jjb sports plc annual report 2011

7/30/2019 JJB Sports PLC Annual Report 2011

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JJB Sports plcAnnual Report and Accounts 2011


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JJB Sports plcwww.jjbsports.comwww.jjbcorporate.co.uk

JJB Sports is one o the UKs leading high street sportsretailers operating rom over 200 stores across the UK andIreland. We are building JJB into a market leading sportsbrand by giving access to top quality products that suit theneeds o all our customers, who range rom spectatorsthrough to perormance athletes.

Our product oer covers an ever growing range o sportsand brands delivered via an evolving multi-channel platormwith a clear ocus on customer service.

The business has been through much change in recent yearsand is currently going through a major restructuring to servethe market and its customers more eectively. By striving toprovide choice, excellent service and competitive pricing orour customers over the next ew years and beyond, JJB willre-establish its position in the highly competitive UK sportsretail market and emerge stronger.

Overview

Chairmans statement 01

Chie Executives review 03

Business review

Operating review 05

Corporate responsibility 10

Governance

Board o Directors 12

Board Committees 14

Corporate Governance report 15

Directors report 21

Directors Remuneration report 24

Directors responsibilities statement 34

Financial statements

Independent auditors report 35

Consolidated statement o nancial perormance 37

Consolidated statement o comprehensive income 38

Consolidated statement o changes in equity 39

Consolidated statement o nancial position 40

Consolidated statement o cash fow 41

Company statement o nancial position 42

Company statement o cash fow 43

Statement o accounting policies 44

Notes to the Financial statements 53

Five year summary 92

Corporate inormation

Corporate inormation 94


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01 JJB Sports plc Annual Report and Accounts 2011

Since becoming Chairman in December 2010, with thesupport o our shareholders, bankers, key suppliers,landlords and other stakeholders and our colleagues,we avoided administration and have taken a numbero signicant steps to stabilise the nancial positiono the business and commence the turnaround o itsperormance.

In my time as Chairman we have completed:> Two capital raisings through Firm Placing and Placing

and Open Oers raising combined gross proceedso 96.5 million;

> A Company Voluntary Arrangement (CVA) with ourLandlords enabling us to reduce our overhead base;

> A Capital Reorganisation;> A transer to AIM rom the main list o the London

Stock Exchange; and> A negotiation o a three year extension to our existing

bank acilities.

These actions provide the management team ledby Keith Jones with the opportunity to address theweaknesses in our business and eect a turnaround

in its operational and nancial perormance.

Our strategyThe turnaround o our business will not be easy andas a consequence will take time. The ocus or theremainder o 2011 is to establish a platorm or uturegrowth so we can exploit the opportunity in the UKsports retail market or an authentic multi-channelsports retailer providing ootwear, apparel, sportsequipment and accessories or spectators throughto perormance athletes nationwide. Key elementso the revised business plan include:> Rightsizing the store portolio through implementation

o the CVA;> Building on the success o the investment in the

six stores transormed during 2010. We intend tocontinue to invest in the store portolio throughcontinued store and proposition development;

> Improving the basic retail disciplines in the Company,including stock selection, buying intake management,allocation, replenishment and clearance markdownmanagement;

> Continuing to source new ranges including exclusiveand dierentiated products rom all key suppliers andto develop exclusive branded products such as RUN365 and Slazenger Gol;

> Promoting new product and service propositionsas part o a co-ordinated marketing plan;

> Focusing on training by extending customer serviceand product knowledge training to all colleagues;

> Improving the multi-channel proposition includingbroadening the online range by introducing onlineexclusives, expanding the collect@store oer,developing a mobile version o the website and

exploiting catalogue opportunities, all ocused onproviding customers with the easiest and mostconvenient ways to shop; and

> Aligning the Companys cost base and workingcapital investment to meet the needs o the businessby exploiting opportunities or eciencies inwarehousing and distribution, stock management,store wages, sales management and the RetailSupport Centre.

Progress to date and next stepsJJBs turnaround programme is now well and trulyestablished. The Company has constructed ve workstreams that encompass all elements o the revisedbusiness plan and work continues on delivering

measurable progress. Eective governance is alsoin place which eeds into both weekly reviews by theoperating board and a monthly review with the Board.Achievements so ar include:> The closure o the rst 18 CVA stores and planned

the next round o store rets;> Operationalising our plans to drive continuous

improvement across the Companys basic retaildisciplines, product sourcing, market planning,allocation and supply chain to orecast milestones;

> Rolling out training to all in-store colleagues on bothextending customer service and improving productknowledge on track;

> Establishing a multi-channel programme to driveimprovements in online capability, aligned to the

in-store channel experience; and> Reducing the Companys cost base, by working

systematically through identied areas o opportunity,including the Companys Retail Support Centrein Wigan.

We have already begun to realise cost savings inrespect o warehousing and distribution, store wagesand central overhead costs.

OverviewChairmans statementMike McTighe

Overview

Business review

Governance




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Our BoardThere have been a number o changes to the Boardduring the year under review and subsequently.On 1 March 2010 Keith Jones joined the businessas Chie Executive Ocer; in Keith the Company hasan extremely able and motivated leader. David Williams,our Chie Financial Ocer, joined the Board in that roleon 17 January 2011 replacing Lawrence Coppock

who had led the nancial aspects o the Companysrestructuring since joining in May 2009.

Colin Tranter and Sir David Jones let the Company inMarch and July respectively. In addition, and as notedabove, I replaced John Clare and became the Chairmano the Company on 23 December 2010. I would like torecord my personal thanks to John or the contributionhe made to JJBs survival during the year.

As we have previously announced Richard Manningand Alan Benzie will both leave the Board at theCompanys Annual General Meeting in July 2011.Richard is our Legal & Operations Director andCompany Secretary and has since January 2009

played a leading role in the restructuring and renancingo our business, as well as establishing a robust legaland governance platorm. Alan Benzie is a Non-executive Director and is chairman o the CompanysAudit Committee and a member o the Remunerationand Nominations Committees. Again I would personallylike to thank both Richard and Alan or their contributionto the survival o our business.

More recently, Richard Bernstein joined the Board asa Non-executive Director on 6 May 2011 ollowing hisnomination by Crystal Amber Fund and on 17 May 2011we announced that Lawrence Christensen will join theBoard as a Non-executive Director on 1 November2011. I look orward to working with them both to help

deliver JJBs turnaround strategy.

Our employeesWithout the hard work and dedication o our employeeswe would not have been able to deliver the changes wehave seen in recent months and I would like to recordmy thanks to all our loyal employees, who have giventheir ull commitment to the Company through yetanother challenging time.

OutlookSince the period end, a great deal has taken place.We have delivered two urther und raisings and agreeda signicant CVA with our landlords that gives yourCompany a real chance o recovery. However this is thebeginning o the hard work and not the end.

The nancial restructuring was completed on schedule

by the end o April and since then the operationalrestructuring has progressed well. Underperormingstores have closed as part o our CVA, and headcountand operating costs have been signicantly reduced.Whilst the sales environment remains challenging,Managements prudent controls mean that businessperormance in the rst quarter has met the Boardsexpectations.

The und-raising in April also provided us with the undsto reurbish our store portolio, ollowing the success olast years trial. Over 150 stores are targeted or rereshor ret in the current period, with more than 50 targetedor 2012/13.

The restructuring o JJB will not be easy or quickand will most likely take three to ve years. The retailenvironment is challenging, will remain so or sometime and we ace intense competition. But the workundertaken over the past six months, together withthe crucial support o all our stakeholders have givenJJB a chance to survive and ultimately to prosper andI look orward to working with our management teamto make this happen.

Mike McTigheChairman25 May 2011

OverviewChairmans statement continued


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OverviewChie Executives reviewKeith Jones

Overview

Business review

Governance



In May o last year I presented my initial observationson JJB Sports and what I believed was necessaryto transorm the business and its perormance.I summarised the issues under the headings o People,Processes and Systems and concluded that thisturnaround would not be quick or easy. This certainlyproved to be an accurate refection, perhaps evenan understatement, o the issues and as the year

progressed the sheer scale o the challenge becamemore apparent with running out o cash and timebecoming the biggest risk.

I have never doubted the market opportunity or anauthentic multi-channel needs sports retailer providingootwear, apparel, sports equipment and accessoriesor spectators through to perormance athletesnationwide. It is clear rom all our customer researchthat JJB has the potential to ll this very signicant gapin the market. It is also clear however that the currentoer o product, service and customer experiencein the majority o our stores is ar rom refecting thisopportunity. We have to change to meet our customersexpectations and make a clear step change that

ultimately dierentiates us rom our competitors.This process has now very clearly begun in earnest.

