JJB.L Regulatory News (JJB)

18 Oct 2006 07:07

JJB Sports PLC18 October 2006 JJB Sports plc Interim results for the 26 Weeks to 30 July 2006 JJB Sports plc ("JJB"), the UK's largest publicly quoted sports retailer,announces its unaudited interim results for the 26 weeks to 30 July 2006. Summary: 2006 2005 Change Revenue £381.6m £340.4m +12.1%Gross margin 48.0% 49.5% -1.5%Operating profit £18.4m £17.6m +4.5%Net profit before taxation £18.2m £18.1m +0.5%Profit after taxation £12.8m £16.6m -22.9%Earnings per share 5.55p 7.20p -22.9%Interim dividend 3.0p 3.0p Key points: • Like-for-like revenue increased by 9.5 per cent • The gross margin continues to be affected by very strong competition within the sports retail sector • The reduction in earnings per share is attributable to the low rate of taxation in the comparative accounting period • The interim dividend has been maintained at the same level as last year • Total revenue and like-for-like revenue has increased by 8.8 per cent during the 11 weeks to 15 October 2006, accompanied by a slightly higher gross margin than that achieved in the comparative period • Focus on "Serious About Sport" strategy to differentiate JJB from its competitors • Continued expansion of the Leisure Division Commenting today, Roger Lane-Smith, Non-executive Chairman, said: "Although we are encouraged by the revenue improvement and the marginal increasein pre-tax profit, difficult trading conditions continue to challenge themargin. This is most evident in the sale of replica kit where the World Cupboosted sales, but these sales were subject to intense competition on pricing. JJB is focusing on its "Serious About Sport" strategy to differentiate itselffrom other retailers and to protect its margin by improving the quality of itsstores and products; I am pleased to report that we are gaining support from themajor brands in this approach. The Leisure Division also continues to grow and Iam very happy to report both increased profitability and membership numbers. Looking forward, the latest trading results give us confidence for asatisfactory outcome to the current accounting period. However, the retailsector continues to be highly competitive and Christmas will be an importanttrading period for us." For further information, please contact Tom KnightDavid Greenwood 01942 221400JJB Sports Plc Philip GawithCharlotte Barker 020 7379 5151Maitland A copy of this press release can also be viewed on the JJB Sports plc website,www.jjbcorporate.co.uk Chairman's statement-------------------- In my Chairman's Statement of the 27th July this year, I stated that I did notanticipate an improvement in trading conditions in the current financial year inview of the climate of severe competition in the sports retail market. Althoughwe are encouraged by the reported revenue improvement and the marginal increasein pre-tax profit, these difficult trading conditions continue to challenge ourmargin. This is most evident in the sale of replica kit where the World Cupboosted sales, but these sales were subject to intense competition on pricing. We are increasing the focus on our "Serious About Sport" strategy todifferentiate us from our competitors and to protect our margin by improving thequality of our stores and products; we are now receiving support from the majorbrands in this approach. This support is manifesting itself in our stores, whichare increasingly achieving a new and fresher look and with our product offerwhich includes an increased number of exclusive ranges at competitive prices. Wehave also been introducing new brands such as UnderArmour, a sports brand thathas taken America by storm. With these new products and brands, I believe theretail shopping experience at JJB will continue to flourish. Our acquisition of the licensing agreement with Glasgow Rangers is alreadyproving to be a successful and profitable addition to our Professional TeamwearDivision; following our acquisition of Golf TV Limited, we are moving towardsthe re-branding of their shopping channel to a JJB shopping channel. Our Leisure Division continues to grow and I am happy to report both increasedprofitability and membership which has increased by 34 per cent in the last 12months. We intend to open at least 12 combined health clubs/superstores in thecurrent financial year taking the total number in operation at the end ofJanuary 2007 to 44. Looking forward, the latest trading results give us confidence for asatisfactory outcome to the current accounting period. However, the retailsector continues to be highly competitive and Christmas will be an importanttrading period for us. We will continue to be focused upon value, quality andservice