JD Sports Fashion Plc Final Results -2-

Sport now consists of the Sports retail businesses of JD, Size?, Chausport, Sprinter, Champion Sports and ActivInstinct together with Topgrade, Kooga, Kukri, Focus and Source Lab. The latter were formerly included within our Distribution segment but in our streamlined segmental structure are now classified within Sport as the product which they deal in is predominantly either active sport or sports fashion related.

Sport has had an excellent year. Operating profit (before exceptional items) of the Sport businesses increased significantly by GBP15.5 million to GBP93.4 million (2013: GBP77.9 million including GBP1.9 million in relation to Canterbury). This is an exceptional performance but one that reflects the continual investment we make in our retail and product propositions. The growth in profitability within Sport principally came from a strong performance in our core UK and Ireland retail fascias. JD is developing into a world class retail fascia and our ultimate objective is to ensure that the high standards in our core UK and Ireland markets are transferred to our new territories as JD becomes increasingly international.

We are satisfied with the performance of our businesses in France. By year end we had 17 JD stores in the country (excluding the Size? store in Paris), after seven new store openings in the year. Subject to property availability, we anticipate continuing our store development in this territory.

Our businesses in Spain have had an encouraging year again, which is pleasing given the well publicised economic difficulties which the country has faced. We have an excellent management team in Spain who understand the geography and the local consumers very well and they have very successfully adapted the Sprinter product proposition to reflect customer demands at this time. The economic situation has meant that, to date, we have been more cautious in our programme for JD in Spain. During the year, we opened three new stores and so have eight stores in the country now. We have worked hard with the Sprinter management team to make the JD product proposition more relevant for the country.

During the year, we acquired a package of stores in the Netherlands from a local fashion retailer which was looking to close one of its fascias. Acquiring the stores in this way gave us immediate critical mass in the country although the majority of the stores are in smaller regional towns and cities. We also acquired the assets of the Isico partnership in Germany which, on acquisition, had 10 small stores primarily in the Berlin area. These stores will be converted to the JD fascia later in 2014 and have already been integrated into the Group's core IT systems. We continue to look for further opportunities in international markets around the world where we can grow with the support of our key brands.

Fashion

Fashion now consists of the established Fashion retail businesses of Bank, Scotts and Tessuti, together with Cloggs and Ark, which were both acquired during the year, and Nicholas Deakins which was formerly included within our Distribution segment but in our streamlined segmental structure is now classified within Fashion.

Losses in Fashion (before exceptional items) increased significantly in the year to GBP6.4 million (2013: GBP1.7 million), principally as a result of increased losses at Bank. Losses of this scale are disappointing and we have made management changes to address the issue. Most importantly, in July a new Managing Director, Gwynn Milligan, who has considerable experience of the Youth Fashion sector, came into the Bank business. Her turnaround plan involves both re-establishing Bank's reputation in branded fashion whilst relying on a flexible supply chain to produce faster fashion and more striking value in the price architecture. On the back of this we believe that expanding Bank's multichannel proposition represents a major opportunity. We have taken some internal actions to reduce the central overhead base but we also need to address property costs which are excessive in some legacy leases. We believe that, with the right blend of desirable third party brands supported by credible own brand ranges, Bank can re-engage with its core customers and that ultimately we can deliver an improved financial performance. We have recognised a charge of GBP11.8 million within exceptional items for the impairment of goodwill which arose on the original acquisition of the business.

The Scotts business has performed well in the year by focussing on its core customers and then delivering a multichannel branded fashion authority and experience to them.

Whilst we continue to experience losses in our Premium Fashion offering (Tessuti and Originals), they have been reduced compared to the prior year. As we have reported previously, we have a number of legacy issues, particularly property, to deal with which are impacting on the financial performance at this time. However, we have made a number of operational improvements to the business during the year with all stores now on the Group's core ERP systems and all stocks now replenished from the Group's Kingsway warehouse. Accordingly, we believe that we are putting the right framework in place to deliver an improved financial performance.

During the year we acquired the Cloggs and Ark businesses from administration. Cloggs is an established online retailer of premium branded fashion footwear whilst Ark is a complementary business to Bank in terms of its customer demographic and product proposition. Both of these businesses have had a difficult year as they recovered from the administration processes and rebuilt their supply chains and supplier relationships. It is too early to comment on the longer term potential of these businesses.

Outdoor

Our pre-existing Blacks and Millets Outdoor fascias have had a mixed year. We started the year with an excess of heavy winter jackets and a lack of Spring / Summer product, particularly in camping and Peter Storm own brand. We had to trade our way out of this position with the significant margin sacrifice required to clear the Winter and earlier season stocks leading to a poor first half trading result. However, the second half of the year, which we acknowledge is traditionally the stronger part of the year, has been much more promising and, ultimately, a breakeven position was achieved in this six month period compared to a loss of GBP4.9 million in the same period of the previous year.

Operationally, we have made a number of significant operational changes which mean that these businesses are now better controlled and so we have started the new financial year with a substantially improved framework on which to develop. These changes can essentially be categorised into two main areas:

-- Whilst there is some commonality of product ranges and brands we believe that Blacks and Millets attract different consumers. Accordingly, we have run Blacks and Millets as two separate fascias since the middle of the year with separate and significantly changed commercial teams. We believe that this decision has had positive effects in testing and developing the Outdoor proposition both instore and online. We are now working to ensure that all of our customers have easy access to our full Outdoor offer.

-- We also integrated Blacks into the Group's operational infrastructure by relocating the warehousing and central functions from the previous facility at Northampton and installing the Group ERP systems. Whilst the warehousing move and the installation of the Group core systems were completed by the end of Q1, the final relocation and establishment of the Bury based new commercial teams did not complete until July. Clearly, this had a disrupting effect in the early part of the year but completion of the reorganisation together with the elimination of the unsustainable property costs associated with the Northampton facility have had positive effects on the business in the second half.

Later in the year we acquired 60% of the loss-making Tiso business which, on acquisition, had 17 premium branded Outdoor stores. These stores are primarily located in Scotland, although Tiso also owned the highly regarded and profitable George Fisher store in Keswick. Tiso is an iconic business in the Scottish Outdoor world and this acquisition has given us increased buying power, additional management expertise and brand access, as we continue to establish JD Sports Fashion's leading position in the Outdoor market.

Overall losses (before exceptional items) in Outdoor have reduced significantly to GBP8.8 million (2013: GBP14.9 million). We anticipate further significant progress in Blacks and Millets in the new financial year tempered by some initial operating losses from the newly acquired Tiso business.

Financials Summary

Revenue

Total revenue increased by 5.7% in the year to GBP1,330.6 million (2013: GBP1,258.9 million including GBP33.5 million in relation to the Canterbury business which was disposed in the year). Like for like sales for the 52 week period in the UK and Ireland combined core retail fascias increased by 6.7% which was an excellent performance.

Gross margin

Total Gross Margin fell from 48.7% to 48.5% reflecting the impact of the considerable margin sacrifice in the Blacks and Millets fascias, principally in the first half, as we cleared excess winter stocks and additional markdown activity in our Fashion retail businesses. We are, however, greatly encouraged by the robust performance in our Sports businesses where margins were maintained at prior year levels.

Operating profits

Operating profit (before exceptional items) increased substantially by GBP16.9 million to GBP78.2 million (2013: GBP61.3 million) with an exceptional performance in Sport and a reduction in the losses in Outdoor. We expect further significant progress in Outdoor in the new financial year.