ANNUAL REPORT
& ACCOUNTS 2007
CONTENTS
02
SUMMARY OF KEY
PERFORMANCE INDICATORS
41
CONSOLIDATED INCOME
STATEMENT
04
CHAIRMAN’S STATEMENT
10
FINANCIAL AND RISK REVIEW
13
PROPERTY AND STORES REVIEW
15
CORPORATE AND SOCIAL
RESPONSIBILITY
16
THE BOARD
41
GROUP AND COMPANY
STATEMENT OF RECOGNISED
INCOME AND EXPENSE
42
GROUP AND COMPANY
BALANCE SHEETS
43
GROUP AND COMPANY
CASH FLOW STATEMENTS
44
NOTES TO THE FINANCIAL
STATEMENTS
19
DIRECTORS’ REPORT
75
FIVE YEAR RECORD
23
CORPORATE GOVERNANCE
76
FINANCIAL CALENDAR
76
SHAREHOLDER INFORMATION
76
HEAD OFFICE
28
DIRECTORS’ REPORT ON
REMUNERATION
AND RELATED MATTERS
36
DIRECTORS’ RESPONSIBILITY
STATEMENT
38
INDEPENDENT AUDITOR’S
REPORT
SUmmARy Of KEy
PERfORmANCE INDICATORS
Revenue
Gross profit %
Operating profit (before net financing costs and exceptional items)
Profit before tax and exceptional items
Exceptional items
Operating profit
Profit before tax
Basic earnings per ordinary share
Adjusted basic earnings per ordinary share
Total dividend payable per ordinary share
Net cash/(debt) at end of year
52 weeks to
27 January 2007
£000
52 weeks to
28 January 2006
£000
530,581
47.5%
27,301
25,066
(7,799)
19,502
17,267
21.52p
36.41p
7.20p
10,932
490,288
46.2%
20,121
16,633
(12,983)
7,138
3,650
4.92p
25.32p
6.90p
(13,247)
BUSINESS HIgHLIgHTS
• Total revenue increased by 8.2% in the year and by 4.7% on a like for like basis.
• Gross margin improved from 46.2% to 47.5%.
• Group profit before tax and exceptional items up 51% to £25.1 million
(2006: £16.6 million).
• Group has now eliminated its year end net debt and has year end net cash
balances of £10.9 million – a three year improvement of £61.9 million after
acquisitions at a cost of £24.1 million in the same three year period.
REVENUE (£M)
NET CASH/(DEBT) (£M)
RETAIL SQUARE FOOTAGE (’000 SQUARE FEET)
530.6
490.3
458.1
471.7
370.8
1,264
1,277
1,236
1,206
1,215
2003
2004
2005
2006
2007
2003
2004
2005
2006
10.9
2007
2003
2004
2005
2006
2007
(13.2)
(30.8)
(51.0)
(55.5)
2003 represents a 10 month period ended 31 January 2003.
CHAIRmAN’S
STATEmENT
INTRODUCTION
The 52 weeks ended 27 January 2007 represented another year of delivery of our
plan to enhance operating margins and eliminate underperforming stores. We have
improved our profit before tax and exceptional items by 51% in the year to £25.1
million (2006: £16.6 million).
Group profit before tax was £17.3 million (2006: £3.6 million) and Group profit
after tax was £10.4 million (2006: £2.3 million).
Group operating profit before exceptional items and net financing costs for the year
of £27.3 million (2006: £20.1 million) comprised a Sports Fascias profit of £29.7
million (2006: £22.6 million) and a Fashion Fascias loss of £2.4 million (2006:
loss of £2.5 million).
SPORTS fASCIAS
The Sports Fascias’ turnover increased to £492.8 million (2006: £448.9 million).
Like for like sales for the year in the Sports Fascias excluding the Allsports and
Hargreaves Airport stores portfolios were up 4.8%. Gross margin rose to 47.6%
(2006: 46.3%).
The 73 ex-Allsports stores retained in the Sports Fascias as JD branches were
fully integrated relatively early in the year and are performing satisfactorily. The
14 Hargreaves Airport stores, acquired from Hargreaves (Sports) Limited on 23
June 2006, were not great contributors to profit during the year and were adversely
affected by new security measures operational at all airports since last August.
We still believe that once these stores have been refurbished and refascia’d
as necessary, with the right product offer and brand support, they will trade
successfully and help us broaden our offer and appeal.
gROUP PERfORmANCE
Revenue
Total revenue increased by 8.2% in the year (2007: £530.6 million; 2006:
£490.3 million) as a result of the Group’s positive like for like sales performance
of 4.7% (excluding ex Allsports and ex Hargreaves Airport stores), combined
with increased turnover from the ex Allsports stores in their first full year (not
all of which have been retained) and from the ex Hargreaves Airport stores.
Turnover growth continues to be held back in both sets of Fascias by the store
rationalisation programme but enhancement of profitability will continue to be our
fundamental goal rather than absolute turnover growth. Like for like sales growth
is, however, essential to the achievement of our long term goals.
gross margin
We are pleased with the progress made in enhancing Group gross margin from
46.2% to 47.5% which we had expected to take two years to achieve. However,
there remains downward pressure on selling prices and we expect economic
conditions to be less favourable in the second half as recent and anticipated
interest rate increases take effect. The best prospects for margin growth come from
own and licensed brands if we can continue to increase their share of sales in the
Sports Fascias.
Overheads
Overheads generally remain tightly controlled wherever possible though rents,
rates and minimum wage rates are outside our control and represent a significant
part of our cost base. We have substantially increased our marketing spend to
continue developing the profile of JD and its brand offer, including support for
own brands such as Carbrini and Brookhaven. We have also begun to invest
more heavily in other support functions such as IT, merchandising and own
brand design.
fASHION fASCIAS
The Fashion Fascias have been engaged in a further year of transition with
underperforming stores gradually being eliminated and the remaining ATH- and
AV stores being converted to the Scotts Fascia. Currently, there are only 6
ATH- and AV stores remaining.
Operating Profits and Results
Operating profit before net financing costs and exceptional items increased by
£7.2 million to £27.3 million (2006: £20.1 million) which represented a 36%
increase on last year. Our Group operating margin (before net financing costs and
exceptional items) has therefore increased to 5.1% (2006: 4.1%).
In spite of a positive like for like sales performance of 3.7% for the year, turnover
declined to £37.7 million (2006: £41.4 million) as a result of the store disposal
programme. Eight underperforming stores were closed in the year and a further
two have already been closed since the year end. Substantial losses were borne
on some of these stores before they were disposed of, meaning that the results
suffered from the early year losses, and did not benefit from the normal anticipated
Christmas trading period profit in the year. Gross margin for the year improved to
46.3% (2006: 45.5%).
The young branded fashion sector remains competitive and we continue to believe
the Fashion Fascias will only deliver profit to the Group when its major property
issues are resolved. The disposals of Liverpool Open in July 2006 and Bluewater
Scotts in January 2007 have both been significant steps towards this goal. We are
increasingly focussed on making the right property and buying and merchandising
decisions to deliver shareholder value from these Fascias.
As a result of reduced exceptional items of £7.8 million (2006: £13.0 million),
operating profit after exceptional items but before net financing costs rose sharply
from £7.1 million to £19.5 million.
The exceptional items comprise:
Impairment of RD Scott goodwill
Impairment of ex Hargreaves Airport Stores goodwill
Lease variation costs
Onerous lease costs
Impairment of property plant and equipment
in underperforming stores
Profit on disposal of fixed assets
Total exceptional charge
£m
2.0
2.0
2.3
1.5
1.5
(1.5)
7.8
RD Scott Limited was acquired through a share purchase in December 2004.
Whilst this acquisition has assisted us by providing increased focus on the
separate operations of our two sets of Fascias, the results of the acquired Scotts
stores and of the Fashion Fascias have been disappointing since the acquisition.
Although progress is being made, it has been necessary to impair the goodwill
carried forward from this acquisition by £2.0 million, reducing it from £4.6 million
to £2.6 million.
The ex Hargreaves Airports stores were acquired in the current year and the
£4.0 million initial goodwill arising from this trade and asset purchase has
been impaired by £2.0 million to £2.0 million reflecting disappointing trading
since acquisition. For the purposes of assessing goodwill fair values, current
expectations are that concession agreements will not be extended. This
assumption has been made based on the experience at Stansted Airport where
BAA would not renew the concession agreement on the landside store as the
space was required for additional security measures.
The lease variation costs were incurred in negotiating break options in onerous
leases for stores in Oxford Street and Bluewater. The onerous lease costs provision
net charge of £1.5 million comprised a charge of £1.8 million on four overrented
trading stores and a credit of £0.3 million on vacant stores. The impairment charge
was on a further four Sports stores and two Fashion stores which are earmarked
for disposal if suitable deals can be negotiated.
Net financing Costs
Net financing costs were down from £3.5 million to £2.3 million principally as a
result of continuing debt reduction.
Debt Reduction and Working Capital
Year end net debt of £13.2 million in the previous year was eliminated and
replaced by net cash balances of £10.9 million, an improvement of £24.1 million
after acquisitions and dividends. Free cash flow generated in the last three years
has been in excess of £92 million.
Stocks were reduced in the year by a further £4.7 million and the other net working
capital movements were small. Suppliers continue to be paid to agreed terms and
settlement discounts are taken.
STORE PORTfOLIO
Since March 2004, we have been working hard to rationalise our store portfolio
and it is pleasing to be reporting further substantial progress this year and at a net
cost below our expectations. We have closed a further 34 underperforming stores
during the period and a further nine stores have already been closed since the
year end. At this time last year, we indicated that this process would take at least a
further year and it has not been made any easier by the number of retailers who are
either ceasing trading or having to rationalise their portfolios nor by the number
of new retail developments opening or in the pipeline. Therefore, we believe that
it will take another year to see us through the major rationalisation programme
though a fast moving environment, higher interest rates and the danger of
assignments failing means that this continues to be a challenge and one for which
the cost is difficult to estimate.
EmPLOyEES
The Group continues to enjoy the support of a dedicated and large workforce
without whom our continued improvement in performance could not be delivered.
The retail environment is a tough one to work in and the Board appreciates the
hard work and commitment which has led to these results in all our shops, offices
and warehouses. Thank you to everybody concerned.
Peter Cowgill
Executive Chairman
26 April 2007
CHAIRmAN’S
STATEmENT
(CONTINUED)
During the year store numbers moved as follows:
Sports Fascias
Start of year
New stores
Additional Allsports assignment
Hargreaves Airport stores
Conversions to Fashion
(incl. three ex Allsports)
Closures
Close of year
Fashion Fascias
Start of year
New stores
Conversions to Fashion
(incl. three ex Allsports)
Closures
Close of year
Units
370
7
1
14
(4)
(26)
362
‘000 sq ft
1,133
14
5
15
(5)
(64)
1,098
Units
46
2
‘000 sq ft
144
7
4
(8)
44
5
(39)
117
DIVIDENDS AND EARNINgS PER
ORDINARy SHARE
The Board proposes paying a final dividend of 4.80p (2006: 4.60p) bringing the
total dividend payable for the year to 7.20p (2006: 6.90p) per ordinary share.
The proposed final dividend will be paid on 30 July 2007 to all shareholders on
the register at 11 May 2007.
The adjusted earnings per ordinary share before exceptional items was 36.41p
(2006: 25.32p).
The basic earnings per ordinary share was 21.52p (2006: 4.92p).
CURRENT TRADINg AND OUTLOOK
Trading since the year end has been encouraging with like for like sales for the
Sports Fascias excluding the ex Hargreaves Airport stores for the 12 weeks
ended 21 April 2007 being up 8.1%. The Fashion Fascias had a particularly
difficult period in February 2007 and its like for like sales for the same 12 week
period were down 2.1%. The Group like for like sales for this 12 week period are
therefore up 7.5%.
It is the Board’s view that the recent good weather and the store rationalisation
programme have considerably enhanced these figures and that these benefits are
unlikely to continue to the same degree in the remainder of the year. In addition,
we will shortly be coming up against World Cup comparatives and interest rate
increases are expected to have more impact later in the year.
Overall, the Board expects a further improvement in the Group’s results for the first
half of the current year but remains aware of the more challenging environment
which is likely to prevail in the balance of the year.
‘THE PERIOD WAS
ANOTHER yEAR Of
DELIVERy Of OUR PLAN
TO ENHANCE OPERATINg
mARgINS. WE HAVE
ImPROVED OUR PROfIT
BEfORE TAX AND
EXCEPTIONAL ITEmS By
51% IN THE yEAR TO
£25.1 mILLION.’
fINANCIAL AND
RISK REVIEW
INTRODUCTION
Profit before tax increased substantially in the year from £3.7m to £17.3m.
This improvement has been achieved through:
• Increased operating profits before exceptional items as a result of increasing
gross margin and improved store cost ratios.
• A reduction in the level of exceptional items.
• A reduction in net financing costs due to debt reduction.
We have maintained our focus on cash generation with year end debt eliminated.
The significant improvement in the Group’s financial position over the three year
period since the current management team came together in early 2004 means that
we are now in a good position to invest in appropriate opportunities whether they
be connected with the current store base or strategic acquisitions.
TAXATION
The effective rate of tax on profit has increased from 35.7% to 39.8%. This
increase is principally due to the fact that certain depreciation charges and the
impairment of the goodwill in RD Scott Limited within the exceptional items do not
qualify for any form of tax relief. It is not expected that such a high effective rate of
tax will continue to be experienced.
EARNINgS PER SHARE
The basic earnings per share has increased from 4.92p to 21.52p. However, we
believe that the more appropriate measure of our earnings performance is the
adjusted basic earnings per share which excludes the post tax effect of exceptional
items except those pertaining to the gain or loss on the disposal of non-current
assets. The adjusted basic earnings per share rose by 44% from 25.32p to 36.41p.
DEBT REDUCTION
Continuing strong free cash flow has also meant that the Group ended the year
with net cash balances of £10.9m. Over the last three years the net cash position
of the Group has now improved by £61.9m even after the acquisitions of RD
Scott, Allsports and the Hargreaves Airport stores in this three year period for cash
totalling £24.1 million. The reduction in debt has been achieved through improved
trading performance and tight controls over stocks and capital expenditure.
Creditors continue to be paid to terms to maximise settlement discounts with our
year end creditor days being 32 (2006: 34).
The improvement in the cash position of the Group has enabled the Group to
benefit from lower net financing costs with the net charge in the year reducing
from £3.5m to £2.2m.
rent payments. The improved financial position of the Group also enabled us to
achieve our objective of securing lower average margin rates. The new facility has
been committed for a five year period with the fees incurred being amortised over
the same timescale. The facility can be used for acquisitions as long as relevant
conditions are complied with.
Interest rate hedging has not been put in place on the new facility. We are mindful
of the current upward trend in the base rate but, given that we do not drawdown on
the facility at certain times of the year, we do not feel that a long term interest rate
hedge is necessary. However, we recognise that this position may change and it is
one that we review regularly along with the level of our facility requirements.
The Group’s principal foreign exchange exposure continues to be on the sourcing
of own brand merchandise from the Far East which usually has to be paid for
in US Dollars. We set a buying rate at the start of the buying season (typically
six to nine months before the product actually starts to appear in the stores)
and we then lock into rates at or above this rate through appropriate foreign
exchange instruments.
RISK fACTORS
Any business undertaking will involve some risk with many risk factors common
to any business no matter what sector it operates in. However, the Directors
consider that certain key risks and uncertainties are more specific to the Group and
the market in which it operates. An assessment of such factors is set out below:
Dependence on Certain Key Brands and Competition
A significant proportion of the Group’s revenue comes from the sale of goods
sourced from a small number of branded suppliers. The Group is conscious that
it cannot be overdependent on these key brands as they are also available in a
number of other retailers. To reduce this risk the Group has taken the following
actions:
• Develop relationships with new brands and seek exclusivity on the sale of these
brands within the UK market.
• Work with the key branded suppliers on the development of product that is
unique to the Group and only available in the Group’s businesses.
• Increase the proportion of sales from own and licensed brands by developing
new brand names and expanding product ranges of existing brands.
Property Developments
The retail landscape has seen significant changes in recent years with a number
of new retail developments either already opened or in the pipeline. As such, the
Group is exposed where it has committed itself to a long term lease in a location
which, as a result of the opening of another retail scheme, is no longer attractive to
the customer and so suffers reduced footfall.
fACILITy RESTRUCTURINg & TREASURy
A new £70.0 million bank syndicated facility was agreed in October 2006. The
new facility is entirely revolver based and contains no fixed repayment element.
We believe that a revolving facility with monthly drawdowns of debt is best
suited to the business given the cyclical nature of the cash flows in the business,
particularly with regard to the trading peak at Christmas and the quarterly store
When the Group is made aware of a new development, a review is performed to
establish the possible impact on the existing stores and then considers whether an
exit strategy is needed. Where possible we try and work with the relevant landlords
to agree a surrender although this is not always possible. Where a surrender is
not possible, we seek to either assign the lease to another retailer or attract a sub
tenant. In many cases this necessitates the payment of an incentive to the other
retailer. Assigning the lease or finding a sub tenant are not without risk because
if the other retailer fails then we can potentially become liable for the main
headlease again.
Seasonality
The Group’s business is highly seasonal. Historically, the Group’s most important
trading period in terms of sales, profitability and cash flow has been the Christmas
season. Lower than expected performance in this period may have an adverse
impact on results for the full year which may result in excess inventories which are
difficult to liquidate.
Damage to Reputation of Brands
The Group is heavily dependent on the brands which it sells being desirable to
the customer. As such, we are exposed to events or circumstances which may
or may not be under our control which could give rise to liability claims and/or
reputational damage.
