ANNUAL
REPORT
AND
ACCOUNTS
2008
Contents
Summary of Key Performance Indicators
Chairman’s Statement
Financial and Risk Review
Property and Stores Review
Corporate and Social Responsibility
The Board
Directors’ Report
Corporate Governance
Directors’ Report on Remuneration and Related Matters
Directors’ Responsibility Statement
Independent Auditor’s Report
Consolidated Income Statement
Group and Company Statement of Recognised Income and Expense
Group and Company Balance Sheets
Group and Company Cash Flow Statements
Notes to The Financial Statements
Five Year Record
Financial Calendar
Shareholder Information
Head Office
02
04
10
15
16
21
22
26
31
41
42
45
45
46
47
48
78
79
79
79
1
SUMMARY
OF KEY
PERFORMANCE
iNDiCATORS
53 weeks to
02 February 2008
£000
52 weeks to
27 January 2007
£000
Revenue
Gross profit %
Operating profit (before net financing costs, exceptional items
and share of results of joint venture)
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 at end of year
592,240
49.2%
44,019
43,407
(8,404)
35,615
35,003
48.79p
57.05p
8.50p
11,752
530,581
47.5%
27,301
25,066
(7,799)
19,502
17,267
21.52p
36.41p
7.20p
10,932
BUSiNESS HigHLigHTS
• Total revenue increased by 11.6% in the year and by 11.1% on a like for like basis (Sports Fascias 11.3%;
Fashion Fascias (excluding Bank) 7.6%)
• Gross margin improved from 47.5% to 49.2%
• Group profit before tax and exceptional items up 73% to £43.4 million (2007: £25.1 million)
• Positive net cash position maintained at £11.7 million (2007: £10.9 million) after acquisitions, investments
and associated asset purchases in the year totalling £31.3 million and net capital expenditure of £21.0 million
(2007: £5.2 million)
• Exceptional items of £8.4 million from the continuing store portfolio rationalisation
REVENUE (£M)
NET (DEBT)/CASH (£M)
592.2
530.6
490.3
458.1 471.7
PROFIT BEFORE TAX AND
EXCEPTIONAL ITEMS (£M)
43.4
2004 2005 2006 2007
2008
2007
2008
2004
2005
2006 2007
2008
25.1
16.6
12.9
10.9
11.8
6.0
2004 2005 2006
(13.2)
(30.8)
(51.0)
2
3
CHAiRMAN’S
STATEMENT
iNTRODUCTiON
The 53 weeks ended 02 February 2008 have been a further period of very
substantial progress for the Group with excellent organic sales growth
and margin enhancement. We have improved our profit before tax and
exceptional items by 73% in the year to £43.4 million (2007: £25.1 million).
This follows on from a 51% increase last year.
Group profit before tax has increased by 103% in the year to £35.0 million
(2007: £17.3 million) and Group profit after tax has increased by 127% to
£23.6 million (2007: £10.4 million).
Group operating profit (before exceptional items) for the year was up 61%
to £44.0 million (2007: £27.3 million) and comprises a Sports Fascias profit
of £45.6 million (2007: £29.7 million) and a Fashion Fascias loss of £1.6
million (2007: loss of £2.4 million).
ACQUiSiTiONS
On 07 December 2007 the Group significantly increased the Fashion
Fascias store base with the addition of 49 Bank Fashion stores through
the acquisition of Bank Stores Holdings Limited (‘Bank’) for a total cash
cost (including fees and repayment of debt) of £18.6 million. Bank made
a positive contribution to the operating profit of the Fashion Fascias in the
second half of the year of £434,000, helped by Christmas trading.
The Group also made two smaller strategic stake acquisitions in other
businesses in the second half. 49% of Focus Brands Limited, a designing,
licensing, and sourcing wholesaler, was acquired at a cost of £3.0 million
(including fees and loans of £2.5 million made to the business) on 03
December 2007. This deal was part of a package in which the Sergio
Tacchini sub-licensed UK brand rights were also acquired directly by JD
as well as a freehold property in St Albans which continues to be occupied
by Focus at an arm’s length rent. The results of Focus for the short
post-acquisition period are presented as ‘Share of results of joint venture’.
Additionally, on 07 November 2007, 51% of Topgrade Sportswear Limited
was acquired for a consideration of £1.2 million (including fees). We took
the decision to acquire this wholesaler of end-of-line stock because of
its buying strength and trading knowledge, which were considered a
foundation for further business development. The results of this business
had no material impact on the Group results for the 53 weeks ended 02
February 2008.
SPORTS FASCiAS
The Sports Fascias’ turnover increased by 10.5% during the period to
£544.4 million (2007: £492.8 million) with like for like sales for the year
up 11.3%. Gross margin rose to 49.9% (2007: 47.6%) as a result of
continuing growth in own brand sales.
The performance of our principal Sports Fascias, JD and Size, has been
very strong during the last year as a result of the current management
team’s consistent strategy over the last four years of eliminating under
4
performing stores, improving gross margins and reducing terminal
stocks. The performance of the buying, merchandising and own brand
departments has been excellent.
In addition, the Group has conducted an ambitious programme of store
development with 13 new store openings and 28 store refurbishments.
This programme will continue through most of 2008 and represents
the most substantial refurbishment programme the Group has ever
undertaken. These store refurbishments often result in full store closures for
a number of weeks but we expect this to be justified by the subsequent
performance. We have also made our most significant investment to date
in merchandising systems and training during the year.
FASHiON FASCiAS
The Fashion Fascias now have two separately managed young branded
fashion businesses trading as Scotts and Bank.
The Scotts Fascia rationalisation has continued throughout the past
year with under performing stores continuing to be eliminated and the
remaining ATH- and AV stores being converted to the Scotts Fascia.
There is now only one ATH- store remaining in the 38 store portfolio.
The Open Fascia no longer trades following the disposal of Glasgow
Open in September 2007.
In spite of a positive like for like sales performance in Scotts of 7.6% for
the year, turnover for this business declined to £34.5 million (2007: £37.7
million) as a result of the store disposal programme. Six under performing
stores were closed in the year. Losses were borne in most 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 declined to 44.0%
(2007: 46.3%), principally as a result of a clearance of stock following
both the closure of Glasgow Open and a substantial change in the
management team mid year. Like for like sales and margin performance
have been encouraging so far this year.
Last year we noted that the young branded fashion sector remained
competitive and that we believed the Fashion Fascias would only deliver
profit to the Group when its major property issues were resolved.
The disposals within Scotts this year represent significant steps towards
this goal. We are now very focussed on improving the buying and
merchandising decisions to deliver results from this Fascia. The head
office of Scotts was transferred to the Group’s offices in Bury in April and
we believe that this move will further assist this objective.
The acquisition of Bank gives the Group the opportunity to develop our
presence in the young aspirational fashion sector and consequently
provide a platform for growth through rollout. However, in advance of any
rollout, the management team will need to ensure that the store model and
brand offer can produce appropriate returns from such expansion. We also
expect the head office of Bank to move into the Group’s offices in Bury in
May 2008.
gROUP PERFORMANCE
Revenue
Total revenue increased by 11.6% in the year to £592.2 million (2007:
£530.6 million) as a result of the Group’s positive like for like sales
performance of 11.1% (excluding the acquired Bank stores), combined
with the turnover from the acquisitions made in the year and a full year
effect from the ex Hargreaves Airport stores.
Gross margin
We are pleased with the progress made in enhancing Group gross
margin from 47.5% to 49.2%. Further progress on gross margin will
be much more difficult to achieve because the scope both for stock
management improvement and expansion of own brand penetration is
now much reduced.
Overheads
Selling and distribution overheads (excluding exceptionals), which include
all store costs, have been well contained with an increase of 6% against a
sales increase of 12% but normal administrative overheads have increased
to £25.8 million from £17.4 million. This latter increase includes provision
for £4 million of a £5 million loyalty and retention package for the Executive
Chairman, designed to ensure that he stays with the business for at least
another two years. £3 million of this was paid in March 2008 and the final
two payments of £1 million each will be made in March 2009 and March
2010, 50% of each further payment being dependent on performance.
Further details of this and of LTIP schemes which will incentivise retention
and performance for the wider executive management team will be
published in the Remuneration Report and the Shareholder Circular to be
sent to shareholders shortly. The LTIP schemes will require shareholder
approval. The administrative overheads also include substantial increases
in systems consultancy and merchandising training associated with
improvements in merchandise planning and stock management.
Operating profits and results
Operating profit before net financing costs, exceptional items and share
of results of joint ventures increased by £16.7 million to £44.0 million
(2007: £27.3 million) which represents a 61% increase on last year. Group
operating margin (before net financing costs, exceptional items and share
of results of joint venture) has therefore increased to 7.4% (2007: 5.1%).
Although exceptional items increased slightly to £8.4 million (2007: £7.8
million), Group operating profit after exceptional items but before share of
results of joint ventures and net financing costs rose sharply from £19.5
million to £35.6 million.
The exceptional items comprise:
Lease variation costs
Impairment of fixed assets in under performing stores
Loss on disposal of fixed assets
Total exceptional charge
£m
2.9
2.5
3.0
8.4
The lease variation costs were incurred in negotiating break options
in onerous leases for stores in Liverpool, Gateshead Metrocentre and
Glasgow Open. The impairment charge is on a further seven Sports stores
and seven Fashion stores which are earmarked for disposal if suitable
deals can be negotiated.
Debt reduction and working capital
Net financing costs are down from £2.2 million to £0.5 million as a result of
continuing core debt reduction.
Year end net cash of £11.7 million represented a £0.8 million improvement
on the position at January 2007 (£10.9 million). This net cash balance
has been achieved after expenditure on acquisitions, investments and
associated asset purchases in the year totalling £31.3 million and net
capital expenditure of £21.0 million (2007: £5.2 million). Gross capital
expenditure was £19.8 million (2007: £14.1 million) being £18.9 million in
the Sports Fascias and £0.9 million in the Fashion Fascias. The capital
expenditure in the year included £7.8 million on new stores and £10.2
million on refurbishments. Investment in the store portfolio is likely to
increase in the current year with three new Sports Fascias stores already
having been opened since the year end.
Excluding the impact from acquisitions, stocks were reduced in the year
by a further £0.9 million. The other major element of our working capital
that has changed significantly has been trade and other payables within
current liabilities which have increased by £21.5 million to £80.4 million.
The acquisitions have contributed £13.4 million of this increase. Suppliers
continue to be paid to agreed terms and settlement discounts are taken.
STORE PORTFOLiO
We have continued working hard to rationalise our store portfolio and it
is pleasing to be reporting further substantial progress this year. We have
closed a further 36 under performing stores during the period with three
further stores in the Sports Fascias having been closed since the year end.
This programme is now much closer to completion although we continue
to find that new developments render older locations redundant whether or
not we take new stores in those developments.
During the year, store numbers moved as follows:
Sports Fascias
Start of year
New stores
Closures
Close of year
Fashion Fascias
Start of year
Acquisition Of Bank Fashion
Closures
Close of year
Units
362
13
(30)
345
Units
44
49
(6)
87
‘000 sq ft
1,098
45
(54)
1,089
‘000 sq ft
117
106
(32)
191
5
CHAiRMAN’S
STATEMENT (CONTiNUED)
DiViDENDS AND EARNiNgS PER
ORDiNARY SHARE
The Board proposes paying a final dividend of 6.00p (2007: 4.80p)
bringing the total dividend payable for the year to 8.50p (2007: 7.20p)
per ordinary share. The proposed final dividend will be paid on 04 August
2008 to all shareholders on the register at 09 May 2008. The final dividend
has been increased by 25% with total dividends payable for the year
increased by 18%.
The adjusted earnings per ordinary share before exceptional items were
57.05p (2007: 36.41p).
The basic earnings per ordinary share were 48.79p (2007: 21.52p).
CURRENT TRADiNg AND OUTLOOK
Given the weather and the timing of Easter, trading since the year end has
been encouraging with like for like sales for the Sports Fascias for the 10
weeks ended 12 April 2008 up 4.0%. The Fashion Fascias have also had
an encouraging start to the year with like for like sales for the same 10
week period up 4.9%. The Group like for like sales for this 10 week period
are therefore up 4.2%.
In the current year, the Group is operating against exceptionally strong
comparatives. Additionally, the Focus and Topgrade investments are
not expected to produce returns in the next two years, other than of a
defensive nature. The Group’s recent strong performance with regards
to like for like sales and gross margins means that further improvement
in these areas is becoming more challenging. Furthermore, despite recent
and current performance, the current economic climate and outlook
dictates a note of prudence. The Board is therefore cautious about the
extent of future growth in earnings.
EMPLOYEES
The Group’s excellent results would not have been possible without
the support of a dedicated and large workforce for which the Board
are very grateful. We are committed to continue increasing training and
other support to enhance both their career prospects and our own
customer service.
Peter Cowgill
Executive Chairman
15 April 2008
6
7
‘This has been a
further period of very
substantial progress
for the Group with
excellent organic sales
growth and margin
enhancement.’
8
9
FiNANCiAL
AND RiSK
REViEW
iNTRODUCTiON
Profit before tax increased substantially in the year from £17.3 million to
£35.0 million. This improvement has been achieved through:
• Strong organic sales growth
• Higher gross margin
• Improved store cost ratios aided by the disposal of under
performing stores
• A reduction in net financing costs from the continuing reduction in
core debt
The Group has maintained its positive net cash position at the year end
after acquisitions, investments and associated asset purchases in the
year totalling £31.3 million and an increase in gross capital expenditure
from £14.1 million to £19.8 million.
TAxATiON
The effective rate of tax on profit has decreased from 39.8% to 32.6%.
This decrease is principally due to the fact that certain depreciation
charges and the impairment of the goodwill in RD Scott Limited within
the exceptional items in the prior year did not qualify for any form of tax
relief. However, the tax charge remains above the standard rate because
of a high rate of disallowable expenditure within the costs of the property
rationalisation programme.
EARNiNgS PER SHARE
The basic earnings per share have increased from 21.52p to 48.79p.
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 57% from 36.41p to 57.05p.
NET CASH
The year end net cash position has increased by £0.8 million to £11.7
million after acquisitions, investments and associated asset purchases
in the year totalling £31.3 million and an increase of £5.7 million in gross
capital expenditure to £19.8 million. The significant improvement in the
Group’s financial position over the four year period since the current
management team came together in early 2004, has enabled the Group
to invest in appropriate opportunities, whether they be connected with the
current store base or strategic acquisitions.
The improvement in the Group’s cash position over the period has enabled
it to benefit from lower net financing costs with the net charge in the year
reducing from £2.2 million to £0.5 million.