and to be "Serious About Sport". R Lane-SmithNon-executive Chairman18 October 2006 Chief Executive's statement--------------------------- Operating results The operating results for the 26 weeks to 30 July 2006 are compared to those forthe 26 weeks to 31 July 2005 below: - Revenue Operating profit (1) Operating profit (1) before HO/DC allocation after HO/DC allocation 2006 2005 2006 2005 2006 2005 £'000 £'000 £'000 £'000 £'000 £'000 _____ ______ ______ ______ ______ ______ Standalone stores 323,481 300,801 33,823 35,849 11,576 12,283Leisure Division 58,163 39,594 10,370 7,560 6,831 5,339 ______ ______ ______ ______ ______ ______ 381,644 340,395 44,193 43,409 18,407 17,622 ======= ======= Head office and distributioncentre costs (25,786) (25,787)('HO/DC') -------- -------- ------- ------- Operating profit (1) 18,407 17,622 18,407 17,622 ======== ======== ======== ======== (1) Operating profit is stated after charging net 'non-recurring' operatingitems of £1,677,000 (2005: after crediting net 'non-recurring' operating itemsof £306,000) Total revenue for the 26 weeks to 30 July 2006 was 12.1 per cent higher than forthe comparative period last year and included an increase in like-for-likerevenue of locations which have been trading for over 52 weeks of 9.5 per cent.Included in the increase in total revenue, is an increase in revenue from theLeisure Division of 46.9 per cent which reflects the increased number of tradinglocations within this Division. The gross margin achieved by the Group during the 26 weeks to 30 July 2006 was48.0 per cent which compares to 49.5 per cent achieved in the comparativeaccounting period. Included in these figures is the gross margin earned from allthe Group's retail stores (including those operated within the LeisureDivision), which fell to 44.4 per cent from 46.7 per cent; the gross marginearned from leisure facilities of 95.6 per cent compared to 94.9 per cent in thecomparative accounting period. Trading conditions and competition from other retailers continue to have aninfluence on the gross margin achieved in the Group's retail stores. Althoughthe accounting period to 30 July 2006 has benefited from the sales of World Cuprelated replica products amounting to approximately £14.1 million, we alsoachieved increases in sales of textiles, footwear and equipment/accessories.Particularly strong competition in World Cup related products resulted in lowerthan usual gross margins being achieved on these products. Operating expenses, net of operating income, increased by £14.0 million or 9.3per cent. This increase includes £9.0 million additional expenses arising fromthe higher number of Leisure Division sites in operation during the period whencompared to the same period last year. Operating expenses also include a netnon-recurring operating item of £1.28 million, being the creation of provisionsrelating to the closure, after 30 July 2006, of stores in the Icon division. Operating profit for the 26 weeks to 30 July 2006 increased by 4.5 per cent to£18.4 million from £17.6 million and profit before taxation increased to £18.2million from £18.1 million. Interest, taxation and dividend Net interest payable of £242,000, compares to net interest receivable in thecomparative period of £461,000 which mainly reflects the costs of increasedborrowing to finance the acquisition of the Glasgow Rangers Football Clublicensing agreement. The effective rate of taxation on the Group's profits before taxation was 29.5per cent which is in line with the UK Corporation Tax rate. The effective rateof taxation in the comparative period had been a very low 8.1 per cent whichresulted from the finalisation of a number of years corporation tax liabilitiesand is the principal reason for the fall in earnings per share to 5.55 pence perordinary share, from 7.20 pence. The Board has proposed an interim dividend of 3 pence per ordinary share, whichis unchanged from last year. Shareholders holding 56.4 per cent of the ordinaryshares, took the Company's offer of a scrip dividend in respect of their 2005/6final dividend. The Board is not proposing a similar choice to shareholders forthe 2006 interim dividend but will consider offering a scrip dividendalternative for the 2006/7 final dividend. The interim dividend will be paid on5 January 2007 to shareholders on the share register at the close of business on8 December 2006; the shares will trade ex-dividend from 6 December 2006. Balance sheet Capital expenditure on property, plant and equipment of £15.0 million, isconsiderably lower than the £31.2 million in the same period last year as aresult of the timing of costs associated with the opening of combined units,between the first