Final Results

John David Group (The) PLC 11 May 2004 11 May 2004 THE JOHN DAVID GROUP PLC PRELIMINARY RESULTS FOR THE YEAR ENDED 31 JANUARY 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 Preliminary Results for the year ended 31 January 2004. • Group turnover increased to £458.1 million (10 month period ended 31 January 2003: £370.8 million). • Group operating profit (before goodwill, exceptional items and loss on disposal) of £10.5 million (10 month period ended 31 January 2003: £18.0 million). • Profit before tax (before goodwill, exceptional items and loss on disposal) of £6.0 million (10 month period ended 31 January 2003: £15.1 million). • Reported operating profit of £7.7 million (10 month period ended 31 January 2003: £14.1 million). • Final dividend of 3.64p maintaining the full year dividend at the same level as last period (total dividend of 6.50p - 10 month period ended 31 January 2003: 6.50p). • Positive like for like sales in the second half reduced the decline for the year ended 31 January 2004 to 0.4%. • Gross margin was 45.6% against 45.5% in the 10 month period ended 31 January 2003. • Group like for like sales for the thirteen weeks to 1 May 2004 have been up 0.9% overall against prior year. • Core Sports Fascias like for like sales growth for the thirteen weeks to 1 May 2004 has been up 2.5%. • During the same period gross margin has been maintained in line with management expectations. Peter Cowgill, Executive Chairman, said: 'Our core Sports business continues to perform strongly without recourse to discounting. Since my return to the Group, we have been carefully evaluating our operations and procedures with a view to improving the future prospects of the business. All strategic options remain under review. ' Enquiries: Tel: 0161 767 1000 The John David Group Plc Peter Cowgill, Executive Chairman Barry Bown, Chief Executive Brian Small, Finance Director Hogarth Partnership Limited Tel: 020 7357 9477 Andrew Jaques Tom Leatherbarrow CHAIRMAN'S STATEMENT The year to 31 January 2004 proved to be very difficult for the Group. This has led to a number of management changes including my own return to the Group as Executive Chairman in March 2004. I am delighted to be back after leaving the position of Finance Director in 2001 and pleased to report that our core business proposition, selling Sportswear with style and fashion, is still clearly an effective consumer offer which differentiates our business from our competition. However, as Chairman, as a shareholder, and as a key member of the team which brought this business to and beyond flotation in the first place, it does not give me any pleasure to report disappointing results for the year. The results for the last year were adversely impacted by continuing First Sport integration problems. The integration process is well advanced and all fascias are now managed by a single management team based at our Bury Head Office. Optimism in October 2003 about the second half was not justified in the final result owing to patchy trading in the last quarter in which a strong November was followed by a weak pre Christmas period which affected many retailers. This was followed by a comparatively strong sales performance in late December but at lower margins during the sale period which extended into January. Nevertheless, there are now grounds for optimism as the core Sports business is performing well in the new year. The JD Sports fascia continues to be recognised as a style leader by our target teenage market and offers a market leading range from our key branded suppliers (Nike, Adidas, Puma, Lacoste) which includes exclusive product as well as an improved range of own label (McKenzie, Carbrini) product. Our relationship with these key suppliers, who recognise our pre-eminence as visual merchandisers of their products to target consumer groups, is key to our continuing success. This part of our business will drive the future business performance. Whilst performance in our Sports Fascias is encouraging, our Fashion Fascias continue to disappoint. We are actively addressing the key issues in this area including the continuation of our fascia rationalisation and the development of stronger brand relationships with fewer Fashion suppliers. Following recent management changes we are now applying the same successful management principles employed in the Sports business to the Fashion business. Given that rationalisation and a strategic review are continuing, it is, in the Board's opinion, inappropriate to report in detail on the Fashion Fascias separately at this stage. The challenges facing the Group have been extensively reported. In difficult market conditions, however, I have been encouraged by the fact that the core Sports business, which represents approximately 90% of Group sales, is increasingly robust. RESULTS Total sales increased to £458.1 million during the period in comparison with £370.8 million for the 10 month period