JJB.L Regulatory News (JJB)

20 Apr 2006 07:01

JJB Sports PLC20 April 2006 JJB Sports plc Preliminary results for the 52 weeks to 29 January 2006 JJB Sports plc ("JJB"), the UK's largest quoted sports retailer, announces itspreliminary results for the 52 weeks to 29 January 2006. Summary: 52 week 53 week period period 2005/6 2004/5 Change (Restated for IFRS)*Revenue £745.2m £773.3m -3.6% On a 52 week comparison -2.4% Gross margin 47.3% 48.0% -0.7% Operating profit £34.3m £62.1m -44.7% Earnings per share 13.10p 19.54p -33.0% Final dividend 7.0p 7.0p • Like-for-like revenue (on a 52 week comparative basis) decreased by 4.3 per cent. Trading conditions have continued to be very competitive with the replica kit comparatives achieved during Euro 2004 being difficult to match. • A more competitive pricing policy has been pursued since October 2005 with a consequent effect upon gross margins. • The impact of lower revenues and gross margins, together with continued increases in operating costs, resulted in the fall in operating profit to £34.3 million (2005: £62.1 million). Operating profit benefited from a change in the basis of calculation of depreciation of £7.6 million (see page 4) and a gain on the disposal of property, plant and equipment of £2.9 million (2005: loss of £0.8 million), but was reduced by an increase in the provisions of £1.9 million made against the possible liabilities in the action brought against the Company by the Office of Fair Trading (see page 5). • Turnover in the Leisure Division increased by 42.2 per cent to £89.2 million. A more significant benefit at operating profit level will be achieved during the current year as last year's openings make a full year contribution. • The tax charge for the period was £3.5 million (2005: £17.3 million) as a result of the recent finalisation of a number of years corporation tax liabilities with the Inland Revenue. This resulted in a credit to current tax , relating to prior year adjustments, of £2.7 million, and to deferred tax of £4.6 million. • The Board has proposed that the final dividend is maintained at the same level as last year. • JJB has increased the number of its combined health club/superstores by 11 to 32. • Despite the distortion of a late Easter in 2006 results are in line with expectations, with an increase in total revenue for the 11 weeks to 16 April of 5.8 per cent (when compared to the same period last year), including a like-for-like increase of 2.6 per cent but with a fall in gross margin to 46.1 per cent from 49.0 per cent. * See separate IFRS transition document referred to in note 1 on page 13 Commenting today, Roger Lane-Smith, Non-Executive Chairman, said: - "Although not unexpected, the fall in the full year profits is disappointing. Aswell as a generally difficult retail climate, the sports sub-sector is alsogoing through a fundamental change with competitive pressures making tradingconditions extremely challenging. To offset this, we have adopted a more aggressive stance on pricing with aresultant pressure on margin and have undertaken other sales initiatives toaddress these competitive issues. However, I am heartened by the continuing expansion of our Leisure Divisionwhere membership of our health clubs at 29 January 2006 was 55 per cent higherthan on the same date last year. Furthermore we look forward, in the comingmonths, to a number of replica kit launches for Premier League Clubs as well asthe World Cup where I have more reason than most to wish England luck!" For further information, please contact Tom KnightDavid Greenwood 01942 221400JJB Sports Plc Lydia PretzlikCharlotte Barker 020 7379 5151Maitland A copy of this press release can also be viewed on the JJB Sports plc website,www.jjbcorporate.co.uk Results-------- JJB announces its unaudited results for the 52 weeks to 29 January 2006. Theseannual results are the first to be prepared under International FinancialReporting Standards (IFRS). The comparative results shown throughout thesePreliminary results have been restated to comply with IFRS accounting standards. Details of the changes in accounting policies arising from the adoption of IFRS,together with restated information for the accounting period of 53 weeks to 30January 2005, were published on JJB's website, www.jjbcorporate.co.uk, on 12October 2005. Operating results The operating results for the 52 weeks to 29 January 2006 and those for the 53weeks to 30 January 2005, are shown below. Revenue Operating profit (1) Operating profit (1) before HO/DC allocation after HO/DC allocation 2006 2005 2006 2005 2006 2005 Restated Restated Restated £'000 £'000 £'000 £'000 £'000 £'000 ______ ______ ______ ______ ______ ______Standalone retailstores 656,086 710,647 71,705 103,376 23,241 55,254 Leisure Division(including 89,152 62,692 15,071 9,639 11,108 6,852associated retail stores) ______ ______ ______ _______ ______ ______ 745,238 773,339 86,776 113,015 34,349 62,106 ======== ======== Head office and distribution centrecosts (52,427) (50,909) ______ _______ Operating profit (1) 34,349 62,106 34,349 62,106 ======= ======= ====== ====== (1) Operating profit is stated after crediting net exceptional