TREASURY FACiLiTiES
A £70.0 million bank syndicated facility was agreed in October 2006.
This 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, particularly with regard to the trading peak at Christmas and the
quarterly store rent payments. This facility has been used to fund the
acquisitions and other investments in the year with no other facilities put in
place. This facility expires in October 2011.
Interest rate hedging has not been put in place on the new facility. We are
mindful of the potential volatility 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. Cover is in place for
the anticipated stock buys in the current financial year.
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 markets in which its businesses operate.
An assessment of such factors is set out below:
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.
The net cash position has benefited from the continuing tight controls over
stocks. Creditors continue to be paid to terms to maximise settlement
discounts with our period end creditor days being 33 (2007: 32).
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.
10
FiNANCiAL
AND RiSK
REViEW (CONTiNUED)
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. Wherever possible, we ensure that new leases are
taken for a period no longer than 10 years thus our exposure is reduced
and our flexibility increased in the event of a competing development.
When the Group is made aware of a new development, a review is
performed to establish the possible impact on the existing stores and to
consider 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 the liability reverts to the main headlease.
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.
DiViDENDS
A final cash dividend of 6.00p per share is proposed which represents an
increase of 25% on the final dividend from the prior year. The dividend for
the year is therefore 8.50p which is an increase of 18% on the prior year.
Brian Small
Group Finance Director
15 April 2008
13
PROPERTY
AND STORES
REViEW
The ongoing rationalisation of the property portfolio has resulted in the
closure of 36 under performing stores in the period (30 Sports Fascia
stores and 6 Fashion Fascia stores) as we continue to drive the efficiency
of the store base upwards. A further three Sports Fascia stores have
closed in the current period. The rationalisation programme is now much
closer to completion although we continue to find that new developments
render older locations redundant whether or not we take new stores in
those developments.
New stores are taken when suitable opportunities occur with a total of
13 new stores opened in the period (all in the Sports Fascias). Five of the
new stores (including two in the Republic of Ireland) were in new locations
whilst the other eight stores were replacements and extentions of existing
space. The opening of 13 new stores represents a significant increase in
investment in the property portfolio compared to previous years and this
increased investment in new space is likely to continue in the current year
with three new Sports Fascia stores already having been opened.
There has also been an increase in the investment in the existing portfolio
with 28 stores being refurbished in the period. These refurbishments
included the following major works:
• Major refurbishment at the flagship JD store on Oxford Street in London
• Conversion of two ex Hargreaves Airport stores in Gatwick Airport to JD
• Conversion of five legacy Ath- stores to the Scotts fascia
As with new stores, there is increased investment planned on the existing
portfolio and it is likely that we will refit in excess of 40 stores in the current
period. This programme of refurbishments represents the most substantial
refurbishment programme that the Group has ever undertaken. These
store refurbishments often result in full store closures for a number of
weeks but we expect this to be justified by the subsequent performance.
The acquisition of Bank Stores Holdings Limited (‘Bank’) gave the Group
a further 49 stores and 106,000 sq ft of retail space. Bank has been
included within the performance of our Fashion Division although we plan
to maintain Scotts and Bank as two separate fascias. The acquisition
of Bank gives the Group the opportunity to develop our presence in the
young aspirational fashion sector and consequently provide a platform
for growth through rollout. However, in advance of any rollout, the
management team will need to ensure that the store model and brand
offer can produce appropriate returns from such expansion.
The store portfolio at 02 February 2008 and 27 January 2007 can be
analysed as follows:
Sports Fascias No. of Stores Retail (000 sq ft)
2007
1,001
20
44
13
20
1,098
JD
Size
First Sport
Nike
Other Fascias
Total
2007
304
14
17
8
19
362
2008
1,013
19
36
10
11
1,089
2008
303
13
12
7
10
345
Fashion Fascias No. of Stores Retail (000 sq ft)
2007
-
75
3
16
23
117
Bank
Scotts
Lacoste (i)
Ath
Other Fascias (ii)
Total
2008
104
80
4
3
-
191
2007
-
34
2
6
2
44
2008
47
36
3
1
-
87
Group Total
432
406
1,280
1,215
(i) Includes two stores from the acquisition of Bank
(ii) Included Glasgow Open department store (21,700 sq ft) which was
closed in September 2007
15
CORPORATE
AND SOCiAL
RESPONSiBiLiTY
fire alarms and gas compliance. Where appropriate, these files also contain
the details of any surveys for Asbestos Containing Materials (‘ACMs’) and
whether any baselines have been established for the management of
potential ACMs.
ENViRONMENTAL
The Group recognises the importance of protecting our environment for
future generations and is committed to carrying out its activities with due
consideration for the environmental impacts of its operations particularly
with regards to:
• Ensuring efficient use of energy and other materials
• Minimising waste with recycling wherever possible
• Ensuring compliance with relevant legislation and codes of best practice
Energy
It is the Group’s aim to give customers an enjoyable retail experience
with goods presented in an environment that is both well lit and has an
ambient temperature. However, the Group accepts that all the businesses
within the Group must be responsible in their energy usage and associated
carbon emissions.
The Group has now employed a dedicated Energy Manager who is
introducing a Carbon Management Programme (‘CMP’) with the aim of
reducing energy usage across the Group. We have also engaged the
services of independent qualified consultants from Inenco Group Limited to
assist in this process.
This CMP will provide the Group with the necessary base data on
CO2 emissions to enable it to operate effectively in the new emissions
trading scheme introduced as part of the statutory Carbon Reduction
Commitment (‘CRC’). Although the introductory phase of the CRC does
not start until January 2010 we are working on this issue now to ensure
a smooth transition. The Group is committed to invest the necessary
resources in this area with the following works planned for 2008:
• The introduction of smart meters for electricity in at least 150 of the
largest energy using stores. Taking into account the fact that we can
receive accurate and timely usage data in 60 stores already then this
programme of works will mean that this usage data will be available
for approximately half of the store base but a higher proportion of the
actual cost
• The introduction of Building Management Systems in new store
developments and major refurbishments to minimise the usage of energy
outside of trading hours
The Group recognises that it has a social responsibility to ensure
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 across the UK and Republic of Ireland. The Group
employs large numbers of school leavers and university graduates and
participates regularly in work experience schemes with schools and
colleges across the country.
The Group is committed to promoting policies which are designed to
ensure that employees and those who seek to work for the Group are
treated equally regardless of sex, marital status, creed, colour, race or
ethnic origin.
The Group gives full and fair consideration to applications for
employment by people who are disabled, to continue wherever possible
the employment of staff who become disabled and to provide equal
opportunities for the career development of disabled employees. It is also
the Group’s policy to provide opportunities for the large number of people
seeking flexible or part-time hours.
The number and geographical dispersion of the Group’s operating
locations make it difficult, but essential, to communicate effectively with
employees. Communication with retail staff is primarily achieved through
the management in the regional and area operational structures although
we have introduced regular newsletters and intranet updates for staff
in the last year. Formal communications informing all employees of the
performance of the Group are issued on a regular basis by the Group’s
Human Resources Department in the form of ‘Team Briefs’.
HEALTH AND SAFETY
The Group acknowledges that it has a responsibility to provide a safe
and healthy environment for all its employees, customers, contractors
and other visitors. The Group therefore employs a dedicated Health and
Safety Officer who co-ordinates all training in this area, carries out risk
assessments and ensures that safe working practices and equipment are
used throughout the Group.
Each retail unit has its own individually prepared health and safety file which
is made available to those who need information to assist in maintenance,
alterations, construction or demolition work. These individual files
document the satisfactory testing of electrical circuits, emergency lighting,
16
CORPORATE
AND SOCiAL
RESPONSiBiLiTY (CONTiNUED)
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. Examples of
this include:
• Sponsorship of the Manchester Versus Cancer concert
• Sponsorship of the 2008 Multiple Sclerosis Society MS Life Conference
• Sponsorship and donations of kit to local junior sports clubs
COMPLiANCE WiTH COMPANiES ACT 2006
The Group will report on significant environmental issues in its 2009 Annual
Report using appropriate KPIs. There are already appropriate KPIs in the
business to report on the recycling of waste. These KPIs will be expanded
in the 2009 report by the inclusion of data on energy usage and carbon
emissions.
Recycling
Wherever possible, cardboard (the major packaging constituent) is taken
back to the distribution centres. The cardboard is then baled and passed
to recycling businesses for reprocessing. During the year, the Group
increased its recycling of cardboard to 176.6 tonnes (2007: 113.5 tonnes).
The Group also continues to recycle paper wherever possible.
This recycling is split into two elements:
• General paper waste is collected by a recycling business with 90.0
tonnes recycled in the year (2007: 89.6 tonnes)
• Confidential paper waste is shredded on collection by a recycling
business. This business provides a ‘Certificate Of Environmental
Accomplishment’ which states that the shredded paper, which was
collected in the year, was the equivalent of 497 trees
Plastic Bags
Approximately 40% of the bags issued by the Group are high quality
drawstring bags which are generally reused by customers many times.
However, the Group is aware of the environmental impact from plastic
bags and to minimise the effects from the Group’s bags we have recently
made the following environmentally responsible changes:
• The bags are now made from 33% recycled material
• The bags now contain an oxo-biodegradable additive which means that
they degrade totally over a very short life span
In addition, the Group uses paper based bags rather than plastic bags in
its stores in the Republic of Ireland.
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 and
environmental policies.
The Group cares about the labour standards in its global supply chain and
expects its suppliers to have similar ethical concerns. The Group’s buyers
inspect the working conditions wherever possible during their visits to the
factories of suppliers and source manufacturers. However, on occasions it
is not possible to visit the factories directly and we have to rely on the good
faith of our suppliers who, through our own supplier contract, are required
to agree to our policy on ‘Employment Standards For Suppliers’
19
THE BOARD
PETER COWgiLL
Executive Chairman and Chairman of the Nominations Committee
aged 55
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 47
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 51
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 66
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 45
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.
21
DiRECTORS’
REPORT
The Directors present their annual report and the audited financial
statements for the 53 week period ended 02 February 2008.
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 19 as follows:
• Summary of Key Performance Indicators (page 02)
• Chairman’s Statement (pages 04 to 06)
• Financial and Risk Review (pages 10 to 13)
• Property and Stores Review (page 15)
• Corporate and Social Responsibility (pages 16 to 19)
RESULTS
Revenue for the 53 week period ended 02 February 2008 was £592.2
million and profit before tax £35.0 million compared with £530.6 million and
£17.3 million respectively in the previous financial year. The Consolidated
Income Statement is set out on page 45.
PROPOSED DiViDEND
The Directors recommend a final dividend of 6.00p per ordinary share
(2007: 4.80p), which together with the interim dividend of 2.50p per
ordinary share (2007: 2.40p) makes the total dividend payable for the year
8.50p (2007: 7.20p).
If approved at the next Annual General Meeting, the dividend will be paid
on 04 August 2008 to shareholders on the register at the close of business
on 09 May 2008.
DiRECTORS
The names of the current directors of the Company and their biographical
details are given on page 21. Mr B Small and Mr C Bird retire by rotation at
the next Annual General Meeting and are eligible for re-election.
STRUCTURE OF SHARE CAPiTAL
As at 02 February 2008, the Company’s authorised share capital of
£3,107,500 comprised 62,150,000 ordinary shares of 5p each.
As at 02 February 2008, the Company’s issued share capital of
£2,413,171 comprised 48,263,434 ordinary shares of 5p each.
RigHTS AND OBLigATiONS OF
ORDiNARY SHARES
On a show of hands at a general meeting, every holder of ordinary shares
present in person or by proxy and entitled to vote, shall have one vote
and on a poll, every member present in person or by proxy and entitled
to vote, shall have one vote for every ordinary share held. Subject to the
relevant statutory provisions, and the Company’s Articles of Association,
holders of ordinary shares are entitled to a divided where declared or paid
out of profits available for such purposes. Subject to the relevant statutory
provisions and the Company’s Articles of Association, on a return of capital
on a winding-up, holders of ordinary shares are entitled to participate in
such a return equally in proportion to their shareholding.
RESTRiCTiONS ON TRANSFER OF SECURiTiES
The restrictions on the transfer of shares in the Company are as follows:
• The Board may, in its absolute discretion, refuse to register any transfer
of shares, which are not fully paid up (but not so as to prevent dealings
in listed shares from taking place)
• The Board may also refuse to register any transfer of shares unless it is
in respect of only one class of share and it is lodged at the place where
the register of members is kept, accompanied by a relevant certificate or
such other evidence as the Board may reasonably require to show the
right of the transferor to make the transfer
• The Board may refuse to register an allotment or transfer of shares in
favour of more than four persons jointly
• Certain restrictions may from time to time, be imposed by laws and
regulations (for example, insider trading laws)
• Restrictions may be imposed pursuant to the Listing Rules of the
Financial Services Authority whereby certain of the Group’s employees
require the Company’s approval to deal in shares
The Company is not aware of any arrangement between its shareholders
that may result in restrictions on the transfer of shares and/or voting rights.
DiRECTORS’ iNTERESTS
The interests of the Directors who held office at 02 February 2008 and their
immediate families in the Company’s shares are shown below:
Ordinary shares of 5p each
02 February 2008 27 January 2007
380,263
5,676
-
8,850
394,789
410,263
5,676
13,750
18,850
448,539
P Cowgill
B Bown
B Small
C Archer
With the exception of the interests in the Company’s shares held by
B Bown and his immediate family, all of the holdings shown above
represent beneficial interests.
There has been no change in Directors’ interests since the period-end.
SUBSTANTiAL iNTERESTS iN SHARE CAPiTAL
As at 15 April 2008, the Company has been advised by the following
companies of notifiable interests in its ordinary share capital:
Number of
ordinary shares
27,566,256
Pentland Group Plc
5,930,255
Sports World International Ltd
5,665,173
Aberforth Partners
AXA Rosenberg
2,011,172
Legal & General Investment Management 1,559,821
%
57.12
12.29
11.74
4.17
3.23
POWERS OF THE DiRECTORS
The Directors are responsible for the management of the business of
the Company and may exercise all powers of the Company subject to
applicable legislation and regulation and the Memorandum and Articles
of Association.
A resolution will be put forward at the 2008 AGM to give the Directors
authority to buy back ordinary shares up to a maximum of 10% of the
total issued ordinary share capital of the Company. Any shares purchased
under such authority would be cancelled.
RESTRiCTiONS ON VOTiNg DEADLiNES
The notice of any general meeting shall specify the deadline for exercising
voting rights and appointing a proxy or proxies to vote in relation to
resolutions to be proposed at the general meeting.
