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.

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END

IR KKKBQABDKKBD

(END) Dow Jones Newswires

December 10, 2020 02:00 ET (07:00 GMT)