The transormation required is signicant but entirelyachievable. The consistently better perormances romour six transormed stores provide evidence and realencouragement; this is even more so when consideringthe potential impact o adding new product propositionsand the benets o colleague training programmeswhich have not been a actor in the perormance so ar.However, i we are to win back old and attract newcustomers we have to change quickly and to invest.

The level o investment required simply could not beunded in our existing shape and size. Thereorerestructuring and re-capitalisation o the business has

been necessary to provide the opportunity to deliverour transormation plan.

One o the rst issues or me to address was to ensurewe have the right senior team and capability in placeto deliver the turnaround plan. In my rst year I haverecruited Directors to lead Retail Operations, HumanResources & Training, Trading and Marketing. Thedeparture o Debbie Robinson to become ManagingDirector o Spar UK, whilst disappointing, providesan opportunity to urther develop the team. I have

also recruited a new CFO in David Williams. David hasconsiderable experience in business turnarounds andhas made a tremendous impact in a relatively shortperiod o time in the Company.

The weakness in retail disciplines and processesidentied during last year could only be sustainablycorrected once an experienced and capable teamwas in place. We now have a strong senior team andwill continue to inuse new talent as well as trainingand developing existing colleagues, in order to createa modern and eective team in all key unctions.

The trading perormance has been poor andconsistently below expectations. Our adjusted operating

loss* or the period was 73.9 million. In addition, wehad exceptional items o 108.0 million which includedan impairment charge or goodwill o 92.6 millionresulting in an operating loss o 181.8 million. Lack ocapability and the weakness in buying disciplines andprocesses account in part or the underperormance.Additionally the cash constraints during the secondhal o the period had a signicant impact on our abilityto bring in the stock ordered and in many casesresulted in stock arriving late and on occasion too lateor our customers who had to buy rom elsewhere. Wehave stopped the buying principles that created manyo last years problems and under the leadership o anew Trading Director we are constantly improving theallocation o stock and the availability both in store and

online. We continue to receive incredible support romour supplier partners, who understand what we aretrying to achieve and absolutely agree with our strategicdirection. Together we will continue to improve quarterover quarter, bringing the best o branded and ownbranded products and improving availability andrelevance or our customers.

* Adjusted operating loss is shown beore (charging) creditingexceptional operating items o (92.6) million o goodwill impairmentand (15.4) million o other exceptional items (2010: 0.3 million ongoing retail, 0.1 million other items) as shown in theConsolidated statement o nancial perormance.


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OverviewChie Executives review continued

Promotionally the World Cup and the need to clearthrough slow selling stock dominated the period.The World Cup was disappointing or JJB due to theEngland teams poor perormance. The clearanceactivity that ollowed, although essential, was purelytactical and did not enhance the JJB brand.Nevertheless, we have made some good progresspromoting our online business, more than doubling our

sales mix in that area and introducing Collect@Storeand i-store ahead o schedule and to all stores. Both aregood examples o very customer ocused propositionsevidenced by the immediate take up and antasticeedback. E-Commerce lies at the heart o our multi-channel needs strategy and provides truly nationwidepenetration and the best o both worlds whencombined with stores. We will continue to developextended ranges online which can be accessed eitherin store or at home and add urther ways to purchaseincluding a mobile version o the site.

In summary, the period has been incredibly challengingand characterised by corporate eorts to survive ratherthan to develop and grow. The Board and I are

incredibly grateul or the extraordinary support romour bank, shareholders, colleagues, suppliers andultimately our landlords who collectively have enabledus to recapitalise the Company and to restructure inorder to provide a oundation upon which we can build.

We have a developing senior team in place that iscapable, committed and condent in our ability todeliver the turnaround plan. The plan is simple andocused on constantly improving our proposition andcustomer experience as well as our protability. Thereremains a lot to do and it will take three to ve years tocomplete this transormation. Nevertheless, the marketopportunity is clear and every day we will improve somepart o our product oer, stores and customer service

such that our customers start to notice the dierence.There is an added incentive to act ast in order to takeadvantage o a 2012 Olympics that promises to bringsport to the ront o the nations mind and create aneven greater opportunity or an authentic sports retailerlike JJB Sports.

Keith JonesChie Executive Ocer25 May 2011


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05 JJB Sports plc Annual Report and Accounts 2011 Overview

Business review

Governance



OverviewThe 52 week period to 30 January 2011 has onceagain proven to be an extremely challenging time orthe Company as a result o both internal and externalactors. Perormance has been very disappointingresulting in the business being close to entering intoadministration as the initiatives put in place by previous

management ailed to deliver the necessary turnaroundin business perormance.

Review o operating resultsThe operating results or the 52 weeks to 30 January2011 and the comparative gures or the 53 weeksto 31 January 2010 are summarised below:

Business reviewOperating review

52 weeks to30 January

2011 53 weeks to 31 January 2010

Total000

Ongoingretail

000

Otheritems*000

Total000

Continuing operations

Revenue 362,894 361,123 11,370 372,493

Cost o sales (238,020) (222,298) (8,118) (230,416)

Gross proft 124,874 138,825 3,252 142,077

Other operating income 1,848 2,960 782 3,742

Distribution expenses (20,810) (20,340) (538) (20,878)

Administration expenses (24,075) (24,245) (504) (24,749)

Selling expenses (263,649) (162,071) (5,433) (167,504)

Operating loss (181,812) (64,871) (2,441) (67,312)Adjusted operating loss** (73,856) (65,176) (2,555) (67,731)

* There are no other items in the current period. In the prior period, other items represented results o retail cessations during the 53 weekperiod to 31 January 2010 including retail stores attached to tness clubs, OSC and Qube stores, and other non-core retail stores.

** Adjusted operating loss is shown beore (charging) crediting exceptional operating items o (92.6) million o goodwill impairment and(15.4) million o other exceptional items (2010: 0.3 million ongoing retail, 0.1 million other items) as shown in the Consolidatedstatement o nancial perormance.

Ongoing retail operationsRevenue rom ongoing retail operations or the52 weeks to 30 January 2011 increased by 1.8 million(0.5 per cent) compared to the previous accountingperiod and refected a like-or-like increase o 5.9 percent (on operating units that have been trading or over52 weeks). However, this overall improvement refects

a rst hal like-or-like sales increase o 14.4 per centand a second hal decline o 1.5 per cent. The rst halbenetted rom the re-stocking o the business ollowingthe previous und-raising which completed on3 November 2009 and the impact o the ootballWorld Cup; although in absolute terms with Englandspoor perormance this was below our expectation.

At the hal period end our stock was 92.7 millioncompared to 47.8 million in the equivalent period inthe prior period. However the overall re-stocking wasnot eective and whilst the good stock that waspurchased helped to support the sales in the rst halo the period, the second hal proved to be a very poortrading period and the business incurred signicanttrading losses and as a consequence experienced a

signicant cash outfow. The working capital positionbecame increasingly constrained and the business wasunable to take in the stock required to support the salesorecasts. As a consequence the business was on thebrink o entering administration towards the end o thenancial period.

Overall gross margin rom ongoing retail operationswas 34.4 per cent compared to 38.4 per cent or theprior year. However, as with our sales perormancethere was a signicant disparity between the rst andsecond hal. In the rst hal gross margins were42.2 per cent compared to 34.0 per cent in theequivalent period in the prior period; in the second hal

margins deteriorated to 26.4 per cent compared to42.3 per cent in the prior period. This deteriorationrefected the poor stock packages available to thebusiness and the need to oer substantial discounts toclear the stock out o the business. In addition, despitethis discounting activity during the second hal, at theperiod end we have reviewed the carrying value oour stock and strengthened our provisions by some11 million as a consequence.

During the period the business invested in a storereurbishment programme comprising six stores. Theperormance o these six transormed stores has beenvery encouraging with sales 16 per cent above theCompany average and gross prot 30 per cent above

the Company average, measured in the period rom1 November 2010 (when the last o the six transormedstores opened) to the period end.


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Ongoing retail net operating expenses beoreexceptional operating items decreased by 3.3 per centto 177.3 million, due mainly to the reduction in storenumbers through the rst CVA in 2009 and disposalo 55 retail stores attached to the tness clubs leadingto decreased running costs, as well as a 33 per centreduction in the number o ull-time equivalent jobsin central services.

At the period end the Company comprised 247 tradingretail stores operating rom 2.7m square eet o retailspace.

