TIDMFRAS
RNS Number : 1971I
Frasers Group PLC
10 December 2020
10 December 2020
Unaudited Interim Results for the 26 weeks to 25 October 2020
("FY21 H1")
Change (%)
FY21 H1 FY20 H1(5)
----------------------------------- ---------- ------------- -----------
GBPm GBPm
Group revenue 1,893.3 2,043.5 (7.4)
UK Sports Retail 1,071.6 1,188.1 (9.8)
Premium Lifestyle 320.4 305.8 4.8
European Retail 352.0 365.5 (3.7)
Rest of World Retail 77.1 92.1 (16.3)
Wholesale & licensing 72.2 92.0 (21.5)
Group gross margin (%) 44.0% 43.8%
Reported EBITDA 357.1 290.0 23.1
Underlying EBITDA(1) 226.3 181.2 24.9
Reported profit before tax 106.1 90.2 17.6
Underlying profit before tax
(PBT)(1) 146.3 101.8 43.7
Reported profit after tax 84.4 65.4 29.1
Reported basic earnings per share 16.0p 12.0p 33.3
Underlying basic earnings per
share (EPS)(1) 23.4p 15.4p 51.9
Underlying free cash flow (2) 252.6 162.3 55.6
Net debt (3) (250.1) (254.4) 1.7
Outlook: The successful reopening of our stores in England on 2
December 2020 combined with continuing strong online performance
means we can confidently raise the bottom end of our full year
guidance for FY21. We now believe the Group will achieve a 20% to
30% improvement in Underlying EBITDA(1) during FY21.
-- Group revenue decreased by 7.4%
-- Excluding acquisitions and on a currency neutral basis,
revenue decreased by 11.2%(4)
-- UK Sports Retail revenue decreased by 9.8% , largely caused
by temporary store closures due to Covid-19 offset by growth in our
online business
-- Excluding acquisitions, revenue decreased by 12.6% (4)
-- Premium Lifestyle revenue increased by 4.8%, largely due to
new Flannels stores, increased web sales, and a full period of the
prior year acquisitions of Jack Wills and Sofa.com, offset by the
temporary store closures due to Covid-19
-- Excluding acquisitions, revenue decreased by 0.7% (4)
-- European Retail revenue decreased by 3.7%, largely caused by
temporary store closures due to Covid-19
-- Excluding acquisitions and on a currency neutral basis,
revenue decreased by 12.3% (4)
-- Group gross margin increased to 44.0% from 43.8%, as we
maintained product margin over the period
-- Group reported EBITDA increased by 23.1% to GBP357.1m
compared to GBP290.0m in the prior period largely driven by the
strong reopening of stores after lockdown, growth in our online
business, new Flannels stores, a full year of trade of the prior
year acquisitions, and continued operating efficiencies
-- Group underlying EBITDA(1) increased by 24.9% to GBP226.3m
compared to GBP181.2m in the prior period
-- Excluding acquisitions and on a currency neutral basis,
underlying EBITDA was 18.8% up on the prior period (4)
-- Underlying free cash flow (pre-capex) (2) increased to
GBP252.6m compared to GBP162.3m in the prior period due to the
growth in underlying EBITDA and improved working capital
-- Reported profit before tax was GBP106.1m, up 17.6% from
GBP90.2m driven by the strong reopening of stores after lockdown,
growth in our online business, new Flannels stores, a full year of
trade of the prior year acquisitions, and continued operating
efficiencies
-- Underlying profit before tax (1) increased by 43.7% to GBP146.3m from GBP101.8m
-- Reported basic earnings per share grew by 33.3% to 16.0p, from 12.0p
-- Underlying basic earnings per share increased by 51.9% to
23.4 p from 15.4p (1)
-- Reported profit after tax was GBP84.4m up 29.1% from GBP65.4m
-- Net debt decreased to GBP250.1m from GBP366.0m at 26 April 2020 (FY20 H1: GBP254.4m)( (3)
(1) Underlying EBITDA, underlying profit before taxation and
underlying EPS exclude the effects of IFRS 16, realised foreign
exchange gains / losses in selling and administration costs,
exceptional costs, and the profit / loss on disposal of
subsidiaries, strategic investments and properties. Further detail
on this calculation can be found in note 3 and the Glossary at the
back of this announcement.
(2) Underlying free cash flow is defined as operating cash flow
after working capital and pre IFRS 16, made up of underlying EBITDA
plus realised foreign exchange gains and losses, less corporation
tax paid. Further detail on this calculation can be found in the
Chief Executive's Report and Business Review.
(3) Net debt is borrowings (excluding IFRS 16 lease liabilities)
less cash and cash equivalents held.
(4) A reconciliation excluding acquisitions and currency neutral
performance measures can be found in the Glossary.
(5) The FY20 H1 numbers have been re-categorised due to changes
in the reporting segments, with Jack Wills and Sofa.com being moved
from UK Sports Retail to Premium Lifestyle.
Frasers Group plc T: 0344 245 9200
Chris Wootton, Chief Financial Officer
Tom Piper, Company Secretary
CHAIR'S STATEMENT
COVID-19
Unfortunately the Covid-19 crisis continues to be a significant
issue for all of us and we are currently living through a second
wave. This has resulted in more lockdowns and restrictions which
are materially impacting the business.
From 5 November virtually all of our Group stores in England
were closed until 2 December. Our stores in Scotland and Northern
Ireland largely remained open, but in Wales were closed from 23
October to 9 November. Across much of Europe further restrictions
have caused stores in a number of countries to close at various
times. Against this backdrop, our online offering remains resilient
and helps to mitigate to a certain extent the negative effect
caused by these bricks and mortar closures.
I am incredibly impressed by the resilience of our staff and
their willingness to adapt and to be flexible as we face new
challenges in our places of work. Over the past several months all
of our retail staff have worked together to create a safe
environment in our stores which complies with Government safety
standards and ensures that we are doing our very best to allow our
customers to enjoy a safe shopping experience with us.
This good work has been mirrored with equal thoroughness in our
office and warehouse environments to ensure that our staff feel
comfortable and safe at work and are able to embrace the challenges
of working while social distancing. We have been visited by health
and safety experts, as well as public health authorities at a
number of our sites, including our Shirebrook HQ, and been found to
be more than complying with the Government guidelines.
The Board are extremely appreciative and grateful for the extra
hard work from our staff during these difficult times.
I do not wish to comment on the wider Covid-19 picture but from
a general retail perspective it is impossible to ignore the lack of
clarity of guidance when it finally arrives. Fortunately the
Frasers Group is a strong business built on solid foundations. We
can weather most of the storms faced this calendar year, however
much of the UK High Street, which was already suffering before
Covid-19, won't survive unless the Government addresses the out of
date business rates regime which is due to return come April
2021.
BRAND RELATIONSHIPS
The Group continues to strengthen relationships with key
suppliers, building upon our position as the UK's largest sporting
goods retailer by revenue. Our aim is to become, in the minds of
consumers, partners and suppliers, the number one sporting goods
retailer in Europe.
Our business strategy is Elevation Without Limits. To support
this we have invested in our people, our key third party brand
relationships, and our infrastructure. This includes significant
investment, which was recently announced, in our digital business,
which will elevate our retail proposition across all our retail
channels. Our investment in our business gives us a unique position
in the market. Our retail business covers multiple fascias. We own
and invest in a number of dynamic and iconic brands. We don't
simply occupy shops within retail destinations, we invest in them.
In many cases we actually own the properties from which we operate.
This gives us a competitive advantage over many other businesses.
We can adapt to rapidly changing situations which includes
elevating our stores and digital offering. We are bringing new
consumer experiences to our stores. This capability has
strengthened our relationship with some of our important suppliers,
such as Nike for Sports Direct, Burberry for Flannels, and Hugo
Boss for House of Fraser. We will continue to build these
partnerships to develop a successful business between us in the
coming years.
Our store programme continues to go from strength to strength
with the recent opening of our new 25,000 square foot flagship
multi fascia offering in Cascades Shopping Centre, Portsmouth . We
are also undertaking significant investment on our flagship Sports
Direct store on Oxford Street in London, confident in its future
trading prospects.
Our promotional, digital and marketing efforts are being
elevated with the focal point being our Christmas advertisements
which can be viewed here for Sports Direct and Flannels .
ELEVATION WITHOUT LIMITS
Even through these testing periods it is clear that our
elevation strategy has no limits and will continue to be the focal
point in the coming months and years.
We have continued our elevated store roll out with Portsmouth,
Birmingham and Wolverhampton opening recently. At our full year
results announcement in August 2020 we stated we would be investing
in excess of GBP100m in our digital elevation strategy. The digital
elevation strategy is very exciting for the Group and is already
bearing fruit. With this in mind, and with the continued growth and
progression in our Flannels business, we are now considering a
further investment specifically in digital luxury elevation for the
Flannels business. We will announce further details with our full
year results in Summer 2021.
We have long invested in businesses we feel are an important
strategic match to the Group's long term plans, and in recent years
with the success of the elevation strategy this has continued. As
announced before our August 2020 results, we had increased our
investment in Hugo Boss to approximately 10%, and in November
further purchases of shares in Mulberry has taken our holding to
approximately 37% of the issued share capital. Mulberry is a truly
iconic luxury British brand that we strongly believe will find its
rightful home in our Flannels business.
OUR PEOPLE
I am very proud of two initiatives that are focused on elevating
our people which were launched recently.
At our AGM in October our shareholders gave approval for a bonus
scheme we are calling the Fearless 1000, which could pay out
GBP100m in shares if our share price reaches GBP10 any time over
the next 4 years. The share price must stay above GBP10 for 30
consecutive trading days to trigger the vesting of shares at the
end of the vesting period which could see 10 workers receiving
shares worth GBP1m if the share price is at GBP10 at the vesting
dates. One thousand of our Fearless workers, who live and breathe
our values, thinking without limits, not hesitating and owning it,
will be eligible to receive share bonuses ranging from GBP50k right
up to GBP1m if the share price is at GBP10 at the vesting
dates.
There is also a cash bonus scheme which runs concurrently with
the share scheme which will pay out bonuses for those eligible
workers who do not qualify for the Fearless 1000.
We recently welcomed 27 new people to the Group through the
Frasers Group Elevation Programme. This is a new programme open to
exceptional individuals be they school leavers, graduates or anyone
else, to fast track them to peak performance within two years, with
the inherent responsibilities and rewards.
We launched the Elevation Programme via social media which
resulted in over 4m impressions. We received approximately 2,500
high quality applications and then we personally assessed 94
candidates. 27 Fearless people were offered positions. We are
extremely enthusiastic about the calibre of the initial intake into
this programme and this is a big step to elevating our people and
to help us in developing the future leaders of the Group.
AGM
We would like extend a big thank you to our shareholders for
your support and unanimous approval for all of the resolutions that
were passed at our AGM in October. Virtually every resolution
received the support of over 99% of our shareholders, and I believe
this reflects the great strides the business has made in many areas
including our corporate governance.
RESULTS AND LOOKING FORWARD
Our results in this half year have been pleasing, particularly
given the fact our stores in the UK were virtually all closed until
mid-June. In an industry sector blighted by the decline of the High
Street we are really proud of our performance and our people who
helped us get there.
Unfortunately given we entered the further lockdown in England
right after our half year date, and given the current rolling
lockdowns we may be under for some time, we have had to be
conservative with our judgements. The coming months will continue
to be tough but we are well prepared and positioned for the
future.
THE ENVIRONMENT
As we disclosed in our FY20 annual report, we continue to have a
strong focus on our impact on the community and the environment.
During the period we launched a Sustainability Steering Group, and
going forward this will be made up of 'Sustainability Champions'
from across the business who have a keen interest in sustainability
and making a difference in their respective departments. The
Steering Group aims to identify areas for improvement across the
business, develop and implement action plans, and to increase
engagement from colleagues.
CLOSED PERIOD
The Group takes insider dealing very seriously and has taken
every step to ensure adequate policies and procedures are in place
to mitigate the risk. The Group sought independent advice with
regard to the communication of the Group's closed period and their
findings stated that 'the notification goes well beyond the legal
requirements' and 'is a very protectionary measure you are
taking'.
DIVID / SHARE BUYBACK
No dividend was paid during the half year period and the Board
has decided not to declare an interim dividend in respect of this
period. No share buyback took place during the half year
period.
David Daly
Non-Executive Chair
10 December 2020
CHIEF EXECUTIVE'S REPORT AND BUSINESS REVIEW
SUMMARY OF RESULTS
26 weeks ended 26 weeks ended
25 October 2020 27 October 2019
Group revenue GBP1,893.3m GBP2,043.5m
Underlying EBITDA(1) GBP226.3m GBP181.2m
------------------------------------- ---------------- ----------------
Group gross margin 44.0% 43.8%
------------------------------------- ---------------- ----------------
Underlying basic earnings per share
(2) 23.4p 15.4p
------------------------------------- ---------------- ----------------
Underlying free cash flow (3) GBP252.6m GBP162.3m
------------------------------------- ---------------- ----------------
Net debt GBP250.1m GBP254.4m
------------------------------------- ---------------- ----------------
Number of retail stores (4) 1,557 1,576
------------------------------------- ---------------- ----------------
(1) The method for calculating underlying EBITDA is set out in the Glossary.
(2) The method for calculating underlying basic earnings per
share is set out in the Glossary.
(3) Underlying free cash flow is defined as operating cash flow
after working capital and pre IFRS 16, made up of underlying EBITDA
plus realised foreign exchange gains and losses, less corporation
tax paid. See Cash Flow and Net Debt section of this report for
calculation.
(4) Excluding associates and stores in the Baltic states that
trade under fascias other than SPORTLAND or SPORTSDIRECT.com and
other niche fascias.
The Directors have adopted Alternative Performance Measures
(APM's). APM's should be considered in addition to IFRS measures.
The Directors believe that underlying EBITDA, underlying profit
before tax and underlying basic EPS provide further useful
information for shareholders on the underlying performance of the
Group in addition to the reported numbers and are consistent with
how business performance is measured internally. They are not
recognised profit measures under IFRS and may not be directly
comparable with "adjusted" or "alternative" profit measures used by
other companies .
PERFORMANCE OVERVIEW
Group revenue was down 7.4% to GBP1,893.3m, largely caused by
temporary store closures due to Covid-19, offset by the strong
reopening of stores after lockdown and growth in our online
business.
Gross margin for the Group increased 20 basis points to 44.0%
(FY20 H1: 43.8%) as we maintained product margins over the
period.
Underlying EBITDA is up 24.9%, largely driven by the strong
reopening of stores after lockdown, growth in our online business,
new Flannels stores, a full year of trade of the prior year
acquisitions, and continued operating efficiencies. Excluding
acquisitions and on a currency neutral basis underlying EBITDA is
up 18.8%.
In FY21 H1, depreciation and amortisation increased by 26.5% to
GBP239.6m and Net Interest decreased to GBP6.0m from GBP9.3m.
Underlying profit before tax increased by 43.7% to GBP146.3m (FY20
H1: GBP101.8m). Underlying basic EPS increased by 51.9% to 23.4p
(FY20 H1: 15.4p).
Reported Profit Before Tax increased by 17.6% to GBP106.1m (FY20
H1: GBP90.2m).
The Group generated underlying free cash flow of GBP252.6m
during the period, up from GBP162.3m in the prior period.
The Group has a Revolving Credit Facility (RCF) of GBP913.5m
(FY20 H1: GBP913.5m) as at 25 October 2020, valid until November
2021 and GBP847.5m valid to November 2022. The Group continues to
operate comfortably within its banking facilities and covenants and
the Board remains comfortable with the Group's available
headroom.
Net debt decreased to GBP250.1m at the period end (GBP366.0m at
26 April 2020), equating to 0.5 times LTM Reported EBITDA (1) (FY20
H1: 0.8 times on net debt of GBP254.4m).
(1) LTM EBITDA is the last twelve months historic Reported EBITDA excluding IFRS 16.
The Fearless 1000 bonus scheme was approved at our AGM in
October but, given the proximity to period-end, there has been
GBPnil impact to these Unaudited Interim Financial Statements.
REVIEW BY BUSINESS SEGMENT
UK SPORTS RETAIL
UK Sports Retail includes core sports retail store operations in
the UK, plus all the Group's sports retail online business
(excluding Bob's Stores, Eastern Mountain Sports and Malaysia), the
gyms, the Group's Shirebrook campus operations, GAME UK stores and
online operations, and retail store operations in Northern Ireland.
UK Sports Retail is the main driver of the Group trading
performance and accounts for 57% of Group revenue.
26 weeks ended 26 weeks ended
25 October 2020 27 October 2019(1)
Revenue GBP1,071.6m GBP1,188.1m
-------------------
Cost of Sales GBP(595.4)m GBP(674.6)m
------------------- ---------------- -------------------
Gross Profit GBP476.2m GBP513.5m
------------------- ---------------- -------------------
Gross Margin % 44.4% 43.2%
------------------- ---------------- -------------------
Underlying EBITDA GBP151.4m GBP141.9m
------------------- ---------------- -------------------
(1) The FY20 H1 numbers have been re-categorised due to changes
in the reporting segments, with Jack Wills and Sofa.com being moved
from UK Sports Retail to Premium Lifestyle.
Revenue decreased 9.8% to GBP1,071.6m. Excluding acquisitions
revenue fell 12.6%. This was largely due to the temporary store
closures in the UK caused by Covid-19, offset by growth in our
online business.
Gross margin increased to 44.4%, as product margins were
maintained and continued to improve.
Underlying EBITDA for UK Sports Retail was GBP151.4m, an
increase of 6.7% for the period, largely due the strong reopening
of stores after lockdown, growth in our online business, and
improved operating efficiencies.
UK SPORTS RETAIL STORE PORTFOLIO
25 October 2020 27 October 26 April 2020
2019(3)
------------------ --------------- ----------- -------------
England 395 370 367
------------------ --------------- ----------- -------------
Scotland 42 37 37
------------------ --------------- ----------- -------------
Wales 32 28 28
------------------ --------------- ----------- -------------
Northern Ireland 21 17 17
------------------ --------------- ----------- -------------
Isle of Man 1 1 1
------------------ --------------- ----------- -------------
USC 27 32 27
------------------ --------------- ----------- -------------
Evans Cycles(2) 53 54 50
------------------ --------------- ----------- -------------
GAME UK (1) 244 257 242
------------------ --------------- ----------- -------------
Total 815 796 769
------------------ --------------- ----------- -------------
Opened 42 8 25
------------------ --------------- ----------- -------------
Closed (38) (8) (53)
------------------ --------------- ----------- -------------
Acquired 42 339 256
------------------ --------------- ----------- -------------
Area (sq.ft.) approx 7.1m approx 6.5m approx. 6.3m
------------------ --------------- ----------- -------------
(1) The GAME UK store numbers include 33 concessions operating
within Sports Direct fascia stores (26 April 2020: 3) and does not
include BELONG arenas.
(2) The Evans Cycles store numbers include 1 concession
operating within a House of Fraser fascia (26 April 2020:
none).
(3) The 27 October 2019 numbers have been re-categorised due to
changes in the reporting segments, with Jack Wills and Sofa.com
being moved from UK Sports Retail to Premium Lifestyle.
PREMIUM LIFESTYLE
Premium Lifestyle consists of Flannels, Cruise, van mildert,
House of Fraser, Jack Wills and Sofa.com fascia stores and
corresponding web sales.
