managers
and other employees as at 28 January 2017, is set
out below:
Plc Board
Senior Managers*
All Employees
Male
5
160
Female
1
49
Total
6
209
12,387
11,197
23,584
%
Male
83%
77%
53%
%
Female
17%
23%
47%
The breakdown for the comparative period, as at
30 January 2016, is set out below:
Our performance against these targets is reviewed and
reported upon regularly and we will ensure that adequate
resource is provided to enable their achievement and
ensure the effective management of risk within the
Group. Our commitment is best evidenced by:
• The continued development of our induction and
training programmes that ensures every colleague
has the competence, understanding and awareness
to work safely and at minimum risk.
• Our Group health and safety committee meeting
four times a year and our distribution health and
safety committee meeting taking place monthly
both ensure engagement with our colleagues. Every
employee has the opportunity to raise any safety
concerns through their nominated representative.
Plc Board
Senior Managers*
All Employees
Male
Female
4
108
1
42
Total
5
150
10,336
9,497
19,833
%
Male
80%
72%
52%
%
Female
20%
28%
48%
• There has been continued safety input into all our
new and refitted stores from the initial design
through to opening. Our health and safety team
conducts its own audit programmes to ensure the
highest safety standards are maintained during the
construction phase of all our shop-fit projects.
* Senior Managers are defined as -
1. persons responsible for planning, directing or
controlling the activities of the Company, or a
strategically significant part of the Company, other
than Company Directors and;
2. any other Directors of subsidiary undertakings
Communication
The number and geographic dispersion of the Group’s
operating locations make it difficult, but essential, to
communicate effectively with employees.
structures.
Communication with retail staff is primarily achieved
in the regional and area
through management
formal
addition,
operational
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’. This department also produces
the People 1st quarterly magazine.
In
Health and Safety
We are fully committed to continuous health and safety
improvement across all areas of the Group and
understand that it is the way we work and behave that
protects our colleagues, customers and other
stakeholders.
Our organisational structure defines individual safety
responsibilities and duties to ensure that we provide
and maintain safe and healthy working conditions,
equipment and systems of work for all our colleagues.
We demonstrate this commitment through active
leadership, promoting best practice and by setting
specific and measurable targets each year.
• We review the processes we have in place and aim
to implement current best practice in all areas of
our business. During the year we have reviewed
our Group, retail and distribution safety policies.
We have also reviewed and revised the safety
improvement plans for our retail and distribution
teams demonstrating that we are committed to
continuous improvement.
• We have implemented Group safety procedures
across all UK companies with our focus on companies
with warehousing and distribution activity and
compliance at all sites has been reviewed throughout
the year.
• Our drive to implement Group safety procedures
across all JD retail stores in Europe continues and we
have recently appointed a Health and Safety Officer
to take the lead in this initiative.
• We set ourselves a number of measurable targets for
the year and have worked towards their achievement,
including:
- Our area sales managers must carry out a health
and safety inspection every six months in each
store under their control. Our target was that
95% of all stores must have a current inspection
in place. At the end of the year the level of
compliance was 96%.
- Our main Distribution Centre achieved a four star
British Safety Council Accreditation in 2016, which
is recognition of the hard work from the operations
and safety teams and a demonstration of the
Group’s commitment to safety.
Annual Report & Accounts 2017
Corporate and Social Responsibility (continued)
Energy
Basic Principles
The Group’s core business is retail and it is the Group’s
aim to give customers an enjoyable retail experience
with goods presented attractively 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. This policy
applies in all territories.
Environment
The Group recognises that it has a responsibility to
manage the impact that its businesses have on the
environment and is committed to carrying out its
activities with due consideration for the potential
environmental impact both now and in the future.
Whilst we continue to comply with the UK Government’s
Carbon Reduction Commitment
legislation, we
recognise that our responsibilities for managing the
impact that our business activities have on the
environment go beyond this. During the period the
Group has adopted an Environmental Policy which
sets out how we are committed to reducing pollution
and advancing our environmental performance. Over
the coming year we plan to undertake a full review of
our environmental management processes within our
core UK trading operations to identify further areas of
improvement. This will provide a platform for the
introduction of an Environmental Management System
(‘EMS’), detailing our outlined targets and objectives in
the following areas:
• Ensuring efficient use of energy and other materials.
• Maximising the amount of waste which is recycled.
• Ensuring compliance with relevant legislation and
codes of best practice.
Carbon Management Programme
The Group maintains a Carbon Management Programme (‘CMP’) which is sponsored by the Chief Financial Officer
and is reviewed regularly. The objectives of this programme are:
Objective
Action & Progress
1. Understand the drivers and timing of usage by continued investment in energy ‘smart’ meters.
2. Reduce energy usage in non-trading periods.
3. Reduce energy usage through investment in lighting technology.
4. Reduce energy usage through staff awareness and training.
5. Purchase energy competitively from sustainable sources wherever possible.
6. Ensure all business activities are aware of their impact on energy consumption.
7. Ensure that the CMP applies to all businesses in all territories.
This has now been achieved in over 550 of the Group’s sites with ongoing rollout planned for remaining
sites. Combined with the stores where accurate and timely usage data is already received from
mandatory half hourly meters, this means that in excess of 96% of the UK and Republic of Ireland
electricity consumption and 78% of gas consumption is automatically measured every 30 minutes.
In the period to 28 January 2017, the Group has invested in Building Management Systems in 229 of its
highest energy consuming stores in the UK. The project covers all fascias and is maintaining average
energy savings of 20% and a payback in less than 12 months. This technology continues to be fitted in
all new stores as standard with further retrofits scheduled for 2017.
Working with our preferred lighting suppliers, we have improved the design of the 23 Watt LED lamps,
which are used as standard in all new shopfits, delivering an 11% improvement in power efficiency
compared to the previous design. Our standard retail lighting scheme also incorporates LED lamps in
changing areas and individual motion sensors on every light fitting in non-retail areas. In addition,
we have now fitted individual motion sensors to all the Group’s Head Office buildings in the year.
Retail staff have a key role to play in the execution of the CMP. All new managers receive training in
energy management as part of their wider training programme.
The Group already sourced 100% of its electricity requirement for sites in England, Wales and Scotland
from renewable sources. This has now been extended on the same basis through a new supply
contract in Northern Ireland. Newly acquired businesses are migrated to the Groups sustainable
supply contracts when possible.
A multi-disciplined approach to the CMP is adopted with considerable focus also given to reducing
usage in the Group’s warehouses and offices.
The CMP applies to all business in the Group. We work closely with the local management after
acquisition to identify gaps and implement group strategies.
6969
69
Strategic ReportStrategic Report Corporate and Social Responsibility (continued)
KPIs
The Group is committed to using and subsequently
reporting on appropriate KPIs with regards to energy
usage. Accordingly, the Group can report the following
which have been calculated based on the GHG Protocol
Corporate Standard using emissions factors from UK
government conversion factor guidance for the year
reported. The emissions reported correspond with our
financial year and reflect emissions from the leased and
controlled assets for which the Group is responsible.
Emissions are predominantly from electricity use and
delivery vehicle fuel consumption for our UK operations.
Emissions from the Group’s overseas operations are
low relative to UK activities.
Global GHG emissions from:
Combustion of fuels & operation of facilities (i)
Purchased electricity, heat, stream & cooling
Intensity measurement (ii)
2016/17
Tonnes CO2
Equivalent
7,308
40,662
2015/16
Tonnes CO2
Equivalent
7,011
39,615
Emissions reported above normalised to per £m revenue
22
26
(i) Excludes facility F-Gas emissions
(ii)
Like for like businesses that have contributed
full years in both years
The following businesses are excluded from the data
above as they are either recently acquired or their
contribution is not material at this time:
• 2Squared Agency Limited
• 2Squared Retail Limited
• Clothingsites.co.uk Limited
• Go Outdoors Topco Limited
(including subsidiary undertakings)
• JD Sports Fashion SDN BHD
• Sports Unlimited Retail BV
• Sportibérica Sociedade de
Artigos de Desporto, S.A.
• Source Lab Limited
• Kooga Rugby Limited
• JD Sports Fashion Holdings Aus Pty
(including subsidiary undertakings)
Whilst it is not mandatory, the Group remains committed
to presenting data with regard to energy usage and
carbon footprint on a ‘like for like’ basis in respect of
those locations in the Group’s core operations in the UK
and Republic of Ireland that have been present for the full
year in both years:
Energy Usage – Electricity (MWh)
Energy Usage – Natural Gas (MWh)
Total Energy Use (MWh)
Carbon Footprint (Tonnes CO2) (i)
2017
62,845
1,450
64,295
26,162
2016
58,495
1,751
60,246
27,359
%
Change
-4%
(i) Total energy use has increased yet the carbon footprint has reduced.
This is due to UK CO2e conversion factors decreasing by 10.8% since
2015 as a result of a significant decrease in coal generation and the
increase in gas and renewables generation.
Objectives For The Period To January 2018
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
the year to 3 February 2018:
• Continue to expand the reach of the CMP by working
with the newly acquired businesses.
• Introduce 100% LED
lighting to all new and
refurbished stores where a new lighting scheme
is fitted. This is to include front and back-of-house
lighting.
• Retrofit further stores with the 23 Watt LEDs for
retail
lighting thereby further reducing energy
consumption and heat gain in the retail environment.
• Further
investment
the use of building
management systems to allow remote monitoring
and control of building services.
in
• Review energy usage and practices at the main
warehouse in Kingsway, Rochdale.
• Implement
recommendations
the energy
surveys carried out to exceed our Energy Savings
Opportunity Scheme (‘ESOS’) obligations.
from
Interaction With Pentland Group Plc
Under the current rules of the statutory Carbon
Reduction Commitment Energy Efficiency scheme
(‘CRC’), the Group’s submission to the UK Environment
Agency is aggregated with that of Pentland Group Plc
which is the Group’s ultimate holding company
(see note C22). The Group continues to work closely
with Pentland Group Plc to ensure an efficient process
with regard to the emissions trading scheme which
was introduced in April 2010, as part of the CRC.
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 amount of cardboard recycled increased to 3,993
tonnes (2016: 1,638 tonnes). This has been driven by
the move to reusable ‘tote’ boxes within our distribution
network, resulting in the retention of inward delivery
cardboard boxes at Kingsway which are then recycled.
Annual Report & Accounts 2017
Corporate and Social Responsibility (continued)
The Group has expanded its use of the Dry Mixed
Recycling (‘DMR’) scheme to all pre-existing stores and
businesses in the UK, Ireland and the Netherlands to
divert as much waste as possible away from landfill.
The scheme will be rolled out to other newly acquired
businesses as soon as this is possible. In the period
to 28 January 2017 we recycled 95% (2016: 95%) of
our DMR waste with the remainder being used as an
energy-from-waste (EfW) material.
Our Kingsway Distribution Facility continues to be a
zero waste to landfill site.
In addition to the DMR scheme, there are three other
main elements to our recycling strategy:
• 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 3,954
trees (2016: 3,808 trees).
• Photocopier and printer toners (laser and ink) are
collected and recycled for charity by Environmental
Business Products Limited.
• Food waste is separated where possible and reused
in the production of compost.
Plastic Bags
Approximately 42% of the bags issued by the Group’s
like for like businesses 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.
The use of this material has also been adopted in an
additional 70% of the Group’s plastic bags handed out
to customers. The Group uses paper-based bags rather
than plastic bags in its stores in the Republic of Ireland
and we are also fully compliant with the carrier bag
charge schemes across the United Kingdom.
100% of the proceeds from the carrier bag charges (net
of VAT) are passed to the JD Foundation for annual
distribution as follows:
• England: £496,000 received in the period to 28
January 2017. 50% of the funds are passed to
Mountain Rescue in England and Wales with the
remaining 50% donated to other charitable causes in
accordance with the objects of the JD Foundation.
• Wales: £22,000 received in the period to 28 January
2017. 50% of the funds are passed to Mountain
Rescue in England and Wales with the balance 50%
donated to other charitable causes in accordance
with the objects of the JD Foundation.
• Scotland: £59,000 received in the period to 28
January 2017. 50% of these funds are passed to
Scottish Mountain Rescue with the balance 50%
donated to other charitable causes in accordance
with the objects of the JD Foundation.
The Foundation has committed to continuing the
arrangements with Mountain Rescue in England and
Wales and Scottish Mountain Rescue for a further two
years on the same basis.
Human Rights
The Group endorses the principles set out in the United
Nations Universal Declaration of Human Rights and
the International Labour Organisation’s Declaration on
Fundamental Principles and Rights at Work which seek
to ensure safe and fair working conditions on a global
scale. Our suppliers are selected upon and contractually
committed to the Group on the basis of their adherence
to these principles.
Ethical Sourcing
The Group seeks to provide its customers with high
quality and value merchandise from suppliers who can
demonstrate compliance with internationally accepted
core labour and ethical standards throughout their
supply chain. These standards are based upon the
provisions of the Ethical Trading Initiative (‘ETI’) Base
Code and specifically cover areas such as wages,
working hours, health and safety and the right to
freedom of association. The Group’s Supplier Code of
Conduct, which follows the ETI base code, is set out in
the Group’s Conditions of Supply, and includes the
labour and ethical standards which all Group suppliers
must adhere to.
All suppliers are contractually obliged to comply with
the Group’s Conditions of Supply, which are regularly
updated. During the year, these were uploaded onto an
external platform, ensuring greater accessibility for all
suppliers. Prior to any orders being placed, all new
suppliers are required to register with the Group’s
external platform and complete the Group’s factory
risk assessment to indicate their degree of compliance
to the Group’s Supplier Code of Conduct and, ultimately,
the ETI Base Code.
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Strategic ReportStrategic Report Corporate and Social Responsibility (continued)
All existing suppliers are also required to conduct this
factory risk assessment on an annual basis with the
results held on an external platform. Those suppliers
who reach a pre-determined level of spend in any one
season are then required to undergo an ethical audit
which is carried out by a pre-approved third party
specialist auditor. The results of these risk assessments
and annual audits are reviewed by the Group’s
Sourcing and Compliance team and any areas of
concern with regard to potential non-compliance are
investigated thoroughly
initially through desktop
reviews and verified when the team visits the factories
concerned. Action plans are devised where required
and must be corrected within the time frames stated
in the audit results. As the Group has a combined
Sourcing and Compliance team, this ensures that
matters of compliance are embedded within the
sourcing processes and procedures which the Group
has in place prior to contracting with a new supplier.
During the last financial year, the Group joined the
Fair Factories Clearing House (‘FFC’) compliance
programme and has continued with its progression of
the Asia Inspections partnership. The Group continually
strives to achieve zero tolerance on critical issues, with
critical issues being defined as ‘an issue that impacts
workers causing hardship or harm’.
This increase in auditing has given the Group enhanced
visibility of issues in its factories and has allowed the
Group, with the help of the FFC and the factories,
to track the resolution of these non-compliances to
improve conditions across all areas of the ETI base
code. The FFC continues to assist the Group in its
monitoring of the progress of individual issues and
allows the Group to share the responsibility for
improvement of factory compliance with other brands
manufacturing products in the same factories.
Due to the diverse nature and scope of the Group’s
supply chain, it is not always possible to visit all of the
factories directly. Where instances of non-compliance
are identified from the risk assessment forms and/or
audits and the supplier cannot be visited, they are
required to provide evidence of corrective action and
are subsequently re-graded against the initial report.
These actions will be verified directly by the Group’s
Sourcing and Compliance team as soon as practically
possible on a future visit.
The Group’s Sourcing and Compliance team will amend
its factory risk assessment process in the forthcoming
financial year, which will include sections on migrant
workers and other relevant areas which are key to
identifying red flags evidencing risks of modern slavery.
Over the past three years the Group has reduced its
supplier base by more than half which is a key part of
the Group’s sourcing strategy and allows a greater
collaboration with the supplier base on issues such as
ethical trade and modern slavery. The Group currently
sources its own brand product from 10 countries using
196 factories with 139 agents.
The Group is also in the process of delivering a modern
slavery training programme for all Group employees
who have direct involvement in procurement of any
kind. The training programme will include modern
slavery awareness training and will be extended to the
Group’s other partners and key suppliers in the
forthcoming financial year.
During this financial year, the Group has increased its
focus on external auditing, with 68% of the Group’s
suppliers now having been audited by a third party
with a further 7% currently undergoing an audit,
as illustrated by the diagram below.
Up to date audit required 7%
No audit
required 25%
The Group continues to work with the FFC to create a
database of all factories and their associated audit
information. The Group has completed this exercise for
all of its first tier suppliers and aims to include the same
information for all of its second tier suppliers by the
end of 2018. Throughout this process, the Group is
working to further improve visibility and adoption of
its core values across its entire supplier base.
An integral part of the Group’s sourcing strategy is to
ensure that we can identify and work with suppliers
who share
the same values and demonstrate
commitment to the Group’s policies on human rights
and general ethics. The Group aims to undertake more
factory visits, carry out training and build on the
partnerships we have in place with suppliers, which we
feel is vital to ensuring the progression of our values.
3rd party in date
ethical audit
received 68%
Annual Report & Accounts 2017 Corporate and Social Responsibility (continued)
The Group is also in the process of issuing a Code of
Conduct for all suppliers of Goods Not For Resale,
which includes commitments from suppliers on key
aspects of ethical trading, human rights and the
eradication of modern slavery from the supply chain.
This year will see our first Charity Day which will bring
young people from several of our charities together,
for an activity day with the Mountain Rescue teams from
England and Wales. This will take place at Holcombe
Moor Training Camp near the Group's Head Office.
Our intention is that all businesses in the Group should
comply with this policy. Over the next financial year we
will work towards ensuring that all subsidiaries are
compliant with Group policy, principally those that
have been recently acquired.
It is important that we build a sustainable future for our
chosen charities and feel that bringing them together in
a fun environment encourages a network of support and
collaboration to build upon.
Furthermore, staff from within Head Office also
supported the charity Smiling Families, which supports
families affected by serious illness, by sending presents
for children to be delivered for Christmas.
Brian Small
Chief Financial Officer
10 April 2017
Our Communities
The Group seeks to be involved in the community where
it can make an appropriate contribution from its
resources and skills base.
The JD Foundation was registered with the Charity
Commission on 13 May 2016 (registered charity number
1167090). In addition to the support given to Mountain
Rescue in England and Wales and Scottish Mountain
Rescue, the mission of the Foundation is to work with
youth charities in the UK to support disadvantaged
young people affected by circumstance or illness.
The JD Foundation’s nominated charities during the
period to January 2017 were:
• C.R.Y. (Cardiac Risk in the Young)
• Once Upon A Smile
• Rays of Sunshine
• Salford Foundation
• Street Games
• Teenage Cancer Trust
• The Factory Youth Zone
• The London Sports Trust
• The Retail Trust
The JD Foundation has donated over £1 million to
charities in the UK during the financial period.
As part of our support of C.R.Y – Cardiac Risk in the
Young, we have undertaken to host two screening days
in our Head Office site which will screen a total of 220
employees for Cardiac Risk while our work with this
charity nationally will see a further five days sponsored
by the Foundation during 2017 bringing our total number
of young adults screened in 2017 to approximately 770.
In addition to this, we have entered into a mentoring
programme with Salford Foundation to support young
people and assist in their career choices as they reach a
critical period in their lives and education.
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Strategic ReportStrategic Report Annual Report & Accounts 2017 GovernanceGovernance
e
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75
75
The Board
Peter Cowgill
Executive Chairman and Chairman of the
Nomination Committee - Aged 64
Peter was appointed Executive Chairman in March
2004. He was previously Finance Director of the Group
until his resignation in June 2001. He is the Non-
Executive Chairman of United Carpets Plc and was
appointed as a Non-Executive Director of Better
Bathrooms (UK) Limited in January 2017.
Brian Small
Chief Financial Officer - Aged 60
Brian was appointed Chief Financial Officer 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.
Andrew Leslie
Non-Executive Director, Chairman of the
Remuneration Committee and Member of the
Audit and Nomination Committees - Aged 70
Andrew was appointed to the Board in May 2010. He has
over 40 years of experience in the retail, footwear and
apparel sectors. He was an Executive Board Director of
Pentland Brands Plc, from which he retired in 2008.
Andrew also held a number of senior positions with
British Shoe Corporation, The Burton Group Plc and
Timpson Shoes Limited.
Martin Davies
Non-Executive Director, Chairman of the Audit
Committee and Member of the Nomination and
Remuneration Committees - Aged 57
Martin was appointed to the Board in October 2012.
Martin also holds the position of Chairman of Sentric
Music Limited. He was previously Group Chief Executive
of Holidaybreak Plc from 2010 until its sale to Cox
and Kings Limited in 2011. He joined the Board of
Holidaybreak Plc in 2007 when it acquired PGL where
he had been Chief Executive. He left Holidaybreak Plc
in 2012. Previously, he has had roles at Allied Breweries,
Kingfisher and Woolworths.
Heather Jackson
Non-Executive Director, member of the Audit,
Nomination and Remuneration Committees - Aged 51
Heather was appointed to the Board in May 2015.
Heather has extensive experience in IT and change
management. Heather is currently Managing Director
at Actinista 2016 Limited and a Non-Executive
Director of Ikano Bank AB. Her former roles have
included CIO and COO of HBOS Plc and other director
level roles with Capital One, Boots the Chemist and
George at Asda.
Andy Rubin
Non-Executive Director - Aged 52
Andy was appointed to the Board in February 2016.
Andy is Chairman of Pentland Brands, a Director of
Pentland Group Plc and the European Vice-President
of the World Federation of the Sporting Goods Industry.
Annual Report & Accounts 2017 Directors’ Report
The Directors present their Annual Report and the
audited financial statements of JD Sports Fashion Plc
(the ‘Company’) and its subsidiaries (together referred
to as the ‘Group’) for the 52 week period ended 28
January 2017. The Board considers that the Annual
Report and Accounts, taken as a whole, is fair, balanced
and understandable and provides the information
necessary for shareholders to assess the Company’s
position and performance, business model and strategy.
Principal Activity
The principal activity of the Group is the retail of
branded sports fashionwear and outdoor clothing
and equipment.
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, social,
community and human rights issues, together with the
Group’s Key Performance Indicators and a description
of the principal risks and uncertainties facing the
business is detailed in the Strategic Report on pages 54
to 73.
All of 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 80 to 84 and
the Directors’ Remuneration Report page 85 to 95
are incorporated by reference into, and are deemed
to form part of, this report. This report is also intended
to incorporate the Company’s management report
within it.
Share Capital
As at 30 January 2016, the Company’s issued share
194,646,632
capital was £2,433,083, comprising
ordinary shares of 1.25p each. However, following a
reorganisation of the Company’s share capital as
approved by the shareholders at a general meeting of
the Company held on 24 November 2016, each 1.25p
ordinary share was subdivided into five ordinary shares
of 0.25p each. The issued share capital following the
general meeting was £2,433,083,
comprising
973,233,160 ordinary shares of 0.25p each. The new
0.25p ordinary shares were admitted to the Official List
of the UK Listing Authority and to trading on 28
November 2016.
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 its absolute discretion, refuse to
register any transfer of shares which are not fully
paid up (but not so as to prevent dealings in listed
shares from taking place), 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 and
the Market Abuse Regulation (which came into force
during this financial year) of the Financial Conduct
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.
Substantial Interests in Share Capital
As at 28 January 2017 the Company has been advised
of the following significant holdings of voting rights in
its ordinary share capital pursuant to the Disclosure
Guidance and Transparency Rules of the Financial
Conduct Authority (‘DTRs’):
Pentland Group Plc
Fidelity Management and Research LLC
Old Mutual Global Investors
Number of
ordinary shares/
voting rights held
559,274,440
48,588,900
34,412,294
% of Ordinary share
capital
57.47
4.99
3.54
As at 28 January 2017 the Company’s issued share
capital was £2,433,083 comprising 973,233,160
ordinary shares of 0.25p each.
The Company has not been notified of any significant
changes in interests pursuant to the DTRs between 28
January 2017 and the date of this report.
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77
GovernanceGovernance Directors’ Report (continued)
Relationship Agreement
In accordance with LR 9.2.2AR (2) (a), the Company
has entered into a written and legally binding relationship
agreement with its controlling shareholder Pentland
Group Plc. So far as the Company is aware, the
independence provisions included within the relationship
agreement have been complied with during the period
since the agreement has been in force.
Directors
The names and roles of the current Directors together
with brief biographical details are given on page 76.
The Directors are responsible for the management
of the business of the Company and, subject to law
and the Company’s Articles of Association (‘Articles’),
the Directors may exercise all of the powers of the
Company and may delegate their power and discretion
to committees.
The number of Directors at any one point in time
shall not be less than two.
The Articles give the Directors power to appoint and
replace Directors. Any Director so appointed shall hold
office only until the dissolution of the first Annual
General Meeting of the Company following appointment
unless they are re-elected during such meeting.
The Articles require that, 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 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.
However,
in accordance with the UK Corporate
Governance Code the Board has determined that all
Directors will stand for re-election at the 2017 AGM.
Contractual Arrangements Essential to the Business
of the Group
The Board considers that continuing supply from
Nike and adidas, being the main suppliers of third party
the Group’s
branded
core sports fashion retail operation is essential to
the business of the Group.
sporting products,
to
Employees
The Group communicates with its employees through
team briefs and via the Company’s intranet and notice
boards. Views of employees are sought on matters of
common concern via one to one meetings with
management, staff
forums and other employee
committees. Priority is given to ensuring that employees
are aware of all significant matters affecting the Group’s
performance and of significant organisational changes.
A key factor in the Group’s employee remuneration
strategy is encouraging the involvement of all employees
in the Company’s performance. Full details of the Group’s
remuneration strategy are set out in the Remuneration
Report on pages 85 to 95.
is committed
to promoting equal
The Group
opportunities in employment regardless of employees’
or potential employees’ gender, marital status, sexual
orientation, age, race, religion, ethnic or social 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 the employment, development and training of
the employee in question within their existing capacity
wherever practicable, or failing that, in an alternative
suitable capacity.
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.
Auditor
KPMG LLP have indicated their willingness to continue in
office as auditor of the Company. A resolution proposing
their re-appointment will be proposed to shareholders at
the forthcoming AGM.
Change of Control – Significant Agreements
In the event of a change of control of the Company,
the Company and the lenders of the £215 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.
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 they are aware, there is no relevant
audit information of which the Company’s auditor
is unaware; and
• Each Director has taken all the steps that they ought
to have taken as a Director to make themselves
aware of any relevant audit information and to
establish that the Company’s auditor is aware of
that information.
Annual Report & Accounts 2017 Annual General Meeting
The Company’s AGM will be held at 1pm on 29 June
2017 at Edinburgh House, Hollinsbrook Way, Pilsworth,
Bury, Lancashire, BL9 8RR. The notice of this year's
AGM is included in a separate circular to shareholders
and will be sent out at least 20 working days before
the meeting. This notice will be available to view
under the 'Investors' section of the Company's website,
www.jdplc.com/investor-relations.
The Directors consider that each of the proposed
resolutions to be presented at the AGM is in the best
interests of the Company and its shareholders and
employees as a whole and most likely to promote the
success of the Company for the benefit of its shareholders
as a whole. The Directors unanimously recommend that
shareholders vote in favour of each of the proposed
resolutions, as the Directors intend to do in respect of
their own shareholdings.
By order of the Board
Brian Small
Chief Financial Officer
10 April 2017
Directors’ Report (continued)
Viability Statement
In accordance with provision C.2.2 of the UK Corporate
Governance Code, published by the Financial Reporting
Council in September 2014, the Directors have assessed
the prospects of the Group over a longer period.
The Board conducted this review for a period of three
years to 1 February 2020. A period of five years was
selected for the previous financial year however this has
been revised to three years as the Board considered this
to be a more appropriate period to assess performance
and the potential impact of key risks in a fast paced
retail environment. The three year period also aligns
with how we measure performance and remunerate
at a senior level through the Long Term Incentive
Plan (‘LTIP’).
In assessment of the viability of the Group, the Board
has considered the Group’s current position and
strategy and performed a robust assessment of each of
the principal risks detailed on pages pages 57 to 59.
These principal risks are considered to be those which
may threaten the business model, future performance
and liquidity. Where appropriate, the Board has
evaluated the impact of the key principal risks actually
occurring based on severe but plausible scenarios. The
evaluation included performing sensitivity analysis by
flexing the main assumptions in the scenarios.
The Board has also considered the Group’s income and
expenditure projections, the Group cash flows and
other key financial ratios over the period along with
the potential impact of Brexit.
Based on the results of the analysis, the Board has
a reasonable expectation that the Group will be able
to continue in operation and meet its liabilities as they
fall due over the three year period of the assessment.
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.
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GovernanceGovernance Corporate Governance Report
Compliance with good corporate governance
is
important to the Board. This report sets out how the
Company has applied the main principles set out in
the UK Corporate Governance Code published by
the Financial Reporting Council in September 2014
(‘the Code’) and the extent to which the Company has
complied with the provisions of the Code. The Company
will be required to apply the main principles of the
2016 UK Corporate Governance Code for the 2017/2018
annual report. This report includes relevant provisions
of the Code, where appropriate.
The Board
The Board currently consists of six Directors; an
Executive Chairman, the Chief Financial Officer and
four Non-Executive Directors. Martin Davies is the
senior independent Non-Executive Director. The name,
position and brief profile of each Director is set out on
page 76.
The composition of the Board is kept under review and
changes are made when appropriate and in the best
interests of the Group. 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. The Board’s
composition also provides entrepreneurial leadership
within an appropriate framework of effective control.
The independence of the Non-Executive Directors is
considered by the Board on an annual basis. All Non-
Executive Directors, save for Andy Rubin, are considered
to be independent by the Board. Andrew Leslie was
formerly an Executive Director of Pentland Brands Plc,
a subsidiary of Pentland Group Plc (‘Pentland’), the
Company’s largest shareholder. Andrew Leslie does not
represent the interests of Pentland on the Board and
retired from Pentland Brands Plc in 2008. Andy Rubin
is the Chairman of Pentland Brands and a Director of
Pentland Group Plc and is, therefore, not considered by
the Board to be an independent Non-Executive
Director. The Board believes that the Non-Executive
Directors have provided ample guidance to the Board
and perform an effective role in challenging the
Executive Directors, when appropriate.