Operating lossOperating loss rom the ongoing retail operations was181.8 million, compared to 64.9 million last period.However the operating loss is ater charging exceptionaloperating items o 108.0 million compared witha credit o 0.3 million or 2010. The principalexceptional item relates to an impairment to the carryingvalue o goodwill in respect o Blane Leisure Limitedand Sports Division (Eireann) Limited and which isincluded within selling expenses. Thus operating loss

rom ongoing retail operations beore exceptional itemswas 73.9 million (2010: 65.2 million).

Full details are shown on the ace o the Consolidatedstatement o nancial perormance.

Net loss beore taxationThe net loss beore taxation increased to a 181.4 millionloss rom a 68.6 million loss in the prior period.

TaxationOwing to the losses incurred there is no taxationpayable.

Loss per share

Continuing operationsBasic loss per Ordinary Share or the 52 weeks to30 January 2011 was 61.83 pence compared to20.84 pence in the previous accounting period. Theloss per share has increased due to the increase inexceptional items to 108.1 million (2010: 0.1 million).The adjusted basic loss per Ordinary Share (beorededuction o exceptional items) or the 52 weeks to30 January 2011 was 26.49 pence compared to20.36 pence in the previous accounting period. Thenumber o shares or the purpose o basic loss perOrdinary Share and adjusted basic loss per OrdinaryShare has been adjusted retrospectively to takeaccount o the Firm Placing and Placing and OpenOers completed during February 2011 and April 2011.

Key perormance indicatorsDuring the period under review the Board monitoredits perormance by reerence to a number o keyperormance indicators (KPIs) o which the mostimportant were:


2011


2010

Financial KPIsChange in like-or-like

revenue ongoing retail 5.9% (27.3)%

Gross margin ongoingretail 34.4% 38.4%

Cash fow rom operations (71.9)m (81.0)m

Net (debt) unds (18.8)m 58.8m

Inventories 52.7m 68.6m

Inventories less tradepayables 14.3m (7.0)m

Non-nancial KPIs

Retail selling space (sq t) 2,748,000 2,777,000

Number o ull time

equivalent employees 3,779 4,629

In order to measure and monitor the success o itsturnaround plans the Board is developing a morecomprehensive set o nancial and non-nancial KPIsaligned to each element o the plan.

Review o Statement o fnancial positionGoodwillGoodwill has been subject to an impairment reviewas at the period end date which has resulted ina reduction in its carrying value o 92.6 million rom106.4 million as at 31 January 2010 to 13.8 millionas at 30 January 2011.

Capital expenditureCapital expenditure on property, plant and equipmentor the 52 weeks to 30 January 2011 was 4.1 millioncompared to 1.8 million in the previous accountingperiod. This capital expenditure was principally spenton the reurbishment o the six trial stores andenhancement to the IT inrastructure.

Business reviewOperating review continued


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Business review

Governance



InventoriesThe value o inventories at 30 January 2011 was52.7 million compared to 68.6 million at 31 January2010. This reduction is due to the working capitalconstraints experienced by the business in the secondhal o the nancial period and a reassessment oprovisioning requirements as at the period end date.

Net (debt) undsThe Groups net debt, excluding Loan notes, at30 January 2011 was 18.8 million compared to58.8 million net unds at 31 January 2010. Theprincipal reason or this deterioration is the net cashoutfow rom operations o 71.9 million.

Trade and other payablesTrade and other payables have reduced to 68.4 millionat 30 January 2011 rom 106.2 million at 31 January2010 owing to the working capital constraintsexperienced by the business in the second halo the nancial period.

Current asset investments and loan notes

The Loan note deposit represented a bank balancewhich acted as security or the Loan notes which wereincluded within current liabilities in the Consolidatedstatement o nancial position or 53 weeks to31 January 2010. The Loan notes were repaid on the11 June 2010.

DividendThe Board does not recommend payment o a dividendin respect o the 52 weeks to 30 January 2011(2010: nil).Share capitalDetails o the share capital and post period endmovements, including the two Firm Placing and Placing

and Open Oers reerred to earlier, and the CapitalReorganisation are described in note 44 o the Notesto the Financial statements.

The mid-market share price o the Ordinary Shares atthe close o business on 28 January 2011, which wasbeore the Capital Reorganisation, was 4.39 pence,representing an equity market capitalisation oapproximately 28.6 million.

Director updateThere have been a number o changes to the Boardover the last 12 months as ollows:> On 1 March 2010, Keith Jones joined the Board

as Chie Executive Ocer;> On 25 March 2010, Colin Tranter resigned as

a Director;> On 27 May 2010 John Clare was appointed as

Chairman o the Company, having been ActingChairman since 28 January 2010;

> On 28 July 2010 David Jones resigned asa Non-executive Director;

> On 23 December 2010 John Clare resigned asa Non-executive Director and Chairman andMike McTighe was appointed as a Non-executiveDirector and Chairman; and

> On 17 January 2011, Lawrence Coppock resignedas Finance Director and David Williams wasappointed as Chie Financial Ocer.

Ater the end o the period, the ollowing changes tothe Board have occurred:> On 6 May 2011, Richard Bernstein was appointed

to the Board as a Non-executive Director appointedby Crystal Amber Fund Limited; and

> On 17 May 2011, the Company announced thatLawrence Christensen will join the Board as aNon-executive Director on 1 November 2011.

Events ater the Statement o fnancial positionThere have been a number o signicant events ater theStatement o nancial position. Please reer to note 44o the Notes to the Financial statements on page 90.

Principal risks and uncertaintiesThe process to strengthen the internal controlenvironment o the Company and its business hascontinued to develop since the last Annual Report, and

the Board continues to identiy and review key businessrisks and oversee the development o processes toensure that these risks are managed appropriately.Executive Directors and senior management aredelegated with the task o implementing theseprocesses and the Executive Directors are charged withreporting to the Board on their outcomes. The key risksidentied by the Board include:


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Economic conditionsIn common with most retailers, JJBs results can beaected by a number o economic conditions includinginterest rates, the availability o consumer credit, thelevel o infation and movements in consumersdisposable income. All these actors aect the level oconsumer condence and can impact upon revenueachieved. This is particularly relevant at the current time

where present economic conditions are having aparticularly adverse eect upon consumers buyinghabits. In order to mitigate these economic risks,JJB needs to remain competitive through the oer oa wide range o products at reasonable prices andthrough a strong and cost-eective property portolio.

CompetitionJJBs retail store chain operates in a particularlycompetitive part o the retail sector and thereore itsdegree o competitiveness is to some extent aectedby the retail pricing policies o its competitors whichin turn impacts upon JJBs margins, protability andmarket share. JJB continues to re-position itsel withinthe market and reocus on its Serious about Sport

strategy oering quality ranges at varying price points,together with improving its multi-channel capability,the quality o its store portolio and its service oering.A wider range o products is being oered includinga greater emphasis on non-clothing merchandise.Senior management will continually review the selectiono ranges on oer, ensuring that good value ismaintained to meet customer demands.

Key personnelThe success o JJB is partly dependent upon thecontinued service o its key management personnel andupon its ability to attract, motivate and retain suitablyqualied employees. The Group structure is continuallyreviewed to ensure it is consistent with the Companys

operations and strategy to drive the business orward.Appropriate remuneration packages will be oeredto ensure that key employees are recruited, retainedand motivated as well as oering suitable careerdevelopment opportunities.

SuppliersJJB is dependent upon its major suppliers continuingto support the Groups business and to design andproduce quality product ranges or sale within its retailstores at wholesale prices which will enable JJB tomaintain its margins and to compete eectively withinthe retail sector. JJB continues to develop mutuallybenecial relationships with its main suppliers.

Availability o creditThe uture cost and availability o nance will aect theability to undertake investment and expansion.

Treasury and fnancial risksJJB is subject to treasury and nancial risks arising romthe security o its existing unds, the ongoing availabilityo new unds and fuctuations in interest and exchange

rates. The Group has adopted a policy o only dealingwith creditworthy counterparties and monitors itsunding requirements by regular unds orecasting.The Board regularly reviews any requirement to protectthe Group against fuctuations in interest rates andexchange rates.

IT systems and business continuityJJB is dependent upon the continued availability andintegrity o its computer systems. Its retail and remainingtness club operations must record and processa substantial volume o data and conduct inventorymanagement accurately and quickly. This can only beachieved on systems which benet rom continuousenhancements and ongoing investment which will

minimise the risk o obsolescence and maintainresponsiveness to business needs. JJB is alsodependent upon the uninterrupted operation o itscomputer systems and thereore reliance needs to beplaced upon a disaster recovery plan to replicate thedata stored on its business critical computer systems.JJB has extensive controls in place to maintain theintegrity and eciency o its IT inrastructure.

