JD Sports Regulatory News (JD.)

5 Oct 2005 07:00

John David Group (The) PLC05 October 2005 5 October 2005 THE JOHN DAVID GROUP PLC INTERIM RESULTS FOR THE TWENTY SIX WEEKS TO 30 JULY 2005 The John David Group Plc (the "Company" or the "Group"), a leading specialistretailer of fashionable branded and own brand sports and leisure wear, todayannounces its interim results for the twenty six weeks ended 30 July 2005. • Turnover was slightly down at £209.6 million (2004: £212.1 million) after a 2.5% fall in average retail square footage. • Group like for like sales declined 0.6%. • Gross margin improved to 46.6% (2004: 46.0%). • Group operating profit (before exceptionals and net financing costs) increased to £2.8 million (2004: £1.8 million). • Net exceptional costs of £3.7 million incurred (2004: £5.9 million), primarily relating to onerous lease costs and store impairment provisions. • Operating loss before financing costs and tax was reduced to £0.9 million (2004: £4.1 million). • Interim dividend of 2.30p per ordinary share (2004: 2.20p). • Inventories reduced by £16.6 million, demonstrating continued success in eliminating out of season lines. • Net debt reduced by £22.1 million, lowering gearing from 93% to 46%. Peter Cowgill, Executive Chairman, said: "Our results for the twenty six weeks ended 30 July 2005, reported here for thefirst time in accordance with International Financial Reporting Standards, showfurther progress being made in our first half trading performance as well as inour programmes to rationalise the store portfolio and reduce debt. However, thecurrent trading environment is tough and conditions have worsened since our AGMtrading statement in July. It is therefore important that we experience bettertrading going forward and particularly over the crucial Christmas period. We arecontinuing to cut costs and drive sales wherever possible without moving awayfrom our basic proposition as the market's leading retailer of style drivenbranded sportswear. "The future success of the Group is still critically dependent on the SportsFascias and we have laid the foundations for a significant improvement in futureoperating margins with the rationalisation of the store portfolio and theelimination of substantial quantities of out of season stock." 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 JaquesEdward Westropp Introduction Our results for the twenty six weeks ended 30 July 2005, reported here for thefirst time in accordance with International Financial Reporting Standards("IFRS"), show further progress being made in our first half trading performanceas well as in our programmes to rationalise the store portfolio and reduce debt.However, the current trading environment is tough and conditions have worsenedsince our AGM trading statement in July. It is therefore important that weexperience better trading going forward and particularly over the crucialChristmas period. We are continuing to cut costs and drive sales whereverpossible without moving away from our basic proposition as the market's leadingretailer of style driven branded sportswear. IFRS The results presented in this announcement have been prepared under IFRS for thefirst time. Prior period figures have been restated in accordance with anannouncement being released simultaneously today. Group Results Operating profit before exceptional items and net financing costs was £2.8million (2004: £1.8 million) and after financing was £1.1 million (2004: loss of£0.3 million). Like for like sales declined 0.6% (Sport Fascias -0.2%; Fashion Fascias -5.3%)for the twenty six weeks ended 30 July 2005 and average retail square footagefell by 2.5% against the comparable period. Total sales for the twenty six weeks ended 30 July 2005 were £209.6 millioncompared with £212.1 million for the six months ended 31 July 2004, a fall of1.2%. Gross margin has improved in both Fascias and was 46.6% overall (2004: 46.0%).This is a creditable performance as we have continued to make