ANNUAL REPORT AND ACCOUNTS
REPOR
RT
TIMES
SQUARE
JD Sports Times Square, New York US
OPENSOON CONTENTS
HIGHLIGHTS
OVERVIEW
2
4 WHO WE ARE
26 WHERE WE ARE
32
EXECUTIVE CHAIRMAN’S STATEMENT
STRATEGIC REPORT
42 BUSINESS MODEL
44 OUR STRATEGY
48 PRINCIPAL RISKS
70 BUSINESS REVIEW
72 FINANCIAL REVIEW
75 PROPERTY AND STORES REVIEW
80 CORPORATE AND SOCIAL
RESPONSIBILITY
109 SECTION 172 STATEMENT
GOVERNANCE
114 THE BOARD
116 DIRECTORS’ REPORT
122
129 AUDIT COMMITTEE REPORT
132
CORPORATE GOVERNANCE REPORT
DIRECTORS’ REMUNERATION REPORT
FINANCIAL STATEMENTS
162 STATEMENT OF DIRECTORS’
164
178
178
179
180
181
182
RESPONSIBILITIES
INDEPENDENT AUDITOR’S REPORT
CONSOLIDATED INCOME STATEMENT
CONSOLIDATED STATEMENT OF
COMPREHENSIVE INCOME
CONSOLIDATED STATEMENT OF
FINANCIAL POSITION
CONSOLIDATED STATEMENT OF
CHANGES IN EQUITY
CONSOLIDATED STATEMENT OF
CASH FLOWS
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
258 COMPANY BALANCE SHEET
259 COMPANY STATEMENT OF CHANGES
IN EQUITY
259 NOTES TO THE COMPANY FINANCIAL
STATEMENTS
GROUP INFORMATION
272 FINANCIAL CALENDAR
273 SHAREHOLDER INFORMATION
274 FIVE YEAR RECORD
275 GLOSSARY
© JD Sports Fashions PLC 2020
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HIGHLIGHTS
REVENUE
£6,110.8m
£4,717.8m
£3,161.4 m
£2,378.7m
£1,821.7m
2020
2019
2018
2017
2016
TOTAL DIVIDEND PAYABLE PER ORDINARY SHARE
0.28p**
1.71p
1.63p
1.55p
1.48P
2020
2019
2018
2017
2016
PROFIT BEFORE TAX AND EXCEPTIONAL ITEMS*
PROFIT BEFORE TAX
£438.8m
£355.2m
£307.4m
£244.8m
£157.1m
2020
2019
2018
2017
2016
£348.5m
£339.9m
£294.5m
£238.4m
£131.6m
2020
2019
2018
2017
2016
BASIC EARNINGS PER ORDINARY SHARE
ADJUSTED BASIC EARNINGS PER ORDINARY SHARE*
25.29p
26.90p
28.83p
18.38p
10.03P
2020
2019
2018
2017
2016
NET ASSETS
£1,289.2m
£1,076.8m
£834.3m
£578.8m
£499.8m
2020
2019
2018
2017
34.26p
28.44p
25.15P
19.04p
12.27p
2020
2019
2018
2017
2016
NET CASH*
£429.9m
£125.2m
£309.7m
£213.6m
£209.4m
2020
2019
2018
2017
2016
2
Throughout the Annual Report ‘*’ indicates the first instance of a term defined and is explained in the Glossary on page 275.
** Final dividend withheld as cash was preserved due to COVID-19 outbreak.
2016
3
GROUP REVENUE BY
GEOGRAPHICAL MARKET
UK
2020
EUROPE
43%
26%
US
26%
REST OF WORLD 5%
GROUP REVENUE BY
CHANNEL
RETAIL STORES
74%
MULTICHANNEL
23%
WHOLESALE
3%
OUR GROUP
1989
JD Sports opened
its first store in
London, on Oxford
Street.
1996
JD Sports Fashion
Plc was listed on
the London Stock
Exchange.
2005
57.5% of JD Sports
Fashion Plc was
bought by the
Pentland Group.
5
5
JD Sports began
with its first store
in Bury, Greater
Manchester.
The Group expanded
into the Outdoor
market with the
acquisition of Blacks
and Millets.
The Group launched its first JD
store in Malaysia, JD’s first entry
into South East Asia. JD is now
also present in Singapore and
Thailand.
The Group opened its first
gym as part of JD Gyms; an
affordable yet stylish gym
concept.
2011
JD Group acquired
Sprinter, a
leading Spanish
Sport Retailer in
footwear, apparel
and equipment;
JD’s first entry into
Spain.
2017
The Group acquired
Hot-T, a South Korean
retailer of branded
footwear.
The Group acquired
Go Outdoors, the
UK “destination” for
everything Outdoors.
The Group launched
its first JD store in
Melbourne, Australia.
2010
2018
2009
JD Group acquired
Chausport, a French
Sport Retailer;
the Group’s first
international presence
and entry into Europe.
2019
“JD Sports Fashion Plc
was promoted into the
FTSE100 list for the first
time on 24 June 2019.
This is a very notable
landmark for the Group
which could not have
been achieved without
the commitment of all
of our colleagues.”
Peter Cowgill
JD Group opened
its first European
JD store in Lille,
France.
The Group acquired Finish
Line in the United States, a
Sport Fashion Retailer with
a store presence across 44
states. The Group opened
its first five JD stores in
the US: Chicago, Houston,
Columbus, Washington
and Indianapolis.
WHO WE ARE
TIMELINE
1981
2012
2016
4
7
7
THE
LEADER
6
6
WHOWEARE WHO WE ARE
9
9
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.
JD SPORTS
JD is a sports fashion, multichannel
retailer of branded sports and casual wear,
combining globally recognised brands
such as Nike, adidas, Puma and The North
Face, with strong own brand labels such
as Pink Soda and Supply & Demand to
provide an elevated consumer experience.
JD is an industry leading retail business
which combines the best of physical and
digital retail to give a compelling consumer
proposition which enables its customers to
shop seamlessly across all channels.
781
STORES
19
TERRITORIES ACROSS
THE GLOBE
8
UNRIVALLED WHO WE ARE
SIZE?
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? has stores
in Belgium, Denmark, France, Germany, Italy,
the Netherlands and Spain.
37
STORES
11
2
STORES
FOOTPATROL
Footpatrol is famous for 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. The original Footpatrol
store is based in the heart of Soho on
Berwick Street which is complemented
with a second store on the fashionable
Rue de Temple in Paris. Footpatrol also has
dedicated local language sites for seven
other countries including the Netherlands
and Germany.
UNIQUE
AND
EXCLUSIVE
10
WHO WE ARE
CHAUSPORT
Chausport operates throughout France
retailing leading international footwear
brands such as Adidas, Nike and Timberland
to a more family focussed customer through
a network of 67 stores and a trading website.
67
STORES IN FRANCE
13
156
STORES
SPRINTER
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.
LEADING
FAMILY
12
WHO WE ARE
15
96
STORES
PERRY SPORT AND
AKTIESPORT
Sports Unlimited Retail operates in the
Netherlands under the Perry Sport and
Aktiesport fascias. Aktiesport is the largest
sports retail business in the Netherlands
with a sharp focus on selling football and
lifestyle goods from various brands such as
Nike, Adidas, Under Armour and FILA. Perry
Sport is a sports and adventure retailer with
a focus on functional sports, sports lifestyle
and adventure simultaneously.
LIFE
STYLE
SPORT ZONE
Sport Zone is a well-established and leading
multibranded sports retailer offering a
wide apparel, footwear, accessories and
equipment range across multiple sports.
The stores in Spain and the Canary Islands
now trade under the Sprinter banner with
Sport Zone now focussed in Portugal.
108
STORES
14
WHO WE ARE
FINISH LINE
Finish Line is one of the largest retailers of
premium, multibranded athletic footwear,
apparel and accessories in the United States.
Finish Line trades from over 500 branded
retail stores in more than 40 US states and
Puerto Rico and is also the exclusive partner
of athletic shoes for Macy’s.
508
STORES
17
JD GYMS
JD Gyms offers seriously stylish, seriously
affordable, award winning facilities across 30
prime locations and plays host to a bespoke
mix of industry leading fitness equipment
and an exciting range of fitness classes.
30
LOCATIONS
STYLE
16
SERIOUS WHO WE ARE
TESSUTI
Tessuti is a leading retailer of high fashion,
aspirational brands catering to both Men
and Women. Tessuti offers its consumers
a unique shopping experience through
its website and concept stores and is
a consumer destination for luxury and
desirable high fashion items, ranging from
footwear and accessories to apparel. Tessuti
stocks brands such as Hugo Boss, Polo
Ralph Lauren, Parajumpers and Stone Island.
39
STORES
19
SCOTTS
Scotts retails fashion and sport led brands
with authority to older, more affluent male
consumers largely beyond school age,
stocking brands such as Lacoste, Fred Perry,
Pretty Green and Paul & Shark.
22
STORES
HIGH
FASHION
18
BLACKS
21
21
57
STORES
Blacks is a long established retailer of
specialist outdoor apparel, footwear and
equipment. 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.
OUT
DOORS
WHO WE ARE
MAINLINE
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.
20
PREMIUM WHO WE ARE
MILLETS
Millets supply a more casual outdoor
customer who seeks value for money,
providing for a wide range of recreational
activities with an emphasis on exclusive
brands, such as Peter Storm and Eurohike.
97
STORES
23
23
GO OUTDOORS
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 exclusive brands such as Hi-Gear,
North Ridge and Freedom Trail, GO is
constantly looking for fresh ideas to keep
things fun.
67
STORES
INSPIRING
IDEAS
22
WHO WE ARE
TISO
Tiso is Scotland’s leading adventure sports
retailer specialising in outdoor, mountain,
skiing and cycling. Originally founded in
1962, their reputation for quality has been
established over 57 years. The Tiso group is
based in Scotland, but includes the iconic
George Fisher store in the English Lake
District.
13
STORES
25
ADVENTURES
ICONIC
24
QUALITY
WHERE WE ARE
FROM THE NORTH WEST
OF ENGLAND TO THE
WEST COAST OF THE US
UNITED KINGDOM
REPUBLIC OF IRELAND
BELGIUM
SPAIN
PORTUGAL
US
The Group has over 2,400 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 in store digital technology providing
it with a truly multichannel, international
platform for future growth.
Where we are
Rest of the World
OVER
2,400
STORES
SWEDEN
FINLAND
DENMARK
AUSTRIA
FRANCE
THE NETHERLANDS
GERMANY
ITALY
27
SOUTH KOREA
THAILAND
MALAYSIA
SINGAPORE
AUSTRALIA
GLOBAL
26
WHERE WE ARE
29
SPORTS FASHION FASCIAS
JD UK AND ROI
STORES
000 SQ FT
OTHER ASIA PACIFIC(ii)
STORES
000 SQ FT
2020
2019
402
390
1,649
1,583
2020
2019
2
33
8
156
JD EUROPE
STORES
000 SQ FT
FINISH LINE (OWN)
STORES
000 SQ FT
2020
2019
304
252
838
661
2020
2019
508
529
1,722
1,797
JD ASIA PACIFIC
STORES
000 SQ FT
FINISH LINE (MACY’S(iii))
STORES
000 SQ FT
2020
2019
JD US
2020
2019
SIZE
2020
2019
64
46
268
201
STORES
000 SQ FT
11
5
47
22
STORES
000 SQ FT
37
41
54
59
SUB-TOTAL JD AND SIZE
STORES
000 SQ FT
2020
2019
818
734
2,855
2,526
FASHION UK
STORES
000 SQ FT
2020
2019
153
84
494
250
OTHER EUROPE(i)
STORES
000 SQ FT
2020
2019
427
438
2,825
2,869
2020
2019
TOTAL
2020
2019
295
349
STORES
2,203
2,167
286
311
000 SQ FT
8,190
7,909
30
JD BRANDED
GYMS*
(i) Chausport (France), Sprinter (Spain), Sport Zone (Portugal, Spain & Canary Islands) and Perry Sport / Aktiesport (Netherlands)
(ii) Hot-T (South Korea) and Glue (Australia) – disposal of Glue business completed 9 August 2019
(iii) Being Finish Line branded concessions within Macy’s department stores only
28
*AT THE PERIOD END AFTER SEVEN OPENINGS IN THE YEAR.
31
EXE
CU
TIVE
STATEMENT
WHERE WE ARE
OUTDOOR FASCIAS
BLACKS
2020
2019
MILLETS
2020
2019
STORES
000 SQ FT
57
56
204
198
STORES
000 SQ FT
97
99
203
209
ULTIMATE OUTDOORS
STORES
000 SQ FT
2020
2019
TISO
2020
2019
6
6
146
146
STORES
000 SQ FT
13
14
93
96
GO OUTDOORS
STORES
000 SQ FT
2020
2019
67
64
1,945
1,904
GO OUTDOORS FISHING
STORES
000 SQ FT
5
14
STORES
245
253
22
79
000 SQ FT
2,613
2,632
2020
2019
TOTAL
2020
2019
30
CHAIRMAN’S EXECUTIVE CHAIRMAN’S STATEMENT
EXECUTIVE CHAIRMAN’S STATEMENT
GROUP DEVELOPMENTS AND PROGRESS
INTRODUCTION
Whilst COVID-19 has constrained our short
term progress, it is important that we do
not lose sight of the core retail standards
and commercial disciplines which have
underpinned our longer term growth to
date. JD has a market leading multi-channel
proposition which maximises its consumer
relevance and reach by creating and then
maintaining a deep emotional connection
with its consumers who see JD as an
authoritative and trustworthy source of
style and fashion inspiration with influences
drawn from both sport and music.
This proposition remains extremely robust
and, in that regard, I am pleased to report
that it was another year of significant
progress for the Group with global revenues
increasing by 30% to £6,110.8 million (2019:
£4,717.8 million) and the headline profit
before tax and exceptional items increasing
by a further 24% to £438.8 million (2019:
£355.2 million). This represented another
record result for the Group.
This result also reflects the application of
IFRS 16 ‘Leases’ for the first time. The Group
has adopted the modified retrospective
transition approach to this new accounting
standard with the result to 2 February 2019,
which reflected the application of IAS 17
‘Leases’, not requiring restatement. On a
consistent accounting basis, the proforma
headline profit before tax and exceptional
items to 1 February 2020 under IAS 17
‘Leases’ would have been £465.6 million
being £110.4 million higher than last year
and £26.8 million higher than that reported
under IFRS 16 ‘Leases’.
A major driver in the improved result is the
inclusion, for the first time, of a full year
contribution from the combined Finish Line
and JD businesses in the United States. We
are pleased with our progress here with
these businesses delivering an operating
profit of £94.2 million (£97.9 million on a
proforma basis under IAS 17 ‘Leases’) (2019:
£26.6 million for the 33 week period post
acquisition).
JD (UK AND REPUBLIC OF IRELAND)
In normal market conditions, consumer
demand for the JD proposition in our core
markets remained very strong with the
total like for like sales growth of more than
10% which we reported for the first half
continuing through the rest of the year. This
was a good performance given the well-
publicised multiple retail challenges in the
UK even before the COVID-19 outbreak and
the tough comparatives from our growth
over a number of years.
We have always believed that the retail
estate for JD in the UK and Republic of
Ireland provides positive benefits in terms
of brand awareness, the customer’s desire
to see, handle and try the product, and
our ability to provide convenience through
multiple delivery points. However, given the
30%
INCREASE IN GLOBAL
REVENUES
clear uncertainty on future levels of footfall,
particularly if social distancing remains an
ongoing requirement, it is inevitable that
maintaining a large nationwide physical
retail presence will require greater flexibility
in property leases.
JD (INTERNATIONAL)
The JD fascia made further significant
progress in its international markets with a
net increase of 76 stores in the year:
• Europe: JD enjoyed another year of
double digit growth in like for like sales,
both in stores and online, complemented
32
by a net increase of 52 stores with new
stores in most of our existing territories
together with our first JD store in Austria
meaning that JD now has a presence in 11
countries across Europe.
Our previously stated ambition of
opening one store on average per week
across Europe reflected a world before
the COVID-19 outbreak. With restricted
movement and activity across the majority
of the territories, the fit-out programme
was largely halted for a number of weeks.
Footfall has been subdued in many
countries in Europe after re-opening and,
whilst this has partially been mitigated by
improved conversion, we have decided
to delay a number of projects that were
planned for this year whilst we assess the
post re-opening performance. It is also
entirely feasible that some projects may
not proceed under the current lease terms.
Consequently, we expect that the number
of openings this year will be significantly
reduced, However, it is still our intention
to open a flagship style store on the key
street of Rue de Rivoli in the centre of
Paris later in the summer.
• Asia Pacific: There was a net increase
of 18 stores in the period with additional
stores in all of our territories. We are
particularly encouraged by further positive
developments in Australia where, after
opening our first JD store in April 2017,
we are now firmly established with 24
stores and a full operational infrastructure.
The Glue business, which we acquired in
2016, no longer provided any strategic
benefit to the ongoing development of
JD and was disposed of during the year.
Elsewhere, there was another positive
performance in Malaysia and we have
doubled our presence in both Singapore
and Thailand with four stores now trading
in each country. In South Korea, we have
increased our store base from 16 stores to
19 stores.
• North America: At the end of the year
the JD presence in the United States had
increased to 11 stores with one new store
at Lincolnwood (Chicago) complemented
by the conversion of a further five
33
existing Finish Line stores. Two of the
conversions, Mall of America (Minnesota)
and Deerbrook Mall (Houston) were ‘full’
conversions with the installation of the
full JD retail systems across all product
categories. The remaining three stores,
Mall of Georgia (Atlanta), Cumberland Mall
(Atlanta) and Roosevelt Field (New York)
were ‘lite’ conversions with the installation
of fixtures for apparel and changes to
the signage with the existing Finish Line
footwear systems largely retained. These
‘lite’ conversions, which require less non-
trading time and can be delivered with
substantially less capital investment,
provide a more flexible framework to
develop JD and are appropriate to the
current trading environment.
We have a clear vision to develop JD
in the major metropolitan markets with
more than 70 additional existing Finish
Line stores considered as being suitable
for conversion to JD of which six have
already been converted in the year to date
in the ‘lite’ style. It is our current intention
that the majority of the remainder will
be converted over the next two years
although the exact timings for these
works will need to be flexed according
to the specific factors and any ongoing
restrictions at each location. At the
instruction of the local authorities and as a
consequence of COVID-19, we also had to
pause work on the fit out of our flagship
store in Times Square, New York. We have
now been able to re-commence on site
and would currently expect this store to
be open by the end of the summer. This
store will be an important milestone in
our development significantly enhancing
our presence and standing with both
consumers and our brand partners in the
United States.
After the period end, we completed the
acquisition of Onepointfive Ventures
Limited in Canada which consists of four
stores trading as Livestock and a website
trading as Deadstock. Based in Vancouver,
this business and its management team
will provide the platform to develop JD
in Canada.
STRENGTH EXECUTIVE CHAIRMAN’S STATEMENT
35
of 54 branded concessions in the year.
This includes a number of locations which
were a consequence of the closure of the
Macy’s host store.
1
Improving sales densities: Prior to
our acquisition, sales of apparel
POSITIVE
FOOTASYLUM
In April 2019 we acquired the Footasylum
business for cash consideration of £86.0
million with the Group also assuming net
debt of approximately £7.8 million. At
acquisition, Footasylum had 69 stores
across the UK complemented by a well-
regarded trading website.
Elsewhere, we continue to be encouraged
by the positive developments in our
Premium Fashion and Gyms businesses.
At the end of the period, we had 30 gyms
across the UK with a membership base of
approximately 158,000 members.
OTHER FASCIAS
Away from JD, there were positive
developments in our other Sports Fashion
businesses in the year:
• Sprinter & Sport Zone (Iberia): The
process to integrate the Sport Zone
businesses in Portugal and the Canary
Islands into the Sprinter operational
infrastructure and to trade through the
excess and disjointed stock from our
acquisition has now completed. The
Sport Zone stores in the Canary Islands
have been converted to the Sprinter
banner although we will retain the Sport
Zone name in Portugal where there is
considerable customer goodwill. Whilst
Iberia, and particularly Spain, has been
one of the regions most impacted by the
COVID-19 outbreak, we firmly believe
that our combined Sprinter and Sport
Zone proposition, which has a greater
emphasis on active sport participation and
fitness, are emerging in a robust position
with their operations already structured
appropriately for the future.
• Finish Line (United States): We believe
that the Finish Line fascia appeals to a
different core demographic to JD and so
we will need both banners longer term if
we are to have flexibility in our consumer
reach and appeal. Finish Line is an
important fascia in our Group and we are
pleased with the developments in its first
34
full year as a subsidiary and the progress
against the key commercial pillars which
we identified previously as providing the
foundation for a sustained improvement in
the performance over the longer term:
represented approximately 5% of total
sales. We believe there is an opportunity
to increase this both in stores and online
although some investment is needed in
additional relevant fixtures and in-store
marketing to ensure that the apparel offer
is presented with authority. This
investment is ongoing with seven stores
given a full refurbishment in the year to
Finish Line’s ‘Store of Now’ concept and a
further 60 stores refurbished in a ‘lite’
style with the installation of relevant
additional fixtures. Work on further
refurbishments was paused as a result of
the COVID-19 outbreak although these will
recommence in due course. We are
encouraged by the early trends on footfall
in the United States in the immediate
period after re-opening with consumers
seemingly more confident to return to
malls than in Europe.
2
Improving product margins: We
continue to make progress on
managing markdown and improving
buying disciplines with product margins
across the combined stand-alone stores
and Macy’s concessions increasing by 0.7%
compared to the proforma equivalent
52-week period in the prior year.
3
Exiting underperforming stores:
In addition to converting five former
Finish Line stores to JD, we also exited 17
underperforming Finish Line stores in the
year as we continued the process of
rightsizing the retail estate. The store
portfolio is under constant review with
decisions on the future strategy of each
store made on a case by case basis taking
into account a number of factors including
the cost of the property, occupancy rate in
the specific mall and trends on both sales
and footfall. There was also a further
reduction in the number of Macy’s
branded concessions with a net decrease
CMA’s ongoing enforcement order which
obliges us to operate the Footasylum
business separately.
OUTDOOR
This has been a challenging period for
our Outdoor businesses overall with an
improved result in the Blacks and Tiso
businesses overshadowed by a significant
loss in the larger Go Outdoors business.
This business underwent significant change
in the period with the transition of store
fulfilment to a central warehouse model
in the first half of the year and then the
closure, later in the year, of its principal
office in Sheffield. Both of these actions
were more disruptive to the operations of
the business in the year than anticipated.
We believed that we had substantially
resolved these operational issues by the
end of the financial year and that Go
Outdoors was then more appropriately
structured operationally. However, the onset
of COVID-19 has added a new material
challenge to trading as the business is more
sensitive to reductions in footfall compared
to other Outdoor fascias in the Group, with
a disproportionate reliance on physical store
sales which, historically, have represented
more than 90% of total revenues.
Unfortunately, as has been widely reported,
reduced consumer confidence and the
requirement to maintain social distancing in
stores have resulted in levels of footfall not
returning to pre-lockdown levels.
The current trading risk then brings into
sharper focus the operating costs of the
business, in particular the inflexible terms
of the property leases in Go Outdoors. The
stores have an average remaining period to
lease expiry of approximately 10 years with
upwards only rent reviews, many of which
are fixed at rates above inflation regardless
of the market rent in the location, combined
with onerous requirements to correct
historic property dilapidations.
Given the potential for Go Outdoors to
remain loss making for the foreseeable
future, the Group considered a number of
alternative strategic options which included
This transaction was reviewed by the
Competition and Markets Authority (‘CMA’)
which announced in its Final Report on 6
May 2020 that it had decided to prohibit
the merger and that, consequently, the
Group would be required to fully divest
its investment. The Group fundamentally
disagrees with the conclusion reached by
the CMA, as it fails to take proper account
of the dynamic and rapidly evolving
competitive landscape in which the Group
operates, which has changed materially
in the period since the acquisition was
completed.
We are currently in negotiations with the
CMA as to how the divestment process
will be conducted and monitored. Further,
having considered the CMA’s decision
carefully we firmly believe that we are
justified in making an application for
Judicial Review to the Competition Appeal
Tribunal. This procedure will run in parallel
with the CMA’s divestment process. In the
meantime, we continue to observe the
108
NEW STORES
EXECUTIVE CHAIRMAN’S STATEMENT
engaging advisers in May 2020 to market
the business to a number of parties. In
the absence of a suitable offer, the Board
decided that it was not in the best interests
of the wider Group, and its shareholders,
to provide continued financial support to
Go Outdoors in its existing form and so Go
Outdoors entered into administration on
23 June 2020.
The Group then reacquired the trade and
assets for a cash consideration of £56.5
million which returns to the Group as partial
repayment against its historic indebtedness,
a transaction approved in advance by
the independent Pre Pack Pool, and now
occupies the stores under licence from
the Administrator. The Group continues to
determine an appropriate store base for the
longer term and has already commenced
negotiations with landlords for new leases
with terms which are structured more
appropriately. The Group believes that
the approach it has taken has delivered
the best result for creditors, with the
Group committing to honouring liabilities
with regards to branded stock suppliers,
employees, HMRC taxation liabilities,
customer returns and historic gift card
sales. Further, all pre-existing Go Outdoors
employees have transferred across to the
new business with their previous terms and
conditions of employment preserved.
We believe that the restructuring of Go
Outdoors will correct fundamental historic
structural weaknesses in the business and,
whilst we regret that there will inevitably
be some store closures in future months,we
are pleased that it will protect the maximum
number of jobs possible. A greater future
integration of the Outdoor businesses, with
Blacks and Go Outdoors having access to
common merchandising systems and shared
commercial resources will provide a robust,
effective and cost efficient platform for
longer term developments.
limited quantity of product from the new
automation equipment through the autumn
and winter peak season to allow the new
system and processes to stabilise. The
intention then was for the volumes picked
through this new extension to accelerate
from the New Year thereby reducing
the pressure on our legacy automation
equipment where picking capacity has
consistently been constrained at lower
levels than was originally expected.
With the onset of COVID-19, and the
requirement for social distancing, we
have had to reduce the maximum number
of people that we can have on site at
Kingsway at any one time. While these
restrictions have started to be relaxed, we
need to mitigate the risk of these measures
being tightened again which could constrain
our operation through the peak trading
period later in the year. Accordingly, there
is an ongoing programme of modifications
to ensure that we can continue to operate
safely and effectively in this situation. These
include making a number of structural
improvements to remove bottlenecks in
the operation, including the provision of
additional communal welfare facilities. We
are also introducing additional shift patterns
to reduce the number of people entering /
exiting the site at any time.
Elsewhere, we have also now opened an
80,000 sqft warehouse in Belgium which,
with mezzanines, has an internal footprint
of approximately 280,000 sqft. This site,
which has now started to receive stocks
and is fulfilling product to some European
stores, will provide us with a number of
learnings which we can use to shape our
longer term European supply chain strategy.
In addition, it will also help us mitigate some
of the potential additional duty costs which
may arise from January 2021 if we exit
the current transition period with the EU
without an appropriate trade agreement.
SUPPLY CHAIN DEVELOPMENTS
The 352,000 sqft extension to our Kingsway
facility in Rochdale was commissioned in
Autumn 2019. We initially only picked a
BREXIT
The UK has now left the EU and is in a
transition period to 31 December 2020.
At this stage, the exact nature of the UK’s
36
37
future relationship with the EU beyond the
end of this transition period is uncertain
and so we remain cognisant of the potential
adverse consequences on supply chains,
tariffs, exchange rates and consumer
demand.
The new warehouse in Belgium which has
now started to receive stocks and is fulfilling
deliveries to some European stores will help
us mitigate some of the potential additional
duty costs which may arise from January
2021 if the UK exits the current transition
period with the EU without an appropriate
trade agreement. It will also provide us with
a number of learnings which we can use
to shape our longer term European supply
chain strategy.
2020, have also been deferred. It is the
intention of the Board and Remuneration
Committee that these will be paid at some
point with the timing of these payments
reflecting the evidence of our actual post
re-opening performance and the projected
cashflows of the Group.
The Group is absolutely committed to
promoting policies which ensure that
colleagues and customers are treated
equally regardless of ethnic or social origin,
race, gender, sexual orientation, disability
or age. The tragic death of George Floyd
has affected us all and we strongly agree
that #blacklivesmatter. We acknowledge
the urgent need for change to eradicate not
just racism but all forms of discrimination in
PEOPLE
The commitment of
colleagues at all levels
has been crucial in our
increasingly global
development and I would
like to thank everyone
in our businesses for
their contribution in
delivering another set
of excellent results. Our
colleagues now face a
different challenge and I
can assure them that the
safety of them, and our
consumers, will always be
our number one priority.
I look forward to the
point when the situation
normalises and we are
able to resume our progression giving our
colleagues the opportunities to develop
their individual careers and achieve their
personal ambitions.
On behalf of the Board, I would also like
to thank the Senior Management team in
the Group who have joined us in accepting
ongoing voluntary salary reductions of at
least 25%. The payment of bonuses and
other contractual incentive payments, due
or arising in respect of individual and Group
performance in the year ended 1 February
society and we recognise that, as a global
business, we have a responsibility to play a
full part in this process. We will collaborate
with our teams around the world to achieve
this objective.
IMPACT OF COVID-19
We suffered our first full country closure
on 11 March 2020 when we closed all of our
stores in Italy. Over the subsequent two
weeks we then closed all of our stores in
a further 13 countries including the United
OPPORTUNI 39
Our next scheduled update will take place
upon the announcement of our Interim
Results which are scheduled for
8 September 2020.
Peter Cowgill
Executive Chairman
7 July 2020
EXECUTIVE CHAIRMAN’S STATEMENT
States where all our stores were closed
by 20 March 2020 and the UK, where all
our stores were closed by 23 March 2020.
Across these 14 countries, this represented
a closure of approximately 98% of the
Group’s total physical store estate.
Our trading websites continued to accept
and fulfil orders in most of these territories
in the closure period which was important,
as not only did it enable us to continue to
turn stock and generate cash, but it also
ensured that we retained engagement and
relevance with consumers. Not surprisingly,
we saw a very strong performance online
in the store closure period and, while these
levels of growth may reduce with time,
it is perhaps inevitable that there will be
some level of permanent transfer from
physical retail to online as a consequence of
COVID-19. To accommodate this possibility,
we have now invested further in our
principal warehouse at Kingsway, Rochdale,
giving us the flexibility in our operational
infrastructure to deal with the additional
volumes online effectively and efficiently.
Whilst the majority of stores have now re-
opened, it is very clear that footfall in stores
will remain uncertain for the foreseeable
future. Social distancing measures have a
disproportionate effect in smaller space,
particularly for fascias like JD which attract
high levels of footfall over concentrated
periods of time such as weekends and
school holidays. This concentration of
footfall has historically been most evident in
major malls and city centres and it is these
locations which are likely to see the biggest
impact relative to historical levels if social
distancing measures continue to operate in
some form, particularly through the peak
period later in the year. However, in terms of
our core UK market, a significant nationwide
presence in both High Streets and Out of
Town Retail Parks does provide consumers
with an alternative location if they wish
to avoid enclosed spaces. Recognising
that rents effectively buy footfall, we will
continue to push for greater correlation
38
between levels of footfall and rents payable
across our physical retail estate.
CURRENT TRADING AND OUTLOOK
Only a relatively short period of time has
elapsed since the reopening of stores in
our core market. This, combined with the
continued uncertainty around the recovery
of footfall and the application of social
distancing measures across many of our
territories, means that it is too early to
extrapolate this performance and give
meaningful guidance for profits in the
current year. However, we were encouraged
by the continued positive trading in
the early weeks of the year prior to the
emergence of COVID-19 and we firmly
believe that we are well placed to regain our
previous momentum.
We are confident that JD’s premium multi-
brand proposition retains its consumer
appeal. We continually challenge
ourselves to advance this proposition and
transform all aspects of the customer
journey through innovation in consumer
awareness, engagement and retail theatre;
an evolving and often exclusive premium
brand selection which is underpinned
by authenticity; and investment in
new technologies in stores, online and
within our operational infrastructure. By
maintaining these standards and principles,
we are confident that we will have the
right foundations for future positive
developments.
Looking longer term, there is inevitably
considerable uncertainty as to what the
effect of COVID-19 will be on consumer
behaviour and footfall with future store
investments highly dependent on rental
realism and lease flexibility. Ultimately,
however, we remain confident that we have
a market leading multi-channel proposition
which has the necessary flexibility and
agility to prosper within a retail environment
that may see profound and permanent
structural change.
CHALLENGES STRATEGIC REPORT
STRATEGIC
4141
REPORT
40
REPORT BUSINESS MODEL
19
COUNTRIES
2,448
STORES
The Group’s principal JD fascia is
widely recognised as the leading
retailer of branded and own
brand sports fashion apparel and
footwear in the UK and Ireland.
53,477
COLLEAGUES
KEY INPUTS
43
INTERNATIONAL
BRANDS
OWN BRANDS
SUPPLY CHAIN
TECHNOLOGY
AND IT
INFRASTRUCTURE
THIRD PARTY
LOGISTICS
ACTIVITIES
KEY COMMERCIAL ACTIVITIES
REVENUE CHANNELS
RETAIL
MERCHANDISING
BUYING
MARKETING
MULTICHANNEL
PROPERTY DISTRIBUTION
• Providing customers with exclusive ranges from the best brands in sports fashion and outdoor.
• Market leading online and in-store technology.
• World class standards.
42
STORES
INSTORE
DEVICES
APPS
DESKTOP,
TABLET AND
MOBILE
OPTIMISED
WEBSITES
STORE COLLECTION
OR HOME DELIVERY
OUR STRATEGY
GLOBAL EXPANSION
The Group’s principal JD fascia has
been widely recognised for a number of
years as the leading retailer of branded
and own brand sports fashion apparel
and footwear in the UK and Ireland.
Increasingly, the JD fascia is attracting
a similar reputation internationally with
further significant expansion in mainland
Europe in particular where we now have
more than 300 stores across 11 countries,
including the first stores in Austria.
There has also been further expansion
in the Asia Pacific region, particularly
Australia. The development of JD in
the United States is also now starting
to gain momentum with a further six
stores opened in the year. This includes
the conversion of five former Finish Line
stores and, notwithstanding the operating
restrictions caused by COVID-19, it
remains our intention to convert at least
a further 20 stores to JD in the year to
January 2021.
Extending the global reach of our
JD fascia is viewed positively by the
international brands, both existing and
new, and we look to leverage that positive
regard for our proposition by negotiating
enhanced access to new and often
exclusive products, further increasing the
differentiation in our offer.
MARKET POSITION
We ensure that the JD retail fascia retains
its dynamic appeal and forges deeper
connection with its consumers through
the continual investment in our physical
store portfolio, digital platforms and
creative marketing. We continually look
to further elevate the market position of
the JD fascia and enhance the experience
for the customer through the constant
nurturing of global branded supplier
relationships, existing and new, which
we can develop and exploit to ensure
our overall product range remains both
authentic and uniquely appealing with
our stores being highly differentiated
destinations.
Our core business strength is
branded sports fashion and outdoor
retail presented in an omnichannel
environment. Where we use own
brands we will seek to present them as
complementary to third party brands
giving us additional options in ranging
and price architecture. We seek to build
very strong market positions and we look
to maintain these through a continuous
and intensely analytical approach to
understanding business performance.
We update our brand line up regularly,
endeavouring to be the partner of choice
to as many brands as possible with as
much exclusive product as possible. The
Board considers that continuing supply
from Nike and Adidas, being the main
suppliers of third party branded sporting
products, to the Group’s core sports
fashion retail operation is essential to the
business of the Group.
We look to protect profitability by
continuing our rigorous approach to
margin protection and, whilst we will
promote product where appropriate,
we aim to avoid short term reactive
discounting unnecessarily when our
proposition is well differentiated.
44
45
The penetration of online sales as a
proportion of total sales in a business varies
depending on a number of factors including
customer demographics, geographical
reach, technological capability and relative
maturity of the website. We see the greatest
penetrations in our specialist Size? business,
which has a significant international
following, and Finish Line, which distributes
product across the whole geography of the
United States and also has ‘Pick from Store’
capabilities. In terms of our core JD fascia
then online sales represented 22% (2019:
18%) of total fascia sales in the core markets
of the UK and Republic of Ireland (excluding
kiosk sales) and 15% (2019: 13%) in Europe,
where our online operations are less mature.
BREXIT
The UK has now left the EU and is in a
transition period to 31 December 2020.
At this stage, the exact nature of the UK’s
future relationship with the EU beyond the
end of this transition period is uncertain.
The key direct and indirect risks associated
with the range of outcomes at the end
of this transition period along with the
mitigating activities that have been, or will
be implemented, by the Group are detailed
further in the Principal Risks section on
page 65. Detailed analysis and stress testing
has been undertaken to assess the potential
impact of the key risks and the results
of this testing are outlined further in the
Viability Statement section on page 69.
STORE PORTFOLIO
We are engaged in omnichannel retail with
the retail estate being essential to brand
and product awareness, the customers’
overall digital experience and our ability to
provide multiple delivery points. 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.
Considerable time and financial resources
are invested in expanding and refurbishing
our retail property portfolio although
we continue to work with landlords on
ensuring that our portfolio of leases has
the maximum flexibility and the lowest
committed cost possible. 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 26.
MULTICHANNEL
The continuing international growth in
physical store space is complemented by
ongoing investment in our international
multichannel capability through a
significant multicurrency and multilanguage
website estate. We utilise our digital
platforms to maximise our reach and
impact to consumers at a domestic and
international level with consumers able to
shop seamlessly across all channels. We
believe this multichannel capability is a key
differentiator for our business.
Our digital and social media channels are
important destinations for our customers
with in store digital devices (kiosk, web till
and iPad) also giving customers additional
options to purchase in store as they enable
access to the full product range on the
website and the full inventory held in the
warehouse. We have also recently extended
our multichannel capabilities with the
launch of ‘Pick From Store’ enabling online
customers to have access to stock which
may be in stores.
EXPANSION 47
47
regards to a number of topics including;
Our People, Health & Safety, Energy & the
Environment and Ethical Sourcing.
The risks faced by the Group and our
mitigation plans are reported separately
on pages 48 to 69.
Note
2020 £m
6,110.8
2019 £m
4,717.8
Change %
29.5%
47.0%
47.5%
23.2%
43.0%
23.5%
2.5%
426.6
516.9
438.8
348.5
25.29p
34.26p
0.28p
429.9
346.2
361.5
355.2
339.9
26.90p
28.44p
1.71p
125.2
10
29
CORPORATE AND SOCIAL
RESPONSIBILITY
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 corporate and social responsibility
section on pages 80 to 108 provides
information on the Group’s strategy with
FINANCIAL KEY PERFORMANCE INDICATORS
Revenue
Gross profit %
Operating profit
Operating profit (before exceptional items)*
Profit before tax and exceptional items
Profit before tax
Basic earnings per ordinary share
Adjusted earnings per ordinary share
Total dividend payable per ordinary share
Net cash at end of period
On behalf of the Board
Peter Cowgill
Executive Chairman
7 July 2020
OUR STRATEGY
INVESTMENT IN NEW BUSINESSES
Any new business 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 shareholder returns (‘TSR’)
through share price 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 154.
INFRASTRUCTURE AND RESOURCES
Details of the significant investments we
continue to make in logistics are included
in the Executive Chairman’s Statement on
page 37 and the Working Capital and Cash
section of the Financial Review on page 73.
52 week period
ended 1 February
2020
52 week period
ended 2 February
2019
m
m
Number of items
processed by
Kingsway Distribution
Centre
94.83
85.50
46
PRINCIPAL RISKS
ASSESSMENT OF PRINCIPAL RISKS
AND UNCERTAINTIES
The Directors confirm that they have
carried out a robust assessment of the
principal risks and uncertainties facing
the Group, including those that would
threaten its business model, future
performance, solvency or liquidity. The
principal risk areas remain the same as
reported last year apart from COVID-19 as
detailed below, and are described below
along with explanations of how they are
managed/mitigated.
COVID-19
A detailed summary of our impact
assessment on the risks that the
coronavirus pandemic poses to the
business, together with potential
mitigating actions to conserve cash, is
included in the Chief Executive’s Review.
SUPPLY CHAIN RISKS
As with other retailers and distributors
into retail businesses, the Group’s core
retail business is highly seasonal and the
most important trading period in terms
of sales, profitability and cash flow in its
Sports Fashion fascias continues to be the
Christmas season. Lower than expected
performance in this period may have
an adverse impact on results for the full
year and may result in excess inventories
that are difficult to liquidate. The Group
seeks to manage this risk by monitoring
the stock levels and managing the peaks
in demand constantly with regular sales
reforecasting. As the Group continues to
grow and expand, the seasonal peak at
Christmas becomes further exaggerated
necessitating even greater flexibility in
the Group’s warehouse and distribution
network. Consequently, the 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 increases.
The supply chain risks and uncertainties
that are specific to the Group and the
markets in which its businesses operate
are as follows:
48
49
LINK
TO OUR
STRATEGY
M
A
R
K
E
T
P
O
S
I
T
I
O
N
RISK AND IMPACT
MITIGATING ACTIVITIES
CHANGE IN
RISK EXPOSURE
2019/20
BEFORE
MITIGATING
ACTIVITIES
The Group seeks to ensure it is not
overly 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.
Furthermore, the Group continues
to actively seek additional brands
which it can either own or license
exclusively.
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.
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.
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.
M
A
R
K
E
T
P
O
S
I
T
I
O
N
INTELLECTUAL PROPERTY
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.
RISK
PRINCIPAL RISKS
RISK AND IMPACT
WAREHOUSE OPERATIONS
A large proportion of the Group’s
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, universal product
availability and quicker deliveries
to our European stores. 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.
CHANGE IN
RISK EXPOSURE
2019/20
BEFORE
MITIGATING
ACTIVITIES
MITIGATING ACTIVITIES
LINK
TO OUR
STRATEGY
A
N
D
R
E
S
O
U
R
C
E
S
I
N
F
R
A
S
T
R
U
C
T
U
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E
The Group has previously 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 qualified
engineers thereby enabling immediate
attention to any equipment issues.
The Group also pays for enhanced
‘hypercare’ support over the seasonal
peak period from Black Friday in
November to after Christmas.
The construction of an extension to
the facility at Kingsway has now been
completed including the installation
of additional automation equipment,
The completion of this project enables
a large part of the fulfilment for
stores and online to be processed
independently in different locations
thereby providing greater flexibility
and resilience. Whilst it is an extension
rather than a separate building, there
is a two hour fire resistance wall
between the two operations. The
Group’s insurers have been involved at
every stage of the project.
Other projects to further expand
our warehousing capabilities and to
reduce the pressure on the Kingsway
site include:
1
We have now completed a project
to fit out a separate dedicated
51
ENVIRONMENTAL, SOCIAL AND
GOVERNANCE (ESG) RISKS
Improving the sustainability and
environmental performance of the Group
has been a key facet of our business plan
over recent years, with efforts intensifying
due to both external pressures, and our
increasing global footprint. Accordingly,
the Group has decided to aggregate our
known ESG risks, impacts and mitigating
activities within this new section of our
Annual Report. This further emphasises
our recognition and acceptance of the
importance of environmental and social
considerations as a core part of our
corporate ethos and strategy, which
instigate continued ESG improvements
within our commercial operations.
Robust governance, transparency and
accountability principles underpin our
approach across all areas of the business.
Understanding and assessing ESG risks
supports our efforts to mitigate and
manage accordingly, benefitting both
the Group, and the local environments in
which we operate.
RISK AND IMPACT
CHANGE IN
RISK EXPOSURE
2019/20
BEFORE
MITIGATING
ACTIVITIES
MITIGATING ACTIVITIES
LINK
TO OUR
STRATEGY
ENVIRONMENTAL –
CLIMATE CHANGE
Carbon emissions
The Group has a global estate
requiring energy to operate its
activities. The Group has direct
control of a limited number of
non-retail sites, but accepts
that these sites, and our core
retail businesses (within leased
buildings) must proactively
manage and reduce their
respective energy usage and
associated carbon emissions.
We envisage that energy
usage and carbon emissions
will continue to be subject to
increasing levels of legislation
and taxation in the years ahead,
as part of respective government
commitments towards achieving
net-zero emissions by 2050 (UK)
or earlier.
The Group has participated in the
Carbon Disclosure Project (CDP)
since 2016. The CDP is recognised as
an authoritative carbon benchmark,
used by investors, companies and
cities alike. Our CDP submission
allows the Group to benchmark our
management of carbon usage and
reduction against industry peers.
Within the Period, JD has achieved a
score two grades above the average
for both our sector, and the wider
European average.
The group takes a pro-active
approach in its emissions by looking
at ways to procure green renewable
energy. This commitment has been
further progressed with the Group
joining RE100 in summer 2019.
(
E
S
G
)
I
E
N
V
R
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N
M
E
N
T
A
L
facility for the Group’s Outdoor
businesses (excl. Tiso which will
maintain its facility in Edinburgh). This
facility, based in Middlewich, has a
footprint of 353,000 sqft and became
operational, initially for the Go
Outdoors business in late Spring 2019
with the Blacks and Millets fascias
transferring into this facility in the first
quarter of 2020. The removal of
Outdoor product which is often not of
a size, shape and weight compatible
with automation equipment will help
simplify the operations at Kingsway.
INFRASTRUC
access to an 80,000 sqft facility in
Belgium. We will commence
receipting product into this facility
and fulfilling to certain stores shortly.
and demand directly impacts
our carbon output, which links to
climate-related impacts such as
climate change and air pollution.
Working with our third party
logistics provider, we now have
Changes in our energy usage
2
50
PRINCIPAL RISKS
RISK AND IMPACT
ENVIRONMENTAL –
CLIMATE CHANGE
Global warming
The 2016 Paris Agreement called
for Science based targets to limit
global warming at a maximum
level of 2°c increase. In 2018 an
IPCC (Intergovernmental panel on
climate change) report confirmed
the temperature is 1°c above
pre-industrial levels. A level of
1.5°c global warming impacts on
natural and human systems, and
accordingly recommendations are
in place for mitigation pathways
to try and restrict global warming
to 1.5°c, a reduction from the 2016
Paris Agreement target. From a
business perspective, this is likely
to result in a) Environmental
risks (including primary materials
and industries) in the event
the 1.5°c target is not reached
and b) additional investment
in renewable energy sources,
carbon-reduction initiatives, and
potential additional taxation to
help achieve the revised target
of restricting global warming to a
maximum of 1.5°c.
CHANGE IN
RISK EXPOSURE
2019/20
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The Group will be improving its
reporting on our Scope 3 carbon
footprint, which accounts for the
largest volume of emissions that our
business can influence. Within the
next period, we will seek to reaffirm
our carbon reduction commitments
via the implementation of Science-
Based Target initiatives (SBTs).
Within the last period, the
Group has continued to reduce
energy consumption and carbon
through investment, monitoring
and behavioural changes. Building
Management Systems (BMS) permits
quick, remote diagnostic-fixes to
equipment and temperature errors,
reducing energy wastage and its
related CO2 emissions. The Group
will continue to introduce BMS to
stores wherever we can achieve
investment payback within lease
terms. In Summer and Winter 2019,
we adopted a new energy-saving
practice by actively reducing our
previous heating and cooling set-
points, further decreasing our energy
usage and CO2 impact.
ENVIRONMENTAL –
CLIMATE CHANGE
Regulatory and compliance
Changes to climate laws and
regulations are emerging such
as the 2019 UK Climate Act, and
compliance with transition from
the UK Government’s Carbon
Reduction Commitment, to
the new Streamlined Energy
and Carbon Reporting (SECR)
regime. Furthermore, we envisage
increasing levels of localised
policy and regulation. Examples of
this include councils and transport
authorities operating ‘Clean
Air’ divisions leading initiatives
such as ‘Clean air zones’ that
target reductions in emissions
city centre emissions. Business
logistics services will be one of
the prominent areas targeted by
such schemes.
ENVIRONMENTAL –
BIODIVERSITY, RESOURCES
AND WATER SECURITY
Biodiversity, Impact on habitats
and Forests
Growing human demand for
natural resources can impact the
biodiversity system. Commercial
agriculture is the largest cause
of deforestation and forests
degradation globally. The
supply-demand of key forest
risk commodities also accounts
for 10–15% of greenhouse gas
emissions1
Compliance with the 2019 UK Climate
Act will be achieved via the Group’s
established environmental data
collection and reporting systems,
including developed environmental
KPIs for all UK trading operations. The
Group continues to engage specialist
energy/environmental consultants to
review our compliance procedures,
and to advice on new and pending
legislation.
Our planned work on Scope 3 data
collation (and subsequent use of
science-based targets) will support
our continued efforts to mitigate
risks associated with operating cost
increases relating to both national
and local-level environmental
legislation and regulations.
During the period the Group re-
launched its corporate website,
a reference point for our ESG
statements, achievements
and strategy, enabling greater
transparency on our practices and
progress. In January 2020 the Group
formed its ESG Committee, chaired
by the CFO. The Committee shall
ensure adherence to documented
Sustainability and ESG standards, and
oversee plans for the introduction a
new ‘ESG and Sustainability Policy
Framework’ during 2020.
The Group has submitted its first
response to the ‘Forests’ CDP,
although the activities of the Group
(in relation to Forests CDP content)
is limited compared to other sectors.
Even when our usage of biodiversity-
impacting resources is low, the
Group welcomes opportunities
to benchmark and improve its
environmental stewardship.
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1 https://www.cdp.net/en/forests
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PRINCIPAL RISKS
RISK AND IMPACT
ENVIRONMENTAL –
BIODIVERSITY, RESOURCES
AND WATER SECURITY
Cotton/polyester – Private label
The fashion industry depends
on natural resources including
cotton as well as other oil
based fibres such as polyester.
Making sustainable products can
directly impact farmers, the use
of pesticides and water. Using
recycled polyester can offer many
sustainable benefits vs virgin
polyester.
ENVIRONMENTAL –
BIODIVERSITY, RESOURCES
AND WATER SECURITY
Water reduction
It is recognised that the fashion
sector is the second largest
consumer of the world’s water
supply and there is an ever-
growing issue of water scarcity2.
The Group acknowledges that
large organisations will be
required (via legislation, or
consumer pressure) to improve
the reporting on water usage and
reduction measures. We envisage
that water usage reporting
may follow the route of Carbon
reporting via a tiered system of
primary, secondary and tertiary
usage.
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For our own footwear and accessories
brands we provide and monitor a
‘supplier manual’ including policies
on modern slavery, procurement
and global environmental footprint
reduction. This includes standards
we require to be met with regards
to Reach (Registration, Evaluation
& Authorisation of Chemicals). For
leather manufactured goods, the
Group requires our suppliers to be
signed up to the Leather Working
Group (LWG) standards.
During the period, the Group has
reduced its use of Virgin Polyester
and increased use of Responsibly
Sourced Cotton (‘Sustainable
cotton’). Sustainable cotton ensures
that; i) farmers are trained on
methods of water reduction ii) farms
are economically irrigated and iii)
receipt and payment of fair wages.
The Groups own-brand
manufactured garments are now
accredited via a ‘Sustainability flag’
process. Over 800,000 garments
were categorised against our
sustainability goals, featuring new
Gold/Silver/Bronze award criteria.
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ENVIRONMENTAL –
BIODIVERSITY, RESOURCES
AND WATER SECURITY
Plastic
As demand on plastic reduction
and recycling continues to
increase, with consumer pressure
presently advancing ahead of
regulatory measures. The Group
expects to see further taxation
on single-use items, and to see an
increase in the threshold standard
of bags and packaging termed
‘reusable’ and ‘recyclable’. The
Group has undertaken research
and multiple plastic and material
re-processing options, and notes
that UK-infrastructure on such
‘circular economy’ solutions is
below the standards of mainland
Europe.
The Groups approach to plastic
encompasses the three classic
principles of ‘reduce, reuse and
recycle’. During the period we have
increased the amount of recycled
content within our plastic bags and
online packaging. We believe in
improving customer awareness of the
importance of re-use and accordingly,
implemented additional messaging
on our packaging.
The Group commenced a review and
trial of different solutions to reduce
and re-use waste streams from our
stores and distribution centre, as well
as identifying local economy solutions
with remaining, unusable waste.
800,000
GARMENTS WERE
CATEGORISED AGAINST
OUR SUSTAINABILITY GOAL
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2 https://www.businessinsider.com/fast-fashion-environmental-impact-pollution-emissions-waste-water-2019-10?r=US&IR=T
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IMPACT
PRINCIPAL RISKS
RISK AND IMPACT
ENVIRONMENTAL –
BIODIVERSITY, RESOURCES
AND WATER SECURITY
Enhanced retailer take back
With growing focus and pressure
on ‘circular economy’ enablement,
there is increasing expectation
from consumers on store take
back schemes. The Group further
anticipates additional regulatory
measures such as ‘Extended
Producer Responsibility’, whereby
brand owners and manufacturers
are required to take on additional
responsibility for the recycling/
disposal of end of life products
and packaging.
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The majority of goods sold by the
Group are manufactured by leading
global brands (e.g. Nike, Adidas, Under
Armour). Accordingly, we engage with
our suppliers on reciprocal positioning
of ESG within their respective business
strategies.
Examples of brand activities to offset
environmental impact (including
some activities potentially covered
by enhanced producer or retailer take
back) include Adidas’ commitment
that from 2024, it shall use recycled
polyester in every product and on
every application where such a
solution exists.
