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Profits shoot up at JD Sports

TIP UPDATE: A World Cup profits boost push JD Sports' shares to a record high
September 22, 2010

JD Sports saw its shares touch an all-time high, as the sports fashion retailer deliver results that, in the words of one analyst, "exceeded forecast at pretty much every level".

IC TIP: Buy at 827p

Pre-tax profits before exceptionals climbed 36.5 per cent to £19.4m, thanks in part to a World Cup boost for its sports fascias, which saw underlying sales climb 3.9 per cent and operating profits rise by £4m to £21.6m.

Its fashion chains, Scotts and Bank, saw underlying sales contract by 3.8 per cent, but a 300 basis point gross margin improvement helped reduce operating losses by £700,000 to £2m. That was the result of a higher proportion of its own brands in the sales mix, including the recently acquired Sonneti and Chilli Pepper labels. Since the period-end, trading in the fashion outlets has turned around sharply, with like-for-like sales up 7.1 per cent.

Tight control of working capital saw cash balances swell, and the group alluded to potential future overseas acquisitions, following the takeover of Chausport in France last year. Broker Investec Securities expects underlying pre-tax profits of £78m and EPS of 113p in the 12 months to January 2011 (from £67.4m and 96.7p in 2010).

JD SPORTS FASHION (JD/)

ORD PRICE:820pMARKET VALUE:£400m
TOUCH:815-825p12-MONTH HIGH:832pLOW: 445p
DIVIDEND YIELD:2.3%PE RATIO:8
NET ASSET VALUE:293p*NET CASH:£34.5m

Half-year to 31 JulTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
200932410.114.43.3
201038416.624.13.8
% change+18+64+68+15

Ex-div:1 Dec

Payment:7 Jan

*Includes intangible assets of £51.5m, or 106p a share

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