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Released: 27/05/2009
Part 2 : For preceding part double click [nRn1a8468S]
The Directors have made judgements regarding the probability
that their future taxable profits will be available against
which the unused tax losses and unused tax credits can be
utilized. Based on this assessment the Group has not
recognised deferred tax assets in respect of unused tax
losses, property, plant and equipment and other short term
timing differences but has recognised a deferred tax asset in
respect of the pension scheme.
Principal Risks and Uncertainties
Jessops operates in a very competitive retail environment and
there is an on-going risk that sales may be lost to rival
businesses. The general economic environment and market
condition for the products and services are also risks common
to all retailers. The Directors believe that one of the key
differentiators of the Jessops business model is customer
service and they seek to build on this to set the Group apart
from its competitors.
The Strategic Review held during 2007 and the restructuring
program carried out in the period to 29 March 2009 addressed
the fundamental issues facing the Group and the strategy
derived has re-positioned Jessops as a true multi-channel
retailer, with a strong presence in the digital printing
services market in addition to continued leadership in digital
cameras. This will be supported by market leading customer
service.
2. Non-recurring items
The restructuring program focused on the closure of 21 stores
and the reduction of costs in our Support Centre. This
exercise was completed during the period and resulted in store
closure costs of £3,290,000, costs of restructuring of
£772,000 and redundancy costs of £361,000 being charged in the
period to 29 March 2009.
The store closure cost is a net value after accounting for the
profit on disposal of freehold property, the asset write off
for closed stores, the provision for onerous leases and for
the cost of surrendering leases. The provision for onerous
leases includes costs for the balance of the 81 stores that
were closed during the Strategic Review of 2007 and for which
the Group has an ongoing liability.
The costs of restructure relate to costs that have been
incurred by the Group to facilitate the implementation of the
store closure and the Support Centre redundancy program.
The non-recurring costs for the year ended 30 September 2008
are outlined in detail in note 3 in the Group financial
statements for that period. The £1,245,000 non-recurring costs
in the six months to 30 March 2008 comprise store closure
costs of £720,000 and redundancy costs of £525,000.
Operating expenses Total
£'000 £'000
Restructuring costs 772 772
Redundancy costs 361 361
Store closure costs 3,290 3,290
Total non-recurring items before tax 4,423 4,423
3. Segmental reporting
The Group has one main business segment, which is retail,
and one main geographical segment, which is the United
Kingdom. The business segment reporting format reflects the
Group's management and internal reporting structure.
4. Financial income and expense - recognised in profit and
loss
29 March 2009 30 March 2008 30 September 2008
£000 £000 £000
Finance income:
Expected return on pension scheme assets (600) (825) (1,631)
Interest income on bank deposits (19) (70) (78)
Net gain on derecognition of financial liability - (86)
Finance income (619) (895) (1,795)
Finance expenses:
Amortisation of finance fees - 3,826 -
Total finance fees - 3,826 -
Interest expense on financial liabilities measured at
amortised cost 2,497 3,219 13,883
Interest on pension scheme liabilities 800 850 1,674
Finance expenses 3,297 7,895 15,557
Net finance costs 2,678 7,000 13,762
In accordance with IAS39 'Financial Instruments' the finance costs associated
with the HSBC facilities (see note 9) form part of the overall effective
interest rate.
5. Income tax expense
The Group's consolidated effective tax rate in respect of
continuing operations for the six months ended 29 March 2009
was Nil% (for the year ended 30 September 2008: credit of 0.8
%; for the period ended 30 March 2008: charge of 0.8%)
6. Write down of Inventory
During the period ended 29 March 2009, the Group released a
writedown of finished goods inventory of £1,693,000 (period
ended 30 March: £Nil) on disposal of the related inventory.
7. Property, plant and equipment
During the period ended 29 March 2009 the Group acquired
assets with a cost of £905,000 (period ended 30 March 2008:
£212,000).
Assets with a carrying value of £399,000 were disposed during
the period ended 29 March 2009 (period ended 30 March 2008:
£227,000) resulting in a profit on disposal of £577,000
(period ended 30 March 2008: loss of £165,000). An impairment
charge of £983,000 was recognised against assets held in
stores which have been closed in the period, £296,000 against
other fixed assets. This is shown as part of Non-recurring
items (note 2).
As at 29 March 2009, the Group had commitments to purchase
property, plant and equipment of £395,000 (March 2008: £Nil).