We work with our suppliers to ensure that the product which we source from them
satisfies the increasingly stringent laws and regulations governing issues of health
and safety, packaging and labelling, pollution and other environmental factors.
DIVIDENDS
A final cash only dividend of 4.80p per share is proposed to make the full dividend
payable for the year 7.20p, an increase of 4.3% from the prior year. Although some
dividend growth is expected in future years, this growth is likely to be restricted
so that we have sufficient headroom in our facilities for the business to continue
the store rationalisation programme, invest in new stores and make appropriate
strategic acquisitions which will maximise future shareholder value.
Brian Small
Group Finance Director
26 April 2007
PROPERTy AND
STORES REVIEW
The ongoing review of the property portfolio has resulted in the closure of 34
under performing stores during the period as we continue to drive the efficiency of
the store base upwards. New stores are taken when suitable opportunities occur
and in the period a total of nine new stores were opened. Two of the new stores
which were opened in the year (Middlesbrough and Ayr) were fitted with a new
trial shopfit. The initial results in these two stores are encouraging and we intend
to extend the trial of this new shopfit into other new stores and refurbishments
planned for the period to January 2008.
In addition, the Group looks to utilise all its space in the most effective manner
possible and enhance future performance through extensions, refurbishments and
conversions to other group fascias. Major works undertaken in the year include:
• Conversion of the ex Allsports stores to existing fascias (73 JDs and 3 Scotts).
• Conversion of a further two ex JD fashion stores to the Scotts fascia.
The acquisition of 14 stores in Airport locations from Hargreaves (Sports) Limited
gave the Group a further 15,000 sq ft of retail space. These stores are licensed
from BAA for periods up to five years and currently operate under four different
legacy fascia names (Hargreaves, Nike, Quiksilver and Beach Party) with these
names owned by other third party companies. The conversions of the stores
previously fascia’d as Hargreaves to the JD fascia format are planned to take place
as soon as practicable. As a result of the need for increased space for security
measures, the license at one store in Stansted Airport was not renewed and the
store subsequently closed after the year end.
The store portfolio at 27 January 2007 and 28 January 2006 can be analysed
as follows:
Sports Fascias
High Street
Airport stores acquired
Out of Town
Total
Fashion Fascias
Ath / AV
Open
Scotts
Lacoste
Total
No. of Stores Retail (000 sq ft)
2007 2006
2007
913
316
-
14
220
32
1,133
362
2006
338
-
32
370
863
15
220
1,098
No. of Stores Retail (000 sq ft)
2007 2006
2007
37
7
40
1
64
34
3
2
144
44
2006
14
2
28
2
46
16
22
76
3
117
Group Total
406
416
1,215 1,277
The portfolio review will be continued into future financial years and the efficiency
of the portfolio should continue to improve as a result. It is anticipated that
approximately 20 stores will be closed this year and at least six will be opened.
CORPORATE AND SOCIAL
RESPONSIBILITy
The Group recognises that it has a social responsibility to ensure that its business
is carried out in a way that ensures high standards of environmental and human
behaviour. With the help and co-operation of all employees, the Group endeavours
to comply with all relevant laws in order to meet that duty and responsibility
wherever it operates. The major contributions of the Group in this respect are
detailed below:
EmPLOymENT
The Group is a large equal opportunities employer and a large training
organisation providing direct employment and career development to thousands
of people all over the UK and in Eire. We employ large numbers of school leavers
and university graduates. We also provide opportunities for large numbers of
people seeking flexible or part-time hours and we participate regularly in work
experience schemes with schools and colleges throughout the country.
ETHICAL LABOUR CONSIDERATIONS
The Group seeks to provide its customers with high quality and value merchandise
from manufacturers who can demonstrate compliance with internationally
accepted good practice in terms of employment policies and environments.
We visit our own brand suppliers and our branded product suppliers wherever
practicable but on occasions we rely on their good faith and statements of policy
along with our own supplier contract which contains a set of ‘Employment
Standards For Suppliers’.
gENERAL SOCIAL RESPONSIBILITy
The Group seeks to be involved in the community where it can make an
appropriate contribution from its resources and skill base. A good example of this
was our support for the international MS Life Conference held in April 2006 in
Manchester by The Multiple Sclerosis Society. We intend to repeat this in 2008
when the conference is expected to return to Manchester.
HEALTH AND SAfETy
The Group employs a Health and Safety Officer who endeavours to ensure that
we provide healthy and safe environments for working and shopping for all our
employees, customers and visitors. He also coordinates all training in this area of
our work, carries out risk assessments and ensures that safe working practices and
equipment are used throughout our business.
ENVIRONmENTAL
general
The Group fulfills its duty to minimise adverse environmental impacts by:
• Ensuring efficient use of materials and energy and recycling wherever possible.
• Minimising waste.
• Ensuring compliance with relevant legislation.
Energy
We aim to give our customers an enjoyable retail experience in our stores with
goods presented in an environment that is both well lit and has an ambient
temperature. However, we acknowledge that we must be responsible in our
energy usage. As such, we have now commenced a process to review our usage
of energy with independent qualified consultants engaged to make appropriate
recommendations. We will report on this matter further in our 2008 report.
Recycling
Wherever possible, cardboard (the major packaging constituent in the business) is
taken back to our distribution centres. The cardboard is then baled and passed to
recycling businesses for reprocessing. During the year we increased our recycling
of cardboard to 113.5 tonnes (2006: 79.1 tonnes).
The Group has introduced new performance measures in the year for the recycling
of paper in the business. This is now collected centrally for recycling and in the
year 89.6 tonnes of paper were recycled.
THE BOARD
PETER COWgILL
Executive Chairman and Chairman of the Nominations Committee
aged 54
Peter was appointed Executive Chairman in March 2004. He was previously
Finance Director of the Group until his resignation in June 2001. Since then
he has been a partner in Cowgill Holloway Chartered Accountants. He is a
Non-Executive Director of a number of private companies and Non-Executive
Chairman of United Carpets Plc and Air Music & Media Group Plc.
BARRy BOWN
Chief Executive aged 46
Barry joined the Board in 2000 and has been with The John David Group Plc since
1984. He held the positions of Head of Retail, Head of Buying and Merchandising
and Chief Operating Officer prior to his appointment as Chief Executive in 2000.
BRIAN SmALL
finance Director aged 50
Brian was appointed Finance Director and Company Secretary in January
2004. Immediately prior to his appointment, he was Operations Finance
Director at Intercare Group Plc and has also been Finance Director of a number
of other companies. He qualified as a Chartered Accountant with Price
Waterhouse in 1981.
COLIN ARCHER
Non-Executive Director, Chairman of Audit and Remuneration
Committees and member of the Nominations Committee aged 65
Colin was appointed a Non-Executive Director in November 2001. He has over
40 years experience in the banking and financial arenas, having previously been
Assistant Corporate Director with Barclays Bank Plc. He is also a member of the
Chartered Institute of Bankers.
CHRIS BIRD
Non-Executive Director, member of Audit, Remuneration and
Nominations Committees aged 44
Chris was appointed to the Board in May 2003. He is a marketing specialist
with his own public relations and marketing agency. Chris has 20 years media
experience in newspapers, commercial radio and sport.
DIRECTORS’
REPORT
The Directors present their annual report and the audited financial statements for
the 52 week period ended 27 January 2007.
DIRECTORS’ INTERESTS
The interests of the Directors who held office at 27 January 2007 and their
immediate families in the Company’s shares are shown below:
PRINCIPAL ACTIVITIES AND BUSINESS REVIEW
The principal activity of the Group continues to be the retail of sports and
leisure wear.
A review of the business, providing a comprehensive analysis of the main trends
and factors likely to affect the development, performance and position of the
business, including environmental, employee, social and community issues
together with the Group’s Key Performance Indicators and a description of the
principal risks and uncertainties facing the business is detailed on pages 02 to 15
as follows:
• Summary of Key Performance Indicators (page 02).
• Chairman’s Statement (pages 04 to 06).
• Financial and Risk Review (pages 10 to 11).
• Property and Stores Review (page 13).
• Corporate and Social Responsibility (page 15).
RESULTS
Revenue for the 52 week period ended 27 January 2007 was £530.6 million and
profit before tax £17.3 million compared with £490.3 million and £3.7 million
respectively in the previous financial year. The Consolidated Income Statement is
set out on page 41.
PROPOSED DIVIDEND
The Directors recommend a final dividend of 4.80p per ordinary share
(2006: 4.60p), which together with the interim dividend of 2.40p per ordinary
share (2006: 2.30p) makes the total dividend payable for the year 7.20p
(2006: 6.90p).
If approved at the next Annual General Meeting, the dividend will be paid on
30 July 2007 to shareholders on the register at the close of business on 11
May 2007.
DIRECTORS
The names of the current directors of the Company and their biographical details
are given on page 16. Mr P Cowgill and Mr B Bown retire by rotation at the next
Annual General Meeting and are eligible for re-election.
P Cowgill
B Bown
C Archer
Ordinary shares of 5p each
27 January 2007
380,263
5,676
8,850
394,789
28 January 2006
380,263
5,676
8,850
394,789
SUBSTANTIAL INTERESTS IN SHARE CAPITAL
As at 26 April 2007, the Company has been advised by the following companies of
notifiable interests in its ordinary share capital:
Pentland Group Plc
Sports World International Ltd
Aberforth Partners
AXA Rosenberg
Barclays Plc
Number of
ordinary shares
27,566,256
4,880,855
4,260,272
3,243,189
1,511,689
%
57.12
10.11
8.83
6.72
3.13
EmPLOyEES
The Group is committed to promote equal opportunities in employment regardless
of employees’ or potential employees’ sex, marital status, creed, colour, race,
ethnic origin or disability. This commitment applies in respect of all terms and
conditions of employment. Recruitment, promotion and the availability of training
are based on the suitability of any applicant and full and fair consideration is
always given to disabled persons in such circumstances.
Should an employee become disabled during his or her employment by the Group,
every effort is made to continue employment and training within their existing
capacity wherever practicable, or failing that, in some alternative suitable capacity.
The Group has continued throughout the year to provide employees with relevant
information and to seek their views on matters of common concern.
Priority is given to ensuring that employees are aware of all significant matters
affecting the Group’s performance and of any significant organisational changes.
DIRECTORS’
REPORT
(CONTINUED)
DONATIONS
During the year the Group made charitable donations of £8,200 (2006: £nil).
No political donations were made in the year (2006: £nil).
CREDITORS PAymENT POLICy
For all trade creditors, it is the Group’s policy to:
• Agree the terms of payment at the start of business with the supplier.
• Ensure that suppliers are aware of the terms of payment.
• Pay in accordance with its contractual and other legal obligations.
The average number of days taken to pay trade creditors by the Group and the
Company at the period end was 32 (2006: 34).
The Group does not follow any code or statement on payment practice.
AUDITOR
In accordance with Section 384 of the Companies Act 1985, a resolution is to be
proposed at the Annual General Meeting for the re-appointment of KPMG Audit
Plc as auditor of the Company.
DISCLOSURE Of INfORmATION TO THE AUDITOR
Each person who is a director at the date of approval of this report confirms that:
• So far as he is aware, there is no relevant audit information of which the
Company’s auditor is unaware.
• Each director has taken all the steps that he ought to have taken as a director
to make himself aware of any relevant audit information and to establish that the
Company’s auditor is aware of that information.
ANNUAL gENERAL mEETINg
Notice of the Annual General Meeting to be held at 1.00pm on 26 July 2007 at
Hollinsbrook Way, Pilsworth, Bury, Lancashire BL9 8RR incorporating explanatory
notes of the resolutions to be proposed at the meeting is enclosed. A Form of
Proxy is also enclosed.
By order of the Board of Directors
B Small
Secretary
26 April 2007
Hollinsbrook Way
Pilsworth, Bury
Lancashire BL9 8RR
CORPORATE
gOVERNANCE
The Group recognises the importance of corporate governance and supports the
principles of corporate governance set out in Section 1 of the July 2003 FRC
Combined Code on Corporate Governance (“the Code”).
The Board has adopted core values and group standards which set out the
behaviours expected of staff in their dealings with shareholders, customers,
colleagues, suppliers and other stakeholders of the Group. One of the core values
communicated within the Group is a belief that the highest standard of integrity is
essential in business.
The Group has complied throughout the year with the provisions of the Code.
The three principal Board Committees to which responsibilities are delegated are:
Remuneration Committee
The Remuneration Committee currently comprises the two independent
non-executive directors, Mr C Archer (Chairman) and Mr C Bird. The Board sets
the terms of reference for the Remuneration Committee.
The Committee’s principal duties are to assist the Board in determining the Group’s
policy on executive directors’ remuneration and to determine specific individual
remuneration packages for senior executives, including the executive directors, on
behalf of the Board. During the process, individual performance is assessed.
BOARD COmPOSITION, mEETINgS
AND COmmITTEES
The Board of Directors carries the ultimate responsibility for the conduct of
the business.
The Board consists of two non-executive directors, both of whom are independent
under the Code, and three executive directors. Brief profiles of each director and
their positions are set out on page 16.
It is the Board’s view that all directors are able to bring independent judgement
to bear on Board matters and individual directors possess a wide variety of skills
and experience. The composition of the Board is kept under review and changes
are made when appropriate and in the best interests of the Group. There have
been no changes to the membership of the Board since the last Annual Report
was published.
Mr C Archer is the recognised senior independent non-executive director. The
Board believes that the two non-executives have provided ample guidance to
and control over the three executive directors in a demanding period for a small
capitalisation listed Group.
None of the directors have served for more than three years without having been
re-elected by the shareholders.The Board held nine Board Meetings in the year
including those convened to discuss and sanction the acquisition of the trade
and certain assets of 14 stores in Airport locations from Hargreaves (Sports)
Limited and to approve the Annual Report and Accounts. Board papers including
reports from the Chief Executive and Group Finance Director as well as reports
from the Operations, Property and Loss Control Directors (who are not on the
main Board but who attend the meetings as required) are circulated in advance of
each meeting.
All the directors have access to the Company Secretary and a procedure exists for
directors, in the furtherance of their duties, to take independent professional advice
if necessary, at the Group’s expense.
The Committee met on three occasions during the year.
Halliwell Consulting were retained through the year to advise the Committee on
senior remuneration policy.
Audit Committee
The Audit Committee currently comprises the two independent non-executive
directors, Mr C Archer (Chairman) and Mr C Bird. The Board sets the terms
of reference for the Audit Committee. The Committee’s principal duties are to
review published financial statements, monitor financial accounting procedures
and policies and to review the appointment and fees of the auditor. The Audit
Committee met three times in the year with the auditor attending each meeting.
In the year the Audit Committee discharged its responsibilities by:
• Reviewing the Group’s draft financial statements and interim results
statement prior to Board approval and reviewing the external auditor’s
detailed reports thereon.
• Reviewing the Group’s pre-close Christmas trading update announcement prior
to release.
• Reviewing the appropriateness of the Group’s accounting policies.
• Reviewing regularly the potential impact on the Group’s financial statements of
certain matters such as impairments of fixed asset values and proposed
International Accounting Standards.
• Reviewing and approving the audit fee and reviewing non-audit fees payable to
the Group’s external auditor. In reviewing the non-audit fees, the Committee also
considers the independence of the external auditor and whether its engagement
to supply non-audit services is appropriate.
• Reviewing the external auditor’s plan for the audit of the Group’s financial
statements, key risks of misstatement in the financial statements, confirmations
of auditor independence and the proposed audit fee, and approving the terms of
engagement for the audit.
CORPORATE
gOVERNANCE (CONTINUED)
The Audit Committee also monitors the Group’s whistle blowing procedures
ensuring that appropriate arrangements are in place for employees to be able
to raise matters of possible impropriety in confidence, with suitable subsequent
follow-up action. An alternative reporting channel exists whereby perceived
wrongdoing may be reported via telephone, anonymously if necessary.
Nomination Committee
The Nomination Committee currently comprises the Chairman and the
independent non-executive directors. The Nomination Committee has not been
required to meet in the period.
Board And Commitee Attendance
The attendance record of individual directors at Board and committee meetings is
detailed below.
Board
Meetings
Remuneration
Committee
Audit
Committee
Number of
meetings
in year
P Cowgill
B Bown
B Small
C Archer
C Bird
9
9
7
9
9
8
3
-
-
-
3
3
3
-
-
-
3
3
P Cowgill and B Small attended all the committee meetings at the invitation of the
non-executive directors.
DIRECTORS’ REmUNERATION
The Directors’ Report on Remuneration and Related Matters is set out on pages 28
to 34.
DIRECTORS’ RESPONSIBILITIES
general
The Board’s main roles are to create value to shareholders, to provide
entrepreneurial leadership of the Group, to approve the Group’s strategic objectives
and to ensure that the necessary financial and other resources are made available
to enable them to meet those objectives.
Specific
The specific responsibilities reserved to the Board include:
• Setting Group strategy and approving an annual budget and
medium-term projections.
• Reviewing operational and financial performance.
• Approving major acquisitions, divestments and capital expenditure.
• Reviewing the Group’s systems of internal control and risk management.
• Ensuring that appropriate management development and succession plans
are in place.
• Reviewing the environmental and health and safety performance of the Group.
• Approving appointments to the Board of Directors and of the
Company Secretary.
• Approving policies relating to directors’ remuneration and the severance of
directors’ contracts.
• Ensuring that a satisfactory dialogue takes place with shareholders.
INTERNAL CONTROL AND AUDIT
Following publication of ‘Internal Control: Guidance for Directors on the Combined
Code’ (the Turnbull guidance), the Board confirms that there is an ongoing process
for identifying, evaluating and managing the significant risks faced by the Group.