Nike has delivered innovations such
as the first fully recyclable running
shoe “Futurecraft Loop” being in the
test phase3 . Nike has reached 25 years
of ‘Nike Grind’ which uses materials
that are created from Nikes recycled
surplus manufacturing materials and
athletic footwear. These materials
are incorporated into performance
products, ranging from new Nike
footwear and apparel to outdoor play
surfaces4, resulting in 30 million pairs
of athletic shoes recycled to date.
The Group does not presently
offer in-store recycling services to
consumers, but is assessing its options
via consultation with key suppliers,
charities, and industry associations.
Important take back scheme
considerations include:
• carbon emissions associated with
the transportation of goods
• impact of retailer take back on
charity volumes
• health and safety procedures, and
• commercial viability.
SOCIAL – HUMAN RIGHTS,
LABOUR STANDARDS AND
RESPONSIBILITY
Human rights and labour
standards
Respecting human rights within
the Group and across our supply
chain is a key part of running a
successful organisation. Human
rights are fundamental principles
which allow individuals to lead
a dignified and independent life,
free from abuse and violations.
Identification and prevention of
Modern Slavery is a key priority
throughout our supply chain. On a
perpetual basis, the Group actively
investigate several tiers of processing
within our private label supply
chain (including agents, factories,
factories, mills, dye houses and print
houses). We recognise the need to
go further and are committed to full
transparency.
With regards to Modern Slavery
in the UK, the Group have focused
on the Kingsway DC and have
implemented several procedural
based strategies. The Group have
joined the GLAA and also host events
on site, with participation including
our 3rd party suppliers.
To mitigate and prevent labour
standard breaches, the Group
promotes an Ethical Code of Practice
for all private label suppliers, outlining
minimum required standards,
including wages being paid in line
with local laws.
The Ethical Code of Practice also
ensures working protection and
provides assurance that our products
are manufactured within safe and fair
conditions.
The Group continuously audits
factories it uses for its private label
business, by third party accredited
auditors. The Group’s factories are
also screened and verified prior to
being included within our sourcing
strategy.
The group recognizes that building
fair relationships with their suppliers
is critical to maintaining standards
across the global workforce.
3 https://www.adidas-group.com/en/sustainability/compliance/environmental-approach/#/approach-to-mitigate-climate-change/approach-
to-water/
4 https://purpose.nike.com/nike-grind
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SOCIAL
PRINCIPAL RISKS
RISK AND IMPACT
SOCIAL – HUMAN RIGHTS,
LABOUR STANDARDS AND
RESPONSIBILITY
Health and Safety
The health and safety of our
customers and employees is of
the utmost importance. Policies
are implemented in conjunction
with training programs to protect
our employees and customers.
Personal injuries, distress and
fatalities could result from a
failure to establish and maintain
safe environments.
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There is a comprehensive induction
and training program 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 with attendees
including the Chief Financial Officer,
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 Kingsway distribution
centre maintained the British Safety
Council ‘Five Star’ accreditation
for the third successive year for
safety management. Further, the
Royal Society for the prevention of
Accidents has awarded the Group a
Gold Award for its overall health and
safety performance during 2019.
The Group has also had to adapt its
retail and other operations in response
to COVID-19 in accordance with the
specific regulations in each of the
territories where it operates. The
measures include:
• Measures to maintain social
distancing
• Provision of additional welfare
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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. Furthermore,
adequate levels of stock are
maintained to cover short periods of
supply delay.
Compliance is monitored by the
Group’s Head of Quality and Ethics
who has extensive experience in
this area. The Group has established
a cross functional approach to
compliance ensuring that the sourcing
and design teams work collaboratively
to ensure compliance is built into the
design process.
The Group is committed to acting
professionally, fairly and with integrity
in all its business dealings. The Group
has its own Anti-corruption and
bribery policy. The Group also works
closely with its Profit Protection
team to monitor and investigate any
convictions and issues.
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GOVERNANCE –
ANTICORRUPTION,
RISK MANAGEMENT,
REGULATORY AND
COMPLIANCE
Data Protection Compliance
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.
GOVERNANCE –
ANTI-CORRUPTION,
RISK MANAGEMENT,
REGULATORY AND
COMPLIANCE
Anti-corruption and anti-bribery
The Group could face the risk
across its employees of breaching
rules and regulations to conduct
responsible business. This can
include risks of corruption and
bribery.
facilities
Equipment
• Quarantining of stock
• Provision of Personal Protective
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CHANGE
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2019/20
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PRINCIPAL RISKS
RISK AND IMPACT
GOVERNANCE –
ANTI-CORRUPTION,
RISK MANAGEMENT,
REGULATORY AND
COMPLIANCE
Risk Management
The Task Force on Climate-related
Financial Disclosures (TCFD) has
provided recommendation of how
organisations operate in relation
to governance, strategy, risk
management, and metrics and
targets.
GOVERNANCE –
ANTI-CORRUPTION,
RISK MANAGEMENT,
REGULATORY AND
COMPLIANCE
Tax transparency
The Group operates on a global
scale across many countries, with
tax policies that vary for each
country, this can result in potential
tax risks.
The Group’s Board is committed
to sustainability, with ESG related
matters representing a discussion item
at Board meetings. Our CFO is the
Board Director responsible for ESG
and Sustainability, and leads the ESG
Committee, founded in January 2020.
Almost all headline TCFD
recommendations are covered within
existing Group statements and
policies. We are presently undertaking
trials of a reporting system with
very similar outputs to the TCFD
‘Knowledge Hub’.
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Our Group aims to ensure that it
pays the right amount of tax in each
country in which it operates and does
not engage in arrangements which
are artificial or contrived. We actively
identify, evaluate, manage and monitor
tax risks where appropriate and strive
to remain low-risk. Where there is
significant uncertainty or complexity
in relation to risk, external advice may
be sought from professional advisors
and discussed with the relevant tax
authority.
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The Group Data Protection Officer
(DPO) has ultimate responsibility
for data protection compliance
matters across the Group. This role is
supported by the Group’s legal team,
information security team, HR and
profit protection team who ensure that
all compliance measures are adhered
to and maintained and updated as
appropriate.
A number of ‘data protection
champions’ have been nominated
to ensure these measures are
implemented effectively in each area
of the business.
Following the completion of
the Group’s readiness for GDPR
programme, the Group now utilizes its
ongoing programme of compliance
measures, which includes regular
audits and training, to ensure
compliance with the data protection
legislation. The legal team regularly
advise on the manner in which the
data protection legislation is being
enforced by the relevant regulatory
bodies in each territory and keeps
abreast of any developments in this
area. The Group also has an extensive
body of data protection policies which
are updated as required.
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 has a legal
team to ensure that various aspects
of the business are aware of their
regulatory obligations and have a
clear understanding of the measures
they need to implement to ensure
compliance. External and specialist
legal advice is obtained where
necessary.
The Group’s legal team 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 an Ethical Code of Practice
which all suppliers must adhere to.
GOVERNANCE –
ANTICORRUPTION, RISK
MANAGEMENT, REGULATORY
AND COMPLIANCE
Data Protection Compliance
The General Data Protection
Regulation (GDPR), which
significantly increased the Group’s
risk exposure in the event of non-
compliance with data protection
requirements, has been in force for 2
years now. As such, the Information
Commissioner’s Office has now firmly
established its enforcement practices
with regard to GDPR and, following
a period of increased focus on data
protection legislation, there remains
a heightened awareness of data
protection rights and protections
amongst data subjects – primarily the
Group’s employees and customers.
The Group is obliged to have an
extensive programme of measures
to ensure compliance with all data
protection legislation across the
Group and to regularly review the
same. This ongoing review process
must include (i) the carrying out
of audits to test compliance and
to refresh processes and materials
where necessary; and (ii) training the
Group’s employees to ensure there is
sufficient awareness of the Group’s
data protection obligations.
GOVERNANCE – ANTI-
CORRUPTION, RISK
MANAGEMENT, REGULATORY
AND COMPLIANCE
Regulatory & Compliance
The Group operates in a fast paced
retail environment which is subject
to various legislation, codes of
practice, guidance and standards
including, but not limited to, the
listing rules, consumer protection
and trading standards legislation,
advertising regulations, product
safety and quality standards, carbon
emission reporting, bribery and
corruption requirements, market
abuse regulation, competition law
and health and safety law.
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The Group recognises that failure to
comply with these legal frameworks
may result in financial or reputational
damage to the business.
PRINCIPAL RISKS
PROPERTY RISKS
RISK AND IMPACT
RETAIL PROPERTY
FACTORS
The retail landscape has seen
significant changes the last
year with a high volume of
retail units becoming vacant
consequent to a number of retail
insolvencies. We firmly believe
that retail occupancy levels will
decrease significantly as a direct
consequence of COVID-19.
The Group can be financially
exposed where it has committed
itself to a long lease in a location
which, as a result of external
factors, now has high vacancy
rates making it less attractive to
the customer which can drive
further reductions in footfall and
potentially future lower sales
volumes.
Additionally there could
be a further shift of revenue
from bricks and mortar stores
to ecommerce as consumer
preferences change over time.
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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 no later than halfway
through the lease with three year
breaks becoming increasingly
the norm
• Capped rent reviews
• Rents which flex with turnover
in the store
As a consequence of COVID-19,
the Group is actively managing the
property risks and is engaging with
all of its landlords, regardless of the
remaining lease term.
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 or other restructuring
processes 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. The Board reviews the list of
assigned leases regularly to assess the
probable risk of the store returning to
the Group under privity of contract.
The Group continues to invest
in store refurbishment, visual
merchandising, retail theatre, customer
service and digital integration to
enhance the consumers’ in store retail
experience.
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TECHNOLOGICAL RISKS
The Group continues to enhance its multichannel proposition and the threat of cyber crime is
constantly evolving resulting in an increased risk exposure before mitigating activities.
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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 becoming more
sophisticated 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.
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.
Outside of the core ERP system,
one of our smaller UK subsidiaries
(Tiso Group Limited) has successfully
implemented the Eurostop ERP
system whilst our Chausport business
in France is nearing completion of a
project to install the Infor ERP system.
The core IT team have been involved
in these development projects and it
is hoped that other group companies
can benefit from the learnings leading
to longer term consistency on ERP
system developments across the
Group.
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.
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PRINCIPAL RISKS
RISK AND IMPACT
COVID-19
Managing IT and Cyber risk in the
COVID-19 pandemic climate of
remote and homeworking and the
strategy implemented.
PERSONNEL RISKS
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.
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MITIGATING ACTIVITIES
LINK
TO OUR
STRATEGY
The Group IT team successfully
managed the roll out of 300+ new
laptops in 2020 Q1 as part of its
migration to windows 10. For remote
working employees can interact via
Microsoft Teams which is part the
IT Strategy access to JD systems is
through VPN.
This technology has been in place
and used significantly throughout
the life of JD due to this being a
requirement of the business.
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 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.
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65
ECONOMIC AND FINANCIAL RISKS
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 income. 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.
As the Group continues to expand in
Europe and further afield into new
territories, the risk of exposure to
fluctuations in foreign exchange rates
increases. The economic and financial
risks and uncertainties that are specific
to the Group and the markets in which its
businesses operate are as follows:
RISK AND IMPACT
CHANGE IN
RISK EXPOSURE
2019/20
BEFORE
MITIGATING
ACTIVITIES
MITIGATING ACTIVITIES
LINK
TO OUR
STRATEGY
BREXIT
There are a number of indirect
and direct risks associated with
Brexit that the Group would be
exposed to:
Tariffs and Duties
The UK has now left the EU
and is in transition period to 31
December 2020. At this stage,
the exact nature of the UK’s
future relationship with the EU
beyond the end of this transition
period is uncertain and so we
remain cognisant of the potential
adverse consequences on supply
chains, tariffs, exchange rates and
consumer demand.
The Group currently operates
with a highly integrated stock
management infrastructure for
its stores across Europe where
the stock requirement for the
JD stores outside of the UK is
aggregated with that of the UK
stores with one consolidated
order then sent to the supplier.
All stocks are then delivered to
the Group’s primary Kingsway
warehouse with different import
processes for third party brands
and the Group’s owned and
licensed brands:
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The Group has selected colleagues
from each area of the business
who collectively work with external
advisors to assess the impact and
manage the changes required as a
result of Brexit.
Tariffs and Duties
The short term cost impact of the
potential tariffs has been modelled by
the Group and is discussed further in
the Viability Statement on page 69.
The Group’s principal mitigation
longer term will come from the
development of a dedicated
warehouse in Europe. As per page 37
this project is ongoing.
The initial site that the Group is
developing will not be big enough
to hold all stocks required for the
JD stores in Europe and so we are
looking at other options to mitigate
the potential cost of additional duties
in the short term including:
1
If necessary, stock deliveries into
mainland Europe will be
accelerated ahead of 31 December
2020 with options to hold stock in
both Sprinter’s warehouse in Alicante
and other third party facilities under
review.
2
The Group has also discussed the
potential direct delivery of some
products from the international
brands own warehouses in mainland
Europe to the JD stores on the
continent.
67
LINK
TO OUR
STRATEGY
B
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CHANGE IN
RISK EXPOSURE
2019/20
BEFORE
MITIGATING
ACTIVITIES
MITIGATING ACTIVITIES
LINK
TO OUR
STRATEGY
RISK AND IMPACT
MITIGATING ACTIVITIES
CHANGE IN
RISK EXPOSURE
2019/20
BEFORE
MITIGATING
ACTIVITIES
B
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BREXIT (continued)
Disruption to the Supply Chain
Exiting the transition period
without a formal agreement
may result in additional customs
requirements and therefore
potential delays to the
supply chain.
Foreign Exchange
Brexit increases the Group’s
exposure to exchange rate
volatility which could impact
the rate at which the Group can
source goods priced or sourced in
US Dollars or Euros.
Regulatory and Compliance
Laws and regulations could
diverge between the UK and EU
leading to increased operational
complexity and a greater risk of
non-compliance.
Disruption to the Supply Chain
In the short term, the Group can
accelerate the intake of goods into
Europe and is looking at both options
to hold these stocks in a central
location, potentially using space at
Sprinter’s warehouse in Alicante, and
increasing the stock holding in each
European store where practicable.
In the longer term, the Group will be
considering the logistics options such
as the European warehouse as noted
above.
Foreign Exchange
The Group’s mitigating activities are
discussed further in the Treasury and
Financial risks section below.
Regulatory and Compliance
The Group will continue to work
with external advisors to ensure that
procedures are in place to monitor
legal and regulatory changes. The
Group will implement appropriate
measures to ensure continued
compliance with laws and regulations.
The Group’s mitigating activities are
discussed further in the GDPR and
Regulatory and Compliance sections
below.
PRINCIPAL RISKS
RISK AND IMPACT
BREXIT (continued)
Third Party Brands: These orders
are very largely placed on a landed
cost basis with the suppliers
dealing with the import process
and the accounting for any duty.
Some of these goods are delivered
direct to the Group from the
original factory whilst some are
routed through the Brands own
warehouses with these located
both in the UK and mainland
Europe. The Group also often only
receives stocks for launches just
before the launch date.
Owned and Licensed Brands:
These orders are largely placed
on a ‘Free on Board’ basis with
the Group then processing the
necessary import documentation
and accounting for the duties.
The majority of the Group’s
retail stores across Europe are
currently supplied with stock by
the Group’s principal warehouse
at Kingsway, Rochdale.
If the transition period ends
either without an agreement
or there is only a very basic
framework agreement which
does not reflect previous tariffs
and duties paid then there
would be additional duties to
pay principally for the export of
stock into the European Union. In
the case of stock of third party
brands then these duties would
have to be recognised on the
full UK landed cost as we do not
have the original factory invoice
from those third party suppliers
and we would not expect to be
able to obtain that invoice as it is
commercially sensitive.
ECONOMIC
66
PRINCIPAL RISKS
RISK AND IMPACT
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.
CHANGE IN
RISK EXPOSURE
2019/20
BEFORE
MITIGATING
ACTIVITIES
MITIGATING ACTIVITIES
LINK
TO OUR
STRATEGY
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 96% of the anticipated
surplus for the year to 1 February
2021. This leaves some Euros
available should the Group need to
move quickly to take advantage of
an acquisition or other investment
opportunity. It is also our longer term
intention to move to Euro pricing
on stocks delivered to the proposed
new warehouse in mainland Europe
creating a natural hedge.
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. Hedging
has now been put in place for
approximately 93% of the anticipated
requirement for the year to 1 February
2021.
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68
ASSESSMENT OF THE GROUP’S
PROSPECTS
The Board regularly reviews the current
financial position and performance and
assesses the future prospects of the Group.
As part of this assessment the Board
reviews the Group’s income and expenditure
projections, cash flows and other key
financial ratios along with the potential
impact of, and challenges presented by, the
principal risks outlined on pages 48 to 69.
The Group’s strategy along with the
factors likely to affect the development,
performance and position of the businesses
are detailed throughout the Strategic
Report on pages 42 to 110.
VIABILITY REPORTING
In accordance with the requirements of the
UK Corporate Governance Code, the Board
has assessed the viability of the Group for a
period of three years to 28 January 2023.
A period of three years has been selected
as the Board considered this to be an
appropriate period to assess performance
and the potential impact of key risks in a
fast paced retail environment. The three
year period also strikes a balance between
the time horizons across the different
aspects of the Group, such as short term
detailed financial budgets and forecasts,
medium term financing considerations and
retail space planning.
For the purposes of Viability Reporting,
the Board has focused on the operational
risks included in the supply chain section
of the principal risks outlined on pages 48
to 50. The Board has evaluated the impact
of these risks actually occurring based
on severe but plausible scenarios. The
evaluation included performing sensitivity
analysis by flexing the main assumptions in
each scenario individually.
Furthermore, the Group has performed
additional analysis to assess the potential
impact of Brexit. For the purposes of
Viability Reporting, the Group has assumed
that the UK exits without an agreement as
69
to the future trading relationship and would
incur additional duties to pay for the export
of stock into the European Union. A decline
in consumer demand as a result of the
political uncertainty has also been factored
into the analysis.
The Board recognises that some form
of social distancing measures may be in
place for the foreseeable future which
could negatively impact on the revenues
generated in physical stores. Whilst the
evidence from the closures earlier in 2020
suggests that the growth of sales through
online channels will provide some mitigation
against this, the Board have considered
scenarios where store revenues reduce and
online sales remain constrained at historic
levels.
VIABILITY STATEMENT
Based on the results of the analysis detailed
above, the Board has confirmed that the
Group can maintain profitability in each
scenario and would not exceed the funding
facility that is available to the Group.
The Board therefore 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 and completing
the assessment outlined in the Viability
Reporting, 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.
Neil Greenhalgh
Chief Financial Officer
7 July 2020
EXPANSION
BUSINESS REVIEW
Sports Fashion
Outdoor
Unallocated2
Total
IFRS 16
£m
IAS 17
IFRS 16
IAS 17
IFRS 16
IAS 17
£m
£m
£m
£m
£m
£m
47.4%
5,696.8
Revenue
Gross profit %
EBITDA
before exceptional items* 952.4
(413.8)
Depreciation
Amortisation1
(5.4)
Operating profit / (loss)
before exceptional items* 533.2
Net interest expense
(64.7)
Profit/ (loss) before tax
and exceptional items*
Exceptional items
Profit/ (loss) before tax
468.5
(40.6)
427.9
5,696.8
414.0
414.0
47.4%
41.9%
41.9%
– 6,110.8 6,110.8
– 47.0% 47.0%
629.6
(132.0)
(5.4)
27.4
(39.2)
(4.5)
(6.0)
(9.9)
(4.5)
– 979.8 623.6
(141.9)
– (453.0)
(9.9)
(9.9)
–
492.2
–
(16.3)
(7.2)
(20.4)
–
– 516.9
(6.2) (78.1)
471.8
(6.2)
492.2
(40.6)
451.6
(23.5)
(49.7)
(73.2)
(20.4)
(49.7)
(70.1)
(6.2) 438.8 465.6
(90.3)
375.3
– (90.3)
(6.2) 348.5
1 This is a non-trading charge relating to the amortisation of various fascia names and brand names which arise consequent to the accounting of
acquisitions made over a number of years. These charges are as follows:
• Sports Fashion: £5.4 million (2019: £7.5 million)
• Outdoor: £4.5 million (2019: £4.5 million)
2 The Group considers that net funding costs are cross divisional in nature and cannot be allocated between the segments on a meaningful basis.
3 Throughout the Annual Report ‘*’ indicates the first instance of a term defined and is explained in the Glossary on page 275.
SPORTS FASHION
Whilst our global Sports Fashion businesses
are inevitably suffering currently from the
adverse impacts of the COVID-19 outbreak,
we should recognise that fundamentally
they have robust propositions and strong
foundations from which to recover. We
firmly believe that the relevance of our
Sports Fashion fascias to consumers
will not be diminished by the current
situation, although it will inevitably slow our
momentum this year.
The fundamental strength and foundations
of our Sports Fashion businesses are
reflected in their performance last year
with profit before tax and exceptional
items increasing by a further 28% to
£468.5 million (2019: £365.8 million). On a
consistent accounting basis, the proforma
headline profit before tax and exceptional
items to 1 February 2020 under IAS 17
‘Leases’ would have been £492.2 million
being £23.7 million higher than that
reported under IFRS 16 ‘Leases’.
Like for like store sales across our global
Sports Fashion fascias (excluding Finish
Line) increased by 8% with total like for
like sales, including online, growing by 12%.
All regions for the JD fascia delivered like
for like growth in the year although we are
particularly encouraged by the performance
in our core UK and Republic of Ireland and
Europe markets where total like for like sales
70
(including online) grew by more than 10%.
The combined Finish Line and JD business
in the United States contributed an
operating profit of £94.2 million (£97.9
million on a proforma basis under IAS 17
‘Leases’) in its first full year as part of the
Group (2019: £26.6 million for the 33 week
period post acquisition). On a proforma
basis, compared to the same 52 week
period in the prior year, total like for like
sales for the combined Finish Line stores
and website (excluding Macy’s concessions)
grew by 9%. We remain satisfied with the
progression on gross margin in the Finish
Line business which increased over the
period to 42.9% (proforma 52 weeks to 2
February 2019: 42.2%).
Elsewhere, having completed the transfer
of the Sport Zone operations into the
Sprinter infrastructure in the first half of the
year, we are encouraged by the positive
developments in our businesses in Iberia.
Over the full year, our combined businesses
contributed a profit of £20.7 million (£23.3
million on a proforma basis under IAS 17
‘Leases’) (2019: £1.4 million). Having already
restructured the operations, these businesses
have a solid platform for future recovery as
the operational restrictions are lifted.
The overall gross margin in Sports Fashion
reduced to 47.4% (2019: 48.0%) largely
due to the inclusion of the lower margin
Finish Line business for the full period. It
is inevitable that there will be some gross
margin sacrifice in the new year with
additional promotional activity required
to clear seasonally non-relevant apparel
stocks in stores as they are re-opened
combined with a delayed launch calendar as
the international brands realign stocks and
production schedules. We aim to end the
current financial year with stock normalised
thereby allowing for a return to our core
commercial disciplines of maximising
sellthrough and limiting markdown.
After recognising exceptional items in
the period of £40.6 million (2019: £13.7
million) relating to the movement in the fair
value of put and call options and the costs
associated with transferring the stocks and
operations of Sport Zone into the Sprinter
infrastructure, the profit before tax in Sports
Fashion was £427.9 million (£451.6 million
on a proforma basis under IAS 17 ‘Lease’)
(2019: £352.1 million).
OUTDOOR
It has been a year of transition and
challenges in Outdoor with the Go Outdoors
business, in particular, experiencing a
number of integration issues in the project
to transition store replenishment to being
fulfilled entirely from a central warehouse.
The overall loss before tax and exceptional
items increased to £23.5 million (£20.4
million on a proforma basis under IAS 17
‘Leases’) (2019: £4.3 million). The impact
from the challenges in Go Outdoors are
clearly reflected in the fact that the loss
before tax and exceptional items in this
specific business increased significantly
to £23.8 million (loss of £20.0 million on a
proforma basis under IAS 17 ‘Leases’) (2019:
loss of £2.2 million).
In recognition of the fact that, even before
the COVID-19 outbreak, the recovery in Go
Outdoors to normal levels of profitability
was likely to go beyond this financial year,
we recognised an exceptional charge of
£42.5 million (2019: £nil) in relation to
the impairment of the goodwill arising in
previous years on the acquisition of the Go
Outdoors business. A partial impairment of
£20.7 million (2019: £nil) was recognised
in the first half of the year at which point
71
the Group believed that the disruption
consequent to the integration issues
associated with the transition of fulfilment
to the new warehouse were resolved. After
further disruption in the business from the
closure of the principal office in Sheffield,
an additional charge of £21.8 million (2019:
£nil) was recognised in the second half.
We also recognised an exceptional charge
of £7.2 million (2019: £1.6 million) for costs
arising on the integration and consolidation
of the principal IT systems, warehousing
and other infrastructure.
Outdoor continues to have relevance as it
provides the Group with additional third
party brand touch points which we may
subsequently be able to leverage elsewhere
in the Group. However, given the inherently
lower sales densities and lower gross
margins in Outdoor on the sale of third
party brands, this requires a proposition
that is relevant all year round delivered from
a store base with an efficient cost structure
complemented by a strong online presence.
Our confidence and belief in our approach
comes from the fact that the Blacks and
Millets business, which is more advanced
on its journey to deliver an all year round
proposition and has an online participation
in excess of 30%, has reversed its loss of the
previous year with a profit of £1.3 million
(£0.3 million on a proforma basis under IAS
17 ‘Leases’) (2019: loss of £1.3 million).
The overall gross margin in Outdoor reduced
slightly to 41.9% (2019: 42.5%) largely driven
by additional promotional activity in Go
Outdoors in the first half of the year when
the impact of the integration issues was
greatest. Encouragingly though, the gross
margin in the Blacks and Millets business
improved by 1% to 43.6% (2019: 42.6%).
After recognising the exceptional items of
£49.7 million (2019: £1.6 million), the loss
before tax in Outdoor was £73.2 million
(loss of £70.1 million on a proforma basis
under IAS 17 ‘Lease’) (2019: loss of £5.9
million).
Peter Cowgill
Executive Chairman
7 July 2020
FINANCIAL REVIEW
Impact of IFRS 16 Transition
Proforma IAS 17
Adjustment
£m
£m
2020
IFRS 16
£m
Revenue
Gross profit %
EBITDA before exceptional items*
Depreciation / amortisation
Operating profit before exceptional items*
Net interest expense
Profit before tax and exceptional items*
Exceptional items
Profit before tax
Basic earnings per ordinary share
Adjusted earnings per ordinary share*
Total dividend payable per ordinary share
Net cash at period end (a)
6,110.8
47.0%
623.6
(151.8)
471.8
(6.2)
465.6
(90.3)
375.3
27.44p
36.41p
0.28p
429.9
47.0%
6,110.8
–
–
979.8
356.2
(462.9)
(311.1)
516.9
45.1
(78.1)
(71.9)
438.8
(26.8)
(90.3)
–
348.5
(26.8)
(2.15)p
25.29p
(2.15)p 34.26p
0.28p
429.9
–
–
2019
IAS 17
£m
4,717.8
47.5%
488.4
(126.9)
361.5
(6.3)
355.2
(15.3)
339.9
26.90p
28.44p
1.71p
125.2
a) Net cash consists of cash and cash equivalents less interest-bearing loans and borrowings
b) Throughout the Annual Report ‘*’ indicates the first instance of a term defined and is explained in the Glossary on page 275
REVENUE, GROSS MARGIN
AND OVERHEADS
Total revenue increased by nearly 30% in
the year to £6,110.8 million (2019: £4,717.8
million). This includes £1,601.5 million of
revenue from Finish Line and JD in the
United States (2019: £956.6 million for
the 33 week period post acquisition) and
£215.9 million (2019: £nil) from Footasylum
in the 39 week period after it was acquired.
Like for like store sales for the 52 week
period across all Group fascias which were
a member of the Group for the full year in
both years increased by 6% with the total
like for like growth including online for the
same businesses increasing by 10%.
As expected, total gross margin in the
year of 47.0% was slightly behind the prior
year (2019: 47.5%) from the inclusion of a
full year of the lower margin Finish Line
business in the United States.
PROFIT BEFORE TAX
Profit before tax and exceptional items
increased by 24% to £438.8 million (2019:
£355.2 million). On a consistent accounting
basis, the proforma headline profit before
tax and exceptional items to 1 February
2020 under IAS 17 ‘Leases’ would have been
£465.6 million.
The profit before tax and exceptional items
includes a profit of £94.2 million (£97.9
million on a proforma basis under IAS 17
‘Leases’) in relation to the combined Finish
Line and JD business in the United States
in its first full half year as part of the Group
(2019: £26.6 million for the 33 week period
post acquisition).
There were exceptional items in the year
of £90.3 million (2019: £15.3 million)
primarily from the non-cash impairment of
intangible assets arising on the acquisition
of Go Outdoors and the movement in the
fair value of put and call options. These
exceptional items comprised:
Impairment of goodwill and fascia names (1)
Movement in fair value of put and call options (2)
Integration of Outdoor systems and warehousing (3)
Integration of Sport Zone into Sprinter infrastructure (4)
Total exceptional charge
2020
£m
43.1
31.4
7.2
8.6
90.3
2019
£m
8.1
5.6
1.6
-
15.3
1. The impairment in the current period relates to the impairment of the goodwill arising in prior years on the acquisition of Go Outdoors Topco
Limited and Choice Limited.
2. Movement in the fair value of the liabilities in respect of the put and call options.
3. Costs arising from the integration and consolidation of the principal IT systems, warehousing and other infrastructure in Go Outdoors.
4. Costs associated with transferring the stocks and other operations of Sport Zone into the Sprinter infrastructure.
72
Group profit before tax ultimately increased
by 3% to £348.5 million (2019: £339.9
million). On a consistent accounting basis,
the Group profit before tax under IAS 17
‘Leases’ would have been £375.3 million.
CASH AND WORKING CAPITAL
We have significantly increased our net cash
position at the end of the period to £429.9
million (2019: £125.2 million) illustrating,
yet again, the forceful combination of our
capacity to generate cash in our retail
operations and a continual focus on robust
stock management disciplines.
During the year, the Group also further
extended its principal syndicated bank
facility. This facility now has a total
commitment of £700 million, expiring on 6
November 2024. This facility was undrawn
at the period end (2019: £30 million drawn
down). The Group’s second principal bank
facility is a syndicated Asset Based Lending
Facility in the United States which has a
maximum revolving advance amount of
$300 million and expires on 18 June 2023.
This facility was also not drawn down at the
period end (2019: $50 million drawn down).
During the year, the primary focus of our
capital expenditure continued to be our
retail fascias with the investment in the
year on property fit outs broadly consistent
with the prior year levels at £99.6 million
(2019: £106.9 million). Within this, the
investment on the international businesses
increased significantly to £84.1 million (2019:
£59.2 million) reflecting the increasingly
international focus of our developments.
The international investment included £20.4
million (2019: £12.0 million) in the United
States. Elsewhere, the programme of works
to fit out the 352,000 sqft extension to our
Kingsway warehouse facility is now nearing
completion with total investment in the
year at the site of £12.2 million (2019: £36.1
million).
Net stocks at the end of the year were
£811.8 million (2019: £763.8 million) with
the increase principally as a result of stocks
in Footasylum of £34.2 million following
the acquisition of the business during
73
the year. We maintain a robust approach
to stock management with continuous
intense monitoring of very detailed
metrics across all our businesses. We are
particularly encouraged by the improved
stock management and disciplines in
Finish Line as, notwithstanding the fact
that additional stocks are required for both
the development of JD and to expand our
textiles offer, net stocks across our combined
businesses in the United States have reduced
to £201.6 million (2019: £210.7 million).
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 in the right 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 1 February 2020 was £223.0
million (2019: £202.0 million). The increase
was reflected across all taxes and was driven
by the rise in the living wage, a higher level
of sales and the associated profitability.
The effective rate of tax on profit from
continuing operations has increased from
22.3% to 28.1% due to impairments of
goodwill on consolidation, the increase
in the value of put options and the level
of overseas profits which are subject to
higher rates of corporation tax than the UK.
Excluding both exceptional items and prior
year adjustments from the tax charge, the
effective core rate* from continuing activities
has increased from 21.5% to 25.2%. This core
effective rate continues to be above the
standard rate due to the effect of overseas
tax rates and the level of expenditure which
is not deductible for tax purposes.
DIVIDENDS AND EARNINGS PER SHARE
Given the current highly unusual
circumstances, the Board believes that it is
in the best interests of shareholders if the
FINANCIAL REVIEW
PROPERTY AND STORES REVIEW
75
Group maintains its cash reserves and so,
accordingly, it does not believe that it is
appropriate to pay a final dividend (2019:
1.44p). It is the Board’s current intention
that we would look to resume dividend
payments when conditions allow, although
it is important that we maintain flexibility
around the timing and quantum of this
commitment. Regardless, we continue to
believe that it is in the longer term interests
of all shareholders to keep future dividend
growth restrained so as to maximise
the available funding for our ongoing
development opportunities.
The adjusted earnings per ordinary share
before exceptional items increased by 20%
to 34.26p (2019: 28.44p). On a consistent
accounting basis the adjusted earnings per
ordinary share were 36.41p.
The basic earnings per ordinary share
decreased slightly by 6% to 25.29p (2019:
26.90p). On a consistent accounting basis,
the basic earnings per ordinary increased by
2% to 27.44p.
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 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 rate through appropriate foreign
exchange instruments. The Group’s forecast
requirement for US Dollars in the period to
January 2021 is now $275 million. Cover is in
place for $264.6 million meaning that the
Group is currently exposed on exchange
rate movements for $10.4 million of the
current year’s estimated requirement.
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 2021, pre any
potential acquisition activity to be funded in
Euros, is €500 million. Hedging contracts
are in place to sell €462.4 million meaning
that the Group is currently exposed on
exchange rate movements for €37.6 million
of the current year’s estimated surplus.
Neil Greenhalgh
Chief Financial Officer
7 July 2020
74
SPORTS FASHION
JD
JD is a world class retail fascia with an
elevated multichannel proposition where a
unique and constantly evolving sports and
fashion premium brand offer is presented
in a vibrant retail theatre with innovative
digital technology. Whilst the majority
of stores have now reopened after the
COVID-19 outbreak, it is very clear that
the challenge from the risk to consumer
demand will exist for the foreseeable future
and this will have an implication on the
number of projects that were planned for
this year as we assess the post reopening
performance and it is entirely feasible that
some projects may not proceed under the
current lease terms.
Where investments in property are justified
then they will be focused on further
expanding the international reach of the JD
fascia. We are confident that our increasing
international reach and the consistency
of our premium proposition across our
territories will be even more attractive
at this time to the major international
landlords and property agents.
The major property developments in the
year to 1 February 2020 were as follows:
• UK & Republic of Ireland – 14 new stores
were opened in the period with two
stores closed. Ensuring that we remain
in positions with the highest footfall and
have sufficient space to present our full
offer in major markets remains a key
strategy. In previous years we enhanced
our proposition in key markets such as
London, Manchester, Liverpool, Glasgow,
Leeds and Dublin. We have now started to
extend this principle into smaller cities and
larger provincial towns with the opening
of new larger stores in the year in Chester,
Portsmouth, Basildon and Bournemouth
and, whilst COVID-19 has delayed our
programme for this year, we continue to
plan further upsizes through 2020.
• Europe – JD has gained further
momentum with a net increase of 52
stores with new stores in all of our existing
territories together with our first store
in Austria. JD now has in excess of 300
stores across mainland Europe with a
presence in 12 countries. The material
developments in the year have been as
follows:
• France: We now have 71 stores in the
country with four stores in new locations
complemented by the conversion of six
former Chausport stores in locations
where we believe that the JD proposition
is more appropriate to the particular
local market. We also relocated two
stores in in the key cities of Paris
and Marseille to larger space thereby
enabling us to present a fuller offer to
the consumer
• Spain: We now have 61 stores in the
country with 10 stores in new locations
complemented by the conversion of a
former Sprinter store in Granada. We
also relocated one store in a mall in
Madrid to larger space which, again,
gives us the opportunity to present an
enhanced offer
• Germany: We now have 60 stores in the
country with 12 stores opened in new
locations in the year
• Italy: We now have 33 stores in the
country with eight stores opened in new
locations in the year
The average size of the new stores opened
in the year across Europe was 3,775
sqft which is an increase of 25% on the
previous year with the larger footprint
• United States – There were 11 JD stores
trading at the end of the year with
one new store at Lincolnwood, Illinois
complemented by the conversion
of a further five existing Finish Line
stores. Two of the conversions, Mall of
America (Minnesota) and Deerbrook
Mall (Houston) were ‘full’ conversions
with the installation of the full JD retail
systems across all product categories. The
remaining three stores, Mall of Georgia
(Atlanta), Cumberland Mall (Atlanta) and
Roosevelt Field (New York) were ‘lite’
conversions with the installation of fixtures
for apparel and changes to the signage
although the existing Finish Line footwear
systems were largely retained. These ‘lite’
conversions require less non-trading time
and can be delivered with substantially
less capital investment.
Whilst the exact timing of works will need
to reflect any ongoing local restrictions,
we would anticipate converting at least
a further 20 stores to JD in the year to
January 2021 with the majority being
converted in the ‘lite’ style. We have also
now been able to recommence works on
the fit out of our flagship store in Times
Square, New York which we anticipate will
open later in the summer.
PROPERTY AND STORES REVIEW
a reflection of our increased confidence
of consumers’ appetite for the full JD
proposition in these markets.
Our previously stated ambition of
opening one store on average per week
across Europe reflects a world before the
COVID-19 outbreak. Whilst he number of
openings this year will be reduced, we
would still anticipate opening at least
30 stores including a flagship style store
on the key street of Rue de Rivoli in the
centre of Paris which we expect to open
later in the summer.
• Asia Pacific – At the period end there
were 64 stores trading as JD across the
region with a net increase of 18 stores in
the period:
• Australia: We opened nine stores in the
year with additional stores in Sydney,
Melbourne, Perth and Brisbane together
with our first store in Newcastle
• Malaysia: We opened two stores in new
locations and relocated our store in Mid
Valley, Kuala Lumpur with 13 stores open
at the end of the year
• Singapore: We opened a further two
stores in the year doubling our portfolio
to four stores
• Thailand: We opened a further two
stores in the year doubling our portfolio
to four stores
• South Korea: Over the year we increased
our store base from 16 stores to 19
stores with one store in a new location
complemented by a further two
conversions of stores previously trading
as Hot-T. We also relocated our store in
Myeongdong, Seoul. One further store
has opened subsequently in Lotte World
Mall, Seoul.
76
77
Elsewhere, there has been a further
reduction in the number of Macy’s branded
concessions with a net decrease of 54
branded concessions in the year. This
includes a number of locations which were
a consequence of the closure of the Macy’s
host store.
CHAUSPORT
In addition to the six stores converted
to JD, we have also closed a further six
smaller stores which had an average retail
area of less than 1,000 sqft each. Whilst we
would not expect a significant expansion
in the Chausport portfolio at this time,
we will invest in the portfolio where it is
appropriate to do so with the closures
offset by three new stores which were
opened in the year.
SPRINTER
Having transferred the Sport Zone stores in
Spain to Sprinter in the previous year, the
focus in the year to January 2020 has been
on integrating the Sport Zone businesses
in Portugal and the Canary Islands into
the Sprinter operational infrastructure.
Consequently, there was less activity than
in previous years with a net increase of
three Sprinter stores in the year with five
stores opened, one store closed and one
store converted to JD. The average retail
footprint of the stores opened in the year
was 6,200 sqft which is consistent with the
smaller spaced openings in recent years and
represents the most effective trading space
for the Sprinter core offer.
We firmly believe that our combined
Sprinter and Sport Zone proposition, which
has a greater emphasis on active sport
participation and fitness, will emerge from
the COVID-19 outbreak in a robust position
with their operations already structured
appropriately for the future.
SIZE?
Size? specialises in supplying the finest
products from the best brands in footwear,
apparel and accessories with stores and
dedicated local websites in nine countries.
With these websites now contributing
more than 50% of overall sales then the
consequence from a property perspective
is that we would not expect to materially
increase the number of stores in our existing
territories with the focus on ensuring
that our stores in the major cities have
sufficient space to present the full offer
and provide the full digital experience to
both consumers and our third party brand
partners. During the year, two smaller stores
were closed with two others converted to
other Group fascias, including the store in
Nottingham which now trades as The Hip
Store.
FINISH LINE
In addition to the conversion of five former
Finish Line stores to JD, we have also closed
17 underperforming Finish Line stores as
we continue the process of rightsizing the
retail estate. The store portfolio is under
constant review with decisions on the future
strategy of each store made on a case by
case basis taking into account a number of
factors including the cost of the property
and trends on both sales and footfall. Prior
to our acquisition of the business in 2018,
there had been a lack of investment in the
retail estate over a number of years and we
have now started the process to correct this
where we believe it will provide a long term
sustained improvement in performance.
During the year, we refurbished 67 stores
of which seven were full conversions to
Finish Line’s ‘Store of Now’ concept with
the remainder being ‘lite’ conversions which
are largely focused on the installation of
fixtures to display an expanded apparel
offer. One new store was opened at the
Freehold Raceway Mall, New Jersey.
67
FINISH LINE STORES
REFURBISHED
PROPERTY AND STORES REVIEW
SPORT ZONE
• Portugal – Two smaller stores were
closed in the year as we look to shape
the portfolio longer term. We have also
now started to invest in the estate with
approximately 40 stores refurbished in the
year. Whilst the stores are operated by the
Sprinter management team in Spain, we
have retained the Sport Zone banner in
Portugal as it has significant goodwill with
consumers.
• Canary Islands – We have now converted
the stores to the Sprinter banner
leveraging from Sprinter’s strength in
mainland Spain. We have also opened one
new store on the island of Tenerife.
PERRY SPORT AND AKTIESPORT
We continue to take action on the retail
estate where it is necessary with a further
six stores closed in the year. We remain
committed to the business and continue
to make limited investments where they
enhance our proposition with two new
stores opened in the year.
HOT-T
After closing six stores and converting a
further two stores to JD in the year, only two
stores continue to trade as Hot-T.
FASHION FASCIAS
Our Premium Fashion businesses further
elevate our overall offer. We have made
further selective complementary acquisitions
in this area with the principal elements of
our proposition now comprising:
• Scotts & Tessuti – This has been a year of
consolidation within Scotts and Tessuti as
we look to exit smaller stores in secondary
markets and focus our activity on larger
space stores in premium centres where
we can showcase the full range of the
premium fashion offer. One Tessuti store
was opened at the premium Fort Kinnaird
Retail Park in Edinburgh with six stores
closed.
• Choice – Choice was acquired in the
previous year with six stores in the
London area. As a retailer of premium
men’s, women’s and children’s apparel
78
and footwear, it has many similarities with
Scotts and Tessuti with the management of
the businesses working increasingly close
together to deliver a consistent proposition
in this sector.
• Base Childrenswear – Base was acquired
in the previous year and is a specialist
retailer of children’s premium apparel and
footwear. We have now extended the reach
of Base beyond its London heartland with
the opening of a new store in Birmingham.
• Kids Cavern – Kids Cavern was acquired
in the previous year and, similar to Base, is
a specialist retailer of children’s premium
apparel and footwear. One store opened in
the year in the Trafford Centre, Manchester
to complement the existing two stores in
Liverpool.
• The Hip Store – The Hip Store continues to
bring together an eclectic mix of domestic
and international labels including emerging
talent and globally-established brands. The
Hip Store has been an institution in Leeds
for over 20 years with a second store in
Nottingham, opened in the year following
the conversion of the former Size? store in
the city.
OUTDOOR
BLACKS, MILLETS AND ULTIMATE
OUTDOORS
Our approach continues to be to keep leases
flexible with break clauses wherever possible
so we can react quickly if market conditions
change. Our policy of flexibility means that
the store portfolio, particularly with regards
to Blacks and Millets, continues to evolve:
• Blacks – One new store opened in the
period
• Millets – The Millets store portfolio has seen
further change during the year with three
new stores opened and four stores closed.
We have also converted one high street
in Southport, to Go Outdoors to test the
performance of this fascia in smaller space.
• Ultimate Outdoors – Six stores continue to
trade as Ultimate Outdoors
79
with the other options available to it and
ultimately determined that, if fundamentally
restructured, Go had a future in the Group.
Consequently, the Group, via its newly
incorporated subsidiary JD Newco 1 Limited,
subsequently re-acquired the business
and substantially all of the assets of Go
Outdoors from its Administrators with this
proposal being reviewed and cleared in
advance by the independent Pre Pack Pool.
The Group continues to determine which
stores it wants to trade from longer term
and has already commenced negotiations
with landlords for new leases with terms
which are structured more appropriately.
Prior to Go Outdoors entering into
administration, we had started to integrate
the Fishing Republic business into the Go
Outdoors stores by creating dedicated
areas for fishing product where space
allows. As a consequence, we did not need
a large number of stand alone Fishing
Republic stores with a net nine stores
closed in the year.
TISO, ALPINE BIKES AND GEORGE FISHER
One underperforming smaller space store
at Ratho, near Edinburgh, was closed in
the year with Tiso having 13 stores at the
end of the year with 12 stores in Scotland,
consisting of nine Tiso Outdoor Experience
stores and three stand alone Alpine Bikes
stores, complemented by the highly
regarded George Fisher store in Keswick.
For a complete table of store numbers see
pages 28 to 30.
Peter Cowgill
Executive Chairman
7 July 2020
GO OUTDOORS
The onset of COVID-19 has added a new
material uncertainty to the recovery of
Go Outdoors as it is more sensitive to
reductions in footfall compared to other
Outdoor fascias in the Group consequent
to its disproportionate reliance on physical
store sales combined with a low average
contribution per store. The potential future
risk from lower footfall then brought into
sharper focus the inflexible terms of the
property leases in Go Outdoors with the
stores having an average remaining period
to lease expiry of approximately 10 years
with upwards only rent reviews, many of
which are fixed at rates above inflation
regardless of the market rent in the location.
Following the onset of COVID-19, the
future viability of Go Outdoors became
materially uncertain with the enforced
closure of the stores on 23 March 2020
bringing into sharper focus the underlying
structural weaknesses of the business. In
particular, the performance of Go Outdoors
is very dependent on levels of footfall into
stores due to its disproportionate reliance
on physical store sales which, historically,
have represented more than 90% of annual
revenues. Further, the terms of the property
leases in Go Outdoors were very inflexible
with the stores having an average remaining
period to lease expiry of approximately 10
years with upwards only rent reviews, many
of which are fixed at rates above inflation
regardless of the market rent in the location.
As has been widely reported, reduced
consumer confidence and the requirement
to maintain social distancing in stores have
resulted in levels of footfall not returning
to pre-lockdown levels. This, combined
with the inflexible lease terms, resulted in
the Board deciding that it was not in the
best interests of the wider Group, and its
shareholders, to provide continued financial
support to Go Outdoors in its current form.
Accordingly Go Outdoors entered into
administration on 23 June 2020.
The Board considered a number of
strategic options for Go which included
the appointment of advisers in May 2020
to market the business for a potential
sale. The Board examined the offers made
through the marketing process together
CORPORATE AND SOCIAL RESPONSIBILITY
81
OUR PEOPLE
The talented individuals working with the
Group are integral to our continued success,
delivering exceptional results year after
year.
Our careers websites enable prospective
employees to see up to the minute vacancy
information across all of our stores, offices
and distribution centres.
As the JD Group expands globally, so does
the network of people who operate in
accordance with our company values and
standards. This is successfully achieved by
focusing on the recruitment, wellbeing and
development of our people who have what
it takes to thrive within this fast-paced and
exhilarating business environment.
Our colleagues now face a different
challenge and the safety of them, and our
consumers, will always be our number
one priority. We look forward to the point
when the situation normalises and we are
able to resume our progression giving our
colleagues the opportunities to develop
their individual careers and achieve their
personal ambitions.
TALENT ACQUISITION
Over 56,000 people work within the Group
all over the world. We attract the very best
talent to our teams and acknowledge the
continuation of this process as an important
factor in the Group’s evolution.
Our careers sites have over 600,000 users
registered internationally with just over
4,500 vacancies being filled on the system
in 2019.
In addition to the company’s careers
site, the JD Group is actively engaged on
digital platforms such as LinkedIn. The
Group has also participated in numerous
presentations at university careers fair
exhibitions around the country. We continue
to explore additional avenues to promote
our attractive employment proposition to
the industry leaders of tomorrow.
WHO ARE OUR PEOPLE?
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.
GENDER SPLIT
Plc Board
Senior Managers*
Male
5
322
Female
2
106
Total
7
428
Other employees
28,924
27,326
56,250
% Male
% Female
71%
75%
51%
29%
25%
49%
The breakdown for the comparative period, as at 2 February 2019, is set out below:
Plc Board
Senior Managers*
Male
5
291
Female
1
116
Total
6
407
Other employees
25,773
23,824
49,597
% Male
% Female
83%
71%
52%
17%
29%
48%
* 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
2) any other Directors of subsidiary undertakings
80
WELLBEING
Employee wellbeing is very important to
the Group and we have taken a holistic
approach to promote health and wellbeing
through different business areas as follows:
2019 saw the introduction of Wellbeing
Champions within the Group. 161 individuals
have been selected and trained on how to
spot signs of modern slavery and how to
support employees who are having mental
health difficulties in an empathetic, sensitive
but practical way. We are looking to expand
this initiative further throughout all areas of
the Group in 2020.
Our training strategy has been developed to
include the following:
• First Aid and Mental Health First Aid
training available to all employees.
• Over 900 employees from our Distribution
Centre and Head Office have attended
at least one of our 108 behavioural
training sessions on subjects ranging from
communication skills to managing conflict.
• Our Wellbeing Champions have been fully
trained in Modern Slavery Awareness and
are at the forefront of supporting the
business’ communication on this with the
wider workforce.
The Group also promotes the physical
wellbeing of employees via discounted
rates at JD Gyms for all employees. We
also continue to encourage and organise
numerous physical activities across the
business.
Our partnerships with external bodies
provide access to additional support to
our employees regarding their emotional,
physical, vocational and financial wellbeing.
We continue to improve communication
throughout the Group via my hub, our
human capital management system,
Facebook Workplace, our HR Advice hub,
employee forums and our Your Voice
initiative. Our People 1st magazine also
continues to deliver Group news to all Head
Office, Distribution Centre and Retail sites
across the business.
The Group offers different flexible working
arrangements, for example; part-time hours,
job-share and a core hour working policy to
promote work-life balance.
DEVELOPMENT
A vital component of the Group’s strategy
is our commitment to the development of
our People, whether this is our focus on
internal progression or ensuring the talent
we acquire is provided with the very best
resources and knowledge to excel in their
careers.
Our learning strategies provide our
colleagues with access to a blend of
e-learning, face-to-face tuition and
experiential learning.
GLOBAL MOVEMENT
Under JD’s Tier 2 Sponsorship Licence
we have recently been approved entry
to the Intra Company Transfer category.
This allows employees from our overseas
operations to work within the UK.
We also have opportunities for our UK
colleagues to work globally, enabling us to
cross-pollenate territories with the required
company knowledge and expertise with
increased fluidity.
LEADERSHIP DEVELOPMENT
In 2019 a further 58 people completed
the 16-week Management Development
Programme for Head office and 8 people
completed the Leadership Development
Programme aimed at leaders wishing to
further develop their skills.
FACE-TO-FACE TRAINING
The reach of digital learning has been
an incredible benefit to the business, the
JD Group acknowledges the need for
traditional classroom-based training to
ensure our teams are achieving their full
potential.
Our international network of training
facilities have hosted a broad range of
courses during 2019, providing tuition and
accreditation for 433 newly appointed store
managers and almost 1,000 supervisors as
well as delivering capability and behavioural
skills training to a further 1,500 employees.
CORPORATE AND SOCIAL RESPONSIBILITY
83
Almost 4.5 million minutes of e-learning
were completed by our employees in
2019. Our e-learning was also introduced
to JD South East Asia during the year
bringing further consistency between our
international territories and the Group’s
successful UK model.
MULTICHANNEL GRADUATE SCHEME
The Multichannel Graduate Scheme offers
new graduates invaluable experience.
Working through a two-year personalised
programme, successful applicants have
the opportunity to perform and train in a
variety of roles, offering insight into multiple
disciplines in order to develop a well-
rounded understanding of e-commerce,
whilst building strong relationships across
the department.
At the end of the two years a final role
is chosen based on each colleague’s
strengths and interests. 2019 saw the
scheme launch internationally for the first
time, with 3 graduates joining us from
Spain. The programme has helped develop
some excellent colleagues and offers new
graduates the chance to try different roles
before they decide on their career path.
THE FUTURE
Notwithstanding the challenges caused by
COVID-19, the Group has a number of key
aims to further improve the wellbeing and
development of our colleagues.
The Group will be continuing its focus on
employee wellbeing throughout 2020 and
beyond.
Our Business Reward team is set to grow
throughout the year, providing a function
dedicated to improving our employee
experience.
APPRENTICESHIPS
In 2020 we aim to grow the number of
apprentices in the business and the number
of apprenticeship standards available to
new recruits and existing employees as part
of their career development.
