JD Sports Fashion Plc Final Results -3-

Exceptional items increased significantly in the year to GBP19.1 million (2013: GBP5.3 million) principally due to a non-cash charge of GBP11.8m to write off goodwill relating to the Bank business. After allowing for exceptional items, Group operating profit increased by GBP3.1 million to GBP59.1 million (2013: GBP56.0 million). The exceptional items comprised:

 
                                              2014   2013 
                                              GBPm   GBPm 
 
 Loss on disposal of fixed assets              1.0     0.2 
 Impairment of fixed assets in loss making 
  stores                                       1.9     0.9 
 Onerous lease provisions                      1.1     1.3 
 
 Total property related exceptional costs      4.0     2.4 
                                             -----  ------ 
 
 Completion of new Kingsway warehouse 
  move (1)                                     0.6     0.2 
 Business restructurings (2)                   2.7     1.1 
 
 Total reorganisation and restructuring 
  costs                                        3.3     1.3 
                                             -----  ------ 
 
 Impairment of intangible assets (3)          11.8     2.3 
 Profit on disposal of Canterbury (4)            -   (0.7) 
 
 Total other exceptional charges              11.8     1.6 
                                             -----  ------ 
 
 
 Total exceptional charge                     19.1     5.3 
                                             =====  ====== 
 

(1) Reorganisation of the warehouse operations consisting of provisions for onerous property leases, redundancy costs and dilapidations at the vacant premises.

(2) Relates to the restructuring of the head office and warehouse operations of the Blacks, Champion and Kooga businesses. The prior period also includes costs relating to the closure of the Canterbury North America LLC and Canterbury European Fashionwear operations following the decision to wind down the separate businesses.

(3) Relates to the impairment in both periods of the goodwill arising on the acquisition of Bank.

(4) Profit on the disposal of the Canterbury group of businesses to Pentland Group plc in September 2012 (see note 5).

Working capital, financing and amended bank facilities

Ongoing acquisition activity and further substantial investments in both the retail fascias and operational infrastructure offset the strong cash generation from trading in the year with net cash at the year end almost unchanged at GBP45.3 million (2013: GBP45.6 million).

On 10 July 2013, the Group amended and extended its syndicated committed GBP75,000,000 bank facility which previously expired on 11 October 2015. The facility has been amended by increasing the syndicated committed facility by GBP80,000,000 to GBP155,000,000. The expiry date has also been extended by two years and so the amended facility now expires on 11 October 2017. This enhanced facility enables us to continue to make acquisitions when opportunities occur whilst maintaining current levels of investment in the retail property portfolio.

Gross capital expenditure (excluding disposal costs) increased by GBP4.7 million to GBP48.2 million (2013: GBP43.5 million). Our commitment to delivering the best possible experience to our customers means that investment in our retail fascias, both in terms of taking new stores where appropriate and refurbishing existing space, remains substantial. A total of GBP27.9 million was invested in our retail fascias during the year (2013: GBP27.2 million). Elsewhere, our continuing investment in the Oracle project increased to GBP5.1 million in the year (2013: GBP2.7 million). Gross capital expenditure included GBP4.6 million (2013: GBPnil) in relation to bespoke software development which is classified within Intangible Assets.

Ongoing confidence in the potential for JD internationally combined with ongoing investment in our other fascias, investment in the new core Oracle ERP system and further works to increase our capabilities at Kingsway means that overall capital expenditure is likely to increase further this year.

Working capital remains well controlled with suppliers continuing to be paid to agreed terms and settlement discounts taken whenever due.