This process has been in place for the year under review and up to the date of
approval of the annual report and accounts, and is regularly reviewed by the Board
and accords with the guidance.
The directors are responsible for the Group’s system of internal controls and
monitoring their effectiveness. However, such a system is designed to manage
rather than eliminate the risk of failure to achieve business objectives, and can
only provide reasonable and not absolute assurance against material misstatement.
The directors have established an organisation structure with clear operating
procedures, lines of responsibility, delegated authority to executive management
and comprehensive financial reporting. In particular there are clear procedures for
the following:
• Identification of, and monitoring of the business risks facing the Group, with
major risks identified and reported to the Audit Committee and the Board.
• Capital investment, with detailed appraisal and authorisation procedures.
• Prompt preparation of comprehensive monthly management accounts providing
relevant, reliable and up-to-date information. These allow for comparison with
budget and previous year’s results. Significant variances from approved budgets
are investigated as appropriate.
• Preparation of comprehensive annual profit and cash flow budgets allowing
management to monitor business activities and major risks and the progress
towards financial objectives in the short and medium term.
• Monitoring of store procedures and the reporting and resolution of suspected
fraudulent activities.
• Reconciliation and checking of all cash and stock balances and investigation of
any material differences.
The Board has reviewed the effectiveness of internal controls by reviewing reports
covering the testing of internal controls. In establishing the system of internal
control the directors have regard to the materiality of relevant risks, the likelihood
of a loss being incurred and costs of control. It follows, therefore, that the system
of internal control can only provide a reasonable, and not absolute, assurance
against the risk of material misstatement or loss.
The scope of internal audit work performed is determined by the Board
in conjunction with the Loss Control Director who reports directly to the
Board every month. The primary focus has continued to be on security and
minimisation of unauthorised losses in the business using a team of appropriately
qualified employees.
The Board has decided not to employ a full time internal audit function as there is
a robust control environment and culture in the business and nothing is known to
have occurred during the last year which suggests such a function is necessary
and the associated costs justified.
CORPORATE
gOVERNANCE (CONTINUED)
SHAREHOLDER RELATIONS
In fulfilment of the Chairman’s obligations under the new Combined Code, the
Chairman gives feedback to the Board on issues raised by major shareholders.
This is supplemented by twice yearly formal feedback to the Board on meetings
between management, analysts and investors which seeks to convey the financial
market’s perception of the Group.
External brokers’ reports on the Group are also circulated to all directors. In
addition, the non-executive directors attend results presentations and analyst
and institutional investor meetings whenever possible. The Annual General
Meeting (“AGM”) is normally attended by all directors, and shareholders are
invited to ask questions during the meeting and to meet with directors after the
formal proceedings have ended. At the AGM the level of proxies lodged on each
resolution is announced to the meeting after the show of hands for that resolution.
The Group has frequent discussions with larger shareholders on a range of issues
affecting its performance. These include meetings following the announcement of
the annual results with the Group’s largest shareholders on an individual basis.
In addition, the Group responds to individual ad hoc requests for discussions
from significant shareholders. The senior independent non-executive director
is available to shareholders if they have concerns which the normal channels
of Chairman, Chief Executive or Group Finance Director have failed to resolve
or for which such contact is inappropriate. All major shareholders are given the
opportunity to meet any new non-executive directors on appointment.
gOINg CONCERN
After making enquiries, the directors have a reasonable expectation that the
Group has adequate resources to continue in operational existence for the
foreseeable future. For this reason, they continue to adopt the going concern
basis in preparing the financial statements.
DIRECTORS’ REPORT ON REmUNERATION
AND RELATED mATTERS
This report sets out the remuneration policy operated by the Group in respect
of the executive directors, together with disclosures on Directors’ remuneration
required by The Directors’ Remuneration Report Regulations 2002 (‘the
Regulations’). The auditor is required to report on the auditable part of this Report
and to state whether, in their opinion, that part of the Report has been properly
prepared in accordance with the Companies Act 1985 (as amended by the
Regulations). The Report is therefore divided into separate sections for unaudited
and audited information.
The Board have reviewed the Group’s compliance with the Combined Code (‘the
Code’) on remuneration related matters. It is the opinion of the Board that the
Group complied with all remuneration related aspects of the Code during the year.
The Report will be put to shareholders for approval at the Annual General Meeting
on 26 July 2007.
UNAUDITED INfORmATION
REmUNERATION COmmITTEE
The Remuneration Committee (the “Committee”) comprises both independent Non
Executive Directors, being Chris Bird and myself as Chairman of the Committee.
The Committee assists the Board in determining the Group’s policy on executive
directors’ remuneration and determines the specific remuneration packages for
senior executives, including the executive directors, on behalf of the Board. When
the Committee is considering matters concerning key executives below Board level
advice is sought from the executive directors. The Committee also received wholly
independent advice on executive compensation and incentives from Halliwell
Consulting during the period. Halliwell Consulting provided no other services to
the Company in the period.
The Committee is formally constituted with written Terms of Reference.
A copy of the Terms of Reference is available to shareholders by writing to the
Company Secretary.
The Committee met three times during the last year with each member attending
all the meetings.
POLICy
The policy of the Committee is to attract, motivate and retain executives of the
necessary calibre required to execute the Group’s business strategy and enhance
shareholder value.
The overriding principle behind the above remuneration policy of the Group is
that levels of base salary should be conservative with the opportunity to earn
significant rewards from short and long-term incentives provided stretching
performance targets are met which lead to the enhancement of shareholder value.
However, currently the opportunity for the executive directors to earn competitive
rewards is severely restricted due to the absence of any long-term incentive
component in the remuneration package. In 2005, a proposal to introduce an
equity based Long Term Incentive Plan to incentivise the executive directors
was agreed by the committee for submission to shareholders at the Annual
General Meeting. This proposal received support from the institutional and larger
0
shareholders but this resolution was withdrawn following the purchase of a
majority shareholding by Pentland Group Plc (‘Pentland’). Although it has always
been the intention of the Committee to implement an alternative competitive
replacement arrangement as soon as possible this has not been easy to achieve
and the entire Board has concentrated more on ensuring the successful turnaround
of the Group. Given this turnaround in the Group’s financial performance over
the last three years total remuneration paid to the executive directors has been
disproportionately low compared to the value created for shareholders. As such a
special bonus will be paid in May 2007 to the executives directors for the value
they have created since 2004 and to compensate them for the absence of any long
term incentive arrangement.
Although the Committee is aware that the payment of special discretionary
bonuses is not in line with corporate governance best practice it believes that
this payment is necessary to retain the current executive team and to focus them
on continuing to grow shareholder value. The terms of this payment have been
discussed with the Company’s major shareholders and are set out on page 31.
The Committee recognises the need to motivate and retain the executive team
going forward. As such, the Committee in conjunction with Halliwell Consulting
conducted a full review of its remuneration policy in March 2007. The conclusions
drawn from the review have led to the following changes in remuneration policy
and its application:
• Salaries will be increased to a more competitive level.
• The annual bonus payment will remain at a maximum of 100% of salary.
The performance targets relating to the bonus will now be based on the
achievement of pre-determined profit targets in line with market expectations.
• A new cash-based long term incentive arrangement will be put to shareholders
for approval to ensure that management are locked in and appropriately rewarded
for creating long-term value going forward. Further details of the arrangement
will be provided to shareholders in a separate circular as soon as possible.
The Committee is of the opinion that the above changes are necessary to retain
the management team and focus them on further enhancing value for shareholders
thereby further aligning the interests of executives with those of shareholders.
COmPONENTS Of REmUNERATION
The main components of the current remuneration package are:
Base Salary
The policy of the Committee has always been to set base salaries for the executive
directors around the lower quartile when compared to UK quoted retailers with
similar corporate attributes to those of the Group.
Factors taken into account by the Committee when determining base salary
levels are:
• Objective research based on a review of the remuneration in comparable retail
companies carried out by Halliwell Consulting.
• The performance of the individual executive director and their contribution to the
performance of the business.
• Experience and responsibilities of each executive director.
• Pay and conditions throughout the Group.
DIRECTORS’ REPORT ON REmUNERATION
AND RELATED mATTERS (CONTINUED)
In line with the revised remuneration policy, new salaries have been set for the
executive directors with effect from 1 April 2007. For the Executive Chairman,
the pay increase reflects his personal contribution to the turnaround and strategic
development of the Company and the increased related time commitment
necessitated by this. For the Chief Executive and Finance Director the pay
increases take into account their performance, the market and continued
development in their respective roles.
With effect from 1 April 2007 the following salaries will apply for the executive
directors:
Executive Director
New Salary
Position against
Peter Cowgill*
Barry Bown*
Brian Small
£385,000
£275,000
£170,000
comparator group
Median
Lower Quartile
Lower Quartile
* Peter Cowgill and Barry Bown will no longer receive any additional cash benefits
in lieu of a fully expensed car following this increase in salary.
The Committee is of the opinion that the above salary rises are required to ensure
that it retains the services of the executive directors who are crucial to the ongoing
success of the Company.
Annual Bonus
For the period ended 27 January 2007, each executive director was entitled to
be paid a bonus which is calculated (in bands) by reference to the percentage
by which the adjusted earnings per ordinary share for the financial year exceeds
the adjusted earnings per ordinary share for the preceding financial period
The maximum bonus payable to each director is 100% of salary, and is not
pensionable. All executive directors were awarded the maximum bonus for the
period after achieving annual adjusted earnings per ordinary share growth of
over 40%.
As part of the strategic remuneration review the Committee has decided to make
changes to the performance measures applying to the annual bonus. The level
of payout under the annual bonus for the next three years will be based on the
achievement of absolute profit targets. Details of the actual profit measures
applying to the bonus and the level of bonus earned in relation to that target will
be set out in further detail in the Remuneration Report for 2008.
The targets will be reviewed by the Committee at the beginning of each financial
year to ensure that they are appropriate to the current market conditions and
position of the Company and remain challenging. It should be noted that the
maximum bonus potentially available for the executive directors for the period
ending 2 February 2008 will remain at 100% of salary.
Special Bonus
The Committee believes that a special bonus is necessary to retain the current
executive team and to compensate them for the significant value created for
shareholders since 2004 given the lack of any long term incentive structure.
As such, the Committee has decided to make the following cash payments to
the executive directors in May 2007 (these payments have been included in the
Consolidated Income Statement for the period ended 28th January 2007):
Participants
Peter Cowgill
Barry Bown
Brian Small
Amount
£1,000,000
£600,000
£400,000
On the assumption that a new cash-based long term incentive plan will be
implemented as soon as possible, the Committee does not intend to make any
further special payments to the executive directors.
Share Awards
No share options have been granted since the last report.
As noted above the Committee intends to put a new cash-based long-term
incentive arrangement to shareholders which will align the interests of
shareholders with executives more closely.
Other Benefits
The Company makes contributions into individual personal pension schemes for
Mr B Bown and Mr B Small at a defined percentage of salary, excluding bonus and
other forms of remuneration.
Other benefits vary from director to director and include entitlement to a fully
expensed car (Brian Small only), private health care for the executive director
and immediate family and life assurance to provide cover equal to four times the
executive director’s salary. Car benefits have been calculated in accordance with
HM Revenue and Customs scale charges.
The Committee actively reviews the levels of benefit received to ensure that they
remain competitive in the UK quoted environment.
SERVICE CONTRACTS
Details of the contracts currently in place for executive directors are as follows:
Date of contract
Notice period Unexpired term
B Bown
B Small
P Cowgill
10 December 2001
10 March 2004
16 March 2004
(months)
12
12
12
Rolling 12 months
Rolling 12 months
Rolling 12 months
Each service contract includes provision for compensation commitments in the
event of early termination. For Mr P Cowgill and Mr B Small these commitments
do not exceed one year’s salary and benefits. For Mr B Bown the agreement
provides for compensation to be paid to him upon termination of appointment of a
sum equivalent to 12 months’ salary plus £170,000 (net of PAYE and NIC) plus an
amount equal to the value over 12 months of the benefits to which he was entitled
at the date of termination.
Each service contract expires upon the director reaching the age of 65 (subject to
re-election by shareholders).
The Committee consider these levels of compensation appropriate in light of the
levels of basic salary provided and prevailing market conditions.
DIRECTORS’ REPORT ON REmUNERATION
AND RELATED mATTERS
(CONTINUED)
In the event of gross misconduct, the Company may terminate the service contract
of an executive director immediately and with no liability to make further payments
other than in respect of amounts accrued at the date of termination.
Directors retiring by rotation at the next Annual General Meeting are shown in the
directors’ report on 19.
NON-EXECUTIVE DIRECTORS
The non-executive directors have entered into letters of appointment with the
Company for a fixed period of 12 months which are renewable by the Board and
the non-executive director.
Their remuneration is determined by the Board taking into account the scope
and nature of their duties and market rates. The Non-Executive Directors do not
participate in the Company’s incentive arrangements and no pension contributions
are made in respect of them. Details of the fees are set out in the audited
information on page 34.
TOTAL SHAREHOLDER RETURN FROM JANUARY 2002
70
60
50
40
30
20
10
%
0
-10
-20
-30
-40
-50
2002
2003
2004
2005
2006
2007
TOTAL SHAREHOLDER RETURN FROM JANUARY 2004
TOTAL SHAREHOLDER RETURN
The following graph shows the Total Shareholder Return (“TSR”) of the Group in
comparison to the FTSE All Share General Retailers Index over the past five years.
The Committee consider the FTSE All Share General Retailers Index a relevant
index for total shareholder return comparison disclosure required under the
Regulations as the index represents the broad range of UK quoted retailers.
150
125
100
75
50
25
0%
TSR is calculated for each financial year end relative to the base date of 31 March
2002 by taking the percentage change of the market price over the relevant period,
re-investing any dividends at the ex-dividend rate.
The following chart illustrates the TSR of the Company from 31 January 2004 as
this illustrates the return generated by the current management team relative to the
FTSE All Share General Retailers Index.
2004
2005
2006
2007
The John David Group Plc
FTSE All Share General Retailer Index
DIRECTORS’ REPORT ON REmUNERATION
AND RELATED mATTERS (CONTINUED)
2007
Total
£000
1,423
1,036
694
34
25
-
-
3,212
2006
Total
£000
388
409
284
37
24
7
7
1,156
2007
Pension
costs
£000
-
16
16
-
-
-
-
32
2006
Pension
costs
£000
-
16
16
-
-
-
-
32
AUDITED INfORmATION
INDIVIDUAL DIRECTORS’ EmOLUmENTS
Directors’ salaries and benefits charged in the period to 27 January 2007 are set
out below. The comparatives for the period to 28 January 2006 exclude amounts
in respect of any gains on the exercise of share options which are detailed below.
Annual
Benefits performance
related
bonus
£000
206
210
140
-
-
-
-
556
excluding
pensions
£000
12
17
15
-
-
-
-
44
Salary
and fees
£000
205
209
139
34
25
-
-
612
Special
bonus
£000
1,000
600
400
-
-
-
-
2,000
P Cowgill
B Bown
B Small
C Archer
C Bird
J Wardle
D Makin
The pension contributions represent amounts payable to defined contribution
pension schemes.
SHARE OPTIONS
No options held by directors were exercised in the current period.
Following the acquisition of the Group by Pentland Group Plc on 11 May 2005
all share options crystallised and became available for exercising between 11 May
and 30 November 2005. After 30 November 2005 all remaining options lapsed.
On 22 July 2005 Mr B Bown and Mr B Small exercised 70,000 and 100,000
options at option exercise prices of 162.0p and 168.0p respectively. The share
price at this time was 220.0p resulting in a gain before tax of £40,600 for Mr B
Bown and £52,000 for Mr B Small.
The market value of the Company’s shares at 27 January 2007 was 383.5p.
The highest and lowest prices during the financial year were 384.0p and
240.0p respectively. The price at 26 April 2007 was 491.25p.
On behalf of the Board of Directors
Colin Archer
Non-Executive Director and Chairman of the
Remuneration Committee
26 April 2007
DIRECTORS’ RESPONSIBILITy
STATEmENT
The directors are responsible for preparing the Annual Report and the Group
and Parent Company financial statements in accordance with applicable law
and regulations.
Company law requires the directors to prepare Group and Parent Company
financial statements for each financial year. Under that law they are required to
prepare the Group financial statements in accordance with IFRSs as adopted by
the EU and applicable law and have elected to prepare the Parent Company
financial statements on the same basis.
The Group and Parent Company financial statements are required by law and
IFRSs as adopted by the EU to present fairly the financial position of the Group
and the Parent Company and the performance for that period; the Companies
Act 1985 provides in relation to such financial statements that references in the
relevant part of that Act to financial statements giving a true and fair view are
references to their achieving a fair presentation.
In preparing each of the Group and Parent Company financial statements, the
directors are required to:
• Select suitable accounting policies and then apply them consistently.
• Make judgments and estimates that are reasonable and prudent.
• State whether they have been prepared in accordance with IFRSs as adopted
by the EU.
• Prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the Group and the Parent Company will continue
in business.
The directors are responsible for keeping proper accounting records that disclose
with reasonable accuracy at any time the financial position of the Parent Company
and enable them to ensure that its financial statements comply with the Companies
Act 1985. They have general responsibility for taking such steps as are reasonably
open to them to safeguard the assets of the Group and to prevent and detect fraud
and other irregularities.
Under applicable law and regulations, the directors are also responsible for
preparing a Directors’ Report, Directors’ Remuneration Report and Corporate
Governance Statement that comply with that law and those regulations.
The directors are responsible for the maintenance and integrity of the corporate
and financial information included on the company’s website. Legislation in the
UK governing the preparation and dissemination of financial statements may differ
from legislation in other jurisdictions.
