Interim Results
John David Group (The) PLC
09 October 2003
9th October 2003
THE JOHN DAVID GROUP PLC
INTERIM RESULTS FOR THE SIX MONTHS TO 31ST JULY 2003
The John David Group Plc ('the Group'), a leading specialist retailer of
fashionable branded sports and leisure wear, today announces its interim results
for the six months to 31st July 2003.
Key financials:
• Turnover increased by 2.4% to £209.7 million (half year to 30th
September 2002: £204.7 million)
• Operating loss before exceptional items and goodwill of £1.5 million
(half year to 30th September 2002: operating profit of £11.1 million)
• Interim dividend maintained at 2.86p per ordinary share
• Positive like for like margin improvement since period end
Operational highlights:
• Turnaround plan developed and being actively implemented
• Store closures and fascia conversion programme ahead of schedule
• Three new JD Sports stores opened in September, including Birmingham
Bull Ring
• Positive initial sales on Autumn/Winter range
Roger Best, Executive Chairman, said: 'Our financial results for the first half
of the year have been disappointing as the Group has continued to deal with
operational issues surrounding the integration of First Sport stores.
'The management team has developed a turnaround strategy which clearly sets out
a long-term direction for the Group and has the full backing of the Board,
including the founder shareholders.
'This strategy is now being aggressively implemented. The core of the strategy
is the refocusing of the Group into two separate divisions, Sports Fascias and
Fashion Fascias. We have also taken action to deal with unprofitable locations
and have, to date, closed 21 stores with a further 16 due for closure before the
end of the year. Our store conversion programme has also continued with, to
date, 106 First Sport stores converted to the JD Sports format.
'In recent weeks, we have witnessed a small, but significant, improvement in
trading, largely as a result of our new Autumn/Winter range. The Board is
confident that the execution of the strategy, now in place, will lead to a
stronger more profitable business in the future.'
Enquiries:
The John David Group Plc 0161 767 1000
Roger Best (Executive Chairman)
Malcolm Blackhurst (Finance Director)
Hogarth Partnership Limited 020 7357 9477
Andrew Jaques
Tom Leatherbarrow
CHAIRMAN'S STATEMENT
The six months to 31st July 2003 was a period when we began the process of
restructuring the Group based upon a clear, long-term strategy.
We have re-organised the business into two operating units - Sports Fascias and
Fashion Fascias. The key fascias with which we will drive forward are all
profitable proven concepts - JD in Sports and Open, Size? and Athleisure in
Fashion. Both businesses have their own management and dedicated buying,
merchandising, retail and marketing teams.
As has been previously announced, despite spells of stronger trading, the
overall improvement in performance that we hoped for in the first half did not
materialise. The integration of First Sport has continued to disrupt our day to
day operational performance, but the action plans put in place to deal with
unprofitable stores are being aggressively implemented. We have now closed 21
unprofitable stores and a further 16 are scheduled for closure before the end of
the financial year. This programme is ahead of schedule and is a key part of
the realignment of our store portfolio taking place between now and January
2005.
We have continued our fascia conversion programme, with 106 First Sport stores
converted to the JD Sports format since February 2003. In addition, we have
improved our stock replenishment capability and the product balance in stores.
Further planned refinements in product mix and marketing will lead to
incremental improvements over the next eighteen months.
Crucially, as a management team, we are more confident in the quality of our
Autumn/Winter range and are already experiencing a small, but significant,
improvement in sales as a result of these new lines.
It will take until the financial year beginning February 2005 for the full
benefit of all our actions to come through and the Board is confident that the
plan will lead to a stronger, better balanced Group and a leading position in
both the sports fashion and casual fashion markets that we target.
GROUP RESULTS
We announced at the AGM that since the business has been reorganised, we would
no longer report on JD Sports and First Sport as separate divisions. The
reorganisation of the Group into Sports Fascias and Fashion Fascias will be
reflected in the analysis accompanying the year end results.
Total sales during the period ended 31st July 2003 were £209.7 million compared
with £158.1 million for the six month period ended 31st July 2002 and £204.7
million in the previous interim period to 30th September 2002. The comparative
period differs as the year end of the Group was changed to 31st January from
31st March in order to ensure coterminous year end dates following the
acquisition of First Sport in May 2002.
Total Group sales increased by 1.7% including a like for like sales decline of
2.7% in comparison with the same six month period to July last year. Gross
margin decreased by 1.3% during the same period. Group like for like sales are
expected to improve in the second half by at least 1% pitched against weak
comparatives from the end of September 2002 onwards and gross margin is also
expected to continue to improve in the second half to January 2004.
Operating loss before exceptional items and amortisation of goodwill was £1.5
million and after interest charges was £3.8 million (half year to 30th September
2002: operating profit of £11.1 million and £9.9 million after interest
charges).
After charging exceptional items of £1.1 million and goodwill amortisation of
£0.4 million, loss before interest charges and loss on disposal of fixed assets
was £3.0 million (half year to 30th September 2002: profit of £8.9 million).
Net loss before tax and after exceptional items and goodwill amortisation was
£5.6 million for the period (half year to 30th September 2002: profit of £7.6
million).
