Interim Results

John David Group (The) PLC 14 October 2004 14th October 2004 THE JOHN DAVID GROUP PLC INTERIM RESULTS FOR THE SIX MONTHS TO 31 JULY 2004 The John David Group Plc (the 'Company' or the 'Group'), a leading specialist retailer of fashionable branded sports and leisure wear, today announces its interim results for the six months ended 31 July 2004. • Group turnover increased to £212.1 million (six month period ended 31 July 2003: £209.7 million) • Group operating profit (before goodwill amortisation, exceptional items and loss on disposal of fixed assets) of £2.2 million and of £0.1million after net interest charges (six month period ended 31 July 2003: Loss of £1.5 million and £3.8 million after net interest charges) • Exceptional costs of £4.7 million incurred in arriving at operating loss, primarily due to accelerated store closure programme (six month period ended 31 July 2003: £1.1 million) • Operating loss before interest charges and loss on disposal of fixed assets of £2.9 million (six month period ended 31 July 2003: £3.0 million) • Interim dividend of 2.20p per ordinary share (2003: 2.86p) following review of dividend policy to reflect the fact that profits are largely earned in the second half • Gross margin improvement to 46.0% (six month period ended 31 July 2003: 45.6%) • Group like for like sales increase of 1.5% • Like for like sales increase of 2.8% in core Sports Fascias • Debt reduced by £6.7m to £45.4 million (31 July 2003: £52.1 million) • Stocks reduced by £6.5 million to £72.1 million (31 July 2003: £78.6 million) • Group like for like sales in the two months to 2 October 2004 up by 7% against weak comparatives Peter Cowgill, Executive Chairman, said: 'I am pleased to report that the Group, and particularly its Sports Fascias, have traded better in the first half of the current year than they did in the corresponding period last year. 'My Strategic Review has highlighted a number of areas for operational improvement and we have moved quickly to implement the most urgent findings. In particular, we have accelerated the store closure programme and have taken a more aggressive approach to aged stock. These actions impact short term financial results adversely, but we are confident that the benefits of this decisive action will become evident in the medium term. 'Trading has continued to be satisfactory since 31 July 2004 with Group like for like sales in the two months to 2 October 2004 up by 7% against weak comparatives. The Board believes considerable progress has been made in the last 6 months towards restoring the Group's fortunes.' Enquiries: The John David Group Plc 0161 767 1000 Peter Cowgill (Executive Chairman) Barry Bown (Chief Executive) Brian Small (Finance Director) Hogarth Partnership Limited 020 7357 9477 Andrew Jaques Barnaby Fry CHAIRMAN'S STATEMENT Introduction I am pleased to report that the Group, and particularly its Sports Fascias, have traded better in the first half of the current year than they did in the corresponding period last year. Before detailing our financial results, I would like to share with you the findings of the Strategic Review I have carried out since rejoining the Group in March 2004. Strategic Review The core of our business remains the Sports Fascias and they are positioned to sell sports footwear and apparel in a fashion oriented way alongside supplementary branded and own brand casual fashion. I have no doubt that this positioning remains a substantial strength and will continue to be supported vigorously by our trading partners. In addition to JD Sports and a diminishing number of First Sport stores, the Size fascia is now included in Sports as it predominantly retails Sports derived footwear with a fashion edge. We have had too many underperforming stores since the First Sport acquisition. The biggest change I have made in this area has been to accelerate significantly the pace of closure of these stores. The net costs of this programme in the six months to 31 July 2004, together with store fit write offs for the anticipated closures, are disclosed as exceptional operating costs or losses on disposal in the first half results. I have also encouraged a more aggressive approach towards sell through of aged stock. Whilst in the short term this impacts on margin, I am confident that it will benefit future margin and cashflow, and will also improve the merchandising support for faster selling lines. I am seeking to improve cohesion between buyers and merchandisers and, with the support of the major brands, improve distribution efficiencies to retail outlets. I am improving store appraisal techniques as I note that certain larger stores in low footfall areas may be inefficient with regard to certain operating ratios. We are considering options to improve income derived from such locations. We will also continue to extend our support for brands which have no other sports retailer distribution and emphasise our exclusive ranges and own brand products. Subject to the requirement to rationalise the store portfolio, I am confident that the market positioning of Sports Fascias and the variation within its product