Half Yearly Report

21 September 2011

JD Sports Fashion Plc (the "Group"), the leading retailer and distributor of sport and athletic inspired fashion apparel and footwear, today announces its Interim Results for the 26 weeks ended 30 July 2011 (comparative figures are shown for the 26 week period ended 31 July 2010).

(a) The share of exceptional items of joint venture in the 26 week period to 30 July 2011 relate to the reversal of the impairment of the investment held by Focus Brands Limited in Focus Group Holdings Limited, following repayment of original purchase consideration by the vendors of Focus Group Holdings Limited.

(b) Net cash consists of cash and cash equivalents together with other borrowings from bank loans, other loans and finance leases.

·; Total Group revenue increased by 14.6% to £439.8 million (2010: £383.9 million) of which £35.1 million came from businesses not wholly owned in both six month periods

·; Profit before taxation increased by 20.6% to £20.1 million (2010: £16.6 million)

·; Underlying group profit before tax and exceptionals declined from £19.4 million to £16.0 million in line with the Board's expectations at the time of the preliminary announcement of results for the last financial year in April

·; Net cash at 30 July 2011 was £19.2 million (31 July 2010: £34.5 million) after net cash investment of £12.4 million on the new warehouse site in Rochdale (2010: £1.3 million) and £22.2 million of net investments and repayments of debt associated with acquisitions (2010: £1.2 million) in the six month period

·; Interim dividend increased by 7.9% to 4.1p (2010: 3.8p)

·; Acquisitions in Ireland (Champion Sports) and Spain (Sprinter) have continued the international expansion of the Sports Retail concepts

·; The gross margin performance is pleasing in the light of all the pressures impacting on gross margin at the start of the year. Sales, gross margin performance and underlying profit of the three business sectors are tabulated below:

·; Overall gross LFL sales for the 26 week period in the UK and Ireland combined core retail segments increased by 0.8% but on a net basis fell by 0.9%:

·; Like for like sales for the seven weeks to 17 September were:

Peter Cowgill, Executive Chairman, said:

"It is pleasing to report that Group profit before tax rose by 20.6% to £20.1 million (2010: £16.6 million). Our continual focus on exploiting all avenues of revenue growth and margin protection has enabled us to deliver a level of profit that represents a platform for meeting expectations for the full year, although trading conditions remain tough. 

"Trading since the period end has continued to improve with gross like for like sales for the core UK and Ireland retail fascias in the seven week period to 17 September up by 3.3% (+2.5% Sports Fascias; +7.4% Fashion Fascias). Excluding the impact of VAT, the net revenues have increased in this period by 1.6% (+1.0% Sports Fascias; +5.0% Fashion Fascias). The result for the full year remains very dependent on the sales and margin performance in December and January and we will issue an Interim Management Statement on the third quarter in November.

"We continue to look for appropriate acquisition opportunities which can deliver additional sources of future earnings growth principally in overseas Sports Retail but also to compliment our core retail fascias.

"The Board again believes that the Group is well positioned for future growth across its markets and trading is in line with its expectations."

Enquiries:

JD Sports Fashion Plc Tel: 0161 767 1000

Peter Cowgill, Executive Chairman

Barry Bown, Chief Executive

Brian Small, Finance Director

MHP Communications Tel: 020 3128 8100

Andrew Jaques

Barnaby Fry

Ian Payne

Executive Chairman's Statement

Introduction

In my statement on the results for the period to 29 January 2011, which I made in April, I referred to the adverse impact on the retail environment from both fiscal changes and multiple macro economic pressures. These influences have had the expected impact on the retail businesses in the first half of the year. However, our continual focus on exploiting all avenues of revenue growth and margin protection has enabled us to deliver a level of profit that represents a platform for meeting expectations for the full year, although trading conditions remain tough.

The 26 week period to 30 July 2011 saw a gross like for like sales improvement in the core UK and Ireland Retail Fascias of +0.8% (-0.1% Sports Fascias; +5.3% Fashion Fascias). However, after taking into account the impact of the increase in VAT to 20%, net sales have declined by 0.9% (-1.6% Sports Fascias; +3.0% Fashion Fascias).