26 weeks ended 26 weeks ended
25 October 2020 27 October 2019(2)
Gross Transaction Value (GTV)(1) GBP350.4m GBP403.6m
-------------------
Revenue GBP320.4m GBP305.8m
---------------------------------- ---------------- -------------------
Cost of Sales GBP(169.9)m GBP(148.3)m
---------------------------------- ---------------- -------------------
Gross Profit GBP150.5m GBP157.5m
---------------------------------- ---------------- -------------------
Gross Margin % 47.0% 51.5%
---------------------------------- ---------------- -------------------
Underlying EBITDA GBP28.4m GBP(7.6)m
---------------------------------- ---------------- -------------------
(1) GTV being gross sales net of VAT, discounts and returns and
gross sales where the Group acts as agent.
(2) The FY20 H1 numbers have been re-categorised due to changes
in the reporting segments, with Jack Wills and Sofa.com being moved
from UK Sports Retail to Premium Lifestyle .
Revenue grew 4.8% to GBP320.4m. This was largely due to new
Flannels stores, increased web sales, and a full period of the
prior year acquisitions of Jack Wills and Sofa.com, offset by the
temporary store closures due to Covid-19. Excluding acquisitions,
revenue fell by 0.7%.
Gross margin decreased to 47.0%. This is driven by a reduction
in concession sales within House of Fraser as a percentage of total
sales which have a higher gross margin.
Underlying EBITDA for Premium Lifestyle improved from a loss of
GBP7.6m in FY20 H1 to a profit of GBP28.4m for the period, largely
due to Flannels store openings, a full period of trading for prior
year acquisitions, continued operating efficiencies, and business
rates relief particularly in House of Fraser.
PREMIUM LIFESTYLE STORE PORTFOLIO
25 October 2020 27 October 2019 26 April 2020
Flannels 38 35 37
----------------- --------------- --------------- -------------
Cruise 6 6 5
----------------- --------------- --------------- -------------
van mildert 1 1 1
----------------- --------------- --------------- -------------
Jack Wills 64 82 67
----------------- --------------- --------------- -------------
House of Fraser 45 52 48
----------------- --------------- --------------- -------------
Sofa.com (1) 19 - 21
----------------- --------------- --------------- -------------
Total 173 176 179
----------------- --------------- --------------- -------------
Opened 2 5 10
----------------- --------------- --------------- -------------
Acquired - 82 117
----------------- --------------- --------------- -------------
Closed (8) (5) (42)
----------------- --------------- --------------- -------------
Area (sq.ft.) approx. 4.4m approx. 5.2m approx. 4.5m
----------------- --------------- --------------- -------------
(1) Sofa.com store numbers include 12 concessions operating
within House Of Fraser fascia stores.
EUROPEAN RETAIL
The European Retail division includes the Group's sports retail
store management and operations in Europe, including the Group's
European distribution centres in Belgium and Austria, stores in the
Baltic regions and GAME Spain stores.
26 weeks ended 26 weeks ended
25 October 2020 27 October 2019
Revenue GBP352.0m GBP365.5m
----------------
Cost of Sales GBP(205.3)m GBP(214.1)m
------------------- ---------------- ----------------
Gross Profit GBP146.7m GBP151.4m
------------------- ---------------- ----------------
Gross Margin % 41.7% 41.4%
------------------- ---------------- ----------------
Underlying EBITDA GBP25.1m GBP32.9m
------------------- ---------------- ----------------
Revenue decreased 3.7% to GBP352.0m. On a currency neutral basis
and excluding acquisitions, European Retail revenue decreased by
12.3% largely due to temporary store closures as a result of
Covid-19.
Gross margin increased to 41.7%, as product margins were
maintained.
Underlying EBITDA was GBP25.1m, a decrease of 23.7% for the
period, largely due to temporary store closures caused by
Covid-19.
All of the following stores are operated by companies wholly
owned by the Group, except Estonia, Latvia and Lithuania where the
Group owns 60.0%.
EUROPEAN RETAIL STORE PORTFOLIO(1)
25 October 2020 27 October 2019 26 April 2020
GAME Spain 241 263 261
------------------------- --------------- --------------- -------------
Belgium 36 35 35
------------------------- --------------- --------------- -------------
Republic of Ireland (2) 33 40 35
------------------------- --------------- --------------- -------------
Austria 22 25 22
------------------------- --------------- --------------- -------------
Estonia (1)(3) 25 26 25
------------------------- --------------- --------------- -------------
Portugal 21 20 21
------------------------- --------------- --------------- -------------
Latvia (1)(3) 19 19 18
------------------------- --------------- --------------- -------------
Lithuania (1) 18 18 18
------------------------- --------------- --------------- -------------
Poland 15 16 16
------------------------- --------------- --------------- -------------
Slovenia 14 14 14
------------------------- --------------- --------------- -------------
Czech Republic 12 12 12
------------------------- --------------- --------------- -------------
Hungary 8 8 8
------------------------- --------------- --------------- -------------
Cyprus 6 6 6
------------------------- --------------- --------------- -------------
Holland 5 5 5
------------------------- --------------- --------------- -------------
Slovakia 5 5 5
------------------------- --------------- --------------- -------------
France 4 4 4
------------------------- --------------- --------------- -------------
Germany 2 2 2
------------------------- --------------- --------------- -------------
Luxembourg 2 2 2
------------------------- --------------- --------------- -------------
Spain 4 2 1
------------------------- --------------- --------------- -------------
Iceland 1 1 1
------------------------- --------------- --------------- -------------
Total 493 523 511
------------------------- --------------- --------------- -------------
Opened 7 8 11
------------------------- --------------- --------------- -------------
Acquired - 263 (14)
------------------------- --------------- --------------- -------------
Closed (25) (4) 265
------------------------- --------------- --------------- -------------
Area (sq.ft.) approx. 3.9m approx. 3.8m approx. 4.0m
------------------------- --------------- --------------- -------------
(1) Includes only stores with SPORTSDIRECT.com and SPORTLAND fascias.
(2) Excluding Heatons fascia stores.
(3) FY19 figures have been revised to exclude outlet stores in
Estonia and Latvia in line with other countries.
REST OF WORLD RETAIL
Rest of World Retail includes sports stores in Malaysia trading
under the SPORTSDIRECT.com fascia and retail stores in the US
trading under Bob's Stores and Eastern Mountain Sports, along with
their e-commerce sites. In Malaysia the stores are 51.0% owned by
the Group.
26 weeks ended 26 weeks ended
25 October 2020 27 October 2019
Revenue GBP77.1m GBP92.1m
----------------
Cost of Sales GBP(46.6)m GBP(55.8)m
------------------- ---------------- ----------------
Gross Profit GBP30.5m GBP36.3m
------------------- ---------------- ----------------
Gross Margin % 39.6% 39.4%
------------------- ---------------- ----------------
Underlying EBITDA GBP10.4m GBP(2.5)m
------------------- ---------------- ----------------
Revenue decreased 16.3% to GBP77.1m. Gross margin increased to
39.6% from 39.4%. Underlying EBITDA was GBP10.4m, compared to a
loss of GBP2.5m in FY20 H1, largely due to operating efficiencies
in the US businesses.
REST OF WORLD RETAIL STORE PORTFOLIO
25 October 2020 27 October 2019 26 April 2020
Malaysia 31 33 31
------------------------- --------------- --------------- -------------
Bob's Stores 24 27 24
------------------------- --------------- --------------- -------------
Eastern Mountain Sports 21 21 20
------------------------- --------------- --------------- -------------
Total 76 81 75
------------------------- --------------- --------------- -------------
Area (sq.ft.) approx. 1.3m approx. 1.3m approx. 1.3m
------------------------- --------------- --------------- -------------
WHOLESALE & LICENSING
The portfolio of Group brands includes a wide variety of
world-famous sport and lifestyle brands. The Group's Sports Retail
division sells products under these brands in its stores, and the
Wholesale & Licensing division sells the brands through its
wholesale and licensing activities. The Wholesale & Licensing
division continues to sponsor a variety of prestigious events and
retains a variety of globally recognised, high-profile celebrities
and sporting professionals as brand ambassadors.
26 weeks ended 26 weeks ended
25 October 2020 27 October 2019
Wholesale GBP61.6m GBP77.8m
----------------
Licensing GBP10.6m GBP14.2m
------------------- ---------------- ----------------
Total Revenue GBP72.2m GBP92.0m
------------------- ---------------- ----------------
Cost of Sales GBP(42.3)m GBP(55.8)m
------------------- ---------------- ----------------
Gross Profit GBP29.9m GBP36.2m
------------------- ---------------- ----------------
Gross Margin % 41.4% 39.3%
------------------- ---------------- ----------------
Underlying EBITDA GBP11.0m GBP16.5m
------------------- ---------------- ----------------
Revenue decreased by 21.5% to GBP72.2m. Wholesale revenues are
down 20.8% to GBP61.6m, and Licensing revenues decreased 25.4% to
GBP10.6m, largely due to the ongoing impact of Covid-19.
Total gross margin increased by 210 bps to 41.4% (FY20 H1:
39.3%) driven by wholesale, in particular Everlast.
Underlying EBITDA decreased 33.3% to GBP11.0m (FY20 H1:
GBP16.5m).
ACQUISITIONS
On 22 August 2020, the Group acquired the trade and assets of DW
Sports for cash consideration of GBP37.0m. The acquisition
complements the Group's existing gym and fitness club portfolio and
is consistent with the Group's elevation strategy. Further
information regarding the acquisition can be found in note 12.
STRATEGIC INVESTMENTS
The Group continues to hold various other interests. On the 29
June 2020 the Group increased its direct investment in Hugo Boss AG
to 2.5%. Subsequent to the period-end, i n November 2020 the Group
increased its investment in luxury handbag retailer Mulberry from
12.5% to 36.8% for consideration of GBP21.9m.
Included within long-term financial assets at the period ended
25 October 2020 are the following direct interests held by the
Group:
25 October 2020 27 October 2019 26 April 2020
% % %
Studio Retail Group plc (formerly
Findel plc) 36.7 36.9 36.9
-------------
French Connection Group plc 26.6 26.1 26.1
----------------------------------- --------------- --------------- -------------
Hugo Boss AG 2.5 - 0.2
----------------------------------- --------------- --------------- -------------
Mulberry Group plc 12.5 - 12.5
----------------------------------- --------------- --------------- -------------
Iconix Brand Group, Inc. 4.8 4.8 4.8
----------------------------------- --------------- --------------- -------------
The movements in fair value of these long-term financial assets
are recognised within Other Comprehensive Income.
The fair value of the contracts for difference and options are
recognised in Derivative Financial Assets or Liabilities on the
Group Balance Sheet, with the movement in fair value recorded in
the Income Statement.
FOREIGN EXCHANGE AND TREASURY
The Group reports its results in GBP but trades internationally
and is therefore exposed to currency fluctuations on currency cash
flows in various ways. These include purchasing inventory from
overseas suppliers, making sales in currencies other than GBP and
holding overseas assets in other currencies. The Board mitigate the
cash flow risks associated with these fluctuations with the careful
use of currency hedging using forward contracts and other
derivative financial instruments.
The Group uses forward contracts that qualify for hedge
accounting in two main ways - to hedge highly probable EUR sales
income and USD inventory purchases. This introduces a level of
certainty into the Group's planning and forecasting process.
Management has reviewed detailed forecasts and the growth
assumptions within them and are satisfied that the forecasts meet
the criteria as being highly probable forecast transactions.
As at 25 October 2020, the Group had the following forward
contracts that qualified for hedge accounting under IFRS 9
Financial Instruments, meaning that fluctuations in the value of
the contracts before maturity are recognised in the Hedging Reserve
through Other Comprehensive Income. After maturity, the sales and
purchases are then valued at the hedge rate .
Currency Hedging against Currency value Timing Rates
EUR / GBP Euro sales EUR 390m FY21 - FY23 0.99 - 1.09
----------- ---------------- --------------- ------------ -----------
USD inventory
USD / GBP purchases USD 160m FY21 1.31
----------- ---------------- --------------- ------------ -----------
USD inventory
USD / EUR purchases USD 60m FY21 1.32
----------- ---------------- --------------- ------------ -----------
The Group also uses currency options, swaps and spots for more
flexibility against cash flows that are less than highly probable
and therefore do not qualify for hedge accounting under IFRS 9
Financial Instruments. The fair value movements before maturity are
recognised in the Income Statement.
The Group has the following currency options and unhedged
forwards:
Currency Expected use Currency value Timing Rates
EUR / GBP Euro sales EUR 470m FY21 - FY23 0.99 - 1.09
---------- ------------ -------------- ----------- -----------
The Group also holds short-term swaps for Treasury management
purposes:
Currency Expected use Currency value Timing Rates
EUR / USD Cash flow management EUR 100m FY21 1.18
-----
The Group is proactive in managing its currency requirements.
The Treasury team works closely with senior management to
understand the Group's plans and forecasts, and discuss and
understand appropriate financial products with various financial
institutions, including those within the Group Revolving Credit
Facility. This information is then used to implement suitable
currency products to align with the Group's strategy.
Regular reviews of the hedging performance are performed by the
Treasury team alongside senior management to ensure the continued
appropriateness of the currency hedging in place, and where
suitable, either implementing additional strategies and/or
restructuring existing approaches in conjunction with our financial
institution partners.
Given the potential impact of commodity prices on raw material
costs, the Group may hedge certain input costs, including cotton,
crude oil and electricity.
CASH FLOW AND NET DEBT
Net debt decreased by GBP115.9m from GBP366.0m at 26 April 2020
to GBP250.1m at 25 October 2020. N et interest on bank loans and
overdrafts decreased to GBP5.6m (FY20 H1: GBP8.0m) due to reduced
LIBOR and interest rates payable on the RCF.
Analysis of net debt:
25 October 2020 27 October 2019 26 April 2020
GBPm GBPm GBPm
Cash and cash equivalents 371.3 326.0 534.0
--------------------------- --------------- --------------- -------------
Borrowings (621.4) (580.4) (900.0)
--------------------------- --------------- --------------- -------------
Total (250.1) (254.4) (366.0)
--------------------------- --------------- --------------- -------------
The Group's Working Capital Facility is GBP913.5m (FY20:
GBP913.5m) and is available until November 2021 and is not secured
against any of the Group's assets. GBP847.5m of t he facility is
due to expire in November 2022.
The Group continues to operate well within its banking covenants
and the Board remains comfortable with the Group's available
headroom.
Cash flow:
26 weeks ended 26 weeks ended
25 October 2020 27 October 2019
GBPm GBPm
Underlying EBITDA 226.3 181.2
----------------
Realised foreign exchange (loss) / gain (7.4) 4.6
------------------------------------------------ ---------------- ----------------
Taxes paid (54.3) (50.7)
------------------------------------------------ ---------------- ----------------
Movement in inventory 92.0 (161.3)
------------------------------------------------ ---------------- ----------------
Working capital and other (4.0) 188.5
------------------------------------------------ ---------------- ----------------
Underlying free cash flow after working
capital 252.6 162.3
------------------------------------------------ ---------------- ----------------
Invested in:
------------------------------------------------ ---------------- ----------------
Purchase of own shares - (38.4)
------------------------------------------------ ---------------- ----------------
Purchase of subsidiaries, net of cash acquired (37.0) 16.1
------------------------------------------------ ---------------- ----------------
Purchase of listed investments (49.9) -
------------------------------------------------ ---------------- ----------------
Purchase of associates - (5.0)
------------------------------------------------ ---------------- ----------------
Proceeds on disposal of investments 4.2 -
------------------------------------------------ ---------------- ----------------
Net capital expenditure (49.7) (8.8)
------------------------------------------------ ---------------- ----------------
Exchange movement on cash balances 1.4 0.9
------------------------------------------------ ---------------- ----------------
Investment income received 0.3 6.3
------------------------------------------------ ---------------- ----------------
Finance income received less finance costs
paid (6.0) (9.3)
------------------------------------------------ ---------------- ----------------
Decrease in net debt(1) 115.9 124.1
------------------------------------------------ ---------------- ----------------
(1) This table excludes the impact of IFRS 16
BALANCE SHEET
25 October 2020 27 October 2019 26 April 2020
GBPm GBPm GBPm
Property, plant and equipment 1,308.6 1263.9 1,347.6
-------------
Inventory 1,110.3 1,231.4 1,198.3
------------------------------- --------------- --------------- -------------
Trade and other receivables 578.8 437.5 414.2
------------------------------- --------------- --------------- -------------
Provisions 331.8 350.2 336.0
------------------------------- --------------- --------------- -------------
Trade and other payables 626.0 748.2 602.5
------------------------------- --------------- --------------- -------------
Lease liabilities 715.6 669.7 624.1
------------------------------- --------------- --------------- -------------
Borrowings 621.4 580.4 900.0
------------------------------- --------------- --------------- -------------
The increase within property, plant and equipment is mainly due
to the purchase of freehold properties, store fitouts and warehouse
automation in the period. Right of use assets relate to leasehold
properties capitalised under IFRS 16. Right of use assets have
decreased from 26 April 2020 largely due to impairments in the
period of GBP124.9m.
Inventory has decreased from 26 April 2020 after lockdown ended
and stores reopened in addition to the stock provision increasing
from 15.7% at 26 April 2020 to 15.9% at period end.
Trade and other receivables includes a GBP118.3m reimbursement
asset in relation to the Group's ongoing non-UK tax enquiries (26
April 2020: GBP118.3m) and GBP158.6m relating to deposits in
respect of derivative financial instruments (26 April 2020:
GBP71.3m) with the increase mainly relating to Hugo Boss.
Trade and other payables has increased from 26 April 2020
largely due to lease payments under negotiation as a result of
Covid-19.
Lease liabilities relate to the present value of property lease
payments expected to be made over the remaining life of the lease
under IFRS 16. The lease liability has increased largely due to
reassessments in the period as a result of rent reviews.
Borrowings have decreased from 26 April 2020. At 26 April 2020
the vast majority of the RCF was drawn down, albeit not fully
utilised, as this was the peak of the Covid-19 crisis. Continued
positive net cash inflow from operating activities in the current
period have allowed for repayment of this draw down.
GOING CONCERN
Having thoroughly reviewed the performance of the Group and
having made suitable enquiries, the Directors are confident that
the Group have adequate resources to remain in operational
existence for the foreseeable future which is at least 12 months
from the date of approval of these Unaudited Interim Financial
Statements. Full details of this assessment can be found in note
1.
DIRECTORS' RESPONSIBILITY STATEMENT
Each of the directors confirm that to the best of their
knowledge:
-- The condensed set of financial statements has been prepared
in accordance with IAS 34 'Interim Financial Reporting' as adopted
by the EU;
-- The interim management report includes a fair review of the information required by:
a) DTR 4.2.7R of the Disclosure Guidance and Transparency Rules,
being an indication of important events during the first 26 weeks
of the financial year and their impact on the condensed set of
financial statements; and a description of the principal risks and
uncertainties for the remaining 26 weeks of the year; and
b) DTR 4.2.8R of the Disclosure Guidance and Transparency Rules,
being related party transactions that have taken place in the first
26 weeks of the current financial year and that have materially
affected the financial position or performance of the entity during
that period; and any changes in the related party transactions
described in the last annual report that could do so.
The summary of results for the 52 weeks ended 26 April 2020 is
an extract from the published Annual Report and Financial
Statements which have been reported on by the Group's auditors at
the time and delivered to the Registrar of Companies. The audit
report was unqualified, did not draw attention to any matters by
way of emphasis and did not contain a statement under s498 (2) or
s498 (3) of the Companies Act 2006.