offering will continue to support the success of the JD brand in particular and the continued profitability of the Group. As anticipated, the performance of the Fashion Fascias has been disappointing. The Fashion Fascias are ATH, a diminishing number of Active Ventures and the two Open fashion department stores in Liverpool and Glasgow. The main fascia, ATH, has suffered from a lack of consistency in its image and brand offer as well as an inherited stock buy which was poor in selection and quantum. The margin impact of this is being borne in the current year. Substantial changes have been made to the buying team in the last six months. Obtaining the right brand and product offer has been and remains the major priority. With the first results of this process coming through, and the benefit of the closures of lossmaking stores being felt in full in the next year, I am anticipating improved results from these Fascias. There will, however, be no material expansion of these Fascias until the results are more encouraging. In the Group as a whole, I am introducing a far more structured approach to accountability with an increased number of profit centres and cost centres, and enhanced incentivisation for improved performance. I have also reduced the number of clearance shops as I wish to use marginal space for clearance wherever possible rather than incurring added fixed overhead. The Group remains well supported by its major brands who have a vested interest in the positioning of Sports Fashion away from the value market. Store Portfolio The store portfolio has changed as follows in the first six months: Stores Sq Ft ('000s) Sports Fascias including Size At 31 January 2004 320 1,106 At 31 July 2004 309 1,086 Fashion Fascias At 31 January 2004 37 130 At 31 July 2004 39 132 Totals At 31 January 2004 357 1,236 At 31 July 2004 348 1,218 During the period we opened 6 stores and closed 15. The new stores were JD Sports stores in Wandsworth, Ilford, Denton and Belfast and ATH stores within JD stores in Oldham and Denton. The 15 stores closed were: JD 1 JD (ex First Sport) 2 First Sport 4 Active Venture 2 Pure Woman 1 Clearance (ex First Sport) 4 Clearance (ex JD) 1 The rate of openings will remain similar and we would expect to close between 15 and 25 stores in the second half after which the store portfolio will be in much better shape. 12 stores have already been closed since 31 July 2004. Results Total sales during the 6 months ended 31 July 2004 were £212.1 million compared with £209.7 million for the six month period ended 31 July 2003. Although total sales only grew by 1.1%, the like for like increase was 1.5%, driven by an improved performance in the Sport Fascias where the like for like growth was 2.8%. Gross margin for the period increased from 45.6% to 46.0%. Operating profit before exceptional items and the amortisation of goodwill was £2.2 million and after interest charges was £0.1 million (6 months to 31 July 2003: loss of £1.5 million and loss of £3.8 million after interest). As well as the improved margin, a reduction in operating expenses (excluding exceptionals) of £1.8 million has contributed to this improvement. The principal savings have been in staff costs. The exceptional costs charged in arriving at the operating result totalling £4.7 million comprise a £3.0 million impairment provision on stores earmarked for disposal, a £1.0 million provision for onerous lease costs on stores not trading and £0.7 million, principally for the termination costs of the previous Chairman and a number of senior staff in buying, merchandising, marketing and HR. The impairment provision relates to 42 stores, almost all of which will be closed in the next 12 months. After charging exceptional items of £4.7 million (6 months to 31 July 2003: £1.1 million) and goodwill amortisation of £0.4 million (6 months to 31 July 2003: £0.4 million), the operating loss before interest charges and loss on disposal of fixed assets was £2.9 million (6 months to 31 July 2003: loss of £3.0 million). Net interest charges fell to £2.1 million (6 months to 31 July 2003: £2.3 million) reflecting a reduction in net average debt. The loss on ordinary activities before taxation rose to £6.4 million (6 months to 31 July 2003: £5.6 million loss) as a result of the increases in exceptional items and loss on disposal of fixed assets incurred as a result of the store closure programme. The adjusted earnings per ordinary share before exceptional items and amortisation of goodwill was 0.34p (6 months to 31 July 2003: loss per ordinary share of 4.32p). Balance Sheet & Financial Resources Total expenditure on fixed assets during the period was £3.3 million. Stock was reduced to £72.1 million (31 July 2003: £78.6 million). Net debt at 31 July 2004 reduced to £45.4 million resulting in a gearing level of 86% (31 July 2003: £52.1 million and 96%). Dividend The Board has reviewed its policy on dividend payment in the light of the fact that, since the change in year end and last year's disappointing second half results, the weighting of the total dividend had become too loaded towards the interim dividend declared on the first half