TIDMLMR
RNS Number : 4419G
Luminar Group Holdings PLC
12 May 2011
Luminar Group Holdings plc
Audited condensed consolidated financial information for the
year ended 26 February 2011
Luminar Group Holdings plc ("Luminar" or the "Group") is the
leading operator of nightclubs in the UK, with 77 nightclubs as at
26 February 2011 trading predominately under the Oceana and Liquid
brands.
Key Points:
-- Loss before tax of GBP1.1m (2010: profit GBP5.5m) from
continuing operations before exceptional items, in line with market
expectations.
- Earnings before interest, tax, depreciation and amortisation
of GBP22.9m from the continuing business.
-- The rate of sales decline improved during the second half of
the year.
- First half of the year down 20.6% and the second half down
14.7% on a same outlet basis.
- Total sales of GBP137.3m (2010: GBP169.0m).
- Average sales per customer largely maintained at GBP12.41
(2010: GBP12.46).
-- Cash generation has reduced net borrowings by GBP10.5m to
GBP82.2m (2010: GBP92.7m).
- Trading within debt covenant tests at 26 February 2011.
- Disposed of 16 sites (10 of which were trading sites)
generating sales proceeds of GBP7.4m.
-- Costs continue to be tightly controlled with savings of
GBP2.8m achieved at head office.
-- Sales for the first 9 weeks of the current year are 13.9%
below the prior year on a same outlet basis.
-- Loss after discontinued operations, exceptional items and tax
of GBP188.0m.
- Exceptional costs totalling GBP187.4m, primarily non-cash
impairment of specific fixed assets and goodwill.
-- The Banking Group continues to be supportive and has granted
a prospective covenant waiver in respect of the financial
covenants, which would fall to be tested at the end of May 2011.
The Banking Group are continuing to provide flexibility to maintain
the Group's liquidity levels until 31 August 2011, whilst they work
with Luminar to determine the appropriate basis for a longer term
restructuring of the Group's debt arrangements in light of
continued challenging trading conditions.
Simon Douglas, Chief Executive Officer said:
"Whilst the marketplace remains challenging, the business is
continuing to focus on operational excellence and responding to
customer demands. The results for the year, while disappointing,
show some early indications of improvements in like for like
trends. Equally encouraging is the early evidence that initiatives
introduced midway through the year appear to be gaining traction
and are diversifying our offerings and revenue streams".
12 May 2011
Enquiries
Luminar Group Holdings plc Tel: 01908 544100
Simon Douglas, Chief Executive
Officer
Philip Bowcock, Finance Director
College Hill Tel: 0207 4572020
Matthew Smallwood
Jamie Ramsay
Note: A copy of this announcement will be available on Luminar's
website www.luminar.co.uk
Overview
The late night dancing market has continued to be difficult with
factors such as the economic environment, high levels of youth
unemployment and lower disposable incomes, together with a highly
competitive market and severe adverse weather conditions during
peak trading periods, contributing to the challenges.
The financial results for the year ended 26 February 2011
reflect these trading conditions. As a result, it has been
necessary to impair certain tangible asset values and reduce the
level of goodwill that is recognised on the balance sheet. Since
refinancing in December 2010, the Group has maintained its strong
relationship with its banking group, comprising Lloyds TSB,
Barclays Bank plc and the Royal Bank of Scotland ("Banking Group"),
which has continued to support the business, the management and the
strategy, as demonstrated by them granting a prospective waiver of
the financial covenants, which would fall to be tested at the end
of May 2011. In addition, the Banking Group are continuing to
provide flexibility to maintain the Group's liquidity levels until
31 August 2011 and agreed to continue dialogue with Luminar and to
work together with the Group with a view to agreeing by that date a
longer term restructuring of the Group's debt arrangements. These
measures have been necessary to address the impact of severe
adverse weather conditions experienced in December combined with
the continued deterioration in market conditions which together
have placed significant stress on financial covenants.
Despite the challenging trading conditions, the Group has made
progress in catering for the demands of our customers through a
number of initiatives. This is evidenced by the introduction of
cocktails, premium branded drinks, branded sessions and new
entertainment such as Jongleurs comedy evenings.
Operational Business Review
As at 26 February 2011, Luminar operated 77 late night venues in
72 towns and cities. This continues to be the largest estate of its
kind in the UK. Luminar clubs trade under 3 main brands: Oceana,
Liquid and Lava & Ignite and we also operate a number of
nightclubs outside of these brands.
Our customers are predominantly in the 18-24 year age group,
including many students although with the introduction of new
initiatives such as Jongleurs comedy nights, we are attracting a
wider audience.
Primary income streams are from the sale of drinks (67.2%) and
admission charges on entry (24.9%).
During the year ended 26 February 2011, we attracted 11 million
people to our venues across an estate that has been reduced by 10
clubs. The sales per customer were marginally down on last year.
The average retail selling price per measured drink (including VAT)
was GBP2.22 across the year, slightly higher than GBP2.15 in the
prior year, with broadly steady levels of consumption. Gross margin
was 81.4%, which, in part, can be attributed to the introduction of
premium brands into the business, one of a number of initiatives to
enhance the customer proposition.
Overall sales in the continuing business totalled GBP137.3m in
the year, a reduction of 18.8% on the prior year, or 17.5% on a
same outlet basis across 73 venues which traded in both years.
There has been an improvement in the rate of decline on the
previous year, with the second half showing a 14.7% decline.
To address our market issue, we are focused on supplementing our
core dancing sessions with a wider late night entertainment
offering. During the year, the Group also launched a number of key
initiatives aimed at driving the business forward. These
initiatives seek to diversify the offering, improve customer
service and value and maximise the return on our assets. The
initiatives include partnering with Jongleurs to run comedy nights
across 12 of our clubs, building a corporate sales team with the
aim of delivering incremental business, further diversifying the
music offering by partnering with Ministry of Sound, introducing
quality live acts into clubs and launching our first ever cocktail
range throughout the estate. We are confident that these
initiatives pave the way to enable the Group to offer a
comprehensive late night entertainment proposition. We are
encouraged by early indications that these initiatives are driving
footfall and spend per head.
In view of the challenging market conditions, the Group
continues to control costs tightly. Capital investment was kept to
a minimum although during the year we did see the completion of
PROJECT. PROJECT was Luminar's first new night club opening in two
and a half years. PROJECT opened at the Riverside Entertainment
Complex in Norwich in March 2010 and, in addition to its unique
cutting edge design, this nightclub is fully equipped to cater for
Live entertainment, Jongleurs comedy nights and all of the other
initiatives envisaged by the management team.
The results for the year, while disappointing, show some early
indications of improvements in like for like trends. Equally
encouraging is the early evidence that initiatives introduced
midway through the year appear to be gaining traction and are
diversifying our offerings and revenue streams.
However, despite seeing an improvement in like for like trends
during the financial year, given the current economic climate the
outlook remains uncertain. We continue to have a strong
relationship with our Banking Group, which has remained supportive
despite the challenging environment as described in further detail
in the Financial Review.
Current Trading
Current trading remains difficult. Same outlet sales for the
first 9 weeks of the financial year were 13.9% below the same
period last year reflecting a continued improvement in like for
like trends despite disappointing trading over the Easter and Royal
Wedding weekends.