considerableefforts to cleanse inventories. Net exceptional costs of £3.7 million (2004: £5.9 million) were incurred in theperiod, comprising store impairment provisions of £1.1 million (2004: £3.0million), and onerous lease provisions and store disposal costs of £2.6 million(2004: £2.2 million). The 2004 exceptional costs also included a further £0.7million, principally for staff termination costs. This year's onerous leasecharge relates to stores previously assigned to failed retailers for which rentresponsibility has returned to JD under privity of contract following the demiseof those retail chains. After charging exceptional costs, the operating loss before financing and taxwas reduced to £0.9 million (2004: £4.1 million). Net financing costs were alsoreduced to £1.7 million (2004: £2.1 million) reflecting both a reduction inaverage debt and in bank margin. Loss before tax was reduced to £2.6 million and after tax to £1.6 million (2004:£6.2 million and £3.5 million respectively). The basic and diluted earnings per ordinary share were minus 3.29p (2004: minus7.47p). The adjusted basic earnings per ordinary share were 2.49p (2004: minus0.04p). Balance Sheet and Financial Resources Total expenditure on property, plant and equipment during the period was £3.3million (2004: £3.2 million). Inventories were reduced by £16.6 million from its level a year previously to£55.5 million, and were only £1.6 million higher than the £53.9 million at 31January 2005, demonstrating continued success in eliminating out of seasonlines. Net debt was reduced by £22.1 million from £45.4 million at 31 July 2004 to£23.3 million bringing gearing down in the same period from 93% to 46%. Store Portfolio and Property The store portfolio changed as follows in the twenty six weeks reported on: Sports: Store nos. Sq Ft '000s At start of year 299 1,042New stores 1 6Store closures (9) (19)Transfers/ stores within stores 4 10 Total 295 1,039 Fashion: Store nos. Sq Ft '000s At start of year 53 164New stores 0 0Store closures (4) (9)Transfers/ stores within stores (1) (7) Total 48 148 Group: Store nos. Sq Ft '000s At start of year 352 1,206New stores 1 6Store closures (13) (28)Transfers/ stores within stores 3 3 Total 343 1,187 The only new store opened in the period was Maidstone in July. A further storewas opened in Norwich in September. Both are JD Sports stores. Maximising performance from our current property portfolio including eliminationof underperforming stores remains a priority. Thirteen stores were closed in theperiod and a further four have been closed since 30 July 2005. Current Trading and Outlook Trading in both the Sports and Fashion Fascias has been disappointing in mostrecent weeks. Even with our differentiated and significantly exclusive productoffer, increasing competition and overcapacity in sportswear retail channels hasmeant that we have not been immune to the current downturn in consumer spendingand footfall. We referred to the impact of the London bombings on Central Londontrade in our AGM statement in July and that impact was exacerbated by thesubsequent further attempted bombings on the day of that announcement. Londontrade has seen significant double digit declines year on year since that time.The negative impacts on trade in August and the first three weeks of Septemberalso included some late deliveries on key lines and a delay in momentum buildingon the sale of Autumn ranges against last year. Like for like sales for the nineweek period from 31 July to 1 October have been -7.6% (Sports -6.8%; Fashion-17.3%). The Group like for like sales performance for the thirty five weeks to1 October is -2.5% (Sports -2.0%; Fashion -8.2%). On the positive side, we are heartened that last week was a significantly betterweek being positive in both Sports and Fashion Fascias for the first time sinceMay. It is important that we now experience a sustained period of better tradinggoing forward and particularly over the crucial Christmas period. The Fashion business