Interim Results

John David Group (The) PLC 05 December 2002 5th December 2002 THE JOHN DAVID GROUP PLC INTERIM RESULTS FOR THE SIX MONTHS TO 30TH SEPTEMBER 2002 The John David Group Plc ('the Group'), a leading specialist retailer of fashionable branded sports and leisure wear, today announces its 2002 Interim Results. Highlights:- • Group turnover increased by 73% to £204.76 million. (2001: £118.34 million) • Group operating profit (before amortisation of goodwill and exceptional items) increased to £11.10 million (2001: £11.05 million) • Gross margin improved in core business to 47.43% from 47.31%. Acquired business 42.19% • 10 new stores opened during the period • Interim dividend increased by 10% to 2.86p from 2.60p per share • Acquisition of the Sport and Fashion division ('First Sport division') of Blacks Leisure Group Plc completed in May 2002 comprising 209 stores and 495,000 sq. ft. of retail space • Total sales in the period in JD Sports increased by 10.56% with like for like sales up 0.64% • Total sales in the First Sport division increased by 1.84% in the period with flat organic sales • 376 stores open at the period end, trading from 1.187 million sq. ft. of retail space • Integration of the acquired division continuing with a positive outlook for the future • Recent trading recovering strongly following integration period John Wardle, Chairman, said: 'Following our recent acquisition, the interim results are in line with our expectations and were achieved against strong trading comparatives which benefited from the timing of Easter last year. We are very pleased with the acquisition of First Sport and, despite some inevitable short term disruption caused by the integration of the two businesses, we remain on track to deliver long term growth in profits from both our core business and the acquired business. The John David Group is an exciting and innovative retailer and the Board is confident in the future success, long term growth and profitability of the group.' Enquiries: The John David Group Plc Tel: 01706 628000 Barry Bown, Chief Executive Malcolm Blackhurst, Finance Director Hogarth Partnership Limited Tel: 020 7357 9477 Andrew Jaques Tom Leatherbarrow CHAIRMAN'S STATEMENT I am pleased to report continued progress in the half year to 30th September 2002 in line with our expectations for the period. This improvement has been achieved against demanding sales comparatives in the interim period last year, which benefited from the timing of Easter. We have continued with the integration of the recently acquired First Sport division and this is proceeding to plan, albeit that we have suffered from some short term disruption to sales. As stated at the time of the acquisition, earnings should be enhanced in the first full year following the acquisition. We have also continued to develop and expand the business and strive to further improve our distinct market position in the retail sector. We remain totally committed to the progression of the enlarged group and to improving long-term profit growth via innovative retail formats and strong brand relationships. We look forward to the future with confidence. RESULTS Total sales increased by 73% during the interim period to £204.76 million. This increase includes £73.9 million in relation to the First Sport division acquired in May 2002. Total sales in JD Sports increased by 10.56% including an underlying like for like sales increase of 0.64%. Total sales in the First Sport division increased by 1.84% during the period, which includes a flat organic performance. Gross margin was again improved in JD Sports by 0.12% up from 47.31% to 47.43%; this is in contrast with a margin performance in the First Sport division of 42.19%. Gross margin in the First Sport division has necessarily been at a lower level, as planned, in order to facilitate the clearance of fragmented stock lines and should improve in future periods. Operating profit before exceptional items and amortisation of goodwill increased to £11.10 million compared with £11.05 million in the half year to September 2001. We announced at the AGM that our year end is now to be January rather than March, therefore eliminating any future trading disparities due to the timing of Easter. After charging exceptional items of £1.975 million and goodwill amortisation of £0.131 million, profit before interest charges and loss on disposal of fixed assets was £8.995 million (2001: £11.050 million - exceptional items £nil). Net interest charges increased to £1.197 million compared with £0.086 million due to the additional debt taken on to fund our recent acquisition. Comparative earnings per share calculations are included in the supporting financial information. Earnings per share, before exceptional items and goodwill, were 14.42p compared with 16.16p, reflecting