JJB.L Regulatory News (JJB)

16 Apr 2008 07:01

JJB Sports PLC16 April 2008 JJB Sports plc Preliminary results for the 52 weeks to 27 January 2008 JJB Sports plc ("JJB") announces its Preliminary unaudited results for the 52weeks to 27 January 2008 Unaudited Audited 52 week 52 week Period PeriodSummary: 2007/8 2006/7 Change Revenue £811.8m £810.3m + 0.2%Gross margin 50.0% 47.5% + 250 bpsAdjusted operating profit* £34.3m £47.7m -28.2%Operating profit £11.3m £39.0m -71.1%Adjusted profit before taxation* £33.8m £47.2m -28.5%Profit before taxation £10.8m £38.5m -71.9%Adjusted basic earnings per share* 10.89p 14.21p -23.4%Basic earnings per share 4.07p 11.07p -63.2%Interim dividend paid 3.0p 3.0pFinal dividend proposed 7.0p 7.0p *Adjusted operating profit, adjusted profit before taxation and adjusted basicearnings per share are shown before charging various exceptional operating itemstotalling £23.0 million (2007: £8.7 million). • Slight increase in total revenue despite difficult comparatives with the period including the 2006 World Cup which included a similar increase in like-for-like revenue. • 250 basis points increase in the gross margin due to higher margins achieved on footwear and replica kit revenue and an increased contribution from the fitness clubs. • Significant restructuring provision of £25.0 million made to implement a store closure programme; store closures will result in strengthened store portfolio. • Continued re-energisation of the retail store chain; introduction of product ranges from new own brands, accompanied by a roll-out in the refits of existing stores. • Final dividend proposed maintained at the rate of 7 pence per ordinary share. • Total revenue for the 7 weeks to 16 March 2008 (pre Easter) is 3.5 per cent lower than the comparative period and is accompanied by a fall in gross margin of less than 100 basis points. • Continued expansion during 2008/9 into combined fitness clubs/ superstores. Commenting today, Roger Lane-Smith, Chairman, said: - "We are taking significant action to improve the performance of JJB's retailstores. Whilst we have identified a number of stores for closure, which willitself strengthen our remaining store portfolio, we are also investing toimprove the quality of our stores and product with further store refits, theintroduction of new products from our own brands and the implementation of stafftraining and incentivisation programmes. We also plan to continue to open more combined fitness clubs and superstores,which continue to deliver strong results. Whilst we expect current difficult market conditions to continue to affectconsumers in the short term, we believe the action we are taking represents aturning point for the Company, which will benefit performance over themedium-term." For further information, please contact Chris RonnieDavid Greenwood 01942 221400JJB Sports plc Lydia PretzlikCharlotte Walsh 020 7379 5151Maitland A copy of this press release can also be viewed on the JJB Sports plc corporatewebsite, www.jjbcorporate.co.uk Chief Executive's Review Trading Results The operating results for the 52 weeks to 27 January 2008 together with thecomparative figures for the 52 weeks to 28 January 2007, are shown below. Wehave decided upon an early adoption of IFRS8 "operating segments". Accordingly,our segmental information is now based upon the two business segments aboutwhich we appraise separate financial information when deciding how to allocateresources and to assess performance. These two segments comprise (a) all ourretail operations and (b) our fitness clubs. The segments that we previouslyused were (a) standalone retail operations and (b) the combined units whichincluded both the fitness clubs and the retail stores situated above them. Webelieve that this new segmentation gives a more meaningful insight into our twooperating divisions. 52 weeks to 27 January 2008 52 weeks to 28 January 2007 Retail Fitness Retail Fitness Operations Clubs Total Operations Clubs Total £'000 £'000 £'000 £'000 £'000 £'000 Revenue 745,474 66,280 811,754 754,488 55,799 810,287 ======== ====== ======= ======== ====== ======= Gross Profit 342,403 63,709 406,112 331,432 53,541 384,973 Location net operatingexpensesbeforeexceptionaloperatingitems (292,968) (46,597) (339,565) (271,157) (38,765) (309,922) -------- ------- ------- -------- ------- -------Operating profitbeforecentralcosts andexceptionaloperatingitems 49,435 17,112 66,547 60,275 14,776 75,051 ======== ======= ======== =======Central costs (32,278) (27,307) ------- -------Operating profitbeforeexceptionaloperatingitems 34,269 47,744 Exceptional operating (22,974) (8,723)items ------- -------Operating profit 11,295 39,021 ======= ======= Retail operations Revenue from retail operations for the 52 weeks to 27 January 2008 fell by £9.0million (1.2 per cent) compared to the previous accounting period which includeda like-for-like decrease, on stores which have been in operation for over 52weeks, of 0.5 per cent. All product categories, with the exception of replicakit products, achieved similar or higher levels of revenue but the strongcomparatives from the FIFA World Cup in the summer of 2006 could not be matchedin the summer of 2007; over the whole 52 weeks, revenue from England relatedproducts fell by £23.4 million. The gross margin achieved on the retail operations for the 52 weeks to 27January 2008 was 45.9 per cent compared to 43.9 per cent in the correspondingperiod. This improvement reflects higher margins from our ranges of footwear andreplica products. The gross margin would have been slightly higher had it notbeen for the extensive stock clearance programme that we carried out duringJanuary 2008 which resulted in a more current stock position by 27 January 2008. Location net operating expenses before exceptional operating items increased by8.0 per cent to £293.0 million, mainly as a result of increased payroll costsand inflationary increases in power and fuel costs. As a result, operating profit from the retail stores, before central costs andexceptional operating items, was £49.4 million, compared to £60.3 million