From time to time, the Executive Chairman meets with
the Non-Executive Directors without the other Director
present to discuss Board performance and other
matters considered appropriate.
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 76
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.
Under the Company’s Articles of Association, all Directors
are required to retire and offer themselves for re-election
every three years. However, in accordance with the
Code, all Directors will retire and offer themselves for re-
election at the 2017 AGM.
Board Operation
The Board is responsible for the direction, management
and performance of the Company. The Board held nine
scheduled meetings during the year under review and
ad hoc meetings were held between scheduled
meetings, where required. Directors’ attendance at
scheduled Board and Committee meetings is set out in
the table opposite. The Board is responsible for
providing effective leadership and promoting the
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, which is kept under regular review to
ensure it is appropriate in light of the Group’s activities.
The Board delegates certain powers to Board Committees,
as set out below.
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. The Board
has a formal procedure for Directors to obtain
independent professional advice.
All Board members have full access to the Company
Secretary who is a fully admitted solicitor and attends
all Board and Committee meetings. The Company
Secretary is responsible for advising 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 receive an appropriate
induction when they join the Board. Relevant training
is arranged as and when deemed appropriate.
A performance evaluation of the Board, its Committees
and individual Directors was conducted during the
year. This consisted of an internally run exercise
conducted through the completion by each Director of
a questionnaire prepared by the Company Secretary
which encourages each Director to give his opinions
on Board and Committee procedures, operation and
effectiveness as well as any other matter they wish
to raise.
Annual Report & Accounts 2017 Corporate Governance Report (continued)
A separate questionnaire was completed by the
Directors (other than the Executive Chairman) in
relation to the performance of the Executive Chairman
with the Senior Independent Director discussing the
resulting feedback with the other Non-Executive
Directors, taking into account the views of the other
Executive Director (excluding the Executive Chairman).
The feedback from the evaluation process is used by
the Board to identify strengths and development areas
and confirmed that the Board and its Committees were
operating effectively. The Board determined that an
internal performance
exercise was
appropriate.
evaluation
its majority shareholder
The Company, through
Pentland Group Plc, maintains appropriate Directors’
and Officers’ liability insurance.
Attendance at Board and Committee Meetings
Year to
28 January 2017
Total number
of meetings
P Cowgill
B Small
A Leslie
M Davies
H Jackson
A Rubin
Board
Meetings
Remuneration
Committee
Audit
Committee
Nomination
Committee
9
9
9
9
9
9
9
2
2(1)
-
2
2
2
-
2
2(1)
2(1)
2
2
2
-
1
1
-
1
1
1
-
Notes:
1. P Cowgill and B Small attended the Remuneration
Committee meetings and/or the Audit 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 are
available for inspection on request and are available on
the Company’s corporate website www.jdplc.com.
Audit Committee
Membership and Meetings
The Audit Committee currently comprises three
independent Non-Executive Directors; Martin Davies,
Andrew Leslie and Heather Jackson. Martin Davies
chairs the Audit Committee. The Board considers that
the composition of the Audit Committee provides the
required skills and experience.
The Audit Committee met twice in the year with
the external auditor attending part of each meeting.
Details of attendance at Audit Committee meetings are
set out in the table opposite.
Principal Duties
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, risk management
and the performance and cost effectiveness of the
external auditor.
Main Activities During the Year
The Committee’s activities included:
• Reviewing the Group’s draft financial statements and
interim results statement prior to Board approval
and reviewing the external auditor’s detailed reports
thereon including internal controls.
• 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 the external auditor’s plan for the audit
of the Group’s financial statements, key risks of
misstatement
statements,
confirmations of auditor independence, audit fee and
terms of engagement of the auditor.
financial
the
in
• Reviewing the independence and effectiveness of
the Group’s external auditor.
• Reviewing the arrangements in place for employees
to be able to raise matters of possible impropriety in
confidence to ensure they remain appropriate.
• Reviewing the Company’s risk register and internal
controls.
• Consideration of whether an internal audit function
should be established.
Financial Statements and Significant Accounting Matters
The Committee is responsible for reviewing the Group’s
draft financial statements and interim results statement
prior to Board approval. As part of such review, the
Committee considers whether suitable accounting
policies have been adopted and whether appropriate
judgements have been made by management. The
Committee also reviews reports by the external auditor
on the full year and half year results.
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GovernanceGovernance Corporate Governance Report (continued)
The following are material areas in which significant
judgements have been applied and have been
considered by the Committee during the year:
Impairment of Goodwill and Fascia Names
The Committee considered the assumptions underlying
the calculation of the value in use of the cash generating
units being tested for impairment, primarily the
achievement of the short term business plan, the
assumptions on discount rates and long term growth
rates. The Committee reviewed the budgets and
business plans that support the impairment reviews
and
used
and are comfortable that they represent management’s
best estimate at the time.
assumptions
challenged
key
the
The external auditor provides to the Committee
detailed explanations of the results of their review
of the estimate of the value in use, including their
challenge of management’s underlying cash flow
projections,
the key growth assumptions and
discount rates. The Committee has also reviewed
the disclosures in the financial statements.
Valuation of Inventories
The Committee considered the assumptions used
in the
inventory obsolescence provision models
across the Group. The valuation of inventories is a
key focus for the Group as its retail businesses are
highly seasonal. The Committee reviews the provision
models and challenges management on the key
judgements made over aged stock and the level
of proceeds for aged stock.
External Auditor
A breakdown of the audit and non-audit related
fees are set out in Note 3 to the Consolidated Financial
Statements on page 114. Non-audit work was comprised
mainly of tax and other project work and was
undertaken by the external auditor due to their
knowledge and understanding of
the Group’s
business and in the interests of efficiency. Larger pieces
of non-audit work were awarded following a tender
process. The Company regularly instructs other firms
to provide non-audit services from time to time. The
Committee is satisfied that the level and scope of non-
audit services performed by the external auditor does
not impact their independence.
In light of the recent audit reforms, the Committee
has revised its policy on the provision of non-audit
services by the external auditor. The objective of the
new policy
is to ensure the external auditor’s
to establish
is maintained and
independence
appropriate approval levels prior to non-audit work
being undertaken by the external auditor, in compliance
with the new FRC Audit Committee Guidance on non-
audit services. Under the policy, any non-audit services
to be undertaken by the auditor which are not
prohibited or potentially prohibited under the audit
reforms require advance authorisation in accordance
with the following:
• For individual pieces of work below £20,000 -
Chief Financial Officer approval required.
• Work in excess of £20,000 – Committee approval
required.
The external auditor reports to the Committee on
the work they have completed and how their audit
work is concentrated on this area.
If it is proposed that any potentially prohibited non-
audit work is carried out by the auditor, this will require
Committee approval.
Valuation of Intangible Assets Recognised as Part
of the Acquisition of Go Outdoors Topco Limited
The Committee has reviewed the acquisition accounting
in relation to the purchase of Go Outdoors Topco
Limited and has considered the assumptions used in
the intangibles valuation models; primarily the budgets
and forecasts, discount rates and royalty rates used.
Furthermore, an external party was engaged to review
the methodology applied and provide other analysis
where relevant.
The external auditor provides to the Committee
detailed explanations of the results of their review of
the acquisition accounting, including their challenge
of management’s key assumptions and discount rates.
The Committee has also reviewed the disclosures in the
financial statements.
KPMG have acted as auditor to the Company since its
flotation in 1996 and no tender exercise has been
conducted to date. The lead partner is subject to
rotation every five years to safeguard independence,
with a new lead partner having been appointed to lead
the audit during the 2014 / 15 financial year. The Audit
Committee confirms that the Company complied
throughout the financial year under review with The
Statutory Audit Services for Large Companies Market
Investigation (Mandatory Use of Competitive Tender
Processes and Audit Committee Responsibilities)
Order 2014. The Audit Committee does not necessarily
intend to recommend to the Board that it carries out a
competitive tender programme for audit services
within the next financial year, however, the Committee
regularly reviews whether such a tender programme
would be in the best interests of the Company’s
shareholders and, accordingly, this process will be
completed at the appropriate time and in any event, in
advance of the deadline for completing a mandatory
competitive tender process in order that a new auditor
is appointed for the financial year commencing
February 2024.
Annual Report & Accounts 2017 Corporate Governance Report (continued)
The 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 and being satisfied that the
independent,
external auditor continues
recommends their reappointment.
to be
Internal Audit
The Company does not currently have an internal audit
function. The Committee considers on a regular basis
whether an internal auditor should be recruited and at
the current time has determined that this is not
necessary, despite overseas expansion, due to the
centralised nature of the Group’s core operations and
the Group’s experienced Profit Protection team who
play an effective role in limiting shrinkage, theft and
fraud as well as in stock and cash audits. The Profit
Protection Director reports to the Board on a quarterly
basis.
Remuneration Committee
The Remuneration Committee currently comprises
three independent Non-Executive Directors; Andrew
Leslie, Martin Davies and Heather Jackson. Andrew
Leslie is the chair of the Remuneration Committee.
The Committee’s principal duties are to determine
overall Group remuneration policy, remuneration
packages
senior
management, the terms of Executive Director service
contracts, the terms of any performance related
schemes operated by the Group and awards thereunder.
for Executive Directors and
The Committee met twice during the year. Details of
attendance at Remuneration Committee meetings are
set out in the table on page 81.
Further details about Directors’ remuneration are
set out in the Directors’ Remuneration Report on pages
85 to 95
Nomination Committee
The Nomination Committee currently comprises Peter
Cowgill, the Executive Chairman, and three independent
Non-Executive Directors, Andrew Leslie, Martin Davies
and Heather Jackson. The Executive Chairman is the
chair of the Nominations Committee.
The Committee’s principal duties are to consider the
size, structure and composition of the Board, ensure
appropriate succession plans are in place for the Board
and senior management and, where necessary, consider
new appointments
the Board and senior
management. The Nominations Committee met once
during the financial year.
to
From time to time, the full Board performs some of the
duties of the Nomination Committee, as was the case
during the year under review. In addition, regular
informal discussions on Board structure, succession
and performance take place between the Non-
Executive Directors and the Executive Chairman.
Board Composition and Diversity
Whilst the Board is mindful of the recommendations of
the Davies Review and of the Hampton-Alexander
Review, the Board’s overriding aim is to ensure that
Board membership is based on merit and that any new
appointments to the Board are measured against
objective criteria. The Board is encouraged by the
gender balance within
senior
management team.
the Company’s
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.
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 structure with
clear operating procedures,
lines of responsibility,
delegated authority to executive management and a
comprehensive financial reporting process.
Key features of the Group’s system of internal control
and risk management are:
• 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
for
comparison with budget and previous year’s results.
Significant variances from approved budgets are
investigated as appropriate.
information. These allow
• 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 detailed
reports from the external auditor in relation to the
financial statements and the Group’s system of internal
controls.
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GovernanceGovernance Corporate Governance Report (continued)
The Group has a formal whistleblowing policy in place
enabling employees to raise concerns in relation to the
Group’s activities on a confidential basis. Information
about whistleblowing channels is made available to all
store and Head Office employees.
Compliance with the Code
The Directors consider that during the year under
review and to the date of this report, the Company
complied with the Code except in relation to the
following:
It is the Group’s policy to conduct all of its business in an
ethical manner. The Group takes a zero tolerance
approach to bribery and corruption, amongst
its
employees, suppliers and any associated parties acting
on the Group’s behalf. The Group has a detailed Anti-
Bribery and Corruption Policy and is committed to acting
professionally, fairly and with integrity in all its business
dealings and relationships and to implementing effective
systems to counter bribery.
The Board has reviewed the effectiveness of the Group’s
system of internal controls and believes this to be
effective. 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.
• Code provision B.6.2 – The Board did not conduct an
externally facilitated evaluation exercise, as the
Board considered it most appropriate to carry out an
internal evaluation exercise this year. The Board will
keep under consideration on an annual basis whether
an externally facilitated exercise is appropriate and
would provide value for money.
• Code provision C.3.7 – The audit has not been put
out to tender within the last ten years. In light of
the Code, the Committee will keep under review
the appropriate timing for a formal tender.
This report was approved by the Board and signed
on its behalf by:
The integration of recently acquired businesses into the
Group’s system of internal controls is achieved as quickly
as possible.
Brian Small
Chief Financial Officer
10 April 2017
Shareholder Relations
The Executive Directors maintain an active dialogue
with the Company’s major shareholders to enhance
understanding of their respective objectives, attending
meetings and investor roadshows on a regular basis.
The Executive Chairman provides 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.
The Senior Independent Non-Executive Director is
available to shareholders if they have concerns which
have not been resolved through dialogue with the
Executive Directors, or for which such contact is
inappropriate. Major shareholders may meet with
the Non-Executive Directors upon request.
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.
Annual Report & Accounts 2017 Directors’ Remuneration Report
Annual Report
The 2016/2017 year delivered outstanding sales and
earnings growth across the Group. The LFL performance
of JD UK has been especially strong reflecting the first
class performance of the Executive Team. The
significant earnings
increased
shareholder value creation are a credit to the energy
and successful efforts of the Executive Directors. The
continuing expansion and successful performance of
JD internationally, particularly in Mainland Europe, is
praiseworthy and bodes well for the future.
improvement and
The Executive Team of Senior Managers directly below
the Board lead outstanding departments and functions
which deliver consistent, professional and exceptional
performance. The growth and development of this
team is an important element in our confidence in the
future. We have a strong and growing team of highly
performing executives.
This year has seen JD Sports Fashion Plc move forward
dramatically compared with its competitors and the
retail market overall. In a year not without challenges,
serious and sustainable progress has been made.
Once again the Annual bonus awards for the Executive
Directors reflect this exceptional company performance.
The Senior Managers have also been rewarded
appropriately for their outstanding performance and
their successful results. The Remuneration Committee
(‘Committee’) has focused on ensuring that our policies
and actions are appropriate for our business in the
current competitive situation and that they balance the
rewards to our Executive Directors for delivering first
class financial performance with our medium/long
term strategic goals to create long term value for our
shareholders.
We believe in rewarding our Executives based on their
individual and team performance and on the value
created for the shareholders. Our annual bonus scheme
combines financial targets with medium / long term
strategic objectives. A Long Term Incentive Plan (‘LTIP’)
was approved at the Annual General Meeting (‘AGM’)
on 26 June 2014, which is based on the achievement
of earnings based on financial targets over a three
year period. A new LTIP is proposed for approval at
the 2017 AGM.
This Directors' Remuneration Report (‘Report’) is based
on the activities of the Committee for the period
to 28 January 2017. It sets out the remuneration
policy and remuneration details for the Executive and
Non-Executive Directors of the Company. There are
three sections:
• This Annual Statement;
• The Policy Report setting out the Directors'
remuneration policy; and
• The Annual Report on Remuneration providing
details on the remuneration earned in the year to 28
January 2017 and how the Directors' remuneration
policy will be operated for 2017 / 2018. This Annual
Report on Remuneration together with the Annual
Statement and Remuneration Policy will be subject
to an advisory shareholder vote at the 2017 AGM.
This report has been prepared in accordance with
Schedule 8 of The Large and Medium-sized Companies
and Groups (Accounts and Reports) Regulations 2008
as amended in August 2013 (‘Regulations’). The
Companies Act 2006 requires the auditor to report to
the shareholders on certain parts of the Report and
to state whether, in their opinion, those parts of the
report have been properly prepared in accordance with
the Regulations. The parts of the Annual Report on
Remuneration that are subject to audit are indicated
in that report.
and
Directors
The Committee keeps under review the remuneration
policy and specific remuneration packages for the
Executive
Senior Managers.
The Committee is mindful that our Group operates in a
highly competitive retail environment and we seek to
ensure that our remuneration policy is appropriate to
attract, retain and motivate Executive Directors and
Senior Managers of the right calibre to ensure the
success of the Company into the future. The Committee
has determined that it would be appropriate for a new
LTIP scheme to be proposed to shareholders at the
2017 AGM. In line with prior LTIP schemes, it will grant
cash awards rather than shares, given the current
shareholder structure, the lack of a large free float and
as the Company does not operate a share scheme.
The Committee believes it is in the best interests of
the Company to adopt the new LTIP in order to be
able to retain and motivate the Executive Directors, to
provide competitive rewards and to incentivise them
to sustain and build long term value in alignment
with shareholder interests. A similar scheme is in place
for the Senior Managers.
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GovernanceGovernance Directors’ Remuneration Report (continued)
Summary of Activity
• Agreeing bonus awards
the Executive
Directors and annual bonus and long term incentive
plan for Senior Managers in relation to the period
2016 / 2017.
for
• Reviewing the basic salary of the Executive
Chairman and the Chief Financial Officer to ensure
these are appropriate for the market in which we
operate. With effect from 1 April 2017, the Committee
has agreed that the basic salary reviews detailed on
page 94 will be implemented. The salary increases
equate to a 1.5% increase for the Executive Chairman
and the Chief Financial Officer (which is in line with
the general increase for our Head Office employees).
• Reviewing the annual bonus awards for the year to
28 January 2017, which are set out on page 92, and
setting appropriate targets for the 2017 / 18 financial
year. These are based on a combination of financial
Indicators
and non-financial Key Performance
(‘KPIs’) linked to key strategic objectives which are
intended to reward our Executive Directors for
performance
alignment with
shareholder interests.
and provide
• Consideration of appropriate LTIP arrangements.
The Company is proposing a new cash LTIP for the
Executive Directors at the 2017 AGM.
Andrew Leslie
Chairman of the Remuneration Committee
10 April 2017
Annual Report & Accounts 2017
Directors’ Remuneration Report (continued)
Directors’ Remuneration Policy (Unaudited)
This Directors' remuneration policy for the financial year ended 28 January 2017 was approved by shareholders
at the AGM held on 26 June 2014 and has remained in force for a period of three years. The remuneration policy
table was disclosed in full in the 2016 Annual Report which is available to download at www.jdplc.com.
The new Directors’ remuneration policy will take effect, subject to it being approved by shareholders, from the
date of the 2017 AGM.
Remuneration payments and payments for loss of office can only be made to Directors if they are consistent
with the approved Directors' remuneration policy. However, commitments made before the Directors'
remuneration policy came into effect and commitments made before an individual became a Director will be
honoured even if they are inconsistent with the policy prevailing when the commitment is fulfilled.
Future Policy Overview
• The Group operates in a highly competitive retail environment and the Committee seeks to ensure that the
level and form of remuneration is appropriate to attract, retain and motivate Executive Directors of the right
calibre to ensure the success of the Company into the future.
• Remuneration should be aligned with the key corporate metrics that drive earnings growth and increased
shareholder value with significant emphasis on performance related pay measured over the longer term.
• Incentive arrangements for Executive Directors should provide an appropriate balance between fixed and
performance related elements and be capable of providing exceptional levels of total payment if outstanding
performance is achieved.
Performance targets
Not applicable
Future Remuneration Policy Table
Executive Directors
Element of Remuneration
Purpose and link to strategy
Operation
Maximum
Base salary
To provide competitive fixed level
remuneration to attract and retain
Executive Directors of the necessary
calibre to execute the Group’s strategy
and deliver shareholder value.
The policy of the Committee is that
the salaries of the Executive Directors
should be reviewed annually, although
it reserves the right to review salaries
on a discretionary basis if it believes
an adjustment is required to reflect
market rates or performance.
There is no prescribed maximum
annual increase. The Committee is
guided by the general increase for the
broader employee population but on
occasion may need to recognise, for
example, an increase in the scale,
scope or responsibility of the role
as well as market rates.
Base salaries for the Executive Directors
are reviewed annually by the Committee.
The following factors are taken into
account when determining base
salary levels:
•
Remuneration levels at
comparable quoted UK
retail companies.
The need for salaries to be
competitive.
The performance of the
individual Executive Director.
Experience and responsibilities.
Pay for other employees
in the Group.
The total remuneration available
to the Executive Directors and the
components thereof and the cost
to the Company.
•
•
•
•
•
Benefits
To ensure the overall package is
competitive for Executive Directors.
Current benefits provision is
detailed on page 92.
Other benefits may be provided
where appropriate including health
insurance, life insurance / death
in service, travel expenses
and relocation.
The Committee determines the
appropriate level taking into account
market practice and individual
circumstances.
Not applicable
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GovernanceGovernance Directors’ Remuneration Report (continued)
Element of Remuneration
Purpose and link to strategy
Operation
Maximum
Performance targets
Not applicable
The rates are set at a
level which the Committee
considers is appropriate.
Current company contribution
rates for Executive Directors
are shown on page 92.
100% of salary, however, the
Committee has the discretion
to award bonuses of up
to 200% of salary for
exceptional performance.
150% to 200% of base salary.
The level of any awards
under the LTIP remains
under the consideration
of the Committee.
The targets are set by the Committee
each year and are based on a
combination of financial and strategic
KPIs, with target and maximum levels.
Two thirds of the annual bonus will
be linked to financial targets. The
Committee retains the discretion to
adjust the targets in the event of
significant corporate activity during
the year. The Committee will review
the Group’s overall performance
before determining final bonus levels.
The Committee may in exceptional
circumstances amend the bonus payout
should this not, in the view of the
Committee, reflect the overall business
performance or individual contribution.
Targets will be disclosed in the following
year’s Annual Report.
The LTIP will measure financial
performance over a 3 year period.
25% of any award will vest at
threshold performance increasing
on a straightline basis to 100% for
maximum performance.
Targets will be disclosed in the annual
accounts for the year following a
performance period.
Pension
To provide post-retirement
benefits for Executive Directors.
Annual Bonus
Executive Directors have the
opportunity to earn performance
related bonuses based on the
achievement of financial targets
and key performance indicators
which incentivise the achievement
of the business strategy.
Long Term Incentive Plans
To provide the Executive Directors
with the opportunity to earn
competitive rewards.
To align the Executive Directors’
interests more closely with those
of the shareholders.
To focus the Executive Directors
on sustaining and improving the
long-term financial performance
of the Company and reward them
appropriately for doing so.
Payments are made into a defined
contribution scheme with company
contributions set as a percentage of
base salary.
The Committee has the discretion to
pay a cash amount in lieu of a pension
contribution (any such payment would
not count for the purposes of calculating
bonus and LTIP awards).
The bonus is paid annually in cash
and is non-pensionable.
Clawback and Malus provisions apply
to the Annual Bonus. The Committee
can use its discretion to reduce, cancel
or impose further conditions on the
awards where it considers such action is
appropriate. This includes where there
has been a material misstatement of the
Company's audited financial results, a
serious failure of risk management
or serious reputational damage.
We are proposing a new LTIP for
shareholder approval at the 2017 AGM.
Key features of the LTIP are:
Cash awards (not shares).
•
Three year performance period.
•
The performance condition can be
•
amended or substituted if events
occur which cause the Committee
to consider that an amended or
substituted performance target
would be more appropriate. Any
amended or substituted target
would not be materially more or
less difficult to satisfy.
Malus provisions apply to unvested
awards. The Committee can use
its discretion to reduce, cancel or
impose further conditions on the
awards where it considers such
action is appropriate. This includes
where there has been a material
misstatement of the Company's
audited financial results, a serious
failure of risk management or
serious reputational damage.
•
Annual Report & Accounts 2017 Directors’ Remuneration Report (continued)
Non-Executive Directors
Element of Remuneration
Purpose and link to strategy
Operation
Maximum
Performance targets
Non-Executive
Director Fees
Set at a level which the
Committee considers reflects
the time commitment and
contributions that are expected
from the Non-Executive Directors.
Cash fee paid. Additional fees based
on additional responsibilities, such as
acting as Senior Independent Director
or serving as Chairman of Board
Committees, may be paid.
Fees are reviewed on an annual basis.
The Non-Executive Directors do
not participate in the Company’s
incentive arrangements and no
pension contributions are made in
respect of them. Reasonable travel
and subsistence expenses may be
paid or reimbursed by the Company.
None
The policy of the Committee is
that the fees paid to Non-Executive
Directors should be reviewed
annually, although it reserves the
right to review fees on a discretionary
basis if it believes an adjustment is
required to reflect market rates, scope
of responsibilities or performance.
There is no prescribed maximum
annual increase.
Share Ownership Guidelines
The Company does not have a minimum share
ownership requirement for the Executive Directors. Given
our narrow shareholder base and taking into account that
the Company does not operate a share scheme, the
impractical to set realistic
Committee considers
shareholding targets.
it
Consideration of Shareholder Views
The Committee engages directly with major shareholders
on key aspects of the remuneration policy and will take
into consideration feedback received in relation to the
AGM (or otherwise) when next reviewing the policy.
arrangements
Consideration of Employee Conditions Elsewhere
in the Group
Remuneration
determined
throughout the Group based on the same principle
that reward should be achieved for delivery of our
business strategy and should be sufficient to attract
and retain high calibre talent, without paying more
than is necessary.
are
Senior Managers below Board level with a significant
ability to influence company results may participate
in an annual bonus plan and deferred bonus plan
which reward both performance and loyalty and are
designed to retain and motivate.
Approach to Recruitment Remuneration
In the event that a new Executive Director was
to be appointed, a remuneration package would
be determined consistent with
the Directors'
remuneration policy. In particular, new Executive
Directors will participate in variable remuneration
the same basis as existing
arrangements on
In the event that a new
Executive Directors.
to be appointed,
Non-Executive Director was
the
in a
manner which
is consistent with the Directors'
remuneration policy.
fees payable would be determined
If it were necessary to attract the right candidate,
due consideration would be given to making awards
necessary to compensate for forfeited awards in a
previous employment. In making any such award, the
Committee will take into account any performance
conditions attached to the forfeited awards, the form
in which they were granted and the timeframe of the
forfeited awards. The value of any such award will be
capped to be no higher on recruitment than the
forfeited awards and will not be pensionable nor count
for the purposes of calculating bonus and LTIP awards.
The Committee retains the right to exercise the
discretion available under Listing Rule 9.4.2 where
necessary to put in place an arrangement established
specifically to facilitate, in unusual circumstances, the
recruitment of a new Executive Director. Where
appropriate the Company will offer to pay reasonable
relocation expenses for new Executive Directors.
In respect of an internal promotion to the Board,
any commitments made before the promotion will
continue to be honoured even if they would otherwise
be inconsistent with the Directors' remuneration policy
prevailing when the commitment is fulfilled.
Service Contracts and Payments for Loss of Office
Details of the contracts currently in place for Executive
Directors are as follows:
Date of Contract
Notice Period (Months) Unexpired Term
P Cowgill
B Small
16 March 2004
10 March 2004
12
12
Rolling 12 months
Rolling 12 months
It is the Company’s policy that notice periods for
Executive Director service contracts are no more than
12 months.
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GovernanceGovernance Directors’ Remuneration Report (continued)
In the event of early termination, the Company may
make a termination payment not exceeding one year’s
salary and benefits. Incidental expenses may also be
payable where appropriate. It is in the discretion of the
Committee as to whether departing Directors would be
paid a bonus. In exercising its discretion on determining
the amount payable to an Executive Director on
termination of employment, the Board would consider
each instance on an individual basis and take into
account contractual terms, circumstances of the
termination and the commercial interests of the
Company. When determining whether a bonus or any
other payment should be made to a departing Director,
the Committee will ensure that no ‘reward for failure’ is
made. The Committee may make a payment to a
departing Director for agreeing to enter into enhanced
restrictive covenants following termination where it
considers that it is in the best interests of the Company
to do so.
Where cessation of employment is due to death, the
LTIP award will, unless the Committee determine
otherwise, vest as soon as reasonably practicable
following death. Where the Executive Director is
dismissed lawfully without notice, the LTIP award will
lapse on the date of cessation.
In all other circumstances the LTIP award will lapse on
the date of cessation of employment unless the
Committee determines otherwise, in which case it will
determine the extent to which the unvested LTIP award
vest taking into account the extent to which the
performance target is satisfied at the end of the
performance period or, as appropriate, on the date on
which employment ceases. The period of time that has
elapsed since the start of the performance period to
the date of cessation of employment will also be taken
into account unless the Committee determines
otherwise.
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.
In the event of a change of control, LTIP awards will
vest at the date of change of control (other than in
respect of an internal reorganisation) unless the
Committee determines otherwise.
Non-Executive Directors
The Non-Executive Directors have entered into letters
of appointment with the Company which are terminable
by the Non-Executive Director or the Company on not
less than three months’ notice.
Non-Executive Directorships
The Board recognises that Executive Directors may be
invited to become Non-Executive Directors of other
businesses and that the knowledge and experience
which they gain in those appointments could be of
benefit to the Company. Prior approval of the Board is
required before acceptance of any new appointments.
During the year to 28 January 2017, only Peter Cowgill
held other Non-Executive Directorships. Peter Cowgill
is the Non-Executive Chairman of United Carpets
Group Plc and was appointed as a Non-Executive
Director of Better Bathrooms (UK) Limited in January
2017. His aggregate retained earnings were £46,042
(2016: £42,500) in respect of these Non-Executive
Directorships.
The current Executive Director service contracts permit
the Company to put an Executive Director on garden
leave for a maximum period of three months. The
Company may adjust such period as deemed
appropriate for any new Executive Directors.
The Executive Director service contracts contain a
change of control provision whereby if 50% or more of
the shares in the Company come under the direct or
indirect control of a person or persons acting in concert,
an Executive Director may serve notice on the
Company, at any time within the 12 month period
following a change of control, terminating his
employment. Upon termination in these circumstances,
an Executive Director will be entitled to a sum equal to
112% of his basic salary (less deductions required by
law) and such Executive Director waives any claim for
wrongful or unfair dismissal. The Company does not
envisage such a provision being contained in any
service contracts for any new Executive Directors.
The service contracts and letters of appointment are
available for
inspection by shareholders at the
forthcoming AGM and during normal business hours at
the Company’s registered office address.
LTIP
Where cessation of employment is due to ill-health,
injury, disability or the sale of the employing entity out
of the group, the unvested LTIP award will continue. It
will continue to vest in accordance with the original
vesting date unless the Committee determines that it
should vest as soon as reasonably practicable following
the date of cessation.