Adjusted loss per share, before exceptional items and goodwill, was 4.32p (half
year to 30th September 2002: EPS of 14.42p).
BALANCE SHEET & FINANCIAL RESOURCES
Shareholders' funds at the balance sheet date have decreased by 7.8% to £54.3
million from the previous level of £58.9 million at the end of September 2002.
Total expenditure on fixed assets during the period amounted to £4.8 million of
which £3.4 million relates to stores. Net borrowings at the end of July 2003
reduced to £52.1 million resulting in a gearing level of 96% (30th September
2002: £56.3 million and 95%).
Despite the disappointing performance in the first half, net cashflow has
improved by £3.4 million.
DIVIDEND
The Board proposes to maintain and pay an interim dividend of 2.86p per ordinary
share (2002: 2.86p). The dividend will be paid on 16th January 2004 to
shareholders on the register as at the close of business on 12th December 2003.
MANAGEMENT RE-ORGANISATION
As announced at the AGM, Barry Bown, Chief Executive, has taken on the role of
leading our larger division, Sports Fascias business, while new appointee
Richard Percival is leading our Fashion Fascias business. In August, Andy Helme
joined the Group from Orange, as Marketing Director Sports.
Malcolm Blackhurst, Group Finance Director, has decided to resign from the Group
to pursue other interests, but has agreed to stay in his role until a
replacement has been recruited. We wish Malcolm well for the future and thank
him for eleven years' loyal service to the Group.
Negotiations regarding a new Group Finance Director are at an advanced stage and
an announcement will be made shortly.
CURRENT TRADING & OUTLOOK
Since the 1st August 2003, overall trading has been mixed and trends have been
distorted by the change in the timing of our Summer Sale from August/September
in 2002 to June/July this year. Whilst sales are down for the first nine weeks
of H2 by 4.5%, compared with the same period in 2002, this has been more than
compensated for by an improvement in like for like gross margin. Furthermore,
since the start of the comparable non-sale period two weeks ago, total sales
have increased by 5.6% compared to the same period in 2002. The Board is
cautiously optimistic that this represents a positive reception to our product
offering for the Autumn/Winter season.
Three new JD Sports stores have opened in the last month - Birmingham Bull Ring,
Greenwich and Beckton. The number of Sports Fascia stores is now 325 and 268 of
these are now under the JD banner.
In the Fashion Fascias business, Size? continues to perform well and our
refitted Carnaby Street store will open shortly. The new Size? in Leeds will
open in November along with three other Group stores, which are being
reformatted to Size? Our new 24,000 sq.ft. Open store on Buchanan Street,
Glasgow is planned to open in early December.
By the end of January 2004, we envisage that the Group will trade from around
1.22 million sq.ft. in 359 stores throughout UK and Ireland of which 302 will be
Sports stores and 57 Fashion stores.
Following extensive independent research, a clear vision and branding has been
created for both our Sports and Fashion Fascia businesses. We are now focussed
on realising this vision and improving profitability. The process of re-shaping
and re-inventing will take time, but the opportunities are being attacked in a
planned and measured way. The Board, including the founder shareholders, are
confident that the plan will lead to a stronger, better balanced Group.
Roger Best
Executive Chairman
9th October 2003
CONSOLIDATED PROFIT AND LOSS ACCOUNT
for the 6 months ended 31 July 2003
Unaudited Unaudited Audited
6 months 6 months 10 months
ended 31 ended 30 ended 31
July September January
2003 2002 2003
Note £000 £000 £000
Turnover 209,731 204,769 370,804
Cost of sales (114,077) (111,508) (202,229)
_______ _______ _______
Gross profit 95,654 93,261 168,575
Operating expenses (net) (98,685) (84,266) (154,493)
_______ _______ _______
Operating (loss)/profit (3,031) 8,995 14,082
Before exceptional items (1,541) 11,101 18,017
and goodwill
amortisation
Exceptional items 1 (1,102) (1,975) (3,514)
Goodwill amortisation 1 (388) (131) (421)
Operating (loss)/profit (3,031) 8,995 14,082
Loss on disposal of (312) (153) (433)
fixed assets
_______ _______ _______
(Loss)/profit on (3,343) 8,842 13,649
ordinary activities
before interest
Interest receivable and 50 160 212
similar income
Interest payable and (2,349) (1,357) (3,080)
similar charges
_______ _______ _______
(Loss)/profit on (5,642) 7,645 10,781
ordinary activities
before taxation
Taxation on (loss)/ 2 2,472 (2,446) (4,024)
profit on ordinary
activities
_______ _______ _______
(Loss)/profit on (3,170) 5,199 6,757
ordinary activities
after taxation
Dividends paid and 3 (1,337) (1,337) (3,038)
proposed
_______ _______ _______
Retained (loss)/profit (4,507) 3,862 3,719
_______ _______ _______
Earnings per ordinary 4
share:
- Basic (6.78p) 11.12p 14.46p
- Adjusted to exclude (4.32p) 14.42p 21.18p
exceptional items and