OUR GLOBAL ACADEMY
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6
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Our established retail academy has been at
the forefront of exporting JD’s DNA across
all countries in which the business operates.
2019 was a landmark year for the academy,
seeing 212 graduates across all territories
successfully completing a 10-week
programme that provides them with all
the tools required for a successful career
in retail management. With over 100%
increase in the number of graduates from
2018, the retail academy continues to go
from strength to strength.
E-LEARNING
The JD Group’s e-learning platform is
an integral part of ensuring employees
throughout the business adhere to the
correct operational standards.
82
RETAIL ACADEMY
The leap in number of graduates from our
retail Academy from 2018 to 2019 was
astounding. Whilst COVID-19 will inevitably
constrain the number of graduates this year,
the expansion of the Academy’s capacity
means that we will be looking to resume
our positive momentum in our graduate
programme in 2021.
MY HUB
The Group’s human capital management
system is crucial to how we continue
to communicate with our colleagues.
Employees have never been so connected
with the business. The my hub mobile app
went live in 2019. This year will see the
remainder of the UK estate migrating to
the system and further exciting benefits are
expected to be delivered across the Group
by my hub in 2020 and beyond.
FURTHER OPPORTUNITIES
As a growing business, we are enthusiastic
about providing our colleagues with the
chance to grow with us. Our International
Talent Pool, provides colleagues with the
opportunity to register their interest in
working in any of the territories in which the
Group operates.
POST COVID-19
As the COVID-19 pandemic continues, the
business will continue to review and adapt
any safeguards put in place whilst adhering
to the specific government advice in each
of our territories.
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.
Occupational Health provision provides
health checks and support for employees
and also enables the business to promote
healthier lifestyles. The Retail Trust is also a
key component of our wellbeing strategy,
providing a free, confidential support
service that aids the emotional and financial
wellbeing of our people, their families and
direct dependants in times of need.
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. 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.
As the widely dispersed nature of the Group
store base increases the risk of breaches in
health and safety standards and regulations,
consequently we have increased the
resource in this area. If breaches do occur
we take appropriate action and use the
experience to ensure even greater focus
on health and safety improvement for the
benefit of the public, our customers and our
employees.
We can report the following for the year:
• We maintained the British Safety Council
‘Five Star’ accreditation for the third
successive year for safety management
at our Kingsway Distribution Centre,
demonstrating our ongoing commitment
to both excellent health and safety
standards and continuous improvement.
• The Royal Society for the Prevention of
Accidents has awarded the Group a Gold
Award for its overall health and safety
performance during 2019.
• There have been three Local Authority
or Fire Authority enforcement notices
served on the Group. In each case we
took immediate action, complied with all
requirements and as a result the notices
were withdrawn.
The table on the next page shows the
number of enforcement notices served on
the company over the 10-year period since
2009.
• The appointment of a Health and Safety
Officer in Germany to provide specific in
country support to the German team.
Our focus in the coming year will be:
1
1
3
• To maintain the British Safety Council
accreditation ‘five star’ accreditation for
our Kingsway distribution centre.
• Continued safety management in all our
stores and ensuring no Local Authority
or Fire Authority enforcement notices are
served on the Group.
• To further improve the level of compliance
with Group standards across the UK,
Europe, Asia/Pacific and the United
States.
• The further implementation of our health
and safety information, training and record
keeping software across all the European
countries in which we operate.
COVID 19
COVID 19 has presented challenges
however we have modified our workplaces,
developed and established revised working
practises and introduced visual reminders
to ensure the safety of our colleague and
customers at this difficult time.
CORPORATE AND SOCIAL RESPONSIBILITY
ENFORCEMENT NOTICES SERVED
2009–2019
5
2
0
0
9
4
2
0
1
1
2
2
0
1
2
1
2
0
1
0
2
0
1
3
2
0
1
4
2
0
1
5
2
0
1
6
2
0
1
7
2
0
1
8
2
0
1
9
Our commitment to continuous health and
safety improvement is demonstrated by:
• The further development across the
Group of our web based, online induction
and training programme ensuring
every colleague has the competence,
understanding and awareness to work
safely and at minimum risk.
• Health and safety input in 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.
• Our policies and processes review that
aims to ensure best practice in all areas
of our business. During the year we have
reviewed and revised our Group Health
and Safety Policy to reflect organisational
and business changes.
• Our quarterly Group and monthly
distribution centre health and safety
committee meetings, allow colleague
engagement in health and safety, with
everyone having the opportunity to raise
safety concerns through their committee
representatives.
• Bi-annual health and safety meetings held
in all other European countries in which
we operate.
• All UK Group companies with warehousing
and distribution activities receive bi-
annual internal health and safety audits to
support our aim of ensuring compliance
with Group health and safety standards
across all areas of the business.
84
85
ENERGY AND ENVIRONMENT
ESG – ENVIRONMENT OVERVIEW
The Group understands the importance of
responsible energy usage as part of our
contribution to combatting the challenges
of climate change. We acknowledge the
necessity of responsible energy usage,
and proactively encourage the reduction
of carbon emissions, and our collective
obligation to reduce our environmental
impact within local environments. During
the period, a number of initiatives and
reviews have been completed, resulting
in a more detailed and comprehensive
Group approach to sustainability and ESG
(Environmental, social and governance).
Independent verification of the Group’s
continued progress on management and
reduction of our environmental footprint
was provided by our score from the January
2020 Carbon Disclosure Project (CDP)
report. The Group retained its high ‘B’
score, outperforming both our benchmark
category (Discretionary Retail) and the
wider European sector average score by
two grades. The CDP is recognised as
a platform where investors, companies
and cities take action on sustainability
by measuring and understanding their
management approach and impact
achieved. Our CDP participation enables the
Group to benchmark performance against
industry peers, ensuring our strategy on
carbon reduction is independently reviewed
against comparable businesses.
Beyond our CDP score achievement,
we have continued our support of, and
compliance with the UK Government’s
Carbon Reduction Commitment, and
working towards the transition of the new
Streamlined Energy and Carbon Reporting
(SECR) regime. Furthermore, we have
fulfilled our Energy Savings Opportunity
Scheme (ESOS) and Energy Efficiency
Directive (EED) commitments, assisting the
reduction of our environmental footprint
and improving resource efficiency across
the UK and Europe.
After the Group’s FTSE100 entry, we
made further commitment improving
our sustainability and environmental
performance by establishing an ESG
Committee. The Committee shall determine
our future ESG strategy, monitor adherence
to our existing documented Sustainability
and ESG standards, and shall oversee
plans for the introduction a new ‘ESG and
Sustainability Policy Framework’ during
2020.
ESG – KEY ACHIEVEMENTS:
• We advanced our reputation as a
sustainable organisation through
increasing the number of environmental
performance benchmarks that we
measure ourselves against. These include
joining RE100 (the world’s most influential
companies, committed to 100% renewable
power) to demonstrate our public
commitment to renewable energy. We
have also completed our first CDP Forests
questionnaire.
• Undertaking measures to improve
communication on our matters of current
public and media interest (e.g. plastic
usage). During the period the Group
re-launched its corporate website - a
reference point for our ESG statements,
achievements and strategy, enabling
greater transparency on our practices and
progress.
• Continuing our progress on moving JD
European stores to 100% ‘Green Energy’
usage, consistent with our current policy
in the UK and Republic of Ireland. During
the period, JD France and Chausport
moved to ‘Green’ energy supply. Through
membership of the RE100, we have
publicised our target of 100% renewable
electricity use for our European operations
by 2022, with the ambition for all existing
global operations to be renewable by
2025.
• Production and distribution of quarterly
Environmental Performance Reporting for
store energy and water usage
• The team has successfully completed and
delivered on the Group’s data gathering
and reporting obligations under the
Energy Efficiency Directive (EED) / Energy
Saving Opportunity Scheme (ESOS)
ahead of the December 2019 deadline
• Collation of Scope 3 emissions data from
our major third-party logistic providers.
This will assist in implementing our
Science Based Target initiative (SBTi)
submission this year, supporting the
provision of enhanced Scope 3 emission
reporting
ENVIRONMENTAL PERFORMANCE
REPORTING - GREENHOUSE GAS
EMISSIONS DATA
The Group uses and reports on KPIs for
energy usage. During the last year, the
Group has engaged the services of a
leading third party audit and certification
body to audit and verify our Greenhouse
Gas (GHG) submissions (in accordance with
ISO 14064-3 standards).
Accordingly, the Group can report the
figures on the next page, calculated based
on GHG Protocol Corporate Standard using
emissions factors from UK government
conversion factor guidance. 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 for our
UK operations, a significant element of
which act as supporting infrastructure for
our international businesses.
CORPORATE AND SOCIAL RESPONSIBILITY
ENERGY MANAGEMENT - BASIC
PRINCIPLES
The Group’s core business is retail.
Throughout our multiple store fascia’s, we
aim to provide customers with an enjoyable
retail experience. This involves displaying
the latest products from the very best
brands in an attractive, well-lit environment
capable of sustaining a comfortable
ambient temperature for customers and
colleagues alike. The Group accepts that all
our businesses (regardless of territory) must
be responsible with their respective energy
usage and associated carbon emissions.
Our recent CDP score demonstrates that
we continue to outperform our industry
benchmark for this obligation, with work
continuing to sustain and improve this
strong performance.
ENVIRONMENTAL PERFORMANCE
REPORTING - SUMMARY
During the period, we continued to build
upon the success of the Group’s long-
standing energy reduction achievements
and management of environmental
issues within our core UK operations. Our
environmental performance reporting is
supported by a team of key colleagues
and specialist energy and environment
consultants. Our reporting system captures
all key energy usage for buildings and
business travel, carbon emissions, water
use, waste and recycling, in addition to
acting as a register for our audit data for all
energy related reporting requirements and
legislation.
During the Period, progress has been made
in the following areas:
• Improved energy efficiency. Reducing
our usage via improved management
reporting, greater use of benchmarks
and investing energy infrastructure (e.g.
‘Smart’ metres)
• Reducing organisational waste - by
using improved site and DC reporting
to increase the number of operationally
feasible recyclable waste streams within
our core operations
86
EMISSIONS SOURCE:
Scope 1 (Gas, Transport, Heating oil)
Scope 2 (Electricity)
Scope 3 (Transport)
87
2019/2020
Tonnes
CO2 Equivalent
2018/2019
Tonnes
CO2 Equivalent
8,979
73,597
27,317 –
4,465
43,124
(i) Reporting boundaries for 2019/20 (aggregated facilities under operational control) include UK, Australia, Austria (new in 2019/20), Belgium,
France, Germany, Ireland (new in 2019/20), Italy, the Netherlands, Malaysia, Portugal, Spain, Sweden & US (new in 2019/20). Scope 1 Transport &
heating oil is for our core UK head-office operations.
(ii) Figures above are from the Group’s 2020 Carbon Disclosure Programme (CDP) data submission in 2019, the results of which were published on
January 20th, 2020. These have been adjusted since our last annual report with verification for our CDP report submission in July 2019
(iii) The figures for gas & electricity are calculated using location-based factors, however we are currently working to report on market-based factors
for our 2020 CDP response
(iv) Scope 3 emissions data is from our key strategic suppliers that provide transport and logistics services. This will be further developed with our
Science-Based Target initiative workstream this year
Whilst not a mandatory disclosure, the Group remains committed to presenting data
appertaining to energy usage and carbon footprint. After improving our reporting
mechanisms, the Group is now able to provide its full, actual UK and International energy
usage and carbon footprint.
Energy Usage – Electricity (MWh)
Energy Usage – Natural Gas (MWh)
Total Energy Use (MWh)
Carbon Footprint (Tonnes CO2)
2020
(UK & ROI)
87,136
18,380
105,516
25,651
2020
(INT)*
94,634
15,436
110,070
55,499
2020
(TOTAL)
181,770
33,816
215,586
81,150
* The increase in usage relates to the inclusion of our US operation’s and other new territories including Austria.
ENVIRONMENTAL PERFORMANCE
REPORTING – INTERACTION WITH
PENTLAND GROUP LIMITED (FORMERLY
KNOWN AS “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
Limited which is the Group’s ultimate
holding company (see note C22). With the
Government deciding to close the CRC
scheme following the 2018–19 compliance
year, this is the last year we will report
under this scheme.
CARBON MANAGEMENT PROGRAMME –
2019/20 PROGRESS REVIEW
Up to, and including the reporting
Period, The Group maintained a Carbon
Management Programme (‘CMP’)
sponsored by our Chief Financial Officer
and reviewed at regular intervals. Following
the establishment of the Group’s ESG
Committee, the management of Carbon,
water, waste, and other key environmental
measures shall be measured against an
updated set of objectives.
To ensure continuity between the last
reporting period and this, we have provided
an update on in-year progress in the original
format (below). The 2020/21 objectives are
listed in the next section.
CORPORATE AND SOCIAL RESPONSIBILITY
89
OBJECTIVE
ACTION AND PROGRESS
1. REDUCE ENERGY
USAGE IN NON-
TRADING PERIODS
2. REDUCE ENERGY
USAGE THROUGH
INVESTMENT
IN LIGHTING
TECHNOLOGY
3. REDUCE ENERGY
USAGE THROUGH
COLLEAGUE
AWARENESS AND
TRAINING
4.ENSURE THAT THE
CMP APPLIES TO ALL
BUSINESSES, IN ALL
TERRITORIES
The Group has invested in Building Management Systems
(BMS) in 372 of its highest energy consuming stores, the
majority of which are in the UK. These investments cover
all fascias and delivered average annual energy savings of
13.1% compared to usage prior to BMS-install (using baseline
figures compared across a number of sites). The BMS-related
energy saving equals a carbon reduction of 1,657t CO2.
During the Period, we trialled additional energy reduction
methods within our BMS sites. In Summer and Winter 2019
we reduced our heating and cooling set-points, decreasing
our energy usage and related CO2 impact. BMS shall continue
to be installed within new JD stores as standard, with further
retrofits and other BMS trials scheduled for the Period ahead.
Group investment in LED and energy reduction has continued
during the Period. Our standard retail lighting scheme uses
LED lamps with motion sensors in both changing room and
non-retail areas. Our Head Office site in Bury was fully retro-
fitted with LEDs within the Period, delivering a reduction of
over 60% in energy usage vs the previous lighting system.
Retail colleagues have a key role to play in the execution
of the CMP. All new staff receive online training in energy
management as part of our induction programme. We have
documented and published (via intranet and employee
magazines) case study material on our achievements. This
‘celebration of success’ increases employee awareness the
importance of energy reduction.
For Group acquisition stores, we work closely with
local management teams to identify carbon reduction
opportunities. Store energy performance reporting has been
introduced by Fascia for the UK retail operation and also for
JD Gyms. The reporting includes store energy performance
league tables (and performance indicators) comparing year
on year energy performance. A verified baseline for energy
has also been developed to show continual performance
improvement. The reporting provided on a quarterly period
has allowed the targeting of poor energy performing stores
and investigation action to be undertaken.
5. PURCHASE ‘GREEN’
(RENEWABLE)
ENERGY WHEREVER
POSSIBLE
100% of the Group’s UK and Irish electricity is ‘Green’ energy
from natural, renewable sources. Within the Period, France
joined, the Netherlands, Italy, Belgium, Sweden, Finland
Denmark and Germany on 100% Green energy. Acquisition
businesses are migrated to the Group’s sustainable supply
contracts (legacy contractual obligation usage.
88
PERCENTAGE OF WORLDWIDE
OPERATIONS SUPPLIED BY RENEWABLE
SOURCED ENERGY (EXCL. USA)
RENEWABLE SOURCED ENERGY
85%
NON RENEWABLE SOURCED ENERGY
15%
PERCENTAGE OF WORLDWIDE
OPERATIONS SUPPLIED BY RENEWABLE
SOURCED ENERGY (INCL. USA)
RENEWABLE SOURCED ENERGY
68%
NON RENEWABLE SOURCED ENERGY
32%
The percentage is calculated based on the revenue of the businesses supplied by renewable sourced energy as a % of the total revenue of the Group
CORPORATE AND SOCIAL RESPONSIBILITY
91
2020/21 ENVIRONMENTAL OBJECTIVES
Our previous reporting on ‘Carbon Management Plan’ has been replaced by an updated
set of environmental objectives, including but not limited to carbon reduction, water-usage
reduction, resource management, benchmarking and engagement.
2020/21 ENVIRONMENTAL
ENVIRONMENTAL OBJECTIVE – DETAILS
2020/21 ENVIRONMENTAL
ENVIRONMENTAL OBJECTIVE – DETAILS
OBJECTIVE
BENCHMARKING AND
ENGAGEMENT:
Increase Group
engagement with
a) independent carbon-
reduction surveys
b) accredited industry
bodies
c) strategic suppliers
RESOURCE
MANAGEMENT
Reducing waste and
improving re-use
The Group shall remain part of the RE100, updating the
forum on our progress throughout the year. The Group
will continue to disclose its carbon reduction plans via
CDP and CDP Forests submissions, and will continue its
engagement with the Retail Energy Forum.
The Group intends to increase ESG-related engagement
with its largest direct and indirect suppliers on carbon
and water reduction, along with wider ESG initiatives.
The Group plans to improve our asset ‘take-back’ –
reducing both waste, and avoiding using the energy
associated with the manufacture of the re-used assets.
The Group plans to further improve our store and
Kingsway DC waste stream infrastructure, including
the identification of new and improved revenue waste
streams, and ‘circular’ asset and waste solutions.
The Group shall complete its initial research and test
solutions for customer take-back on waste streams from
stores.
WATER REDUCTION
Site level measures
In the Period ahead, the Group intends to reduce overall
direct consumption via increasing usage of ‘smart’ and
Automatic Meter Reading (AMR) meter roll-out at high-
usage sites within the UK and Europe.
OBJECTIVE
CARBON REDUCTION –
ON SITE
Reduce carbon usage in
trading and non-trading
sites via investment in
technology
CARBON REDUCTION -
EDUCATION
Reduce energy usage
through colleague
awareness and training
CARBON REDUCTION -
REPORTING
Ensure that carbon
management and
reduction measures are
applied to all businesses,
in all territories, and by
key suppliers
CARBON REDUCTION –
PROCUREMENT
Purchase of green’
(renewable) energy
wherever operationally
feasible
BMS shall continue to be installed within new JD stores as
standard, with further retrofits and BMS trials scheduled
for the Period ahead.
We have planned an LED retrofit for our Kingsway
DC, in addition to the implementation of appropriate
energy saving solutions in accordance with ESOS report
recommendations.
Within the Period ahead, we plan to undertake a
comprehensive review of our employee sustainability and
ESG engagement. The review shall include topics such
as energy efficiency, resource usage reduction, resource
recovery, the circular economy, Sustainable Development
Goals (SDGs) and other areas directly linked to our
sustainability objectives.
We shall continue to evolve our ESG reporting practices
via the development KPIs aligned with our ESG and
Sustainability Policy Framework. These will include
further reporting of our Scope 3 carbon footprint, and
our commitments on implementation of Science-Based
Target initiatives (SBTs).
Continue improving our green energy supply
commitments to achieve our RE100 target of 100%
renewable electricity use for our European operations by
2022, with the ambition for all existing global operations
to be renewable by 2025.
90
CORPORATE AND SOCIAL RESPONSIBILITY
93
RESOURCE MANAGEMENT OVERVIEW:
Recycling, plastic, paper and customer packaging
RESOURCE MANAGEMENT:
Recycling, plastic, paper and customer packaging – 2019/20 progress review
The Group acknowledges the continued
increase in public and media focus on
the use of plastics, and encourage the
ongoing debate and encouragement for an
overall reduction in usage of plastic, paper
and other packaging materials across all
industry sectors.
PLASTIC, PAPER AND CUSTOMER
PACKAGING
With regards to the use of plastic bags for
customers, the Group continues to support
its belief that encouraging the re-use of
bags is the most effective way to reduce
overall plastic usage. Our JD fascia is known
for its high quality, durable drawstring duffle
bags, the re-use of which is visually evident
from the high street to the high school.
In 2013 the European Commission adopted
a proposal targeting member states to
reduce their consumption of plastic bags
with a thickness below 50 microns. In the
period, the Group’s core retail businesses
did not use plastic bags below 50 microns.
The plastic bags produced by the Group
are within and above the DEFRA 50-70
micron ‘bag for life’ criterion. We continue
to remain fully compliant with the carrier
bag charge schemes across the United
Kingdom. The JD drawstring bag is classed
as a ‘bag for life’ within England and
Republic of Ireland.
PLASTIC – BAG TAX/LEVY DONATIONS
To encourage customer consideration of the
necessity of bag use, the Group voluntarily
charges for the use/sale of drawstring-bags.
Where local authorities permit the donation
of bag-levy income, the Group donates all
proceeds from carrier bags charges (both
voluntarily, and bags covered by the levy)
to the JD Foundation. The Group does not
reclaim any production or ‘administrative’
costs from its bag-levy income, and
accordingly 100% of (net of VAT) proceeds
are received by the JD Foundation, for
annual distribution as follows:
• England: £0.32 million received in the
period to 1 February 2020. For the period
25% of the funds were passed to Mountain
Rescue in England and Wales with the
remaining 75% donated to other charitable
causes in accordance with the objects of
the JD Foundation.
• Wales: £0.01 million received in the period
to 1 February 2020. For the period 25%
of the funds were passed to Mountain
Rescue in England and Wales with the
remaining 75% donated to other charitable
causes in accordance with the objects of
the JD Foundation.
• Scotland: £0.04 million received in the
period to 1 February 2020. For the period
25% of the funds were passed to Scottish
Mountain Rescue with the remaining 75%
donated to other charitable causes in
accordance with the objects of the JD
Foundation.
Further information about the JD
Foundation and its activities can be found
on pages 104 to 108.
92
RECYCLING
Wherever possible, plastic or cardboard
(our major packaging constituent), is
removed at the earliest source of our
core supply chain (our Kingsway DC).
During the year, the amount of cardboard
recycled increased to 5,491 tonnes (2018:
4,756 tonnes). In 2019 we outsourced our
waste management on-site to a third-party
supplier, this has enabled the Group to
trial new initiatives such as re-processing
used hangers back into our estate via
backhauling and reducing our general waste
streams through finding different solutions
for these materials. We are working towards
completed a ‘zero waste to landfill’ audit at
our Kingsway DC by a third-party auditor.
The Group continues to expand its use of
the Dry Mixed Recycling (‘DMR’) schemes to
all its stores and businesses in the UK and
Ireland, to maximise waste diversion from
landfill. In 2019 we diverted 98.6% (2018:
98%) from landfill of our waste.
TONNES OF RECYCLED CARDBOARD
AT KINGSWAY DC
,
5
4
9
1
,
4
7
5
6
4
,
1
7
4
,
3
9
9
3
1
,
3
2
2
2
0
1
5
1
,
6
3
8
2
0
1
6
2
0
1
7
2
0
1
8
2
0
1
9
2
0
2
0
PLASTIC AND PAPER
Whilst our documented approach to
re-use approach is effective, the Group
seeks to further minimise the associated
environmental impact of customer bags by
ensuring that duffle bags are made from
50% recycled material, up from 33% in the
previous period. The 50% recycled material
specification is in use across our UK,
European and SEA operations. Our U.S and
Australian businesses work with in-country
suppliers to minimise carbon usage arising
from transportation, and will be aiming
to increase from 33% to 50% recycled
material by the end of the next period. We
have taken pro-active measures to provide
customers with more support on reducing
plastic usage via re-using and recycling, and
plan to trial the effectiveness of plastic-bag
recycling/take-back within some of our core
locations.
In line with territory legislation, the Group
uses paper-based bags rather than plastic
bags in its stores in the Republic of Ireland,
Belgium, Germany, selected Spanish regions
and Malaysia. The Group is mindful of
paper’s higher level of pre-manufacture
carbon emissions versus plastic, and works
to ensure that whole-life carbon emission
and environmental impact is assessed when
reviewing bags and packaging for any new
territories.
Our Blacks and Millets fascias successfully
ceased production of plastic customer bags
during the period, adopting an attractive
paper design that we believe will encourage
further re-use, in keeping with our key
plastic and paper re-use and lifecycle
environmental impact assessment objective.
Similar to the progress made by Millets and
Blacks, our GO Outdoors business is moving
new stores to an improved paper design,
in addition to reviewing the potential of
selling heavy-duty ‘bags for life’ specifically
targeted for customer re-use as part of
outdoor activities.
CORPORATE AND SOCIAL RESPONSIBILITY
CUSTOMER PACKAGING - ECOMMERCE
The group completed a material
specification and commercial review for
our core UK distribution sites for our online
packaging. This resulted in our fixed size
plastic mailing bags now being made
from up to 97% recycled material, and our
card packaging is now made from 100%
recycled material. By choosing to use
recycled plastic material (avoiding virgin
material) we achieved an annual equivalent
embodied carbon saving of 490t CO2e.
New messaging has also been introduced to
provide further guidance to our customers
of how they can dispose these materials.
MICROPLASTICS – CUSTOMER BAGS
In accordance with the prevailing market
research at the time the Group, in line with
a number of other retailers, historically
adopted the use of additives to try and
catalyse the degradation process of higher-
volume low-density polyethylene (LDPE)
customer bags.
The Group took the decision to remove
degradable additives from our bags in
late 2018, on the basis that there is little
direct evidence of even medium-long-term
degradation within samples of its additive
containing customer bag products. Indeed,
both DEFRA (Department for Environment,
Food and Rural Affairs) in their ‘Review
of standards for biodegradable plastic
carrier bags’ and UNEP (United Nations
Environment Programme) in their ‘Review
of standards for biodegradable plastic
carrier bags’ concluded that there is a lack
of evidence for the biodegradability of
carrier bags in an unmanaged environment.
Further, describing a bag as degradable is
often an (unintentional) regressive measure
owing to 1) removal of responsibility
from the individual using the bag and
2) ‘degradable’ or ‘biodegradable’ bags
containing insufficient instructions on the
exact environment required to achieve
material degradation and 3) a lack of local
infrastructure to support the disposal and
collection of degradable materials.
94
Accordingly, the position of Group remains
that we do not use degradable additives
within our plastic bags, and continue to
remind our customers of the importance
and value of multiple re-use. Encouraging
the re-use of items such as bags reduces
the overall demand for raw materials, and
thus is the most influential way to reduce
overall resource usage, whether plastic or
paper.
ESG – ENVIRONMENT SUMMARY
The Group recognises the importance
of protecting our environment and
is committed to carrying out our
activities with due consideration for our
environmental impact, particularly with
regard to; reducing carbon, energy and
water, ensuring efficient use of energy,
and using life-cycle analysis to determine
overall impact on environment. The Group
complies with all relevant legislation and
best industry practice, and continues
to minimise waste by using the simple
principles of reduction, reuse and recycling
across all resource intensive activities under
our remit or control.
ETHICAL SOURCING
2019 saw the introduction of our Code of
Practice encompassing our policies into a
concise document for our manufacturing
suppliers and brands. The JD Sports
Fashion Plc Ethical Code of practice is
to establish a procedure for protecting
workers and providing assurance that our
products are manufactured within safe
and fair conditions. The Ethical Code of
Practice applies to everything we do and
forms part of the contract with us. The
people working for our suppliers are to be
treated with respect, their health and safety
and basic human rights must be protected
and promoted. The JD code of conduct is
included in this document which follows the
ILO minimum standards. To find out more
about our Ethical Code of Practice, please
visit our corporate website.
95
JD CODE OF CONDUCT:
MINIMUM STANDARDS
EMPLOYMENT IS FREELY CHOSEN –
THERE MUST BE NO FORCED LABOUR,
BONDED OR INVOLUNTARY.
The organisation shall not engage in or
support the use of forced or compulsory
labour, including prison labour, shall not
retain original identification papers. No
personnel shall be required to pay deposits
to the organisation at any time during or
prior to commencing employment.
FREEDOM OF ASSOCIATION AND THE
RIGHT TO COLLECTIVE BARGAINING
MUST BE RESPECTED
All personnel should have the right to form,
join and organise trade union(s) and to
bargain collectively on their behalf with
the organisation. Where these rights are
restricted under local laws the organisation
shall allow workers to freely elect their own
representatives.
WORKERS CONDITIONS ARE SAFE AND
HYGIENIC
The organisation shall establish
documented procedures to detect, prevent,
minimise and eliminate potential risks to
the health and safety of personnel. The
organisation shall maintain written records
of all health and safety incidents that
occur in the workplace and in dormitories
provided by the organisation, whether it
owns, leases or contracts dormitories from a
service provider.
The organisation shall provide, for use by
all personnel, free access to: clean toilet
facilities, potable water, suitable spaces for
meal breaks and, where applicable, sanitary
facilities for food storage.
CHILD LABOUR SHALL NOT BE USED
The organisation shall establish, document,
maintain and effectively communicate to
personnel and approved subcontractors,
written policies and procedures for
remediation of child labourers, and shall
provide adequate financial and other
support to enable such children to attend
and remain in school until no longer a child
as defined above.
The organisation may employ young
workers, but where such young workers are
subject to compulsory education laws, they
shall work only outside of school hours.
Under no circumstances shall any young
worker’s school, work and transportation
time exceed a combined total of 10 hours
per day, and in no case shall young workers
work more than 8 hours a day. Young
workers may not work during night hours.
LIVING WAGES ARE PAID IN LINE WITH
LOCAL LAWS AND FOR A STANDARD
WORKING WEEK, OVERTIME MUST BE
PAID AT PREMIUM RATE
The organisation shall respect the right
of personnel to a living wage and ensure
that wages for a normal work week, not
including overtime, shall always meet at
least legal or industry minimum standards,
or collective bargaining agreements (where
applicable). Wages shall be sufficient to
meet the basic needs of personnel and to
provide some discretionary income. The
organisation shall not make deductions
from wages for disciplinary purposes.
CORPORATE AND SOCIAL RESPONSIBILITY
97
WORKING HOURS MUST NOT BE
EXCESSIVE AND MUST BE VOLUNTARY
The organisation shall comply with
applicable laws, collective bargaining
agreements (where applicable) and industry
standards on working hours, breaks and
public holidays. The normal work week, not
including overtime, shall be defined by law
but shall not exceed 48 hours. Personnel
shall be provided with at least one day off
following every six consecutive days of
working.
REGULAR EMPLOYMENT IS PROVIDED
Obligations to employees under labour or
social security laws and regulations arising
from the regular employment relationship
shall not be avoided through the use of
labour-only contracting, sub-contracting,
or home-working arrangements, or through
apprenticeship schemes where there is no
real intent to impart skills or provide regular
employment, nor shall any such obligations
be avoided through the excessive use of
fixed-term contracts of employment.
NO DISCRIMINATION
The organisation shall not engage in
or support discrimination in hiring,
remuneration, access to training, promotion,
termination or retirement based on race,
national or territorial or social origin, caste,
birth, religion, disability, gender, sexual
orientation, family responsibilities, marital
status, union membership, political opinions,
age or any other condition that could give
rise to discrimination. The organisation shall
not allow any behaviour that is threatening,
abusive or exploitative, including gestures,
language and physical contact, in the
workplace and in all property provided by
the organisation, whether it owns, leases or
contracts the residences or property from a
service provider.
NO HARSH OR INHUMANE TREATMENT
IS TOLERATED
Physical abuse or discipline, the threat of
physical abuse, sexual or other harassment
and verbal abuse or other forms of
intimidation shall be prohibited.
The health & safety of workers is paramount
in all areas of our business, direct or
otherwise.
The Group continues to review its policies
on ethical sourcing on a regular basis. We
continuously assess factory ethical and
quality management and work with our
suppliers to improve conditions in our
factories.
100%
REACH COMPLIANT
96
REACH COMPLIANCE
The Group continue to monitor REACH
performance through a robust due diligence
program. We adopted a risk-based strategy
to eliminate the use of restricted chemicals
in our supply base which was implemented
through the below criteria:
• Evaluating certification and accreditations
in the 1st and 2nd Tiers
• Focusing on high risk product and
components across brands
• Highlighting the risks of small volume
orders
This approach has proved successful as
demonstrated by our random due diligence
testing program in providing product
100% REACH compliant and free from
‘Substances of Very High Concern (SVHC)
• Intertek Testing Services (ITS) continue
to be appointed as our nominated testing
house, publishing the Group ‘Substances
of Very High Concern’ (SVHC) list and
testing standards matrix on their web
platform. It is mandatory for all of the
Group’s suppliers to sign up to our
platform on ITS and therefore accept
our terms and conditions before they are
approved into the supply chain.
• We further engaged ITS to assist
in training and development of our
compliance process for California’s ‘Prop
65’ (Safe water and Toxic enforcement
act) and the USA’s Federal Hazardous
substances Act regulations as required for
the sale of apparel in the United States.
• Having previously harvested data from
our Mills and Dye houses and visiting
selected sites to evaluate their ZDHC
compliance (Zero Discharge of Hazardous
Chemicals), we are moving into our next
phase by engaging with a 3rd party
to develop an initial self-assessment
tool for management of sustainability
and environmental issues in our supply
chain. This is in preparation to join the
SAC (Sustainable Apparel Coalition)
and utilize the Higg Index FEM (Facility
Environmental Module).
SUSTAINABILITY IN PRIVATE LABEL
MANUFACTURING
JD recognise the need for responsible
sourcing, and this includes making
sustainability an integral part of our private
label production from conception to end
product and beyond.
The initial target set in June 2019 was for
upwards of 2 million garments to be made
from sustainable materials, sustainably
grown cotton and/or recycled polyester.
From October 2019 to March 2020 the
implementation of the research and
subsequent strategy resulted in 2.1 million
products being available for sale, surpassing
this original target. New targets have been
set to take us to the end of the year.
The target for 2020 is 4 million garments to
be made from sustainable materials.
At this present time sustainability is not
cost neutral, one of the reasons for this
is availability of supply and demand so
considerations must be made from the very
start. These are Availability, Affordability,
Aesthetics and Performance. It may not
always be possible for commercial reasons
on some brands that we produce in house
to include sustainable fabrics but it is
important that we make changes in other It
is important to consider all opportunities no
matter how small or insignificant they can
appear.
Considerations are to be given to:
• All products
• Recycled Care labels
• FSC Barcode stickers with APEO
free adhesive
• Recycled Hangtags/Strings
CORPORATE AND SOCIAL RESPONSIBILITY
99
AIR FREIGHT ANALYSIS (CO2)
2020
2019
5,294
953
MONTHLY CO2 TONNAGE
CY
PY
2000
1500
1000
500
0
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ANNUAL AIR FREIGHT SPEND
£93,781.67
£1,399,881.33
CY
PY
98
INTERNAL / 3RD PARTY DEVELOPMENT
PROCESSES
• Reducing the packaging on incoming
samples. Less plastic usage.
• Less sampling of full garments, using
fabric swatches.
• All submissions to be submitted on
recycled card.
• Approvals by photograph as opposed to
repeat submissions where possible.
abreast of new trends emerging from those
involved in labour exploitation and modern
slavery and with the collaboration of the
GLAA and our supply chain it allows us
to adapt and inform efficiently within our
operations.
Our Plc website demonstrates the progress
we have made, not only with our overseas
partners but in our own UK operations with
the implementation of Welfare Champions.
The welfare champions have already proven
MODERN SLAVERY
Following the formation
of a new UK modern
slavery committee within
the existing CSR team
2019-2020 has been a
milestone within our UK
operations and with the
collaboration of our 3rd
party contractors we have
been able to implement
the standardisation of our
policies across external
partners, leading to better
understanding of the UK
supply chain and work
towards integration to the
Group Modern Slavery
programme.
The Group joined the
apparel protocol and is working closely
with the GLAA (Gangmasters Labour
Abuse Authority) and we were proud to
host our first GLAA conference on site at
our Kingsway DC. Attendees were invited
from the JD supply chain and subsidiaries
including our service contractors and JD
are committed to working with the GLAA
over the coming months to improve our
understanding and processes better
enabling us to highlight and work to
eradicate modern slavery in our UK
operations.
At the end of 2019, the CSR team fully
mapped our 3rd party warehousing
operations in the UK and overseas and are
working to identify our external contractors
supply chain. This will be expanded to our
overseas subsidiaries for inclusion.
Modern Slavery is a constantly changing
environment and it is important to keep
to be a vital source of support for the
DC staff and this programme has begun
its rollout to the head office which will
continue over the coming months. It was
important to develop a robust escalation
process with ultimate responsibility given
to relevant senior management to ensure
the safety of those who may be affected
and that we work within the guidelines
suggested by the GLAA and Stronger
Together should an investigation be
required. Working with the GLAA has
ensured that we eliminate risk to both
permanent and agency supply. The role
of a champion involves training in Modern
Slavery, cause and effect and how to spot
the signs, but also extends to mental
health and general wellbeing. With the
involvement of the JD Foundation partner,
Papyrus, mental health seminars have been
held at the DC involving the appointed
welfare champions and senior staff.
CORPORATE AND SOCIAL RESPONSIBILITY
101
SUPPLY CHAIN
We have continued to map our supply chain
to 4th Tier. This strategy requires continual
engagement with our partners as the
manufacturing chains beyond first tier will
often change due to demand and capacity.
As a supplier of fully factored garments, our
partnership does not extend to mills and
dye houses historically and we recognise the
need to develop these relationships further.
• 1st Tier = CMT Site (Factory)
• 2nd Tier = Mill
• 3rd Tier = Dye House
• 4th Tier = Print House
• 243 Agents (2019: 158 Agents)
• 494 Factories (2019: 355 factories)
• 25 Sourcing Countries (2019: 20 Sourcing
Countries)
The Transparency map is available on our PLC website.
This map details the city locations of all the above four tiers of the private label manufacturing
supply chain.
100
Additional information relating to the numbers of workers and gender are listed for each of
our factories and our audited percentage by country.
8
6
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This year
Last year
AUDIT STATUS 2020 Vs 2019
The protection of those workers in our
supply chain is paramount and we will
continue to have zero tolerance to critical
issues identified by the Group Personnel or
third party auditors relating to safe working
environment. Critical issues are defined
as an issue that impacts workers causing
hardship or harm. 86% of the factories used
by the JD Group are audited by third party
accredited audit companies, as shown in
the graph below. The 86% represents 100%
of the factories where an audit is required.
The remaining 14% of factories 7.8% did
not require an audit due to the low level
of spend or where 2019/20 was the first
year that the Group has worked with these
factories the remaining 6.2% due to dual
sourcing.
103
It is the aim of the Group to ensure that all
entities within the Group should comply
with our policies. We will continue to work
towards ensuring all subsidiaries embed
our policies into their businesses, including
those which have been recently acquired.
During the Covid-19 outbreak, the JD Group
have not cancelled any commitments in our
overseas manufacturing base. The Sourcing
and Development teams have worked with
the factories to evaluate the manufacture
status of all orders and for those orders
which will fall out of season due to the
lockdown in Europe and the UK, fabrics are
to be utilised in full for new orders across
our brands. It has been impossible not to
halt the production at certain stages, further
amplified by countries outside of China also
being affected by lockdown in their own
countries which has led to manufacture
being ceased for several weeks. Sourcing
strategies were engaged and implemented
in late February to spread the risk and
liabilities for both JD and the factories
which have proved to be successful.
The long-term partnerships with the supply
base has been instrumental in working
through the difficulties out of season orders
creates and ensuring that liabilities are met
for the long term sustainability of both
suppliers and the Group. Each country has
different evolving situations at varying
times and communication is critical to
ensuring the safety of all workers and their
rights are upheld.
Neil Greenhalgh
Chief Financial Officer
7 July 2020
£2.8M PORTUGAL
£1.0M CAMBODIA
£2.3M OTHER
Subcontracting is expressly forbidden
without authorisation and verification. The
Group regularly visits the factories that
we work with to check production and
standards. This is critical to promote the
importance of longer term relationships;
we believe this is the key to the protection
of workers’ rights and working with the
factories to achieve higher standards for
workers.
We consider the protection of those
workers in our supply chain is paramount
and we will continue to have a zero
tolerance to critical issues identified either
by JD personnel or third party auditors
relating to a safe working environment,
timely payment of correct wages and
minimum standards in line with local laws.
Critical issues are defined as those non-
compliances that impact workers potentially
causing hardship or harm.
CORPORATE AND SOCIAL RESPONSIBILITY
SOURCING OF PRODUCT
The percentage of suppliers audited has
consistently been maintained over 85%.
Given that our supply base has continually
increased this year at 28% due to new
acquisitions and commercial growth which
again shows greater coverage of third party
ethical audits year on year.
Our main sourcing regions are in Asia,
India, Turkey and Pakistan. The chart below
illustrates the sourcing value in sterling by
country for all entities which source private
label products.
CHINA
TURKEY
£111.2M
£10.9M
INDIA
£14.9M
MYANMAR
£3.2M
PAKISTAN
£5.9M
BANGLADESH
£1.1M
102
PRODUC CORPORATE AND SOCIAL RESPONSIBILITY
105
CHANGING LIVES, SAVING LIVES
CHANGING
The mission of The JD Foundation is to support
charities working with disadvantaged young
people in the UK. The JD Foundation (‘the
Foundation’) supported 18 charities in 2019
with a focus on physical health, mental health
and homelessness.
The JD Foundation is a registered charity,
founded by JD Sports Fashion plc in
October 2015. 100% of the net proceeds
from the sale of the iconic JD Duffle Bag
and all carrier bags across the JD Group are
transferred to the JD Foundation.
ENVIRONMENTAL CHARITIES
In addition to supporting youth charities,
the Foundation also support of Mountain
Rescue England and Wales and Scottish
Mountain Rescue. For the first three years
of this partnership, 2016 to 2018, the
Foundation donated 50% from proceeds
from the sale of carrier bags in England,
Wales and Scotland.
The Foundation is committed to distributing
100% of all monies raised, less direct
expenses with any residual amounts
over amounts committed to the principal
partners retained for emergency funding.
The Foundation have continued the partner-
ship with both Mountain Rescue England
and Wales and Scottish Mountain Rescue by
donating 25% for a further three years 2019
to 2021.
In the period from October 2015 to January
2020, the JD Foundation has raised £3
million to date, with 93% of funds received
donated to charity. All monies raised
(excluding fees) are distributed amongst
the chosen charity partners, with a small
reserve left for emergency funding.
LIVES
SAVING LIVES
CHOSEN CHARITIES FOR 2019
The JD Foundation’s selection of charity
partners support a range of disadvantaged
communities around the UK, from
those tackling youth homelessness and
unemployment, to others providing support
for families dealing with undiagnosed
heart conditions, terminal illness and
bereavement. The Foundation recognises
the importance of building a sustainable
charity and want to develop long term
relationships with charities who are
leaving a life changing impression on their
beneficiaries.
SOCIAL IMPACT
A Social Impact Assessment was
undertaken in 2019 to assess the impact of
the work being done by the Foundations
charity partners. A number of interviews,
focus groups and questionnaires were
completed by the charity partners and a
Social Impact Report was written. This will
help the JD Foundation expand its reach,
continue to support charities in need
of funding or support and improve our
processes to enable this growth.
£3,000,000
TOTAL AMOUNT RAISED
For more about the Foundation, please visit
on social media:
@TheJDFoundation
@TheJDFoundation
@JDFoundationUK
104
CORPORATE AND SOCIAL RESPONSIBILITY
107
CARDIAC RISK IN THE YOUNG
With donations from the Foundation,
Cardiac Risk in the Young (CRY) has been
able to hold ten screening days during 2019,
with 823 young people screened and 22
being referred for full cardiac evaluation.
THE WELLSPRING
The Wellspring charity are a resource center
for homeless and disadvantaged people,
opening 365 days a year, offering different
services available such as housing referrals,
health services or educational courses.
SALFORD FOUNDATION
The Inspired to Aspire mentoring
programme is to enable students to
discover the skills and attitudes needed to
successfully transition from education into
the world of work.
The Foundation actively promote a
circular economy with product donations;
consisting of outdoor jackets, thermals and
underwear, to toiletries that the Foundation
encourage employees who travel to bring
home from hotel stays.
52
NUMBER OF
JD EMPLOYEES
WHO HAVE
VOLUNTEERED
608
NUMBER OF
STUDENTS WHO
HAVE RECIEVED
MENTORING
BUDDIES OF THE BIRCHES
Buddies of the Birches is a registered
charity bringing together parents, carers,
children and staff connected with The
Birches School; a specialist support school.
2019 saw an additional donation from the
Foundation to fund the new outside area for
one of the schools most complex classes.
14
SCHOOLS
TAKEN PART
The Foundation attended the Inspired to
Aspire event at MediaCity UK, with the
Greater Manchester mayor, Andy Burnham,
and other local businesses.
CARDIAC RISK
823
YOUNG PEOPLE
SCREENED IN
2019
OUTDOOR WEEKEND 2019
The Foundation held their
second outdoor charity event
in June 2019 in partnership with
Mountain Rescue England &
Wales, at the Holcombe Moor
Training Camp near Bury. Nine of
the Foundation’s chosen charities
were invited to attend with the
young people they support.
The weekend was attended
by over 40 Mountain Rescue
Volunteers, their search and
rescue dogs, and was also
supported by the Group
Executive Chairman and a
number of the Foundation
Trustees.
106
FOUNDATIO CORPORATE AND SOCIAL RESPONSIBILITY
SECTION 172 STATEMENT
109
THE JD FOUNDATION CHARITY BALL
The Foundation had their fourth anniversary
in October 2019, and hosted their own
Charity Ball to celebrate.
The event was held at Old Trafford Cricket
Ground in Manchester, and saw a drinks
reception, gala dinner, special guests John
McAvoy and Radzi Chinyanganya.
There were performances from Suggs, We
Will Rock You the Musical and Alex Birtwell
and his band, plus a special performance
from Luci Ormrod, a designer for JD’s own
brand.
An incredible £130,000 was raised on
the evening for the Foundation, and will
be split across their charity partners who
are in line with the mission of supporting
disadvantaged youth in the UK.
108
SECTION 172 STATEMENT
This statement sets out how the
Directors have approached and met their
responsibilities under section 172 Companies
Act 2006 and in particular how the Directors
have satisfied themselves that they have
acted in a way which is most likely to
promote the success of the company for
the benefit of its members as a whole and
in doing having regard for stakeholders
interests. As such, the Board have
considered (amongst other things):
• the likely consequences of any decision
in the long term. For example, as set out
in this Strategic Report, the Board gives
significant consideration through the
assessment of various board papers to
the likely long term benefits to the Group
when considering Investment in New
Businesses, confirming that it is the Board’s
ultimate objective to deliver long term
sustainable earnings growth to enhance
total shareholder returns.
• the interests of the company’s employees.
For example, as set out in more detail in
the Corporate Social Responsibility section,
the Board has supported the investment
in and development of a human capital
management system which has progressed
during the course of the financial year to
establish a better system of communication
with the Group’s employees, which
has been especially useful during the
COVID-19 crisis as it has been necessary
to communicate with our people on a
frequent basis during this time. Also, as set
out in the Directors Report, the Group’s
employees can raise any concerns they
may have in confidence through a series
of employee forums led by the Group’s
HR Business Partners. The outcomes
of these forums are included in regular
Board updates and discussions with the
Board. The Group is now taking steps to
further this engagement by establishing a
dedicated workforce committee which will
comprise of employee representatives from
across the various areas of the business
who are able to present their thoughts
and feedback to the Board at appropriate
intervals.
• the need to foster the company’s business
relationships with suppliers, customers and
others. As set out in this Strategic Report,
the Board considers its relationships
with suppliers as a fundamental aspect
of the ongoing success of the JD Group.
This Strategic Report also notes the
importance with which the Board takes
its responsibility to act in a responsible
and ethical manner with all stakeholders
including suppliers, employees and
customers. And as set out in the Principal
Risks Section, with regard to the ESG
related risks facing our business, we
engage with our suppliers on the reciprocal
positioning of ESG within their respective
business strategies.
• the impact of the company’s operations on
the community and the environment. The
Board was pleased to be able to provide
an extensive update in the Corporate
and Social Responsibility section on the
progress made from an environmental
perspective this year. In particular, the
Board has ensured that there has been a
focus on key environmental goals during
the course of the year, including regarding
energy efficiency and waste reduction and
has requested Board updates regarding our
progress in this area.
• the desirability of the company maintaining
a reputation for high standards of business
conduct. For example, the Board ensures
that the Group operates in a manner
which encourages the protection of the
people working for our suppliers, such
that they are treated with respect and that
their health and safety and basic human
rights are safeguarded and promoted.
The Board has established a JD code of
conduct which is shared with all suppliers
and follows the International Labour
111
111
111
STRATEGIC REPORT
The strategic report on pages 42 to 110
is approved by the board of directors.
By order of the Board
Neil Greenhalgh
Chief Financial Officer
7 July 2020
SECTION 172 STATEMENT
Organisation minimum standards. As
set out in more detail in the Corporate
Social Responsibility section, the Board
is keen to ensure that, as the JD Group
expands globally, so does the network of
people who operate in accordance with
our company values and standards. This is
successfully achieved by focusing on the
recruitment, wellbeing and development of
our people.
• the need to act fairly as between members
of the company. The Board takes its
responsibility to its members extremely
seriously, as set out in the Shareholder
Relations section of the Corporate
Governance Report.
This report contains various references to the
considerations described above and those
comments signposted above should be
considered as incorporated by reference into
this statement.
By order of the Board
Neil Greenhalgh
Chief Financial Officer
7 July 2020
110
113
113
113
GOVERN
ANCE
112
112
GOVERNANCE THE BOARD
115
PETER COWGILL
Executive Chairman and Chairman of the
Nomination Committee Aged 67
Peter was appointed Executive Chairman in March
2004. He was previously Finance Director of the Group
until his resignation in June 2001. Peter Cowgill is the
Non-Executive Chairman of United Carpets Group Plc,
Quiz Plc and Roxor Group Limited. Peter is a chartered
accountant and founder of North West based
chartered accountancy firm, Cowgill Holloway. In 2019,
Peter was awarded an honouree doctorate (Doctor of
Business Administration) from the University of Bolton
for his outstanding contribution to business.
NEIL GREENHALGH
Chief Financial Officer Aged 49
Neil joined the Group in June 2004 and was appointed
Chief Financial Officer in November 2018 having been
promoted from his previous role as Group Finance
Director. Neil previously held a number of senior
positions within the Woolworths Group and qualified
as a chartered accountant with KPMG in 1996.
MARTIN DAVIES
Non-Executive Director, Senior Independent Director,
Chairman of the Audit Committee and Member of the
Nomination and Remuneration Committees Aged 60
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.
114
ANDREW LESLIE
Non-Executive Director, Chairman of the
Remuneration Committee and Member of the Audit
and Nomination Committees Aged 73
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.
HEATHER JACKSON
Non-Executive Director, Member of the Audit,
Nomination and Remuneration Committees Aged 54
Heather was appointed to the Board in May 2015.
Heather has extensive experience in strategy, change
and technology in different sizes of company from FTSE
100 to start up and in different consumer facing sectors.
She is currently a Non-Executive Director of Lookers
Motor Group plc, Skipton Building Society and Ikano
Bank AB. Her former roles have included CIO and COO
of HBOS/Lloyds Plc and other director level roles with
Capital One, Boots the Chemist and George at Asda.
ANDY RUBIN
Non-Executive Director Aged 55
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.
KATH SMITH
Non-Executive Director Aged 63
Kath was appointed to the Board in May 2019. Kath was
previously the GM / Vice President of The North Face
EMEA, a VF Corporation company. She has over 30 years’
experience of building world leading brands including
Mars and Diageo and 20 years’ experience within the
sporting goods industry where she was Managing
Director of both the Adidas and Reebok brands. Kath has
also served as a co-opted member of the University of
Salford’s Audit Committee from 2012 to 2014.
SHARE CAPITAL
As at 1 February 2020, the Company’s
issued share capital was £2,433,083
comprising 973,233,160 ordinary shares of
0.25p each.
SHAREHOLDER AND VOTING RIGHTS
All members who hold ordinary shares
are entitled to attend and vote at the
Company’s Annual General Meeting, save
as set out in the Company’s Articles of
Association. 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. Details of the interim and
final dividends proposed are provided in the
Dividends and Earnings per Share section of
the Finance Review on page 73.
117
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 in a
manner which prevents 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 (LR) and the Market Abuse
Regulation (MAR) of the Financial
Conduct Authority. The Company has
in place a share dealing policy which
includes processes which must be
followed to ensure that any transfer of
shares activity is conducted in compliance
with MAR and the LR and that all Directors
and certain Company employees obtain
prior approval before dealing in the
Company’s shares .
DIRECTORS’ REPORT
Pages 116 to 121 (inclusive) of the Annual
Report, together with the relevant
sections of the Annual Report, which are
incorporated into these pages by reference,
constitute a Directors’ Report, which is
required to be produced by law and is
prepared in accordance with applicable law.
The Directors’ Report also includes certain
disclosures that the Company is required to
make by the Financial Conduct Authority’s
Listing Rules and Disclosure Guidance and
Transparency Rules.
FAIR, BALANCED AND UNDERSTANDABLE
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 Group’s position and
performance, business model and strategy.
A summary of the Directors’ responsibilities
in respect of the Annual Report and
Financial Statements is set out on pages 162
to 163.
116
PRINCIPAL ACTIVITY
The principal activity of the Group is the
retail of multibranded, sports fashion and
outdoor clothing, footwear, accessories and
equipment.