lastyear. Fitness clubs Revenue from the fitness clubs increased by 18.8 per cent to £66.3 million as wecontinued our expansion into combined units; this included a like-for-likeincrease of 3.7 per cent; we operated from 39 clubs at 28 January 2007 and from49 clubs at 27 January 2008. The gross margin continues at a very high level andfor the accounting period just ended, was 96.1 per cent. Location operating expenses before exceptional operating items increased by 20.2per cent to £46.6 million resulting in an operating profit before central costsand exceptional operating items of £17.1 million, a 15.8 per cent increasecompared to the previous accounting period. Exceptional operating items Exceptional operating items for the 52 weeks to 27 January 2008 total £23.0million and include a provision in respect of the re-structuring of our retailstore chain of £25.0 million relating to store closure costs of 72 stores whichwe are committed to close in April 2008. Included in that store number is 7which we are to re-badge as "Original Shoe Company" stores. This compares toexceptional operating items in the previous accounting period of £8.7 million,including £4.1 million relating to the final costs of the action taken againstus by the Office of Fair Trading and a provision of £3.3 million following theclosure of our Icon chain of stores. Taxation and Dividend The effective rate of taxation on the Group's profit before taxation is 10.8 percent compared to 32.9 per cent in the previous accounting period. This decreaseresults from the calculation of deferred tax liabilities at the new corporationtax rate of 28.0 per cent which becomes effective on 1 April 2008. If thedeferred tax liability had been calculated at the former corporation tax rate of30.0 per cent, the effective rate of tax would have been 30.1 per cent. Theeffective rate of 32.9 per cent in the prior year was higher than the thencurrent corporation tax rate because of the increase in provisions relating tothe legal penalty and interest thereon which were regarded as being disallowablefor tax purposes. The Board has proposed, subject to approval by the shareholders at theforthcoming Annual General Meeting, to maintain the rate of the final dividendat 7.0 pence net per ordinary share. If approved, the final dividend will bepaid on 8 August 2008 to shareholders on the share register at the close ofbusiness on 11 July 2008 and the shares will trade ex-dividend from 9 July 2008. The total of the interim dividend of 3 pence per ordinary share for the 52 weeksto 27 January 2008, paid on 9 January 2008, together with the proposed finaldividend, is covered 0.4 times calculated upon basic earnings per ordinary sharebut is covered 1.1 times calculated on the adjusted basic earnings per share.The dividend yield, based on the share price of 112.5 pence at 25 January 2008,will be 8.9 per cent if the proposed final dividend is approved. Review of Balance sheet Capital expenditure Capital expenditure on property, plant and equipment for the 52 weeks to 27January 2008 was £27.3 million compared to £33.1 million in the previousaccounting period. The majority of this capital expenditure was spent on thecombined fitness club/superstore sites. A total of 9 sites were opened duringthe 52 weeks to 27 January 2008 (although one of the attached superstores hadnot opened at the end of the accounting period), compared to 7 in the previousaccounting period, although much of the capital expenditure on 3 clubs whichopened in the early months of the accounting period to 27 January 2008 wasincluded in the capital expenditure for the previous accounting period. Current Asset Investment In October 2007, we acquired a strategic interest in Umbro plc ("Umbro") for£26.5 million, equivalent to 10.12% of its issued share capital, at a price(including costs) of 179.6 pence per share. The current asset investment has been valued in the Consolidated balance sheetat 27 January 2008 at 190.3 pence being the market price of Umbro's shares onthat day and the gain on the revaluation of £1.6 million has been taken toequity. These shares, pursuant to a Scheme of Arrangement, were acquired by NikeVapour Ltd for 193.06 pence per share in March 2008 giving a gain in the currentaccounting period of £434,000. Inventories The value of inventories at 27 January 2008 was £115.0 million, 10.2 per centlower than at 28 January 2007, partly as a result of the extensive clearanceprogramme of non-current stock in January 2008 and partly from lower levels ofEngland replica stock because of a later launch of the new kit in 2008. Net debtThe Group's net debt at 27 January 2008 was £42.2 million compared to £9.2million at 28 January 2007. The principal reason for the increase in net debt isthe acquisition of the shares in Umbro Plc at a cost of £26.5 million which, asreferred to above, have subsequently been sold to Nike Vapour Ltd in March 2008. Operational review Retail operations At the time of publication of our interim results in September 2007, we set outour plans for the re-energisation of our retail stores whilst maintaining ourfocus upon being "Serious about sport". During the last 26 week period, we havecommenced a number of initiatives which have started this re-energisation: - • We have undertaken an extensive clearance programme of non-current stock throughout January 2008 and whilst this has impacted our gross margins, it has left our stock package in a much cleaner position than at earlier period ends. • We are committed to increasing the proportion of our retail store revenue from our own brand products and have recently completed an agreement to licence the UK distribution rights of the Champion brand. Since the year end, we have also purchased the Travel Fox brand. We have doubled the number of staff in our design/sourcing department over the last few months in order to take advantage of the product opportunities presented by these new brands. We will continue to seek to acquire rights to other brands and believe that this will lead to enhanced levels of both revenue and gross margin. We also believe that these