INDEPENDENT AUDITOR’S REPORT TO THE
mEmBERS Of THE JOHN DAVID gROUP PLC
AVAILABLE IN STORE AND ONLINE
We read the other information contained in the Annual Report and consider
whether it is consistent with the audited financial statements. We consider the
implications for our report if we become aware of any apparent misstatements or
material inconsistencies with the financial statements. Our responsibilities do not
extend to any other information.
BASIS Of AUDIT OPINION
We conducted our audit in accordance with International Standards on Auditing
(UK and Ireland) issued by the Auditing Practices Board. An audit includes
examination, on a test basis, of evidence relevant to the amounts and disclosures
in the financial statements and the part of the Directors’ Remuneration Report to be
audited. It also includes an assessment of the significant estimates and judgments
made by the Directors in the preparation of the financial statements, and of
whether the accounting policies are appropriate to the Group’s and Company’s
circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with sufficient
evidence to give reasonable assurance that the financial statements and the
part of the Directors’ Remuneration Report to be audited are free from material
misstatement, whether caused by fraud or other irregularity or error. In forming our
opinion we also evaluated the overall adequacy of the presentation of information
in the financial statements and the part of the Directors’ Remuneration Report to
be audited.
OPINION
In our opinion:
• The group financial statements give a true and fair view, in accordance with
IFRSs as adopted by the EU, of the state of the Group’s affairs as at 27 January
2007 and of its profit for the year then ended.
• The parent company financial statements give a true and fair view, in accordance
with IFRSs as adopted by the EU as applied in accordance with the provisions
of the Companies Act 1985, of the state of the Parent Company’s affairs as at 27
January 2007.
• The financial statements and the part of the Directors’ Remuneration Report
to be audited have been properly prepared in accordance with the Companies
Act 1985 and, as regards the Group financial statements, Article 4 of the
IAS Regulation.
• The information given in the Directors’ Report is consistent with the
financial statements.
KPMG Audit Plc
Chartered Accountants
Registered Auditor
Preston
26 April 2007
We have audited the Group and Parent Company financial statements (the
‘financial statements’) of The John David Group Plc for the period ended 27
January 2007 which comprise the Consolidated Income Statement, the Group
and Parent Company Balance Sheets, the Group and Parent Company Cash Flow
Statements, the Group and Parent Company Statements of Recognised Income
and Expense and the related notes. These financial statements have been prepared
under the accounting policies set out therein. We have also audited the information
in the Directors’ Remuneration Report that is described as having been audited.
This report is made solely to the Company’s members, as a body, in accordance
with section 235 of the Companies Act 1985. Our audit work has been undertaken
so that we might state to the Company’s members those matters we are required to
state to them in an auditor’s 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 and the Company’s members as a body, for our audit work, for this
report, or for the opinions we have formed.
RESPECTIVE RESPONSIBILITIES Of DIRECTORS
AND AUDITOR
The Directors’ responsibilities for preparing the Annual Report, the Directors’
Remuneration Report and the financial statements in accordance with applicable
law and International Financial Reporting Standards (IFRSs) as adopted by the EU
are set out in the Directors’ Responsibility Statement on page 36.
Our responsibility is to audit the financial statements and the part of the Directors’
Remuneration Report to be audited in accordance with relevant legal and
regulatory requirements and International Standards on Auditing (UK and Ireland).
We report to you our opinion as to whether the financial statements give a true
and fair view and whether the financial statements and the part of the Directors’
Remuneration Report to be audited have been properly prepared in accordance
with the Companies Act 1985 and, as regards the Group financial statements,
Article 4 of the IAS Regulation. We also report to you whether, in our opinion,
the information given in the Directors’ Report is consistent with the financial
statements. The information given in the Directors’ Report includes that specific
information presented in the Summary of Key Performance Indicators, Chairman’s
Statement, Financial and Risk Review, Property and Stores Review and Corporate
and Social Responsibility that is cross referenced from the Principal Activities and
Business Review section of the Directors’ Report.
In addition we report to you if, in our opinion, the Company has not kept proper
accounting records, if we have not received all the information and explanations
we require for our audit, or if information specified by law regarding directors’
remuneration and other transactions is not disclosed.
We review whether the Corporate Governance Statement reflects the Company’s
compliance with the nine provisions of the 2003 Combined Code specified for
our review by the Listing Rules of the Financial Services Authority, and we report
if it does not. We are not required to consider whether the Board’s statements
on internal control cover all risks and controls, or form an opinion on the
effectiveness of the Group’s corporate governance procedures or its risk and
control procedures.
0
CONSOLIDATED INCOmE STATEmENT
fOR THE 52 WEEKS ENDED 27 JANUARy 2007
52 weeks to
52 weeks to
27 January 2007 27 January 2007
Continuing
Operations
£000
Continuing
Operations
£000
Note
52 weeks to
28 January 2006
Continuing
Operations
£000
52 weeks to
28 January 2006
Continuing
Operations
£000
(192,730)
(11,206)
(15,438)
(1,777)
REvENUE
Cost of sales
GROSS PROFiT
Selling and distribution expenses - normal
Selling and distribution expenses - exceptional
Selling and distribution expenses
Administrative expenses - normal
Administrative expenses - exceptional
Administrative expenses
Other operating income
OPERATiNG PROFiT
Before exceptional items
Exceptional items
OPERATiNG PROFiT
Financial income
Financial expenses
PROFiT BEFORE TAx
Income tax expense
PROFiT FOR THE PERiOD ATTRiBUTABLE
TO EqUiTy HOLDERS OF THE PARENT
Basic earnings per ordinary share
Diluted earnings per ordinary share
4
4
3
4
7
8
3
9
10
10
(209,270)
(3,799)
(17,409)
(4,000)
530,581
(278,331)
252,250
(213,069)
(21,409)
1,730
19,502
27,301
(7,799)
19,502
177
(2,412)
17,267
(6,879)
10,388
21.52p
21.52p
STATEmENT Of RECOgNISED
INCOmE AND EXPENSE
fOR THE 52 WEEKS ENDED 27 JANUARy 2007
gROUP
The Group has no material recognised gains or losses during the current or previous period other than the results reported above.
COmPANy
The Company has no material recognised gains or losses during the current or previous period other than the results reported in note 23.
490,288
(263,608)
226,680
(203,936)
(17,215)
1,609
7,138
20,121
(12,983)
7,138
230
(3,718)
3,650
(1,302)
2,348
4.92p
4.92p
BALANCE SHEETS
AS AT 27 JANUARy 2007
GROUP
As at
27 January 2007
£000
Note
As at
As at
28 January 2006 27 January 2007
£000
£000
Restated (1)
COMPANy
As at
28 January 2006
£000
Restated (1)
ASSETS
Intangible assets
Property, plant and equipment
Other receivables
Investments
TOTAL NON-CURRENT ASSETS
Inventories
Income tax receivable
Trade and other receivables
Cash and cash equivalents
TOTAL CURRENT ASSETS
TOTAL ASSETS
LiABiLiTiES
Interest bearing loans and borrowings
Trade and other payables
Provisions
Income tax liabilities
TOTAL CURRENT LiABiLiTiES
Interest bearing loans and borrowings
Other payables
Provisions
Deferred tax liabilities
11
12
13
14
15
16
17
18
20
21
18
20
21
22
20,562
41,919
2,753
-
65,234
51,469
-
13,012
11,230
75,711
20,517
49,040
2,515
-
72,072
56,168
1,736
12,539
9,336
79,779
17,945
36,739
2,592
3,470
60,746
47,109
-
22,325
11,425
80,859
15,900
45,665
2,473
4,470
68,508
51,171
1,736
23,260
8,197
84,364
140,945
151,851
141,605
152,872
(106)
(58,849)
(2,130)
(3,477)
(12,178)
(56,202)
(2,569)
-
(95)
(54,838)
(1,531)
(3,477)
(12,000)
(51,192)
(2,456)
-
(64,562)
(70,949)
(59,941)
(65,648)
(192)
(8,189)
(4,829)
(1,571)
(10,405)
(9,299)
(4,988)
(1,617)
(192)
(14,588)
(1,707)
(1,490)
(10,287)
(15,883)
(4,542)
(1,656)
TOTAL NON-CURRENT LiABiLiTiES
(14,781)
(26,309)
(17,977)
(32,368)
TOTAL LiABiLiTiES
(79,343)
(97,258)
(77,918)
(98,016)
TOTAL ASSETS LESS TOTAL LiABiLiTiES
61,602
54,593
63,687
54,856
CAPiTAL AND RESERvES
Issued ordinary share capital
Share premium
Retained earnings
TOTAL EqUiTy ATTRiBUTABLE
TO EqUiTy HOLDERS OF THE PARENT
61,602
54,593
63,687
54,856
(1) The Group and Company Balance Sheets at 28 January 2006 have been restated in accordance with IFRS3 'Business Combinations' to reflect fair value
adjustments made on the acquisition of Allsports during the hindsight period (see note 11).
These financial statements were approved by the Board of Directors on 26 April 2007 and were signed on its behalf by:
B Bown
B Small
Directors
CASH fLOW STATEmENTS
fOR THE 52 WEEKS ENDED 27 JANUARy 2007
GROUP
52 weeks to
27 January 2007
£000
Note
52 weeks to
52 weeks to
28 January 2006 27 January 2007
£000
£000
Restated (1)
COMPANy
52 weeks to
28 January 2006
£000
Restated (1)
CASH FLOWS FROM OPERATiNG ACTiviTiES
Profit for the period
Income tax expense
Financial expenses
Financial income
Depreciation of property, plant and equipment
Impairment of property, plant and equipment
Impairment of intangible assets
Impairment of investments
Amortisation of non-current other receivables
Impairment of non-current other receivables
Profit on disposal of non-current assets
Decrease in inventories
(Increase)/decrease in trade and other receivables
Increase/(decrease) in trade and other payables and provisions
Interest paid
Income taxes paid
23
9
8
7
12
4
11
14
3
4
4
10,388
6,879
2,412
(177)
11,451
1,482
4,000
-
437
-
(1,491)
5,299
(475)
1,488
(2,412)
(1,712)
2,348
1,302
3,718
(230)
10,236
3,172
-
-
396
34
(676)
10,585
669
13,895
(3,718)
(2,841)
12,210
7,217
2,336
(149)
10,818
842
2,000
2,000
412
-
(2,138)
4,662
509
(1,259)
(2,336)
(1,712)
2,560
1,547
3,087
(230)
9,715
3,172
-
-
267
34
(505)
13,702
(4,286)
11,215
(3,087)
(2,841)
NET CASH FROM OPERATiNG ACTiviTiES
37,569
38,890
35,412
34,350
CASH FLOWS FROM iNvESTiNG ACTiviTiES
Interest received
Proceeds from sale of non-current assets
Disposal costs of non-current assets
Acquisition of property, plant and equipment
Acquisition of non-current other receivables
Cash consideration of acquisitions
NET CASH USED iN iNvESTiNG ACTiviTiES
CASH FLOWS FROM FiNANCiNG ACTiviTiES
Proceeds from issue of ordinary share capital
Repayment of interest bearing loans and borrowings
Payment of finance lease and similar hire purchase contracts
Dividends paid
12
11
23
177
11,099
(2,188)
(13,665)
(434)
(5,000)
230
1,782
(683)
(6,566)
(261)
(14,517)
149
11,099
(1,668)
(11,046)
(339)
(5,000)
230
1,602
(683)
(4,851)
(91)
(14,517)
(10,011)
(20,015)
(6,805)
(18,310)
-
(22,000)
(285)
(3,379)
1,197
(12,500)
(415)
(2,552)
-
(22,000)
-
(3,379)
1,197
(12,500)
-
(2,552)
CASH AND CASH EqUivALENTS AT
THE BEGiNNiNG OF THE PERiOD
CASH AND CASH EqUivALENTS
AT THE END OF THE PERiOD
28
28
9,336
4,731
8,197
6,012
11,230
9,336
11,425
8,197
(1) The Group and Company Cash Flow Statements for the 52 weeks to 28 January 2006 have been restated in accordance with IFRS3
'Business Combinations' to reflect fair value adjustments made on the acquisition of Allsports during the hindsight period (see note 11).
23
23
23
2,413
10,823
48,366
2,413
10,823
41,357
2,413
10,823
50,451
2,413
10,823
41,620
NET CASH USED iN FiNANCiNG ACTiviTiES
(25,664)
(14,270)
(25,379)
(13,855)
NET iNCREASE iN CASH AND CASH EqUivALENTS
28
1,894
4,605
3,228
2,185
NOTES TO THE fINANCIAL STATEmENTS
NOTES TO THE fINANCIAL STATEmENTS
1. SIgNIfICANT ACCOUNTINg POLICIES
The John David Group Plc (the “Company”) is a company incorporated and domiciled in the United Kingdom. The financial statements for the period ended
27 January 2007 represent those of the Company and its subsidiaries (together referred to as the “Group”). The Parent Company financial statements present
information about the Company as a separate entity and not about its group.
The financial statements were authorised for issue by the Board of Directors on 26 April 2007.
BASiS OF PREPARATiON
European Union (‘EU LAW’) law (IAS Regulation EC 1606/2002) requires that the financial statements of the Group are prepared and approved in accordance
with International Financial Reporting Standards as adopted by the EU (‘EU-IFRS’). The financial statements have been prepared on the basis of the
recognition and measurement requirements of EU-IFRS that are endorsed by the EU and effective at 27 January 2007.
The Company has chosen to present its own results under EU-IFRS and by publishing the Company financial statements here, with the Group financial
statements, the Company is taking advantage of the exemption in s230 of the Companies Act 1985 not to present its individual income statement and related
notes.
The following EU-IFRSs, which will have an impact for the Group, were available for early adoption but have not been applied in these financial statements:
(CONTINUED)
PROPERTy, PLANT AND EqUiPMENT
i.
Owned assets
Items of property, plant and equipment are stated at cost less accumulated depreciation and impairment losses.
Where parts of an item of property, plant and equipment have different useful economic lives, they are accounted for as separate items.
ii.
Leased assets
Assets funded through finance leases and similar hire purchase contracts are capitalised as property, plant and equipment where the Group assumes
substantially all of the risks and rewards of ownership. Upon initial recognition, the leased asset is measured at the lower of its fair value and the
present value of the minimum lease payments. Future instalments under such leases, net of financing costs, are included within interest bearing loans
and borrowings. Rental payments are apportioned between the finance element, which is included in finance costs, and the capital element which
reduces the outstanding obligation for future installments so as to give a constant charge on the outstanding obligation.
All other leases are accounted for as operating leases and the rental charges are charged to the Consolidated Income Statement on a straight line
basis over the life of the lease.
Legal fees and other costs associated with the acquisition of a leasehold interest are capitalised as other receivables within non-current assets.
These costs are amortised over the life of the lease.
• Amendments to IAS1 ‘Presentation of Financial Statements’ applicable for financial periods commencing on or after 1 January 2007.
Lease incentives are credited to the Consolidated Income Statement on a straight line basis over the life of the lease.
This introduces new requirements for capital disclosures and, as such, will have no impact on the Consolidated Income Statement or Group and
Company Balance Sheets.
• IFRS7 ‘Financial Instruments: Disclosure’ applicable for financial periods commencing on or after 1 January 2007. This introduces new
disclosures for financial instruments and, as such, will have no impact on the Consolidated Income Statement or Group and
Company Balance Sheets.
• IFRS8 'Operating Segments' applicable for financial periods commencing on or after 1 January 2009. This requires that entities adopt the
'management approach' to reporting the financial performance of it's operating segments. It is concerned with disclosures only and, as such,
will have no impact on the Consolidated Income Statement or Group and Company Balance Sheets.
All other standards that are available for early adoption have no impact for the Group.
The financial statements are presented in pounds sterling, rounded to the nearest thousand.
The financial statements have been prepared under the historical cost convention, as modified for financial assets and liabilities (including derivative
instruments) at fair value through the Consolidated Income Statement.
The preparation of financial statements in conformity with EU-IFRS requires management to make judgements, estimates and assumptions that affect the
application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on
historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the
judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the
estimate is revised and in any future periods affected.
The accounting policies set out below have unless otherwise stated been applied consistently to all periods present in these financial statements and have
been applied consistently by all Group entities.
BASiS OF CONSOLiDATiON
Subsidiaries
i.
Subsidiaries are entities controlled by the Group. Control exists when the Group has the power to govern the financial and operating policies of an
entity so as to obtain benefits from its activities. In assessing control, potential voting rights that presently are exercisable are taken into account.
The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that
control ceases.
ii.
Transactions eliminated on consolidation
Intragroup balances and any unrealised income and expenses arising from intragroup transactions, are eliminated in preparing the consolidated
financial statements.
iii.
Depreciation
Depreciation is charged to the Consolidated Income Statement over the estimated useful lives of each part of an item of property, plant and equipment.
The estimated useful economic lives are as follows:
• Long leasehold properties
• Improvements to short leasehold properties
• Computer equipment
• Fixtures and fittings
• Motor vehicles
2% per annum on a straight line basis
life of lease on a straight line basis
3 - 6 years on a straight line basis
7 - 10 years, or length of lease if shorter, on a straight line basis
25% per annum on a reducing balance basis
iNTANGiBLE ASSETS
Goodwill
i.
All business combinations are accounted for by applying the purchase method. Goodwill represents amounts arising on acquisition of subsidiaries.
In respect of business acquisitions that have occurred since 1 February 2004, goodwill represents the difference between the cost of the acquisition
and the net fair value of the identifiable assets, liabilities and contingent liabilities of the acquiree.
In respect of acquisitions prior to this date, goodwill is included on the basis of its deemed cost, which represents the amount recorded under
previous GAAP. The classification and accounting treatment of business combinations that occurred prior to 1 February 2004 has not been
reconsidered in preparing the Group’s opening EU-IFRS balance sheet at 1 February 2004.
Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to cash-generating units (CGUs) and is tested annually
for impairment. The CGUs used are the store portfolios acquired through acquisitions. The recoverable amount is compared to the carrying amount
of the CGU including goodwill. The recoverable amount of a CGU is determined based on value-in-use calculations.
Negative goodwill arising on an acquisition is recognised immediately in the Consolidated Income Statement.
iNvESTMENTS iN SUBSiDiARy UNDERTAKiNGS
In the Company’s accounts all investments in subsidiary undertakings are stated at cost less provisions for impairment losses.
iNvENTORiES
Inventories are stated at the lower of cost and net realisable value. Cost is based on the weighted average principle. Provisions are made for obsolescence,
mark downs and shrinkage.
FiNANCiAL iNSTRUMENTS
Financial assets and financial liabilities are recognised on the Group’s balance sheet when the Group becomes a party to the contractual provisions of
the instrument. Financial assets are derecognised when the contractual rights to the cashflows from the financial assets expire. Financial liabilities are
derecognised when the obligation specified in the contract is discharged, cancelled or expires.
NOTES TO THE fINANCIAL STATEmENTS
NOTES TO THE fINANCIAL STATEmENTS
(CONTINUED)
(CONTINUED)
TRADE RECEivABLES
Trade receivables are recognised at fair value. A provision for the impairment of trade receivables is established when there is objective evidence that the
Group will not be able to collect all amounts due according to the original terms. The movement in the provision is recognised in the Consolidated Income
Statement.
CASH AND CASH EqUivALENTS
Cash and cash equivalents comprise cash balances and call deposits with an original maturity of three months or less. Bank overdrafts that are repayable on
demand are included as a component of cash and cash equivalents for the purpose of the Statement of Cash Flows, as these are used as an integral part of
the Group’s cash management.
NET DEBT / iNTEREST BEARiNG BORROWiNGS
Net debt consists of cash and cash equivalents together with other borrowings from bank loans, other loans, loan notes, finance leases and similar hire
purchase contracts.
Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs. Following the initial recognition, interest-bearing
borrowings are stated at amortised cost with any difference between cost and redemption value being recognised in the Consolidated Income Statement over
the period of the borrowings on an effective interest basis.
TRADE AND OTHER PAyABLES
Trade and other payables are non-interest bearing and are stated at fair value.
FOREiGN CURRENCy TRANSLATiON
Transactions denominated in foreign currencies are translated into sterling at the exchange rate prevailing on the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies are translated into sterling at the rate of exchange at the balance sheet date. Exchange
differences in monetary items are recognised in the Consolidated Income Statement.
Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the
transaction.
DERivATivE FiNANCiAL iNSTRUMENTS
The Group uses derivative financial instruments to hedge its exposure to foreign exchange and interest rate risks arising from operational, financing and
investment activities. In accordance with its treasury policy, the Group does not hold or issue derivative financial instruments for trading purposes. However,
derivatives that do not qualify for hedge accounting are accounted for as trading instruments.
Derivative financial instruments are recognised initially at cost. Following initial recognition, derivative financial instruments are stated at fair value. The
gain or loss on remeasurement to fair value is recognised immediately in the Consolidated Income Statement. However, where derivatives qualify for hedge
accounting, recognition of any resultant gain or loss depends on the nature of the item being hedged.
Interest rate swaps are recognised at fair value in the balance sheet with movements in fair value recognised in the Consolidated Income Statement for the
period. The fair value of interest rate swaps is the estimated amount that the Group would receive or pay to terminate the swap at the balance sheet date,
taking into account current interest rates and the respective risk profiles of the swap counterparties.
HEDGiNG
i.
Cash flow hedges
Changes in the effective portion of the fair value of derivative financial instruments that are designated as hedges of future cash flows are recognised
directly in equity and the ineffective portion is recognised immediately in the Consolidated Income Statement where relevant. If the cash flow hedge
of a firm commitment or forecasted transaction results in the recognition of a non-financial asset or a liability then, at the time it is recognised, the
associated gains or losses on the derivative that had previously been recognised in equity are included in the initial measurement. For hedges that
result in the recognition of a financial asset or liability, amounts deferred in equity are recognised in the Consolidated Income Statement in the same
period in which the hedged item affects net profit or loss.
When a hedging instrument expires or is sold, terminated or exercised, or the entity revokes designation of the hedge relationship but the hedged
forecast transaction is still expected to occur, the cumulative gain or loss at that point remains in equity and is recognised in accordance with the
above policy when the transaction occurs. If the hedged transaction is no longer expected to take place, the cumulative unrealised gain or loss
recognised in equity is recognised immediately in the Consolidated Income Statement.
ii.
Hedge of monetary assets and liabilities
Where a derivative financial instrument is used to hedge the foreign exchange exposure of a recognised monetary asset or liability, no hedge
accounting is applied and any gain or loss on the hedging instrument is recognised in the Consolidated Income Statement.
PROviSiONS
A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a past event, it is more likely than
not that an outflow of economic benefits will be required to settle the obligation and the obligation can be estimated reliably
Within the onerous lease provision, management have provided against the minimum cost of exit for stores sublet at a shortfall, vacant stores and for loss
making trading stores where the position is considered to be irrecoverable. The provision is based on the value of future cash outflows.
REvENUE
Revenue represents the amounts receivable by the Group for goods supplied to customers net of discounts, returns and VAT.
ExCEPTiONAL iTEMS
Items that are material in size, unusual and infrequent in nature are included within operating profit and disclosed separately as exceptional items in the
Consolidated Income Statement.
The separate reporting of exceptional items, which are presented as exceptional within the relevant category in the Consolidated Income Statement, helps
provide an indication of the Group’s underlying business performance. The principal items which will be included as exceptional items are:
• (Profits)/losses on the disposal of non-current assets.
• Provisions for rentals on onerous property leases.
• Impairments of property, plant and equipment.
• Impairments of non-current other receivables.
• Impairments of intangible assets.
• The costs of significant restructuring and incremental integration costs following acquisition.
FiNANCiAL iNCOME
Financial income comprises interest receivable on funds invested. Financial income is recognised in the Consolidated Income Statement on an effective
interest method.
FiNANCiAL ExPENSES
Financial expenses comprise interest payable on interest-bearing loans and borrowings. Financial expenses are recognised in the Consolidated Income
Statement on an effective interest method.
iNCOME TAx ExPENSE
Tax on the profit or loss for the year comprises current and deferred tax.
i.
ii.
Current income tax
Current income tax expense is calculated using the tax rates which have been enacted or substantively enacted by the balance sheet date, adjusted for
any tax paid in respect of prior years.
Deferred taxation
Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for:
• Goodwill not deductible for tax purposes.
• The initial recognition of assets or liabilities that affect neither accounting nor taxable profit.
• Differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future.
The amount of deferred tax provided is based on the expected realisation or settlement of the carrying amount of assets and liabilities, using tax rates
enacted or substantively enacted by the balance sheet date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be
utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised.
iMPAiRMENT
The carrying amounts of the Group’s assets other than inventories and deferred tax assets are reviewed annually to determine whether there is any indication
of impairment. An impairment review is performed on individual cash generating units (CGUs) being individual stores or a collection of stores where the
cash flows are not independent. If any such impairment exists then the asset’s recoverable amount is estimated. Impairment losses are recognised in the
Consolidated Income Statement.
Impairment losses in respect of goodwill are not reversed.
NOTES TO THE fINANCIAL STATEmENTS
NOTES TO THE fINANCIAL STATEmENTS
(CONTINUED)
PENSiONS
The Group operates defined contribution pension schemes, the assets of which are held separately from those of the Group in independently administered
funds. Obligations for contributions to the defined contribution schemes are recognised as an expense in the Consolidated Income Statement when incurred.
SHARE BASED PAyMENTS
A share option scheme was in place up to 11 May 2005, at which point all options crystallised following the acquisition of the Group by Pentland Group Plc.
The following accounting policy was applied up to this point.
The share option programme allowed Group employees to acquire shares of the Company. The fair values of the share options granted were recognised as
an employee expense with a corresponding increase in equity. The fair values were measured at grant data, using an appropriate model, taking into account
the terms and conditions upon which the share options were granted, and were spread over the period during which the employees became unconditionally
entitled to the options. The amount recognised as an expense was adjusted to reflect the actual number of share options that vest except where forfetiture was
only due to share prices not achieving the threshold for vesting.
CRiTiCAL ACCOUNTiNG ESTiMATES AND JUDGEMENTS
The preparation of financial statements in conformity with EU-IFRS requires management to make judgements, estimates and assumptions that affect the
application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on
historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the
judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next
financial year are discussed below:
i.
ii.
iii.
iv.
impairment of goodwill
The Group is required to test whether goodwill has suffered any impairment. The recoverable amounts of cash generating units have been determined
based on value-in-use calculations. The use of this method requires the estimation of future cash flows expected to arise from the continuing
operation of the cash generating unit and the choice of a suitable discount rate in order to calculate the present value. Actual outcomes could vary
significantly from these estimates.
impairment of assets
Property, plant and equipment are reviewed for impairment if events or changes in circumstances indicate that the carrying amount of an asset or a
cash generating unit is not recoverable. The carrying value is determined based on their fair value as supported by a management valuation less costs
to sell.
Provisions to write inventories down to net realisable value
The Group makes provisions for obsolescence, mark downs and shrinkage based on historical experiences and management estimates of future
events. Actual outcomes could vary significantly from these estimates.
Onerous property lease provisions
The Group makes a provision for onerous property leases on specific stores based on the anticipated future cash outflows relating to minimum cost
of exit. In making this provision, management have taken into account the estimated time to dispose of a property where a reasonable estimate can be
made. This estimation is based on historical experience and knowledge of the retail property market in the area around each specific property.
(CONTINUED)
2. SEgmENTAL ANALySIS
The Group manages its business activities through two Divisions - Sport and Fashion. Each Division has its own executive board responsible for
managing day-to-day operations through its trading outlets. Revenue and costs are readily identifiable for each segment, for the 52 weeks ended
27 January 2007.
The Divisional results for the 52 weeks to 27 January 2007 are as follows:
iNCOME STATEMENT
Revenue
Operating profit/(loss) before financing and exceptional items
Exceptional items
Operating profit/(loss)
Financial income
Financial expenses
Profit before tax
Income tax expense
Profit for the year
Sport
£000
492,833
29,658
(4,786)
24,872
Fashion
£000
37,748
(2,357)
(3,013)
(5,370)
Total
£000
530,581
27,301
(7,799)
19,502
177
(2,412)
17,267
(6,879)
10,388
The Board consider that net funding costs and income tax are cross divisional in nature and cannot be allocated between the Divisions
on a meaningful basis.
BALANCE SHEET
Total assets
Total liabilities
Sport
£000
110,792
Fashion
£000
14,253
Unallocated
£000
Total
£000
15,900
140,945
(54,650)
(19,645)
(5,048)
(79,343)
Unallocated assets and liabilities relate to items which are cross divisional including tax, elements of goodwill and net debt.
OTHER SEGMENT iNFORMATiON
Capital expenditure:
Property, plant and equipment
Non-current other receivables
Goodwill on acquisition
Depreciation, amortisation and impairments:
Depreciation
Amortisation of non-current other receivables
Impairments of intangible assets
Impairments of property, plant and equipment
Sport
£000
11,045
339
4,045
10,213
412
2,000
840
Fashion
£000
2,620
95
-
1,238
25
2,000
642
Total
£000
13,665
434
4,045
11,451
437
4,000
1,482
0
NOTES TO THE fINANCIAL STATEmENTS
NOTES TO THE fINANCIAL STATEmENTS
(CONTINUED)
2. SEgmENTAL ANALySIS (CONTINUED)
The comparative divisional results for the 52 weeks to 28 January 2006 are as follows:
iNCOME STATEMENT
Revenue
Operating profit/(loss) before financing and exceptional items
Exceptional items
Operating profit/(loss)
Financial income
Financial expenses
Profit before tax
Income tax expense
Profit for the year
Sport
£000
448,884
22,659
(8,716)
13,943
Fashion
£000
41,404
(2,538)
(4,267)
(6,805)
Total
£000
490,288
20,121
(12,983)
7,138
230
(3,718)
3,650
(1,302)
2,348
The Board consider that net funding costs and income tax are cross divisional in nature and cannot be allocated between the Divisions
on a meaningful basis.
BALANCE SHEET
(Restated)
Total assets
Total liabilities
Sport
£000
114,262
Fashion
£000
15,336
Unallocated
£000
Total
£000
22,253
151,851
(54,103)
(19,490)
(23,665)
(97,258)
Unallocated assets and liabilities relate to items which are cross divisional including tax, goodwill and net debt.
OTHER SEGMENT iNFORMATiON
Capital expenditure:
Property, plant and equipment
Non-current other receivables
Goodwill on acquisition (restated)
Depreciation, amortisation and impairments:
Depreciation
Amortisation of non-current other receivables
Impairments of property, plant and equipment
Impairments of non-current other receivables
Sport
£000
4,786
192
-
9,121
363
1,605
23
Fashion
£000
Unallocated
£000
1,780
69
-
1,115
33
1,567
11
-
-
924
-
-
-
-
Total
£000
6,566
261
924
10,236
396
3,172
34
The operations and assets of the Group are located almost entirely in the United Kingdom. Accordingly, no geographical analysis is presented.
(CONTINUED)
3. PROfIT BEfORE TAX
PROFiT BEFORE TAx iS STATED
after charging:
Auditor’s remuneration:
Fees payable to the Company's auditor for the audit of the Company's annual accounts
Fees payable to the Company's auditor and its associates for other services:
The audit of the Company's subsidiaries pursuant to legislation
Other services pursuant to legislation
Tax services
All other services
Depreciation and other amounts written off property, plant and equipment:
Owned
Held under finance lease and similar hire purchase contracts
Impairments of property, plant and equipment (see note 4)
Impairments of intangible assets (see note 4)
Amortisation and other amounts written off non-current other receivables:
Owned
Impairments of non-current other receivables (see note 4)
Rentals payable under non-cancellable operating leases for:
Land and buildings
Other - plant and equipment
Rentals payable to the Administrator to occupy Allsports properties
Provision to write down inventories to net realisable value
Foreign exchange losses recognised
after crediting other operating income:
Rents receivable and other income from property
52 weeks to
27 January 2007
£000
52 weeks to
28 January 2006
£000
75
15
20
54
22
11,272
179
1,482
4,000
437
-
63,579
988
2,402
4,916
28
70
10
20
66
10
10,029
207
3,172
-
396
34
58,628
979
3,624
919
-
1,730
1,609
In addition, fees of £30,000 (2006: £30,000) were incurred and paid by Pentland Group Plc (see note 30) in relation to the non-coterminous audit of
the Group for the purpose of inclusion in their consolidated financial statements.
Non-current other receivables comprises legal fees and other costs associated with the acquisition of leasehold interests.
NOTES TO THE fINANCIAL STATEmENTS
NOTES TO THE fINANCIAL STATEmENTS
(CONTINUED)
4.
EXCEPTIONAL ITEmS
Profit on disposal of non-current assets
Provision for rentals on onerous property leases (see note 21)
Impairment of property, plant and equipment (see note 12)
Impairment of other non-current receivables (see note 13)
Lease variation costs (i)
Selling and distribution expenses - exceptional
Impairments of intangible assets (see note 11)
Allsports restructuring costs (ii)
Administrative expenses - exceptional
52 weeks to
27 January 2007
£000
52 weeks to
28 January 2006
£000
(1,491)
1,558
1,482
-
2,250
3,799
4,000
-
4,000
7,799
(676)
6,954
3,172
34
1,722
11,206
-
1,777
1,777
12,983
(CONTINUED)
6.
STAff NUmBERS AND COSTS (CONTINUED)
The aggregate payroll costs of these persons were as follows:
Wages and salaries
Social security costs
Other pension costs (see note 27)
52 weeks to
27 January 2007
£000
52 weeks to
28 January 2006
£000
76,247
4,703
300
81,250
69,245
4,450
297
73,992
In the opinion of the Board, the key management as defined under IAS24 'Related Party Disclosures' are the five executive and non-executive
Directors (2006: seven). Full disclosure of the directors' remuneration is given in the Directors' Report on Remuneration and Related Matters on
page 34.
COMPANy
The average number of persons employed by the Company (including directors) during the period, analysed by category, was as follows:
(i) Lease variation costs represent the costs of varying an onerous lease to create a break option.
(ii) The Allsports restructuring costs in the prior year were principally redundancy and store and warehouse related closure costs.
5.
REmUNERATION Of DIRECTORS
Directors’ emoluments:
As non-executive directors
As executive directors
Pension contributions
52 weeks to
27 January 2007
£000
52 weeks to
28 January 2006
£000
58
3,154
32
3,244
75
1,081
32
1,188
The remuneration of the executive directors includes special bonuses totalling £2,000,000 (2006: £nil). Further information on directors’ emoluments is
shown in the Directors' Report on Remuneration and Related Matters on page 34.
6.