results whereas the critical trading period for the Group is the second half. In future, it is intended that, subject to financial performance, dividends will be higher in the second half as was the case in the year ended 31 March 2002 and prior. The Board proposes to pay an interim dividend of 2.20p per ordinary share (2003: 2.86p). The dividend will be paid on 14 January 2005 to shareholders on the register as at close of business on 10 December 2004. Current Trading and Outlook Trading has continued to be satisfactory since 31 July 2004 with Group like for like sales to 2 October 2004 up by 7% against weak comparatives. The Board believes considerable progress has been made in the last 6 months towards restoring the Group's fortunes. Peter Cowgill Executive Chairman 14th October 2004 CONSOLIDATED PROFIT AND LOSS ACCOUNT For the 6 months ended 31 July 2004 Unaudited Unaudited Audited 6 months 6 months ended 12 months 31 July ended 31 January ended 31 July 2004 2003 2004 Note £000 £000 £000 Turnover 212,079 209,731 458,073 Cost of sales (114,530) (114,077) (249,379) _______ _______ _______ Gross profit 97,549 95,654 208,694 Operating expenses (net) - normal (95,772) (97,583) (198,982) Operating expenses (net) - exceptional (4,717) (1,102) (1,978) _______ _______ _______ Operating (loss) / profit (2,940) (3,031) 7,734 ------------------- ------- ------ -------- -------- --------- Analysed as: Profit / (loss) before exceptional items and goodwill amortisation 2,170 (1,541) 10,498 Exceptional items 1 (4,717) (1,102) (1,978) Goodwill amortisation 1 (393) (388) (786) ------------------- ------- ------ -------- -------- --------- Operating (loss) / profit (2,940) (3,031) 7,734 Loss on disposal of fixed assets 2 (1,314) (312) (1,095) _______ _______ _______ (Loss) / profit on ordinary activities before interest (4,254) (3,343) 6,639 Interest receivable and similar income 170 50 100 Interest payable and similar charges (2,285) (2,349) (4,634) _______ _______ _______ (Loss) / profit on ordinary activities before taxation (6,369) (5,642) 2,105 Taxation on (loss) / profit on ordinary activities 3 2,654 2,472 (1,457) _______ _______ _______ (Loss) / profit on ordinary activities after taxation (3,715) (3,170) 648 Dividends paid and proposed 4 (1,063) (1,337) (3,038) _______ _______ _______ Retained loss (4,778) (4,507) (2,390) _______ _______ _______ Earnings per ordinary share: 5 - Basic (7.95p) (6.78p) 1.39p - Adjusted to exclude exceptional items and goodwill amortisation 0.34p (4.32p) 6.21p - Diluted (7.95p) (6.78p) 1.39p CONSOLIDATED BALANCE SHEET As at 31 July 2004 Unaudited Unaudited Audited as at as at as at 31 July 31 July 2003 31 January 2004 2004 £000 £000 £000 Fixed assets Intangible assets 14,583 12,568 14,976 Tangible assets 61,669 70,528 68,183 _______ _______ _______ 76,252 83,096 83,159 _______ _______ _______ Current assets Stocks 72,113 78,646 65,727 Debtors and prepayments 10,623 12,734 14,452 Cash at bank and in hand 24,583 13,919 4,934 _______ _______ _______ 107,319 105,299 85,113 Creditors: amounts falling due within one year (60,877) (70,001) (55,667) _______ _______ _______ Net current assets 46,442 35,298 29,446 _______ _______ _______ Total assets less current liabilities 122,694 118,394 112,605 Creditors: amounts falling due after more than one year (64,991) (61,627) (51,555) Provisions for liabilities and charges (5,187) (2,510) (3,756) _______ _______ _______ Net assets 52,516 54,257 57,294 _______ _______ _______ Capital and reserves Called up share capital 2,338 2,338 2,338 Share premium account 8,917 8,917 8,917 Profit and loss account 41,261 43,002 46,039 _______ _______ _______ Equity shareholders' funds 52,516 54,257 57,294 _______ _______ _______ RECONCILIATION OF MOVEMENTS IN EQUITY SHAREHOLDERS' FUNDS As at 31 July 2004 Unaudited Unaudited Audited as at as at as at 31 July 31 July 31 January 2004 2003 2004 £000 £000 £000 (Loss) / profit for the financial period (3,715) (3,170) 648 Dividends paid and proposed (1,063) (1,337) (3,038) _______ _______ _______ Retained loss for the financial (4,778) (4,507) (2,390) period Irrevocable dividend waiver - - 920 _______ _______ _______ Net movement in equity shareholders' funds (4,778) (4,507) (1,470) Opening equity shareholders' funds 57,294 58,764 58,764 _______ _______ _______ Closing equity shareholders' funds 52,516 54,257 57,294 _______ _______ _______ CONSOLIDATED CASH FLOW STATEMENT For the 6 months ended 31 July 2004 Unaudited Unaudited Audited 6 months 6 months 12 months ended 31 ended 31 ended 31 July July January 2004 2003 2004 Note £000 £000 £000 Net cash inflow from operating activities 9,431 11,837 23,600 Returns on investments and servicing of finance (2,115) (2,203) (4,302) Taxation 1,074 (58) (1,287) Capital expenditure (2,741) (4,847) (9,229) Equity dividends paid - (1,337) (4,375) _______ _______ _______ Net cash inflow before financing 5,649 3,392 4,407 Financing 14,000 7,000 (3,000) _______ _______ _______ Increase in cash 6 19,649 10,392 1,407 _______ _______ _______ NOTES TO THE INTERIM FINANCIAL STATEMENTS 1 Operating (loss) / profit and exceptional items Operating (loss) / profit is stated after charging goodwill amortisation of £393,000 relating to the acquisition of the Sport and Fashion division from Blacks Leisure Group Plc in May 2002. The exceptional items totalling £4,717,000 comprise an impairment provision of £2,976,000 on stores earmarked for disposal, a provision of £1,012,000 for onerous leases on stores not trading and £729,000, principally for the termination costs of the previous Chairman and a number of senior staff in buying, merchandising, marketing and HR. 2 Exceptional items In addition to the items described in Note 1 there is an additional charge of £1,314,000 relating to loss on disposal of fixed assets associated with store closures. 