APPOiNTMENT AND REPLACEMENT
OF DiRECTORS
The Company may by ordinary resolution appoint a person who is willing
to act to be a director, either to fill a vacancy or as an addition to the
existing Board. Any director so appointed shall hold office only until the
dissolution of the first AGM of the Company following appointment unless
they are re-elected during such meeting.
At each AGM of the Company, any director who was elected or last
re-elected at or before the AGM held in the third calendar year before
the then current calendar year must retire by rotation and such further
Directors must retire by rotation so that in total not less than one-third
of the Directors retire by rotation each year. A retiring director is eligible
for re-election.
The number of directors at any point in time shall not be less than two.
AMENDMENT OF THE COMPANY’S ARTiCLES
OF ASSOCiATiON
The Companies Articles of Association may only be amended by a special
resolution at a general meeting of shareholders.
At the 2008 AGM, a special resolution will be put to shareholders
proposing amendments to the existing Articles of Association primarily
to accommodate the provisions of the Companies Act 2006.
CHANgE OF CONTROL –
SigNiFiCANT AgREEMENTS
In the event of a change of control of the Company, the Company and
the lenders of the £70.0 million bank syndicated facility shall enter into
negotiations to determine how to continue the facility. If no agreement
is reached within 20 business days of the date of change in control,
the lenders may, by giving not less than 10 business days notice to the
Company, cancel the facility and declare all outstanding loans, together
with accrued interest and all other amounts accrued, immediately due
and payable.
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.
DONATiONS
During the period the Group made charitable donations of £21,700
(2007: £8,200). No political donations were made in the period (2007: £nil).
22
23
DiRECTORS’
REPORT (CONTiNUED)
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
at the period end was 33 (2007: 32).
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
June 2008 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
15 April 2008
Hollinsbrook Way
Pilsworth, Bury
Lancashire BL9 8RR
24
25
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.
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.
The Group has complied throughout the year with the provisions
of the Code.
The Committee met once during the year.
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 21.
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 eight Board
Meetings in the year including those convened to discuss and sanction
the acquisitions in the period 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 of 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 three principal Board Committees to which responsibilities are
delegated are as follows:
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
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 Committee Attendance
The attendance record of individual directors at Board and committee
meetings is detailed below:
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
Turnbull guidance.
Board Remuneration
Audit
Committee Committee
Number of meetings
in year
P Cowgill
B Bown
B Small
C Archer
C Bird
Meetings
8
8
7
8
8
8
1
1
-
1
1
1
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 31 to 38.
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
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 a
comprehensive financial reporting process. In particular there are clear
procedures for the following:
• Identification 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 unauthorized losses in the business using a team of
appropriately experienced 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.
On this basis, the costs of such a function are not considered to be either
necessary or justified.
26
27
CORPORATE
gOVERNANCE (CONTiNUED)
The responsibility for internal control procedures with joint ventures rests
with the senior management of those operations. The Company monitors
its investments and exerts influence through Board representation.
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.
28
29
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 audited and unaudited information.
The Committee conducted a full review of its remuneration policy in
conjunction with Halliwell Consulting in March 2007. The conclusions
from this review were:
• Base salaries should be competitive
• The maximum annual bonus will be 100% of salary based on
the achievement of pre-determined profit targets in line with market
expectations although the Committee would retain the discretion to
pay bonuses above this level for exceptional performance
• A new cash-based long-term incentive arrangement will be put to
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.
shareholders for approval to ensure that management are locked in and
are appropriately rewarded for creating long-term value going forward.
Details of this arrangement will be set out in a shareholder circular for
approval at the Annual General Meeting to be held on 26 June 2008
The Report will be put to shareholders for approval at the Annual General
Meeting on 26 June 2008.
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 which is available to shareholders by writing to the Company
Secretary.
The Committee has met once during the last year with each member
attending the meeting.
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 Committee has also agreed a separate cash-based Special
Retention Payment for the Executive Chairman, which has been designed
to ensure that he stays with the business for at least another two years.
The maximum amount payable under this package is £5 million with
payments as follows:
• £3 million was paid in March 2008
• £1 million will be payable in March 2009 and also in March 2010 with
each payment based on:
- 50% for the retention of his services in the preceding financial year
- 50% for the achievement of pre-determined profit targets in line with
market expectations
The Committee recognises that the Executive Chairman has been
instrumental in the turnaround in the Group’s financial performance
since his appointment to the role in March 2004. Accordingly, the
Committee believe that it is in the interests of shareholders that his
services be retained.
COMPONENTS OF REMUNERATiON
The main components of the current remuneration package are:
Base Salary
The policy of the Committee is to set base salaries for the Executive
Directors around the median or 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
31
DiRECTORS’ REPORT
ON REMUNERATiON
AND RELATED MATTERS
(CONTiNUED)
In line with the remuneration policy, the salaries of the Executive Directors
are reviewed annually. For the Executive Chairman, the salary reflects
his personal contribution to the turnaround and strategic development of
the Company and the related time commitment. For the Chief Executive
and Finance Director the salary takes into account their performance,
the market and continued development in their respective roles.
Executive Chairman are secured in the short to medium term. To this
end, the Committee has introduced a Special Retention Payment for
the Executive Chairman to ensure that he is retained to focus on driving
shareholder value for the foreseeable future. The structure of the payment
was discussed with the Company’s principal shareholders and they are
fully supportive.
With effect from 1 April 2008, the salaries for the Executive Directors have
been increased as follows:
Executive
Director
Peter Cowgill
Barry Bown
Brian Small
Previous Salary New Salary
£385,000
£275,000
£170,000
£398,475
£284,625
£175,950
Position against
Comparator Group
Median
Lower Quartile
Lower Quartile
Whilst these salary rises are below the median level of salary rises at
comparable retail companies in the UK, the Committee felt it appropriate
that they should be in line with the wider salary rises throughout the Group.
Annual Bonus
The level of payout for annual bonus is now based on the achievement
of challenging absolute EPS targets (rather than adjusted EPS) with the
bonus calculated (in bands) by reference to the percentage by which the
earnings per ordinary share exceeds the earnings per ordinary share for
the preceding financial period. The Committee reviews these targets at the
beginning of the financial year to ensure that they remain challenging and
are appropriate to the current market conditions and position of the Group.
Whilst the normal maximum bonus potential is 100% of salary,
the Remuneration Committee retains the discretion to pay bonuses
above that level for exceptional performance.
For the period ended 02 February 2008, the Company achieved absolute
earnings per ordinary share growth of over 125% which was significantly
ahead of market expectations at the start of the year and which, in the
opinion of the Remuneration Committee, merited the payment, to all
executive directors, of a bonus of 120% of current basic salary.
This is in line with shareholder expectations that higher levels of payout
should be commensurate with increasing levels of performance.
Special Retention Payment
The Company has recently faced a real retention risk in relation to the
Executive Chairman. It is the strong belief of the Committee that it is
crucial to the continued growth of the Company that the services of the
32
Paid / Payable
March 2008 March 2009 March 2010
Total
£000
£000
4,000
500
500 (ii) 1,000
5,000
£000
3,000
-
3,000
£000
500
500 (i)
1,000
1,000
Retention element
Performance element
Total
(i) Based on performance in the period ending 31 January 2009
(ii) Based on performance in the period ending 30 January 2010
The amounts shown above are non-pensionable.
The retention element of £4 million has been recognised in full in the
Consolidated Income Statement for the period ended 02 February 2008.
The performance related element will be payable on the achievement
of pre-determined profit targets in line with market expectations.
This element of the cost has not been recognised in the Consolidated
Income Statement for the period ended 02 February 2008. The cost will
be recognised in the Consolidated Income Statement in the financial year
to which the performance relates if the applicable target for that period has
been achieved.
Cash Based Long Term Incentive Plan
In 2005 the Company had proposed to introduce an equity-based
long-term incentive plan, which received support from institutional
shareholders through advance consultation, but the actual resolution was
withdrawn following the purchase of a majority shareholding by Pentland
Group Plc.
This has meant that although the Group has performed well over the last
few years the Executives responsible for delivering that performance have
not had any significant share in the value that they have created.
In May 2007 the Company made special bonus payments to the
Executives in recognition of the Group’s performance since 2004, which
went some way towards redressing the overall remuneration imbalance.
However, these payments still bore no real correlation to the actual value
that had been created for shareholders over that period, and perhaps
more importantly, still left the Executives without any long-term incentive
plan in place.
DiRECTORS’ REPORT
ON REMUNERATiON
AND RELATED MATTERS
(CONTiNUED)
The Committee is therefore proposing to introduce The John David Group
plc 2008 Long-Term Incentive Plan (‘LTIP’) in order to:
• Provide the Committee with the necessary mechanism with which
to retain the Executives who are critical to driving shareholder value
• Provide the Executives with the opportunity to earn competitive rewards
which has, until now, been severely restricted by the absence of any
long-term incentive plan
• Align the Executives’ interests more closely with those of
the shareholders
An amount of £833,000 has been recognised in the Consolidated Income
Statement for the period ended 02 February 2008, being one-third of the
1st award payable. This is consistent with the vesting profile of a three year
performance period had an award been made in 2007.
Full details of the LTIP will be set out in a shareholder circular for
shareholder approval at the Annual General Meeting to be held on 26 June
2008. Any payments made under the scheme will be non-pensionable.
• Focus the Executives on sustaining and improving the long-term
financial performance of the Group and reward them appropriately
for doing so
• Ensure a more appropriate balance in the Executives’ compensation
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.
between fixed and performance elements
The proposed LTIP consists of two separate awards that pay out in cash
after two and three years respectively, subject to continued employment
and meeting stretching performance targets which drive the creation
of shareholder value. The Committee gave considerable thought as to
whether the awards should pay out in cash or shares and decided that
given the current shareholder structure and the lack of a large free float,
the delivery mechanism should be in cash.
The following table outlines the proposed structure of the LTIP:
Other benefits vary from director to director and include entitlement to
a fully expensed car, 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.
Performance to
Payable
Amount Payable:
Peter Cowgill
Barry Bown
Brian Small
Other Key Executives
1st Award
30 January 2010
March 2010
2nd Award
29 January 2011
March 2011
SERViCE CONTRACTS
Details of the contracts currently in place for executive directors are
as follows:
£400,000
£350,000
£250,000
£1,500,000
£2,500,000
£450,000
£393,750
£281,250
£1,625,000
£2,750,000
Date Of Contract Notice Period
(Months)
12
12
12
Barry Bown 10 December 2001
10 March 2004
Brian Small
16 March 2004
Peter Cowgill
Unexpired Term
Rolling 12 months
Rolling 12 months
Rolling 12 months
The 1st award would be paid out in March 2010 subject to the Group
achieving average headline earnings* of £40 million over the three year
period ending 30 January 2010.
The 2nd award would be paid out in March 2011 subject to the Group
achieving average headline earnings* of £44 million (40% of payout)
and £48 million (100% of payout) over the three year period ending 29
January 2011.
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.
*Headline earnings are defined as profit before tax and exceptional items.
Each service contract expires upon the director reaching the age of 65
(subject to re-election by shareholders).
34
DiRECTORS’ REPORT
ON REMUNERATiON
AND RELATED MATTERS
(CONTiNUED)
Figure 1: Total Shareholders Return from 31st January 2003
2003
2005
2004
2006
2007
2008
FTSE All Share General Retailers Index
The John David Group plc
Figure 2: Total Shareholders Return from 31st January 2004
2004
2005
2006
2007
2008
FTSE All Share General Retailers Index
The John David Group plc
180
160
140
120
%
100
80
60
40
20
0
%
150
125
100
100
75
50
25
0
The Committee consider these levels of compensation appropriate in light
of the levels of basic salary provided and prevailing market conditions.
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 page 22.
During the year, Peter Cowgill served as a Non-Executive Director
elsewhere and has retained earnings of £67,900 in respect of this service.
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, and are terminable by the
non-executive director or Company on not less than three months’ notice.
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 38.
TOTAL SHAREHOLDER RETURN
Figure 1 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.
TSR is calculated for each financial year end relative to the base date of 31
January 2003 by taking the percentage change of the market price over
the relevant period, re-investing any dividends at the ex-dividend rate.
Figure 2 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.
36
DiRECTORS’ REPORT
ON REMUNERATiON
AND RELATED MATTERS
(CONTiNUED)
AUDiTED iNFORMATiON
Individual Directors’ emoluments
Directors’ salaries and benefits charged in the period to 02 February
2008 are set out below together with comparatives for the period to 27
January 2007.
Salary
and fees
£000
354
263
165
35
26
843
Benefits
excluding
pensions
£000
3
4
17
-
-
24
Annual
performance
related
bonus
£000
462
330
204
-
-
996
Special
retention
payment
£000
4,000*
-
-
-
-
4,000
2008
Total
£000
4,819
597
386
35
26
5,863
2007
Total
£000
1,423
1,036
694
34
25
3,212
2008
Pension
total
£000
-
21
20
-
-
41
2007
Pension
costs
£000
-
16
16
-
-
32
P Cowgill
B Bown
B Small
C Archer
C Bird
*Includes £500,000 payable in March 2009 and £500,000 payable in
March 2010.
The pension contributions represent amounts payable to defined
contribution pension schemes.
Cash Based Long Term Incentive Plan
In addition, the following amounts have been provided as at 02 February
2008 in respect of the proposed LTIP. The amounts recognised represent
one third of the amount proposed for the 1st award based on Group
performance in the first year of the three year vesting period. The 1st award,
if approved, will be payable in March 2010 subject to the Group meeting
the performance conditions as detailed on page 34.
2008
£000
133
117
83
333
P Cowgill
B Bown
B Small
On behalf of the Remuneration Committee
Colin Archer
Chairman of the Remuneration Committee
15 April 2008
38
39
DiRECTORS’
RESPONSiBiLiTY
STATEMENT
RESPONSiBiLiTiES OF DiRECTORS
The Directors are responsible for preparing the Annual Report and the
Group and Parent Company financial statements in accordance with
applicable law and regulations.
RESPONSiBiLiTY STATEMENT
We confirm that to the best of our knowledge:
• the financial statements, prepared in accordance with IFRSs as adopted
by the EU, give a true and fair view of the assets, liabilities, financial
position and profit of the Parent Company and Group; and
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 management report, comprising the chairman’s statement, financial
and risk review, property and stores review and directors’ report, includes
a fair review of the development and performance of the business and the
position of the Parent Company and Group, together with a description
of the principal risk and uncertainties that they face.
