JJB.L Regulatory News (JJB)

13 Apr 2005 07:00

JJB Sports PLC13 April 2005 Embargoed until 7.00am JJB Sports plc Preliminary Results For The 53 Weeks Ended 30 January 2005 JJB Sports plc ("JJB"), the UK's largest sports retailer, announces itspreliminary unaudited results for the 53 weeks ended 30 January 2005. Significant matters: Core JJB (1) Group (2) 2004/5 2003/4 Change 2004/5 2003/4 Change Turnover £773.3m £771.8m + 0.2% £773.3m £929.8m - 16.8% Gross margin 48.0% 48.7% 48.0% 45.7% Underlyingoperatingprofit £63.3m(3) £88.0m - 28.0% £63.3m(3) £90.5m - 30.0% Reportedoperatingprofit £50.3m £69.1m - 27.2% £50.3m £71.3m - 29.4% Underlyingheadline EPS 20.12p(3) 26.99p - 25.5% Total dividendsper share 10.00p 10.00p - • Total turnover within the core JJB business, comparing two 52 week periods was 1.1 per cent lower, including a reduction in like for like turnover of 1.2 per cent. • Gross margin fell by 70 basis points from 48.7 per cent to 48.0 per cent (comparing the 53 weeks ended 30 January 2005 with the 52 weeks ended 25 January 2004), affected by discounted promotions of excess clothing stocks. • Underlying operating profit within the core JJB business fell by 28.0 per cent to £63.3 million from £88.0 million. • Operating profit in the stand alone JJB retail stores fell to £103.6 million (before a share of head office and distribution centre costs). The successful reduction of excess clothing ranges resulted in a decrease in stock levels of 12.0 per cent to £112.7 million from £128.1 million at 25 January 2004, and policy changes made to limit range fragmentation give the Board confidence of a better performance from its clothing offer during the current accounting period. • Continued expansion in the Leisure Division resulted in an increase in operating profits within that division (before a share of head office and distribution centre costs) of 17.1 per cent to £10.6 million. • Major uplift in the opening programme for combined health clubs/ superstores during 2005 - 18 units proposed to be opened, taking the number of units planned to be in operation at 29 January 2006 to 39. Membership of the 24 clubs now in operation has almost reached 100,000. • Strong cash flow resulted in a net funds position of £4.4 million at 30 January 2005, compared to a net debt of £3.6 million at 25 January 2004 and after the return of £20.8 million to shareholders in a Tender Offer in February 2004. • Proposed final dividend maintained at 7 pence net per ordinary share, giving a dividend of 10 pence per ordinary share for the full accounting period. • Current trading conditions continue to be challenging with total turnover within the core JJB business for the 10 weeks ended 10 April 2005 1.3 per cent lower than the comparative period last year, including a like for like decrease of 1.2 per cent. The gross margin achieved in this period was marginally higher than that earned in the comparative period. Notes ----- (1) Core JJB results include the stand alone retail stores and the Leisure Division. (2) Group results include in the comparative figures, the core JJB results plus those of TJ Hughes which was sold in November 2003. (3) The figures are stated before goodwill amortisation of £13.0 m and exceptional operating items (see note 2 on page 14) Commenting today, David Whelan, Chairman, said: - "Trading conditions are as difficult as any I have known for some years. It isquite clear that consumers have tightened their belt and that this is fuellingcompetition between retailers. I believe that trading conditions will remaindifficult throughout the current accounting period. Over the last nine months wehave taken certain measures that will keep us competitive in the presentenvironment. At some cost to margin, we have successfully reduced our clothingstock by over £20m. We have also re-established ourselves as sporting goods andsports clothing retailers - what I class as back to basics. The profit from our Leisure division continues to grow and we plan to open 18combined health clubs/superstores in the current accounting period. I am hopingthat by Wednesday 13th April we will have hit our milestone of 100,000 members.By this time next year we are forecasting that we will have 175,000 members andour long term goal is 1,000,000 members nationwide. Despite the reduced level of profit during the accounting period just ended, wecontinue to benefit from a very strong cash flow which supports the platform forthe expansion of our Leisure Division and also of our stand alone superstores.Dividend levels have also been maintained as an ongoing commitment to ourshareholders." For further information, please contact:Tom Knight 01942 221400David GreenwoodJJB Sports Plc Philip Gawith 020 7379 5151Charlotte BarkerThe Maitland Consultancy A copy of this press release can also be viewed on the JJB Sports plc website,www.jjb.co.uk. Results------- JJB announces its unaudited results for the 53 weeks ended 30 