JD Sports Regulatory News (JD.)

4 May 2006 07:01

John David Group (The) PLC04 May 2006 4 May 2006 THE JOHN DAVID GROUP PLC PRELIMINARY RESULTS FOR THE 52 WEEKS ENDED 28 JANUARY 2006 The John David Group Plc (the "Group"), the specialist retailer of sports andfashion footwear and apparel, today announces its Preliminary Results for the 52weeks ended 28 January 2006. 2006 2005 £000 £000 (1) % Change Revenue 490,288 471,656 +4%Gross profit % 46.2% 45.6%Operating profit (before net financing costs andexceptional items) 20,121 17,098 +18%Operating profit after net financing costs(before exceptional items) 16,633 12,941 +29%Exceptional items (12,983) (9,339)Operating profit before net financing costs(after exceptional items) 7,138 7,759 -8%Profit before tax 3,650 3,602 +1%Basic earnings per ordinary share 4.92p 4.81p +2%Adjusted basic earnings per ordinary share (seenote 3) 25.32p 18.62p +36%Total dividend per ordinary share 6.90p 6.60p +5%Net debt at end of period (2) 13,247 30,767 -57% (1) As restated for IFRS. (2) Net debt consists of cash and cash equivalents together with interest bearing loans and borrowings, loan notes and finance lease and hire purchase contracts. Highlights • Total revenue increased by 4.0% in the year and by 0.3% on a like for like basis in the JD Sports Fascias. • Gross margin improved from 45.6% to 46.2% reflecting improved stock quality in the Fashion Fascias. • Net debt reduced by £17.6 million in the year and £37.8 million in two years, even after the purchase of Allsports for £15.0 million in the current year and RD Scott for £4.5 million in the previous year. • Exceptional items of £13.0m mainly as a result of continuing store portfolio rationalisation. Peter Cowgill, Executive Chairman, said: "The period was another year of encouraging progress for our core SportsFascias. As well as improving the operating profitability of the Group, we havereduced net debt by a further £17.6 million bringing total net debt to £13.2million, a two year fall of £37.8 million. "We remain convinced that the Allsports store portfolio which we have retainedwill generate a profit in the future. Overall the Board expects results tocontinue to improve, particularly in the second half, and trading remains inline with expectations." Enquiries: The John David Group Plc Tel: 0870 873 0333Peter Cowgill, Executive ChairmanBarry Bown, Chief ExecutiveBrian Small, Finance Director Hogarth Partnership Limited Tel: 020 7357 9477Andrew JaquesBarnaby FryCharlie Field EXECUTIVE CHAIRMAN'S STATEMENT INTRODUCTION The 52 week period to 28 January 2006 was another year of encouraging progressfor our core Sports Fascias. Our long term plans are to enhance operatingprofitability, eliminate underperforming stores, and to control overhead growthagainst a background of above inflationary increases in rents, rates, utilitiesand minimum wage rates. Our success against these objectives has enabled us toimprove our operating profit before exceptional items and after net financingcosts to £16.6 million (2005: £12.9 million). The Group operating profit before exceptional items and net financing costs forthe year of £20.1 million (2005: £17.1 million) includes a Sports Fascias profitof £22.6 million. The Sports Fascias profit includes the Allsports stores'results from 29 October 2005 when they were acquired from the Administrators ofAllsports Retail Limited. These stores have now become an integral part of theJD Sports store portfolio. The balance is a £2.5 million loss from the FashionFascias which now run with autonomous management, their own separate stock filesand fully identifiable overhead. The total Fashion Fascias store contributionimproved in the year as a result of a substantial improvement in margin afterthe high stock writedowns and clearance activity of the previous year. As well as improving the operating profitability of the Group we have againimproved its stock quality and year end stocks were only up by £1.6 million evenafter the Allsports acquisition. This has helped us to reduce net debt by afurther £17.6 million bringing down total net debt to £13.2 million, a two yearfall of £37.8 million despite the purchase of RD Scott Limited in December 2004for £4.5 million and the Allsports' business