By order of the Board
Brian Small
Group Finance Director
15 April 2008
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 web site.
Legislation in the UK governing the preparation and dissemination of
financial statements may differ from legislation in other jurisdictions.
41
iNDEPENDENT
AUDiTOR’S REPORT
TO THE MEMBERS
OF THE JOHN DAViD
gROUP PLC
We have audited the Group and Parent Company financial statements
(the ‘financial statements’) of The John David Group Plc for the 53 week
period ended 02 February 2008 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 Statement
of Directors’ Responsibilities on page 41.
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
42
Responsibility pages 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 2006 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.
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 02 February 2008 and of its profit for the period 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 02 February 2008;
• 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; and
• the information given in the Directors’ Report is consistent with the
financial statements.
KPMG Audit Plc
Chartered Accountants
Registered Auditor
Preston
15 April 2008
43
CONSOLiDATED iNCOME STATEMENT
FOR THE 53 WEEKS ENDED 02 FEBRUARY 2008
53 weeks to
02 February 2008
Continuing
Operations
£000
53 weeks to
02 February 2008
Continuing
Operations
£000
52 weeks to
27January 2007
Continuing
Operations
£000
52 weeks to
27 January 2007
Continuing
Operations
£000
Note
(222,720)
(8,404)
(25,774)
-
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
Share of results of joint venture
Financial income
Financial expenses
PROFIT BEFORE TAX
Income tax expense
PROFIT FOR THE PERIOD
Attributable to equity holders of the parent
Attributable to minority interest
Basic earnings per ordinary share
Diluted earnings per ordinary share
4
4
4
15
7
8
3
9
10
10
592,240
(300,813)
291,427
(231,124)
(25,774)
1,086
35,615
44,019
(8,404)
35,615
(145)
297
(764)
35,003
(11,416)
23,587
23,549
38
48.79p
48.79p
(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
10,388
21.52p
21.52p
STATEMENT OF RECOgNiSED
iNCOME AND ExPENSE
FOR THE 53 WEEKS ENDED 02 FEBRUARY 2008
gROUP
The Group has no recognised gains or losses during the current or previous period other than the results reported above.
COMPANY
The Company has no recognised gains or losses during the current or previous period other than the results reported in note 25.
44
45
BALANCE SHEETS
AS AT 02 FEBRUARY 2008
CASH FLOW STATEMENTS
FOR THE 53 WEEKS ENDED 02 FEBRUARY 2008
GROUP
COMPANY
As at
02 February 2008
£000
As at
27 January 2007
£000
As at
02 February 2008
£000
As at
27 January 2007
£000
Note
GROUP
COMPANY
53 weeks to
02 February 2008
£000
52 weeks to
27 January 2007
£000
53 weeks to
02 February 2008
£000
52 weeks to
27 January 2007
£000
Note
ASSETS
Intangible assets
Property, plant and equipment
Other receivables
Investment property
Equity accounted investment in joint venture
Investments
TOTAL NON-CURRENT ASSETS
Inventories
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
TOTAL NON-CURRENT LIABILITIES
TOTAL LIABILITIES
TOTAL ASSETS LESS TOTAL LIABILITIES
CAPITAL AND RESERVES
Issued ordinary share capital
Share premium
Retained earnings
TOTAL EQUITY
Attributable to equity holders of the parent
Attributable to minority interest
TOTAL EQUITY
11
12
14
13
15
16
17
18
19
20
22
23
20
22
23
24
25
25
25
41,371
53,622
5,025
4,151
360
-
104,529
58,669
15,899
11,969
86,537
20,562
41,919
2,753
-
-
-
65,234
51,469
13,012
11,230
75,711
22,164
39,678
4,801
4,151
-
5,298
76,092
45,172
47,809
9,343
102,324
17,945
36,739
2,592
-
-
3,470
60,746
47,109
22,325
11,425
80,859
191,066
140,945
178,416
141,605
(134)
(80,389)
(1,893)
(9,147)
(106)
(58,849)
(2,130)
(3,477)
(83)
(62,177)
(1,438)
(8,485)
(95)
(54,838)
(1,531)
(3,477)
(91,563)
(64,562)
(72,183)
(59,941)
(83)
(11,839)
(4,726)
(46)
(192)
(8,189)
(4,829)
(1,571)
(83)
(17,939)
(3,351)
(310)
(192)
(14,588)
(1,707)
(1,490)
(16,694)
(14,781)
(21,683)
(17,977)
(108,257)
(79,343)
(93,866)
(77,918)
82,809
61,602
84,550
63,687
2,413
10,823
69,573
82,809
81,627
1,182
82,809
2,413
10,823
48,366
61,602
61,602
-
61,602
2,413
10,823
71,314
84,550
84,550
-
84,550
2,413
10,823
50,451
63,687
63,687
-
63,687
These financial statements were approved by the Board of Directors on 15 April 2008 and were signed on its behalf by:
B Bown
B Small
Directors
25
15
9
8
7
CASH FLOWS FROM OPERATING ACTIVITIES
Profit for the period
Share of results of joint venture
Income tax expense
Financial expenses
Financial income
Depreciation and amortisation of non-current assets
Impairment of non-current assets
Loss/(profit) on disposal of non-current assets
Decrease in inventories
Decrease/(increase) in trade and other receivables
Increase/(decrease) in trade and other payables and provisions
Interest paid
Income taxes paid
4
NET CASH FROM OPERATING ACTIVITIES
CASH FLOWS FROM INVESTING ACTIVITIES
Interest received
Proceeds from sale of non-current assets
Proceeds from group asset transfer
Disposal costs of non-current assets
Acquisition of intangible assets
Acquisition of property, plant and equipment
Acquisition of investment property
Acquisition of non-current other receivables
Cash consideration of acquisitions net of cash acquired
Investment in joint venture
Amounts loaned to joint venture
11
12
13
11
15
23,587
145
11,416
764
(297)
12,421
2,535
3,015
2,955
1,396
6,877
(764)
(7,619)
56,431
297
1,257
-
(2,432)
(4,279)
(19,407)
(4,160)
(389)
(1,135)
(505)
(2,479)
10,388
-
6,879
2,412
(177)
11,888
5,482
(1,491)
5,299
(475)
1,488
(2,412)
(1,712)
37,569
177
11,099
-
(2,188)
-
(13,665)
-
(434)
(5,000)
-
-
24,387
- -
11,605
887
(320)
10,848
1,499
2,766
1,109
(24,660)
11,805
(887)
(7,777)
12,210
7,217
2,336
(149)
11,230
4,842
(2,138)
4,662
509
(1,259)
(2,336)
(1,712)
31,262
35,412
320
1,168
2,339
(2,123)
(4,279) -
(18,284)
(4,160) -
(373)
(1,323)
(505) -
(2,479)
149
11,099
-
(1,668)
(11,046)
(339)
(5,000)
-
NET CASH USED IN INVESTING ACTIVITIES
(33,232)
(10,011)
(29,699)
(6,805)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of interest bearing loans and borrowings
Payment of finance lease and similar hire purchase contracts
Dividends paid
(18,917)
(19)
(3,524)
(22,000)
(285)
(3,379)
NET CASH USED IN FINANCING ACTIVITIES
(22,460)
(25,664)
NET INCREASE IN CASH AND CASH EQUIVALENTS
29
739
1,894
(121)
- -
(3,524)
(3,645)
(2,082)
(22,000)
(3,379)
(25,379)
3,228
CASH AND CASH EQUIVALENTS AT
THE BEGINNING OF THE PERIOD
CASH AND CASH EQUIVALENTS
AT THE END OF THE PERIOD
29
29
11,230
9,336
11,425
8,197
11,969
11,230
9,343
11,425
46
47
NOTES TO THE FiNANCiAL STATEMENTS
NOTES TO THE FiNANCiAL STATEMENTS
(CONTiNUED)
1. SigNiFiCANT ACCOUNTiNg POLiCiES
1. SigNiFiCANT ACCOUNTiNg POLiCiES (CONTiNUED)
The John David Group Plc (the 'Company') is a company incorporated and domiciled in the United Kingdom. The financial statements for the 53 week
period ended 02 February 2008 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.
PROPERTY, PLANT AND EQUIPMENT
I.
Owned assets
Items of property, plant and equipment are stated at cost less accumulated depreciation and impairment losses.
The financial statements were authorised for issue by the Board of Directors on 15 April 2008.
Where parts of an item of property, plant and equipment have different useful economic lives, they are accounted for as separate items.
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 (‘adopted IFRSs’). The financial statements have been prepared on
the basis of the requirements of adopted IFRSs that are endorsed by the EU and effective at 02 February 2008.
The Company has chosen to present its own results under adopted IFRSs 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 Group has adopted the disclosure requirements of IFRS 7 ‘Financial Instruments: Disclosures’ and the amendment to IAS 1 ‘Presentation of Financial
Statements: Capital Disclosures’ in the current year financial statements. Full comparative figures are presented. The adoption of these standards has
not led to any changes in the Group’s accounting policies and has not had any impact on the Consolidated Income Statement or Group and Company
Balance Sheets.
The following adopted IFRSs, which will have an impact for the Group, were available for early adoption but have not been applied in these
financial statements:
•
IFRS8 'Operating Segments' applicable for financial periods commencing on or after 01 January 2009. This requires that entities adopt the
'management approach' to reporting the financial performance of its 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 and interpretations 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 adopted IFRSs 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
I.
Subsidiaries 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. Minority interests in the net assets of consolidated subsidiaries are identified separately from the equity attributable to holders of the
parent. Minority interests consist of the amount of those interests at the date that control commences and the minority's share of changes in equity
subsequent to that date.
II. Joint ventures
Joint ventures are entities over which the Group has joint control based on a contractual arrangement. The results and assets and liabilities of joint
ventures are incorporated in the consolidated financial statements using the equity method of accounting. Investments in joint ventures are carried in
the balance sheet at cost and adjusted for post-acquisition changes in the Group's share of the net assets. Losses of the joint venture in excess of
the Group's interest in it are not recognised.
III. Transactions eliminated on consolidation
Intragroup balances and any unrealised income and expenses arising from intragroup transactions, are eliminated in preparing the consolidated
financial statements.
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 installments 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.
Lease incentives are credited to the Consolidated Income Statement on a straight line basis over the life of the lease.
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
INVESTMENT PROPERTY
Investment property, which is property held to earn rentals, is stated at cost less accumulated depreciation and impairment losses. Investment property is
depreciated over a period of 50 years on a straight-line basis, with the exception of freehold land, which is not depreciated. The Group has elected not to
revalue investment property annually but to disclose the fair value in the consolidated financial statements.
The fair value is based on an external valuation prepared by persons having the appropriate professional qualification and experience.
INTANGIBLE ASSETS
I.
Goodwill
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 01 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 01 February 2004 has not been
reconsidered in preparing the Group’s opening adopted IFRS balance sheet at 01 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.
II. Other intangible assets
Other intangible assets represent brand licences and purchased fascia names. Brand licences are stated at cost less accumulated amortisation
and impairment losses. Amortisation of brand licences is charged to the Consolidated Income Statement over the term to the licence expiry on a
straight-line basis.
Separately identifiable fascia names acquired on acquisition are initially stated at fair value and thereafter at cost less accumulated amortisation and
impairment losses. The useful economic life of each purchased fascia name is considered separately. Where the Directors believe that there is no
foreseeable limit to the period over which the asset is expected to generate a net cash flow, the specific fascia name is not amortised but is subject to
annual impairment reviews.
INVESTMENTS IN SUBSIDIARY UNDERTAKINGS AND JOINT VENTURES
In the Company’s accounts all investments in subsidiary undertakings and joint ventures 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.
48
49
NOTES TO THE FiNANCiAL STATEMENTS
(CONTiNUED)
NOTES TO THE FiNANCiAL STATEMENTS
(CONTiNUED)
1. SigNiFiCANT ACCOUNTiNg POLiCiES (CONTiNUED)
1. SigNiFiCANT ACCOUNTiNg POLiCiES (CONTiNUED)
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 or are transferred. Financial
liabilities are derecognised when the obligation specified in the contract is discharged, cancelled or expires.
TRADE RECEIVABLES
Trade receivables are recognised at amortised cost less impairment losses. 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. Significant financial difficulties of the debtor,
probability that the debtor will enter bankruptcy or financial reorganisation and default or delinquency in payments are considered indicators that the trade
receivable is impaired. 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 their cost.
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.
EXCEPTIONAL ITEMS
Items that are material in size, unusual or 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:
• Loss/(profit) on the disposal of non-current assets
• Provision for rentals on onerous property leases
Impairment of property, plant and equipment
•
Impairment of non-current other receivables
•
•
Impairment of intangible assets
• The cost 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.
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.
II. 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
On consolidation, the assets and liabilities of the Group's overseas operations are translated into sterling at the rate of exchange at the balance sheet
date. Income and expenses are translated at the average exchange rate for the accounting period.
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.
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 fair value and remeasured at each period end. 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
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 contractual lease cost less potential sublease income for vacant
stores. For loss making trading stores, provision is made to the extent that the lease is deemed to be onerous.
REVENUE
Revenue represents the amounts receivable by the Group for goods supplied to customers net of discounts, returns and VAT. Revenue is recognised
when goods are sold and title has passed.
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.
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.
50
51
NOTES TO THE FiNANCiAL STATEMENTS
(CONTiNUED)
NOTES TO THE FiNANCiAL STATEMENTS
(CONTiNUED)
1. SigNiFiCANT ACCOUNTiNg POLiCiES (CONTiNUED)
2.
SEgMENTAL ANALYSiS
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
The preparation of financial statements in conformity with adopted IFRSs 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.
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.
II. Impairment of property, plant and equipment and non-current other receivables
Property, plant and equipment and non-current other receivables 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.
III. Impairment of other intangible assets with indefinite lives
The Group is required to test whether other intangible assets with an indefinite useful economic life have suffered any impairment. The recoverable
amount of these assets is based on the estimation of future sales and the choice of a suitable royalty and discount rate in order to calculate the
present value. Actual outcomes could vary significantly from these estimates.
IV. 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.
V.
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 the contractual
lease cost less potential sublease income. The estimation of sublease income is based on historical experience and knowledge of the retail property
market in the area around each specific property.
The Group manages its business activities through two Divisions - Sport and Fashion. Revenue and costs, for the 53 weeks ended 02
February 2008, are readily identifiable for each segment.