STAff NUmBERS AND COSTS
GROUP
The average number of persons employed by the Group (including directors) during the period, analysed by category, was as follows:
Sales and distribution
Administration
Full time equivalents
Number of employees
2007
8,678
246
8,924
4,841
2006
8,531
246
8,777
4,942
Sales and distribution
Administration
Full time equivalents
The aggregate payroll costs of these persons were as follows:
Wages and salaries
Social security costs
Other pension costs
7.
fINANCIAL INCOmE
Bank interest
Other interest
Number of employees
2007
8,392
231
8,623
4,677
2006
8,275
231
8,506
4,789
52 weeks to
27 January 2007
£000
52 weeks to
28 January 2006
£000
70,464
4,530
299
75,293
67,014
4,307
297
71,618
52 weeks to
27 January 2007
£000
52 weeks to
28 January 2006
£000
139
38
177
136
94
230
NOTES TO THE fINANCIAL STATEmENTS
NOTES TO THE fINANCIAL STATEmENTS
(CONTINUED)
8.
fINANCIAL EXPENSES
(CONTINUED)
10. EARNINgS PER ORDINARy SHARE
On bank loans and overdrafts
Finance charges payable in respect of finance lease and similar hire purchase contracts
Other loans
9.
INCOmE TAX EXPENSE
Current tax
UK corporation tax at 30% (2006: 30%)
Adjustment relating to prior periods
Total current tax charge/(credit)
Deferred tax
Deferred tax (origination and reversal of temporary differences)
Adjustment relating to prior periods
Total deferred tax (credit)/charge (see note 22)
Income tax expense
RECONCiLiATiON OF iNCOME TAx ExPENSE
Profit before tax multiplied by the standard rate of corporation tax in the UK of 30% (2006: 30%)
Effects of:
Expenses not deductible
Income not taxable
Depreciation on non qualifying property, plant and equipment
Amortisation on non qualifying non-current other receivables
Loss/(profit) on disposal of non qualifying non-current assets
Non qualifying impairment of investment (see note 14)
Exercise of share options
Other differences
Adjustments to tax charge in respect of earlier periods
Income tax expense
52 weeks to
27 January 2007
£000
52 weeks to
28 January 2006
£000
2,364
42
6
2,412
3,537
107
74
3,718
BASiC EARNiNGS PER ORDiNARy SHARE
The calculation of basic earnings per ordinary share at 27 January 2007 is based on the profit for the period attributable to equity holders of the
parent of £10,388,000 (2006: £2,348,000) and a weighted average number of ordinary shares outstanding during the 52 weeks ended 27 January
2007 of 48,263,434 (2006: 47,721,276), calculated as follows:
Issued ordinary shares at beginning of period
Effect of shares issued during the period
52 weeks to
27 January 2007
52 weeks to
28 January 2006
48,263,434
-
47,276,628
444,648
Weighted average number of ordinary shares during the period
48,263,434
47,721,276
52 weeks to
27 January 2007
£000
52 weeks to
28 January 2006
£000
DiLUTED EARNiNGS PER ORDiNARy SHARE
The calculation of diluted earnings per ordinary share at 27 January 2007 is based on the profit for the period attributable to equity holders of the
parent of £10,388,000 (2006: £2,348,000) and a weighted average number of ordinary shares outstanding during the 52 weeks ended 27 January
2007 of 48,263,434 (2006: 47,721,276), calculated as follows:
Weighted average number of ordinary shares during the period
Dilutive effect of outstanding share options
52 weeks to
27 January 2007
52 weeks to
28 January 2006
48,263,434
-
47,721,276
-
Weighted average number of ordinary shares (diluted) during the period
48,263,434
47,721,276
ADJUSTED BASiC EARNiNGS PER ORDiNARy SHARE
Adjusted basic earnings per ordinary share has been based on the profit for the period attributable to equity holders of the parent for each financial
period but excluding the post tax effect of certain exceptional items. The Directors consider that this gives a more meaningful measure of the
underlying performance of the Group.
52 weeks to
Note 27 January 2007
£000
52 weeks to
28 January 2006
£000
Profit for the period attributable to equity holders of the parent
Exceptional items excluding profit on disposal of non-current assets
Tax relating to exceptional items
4
Profit for the period attributable to equity holders of the parent excluding exceptional items
Adjusted basic earnings per ordinary share
10,388
9,290
(2,107)
17,571
36.41p
2,348
13,659
(3,925)
12,082
25.32p
6,637
288
6,925
641
(687)
(46)
6,879
(182)
(130)
(312)
1,633
(19)
1,614
1,302
52 weeks to
27 January 2007
£000
52 weeks to
28 January 2006
£000
5,180
364
(28)
1,090
-
141
600
-
(69)
(399)
6,879
1,095
162
(49)
638
132
(272)
-
(83)
(172)
(149)
1,302
NOTES TO THE fINANCIAL STATEmENTS
NOTES TO THE fINANCIAL STATEmENTS
(CONTINUED)
11. INTANgIBLE ASSETS
COST OR vALUATiON
At 29 January 2005
Acquisitions
At 28 January 2006 (as previously reported)
Restatement
At 28 January 2006 (restated)
Acquisitions
At 27 January 2007
AMORTiSATiON
At 29 January 2005 and 28 January 2006
Impairment for the period
At 27 January 2007
Net book value at 27 January 2007
Net book value at 28 January 2006 (restated)
Net book value at 29 January 2005
GOODWiLL
gROUP
£000
COmPANy
£000
20,800
2,174
22,974
(1,250)
21,724
4,045
25,769
1,207
4,000
5,207
14,976
2,174
17,150
(1,250)
15,900
4,045
19,945
-
2,000
2,000
20,562
17,945
20,517
19,593
15,900
14,976
On 23 June 2006, the Group acquired the trade and certain assets of 14 stores in Airport locations from Hargreaves (Sports) Limited for a cash
consideration of £5,000,000. The goodwill calculation is summarised below:
Acquiree’s net assets at the acquisition date:
Property, plant and equipment
Inventories
Cash and cash equivalents
Trade and other payables
Net identifiable assets/(liabilities)
Goodwill capitalised
Consideration paid - satisfied in cash
Book value at
23 June 2006
£000
Fair value
adjustment
£000
Book and
fair value at
27 January 2007
£000
520
600
2
-
1,122
3,878
5,000
(147)
-
-
(20)
(167)
167
-
373
600
2
(20)
955
4,045
5,000
The stores which were acquired currently trade under the legacy fascias with the names owned by other third party companies. It is the Group's
intention to convert most of these stores to other pre existing Group fascias. Accordingly, the Board consider that no business names or trademarks
were acquired in this transaction. The individual store concession agreements give the Company the right to trade in a particular airport but not a
specific site within that airport and so, accordingly, the Board believe that no interest in land has been acquired.
(CONTINUED)
11. INTANgIBLE ASSETS (CONTINUED)
The Board believe that the excess of consideration over net identifiable assets acquired is best considered as goodwill on acquisition representing the
value that the Company was willing to pay to gain access to the non-contractual customer base in the Airport market arena. The £4,045,000 initial
goodwill arising from this trade and asset purchase has been impaired by £2,000,000 to reflect disappointing trade since acquisition.
In accordance with IFRS3 'Business Combinations', the initial accounting on this acquisition will be completed within 12 months of the acquisition.
In the period after acquisition to 27 January 2007 the stores generated revenue of £6,984,000 and an operating profit of £728,000.
ACqUiSiTiONS
On 28 October 2005 the Group acquired the trade and certain assets of Allsports Retail Limited (in administration) initially for a cash consideration
of £14,153,000 together with associated fees of £867,000. The initial consideration of £14,153,000 (before fees) was provisional with the ultimate
price dependent on the success of the Administrator in realising the remaining assets of Allsports Retail Limited (in administration). Subsequently,
£500,000 of consideration has been refunded.
Effect of acquisition
The fair values are summarised below:
Acquiree’s net assets at the acquisition date:
Property, plant and equipment
Inventories
Cash and cash equivalents
Trade and other payables
Net identifiable assets
Goodwill on acquisition
Consideration paid - satisfied in cash
Book and
fair value at
28 January 2006
£000
Fair value
adjustment
£000
Book and
fair value at
27 January 2007
£000
3,290
12,178
3
(2,625)
12,846
2,174
15,020
(160)
718
-
192
750
(1,250)
3,130
12,896
3
(2,433)
13,596
924
(500)
14,520
Given the conversion of the Allsports stores to other pre-existing Group fascias, the Board believe that there is no value in the Allsports name.
Accordingly, the excess of consideration over net identifiable assets acquired is best considered as goodwill on acquisition constituting customer
loyalty and employee expertise.
iMPAiRMENT TESTS FOR CASH GENERATiNG UNiTS CONTAiNiNG GOODWiLL
Goodwill is allocated to the Group’s cash generating units (CGUs) and tested annually for impairment. The CGUs used are the store portfolios
acquired through acquisitions. The recoverable amount is compared to the carrying amount of the CGU including goodwill. The recoverable amount
of a CGU is determined based on value-in-use calculations. The CGUs for which the carrying amount of goodwill is deemed significant are shown
below:
Hargreaves airports store portfolio
Allsports store portfolio
RD Scott store portfolio
First Sport store portfolio
gROUP
2007
£000
2,045
924
2,617
14,976
20,562
COmPANy
2007
£000
2006
£000
Restated
2006
£000
Restated
-
924
4,617
14,976
20,517
2,045
924
-
14,976
17,945
-
924
-
14,976
15,900
NOTES TO THE fINANCIAL STATEmENTS
NOTES TO THE fINANCIAL STATEmENTS
(CONTINUED)
11. INTANgIBLE ASSETS (CONTINUED)
Based on the value-in-use calculations performed at 27 January 2007, impairment charges have been recognised in the Consolidated Income
Statement as follows:
• Hargreaves airports store portfolio
• RD Scotts store portfolio
£2,000,000
£2,000,000
Based on the value-in-use calculations performed at 27 January 2007, impairment charges have been recognised in the individual Income Statement
of the Company as follows:
• Hargreaves airports store portfolio
£2,000,000
The key assumptions used for value-in-use calculations are set out below:
• In relation to the Allsports store portfolio, RD Scott store portfolio and First Sport store portfolio, the cash flow projections are based on actual
operating results, together with financial forecasts and strategy plans approved by the Board covering a five year period. These forecasts and plans
are based on both past performance and expectations for future market development. Cash flows beyond this five year period are extrapolated
using a growth rate of 2.0% (2006: 2.0%) which is a prudent estimate of the growth based on past experience.
• In relation to the Hargreaves airports store portfolio, the cash flow projections are based on actual operating results together with financial
forecasts and strategy plans for individual stores for the periods to the end of the individual concession agreements. No assumption has been
made on agreements being extended except where those extensions were agreed before 27 January 2007.
• The discount rate of 9.0% (2006: 9.0%) is pre-tax and reflects the specific risks and costs of capital of the Group.
• The Board believe that any foreseeable possible change in these assumptions would not cause the aggregate carrying amount to exceed the
recoverable amount.
Impairment charges have been recognised where the aggregated value-in-use of the acquired store portfolio is lower than the combined total of the
non-current assets in that store portfolio. Consequently, impairment charges are generated as a result of a realised or anticipated deterioration in the
performance of the acquired store portfolio as a whole.
In accordance with paragraph 62 of IFRS3 ‘Business Combinations’ the initial accounting on the Hargreaves store portfolio goodwill will be completed
within twelve months of the acquisition date and a full impairment test will be performed at that time.
(CONTINUED)
12. PROPERTy, PLANT AND EqUIPmENT
GROUP
Long leasehold
properties
£000
Improvements to
short leasehold
properties
£000
Computer
equipment
£000
Fixtures and
fittings
£000
Motor vehicles
£000
COST
At 29 January 2005
Additions
Disposals
On acquisition of
trade and assets
At 28 January 2006
(as previously reported)
Restatement (see note 11)
At 28 January 2006
(restated)
Additions
Disposals
On acquisition of
trade and assets
At 27 January 2007
4,447
-
(2)
-
4,445
-
4,445
-
(4,445)
-
-
DEPRECiATiON AND iMPAiRMENT
At 29 January 2005
Charge for period
Impairments
Disposals
597
89
-
(1)
At 28 January 2006
Charge for period
Impairments
Disposals
At 27 January 2007
NET BOOK vALUE
At 27 January 2007
685
73
-
(758)
-
-
At 28 January 2006 (restated) 3,760
17,030
400
(1,437)
290
16,283
-
16,283
475
(2,962)
10,487
1,121
(2,350)
84,749
5,045
(5,185)
-
3,000
9,258
-
9,258
1,528
(2,502)
87,609
(160)
87,449
11,634
(16,256)
-
-
373
13,796
8,284
83,200
10,223
778
937
(1,299)
10,639
957
111
(2,936)
8,771
5,025
5,644
7,390
1,426
84
(2,332)
6,568
1,451
4
(2,391)
5,632
2,652
2,690
45,517
7,840
2,151
(4,760)
50,748
8,923
1,367
(11,979)
49,059
34,141
36,701
At 29 January 2005
3,850
6,807
3,097
39,232
952
-
(397)
-
555
-
555
28
(344)
-
239
466
103
-
(259)
310
47
-
(219)
138
101
245
486
Total
£000
117,665
6,566
(9,371)
3,290
118,150
(160)
117,990
13,665
(26,509)
373
105,519
64,193
10,236
3,172
(8,651)
68,950
11,451
1,482
(18,283)
63,600
41,919
49,040
53,472
Included in the net book value of computer equipment is £91,000 (2006: £122,000), fixtures and fittings £735,000 (2006: £987,000) and motor
vehicles £1,000 (2006: £3,000) in respect of assets held under finance leases and similar hire purchase contracts. Depreciation for the period on
these assets was £35,000 (2006: £44,000), £142,000 (2006: £162,000) and £2,000 (2006: £1,000), respectively. The maturity of obligations under
finance lease and similar hire purchase contracts is included in note 18.
Impairment charges of £1,482,000 (2006: £3,172,000) relate to all classes of property, plant and equipment in cash generating units which are loss
making and where it is considered that the position can not be recovered as a result of a continuing deterioration in the performance in the particular
store. The cash generating units represent individual stores, or a collection of stores where the cash flows are not independent, with the loss based on
the specific revenue streams and costs attributable to those cash generating units. No allocation of central overhead has been made in calculating this
profit/(loss). Assets in impaired stores are written down fully except where a reasonable estimate may be made of their recoverable value, calculated
by reference to their fair value as supported by a management valuation less costs to sell.
0
NOTES TO THE fINANCIAL STATEmENTS
NOTES TO THE fINANCIAL STATEmENTS
(CONTINUED)
12. PROPERTy, PLANT AND EqUIPmENT (CONTINUED)
COMPANy
Long leasehold
properties
£000
Improvements to
short leasehold
properties
£000
Computer
equipment
£000
Fixtures and
fittings
£000
Motor vehicles
£000
COST
At 29 January 2005
Additions
Disposals
On acquisition of
trade and assets
At 28 January 2006
(as previously reported)
Restatement (see note 11)
At 28 January 2006
(restated)
Additions
Disposals
On acquisition of
trade and assets
Transfers to other
group companies
At 27 January 2007
4,447
-
(2)
-
4,445
-
4,445
-
(4,445)
-
-
-
DEPRECiATiON AND iMPAiRMENT
At 29 January 2005
Charge for period
Impairments
Disposals
597
90
-
(2)
At 28 January 2006
Charge for period
Impairments
Disposals
Transfers to other
group companies
At 27 January 2007
NET BOOK vALUE
At 27 January 2007
685
73
-
(758)
-
-
-
16,997
368
(1,425)
290
16,230
-
16,230
247
(2,955)
-
(723)
10,231
902
(2,339)
82,786
3,581
(5,021)
-
3,000
8,794
-
8,794
1,414
(2,437)
-
(96)
84,346
(160)
84,186
9,374
(15,212)
373
(3,047)
947
-
(388)
-
559
-
559
11
(329)
-
-
12,799
7,675
75,674
241
10,222
889
937
(1,298)
10,750
933
55
(2,902)
(688)
8,148
7,379
1,298
84
(2,322)
6,439
1,355
4
(2,335)
45,463
7,337
2,151
(4,593)
50,358
8,414
783
(11,062)
(79)
(2,524)
5,384
45,969
4,651
2,291
29,705
465
101
-
(249)
317
43
-
(211)
-
149
92
242
482
At 28 January 2006 (restated) 3,760
At 29 January 2005
3,850
5,480
6,775
2,355
2,852
33,828
37,323
Total
£000
115,408
4,851
(9,175)
3,290
114,374
(160)
114,214
11,046
(25,378)
373
(3,866)
96,389
64,126
9,715
3,172
(8,464)
68,549
10,818
842
(17,268)
(3,291)
59,650
36,739
45,665
51,282
(CONTINUED)
13. OTHER NON-CURRENT RECEIVABLES
Other receivables
gROUP
2007
£000
2,753
COmPANy
2007
£000
2006
£000
2006
£000
2,515
2,592
2,473
Other receivables represent lease premia, legal fees and other costs associated with the acquisition of leasehold interests.
Impairment losses of £nil (2006: £34,000) have been recognised on specific cash generating units which are loss making. The methodology behind
identifying loss making cash generating units is explained in note 12.
14. INVESTmENTS
COMPANy
COST AND NET BOOK vALUE
At 29 January 2005 and 28 January 2006
Additions
Impairments
At 27 January 2007
Investments
£000
4,470
1,000
(2,000)
3,470
The investment represents the total consideration for the acquisition of 100% of the issued ordinary share capital of RD Scott Limited. The addition
to the investment in the year arose as a result of the Company subscribing for 500 £1 ordinary shares for a total consideration of £1,000,000. The
investment subsequently has been impaired at 27 January 2007 to its fair value as supported by a management valuation.
15. INVENTORIES
Finished goods and goods for resale
GROUP
COMPANy
2007
£000
51,469
2006
£000
Restated
56,168
2007
£000
47,109
2006
£000
Restated
51,171
The cost of inventories recognised as expenses and included in cost of sales for the 52 weeks ended 27 January 2007 was £280,078,000
(2006: £270,945,000).