In accordance with the Companies Act
2006, the Strategic Report on pages 42 to
110 contains a:
• Fair review of the business
• Description of the principal risks and
uncertainties facing the Group
• Balanced, comprehensive and
understandable analysis of the
development and performance of the
Group’s business, during the financial
year, including an assessment of
relevant environmental, employee,
social, community and human rights
issues, together with the Group’s Key
Performance Indicators; in a manner which
is consistent with the size and complexity
of the business
The Group is committed to establishing and
maintaining good corporate governance
practices (as set out in the Corporate
Governance Report), which the Board
believes is fundamental for retaining
effective and long term, sustainable
relationships with its key stakeholders.
The Corporate Governance Report (pages
122 to 128) is incorporated by reference
into, and is deemed to form part of, this
report. For the purposes of DTR 4.1.5R (2)
and DTR 4.1.8, this Directors’ Report and the
Strategic Report, which has been approved
by the Board and is set out on pages 42
to 110, comprise the Group’s management
report.
Details of the Group’s use of financial
instruments, together with information
on policies and exposure to interest rate,
foreign currency, credit and liquidity risks
can be found in Note 20 to the financial
statements. The information included in
Note 20 is incorporated into the Directors’
Report and is deemed to form part of this
Directors’ Report.
DIRECTORS’ REPORT
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 1 February 2020, 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’):
The Company has not been notified of any
significant changes in interests pursuant
to the DTRs between 1 February 2020 and
the latest practicable date prior to the
publication of this report.
exercise all of the powers of the Company
and may delegate their power and
discretion to committees.
There are no agreements between the
Company and its Directors or employees
providing for compensation for loss of
office or employment (whether through
resignation, purported redundancy or
otherwise) that occurs because of a
takeover bid.
DIRECTORS’ INTERESTS
Details of Directors’ interests and those
of their connected persons in the share
capital of the Company are set out on page
153. This information is incorporated into
this Directors’ Report by reference and is
deemed to form a part of it.
Number of ordinary
shares/voting rights
held
% of
ordinary share
capital
Pentland Group Limited
Fidelity Management and Research LLC
535,278,239
60,125,238
55.0
6.18
RELATIONSHIP AGREEMENT
In accordance with LR 9.2.2 AD R (1), the
Company has in place a legally binding
relationship agreement with its controlling
shareholder, Pentland Group Limited.
The Company has complied with the
undertakings included in the relationship
agreement during the period under
review. So far as the Company is aware,
the undertakings in the agreement have
also been complied with by both Pentland
Group Limited and its associates during the
period under review.
DIRECTORS
Details of all persons who were Directors
at the financial period end including their
roles and brief biographical details are
set out on pages 114 to 115. 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
The number of Directors at any one point in
time shall not be less than two.
APPOINTMENT AND REPLACEMENT
OF DIRECTORS
The Company’s Articles of Association
provide that the Company may by ordinary
resolution at general meeting appoint
any person to act as a Director, provided
that (where such person has not been
recommended by the Board) notice is given
by a member entitled to attend and vote at
the meeting of the intention to appoint such
a person and that the Company receives,
among other information, confirmation of
that person’s willingness to act as Director.
The Articles also empower the Board to
appoint as a Director any person who
is willing to act as such. The maximum
possible number of Directors under the
Articles is 20.
In addition to the powers of removal
conferred by statute, the Company may by
118
ordinary resolution remove any Director
before the expiration of his or her period
of office. The Articles also set out the
circumstances in which a Director shall
vacate office.
The Articles broadly require that at each
AGM one-third of eligible Directors shall
retire from office by rotation and may
stand for re-election and that any Director
who was appointed by the Board after the
previous AGM must retire from office and
may stand for election by the shareholders.
Additionally, any other Director who has
not been elected or re-elected at one of the
previous two AGMs must also retire from
office and may stand for re-election.
Notwithstanding the provisions of the
Articles, the Board has determined that
all the Directors will stand for re-election
at the 2020 AGM in accordance with the
best practice recommendations of the UK
Corporate Governance Code.
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.
CHANGE OF CONTROL – SIGNIFICANT
AGREEMENTS
In the event of a change of control of the
Company, the Company and the lenders of
the £700 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 of control, the lenders may,
by giving not less than 10 business days’
notice to the Company, cancel the facility
and declare all outstanding loans, together
with accrued interest and all other amounts
accrued immediately due and payable.
EMPLOYEES
The Strategic Report on pages 42 to
110 provides information on the Group’s
approach to people and how the Group
attracts, develops and engages with its
employees.
119
The Group acknowledges the new
requirements under the UK Corporate
Governance Code 2018, regarding
stakeholder engagement. The Group has
continued its focus on ensuring that the
Group’s employees are fully informed
about all significant matters affecting the
Group’s performance and of any significant
organisational changes. The Group has
also ensured that its employees have a
method of raising any concerns they may
have in confidence. In order to achieve
this, the Group holds a series of employee
forums led by the Group’s HR Business
Partners. The outcomes of these forums
are included in regular Board updates
and discussions with the Board. The
Group is now taking steps to further this
engagement by establishing a dedicated
workforce committee which will comprise of
employee representatives from across the
various areas of the business who are able
to present their thoughts and feedback to
the Board at appropriate intervals.
In addition, a key factor in the Group’s
employee remuneration strategy is
encouraging the involvement of all
employees in the Group’s performance. Full
details of the Group’s remuneration strategy
are set out in the Remuneration Report on
132 to 159.
DIRECTORS’ REPORT
121
POST BALANCE SHEET EVENTS
Details of post balance sheet events
are provided in Note 31 of the financial
statements.
FUTURE DEVELOPMENTS
Future developments are discussed
throughout the Strategic Report on pages
42 to 110.
POLITICAL DONATIONS AND
EXPENDITURE
Neither the Company nor any of its
subsidiaries has made any political donation
or incurred any political expenditure during
the period under review.
RESEARCH & DEVELOPMENT
During the financial period ended 1
February 2020, the Group engaged in
Research & Development activity in relation
to technological advances in the Group’s
multichannel platform.
GREENHOUSE GAS EMISSIONS
Details of the Group’s greenhouse gas
emissions are shown in the Corporate
and Social Responsibility report on page
86. This information is incorporated into
this Directors’ Report by reference and is
deemed to form part of it.
The Group is committed to promoting equal
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 and development
at all areas within the Group are based on
the suitability and merit 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.
Further information regarding the Group’s
approach to equality and diversity is set out
in the Strategic Report on pages 42 to 110.
120
AUDITOR
As set out on pages 129 to 131, the Audit
Committee has recommended that KPMG
LLP be re-appointed as auditors for the
financial year 2020/21. 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.
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
• 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 GENERAL MEETING
Due to the current coronavirus (COVID-19)
pandemic, the AGM of the Company will
be held as a closed meeting on 31 July
2020 at Edinburgh House, Hollinsbrook
Way, Pilsworth, Bury, Lancashire, BL9
8RR. The meeting will consider formal
business only. Shareholders are invited to
submit any questions in advance via email
(investorrelations@jdplc.com). Shortly after
the meeting, the Company will publish on
its website the results of the AGM and an
answer to any question submitted.
By order of the Board
Neil Greenhalgh
Chief Financial Officer
7 July 2020
CORPORATE GOVERNANCE REPORT
It is the role of the Board to ensure that the
Group is managed for the long term benefit
of the shareholders, whilst also ensuring the
interests of other key stakeholders – including
employees and suppliers – are protected.
The Board promotes the principles set out
in the UK Corporate Governance Code
2018 as issued by the Financial Reporting
Council (FRC) (the ‘Code’). This report sets
out how the Company has applied the main
principles set out in the Code and the extent
to which the Company has complied with the
provisions of the Code. This report includes
relevant provisions of the Code, where
appropriate. The full Code can be found on
the FRC website (www.frc.org.uk).
THE BOARD
BOARD COMPOSITION AND SUCCESSION
The Board comprises seven Directors: the
Executive Chairman, the Chief Financial
Officer and five Non-Executive Directors.
Martin Davies performs the role of Senior
Independent Non-Executive Director. The
name, position and a brief profile of each
Director is set out on pages 114 to 115.
The Board has again this year focused its
efforts on ensuring that succession planning
is central to its approach to reviewing Board
composition on an ongoing basis. This focus
is also applied to the Board’s review of the
composition of the Group’s senior team.
The Board and the Nominations Committee
have kept under review the position of
Andrew Leslie as Non-Executive Director and
Chairman of the Remuneration Committee
during the course of the year, given that he
has now held his position for more than nine
years, and in particular his ability to remain
independent in these roles. The Board and
the Nominations Committee do not consider
that Andrew, simply as a result of the fact that
he has held the position of Non-Executive
Director for more than nine years, is unable to
act independently when carrying out his roles.
The Board has considered Andrew’s roles
in light of a number of fundamental factors,
including the importance of preparing a new
remuneration policy to put to shareholders
for approval at this year’s AGM. As such,
The Board and Nominations Committee are
satisfied that Andrew remains sufficiently
122
independent and effective in his respective
roles on the Board and Board Committees
and therefore wish to support Andrew Leslie
continuing in his roles for the forthcoming
financial year. In accordance with the Code,
Andrew Leslie will be subject to re-election at
the AGM this year, as will all other Directors
(as explained further on page 118).
The Board is dedicated to ensuring that it
maintains entrepreneurial leadership within
a framework of effective control and risk
management. It is also considered that
the Board’s mix of Executive and Non-
Executive Directors provides an appropriate
combination of judgement, skills and
experience to satisfy the Group’s need for
overall effective and agile leadership.
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. Andy Rubin is
the Chairman of Pentland Brands and a
Director of Pentland Group Limited 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 and encouraging the effective
leadership of the Executive Directors, when
and in a manner which is appropriate.
From time to time, the Executive Chairman
meets with the Non-Executive Directors
without the other Directors 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 pages 114 to 115 includes
details of the Chairman’s other directorships
of listed companies. The Board is satisfied
that, given the limited time commitment
required for the Executive Chairman to
perform these roles, these appointments do
not conflict with the Executive Chairman’s
ability to carry out his role effectively for
the Group.
A summary of the rules that the Company
has in place about the appointment and
replacement of Directors is set out on page
118. Notwithstanding the provisions of the
Company’s Articles regarding the retirement
of Directors, the Board determined that
all Directors will retire at the 2020 AGM
and offer themselves for re-election
in accordance with the best practice
recommendation of the UK Corporate
Governance Code.
BOARD COMPOSITION AND DIVERSITY
The Board remains committed to achieving
better diversity at all levels in the Group,
including at Board level. The Board has
previously engaged directly with the Chair
of the Alexander-Hamilton Review and the
Investment Association, in order to provide
further information on the Board’s perspective
on diversity and the impact this may have on
the future composition of the Board.
The Group is pleased to welcome Kath
Smith onto its Board during the course
of the financial year, bringing the female
composition of the Board to almost 30%.
The Board is committed to ensuring that
its composition of its people - at all levels
throughout the Group – is diverse and
is reflective of the diverse nature of the
communities in which it operates. It is
the Board’s view that this creates a more
inclusive and accountable corporate culture.
It is a fundamental point of principle for
the Board to ensure that all recruitment,
including Board membership, is measured
against purely objective criteria, based on
individual merit, expertise and talent.
123
The Board’s primary focus is ensuring
that its membership has the relevant
skills, experience and judgement,
which is fundamental to maintaining an
entrepreneurial and effective management
and leadership team. The Board is
encouraged by the gender balance within
the Company’s Senior Management Team,
which includes a number of highly regarded
female members, who have frequent
interaction with the Board.
The Board recognises the essential need
to engage with a wide talent pool in its
recruitment policy, targeting a broad range
of candidates from various backgrounds,
sectors and cultures when hiring both new
Board members and new candidates at
all levels within the business. The Board is
committed to ensuring that all recruitment
is conducted on this basis and to continually
monitor our diversity mix.
BOARD OPERATION AND
RESPONSIBILITIES
The Board is responsible for the direction,
management and performance of the
Company. The Directors act together in the
best interests of the Group via the Board
and its Committees. The Board held ten
scheduled Board 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 below.
ATTENDANCE AT BOARD AND COMMITTEE MEETINGS
Year to 1 February
2020
Total number of
meetings
P Cowgill
N Greenhalgh
A Leslie
M Davies
H Jackson
A Rubin
K Smith
Board Meetings
Remuneration
Committee
Audit Committee
Nomination
Committee
10
10
10
10
10
10
10
6
2
2*
2*
2
2
2
–
–
4
4*
4*
4
4
4
–
–
1
1
1*
1
1
1
–
–
Notes:
*P Cowgill and N Greenhalgh attended the meetings as annotated in the table above at the invitation of the members of those Committees in order
to provide additional detail on day to day matters arising at such meetings and to assist the Committee members with the matters delegated to
the Committee as deemed appropriate by such Committee members.
On occasion certain members of the Board and Committees have attended the meetings by telephone.
CORPORATE GOVERNANCE REPORT
125
BOARD EVALUATION
As an externally facilitated Board evaluation
was carried out during the 2018/2019
financial year, the Board deemed it
appropriate to carry out an internal
evaluation of its performance during the
financial year to 1 February 2020.
The evaluation exercise required the Board
members to score themselves individually
and the Board as a whole on topics such as:
MATTERS RESERVED FOR THE BOARD
The Board has a formal schedule of matters
reserved specifically to it for decisions
which include:
• Strategy setting and major strategic
matters
• Approval of the Group’s financial
statements
• Corporate acquisitions and disposals
• The Board’s contribution to the shaping of
• Significant capital projects
the Group’s strategy
• An assessment of the effectiveness of the
Group’s risk management approach
• The process of sharing information with
the Board to allow appropriate and
effective interaction between the Board
and the rest of the Group
• The Board’s expertise and skills in the
context of the Group
• The effectiveness of the Committee and
the relevant expertise and experience of
the Committee members
• The decision making process adopted by
the Board and the Senior Management
Team
The Company Secretary has assisted
the Executive Chairman and the Senior
Independent Director to collate all
evaluation responses to facilitate the
provision of appropriate feedback and
recommend suitable measures which will
aim to improve the effectiveness of the
Board.
The matters reserved for the Board are
kept under continual review to ensure they
remain appropriate in light of the size of the
Group and the nature of its activities. This is
another aspect which the Board members
are asked to evaluate as part of the Board
evaluation process.
MAIN ACTIVITIES OF THE BOARD
DURING THE YEAR
• Approved a number of key strategic
corporate acquisitions (see Note 11 of the
financial statements)
• Assessed the impact of Brexit on the
Group in various areas including in relation
to people, supplier relationships and
logistics.
• Assessed the current cyber security
risks posed to the Group and the various
measures being implemented to counter
this risk on an ongoing basis.
In order to assist the Board in its effective
review and decision making regarding
the Group’s activities, Board papers are
circulated to Directors prior to Board
meetings which include up-to-date financial
information, reports from the Executive
Directors, a summary of key risk and
compliance issues and papers on major
issues for consideration by the Board. The
Board has a formal procedure for Directors
to obtain independent professional advice.
124
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 all Corporate Governance and
legal matters.
All newly appointed Directors receive
an appropriate induction when they join
the Board. Relevant training is arranged
throughout the year as deemed appropriate
including the attendance at Board meetings
by external legal specialists and/or the
circulation of advice notes. In particular,
the Board members received face to face
training by external specialists during
the course of the year on key corporate
governance and legislative changes.
INSURANCE ARRANGEMENTS
The Company, through its majority
shareholder Pentland Group Limited,
maintains Directors’ and Officers’ liability
insurance, which is reviewed at appropriate
intervals to ensure it remains fit for purpose.
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
The Board delegates certain powers to
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 reviewed by each Committee regularly
and are available for inspection on request
and are available on the Company’s
corporate website www.jdplc.com.
AUDIT COMMITTEE
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
notes that it is a requirement of the DTRs
and a recommendation of the Code that
the Audit Committee as a whole shall
have competence relevant to the sector
in which the Company operates. This
is something which is explored during
the Board Evaluation process, referred
to above. The Board confirms that it
considers the composition of the Audit
Committee provides the requisite skills and
experience, however, the Board and the
Audit Committee considers it is prudent to
keep this under continual review in order
to ensure that it remains satisfied that the
expertise of the membership of the Audit
Committee remains appropriate.
The Audit Committee met four times 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 above.
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. Since 1 February 2020, it has
been decided that Kath Smith will also join
the Remuneration Committee.
The Committee’s principal duties are to
determine:
• Overall Group remuneration policy
• Remuneration packages for Executive
Directors and Senior Management
• The terms of Executive Director service
contracts as may be required from time to
time
• The terms of any performance-related
and/or long term incentive schemes
operated by the Group and awards
thereunder
CORPORATE GOVERNANCE REPORT
In particular during the course of the
year, the Remuneration Committee was
responsible for assessing and determining
the appropriate level of remuneration
for the newly appointed Chief Financial
Officer and to review and consider the
appropriateness of the remuneration
arrangements of the Executive Chairman.
The Committee met twice during the year.
Details of attendance at Remuneration
Committee meetings are set out in the table
above.
Further details about Directors’
remuneration are set out in the Directors’
Remuneration Report on pages 132 to 159.
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. Since 1
February 2020, it has been decided that
Kath Smith will also join the Nomination
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 to the Board
and Senior Management. The matters
delegated to the remit of the Nominations
Committee include Board structure,
succession planning and the performance of
the Board and the Senior Management.
INTERNAL CONTROL
There is an ongoing process for identifying,
evaluating and managing the significant
risks faced by the Group. This process was
utilised during 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 monitor
and manage the risk of failure to achieve
business objectives and cannot eliminate
such risk entirely. The Board seeks to
manage this risk by having established
126
a well-defined organisational structure,
clear operating procedures, embedded
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 including
via brief monthly updates, more in depth
quarterly updates and an annual risk
report preparation and review process
• Detailed appraisal and authorisation
procedures for capital investment, which
is documented in the Matters Reserved
for the Board and the Group’s Contract
Authorisation Policy
• Prompt preparation of comprehensive
monthly management accounts providing
relevant, reliable and up-to-date
information. These allow for comparison
with budget and previous year’s results.
Significant variances from approved
budgets are investigated as appropriate
• Preparation of comprehensive annual
profit and cash flow budgets allowing
management to monitor business
activities and major risks and the progress
towards financial objectives in the short
and medium term
• Monitoring of store procedures and the
reporting and investigation of suspected
fraudulent activities
• Reconciliation and checking of all cash
and stock balances and investigation of
any material differences
In addition, the Audit Committee receives
detailed reports from the external auditor in
relation to the financial statements and the
Group’s system of internal controls.
The Senior Independent Director, as Chair
of the Audit Committee, has regular
interaction with the external auditor and
senior members of the Group finance
department in order to monitor and assess
the effectiveness of the Group’s system of
internal controls.
The Group has a formal whistleblowing
policy in place which provides details
of how employees can raise concerns in
relation to the Group’s activities or the
actions of any employee of the Group on a
confidential basis. This policy is reviewed
annually by the Audit Committee. The
mechanism for employees to access
whistleblowing channels has been recently
reviewed to ensure that they are effective.
The Group strives to conduct itself in all
areas and at all levels 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 and
this is very clearly documented in the way
that it contracts with any such third parties.
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. The
Group has appropriate processes in place
to audit compliance with its Anti-Bribery
and Corruption Policy and its Gifts and
Hospitality Policy, periodically.
127
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 reasonable, and not absolute,
assurance against the risk of material
misstatement or loss.
The integration of recently acquired
businesses into the Group’s system of
internal controls is achieved as quickly as
possible and is done on a proportion basis
taking into account the size and type of
business acquired.
SHAREHOLDER RELATIONS
During the course of the 2019/20 financial
year, the Executive Chairman, the Senior
Independent Director and the Company
Secretary conducted a series of meetings
with some of its largest shareholders
particularly to discuss corporate
governance and the matters which were
put to shareholders at last year’s AGM and
those which would be raised at this year’s
AGM. The purpose of the meetings was
to understand any key areas of concern in
relation to corporate governance matters
and whether there were any measures
which could be employed to provide further
comfort to shareholders in these areas.
Key themes discussed related to greater
transparency and visibility, particularly in
relation to remuneration, and achieving a
more regular dialogue with shareholders
throughout the course of the financial
year so that concerns can be raised and
addressed on a frequent basis.
The Executive Directors maintain an
active dialogue with the Company’s major
shareholders to enhance understanding
of their respective objectives, holding
conference calls and attending meetings
and investor roadshows on a regular basis.
The Executive Chairman and the Chief
Financial Officer each provide feedback
to the Board on issues raised by major
shareholders.
CORPORATE GOVERNANCE REPORT
AUDIT COMMITTEE REPORT
129
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 as follows:
Code Provision 9 – The role of Chief
Executive and Chairman is undertaken by
one person – Peter Cowgill, the Company’s
Executive Chairman, which has been the
case for almost the last six years. The
Board believes that there is sufficient
separation of responsibilities of the roles
usually undertaken by the Chairman and
the Chief Executive amongst the Executive
Chairman, the Chief Financial Officer, the
Non-Executive Directors and the Company’s
Senior Management team. The Board, with
assistance from the Nomination Committee,
keeps this arrangement constantly under
review.
This report was approved by the Board and
signed on its behalf by:
Neil Greenhalgh
Chief Financial Officer
7 July 2020
The Group has also appointed an Investor
Relations Manager to support the Chief
Financial Officer and the Executive
Chairman in their shareholder relations
objectives, and to ensure effective and
efficient communication in this regard.
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.
Shareholders are invited to attend the
Group’s AGM and to raise any queries that
they may have during the meeting and
may meet with the Board after the formal
proceedings have ended, should they
request to do so.
The Company has one class of issued share
and, as such, all shareholders have the
same rights, as set out in the Company’s
articles of association which were disclosed
on 28 April 2020. In addition, the Board
receives regular training and updates on its
obligations under various legal frameworks,
including the EU Market Abuse Regulation,
to ensure that no shareholder or group
of shareholders are prejudiced or given
an unfair advantage compared to the
shareholders as a whole.
128
PRINCIPAL DUTIES
The principal duties of the Audit Committee
‘the Committee’ 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 OF THE AUDIT
COMMITTEE 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 impairment
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 in
the financial statements, confirmations of
auditor independence, audit fee and terms
of engagement of the auditor
• Reviewing the independence and
effectiveness of the Group’s external
auditor
• Preparations for a tender process to take
place in respect of the Group’s external
auditor to take place during the financial
year 2021/2022
• Reviewing the whistleblowing
arrangements in place for employees to
be able to raise concerns in confidence
to ensure they remain effective and
appropriate
• Reviewing the Company’s risk register and
internal controls
• Assessment of the need for an internal
audit function and the effectiveness of
the Group’s existing system of internal
controls
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.
The following are material areas in
which significant judgements have been
applied and have been considered by the
Committee during the year:
VALUATION OF INVENTORIES
The Audit Committee considered the risk
that inventory may need to be impaired
and tested the principles and integrity of
the obsolescence provision calculation
used across the Group. This risk review is
particularly important to the Group given
the extremely seasonal nature of its retail
businesses and the changing desirability
of branded products over time. The Audit
Committee also reviewed the assessment
carried out by the auditors of the overall
consistency of the assumptions used by
comparing to those used in prior periods.
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. The
external auditor reports to the Committee
on the work they have completed and how
their audit work is concentrated on this
area.
VALUATION OF GOODWILL AND FASCIA
NAMES INCLUDING THE RECOVERABILITY
OF GOODWILL AND FASCIA NAME IN GO
OUTDOORS
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
AUDIT COMMITTEE REPORT
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
challenged the key assumptions used
and are comfortable that they represent
management’s best estimate at the time.
During the year a letter was received from
the Financial Reporting Council following
them carrying out a limited scope review of
the disclosures relating to the impairment
of non-financial assets, as part of this
review further information was supplied and
correspondence is now closed, additional
disclosures will be included going forward.
The nature of the FRC review is that it
provides no assurance that the annual
report and accounts are correct in all
material respects. The FRC’s role is not
to verify the information provided but is
to consider compliance with reporting
requirements.
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.
130
VALUATION OF IFRS16 LEASE LIABILITY
The committee considered the assumptions
underlying the calculation of the lease
liabilities as part of the introduction of the
new leases standard IFRS16. The Committee
considered the discount rates being used
and the judgement required in determining
the appropriate lease term, including the
expectation of the likelihood of renewal and
the length of holdover
COVID-19
The committee has reviewed the disclosures
in respect of COVID-19 in the Post Balance
Sheet Events note.
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 193.
The Committee has regard to the FRC rules
on auditor independence and the provision
of non-audit services by the auditor and
in particular the recently revised policy on
the provision of non-audit services by the
external auditor. The Committee recognises
that the policy’s objective is to ensure
auditor independence and appropriate
levels of approval for non-audit work
being undertaken by the external auditor.
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
If it is proposed that any potentially
prohibited non-audit work is carried out
by the auditor, this will require Committee
approval.
131
INTERNAL AUDIT
Whilst the Company does not have an
internal audit function, the Audit Committee
regularly reviews the need for such a
function. During the financial year, the
Audit Committee determined that such an
appointment is not currently necessary as
the aspects of internal control which an
internal audit function would be responsible
for are currently adequately addressed by
various existing business functions within
the Group, namely the Group’s finance
and profit protection functions. Such
functions appropriately focus on aspects
such as financial control, stock shrinkage,
theft, fraud and stock and cash audits. The
finance and profit protection departments
report to the Board on a regular basis and
the Audit Committee considers that this
function plays an effective and efficient role.
Martin Davies
Chairman of the Audit Committee
7 July 2020
KPMG have acted as auditor to the
Company since its flotation in 1996. The
Committee is satisfied that this is in
compliance with the FRC’s rules on
mandatory firm rotation. The Committee
acknowledges that the lead audit partner is
subject to rotation every five years to
safeguard independence, with a new lead
audit partner having been appointed during
the 2019/20 financial year. The Committee
is confident that this has brought an
additional level of independence to the
audit process.
The Audit Committee recommends that
KPMG be reappointed as the Company’s
statutory auditor for the 2020/21 financial
year. The Audit Committee, after careful
consideration including of the auditor’s
performance during their period in office,
is satisfied with the level of independence
and impartiality of the external auditor and
is happy with the audit process and that the
way it operates remains effective.
Whilst the Audit Committee’s current
recommendation is to re-appoint KPMG
as auditors for the forthcoming financial
year, the Audit Committee notes that a new
auditor will have to be appointed no later
than the beginning of the financial year
commencing February 2024. The Audit
Committee acknowledges the importance
of this decision and, to ensure the best
possible process, believes that their
considerations should not be constrained
by COVID-19. Accordingly, the Audit
Committee now proposes to commence its
tender programme in the 2021/22 financial
year with a decision made before the end
of that year on 29 January 2022. Therefore,
the current expectation is that a new
auditor will be appointed for the 2022/2023
financial year although the Audit Committee
will maintain a flexible approach.
The Audit Committee confirms that the
Company otherwise 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.
DIRECTORS’ REMUNERATION REPORT
133
ANNUAL STATEMENT OF THE CHAIRMAN
OF THE COMMITTEE
DEAR SHAREHOLDER
As Chairman of the Committee (the
Committee), I am pleased to present the
Company’s Remuneration Report for the
financial year 2019/20.
This Directors’ Remuneration Report
(‘Report’) summarises the activities of
the Committee during the period to 1
February 2020. It sets out a summary of
the remuneration policy and remuneration
details for the Executive and Non-Executive
Directors of the Company. 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)
(‘Regulations’) and the requirements of
the Listing Rules. 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.
KEY HIGHLIGHTS
There are three sections:
• This Annual Statement
• The Policy Report which sets out the
Company’s proposed remuneration policy
for directors, the key factors which were
taken into consideration in setting the
policy and details of the changes from the
current policy. The proposed policy will be
put to a binding shareholder vote at the
2020 AGM and will apply for three years
from the date of approval.
• The Annual Report on Remuneration
providing details on the remuneration
earned in the year to 1 February 2020 and
how the Directors’ Remuneration Policy
will be operated during the 2020/2021
financial year. This Annual Report on
Remuneration together with the Annual
Statement will be subject to an advisory
shareholder vote at the 2020 AGM.
Once again the Group has continued to
make excellent progress in its growth and
ambitions, posting 24% growth in profit
before tax and exceptional items.
The Committee has continued to focus on
how it can support the Group in ensuring
that it’s Executive Director and Senior
Management remuneration is reflective
of the performance, size and global reach
of the Group, and continues to drive it’s
strategic aims in both the short, medium
and long term.
The Committee has engaged with a number
of its major shareholders throughout
the 2019/2020 financial year in order to
understand the key aspects of the Group’s
remuneration structures and policies that
such shareholders wanted to discuss further
and/or to obtain further visibility on. The
Committee has shared its proposals with
its major shareholders in advance, before
putting this Policy Report and Annual
Report on Remuneration to its shareholder
base as a whole, in order to ensure that any
concerns have been addressed.
Key Points to Note:
• EBITDA (before exceptional items)
increased by a further 101%, to £979.8
million (2019: £488.4 million).
• IFRS16 has added £311.1 million
depreciation and impairments.
• Headline profit before tax and exceptional
items increased by 24% to £438.8 million
(2019: £355.2 million).
• Profit before tax increased to £348.5
million (2019: £339.9 million)
• Encouraging total like for like sales growth
in global Sports Fashion fascias of more
than 12% achieved against a backdrop of
widely reported retail issues.
132
• Finish Line fascia in the United States
• Agreed reductions in salary and fees of at
increased operating profit before
exceptional items on a comparable
accounting basis to £97.9 million (2019:
£26.6 million for the 33 weeks post
acquisition)
• Net increase of 52 stores (2019: 39 stores)
for the JD fascia across Europe
• A further 18 JD stores opened in the Asia
Pacific region in the year (2019: 34 stores)
For this year I believe that bonus and
Long Term Incentive Plan (LTIP) outcomes
continue to be reflective of the sustained
outstanding performance of the Group
and will be echoed throughout the senior
leadership remuneration. The continued
growth and posting of exceptional results
demonstrates that the remuneration
approach is continuing to support and drive
this performance.
UPDATE IN RELATION TO 2019/20
REMUNERATION
Since the remuneration outcomes for
2019/20 were approved by the Committee,
it has been agreed given the impact of
COVID-19, that all incentive payments due
following the year ended 1 February 2020
would be deferred and paid at a later date.
This includes bonuses earned during the
year, payments of special bonus (as earlier
approved by shareholders) and contractual
LTIP payments.
It is the intention of the Board and
Remuneration Committee that all deferred
incentive payments will be made once
our stores have re-opened and when the
Board and Committee are satisfied that
performance and projected cashflows of
the Group permit payment. At the time of
publication of this report, the timing of such
payments remain under review.
APPROACH FOR 2020/21 REMUNERATION
We have also taken a number of actions
in respect of remuneration in 2020/21 in
response to developments in relation to the
COVID-19 pandemic. As we disclosed, this
has involved the following for the period of
disruption:
least 30% for members of the Board.
• Agreed reductions in salary for the Senior
Management team.
• A voluntary reduction in salary of 75% for
the Executive Chairman.
The timing of temporary salary reductions
for the Board and for Senior Management
will be kept under review during 2020, and
will only be reversed when the Board are
satisfied it is in a position to do so.
In addition, the planned salary rise for
Executive Directors with effect from 1 April
2020 has been cancelled.
ACTIVITY SUMMARY
Over the last 12 months the Committee
has spent significant time working with the
Group to review the existing remuneration
policy, seeking external advice on best
market practice and identifying changes
needed. Any changes have continued
to focus on maintaining effective and
straightforward remuneration polices as
well as addressing previous commentary
from shareholders in the last AGM. We have
worked to increase transparency and retain
competitive remuneration that supports the
growth of the business. This has resulted in
the following actions being undertaken by
the committee:
• Agreeing annual bonus awards and
devising additional, appropriate incentive
arrangements for the Executive Directors
• Reviewing the basic salary of the
Executive Chairman and the Chief
Financial Officer to ensure that this
remains appropriate for the market in
which the Group operates. Whilst pay
rises were intended to be increased in line
with the planned increases for the wider
workforce from 1 April 2020, a subsequent
decision has been made not to enact the
pay rises for the financial year given the
current situation.
• Undertaking a review of potential
alternative arrangements for remuneration
including various share plans
• The design of a new remuneration
policy that continues to focus on driving
performance and addressing the need to
provide greater transparency
Consultation with shareholders would
take place were a material change to be
proposed.
The Committee is dedicated to ensuring
that the Group’s remuneration packages
for both the Executive Directors and the
members of the Senior Management Team
reflect the outstanding performance of
the Group along with the medium and
long term strategic aims of the Group
and are appropriate in an increasingly
competitive UK and international retail
sector. The remuneration packages also
seek to retain the vital Senior Management
Team members who are a fundamental
part of the Board’s succession and growth
plans for the Group. The fact that the
Senior Management Team has once again
been successfully motivated to deliver
exceptional results during the course of the
financial year demonstrates that this has
been effective.
POLICY REVIEW
It is without doubt that COVID-19 has,
and will continue to have, a significant
impact on our business. While we do not
currently have intentions to revisit the
Directors’ Remuneration Policy during
its three year term, as a Committee we
will undertake a review in due course to
assess its effectiveness in the context of
the disruption caused by COVID-19 and
any implications for the future state of the
business and its strategy.
Andrew Leslie
Chairman of the Remuneration Committee
7 July 2020
DIRECTORS’ REMUNERATION REPORT
• A full review and redesign of the LTIP
• Review of the performance metrics used
for annual bonuses
• A review of wider market practice for
senior remuneration
• Setting appropriate targets for
remuneration in the 2020/21 financial year
• Ongoing consideration in respect
of appropriate succession plans,
in conjunction with the Board and
Nominations Committee members, to
put in place an efficient and evolving
future structure for the Board and Senior
Management Team
OUTCOMES
The outcome of the above has been taken
into consideration as part of the creation
of a new remuneration policy which will be
put to shareholders at the AGM in 2020
and which has been prepared taking into
account the requirements of the new UK
Corporate Governance Code (the “Code”).
A summary of key changes under the new
policy (with full detail provided later) are as
follows:
• Additional financial linked metrics added
to the LTIP programme
• Adjustments to malus and clawback
clauses
• Introduction of caps for LTIP payments
• Introduction of a pension contribution cap
at Executive levels
The annual bonuses for the Executive
Directors are based on a mix of financial
targets (66.7%) and Strategic Objectives
(33.3%). The Committee maintains the
view that this is an appropriate method
of incentivising the Executive Directors
to focus their efforts on the fundamental
drivers for growth and exceptional
performance during the course of the
financial year.
This report sets out our proposals for
LTIP awards due to be granted during
the following financial year. Given the
disruption caused by COVID-19, the
Committee reserves the right to review the
planned implementation of LTIP awards.
134
135
DIRECTORS’ REMUNERATION POLICY
(UNAUDITED)
INTRODUCTION
The Directors’ remuneration policy (the
“Policy”) as set out below will be put to
a binding shareholder vote at the AGM
which is currently scheduled to take place
on 31 July 2020 and, subject to approval
by shareholders, will apply for a period of
3 years from that date. There are currently
no planned changes to the policy over the
three-year period to which it relates.
Remuneration payments and payments for
loss of office can only be made to Directors
if they are consistent with the Policy.
POLICY OVERVIEW
The Committee has designed the Policy
around the following key principles, which
are unchanged from those used for the
previous Policy.
• The Group operates in a highly
competitive global 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 Group 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 the 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.
UK CORPORATE GOVERNANCE CODE
The Committee has considered in detail the
requirements of the new the Code which
applies to the Group for the 2019/2020
financial year and is comfortable that
the proposed Policy is in line with such
requirements.
The changes we are making to remuneration
include:
• The introduction of new LTIP rules that
give more discretion to override formulaic
outcomes;
• Extension of malus and clawback
provisions to reflect best practice; and
• Introduction of a formal cap on Executive
Director pensions provision at 8% of
salary.
In addition to the Executive Directors, the
Committee continues to have responsibility
for setting remuneration for the Group’s
Senior Management team, as well as
having oversight of the remuneration
of the workforce as a whole, and so is
satisfied that it is already compliant with
the Code’s new requirement in this respect.
The Committee takes both of these into
account when setting remuneration for the
Executive Directors.
The Group has continued to engage and
consult with the workforce in relation to
remuneration via a series of employee
forums led by the Group’s HR Business
Partners. The outcomes of these forums
are included in regular board updates and
discussions. The Group is now taking steps
to further this engagement by establishing
a dedicated workforce committee which will
comprise of employee representatives from
across the various areas of the business
who will be able to present their thoughts
and feedback to the Board at appropriate
intervals.
137
PROPOSED CHANGES TO THE EXISTING
DIRECTORS’ REMUNERATION POLICY
In light of the next scheduled Policy
vote at the 2020 AGM, the Committee
has taken the opportunity to conduct a
comprehensive review of the remuneration
arrangements for Executive Directors to
ensure it supports the Group’s continued
growth and success over the next three
years. The Committee believes that the
overall structure of the Policy does remain
fit for purpose, but is proposing to make
a number of small changes to ensure
compliance with the Code and reflect
current market best practice.
DISCRETION
The Committee has discretion in several
areas of policy as set out in this report.
The Committee may also exercise
operational and administrative discretions
under relevant plan rules approved by
shareholders and as set out in those
rules. In addition, the Committee has
the discretion to amend the Policy with
regard to minor or administrative matters
where it would be, in the opinion of the
Committee, disproportionate to seek or
await shareholder feedback.
DIFFERENCES IN POLICY FROM THE
WIDER EMPLOYEE POPULATION
The Group aims to provide a remuneration
package for all employees that is market
competitive and operates the same reward
and performance philosophy throughout
the business. As with many companies, the
Group operates variable pay plans primarily
focused on the senior management level.
DIRECTORS’ REMUNERATION REPORT
In reviewing the Policy, the Committee has
considered the following:
ASPECT
HOW THIS IS ADDRESSED IN THE POLICY
CLARITY
SIMPLICITY
RISK
PREDICTABILITY
The Committee’s Policy has been clearly set out in this report,
including the individual elements of remuneration and their
operation.
The structure of remuneration is in line with normal market
practice and is viewed to be simpler than the arrangements
operated by many other companies.
The Committee believes that the incentive arrangements do
not encourage undue risk-taking, as the bonus is capped and
the LTIP structure is in line with standard market practice.
The Policy table and the illustrations of remuneration provide
an indication of the possible levels of remuneration that
may result from the application of the policy under different
performance scenarios.
The Committee believes that the range of potential total
remuneration scenarios is appropriate for the roles and
responsibilities of the Executive Directors and in the context
of the performance required for incentive awards to pay out.
PROPORTIONALITY
The Policy has been designed to give flexibility in operation,
particularly in relation to incentive plan metrics. This allows
the Committee to implement the policy from year to year
using the metrics that most closely align with the group’s
strategy.
ALIGNMENT TO
CULTURE
The Policy has retained the simplicity it previously had, in line
with our straight-forward culture.
There is a strong performance culture across the business
and this is reflected in the fact that the majority of the
potential value for Executive Directors derives from variable
pay that needs to be earned through performance.
136
DIRECTORS’ REMUNERATION REPORT
The proposed changes are set out in the table below:
ELEMENT OF
CURRENT POLICY
PROPOSED AMENDMENT TO
REASON FOR
REMUNERATION
SUMMARY
POLICY
CHANGE
The following table sets out each element of remuneration and how it supports the Group’s
short and long-term strategic objectives.
139
PENSION
No maximum
contribution rate.
Maximum pension of 8%
payable to Executive
Directors
Aligns with
pension provision
available for senior
management
Aligns with
competitive market
levels of bonus for
companies of a
similar size to JD.
Amendment to operate
normal bonus maximum
of 200% of salary in any
year.
ANNUAL
BONUS
PLAN
LONG TERM
INCENTIVE
PLAN (LTIP)
Cash awards,
normally of
up to 100% of
base salary. The
Committee has
discretion to
make awards
of up to 200%
of base salary
for exceptional
performance.
Bonus awards
are based on
a combination
of financial and
strategic KPIs, with
two thirds being
linked to financial
targets.
Cash awards of up
to 200% of base
salary.
Awards vest at
the end of a three-
year performance
period subject
to continued
employment and
performance
against financial
targets.
138
Provides alignment
with shareholder
value in the long
term.
Introduction of
formal cap on
payout prevents
excessive payouts.
Ensures payouts
are fair in the
context of overall
performance and
avoids payout in
circumstances
of individual or
corporate failure.
Introduction of ability to
for a portion of the LTIP
awards to track share
price.
Introduction of cap on
payout equal to 250% of
base salary.
Clawback and Malus
provisions apply to the
LTIP. 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 Group’s audited
financial results, a
serious failure of risk
management or serious
reputational damage.
HOW THE
ELEMENT
SUPPORTS OUR
SHORT AND
LONG TERM
STRATEGIC
OBJECTIVES
BASE SALARY
Provides a
competitive
fixed level of
remuneration
to attract
and retain
Executive
Directors of
the necessary
calibre to
execute
the Group’s
strategy
and deliver
shareholder
value
BENEFITS
Ensures
the overall
package is
competitive
for Executive
Directors
OPERATION
MAXIMUM
OPPORTUNITY
PERFORMANCE
TARGETS
None
None
Base salaries for the
Executive Directors
are normally 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 of the
individual Executive
Director
• Pay for other
employees in the
Group
• The total
remuneration
available to the
Executive Directors
and the components
thereof and the cost
to the Group.
Current benefit provision
is detailed on page 149.
Other benefits may
be provided where
appropriate, including
health insurance, life
insurance / death in
service, travel and
relocation expenses.
Base salaries
will normally be
reviewed annually,
but the Committee
reserves the right
to review fees 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.
The Committee
determines the
appropriate level
taking into account
market practice
and individual
circumstances.
DIRECTORS’ REMUNERATION REPORT
141
HOW THE
ELEMENT
SUPPORTS OUR
SHORT AND
LONG TERM
STRATEGIC
OBJECTIVES
PENSIONS
Provides
market
competitive
post-
retirement
benefits for
Executive
Directors
OPERATION
MAXIMUM
OPPORTUNITY
PERFORMANCE
TARGETS
The maximum
pension provision is
8% of salary.
None
Payments are made into
a defined contribution
pension 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 form part of the
salary for the purposes
of determining the
extent of participation
in the Group’s incentive
arrangements.
140
HOW THE
ELEMENT
SUPPORTS OUR
SHORT AND
LONG TERM
STRATEGIC
OBJECTIVES
ANNUAL
BONUS
Provides
Executive
Directors
with 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
OPERATION
MAXIMUM
PERFORMANCE TARGETS
OPPORTUNITY
The
maximum
bonus
opportunity
may be up
to 200% of
salary.
The bonus is paid
annually in cash and is
non-pensionable.
Clawback and Malus
provisions apply
to the 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 Group’s audited
financial results, a
serious failure of
risk management or
serious reputational
damage.
On change of control
the Committee may
pay bonuses on a pro-
rata basis measured
on performance up to
the date of change of
control.
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 performance 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.
The Committee is of the
opinion that given the
commercial sensitivity
arising in relation to the
detailed targets used
for the annual bonus,
disclosing precise
targets for the bonus
plan in advance would
not be in shareholder
interests. Actual targets,
performance achieved,
and awards made will be
published in the following
year’s Annual Report so
that shareholders can fully
assess the basis for any
payouts under the annual
bonus.
143
MAXIMUM
OPPORTUNITY
PERFORMANCE
TARGETS
HOW THE ELEMENT
OPERATION
SUPPORTS OUR
SHORT AND LONG
TERM STRATEGIC
OBJECTIVES
NON-EXECUTIVE
DIRECTOR FEES
Provides a
level of fees to
reflect the time
commitment and
contributions
that are expected
from the Non-
Executive
Directors.
None
The Board as a whole is
responsible for setting the
remuneration of the Non-
Executive Directors, other
than the Chairman whose
remuneration is considered
by the Committee and
recommended to the Board.
Non-Executive Directors
are paid a base fee in
cash. Additional fees may
be paid for additional
responsibilities such
as acting as Senior
Independent Director or the
Chairman of a Committee of
the Board.
Fee levels are reviewed
annually.
The Non-Executive
Directors do not participate
in the Group’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 Group.
The fees paid to Non-
Executive Directors
will normally be
reviewed annually,
but the Committee
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
increase, but in
general the level
of fee increase for
the Non-Executive
Directors will be
set taking account
of any change in
responsibility and
the general rise in
salaries across the UK
workforce.
MAXIMUM
OPPORTUNITY
PERFORMANCE
TARGETS
Base award on grant
equal to 100% of
salary.
Payout is capped at
250% of salary.
Subject to an
underpin being
met, the value of
the base award
is linked to the
change in profits
and/or share
price, subject to
the overall cap.
Targets will
be disclosed
in the Annual
Report for the
year following
a performance
period.
DIRECTORS’ REMUNERATION REPORT
HOW THE ELEMENT
OPERATION
Cash awards with a three
year performance period.
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 Group’s
audited financial results,
a serious failure of risk
management or serious
reputational damage.
LTIP awards track the
Group’s share price and/or a
measure of Group profit.
SUPPORTS OUR
SHORT AND LONG
TERM STRATEGIC
OBJECTIVES
LONG TERM
INCENTIVE
PLAN (LTIP)
Provides the
Executive
Directors with
the opportunity
to earn
competitive
rewards.
Aligns the
Executive
Directors’
interests
more closely
with those of
shareholders.
Focuses the
Executive
Directors on
sustaining and
improving
the long term
financial
performance of
the Group and
rewards them
appropriately for
doing so.
142
DIRECTORS’ REMUNERATION REPORT
SHARE OWNERSHIP GUIDELINES
The Group does not have a minimum share
ownership requirement for the Executive
Directors. Taking into account that the
Group does not operate a share scheme
and the views of our majority shareholder,
the Committee considers it is not possible
to set shareholding targets for Executive
Directors. The main shareholder continues
to support this view.
PREVIOUS REMUNERATION
ARRANGEMENTS
The Company may honour any outstanding
remuneration commitments entered
into with current or former Directors (as
disclosed to shareholders) before this
policy took effect or before they became a
Director.
RECRUITMENT POLICY
In the event that a new Executive Director
was to be appointed, a remuneration
package would be determined consistent
with the Policy. In particular, new Executive
Directors will participate in variable
remuneration arrangements on the same
basis as existing Executive Directors. In the
event that a new Non-Executive Director
was to be appointed, the fees payable
would be determined in a manner which is
consistent with the Policy.
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. Any such award would be
in addition to the normal bonus and LTIP
awards set out in the policy table.
The Committee retains the right 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 Group will offer to pay reasonable
relocation expenses and admission to LTIP
arrangements 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
Details of the contracts currently in place for Executive Directors are as follows:
NAME
DATE OF CONTRACT
NOTICE PERIOD
UNEXPIRED TERM
Peter Cowgill
16 March 2004
Neil Greenhalgh
1 November 2018
(MONTHS)
12
12
Rolling 12 months
Rolling 12 months
144
It is the Group’s policy that notice periods
for Executive Director service contracts are
no more than 12 months.
The service contracts and letters of
appointment are available for inspection by
shareholders at the forthcoming AGM and
during normal business hours at the Group’s
registered office address.
NON-EXECUTIVE DIRECTORS
The Non-Executive Directors have entered
into letters of appointment with the Group
which are terminable by the Non-Executive
Director or the Group on not less than three
months’ notice.
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 Group. Prior approval of the
Board is required before acceptance of any
new appointments.
PAYMENTS FOR LOSS OF OFFICE
In the event of early termination, the Group
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
145
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 Group. 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.
In the event of gross misconduct, the Group
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.
The current Executive Director service
contracts permit the Group to put an
Executive Director on garden leave for the
duration of the notice period.
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.
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.
DIRECTORS’ REMUNERATION REPORT
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 shall 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.
CHANGE OF CONTROL
The Executive Director service contracts
contain a change of control provision
whereby if 50% or more of the shares in the
Group come under the direct or indirect
control of a person or persons acting in
concert, an Executive Director may serve
notice on the Group, at any time within
the 12 month period following a change of
control, terminating his employment
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.
146
147
ILLUSTRATIONS OF THE APPLICATION OF
THE POLICY
The chart below illustrates the remuneration
that would be paid to each of the Executive
Directors in the first year of operation of the
Directors’ remuneration policy.
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.
Variable element
of remuneration
Fixed elements
of remuneration
£0.9M
£1.7M
£2.6M
£0.3M £0.9M
£1.7M
5
0
%
6
7
%
6
4
%
8
1
%
1
0
0
%
i
i
M
n
m
u
m
5
0
%
O
n
t
a
r
g
e
t
3
3
%
M
a
x
i
m
u
m
1
0
0
%
i
i
M
n
m
u
m
3
6
%
O
n
t
a
r
g
e
t
1
9
%
M
a
x
i
m
u
m
P Cowgill Executive Chairman
N Greenhalgh Chief Financial Officer
DIRECTORS’ REMUNERATION REPORT
149
The scenarios in the above graphs are defined as follows:
Minimum
On target performance Maximum performance Maximum
performance with
50%share price
growth
Fixed elements
of remuneration
The base salary is the salary as at 1 April 2020
The benefits are taken as those in the single figure
table on page 149
The pension contribution is equal to 8% of base salary
(for Neil Greenhalgh only)
Annual Bonus
Long term
incentive plan1
Nil
Nil
100% of salary
200% of salary
200% of salary
150% of salary
250% of salary
250% of salary
1. Only Neil Greenhalgh is to be granted LTIP in the first year of operation of the Directors’ Remuneration Policy. On-target performance is assumed
to be 60% of the maximum LTIP payout. Maximum performance assumes maximum payout but without share price growth i.e. all growth in value is
assumed to be derived from profit growth. Under the scenario with 50% share price growth, some value is derived from profit growth and some is
derived from share price growth.
2. The Executive Chairman’s Special Bonus, which was disclosed in the 2018/19 Remuneration Report, has been excluded.
process. The new workforce committee will
provide further insights into the Group’s
remuneration practices which will be fully
considered by the Committee and the
Board.
CONSIDERATION OF SHAREHOLDER
VIEWS
The Committee has engaged with certain
major shareholders to obtain their views on
key aspects of the proposed remuneration
policy. The shareholders confirmed that
one of their main concerns was a lack of
transparency in its previous remuneration
policy and reports. As such, the Committee
has introduced greater visibility in this
year’s report and in the new elements of
the remuneration policy to ensure that
shareholders have a better understanding
of the key metrics used to ensure that
remuneration is based on measures which
retain and motivate the Executive Directors
and the Group’s Senior Management team,
as well as being aligned with shareholder
interests, as far as possible.
STATEMENT OF EMPLOYEE CONDITIONS
ELSEWHERE IN THE GROUP
Remuneration arrangements are determined
throughout the Group based on the same
principle that reward should be achieved
for delivery of the Group’s business strategy
and should be sufficient to attract and
retain high calibre talent, without paying
more than is necessary.
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.
The Committee considers pay and
employment conditions across the Group
when reviewing the remuneration of the
Executive Directors and other senior
employees. In particular, the Committee
considers the range of base pay increases
across the Group when determining
the increases to award to the Executive
Directors
The Committee has obtained the views
of the workforce on issues such as
remuneration via the various workforce
forums led by the Group’s HR business
partners. Such views have been fed back,
as appropriate, to the Committee and the
Board via the monthly Board reporting
148
ANNUAL REPORT ON REMUNERATION
SINGLE TOTAL FIGURE OF
REMUNERATION (AUDITED)
The table below sets out the single total
figure of remuneration and breakdown
for each Executive and Non-Executive
Director in respect of the 2020 financial
year. Comparative figures for the 2019
financial year have also been provided.
Figures provided have been calculated in
accordance with the new UK disclosure
requirements: the Large and Medium-Sized
Companies and Groups (Accounts and
Reports) (Amendment) Regulations 2013
(Schedule 8 to the Regulations).
Name
Salary / Fee
(£’000)
Benefits
(£’000)
Bonus
(£’000)
LTIP
(£’000)
Pension
(£’000)
Others
(£’000)
Total
(£’000)
2020
2019 2020 2019
2020
2019 2020 2019 2020 2019
2020 2019
2020
2019
2 1,726 1,700
–
–
–
– 3,000
– 5,592 2,552
Peter
Cowgill
863 850
Neil
Greenhalgh
300
57
3
3
–
–
–
–
–
–
–
–
–
–
63
60
71
65
56
55
40
–
–
–
– 204
–
14
2 300
56 223
70
10
5
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
24
–
–
–
–
–
–
–
–
836
190
–
–
–
–
–
–
63
50
71
65
56
55
40
–
–
–
–
242
Andrew
Leslie
Martin
Davies
Heather
Jackson
Kath
Smith
Andy
Rubin
Brian
Small
(1) Salary reviews effective 1 April annually. No salary rises have been awarded for 2020/21.
(2) The 2018/19 salary figure for Neil Greenhalgh represents a part year figure based on when he was appointed into the role.
(3) The 2019/2020 salary figure for Kath Smith represents a part year figure based on when she commenced her role.
(4) As disclosed in the 2018/19 Remuneration Report and as approved by shareholders, a Special Bonus is due to be paid to the Executive
Chairman in four instalments of £1.5m. The first two instalments were made in October 2019 and February 2020. In the light of developments
caused by the COVID-19 pandemic, it has been agreed that the remaining payments would be deferred and paid when the Board and
Committee are satisfied it is appropriate to do so.
(5) Neil Greenhalgh pension value is provided by means of a pension allowance salary supplement.
