JJB.L Regulatory News (JJB)

12 Apr 2007 07:01

JJB Sports PLC12 April 2007 JJB Sports plc Preliminary unaudited results for the 52 weeks to 28 January 2007 JJB Sports plc ("JJB") announces its Preliminary results for the 52 weeks to 28January 2007. Unaudited Summary: 52 week 52 week period period 2006/7 2005/6 Change Revenue £810.3m £745.2m +8.7% Gross margin 47.5% 47.3% +0.2% Operating profit £39.0m £34.3m +13.6% Adjusted operating profit* £46.4m £36.2m +28.1% Profit before taxation £38.5m £33.7m +14.1% Adjusted profit before taxation* £45.9m £35.6m +28.8% Basic earnings per share 11.07p 13.10p -15.5% Final dividend 7.0p 7.0p * Adjusted operating profit and adjusted profit before taxation are before charging £4,063,000 (2006: £1,882,000) relating to the legal penalty and interest thereon, and £3,343,000 (2006: NIL) relating to the closure of the Icon stores and are shown in the Consolidated income statement on page 7. • Like-for-like revenue increased by 7.5 per cent. • The 8.7% increase in total revenue was principally a result of higher sales of replica kit products and the continuing expansion of the Leisure Division. • The gross margin has continued to be impacted by competition within the sports retail sector although these pressures have eased during the latter part of the accounting period. • There is a reduction in earnings per share despite the increased operating profit which is largely attributable to the low rate of taxation in the comparative accounting period. • The Board has proposed that the final dividend is maintained at the same level as last year with a scrip dividend alternative. • Total revenue has increased by 4.3 per cent during the 9 weeks to 1 April 2007, accompanied by a rise in the gross margin of 250 basis points in the retail stores. Like-for-like revenue increased by 3.2 per cent. • "Serious about sport" strategy is progressing with the creation of adidas and Nike "in-store" areas and product differentiation. • Continuing expansion of the Leisure Division throughout 2007/8. Commenting today, Roger Lane-Smith, Non-executive Chairman, said: "I am encouraged by the performance that we have achieved during the 52 weeks to28 January 2007 with the adjusted operating profit increasing by 28.1 per centto £46.4 million from £36.2 million. Whilst higher revenue of football replicakit generated by the FIFA World Cup and certain Premiership Team kit launchesexplains much of the improvement, our "Serious about sport" stance which helpsto differentiate our product offering from that of our competitors, togetherwith the continuing growth from our Leisure Division, have also made asignificant contribution. The current year will continue to be very competitive. However, we will continuewith the fitting-out of our adidas and Nike "in-store" areas whilst at the sametime pushing forward with the expansion of our Leisure Division." 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 Chief Executive's Review Results I am pleased to announce our results for the 52 weeks to 28 January 2007,prepared under International Financial Reporting Standards (IFRS). Operating results The operating results for the 52 weeks to 28 January 2007 and the comparativefigures for the 52 weeks to 29 January 2006 are shown below. Revenue Operating profit Operating profit before HO/DC after HO/DC allocation allocation 2007 2006 2007 2006 2007 2006 £'000 £'000 £'000 £'000 £'000 £'000 Standalone retail 686,836 656,086 73,915 71,705 23,107 23,241 stores Leisure Division (including associated 123,451 89,152 21,402 15,071 15,914 11,108 retail stores) 810,287 745,238 95,317 86,776 39,021 34,349 Head office and distribution centre (56,296) (52,427) costs Operating profit 39,021 34,349 39,021 34,349 Total revenue for the 52 weeks to 28 January 2007 is 8.7 per cent higher thanfor the 52 weeks to 29 January 2006. Included in these figures is the increase in total revenue from the LeisureDivision of 38.5 per cent which reflects in part the increase in the number ofoperating units within this Division from 32 at 29 January 2006 to 39 at 28January 2007. The principal increase in revenue from our retail stores was from replica kitproducts which increased by £35.3 million when compared to the last accountingperiod. This increase resulted partly from the FIFA World Cup in the summer of2006 but also from new kits introduced by all the leading FA Premiership clubsat the start of the 2006/7 season and from our acquisition of the GlasgowRangers franchise in June 2006. The increase in like-for-like revenue of locations which have traded for over 52weeks is 7.5 