Annual Report & Accounts 2017 Directors’ Remuneration Report (continued)
Illustrations of Application of Remuneration Policy
The chart below illustrates the level of remuneration that would be received by the Executive Directors in
accordance with the Directors’ remuneration policy in the year to 3 February 2018.
Each bar gives an indication of the minimum amount of remuneration payable at target performance and
remuneration payable at maximum performance to each Director under the policy. Each of the bars is broken
down to show how the total under each scenario is made up of fixed elements of remuneration and variable
remuneration.
Fixed elements of remuneration
Variable element of remuneration
LTIP (LTIP scheme approved by the shareholders at the 2017 AGM)
)
0
0
0
£
(
n
o
i
t
a
r
e
n
u
m
e
R
2,500
2,250
2,000
1,750
1,500
1,250
1,000
750
500
250
0
£2,053k
25%
37%
£1,220k
5%
32%
£771k
100%
63%
38%
£321k
100%
£477k
5%
28%
67%
£723k
19%
37%
44%
Minimum
On target
Maximum
Minimum
On target
Maximum
P. Cowgill Executive Chairman
B. Small Chief Financial Officer
The scenarios in the above graphs are defined as follows:
Minimum
On target performance
Maximum performance
Fixed Elements of
Remuneration
• The base salary is the salary as at 1 April 2017
• The benefits are taken as those in the single figure table on page 92
• The pension contribution for Brian Small
Annual Bonus (1)
Long Term Incentive Plan (2)
0%
0%
50%
25%
100%
150% to 200%
1. The maximum annual bonus has been based on the usual maximum award of 100% of salary.
2. The above graphs assume that the new LTIP is adopted at the 2017 AGM. On target performance is 25% of salary.
Maximum performance is 150% of salary in the case of Brian Small and 200% of salary in the case of Peter Cowgill.
One third of the award would be earned in the year to 3 February 2018 subject to the performance conditions being
met and the rules of the scheme.
9191
GovernanceGovernance
Directors’ Remuneration Report (continued)
Annual Report on Remuneration
Single Total Figure Table (Audited)
Salary
£000
Benefits
£000
Pension
£000
Peter Cowgill
2017
2016
Brian Small (2)
2017
2016
Andrew Leslie
2017
2016
Martin Davies
2017
2016
Heather Jackson (3)
2017
2016
Andy Rubin (4)
2017
2016
756
744
264
264
49
44
49
44
49
34
-
-
2
2
21
19
-
-
-
-
-
-
-
-
-
-
32
26
-
-
-
-
-
-
-
-
Bonus
£000
1,516
1,494
396
312
-
-
-
-
-
-
-
-
LTIP
£000
488
488
128
127
-
-
-
-
-
-
-
-
Total
£000
2,762
2,728
841
748
49
44
49
44
49
34
-
-
1. Salary reviews effective 1 April annually
2. In accordance with the remuneration policy £32,000 (2016: £26,000) of the pension contribution shown above
for Brian Small has been paid as a cash amount
3. Heather Jackson was appointed as a Non-Executive Director on 6 May 2015
4. Andy Rubin was appointed as a Non-Executive Director on 12 February 2016 but does not receive a salary
from JD Sports Fashion Plc for this role
The taxable benefit received by Peter Cowgill
received by Brian Small are car benefits and healthcare insurance.
is healthcare
insurance and the taxable benefits
Pension contributions are:
• Peter Cowgill – 0% of salary
• Brian Small - 12% of salary
2014 – 2017 LTIP (Audited)
An LTIP was approved by shareholders at the 2014 AGM (‘2014 LTIP’) and consisted of one award made in
2014 that would pay out in cash after three years, subject to continued employment and meeting three annual
performance targets which would drive the creation of shareholder value. The delivery mechanism was cash
rather than shares, given the current shareholder structure, the lack of a large free float and taking into
account that the Company does not operate a share scheme. All payments would be non-pensionable.
The following table outlines the total structure of the three year 2014 LTIP:
P Cowgill
B Small
Performance to 28 January 2017
£000
1,464
383
1,847
The 2014 LTIP will be paid out in full in 2017 following satisfaction of the performance conditions under that
plan. No further awards can be made under the 2014 LTIP.
Annual Report & Accounts 2017
Directors’ Remuneration Report (continued)
The target for the period 2016 / 2017 was £86.2m
threshold earnings with a maximum payment being
achieved where earnings of £94.8m are achieved with
straight line vesting in-between. Threshold earnings
are the consolidated earnings on a normalised basis
(pre-exceptional and goodwill) as represented in the
audited accounts for the period. In the interests of
commercial confidence the targets for subsequent
years (based on threshold earnings) will be disclosed
one year in arrears.
Statement of Directors’ Shareholding (Audited)
The interests of the Directors who held office at 28
January 2017 and their connected persons in the
Company’s ordinary shares are shown below:
Ordinary shares of 0.25p each
28 January 2017
30 January 2016
TSR is calculated for each financial year end relative to
the base date of 31 January 2009 by taking the
percentage change of the market price over the
relevant period, re-investing any dividends at the ex-
dividend rate.
Executive Chairman’s Remuneration Over Past
5 years (Audited)
The total remuneration figures for the Executive
Chairman during each of the last 5 financial years
are shown in the table below. The total remuneration
figure includes the annual bonus based on that year’s
performance and LTIP awards based on three year
performance periods ending in the relevant financial
year. The annual bonus payout and LTIP vesting level as
a percentage of the maximum opportunity are
also shown for each of these years.
Year ended
January 2013 January 2014 January 2015 January 2016 January 2017
P Cowgill
B Small
8,380,260
504,000
8,884,260
8,305,260
479,000
Total remuneration
£000
8,784,260
Annual bonus %
LTIP vesting %
2,045
37
100
3,137
100
n/a
1,951
100
n/a*
2,728
200
n/a*
2,762
200
100*
There has been no change in the interests of the
Directors or their connected persons between 28
January 2017 and the date of this report. The holdings
stated above are held directly by the Directors and
their connected persons and are not subject to any
performance targets. The Directors have no other
interests in Company shares. As stated in the Directors'
remuneration
does
not have a minimum share ownership requirement
for Directors. Given our narrow shareholder base,
impractical to set
the Committee considers
realistic shareholding targets.
Company
policy,
the
it
Total Shareholder Return (Unaudited)
The following graph shows the Total Shareholder
Return (‘TSR’) of the Group in comparison to the FTSE
All Share General Retailers
the
past eight years. The Committee consider the FTSE All
Share General Retailers
index
for total shareholder return comparison disclosure
required under the Regulations as the index represents
the broad range of UK quoted retailers.
Index a relevant
Index over
JD Sports Fashion Plc
FTSE All Share General Retailers Index
4500%
4000%
3500%
3000%
2500%
2000%
1500%
1000%
500%
0%
31/01/09 31/01/10 31/01/11
31/01/12 31/01/13 31/01/14 31/01/15 31/01/16 31/01/17
• The LTIP performance criteria has been achieved
over the full three year period to 28 January 2017
and the award will vest on 30 October 2017.
in Executive Chairman’s
Percentage Change
Remuneration (Unaudited)
The table below shows the percentage change in
the Executive Chairman’s salary, benefits and annual
bonus between financial years 30 January 2016
and 28 January 2017 compared to UK Head Office
employees in the JD and Size? businesses, being
deemed by the Board as the most appropriate
comparator group.
Salary
Executive Chairman
UK Head Office Employee average*
Benefits
Executive Chairman
UK Head Office Employee average*
Annual Bonus
Executive Chairman
UK Head Office Employee average*
% change
1.5
3.3
-
-
200.0
3.0
• Comparator group as defined above. There are
circa 1,204 employees within this group.
9393
GovernanceGovernance
Directors’ Remuneration Report (continued)
Relative Importance of Spend on Pay (Unaudited)
Non-Financial 2016/17
The following table shows the Group’s actual spend
on pay (for all employees) relative to dividends, tax and
retained profits:
These
targets
strategic areas:
focused on
the
following key
Staff costs (£’000)
Dividends (£’000)
Tax (£’000)
Retained profits (£’000)
2017
335,773
14,501
53,788
184,580
2016
267,994
13,820
31,001
100,630
• Strategic development and growth of JD
% Change
in the UK
25.3
4.9
73.5
83.4
• International development of the JD brand
• The strategic future plan and profitability
for the Outdoor businesses
• People
development,
succession planning across
recruitment
and
the JD Group
Implementation of Directors' Remuneration Policy
in 2016 / 17 (Unaudited)
Salaries
Following this year’s review, the Committee has
determined that salaries for the current year will be
revised as follows with effect from 1 April 2017:
Previous
Salary
£000
758
264
New
Salary
£000
769
268
Percentage
Increase
Position Against
Comparator
Group
1.5%
1.5%
Upper Quartile
Lower Quartile
P Cowgill
B Small
The Comparator Group for these purposes is the
FTSE 350 companies.
The salary increases for P Cowgill and B Small are
in line with the general salary increase for Head
Office employees.
Annual Bonus Performance Targets
Financial Targets 2016/17
Two thirds of the annual bonus is linked to financial
targets. The targets in respect of the annual bonus for
the financial year to 28 January 2017 were £166 million
threshold earnings with a maximum payment being
achieved where earnings are £183 million. The Board
considers that the targets for the financial year to 3
February 2018 are commercially sensitive and so
will be disclosed in the 2018 Annual Report.
Consideration by Directors of Matters Relating
to Directors’ Remuneration (Unaudited)
The Committee
independent
three
Non-Executive Directors, being Andrew Leslie,
Martin Davies and Heather Jackson. Andrew Leslie
was appointed as the Chairman of the Committee
on 1 October 2013.
comprises
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. Peter Cowgill, the Executive
Chairman and Brian Small, the Chief Financial Officer,
have assisted the Committee when requested with
regards to matters concerning key Executives below
Board level.
The Committee can obtain independent advice at the
Company’s expense where they consider it appropriate
and in order to perform their duties. No such advice
was obtained during 2016 / 17.
is
formally
constituted with
The Committee
written Terms of Reference, which are available on
the Company’s corporate website www.jdplc.com.
The Committee engages with the major shareholders
or other representative groups where appropriate
concerning remuneration matters.
The Committee is mindful of the Company’s social,
ethical and environmental responsibilities and is satisfied
that the current remuneration arrangements and policies
do not encourage irresponsible behaviour.
The Committee has met twice during the year under
review with each member attending all the meetings.
Details of attendance at the Committee meetings are set
out on page 81.
Annual Report & Accounts 2017
Directors’ Remuneration Report (continued)
Statement of Voting at General Meeting (Unaudited)
At the 2014 AGM, the approval of the Directors’
Remuneration Policy received the following votes
from shareholders:
Votes cast for
Votes cast against
Total votes cast
Votes withheld
2014 AGM
37,657,370
1,780,858
39,438,228
-
%
95.48
4.52
At last year’s AGM, the Directors’ Remuneration Report
received the following votes from shareholders:
Votes cast for
Votes cast against
Total votes cast
Votes withheld
2016 AGM
136,999,926
27,940,303
164,940,229
5,858,818
%
83.06
16.94
This report has been prepared on behalf of the Board.
Andrew Leslie
Chairman of the Remuneration Committee
10 April 2017
9595
GovernanceGovernance Annual Report & Accounts 2017 Financial StatementsFinancial
Statements
s
t
n
e
m
e
t
a
t
S
l
a
i
c
n
a
n
F
i
97
97
Statement of Directors’ Responsibilities in Respect
of the Annual Report and the Financial Statements
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
in accordance with UK
Accounting Standards, including FRS 101 Reduced
Disclosure Framework.
statements
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 judgements and estimates that are reasonable
and prudent;
• for the group financial statements, state whether
they have been prepared in accordance with IFRSs
as adopted by the EU;
• for the parent company financial statements, state
whether applicable UK Accounting Standards have
been followed, subject to any material departures
disclosed and explained in the parent company
financial statements; and
• prepare the financial statements on the going
concern basis unless it is inappropriate to presume
that the group and the parent company will continue
in business.
The directors are responsible for keeping 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 Strategic Report,
Directors’ Report, Directors’ Remuneration Report and
Corporate Governance Statement 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 company’s website. Legislation in the
UK governing the preparation and dissemination of
financial statements may differ from legislation in
other jurisdictions.
Responsibility Statement of the Directors in Respect
of the Annual Financial Report
We confirm that to the best of our 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; and
• the strategic report includes a fair review of the
development and performance of the business
and the position of the issuer and the undertakings
included in the consolidation taken as a whole,
together with a description of the principal risks and
uncertainties that they face.
We consider the annual report and accounts, taken
as a whole, is fair, balanced and understandable and
provides the information necessary for shareholders to
assess the group’s position and performance, business
model and strategy.
Brian Small
Chief Financial Officer
10 April 2017
Annual Report & Accounts 2017 Independent Auditor’s Report to the Members of
JD Sports Fashion Plc only
Opinions and Conclusions Arising from our Audit
• Our response – our procedures included:
1. Our Opinion on the Financial Statements is
Unmodified
We have audited the financial statements of JD Sports
Fashion Plc for the 52 week period ended 28 January
2017 set out on pages 103 to 171. 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 28 January 2017 and
of the Group’s profit for the year then ended;
• the Group financial statements have been properly
prepared in accordance with International Financial
Reporting Standards as adopted by the European
Union (IFRSs as adopted by the EU);
• the Parent Company financial statements have
been properly prepared in accordance with UK
Accounting Standards, including FRS 101 Reduced
Disclosure Framework; and
• 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.
2. Our Assessment of Risks of Material Misstatement
In arriving at our audit opinion above on the financial
statements the risks of material misstatement that
had the greatest effect on our audit, in decreasing
order of audit significance, were as follows:
Goodwill and Fascia Names - £176.4m (2016: £64.8m).
Risk vs 2016: ▼
to page 82 (Audit Committee Report),
Refer
pages 128 to 129 (accounting policy) and pages 128 to
131 (financial disclosures)
• The risk – There is a risk of impairment of the group’s
significant goodwill and fascia name balances due to
challenging trading conditions in certain of the high
street retail sectors and locations that the Group
operates in. Goodwill and fascia names are reviewed
by the directors for impairment using value in use
models which require estimates to be made of the
present value of future cash flows to be earned/
generated in the related business. Due to the inherent
uncertainty involved in forecasting and discounting
future cash flows, which are used as the basis of the
assessment of recoverability of all goodwill and fascia
names, this is one of the key judgmental areas that our
audit concentrated on.
• We regard the risk of impairment of the group’s
significant goodwill and fascia name balances as
having reduced year on year. This is due to impairments
which have been taken in previous years, in particular
in relation to the Blacks and Millets CGU. Furthermore
there has been an improvement in the trading
performance of the Outdoor CGUs and continued
strong performance of the Sports Fashion CGUs.
- An assessment of the Group’s historical budgeting
accuracy in relation to each significant CGU in
order to evaluate the Group’s ability to achieve
forecasts;
- We agreed the 2017-18 figures used in the
discounted cash flow models to board approved
budgets having challenged the assumptions
inherent within those budgets;
- We have tested the principles and integrity of
the discounted cash flow models used;
- We challenged the directors’ assumptions on
revenue, margin and terminal growth by critically
analysing their strategy for future growth and
undertook our own assessments of future growth
potential based on long term growth within the
market and historical performance of margin
growth within the Group;
- We assessed the overall consistency of the
assumptions and of the inputs, by comparing
growth and discount rates applied in the models
across each CGU;
- With the support of our own KPMG valuation
specialist we assessed the reasonableness of
the discount rates applied to groups of cash
generating units; and
- We performed sensitivity analysis on the key
assumptions underlying the cash flow forecasts
(predominantly revenue growth, margin growth,
and terminal growth) and the discount rates used.
- We considered the adequacy of the Group’s
disclosures in respect of impairment testing and
whether disclosures about the sensitivity of the
outcome of the
impairment assessment to
changes in the key assumptions reflected the risks
inherent in the valuation of goodwill and fascia
names.
Valuation of Separately Identifiable Intangible Assets
Recognised as Part of the Acquisition of Go Outdoors
Topco Limited - £66.7m (2016: £nil) – new risk
Refer to page 82 (Audit Committee Report), pages 126
to 129 (accounting policy) and page 123 (financial
disclosures)
• The risk – Included within the fair value of net
identifiable assets recognised on acquisition of Go
Outdoors Topco Limited are separately identifiable
intangible assets of £66.7m. The technique involved in
valuing these assets involves a high degree of
judgement, with estimates including future sales,
discount rates and also royalty relief rates.
• Our response – our procedures included:
- An inspection of the sale and purchase agreement,
with the assistance of both our forensic and
taxation specialists, in order to identify key terms
of the transaction and the how they may impact
the accounting treatment;
9999
Financial StatementsFinancial Statements
Independent Auditor’s Report to the Members of
JD Sports Fashion Plc only (continued)
- An assessment of the work prepared by the Group
which was informed by an external valuation
specialist, engaged by the entity, who advised on
the methodology and assumptions used to
identify and value the separately identifiable
intangible assets;
- An examination and challenge of the key
judgements adopted in preparing the underlying
forecasts, such as the forecast revenues and cash
flows, used to value the separately identifiable
intangible assets;
- With the assistance of our internal valuation
specialists, evaluating the valuation methodologies
used as well as assessing both the royalty relief
rate and discount
rate against externally
benchmarked data;
- Performing sensitivity analysis relating to the
valuation of intangible assets, specifically around
the royalty rate and discount rate; and
- We considered the adequacy of the financial
statement disclosures
in respect of critical
accounting estimates and judgements relating to
intangible assets recognised on acquisitions.
Carrying Value of Inventories – £348.0m (2016:
£238.3m). Risk vs 2016: h g
Refer to page 82 (Audit Committee Report), page 136
(accounting policy) and page 136 (financial disclosures)
• The risk over the carrying value of inventories is
considered a significant audit risk due to the seasonal
nature of the Group’s core retail business, the
changing desirability of branded products over time
and the judgement therefore made in assessing the
recoverability of its carrying value. The inventory
balance has increased by £109.7m due to organic
growth within existing fascias coupled with the
effect of newly acquired entities.
• We regard this risk as having remained at the same
level year on year. Although revenues and profits
have increased, there remains an inherent level of
uncertainty over inventory valuation given its nature
and the reliance on future sales prices.
• Our response – Our procedures included:
- Testing the principles and
integrity of the
obsolescence provision calculations used across
the Group principally by performing our own
assessments in relation to key assumptions within
the model such as the proportion of current
inventory expected to become aged in the future
and average proceeds received for aged inventory;
- We assessed the overall consistency of the
application of the policy, by evaluating against
prior periods, coupled with an assessment of the
assumptions used and inventory sold below cost
during the year. We formed our own expectation
of the inventory provision by analysing inventory
disaggregated by season, and
forming an
expectation based on stock not bought in the last
6 months, and stock that would not be sold within
the next 12 months based on historical sales
rates; and
- We considered the adequacy of the financial
statement disclosures in respect of gross inventory
and inventory provisioning. In relation to inventory
acquired as part of business acquisitions, we
challenged management’s assessment of the fair
value and performed sensitivity analysis with
respect to historic gross margin percentages as
well as expected costs to sell.
3. Our Application of Materiality and an Overview
of the Scope of our Audit
The materiality of the Group financial statements as
a whole was set at £10.0 million (2016: £7.0 million),
determined with reference to a benchmark of Group
profit before tax, of which it represents 4.2%. In 2016
materiality was determined with reference to a
benchmark of Group operating profit, normalised
to exclude that year’s exceptional items, of which
it represented 4.5%.
We report to the Audit Committee any corrected
and uncorrected misstatements exceeding £0.5
million (2016: £0.3m), in addition to other identified
misstatements
on
that warranted
qualitative grounds.
reporting
Of the group’s 40 (2016: 33) reporting components, we
subjected 5 (2016: 4) to audits for group reporting
purposes and 1 (2016: Nil) to specified risk-focused
audit procedures covering the specific risk areas
including those identified in this report. The latter
was not individually financially significant enough
to require an audit for group reporting purposes,
but did present specific
that
needed to be addressed.
individual
risks
Annual Report & Accounts 2017 Independent Auditor’s Report to the Members of
JD Sports Fashion Plc only (continued)
The components within the scope of our work
accounted for the following percentages of the
Group’s results:
Number of
components
Group
revenue %
Group profit
and losses
before tax %
Group total
assets and
liabilities %
5
1
6
4
77
3
80
79
83
3
86
83
86
1
87
88
Audits for Group
reporting purposes1
Specified risk-focused
audit procedures2
Total
Total 2015/16
(1) In the UK, France, and Spain.
(2) In the Netherlands.
The remaining 20% (2016: 21%) of total group
revenue, 14% (2016: 17%) of group profit and losses
before tax and 13% (2016: 14%) of total group assets is
represented by 34 reporting components (2016: 29),
none of which individually represented more than 3.5%
of any of total group revenue, group profit before tax
or total group assets. For these remaining components,
we performed analysis at an aggregated group level to
re-examine our assessment that there were no
significant risks of material misstatement within these.
The Group team instructed component auditors as
to the significant areas to be covered, including the
relevant risks detailed above and the information to be
reported back. The Group team approved the
component materialities, which ranged from £1.0m
to £7.2m (2016: £1.5m to £6.2m), having regard to
the mix of size and risk profile of the Group across
the components. The work on 4 of the 6 components
(2016: 2 of the 4 components) was performed by
component auditors and the rest by the Group team.
The Group team visited 4 (2016: Nil) component
locations in the UK, Spain, France, and the Netherlands,
including to assess the audit risk and strategy. Video
and telephone conference meetings were also held
with these component auditors. At these meetings, the
findings reported to the Group team were discussed in
more detail, and any further work required by the
Group team was then performed by the component
auditor.
4. Our Opinion on Other Matters Prescribed by the
Companies Act 2006 is Unmodified
In our opinion:
• the part of the Directors’ Remuneration report
to be audited has been properly prepared in
accordance with the Companies Act 2006; and
• the information given in the Strategic Report
and the Directors’ Report for the financial year
is consistent with the financial statements.
Based solely on the work required to be undertaken in
the course of the audit of the financial statements and
from reading the Strategic report and the Directors’
report:
• we have not identified material misstatements in
those reports and in our opinion, those reports have
been prepared in accordance with the Companies
Act 2006.
5. We Have Nothing to Report on the Disclosure of
Principal Risks
Based on the knowledge we acquired during our audit,
we have nothing material to add or draw attention to in
relation to:
• the directors’ viability statement on page 79
concerning the principal risks, their management,
and, based on that, the directors’ assessment and
expectations of the group’s continuing in operation
over the 3 years to 2020;
or
• the disclosures in note 1 of the financial statements
concerning the use of the going concern basis of
accounting.
6. We Have Nothing to Report in Respect of the
Matters on Which We Are Required to Report by
Exception
Under International Standards of Auditing (UK and
Ireland) we are required to report to you if, based on
the knowledge we acquired during our audit, we have
identified other information in the annual report that
contains a material inconsistency with either that
knowledge or the financial statements, a material
misstatement of fact, or that is otherwise misleading.
In particular we are required to report to you if:
• we have identified material inconsistencies between
the knowledge we acquired during our audit and the
Directors’ statement that they consider that the
annual report and financial statements taken as a
whole is fair, balanced and understandable and
provides information necessary for shareholders to
assess the Group’s performance, business model and
strategy; or
• the section of the Corporate Governance Statement
describing the work of the Audit Committee does
not appropriately address matters communicated
by us to the Audit Committee.
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; or
101101
Financial StatementsFinancial Statements
Annual Report & Accounts 2017
Independent Auditor’s Report to the Members of
JD Sports Fashion Plc only (continued)
• 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; or
• certain disclosures of directors’ remuneration specified by law are not made; or
• 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 79, in relation to going concern and longer-term viability; and
• the part of the Corporate Governance Statement on pages 80 to 84 relating to the company’s compliance
with the eleven provisions of the 2014 UK Corporate Governance Code specified for our review.
We have nothing to report in respect of the above responsibilities.
Scope and Responsibilities
As explained more fully in the Directors’ Responsibilities Statement set out on page 98, the directors are responsible
for the preparation of the financial statements and for being satisfied that they give a true and fair view. A description
of the scope of an audit of financial statements is provided on the Financial Reporting Council’s website at
www.frc.org.uk/auditscopeukprivate. This report is made solely to the company’s members as a body and is subject
to important explanations and disclaimers regarding our responsibilities, published on our website at www.kpmg.
com/uk/auditscopeukco2014a, which are incorporated into this report as if set out in full and should be read to
provide an understanding of the purpose of this report, the work we have undertaken and the basis of our opinions.
Mick Davies (Senior Statutory Auditor) for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants,
1 St. Peter’s Square,
Manchester, M2 3AE
10 April 2017
Financial Statements
Consolidated Income Statement
For the 52 weeks ended 28 January 2017
Revenue
Cost of sales
Gross profit
Selling and distribution expenses
Administrative expenses - normal
Administrative expenses - exceptional
Administrative expenses
Other operating income
Operating profit
Before exceptional items
Exceptional items
Operating profit
Financial income
Financial expenses
Profit before tax
Income tax expense
Profit for the period
Attributable to equity holders of the parent
Attributable to non-controlling interest
Basic earnings per ordinary share
Diluted earnings per ordinary share
52 weeks to
28 January 2017
52 weeks to
28 January 2017
52 weeks to
30 January 2016
52 weeks to
30 January 2016
Note
£000
(106,272)
(6,419)
4
4
7
8
3
9
10
10
£000
2,378,694
(1,215,053)
1,163,641
(812,972)
(112,691)
1,815
239,793
246,212
(6,419)
239,793
767
(2,192)
238,368
(53,788)
184,580
178,914
5,666
18.38p
18.38p
£000
(78,228)
(25,496)
£000
1,821,652
(937,431)
884,221
(648,333)
(103,724)
1,242
133,406
158,902
(25,496)
133,406
388
(2,163)
131,631
(31,001)
100,630
97,634
2,996
10.03p
10.03p
Statement of Comprehensive Income
For the 52 weeks ended 28 January 2017
Profit for the period
Other comprehensive income:
Items that may be classified subsequently to the Consolidated Income Statement:
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 non-controlling interest
52 weeks to
28 January 2017
52 weeks to
30 January 2016
£000
184,580
22,551
22,551
207,131
197,761
9,370
£000
100,630
4,144
4,144
104,774
101,828
2,946
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Annual Report & Accounts 2017
Statement of Financial Position
As at 28 January 2017
Assets
Intangible assets
Property, plant and equipment
Other assets
Deferred tax assets
Total non-current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
Liabilities
Interest-bearing loans and borrowings
Trade and other payables
Provisions
Income tax liabilities
Total current liabilities
Interest-bearing loans and borrowings
Other payables
Provisions
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Total assets less total liabilities
Capital and reserves
Issued ordinary share capital
Share premium
Retained earnings
Other reserves
Total equity attributable to equity holders of the parent
Non-controlling interest
Total equity
As at
28 January 2017
As at
30 January 2016
Note
£000
£000
12
13
14
22
15
16
17
18
20
21
18
20
21
22
23
24
190,902
235,762
38,103
-
464,767
348,007
118,602
247,560
714,169
1,178,936
(31,431)
(469,062)
(1,015)
(33,648)
(535,156)
(2,529)
(53,179)
(1,038)
(8,192)
(64,938)
(600,094)
578,842
2,433
11,659
543,268
(5,110)
552,250
26,592
578,842
73,611
173,317
33,191
482
280,601
238,324
56,375
215,996
510,695
791,296
(6,301)
(324,964)
(1,132)
(15,757)
(348,154)
(274)
(40,834)
(1,209)
-
(42,317)
(390,471)
400,825
2,433
11,659
378,898
(10,570)
382,420
18,405
400,825
These financial statements were approved by the Board of Directors on 10 April 2017 and were signed on
its behalf by:
Brian Small
Director
Registered number: 1888425
Financial Statements
Consolidated Statement of Changes in Equity
For the 52 weeks ended 28 January 2017
Balance at 31 January 2015
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 non-controlling interest
Balance at 30 January 2016
Profit for the period
Other comprehensive income:
Exchange differences on translation of foreign
operations
Total other comprehensive income
Total comprehensive income for the period
Repurchase of share capital held as Treasury Shares
Dividends to equity holders
Put options held by non-controlling interests
Acquisition of non-controlling interest
Divestment of non-controlling interest
Non-controlling interest arising on acquisition
Ordinary share
capital
Share
premium
Retained
earnings
Treasury
reserve
£000
£000
£000
11,659
297,161
£000
2,433
-
-
-
-
-
-
-
-
-
-
-
-
2,433
11,659
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(15,926)
-
-
-
-
-
97,634
-
-
97,634
(13,820)
(2,077)
378,898
178,914
-
-
178,914
(14,501)
(2,180)
2,052
85
-
Foreign
currency
translation
reserve
£000
(11,691)
-
4,194
4,194
4,194
-
-
Other
equity
£000
(3,073)
-
-
-
-
-
-
(3,073)
(7,497)
-
Total equity
attributable
to equity
holders of
the parent
Non-
controlling
interest
£000
296,489
97,634
4,194
4,194
101,828
(13,820)
(2,077)
382,420
178,914
£000
13,502
2,996
(50)
(50)
2,946
(120)
2,077
18,405
5,666
Total
equity
£000
309,991
100,630
4,144
4,144
104,774
(13,940)
-
400,825
184,580
18,847
18,847
3,704
22,551
-
-
-
-
-
2,539
-
-
-
18,847
18,847
-
-
-
-
-
18,847
197,761
(15,926)
(14,501)
359
2,052
85
-
Balance at 28 January 2017
2,433
11,659
543,268
(15,926)
(534)
11,350
552,250
3,704
9,370
-
(656)
-
(2,052)
(85)
1,610
26,592
22,551
207,131
(15,926)
(15,157)
359
-
-
1,610
578,842
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Consolidated Statement of Cash Flows
For the 52 weeks ended 28 January 2017
Cash flows from operating activities
Profit for the period
Income tax expense
Financial expenses
Financial income
Depreciation and amortisation of non-current assets
Forex (gains) / losses on monetary assets and liabilities
Loss on disposal of non-current assets
Termination of IT project
Impairment of intangible fixed assets
Increase in inventories
(Increase) / decrease 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
Interest received
Proceeds from sale of non-current assets
Investment in bespoke software development
Acquisition of property, plant and equipment
Acquisition of non-current other assets
Acquisition of subsidiaries, net of cash acquired
Net cash used in investing activities
Cash flows from financing activities
Repayment of interest-bearing loans and borrowings
Repayment of finance lease liabilities
Draw down of finance lease liabilities
Repayment of syndicated bank facility
Subsidiary shares repurchased and held as Treasury Shares
Equity dividends paid
Dividends paid to non-controlling interest in subsidiaries
Net cash used in financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the period
Foreign exchange gains / (losses) on cash and cash equivalents
Cash and cash equivalents at the end of the period
52 weeks to
28 January 2017
52 weeks to
30 January 2016
Note
£000
£000
9
8
7
3
12
13
14
25
28
28
28
28
184,580
53,788
2,192
(767)
62,370
(5,371)
320
-
6,419
(21,240)
(4,594)
43,895
(2,192)
(40,139)
279,261
767
2,431
(3,843)
(77,229)
(6,886)
(138,568)
(223,328)
(3,133)
(148)
-
-
(14,815)
(14,501)
(656)
(33,253)
22,680
209,859
1,796
234,335
100,630
31,001
2,163
(388)
48,778
7,997
-
14,896
10,600
(13,304)
47
55,738
(2,163)
(29,981)
226,014
388
1,145
(4,401)
(72,765)
(6,343)
-
(81,976)
(191)
(30)
75
(31,000)
-
(13,820)
(120)
(45,086)
98,952
115,697
(4,790)
209,859
Annual Report & Accounts 2017 Notes to the Consolidated Financial Statements
1. Basis of Preparation
General Information
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 28 January 2017 represent those of the Company and its
subsidiaries (together referred to as the ‘Group’).