half and second half of each financial year. Capitalexpenditure included £7.1 million on operating units opened during the 26 weeksto 30 July 2006 and £4.6 million on operating units to open during the secondhalf of the current accounting period. Expenditure on intangible assetsincreased to £18.4 million from £10.2 million as a result of the £18 millionacquisition of the Glasgow Rangers Football Club 10 year licensing agreement. Inventories at 30 July 2006 amounted to £149.8 million compared to £155.6million at the same date last year despite there being a small increase inretail store selling space between these two dates. Net debt at 30 July 2006 amounted to £31.5 million compared to £36.1 million at31 July 2005. Although further borrowings of £18 million had been taken up inJune 2006 to finance the acquisition of the Glasgow Rangers Football Clublicensing agreement, the net debt was below that at the same date last yearpartly because of the lower capital expenditure on property, plant and equipmentand partly because the final 2005/6 dividend was paid in August 2006, whilst theearlier year's dividend was paid in July 2005. JJB product and brand development The following table shows the percentage of JJB's store revenue for each productcategory: 26 weeks to 26 weeks to 30 July 2006 31 July 2005 % % Textiles 32.2 33.7 Footwear 30.4 32.9 Replica kit 16.4 12.2 Equipment and accessories 15.2 14.4 Golf and cycles 5.8 6.8 ----- ----- 100 100 ===== ===== Revenue from replica kit sales during the FIFA World Cup was approximately £14.1million higher than in the same period last year, which was a non-competitionyear. This increase in revenue did not have a material impact upon textile saleswhich produced an increase in revenue of 5.0 per cent as our product ranges weremore competitively priced and more attractive to the consumer than during theequivalent period last year. Competition in the retail sports industry is particularly strong in replica kitproducts and also in the footwear category; footwear revenue increased slightlycompared to the same period last year but at lower gross margins. We are continuing to emphasise JJB's sports-related stance by using the "SeriousAbout Sport" slogan in our advertising and by stocking a range of products fromthe two premium manufacturers - Nike and adidas, supported by lower-pricedranges from a number of other brands including our own exclusive brands ofPatrick, Olympus, Lotto, Le Coq Sportif and Slazenger. We have for some timebeen trying to achieve a greater product differentiation in our retail stores,when compared to those of our competitors, and we are now more confident thatour close relationships with both the Nike and adidas brands will result in amuch wider range of exclusive products being on offer at JJB. This closerelationship has also resulted in the introduction of new adidas in-store areaswithin our superstores and we hope to also roll-out Nike in-store areas in thenear future. We have recently begun to stock a range of products from Underarmour, which is avery successful American premium clothing brand and have signed an agreement toboth wholesale and retail a range of high visibility clothing. In May 2006, we announced the acquisition of the whole of the share capital ofGolf TV Limited ("Golf TV") for an initial consideration of £0.5 million, adeferred consideration of £1 million and a further performance relatedconsideration of £1.8 million. The Company operates both The Golf Channel andThe Golf TV Pro-Shop Channel. We intend to re-brand the Golf TV Pro-Shop Channelto "JJB Sports TV" and to expand the product range offered on the Channel to awider range of golf and keep-fit products. The results of Golf TV have beenconsolidated within our Group accounts; revenue since the date of acquisitionhas been £1.28 million and the operating loss is £220,000. The acquisition of Golf TV, has extended our multi-channel offering from theretail stores and our transactional website (www.jjbsports.com); revenue fromthe website for the 26 weeks to 30 July 2006, has already achieved the revenuelevel of a large, successful superstore. Our Professional Teamwear Division has been expanded following the acquisitionin June 2006 of the licensing agreement with Glasgow Rangers Football Club; wenow licence replica products for Wigan Athletic, Wigan Warriors, Leeds Rhinos,Northern Ireland Football Association, Everton , Leicester City and GlasgowRangers. In our AGM Trading Statement of 27 July 2006, we announced our intention toclose our chain of small high street stores which traded under the "Icon"fascia. These stores had not performed particularly well but were a means ofgenerating some income