Store Portfolio

During the period, store numbers (excluding trading websites) have moved as follows:

Sports Fascias

 
                       JD   JD France       JD             JD         JD 
  (No.           UK & ROI         (2)    Spain    Netherlands    Germany     Size     Chausport     Sprinter     Total 
  Stores)             (1)                                                     (3) 
 
 Start of 
  period              349          10        5              -          -       24            75           53       516 
 New stores            15           7        3              1          -        1             1           13        41 
 Acquired               -           -        -             14         10        -             -            -        24 
 Closures            (16)           -        -              -          -        -           (1)          (1)      (18) 
               ----------  ----------  -------  -------------  ---------  -------  ------------  -----------  -------- 
 
 End of 
  period              348          17        8             15         10       25            75           65       563 
               ----------  ----------  -------  -------------  ---------  -------  ------------  -----------  -------- 
 
 (000 Sq 
  Ft) 
 
 Start of 
  period            1,255          24       14              -          -       31            84          643     2,051 
 New stores            60          18        7              3          -        3             1          116       208 
 Acquired               -                                  18          8        -             -            -        26 
 Closures            (41)           -        -              -          -        -           (1)         (14)      (56) 
 
 End of 
  period            1,274          42       21             21          8       34            84          745     2,229 
               ----------  ----------  -------  -------------  ---------  -------  ------------  -----------  -------- 
 

1. Includes Champion stores which are now serviced and managed by the UK team but excludes Size store in Dublin

   2.         Excludes the Size store in Les Halles, Paris 
   3.         Being all stores in all territories which are managed by one team 

Fashion Fascias

 
 
 (No. Stores)     Bank   Scotts   Premium     Ark   Cloggs      Total 
 
 Start of 
  period            85       31        16       -        -        132 
 New stores          8        6         3       -        1         18 
 Acquired            -        -         -       9        -          9 
 Closures          (4)      (4)       (2)       -        -       (10) 
                 -----  -------  --------  ------  -------  --------- 
 
 End of period      89       33        17       9        1        149 
                 -----  -------  --------  ------  -------  --------- 
 
 (000 Sq 
  Ft) 
 
 Start of 
  period           252       65        42       -        -        359 
 New stores         28        9         9       -        1         47 
 Acquired            -        -         -      25        -         25 
 Closures         (11)      (9)       (5)       -        -       (25) 
 
 End of period     269       65        46      25        1        406 
                 -----  -------  --------  ------  -------  --------- 
 
 

Outdoor Fascias

 
 (No. Stores)     Blacks   Millets   Tiso   Total 
 
 Start of 
  period              85        89      -     174 
 New stores            4         7      -      11 
 Acquired              -         -     17      17 
 Closures           (13)      (16)      -    (29) 
                 -------  --------  -----  ------ 
 
 End of period        76        80     17     173 
                 -------  --------  -----  ------ 
 
 (000 Sq 
  Ft) 
 
 Start of 
  period             324       160      -     484 
 New stores           13        14      -      27 
 Acquired              -         -    101     101 
 Closures           (50)      (31)      -    (81) 
 
 End of period       287       143    101     531 
                 -------  --------  -----  ------ 
 

Dividends and Earnings per Share

The Board proposes paying a final dividend of 22.65p (2013: 22.00p) bringing the total dividend payable for the year to 27.10p (2013: 26.30p) per ordinary share. The proposed final dividend will be paid on 4 August 2014 to all shareholders on the register at 9 May 2014. The total dividends payable for the year have therefore increased by a further 3% with a cumulative growth since 2009 in excess of 125%. Future dividend growth will be limited with cash retained as we look to drive the continuing overseas growth of the Sports fascias.

The adjusted earnings per ordinary share before exceptional items were 117.12p (2013: 88.51p).

The basic earnings per ordinary share were 82.52p (2013: 79.71p).

Board Effectiveness

As Executive Chairman, I am responsible for the leadership of the Board and ensuring its effectiveness in all aspects of its role. The Board is then responsible for the Group's strategic development, review of performance against the business objectives, overseeing risk and maintaining effective corporate governance including health and safety, environmental, social and ethical matters.

People

The exceptional performance in Sport is a testament to the skills, energy, experience and professionalism of everyone involved in these businesses. JD, in particular, is a world class retail fascia and continues to set higher standards that we challenge our other businesses to match.