The taxable benefit received by Peter
Cowgill and Neil Greenhalgh is healthcare
insurance.
Pension contributions are:
• Peter Cowgill – 0% of salary
• Neil Greenhalgh – 8% of salary
ADDITIONAL INFORMATION REGARDING
SINGLE FIGURE TABLE (AUDITED)
2020 ANNUAL BONUS AWARDS
The annual bonuses for the Executive
Directors are based on a mix of financial
targets (66.7%) and strategic/ non-financial
performance objectives (33.3%). The
Committee maintains the view that this is
an appropriate method of incentivising the
Executive Directors to focus their efforts
on the fundamental drivers for growth and
exceptional performance during the course
of the financial year.
The apportioning and determination of
the award values for the 2020 annual
bonus values were measured against the
following criteria.
Weighting
Criteria
Target Outcome
Actual performance
67%
£355.2m minimum
£375.0m
£465.6m
Weighting
Criteria
Target Outcome
Actual performance
%
vesting
100%
100%
100%
(£400m for
maximum value)
Identify a
succession plan
for the senior
management
team. Provide
opportunities
for employees
based outside
of the UK to
complete the JD
retail academy
course
To remove
plastic
packaging
products where
the opportunity
to re-use such
products is not
at an optimal
level
All senior team members
have created a succession
plan to identify the
appropriate skills and
leadership potential to
step into business critical
roles and have highlighted
pathway planning strategies
for the forthcoming
financial year.
Successful launch of JD’s
retail training academy
in USA, Spain, France
and Germany, increasing
the number of learners
completing the JD retail
academy courses by 50%.
Our Blacks and Millets
businesses have
transitioned from the use
of plastic bags and have
replaced them with an
improved paper product.
In our core JD business,
we have reduced the
number of consumer carrier
bag options such that all
bags offered to consumers
are fully reusable.
Each of these actions
have reaffirmed the
Group’s “re-use” message
which is integral to our
environmental policy.
DIRECTORS’ REMUNERATION REPORT
Profit Before
Tax
(prior to
exceptional
items and
IFRS 16
adjustments)
People
6.7%
Promote and
expand the
succession planning
and development
of people within the
Group
Environmental 6.7%
Reduce usage of
plastic packaging
and its impact on
the environment
150
151
%
vesting
100%
The goal of categorising
500,000 garments
in accordance with a
sustainability “flag” has not
only been achieved but
has been exceeded by over
300% such that over 1.6
million garments have now
been categorised against
our sustainability standard.
100%
The Group has successfully
launched a new investor
and stakeholder-facing
website, engaging
stakeholders and disclosing
a range of key governance
topics via a concise and
accessible format.
100%
Continued investment in the
JD App and the widespread
adoption of it, ensuring the
most engaging experience
for our consumers in our
most important digital
channel.
Having #1 Christmas TV
advert on YouTube in the
UK.
Being the first UK launch
partner for the alternative
payment method, Clear Pay.
Sustainability
6.7%
Governance
6.7%
Digital
Innovation
6.7%
To categorise
a minimum
of 500,000
garments
against a new
sustainability
“flag” process,
which identifies
that the
garments in
question contain
sustainably
grown cotton
and recycled
polyester.
Bring together
key information
and engage key
stakeholders
to ensure
all relevant
information
is available to
shareholders in
a user friendly
format and is
updated on a
regular basis.
Implementation
of new
technologies
across multiple
consumer
channels.
Quick adoption
of new
alternative
payment
methods to
enable our
customers to
shop with us
in new and
innovative ways.
Deliver a transparent
monitoring and
reporting process
relating to the use
of more sustainable
materials within our
private label supply
chain.
Deliver greater
accessibility
and visibility of
environmental,
social and corporate
governance
information
Ensure that the
business is at
the forefront
of consumer
innovation and
technology
adoption in order to
maximise consumer
engagement.
Early adoption of
new technologies
to enhance
the consumer
experience and
improve operational
efficiencies.
Being first to market
with new consumer
innovation. Being
first to market with
new consumer
innovation.
DIRECTORS’ REMUNERATION REPORT
As a result of this performance, the
Committee determined that the following
bonuses were appropriate in the context of
the truly exceptional performance in both
financial and non-financial measures:
• Peter Cowgill: Exceptional bonus equal to
200% of salary, or £1,726,000;
• Neil Greenhalgh: Bonus equal to 100% of
salary, or £300,000
The Committee determined that an
exceptional bonus was appropriate for Peter
Cowgill, given his leadership of the business
in again achieving record results for the
Company. From 2020/21 onwards, under
the proposed policy, the normal maximum
bonus will be increased to 200% of salary
to reflect typical market practice for
companies of a similar size and complexity
to the Group.
As noted in the Chairman’s letter, it has
been agreed that all bonus and LTIP
payments will be deferred. It is the intention
of the Board and Remuneration Committee
that any deferred payments will be made
once our stores have re-opened and when
the Board and Committee are satisfied that
performance and projected cashflows of
the Group permit payment. At the time of
publication of this report, the timing of such
payments remain under review.
LONG TERM INCENTIVES VESTING
DURING 2019/20
The LTIP and annual bonus payments that
Neil Greenhalgh is entitled to for this period
were granted under the Senior Manager
LTIP and bonus schemes.
LONG TERM INCENTIVES DUE TO BE
AWARDED DURING 2019/20
As stated in the remuneration report for
the 2018/19 financial year, the Committee
determined that it was appropriate to
grant an award under the current Executive
Director LTIP to the Chief Financial Officer.
The award granted will vest in 2022.
The Executive Director LTIP was approved
by shareholders at the 2014 AGM.
To summarise, the terms of the current
Executive Director LTIP are as follows:
• Cash awards (not shares).
152
• 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.
• The maximum award which can be
granted to the Chief Financial Officer
is 200% of base salary. The level of any
awards under the LTIP remains under the
consideration of the Committee.
• The LTIP will measure financial
performance over a 3 year period. 25%
of any award will vest at threshold
performance increasing on a straight-line
basis to 100% for maximum performance.
Targets will be disclosed in the annual
accounts for the year following a
performance period.
The aim of the LTIP is 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 and to
focus the Executive Directors on sustaining
and improving the long-term financial
performance of the Company and reward
them appropriately for doing so.
PERFORMANCE CONDITIONS OF THE
EXECUTIVE DIRECTOR LTIP (CHIEF
FINANCIAL OFFICER)
An award under the Executive Director
LTIP shall be in the form of a conditional
right to receive a pre-determined cash
amount ‘Award’. Awards will generally only
vest or become exercisable subject to the
satisfaction of a performance condition
measured over a three year period
153
‘Performance Period’ determined by the
Committee at the time of grant. Awards
will vest dependent on the satisfaction of
performance conditions determined by
the Committee prior to the date of grant.
The performance conditions must contain
objective conditions, which must be related
to the underlying financial performance of
the Company.
The Award granted to the Chief Financial
Officer in 2019 is based on a performance
condition of headline earnings of the
Group ‘Headline Earnings’ over a three year
performance period commencing from the
start of the financial year immediately prior
to the grant of the Award will be as follows:
Performance condition
Proportion of the Award subject to that
element of the performance condition
Underpin condition
Headline Earnings for
2019/20 (Year 1)
33.33%
Headline Earnings for
2020/21 (Year 2)
33.33%
In order to vest at the end of
three years, the target met at
the end of Year 1 must have
been maintained at the end
of the Performance Period
In order to vest at the end of
three years, the target met at
the end of Year 2 must have
been maintained at the end
of the Performance Period
Headline Earnings for
2021/22 (Year 3)
33.33%
N/A
The initial Performance Period commenced
on 3 February 2019 for the 2019 Award
and the Headline Earnings for the three
financial years will be determined before
the date of grant of the Award. Performance
measurement for the Headline Earnings
for the 2019 Award will be based on the
increase in the Headline Earnings over
the Performance Period. Awards will vest
on a sliding scale from 25% to 100% in
relation to the Headline Earnings targets
for the relevant year. Details of the specific
Headline Earnings targets will be disclosed
in the annual report on remuneration
following the end of the relevant
Performance Period.
The Committee will have the flexibility
to make appropriate adjustments to the
performance conditions in exceptional
circumstances, to ensure that the Award
achieves its original purpose. Any vesting
is also subject to the Committee being
satisfied that the Company’s performance
on these measures is consistent with
underlying business performance.
It is the intention of the Committee to
review the terms of the Executive Director
LTIP during the forthcoming year in order
to ensure that it remains appropriate. In
the event that the Committee agree upon
the terms of a new LTIP, this will be put to
shareholders at the appropriate time.
STATEMENT OF DIRECTORS’ SHAREHOLDINGS AND SHARE INTERESTS (AUDITED)
Peter Cowgill
Neil Greenhalgh
1 February
2020
2 February
2019
8,465,260
2,000
8,450,260
2,000
DIRECTORS’ REMUNERATION REPORT
The interests of the Directors who held
office at 1 February 2020 and persons
closely associated with them in the
Company’s ordinary shares are shown on
previous page.
On 5 June 2020 Peter Cowgill sold
1,985,000 shares. There has been no other
changes in the interests of the Directors
or persons closely associated with them
between 1 February 2020 and the latest
practicable date prior to the publication
of this report. The holdings stated above
are held directly by the Directors and
persons closely associated with them are
not subject to any performance targets.
The Directors have no other interests in
Company shares. As stated in the Directors’
remuneration policy, the Company does
not have a minimum share ownership
requirement for Directors. Given our
narrow shareholder base and the fact that
there is a controlling shareholder with a
majority shareholding in the business, the
Committee considers it impractical to set
realistic shareholding targets.
JD Sports Fashion PLC
FTSE all share general
retailers index
PAYMENTS TO PAST DIRECTORS
(AUDITED)
No such payments were made.
PAYMENTS FOR LOSS OF OFFICE
(AUDITED)
No such payments were made.
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 Index over the past ten years. The
Committee consider the FTSE All Share
General Retailers Index a relevant index
for total shareholder return comparison
disclosure required under the Regulations
as the index represents the broad range
of UK quoted retailers. TSR is calculated
for each financial year end relative to the
base date of 31 January 2010 by taking the
percentage change of the market price
over the relevant period, reinvesting any
dividends at the ex-dividend rate.
10000
8000
6000
4000
2000
0
154
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155
EXECUTIVE CHAIRMAN’S REMUNERATION OVER PAST TEN YEARS (UNAUDITED)
The total remuneration figures for the Executive Chairman during each of the last ten
financial years are shown in the table below. The total remuneration figure includes the
annual bonus based on that year’s performance and the LTIP award 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.
Jan
2011
Jan
2012
Jan
2013
Jan
2014
Year ended
Jan
2015
Jan
2016
Jan
2017
Jan
2018
Jan
2019
Jan
2020
Total remuneration £m
1.8
2.3
2.0
3.1
2.0
2.7
2.8
2.3
2.6
5.6
Annual bonus %
120
75
37
100 100 200 200 200 200 200
LTIP vesting %
100
100 100 n/a
n/a*
n/a*
100*
n/a
n/a
n/a
* The LTIP performance criteria was achieved over the full three year period to 28 January 2017 and the award was paid on 30 October 2017.
PERCENTAGE CHANGE IN EXECUTIVE CHAIRMAN’S REMUNERATION (UNAUDITED)
The table below shows the percentage change in the Executive Chairman’s salary and annual
bonus between financial years 2 February 2019 and 1 February 2020 compared to UK Head
Office employees in the JD and Size? businesses, being deemed by the Board as the most
appropriate comparator group based on the Group being the ones who are remunerated in
the most comparable way within the 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
1.53
4.24
4.28
10.54
1.53
13.28
DIRECTORS’ REMUNERATION REPORT
157
CEO PAY RATIO (UNAUDITED)
In line with new reporting requirements, set out below are ratios which compare the total
remuneration of the executive chairman (as included in the single figure table on page 149)
to the remuneration of the 25th, 50th and 75th percentile of our UK employees.
Financial year end
Method used
25th Percentile Ratio
50th Percentile Ratio
75th Percentile Ratio
2019/20
B
348:1
310:1
304:1
25th Percentile
Remuneration
50th Percentile
Remuneration
75th Percentile
Remuneration
Base Salary
£16,067
£17,877
£17,981
Total Remuneration
£16,067
£18,299
£18,366
We have used Option B in the legislation to
identify the 25th, 50th and 75th percentile
UK employees. This has utilised the most
recent data from our UK gender pay gap
reporting for April 2019.
The Group has elected to utilise this
approach for this year as to prepare
individual employee calculations across
a vast employee base would be overly
complicated. In addition, the Group is
undergoing a system transformation project
currently focused on its HR and payroll
systems. This means that, currently, data for
certain areas of the Group are being held in
different locations on separate systems.
Utilising the Gender Pay Gap data we
identified the employees at the three
percentiles. To then calculate total
remuneration for these individuals, we have
used the same methodology applied in the
single figure calculation.
these populations. This is in line with typical
practice in the retail sector and rates of pay
at these levels will not be as high as those
for management and head office employees
in technical roles. Following consideration,
we believe these ratios, and the individuals,
are representative and appropriate.
As the hours our employees work vary week
to week we have converted their hourly rate
of pay into the equivalent 40-hour week in
order that this is directly comparable.
As disclosed in the 2018/19 Remuneration
Report and as approved by shareholders,
a Special Bonus was paid to the Executive
Chairman. As the Executive Chairman is
in receipt of variable pay that is linked
to the Group’s performance, the level of
remuneration will vary vastly from year to
year and this combined with the factors
above contribute to the level of the ratios.
The largest population of employees
within the Group are store colleagues and
warehouse operatives and the individuals
represented at the 25th, 50th and 75th
percentile IDENTIFIED BY THE USE OF THE
GENDER PAY DATA are all employees within
RELATIVE IMPORTANCE OF THE SPEND
ON PAY (UNAUDITED)
The following table shows the Group’s
actual spend on pay (for all employees)
relative to dividends, tax and retained
profits:
Staff costs
Dividends
Tax
Retained profits
156
2020 (£m)
2019 (£m)
% change
873.8
16.7
97.8
250.7
697.8
15.9
75.7
264.2
25.2%
5.0%
29.2%
-5.1%
IMPLEMENTATION OF REMUNERATION
POLICY IN FINANCIAL YEAR 2020/21
(UNAUDITED)
The Committee proposes to implement the
policy for 2020/21 as set out below:
SALARIES AND BENEFITS
Whilst salary rises were intended to be
increased in line with the planned increases
for the wider workforce from 1 April 2020, a
subsequent decision has been made not to
enact the pay rises for Executive Directors
for the financial year given the current
situation. A decision on increases for the
workforce has been deferred and is subject
to review later during the year.
EXECUTIVE DIRECTOR LTIP
The Chief Financial Officer will be granted
an award for the financial year 2021
under the new Executive Director LTIP in
accordance with the Remuneration Policy,
further details of which are set out below.
To summarise, the terms of the new
Executive Director LTIP are as follows:
• 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
• The maximum award which can be
granted to the Chief Financial Officer
is 250% of base salary. The level of any
awards under the LTIP remains under the
consideration of the Committee
• The award will track performance against
agreed financial metrics and the overall
award value will be determined based on
a percentage of base salary for 60% of the
award, and tracking of share price for 40%
of the award.
• The element of the award utilised to track
share performance will be determined
based on the share price as at 2 February
2020 and at the end of the performance
period
• The LTIP will measure financial
performance over a 3 year period.
• 100% of any award will vest at threshold
performance increasing on a straight-line
basis to 250% for maximum performance.
• A minimum award value will be granted
should consistent growth targets be
obtained once the initial performance
threshold has been met, this minimum
value will not be less than awards received
in previous years. This is to ensure
that focus remains on sustainable and
consistent growth
• Targets will be disclosed in the annual
accounts for the year following a
performance period
The aim of the LTIP is; 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 and to
focus the Executive Directors on sustaining
and improving the long-term financial
performance of the Company and reward
them appropriately for doing so.
PERFORMANCE CONDITIONS OF THE
EXECUTIVE DIRECTOR LTIP (CHIEF
FINANCIAL OFFICER)
An award under the Executive Director
LTIP shall be in the form of a conditional
right to receive a pre-determined cash
amount ‘Award’. Awards will generally only
vest or become exercisable subject to the
satisfaction of a performance condition
measured over a three-year period
‘Performance Period’ determined by the
Committee at the time of grant. Awards
will vest dependent on the satisfaction of
performance conditions determined by
the Committee prior to the date of grant.
The performance conditions must contain
objective conditions, which must be related
to the underlying financial performance of
the Company.
It is intended that, for the Award to be
granted to the Chief Financial Officer in
2020, the performance conditions must
have been met. This is to apply over a three-
DIRECTORS’ REMUNERATION REPORT
year performance period commencing from
the start of the financial year immediately
prior to the grant of the Award.
The award will be calculated based on four
principles:
1 60% of the award value will be based
on achieving a minimum level of Profit
Before Tax (prior to exceptional items and
IFRS16 adjustments). Should this minimum
level be achieved awards will vest based on
a sliding scale and details of the specific
targets will be disclosed in the annual
report on remuneration following the end of
the relevant Performance Period.
2 Should consistent growth targets be
met in each of the three years within
the performance period, and the minimum
level of Profit Before Tax (prior to
exceptional items and IFRS16 adjustments)
as outlined above, have been achieved, the
award will pay out at a minimum level of the
value of previous awards received in the
year prior to the award being made. Specific
targets for the three-year growth targets
will be disclosed in the annual report on
remuneration following the end of the
relevant Performance Period.
3 40% of the award value will be based
on the share price as at the start of the
financial year in which the award is made.
This amount will be utilized to create a
number of notional shares. At the end of the
performance period the award value will be
calculated based on the number of notional
shares and the share price at the end of the
performance period.
4 The combined value of the points
above will be capped at a maximum
value of 250% of base salary at the point of
award.
The intention of this arrangement is to
diversify the metrics used in assessing
performance with the LTIP, and to reward
either exceptional and/or consistent growth
reflecting the challenging conditions facing
retailers in the current climate.
Given the disruption caused by COVID-19,
the Committee reserves the right to review
the planned implementation of LTIP awards
for 2020/21. Consultation with shareholders
would take place were a material change to
be proposed.
158
The Committee will have the flexibility
to make appropriate adjustments to the
performance conditions in exceptional
circumstances, to ensure that the Award
achieves its original purpose. Any vesting
is also subject to the Committee being
satisfied that the Company’s performance
on these measures is consistent with
underlying business performance.
FINANCIAL TARGETS AND STRATEGIC
OBJECTIVES FOR THE ANNUAL BONUS
AWARDS IN 2019/20
The split between financial targets and
strategic objectives will remain two thirds
and one third respectively. The targets in
respect of the annual bonus for the financial
year to 1 February 2020 were as follows:
• a minimum criteria of £355.2 million Profit
Before Tax (prior to exceptional items
and IFRS16 adjustments) for any bonus
payment to be made;
• a target level of £375 million Profit Before
Tax (prior to exceptional items and IFRS16
adjustments); and
• 100% of the maximum award being
achieved where Profit Before Tax (prior to
exceptional items and IFRS16 adjustments)
reaches £400 million.
As disclosed above, earnings were in excess
of the maximum payment figure due to
exceptional performance.
The strategic objectives will be set against
criteria in the following categories:
1 People – focused on increased
retention and development
2 Environmental – focused in our integral
re-use strategy
3 Sustainability – focused on the supply
chain for our private label business
4 Governance – increasing transparency
for our shareholder base
5 Digital Innovation – focused on the
adoption of new technologies
The Board considers that the both the
financial targets and the strategic objectives
for the financial year to 31 January 2021
are commercially sensitive and so will be
disclosed in the 2021 Annual Report.
159
The advice was taken at the request of
Andrew Leslie and was engaged directly by
him with PriceWaterhouseCoopers (PwC).
This was following the meeting with Andrew
Leslie and PwC, and Andrew being satisfied
that the advisor had adequate knowledge,
skills and representation of a wider market
view. The advisor was chosen due to
independence of the current auditors, and
one who was not providing any advice to
the Group on remuneration matters at the
point of selection.
The fees for these services were £18,000
plus VAT invoiced on completion.
The Committee is formally constituted
with 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 123.
Andrew Leslie
Chairman of the Remuneration Committee
7 July 2020
STATEMENT OF VOTING AT GENERAL
MEETING (UNAUDITED)
At the 2019 AGM, the Directors’
Remuneration Report received the following
votes from shareholders:
For
Against
Withheld
597,455,707 262,409,076
8,702,483
(69.48%)
(30.52%)
At the 2018 AGM, the Directors’
Remuneration Policy received the following
votes from shareholders:
For
Against
Withheld
753,242,894
(85.1%)
131,883,333
(14.9%)
3,966,662
COMPOSITION OF THE COMMITTEE AND
ADVISORS (UNAUDITED)
The Committee comprises three
independent 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.
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 Neil
Greenhalgh, 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. Advice was taken
during 2019/20 to support in the review
and design of the new Executive LTIP
arrangement, as well as benchmarking
Executive remuneration, and the creation
of the Remuneration Policy and the
Remuneration Report.
161
161
FINANCIAL
STATEMENTS
160
160
OUR GROUP STATEMENT OF DIRECTORS’ RESPONSIBILITIES
163
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
• The Strategic Report and the Directors’
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.
Neil Greenhalgh
Chief Financial Officer
7 July 2020
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 International Financial
Reporting Standards as adopted by the
European Union (IFRSs as adopted by
the EU) and applicable law and have
elected to prepare the parent Company
financial statements in accordance with UK
accounting standards, including FRS 101
Reduced Disclosure Framework.
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, relevant and reliable
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
• Assess the Group and parent Company’s
ability to continue as a going concern,
disclosing, as applicable, matters related
to going concern
• Use the going concern basis of accounting
unless they either intend to liquidate the
Group or the parent Company or to cease
operations, or have no realistic alternative
but to do so
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 are responsible for such internal
control as they determine is necessary
to enable the preparation of financial
statements that are free from material
misstatement, whether due to fraud or
error, and 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.
162
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF JD SPORTS FASHION PLC
165
INDEPENDENT AUDITOR’S REPORT
BASIS FOR OPINION
We conducted our audit in accordance
with International Standards on Auditing
(UK) (“ISAs (UK)”) and applicable law. Our
responsibilities are described below. We
believe that the audit evidence we have
obtained is a sufficient and appropriate
basis for our opinion. Our audit opinion
is consistent with our report to the audit
committee.
We were first appointed as auditor by the
shareholders in March 1996. The period of
total uninterrupted engagement is for the
24 financial periods ended 1 February 2020.
We have fulfilled our ethical responsibilities
under, and we remain independent of
the Group in accordance with, UK ethical
requirements including the FRC Ethical
Standard as applied to listed public interest
entities. No non-audit services prohibited by
that standard were provided.
TO THE MEMBERS OF JD SPORTS
FASHION PLC
1. OUR OPINION IS UNMODIFIED
We have audited the financial statements of
JD Sports Fashion plc (“the Company”) for
the 52 week period ended 1 February 2020
which comprise the Consolidated Income
Statement, the Consolidated Statement of
Comprehensive Income, the Consolidated
Statement of Financial Position, the
Consolidated Statement of Changes in
Equity, the Consolidated Statement of
Cash Flows, the Company Balance Sheet,
the Company Statement of Changes in
Equity and the related notes, including
the accounting policies in note 1 to the
consolidated financial statements and note
C1 to the company financial statements.
In our opinion:
• the financial statements give a true and
fair view of the state of the Group’s and
of the parent Company’s affairs as at 1
February 2020 and of the Group’s profit
for the 52 week period 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.
164
OVERVIEW
Materiality:
group financial
statements as a
whole
£17.4m (2019: £15.0m)
4.1% (2019: 4.4% of profit before tax) of normalised profit before tax*
Coverage
91.8% (2019: 87.7%) of Group normalised profit before tax
VS 2019
KEY AUDIT MATTERS
Event driven risks
Recurring risks
Group and parent Company: the
impact of uncertainties consequent
upon the UK’s departure from the
European Union on our audit
Group and parent Company: Going
concern including the impact of
Coronavirus on the business
Group: Carrying amount of Goodwill
and fascia names in Go Outdoors
Group and parent Company:
Carrying amount of inventories
New risk
Group and parent Company:
Carrying amount of IFRS 16 right of
use assets and lease liabilities
*We have normalised 2020 profit before tax to exclude the Go Outdoors impairment (£42.6m) and the movement in the fair value of the Sport
Zone put option (£32.7m).
our results from those procedures. These
matters were addressed, and our results
are based on procedures undertaken, in the
context of, and solely for the purpose of, our
audit of the financial statements as a whole,
and in forming our opinion thereon, and
consequently are incidental to that opinion,
and we do not provide a separate opinion
on these matters.
2. KEY AUDIT MATTERS: INCLUDING OUR
ASSESSMENT OF RISKS OF MATERIAL
MISSTATEMENT
Key audit matters are those matters that, in
our professional judgement, were of most
significance in the audit of the financial
statements and include the most significant
assessed risks of material misstatement
(whether or not due to fraud) identified by
us, including those which had the greatest
effect on: the overall audit strategy; the
allocation of resources in the audit; and
directing the efforts of the engagement
team. We summarise below the key audit
matters in arriving at our audit opinion
above, together with our key audit
procedures to address those matters and,
as required for public interest entities,
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF JD SPORTS FASHION PLC
167
THE RISK
OUR RESPONSE
THE RISK
OUR RESPONSE
THE IMPACT OF UNCERTAINTIES CONSEQUENT UPON THE UK’S DEPARTURE FROM
THE EUROPEAN UNION ON OUR AUDIT.
Refer to page 65 (principal risk) and page 69 (viability statement).
EXTREME LEVELS OF UNCERTAINTY:
The UK left the European Union (EU)
on 31 January 2020 and entered an
implementation period which is due to
operate until 31 December 2020. At that
point current trade agreements with the
European Union terminate. The UK is entering
negotiations over future trading relationships
with the EU and a number of other countries.
Where new trade agreements are not in
place World Trade Organisation (WTO)
arrangements will be in force, meaning
among other things import and export tariffs,
quotas and border inspections which may
cause delivery delays. Different potential
outcomes of these trade negotiations
could have wide ranging impacts on the
Group’s operations and the future economic
environment in the UK and EU. In particular,
in the 52 week period ended 1 February 2020
57.5% of the Group’s sales were outside of
the UK and hence where WTO arrangements
could come into force.
All audits assess and challenge the
reasonableness of estimates, in particular
as described in the valuation of Goodwill
in Go outdoors and related disclosures;
and the appropriateness of the going
concern basis of preparation of the financial
statements (see below). All of these depend
on assessments of the future economic
environment and the Group’s future
prospects and performance.
In addition, we are required to consider the
other information presented in the Annual
Report including the principal risks disclosure
and the viability statement and to consider
the directors’ statement that the annual
report and financial statements 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.
The uncertainty over the UK’s future trading
relationships with the rest of the world and
related economic effects give rise to extreme
levels of uncertainty, with the full range of
possible effects currently unknown.
We developed a standardised firm-wide
approach to the consideration of the
uncertainties arising from the UK’s departure
from the EU in planning and performance our
audits. Our procedures included:
• Our knowledge of the business: We
considered the directors’ assessment of
risks arising from different outcomes to
the trade negotiations for the Group’s
and parent Company’s business and
financial resources compared with our own
understanding of the risks. We considered
the directors’ plans to take action to
mitigate the risks;
• Sensitivity analysis: When addressing the
valuation of Goodwill and fascia name
arising on the acquisition of Go Outdoors
and other areas that depend on forecasts,
we compared the directors’ analysis to our
assessment of the full range of reasonably
possible scenarios resulting from these
uncertainties and, where forecast cash
flows are required to be discounted,
considered adjustments to discount rates
for the level of remaining uncertainty; and
• Assessing transparency: As well as
assessing individual disclosures as part of
our procedures on the valuation of Goodwill
and fascia name arising on the acquisition
of Go Outdoors, we considered all of the
disclosures concerning uncertainties related
to the UK’s future trading relationships
together, including those in the strategic
report, comparing the overall picture
against our understanding of the risks.
OUR RESULTS
• As reported under the valuation of Goodwill
and fascia name arising on the acquisition
of Go Outdoors, we found the resulting
estimates and related disclosures in relation
to going concern to be acceptable (2019:
acceptable). However, no audit should be
expected to predict the unknowable factors
or all possible future implications for a
company and this is particularly the case in
relation to the impact of the UK’s departure
from the EU.
166
GOING CONCERN INCLUDING THE IMPACT OF CORONAVIRUS ON THE BUSINESS
Refer to page 129 (Audit Committee Report), page 64 (principal risk), page 69 (viability statement) and note 1 on page 182 (accounting policy).
UNPRECEDENTED LEVELS OF UNCERTAINTY
The financial statements explain how the Board
has formed a judgement that it is appropriate to
adopt the going concern basis of preparation for
the Group and parent Company.
The judgement is based on an evaluation of
the inherent risks to the Group’s and the parent
Company’s business model and how those
risks might affect the Group’s and the parent
Company’s financial resources or ability to
continue operations over a period of at least a
year from the date of approval of the financial
statements.
The risks most likely to affect the Group’s
and the parent Company’s available financial
resources over this period were:
• The uncertainty of the impact of Coronavirus
with the full range of possible effects
unknown given the rapidly evolving nature
of the situation on financial and operational
performance;
• The impact of Brexit;
• The erosion of customer or supplier confidence,
which could result in a rapid reduction of
financial resources as a result of Coronavirus
and/or Brexit;
• General economic downturn possibly arising as
a result of Coronavirus and/or Brexit;
• Market demand and increased pressure from
competitors;
• Adverse fluctuations in foreign exchange rates;
• Working capital requirements as the Group
continues to grow.
The risk for our audit was whether or not those
risks were such that they amounted to a material
uncertainty that may have cast significant doubt
about the ability to continue as a going concern.
Had they been such, then that fact would have
required to have been disclosed.
DISCLOSURE QUALITY
Clear and full disclosures of the assessment
undertaken by the Directors and the rationale
for the use of the going concern assumption,
represents a key financial statement disclosure
requirement.
There is a risk that insufficient details are
disclosed to allow a full understanding of the
assessment undertaken by the Directors.
Our procedures included:
• Funding assessment: we assessed
the loan covenant compliance to
check whether the Group is at risk of
breaching the covenants and reviewed
the availability of cash and the cash
flow forecasts to determine whether the
assumptions are realistic, achievable and
consistent with the external and internal
environment;
• Historical comparisons: we considered
the historical accuracy of management’s
forecasting in previous year in
comparisons to actual performance
achieved;
• Sensitivity analysis: we considered
sensitivities over the level of financial
resources indicated by the Group’s
financial forecasts taking account of
reasonably possible (but not unrealistic)
adverse effects that could arise from
the risks identified individually and
collectively;
• Evaluating directors’ intent: we
evaluated the achievability of the
actions the Directors consider they
would take to improve the position
should the risks materialise; and
• Assessing transparency: we assessed
the completeness and accuracy of the
matters covered in the going concern
disclosure by comparing the overall
picture against our understanding of the
risks.
OUR RESULTS
• We found the going concern disclosure
without any material uncertainty to be
acceptable (2019: acceptable). However,
no audit should be expected to predict
the unknowable factors or all possible
future implications for a company and
this is particularly the case in relation to
Coronavirus and/or Brexit.
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF JD SPORTS FASHION PLC
169
THE RISK
OUR RESPONSE
THE RISK
OUR RESPONSE
CARRYING AMOUNT OF GOODWILL AND FASCIA NAMES IN GO OUTDOORS
(£52.1 million; 2019: £97.6 million)
CARRYING AMOUNT OF INVENTORIES
(Group £811.8 million; 2019: £763.8 million) (Company £181.6 million; 2019: £169.8 million)
Refer to page 129 (Audit Committee Report) and note 12 on page 203 (accounting policy and financial disclosures).
Refer to page 129 (Audit Committee Report) and note 16 on page 218 (accounting policy and financial disclosures).
FORECAST BASED VALUATION:
Goodwill and fascia names are significant and
at risk of recoverability due to challenging
trading conditions in certain high street
retail sectors and locations that the Group
operates in. The risk applies most specifically
to Go Outdoors as this holds the most
judgemental balances and an impairment
of £42.6 million has been recognised by the
Directors in the current year.
The estimated recoverable amounts are
subjective due to the inherent uncertainty
involved in forecasting and discounting
future cash flows therefore this is one of the
key areas that our audit concentrated on.
The effect of these matters is that, as part
of our risk assessment, we determined that
the recoverability of goodwill and fascia
names in Go Outdoors had a high degree of
estimation uncertainty, with a potential range
of reasonable outcomes greater than our
materiality for the financial statements as a
whole, and possibly many times that amount.
The financial statements (note 12) disclose
the sensitivity estimated by the Directors.
Our procedures included:
• Historical comparisons: we assessed
the reasonableness of the budgets by
considering the historical accuracy of
previous forecasts;
• Our sector experience: we assessed
whether assumptions used, in particular
those relating to short term forecast
revenue growth, profit margins, the
discount rate and the long term growth
rate, reflect our knowledge of the business
and industry, including known or probable
changes in the business environment;
• Benchmarking assumptions: using our own
valuation specialists, we challenged the key
inputs used in the Group’s calculation of
the discount rates by comparing them to
externally derived data, including available
sources for comparable companies;
• Sensitivity analysis: we performed
sensitivity analysis on the key assumptions
noted above; and
• Assessing transparency: we assessed
whether the Group’s disclosures about the
impairment tests and resulting impairment
loss appropriately reflect the risks inherent
in the valuation of goodwill and fascia
names.
OUR RESULTS
• We found the carrying amount of goodwill
and fascia names in Go Outdoors to be
acceptable (2019: acceptable).
SUBJECTIVE ESTIMATE:
Inventories is one of the most significant
items on the Group’s and parent Company’s
balance sheets and is stated at the lower of
cost and net realisable value.
As the Group operates in the retail business
where branded products are subject
to frequent changes in desirability, the
assessment of net realisable value involves
significant estimation uncertainty.
The effect of these matters is that, as part of
our risk assessment, we determined that the
valuation of inventories had a high degree of
estimation uncertainty, with a potential range
of reasonable outcomes greater than our
materiality for the financial statements as a
whole.
Our procedures included:
• Our sector experience: we assessed
the Directors’ methodology and key
assumptions behind the inventory provision,
including the expected level of inventory
that will not be in demand and respective
sales prices, against our knowledge of the
business and industry and historical track
record of the Group;
• Expectation vs. outcome: we formed our
own expectation of the inventory provision
using our own view of the key assumptions
above and comparing our expectation to
the actual provision amount. This included
analysing inventory balances by season and
criteria such as inventory not bought in the
last 6 months and slower moving inventory;
• Test of detail: we examined recent selling
prices of a sample of inventory lines
to check whether lines already being
discounted below cost are included in the
inventory provisions; and
• Assessing transparency: we assessed
the adequacy of the financial statement
disclosures about the degree of estimation
in arriving at the net realisable value.
We also considered the adequacy of the
Group’s disclosures about the degree of
sensitivity to key assumptions.
OUR RESULTS
• We consider the valuation of inventories to
be acceptable (2019 result: acceptable).
168
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF JD SPORTS FASHION PLC
171
THE RISK
OUR RESPONSE
CARRYING AMOUNT OF IFRS 16 RIGHT OF USE ASSETS AND LEASE LIABILITIES
(Group: Right of use assets, £1,854.1 million, lease liabilities, £1,992.7 million; parent
Company: £451.0 million, lease liabilities £489.2 million)
Refer to page 129 (Audit Committee Report) and note 14 on page 212 (accounting policy and financial disclosures).
SUBJECTIVE ESTIMATE:
The new leases standard, IFRS 16, applies for
the first time for the 2020 year end. Given
the number of leases within the Group retail
estate the impact on the financial statements
is very significant.
The estimate of the carrying amount of right
of use assets and lease liabilities is complex
and relies on a number of assumptions for
which there is an inherent risk of error:
• Accurate lease data is needed for the whole
population of leased shops; the volume of
data points increases the risk of error;
• Discount rates are inherently unobservable
and need to approximate to shop/lease-
specific factors such as commencement
date; and
• Judgements are required in determining
the appropriate lease term, including the
expectation of the likelihood of renewal and
length of hold over.
The effect of these matters is that, as part
of our risk assessment, we determined that
the valuation of IFRS 16 right of use assets
and lease liabilities had a high degree of
estimation uncertainty, with a potential range
of reasonable outcomes greater than our
materiality for the financial statements as
a whole.
Our procedures included:
• Methodology choice: we assessed the
calculation methodology to check whether
it operates in line with the requirements of
the accounting standard;
• Our sector experience: we assessed the
Group’s assumptions on lease terms with
reference to historical experience of lease
renewals and our understanding of the
business;
• Benchmarking assumptions: we compared
the discount rates applied with market data
and considering the need for property-
specific adjustments;
• Test of detail: we compared the shops
included in the calculation of the lease
liability with the lease data accumulated
from our prior year audits and lease
changes in current year and for a sample
of lease agreements, agreed the key data
points to underlying lease agreements and
variations; and
• Assessing transparency: we assessed
whether the Group’s disclosures in respect
of the impact on adoption of IFRS 16 and
the sensitivity to assumptions appropriately
reflect the inherent risks.
OUR RESULTS
• We found the resulting estimate of the
valuation of IFRS 16 right of use assets and
lease liabilities to be acceptable.
170
The Group team instructed component
auditors as to the significant areas to be
covered, including relevant risks detailed
above and the detailed information to be
reported back. The Group team approved
the component materialities, which ranged
from £1.0m to £11.4m (2019: £0.6m to
£11.4m), having regard to the mix of size
and risk profile of the Group across the
components. The work on 6 out of the 10
components (2019: 4 of the 8 components)
was performed by component auditors
and the rest by the Group team. The parent
Company audit was performed by the
Group audit team.
The Group audit team performed specified
procedures on the amounts which were
excluded in arriving at the normalised
Group profit before tax for the current year
as identified above.
The Group team had planned to visit
component locations in Spain, Portugal,
France, USA and in the UK. However,
these visits were prevented by movement
restrictions relating to the COVID-19
pandemic. Instead the Group team
attended meetings via conference call with
5 (2019: 4) component teams (for Spain,
Portugal, France, USA and Footasylum),
which included assessing the audit risk
and strategy. 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.
The Group team also reviewed specific
areas of the component auditor’s files.
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 £17.4
million (2019: £15.0 million), determined
with reference to a benchmark of Group
normalised profit before tax of £424.3
million (2019: £339.9 million) which
represents 4.1% (2019: 4.4%). For the
current year we have normalised the
amount of profit to exclude the Go
Outdoors impairment of (£43.1m) and the
movement in the fair value of the Sport
Zone put option (£32.7m).
The materiality of the parent Company
financial statements as a whole was set at
£11.4 million (2019: £11.4 million), determined
with reference to a benchmark of parent
Company profit before tax of £291.5 million
(2019: £229.0 million), which represents
3.9% (2019: 4.9%).
We report to the Audit Committee any
corrected and uncorrected misstatements
exceeding £0.90 million (2019: £0.75
million), in addition to other identified
misstatements that warranted reporting on
qualitative grounds.
Of the Group’s 71 (2019: 59) reporting
components, we subjected 9 (2019: 8) to
audits for group reporting purposes and 1
(2019: nil) to specified risk focused audit
procedures covering the specific risk areas
including those identified in this report.
The remaining 17.8% (2019: 21%) of total
Group revenue, 8.2% (2019: 12%) of Group
profit before tax and 9% (2019: 22%) of
total Group assets is represented by 61
reporting components (2019: 51), none of
which individually represented more than
3% of any total Group revenue, Group profit
before tax or total Group assets. For these
remaining components, we performed
analysis at an aggregated group level and
at a disaggregated entity level, to re-
examine our assessment that there were no
significant risks of material misstatement
within these.
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF JD SPORTS FASHION PLC
NORMALISED PROFIT BEFORE TAX
£423.8m (2019: £339.9m)
GROUP MATERIALITY
£17.4m (2019: £15.0m)
GROUP REVENUE
PROFIT BEFORE TAX
£423.8M
.
1
7
4
M
Whole financial statements
materiality (2019: £15m)
173
Full scope for group
audit purposes 2020
Specified risk focussed
audit procedures 2020
Full scope for group
audit purposes 2019
Residual
components
1
1
.
4
M
Range of materiality at 9
components (£1m to £11.4m)
(2019: £0.6m to £11.4m)
82.2%
(2019: 79.0%)
80.4
79.0
GROUP PROFIT BEFORE TAX
89.8
88.0
91.8%
(2019: 88.0%)
GROUP TOTAL ASSETS
91.0%
(2019: 78.0%)
91.0
78.0
GROUP MATERIALITY
£17.4M
.
0
9
M
Misstatements reported to
the audit committee
(2019: £0.75m)
172
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF JD SPORTS FASHION PLC
175
5. WE HAVE NOTHING TO REPORT
ON THE OTHER INFORMATION IN THE
ANNUAL REPORT
The directors are responsible for the other
information presented in the Annual Report
together with the financial statements.
Our opinion on the financial statements
does not cover the other information and,
accordingly, we do not express an audit
opinion or, except as explicitly stated below,
any form of assurance conclusion thereon.
Our responsibility is to read the other
information and, in doing so, consider
whether, based on our financial statements
audit work, the information therein is
materially misstated or inconsistent with
the financial statements or our audit
knowledge. Based solely on that work we
have not identified material misstatements
in the other information.
Strategic report and directors’ report
Based solely on our work on the other
information:
• we have not identified material
misstatements in the strategic report and
the directors’ report;
• in our opinion the information given in
those reports for the financial year is
consistent with the financial statements;
and
• in our opinion those reports have
been prepared in accordance with the
Companies Act 2006.
Directors’ remuneration report
In our opinion the part of the Directors’
Remuneration Report to be audited has
been properly prepared in accordance with
the Companies Act 2006.
Disclosures of emerging and principal risks
and longer-term viability
Based on the knowledge we acquired
during our financial statements audit,
we have nothing material to add or draw
attention to in relation to:
4. WE HAVE NOTHING TO REPORT ON
GOING CONCERN
The Directors have prepared the financial
statements on the going concern basis as
they do not intend to liquidate the parent
Company or the Group or to cease their
operations, and as they have concluded
that the parent Company’s and the Group’s
financial position means that this is realistic.
They have also concluded that there are
no material uncertainties that could have
cast significant doubt over their ability to
continue as a going concern for at least
a year from the date of approval of the
financial statements (“the going concern
period”).
Our responsibility to conclude on
the appropriateness of the Directors’
conclusions and, had there been a material
uncertainty related to going concern, to
make reference to that in this audit report.
However, as we cannot predict all future
events or conditions and as subsequent
events may result in outcomes that are
inconsistent with judgements that were
reasonable at the time they were made,
the absence of reference to a material
uncertainty in this auditor’s report is not
a guarantee that the Group and parent
Company will continue in operation.
We identified going concern as a key audit
matter (see section 2 of this report). Based
on the work described in our response to
that key audit matter, we are required to
report to you if:
• We have anything material to add or
draw attention to in relation to the
director’s statements in note 1 to the
financial statements on the use of the
going concern basis of accounting with
no material uncertainties that may cast
significant doubt over the Group and
parent Company’s use of that basis for
a period of at least twelve months from
the date of approval of the financial
statements; or
• The related statement under the Listing
Rules set out on page 69 is materially
inconsistent with our audit knowledge.
We have nothing to report in these respects.
174
• the directors’ confirmation within the
viability statement page 69 that they
have carried out a robust assessment of
the emerging and principal risks facing
the Group, including those that would
threaten its business model, future
performance, solvency and liquidity;
• the Principal Risks disclosures describing
these risks and explaining how they are
being managed and mitigated; and
• the directors’ explanation in the viability
statement of how they have assessed
the prospects of the Group, over what
period they have done so and why they
considered that period to be appropriate,
and their statement as to whether they
have a reasonable expectation that the
Group will be able to continue in operation
and meet its liabilities as they fall due
over the period of their assessment,
including any related disclosures drawing
attention to any necessary qualifications
or assumptions.
Under the Listing Rules we are required
to review the viability statement. We have
nothing to report in this respect.
Our work is limited to assessing these
matters in the context of only the
knowledge acquired during our financial
statements audit. As we cannot predict
all future events or conditions and as
subsequent events may result in outcomes
that are inconsistent with judgements that
were reasonable at the time they were
made, the absence of anything to report
on these statements is not a guarantee as
to the Group’s and the parent Company’s
longer-term viability.
for shareholders to assess the Group’s
position and performance, business model
and strategy; or
• the section of the annual report describing
the work of the Audit Committee does
not appropriately address matters
communicated by us to the Audit
Committee.
We are required to report to you if the
Corporate Governance Statement does
not properly disclose a departure from the
provisions of the UK Corporate Governance
Code specified by the Listing Rules for our
review.
We have nothing to report in these respects.
6. WE HAVE NOTHING TO REPORT ON
THE OTHER MATTERS ON WHICH WE ARE
REQUIRED TO REPORT BY EXCEPTION
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
• 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.
We have nothing to report in these respects.
Corporate governance disclosures
We are required to report to you if:
• we have identified material inconsistencies
between the knowledge we acquired
during our financial statements 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 the information necessary
7. RESPECTIVE RESPONSIBILITIES
Directors’ responsibilities
As explained more fully in their statement
set out on pages 162 to 163, the directors
are responsible for: the preparation of
the financial statements including being
satisfied that they give a true and fair view;
such internal control as they determine
is necessary to enable the preparation of
financial statements that are free from
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF JD SPORTS FASHION PLC
177
177
material misstatement, whether due to
fraud or error; assessing the Group and
parent Company’s ability to continue as a
going concern, disclosing, as applicable,
matters related to going concern; and using
the going concern basis of accounting
unless they either intend to liquidate the
Group or the parent Company or to cease
operations, or have no realistic alternative
but to do so.
Auditor’s responsibilities
Our objectives are to obtain reasonable
assurance about whether the financial
statements as a whole are free from
material misstatement, whether due to fraud
or other irregularities (see below), or error,
and to issue our opinion in an auditor’s
report. Reasonable assurance is a high level
of assurance, but does not guarantee that
an audit conducted in accordance with
ISAs (UK) will always detect a material
misstatement when it exists. Misstatements
can arise from fraud, other irregularities
or error and are considered material if,
individually or in aggregate, they could
reasonably be expected to influence the
economic decisions of users taken on the
basis of the financial statements.
A fuller description of our responsibilities is
provided on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities.
Irregularities – ability to detect
We identified areas of laws and regulations
that could reasonably be expected to have
a material effect on the financial statements
from our general commercial and sector
experience and through discussion with
the directors and other management (as
required by auditing standards), and from
inspection of the Group’s regulatory and
legal correspondence and discussed with
the directors and other management
the policies and procedures regarding
compliance with laws and regulations.
We communicated identified laws and
regulations throughout our team and
remained alert to any indications of non-
compliance throughout the audit. This
included communication from the Group to
component audit teams of relevant laws and
regulations identified at Group level.
The potential effect of these laws and
regulations on the financial statements
varies considerably.
Firstly, the Group is subject to laws and
regulations that directly affect the financial
statements including financial reporting
legislation (including related companies
legislation), distributable profits legislation
and taxation legislation and we assessed
the extent of compliance with these laws
and regulations as part of our procedures
on the related financial statement items.
Secondly, the Group is subject to many
other laws and regulations where the
consequences of non-compliance could
have a material effect on amounts or
disclosures in the financial statements, for
instance through the imposition of fines or
litigation or the loss of the Group’s licence
to operate. We identified the following
areas as those most likely to have such
an effect: health and safety, anti-bribery,
employment law, regulatory capital and
liquidity and certain aspects of company
legislation recognising the regulated nature
of the Group’s activities. Auditing standards
limit the required audit procedures to
identify non-compliance with these laws
and regulations to enquiry of the directors
and other management and inspection
of regulatory and legal correspondence,
if any. Through these procedures, we
became aware of actual or suspected
non-compliance and considered the effect
as part of our procedures on the related
financial statement items. The identified
actual or suspected non-compliance was
not sufficiently significant to our audit to
result in our response being identified as a
key audit matter.
Owing to the inherent limitations of an
audit, there is an unavoidable risk that
we may not have detected some material
misstatements in the financial statements,
even though we have properly planned and
performed our audit in accordance with
auditing standards. For example, the further
removed non-compliance with laws and
176
regulations (irregularities) is from the events
and transactions reflected in the financial
statements, the less likely the inherently
limited procedures required by auditing
standards would identify it. In addition, as
with any audit, there remained a higher risk
of non-detection of irregularities, as these
may involve collusion, forgery, intentional
omissions, misrepresentations, or the
override of internal controls. We are not
responsible for preventing non-compliance
and cannot be expected to detect non-
compliance with all laws and regulations.
8. THE PURPOSE OF OUR AUDIT
WORK AND TO WHOM WE OWE OUR
RESPONSIBILITIES
This report is made solely to the Company’s
members, as a body, in accordance with
Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken
so that we might state to the Company’s
members those matters we are required
to state to them in an auditor’s report and
for no other purpose. To the fullest extent
permitted by law, we do not accept or
assume responsibility to anyone other than
the Company and the Company’s members,
as a body, for our audit work, for this report,
or for the opinions we have formed.
STUART BURDASS
(Senior Statutory Auditor)for and on behalf
of KPMG LLP, Statutory Auditor
Chartered Accountants
1 St. Peter’s Square, Manchester, M2 3AE
7th July 2020
For the 52 weeks ended 1 February 2020
As at 1 February 2020
52 weeks to
1 February 2020
52 weeks to
1 February 2020
52 weeks to
52 weeks to
2 February 2019 2 February 2019
Note
£m
£m
£m
£m
As at
1 February 2020
As at
2 February 2019
Note
£m
£m
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
179
Revenue
Cost of sales
Gross profit
Selling and distribution expenses
Administrative expenses – normal
Administrative expenses – exceptional 4
Administrative expenses
Other operating income
Operating profit before financing
Before exceptional items
Exceptional items
Financial income
Financial expenses
Profit before tax
Income tax expense
Profit for the period
4
7
8
3
9
Attributable to equity holders of the parent
Attributable to non-controlling interest 25
Basic earnings per ordinary share
Diluted earnings per ordinary share
10
10
6,110.8
(3,236.0)
2,874.8
(2,020.2)
(348.6)
(90.3)
(253.6)
(15.3)
(438.9)
10.9
426.6
516.9
(90.3)
1.7
(79.8)
348.5
(97.8)
250.7
246.1
4.6
25.29p
25.29p
4,717.8
(2,474.5)
2,243.3
(1,632.9)
(268.9)
4.7
346.2
361.5
(15.3)
1.2
(7.5)
339.9
(75.7)
264.2
261.8
2.4
26.90p
26.90p
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the 52 weeks ended 1 February 2020
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
52 weeks to
1 February 2020 2 February 2019
£m
250.7
£m
264.2
(21.5)
(21.5)
229.2
227.2
2.0
(0.8)
(0.8)
263.4
260.0
3.4
178
Assets
Intangible assets
Property, plant and equipment
Other assets
Investment in associate
Total non-current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
Liabilities
Interest-bearing loans and borrowings
Lease Liabilities
Trade and other payables
Provisions
Income tax liabilities
Total current liabilities
Interest-bearing loans and borrowings
Lease Liabilities
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
12
13
15
16
17
18
19
14
21
22
19
14
21
22
23
24
413.7
2,420.1
47.9
2.6
2,884.3
811.8
183.9
465.9
1,461.6
4,345.9
(20.4)
(285.0) –
(900.7)
–
(34.3)
(1,240.4)
(15.6)
(1,707.7) –
(80.5)
–
(12.5)
(1,816.3)
(3,056.7)
1,289.2
2.4
11.7
1,245.7
(40.6)
394.3
539.8
79.1
0.1
1,013.3
763.8
177.2
251.2
1,192.2
2,205.5
(63.8)
(808.1)
(1.3)
(27.3)
(900.5)
(62.2)
(153.8)
(1.2)
(11.0)
(228.2)
(1,128.7)
1,076.8
2.4
11.7
1,016.3
(21.6)
Total equity attributable to equity holders of the parent
Non-controlling interest
Total equity
These financial statements were approved by the Board of Directors on 7 July 2020 and were
signed on its behalf by:
1,219.2
70.0
1,289.2
1,008.8
68.0
1,076.8
25
N Greenhalgh
Director
Registered number: 1888425
CONSOLIDATED INCOME STATEMENT
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
CONSOLIDATED STATEMENT OF CASH FLOWS
For the 52 weeks ended 1 February 2020
For the 52 weeks ended 1 February 2020
Balance at 3 February 2018
Profit for the period
Other comprehensive income:
Ordinary
share
capital
£m
2.4
–
Exchange differences on translation
of foreign operations
Total other comprehensive income
–
–
–
–
Total comprehensive income
for the period
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
Share capital issued
–
–
Non-
Share Retained Other translation holders of the controlling
interest
earnings
reserve
parent
equity
premium
Total
equity
Foreign
currency
Total equity
attributable
to equity
£m
£m
£m
£m
£m
£m
£m
11.7
773.6 (33.8)
16.5
770.4
63.9 834.3
–
261.8
–
–
261.8
2.4 264.2
–
–
–
–
–
–
–
–
–
–
–
261.8
(15.9)
–
–
–
–
–
(4.1)
0.9
(2.5)
–
–
–
–
–
–
(1.8)
(1.8)
(1.8)
(1.8)
1.0
(0.8)
1.0
(0.8)
(1.8)
–
260.0
(15.9)
3.4 263.4
(0.7) (16.6)
–
–
–
–
–
(2.5)
(4.1)
0.9
–
(2.5)
(5.2) (9.3)
0.4
1.3
–
–
(0.2) (0.2)
6.4
6.4
Balance at 2 February 2019
2.4
11.7 1,016.3 (36.3)
14.7
1,008.8
68.0 1,076.8
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
Put options held by
non-controlling interests
Non-controlling interest arising
on acquisition
–
–
–
–
–
–
–
–
246.1
–
–
246.1
4.6 250.7
–
–
–
–
–
–
–
–
246.1
(16.7)
–
–
–
–
(18.9)
(18.9)
(2.6) (21.5)
(18.9)
(18.9)
(2.6) (21.5)
(18.9)
–
227.2
(16.7)
2.0 229.2
(1.3) (18.0)
–
–
(0.1)
–
–
–
(0.1)
–
(0.1)
–
1.3
1.3
Balance at 1 February 2020
2.4
11.7 1,245.7 (36.4)
(4.2)
1,219.2
70.0 1,289.2
180
Cash flows from operating activities
Profit for the period
Income tax expense
Financial expenses
Financial income
Depreciation and amortisation of non-current assets
Forex losses on monetary assets and liabilities
Impairment of other intangibles and non-current assets
Loss on disposal of non-current assets
Other exceptional items
Impairment of goodwill and fascia names
Increase in inventories
Increase in trade and other receivables
Increase in trade and other payables
Interest paid
Lease interest
Income taxes paid
Net cash from operating activities
Cash flows from investing activities
Interest received
Proceeds from sale of non-current assets
Investment in 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
Note
9
8
7
3
12
13
15
Cash flows from financing activities
(Repayment) / draw down of interest-bearing loans and borrowings
Repayment of lease liabilities
Repayment of finance lease liabilities
Draw down of finance lease liabilities
Subsidiary shares issued in the period
Equity dividends paid
Dividends paid to non-controlling interest in subsidiaries
26
Net cash (used) / from in financing activities
Net increase / (decrease) in cash and cash equivalents
29
Cash and cash equivalents at the beginning of the period 29
29
Foreign exchange gains on cash and cash equivalents
Cash and cash equivalents at the end of the period
29
181
181
52 weeks to
1 February
2020
£m
52 weeks to
2 February
2019
£m
250.7
97.8
79.8
(1.7)
450.0
9.9
12.9
6.3
47.2
43.1
(9.5)
(13.0)
58.1
(7.9)
(71.9)
(97.8)
854.0
1.7
3.1
(23.2)
(147.2)
(6.8)
(89.3)
(261.7)
(88.6)
(264.8) –
–
–
–
(16.7)
(1.3)
(371.4)
220.9
237.7
1.7
460.3
264.2
75.7
7.5
(1.2)
115.0
2.5
11.9
2.0
7.2
8.1
(26.2)
(22.5)
21.2
(7.5)
–
(80.3)
377.6
1.2
1.0
(12.3)
(173.6)
(5.1)
(362.0)
(550.8)
82.1
(1.5)
5.8
6.4
(15.9)
(0.7)
76.2
(97.0)
334.6
0.1
237.7
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
183
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 1 February
2020 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 7 July
2020.
