Jessops to drop PLC status ‘before Christmas’: Chairman interview
November 17, 2009
Page One: Jessops set to drop PLC status
High-street photographic retailer Jessops will be de-listed from the London Stock Exchange before Christmas, according to chairman David Adams in an exclusive interview with Amateur Photographer (AP) magazine.
In September Jessops’ main operating company was sold to a new firm called Snap Equity Ltd, 47% of which is owned by HSBC bank.
The financial restructure saved 2,000 jobs and meant that HSBC forgave £34m of debt owed by Jessops.
As part of the restructuring deal, Jessops – which was saddled with £57m of debt – said that £100,000 will be made available for distribution to Jessops shareholders.
Jessops floated on the stock market in 2004 and continued on an expansion path that increased its store portfolio to more than 300.
In 2007 its share price plummeted more than 70% after it warned of a huge loss, largely blaming this on the falling price of digital compact cameras.
Bosses admitted to AP that the chain may have grown too fast for its own good.
Jessops then embarked on a massive cost-cutting plan that led to the closure of 81 shops and the loss of 550 jobs.
Earlier this year Jessops slashed 200 assistant manager positions and reduced staff levels at its head office in Leicester to 150 – less than half the number employed there in 2007.
Last month The Times newspaper suggested that Jessops’ share price, of more than a penny a share, did not truly reflect the value of a firm that was ‘effectively bust’.
In an exclusive interview with AP, chairman David Adams admitted it is ‘bizarre’ that Jessops plc is still trading on the London Stock Exchange with shares that carry a ‘spurious value’.
‘We are in a slightly anomalous situation,’ he told AP. ‘It’s still a listed vehicle but it owns nothing. It doesn’t own Jessops Group Limited anymore. This was always going to happen. It will be de-listed before Christmas.’
Adams continued: ‘For some reason it’s still trading at around a penny [per share] which values the whole thing [Jessops] at about a million pounds.’
However, he insisted that Jessops has met all its stock exchange obligations, in terms of keeping people informed of the firm’s position.
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Page Two: Government’s VAT plan is ‘madness’
Meanwhile, Adams hopes new chief executive Trevor Moore will focus on making sure that stores are in good shape in the run up to Christmas in terms of appearance and operational standards, for example.
Adams expects Moore’s appointment to allow the chairman to ‘step back’ and figure out Jessops’ strategy for the next two or three years.
Asked when he expects Jessops to make a profit Adams said: ‘I think we will make a significant step in 2010 towards it.’
He explained that, next year, the firm will see the financial benefits of its cost-saving measures and lower interest payments as a result of its bank loan being cut to £20m.
Though Adams is optimistic about sales over Christmas he warned that the recession is not over and that the first part of next year may be ‘quite tough’.
He described the government’s reintroduction of 17.5% VAT as ‘madness’ – a measure that will hit smaller businesses in particular like a ‘cold, wet towel’ in January. ‘I think it is stupidity,’ he added.
Though he said autumn sales were ‘okay’, current sales have flagged, hit by bad weather last week that deterred people from the high street.
Yet he remains buoyant. ‘I think we are strongly set up for Christmas, in terms of product, deals with suppliers, incentives for staff, the way the stores look. I think we are in good shape.’
Adams does not plan to close more stores but he did not rule it out. ‘We are a normal business now and if a store comes up to the end of its lease and it’s not performing very well – and we don’t think we can improve it – then, yes we may take the opportunity to close. But any normal retailer does that.’
Page Three: Jessops on WH Smith and Pentax
There is certainly no expansion plan in the offing. Adams recalled his first days in his job as chairman: ‘Somewhere in my drawer there’s a plan to take it [the store portfolio] up to 400. I just couldn?t see where those stores would be.’
Since he took on the role in 2007, Adams has overseen the opening of just one store, in Westfield shopping centre in London.
And, in the past few weeks, Jessops ‘concessions’ have opened in three existing WH Smith shops, located in Nottingham, Watford and Manchester.
In many towns, explained Adams, Jessops stores exist in ‘secondary or tertiary locations some way from the high street’.
He insisted, however, that this is purely an ‘experiment’ designed to gauge the benefit offered by the higher footfall of the newsagent’s high-street locations. He said these outlets will not replace the main Jessops stores.
Unlike his predecessors, Adams will not be launching a fresh march on the high street.
He said Jessops currently turns over £200-250m from just over 200 shops, a store portfolio that he believes gives Jessops a ‘critical mass’ and an importance to suppliers. ‘There is a mutual interdependence. They need us and we need them.’
Those suppliers do not include Pentax, however, a brand which Jessops has no immediate plans to re-introduce.
‘We keep the lines of communication open to Pentax and if they come up with the right product and the right deals and so on, we are determined to talk again.’
Page Four: Plans for 2010
Though Jessops’ 12-store refurbishment programme has boosted sales at those revamped branches by nearly 10%, compared to non-refurbished shops, the programme has been put on hold until the spring, partly due to the cost involved.
‘One of the good things about the restructure and the support of HSBC and is that we haven’t just dusted the business down. We have enough money to do an element of refurbishment next year,’ said Adams.
‘And, there is no repayment on the loan to the bank for the next three years which means any cash we generate we can invest – whether it?s in stores, people, training, new products of whatever.’
Adams admits the competition remains fierce, citing Currys, Amazon and John Lewis as doing well in the camera retail market, along with ‘very good independents’.
He repeated Jessops’ aim to serve both the photographic enthusiast, as well as the wider ‘family orientated’ mass market over Christmas.
‘People say that Jessops is losing all product knowledge. It isn’t. We are very well plugged into all the suppliers and making sure our staff constantly receive product training.’
Adams (pictured below) has made key changes at the top to help take the firm forward. He has brought in a new operations director called Chris Yates, who has 20 years’ experience at Sainsbury’s. Yates replaces Dominic Prendergast.
Meanwhile, supply chain director Steve Pooley is ‘leaving the business’, said Adams. The supply chain will now report direct to Jessops’ finance division instead.
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