Revenue dependence on key sporting eventsJJB derives some benet in alternate years rom thesale o replica kits i the national ootball teams reachthe nals o the two major competitions (the FIFA WorldCup and the Euro Championships). In order to mitigateagainst this risk JJB continues to implement measures

to reduce the level o dependency on tournament yearsby concentrating on all major sporting events andoering a wider perennial product portolio.Logistics and distribution inrastructureAn important component o JJBs strategy is tomaintain a secure and ecient Distribution Centre inorder to ensure prompt and requent deliveries oinventory to its retail stores. Any disruption to this supplychain could adversely aect the Groups revenue levels.

Business reviewOperating review continued


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Business review

Governance



Revised business planJJB has nalised a revised business plan with the aimo restoring the viability o the Groups business modeland returning the business to protability in the longerterm. The key components include a multi-channelretail oering, revised store ormat and layout andcomprehensive internet acilities, and extensive productoerings. The plan assumes certain assumptions and

judgements relating to, amongst other things, uturemarket conditions and consumer preerence. I theseassumptions and judgements were to prove incorrect,or the key components were to ail, the expectedbenets o the business plan may not materialise whichcould aect the Groups business, nancial conditionor results o operations.

Cost saving initiativesAs part o developing the Groups revised businessplan, JJB has identied and has either commencedimplementation or intends to implement cost savingsthrough various initiatives. The achievability o suchsavings and estimated costs o achieving such savingsrelate to uture actions and circumstances which,

by their nature, involve risks, uncertainties and otheractors. The Board will continue to monitor cost savinginitiatives and related expenses to ensure they areconsistent with the revised business plan.

Buying and stock intakeAs part o implementing a sustainable operating modelgoing orward, the Group has endeavoured and iscontinuing to endeavour to make signicant operationalimprovements and eciencies within its buyingunction. Inecient buying procedures and inadequatestock management processes can mean the Groupoperates at a competitive disadvantage and ailsto maximise sales. By introducing well managedautomated systems and processes that control the

ordering, management and distribution o stock,together with the recruitment o experiencedmanagement, the Group aims to remove theseoperational risks.

Leasehold property portolioThe Groups store portolio is held through leaseholdinterests, which are generally subject to periodic rentreviews, lease expiries and renegotiations. As a result,the Group is susceptible to changes in the propertyrental market, such as increases in market rents, andmay not be able to renew existing store leases i thelandlord establishes statutory grounds or non-renewal

or i the leases do not have the benet o statutory orcontractual rights o renewal. This could have an eecton the Groups business and overall nancial condition.Impending rent reviews and lease expiries areconstantly monitored to ensure the Groups propertyportolio is not put at risk and that new opportunitiesare available i required.


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Corporate Social ResponsibilityJJB recognises that it has a duty to ensure that itsbusiness is conducted in a socially responsible mannermeeting high standards in both social and environmentalbehaviour. Through its employees, the Group aims tocomply with all applicable laws and, where possible,exceed best practice conditions in the markets withinwhich it operates.

The Board is responsible or corporate socialresponsibility and it has made the commitments setout below. As noted elsewhere in this Report, the Boardhas recently constituted a CSR Committee which willpursue a number o new CSR activities which will bereported on in the uture:> Endeavours and initiatives are ocused towards the

provision o ethically produced, quality, value-or-money products, through a sae and satisedworkorce in a way that benets the communitieswithin which the Group operates;

> Any negative social and environmental impact withinall areas o its operation will be minimised;

> It will monitor the eectiveness o controls in placeto manage corporate social responsibility risks andchanges in new legislation;

> It will apply guiding principles o corporate socialresponsibility relating to ethical codes o conductand worldwide labour standards, environmentalimpact and social and community issues; and

> Charitable activities will be pursued and encouraged.

Ethical codes o conduct and worldwide labourstandardsJJB seeks to provide its customers with high quality,value-or-money products, sourced rom suppliersand manuacturers who can clearly demonstratecompliance with JJBs own codes o practice as wellas internationally accepted standards. JJBs Code oPractice on Socially Responsible Trading and the

Factory Code o Conduct have been accepted byJJBs principal suppliers and source manuacturers.The Codes are based upon the internationally acceptedprinciples o the Ethical Trading Initiative Base Codeo Labour Standards and the Model Code o Conductdevised by the World Federation o the Sporting GoodsIndustry.

JJB cares about the labour standards within its globalsupply chain and expects its suppliers to demonstratesimilar concerns. In order to obtain assurance thatthe actories used by JJBs suppliers and sourcemanuacturers comply with the Factory Code oConduct and so promote sustained improvement inactory working conditions, a actory inspection

methodology is in operation. The actory inspectionprocess ends with ollow-up inspections to ensurethe Factory Code o Conduct is being adhered to.

The majority o JJBs products are purchased romthe UK subsidiaries o major international suppliers whogenerally source their products in the Far East. Through

regular meetings with suppliers JJB tries to ensurethat those manuacturing units have comprehensivecompliance procedures and good working practicesin place.

JJB applies the same level o corporate socialresponsibility commitment towards all o its ownworkplaces, thereby ensuring a sae and healthy, yet

challenging and rewarding work environment. JJB hasa Code o Practice on Socially Responsible Trading,a Health and Saety Policy, an Equal Opportunities Policyand a Whistle-blowing Policy, together with highstandards o employment practice. These policies,together with store work procedures, are set out in theRetail Operations Manual at each workplace. They areconsidered to be eective in achieving their stated aims.

The Groups policies are designed to value the humanrights o all employees, whether directly employed,sub-contracted or employed within the supply chain.

Environmental impactThe Board takes into account the environmental impacto its decisions in the decision-making process. JJBsenvironmental management system operates inconjunction with the risk management rameworkcovering core business management processes andhas ve environmental principles:> Reduce adverse environmental impacts arising rom

the Group operations;> Ensure eective and ecient use o materials and

energy;> Operate a waste management system to minimise

waste and maximise waste recovery;> Ensure compliance with relevant environmental laws

and codes o best practice; and> Incorporate the principle o sustainable development

through a systematic approach to environmentalmanagement in order to achieve continual

improvement.

The Boards policy is to source energy-ecient plant orits new retail stores wherever possible. The Board iscommitted to a Carbon Management Programme whichaims to reduce the Groups carbon ootprint and pointthe way towards achieving a carbon neutral position.

The Board is committed to reducing the Groups landllwaste rom all its operations. During the year to30 January 2011, JJB recycled 19 tonnes o paper whichwould otherwise have been sent to landll. Whereverpossible, cardboard (the major packaging constituentin the business) and plastic are baled and passed toa recycling business or reprocessing. During the

past year, JJB recycled plastic totalling 129 tonnes.The usage o cardboard ell or the third year insuccession due to the reduced usage to 1,427 tonnes(2010: 2,050 tonnes). This urther reduction in cardboardrecycling is a refection o the reduced usage opackaging by JJB Sports and the use o recycled tubsto transer stock to stores.

Business reviewCorporate responsibility


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Charitable and community issuesJJB values the relationships with both its customers andthe wider community. The Group provides a valuableservice to the community by supplying a wide rangeo competitively priced sports clothing, ootwear andaccessories through its retail stores to enable thegeneral public to take part in healthy, sporting activities.

JJB continues to support local and national charities as wellas supporting local sporting teams. Currently, we providetwo o our sites rent ree to registered charities (ourBlackpool site to the Fylde Ex-Service Liaison Committeeand a site in St Helens to Willowbrook Hospice).

A summary o the principal amounts o money raisedor charities during the accounting year through JJBactivities is given below:> 3,792 was raised or Macmillan Cancer Relie through

the sale o ootball badges and discounts on sportingleisurewear. Since the campaign began in 1999 over1.2 million has been donated to this charity;

> 3,738 was raised or Breakthrough Breast Cancerthrough the sale o pin badges in the Companysstores; and

> A number o JJB colleagues ran in the LondonMarathon raising individual amounts or charity.

Ater the end o the nancial year, JJB launched a shoerecycling programme. Customers receive a voucherredeemable against a new pair o sports shoes whenthey deposit an old pair in store. The money that JJBraises rom this activity is donated to its chosen charity Whizz-kidz. The scheme has proved to be extremelysuccessul and the Company is pursuing a number oother avenues to extend the partnership with Whizz-kidz.

JJB made no political donations during the current orprevious accounting period.

Employment issuesThe Group currently employs approximately 5,200people throughout the UK and overseas (principallyEire). This has been an extremely dicult year or manyemployees o the Group and JJB always strives to bea responsible and valued employer. JJB is an equalopportunities employer and as such the ollowing keyvalues are respected throughout JJBs operations:> All employees should be treated airly and equally

and the workplace should be ree rom discrimination,harassment and intimidation;

> Recruitment, retention and progression o employeesis based solely on personal ability and competencyor the work in question;

> Disabled persons should enjoy equal opportunities

within the workplace. Applications or employment bydisabled persons are always ully considered, bearingin mind the aptitudes o the applicant concerned; and

> Redundancies will be conducted airly and inaccordance with all applicable laws.