The Divisional results for the 53 weeks to 02 February 2008 are as follows:
INCOME STATEMENT
Revenue
Operating profit/(loss) before financing and exceptional items
Exceptional items
Operating profit/(loss)
Share of results of joint venture
Financial income
Financial expenses
Profit before tax
Income tax expense
Profit for the period
Sport
£000
544,372
45,615
(8,574)
37,041
Fashion
£000
47,868
(1,596)
170
(1,426)
Total
£000
592,240
44,019
(8,404)
35,615
(145)
297
(764)
35,003
(11,416)
23,587
The Board consider that the share of results of joint venture and net funding costs are cross divisional in nature and cannot be allocated
between the Divisions on a meaningful basis.
BALANCE SHEET
Total assets
Total liabilities
Sport
£000
127,546
(80,450)
Fashion
£000
47,260
(18,614)
Unallocated
£000
16,260
(9,193)
Total
£000
191,066
(108,257)
Unallocated assets and liabilities relate to items which are cross divisional including interest in joint venture, tax, elements of goodwill and
bank debt.
OTHER SEGMENT INFORMATION
Capital expenditure:
Property, plant and equipment
Investment property
Non-current other receivables
Goodwill on acquisition
Other intangible assets
Depreciation, amortisation and impairments:
Depreciation and amortisation of non-current assets
Impairment of non-current assets
The comparative 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 period
Sport
£000
18,491
4,160
373
-
4,279
10,918
1,500
Sport
£000
492,833
29,658
(4,786)
24,872
Fashion
£000
916
-
16
11,109
5,481
1,503
1,035
Total
£000
19,407
4,160
389
11,109
9,760
12,421
2,535
Fashion
£000
Total
£000
37,748
530,581
(2,357)
(3,013)
(5,370)
27,301
(7,799)
19,502
177
(2,412)
17,267
(6,879)
10,388
The Board consider that net funding costs are cross divisional in nature and cannot be allocated between the Divisions on a meaningful basis.
52
53
NOTES TO THE FiNANCiAL STATEMENTS
(CONTiNUED)
NOTES TO THE FiNANCiAL STATEMENTS
(CONTiNUED)
2.
SEgMENTAL ANALYSiS (CONTiNUED)
4.
ExCEPTiONAL iTEMS
BALANCE SHEET
Total assets
Total liabilities
Sport
£000
110,792
(54,650)
Fashion
£000
14,253
(19,645)
Unallocated
£000
15,900
(5,048)
Unallocated assets and liabilities relate to items which are cross divisional including tax, elements of goodwill and bank debt.
OTHER SEGMENT INFORMATION
Capital expenditure:
Property, plant and equipment
Non-current other receivables
Goodwill on acquisition
Depreciation, amortisation and impairments:
Depreciation and amortisation of non-current assets
Impairment of non-current assets
Sport
£000
11,045
339
4,045
10,625
2,840
Fashion
£000
2,620
95
-
1,263
2,642
Total
£000
140,945
(79,343)
Total
£000
13,665
434
4,045
11,888
5,482
The operations and assets of the Group are located almost entirely in the United Kingdom. Accordingly, no geographical analysis is presented.
Loss/(profit) on disposal of non-current assets
Provision for rentals on onerous property leases
Impairment of property, plant and equipment
Lease variation costs (i)
Selling and distribution expenses - exceptional
Impairments of intangible assets
Administrative expenses - exceptional
Note
23
12
11
53 weeks to
02 February 2008
£000
52 weeks to
27 January 2007
£000
3,015
-
2,535
2,854
8,404
-
-
8,404
(1,491)
1,558
1,482
2,250
3,799
4,000
4,000
7,799
(i) Lease variation costs represent the costs of varying onerous leases to create a break option.
5.
REMUNERATiON OF DiRECTORS
3.
PROFiT BEFORE TAx
53 weeks to
02 February 2008
£000
52 weeks to
27 January 2007
£000
Directors’ emoluments:
As non-executive directors
As executive directors
Pension contributions
53 weeks to
02 February 2008
£000
52 weeks to
27 January 2007
£000
61
6,135
41
6,237
58
3,154
32
3,244
The remuneration of the executive directors includes retention payments totalling £4,000,000 (2007: special bonuses totalling £2,000,000) and
provision for future LTIP payments of £333,000 (2007: £nil). Further information on directors’ emoluments is shown in the Directors' Report on
Remuneration and Related Matters on page 38.
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
2008
8,359
268
8,627
4,951
2007
8,678
246
8,924
4,841
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 amortisation of non-current assets:
Depreciation of property, plant and equipment
Owned
Held under finance lease and similar hire purchase contracts
Depreciation of investment property - owned
Amortisation of intangible assets
Amortisation and other amounts written off non-current other receivables - owned
Impairments of non-current assets:
Property, plant and equipment (see note 4)
Intangible assets (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 loss recognised
AFTER CREDITING OTHER OPERATING INCOME:
Rents receivable and other income from property
Foreign exchange gain recognised
106
42
51
27
20
11,674
155
9 -
60 -
523
2,535
-
67,332
923
-
216
-
1,087
525 -
75
15
20
54
22
11,272
179
437
1,482
4,000
63,579
988
2,402
4,916
28
1,730
In addition, fees of £40,000 (2007: £30,000) were incurred and paid by Pentland Group Plc (see note 32) in relation to the non-coterminous
audit of the Group for the purpose of inclusion in their consolidated financial statements.The Group also incurred fees of £35,000 in respect of
tax and accounting advice provided by the Company's auditor, which is included in the cost of acquisitions in the period (see note 11).
Non-current other receivables comprises legal fees and other costs associated with the acquisition of leasehold interests (see note 14).
54
55
NOTES TO THE FiNANCiAL STATEMENTS
(CONTiNUED)
NOTES TO THE FiNANCiAL STATEMENTS
(CONTiNUED)
6.
STAFF NUMBERS AND COSTS (CONTiNUED)
The aggregate payroll costs of these persons were as follows:
9.
iNCOME TAx ExPENSE
Wages and salaries
Social security costs
Other pension costs (see note 28)
53 weeks to
02 February 2008
£000
52 weeks to
27 January 2007
£000
83,890
5,601
374
89,865
76,247
4,703
300
81,250
In the opinion of the Board, the key management as defined under IAS24 'Related Party Disclosures' are the five executive and non-executive
Directors (2007: five). Full disclosure of the directors' remuneration is given in the Directors' Report on Remuneration and Related Matters on
page 38.
COMPANY
The average number of persons employed by the Company (including directors) during the period, analysed by category, was as follows:
CURRENT TAX
UK corporation tax at 30% (2007: 30%)
Adjustment relating to prior periods
Total current tax charge
DEFERRED TAX
Deferred tax (origination and reversal of temporary differences)
Adjustment relating to prior periods
Total deferred tax credit (see note 24)
Income tax expense
RECONCILIATION OF INCOME TAX EXPENSE
53 weeks to
02 February 2008
£000
52 weeks to
27 January 2007
£000
13,229
(251)
12,978
(544)
(1,018)
(1,562)
11,416
6,637
288
6,925
641
(687)
(46)
6,879
53 weeks to
02 February 2008
£000
52 weeks to
27 January 2007
£000
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
8.
FiNANCiAL ExPENSES
On bank loans and overdrafts
Finance charges payable in respect of finance lease and similar hire purchase contracts
Other loans
2008
7,723
248
7,971
4,553
2007
8,392
231
8,623
4,677
53 weeks to
02 February 2008
£000
52 weeks to
27 January 2007
£000
77,186
5,169
351
82,706
70,464
4,530
299
75,293
53 weeks to
02 February 2008
£000
52 weeks to
27 January 2007
£000
278
19
297
139
38
177
53 weeks to
02 February 2008
£000
52 weeks to
27 January 2007
£000
758
6
- 6
764
2,364
42
2,412
Profit before tax multiplied by the standard rate of corporation tax in the UK of 30% (2007: 30%)
Effects of:
Expenses not deductible
Income not taxable
Depreciation and impairment of non-qualifying non-current assets
Loss on disposal of non-qualifying non-current assets
Non qualifying impairment of investment (see note 16)
Reduction in future tax rate
Effect of overseas tax rates
Other differences
Adjustments to tax charge in respect of earlier periods
Income tax expense
10,501
306
-
1,451
586
-
3
(161)
(1)
(1,269)
11,416
5,180
364
(28)
1,090
141
600
-
-
(69)
(399)
6,879
The adjustment relating to prior periods represents a reduction in the provision for rolled-over chargeable gains which were eliminated by
capital losses.
10. EARNiNgS PER ORDiNARY SHARE
BASIC AND DILUTED EARNINGS PER ORDINARY SHARE
The calculation of basic and diluted earnings per ordinary share at 02 February 2008 is based on the profit for the period attributable to equity
holders of the parent of £23,549,000 (2007: £10,388,000) and a weighted average number of ordinary shares outstanding during the 53 weeks
ended 02 February 2008 of 48,263,434 (2007: 48,263,434), calculated as follows:
Issued ordinary shares at beginning and end of period
Weighted average number of ordinary shares during the period - basic and diluted
53 weeks to
02 February 2008
52 weeks to
27 January 2007
48,263,434
48,263,434
48,263,434
48,263,434
56
57
NOTES TO THE FiNANCiAL STATEMENTS
(CONTiNUED)
NOTES TO THE FiNANCiAL STATEMENTS
(CONTiNUED)
10. EARNiNgS PER ORDiNARY SHARE (CONTiNUED)
11.
iNTANgiBLE ASSETS (CONTiNUED)
ADJUSTED BASIC AND DILUTED EARNINGS PER ORDINARY SHARE
Adjusted basic and diluted 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.
Profit for the period attributable to equity holders of the parent
Exceptional items excluding loss/profit on disposal of non-current assets
Tax relating to exceptional items
Note
4
Profit for the period attributable to equity holders of the parent excluding exceptional items
Adjusted basic and diluted earnings per ordinary share
53 weeks to
02 February 2008
£000
52 weeks to
27 January 2007
£000
23,549
5,389
(1,405)
27,533
57.05p
10,388
9,290
(2,107)
17,571
36.41p
11.
iNTANgiBLE ASSETS
GROUP
COST OR VALUATION
At 28 January 2006
Acquisitions
At 27 January 2007
Acquisitions
At 02 February 2008
AMORTISATION AND IMPAIRMENT
At 28 January 2006
Impairment
At 27 January 2007
Charge for the period
At 02 February 2008
NET BOOK VALUE
At 02 February 2008
At 27 January 2007
At 28 January 2006
Goodwill
£000
Brand Licence
£000
Fascia Name
£000
Total
£000
21,724
4,045
25,769
11,109
36,878
1,207
4,000
5,207
-
5,207
31,671
20,562
20,517
-
-
-
4,279
4,279
-
-
-
60
60
-
-
-
5,481
21,724
4,045
25,769
20,869
5,481
46,638
-
-
-
-
-
1,207
4,000
5,207
60
5,267
4,219
5,481
41,371
-
-
-
-
20,562
20,517
Goodwill as at 28 January 2006, was restated in accordance with IFRS 3 'Business Combinations' to reflect fair value adjustments made on
the acquisition of Allsports during the hindsight period.
The brand licence acquired in the period comprises an amount of £4,279,000 for a sub-licence to use the Sergio Tacchini brand in the UK until
2019. This amount is being amortised on a straight-line basis over the licence period. Amortisation of this intangible is included within cost of
sales in the Consolidated Income Statement.
The fascia name acquired in the period of £5,481,000 represents the fair value of the ‘Bank’ fascia name acquired as part of the acquisition
of Bank Stores Holdings Limited and its subsidiaries. The ‘Bank’ fascia name is not being amortised as management consider this asset
to have an indefinite useful economic life. Factors considered by the Board in determining that the useful life of the Bank fascia name is
indefinite include:
• The strength of the Bank fascia name in the branded fashion sector
• The history of the fascia name and that of similar assets in the retail sector
• The commitment of the Group to continue to operate Bank stores separately for the foreseeable future
COMPANY
COST OR VALUATION
At 28 January 2006
Acquisitions
At 27 January 2007
Acquisitions
At 02 February 2008
AMORTISATION AND IMPAIRMENT
At 28 January 2006
Impairment
At 27 January 2007
Charge for the period
At 02 February 2008
NET BOOK VALUE
At 02 February 2008
At 27 January 2007
At 28 January 2006
Goodwill
£000
Brand Licence
£000
Total
£000
15,900
4,045
19,945
-
19,945
-
2,000
2,000
-
2,000
17,945
17,945
15,900
-
-
-
4,279
4,279
-
-
-
60
60
4,219
-
-
15,900
4,045
19,945
4,279
24,224
-
2,000
2,000
60
2,060
22,164
17,945
15,900
ACQUISITION OF TOPGRADE SPORTSWEAR LIMITED
On 07 November 2007, the Group acquired a 51% share of Topgrade Sportswear Limited for a cash consideration of £1,020,000
together with associated fees of £168,475. Topgrade Sportswear Limited is a wholesaler of sports and fashion related footwear, apparel
and accessories.
The goodwill calculation is summarised below:
Acquiree’s net assets at the acquisition date:
Property, plant & equipment
Inventories
Cash and cash equivalents
Trade and other receivables
Interest bearing loans and borrowings
Trade and other payables
Deferred tax liabilities
Net identifiable assets
Minority interest
Goodwill on acquisition
Consideration paid – satisfied in cash
Book and
provisional
fair value
£000
191
2,005
189
1,115
(59)
(1,072)
(37)
2,332
(1,144)
-
1,188
In accordance with IFRS3 ‘ Business Combinations’, the initial accounting on this acquisition will be completed within 12 months from the
date of acquisition.
In the period after acquisition to 02 February 2008, Topgrade Sportswear Limited generated turnover of £2,598,000 and an operating profit
of £126,000.
58
59
NOTES TO THE FiNANCiAL STATEMENTS
(CONTiNUED)
NOTES TO THE FiNANCiAL STATEMENTS
(CONTiNUED)
11.
iNTANgiBLE ASSETS (CONTiNUED)
11.
iNTANgiBLE ASSETS (CONTiNUED)
ACQUISITION OF BANK STORES HOLDINGS LIMITED
On 07 December 2007, the Group acquired the entire share capital of Bank Stores Holdings Limited for a cash consideration of £1 together
with associated fees of £135,015. Bank is a retailer of branded mens and womens fashion footwear, apparel and accessories with 49 retail
outlets across the UK.