and assets in October 2005 for£15.0 million. SPORTS FASCIAS AND ALLSPORTS ACQUISITION The Sports Fascias continue to benefit from a differentiated sports fashion ledproduct positioning and a well designed own brand and licensed brandproposition. The results of the Sports Fascias are encouraging and theirimproved performance endorses the positioning and the operational strategy wehave been pursuing for the last two years. The appointment of Administrators at the heavily loss making Allsports chain inSeptember 2005 afforded us the chance to be a major player in the furtherconsolidation which is ongoing amongst sports retailers. Allsports operatednearly 270 generally small stores immediately before the appointment ofAdministrators but over 90 of the stores were closed very shortly after thatappointment. On 28 October 2005 we acquired most of the business assets ofAllsports and the right to occupy and trade from its premises under licence for£15.0 million. The acquired store portfolio enabled us to clear most of the excessive and poorquality stocks of Allsports in the financial period whilst further assessing thebusiness and its prospects store by store, initially with the incumbentmanagement team. Although our original intention was to operate the Allsportsstores under the Allsports name, we decided in January that this Fascia was nolonger of value as a trading format and that it was difficult to obtain asufficiently differentiated product offer to allow it to reclaim a profitablemarket position. Consequently its management team was made redundant and we nowoperate nearly 80 of the acquired stores as JD Sports stores with the remainderreverting to the Administrators. Nearly all the long term retained stores havebeen converted to the JD fascia in the first quarter of the new financial periodand the lease assignments for the long term store portfolio are progressingwell. Like for like sales figures for the Allsports chain will not become meaningfuluntil after next year when the impact of clearance activity drops out of thecomparatives. We remain convinced that the Allsports store portfolio we haveretained will generate a profit in the future as a result of the actions we havetaken. FASHION FASCIAS After the acquisition of RD Scott Limited in December 2004 we have endeavouredto concentrate on converting nearly all the Fashion stores to the Scotts fasciaand 8 ex Ath stores have been converted in the period to date. The businesssuffered in midyear from a shortage of stock as two separate stock files andwarehouses were integrated into one but these issues have been resolved. The like for like sales performance of the business has remained disappointing.However the performance of the acquired and converted Scotts stores has beenbetter than that of the old JD Fashion Fascias. Overall, the results are belowour expectations and the Fashion Fascias will only provide profit to thebusiness if some of the larger rented and over rented ex JD Fashion Fasciastores can be disposed of. GROUP PERFORMANCE Revenue and gross margin Total revenue increased by 4.0% in the year (2006: £490.3 million; 2005: £471.7million) and by 0.3% on a like for like basis in the Sports Fascias (Allsportsstores excluded as they were deployed for stock clearance only in the period).The Fashion Fascias fell back by 8.5% on a like for like basis, being split-2.0% in the ex Scotts stores and -13.4% in the JD Fashion Fascia stores wherethe prior year revenue performance benefited from stock clearance activity. We are committed to improving like for like sales and gross margin in thelong-term in order to compensate for increases in costs, particularly propertycosts. Gross margin increased in the year from 45.6% to 46.2% helped by areduction in writedowns and clearance activity in the Fashion division. Debt reduction and working capital Net debt was reduced from £30.8 million to £13.2 million in the year bringinggearing down from 57% to 24%. This brings total debt reduction in the last two years to £37.8 million, a 74%reduction. Inventories have increased only nominally in spite of the acquisitionof Allsports. Trade creditors continue to be paid to terms to maximisesettlement discounts. Overheads Non-store overheads are constantly