In the event o members o sta becoming disabled,every eort is made to ensure that their employmentwith the Group continues and that the appropriate

training is arranged. It is the policy o the Group that thetraining, career development and promotion o disabledpersons should, as ar as possible, be identical to thato other employees.Employee trainingSta training and development is a major priority orJJB and is taking on a new ocus as the Company

develops its business planning in 2011 and beyond.Colleagues working in store receive training relating toselling techniques, products and health and saety.The Group grants nancial support to those employeeswishing to obtain relevant proessional qualicationswhilst in its employment. Career progression is availableto employees across the Group.

Employee consultationThe Group places considerable value on the involvemento its employees in matters aecting them as employees.JJB has continued the practice o keeping employeesinormed on such matters and on the various actorsaecting the perormance o the Group. This is achievedthrough regular meetings involving Directors, managersand supervisory sta to convey inormation about thebusiness as well as via Company notice boards andregular emails and blogs. Furthermore, the Companyhas established an RSC Employee Forum to assist withcommunication on a number o levels, including inrelation to redundancy consultation.

The GMB Union is accepted by the Company tonegotiate collective bargaining on behal o hourly paidsta within the Distribution Centre.

Employee Sharesave planThe Group operates a Sharesave plan which is open toall employees with the relevant length o service with theGroup. Three invitations under the Plan have been madeas ollows:

> September 2007 at an option price o 1690 pence perOrdinary Share. As at 30 January 2011, the plan had46 members holding options over 5,366 OrdinaryShares.

> November 2009 at an option price o 232 pence perOrdinary Share. As at 30 January 2011, the plan had91 members holding options over 75,722 OrdinaryShares.

> November 2010 at an option price o 77 pence perOrdinary Share. There were no options under the 2010Sharesave plan as at 30 January 2011.

All gures quoted are ater the Capital Reorganisationon 21 February 2011, and remain subject to HMRCapproval o the changes.

Under the plan, employees can save up to a monthlylimit o 250 and are given an option to buy OrdinaryShares in JJB, in the case o the September 2007invitation, at the end o three or ve years, and in thecase o subsequent invitations, at the end o three years,at a discount o 20 per cent o the market value o theOrdinary Shares at the date o grant. There are noperormance conditions attached to these options.


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7 8

4 5 6

GovernanceBoard o Directors

1 2 3


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Executive Directors01 Keith Jones MBA (46)Chie Executive OfcerKeith joined the Board on 1 March 2010 as ChieExecutive Ocer. He was previously Group RetailDirector at DSG International plc, the leading electricalretail group, where he spent the past ten years ina variety o senior roles. Beore that he held a numbero positions within other retail groups, including

Virgin and B&Q. He has an MBA rom ManchesterBusiness School.

02 David Williams BA FCA (44)Chie Financial OfcerDave Williams joined the Board on 17 January 2011 asChie Financial Ocer. He previously held the position oFinance and IT Director at TJ Hughes Limited, a leadingdiscount department store chain. Prior to joining JJB,Dave held a number o senior nance roles at Focus DIYGroup Limited, most recently as Group Finance Directorand Company Secretary. He is a Fellow o the Instituteo Chartered Accountants and a ormer Director in the

Transaction Services division o KPMG. He will becomeCompany Secretary o the Company upon RichardMannings departure rom the Board.

03 Richard Manning LLB (Hons), MBA, Solicitor (46)Legal and Operations Director andCompany SecretaryRichard Manning was appointed to the JJB Board on25 March 2009, having been acting General Counselsince 7 January 2009. In addition to his duties asCompany Secretary and General Counsel, he isresponsible or HR, property and property-relatedissues, IT and warehousing and distribution. Prior to

joining JJB, Richard was Company Secretary andlatterly a director o GCap Media plc and GWR Group plc.

He will stand down rom the Board at the CompanysAGM on 8 July 2011.

Non-executive Directors04 Mike McTighe (57)ChairmanMike McTighe was appointed Chairman o the Boardo the Company on 23 December 2010. Following anexecutive career in the medical equipment andtelecommunications industries, including the chieexecutive role at the global operations division o Cable& Wireless plc, he holds a number o directorships, andis currently on the board o OFCOM (the UKs regulatoro the broadcasting, telecommunications and wirelesscommunication sectors). He was recently voted theUK Quoted Companies 2010 Chairman o the Year andcurrently serves as Chairman o Pace plc, Volex Groupplc and WYG Group plc and is the senior independentnon-executive director o Betair Group plc. Mike haspreviously served as a director o Alliance & Leicester plcand Chairman and CEO o Carrier1 International SA.

05 David Adams M.A. (Hons), FCMA (56)Senior Independent Non-executive DirectorDavid Adams was appointed as a Non-executiveDirector o the Company on 29 January 2010. He iscurrently Chairman o Snap Equity Ltd (Jessops) as wellas being a Non-executive Director o Halords Group,Alexon Group (where he will become Chairman on31 May 2011) and British Retail Consortium (Trading)

and a Trustee and Non-executive Director o Walkthe Walk, a breast cancer charity. He has also heldNon-executive positions at Moss Bros (where hewas Non-executive Chairman), Whittard o Chelsea,Ottakars and Eidos. Between 1997 and 2006,David was Finance Director o House o Fraser,additionally becoming Deputy CEO in 2001. Prior to1997, he held senior positions at Asprey, Ladbrokesand Burton Group.

06 Sir Matthew Pinsent CBE (40)Independent Non-executive DirectorSir Matthew Pinsent was appointed as a Non-executiveDirector o the Company on 31 January 2010. He readgeography at Oxord University beore embarking on an

international rowing career that spanned two decades.During that time he won ten World Championship andour Olympic gold medals. In addition Matthew racedthe University Boat Race three times or Oxord winningtwice and has won 14 times at Henley Royal Regatta.In 2005 he was an ambassador or the successulLondon bid to bring the Olympic Games to the UK.He is now a journalist and broadcaster, reporting ona wide range o sports or the BBC and The Timesnewspaper. Matthew was awarded an MBE in 1993,a CBE in 2001 and knighted in 2005.

07 Alan Benzie FCA (64)Independent Non-executive DirectorAlan Benzie was appointed as a Non-executive Director

on 3 August 2007. Alan was Chairman o KPMG in theNorth o England until his retirement in 2003 and isnow Chairman o a national legal rm, DWF. He is alsoa Non-executive Director o Auto Think Limited and isChairman o the Board o Governors o ManchesterMetropolitan University. He will stand down rom theBoard at the Companys AGM on 8 July 2011.

08 Richard Bernstein (48)Non-executive DirectorRichard Bernstein was appointed as a Non-executiveDirector on 6 May 2011. He was nominated to theBoard by Crystal Amber Fund, one o the Companysleading shareholders. Richard is also ounder andChie Executive o Eurovestech plc, the AIM listedEuropean technology und. Richard was named UKBusiness Charity Champion by Third Sector in 2010or raising 2 million or charitable causes.

Note: The Directors named above comprise all o the Directors oJJB at the date o this report. For details o other Directors who servedduring the year under review, see the Corporate Governance reporton pages 15 to 20.


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GovernanceBoard Committees

The current members o the our principal Committeeso the Board are as set out below:

Audit CommitteeAlan Benzie (Committee Chairman)Mike McTigheDavid Adams

Remuneration CommitteeDavid Adams (Committee Chairman)Alan BenzieMatthew PinsentRichard Bernstein

Nominations CommitteeMike McTighe (Committee Chairman)Alan BenzieDavid Adams

CSR CommitteeRichard Bernstein (Committee Chairman)Matthew PinsentKeith Jones

Notes:> David Adams and Matthew Pinsent joined,

respectively, the Audit Committee and theRemuneration Committee, on 3 March 2010;

> John Clare let the Audit Committee, the NominationsCommittee and the Remuneration Committee, whenhe stepped down rom the Board on 23 December2010;

> Mike McTighe joined the Audit Committee and theNominations Committee on 23 December 2010;

> Richard Bernstein joined the RemunerationCommittee on 6 May 2011;

> The CSR Committee was ormed on 6 May 2011;> The terms o reerence o these Committees are

summarised in the Corporate Governance reporton pages 17 to 18 and on JJBs corporate website,www.jjbcorporate.co.uk; and

> Richard Manning is secretary o each o theseCommittees.