from former JJB stores in preference to trying to marketthe lease of the property concerned. A total of 20 of these stores have beenclosed since 30 July 2006 and it is planned to rebadge the remaining 2 storesduring the next few weeks. We have already had some success in divestingourselves of some of the leases. Provisions totalling £1.28 million have beencreated in the Consolidated income statement for the 26 weeks to 30 July 2006 inrespect of anticipated losses on stocks, fixtures and the ongoing rentals ofthese stores. JJB Stores and store development During the 26 weeks to 30 July 2006, we have opened 5 combined health clubs/superstores, together with 6 other stores, most of which have been football clubstores either taken over from Glasgow Rangers and Everton, or smaller highstreet stores that we have re-opened as football club stores. In the sameperiod, we closed 10 stores, 3 of which were as a result of the relocation ofnewly opened combined units. At 30 July 2006, we operated from a total of 439stores, including our combined health clubs/superstores, comprising sellingspace of 4.407 million square feet. This compares to a total of 438 stores and4.398 million square feet of selling space at 29 January 2006. We plan to open a further 7 combined health clubs/superstores in the second halfof the current accounting period and plans are already well advanced for theopenings of these units in the next accounting period with 12 combined unitsalready identified and being in various stages of negotiations. Leisure Division With the opening of 5 combined health clubs/superstores during the 26 weeks to30 July 2006, we traded from 37 units at that date; these units included 6 siteswhich also operate indoor soccer centres. The total number of members of the 37 health clubs at 30 July 2006 was 156,200which compares to 136,800 members from the 32 clubs operated at 29 January 2006and 116,300 members operated from 28 clubs at 31 July 2005. The increase in thenumber of members in clubs open for over 52 weeks at 30 July 2006 was 9.9 percent.. No increase has been applied to membership rates of existing clubs duringthe last 2 years and this, together with the already low membership rates andfirst class facilities, has contributed towards the very strong value-for-moneyoffer being made by our clubs. The operating profit of the Leisure Division for the 26 weeks to 30 July 2006,before any allocation for head office/distribution centre costs, has increasedby 37 per cent to £10.37 million from £7.56 million and after deducting thesecosts, by 28 per cent to £6.83 million from £5.34 million. With newly openedoperating units rarely contributing to profits in their first full year oftrading, the rise in operating profits has resulted from the increasing maturityof operating units which have been in operation for over 52 weeks. The fullbenefit of increasing the number of openings is never achieved until the unitshave been opened for at least 12 months. The continuing success of the concept of combined health clubs/superstores hasled to our decision to open at least as many new units next year as the 12 thatwe plan to open in the current year. Office of Fair Trading An appeal made by the Company 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. We were disappointed with the CAT's judgement on liability and the consequentamount of the reduction in the penalty and applied for permission to appeal tothe Court of Appeal against those aspects that it was possible to appeal. On thebasis of legal advice regarding the appeal to the Court of Appeal, we decided tomake a provision against the penalty of £2 million in our accounts for the 53weeks ended 30 January 2005. Acknowledging the specific grounds on which we wereto appeal and the inherent uncertainty of the appeal process, we decided, on thebasis of further legal advice, to increase our provision against the penalty to£3.88 million in the Consolidated income statement for the 52 weeks to 29January 2006. We were duly granted leave to appeal to the Court of Appeal and the hearing washeld in May 2006. The decision of the Court of Appeal will be handed down on 19October 2006. Current trading The second half of the current accounting period has started satisfactorily withrevenue for the 11 weeks to 15 October increasing by 8.8 per cent, compared tothe same period last year and including an increase in like-for-like revenuealso of 8.8 per cent. The gross margin for the Group during this period wasslightly higher than that achieved in the same period last year. Increases in revenue were achieved in all of the retail store product categoriesincluding a strong performance from the launch of new replica