January 2005. Operating results----------------- The operating results for the 53 weeks ended 30 January 2005 together with thosefor the 52 weeks ended 25 January 2004 are analysed as follows:- Turnover Operating profit (1) -------- -------------------- 2005 2004 2005 2004 £'000 £'000 £'000 £'000 ------- ------- ------- -------Continuing operations---------------------Core JJBJJB retail stores 710,647 727,377 103,614 122,037 Leisure Division 62,692 44,395 10,623 9,075 ------- ------- ------- ------- 773,339 771,772 114,237 131,112Head office /Distribution centre costs (50,909) (43,134) ------- ------- 63,328 87,978Discontinued operations-------------------------T J Hughes - 158,040 - 2,523 ------- ------- ------- ------- 773,339 929,812 63,328 90,501 ======= ======= ======= ======= (1) Operating profit is stated before goodwill amortisation and exceptionaloperating items (see Profit and loss account on page 8). All the comparative figures referred to in this section of the Preliminaryresults exclude the results of the T J Hughes business, which was sold inNovember 2003. Total turnover for the accounting period, within the core JJB business,increased marginally by 0.2 per cent to £773.3 million from £771.8 million.However, the figures for the accounting period just ended benefit from an extraweeks trading and on a 52 week comparison total turnover fell by 1.1 per cent.This latter figure includes a like-for-like decrease in the turnover oflocations which have been trading for over 52 weeks, of 1.2 per cent. A total increase in turnover of 41 per cent was achieved within the LeisureDivision as the expansion of this Division continued and with the success of thevalue-for-money offering within the health clubs. This was offset by an adverseperformance from JJB's clothing products where the relatively poor Summerweather, fragmented ranges and increased competition affected the level ofturnover achieved in the retail store chain. The clearance of excess clothing ranges and fragmented stock was made through adiscounted promotional policy, the resulting impact of which has contributed toa decrease in gross margin from 48.7 per cent to 48.0 per cent. The fall ingross margin from this policy was partly offset by the increase in health clubturnover at a near 95 per cent gross margin. Operating expenses before goodwill amortisation and exceptional operating itemsincreased by 6.9 per cent to £308.0 million from £288.1 million, an increase of£19.9 million. This increase is partly accounted for by £5.8 million relating tothe additional weeks trading in the accounting period just ended, and partly byan increase of £11.4 million from the number of operating locations within theLeisure Division compared to the previous accounting period. The impact of a fall in gross profit of £4.8 million and the increase inoperating expenses of £19.9 million resulted in operating profit before goodwillamortisation and exceptional operating items falling by 28.0 per cent from £88.0million to £63.3 million. Interest, taxation and dividend------------------------------- Net interest receivable by the Group of £0.3 million compares to £2.6 millionnet interest payable in the comparative accounting period, indicative of thecontinuing strong cash flow. The effective rate of taxation on the profits of the Group before goodwillamortisation and the loss on disposal of a subsidiary undertaking amounted to27.0 per cent (after crediting a prior year adjustment for deferred taxationwhich effectively reduced the rate from 30.1 per cent). This compares to a rateof 27.4 per cent in the comparative period last year (after crediting a prioryear adjustment which effectively reduced the rate from 29.2 per cent). Underlying headline earnings per share for the Group, stated before goodwillamortisation, exceptional operating items and the loss on disposal of asubsidiary undertaking, fell by 25.5 per cent to 20.12 pence per ordinary sharefrom 26.99 pence per ordinary share in the previous accounting period. Earningsper ordinary share for the Group, as defined on page 16, also fellby 25.5 per cent. Despite the reduction in underlying headline earnings per ordinary share, theBoard has proposed a final dividend of 7 pence net per ordinary share, payableon 18 July 2005 to shareholders recorded on the share register on 10 June 2005.This dividend, together with the interim dividend of 3 pence per share alreadypaid, gives a total for the accounting period just ended of 10 pence which isidentical to the total dividend per share paid in the comparative period. Dividend cover based on underlying headline earnings per ordinary share for theaccounting period just ended is 2.0 times and the yield, based on the shareprice of 208 pence at 28 January 2005, is 4.8 per cent. Balance Sheet------------- Capital expenditure for the 53 weeks ended 30 January 2005 within the core JJBbusiness was £43.0 million, compared to £30.5 million in the comparative