per cent. The total gross margin achieved by the Group (including that from the LeisureDivision) for the 52 weeks to 28 January 2007 was 47.5 per cent, which is aslight increase over the 47.3 per cent achieved in the previous accountingperiod. The strong competitive stance that we adopted in the second half of the previousaccounting period continued into the accounting period to 28 January 2007although this pressure has begun to ease as we have sought to furtherdifferentiate our product ranges from those of our major competitors as part ofour "serious about sport" strategy. Particularly strong competition wasexperienced on the England replica shirts although the impact was offset by thehigh gross margin achieved on health club revenue. Net operating expenses increased by £28.1 million or 8.9 per cent to £346.0million during the 52 weeks to 28 January 2007. The increase in net operatingcosts was partly a result of the higher number of Leisure Division sites inoperation during the accounting period just ended, but was also the result ofthe following 2 items:- A charge of £4.1 million (2006: £1.9 million) in respect of a further increase in the provision made for the penalty in the action brought against the Company by the Office of Fair Trading, together with interest thereon, and A charge of £3.3 million (2006: nil) in respect of the closure of the Icon stores. Adjusted operating profit increased by 28.1 per cent to £46.4 million from £36.2million which after the deduction of the adjusted operating items gives anincrease in operating profit of 13.6 per cent to £39.0 million from £34.3million in the comparative period. Adjusted profit before taxation increased by 28.8 per cent to £45.9 million from£35.6 million and profit before taxation and after deducting the adjustedoperating items increased by 14.1 per cent to £38.5 million from £33.7 million. The chain of small high street stores, which traded under the "Icon" fascia, wasclosed during the 26 weeks to 28 January 2007. The resulting loss from thedisposal of the fixtures and the provision for forward rental costs, which webelieve will be incurred before the relevant leases are disposed of, have beenexpensed during the period at a total cost of £3.3 million. Interest, taxation and dividend Net finance costs of £528,000 for the 52 weeks to 28 January 2007 were slightlylower than the £602,000 of costs in the previous period as a result of a loweraverage level of borrowings following an increase in the net cash inflow fromoperating activities. This was assisted by part of the 2005/6 final dividendbeing paid in scrip form. The effective rate of taxation on the Group profit is 32.9 per cent compared to10.4 per cent in the previous accounting period. The low effective rate oftaxation in the previous accounting period arose from the finalisation of anumber of years corporation tax liabilities with the Inland Revenue whichresulted in a release of corporation tax provisions and a recalculation of thedeferred tax liability. The effective rate of 32.9 per cent is higher than thecurrent corporation tax rate because the increase in provisions relating to thelegal penalty and interest thereon is disallowable for tax purposes. The Board recommends maintaining the level of the final dividend and hastherefore proposed a final dividend of 7 pence net per ordinary share. Subjectto approval by the shareholders at the forthcoming Annual general meeting (AGM),the final dividend will be paid on 3 August 2007 to shareholders on the shareregister at the close of business on 18 May 2007 and the shares will tradeex-dividend from 16 May 2007. The Board is proposing to offer a scrip dividendalternative which will also be subject to approval by shareholders at theforthcoming AGM. Balance Sheet Capital expenditure on property, plant and equipment for the 52 weeks to 28January 2007 was £33.1 million compared to £47.4 million in the previousaccounting period. The majority of this capital expenditure was expended on thecombined health club/superstore sites. A total of 7 sites were opened during the52 weeks to 28 January 2007, compared to 11 in the previous accounting periodwhich drove the overall reduction in capital expenditure. Capital expenditure onintangible assets included £18.1 million incurred in the acquisition of a 10year licensing agreement with Glasgow Rangers Football Club. The value of inventories at 28 January 2007 was £128.1 million, 6.5 per centhigher than at 29 January 2006 and was the result of the stock intake of Englandreplica kit products prior to the end of the accounting period. The launch