Mike Ashley
Chief Executive
10 December 2020
UNAUDITED CONSOLIDATED INCOME STATEMENT
FOR THE 26 WEEKSED 25 OCTOBER 2020
26 weeks 26 weeks 52 weeks
ended ended ended
Note 25 October 27 October 26 April
2020 2019 2020
GBPm GBPm GBPm
Revenue 1,893.3 2,043.5 3,957.4
--------------------------------------------------- ------ ---------------- ---------------- --------------
Cost of sales (1,059.5) (1,148.6) (2,294.8)
--------------------------------------------------- ------ ---------------- ---------------- --------------
Gross profit 833.8 894.9 1,662.6
--------------------------------------------------- ------ ---------------- ---------------- --------------
Selling, distribution and administrative expenses (728.3) (825.1) (1,564.3)
--------------------------------------------------- ------ ---------------- ---------------- --------------
Other operating income 15.1 16.4 32.5
--------------------------------------------------- ------ ---------------- ---------------- --------------
Exceptional items 4 3.7 (3.3) (13.1)
--------------------------------------------------- ------ ---------------- ---------------- --------------
Profit on sale of properties - 23.3 54.2
--------------------------------------------------- ------ ---------------- ---------------- --------------
Operating profit 124.3 106.2 171.9
--------------------------------------------------- ------ ---------------- ---------------- --------------
Investment income 5 40.0 7.2 15.2
--------------------------------------------------- ------ ---------------- ---------------- --------------
Investment costs 6 (37.1) (4.2) (49.8)
--------------------------------------------------- ------ ---------------- ---------------- --------------
Finance income 7 2.2 6.2 31.0
--------------------------------------------------- ------ ---------------- ---------------- --------------
Finance costs 8 (23.3) (19.6) (29.3)
--------------------------------------------------- ------ ---------------- ---------------- --------------
Share of loss of associated undertakings - (5.6) (15.9)
--------------------------------------------------- ------ ---------------- ---------------- --------------
Fair value gain on step acquisition - - 20.4
--------------------------------------------------- ------ ---------------- ---------------- --------------
Profit before taxation 106.1 90.2 143.5
--------------------------------------------------- ------ ---------------- ---------------- --------------
Taxation (21.7) (24.8) (42.5)
--------------------------------------------------- ------ ---------------- ---------------- --------------
Profit for the period 84.4 65.4 101.0
--------------------------------------------------- ------ ---------------- ---------------- --------------
ATTRIBUTABLE TO:
--------------------------------------------------- ------ ---------------- ---------------- --------------
Equity holders of the Group 80.4 61.3 93.8
--------------------------------------------------- ------ ---------------- ---------------- --------------
Non-controlling interests 4.0 4.1 7.2
--------------------------------------------------- ------ ---------------- ---------------- --------------
Profit for the period 84.4 65.4 101.0
--------------------------------------------------- ------ ---------------- ---------------- --------------
EARNINGS PER SHARE ATTRIBUTABLE TO THE EQUITY
SHAREHOLDERS
--------------------------------------------------- ------ ---------------- ---------------- --------------
Pence per Pence per Pence per
share share share
--------------------------------------------------- ------ ---------------- ---------------- --------------
Basic earnings per share 9 16.0 12.0 18.5
--------------------------------------------------- ------ ---------------- ---------------- --------------
Diluted earnings per share 9 16.0 12.0 18.5
--------------------------------------------------- ------ ---------------- ---------------- --------------
The Unaudited Consolidated Income Statement has been prepared on
the basis that all operations are continuing.
The accompanying accounting policies and notes form part of
these Interim Financial Statements.
UNAUDITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE 26 WEEKSED 25 OCTOBER 2020
26 weeks 26 weeks 52 weeks
ended ended ended
Note 25 October 27 October 26 April
2020 2019 2020
GBPm GBPm GBPm
Profit for the period 84.4 65.4 101.0
-------------------------------------------------- ------ ---------------- ---------------- --------------
OTHER COMPREHENSIVE INCOME
-------------------------------------------------- ------ ---------------- ---------------- --------------
ITEMS THAT WILL NOT BE RECLASSIFIED SUBSEQUENTLY
TO PROFIT OR LOSS
-------------------------------------------------- ------ ---------------- ---------------- --------------
Fair value movement on long-term financial
assets (0.5) 12.5 (19.7)
-------------------------------------------------- ------ ---------------- ---------------- --------------
ITEMS THAT WILL BE RECLASSIFIED SUBSEQUENTLY
TO PROFIT OR LOSS
-------------------------------------------------- ------ ---------------- ---------------- --------------
Exchange differences on translation of
foreign operations (9.9) 3.7 9.8
-------------------------------------------------- ------ ---------------- ---------------- --------------
Fair value movement on hedged contracts
- recognised in the period 11 (15.3) 13.4 16.4
-------------------------------------------------- ------ ---------------- ---------------- --------------
Fair value movement on hedged contracts
- ineffectiveness 11 - (1.5) 0.2
-------------------------------------------------- ------ ---------------- ---------------- --------------
Fair value movement on hedged contracts
- reclassified and reported in sales 11 (1.3) (1.2) (1.7)
-------------------------------------------------- ------ ---------------- ---------------- --------------
Fair value movement on hedged contracts
- reclassified and reported in cost of
sales 11 (8.7) (19.4) (37.4)
-------------------------------------------------- ------ ---------------- ---------------- --------------
Fair value movement on hedged contracts
- taxation taken to reserves 11 4.3 1.7 3.8
-------------------------------------------------- ------ ---------------- ---------------- --------------
OTHER COMPREHENSIVE (COST) / INCOME FOR
THE PERIOD, NET OF TAX (31.4) 9.2 (28.6)
-------------------------------------------------- ------ ---------------- ---------------- --------------
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD 53.0 74.6 72.4
-------------------------------------------------- ------ ---------------- ---------------- --------------
ATTRIBUTABLE TO:
-------------------------------------------------- ------ ---------------- ---------------- --------------
Equity holders of the Group 49.0 70.5 65.2
-------------------------------------------------- ------ ---------------- ---------------- --------------
Non-controlling interest 4.0 4.1 7.2
-------------------------------------------------- ------ ---------------- ---------------- --------------
53.0 74.6 72.4
-------------------------------------------------- ------ ---------------- ---------------- --------------
The accompanying accounting policies and notes form part of
these Interim Financial Statements.
UNAUDITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 25 OCTOBER 2020
25 October 27 October 26 April
Note 2020 2019 2020
GBPm GBPm GBPm
ASSETS - NON
CURRENT
------------------ -------------------------------------------------------------------------------
Property, plant and equipment 1,308.6 1,263.9 1,347.6
---------------------------------------------- --------------- --------------- -------------
Investment properties 18.2 46.2 18.9
---------------------------------------------- --------------- --------------- -------------
Intangible assets 131.7 170.9 143.4
---------------------------------------------- --------------- --------------- -------------
Investments in associated undertakings - 0.3 -
---------------------------------------------- --------------- --------------- -------------
Long-term financial assets 127.2 86.2 83.8
---------------------------------------------- --------------- --------------- -------------
Deferred tax assets 59.3 29.3 49.9
---------------------------------------------- --------------- --------------- -------------
1,645.0 1,596.8 1,643.6
---------------------------------------------- --------------- --------------- -------------
ASSETS - CURRENT
------------------ -------------------------------------------------------------------------------
Inventories 1,110.3 1,231.4 1,198.3
---------------------------------------------- --------------- --------------- -------------
Trade and other receivables 578.8 437.5 414.2
---------------------------------------------- --------------- --------------- -------------
Derivative financial assets 11 64.9 83.1 78.1
---------------------------------------------- --------------- --------------- -------------
Cash and cash equivalents 371.3 326.0 534.0
---------------------------------------------- --------------- --------------- -------------
2,125.3 2,078.0 2,224.6
---------------------------------------------- --------------- --------------- -------------
TOTAL ASSETS 3,770.3 3,674.8 3,868.2
---------------------------------------------- --------------- --------------- -------------
Share capital 64.1 64.1 64.1
---------------------------------------------- --------------- --------------- -------------
Share premium 874.3 874.3 874.3
---------------------------------------------- --------------- --------------- -------------
Treasury shares reserve (295.7) (320.2) (295.7)
---------------------------------------------- --------------- --------------- -------------
Permanent contribution to capital 0.1 0.1 0.1
---------------------------------------------- --------------- --------------- -------------
Capital redemption reserve 8.0 8.0 8.0
---------------------------------------------- --------------- --------------- -------------
Foreign currency translation reserve 68.0 71.8 77.9
---------------------------------------------- --------------- --------------- -------------
Reverse combination reserve (987.3) (987.3) (987.3)
---------------------------------------------- --------------- --------------- -------------
Own share reserve (67.0) (67.0) (67.0)
---------------------------------------------- --------------- --------------- -------------
Hedging reserve 11 7.0 39.7 28.0
---------------------------------------------- --------------- --------------- -------------
Retained earnings 1,644.8 1,568.6 1,564.9
---------------------------------------------- --------------- --------------- -------------
Issued capital and reserves attributable
to owners of the parent 1,316.3 1,252.1 1,267.3
---------------------------------------------- --------------- --------------- -------------
Non-controlling interests 17.0 9.9 13.0
---------------------------------------------- --------------- --------------- -------------
TOTAL EQUITY 1,333.3 1,262.0 1,280.3
---------------------------------------------- --------------- --------------- -------------
LIABILITIES -
NON CURRENT
------------------ -------------------------------------------------------------------------------
Borrowings 621.4 580.4 900.0
---------------------------------------------- --------------- --------------- -------------
Lease liabilities 585.9 507.2 476.2
---------------------------------------------- --------------- --------------- -------------
Retirement benefit obligations 2.0 1.9 1.9
---------------------------------------------- --------------- --------------- -------------
Deferred tax liabilities 19.6 13.1 25.6
---------------------------------------------- --------------- --------------- -------------
Provisions 10 331.8 350.2 336.0
---------------------------------------------- --------------- --------------- -------------
1,560.7 1,452.8 1,739.7
---------------------------------------------- --------------- --------------- -------------
LIABILITIES -
CURRENT
------------------ -------------------------------------------------------------------------------
Derivative financial liabilities 11 88.4 19.9 44.2
---------------------------------------------- --------------- --------------- -------------
Trade and other payables 626.0 748.2 602.5
---------------------------------------------- --------------- --------------- -------------
Lease liabilities 129.7 162.5 147.9
---------------------------------------------- --------------- --------------- -------------
Current tax liabilities 32.2 29.4 53.6
---------------------------------------------- --------------- --------------- -------------
876.3 960.0 848.2
---------------------------------------------- --------------- --------------- -------------
TOTAL LIABILITIES 2,437.0 2,412.8 2,587.9
---------------------------------------------- --------------- --------------- -------------
TOTAL EQUITY AND LIABILITIES 3,770.3 3,674.8 3,868.2
The accompanying accounting policies and notes form part of
these Interim Financial Statements.
UNAUDITED CONSOLIDATED CASH FLOW STATEMENT
FOR THE 26 WEEKSED 25 OCTOBER 2020
26 weeks 26 weeks 52 weeks
ended ended ended
Note 25 October 27 October 26 April
2020 2019 2020
GBPm GBPm GBPm
CASH INFLOW FROM OPERATING ACTIVITIES 13 330.5 270.8 425.2
------------------------------------------------ ------ ---------------- ---------------- --------------
Income taxes paid (54.3) (50.6) (48.5)
------------------------------------------------ ------ ---------------- ---------------- --------------
NET CASH INFLOW FROM OPERATING ACTIVITIES 276.2 220.2 376.7
------------------------------------------------ ------ ---------------- ---------------- --------------
CASH FLOW FROM INVESTING ACTIVITIES
------------------------------------------------------------------------------------------------------------
Proceeds on disposal of property, plant
and equipment 2.7 125.8 152.6
------------------------------------------------ ------ ---------------- ---------------- --------------
Proceeds on disposal of intangible assets 4.6 - -
------------------------------------------------ ------ ---------------- ---------------- --------------
Proceeds on disposal of listed investments 4.2 - 4.9
------------------------------------------------ ------ ---------------- ---------------- --------------
Purchase of associates - (5.0) (5.6)
------------------------------------------------ ------ ---------------- ---------------- --------------
Purchase of subsidiaries, net of cash
acquired 12 (37.0) 16.1 (7.3)
------------------------------------------------ ------ ---------------- ---------------- --------------
Purchase of property, plant and equipment (57.0) (134.6) (323.5)
------------------------------------------------ ------ ---------------- ---------------- --------------
Purchase of listed investments (49.9) - (24.8)
------------------------------------------------ ------ ---------------- ---------------- --------------
Investment income received 0.3 6.3 0.5
------------------------------------------------ ------ ---------------- ---------------- --------------
Finance income received 2.2 1.0 9.8
------------------------------------------------ ------ ---------------- ---------------- --------------
NET CASH (OUTFLOW)/INFLOW FROM INVESTING
ACTIVITIES (129.9) 9.6 (193.4)
------------------------------------------------ ------ ---------------- ---------------- --------------
CASH FLOW FROM FINANCING ACTIVITIES
------------------------------------------------------------------------------------------------------------
Lease payments (17.1) (57.9) (113.6)
------------------------------------------------ ------ ---------------- ---------------- --------------
Finance costs paid (14.7) (10.3) (18.3)
------------------------------------------------ ------ ---------------- ---------------- --------------
Borrowings drawn down 1,551.4 63.8 510.0
------------------------------------------------ ------ ---------------- ---------------- --------------
Borrowings repaid (1,830.0) (310.0) (436.5)
------------------------------------------------ ------ ---------------- ---------------- --------------
Purchase of own shares - (38.4) (43.9)
------------------------------------------------ ------ ---------------- ---------------- --------------
NET CASH OUTFLOW FROM FINANCING ACTIVITIES (310.4) (352.8) (102.3)
------------------------------------------------ ------ ---------------- ---------------- --------------
NET (DECREASE) / INCREASE IN CASH AND
CASH EQUIVALENTS (164.1) (123.0) 81.0
------------------------------------------------ ------ ---------------- ---------------- --------------
Exchange movement on cash balances 1.4 1.0 5.0
------------------------------------------------ ------ ---------------- ---------------- --------------
CASH AND CASH EQUIVALENTS INCLUDING OVERDRAFTS
AT BEGINNING OF PERIOD 534.0 448.0 448.0
------------------------------------------------ ------ ---------------- ---------------- --------------
CASH AND CASH EQUIVALENTS INCLUDING OVERDRAFTS
AT THE PERIOD 371.3 326.0 534.0
The accompanying accounting policies and notes form part of
these Interim Financial Statements.
UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE 26 WEEKSED 25 OCTOBER 2020
Foreign Total Non-controlling
Share Share Treasury currency Own Retained Other(2) attributable Interests Total
capital premium(1) shares translation share earnings to owners
reserve of
parent
(GBPm) (GBPm) (GBPm) (GBPm) (GBPm) (GBPm) (GBPm) (GBPm) (GBPm) (GBPm)
At 26 April 2020 64.1 874.3 (295.7) 77.9 (67.0) 1,564.9 (951.2) 1,267.3 13.0 1,280.3
----------------- ----------- -------------- --------- --------------- --------- --------- --------- ------------ --------------- --------
Profit for the
financial
period - - - - - 80.4 - 80.4 4.0 84.4
----------------- ----------- -------------- --------- --------------- --------- --------- --------- ------------ --------------- --------
OTHER COMPREHENSIVE INCOME
----------------------------------------------------------------------------------------------------------------------------------------------------
Cash flow hedges
-
recognised in
the period - - - - - - (15.3) (15.3) - (15.3)
----------------- ----------- -------------- --------- --------------- --------- --------- --------- ------------ --------------- --------
Cash flow hedges
-
reclassified
and reported
in sales - - - - - - (1.3) (1.3) - (1.3)
----------------- ----------- -------------- --------- --------------- --------- --------- --------- ------------ --------------- --------
Cash flow hedges
-
reclassified
and reported
in cost of
sales - - - - - - (8.7) (8.7) - (8.7)
----------------- ----------- -------------- --------- --------------- --------- --------- --------- ------------ --------------- --------
Cash flow hedges
-
taxation - - - - - - 4.3 4.3 - 4.3
----------------- ----------- -------------- --------- --------------- --------- --------- --------- ------------ --------------- --------
Fair value
adjustment
in respect of
long
term financial
assets
- recognised - - - - - (0.5) - (0.5) - (0.5)
----------------- ----------- -------------- --------- --------------- --------- --------- --------- ------------ --------------- --------
Translation
differences
- Group - - - (9.9) - - - (9.9) - (9.9)
----------------- ----------- -------------- --------- --------------- --------- --------- --------- ------------ --------------- --------
Total
comprehensive
income for the
period - - - (9.9) - 79.9 (21.0) 49.0 4.0 53.0
----------------- ----------- -------------- --------- --------------- --------- --------- --------- ------------ --------------- --------
At 25 October
2020 64.1 874.3 (295.7) 68.0 (67.0) 1,644.8 (972.2) 1,316.3 17.0 1,333.3
----------------- ----------- -------------- --------- --------------- --------- --------- --------- ------------ --------------- --------
At 29 April 2019 64.1 874.3 (281.7) 68.1 (67.2) 1,494.8 (932.5) 1,219.9 5.8 1,225.7
----------------- ----------- -------------- --------- --------------- --------- --------- --------- ------------ --------------- --------
Purchase of own
shares - - (38.5) - 0.2 - - (38.3) - (38.3)
----------------- ----------- -------------- --------- --------------- --------- --------- --------- ------------ --------------- --------
Transactions
with owners - - (38.5) - 0.2 - - (38.3) - (38.3)
----------------- ----------- -------------- --------- --------------- --------- --------- --------- ------------ --------------- --------
Profit for the
financial
period - - - - - 61.3 61.3 4.1 65.4
----------------- ----------- -------------- --------- --------------- --------- --------- --------- ------------ --------------- --------
OTHER COMPREHENSIVE INCOME
----------------------------------------------------------------------------------------------------------------------------------------------------
Cash flow hedges
-
recognised in
the period - - - - - - 13.4 13.4 - 13.4
----------------- ----------- -------------- --------- --------------- --------- --------- --------- ------------ --------------- --------
Cash flow hedges
-
ineffectiveness - - - - - - (1.5) (1.5) - (1.5)
----------------- ----------- -------------- --------- --------------- --------- --------- --------- ------------ --------------- --------
Cash flow hedges
-
reclassified
and reported
in sales - - - - - - (1.2) (1.2) - (1.2)
----------------- ----------- -------------- --------- --------------- --------- --------- --------- ------------ --------------- --------
Cash flow hedges
-
reclassified
and reported
in cost of
sales - - - - - - (19.4) (19.4) - (19.4)
----------------- ----------- -------------- --------- --------------- --------- --------- --------- ------------ --------------- --------
Cash flow hedges
-
taxation - - - - - - 1.7 1.7 - 1.7
----------------- ----------- -------------- --------- --------------- --------- --------- --------- ------------ --------------- --------
Fair value
adjustment
in respect of
long
term financial
assets
- recognised - - - - - 12.5 - 12.5 - 12.5
----------------- ----------- -------------- --------- --------------- --------- --------- --------- ------------ --------------- --------
Translation
differences
- Group - - - 3.7 - - - 3.7 - 3.7
----------------- ----------- -------------- --------- --------------- --------- --------- --------- ------------ --------------- --------
Total
comprehensive
income for the
period - - - 3.7 - 73.8 (7.0) 70.5 4.1 74.6
----------------- ----------- -------------- --------- --------------- --------- --------- --------- ------------ --------------- --------
At 27 October
2019 64.1 874.3 (320.2) 71.8 (67.0) 1,568.6 (939.5) 1,252.1 9.9 1,262.0
(1) The share premium account is used to record the excess
proceeds over nominal value on the issue of shares.