ended January 2003 which incorporated eight months post acquisition trading from First Sport. Gross margin for the year rose slightly from 45.5% to 45.6%. Operating profit before exceptional items, losses on disposals and amortisation of goodwill was £10.5 million and after interest charges was £6.0 million (10 month period ended 31 January 2003: £18.0 million and £15.1 million after interest charges). After charging exceptional items of £2.0 million and goodwill amortisation of £0.8 million, operating profit before interest charges and loss on disposal of fixed assets was £7.7 million (10 month period ended 31 January 2003: £14.1 million). Profit before tax and after exceptional items and goodwill amortisation was £2.1 million (10 month period to 31 January 2003: £10.8 million). Net interest charges increased to £4.5 million compared with £2.9 million (10 month period) due to the full year's charge on the additional debt taken on to fund our recent acquisition. Earnings per share, before exceptional items and goodwill, were 6.21p compared with 21.18p in the previous period. DIVIDEND The Board proposes to pay a final dividend of 3.64p per ordinary share (10 month period ended 31 January 2003: 3.64p) bringing the total dividend paid to 6.50p per ordinary share (10 month period ended 31 January 2003: 6.50p). The Board is offering a scrip dividend alternative to shareholders, full details of which will be included in a circular to be issued with the Annual Report. Irrevocable undertakings to elect to receive the scrip dividend alternative have been given by holders of 54% of the ordinary share capital in relation to the beneficial interest holdings of John Wardle and David Makin, the founding shareholders. The proposed final dividend will be paid on 2 August 2004 to shareholders on the register as at 21 May 2004. As the Group's performance is heavily weighted to the key Christmas trading period it is likely that future dividend payments will be more weighted towards the final dividend than they have been in the current year. OPERATING REVIEW The year ended 31 January 2004 has been a challenging one for the Group and has seen a substantial change in the shape of our store portfolio as we sought to eliminate the old First Sport trading fascias. In the year, over 100 First Sport stores were converted into JD stores. We also closed 37 loss making stores and acquired 9 new stores. At 31 January 2004, we had 306 Sports Stores (2003: 337) and 51 Fashion Stores (2003: 48) trading from a total of 1,236,000 square feet (2003: 1,264,000 square feet) of which 13% is devoted to Fashion Fascias. Our focus in the current year will be to continue to eliminate loss making stores either by disposal or conversion. One new store has been opened so far this year and six more are committed to. All new stores will only be added to the portfolio if they meet prudent selection criteria and very few others are likely to be added this year. The basic product proposition across the Sports Fascias remains Sportswear with fashion and style and is now uniform across those fascias. Our objective is to provide main brand fashionable product, introducing new ranges quickly and efficiently, including a great number of lines exclusively available at JD. We supplement the branded ranges with an innovative and exclusive range of both McKenzie and Carbrini own brand merchandise. The Fashion business continues to concentrate on fashionable branded leisurewear but is currently seeking to focus on fewer brands than in the recent past so that we can more effectively leverage our buying relationships. This is the approach which has been successfully developed in the Sports business. Our Group product mix for the year as a whole was broadly 50% Footwear (2003: 50%), 46% Apparel (2003: 46%), and 4% Accessories (2003: 4%). Replica kit continues to be a minimal part of our turnover. The main marketing thrust of the current year has been to rationalise our fascias with JD being the principal Sports fascia and Ath (formerly Ath-Leisure) being our principal Fashion fascia. The Group also moved into its new head office facilities in Bury at the start of the year and the key management is based there. We retain bulk warehousing facilities in Peterlee as well as Bury. Service to the business from these facilities continues to improve and was very effective in the key Christmas and New Year trading period. BALANCE SHEET & FINANCIAL RESOURCES Shareholders' funds at the balance sheet date have decreased by 2.5% to £57.3 million from the previous level of £58.8 million at the end of January 2003 after dividend payments of £2.1m (net of irrevocable elections for the scrip dividend alternative). Total expenditure on fixed assets during the period amounted to £11.5 million of which £9.4 million related to stores. Net borrowings at the end of January 2004 were £51.1 million (2003: £55.5 million). A small reduction in gearing is presently expected by the