dateof this year's kit was 6 February 2007, whilst in the previous year the productswere received in February 2006 ahead of a launch date later in February. Although a new bank loan of £18 million was used to finance the Glasgow Rangersdeal, the Group's strong cash flow enabled the Company to reduce its net debt at28 January 2007 by £15.8 million to £9.2 million from a net debt of £25.0million at 29 January 2006 (see note 9 on page 14). Operational review JJB product and brand development Revenue generated from retail store products for the 52 weeks to 28 January 2007was £51.2 million and 7.3 per cent higher than in the previous accountingperiod; this increase included higher revenue from replica products of £35.3million and of £10.4 million for equipment and accessories. The increase in revenue from replica products came from England products boostedby the 2006 FIFA World Cup, a number of new kits launched by the major FAPremiership clubs which had changed either their kit manufacturer or theirsponsor and also from the sale of Glasgow Rangers' products, the licence forwhich was acquired in June 2006. We continue to be focused on our "Serious about sport" strategy, by providing awide range of branded sports products to our customers. This includes rangesfrom the premium brands of adidas and Nike, supplemented with more competitivelypriced products from secondary brands and sports brands such as Under Armourwhere JJB is the principal retailer in the UK. This focused approach has led toagreements with adidas and Nike to create "in-store" areas for these brandswithin our superstores. The programme to create the "in-store" areas was pilotedtowards the close of the accounting period just ended and is being rapidlyimplemented. As at 8 April 2007, 40 adidas and 26 Nike areas had been createdand plans are in place to complete a further 184 areas before 29 July 2007. Ourplans are to introduce up to 600 of these in-store areas during 2007 and 2008.The trading results from those stores that have had the benefit of the newin-store areas are encouraging both in terms of the increase in revenue and ofgross margin. The strong competitive stance that we took in the second half of the accountingperiod to January 2006 has eased slightly during the 52 weeks to 28 January 2007as we seek to further differentiate our product ranges from those of our majorcompetitors as part of our "Serious about sport" strategy. This differentiationpolicy is clearly shown by the creation of the "in-store" areas referred toabove, the successful introduction of the Under Armour brand from the UnitedStates and the wide range of accessories, golf and cycling products which are onsale in our stores. Our Professional Teamwear Division has fully integrated the sourcing, supply anddistribution of the product ranges of the Glasgow Rangers franchise which weacquired during the summer of 2006 and is now responsible for the product rangesof Everton, Wigan Athletic, Wigan Warriors, Leeds Rhinos and the NorthernIreland Football Association. Approaches are being made to a number of otherclubs, but new contracts will only be signed if JJB can make a satisfactoryreturn on the product ranges. Our transactional website (www.jjbsports.com) has successfully completed itsfirst 18 months of trade. Revenue in the 4 weeks to Christmas 2006 was 150 percent higher than in the same period last year. During the last six months, wehave taken in-house the operations of both the Glasgow Rangers and Evertonwebsites and these will be joined in-house with the JJB website in the next fewmonths. We will then be fully responsible for all the operational aspects of thethree websites. The acquisition in May 2006 of the whole of the share capital of the companieswhich operate The Golf Channel and The Golf TV Pro-Shop Channel extends ourmulti-channel offering. We are now beginning to retail a wider range of golf andfitness products on the Golf TV Pro-Shop Channel which will shortly bere-branded as "JJB Sports TV". These products are also available for sale in oursuperstores. The results of Golf TV from the date of acquisition have beenconsolidated within our Group accounts and include revenue of £3.8 million andan operating loss of £623,000. JJB stores and store development During the 52 weeks to 28 January 2007, we opened 13 sites and closed 35 sites.The openings included 7 combined health clubs/superstores, 3 standalonesuperstores and 2 football stores acquired from Glasgow Rangers and Everton. Theclosures included 21 stores which formerly traded as Icon stores and 6superstores which closed as a result