initiatives will reduce our dependency on the major bi-annual international football tournaments. • In November 2007, we refitted our existing store at The Trafford Centre in Manchester incorporating many new features and layouts, including a mezzanine floor. The trading results from this store since the re-opening have been very encouraging with double digit increases in revenue. We intend to refit up to 40 stores during the current year in both our out-of-town superstore and high street superstore formats. • We are today announcing the results of a major review of our existing store portfolio. Prior to the year end, we started to implement a plan to close 72 stores which we believe will not make any significant contribution to Group profits in the near future. Seven of these stores are to be re-badged as "Original Shoe Company". Many of these stores compete against other newer and larger stores that we trade from in nearby locations. It is intended that all these stores will close in April 2008. Provisions amounting to £25.0 million have been created in respect of these closures, which include the impairment of items within property, plant and equipment, tenancy costs expected to be incurred in exiting the relevant lease agreements and the attendant redundancy costs. We believe that these closures will leave us with a more profitable store portfolio that will be able to take full advantage of the other elements of our re-energisation plans which we set out in this section. • We have made a number of changes to the operation of our Distribution Centre in order to improve the level of service given to retail stores. The frequency of deliveries to stores has been considerably improved and the Distribution centre is now working a seven-day week and we have begun to pre-retail all products going to our best performing stores. • Two initiatives which have already been fully implemented are those relating to the introduction of a significant retail store staff incentivisation scheme and the opening of a Training Academy at Martland Park in Wigan. In September 2007, we opened a training academy with a team of ten dedicated trainers who are carrying out training programmes for all retail staff. We are focused on driving revenue through training and believe that this will improve customers' experiences within our stores and further differentiate us from our competitors. • On 28th January 2008 we acquired the whole of the share capital of the Original Shoe Company Limited ("OSC") for a cash consideration of £5m which was paid at the end of March 2008. OSC carries a range of branded lifestyle clothing and footwear products which have never been available within JJB. There are currently 60 OSC stores based predominately on the high street in the north of England and in Scotland. This fascia will be maintained and we also plan to convert some of our smaller high street stores into OSC stores. OSC will be run as a separate division of JJB, although it will share JJB's financing and marketing functions which will minimise any increase in central costs. The acquisition of OSC allows us to access new customers and to compete more effectively with other retailers in the branded lifestyle part of the retail sports trade without diluting our JJB strategy of being "Serious about sport". Fitness clubs During the 52 weeks to 27 January 2008 we opened 9 combined fitness clubs/superstores and acquired one stand-alone fitness club from Fitness First. Thetotal number of fitness clubs in operation at the end of the accounting periodwas 49 and these sites included 6 indoor soccer centres. For some time now, we have not considered the growth of our indoor soccercentres as being a strategic part of our future development and consequentlysold 5 of these centres to a subsidiary of Powerleague Group plc in February2008 for a cash consideration of £17.4 million. Membership levels at the fitness clubs continue to be very satisfactory. Therewas a total of 205,800 members at the 49 fitness clubs at 27 January 2008,compared to 174,700 members at 28 January 2007 from the 39 fitness clubs inoperation at that date. This represents a total increase of 17.8 per cent andincludes a like-for-like increase of 3.4 per cent in the number of members inthe 39 fitness clubs that have been open throughout the accounting period. Oursuccess in achieving the high levels of membership in our clubs results from thestrong value-for-money offering of first-class facilities at very competitivesubscription rates. The continuing success of the concept of combined units fully justifies theBoard's decision to maintain the opening programme, referred to in the nextsection of this Review. Property review and store locations During the 52 weeks to 27 January 2008, we opened 14 new retail stores andreopened 5 stores; during the same period we closed 26 retail stores. The 14openings comprised 8 stores situated above fitness cubs and 6 standalonesuperstores. The 26 closures included 7 retail stores which closed as a resultof relocations to newly opened nearby sites, with most of the other stores beingclosed because of their poor trading performance. The number of operating units is as follows: As at As at 27 January 28 January 2008 2007 Out-of-town superstores* 192 191High Street superstores 102 107Others - mainly small high street stores 115 118 ----------- ----------- 409 416 ----------- -----------* includes combined fitness club/superstores 44 37 ----------- -----------Retail selling space (square feet) 4,348,000 4,295,000 ----------- ----------- Our opening plans for the current accounting period comprise 10 combined fitnessclub/superstores and 9 other superstores. The sites of these openings are invarious stages of legal negotiation or actual construction. Sites identified foropening during the next accounting period comprise 14 combined fitness clubs/superstores and 4 other superstores. We have already referred in the Retail operations part of the Operational reviewon an earlier page, to our plans for the closure of a number of stores as aresult of a review of our existing store portfolio