(2) Other reserves comprises permanent contribution to capital,
capital redemption reserve, reverse combination reserve and the
hedging reserve. All movements in the period related to the hedging
reserve.
The accompanying accounting policies and notes form part of
these Interim Financial Statements.
NOTES TO THE FINANCIAL INFORMATION
FOR THE 26 WEEKSED 25 OCTOBER 2020
1. BASIS OF PREPARATION
Non-Statutory
The results for the first half of the financial year have not
been audited or reviewed by external auditors. The financial
information in the Group's Annual Report and Financial Statements
is prepared in accordance with International Financial Reporting
Standards as adopted by the European Union ("IFRS"). The Interim
Results have been prepared in accordance with International
Accounting Standard (IAS) 34 'Interim Financial Reporting' as
adopted by the European Union and the Disclosure Guidance and
Transparency Rules of the UK's Financial Conduct Authority (DTR).
This consolidated financial information for the 26 Weeks ended 25
October 2020 and 27 October 2019, and for the 52 Weeks ended 26
April 2020 does not constitute statutory financial statements
within the meaning of s434 of the Companies Act 2006.
The summary of results for the 52 weeks ended 26 April 2020 is
an extract from the published Annual Report and Financial
Statements which have been reported on by the Group's auditors at
the time and delivered to the Registrar of Companies. The audit
report was unqualified, did not draw attention to any matters by
way of emphasis and did not contain a statement under s498 (2) or
s498 (3) of the Companies Act 2006.
Going Concern
In light of the current economic uncertainty caused by Covid-19,
the Directors have reviewed the current financial performance and
liquidity of the business, including modelling a number of
scenarios that include further lockdowns and periods of store
closures. The Group is still profitable, highly cash generative and
has considerable financial resources. The Group is able to operate
within its banking facilities and covenants, which run until
November 2022, and is well placed to take advantage of strategic
opportunities as they arise. As a consequence, the Directors
believe that the Group is well placed to manage its business risks
successfully despite the continued uncertain economic outlook.
Management have assessed the level of trading to date since the
initial impact of Covid-19 and has forecast and projected a
conservative base case and also a number of even more conservative
scenarios taking into account the second lockdown, potential
further lockdowns, Government support, foreign exchange exposure
and cost saving initiatives. These forecasts and projections show
that the Group will be able to operate within the level of the
current facility and its covenant requirements (being interest
cover and net debt to EBITDA ratios). Management also have a number
of mitigating actions which could be taken if required such as
putting on hold discretionary spend, liquidating certain assets on
the balance sheet and paying down the Revolving Credit
Facility.
Having thoroughly reviewed the Group's performance and having
made suitable enquiries, the Directors are confident that the Group
has adequate resources to remain in operational existence for at
least 12 months from the date of approval of these financial
statements. Trading would need to fall significantly below levels
observed during the pandemic, including during the various
lockdowns already experienced, to require mitigating actions or a
relaxation of covenants. On this basis, the Directors continue to
adopt the going concern basis for the preparation of these
Unaudited Interim Financial Statements which is a period of at
least twelve months from the date of approval of these Unaudited
Interim Financial Statements.
New accounting standards, interpretations and amendments adopted
by the Group
The principal accounting policies have remained unchanged from
the prior financial information for the 52 weeks ended 26 April
2020. The IFRS 16 Covid-19 Rent Concessions Amendment and the IFRS
3 Amendments to the Definition of a Business are not considered to
have a material impact on the Group. The Group continues to monitor
the potential impact of other new standards and interpretations
which have been or may be endorsed and required adoption by the
Group in future reporting period. The Group does not consider that
any other standards, amendments or interpretation issued by the
IASB, but not yet applicable, will have a significant impact on the
financial statements.
The Group has received government support in the period relating
to business rates relief and the Coronavirus Job Retention Scheme
(CJRS) as a result of the Covid-19 pandemic. Government grants that
compensate the Group for expenses incurred are recognised in profit
or loss, as a deduction against the related expense, over the
periods necessary to match them with the related costs.
Risks and uncertainties
The Board has considered the risks and uncertainties for the
remaining half of the financial year and determined that the risks
presented in the FY20 Annual Report, noted below, also remain
relevant for the rest of the financial year:
-- Strategy
-- Third-party brand relationships, key suppliers and supply chain management
-- Financial and business performance
-- Treasury, liquidity and credit risks
-- Customer
-- Legal and regulatory compliance
-- Technology capability and infrastructure renewal
-- Cyber risks, data loss and data privacy
-- Business continuity management and incident response
-- Group entities and extended enterprise
-- People, talent management and succession
-- COVID-19
-- Brexit
2. CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATES
The critical accounting estimates and judgements made by the
Group regarding the future or other key sources of estimation,
uncertainty and judgement that may have a significant risk of
giving rise to a material adjustment to the carrying values of
assets and liabilities within the next financial period are:
Key Judgements
Determining Related Party Relationships
Management determines whether a related party relationship
exists by assessing the nature of the relationship by reference to
the requirements of IAS 24, Related Party Disclosures. This is in
order to determine whether significant influence exists as a result
of control, shared directors or parent companies, or close family
relationships. The level at which one party may be expected to
influence the other is also considered for transactions involving
close family relationships .
Control And Significant Influence Over Certain Entities
Under IAS 28 Investments in Associates and Joint Ventures, if an
entity holds 20% or more of the voting power of the investee, it is
presumed that the entity has significant influence, unless it can
clearly demonstrate that this is not the case. The Group holds
greater than 20% of the voting rights of Studio Retail Group Plc
and French Connection Group Plc, whereby management consider that
the Group does not have significant influence over these entities
for combinations of the following reasons:
-- The Group does not have any representation on the board of
directors of the investee other than a Frasers Group representative
having an observer role on the board of Studio Retail Group Plc.
Management have reviewed the terms of the observer arrangement and
have concluded that this does not give them the right to
participate in or influence the financial or operating decisions of
Studio Retail Group Plc. Studio Retail Group Plc can terminate this
arrangement at any time, and can determine which parts of the board
meetings the representative can be present at and what information
they are given access to;
-- There is no participation in decision making and strategic
processes, including participation in decisions about dividends or
other distributions;
-- There have been no material transactions between the entity and its investee companies;
-- There has been no interchange of managerial personnel;
-- No non-public essential technical management information is provided to the investee.
In assessing the level of control that management have over
certain entities, management will consider the various aspects that
allow management to influence decision making. This includes the
level of share ownership, board membership, the level of investment
and funding and the ability of the Group to influence operational
and strategic decisions and effect its returns through the exercise
of such influence.
The Group holds 49% of the share capital of Four (Holdings)
Limited which is accounted for using the equity method. The Group
does not have any representation on the board of directors and no
participation in decisions about relevant activities such as
establishing operating and capital decisions, including budgets,
appointing/remunerating key management personnel or service
providers and terminating their services or employment. However, in
prior periods the Group has provided Four (Holdings) Limited with a
significant loan. At the reporting date, the amount owed by Four
(Holdings) Limited totalled GBP68.5m (GBP34.8m net of amounts
recognised in respect of expected credit losses). The Group is
satisfied that the existence of these transactions provides
evidence that the entity has significant influence over the
investee but in the absence of any other rights, in isolation it is
insufficient to meet the control criteria of IFRS 10, as the Group
does not have power over Four (Holdings) Limited.
Cash Flow Hedging
The Group uses a range of forward and option contracts that are
entered into at the same time, they are in contemplation with one
another and have the same counterparty. A judgement is made in
determining whether there is an economic need or substantive
business purpose for structuring the transactions separately that
could not also have been accomplished in a single transaction.
Management are of the view that there is a substantive distinct
business purpose for entering into the options and a strategy for
managing the options independently of the forward contracts. The
forward and options contracts are therefore not viewed as one
instrument and hedge accounting for the forwards is permitted.
Under IFRS 9 in order to achieve cash flow hedge accounting,
forecast transactions (primarily Euro denominated sales and USD
denominated purchases) must be considered to be highly probable.
The hedge must be expected to be highly effective in achieving
offsetting changes in cash flows attributable to the hedged risk.
The forecast transaction that is the subject of the hedge must be
highly probable and must present an exposure to variations in cash
flows that could ultimately affect profit or loss. Management have
reviewed the detailed forecasts and growth assumptions within them,
and are satisfied that forecasts in which the cash flow hedge
accounting has been based meet the criteria per IFRS 9 as being
highly probable forecast transactions. Should the forecast levels
not pass the highly probable test, any cumulative fair value gains
and losses in relation to either the entire or the ineffective
portion of the hedged instrument would be taken to the Income
Statement.
Management considers various factors when determining whether a
forecast transaction is highly probable. These factors include
detailed sales forecasts by channel, geographical area and
seasonality, conditions in target markets and the impact of
expansion in new areas. Management also consider any change in
alternative customer sales channels that could impact on the hedged
transaction.
If the forecast transactions were determined to be not highly
probably and all hedge accounting was discontinued, the Hedging
reserve of GBP7.0m (excluding deferred tax) would be shown in
Finance Income.
Defining Operating Segments
Management determines its operating segments with reference to
the Chief Operational Decision Maker's process for making key
decisions over allocation of resources to the segment and in
assessing a segment's performance. This is based on:
-- The nature of the operation type and products sold
-- The type of class of customer targeted
-- Product distribution methods
Similar operations are amalgamated into operating segments for
the purposes of segmental reporting. See also note 3.
Key Estimates
Provision For Obsolete, Slow Moving or Defective Inventories
The Directors have applied their knowledge and experience of the
retail industry in determining the level and rates of provisioning
required in calculating the appropriate inventory carrying values.
Specific estimates and judgements applied in relation to assessing
the level of inventory provisions required are considered in
relation to the following areas:
a) Continuity inventory
b) Seasonal inventory lines - specifically seasons that have now
finished
c) Third party versus own brand inventory
d) Ageing of inventory
e) Sports Retail or Premium Lifestyle
f) Local economic conditions
g) Divisional specific factors
h) Increased cost of inventory and lower margins with the
devaluation of the Pound
i) Over-stock and out of season inventory as a result of
Covid-19
Provision estimates are forward looking and are formed using a
combination of factors including historical experience,
management's knowledge of the industry, group discounting, sales
pricing protocols and the overall assessment made by management of
the risks in relation to inventory. Management use a number of
internally generated reports to monitor and continually re-assess
the adequacy and accuracy of the inventory provision. The
additional cost of repricing inventory and handling charges in
relation to relocating inventory (tunnelling) are considered in
arriving at the appropriate percentage provision. The assessment
involves significant estimation uncertainty, therefore in order to
check that the assumptions applied remain valid, management
produces a range of outcomes and the provision is set within this
range.
Key assumptions used to create the estimates are:
-- Discounting - Based on historical experience and managements
anticipated future discounting including the impact of Covid-19
-- Tunnelling - Cost of handling stock for reworking, repacking and repricing
-- Repricing - Labour cost associated with repricing units of stock
-- Shrinkage - Stock lost through damage and theft
Total Group inventory provision at 25 October 2020 is 15.9% (27
October 2019: 14.1%, 26 April 2020: 15.7%). A 1% change in the
total provision would impact underlying and reported EBITDA by
approx. GBP13.6m (27 October 2019: GBP14.3m, 26 April 2020:
GBP14.2m).
Property Related Provisions
Property related estimates and judgements are continually
evaluated and are based on historical experience, external advice
and other factors, including expectations of future events that are
believed to be reasonable under the circumstances.
Dilapidations
The Group provides for its legal responsibility for dilapidation
costs following advice from chartered surveyors and previous
experience of exit costs (including strip out costs and
professional fees). Management use a reference estimate of
GBP100,000 (FY20: GBP100,000) for large leasehold stores, GBP50,000
(FY20: GBP50,000) for smaller leasehold stores (GBP25,000 per store
for Game UK and Game Spain stores) and $/EUR50,000 (FY20:
$/EUR50,000) for non-UK stores. Management do not consider these
costs to be capital in nature and therefore dilapidations are not
capitalised, except for in relation to the sale and leaseback of
Shirebrook in the prior year in which a material dilapidations
provision was recognised.
A 10% increase per store would result in an approx. GBP8.0m
charge to the income statement.
Other Provisions
Provisions are made for items where the Group has identified a
present legal or constructive obligation arising as a result of a
past event, it is probable that an outflow of resources will be
required to settle the obligation and a reliable estimate can be
made of the amount of the obligation.
Legal and regulatory provisions relate to management's best
estimates of provisions required for legal and regulatory claims
and ongoing non-UK tax enquiries. Other provisions relate to
management's best estimates of provisions required for
restructuring, employment and commercial. Where applicable these
are inclusive of any estimated penalties, interest and legal
costs.
In relation to the non-UK tax enquiries during H1 FY21
management have made a judgement to consider all claims
collectively, applying the following key estimates to the gross
amounts (excluding re-imbursement assets):
-- 10% penalty (FY20: 10%). A 5% increase would result in
approx. GBP7m increase in the provision.
-- 3% interest on the liability (FY20: 3%). A 1% increase would
result in approx. GBP10m increase in the provision.
Management are satisfied that the judgement to consider all
claims collectively is the only reasonable approach because they
are all dependant on the outcome of a court ruling on the
interpretation of the non-UK tax enquiries. Management are
satisfied that with regard to timing a reasonable range of outcomes
are all greater than one year and so are satisfied with including
the provisions as non-current.
Other Receivables And Amounts Owed By Related Parties
Other receivables and amounts owed by related parties are stated
net of provision for any impairment. Management have applied
estimates in assessing the recoverability of working capital and
loan advances made to investee companies. Matters considered
include the relevant financial strength of the underlying investee
company to repay the loans, the repayment period and underlying
terms of the monies advanced, forecast performance of the
underlying borrower, and where relevant, the Group's intentions for
the companies to which monies have been advanced.
The key estimate within the loan assessment for the Four
(Holdings) Limited amounts owed by related parties is the discount
rate applied and management have based the discount rate on a
market rate of 6.5%. The discount rate would need to be increased
by 2% for a further loss allowance to be recognised.
IFRS 16
The key areas of judgement in relation to property leases
recognised under IFRS 16 are below:
-- IFRS 16 defines the lease term as the non-cancellable period
of a lease together with the options to extend or terminate a
lease, if the lessee were reasonably certain to exercise that
option. The Group will assess the likelihood of extending lease
contracts beyond the break date by taking into account current
economic and market conditions, current trading performance,
forecast profitability and the level of capital investment in the
property.
-- IFRS 16 states that the lease payments shall be discounted
using the lessee's incremental borrowing rate where the rate
implicit in the lease cannot be readily determined. Accordingly,
all lease payments have been discounted using the incremental
borrowing rate (IBR). The IBR has been determined by using a
synthetic credit rating for the Group which is used to obtain
market data on debt instruments for companies with the same credit
rating, this is split by currency to represent each of the
geographical areas the Group operates within and adjusted for the
lease term.
-- Management have performed an assessment of core and non-core
entities to which management have applied the IBR to core entities.
The remaining non-core entities are not significant to the Group
and therefore the core IBR has also been applied to these.
-- Exit costs have not been capitalised within the right of use
asset (except for Shirebrook), this is in line with the Group's
property, plant and equipment capitalisation policy.
-- The right of use asset will be reviewed for impairment at
each reporting period in line with IAS 36 impairment to review
whether the carrying amount exceeds it recoverable amount. For
impairment testing purposes the Group has determined that each
store is a separate CGU. The recoverable amount is calculated based
on the Group's latest forecast cash flows which are then
extrapolated to cover the period to the break date of the lease
taking into account historic performance and knowledge of the
current market, together with the Group's views on future
profitability of each CGU. The key assumptions in the calculations
which are subject to a high degree of estimation uncertainty are
the sales growth rates, gross margin rates, changes in the
operating cost base and the pre-tax discount rate derived from the
Group's weighted average cost of capital using the capital asset
pricing model, the inputs of which include a risk-free rate, equity
risk premium and a risk adjustment (Beta). Impairments in the
period have been recognised in the amount of GBP124.9m due to the
ongoing impact of Covid-19 and the challenges in the retail sector
on the forecast cash flows of the CGU.
The key assumptions, which are equally applicable to each CGU,
in the cash flow projections used to support the carrying amount of
the right of use asset were as follows:
25 October 27 October 26 April
Key assumptions used 2020 2019 2020
Sales decline - year 1 12.0% 5.0% 10.0%
----------------------------------------- ---------- --------
Sales decline - year 2 8.0% 1.0% 1.0%
----------------------------------------- ---------- ---------- --------
Sales decline - year 3 4.0% 1.0% 1.0%
----------------------------------------- ---------- ---------- --------
Sales decline - year 4-5 1.0% 1.0% 1.0%
----------------------------------------- ---------- ---------- --------
Gross margin reduction in basis points -
year 1 300 250 300
----------------------------------------- ---------- --------
Operating costs increase 3.0% 3.0% 3.0%
----------------------------------------- ---------- --------
Discount rate 6.0% 6.0% 6.0%
----------------------------------------- ---------- --------
Management have revised the sales assumptions during the period
due to the expectation that Covid-19 will continue to impact
customer habits and the potential risk of further lockdowns. A
sensitivity analysis has been performed in respect of sales as
management consider this to be the most sensitive of the key
assumptions. A change in the year 1 sales assumption from 12% to
13% would result in an increase in impairment of GBP3.9m (26 April
2020: from 10% to 11% result in GBP5.4m).
Key Estimates In Relation To Alternative Performance
Measures
The Directors have adopted Alternative Performance Measures
(APM's). APM's should be considered in addition to IFRS measures.
The Directors believe that underlying EBITDA, underlying profit
before tax and underlying basic EPS provide further useful
information for shareholders on the underlying performance of the
Group in addition to the reported numbers and are consistent with
how business performance is measured internally. They are not
recognised profit measures under IFRS and may not be directly
comparable with "adjusted" or "alternative" profit measures used by
other companies.
EBITDA is earnings before investment income, finance income and
finance costs, tax, depreciation, amortisation and impairment. It
includes the Group's share of losses from associated undertakings
and joint ventures. Underlying EBITDA excludes the impact of IFRS
16, foreign exchange gains/losses in selling and administration
costs, exceptional costs, and the profit / loss on disposal of
subsidiaries, strategic investments and properties. Underlying
EBITDA also excludes fair value adjustments on step
acquisitions.
The following are further key estimates used with regard to the
alternative performance measures used by the Group.
Onerous lease provision
Provisions for onerous lease contracts are recognised when the
unavoidable costs of meeting lease obligations exceed the economic
benefits expected to be received over the term of the lease. Where
an onerous lease has been identified, the fixed assets associated
to that store are also reviewed for impairment. As at period-end
approximately 10% of the Group's store portfolio had an onerous
provision recognised in relation to the lease contract.