Gross margins have declined slightly to 48.0% (2010: 48.2%) although this is due to the higher proportion of total sales generated by the lower margin distribution segment of the business rather than a decline in overall retail margins. This has been an excellent performance given the current pressures on margin but, looking forward, we still have tough margin comparatives in the second half of the year.

The period end net cash was £19.2 million (2010: £34.5 million). This represents a reduction of £67.0 million compared to the year end position at January (2010: reduction of £26.0 million). However, included within the outflow of cash in the current period is £22.2 million for the net cost of investments and repayments of debt associated with acquisitions (2010: £1.2 million). We have also incurred £26.1 million (2010: £16.1 million) on capital expenditure which includes £12.4 million of investment on the new warehouse site in Rochdale (2010: £1.3 million). The remainder of the movement represents more normal cash flows, including the impact of seasonal working capital movements.

Acquisitions

We continue to look for appropriate acquisition opportunities which can deliver additional sources of future earnings growth principally in overseas Sports Retail but also to compliment our core retail fascias.

We have expanded further in mainland Europe through our acquisition during the period of 50.1% of the Sprinter business in Spain. Sprinter's experienced management team and established infrastructure provides the JD fascia with the opportunity to expand both its European retail presence and the distribution of its own and licensed brands. It is our intention that the Sprinter store chain will continue to grow and a joint venture has been established between Sprinter and JD (in which JD will have an effective shareholding of 65%) to rollout JD as a more fashion oriented retail fascia in Spain, emulating the UK format. We anticipate that the first JD stores in Spain will open in Spring 2012.

We have also enhanced our previously limited position in the Republic of Ireland through the acquisition of 100% of the Champion Sports business. We are working with the Champion management team on their legacy profitability issues in a difficult retail market in Ireland.

The acquisition of 8 Cecil Gee stores, from Moss Bros Group plc, provides the Group with the opportunity to develop a premium fashion fascia which will continue to stock brands unavailable to the Group's existing fascias. We believe that by applying our established merchandising and buying skills and disciplines it will have the opportunity to become a profitable standalone entity. We are currently working on a proposition which would involve re-launching these stores under a new style in Spring 2012.

The acquisition of the Fenchurch and Peter Werth brands together with the agreement for exclusive licences in the UK and Ireland for Fila and Diadora, is a further demonstration of our commitment to developing a unique product offering to our Retail consumers.

Elsewhere, in the Distribution segment, we have further increased our general teamwear offering through the acquisition of 80% of the Kukri business and have increased our shareholding in the Focus business by 31% to 80% making it a subsidiary for the first time.

Sports Fascias

The Sports Fascias are JD, Size?, Chausport, Sprinter and Champion Sports.

The Sports Fascias' total revenue (after elimination of inter-group sales) increased by 9.0% during the period to £322.7 million (2010: £296.2 million) although like for like sales for the period in the core UK and Ireland sports fascia stores were down by 1.6% (2010: +3.9%) which represents a significant improvement from the position announced in the Interim Management Statement in June when the like for like performance after 18 weeks was -3.0%. Chausport had a satisfactory half year with LFL sales up by 4.9% (2010: 10.5%) which is pleasing given the strong comparative of the prior year. The newly acquired Champion and Sprinter businesses contributed turnover of £13.4 million (4 months) and £6.5 million (1 month) respectively.

Gross margin achieved in the Sports Fascias has improved marginally to 49.5% helped by improved margins in France primarily from the JD stores where the premium product being sold can command higher price points. This is a robust performance in current economic conditions.

Overall, operating profits (before exceptional items) in the Sports Fascias reduced from £21.6 million to £20.2 million. Within this, following the like for like sales decline in the core UK and Ireland business, operating profit in JD reduced by £1.5 million to £20.5 million (2010: £22.0 million). The continued progress in Chausport combined with the encouraging start to JD in France saw first half operating losses in France reduce from £(0.4) million to £(0.1) million. On a combined basis, the newly acquired Champion and Sprinter businesses contributed a net operating loss of £(0.2) million.