of relocations to newly opened sites. At 28 January 2007 we operated from 416 stores which contained 4.295 millionsquare feet of retail selling space. This compares to a total of 438 storescomprising 4.398 million square feet at 29 January 2006. Our plans for store openings during the current accounting period are to open 9combined health clubs/superstores (3 of which have already been opened before 8April 2007), and 10 standalone superstores. We have already identified 17 sitesfor potential openings of combined units during the accounting period commencingFebruary 2008. Leisure Division During the 52 weeks to 28 January 2007 we opened 7 combined health clubs/superstores. The total combined units in operation at the end of the accountingperiod was 39 and these sites include 6 indoor soccer centres. Membership levels at the health clubs continue to be very satisfactory with atotal of 174,700 members at the 39 health clubs at 28 January 2007, compared to136,800 at 29 January 2006 from the 32 health clubs in operation at that date.This represents a total increase of 27.7 per cent and includes a like-for-likeincrease of 10.0 per cent in the number of members in the 32 health clubs thathave been open throughout the accounting period. The success in the high levelsof membership in our clubs results from the strong value-for-money offering offirst-class facilities at very competitive subscription rates. Total revenue for the 52 weeks to 28 January 2007 in the Leisure Divisionincreased by 38.5 per cent to £123.5 million and included an increase in revenuefrom the health clubs of 32.8 per cent to £55.8 million. The operating profit ofthe Leisure Division, before any allocation for head office/distribution centrecosts, increased by 42.0 per cent to £21.4 million and after deducting theDivision's share of these costs their operating profit increased by 43.3 percent to £15.9 million. The profitability of the Division is adversely affectedby the maturity profile of the combined units which take longer to reachmaturity than stand-alone superstores, partly because of their higherpre-opening costs as a result of the treatment of rent-free periods under IFRS.The operating loss of every newly opened combined unit in its first year oftrading averages £250,000 The continuing success of the concept of combined units underpins the Board'sdecision to maintain the significant opening programme, referred to in theprevious section. Office of Fair Trading An appeal made by JJB to the independent Competition Appeal Tribunal (CAT) inMay 2005 against the decision of the Office of Fair Trading (OFT) regardingallegations of price-fixing in certain replica kit products during 2000 and 2001resulted in a reduction in the amount of the penalty imposed by the OFT from£8.4 million to £6.7 million. The Board of JJB was disappointed with the CAT's judgment on liability and theamount of the subsequent reduction in the penalty and appealed against parts ofthe CAT's liability and penalty judgment to the Court of Appeal. The decision ofthe Court of Appeal, given on 19 October 2006, supported the CAT's judgment andJJB's subsequent application for leave to appeal to the House of Lords wasrefused by the House of Lords itself. At 29 January 2006, JJB had provided £3.9 million against the penalty and theinterest thereon. Having exhausted its right to appeal, JJB paid the penalty andinterest amounting to £8.0 million to the OFT on 26 February 2007. JJB hasprovided in full for this liability in its balance sheet at 28 January 2007which has resulted in a charge of £4.1 million in operating expenses in theConsolidated income statement for the 52 weeks to 28 January 2007. On 5 March 2007 The Consumers Association lodged a representative action fordamages against JJB at the CAT. The action is brought on behalf of consumers forlosses claimed to be suffered by purchasing certain replica shirts in 2000 and2001. Our defence against this action was lodged on 4 April 2007. In March 2007,we made an offer to give a free England shirt and mug to anyone who presentedone of these old replica shirts in our stores. Provision has been made for boththe cost of this free offer and of the legal action by The Consumers Associationin the Consolidated income statement for the 52 weeks to 28 January 2007 but theamounts concerned are not material. Current trading As the Easter holiday falls at different times of the year and can distorttrading patterns, we give below information on current trading for the 9 weeksto 1 April 2007, before the effect of the first Easter week's trade in 2007. Total revenue