the full interest burden of the acquisition prior to full integration of the acquired business. DIVIDEND The Board proposes to pay an increased interim dividend of 2.86p per ordinary share (2001: 2.60p). This uplift represents a 10% increase on the previous period and will be paid on 24th February 2003 to shareholders on the register as at the close of business on 24th January 2003. JD SPORTS DIVISION Total sales for the period in JD Sports increased by 10.56% including an underlying improvement in like for like sales performance of 0.64% with stock levels in line with forecast at the period end. Gross margin performance continued to improve to 47.43% from 47.31% in the prior period. Expansion continued during the period, opening 8 new stores and closing 3 smaller stores, adding a net 33,000 sq. ft. of retail space. By way of comparison, 18 new stores were added in the same period last year and three stores closed adding a net 109,000 sq. ft. in the interim period. At the end of September 2002, therefore, the JD Sports format traded from 169 stores occupying a total of 684,000 retail sq. ft. This total includes 27 out of town / edge of town stores which occupy 191,000 retail sq. ft. All new stores continue to be subject to our demanding selection criteria, prior to adoption. Focus on own brand and exclusive branded merchandise has continued, complemented by our Mckenzie and Carbrini labels. Fashionable product differentiation has been maintained via exclusive lines, enhanced by our own unique in house design capabilities. Product mix for the period has remained fairly consistent with the previous period being broadly 53% footwear, 43% clothing and 4% accessories. By the end of January 2003, a further 10 new stores will open and one small store will close adding a further 87,000 sq. ft. of retail space to the JD Sports chain. Total space in this chain will therefore be around 771,000 retail sq. ft. trading from 178 stores, by the end of January 2003. Total space added during the period to January 2003, therefore, will be in the region of 120,000 sq. ft. (2001/02: 170,000 sq.ft) being a net 14 additional stores (2001/02: 24 net additional stores). FIRST SPORT DIVISION Total sales for the period in the First Sport division increased by 1.84% including a flat like for like sales performance with stock levels in line with forecast at the period end. Gross margin has been at a lower level, as planned, in order to clear fragmented stock lines in readiness for the Christmas trading period. Margin performance in this division during the period was 42.19% and should continue to improve in future periods. Since the acquisition two new stores have been opened and four stores have now been closed. At the end of September 2002, therefore, the First Sport division traded from 207 stores occupying a total of 503,000 retail sq. ft. By the end of January 2003, one further store will open, two small stores will close and one will be relocated, reducing retail space by a net 5,000 sq. ft. in this chain. Total retail space in this division will therefore be around 498,000 retail sq. ft. trading from 205 stores, by the end of January 2003. The store portfolio continues to be under review as sales densities increase towards their expected future levels; integration is progressing well and our retail disciplines and high standards of merchandising and display continue to be introduced throughout the chain. In Spring 2003, the First Sport chain will be completely re-launched, including a new fascia design, new logo, improved store ambience and increased product differentiation. BALANCE SHEET & FINANCIAL RESOURCES Shareholders' funds at the balance sheet date have increased by 15% from £51.18 million (30th September 2001) to £58.89 million at the end of September 2002. Total expenditure on fixed assets during the period amounted to £10 million of which £8.53 million relates to stores. Net borrowings at the end of September 2002 were £56.28 million resulting in a gearing level of 95%, in line with expected levels and interest cover is at a comfortable level. Gearing is presently expected to reduce significantly by our year end of 31st January 2003. CURRENT TRADING Trading performance since the period end has been affected by a period of major stock and computer integration, which we were eager to complete before the key Christmas trading period. A major transformation of this nature inevitably causes some disruption despite detailed pre-planning. During this 10 to 11 week period of integration our operating efficiency was reduced, resuming to expected levels in the past few weeks. Both the trade of the First Sport division, and to a much lesser extent, JD Sports were affected from the middle of September 2002. The integration issues referred to above have adversely affected