Strategy Review
In-depth market research undertaken by Luminar in 2010,
highlighted a number of key opportunities and reinforced the
appropriateness of the operational strategy now at the core of our
business.
There are four key areas where we are concentrating our
efforts.
-- Improving our operational template
Research shows that customers regard appropriate music as being
a key factor for a good night out and that they are developing an
increasingly diverse range of musical tastes. This research also
indicates that it is important to customers that they are able to
attend live performances by well-known acts or artists.
Over the past year, we have significantly improved the quality
of the music offering by refreshing our DJ's and introducing a wide
variety of quality live acts to perform in our clubs including
Calvin Harris and Basshunter. In addition to mainstream dance
sessions and speciality nights offered at a local level, we have
partnered with Ministry of Sound to address the diversity of
musical tastes. Ministry of Sound is a world leading dance brand
and, in conjunction with them, we are now able to offer a series of
events under their well-known dance brands such as Hed Kandi and
Dance Nation.
Through our partnership with Jongleurs, the UK's leading comedy
brand, we are operating comedy nights across a number of clubs.
These sessions have opened clubs to a new audience and take place
at times when they would otherwise be closed.
During the year, we have introduced premium drink brands into
the business as part of our overall strategy of providing a high
quality value for money offering to our customers. In addition, we
have introduced a cocktail offering into clubs for the first time
to huge success.
All of the initiatives outlined have, at their core, a desire to
focus heavily on customer service. We are placing great emphasis on
delivering a brand new customer experience programme to engage
staff, focusing on the customer's end to end journey from websites
to in-club to aftercare. This revised programme will see a greater
focus on customer service training and the introduction of customer
satisfaction surveying to understand more about our customers'
opinions.
We continue to review our operational template but are reassured
that the steps that we have taken are market leading and their
appropriateness has been reinforced in recent industry studies
[Source: Mintel Report: December 2010].
-- Improving our marketing function
We have developed strong partnerships with market leaders in
music, comedy and premium drinks brands to make sure our offerings
are fashionable and relevant for customers.
We have established a successful student brand in Fuzzy Logic
and will shortly be re-launching our urban brand, Vibe. We have
also re-branded our underage events (formerly UK Club Culture or
UKCC) to Love Social, which was launched at the end of 2010.
We have centralised promotional activity and run successful
nationwide campaigns on key trading nights. We have also
centralised the e-commerce platform delivering a consistent
communication message to customers. During the last financial year,
we have taken huge strides in communicating with our customers
through the use of social media. We have invested in a social media
management tool to coordinate and protect our social media activity
across the clubs and measure activity. This tool also assists us to
enhance the content on our Facebook pages and to capitalise on
strong brand / performer associations through exclusive VIP
competitions for our customers.
We are now working closely with our search engine optimisation
agency to improve the search engine rankings of our websites and
drive quality traffic to them. We have brought new customers to our
websites through targeted Facebook advertising, specifically
identifying people who are familiar to the acts/ brands now taking
place at our clubs.
Our digital customer communications has been streamlined by
condensing promotional activity into one newsletter with consistent
branding across the estate, creating an overall customer view of
the communication lifecycle to ensure maximum response rates with
minimal attrition.
We will continue to develop strong partnerships, build upon our
established brands and create new ones and will further develop our
communication platforms to ensure they are relevant for
customers.
-- Driving efficiency at our Head Office function
We have rationalised our head office function saving annual
costs of GBP2.8m against the prior year. The revised head office
structure has a greater emphasis on supporting operations,
marketing our offering and developing our partnerships.
We will continue to tightly control central costs and allocate
resource sensibly to ensure maximum value is achieved.
-- Improving the use of our assets
During the year, we have disposed of 16 sites. These sites were
either non-core or loss making. We continue to refurbish the estate
and develop our properties in a cost effective way while ensuring
the offering remains modern, market leading and appealing to our
customers.
By expanding the proposition outside of core dancing sessions,
we are utilising our assets more than ever.
We are developing strong working relationships with our
landlords and we continue to challenge them hard to ensure that we
are achieving value for money across the estate. We will remain
focused on ensuring the estate is appropriately refreshed and
utilised to its full potential.
We have approached each aspect of our strategy by making use of
the best information available, seeking to build on fact rather
than intuition and developing a professional rigorous methodology.
Our strategy will continue to evolve and adapt to our changing
market environment.
Financial review
The total revenue and profitability generated by the Group is
detailed below:
Total operations Revenue# EBITDA*# PBT*#
--------------------- ---------------- ---------------- --------------
2011 2010 2011 2010 2011 2010
GBPm GBPm GBPm GBPm GBPm GBPm
--------------------- ------- ------- ------- ------- ------ ------
Continuing 137.3 169.0 22.9 35.2 (1.1) 5.5
--------------------- ------- ------- ------- ------- ------ ------
Discontinued** 0.4 4.6 (0.1) (1.5) (0.1) (1.8)
--------------------- ------- ------- ------- ------- ------ ------
Total 137.7 173.6 22.8 33.7 (1.2) 3.7
--------------------- ------- ------- ------- ------- ------ ------
# Includes units disposed of during the year
*Pre-exceptional items
** Reclassified to reflect the composition of discontinued
operations at the balance sheet date
-------------------------------------------------------------------------
Earnings before interest, tax, depreciation and amortisation
("EBITDA") from continuing operations before exceptional items
totalled GBP22.9m in the year ended 26 February 2011, (GBP12.3m or
34.9% below the previous year due principally to lower admissions
to our clubs). Depreciation and amortisation was GBP15.3m (2010:
GBP22.7m) as the investment programme remained modest and fixed
asset impairment reduced the asset base. Net interest costs
increased to GBP8.7m (2010: GBP7.2m) despite a reduction in debt
levels from GBP140.0m to GBP91.5m. This is in part due to us not
recognising interest receivable in respect of the loan note to The
3D Entertainment Group Limited ("3DE"), which is now in
administration (2010: GBP0.9m). In addition, increased interest
receivable on deposits in the current year was offset by an
increased interest charge as a result of the increase in the
effective interest rate on the new facility to 7.8%.
The loss before tax from continuing operations before
exceptional items was GBP1.1m (2010: profit of GBP5.5m) and a
taxation credit of GBP0.5m (2010: GBPnil credit) gave rise to a
loss for the year from continuing operations before exceptional
items of GBP0.6m (2010: profit GBP5.5m). Loss per share from
continuing operations before exceptional costs was 1.1p (2010: EPS
6.7p). Statutory loss from continuing operations after exceptional
items was GBP184.6m (2010: GBP98.8m loss), giving rise to loss per
share of 183.9p (2010: 119.9p loss).
Exceptional items within continuing operations totalled a net
cost of GBP184.0m after tax for the year ended 26 February 2011
(2010: GBP104.3m). This charge followed a review of balance sheet
values, triggered by lower profits, and the majority related to
impairment of specific asset values. The major exceptional items
contributing to this charge are described in note 7. The impairment
review has also impacted the accounts of the parent company,
reducing distributable reserves to a deficit of GBP155.8m.