end of January 2005 and £8 million of our core borrowings are planned to be repaid during the year in accordance with the original schedule of repayments. Gearing should fall following reduced capital expenditure and improving retained earnings in the year to 31 January 2005. EBITDA interest cover fell to a manageable 4.5 times in the year ended 31 January 2004 and will rise again in the current year. Stocks at the year end were £65.7 million, lower than last year's level of £69.2 million. BOARD CHANGES There have been a number of Board changes in the past twelve months. The Company's founders and principal shareholders, John Wardle and David Makin, stepped down from their executive roles in January 2004 and are now non-executive directors. Their considerable market, product, retail and consumer knowledge is something the Board will continue to draw on although they are no longer involved in the day to day management of the business. Malcolm Blackhurst resigned as Group Finance Director and Company Secretary in December 2003 and Brian Small was appointed to those positions in January 2004. Roger Best was replaced as Executive Chairman in March 2004 by me. Frank Martin, a non-executive director, left the Board in March 2004 and will be replaced as soon as possible. CURRENT TRADING It is pleasing to be able to report that trading since the year end has been in line with management expectations although the Fashion Fascias will take some time to recover from some of the buying decisions in the past year. During the thirteen weeks to 1 May 2004, Group like for like sales have been up 0.9% against the prior period whilst our core Sports business has been up 2.5%. During the same period,gross margin has been in line with management expectations. PROSPECTS On my appointment eight weeks ago, I promised to oversee a Board review of all the strategic options open to the Group. I have concentrated in my opening weeks on ensuring we have the right management team, the right operating controls and the right targets so that the Board's expectation of a progressive improvement in results can be delivered. The strategic review will take some time to complete and we will announce its findings and conclusions as soon as it is practicable. Peter Cowgill Chairman 11 May 2004 CONSOLIDATED PROFIT AND LOSS ACCOUNT for the year ended 31 January 2004 Note 12 months to 31 10 months to 31 January 2004 January 2003 Continuing Continuing operations operations £000 £000 Turnover 458,073 370,804 Cost of sales (249,379) (202,229) _______ _______ Gross profit 208,694 168,575 Distribution costs - normal (186,117) (141,145) Distribution costs - exceptional (1,366) (2,933) Administrative expenses - normal (13,503) (10,167) Administrative expenses - exceptional (612) (581) Other operating income 638 333 _______ _______ Operating profit 7,734 14,082 ------------------- ------ --------- -------- ---------- --------- Before exceptional items and goodwill amortisation 10,498 18,017 Exceptional items 1 (1,978) (3,514) Goodwill 1 (786) (421) ------------------- ------ --------- -------- ---------- --------- Operating profit 7,734 14,082 Loss on disposal of fixed assets (1,095) (433) _______ _______ Profit on ordinary activities before interest 6,639 13,649 Interest receivable and similar income 100 212 Interest payable and similar charges (4,634) (3,080) _______ _______ Profit on ordinary activities before taxation 2,105 10,781 Taxation on profit on ordinary activities (1,457) (4,024) _______ _______ Profit on ordinary activities after taxation 648 6,757 Dividends paid and proposed (3,038) (3,038) _______ _______ Retained (loss)/profit (2,390) 3,719 _______ _______ Earnings per ordinary share: 2 - Basic 1.39p 14.46p - Adjusted to exclude exceptional items and goodwill amortisation 6.21p 21.18p - Diluted 1.39p 14.45p The group has no recognised gains or losses other than the results reported above. The results above also represent the historic cost profit. CONSOLIDATED BALANCE SHEET As at 31 January 2004 31 January 2004 31 January 2003 £000 £000 Fixed assets Intangible assets 14,976 11,643 Tangible assets 68,183 74,292 _______ _______ 83,159 85,935 _______ _______ Current assets Stocks 65,727 69,171 Debtors and prepayments 14,452 13,632 Cash at bank and in hand 4,934 3,527 _______ _______ 85,113 86,330 Creditors: amounts falling due within one year (55,667) (53,157) _______ _______ Net current assets 29,446 33,173 _______ _______ Total assets less current liabilities 112,605 119,108 Creditors: amounts falling due after more than one year (51,555) (56,294) Provisions for liabilities and charges (3,756) (4,050) _______ _______ Net assets 57,294 58,764 _______ _______ Capital and reserves Called up share capital 2,338 2,338 Share premium account 8,917 8,917 Profit and loss account 46,039 47,509 _______ _______ Equity shareholders' funds 57,294 58,764 _______ _______ RECONCILIATION OF MOVEMENTS IN EQUITY SHAREHOLDERS' FUNDS As at 31 January 