ANNUAL REPORT EXAMINATION AND KCQ’s

EXAMINATION OF ANNUAL REPORTS

Skimming through the three Annual reports, the first thing that caught my eye was that each report began with a Chairman’s statement highlighting the opportunities, challenges, milestones and so forth of the reported year. The basic structure of the reports was divided up into sections consisting of a Strategic Report, Governance, Financial Statements and final Group Information. This layout made it easier for me to understand and extract necessary information out of each report enabling me to fluidly flow through my research into each report. I found the reports to be fairly graphical and visually representative with numerous images, colours and graphs to keep me engaged.

To ensure that I would understand the terminology when reading the report I skimmed down to the glossary to explore any terms that I may have been unfamiliar with. This is where I came across the term, EBITDA, which stands for Earnings before exceptional items, interest, tax, depreciation and amortisation. Never having come across this term, all I could think of was ‘what the hell?’. Is this a special accounting term? Will I continue to come across it further in the unit? I then chose to partake in some thorough research to make sure that I had my head wrapped around the term and what its all about.

The report then included a basic timeline of major events that had occurred over the past 30 years. This gave me a basic idea of how far the company had come. I found that in 2005 57.5% of the JD Sports group had been bought the Petland Group. Who are they? What did this mean for the company? How then was the revenue and earning distributed? I then moved on to see that in 2017, JD Sportswear opened their first ever Melbourne store.

The first piece of information I noticed in the 2019 report was a table showing a basic record of the revenue earnt over the past 4 years. I could quickly see the huge rise in revenue each year hinting promising signs of how successful the JD Sports has become. In just four years, the revenue had increased from 1522.3m in 2015 to 4717.8m in 2019. According to the 2019 report, the headline profit has had a compound rise in a whopping excess of 37% per annum over the last 4 years. Is this increase expected for a company as big as JD Sports? How does it compare to similar companies around the world? The report then when on to state that the total revenue had increased from £3,161.4 million in 2018 to £4,717.8 million in 2019. This shocked me. How can a company’s total revenue increase by almost 50% in just one year? Could it be due to online accessibility? Or just through opening new stores? Regardless, this incredible margin clearly proves how successful the firm has been over the year and hopefully gives insight to what is to come.

As expected, I soon came across the term EBITDA, with the firms increasing by a further 26.8% from £385.2 million in 2018 to £488.4 million in 2019. The increase in EBITDA suggests that the company has had a significant year in terms of sales with the EBITDA expanding by over £1 million. This got me thinking into what aspect of the business has caused this incredible upsurge? Is it one thing in particular or just the general organisation of the company? This is definitely something I’d like to look into when completing this assignment.

A part of the report that came to my attention was the segment which highlighted JD Sports involvement in charitable funding. In 2018, JD Sportswear supported 13 principal charities, raising an exceptional £2.5m with 92% of funds received donated to charity. I’m extremely impressed with the efforts of the company and wonder what drove them to implement this scheme? What affect did it have on their yearly report? Did it help or hinder their total income for the year?

As I finished reading the report, I came across a few terms and concepts that I didn’t quite fully grasp. Concepts such as ‘headline profits’, ‘dividends’ and ‘earnings per share’, are definitely things I hope to look into as the remainder of the assignment progresses. I’m hoping Step 4 will enlighten me with the necessary procedures needed for general accounting.