Management use store EBITDA in order to determine whether an
onerous lease exists, specific assumptions which include
significant estimation uncertainty to determine the appropriate
level of provision include:
a. Forecast sales and margin in stores, reflecting historic and
expected future performance including the impact of Covid-19 across
the Group
-- UK forecasts are currently expecting a sales drop of -12% in
FY21, -8% in FY22, -4% in FY23 and then -1% for future years (FY20
H1: -5% in FY20 followed by -1% for future years) and a margin
impact of -300bps (FY20 H1: -250bps)
-- European forecasts are currently expecting a sales drop of
-12% in FY21, -8% in FY22, -4% in FY23 and then -1% for future
years (FY20 H1: -2% in FY20 followed by -2% for future years) and a
margin impact of -300bps (FY20 H1: -200bps)
b. Forecast wages and direct store cost inflation
-- UK wage and operating costs inflation assumes 3% (FY20 H1:
3%) and Europe assumes 3% (FY20 H1: 2%)
-- UK rent increases are expected at 2% (FY20 H1: 16%)
-- European rent increases are expected at 2% (FY20 H1: 2%)
c. Other
-- Discount rate 2% (FY20 H1: 3%) across the Group
-- Store profitability includes 100% contribution towards central overheads
-- Assumed get out cap of 10 years (FY20 H1: no cap)
d. Planned store closures, relocations and re-brandings
e. Lease obligations calculated to the end of the lease or the
earlier of the assumed get out cap / applicable break clause
Sensitivity of estimates:
Forecast: Impact of: (GBPm)
Sales year 1 1% change 7.2
---------------------- ------------- --------
Margin 100bps 13.7
---------------------- ------------- --------
Wages and operating
costs 1% change 25.0
---------------------- ------------- --------
Rent increase 1% change 1.8
---------------------- ------------- --------
Discount rate 1% change 8.7
3. SEGMENTAL ANALYSIS
Management has determined to present its segmental disclosures
consistently with the presentation in the 2020 Annual Report.
Management considers operationally that the UK Retail divisions (UK
Sports Retail and Premium Lifestyle) are run as one business unit
in terms of allocating resources, inventory management and
assessing performance. Under IFRS 8 we have not at this reporting
date met the required criteria with enough certainty to aggregate
these operating segments. We will continually keep this under
review at subsequent reporting dates. We continue to monitor the
impacts of Covid-19, Brexit, and the continued uncertainties this
has brought relating to the political and economic environments,
and market and currency volatility in the countries we operate in.
European countries have been identified as operating segments and
have been aggregated into a single operating segment as permitted
under IFRS 8. The decision to aggregate these segments was based on
the fact that they each have similar economic characteristics,
similar long-term financial performance expectations, and are
similar in each of the following respects:
-- The nature of the products;
-- The type or class of customer for the products; and
-- The methods used to distribute the products.
In accordance with paragraph 12 of IFRS 8 the Group's operating
segments have been aggregated into the following reportable
segments:
1) UK Retail:
i) UK Sports Retail - includes core sports retail store
operations in the UK, plus all the Group's sports retail online
business (excluding Bob's Stores, Eastern Mountain Sports and
Malaysia), the gyms, the Group's Shirebrook campus operations, GAME
UK stores and online operations, and retail store operations in
Northern Ireland .
ii) Premium Lifestyle - includes the results of the premium
retail businesses Flannels, Cruise, van mildert, Jack Wills, House
of Fraser and Sofa.com along with the related websites.
2) European Retail - includes all the Group's sports retail
stores, management and operations in Europe including the Group's
European Distribution Centres in Belgium and Austria as well as
GAME Spain stores acquired in the prior year.
3) Rest of World Retail - includes the results of US based
retail activities, Asia based retail activities along with their
e-commerce offering.
4) Wholesale & Licensing - includes the results of the
Group's portfolio of internationally recognised brands such as
Everlast, Karrimor, Lonsdale and Slazenger.
It is management's current intention to run the Group as four
operating segments being UK Retail (including UK Sports Retail and
Premium Lifestyle), European Retail, Rest of World Retail and
Wholesale & Licensing. Management is satisfied that the UK
Sports Retail and Premium Lifestyle segments will meet the criteria
permitted under IFRS 8 to aggregate as one segment in due
course.
The FY20 H1 numbers have been re-categorised due to changes in
the reporting segments, with Jack Wills and Sofa.com being moved
from UK Sports Retail to Premium Lifestyle.
Segmental information for the 26 weeks ended 25 October
2020:
UK Sports Premium UK Retail European Rest Total Wholesale Eliminations Group
Retail Lifestyle Total Retail of World Retail & Licensing Total
Retail
----------------- --------- ---------- --------- -------- --------- ------- ------------ ------------ -------
(GBPm) (GBPm) (GBPm) (GBPm) (GBPm) (GBPm) (GBPm) (GBPm) (GBPm)
--------- ---------- --------- -------- --------- ------- ------------ ------------
Sales to
external
customers 1,071.6 320.4 1,392.0 352.0 77.1 1,821.1 72.2 - 1,893.3
----------------- --------- ---------- --------- -------- --------- ------- ------------ ------------ -------
Sales to other
segments - - - - - - 30.6 (30.6) -
----------------- --------- ---------- --------- -------- --------- ------- ------------ ------------ -------
Revenue 1,071.6 320.4 1,392.0 352.0 77.1 1,821.1 102.8 (30.6) 1,893.3
----------------- --------- ---------- --------- -------- --------- ------- ------------ ------------ -------
Gross profit 476.2 150.5 626.7 146.7 30.5 803.9 29.9 - 833.8
----------------- --------- ---------- --------- -------- --------- ------- ------------ ------------ -------
Operating profit
before
foreign
exchange,
exceptional
items
and IFRS 16 106.8 18.7 125.5 10.5 9.2 145.2 7.1 - 152.3
----------------- --------- ---------- --------- -------- --------- ------- ------------ ------------ -------
Exceptional 3.7 - 3.7 - - 3.7 - - 3.7
----------------- --------- ---------- --------- -------- --------- ------- ------------ ------------ -------
Realised foreign
exchange
loss (13.7) (0.6) (14.3) 7.6 (0.1) (6.8) (0.6) - (7.4)
----------------- --------- ---------- --------- -------- --------- ------- ------------ ------------ -------
IFRS 16
adjustments (50.0) 16.0 (34.0) 8.7 1.0 (24.3) - - (24.3)
----------------- --------- ---------- --------- -------- --------- ------- ------------ ------------ -------
Operating profit 46.8 34.1 80.9 26.8 10.1 117.8 6.5 - 124.3
----------------- --------- ---------- --------- -------- --------- ------- ------------ ------------ -------
Investment
income 40.0
----------------- ------------------------------------------------------------------------------------------ -------
Investment costs (37.1)
----------------- --------- ---------- --------- -------- --------- ------- ------------ ------------ -------
Finance income 2.2
----------------- -------
Finance costs (23.3)
----------------- -------
Profit before
taxation 106.1
----------------- -------
Taxation (21.7)
----------------- -------
Profit for the
period 84.4
----------------- --------- ---------- --------- -------- --------- ------- ------------ ------------ -------
Other segment items included in the Income Statement for the 26
weeks ended 25 October 2020:
UK Sports Premium UK Retail European Rest Of Total Wholesale Group
Retail Lifestyle Total Retail World Retail & Licensing Total
Retail
--------------------------------- --------- ---------- --------- -------- ------- ------- ------------ ------
(GBPm) (GBPm) (GBPm) (GBPm) (GBPm) (GBPm) (GBPm) (GBPm)
--------- ---------- --------- -------- ------- ------- ------------
Depreciation 44.3 9.6 53.9 14.1 1.3 69.3 0.6 69.9
--------------------------------- --------- ---------- --------- -------- ------- ------- ------------ ------
IFRS 16 Depreciation/Impairment 133.1 11.1 144.2 28.8 5.1 178.1 - 178.1
--------------------------------- --------- ---------- --------- -------- ------- ------- ------------ ------
IFRS 16 Disposal of
lease liabilities (14.5) (0.5) (15.0) (4.3) - (19.3) - (19.3)
--------------------------------- --------- ---------- --------- -------- ------- ------- ------------ ------
Impairment 3.7 - 3.7 - - 3.7 - 3.7
--------------------------------- --------- ---------- --------- -------- ------- ------- ------------ ------
Amortisation 0.3 - 0.3 0.5 - 0.8 3.3 4.1
--------------------------------- --------- ---------- --------- -------- ------- ------- ------------ ------
Information regarding segment assets and liabilities as at 25
October 2020 and capital expenditure for the 26 weeks then
ended:
UK Sports Premium UK Retail European Rest Of Total Wholesale Eliminations Group
Retail Lifestyle Total Retail World Retail & Licensing Total
Retail
--------------- --------- ---------- --------- -------- ------- --------- ------------ ------------ ---------
(GBPm) (GBPm) (GBPm) (GBPm) (GBPm) (GBPm) (GBPm) (GBPm) (GBPm)
--------- ---------- --------- -------- ------- --------- ------------
Total assets 3,109.0 268.0 3,377.0 459.1 125.9 3,962.0 340.6 (532.3) 3,770.3
--------------- --------- ---------- --------- -------- ------- --------- ------------ ---------
Total
liabilities (1,751.5) (329.0) (2,080.5) (615.9) (185.8) (2,882.2) (87.1) 532.3 (2,437.0)
--------------- --------- ---------- --------- -------- ------- --------- ------------ ------------ ---------
Tangible asset
additions 32.7 7.1 39.8 12.5 4.7 57.0 - - 57.0
--------------- --------- ---------- --------- -------- ------- --------- ------------ ------------ ---------
Right-of-use
asset
additions 26.9 13.3 40.2 9.7 - 49.9 - - 49.9
--------------- --------- ---------- --------- -------- ------- --------- ------------ ------------ ---------
Segmental information for the 26 weeks ended 27 October 2019(1)
:
UK Sports Premium UK Retail European Rest Of Total Wholesale Eliminations Group
Retail Lifestyle Total Retail World Retail & Licensing Total
Retail
------------------- --------- ---------- --------- -------- ------- ------- ------------ ------------ -------
(GBPm) (GBPm) (GBPm) (GBPm) (GBPm) (GBPm) (GBPm) (GBPm) (GBPm)
--------- ---------- --------- -------- ------- ------- ------------ ------------
Sales to external
customers 1,188.1 305.8 1,493.9 365.5 92.1 1,951.5 92.0 - 2,043.5
------------------- --------- ---------- --------- -------- ------- ------- ------------ ------------ -------
Sales to other
segments - - - - - - 8.7 (8.7) -
------------------- --------- ---------- --------- -------- ------- ------- ------------ ------------ -------
Revenue 1,188.1 305.8 1,493.9 365.5 92.1 1,951.5 100.7 (8.7) 2,043.5
------------------- --------- ---------- --------- -------- ------- ------- ------------ ------------ -------
Gross profit 513.5 157.5 671.0 151.4 36.3 858.7 36.2 - 894.9
------------------- --------- ---------- --------- -------- ------- ------- ------------ ------------ -------
Operating
profit/(loss)
before foreign
exchange and
exceptional items 98.7 (11.9) 86.8 19.8 (5.1) 101.5 15.3 - 116.8
------------------- --------- ---------- --------- -------- ------- ------- ------------ ------------ -------
Operating
profit/(loss) 93.4 (18.9) 74.5 21.3 (4.3) 91.5 14.7 - 106.2
------------------- --------- ---------- --------- -------- ------- ------- ------------ ------------ -------
Other investment
income 7.2
------------------- ---------------------------------------------------------------------------------------- -------
Investment costs (4.2)
------------------- --------- ---------- --------- -------- ------- ------- ------------ ------------ -------
Finance income 6.2
------------------- -------
Finance costs (19.6)
------------------- -------
Share of loss
of associated
undertakings (5.6)
------------------- -------
Profit before
taxation 90.2
------------------- -------
Taxation (24.8)
------------------- -------
Profit for the
period 65.4
------------------- --------- ---------- --------- -------- ------- ------- ------------ ------------ -------
(1) The FY20 H1 numbers have been re-categorised due to changes
in the reporting segments, with Jack Wills and Sofa.com being moved
from UK Sports Retail to Premium Lifestyle.
Sales to other segments are priced at cost plus a 10%
mark-up.
Other segment items included in the income statement for the 26
weeks ended 27 October 2019(1) :
UK Sports Premium UK Retail European Rest Total Wholesale Group
Retail Lifestyle Total Retail Of World Retail & Licensing Total
Retail
-------------------------------- --------- ---------- --------- -------- --------- ------- ------------ ------
(GBPm) (GBPm) (GBPm) (GBPm) (GBPm) (GBPm) (GBPm) (GBPm)
--------- ---------- --------- -------- --------- ------- ------------
Depreciation 38.3 3.7 42.0 12.0 2.7 56.7 0.9 57.6
-------------------------------- --------- ---------- --------- -------- --------- ------- ------------ ------
IFRS 16 Depreciation/Impairment 83.3 6.5 89.8 25.0 4.6 119.4 - 119.4
-------------------------------- --------- ---------- --------- -------- --------- ------- ------------ ------
IFRS 16 Disposal
of lease liabilities - - - (5.2) (5.2) - (5.2)
-------------------------------- --------- ---------- --------- -------- --------- ------- ------------ ------
Amortisation 2.3 - 2.3 0.4 - 2.7 0.2 2.9
-------------------------------- --------- ---------- --------- -------- --------- ------- ------------ ------
Impairment 8.7 - 8.7 0.8 - 9.5 - 9.5
-------------------------------- --------- ---------- --------- -------- --------- ------- ------------ ------
(1) The FY20 H1 numbers have been re-categorised due to changes
in the reporting segments, with Jack Wills and Sofa.com being moved
from UK Sports Retail to Premium Lifestyle.
Information regarding segment assets and liabilities as at 27
October 2019 and capital expenditure for the 26 weeks then ended(1)
:
UK Sports Premium UK Retail European Rest Total Wholesale Eliminations Group
Retail Lifestyle Total Retail Of World Retail & Licensing Total
Retail
-------------- --------- ---------- --------- -------- --------- --------- ----------- ------------ ---------
(GBPm) (GBPm) (GBPm) (GBPm) (GBPm) (GBPm) (GBPm) (GBPm)
-------------- --------- ---------- --------- -------- --------- --------- ----------- ------------ ---------
Total assets 3,063.5 400.8 3,464.3 549.4 146.3 4,160.0 338.4 (823.6) 3,674.8
-------------- --------- ---------- --------- -------- --------- --------- ----------- ------------ ---------
Total
liabilities (1,748.0) (490.0) (2,238.0) (733.7) (190.5) (3,162.2) (74.2) 823.6 (2,412.8)
-------------- --------- ---------- --------- -------- --------- --------- ----------- ------------ ---------
Tangible
asset
additions 88.9 14.2 103.1 28.2 2.4 133.7 0.9 - 134.6
-------------- --------- ---------- --------- -------- --------- --------- ----------- ------------ ---------
Right-of-use
asset
additions 37.3 0.3 37.6 8.8 - 46.4 - - 46.4
-------------- --------- ---------- --------- -------- --------- --------- ----------- ------------ ---------
(1) The FY20 H1 numbers have been re-categorised due to changes
in the reporting segments, with Jack Wills and Sofa.com being moved
from UK Sports Retail to Premium Lifestyle.
GEOGRAPHIC INFORMATION
Segmental information for the 26 weeks ended 25 October
2020:
UK Other Non-UK US Asia Eliminations Total
(GBPm) (GBPm) (GBPm) (GBPm) (GBPm) (GBPm)
Segmental revenue from
external customers 1,401.3 366.3 106.5 19.2 - 1,893.3
--------------------------- ------- ------------------- ---------- ------- ------------ -------
Total capital expenditure 39.8 14.3 2.5 0.4 - 57.0
--------------------------- ------- ------------------- ---------- ------- ------------ -------
Non-current segmental
assets* 1,165.2 84.3 194.8 14.2 - 1,458.5
--------------------------- ------- ------------------- ---------- ------- ------------ -------
Total segmental assets 3,437.9 471.0 352.2 41.5 (532.3) 3,770.3
*Excludes deferred tax and financial instruments.
Segmental information for the 26 weeks ended 27 October
2019:
UK Other Non-UK US Asia Eliminations Total
(GBPm) (GBPm) (GBPm) (GBPm) (GBPm) (GBPm)
Segmental revenue from
external customers 1,517.0 381.5 117.2 27.8 - 2,043.5
--------------------------- ------- ------------------- ---------- ------- ------------ -------
Total capital expenditure 88.7 43.9 1.3 0.7 - 134.6
--------------------------- ------- ------------------- ---------- ------- ------------ -------
Non-current segmental
assets* 1,138.6 117.2 213.1 12.4 - 1,481.3
--------------------------- ------- ------------------- ---------- ------- ------------ -------
Total segmental assets 3,547.9 544.9 372.0 33.6 (823.6) 3,674.8
*Excludes deferred tax and financial instruments.
Material non-current segmental assets - by a non-UK country:
USA Belgium Austria Estonia ROI Spain
(GBPm) (GBPm) (GBPm) (GBPm) (GBPm) (GBPm)
25 October 2020 159.3 46.3 34.8 19.2 30.7 38.6
-------
27 October 2019 173.9 33.5 50.2 27.1 53.6 2.3
The following table reconciles the reported operating profit to
the underlying EBITDA as it is one of the main measures used by the
Chief Operating Decision Maker when reviewing performance:
Reconciliation of operating profit to underlying EBITDA for the
26 week period ended 25 October 2020:
UK Sports Premium UK Retail European Rest Of Total Wholesale Group
Retail Lifestyle Total Retail World Retail & Licensing Total
Retail
(GBPm) (GBPm) (GBPm) (GBPm) (GBPm) (GBPm) (GBPm) (GBPm)
Operating profit 46.8 34.1 80.9 26.8 10.1 117.8 6.5 124.3
------------------------- --------- ---------- --------- ----------- ----------- -------- ----------- --------
IFRS 16 disposal of
lease liability (14.5) (0.5) (15.0) (4.3) - (19.3) - (19.3)
------------------------- --------- ---------- --------- ----------- ----------- -------- ----------- --------
IFRS 16 ROU
depreciation/impairment 131.3 11.1 142.4 24.4 5.1 171.9 - 171.9
------------------------- --------- ---------- --------- ----------- ----------- -------- ----------- --------
IFRS 16 PPE impairment 1.8 - 1.8 4.4 - 6.2 - 6.2
------------------------- --------- ---------- --------- ----------- ----------- -------- ----------- --------
Depreciation 44.3 9.6 53.9 14.1 1.3 69.3 0.6 69.9
------------------------- --------- ---------- --------- ----------- ----------- -------- ----------- --------
Amortisation/impairment 0.3 - 0.3 0.5 - 0.8 3.3 4.1
------------------------- --------- ---------- --------- ----------- ----------- -------- ----------- --------
Reported EBITDA 210.0 54.3 264.3 65.9 16.5 346.7 10.4 357.1
------------------------- --------- ---------- --------- ----------- ----------- -------- ----------- --------
Exceptional items (3.7) - (3.7) - - (3.7) - (3.7)
------------------------- --------- ---------- --------- ----------- ----------- -------- ----------- --------
IFRS 16 adjustments
(1) (68.6) (26.5) (95.1) (33.2) (6.2) (134.5) - (134.5)
------------------------- --------- ---------- --------- ----------- ----------- -------- ----------- --------
Realised foreign
exchange
loss / (gain) 13.7 0.6 14.3 (7.6) 0.1 6.8 0.6 7.4
------------------------- --------- ---------- --------- ----------- ----------- -------- ----------- --------
Underlying EBITDA 151.4 28.4 179.8 25.1 10.4 215.3 11.0 226.3
(1) Relates to the reversal of IFRS 16, offset by rent and
onerous lease provisions.