still represents less than 10% of sales and is now managedautonomously with separate systems from a head office in Congleton and awarehouse in Middlewich. The reorganisation was satisfactorily completed in Junethough initially the amalgamation of two stock files both physically and insystem terms left us significantly short of stock in July and August. A new lookScotts store was opened in Hull (in an old AV store) in September and this storehas traded well. Further conversions are already underway in Bradford andBluewater, and brand support is still increasing. Gross margin and operatingcosts performance are satisfactory but ultimately increases in sales per squarefoot are required to drive the business forward. The future success of the Group is still critically dependent on the SportsFascias. We have laid the foundations for a significant improvement in futureoperating margins with the rationalisation of the store portfolio and theelimination of substantial quantities of out of season stock lines. What we nowneed is a return in consumer confidence and footfall. Above average inflationarycost pressure makes earnings growth difficult without like for like salesgrowth. We continue to look at all overhead savings opportunities but we arealso looking more at new merchandising, customer service and footfall conversiontracking initiatives to ensure we capitalise on our differentiated style ledfashion product offer. We are also continuing to pursue opportunities toincrease returns from our larger space stores. Dividend The Board has considered both the improved first half trading performance andcurrent trading conditions and has decided to propose an increased interimdividend of 2.30p per ordinary share (2004: 2.20p). It is intended that allshareholders will be offered a scrip dividend alternative to this dividend in aseparate circular to shareholders. The dividend will be paid on 13 January 2006to shareholders on the register as at close of business on 9 December 2005. Peter CowgillExecutive Chairman5 October 2005 CONSOLIDATED INCOME STATEMENTFor the 26 weeks ended 30 July 2005 Unaudited Unaudited Unaudited 26 weeks ended 6 months ended 52 weeks ended 30 July 31 July 29 January 2005 2004 2005 Note £000 £000 £000 REVENUE 209,608 212,079 471,656Cost of sales (111,935) (114,530) (256,504) _______ _______ _______GROSS PROFIT 97,673 97,549 215,152 Net operating expenses (98,608) (101,652) (207,393) _______ _______ _______OPERATING (LOSS)/PROFIT (935) (4,103) 7,759BEFORE FINANCING Before exceptional items 2,799 1,853 17,098 Exceptional items 2 (3,734) (5,956) (9,339) OPERATING (LOSS) / PROFIT (935) (4,103) 7,759BEFORE FINANCING _______ _______ _______Financial income 156 170 304Financial expenses (1,814) (2,285) (4,461) _______ _______ _______(LOSS)/PROFIT BEFORE TAX (2,593) (6,218) 3,602 Income tax credit/(expense) 3 1,037 2,727 (1,341) _______ _______ _______(LOSS)/PROFIT FOR THE (1,556) (3,491) 2,261PERIOD _______ _______ _______ Earnings per ordinary share: - Basic 4 (3.29p) (7.47p) 4.81p- Diluted 4 (3.29p) (7.47p) 4.81p GROUP STATEMENT OF RECOGNISED INCOME AND EXPENSEFor the 26 weeks ended 30 July 2005 The Group has no recognised gains or losses during the current or previousperiod other than the results reported above. CONSOLIDATED BALANCE SHEETAs at 30 July 2005 Unaudited Unaudited Unaudited As at As at As at 30 July 31 July 29 January 2005 2004 2005 Note £000 £000 £000 ASSETSIntangible assets 19,732 14,976 19,130Property, plant and equipment 50,170 58,438 54,074Other receivables 2,545 3,231 2,715 _______ _______ _______TOTAL NON-CURRENT ASSETS 72,447 76,645 75,919 _______ _______ _______ Inventories 55,499 72,113 53,857Income tax receivable 3,207 3,561 -Trade and other receivables 11,010 10,623 11,707Cash and cash equivalents 8,355 24,583 6,531 _______ _______ _______TOTAL CURRENT ASSETS 78,071 110,880 72,095 _______ _______ _______TOTAL ASSETS 150,518 187,525 148,014 _______ _______ _______LIABILITIESBank overdraft (939) - (1,800)Interest-bearing