being reviewed and managed downwards whereverit is possible without damaging the business although the retail sectorcontinues to suffer above average increases in costs such as rents, rates,utility costs and the minimum wage. In spite of these pressures, the selling anddistribution overhead ratio was very marginally improved and the biggest gainswe can achieve in further improving the ratios will be through increasing salesand the continuing disposal of lossmaking and underperforming stores.Administration overheads have increased reflecting both the full year impact ofScotts and the part year impact of Allsports. This ratio will improve as aresult of the elimination of most of Allsports' central administration costs inJanuary 2006. Operating profits and results Operating profit before net financing costs and exceptional items increased by£3.0 million from £17.1 million to £20.1 million, representing an 18% increaseon last year. Our Group operating profit margin (before net financing costs andexceptional items) has therefore increased from 3.6% to 4.1%. As a result of increased exceptional items of £13.0 million (2005: £9.3million), operating profit after exceptional items but before net financingcosts fell slightly from £7.8 million to £7.1 million. The exceptional items comprise: £m Onerous lease and lease variation costs 8.7Allsports restructuring 1.8Store impairments 3.2Profit on disposal of fixed assets (0.7) ----------- Total 13.0 ----------- The onerous lease costs relate to the return of properties from recently failedassignments, originally completed in 2002 and 2003, to Pilot and Eisenegger(£3.2 million), vacant stores (£0.8 million), over rented stores (£3.0 million),and the cost of varying an onerous lease to create a break option (£1.7million). The Allsports restructuring costs are principally redundancy and store andwarehouse closure related costs. The impairment charge is on a further 25 underperforming stores and half of thecharge relates to the Fashion division. Nearly all of these stores have beenearmarked for disposal. Net financing costs of £3.5 million are £0.7 million down on the prior year as aresult of reduced debt levels. STORE PORTFOLIO The Group store portfolio has had too many underperforming stores and propertyissues ever since First Sport was acquired in 2002. After my appointment asExecutive Chairman in March 2004, I significantly accelerated the store disposalprogramme and there have been significant exceptional charges again this year asa result of our continuing drive to rationalise the store portfolio. Thisprocess will continue for at least a further year. The future cost of this process is extremely difficult to estimate. Somedisposals are achieving premiums which to date have resulted in the net cashcost of disposals not being substantial. The property market is now moredifficult than it was two years ago, not helped by a spate of retail failures.We have suffered from those failures this year with the return of assignedproperty from Eisenegger and Pilot. Overall though, the disposal programmecontinues to provide an improving store portfolio from which to increaseprofitability. During the year store numbers changed as follows: Sport excluding Allsports: At 30 January 2005 299New stores 5Conversions from Fashion 2Size concessions in Open 2Disposals (18) ----------At 28 January 2006 290 ---------- Fashion: At 30 January 2005 53Conversions to Sport (2)Shop within JD Leicester 1Disposals (6) ----------At 28 January 2006 46 ---------- DIVIDENDS AND EARNINGS PER ORDINARY SHARE The Board proposes paying a final dividend of 4.60p (2005: 4.40p) per ordinaryshare bringing the total dividend paid for the year to 6.90p (2005: 6.60p) perordinary share. The proposed final dividend will be paid on 31 July 2006 to allshareholders on the register at 12 May 2005. The adjusted earnings per ordinary share before exceptional items is 25.32p(2005: 18.62p). The basic earnings per ordinary share was 4.92p (2005: 4.81p). CURRENT TRADING AND OUTLOOK Trading since the year end has been satisfactory with like for like sales in theJD Sports Fascia stores up 2.1% to 29 April 2006. The Fashion Fascias like forlike sales for the same thirteen week period are -5.2% and