for the 9 weeks to 1 April 2007 was 4.3 per cent higher than thesame period last year and included a like-for-like increase of 3.2 per cent fromlocations which had traded for over 52 weeks. The gross margin earned in thisperiod in the retail stores was 250 basis points higher than last year. All product categories and the health clubs contributed to this increase inrevenue except for replica kit products where revenue was lower than thatachieved in the comparative period. Demand for the new England shirt, launchedin February 2007, was lower than that for the shirt launched in February 2006.Our gross margins across all categories have been higher than those achieved inthe same period last year. The strength of our trading results over the early weeks of the currentaccounting period gives me confidence that our policies of productdifferentiation and the expansion of our health clubs, are the correct ones topursue. However, the lack of a major international football tournament in thesummer of 2007 will make comparatives with last year's figures in this categoryimpossible to match. T W KnightChief Executive12 April 2007 Consolidated income statement for the 52 weeks to 28 January 2007 Unaudited Audited 52 weeks to 52 weeks to 28 January 29 January 2007 2006 £'000 £'000 Continuing operations Revenue 810,287 745,238 Cost of sales (425,314) (393,075) ---------- ----------Gross profit 384,973 352,163 Other operating income 5,163 3,177 Distribution expenses (23,844) (21,722) Administration expenses (33,439) (30,705) Selling expenses (293,832) (268,564) ---------- ----------Operating profit 39,021 34,349 ---------- ---------- Operating profit is stated after (charging) crediting Increase in provisions relating to legal penalty and interest thereon (4,063) (1,882) Charges relating to the closure of Icon stores (3,343) - Net (loss) gain on disposal of property, plant and equipment (1,317) 2,917 ---------- ---------- (8,723) 1,035 ---------- ----------Finance income 9,437 8,896 Finance costs (9,965) (9,498) ---------- ----------Profit before taxation 38,493 33,747 Taxation (Note 4) (12,668) (3,510) ---------- ----------Profit after taxation for the period attributable to equity holders of the parent 25,825 30,237 ========== ========== Basic earnings per ordinary share - (Note 6) Pence 11.07 13.10 Diluted earnings per ordinary share - (Note 6) Pence 11.07 13.10 Consolidated statement of recognised income and expensefor the 52 weeks to 28 January 2007 Unaudited Audited 52 weeks to 52 weeks to 28 January 29 January 2007 2006 £'000 £'000 Exchange differences on translation of foreign operations 163 45 --------- ---------Net income recognised directly in equity 163 45 Profit after taxation for the period 25,825 30,237 --------- ---------Recognised income and expense for the period 25,988 30,282 ========= ========= Reconciliation of movements in equity for the 52 weeks to 28 January 2007 Unaudited Total equity £'000 At 29 January 2006 364,593 Recognised income and expense for the period 25,988 Share issues 3,359 Share based payment reserve 297 Investment in own shares (3,083) Dividends paid (23,238) Scrip dividends re-invested 9,110 ---------At 28 January 2007 377,026 ========= Consolidated balance sheet as at 28 January 2007 Unaudited Audited As at As at 28 January 29 January 2007 2006 £'000 £'000 Non-current assets Goodwill 188,459 186,084 Other intangible assets 27,397 10,191 Property, plant and equipment 198,980 189,222 --------- --------- 414,836 385,497 --------- ---------Current assets Inventories 128,082 120,266 Trade and other receivables 38,205 38,738 Current asset investment 168,117 168,117 Cash and cash equivalents 23,566 34,860 --------- --------- 357,970 361,981 --------- ---------Total assets 772,806 747,478 --------- ---------Current liabilities Trade and other payables (104,546) (81,530) Tax liabilities (14,985) (13,678) Loan notes (168,117) (168,117) Short-term provisions (13,277) (7,330) --------- --------- (300,925) (270,655) --------- ---------Net current assets 57,045 91,326 --------- ---------Non-current liabilities Bank loans (32,812) (59,885) Deferred tax liabilities (23,416) (19,785) Deferred lease incentives (38,627) (32,560) --------- --------- (94,855) (112,230) --------- ---------Total liabilities (395,780) (382,885) --------- ---------Net assets 377,026 364,593 ========= =========Equity Share capital 11,892 11,538 Share premium account 169,334 157,219 Capital redemption reserve 1,069 1,069 Investment in own shares (3,083) - Share based payment reserve 297 - Foreign currency translation reserve 187 24 Retained earnings 