operating itemsof £1,035,000 (2005: restated - charging £835,000) which are detailed in theConsolidated income statement on page 9. Total revenue for the 52 weeks to 29 January 2006 is 3.6 per cent lower than forthe 53 weeks to 30 January 2005 (2.4 per cent lower on a 52 week comparison).The decrease in like-for-like revenue of locations which have traded for over 52weeks, on a 52 week comparison basis, is 4.3 per cent. Included in these figures is the increase in total revenue from the LeisureDivision of 42.2 per cent (44.3 per cent on a 52 week comparison), whichreflects in part the increase in the number of operating units within thisDivision. The strong competition which affected JJB's retail store revenue in the firsthalf of the accounting period to 29 January 2006 continued into the second halfof the period. However, the decline in revenue slowed as a result of thepromotional stance that was taken in October 2005. The retail store revenue inthe first half of the accounting period was also severely affected by the lowerlevel of revenue from England replica products which had benefited in the firsthalf of 2004 from the Euro 2004 tournament. Revenue from all the retail stores in the first half of the accounting period to29 January 2006 fell by £28.3 million or 8.1 per cent, whilst revenue in thesecond half year fell by £2.9 million or 0.8 per cent. The comparative figurefor the second half of the accounting period to 30 January 2005 has beenadjusted for the fact that it was a 27 week period. This lowering of the decrease in retail store revenue during the second half ofthe accounting period to 29 January 2006 was achieved as a result of thepromotional stance that was taken by JJB. However, this had a consequent effectupon the gross margin achieved in the retail stores resulting in the combinedgross margin achieved during the first half of the accounting period (includingthe gross margin from the health clubs) of 49.5 per cent, falling to 45.4 percent in the second half year. The total gross margin achieved by the Group (including that from the healthclubs) for the 52 weeks to 29 January 2006, was 47.3 per cent, which compares to48.0 per cent achieved in the 53 week comparative period. Net operating expenses increased by £8.7 million during the 52 weeks ended 29January 2006, compared to the 53 weeks of the previous accounting period,(increased to £13.9 million or 4.6 per cent on a 52 week comparison). Theincrease in net operating costs primarily resulted from the higher number ofLeisure Division sites in operation during the accounting period just ended,when compared to last year. Net operating expenses were affected by:- A charge of £1.9 million (2005: restated NIL) in respect of a further increasein provisions made against possible liabilities in the action brought againstthe Company by the Office of Fair Trading and which is currently under appeal bythe Company at the Court of Appeal. A reduction in the charge for depreciation of £7.6 million, resulting from areview of the useful economic lives of certain categories of property, plant andequipment which had previously been depreciated over 10 years; and A net gain on the disposal of property, plant and equipment of £2.9 million(2005: restated a net loss of £0.8 million). Whilst undertaking the impairment review on the value of goodwill in the balancesheet for the introduction of IFRS, the Board of JJB also considered thecarrying value of property, plant and equipment. It found that many items ofproperty, plant and equipment within its operating units, had useful economiclives that more closely matched the length of the short-term lease of theproperty in which they were constructed, rather than the 10-year economic lifewhich had formed the basis of the depreciation charge in previous accountingperiods. The useful economic lives of these items of property, plant andequipment have been restated with effect from 30 January 2005 and the consequenteffect upon the income statement for the 52 weeks to 29 January 2006 is toreduce the charge for depreciation by £7.6 million. The operating profit fell by 44.7 per cent from a restated £62.1 million to£34.3 million. Interest, taxation and dividend Net finance costs of £602,000 for the 52 weeks to 29 January 2006 compare to£344,000 net finance income in the comparative period. This adverse movementresults from a higher average level of borrowings because of the lower net cashflow and the higher expenditure on intangible assets, property, plant andequipment. The effective rate of taxation on the profit of the Group is 10.4 per centcompared to a restated 27.7 per cent in the comparative period last year. Thelow effective rate of taxation in the 52 weeks to 29 January 2006 arises partlyfrom a prior year adjustment to current tax of £2,692,000 which has arisen as aresult of the recent finalisation of a number of years corporation taxliabilities with the Inland Revenue. Following the agreement of thesecorporation tax liabilities, the deferred tax liability arising on thedifference between the net book value of property, plant and equipment andtheir tax written down value, has been recalculated and the