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 1 February 2020.
The financial statements are presented in
pounds sterling, rounded to the nearest tenth
of a million.
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 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 32
to 39 and pages 65 to 68 respectively. In
addition, details of financial instruments and
exposures to interest rate, foreign currency,
credit and liquidity risks are outlined in
Note 20.
182
At 1 February 2020, the Group had net
cash balances of £429.9 million (2019:
£125.2 million) with available committed UK
borrowing facilities of £700 million (2019:
£400 million) of which £nil million (2019: £30
million) has been drawn down (see Note 19)
and US facilities of $300million of which $nil
was drawn down. These facilities are subject
to certain covenants (see note 19). With a
UK facility of £700 million available up to 6
November 2024 and a US facility of $300m
available up until 18 June 2023, the Directors
believe that the Group is well placed to
manage its business risks successfully despite
the current uncertain economic outlook.
Despite the Group’s strong position at the
end of the financial year, it is now clear that
the effects of Covid-19 will result in a material
reduction in our expectations for revenue and
profit for the next financial period ending 30
January 2021. To date we have seen a decline
in physical store revenue as stores have had to
close which has been only partially countered
by a strong online revenue performance
as our customers have moved even more
online. Only a relatively short period of time
has elapsed since the re-opening of stores
in our core markets, we are encouraged by
the initial results but believe it is inevitable
that there will be some level of permanent
transfer from physical retail to online as a
consequence of Covid-19.
To date we have taken a number of actions to
strongly control cash and as at 22 June 2020
the Group had net cash balances of £570
million which is stated net of a drawdown of
£190 million from the available committed
facilities in the UK of £700 million. The $300
million ABL facility in the United States
remains undrawn.
Based on our experience of trading to date,
the Group has reforecast and modelled a base
case and a number of severe but plausible
scenarios taking account of the length of
any potential additional localised lockdowns,
transition from physical sales to online, the
resulting impact on margin and management’s
controllable mitigating actions on costs.
1. Basis of Preparation (continued)
These reforecasts cover the period to
31 July 2021 and on the base case and
sensitised basis show that the Group will
be able to operate within the levels of its
agreed facilities and covenant requirements
to 31 July 2021 being a period of at least 12
months from the date of approval of the
financial statements.
Whilst the Directors consider that there
is a degree of subjectivity involved in the
assumptions that have modelled on the
basis of the above, the Directors have a
reasonable expectation that the Group
has adequate resources to continue in
operational existence to 31 July 2021 being
a period of at least 12 months from the date
of approval of these Financial Statements.
Accordingly, they continue to adopt the
going concern basis of accounting in
preparing the Annual Report and Financial
Statements.
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.
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. The Directors believe
that these alternative performance
measures assist in providing additional
useful information on the underlying
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
185
1. Basis of Preparation (continued)
performance of the Group. Alternative
performance measures are also used to
enhance the comparability of information
between reporting periods, by adjusting for
exceptional items, which could distort the
understanding of the performance for the
year.
Further information can be found in the
Glossary on page 275.
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 by the
Group in the period, only IFRS16 has had
a significant impact on its consolidated
results and financial position:
• Annual Improvements to IFRSs 2015–2017
Cycle
• IFRIC 23 ‘Uncertainty over Income Tax
Treatments’
• Amendments to IFRS 9 ‘Financial
Instruments’
• Amendments to IAS 28 ‘Long-term
Interests In Associates and Joint Ventures’
• Amendments to IAS 19 ‘Employee
Benefits’
• IFRS 16 ‘Leases’
IFRS 16 ‘Leases’
The Group has adopted IFRS 16 Leases
from 3 February 2019.
IFRS 16 introduced a single, on-balance
sheet accounting model for lessees.
As a result, the Group, as a lessee, has
recognised right-of-use assets representing
its rights to use the underlying assets and
lease liabilities representing its obligation
to make lease payments. Lessor accounting
remains similar to previous accounting
policies.
The Group has applied IFRS 16 using the
modified retrospective approach, under
184
which any cumulative effect of initial
application is recognised in retained
earnings at 3 February 2019. Accordingly
the comparative information presented
for the period to 3 February 2018 has not
been restated. Therefore it is presented
as previously reported under IAS 17
and related interpretations. The details
of changes in accounting policies are
disclosed below.
I. Definition of a lease
The Group now assesses whether a
contract is or contains a lease based on
the new definition of a lease. Under IFRS
16, a contract is, or contains, a lease if the
contract conveys a right to control the use
of an identified asset for a period of time in
exchange for consideration.
On transition to IFRS 16, the Group
elected to apply the practical expedient
to grandfather the assessment of which
transactions are leases. It applied IFRS
16 only to contracts that were previously
identified as leases. Contracts that were
not identified as leases under IAS 17 were
not reassessed. Therefore, the definition of
a lease under IFRS 16 has been applied only
to contracts entered into or changed on or
after 3 February 2019.
II. As a lessee
The Group leases assets which consist of
properties, vehicles and equipment.
As a lessee, the Group previously classified
leases as operating or finance leases based
on its assessment of whether the lease
transferred substantially all the risks and
rewards of ownership. Under IFRS 16, the
Group recognises right-of-use assets and
lease liabilities for most leases.
However, the Group has elected not to
recognise right-of-use assets and lease
liabilities for some leases of low-value
assets (e.g. IT equipment). The Group
recognises the lease payments associated
with these leases as an expense on a
straight-line basis over the lease term.
For any finance leases, the carrying
amount of the right-of-use asset and the
lease liability at 3 February 2019 were
determined at the carrying amount of the
lease asset and lease liability under IAS 17
immediately before that date.
III. As a lessor
The Group sub-leases a small number of
properties. Under IAS 17, the head lease
and sub-lease contracts were classified as
operating leases. The Group has classified
these leases as operating leases.
The accounting policies applicable to the
Group as a lessor are not different from
those under IAS 17. However, when the
Group is an intermediate lessor the sub-
leases are classified with reference to the
right-of-use asset arising from the head
lease, not with reference to the underlying
asset.
IV. Impacts on transition
On transition to IFRS 16, the Group
recognised a right-of-use asset, including
investment property, and lease liabilities,
recognising any difference in retained
earnings. The impact on transition is
summarised below (not including the
adjustment for deferred income, initial
direct costs or onerous leases).
1. Basis of Preparation (continued)
The Group presents right-of-use assets that
do not meet the definition of investment
property in ‘property, plant and equipment’,
the same line item as it presents underlying
assets of the same nature that it owns.
Prior to 3 February 2019, the Group
classified property leases as operating
leases under IAS 17. These include retail,
warehouse and office facilities. These
leases typically run for a period of 10 years.
Some leases include an option to renew
the lease for an additional number of
years after the end of the non€ cancellable
period. Some leases provide for additional
rent payments that are based on changes
in local price indices.
At transition, for leases classified as
operating leases under IAS 17, lease
liabilities were measured at the present
value of the remaining lease payments,
discounted at the Group’s incremental
borrowing rate as at 3 February 2019.
Right-of-use assets are measured at an
amount equal to the lease liability, adjusted
by the amount of any prepaid or accrued
lease payments.
The Group used the following practical
expedients when applying IFRS 16 to leases
previously classified as operating leases
under IAS 17.
• Applied the exemption not to recognise
right-of-use assets and liabilities for
leases with less than 12 months of lease
term
• Applied a single discount rate to a
portfolio of leases with reasonably similar
characteristics
• Reliance on previous assessments on
whether leases are onerous
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
187
1. Basis of Preparation (continued)
1. Basis of Preparation (continued)
Right-of-use asset presented in property, plant and equipment
Lease liabilities
Retained earnings
3 February
2019
£m
2,007.8
2,007.8
–
When measuring lease liabilities for leases that were classified as operating leases, the
Group discounted lease payments using the incremental borrowing rate at 3 February
2019. The weighted average rate applied at transition was 2.9%. As at 1 February 2020, the
weighted average discount rate applied to the lease portfolio of the Group is 3.5%.
A reconciliation of the Group’s operating lease commitment at 2 February 2019 to the lease
liability recognised at transition to IFRS16 is shown below.
Operating lease commitment at 2nd February 2019 as disclosed in the
Group’s consolidated financial statements
Discounted using the incremental borrowing rate at 3rd February 2019
Recognition exemption for leases of low‐value assets and for leases with less
than 12 months of lease term at transition
Extension options reasonably certain to be exercised
Working capital movements
Effects of changes in exchange rates for foreign subsidiaries
Intercompany leases
Adjustment for expired leases
Lease liabilities recognised at 3 February 2019
Adjustment for deferred income, initial direct costs or onerous leases
Opening Right of Use asset at 3 February 2019
3 February
2019
£m
1,619.0
(424.4)
(19.8)
781.0
(0.6)
(32.5)
(13.2)
98.3
2,007.8
(112.7)
1,895.1
V. Impacts for the period
As a result of initially applying IFRS 16, in
relation to the leases that were previously
classified as operating leases, the Group
recognised £1.8 billion of right-of-use
assets and £2.0 billion of lease liabilities as
at 3 February 2019.
Also in relation to those leases under IFRS
16, the Group has recognised depreciation
and interest costs, instead of operating
lease expense. During the 52 weeks ended
1 February 2020, the Group recognised
£303.3 million of depreciation and £71.9
million of interest from these leases.
The indicative impact of the adoption of
IFRS 16 disclosed in the pre-transition
financial statements was a right-of-use
asset of approximately £1.8 billion, with
corresponding lease liability of £1.9 billion
(after adjustments for deferred income,
186
initial direct costs or onerous leases). As a
result of the finalisation of the accounting
judgement relating to the estimated lease
term on expired leases, an additional £0.1
billion has been calculated and added
to both the right of use asset and the
corresponding lease liability.
Other
The Group continues 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.
Standard
Summary of changes
EU Endorsement status
Amendments to
References to
the Conceptual
Framework in
IFRS Standards
Amendment to
IFRS 3 Business
Combinations
Amendments to IFRS 2, IFRS 3, IFRS 6, IFRS
14, IAS 1, IAS 8, IAS 34, IAS 37, IAS 38, IFRIC
12, IFRIC 19, IFRIC 20, IFRIC 22 and SIC-32 to
update those pronouncements with regard to
the revised the Conceptual Framework
Endorsed (29
November 2019),
EU effective date 1
January 2020
Amendment to IFRS 3 to clarify the definition
of business
Not yet endorsed
Amendments to
IAS 1 and IAS 8
Amendment to IAS 1 and IAS 8 to update the
definition of material
Endorsed (29
November 2019),
EU effective date 1
January 2020
Amendments to
IFRS 7, IFRS 9 and
IAS 39
Amendments to IFRS 7, IFRS 9 and IAS 39
addressing issues affecting financial reporting
in the period leading up to IBOR reform
Endorsed (15 January
2020), EU effective
date 1 January 2020
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 estimates disclosed below are those
which have a significant risk of causing
a material adjustment to the carrying
amount of assets and liabilities. All other
accounting estimates and judgements are
disclosed within the relevant accounting
policy in the notes to the financial
statements.
CHANGES TO CRITICAL ACCOUNTING
ESTIMATES
Footasylum acquisition
The transaction to acquire Footasylum
Plc was reviewed by the Competition
and Markets Authority (‘CMA’) who
announced in its Final Report on 6th
May 2020 that they were prohibiting
the merger and that, consequently, they
required the Group to fully divest its
investment. The Group are currently in
negotiations with the CMA as to how the
disposal process will be conducted and
monitored and have also made a claim for
Judicial Review to the Competition Appeal
Tribunal. Consequently, at the date of this
announcement, the exact nature and timing
of the disposal process is unknown and the
Group may not recover the carrying value
as part of this disposal.
Iberian Sports Retail Group Put Option
The Group holds Put Options over part
of the remaining Minority Interest in
Iberian Sport Retail Group, these options
are required to be fair valued at each
accounting period date. A valuation has
been performed by management using
an EBITDA multiple, a suitable discount
rate and approved forecasts. The valuation
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
189
1. Basis of Preparation (continued)
is considerably higher than the previous
year which is primarily due to substantially
better trading performance.
Valuation of rolling leases
In initially applying IFRS16 Leases, the
Group has applied judgement to determine
the lease term for certain lease contracts
in which the Group is a lessee that either
have no specified end date, or where the
Group continues to occupy the property
despite the contractual lease end date
having passed. In determining the lease
term, the Group takes into consideration
its commercial strategy on a store by
store basis and the future intentions of the
Group regarding the duration of continuing
occupation of the property. For lease
contracts falling into these parameters,
the associated lease liability is calculated
at the present value of the minimum lease
payments over the estimated lease term,
discounted at the group’s incremental cost
of borrowing. A corresponding right of use
asset is also recognised.
CRITICAL ACCOUNTING ESTIMATES
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 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
188
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.
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.
The use of this method requires the
estimation of future cash flows expected to
arise from the continuing operation of the
asset until the licence expiry date and the
choice of a suitable discount rate in order
to calculate the present value. Impairment
losses are recognised in the Consolidated
Income Statement. Note 12 provides
further disclosure on impairment of
other intangible assets with definite lives,
including review of the key assumptions
used.
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.
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 price discounts and
sales related taxes.
Gym Membership Revenue
Revenue from the sale of fitness club
memberships is recognised in the period
the membership relates to. JD Gyms
offers gym membership with no contract
therefore income related to joining fees are
recognised immediately on the basis that
the related service has been performed. For
new club openings, memberships are sold
and joining fees are collected in the period
before the new club is opened. Membership
income received in advance of the club
opening is deferred until the club is open
and then recognised on an accruals basis
over the related membership period.
Discount Card Revenue
Income from the sale of annual discount
cards is accounted for on a systematic
basis over the 12 month life of the card
which best matches the profile of the
spend on these cards.
Gift Cards
The initial sale of a gift card is treated as
an exchange of tender with the revenue
recognised when the cards are redeemed
by the customer. Revenue from gift card
breakage is recognised when the likelihood
of the customer utilising the gift card
becomes remote.
1. Basis of Preparation (continued)
Goods Sold Through Retail Stores and
Trading Websites
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.
• For online sales and click and collect
orders, where the customer pays online
but collects in store, title is deemed
to have passed when the goods are
dispatched from the warehouse.
• For reserve and collect, where the
customer reserves online but pays at the
point of collection from the store, the
title is deemed to have passed when the
goods are collected by the customer.
Wholesale Revenue
Wholesale revenue is recognised when
goods are dispatched and the title and
control over a product 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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
191
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 focussed
on the nature of the businesses within
the Group. The Group’s operating and
reportable segments under IFRS 8 are
therefore Sports Fashion and Outdoor.
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. A deferred tax liability of £12.5
million (2019: £11.0 million) and an income
tax liability of £34.3 million (2019: £27.3
million) are included within the unallocated
segment. During the year, there has been a
draw down on the syndicated bank facility
of £nil (2019: £30.0 million). This has been
treated as unallocated.
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.
190
2. Segmental Analysis (continued)
BUSINESS SEGMENTS
Information regarding the Group’s reportable operating segments for the 52 weeks to 1
February 2020 is shown below:
Income statement
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
Sports Fashion
Outdoor
Unallocated
£m
5,696.8
£m
414.0
£m
Total
£m
6,110.8
533.2
(40.6)
492.6
(16.3)
(49.7)
(66.0)
(64.7)
(7.2)
427.9
(73.2)
1.7
(7.9)
(6.2)
Sports Fashion
Outdoor
Unallocated
Eliminations
516.9
(90.3)
426.6
1.7
(79.8)
348.5
(97.8)
250.7
Total
£m
Total assets and liabilities
Total assets
Total liabilities
£m
£m
4,047.7
(2,723.5)
411.7
(393.9)
Total segment net assets / (liabilities)
1,324.2
17.8
£m
–
(52.8)
(52.8)
£m
(113.5) 4,345.9
(3,056.7)
113.5
–
1,289.2
Sports Fashion
Outdoor
Other segment information
Capital expenditure:
Software development
Property, plant and equipment
Right of use
Non-current other assets
Depreciation, amortisation and impairments:
Depreciation and amortisation of non-current assets
Depreciation and amortisation of right of use assets
Impairment of intangible assets (exceptional items)
Impairment of non-current assets (non exceptional items)
Impairment of right of use assets
£m
23.2
138.4
408.5
6.8
132.3
274.9
0.6
5.0
7.0
£m
–
8.8
9.6
–
14.4
28.4
42.5
–
0.8
Total
£m
23.2
147.2
418.1
6.8
146.7
303.3
43.1
5.0
7.8
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
193
2. Segmental Analysis (continued)
2. Segmental Analysis (continued)
Total
£m
4,717.8
361.5
(15.3)
346.2
1.2
(7.5)
339.9
(75.7)
264.2
Total
£m
Total
£m
12.3
173.6
5.1
115.0
8.1
11.9
The comparative segmental results for the 52 weeks to 2 February 2019 are as follows:
Income statement
Revenue
Operating profit before exceptional items
Exceptional items
Sports Fashion
Outdoor
Unallocated
£m
4,296.4
365.8
(13.7)
352.1
£m
421.4
(4.3)
(1.6)
(5.9)
352.2
(5.8)
£m
1.2
(7.5)
(6.3)
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)
1,060.7
84.4
Sports Fashion
Outdoor
Unallocated
Eliminations
£m
£m
2,039.2
(978.5)
255.9
(171.5)
£m
–
(68.3)
(68.3)
£m
(89.6)
89.6
2,205.5
(1,128.7)
–
1,076.8
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 (exceptional Items)
Impairment of non-current assets (non exceptional Items)
Sports Fashion
Outdoor
£m
£m
12.3
159.7
5.1
101.4
8.1
11.2
–
13.9
–
13.6
–
0.7
GEOGRAPHICAL INFORMATION
The Group’s operations are located in the UK, Australia, Austria, Belgium, Canada, Denmark,
Dubai, Finland, France, Germany, Hong Kong, India, Italy, Malaysia, the Netherlands, New
Zealand, Portugal, Republic of Ireland, Singapore, South Korea, Spain and the Canary
Islands, Sweden, Thailand and the United States of America.
The following table provides analysis of the Group’s revenue by geographical market,
irrespective of the origin of the goods / services:
Revenue
UK
Europe
US
Rest of world
52 weeks to
1 February 2020
52 weeks to
2 February 2019
£m
2,599.2
1,619.2
1,611.0
281.4
6,110.8
£m
2,137.9
1,368.6
967.3
244.0
4,717.8
The revenue from any individual country, with the exception of the UK & US, is not more
than 10% of the Group’s total revenue.
192
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
US
Rest of world
3. Profit Before Tax
2020
£m
1,296.2
979.2
497.4
111.5
2,884.3
2019
£m
391.6
323.3
258.2
40.2
1,013.3
52 weeks to
1 February 2020
52 weeks to
2 February 2019
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
Interim review
Reporting accountant work
Depreciation and amortisation of non-current assets:
Depreciation of property, plant and equipment
Amortisation of intangible assets
Amortisation of non-current other assets
Impairments of non-current assets:
Property, plant and equipment
Goodwill & fascia names
Other intangibles 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
Profit before tax is stated after crediting:
Rents receivable and other income from property
Sundry income
Reverse premia
Movement in the fair value of forward contracts
Foreign exchange gain recognised
£m
0.2
1.5
0.1
–
409.2
40.8
–
12.2
43.1
0.7
–
6.3
351.3
36.2
5.3
–
–
2.2
1.7
2.1
£m
0.2
1.5
0.1
0.2
92.8
21.0
1.2
10.5
8.1
0.8
0.6
2.0
286.2
36.2
4.8
0.9
3.8
2.2
33.9
13.9
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
195
3. Profit Before Tax (continued)
In addition, fees of £0.1 million (2019:
£0.1 million) were incurred and paid by
Pentland Group Limited 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 15).
The contingent rents shown on the
previous page relate to turnover rents
which are impacted by changes in sales at
certain stores where the lease includes an
element of turnover rent.
4. Exceptional Items
Items that are, in aggregate, material in
size and / or in nature, are included within
operating profit and disclosed separately
as exceptional items in the Consolidated
Income Statement. Exceptional items
are disclosed separately as they are not
considered reflective of the year on year
trading performance of the Group.
The separate reporting of exceptional
items, which are presented as exceptional
within the relevant category in the
Consolidated Income Statement, helps
provide an indication of the Group’s
underlying business performance. The
principal items which may be included as
exceptional items are:
• 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
• Profit / (loss) on the disposal of non-
liabilities
current assets
• Impairment of right of use assets
• Impairment of property, plant and
equipment
Impairment of goodwill and fascia names1
Movement in fair value of put and call options2
Integration and consolidation of the outdoor systems
and warehousing3
Integration of Sport Zone into Sprinter infrastructure4
Administrative expenses – exceptional
Note
12
21
52 weeks to
1 February 2020
52 weeks to
2 February 2019
£m
43.1
31.4
7.2
8.6 –
90.3
£m
8.1
5.6
1.6
15.3
(1) The impairment in the current period relates to the impairment of the goodwill arising in prior years on the acquisition of Go Outdoors Topco
Limited and Choice Limited.
(2) Movements in the fair value of the liabilities in respect of the put and call options (see note 21).
(3) Costs arising from the integration and consolidation of the principal IT systems, warehousing and other infrastructure in Go Outdoors Limited.
(4) Costs associated with transferring the stocks and other operations of Sport Zone into the Sprinter infrastructure.
Items (1) and (2) are exceptional items as they are not considered to be reflective of the underlying trading performance of the Group. Item (3)
and (4) are presented as an exceptional item as these costs relate to one off projects.
194
5. Remuneration of Directors
The remuneration of the Executive Directors includes provision for future LTIP payments of
£223,000 (2019; £70,000). Further information on Directors’ emoluments is shown in the
Directors’ Remuneration Report on pages 132 to 159.
In the opinion of the Board, the key management as defined under revised IAS 24
‘Related Party Disclosures’ are the seven Executive and Non-Executive Directors (2019:
six). During the year there was one (2019: one) director within the defined contribution
pension scheme. Full disclosure of the Directors’ remuneration is given in the Directors’
Remuneration Report on page 149.
Directors’ emoluments:
As Non-Executive Directors
As Executive Directors
Pension contributions
Compensation for loss of office
52 weeks to
1 February 2020
52 weeks to
2 February 2019
£m
0.2
6.4
–
–
6.6
£m
0.2
3.0
–
0.8
4.0
6. Staff Numbers and Costs
The average number of persons employed by the Group (including Directors) during the
period, analysed by category, was as follows:
GROUP
Sales and distribution
Administration
Full time equivalents – continuing operations
The aggregate payroll costs of these persons were as follows:
GROUP
Wages and salaries
Social security costs
Pension costs
Other employed staff costs
2020
2019
51,475
2,002
53,477
34,885
46,905
1,947
48,852
32,265
52 weeks to
1 February 2020
52 weeks to
2 February 2019
£m
759.4
87.0
13.1
14.3
873.8
£m
609.8
68.6
11.8
7.6
697.8
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
197
7. Financial Income
9. Income Tax Expense (continued)
Financial income comprises interest receivable on funds invested. Financial income is
recognised in the Consolidated Income Statement on an effective interest method.
Bank interest
8. Financial Expenses
52 weeks to
1 February 2020
52 weeks to
2 February 2019
£m
1.7
£m
1.2
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.
Current tax
UK corporation tax at 19.0% (2019: 19.0%)
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
52 weeks to
1 February 2020
52 weeks to
2 February 2019
£m
£m
106.7
(2.6)
104.1
(4.7)
(1.6)
(6.3)
97.8
75.6
(0.7)
74.9
(0.2)
1.0
0.8
75.7
52 weeks to
1 February 2020
52 weeks to
2 February 2019
52 weeks to
1 February 2020
52 weeks to
2 February 2019
£m
6.6
1.0
71.9 –
0.3
79.8
£m
6.7
0.6
0.2
7.5
• 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.
On bank loans and overdrafts
Amortisation of facility fees
Lease interest
Other interest
Financial expenses
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
196
Profit before tax multiplied by the standard rate of
corporation tax 19.0% (2019: 19.0%)
Effects of:
Expenses not deductible
Depreciation and impairment of non-qualifying non-current assets
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
Other taxes due
Income tax expense
£m
66.2
12.8
10.9
(1.1)
–
6.3
(0.3)
(0.2)
(1.2)
4.3
(4.2)
4.3
97.8
£m
64.6
2.7
3.0
(3.0)
0.1
4.0
(0.6)
(0.3)
0.1
3.2
0.3
1.6
75.7
10. Earnings Per Ordinary Share
BASIC AND DILUTED EARNINGS PER ORDINARY SHARE
The calculation of basic and diluted earnings per ordinary share at 1 February 2020 is based
on the profit for the period attributable to equity holders of the parent of £246.1 million
(2019: £261.8 million) and a weighted average number of ordinary shares outstanding
during the 52 week period ended 1 February 2020 of 973,233,160 (2019: 973,233,160).
Issued ordinary shares at beginning and end of period
973,233,160
973,233,160
52 weeks to
1 February 2020
52 weeks to
2 February 2019
Number
Number
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
199
10. Earnings Per Ordinary Share (continued)
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 useful measure of the underlying performance of the Group.
52 weeks to
1 February 2020
52 weeks to
2 February 2019
Note
£m
£m
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
4
Adjusted basic and diluted earnings per ordinary share
Unadjusted basic and diluted earnings per ordinary share
246.1
261.8
90.3
(3.0)
333.4
34.26p
25.29p
15.3
(0.3)
276.8
28.44p
26.90p
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
198
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.
The valuation techniques used for
measuring the fair value of material assets
acquired are as follows:
• Assembled workforce – In accordance
with IAS 38, the assembled workforce
should not be recognised as a separate
intangible asset but is subsumed within
goodwill. The assembled workforce was
valued using the cost savings method
which estimates the costs saved by the
acquirer from purchasing the asset versus
building or developing the asset internally.
• Intangible assets (computer software)
– The cost approach was used which
reflects the amount that would be
required to currently replace the service
capacity of an asset (often referred to as
current replacement cost).
11. Acquisitions (continued)
• Intangible assets (fascia names and brand
names) – The relief from royalty method
considers the discounted estimated
royalty payments that are expected to
be avoided as a result of the intangible
assets being owned.
• Inventories – The fair value is determined
based on the estimated selling price in
the ordinary course of business less the
estimated costs of completion and sale,
and a reasonable profit margin based on
the effort required to sell the inventories.
• Leases – a right of use asset and lease
liability are recognised, measured as if
the acquired lease were a new lease at
the date of acquisition. The fair value
of the acquired leases are estimated
by comparing the annual rent to a
normalised rent level based on a market
oriented occupancy rate. The difference
is calculated over the remaining lease
term and discounted at the estimated
pre-tax discount rate, adjusting the value
of the right of use asset recognised
under IFRS16 Leases. The lease liability
recognised is measured at the present
value of the remaining lease payments,
using a discount rate determined in
accordance with IFRS 16 at the date of
acquisition.
• Owned property – The cost approach
considers the cost to replace the existing
improvements, less accrued depreciation,
plus the fair value of the land. The value
of the properties is derived by adding
the estimated value of the land to the
cost of constructing a reproduction
or replacement for the improvements
and then subtracting the amount of
depreciation.
• Property, plant and equipment – The
depreciated replacement cost new
valuation approach is utilised reflecting
adjustments for physical deterioration
as well as functional and economic
obsolescence.
CURRENT PERIOD ACQUISITIONS
Footasylum Plc (‘Footasylum’)
On 18 February 2019, JD Sports Fashion Plc
acquired 19,579,964 Footasylum Plc shares
at prices between 50 pence and 75 pence
per share, representing 18.7% of the issued
ordinary share capital.
On 18 March 2019, in conjunction with
the board of Footasylum Plc, JD Sports
Fashion Plc announced the terms of an
offer to be made for the remaining 81.3%
of the ordinary share capital of Footasylum
at a price of 82.5 pence per ordinary share.
This offer was declared unconditional in all
respects on 12 April 2019 with acceptances
received for a total of 78,176,481 shares
representing a further 74.8% of the issued
ordinary share capital. On 26 April 2019, the
first bulk transfer was made to acquire an
additional 80.5m shares (in addition to the
19.5m already owned). The formal process
to acquire the remaining Footasylum shares
(incl. the dissenting shareholders) was
completed on 4 June 2019. Footasylum
was delisted on 16 May 2019 and converted
from an unlisted Plc to a private company
on 19 September 2019.
Footasylum is a UK-based fashion retailer
founded in 2005 focusing on the footwear
and apparel market. The company operates
a multi-channel model which combines
a store estate of 69 stores in a variety of
high street, mall and retail park locations in
cities and towns throughout Great Britain,
with a strong online platform and a recently
launched wholesale arm for distributing
its own brand ranges via a network of
partners.
Included within the provisional fair value
of the net identifiable assets on acquisition
is an intangible asset of £34.3 million
representing the Footasylum fascia name
and an intangible asset of £3.0 million for
Footasylum exclusive brands. The Board
believes the excess of cash consideration
paid over the net identifiable assets
on acquisition of £27.3 million is best
considered as goodwill representing future
operating synergies.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
201
11. Acquisitions (continued)
Given that this transaction was reviewed
by the Competition and Markets Authority
(‘CMA’), the directors of the company
have had to assess whether or not the
Group had control over Footasylum.
In making their judgement, the Board
considered the Group’s ability to direct
the relevant activities of Footasylum
during the investigation period. Ultimately,
after careful consideration, the Board
concluded that the Group had control
and, accordingly, Footasylum should be
consolidated from the date of acquisition.
The CMA subsequently announced in
its Final Report on 6th May 2020 that
they were prohibiting the merger and
that, consequently, they required the
Acquiree’s net assets at acquisition date:
Intangible Assets
Property, plant and equipment
Right of use assets
Inventories
Cash
Trade and other receivables
Deferred tax liabilities
Trade and other payables – current
Trade and other payables – non current
Lease liabilities
Interest bearing loans and borrowings
Net identifiable assets
Goodwill on acquisition
Total consideration – satisfied in cash
Rascal Clothing Limited
On 5 February 2019, the Group acquired
50% of the issued share capital of Rascal
Clothing Limited (‘Rascal’) for cash
consideration of £2.5 million with additional
consideration of up to £1.0 million payable
if certain performance criteria were
achieved. Rascal is a wholesaler and online
retailer of sports inspired leisurewear.
At acquisition, management believed
that Rascal was on course to meet the
performance criteria for the maximum
contingent consideration to be payable and
therefore the fair value of the contingent
200
Group to fully divest its investment. The
Group are currently in negotiations with
the CMA as to how the disposal process
will be conducted and monitored and
have also made a claim for Judicial
Review to the Competition Appeal
Tribunal. Consequently, at the date of this
announcement, the exact nature and timing
of the disposal process is unknown and the
Group may not recover the carrying value
as part of this disposal.
Included in the 52 week period ended 1
February 2020 is revenue of £215.9 million
and a profit before tax of £1.7 million in
respect of Footasylum.
Book value
Measurement
Provisional fair
value as at 1
adjustments February 2020
£m
£m
£m
–
29.1
100.4
39.6
5.7
19.4
0.2
(42.0)
(0.2)
(107.5)
(13.5)
31.2
37.3
(3.5)
–
–
–
–
(6.3)
–
–
–
–
27.5
37.3
25.6
100.4
39.6
5.7
19.4
(6.1)
(42.0)
(0.2)
(107.5)
(13.5)
58.7
27.3
86.0
consideration at this time was £1.0 million.
The Group has the ability to direct the
relevant activities of Rascal Clothing
and there are restrictions on the existing
shareholders via a shareholder agreement.
Accordingly, the Board have concluded
that the Group has control and that Rascal
Clothing should be consolidated from the
date of acquisition.
The Board believes that the excess of
consideration paid over the net assets
on acquisition of £2.2 million is best
considered as goodwill on acquisition
representing future operating synergies.
11. Acquisitions (continued)
Included in the 52 week period ended 1
February 2020 is revenue of £4.4 million
and a profit before tax of £0.6 million in
respect of Rascal Clothing Limited.
PG2019 Limited (‘Pretty Green’)
On 4 April 2019, the Group acquired, via its
100% subsidiary PG2019 Limited, the trading
assets and trade of Pretty Green Limited (in
administration), the boutique men’s clothing
brand, from its administrator. The acquisition
included the business, brand, website and
wholesale business as well as a flagship
store in Manchester. Cash consideration of
£1.5 million was paid on completion with the
Group also assuming a further £1.8 million of
debt.
Included within the provisional fair value
of the net identifiable assets on acquisition
is an intangible asset of £1.0 million
representing the Pretty Green fascia name
and an intangible asset of £0.7 million
representing the Pretty Green brand name.
The Board believes the excess of cash
consideration paid over the net identifiable
assets on acquisition of £2.7 million is best
considered as goodwill representing future
operating synergies.
Included in the 52 week period ended 1
February 2020 is revenue of £13.5 million
and a profit before tax of £1.7 million in
respect of PG2019 Limited.
Giulio Fashion Limited
On 30 April 2019, the Group acquired
80% of the issued share capital of Giulio
Fashion Limited including two wholly
owned subsidiaries, Giulio Limited (a trading
company) and Giulio Woman Limited (a
dormant company) for cash consideration
of £3.0m. The acquisition included put
and call options over the remaining stores
exercisable after 3 years.
The Board believes the excess of cash
consideration paid over the net identifiable
assets on acquisition of £2.7 million is best
considered as goodwill representing future
operating synergies.
Included in the 52 week period ended 1
February 2020 is revenue of £5.6 million and
a profit before tax of £0.2 million in respect
of Giulio Fashion Limited.
OTHER ACQUISITIONS
During the period, the Group made several
small acquisitions, these transactions were
not material.
FULL YEAR IMPACT OF ACQUISITIONS
Had the acquisitions of the entities listed
above been effected at 3 February 2019, the
revenue and profit before tax of the Group
for the 52 week period to 1 February 2020
would have been £6.2 billion and £349.2
million respectively.
ACQUISITION COSTS
Acquisition related costs amounting to
£7.4 million (Footasylum Plc, £7.3 million,
other acquisitions £0.1 million) 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
The Finish Line, Inc.
On 18 June 2018, the Group acquired 100%
of the issued share capital of The Finish Line,
Inc. (‘Finish Line’) for cash consideration of
$558 million (£400.5 million).
Finish Line is one of the largest retailers of
premium multibranded athletic footwear,
apparel and accessories in the United States
(‘US’), the largest sportswear market in the
world. At acquisition, Finish Line traded
from 556 Finish Line branded retail stores
across 44 US states and Puerto Rico in
addition to a well-established multichannel
offering. Finish Line is also the exclusive
retailer of athletic shoes, both in-store and
online for Macy’s, one of the US’ premier
retailers, operating 375 branded and more
than 150 small unbranded concessions
within Macy’s stores at acquisition.
Included within the fair value of the
net identifiable assets on acquisition
is an intangible asset of £70.6 million,
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
203
11. Acquisitions (continued)
representing the Finish Line fascia name.
The Board believed that the excess of
consideration paid over the net assets
on acquisition of £98.5 million was best
considered as goodwill on acquisition
representing future operating synergies. The
goodwill calculation is summarised below:
Acquiree’s net assets at acquisition date:
Intangible assets
Property, plant and equipment
Inventories
Cash and cash equivalents
Trade and other receivables
Income tax liabilities
Deferred tax assets / (liabilities)
Trade and other payables – current
Trade and other payables – non-current
Net identifiable assets
Goodwill on acquisition
Total consideration – satisfied in cash
Book value
Fair value
Measurement as at 1 February
2020
adjustments
£m
£m
£m
16.9
76.5
261.6
50.9
38.6
(1.5)
7.0
(135.9)
(40.2)
273.9
70.6
4.9
(5.8)
–
–
–
(11.5)
(16.8)
(13.3)
28.1
87.5
81.4
255.8
50.9
38.6
(1.5)
(4.5)
(152.7)
(53.5)
302.0
98.5
400.5
No measurement adjustments have been
made to the fair value during the 52 week
period ended 1 February 2020 and the
period in which measurement adjustments
could be made has now closed on this
acquisition.
No measurement adjustments have been
made to the fair value during the 52 week
period ended 1 February 2020 and the
period in which measurement adjustments
could be made has now closed on this
acquisition.
OTHER ACQUISITIONS
During the prior period, the Group
made several small acquisitions. These
transactions were not material.
Choice Limited
On 13 August 2018 the Group acquired, via
its subsidiary Tessuti Limited, 100% of the
issued share capital of Choice Limited for
cash consideration of £4.0 million and 8.8%
of the issued share capital of Tessuti Limited
with a fair value of £1.3 million. Choice
Limited operates as a retailer of premium
fashion apparel and footwear with six
stores and a trading website at acquisition.
Included within the fair value of the net
identifiable assets on acquisition is an
intangible asset of £1.5 million, representing
the Choice fascia name. The Board believed
that the excess of consideration paid
over the net assets on acquisition of £3.0
million was best considered as goodwill on
acquisition representing future operating
synergies.
202
12. Intangible Assets
Cost or valuation
At 3 February 2018
Additions
Acquisitions
Reclassifications
Disposals
Exchange differences
At 2 February 2019
Additions
Acquisitions
Reclassifications
Disposals
Exchange differences
At 1 February 2020
Amortisation and impairment
At 3 February 2018
Charge for the period
Impairments
Reclassifications
Disposals
Exchange differences
At 2 February 2019
Charge for the period
Impairments
Reclassifications
Disposals
Exchange differences
At 1 February 2020
Net book value
At 1 February 2020
At 2 February 2019
At 3 February 2018
Goodwill Brand licences Brand names
Software
Fascia name development
£m
£m
£m
£m
£m
Total
£m
155.3
103.5
–
–
(1.5)
4.3
261.6
34.8
–
–
–
3.4
299.8
40.7
–
8.1
–
(1.5)
–
47.3
–
43.1
–
–
–
90.4
209.4
214.3
114.6
11.8
–
–
–
–
–
11.8
–
–
–
–
–
11.8
9.7
0.8
–
–
–
–
10.5
1.4
–
–
–
(0.8)
11.1
0.7
1.3
2.1
24.5
–
–
–
(0.5)
0.4
24.4
3.7
–
–
(2.0)
(0.2)
25.9
12.6
1.5
–
–
(0.5)
–
13.6
1.8
–
–
(2.1)
–
13.3
12.6
10.8
11.9
107.5
72.1
–
–
–
2.0
181.6
35.3
–
–
–
(2.9)
15.2 314.3
187.9
12.3
17.3
17.3
3.8
3.8
(3.0)
(1.0)
7.2
0.5
48.1 527.5
23.2 97.0
0.6
0.6
6.6
6.6
(2.4)
(0.4)
(0.3)
(0.6)
214.0
77.5 629.0
28.9
10.5
–
–
–
0.4
39.8
15.4
–
–
–
(0.2)
55.0
11.4
8.2
0.8
2.5
(0.9)
–
103.3
21.0
8.9
2.5
(2.9)
0.4
22.0
133.2
22.2 40.8
0.7 43.8
0.8
0.8
(2.3)
(0.2)
(1.0)
–
45.5 215.3
159.0
32.0 413.7
141.8
78.6
26.1 394.3
3.8
211.0
ACQUISITIONS
The acquisitions of intangibles assets in the
current year principally relate to the acquisition
of Footasylum plc, Rascal Clothing Limited,
Pretty Green Limited and Giulio Fashion Limited.
The acquisitions in the prior year principally
relate to the acquisition of Finish Line, Inc.
Further details, including the provisional fair
value of the assets acquired, are provided in
Note 11.
AMORTISATION
Included within the amortisation charge for the
period ended 1 February 2020 is accelerated
amortisation of £7.0 million (2019: £0.5 million)
following a review of the useful economic
life of certain items of software development
capitalised.
INTANGIBLES ASSETS WITH DEFINITE LIVES
DISPOSALS
The disposals of intangible assets in the current
year are the Duffy trademark in Japan.
BRAND LICENCES
Brand licences are stated at cost less
accumulated amortisation and impairment
losses. Amortisation of brand licences is
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
205
12. Intangible Assets (continued)
charged to the Consolidated Income
Statement within cost of sales over the
term to the licence expiry on a straight line
basis.
At each reporting date, the Group
reviews the carrying amounts of its
brand licences to determine whether
there is any indication of impairment.
If any such indication exists, then the
asset’s recoverable amount is estimated.
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 asset until the
licence expiry date and the choice of a
suitable discount rate in order to calculate
the present value.
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. 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.
Brand names are amortised over a period
of 10 years and the amortisation charge is
included within administrative expenses in
the Consolidated Income Statement.
At each reporting date, the Group reviews
the carrying amounts of its brand names to
determine whether there is any indication
of impairment. If any such indication exists,
then the asset’s recoverable amount is
estimated. The recoverable amount of
204
brand names is determined based on a
‘royalty relief’ method of valuation. 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. The use of this
method requires the estimation of future
cash flows expected to arise from the
continuing operation of the asset and the
choice of a suitable discount rate in order
to calculate the present value. Impairment
losses are recognised in the Consolidated
Income Statement.
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.
FASCIA NAME
Separately identifiable fascia names
acquired are stated at fair value as at
the acquisition date less accumulated
amortisation and 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
12. Intangible Assets (continued)
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 and online fascia names are
considered to have a finite useful economic
life. The useful economic life of an online
fascia name is lower than that of a store
fascia name due to increased competition
in the marketplace as a result of reduced
barriers to entry. The estimated useful
economic lives are as follows:
• Online fascia names
3 to 5 years
• Store fascia names
10 to 20 years
INTANGIBLE ASSETS WITH INDEFINITE
LIVES
Goodwill
Goodwill represents amounts arising on
acquisition of subsidiaries. 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 factors that are considered when
determining the useful life of each fascia
name are:
• the net recognised amount of the
identifiable assets acquired and liabilities
assumed.
• 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
At each reporting date, the Group reviews
the carrying amounts of its fascia names to
determine whether there is any indication
of impairment. If any such indication exists,
then the asset’s recoverable amount is
estimated. 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.
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.
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 intangible
assets in the table below have been
reviewed for indicators of impairment
and none were noted. 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 as follows:
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
207
12. Intangible Assets (continued)
12. Intangible Assets (continued)
Basic financial information
Impairment model assumptions used
Segment
Goodwill
2020
£m
Fascia
name
2020
£m
Total
intangible
2020
£m
Goodwill
2019
£m
Fascia
name
2019
£m
Total
intangible
2019
£m
Sports Fashion
9.6
–
9.6
9.7
–
9.7
Champion store
portfolio
Finish Line
Sports Fashion
94.5
57.2
151.7
98.5
66.4
164.9
First Sport store
portfolio
Mainline Menswear
Limited
Sports Fashion
15.0
–
15.0
15.0
–
15.0
Sports Fashion
7.4
0.3
7.7
7.4
0.5
7.9
Sport Zone
Sports Fashion
17.2
8.2
25.4
17.5
9.2
26.7
Sprinter store portfolio Sports Fashion
6.8
3.4
10.2
6.9
3.8
10.7
Go Outdoors
Outdoor
1.9
50.2
52.1
44.4
53.2
97.6
Footasylum
Sports Fashion
27.3
31.7
59.0
–
–
–
Other
Sports Fashion
& Outdoor
29.7
8.0
37.7
14.9
8.7
23.6
209.4
159.0
368.4
214.3
141.8
356.1
206
Short term
growth
rate (1)
%
2.0%
2.0%
1.0%
1.0%
3.0%
2.0%
2.1%
2.0%
1.0%–
3.0%
Long term
growth
rate (2)
%
Margin rate
2.0% Gross margins are assumed to be broadly
consistent with recent historic and
approved budget levels
1.0% Gross margins are assumed to be broadly
consistent with recent historic and
approved budget levels
1.0% Gross margins are assumed to be broadly
consistent with recent historic and
approved budget levels
1.0% Gross margins are assumed to improve
by 1.0% in the short term to reflect
implementation of enhanced group terms
and focused strategy regarding stock and
merchandising
2.0% Gross margins are assumed to improve
by 1% in the short term to reflect
implementation of a focused strategy
regarding stock
2.0% Gross margins are assumed to be broadly
consistent with recent historic and
approved budget levels
2.5% Gross margins are assumed to be broadly
consistent with recent historic and
approved budget levels
2.0% Gross margins are assumed to be broadly
consistent with recent historic and
approved budget levels
1.0%–
3.0%
A range of gross margin assumptions, from
broadly consistent with approved budget
levels to improvements of up to 2% in
the short term to reflect implementation
of enhanced group terms and focused
strategy regarding stock and merchandising
Pre Tax
Discount rate(3)
2020
%
Pre Tax
Discount rate(3)
2019
%
7.0%
7.6%
11.8%
–
6.7%
7.6%
8.5%
9.4%
10.6%
11.6%
10.6%
10.6%
12.9%
13.2%
8.9%
–
7.5%–
14.3%
7.5%–
14.3%
(1) The short term growth rate is the Board approved compound annual growth rate for the four year period following the January 2021 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
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
209
• Reducing the long term growth rate by
1% would lead to an impairment of £9.4
million. All other assumptions remain
unchanged.
• Increasing the pre-tax discount rate by
1% would lead to an impairment of £13.5
million. All other assumptions remain
unchanged.
• Reducing the margin rate by 1% would
lead to an impairment of £24.7 million.
All other assumptions remain unchanged.
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.
The Board has considered the possibility
of each business 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. With regards to the
assessment of value-in-use of all cash-
generating units, with the exceptions of Go
Outdoors, the Board believes 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 and the amount
of head room would cover large negative
growth rates.
The table below shows the amount of head
room for each cash generating unit, as
well as the current assumption used and
the revised assumption which would be
required to eliminate the headroom.
Company
£m
% Used
Revised %
% Used
Revised %
% Used % Revised
Headroom
Sensitivity 1
Short Term Growth Rate
Sensitivity 2
Long Term Growth Rate
Sensitivity 3
Pre Tax Discount Rate
Champion store portfolio
230.7
2.0
-43.5
Finish Line
608.1
2.0
-20.5
First Sport store portfolio
559.3
1.0
-127.0
Mainline Menswear
52.7
1.0
-49.0
Sport Zone
674.2
3.0
-20.6
Sprinter store portfolio
262.1
2.0
-24.4
Go Outdoors
Footasylum
–
37.2
2.1
2.0
N/A
-6.9
2.0 more than
-1,000.0
1.0 more than
-1,000.0
1.0 more than
-1,000.0
1.0 more than
-1,000.0
2.0 more than
-1,000.0
2.0 more than
-1,000.0
N/A
-3.23
2.5
2.0
7.0
62.7
11.8
34.1
6.7
147.2
8.5
47.7
10.6
39.6
10.6
38.3
12.9
8.9
N/A
11.2
12. Intangible Assets (continued)
For the Go Outdoors cash-generating
unit, there is no head room following the
£42.5 million impairment during the period,
therefore any change in key assumptions
will result in further impairments. A partial
impairment of £20.7 million (2019: £nil)
was recognised in the first half of the year
at which point the Group believed that the
disruption consequent to the integration
issues associated with the transition of
fulfilment to the new warehouse were
resolved. After further disruption in the
business from the closure of the principal
office in Sheffield, an additional charge of
£21.8 million (2019: £nil) was recognised in
the second half. At the Balance Sheet date
the short term issues were resolved but
took longer than anticipated, and as such
recovery has gone into the next financial
year. Although there are some encouraging
signs, we did not forecast growth to the
same levels as previous. See Note 31 for a
post Balance Sheet update in relation to
Go Outdoors.
Significant changes in key assumptions
could cause the carrying value of the unit
to exceed its recoverable amount. The
following sensitivities were performed:
• Reducing the assumed short term store
and online sales growth by 1%, assuming
the business would be unable to reduce
selling and distribution and administrative
costs, would lead to an impairment of
£33.5 million. All other assumptions
remain unchanged.
208
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
211
13. Property, Plant and Equipment
13. Property, Plant and Equipment (continued)
Freehold land, Improvements
to short
long leasehold &
freehold
properties
leasehold Assets under Fixtures and Computer
properties construction
fittings equipment vehicles
Motor Right of use
assets
£m
£m
£m
£m
£m
£m
£m
Total
£m
Cost
At 3 February 2018
Additions
Disposals
Reclassifications
Acquisitions
Exchange differences
At 2 February 2019
Recognised on adoption
of IFRS16
Additions
Disposals
Reclassifications
Acquisitions
Exchange differences
36.5
1.0
–
–
15.9
1.4
54.8
–
0.6
–
(0.2)
–
(0.7)
57.1
28.8
(1.9)
(14.5)
37.7
0.8
19.0
6.5
(0.1)
(24.1)
–
1.8
459.7
124.0
(22.9)
16.3
19.4
24.6
61.0
13.2
(2.6)
(2.9)
9.8
0.9
0.3
0.1
(0.1)
–
0.8
–
– 633.6
173.6
–
(27.6)
–
(25.2)
–
83.6
–
29.5
–
108.0
3.1
621.1
79.4
1.1
– 867.5
–
23.0
(3.9)
(5.6)
0.3
(1.4)
–
20.6
–
(14.3)
1.9
(0.1)
–
89.4
(18.3)
9.6
18.9
(9.1)
–
–
0.6
13.0
(1.8) (0.2)
(3.4) (0.4)
0.2
3.0
–
(0.7)
1,895.1
1,895.1
418.1 565.3
(36.4)
(60.6)
(92.6) (106.9)
24.3
(31.0)
–
(19.0)
At 1 February 2020
54.5
120.4
11.2
711.6
89.5
1.3
2,165.2 3,153.7
1.3
1.4
–
–
–
–
2.7
1.9
–
–
–
–
4.6
49.9
52.1
35.2
19.7
15.6
(1.2)
(9.3)
5.5
0.2
30.5
16.4
(2.0)
(2.2)
0.3
(0.2)
42.8
77.6
77.5
37.4
–
–
–
–
–
–
–
–
–
–
–
–
–
189.2
64.0
(20.1)
(6.1)
5.0
9.2
241.2
75.8
(11.4)
3.7
4.0
(1.4)
46.4
11.5
(2.4)
(3.1)
–
0.6
53.0
11.2
(1.4)
(0.2)
0.1
(0.3)
0.1
0.3
(0.1)
–
–
–
0.3
0.6
(0.1)
–
–
–
–
–
–
–
–
–
256.7
92.8
(23.8)
(18.5)
10.5
10.0
–
327.7
303.3 409.2
(14.9)
1.3
12.2
(1.9)
–
–
7.8
–
311.9
62.4
0.8
311.1
733.6
11.2
399.7
27.1
0.5
1,854.1 2,420.1
3.1
379.9
26.4
19.0
270.5
14.6
0.8
0.2
– 539.8
– 376.9
Depreciation and impairment
At 3 February 2018
Charge for the period
Disposals
Reclassifications
Impairments
Exchange differences
At 2 February 2019
Charge for the period
Disposals
Reclassifications
Impairments
Exchange differences
At 1 February 2020
Net book value
At 1 February 2020
At 2 February 2019
At 3 February 2018
210
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 15). 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
not depreciated
Warehouse
15–25 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
3–4 years on a
straight line basis
Fixtures and fittings 5–7 years, or length
Motor vehicles
of lease if shorter,
on a straight line
basis
25% per annum on
a reducing balance
basis
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.
