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21 Sep 2022
First Take: JD Sports Fashion - Agreement reached with Mr Cowgill
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First Take: JD Sports Fashion - Agreement reached with Mr Cowgill
JD Sports Fashion Plc (JD:LON) | 117 -4.2 (-3.0%) | Mkt Cap: 6,062m
- Published:
21 Sep 2022 -
Author:
Ben Hunt, CFA | Kate Calvert -
Pages:
4
Peter Cowgill’s services have been retained under an expected 3 year consultancy agreement
Ahead of its 1H results on Thursday, the company has announced details of the agreement it has reached with Peter Cowgill, former Chairman and CEO, post his recent departure. The company will honour his 12 month notice period post 25 May and, prior to 25 May, it has paid his salary and contractual benefits with an appropriate annual bonus on a pro-rata basis, subject to usual performance conditions.
Separately, Mr Cowgill will receive £3.5m over 2 years for a 2 year restrictive covenant which prevents him from working for a competitor and soliciting any of JD’s employees. In addition, a consultancy agreement for an expected 3 year period has been agreed for which Mr Cowgill will be paid £2m over the life of the agreement.
We welcome this agreement as it means that recently appointed Andy Higginson (Chair) and Regis Schultz (CEO) will have ongoing access to Mr Cowgill’s unparalleled knowledge and valuable experience gained from successfully building JD over the last 18 years into the company it is today.
1H23 results due this Thursday 23 September
As set out in our 1H23 Preview (published 5/9/2022), we are forecasting a 14% decline in 1H23 PBT to £379m (1H22 £451m), driven by a fall in US profits, which is partially offset by growth elsewhere. Management estimated that JD US benefitted last year from an exceptional one-off £100m EBIT as a result of the fiscal stimulus cheques. Focus will be on any comment on current trading, which we expect to be robust, and on FY23 guidance. Mid-July, management reiterated FY23 guidance of flat PBT YoY with FY22 PBT of £947m (INVe FY23E PBT £958m; Factset consensus £960m). This is at constant currency (c.$1.30) so the depreciation of sterling to current spot of $1.14 is likely to result in an addition translational FX benefit.
The shares trade on a very undemanding valuation (CY23E 9.7x) with a disconnect, in our view, between the valuation, the strength of its global proposition and the multitude of exciting long term growth opportunities available to the Group. The balance sheet is strong with forecast FY23E IAS17 net cash of c.£1.5bn available for acquisitions. Reiterate Buy