Discontinued operations contributed a post-tax loss of GBPnil
plus exceptional costs of GBP3.4m. The main element of the
exceptional cost was a loss on disposal of discontinued
operations.
The Group continues to be cash generative, with a net cash
inflow after exceptional items and investing activities of GBP10.5m
for the year (2010: GBP13.7m). Control and reduction of expenditure
has been strong during the year, with capital expenditure of
GBP5.5m (2010: GBP4.2m). The majority of this capital expenditure
relates to the development of the PROJECT nightclub in Norwich, for
which insurance proceeds were received.
Details of the Group's borrowings are set out in note 1.
The balance sheet includes a current tax liability of GBP42.8m
(2010: GBP42.8m) in respect of amounts potentially due for tax
years since 2004 which remain under discussion with HMRC.
In view of current trading, the Group continues to conserve cash
and in line with Board policy does not recommend a dividend payment
at the current time.
Financial risk management
Taxation
The current approach of the UK tax authorities means that as a
large corporate entity we are subject to regular tax audits, which
by their very nature are often complex and take many years to
complete. We draw a distinction between tax planning for
non-commercial reasons, and optimising the tax treatment of
commercial transactions, and we only enter into tax planning in
respect of the latter.
Funding and liquidity
The Group's cash and debt balances are managed centrally.
Liquidity risk is managed through an assessment of short, medium
and long-term cash flow forecasts to ensure the adequacy of debt
facilities.
The Group has positive cash flows from operating activities.
Further details on the Group's financing arrangements can be found
in note 1.
Interest rate risk
Interest rate risk is being predominately managed through
swapping between floating rate debt and fixed rate debt. This has
been achieved through a GBP34.5m fixed rate swap, a GBP27.5m fixed
rate swap and a GBP34.5m cap and floor swap. At the year end,
GBP91.5m of the bank facility was drawn down, of which all was
hedged.
Currency risk
The Group operates within the UK and substantially all
transactions are denominated in sterling; therefore, the Group does
not suffer from a significant concentration of currency risk.
Credit risk
Credit risk is managed on a group basis. Credit risk arises from
cash and cash equivalents, derivative financial instruments and
deposits with banks and financial institutions, as well as credit
exposures to receivables principally recognised on sales of
property assets and on income received from sub-lets. The Group
does not have a significant concentration of credit risk, and the
majority of the Group's revenues are cash based.
On 19 January 2007, the Group sold certain trade and assets of
its clubs to the 3DE (an associate of the Group). Post-completion a
transitional service agreement was put in place between the Group
and 3DE for the provision of certain services. 3DE went into
administration on 26 February 2010 and this process is ongoing. All
debtor trading balances relating to 3DE under the terms of the TSA
are fully provided for. Vendor loan notes of GBP19.3m (plus accrued
interest totalling GBP5.3m) remains owed to the Group. At the year
end, the loan notes and accrued interest continue to be fully
provided for.
Pensions
The Group contributes to a defined contribution pension scheme
for qualifying employees. The Group has no exposure to defined
benefit pension schemes.
Risks and uncertainties
The principal risks and uncertainties that could affect the
Group's business are summarised below:
Risks
Internal risks
Covenant compliance and liquidity risk
During the year, the Group signed a revised three year facility
of GBP99m (the "New Facility") with its banking group comprising
Lloyds TSB, Barclays Capital and The Royal Bank of Scotland (the
"Banking Group"). The New Facility was effective from 8 December
2010.
The New Facility comprises two term loans of GBP44m and GBP40m
repayable over three years and a revolving credit facility (RCF) of
GBP15m. The weighted average cash interest rate for the New
Facility is 7.8%.
The main financial covenants applying to the New Facility are
those of leverage (the ratio of Net Debt to EBITDA) and fixed
interest cover. The leverage covenant ratio was set at 3.8 times,
reducing to 2.0 times over the life of the New Facility, and the
fixed interest cover was set at 1.35 times rising to 1.75
times.
Severe adverse weather conditions experienced in December
combined with the continued deterioration in market conditions
since that time have placed significant stress on the financial
covenants. At the February 2011 testing date the Group continued to
operate within the required parameters. However, trading conditions
have remained difficult and operating results have been worse than
anticipated, such that it appears likely that a covenant breach
would arise when next tested at the end of May 2011 and a short
term liquidity problem may arise during the Summer months due to
scheduled amortisation payments falling due under the New Facility
during that period. Since signing the New Facility the Group has
maintained its strong relationship with the Banking Group which has
throughout remained supportive of the business, the management and
its strategy. This has been demonstrated by the Banking Group
granting a prospective waiver in respect of the financial covenants
which would fall to be tested at the end of May 2011. In addition,
the Banking Group are continuing to provide flexibility to maintain
the Group's liquidity levels until 31 August 2011 and agreed to
continue dialogue with Luminar and work together with the Group
with a view to agreeing by that date a longer term restructuring of
the Group's debt arrangements.
The Directors are of the opinion that the Banking Group will
remain supportive and that the ongoing discussions with the Banking
Group will result in restructured debt arrangements which will
allow the Company and the Group to continue to trade as a Going
Concern and secure a more sustainable, longer term debt structure
for the Group. Should the discussions with the Banking Group not
secure such a longer term solution, the Group is unlikely to be
able to operate within the existing terms of the New Facility and
it is likely that a breach of the financial covenants would occur
at the covenant testing point at the end of August 2011 and future
liquidity risk would arise thereafter. In those circumstances, the
New Facility could be accelerated and the debt then drawn under the
New Facility could be required to be repaid immediately which could
result in the business no longer being a going concern.
The Directors have examined all available evidence and have
concluded that, although the trading environment is still
exceptionally challenging, and there is a risk that discussions
with the Banking Group will not result in a successful
restructuring of the Group's debt arrangements, in light of the
supportive nature of the banking relationship to date, the
Directors are satisfied that adequate financial resources will
continue to be made available to the Group so as to enable it to
continue to trade on a going concern basis. As a result, the
Directors continue to adopt the going concern basis in preparing
the Group's and the Company's financial statements. The financial
statements do not include the adjustments that would result if the
Group and the Company were unable to continue as a going
concern.
High proportion of fixed overheads and variable revenues
A significant proportion of the Group's cost base remains
relatively constant notwithstanding changes to the level of
revenues and therefore any significant changes in the level of the
Group's revenues could significantly affect the level of earnings
and cash flows.
Significant progress has been made in simplifying and reducing
the fixed cost base and this remains an area of focus going
forward.
Failure to ensure brands evolve in relation to changes in
consumer taste
The market in which the Group operates is subject to changes in
fashions and trends and the Group is exposed to the risk that its
innovations in venue format and content do not keep up with changes
in consumer tastes. Therefore, the Group continues to monitor
closely changes in the marketplace so that it can adapt its
offering to protect and secure its revenues.
Major fire
The business has suffered from three major fires since 2000,
with the last being in 2005. These resulted in the destruction and
closure of the clubs concerned. Therefore, fire prevention and fire
safety are taken very seriously in staff training and internal
health and safety reviews. The Group introduced specific training
for all venues in the form of a dedicated 'fire safety week', which
aimed to ensure that best practice was maintained throughout the
Group. Following the substantial reduction agreed in 2008 to the
excess payable by the Group on any one incident, the financial risk
posed by any major fires that might be suffered in the future has
been significantly reduced.