We continue to invest heavily in JD, Size? and the new businesses. The returns to date from investing in the existing fascias whether that be from refurbishment, relocations or new locations mean that we will continue our investment programme. We have completed 12 new stores in the period and 3 refurbishments (including one upsizing of space from taking a neighbouring unit) in the UK Sports Fascia stores.

We are cautiously pleased with the development of the JD stores in France with the new locations at Lyon and Evry both performing ahead of our initial expectations. The converted store in Lille is performing over 50% ahead of its historic performance as a Chausport. The performance to date of these three stores has given us the confidence to look at further new stores and conversions. Before the end of the year, we anticipate opening a new store in Marseille and converting at least one more Chausport to the JD fascia. We have also engaged new property agents in France to identify opportunities for further JD stores. Elsewhere in France, we have opened one new Chausport store and completed two refurbishments.

The initial performance of JD in France has also given us the confidence to look at additional European territories. As with France, our preferred model is to work with a local business which has knowledge of relevant retail locations in its territory and has an existing distribution network which we can access. We are currently working with the Sprinter management team on this basis with a view to opening JD stores in Spain in early to mid 2012. We will focus the initial openings on the major metropolitan areas. The Sprinter team will also continue to develop the existing Sprinter business, which is currently largely based in the South and East of Spain.

Champion Sports is still experiencing difficult trading conditions with the Irish economy not yet showing any recovery momentum. We do not believe that Champion will deliver a significant operating profit until we see economic improvement in the Republic of Ireland although there is a plan in place to enhance operating margins.

Fashion Fascias

The Fashion Fascias are Bank, Scotts and the recently acquired Cecil Gee.

The Fashion Fascias' total revenue increased by 16.3% during the period to £59.5 million (2010: £51.2 million) which includes £1.2 million from the Cecil Gee stores (1 month). Like for like sales for the period were up by 3.0% (2010: -3.8%) being Bank +5.9% (2010: -3.7%) and Scotts -4.5% (2010: -4.0%). As with the Sports Fascias, the performance after 26 weeks represents a significant improvement from the position announced in the Interim Management Statement in June when the like for like performance after 18 weeks was -1.6% (Bank -0.4% and Scotts -4.8%).

Gross margin achieved in the Fashion Fascias has reduced from 48.6% to 48.0% which we attribute to current market conditions.

We have continued our investment in the Bank fascia stores with 6 new stores opened in the period. These openings included a store in Belfast which is Bank's first store in Northern Ireland. We have also invested in additional resource within the Bank commercial teams with particular emphasis on buying and merchandising. We believe this will lead to an enhanced future performance although given the lead times for ordering product the impact will be most evident in future years.

The operating loss (before exceptional items) in the Fashion Fascias has increased to £3.4 million (2010: £2.0 million). Although there was pleasing like for like sales growth in the Bank fascia, the reduced margin and the investment in new stores and additional resource resulted in operating losses increasing by £1.1 million to £3.1 million (2010: £2.0 million). Scotts, which broke even in the first half of 2010, saw a small loss in the current period of £0.1 million. The recently acquired Cecil Gee business delivered a small loss of £0.2 million.

The current performance of the Fashion fascias is more encouraging although it is being boosted currently by significant growth in Bank's ecommerce sales and the performance of these fascias remains more volatile than those in Sports.

Distribution

The Distribution businesses are now Canterbury, Topgrade, Deakins, Kooga and the recently acquired Kukri and Focus.

The first half operating losses in the Distribution businesses have reduced to £0.5 million (2010: £1.0 million) primarily from an increased profit from Canterbury, where first half profits grew to £0.9 million (2010: £0.5 million) principally from a strong performance in Australia and New Zealand where there was a sales build up in advance of the Rugby World Cup, combined with favourable local exchange rates relative to the US Dollar. Performance in the other parts of Canterbury still needs to improve but we remain excited by brand development prospects.