The goodwill calculation is summarised below:
IMPAIRMENT TESTS FOR GOODWILL AND INTANGIBLE ASSETS WITH INDEFINITE LIVES
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
Bank store portfolio
GROUP
COMPANY
2008
£000
2,045
924
2,617
14,976
11,109
31,671
2007
£000
2,045
924
2,617
14,976
-
20,562
2008
£000
2,045
924
- -
14,976
- -
17,945
2007
£000
2,045
924
14,976
17,945
Based on the value-in-use calculations performed at 02 February 2008, no impairment charges have been recognised in the Consolidated
Income Statement in the period.
The key assumptions used for value-in-use calculations are set out below:
•
•
•
•
In relation to the Allsports store portfolio, RD Scott store portfolio, Bank 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% (2007: 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 02 February 2008
The discount rate of 9.0% (2007: 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
Intangible assets with indefinite lives
Intangible assets with indefinite lives are tested annually for impairment by comparing the recoverable amount of fascia names to their carrying
value. The recoverable value of individual fascia names is determined based on a ‘royalty relief’ method of valuation, which takes projected
future sales, applies a royalty rate to them and discounts the projected future post tax royalties, to arrive at a net present value. The Group has
used a discount rate of 12.5% to reflect current market assessments of the time value of money and risks specific to the asset, for which the
future cash flow estimates have not been adjusted. Projected future sales are based on financial forecasts approved by the Board covering a
five-year period. Subsequent sales projections assume annual growth of 5% for a further five years and 0% growth thereafter.
Acquiree’s net liabilities at the acquisition date:
Intangible assets
Property, plant & equipment
Inventories
Cash and cash equivalents
Trade and other receivables
Interest bearing loans and borrowings
Trade and other payables
Provisions
Income tax liabilities
Net identifiable liabilities
Goodwill on acquisition
Consideration paid – satisfied in cash
Book value
£000
Fair value
adjustments
£000
Provisional
fair value
£000
-
10,856
9,562
-
3,169
(18,796)
(14,629)
(127)
-
(9,965)
5,481
(2,428)
(1,411)
-
-
-
(1,285)
(990)
(376)
(1,009)
5,481
8,427
8,151
-
3,169
(18,796)
(15,913)
(1,117)
(376)
(10,974)
11,109
135
On the same date, and as part of the sale and purchase agreement, the Company transferred a further £18,499,999 to Bank Stores Holdings
Limited, to enable it to settle the remaining balances due on its interest bearing bank loans and loan notes.
The Board believe that the excess of consideration paid over net identifiable liabilities is best considered as goodwill on acquisition, representing
non-contractual customer loyalty, employee expertise and anticipated future operating synergies. The ‘Bank’ trademark and fascia has been
valued using the 'royalty relief' method of valuation, which takes projected future sales, applies a royalty rate to them and discounts the
projected future post tax royalties, to arrive at a net present value. This amount is included within acquired intangible assets. It is the intention of
the Group to continue to trade under the Bank fascia for the foreseeable future.
The acquiree's net liabilities in the table above, exclude any deferred tax asset in respect of tax losses of £1,447,000 as at the acquisition date
as it is not probable that these losses can be utilised against future profits.
In accordance with IFRS3 ‘Business Combinations’, the initial accounting on this acquisition will be completed within 12 months from the date
of the acquisition.
In the period after acquisition to 02 February 2008, the stores generated revenue of £13,333,000 and an operating profit of £434,000.
If the acquisitions of Bank Stores Holdings Limited and Topgrade Sportswear Limited had been completed on 28 January 2007, Group
revenues and operating profits would have been £639,245,000 and £33,850,000 respectively.
PRIOR PERIOD ACQUISITION
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
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 £4,045,000 initial goodwill arising from this trade and asset purchase was impaired by £2,000,000 at 27 January 2007 to reflect
disappointing trade since acquisition.
60
61
NOTES TO THE FiNANCiAL STATEMENTS
(CONTiNUED)
NOTES TO THE FiNANCiAL STATEMENTS
(CONTiNUED)
12.
PROPERTY, PLANT AND EQUiPMENT
12.
PROPERTY, PLANT AND EQUiPMENT (CONTiNUED)
GROUP
Long leasehold
properties
£000
Improvements to
short leasehold
properties
£000
Computer
equipment
£000
Fixtures and
fittings
£000
Motor vehicles
£000
Total
£000
COMPANY
Long leasehold
properties
£000
Improvements to
short leasehold
properties
£000
Computer
equipment
£000
Fixtures and
fittings Motor vehicles
£000
£000
Total
£000
COST
At 28 January 2006
Additions
Disposals
On acquisition of
trade and assets
At 27 January 2007
Additions
Disposals
On acquisition of subsidiaries
At 02 February 2008
4,445
-
(4,445)
-
-
-
-
-
-
DEPRECIATION AND IMPAIRMENT
At 28 January 2006
Charge for period
Impairments
Disposals
685
73
-
(758)
At 27 January 2007
Charge for period
Impairments
Disposals
At 02 February 2008
NET BOOK VALUE
At 02 February 2008
At 27 January 2007
-
-
-
-
-
-
-
At 28 January 2006
3,760
16,283
475
(2,962)
-
13,796
1,504
(2,341)
784
13,743
10,639
957
111
(2,936)
8,771
1,026
112
(1,876)
8,033
5,710
5,025
5,644
9,258
1,528
(2,502)
-
8,284
1,585
(290)
114
9,693
6,568
1,451
4
(2,391)
5,632
1,360
20
(276)
6,736
2,957
2,652
2,690
87,449
11,634
(16,256)
373
83,200
16,173
(8,609)
7,631
98,395
50,748
8,923
1,367
(11,979)
49,059
9,403
2,403
(7,195)
53,670
44,725
34,141
36,701
555
28
(344)
-
239
145
(176)
89
117,990
13,665
(26,509)
373
105,519
19,407
(11,416)
8,618
297
122,128
310
47
-
(219)
138
40
-
(111)
68,950
11,451
1,482
(18,283)
63,600
11,829
2,535
(9,458)
67
68,506
230
101
245
53,622
41,919
49,040
Included in the net book value of computer equipment is £62,000 (2007: £91,000), fixtures and fittings £481,000 (2007: £735,000) and
motor vehicles £41,000 (2007: £1,000) in respect of assets held under finance leases and similar hire purchase contracts. Depreciation for
the period on these assets was £29,000 (2007: £35,000), £120,000 (2007: £142,000) and £6,000 (2007: £2,000), respectively. The maturity
of obligations under finance lease and similar hire purchase contracts is included in note 20.
Impairment charges of £2,535,000 (2007: £1,482,000) 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 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.
COST
At 28 January 2006
Additions
Disposals
On acquisition of
trade and assets
Transfers to other
group companies
At 27 January 2007
Additions
Disposals
Transfers to other
group companies
At 02 February 2008
DEPRECIATION AND IMPAIRMENT
At 28 January 2006
Charge for period
Impairments
Disposals
Transfers to other
group companies
At 27 January 2007
Charge for period
Impairments
Disposals
Transfers to other
group companies
At 02 February 2008
NET BOOK VALUE
At 02 February 2008
At 27 January 2007
At 28 January 2006
3,760
4,445
-
(4,445)
-
-
-
-
-
-
-
685
73
-
(758)
-
-
-
-
-
-
-
-
-
16,230
247
(2,955)
-
(723)
12,799
1,377
(1,935)
(431)
11,810
10,750
933
55
(2,902)
(688)
8,148
922
76
(1,484)
(55)
7,607
4,203
4,651
5,480
8,794
1,414
(2,437)
-
(96)
7,675
1,517
(228)
(40)
8,924
6,439
1,355
4
(2,335)
(79)
5,384
1,121
1
(219)
(34)
6,253
2,671
2,291
2,355
84,186
9,374
(15,212)
373
(3,047)
75,674
15,278
(7,273)
(2,276)
81,403
50,358
8,414
783
(11,062)
(2,524)
45,969
8,242
1,422
(5,900)
(1,011)
48,722
32,681
29,705
33,828
559
11
(329)
-
-
241
112
(164)
114,214
11,046
(25,378)
373
(3,866)
96,389
18,284
(9,600)
-
(2,747)
189
102,326
317
43
-
(211)
-
149
28
-
(111)
-
66
123
92
242
68,549
10,818
842
(17,268)
(3,291)
59,650
10,313
1,499
(7,714)
(1,100)
62,648
39,678
36,739
45,665
62
63
NOTES TO THE FiNANCiAL STATEMENTS
(CONTiNUED)
NOTES TO THE FiNANCiAL STATEMENTS
(CONTiNUED)
13.
iNVESTMENT PROPERTY
15.
iNTEREST iN JOiNT VENTURES
COST
At 28 January 2006 and 27 January 2007
Additions
At 02 February 2008
DEPRECIATION AND IMPAIRMENT
At 28 January 2006 and 27 January 2007
Charge for period
At 02 February 2008
NET BOOK VALUE
At 02 February 2008
At 28 January 2006 and 27 January 2007
GROUPGGROUP AND COMPANY
£000
-
4,160
4,160
-
9
9
4,151
-
Based on an external valuation, the fair value of investment property as at 02 February 2008 was £4,160,000.
14.
OTHER NON-CURRENT RECEiVABLES
Loan notes receivable from joint venture
Other receivables
GROUP
COMPANY
2008
£000
2,479
2,546
5,025
2007
£000
-
2,753
2,753
2008
£000
2,479
2,322
4,801
2007
£000
-
2,592
2,592
The loan notes receivable from the joint venture earn interest at bank base lending rates plus a margin of 1.5% and are repayable in full over a
five-year period ending in December 2012. The first repayment is due to be made in July 2011 of an amount equal to that which would have
been repaid cumulatively to July 2011 had repayments been made in equal quarterly instalments over the full five-year period and will include
accrued interest at that time. The remaining balance will be paid in equal quarterly instalments to December 2012.
The Board do not consider there to be any significant credit risk in respect of the loan notes receivable from the joint venture as at 02
February 2008.
Other receivables represent lease premia, legal fees and other costs associated with the acquisition of leasehold interests.
Impairment losses of £86,000 (2007: £nil) 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.
On 03 December 2007, the Group acquired 49% of the issued share capital of Focus Brands Limited for an initial cash consideration of
£49,000 together with associated fees of £456,000. Focus Brands Limited is a jointly controlled entity set up for the purposes of acquiring
Focus Group Holdings Limited and its subsidiary companies ('Focus Group'), which are involved in the design, sourcing and distribution of
branded and own brand footwear, apparel and accessories. Focus Brands Limited is jointly controlled with the former shareholders of Focus
Group Holdings Limited.
Deferred consideration may be payable to the vendors in the event that the profit before amortisation and after tax of the Focus Group
exceeds certain thresholds in the period to 31 January 2013. The maximum total deferred consideration that could be payable to the
vendors is approximately £12.4 million. As at 02 February 2008, the Board do not consider it probable that further consideration will be paid.
Accordingly, no further liability has been recognised as at the balance sheet date.
The results and assets and liabilities of the Focus Group are incorporated in the consolidated financial statements using the equity method
of accounting. The interest in the joint venture in the Group's balance sheet is based on the share of the net assets, which are as follows:
Non-current assets
Current assets
Current liabilities
Non-current liabilities
Total net assets
02 February 2008
£000
27 January 2007
£000
592 -
9,778 -
(4,381) -
(5,629) -
360 -
The amount included in the Consolidated Income Statement for the period ended 02 February 2008 in relation to joint ventures is as follows:
£000
Revenue
Loss before tax
Tax
Loss after tax
53 weeks to
02 February 2008
£000
52 weeks to
27 January 2007
£000
3,142 -
(207) -
62 -
(145) -
As at 02 February 2008, the Group had loan notes receivable from Focus Brands Limited to the value of £2,479,000 (2007: £nil).
16.
iNVESTMENTS
COMPANY
COST
At 28 January 2006
Additions
At 27 January 2007
Additions
At 02 February 2008
IMPAIRMENT
At 28 January 2006
Impairments
At 27 January 2007 and 02 February 2008
NET BOOK VALUE
At 02 February 2008
At 27 January 2007
At 28 January 2006
Investments
£000
4,470
1,000
5,470
1,828
7,298
-
(2,000)
(2,000)
5,298
3,470
4,470
The addition to investments in the year comprises £1,323,000 on the acquisition of Bank Stores Holdings Limited (100% owned) and Topgrade
Sportswear Limited (51% owned - see note 11) and £505,000 on the investment in Focus Brands Limited (49% owned joint venture - see note
15). A full list of subsidiaries and jointly controlled entities is shown in Note 33.
64
65
NOTES TO THE FiNANCiAL STATEMENTS
(CONTiNUED)
NOTES TO THE FiNANCiAL STATEMENTS
(CONTiNUED)
17.
iNVENTORiES
19.
CASH AND CASH EQUiVALENTS
Finished goods and goods for resale
58,669
51,469
45,172
47,109
Bank balances and cash floats
11,969
11,230
9,343
11,425
The cost of inventories recognised as expenses and included in cost of sales for the 53 weeks ended 02 February 2008 was £303,092,000
(2007: £280,078,000).
20.
iNTEREST BEARiNg LOANS AND BORROWiNgS
GROUP
2008
£000
2007
£000
COMPANY
2008
£000
2007
£000
GROUP
2008
£000
2007
£000
COMPANY
2008
£000
2007
£000
18.
TRADE AND OTHER RECEiVABLES
GROUP
2008
£000
2007
£000
COMPANY
2008
£000
2007
£000
CURRENT LIABILITIES
Obligations under finance leases and similar hire purchase contracts
Loan notes
CURRENT ASSETS
Trade receivables
Other receivables
Prepayments and accrued income
Amounts owed by other Group companies
The ageing of trade receivables is detailed below:
GROUP
Not past due - 60 days
Past 60 days
GROUP COMPANY
Not past due - 60 days
Past 60 days
Gross
£000
1,951
426
2,377
Gross
£000
584
40
624
2008
Provision
£000
-
(142)
(142)
2008
Provision
£000
-
(6)
(6)
2,235
167
13,497
-
15,899
Net
£000
1,951
284
2,235
Net
£000
584
34
618
477
86
12,449
-
13,012
Gross
£000
469
14
483
Gross
£000
469
14
483
618
5 -
10,657
36,529
477
10,610
11,238
47,809
22,325
2007
Provision
£000
-
(6)
(6)
2007
Provision
£000
-
(6)
(6)
Net
£000
469
8
477
Net
£000
469
8
477
The Board consider that the carrying amount of trade and other receivables approximate their fair value. Concentrations of credit risk with
respect to trade receivables are limited due to the majority of the Group’s customer base being large and unrelated. Therefore, no further
credit risk provision is required in excess of the normal provision for impairment losses, which has been calculated following individual
assessments of credit quality based on historic default rates and knowledge of debtor insolvency or other credit risk. Movement on this
provision is shown below:
At 28 January 2006
Utilised
At 27 January 2007
On acquisition of subsidiaries
At 02 February 2008
GROUP
£000
COMPANY
£000
72
(66)
6
136
142
72
(66)
6
-
6
GROUP
2008
£000
2007
£000
COMPANY
2008
£000
2007
£000
51
83
134
83
11
95
106
192
-
83
83
83
-
95
95
192
NON-CURRENT LIABILITIES
Loan notes
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 21.