16. TRADE AND OTHER RECEIVABLES
GROUP
COMPANy
CURRENT ASSETS
Trade receivables
Other receivables
Prepayments and accrued income
Amounts owed by other Group companies
2007
£000
477
86
12,449
-
13,012
2006
£000
Restated
194
2,008
10,337
-
12,539
2007
£000
477
-
10,610
11,238
22,325
2006
£000
Restated
194
2,000
9,584
11,482
23,260
NOTES TO THE fINANCIAL STATEmENTS
NOTES TO THE fINANCIAL STATEmENTS
(CONTINUED)
(CONTINUED)
16. TRADE AND OTHER RECEIVABLES (CONTINUED)
18. INTEREST BEARINg LOANS AND BORROWINgS (CONTINUED)
The Board consider that the carrying amount of trade and other receivables approximate their fair value. In addition, concentrations of credit risk
with respect to trade receivables are limited due to the Group’s customer base being large and unrelated. Therefore, no further credit risk provision is
required in excess of the normal provision for doubtful receivables. At 27 January 2007, this provision was £6,000 (28 January 2006: £72,000).
Included within prepayments and accrued income for the Group and Company is £259,000 (2006: £nil) in relation to deferred costs
incurred in setting up the new bank facility (see note 18).
RENEGOTiATiON OF BANK FACiLiTiES
The Group has renegotiated its bank facilities in the year. As a result, the Group now has a £70,000,000 revolving facility which expires on 18 October
2011. Under this facility, a maximum of 10 drawdowns may be outstanding at any time with drawdowns made for a period of one, two, three or six
months with interest currently payable at a rate of LIBOR plus a margin of 0.95%. The commitment fee on the undrawn facility is 45% of the margin
rate on the facility.
17. CASH AND CASH EqUIVALENTS
Bank balances and cash floats
GROUP
COMPANy
2007
£000
11,230
2006
£000
9,336
2007
£000
11,425
18. INTEREST BEARINg LOANS AND BORROWINgS
GROUP
COMPANy
CURRENT LiABiLiTiES
Bank loans
Obligations under finance leases and similar hire purchase contracts
Loan notes
NON-CURRENT LiABiLiTiES
Bank loans
Obligations under finance leases and similar hire purchase contracts
Loan notes
2007
£000
-
11
95
106
-
-
192
192
2006
£000
12,000
178
-
12,178
10,000
118
287
10,405
2007
£000
-
-
95
95
-
-
192
192
The following note provides information about the contractual terms of the Group and Company’s interest bearing loans and borrowings.
For more information about the Group and Company’s exposure to interest rate risk, see note 19.
iNTEREST BEARiNG LOANS AND OvERDRAFTS
The interest bearing loans and overdrafts due for repayment mature as follows:
Interest bearing loans and overdrafts
Within one year
Between one and two years
Between two and five years
GROUP
COMPANy
2007
£000
-
-
-
-
2006
£000
12,000
10,000
-
22,000
2007
£000
-
-
-
-
2006
£000
8,197
2006
£000
12,000
-
-
12,000
10,000
-
287
10,287
2006
£000
12,000
10,000
-
22,000
The Group has total interest bearing loans and overdrafts outstanding of £nil (2006: £22,000,000).
At 28 January 2007, there were no drawdowns outstanding on this facility.
FiNANCE LEASES AND SiMiLAR HiRE PURCHASE CONTRACTS
The maturity of obligations under finance leases and similar hire purchase contracts is as follows:
Within one year
Between one and five years
GROUP
COMPANy
2007
£000
11
-
11
2006
£000
178
118
296
2007
£000
-
-
-
2006
£000
-
-
-
Amounts owed under finance leases and similar hire purchase contracts are secured on the assets to which they relate with interest charged at rates of
9% to 19%. All of these agreements were entered into by RD Scott Limited prior to their acquisition by the Company on 15 December 2004.
Future minimum lease payments under finance leases and similar hire purchase contracts together with the value of the principle are as follows:
GROUP
Minimum lease
payments
2007
£000
Within one year
Between one and five years
12
-
12
Interest
2007
£000
(1)
-
(1)
Principal
2007
£000
11
-
11
Minimum lease
payments
2006
£000
217
138
355
No new finance leases or similar hire purchase contracts were entered into in the period.
Interest
2006
£000
(39)
(20)
(59)
Principal
2006
£000
178
118
296
LOAN NOTES
The maturity of the loan notes is as follows:
Within one year
Between one and two years
Between two and five years
GROUP
COMPANy
2007
£000
95
96
96
287
2006
£000
-
95
192
287
2007
£000
95
96
96
287
2006
£000
-
95
192
287
The loan notes do not carry interest and are redeemable at par in three equal annual installments commencing 28 December 2007.
NOTES TO THE fINANCIAL STATEmENTS
NOTES TO THE fINANCIAL STATEmENTS
(CONTINUED)
19. fINANCIAL INSTRUmENTS
(CONTINUED)
19. fINANCIAL INSTRUmENTS (CONTINUED)
FiNANCiAL ASSETS
Financial assets comprise short term cash deposits with major United Kingdom and European clearing banks and earn floating rates of interest based
upon bank base rates or rates linked to LIBOR.
GROUP
Bank balances and cash floats
The currency profile of financial assets was:
Sterling
Euros
US Dollars
COMPANy
Bank balances and cash floats
The currency profile of financial assets was:
Sterling
Euros
US Dollars
FiNANCiAL LiABiLiTiES
The interest rate risk profile of the Group’s and Company’s financial liabilities is as follows:
Bank floating rate financial liabilities swapped to fixed rate
Weighted average interest rate at end of the period
2007
£000
11,230
10,523
464
243
11,230
2007
£000
11,425
10,718
464
243
11,425
2007
£000
-
-
2006
£000
9,336
7,959
514
863
9,336
2006
£000
8,197
6,820
514
863
8,197
2006
£000
22,000
6.9%
iNTEREST RATE RiSK
The Group finances its operations by a mixture of retained profits and bank borrowings. Interest rate risk therefore arises from bank borrowings.
The Group manages its risk by using a combination of floating interest rates and legacy swap instruments, which it reviews on a regular basis.
The weighted average period to maturity for the borrowings is £nil (2006: 1.3 years).
iNTEREST RATE SWAP ON BANK FixED RATE FiNANCiAL LiABiLiTiES
The Group renegotiated its bank facilities in the year. The previous facility, which was due to expire on 3 May 2007, included an interest rate swap,
denominated in pounds sterling, to protect the maximum interest expense to which the Group was exposed. This swap enabled the Group to swap a
floating rate liability in the bank term loan, which was linked to LIBOR, to a fixed rate liability with interest payable at 5.55% plus a margin of 1.38%.
Although the facility which this swap related to has now been replaced, the legacy interest rate swap has been kept. As at 27 January 2007, this swap
would have protected borrowings of £6,000,000 (2006: £22,000,000) which is what the debt balance would have been under the previous facility.
This swap expires on 3 May 2007.
The Board regularly reviews the interest rate risk of the Group although given that the facility is not drawndown at certain times of the year it does not
consider that an interest rate swap on the new floating rate facility is necessary at this time.
The net fair value of swap liabilities at 27 January 2007 was £5,000 (28 January 2006: £166,000).
In the opinion of the Board, the fair value of the Groups financial assets and liabilities as at 27 January 2007 and 28 January 2006 are not considered
materially different to that of the book value. On this basis, the carrying amounts have not been adjusted for the fair values.
BANK FLOATiNG RATE FiNANCiAL LiABiLiTiES
Following the renegotiation of the bank facilities in the year, the Group now only has potential bank floating rate financial liabilities although there
were no drawdowns from this facility at 27 January 2007. When drawdowns are made, the Group is exposed to cash flow interest risk with interest
paid on its bank floating rate liabilities at a rate of LIBOR plus a margin of 0.95% (2006: 1.38%).
FiNANCE LEASES AND SiMiLAR HiRE PURCHASE CONTRACTS
The Group pays interest on its finance leases and similar hire purchase contracts at market interest rates. Although the rates vary between agreements,
the rates on each individual agreement are fixed for the whole term with the interest range being between 9% to 19% (see note 18).
FOREiGN CURRENCy RiSK
The Group is exposed to foreign currency risk on sales and purchases that are denominated in a currency other than pound sterling. The currencies
giving rise to this risk are the Euro and U.S. Dollar with sales made in Euros and purchases made in both Euros and U.S. Dollars (principal
exposure). To protect its foreign currency position, the Group sets a buying rate for the purchase of goods in U.S. Dollars at the start of the buying
season (typically six to nine months before the product actually starts to appear in the stores) and then enters into a number of Euro/Dollar options
whereby the minimum exchange rate on the sale of Euros to buy dollars is guaranteed.
As at 27 January 2007, options have been entered into to protect approximately 70% of the U.S. Dollar requirement for the period to July 2007 which
represents the end of the spring/summer buying season. The balance of the U.S. Dollar requirement for the spring/summer buying season will be
satisfied at spot rates.
As of 27 January 2007, the fair value of these instruments was a liability of £40,000 which has been included within current trade and other payables.
BORROWiNG FACiLiTiES
In addition, there are undrawn committed facilities with a maturity profile as follows. The commitment fee on these facilities is 0.43% (2006: 0.69%).
Expiring within one year
Expiring in more than one year but no more than two years
Expiring in more than two years but no more than three years
Expiring in more than three years but no more than four years
Expiring in more than four years but no more than five years
2007
£000
-
-
-
-
70,000
70,000
2006
£000
-
40,000
-
-
-
40,000
FAiR vALUES
The fair values together with the carrying amounts shown in the balance sheet are as follows:
Trade and other receivables
Cash and cash equivalents
Finance lease and similar hire purchase contracts
Loan notes
Unsecured bank loan
Interest rate swap liabilities
Trade and other payables - current
Trade and other payables - non-current
Note
16
17
18
18
18
20
20
GROUP
COMPANy
Carrying amount
2007
£000
Fair value
2007
£000
Carrying amount
2007
£000
13,012
11,230
(11)
(287)
-
-
(58,849)
(8,189)
13,012
11,230
(11)
(257)
-
(5)
(58,849)
(8,189)
22,325
11,425
-
(287)
-
-
(54,838)
(14,588)
Fair value
2007
£000
22,325
11,425
-
(257)
-
(5)
(54,838)
(14,588)
(43,094)
(43,069)
(35,963)
(35,938)
Unrecognised gains
25
25
NOTES TO THE fINANCIAL STATEmENTS
NOTES TO THE fINANCIAL STATEmENTS
(CONTINUED)
19. fINANCIAL INSTRUmENTS (CONTINUED)
The comparatives at 28 January 2006 are as follows:
Trade and other receivables
Cash and cash equivalents
Finance lease and similar hire purchase contracts
Loan notes
Unsecured bank loan
Interest rate swap liabilities
Trade and other payables - current
Trade and other payables - non-current
GROUP
COMPANy
Carrying amount
2006
£000
Restated
Fair value
2006
£000
Restated
Carrying amount
2006
£000
Restated
12,539
9,336
(296)
(287)
(22,000)
-
(56,202)
(9,299)
12,539
9,336
(338)
(241)
(22,000)
(166)
(56,202)
(9,299)
23,260
8,197
-
(287)
(22,000)
-
(51,192)
(15,883)
Note
16
17
18
18
18
20
20
Fair value
2006
£000
Restated
23,260
8,197
-
(241)
(22,000)
(166)
(51,192)
(15,883)
(66,209)
(66,371)
(57,905)
(58,025)
Unrecognised losses
(162)
(120)
ESTiMATiON OF FAiR vALUES
The major methods and assumptions used in estimating the fair values of financial instruments reflected in the table are as follows:
Finance lease and similar hire purchase contracts
The fair value is estimated as the present value of future cash flows, discounted at market rates for homogeneous lease agreements (7% - 10%).
The estimated fair value reflects changes in interest rates.
Loan notes
The loan notes have been discounted at a rate of 5.5%.
interest rate swap liabilities on unsecured bank loan
The fair value of the interest rate swap liabilities on the previous term loan facility is calculated on the discounted expected future interest cash flows.
Trade and other receivables/payables
For trade and other receivables/payables (as adjusted for the fair value of the foreign exchange contracts), the notional amount is deemed to reflect the
fair value.
20. TRADE AND OTHER PAyABLES
CURRENT LiABiLiTiES
Trade payables
Other payables and accrued expenses
Other tax and social security costs
NON-CURRENT LiABiLiTiES
Other payables and accrued expenses
Amounts payable to other group companies
GROUP
COMPANy
2007
£000
26,937
20,555
11,357
58,849
8,189
-
8,189
2006
£000
Restated
27,913
18,542
9,747
56,202
9,299
-
9,299
2007
£000
25,052
19,137
10,649
54,838
8,006
6,582
2006
£000
Restated
25,013
17,428
8,751
51,192
9,301
6,582
14,588
15,883
(CONTINUED)
21. PROVISIONS
Provisions relate to costs on onerous property leases and represent anticipated minimum costs for rents, rates and service charges on properties that
are vacant or sublet at a shortfall. The provisions cover the period until the anticipated disposal. In addition, provision is made for future rentals where
the store is loss making and the position is considered to be irrecoverable. The provisions are discounted where the effect is material. The discount
rate used is 9% (see note 11).
GROUP
Balance at 28 January 2006
Provisions created during the period
Provisions released during the period
Provisions utilised during the period
Current
£000
2,569
2,794
(1,077)
(2,156)
Non-current
£000
4,988
934
(1,093)
-
Total
£000
7,557
3,728
(2,170)
(2,156)
Balance at 27 January 2007
2,130
4,829
6,959
COMPANy
Balance at 28 January 2006
Provisions created during the period
Provisions released during the period
Provisions utilised during the period
Transfers to other group companies
Current
£000
2,456
1,326
(1,072)
(1,051)
(128)
Non-current
£000
4,542
1,375
(615)
-
(3,595)
Total
£000
6,998
2,701
(1,687)
(1,051)
(3,723)
Balance at 27 January 2007
1,531
1,707
3,238
22. DEfERRED TAX ASSETS AND LIABILITIES
RECOGNiSED DEFERRED TAx ASSETS AND LiABiLiTiES
Deferred tax assets and liabilities are attributable to the following:
GROUP
Assets 2007
£000
Assets 2006
£000
Restated
Liabilities 2007
£000
Property, plant and equipment
Chargeable gains
held over/rolled over
Lease variations
Other items
General accruals
Tax losses
Tax (assets)/liabilities
-
-
(588)
-
(50)
-
(638)
-
-
(245)
(33)
(50)
(100)
(428)
1,049
1,160
-
-
-
-
2,209
Liabilities 2006
£000
Restated
2,045
-
-
-
-
-
2,045
Net 2007
£000
1,049
1,160
(588)
-
(50)
-
1,571
Net 2006
£000
Restated
2,045
-
(245)
(33)
(50)
(100)
1,617
NOTES TO THE fINANCIAL STATEmENTS
NOTES TO THE fINANCIAL STATEmENTS
(CONTINUED)
22. DEfERRED TAX ASSETS AND LIABILITIES (CONTINUED)
MOvEMENT iN DEFERRED TAx DURiNG THE PERiOD
GROUP
Balance at 29 January 2005
Recognised in income
Other movements
Balance at 28 January 2006
(as previously reported)
Restatement (see note 11)
Balance at 28 January 2006 (restated)
Recognised in income
Property, plant
and equipment
Chargeable
gains held over/
rolled over
Lease variations
and other items
Tax losses
2,635
(542)
-
2,093
(48)
2,045
(996)
-
-
-
-
-
-
1,160
(2,315)
2,126
(139)
(328)
-
(328)
(310)
(130)
30
-
(100)
-
(100)
100
Total
190
1,614
(139)
1,665
(48)
1,617
(46)
Balance at 27 January 2007
1,049
1,160
(638)
-
1,571
RECOGNiSED DEFERRED TAx ASSETS AND LiABiLiTiES
Deferred tax assets and liabilities are attributable to the following:
COMPANy
Assets 2007
£000
Assets 2006
£000
Restated
Liabilities 2007
£000
Property, plant and equipment
Chargeable gains
held over/rolled over
Lease variations
General accruals
Tax (assets)/liabilities
-
-
(588)
(50)
(638)
-
-
(245)
(50)
(295)
968
1,160
-
-
2,128
Liabilities 2006
£000
Restated
1,951
-
-
-
1,951
Net 2007
£000
968
1,160
(588)
(50)
1,490
MOvEMENT iN DEFERRED TAx DURiNG THE PERiOD
COMPANy
Property, plant
and equipment
Chargeable
gains held over/
rolled over
Lease variations
and other items
Balance at 29 January 2005
Recognised in income
Balance at 28 January 2006 (as previously stated)
Restatement (see note 11)
Balance at 28 January 2006 (restated)
Recognised in income
Balance at 27 January 2007
2,435
(436)
1,999
(48)
1,951
(983)
968
-
-
-
-
-
1,160
(2,175)
1,880
(295)
-
(295)
(343)
Net 2006
£000
Restated
1,951
-
(245)
(50)
1,656
Total
260
1,444
1,704
(48)
1,656
(166)
1,160
(638)
1,490
(CONTINUED)
23. CAPITAL AND RESERVES
iSSUED ORDiNARy SHARE CAPiTAL
GROUP AND COMPANy
At 29 January 2005
Issued on a scrip dividend alternative (see note 24)
At 28 January 2006 and 27 January 2007
Number of
ordinary shares
thousands
Ordinary
share capital
£000
47,277
986
48,263
2,364
49
2,413
The total number of authorised ordinary shares was 62,150,000 (2006: 62,150,000) with a par value of 5p per share (2006: 5p per share).
All issued shares are fully paid.
