Preliminary Results

30 November 2006

JESSOPS PLC

Preliminary Results

Jessops plc, the UK’s No.1 specialist photographic retailer, announces its preliminary results for the year ended 30 September 2006.

Financial Highlights:

• Sales up 6.9% to £350.0m (2005: £327.4m)

• Overall like for like sales up 2.9%

• Gross margin increased by one percentage point to 32.9% (2005: 31.9%)

• Operating profit up 12.3% at £20.0m (2005: £17.8m)

• Reported profit before tax of £17.0m (2005 proforma: £14.8m) and earnings per share of 11.0p (2005 proforma: 10.1p)

• Proposed final dividend of 1.50p (2005: 1.40p) making a total for the year of 2.25p (2005: 2.10p)

• Net debt reduced by £4.3m to £34.9m

Operational Highlights:

• Jessops digital camera market share for the year ended 30 September 2006increased to 18.7% (2005: 16.8%) against a challenging market

-Jessops digital SLR sales grew by 60%, whilst the market grew by 34%

-Jessops digital compact sales declined by 1.4%, whilst the market declined by 2.5%

• Relaunch of direct sales up 68.5%,whichin the last quarter representedc. 10% of total sales

• New digital Spacemix format rolled-out to 200 stores in the year, giving Jessops over 1,200 digital printing kiosks – more than any other retailer

• Digital printing sales up 36% by value, with a new high of 3million digital prints per week

• Jessops Picture House (the online photo printing service) is making encouraging progress since its launch in August and has already attracted over 300,000 customer registrations

• 15 new stores added in the year, with a further 20 acquired in October 2006. Total number of Jessops stores as at 30 November 2006 is 315

Chris Langley, Chief Executive of Jessops plc, said:

“We have delivered profits in line with our expectations, despite volatile market conditions throughout the year. This was achieved by focusing on margin growth and from increased digital SLR and digital printing sales. We continue to seek new growth opportunities and are encouraged by the initial customer response to our new online photo printing site, Jessops Picture House.

“Total like for like sales in the eight weeks to 26November 2006 were up 4.2%, with a 51.4% increase in internet sales offsetting a 0.3% decline in store like for likesales. We continue to gain market share in all our key categoriesand, although Christmas is less important to Jessops than it is to many other retailers, we are taking a cautious view of the near term outlook in our markets, particularly by comparison with the very strong Christmas we enjoyed last year. It remains very early in our financial year, but subject to the market softness easing, as referred to in our 29thSeptember 2006trading statement, we are well positioned to deliver in line with our expectations.”

For further information please contact:

Jessops plc / Tel:
Chris Langley, Chief Executive / 020 7357 9477 (today 30/11/06)
0116 232 6000 (thereafter)
Hogarth Partnership / Tel: 020 7357 9477
James Longfield/Rachel Hirst/Georgina Briscoe

CHAIRMAN’S STATEMENT

I am pleased to report that Jessops has responded well to the challenges facing all retailers in 2006. Consumer spending, and our markets in particular, remained volatile throughout the year, yet despite this we have delivered results in line with expectations.

This achievement demonstrates the positive way colleagues in our stores and at our head office have responded to these testing trading conditions. The team has focussed on driving through margin improvements, capitalising on Jessops’ unique market position and strong supplier relationships. On behalf of the Board and shareholders, I thank them all for their continued commitment and professionalism.

Sales in 2006 were 6.9% ahead of the previous year at £350 million and operating profit increased 12.3% to £20.0 million, a creditable performance given the volatile retail climate in 2006. The Board is recommending a final dividend of 1.50p per share, representing a total of 2.25p for the year, an increase of 7.1%. If approved, the dividend will be paid on 9th February 2007 to shareholders on the register on 12th January2007.

The year also saw the orderly transition of the executive management from the team that had brought the company from private to public ownership. Chris Langley, our Chief Operating Officer since February 2005 succeeded Derek Hine as Chief Executive in May this year. The Board was further strengthened in July with the appointment of Robin Whitbread as Commercial Director. Robin, formerly a non-executive director, assumed responsibility for the day to day commercial operations, including stores, buying, marketing and developing and printing (D&P). Following Robin’s appointment as an executive director, the Board will appoint another non-executive Director in the near term. Ian Harris, formerly Finance Director of the RAC and Welcome Break, succeeds John Crabtree as Finance Director with effect from 30 November.

Despite the considerable volatility in sales over the past year, decisive action has helped us achieve our goals in 2006. As we head towards 2007, due to the recent softness we are experiencing, we remain cautious about the near term outlook for our markets. Wehave a strong team in place and are determined to seize the opportunities that are open to us.

Gavin Simonds

Chairman

CHIEF EXECUTIVE’S REVIEW

The strength of Jessops’ unique market position has been demonstrated by our results in 2006. Despite continuing challenging retail conditions, sales were up 6.9% in the year and total like for like sales were up 2.9%. Management actions ensured that we consistently delivered against expectations.