and to our plans for storerefits. Board changes David Greenwood, who has been Finance Director of the Company for 30 years,reaches his retirement age in August 2008 and is to step down as FinanceDirector on 30 April 2008. He will continue in his position of Company Secretaryuntil 27 July 2008. David will be replaced by David Madeley, who has been ourCommercial Director since 26 November 2007. The Board wishes to thank DavidGreenwood for his long service to the Company and wish him a very happyretirement. Current trading With Easter falling very early this year and the school holidays beingstaggered, it has been difficult to make direct comparisons with the equivalentperiod last year. We are therefore reporting our revenue for the 7 weeks to 16March 2008, before the start of the Easter period and will report during May inour Interim Management statement on the first 13 weeks of the current accountingperiod to 27 April 2008. Total revenue for JJB stores and fitness clubs for the 7 weeks to 16 March 2008was 3.5 per cent lower than the same period last year and includes alike-for-like reduction in revenue of 3.0 per cent on operating units which havebeen trading for over 52 weeks. The combined gross margin achieved in thisaccounting period was less than 100 basis points lower than that achieved in thesame period last year; this level of performance is not unexpected under theprevailing economic conditions. We acquired the Original Shoe Company chain of stores on 28 January 2008 and itwill be a number of months before we see the benefit from the sale of productswhich have been purchased by our own buyers. Whilst we do not expect the current difficult economic conditions to improve inthe short-term, we believe that the initiatives we are taking to improve thequality and performance of our retail stores, will result in a stronger Grouptrading position in the medium-term. This improved position will be supported bythe continued expansion into combined fitness clubs/superstores. C RonnieChief Executive16 April 2008 Consolidated income statement for the 52 weeks to 27 January 2008 Unaudited Audited 52 weeks to 52 weeks to 27 January 28 January 2008 2007 £'000 £'000Continuing operations Revenue 811,754 810,287 Cost of sales (405,642) (425,314) -------- --------Gross profit 406,112 384,973 Other operating income 3,314 5,163Distribution expenses (28,619) (23,844)Administration expenses (35,413) (33,439)Selling expenses (334,099) (293,832) -------- --------Operating profit 11,295 39,021 -------- -------- Operating profit is stated after (charging)creditingProvision for restructuring of retail store chain (24,970) -(Note 4)Increase in provisions relating to legal penalty and - (4,063)interest thereonCharges relating to the closure of Icon stores - (3,343)Net gain (loss) on disposal of property, plant and equipment 1,996 (1,317) -------- -------- (22,974) (8,723) -------- -------- Investment revenue 11,551 9,437Finance costs (12,442) (9,965)Share of results of associated undertaking 396 - -------- -------- Profit before taxation 10,800 38,493 Taxation (Note 5) (1,170) (12,668) -------- -------- Profit after taxation for the period attributable to equity holders of the parent 9,630 25,825 ======== ========Basic earnings per ordinary share - (Note 7) Pence 4.07 11.07Diluted earnings per ordinary share - (Note 7) Pence 4.07 11.07Adjusted basic earnings per ordinary share - (Note 7) Pence 10.89 14.21 Consolidated statement of recognised income and expensefor the 52 weeks to 27 January 2008 Unaudited Audited 52 weeks to 52 weeks to 27 January 28 January 2008 2007 £'000 £'000 Gain on revaluation of available-for-sale investment 1,555 -taken to equityTaxation on item taken directly to equity (435) -Exchange differences on translation of foreign operations (1,398) 163 -------- --------Net (expense) income recognised directly in equity (278) 163 Profit after taxation for the period 9,630 25,825 -------- --------Recognised income and expense for the period 9,352 25,988 ======== ======== Reconciliation of movements in equity for the 52 weeks to 27 January 2008 Unaudited Audited 52 weeks to 52 weeks to 27 January 28 January 2008 2007 £'000 £'000 Opening total equity 377,026 364,593 Recognised income and expense for the period 9,352 25,988Share issues 1,899 3,359Share based payment reserve 383 297Investment in own shares - (3,083)Dividends paid (Note 6) (23,672) (23,238)Scrip dividends re-invested 67 9,110 -------- --------Closing total equity 365,055 377,026 ======== ======== Consolidated balance sheet as at 27 January 2008 Unaudited Audited As at As at 27 January 28 January 2008 2007 £'000 £'000 Restated (see note below) Non-current assetsGoodwill 187,834 188,459Other intangible assets 25,417 27,397Property, plant and equipment 198,272 198,980Investment in associated undertaking (Note 8) 1,677 -Loan to associated undertaking (Note 8) 4,000 - -------- --------- 417,200 414,836 -------- ---------Current assetsInventories 114,984 128,082Trade and other receivables 45,412 38,205Current asset investments (Note 9) 196,217 168,117Cash and cash equivalents 14,199 23,566Current tax receivable 1,536 - -------- --------- 372,348 357,970 -------- ---------Total assets 789,548 772,806 -------- --------- Current liabilitiesTrade and other payables (110,874) (113,509)Current tax liabilities - (6,022)Loan notes (168,117) (168,117)Provisions (22,656) (12,380) -------- --------- (301,647) (300,028) -------- --------- Net current assets 70,701 57,942 -------- --------- Non-current liabilitiesBank loans (56,355) (32,812)Deferred tax liabilities (24,237) (23,416)Deferred lease incentives (39,950) (38,627)Provisions (2,304) (897) -------- --------- (122,846) (95,752) -------- ---------Total liabilities (424,493) (395,780) -------- ---------Net assets 365,055 377,026 ======== =========EquityShare capital (Note 11) 11,944 11,892Share premium account 171,248 169,334Capital redemption reserve 1,069 1,069Investment in own shares (3,083) (3,083)Share based payment reserve 680 297Foreign currency translation reserve (1,211) 187Retained earnings 184,408 197,330 -------- ---------Equity attributable to equity holders of the parent 365,055 377,026 ======== ========= Note The Consolidated balance sheet at 28 January 2007 has been restated byreclassifying taxes other than corporation tax amounting to £8,963,000 to "Tradeand other payables"; in the published accounts they had been included withCorporation tax in "Tax liabilities". There has also been a reclassificationamounting to £897,000 of provisions greater than one year to "Non-currentliabilities". The Directors consider that the reclassifications give a moreappropriate presentation. Consolidated cash flow statement for the 52 weeks to 27 January 2008 Unaudited Audited 52 weeks to 52 weeks to 27 January 28 January 2008 2007 £'000 £'000 Net cash from operating activities (Note 12) 45,531 80,339 -------- -------- Investing activitiesInterest received 11,263 9,437Dividend received on available-for-sale investment 288 -Purchase of subsidiary (31) (1,228)Cash and cash equivalents of subsidiary acquired - 231Release of deferred consideration relating to a 818 -subsidiaryProceeds on disposal of property, plant and equipment 5,146 1,956Proceeds on disposal of intangible assets 153 -Purchase of goodwill (339) -Purchase of intangible assets (182) (18,488)Purchase of property, plant and equipment (27,277) (33,124)Investment in associated undertaking (1,281) -Purchase of available-for-sale investment (26,545) - -------- --------Net cash used in investing activities (37,987) (41,216) -------- --------Financing activitiesInterest paid (12,399) (9,930)Dividends paid (23,605) (14,128)Investment in own shares - (3,083)Proceeds from issues of share capital 1,899 3,359Net proceeds from bank loans 23,500 17,892Repayment of bank loan - (45,000)Loan to associated undertaking (4,000) - -------- --------Net cash used in financing activities (14,605) (50,890) -------- -------- Net decrease in cash and cash equivalents (7,061) (11,767) Cash and cash equivalents at beginning of period 23,566 34,860 Effect of foreign exchange rate changes (2,306) 473 -------- --------Cash and cash equivalents at end of period 14,199 23,566 ======== ======== Notes to the Condensed consolidated preliminary results for the 52 weeks to 27January 2008 1. Basis of preparation The Group's unaudited Condensed consolidated preliminary results for the 52weeks to 27 January 2008 were approved by the Board of Directors on 15 April2008. The Group's Condensed consolidated preliminary results for the 52 weeks to 27January 2008 have been prepared in accordance with International FinancialReporting Standards ('IFRS'), as adopted for use in the EU and the accountingpolicies adopted in the preparation of these Condensed consolidated preliminaryresults are consistent with those set out in the Group's Annual financialstatements for the 52 weeks to 28 January 2007, published by the Company on 6June 2007, with the exception of the adoption if IFRS 7 'Financial Instruments:Disclosures' and IFRS 8 'Operating Segments'. Copies of these Annual financialstatements are available from the Company Secretary, JJB Sports plc, MartlandPark, Challenge Way, Wigan, WN5 0LD and can be downloaded or viewed via theGroup's website, www.jjbcorporate.co.uk 2. Statement of compliance These Condensed consolidated preliminary results for the 52 weeks to 27 January2008, contain condensed consolidated financial statements which have been drawnup in accordance with IFRS and the provisions of IFRS 1. The condensedconsolidated financial statements are unaudited and do not include all theinformation required to comply with the requirements of IFRS regarding fullannual financial statements. The financial information set out in these Condensed consolidated preliminaryresults do not constitute the Company's statutory accounts for the 52 weekperiods ended 27 January 2008 or 28 January 2007. The financial information forthe 52 week period ended 28 January 2007 is derived from the Annual financialstatements for that period which have been delivered to the Registrar ofCompanies. The auditors reported on those statements; their report wasunqualified, did not draw attention to any matters by way of emphasis withoutqualifying their report and did not contain a statement under s237 (2) or (3)Companies Act 1985. The audit of the statutory accounts for the 52 week periodended 27 January 2008 is not yet complete. These accounts will be finalised onthe basis of the financial information presented by the Directors in theseCondensed consolidated preliminary results and will be delivered to theRegistrar of Companies following the Company's Annual general meeting. 3. Segmental information The Group has adopted IFRS8 Operating Segments for the 52 weeks to 27 January2008. The adoption of IFRS8 has resulted in a change to those business segmentswhich have been disclosed in earlier Consolidated financial statements. The new business segments have been based upon the separate financialinformation which is provided to management in order for them to appraise theallocation of resources and the assessment of performance. The new segmentscomprise (a) all the Group's retail operations including any retail stores whichare attached to fitness clubs and (b) the fitness club operation, including theindoor soccer centres. Information regarding the Group's operating segments is reported below. Amountsreported for the 52 weeks to 28 January 2007 have been restated to make themconsistent with the amounts reported for the 52 weeks to 27 January 2008. Segmental information for the 52 weeks to 27 January 2008Consolidated income statement Retail Fitness operations clubs Total £'000 £'000 £'000 Revenue 745,474 66,280 811,754 --------- --------- ---------Gross profit 342,403 63,709 406,112Location net operating expenses before (292,968) (46,597) (339,565)exceptional operating items --------- --------- ---------Operating profit before central costs and exceptional operating items 49,435 17,112 66,547 --------- --------- Central costs (32,278) ---------Operating profit before exceptional operating items 34,269Exceptional operating items (22,974)Operating profit 11,295Investment