loans and (10,000) (8,000) (9,000)borrowingsTrade and other payables (51,804) (54,657) (44,041)Provisions (1,504) (845) (674)Income tax liabilities - - (1,417) _______ _______ _______TOTAL CURRENT LIABILITIES (64,247) (63,502) (56,932) _______ _______ _______Interest-bearing loans and (20,000) (62,000) (25,500)borrowingsOther payables (10,369) (11,196) (10,852)Provisions (2,434) (167) (940)Deferred tax liabilities (2,335) (1,929) (190) _______ _______ _______TOTAL NON-CURRENT LIABILITIES (35,138) (75,292) (37,482) _______ _______ _______TOTAL LIABILITIES (99,385) (138,794) (94,414) _______ _______ _______TOTAL ASSETS LESS TOTAL LIABILITIES 51,133 48,731 53,600 _______ _______ _______EQUITYIssued ordinary share capital 5 2,400 2,338 2,364Share premium 5 10,173 8,917 9,042Retained earnings 5 38,560 37,476 42,194 _______ _______ _______TOTAL EQUITY ATTRIBUTABLE TO EQUITY 51,133 48,731 53,600SHAREHOLDERS _______ _______ _______ CONSOLIDATED STATEMENT OF CASH FLOWSFor the 26 weeks ended 30 July 2005 Unaudited Unaudited Unaudited 26 weeks 6 months 52 weeks ended ended ended 30 July 31 July 29 January 2005 2004 2005 Note £000 £000 £000 CASH FLOWS FROM OPERATINGACTIVITIES(Loss)/profit for the period (1,556) (3,491) 2,261Income tax (credit)/expense (1,037) (2,727) 1,341Financial expenses 1,814 2,285 4,461Financial income (156) (170) (304)Depreciation 4,817 5,183 11,111(Profit) / loss on disposal of (84) 1,239 616property, plant and equipmentImpairment of property, plant and 1,097 2,976 6,701equipment(Increase)/decrease in (1,642) (6,386) 14,674inventoriesDecrease in trade and other 697 2,878 2,360receivablesIncrease/(decrease) in trade, 7,953 7,645 (6,002)other payables and provisionsInterest paid (1,814) (2,285) (4,461)Income tax (paid)/received (1,441) 1,074 244 _______ _______ _______NET CASH FROM OPERATING 8,648 8,221 33,002ACTIVITIES _______ _______ _______CASH FLOWS FROM INVESTINGACTIVITIESInterest received 156 170 304Proceeds from sale of property, 774 493 2,910plant and equipmentAcquisition of property, plant (3,327) (3,235) (8,056)and equipmentCash consideration on acquisition - - (4,183)of subsidiaryNet overdrawn balances acquired - - (420)on acquisition of subsidiary _______ _______ _______NET CASH USED IN INVESTING (2,397) (2,572) (9,445)ACTIVITIES _______ _______ _______CASH FLOWS FROM FINANCINGACTIVITIESProceeds from issue of ordinary 1,167 - 146share capital(Repayment)/drawdown of (4,500) 14,000 (21,500)borrowingsPayment of finance lease (233) - (170)liabilitiesDividends paid - - (1,816) _______ _______ _______NET CASH (USED)/RECEIVED FROM (3,566) 14,000 (23,340)FINANCING ACTIVITIES _______ _______ _______ NET INCREASE IN CASH AND CASH 7 2,685 19,649 217EQUIVALENTS 1. BASIS OF PREPARATION European Union ("EU") law (IAS Regulation EC 1606/2002) requires that the nextannual consolidated financial statements of The John David Group Plc ("TheGroup"), those covering the 52 weeks ending 28 January 2006, are prepared inaccordance with International Financial Reporting Standards ("IFRS") adopted foruse in the E.U.. The Group has adopted IFRS with effect from 30 January 2005. The transition dateis 1 February 2004, being the start date of the earliest period for which fullcomparative information in the 2006 Annual Report and Accounts will bepresented. This interim financial information has been prepared on the basis of therecognition and measurement requirements of IFRS in issue that either areendorsed by the EU and effective (or available for early adoption) at 28 January2006 or are expected to be endorsed and effective (or available for earlyadoption) at 28 January 2006, the Group's first annual reporting date at whichit is required to use endorsed IFRS. Based on these endorsed IFRS, the directorshave made assumptions about the accounting policies expected to be applied whenthe first annual IFRS financial statements are prepared for the 52 weeks ending28 January 2006. Furthermore, the adopted IFRS that will be effective (or available