Health and safety
Health and safety is taken very seriously by the Group, as
detailed in the Corporate Social Responsibility statement. The risk
of non-compliance with health and safety legislation is minimised
through comprehensive training and an active in-house team who
regularly carry out health and safety audits, and review and
develop policies and procedures to maintain standards. Furthermore,
the Group carries substantial public and employer's liability
insurance cover, in order to minimise the financial impact of any
claim that might arise as a consequence of a failure in health and
safety regulatory compliance.
Failure of internal control regarding frauds and thefts
The Group is vulnerable to the conventional financial threats
faced by all businesses. Finance and Operations management continue
to review, challenge and improve many processes and controls. This
process is backed up by internal audit covering both Head Office
administration/accounting and the operating venues.
External risks
Interest rate movements
Interest rate risk is being predominately managed through
swapping between floating rate debt and fixed rate debt. This has
been achieved through the use of a GBP50.0m five year fixed rate
swap ending August 2010, a GBP40.0m seven year fixed rate swap
ending August 2014 and a GBP50.0m cap and floor swap. Elements of
these swaps were terminated on the switch from the old facility to
the new facility on 8th December 2010 to ensure the new facility is
100% hedged.
Loss of licences
The Group has a dedicated and experienced licensing officer, who
monitors all licensing related matters and works closely with the
operations management team, local licensing authorities and local
police. This is backed up with centralised incident reporting and
follow-up, including liaison with licensing authorities for early
warning of potential issues. The Company also has access to
specialist external licensing solicitors who provide additional
advice as and when required.
Every effort is made to ensure that managers and supervisors are
fully conversant with current licensing legislation and their
responsibilities under it.
Uncertainties
Economic downturn
The principal uncertainty facing the Group is that of continued
or worsening economic uncertainty, particularly as it may affect
young people. Whilst there is some evidence at national level that
conditions are improving, any recovery remains fragile and there is
minimal evidence that it has yet impacted our core market.
Should the spending propensity of young people reduce further,
there is a risk that the Group's profitability could worsen to the
extent that we are no longer able to meet the requirements placed
upon us by our current lenders. The Board has considered this
carefully, please see note 1 for further details on the Group's
financing arrangements.
Seasonality and weather
The number of admissions in the Group's venues is considerably
increased during holiday periods, especially Christmas and New
Year, and over bank holiday periods. Similarly the admissions and
revenue levels are generally lower in the early months of the
calendar year and over the summer, compared to during the autumn
and spring periods. The Group's revenues can also be adversely
impacted by extremes of weather conditions, which could deter
customers from visiting the Group's venues. Current planning
assumes average seasonal weather conditions.
Fluctuations in the commercial property market
At the year end, the Group held 59 of its properties under short
leaseholds, which are subject to regular rent reviews. These rent
reviews could either increase or remain the same, which could in
turn affect the economic viability of any of the Group's units.
The Group also held 18 freehold properties and 5 long leaseholds
as at 26 February 2011 and therefore, any changes to the UK
property market could lead to changes in the value of the Group's
property portfolio.
The total number of trading units is lower than the total number
of leasehold and freehold properties held by the Group. This is due
to the fact that some clubs which are combined to trade as a multi
venue site may have individual title deeds for each unit and the
inclusion of units in development and sub-let units.
Terrorism
In common with many businesses, the Group's revenues are
vulnerable to disruption from acts of terrorism. Current planning
assumes no change in the existing level of threat. The Company has
issued documentation based on Home Office guidance to ensure that
employees are aware of these issues and what to look out for. In
addition, the Company purchases a specific insurance policy to
cover risks from terrorist activities.
Board Changes
As reported in last year's Annual Report, Stephen Thomas left
the Board on 1 March 2010. He was the Chief Executive Officer and
founder of Luminar, Robert McDonald (Finance Director) left the
Board on 1 June 2010 and Alan Jackson stepped down as Chairman on
13 July 2010.
Simon Douglas joined the Board in March 2010 as Chief Executive
Officer ("CEO"). Simon has a strong track record in the leisure and
entertainment sector, including various management roles at HMV,
Virgin Retail and latterly as CEO in leading the MBO of Zavvi,
where he extracted considerable shareholder value from the
business.
John Leach joined the board as a Non-Executive Director on 30
April 2010 and became Chairman on 13 July 2010. John has wide
experience of both the leisure sector and most recently the City
where from 2003 to 2008 he was involved in various roles and
latterly as CEO of Hermes Focus Asset Management Limited. Prior to
this he was Chairman of Orbis Plc, Waterhall Group Plc and Brent
Walker Group, where he was CEO and Finance Director from 1994 to
1998 and Group Finance Director from 1991 to 1994.
Philip Bowcock joined the board as Finance Director on 1 June
2010 from Barratt Developments plc, where he was Group Financial
Controller. Prior to this, he held senior finance roles at Tesco
and Hilton Group.
Forward-looking statements
Certain statements in this consolidated financial information
for the year ended 26 February 2011 are forward-looking. Although
the Group believes that the expectations reflected in these
forward-looking statements are reasonable, it can give no assurance
that these expectations will prove to have been correct. Because
these statements involve risks and uncertainties, actual results
may differ materially from those expressed or implied by these
forward-looking statements.
The Group undertakes no obligation to update any forward-looking
statements whether as a result of new information, future events or
otherwise.
Responsibility statements
The Directors' responsibility statements are made in respect of
the full Annual Report and financial statements relating to the
year ended 26 February 2011 and the Business Review contained in
the Annual Report. Such responsibility statements are not made in
relation to the condensed statements set out in this
announcement.
The Annual Report and financial statements comply with the
United Kingdom's Financial Services Authority Disclosure Rules and
Transparency Rules in respect of the requirement to produce an
annual financial report.
Each of the Directors, whose names and functions are listed in
the Annual Report, confirm that to the best of their knowledge:
-- the group financial statements, which have been prepared in
accordance with IFRSs as adopted by the EU, give a true and fair
view of the assets, liabilities, financial position and loss of the
group; and
-- the Business Review includes a fair review of the development
and performance of the business and the position of the group,
together with a description of the principal risks and
uncertainties that it faces.