period.The total expenditure of £43.0 million includes £16.9 million on newly openedstores and health clubs, a further £11.2 million on stores and health clubs toopen after 30 January 2005, £7.7 million on existing stores and £3.2 million onnew computer equipment and EPOS tills. The capital expenditure on existingstores includes £3.5 million incurred on refitted and refreshed stores; the netbook value of tangible fixed assets which have been scrapped in these storesamounted to £1.6 million and has been written off in operating expenses. Stock levels have reduced by 12.0 per cent to £112.7 million at 30 January 2005compared to £128.1 million at 25 January 2004 as a result of the successfulclearance of excess clothing stocks. Partly as a result of the reduction in the level of stock, the net cash inflowfrom operating activities improved by £26.3 million to £104.0 million. Net fundsat 30 January 2005 amounted to £4.4 million compared to a net debt of £3.6million at 25 January 2004; a Tender Offer resulted in the acquisition andcancellation of shares by the Company at a cost of £20.8 million in February2004. Operational Review------------------Product and Brand Development-----------------------------The following table shows the percentage of JJB retail store turnover for eachproduct category: 53 weeks ended 52 weeks ended 30 January 2005 25 January 2004 % %Clothing 35 39 ==== ====Footwear 33 32 ==== ====Equipment and accessories 14 12 ==== ====Replica kit 12 11 ==== ====Golf and cycles 6 6 ==== ==== 100 100 ==== ==== Product performance from all categories, except clothing, remains resilient. Thehigh level of replica kit turnover achieved during the Euro 2004 tournamentadversely affected sales of some clothing products; the relatively poor summerweather and a fragmented clothing offer also contributed to the fall in turnoverof JJB's clothing products. JJB has instituted a number of policy changes whichit believes will improve the clothing offer in its Spring/Summer 2005 ranges.These changes are explained more fully on page 7. High street competition, particularly within the clothing sector, continues tobe strong and also had a material impact on JJB's results. JJB's gross margin onits clothing products was affected by the discounted promotional policy whichsold off a large part of the excess clothing stocks and consequently,considerably reduced the level of clothing stocks at 30 January 2005. JJB has an authoritative range of footwear, equipment, replica kit and golfproducts, and the trading performance of these ranges has been satisfactorythroughout the accounting period. JJB's product strategy continues to be focused upon its offering of brandedproducts from its principal suppliers of Nike and adidas, supplemented byproducts at lower price points designed and sourced by its own staff andmarketed under JJB's exclusive brands of Patrick, Olympus, Lotto and Slazenger.This strategy provides JJB's customers with a variety of choice over a range ofpremium and value-for-money price points. In addition, JJB's close relationshipwith its principal suppliers is enabling it to obtain a range of exclusiveproducts, thereby enabling JJB to differentiate its offerings from otherretailers. JJB has recently signed an irrevocable 999 year licence with Slazengers Limitedfor £10 million for the exclusive right to design, source and sellSlazenger-branded golf clubs, balls, clothing, footwear and accessories in theEuropean Economic Area. This licence replaces a previous royalty agreementbetween the two companies. This agreement should ensure unrestricted productdevelopment, enhanced gross margin and income generation. JJB has further strengthened its golf-branded offering by entering into aroyalty agreement to exclusively design, source and sell "Maxfli" golf clubs,clothing, footwear and accessories in the UK and Eire. JJB's Professional Teamwear division has recently signed a three year contractwith Leicester City Football Club to supply and distribute team kits, trainingwear and retail merchandise from May 2005. This will be the first kit that willcarry "JJB" as the kit manufacturers brand. This is in addition to two other kitcontracts which started during 2004 - those of Everton FC and the NorthernIreland Football Association. JJB Stores and store development-------------------------------- In order to maximise store profitability, JJB continues to pursue a policy ofmigrating from smaller high street stores to both high street superstores andout of town superstores where a more complete range of clothing, footwear andequipment can be displayed. With the 5 year rent reviews on out-of-town sitesregularly exceeding the rate of inflation, most of these stores that JJB willopen in the future are intended to be of the combined health club/superstoreformat where, by negotiation with the landlord, a cap is placed on all futurerent reviews. During the 53 weeks ended 30 January 2005, JJB opened 15 superstores (5 of whichwere of the combined health club/ superstore format) and opened 8 stores as"Icon" stores. During this period, JJB closed 33, mainly smaller stores. At 30 January 2005, JJB operated from 438 stores comprising 189 out of townsuperstores, 102 high street superstores, 123 smaller high street stores, 4small golf stores and 20 icon stores. The selling space totalled approximately4,234,000 square feet, an increase of 1.2 per cent compared to the selling spacein operation at 25 January 2004. Included in these superstore numbers are 21units which are combined health club/superstores. This compares to 448 stores inoperation at 25 January 2004, comprising 191 out of town superstores, 92 highstreet superstores, 147 smaller high street stores, 5 small golf stores and 13icon stores, representing 4,184,000 square feet of selling space. JJB's icon format continues to use small high street stores which have beenclosed by JJB when a new superstore location has been opened nearby. They retaila range of mens fashion brands which are not sold within JJB's stores. Thegrowth in this format will continue as JJB gradually relocates from small highstreet stores to high street superstores. JJB has continued its policy of carrying out complete refits or "refreshers" tosome of its older sites. "Refreshers" include new flooring, improvedillumination and a re-paint. A total of 15 stores have been refitted during theaccounting period just ended, together with 11 stores being "refreshed". Thetotal capital expenditure on these sites has been £3.5 million and the net bookvalue of assets which have been scrapped, amounting to £1.6 million, has beencharged to operating expenses. Trading resultsfrom the newly-refitted and refreshed stores is satisfactory; the averageincrease in turnover has been 9 per cent. JJB plans to step up this policy in the current accounting period with 31 sitesidentified for refits. These sites include 12 out of town superstores which willhave mezzanine floors of approximately 8,000 square feet installed in thebuilding. The number of retail stores opened by JJB in the last 4 years plus those storeswhich have been or will be refitted or refreshed up to January 2006, represents46 per cent of the total stores in operation at 30 January 2005. JJB's plans for store openings in the current accounting period are welladvanced, with 33 stores planned for opening including 18 combined health club/superstores and 15 stand alone superstores. Two of the health club/superstoresites will also include an indoor soccer centre. Contracts have already beenexchanged on 25 of these sites with the remainder close to final approval. Inthe 10 weeks to 10 April 2005, JJB has opened 4 standalone stores, 3 combinedhealth club/superstores and closed 8 other stores. JJB has already identified openings for the following accounting period of afurther 11 stores, including 6 combined health club/superstores (one of whichincorporates an indoor soccer centre) and 5 standalone stores; contracts for 8of these sites have already been exchanged. JJB has for some time considered trading its products on the Internet butbelieved that format to be inappropriate at that time. However, the success ofthis market over the last 12 months has encouraged JJB to seek an agreement withZendor, the leading distance-shopping fulfilment specialist in the UK, to launcha JJB e-commerce web site. This web site will offer a range of JJB's productsand fulfilment will largely be direct through Zendor, except for certain largeitems which will be dispatched direct from the supplier. Leisure Division---------------- During the 53 weeks ended 30 January 2005, JJB's Leisure Division opened 5 newsites, all of which comprised a health club and a superstore and in addition,one site included an indoor soccer centre. At 30 January 2005, the LeisureDivision traded from 21 combined health clubs/superstores, 4 of which includedindoor soccer centres. At 30 January 2005, the 21 health clubs had a combined membership of 88,400,compared to 67,300 members at 30 January 2004 from the 16 health clubs open atthat date. Of the 16 clubs which were open at 30 January 2004, membership hasincreased by 7.0% from 67,300 at that date to 72,000 as at 30 January 2005. The unique concept of a superstore being located on a mezzanine floor above ahealth club site has the key attraction of rent for both income streams onlybeing paid on the footprint. The success of the concept lies also in theattractiveness to members of providing a well-equipped gym, swimming pool,health spa, steam room, aerobic studios and bar area at very competitivevalue-for-money membership fees; this offering attracts large numbers of membersand thereby contributes to the success of the concept. Of the 21 health clubstrading at 30 January 2005, 16 are of this concept. Operating results continue to be encouraging with turnover of the LeisureDivision, including stores, up by 41% to £62.7 million from £44.4 million in thecomparative period. Operating profits (before a share of head office anddistribution centre costs) increased to £10.6 million from £9.1 million in 2004.The combined units reach satisfactory profitability within 12 months of opening;the average operating profit (before a share of head office and distributioncentre costs) of the 11 combined units which had been open for over 1 year, was£768,000 and the average capital expenditure of these units was £2.5 million. The availability of sites throughout the UK and the profitability of thecombined unit concept gives JJB confidence in its potential for growth. Openingsplanned for the current year total 18 of which 3 have already opened. It isJJB's intention to continue its health club/superstore roll-out programme as akey part of future strategy. Office of Fair Trading---------------------- In August 2003, the Office of Fair Trading (OFT) pronounced JJB 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 lodged an appeal to the independent Competition Appeal Tribunal (CAT)against both the decision of the OFT and against the level of the penalty. Theappeal against the decision of the OFT was held in March 2004 and the resultannounced in October 2004. The CAT disallowed JJB's appeal against price fixingon two of the allegations made against it by the OFT, disallowed part of anotherallegation but allowed JJB's appeal on a fourth allegation. In January 2005, the appeal against the level of the penalty was heard by theCAT and their decision has not yet been handed down. Up until the publication ofits Interim results for the 26 weeks ended 25 July 2004, JJB had not previouslymade any provision in its accounts in respect of the penalty on the grounds thatit did not consider that it had breached any part of the Competition Act.However, in view of the decision of the CAT which was announced in October 2004,JJB believed, on the basis of legal advice, that it was then appropriate to makea provision in its accounts of £2 million in respect of a penalty. The decision of the CAT on JJB's appeal against the level of the penalty will beknown only when judgement is handed down. Nevertheless, taking into account thefact that it will still be open for JJB to appeal to the Court of Appeal againstthe CAT's decision on liability itself, as well as the decision purely on penalty, then based upon legal advice, the Board still regard £2 million as being a reasonable provision in the accounts. Share buy-backs--------------- JJB obtained the authority from shareholders to purchase up to 5 per cent of itsissued share capital at the time of its AGM on 9 July 2004; this authority willexpire at the time of the 2005 AGM in July 2005. After the Tender Offer inFebruary 2004 where 7.25 million ordinary shares were acquired and cancelled ata cost of £20.8 million, no further share buy-backs have been undertaken by theCompany. The Board believes that the primary call on the Group's surplus cash flowsshould continue to be the further expansion of its combined health clubs/superstores and the development and refurbishment of its retail store chainafter which it will consider a further buy back of shares, if that is earningsenhancing. JJB will seek a renewal of the authority to purchase up to 5 per cent of itsissued share capital at the 2005 AGM, which will then be in place for thefollowing 12 months. Current trading and prospects----------------------------- In common with many retailers and in line with statistics issued by a number oftrade organisations, JJB has found trading on the high street during Februaryand the greater part of March 2005 to be challenging with strong competitionbetween many retailers, all aiming to take a bigger share of the shrinkingdisposable income of the consumer. However, the launch of the new Englandreplica shirt on 24 March, a week earlier than the comparable launch in 2004,coinciding with the Easter holidays being two weeks earlier than in 2004,resulted in higher turnover levels. Because the second week of the Easterholidays last year ended on 18 April 2004, it will not be until the results forthe week ending 17 April 2005 are known, that an accurate comparison can be madeof the Group's start to the current year. However, for the 10 weeks ended 10 April 2005, total turnover decreased by 1.3per cent which included a like-for-like decrease of 1.2 per cent; the grossmargin in this period was marginally higher than that earned in the comparativeperiod. As Easter is a peak selling period, JJB anticipates that its totalturnover for the 11 weeks ending 17 April 2005 will show a greater decrease thanthe 1.3 per cent shown over the 10 week period. For some time now, JJB's clothing category has been the one area of the businesswhich has not performed satisfactorily. The Board believes this has been in partdue to excessive range fragmentation and policy changes have been made toaddress this situation. These changes of policy include