Reconciliation of operating profit to underlying EBITDA for the
26 week period ended 27 October 2019(1) :
UK Premium UK Retail European Rest of Retail Wholesale Group
Sports Lifestyle Total Retail World Total & Total
Retail Retail Licensing
(GBPm) (GBPm) (GBPm) (GBPm) (GBPm) (GBPm) (GBPm) (GBPm)
Operating profit /
(loss) 93.4 (18.9) 74.5 21.3 (4.3) 91.5 14.7 106.2
------------------------- ------------ ----------- ---------- --------- ---------- ------- ----------- -------
IFRS 16 ROU
depreciation/impairment 80.0 6.3 86.3 19.0 4.6 109.9 - 109.9
------------------------- ------------ ----------- ---------- --------- ---------- ------- ----------- -------
IFRS 16 PPE impairment 3.3 0.2 3.5 6.0 - 9.5 - 9.5
------------------------- ------------ ----------- ---------- --------- ---------- ------- ----------- -------
Depreciation 37.9 4.1 42.0 12.0 2.7 56.7 0.9 57.6
------------------------- ------------ ----------- ---------- --------- ---------- ------- ----------- -------
Amortisation/impairment 11.0 - 11.0 1.2 - 12.2 0.2 12.4
------------------------- ------------ ----------- ---------- --------- ---------- ------- ----------- -------
Share of loss of
associated
undertakings (5.6) - (5.6) - - (5.6) - (5.6)
------------------------- ------------ ----------- ---------- --------- ---------- ------- ----------- -------
Reported EBITDA 219.9 (8.2) 211.7 59.5 3.0 274.2 15.8 290.0
------------------------- ------------ ----------- ---------- --------- ---------- ------- ----------- -------
Profit on sale of
properties (84.9) - (84.9) (5.5) - (90.4) - (90.4)
------------------------- ------------ ----------- ---------- --------- ---------- ------- ----------- -------
Exceptional items (0.7) 3.8 3.1 - - 3.1 0.2 3.3
------------------------- ------------ ----------- ---------- --------- ---------- ------- ----------- -------
IFRS 16 adjustments
(2) 10.3 (3.6) 6.7 (18.8) (5.1) (17.2) 0.3 (16.9)
------------------------- ------------ ----------- ---------- --------- ---------- ------- ----------- -------
Realised foreign
exchange
(gain) / loss (2.7) 0.4 (2.3) (2.3) (0.4) (5.0) 0.2 (4.8)
------------------------- ------------ ----------- ---------- --------- ---------- ------- ----------- -------
Underlying EBITDA 141.9 (7.6) 134.3 32.9 (2.5) 164.7 16.5 181.2
(1) The FY20 H1 numbers have been re-categorised due to changes
in the reporting segments, with Jack Wills and Sofa.com being moved
from UK Sports Retail to Premium Lifestyle.
(2) Relates to the reversal of IFRS 16, offset by rent and
onerous lease provisions.
4. EXCEPTIONAL ITEMS
26 weeks ended 26 weeks 52 weeks
ended ended
25 October 2020 27 October 26 April
2019 2020
(GBPm) (GBPm) (GBPm)
Impairments 3.7 3.3 13.1
----------------------------------------- ----------------- ------------ ---------
Profit on disposal of intangible assets (7.4) - -
----------------------------------------- ----------------- ------------ ---------
(3.7) 3.3 13.1
The impairment relates to goodwill, whereby the discounted
present value of future cash flows do not support the full value of
the assets. The profit on disposal of intangible assets relates to
the sale of certain IP relating to the BELONG business.
5. INVESTMENT INCOME
26 weeks ended 26 weeks 52 weeks
ended ended
25 October 2020 27 October 26 April
2019 2020
(GBPm) (GBPm) (GBPm)
Profit on disposal of financial assets
and equity derivative financial instruments 4.0 - 7.4
---------------------------------------------- ----------------- ------------ ---------
Premium received on derivative financial
instruments 16.9 5.9 -
---------------------------------------------- ----------------- ------------ ---------
Fair value gain on derivative financial
instruments 18.8 1.0 7.3
---------------------------------------------- ----------------- ------------ ---------
Dividend income 0.3 0.3 0.5
---------------------------------------------- ----------------- ------------ ---------
40.0 7.2 15.2
The profit on disposal of financial assets and equity derivative
financial instruments and the fair value gain on equity derivative
financial instruments mainly relates to current derivative
financial assets.
6. INVESTMENT COSTS
26 weeks ended 26 weeks 52 weeks
ended ended
25 October 2020 27 October 26 April
2019 2020
(GBPm) (GBPm) (GBPm)
Loss on disposal of financial assets
and equity derivative financial instruments - - 14.0
---------------------------------------------- ----------------- ------------ ---------
Fair value loss on derivative financial
instruments 37.1 4.2 35.8
---------------------------------------------- ----------------- ------------ ---------
37.1 4.2 49.8
The fair value loss on equity derivatives mainly relates to Hugo
Boss. The loss on disposal recognised in the prior period mainly
relates to the disposal of equity derivatives.
7. FINANCE INCOME
26 weeks ended 26 weeks 52 weeks
ended ended
25 October 2020 27 October 26 April
2019 2020
(GBPm) (GBPm) (GBPm)
Bank interest receivable - 0.9 1.6
------------------------------------------- ----------------- ------------ ---------
Other finance income 2.2 0.1 8.1
------------------------------------------- ----------------- ------------ ---------
Fair value adjustment to foreign exchange
contracts - - 21.3
------------------------------------------- ----------------- ------------ ---------
IFRS 16 adjustment - 5.2 -
------------------------------------------- ----------------- ------------ ---------
2.2 6.2 31.0
The fair value adjustment to foreign exchange contracts relates
to differences between the fair value of forward foreign currency
contracts and written options that were not designated for hedge
accounting from one period end to the next. This also includes
immaterial adjustments due to ineffectiveness on hedged contracts.
Other finance income largely relates to premiums received on FX
contracts.
8. FINANCE COSTS
26 weeks ended 26 weeks 52 weeks
ended ended
25 October 2020 27 October 26 April
2019 2020
(GBPm) (GBPm) (GBPm)
Interest on bank loans and overdrafts 5.6 8.0 17.9
-------------------------------------------- ----------------- ------------ ---------
Other interest 2.6 2.3 0.4
-------------------------------------------- ----------------- ------------ ---------
Interest on retirement benefit obligations - - 0.1
-------------------------------------------- ----------------- ------------ ---------
Fair value adjustment to foreign exchange
contracts 8.6 3.2 -
-------------------------------------------- ----------------- ------------ ---------
IFRS 16 lease interest 6.5 6.1 10.9
-------------------------------------------- ----------------- ------------ ---------
23.3 19.6 29.3
The fair value adjustment to foreign exchange contracts relates
to differences between the fair value of forward foreign currency
contracts and written options that were not designated for hedge
accounting from one period end to the next.
9. EARNINGS PER SHARE ATTRIBUTABLE TO THE EQUITY
SHAREHOLDERS
Basic earnings per share is calculated by dividing the earnings
attributable to ordinary shareholders of the parent by the weighted
average number of ordinary shares outstanding during the year.
For diluted earnings per share, the weighted average number of
shares, 501,953,439 (FY20 H1: 509,095,427), is adjusted to assume
conversion of all dilutive potential ordinary shares under the
Group's share schemes, being 1,239,075 (FY20 H1: 1,239,075), to
give the diluted weighted average number of shares of 503,192,514
(FY20 H1: 510,334,502).
BASIC AND DILUTED EARNINGS PER SHARE
26 weeks 26 weeks 26 weeks 26 weeks 52 weeks 52 weeks
ended ended ended ended ended ended
25 October 25 October 27 October 27 October 26 April 26 April
2020 2020 2019 2019 2020 2020
Basic Diluted Basic Diluted Basic Diluted
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------- ----------- ----------- ---------- ---------
Profit for the period 80.4 80.4 61.3 61.3 93.8 93.8
------------------------- ----------- ----------- ----------- ----------- ---------- ---------
Number in thousands Number in thousands Number in thousands
------------------------- ------------------------ ------------------------ ---------------------
Weighted average number
of shares 501,953 503,193 509,095 510,335 505,827 507,066
------------------------- ----------- ----------- ----------- ----------- ---------- ---------
Pence per share Pence per share Pence per share
------------------------- ------------------------ ------------------------ ---------------------
Earnings per share 16.0 16.0 12.0 12.0 18.5 18.5
UNDERLYING EARNINGS PER SHARE
The underlying earnings per share reflects the underlying
performance of the business compared with the prior period and is
calculated by dividing underlying earnings by the weighted average
number of shares for the period. Underlying earnings is used by
management as a measure of profitability within the Group.
Underlying earnings is defined as profit for the period
attributable to equity holders of the parent for each financial
period but excluding the post-tax effect of certain non-trading
items. Tax has been calculated with reference to the effective rate
of tax for the Group.
The Directors believe that the underlying earnings before
exceptional items and underlying earnings per share measures
provide additional useful information for shareholders on the
underlying performance of the business and are consistent with how
business performance is measured internally. Underlying earnings is
not a recognised profit measure under IFRS and may not be directly
comparable with "adjusted" profit measures used by other
companies.
Given the market condition for the Fearless 1000 share bonus
scheme has not been achieved at period-end, these shares have not
been included in the calculation of the diluted weighted average
number of shares.
26 weeks 26 weeks 26 weeks 26 weeks 52 weeks 52 weeks
ended ended ended ended ended ended
25 October 25 October 27 October 27 October 26 April 26 April
2020 2020 2019 2019 2020 2020
Basic Diluted Basic Diluted Basic Diluted
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------------- ----------- ----------- ---------- ---------
Profit for the period 80.4 80.4 61.3 61.3 93.8 93.8
-------------------------------- ----------- ----------- ----------- ----------- ---------- ---------
Post tax adjustments
to profit for the period
for the following exceptional
items:
-------------------------------- ----------- ----------- ----------- ----------- ---------- ---------
Realised foreign exchange
loss / (gain) 5.9 5.9 (3.5) (3.5) (26.1) (26.1)
-------------------------------- ----------- ----------- ----------- ----------- ---------- ---------
Fair value adjustment
to forward foreign exchange
contracts 6.9 6.9 2.4 2.4 (16.0) (16.0)
-------------------------------- ----------- ----------- ----------- ----------- ---------- ---------
Fair value gain on step
acquisitions - - - - (20.4) (20.4)
-------------------------------- ----------- ----------- ----------- ----------- ---------- ---------
Fair value loss / (gain)
on derivative financial
instruments 18.3 18.3 (1.0) (1.0) 26.9 26.9
-------------------------------- ----------- ----------- ----------- ----------- ---------- ---------
(Profit) / loss on disposal
and premium received
on financial instruments (21.2) (21.2) (2.0) (2.0) 7.7 7.7
-------------------------------- ----------- ----------- ----------- ----------- ---------- ---------
Profit on disposal of
property - - (15.0) (15.0) (54.2) (54.2)
-------------------------------- ----------- ----------- ----------- ----------- ---------- ---------
Exceptional items (3.7) (3.7) - - 13.1 13.1
-------------------------------- ----------- ----------- ----------- ----------- ---------- ---------
IFRS 16 adjustments 30.8 30.8 36.0 36.0 56.9 56.9
-------------------------------- ----------- ----------- ----------- ----------- ---------- ---------
Underlying profit for
the period 117.4 117.4 78.2 78.2 81.7 81.7
-------------------------------- ----------- ----------- ----------- ----------- ---------- ---------
Number in thousands Number in thousands Number in thousands
-------------------------------- ------------------------ ------------------------ ---------------------
Weighted average number
of shares 501,953 503,193 509,095 510,335 505,827 507,066
-------------------------------- ----------- ----------- ----------- ----------- ---------- ---------
Pence per share Pence per share Pence per share
-------------------------------- ------------------------ ------------------------ ---------------------
Underlying earnings
per share 23.4 23.3 15.4 15.3 16.2 16.1
10. PROVISIONS
Legal and Property Other Total
regulatory related (GBPm) (GBPm)
(GBPm) (GBPm)
At 26 April 2020 225.4 107.9 2.7 336.0
----------------------------- -------- ------- -------
Amounts provided 1.5 18.1 - 19.6
----------------------------- ----------- -------- ------- -------
Amounts utilised / reversed (1.4) (21.8) (0.6) (23.8)
----------------------------- ----------- -------- ------- -------
At 25 October 2020 225.5 104.2 2.1 331.8
----------------------------- ----------- -------- ------- -------
Legal and regulatory provisions relate to management's best
estimate of the potential impact of claims including legal,
commercial, regulatory and ongoing non-UK tax enquiries. The timing
of the outcome of non-UK tax enquiries and legal claims made
against the Group is dependent on factors outside the Group's
control and therefore the timing of settlement is uncertain. After
taking appropriate legal advice, the outcomes of these claims are
not expected to give rise to material loss in excess of the amounts
provided.
A reimbursement asset of GBP118.3m (26 April 2020: GBP118.3m)
has been recognised separately within debtors relating to ongoing
non-UK tax enquiries.
Included within property related provisions are provisions for
dilapidations in respect of the Group's retail stores and
warehouses. Further details of managements' estimates are included
in Note 2.
Other provisions relate to provisions for restructuring and
employment (non-retirement related).
11. FINANCIAL INSTRUMENTS
(a) Financial assets and liabilities by category and fair value
hierarchy
The fair value hierarchy for financial assets and liabilities,
which are principally denominated in Sterling or US Dollars, were
as follows:
Level Level Level Other Total
1 2 3
(GBPm) (GBPm) (GBPm) (GBPm) (GBPm)
FINANCIAL ASSETS - 25 October 2020
------------------------------------------------- ------- ------- -------
Amortised cost:
------------------------------------------------- ------- ------- ------- ------- -------
Trade and other receivables* - - - 473.5 473.5
------------------------------------------------- ------- ------- ------- ------- -------
Cash and cash equivalents - - - 371.3 371.3
------------------------------------------------- ------- ------- ------- ------- -------
Amounts owed by related parties - - - 35.2 35.2
------------------------------------------------- ------- ------- ------- ------- -------
FVOCI:
------------------------------------------------- ------- ------- ------- ------- -------
Long Term Financial Assets (Equity Instruments)
- designated 127.2 - - - 127.2
------------------------------------------------- ------- ------- ------- ------- -------
Derivative financial assets (FV):
------------------------------------------------- ------- ------- ------- ------- -------
Foreign forward purchase and sale contracts - 28.4 - - 28.4
------------------------------------------------- ------- ------- ------- ------- -------
Derivative financial assets - contracts
for difference - 36.5 - - 36.5
------------------------------------------------- ------- ------- ------- ------- -------
- 64.9 - - 64.9
------------------------------------------------- ------- ------- ------- ------- -------
FINANCIAL LIABILITIES - 25 October 2020
------------------------------------------------- ------- ------- ------- ------- -------
Amortised cost:
------------------------------------------------- ------- ------- ------- ------- -------
Non-current borrowings - - - (621.4) (621.4)
------------------------------------------------- ------- ------- ------- ------- -------
Trade and other payables** - - - (568.1) (568.1)
------------------------------------------------- ------- ------- ------- ------- -------
IFRS 16 lease liabilities - - - (715.6) (715.6)
------------------------------------------------- ------- ------- ------- ------- -------
Derivative financial liabilities (FV):
------------------------------------------------- ------- ------- ------- ------- -------
Foreign forward and written options purchase
and sales contracts - unhedged - (6.6) - - (6.6)
------------------------------------------------- ------- ------- ------- ------- -------
Derivative financial liabilities - contracts
for difference & equity options - (81.8) - - (81.8)
------------------------------------------------- ------- ------- ------- ------- -------
- (88.4) - - (88.4)
*Prepayments of GBP70.1m are not included as a financial
asset.
**Other taxes including social security costs of GBP57.9m are
not included as a financial liability.
Level Level Level Other Total
1 2 3
(GBPm) (GBPm) (GBPm) (GBPm) (GBPm)
FINANCIAL ASSETS - 27 October 2019
------------------------------------------------- ------- ------- -------
Amortised cost:
------------------------------------------------- ------- ------- ------- ------- -------
Trade and other receivables* - - - 337.7 337.7
------------------------------------------------- ------- ------- ------- ------- -------
Cash and cash equivalents - - - 326.0 326.0
------------------------------------------------- ------- ------- ------- ------- -------
Amounts owed by related parties - - - 33.8 33.8
------------------------------------------------- ------- ------- ------- ------- -------
FVOCI:
------------------------------------------------- ------- ------- ------- ------- -------
Long Term Financial Assets (Equity Instruments)
- designated 86.2 - - - 86.2
------------------------------------------------- ------- ------- ------- ------- -------
Derivative financial assets (FV):
------------------------------------------------- ------- ------- ------- ------- -------
Foreign forward purchase and sale contracts - 80.2 - - 80.2
------------------------------------------------- ------- ------- ------- ------- -------
Derivative financial assets - contracts
for difference - 2.9 - - 2.9
------------------------------------------------- ------- ------- ------- ------- -------
- 83.1 - - 83.1
------------------------------------------------- ------- ------- ------- ------- -------
FINANCIAL LIABILITIES - 27 October 2019
------------------------------------------------- ------- ------- ------- ------- -------
Amortised cost:
------------------------------------------------- ------- ------- ------- ------- -------
Non-current borrowings - - - (580.4) (580.4)
------------------------------------------------- ------- ------- ------- ------- -------
Trade and other payables** - - - (707.4) (707.4)
------------------------------------------------- ------- ------- ------- ------- -------
IFRS 16 lease liabilities - - - (669.7) (669.7)
------------------------------------------------- ------- ------- ------- ------- -------
Derivative financial liabilities (FV):
------------------------------------------------- ------- ------- ------- ------- -------
Foreign forward and written options purchase
and sales contracts - unhedged - (18.0) - - (18.0)
------------------------------------------------- ------- ------- ------- ------- -------
Derivative financial liabilities - contracts
for difference & equity options (1.9) - - - (1.9)
------------------------------------------------- ------- ------- ------- ------- -------
(1.9) (18.0) - - (19.9)
*Prepayments of GBP66.0m are not included as a financial
asset.
**Other taxes including social security costs of GBP40.8m are
not included as a financial liability.
(b) Financial assets and liabilities sensitivities by
currency
The Group ' s principal foreign currency exposures are to US
Dollars and Euros. The table below illustrates the hypothetical
sensitivity of the Group ' s reported profit and equity to a 5%
increase and decrease in the US Dollar / Sterling and Euro /
Sterling exchange rates at the period-end date, assuming all other
variables remain unchanged. The figures have been calculated by
comparing the fair values of outstanding foreign currency
contracts, assets and liabilities at the current exchange rate to
those if exchange rates moved as illustrated. The income statement
figures include the profit effect of any relevant derivatives which
are not in a designated cash flow hedge. The impact on US Dollar
and Euro related hedging instruments is included in equity.
The analysis has been prepared using the following
assumptions:
1) Existing assets and liabilities are held as at the period
end.
2) No additional hedge contracts are taken out.
