JD Sports Fashion plc

Good morning, everyone, and welcome to the JD interim results. I do feel slightly overdressed here this morning. I must remember to give a call and work out what the dress code is next time. It's been an incredibly busy first half, and I have to tell you that the pace at JD is quite extraordinary. As chairman, of course, I stand above this, and my pace is a bit less, but it's interesting to see. We've continued to make really great progress on the plans that were outlined at the Capital Markets Day. And it is hard to think that the Capital Markets Day was only in February this year. So the pace that we've been going at since is extraordinary. We've continued to build the infrastructure within the business, and the foundations have been further strengthened, I think. Ray Gies has continued to build out his top team with a new CFO, new CTO. We've got a new group legal counsel. The governance program we've got in place has been forging ahead. Pete might be able to talk to you a little about that. He's been very central to that. We've added three new NEDs to the board to add some deep PLC experience to a very good board. And we've continued with things like disposing of the fashion brands. We've announced our plan to acquire the minority interests in Iberia, Germany, and Central Europe. And, you know, subject to competition clearance, we've announced the acquisition of Courier in France. So, I mean, in terms of things we've got on the tick list for the last six months, it's certainly been a very, very busy time. And I commend the management for their incredible efforts. I think we've also watched with interest how the stock has been buffeted a bit by results at other retailers. We've seen the concerns that have come from the performance of people like Foot Locker and Dick's and so on in the US. And I kind of remember this at Tesco, where JS results always used to sort of have an impact on Tesco. Yet over time, the Tesco business became double the size of Sainsbury's here in the UK alone, let alone all the other things we were doing with International. And while certain market conditions affect everyone, we were also on our own path in a way. We were also shaping our own destiny. And I hope over time that JD will start to be seen in that way. As the sheer number of opportunities we're pursuing, the growth aspirations we laid down in that capital markets day become more tangible. We are in and of the market, of course. But we're also on our own path. And that's important, I think, to remember. Anyway, I'll hand over to Regis now, who will take you through the numbers. I do want to thank him, and thank you, Regis, and the team, for the extraordinary efforts in this first half. And I'll let him take you through now some of the numbers that underpin that.