BANK FACILITIES
The Group 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 0.75% (2007: 0.95%). The commitment fee on the undrawn element of the facility is 45% of the applicable margin rate.
At 02 February 2008, there were no amounts drawdown on this facility (2007: £nil).
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
GROUP
COMPANY
2008
£000
51
2007
£000
11
2007
£000
2008
£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 10% to 21%. No new finance leases or similar hire purchase contracts were entered into in the period. All of the agreements in place
as at 02 February 2008 were entered into by Topgrade Sportswear Limited prior to its acquisition by the Company on 07 November 2007.
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
2008
£000
Interest
2008
£000
Minimum lease
payments
2007
£000
Principal
2008
£000
Interest
2007
£000
Principal
2007
£000
Within one year
60
(9)
51
12
(1)
11
LOAN NOTES
The maturity of the loan notes is as follows:
GROUP
COMPANY
2008
£000
83
83
-
166
2007
£000
95
96
96
287
2008
£000
83
83
-
166
2007
£000
95
96
96
287
The other classes within trade and other receivables do not contain impaired assets.
Included within prepayments and accrued income for the Group and Company is £217,000 (2007: £259,000) in relation to deferred costs
incurred in setting up the current bank facility (see note 20).
Within one year
Between one and two years
Between two and five years
66
67
The loan notes do not carry interest and are redeemable at par in two equal annual installments commencing 29 December 2008.
NOTES TO THE FiNANCiAL STATEMENTS
(CONTiNUED)
NOTES TO THE FiNANCiAL STATEMENTS
(CONTiNUED)
21.
FiNANCiAL iNSTRUMENTS
21.
FiNANCiAL iNSTRUMENTS (CONTiNUED)
FINANCIAL ASSETS
The Group’s financial assets are all categorised as loans and receivables. Loans and receivables are non-derivative financial assets with fixed
or determinable payments that are not quoted in an active market. The Group’s loans and receivables comprise ‘Trade and other receivables’,
‘Cash and cash equivalents’ and ‘Loan notes receivable from joint venture’ included within ‘Other non-current receivables’ in the balance sheet.
Cash and cash equivalents 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. The currency profile of cash and cash equivalents is shown below:
GROUP
Bank balances and cash floats
Sterling
Euros
US Dollars
COMPANY
Bank balances and cash floats
Sterling
Euros
US Dollars
2008
£000
11,969
6,218
5,067
684
11,969
2008
£000
9,343
3,833
4,826
684
9,343
2007
£000
11,230
10,523
464
243
11,230
2007
£000
11,425
10,718
464
243
11,425
Other financial assets are all denominated in sterling.
FINANCIAL LIABILITIES
The Group’s financial liabilities are all categorised as other financial liabilities. Other financial liabilities are measured at amortised cost.
The Group’s other financial liabilities comprise ‘Interest bearing loans and borrowings’ and ‘Trade and other payables’.
RISK MANAGEMENT
The Group’s operations expose it to a variety of financial risks that include the effects of changes in exchange rates, interest rates, credit risk
and its liquidity position. The Group manages these risks through the use of derivative instruments, which are reviewed on a regular basis.
Derivative instruments are not entered into for speculative purposes.
Interest rate risk
The Group finances its operations by a mixture of retained profits and bank borrowings. Other than a small proportion of finance lease
borrowing at fixed interest rates, the Group’s borrowings are at floating rates, partially hedged by floating rate interest on deposits, reflecting
the seasonality of its cash flow.
Interest rate risk therefore arises from bank borrowings. The Board regularly reviews the interest rate risk of the Group and uses interest rate
swaps to minimise exposure to interest rate fluctuations where appropriate. Given that the facility is not drawndown at certain times of the year,
the Board did not consider that an interest rate swap on the floating rate facility was necessary as at 02 February 2008. The net fair value of
swap liabilities at 02 February 2008 was £nil (2007: £5,000).
The Group has potential bank floating rate financial liabilities on the £70,000,000 revolving credit facility, although there were no drawdowns
from this facility at 02 February 2008 (2007: £nil). 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 0.75% (2007: 0.95%).
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 10% to 21% (see
note 20).
A change of 1% in the average interest rates during the year, applied to the average net cash/debt position of the Group during the period,
would change profit before tax by £6,000 (2007: £252,000). This assumes that all other variables remain unchanged.
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 and Sterling/Dollar options whereby the minimum exchange rate on the purchase of dollars is guaranteed.
As at 02 February 2008, options have been entered into to protect approximately 70% of the U.S. Dollar requirement for the period to July
2008, 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. Hegde accounting is not applied.
As at 02 February 2008, the fair value of these instruments was a liability of £347,000 (2007: £40,000) which has been included within
current liabilities.
A 10% strengthening of sterling relative to the Euro and the U.S. Dollar as at the balance sheet date would have reduced profit before tax
by £523,000 (2007: £68,000). A 10% weakening of sterling relative to the Euro and the U.S. Dollar as at the balance sheet date would have
increased profit before tax by £575,000 (2007: £80,000). These figures assume that all other variables remain unchanged.
Credit risk
Investments of cash surpluses, borrowings and derivative instruments are made through major United Kingdom and European clearing banks,
which must meet minimum credit ratings as required by the Board.
All customers who wish to trade on credit terms are subject to credit verification procedures. Receivable balances are monitored on an ongoing
basis and provision is made for impairment where amounts are not thought to be recoverable (see note 18).
Liquidity risk
The Group manages its cash and borrowing requirement to minimise net interest expense, whilst ensuring that the Group has sufficient liquid
resources to meet the operating needs of the business. The forecast cash and borrowing profile of the Group is monitored on an ongoing
basis, to ensure that adequate headroom remains under committed borrowing facilities.
All of the Groups financial liabilities as at 02 February 2008 and 27 January 2007 have a contractual maturity date falling within a period of one
year from the balance sheet date.
As at 02 February 2008, there are undrawn committed facilities with a maturity profile as follows:
Expiring in more than three years but no more than four years
Expiring in more than four years but no more than five years
The commitment fee on these facilities is 0.34% (2007: 0.43%).
FAIR VALUES
The fair values together with the carrying amounts shown in the balance sheet are as follows:
2008
£000
70,000 -
-
70,000
2007
£000
70,000
70,000
Trade and other receivables
Cash and cash equivalents
Finance lease and similar hire purchase contracts
Loan notes
Trade and other payables - current
Trade and other payables - non-current
Unrecognised gains
The comparatives at 27 January 2007 are as follows:
Trade and other receivables
Cash and cash equivalents
Finance lease and similar hire purchase contracts
Loan notes
Interest rate swap liabilities
Trade and other payables - current
Trade and other payables - non-current
Unrecognised gains
Note
18
19
20
20
22
22
Note
18
19
20
20
22
22
GROUP
COMPANY
Carrying amount
2008
£000
15,899
11,969
(51)
(166)
(80,389)
(11,839)
(64,577)
Fair value
2008
£000
Carrying amount
2008
£000
Fair value
2008
£000
15,899
11,969
(51)
(152)
(80,389)
(11,839)
(64,563)
14
47,809
9,343
-
(166)
(62,177)
(17,939)
47,809
9,343
-
(152)
(62,177)
(17,939)
(23,130)
(23,116)
14
GROUP
COMPANY
Carrying amount
2007
£000
13,012
11,230
(11)
(287)
-
(58,849)
(8,189)
(43,094)
Fair value
2007
£000
Carrying amount
2007
£000
Fair value
2007
£000
13,012
11,230
(11)
(257)
(5)
(58,849)
(8,189)
22,325
11,425
-
(287)
-
(54,838)
(14,588)
22,325
11,425
-
(257)
(5)
(54,838)
(14,588)
(43,069)
(35,963)
(35,938)
25
25
In the opinion of the Board, the fair value of the Groups financial assets and liabilities as at 02 February 2008 and 27 January 2007 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.
68
69
NOTES TO THE FiNANCiAL STATEMENTS
(CONTiNUED)
NOTES TO THE FiNANCiAL STATEMENTS
(CONTiNUED)
21.
FiNANCiAL iNSTRUMENTS (CONTiNUED)
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 6.0% (2007: 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.
22.
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
23.
PROViSiONS
GROUP
COMPANY
2008
£000
2007
£000
2008
£000
2007
£000
33,818
36,349
10,222
80,389
11,839
-
11,839
26,937
20,555
11,357
26,018
28,963
7,196
25,052
19,137
10,649
58,849
62,177
54,838
8,189
-
11,357
6,582
8,006
6,582
8,189
17,939
14,588
Provisions relate to costs on onerous property leases and represent anticipated minimum contractual lease costs less potential sublease
income for vacant properties. For loss making trading stores, provision is made to the extent that the lease is deemed to be onerous. The
provisions are discounted where the effect is material. The discount rate used is 9.0% (2007: 9.0%) (see note 11).
24.
DEFERRED TAx ASSETS AND LiABiLiTiES
RECOGNISED DEFERRED TAX ASSETS AND LIABILITIES
Deferred tax assets and liabilities are attributable to the following:
GROUP
Assets 2008
£000
Assets 2007
£000
Liabilities 2008
£000
Liabilities 2007
£000
Net 2008 Net 2007
£000
£000
Property, plant and equipment
Chargeable gains
held over/rolled over
Lease variations
General accruals
-
-
(603)
(830)
Tax (assets)/liabilities
(1,433)
-
-
(588)
(50)
(638)
1,147
332
-
-
1,479
1,049
1,160
-
-
2,209
1,147
1,049
332
(603)
(830)
1,160
(588)
(50)
46
1,571
MOVEMENT IN DEFERRED TAX DURING THE PERIOD
GROUP
Balance at 28 January 2006
Recognised in income
Balance at 27 January 2007
On acquisition
Recognised in income
Balance at 02 February 2008
Property, plant
and equipment
Chargeable
gains held over/
rolled over
Lease variations
and other items
Tax losses
Total
2,045
(996)
1,049
37
61
1,147
-
1,160
1,160
-
(828)
332
(328)
(310)
(638)
-
(795)
(1,433)
(100)
100
-
-
-
-
1,617
(46)
1,571
37
(1,562)
46
RECOGNISED DEFERRED TAX ASSETS AND LIABILITIES
Deferred tax assets and liabilities are attributable to the following:
COMPANY
Assets 2008
£000
Assets 2007
£000
Liabilities 2008
£000
Liabilities 2007
£000
Net 2008 Net 2007
£000
£000
Property, plant and equipment
Chargeable gains
held over/rolled over
Lease variations
General accruals
Tax (assets)/liabilities
-
-
(470)
(830)
(1,300)
-
-
(588)
(50)
(638)
1,278
332
-
-
1,610
968
1,160
-
-
2,128
1,278
968
332
(470)
(830)
310
1,160
(588)
(50)
1,490
GROUP
Balance at 27 January 2007
Provisions created during the period
Provisions acquired in the period
Provisions released during the period
Provisions utilised during the period
Balance at 02 February 2008
COMPANY
Balance at 27 January 2007
Provisions created during the period
Provisions released during the period
Provisions utilised during the period
Balance at 02 February 2008
Current
£000
Non-current
£000
Total
£000
2,130
1,995
144
(899)
(1,477)
1,893
4,829
1,516
993
(2,612)
-
6,959
3,511
1,137
(3,511)
(1,477)
4,726
6,619
Current
£000
Non-current
£000
Total
£000
1,531
1,636
(785)
(944)
1,438
1,707
1,644
-
-
3,238
3,280
(785)
(944)
3,351
4,789
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 28 January 2006
Recognised in income
Balance at 27 January 2007
Recognised in income
Balance at 02 February 2008
25.
CAPiTAL AND RESERVES
ISSUED ORDINARY SHARE CAPITAL
GROUP AND COMPANY
At 27 January 2007 and 02 February 2008
1,951
(983)
968
310
1,278
-
1,160
1,160
(828)
332
Total
1,656
(166)
1,490
(1,180)
(295)
(343)
(638)
(662)
(1,300)
310
Number of
ordinary shares
thousands
48,263
Ordinary
share capital
£000
2,413
70
71
The total number of authorised ordinary shares was 62,150,000 (2007: 62,150,000) with a par value of 5p per share (2007: 5p per share).
All issued shares are fully paid.
NOTES TO THE FiNANCiAL STATEMENTS
(CONTiNUED)
NOTES TO THE FiNANCiAL STATEMENTS
(CONTiNUED)
25.
CAPiTAL AND RESERVES (CONTiNUED)
RECONCILIATION OF MOVEMENT IN CAPITAL AND RESERVES
GROUP
Balance at 28 January 2006
Total recognised income and expense
Dividends to shareholders (see note 26)
Balance at 27 January 2007
Minority interest on acquisition
Total recognised income and expense
Dividends to shareholders (see note 26)
Balance at 02 February 2008
Ordinary
share capital
£000
2,413
-
-
2,413
-
-
-
2,413
RECONCILIATION OF MOVEMENT IN CAPITAL AND RESERVES
COMPANY
Balance at 28 January 2006
Total recognised income and expense
Dividends to shareholders (see note 26)
Balance at 27 January 2007
Total recognised income and expense
Dividends to shareholders (see note 26)
Balance at 02 February 2008
Share
premium
£000
10,823
-
-
10,823
-
-
-
10,823
Ordinary
share capital
£000
2,413
-
-
2,413
-
-
2,413
Retained
earnings
£000
41,357
10,388
(3,379)
48,366
-
23,549
(3,524)
68,391
Share
premium
£000
10,823
-
-
10,823
-
-
10,823
Minority
interest
£000
-
-
-
-
1,144
38
-
1,182
Retained
earnings
£000
41,620
12,210
(3,379)
50,451
24,387
(3,524)
71,314
Total
equity
£000
54,593
10,388
(3,379)
61,602
1,144
23,587
(3,524)
82,809
Total
equity
£000
54,856
12,210
(3,379)
63,687
24,387
(3,524)
84,550
The capital structure of the Group consists of equity attributable to equity holders of the parent, comprising issued share capital, share
premium and retained earnings. The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market
confidence and to sustain future development of the business. There were no changes to the Group’s approach to capital management during
the period.