for earlyadoption) in the annual financial statements for the 52 weeks ending 28 January2006 are still subject to change and to additional interpretations and thereforecannot be determined with certainty. Accordingly, the accounting policies forthat annual period will be determined finally only when the annual financialstatements are prepared for the 52 weeks ending 28 January 2006. The comparative figures for the 52 weeks ended 29 January 2005 do not constitutethe Group's statutory accounts for that financial period. Those accounts, whichwere prepared under UK GAAP, have been reported on by the Group's auditors anddelivered to the Registrar of Companies. The report of the auditors wasunqualified and did not contain statements under section 237(2) or (3) of theCompanies Act 1985. The interim financial information for the 26 weeks ended 30 July 2005 and 6months ended 31 July 2004 has not been audited. In relation to the financialstatements for the 52 weeks ended 29 January 2005, this has been extracted froma restatement of the financial information taken from the Group's statutoryaccounts for that financial year. The interim financial reports are not prepared in accordance with the EUendorsed standard IAS34 "Interim Financial Reporting" as permitted by theListing Rules. The financial statements are presented in pounds sterling, rounded to thenearest thousand. The preparation of financial statements in conformity with IFRS requiresmanagement to make judgements, estimates and assumptions that affect theapplication of policies and reported amount of assets and liabilities, incomeand expenses. The estimates and associated assumptions are based on historicalexperience and various other factors that are believed to be reasonable underthe circumstances, the results of which form the basis of making the judgementsabout carrying values of assets and liabilities that are not readily apparentfrom other sources. Actual results may differ from those estimates. The estimates and underlying assumptions are reviewed on an ongoing basis.Revisions to accounting estimates are recognised in the period in which theestimate is revised if the revision only affects that period, or in the periodof the revision and future periods if the revision affects both current andfuture periods. This is the Group's first consolidated interim financial report prepared inaccordance with IFRS. A detailed review of the changes in the accountingpolicies and reconciliations of the financial statements from UK GAAP to IFRS atkey dates has today been provided to the London Stock Exchange. The accounting policies set out in the IFRS transition statement have beenapplied consistently to all periods presented in these consolidated financialstatements and in preparing an opening IFRS balance sheet at 1 February 2004 forthe purposes of the transition to IFRS. The accounting policies have been applied consistently by all Group entities. 2. EXCEPTIONAL ITEMS Unaudited Unaudited Unaudited 26 weeks ended 6 months ended 52 weeks ended 30 July 31 July 29 January 2005 2004 2005 £000 £000 £000 (Profit)/loss on disposal of (84) 1,239 616property, plant and equipmentProvision for rentals on onerous 2,721 1,012 1,286property leasesImpairment of property, plant and 1,097 2,976 6,701equipment on loss making storesRedundancy costs - 440 440Bank reorganisation costs - 289 296 _______ _______ _______TOTAL EXCEPTIONAL ITEMS 3,734 5,956 9,339 _______ _______ _______ 3. INCOME TAX (CREDIT)/EXPENSE Unaudited Unaudited Unaudited 26 weeks ended 6 months ended 52 weeks ended 30 July 31 July 29 January 2005 2004 2005 £000 £000 £000 CURRENT TAX (CREDIT) / EXPENSEUK corporation tax (1,033) (3,073) 3,440Adjustment relating to prior - - (755)periods _______ _______ _______ (1,033) (3,073) 2,685DEFERRED TAX (CREDIT) / EXPENSEDeferred tax (4) 346 (1,344) _______ _______ _______TOTAL INCOME TAX (CREDIT) / EXPENSE (1,037) (2,727) 1,341IN INCOME STATEMENT _______ _______ _______ 4. EARNINGS PER ORDINARY SHARE The