A quarter of Jessops stores and over 500 jobs to go

Jessops, the UK's largest specialist high street photographic retailer, has annouced to the stock market this morning that it is to close 81 stores, leaving it with 234. Around 550 staff will be made redundant. Jessops explains that several stores that will close are in close proximity to other stores and some selected stores will be relocated.

Facing stiff competition from online vendors, Jessops lost £25 million in it's most recent half year results to the end of April. Jessops suggests that the restructuring announced today will only save some £15m. Ironically, one of the biggest competitors to the firm's high street chain is its own online sales effort, which some have remarked as being a canibalistic business strategy.

Three months ago Jessops share price dropped by over two thirds after a profits warning and has not recovered since.

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Interim Results for the 26 Weeks to 1 April 2007

Jessops, the UK’s leading photographic retailer, today announces the outcome of its Strategic Review, its new banking facilities to December 2008 and its interim results for the 26 weeks to 1 April 2007.

The Strategic Review addresses the fundamental issues that face Jessops in this challenging market. This strategy re-positions Jessops as a true multi-channel retailer with a strong presence in the growing digital printing services market in addition to continued leadership in digital cameras. This will be supported by market leading customer service.

In addition Jessops announces several immediate profit enhancing initiatives to address the cost base across the store portfolio and its support functions. This will create a strong platform for future growth.

Strategic Review – key points
· Increased focus on growing digital printing and photo merchandise markets, building on recently launched multi-channel collect@store service;
· Focused new ‘bricks & clicks’ strategy via jessops.com and Jessops Picture House;
· Planned closure of 81 stores – 47 overlapping, 31 loss-making and three subject to redevelopment;
· Remaining 234 stores are profitable and cash generative;
· Sale of aged stock through outsourced clearance specialists;
· Reduction in central overheads by 20%, and total overheads reduced by over £15m; and
· Non-recurring costs of restructuring actions in the full year of 2007 amount to around £25m, of which £6.9m are cash costs of closing the stores and re-organising the support centre, for which funding is in place

New banking facilities
· £66.5m facility agreed with HSBC to December 2008, of which £60m is committed;
· Terms agreed with Pension Fund Trustees; Pension Regulator’s clearance is being sought;
· Interest charged at up to 5.25% over LIBOR;
· Deferred re-financing fee of £7m, payable in December 2008; and
· The issue of Warrants to HSBC over unissued ordinary shares equivalent to 10% of Jessops’ issued share capital (5% exercisable from June 2007 and 5% after the AGM to be held in January 2008)

Commenting on the Strategic Review, David Adams, Executive Chairman, said:
“Since I joined as Chairman at the beginning of May I have been delighted with the progress that has been made by Chris Langley and his team in developing our strategy for the future. The strategy allows us to re-position Jessops as a true multi-channel retailer, building on our core strengths in the digital imaging market place.

“We have been working closely with our bankers HSBC and are pleased to announce that we have agreed new banking facilities. These facilities will provide us with the opportunity over the next 18 months to build a solid platform for the long term. I would also like to thank our suppliers for their support and the entire Jessops team who have worked extremely hard over the past few months in difficult circumstances.

“The Board is confident that Jessops will deliver a significant turnaround in its financial performance.”

Interim Results
· Interim results in line with guidance given on 28 March 2007;
· Total sales of £178.9m ( 2006: £177.8m);
· Like for like sales down 2.8% (2006: increase 2.3%);
· Loss before tax and non-recurring items of £8.5m (2006: profit £5.1m);
· First half non-recurring and non-cash items of £16.7m (2006: nil);
· Loss before tax of £25.2m (2006: profit £5.1m);
· Loss per share before non-recurring items of 6.4p (2006: earnings 3.3p);
· Basic loss per share of 19.1p (2006: earnings 3.3p);
· No interim dividend declared (2006: 0.75p per share); and
· Net debt at 1 April 2007 of £61.5m (2006: £53.6m)

Current Trading and Outlook
· Trading since 1 April impacted by shortages of key product lines caused by financial uncertainty. This is reflected in total sales for the 12 weeks to 17 June down 9.8% and like for like sales down 12.9%;
· Jessops has been working closely with its suppliers and the shortage of key product lines is now much improved going into the busy summer trading period; and
· The sales shortfall since 1 April has been mitigated by an improved gross margin and a continued focus on costs.

In the statement of 28 March 2007, the Board indicated a full year loss before tax of around £5m, before any costs relating to the strategic review and restructuring. The underlying performance of the business remains in line with this guidance but, as a result of the refinancing the assumed interest charge in the second half will increase by £1m. There will also be a non-cash charge to the profit and loss account of £2m representing this year’s element of the total deferred refinancing costs. In addition the impact of converting the 39 stores into clearance stores, and other store closures in the current financial year, is anticipated to result in a reduced profit contribution from these stores over the summer trading period of around £1.5m.

Chris Langley, Chief Executive of Jessops added:
“The strategy and actions we have announced today build on the underlying strengths of Jessops and our unique position as the leading photographic retailer in the UK.

“Our results show the extent of the tough market conditions we have faced in the past eight months and the severe price deflation affecting our markets. Despite this, the number of cameras sold increased and we continued to make market share gains.

“Phase one of our strategic plan is set out in the restructuring actions announced today. Phase two involves focusing the business around an “image enjoyment” customer-led proposition and on those parts of our market that continue to demonstrate growth, namely in-store and online digital printing and digital SLR camera sales. We will deliver this strategy by maintaining our market leading levels of customer service.

“Whilst the market is likely to remain challenging, I am confident that the steps we are taking will provide us with a stronger platform for the future.

“I would like to thank all Jessops colleagues and our suppliers for their support during these difficult past months. We have a strong team in place who have the skills and experience to ensure that we will deliver this strategic plan.”