RECONCiLiATiON OF MOvEMENT iN CAPiTAL AND RESERvES
GROUP
Balance at 29 January 2005
Issue of ordinary share capital
Total recognised income and expense
Dividends to shareholders (see note 24)
Scrip dividend alternative
Balance at 28 January 2006
Total recognised income and expense
Dividends to shareholders (see note 24)
Ordinary
share capital
£000
2,364
37
-
-
12
2,413
-
-
Share premium
£000
Retained earnings
£000
Total equity
£000
9,042
1,160
-
-
621
10,823
-
-
42,194
-
2,348
(3,185)
-
41,357
10,388
(3,379)
53,600
1,197
2,348
(3,185)
633
54,593
10,388
(3,379)
Balance at 27 January 2007
2,413
10,823
48,366
61,602
RECONCiLiATiON OF MOvEMENT iN CAPiTAL AND RESERvES
COMPANy
Balance at 29 January 2005
Issue of ordinary share capital
Total recognised income and expense
Dividends to shareholders (see note 24)
Scrip dividend alternative
Balance at 28 January 2006
Total recognised income and expense
Dividends to shareholders (see note 24)
Ordinary
share capital
£000
2,364
37
-
-
12
2,413
-
-
Share premium
£000
Retained earnings
£000
Total equity
£000
9,042
1,160
-
-
621
10,823
-
-
42,245
-
2,560
(3,185)
-
41,620
12,210
(3,379)
53,651
1,197
2,560
(3,185)
633
54,856
12,210
(3,379)
Balance at 27 January 2007
2,413
10,823
50,451
63,687
0
NOTES TO THE fINANCIAL STATEmENTS
NOTES TO THE fINANCIAL STATEmENTS
(CONTINUED)
24. DIVIDENDS
After the balance sheet date the following dividends were proposed by the Directors. The dividends were not provided for at the balance sheet date.
4.80p per ordinary share (2006: 4.60p)
DiviDENDS ON iSSUED ORDiNARy SHARE CAPiTAL
52 weeks to
27 January 2007
£000
52 weeks to
28 January 2006
£000
2,413
2,221
52 weeks to
27 January 2007
£000
52 weeks to
28 January 2006
£000
Final dividend of 4.60p (2006: 4.40p) per qualifying ordinary share paid in respect of prior period,
but not recognised as a liability in that period
Interim dividend of 2.40p (2006: 2.30p) per qualifying ordinary share paid in respect of current period
Scrip dividend alternative
2,221
1,158
-
3,379
2,080
472
633
3,185
25. SHARE BASED PAymENTS
SHARE BASED PAyMENTS
Under the share options scheme rules for both the approved and unapproved schemes, all options crystallised on the acquisition of the Group by
Pentland Group Plc on 11 May 2005. Option holders had until 30 November 2005 to exercise their remaining options. After this date, all remaining
options lapsed.
The number and weighted average exercise prices of share options prior to them lapsing was as follows:
GROUP AND COMPANY
Outstanding at the beginning of the period
Exercised during the period
Lapsed during the period
Outstanding at the end of the period
Weighted average
exercise price 2006
2.118p
(1.626p)
(2.997p)
Number of
options 2006
1,443,229
(736,648)
(706,581)
-
-
The weighted average share price at the date of exercise of share options exercised during the period was £nil (2006: £1.626).
26. COmmITmENTS
GROUP
(i) Capital commitments
During the period ended 27 January 2007 the Group entered into contracts to purchase property, plant and equipment as follows:
Contracted
These commitments are expected to be settled in the following financial period.
27 January 2007
£000
28 January 2006
£000
2,320
3,767
(CONTINUED)
26. COmmITmENTS (CONTINUED)
(ii) Operating lease commitments
The Group leases various retail outlets, offices, warehouses, plant and equipment under non-cancellable operating lease agreements. The leases have
varying terms, escalation clauses and renewal rights.
Undiscounted total future minimum rentals payable under non-cancellable operating leases are as follows:
Expiring within one year
Expiring in the second to fifth year inclusive
Expiring over five years
Land and
buildings
2007
£000
947
38,521
493,350
532,818
Plant and
equipment
2007
£000
154
828
-
982
Land and
buildings
2006
£000
203
21,834
534,348
556,385
Plant and
equipment
2006
£000
7
1,327
-
1,334
The future minimum rentals payable on land and buildings represent the base rents that are due on each property. Certain properties have rents which
are partly dependent on turnover levels in the individual store concerned.
(iii) Sublease receipts
The Group subleases various retail outlets under non-cancellable operating lease agreements. The leases have varying terms, escalation clauses and
renewal rights. The total future minimum operating sublease receipts expected to be received at 27 January 2007 are as follows:
Expiring within one year
Expiring in the second to fifth year inclusive
Expiring over five years
2007
£000
-
128
1,043
1,171
2006
£000
86
-
1,344
1,430
COMPANy
(i) Capital commitments
During the period ended 27 January 2007 the Company entered into contracts to purchase property, plant and equipment as follows:
Contracted
These commitments are expected to be settled in the following financial period.
27 January 2007
£000
28 January 2006
£000
2,070
3,767
(ii) Operating lease commitments
The Company leases various retail outlets, offices, warehouses, plant and equipment under non-cancellable operating lease agreements. The leases
have varying terms, escalation clauses and renewal rights.
Undiscounted total future minimum rentals payable under non-cancellable operating leases are as follows:
Expiring within one year
Expiring in the second to fifth year inclusive
Expiring over five years
Land and
buildings
2007
£000
775
33,019
438,879
Plant and
equipment
2007
£000
149
762
-
Land and
buildings
2006
£000
203
20,725
512,120
Plant and
equipment
2006
£000
7
1,294
-
472,673
911
533,048
1,301
NOTES TO THE fINANCIAL STATEmENTS
NOTES TO THE fINANCIAL STATEmENTS
(CONTINUED)
26. COmmITmENTS (CONTINUED)
(iii) Sublease receipts
The Company subleases various retail outlets under non-cancellable operating lease agreements. The leases have varying terms, escalation clauses
and renewal rights. The total future minimum operating sublease receipts expected to be received at 27 January 2007 are as follows:
(CONTINUED)
29. RELATED PARTy TRANSACTIONS AND BALANCES
Transactions and balances with related parties during the period were as follows:
RELATED PARTy - PENTLAND GROUP PLC
Following the acquisition on 11 May 2005, Pentland Group Plc owns 57% of the issued ordinary share capital of The John David Group Plc.
Expiring within one year
Expiring in the second to fifth year inclusive
Expiring over five years
2007
£000
-
128
1,043
1,171
2006
£000
86
-
1,344
1,430
27. PENSION SCHEmES
The Group only operates defined contribution pension schemes. The pension charge for the period represents contributions payable by the Group of
£268,000 (2006: £266,000) in respect of employees, and £32,000 (2006: £32,000) in respect of directors. The amount owed to the schemes at the
period end was £38,000 (2006: £32,000).
28. ANALySIS Of NET DEBT
GROUP
Bank balances and cash floats
CASH AND CASH EqUivALENTS
Interest bearing loans and borrowings:
Current
Non-current
Loan notes
Finance leases and similar hire purchase contracts
COMPANy
Bank balances and cash floats
CASH AND CASH EqUivALENTS
Interest bearing loans and borrowings:
Current
Non-current
Loan notes
At 28 January
2006
£000
9,336
9,336
(12,000)
(10,000)
(287)
(296)
Cash flow
£000
1,894
1,894
12,000
10,000
-
285
At 27 January
2007
£000
11,230
11,230
-
-
(287)
(11)
(13,247)
24,179
10,932
At 28 January
2006
£000
8,197
8,197
(12,000)
(10,000)
(287)
Cash flow
£000
3,228
3,228
12,000
10,000
-
At 27 January
2007
£000
11,425
11,425
-
-
(287)
(14,090)
25,228
11,138
GROUP
Concession fee income
Purchases of inventory for retail
Other income
Payments (gross including VAT)
Receipts (gross including VAT)
Value of
transactions
2007
£000
(504)
(26,333)
64
(29,588)
76
(Payable)
/receivable at
period end
2007
£000
-
-
-
-
-
Value of
transactions
2006
£000
(555)
(15,042)
71
(16,755)
76
(Payable)
/receivable at
period end
2006
£000
-
-
-
-
-
Trade payables (gross including VAT)
-
(2,573)
-
(2,465)
RELATED PARTy - PENTLAND GROUP PLC
COMPANy
Concession fee income
Purchase of inventory for retail
Other income
Payments (gross including VAT)
Receipts (gross including VAT)
Value of
transactions
2007
£000
(504)
(24,461)
64
(26,975)
76
Trade payables (gross including VAT)
-
(2,281)
(Payable)
/receivable at
period end
2007
£000
-
-
-
-
-
-
Value of
transactions
2006
£000
(555)
(14,055)
71
(15,782)
76
(2,299)
(Payable)
/receivable at
period end
2006
£000
-
-
-
-
-
The income and purchase figures highlighted above for 2006 are based on the period post acquisition from 11 May 2005 to
28 January 2006.
Unless otherwise stated the amounts above are stated net of VAT.
RELATED PARTy - SPORTS WORLD iNTERNATiONAL LiMiTED
On 23 June 2006, the Company acquired the trade and certain assets of 14 stores in Airport locations from Hargreaves (Sports) Limited for a cash
consideration of £5,000,000 (see note 11) which it settled in full on that day. The ultimate holding company for Hargreaves (Sports) Limited is Sports
Direct International Plc which is also the ultimate holding company for Sports World International Limited which has an interest in 10.11% of the
issued ordinary share capital of the Company.
RELATED PARTy - ATHLEiSURE LiMiTED
COMPANy
Income tax group relief
Amounts owed to The John David Group Plc
Value of
transactions
2007
£000
-
-
(Payable)
/receivable at
period end
2007
£000
-
6,638
Value of
transactions
2006
£000
(280)
-
(Payable)
/receivable at
period end
2006
£000
-
7,200
NOTES TO THE fINANCIAL STATEmENTS
(CONTINUED)
fIVE yEAR RECORD
CONSOLIDATED INCOmE STATEmENTS
29. RELATED PARTy TRANSACTIONS AND BALANCES (CONTINUED)
PREPARED UNDER UK GAAP PREPARED UNDER EU-iFRS
RELATED PARTy - RD SCOTT LiMiTED
COMPANy
Sale of inventory
Purchase of inventory
Intercompany balance capitalised into share capital
Store assets legally transferred to RD Scott Limited
Income tax group relief
Amounts owed to The John David Group Plc
Value of
transactions
2007
£000
(Payable)
/receivable at
period end
2007
£000
-
(8,360)
1,000
1,709
134
-
-
-
-
-
-
4,600
Value of
transactions
2006
£000
2,831
(9,152)
-
-
224
-
(Payable)
/receivable at
period end
2006
£000
-
-
-
-
-
4,282
On 12 October 2006, £1,000,000 of the intercompany balance due from RD Scott Limited was converted into share capital with 500
ordinary shares of £1 each allotted at this time.
On 25 November 2006, the company legally transferred the trade and assets of 25 stores to RD Scott Limited. The consideration
equated to the book value of the assets at this time.
JD Sports Limited is also as subsidiary undertaking of the Company but there have been no transactions in the year and there are no
balances outstanding at 27 January 2007 (2006: £nil).
30. ULTImATE PARENT COmPANy
The Company is a subsidiary undertaking of Pentland Group Plc which is also the ultimate parent company. Pentland Group Plc is incorporated in
England and Wales.
The largest group in which the results of the Company are consolidated is that headed by Pentland Group Plc. The results of Pentland Group Plc
maybe obtained from Companies House, Crown Way, Maindy, Cardiff, CF14 3UZ.
The Company has taken advantage of the exemption in s230 of the Companies Act 1985 not to present its individual income statement and
related notes. The total recognised income and expense for the parent included in these consolidated financial statements is £12,210,000 (2006:
£2,560,000). The consolidated financial statements of The John David Group Plc are available to the public and may be obtained from The Company
Secretary, The John David Group Plc, Hollinsbrook Way, Pilsworth, Bury, BL9 8RR.
31. PRINCIPAL SUBSIDIARy UNDERTAKINgS
The following companies were the principal subsidiary undertakings of The John David Group Plc at 27 January 2007 and 28 January 2006. The
companies are wholly owned, operate in the UK and are included in the consolidated financial statements.
RD Scott Limited
First Sport Limited
Allsports Retail Limited
The Sports Shop (Fife) Limited
Allsports.co.uk Limited
Athleisure Limited
JD Sports Limited
Jog Shop Limited
Nature of business
Retailer of fashion clothing and footwear
Dormant
Dormant
Dormant
Dormant
Investment Company
Dormant
Dormant
10 months to
31 January 2003
£000
Year ended
31 January 2004
£000
52 weeks to
29 January 2005
£000
52 weeks to
29 January 2005
£000
52 weeks to
52 weeks to
28 January 2006 27 January 2007
£000
£000
REvENUE
Cost of sales
370,804
(202,229)
458,073
(249,379)
471,656
(256,504)
471,656
(256,504)
490,288
(263,608)
530,581
(278,331)
GROSS PROFiT
168,575
208,694
215,152
215,152
226,680
252,250
Selling and distribution
expenses - normal
Selling and distribution
expenses - exceptional
Selling and distribution
expenses
Administrative expenses
- normal
Administrative expenses
- exceptional
(141,145)
(186,117)
(185,437)
(186,230)
(192,730)
(209,270)
(2,933)
(1,366)
(7,987)
(8,603)
(11,206)
(3,799)
(144,078)
(187,483)
(193,424)
(194,833)
(203,936)
(213,069)
(10,167)
(13,503)
(13,589)
(12,777)
(15,438)
(17,409)
(581)
(612)
(736)
(736)
(1,777)
(4,000)
Administrative expenses
(10,748)
(14,115)
(14,325)
(13,513)
(17,215)
(21,409)
Other operating income
333
OPERATiNG PROFiT
14,082
Before exceptional items
and goodwill amortisation
Exceptional items
Goodwill amortisation
18,017
(3,514)
(421)
OPERATiNG PROFiT
Loss on disposal of fixed assets
14,082
(433)
OPERATiNG PROFiT
BEFORE FiNANCiNG
Financial income
Financial expenses
PROFiT BEFORE TAx
Income tax expense
13,649
212
(3,080)
10,781
(4,024)
PROFiT FOR THE PERiOD
6,757
638
7,734
10,498
(1,978)
(786)
7,734
(1,095)
6,639
100
(4,634)
2,105
(1,457)
648
953
8,356
17,891
(8,723)
(812)
8,356
(1,569)
6,787
304
(4,461)
2,630
(1,293)
1,337
953
7,759
17,098
(9,339)
-
7,759
-
7,759
304
(4,461)
3,602
(1,341)
2,261
1,609
7,138
20,121
(12,983)
-
7,138
-
7,138
230
(3,718)
3,650
(1,302)
1,730
19,502
27,301
(7,799)
19,502
-
19,502
177
(2,412)
17,267
(6,879)
2,348
10,388
BASiC EARNiNGS PER
ORDiNARy SHARE
ADJUSTED BASiC EARNiNGS
PER ORDiNARy SHARE (i)
DiviDENDS PER
ORDiNARy SHARE (ii)
14.46p
1.39p
2.85p
4.81p
4.92p
21.52p
21.18p
6.21p
18.39p
18.62p
25.32p
36.41p
6.50p
6.50p
6.60p
6.60p
6.90p
7.20p
With the exception of RD Scott Limited, Athleisure Limited and JD Sports Limited, all these holdings were indirectly held by the Parent Company at
the balance sheet date.
(i) Adjusted basic earnings per ordinary share is based on earnings before certain exceptional items and goodwill amortisation (see note 10).
(ii) Represents dividends declared for the year. Under EU-IFRS dividends are only accrued when approved.
fINANCIAL CALENDAR
FiNAL RESULTS ANNOUNCED
FiNAL DiviDEND RECORD DATE
FiNANCiAL STATEMENTS PUBLiSHED
ANNUAL GENERAL MEETiNG
FiNAL DiviDEND PAyABLE
iNTERiM RESULTS ANNOUNCED
PERiOD END (53 WEEKS)
FiNAL RESULTS ANNOUNCED
SHAREHOLDER INfORmATION
Registered Office
The John David Group Plc
Hollinsbrook Way
Pilsworth
Bury
Lancashire BL9 8RR
Company number
Registered in England
and Wales,
number 1888425
Financial advisers
and stockbrokers
Investec
2 Gresham Street
London EC2V 7QP
Financial public relations
Hogarth Partnership Limited
No 1 London Bridge
London SE2 9BG
Principal bankers
Barclays Bank Plc
43 High Street
Sutton
Surrey SM1 1DR
Registrars
Lloyds TSB Registrars
The Causeway
Worthing
West Sussex BN99 6DA
26 APRiL 2007
11 MAy 2007
JUNE 2007
26 JULy 2007
30 JULy 2007
26 SEPTEMBER 2007
2 FEBRUARy 2008
APRiL 2008
Solicitors
DLA Piper UK LLP
Princes Exchange
Princes Square
Leeds LS1 4BY
Auditor
KPMG Audit Plc
Edward VII Quay
Navigation Way
Ashton-on-Ribble
Preston
Lancashire PR2 2YF
HEAD OffICE
The John David Group Plc
Hollinsbrook Way
Pilsworth
Bury
Lancashire BL9 8RR
Telephone 0870 873 0333
Facsimile 0161 767 1001
CORPORATE WEBSITE
www.thejohndavidgroup.com
TRADINg WEBSITES
www.jdsports.co.uk
www.size-online.co.uk
The Board wishes to express its thanks to the marketing department for the in-house production of this Annual Report and Accounts.
0