197,330 194,743 --------- ---------Equity attributable to equity holders of the parent 377,026 364,593 ========= ========= Consolidated cash flow statement for the 52 weeks to 28 January 2007 Unaudited Audited 52 weeks to 52 weeks to 28 January 29 January 2007 2006 Restated £'000 £'000 Net cash inflow from operating activities (Note 7) 80,338 43,976 ---------- ---------- Cash flows from investing activities Interest received 9,437 8,896 Purchase of subsidiary (997) - Proceeds on disposal of property, plant and equipment 1,956 7,981 Purchase of intangible assets (18,487) (10,224)Purchase of property, plant and equipment (33,124) (47,443) ---------- ----------Net cash flow used in investing activities (41,215) (40,790) ---------- ---------- Cash flows from financing activities Interest paid (9,930) (9,413) Dividends paid (14,128) (23,077) Investment in own shares (3,083) - Proceeds from issues of share capital 3,359 - Net proceeds from bank loans 17,892 59,850 Repayment of bank loan (45,000) (25,000) ---------- ----------Net cash (outflow)inflow from financing activities (50,890) 2,360 ---------- ---------- Net (decrease) increase in cash and cash equivalents (11,767) 5,546 Cash and cash equivalents at beginning of period 34,860 29,323 Effect of foreign exchange rate changes 473 (9) ---------- ----------Cash and cash equivalents at end of period 23,566 34,860 ========== ========== Note The Directors consider that the reclassification of "Interest paid" from "Cashflows from investing activities" to "Cash flows from financing activities" to bemore appropriate given the nature of the cash flow item. Notes to the Consolidated financial statements for the 52 weeks to 28 January2007 1. Basis of preparation The Group's unaudited Preliminary results for the 52 weeks to 28 January 2007were approved by the Board of Directors on 11 April 2007. The Group's Preliminary results for the 52 weeks to 28 January 2007 have beenprepared in accordance with International Financial Reporting Standards('IFRS'), as adopted for use in the EU and the accounting policies adopted inthe preparation of these financial statements are consistent with those set outin the Group's Annual financial statements for the 52 weeks to 29 January 2006,published by the Company on 13 June 2006. Copies of these Annual financialstatements are available from the Secretary, JJB Sports plc, Challenge Way,Wigan, WN5 0LD and can be downloaded or viewed via the Group's website,www.jjbcorporate.co.uk. 2. Statement of compliance These Preliminary results for the 52 weeks to 28 January 2007, contain condensedconsolidated financial statements which have been drawn up in accordance withIFRS and the provisions of IFRS 1. The condensed consolidated financialstatements are unaudited and do not include all the information required forfull annual financial statements. The financial information for the 52 weeks to 29 January 2006 contained withinthese condensed consolidated financial statements has been produced usingextracts from the statutory accounts prepared under IFRS and does not representfull accounts within the meaning of Section 240 of the Companies Act 1985. Thestatutory accounts for that period, have been delivered to the Registrar ofCompanies; these accounts incorporated an unqualified audit report and did notcontain a statement under section 237(2) or (3) of the Companies Act 1985. The statutory accounts for the 52 weeks to 28 January 2007 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 52 weeks to to 28 January 29 January 2007 2006 £'000 £'000 Revenue JJB retail stores 686,836 656,086 Leisure Division (including associated retail stores) 123,451 89,152 ---------- ----------Total revenue 810,287 745,238 ========== ==========Operating profit JJB retail stores 23,107 23,241 Leisure Division (including associated retail stores) 15,914 11,108 ---------- ----------Total operating profit 39,021 34,349 Net finance costs (528) (602) ---------- ----------Profit before taxation 38,493 33,747 ========== ========== 4. Taxation The net taxation charge shown in the Consolidated income statement for the 52weeks to 28 January 2007 has been based on the current rate of taxation of 30per cent (2006: 30 per cent.) 52 weeks 52 weeks to to 28 January 29 January 2007 2006 £'000 £'000 Current tax: UK corporation tax 9,030 5,649 Foreign tax 207 57 Prior year adjustment (207) (2,692) --------- --------- 9,030 3,014 --------- ---------Deferred tax: Current period 3,638 5,131 Prior year adjustment - (4,635) --------- --------- 3,638 496 --------- ---------Taxation charge 12,668 3,510 ========= ========= The prior year adjustment to current tax in the comparative period arose as aresult of the finalisation of a number of years corporation tax liabilities withthe Inland Revenue. Following the agreement of these corporation taxliabilities, the deferred tax liability arising on the difference between thenet book value of property, plant and equipment and their tax written downvalue, was recalculated and the provision reduced. The deferred tax charge in the current period has resulted from the depreciationrates on qualifying assets being lower than capital allowances for tax purposes. 