kits by severalmajor Premiership Clubs. Significant increases in revenue are also beingachieved from the health clubs. These latest trading results give me confidence for a satisfactory outcome tothe current accounting period although there is no doubt that the sports sectorof the retail market remains at least as competitive as any other sector. As inevery year, the results will depend to a certain extent upon the success of ourChristmas trading period and considerable effort is currently being spent onensuring that we have a strong range of branded products available for ourcustomers supported by competitively priced own-brand products. As regards the next accounting period, the high levels of revenue achievedduring the World Cup in 2006 create very difficult comparatives for what will bea non-competition year for International football tournaments. It will beimpossible to match these comparatives during May and June 2007 but I believethat much of this will be offset by the continuing increasing profitability ofour Leisure Division, as more combined units become mature and contribute toprofits, and by results which will follow from the differentiation of ourproduct ranges from those of our competitors. T W KnightChief Executive18 October 2006 Unaudited consolidated income statementfor the 26 weeks to 30 July 2006 26 weeks to 26 weeks to 52 weeks to 30 July 31 July 29 January 2006 2005 2006 £'000 £'000 £'000 -------- ------- -------Continuing operations Revenue 381,644 340,395 745,238 Cost of sales (198,332) (171,880) (393,075) -------- ------- -------Gross profit 183,312 168,515 352,163 Other operating income 2,674 1,668 3,177Distribution expenses (11,624) (10,936) (21,722)Administration expenses (14,463) (14,850) (30,705)Selling expenses (141,492) (126,775) (268,564) -------- ------- -------Operating profit 18,407 17,622 34,349 -------- ------- ------- Operating profit is stated after(charging) creditingCreation of provision relating tolegal penalty - (1,300) (1,882)Net (loss) gain on disposal ofproperty, plant and equipment (397) 1,606 2,917Creation of provisions relating to closure of Icon stores (1,280) - - -------- ------- ------- (1,677) 306 1,035 -------- ------- ------- Finance income 4,502 5,041 8,896Finance costs (4,744) (4,580) (9,498) -------- ------- -------Profit before taxation 18,165 18,083 33,747 Taxation (5,360) (1,465) (3,510) -------- ------- -------Profit after taxation for the period attributable to equity holders of theparent 12,805 16,618 30,237 ======== ======= ======= Basic earnings per share - Pence 5.55 7.20 13.10Diluted earnings per share - Pence 5.55 7.20 13.10 Unaudited consolidated statement of recognised income and expensefor the 26 weeks to 30 July 2006 26 weeks to 26 weeks to 52 weeks to 30 July 31 July 29 January 2006 2006 2005 £'000 £'000 £'000 -------- ------- --------Exchange differences on translation offoreign operations (15) 74 45 -------- ------- -------Net (expense)income recognised directly in equity (15) 74 45Profit after taxation forthe period 12,805 16,618 30,237 -------- -------- -------Recognised income and expense forthe period 12,790 16,692 30,282 ======== ======= ======= Unaudited reconciliation of movements in equityfor the 26 weeks to 30 July 2006 Total equity £'000 -------- At 29 January 2006 364,593 Recognised income and expense for the period 12,790 Final dividend for the 52 weeks to 29 January 2006 (16,154) -------- At 30 July 2006 361,229 ======== Unaudited consolidated balance sheetas at 30 July 2006 As at As at As at 30 July 31 July 29 January 2006 2005 2006 £'000 £'000 £'000 -------- ------- -------Non-current assetsGoodwill 189,558 186,114 186,084Other intangible assets 28,236 10,214 10,191Property, plant and equipment 192,632 186,350 189,222 -------- ------- ------- 410,426 382,678 385,497 -------- ------- -------Current assetsInventories 149,828 155,586 120,266Trade and other receivables 50,801 50,311 38,738Current asset investment 168,117 168,117 168,117Cash and cash equivalents 31,244 13,720 34,860 -------- ------- ------- 399,990 387,734 361,981 -------- ------- ------- Total assets 810,416 770,412 747,478 -------- ------- ------- Current liabilitiesTrade and other payables (139,083) (139,025) (81,530)Tax liabilities (12,150) (4,702) (13,678)Bank loan and loan notes (168,117) (168,117) (168,117)Short-term provisions (7,784) (3,300) (7,330) -------- ------- ------- (327,134) (315,144) (270,655) -------- ------- ------- Net current assets 72,856 72,590 91,326 -------- ------- ------- Non-current liabilitiesBank loans (62,791) (49,860) (59,885)Deferred tax liabilities (20,933) (17,182) (19,785)Deferred lease incentives (38,329) (30,300) (32,560) -------- ------- --------- (122,053) (97,342) (112,230) -------- ------- --------- Total liabilities (449,187) (412,486) (382,885) -------- -------- ------- Net assets 361,229 357,926 364,593 ======== ======= ======= Equity Share capital 11,538 11,538 11,538Share premium account 157,219 157,219 157,219Capital redemption reserve 1,069 1,069 1,069Foreign currencytranslation reserve 9 53 24Retained earnings 191,394 188,047 194,743 -------- ------- -------Equity attributable to equityholders of the parent 361,229 357,926 364,593 ======== ======= ======= Unaudited consolidated cash flow statementfor the 26 weeks to 30 July 2006 26 weeks to 26 weeks to 52 weeks to 30 July 31 July 29 January 2006 2005 2006 Restated Restated £'000 £'000 £'000 ------- ------- -------Net cash inflow from operatingactivities (note 6) 26,214 13,294 43,976 -------- ------- ------- Cash flows from investing activitiesInterest received 4,502 5,041 8,896Purchase of subsidiary (805) - -Proceeds on disposal of property,plant and equipment 1,725 3,340 7,981Purchase of intangible assets (18,357) (10,214) (10,224)Purchase of property, plant andequipment (15,047) (31,193) (47,443) -------- ------- -------Net cash flow used in investingactivities (27,982) (33,026) (40,790) -------- ------- ------- Cash flows from financing activitiesInterest paid (4,838) (4,520) (9,413)Dividends - (16,154) (23,077)Net proceeds from bank loan 3,000 49,850 59,850Repayment of bank loan - (25,000) (25,000) ------- ------- -------Net cash (outflow) inflow fromfinancing activities (1,838) 4,176 2,360 -------- ------- ------- Net (decrease) increase in cash andcash equivalents (3,606) (15,556) 5,546Cash and cash equivalents atbeginning of period 34,860 29,323 29,323Effect of foreign exchange ratechanges (10) (47) (9) -------- ------- -------Cash and cash equivalents at end ofperiod 31,244 13,720 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 Interim financial statements for the 26 weeks to 30 July 2006 1. Basis of preparation The Group's Interim results for the 26 weeks to 30 July 2006 were approved bythe Board of Directors on 17 October 2006. The accounting policies adopted in the preparation of these Interim financialstatements are consistent with those set out in the Group's Annual financialstatements for the 52 weeks to 29 January 2006. The Interim financial statements are unaudited and do not constitute full statutory accounts within the meaning of Section 240 of the Companies Act 1985. The interim financial report has been prepared using accounting policiesconsistent with International Financial Reporting Standards (IFRSs) and inaccordance with those disclosed in the annual report for the 52 weeks to 29January 2006, published by the company on 13 June 2006. Copies of this reportand the last Annual Report and Accounts are available from the Secretary, JJBSports plc, Challenge Way, Martland Park, Wigan, WN5 0LD and can each bedownloaded or viewed via the Group's website, www.jjbcorporate.co.uk. The Interim financial statements have been reviewed by the Auditors and theirreport to the Directors is set out on page 16. The financial information in respect of the 52 weeks to 29 January 2006 has beenproduced using extracts from the statutory accounts prepared under IFRS. Thestatutory accounts for this period have been filed with the Registrar ofCompanies. The Auditor's report on these accounts was unqualified and did notcontain a statement under sections 237 (2) and (3) of the Companies Act 1985. 2. Segmental information Segmental revenue and profit before taxation by business activity were asfollows: 26 weeks to 26 weeks to 52 weeks to 30 July 31 July 29 January 2006 2005 2006 £'000 £'000 £'000 -------- -------- -------Revenue JJB Retail stores 323,481 300,801 656,086Leisure Division (includingassociated retail stores) 58,163 39,594 89,152 -------- -------- -------Total revenue 381,644 340,395 745,238 ======== ======== ======= Operating profit JJB Retail stores 11,576 12,283 23,241Leisure Division (includingassociated retail stores) 6,831 5,339 11,108 -------- -------- ------- Total operating profit 18,407 17,622 34,349 Finance costs less finance income (242) 461 (602) -------- -------- ------- Profit before taxation 18,165 18,083 33,747 ======== ======== ======= 3. Taxation The net taxation charge shown in the Consolidated income statement for the 26weeks to 30 July 2006 has been based on the anticipated effective taxation ratefor the 52 weeks to 28 January 2007 of 30 per cent (2006: 30 per cent). 