provision has beenreduced by £4,635,000 in the 52 weeks to 29 January 2006. The Board anticipatesthat the effective rate of taxation for the year to 28 January 2007 will beapproximately 30 per cent. The Board is conscious that the maintenance of dividends is of major importanceto all shareholders and, despite the reduced level of profits, has proposed tomaintain the rate of the final dividend at 7 pence net per ordinary share. Thefinal dividend will be paid on 9 August 2006 to shareholders on the shareregister at the close of business on 26 May 2006 and the shares will tradeex-dividend from 24 May 2006. The Board has also made a decision to offer a scrip dividend alternative toshareholders, giving them the opportunity of taking the final dividend in theform of ordinary shares in JJB. Details of the terms and conditions applicableto this scrip dividend alternative, and the resolutions which will require to bepassed at this years AGM for its implementation, will be given in the Circularwhich will accompany the Annual Report and Financial Statements which will besent to shareholders before the Annual General Meeting which will be held on 27July 2006. Balance Sheet Capital expenditure on property, plant and equipment for the 52 weeks ended 29January 2006 was £47.4 million compared to £43.0 million in the comparativeaccounting period, and included £30.9 million of expenditure on combined healthclub/superstores and £5.4 million on stand alone retail stores opened eitherduring the accounting period or to be opened during 2006. A total of £5.3million was expended on the refurbishment of retail stores. Capital expenditureon intangible assets totalled £10.2 million being principally the £10.0 millionspent on the acquisition of a 999 year licence for the Slazenger golf brand. The value of inventories at 29 January 2006 of £120.3 million was 6.7 per centhigher than at 30 January 2005. Whilst this increase partly arises from theachieved level of revenue being slightly lower than that planned and from theincrease in the retail store selling area of 3.9 per cent, the ratio of currentto non-current stocks has improved. Net debt at 29 January 2006 was £25.0 million (see note 9 on page 16) comparedto net funds of £4.4 million at 30 January 2005, resulting in part from thelower net cash flow from operating activities achieved during the 52 weeks ended29 January 2006 when compared to the previous accounting period but also fromhigher expenditure on intangible assets, property, plant and equipment. At the 2005 Annual General Meeting held on 6 July 2005, the Company was grantedauthority by its shareholders to make market purchases of up to 5 per cent ofits ordinary shares. No such market purchases have yet been made because theBoard has made the decision to use the Group's net cash flow to finance theacquisition of its long term licence of the Slazenger golf brand and thecontinuing expansion of its combined health club/superstores. The authority willexpire at the 2006 Annual General Meeting and it is the Board's intention torenew the authority to make market purchases at that meeting. Office of Fair Trading An appeal made by JJB to the independent Competition Appeal Tribunal (CAT)against the decision of the Office of Fair Trading (OFT) regarding theprice-fixing of certain replica kit products had resulted in a reduction in theamount of the penalty of £8.4 million to £6.7 million. JJB was disappointed with the CAT's judgement on liability and the consequentamount of the reduction in its penalty and applied for permission to appeal tothe Court of Appeal against those aspects that it was possible to appeal. It hasnow been granted permission to appeal by the Court of Appeal on these matters.This appeal will be heard in May 2006. On the basis of legal advice regarding the appeal to the Court of Appeal, JJBdecided to make a provision against the penalty of £2 million in its accountsfor the 53 weeks ended 30 January 2005. Acknowledging the specific grounds onwhich it intends to appeal and the inherent uncertainty of the appeal process,JJB has decided, on the basis of further legal advice, to increase its provisionagainst the penalty to £3.88 million in its consolidated income statement forthe 52 weeks to 29 January 2006. Operational review JJB product and brand development The following table shows the percentage of JJB retail store revenue for eachproduct category. 