LEASED ASSETS
Policy applicable before 3 February 2019
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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
213
13. Property, Plant and Equipment (continued)
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.
Policy applicable from 3 February 2019
Assets funded through finance leases and
similar hire purchase contracts and those
previously classified as operating leases
are now recognised in the consolidated
statement of financial position under
IFRS16 Leases as a right of use asset.
Note 14 describes the recognition and
subsequent measurement of leased assets
under IFRS16.
Impairment charges of £12.2 million
(2019: £10.5 million) 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 depreciation charge
for the period ended 1 February 2020 is
accelerated depreciation of £0.3 million
(2019: £5.2 million) following a review of
the useful economic life of certain items of
property, plant and equipment and assets
capitalised.
14. Leases
The Group has applied IFRS 16 using the
modified retrospective approach and
therefore the comparative information
has not been restated and continues to
be reported under IAS 17. The details
of accounting policies under IAS 17 are
disclosed separately if they are different
from those under IFRS 16 and the impact of
changes is disclosed in note 1.
A. SIGNIFICANT ACCOUNTING POLICY
Policy applicable from 3 February 2019
The Group assesses whether a contract
is or contains a lease. Under IFRS 16, a
contract is, or contains, a lease if the
contract conveys a right to control the use
of an identified asset for a period of time
in exchange for consideration. To assess
whether a contract conveys the right to
control the use of an identified asset, the
Group assesses whether:
212
• The contract involves the use of an
identified asset – this may be specified
explicitly or implicitly, and should
be physically distinct or represent
substantially all of the capacity of a
physically distinct asset. If the supplier
has a substantive substitution right, then
the asset is not identified;
• The Group has the right to obtain
substantially all of the economic benefits
from use of the asset throughout the
period of use; and
• The Group has the right to direct the use
of the asset. The Group has this right
when it has the decision-making rights
that are most relevant to changing how
and for what purpose the asset is used.
In rare cases the decision about how and
for what purpose the asset is used is
predetermined, the group has the right to
direct the use of the asset if either:
14. Leases (continued)
• The Group has the right to operate the
asset; or
• The Group designed the asset in a way
that predetermines how and for what
purpose it will be used.
This policy is applied to contracts entered
into, or changed, on or after 3 February
2019.
At inception or on reassessment of a
contract that contains a lease component,
the Group allocates the consideration in
the contract to each lease component
on the basis of their relative stand-alone
prices. However, for the leases of land and
buildings in which it is a lessee, the Group
has elected not to separate non-lease
components and account for the lease and
non-lease components as a single lease
component.
Policy applicable before 3 February 2019
For contracts entered into before 3
February 2019, the Group determined
whether the arrangement was or contained
a lease based on the assessment of
whether:
• Fulfilment of the arrangement was
dependent on the use of a specific asset
or assets; and
• The arrangement had conveyed a right to
use the asset. An arrangement conveyed
the right to use the asset if one of the
following was met:
• The purchaser had the ability or right
to operate the asset while obtaining or
controlling more than an insignificant
amount of the output;
• The purchaser had the ability or right
to control physical access to the asset
while obtaining or controlling more than
an insignificant amount of the output; or
• Facts and circumstances indicated that
it was remote that other parties would
take more than an insignificant amount
of the output, and the price per unit
was neither fixed per unit or output nor
equal to the current market price per
unit of output.
I. AS A LESSEE
The Group recognises a right-of-use
asset and a lease liability at the lease
commencement date. The right-of-use
asset is initially measured at cost, which
comprises the initial amount of the lease
liability adjusted for any lease payments
made at or before the commencement
date, plus any initial direct costs incurred
less any lease incentives received.
The right-of-use asset is subsequently
depreciated using the straight line method
from the commencement date to the earlier
of the end of the useful life of the right-of-
use asset or the end of the lease term. A
right-of-use asset’s useful economic life is
determined on the same basis as for land
and buildings recognised in property, plant
and equipment. In addition, the right-of-use
asset is periodically reduced by impairment
losses, if any and adjusted for certain
remeasurements of the lease liability.
The lease liability is initially measured at
the present value of the lease payments
that are not paid at the commencement
date, discounted at the rate implicit in
the lease. If the rate implicit in the lease
is not readily available then payments are
discounted using the Group’s incremental
borrowing rate.
Lease payments included in the
measurement of the lease liability comprise
the following:
• Fixed payments, including in-substance
fixed payments;
• Variable lease payments that depend
on an index or a rate, initially measured
using the index or rate as at the
commencement date; and
• Lease payments in an optional renewal
period if the Group is reasonably certain
to exercise an extension option and
penalties for early termination of a lease
unless the Group is reasonably certain not
to terminate early.
The lease liability is measured at amortised
cost using the effective interest method.
It is remeasured when there is a change
in future lease payments arising from a
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
215
14. Leases (continued)
change in index or rate, a change in the
estimate of the amount expected to be
payable under a residual value guarantee,
or as appropriate in the assessment of
whether a purchase or extension option
is reasonably certain to be exercised or a
termination option is reasonably certain not
to be exercised.
The Group has applied judgement to
determine the lease term for some lease
contracts in which it is a lessee that
include renewal options. The assessment
of whether the Group is reasonably certain
to exercise such options impacts the
lease term, which significantly affects the
amount of lease liabilities and right-of-use
assets recognised.
When the lease liability is remeasured in
this way, a corresponding adjustment is
made to the carrying amount of the right-
of-use asset, or is recorded in profit or loss
if the carrying amount of the right-of-use
asset has been reduced to zero.
The Group has also applied judgement to
determine the lease term for some lease
contracts in which it is a lessee that either
have no specified end date, or where the
Group continues to occupy the property
despite the contractual lease end date
having passed. In determining the lease
term, the Group takes into consideration
its commercial strategy on a store by
store basis and the future intentions of the
Group regarding the duration of continuing
occupation of the property.
The Group presents right-of-use assets that
do not meet the definition of investment
property in ‘property, plant and equipment’,
the same line item as it presents underlying
assets of the same nature that it owns. The
Group presents lease liabilities separately
within the statement of financial position.
Short-term leases and leases of low-value
assets
The Group has elected not to recognise
right-of-use assets and lease liabilities for
short-term leases that have a lease term of
12 months or less and leases of low-value
assets, including IT equipment. The Group
214
recognises the lease payments associated
with these leases as an expense on a
straight-line basis over the lease term.
UNDER IAS 17
In the comparative period, as a lessee
the Group classified leases that transfer
substantially all of the risks and rewards of
ownership as finance leases. When this was
the case the leased assets were measured
initially at an amount equal to the lower of
their fair value and the present value of the
minimum lease payments. Minimum lease
payments were the payments over the
lease term that the lessee was required to
make, excluding any contingent rent.
Subsequently, the assets were accounted
for in accordance with the accounting
policy applicable to that asset.
Assets held under other leases were
classified as operating leases and were not
recognised in the Group’s statement of
financial position. Payments made under
operating leases were recognised in profit
or loss on a straight-line basis over the term
of the lease. Lease incentives received were
recognised as an integral part of the total
lease expense, over the term of the lease.
II. AS A LESSOR
When the Group acts as a lessor, it
determines at lease inception whether each
lease is a finance lease or an operating
lease.
To classify each lease, the Group makes an
overall assessment of whether the lease
transfers substantially all of the risks and
rewards incidental to ownership of the
underlying asset. If this is the case, the
lease is a finance lease; if not, then it is an
operating lease. As part of this assessment,
the Group considers certain indicators such
as whether the lease is for the major part of
the economic life of the asset.
When the Group is an intermediate lessor,
it accounts for its interests in the head
lease and the sub-lease separately. It
assesses the lease classification of a sub-
14. Leases (continued)
lease with reference to the right-of-use
asset arising from the head lease, not with
reference to the underlying asset. If a head
lease is a short-term lease to which the
Group applies the exemption described
above, then it classifies the sub-lease as an
operating lease.
The Group recognises lease payments
received under operating leases as income
on a straight-line basis over the lease term
as part of ‘other income’.
The accounting policies applicable to the
Group as a lessor are not different from
those under IAS 17. However, when the
Group is an intermediate lessor the sub-
leases are classified with reference to the
right-of-use asset arising from the head
lease, not with reference to the underlying
asset.
B. AS A LESSEE
The Group leases many assets including
land and buildings, vehicles, machinery and
IT equipment. Information about leases for
which the Group is a lessee is presented
below.
The Group presents right-of-use assets that
do not meet the definition of investment
property in ‘property, plant and equipment’,
the same line item as it presents underlying
assets of the same nature that it owns. The
carrying amount of the right-of-use asset is
as below
Property, plant and equipment
Right-of-use assets, except for investment property
Cost
Recognised on adoption of IFRS16
Additions
Disposals
Remeasurement adjustments
Foreign exchange retranslation
At 1 February 2020
Depreciation and impairment
Depreciation charge for the period
Impairment of Right of Use assets
At 1 February 2020
Note
13
Property
Vehicles
£m
1,891.3
416.5
(36.4)
(93.5)
(19.0)
2,158.9
301.4
7.8
309.2
£m
3.8
1.6
–
0.9
–
6.3
1.9
–
1.9
2020
£m
566.0
1,854.1
2,420.1
Total
£m
1,895.1
418.1
(36.4)
(92.6)
(19.0)
2,165.2
303.3
7.8
311.1
At 1 February 2020
1,849.7
4.4
1,854.1
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
217
14. Leases (continued)
The Group presents lease liabilities separately within the statement of financial position.
The carrying amount of the lease liability as at 1 February 2020 is below.
Maturity analysis – contractual undiscounted cash flows
Within one year
Later than one year and not later than five years
After five years
Total undiscounted lease liabilities at 1 February 2020
2020
£m
333.2
1,076.7
835.1
2,245.0
2020
£m
Lease liabilities included in the statement of financial position at 1 February 2020
1,992.7
Current
Non-Current
Amounts recognised in profit or loss.
Interest on lease liabilities
Variable lease payments not included in the measurement of lease liabilities
Income from subleasing right-of-use assets
Expenses relating to short terms leases and low value leases
Amounts recognised in statement of cash flows.
285.0
1,707.7
52 weeks to
1 February 2020
£m
71.9
36.2
0.8
22.7
52 weeks to
1 February 2020
£m
264.8
Total cash outflow for leases
B. AS A LESSEE (CONTINUED)
I. PROPERTY LEASES
The Group leases buildings for its office
space, retail stores and warehouses. These
leases typically run for a period of 10 years.
Some leases include an option to renew
the lease for an additional number of years
after the end of the non-cancellable period.
Some require the Group to make payments
that relate to the property taxes levied on
the lessor and insurance payments made
by the lessor.
Some properties leased by the Group
provide for additional rent payments that
are based on changes in local price indices
216
or sales that the Group makes at the leased
store in the period. In respect of contracts
linked to store sales, initial recognition
of the lease liability is measured at the
present value of the minimum lease
payments specified in the contract
excluding the element linked to sales since
the variable element of these payments is
not based on an index or rate. Where the
variable element of the payments is based
on an index or rate, initial and subsequent
measurement of the lease liability includes
these index linked payments.
The Group sub-leases some of its
properties under operating leases.
14. Leases (continued)
II. OTHER LEASES
The Group leases vehicles and equipment
(Inc. IT equipment) with lease terms of
three to five years. Leases of equipment
are of low-value items, therefore the Group
has elected not to recognise right-of-use
assets and lease liabilities for these leases.
C. AS A LESSOR
Lease income from lease contracts in
which the Group acts as a lessor is as
below.
52 weeks to
1 February 2020
Operating Lease
Lease Income
The Group leases out residential and office properties. The Group has classified these
leases as operating leases, because they do not transfer substantially all the risk and
rewards incidental to the ownership of the assets.
The following table sets out a maturity analysis of lease payments, showing the
undiscounted lease payments to be received after the reporting date.
Within one year
Later than one year and not later than five years
2020
£m
0.2
0.3
0.5
£m
0.8
2019
£m
1.1
1.2
2.3
15. 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 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. Deposits are assessed
for recoverability on leased stores on a
practical basis and 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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
219
15. Non-current Other Assets (continued)
Key Money
Deposits
Legal Fees
Lease Premia
Total assets and liabilities
Cost
At 3 February 2018
Additions
Disposals
Reclassifications
Exchange Differences
At 2 February 2019
IFRS16 reclassification
Additions
Disposals
Exchange Differences
At 1 February 2020
Depreciation and impairment
At 3 February 2018
Charge for period
Disposals
Reclassifications
Impairments
Exchange differences
At 2 February 2019
IFRS16 reclassification
At 1 February 2020
Net book value
At 1 February 2020
At 2 February 2019
At 3 February 2018
£m
£m
£m
21.1
0.8
(0.2)
(0.1)
2.5
24.1
–
0.1
(0.9)
(0.3)
30.6
3.6
(0.7)
–
1.8
35.3
–
6.7
(2.9)
(12.6)
23.0
26.5
1.0
–
–
–
0.4
0.1
1.5
–
1.5
21.5
22.6
20.1
0.1
–
–
–
–
–
0.1
–
0.1
26.4
35.2
30.5
17.9
0.2
(0.1)
7.3
0.2
25.5
(25.5)
–
–
–
–
10.1
0.4
(0.1)
1.8
–
0.1
12.3
(12.3)
–
–
13.2
7.8
£m
11.3
0.5
–
0.5
0.7
13.0
(13.0)
–
–
–
Total
£m
80.9
5.1
(1.0)
7.7
5.2
97.9
(38.5)
6.8
(3.8)
(12.9)
–
49.5
3.2
0.8
–
0.5
0.2
0.2
4.9
(4.9)
–
–
8.1
8.1
14.4
1.2
(0.1)
2.3
0.6
0.4
18.8
(17.2)
1.6
47.9
79.1
66.5
16. 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
2020
£m
811.8
2019
£m
763.8
The cost of inventories recognised as expenses and included in cost of sales for the 52
weeks ended 1 February 2020 was £3,236.0 million (2019: £2,474.5 million).
The Group has £74.9 million (2019: £73.9 million) of stock provisions at the end of the
period.
Cost of inventories includes a net charge of £21.1 million (2019: £12.9 million) in relation to
net provisions recognised against inventories.
218
17. Trade and Other Receivables
CREDIT RISK
The Group’s exposure to credit risk
is influenced mainly by the individual
characteristics of each customer. However,
management also considers the factors
that may influence the credit risk of its
customer base, including the default risk
associated with the industry and country in
which customers operate.
The trade receivables balances are typically
held by the wholesale businesses within the
Group. Each subsidiary establishes a credit
policy under which each new customer is
analysed individually for creditworthiness
before the payment and delivery terms and
conditions are offered. The Group review
includes financial statements, credit agency
information and industry information. Each
subsidiary limits its credit exposure by
setting payment periods and, in certain
circumstances, these are approved by JD
Plc Group management.
Customers are monitored by taking
into account their credit characteristics;
whether they are a wholesale or retail
customer, their geographic location,
industry, trading history with the Group and
existence of previous financial difficulties.
Current assets
Trade receivables
Other receivables
Prepayments and accrued income
EXPECTED CREDIT LOSS ASSESSMENT
Each subsidiary within the Group allocates
each exposure to a credit risk grade
based on the data that is determined to
be predictive of the risk of loss (including
but not limited to external ratings, audited
financial statements, management
accounts and available press information
about customers) and by applying
experienced credit judgement.
An allowance matrix is used to measure
the expected credit losses (ECL’s) of trade
receivables from smaller customers, which
comprise a very large number of small
balances. Loss rates are based on actual
credit loss experience over the past 5
years, factoring in other information such
as current conditions, age of the customer
relationship and the view of the economic
conditions over the expected lives of the
receivables.
The Group recognises loss allowances
for ECL’s on financial assets measured
at amortised cost and measures the loss
allowances at an amount equal to the
lifetime ECL’s for trade receivables.
2020
£m
42.6
39.0
102.3
2019
£m
36.8
45.5
94.9
183.9
177.2
A summary of the Group’s exposure to credit risk for trade receivables is as follows:
Not past due
Past due 0 – 30 days
Past due 30 – 60 days
Past 60 days
Gross
£m
28.1
7.1
5.1
3.6
43.9
2020
Provision
£m
(0.7)
–
(0.2)
(0.4)
Net
£m
27.4
7.1
4.9
3.2
(1.3) 42.6
Gross
£m
23.7
7.2
2.3
4.9
38.1
2019
Provision
£m
(0.3)
(0.1)
(0.1)
(0.8)
(1.3)
Net
£m
23.4
7.1
2.2
4.1
36.8
At 1 February 2020, the exposure to credit risk for trade receivables by geographic region
was as follows:
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
221
17. Trade and Other Receivables (continued)
18. Cash and Cash Equivalents
UK
Europe
USA
Rest of world
Total
As at
2 February 2020
Total
As at
2 February 2019
Total
£m
13.4
21.0
5.2
4.3
43.9
£m
12.8
13.5
4.7
7.1
38.1
At 1 February 2020, the exposure to credit risk for trade receivables by type of
counterparty was as follows:
Wholesale customers
Retail customers
End user customers
Other
Total
As at
1 February 2020
Total
As at
2 February 2019
Total
£m
25.3
9.6
5.5
3.5
43.9
£m
7.6
20.1
4.2
6.2
38.1
At 1 February 2020, the carrying amount of the Group’s most significant customer was £3.0
million (2019: £3.8 million).
The following table provides information about the exposure to credit risk and expected
credit losses for trade receivables as at 1 February 2020:
Income statement
Not past due
Past due 0 – 30 days
Past due 30 – 60 days
Past due 61 – 90 days
More than 90 days past due
Total
Weighted
average loss rate
Gross carrying
amount
Loss
allowance
£m
2.5%
–
3.9%
–
17.4%
3.0%
£m
28.1
7.1
5.1
1.3
2.3
43.9
£m
(0.7)
–
(0.2)
–
(0.4)
(1.3)
Movement on this provision is shown below:
At 3 February 2018 (as per IFRS 9)
Created
Released
Acquired
At 2 February 2019
Created
Released
Acquired
At 1 February 2020
Credit
impaired
£m
–
–
–
–
–
–
£m
1.1
0.8
(0.4)
(0.2)
1.3
(0.3)
0.4
(0.1)
1.3
The other classes within trade and other receivables do not contain impaired assets.
220
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.
Cash at bank and in hand
2020
£m
465.9
2019
£m
251.2
19. Interest-bearing Loans and Borrowings
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
Syndicated bank facility
Non-current liabilities
Finance lease liabilities
Bank loans
Other loans
2020
£m
–
20.4
–
20.4
–
14.9
0.7 –
15.6
2019
£m
2.2
31.6
30.0
63.8
5.9
56.3
62.2
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 20.
BANK FACILITIES
As at 1 February 2020, the Group has a syndicated committed £700 million bank facility
which expires on 6 November 2024. The Group is subject to covenants on Net Worth, Net
Debt Leverage and a Fixed Charge Cover.
Under this facility, a maximum of 15 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 0.9% (2019: 0.9%). The arrangement and
underwriting fee payable on the facility is 1.0% and 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, Blacks Outdoor Retail
Limited, Tessuti Limited, Go Outdoors Limited, The Finish Line, Inc, The Finish Line USA Inc,
Genesis Holdings Inc, Genesis Finco Limited, Focus Brands Limited and Focus International
Limited.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
223
19. Interest-bearing Loans and Borrowings
20. Financial Instruments (continued)
At 1 February 2020, £nil was drawn down on this facility (2019: £30.0 million).
The Group’s second principal bank facility is a syndicated Asset Based Lending Facility in
the United States which has a maximum revolving advance amount of $300 million and
expires on 18 June 2023. At 1 February 2020 $nil was drawn down on this facility (2019:
$50.0 million).
BANK LOANS AND OVERDRAFTS
The bank loans and overdrafts attract interest rates at 0.7%–8.4%. The overdrafts are
repayable on demand and the bank loans are repayable over periods between two and 60
months. The maturity of the bank loans and overdrafts is as follows:
Within one year
Between one and five years
2020
£m
20.4
14.9
35.3
2019
£m
31.6
56.3
87.9
OTHER LOANS
The acquisition of Pretty Green Limited included loans with balances remaining of £1.8
million at the time of acquisition, £1.1m of the loans were repaid during the period, the
remaining loan attracts interest at base plus 3% and are repayable in April 2021. As at 1
February 2020 £0.7m was still outstanding.
The maturity of the other loans is as follows:
Between one and five years
2020
£m
0.7 –
2019
£m
FINANCE LEASES
As at 1 February 2020, the Group’s liabilities under finance leases are included in Leases,
see Note 14.
Income statement
Minimum lease payments
2019
2020
Present value of minimum lease
payments
2019
2020
£m
£m
£m
£m
Amounts payable under finance leases:
Within one year
Later than one year and not later than five years
–
–
–
2.2
6.0
8.2
–
–
–
2.2
5.9
8.1
20. 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.
222
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 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:
Cash and cash equivalents
Sterling
Euros
US Dollars
Australian Dollars
Danish Krone
Other
2020
£m
465.9
120.1
188.9
114.1
15.6
5.1
22.1
465.9
2019
£m
251.2
37.1
136.0
44.3
20.9
3.3
9.6
251.2
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
US Dollars
Australian Dollars
Other
2020
£m
36.0
8.9
19.9
–
–
7.2
36.0
2019
£m
126.0
39.7
30.2
37.0
8.5
10.6
126.0
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 1
February 2020.
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
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
225
20. Financial Instruments
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 £700 million
committed bank facility, together with
overdraft facilities in subsidiary companies
(see note 19). At 1 February 2020 £nil
was drawn down from the committed
bank facility (2019: £30.0 million). 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 0.9%
(2019: 0.9%).
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 £nil (2019: £1.9
million) and would change equity by £nil
(2019: £1.9 million). The calculation is based
on any floating interest rate loans and
borrowings drawn down at the period end
date. 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
224
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.
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.
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
20. Financial Instruments (continued)
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 1 February 2020, options have been
entered into to protect approximately 93%
of the US Dollar trading requirement for the
period to January 2021. The balance of the
US Dollar requirement for the period will be
satisfied at spot rates.
Euros
US Dollars
Australian Dollars
Other
As at 1 February 2020, the fair value of
these instruments was an asset of £10.8
million (2019: asset of £9.1 million) and
these are all classified as due within one
year. A gain of £5.3 million (2019: gain of
£33.9 million) 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:
Profit before tax
Equity
2020
£m
3.9
0.4
0.9
0.4
5.6
2019
£m
2.7
0.6
1.7
0.5
5.5
2020
£m
23.4
31.4
0.6
2.6
58.0
2019
£m
18.6
30.8
2.1
1.6
53.1
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:
Euros
US Dollars
Australian Dollars
Other
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.
Profit before tax
Equity
2020
£m
4.7
0.5
1.1
0.5
6.8
2019
£m
3.3
0.8
2.1
0.7
6.9
2020
£m
28.7
38.4
0.8
3.2
71.0
2019
£m
22.8
37.7
2.6
2.0
65.1
Investments of cash surpluses, borrowings
and derivative instruments are made
through major 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 a
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
227
20. Financial Instruments (continued)
provision is made for impairment where
amounts are not thought to be recoverable
(see note 17). 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 £183.9
million (2019: £177.2 million) and cash and
cash equivalents of £465.9 million (2019:
£251.2 million).
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 19.
The commitment fee on these facilities is
0.35% (2019: 0.32%).
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
FAIR VALUES
The fair values together with the carrying
amounts shown in the Statement of
Financial Position as at 1 February 2020 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 2 February 2019 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
Carrying amount
2020
Note
17
18
19
19
£m
81.6
465.9
(20.4)
(15.6)
(806.1)
(73.2)
Fair value
2020
£m
81.6
465.9
(20.4)
(13.0)
(806.1)
(73.2)
(367.8)
(365.2)
2.6
Fair value
2019
£m
82.3
251.2
(63.8)
(50.6)
(708.7)
(46.5)
Carrying amount
2019
Note
£m
17
18
19
19
82.3
251.2
(63.8)
(62.2)
(708.7)
(46.6)
(547.8)
(536.1)
11.7
226
20. Financial Instruments (continued)
In the opinion of the Board, the fair value
of the Group’s current financial assets
and liabilities as at 1 February 2020 and
2 February 2019 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 1 February 2020 and
2 February 2019, the fair value has been
calculated using a pre-tax discount rate of
6.6% (2019: 7.1%) 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.
FAIR VALUE HIERARCHY
As at 1 February 2020, the Group held the
following financial instruments carried at
fair value on the Statement of Financial
Position:
• Foreign exchange forward contracts –
non-hedged
• Put and call option
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
Carrying amount
Level 1
Level 2
Level 3
£m
£m
£m
£m
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
Other financial liabilities
Interest-bearing loans and borrowings – current
Interest-bearing loans and borrowings – non-current
Trade and other payables – current
Put options held by non-controlling interests
26.4
70.8
465.9
10.8
(20.4)
(15.6)
(806.1)
(73.2)
–
–
–
–
–
–
–
–
26.4
70.8
465.9
10.8
–
–
–
–
(20.4)
(15.6)
(806.1)
–
–
–
–
(73.2)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
229
20. Financial Instruments (continued)
The comparatives at 2 February 2019 are as follows:
Carrying amount
Level 1
Level 2
Level 3
£m
£m
£m
£m
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
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
35.2
73.2
251.2
9.1
(63.8)
(62.2)
(708.7)
(0.5)
(46.1)
–
–
–
–
–
–
–
–
–
35.2
73.2
251.2
9.1
–
–
–
–
(63.8)
(62.2)
(708.7)
(0.5)
–
–
–
–
–
(46.1)
REVERSE PREMIA
Reverse premia represent monies received
by the Group on assignment of property
leases and are included within other
payables and accrued expenses. Reverse
premia are amortised over the life of the
remaining lease.
2020
£m
426.6
379.5
94.6
900.7
2019
£m
366.9
368.0
73.2
808.1
80.5
153.8
21. 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.
Current liabilities
Trade payables
Other payables and accrued expenses
Other tax and social security costs
Non-current liabilities
Other payables and accrued expenses
228
21. Trade and Other Payables (continued)
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 1 February 2020
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 2021 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
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. 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 or earnings
multiple. 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.
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 or earnings multiple. Upon
initial recognition and for subsequent
changes on remeasurement of the liability
of call options a corresponding entry is
made to the Income Statement.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
231
21. Trade and Other Payables (continued)
21. Trade and Other Payables (continued)
At 1 February 2020
0.1
0.4
–
1.5
68.8
0.6
–
0.3
Company
Options in existence
Exercise periods
Methodology
Maximum price
Put and call options
At 2 February 2019
Acquisitions
Option settled during the period
Increase/ (decrease) in the present value of the
existing option liability
Put Options
Source
Lab
Limited
£m
JD
Germany
GmbH
£m
Tiso
Group
Limited
£m
JD Gyms
Limited
£m
Iberian
Sports
Retail
Group
£m
0.1
0.9
0.6
1.4
36.1
–
–
–
–
–
–
–
–
–
–
–
(0.5)
(0.6)
0.1
32.7
Source Lab
Limited
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.
JD Germany
GmbH
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.
Tiso Group
Limited
Put and call option whereby JD
Sports Fashion Plc may acquire or be
required to acquire 40% of the issued
share capital of Tiso Group Limited.
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.
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 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 put option is exercisable 60 days
following the end of the second call
option.
230
Dantra
Limited
£m
Base
£m
Tessuti
£m
JD Sports
Fashion Holdings
Australia Pty
£m
Total Put
Options
£m
Sportiberica
£m
Total Put and Call Options
£m
Call Option
0.5
0.3
–
–
–
–
0.7
0.1
–
0.1
(0.3)
(0.5)
1.5
–
–
–
1.5
42.1
0.1
–
31.0
73.2
4.0
–
(4.4)
0.4
–
46.1
0.1
(4.4)
31.4
73.2
Recognised as a liability
At 1 February
2020
At 2 February
2019
£m
0.1
£m
0.1
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 shall
not exceed £12.5
million.
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
million.
0.4
0.9
The option price is calculated based
on a multiple of the average operating
profit for the financial ending 3
February 2018 and the prior year.
The option price shall
not exceed £8 million
or 25p per share.
–
0.6
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
233
21. Trade and Other Payables (continued)
21. Trade and Other Payables (continued)
Company
Options in existence
Exercise periods
Methodology
Maximum price
JD Sports
Gyms Limited
Put and call option whereby JD Sports
Fashion Plc may acquire 12.5% of the
issued share capital of JD Sports Gyms
Limited in five tranches of 2.5%.
The put and call options are
exercisable 30 days after the
approval by the Board of the annual
audited accounts of:
Iberian Sports
Retail Group
First put option whereby JD Sports
Fashion Plc may acquire or be
required to acquire 70% of the option
holders 20% holding of the issued
share capital of JD Sprinter Holdings.
Second put option whereby JD
Sports Fashion Plc may acquire or be
required to acquire 30% of the option
holders 20% holding of the issued
share capital of JD Sprinter Holdings in
three tranches of 10%.
Dantra Limited First put and call option whereby JD
Sports Fashion Plc may acquire 12.5%
of the issued share capital of Dantra
Limited. Second put and call option
whereby JD Sports Fashion Plc may
acquire 12.5% of the issued share
capital of Dantra Limited.
Sportibérica
Sociedade de
Artigos de
Desporto, S.A
Call option whereby JD Sports
Fashion Plc may acquire 20% of the
issued share capital of Sportiberica
Sociedade de Artigos de Desporto,
S.A.
• The year ended 31 January 2020
• The year ended 31 January 2021
• The year ended 31 January 2022
• The year ended 31 January 2023
• The year ended 31 January 2024
The first put option is exercisable
after 31 January 2021. The second put
option is exercisable after at least
one year has lapsed since the first
put option was exercised. The 30%
option, in three separate tranches
of 10%, need not be exercised in
consecutive years.
The first put option is exercisable
for a ten year period beginning the
day after the accounts of Dantra
Limited are signed by the auditors for
the financial year ending 31 January
2022. The second put option is
exerciseable after at least one year
has lapsed since the first put option
was exercised.
The call option is exercisable 3
months after the approval by the
Shareholders General Meeting of the
annual audited accounts of the period
ending 1 February 2020, 30 January
2021 or 29 January 2022.
232
The option price is calculated
based on a multiple of profit
before tax for the relevant
financial year prior to the
exercise date.
The option price shall not
exceed £9 million.
Recognised as a liability
At 1 February
2020
At 2 February
2019
£m
1.5
£m
1.4
The option price is calculated
based on the equity value
plus the outstanding loans
or financing provided by the
option holder with unpaid
interest accrued.
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 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.
The option price shall not
exceed £332 million.
68.8
36.1
Each put option price shall not
exceed £7.8 million.
0.6
0.5
–
4.0
The minimum option price is
‐6 million; ‐6.1 million and ‐6.2
million for the financial period
ending 2 February 2019; 1
February 2020 and 30 January
2021 respectively.
The maximum option price is ‐11
million; ‐12 million and ‐13 million
for the financial period ending
2 February 2019; 1 February
2020 and 30 January 2021
respectively.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
235
21. Trade and Other Payables (continued)
21. Trade and Other Payables (continued)
Company
Options in existence
Exercise periods
Methodology
Maximum price
Base
Childrenswear
Limited
Put and call options whereby JD
Sports Fashion Plc may acquire or be
required to acquire 20% of the issued
share capital in Base Childrenswear
Limited.
Tessuti Limited First put and call option whereby JD
Sports Fashion Plc may acquire or be
required to acquire 100% of the option
holders 6.8% of the issued share
capital of Tessuti Limited over four
separate tranches.
Second put and call option whereby
JD Sports Fashion Plc may acquire
or be required to acquire 100% of the
option holders 1.7% of the issued share
capital of the issued share capital of
Tessuti Limited in one tranche.
Third put option whereby JD Sports
Fashion Plc may acquire 4% of the
issued share capital of Tessuti Limited
in four tranches of
187.5 shares.
JD Sports
Fashion
Holdings
Australia Pty
Put option whereby JD Sports Fashion
Plc may acquire 20% of the issued
share capital of Next Athleisure
Limited in tranches of 10%.
The put and call options are
exercisable 3 months after the
approval by the auditors of the annual
accounts of:
• The year ended 31 January 2021
• The year ended 31 January 2022
• The year ended 31 January 2023
• The year ended 31 January 2024
The first put option is exercisable
30 days after the approval by the
auditors of the annual Tessuti Limited
accounts of:
• The year ended 31 January 2021
• The year ended 31 January 2022
• The year ended 31 January 2023
• The year ended 31 January 2024
The second is exercisable 3 months
after the approval by the auditors of
the annual accounts of:
• The year ended 31 January 2024
The third put option is exercisable
30 days after the approval by the
auditors of the annual Giulio Limited
accounts of:
• The year ended 31 January 2023
• The year ended 31 January 2024
• The year ended 31 January 2025
• The year ended 31 January 2026
The put option is exercisable after 26
August 2019 and is only exercisable
once per annum, 30 days after the
approval of the annual consolidated
accounts of JD Sports Fashion
Holdings Australia Pty.
234
Recognised as a liability
At 1 February
2020
At 2 February
2019
£m
–
£m
0.3
The option price is calculated based
on the lower of average earnings
before interest, tax, depreciation and
amortisation or forecast earnings
before interest, tax, depreciation and
amortisation for the relevant financial
period.
The maximum option
price is £20 million.
The option price is calculated based on
a multiple of earnings before interest,
tax, depreciation and amortisation for
the relevant two financial years prior
to the exercise date.
The option price
shall not exceed £30
million for the first and
second put and call
option.
0.3
0.7
The maximum option
price for the third put
option is £7.5 million.
The option price is calculated based on
a multiple of earnings before interest,
tax, depreciation and amortisation
for the relevant financial period, less
net debt as a % of the total number
of shares in issue as at the date of the
proposed completion.
The maximum option
price is £20 million.
1.5
1.5
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
237
21. Trade and Other Payables (continued)
21. Trade and Other Payables (continued)
Company
Options in existence
Exercise periods
Methodology
Maximum price
Bernard Esher
Limited
Put and call option whereby JD
Sports Fashion Plc may acquire or be
required to acquire 20% of the issued
share capital of Bernard Esher Limited.
The put option is exercisable 30 days
after the approval by the auditors
of the annual Bernard Esher Limited
accounts of:
• The year ended 31 January 2021
The call option may only be exercised:
• 30 days following the publication
of the audited accounts of the year
ended 31 January 2022, or
• within a period of 6 calendar
months commencing on the date
the relevant Seller ceases to be
an employee or director of the
Company.
The option price is calculated based on
a multiple of earnings before interest,
tax, depreciation and amortisation for
the relevant two financial years prior
to the exercise date.
The maximum
consideration is £4.68
million
Recognised as a liability
At 1 February
2020
At 2 February
2019
£m
–
£m
–
73.2
46.1
22. 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.
ONEROUS LEASE PROVISION
Under IFRS16 onerous lease provisions are
no longer applicable as the impact of the
provision is reflected in the calculation of
right of use asset valuation.
ONEROUS CONTRACTS PROVISION
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.
22. Provisions (continued)
Balance at 2 February 2019
Reversal of onerous lease provision (IFRS 16)
Provisions utilised during the period
Balance at 1 February 2020
Onerous
property leases
Onerous
contracts
£m
2.4
(2.4)
–
–
£m
0.1
–
(0.1)
–
Provisions have been analysed between current and non-current as follows:
Current
Non-current (within five years)
2020
£m
–
–
–
Total
£m
2.5
(2.4)
(0.1)
–
2019
£m
1.3
1.2
2.5
236
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
239
23. Deferred Tax Assets and Liabilities
RECOGNISED DEFERRED TAX ASSETS AND LIABILITIES
Deferred tax assets and liabilities are attributable to the following:
Assets
2019
Liabilities
2020
Liabilities
2019
£m
(6.4)
(20.3)
–
–
£m
–
(13.6)
0.6
–
Net
2020
£m
(6.4)
(20.3)
13.0
1.2
Net
2019
£m
1.2
(13.6)
0.6
0.8
(26.7)
(13.0)
(12.5)
(11.0)
£m
1.2
–
–
0.8
2.0
within JD Sports Fashion Korea Inc; £0.9
million (2019: £0.3 million) within JD Sports
(Thailand) Limited; £0.4 million (2019: £0.4
million) within Focus Brands Limited (and
its subsidiaries); £3.6 million (2019: £3.6
million) within KGR Rugby Limited; £nil (2019:
£0.7 million) within Blacks Outdoor Retail
Limited; £3.7 million (2019: £3.7 million) within
Champion Retail Limited; £2.1 million (2019:
£2.1 million) within Ark Fashion Limited; £0.1
million (2019: £0.1 million) within Kukri Sports
Limited (and its subsidiaries); £4.7 million
(2019: £1.6 million) within Tiso Group Limited
(and its subsidiaries); £4.6 million (2019: £4.6
million) within Clothingsites.co.uk Limited; £1.0
million (2019: £0.5 million) within 2 Squared
Agency Limited; and £1.0 million within UC
Clothing Limited have not been recognised
as there is uncertainty over the utilisation of
these losses.
Property, plant and equipment
Fascia name
Other temporary differences
Tax losses
Tax assets / (liabilities)
Assets
2020
£m
–
–
13.0
1.2
14.2
The UK corporation tax rate reduced to
19% with effect from 1 April 2017 and was
expected to reduce to 17% with effect from 1
April 2020 as at the balance sheet date. The
deferred tax liability at 1 February 2020 has
been calculated based on a rate of 17% as this
was the prevailing rate at which the group
expected the deferred tax liability to reverse.
The UK Government announced in the Budget
on 11 March 2020 that the reduction in the
rate to 17% was to be cancelled and the UK
corporation tax rate is to remain at 19%. Had
the deferred tax liability been calculated at
19%, the deferred tax liability would increase
by £1.7m.
Deferred tax assets on losses of £17.4 million
(2019: £12.2 million) within SDSR – Sports
Division SR, S.A.; £3.6 million (2019: £3.0
million) within JD Size GmbH; £1.9 million
within JD Sports Fashion AT GmbH; £3.2
million (2019: £1.3 million) within JD Sports
Fashion Sweden AB; £0.3 million (2019: £0.3
million) within JD Sports Fashion Denmark
ApS; £2.0 million (2019: £0.6 million) within
JD Sports Fashion Finland OY; £8.2 million
238
23. Deferred Tax Assets and Liabilities (continued)
MOVEMENT IN DEFERRED TAX DURING THE PERIOD
Property, plant
and equipment
Fascia name
Other
Tax losses
Balance at 3 February 2018
Recognised on acquisition
Recognised in income
Foreign exchange movements
Balance at 2 February 2019
Recognised on acquisition
Recognised on disposal
Recognised in income
Reclassifications
Foreign exchange movements
£m
1.8
(0.2)
(0.5)
0.1
1.2
(0.6)
0.1
(8.0)
0.7
0.2
£m
(14.7)
(0.3)
1.3
0.1
(13.6)
(6.3)
–
4.3
(4.4)
(0.3)
£m
4.9
(4.5)
0.4
(0.2)
0.6
0.5
(1.3)
9.6
3.7
(0.1)
Balance at 1 February 2020
(6.4)
(20.3)
13.0
£m
2.7
–
(2.0)
0.1
0.8
–
–
0.4
–
–
1.2
Total
£m
(5.3)
(5.0)
(0.8)
0.1
(11.0)
(6.4)
(1.2)
6.3
–
(0.2)
(12.5)
As at 1 February 2020, the Group has no
recognised deferred income tax liability
(2019: £nil) in respect of taxes that would
be payable on the unremitted earnings
of certain overseas subsidiaries. As at 1
February 2020, the unrecognised gross
temporary differences in respect of
overseas subsidiaries is £192.7 million
(2019: £92.9 million). No deferred income
tax liability has been recognised in respect
of this temporary timing difference due
to the foreign profits exemption and the
availability of double tax relief.
There are no income tax consequences
attached to the payment of dividends by
the Group to its shareholder.
24. Capital and Reserves
ISSUED ORDINARY SHARE CAPITAL
The total number of authorised ordinary
shares was 1,243,000,000 (2019:
1,243,000,000) with a par value of 0.25p
per share (2019: 0.25p per share). All issued
shares are fully paid.
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 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
The Board consider the capital of the
Group as the net cash / debt at the year
end (see note 29) and the Board review the
gearing position of the Group which as at 1
February 2020 was 1.6% (2019: 2.7%). 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 117.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
241
24. Capital and Reserves (continued)
25. Non-controlling Interests (continued)
Summarised statement of financial position
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Net assets
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 from financing activities
Cash and cash equivalents:
At the beginning of the period
At the end of the period
Iberian Sports
Retail Group SL
2020
Iberian Sports
Retail Group SL
2019
£m
216.1
166.4
382.5
(204.3)
(29.2)
149.0
£m
156.5
148.3
304.8
(158.1)
(27.4)
119.3
Iberian Sports
Retail Group SL
52 weeks to
1 February 2020
Iberian Sports
Retail Group SL
52 weeks to
2 February 2019
£m
629.9
25.7
£m
533.7
13.4
Iberian Sports
Retail Group SL
52 weeks to
1 February 2020
Iberian Sports
Retail Group SL
52 weeks to
2 February 2019
£m
42.2
(22.2)
0.4
62.1
82.5
£m
42.0
(16.1)
22.6
13.6
62.1
At 2 February 2019 and 1 February 2020
Number of
ordinary shares
Ordinary
share capital
thousands
973,233
£m
2.4
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.
25. 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
1 February 2020 and 2 February 2019:
% of non-
controlling
interests and
non-controlling
voting rights
at 1 February
2020
% of non-
controlling
interests
and non-
controlling
voting rights
at 2 February
2019
Net income/
(loss)
attributable
to non-
controlling
interests for
52 weeks
ending 1
February
2020
Net income/
(loss)
attributable
to non
controlling
interests for
52 weeks
ending 2
February
2019
Non-
controlling
interests at
2 February
2019
Non-
controlling
interests at
1 February
2020
£m
£m
£m
£m
50.0%
50.0%
8.9
62.4
4.7
53.2
Country of
incorporation
Spain/
Portugal/
Canaries
Korea
50.0%
50.0%
(3.0)
10.1
(2.4)
13.2
12.5%–50% 15%–0%
(1.3)
(2.5)
0.1
1.6
UK/ Malaysia/
India/
Germany/
Australia
4.6
70.0
2.4
68.0
Name of
subsidiary:
Iberian Sports
Retail Group
SL
JD Sports
Fashion Korea
Other
During the period, the Group has increased its shareholding in four non-wholly owned
subsidiaries. For newly acquired non-wholly owned subsidiaries, further details are provided
in Note 11.
240
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
243
26. Dividends
29. Analysis of Net Cash
Dividend distribution to the Company’s shareholders is recognised as a liability in the Group
and Company financial statements in the period in which it is approved.
After the reporting date the following dividends were proposed by the Directors. The
dividends were not provided for at the reporting date.
0.00p per ordinary share (2019: 1.44p)
Dividends on Issued Ordinary Share Capital
Final dividend of 1.44p (2019: 1.37p) per qualifying ordinary
share paid in respect of prior period, but not recognised
as a liability in that period
Interim dividend of 0.28p (2019: 0.27p) per qualifying ordinary
share paid in respect of current period
52 weeks to
1 February 2020
52 weeks to
2 February 2019
£m
–
£m
14.0
52 weeks to
1 February 2020
52 weeks to
2 February 2019
£m
£m
14.0
2.7
16.7
13.3
2.6
15.9
27. Commitments
As at 1 February 2020, the Group had entered into contracts to purchase property, plant
and equipment as follows:
Contracted
2020
£m
20.3
2019
£m
8.2
28. Pension Schemes
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 £13.1 million (2019: £11.8 million)
in respect of employees. Disclosure of the
pension contributions payable in respect
of the Directors is included in the Directors
Remuneration Report. The amount owed
to the schemes at the period end was £1.8
million (2019: £1.1 million).
242
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.
At 2 February On acquisition of
subsidiaries
2019
Cash at bank and in hand
Overdrafts
Cash and cash equivalents
Interest-bearing loans and
borrowings: Bank loans
Syndicated bank facility
Finance lease liabilities
Other loans
Net Cash / (financial debt)
Lease liabilities
Net Debt
£m
251.2
(13.5)
237.7
(74.4)
(30.0)
(8.1)
–
125.2
–
125.2
Cash flow
£m
205.2
7.9
213.1
59.3
30.0
–
(0.7)
Non-cash At 1 February
2020
movements
£m
1.7
–
1.7
1.1
–
8.1
–
£m
465.9
(5.6)
460.3
(29.7)
–
–
(0.7)
£m
7.8
–
7.8
(15.7)
–
–
–
(7.9)
301.7
10.9
429.9
–
264.8
(2,257.5)
(1,992.7)
(7.9)
566.5
(2,246.6)
(1,562.8)
30. 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 LIMITED
Pentland Group Limited owns 55% (2019: 57.5%) of the issued ordinary share capital of JD
Sports Fashion Plc. The Group made purchases of inventory from Pentland Group Limited
in the period and the Group also sold inventory to Pentland Group Limited. The Group also
paid royalty costs to Pentland Group Limited for the use of a brand.
During the period, the Group entered into the following transactions with Pentland Group
Limited:
Sale of inventory
Purchase of inventory
Royalty costs
Marketing costs
Other income
Income from Expenditure with
related parties
2020
related parties
2020
Income from Expenditure with
related parties
2019
related parties
2019
£m
1.6
–
–
0.1
0.5
£m
–
(48.4)
(5.1)
–
–
£m
3.3
–
–
0.8
0.1
£m
–
(42.9)
(4.9)
–
–
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
245
30. Related Party Transactions and Balances (continued)
31. Post Balance Sheet Events (continued)
At the end of the period, the following balances were outstanding with Pentland Group
Limited:
Amounts owed by Amounts owed to Amounts owed by Amounts owed to
related parties
2019
related parties
2020
related parties
2020
related parties
2019
Trade receivables / (payables)
£m
1.4
£m
(1.1)
£m
0.6
£m
(0.1)
Other than the remuneration of Directors as shown in note 5 and in the Directors’
Remuneration Report on page 149 there have been no other transactions with Directors in
the year (2019: nil).
31. Post Balance Sheet Events
ONEPOINTFIVE VENTURES LIMITED
TRADING AS LIVESTOCK (“LIVESTOCK”)
On 10 February 2020, the Group acquired
100% of the issued share capital of
Onepointfive Ventures Limited DBA
Livestock (“Livestock”) through a newly
established Canadian holdco structure
(JDSF Holdings (Canada) Inc “Holdco”).
Consideration was comprised of £7.0
million in cash and 20% of the equity in
Holdco. Effectively, the Group acquired
80% of Livestock. Based in Vancouver,
this business and its management team
will provide the platform to develop JD in
Canada.
Included within the provisional fair
value of the net identifiable assets on
acquisition is an intangible asset of £1.2
million, representing the “Livestock”
fascia name. The Board believes that the
excess of consideration paid over net
assets on acquisition of £6.7 million is best
considered as goodwill on acquisition
representing future operating synergies.
The provisional goodwill calculation is
summarised below:
Book value
£m
Acquiree’s net assets at acquisition date: Intangible assets
Property, plant and equipment
Inventories
Cash and cash equivalents
Trade and other receivables
Trade and other payables
Deferred tax liability
Corporation Tax
–
0.4
0.5
(0.8)
0.1
(0.4)
-
(0.3)
Net identifiable assets
Non-controlling interest
Goodwill on acquisition
Consideration paid – satisfied in cash
Total consideration
244
(0.5)
0.1
Measurement
adjustments
Provisional fair
value at 10
February 2020
£m
1.2
(0.3)
0.9
(0.2)
£m
1.2
0.4
0.5
(0.8)
0.1
(0.4)
(0.3)
(0.3)
0.4
(0.1)
6.7
7.0
7.0
FOOTASYLUM LIMITED
The Competition and Markets Authority
(‘CMA’) announced in its Final Report on
6th May 2020 that they were prohibiting
the merger with Footasylum Limited and
that, consequently, they required the Group
to fully divest its investment. The Group
are currently in negotiations with the CMA
as to how the disposal process will be
conducted and monitored and have also
made a claim for Judicial Review to the
Competition Appeal Tribunal. At the date
of this announcement, the exact nature and
timing of the disposal process is unknown
and the Group may not recover the
carrying value as part of this disposal.
COVID-19
COVID-19 is a non-adjusting post balance
sheet event for the Group. The Group
has considered the impact of COVID-19
as at the date of signing these financial
statements. As noted below, the key area
of impact is in regards to Go Outdoors
Limited.
GO OUTDOORS LIMITED
The onset of COVID-19 in March 2020, and
the subsequent requirement to close all
stores on 23 March 2020, presented Go
Outdoors Limited with a new significant
trading challenge with the Board ultimately
deciding that it was not in the best interests
of the wider Group, and its shareholders, to
provide continued financial support to the
company in its existing form. Administrators
were subsequently appointed to Go
Outdoors Limited on 23 June 2020.
Prior to making this decision, the Board
considered a number of strategic options
for Go Outdoors Limited which included
the appointment of advisers in May 2020 to
market the business for a potential sale. The
Board examined the offers made through
the marketing process together with
the other options available to it and has
ultimately determined that, if fundamentally
restructured, Go would have a future
in the Group. Consequently, the Group,
via its newly incorporated subsidiary JD
Newco 1 Limited, subsequently re-acquired
the business and substantially all of the
assets of Go Outdoors Limited from its
Administrators for consideration of £56.5
million of which £55.2 million returns to
the Group as partial repayment against
an intergroup receivable of £82.8 million.
This proposal was reviewed and cleared in
advance by the independent Pre Pack Pool.
At the point of administration, Go Outdoors
Limited operated 67 standalone stores
and a trading website. The Group has
taken an initial 12 month licence with the
Administrator at the previously agreed
rental payments (cancellable by store
on a 2 week notice period) such that
it will continue to occupy all of the Go
Outdoors stores and, subject to agreeing
new leases, it is the Group’s intention to
retain the majority of the retail estate. It
is also the Group’s intention to honour
the principal historic liabilities of the Go
business including branded stock suppliers,
HMRC liabilities on taxation, customer
returns, and gift cards. Further, all pre-
existing Go Outdoors employees have
transferred across to the new business
with their previous terms and conditions of
employment preserved.
Included within the Group’s Statement of
Financial Position at 1 February 2020 were
Goodwill of £1.9 million, Intangible assets
(Brand and Fascia name) of £50.2 million,
Property, Plant and Equipment of £32.3
million, Right of use assets of £153.8 million,
Right of use liabilities of £167.6 million,
current assets of £69.7 million and current
liabilities of £62.2 million. The net impact
of the transaction is that the Group will
de-recognise the Right of use assets and
associated liabilities and record a net gain
or loss.