The financial statements were authorised for issue by the Board of Directors on 10 April 2017.
Basis of Preparation
European Union law (‘EU 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 28 January 2017.
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 and also
put and call options held by the non-controlling interests.
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 Executive Chairman’s Statement and Financial and Risk Review on pages 50 to 51 and
pages 57 to 63 respectively. In addition, details of financial instruments and exposures to interest rate, foreign
currency, credit and liquidity risks are outlined in note 19.
As 28 January 2017, the Group had net cash balances of £213,600,000 (2016: £209,421,000) with available
committed borrowing facilities of £215,000,000 (2016: £215,000,000) of which £nil (2016: £nil) has been drawn
down (see note 18). With a facility of £215,000,000 available, the Directors believe that the Group is well placed to
manage its business risks successfully despite the current uncertain economic outlook.
After making enquiries, the Directors have a reasonable expectation the Group has 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.
Alternative Performance Measures
The Directors measure the performance of the Group based on a range of financial measures, including measures
not recognised by EU-adopted IFRS. These alternative performance measures may not be directly comparable
with other companies’ alternative performance measures and the Directors do not intend these to be a substitute
for, or superior to, IFRS measures. Further information can be found in the Glossary on page 176.
Adoption of New and Revised Standards
The following amendments to accounting standards and interpretations, issued by the International Accounting
Standards Board (IASB), have been adopted for the first time by the Group in the period with no significant
impact on its consolidated results or financial position:
• Annual Improvements to IFRSs - 2012 – 2014 Cycle
• Amendments to IAS 1 ‘Disclosure initiative’
• Amendments to IAS 16 and IAS 38 ‘Clarification of acceptable methods of depreciation and amortisation’
• Amendments to IAS 27 ‘Equity method in separate financial statements’
107107
Financial StatementsFinancial Statements Annual Report & Accounts 2017
Notes to the Consolidated Financial Statements (continued)
1. Basis of Preparation (continued)
IFRS 9 ‘Financial Instruments’ is expected to be applicable after 1 January 2018. If endorsed, this standard will
simplify the classification of financial assets for measurement purposes, but it is not anticipated to have a
significant impact on the financial statements.
IFRS 16 Leases is effective for periods that commence on or after 1 January 2019 and will significantly affect the
presentation of the Group financial statements with all leases apart from short term leases being recognised as
on-balance sheet finance leases with a corresponding liability being the present value of lease payments. IFRS 16
is also expected to have a material impact on key components within the Consolidated Income Statement as
operating lease rental charges will be replaced with depreciation and finance costs. The Group is currently
undertaking an impact assessment of the likely effect on the Group’s consolidated results and financial position.
The Group continued to monitor the potential impact of other new standards and interpretations which may be
endorsed and require adoption by the Group in future reporting periods. 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.
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 considered to be the valuation of the intangible assets
recognised as part of the acquisition of Go Outdoors Topco Limited (due to the inherent uncertainty involved
in the estimation of future sales, discount rates and royalty relief rates), the impairment of goodwill and
intangibles (due to the inherent uncertainty involved in forecasting and discounting future cash flows) and
inventory (due to the seasonal nature of the Group’s retail businesses and the judgement required in assessing
the recoverability of its carrying value). These are discussed further below:
I. Determination of Fair Value of Assets and Liabilities on Acquisition
For each acquisition, the Group reviews the appropriateness of the book values of the assets and liabilities
acquired, taking into account the application of Group accounting policies, to determine if fair value adjustments
are required. The key judgements involved are the identification and valuation of intangible assets which require
the estimation of future cash flows based on the Board’s strategic plans for the intangible asset, the useful
economic life of the intangible asset and the selection of a suitable discount rate.
II. Impairment of Goodwill
Goodwill arising on acquisition is allocated to groups of cash-generating units that are expected to benefit
from the synergies of the business combination from which goodwill arose. Goodwill is allocated to groups of
cash-generating units, being portfolios of stores or individual businesses. The cash-generating units used to
monitor goodwill and test it for impairment are therefore the store portfolios and individual businesses rather
than individual stores, as the cash flows of individual stores are not considered to be independent. The recoverable
amount is the higher of the value in use and the fair value less the costs to sell. The recoverable amounts of these
cash-generating units are 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. See Note 12 for further disclosure on
impairment of goodwill and review of the key assumptions used.
III. Impairment of Other Intangible Assets with Definite Lives
The Group is required to test whether other intangible assets with a definite useful economic life have suffered
any impairment. The recoverable amount of brand names is based on an estimation of future sales and the choice
of a suitable royalty and discount rate in order to calculate the present value, when this method is deemed the
most appropriate. Alternatively the carrying value of the brand names has been allocated to a cash-generating
unit, along with the relevant goodwill and fascia names, and tested in the value-in-use calculation performed for
that cash-generating unit. The recoverable amount of brand licences is 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 until the licence expiry date and the choice of a suitable discount
rate in order to calculate the present value. Note 12 provides further disclosure on impairment of other intangible
assets with definite lives, including review of the key assumptions used.
Financial Statements
Notes to the Consolidated Financial Statements (continued)
1. Basis of Preparation (continued)
VI. 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 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
determination of an indefinite life is an estimate and could be subject to change if market conditions change.
Note 12 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.
V. Provisions to Write Inventories Down to Net Realisable Value
The Group makes provisions for obsolescence, mark downs and shrinkage based on historical experiences,
the quality of the current season buy, market trends and management estimates of future events. The provision
requires estimates for shrinkage, the expected future selling price of items and identification of aged and
obsolete items.
Other Accounting Estimates and Judgements
I. Impairment of Property, Plant and Equipment and Non-current Other Assets
Property, plant and equipment and non-current other assets 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. A cash-
generating unit is an individual store. The recoverable amount is the greater of the fair value less costs to sell and
value-in-use. Impairment losses recognised in prior periods are assessed at each reporting period date for any
indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a
change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the
extent that the assets carrying amount does not exceed the carrying amount that would be held (net of
depreciation) if no impairment had been realised.
II. 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.
III. Value of Put Options Held by Non-controlling Interest
The Group recognises put options over non-controlling interests in its subsidiary undertakings as a liability in the
Consolidated Statement of Financial Position at the present value of the estimated exercise price of the put
option. The present value of the non-controlling interests’ put options are estimated based on expected earnings
in Board-approved forecasts and the choice of a suitable discount rate. Upon initial recognition a corresponding
entry is made to other equity. For subsequent changes on remeasurement of the liability the corresponding entry
is made to the Income Statement.
IV. Estimation of Useful Economic Lives of Brand Names
The Group amortises brand names over their useful economic life. In determining the useful economic life of each
brand name, the Board considers the market position of the brands acquired, the nature of the market that the
brands operate in, typical product life cycles of brands and the useful economic lives of similar assets that are
used in comparable ways.
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Notes to the Consolidated Financial Statements (continued)
2. Segmental Analysis
IFRS 8 ‘Operating Segments’ requires the Group’s segments to be identified on the basis of internal reports about
components of the Group that are regularly reviewed by the Chief Operating Decision Maker to allocate resources
to the segments and to assess their performance. The Chief Operating Decision Maker is considered to be the
Executive Chairman of JD Sports Fashion Plc.
Information reported to the Chief Operating Decision Maker is focused on the nature of the businesses within the
Group. The Group’s operating and reportable segments under IFRS 8 are therefore as follows:
• Sports Fashion – includes the results of JD Sports Fashion Plc, John David Sports Fashion (Ireland) Limited,
Spodis SA, Champion Sports Ireland, JD Sprinter Holdings 2010 SL (including subsidiary companies), JD Sports
Fashion BV, Sports Unlimited Retail BV, JD Sports Fashion Germany GmbH, JD Sports Fashion SRL, JD Sports
Fashion Belgium BVBA, JD Sports Fashion Sweden AB, JD Sports Fashion Denmark ApS, JD Sports Fashion
SDN BHD,JD Sports Fashion Holdings Aus Pty (including subsidiary companies), Size GmbH, ActivInstinct
Limited, JD Gyms Limited, Duffer of St George Limited, Topgrade Sportswear Limited, Kooga Rugby Limited,
Focus Brands Limited (including subsidiary companies), Kukri Sports Limited (including global subsidiary
companies), Source Lab Limited, R.D. Scott Limited, Tessuti Group Limited (including subsidiary companies),
Nicholas Deakins Limited, Cloggs Online Limited, Clothingsites.co.uk Limited, Ark Fashion Limited, 2Squared
Agency Limited, 2Squared Retail Limited and Mainline Menswear Limited.
• Outdoor – includes the results of Blacks Outdoor Retail Limited, Tiso Group Limited (including subsidiary
companies) and Go Outdoors Topco Limited (including subsidiary companies).
The Chief Operating Decision Maker receives and reviews segmental operating profit. Certain central administrative
costs including Group Directors’ salaries are included within the Group’s core ‘Sports Fashion’ result. This is
consistent with the results as reported to the Chief Operating Decision Maker.
IFRS 8 requires disclosure of information regarding revenue from major products and customers. The majority of
the Group’s revenue is derived from the retail of a wide range of apparel, footwear and accessories to the general
public. As such, the disclosure of revenues from major customers is not appropriate. Disclosure of revenue from
major product groups is not provided at this time due to the cost involved to develop a reliable product split on
a same category basis across all companies in the Group.
Intersegment transactions are undertaken in the ordinary course of business on arm’s length terms.
The Board consider that certain items are cross divisional in nature and cannot be allocated between the segments
on a meaningful basis. Net funding costs and taxation are treated as unallocated reflecting the nature of the
Group’s syndicated borrowing facilities and its tax group. Drawdowns from the Group’s syndicated borrowing
facility of £nil (2016: £nil), a deferred tax liability of £8,192,000 (2016: asset of £482,000) and an income tax
liability of £33,648,000 (2016: £15,757,000) are included within the unallocated segment.
Each segment is shown net of intercompany transactions and balances within that segment. The eliminations
remove intercompany transactions and balances between different segments which primarily relate to the net
down of long term loans and short term working capital funding provided by JD Sports Fashion Plc (within Sports
Fashion) to other companies in the Group, and intercompany trading between companies in different segments.
Revenue Recognition
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 and trading websites, 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 and this provision is included within accruals. Retail sales are
usually in cash, by debit card or by credit card.
Wholesale revenue is recognised when goods are dispatched and the title and the risks and rewards of
ownership have passed to the customer. In some instances, goods are sold with a right of return. Where
wholesale goods are sold with a right of return, a provision is made to estimate the expected level of returns
based on accumulated experience and historical rates. The provision for returns is included within accruals.
Wholesale sales are either settled by cash received in advance of the goods being dispatched or made on
agreed credit terms.
Annual Report & Accounts 2017 Financial Statements
Notes to the Consolidated Financial Statements (continued)
2. Segmental Analysis (continued)
Business Segments
Information regarding the Group’s reportable operating segments for the 52 weeks to 28 January 2017 is
shown below:
Income statement
Revenue
Operating profit before exceptional items
Exceptional items
Operating profit
Financial income
Financial expenses
Profit before tax
Income tax expense
Profit for the period
Total assets and liabilities
Total assets
Total liabilities
Total segment net assets / (liabilities)
Sports Fashion
£000
994,547
(463,364)
531,183
Outdoor
£000
255,949
(166,450)
89,499
Other segment information
Capital expenditure:
Software development
Property, plant and equipment
Non-current other assets
Depreciation, amortisation and impairments:
Depreciation and amortisation of non-current assets
Impairment of intangible assets
Impairment of non-current assets
Sports Fashion
£000
2,180,553
245,056
(6,419)
238,637
Outdoor
£000
198,141
1,156
-
1,156
Unallocated
Eliminations
£000
-
(41,840)
(41,840)
Sports Fashion
£000
3,843
72,741
6,886
57,353
6,419
(698)
£000
(71,560)
71,560
-
Outdoor
£000
-
4,488
-
5,017
-
705
Total
£000
2,378,694
246,212
(6,419)
239,793
767
(2,192)
238,368
(53,788)
184,580
Total
£000
1,178,936
(600,094)
578,842
Total
£000
3,843
77,229
6,886
62,370
6,419
7
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Notes to the Consolidated Financial Statements (continued)
2. Segmental Analysis (continued)
The comparative segmental results for the 52 weeks to 30 January 2016 are as follows:
Income statement
Gross revenue
Intersegment revenue
Revenue
Operating profit / (loss) before exceptional items
Exceptional items
Operating profit / (loss)
Financial income
Financial expenses
Profit before tax
Income tax expense
Profit for the period
Total assets and liabilities
Total assets
Total liabilities
Total segment net assets / (liabilities)
Sports Fashion
£000
792,411
(336,736)
455,675
Outdoor
£000
82,016
(121,591)
(39,575)
Other segment information
Capital expenditure:
Software development
Property, plant and equipment
Non-current other assets
Depreciation, amortisation and impairments:
Depreciation and amortisation of non-current assets
Impairment of intangible assets
Termination of IT project
Impairment of non-current assets
Sports
Fashion
£000
1,666,477
(138)
1,666,339
162,864
(21,634)
141,230
Outdoor
£000
155,313
-
155,313
(3,962)
(3,862)
(7,824)
Unallocated
Eliminations
£000
482
(15,757)
(15,275)
Sports Fashion
£000
4,401
69,025
6,343
45,326
6,739
14,896
843
£000
(83,613)
83,613
-
Outdoor
£000
-
3,740
-
3,452
3,861
-
584
Total
£000
1,821,790
(138)
1,821,652
158,902
(25,496)
133,406
388
(2,163)
131,631
(31,001)
100,630
Total
£000
791,296
(390,471)
400,825
Total
£000
4,401
72,765
6,343
48,778
10,600
14,896
1,427
Financial Statements
Notes to the Consolidated Financial Statements (continued)
2. Segmental Analysis (continued)
Geographical Information
The Group’s operations are located in the UK, Republic of Ireland, France, Spain, Germany, the Netherlands,
Italy, Portugal, Sweden, Denmark, Belgium, Malaysia, Australia, New Zealand, Canada, Dubai, Singapore and
Hong Kong.
The following table provides analysis of the Group’s revenue by geographical market, irrespective of the origin of
the goods / services:
Revenue
UK
Europe
Rest of world
52 weeks to
28 January 2017
52 weeks to
30 January 2016
£000
£000
1,655,537
1,407,866
656,858
66,299
391,954
21,832
2,378,694
1,821,652
The revenue from any individual country, with the exception of the UK, is not more than 10% of the Group’s
total revenue.
The following is an analysis of the carrying amount of segmental non-current assets by the geographical
area in which the assets are located:
Non-current assets
UK
Europe
Rest of world
2017
£000
284,655
163,316
16,796
464,767
2016
£000
183,623
96,437
541
280,601
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Annual Report & Accounts 2017
Notes to the Consolidated Financial Statements (continued)
3. Profit Before Tax
Profit before tax is stated after charging:
Auditor's remuneration:
Audit of these financial statements (KPMG LLP)
Amounts receivable by the Company’s auditor (KPMG LLP) and its associates in respect of:
Audit of financial statements of subsidiaries of the Company
Audit-related assurance services
Taxation compliance services
Other tax advisory services
Depreciation and amortisation of non-current assets:
Depreciation of property, plant and equipment
Amortisation of intangible assets
Amortisation of non-current other assets - owned
Impairments of non-current assets:
Property, plant and equipment
Intangible assets
Other non-current assets
Loss on disposal of non-current assets
Rentals payable under non-cancellable operating leases for:
Land and buildings - non-contingent rentals payable
Land and buildings - contingent rentals payable
Other - plant and equipment
Foreign exchange loss recognised
Movement in the fair value of forward contracts
Profit before tax is stated after crediting:
Rents receivable and other income from property
Sundry income
Reversal of impairments of other non current assets
Reverse premia
Foreign exchange gain recognised
52 weeks to
28 January 2017
52 weeks to
30 January 2016
£000
£000
118
647
34
9
68
51,110
7,980
3,280
284
6,419
-
320
149,253
14,359
3,224
-
60
626
1,189
277
2,135
3,467
115
345
33
-
40
37,310
9,304
2,164
1,382
10,600
45
-
118,717
10,071
3,102
6,300
7,849
566
676
-
2,505
-
In addition, fees of £65,000 (2016: £76,000) were incurred and paid by Pentland Group Plc (see Company note
C22) in relation to the non-coterminous audit of the Group for the purpose of inclusion in their consolidated
financial statements.
Non-current other assets comprise key money, store deposits, legal fees and lease premia associated with the
acquisition of leasehold interests (see Note 14).
Financial Statements
Notes to the Consolidated Financial Statements (continued)
4. Exceptional Items
Items that are, in aggregate, material in size and / or 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 where significant or non-recurring which will be included as exceptional
items are:
• Profit / (loss) 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 assets
• Impairment of goodwill, brand names and fascia names
• Impairment of investment property
• Profit / (loss) on disposal of subsidiary undertakings
• Negative goodwill
• Business restructuring and business closure related costs
• (Gains) / losses arising on changes in ownership interest where control has been obtained
• Fair value adjustments to put option liabilities
Impairment of goodwill, brand names and fascia names (1)
Termination of project to replace core IT systems (2)
Administrative expenses - exceptional
Note
12
52 weeks to
28 January 2017
52 weeks to
30 January 2016
£000
6,419
-
6,419
£000
10,600
14,896
25,496
(1) The charge in the period to 28 January 2017 relates to the non-cash impairment of the fascia name
balance arising in prior years on the acquisition of ActivInstinct Limited, the fascia name arising in the
year on the acquisition of Aspecto Holdings Limited and Infinities Retail Group Holdings Limited and the
impairment of the goodwill arising in the year on the acquisition of 2Squared Agency Limited. The charge
in the period to 30 January 2016 relates to the non-cash impairment of the goodwill arising in prior years
on the acquisition of ActivInstinct Limited, a partial impairment of the Blacks fascia name and the impairment
of other goodwill and fascia name balances which were not significant.
(2) One off exceptional charge in the period to 30 January 2016 writing off costs incurred on a terminated
IT project.
These administrative expenses are exceptional items as they are, in aggregate, material in size and / or unusual
or infrequent in nature.
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5. Remuneration of Directors
The remuneration of the Executive Directors includes provision for future LTIP payments of £615,000 (2016:
£615,000). Further information on Directors’ emoluments is shown in the Directors’ Remuneration Report
on page 85.
In the opinion of the Board, the key management as defined under revised IAS 24 ‘Related Party Disclosures’ are
the six Executive and Non-Executive Directors (2016: five). During the year there was one (2016: one) director
within the defined contribution pension scheme. Full disclosure of the Directors’ remuneration is given in the
Directors’ Remuneration Report on page 92.
Directors' emoluments:
As Non-Executive Directors
As Executive Directors
Pension contributions
6. Staff Numbers and Costs
52 weeks to
28 January 2017
52 weeks to
30 January 2016
£000
147
3,571
32
3,750
£000
122
3,450
26
3,598
Group
The average number of persons employed by the Group (including Directors) during the period, analysed by
category, was as follows:
Sales and distribution
Administration
Full time equivalents
The aggregate payroll costs of these persons were as follows:
Wages and salaries
Social security costs
Other pension costs (see note 27)
2017
24,850
976
25,826
16,218
2016
18,284
749
19,033
12,602
52 weeks to
28 January 2017
52 weeks to
30 January 2016
£000
301,137
29,881
4,755
335,773
£000
241,536
23,341
3,117
267,994
Annual Report & Accounts 2017Notes to the Consolidated Financial Statements (continued) 7. Financial Income
Financial income comprises interest receivable on funds invested. Financial income is recognised in the
Consolidated Income Statement on an effective interest method.
Bank interest
Other interest
Financial income
8. Financial Expenses
52 weeks to
28 January 2017
52 weeks to
30 January 2016
£000
649
118
767
£000
388
-
388
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.
On bank loans and overdrafts
Amortisation of facility fees
Interest on obligations under finance leases
Other interest
Financial expenses
52 weeks to
28 January 2017
52 weeks to
30 January 2016
£000
1,934
255
3
-
2,192
£000
1,908
230
7
18
2,163
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Financial StatementsNotes to the Consolidated Financial Statements (continued)Financial Statements 9. Income Tax Expense
Tax on the profit or loss for the year comprises current and deferred tax.
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.
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
• The initial recognition of assets or liabilities that affect neither accounting nor taxable profit
• Differences relating to investments in subsidiaries to the extent that they will probably not reverse
in the foreseeable future
The amount of deferred tax provided is based on the expected realisation or settlement of the carrying amount
of assets and liabilities, using tax rates enacted or substantively enacted by the 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.
Current tax
UK corporation tax at 20% (2016: 20.2%)
Adjustment relating to prior periods
Total current tax charge
Deferred tax
Deferred tax (origination and reversal of temporary differences)
Adjustment relating to prior periods
Total deferred tax credit
Income tax expense
Reconciliation of income tax expense
Profit before tax multiplied by the standard rate of corporation tax in the UK of 20% (2016: 20.2%)
Effects of:
Expenses not deductible
Depreciation and impairment of non-qualifying non-current assets (including brand names arising on consolidation)
Non taxable income
Loss on disposal of non-qualifying non-current assets
Effect of tax rates in foreign jurisdictions
Research and development tax credits and other allowances
Recognition of previously unrecognised tax losses
Reduction in tax rate
Change in unrecognised temporary differences
Under provided in prior periods
Chargeable gains
Income tax expense
52 weeks to
28 January 2017
52 weeks to
30 January 2016
£000
£000
57,909
(142)
57,767
(4,830)
851
(3,979)
53,788
32,568
574
33,142
(2,892)
751
(2,141)
31,001
52 weeks to
28 January 2017
52 weeks to
30 January 2016
£000
47,675
1,160
2,875
(411)
181
685
(62)
(233)
708
706
709
(205)
53,788
£000
26,590
310
2,315
(452)
(116)
612
(54)
(283)
262
492
1,325
-
31,001
Annual Report & Accounts 2017Notes to the Consolidated Financial Statements (continued) 10. Earnings Per Ordinary Share
Basic and Diluted Earnings Per Ordinary Share
The calculation of basic and diluted earnings per ordinary share at 28 January 2017 is based on the profit for the
period attributable to equity holders of the parent of £178,914,000 (2016: £97,634,000) and a weighted average
number of ordinary shares outstanding during the 52 week period ended 28 January 2017 of 973,233,160 (2016
restated: 973,233,160).
An Ordinary Resolution was passed at the Annual General Meeting, effective 24 November 2016, resulting in a
share split whereby five Ordinary shares were issued for each Ordinary share. In accordance with IAS 33, the
number of shares outstanding before the event has been adjusted for the proportionate change as if the event
had occurred at the beginning of the earliest period presented.
Issued ordinary shares at beginning and end of period
52 weeks to
28 January 2017
52 weeks to
30 January 2016
(restated)
Number
Number
973,233,160
973,233,160
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
Profit for the period attributable to equity holders of the parent excluding exceptional items
Adjusted basic and diluted earnings per ordinary share
Note
4
52 weeks to
28 January 2017
52 weeks to
30 January 2016
(restated)
£000
178,914
6,419
-
185,333
19.04p
£000
97,634
25,496
(3,737)
119,393
12.27p
119119
Financial StatementsNotes to the Consolidated Financial Statements (continued)Financial Statements 11. Acquisitions
Business Combinations
The Group accounts for business combinations using the acquisition method when control is transferred to the
Group. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement
with the entity and has the ability to affect the returns through its power over the entity.
Costs related to the acquisition, other than those associated with the issue of debt or equity securities, that
the Group incurs in connection with a business combination are expensed as incurred.
The consideration transferred in the acquisition is generally measured at fair value, as are the identifiable net
assets acquired. Any goodwill that arises is tested annually for impairment. The consideration transferred does
not include amounts related to the settlement of pre-existing relationships. Such amounts are generally
recognised in the Consolidated Income Statement.
Any contingent consideration is measured at fair value at the date of acquisition. If an obligation to pay
contingent consideration that meets the definition of a financial instrument is classified as equity, then it is not
remeasured and the settlement is accounted for within equity. Otherwise, subsequent changes in the
fair value of the contingent consideration are recognised in the Consolidated Income Statement.
Current Period Acquisitions
Sports Unlimited Retail BV
On 20 March 2016, the Group acquired, via its newly incorporated subsidiary Sports Unlimited Retail BV, the
trading assets and trade of the Aktiesport and Perry Sport fascias from the Trustee of Unlimited Sports Group
BV which was declared bankrupt by the court of Amsterdam on 23 February 2016. On acquisition there were 187
stores and two trading websites.
The Board believes that the cash consideration of €26.5 million represents the current best estimates of the fair
value of the net assets acquired. The provisional goodwill calculation is summarised below:
Acquiree's net assets at acquisition date:
Property, plant and equipment
Inventories
Cash and cash equivalents
Trade and other payables
Provisions
Net identifiable assets
Goodwill on acquisition
Consideration paid - satisfied in cash
Book value
£000
3,929
23,330
58
(8,364)
-
18,953
Measurement
adjustments
Provisional fair value
at 28 January 2017
£000
£000
-
5,242
-
(2,135)
(3,107)
-
3,929
28,572
58
(10,499)
(3,107)
18,953
-
18,953
Included in the 52 week period ended 28 January 2017 is revenue of £81,317,000 and a loss before tax of
£7,904,000 in respect of Sports Unlimited Retail BV.
Annual Report & Accounts 2017Notes to the Consolidated Financial Statements (continued) 11. Acquisitions (continued)
JD Sports Fashion SDN BHD
On 28 April 2016, the Group acquired via its 50% subsidiary in Malaysia, JD Sports Fashion SDN BHD, 20 multi-
brand Sports Fashion stores and a trading website which trade as Sports Empire, Revolution and The Marathon
Shop from Runners World SDN BHD. JD Sports Fashion SDN BHD is an entity controlled by the Group and
therefore the results and financial position of the entity are consolidated into the financial statements of the
Group. The cash consideration payable on this transaction was MYR 20.7 million.
The Board believes that the cash consideration of MYR 20.7 million represents the current best estimates
of the fair value of the net assets acquired. The provisional goodwill calculation is summarised below:
Acquiree's net assets at acquisition date:
Intangible assets
Property, plant and equipment
Other non-current assets
Inventories
Deferred tax liabilities
Net identifiable assets
Goodwill on acquisition
Consideration paid - satisfied in cash
Book value
£000
823
356
249
2,018
-
3,446
Measurement
adjustments
Provisional fair value
at 28 January 2017
£000
260
-
-
-
(260)
-
£000
1,083
356
249
2,018
(260)
3,446
-
3,446
Included in the 52 week period ended 28 January 2017 is revenue of £10,176,000 and profit before tax of £486,000
in respect of JD Sports Fashion SDN BHD.
SportIberica Sociedade de Artigos de Desporto, S.A.
On 1 July 2016, the Group acquired, both directly and via its 50.1% owned subsidiary JD Sprinter Holdings
2010 SL, an aggregate of 80% of the issued share capital of Sportiberica Sociedade de Artigos de Desporto
S.A (“Sportiberica”) for cash consideration of €4.2 million with additional consideration of up to €0.5 million
payable if certain criteria are met. At acquisition, management believed that the criteria would be met for
the maximum consideration to be payable and therefore management believes that the fair value of the
total consideration at this time is €4.7 million.
The Board believes that the excess of cash consideration paid over net identifiable assets on acquisition of
£1,422,000 is best considered as goodwill on acquisition representing anticipated future operating synergies. The
provisional goodwill calculation is summarised below:
Acquiree's net assets at acquisition date:
Property, plant and equipment
Other non current assets
Inventories
Cash
Trade and other receivables
Income tax assets
Trade and other payables
Interest bearing loans and borrowings
Net identifiable assets
Non-controlling interest
Goodwill on acquisition
Consideration paid - satisfied in cash
Contingent consideration
Total consideration
Book value
£000
183
42
2,821
679
866
36
(1,540)
(705)
2,382
(476)
Measurement
adjustments
Provisional fair value
at 28 January 2017
£000
-
-
-
-
-
-
-
-
-
-
£000
183
42
2,821
679
866
36
(1,540)
(705)
2,382
(476)
1,422
2,971
357
3,328
Included in the 52 week period ended 28 January 2017 is revenue of £6,411,000 and a loss before tax of £1,288,000
in respect of Sportiberica.