trading continues tobe held back by the ex JD Fashion Fascia stores. Fashion sales presentlyrepresent less than 8% of Group sales. Overall the Board expects results tocontinue to improve, particularly in the second half, and trading remains inline with our expectations. EMPLOYEES The Group's employees are an essential part of the Group's success and wecontinue to invest in training to improve our customer service and operations.The Board appreciates their hard work and commitment and thanks them for it. Peter CowgillExecutive Chairman4 May 2006 CONSOLIDATED INCOME STATEMENT for the 52 weeks ended 28 January 2006 52 weeks to 52 weeks to January 2006 29 January 2005 Continuing Continuing Operations Operations Note £000 £000 Revenue 490,288 471,656Cost of sales (263,608) (256,504) ------------- ------------- Gross profit 226,680 215,152Selling and distribution expenses -normal (192,730) (186,230)Selling and distribution expenses -exceptional (11,206) (8,603)Administrative expenses - normal (15,438) (12,777)Administrative expenses - exceptional (1,777) (736)Other operating income 1,609 953 ------------- ------------- Operating profit before financing 7,138 7,759 Before exceptional items 20,121 17,098Exceptional items 2 (12,983) (9,339) Operating profit before financing 7,138 7,759Financial income 230 304Financial expenses (3,718) (4,461) ------------- -------------Profit before tax 3,650 3,602Income tax expense (1,302) (1,341) ------------- -------------Profit for the period 2,348 2,261 ============= =============Basic earnings per ordinary share 3 4.92p 4.81p ------------- -------------Diluted earnings per ordinary share 3 4.92p 4.81p ============= ============= The Group has no recognised gains or losses other than the results reportedabove. The results above also represent the historic cost profit. CONSOLIDATED BALANCE SHEETas at 28 January 2006 As at As at 28 January 2006 29 January 2005 £000 £000AssetsIntangible assets 21,767 19,130Property, plant and equipment 49,200 54,074Other receivables 2,515 2,715 ------------- -------------Total non-current assets 73,482 75,919 ------------- ------------- Inventories 55,450 53,857Income tax receivable 1,736 -Trade and other receivables 12,039 11,707Cash and cash equivalents 9,336 6,531 ------------- -------------Total current assets 78,561 72,095 ------------- -------------Total assets 152,043 148,014 ============= =============LiabilitiesInterest bearing loans and borrowings (12,178) (11,212)Trade and other payables (56,346) (43,629)Provisions (2,569) (674)Income tax liabilities - (1,417) ------------- -------------Total current liabilities (71,093) (56,932) ------------- -------------Interest bearing loans and borrowings (10,405) (26,086)Other payables (9,299) (10,266)Provisions (4,988) (940)Deferred tax liabilities (1,665) (190) ------------- -------------Total non-current liabilities (26,357) (37,482) ------------- -------------Total liabilities (97,450) (94,414) ============= ============= Total assets less total liabilities 54,593 53,600 ============= =============Capital and reservesIssued ordinary share capital 2,413 2,364Share premium 10,823 9,042Retained earnings 41,357 42,194 ------------- -------------Total equity attributable to equityshareholders 54,593 53,600 ============= ============= RECONCILIATION OF MOVEMENT IN CAPITAL AND RESERVESas at 28 January 2006 Issued Ordinary Share Share Retained Total Capital Premium Earnings Equity £000 £000 £000 £000 Balance at 1 February 2004 2,338 8,917 41,749 53,004Issue of ordinary sharecapital 26 120 - 146Total recognised income and expense - - 2,261 2,261Dividends - - (1,816) (1,816)Scrip dividend adjustment - 5 - 5 -------- -------- -------- --------Balance at 29 January 2005 2,364 9,042 42,194 53,600 Issue of ordinary sharecapital 37 1,160 - 1,197Total recognised income and expense - - 2,348 2,348Dividends - - (3,185) (3,185)Irrevocable dividendwaiver 12 621 - 633 -------- -------- -------- --------Balance at 28 January 2006 2,413 10,823 41,357 54,593 ======== ======== ======== ======== CONSOLIDATED STATEMENT OF CASH FLOWSfor the 52 weeks ended 28 January 2006 52 weeks to 52 weeks to 28 January 29 January 2006 2005 £000 £000Cash flows from operating activitiesProfit for the period 2,348 