Consolidated Income Statement
for the year ended 26 February 2011
Year ended 25 February
2010
Year ended 26 February 2011 (reclassified **)
----------------------- ------------------------------------ ------------------------------------
Exceptional Exceptional
Pre- items Pre- items
exceptional (note 7) Total exceptional (note 7) Total
Note items GBPm GBPm GBPm items GBPm GBPm GBPm
---------------- ----- ------------ ------------ -------- ------------ ------------ --------
Continuing
operations
Revenue 137.3 - 137.3 169.0 - 169.0
Cost of sales (25.6) - (25.6) (29.1) - (29.1)
Gross profit 111.7 - 111.7 139.9 - 139.9
Administrative
expenses (104.9) (187.3) (292.2) (127.2) (114.6) (241.8)
Other operating
income 0.8 - 0.8 - - -
Profit / (loss)
from
operations 7.6 (187.3) (179.7) 12.7 (114.6) (101.9)
Finance income 3 0.8 - 0.8 1.1 - 1.1
Finance costs 3 (9.5) (9.5) (19.0) (8.3) - (8.3)
---------------- ----- ------------ ------------ --------
(Loss)/Profit
before
taxation (1.1) (196.8) (197.9) 5.5 (114.6) (109.1)
Tax credit /
(charge) on
(loss) /
profit 4 0.5 12.8 13.3 - 10.3 10.3
---------------- ----- ------------ ------------ -------- ------------ ------------ --------
(Loss)/Profit
for the year
from
continuing
operations
attributable
to equity
shareholders (0.6) (184.0) (184.6) 5.5 (104.3) (98.8)
Loss from
discontinued
operations * 8 - (3.4) (3.4) (0.8) (23.5) (24.3)
---------------- ----- ------------ ------------ -------- ------------ ------------ --------
(Loss)/Profit
for the year
attributable
to equity
shareholders (0.6) (187.4) (188.0) 4.7 (127.8) (123.1)
---------------- ----- ------------ ------------ -------- ------------ ------------ --------
Loss per share
from
continuing
operations 6
Basic (183.9) (119.9)
Diluted (183.9) (119.9)
Loss per share
from
continuing and
discontinued
operations 6
Basic (187.3) (149.4)
Diluted (187.3) (149.4)
---------------- ----- ------------ ------------ -------- ------------ ------------ --------
* The loss from discontinued operations is stated post tax.
** Reclassified to reflect the composition of discontinued
operations at the latest balance sheet date
The accompanying accounting policies and notes form an integral
part of these financial statements.
Consolidated Statement of Comprehensive Income
For the year ended 26 February 2011
26 February 25 February
2011 2010
GBPm GBPm
------------------------------- ------------ ------------
Loss for the year (188.0) (123.1)
------------------------------- ------------ ------------
Other comprehensive income
Cash flow hedges (net of tax) (3.7) (0.5)
Other comprehensive income
from the period, net of tax (3.7) (0.5)
Total Comprehensive Income
for the year attributable
to equity shareholders (191.7) (123.6)
------------------------------- ------------ ------------
Consolidated Balance Sheet
at 26 February 2011
26 February 25 February
2011 2010
Note GBPm GBPm
Non-current assets
Goodwill 10 33.8 130.8
Other intangible assets 11 1.8 2.6
Property, plant and equipment 12 124.6 226.9
Other non-current assets 1.5 1.9
161.7 362.2
Current assets
Inventories 1.5 1.5
Trade and other receivables 4.2 5.6
Cash and cash equivalents 9.3 37.3
Monies on deposit - 10.0
---------------------------------- ----- ------------ ------------
Assets classified as held 15.0 54.4
for sale 4.5 2.1
---------------------------------- ----- ------------ ------------
19.5 56.5
Current liabilities
Trade and other payables (17.7) (14.1)
Borrowings and loans (12.5) -
Current tax liabilities (42.8) (42.8)
Deferred income (0.5) (0.5)
Provisions (1.9) (2.3)
(75.4) (59.7)
Liabilities classified as
held for sale (6.1) (0.7)
---------------------------------- ----- ------------ ------------
(81.5) (60.4)
Net current liabilities (62.0) (3.9)
---------------------------------- ----- ------------ ------------
Total assets less current
liabilities 99.7 358.3
Non-current liabilities
Borrowings and loans (79.0) (139.9)
Derivative financial instruments (7.6) (13.8)
Deferred income (5.3) (6.1)
Obligations under finance
leases (2.7) (7.9)
Provisions (2.0) (2.9)
Deferred tax liabilities - (7.9)
(96.6) (178.5)
Net assets 3.1 179.8
---------------------------------- ----- ------------ ------------
Capital and reserves
Share capital 25.1 131.8
Share premium 25.8 25.8
Capital redemption reserve 148.8 42.1
Equity reserve 2.2 1.7
Cash flow hedge reserve 1.9 -
Retained earnings (200.7) (21.6)
---------------------------------- ----- ------------ ------------
Shareholders' equity 3.1 179.8
---------------------------------- ----- ------------ ------------
The financial statements were approved by the Board of Directors
on 11 May 2011.
Philip Bowcock
Finance Director
Consolidated Cash Flow Statement
for the year ended 26 February 2011
Year ended Year ended
26 February 25 February
2011 2010
Note GBPm GBPm
-------------------------------------- ----- ------------- -------------
Cash flows from operating
activities
Net cash inflow from operations 9 15.5 23.3
Finance costs paid (7.7) (8.2)
Tax received - 2.2
7.8 17.3
-------------------------------------- ----- ------------- -------------
Cash flows from investing
activities
Purchase of property, plant
and equipment (5.5) (3.9)
Purchase of intangible assets - (0.3)
Net proceeds from sale of
property, plant and equipment 7.4 0.5
Finance income received 0.8 0.1
2.7 (3.6)
-------------------------------------- ----- ------------- -------------
Cash flows from financing
activities
Repayment of long-term borrowings (142.5) (30.0)
Drawdown of new facility (post-issue
costs) 94.0 -
Monies withdrawn from / (placed
on) deposit 10.0 (10.0)
Net proceeds from issue of
shares - 35.7
(38.5) (4.3)
-------------------------------------- ----- ------------- -------------
Net (decrease)/increase in
cash and cash equivalents (28.0) 9.4
Cash and cash equivalents
at beginning of year 37.3 27.9
Cash and cash equivalents
at end of year 9.3 37.3
-------------------------------------- ----- ------------- -------------
Consolidated Net Debt Statement
for the year ended 26 February 2011
The movement in net debt in the year was analysed as
follows:
Year ended Year ended
26 February 25 February
2011 2010
GBPm GBPm
------------------------------------ ------------- -------------
Decrease/(Increase) in cash in
the year 28.0 (9.4)
Cash inflow from increases in debt
(post-issue costs) 94.0 -
Cash inflow/(outflow) from monies
being placed on deposit 10.0 (10.0)
Cash outflow from repayment of
debt (142.5) (30.0)
------------------------------------ ------------- -------------
Movement in net debt in the year (10.5) (49.4)
Opening net debt 100.6 150.0
Closing net debt * 90.1 100.6
------------------------------------ ------------- -------------
*The closing net debt figure includes finance leases of GBP7.9m
(2010: GBP7.9m).