a greater emphasis beingplaced on the ranges of JJB's principal suppliers of Nike and adidas togetherwith the offering being concentrated upon a smaller number of styles ofindividual categories of clothing than in earlier seasons, but with the stockingof these styles in greater quantities. JJB believes that the changes will limitthe number of items which need to be discounted at the end of a season andresult in a higher level of gross margin. Whilst there are inevitable timedelays in the order/delivery cycle before the changes can be fully implemented,the Board believes that the new products ordered for Spring/Summer 2005 willresult in a more authoritative range. The recent discounted promotion policy hasresulted in the levels of clothing stocks currently on hand containingsignificantly less stock over 3 months old than at the comparative date lastyear. JJB has ambitious plans for the further expansion of its Leisure Division, with18 combined units being planned for opening during the current accountingperiod, which will bring the number of combined units in operation at 29 January2006 to 39. An average of 11 openings per annum are planned for future years.Since the beginning of the current accounting period, 3 combined units have beenopened and the total membership of the 24 health clubs at 10 April 2005 was99,800. Whilst the Board accepts that the trading environment will remain competitivethroughout the current year, it is also confident that the increased investmentin the refurbishment and expansion of the core business will enhance futureprofitability. The growth of the Leisure Division will, due to timing issues,produce limited returns in the current accounting period followed by asignificant improvement in the following accounting period. CONSOLIDATED PROFIT AND LOSS ACCOUNTFOR THE 53 WEEKS ENDED 30 JANUARY 2005 Unaudited Audited ----------- --------- 53 weeks 52 weeks ended ended 30 January 25 January 2005 2004 Notes Continuing Continuing Discontinued operations operations operations Total £'000 £'000 £'000 £'000 ------- -------- -------- ------- Turnover 3 773,339 771,772 158,040 929,812 Cost of sales(includingexceptional items) (402,082) (395,624) (109,041) (504,665) ------- -------- -------- ------- Gross profit 371,257 376,148 48,999 425,147 Other net operatingexpenses (includinggoodwill amortisationand exceptionaloperating items) (320,918) (307,000) (46,825) (353,825) ------- -------- -------- ------- Operating profit 50,339 69,148 2,174 71,332 ------- -------- -------- -------Operating profit before goodwillamortisation andexceptional operating items 63,328 87,978 2,523 90,501 Goodwill amortisation (12,989) (12,753) (349) (13,102) ------- -------- -------- ------- Exceptionaloperating items 2 -creation of legal penalty provision (2,000) - - - -release of legal cost accrual 2,000 - - --other - (6,077) - (6,077) ------- -------- -------- ------- Loss on disposal of subsidiary undertaking (309) (852) Interest receivable and similar income 9,036 7,149 Interest payableand similar charges (8,692) (9,781) ------- -------Profit on ordinaryactivities before taxation 3 50,374 67,838 Taxation on profiton ordinary activities (17,175) (22,376) ------- ---------Profit on ordinaryactivities after taxation 33,199 45,462 Dividends paidand proposed 6 (23,080) (23,297) ------- ------- Retained profitfor the period 10,119 22,165 ======= ======= Profit on ordinary activitiesbefore taxation, goodwill amortisation,exceptional operating items and loss onitems and loss on disposal ofsubsidiary undertaking 63,672 87,869 ======= =======Underlying headlineearnings per ordinary share 5 20.12p 26.99pEarnings per ordinaryshare 5 14.36p 19.27pDiluted earnings perordinary share 5 14.34p 19.23p ======= =======Dividends per ordinaryshareInterim 6 3.00p 3.00pFinal 6 7.00p 7.00p ------- ------- 6 10.00p 10.00p ======= ======= STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSESFOR THE 53 WEEKS ENDED 30 JANUARY 2005 Unaudited Audited 53 weeks 52 weeks ended ended 30 January 25 January 2005 2004 £'000 £'000 --------- ---------Profit on ordinary activities aftertaxation 33,199 45,462 Exchange rate movement (21) 223 --------- ---------Total recognised gains and losses relatingto the period 33,178 45,685 ========= ========= RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDSFOR THE 53 WEEKS ENDED 30 JANUARY 2005 Unaudited Audited 53 weeks 52 weeks ended ended 30 January 25 January 2005 2004 £'000 £'000 -------- -------- Retained profit for the period 10,119 22,165 Exchange rate movement (21) 223 -------- -------- 10,098 22,388 Proceeds of share issues 92 5,440 Consideration paid on purchase of own shares (20,778) -Opening shareholders' funds 353,003 325,175 -------- -------- Closing shareholders' funds 342,415 353,003 ======== ======== CONSOLIDATED BALANCE SHEETAS AT 30 JANUARY 2005 Unaudited Audited As at As at 30 January 25 January 2005 2004 £'000 £'000 -------- -------- Fixed assetsIntangible