8. Provisions
The provisions shown below relate to the future costs of
estimated rent, rates, lease premiums and dilapidations up
to the anticipated point of disposal of the properties and
they have been calculated to reflect the deterioration in
the retail property market.
29 March 30 September
2009 2008
£000 £000
Balance at beginning of period (2,857) (3,235)
Provisions used in year 1,314 3,515
P&L charge in year (2,394) (3,137)
Balance at end of period (3,937) (2,857)
£000 £000
Due within 1 year (3,332) (2,857)
Due after 1 year (605) -
Balance at end of period (3,937) (2,857)
9. Bank overdrafts and loans
29 March 2009 30 March 2008 30 September 2008
£000 £000 £000
Current:
Bank overdraft 1,204 - 5,420
Bank loans - 52,260 2,786
1,204 52,260 8,206
Obligations under HP and finance lease 1,414 1,450 1,414
2,618 53,710 9,620
Non current:
Bank loans 58,560 - 54,861
Obligations under HP and finance lease 585 1,995 1,313
59,145 1,995 56,174
Total bank overdraft and loans 61,763 55,705 65,794
The maturity profile of the Group's non-current bank loans is as follows:
29 March 2009 30 March 2008 30 September 2008
£000 £000
Expiring between 1 and 2 years 7,000 - 4,190
Expiring between 2 and 5 years 51,560 - 50,671
58,560 - 54,861
The bank facilities are secured by fixed and floating charges over the Group's
assets.
The Group also has access to an overdraft facility the level of which varies
dependant on the working capital needs of the business. Interest is charged at
2.25% over LIBOR on amounts drawn down under this facility. The facility is
repayable on demand.
On 30 August 2007 the Group entered into a £60,000,000 loan facility split into
Facility A for £20,000,000 and Facility B for £40,000,000.The facilities were
due to expire on 31 December 2008.
On 26 September 2008 the Group renegotiated the unexpired portion of these
facilities such that they are repayable on 31 December 2011.
Loan repayments of £3,000,000 and £4,000,000 falling due on 31 May 2009 and 2010
respectively have been waived by the bank, and are now repayable in September
2010. A further £5,000,000 is due for repayment in May 2011.
Interest rate margins payable above LIBOR have also been varied. A comparison of
the margin rates is shown below:
Original Agreement Agreement
30 August Extension
2007 26 September 2008
% %
Facility A 3.00 2.50
Facility B - Cash 2.00 2.00
- Deferred 3.25 2.00
interest
5.25 4.00
The deferred interest is rolled up and is payable on the 31 December 2011.
On renegotiation of the borrowing facilities in September 2008 the terms of the
facility were substantially modified. This is on the basis that the present
value of the cash flows under the new facility, discounted using the original
effective interest rate, were at least 10% different to the discounted present
value of the remaining cash flows of the facility being replaced. Accordingly
the transaction has been accounted for as an extinguishment of the old facility,
resulting in a gain of £86,000 being recorded within finance income in the
income statement (note 4). The £86,000 represents the difference between the
book value of the old facility and the fair value of the new facility.
The £7,000,000 deferred refinancing fee arising in respect of the old facility
has been reduced to £5,000,000, with payment now deferred until 31 December
2011. The reduction of the deferred refinancing fee was a factor considered by
the Directors in assessing the fair value of the new facilities and has been
included in the calculation of the gain disclosed above.
The assessment of the fair value of the new facilities at £57,000,000 is a
source of estimation uncertainty. In the absence of readily observable market
data, the directors have considered the underlying effective interest rate for
reasonableness. A reduction in the fair value of the loan would have resulted in
a higher gain on derecognition on extinguishment of the previous facility and a
higher interest rate expense (measured on an effective interest method) over the
remaining term of the debt.
Two warrants over un - issued ordinary shares representing 10% of Jessops issued
share capital were issued in reference to the original facility agreement of 30
August 2007. It was agreed that on signing the extension to the agreement on 26
September 2008 to issue warrants over a further 5% over the issued share capital
of the Company to HSBC Bank plc. HSBC Bank Plc now hold warrants over 15% of the
issued share capital.
The fair value of the service received in connection with the warrants formed
part of the overall fees payable in relation to the facilities provided.
Consequently the fair value of the warrants was estimated directly, rather than
by reference to the fair value of the services provided. The directors consider
that the warrants, in respect of which there are no vesting conditions, relate
to the provision of the facility itself and the fair value has therefore been
expensed immediately. The fair value charge in the year ended 30 September 2008
was £76,000.