5. Dividends 52 weeks to 52 weeks to 28 January 29 January 2007 2006 £'000 £'000 Amounts recognised as distributions to equity holders in the period: Final dividend for the 52 weeks to 29 January 2006 of 7.0 pence net per ordinary share paid on 9 August 2006 (2006: 7.0 pence) 16,154 16,154 Interim dividend for the 52 weeks to 28 January 2007 of 3.0 pence net per ordinary share paid on 5 January 2007 (2006: 3.0 pence) 7,084 6,923 --------- --------- 23,238 23,077 ========= =========Proposed final dividend for the 52 weeks to 28 January 2007 of 7.0 pence net per ordinary share (2006: 7.0 pence) 16,530 16,154 ========= ========= The proposed final dividend is subject to approval by shareholders at the 2007Annual General Meeting and has not been included as a liability in theseCondensed consolidated financial statements. 6. Earnings per share The calculation of basic earnings per ordinary share is based upon the profitafter taxation for the period attributable to equity holders of the parent of£25,825,000 (2006: £30,237,000) and 233.26 million ordinary shares (2006: 230.77million ordinary shares), being the weighted average number of shares in issueduring the period. The diluted earnings per ordinary share calculation is based upon the profitafter taxation for the period attributable to equity holders of the parent of£25,825,000 (2006: £30,237,000) and 233.31 million ordinary shares, (2006:230.83 million ordinary shares), being the weighted average number of shares inissue during the period, used in the calculation of basic earnings per shareshown above, increased by the dilutive effect of ordinary shares issuablepursuant to options granted under employee share option schemes of 50,000ordinary shares (2006: 60,000 ordinary shares). 7. Reconciliation of operating profit to net cash inflow from operating activities 52 weeks 52 weeks to to 28 January 29 January 2007 2006 £'000 £'000 Operating profit from continuing operations 39,021 34,349 Depreciation and impairment of property, plant, equipment 18,432 18,387 Amortisation of other intangible assets 1,282 33 Net loss (gain) on disposal of property, plant and equipment 1,317 (2,917) Loss on disposal of property, plant and equipment relating to the closure of Icon stores 1,376 - Loss on disposal of goodwill - 30 Increase in provisions 5,947 2,361 Share based payment reserve 297 - --------- ---------Operating cash flow before movements in working capital 67,672 52,243 Increase in inventories (7,433) (7,547) Decrease (increase) in trade and other receivables 1,825 (2,946) Increase in trade and other payables 21,118 11,853 --------- ---------Cash generated by operations 83,182 53,603 Taxation paid (2,844) (9,627) --------- ---------Net cash inflow from operating activities 80,338 43,976 ========= ========= 8. Bank borrowings The Group's working capital is provided through a 5 year £60 million revolvingbank credit facility which commenced in June 2005. In June 2006, a Term loan of£18 million was obtained in order to finance the acquisition of the GlasgowRangers FC licensing agreement. 9. Analysis of net debt as at 28 January 2007 As at Other As at 29 January Cash non-cash 28 January 2006 Flow items 2007 £'000 £'000 £'000 £'000 Current asset investment 168,117 - - 168,117 Cash and cash equivalents 34,860 (11,767) 473 23,566 --------- --------- --------- --------- 202,977 (11,767) 473 191,683 Current liabilities Loan notes (168,117) - - (168,117) Non-current liability Bank loans (59,885) 27,108 (35) (32,812) --------- --------- --------- --------- (25,025) 15,341 438 (9,246) ========= ========= ========= ========= 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, and based on legaladvice, JJB had made a charge of £2 million in respect of the penalty in itsConsolidated income statement for the 53 weeks to 30 January 2005. JJB was disappointed in parts of the CAT's judgement on liability and theconsequent amount of the reduction in its penalty. In consultation with itslegal advisers, JJB determined the