Sensitivity
USD EUR
GBP &
Other USD EUR Total -5% +5% -5% +5%
25 October 2020:
----------------------------- ------- ----- ----- ----- -----
Trade and other receivables 393.0 33.6 47.3 473.9 (1.6) 1.8 (2.3) 2.5
----------------------------- ------- ------ ------- ------- ----- ----- ----- -----
Cash and cash equivalents 254.8 67.1 49.4 371.3 (3.2) 3.5 (2.4) 2.6
----------------------------- ------- ------ ------- ------- ----- ----- ----- -----
Trade and other payables (436.0) (36.3) (95.8) (568.1) 1.7 (1.9) 4.6 (5.0)
----------------------------- ------- ------ ------- ------- ----- ----- ----- -----
27 October 2019:
----------------------------- ------- ------ ------- ------- ----- ----- ----- -----
Trade and other receivables 282.2 35.1 20.4 337.7 (1.7) 1.8 (1.0) 1.1
----------------------------- ------- ------ ------- ------- ----- ----- ----- -----
Cash and cash equivalents 211.3 35.3 79.4 326.0 (1.7) 1.9 (3.8) 4.2
----------------------------- ------- ------ ------- ------- ----- ----- ----- -----
Trade and other payables (516.7) (36.6) (154.1) (707.4) 1.7 (1.9) 7.3 (8.1)
----------------------------- ------- ------ ------- ------- ----- ----- ----- -----
There is no difference between fair value and carrying value of
the above financial instruments (FY20: GBPnil).
Fair value hierarchy
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; and
-- Level 3: techniques which use inputs which have a significant
effect on the recorded fair value that are not based on observable
market data.
Foreign forward purchase and sales contracts and options are
classified as Level 2, the Group enters into these derivative
financial instruments with various counterparties, principally
financial institutions with investment grade credit ratings.
Foreign exchange forward contracts and options are valued using
valuation techniques, which employ the use of market observable
inputs. The most frequently applied valuation techniques include
forward pricing and swap models using present value calculations.
The models incorporate various inputs including the credit quality
of counterparties, foreign exchange spot and forward rates, and
yield curves of the respective currencies.
Long-term financial assets such as equity instruments are
classified as Level 1 as the fair value is calculated using quoted
prices.
The fair value of equity derivative agreements are included
within the derivative financial assets balance of GBP36.5m (27
October 2019: GBP2.9m) and derivative financial liabilities balance
of GBP81.8m (27 October 2019: GBP1.9m). The derivative financial
assets and derivative financial liabilities as at 25 October 2020
relate to strategic investments.
Sold options are classified as Level 2 as the fair value is
calculated using other techniques, where inputs are observable.
Trade receivables / payables, amounts owed from related parties,
other receivables / payables, cash and cash equivalents and current
/ non-current borrowings are held at amortised cost.
(c) Derivatives: Foreign currency forward contracts
(c)(i) Hedged currency instruments
The most significant exposure to foreign exchange fluctuations
relates to purchases made in foreign currencies, principally the US
Dollar, and online sales in Euros. The Group's policy is to reduce
substantially the risk associated with foreign currency spot rates
by using forward fixed rate currency purchase contracts, taking
into account any foreign currency cash flows. The Group does not
hold or issue derivative financial instruments for trading
purposes, however if derivatives, including both forwards and
written options, do not qualify for hedge accounting they are
accounted for as such and accordingly any gain or loss is
recognised immediately in the Income Statement. Management are of
the view that there is a substantive distinct business purpose for
entering into the written options and a strategy for managing the
written options independently of the forward contracts. The forward
and written options contracts are therefore not viewed as one
contract and hedge accounting for the forwards is permitted under
IFRS 9.
Hedge effectiveness is determined at inception of the hedge
relationship and at every reporting period end through the
assessment of the hedged items and hedging instrument to determine
whether there is still an economic relationship between the
two.
The critical terms of the foreign currency forwards entered into
exactly match the terms of the hedged item. As such the economic
relationship and hedge effectiveness are based on the qualitative
factors and the use of a hypothetical derivative where appropriate.
Hedge ineffectiveness may arise where the critical terms of the
forecast transaction no longer meet those of the hedging
instrument, for example if there was a change in the timing of the
forecast sales transactions from what was initially estimated or if
the volume of currency in the hedged item was below expectations
leading to over-hedging. Differences can arise when the initial
value on the hedging instrument is not zero .
The hedged items and the hedging instrument are denominated in
the same currency and as a result the hedging ratio is always one
to one.
All derivative financial instruments used for hedge accounting
are recognised initially at fair value and reported subsequently at
fair value in the statement of financial position. To the extent
that the hedge is effective, changes in the fair value of
derivatives designated as hedging instruments in cash flow hedges
are recognised in other comprehensive income and included within
the cash flow hedge reserve in equity. Any ineffectiveness in the
hedge relationship is recognised immediately in profit or loss.
At the time the hedged item affects profit or loss, any gain or
loss previously recognised in other comprehensive income is
reclassified from equity to profit or loss and presented as a
reclassification adjustment within other comprehensive income. If a
forecast transaction is no longer expected to occur, any related
gain or loss recognised in other comprehensive income is
transferred immediately to profit or loss. If the hedging
relationship ceases to meet the effectiveness conditions, hedge
accounting is discontinued, and the related gain or loss is held in
the equity reserve until the forecast transaction occurs.
The fair value of hedged contracts as at 25 October 2020
was:
25 October 2020 26 April
2020
(GBPm) (GBPm)
Assets
--------------------------- --------------- --------
US Dollar purchases - GBP 0.4 -
--------------------------- --------------- --------
US Dollar purchases - EUR 4.6 17.1
--------------------------- --------------- --------
Euro sales 23.3 41.5
--------------------------- --------------- --------
Total 28.3 58.6
The details of hedged forward foreign currency purchase
contracts and contracted forward rates were as follows:
25 October 2020 26 April 2020
Currency GBP (millions) Rates Currency GBP (millions) Rates
(millions) (millions)
--------------------------------- ------ ----------- -------------- ------
US Dollar purchases (USD / GBP) 160.0 122.1 1.31 - - -
--------------------------------- ----------- -------------- ------ ----------- -------------- ------
US Dollar purchases (USD / EUR) 60.0 45.5 1.32 120.0 90.9 1.32
--------------------------------- ----------- -------------- ------ ----------- -------------- ------
0.99 - 0.99 -
Euro sales (EUR / GBP) (390.0) (381.1) 1.09 (540.0) (519.8) 1.09
--------------------------------- ----------- -------------- ------ ----------- -------------- ------
Currency Hedging against Currency value Timing Rates
USD inventory
USD / GBP purchases USD 160m FY21 1.31
----------- ----------------- ---------------- ------------- ------------
USD inventory
USD / EUR purchases USD 60m FY21 1.32
----------- ----------------- ---------------- ------------- ------------
EUR / GBP Euro sales EUR 390m FY21 - FY23 0.99 - 1.09
----------- ----------------- ---------------- ------------- ------------
The timing of the contracts is as follows:
Hedge ineffectiveness may arise where the critical terms of the
forecast transaction no longer meet those of the hedging
instrument, for example if there was a change in the timing of the
forecast sales transactions from what was initially estimated or if
the volume of currency in the hedged item was below expectations
leading to over-hedging.
25 October 2020 26 April 2020
(GBPm) (GBPm)
Change in Change in Change in Change in
the fair the fair the fair the fair
value of value of value of value of
the currency the hedged the currency the hedged
forward item forward item
--------------------------- ------------- -----------
US Dollar purchases - GBP (0.4) 0.4 - -
--------------------------- ------------- ----------- ------------- -----------
US Dollar purchases - EUR (3.9) 3.9 6.7 (6.7)
--------------------------- ------------- ----------- ------------- -----------
Euro sales (11.0) 11.0 9.8 (9.5)
--------------------------- ------------- ----------- ------------- -----------
At 25 October 2020 GBP167.6m of purchase contracts and GBP381.1m
of forward sales contracts qualified for hedge accounting and the
loss on fair valuation of these contracts of GBP15.3m has been
recognised in other comprehensive income.
At 25 October 2020, GBPnil hedged purchase contracts had a
maturity of greater than 12 months (26 April 2020: GBPnil of
purchase contracts) and GBP242.0m of hedged sales had a maturity of
greater than 12 months (26 April 2020: GBP242.0m of sales
contracts).
The movements through the Hedging reserve are:
USD/GBP EUR/GBP AUD/GBP USD/EUR Total Deferred Total
Hedge Tax Hedging
Movement Reserve
As at 28 April 2019 34.9 8.0 0.3 13.1 56.3 (9.6) 46.7
--------------------------- ------- --------- -------- --------
Recognised - 9.8 - 6.6 16.4 - 16.4
--------------------------- ------- ------- ------- ------- --------- -------- --------
Ineffectiveness - 0.2 - - 0.2 - 0.2
--------------------------- ------- ------- ------- ------- --------- -------- --------
Reclassified in sales - (1.4) (0.3) - (1.7) - (1.7)
--------------------------- ------- ------- ------- ------- --------- -------- --------
Reclassified in inventory
/ cost of sales (34.9) - - (2.5) (37.4) - (37.4)
--------------------------- ------- ------- ------- ------- --------- -------- --------
Deferred tax - - - - - 3.8 3.8
--------------------------- ------- ------- ------- ------- --------- -------- --------
As at 26 April 2020 - 16.6 - 17.2 33.8 (5.8) 28.0
--------------------------- ------- ------- ------- ------- --------- -------- --------
Recognised (0.4) (11.0) - (3.9) (15.3) - (15.3)
--------------------------- ------- ------- ------- ------- --------- -------- --------
Reclassified in sales - (1.3) - - (1.3) - (1.3)
--------------------------- ------- ------- ------- ------- --------- -------- --------
Reclassified in inventory
/ cost of sales - - - (8.7) (8.7) - (8.7)
--------------------------- ------- ------- ------- ------- --------- -------- --------
Deferred tax - - - - - 4.3 4.3
--------------------------- ------- ------- ------- ------- --------- -------- --------
As at 25 October 2020 (0.4) 4.3 - 4.6 8.5 (1.5) 7.0
--------------------------- ------- ------- ------- ------- --------- -------- --------
(c)(ii) Unhedged currency instruments
The sterling principal amounts of unhedged written currency
option contracts and contracted rates were as follows:
25 October 26 April
2020 2020
(GBPm) (GBPm)
Euro sales (470.0) (630.0)
---------------------------- --------
Contracted rates EUR / GBP 0.99 - 0.99 -
1.09 1.09
---------------------------- ---------- --------
Euro purchases - 172.0
---------------------------- ---------- --------
Contracted rates EUR / GBP - 1.16
---------------------------- ---------- --------
The loss on fair value of the written options and swaps of
GBP8.6m has been included within finance costs (FY20 H1:
GBP3.2m).
At 25 October 2020, GBPnil of unhedged purchase contracts had a
maturity at inception of greater than 12 months (26 April 2020:
GBPnil) and GBP242.0m of unhedged sales contracts had a maturity at
inception of greater than 12 months (26 April 2020: GBP242.0m).
These contracts form part of the Treasury management activities,
which incorporates the risk management strategy for areas that are
not reliable enough in timing and amount to qualify for hedge
accounting. This includes acquisitions, disposals of overseas
subsidiaries, related working capital requirements, dividends and
loan repayments from overseas subsidiaries and purchase and sale of
overseas property. Written options carry additional risk as the
exercise of the option lies with the purchaser. The options involve
the group receiving a premium on inception in exchange for
accepting that risk and the outcome is that the bank may require
the group to sell Euros or buy USD. However, the Group is satisfied
that the use of options as a Treasury management tool is
appropriate.
The FY21 H1 value excludes short term swaps of EUR/USD of EUR
100.0m which are required for Treasury management purposes only (26
April 2020: EUR/USD of EUR 80.0m, USD/GBP of USD 190.0m, and
EUR/GBP of EUR 75.0m).
(d) Sensitivity analysis
The Group's principal foreign currency exposures are to US
Dollars and Euros. The table below illustrates the hypothetical
sensitivity of the Group's reported profit and equity to a 10%
increase and decrease in the US Dollar / Sterling and Euro /
Sterling exchange rates at the period-end date, assuming all other
variables remain unchanged. The figures for the Income Statement
have been calculated by comparing the achieved US Dollar and Euro
Income Statement amounts in the period to the equivalent results
had the exchange rates moved as illustrated. The impact on the
translation of wholly owned subsidiaries who's denominated currency
are US Dollar and Euro is included in equity.
Positive figures represent an increase in profit or equity:
Income Statement Equity
25 October 26 April 25 October 26 April
2020 2020 2020 2020
(GBPm) (GBPm) (GBPm) (GBPm)
----------------------------- ---------- --------
Sterling strengthens by 10%
----------------------------- ---------- -------- ---------- --------
US Dollar 9.0 14.6 (12.7) 13.4
----------------------------- ---------- -------- ---------- --------
Euro 0.3 15.1 13.0 37.1
----------------------------- ---------- -------- ---------- --------
Sterling weakens by 10%
----------------------------- ---------- -------- ---------- --------
US Dollar (11.1) (34.0) 15.5 (16.4)
----------------------------- ---------- -------- ---------- --------
Euro (11.5) (13.4) (15.8) (45.4)
----------------------------- ---------- -------- ---------- --------
Interest rate sensitivity analysis
The following table illustrates the hypothetical sensitivity of
the Group's reported profit and equity to a 0.5% increase or
decrease in interest rates, assuming all other variables were
unchanged.
The analysis has been prepared using the following
assumptions:
-- For floating rate assets and liabilities, the amount of asset
or liability outstanding at the balance sheet date is assumed to
have been outstanding for the whole year
-- Fixed rate financial instruments that are carried at
amortised cost are not subject to interest rate risk for the
purposes of this analysis
Positive figures represent an increase in profit:
Income Statement
25 October 26 April
2020 2020
(GBPm) (GBPm)
--------------------------------
Interest rate increase of 0.5% (3.1) (4.1)
-------------------------------- ---------- --------
Interest rate decrease of 0.5% 3.1 4.1
-------------------------------- ---------- --------
Long term investments sensitivity analysis
The following table illustrates the hypothetical sensitivity of
the price risk in relation to long term investments held by the
Group:
Equity
25 October 26 April
2020 2020
(GBPm) (GBPm)
---------- --------
Share price increase of 0.5% 9.0 8.0
-------------------------------- ---------- --------
Share price decrease of 0.5% (9.0) (8.0)
-------------------------------- ---------- --------
(e) Liquidity risk
The following table shows the maturity analysis of the
undiscounted remaining contractual cash flows of the Group's non
derivative liabilities and foreign currency derivative financial
instruments:
Less than 1 to 2 years 2 to 5 years Over 5 years Total
1 year (GBPm) (GBPm) (GBPm) (GBPm)
(GBPm)
25 October 2020
------------------------------------ ------------ ---------
Non derivative financial
liabilities:
------------------------------------ --------- ------------ ------------ ------------ ---------
Bank loans and overdrafts - 621.4 - - 621.4
------------------------------------ --------- ------------ ------------ ------------ ---------
Bank loans and overdrafts
interest - 8.3 - - 8.3
------------------------------------ --------- ------------ ------------ ------------ ---------
Trade and other payables 568.1 - - - 568.1
------------------------------------ --------- ------------ ------------ ------------ ---------
IFRS 16 lease liabilities 133.3 101.7 173.1 396.2 804.3
------------------------------------ --------- ------------ ------------ ------------ ---------
Derivative financial instruments*:
------------------------------------ --------- ------------ ------------ ------------ ---------
Cash inflows 476.9 131.4 484.8 - 1,093.1
------------------------------------ --------- ------------ ------------ ------------ ---------
Cash outflows (470.6) (133.1) (467.6) - (1,071.3)
------------------------------------ --------- ------------ ------------ ------------ ---------
707.7 729.7 190.3 396.2 2,023.9
------------------------------------ --------- ------------ ------------ ------------ ---------
26 April 2020
------------------------------------ --------- ------------ ------------ ------------ ---------
Non derivative financial
liabilities:
------------------------------------ --------- ------------ ------------ ------------ ---------
Bank loans and overdrafts - 900.0 - - 900.0
------------------------------------ --------- ------------ ------------ ------------ ---------
Bank loans and overdrafts
interest - 13.2 - - 13.2
------------------------------------ --------- ------------ ------------ ------------ ---------
Trade and other payables 602.5 - - - 602.5
------------------------------------ --------- ------------ ------------ ------------ ---------
IFRS 16 lease liabilities 146.7 102.1 198.2 257.1 704.1
------------------------------------ --------- ------------ ------------ ------------ ---------
Derivative financial instruments*:
------------------------------------ --------- ------------ ------------ ------------ ---------
Cash inflows (1,186.5) (462.8) - - (1,649.3)
------------------------------------ --------- ------------ ------------ ------------ ---------
Cash outflows 1,225.1 484.8 - - 1,709.9
------------------------------------ --------- ------------ ------------ ------------ ---------
787.8 1,037.3 198.2 257.1 2,280.4
------------------------------------ --------- ------------ ------------ ------------ ---------
*Excludes contingent cash flows
Capital Management
The capital structure of the Group consists of equity
attributable to the equity holders of the parent company,
comprising issued share capital (less treasury shares), share
premium, retained earnings and cash and borrowings.
It is the Group's policy to maintain a strong capital base so as
to maintain investor, creditor and market confidence and to sustain
the development of the business.
In respect of equity, the Board has decided that, in order to
maximise flexibility in the near term with regards to a number of
inorganic growth opportunities under review, not to return any cash
by way of a dividend at this time.
The Board is committed to keeping this policy under review and
to looking to evaluate alternative methods of returning cash to
shareholders when appropriate.
The objective of Group Share Schemes is to encourage worker
share ownership and to link worker's remuneration to the
performance of the Company. It is not designed as a means of
managing capital.
In respect of cash and borrowings, the Board regularly monitors
the ratio of net debt to LTM Reported EBITDA(1) , the working
capital requirements and forecasted cash flows, however no minimum
or maximum ratios are set. The ratio for net debt to LTM Reported
EBITDA(1) is 0.5 (FY20 H1: 0.8). The objective is to keep this
figure below 3.0 (FY20 H1: 3.0).
(1) LTM EBITDA is the last twelve months historic Reported EBITDA excluding IFRS 16.
Based on this analysis, the Board determines the appropriate
return to equity holders whilst ensuring sufficient capital is
retained within the Group to meet its strategic objectives,
including but not limited to, acquisition opportunities.
These capital management policies have remained unchanged from
the prior year.
12. ACQUISITIONS
On 22 August 2020, the Group acquired the trade and assets of DW
Sports for cash consideration of GBP37m which is deemed to be the
fair value of the consideration. The acquisition complements the
Group's existing gym and fitness club portfolio and is consistent
with the Group's elevation strategy.
We have reviewed the fair value of the assets and liabilities
acquired and the following table summarises the provisional amounts
recognised:
DW Sports
Book Value Fair Value Fair Value
(GBPm) Adjustment (GBPm)
(GBPm)
Property, plant and equipment 71.1 (42.1) 29.0
------------------------------- ----------- ----------
Intangible assets 2.9 (2.9) -
------------------------------- ---------- ----------- ----------
Inventories 3.1 0.9 4.0
------------------------------- ---------- ----------- ----------
Trade receivables 0.3 - 0.3
------------------------------- ---------- ----------- ----------
Goodwill - 3.7 3.7
------------------------------- ---------- ----------- ----------
Net assets acquired 77.4 (40.4) 37.0
------------------------------- ---------- ----------- ----------
Goodwill represents the premium associated with advantageous
site locations, potential growth opportunities offered by economies
of scale, and the assembled workforce.