52 weeks to 53 weeks to 29 January 30 January 2006 2005 % % ------------ ----------- Textiles 35 35Footwear 32 33Equipment and accessories 15 14Replica products 11 12Golf and cycles 7 6 ------------ ----------- 100 100 ============ =========== Revenue from textiles and footwear suffered from strong retail competitionwhilst replica products were affected by difficult comparisons from the Euro2004 competition during the previous year. Revenue from equipment, accessories,golf and cycle products showed an improvement over the comparative period. The reduction in revenue from textiles and footwear products contrasts with theincrease in the number of those items sold of between 4 and 6 per cent,confirming that demand for these products is still strong, but at lower pricelevels than those achieved in earlier accounting periods. JJB's retail product strategy continues to be to provide a wide range of sportsbranded products including ranges from the premium brands of Nike and adidas,supplemented with more competitively priced products from secondary brands andfrom brands which are marketed exclusively by JJB within the UK. Competition on the product ranges from the premium brands comes principally fromother specialist sports retailers whilst competition on lower priced productscomes from a wider range of clothing and footwear retailers as well as the majorsupermarket chains. JJB's recent competitive stance is aimed at maintaining itsmarket share whilst it pursues a strategy which aims to differentiate itsproduct ranges from those of its principal competitors. A number of other initiatives are currently being developed:- In March 2005, JJB acquired the Slazenger licence for the design, sourcing andsales of golf clubs and related clothing and footwear in the EU. Initial resultsfrom the sale of these products are encouraging and have led to a higher grossmargin being earned within the golf product category; JJB's transactional website came into operation in September 2005, thefulfilment of transactions being dealt with by Zendor. Revenue from the websiteis currently equivalent to that of a JJB superstore; and JJB's Professional Teamwear Division has recently signed a 10 year licensingagreement with Rangers FC for an initial consideration of £18 million, todesign, source and retail Rangers merchandise throughout JJB's retail storechain. The agreement will commence with the launch of a new home replica kit inJune 2006. JJB's existing agreement to source replica kit for Everton FC hasrecently been extended to enable JJB to also become responsible for theretailing of these products. Stores and store development JJB has continued its property policy of gradually migrating from smaller highstreet stores into both high street superstores (on basement or first floorlevels) and into out-of-town superstores; the preferred format for the latter isto open combined health club/superstores where by negotiation with the landlorda cap is placed on all future rent reviews. During the 52 weeks ended 29 January 2006, JJB has opened 11 combined healthclub/superstores, 7 high street superstores, 7 standalone out-of-townsuperstores and 3 small icon stores and 1 golf store. During the same period,JJB has closed 15 small high street stores and 14 superstores. Of the 14superstores which have been closed, 7 are as a result of re-locations and 7 werestores that were not performing satisfactorily. At 29 January 2006, JJB operated from 438 retail stores which comprised 194out-of-town superstores, 109 high street superstores, 108 small high streetstores, 23 icon stores and 4 golf stores. The retail selling space at that datetotalled 4.398 million square feet, an increase of 3.9 per cent when compared tothe retail selling space at 30 January 2005. The numbers of superstores referredto above include 32 combined health club/superstores. At 30 January 2005, JJB operated from 438 retail stores which comprised 189out-of-town superstores, 102 high street superstores, 123 smaller high streetstores, 20 icon stores and 4 golf stores, representing 4.234 million square feetof selling space. Leisure Division During the 52 weeks to 29 January 2006, JJB opened 11 combined health club/superstores (which also included 2 indoor soccer centres). At 29 January 2006,the Leisure Division traded from 32 combined units, which included 6 indoorsoccer centres. The growth of this division is reflected in the health clubmembership figures which totalled 136,800 members at 29 January 2006 from the 32clubs in operation at that date, compared to 88,400 members from the 21 healthclubs in operation at 30 January 2005. The concept of locating a superstore on a mezzanine floor, which has beenconstructed by JJB, with a health club on the ground floor is unique to JJBwithin the UK. The savings from only paying rent on the footprint and receivingtwo revenue streams from one building enables the benefits in running costs tobe passed on in low membership fees to members which results in health clubmemberships becoming a very strong value-for-money offering. Thisvalue-for-money offering is further supported by the attractiveness to membersof a well-equipped gym, swimming pool, health spa, steam room, aerobics studioand bar. The Board continues to be very satisfied with the operating results of theLeisure Division, particularly taking into account the fact that the tradingresults of the stores located above the health clubs have, in common withstand-alone stores, been impacted adversely by the strong competitive forces inthe retail market. The principal features are: - Revenue increased by 42.2 per cent to £89.2 million; Gross margin slightly lower at 68.6 per cent compared to 69.5 per cent; Operating profit (before a share of head office and distribution centre costs)increased by 56.4 per cent to £15.1 million (although this benefited from thechange in the basis of depreciation of which £3.6 million applies to the