The volatile market conditions were evident in marked trading swings throughout the year. Against this challenging trading background, we focused our efforts on driving gross margins, whilst at the same time investing in our stores and online, to capture and grow our market share

Sales increases hard won

Year ended 30 Sept 06
% change
Total sales / + 6.9%
Store like for like sales / - 1.0%
Direct like for like sales* / + 68.5%
Total like for like sales / + 2.9%

* Internet, mail order and tele sales

Digital camera sales were up 16.6% by value in the year, with the growth driven by a strong performance from digital SLR cameras, where our reputation for unbiased advice, high levels of customer service and value for money, are particularly important to customers. Our share of the overall digital camera market for the year ended 30 September 2006increased to 18.7% (Sept 2005: 16.8%) Source: Gfk Marketing Services Limited.

Digital SLR sales were up 60% by value. This segment of the market was very active in the year, with new digital SLR launches from Sony and Samsung and upgraded SLR models from Canon and Nikon.

The market for digital compact cameras remained tough, down by 2.5% in the year. Despite this, we managed to increase our market share in this segmentthrough a combination of exclusive deals and competitive pricing.

Price deflation remained a feature across the camera hardware market, although our strength in the SLR segment of the market provided some protection. The average price of a digital camera sold in the UK in the year to September 2006 was £161, 8.4% below last year’s level. This compares to an average price of a Jessops camera sold of £218, 5.3% below last year. Source: Gfk Marketing Services Limited.

Sales of accessories, camcorders and other photographic hardware were flat year on year at £137.5 million, with an 8% increase in accessories offsetting declines in camcorders and other photographic hardware sales. This reflected our strong focus in the year on sales of higher margin accessories. D&P sales were 2% down in the year, with a 36% increase in digital printing almost offsetting continuing declines in analogue D&P.

Driving the business

A number of initiatives were implemented in the year, which helped us achieve a further one percentage point increase in gross margins for the full year, building on similar gains achieved in 2005. Looking forward, further incremental increases in gross margin will inevitably be harder to achieve.

We continued to work closely with our suppliers in the year, maintaining our focus on exclusive merchandise deals. In addition we achieved our aim of increasing the proportion of sales from higher margin accessories and digital printing. This was supported by the roll-out of our £5 million Spacemix programme, which greatly enhances our digital printing services and strengthens the merchandising of accessories products. Theroll-out was completed in September, ahead of plan, and we now have over 240 stores trading under the Spacemix format.

In May we also announced that we had created a state of the art in-house digital photoprinting operation in Leicester called “Jessops Pro Lab”. This new facility supports the 98 Jessops stores that do not have in-store minilabs, with a capacity to print up to 2 million prints per week. This move provides us with increased flexibility in supporting our online and store-based photo printing activities and provides Jessops with greater control over the cost, quality and pricing of its D&P offer.

Developing Jessops as a true multi-channel retailer

The second half saw a number of further initiatives in support of our multi-channel retail strategy, including the relaunch of the website in May. Direct sales increased 68.5% in the year, and 85.6% in the second half, accounting for circa10% of sales in the final quarter of the year.

Successful launch of Jessops Picture House

In addition to hardware sales online, we are also aiming to take a leading position in the nascent online printing market. In August we launched our innovative online digital printing,photo storage and photo sharing website, “Jessops Picture House”.

The initial customer response to Jessops Picture House has been encouraging, with more than 300,000 customers signing up to the site in the first 13 weeks since its launch. Over four million customer photos have already been uploaded to the site, which offers unlimited, free storage. Whilst it remains very early days, over one million photos were printed from the site in October, and over 50%of customers are currently opting for our innovative “collect@store” service.

Online photo printing remains at a very early stage in the UK, but we believe that we are at the leading edge of this market. We will be accelerating our investment in marketing Jessops Picture House in the coming year. This willdrive customer acquisition and also add further functionality to the site, such asour new 1 hour“print@store” service, which we began rolling out in November.

New store openings

Our store opening programme continued throughout the year, with an additional 15 stores added in the year, including three stores acquired from That Camera Place Limited. Since the year end we have opened 3 further stores and also acquired 20 former Photo Factory stores in Scotland and Northern Ireland from MacKinnons of Dyce. These acquisitions and openings take the total number of Jessops stores to 315 stores.

People

As we continue to develop our business, we have also maintained our investment in our people, who epitomise the Jessops difference. I thank all colleagues, on behalf of shareholders, for the way they responded to the challenges and opportunities we have faced during the year. Jessops’ reputation stands on the performance of our people in our stores and throughout the company.

As evidence of this, earlier this month we were delighted once again to receive Practical Photography Magazine and Digital Photo Magazine’s award for “Best Photo Retailer of the Year” for 2006, the 11th year in succession that we have received this award.

Senior management changes

In addition to the appointments of Ian Harris and Robin Whitbread to the Board, we have also taken further steps in the year to strengthen our operational management team.

Peter Riordan, joined Jessops in July 2005 as Property Director and was appointed Stores Director in May 2006. Peter has worked in the retail sector for over 30 years, gaining a vast amount of experience in both operations and store development. He was previously Group Store Development Director at Dixons and Operations Director at Currys.