Consolidated Statement of Changes in Shareholders' Equity
for the year ended 26 February 2011
Capital Cashflow
Share Share redemption Equity hedge Retained
capital premium reserve reserve reserve earnings Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------- -------- -------- ----------- -------- --------- --------- ----------------------------
Brought
forward at 27
February
2009 121.9 - 42.1 1.2 - 102.1 267.3
Total
comprehensive
income for
the year - - - - - (123.6) (123.6)
Share-based
payment
charge - - - 0.5 - - 0.5
Issue of
shares (net
of costs) 9.9 25.8 - - - - 35.7
Purchase of
shares
through
Employee
Benefit
Trust - - - - - (0.1) (0.1)
Carried
forward at 25
February
2010 131.8 25.8 42.1 1.7 - (21.6) 179.8
--------------- -------- -------- ----------- -------- --------- --------- ----------------------------
Brought
forward at 26
February
2010 131.8 25.8 42.1 1.7 - (21.6) 179.8
Cancellation
of deferred
shares (106.7) - 106.7 - - - -
Total
comprehensive
income for
the year - - - - - (191.7) (191.7)
Recycle
hedging
reserve under
old facility - - - - - 12.6 12.6
Fair value
gains on
cashflow
hedges in
year - - - - 1.9 - 1.9
Share-based
payment /
share
warrants
charge - - - 0.5 - - 0.5
Carried
forward at 26
February
2011 25.1 25.8 148.8 2.2 1.9 (200.7) 3.1
--------------- -------- -------- ----------- -------- --------- --------- ----------------------------
Notes to the Consolidated Financial Statements
for the year ended 26 February 2011
1 Basis of preparation
The consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards (IFRSs)
as adopted by the European Union and International Financial
Reporting Interpretations Committee (IFRIC) and with those parts of
the Companies Act 2006 applicable to companies reporting under
IFRSs. The Group has complied with those IFRSs or IFRIC
interpretations where the implementation date is relevant to the
financial year ended 26 February 2011. No IFRSs or IFRIC
interpretations have been early adopted.
The financial statements have been prepared on a historical cost
basis, except for non-current assets and disposal groups and
investments held for sale measured at their fair value less costs
to sell and financial assets and liabilities recorded at fair
value.
The preparation of financial statements in conformity with
generally accepted accounting principles requires the use of
estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting
period. Although these estimates are based on management's best
knowledge of the amount, event or actions, actual results may
ultimately differ from those estimates.
During the year the Group signed the New Facility (being a
revised three year facility of GBP99m) with the Banking Group. The
New Facility became effective from 8 December 2010.
The New Facility comprises two term loans of GBP44m and GBP40m
respectively , both repayable over three years and a revolving
credit facility (RCF) of GBP15m. The weighted average cash interest
rate for the New Facility is 7.8%.
The main financial covenants applying to the New Facility are
those of leverage (the ratio of Net Debt to EBITDA as defined in
the New Facility Agreement) and fixed interest cover. The leverage
covenant ratio was set at 3.8 times, reducing to 2.0 times over the
life of the New Facility, and the fixed interest cover was
initially set at 1.35 times rising to 1.75 times.
Severe adverse weather conditions experienced in December
combined with the continued deterioration in market conditions
since that time have placed significant stress on the financial
covenants. At the February 2011 testing date, the Group continued
to operate within the required parameters. However, trading
conditions have remained difficult and operating results have been
worse than anticipated, such that it appears likely that a covenant
breach would arise when next tested at the end of May 2011 and a
short term liquidity problem may arise during the Summer months due
to scheduled amortisation payments falling due under the New
Facility during that period. Since signing the New Facility, the
Group has maintained its strong relationship with the Banking Group
which has throughout remained supportive of the business, the
management and its strategy. This has been demonstrated by the
Banking Group granting a prospective waiver in respect of the
financial covenants which would fall to be tested at the end of May
2011. In addition, the Banking Group are continuing to provide
flexibility to maintain the Group's liquidity levels until 31
August 2011 and agreed to continue dialogue with Luminar and work
together with the Group with a view to agreeing by that date a
longer term restructuring of the Group's debt arrangements.
The Directors are of the opinion that the Banking Group will
remain supportive and that the ongoing discussions with the Banking
Group will result in restructured debt arrangements which will
allow the Company and the Group to continue to trade as a Going
Concern and secure a more sustainable, longer term debt structure
for the Group. Should the discussions with the Banking Group not
secure such a longer term solution, the Group is unlikely to be
able to operate within the existing terms of the New Facility and
it is likely that a breach of the financial covenants would occur
at the covenant testing point at the end of August 2011 and future
liquidity risk would arise thereafter. In those circumstances, the
debt drawn under the New Facility could be required to be repaid
immediately which could result in the Company and the Group no
longer being a going concern.
The Directors have examined all available evidence and have
concluded that, although the trading environment is still
exceptionally challenging, and there is a risk that discussions
with the Banking Group will not result in a successful
restructuring of the Group's debt arrangements, in light of the
supportive nature of the banking relationship to date, the
Directors are satisfied that adequate financial resources will
continue to be made available to the Group so as to enable it to
continue to trade on a going concern basis. As a result, the
Directors continue to adopt the going concern basis in preparing
the Group's and the Company's financial statements. The financial
statements do not include the adjustments that would result if the
Group and the Company were unable to continue as a going
concern.
The figures and financial information for the year ended 26
February 2011 do not constitute the statutory financial statements
for that year. Those financial statements have not yet been
delivered to the registrar of companies and include the auditors'
report which, whilst unqualified, contains an emphasis of matter in
reference to the material uncertainty around Going Concern
disclosed above. The auditors' report does not contain a statement
under either section 498 (2) or section 498 (3) of the Companies
Act 2006. The statutory financial statements will be published as
part of the Annual Report during June 2011 and following approval
at the Company's AGM which will be held on 12 July 2011 will be
filed at Companies House.
Impact of new accounting standards
The following new standards, amendments to standards or
interpretations are mandatory for the first time for the financial
year beginning 26 February 2010:
Amendment to IAS 39, 'Financial instruments: Recognition and
measurement', on Eligible hedged items. This amended standard
requires the Group to split the fair value of the cap and floor
swap between intrinsic and time value, with the time value element
no longer eligible to be hedged and therefore potentially
increasing volatility in the Income Statement.
The following standards, amendments and interpretations are
mandatory for the first time for the current accounting period but
have had no impact on the Group's operations:
Amendment to IAS 32, 'Financial instruments: Presentation' on
classification or rights issues. This amendment addresses the
accounting for rights issues that are denominated in a currency
other than the functional currency of the issuer (effective 1
February 2010).
Amendments to IFRS 2, 'Share-based payments' on group
cash-settled transactions. This amendment incorporates IFRIC 8 and
IFRIC 11 into one standard and provides clarification over the
definitions included within IFRS2 (effective 1 January 2010).
IFRS 3 (revised), 'Business combinations'. The main changes to
this standard are that directly attributable costs such as
advisers' fees and stamp duty will be charged to the income
statement, revisions to contingent cash consideration in the period
following the acquisition will be recorded in the income statement
and any difference between the fair value of the consideration in
the buy out of minority interests and the value of their reported
minority interest will be recorded against equity rather than
goodwill (effective 1 July 2009).
IAS 27 (revised) 'Consolidated and separate financial
statements'. The revised standard requires the impact of all
transactions with non-controlling interests to be recorded in
equity if there is no change in control and also clarifies the
accounting for when control is lost (effective 1 July 2009).
IFRIC 17 'Distributions of non-cash assets to owners'. This
interpretation clarifies the measurements of distributions of
non-cash assets in the form of dividends to owners (effective 1
July 2009).
2 Segmental reporting
The Group adopted IFRS 8 'Operating segments' in the year ended
26 February 2009. IFRS 8 requires operating segments to be
identified on the basis of internal reports about components of the
Group that are regularly reviewed by the Chief Operating Decision
Maker (CODM) to allocate resources to the segments and to assess
their performance. We report our segment information on the same
basis as our internal management reporting structure, which drives
how our company is organised and managed.