Yes. Thank you very much, Andy. Thank you for your kind words. Can you hear me? Is it okay? Yeah. So good morning to everyone here in the room and for the one who are watching us on the webcast. And thank you for attending our interim result presentation today. Today I will do a double act. I will do the financial and the strategy updates. Dominic is joining us on the 4th of October. So not long time, but he's joining us on the 4th of October, taking over from Neil. And despite Andy have been a CFO not long time ago, two or three years ago. And me, the same. I've been a CFO too, but we feel more comfortable to have Pete Fox with us to answer your tricky and picky question at the end of the presentation. So let's go to the presentation and share with you the numbers. So in the first half, I think you have seen that we have delivered on our strategy and our triple-double objective. As you remember, we say double-digit growth. We are delivering 12% organic growth. Double digit market share. We are gaining share in every market we operate, including UK, which is our more mature market. And double digit profit. And as you have seen, we are on track to deliver more than one billion profit for the full year in line with our guidance. We have done particularly well in North America, and we had over-scrutinity around North America, but we have done particularly well. I think the numbers is telling. Premium organic sales has been growing by 15%, and our profit grew by 12%, which I think it's a first-class performance. As we said, we are delivering the full-year profit before tax and adjusted item guidance of 35% in the first half of the $1.4 billion that we want to deliver for the full year. This is down $10 million compared to last year. But as you remember, we are going back to the normal first half, second half split. And last year, the first half, our margin rate was artificially high because of the fact that we had no clearance and no stock in the market at the end of the quarter. We are on track to open more than 200 new JD stores worldwide, in line with our plan. We opened 83 stores in the first half. And finally, we have a strong balance sheet. We have a strong cash position with 1.3 billion of net cash on our balance sheet, which gives us the ability to increase our dividend to go back to the cover that we had before the pandemic. So the next slide gives you a more detailed understanding of our growth by region. So this is our total business growth. So you can see that, and you have the total growth, 8%. This includes the investments that we have done at the end of last year, which we have a very small exchange rate impact, which means that we're going from 8% to 7%. And in terms of currency, you have a 12% organic growth. So the difference between organic growth and like-for-like is a new space that we had in the market, relocation and soil expansion. This is 4% for the first half. This will increase in the second half because we opened a lot of stores in the first half and even more stores in the second half. As you can see, from both like-for-like and organic perspective, the sales growth have been good in all regions. So if you look at APAC is leading the way with a 24% growth in terms of organic, 15% in terms of like-for-like, followed by Europe, and Europe is already a big business, and this business is growing very fast with a double-double, 19% growth in terms of organic, 12% in terms of like-for-like. North America, almost the same as Europe, plus 14% organic, plus 8% like-for-like. And in UK, this is our total UK, as you will see, for JD we do better than that, but it's a plus 5% and plus 4% like-for-like. If you go to our P&L, and I think we can look at our P&L in more details, revenue line, $4.8 billion for the first half. And just to echo what Andy was saying, $4.8 billion, this is more than our total year 2018 turnover. So it's not a long time ago. That was five years ago. That was our full year turnover. This is now our first half turnover. It gives you a magnitude of the growth that we have delivered. we want to deliver for the future. Margin, 48%, last year was 48.5. I think if you want to compare like for like, we should say 48.8, because there is 30 basis points which is linked to the fact that we reclass the delivery income part of revenue versus part of netting the cost. So there is 80 points below last year, which is completely in line with our expectation, and the fact that last year we had no clearance at the end, we had no stock, especially in the US. So we are very comfortable for 48%. 48% is 1.5 point, one point more than pre-pandemic level of margin for the first half. And if you look at our history, we always have a better margin in second half than first half. That has been consistent through the years, except during the pandemic one. So that's for the margin. We have in this margin an increased shrinkage, because that has been one of the questions asked. But this is really very small for us. We see an increase, but from a very low base. As you will see in our store, the stock, which is the most valuable stock, which is around footwear, is not on the sales floor. So the ability for the consumer to walk away with a pair of sneakers they can have one pair, oh no, not one pair, one shoes, which is a demo shoes, but it's not going to impact us very, and it doesn't look cool when you wear it. So we have less issue around that. So that's only, so the increased shrinkage is six basis point of margin in the first half, which is not really significant. In terms of our cost, up 10%, and that is 8.5% if you take like for like, if you take into account the reclassification of the delivery cost. That reflects the investment that Andy was mentioning. We have invested a lot in the first half, and invest in our people first. As you know, in October last year, we decided to increase the self-assistance salary almost by 30% by removing the underage policy. That is 45 million investment in total for our staff that is reflecting in our P&L. Second investment has been around acquisition, the cost of doing the acquisition of Courier, CompiBell, Gap, That is around a 10 million bill for the first half of one of that we have in our P&L. We have a successful effort to improve governance and strategy, which we have, of course, some costs around that. and infrastructure and IT. We are dual running of DCs, so we still have, and that is really protecting us from a big bond, so in UK, as you know, we have opened Darby, which is our new warehouse, completely automized for e-comm, but that is, still doing in Kinsway, we still are doing both in parallel, so we have the two costs. Same in Europe, we have Erlen, which is a warehouse in Netherlands. We are starting to implement all the automation and all that stuff. At the same moment, we are not using it, so we don't get the benefits, so we have the double running cost of that, and that is significant for the first half. On system, we have done a lot of investment, around 10 million pounds around security, because we wanted to make sure that we have the right level of security, so that's a 10 million investment in cyber security. We have the cost of our new HR platform program and our new digital program. So all that has been done at the same time that we have developed the business. If we look at PBT, I think that you see that it's down by 10 million. At the same moment, if you look at PBT before tax, it's plus 26%, reflecting the fact that we have less and negligible impact of adjusted item for the year. And you can see the dividend pressure. So this is a big... test for pronunciation for a French guy, so we move from 13 to 30, hopefully not the other way, but that's Pete trying to have this test for my pronunciation skills, so thank you for that. Trying to pass it. If you look in more details, and this is our premium sport fashion business, which is driving revenue growth. So this is the way we segment our activity. As you will see, premium sport fashion, which is mainly JD, represents 75% of our turnover, 85% of our profit, and all the growths in the first half. This is where we are investing, this is where we are focusing, and this is where the growth is coming and the profit is coming. You can see we are not far away from a double-digit profit. It's down year on year, reflecting the investment that we have done in terms of our cost, and at the same moment, the growth margin reduction. In other retail fascia, we see some organic growth, but the total growth is down because of the divestment of non-core business that we have done at the end of last year. Other business you can see that the same that include our gym business which is doing very well is going down in terms of sales because of the divestment but at the same moment profitability is going up thanks to the gym business. Our outdoor business has been flat in terms of sales reflecting a growth in terms of store sales and a decrease in terms of online sales And in the period, we have some small one-off costs that have been taken, which means that we are a little bit below last year, but should be okay for the full year. Now, if we focus on the premium revenue growth in all regions, which is the one that is the most important for us and which we focus. So what you can see is that all regions are growing and are growing at pace. And you can see the difference between the different regions. The same UK is doing well. And I think that for a mature country, we are delivering 8% growth and 5% like for like. You see Europe, in terms of EBIT, this reflects the investment that we have done because all the investment in infrastructure is through the UK P&L because the PLC is in the UK. That reflects the EBIT that is going down a little bit. Europe has been growing at 28%, 27% organic growth and 15% like for like. North America plus 15%, 9% like for like and APAC 26 plus 15. So you see a very nice picture for our growth and you see the opening of new stores in the region. In terms of cash, you see the comparison between last year and the first half. This is the first half-first half comparison. We generated around 200 million cash from the activity, up from 67 last year, and net cash strengthened by almost 300 million from 1 billion last year to 1.3 billion this year. And on CAPEX, you see that we are increasing our CAPEX. And I will go into more details around our CAPEX expenditure for the first half. So this is our first half expenditure of CAPEX for the last three years. So you see the increase of CAPEX, mainly around the store and infrastructure. But store has been taking 50% of our investment, which is in line with our guidance we give you during the CMD. So that's 50% of the CAPEX going through store. A third is going through supply chain with mainly Europe, which is the airline project, and North America, which is a warehouse that we are building on the West Coast. And system and other is the investment on cybersecurity and the investment in terms of our HR platform. So that was a quick run through our financial. There is an appendix too, which will be on the website by now, and which has a number of detailed financial slides to help you with the model.

Now, before we move to the strategy updates, there is a short video I wanted to share with you. Any boy try fi take my style right now Better bring it right back Got me look good in anything from the latest fashion Or throwbacks from a thrift shop You hear that? Because my style's so different You see my style's so different Yo, watch how my style's so different Anywhere me go, yo, I'm just straight killing it Because my style's so different You see my style's so different Money on my mind, all I hear is ching, ching, ching. Some boy can't afford one chicken wing. Roll with top class, girl, no basic ting. Confidence in myself from the words we sing. Yo, become a style done properly, because I must complement the physical anatomy. When you see me on the street every day looking fresh, well, I swear that the ting is a strategy. But it's just my style so different. You see my style so different. Yo, watch how my style so different. Anywhere me go, yo, I'm just straight killing it. Ha, become a style so different. You see my style so different.