26 weeks to 26 weeks to 52 weeks to 30 July 31 July 29 January 2006 2005 2006 £'000 £'000 £'000 -------- -------- -------Current tax: UK corporation tax 4,091 3,624 5,649Foreign tax 121 36 57Prior year adjustment - (88) (2,692) -------- -------- ------- 4,212 3,572 3,014 ======== ======== ======= Deffered tax: Current period 1,148 2,410 5,131Prior year adjustment - (4,517) (4,635) ------- -------- ------- 1,148 (2,107) 496 ------- -------- -------Taxation charge 5,360 1,465 3,510 ======= ======== ======= The prior year adjustments to current tax in the comparative periods 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. 4. Dividends A dividend of 3.0p net per ordinary share will be paid on 5 January 2007 toshareholders whose names appear on the share register at 8 December 2006. Theshares will trade ex-dividend from 6 December 2006. In accordance with IFRSaccounting policies, the dividend has not been included in the balance sheet asa liability at 30 July 2006. For the 52 weeks to 29 January 2006, an interim dividend of £6,923,000,representing 3.0p net per ordinary share was paid on 6 January 2006 and a finaldividend of £16,154,000 representing 7.0p net per ordinary share was approved atthe Company's Annual General Meeting on 27 July 2006; a scrip dividendalternative was offered to the shareholders. The final dividend was paid on 9August 2006, £7,043,000 being paid in cash and £9,111,000 in the form of a scripissue of ordinary shares. This final dividend has been included in the Balancesheet as a liability at 30 July 2006. 5. 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 £12,805,000 (2005:£16,618,000) and 230.77 million ordinary shares, (2005: 230.77 million shares),being the weighted average number of shares in issue during the period. Diluted earnings per share is based upon the profit for the period attributableto equity holders of the parent of £12,805,000 (2005: £16,618,000) and 230.81million ordinary shares, (2005: 230.86 million) being the weighted averagenumber of shares in issue during the period, used in the calculation of earningsper share shown above, increased by the dilutive effect of ordinary sharesissuable pursuant to options granted under employee share option schemes of40,000 shares (2005: 90,000 shares). 6. Reconciliation of operating profit to net cash inflow from operatingactivities 26 weeks to 26 weeks to 52 weeks to 30 July 31 July 29 January 2006 2006 2005 £'000 £'000 £'000 ------- ------- -------Operating profit from continuingoperations 18,407 17,622 34,349Depreciation and impairment ofproperty, plant and equipment 9,511 8,406 18,387Amortisation of intangible assets 312 - 33Loss (gain) on disposal of property,plant and equipment 397 (1,606) (2,917)Loss on disposal of goodwill - - 30Increase in provisions 454 1,300 2,361 ------- ------- ------- Operating cashflows before movementsin working capital 29,081 25,722 52,243 Increase in inventories (29,562) (42,867) (7,547)Increase in trade and otherreceivables (12,063) (14,519) (2,946)Increase in trade and other payables 37,915 53,194 11,853 -------- ------- ------- Cash generated by operations 25,371 21,530 53,603 Taxation received (paid) 843 (8,236) (9,627) -------- ------- ------- Net cash inflow from operatingactivities 26,214 13,294 43,976 ======== ======= ======= 7. Bank overdrafts and 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. In June 2006, a Term loan of £18million was obtained in order to finance the acquisition of the Glasgow RangersFC licensing agreement. 8. Analysis of net debt as at 30 July 2006 As at 29 January Cash Flow Other non - As at 30 July 2006 cash items 2006 £'000 £'000 £'000 £'000 --------- ------- ------- --------Current assetinvestment 168,117 - - 168,117 Cash and cashequivalents 34,860 (3,606) (10) 31,244 -------- ------- ------- -------- 202,977 (3,606) (10) 199,361 Currentliabilities - Loan notes (168,117) - - (168,117) Non-currentliability - Bank loan (59,885) (3,000) 94 (62,791) --------- ------- ------- -------- (25,025) (6,606) 84 (31,547) ========= ======= ======= ======== 9. 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 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, JJBincreased its provision against the penalty from £2 million to £3.88 million inits Consolidated income statement for the 52 weeks to 29 January 2006. After being granted permission to appeal to the Court of Appeal, the appeal wasduly heard in May 2006. The decision of the Court of Appeal will be handed downon 19 October 2006. 10. 