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GovernanceCorporate Governance report

The Board o JJB is ully committed to high standards o corporate governance. This report explains how theCompany has applied the principles set out in the Combined Code on Corporate Governance published by theFinancial Reporting Council in June 2008 (the Code) which applies to the Company in respect o the year underreview, and the extent to which it has complied with the detailed provisions o the Code. A copy o the Code canbe ound at www.rc.org.uk/corporate/combinedcode.cm. In May 2010 the Financial Reporting Council issueda new edition o the Code (called the UK Corporate Governance Code) which applies to nancial years beginningon or ater 29 June 2010. Notwithstanding the Companys move to AIM, it intends to continue to comply, to theextent that it is able, with the provisions o the Code as it is amended rom time to time.

ComplianceThe Board considers that the Company, which was a smaller company (meaning a company outside o theFTSE 350 throughout the year immediately prior to the reporting period) has complied with the provisions set outin Section 1 o the Code throughout the year under review.

The Board currently comprises eight Directors: the Chairman, three Executive Directors and ve Non-executiveDirectors. Their names, roles and brie biographical details are provided on page 13. The Company has previouslyreported that Richard Manning and Alan Benzie will leave the Board at the AGM on 8 July 2011 and LawrenceChristensen will join the Board on 1 November 2011 as a Non-executive Director.

All o the Non-executive Directors with the exception o the Chairman and Richard Bernstein are considered by theBoard to be independent and have no cross-directorships or signicant links which could materially interere withthe exercise o their independent judgement. A Chairman is not considered to be independent or the purposeso the Code. Richard Bernstein is not considered to be independent as he was appointed to the Board ollowing

a nomination pursuant to a Relationship Agreement entered into between the Company and Crystal Amber FundLimited dated 21 November 2010. Harris Associates L.P. has a right to appoint a Director to the Board which theyhave not exercised.

With eect rom 1 October 2008, a Director has had a duty to avoid a situation in which he has, or can have,a direct or indirect interest that conficts, or possibly may confict, with the interests o the Company. The Boardhas adopted appropriate processes to manage any such conficts ollowing the necessary amendments to theCompanys Articles o Association at the 2009 AGM.

The DirectorsFull details o all current Directors are set out on pages 12 to 13. For details o other Directors who served duringthe period under review, see the Operating review on page 7.

All Directors are subject to retirement by rotation and re-election by the Companys shareholders in accordancewith the Articles o Association. All new Directors appointed by the Board are required to be elected by

shareholders at the rst AGM ollowing their appointment. Subsequently, at each AGM one-third o the Directors(or, i their number is not three or a multiple o three, then the number nearest to but not exceeding one third)must retire, but will be eligible or re-election. Mike McTighe, Dave Williams and Richard Bernstein will be seekingelection at the AGM and Keith Jones will be seeking re-election. The reasons why the Board believes that eacho these continuing Directors should remain in oce will be set out in the explanatory notes to the Notice o AGM.

The Company maintains liability insurance or its Directors and Ocers and the level o cover is reviewed annually.

Perormance evaluationOwing to the number o changes in the composition o the Board during the year and the Companys continuingnancial diculties, inormal rather than ormal board perormance evaluation was conducted during the yearunder review. Board perormance evaluation will continue to be conducted. The extent to which this is ormal orinormal will be determined by the Chairman and the Board according to the available resources and businessneeds.How the Board operates

The Board is responsible or the direction, management and perormance o the Company. It determinescorporate strategy and reviews both nancial and operational perormance against orecasts. The Board is thedecision-making body or all matters material to the Group in strategic, nancial and reputational terms. The Boardhas a ormal schedule o matters specically reserved to the Board or decision, including approval o the nancialresults, strategy and corporate objectives, signicant transactions and matters aecting share capital. The Boarddelegates certain powers to a number o committees within written terms o reerence.


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GovernanceCorporate Governance report continued

How the Board operates (continued)Full and timely access to all relevant inormation is provided to all Directors via comprehensive Board papers,which are circulated in good time ahead o Board meetings. These include regular and up-to-date managementaccounts, detailed trading inormation, and reports rom Executive Directors and papers on major issues ordecision by the Board.

There is an established procedure whereby any Director may, in the urtherance o his duties, have access toindependent proessional advice and services at the Groups expense. The Chairman ensures that Board

procedures are ollowed and that the Board seeks independent advice whenever necessary.

The Company Secretary, Richard Manning, is responsible or advising the Board on all governance matters andall Directors have access to the advice and services o the Company Secretary. The appointment and removalo the Company Secretary is a matter or the Board to decide. The Company Secretary acts as secretary to theBoard and all o its principal committees.

All newly appointed Directors receive a tailored induction when they join the Board or a Committee. The continuingproessional development needs o each Director will be reviewed and, where appropriate, relevant training will bemade available.

Board and Committee meetingsThe Board normally holds 10 scheduled Board meetings each year, but during the period under review, owing tothe intense activity required as a result o the issues aced by the Company during the year, the Board met ormally20 times and on many other occasions on a less ormal basis.

The ollowing table shows the number o ormal Board and Committee meetings held during the year and theattendance record o the individual Directors holding oce during the period. The maximum number o meetingsa Director could attend as a Board/Committee member is shown in brackets.

Number o meetings

Boardo Directors

20

AuditCommittee

3

RemunerationCommittee

7

NominationsCommittee

2

Current Directors:

Mike McTighe1 4 (4) 0 (0) 0 (0)

Keith Jones2 18 (19)

Richard Manning 20 (20)

David Williams3 3 (3)

David Adams4 18 (20) 2 (3) 3 (3) 2 (2)

Alan Benzie 20 (20) 3 (3) 6 (7) 2 (2)

Richard Bernstein5 0 (0) 0 (0)

Matthew Pinsent6 14 (20) 4 (5)

Former Directors:

John Clare7 16 (16) 3 (3) 4 (4) 0 (0)

Lawrence Coppock8 17 (17)

David Jones9 2 (6) 0 (2)

Colin Tranter10 2 (3)

Notes:1 Appointed 23 December 2010.2 Appointed 1 March 2010.3 Appointed 17 Januar y 2011.4 Appointed to the Board on 29 January 2010; appointed to the Audit Committee on 3 March 2010; appointed to the Remuneration

Committee on 1 July 2010; appointed ormally to the Nominations Committee on 28 July 2010, although was appointed on a temporarybasis or the two meetings shown in the table.

5 Appointed to the Board and the Remuneration Committee on 6 May 2011.6 Appointed to the Board on 31 January 2010; Matthew Pinsent had a number o prior commitments which made his attendance at some

previously scheduled Board meetings, particularly near the beginning o the period impossible. Appointed to the Remuneration Committeeon 3 March 2010.

7 Resigned 23 December 2010.8 Resigned on 17 January 2011.9 Resigned on 28 July 2010, having moved rom being Executive Chairman to Non-executive Director on 28 January 2010.10 Resigned on 25 March 2010.


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Board CommitteesDuring the period under review, the Board had established three principal Board Committees to which it hasdelegated certain o its responsibilities. Each operates within clearly dened terms o reerence which are availableat www.jjbcorporate.co.uk. These Committees are described below.

Audit CommitteeThe Audit Committee met three times during the year. The Committee is chaired by Alan Benzie, who, until hisretirement in 2003, was chairman o KPMG in the North o England. The other Committee members are currently

David Adams and Mike McTighe. John Clare also served as a member o the Committee during the year underreview. The Chie Financial Ocer, senior executives and the Groups external auditors also attend meetingso the Committee at the invitation o the Committee chairman. Alan Benzie will retire rom the Board at the AGMon 8 July 2011.

The Committees responsibilities include:> Monitoring the integrity o the Groups Financial statements;> Reviewing the eectiveness o the Groups internal controls, risk management systems and nancial reporting

processes;> Reviewing the independence and objectivity o the external auditor, the services they provide, and the scope

o their audit work and related ees, along with a review o their reported ndings; and> Making recommendations to the Board on the appointment, retirement and removal o the external auditor.

Remuneration CommitteeThe Remuneration Committee met seven times during the year. The Committee is chaired by David Adams and

the other members are currently Alan Benzie, Matthew Pinsent and Richard Bernstein. John Clare also servedas a member o the Committee during the year under review. Alan Benzie will retire rom the Board at the AGMon 8 July 2011.

The Committees responsibilities include:> Determining the overall Group remuneration policy;> Determining the individual remuneration packages o Executive Directors based on their perormance during

the year and giving guidance on remuneration packages or senior executives;> Making incentive awards under the Companys various incentive plans;> Approving disclosures relating to executive remuneration in the Annual Report; and> Agreeing the terms o service agreements or Executive Directors.