10. Dividends
The directors do not propose an interim dividend for the
period ended 29 March 2009 (for the period ended 30 March
2008: £nil).
11. Pension Scheme Obligations
The net liability for defined benefit obligations has
increased from £3,708,000 at 30 September 2008 to £5,110,000
at 29 March 2009. The increase of £1,402,000 comprises
contributions of £900,000, a charge to the income statement of
£254,000 and a net actuarial loss of £2,000,000. The actuarial
loss has arisen in part due to changes in the principal
assumptions used in the valuation of the Scheme's assets and
liabilities over those used at 30 September 2008. The
assumptions subject to change are the discount rate of 6.7%
(September 2008: 6.8%), inflation rate of 3.3% (September
2008: 3.5%) and the rate of increase in pensions payment of
3.3% (September 2008: 3.5%)
12. Related party transactions
There have been no related party transactions that have taken
place in the first six months of the current financial year
that have materially affected the financial position
performance of the group during that period and there have
been no changes in the related party transactions described in
the last annual report that could do so.
13. Loss per share
Basic loss per share is calculated by dividing the loss for
the period attributable to equity shareholders by the weighted
average number of ordinary shares in issue during the period.
For diluted loss per share, the weighted average number of
ordinary shares in issue is adjusted to assume conversion of
all dilutive potential ordinary shares. These represent share
options granted to employees where the exercise price is less
than the average market price of the Company's ordinary shares
during the period. The share options have no dilutive effect
on any periods covered by these condensed financial
statements.
Weighted average numbers of shares:
Period
ended 30 March Year ended 30 September 2008
Period ended 29 March 2008
2009
'000 '000 '000
Weighted average number of shares in issue during theperiod 102,871 102,871 102,871
In addition to basic loss per ordinary share, an additional adjusted loss per
share has been provided below which excludes non-recurring costs (net of tax).
The loss used for the basic and additional calculations, together with the
resultant basic loss per share, is shown below:
Period
ended 29 March Period ended 30 March Year ended 30 September 2008
2009 2008
£'000 £'000 £'000
Loss for the period (13,055) (11,235) (50,231)
Non-recurring costs net of tax 4,423 1,245 30,721
Finance fees post tax - 3,796 -
Loss for the period excluding non-recurring costs and (8,632) (6,194) (19,510)
finance fees
Loss per ordinary share - basic and diluted (12.67)p (10.9)p (48.8)p
Adjusted loss per ordinary share - basic and diluted (8.39)p (6.0)p (18.9)p
14. Analysis of movement in reserves
Share Share Retained Exchange Total
Capital premium earnings Gains Equity
£'000 £'000 £'000 £'000 £'000
As at 1October 2007 2,571 89,161 (59,311) (16) 32,405
Loss for the period - - (11,235) - (11,235)
Employee share option scheme - - 121 - 121
Actuarial gain (net of tax) - - 1,008 - 1,008
As at 30 March 2008 2,571 89,161 (69,417) (16) 22,229
Loss for the period - - (38,996) - (38,996)
Employee share option scheme - - 104 - 104
Fair value of warrants issued - - 75 - 75
Purchase of own shares - - 29 - 29
Actuarial (loss) / gain (net of tax) - - 1,167 - 1,167
Currency translation difference - - - 16 16
As at 30September 2008 2,571 89,161 (107,038) - (15,306)
Loss for the period - - (13,055) - (13,055)
Employee share option scheme - - 90 - 90
Actuarial loss (net of tax) - - (1,608) - (1,608)
As at 29 March 2009 2,571 89,161 (121,611) - (29,879)
15. Analysis of movement in net debt
At 1 October 2008 Cash flow Other non cash changes At 29 March 2009
Cash at bank and in hand -
Bank overdraft (5,420) 4,216 - (1,204)
(5,420) 4,216 - (1,204)
Debt due within one year (2,786) - 2,786 -
Debt due after one year (54,861) (372) (3,327) (58,560)
Amounts due under HP and finance leases (2,727) 728 - (1,999)
Net debt (65,794) 4,572 (541) (61,763)
16. Announcement
The half yearly financial report was approved by the Board on 27
May 2009 and copies will be available from the registered office
at Jessop House, 98 Scudamore Road, Leicester, LE3 1TZ or from the
website at www.jessops.com.