121121
Financial StatementsNotes to the Consolidated Financial Statements (continued)Financial Statements 11. Acquisitions (continued)
Next Athleisure Pty Limited
On 26 August 2016, the Group acquired, via its newly incorporated subsidiary JD Sports Fashion Holdings
Australia Pty, 80% of the issued ordinary share capital of Next Athleisure Pty Limited for consideration of
$6.6 million AUD and has also advanced $2.4 million AUD to allow it to settle an element of its indebtedness. Next
Athleisure Pty Limited operates 32 stores and a trading website in Australia under the Glue and Superglue retail
banners.
The Board believes that the cash consideration of $6.6 million represents the current best estimates of the fair
value of the net assets acquired. The provisional goodwill calculation is summarised below:
Acquiree's net assets at acquisition date:
Intangible assets
Property, plant and equipment
Other non current assets
Inventories
Cash
Trade and other receivables
Income tax assets
Deferred tax liabilities
Trade and other payables
Interest bearing loans and borrowings
Net identifiable assets
Non-controlling interest
Goodwill on acquisition
Consideration paid - satisfied in cash
Consideration as loan owed to NCI
Total consideration
Book value
£000
4,821
5,150
2
9,428
471
2,683
159
1,510
(11,903)
(7,998)
4,323
(865)
Measurement
adjustments
Provisional fair value
at 28 January 2017
£000
2,810
599
-
851
137
108
11
(2,092)
(1,093)
(821)
510
(102)
£000
7,631
5,749
2
10,279
608
2,791
170
(582)
(12,996)
(8,819)
4,833
(967)
-
3,420
446
3,866
Included in the 52 week period ended 28 January 2017 is revenue of £32,017,000 and a loss before tax of £91,000
in respect of Next Athleisure Pty Limited.
Annual Report & Accounts 2017Notes to the Consolidated Financial Statements (continued) 11. Acquisitions (continued)
Go Outdoors Topco Limited
On 27 November 2016, the Group acquired 100% of the issued ordinary share capital of Go Outdoors Topco
Limited (‘Go Outdoors’) for consideration of £112,305,000 with the Group assuming net debt of £11,359,000 as
part of the transaction. Go Outdoors is a nationwide omnichannel retailer catering for the outdoor enthusiast and
specialist alike with 58 stores across the UK at acquisition, the majority of which are situated in out of
town retail parks.
Included within the fair value of net identifiable assets on acquisition are intangible assets of £66,729,000;
£59,076,000 representing the ‘GO Outdoors’ fascia name and £7,653,000 of brands.
The Board believes that the excess of cash consideration paid over net identifiable assets on acquisition
of £44,434,000 is best considered as goodwill on acquisition representing the strategic benefit of a larger
Outdoor operation in the Group. The provisional goodwill calculation is summarised below:
Acquiree's net assets at acquisition date:
Intangible assets
Property, plant and equipment
Inventories
Cash
Trade and other receivables
Trade and other payables
Income tax liabilities
Deferred tax liabilities
Interest bearing loans and borrowings
Net identifiable assets
Goodwill on acquisition
Consideration paid - satisfied in cash
Book value
£000
Measurement
adjustments
Provisional fair value
at 28 January 2017
£000
£000
319
28,495
40,354
8,821
7,251
(48,240)
(897)
(48)
(20,180)
15,875
66,410
(2,518)
-
-
-
(573)
-
(11,323)
-
51,996
66,729
25,977
40,354
8,821
7,251
(48,813)
(897)
(11,371)
(20,180)
67,871
44,434
112,305
Included in the 52 week period ended 28 January 2017 is revenue of £34,183,000 and a loss before tax of £93,000
in respect of Go Outdoors.
Aspecto Holdings Limited
On 18 July 2016, the Group, via its new 100% subsidiary Napco 104 Limited acquired 100% of the entire issued
share capital of Aspecto Holdings Limited for cash consideration of £1. As at 28 January 2017, the Group had also
advanced £900,000 of working capital. The Board believes that the cash consideration of £1 represents the
current best estimates of the fair value of the net assets acquired.
On 21 August 2016, the trade and assets (with the exception of certain assets and liabilities) were hived up into
Tessuti Limited, a 100% owned subsidiary of JD Sports Fashion Plc.
Infinities Retail Group Limited
On 12 September 2016, the Group, via its new 100% subsidiary Ensco 1157 Limited acquired 100% of the entire
issued share capital of Infinities Retail Group Limited for cash consideration of £1. As at 28 January 2017, the
Group has also advanced £1,020,000 of working capital. The Board believes that the cash consideration of £1
represents the current best estimates of the fair value of the net assets acquired.
On 31 October 2016, the trade and assets (with the exception of certain assets and liabilities) were hived up into
Tessuti Limited, a 100% owned subsidiary of JD Sports Fashion Plc.
123123
Financial StatementsNotes to the Consolidated Financial Statements (continued)Financial Statements 11. Acquisitions (continued)
Clothingsites.co.uk Limited
On 26 September 2016, the Group, via its new 100% subsidiary Ensco 1173 Limited acquired 100% of the entire
issued share capital of Clothingsites.co.uk Limited for an initial cash consideration of £1. As at 28 January 2017,
the Group had also advanced £1,100,000 of working capital. Clothingsites.co.uk Limited currently operates two
trading websites, Woodhouse Clothing and Brown Bag Clothing. The Board believes that the excess of cash
consideration paid over net identifiable assets on acquisition of £2,443,000 represents the fair value of the
‘Woodhouse Clothing’ and ‘Brown Bag’ online fascia names.
Included in the 52 week period ended 28 January 2017 is revenue of £3,811,000 and a loss before tax of £329,000
in respect of Clothingsites.co.uk Limited.
2Squared Agency Limited & 2Squared Retail Limited (‘2Squared’)
On 30 November 2016, the Group acquired 69% of the issued share capital of 2Squared Agency Limited and 51%
of the issued share capital of 2Squared Retail Limited for cash consideration of £512,000. As at 28 January 2017,
the Group had also advanced £3,020,000 of working capital to settle outstanding debt. The Board believed that
the excess of cash consideration paid over the net identifiable assets on acquisition of £959,000 was best
considered as goodwill representing future operating synergies. The goodwill was subsequently impaired during
the financial period ended 28 January 2017.
Included in the 52 week period ended 28 January 2017 is revenue of £1,519,000 and a loss before tax of £99,000
in respect of 2Squared.
Other Acquisitions
During the period, the Group has made several small acquisitions, including increasing its shareholding to
100% in three subsidiaries which were previously non-wholly owned. These transactions were not material.
Full Year Impact of Acquisitions
Had the acquisitions of the entities listed above been effected at 31 January 2016, the revenue and profit before
tax of the Group for the 52 week period to 28 January 2017 would have been £2,634,888,000 and £236,454,000
respectively.
Acquisition Costs
Acquisition related costs amounting to £1,684,000 (Sports Unlimited Retail BV: £139,000; JD Sports Fashion SDN
BHD: £68,000 and SportIberica Sociedade de Artigos de Desporto S.A: £34,000, Next Athleisure Pty Limited:
£307,000, Go Outdoors Limited: £1,086,000, Aspecto Holdings Limited: £10,000,
Infinities Retail
Group Limited: £10,000, Clothingsites.co.uk: £10,000 and 2Squared: £20,000) have been excluded from the
consideration transferred and have been recognised as an expense in the year, within administrative expenses
in the Consolidated Income Statement.
Prior Period Acquisitions
During the prior period, the Group increased its shareholding in three non-wholly owned subsidiaries.
These transaction were not material.
Annual Report & Accounts 2017Notes to the Consolidated Financial Statements (continued) 12. Intangible Assets
Cost or valuation
At 31 January 2015
Additions
Disposals
Exchange differences
At 30 January 2016
Additions
Acquisitions
Disposals
Exchange differences
At 28 January 2017
Amortisation and impairment
At 31 January 2015
Charge for the period
Impairments
At 30 January 2016
Charge for the period
Impairments
Disposals
At 28 January 2017
Net book value
At 28 January 2017
At 30 January 2016
At 31 January 2015
Goodwill
£000
Brand licences
£000
Brand names
£000
Fascia name
£000
Software
development
£000
86,139
11,779
15,343
24,926
-
-
(2,195)
83,944
-
46,869
-
(186)
130,627
29,713
-
6,738
36,451
-
959
-
37,410
93,217
47,493
56,426
-
-
-
11,779
-
-
-
-
11,779
7,342
750
-
8,092
750
-
-
8,842
2,937
3,687
4,437
-
-
-
15,343
-
7,653
(2,400)
-
20,596
7,821
3,984
-
11,805
1,719
-
(2,400)
11,124
9,472
3,538
7,522
-
-
(493)
24,433
-
73,360
-
152
97,945
2,307
1,000
3,862
7,169
2,171
5,460
-
14,800
83,145
17,264
22,619
11,732
4,401
(9,273)
-
6,860
3,843
-
(3)
-
10,700
1,661
3,570
-
5,231
3,340
-
(2)
8,569
2,131
1,629
10,071
Total
£000
149,919
4,401
(9,273)
(2,688)
142,359
3,843
127,882
(2,403)
(34)
271,647
48,844
9,304
10,600
68,748
7,980
6,419
(2,402)
80,745
190,902
73,611
101,075
Impairment
The impairment in the current period relates to the impairment of the ActivInstinct, Aspecto and Infinities fascia
names and the impairment of the goodwill arising in the current year on the acquisition of 2Squared.
Following a weaker than anticipated performance as a result of increased competition in the marketplace and
adverse currency movements, the decision was made to transfer the ActivInstinct website and trade into the
parent company, JD Sports Fashion Plc, and exit the short term store lease during the financial year ending 28
January 2017. The ActivInstinct online fascia name was being amortised over a three year period until the decision
to impair the remaining written down value of £2,635,000.
The impairment in the previous period related to the impairment of the goodwill arising in prior years on
the acquisition of ActivInstinct Limited, a partial impairment of the Blacks fascia name and the impairment
of several other goodwill and fascia name balances which were not significant.
125125
Financial StatementsNotes to the Consolidated Financial Statements (continued)Financial Statements 12. Intangible Assets (continued)
Intangibles Assets with Definite Lives
Brand Licences
Brand licences are stated at cost less accumulated amortisation and impairment losses. Amortisation of brand
licences is charged to the Consolidated Income Statement within cost of sales over the term to the licence
expiry on a straight line basis.
Brand licences are tested annually for impairment by comparing the recoverable amount to their carrying
value. Impairment losses are recognised in the Consolidated Income Statement.
The recoverable amount of brand licences is 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
relevant cash-generating unit until the licence expiry date and the choice of a suitable discount rate in order
to calculate the present value.
The Group’s brand licences and the key assumptions used in the value-in-use calculations, is as follows:
Segment
Terms
Fila
Sports Fashion
Sergio
Sports Fashion
10 year licence from
January 2011 for exclusive
use of the brand in the UK
and Republic of Ireland
Sub-licence to use the
brand in the UK
Basic information
Impairment model assumptions used
Net Book
Value 2017
Net Book
Value 2016
Short term
growth
rate (1)
Long term
growth
rate (2)
£000
2,937
£000
3,687
%
2.0%
%
2.0%
Cost
£000
7,500
Pre Tax
Discount rate
(3) 2017
Pre Tax
Discount rate
(3) 2016
%
11.3%
%
12.9%
Margin rate
Gross margins over the remaining
licence period are assumed to be
consistent with approved budget levels
for the period ending January 18
4,279
-
-
N/A
N/A
The licence was fully written down in
the period ended January 2015
N/A - fully
written down
N/A - fully
written down
11,779
2,937
3,687
(1) The short term growth rate is the Board approved compound annual growth rate in sales for the first two year
period following the January 2018 financial year currently underway
(2) The long term growth rate is the rate used thereafter until the end of the licence period
(3) The discount rate applied is pre-tax and reflects current market assessments of the time value of money
and risks specific to the assets, for which future cash flow estimates have not been adjusted. This discount
rate is considered to be equivalent to the rate a market participant would use
Annual Report & Accounts 2017Notes to the Consolidated Financial Statements (continued) 12. Intangible Assets (continued)
Brand Names
Brand names acquired as part of a business combination are stated at fair value as at the acquisition date
less accumulated amortisation and impairment losses. Brand names separately acquired are stated at cost less
accumulated amortisation and impairment losses. The useful economic life of each purchased brand name is
considered to be finite.
Brand names are all amortised over a period of 10 years and the amortisation charge is included within
administrative expenses in the Consolidated Income Statement. Brand names are tested annually for impairment
by comparing the recoverable amount to their carrying value.
The recoverable amount of brand names is determined based on a ‘royalty relief’ method of valuation.
This is based on an estimation of future sales and the choice of a suitable royalty and discount rate in order
to calculate the present value, when this method is deemed the most appropriate. This method involves
calculating a net present value for each brand by discounting the projected future royalties expected over
the remaining useful life of each brand. The future royalties are estimated by applying a suitable royalty
rate to the sales forecast. Alternatively the carrying value of the brand names has been allocated to a cash-
generating unit, along with the relevant goodwill and fascia names, and tested in the value-in-use calculation
performed for that cash-generating unit (see below). Impairment losses are recognised in the Consolidated
Income Statement.
The Group’s brand names and the key assumptions used in ‘royalty relief’ method of valuation, is as follows:
Segment
Date of
acquisition
Cost
£000
Royalty relief model used to test the following brands:
Duffer of St George
Sports Fashion
24 November 2009
Hi-Gear
North Ridge
Freedom Trail
Outdoor
Outdoor
Outdoor
27 November 2016
27 November 2016
27 November 2016
Brands included within the intangible asset models (as below):
Nanny State
Peter Storm
Eurohike
Brands with nil net book value at period end:
Kooga
Sonneti
Chilli Pepper
Kukri
Fenchurch
Peter Werth
Henleys
One True Saxon
Fly 53
Sports Fashion
4 August 2010
Outdoor
Outdoor
9 January 2012
9 January 2012
Sports Fashion
Sports Fashion
Sports Fashion
3 July 2009
26 April 2010
18 June 2010
Sports Fashion
7 February 2011
Sports Fashion
Sports Fashion
Sports Fashion
17 March 2011
26 May 2011
4 May 2012
Sports Fashion
13 September 2012
Sports Fashion
2 February 2013
2,071
6,050
822
781
350
2,250
750
452
1,520
190
720
1,100
400
2,632
50
458
Basic information
Impairment model assumptions used
Net Book
Value 2017
Net Book
Value 2016
Short term
growth rate (1)
Long term
growth rate (2)
Pre Tax Discount
rate (3) 2017
Pre Tax Discount
rate (3) 2016
%
2.0%
3.0%
3.0%
3.0%
%
2.0%
3.0%
3.0%
3.0%
%
%
11.3%
16.4%
16.4%
16.4%
12.9%
-
-
-
£000
£000
455
5,945
807
767
-
1,135
363
-
-
-
-
-
-
-
-
-
684
-
-
-
160
1,359
438
-
684
-
-
-
213
-
-
-
20,596
9,472
3,538
(1) The short term growth rate is the Board approved annual growth rate in sales for the first two year period
following the January 2018 financial year currently underway
(2) The long term growth rate is the rate used thereafter until the end of the useful life remaining
(3) The discount rate applied is pre-tax and reflects current market assessments of the time value of money
and risks specific to the assets, for which future cash flow estimates have not been adjusted. This discount
rate is considered to be equivalent to the rate a market participant would use
127127
Financial StatementsNotes to the Consolidated Financial Statements (continued)Financial Statements
12. Intangible Assets (continued)
Software Development
Software developments costs (including website development costs) are capitalised as Intangible Assets if the
technical and commercial feasibility of the project has been demonstrated, the future economic benefits are
probable, the Group has an intention and ability to complete and use or sell the software and the costs can be
measured reliably. Costs that do not meet these criteria are expensed as incurred. Software development
costs are stated at historic cost, less accumulated amortisation.
Software development costs are all amortised over a period of two to seven years and the amortisation charge
is included within administrative expenses in the Consolidated Income Statement.
Intangibles Assets with Indefinite Lives
Fascia Name
Separately identifiable fascia names acquired are stated at fair value as at the acquisition date less accumulated
impairment losses. The initial fair value is determined by using a ‘royalty relief’ method of valuation. This is based
on an estimation of future sales and the choice of a suitable royalty and discount rate in order to calculate
the present value, when this method is deemed the most appropriate. This method involves calculating a net
present value for each fascia name by discounting the projected future royalties expected using an indefinite
useful economic life for each fascia. The future royalties are estimated by applying a suitable royalty rate to the
sales forecast.
Store fascia names are not being amortised as management currently consider these assets to have indefinite
useful economic life. Online fascia names are considered to have a finite useful economic life due to increased
competition in the marketplace as a result of reduced barriers to entry. The online fascia names are amortised over
a useful economic life of three years.
All fascia names are subject to an impairment review on an annual basis or more frequently if there is an indicator
that the fascia name is impaired. The recoverable amount of these assets is 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. Impairment losses are recognised in the Consolidated Income Statement.
As the remaining Champion stores are being converted to the JD fascia it was determined that this now
indicates that the Champion fascia name has a finite useful life and should be amortised in line with the conversion
programme. The change in the useful life assessment from indefinite to finite in the previous period was accounted
for as a change in the accounting estimate in accordance with IAS 8. The fascia name had been fully amortised in
the period ended 30 January 2016.
Factors considered by the Board in determining that the useful life of the fascia names are indefinite for all
store fascia names (with the exception of Champion):
• The strength of the respective fascia names in the relevant sector and geographic region where the fascia is
located
• The history of the fascia names and that of similar assets in the relevant retail sectors
• The commitment of the Group to continue to operate these stores separately for the foreseeable future,
including the ongoing investment in new stores and refurbishments
Annual Report & Accounts 2017Notes to the Consolidated Financial Statements (continued) 12. Intangible Assets (continued)
Goodwill
Goodwill represents amounts arising on acquisition of subsidiaries.
Method 1: For acquisitions on or after 31 January 2010, the Group measures goodwill at the acquisition date as:
• the fair value of the consideration transferred; plus
• the recognised amount of any non-controlling interests in the acquiree; plus
• if the business combination is achieved in stages, the fair value of the existing equity interest
in the acquiree; less
• the net recognised amount of the identifiable assets acquired and liabilities assumed.
When the excess is negative, negative goodwill is recognised immediately in the Consolidated Income Statement.
On disposal of a subsidiary, the attributable amount of goodwill is included in the determination of the profit
/ loss on disposal.
Method 2: In respect of business acquisitions that occurred from 1 February 2004 to 30 January 2010, 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 was negative (negative goodwill), it was
recognised immediately in the Consolidated Income Statement as an exceptional item. Transaction costs, other
than those associated with the issue of debt or equity securities, that the Group incurred in connection with
business combinations were capitalised as part of the cost of the acquisition.
Method 3: In respect of acquisitions prior to 1 February 2004, goodwill is included on the basis of its deemed
cost, which represents the amount recorded under previous GAAP. The classification and accounting treatment
of business combinations that occurred prior to 1 February 2004 has not been reconsidered in preparing the
Group’s opening adopted IFRS balance sheet at 1 February 2004.
Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to groups of
cash-generating units and is tested annually for impairment and whenever there is an indication that the goodwill
may be impaired. The cash-generating units used are individual stores and the groups of cash-generating units
are either the store portfolios or individual businesses acquired. The recoverable amount is compared to the
carrying amount of the cash-generating units including goodwill.
The recoverable amount of a cash-generating unit is determined based on value-in-use calculations. The carrying
amount of goodwill and fascia name by cash-generating units, along with the key assumptions used in the
value-in-use calculation is set out on the following pages:
129129
Financial StatementsNotes to the Consolidated Financial Statements (continued)Financial Statements 12. Intangible Assets (continued)
Basic financial information
Impairment model assumptions used
Segment
First Sport
store portfolio
Sports
Fashion
Champion
store portfolio
Sports
Fashion
Goodwill
2017
£000
14,976
Fascia
name
2017
£000
Total
intangible
2017
Goodwill
2016
£000
£000
Fascia
name
2016
£000
£000
Total
intangible
2016
Short term
growth
rate (1)
Long term
growth
rate (2) Margin rate
-
14,976
14,976
-
14,976
%
1.0%
%
1.0% Gross margins are assumed to
be broadly consistent with recent
historic and approved budget levels
Pre Tax
Discount
rate (3)
2017
%
7.7%
Pre Tax
Discount
rate (3)
2016
%
9.7%
10,203
-
10,203
9,757
-
9,757
2.0%
2.0% Gross margins are assumed to
8.9%
10.9%
be broadly consistent with recent
historic and approved budget levels
Sports
Fashion
Sports
Fashion
5,727
3,797
9,524
5,528
3,644
9,172
2.0%
2.0% Gross margins are assumed to
12.2%
13.8%
be broadly consistent with recent
historic and approved budget levels
-
-
-
-
3,524
3,524
-
- ActivInstinct has been fully im-
-
15.9%
paired during the financial period
ended 28 January 2017
Outdoor
-
5,000
5,000
-
5,000
5,000
3.0%
3.0% Gross margins are assumed to
13.2%
15.3%
Outdoor
3,280
2,700
5,980
3,280
2,700
5,980
3.3%
Sports
Fashion
7,363
843
8,206
7,363
843
8,206
3.0%
Next
Athleisure Pty
Limited
Sports
Fashion
-
7,632
7,632
Go Outdoors
Outdoor
44,434
59,076
103,510
-
-
-
-
-
-
2.0%
3.0%
improve by 2.0% in the short term
to reflect increase proportion of
own brand sales budget and
better purchasing
2.5% Gross margins are assumed to
improve by 2.0% in the short
term to reflect focused strategy
regarding stock and merchandising
1.0% Gross margins are assumed to
improve by 1.5% in the short
term to reflect implementation
of enhanced group terms and
focused strategy regarding
stock and merchandising
2.0% Acquired during the financial
period ended 28 January 2017
3.0% Acquired during the financial
period ended 28 January 2017
13.4%
15.4%
10.8%
13.5%
11.7%
15.2%
-
-
Sprinter store
portfolio
ActivInstinct
online
Blacks/Millets
store portfolio
(4)
Tiso store
portfolio
Mainline
Menswear
Limited
Other
Sports
Fashion
7,234
4,097
11,331
6,589
1,553
8,142 1.0% - 7.9% 1.0% - 2.0% A range of gross margin
7.7% - 12.6%
9.7% - 12.9%
assumptions, from broadly
consistent with approved budget
levels to improvements of up to
1% in the short term to reflect
implementation of enhanced
group terms and focused strategy
regarding stock and merchandising
93,217
83,145
176,362
47,493
17,264
64,757
(1) The short term growth rate is the Board approved compound annual growth rate for the four year period
following the January 2018 financial year currently underway
(2) The long term growth rate is the rate used thereafter, which is an estimate of the growth based on past
experience within the Group taking account of economic growth forecast for the relevant industries
(3) The discount rate applied is pre-tax and reflects the current market assessments of the time value of money
and any specific risk premiums relevant to the individual cash-generating unit. These discount rates are
considered to be equivalent to the rates a market participant would use
(4) The impairment model prepared for Blacks and Millets, in addition to covering the fascia names, has also been
used to support the net book value of the Peter Storm and Eurohike brand names, which are exclusively sold
through the Blacks and Millets store portfolio
Annual Report & Accounts 2017Notes to the Consolidated Financial Statements (continued) 12. Intangible Assets (continued)
The cash flow projections used in the value-in-use calculations are all 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.
Sensitivity Analysis
A sensitivity analysis has been performed on the base case assumptions of margin growth used for assessing the
goodwill and other intangibles.
With regards to the assessment of value-in-use of all cash-generating units, with the exceptions of those listed
below, the Board believe that there are no reasonably possible changes in any of the key assumptions, which
would cause the carrying value of the unit to exceed its recoverable amount.
For the Blacks and Millets cash-generating unit, significant changes in key assumptions could cause the carrying
value of the unit to exceed its recoverable amount. However, the following sensitivities were performed and did
not result in impairment:
• Reduce the assumed store gross margin rate % growth in the first five year period of 2% to 1%, assuming the
business would be unable to reduce selling and distribution and administrative costs. All other assumptions
remain unchanged.
• The business not achieving the assumed online gross margin rate % growth in the first five year period of 2.3%,
assuming the business would be unable to reduce selling and distribution and administrative costs. All other
assumptions remain unchanged.
• Increasing the pre-tax discount rate by 1%. All other assumptions remain unchanged.
• Reducing the long term growth rate by 1%. All other assumptions remain unchanged.
For the Tiso cash-generating unit, significant changes in key assumptions could cause the carrying value of the
unit to exceed its recoverable amount. The following sensitivities were performed:
• Reduce the assumed store and online gross margin rate % growth in the first five year period of 2% to 1%,
assuming the business would be unable to reduce selling and distribution and administrative costs. Assuming
all other assumptions remain unchanged, this would lead to an impairment of £1,240,000.
• Increasing the pre-tax discount rate by 1% would lead to an impairment of £1,180,000. All other assumptions
remain unchanged.
• Reducing the long term growth rate by 1% would lead to an impairment of £650,000. All other assumptions
remain unchanged.
The Board has considered the possibility of each of these businesses achieving less revenue and gross profit %
than forecast. Whilst any reduction in revenue would be partially offset by a reduction in revenue related costs,
the Board would also take actions to mitigate the loss of gross profit by reducing other costs.
131131
Financial StatementsNotes to the Consolidated Financial Statements (continued)Financial Statements 13. Property, Plant and Equipment
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.
Legal fees and other costs associated with the acquisition of a leasehold interest are capitalised within
non-current other assets (see note 14). These costs are amortised over the life of the lease.
Rental income from operating leases where the Group is the lessor is recognised on a straight-line basis over
the term of the relevant lease.
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:
• Freehold land
• Warehouse
not depreciated
15 years on a straight line basis
• Long leasehold and freehold properties
2% per annum on a straight line basis
• Improvements to short leasehold properties
life of lease on a straight line basis
• Computer equipment
• Fixtures and fittings
• Motor vehicles
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
Annual Report & Accounts 2017Notes to the Consolidated Financial Statements (continued) 13. Property, Plant and Equipment (continued)
Freehold land,
long leasehold &
freehold properties
£000
Improvements to
short leasehold
properties
£000
Computer
equipment
£000
Fixtures
and fittings
£000
Cost
At 31 January 2015
Additions
Disposals
Reclassifications
Exchange differences
At 30 January 2016
Additions
Disposals
Reclassifications
Acquisitions
Exchange differences
At 28 January 2017
Depreciation and impairment
At 31 January 2015
Charge for the period
Disposals
Reclassifications
Impairments
Exchange differences
At 30 January 2016
Charge for the period
Disposals
Reclassifications
Impairments
Exchange differences
At 28 January 2017
Net book value
At 28 January 2017
At 30 January 2016
At 31 January 2015
12,674
4,511
-
-
-
17,185
1
(1)
-
-
-
17,185
491
189
-
-
-
-
680
189
-
-
-
-
19,050
5,481
(1,587)
-
(157)
22,787
5,306
(1,844)
-
17,790
151
44,190
11,146
1,966
(1,532)
-
74
(67)
11,587
4,604
(772)
4
56
34
38,643
4,827
(3,060)
6
(540)
39,876
7,142
(1,614)
46
4,033
234
49,717
22,322
8,594
(393)
11
35
(349)
30,220
9,967
(1,537)
11
168
132
869
15,513
38,961
16,316
16,505
12,183
28,677
11,200
7,904
10,756
9,656
16,321
220,463
57,911
(8,159)
(6)
(9,170)
261,039
64,679
(14,954)
(272)
15,478
3,891
329,861
109,176
26,482
(7,297)
(11)
1,273
(4,374)
125,249
36,260
(13,208)
(15)
60
1,740
150,086
179,775
135,790
111,287
Motor
vehicles
£000
315
35
(100)
-
(15)
235
101
(98)
-
84
-
322
76
79
(80)
-
-
(6)
69
90
(75)
-
-
-
84
238
166
239
Total
£000
291,145
72,765
(12,906)
-
(9,882)
341,122
77,229
(18,511)
(226)
37,385
4,276
441,275
143,211
37,310
(9,302)
-
1,382
(4,796)
167,805
51,110
(15,592)
-
284
1,906
205,513
235,762
173,317
147,934
Impairment charges of £284,000 (2016: £1,382,000) 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 with the loss based on the specific revenue streams and costs attributable to those
cash-generating units. Assets in impaired stores are written down to their recoverable amount which is calculated
as the greater of the fair value less costs to sell and value-in-use.
Included within the charge for the period is accelerated depreciation of £9,400,000 following a review of the
useful economic life of certain items of property, plant and equipment and assets capitalised.
133133
Financial StatementsNotes to the Consolidated Financial Statements (continued)Financial Statements 13. Property, Plant and Equipment (continued)
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. Contingent rentals payable based on store
revenues are accrued in line with the related sales and are charged as expenses in the period to which they
relate. The value of any lease incentives is recognised as deferred income and credited to the Consolidated
Income Statement against rentals payable on a straight line basis over the life of the lease.
The carrying amount of the Group’s property, plant and equipment includes an amount of £1,068,000 (2016:
£122,000) in respect of assets held under finance leases. The depreciation charge on those motor vehicles for the
current period was £610,000 (2016: £36,000).
Annual Report & Accounts 2017Notes to the Consolidated Financial Statements (continued) 14. Non-current Other Assets
Key Money
Monies paid in certain countries to give access to retail locations are capitalised within non-current assets.
Key money is stated at historic cost less impairment losses. These assets are not depreciated as past
experience has shown that the key money is fully recoverable on disposal of a retail location and is deemed
to have an indefinite useful economic life 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.
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.
Legal Fees
Legal fees and other costs associated with the acquisition of a leasehold interest are capitalised within
non-current other assets and amortised over the life of the lease.