The operating losses in Topgrade increased to £1.1 million (2010: £0.5 million) with ongoing investment in Get The Label. We are still encouraged by the sales growth in Get The Label with revenues increased by approximately 80% compared to the prior year and we remain optimistic about the long term profitability of this venture. End of line wholesaling sales within Topgrade also increased in the period.

Focus has been accounted for as a subsidiary since March and has contributed revenues of £10.4m and an operating profit of £0.4 million. Focus will continue to concentrate on the design, sourcing and distribution of footwear and apparel both for own brand and under license brands for both group and external customers. Included within Focus's stable of brands going forward is Peter Werth which we acquired in the period for £0.4 million.

The operational processes and disciplines around sponsorship properties in Kooga Rugby have benefitted from a strengthened management team but losses have only slightly reduced.

Deakins has made an encouraging start to the year.

Joint Venture

We have now increased our shareholding in Focus Brands Limited to 80% by purchasing an additional 31% shareholding for a maximum consideration of £1.25 million. As such, the results for the period represent one month only with Focus recognised as a subsidiary for the balance of the period.

Group Performance

Revenue, gross margin and overheads

Total Group revenue increased by 14.6% in the period to £439.8 million (2010: £383.9 million) with a decline of 0.9% on a like for like basis in the net sales in the UK and Ireland retail fascias.

Revenue decreased by 1.6% on a like for like basis in the Sports Fascias but increased by 3.0% in the Fashion Fascias.

Group gross margin decreased in the period from 48.2% to 48.0% reflecting the increased participation of the lower margin distribution businesses.

Non-store retail overheads have risen by more than the rate of inflation as we have built infrastructure to support acquisitions and international growth. This has impacted the results of the Sports Fascias operating segment.

Operating profits and results

Group operating profit (before exceptional items) for the period was down 12.7% to £16.3 million (2010: £18.6 million) and comprises a Sports Fascias profit of £20.2 million (2010: £21.6 million), a Fashion Fascias loss of £3.4 million (2010: loss of £2.0 million) and a Distribution segment loss of £0.5 million (2010: loss of £1.0 million).

An exceptional credit of £2.8 million (2010: charge of £2.7 million) arose primarily following a dividend received from the Focus Brands joint venture prior to the Group's acquisition of the enlarged shareholding which has now made Focus a group subsidiary. The dividend received was eliminated against the carrying value of the investment with the excess of £2.7 million recognised as an exceptional credit. Including the exceptional items, Group operating profit rose by £3.2 million to £19.1 million (2010: £15.9 million).

We continue to separate exceptional items as we believe that this better reflects the underlying performance of the business. The exceptional items comprise:

The gain on the disposal of the Focus joint venture arose from the remeasurement to fair value of the Group's previously held investment in Focus Brands Limited

Group profit before tax in the period ultimately increased by 20.6% to £20.1 million (2010: £16.6 million).

Working capital and cash

Net cash at 30 July 2011 was £19.2 million (31 July 2010: £34.5 million).

Inventories have increased to £127.7 million at 30 July 2011 from £90.0 million at 31 July 2010. The rise is principally due to stocks of £24.0 million in new and acquired businesses. Elsewhere, stocks have increased in JD from the earlier receipt of own brand stocks, in Bank as the business grows both organically and through new space and Topgrade for the ongoing development of Get The Label. Trade creditors continue to be paid to terms to maximise settlement discounts.

Store Portfolio

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

Sports Fascias

Fashion Fascias

Impact of Recent Riots

The Group's businesses, particularly JD, were impacted in certain areas by the recent riots. Stock totalling £0.7 million was looted from a total of 16 stores with 6 stores in the London area suffering very significant thefts. Whilst London was impacted more than other areas, we also saw damage to stores in Birmingham, Manchester and Nottingham. This damage could have been significantly worse but for the pre-emptive actions which we took in certain locations to prevent looters accessing the stores. The JD store at Woolwich suffered fire damage in the riots and has not yet reopened. However, all other stores were reopened by Sunday 21 August.

We are currently working with our insurers on the subsequent claim, covering theft of stock, repair costs and business interruption. We do not believe that the riots will have a material adverse impact on the outturn for the current year.