Principal Risks and Uncertainties
Jessops plc operates in a very competitive retail environment and there is an
ongoing risk that sales may be lost to rival businesses. The risks to achieving
the Group's objectives remain those disclosed on page 20 in the Group Report and
Accounts for the year ended 30 September 2008. Furthermore, the Current Trading
and Outlook section of the interim statement provides commentary by the
Executive Chairman concerning the remainder of the financial year.
The funding of the Group continues to represent a risk and this is more fully
explained in note 1 to the condensed interim financial statements.
Responsibility statement of the directors in respect of the half-yearly
financial report
We confirm that to the best of our knowledge:
* the condensed set of financial statements has been prepared in accordance
with IAS 34 Interim Financial Reporting as adopted by the EU;
* the interim management report includes a fair review of the information
required by: (a)DTR 4.2.7R of the Disclosure and Transparency Rules, being an
indication of important events that have occurred during the first six months of
the financial year and their impact on the condensed set of financial
statements; and a description of the principal risks and uncertainties for the
remaining six months of the year; and (b)DTR 4.2.8R of the Disclosure and
Transparency Rules, being related party transactions that have taken place in
the first six months of the current financial year and that have materially
affected the financial position or performance of the entity during that period;
and any changes in the related party transactions described in the last annual
report that could do so.
On behalf of the Board
David Adams, Executive Chairman
27 May 2009
Independent review report to Jessops plc
Introduction
We have been engaged by the company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 29 March
2009 which comprises the condensed consolidated income statement, condensed
consolidated statement of recognised income and expense, condensed consolidated
balance sheet, condensed consolidated cash flow statement and the related
explanatory notes. We have read the other information contained in the
half-yearly financial report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in the condensed
set of financial statements.
This report is made solely to the company in accordance with the terms of our
engagement to assist the company in meeting the requirements of the Disclosure
and Transparency Rules ("the DTR") of the UK's Financial Services Authority
("the UK FSA"). Our review has been undertaken so that we might state to the
company those matters we are required to state to it in this 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 for our review work, for
this report, or for the conclusions we have reached.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved
by, the directors. The directors are responsible for preparing the half-yearly
financial report in accordance with the DTR of the UK FSA.
As disclosed in note 1, the annual financial statements of the group are
prepared in accordance with IFRSs as adopted by the EU. The condensed set of
financial statements included in this half-yearly financial report has been
prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the
EU.
Our responsibility
Our responsibility is to express to the company a conclusion on the condensed
set of financial statements in the half-yearly financial report based on our
review.
Scope of review
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410 Review of Interim Financial Information
Performed by the Independent Auditor of the Entity issued by the Auditing
Practices Board for use in the UK. A review of interim financial information
consists of making enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review procedures. A
review is substantially less in scope than an audit conducted in accordance with
International Standards on Auditing (UK and Ireland) and consequently does not
enable us to obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do not express an
audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe
that the condensed set of financial statements in the half-yearly financial
report for the six months ended 29 March 2009 is not prepared, in all material
respects, in accordance with IAS 34 as adopted by the EU and the DTR of the UK
FSA.
Emphasis of Matter
In forming our review conclusion on the condensed set of financial statements in
the half-yearly financial report, which is not qualified, we have considered the
adequacy of the disclosure made in note 1 concerning the Group's ability to
continue as a going concern. This ability is dependent on three main factors.
First it must continue to operate within available banking facilities, which is
dependent on the Group achieving net cash flows substantially in line with, or
favourable to, projections. Secondly, the Group is dependent on the lenders not
exercising any right to demand immediate repayment of borrowings under those
facilities should they become repayable on demand, and continuing to make the
full amount of those facilities, including undrawn amounts, available until
their maturity. Thirdly, any proposal to comprehensively restructure the group
and the facilities available to it may, depending on the precise nature of any
such restructuring, mean that the group is not able to continue to trade as a
going concern.
These matters, along with other matters, explained in note 1 to the condensed
consolidated interim financial statements, indicate the existence of a material
uncertainty which may cast significant doubt on the Group's ability to continue
as a going concern. The condensed consolidated interim financial statements do
not include the adjustments that would result if the Group were unable to
continue as a going concern.
Wayne Cox
KPMG Audit Plc
Chartered Accountants
St Nicholas Row
31 Park Row
Nottingham
NG1 6FQ
27 May 2009
This information is provided by RNS
The company news service from the London Stock Exchange
END
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