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Released: 27/05/2009
com:20090527:Rnsa8588S
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RNS Number : 8588S
Jessops plc
27 May 2009
CORRECTION TO FRONT PAGE - THIS REPLACES THE RELEASE ISSUED AT 7AM
27 May 2009
Jessops plc Interim Results
Jessops plc, the UK's largest photographic retailer, today reports on its
results for the six months to 31 March and provides an update on its financial
position
* Like for like sales down 4.5% (2008: down 5.0%)
* Gross profit margin declined to 28.1% (2008: 30.8%)
* Loss before non-recurring items and tax £5.9m (2008: £2.9m)
* Net liabilities£29.9m (2008: net assets £22.3m)
* Restructuring programme ongoing
* Talks with lenders continuing but shareholders unlikely to realise any value
from their equity
David Adams, Executive Chairman, said:
"Since my arrival at Jessops in 2007, the team has worked very hard in extremely
challenging conditions to secure a successful future for the business. We have
reduced costs wherever possible, worked closely with suppliers and explored a
range of options to deliver a sustainable future for Jessops.
"In January we said that we were in discussions with our advisers and HSBC Bank
and that it was highly likely that this exercise would involve a fundamental
restructuring of our debt. These discussions continue. Regrettably however,
against the backdrop of the challenging retail environment and the historic
level of debt, the board believes that it is unlikely that any value will be
attributed to shareholders. Nevertheless we are still working with HSBC towards
a solvent solution for the business."
For further information please contact:
Jessops plc
David Adams, Executive Chairman Tel: 020 7404 5959
Brunswick
Jonathan Glass Tel: 020 7404 5959
David Litterick
Claire Gore
Overview
As we said on 30 January 2009 in the announcement of our results for the year
ended 30 September 2008, the start to the new financial year was difficult,
which reflected the uncertain retail trading conditions.
In February of this year we undertook a restructuring programme in which we
closed a further 21 stores, reducing the store estate to 211 stores, and reduced
our Head Office staff by 50 people to 125.
We also identified that we needed to undertake a fundamental review of our store
staff scheduling and then increase our investment in the sales training that we
provide for our store colleagues. This will significantly increase our
efficiency by replacing full time colleagues with part time colleagues so that
our stores will be able to be fully staffed at our peak trading periods. It is,
however, likely that this will result in a number of redundancies across our
store estate. This programme commenced on 11 May and it is on track to be
completed by the end of July.
We are focussing on working capital controls and our stock at 29 March 2009 was
£19.4m (2008: £26.8m). We do not believe that our stocks can be reduced
significantly further but we will continue to ensure that our working capital is
as efficient as possible.
Current Trading and Outlook
Trading in the 8 weeks to 24 May 2009 has been encouraging with like for like
sales in this 8 week period fell by 3.6% (2008: 8.0%) and total sales fell by
8.6% (2008: 24.1%), reflecting the 21 store closures in February this year. This
has, however, been offset by the increase in gross margin rate during the
period, compared to both last year and to the six months ended 29 March 2009.
This year has already seen the launch of 2 new major DSLR's in the UK and the
remainder of the year will see a significant number of new product launches in
the UK market. This should help us to maintain gross profit levels on hardware.
The macro environment, however, remains challenging and as a result we expect to
make a loss before non-recurring charges and taxation for the year.
In our statement of 30 January 2009 we stated that we were actively engaging
with our advisers and our bankers HSBC Bank plc ("HSBC") to put the business on
a more stable footing for the future, including discussions on a fundamental
restructuring of our debt. These discussions were against the background of the
Emphasis of Matter in the Accounts for the year ended 30 September 2008. A
similar note is contained in these Interim Accounts. Our discussions with HSBC
are ongoing and we are working together towards a solvent solution. However, due
to the historic high level of debt, the Board believes that it is unlikely that
any value will be attributed to shareholders.