The fair value adjustment to property, plant and equipment
relates to the management's assessment of the price that would be
paid for the acquired assets in an orderly transaction between
market participants at the acquisition date.
The leases were acquired under short-term licences and therefore
no right of use asset or lease liability has been recognised on
acquisition.
Since the date of acquisition, revenue of GBP5.3m and loss
before tax of GBP1.4m have been included within the Group's
financial results for the period within the UK Sports Retail
segment. Had the acquisition been included from the start of the
period, revenue of GBP8.4m and loss before tax of GBP0.9m would
have been included within the Group's financial results for
period.
In line with IFRS 3 Business Combinations, the above values are
provisional and subject to change as the period-end date falls in
the measurement period for the acquisition.
13. CASH INFLOW FROM OPERATING ACTIVITIES
26 weeks ended 26 weeks 52 weeks
ended ended
25 October 2020 27 October 26 April
2019 2020
(GBPm) (GBPm) (GBPm)
Profit before taxation 106.1 90.2 143.5
-------------------------------------------- ----------------- ------------ ---------
Net finance costs/(income) 21.1 13.4 (1.7)
-------------------------------------------- ----------------- ------------ ---------
Net investment (income)/costs (2.9) (3.0) 34.6
-------------------------------------------- ----------------- ------------ ---------
Share of losses of associated undertakings - 5.6 15.9
Fair value gain on step acquisition - - (20.4)
Operating profit 124.3 106.2 171.9
Depreciation & impairment of property,
plant and equipment 247.3 176.3 381.0
Depreciation on investment properties 0.7 0.7 3.3
Gain on disposal of lease liabilities (19.3) - (9.7)
Amortisation of intangible assets 4.1 3.0 14.5
Impairment of intangible assets 3.7 9.5 19.0
Profit on disposal of property, plant
and equipment - (23.3) (54.2)
Profit on disposal of intangibles (7.4) - -
Operating cash inflow before changes
in working capital 353.4 272.4 525.8
(Increase) / decrease in receivables (141.7) 82.3 73.5
Decrease / (Increase) in inventories 92.0 (161.3) (120.8)
Increase / (decrease) in payables 31.0 (103.2) 61.8
Increase / (decrease) in provisions (4.2) 180.6 (115.1)
Cash inflows from operating activities 330.5 270.8 425.2
14. POST BALANCE SHEET EVENTS
On 4 November 2020 the Group increased its stake in luxury
handbag retailer Mulberry from 12.5% to 29.7% for consideration of
GBP15.4m, and then to 36.8% on the 19 November 2020 for
consideration of GBP6.5m.
15. CAPITAL COMMITMENTS
The Group had capital commitments of GBP10.6m relating to
property purchases (FY20 H1: GBP85.0m) and GBP48.0m relating to
warehouse development (FY20 H1: GBPnil) as at 25 October 2020.
16. RELATED PARTY TRANSACTIONS
The Group has taken advantage of the exemptions contained within
IAS 24 - "Related Party Disclosures" from the requirement to
disclose transactions between Group companies as these have been
eliminated on consolidation.
26 weeks ended 25 October 2020:
Related party Relationship Trade and Trade and
Sales Purchases other receivables other payables
(GBPm) (GBPm) (GBPm) (GBPm)
Four (Holdings) Limited & subsidiaries(1) Associate 1.0 22.6 34.8 1.2
------------------------------------------- ------------------ ---------------
Mash Holdings Limited Parent company - - 0.2 -
------------------------------------------- --------------- ------- ---------- ------------------ ---------------
Mike Ashley(2) Plc Director 0.4 - - -
------------------------------------------- --------------- ------- ---------- ------------------ ---------------
Connected
N M Design London Limited persons - 0.1 - -
------------------------------------------- --------------- ------- ---------- ------------------ ---------------
Rangers Retail Limited Associate - - - 0.1
------------------------------------------- --------------- ------- ---------- ------------------ ---------------
Newcastle United Football Club Connected
& St James Holdings Limited(3) persons 0.1 - 0.2 2.0
------------------------------------------- --------------- ------- ---------- ------------------ ---------------
26 weeks ended 27 October 2019:
Related party Relationship Trade and Trade and
Sales Purchases other receivables other payables
(GBPm) (GBPm) (GBPm) (GBPm)
Four (Holdings) Limited & subsidiaries(1) Associate - 15.2 35.5 2.0
------------------------------------------- ------------------ ---------------
Mash Holdings Limited Parent company - - 0.2 -
------------------------------------------- --------------- ------- ---------- ------------------ ---------------
Mike Ashley(2) Plc Director 1.2 - - -
------------------------------------------- --------------- ------- ---------- ------------------ ---------------
Connected
MM Prop Consultancy Limited persons - - - 5.4
------------------------------------------- --------------- ------- ---------- ------------------ ---------------
Connected
N M Design London Limited persons - 0.4 - -
------------------------------------------- --------------- ------- ---------- ------------------ ---------------
Rangers Retail Limited Associate - - - 0.1
------------------------------------------- --------------- ------- ---------- ------------------ ---------------
Newcastle United Football Club Connected
& St James Holdings Limited(3) persons 0.4 1.0 0.2 -
------------------------------------------- --------------- ------- ---------- ------------------ ---------------
(1) The outstanding balance with Four (Holdings) Limited
reflects the funding related to Agent Provocateur. Management
consider that the underlying results of Four (Holdings) Limited
supports the recoverability of the receivables balance. The results
of Four (Holdings) Limited do not meet the thresholds requiring
more detailed disclosures under IFRS 12.
(2) Use of the Company jet and helicopter are charged at
commercial rates.
(3) The sales relate to inventory.
52 weeks ended 26 April 2020:
Related party Relationship Trade and Trade and
Sales Purchases other receivables other payables
(GBPm) (GBPm) (GBPm) (GBPm)
Four (Holdings) Limited & subsidiaries(1) Associate 2.1 42.5 33.8 2.4
------------------------------------------- ------------------ ---------------
Mash Holdings Limited Parent company - - 0.2 -
------------------------------------------- --------------- ------- ---------- ------------------ ---------------
Mike Ashley(2) Plc Director 2.0 - - -
------------------------------------------- --------------- ------- ---------- ------------------ ---------------
Rangers Retail Limited Associate - - - 0.1
------------------------------------------- --------------- ------- ---------- ------------------ ---------------
Newcastle United Football Club Connected
& St James Holdings Limited(3) persons 0.7 2.0 0.1 2.0
------------------------------------------- --------------- ------- ---------- ------------------ ---------------
(1) The outstanding balance with Four (Holdings) Limited
reflects the funding related to Agent Provocateur. Management
consider that the underlying results of Four (Holdings) Limited
supports the recoverability of the receivables balance. The results
of Four (Holdings) Limited do not meet the thresholds requiring
more detailed disclosures under IFRS 12.
(2) Use of the Company jet and helicopter are charged at
commercial rates.
(3) The sales relate to inventory
An agreement has been entered into with Double Take Limited, a
company owned by Mash Holdings Limited and in which Matilda Ashley,
Mike Ashley's daughter, is a director. Under the agreement, Double
Take Limited licenses the Group the exclusive rights to the
cosmetic brand SPORT FX. During the period a review has been
undertaken and no royalties or other fees are expected to be
payable to Double Take Limited for these rights until at least
September 2021, the fee arrangement will continue to be reviewed on
an ongoing basis, no provision is required in the financial
statements. It should be noted that the Group (rather than Double
Take Limited) owns the rights to SPORT FX for clothing, footwear
and sports equipment.
N M Design London Limited is a company in which Nicola Murray,
Michael Murray's mother, is a director. N M Design London Limited
perform design work for the Group in relation to some of the
Group's sites.
There is an agreement with Newcastle United Football Club
Limited in relation to the Group's advertising at Newcastle United
Football Club Limited. Currently, providing that certain criteria
are met, the Group will be charged GBP2.0m for the 2020/21 season
(2020: GBP2.0m for the 2019/20 season). The Group considers this
transaction to be in the normal course of business.
The trade and other receivables balance with Four (Holdings)
Limited includes a loan balance of GBP67.5m (gross of amounts
recognised in respect of loss allowance) which attracts interest at
a rate of 3% within current assets. This has been accounted for at
amortised cost in accordance with IFRS 9. The carrying value has
been determined by assessing the recoverability of the receivable
balance, discounted at an appropriate market rate of interest .
GBPnil was recognised in the period in respect of doubtful debts.
The sales amounts in relation to Four (Holdings) Limited relates to
the interest charge on the loan and the purchases relate to the
purchase of clothing products.
The Group does not have significant influence over but holds
greater than 20% of the voting rights of Studio Retail Group plc
and French Connection Group plc. Studio Retail Group plc and French
Connection Group plc have disclosed transactions with the Group as
a related party within their most recent Financial Statements.
Transactions between Studio Retail Group plc and French Connection
Group plc and the Group related to normal commercial trading
arrangements and are not considered material to the results of the
Group.
The Group does not consider it has the power to participate in
the financial and operating policy decisions of the entities and so
management do not consider the Group to be able to exert
significant influence over these entities as per IAS 28 Investments
in Associates and Joint Ventures and IAS 24 Related Party
Disclosures.
MM Prop Consultancy Ltd, a company owned and controlled by
Michael Murray, a member of key management, continues to provide
property consultancy services to the Group. MM Prop Consultancy Ltd
is primarily tasked with finding and negotiating the acquisition of
new sites in the UK, Europe and rest of the world for both our
larger format stores and our combined retail and gym units but it
also provides advice to the Company's in-house property team in
relation to existing sites in the UK, Europe and rest of the world.
In the year all properties are assessed and those that are
considered by the Group's independent non-executive directors to
have been completed and be eligible for review at the year-end are
assessed and valued by an independent valuer who confirms the value
created by MM Prop Consultancy Ltd. The Group's independent
non-executive directors then review and agree the value created and
have full discretion to approve a payment to MM Prop Consultancy
Ltd of up to 25% of the value created. There is a current pipeline
of properties that may be eligible to be assessed both positively
and negatively by the Group's non-executive directors in future
years.
At the period end GBPnil has been accrued (FY20 H1: GBP5.35m
accrued, subsequently GBP4.3m paid in FY20) as payable to MM Prop
Consultancy . The Independent Non-Executive Directors consider this
to be appropriate due to the effects of the Covid-19 pandemic which
has resulted in significant economic uncertainty in the UK. With
the widespread closure of businesses, furloughing of employees,
lockdowns and the unprecedented economic environment; any property
valuations would, at best, be uncertain and, at worst, be
unreliable. As a consequence, it is not possible to quantify the
value created on property transactions reliably. MM Prop
Consultancy Ltd has agreed to defer the valuation until a reliable
assessment can be performed.
GLOSSARY
ALTERNATIVE PERFORMANCE MEASURES
Reconciliation of excluding acquisitions and currency neutral
performance measures:
UK Sports Premium European Rest Of Wholesale Group
Retail Lifestyle Retail World & Licensing Total
Retail
Revenue
-------------------------------- ---------------------------------------------------------------
FY21 H1 Reported 1,071.6 320.4 352.0 77.1 72.2 1,893.3
-------------------------------- --------- ---------- -------- ------- -------
Adjustments for acquisitions
and currency neutral (102.8) (39.6) (78.1) - - (220.5)
-------------------------------- --------- ---------- -------- ------- -------
FY21 H1 Excluding acquisitions
and currency neutral 968.8 280.8 273.9 77.1 72.2 1,672.8
-------------------------------- --------- ---------- -------- ------- -------
FY20 H1 Reported 1,188.1 305.8 365.5 92.1 92.0 2,043.5
-------------------------------- --------- ---------- -------- ------- -------
Adjustments for acquisitions
and currency neutral (80.1) (23.1) (53.1) (1.9) (1.0) (159.2)
-------------------------------- --------- ---------- -------- ------- -------
FY20 H1 Excluding acquisitions
and currency neutral 1,108.0 282.7 312.4 90.2 91.0 1,884.3
-------------------------------- --------- ---------- -------- ------- -------
% Variance (12.6) (0.7) (12.3) (14.5) (20.7) (11.2)
-------------------------------- --------- ---------- -------- ------- -------
Underlying EBITDA
-------------------------------- ---------------------------------------------------------------
FY21 H1 Reported 151.4 28.4 25.1 10.4 11.0 226.3
-------------------------------- --------- ---------- -------- ------- -------
Adjustments for acquisitions
and currency neutral 5.4 (9.5) (0.2) - - (4.3)
-------------------------------- --------- ---------- -------- ------- -------
FY21 H1 Excluding acquisitions
and currency neutral 156.8 18.9 24.9 10.4 11.0 222.0
-------------------------------- --------- ---------- -------- ------- -------
FY20 H1 Reported 141.9 (7.6) 32.9 (2.5) 16.5 181.2
-------------------------------- --------- ---------- -------- ------- -------
Adjustments for acquisitions
and currency neutral 3.9 2.1 (0.1) - (0.2) 5.7
-------------------------------- --------- ---------- -------- ------- -------
FY20 H1 Excluding acquisitions
and currency neutral 145.8 (5.5) 32.8 (2.5) 16.3 186.9
-------------------------------- --------- ---------- -------- ------- -------
% Variance 7.5 443.6 (24.1) 516.0 (32.5) 18.8
-------------------------------- --------- ---------- -------- ------- -------
The FY20 H1 numbers have been re-categorised due to changes in
the reporting segments, with Jack Wills and Sofa.com being moved
from UK Sports Retail to Premium Lifestyle.
Movement in provisions pre-IFRS 16:
Legal and Property Other (GBPm) Total (GBPm)
regulatory related
(GBPm) (GBPm)
At 28 April 2019 234.0 198.5 8.0 440.5
----------------------------- ------------------- -------- ------------------------- --------------------------
Amounts provided 13.0 34.7 1.1 48.8
----------------------------- ------------------- -------- ------------------------- --------------------------
Reclassified from accruals (2.7) (6.0) (3.0) (11.7)
----------------------------- ------------------- -------- ------------------------- --------------------------
Acquisitions - 12.9 - 12.9
----------------------------- ------------------- -------- ------------------------- --------------------------
At 27 October 2019 244.3 240.1 6.1 490.5
----------------------------- ------------------- -------- ------------------------- --------------------------
At 26 April 2020 225.4 249.5 2.7 477.6
----------------------------- ------------------- -------- ------------------------- --------------------------
Amounts provided 1.5 84.0 - 85.5
----------------------------- ------------------- -------- ------------------------- --------------------------
Amounts utilised / reversed (1.4) (19.4) (0.6) (21.4)
----------------------------- ------------------- -------- ------------------------- --------------------------
At 25 October 2020 225.5 314.1 2.1 541.7
----------------------------- ------------------- -------- ------------------------- --------------------------
During the period, onerous lease provisions (pre-IFRS 16) were
recognised due to an ongoing management review of the Group's store
profile and strategy including current and anticipated freehold
acquisitions, resulting in additional provisions being made of
GBP84.0m in the period (excluding acquisitions), with reference to
the Group's alternative performance measures.
Reconciliation of underlying performance measures (EBITDA and
PBT):
26 weeks ended 26 weeks ended
25 October 2020 27 October 2019
EBITDA (GBP'm) PBT (GBP'm) EBITDA (GBP'm) PBT (GBP'm)
--------------------------------------- -------------- ----------- -------------- -----------
OPERATING PROFIT 124.3 - 106.2 -
--------------------------------------- -------------- ----------- -------------- -----------
Depreciation and amortisation 74.0 - 70.0 -
--------------------------------------- -------------- ----------- -------------- -----------
IFRS 16 depreciation 53.2 - 55.3 -
--------------------------------------- -------------- ----------- -------------- -----------
IFRS 16 impairment 124.9 - 64.1 -
--------------------------------------- -------------- ----------- -------------- -----------
IFRS 16 disposal of lease liabilities (19.3) - - -
--------------------------------------- -------------- ----------- -------------- -----------
Share of (loss) of associates - - (5.6) -
--------------------------------------- -------------- ----------- -------------- -----------
REPORTED 357.1 106.1 290.0 90.2
--------------------------------------- -------------- ----------- -------------- -----------
Exceptional items (3.7) (3.7) 3.3 3.3
--------------------------------------- -------------- ----------- -------------- -----------
IFRS 16 reversal of rent expense (66.5) (66.5) (56.6) (56.6)
--------------------------------------- -------------- ----------- -------------- -----------
IFRS 16 reversal of onerous
lease provision (68.0) (68.0) (27.6) (27.6)
--------------------------------------- -------------- ----------- -------------- -----------
IFRS 16 depreciation - 53.2 - 55.3
--------------------------------------- -------------- ----------- -------------- -----------
IFRS 16 impairment - 124.9 - 64.1
--------------------------------------- -------------- ----------- -------------- -----------
IFRS 16 disposal of lease liabilities - (19.3) - (5.2)
--------------------------------------- -------------- ----------- -------------- -----------
IFRS 16 interest expense - 6.5 - 6.1
--------------------------------------- -------------- ----------- -------------- -----------
(134.5) 30.8 (84.2) 36.1
--------------------------------------- -------------- ----------- -------------- -----------
(Profit) on sale of properties:
--------------------------------------- -------------- ----------- -------------- -----------
(Profit) on sale of properties
- Pre-IFRS 16 basis - - (90.4) (90.4)
--------------------------------------- -------------- ----------- -------------- -----------
IFRS 16 sale and leaseback -
Adjustment to post-IFRS 16 basis - - 67.3 67.3
--------------------------------------- -------------- ----------- -------------- -----------
- - (23.1) (23.1)
--------------------------------------- -------------- ----------- -------------- -----------
(Profit) on disposal of financial
instruments - (21.2) - (6.3)
--------------------------------------- -------------- ----------- -------------- -----------
Realised FX loss / (gain) 7.4 7.4 (4.8) (4.8)
--------------------------------------- -------------- ----------- -------------- -----------
Fair value adjustment on equity
derivatives - 18.3 - 3.2
--------------------------------------- -------------- ----------- -------------- -----------
Fair value adjustment on foreign
currency contracts - 8.6 - 3.2
--------------------------------------- -------------- ----------- -------------- -----------
UNDERLYING 226.3 146.3 181.2 101.8
--------------------------------------- -------------- ----------- -------------- -----------
KEY PERFORMANCE INDICATORS
Group revenue
The Board considers that this measure is a key indicator of the
Group's growth.
Underlying EBITDA
Underlying EBITDA shows how well the Group is managing its
trading and operational efficiency and therefore the overall
performance of the Group.
Group gross margin
The Board considers that this measure is a key indicator of the
Group's trading profitability.
Underlying basic earnings per share (EPS)
Underlying basic EPS is a measure of adjusted total shareholder
return and ultimately an indicator to our shareholders of the
success of our elevation strategy.
Underlying free cash flow
Underlying free cash flow is considered an important indicator
for the business of the cash available for investment in the
elevation strategy.
Net debt
Net debt is an indicator of both the Group's investment in the
elevation strategy and its covenant headroom which is a key
component of the Group's going concern considerations.
Number of retail stores
The Board considers that this measure is an indicator of the
Group's growth. The Group's elevation strategy is replacing older
stores and often this can result in the closure of two or three
stores to be replaced by one larger new generation store.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
IR KKKBQABDKKBD
(END) Dow Jones Newswires
December 10, 2020 02:00 ET (07:00 GMT)
Sports Direct (LSE:SPD)
Historical Stock Chart
From Mar 2024 to Apr 2024
Sports Direct (LSE:SPD)
Historical Stock Chart
From Apr 2023 to Apr 2024