The Group is principally engaged as owner, developer and
operator of nightclubs and themed bars in the UK. The CODM has been
identified as the Senior Executive Management (SEM) that exercises
the day-to-day management function of the Group. Operational and
financial information, which is reported at an individual venue
level and aggregated on a geographical basis, is received by the
CODM on a monthly basis. As the geographical segments meet the
aggregation criteria defined in IFRS 8 and the unit information
does not meet the quantitative thresholds as required by IFRS 8,
management have judged it appropriate to aggregate the financial
information relating to all units into a single reportable
segment.
3 Net finance costs
Net finance costs relating to continuing operations were as
follows:
Year ended Year ended
26 February 25 February
2011 2010
GBPm GBPm
Interest payable on bank borrowings (8.9) (7.7)
Interest payable on obligations
under finance leases (0.5) (0.4)
Amortisation of issue costs of the
bank loan (note 18) (0.1) (0.2)
Finance costs (pre-exceptional items) (9.5) (8.3)
--------------------------------------- ------------- -------------
Exceptional finance costs: Hedge
reserve recycled through income
statement and recognition of new
derivative financial instrument
liability upon refinancing (9.5) -
--------------------------------------- ------------- -------------
Finance costs (post-exceptional
items) (19.0) 8.3
--------------------------------------- ------------- -------------
Income on bank deposits
Interest on loan to associate 0.5 0.1
Other interest receivable - 0.9
Fair value movement on derivatives 0.3 -
not hedge accounted for - 0.1
Finance income 0.8 1.1
--------------------------------------- ------------- -------------
Net finance costs (pre exceptional
items) (8.7) (7.2)
--------------------------------------- ------------- -------------
Net finance costs (post exceptional
items) (18.2) (7.2)
--------------------------------------- ------------- -------------
Finance costs relating to discontinued operations totaled GBPnil
(2010: GBPnil).
4 Tax on (loss) / profit
(a) Analysis of charge in period
The taxation charge is based on the loss for the year and
represents:
Year ended
Year ended 25 February
26 February 2010
2011 (reclassified*)
GBPm GBPm
----------------------------------- ------------- -----------------
Current tax credit / (charge)
- Continuing operations:
- Current period - (3.3)
- Adjustments from prior periods - 2.1
- Discontinued operations:
- Current period 0.1 3.3
0.1 2.1
Deferred tax credit
- Continuing operations 13.3 11.5
- Discontinued operations - 0.7
----------------------------------- ------------- -----------------
13.3 12.2
Total taxation credit / (charge)
- Continuing operations 13.3 10.3
- Discontinued operations 0.1 4.0
----------------------------------- ------------- -----------------
13.4 14.3
----------------------------------- ------------- -----------------
(b) Tax on items charged / (credited) to equity
Year ended Year ended
26 February 25 February
2011 2010
GBPm GBPm
---------------------------------- ------------- -------------
Derivative financial instruments 4.9 (0.2)
4.9 (0.2)
---------------------------------- ------------- -------------
The amounts charged (2010: credited) to equity relate to
deferred taxation.
(c) Factors affecting tax charge for period
The tax assessed for the period is higher (2010: higher) than
the standard rate of corporation tax in the UK. The differences are
explained as follows:
Year ended
Year ended 25 February
26 February 2010
2011 (reclassified*)
GBPm GBPm
---------------------------------------- ------------- -----------------
Loss on ordinary activities from
continuing operations before tax (197.9) (109.1)
---------------------------------------- ------------- -----------------
Loss on ordinary activities multiplied
by standard rate of corporation
tax in the UK of 28% (2010: 28%) 55.4 30.5
Effects of:
Non-deductible exceptional items (41.4) (15.2)
Adjustments in respect of the prior
year - 2.1
Remeasurement of tax change in UK
tax rate 0.3 -
Depreciation on non-qualifying assets (1.0) (7.1)
---------------------------------------- ------------- -----------------
Total tax credit / (charge) from
continuing operations for the year 13.3 10.3
---------------------------------------- ------------- -----------------
*Reclassified to reflect the composition of discontinued
operations at the latest balance sheet date.
5 Dividends
As reported in the Interim Report approved on 20 October 2010,
the Board did not recommend an interim dividend for the half year
ended 26 August 2010.
6 (Loss) / Earnings per share
The basic earnings per share (EPS) is calculated by dividing the
earnings attributed to equity shareholders by the weighted average
number of shares in issue during the year. For diluted earnings per
share the weighted average number of ordinary shares in issue is
adjusted to assume conversion of all dilutive potential ordinary
shares. The Group has two classes of dilutive potential ordinary
shares: share options granted to Directors and employees where the
exercise price is less than the average market price of the Group's
ordinary shares during the year, and the contingently issuable
shares under the Group's long-term incentive plan. At the year-end,
an assessment is made as to whether the performance criteria for
the vesting of awards under the share option schemes of the Group
is likely to be met and any potential shares unlikely to be
exercised are excluded from the diluted EPS calculation.
An alternative measure of earnings per share has also been
presented below, that being earnings per share from continuing
operations pre-exceptional items, as the Directors believe that
this measure of pre-exceptional earnings from continuing operations
is more reflective of the ongoing trading of the Group.
Reconciliation of the earnings and weighted average number of
shares used in the calculations are set out below:
Year ended 26 February 2011
------------------------------------ ----------------------------------------
Weighted average Per share
Loss number of shares amount
GBPm (in millions) (pence)
------------------------------------ -------- ------------------ ----------
Basic and diluted EPS
Loss attributable to ordinary
shareholders (188.0) 100.4 (187.3)
Basic and diluted EPS from
continuing operations (184.6) 100.4 (183.9)
Basic and diluted EPS from
discontinued operations (3.4) 100.4 (3.4)
EPS from continuing operations
pre-exceptional items
Basic and diluted EPS from
continuing operations
pre-exceptional items (pre tax) (1.1) 100.4 (1.1)
------------------------------------ -------- ------------------ ----------
At 26 February 2011, as the Group is loss-making, any share
options in issue are considered to be "anti-dilutive" and as such,
the calculation is the same for both basic and diluted earnings per
share.
Year ended 25 February 2010
(Loss) / Weighted average Per share
Earnings number of shares amount
GBPm (in millions) (pence)
---------------------------------- ---------- ------------------ ----------
Basic and diluted EPS
Loss attributable to ordinary
shareholders (123.1) 82.4 (149.4)
Basic and diluted EPS from
continuing operations (98.8) 82.4 (119.9)
Basic and diluted EPS from
discontinued operations (24.3) 82.4 (29.5)
EPS from continuing operations
pre-exceptional items
Basic and diluted EPS from
continuing operations
pre-exceptional items (pre tax) 5.5 82.4 6.7
---------------------------------- ---------- ------------------ ----------
At 25 February 2010, as the Group is loss-making, any share
options in issue are considered to be "anti-dilutive" and as such,
the calculation is the same for both basic and diluted earnings per
share.
All amounts included in the column headed '(Loss) / Earnings'
are taken from the face of the Consolidated Income Statement.
