Tax break cushions JJB's fall

A one-off tax break helped JJB Sports to cushion what could have been an even
bigger fall in earnings, as the FTSE250 retailer reported a 33% fall in earnings
per share on last year’s figures.

Founded by Wigan Athletic owner Dave Whelan, JJB has battled to cope with a
fall in retail spending and cutthroat competition from privately-owned rival
Sportsworld.

For the year ended 29 January 2006 the company saw operating profit almost
halve from £62.1m to £34.3m on the previous year, while earnings per share
dropped by a third to 13.10p per share.

The fall in profits could have been even more substantial had the company not
been rescued by a significant fall in its tax rate to just 10.4%. The company
said the drop related to ‘the finalisation of a number of years of corporation
tax liabilities with the Inland Revenue’. As a result JJB Sport’s tax bill
dropped from £17.3m to £3.5m.

Analysts, however, warned that without the reduced tax rate earnings per
share would have dropped by more than the 33% reported.

‘Reported EPS was boosted by a 10% tax charge relating to prior year
adjustments. Using an ongoing 30% tax charge, EPS was 9.9p,’ analysts at
investment bank UBS said.