Results
Revenue was £124.0m (2008: £134.8m) a reduction of 8.0% reflecting the closure
of 21 stores in February this year. It should be noted that revenue for the
period was adversely effected by timing of Easter which in 2008 fell in March
and was included in the first six months trading. This has resulted in a shift
of some £1.6m of revenue from the first half of the year to the second half.
Like for like sales in the same period were down 4.5% (2008: Down 5.0%).
Gross profit margin decreased in the period by over 2 percentage points to 28.1%
(2008: 30.8%) due to the promotional stance taken in the first 13 weeks of the
year, as set out in our announcement of 30 January 2009.
The operating loss before non-recurring items increased to £5.9m (2008: £2.9m)
but the loss before non-recurring items and tax fell to £8.6m (2008: £9.9m).
Although operating expenses before non-recurring items were reduced by 8.5% to
£40.7m (2008: £44.5m), reflecting the full year effects of the savings we have
been making, this was not sufficient to offset the reduction in gross profit.
The increase in the operating loss before non-recurring items was offset by the
lower financing cost reflecting the reduced cost of the new financing package we
put in place last September.
The Group incurred non-recurring costs of £4.4m before tax (2008: £1.2m before
tax) £1.2m of this were costs relating to the restructuring and reductions in
staffing levels announced in February 2009, an increase of £2.3m in the
provision against disposal of the Group's vacant properties, caused by the
closure of the further 21 stores and the ongoing deterioration in the retail
property market since we announced our full year results on 30 January 2009 and
£0.9 million net costs of store closures.
Total loss before tax for the period was £13.0m (2008: £11.2m) and total loss
per share was 12.7p (2008: 10.9p loss per share).
The Directors are not recommending payment of an interim dividend (2008: nil).
Net liabilities at 29 March 2009 were £29.9m (2007: net assets £22.3m; 30
September 2008: net liabilities £15.3m).
Review of Trading
In the first six months of the year DSLR revenue was up 3.9% at £35.7m (2008:
£34.4m) but DSC revenue was down 12.8% at £28.4m (2008: £32.6m). Overall
hardware sales were down 7.8% at £70.9m (2008: £76.9m). Our online sales
through www.jessops.com grew over 28.0% in the period which was the result of
our upgraded web technology. This was achieved on a flat margin year on year
which is particularly pleasing given the continued heavy discounting activities
of our online competitors. Our Photo operation has also grown year on year and
in the first six months of the year we printed 49 million digital images, a
growth of 7.5% of last year's 45.6 million digital images. This reflects the
investment we have made in our new relationship with CeWe, Europe's leading
photographic developer and printer. Our photo-book offering continues to grow
and we are now regularly selling over 1,000 photo-books per week. We see this as
a continuing source of incremental revenue in the future.
On 30 October 2008 we opened a new store in the Westfield development in West
London. Trading in the first five months has been encouraging and the new store
is already one of our top ten stores.
As set out above we took further steps to address our cost base and we have
reduced our staffing levels at Head Office. In under two years we have reduced
the number of people working centrally from 375 to today's 125. We also closed a
further 21 stores in February this year.
David Adams
Executive Chairman
Condensed consolidated income statement
For the period ended 29 March 2009
Results for the period Non-recurring items in Results for the period
ended the period ended ended 30 March 2008 Non-recurring items in Results for the
29 March 2009 before 29March 2009 Total Period ended before non-recurring the period ended Period ended 30 March year ended Non-recurring Year ended 30
non-recurring items (see note 2) 29March 2009 items 30 March 2008 2008 30 September items in the year September 2008
Note 2008 before ended 30September
non-recurring items 2008
£000 £000 £000 £000 £000 £000 £000 £000 £000
Revenue 124,011 - 124,011 134,803 - 134,803 250,136 - 250,136
Cost of sales (89,191) - (89,191) (93,246) - (93,246) (170,047) - (170,047)
Gross profit / (loss) 34,820 - 34,820 41,557 - 41,557 80,089 - 80,089
Impairment of goodwill - - - - - - - (26,900) (26,900)
Other Operating (40,774) (4,423) (45,197) (44,462) (1,245) (45,707) (85,439) (3,821) (89,260)
expenses
Operating loss (5,954) (4,423) (10,377) (2,905) (1,245) (4,150) (5,350) (30,721) (36,071)
Finance expense 4 (3,297) - (3,297) (7,895) - (7,895) (15,557) - (15,557)
Finance income 4 619 - 619 895 - 895 1,795 - 1,795
Loss before taxation (8,632) (4,423) (13,055) (9,905) (1,245) (11,150) (19,112) (30,721) (49,833)
Taxation 5 - - - (85) - (85) (398) - (398)
Loss for the period (8,632) (4,423) (13,055) (9,990) (1,245) (11,235) (19,510) (30,721) (50,231)
Loss per
ordinary share - basic 13 (12.7)p (10.9)p (48.8)p
Loss per
ordinary share - 13 (12.7)p (10.9)p (48.8)p
diluted
All activities relate to continuing operations. All loss is attributable to
equity shareholders.