group sales in the 9 weeks since the period end. Sales in the JD Sports division are up 9.85% in total and down 1.97% on a like for like basis over this period. Following the recent stock and computer integration, sales have now risen sharply in JD Sports, being up 15.74% in total and 4.51% on a like for like basis in the most recent week's trading. Sales within the First Sport division were inevitably affected to a greater degree and the directors estimate that just under 3% of annualised divisional sales were lost during this period. All issues have now been resolved and sales have now returned to targeted levels. We are very pleased to report, however, that we have maintained gross margins in JD Sports since the period end and that gross margins have continued to improve in the First Sport division. Stock levels are also in line with plan. Since 30th September 2002, a further 9 stores have been opened, 2 smaller stores closed and one relocated, increasing total retail space to 1,232,000 sq.ft. and total number of stores to 382. Two further stores will open and one small store will close prior to the end of our financial period, adding a further 37,000 sq.ft. of retail space. At the end of January 2003, therefore, we envisage that the group will trade from around 1,269,000 sq.ft. from 383 stores throughout the U.K. and Eire. OUTLOOK In common with many other retailers, the period end results are heavily dependent upon our trade during both the key Christmas trading and January sales periods. The Board acknowledges the importance of this, and a further Christmas trading update will be given in early January 2003, in the normal way. The Board remains confident that - despite any short-term fluctuations - the company's long term profitability and growth prospects are excellent. Continued product differentiation in desirable branded merchandise, unique store ambience and maintained focus on our brand conscious consumer will continue to contribute to the increasing success of the group. There still remains significant expansion opportunity within the JD Sports fascia, via a number of innovative formats and the benefits and synergies from our recent acquisition will continue to improve. I am pleased with our performance in the first half of the year, which is in line with our expectations. We are delighted with the acquisition of First Sport and, despite short term disruption caused by the integration of the stock and computer systems which has affected trading over the past 11 weeks, we remain in line to deliver growth in profits from both our core business and the acquired business. The John David Group is an exciting and innovative retailer and the Board remains confident in the future success, long term growth and profitability of the group. John Wardle 5th December 2002 Chairman CONSOLIDATED PROFIT AND LOSS ACCOUNT for the half year ended 30 September 2002 Note Unaudited Unaudited Unaudited Unaudited Audited first half first half first half first half year ended continuing Acquisitions Total operations 2002 2002 2002 2001 31 March 2002 £000 £000 £000 £000 £000 Turnover 130,853 73,916 204,769 118,347 245,621 Cost of sales (68,783) (42,725) (111,508) (62,347) (130,144) _______ _______ _______ _______ _______ Gross profit 62,070 31,191 93,261 56,000 115,477 Operating expenses (net) (52,086) (32,180) (84,266) (44,950) (95,038) Operating profit Before exceptional items 10,515 586 11,101 11,050 20,439 and goodwill amortisation Exceptional items 1 (400) (1,575) (1,975) - - Goodwill 1 (131) - (131) - - 9,984 (989) 8,995 11,050 20,439 Loss on disposal of (153) (105) (187) fixed assets _______ _______ _______ Profits on ordinary 8,842 10,945 20,252 activities before interest Interest receivable and 160 48 104 similar income Interest payable and (1,357) (134) (283) similar charges _______ _______ _______ Profit on ordinary 7,645 10,859 20,073 activities before taxation Taxation on profit on 2 (2,446) (3,304) (6,235) ordinary activities _______ _______ _______ Profit on ordinary 5,199 7,555 13,838 activities after taxation Dividends paid and 3 (1,337) (1,215) (3,646) proposed _______ _______ _______ Retained profit 3,862 6,340 10,192 _______ _______ _______ Earnings per ordinary 4 share: - Basic 11.12p 16.16p 29.61p - Adjusted to exclude 14.42p 16.16p 29.61p exceptional items and goodwill amortisation - Diluted 11.12p 16.16p 29.60p CONSOLIDATED BALANCE SHEET as at 30 September 2002 Note Unaudited Unaudited Audited as at as at as at 30 September 30 September 31 March 2002 2001 2002 £000 £000 £000 Fixed assets Intangible assets 5 6,302 - - Tangible assets 74,370 39,815 40,033 _______ _______ _______ 80,672 39,815 40,033 _______ _______ _______ Current assets Stocks 73,321 35,783 36,472 Debtors and prepayments 16,941 6,052 6,574 Cash at bank and in hand 3,721 197 986 _______ _______ _______ 93,983 42,032 44,032 Creditors: amounts falling due within one year (50,983) (25,938) (22,880) _______ _______ _______ Net current assets 43,000 16,094 21,152 _______ _______ _______ Total assets less current liabilities 123,672 55,909 61,185 Creditors: amounts falling due after more than one (60,726) (2,041) (3,134) year Provisions for liabilities and charges (4,049) (2,685) (3,016) _______ _______ _______ Net assets 58,897 51,183 55,035 _______ _______ _______ Capital and reserves Called up share capital 2,337 2,337 2,337 Share premium account 8,908 8,908 8,908 Profit and loss account 47,652 39,938 43,790 _______ _______ _______ Equity shareholders' funds 58,897 51,183 55,035 _______ _______ _______ RECONCILIATION OF MOVEMENTS IN EQUITY SHAREHOLDERS' FUNDS as at 30 September 2002 Unaudited Unaudited Audited as at as at as at 30 September 30 September 31 March 2002 2001 2002 £000 £000 £000 Profit for the period 5,199 7,555 13,838 Dividends paid and proposed (1,337) (1,215) (3,646) _______ _______ _______ Net movement in equity shareholders' funds 3,862 6,340 10,192 Opening equity shareholders' funds 55,035 44,843 44,843 _______ _______ _______ Closing equity shareholders' funds 58,897 51,183 55,035 _______ _______ _______ CONSOLIDATED CASH FLOW STATEMENT for the half year ended 30 September 2002 Unaudited Unaudited Audited first half First half year ended 2002 2001 31 March 2002 £000 £000 £000 Net cash inflow from operating activities 11,481 10,366 21,460 Returns on investments and servicing of finance (1,127) (86) (179) Taxation (2,347) (1,346) (5,324) Capital expenditure (9,845) (8,256) (11,816) Acquisitions (55,345) - - Equity dividends paid - - (3,365) _______ _______ _______ Net cash (outflow)/inflow before financing (57,183) 678 776 Financing 56,665 (1,656) (659) _______ _______ _______ (Decrease)/increase in cash (518) (978) 117 _______ _______ _______ NOTES TO THE INTERIM FINANCIAL STATEMENTS 1 Operating profit and exceptional items Operating profit is stated after charging goodwill amortisation of £131,000 relating to the acquisition of the Sport and Fashion division. Exceptional items comprise mainly expenditure directly relating to the acquisition and integration of the Sport and Fashion division of Blacks Leisure Group Plc, acquired in May 2002 this year. 2 Taxation Taxation has been estimated at the expected rate for the full year. 3 Dividend The Directors have declared an interim dividend of 2.86p per ordinary share, to be paid on 24 February 2003 to shareholders on the register as at 24 January 2003. 4 Earnings per ordinary share Basic earnings per ordinary share represent the profit for the period of £5,199,000 (2001: £7,555,000) divided by the weighted average number of ordinary shares in issue of 46,740,477 (2001:46,740,477). Adjusted 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 earnings used to calculate earnings per ordinary share is given below: Earnings attributable to ordinary As at 30 As at 30 As at 31 March shareholders September 2002 September 2001 2002 £000 £000 £000 Profit on ordinary activities after 5,199 7,555 13,838 taxation - Exceptional items 1,975 - - - Tax relating to exceptional items (562) - - - Goodwill amortisation 131 - - _______ _______ _______ Profit after taxation excluding exceptional 6,743 7,555 13,838 items and goodwill amortisation _______ _______ _______ Adjusted earnings per ordinary share 14.42p 16.16p 29.61p _______ _______ _______ Effect of net interest payable (net of 1.79p 0.12p 0.27p taxation) _______ _______ _______ 16.21p 16.28p 29.88p _______ _______ _______ 5 Acquisition of Sport and Fashion division from Blacks Leisure Group Plc The group purchased four companies comprising the Sport and Fashion division of Blacks Leisure Group Plc on 21 May 2002 for a total consideration of £54.3 million (£52.8 million plus acquisition costs of £1.5 million). The acquisition was funded by a new bank facility, being a five year term loan of £40 million together with a revolving credit facility of £40 million, over the same period. The total fair value of net assets at acquisition was £47.9 million, creating goodwill on acquisition of £6.4 million. The goodwill arising has been capitalised as an intangible fixed asset and amortised over 20 years, in accordance with FRS10. Goodwill amortisation of £131,000 has been charged to operating profit since the date of acquisition. 6 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 March 2002. 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 year ended 31 March 2002 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: Unit P14 Parklands, Heywood Distribution Park, Heywood, Lancs OL10 2TT. This information is provided by RNS The company news service from the London Stock Exchange

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