Lease Premia
Money paid in certain countries specifically to landlords or tenants as an incentive to exit an existing lease
commonly referred to as compensation for early termination, to enable acquisition of that lease. These
payments are capitalised within other non-current assets and amortised over the life of the lease.
Key Money
£000
Deposits
£000
Legal Fees
£000
Lease Premia
£000
Cost
At 31 January 2015
Additions
Disposals
Reclassifications
Exchange differences
At 30 January 2016
Additions
Disposals
On acquisition
Reclassifications
Exchange differences
At 28 January 2017
Depreciation and Impairment
At 31 January 2015
Charge for period
Disposals
Reclassifications
Impairments
Exchange differences
At 30 January 2016
Charge for period
Disposals
Impairments
Exchange differences
At 28 January 2017
Net book value
At 28 January 2017
At 30 January 2016
At 31 January 2015
Total
£000
39,014
6,343
(1,192)
-
(2,535)
41,630
6,886
(842)
293
226
958
49,151
6,612
2,164
(263)
-
45
(119)
8,439
3,280
(445)
(277)
51
12,716
1,210
(422)
31
(43)
13,492
1,671
(545)
43
-
13
14,674
5,693
1,243
(263)
(185)
-
(13)
6,475
2,346
(445)
-
3
8,655
264
(525)
-
(380)
8,014
215
-
-
-
116
8,345
99
921
-
185
-
(46)
1,159
934
-
-
26
13,791
1,105
(23)
-
(1,531)
13,342
1,633
(112)
-
226
526
15,615
3,852
3,764
(222)
(31)
(581)
6,782
3,367
(185)
250
-
303
10,517
758
62
-
-
-
-
-
62
-
-
-
-
62
-
-
-
45
(60)
743
-
-
(277)
22
488
15,127
12,599
13,033
8,379
2,119
11,048
10,455
6,720
3,790
6,295
7,017
7,023
6,226
6,855
8,556
38,103
33,191
32,402
135135
Financial StatementsNotes to the Consolidated Financial Statements (continued)Financial Statements
15. 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.
Finished goods and goods for resale
2017
£000
348,007
2016
£000
238,324
The cost of inventories recognised as expenses and included in cost of sales for the 52 weeks ended 28 January
2017 was £1,215,053,000 (2016: £937,431,000).
The Group has £25,611,000 (2016: £28,430,000) of stock provisions at the end of the period.
Cost of inventories includes a net charge of £4,500,000 (2016: £7,800,000) in relation to net provisions recognised
against inventories.
16. Trade and Other 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.
Current assets
Trade receivables
Other receivables
Prepayments and accrued income
The ageing of trade receivables is detailed below:
2017
£000
22,677
50,398
45,527
118,602
Not past due
Past due 0 - 30 days
Past due 30 - 60 days
Past 60 days
2017
Provision
£000
(16)
(267)
(182)
(650)
(1,115)
Gross
£000
15,727
4,835
2,104
1,126
23,792
Net
£000
15,711
4,568
1,922
476
22,677
2016
Provision
£000
(3)
(31)
(175)
(676)
(885)
Gross
£000
8,447
3,776
1,477
1,777
15,477
2016
£000
14,592
11,297
30,486
56,375
Net
£000
8,444
3,745
1,302
1,101
14,592
Annual Report & Accounts 2017Notes to the Consolidated Financial Statements (continued)
16. Trade and Other Receivables (continued)
Analysis of gross trade receivables is shown below:
Not past due or impaired
Past due but not impaired
Impaired
The ageing of the impaired trade receivables is detailed below:
Not past due
Past due 0 - 30 days
Past due 30 - 60 days
Past 60 days
2017
£000
15,711
6,966
1,115
23,792
2017
£000
16
267
182
650
1,115
2016
£000
8,444
6,148
885
15,477
2016
£000
3
31
175
676
885
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 wide 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 31 January 2015
Created
Released
Utilised
Exchange differences
At 30 January 2016
Created
Released
Utilised
Exchange differences
At 28 January 2017
The other classes within trade and other receivables do not contain impaired assets
£000
1,109
437
(7)
(642)
(12)
885
281
(43)
(11)
3
1,115
137137
Financial StatementsNotes to the Consolidated Financial Statements (continued)Financial Statements 17. 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.
Bank balances and cash floats
18. Interest-bearing Loans and Borrowings
2017
£000
247,560
2016
£000
215,996
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.
Current liabilities
Finance lease liabilities
Bank loans and overdrafts
Other loans
Non-current liabilities
Finance lease liabilities
Bank loans
Other loans
2017
£000
503
30,565
363
31,431
461
1,776
292
2,529
2016
£000
44
6,191
66
6,301
64
-
210
274
The following provides information about the contractual terms of the Group’s interest-bearing loans and
borrowings. For more information about the Group’s exposure to interest rate risk, see note 19.
Bank Facilities
As at 28 January 2017, the Group has a syndicated committed £215,000,000 bank facility which expires on 11
October 2019.
Under this facility, a maximum of 10 drawdowns can 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 1.10%
(2016: 1.10%). The arrangement fee payable on the amended facility is 0.5% on £60,000,000 of the commitment
and 0.25% on £155,000,000 of the commitment. The commitment fee on the undrawn element of the facility is
35% of the applicable margin rate.
This facility encompasses cross guarantees between the Company, RD Scott Limited, Topgrade Sportswear
Limited, Blacks Outdoor Retail Limited, Tessuti Limited and Focus International Limited.
At 28 January 2017, £nil was drawn down on this facility (2016: £nil).
Annual Report & Accounts 2017Notes to the Consolidated Financial Statements (continued) 18. Interest-bearing Loans and Borrowings (continued)
Bank Loans and Overdrafts
The following Group companies have overdraft facilities which are repayable on demand:
• ActivInstinct Limited £300,000 (2016: £300,000)
• Champion Sports Ireland €nil (2016: €3,000,000)
• Cloggs Online Limited £500,000 (2016: £500,000)
• Go Outdoors Limited £5,000,000 (acquired in the current period)
• Kukri Sports Limited and Kukri GB Limited £1,000,000 (2016: £1,000,000)
• Next Athleisure Pty Limited $12,000,000 (acquired in the current period)
• Source Lab Limited £350,000 (2016: £350,000)
• Spodis SA €5,000,000 (2016: €5,000,000)
• Sportibérica Sociedade de Artigos de Desporto, S.A. €2,157,500 (acquired in the current period)
• Sprinter Megacentros Del Deporte SLU €7,100,000 (2016: €6,600,000)
• Tiso Group £5,000,000 (2016: £5,030,000)
As at 28 January 2017, these overdraft facilities were drawn down by £13,225,000 (2016: £6,136,000).
The maturity of the bank loans and overdrafts is as follows:
Within one year
Between one and five years
2017
£000
30,565
1,776
32,341
2016
£000
6,191
-
6,191
Other Loans
The acquisition of Tessuti Group Limited included a freehold property with a mortgage balance remaining of
£508,000 at the time of acquisition. The loan was repayable over 10 years and attracted interest at 2.99% over
base. The mortgage was repaid during the financial period ended 28 January 2017.
The acquisition of Go Outdoors Topco Limited included term loans with balances remaining of £731,000 at the
time of acquisition. The term loans are repayable over 36 months and attract interest at 4.9% - 6.2%. As at 28
January 2017, 13 to 21 months are remaining.
The maturity of the other loans is as follows:
Within one year
Between one and five years
Finance Leases
As at 28 January 2017, the Group’s liabilities under finance leases are analysed as follows:
2017
£000
363
292
655
2016
£000
66
210
276
Amounts payable under finance leases:
Within one year
Later than one year and not later than five years
Minimum lease payments
Present value of
minimum lease payments
2017
£000
539
479
1,018
2016
£000
48
72
120
2017
£000
503
461
964
2016
£000
44
64
108
The fair value of the Group’s lease obligations approximate to their present value. The Group’s obligations under
finance leases are secured by the lessors’ rights over the leased assets.
139139
Financial StatementsNotes to the Consolidated Financial Statements (continued)Financial Statements 19. 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.
Financial Assets
The Group’s financial assets are all categorised as loans and receivables with the exception of derivative assets.
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’ and ‘Cash and cash
equivalents’ 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 and EURIBOR.
The currency profile of cash and cash equivalents is shown below:
Bank balances and cash floats
Sterling
Euros
US Dollars
Australian Dollars
New Zealand Dollars
Swedish Krona
Danish Krone
Other
2017
£000
247,560
159,094
75,619
5,084
4,227
196
280
1,292
1,768
247,560
2016
£000
215,996
136,459
67,245
7,981
611
588
792
791
1,529
215,996
Financial Liabilities
The Group’s financial liabilities are all categorised as other financial liabilities. Other financial liabilities, with the
exception of foreign exchange forward contracts and put option 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
Australian Dollars
New Zealand Dollars
Other
2017
£000
33,960
25,741
718
7,073
9
419
33,960
2016
£000
6,575
6,500
53
4
18
-
6,575
Annual Report & Accounts 2017Notes to the Consolidated Financial Statements (continued) 19. Financial Instruments (continued)
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 28 January 2017.
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. 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 the inherent short term nature of both
the revolving credit facility and working capital facility. This position is reviewed regularly, along with the level
of facility required.
The Group has potential bank floating rate financial liabilities on the £215,000,000 committed bank facility, together
with overdraft facilities in subsidiary companies (see note 18). At 28 January 2017 £nil was drawn down from the
committed bank facility (2016: £nil). When drawdowns are made, the Group is exposed to cash flow interest risk
with interest paid at a rate of LIBOR plus a margin of 1.10% (2016: 1.10%).
As at 28 January 2017 the Group has liabilities of £964,000 (2016: £108,000), in respect of finance lease or similar
hire purchase contracts.
A change of 1.0% in the average interest rates during the year, applied to the Group’s floating interest rate loans and
borrowings as at the reporting date, would change profit before tax by £108,000 (2016: £610,000) and would
change equity by £108,000 (2016: £610,000). The calculation is based on any floating interest rate loans and
borrowings drawn down at the period end date. This includes the Group’s committed bank facility, Tiso Group
Limited’s overdraft, Next Athleisure Limited’s overdraft and Go Outdoors Limited’s bank loans. Calculations are
performed on the same basis as the prior year and assume that all other variables remain unchanged.
Foreign Currency Risk
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. Foreign currency differences are recognised in Other Comprehensive Income and
are presented in the foreign currency translation reserve.
141141
Financial StatementsNotes to the Consolidated Financial Statements (continued)Financial Statements 19. Financial Instruments (continued)
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.
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.
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 28 January 2017, options have been entered into to protect approximately 92% of the US Dollar requirement
for the period to January 2018. The balance of the US Dollar requirement for the period will be satisfied at
spot rates.
As at 28 January 2017, the fair value of these instruments was a liability of £3,303,000 (2016: liability of
£4,344,000) and these are all classified as due within one year. A loss of £4,405,000 (2016: loss of £4,344,000)
has been recognised in cost of sales within the Consolidated Income Statement for the change in fair value of
these instruments.
We have considered the credit risk of the Group’s and counterparty’s credit risk and this is not expected to have
a material effect on the valuation of these options.
A 10.0% strengthening of sterling relative to the following currencies as at the reporting date would have reduced
profit before tax and equity as follows:
Impact of 10% strengthening of sterling
Euros
US Dollars
Australian Dollars
Other
Profit before tax
Equity
2017
£000
4,862
400
262
124
5,648
2016
£000
4,147
615
28
82
4,872
2017
£000
13,069
400
718
31
14,218
2016
£000
10,937
615
55
(55)
11,552
Annual Report & Accounts 2017Notes to the Consolidated Financial Statements (continued) 19. Financial Instruments (continued)
A 10.0% weakening of sterling relative to the following currencies as at the reporting date would have increased
profit before tax and equity as follows:
Impact of 10% weakening of sterling
Euros
US Dollars
Australian Dollars
Other
Profit before tax
Equity
2017
£000
5,942
488
320
153
6,903
2016
£000
5,068
752
35
94
5,949
2017
£000
16,327
488
878
(40)
17,653
2016
£000
13,534
752
67
(73)
14,280
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 16). 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
£118,602,000 (2016: £56,375,000) and cash and cash equivalents of £247,560,000 (2016: £215,996,000).
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 18.
As at 28 January 2017, there are committed facilities with a maturity profile as follows:
Expiring in more than two years but no more than three years
Expiring in more than three years but no more than four years
The commitment fee on these facilities is 0.35% (2016: 0.35%).
2017
£000
215,000
-
215,000
2016
£000
-
215,000
215,000
143143
Financial StatementsNotes to the Consolidated Financial Statements (continued)Financial Statements 19. Financial Instruments (continued)
Fair Values
The fair values together with the carrying amounts shown in the Statement of Financial Position as at 28 January
2017 are as follows:
Trade and other receivables
Cash and cash equivalents
Interest-bearing loans and borrowings - current
Interest-bearing loans and borrowings - non-current
Trade and other payables - current
Trade and other payables - non-current
Unrecognised gains
The comparatives at 30 January 2016 are as follows:
Trade and other receivables
Cash and cash equivalents
Interest-bearing loans and borrowings - current
Interest-bearing loans and borrowings - non-current
Trade and other payables - current
Trade and other payables - non-current
Unrecognised gains
Note
16
17
18
18
Note
16
17
18
18
Carrying amount
2017
£000
73,075
247,560
(31,431)
(2,529)
(399,345)
(7,455)
(120,125)
Carrying amount
2016
£000
25,889
215,996
(6,301)
(274)
(275,910)
(4,890)
(45,490)
Fair value
2017
£000
73,075
247,560
(31,431)
(1,995)
(399,345)
(6,368)
(118,504)
1,621
Fair value
2016
£000
25,889
215,996
(6,301)
(189)
(275,910)
(4,282)
(44,797)
693
In the opinion of the Board, the fair value of the Group’s current financial assets and liabilities as at 28 January 2017
and 30 January 2016 are not considered to be materially different to that of the book value. On this basis, the fair
value hierarchy reflects the carrying values. In respect of the Group’s non-current financial assets and liabilities as at
28 January 2017 and 30 January 2016, the fair value has been calculated using a pre-tax discount rate of 10.7% (2016:
12.3%) which reflects the current market assessments of the time value of money and the specific risks applicable to
the liability.
Estimation of Fair Values
For trade and other receivables/payables, the notional amount is deemed to reflect the fair value.
Annual Report & Accounts 2017Notes to the Consolidated Financial Statements (continued) 19. Financial Instruments (continued)
Fair Value Hierarchy
As at 28 January 2017, the Group held the following financial instruments carried at fair value on the Statement
of Financial Position:
• Foreign exchange forward contracts - non-hedged
The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by
valuation technique:
Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities
Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are
observable, either directly or indirectly
Level 3: techniques which use inputs that have a significant effect on the recorded fair value that are not based
on observable market data
At 28 January 2017
Loans and receivables
Deposits
Trade and other receivables
Cash and cash equivalents
Financial assets at fair value through profit or loss
Foreign exchange forward contracts – non-hedged
Financial liabilities at fair value through profit or loss
Foreign exchange forward contracts – non-hedged
Other financial liabilities
Interest-bearing loans and borrowings - current
Interest-bearing loans and borrowings - non-current
Trade and other payables - current
Trade and other payables - non-current
Put options held by non-controlling interests
Carrying amount
£000
Level 1
£000
10,455
71,146
247,560
1,929
(5,232)
(31,431)
(2,529)
(394,113)
(4,011)
(3,444)
-
-
-
-
-
-
-
-
-
-
Level 2
£000
10,455
71,146
247,560
1,929
(5,232)
(31,431)
(2,529)
(394,113)
(4,011)
(3,444)
Level 3
£000
-
-
-
-
-
-
-
-
-
-
145145
Financial StatementsNotes to the Consolidated Financial Statements (continued)Financial Statements
20. Trade and Other Payables
Trade and Other Payables
Trade and other payables are non-interest-bearing and are stated at their cost. Volume related rebates or other
contributions from suppliers are recognised in the Consolidated Financial Statements when it is contractually
agreed with the supplier and can be reliably measured. All significant rebates and contributions are agreed with
suppliers retrospectively and after the end of the relevant supplier’s financial year.
Reverse Premia
Reverse premia represent monies received by the Group on assignment of property leases. Reverse premia are
amortised over the life of the remaining lease.
Current liabilities
Trade payables
Other payables and accrued expenses
Other tax and social security costs
Non-current liabilities
Other payables and accrued expenses
2017
£000
165,003
245,548
58,511
469,062
2016
£000
122,638
160,613
41,713
324,964
53,179
40,834
Put and Call Options
Put options held by non-controlling interests are accounted for using the present access method. The
Group recognises put options held by non-controlling interests in its subsidiary undertakings as a liability in
the Consolidated Statement of Financial Position at the present value of the estimated exercise price of
the put option. Upon initial recognition of put options a corresponding entry is made to other equity, and
for subsequent changes on remeasurement of the liability the corresponding entry is made to the
Income Statement.
Call options held by the Group are also accounted for using the present access method. The Group recognises
call options over non-controlling interests in its subsidiary undertakings as a liability in the Consolidated
Statement of Financial Position at the present value of the estimated exercise price of the put option. Upon
initial recognition and for subsequent changes on remeasurement of the liability of call options a corresponding
entry is made to the Income Statement.
The Group has a number of options to buy the remaining shares in partly-owned subsidiaries from the non-
controlling interest. The present value of these options has been estimated as at 28 January 2017 and is included
within non-current other payables and accrued expenses.
The present value of the estimated exercise price is calculated using the option price formula agreed on
acquisition. All existing option price formulas are based on a profit measure, which is estimated by applying
an approved growth assumption to the current budget profit for the January 2018 financial year, if appropriate
for the individual business the put or call option directly relates to. A discount rate is also applied to the option
price which is pre-tax and reflects the current market assessments of the time value of money and any specific
risk premiums relevant to the individual businesses involved. These discount rates are considered to be equivalent
to the rates a market participant would use.
Put and call options
At 30 January 2016
Increase/ (decrease) in the present value of the
existing option liability
At 28 January 2017
Put Options
Call Option
Source Lab
Limited
£000
Tessuti Group
Limited
£000
JD Germany
GmbH
£000
Tiso Group
Limited
£000
149
97
246
2,360
(2,360)
-
119
1,192
1,311
632
-
632
Total Put
Options
£000
3,260
(1,071)
2,189
Sportiberica
£000
Total Put and
Call Options
£000
-
1,255
1,255
3,260
184
3,444
Annual Report & Accounts 2017Notes to the Consolidated Financial Statements (continued)
20. Trade and Other Payables (continued)
Company
Source Lab
Limited
Tessuti Group
Limited
Cloggs
Online
Limited
JD Germany
GmbH
Tiso Group
Limited
Options in existence
Put and call option, whereby
JD Sports Fashion Plc may
acquire or be required to
acquire (in stages) the
remaining 15% of the issued
share capital of Source
Lab Limited.
Put and call option whereby JD
Sports Fashion Plc may acquire
or be required to acquire (in
stages) the remaining 40% of
the issued share capital
of Tessuti Group Limited.
The option was exercised
during the financial period
ended 28 January 2017.
The put option liability was
reduced by the consideration
paid to exercise the option.
The residual put option liability
was removed along with
the equity element with
the remainder being
recognised in the Consolidated
Income Statement.
Put and call options, whereby
JD Sports Fashion Plc may
acquire or be required to
acquire the remaining 6% of
the issued share capital of
Cloggs Online Limited.
Put option whereby JD Sports
Fashion Plc may be required
to acquire all or some of the
remaining 15% of the issued
share capital of JD Germany
GmbH, including earn
out shares.
First put and call option
whereby JD Sports Fashion Plc
may acquire or be required to
acquire 20% of the issued share
capital of Tiso Group Limited.
Second put and call option
whereby JD Sports Fashion Plc
may acquire or be required to
acquire 40% (or the remaining
20%) of the issued share capital
of Tiso Group Limited.
Recognised as a liability
At 28 January 2017
£000
246
At 30 January 2016
£000
149
-
2,360
Exercise periods
Exercisable by either party after the third anniversary
of the completion of the initial transaction, during the
30 day period commencing on the date on which the
statutory accounts of Source Lab Limited for the
relevant financial year have been approved by
the board of directors.
Exercisable by either party after the fifth anniversary
of the completion of the initial transaction, during the
30 day period commencing on the date on which the
statutory accounts of Tessuti Group Limited for the
relevant financial year have been approved by the
board of directors (exercise period).
Maximum price
The option price
shall not exceed
£12,450,000.
The option price
shall not exceed
£12,000,000.
Methodology
The option price is calculated
based on a multiple of the
audited profit before distributions,
interest, amortisation and
exceptional items but after
taxation for the relevant financial
year prior to the exercise date.
The option price is calculated
based on a multiple of the
audited consolidated profit
before distributions, interest,
amortisation and exceptional
items but after taxation for Tessuti
Group Limited (which includes its
subsidiary undertakings) for the
relevant financial year prior to the
exercise date.
The put option is exercisable between the period
starting on the date on which the statutory accounts for
the financial year ending in 2016 have been approved
by the board of directors of the Company until one
month after the date on which the statutory accounts
of the Company for the financial period ending in 2018
have been approved by the board of directors of the
Company. Two months after the put options cease to be
exercisable the call options become exercisable.
The put option is exercisable after a period of five years
from the completion date during the 30 days following
approval of the shareholders meeting of the audited
annual accounts of the Company for the relevant
financial year.
The option price is calculated
based on a multiple of the
average audited profit before
distributions, amortisation and
exceptional items but after
taxation for the relevant two
financial years prior to the
exercise date.
The put option
price shall
not exceed
£3,000,000 and
the call option
shall not exceed
£5,000,000.
The option price is calculated
based on a multiple of the
average earnings before tax for
the relevant two financial years
prior to the exercise date.
The put option
price shall
not exceed
€20,000,000.
First call option is exercisable 90 days beginning 30
days after the consolidated accounts of the Company
for the financial period ending 28 January 2017 are
signed. The first put option is exercisable 60 days
following the end of the first call option. The second
call option is exercisable 90 days beginning 30 days
after the consolidated accounts of the Company for the
financial period ending 3 February 2018 are signed. The
first put option is exercisable 60 days following the end
of the second call option.
The option price is calculated
based on a multiple of the
average operating profit for
the financial period ending 28
January 2017 and the prior year
for the first put and call option
and year ending 3 February 2018
and the prior year for the second
put and call option.
The option price
shall not exceed
£8,000,000 or
25p per share.
-
-
1,311
119
632
632
147147
Financial StatementsNotes to the Consolidated Financial Statements (continued)Financial Statements 20. Trade and Other Payables (continued)
Company
Sportibérica
Sociedade
de Artigos
de Desporto,
S.A
Options in existence
Call option whereby JD Sports
Fashion Plc may acquire 20%
of the issued share capital
of Sportiberica Sociedade de
Artigos de Desporto, S.A
Exercise periods
The call option is exercisable 3 months after
the approval by the Shareholders General
Meeting of the annual audited accounts of the
period ending 2 February 2019, 1 February
2020 or 30 January 2021.
Methodology
The option price is calculated
based on a multiple of earnings
before interest, tax, depreciation
and amortisation for the relevant
financial period plus a % of post
completion cash.
Recognised as a liability
At 28 January 2017
£000
1,255
At 30 January 2016
£000
-
Maximum price
The minimum option
price is €6,000,000;
€6,100,000 and
€6,200,000 for the
financial period ending
2 February 2019; 1
February 2020 and
30 January 2021
respectively.
The maximum option
price is €11,000,000;
€12,000,000 and
€13,000,000 for the
financial period ending
2 February 2019; 1
February 2020 and
30 January 2021
respectively
3,444
3,260
21. 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 and for stores where there is
a probable risk of the store returning to the Group under privity of contract, a provision is made to the extent
that the lease is deemed to be onerous.
Within the onerous contracts provision, management have provided against the minimum contractual cost for
the remaining term on non-cancellable sponsorship contracts. For contracts where there is probable risk that
the costs to fulfil the terms of the contract are higher than the income received, a provision is made to the
extent that the contract is deemed onerous.
The provisions are discounted where the effect is material. The pre-tax discount rate used is 10.7% (2016: 12.3%) which
reflects the current market assessments of the time value of money and the specific risks applicable to the liability.
Annual Report & Accounts 2017Notes to the Consolidated Financial Statements (continued) Total
£000
2,341
323
(91)
(921)
401
2,053
2016
£000
1,132
1,209
2,341
Net
2016
£000
(1,717)
225
2,531
(1,122)
(399)
(482)
21. Provisions (continued)
Balance at 30 January 2016
Provisions created during the period
Provisions released during the period
Provisions utilised during the period
Provisions acquired on acquisition
Balance at 28 January 2017
Provisions have been analysed between current and non-current as follows:
Current
Non-current (within five years)
Onerous property leases
£000
Onerous contracts
£000
2,341
-
(91)
(921)
401
1,730
-
323
-
-
-
323
2017
£000
1,015
1,038
2,053
22. Deferred Tax Assets and Liabilities
Recognised Deferred Tax Assets and Liabilities
Deferred tax assets and liabilities are attributable to the following:
Property, plant and equipment
Chargeable gains held over / rolled over
Fascia name
Other
Tax losses
Tax (assets) / liabilities
Assets
2017
£000
(2,279)
-
-
(3,560)
(1,892)
(7,731)
Assets
2016
£000
(1,717)
-
-
(1,122)
(399)
(3,238)
Liabilities
2017
£000
-
-
15,923
-
-
Liabilities
2016
£000
-
225
2,531
-
-
15,923
2,756
Net
2017
£000
(2,279)
-
15,923
(3,560)
(1,892)
8,192
Deferred tax assets on losses of £379,000 (2016: £391,000) within Focus Brands Limited (and its subsidiaries);
£4,136,000 (2016: £4,136,000) within Kooga Rugby Limited; £666,000 (2016: £666,000) within Blacks Outdoor
Retail Limited; £nil (2016: £723,000) within Champion Sports Ireland; £3,229,000 (2016: £3,114,000) within
Champion Retail Limited; £978,000 (2016: £1,000,000) within Tessuti Group Limited (and its subsidiaries);
£2,251,000 (2016: £2,251,000) within Ark Fashion Limited, £393,000 (2016: £523,000) within Kukri Sports
Limited (and its subsidiaries); £3,032,000 within Tiso Group Limited (and its subsidiaries) and £3,753,000 (2016:
N/A) within Clothingsites.co.uk Limited have not been recognised as there is uncertainty over the utilisation of
these losses. None of the losses are subject to expiration.
149149
Financial StatementsNotes to the Consolidated Financial Statements (continued)Financial Statements 22. Deferred Tax Assets and Liabilities (continued)
Movement in Deferred Tax During the Period
Balance at 31 January 2015
Recognised in income
Foreign exchange movements
Balance at 30 January 2016
Recognised on acquisition
Recognised in income
Foreign exchange movements
Balance at 28 January 2017
Property,
plant and equipment
£000
Chargeable gains
held over/
rolled over
£000
Fascia name
£000
(314)
(1,401)
(2)
(1,717)
(197)
(343)
(22)
(2,279)
237
(12)
-
225
-
(225)
-
-
3,130
(475)
(124)
2,531
14,308
(954)
38
15,923
Other
£000
(670)
(425)
(27)
(1,122)
(1,488)
(964)
14
(3,560)
Tax losses
£000
(579)
172
8
(399)
-
(1,493)
-
(1,892)
Total
£000
1,804
(2,141)
(145)
(482)
12,623
(3,979)
30
8,192
As at 28 January 2017, the Group has no recognised deferred income tax liability (2016: £nil) in respect of
taxes that would be payable on the unremitted earnings of certain overseas subsidiaries. As at 28 January
2017, the unrecognised gross temporary differences in respect of overseas subsidiaries is £51,684,000 (2016:
£32,088,000). 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.
The UK corporation tax rate has been 20% since 1 April 2015. The rate will reduce to 19% with effect from 1 April
2017 and to 17% with effect from 1 April 2020. This will reduce the group’s future current tax charge accordingly.
The deferred tax liability at 28 January 2017 has been calculated based on a rate of 17% as this is the prevailing rate
at which the group expects the deferred tax liability to reverse.
Annual Report & Accounts 2017Notes to the Consolidated Financial Statements (continued) 23. Capital and Reserves
Issued Ordinary Share Capital
An Ordinary Resolution was passed at the Annual General Meeting, effective 24 November 2016, resulting in a
share split whereby five Ordinary shares were issued for each Ordinary share. In accordance with IAS 33, the
number of shares outstanding before the event has been adjusted for the proportionate change as if the event
had occurred at the beginning of the earliest period presented.
The total number of authorised ordinary shares was 1,243,000,000 (2016: restated 1,243,000,000) with a par
value of 0.25p per share (2016: restated 0.25p 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.
It is the Board’s policy to maintain a strong capital base so as to maintain investor, creditor and market confidence
and to sustain future development of the business. The processes for managing the Group’s capital levels are
that the Board regularly monitors the net cash / debt in the business, the working capital requirements and
forecast cash flows. Based on this analysis, the Board determines the appropriate return to equity holders while
ensuring sufficient capital is retained in the business to meet its strategic objectives.
The Board consider the capital of the Group as the net cash / debt at the year end (see note 28) and the
Board review the gearing position of the Group which as at 28 January 2017 was less than zero (2016: less than
zero). There were no changes to the Group’s approach to capital management during the period.
Full disclosure on the rights attached to shares is provided in the Directors’ Report on page 77.
At 30 January 2016 and 28 January 2017
Number of
ordinary shares
thousands
973,233
Ordinary
share capital
£000
2,433
Treasury Reserve
The reserve for the Group’s treasury shares comprises the cost of the shares of a subsidiary, JD Sprinter Holdings
2010 SL, held by the Group. At 28 January 2017, the Group held 24.95% of the shares of JD Sprinter Holdings 2010
SL (2016: nil).
Foreign Currency Translation Reserve
The foreign currency translation reserve comprises all foreign currency differences arising from the translation of
the financial statements of foreign operations.
151151
Financial StatementsNotes to the Consolidated Financial Statements (continued)Financial Statements 24. Non-controlling Interests
The following disclosure provides summarised financial information for investments that have non-controlling
interests. Non-controlling interest is initially measured at the proportionate interest in identifiable net assets of
the acquiree.