Further details about Directors remuneration are set out in the Directors Remuneration report on pages 24 to 33.

Nominations Committee

The Nominations Committee met twice during the year. The Committee was chaired by John Clare until he let theBoard on 23 December 2010 since when Mike McTighe has chaired the Committee. The other members o theCommittee are Alan Benzie and David Adams. David Jones also served as a member o the Committee duringthe year under review. Alan Benzie will retire rom the Board at the AGM on 8 July 2011. An announcement aboutthe uture composition o the Nominations Committee will be made in due course. As its two meetings duringthe year were to consider the appointment o a Chairman, John Clare did not attend those meetings (as he was acandidate and eventually appointed as Chairman). David Adams was appointed to the Committee on a temporarybasis in his place or those meetings beore being ormally appointed later in the year.

The Committees responsibilities include:> Reviewing the structure, size and composition o the Board;> Making recommendations to the Board regarding any changes to the Boards composition;> Identiying and nominating (or Board approval) candidates to ll any vacancies on the Board;> Reviewing succession plans or both Executive and Non-executive Directors; and> Reviewing the membership o Board Committees.

The process or appointing new Directors involves creating a short-list o potential candidates or any vacantposition. Usually, this is done by the Chairman o the Committee ater discussions with a range o senior retailtrade executives and proessional advisers. External search consultants are engaged where appropriate. Thesecandidates are then interviewed by the members o the Committee beore the Committee makes the decision whoto nominate to the Board as their preerred candidate or the vacant position. During the year under review, manyo the unctions o the Committee were exercised by the ull Board.


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CSR CommitteeUpon the appointment o Richard Bernstein as a Non-executive Director on 6 May 2011, the Board resolved toconstitute a CSR Committee to urther the Companys activities in the Community with a particular emphasis oncharitable issues. The Committee currently comprises o Richard Bernstein as Chairman, Matthew Pinsent andKeith Jones. The activities and terms o reerence o this Committee will be reported in the next Annual Report.

Internal Control and Risk ManagementThe Board has applied Code provision C.2.1 which requires that it should, at least annually, conduct a review o

the eectiveness o the Groups system o internal controls and should report to shareholders that they have doneso. It also requires the review to cover all material controls, including nancial, operational and compliance controlsand risk management systems. This process has been in place rom the start o the year to the date o approvalo the Financial statements.

Furthermore, Code provision C.3.5 states that the Audit Committee should monitor and review the eectivenesso a companys internal audit activities. Where there is no internal audit unction, the Committee should considerannually whether there is a need or an internal audit unction and make a recommendation to the Board, and thereasons or the absence o such a unction should be explained in the relevant section o the Annual Report.

The Company has established an internal audit unction and has recruited a Head o Audit and Risk Management.The internal control ramework encompasses both nancial and non-nancial controls, the eectiveness o whichis regularly reviewed by the Board and by senior executives. This ramework orms an important part o theprocess o embedding internal control and risk management into the operations o the Companys business.

Any system o internal control can only provide reasonable and not absolute assurance that all signicant businessrisks will be ully mitigated. However, by ensuring that the system o internal control refects the risk environment inwhich the Group operates, the new systems should provide adequate assurance that the principal risks acing theGroup are properly managed.

Sta can raise concerns regarding any impropriety over nancial reporting or other matters through a Whistle-blowing Policy. The Board has recently taken steps to improve this process.

It is the Boards rm intention that the risk management processes and internal controls will be continuouslyreviewed or eectiveness and assessed by them.

The Board also takes into consideration any matters raised by the Audit Committee. The Audit Committee willcontinue to review in detail both the eectiveness and level o resources available within the Group to manage riskand monitor control eciency o the new internal audit unction.

The Company has continued to identiy weaknesses and ineciencies in many o the Companys processes,including particularly the buying and merchandising and supply chain unctions. These have been addressedby the new Trading Director and improvements have started to show, although this is an area that will be closelymonitored as the Company continues its ocus on the process and people aspects o the identied areas.

The control o working capital as well as costs and the management o cash has improved signicantly duringthe period.


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Auditor independenceDeloitte LLP has reported to the Audit Committee that, in their proessional judgement, they are independentand that the objectivity o the audit partner and audit sta is not impaired. The Audit Committee has reviewedthis report and agrees with its conclusion and is satised that Deloitte LLP has adequate policies and saeguardsin place to ensure that auditor objectivity and independence is maintained. The Audit Committee is aware thatproviding audit and non-audit advice could lead to a potential confict o interest. The level o ees paid toDeloitte LLP or non-audit services has been considered by the Audit Committee and is not perceived to bein confict with auditor independence. In order to ensure the continued independence and objectivity o the

external auditor, there is an established policy regarding the provision o non-audit services.

Deloitte LLP has been the external auditor since August 2002. The Audit Committee assesses and considersthe requency o changing auditor based on their assessment o the audit, and rotation o audit partner, themost recent o which occurred in the current period. No contractual obligations exist which restrict the AuditCommittees choice o auditor.

Non-audit services in the period predominantly relate to work required as a result o Deloitte LLPs role as auditor,or work more eciently completed by the Groups auditor. Reporting accountants services include necessarywork related to the capital raisings and CVA. Their work was best perormed by the Groups auditor becauseo their knowledge o the Group.

Alternative Investment Market (AIM)The Companys listing on the main market o the London Stock Exchange was cancelled and its shares wereadmitted to AIM on 28 April 2011.

Relations with shareholdersThe Group is committed to maintaining an active dialogue with its shareholders in order to build a mutualunderstanding o its objectives and this is particularly so ollowing the First and the Second Firm Placing andPlacing and Open Oer and the appointment to the Board o Richard Bernstein; the our largest shareholders inthe Company now hold approximately 84 per cent o the issued shares in the Company and the Board ensuresthat it continues to communicate with them regularly. The Board invites institutional shareholders and analyststo briengs ater the announcement o the Companys interim and annual results. There is also regular dialoguewith individual institutional investors, und managers and analysts. The Senior Independent Non-executive Directoris available to act as a conduit to the Board or communication o shareholder concerns when other channels ocommunication are inappropriate.

The Board encourages communication with private shareholders through publication o the interim and annualresults.

The AGM is used as an opportunity to gather the views o shareholders and to answer the questions o bothprivate and institutional investors on all issues relevant to the Group. Save in exceptional circumstances, allDirectors attend the Companys AGM and the chairmen o the Boards Audit, Remuneration and NominationsCommittees are usually available to answer shareholders questions regarding the activities o those Committees.

The Groups corporate website, www.jjbcorporate.co.uk, also includes an area dedicated to corporate inormation,including annual and interim reports, press releases, share price histories, Group news and certain Group policydocuments.


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Going concernAt the time o the announcement o the Groups interim results on 27 September 2010, it was disclosed thattrading conditions experienced by the Group were dicult and consequently the Groups lender, Bank o Scotland(BoS), had agreed to waive the Groups EBITDAR covenant test in October 2010.

The Group continued to experience very dicult trading conditions and on 23 December 2010, the Company andBoS agreed the terms o a waiver o the EBITDAR and xed charge cover ratio tests scheduled or 31 January2011. On this date the Group also announced that it had secured support rom key investors or a capital raising

totalling 31.5 million gross proceeds.

The rst Firm Placing and Placing and Open Oer, ull details o which are set out in the Prospectus sent toShareholders and dated 2 February 2011, was concluded on 25 February 2011 and resulted in gross proceeds o31.5 million which allowed the Group to settle overdue creditors and provide the Group with short term liquidityto allow the preparation o a undable revised business plan and provide sucient time to execute a renancingand a restructure o the Groups store portolio.

On 3 March 2011, as part o the Groups restructuring and renancing, a CVA proposal was announced.

The second Firm Placing and Placing and Open Oer, ull details o which are set out in the Prospectus sentto Shareholders and dated 6 April 2011, was concluded on 27 April 2011 and resulted in gross proceeds o65 million.

The CVA challenge period expired on 21 April 2011, and on 28 April 2011, ollowing receipt o the gross proceeds

rom the second stage capital raise, the CVA proposal was implemented and the Company entered into new banknancing arrangements (see note 44 o the Notes to the Financial statements) with BoS with an extension o itscurrent 25 million revolving working capital acility which will now expire on 31 May 2014. This acility also includesrevised covenants and concluded the Groups restructuring.

The Group has traded in line with its business plan during the rst quarter o its current nancial period i.e. the52 weeks ending 29 January 2012. The turnaround programme is now established in the business and the newmanagement team are executing the plan, notably re-balancing and re-investing in the stock packages ollowingthe period o signicant working capital constraints in order to drive trading perormance and also ensuring thecost base refects the needs o the business or the uture.