Due to the proximity of the date of the
transaction and the signing of the financial
statements, the directors have yet to
quantify all of the impairment and effects
resulting from the transaction. This will
be presented in the announcement of the
Interim Results for the period to 1 August
2020.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
247
32. Subsidiary Undertakings
32. Subsidiary Undertakings (continued)
Name of subsidiary
Place of
Registration
Registered Address
Nature of Business and Operation
Ownership
& Voting
Rights
Interest
90%
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
Distributor of fashion
apparel and accessories
Intermediate holding
company
100%
Dormant company
100%
Dormant company
100%
41 Commercial Street, Leith,
Edinburgh, EH6 6JD
Dormant company
41 Commercial Street, Leith,
Edinburgh, EH6 6JD
Intermediate holding
company
60%
60%
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
100%
Dormant company
100%
Dormant company
100%
Intermediate holding
company
Hollinsbrook Way,
Pilsworth, Bury, Lancashire,
BL9 8RR
Retailer of childrens
fashion apparel and
footwear
Hollinsbrook Way,
Pilsworth, Bury, Lancashire,
BL9 8RR
Retailer of premium
womens fashion apparel
and footwear
Hollinsbrook Way,
Pilsworth, Bury, Lancashire,
BL9 8RR
Retailer of outdoor
footwear, apparel and
equipment
Hollinsbrook Way,
Pilsworth,Bury, Lancashire,
BL9 8RR
Dormant company
100%
100%
80%
80%
100%
2Squared
Agency Limited
ActivInstinct
Holdings
Limited
ActivInstinct
Limited*
Allsports.co.uk
Limited*
Alpine Bikes
Limited*
Alpine Group
(Scotland)
Limited*
Ark Fashion
Limited
Aspecto
(Holdings)
Limited
UK
UK
UK
UK
UK
UK
UK
UK
Aspecto Trading
Limited*
UK
Athleisure
Limited
Base
Childrenswear
Limited
Bernard Esher
Limited
UK
UK
UK
Blacks Outdoor
Retail Limited
UK
Blue Retail
Limited*
UK
*Indirect holding of the Company
246
Name of subsidiary
Place of
Registration
Registered Address
Nature of Business and Operation
Capso Holdings
Limited*
Isle of
Man
33–37 Athol Street, Isle Of
Man, IM1 1LB
Intermediate holding
company
UK
Castlebrook
Management
Company
Limited
Hollinsbrook Way,
Pilsworth, Bury, Lancashire,
BL9 8RR
Combined facilities
support activities
Ownership
& Voting
Rights
Interest
100%
100%
CCC Outdoors
Limited*
UK
Cuthbert House, Arley
Street, Sheffield, S2 4QP
Dormant company
100%
Champion Retail
Limited*
Ireland
Champion
Sports
(Holdings)
Unlimited*
Champion
Sports Group
Limited*
Champion
Sports Ireland*
Champion
Sports Newco
Limited*
Choice 33
Limited*
Ireland
Ireland
Ireland
Ireland
UK
Choice Limited* UK
Cloggs Online
Limited
Clothingsites
Holdings
Limited
UK
UK
Dantra Limited
UK
Duffer of St
George Limited
UK
*Indirect holding of the Company
3 Burlington Road, Dublin
4, D04RD68, Republic of
Ireland
3 Burlington Road, Dublin
4, D04RD68, Republic of
Ireland
3 Burlington Road, Dublin
4, D04RD68, Republic of
Ireland
3 Burlington Road, Dublin
4, D04RD68, Republic of
Ireland
3 Burlington Road, Dublin
4, D04RD68, Republic of
Ireland
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
Retailer of sports and
leisure goods
100%
Dormant company
100%
Intermediate holding
company
Retailer of sports and
leisure goods
100%
100%
Dormant company
100%
Dormant company
87.55%
Retailer of fashion apparel
and footwear
87.55%
Dormant company
100%
Intermediate holding
company
Hollinsbrook Way,
Pilsworth, Bury, Lancashire,
BL9 8RR
Retailer of childrens
fashion apparel and
footwear
Hollinsbrook Way,
Pilsworth, Bury, Lancashire,
BL9 8RR
Licensor of a fashion
brand
100%
75%
100%
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
249
32. Subsidiary Undertakings (continued)
32. Subsidiary Undertakings (continued)
Name of subsidiary
Place of
Registration
Registered Address
Nature of Business and Operation
Ownership
& Voting
Rights
Interest
Name of subsidiary
Place of
Registration
Registered Address
Nature of Business and Operation
Ownership
& Voting
Rights
Interest
Hollinsbrook Way, Pilsworth,
Bury, Lancashire, BL9 8RR
Dormant company
90%
Hollinsbrook Way, Pilsworth,
Bury, Lancashire, BL9 8RR
Dormant company
100%
Hollinsbrook Way, Pilsworth,
Bury, Lancashire, BL9 8RR
Intermediate holding
company
100%
Hollinsbrook Way, Pilsworth,
Bury, Lancashire, BL9 8RR
Dormant company
100%
Hollinsbrook Way, Pilsworth,
Bury, Lancashire, BL9 8RR
Intermediate holding
company
Hollinsbrook Way, Pilsworth,
Bury, Lancashire, BL9 8RR
Distributor of sports
apparel and footwear
Viale Majno Luigi 17/A,
20122 Milano Italy
Distributor of sports
apparel and footwear
100%
100%
100%
Hollinsbrook Way, Pilsworth,
Bury, Lancashire, BL9 8RR
Dormant company
100%
Hollinsbrook Way, Pilsworth,
Bury, Lancashire, BL9 8RR
Retailer of sports inspired
footwear and apparel
100%
Hollinsbrook Way, Pilsworth,
Bury, Lancashire, BL9 8RR
Hollinsbrook Way, Pilsworth,
Bury, Lancashire, BL9 8RR
Dormant company
100%
Dormant company
100%
Hollinsbrook Way, Pilsworth,
Bury, Lancashire, BL9 8RR
Dormant company
90%
Hollinsbrook Way, Pilsworth,
Bury, Lancashire, BL9 8RR
Intermediate holding
company
3308 N. Mitthoeffer Rd.
Indianapolis, IN 46235
Intermediate holding
company
Hollinsbrook Way, Pilsworth,
Bury, Lancashire, BL9 8RR
Intermediate holding
company
Hollinsbrook Way, Pilsworth,
Bury, Lancashire, BL9 8RR
Retailer of outdoor
footwear, apparel and
equipment
100%
100%
60%
60%
UK
UK
UK
UK
UK
UK
Italy
UK
UK
UK
UK
UK
UK
US
UK
UK
Exclusive
Footwear
Limited
First Sport
Limited*
Focus Brands
Limited
Focus
Equipment
Limited*
Focus Group
Holdings
Limited*
Focus
International
Limited*
Focus Italy
S.pa.*
Focus Sports
& Leisure
International
Limited*
Footasylum
Limited
Footasylum
Brands Limited
Footpatrol
London 2002
Limited
Frank Harrison
Limited*
Genesis Finco
Limited
Genesis
Holdings Inc
George Fisher
Holdings
Limited*
George Fisher
Limited*
248
GetTheLabel.
com Limited*
Giulio Fashion
Limited
UK
UK
Giulio Limited*
UK
Giulio Woman
Limited*
Go Explore
Consulting
Limited*
Go Outdoors
Fishing Limited*
Go Outdoors
Limited*
Go Outdoors
Topco Limited
Graham Tiso
Limited*
Henleys
Clothing
Limited
Hip Store
Limited
UK
UK
UK
UK
UK
UK
UK
UK
Hollinsbrook Way,
Pilsworth, Bury, Lancashire,
BL9 8RR
24–32 King Street,
Cambridge,
Cambridgeshire, CB1 1LN
24–32 King Street,
Cambridge,
Cambridgeshire, CB1 1LN
24–32 King Street,
Cambridge,
Cambridgeshire, CB1 1LN
Cuthbert House, Arley
Street, Sheffield, S2 4QP
Dormant company
80%
Intermediate holding
company
Retailer of premium
fashion apparel and
footwear
87.55%
87.55%
Dormant company
87.55%
Dormant company
100%
Cuthbert House, Arley
Street, Sheffield, S2 4QP
Retailer of outdoor leisure
equipment and apparel
Cuthbert House, Arley
Street, Sheffield, S2 4QP
Retailer of outdoor
footwear, apparel and
equipment
Cuthbert House, Arley
Street, Sheffield, S2 4QP
Intermediate holding
company
41 Commercial Street, Leith,
Edinburgh, EH6 6JD
Retailer of outdoor
footwear, apparel and
equipment
100%
100%
100%
60%
Hollinsbrook Way,
Pilsworth, Bury, Lancashire,
BL9 8RR
Dormant company
100%
Hollinsbrook Way,
Pilsworth, Bury, Lancashire,
BL9 8RR
Retailer of premium
mens fashion apparel and
footwear
100%
50%
Intermediate holding
company
Iberian Sports
Retail Group SL
Spain
Il Sarto Milano
Limited
Infinities Retail
Group Holdings
Limited
Infinities Retail
Group Limited*
UK
UK
UK
*Indirect holding of the Company
Polígono Industrial de las
Atalayas, Avenida Euro, N2,
Alicante 03114.
Tanzaro House, Ardwick
Green N, Manchester, M12
6HD
Hollinsbrook Way,
Pilsworth, Bury, Lancashire,
BL9 8RR
Hollinsbrook Way,
Pilsworth, Bury, Lancashire,
BL9 8RR
Retailer of fashion apparel 27%
Intermediate holding
company
100%
Dormant company
100%
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
251
32. Subsidiary Undertakings (continued)
32. Subsidiary Undertakings (continued)
Name of subsidiary
Place of
Registration
Registered Address
Nature of Business and Operation
Dormant company
Ownership
& Voting
Rights
Interest
100%
IRG Altrincham
Limited*
UK
IRG Birkenhead
Limited*
UK
IRG Blackburn
Limited*
IRG Bradford
Limited*
IRG Bury
Limited*
UK
UK
UK
IRG Chesterfield
Limited*
UK
IRG Denton
Limited*
IRG Derby
Limited*
IRG Stockport
Limited*
IRG Stoke
Limited*
UK
UK
UK
UK
IRG Warrington
Limited*
UK
J D Sports
Limited
UK
Jandernama
Spain
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
Hollinsbrook Way,
Pilsworth, Bury, Lancashire,
BL9 8RR
Polígono Industrial de las
Atalayas, Avenida Euro, N2,
Alicante 03114.
Dormant company
100%
Dormant company
100%
Dormant company
100%
Dormant company
100%
Dormant company
100%
Dormant company
100%
Dormant company
100%
Dormant company
100%
Dormant company
100%
Dormant company
100%
Dormant company
100%
Intermediate holding
company
100%
100%
JD Academy
Limited
UK
Hollinsbrook Way,
Pilsworth, Bury, Lancashire,
BL9 8RR
Management consultancy
activities other than
financial management
*Indirect holding of the Company
250
Name of subsidiary
Place of
Registration
Registered Address
Nature of Business and Operation
Ownership
& Voting
Rights
Interest
JD Canary
Islands Sports
SL*
JD Size GmbH
Spain
Polígono Industrial de las
Atalayas, Avenida Euro, N2,
Alicante 03114.
Retailer of sports inspired
footwear and apparel
65%
Germany Schloßstraße 107–108, 12163
Berlin, Germany
Retailer of sports inspired
footwear and apparel
100%
JD Spain Sports
Fashion 2010
SL*
Spain
JD Sports
(Thailand)
Limited
Thailand
JD Sports
Active Limited
UK
Polígono Industrial de las
Atalayas, Avenida Euro, N2,
Alicante 03114.
Room No. TT04 No.
1106 Sukhumvit Road,
Phrakhanong Sub-district,
Klongtoey District, Bangkok
Hollinsbrook Way,
Pilsworth, Bury, Lancashire,
BL9 8RR
Retailer of sports inspired
footwear and apparel
65%
Retailer of sports inspired
footwear and apparel
80%
Dormant company
100%
JD Sports
Fashion
(France) SAS
JD Sports
Fashion AT
GmbH
JD Sports
Fashion Aus
Pty*
JD Sports
Fashion
Belgium BV
JD Sports
Fashion BV
JD Sports
Fashion
Denmark APS
JD Sports
Fashion Finland
OY
JD Sports
Fashion
Germany GmbH
JD Sports
Fashion
Holdings Aus
Pty
France
96 R Du Pont Rompu,
59200 Tourcoing.
Intermediate holding
company
100%
Austria Wallnerstraße 1, 3. Stock,
1010 Vienna, Austria
Retailer of sports inspired
footwear and apparel
100%
Australia
Level 12, 54 Park St, Sydney,
NSW 2000
Retailer of sports inspired
footwear and apparel
90%
Belgium Wiegstraat 21, 2000
Antwerpen.
Retailer of sports inspired
footwear and apparel
100%
Netherlands Oosteinderweg 247 B 1432
Denmark
Finland
AT Aalsmeer.
c/o Harbour House,
Sundkrogsgade 21, 2100
Copenhagen.
c/o Intertrust Finland Oy,
Lautatarhankatu 6, 00580,
Helsinki
Retailer of sports inspired
footwear and apparel
100%
Retailer of sports inspired
footwear and apparel
100%
Retailer of sports inspired
footwear and apparel
100%
Germany
Lap Street 107–108, 12163
Berlin.
Retailer of sports inspired
footwear and apparel
80%
Australia
Level 12, 54 Park St, Sydney,
NSW 2000
Intermediate holding
company
90%
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
253
32. Subsidiary Undertakings (continued)
32. Subsidiary Undertakings (continued)
Name of subsidiary
Place of
Registration
Registered Address
Nature of Business and Operation
Name of subsidiary
Place of
Registration
Registered Address
Nature of Business and Operation
Ownership
& Voting
Rights
Interest
100%
JD Sports
Fashion India
LLP
JD Sports
Fashion Korea
Inc
JD Sports
Fashion PTE
LTD*
JD Sports
Fashion SDN
BHD
India
Korea
Singapore
Malaysia
B-808 The Platina,
Gachibawli, Hyderabad,
Telangana, India – 500032
Outsourced multi-channel
operations
6F Yoonik Bldg. 430 Eonju-
ro, Gangnam-gu, Seoul
Retailer of sports inspired
footwear and apparel
50%
190 Middle Road, 14–05,
Fortune Centre, Singapore,
188979
Suite D23, 2ND Floor, Plaza
Pekeliling, No. 2, Jalan
Tun Razak, 50400 Kuala
Lumpur, Malaysia
Retailer of sports inspired
footwear and apparel
80%
Retailer of sports inspired
footwear and apparel
80%
Kukri Events
Limited*
Kukri GB
Limited*
Kukri NZ
Limited*
Kukri Pte
Limited*
Kukri Shanghai
Limited*
UK
UK
Hollinsbrook Way,
Pilsworth, Bury, Lancashire,
BL9 8RR
Dormant company
Hollinsbrook Way,
Pilsworth, Bury, Lancashire,
BL9 8RR
Distributor and retailer
of sports apparel and
accessories
New
Zealand
Unit 2, 45 The Boulevard,
Te Rapa Park, Hamilton
Distributor of sports
apparel and accessories
Singapore 10 Anson Road, 19–15
International Plaza,
Singapore 079903
Shanghai Room 221–225, No. 2
Ownership
& Voting
Rights
Interest
100%
100%
75%
100%
JD Sports
Fashion SRL
Italy
Via Montenapoleone n. 29 –
20121 Milan, Italy
Retailer of sports inspired
footwear and apparel
100%
JD Sports
Fashion Sweden
AB
JD Sports Gyms
Acquisitions
Limited*
Sweden
UK
JD Sports Gyms
Limited
UK
Ireland
John David
Sports Fashion
(Ireland)
Limited
KGR Rugby
Limited
UK
C/o Intertrust CN (Sweden)
AB, PO Box 16285, 103 25
Stockholm, Sweden
Hollinsbrook Way,
Pilsworth, Bury, Lancashire,
BL9 8RR
Hollinsbrook Way,
Pilsworth, Bury, Lancashire,
BL9 8RR
3 Burlington Road, Dublin
4, D04RD68, Republic of
Ireland
Retailer of sports inspired
footwear and apparel
100%
Dormant company
87.5%
Operator of fitness
centres
87.5%
Retailer of sports inspired
footwear and apparel
100%
Hollinsbrook Way,
Pilsworth, Bury, Lancashire,
BL9 8RR
Distributor of rugby
apparel and accessories
100%
Kukri (Asia)
Limited*
Kukri (HK)
Limited*
Hong Kong Unit 4, 27th Floor, Global
Trade Square, 21 Wong
Chuk Hang Road, Hong
Kong
Distributor of sports
apparel and accessories
100%
Hong Kong Unit 4, 27th Floor, Global
Dormant company
100%
Trade Square, 21 Wong
Chuk Hang Road, Hong
Kong
Kukri Australia
Pty Limited*
Australia
39 Charles Street,
Norwood, SA 5067
Distributor of sports
apparel and accessories
100%
252
Kukri Sports
Canada Inc*
Canada
Kukri Sports
Ireland Limited*
Ireland
Kukri Sports
Limited
UK
Kukri Sports
Middle East
JLT*
Middle
East
Mainline
Menswear
Holdings
Limited
Mainline
Menswear
Limited*
Mallet.
Footwear LTD
UK
UK
UK
Marathon
Sports Limited*
Ireland
*Indirect holding of the Company
Distributor of sports
apparel and accessories
Distributor of sports
apparel and accessories
100%
Distributor of sports
apparel and accessories
75%
Distributor of sports
apparel and accessories
100%
Intermediate holding
company
100%
Distributor of sports
apparel and accessories
100%
Intermediate holding
company
80%
Building, No.38 Debao
Road, China (Shanghai)
Pilot Free Trade Zone,
Shanghai, 200131, China
106-1533 Broadway St,
Port Coquitlam, British
Columbia, V3c 6P3
3 Burlington Road, Dublin
4, D04RD68, Republic of
Ireland
Hollinsbrook Way,
Pilsworth, Bury, Lancashire,
BL9 8RR
Lakeview Tower, Jumeirah
Lake Towers, Dubai, United
Arab Emirates
Hollinsbrook Way,
Pilsworth, Bury, Lancashire,
BL9 8RR
Hollinsbrook Way,
Pilsworth, Bury, Lancashire,
BL9 8RR
Retailer of premium
mens fashion apparel and
footwear
80%
25%
Retailer of fashion
apparel and footwear
Dormant company
100%
31 Grange Court Upper
Park, Loughton, Essex,
England, IG10 4QY
3 Burlington Road, Dublin
4, D04RD68, Republic of
Ireland
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
255
32. Subsidiary Undertakings (continued)
Name of subsidiary
Place of
Registration
Registered Address
Nature of Business and Operation
Ownership
& Voting
Rights
Interest
32. Subsidiary Undertakings (continued)
Name of subsidiary
Place of
Registration
Registered Address
Nature of Business and Operation Ownership
& Voting
Rights
Interest
Millets Limited
UK
Mitchell’s
Practical
Campers
Limited*
Nanny State
Limited
UK
UK
Nicholas
Deakins Limited
UK
Old Brown
Bag Clothing
Limited*
UK
OneTrueSaxon
Limited
UK
Open Fashion
Limited
UK
PCPONE*
Ireland
Peter Werth
Limited*
UK
PG2019 Limited UK
Pink Soda
Limited
UK
Premium
Fashion Limited
UK
Prima Designer
Limited*
UK
R.D. Scott
Limited
UK
*Indirect holding of the Company
254
Hollinsbrook Way,
Pilsworth, Bury, Lancashire,
BL9 8RR
Cuthbert House, Arley
Street, Sheffield, S2 4QP
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
3 Burlington Road, Dublin
4, D04RD68, Republic of
Ireland
Millae & Bryce Limited,
Bonnington Bond 2
Anderson Place, Edinburgh,
EH6 5NP
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
100%
Dormant company
100%
Dormant company
100%
Distributor of fashion
footwear
100%
Dormant company
100%
Dormant company
100%
Dormant company
100%
Intermediate holding
company
100%
Rascal Clothing
Ltd
UK
SDSR – Sports
Division SR,
S.A*
Portugal
Shanghai Go
Outdoors
Limited*
China
Size? Limited
UK
Sonneti
Fashions
Limited*
Source Lab
Limited
South South
East Limited
UK
UK
UK
Acre House, 11/15 William
Road, London, United
Kingdom, NW1 3ER
Rua Joao Mendoça, nº
505, Matosinhos Freguesia,
São Mamede de Infesta e
Senhora da Hora, 4464 503
Matosinhos, Portugal
Retailer of fashion
apparel and footwear
Retailer of sports and
leisure goods
Room A1412, 1 Building,
No.5500 Yuanjiang Road,
Minhang, Shanghai, China
Sourcing of products and
management of supplier
relationships
Hollinsbrook Way,
Pilsworth, Bury, Lancashire,
BL9 8RR
Retailer of sports
inspired footwear and
apparel
50%
50%
100%
100%
Hollinsbrook Way,
Pilsworth, Bury, Lancashire,
BL9 8RR
Hollinsbrook Way,
Pilsworth, Bury, Lancashire,
BL9 8RR
Hollinsbrook Way,
Pilsworth, Bury, Lancashire,
BL9 8RR
Dormant company
100%
Design and distributor of
sportswear
85%
Intermediate holding
company
50.1%
Spikes Holding
LLC*
US
3308 N. Mitthoeffer Rd.
Indianapolis, IN 46235
Dormant company
100%
Dormant company
100%
Spodis SA*
France
96 R Du Pont Rompu,
59200 Tourcoing, France
Retailer of sports and
leisure goods
100%
30%
Retailer of fashion
apparel and footwear
Intermediate holding
company
100%
100%
Dormant company
100%
Intermediate holding
company
Retailer of fashion
apparel and footwear
100%
100%
Sportiberica
– Sociedade
de Arigos de
Desporto S.A.
Sports
Unlimited
Retail BV
Sport Zone
Canarias (SL)*
Spain
Retailer of sports and
leisure goods
Avenida el Paso, 10, 1º,
Edificio Multiusos, Polígono
Industrial Los Majuelos, La
Laguna 38201, Santa Cruz
de Tenerife, Spain
Avenida das Indústrias, n.º
63, Agualva do Cacém,
Sintra, Portugal
Portugal
Retailer of sports and
leisure goods
65%
Netherlands Oosteinderweg 247 B
1432 AT Aalsmeer, The
Netherlands
Retailer of sports and
leisure goods
100%
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
257
32. Subsidiary Undertakings (continued)
Name of subsidiary
Place of
Registration
Registered Address
Nature of Business and Operation Ownership
& Voting
Rights
Interest
32. Subsidiary Undertakings (continued)
Name of subsidiary
Place of
Registration
Registered Address
The John David
Group Limited
UK
Tiso Group
Limited
Topgrade
Sportswear
Holdings
Limited
Topgrade
Sportswear
Limited*
Touchwood
Sports Limited
UC Clothing
Limited
Ultimate
Outdoors
Limited*
Varsity Kit
Limited*
Weavers Door
Ltd
UK
UK
UK
UK
UK
UK
UK
UK
Hollinsbrook Way,
Pilsworth, Bury,
Lancashire, BL9 8RR
41 Commercial Street,
Leith, Edinburgh, EH6
6JD
Hollinsbrook Way,
Pilsworth, Bury,
Lancashire, BL9 8RR
Hollinsbrook Way,
Pilsworth, Bury,
Lancashire, BL9 8RR
Cuthbert House, Arley
Street, Sheffield, S2 4QP
Kendal House Murley
Moss Business Park,
Oxenholme Road, Kendal,
Cumbria, England, LA9
7RL
Hollinsbrook Way,
Pilsworth, Bury,
Lancashire, BL9 8RR
Hollinsbrook Way,
Pilsworth, Bury,
Lancashire, BL9 8RR
Hollinsbrook Way,
Pilsworth, Bury,
Lancashire, BL9 8RR
Polígono Industrial de las
Atalayas, Avenida Euro,
N2, Alicante 03114, Spain
Retailer of sports and
leisure goods
50%
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
100%
Business support service
activities
100%
Intermediate holding
company
100%
Retailer of fashion
apparel and footwear
87.55%
Dormant company
100%
41 Commercial Street,
Leith, Edinburgh, EH6 6JD
Intermediate holding
company
Tanzaro House, Ardwick
Green N, Manchester,
England, M12 6HD
Retailer of fashion
apparel
60%
36%
3308 N. Mitthoeffer Rd.
Indianapolis, IN 46235
Retailer of sports and
leisure inspired goods
100%
3308 N. Mitthoeffer Rd.
Indianapolis, IN 46235
Dormant company
100%
3308 N. Mitthoeffer Rd.
Indianapolis, IN 46235
Retailer of sports and
leisure inspired goods
3308 N. Mitthoeffer Rd.
Indianapolis, IN 46235
Retailer of sports and
leisure inspired goods
3308 N. Mitthoeffer Rd.
Indianapolis, IN 46235
Retailer of sports and
leisure inspired goods
3308 N. Mitthoeffer Rd.
Indianapolis, IN 46235
Intermediate holding
company
100%
100%
100%
100%
Spain
Sprinter
Megacentros
Del Deporte
SLU*
Squirrel Sports
Limited*
UK
Streamdata
Limited
Tessuti Group
Limited
UK
UK
Tessuti Limited* UK
Tessuti Retail
Limited*
The Alpine
Group Limited*
The Couture
Club Ltd*
The Finish Line
Distribution, Inc
The Finish Line
MA, Inc
The Finish Line
Puerto Rico, Inc
The Finish Line
Transportation,
Inc
The Finish Line
USA, Inc
The Finish Line,
Inc
UK
UK
UK
US
US
US
US
US
US
*Indirect holding of the Company
256
Nature of Business and Operation Ownership
& Voting
Rights
Interest
Dormant company
100%
Intermediate holding
company
60%
Dormant company
80%
Distributor and
multichannel retailer
of sports and fashion
apparel and footwear
80%
Dormant company
100%
Retailer of fashion
apparel and footwear
50.1%
Dormant company
100%
Dormant company
100%
Retailer of fashion
apparel and footwear
100%
COMPANY BALANCE SHEET
COMPANY STATEMENT OF CHANGES IN EQUITY
259
As at 1 February 2020
For the 52 weeks ended 1 February 2020
Assets
Intangible assets
Property, plant and equipment
Investment property
Other assets
Investments
Associates
Deferred tax assets
Total non-current assets
Stocks
Debtors
Cash and cash equivalents
Total current assets
Total assets
Liabilities
Interest-bearing loans and borrowings
Creditors : amounts falling due within one year
Lease Liabilities
Provisions
Income tax liabilities
Total current liabilities
Creditors: amounts falling due after more than one year
Lease Liabilities
Provisions
Total non-current liabilities
Total liabilities
Total assets less total liabilities
Capital and reserves
Issued ordinary share capital
Share premium
Retained earnings
Note
C5
C6
C8
C9
C10
C17
C11
C12
C13
C13
C14
C7
C16
C15
C7
C16
C18
As at 1 February
2020
As at 2 February
2019
£m
£m
27.9
607.6
3.0
–
587.3
2.5 –
1.0
1,229.3
181.6
487.6
143.8
813.0
26.0
158.4
3.2
12.8
520.7
1.7
722.8
169.8
449.5
81.2
700.5
2,042.3
1,423.3
–
(370.8)
(68.3) –
–
(27.4)
(466.5)
(5.6)
(420.9) –
–
(426.5)
(893.0)
1,149.3
2.4
11.7
1,135.2
(30.0)
(345.9)
(0.3)
(25.3)
(401.5)
(33.4)
(0.2)
(33.6)
(435.1)
988.2
2.4
11.7
974.1
Total equity
These financial statements were approved by the Board of Directors on 7 July 2020 and were
signed on its behalf by:
1,149.3
988.2
N Greenhalgh
Director
Registered number: 1888425
258
Balance at 3 February 2018
Profit for the period
Total comprehensive income for the period
Dividends to equity holders
Ordinary
share
capital
Share
premium
£m
2.4
–
–
–
£m
11.7
–
–
–
Balance at 2 February 2019
2.4
11.7
Profit for the period
Total comprehensive income for the period
Dividends to equity holders
–
–
–
–
–
–
Retained
earnings
£m
760.6
229.4
229.4
(15.9)
974.1
177.8
177.8
(16.7)
Total
equity
£m
774.7
229.4
229.4
(15.9)
988.2
177.8
177.8
(16.7)
Balance at 1 February 2020
2.4
11.7
1,135.2
1,149.3
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”).
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 have been taken.
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:
• 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 IFRS15
Revenue from contracts with customers in
respect of disaggregation of revenue and
performance obligations;
• Certain disclosures required by IFRS16
Leases in respect of the Company acting as
a lessor;
• Certain disclosures required by IFRS 3
NOTES TO THE COMPANY FINANCIAL STATEMENTS
NOTES TO THE COMPANY FINANCIAL STATEMENTS
261
C1. BASIS OF PREPARATION (CONTINUED)
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 £177.8 million (2019: £229.4
million).
The accounting policies set out below
have, unless otherwise stated, been applied
consistently to all periods presented in these
financial statements.
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 182 to 189 in the
Group financial statements.
On transition to IFRS 16, the Company
recognised a right-of-use asset, including
investment property, and lease liabilities,
recognising any difference in retained
earnings. The impact on transition is
summarised below (not including the
adjustment for deferred income, initial direct
costs or onerous leases).
Right-of-use asset presented in property, plant and equipment
Lease liabilities
Retained earnings
3 February 2019
£m
489.2
489.2
–
When measuring lease liabilities for leases
that were classified as operating leases, the
Company discounted lease payments using
the incremental borrowing rate at 3 February
2019. The weighted average rate applied at
transition was 2.9%. As at 1 February 2020, the
weighted average discount rate applied to the
lease portfolio of the Company is 3.2%.
A reconciliation of the Company’s operating
lease commitment at 2 February 2019 to
the lease liability recognised at transition to
IFRS16 is shown below.
Operating lease commitment at 2nd February 2019 as
disclosed in the Group’s consolidated financial statements
Discounted using the incremental borrowing rate at 3rd February 2019
Recognition exemption for leases of low‐value assets and for leases with
less than 12 months of lease term at transition
Extension options reasonably certain to be exercised
Working capital movements
Adjustment for expired leases
Lease liabilities and Right of Use asset recognised at 3 February 2019
3 February 2019
£m
558.2
(86.0)
(6.2)
(24.5)
6.6
41.1
489.2
260
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.
C4. STAFF NUMBERS AND COSTS
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
Pension costs
Other employed staff costs
2020
14,767
566
15,333
10,173
2019
14,322
585
14,907
9,542
52 weeks to
1 February 2020
52 weeks to
2 February 2019
£m
225.7
15.8
3.4
1.2
246.1
£m
202.9
13.6
2.4
1.0
219.9
C5. INTANGIBLE ASSETS
Goodwill in the Company comprises the goodwill on acquisition of First Sport (£15.0 million) and
Allsports (£0.9 million).
Brand names in the Company comprise all brand names included in the Group table (Note 12)
within the Sport Fashion segment with the exclusion of the Duffer brand name which is included
within Duffer of St George Limited and the Doone brand name which is included in the Sport
Zone group.
Cost or valuation
At 2 February 2019
Additions
At 1 February 2020
Amortisation and impairment
At 2 February 2019
Charge for the period
At 1 February 2020
Net book value
At 1 February 2020
At 2 February 2019
Goodwill
Brand licences
Brand names
£m
19.9
–
19.9
4.0
–
4.0
15.9
15.9
£m
11.7
–
11.7
10.3
0.7
11.0
0.7
1.4
£m
7.4
–
7.4
7.4
–
7.4
–
–
Software
development
£m
22.8
13.5
36.3
14.1
10.9
25.0
11.3
8.7
Total
£m
61.8
13.5
75.3
35.8
11.6
47.4
27.9
26.0
NOTES TO THE COMPANY FINANCIAL STATEMENTS
NOTES TO THE COMPANY FINANCIAL STATEMENTS
263
C6. PROPERTY, PLANT AND EQUIPMENT
Improvements
to short
leasehold
properties
Land
Computer Fixtures and
fittings
equipment
Motor Right of use
assets
vehicles
£m
£m
£m
£m
£m
£m
Total
£m
Cost
At 2 February 2019
Recognised on adoption of IFRS16
Additions
Disposals
Reclassifications
Other
13.0
–
–
–
–
–
18.0
–
2.4
(0.2)
–
0.2
42.0
–
3.5
(0.1)
–
–
259.5
–
12.0
(1.0)
–
3.7
0.1
–
–
–
–
–
– 332.6
489.2 489.2
58.4
(7.6)
0.5
3.9
40.5
(6.3)
0.5
–
At 1 February 2020
13.0
20.4
45.4
274.2
0.1
523.9 877.0
Depreciation and impairment
At 2 February 2019
Charge for period
Disposals
Impairments
Other
At 1 February 2020
Net book value
At 1 February 2020
At 2 February 2019
–
–
–
–
–
–
13.0
13.0
14.4
3.0
(0.2)
–
(1.3)
15.9
4.5
3.6
36.6
2.8
–
–
–
39.4
6.0
5.4
123.1
18.7
(0.7)
–
–
141.1
133.1
136.4
0.1
–
–
–
–
0.1
–
–
–
70.6
–
2.3
–
174.2
95.1
(0.9)
2.3
(1.3)
72.9 269.4
451.0 607.6
–
158.4
C7. LEASES
The Company has adopted the same accounting policies as the Group in respect of IFRS16 Leases
and adopted IFRS16 on 3 February 2019. Details of the transition to this accounting standard, the
accounting policies applied prior to adoption of IFRS16 Leases and those applied from 3 February
2019 onwards can be found in note 1 to the Group financial statements on pages 182 to 189 and
note 14 to the Group financial statements on pages 212 to 217.
As a lessee
‘Property, plant and equipment’ comprise owned and leased assets that do not meet the
definition of investment property.
Property, plant and equipment
Right-of-use assets, except for investment property
note
C6
As at 2020
£m
156.6
451.0
607.6
262
C7. LEASES (CONTINUED)
The Company leases many assets including land and buildings, vehicles, machinery and IT
equipment. Information about leases for which the Company is a lessee is presented below.
Right-of-use assets
Cost
Recognised on transition to IFRS16
Additions
Disposals
Remeasurement adjustments
At 1 February 2020
Depreciation and impairment
At 3 February 2019
Depreciation charge for the period
Impairment of Right of Use assets
At 1 February 2020
At 1 February 2020
Lease Liabilities
Property
£m
Vehicles
£m
487.7
40.3
(6.3)
0.5
522.2
–
69.8
2.3
72.1
450.1
1.5
0.2
–
–
1.7
–
0.8
–
0.8
0.9
Maturity analysis – contractual undiscounted cash flows
Less than one year
One to five years
More than five years
Total undiscounted lease liabilities at 1 February 2020
Lease liabilities included in the statement of financial position at 1 February 2020
Current
Non-Current
Amounts recognised in profit or loss
Interest on lease liabilities
Variable lease payments not included in the measurement of lease liabilities
Income from subleasing right-of-use assets
Expenses relating to short terms leases and low value leases
As a lessor
Lease income from lease contracts in which the Company acts as a lessor is as below.
Operating Lease
Lease Income
Total
£m
489.2
40.5
(6.3)
0.5
523.9
–
70.6
2.3
72.9
451.0
As at 2020
£m
78.4
246.9
218.9
544.2
489.2
68.3
420.9
52 weeks to
1 February
2020
£m
14.6
13.0
0.1
5.8
52 weeks to
1 February
2020
£m
0.1
NOTES TO THE COMPANY FINANCIAL STATEMENTS
NOTES TO THE COMPANY FINANCIAL STATEMENTS
265
C7. LEASES (CONTINUED)
The Company leases out residential and office properties. The Company has classified these
leases as operating leases, because they do not transfer substantially all the risk and rewards
incidental to the ownership of the assets.
The following table sets out a maturity analysis of lease payments, showing the undiscounted
lease payments to be received after the reporting date.
Within one year
Later than one year and not later than five years
After five years
2020
£m
0.1
0.1
– –
0.2
2019
£m
0.5
0.9
1.4
C8. INVESTMENT PROPERTY
Investment property, which is property held to earn rentals, is stated at cost less accumulated
depreciation and impairment losses. Investment property is depreciated over a period of 50
years on a straight line basis, with the exception of freehold land, which is not depreciated. The
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.
Cost
2 February 2019 and 1 February 2020
Depreciation and impairment
At 2 February 2019
Charge for period
At 1 February 2020
Net book value
At 1 February 2020
At 2 February 2019
£m
4.8
1.6
0.2
1.8
3.0
3.2
The investment properties brought forward relate to properties leased to Focus Brands Limited
(£4.2 million) and Kukri Sports Limited (£0.6 million).
These properties remain Investment Properties from the Company perspective as at 1 February
2020.
Based on an external valuation prepared as at 31 December 2018, the fair value of the investment
properties as at that date was £4.5 million.
Management do not consider either of the investment properties to be impaired as the future
rental income supports the carrying value.
264
C9. NON-CURRENT OTHER ASSETS
Cost
At 2 February 2019
IFRS16 reclassification
At 1 February 2020
Depreciation and impairment
At 2 February 2019
IFRS16 reclassification
At 1 February 2020
Net book value
At 1 February 2020
At 2 February 2019
Legal Fees
Lease Premia
£m
£m
19.5
(19.5)
–
9.0
(9.0)
–
–
10.5
5.0
(5.0)
–
2.7
(2.7)
–
–
2.3
Total
£m
24.5
(24.5)
–
11.7
(11.7)
–
–
12.8
C10. INVESTMENTS
In the Company’s accounts all investments in subsidiary undertakings and joint ventures are
stated at cost less provisions for impairment losses.
Cost
At 2 February 2019
Additions
At 1 February 2020
Impairment
At 2 February 2019
Impairments
At 1 February 2020
Net book value
At 1 February 2020
At 2 February 2019
2020
£m
526.2
109.1
635.3
5.5
42.5
48.0
587.3
520.7
The additions to investments in the current year comprise the following. Unless otherwise stated
the investment is 100% owned.
Footasylum Plc
Sports Unlimited Retail BV
JD Sports Fashion Sweden AB
Rascal Clothing Limited
JD Sports Fashion Finland Oy
Bernard Esher Limited
UC Clothing Limited
Total additions
A list of subsidiaries is shown in Group Note 32.
2020
£m
86.0
12.3
4.1
3.5
2.6
0.3
0.3
109.1
NOTES TO THE COMPANY FINANCIAL STATEMENTS
NOTES TO THE COMPANY FINANCIAL STATEMENTS
267
C11. STOCKS
Finished goods and goods for resale
2020
£m
181.6
2019
£m
169.8
The Company has £19.0 million (2019: £18.3 million) of stock provisions at the end of the period.
C12. TRADE AND OTHER RECEIVABLES
Current assets
Trade receivables
Other receivables
Prepayments and accrued income
Amounts owed by other Group companies
2020
£m
2.0
14.5
33.8
437.3
487.6
2019
£m
2.4
21.2
23.5
402.4
449.5
A summary of the Company’s exposure to credit risk for trade receivables is as follows:
Not past due
Past due 0 – 30 days
Past due 30–60 days
Past 60 days
Gross
£m
1.6
0.1
0.3
0.3
2.3
2020
Provision
£m
–
–
–
(0.3)
(0.3)
Net
£m
1.6
0.1
0.3
–
2.0
Gross
£m
1.8
0.3
0.1
0.4
2.6
2019
Provision
£m
–
–
–
(0.2)
(0.2)
Net
£m
1.8
0.3
0.1
0.2
2.4
C12. TRADE AND OTHER RECEIVABLES (CONTINUED)
A summary of the Company’s exposure to credit risk for trade receivables is as follows:
As at 1 February 2020
Not past due
Past due 0–30 days
Past due 30–60 days
Past due 61–90 days
More than 90 days past due
Total
As at 2 February 2019
Not past due
Past due 0–30 days
Past due 30–60 days
Past due 61–90 days
More than 90 days past due
Total
Movement on this provision is shown below:
At 2 February 2019
Created
At 1 February 2020
Weighted
average loss rate
Gross carrying
amount
Loss
allowance
Credit
impaired
£m
–
–
–
100.0%
100.0%
13.0%
£m
1.6
0.1
0.3
0.2
0.1
2.3
£m
–
–
–
(0.2)
(0.1)
(0.3)
£m
–
–
–
–
–
–
Weighted
average loss rate
Gross carrying
amount
Loss
allowance
Credit
impaired
£m
–
–
–
50.0%
–
7.7%
£m
1.8
0.3
0.1
0.4
–
2.6
£m
–
–
–
(0.2)
–
(0.2)
£m
–
–
–
–
–
–
COMPANY
£m
0.2
0.1
0.3
At 1 February 2020, the exposure to credit risk for trade receivables by geographic region was as
follows:
The Amounts owed by other Group companies is after a provision of £106.6 million (2019: £80.2
million) against the balances outstanding at the end of the period. The other classes within trade
and other receivables do not contain impaired assets.
Trade receivables
UK and Rest of world
Europe
Total
As at
1 February 2020
Total
As at
2 February 2019
Total
£m
–
2.3
2.3
£m
1.0
1.6
2.6
At 1 February 2020, the exposure to credit risk for trade receivables by type of counterparty was
as follows:
Supplier rebates and royalties
Total
As at
1 February 2020
Total
As at
2 February 2019
Total
£m
2.3
2.3
£m
2.6
2.6
C13. 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
Other
2020
£m
143.8
91.3
32.1
6.0
10.0
4.4
143.8
2019
£m
81.2
24.2
24.4
8.1
18.7
5.8
81.2
Financial Liabilities
See Note 19 of the Group accounts for information on the bank facilities. The maturity of the bank
loans and overdrafts are as follows:
At 1 February 2020, the carrying amount of the Company’s most significant customer was £0.2
million (2019: £1.0 million).
266
Current liabilities (within one year)
Bank loans and overdrafts
2020
£m
2019
£m
–
(30.0)
NOTES TO THE COMPANY FINANCIAL STATEMENTS
NOTES TO THE COMPANY FINANCIAL STATEMENTS
269
C13. FINANCIAL INSTRUMENTS (CONTINUED)
Credit Risk
The Company has provided guarantees on working capital and other banking facilities entered
into by Spodis SA (€6.6 million), Next Athleisure Pty Limited (AUS$15.3 million), and Kukri Sports
Limited and Kukri GB Limited (£1.0 million). In addition, the syndicated committed £700 million
bank facility, which was in place as at 1 February 2020, encompassed cross guarantees between
the Company, Blacks Outdoor Retail Limited, Tessuti Limited, Go Outdoors Limited and The Finish
Line, Inc., Focus Brands Limited and Focus International Limited to the extent to which any of
these companies were overdrawn. As at 1 February 2020, these facilities were drawn down by £nil
(2019: £30.0 million).
Fair Values
The fair values together with the carrying amounts shown in the Balance Sheet as at 1 February
2020 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
C12
C13
Carrying
amount
2020
Fair value
2020
£m
£m
478.8
143.8
(321.6)
(1.8)
478.8
143.8
(321.6)
(1.8)
299.2
299.2
–
Fair Value Hierarchy
For information on Company balances which are categorised at the same level as for Group, see
Note 20. In addition, Investment property held in the Company of £3.0 million (2019: £3.2 million)
is categorised as Level 3 within the fair value hierarchy.
C14. 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
C15. CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
Other creditors and accrued expenses
2020
£m
162.5
164.9
8.5
34.9
2019
£m
126.8
166.6
6.9
45.6
370.8
345.9
2020
£m
5.6
2019
£m
33.4
Included within other creditors and accrued expenses are put option liabilities of £1.8 million
(2019: £3.1 million). Put options are held at fair value through profit or loss.
268
C16. PROVISIONS
Balance at 2 February 2019
Reversal of onerous lease provision (IFRS 16)
Balance at 1 February 2020
Current
Non-current
C17. 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
Other
Tax assets / (liabilities)
Assets
2020
Assets
2019
Liabilities
2020
Liabilities
2019
£m
–
2.2
2.2
£m
–
2.3
2.3
£m
(1.2)
–
(1.2)
£m
(0.6)
–
(0.6)
Movement in Deferred Tax during the Period
Balance at 3 February 2018
Recognised in income
Balance at 2 February 2019
Recognised in income
Balance at 1 February 2020
Property, plant
and equipment
£m
0.2
(0.8)
(0.6)
(0.6)
(1.2)
Onerous
property
leases
£m
0.5
(0.5)
–
2019
£m
0.3
0.2
0.5
Net
2019
£m
(0.6)
2.3
1.7
Total
£m
2.2
(0.5)
1.7
(0.7)
1.0
2020
£m
–
–
–
Net
2020
£m
(1.2)
2.2
1.0
Other
£m
2.0
0.3
2.3
(0.1)
2.2
C18. CAPITAL
Issued Ordinary Share Capital for both the Company and Group is disclosed in Note 24 of the
Group financial statements.
C19. DIVIDENDS
After the reporting date the dividends proposed by both Company and Group directors is
disclosed in Note 26 of the Group financial statements.
C20. COMMITMENTS
As at 1 February 2020, the Company had entered into contracts to purchase property, plant and
equipment as follows:
Contracted
2020
£m
7.4
2019
£m
7.8
NOTES TO THE COMPANY FINANCIAL STATEMENTS
NOTES TO THE COMPANY FINANCIAL STATEMENTS
271
C21. RELATED PARTY TRANSACTIONS AND BALANCES
The Company made purchases of inventory from Pentland Group Limited in the period and the
Company also sold inventory to Pentland Group Limited in the period. During the period, the
Company entered into the following transactions with Pentland Group Limited:
Purchase of inventory
Other income
Income from Expenditure with
related parties
2020
related parties
2020
Income from Expenditure with
related parties
2019
related parties
2019
£m
–
0.1
£m
(23.5)
–
£m
–
0.1
£m
(23.5)
–
At the end of the period, the Company had the following balances outstanding with Pentland
Group Limited:
Amounts owed by Amounts owed to Amounts owed by Amounts owed to
related parties
2019
related parties
2020
related parties
2020
related parties
2019
Trade payables
£m
–
£m
(0.1)
£m
–
£m
(0.5)
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; and
• 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 Expenditure with
related parties
2020
related parties
2020
Income from Expenditure with
related parties
2019
related parties
2019
£m
169.1
0.3
11.6
0.2
3.1
6.0
£m
–
–
–
–
–
–
£m
125.7
2.3
16.0
0.3
0.9
4.1
£m
(1.8)
–
–
–
–
–
270
C21. RELATED PARTY TRANSACTIONS AND BALANCES (CONTINUED)
At the end of the period, the Company had the following balances outstanding with subsidiaries
not wholly owned:
Amounts owed by Amounts owed to Amounts owed by Amounts owed to
related parties
2019
related parties
2020
related parties
2020
related parties
2019
Non-trading loan receivable
Non-trading loan receivable (interest bearing)
Trade receivables
Other intercompany balances
Income tax group relief
£m
22.8
96.1
34.4
–
2.6
£m
–
–
–
(3.4)
(0.9)
£m
28.6
67.2
30.7
1.0
1.6
£m
–
–
–
(2.1)
(1.6)
C22. CONTINGENT LIABILITIES
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
€6.6 million (2019: €6.6 million)
• Guarantee on the working capital facilities
Kukri Sports Limited and Kukri GB Limited of
£1.0 million (2019: £1.0 million)
• Guarantee to Kiddicare Properties Limited in
relation to the rental commitments on four
stores assigned to Blacks Outdoor Retail
Limited. The total value of the remaining
rental commitments at 1 February 2020 was
£2.9 million (2019: £5.3 million)
• Guarantee on loan facility with HSBC in JD
Australia of AUD1.1 million (2019: AUDnil)
• Guarantee on overdraft facility with Lloyds
for Tiso Limited of £5.7 million (2019: £nil)
C23. ULTIMATE PARENT COMPANY
The immediate parent undertaking is Pentland
Group Limited (formerly known as “Pentland
Group Plc”), a company registered in England
and Wales. R S Rubin and his close family
are considered the ultimate controlling party
by virtue of their control of Pentland Group
Limited (a company registered in Jersey).
Consolidated financial statements will be
prepared by Pentland Group Limited (a
company registered in England and Wales),
which is the parent undertaking of the
smallest and largest group of undertakings
to consolidate these financial statements
for the year ended 31 December 2019. The
consolidated financial statements of Pentland
Group Limited can be obtained from the
company’s registered office at 8 Manchester
Square, London, W1U 3PH, England.
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.
C24. POST BALANCE SHEET EVENTS
As disclosed in Note 31 in the Group accounts,
Administrators were appointed to Go
Outdoors Limited on 23 June 2020. Included
in the Company’s Statement of Financial
Position at 1 February 2020 was an Investment
of £112.3 million in Go Outdoors Limited and
an Intercompany Debtor of £62.2 million. As
at 23 June 2020, the Intercompany Debtor
was £82.8 million against which the Company
received £55.2 million and will record an
impairment against the remainder. The
directors have yet to quantify the impact on
the cost of investment.
FINANCIAL CALENDAR
SHAREHOLDER INFORMATION
273
Final Results Announced
Financial Statements Published
Annual General Meeting
Interim Results Announced
Period End (52 Weeks)
Final Results Announced
07 July 2020
07 July 2020
31 July 2020
08 September 2020
30 January 2021
13 April 2021
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 BANK PLC
30 Gresham Street
London
EC2V 7QP
PRINCIPAL BANKERS
BARCLAYS BANK PLC
43 High Street Sutton
Surrey
SM1 1DR
SOLICITORS
DLA PIPER UK LLP
Princes Exchange
Princes Square
Leeds
LS1 4BY
REGISTRARS
EQUINITI LIMITED
Aspect House
Spencer Road
Lancing
West Sussex
BN99 6DA
ADDLESHAW
GODDARD LLP
1 St. Peter’s Square
Manchester
M2 3DE
FINANCIAL PUBLIC RELATIONS
MHP COMMUNICATIONS
6 Agar Street
London
WC2N 4HN
AUDITOR
KPMG LLP
1 St. Peter’s Square
Manchester
M2 3AE
The Board wishes to express its thanks to the finance department for the in-house production of
this Annual Report and Accounts.
272
FIVE YEAR RECORD (UNAUDITED)
GLOSSARY (TERMS LISTED IN ALPHABETICAL ORDER)
275
52 weeks to
52 weeks to
30 January 2016 28 January 2017 3 February 2018 2 February 2019 1 February 2020
53 weeks to
52 weeks to
52 weeks to
Revenue
Cost of sales
Gross profit
£m
£m
£m
£m
£m
1,821.7
(937.5)
2,378.7
(1,215.1)
3,161.4
(1,629.8)
4,717.8
(2,474.5)
6,110.8
(3,236.0)
884.2
1,163.6
1,531.6
2,243.3
2,874.8
Selling and distribution expenses
(648.3)
(813.0)
(1,080.5)
(1,632.9)
(2,020.2)
Administrative expenses – normal
Administrative expenses – exceptional
(78.2)
(25.5)
(106.2)
(6.4)
(144.7)
(12.9)
(253.6)
(15.3)
(348.6)
(90.3)
Administrative expenses
(103.7)
(112.6)
(157.6)
(268.9)
(438.9)
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
1.2
133.4
158.9
(25.5)
133.4
0.4
(2.2)
131.6
(31.0)
100.6
Attributable to equity holders of the parent 97.6
3.0
Attributable to non-controlling interest
1.8
2.4
4.7
10.9
239.8
246.2
(6.4)
239.8
0.8
(2.2)
238.4
(53.8)
184.6
178.9
5.7
295.9
346.2
426.6
308.8
(12.9)
361.5
(15.3)
516.9
(90.3)
295.9
346.2
426.6
0.6
(2.0)
294.5
(58.1)
1.2
(7.5)
339.9
(75.7)
236.4
264.2
231.9
4.5
261.8
2.4
1.7
(79.8)
348.5
(97.8)
250.7
246.1
4.6
Basic earnings per ordinary share from
continuing operations (i)
Adjusted basic earnings per ordinary
share from continuing operations (i) (ii)
10.03p
18.38p
23.83p
26.90p
25.29p
12.27p
19.04p
25.15p
28.44p
34.26p
Dividends per ordinary share (i) (iii)
1.48p
1.55p
1.63p
1.71p
0.28p
(i) Basic and adjusted earnings per ordinary share and dividends per ordinary share have been adjusted to reflect the two share splits (see note 26),
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) 52 weeks to 1 February 2020 reflects the application of IFRS16 “Leases” for the first time, the impact is on Operating Profit and Financial Expenses.
274
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. The
Directors believe that these alternative performance measures assist in providing additional useful
information on the underlying performance of the Group.
Alternative Performance Measures are also used to enhance the comparability of information
between reporting periods, by adjusting for exceptional items. Exceptional items are disclosed
separately as they are not considered reflective of the year on year trading performance of the
Group. The separate reporting of exceptional items, which are presented as exceptional within
the relevant category in the Consolidated Income Statement, helps provide an indication of
the Group’s underlying business performance. The principal items which may be included as
exceptional items are listed in Note 4.
ADJUSTED EARNINGS PER ORDINARY SHARE BEFORE EXCEPTIONALS
The calculation of basic earnings per share is detailed in Note 10. Adjusted basic earnings per
ordinary share has been based on the profit for the period attributable to equity holders of the
parent for each financial period but excluding the post-tax effect of certain exceptional items. 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 ordinary share
2020
2019
25.29p 26.90p
1.57p
9.27p
(0.30)p (0.03)p
34.26p
28.44p
Comparable accounting basis
Restating the performance for the period to 1 February 2020 using the accounting standards
which were applicable for the period to 2 February 2019; specifically, the re-calculation of
property lease costs under IAS 17 ‘Leases’.
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
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
2020
%
19.0
0.7
1.8
1.8
(0.5)
2.4
25.2
2019
%
19.0
0.5
1.2
(0.4)
(0.1)
1.3
21.5
GLOSSARY (TERMS LISTED IN ALPHABETICAL ORDER)
EBITDA before exceptional items
Earnings before interest, tax, depreciation and amortisation.
Profit for the period
Addback:
Financial expenses
Income tax expense
Depreciation, amortisation and impairment of non-current assets
Exceptional items
Deduct:
Financial income
EBITDA before exceptional items
2020
£m
2019
£m
250.7
264.2
79.8
97.8
462.9
90.3
7.5
75.7
126.9
15.3
(1.7)
(1.2)
979.8
488.4
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.
Like for Like Sports Fashion businesses
The performance in the Sports Fashion segment excluding acquisitions in the current financial
year and the annualisation period of businesses acquired in the previous financial year.
Net Cash
Net cash consists of cash and cash equivalents together with interest-bearing loans and
borrowings.
Operating Profit Before Exceptional Items
A reconciliation between operating profit and 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
2020
£m
348.5
90.3
2019
£m
339.9
15.3
438.8
355.2
276
JD
PLC
.COM
ANNUAL REPORT AND ACCOUNTS