The table below provides a list of the subsidiaries which include non-controlling interests at 28 January 2017 and
30 January 2016:
% of
non-controlling
interests and
non-controlling
voting rights at
28 January 2017
% of
non-controlling
interests and
non-controlling
voting rights at
30 January 2016
Net income/(loss)
attributable to
non-controlling
interests for 52
weeks ending
28 January 2017
£000
Net income/(loss)
attributable to
non-controlling
interests for 52
weeks ending
30 January 2016
£000
Non-controlling
interests at
28 January 2017
£000
Non-controlling
interests at
30 January 2016
£000
33.2%
20.0%
20.0%
15.0%
20.0%
6.0%
40.0%
0.0%
0.0%
0.0%
49.9%
20.0%
-
15.0%
-
6.0%
40.0%
13.3%
40.0%
22.0%
5,109
491
(558)
143
(18)
(101)
(127)
-
-
-
727
5,666
24,314
865
22
385
948
(262)
(1,544)
-
-
-
1,865
26,592
4,008
373
-
25
-
(93)
(265)
(1,266)
267
(297)
244
2,996
21,618
1,643
-
230
-
(160)
(1,417)
(2,509)
(1,272)
(841)
1,113
18,405
Country of
incorporation
Spain
UK
Portugal
Germany
Australia
UK
UK
UK
UK
UK
UK/ Malaysia
15% - 50%
15% - 50%
Name of subsidiary:
Sprinter Megacentros Del Deporte SLU (Sprinter)
Mainline Menswear Holdings Limited
Sportiberica
JD Sports Fashion Germany GmbH
JD Sports Fashion Holdings Aus Pty
Cloggs Online Limited
Tiso Group Limited
ActivInstinct Holdings Limited
Tessuti Group Limited
Ark Fashion Limited
Other
During the period, the Group has increased its shareholding in three non-wholly owned subsidiaries. The
consideration paid was negligible.
For newly acquired non-wholly owned subsidiaries, further details are provided in note 11.
The table below provides summarised financial information for significant non-controlling interests at 28 January
2017 and 30 January 2016:
Summarised statement of financial position
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Net assets
Sprinter
2017
£000
61,603
52,711
114,314
(63,926)
(3,248)
47,141
Sprinter
2016
£000
52,370
38,080
90,450
(40,647)
(1,755)
48,048
Annual Report & Accounts 2017Notes to the Consolidated Financial Statements (continued) 24. Non-controlling Interests (continued)
Summarised results of operations
Revenue
Profit for the period, net of tax
Summarised statement of cash flows
Net cash provided by operating activities
Net cash used in investing activities
Net cash used in financing activities
Cash and cash equivalents:
At the beginning of the period
At the end of the period
Sprinter
52 weeks to
28 January 2017
£000
198,413
9,627
Sprinter
52 weeks to
28 January 2017
£000
11,872
(11,983)
(60)
22,341
22,170
Sprinter
52 weeks to
30 January 2016
£000
141,590
7,888
Sprinter
52 weeks to
30 January 2016
£000
12,200
(12,707)
(1,613)
24,461
22,341
25. Dividends
After the reporting date the following dividends were proposed by the Directors. The dividends were not provided
for at the reporting date.
1.30p per ordinary share (2016 (restated): 1.24p)
Dividends on Issued Ordinary Share Capital
Final dividend of 1.24p (2016 (restated): 1.18p) per qualifying ordinary share paid in respect of prior period, but not recognised as a
liability in that period
Interim dividend of 0.25p (2016 (restated): 0.24p) per qualifying ordinary share paid in respect of current period
52 weeks to
28 January 2017
£000
12,652
52 weeks to
30 January 2016
£000
12,068
52 weeks to
28 January 2017
£000
52 weeks to
30 January 2016
£000
12,068
2,433
14,501
11,484
2,336
13,820
153153
Financial StatementsNotes to the Consolidated Financial Statements (continued)Financial Statements Annual Report & Accounts 2017
Notes to the Consolidated Financial Statements (continued)
26. Commitments
(i) Capital Commitments
As at 28 January 2017, the Group had entered into contracts to purchase property, plant and equipment
as follows:
Contracted
2017
£000
39,843
2016
£000
4,442
(ii) Operating Lease Commitments
The Group leases various retail outlets, offices, warehouses, plant and equipment under non-cancellable operating
lease agreements. The leases have varying terms, escalation clauses and renewal rights.
Undiscounted total future minimum rentals payable under non-cancellable operating leases are as follows:
Within one year
Later than one year and not later than five years
After five years
Land and
buildings
2017
£000
167,557
498,438
407,820
1,073,815
Plant and
equipment
2017
£000
2,089
2,049
-
4,138
Land and
buildings
2016
£000
106,219
312,653
219,975
638,847
Plant and
equipment
2016
£000
1,846
1,583
3
3,432
The future minimum rentals payable on land and buildings represent the base rents that are due on each property
over the non-cancellable lease term, being usually the earliest date at which the lease can be exited. 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 28 January 2017 are as follows:
Within one year
Later than one year and not later than five years
After five years
27. Pension Schemes
2017
£000
485
1,416
277
2,178
2016
£000
489
1,447
613
2,549
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.
The pension charge for the period represents contributions payable by the Group of £4,723,000 (2016:
£3,091,000) in respect of employees, and £32,000 (2016: £26,000) in respect of Directors. The amount owed to
the schemes at the period end was £765,000 (2016: £435,000).
Financial Statements
Notes to the Consolidated Financial Statements (continued)
28. Analysis of Net Cash
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.
Cash at bank and in hand
Overdrafts
Cash and cash equivalents
Interest-bearing loans and borrowings:
Bank loans
Finance lease liabilities
Other loans
At 30 January
2016
£000
On acquisition of
subsidiaries
£000
215,996
(6,137)
209,859
(54)
(108)
(276)
209,421
10,669
(6,125)
4,544
(21,920)
(1,004)
(654)
(19,034)
Cash flow
£000
19,099
(963)
18,136
2,858
148
275
21,417
Non-cash
movements
£000
At 28 January
2017
£000
1,796
-
1,796
-
-
-
247,560
(13,225)
234,335
(19,116)
(964)
(655)
1,796
213,600
29. Related Party Transactions and Balances
Transactions and balances with each category of related parties during the period are shown below. Transactions
were undertaken in the ordinary course of business on an arm’s length basis. Outstanding balances are unsecured
(unless otherwise stated) and will be settled in cash.
Transactions with Related Parties Who Are Not Members of the Group
Pentland Group Plc
Pentland Group Plc owns 57.5% (2016: 57.5%) of the issued ordinary share capital of JD Sports Fashion Plc. The
Group made purchases of inventory from Pentland Group Plc in the period and the Group also sold inventory to
Pentland Group Plc. The Group also paid royalty costs to Pentland Group Plc for the use of a brand.
During the period, the Group entered into the following transactions with Pentland Group Plc:
Sale of inventory
Purchase of inventory
Royalty costs
Income from
related parties
2017
£000
Expenditure with
related parties
2017
£000
Income from
related parties
2016
£000
Expenditure with
related parties
2016
£000
290
-
-
-
(29,552)
(1,754)
45
-
-
-
(21,251)
(785)
At the end of the period, the following balances were outstanding with Pentland Group Plc:
Trade receivables / (payables)
Amounts owed by
related parties
2017
£000
Amounts owed to
related parties
2017
£000
Amounts owed by
related parties
2016
£000
Amounts owed to
related parties
2016
£000
-
(1,607)
-
(570)
Other than the remuneration of Directors as shown in note 5 and in the Directors’ Remuneration Report on
page 92 there have been no other transactions with Directors in the year (2016: nil)
30. Subsequent Events
Memorandum of Understanding with Sonae - SGPS, SA
On 9 March 2017, JD Sports Fashion Plc, announced that it had agreed a Memorandum of Understanding (‘MoU’) with
Sonae - SGPS, SA (‘Sonae’) which sets out the basis for a potential combination of the JD Group’s existing businesses
in Spain and Portugal, JD Sprinter Holdings (‘JD Sprinter’), with the Sport Zone business of Sonae which is one of the
largest sports retailers in the region.
This MoU establishes the key parameters for the creation of an Iberian Sports Retail Group that, subject to contract
and subsequent clearance by the relevant Competition Authorities, will have as shareholders the JD Group, Sonae and
the family shareholders of JD Sprinter, with shareholdings of approximately 50%, 30% and 20%, respectively.
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Notes to the Consolidated Financial Statements (continued)
31. Subsidiary Undertakings
The following companies were the subsidiary undertakings of JD Sports Fashion Plc at 28 January 2017.
Name of
subsidiary
Kukri Australia Pty Limited*
JD Sports Fashion Holdings Aus Pty
JD Sports Fashion Aus Pty
Next Athleisure Pty Ltd
Trend Imports Pty Ltd
Le Coq Sportif Oceania Pty Ltd
JD Sports Fashion Belgium BVBA
Kukri Sports Canada Inc*
Place of
registration
Registered
Address
Nature of business
and operation
39 Charles Street, Norwood, SA 5067
Distributor of sports clothing and accessories
Level 3, 80 George Street, Sydney NSW 2000
Intermediate holding company
Level 3, 80 George Street, Sydney NSW 2000
Retailer of sports inspired footwear and apparel
Level 3, 80 George Street, Sydney NSW 2000
Retailer of sports inspired footwear and apparel
Level 3, 80 George Street, Sydney NSW 2000
Distributor of sports inspired footwear and apparel
Level 3, 80 George Street, Sydney NSW 2000
Retailer of sports inspired footwear and apparel
Retailer of sports inspired footwear and apparel
Distributor of sports clothing and accessories
Ownership
interest
Voting rights
interest
83.0%
80.0%
80.0%
80.0%
80.0%
56.0%
100.0%
75.0%
83.0%
80.0%
80.0%
80.0%
80.0%
56.0%
100.0%
75.0%
Shanghai Go Outdoors Limited
China
JD Sports Fashion Denmark APS
Denmark
Sourcing of products and management of supplier relationships
100.0%
100.0%
Retailer of sports inspired footwear and apparel
100.0%
100.0%
Wiegstraat 21, 2000 Antwerpen, Belgie
106-1533 Broadway St, Port Coquitlam,
British Columbia, V3c 6P3
Room A1412, 1 Building, No.5500 Yuanjiang Road,
Minhang, Shanghai, China
c/o Harbour House, Sundkrogsgade 21,
2100 Copenhagen,Denmark
JD Sports Fashion (France) SAS
Spodis SA*
France
France
96 R Du Pont Rompu, 59200 Tourcoing, France
Intermediate holding company
96 R Du Pont Rompu, 59200 Tourcoing, France
Retailer of sports footwear and accessories
JD Sports Fashion Germany GmbH
Germany
Lap Street 107-108, 12163 Berlin, Germany
Retailer of sports inspired footwear and apparel
Germany
Schloßstraße 107-108, 12163 Berlin, Germany
Retailer of sports inspired footwear and apparel
Hong Kong
Hong Kong
Unit 4, 27th Floor, Global Trade Square,
21 Wong Chuk Hang Road, Hong Kong
Unit 4, 27th Floor, Global Trade Square,
21 Wong Chuk Hang Road, Hong Kong
Distributor of sports clothing and accessories
Dormant company
100.0%
100.0%
B-808 The Platina, Gachibawli, Hyderabad,
Telangana, India - 500032
Outsourced multi-channel operations
100.0%
100.0%
3 Burlington Road, Dublin 4, D04RD68, Republic of Ireland
Retailer of sports inspired footwear and apparel
3 Burlington Road, Dublin 4, D04RD68, Republic of Ireland
Intermediate holding company
2 Burlington Road, Dublin 4, D04RD68, Republic of Ireland
Distributor of sports clothing and accessories
3 Burlington Road, Dublin 4, D04RD68, Republic of Ireland
Intermediate holding company
3 Burlington Road, Dublin 4, D04RD68, Republic of Ireland
Intermediate holding company
3 Burlington Road, Dublin 4, D04RD68, Republic of Ireland
Retailer of sports and leisure goods
3 Burlington Road, Dublin 4, D04RD68, Republic of Ireland
Retailer of sports and leisure goods
3 Burlington Road, Dublin 4, D04RD68, Republic of Ireland
Dormant company
3 Burlington Road, Dublin 4, D04RD68, Republic of Ireland
Dormant company
3 Burlington Road, Dublin 4, D04RD68, Republic of Ireland
Dormant company
Isle of Man
33-37 Athol Street, Isle Of Man, IM1 1LB
Intermediate holding company
Italy
Italy
Malaysia
Viale Majno Luigi 17/A, 20122 Milano Italy
Distributor of sports clothing and footwear
Via Montenapoleone n. 29 - 20121 Milan, Italy
Retailer of sports inspired footwear and apparel
Suite D23, 2ND Floor, Plaza Pekeliling,
No. 2, Jalan Tun Razak, 50400 Kuala Lumpur, Malaysia
Retailer of sports inspired footwear and apparel
Middle East
Lakeview Tower, Jumeirah Lake Towers, Dubai,
United Arab Emirates
Distributor of sports clothing and accessories
100.0%
100.0%
Netherlands Oosteinderweg 247 B 1432 AT Aalsmeer, The Netherlands
Retailer of sports inspired footwear and apparel
Netherlands Oosteinderweg 247 B 1432 AT Aalsmeer, The Netherlands
Retailer of sports inspired footwear and apparel
New Zealand Unit 2, 45 The Boulevard, Te Rapa Park, Hamilton
Distributor of sports clothing and accessories
Trend Imports (NZ) Pty Limited
New Zealand Level 2, Fidelity House, 81 Carlton Gore Rd,
Distributor of sports inspired footwear and apparel
Kukri Pte Limited*
JD Sprinter Holdings 2010 SL
JD Spain Sports Fashion 2010 SL
Newmarket, Auckland , New Zealand
Singapore
10 Anson Road, 19-15 International Plaza,
Singapore 079903
Spain
Spain
Ctra. de Dolores 1.8 km Pol. Industrial Vizcarra,
Nave 14 03290 Elche, Alicante, Spain
Ctra. de Dolores 1.8 km Pol. Industrial Vizcarra,
Nave 14 03290 Elche, Alicante, Spain
Distributor of sports clothing and accessories
100.0%
100.0%
Intermediate holding company
Retailer of sports and leisure goods
66.8%
66.8%
76.8%
76.8%
*Indirect holding of the Company
Australia
Australia
Australia
Australia
Australia
Australia
Belgium
Canada
India
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
JD Size GmbH
Kukri (Asia) Limited*
Kukri (HK) Limited*
JD Sports Fashion India LLP
John David Sports Fashion (Ireland) Limited
J.D Sports Limited*
Kukri Sports Ireland Limited*
Champion Sports Group Limited*
PCPONE*
Champion Retail Limited*
Champion Sports Ireland*
Champion Sports Newco Limited*
Marathon Sports Limited*
Champion Sports (Holdings) Unlimited*
Capso Holdings Limited*
Focus Italy S.pa.*
JD Sports Fashion SRL
JD Sports Fashion SDN BHD
Kukri Sports Middle East JLT*
JD Sports Fashion BV
Sports Unlimited Retail BV
Kukri NZ Limited*
100.0%
100.0%
85.0%
100.0%
100.0%
100.0%
100.0%
85.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
80.0%
100.0%
50.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
80.0%
100.0%
50.0%
100.0%
100.0%
75.0%
80.0%
100.0%
100.0%
75.0%
80.0%
Financial Statements
Notes to the Consolidated Financial Statements (continued)
31. Subsidiary Undertakings (continued)
Name of
subsidiary
Place of
registration
Registered
Address
Sprinter Megacentros Del Deporte SLU*
Spain
Sportiberica -
Sociedade de Arigos de Desporto S.A.
JD Sports Fashion Sweden AB
Portugal
Sweden
Ctra. de Dolores 1.8 km Pol. Industrial Vizcarra,
Nave 14 03290 Elche, Alicante, Spain
Avenida das Indústrias, n.º 63, Agualva do Cacém,
Sintra, Portugal
C/o Intertrust CN (Sweden) AB, PO Box 16285,
103 25 Stockholm, Sweden
Nature of business
and operation
Retailer of sports and leisure goods
Ownership
interest
Voting rights
interest
66.8%
66.8%
Retailer of sports and leisure goods
61.4%
61.4%
Retailer of sports inspired footwear and apparel
100.0%
100.0%
Athleisure Limited
Jog Shop Limited*
Allsports.co.uk Limited*
Sonneti Fashions Limited*
Peter Werth Limited*
First Sport Limited*
R.D. Scott Limited
Topgrade Sportswear Holdings Limited
Topgrade Sportswear Limited*
GetTheLabel.com Limited*
Topgrade Trading Limited*
Nicholas Deakins Limited
Kooga Rugby Limited
Duffer of St George Limited
Focus Brands Limited
Focus Group Holdings Limited*
Focus International Limited*
Focus Sports & Leisure International Limited*
Focus Equipment Limited*
Kukri Sports Limited
Kukri GB Limited*
Kukri Events Limited*
Squirrel Sports Limited*
Blacks Outdoor Retail Limited
Ultimate Outdoors Limited*
Oswald Bailey Limited*
Source Lab Limited
Tessuti Group Limited
Tessuti Limited*
Tessuti Retail Limited*
Prima Designer Limited*
Blue Retail Limited*
Cloggs Online Limited
Ark Fashion Limited
Tiso Group Limited
Graham Tiso Limited*
Sundown Limited*
Alpine Group (Scotland) Limited*
The Alpine Group Limited*
Alpine Bikes Limited*
The Alpine Store Limited*
George Fisher Holdings Limited*
George Fisher Limited*
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
Hollinsbrook Way, Pilsworth, Bury, Lancashire, BL9 8RR
Intermediate holding company
Hollinsbrook Way, Pilsworth, Bury, Lancashire, BL9 8RR
Hollinsbrook Way, Pilsworth, Bury, Lancashire, BL9 8RR
Hollinsbrook Way, Pilsworth, Bury, Lancashire, BL9 8RR
MILLAR & BRYCE LIMITED, Bonnington Bond 2 Anderson Place,
Edinburgh, EH6 5NP
Dormant company
Dormant company
Dormant company
Dormant company
Hollinsbrook Way, Pilsworth, Bury, Lancashire, BL9 8RR
Dormant company
Hollinsbrook Way, Pilsworth, Bury, Lancashire, BL9 8RR
Retailer of fashion clothing and footwear
Hollinsbrook Way, Pilsworth, Bury, Lancashire, BL9 8RR
Dormant company
Hollinsbrook Way, Pilsworth, Bury, Lancashire, BL9 8RR
Distributor and multichannel retailer of sports and
fashion clothing and footwear
Hollinsbrook Way, Pilsworth, Bury, Lancashire, BL9 8RR
Hollinsbrook Way, Pilsworth, Bury, Lancashire, BL9 8RR
Dormant company
Dormant company
Hollinsbrook Way, Pilsworth, Bury, Lancashire, BL9 8RR
Distributor of fashion footwear
Hollinsbrook Way, Pilsworth, Bury, Lancashire, BL9 8RR
Distributor of rugby clothing and accessories
Hollinsbrook Way, Pilsworth, Bury, Lancashire, BL9 8RR
Licensor of a fashion brand
Hollinsbrook Way, Pilsworth, Bury, Lancashire, BL9 8RR
Intermediate holding company
Hollinsbrook Way, Pilsworth, Bury, Lancashire, BL9 8RR
Intermediate holding company
Hollinsbrook Way, Pilsworth, Bury, Lancashire, BL9 8RR
Distributor of sports clothing and footwear
Hollinsbrook Way, Pilsworth, Bury, Lancashire, BL9 8RR
Hollinsbrook Way, Pilsworth, Bury, Lancashire, BL9 8RR
Dormant company
Dormant company
Hollinsbrook Way, Pilsworth, Bury, Lancashire, BL9 8RR
Intermediate holding company
Hollinsbrook Way, Pilsworth, Bury, Lancashire, BL9 8RR
Distributor and retailer of sports clothing and accessories
Hollinsbrook Way, Pilsworth, Bury, Lancashire, BL9 8RR
Hollinsbrook Way, Pilsworth, Bury, Lancashire, BL9 8RR
Dormant company
Dormant company
Hollinsbrook Way, Pilsworth, Bury, Lancashire, BL9 8RR
Retailer of outdoor footwear, apparel and equipment
Hollinsbrook Way, Pilsworth, Bury, Lancashire, BL9 8RR
Hollinsbrook Way, Pilsworth, Bury, Lancashire, BL9 8RR
Dormant company
Dormant company
Hollinsbrook Way, Pilsworth, Bury, Lancashire, BL9 8RR
Design and distributor of sportswear
Hollinsbrook Way, Pilsworth, Bury, Lancashire, BL9 8RR
Intermediate holding company
Hollinsbrook Way, Pilsworth, Bury, Lancashire, BL9 8RR
Retailer of fashion clothing and footwear
Hollinsbrook Way, Pilsworth, Bury, Lancashire, BL9 8RR
Dormant company
Hollinsbrook Way, Pilsworth, Bury, Lancashire, BL9 8RR
Intermediate holding company
Hollinsbrook Way, Pilsworth, Bury, Lancashire, BL9 8RR
Retailer of sports inspired footwear and apparel
Hollinsbrook Way, Pilsworth, Bury, Lancashire, BL9 8RR
Multichannel retailer of fashion footwear
Hollinsbrook Way, Pilsworth, Bury, Lancashire, BL9 8RR
Retailer of fashion clothing and footwear
41 Commercial Street, Leith, Edinburgh, EH6 6JD
Intermediate holding company
41 Commercial Street, Leith, Edinburgh, EH6 6JD
Retailer of outdoor footwear, apparel and equipment
41 Commercial Street, Leith, Edinburgh, EH6 6JD
Dormant company
41 Commercial Street, Leith, Edinburgh, EH6 6JD
41 Commercial Street, Leith, Edinburgh, EH6 6JD
Intermediate holding company
Intermediate holding company
41 Commercial Street, Leith, Edinburgh, EH6 6JD
46 Commercial Street, Leith, Edinburgh, EH6 6JD
41 Commercial Street, Leith, Edinburgh, EH6 6JD
Dormant company
41 Commercial Street, Leith, Edinburgh, EH6 6JD
Intermediate holding company
Hollinsbrook Way, Pilsworth, Bury, Lancashire, BL9 8RR
Retailer of outdoor footwear, apparel and equipment
*Indirect holding of the Company
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
80.0%
80.0%
80.0%
80.0%
100.0%
100.0%
100.0%
80.0%
80.0%
80.0%
80.0%
80.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
85.0%
100.0%
100.0%
100.0%
100.0%
100.0%
94.0%
100.0%
60.0%
60.0%
60.0%
60.0%
60.0%
60.0%
60.0%
60.0%
60.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
80.0%
80.0%
80.0%
80.0%
100.0%
100.0%
100.0%
80.0%
80.0%
80.0%
80.0%
80.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
85.0%
100.0%
100.0%
100.0%
100.0%
100.0%
94.0%
100.0%
60.0%
60.0%
60.0%
60.0%
60.0%
60.0%
60.0%
60.0%
60.0%
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Annual Report & Accounts 2017
Notes to the Consolidated Financial Statements (continued)
31. Subsidiary Undertakings (continued)
Name of
subsidiary
ActivInstinct Holdings Limited
ActivInstinct Limited*
Activinstinct Pty Limited*
Mainline Menswear Holdings Limited
Mainline Menswear Limited*
Dapper (Scarborough) Limited*
JD Sports Gyms Limited
JD Sports Fashion Distribution Limited
Size? Limited
Henleys Clothing Limited
Nanny State Limited
Fly53 Ltd
Footpatrol London 2002 Limited
Premium Fashion Limited
Exclusive Footwear Limited
Pink Soda Limited
Varsity Kit Limited*
Allsports (Retail) Limited
OneTrueSaxon Limited
Peter Storm Limited
Open Fashion Limited
Millets Limited
Planet Fear Limited
JD Sports Active Limited
Hip Store Limited
Aspecto Holdings Limited
Aspecto Trading Limited*
Infinities Retail Group Holdings Limited
Infinities Retail Group Limited
IRG Bury Limited
IRG Denton Limited
IRG Stockport Limited
IRG Warrington Limited
IRG Birkenhead Limited
IRG Bradford Limited
IRG Derby Limited
IRG Blackburn Limited
IRG Stoke Limited
IRG Altrincham Limited
IRG Chesterfield Limited
Clothingsites Holdings Limited
Clothingsites.co.uk Limited
Old Brown Bag Clothing Limited
Go Outdoors Topco Limited
Go Outdoors Limited
Mitchell's Practical Campers Limited
Touchwood Sports Limited
C.C.C. (Camping & Caravan Centre) Limited
Ensco 1092 Limited
CCC Outdoors Limited
Place of
registration
Registered
Address
Nature of business
and operation
Ownership
interest
Voting rights
interest
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
Hollinsbrook Way, Pilsworth, Bury, Lancashire, BL9 8RR
Intermediate holding company
Hollinsbrook Way, Pilsworth, Bury, Lancashire, BL9 8RR
Multichannel retailer of sports inspired footwear and apparel
Hollinsbrook Way, Pilsworth, Bury, Lancashire, BL9 8RR
Dormant company
Hollinsbrook Way, Pilsworth, Bury, Lancashire, BL9 8RR
Intermediate holding company
Hollinsbrook Way, Pilsworth, Bury, Lancashire, BL9 8RR
Retailer of premium branded Men's apparel and footwear
Hollinsbrook Way, Pilsworth, Bury, Lancashire, BL9 8RR
Retailer of premium branded Men's apparel and footwear
Hollinsbrook Way, Pilsworth, Bury, Lancashire, BL9 8RR
Operator of fitness centres
Hollinsbrook Way, Pilsworth, Bury, Lancashire, BL9 8RR
Dormant company
Hollinsbrook Way, Pilsworth, Bury, Lancashire, BL9 8RR
Retailer of sports inspired footwear and apparel
Hollinsbrook Way, Pilsworth, Bury, Lancashire, BL9 8RR
Dormant company
Hollinsbrook Way, Pilsworth, Bury, Lancashire, BL9 8RR
Distributor of fashion clothing and footwear
Hollinsbrook Way, Pilsworth, Bury, Lancashire, BL9 8RR
Hollinsbrook Way, Pilsworth, Bury, Lancashire, BL9 8RR
Hollinsbrook Way, Pilsworth, Bury, Lancashire, BL9 8RR
Dormant company
Dormant company
Dormant company
Hollinsbrook Way, Pilsworth, Bury, Lancashire, BL9 8RR
Retailer of premium branded footwear
Hollinsbrook Way, Pilsworth, Bury, Lancashire, BL9 8RR
Intermediate holding company
Hollinsbrook Way, Pilsworth, Bury, Lancashire, BL9 8RR
Hollinsbrook Way, Pilsworth, Bury, Lancashire, BL9 8RR
Hollinsbrook Way, Pilsworth, Bury, Lancashire, BL9 8RR
Hollinsbrook Way, Pilsworth, Bury, Lancashire, BL9 8RR
Dormant company
Dormant company
Dormant company
Dormant company
Hollinsbrook Way, Pilsworth, Bury, Lancashire, BL9 8RR
Retailer of fashion clothing and footwear
Hollinsbrook Way, Pilsworth, Bury, Lancashire, BL9 8RR
Hollinsbrook Way, Pilsworth, Bury, Lancashire, BL9 8RR
Hollinsbrook Way, Pilsworth, Bury, Lancashire, BL9 8RR
Dormant company
Dormant company
Dormant company
Hollinsbrook Way, Pilsworth, Bury, Lancashire, BL9 8RR
Retailer of fashion clothing and footwear
Hollinsbrook Way, Pilsworth, Bury, Lancashire, BL9 8RR
Intermediate holding company
Hollinsbrook Way, Pilsworth, Bury, Lancashire, BL9 8RR
Dormant company
Hollinsbrook Way, Pilsworth, Bury, Lancashire, BL9 8RR
Intermediate holding company
Hollinsbrook Way, Pilsworth, Bury, Lancashire, BL9 8RR
Retailer of fashion clothing and footwear
Hollinsbrook Way, Pilsworth, Bury, Lancashire, BL9 8RR
Hollinsbrook Way, Pilsworth, Bury, Lancashire, BL9 8RR
Hollinsbrook Way, Pilsworth, Bury, Lancashire, BL9 8RR
Hollinsbrook Way, Pilsworth, Bury, Lancashire, BL9 8RR
Hollinsbrook Way, Pilsworth, Bury, Lancashire, BL9 8RR
Hollinsbrook Way, Pilsworth, Bury, Lancashire, BL9 8RR
Hollinsbrook Way, Pilsworth, Bury, Lancashire, BL9 8RR
Hollinsbrook Way, Pilsworth, Bury, Lancashire, BL9 8RR
Hollinsbrook Way, Pilsworth, Bury, Lancashire, BL9 8RR
Hollinsbrook Way, Pilsworth, Bury, Lancashire, BL9 8RR
Hollinsbrook Way, Pilsworth, Bury, Lancashire, BL9 8RR
Dormant company
Dormant company
Dormant company
Dormant company
Dormant company
Dormant company
Dormant company
Dormant company
Dormant company
Dormant company
Dormant company
Hollinsbrook Way, Pilsworth, Bury, Lancashire, BL9 8RR
Intermediate holding company
Hollinsbrook Way, Pilsworth, Bury, Lancashire, BL9 8RR
Retailer of fashion clothing and footwear
The Old Dairy 76 Heyes Lane, Alderley Edge, Cheshire, SK9 7LE
Dormant company
Cuthbert House, Arley Street, Sheffield, S2 4QP
Intermediate holding company
Cuthbert House, Arley Street, Sheffield, S2 4QP
Retailer of outdoor footwear, apparel and equipment
Cuthbert House, Arley Street, Sheffield, S2 4QP
Cuthbert House, Arley Street, Sheffield, S2 4QP
Cuthbert House, Arley Street, Sheffield, S2 4QP
Cuthbert House, Arley Street, Sheffield, S2 4QP
Cuthbert House, Arley Street, Sheffield, S2 4QP
Dormant company
Dormant company
Dormant company
Dormant company
Dormant company
100.0%
100.0%
100.0%
80.0%
80.0%
80.0%
75.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
90.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
80.0%
80.0%
80.0%
75.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
90.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
*Indirect holding of the Company
31. Subsidiary Undertakings (continued)
Name of
subsidiary
C.C.C. (Wholesale Leisure) Limited
Go Explore Consulting Limited
Outdoorclearance Company Limited
Robin Acquisitionco Limited
2Squared Agency Limited
2Squared Retail Limited
Frank Harrison Limited*
The John David Group Limited
J D Sports Limited
Millet Sports Limited*
Place of
registration
Registered
Address
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
Cuthbert House, Arley Street, Sheffield, S2 4QP
Cuthbert House, Arley Street, Sheffield, S2 4QP
Cuthbert House, Arley Street, Sheffield, S2 4QP
Hollinsbrook Way, Pilsworth, Bury, Lancashire, BL9 8RR
St. Ann's Square, Manchester, M2 7PW
St. Ann's Square, Manchester, M2 7PW
Hollinsbrook Way, Pilsworth, Bury, Lancashire, BL9 8RR
Hollinsbrook, Way, Pilsworth, Bury, Lancashire, BL9 8RR
Hollinsbrook, Way, Pilsworth, Bury, Lancashire, BL9 8RR
Hollinsbrook, Way, Pilsworth, Bury, Lancashire, BL9 8RR
Nature of business
and operation
Dormant company
Dormant company
Dormant company
Dormant company
Wholesaler of Men's leisure footwear
Internet retailer of Men's footwear
Dormant company
Dormant company
Dormant company
Dormant company
Ownership
interest
Voting rights
interest
100.0%
100.0%
100.0%
100.0%
69.0%
51.0%
90.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
69.0%
51.0%
90.0%
100.0%
100.0%
100.0%
*Indirect holding of the Company
159159
Financial StatementsNotes to the Consolidated Financial Statements (continued)Financial Statements Annual Report & Accounts 2017
Company Balance Sheet
As at 28 January 2017
Fixed assets
Intangible assets
Property, plant and equipment
Investment property
Other assets
Investments
Deferred tax assets
Current assets
Stocks
Debtors
Cash and cash equivalents
Total assets
Creditors : amounts falling due within one year
Provisions
Income tax liabilities
Creditors: amounts falling due after more than one year
Provisions
Total liabilities
Net assets
Capital and reserves
Issued ordinary share capital
Share premium
Retained earnings
Total equity
Note
C5
C6
C7
C8
C9
C16
C10
C11
C12
C13
C15
C14
C15
C17
As at 28 January
2017
£000
As at 30 January
2016
£000
20,979
84,250
3,450
9,176
189,326
3,765
310,946
116,557
314,857
168,170
599,584
910,530
(263,340)
(394)
(29,400)
(293,134)
(24,316)
(738)
(25,054)
(318,188)
592,342
2,433
11,659
578,250
592,342
22,291
88,557
3,491
10,240
69,785
2,148
196,512
106,336
259,059
148,138
513,533
710,045
(218,040)
(587)
(14,333)
(232,960)
(31,890)
(1,117)
(33,007)
(265,967)
444,078
2,433
11,659
429,986
444,078
These financial statements were approved by the Board of Directors on 10 April 2017 and were signed on its
behalf by:
Brian Small
Director
Registered number: 1888425
Financial Statements
Company Statement of Changes in Equity
For the 52 weeks ended 28 January 2017
Balance at 31 January 2015
Profit for the period
Total comprehensive income for the period
Dividends to equity holders
Balance at 30 January 2016
Profit for the period
Total comprehensive income for the period
Dividends to equity holders
Balance at 28 January 2017
Ordinary
share capital
£000
2,433
-
-
-
Share
premium
£000
11,659
-
-
-
2,433
11,659
-
-
-
-
-
-
2,433
11,659
Retained
earnings
£000
351,875
91,931
91,931
(13,820)
429,986
162,765
162,765
(14,501)
578,250
Total
equity
£000
365,967
91,931
91,931
(13,820)
444,078
162,765
162,765
(14,501)
592,342
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Notes to the Company Financial Statements
C1. Basis of Preparation
The parent company financial statements of JD Sports Fashion Plc were prepared in accordance with Financial
Reporting Standard 101 Reduced Disclosure Framework (“FRS 101”). The amendments to FRS 101 (2014/15 Cycle)
issued in July 2015 and effective immediately have been applied.