Full disclosure on the rights attached to shares is provided in the Directors' Report on page 22.
26.
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.
6.00p per ordinary share (2007: 4.80p)
53 weeks to
02 February 2008
£000
52 weeks to
27 January 2007
£000
2,896
2,317
27.
COMMiTMENTS
GROUP
(i) Capital commitments
During the period ended 02 February 2008 the Group entered into contracts to purchase property, plant and equipment as follows:
Contracted
02 February 2008
£000
27 January 2007
£000
4,072
2,320
These commitments are expected to be settled in the following financial period.
(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:
Within one year
Later than one year and not later than five years
After five years
Land and
buildings
2008
£000
74,072
271,984
294,301
640,357
Plant and
equipment
2008
£000
818
820
-
1,638
Land and
buildings
2007
£000
57,615
213,055
262,148
532,818
Plant and
equipment
2007
£000
828
154
-
982
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 02 February 2008 are as follows:
Within one year
Later than one year and not later than five years
After five years
2008
£000
614
2,293
3,794
6,701
2007
£000
156
621
394
1,171
COMPANY
(i) Capital commitments
During the period ended 02 February 2008 the Company entered into contracts to purchase property, plant and equipment as follows:
Contracted
02 February 2008 27 January 2007
£000
£000
3,730
2,070
DIVIDENDS ON ISSUED ORDINARY SHARE CAPITAL
These commitments are expected to be settled in the following financial period.
Final dividend of 4.80p (2007: 4.60p) per qualifying ordinary share paid in respect of prior period,
but not recognised as a liability in that period
Interim dividend of 2.50p (2007: 2.40p) per qualifying ordinary share paid in respect of current period
53 weeks to
02 February 2008
£000
52 weeks to
27 January 2007
£000
2,317
1,207
3,524
2,221
1,158
3,379
(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:
Within one year
Later than one year and not later than five years
Later than one year and not later than five years
Land and
buildings
2008
£000
52,322
187,095
188,675
428,092
Plant and
equipment
2008
£000
598
592
-
1,190
Land and
buildings
2007
£000
51,801
192,244
228,628
472,673
Plant and
equipment
2007
£000
798
113
-
911
72
73
NOTES TO THE FiNANCiAL STATEMENTS
(CONTiNUED)
NOTES TO THE FiNANCiAL STATEMENTS
(CONTiNUED)
27.
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 02 February 2008 are as follows:
30.
RELATED PARTY TRANSACTiONS AND BALANCES
Transactions and balances with related parties during the period were as follows:
RELATED PARTY - PENTLAND GROUP PLC
Pentland Group Plc owns 57% of the issued ordinary share capital of The John David Group Plc.
Within one year
Later than one year and not later than five years
Later than one year and not later than five years
2008
£000
535
1,994
3,414
5,943
2007
£000
156
621
394
1,171
28.
PENSiON SCHEMES
The Group only operates defined contribution pension schemes. The pension charge for the period represents contributions payable by
the Group of £333,000 (2007: £268,000) in respect of employees, and £41,000 (2007: £32,000) in respect of directors. The amount owed
to the schemes at the period end was £42,000 (2007: £38,000).
29.
ANALYSiS OF NET CASH
GROUP
Cash at bank and in hand
CASH AND CASH EQUIVALENTS
Interest bearing loans and borrowings:
Current
Loan notes
Finance leases and similar hire purchase contracts
COMPANY
Cash at bank and in hand
CASH AND CASH EQUIVALENTS
Interest bearing loans and borrowings:
Loan notes
At 27 January
2007
£000
On acquisition
of subsidiary
£000
Cash flow
£000
At 02 February
2008
£000
11,230
11,230
-
(287)
(11)
10,932
189
189
(18,796)
-
(59)
(18,666)
550
550
18,796
121
19
19,486
11,969
11,969
-
(166)
(51)
11,752
At 27 January
2007
£000
Cash flow
£000
At 02 February
2008
£000
11,425
11,425
(2,082)
(2,082)
(287)
121
11,138
(1,961)
9,343
9,343
(166)
9,177
GROUP
Concession fee income
Purchases of inventory for retail
Other income
Payments (gross including VAT)
Receipts (gross including VAT)
Value of
transactions
2008
£000
(147)
(26,238)
203
(30,897)
239
(Payable)
/receivable at
period end
2008
£000
Value of
transactions
2007
£000
(Payable)
/receivable at
period end
2007
£000
-
-
-
-
-
(504)
(26,333)
64
(29,588)
76
-
-
-
-
-
Trade payables (gross including VAT)
-
(1,574)
-
(2,573)
RELATED PARTY - PENTLAND GROUP PLC
COMPANY
Value of
transactions
2008
£000
(Payable)
/receivable at
period end
2008
£000
Value of
transactions
2007
£000
(Payable)
/receivable at
period end
2007
£000
Concession fee income
Purchase of inventory for retail
Other income
Payments (gross including VAT)
Receipts (gross including VAT)
-
(23,930)
157
(27,953)
184
-
-
-
-
-
Trade payables (gross including VAT)
-
(1,315)
(504)
(24,461)
64
(26,975)
76
(2,281)
-
-
-
-
-
-
Unless otherwise stated the amounts above are stated net of VAT.
RELATED PARTY - ATHLEISURE LIMITED
COMPANY
Value of
transactions
2008
£000
(Payable)
/receivable at
period end
2008
£000
Value of
transactions
2007
£000
(Payable)
/receivable at
period end
2007
£000
Amounts owed to The John David Group Plc
-
6,638
-
6,638
RELATED PARTY - RD SCOTT LIMITED
COMPANY
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
2008
£000
(Payable)
/receivable at
period end
2008
£000
Value of
transactions
2007
£000
(Payable)
/receivable at
period end
2007
£000
-
-
-
537
-
-
-
-
-
9,245
(8,360)
1,000
1,709
134
-
-
-
-
-
4,600
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.
74
75
NOTES TO THE FiNANCiAL STATEMENTS
(CONTiNUED)
NOTES TO THE FiNANCiAL STATEMENTS
(CONTiNUED)
30.
RELATED PARTY TRANSACTiONS AND BALANCES (CONTiNUED)
RELATED PARTY - JOHN DAVID SPORTS FASHION (IRELAND) LIMITED
COMPANY
Value of
transactions
2008
£000
(Payable)
/receivable at
period end
2008
£000
Value of
transactions
2007
£000
(Payable)
/receivable at
period end
2007
£000
Sale of inventory
Other income
Store assets legally transferred to
John David Sports Fashion (Ireland) Limited
1,725
514
2,339
-
-
-
Amounts owed to The John David Group Plc
-
2,136
-
-
-
-
-
-
-
-
On 26 November 2007, the Company legally transferred the trade and assets of 5 stores to John David Sports Fashion (Ireland) Limited.
The consideration equated to the book value of the assets at this time.
RELATED PARTY - FOCUS BRANDS LIMITED
GROUP
Purchase of inventory
Rental income
Interest income
Payments (gross including VAT)
Trade payables (gross including VAT)
Loan notes receivable
COMPANY
Purchase of inventory
Rental income
Interest income
Payments (gross including VAT)
Trade payables (gross including VAT)
Loan notes receivable
Value of
transactions
2008
£000
(Payable)
/receivable at
period end
2008
£000
Value of
transactions
2007
£000
(Payable)
/receivable at
period end
2007
£000
(714)
54
28
(1,475)
-
-
-
-
-
-
(123)
2,479
-
-
-
-
-
-
-
-
-
-
-
-
Value of
transactions
2008
£000
(Payable)
/receivable at
period end
2008
£000
Value of
transactions
2007
£000
(Payable)
/receivable at
period end
2007
£000
(708)
54
28
(1,448)
-
-
-
-
-
-
(124)
2,479
-
-
-
-
-
-
-
-
-
-
-
-
31.
CONTiNgENT LiABiLiTY
The Group has provided a guarantee on an interest bearing loan of £6,500,000 in Focus Brands Limited. This guarantee has been provided in
conjunction with the other shareholders on a several basis with each shareholder guaranteeing the loan in line with their relative shareholding.
As at 02 February 2008, the Group and Company's contingent liability on this loan was £3,185,000 (2007: £nil).
32.
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, 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 £24,387,000
(2007: £12,210,000). 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 or online at www.thejohndavidgroup.com.
33.
PRiNCiPAL SUBSiDiARY UNDERTAKiNgS AND JOiNTLY CONTROLLED ENTiTiES
The following companies were the principal subsidiary undertakings and jointly controlled entities of The John David Group Plc at 02
February 2008.
Place of registration
Nature of business
and operation
Ownership
interest
Voting rights
interest
NAME OF SUBSIDIARY
John David Sports Fashion
(Ireland) Limited
John David Sports Limited
JD Sports Fashion Group Limited
JD Sports Limited
Athleisure Limited
First Sport Limited*
Allsports Retail Limited*
Allsports.co.uk Limited*
The Sports Shop (Fife) Limited*
Jog Shop Limited*
RD Scott Limited
Bank Stores Holdings Limited
Bank Stores Financing Limited*
Bank Fashion Limited*
Hoss Ventures Limited*
Hallco 1521 Limited
Topgrade Sportswear Limited*
Hallco 1531 Limited*
Topgrade Trading Limited*
Ireland
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
NAME OF JOINTLY CONTROLLED ENTITY
Retailer of sports clothing and footwear
Dormant
Dormant
Dormant
Intermediate holding company
Dormant
Dormant
Dormant
Dormant
Dormant
Retailer of fashion clothing and footwear
Intermediate holding company
Intermediate holding company
Retailer of fashion clothing and footwear
Dormant
Intermediate holding company
Wholesaler of sports clothing and footwear
Dormant
Dormant
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
51%
51%
51%
51%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
51%
51%
51%
51%
The figures highlighted above for 2008 are based on the period post acquisition from 03 December 2007 to 02 February 2008.
Focus Brands Limited
UK
Wholesaler of sports clothing and footwear
49%
50%
RELATED PARTY - BANK STORES HOLDINGS LIMITED
COMPANY
Value of
transactions
2008
£000
(Payable)
/receivable at
period end
2008
£000
Value of
transactions
2007
£000
(Payable)
/receivable at
period end
2007
£000
Amounts owed to The John David Group Plc
-
18,510
-
-
The figures highlighted above for 2008 are based on the period post acquisition from 07 December 2007 to 02 February 2008.
There have been no transactions in the year (2007: £nil) and there are no balances outstanding (2007: £nil) with the other subsidiary
undertakings of the Company, as listed in note 33.
*Indirect holding of the Company.
76
77
FiVE YEAR RECORD
CONSOLiDATED iNCOME STATEMENTS
PREPARED UNDER UK GAAP
Year ended
31 January 2004
£000
52 weeks to
29 January 2005
£000
52 weeks to
29 January 2005
£000
52 weeks to
28 January 2006
£000
PREPARED UNDER ADOPTED IFRSs
52 weeks to
53 weeks to
27 January 2007 02 February 2008
£000
£000
REVENUE
Cost of sales
458,073
(249,379)
471,656
(256,504)
471,656
(256,504)
490,288
(263,608)
530,581
(278,331)
592,240
(300,813)
208,694
215,152
215,152
226,680
252,250
291,427
(186,117)
(185,437)
(186,230)
(192,730)
(209,270)
(222,720)
(1,366)
(7,987)
(8,603)
(11,206)
(3,799)
(8,404)
(187,483)
(193,424)
(194,833)
(203,936)
(213,069)
(231,124)
(13,503)
(13,589)
(12,777)
(15,438)
(17,409)
(25,774)
Administrative expenses
(14,115)
(14,325)
(612)
(736)
(736)
(13,513)
953
7,759
17,098
(9,339)
-
7,759
-
7,759
-
304
(4,461)
3,602
(1,341)
2,261
2,261
-
(1,777)
(17,215)
1,609
7,138
20,121
(12,983)
-
7,138
-
7,138
-
230
(3,718)
3,650
(1,302)
2,348
2,348
-
(4,000)
(21,409)
1,730
19,502
27,301
(7,799)
19,502
-
19,502
-
177
(2,412)
17,267
(6,879)
10,388
10,388
-
-
(25,774)
1,086
35,615
44,019
(8,404)
-
35,615
-
35,615
(145)
297
(764)
35,003
(11,416)
23,587
23,549
38
953
8,356
17,891
(8,723)
(812)
8,356
(1,569)
6,787
-
304
(4,461)
2,630
(1,293)
1,337
1,337
-
GROSS PROFIT
Selling and distribution
expenses - normal
Selling and distribution
expenses - exceptional
Selling and distribution
expenses
Administrative expenses
- normal
Administrative expenses
- exceptional
Other operating income
OPERATING PROFIT
Before exceptional items
and goodwill amortisation
Exceptional items
Goodwill amortisation
OPERATING PROFIT
Loss on disposal of fixed assets
638
7,734
10,498
(1,978)
(786)
7,734
(1,095)
OPERATING PROFIT
BEFORE FINANCING AND SHARE
OF RESULTS OF JOINT VENTURE 6,639
-
Share of results of joint venture
100
Financial income
(4,634)
Financial expenses
2,105
(1,457)
648
648
-
PROFIT BEFORE TAX
Income tax expense
PROFIT FOR THE PERIOD
Attributable to equity holders
of the parent
Attributable to minority interest
BASIC EARNINGS PER
ORDINARY SHARE
ADJUSTED BASIC EARNINGS
PER ORDINARY SHARE (I)
DIVIDENDS PER
ORDINARY SHARE (II)
1.39p
2.85p
4.81p
4.92p
21.52p
48.79p
6.21p
18.39p
18.62p
25.32p
36.41p
57.05p
6.50p
6.60p
6.60p
6.90p
7.20p
8.50p
(i) Adjusted basic earnings per ordinary share is based on earnings before certain exceptional items and amortisation (see note 10).
(ii) Represents dividends declared for the year. Under Adopted IFRSs 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 (52 WEEKS)
FINAL RESULTS ANNOUNCED
15 APRIL 2008
09 MAY 2008
MAY 2008
26 JUNE 2008
04 AUGUST 2008
SEPTEMBER 2008
31 JANUARY 2009
APRIL 2009
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
Equiniti Limited
Aspect House
Spencer Road
Lancing
West Sussex BN99 6DA
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
www.scottsonline.co.uk
OTHER WEBSITES
www.bankfashion.co.uk
The Board wishes to express its thanks to the marketing department for the in-house production of this Annual Report and Accounts.
78
79