2,261Income tax expense 1,302 1,341Financial expenses 3,718 4,461Financial income (230) (304)Depreciation of property, plant andequipment 10,236 10,823Impairment of property, plant and equipment 3,172 6,301Amortisation of non-current otherreceivables 396 288Impairment of non-current other receivables 34 400(Profit)/loss on disposal of non-currentassets (676) 616Decrease in inventories 10,585 14,674Decrease in trade and other receivables 1,169 2,360Increase/(decrease) in trade and otherpayables and provisions 13,895 (6,002)Interest paid (3,718) (4,461)Income taxes (paid)/received (2,841) 244 --------- ---------Net cash from operating activities 39,390 33,002 --------- ---------Cash flows from investing activitiesInterest received 230 304Proceeds from sale of non-current assets 1,782 2,910Disposal costs of non-current assets (683) (1,885)Acquisition of property, plant and equipment (6,566) (5,803)Acquisition of non-current other receivables (261) (368)Cash consideration of acquisitions (15,020) (4,183)Net cash / (overdrawn) balances acquired onacquisitions 3 (420) --------- ---------Net cash used in investing activities (20,515) (9,445) Cash flows from financing activitiesProceeds from issue of ordinary sharecapital 1,197 146Repayment of interest bearing loans andborrowings (12,500) (21,500)Payment of finance lease and hire purchasecontracts (415) (170)Dividends paid (2,552) (1,816) --------- ---------Net cash used in financing activities (14,270) (23,340)Net increase in cash and cash equivalents 4,605 217 --------- --------- ANALYSIS OF NET DEBTfor the 52 weeks ended 28 January 2006 At 29 Other At 28 January non cash January 2005 Cashflow changes 2006 £000 £000 £000 £000Cash at bankand in hand 6,531 2,805 - 9,336Overdraft (1,800) 1,800 - - --------- --------- --------- --------- Cash and cashequivalents 4,731 4,605 - 9,336 Interest bearing loans andborrowingsCurrent (9,000) 3,000 (6,000) (12,000)Non-current (25,500) 9,500 6,000 (10,000) Loan notes (287) - - (287)Finance lease and hirepurchase contracts (711) 415 - (296) --------- --------- --------- --------- (30,767) 17,520 - (13,247) ========= ========= ========= ========= 1. SEGMENTAL ANALYSIS The Group manages its business activities through two Divisions - Sport andFashion. Each Division has its own executive board responsible for managing dayto day operations through its trading outlets. Revenue and costs are readilyidentifiable for each segment, for the 52 weeks ended 28 January 2006. The Divisional results for the 52 weeks to 28 January 2006 are as follows: INCOME STATEMENT Sport Fashion Unallocated Total £000 £000 £000 £000 Revenue 448,884 41,404 - 490,288 ====== ====== ====== ======Operating profit/(loss) beforefinancing and exceptional items 22,659 (2,538) - 20,121Exceptional items (8,716) (4,267) - (12,983)Financial income - - 230 230Financial expenses - - (3,718) (3,718) ====== ====== ====== ======Profit/(loss) before tax 13,943 (6,805) (3,488) 3,650 ====== ====== ====== ====== The Board consider that net funding costs are cross-divisional in nature and cannotbe allocated between the Divisions in a meaningful way. BALANCE SHEET Sport Fashion Unallocated Total £000 £000 £000 £000 Total assets 113,204 15,336 23,503 152,043 ====== ====== ====== ======Total liabilities (54,295) (19,490) (23,665) (97,450) ====== ====== ====== ====== Unallocated assets and liabilities relate to items which are cross-divisionalincluding tax, goodwill and net debt. OTHER SEGMENT Sport Fashion Unallocated TotalINFORMATION £000 £000 £000 £000 Capital expenditure:Property, plant andequipment 4,786 1,780 - 6,566Non-current otherreceivables 192 69 - 261Goodwill onacquisition - - 2,174 2,174Fair value adjustmentto goodwill - - 463 463 Depreciation, amortisation andimpairments:Depreciation 9,121 1,115 - 10,236Amortisation ofnon-current otherreceivables 363 33 - 396Impairments ofproperty, plant andequipment 1,605 1,567 - 3,172Impairments ofnon-current otherreceivables 23 11 - 34 Following the acquisition of RD Scott Limited on 15 December 2004, the FashionDivision has been managed by the management team of that company. Prior to thatit shared its facilities and management with the Sports Fascias. Consequently nomeaningful comparatives are available. The financial operation and assets of the Group are principally located in theUnited Kingdom. Accordingly, no geographical analysis is presented. 