revenue 11,551Finance costs (12,442)Share of results of associated undertaking 396 ---------Profit before taxation 10,800Taxation (1,170) ---------Profit after taxation for the period 9,630 --------- Segmental information for the 52 weeks to 28 January 2007Consolidated income statement Retail Fitness operations Clubs Total £'000 £'000 £'000 Revenue 754,488 55,799 810,287 --------- --------- ---------Gross profit 331,432 53,541 384,973Location net operating expenses before exceptional operating items (271,157) (38,765) (309,922) --------- --------- ---------Operating profit before central costs and exceptional operating items 60,275 14,776 75,051 --------- --------- Central costs (27,307) ---------Operating profit before exceptional operating items 47,744Exceptional operating items (8,723) ---------Operating profit 39,021Investment revenue 9,437Finance costs (9,965) ---------Profit before taxation 38,493Taxation (12,668) ---------Profit after taxation for the period 25,825 --------- 4. Provision for restructuring of retail store chain 52 weeks to 52 weeks to 27 January 28 January 2008 2007 £'000 £'000 Provision for restructuring of retail store chain 24,970 - ------- ------- The above provision reflects the direct expenditure expected to be incurred inclosing the stores which the Group, prior to the year end, was committed tocease trading from before the end of April 2008, following a review of theexisting store portfolio carried out prior to the end of the year. The provisioncomprises staff redundancy costs, losses on the disposal of property, plant andequipment and the costs expected to be incurred in exiting the relevant leaseagreements. 5. Taxation The current taxation charge shown in the Consolidated income statement for the52 weeks to 27 January 2008 has been based on the current rate of taxation of 30per cent (2007: 30 per cent). The deferred taxation charge shown in theConsolidated income statement for the 52 weeks to 27 January 2008 has been basedon the rate of taxation of 28 per cent (2007: 30 per cent). The main rate ofcorporation tax became 28 per cent on 1 April 2008. As a result of thisreduction in the rate of corporation tax, the timing differences will reverse atthis rate and have been calculated accordingly. 52 weeks to 52 weeks to 27 January 28 January 2008 2007 £'000 £'000Current tax: UK corporation tax 459 9,030Foreign tax 240 207Adjustment in respect of prior periods 109 (207) --------- -------- 808 9,030 --------- --------Deferred tax: Current period 362 3,638 --------- -------- 362 3,638 --------- --------Taxation charge 1,170 12,668 ========= ======== The deferred tax charge in the current period has resulted from the depreciationrates on qualifying assets being lower than the rates of writing down allowancesused for tax purposes. The taxation charge for the period can be reconciled to the profit beforetaxation shown in the Consolidated income statement as follows: 52 weeks to 52 weeks to 27 January 28 January 2008 2007 £'000 % £'000 % Profit before taxation: 10,800 38,493 -------- -------Tax at the current UK corporation tax rate 3,240 30.0 11,548 30.0Tax effect of expenses that are not deductible in determining taxable profit 237 2.2 1,624 4.2Tax effect of prior year UK corporation tax adjustments 109 1.0 (207) (0.5)Tax effect of share of results of associates (119) (1.1) - -Effect of different tax rates of subsidiaries operating in other jurisdictions (216) (2.0) (297) (0.8)Tax effect of change in tax rates (2,081) (19.3) - - -------- ------ ------- ------Taxation charge and effective tax rate for the period 1,170 10.8 12,668 32.9 -------- ------ ------- ------ 6. Dividends 52 weeks to 52 weeks to 27 January 28 January 2008 2007 £'000 £'000 Amounts recognised as distributions to equityholders in the period:Final dividend for the 52 weeks to 28 January 2007 of 7.0 pence net per ordinary share paid on 3 August2007 (2007: 7.0 pence) 16,556 16,154Interim dividend for the 52 weeks to 27 January 2008 of 3.0 pence net per ordinary share paid on 9January 2008 (2007: 3.0 pence) 7,116 7,084 -------- -------- 23,672 23,238 -------- --------Proposed final dividend for the 52 weeks to 27 January 2008 of 7.0 pence net per ordinary share (2007: 7.0 pence) 16,722 16,530 -------- -------- The proposed final dividend is subject to approval by shareholders at the 2008Annual General Meeting and has not been included as a liability in theseCondensed consolidated financial statements. 7. Earnings per share The calculation of the basic and diluted earnings per ordinary share are basedon the following data: 52 weeks to 52 weeks to 27 January 28 January 2008 2007 Earnings Earnings £'000 per £'000 per share share Earnings for the purposes of basic earnings per ordinary share anddiluted earnings per ordinary share,being net profit after taxationattributable to equity holders of theparent 9,630 4.07p 25,825 11.07p Exceptional items (net) 22,974 9.70p 8,723 3.74p Tax on exceptional items (net) (6,806) (2.88p) (1,398) (0.60p) -------- ------ -------- -------Earnings for the purposes of adjusted 25,798 10.89p 33,150 14.21pbasic earnings per ordinary share, -------- ------ -------- -------being net profit attributable toequity holders of the parent beforeexceptional operating items, aftertaxation Number of shares Number of ordinary shares (thousands) Weighted average number of ordinary 236,802 233,261shares for the purposes of basicearnings per ordinary share Effect of dilutive potential ordinaryshares:Share options 53 51 --------- ---------Weighted average number of ordinary 236,855 233,312shares for the purposes of diluted --------- ---------earnings per ordinary share Basic earnings per ordinary share 4.07p 11.07pDiluted earnings per ordinary share 4.07p 11.07pAdjusted basic earnings per ordinary share 10.89p 14.21p 8. Investment in associated undertaking On 14 June 2007, JJB Sports plc ("JJB") acquired 48 per cent of the issued sharecapital of KooGa Rugby Limited ("KooGa"), a company incorporated in England, fora consideration of £1,281,000. The business activity of KooGa is the manufactureof sporting apparel, principally