LeisureDivision); and Operating profit after a share of head office and distribution centre costsincreased by 62.1 per cent to £11.1 million from £6.9 million (which alsobenefited from the change in the basis of depreciation). The maturity profile of health clubs and the pre-opening costs, which areexpensed in their year of opening, results in newly-opened clubs not materiallycontributing to profits in their opening year. The operating profit benefit ofthe 11 health clubs opened during the 52 weeks to 29 January 2006 will thereforebe more significant in the 52 weeks to 28 January 2007 and in future accountingperiods. JJB has already identified 12 sites for the opening of combined health club/superstores during the current accounting period and regards the continuingroll-out of these combined units as being an important part of its futurestrategy. Current trading--------------- In common with many retailers, a significantly higher than average level oftrading is enjoyed during the Easter holiday weeks which distorts comparisons ifthe comparative accounting periods differ in the number of holiday weeks whichthey contain. JJB's total revenue for the 11 weeks to 16 April 2006 has increased by 5.8 percent compared with the same period last year; the 2006 trading period howeverincludes only one of the Easter holiday weeks whilst 2005 contained two holidayweeks. Included in the total revenue is a like-for-like increase in operatingunits which have been open for over 52 weeks of 2.6 per cent. The strong competitive climate has continued into the current year and JJB hasmaintained its promotional stance during this period. The gross margin achievedin this period was 46.1 per cent compared to 49.0 per cent in the same periodlast year. JJB will continue with the expansion of its Leisure Division with 12 combinedsites planned to open during the current accounting period. Since 29 January2006, JJB has opened a further 3 health clubs and the total membership at 16April 2006 of the 35 clubs currently in operation, was 147,000. In addition tothe combined sites, a further 3 high street superstores are to be opened duringthe current accounting period. The Board does not anticipate any significant improvement in trading conditionsduring the current year. It is however hopeful that JJB will benefit not onlyfrom improved revenue from replica products as a result of the FIFA World Cup,from the recently signed Rangers contract, and from the launch of kits fromseveral of the principal Premiership clubs. The Board also expects a benefitfrom a full years contribution from the health clubs opened last year. Consolidated income statement for the 52 weeks to 29 January 2006 Unaudited Audited --------- -------- 52 weeks to 53 weeks to 29 January 30 January 2006 2005 Restated £'000 £'000 --------- ---------Continuing operations Revenue 745,238 773,339 Cost of sales (393,075) (402,082) --------- ---------Gross profit 352,163 371,257 Other operating income 3,177 3,079Distribution expenses (21,722) (19,272)Administration expenses (30,705) (31,637)Selling expenses (268,564) (261,321) --------- --------- Operating profit 34,349 62,106 Operating profit is stated after (charging) creditingCreation of provisions relating to legal penalty (1,882) (2,000)Release of legal cost accrual - 2,000Net gain (loss) on disposal of property, plant and equipment 2,917 (835) ------ ------ 1,035 (835) ------ ------ Finance income 8,896 9,036Finance costs (9,498) (8,692) ------- -------Profit before taxation 33,747 62,450 Taxation (Note 4) (3,510) (17,287) ------- -------- Profit after taxation for the period attributableto equity holders of the parent 30,237 45,163 ====== ======== Earnings per share - (Note 6) Pence 13.10 19.54Diluted earnings per share - (Note 6) Pence 13.10 19.51 Consolidated statement of recognised income and expensefor the 52 weeks to 29 January 2006 Unaudited Audited --------- -------- 52 weeks to 53 weeks to 29 January 30 January 2006 2005 Restated £'000 £'000 --------- ---------Exchange differences on translation offoreign operations 45 (21) --------- --------- Net income (expense)recognised directly in equity 45 (21) Profit after taxation forthe period 30,237 45,163 -------- -------- Recognised income and expense for the period 30,282 45,142 ======== ======== Reconciliation of movements in equity for the 52 weeks to 29 January 2006 Total equity £'000 -------- At 30 January 2005 357,388 Recognised income and expense for the period 30,282 Dividends paid (23,077) -------- At 29 January 2006 364,593 ======== Consolidated balance sheet as at 29 January 2006 Unaudited Audited ---------- ------- As at As at 29 January 30 January 2006 2005 Restated £'000 £'000 -------- --------Non-current assetsGoodwill 186,084 186,114Other intangible assets 10,191 -Property, plant and equipment 189,222 165,175 -------- -------- 385,497 351,289 -------- --------Current assetsInventories 120,266 112,719Trade and otherreceivables 38,738 35,792Current asset investment 168,117 168,117Cash and cash equivalents 34,860 29,323 -------- -------- 361,981 345,951 -------- -------- Total assets 747,478 697,240 -------- --------Current liabilitiesTrade and other payables (81,530) (83,338)Tax liabilities (13,678) (14,698)Bank loan and loan notes (168,117) (193,067)Short-term provisions (7,330) (4,969) -------- -------- (270,655) (296,072) -------- -------- Net current assets 91,326 49,879 -------- -------- Non-current liabilitiesBank loan (59,885) -Deferred tax liabilities (19,785) (19,289)Deferred lease incentives (32,560) (24,491) -------- -------- (112,230) (43,780) -------- -------- Total liabilities (382,885) (339,852) -------- -------- Net assets 364,593 357,388 ======== ======== EquityShare capital 11,538 11,538Share premium account 157,219 157,219Capital redemption reserve 1,069 1,069Foreign currency translation reserve 24 (21)Retained earnings 194,743 187,583 -------- -------- Equity attributable to equity holders of the parent 364,593 357,388 ======== ======== Consolidated cash flow statement for the 52 weeks to 29 January 2006 Unaudited Audited --------- --------- 52 weeks to 53 weeks to 29 January 30 January 2006 2005 Restated £'000 £'000 ----------- -----------Net cash flow from operating activities(Note 7) 43,976 85,507 ----------- ----------- Cash flows from investing activitiesInterest received 8,896 9,036Interest paid (9,413) (8,563)Proceeds on disposal of subsidiary - 495Proceeds on disposal of property,plant and equipment 7,981 8,392Purchase of intangible assets (10,224) -Purchase of property, plant and equipment (47,443) (42,982) ----------- ------------Net cash flow used in investing activities (50,203) (33,622) ----------- ------------ Cash flows from financing activitiesDividends paid (23,077) (23,077)Purchase of own shares - (20,778)Proceeds from issues of share capital - 92Net proceeds from bank loan 59,850 -Repayment of bank loan (25,000) (60,000)Receipt of tender offer cash deposit - 40,000 Net cash flow from (used in)financingactivities 11,773 (63,763) Net increase (decrease) incash and cash equivalents 5,546 (11,878) Cash and cash equivalents atbeginning of period 29,323 41,258 Effect of foreign exchange ratechanges (9) (57) --------- --------- Cash and cash equivalents at end of period 34,860 29,323 ========= ========= Notes to the Consolidated financial statements for the 52 weeks to 29 January2006 1. Basis of preparation The Group's results for the 52 weeks to 29 January 2006 are its first annualresults to be prepared in accordance with International Financial ReportingStandards ('IFRS'), as adopted for use in the EU. Details of the changes in accounting policies arising from the adoption of IFRS,together with restated financial information for the 53 weeks to 30 January2005, have previously been published on the Group's website,www.jjbcorporate.co.uk. With the exception of financial instruments, as detailed below, the accountingpolicies set out in that document have been consistently applied to all periodspresented in these condensed consolidated financial statements. Financial InstrumentsIn accordance with IFRS 1 First Time Adoption of International FinancialReporting Standards, the Group has elected not to restate comparativeinformation for the impact of IAS 32 and IAS 39 Financial Instruments. Theopening balance sheet at 31 January 2005 has been adjusted to reflect theadoption of these standards from that date. 2. Statement of compliance These Preliminary results for the 52 weeks to 29 January 2006, contain condensedconsolidated financial statements which have been drawn up in accordance withthe IFRS accounting standards, and the provisions of IFRS 1. The condensedconsolidated financial statements are unaudited and do not include all theinformation required for full annual financial statements. The financial information for the 53 weeks to 30 January 2005 contained withinthese condensed consolidated financial statements does not represent fullaccounts within the meaning of Section 240 of the Companies Act 1985. Fullaccounts for that period prepared under UK GAAP, have been delivered to theRegistrar of Companies; these accounts incorporated an unqualified audit reportand did not contain a statement under section 237(2) or (3) of the Companies Act1985. The statutory accounts for the 52 weeks to 29 January 2006 will be finalised onthe basis of the financial information presented by the Directors in thesecondensed consolidated financial statements and will be delivered to theRegistrar of Companies following the Company's Annual General Meeting. 3. Segmental information Segmental revenue and profit before taxation by business activity were asfollows: 52 weeks to 53 weeks to 29 January 30 January 2006 2005 Restated £'000 £'000 -------- --------Revenue Standalone retail stores 656,086 710,647Leisure Division (including associated retailstores) 89,152 62,692 -------- --------Total revenue 745,238 773,339 ======== ======== Operating profit Standalone retail stores 23,241 55,254Leisure Division (including associated retailstores) 11,108 6,852 -------- --------Total operating profit 34,349 62,106 Net finance (costs) income (602) 344 -------- -------- Profit before taxation 33,747 62,450 ======== ======== Notes to the Consolidated financial statements for the 52 weeks to 29 January2006 (continued) 4. Taxation The net taxation charge