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. During the 26 weeks to 30 July 2006, JJB Sports entered into the followingtransactions with related parties who are not members of the Group: Income Expenditure ------ ----------- 26 weeks to 26 weeks to 52 weeks to 26 weeks to 26 weeks to 52 weeks to 30 July 31 July 29 January 30 July 31 July 29 January 2006 2005 2006 2006 2005 2006 £'000 £'000 £'000 £'000 £'000 £'000 ------- ------- ------ ------- ------- ------Whelco Holdings Limited 142 67 163 511 365 968 Executive Director's family trust - - - 75 75 150 E-View Properties Limited 504 - - - - - Amounts owed by Amounts owed by ---------------- --------------- related parties related parties --------------- --------------- 26 weeks to 26 weeks to 52 weeks to 26 weeks to 26 weeks to 52 weeks to 30 July 31 July 29 January 30 July 31 July 29 January 2006 2005 2006 2006 2005 2006 £'000 £'000 £'000 £'000 £'000 £'000 ------- ------- ------ ------- ------- ------ Whelco Holdings Limited 140 49 101 11 65 24 Whelco Holdings Limited is a company owned by members of the family of anExecutive Director of JJB, operating itself or through its subsidiaries a numberof businesses including that of Wigan Athletic Football Club (WAFC), WiganWarriors Rugby League Club (WWRLC) and the stadium in which both teams playwhich is known as the "JJB Stadium". The Group incurred expenditure in its capacity as sponsors of 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 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 on 10 August 2003, JJB has continued to pay rent on a full commercialbasis at the rate of £150,000 per annum. The Group has sold 3 acres of a 10 acre site adjacent to its head office and distribution centre, to E-View Properties Ltd, a company owned by members of thefamily of an Executive Director of JJB. The sale price was based upon an externalvaluation of £504,000 and resulted in a profit on disposal of £82,000 which has been credited to the Consolidated income statement for the 26 weeks to 30 July 2006. 11. Event since the balance sheet date On 17 October 2006, the Directors approved the payment of an interim dividend of3.0 pence per share (2005: 3.0 pence per share). This has not been included as aliability in the Consolidated balance sheet as at 30 July 2006. The dividendwill be paid on 5 January 2007 to shareholders on the register at 8 December2006. The shares will trade ex-dividend from 6 December 2006. INDEPENDENT REVIEW REPORT TO JJB SPORTS PLC Introduction We have been instructed by the Company to review the financial information forthe 26 weeks to 30 July 2006 which comprises the Income statement, the Statementof recognised income and expense, the Reconciliation of movements in equity, theBalance sheet, the Cash flow statement and related Notes 1 to 11. We have readthe other information contained in the Interim report and considered whether itcontains any apparent misstatements or material inconsistencies with thefinancial information. This report is made solely to the Company in accordance with Bulletin 1999/4issued by the Auditing Practices Board. Our work has been undertaken so that wemight state to the Company those matters we are required to state to them in anindependent review report and for no other purpose. To the fullest extentpermitted by law, we do not accept or assume responsibility to anyone other thanthe Company, for our review work, for this report, or for the conclusions wehave formed. Directors' responsibilities The Interim report, including the financial information contained therein, isthe responsibility of, and has been approved by, the Directors. The Directorsare responsible for preparing the Interim report in accordance with the ListingRules of the Financial Services Authority which require that the accountingpolicies and presentation applied to the interim figures are consistent withthose applied in preparing the preceding annual accounts except where anychanges, and the reasons for them, are disclosed. Review work performed We conducted our review in accordance with the guidance contained in Bulletin1999/4 issued by the Auditing Practices Board for use in the United Kingdom. Areview consists principally of making enquiries of Group management and applyinganalytical procedures to the financial information and underlying financial dataand, based thereon, assessing whether the accounting policies and presentationhave been consistently applied unless otherwise disclosed. A review excludesaudit procedures such as tests of controls and verification of assets,liabilities and transactions. It is substantially less in scope than an auditperformed in accordance with International Standards on Auditing (UK and Ireland) and therefore provides a lower level of assurance than an audit. Accordingly,we do not express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the 26 weeks to 30July 2006. Deloitte & Touche LLPChartered AccountantsManchester18 October 2006 This information is provided by RNS The company news service from the London Stock Exchange