Condensed consolidated statement of recognised income and expense
For the period ended 29 March 2009
Period ended29 March Period ended Year ended 30 September 2008
2009 30 March
2008
£000 £000 £000
Actuarial (loss)/ gain recognised in the pension scheme (2,000) 1,400 3,021
Deferred tax on actuarial (gain) / loss in the pension 392 (392) (846)
scheme
Impact of tax rate changes on deferred tax asset - - -
Foreign exchange translation differences - - 16
Net income and expense recognised directly in equity (1,608) 1,008 2,191
Loss for period (13,055) (11,235) (50,231)
Total recognised income and expense for the period (14,663) (10,227) (48,040)
All recognised income and expense is attributable to equity shareholders.
Condensed consolidated balance sheet
As at 29 March 2009
29 March 30 March 30 September 2008
2009 2008
Note
£000 £000 £000
Non current assets
Goodwill 20,788 47,688 20,788
Intangible assets 5,220 7,075 6,209
Property, plant and equipment 7 24,528 32,358 28,718
Deferred tax 1,428 1,712 1,036
51,964 88,833 56,751
Current Assets
Inventories 19,411 26,801 26,143
Trade and other receivables 7,667 12,079 11,245
Cash and cash equivalents - 3,170 -
27,078 42,050 37,388
Current liabilities
Bank overdrafts and borrowings 9 (1,204) (52,260) (8,206)
Obligations under finance leases 9 (1,414) (1,450) (1,414)
Trade and other payables (37,669) (46,281) (36,644)
Provisions 8 (3,332) - (2,857)
Current tax liabilities (442) (483) (442)
(44,061) (100,474) (49,563)
Net current (liabilities) / assets (16,983) (58,424) (12,175)
Non current liabilities
Borrowings 9 (58,560) - (54,861)
Obligations under finance leases 9 (585) (1,995) (1,313)
Provisions 8 (605) - -
Retirement benefits obligations (5,110) (6,115) (3,708)
(64,860) (8,110) (59,882)
Net assets (29,879) 22,299 (15,306)
Equity
Issued capital 14 2,571 2,571 2,571
Share premium 14 89,161 89,161 89,161
Retained earnings 14 (121,611) (69,417) (107,038)
Translation reserve 14 - (16) -
Total equity attributable to equity shareholders of (29,879) 22,299 (15,306)
the parent
Condensed consolidated cash flow statement
For the period ended 29 March 2009
Period ended 29 March Period ended 30 March Year ended 30 September 2008
2009 2008
£000 £000 £000
Cash flows from operating activities
Loss before taxation (13,055) (11,150) (49,833)
Adjusted for:
Finance income (619) (895) (1,795)
Financing expense 3,297 7,895 15,557
Depreciation and amortisation 4,467 4,996 10,076
Impairment of goodwill - - 26,900
Share-based payment expense 90 121 225
Exchange difference - - 14
(Profit)/loss on disposal of property, plant and equipment 702 131 130
Pension contributions in excess of charge (546) (396) (1,157)
Operating cash (outflow)/inflow before movement in working capital (5,664) 702 117
Decrease in stocks 6,732 11,164 11,824
Decrease in debtors 3,578 1,164 2,208
Increase/(decrease) in creditors 2,125 (17,495) (16,833)
Cash absorbed by operations 6,771 (4,465) (2,684)
Taxes paid - (55) (187)
Interest paid (1,875) (2,628) -
Net cash from operating activities 4,896 (7,148) (2,871)
Cash flows from investing activities
Proceeds on disposal of property, plant and equipment 975 136 -
Acquisition of property, plant and equipment (905) (212) (1,103)
Acquisition of intangible assets (60) (386) (300)
Acquisition of business assets - - -
Net cash from investing activities 10 (462) (1,403)
Cash flows from financing activities
Repayment of borrowings - (2,000) (348)
Payment of finance expenses 38 - (12,859)
Movement of finance lease liabilities (728) (299) (1,018)
Net cash from financing activities (690) (2,299) (14,225)
Net increase / (decrease) in cash and cash equivalents 4,216 (9,909) (18,499)