shown in the consolidated income statement for the 52weeks to 29 January 2006 has been based on the current rate of taxation of 30per cent (2005: restated 30 per cent.) 52 weeks to 53 weeks to 29 January 30 January 2006 2005 Restated £'000 £'000 -------- --------Current tax: UK corporation tax 5,649 16,931Foreign tax 57 208Prior year adjustment (2,692) 41 -------- -------- 3,014 17,180 -------- --------Deferred tax: Current period 5,131 107Prior year adjustment (4,635) - -------- -------- 496 107 -------- --------Taxation charge 3,510 17,287 ======== ======== The prior year adjustment to current tax of £2,692,000 in the 52 weeks to 29January 2006 has arisen as a result of the recent finalisation of a number ofyears corporation tax liabilities with the Inland Revenue. Following theagreement of these corporation tax liabilities, the deferred tax liabilityarising on the difference between the net book value of property, plant andequipment and their tax written down value, has been recalculated and theprovision has been reduced by £4,635,000 in the 52 weeks to 29 January 2006. 5. Dividends 52 weeks to 53 weeks to 29 January 30 January 2006 2005 Restated £'000 £'000 ------------ ------------- Amounts recognised as distributions to equityholders in the period: Final dividend for the 53 weeks to 30 January 2005 of 7.0 p net per ordinary share paid on 18 July 2005 (2004: 7.0p) 16,154 16,150 Interim dividend for the 52 weeks to 29 January 2006 of 3.0p net perordinary share paid on 6 January 2006 (2005: 3.0p) 6,923 6,923 Underprovision in respect of dividends paidin earlier years - 3 -------- --------- 23,077 23,076 ========= ========= Proposed final dividend for the 52 weeksto 29 January 2006 of 7.0p net perordinary share (2005: 7.0p) 16,154 16,154 ========= ========= The proposed final dividend is subject to approval by shareholders at the 2006Annual General Meeting and has not been included as a liability in thesecondensed consolidated financial statements. Notes to the Consolidated financial statements for the 52 weeks to 29 January2006 (continued) 6. Earnings per share The calculation of earnings per ordinary share is based upon the profit for theperiod attributable to equity holders of the parent of £30,237,000 (2005:restated £45,163,000) and 230.8 million ordinary shares (2005: 231.1 millionordinary shares), being the weighted average number of shares in issue duringthe period. The diluted earnings per share calculation is based upon the profit for theperiod attributable to equity holders of the parent of £30,237,000 (2005:restated £45,163,000) and 230.9 million ordinary shares, (2005: 231.4 millionordinary shares), being the weighted average number of shares in issue duringthe period, used in the calculation of earnings per share shown above, increasedby the dilutive effect of ordinary shares issuable pursuant to options grantedunder employee share option schemes of 100,000 ordinary shares (2005: 300,000ordinary shares). 7. Reconciliation of operating profit to net cash inflow from operatingactivities 52 weeks to 53 weeks to 29 January 30 January 2006 2005 Restated £'000 £'000 -------- ------- Operating profit 34,349 62,106Depreciation of property, plant, equipment 18,387 23,834Impairment of intangible assets 33 -(Gain) loss on disposal of property, plant andequipment (2,917) 835Loss on disposal of goodwill 30 -Loss on disposal of subsidiary undertaking - 309Increase in provisions 2,361 4,969 -------- ------- Operating cash flow before movement inworking capital 52,243 92,053 (Increase) decrease in inventories (7,547) 15,365(Increase) decrease in trade and otherreceivables (2,946) 5Increase (decrease) in trade and otherpayables 11,853 (3,398) -------- -------Cash generated by operations 53,603 104,025 Taxation paid (9,627) (18,518) -------- -------Net cash inflow from operating activities 43,976 85,507 ======== ======= 8. Bank loans In June 2005, JJB's existing £100 million committed revolving bank creditfacility expired. This was replaced with a new 5 year £60 million revolving bankcredit facility which commenced in June 2005. Notes to the Consolidated financial statements for the 52 weeks to 29 January2006 (continued) 9. Analysis of net (debt) funds as at 29 January 2006 As at 30 January Cash Flow Other non-cash As at 29 2005 items January 2006 £'000 £'000 £'000 £'000 ---------------- ---------- -------------- -------------Current assetinvestment 168,117 - - 168,117 Cash and cashequivalents 29,323 5,546 (9) 34,860 ----------- ----------- ------------- ------------- 197,440 5,546 (9) 202,977 Current liabilities Loan notes (168,117) - - (168,117) Bank loan (24,950) 25,000 (50) - Non-current liability Bank loan - (59,850) (35) (59,885) ---------- --------- ------------ ------------- 4,373 (29,304) (94) (25,025) ========= ========= =========== ============ 10. Office of Fair Trading penalty In August 2003, the Office of Fair Trading (OFT) adjudicated JJB to be guilty ofprice-fixing of certain replica kit products over a two year period during 2000and 2001 and levied a penalty of £8.4 million. JJB appealed to the CompetitionAppeal Tribunal (CAT) against the OFT's decision on liability and against