calculation of basic earnings per ordinary share at 30 July 2005 is based onthe loss attributable to ordinary shareholders of £1,556,000 (2004: £3,491,000)and a weighted average number of ordinary shares outstanding during the 26 weeksended 30 July 2005 of 47,308,292 (2004: 46,748,607). The calculation of diluted earnings per ordinary share at 30 July 2005 is basedon the loss attributable to ordinary shareholders of £1,556,000 (2004:£3,491,000) and a weighted average number of ordinary shares outstanding duringthe 26 weeks ended 30 July 2005 of 47,314,071 (2004: 46,751,332). ADJUSTED BASIC EARNINGS PER ORDINARY SHARE Adjusted basic earnings per ordinary share has been based on the (loss)/profitattributable to ordinary shareholders for each financial period but excludingthe post tax effect of exceptional items since the directors consider that thisgives a more meaningful measure of the underlying performance of the Group. Unaudited Unaudited Unaudited 26 weeks ended 6 months ended 52 weeks ended 30 July 31 July 29 January 2005 2004 2005 £000 £000 £000 (Loss)/profit attributable to (1,556) (3,491) 2,261ordinaryshareholders- Exceptional items excluding 3,818 4,717 8,723(profit)/loss on disposal ofproperty, plant and equipment- Tax relating to exceptional (1,083) (1,245) (2,235)items _______ _______ _______Profit/(loss) attributable to 1,179 (19) 8,749ordinaryshareholders excluding exceptionalitems _______ _______ _______Adjusted basic earnings per ordinary 2.49p (0.04p) 18.62pshare _______ _______ _______ 5. EQUITY CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Unaudited Attributable to equity shareholders Issued Share Retained Total ordinary premium earnings share capital £000 £000 £000 £000 At 29 January 2005 2,364 9,042 42,194 53,600 Ordinary shares issued in the 36 1,131 - 1,167periodLoss for the period - - (1,556) (1,556)Equity dividend - - (2,078) (2,078) _______ _______ _______ _______At 30 July 2005 2,400 10,173 38,560 51,133 _______ _______ _______ _______ The ordinary shares issued in the period relate to the exercise of optionsgranted under the executive share option schemes. These options were exercised following the acquisition of a controlling interestin the Group by Manchester Square Enterprises Limited, a wholly owned subsidiaryof Pentland Group Plc. Option holders have until 30 November 2005 to exerciseany remaining options. Unaudited Attributable to equity shareholders Issued Share Retained Total ordinary premium earnings share capital £000 £000 £000 £000 At 31 January 2004 2,338 8,917 41,749 53,004 Ordinary shares issued in the - - - -periodLoss for the period - - (3,491) (3,491)Equity dividend - - (782) (782) _______ _______ _______ _______At 31 July 2004 2,338 8,917 37,476 48,731 _______ _______ _______ _______ 6. DIVIDENDS After the balance sheet date the following dividends were proposed by thedirectors. The dividends were not provided for at the balance sheet date. Unaudited Unaudited Unaudited 26 weeks ended 6 months ended 52 weeks ended 30 July 31 July 29 January 2005 2004 2005 £000 £000 £000 2.30p per ordinary share(31 July 2004: 2.20p, 29 January 1,104 1,063 2,0562005: 4.40p) 7. ANALYSIS OF NET DEBT Unaudited At 29 January Cash flow Other At 30 July 2005 2005 £000 £000 £000 £000 Cash and cash equivalents 6,531 1,824 - 8,355Bank overdraft (1,800) 861 - (939) _______ _______ _______ _______ 4,731 2,685 - 7,416 Interest bearing loans andborrowings - Current (9,000) 5,000 (6,000) (10,000) - Non current (25,500) (500) 6,000 (20,000)Loan notes (287) - - (287)Finance leases (711) 233 - (478) _______ _______ _______ _______NET DEBT (30,767) 7,418 - (23,349) _______ _______ _______ _______ 8. INTERIM REPORT The interim report will be posted to all shareholders in due course. Additionalcopies are available on application to the Company Secretary, The John DavidGroup Plc, Hollinsbrook Way, Pilsworth, Bury, Lancashire, BL9 8RR. This information is provided by RNS The company news service from the London Stock Exchange