Dividends and Earnings per Ordinary Share

The Board has decided to pay an interim dividend of 4.10p per ordinary share, which represents an increase of 7.9% over the prior year (2010: 3.80p). The Board still believes that the level of increase in the total dividend for the year should be determined after the year end as the results are so dependent on Christmas trading. Whilst the Board intends to continue with the progressive dividend policy which has seen total dividends rise from 8.50p in the year to 2 February 2008 to 23.00p in the year to 29 January 2011, it also wishes to retain funding flexibility in the business to continue to allow it to make strategic acquisitions and other capital investments which are in the long term interests of the Group.

The dividend will be paid on 6 January 2012 to shareholders on the register as at close of business on 2 December 2011. A scrip dividend alternative will not be offered.

The adjusted basic earnings per ordinary share before exceptional items are 18.78p (2010: 27.29p).

The basic earnings per ordinary share are 28.51p (2010: 24.14p).

Employees

The Board recognises the skills, talent and dedication of our many colleagues around the World. The Board would like to extend its thanks to all employees and would particularly like to record their appreciation for the efforts of all colleagues who have been caught up in the recent riots. This was a very demanding time but thanks to their determination, we were able to minimise the disruption to the business.

Current Trading and Outlook

Trading since the period end has continued to improve with gross like for like sales for the core UK and Ireland retail fascias in the seven week period to 17 September up by 3.3% (+2.5% Sports Fascias; +7.4% Fashion Fascias). Excluding the impact of VAT, the net revenues have increased in this period by 1.6% (+1.0% Sports Fascias; +5.0% Fashion Fascias). The result for the full year remains very dependent on the sales and margin performance in December and January and we will issue an Interim Management Statement on the third quarter in November.

Nevertheless, the Board believes that the Group is well positioned for future growth across its markets and trading is in line with its expectations.

Peter Cowgill

Executive Chairman

21 September 2011

Condensed Consolidated Income Statement

For the 26 weeks to 30July 2011

Condensed Consolidated Statement of Comprehensive Income

For the 26 weeks to 30 July2011

Condensed Consolidated Statement of Financial Position

As at 30 July 2011

Condensed Consolidated Statement of Changes in Equity (continued)

For the 26 weeks to 30 July 2011

Condensed Consolidated Statement of Changes in Equity (continued)

For the 26 weeks to 31 July 2010

Condensed Consolidated Statement of Cash Flows

1. Basis of Preparation

JD Sports Fashion Plc (the 'Company') is a company incorporated and domiciled in the United Kingdom. The half-year financial report for the 26 week period to 30 July 2011 represents that of the Company and its subsidiaries (together referred to as the 'Group').

This half-year financial report is an interim management report as required by DTR 4.2.3 of the Disclosure and Transparency Rules of the UK's Financial Services Authority and was authorised for issue by the Board of Directors on 21 September 2011.

The half-year financial report is prepared in accordance with the EU endorsed standard IAS 34 'Interim Financial Reporting'. The comparative figures for the 52 week period to 29 January 2011 are not the Group's statutory accounts for that financial year. Those accounts have been reported on by the Group's Auditor and delivered to the Registrar of Companies. The Report of the Auditor was (i) unqualified, (ii) did not include a reference to any matters to which the Auditor drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498 of the Companies Act 2006.

The information contained in the half-year financial report for the 26 week period to 30 July 2011 and 31 July 2010 is unaudited.

As required by the Disclosure and Transparency Rules of the UK's Financial Services Authority, the half-year financial report has been prepared by applying the same accounting policies and presentation that were applied in the preparation of the Company's published consolidated financial statements for the 52 week period to 29 January 2011.

The following amendments to accounting standards and interpretations, issued by the International Accounting Standards Board (IASB), have been adopted for the first time by the Group in the period with no significant impact on its consolidated results or financial position:

·; Amendments to IAS 32 'Financial Instruments: Presentation' (Classification of rights issues)

·; Revised IAS 24 'Related Party Disclosure'

·; Amendments to IAS 34 'Interim Financial Statements'

Use of estimates and judgements

The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

In preparing these condensed consolidated interim financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the 52 week period to 29 January 2011.