Cash and cash equivalents at the beginning of the period (5,420) 13,079 13,079
Cash and cash equivalents at the end of the period (1,204) 3,170 (5,420)
Notes to the condensed consolidated interim financial statements
1. Basis of preparation and principal accounting policies
Jessops Plc is a company domiciled in the UK. The condensed
consolidated interim financial statements of the company as at
and for the six months ended 29 March 2009 comprise the
company and its subsidiaries (together referred to as the
"Group").
The Group financial statements as at and for the year ended 30
September 2008 prepared in accordance with IFRSs as adopted by
the EU and with those parts of the Companies Act 1985
applicable to companies reporting under IFRS, are available
upon request from the company's registered office at Jessop
House, 98 Scudamore Road, Leicester, LE3 1TZ or from the
website at www.jessops.com.
The prior year comparatives are derived from audited financial
information for Jessops Plc as set out in the Annual Report
for the year ended 30 September 2008 and the unaudited
financial information in the interim financial statements for
the period ended 30 March 2008. The comparative figures for
the financial year ended 30 September 2008 are not the
Company's statutory accounts for that financial year. Those
accounts have been reported on by the Company's auditors and
delivered to the registrar of companies. The auditors' report
on those accounts was not qualified and did not contain
statements under section 237(2) or (3) of the Companies Act
1985. The auditors report included a reference in respect of
the existence of a material uncertainty which may cast
significant doubt on the Company's and Group's ability to
continue as a going concern. The auditors drew attention to
this matter by way of emphasis without qualifying their
report.
The condensed set of interim financial statements for the
period ended 29 March 2009 is unaudited but has been reviewed
by the auditors. The Independent Review Report is set out on
page 22.
The condensed consolidated interim financial statements are
prepared on a going concern basis which the directors believe
to be appropriate for the reasons set out below.
The Group meets its day to day working capital requirements
and medium term funding requirements through banking
facilities that mature in December 2011. Some of the
facilities are made available subject to a number of covenant
tests. As at the 29 March 2009 the Group was not in breach of
these covenants as covenant tests had been deferred. The
covenants are next tested at the end of June and quarterly
thereafter. In the absence of ongoing covenant waivers from
the bank the Directors believe that the covenants will be
breached for the immediately foreseeable future. The balance
of the facilities consists primarily of an overdraft which is
repayable on demand. The Directors consider that in effect the
entire facilities may shortly become repayable on demand at
the option of the lenders.
The Directors have prepared trading and cash flow forecasts
for a period in excess of one year from the date of approval
of these interim financial statements which project that the
total facilities are not exceeded over the duration of the
forecasts. The forecasts prepared make assumptions in respect
of future trading conditions and in particular the trend in
like for like revenue in the remainder of financial year 2009
not being materially worse than that experienced for the six
months to 31 March 2009 and then a forecast year-on-year
improvement in underlying retail conditions in the UK during
2010, achieving operational improvements, cost reductions and
cash outflow deferral in respect of property lease payments.