The Directors have reviewed trading and cash fow orecasts as part o their going concern assessmentwhich take into consideration the uncertainties in the current operating environment and also the latest tradinginormation. The Directors are aware that there are uncertainties acing the business, not least that uture tradingmay not be in line with the assumptions in the Groups latest business plan, which in turn, is dependent on the

current economic climate and the implementation o its business recovery programme.

The Directors have applied reasonable stress testing to their trading and cash fow orecasts and ater applyingreasonable sensitivities, these show that the Group would continue to have headroom within its working capitalacilities and on its revised covenants.

The Directors are thereore o the opinion that the Group and Company have adequate resources to continue inoperational existence or the oreseeable uture and or this reason, they continue to adopt the going concern basisin preparing the Annual Report and Financial statements. This Annual Report does not include any adjustmentsthat would result in the going concern basis o preparation being inappropriate.

Mike McTigheChairman25 May 2011


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GovernanceDirectors report

Annual ReportThe Directors o JJB Sports plc present their Annual Report on the aairs o the Group, together with the Financialstatements and auditors report or the 52 week period ended 30 January 2011.

Principal activitiesJJB Sports is a sports retailer supplying branded sports and leisure clothing, ootwear and accessories. Full detailso the Groups activities can be ound in the Operating review on pages 5 to 9.

Business reviewThe Company is required by the Companies Act to include an Operating review in this report. The requisiteinormation is included in the ollowing sections, which are deemed to be incorporated into this report by reerence:> Chairmans statement on page 1;> Chie Executives review on pages 3 to 4;> Operating review on pages 5 to 9;> Corporate Governance report on pages 15 to 20; and> Directors Remuneration report on pages 24 to 33.

Events ater the period endDetails o important events aecting the Company occurring since the period end are set out in note 44 o theNotes to the Financial statements.

Results and dividendsGroup losses rom continuing operations ater taxation and ater exceptional items were 181.4 million

(2010: Loss 61.1 million). Losses rom continuing operations beore exceptional items were 73.9 million(2010: Loss 67.7 million). No interim dividend was paid during the year and the Directors cannot recommenda nal dividend or the period (2010: same).

Financial instrumentsInormation on the Companys use o nancial instruments, its nancial risk management objectives and policiesand the exposure o the Company to price risk, credit risk, liquidity risk and cash fow risk is provided in theOperating review on pages 5 to 9 and in note 41 o the Notes to the Financial statements.

Share capital structureDetails o the issued share capital, together with details o the movements in the Companys issued share capitalduring the year, are shown in note 27 o the Notes to the Financial statements. The Company has two classeso share, Ordinary Shares and Deerred Shares. The Ordinary Shares carry no right to xed income and eachOrdinary Share carries the right to one vote at general meetings o the Company. The Deerred Shares carryno rights.

The Company has issued Warrants to subscribe or Ordinary Shares. Details are in notes 23 and 44 o theNotes to the Financial statements.

There are no specic restrictions on the size o a holding or on the transer o shares, which are both governed bythe general provisions o the Articles o Association and prevailing legislation. The Directors are not aware o anyagreements between holders o the Companys shares that may result in restrictions on the transer o securitiesor on voting rights. No person has any special rights o control over the Companys share capital.

Details o employee share schemes are set out in note 28 o the Notes to the Financial statements and in theDirectors Remuneration report on page 24 to 33. The provisions o the Companys share schemes and plans maycause options and awards granted under such schemes and plans to vest on a takeover.

Ater the end o the nancial period under review, there were a number o changes to the share capital structureas described in the Operating review on pages 5 to 9, and in note 44 o the Notes to the Financial statements.


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GovernanceDirectors report continued

Directors powersSubject to any statutory provisions and the Companys Memorandum o Association, the Articles:> Enable the Directors to exercise all the powers o the Company;> Allow the Directors to delegate any o their powers, authorities and discretions to any Executive Director and

to delegate any o their powers or discretions to committees consisting o one or more Directors;> Authorise the Company to purchase all or any o its own shares (subject to certain restrictions); and> Authorise the Directors to allot unissued shares or to grant options or rights o subscription or conversion over

unissued shares.

DirectorsThe names, roles and brie biographical details o the current Directors are set out on page 13. The names o otherDirectors who served during the period together with ull details o Board changes are contained in the Operatingreview on page 7.

With regard to the appointment and replacement o Directors, the Company is governed by its Articles oAssociation, the Code, the Companies Acts and related legislation. The Articles themselves may be amendedby special resolution o the shareholders at a general meeting.

The interests o the Directors in the Ordinary Shares o the Company at the period end (together with details oany subsequent changes) are set out in the Directors Remuneration report on pages 24 to 33. In addition, detailso all service agreements and letters o appointment entered into between the Company and the Directors areset out in the Directors Remuneration report.

Details o related party transactions aecting the Directors are set out in note 43 o the Notes to the Financialstatements.

ContractsThe Group conrms that there are no persons with whom the Group has contractual or other arrangements whichthe Group considers are essential to its business. Furthermore, there are no signicant agreements to which theGroup is a party that take eect, alter or terminate upon a change o control o the Company ollowing a takeoverbid.

Substantial ShareholdersAt the date o this report the Company has been notied, in accordance with the Disclosure and TransparencyRules as they relate to companies listed on the AIM, o the ollowing interests in the voting rights attached tothe Companys Ordinary Shares:

Number oshares in

which there isan interest

Interest inissued

shareCapital (%)

Invesco Asset Management Limited 139,275,935 47.48

Harris Associates L.P. 73,118,445 24.93

Crystal Amber Fund Limited 20,889,701 7.12

William Gates III 6,505,997 4.97

Charitable and political donationsCharitable donations o 7,530 (2010: 52,505) were made by the Group during the period. Details are given in theCorporate responsibility report on page 11. No political donations or contributions were made during the currentor previous accounting period.

Supplier payment policyThe Groups policy or the payment o suppliers is to agree terms o payment with suppliers at the time when

orders are placed. Payment is then made in accordance with the agreed terms. At 30 January 2011, the numbero days purchases included in the amounts owing to trade creditors in the Group and Company was 50 days(2010: 80 days), based on the ratio o trade creditors at the end o the accounting period to the amounts paidduring the accounting period to trade creditors.


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Statement as to disclosure o inormation to AuditorsPursuant to section 418 o the Companies Act 2006, each Director o the Company conrms that (a) so ar ashe is aware, there is no relevant audit inormation o which the Companys auditor are unaware; and (b) that he hastaken all the steps that he ought to have taken as a Director in order to make himsel aware o any relevant auditinormation and to establish that the Companys auditor are aware o that inormation. For these purposes, relevantaudit inormation means inormation needed by the Companys auditor in connection with preparing their reportset out on pages 35 to 36.

Annual General MeetingDetails o the Companys AGM to be held in 2011 are set out in the Notice o AGM being sent to shareholders,a copy o which will be available on the Companys website.

By Order o the Board

Richard ManningCompany Secretary25 May 2011


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GovernanceDirectors Remuneration report

IntroductionThis report has been prepared in accordance with the Companies Act 2006 (the Act); the FSAs Listing Rules andthe Combined Code. A resolution to approve this report will be proposed at the Companys orthcoming AGM.

This report contains unaudited and audited inormation in two sections. The Act requires the auditor to report onthe audited inormation within the Directors Remuneration Report and to state whether in their opinion those partso the report have been properly prepared in accordance with the Act.

Unaudited inormationThe Remuneration CommitteeThe terms o reerence o the Remuneration Committee are summarised in the Corporate Governance reporton pages 15 to 20. The names o the current members o the Remuneration Committee and the changes tomembership made during the period are set out under Board Committees on page 17.

No Director participates in the determination o his own remuneration package.

External advisersThe Remuneration Committee has not appointed ormal external advisers during the year, but has on occasionsduring the period and ater the end o the period taken advice rom KPMG LLP, Hewitt New Bridge Street,MM & K Limited and Herbert Smith LLP.

Remuneration policy

Executive DirectorsThe remuneration o Executive Directors is determined by the Remuneration Committee, which also givesguidance on remuneration or senior executives and agrees policy or the whole Company. It is the Companysremuneration policy to seek to ensure that:> Its Executive Directors are airly rewarded or their individual contributions to the Groups perormance;> Their overall remuneration packages are competitive with those o comparable listed companies; and> Each Executive Director is incentivised to improve the Groups perormance by means o a perormance-related

bonus and the award o share in

jjb sports plc annual report 2011

Documents