2004 31 January 31 January 2004 2003 £000 £000 Profit for the year/period 648 6,757 Dividends paid and proposed (3,038) (3,038) _______ _______ Retained (loss)/profit for the year/period (2,390) 3,719 Proceeds from issue of ordinary shares - 10 Irrevocable dividend waiver 920 - _______ _______ Net movement in equity shareholders' funds (1,470) 3,729 Opening equity shareholders' funds 58,764 55,035 _______ _______ Closing equity shareholders' funds 57,294 58,764 _______ _______ CONSOLIDATED CASH FLOW STATEMENT for the year ended 31 January 2004 12 months to 31 10 months to January 2004 31 January 2003 £000 £000 Net cash inflow from operating activities 23,600 28,194 Returns on investments and servicing of finance (4,302) (2,734) Taxation (1,287) (5,957) Capital expenditure (9,229) (18,005) Acquisitions - (52,201) Equity dividends paid (4,375) (2,431) _______ _______ Net cash inflow/(outflow) before financing 4,407 (53,134) Financing (3,000) 55,675 _______ _______ Increase in cash 1,407 2,541 _______ _______ RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT for the year ended 31 January 2004 12 months to 10 months to 31 January 31 January 2004 2003 £000 £000 Increase in cash in the period 1,407 2,541 Cash outflow/(inflow) from movement in debt and lease financing 3,000 (55,665) Reduction/(increase) in net debt in the period 4,407 (53,124) Net debt at start of period (55,473) (2,349) Net debt at end of period (51,066) (55,473) RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM OPERATING ACTIVITIES for the year ended 31 January 2004 12 months to 10 months to 31 January 31 January 2004 2003 £000 £000 Operating profit 7,734 14,082 Depreciation charge 10,060 7,907 Amortisation of goodwill 786 421 Decrease in stocks 1,990 227 Decrease/(increase) in debtors 80 (1,230) Increase in creditors 2,950 6,787 Net cash inflow from operating activities 23,600 28,194 === === All exceptional items shown within operating profit have resulted in cash flows in the period. NOTES TO THE INTERIM FINANCIAL STATEMENTS 1 Operating profit and exceptional items Operating profit is stated after charging goodwill amortisation of £786,000. Exceptional items comprise mainly of expenditure directly relating to the integration of the First Sport division of Blacks Leisure Group Plc, acquired in May 2002, as detailed below. £000 Redundancy costs 978 Store closure costs 479 Lease and contract exit payments 314 Warehousing, distribution and other reorganisation costs 130 OFT replica kit investigation 77 _____ 1,978 _____ 2 Earnings per ordinary share Basic earnings per ordinary share represents the profit for the period of £648,000 (2003: £6,757,000) divided by the weighted average number of ordinary shares in issue of 46,748,607 (2003: 46,743,692). Adjusted basic earnings per ordinary share have been based on the profit on ordinary activities after taxation for each financial period but excluding exceptional items and goodwill amortisation. The diluted earnings per share is based on 46,750,776 (2003: 46,747,348) ordinary shares, the difference to the basic calculation representing the additional shares that would be issued on the conversion of all the dilutive potential ordinary shares. There is no material difference to earnings if all the dilutive potential ordinary shares are converted. The earnings used to calculate earnings per ordinary share is given below: Earnings attributable to ordinary shareholders As at 31 As at 31 January January 2003 2004 £000 £000 Profit on ordinary activities after taxation 648 6,757 - Exceptional items 1,978 3,514 - Tax relating to exceptional items (509) (791) - Goodwill amortisation 786 421 _______ _______ Profit after taxation excluding exceptional items and goodwill amortisation 2,903 9,901 _______ _______ Adjusted basic earnings per ordinary share 6.21p 21.18p _______ _______ 3 Accounts These figures are abridged versions of the Group's full accounts for the year ended 31 January 2004 and do not constitute the Group's statutory accounts within the meaning of Section 240 of the Companies Act 1985. The Group's auditors have audited the statutory accounts for the Group and have issued an unqualified audit opinion thereon within the meaning of Section 235 of the Companies Act 1985 and have not made any statement under Section 237 (2) or (3) of the Companies Act 1985 for the year ended 31 January 2004. Statutory accounts for the 10 month period ended 31 January 2003 have been delivered to the Registrar of Companies. Statutory accounts for the year ended 31 January 2004 will be delivered to the Registrar of Companies following the Annual General Meeting. Copies of the full accounts will be sent to shareholders in due course. Additional copies will be available from The John David Group Plc, Hollinsbrook Way, Pilsworth, Bury, Lancashire, BL9 8RR. This information is provided by RNS The company news service from the London Stock Exchange

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