In addition to this the nature of the Group's business is such
that there can be variation in the timing of cash inflows as
trading patterns develop, in particular the quantum and timing
of Summer and Christmas trading activity. The forecasts take
into account the aforementioned factors to an extent which the
Directors consider to be reasonable, based on the information
that is available to them at the time of approval of these
condensed consolidated interim financial statements.
In discussions with the Group, the existing lenders have
indicated that it is their current intention (a) not to seek
early repayment of the bank loans, (b) to continue to make
available the undrawn element of the facilities and (c) to
consider on an ongoing basis any appropriate, alternative
options for the structure of the facilities provided to the
business. The existing lenders have also indicated that they
will not increase the total amount made available to the Group
under the existing facilities.
In the event that additional funds are required in excess of
the existing facilities as a result of the Group not
substantially achieving its forecasts the Directors would have
to supplement, renew or replace those facilities with
facilities that are appropriate to the Group's ongoing
requirements. The potential source and cost of such
supplementary, new or replacement facilities is a matter which
the Directors are keeping under review although they regard
the likelihood of securing such facilities to be low.
Notes to the condensed consolidated interim financial statements continued
1. Basis of preparation and principal accounting policies
continued
As regards the future structure of the facilities provided to
the Group by the existing lenders a number of options are
being considered including a comprehensive restructuring of
the Group. The Director's are working with the Group's
existing lenders towards a satisfactory solution, however,
depending on the precise nature of any such proposal the Group
may or may not be able to continue to trade as a going
concern.
These conditions indicate the existence of material
uncertainties which may cast significant doubt on the Group's
ability to continue as a going concern and therefore the Group
may be unable to continue to realise assets and discharge
liabilities in the normal course of business. These condensed
consolidated interim financial statements do not include any
adjustments that would result from the going concern basis of
preparation being inappropriate.
Statement of compliance
The condensed set of interim financial statements has been
prepared in accordance with IAS 34 Interim Financial Reporting
as adopted by the EU. They do not include all of the
information required for full annual financial statements, and
should be read in conjunction with the consolidated financial
statements of the Group as at and for the year ended 30
September 2008.
These condensed consolidated interim financial statements were
approved by the Board of Directors on 27 May 2009.
Significant accounting policies
As required by the Disclosure and Transparency Rules of the
Financial Services Authority, the condensed set of financial
statements has been prepared applying the accounting policies
and presentation that were applied in the preparation of the
Group's latest annual audited financial statements for the
year ended 30 September 2008.
Estimates and judgements
The preparation of the condensed interim financial statements
requires management to make judgements, estimates and
assumptions that affect the application of accounting policies
and the reported amounts of assets and liabilities, income and
expense. Actual results may differ from these estimates.
In preparing these condensed consolidated interim financial
statements, the significant judgements made by management in
applying the Group's accounting policies and the key sources
of estimation uncertainty were the same as those that applied
to the consolidated financial statements as at and for the
year ended 30 September 2008.
During the period ended 29 March 2009 management has
reassessed its estimates in respect of the recoverable amount
of goodwill by assessing the recoverable amount of each cash
generating unit and deemed no further impairment is required.
In reaching this conclusion, a pre-tax discount rate of 16.8%
(for the year ended 30 September 2008: 16.8%; for the period
ended 30 March 2008: 15.7%) was applied which reflects the
current market assessment of the time value of money and the
risks specific to the assets concerned.
During the period, tangible and intangible assets have been
reviewed for Impairment, determined with reference to the
higher of fair value less costs to sell and value in use. As
noted above, significant judgements and assumptions are made
in calculating these cashflows, such as discount rates, long
term growth rates and the impact of risk. Changes in
assumptions could change the outcomes of the impairment
review.
In addition, management's assumptions in respect of the time
and cost involved in disposing of the Group's closed
properties is key to establishing the expense charged to the
income statement. This represents an area of estimation
uncertainty.
Notes to the condensed consolidated interim financial statements continued
1.
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