for rugby. The Group uses the equity method of accounting for associated undertakings. At27 January 2008, the investment in the associated undertaking is as follows:- £'000 Consideration 1,281Fair value of net liabilities acquired 251 -------Goodwill on acquisition 1,532Fair value of net assets at 27 January 2008 145 -------Investment in associated undertaking 1,677 -------Loan to associated undertaking 4,000 ------- JJB's 48 per cent share of KooGa's assets, liabilities and results (postbecoming an associate of JJB) as shown in their management accounts is asfollows:- At 27 January 2008 £'000 Total assets 3,587Total liabilities (3,442) -------Net assets 145 -------Revenue 4,388 -------Profit before taxation 396 ------- KooGa has a co-terminous year end with JJB. There are no significantrestrictions on the ability of the associated undertaking to transfer funds toits shareholders, other than those imposed by legal requirements. The carryingvalue of the investment in the associated undertaking includes acquiredgoodwill. 9. Current asset investments At At 27 January 28 January 2008 2007 £'000 £'000 Available-for-sale investment carried at fair valueShares 28,100 -Loans and receivablesLoan note deposit 168,117 168,117 -------- --------- 196,217 168,117 -------- --------- The Shares represent a non-controlling interest of 10.12 per cent in the issuedshare capital of Umbro Plc purchased for strategic purposes. These shares werenot held for trading and accordingly are classified as available for sale. Thefair value of these shares is based upon their quoted market price at 27 January2008. The purchase price of the shares was £26,545,000 and the fair valueadjustment taken directly to equity during the 52 weeks to 27 January 2008 was£1,555,000. The loan note deposit represents a bank balance which acts as security for theloan notes which are included within Current liabilities in the Balance sheet.Interest is received on the loan note deposit at an interest rate linked toLIBOR (see Note 10). 10. Bank loans and loan notes The Groups' working capital is provided through a 5 year £60 million revolvingbank credit facility which commenced in June 2005, and a 6 year Term loan of £18million, in order to finance the acquisition of the Glasgow Rangers FC licensingagreement, which commenced in June 2006. Both facilities were arranged atinterest rates fixed to LIBOR and expose the Group to fair value interest raterisk. Loan notes were issued to the vendors of Blane Leisure Limited (Sports Division)in September 1998, as part of the consideration for the acquisition of thatcompany and its subsidiaries, under an instrument which provided that the loannotes were redeemable on any quarterly interest payment dates after 11 June1999. By a Deed of Variation dated 26 February 2001, the maturity date up towhich the loan notes can be redeemed was extended to 28 April 2011. Interest ispayable on the loan notes at a quarterly rate linked to LIBOR and the loan notesare secured by an identical amount held in a bank account and shown in theConsolidated balance sheet under Current assets as "Current asset investments"(see Note 9). 11. Share capital At At 27 January 28 January 2008 2007 £'000 £'000Authorised:331,600,000 ordinary shares of 5p each 16,580 16,580 ------- -------- Number £'000 '000Allotted, called up and fully paid:At 28 January 2007 11,892 237,837Scrip issue in lieu of dividend 1 24Issued on exercise of options 51 1,027 ------- --------At 27 January 2008 11,944 238,888 ------- -------- The Company has one class of ordinary shares and these carry no right to fixedincome. 12. Reconciliation of operating profit to net cash from operating activities 52 weeks to 52 weeks to 27 January 28 January 2008 2007 £'000 £'000 Operating profit from continuing operations 11,295 39,021Depreciation and impairment of property, plant, equipment 25,743 18,432Amortisation of other intangible assets 1,994 1,282Impairment of goodwill 178 -Net (gain) loss on disposal of property, plant and equipment (1,996) 1,317Loss on disposal of property, plant and equipment relating to the closure of Icon stores - 1,376Loss on disposal of intangible assets 14 -Increase in provisions 11,683 5,947Share based payment reserve 383 297 -------- ---------Operating cash flow before movements in working capital 49,294 67,672Decrease (increase) in inventories 13,098 (7,432)(Increase) decrease in trade and other receivables (7,207) 1,825(Decrease) increase in payables (1,312) 21,118 -------- ---------Cash generated by operations 53,873 83,183Taxation paid (8,342) (2,844) -------- ---------Net cash from operating activities 45,531 80,339 ======== ========= 13. Analysis of net debt as at 27 January 2008 As at Other As at 28 January Cash non-cash 27 January 2007 Flow items 2008 £'000 £'000 £'000 £'000Current asset investment Loan note deposit 168,117 - - 168,117Cash and cash equivalents 23,566 (7,061) (2,306) 14,199 --------- ------- ------- ---------- 191,683 (7,061) (2,306) 182,316Current liabilityLoan notes (168,117) - - (168,117)Non-current liabilityBank loans (32,812) (23,500) (43) (56,355) --------- ------- ------- ---------- (9,246) (30,561) (2,349) (42,156) ========= ======= ======= ========== 14. 