goodwill amortisation
- Diluted (6.78p) 11.12p 14.45p
CONSOLIDATED BALANCE SHEET
As at 31 July 2003
Note Unaudited Unaudited Audited
as at as at as at
31 July 30 September 31 January
2003 2002 2003
£000 £000 £000
Fixed assets
Intangible assets 5 12,568 6,302 11,643
Tangible assets 70,528 74,370 74,292
_______ _______ _______
83,096 80,672 85,935
_______ _______ _______
Current assets
Stocks 78,646 73,321 69,171
Debtors and prepayments 12,734 16,941 13,632
Cash at bank and in hand 13,919 3,721 3,527
_______ _______ _______
105,299 93,983 86,330
Creditors: amounts falling due within one year (70,001) (50,983) (53,157)
_______ _______ _______
Net current assets 35,298 43,000 33,173
_______ _______ _______
Total assets less current liabilities 118,394 123,672 119,108
Creditors: amounts falling due after more than one year (61,627) (60,726) (56,294)
Provisions for liabilities and charges (2,510) (4,049) (4,050)
_______ _______ _______
Net assets 54,257 58,897 58,764
_______ _______ _______
Capital and reserves
Called up share capital 2,338 2,337 2,338
Share premium account 8,917 8,908 8,917
Profit and loss account 43,002 47,652 47,509
_______ _______ _______
54,257 58,897 58,764
Equity shareholders' funds _______ _______ _______
RECONCILIATION OF MOVEMENTS IN EQUITY SHAREHOLDERS' FUNDS
As at 31 July 2003
Unaudited Unaudited Audited
as at as at as at
31 July 30 September 31 January
2003 2002 2003
£000 £000 £000
(Loss)/profit for the financial period (3,170) 5,199 6,757
Dividends paid and proposed (1,337) (1,337) (3,038)
_______ _______ _______
Retained (loss)/profit for the financial (4,507) 3,862 3,719
period
Proceeds from issue of ordinary shares - - 10
_______ _______ _______
Net movement in equity shareholders' funds (4,507) 3,862 3,729
Opening equity shareholders' funds 58,764 55,035 55,035
_______ _______ _______
Closing equity shareholders' funds 54,257 58,897 58,764
_______ _______ _______
CONSOLIDATED CASH FLOW STATEMENT
for the 6 months ended 31 July 2003
Unaudited Unaudited Audited
6 months 6 months 10 months
ended 31 ended 30 ended 31
July September January
2003 2002 2003
£000 £000 £000
Net cash inflow from operating activities 11,837 11,481 28,194
Returns on investments and servicing of finance (2,203) (1,127) (2,734)
Taxation (58) (2,347) (5,957)
Capital expenditure (4,847) (9,845) (18,005)
Acquisitions - (55,345) (52,201)
Equity dividends paid (1,337) - (2,431)
_______ _______ _______
Net cash inflow/(outflow) before financing 3,392 (57,183) (53,134)
Financing 7,000 56,665 55,675
_______ _______ _______
Increase/(decrease) in cash 10,392 (518) 2,541
_______ _______ _______
NOTES TO THE INTERIM FINANCIAL STATEMENTS
1 Operating (loss)/profit and exceptional items
Operating (loss)/profit is stated after charging goodwill amortisation of
£388,000 relating to the acquisition of the Sport and Fashion division from
Blacks Leisure Group Plc in May 2002.
Exceptional items primarily comprise integration and redundancy costs
attributable to the First Sport acquisition. These include £666,000 of
redundancy costs, lease exit payments of £189,000 and other sundry costs of
£197,000. There were also costs associated with the OFT investigation into
replica kits of £50,000.
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 16 January 2004 to shareholders on the register as at 12 December
2003.
4 Earnings per ordinary share
Basic earnings per ordinary share represent the loss for the period of
£3,170,000 (2002: profit £5,199,000) divided by the weighted average number of
ordinary shares in issue of 46,748,607 (2002:46,740,477).
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:
Earnings attributable to ordinary As at 31 As at 30 As at 31
shareholders July 2003 September 2002 January 2003
£000 £000 £000
(Loss)/profit on ordinary activities after (3,170) 5,199 6,757
taxation
- Exceptional items 1,102 1,975 3,514
- Tax relating to exceptional items (339) (562) (791)
- Goodwill amortisation 388 131 421
_______ _______ _______
(Loss)/profit after taxation excluding (2,019) 6,743 9,901
exceptional items and goodwill
amortisation
_______ _______ _______
Adjusted earnings per ordinary share (4.32p) 14.42p 21.18p
_______ _______ _______
5 Goodwill
In accordance with FRS7 the directors have revised the provisional fair value
adjustments relating to the acquisition of the acquisition of the Sport and
Fashion division. The revisions include additional fixed asset impairments of
£3,452,000, property revaluation of £300,000, reduction of costs associated with
the OFT investigation into replica kits of £697,000 and deferred taxation
adjustments of £1,141,000. The impact of these adjustments is to increase the
cost of goodwill by £1,314,000.
6 Basis of preparation
The unaudited results have been prepared using the same accounting policies as
those used for the financial statements for the period ended 31 January 2003.
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 2003 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.
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