2. EXCEPTIONAL ITEMS 52 weeks to 52 weeks to 28 January 2006 29 January 2005 £000 £000 (Profit)/loss on disposal of non-currentassets (676) 616Provision for rentals on onerous propertyleases 6,954 1,286Impairment of property, plant andequipment 3,172 6,301Impairment of non-current otherreceivables 34 400Lease variation costs 1,722 -Allsports restructuring costs 1,777 -Redundancy costs - 440Bank reorganisation costs - 296 -------- -------- 12,983 9,339 ======== ======== Non-current other receivables comprises legal fees and other costs associatedwith the acquisition of leasehold interests. 3. EARNINGS PER ORDINARY SHARE Basic earnings per ordinary share The calculation of basic earnings per ordinary share at 28 January 2006 is basedon the profit attributable to ordinary shareholders of £2,348,000 (2005:£2,261,000) and a weighted average number of ordinary shares outstanding duringthe 52 weeks ended 28 January 2006 of 47,721,276 (2005: 46,978,013), calculatedas follows: 52 weeks to 52 weeks to 28 January 2006 29 January 2005 Issued ordinary shares at beginning ofperiod 47,276,628 46,748,607Effect of shares issued during the period 444,648 229,406 ---------- ----------Weighted average number of ordinary sharesduring the period 47,721,276 46,978,013 ========== ========== Diluted earnings per ordinary share The calculation of diluted earnings per ordinary share at 28 January 2006 isbased on the profit attributable to ordinary shareholders of £2,348,000 (2005:£2,261,000) and a weighted average number of ordinary shares outstanding duringthe 52 weeks ended 28 January 2006 of 47,721,276 (2005: 46,981,420), calculatedas follows: 52 weeks to 52 weeks to 28 January 2006 29 January 2005 Weighted average number of ordinary sharesduring the period 47,721,276 46,978,013Dilutive effect of outstanding shareoptions - 3,407 ---------- ----------Weighted average number of ordinary shares(diluted) during the period 47,721,276 46,981,420 ========== ========== Adjusted basic earnings per ordinary share Adjusted basic earnings per ordinary share has been based on the profitattributable to ordinary shareholders for each financial period but excludingthe post tax effect of exceptional items. The directors consider that this givesa more meaningful measure of the underlying performance of the Group. 52 weeks to 52 weeks to 28 January 2006 29 January 2005 Note £000 £000 Profit attributable to ordinaryshareholders 2,348 2,261Exceptional items excluding(profit)/loss on disposal ofnon-current assets 2 13,659 8,723Tax relating to exceptional items (3,925) (2,235) ---------- ----------Profit attributable to ordinaryshareholders excluding exceptionalitems 12,082 8,749 ---------- ----------Adjusted basic earnings per ordinaryshare 25.32p 18.62p ========== ========== 4. ACCOUNTS These figures are abridged versions of the Group's full accounts for the 52weeks ended 28 January 2006 and do not constitute the Group's statutory accountswithin the meaning of Section 240 of the Companies Act 1985. The Group'sauditors have audited the statutory accounts for the Group and have issued anunqualified audit opinion thereon within the meaning of Section 235 of theCompanies Act 1985 and have not made any statement under Section 237 (2) or (3)of the Companies Act 1985 for the 52 weeks ended 28 January 2006. The comparative figures for the 52 weeks ended 29 January 2005 do not constitutethe Group's consolidated financial statements for that financial period. Thoseaccounts, which were prepared under UK GAAP, have been reported on by theGroup's auditors and delivered to the Registrar of Companies. The report of theauditors was unqualified and did not contain statements under Section 237(2) or(3) of the Companies Act 1985. These accounts were delivered to the Registrar ofCompanies following the Annual General Meeting. Copies of full accounts will be sent to shareholders in due course. Additionalcopies will be available from The John David Group Plc, Hollinsbrook Way,Pilsworth, Bury, Lancashire, BL9 8RR. This information is provided by RNS The company news service from the London Stock Exchange