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 27 January 2008, the Company entered into the followingtransactions with related parties who are not members of the Group: Income from related Expenditure with related parties parties 52 weeks to 52 weeks to 52 weeks to 52 weeks to 27 January 28 January 27 January 28 January 2008 2007 2008 2007 £'000 £'000 £'000 £'000 Whelco Holdings Limited 132 267 351 795Executive Director's family trust - - 50 150E - View Properties Limited - 504 - -KooGa Rugby Limited 182 - 1,680 -Source Lab Limited - - 486 - ======= ======== ======== ======== Amounts owed by Amounts owed to related parties related parties As at As at As at As at 27 January 28 January 27 January 28 January 2008 2007 2008 2007 £'000 £'000 £'000 £'000 Whelco Holdings Limited - 137 - 176KooGa Rugby Limited - Loan 4,000 - - - - Trade receivables/payable 1,156 - 1,786 -Source Lab Limited - - 208 - ======== ======== ======== ======== Whelco Holdings Limited, E-View Properties Limited and the Executive Director'sfamily trust, are all entities in which David Whelan, a former ExecutiveDirector of the Company, had an interest. David Whelan, his immediate family andrelated trusts, disposed of their entire shareholdings in the Company on 8 June2007 at which date they ceased to be a related party. Whelco Holdings Limited is a company owned by members of the family of DavidWhelan, operating itself or through its subsidiaries, a number of businessesincluding that of Wigan Athletic Football Club (WAFC), Wigan Warriors RugbyLeague Club (WWRLC) and the stadium in which both teams play which is known asthe "JJB Stadium". The Group incurred expenditure in its capacity of sponsors to WAFC and WWRLC andincurred costs in respect of the naming rights for the JJB Stadium. Advice wastaken from independent third parties as to the comparative levels of the costsof sponsorship and naming rights at other clubs and stadia, prior to theagreement of the amounts to be paid. The Group made sales to Whelco Holdings Limited and its subsidiary companies inrespect of both football and rugby related products. A store in Northampton had previously been leased by JJB from a third party fora number of years and was operated as a retail store until October 1998. Thefreehold of the store was subsequently acquired from the third party by theTrustees of an Executive Director's Accumulation and Maintenance Settlement, (aSettlement in which some members of the family of David Whelan have aninterest). Following the opening of the new retail store on 10 August 2003, JJBhas continued to pay rent on a full commercial basis at the rate of £150,000 perannum. The Group made purchases from Source Lab Limited, a company of which a directoris the brother of the Chief Executive of JJB Sports Plc. Following the disposal of his shareholdings in the Company, David Whelanacquired the Vizwear Garments business, an intangible asset of the Group, at anarms length valuation of £153,000. The Company acquired 48 per cent of the issued share capital of KooGa RugbyLimited ("KooGa") on 14 June 2007 (see Note 8). Purchases were made by theCompany from KooGa at arms length prices. Income represents interest which ispayable to the Company on a loan made to KooGa at a rate equivalent to thatcharged on the Company's revolving bank credit facility. The net amount of tradereceivables/payables is unsecured and will be settled in cash. No guaranteeshave been given. During the period 14 June 2007 to 27 January 2008, the Company has advanced aloan of £4 million to KooGa. Repayments will be made out of the profit aftertaxation of KooGa. 15. Events since the balance sheet date Final dividend The Board has proposed a final dividend of 7.0 pence net per ordinary share(2007: 7.0 pence). In accordance with IAS 10, the proposed dividend has not beenincluded as a liability in the Consolidated balance sheet at 27 January 2008.Subject to shareholders approval at the forthcoming Annual General Meeting(AGM), this dividend will be paid on 8 August 2008 to shareholders on theregister at 11 July 2008. Original Shoe Company On 18 December 2007 the Company agreed to acquire the whole of the issued sharecapital of the Original Shoe Company ("OSC") from Sports Direct InternationalPlc with effect from 28 January 2008 for a cash consideration of £5 million. OSCtrades from 60 stores which are predominately situated in the north of Englandand in Scotland. OSC sells a range of branded lifestyle clothing and footwear. Its premiumclothing brands include Ben Sherman, Henri Lloyd, adidas Originals andTimberland whilst its footwear includes trainers and other leisure footwearbrands such as Lacoste, K-Swiss, Caterpillar, Converse and Timberland. Sale of UK indoor soccer centres On 26 February 2008, the Company announced the sale of its 5 UK indoor soccercentres to a subsidiary of Powerleague Group plc ("Powerleague") for a cashconsideration of £17.4 million. The Company will retain ownership of the leasehold sites and continue tradingfrom the attached retail stores and fitness clubs. Powerleague will lease theindoor soccer centres and their wet sales facilities from the Company. Available-for-sale investment On 19 October 2007, the Company announced the purchase of 10.12 per cent of theissued share capital of Umbro Plc ("Umbro"). These shares were not held fortrading and accordingly were classified as an "available-for-sale investment" inits Consolidated balance sheet at 27 January 2008 (see Note 10). On 23 October 2007, the Boards of Umbro and Nike Vapour Ltd ("Nike") announcedthey had reached agreement on terms for a recommended cash acquisition to bemade by Nike for the entire issued and to be issued share capital of Umbro, suchacquisition to be effected by means of a Scheme of Arrangement under section 425of the Companies Act 1985 and section 899 of the Companies Act 2006. On 29 February 2008, the Company announced that it had entered into anirrevocable undertaking with Nike to vote its interest in the shares of Umbro infavour of this Scheme of Arrangement. On 3 March 2008, Umbro announced that the Scheme of Arrangement had becomeeffective and on 17 March 2008, the Company received the proceeds from the saleof its shareholding in Umbro for £28,534,000, which compares to its carryingvalue as at 27 January 2008 of £28,100,000. 16. Forward looking statement Certain statements made in this announcement are forward looking statements.Such statements are based on current expectations and are subject to a number ofrisks and uncertainties that could cause actual results to differ materiallyfrom any expected future events or results referred to in these forward lookingstatements. Unless otherwise required by applicable laws, regulations oraccounting standards, we do not undertake any obligation to update or revise anyforward looking statements, whether as a result of new information, futuredevelopments or otherwise. This information is provided by RNS The company news service from the London Stock Exchange