assets - goodwill 173,125 186,347Tangible assets 165,175 155,791 -------- -------- 338,300 342,138 -------- -------- Current assetsStock 112,719 128,084Debtors 12,181 11,481Current asset investments 168,117 210,478Cash at bank and in hand 29,323 41,258 ------- -------- 322,340 391,301 ------- -------- Creditors: amounts falling due within one yearBorrowings (168,117) (170,478)Others (99,269) (100,987) -------- -------- (267,386) (271,465) -------- -------- Net current assets 54,954 119,836 Total assets less current liabilities 393,254 461,974 Creditors: amounts falling due after more than one yearBorrowings (24,950) (84,821)Others (7,577) (7,559) -------- -------- (32,527) (92,380) -------- -------- Provisions for liabilities and charges (18,312) (16,591) -------- --------Net assets 342,415 353,003 ======== ======== Capital and reservesCalled-up share capital 11,538 11,899Share premium account 157,219 157,129Capital redemption reserve 1,069 706Profit and loss account 172,589 183,269 -------- --------Equity shareholders' funds 342,415 353,003 ======== ======== CONSOLIDATED CASH FLOW STATEMENTFOR THE 53 WEEKS ENDED 30 JANUARY 2005 Unaudited Audited 53 weeks 52 weeks ended ended 30 January 25 January 2005 2004 £'000 £'000 --------- -------- Net cash inflow from operatingactivities 103,968 77,707 Returns on investments and servicing of financeInterest received 9,036 7,149Interest paid (8,563) (9,358) --------- -------- Net cash inflow (outflow) 473 (2,209) TaxationUK corporation tax paid (18,366) (24,564)Foreign tax paid (152) (296) --------- -------- Net cash outflow (18,518) (24,860) Capital expenditurePurchase of tangible fixed assets (42,982) (34,670)Sale of tangible fixed assets 8,392 1,977 --------- -------- Net cash outflow (34,590) (32,693) Acquisitions and disposalsPurchase of subsidiary undertaking - (5)Disposal of subsidiary undertaking 495 46,421Net cash disposed with subsidiaryundertaking - (228) --------- --------Net cash inflow 495 46,188 Equity dividends paid (23,077) (18,899) --------- --------Cash inflow before management ofliquid resources and financing 28,751 45,234 Management of liquid resourcesTender offer cash deposit 40,000 (40,000)FinancingIssues of ordinary share capital 92 5,440Decrease in loans (60,000) (6,667)Purchase of own shares (20,778) - --------- -------- Net cash outflow (80,686) (1,227) --------- -------- (Decrease) increase in cash in the period (11,935) 4,007 ========= ======== RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOWFROM OPERATING ACTIVITIES FOR THE 53 WEEKS ENDED 30 JANUARY 2005 Unaudited Audited 53 weeks 52 weeks ended ended 30 January 25 January 2005 2004 £'000 £'000 --------- -------- Operating profit 50,339 71,322Goodwill amortisation 12,989 13,102Depreciation of tangible fixedassets 23,834 25,919Loss on sale of tangible fixedassets 834 3,615Decrease (increase) in stocks 15,365 (20,669)(Increase) decrease in debtors (700) 2,304Decrease in creditors (693) (17,886)Increase in provisions 2,000 - --------- -------- Net cash inflow from operatingactivities 103,968 77,707 ========= ======== RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS (DEBT)FOR THE 53 WEEKS ENDED 30 JANUARY 2005 Unaudited Audited 53 weeks 52 weeks ended ended 30 January 25 January 2005 2004 £'000 £'000 --------- --------(Decrease) increase in cash in the period (11,935) 4,007 Cash outflow from change in debt 60,000 6,667 --------- -------- Change in net debt resulting fromcash flows 48,065 10,674 Loan disposed with subsidiary - 6,833 Cash flow from (increase) decreasein liquid resources (40,000) 40,000 Amortisation of bank loan costs (129) (423) --------- -------- Movement in net funds in the period 7,936 57,084 Opening net debt (3,563) (60,647) --------- -------- Closing net funds (debt) 4,373 (3,563) ========= ======== ANALYSIS OF NET FUNDS (DEBT)AS AT 30 JANUARY 2005 At 25 January Cash Flow Other non-cash At 30 January 2004 items 2005 £'000 £'000 £'000 £'000 --------- -------- -------- --------- Loan notedeposit 170,478 (2,361) - 168,117 Tender offercash deposit 40,000 (40,000) - - Cash at bankand in hand 41,258 (11,935) - 29,323 --------- -------- -------- --------- 251,736 (54,296) - 197,440 Borrowings falling due within oneyear (170,478) 2,361 - (168,117) Borrowings falling due after morethan one year (84,821) 60,000 (129) (24,950) --------- -------- -------- --------- (3,563) 8,065 (129) 4,373 ========= ======== ======== ========= NOTES ON PRELIMINARY RESULTS FOR THE 53 WEEKS ENDED 30 JANUARY 20051. Basis of preparation The financial information set out in the announcement does not constitute theCompany's statutory accounts for the 53 weeks ended 30 January 2005 or the 52weeks ended 25 January 2004. The financial information for the 52 weeks ended 25January 2004 is derived from the statutory accounts for that period which havebeen delivered to the Registrar of Companies. The Auditors reported on thoseaccounts; their report was unqualified and did not contain a statement unders237(2) or (3) of the Companies Act 1985. The statutory accounts for the 53weeks ended 30 January 2005 will be finalised on the basis of the financialinformation presented by the Directors in this preliminary announcement and willbe delivered to the Registrar of Companies following the Company's annual general meeting. 