specific grounds on which it wished to appealto a higher court. On the basis of further legal advice regarding the appeal tothe Court of Appeal, acknowledging the specific grounds on which the appeal wasto be heard together with the inherent uncertainty of the appeal process, JJBmade a further charge in respect of the penalty of £1.9 million in itsConsolidated income statement for the 52 weeks to 29 January 2006. On 19 October 2006 the Court of Appeal handed down its judgment dismissing JJB'sappeal against the OFT's and CAT's findings that JJB infringed the CompetitionAct 1998. JJB's subsequent application for leave to appeal to the House of Lordswas refused by the House of Lords itself. Having exhausted its right to appeal, JJB paid the penalty and interest,amounting to £7.9 million to the OFT on 26 February 2007. In acknowledgement ofthis liability, JJB has made a further charge in respect of the penalty and theinterest thereon of £4.0 million in its Consolidated income statement for the 52weeks to 28 January 2007. On 5 March 2007 The Consumers Association lodged a representative action fordamages against JJB at the CAT. The action is brought on behalf of consumers forlosses suffered by purchasing certain replica shirts in 2000 and 2001. JJB madean offer to give a free England shirt and mug to anyone who presented one ofthese old replica shirts in its stores. The cost of this free offer and aprovision for future legal costs has been expensed by JJB in its Consolidatedincome statement for the 52 weeks to 28 January 2007. 11. Related party transactions a) 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 28 January 2007, the Company entered into the followingtransactions with related parties who are not members of the Group: Income from Expenditure with related parties related parties 52 weeks 52 weeks 52 weeks 52 weeks to 28 to 29 to 28 to 29 January January January January 2007 2006 2007 2006 £'000 £'000 £'000 £'000 Whelco Holdings Limited 267 163 795 968 Executive Director's family trust - - 150 150 E - View Properties Limited 504 - - - ========= ========= ========= ========= Amounts owed by Amounts owed to related parties related parties As at As at As at As at 28 29 28 29 January January January January 2007 2006 2007 2006 £'000 £'000 £'000 £'000 Whelco Holdings Limited 137 101 176 24 ========= ========= ========= ========= Whelco Holdings Limited is a company owned by members of the family of anExecutive Director of JJB Sports plc ("JJB"), operating itself or through itssubsidiaries, a number of businesses including that of Wigan Athletic FootballClub (WAFC), Wigan Warriors Rugby League Club (WWRLC) and the stadium in whichboth teams play which is known as the "JJB Stadium". During the 52 weeks to 28 January 2007, JJB incurred expenditure in its capacityas 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 28 January 2007, JJB made sales to Whelco HoldingsLimited and its subsidiary companies in respect of both football and rugbyrelated 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, have an interest). Following the opening of the new retailstore in 2003, JJB has continued to pay rent on a full commercial basis at therate of £150,000 per annum. JJB has sold 3 acres of a 10 acre site adjacent to its head office anddistribution centre, to E-View Properties Ltd, a company owned by members of afamily of an Executive Director of JJB. The sale price was based upon anassessment of land value in the area by an external property consultant andresulted in a profit on disposal of £82,000 which has been credited to theConsolidated income statement for the 52 weeks to 28 January 2007. 12. Events since the balance sheet date Final dividend The Board has proposed a final dividend of 7.0 pence net per ordinary share(2006: 7.0 pence) . In accordance with IAS 10, the proposed dividend has notbeen included as a liability in the Consolidated balance sheet at 28 January2007. Subject to shareholders approval, at the forthcoming Annual generalmeeting (AGM), this dividend will be paid on 3 August 2007 to shareholders onthe register at 18 May 2007. The Board is proposing to offer a scrip dividendalternative which will also be subject to approval by shareholders at theforthcoming AGM. Office of Fair Trading On 5 March 2007, The Consumers Association lodged a representative action fordamages against JJB at the Competition Appeal Tribunal. Details of this matterare set out in note 10 of these Notes to the Consolidated financial statementson page 14. This information is provided by RNS The company news service from the London Stock Exchange