Ralph Percival joined Jessops in March 2006 asE-Commerce and B2BDirector. Over the last seven years, he was responsible for the development and management of numerous e-commerce solutions, including the launch of new retail websites for Phones4u and Dixons.

Most recently we have appointed Brian Linnington as Marketing Director. Brian will join Jessops in January 2007, from Boots, where he has held a number of senior positions in the UK and overseas. Most recently he was Commercial Director – Boots.com and New Channels.

Market Dynamics

At the compact end of the market, where competition is at its most intense as digital compact cameras have now become mass market products, the market growth seen in recent years has peaked, and now appears to be in decline. Price deflation and competition means that sales growth can only be achieved through increases in market share. Overall the digital compact market is maturing, with around 60% of households now owning a digitalcompact camera (against 83% for analogue compact cameras). The market is moving towards a replacement cycle and in 2007 it is expected that 62% of digital compact camera sales will be replacement cameras (source: Infotrends).

By contrast, the digital SLR camera market is still in its growth phase, with new manufacturers, including Panasonic, Samsung and Sony, entering the market and existing suppliers introducing new and improved product offerings. The household penetration of digital SLRs is around 2% compared to 10% for analogue SLR cameras. It is this segment of the market where the benefits of our specialist knowledge and reputation for impartial advice gives Jessops a competitive advantage. We expect the digital SLRmarket to continue to show good growth for 2007 and beyond.

In D&P, the switch from analogue to digital continues. In the coming year, we expect to see the growth in digital printing offset the continuing decline of analogue developing and for the photo printing market as a whole to return to growth. We are well placed to benefit from this trend. Our early move into digital printing and our continuing innovation in this area, offering the full range of online, in store and home printing solutions, has helped us secure a significant share of the fast growing digital printing market.

Growth strategy

Our growth strategy aims to capitalise on these market trends and to use our strong market position and reputation for impartial advice, to take advantage of the opportunities open to us. In addition to pursuing operating efficiencies, growth will be achieved through the maturing of recently opened stores, continuing innovation and investment, and from targeting growth markets such as digital SLR and digital printing.

We will continue to build the store portfolio, through a combination of acquisitions of existing camera shops and from opening new sites, and will seek to maximise the unique multi-channel opportunities open to us through the full integration of our online and national store proposition.

We will also seek to exploit our expertise in running websites and fulfilment of online sales across a broader range of consumer electronics products. To this end, we recently launched a new website called which offers flat screen TVs, MP3 players, SatNav systems as well as a full range of digital cameras, camcorders, printers and accessories.

The progress of our multi-channel strategy and our increased in-store marketing activities, which are designed to encourage store customers to visit and use our online services, is making it harder to distinguish like for like sales between store and online channels. Accordingly, going forward we intend only reporting a single like for like sales figure. This will take effect from the Christmas trading update in January.

Outlook and current trading

We have delivered profits in line with our expectations, despite volatile market conditions throughout the year. This was achieved by focusing on margin growth and from increased digital SLR and digital printing sales. We continue to seek new growth opportunities and are encouraged by the initial customer response to our new online photo printing site, Jessops Picture House.

Total like for like sales in the eight weeks to 26 November 2006 were up 4.2%, with a 51.4% increase in internet sales offsetting a 0.3% decline in store like for like sales. We continue to gain market share in all our key categories and, although Christmas is less important to Jessops than it is to many other retailers, we are taking a cautious view of the near term outlook in our markets, particularly by comparison with the very strong Christmas we enjoyed last year. It remains very early in our financial year, but subject to the market softness easing, as referred to in our 29th September 2006 trading statement, we are well positioned to deliver in line with our expectations.

Chris Langley

Chief Executive

FINANCIAL REVIEW

Turnover

Jessops’ turnover increased by 6.9% to £350.0 million in the year ended 30 September 2006 (2005: £327.4 million). This was principally the result of increased demand for digital photo imaging products, in particular digital SLR cameras, growing internet sales and new store openings, partially offset by a 1% decline in store like for like sales**.

Jessops’ store network accounted for 88.5% of the Group’s turnover in 2006. The remainder was generated through the direct consumer channel, primarily the internet, and the business to business and wholesaling activities. Like for like sales on the internet grew by 68.5% resulting in an overall like for like sales increase of 2.9% for the Group.

Digital SLR sales grew 60% by value, driven by new products, lower prices, and more manufacturers entering the market, providing the consumer with a wider range of products at competitive price points. Digital compact sales declined by 1.4%, resulting in an overall increase in digital camera sales of 16.6%. Strong growth was also evident in digital printing, up 36% year on year, as consumers became more aware of the convenience, quality and competitive pricing available in all Jessops’ stores. The decline in other photographic hardware reflects lower sales of scanners and home printers.

FY2006 / FY2005
£ million / £ million
Cameras / 183.0 / 159.8
Photographic accessories / 88.1 / 81.2
Developing and printing / 29.5 / 30.1
Camcorders / 29.5 / 31.2
Other photographic hardware / 19.9 / 25.1
Total turnover / 350.0 / 327.4

**Like for like sales information is a comparison of stores sales in consecutive financial years, with new stores being included in the calculation after a trading period of at least 12 months and excluding stores closed in the relevant period