2. Exceptional operating items 53 weeks 52 weeks ended ended 30 January 25 January 2005 2004 £'000 £'000 ---------- ----------Cost of sales:Creation of legal penalty provision (see note 4) 2,000 - Release of legal cost accrual (2,000) - ---------- ---------- - - ========== =========Operating expenses:Losses on closure of certain flagship stores andthe subsequent disposal of the leases to thosestores - 5,272 Costs incurred on the abortive managementbuy out of the Group - 805 ---------- ---------- - 6,077 ========== ========== 3. Segmental information A. By class of business : Turnover Profit on ordinary activities before taxation 53 weeks 52 weeks 53 weeks 52 weeks ended ended ended ended 30 January 25 January 30 January 25 January 2005 2004 2005 2004Continuing operations £'000 £'000 £'000 £'000----------------------- -------- --------- ------------ -----------JJB retail stores 710,647 727,377 42,503 68,122Leisure Division(including associatedretail stores) 62,692 44,395 7,836 7,103 -------- --------- ------------ ----------- 773,339 771,772 50,339 75,225Discontinued operations-------------------------TJ Hughes - 158,040 - 2,174 -------- --------- ------------ ----------- 773,339 929,812 50,339 77,399 ======== =========Exceptional operatingitems - (6,077)Loss on disposal ofsubsidiary undertaking (309) (852)Net interest receivable(payable) 344 (2,632) ------------ ----------- 50,374 67,838 ============ =========== Net assets As at As at 30 January 25 January 2005 2004Continuing operations £'000 £'000----------------------- ---------- -----------JJB retail stores 100,366 123,349Leisure Division (including associated retail stores) 64,551 46,870 ---------- ----------- 164,917 170,219 Net funds (debt) 4,373 (3,563)Goodwill 173,125 186,347 ---------- -----------Net assets 342,415 353,003 ========== =========== Turnover Profit on ordinary activities before taxation 53 weeks 52 weeks 53 weeks 52 weeks ended ended ended ended 30 January 25 January 30 January 25 January 2005 2004 2005 2004 £'000 £'000 £'000 £'000 --------- --------- ------------- ------------ UK continuing operations 764,829 760,277 48,876 74,366 UK discontinued operations - 158,040 - 2,174 Europe (excluding UK) 8,510 11,495 1,463 859 --------- --------- ------------- ------------ 773,339 929,812 50,339 77,399 ========= ========= Exceptional operatingitems - (6,077)Loss on disposal ofsubsidiary undertaking (309) (852)Net interest receivable(payable) 344 (2,632) ------------ ------------- 50,374 67,838 ============ ============= Net Assets As at As at 30 January 25 January 2005 2004 £'000 £'000 ------------ ------------- UK continuing operations 166,670 169,573 Europe (excluding UK) (1,753) 646 ------------ ------------- 164,917 170,219 Net funds (debt) 4,373 (3,563) Goodwill 173,125 186,347 ------------ ------------- Net assets 342,415 353,003 ============ ============= 4. Office of Fair Trading In August 2003, the Office of Fair Trading (OFT) pronounced JJB guilty ofprice-fixing in the sale of certain replica kit products over a two year periodduring 2000 and 2001, and levied a penalty of £8.4 million. JJB has appealed tothe independent Competition Appeals Tribunal (CAT) against both the decision ofthe OFT and also against the level of the penalty. The result of the first appeal was given mainly in favour of the OFT's decisionbut with some elements that were found in JJB's favour. The appeal against thelevel of the penalty has been heard by the CAT but no decision has yet beenannounced. Whilst JJB is awaiting the decision of the CAT regarding the appeal against thelevel of the penalty, on the basis of legal advice it has provided £2 millionfor any potential penalty (see page 6). 5. Earnings per share Earnings per share have been calculated as follows: 53 weeks ended 52 weeks ended 30 January 25 January 2005 2004 £'000 £'000 ---------- ----------Underlying headline earnings:Profit on ordinary activities after taxation butbefore goodwillamortisation, exceptional operating items net of taxand loss on disposal of subsidiary undertaking 46,497 63,670 Goodwill amortisation (12,989) (13,102) Exceptional operating items net of tax -creation of legal penalty provision (1,400) - -release of legal cost accrual 1,400 - -losses on closure of certain flagship stores - (3,690) -costs incurred on abortive management buy-out - (564) Loss on disposal of subsidiary (309) (852) ---------- ---------- Profit on ordinary activities after taxation, goodwill amortisation, exceptional operating items net of tax and loss on disposal of subsidiary undertaking 33,199 45,462 ========== ==========