Going concern

The Board has considered the risks and uncertainties for the remaining 26 week period to 28 January 2012 and determined that the risks presented in the Annual Report and Accounts 2011, noted below, remain relevant:

Retail specific

·; Damage to reputation of brands

·; Retail property factors

·; Consolidation of warehouse operations

·; Seasonality of sales

·; Reliance on legacy IT systems

Distribution specific

·; Credit risk in distribution businesses;

All businesses

·; Economic factors

·; Reliance on non-UK manufacturers

·; Protection of intellectual property

·; Retention of key personnel

·; Treasury risks from movement in interest rates and currency exposures

A major variable, and therefore risk, to the Group's financial performance for the balance of the financial period is the sales and margin performance in the retail fascias, particularly in December and January. Further comment on this and other risks and uncertainties faced by the Group is provided in the Executive Chairman's statement included within this half-year report.

As at 30 July 2011, the Group had net cash balances (cash net of debt) of £19,151,000 with available committed borrowing facilities of £75,000,000 of which £13,000,000 had been drawn down (see note 7). As a consequence, the Directors believe that the Group is well placed to manage its business risks successfully despite the current uncertain economic outlook.

After making enquiries, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the financial statements.

2. Segmental Analysis

IFRS 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the Chief Operating Decision Maker to allocate resources to the segments and to assess their performance. The Chief Operating Decision Maker is considered to be the Executive Chairman of JD Sports Fashion Plc.

Information reported to the Chief Operating Decision Maker is focused more on the nature of the businesses within the Group. The Group's reportable segments under IFRS 8 are therefore as follows:

·; Sport retail - includes the results of the sport retail trading companies JD Sports Fashion Plc, John David Sports Fashion (Ireland) Limited, Chausport SA, Champion Sports (Holdings), JD Sprinter Holdings 2010 SL and Duffer of St George Limited

·; Fashion retail - includes the results of the fashion retail trading companies Bank Fashion Limited, RD Scott Limited and Premium Fashion Limited

·; Distribution businesses - includes the results of the distribution companies Topgrade Sportswear Limited, Nicholas Deakins Limited, Canterbury Limited (including global subsidiary companies), Kooga Rugby Limited, Nanny State Limited, Focus Brands Limited and Kukri Sports Limited (including global subsidiary companies)

The Chief Operating Decision Maker receives and reviews segmental operating profit. Certain central administrative costs including Group Directors' salaries are included within the Group's core 'Sport retail' result. This is consistent with the results as reported to the Chief Operating Decision Maker.

IFRS 8 requires disclosure of information regarding revenue from major products and customers. The majority of the Group's revenue is derived from the retail of a wide range of apparel, footwear and accessories to the general public. As such, the disclosure of revenues from major products and customers is not appropriate.

Intersegment transactions are undertaken in the ordinary course of business on arms length terms.

The Board consider that certain items are cross divisional in nature and cannot be allocated between the segments on a meaningful basis. The share of results of joint venture is presented as unallocated in the following tables, as this entity has trading relationships with companies in all of the three segments. An asset of £nil (2010: £1,323,000) for the equity accounted investment in joint venture is included within the unallocated segment. The exceptional credits pertaining to the dividend received from joint venture (£2,691,000) and gain on disposal of joint venture (£871,000) (see note 3) are included within the unallocated segment. Draw downs from the Group's syndicated borrowing facility of £13,000,000 (2010: £nil) and liabilities for taxation of £7,306,000 (2010: £6,102,000) are also treated as unallocated reflecting the nature of the Group's syndicated borrowing facilities and its tax group.

Each segment is shown net of intercompany transactions and balances within that segment. The eliminations remove intercompany transactions and balances between different segments which primarily relate to the net down of long term loans and short term working capital funding provided by JD Sports Fashion Plc (within Sport retail) to other companies in the Group and intercompany trading between companies in different segments.

Operating Segments

Information regarding the Group's operating segments for the 26 weeks to 30 July 2011 is reported below:

Income statement

Total assets and liabilities