3 Taxation Taxation has been estimated at the expected rate for the full year. 4 Dividend The Directors have declared an interim dividend of 2.20p per ordinary share, to be paid on 14 January 2005 to shareholders on the register as at 10 December 2004. 5 Earnings per ordinary share Basic earnings per ordinary share represent the loss for the period of £3,715,000 (2003: loss £3,170,000) divided by the weighted average number of ordinary shares in issue of 46,748,607 (2003:46,748,607). Adjusted earnings per ordinary share have been based on the profit or loss on ordinary activities after taxation for each financial period but excluding exceptional items and goodwill amortisation. The earnings used to calculate earnings per ordinary share is given below: Unaudited Unaudited Audited 6 months 6 months ended 12 months 31 July ended 31 ended 31 July January 2004 2003 2004 Earnings attributable to ordinary shareholders £000 £000 £000 (Loss) / profit on ordinary activities after taxation (3,715) (3,170) 648 - Exceptional items 4,717 1,102 1,978 - Tax relating to exceptional items (1,237) (339) (509) - Goodwill amortisation 393 388 786 _______ _______ _______ Profit / (loss) after taxation excluding exceptional items and goodwill amortisation 158 (2,019) 2,903 _______ _______ _______ Adjusted earnings per ordinary share 0.34p (4.32p) 6.21p _______ _______ _______ 6 Analysis of net debt At 31 January Cash At 31 July 2004 flow 2004 £000 £000 £000 Cash at bank and in hand 4,934 19,649 24,583 _______ _______ _______ 4,934 19,649 24,583 Loans (56,000) (14,000) (70,000) _______ _______ _______ Total net debt (51,066) 5,649 (45,417) _______ _______ _______ 7 Basis of preparation The unaudited results have been prepared using the same accounting policies as those used for the financial statements for the year ended 31 January 2004. The financial information set out above does not constitute full statutory accounts within the meaning of Section 240 of the Companies Act 1985. The amounts shown in respect of the period ended 31 January 2004 have been extracted from the full statutory accounts, on which the auditors have made an unqualified report. The statutory accounts have been filed with the Registrar of Companies. Copies of the interim financial statements will be posted to shareholders and are available to members of the general public from the company's registered office: Hollinsbrook Way, Pilsworth, Bury, Lancashire BL9 8RR. Independent review report by KPMG Audit Plc to The John David Group Plc Introduction We have been engaged by the Company to review the financial information set out on pages 6 to 10 and we have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information. This report is made solely to the Company in accordance with the terms of our engagement to assist the company in meeting the requirements of the Listing Rules of the Financial Services Authority. Our review has been undertaken so that we might state to the company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company for our review work, for this report, or for the conclusions we have reached. Directors' responsibilities The interim report, including the financial information contained therein, is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the interim report in accordance with the Listing Rules which require that the accounting policies and presentation applied to the interim figures should be consistent with those applied in preparing the preceding annual accounts except where they are to be changed in the next annual accounts in which case any changes, and the reasons for them, are to be disclosed. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/ 4: Review of interim financial information issued by the Auditing Practices Board for use in the United Kingdom. A review consists principally of making enquiries of Group management and applying analytical procedures to the financial information and underlying financial data and, based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review is substantially less in scope than an audit performed in accordance with Auditing Standards 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 that should be made to the financial information as presented for the six months ended 31 July 2004. KPMG Audit Plc Chartered Accountants Preston 14 October 2004 This information is provided by RNS The company news service from the London Stock Exchange

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