In preparing these financial statements, the Company applies the recognition, measurement and disclosure
requirements of International Financial Reporting Standards as adopted by the EU (“Adopted IFRSs”), but makes
amendments where necessary in order to comply with Companies Act 2006 and has set out below where
advantage of the FRS 101 disclosure exemptions has been taken.
In the transition to FRS 101 from Adopted IFRS, the Company has made no measurement and recognition
adjustments.
In these financial statements, the company has applied the exemptions available under FRS 101 in respect of the
following disclosures:
• a Cash Flow Statement and related notes;
• Comparative period reconciliations for share capital, tangible fixed assets, intangible assets and investment
properties;
• Disclosures in respect of transactions with wholly owned subsidiaries;
• Disclosures in respect of capital management;
• The effects of new but not yet effective IFRSs;
• Disclosures in respect of the compensation of Key Management Personnel; and
• Disclosures of transactions with a management entity that provides key management personnel services to
the company.
As the consolidated financial statements of JD Sports Fashion Plc include the equivalent disclosures, the Company
has also taken the exemptions under FRS 101 available in respect of the following disclosures:
• IFRS 2 Share Based Payments in respect of group settled share based payments;
• Certain disclosures required by IAS 36 Impairment of assets in respect of the impairment of goodwill and
indefinite life intangible assets;
• Certain disclosures required by IFRS 3 Business Combinations in respect of business combinations
undertaken by the Company; and
• Certain disclosures required by IFRS 13 Fair Value Measurement and the disclosures required by IFRS 7
Financial Instrument Disclosures.
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 comprehensive income for the parent
included in these consolidated financial statements is £162,765,000 (2016: £91,931,000).
The Company proposes to continue to adopt the reduced disclosure framework of FRS 101 in its next
financial statements.
The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods
presented in these financial statements and in preparing an opening FRS 101 IFRS balance sheet at 30 January
2016 for the purposes of the transition to FRS 101 Adopted IFRSs.
The financial statements have been prepared on a going concern basis under the historical cost convention
except as disclosed in the accounting policies in Note 1 of the Group financial statements. The preparation of
financial statements in conformity with FRS 101 requires the use of certain critical accounting estimates. It also
requires management to exercise its judgement in the process of applying the Company’s accounting policies.
The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are
significant to the financial statements are the same for the Company as they are for the Group. For further details,
see pages 108 to 109 in the Group financial statements.
C2. Directors Remuneration
The remuneration of Executive directors for both the Company and Group are disclosed in Note 5 of the Group
financial statements.
C3. Auditor’s Remuneration
Fees payable to the Company’s auditor for the audit of the Company and Group financial statements are disclosed
in Note 3 of the Group financial statements.
Financial Statements
Notes to the Company Financial Statements (continued)
C4. Staff Numbers and Costs Company
The average number of persons employed by the Company (including Directors) during the period, analysed by
category, was as follows:
Sales and distribution
Administration
Full time equivalents
The aggregate payroll costs of these persons were as follows:
Wages and salaries
Social security costs
Other pension costs
C5. Intangible Assets
2017
11,751
375
12,126
7,568
52 weeks to
28 January 2017
£000
160,528
10,762
1,615
172,905
2016
10,463
359
10,822
7,056
52 weeks to
30 January 2016
£000
135,525
8,743
1,456
145,724
Goodwill in the Company comprises the goodwill on acquisition of First Sport (£14,976,000) and Allsports
(£924,000).
Brand names in the Company comprise all brand names included in the Group table (Note 12) within the Sport
Fashion segment, with the exception of the fair value adjustments remaining in relation to brand name acquired
on acquisition of Duffer of St George (£446,000).
Cost or valuation
At 30 January 2016
Additions
Disposals
At 28 January 2017
Amortisation and impairment
At 30 January 2016
Charge for the period
Disposals
At 28 January 2017
Net book value
At 28 January 2017
At 30 January 2016
Goodwill
£000
Brand licences
£000
Brand names
£000
Software
development
£000
19,945
11,779
-
-
-
-
19,945
11,779
4,045
-
-
4,045
15,900
15,900
8,092
750
-
8,842
2,937
3,687
9,779
-
(2,400)
7,379
8,704
1,065
(2,400)
7,369
10
1,075
6,860
3,843
(3)
10,700
5,231
3,339
(2)
8,568
2,132
1,629
Total
£000
48,363
3,843
(2,403)
49,803
26,072
5,154
(2,402)
28,824
20,979
22,291
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Notes to the Company Financial Statements (continued)
C6. Property, Plant and Equipment
Cost
At 30 January 2016
Additions
Disposals
At 28 January 2017
Depreciation and impairment
At 30 January 2016
Charge for period
Disposals
At 28 January 2017
Net book value
At 28 January 2017
At 30 January 2016
C7. Investment Property
Improvements
to short leasehold
properties
£000
Computer
equipment
£000
Fixtures
and fittings
£000
Motor
vehicles
£000
15,678
2,138
(1,728)
16,088
9,538
3,211
(710)
12,039
4,049
6,140
28,826
3,989
(252)
32,563
24,117
6,549
(217)
30,449
2,114
4,709
165,604
19,105
(8,954)
175,755
93,383
18,259
(8,500)
103,142
72,613
72,221
70
15
(25)
60
36
18
(15)
39
21
34
Land
£000
5,453
-
-
5,453
-
-
-
-
5,453
5,453
Total
£000
215,631
25,247
(10,959)
229,919
127,074
28,037
(9,442)
145,669
84,250
88,557
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 Company has not elected to revalue
investment property annually but to disclose the fair value in the Consolidated Financial Statements.
An external valuation to determine the fair value is prepared every three years by persons having the
appropriate professional experience. When an external valuation is not prepared, an annual assessment is
conducted using internal expertise.
At 30 January 2016 and 28 January 2017
Depreciation and impairment
At 30 January 2016
Charge for period
At 28 January 2017
Net book value
At 28 January 2017
At 30 January 2016
£000
4,837
1,346
41
1,387
3,450
3,491
The investment properties brought forward relate to properties leased to Focus Brands Limited (£4,160,000) and
Kukri Sports Limited (£677,000).
These properties remain Investment Properties from the Company perspective as at 28 January 2017.
Based on an external valuation prepared as at 30 January 2016, the fair value of the investment properties as at
that date was £3,977,000. An internal assessment was conducted for the current financial year and the fair value
of £3,977,000 remains appropriate as at 28 January 2017.
Management do not consider either of the investment properties to be impaired as the future rental income
supports the carrying value.
Financial Statements
Notes to the Company Financial Statements (continued)
C8. Non-current Other Assets
Cost
At 30 January 2016
Additions
Disposals
At 28 January 2017
Depreciation and impairment
At 30 January 2016
Charge for period
Disposals
At 28 January 2017
Net book value
At 28 January 2017
At 30 January 2016
C9. Investments
Legal Fees
£000
Lease Premia
£000
11,168
1,573
(366)
12,375
5,303
1,951
(291)
6,963
5,412
5,865
5,000
-
-
5,000
625
611
-
1,236
3,764
4,375
Total
£000
16,168
1,573
(366)
17,375
5,928
2,562
(291)
8,199
9,176
10,240
In the Company’s accounts all investments in subsidiary undertakings and joint ventures are stated at cost less
provisions for impairment losses.
Basis of Consolidation
I. Subsidiaries
Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has
rights to, variable returns from its involvement with the entity and has the ability to affect those returns
through its power over the entity.
The financial statements of subsidiaries are included in the consolidated financial statements from the date
that control commences until the date that control ceases. Non-controlling interests in the net assets
of consolidated subsidiaries are identified separately from the equity attributable to holders of the parent.
Non-controlling interests consist of the amount of those interests at the date that control commences and the
attributable 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.
Changes in Ownership Interest Without a Loss of Control
In accordance with IAS 27 ‘Consolidated and Separate Financial Statements’ (2008), upon a change in
ownership interest in a subsidiary without a loss of control, the carrying amounts of the controlling and
non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiary. Any
difference between the amount by which the non-controlling interests are adjusted and the fair value of the
consideration paid or received is recognised directly in equity and attributed to the owners of the parent.
Acquisitions or disposals of non-controlling interests are therefore accounted for as transactions with owners
in their capacity as owners and no goodwill is recognised as a result of such transactions. Associated
transaction costs are accounted for within equity.
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Notes to the Company Financial Statements (continued)
C9. Investments (continued)
Cost
At 30 January 2016
Additions
At 28 January 2017
Impairment
At 30 January 2016 and 28 January 2017
Net book value
At 28 January 2017
At 30 January 2016
£000
75,255
119,541
194,796
5,470
189,326
69,785
The additions to investments in the current year comprise the following. Unless otherwise stated the investment
is 100% owned.
JD Sports Fashion Sweden AB
JD Sports Fashion SDN BHD (50% owned)
JD Sports Fashion SRL
2Squared Agency Limited & 2Squared Retail Limited (69% and 51% owned)
SportIberica Sociedade de Artigos de Desporto, S.A. (80% owned)
Tessuti Limited
JD Sports Fashion Holdings Australia Pty Limited (80% owned)
Go Outdoors Topco Limited
Total additions
A list of subsidiaries is shown in Group Note 31.
C10. Stocks
Finished goods and goods for resale
2017
£000
116,557
The Company has £13,641,000 (2016: £12,450,000) of stock provisions at the end of the period.
C11. Debtors - amounts falling due within one year
Current assets
Trade debtors
Other debtors
Prepayments and accrued income
Amounts owed by other Group companies
2017
£000
5,872
-
15,939
293,046
314,857
2017
£000
215
308
444
512
891
1,000
3,866
112,305
119,541
2016
£000
106,336
2016
£000
3,847
3,218
18,011
233,983
259,059
Financial Statements
Notes to the Company Financial Statements (continued)
C12. Financial Instruments
Financial Assets
The currency profile of cash and cash equivalents is shown below:
Bank balances and cash floats
Sterling
Euros
US Dollars
Australian Dollars
Danish Krone
Other
2017
£000
168,170
140,394
20,932
2,483
2,955
879
527
2016
£000
148,138
113,066
27,766
6,428
34
381
463
168,170
148,138
Financial Liabilities
The company does not have any interest bearing loans and borrowings balances as at 28 January 2017
(30 January 2016: £nil).
Credit Risk
The Company has provided guarantees on working capital and other banking facilities entered into by Spodis SA
(€6,600,000), Sprinter Megacentros Del Deporte SLU (€8,750,000), Next Athleisure Pty Limited ($15,300,000),
Cloggs Online Limited (£500,000), Kukri Sports Limited and Kukri GB Limited (£1,000,000), and Kooga Rugby
Limited (£250,000). As at 28 January 2017, these facilities were drawn down by £7,059,000 (2016: £490,000). In
addition, the syndicated committed £215,000,000 bank facility, which was in place as at 28 January 2017,
encompassed cross guarantees between the Company, RD Scott Limited, Topgrade Sportswear Limited, Blacks
Outdoor Retail Limited, Tessuti Limited and Focus International Limited to the extent to which any of these
companies were overdrawn. As at 28 January 2017, these facilities were drawn down by £nil (2016: £nil).
Fair Values
The fair values together with the carrying amounts shown in the Balance Sheet as at 28 January 2017 are as follows:
Trade and other debtors
Cash and cash equivalents
Trade and other creditors - current
Trade and other creditors - non-current
Unrecognised gains
Note
C11
C12
Carrying
amount
2017
£000
298,918
168,170
(242,066)
(3,442)
221,580
Fair
value
2017
£000
298,918
168,170
(242,066)
(3,442)
221,580
-
Fair Value Hierarchy
For information on Company balances which are categorised at the same level as for Group, see note 19.
In addition, Investment property held in the Company of £3,450,000 (2016: £3,491,000) is categorised as Level 3
within the fair value hierarchy.
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Notes to the Company Financial Statements (continued)
C13. Creditors: amounts falling due within one year
Trade creditors
Other creditors and accrued expenses
Other tax and social security costs
Amounts payable to other Group companies
C14. Creditors: amounts falling due after one year
Other creditors and accrued expenses
Amounts payable to other Group companies
2017
£000
92,197
146,696
17,119
7,328
263,340
2017
£000
24,316
-
24,316
2016
£000
78,643
124,791
14,606
-
218,040
2016
£000
24,562
7,328
31,890
Included with Other creditors and accrued expenses are put option liabilities of £3,444,000 (2016: 3,260,000).
Further disclosure can be found in Note 20 of the Group accounts.
C15. Provisions
Balance at 30 January 2016
Provisions released during the period
Provisions utilised during the period
Balance at 28 January 2017
Onerous
property leases
£000
1,704
(91)
(481)
1,132
C16. Deferred Tax Assets and Liabilities
Recognised Deferred Tax Assets and Liabilities
Deferred tax assets and liabilities are attributable to the following:
Property, plant and equipment
Chargeable gains held over / rolled over
Other
Tax (assets) / liabilities
Assets
2017
£000
(1,330)
-
(2,435)
(3,765)
Assets
2016
£000
(930)
-
(1,444)
(2,374)
Liabilities
2017
£000
-
-
-
-
Liabilities
2016
£000
-
226
-
226
Net
2017
£000
(1,330)
-
(2,435)
(3,765)
Net
2016
£000
(930)
226
(1,444)
(2,148)
Financial Statements
Notes to the Company Financial Statements (continued)
C16. Deferred Tax Assets and Liabilities (continued)
Movement in Deferred Tax During the Period
Balance at 31 January 2015
Recognised in income
Balance at 30 January 2016
Recognised in income
Balance at 28 January 2017
Property, plant and
equipment
£000
Chargeable gains
held over/
rolled over
£000
263
(1,193)
(930)
(400)
(1,330)
237
(11)
226
(226)
-
Other
£000
(904)
(540)
(1,444)
(991)
(2,435)
Total
£000
(404)
(1,744)
(2,148)
(1,617)
(3,765)
C17. Capital
Issued Ordinary Share Capital for both the Company and Group is disclosed in Note 23 of the Group financial
statements.
C18. Dividends
After the reporting date the dividends proposed by both Company and Group directors is disclosed in Note 25 of
the Group financial statements.
C19. Commitments
(i) Capital Commitments
As at 28 January 2017, the Company had entered into contracts to purchase property, plant and equipment as follows:
Contracted
2017
£000
29,506
2016
£000
261
(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:
Within one year
Later than one year and not later than five years
After five years
Land and
buildings
2017
£000
65,643
217,164
174,370
457,177
Plant and
equipment
2017
£000
1,212
1,128
-
2,340
Land and
buildings
2016
£000
53,696
160,502
125,961
340,159
Plant and
equipment
2016
£000
890
839
-
1,729
(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 28 January 2017 are as follows:
Within one year
Later than one year and not later than five years
After five years
2017
£000
366
1,239
277
1,882
2016
£000
324
1,254
578
2,156
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Notes to the Company Financial Statements (continued)
C20. Related Party Transactions and Balances
The Company made purchases of inventory from Pentland Group Plc in the period and the Company also
sold inventory to Pentland Group Plc in the prior year. The Company also paid royalty costs to Pentland Group Plc
for the use of a brand. During the period, the Company entered into the following transactions with Pentland
Group Plc:
Sale of inventory
Purchase of inventory
Income from
related parties
2017
£000
Expenditure with
related parties
2017
£000
Income from
related parties
2016
£000
Expenditure with
related parties
2016
£000
-
-
-
(14,967)
45
-
-
(10,912)
At the end of the period, the Company had the following balances outstanding with Pentland Group Plc:
Trade receivables / (payables)
Amounts owed by
related parties
2017
£000
Amounts owed to
related parties
2017
£000
Amounts owed by
related parties
2016
£000
Amounts owed to
related parties
2016
£000
-
(1,244)
-
(283)
Transactions with Related Parties Who Are Members of the Group
Subsidiaries
In the disclosure below the Company has applied the exemptions available under FRS 101 in respect of transactions
with wholly owned subsidiaries.
Loans represent historic intercompany balances and initial investment in subsidiary undertakings to enable them
to purchase other businesses. For subsidiaries with a non-controlling interest, these long term loans attract
interest at the UK base rate plus an applicable margin.
Other intercompany balances and trade receivables / payables relates to:
- The sale and purchase of stock between the Company and its subsidiaries on arm’s length terms
- Recharges for administrative overhead and distribution costs.
Other intercompany balances are settled a month in arrears. These balances do not accrue interest. In certain
circumstances where the subsidiaries have not repaid these balances, they have been reclassified to long term
loans, and therefore accrue interest as applicable.
During the period, the Company entered into the following transactions with subsidiaries not wholly owned:
Sale / (purchase) of inventory
Interest receivable
Dividend income received
Rental income
Royalty income
Management charge receivable
Income from
related parties
2017
£000
Expenditure with
related parties
2017
£000
Income from
related parties
2016
£000
Expenditure with
related parties
2016
£000
42,833
1,060
315
200
561
1,876
(12,924)
27,718
(7,606)
-
-
-
-
-
625
680
200
732
166
-
-
-
-
-
Financial Statements
Notes to the Company Financial Statements (continued)
C20. Related Party Transactions and Balances (continued)
At the end of the period, the Company had the following balances outstanding with subsidiaries not wholly owned:
Non-trading loan receivable
Non-trading loan receivable (interest bearing)
Trade receivables / (payables)
Other intercompany balances
Income tax group relief
C21. Contingent Liabilities
Amounts owed by
related parties
2017
£000
Amounts owed to
related parties
2017
£000
Amounts owed by
related parties
2016
£000
Amounts owed to
related parties
2016
£000
12,619
42,041
12,762
5,078
13
-
-
(571)
(1,367)
(1,404)
13,849
24,449
6,686
3,737
12
-
-
(139)
(4,107)
(804)
Where the Company enters into financial guarantee contracts to guarantee the indebtedness of other
companies within its group, the Company treats the guarantee contract as a contingent liability until such time
as it becomes probable that the Company will be required to make a payment under the guarantee.
The Company has provided the following guarantees:
• Guarantee on the working capital facilities and bonds and guarantees in Spodis SA of €6,600,000
(2016: €6,600,000)
• Guarantee on the working capital and other banking facilities in relation to the Sprinter Megacentros
Del Deporte SLU of €8,750,000 (2016: €8,750,000)
• Guarantee on the working capital and other banking facilities in relation to the Next Athleisure Pty
Limited of $15,300,000 (2016: $nil)
• Guarantee on the working capital facilities in Cloggs Online Limited of £500,000 (2016: £500,000)
• Guarantee on the working capital facilities in Kooga Rugby Limited of £250,000 (2016: £250,000)
• Guarantee on the working capital facilities in Kukri Sports Limited and Kukri GB Limited of £1,000,000
(2016: £1,000,000)
• Guarantee to Kiddicare Properties Limited in relation to the rental commitments on four stores
assigned to Blacks Outdoor Retail Limited in the year. The total value of the remaining rental
commitments at 28 January 2017 was £10,167,000 (2016: £15,383,026)
C22. 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 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.
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Annual Report & Accounts 2017 Financial Statements Group
Information
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11 April 2017
23 June 2017
26 May 2017
29 June 2017
31 July 2017
12 September 2017
03 February 2018
April 2018
Financial Calendar
Final Results Announced
Final Dividend Record Date
Financial Statements Published
Annual General Meeting
Final Dividend Payable
Interim Results Announced
Period End (53 Weeks)
Final Results Announced
Shareholder Information
Registered office
JD Sports Fashion Plc
Hollinsbrook Way
Pilsworth
Bury
Lancashire
BL9 8RR
Company number
Registered in England
and Wales,
Number 1888425
Financial advisers
and stockbrokers
Investec
2 Gresham Street
London
EC2V 7QP
Financial public relations
MHP Communications
60 Great Portland Street
London
W1W 7RT
Principal bankers
Barclays Bank Plc
43 High Street
Sutton
Surrey
SM1 1DR
Registrars
Equiniti Limited
Aspect House
Spencer Road
Lancing
West Sussex
BN99 6DA
Solicitors
DLA Piper UK LLP
Princes Exchange
Princes Square
Leeds
LS1 4BY
Addleshaw Goddard LLP
100 Barbirolli Square
Manchester
M2 3AB
Auditor
KPMG LLP
1 St. Peter’s Square
Manchester
M2 3AE
The Board wishes to express its thanks to the marketing and finance departments for the in-house production
of this Annual Report and Accounts.
Annual Report & Accounts 2017 Five Year Record (Unaudited)
Revenue
Cost of sales
Gross profit
Selling and distribution expenses - normal
Selling and distribution expenses - exceptional
Selling and distribution expenses
Administrative expenses - normal
Administrative expenses - exceptional
Administrative expenses
Other operating income
Operating profit
Before exceptional items
Exceptional items
Operating profit before financing
Financial income
Financial expenses
Profit before tax
Income tax expense
Profit for the period
Discontinued operation
Loss from discontinued operation, net of tax
Attributable to equity holders of the parent
Attributable to non-controlling interest
Basic earnings per ordinary share from continuing operations (i)
Adjusted basic earnings per ordinary share from continuing operations (ii)
Dividends per ordinary share (i) (iii)
(iv)
53 weeks to
2 February 2013
£000
(iv)
52 weeks to
1 February 2014
£000
(iv)
52 weeks to
31 January 2015
£000
1,258,892
1,216,371
1,522,253
(645,404)
613,488
(494,619)
(3,724)
(498,343)
(59,973)
(1,624)
(61,597)
2,427
55,975
61,323
(5,348)
55,975
645
(1,503)
55,117
(13,875)
41,242
-
38,786
2,456
3.99p
4.43p
1.32p
(624,220)
592,151
(455,657)
(5,164)
(460,821)
(55,185)
-
(55,185)
1,723
77,868
83,032
(5,164)
77,868
582
(1,619)
76,831
(18,897)
57,934
(16,448)
40,158
1,328
5.82p
6.16p
1.36p
(782,703)
739,550
(564,333)
(4,467)
(568,800)
(73,969)
(5,060)
(79,029)
925
92,646
102,173
(9,527)
92,646
657
(2,807)
90,496
(20,741)
69,755
(15,784)
52,677
1,294
7.03p
7.78p
1.41p
52 weeks to
30 January 2016
£000
52 weeks to
28 January 2017
£000
1,821,652
(937,431)
884,221
(648,333)
-
(648,333)
(78,228)
(25,496)
(103,724)
1,242
133,406
158,902
(25,496)
133,406
388
(2,163)
131,631
(31,001)
100,630
-
97,634
2,996
10.03p
12.27p
1.48p
2,378,694
(1,215,053)
1,163,641
(812,972)
-
(812,972)
(106,272)
(6,419)
(112,691)
1,815
239,793
246,212
(6,419)
239,793
767
(2,192)
238,368
(53,788)
184,580
-
178,914
5,666
18.38p
19.04p
1.55p
(i)
Basic and adjusted earnings per ordinary share and dividends per ordinary share have been adjusted to
reflect the two share splits (see note 23), effective 30 June 2014 and 24 November 2016, as if the event had
occurred at the beginning of the earliest period presented.
(ii)
Adjusted basic earnings per ordinary share is based on earnings excluding the post-tax effect of certain
exceptional items (see note 10).
(iii) Represents dividends declared for the year. Under IFRS dividends are only accrued when approved.
(iv) In accordance with IFRS 5, the results of Bank Fashion Limited (‘Bank’) are presented as a discontinued
activity in the 52 weeks to 31 January 2015 as Bank was a separate major line of business. The Consolidated
Income Statement for the 52 weeks to 1 February 2014 has consequently been re-presented as if Bank had
been discontinued from the start of the comparative year. The financial year ended 2 February 2013 has not
been re-presented.
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Financial Statements
Glossary
The Directors measure the performance of the Group based on a range of financial measures, including measures
not recognised by EU-adopted IFRS. These alternative performance measures may not be directly comparable
with other companies’ alternative performance measures and the Directors do not intend these to be a substitute
for, or superior to, IFRS measures. Terms are listed in alphabetical order.
Adjusted Earnings Per Share
The calculation of basic and diluted earnings per share is detailed in Note 10. 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. A reconciliation between
basic earnings per share and adjusted earnings per share is shown below:
Basic earnings per share
Exceptional items excluding loss on disposal of non-current assets
Tax relating to exceptional items
Adjusted earnings per share
2017
18.38p
0.66p
-
19.04p
2016
10.03p restated
2.62p
(0.38)p
12.27p
Core
The Group’s core Sports Fashion fascia is JD and the Group’s core market is the UK and Republic of Ireland.
Effective Core Rate of Taxation
A reconciliation between the UK main rate of corporation tax and the effective core rate from continuing activities
is as follows:
UK main rate of corporation tax
Depreciation and impairment of non-qualifying non-current assets
Loss on disposal of non-qualifying non-current assets
Effect of tax rates in foreign jurisdictions
Expenses not deductible and income not taxable
Recognition of previously unrecognised tax losses/movement in deferred tax assets
Other
Effective core rate of taxation
2017
%
20.0
0.7
-
0.3
0.3
0.2
0.3
21.8
2016
%
20.2
0.7
(0.1)
0.5
(0.1)
(0.1)
0.3
21.4
LFL (Like for Like) Sales
The percentage change in the year-on-year sales, removing the impact of new store openings and closures in the
current or previous financial year.
Operating Profit Before Exceptional Items
A reconciliation between operating profit and operating profit before exceptional items can be found in the
Consolidated Income Statement.
Profit Before Tax and Exceptional Items
A reconciliation between profit before tax and profit before tax and exceptional items is as follows:
Profit before tax
Exceptional items
Profit before tax and exceptional items
2017
£000
238,368
6,419
244,787
2016
£000
131,631
25,496
157,127
Annual Report & Accounts 2017