thelevel of the penalty itself. The result of the appeal against the decision ofthe OFT on liability, although given mainly in favour of the OFT, included someelements that were found in JJB's favour. The decision of the CAT in the appealagainst the level of the penalty which was announced in May 2005 was to reducethe penalty to £6.7 million. Acknowledging this decision, JJB had made aprovision of £2 million in respect of the penalty in the accounting period to 30January 2005. JJB was disappointed with the CAT's judgement on liability and the consequentamount of the reduction in its penalty. In consultation with its legal advisers,JJB has determined the specific grounds on which it wishes to appeal to a highercourt, and has been granted permission to appeal to the Court of Appeal. Thisappeal will be heard in May 2006. On the basis of legal advice regarding the appeal to the Court of Appeal andacknowledging the specific grounds on which it intends to appeal together withthe inherent uncertainty of the appeal process, JJB has decided to increase itsprovision against the penalty from £2 million to £3.88 million in itsconsolidated income statement for the 52 weeks to 29 January 2006. Notes to the Consolidated financial statements for the 52 weeks to 29 January2006 (continued) 11. Related party transactions Transactions between the Company and its subsidiaries, which are relatedparties, have been eliminated on consolidation and are not disclosed in thisnote. Transactions between the Group and other related parties are disclosedbelow. Trading transactions During the 52 weeks to 29 January 2006, the Company entered into the followingtransactions with related parties who are not members of the Group: Income Expenditure ------- ------------- 52 weeks to 53 weeks to 52 weeks to 53 weeks to 29 January 30 January 29 January 30 January 2006 2005 2006 2005 £'000 £'000 £'000 £'000 -------- ------- ------- --------Whelco HoldingsGroup 163 134 968 778 Executive Director'sfamily trust - 83 150 150 ======== ======= ======= ======== Amounts owed by Amounts owed to ----------------- ----------------- related parties related parties ----------------- ----------------- As at As at As at As at 29 January 30 January 29 January 30 January 2006 2005 2006 2005 £'000 £'000 £'000 £'000 -------- ------- ------- --------Whelco HoldingsGroup 101 76 24 81 ======== ======= ======= ======== Whelco Holdings Limited is a company owned by members of the family of anExecutive Director of JJB, operating itself or through its subsidiaries, anumber of businesses including that of Wigan Athletic Football Club (WAFC),Wigan Warriors Rugby League Club (WWRLC) and the stadium in which both teamsplay which is known as the "JJB Stadium". During the 52 weeks to 29 January 2006, JJB incurred expenditure in its capacityof sponsors to WAFC and WWRLC and incurred costs in respect of the naming rightsfor the JJB Stadium. Advice was taken from independent third parties as to thecomparative levels of the costs of sponsorship and naming rights at other clubsand stadia, prior to the agreement of the amounts to be paid. During the 52 weeks to 29 January 2006, the Company made sales to WhelcoHoldings Limited and its subsidiary companies in respect of both football andrugby related products. A store in Northampton had previously been leased by JJB from a third party fora number of years and at which it had operated a retail store until October1998. The freehold of the store was subsequently acquired from the third partyby the Trustees of an Executive Director's Accumulation and MaintenanceSettlement, (a Settlement in which some members of the family of one of JJB'sExecutive Directors, has an interest). JJB initially paid for certaindevelopment costs of the site, with the Settlement subsequently reimbursing JJBin full in January 2005, inclusive of interest charges on the debt which werecharged at 1% above base rate. Following the opening of the new retail store on10 August 2003, JJB has continued to pay rent on a full commercial basis at therate of £150,000 per annum. Notes to the Consolidated financial statements for the 52 weeks to 29 January2006 (continued) 12. Events since the balance sheet date Final dividend The Board has proposed a final dividend of 7.0 pence net per ordinary share(2005: 7.0 pence) and is also proposing to offer a scrip dividend alternative toshareholders. The amount of the dividend has not been included as a liability at29 January 2006. Subject to shareholders approval, this dividend will be paid on9 August 2006 to shareholders on the register at 26 May 2006. Rangers Football Club On 9 March 2006, JJB announced that it had signed a ten year licensing agreementwith Rangers Football Club to design, develop, source and retail Rangersmerchandise throughout JJB's retail store chain. The contract will commence on 8June 2006 with the launch of Ranger's new home replica kit. An initialconsideration of £18 million will be paid on that day with the agreement alsoproviding for a minimum annual royalty of £3 million during the term of theagreement. This information is provided by RNS The company news service from the London Stock Exchange