7 Exceptional items
(a) Continuing operations
The Group incurred exceptional items on continuing operations as
follows:
Year ended Year ended
26 February 25 February
2011 2010
GBPm GBPm
--------------------------------------------- ------------- -------------
Exceptional items
Impairment of property, plant and equipment (77.8) (63.8)
Provision for loss on liquidation of
supplier - (0.8)
Costs relating to reorganisation and
rationalisation (1.4) (1.5)
Impairment of goodwill (97.0) (41.1)
Impairment of lease premiums (0.3) (1.9)
Realised loss on disposal (2.8) -
Net movement on provision for onerous
lease commitments (0.3) (3.5)
Provision against carrying value of
memorabilia stock - (0.6)
Provision against receivable due from
associate - (0.7)
Refinancing costs (7.7) -
Finance Costs (9.5) -
Costs relating to aborted projects - (0.7)
Pre-tax exceptional items relating
to continuing operations (196.8) (114.6)
Tax on exceptional items 12.8 10.3
Post-tax exceptional items relating
to continuing operations (184.0) (104.3)
--------------------------------------------- ------------- -------------
The impairment of property, plant and equipment of GBP77.8m
(2010: GBP63.8m) and impairment of lease premiums of GBP0.3m (2010:
GBP1.9m) reflects the difference between the value in use of the
units and their carrying value, or in the case of assets held for
sale, the difference between fair value less costs to sell and
their carrying value. An impairment review was triggered on these
assets due to the tough trading conditions seen through the year,
resulting in reduced profit contributions.
Included within refinancing costs of GBP7.7m are the following
related costs, GBP3.1m associated with breaking hedges, GBP2m
amendment fee, GBP2.3m professional fees.
Costs of reorganisation and rationalisation of GBP1.4m (2010:
GBP1.5m) primarily relate to redundancy and termination costs
incurred in respect of internal restructures. The prior year costs
related mainly to previous restructures.
The impairment of goodwill of GBP97.0m (2010: GBP41.1m) has
arisen following the annual impairment test, which compared the
carrying value of units to their recoverable value (their value in
use).
The charges arising from onerous lease commitments of GBP0.3m
(2010: GBP3.5m) were to recognise the obligation for rent, rates
and other property related holding costs on currently vacant or
closed units, where the likelihood of assignment of the lease or
sub-let of the property is unlikely in the short term. These units
are closed or vacant due to them being unprofitable and unsuitable
for re-branding.
(b) Discontinued operations
The Group incurred exceptional items relating to discontinued
operations as follows:
Year ended Year ended
26 February 25 February
2011 2010
GBPm GBPm
--------------------------------------- ------------- -------------
Impairment of property, plant and
equipment (0.1) (0.3)
Impairment of investment in associate - (3.6)
Provision against receivable due
from associate - (23.7)
Costs relating to reorganisation
and rationalisation (0.2) -
Net movement on provision for onerous
lease commitments (0.2) 0.3
Realised (loss)/profit on disposals (2.9) 0.3
(3.4) (27.0)
Costs associated with the disposal
of companies:
Indemnity provision - 0.5
--------------------------------------- ------------- -------------
- 0.5
Pre-tax exceptional items relating
to discontinued operations (3.4) (26.5)
Tax on exceptional items - 3.0
--------------------------------------- ------------- -------------
Post-tax exceptional items relating
to discontinued operations (3.4) (23.5)
--------------------------------------- ------------- -------------
The impairment of property, plant and equipment of GBP0.1m
(2010: GBP0.3m) reflects the difference between the value in use of
the units and their carrying value.
In the prior year, a non-cash impairment of GBP3.6m was
recognised against the carrying value of the Group's investment in
3DE, reflecting the fact that the company went into administration
on 26 February 2010. A further GBP23.7m was provided against the
carrying value of the vendor loan note and related accrued
interest.
The credit in relation to the disposal of companies in the prior
year of GBP0.5m related to a release of brought forward provisions,
for which the relative amounts are no longer payable, due to the
companies disposed of having been placed into liquidation and
administration in the prior year.
8 Discontinued operations and non-current assets held for
sale
(a) Results of discontinued operations
The results of discontinued operations, which comprise those of
the units sold to Cavendish Bars Limited for which the sale
completed on 5 April 2010 and other non-core units, either disposed
of or held for sale, forming part of
the Group's plan to exit from non-core operations, included
within the Consolidated Income Statement were as follows:
Year ended Year ended
26 February 25 February
2011 2010
GBPm GBPm
--------------------------------------- ------------- -------------
Revenue 0.4 4.6
Cost of sales and administrative
expenses (0.5) (6.4)
Loss before tax pre-exceptional items (0.1) (1.8)
Attributable tax credit 0.1 1.0
--------------------------------------- ------------- -------------
Loss after tax pre-exceptional items - (0.8)
Exceptional items (see note 7) (3.4) (26.5)
Attributable tax credit - 3.0
Loss from discontinued operations (3.4) (24.3)
--------------------------------------- ------------- -------------
(b) Cash flow from discontinued operations
The Consolidated Cash Flow Statement includes the following cash
flows arising from discontinued operations:
Year ended Year ended
26 February 25 February
2011 2010
GBPm GBPm
------------------------------- ------------ ------------
Net cash flows from operating
activities (0.1) (5.3)
Net cash flows from investing
activities 2.6 (0.1)
2.5 (5.4)
------------------------------- ------------ ------------
(c) Assets and liabilities of units held for sale
As at 26 February 2011, twelve units (2010: five units) were
classified as held for sale, of which one (2010: four) of the units
was reported within discontinued operations, and the remaining
units were reported within continuing operations as they are not
part of a disposal group.
The major classes of assets and liabilities comprising the units
classified as held for sale were as follows:
26 February 25 February
2011 2010
GBPm GBPm
------------------------------------- ------------ ------------
Property, plant and equipment 3.7 2.0
Deferred tax assets 0.5 -
Inventories 0.1 -
Trade and other receivables 0.2 0.1
------------------------------------- ------------ ------------
Total assets classified as held
for sale 4.5 2.1
Trade and other payables - (0.1)
Finance lease creditor (5.2) -
Provisions (0.9) (0.5)
Deferred tax liabilities - (0.1)
Total liabilities classified as
held for sale (6.1) (0.7)
Net (liabilities)/assets classified
as held for sale (1.6) 1.4
------------------------------------- ------------ ------------
The total loss of GBP10.5m (2010: GBP1.6m) incurred in writing
these assets down to fair value less costs to sell has been
included in continuing exceptional items within impairment of
property, plant and equipment (see note 7).
9 Cash flow from operating activities
Reconciliation of net cash inflow from operating activities
Year ended Year ended
26 February 25 February
2011 2010
GBPm GBPm
------------------------------------- ------------- -------------
Profit before taxation - continuing
operations (197.9) (110.2)
Loss before taxation - discontinued
operations (3.5) (27.2)
------------------------------------- ------------- -------------
Loss before taxation (201.4) (137.4)
Depreciation and amortisation 15.2 22.7
Amortisation of lease premiums 0.1 0.1
Amortisation of issue costs 0.1 0.2
Net impairment of property,
plant and equipment 78.2 64.0
Impairment of other intangible
assets 0.2 -
Impairment of goodwill 97.0 41.1
Impairment of other non-current
assets 0.3 1.9
Impairment of investment in
associate - 3.6
Provision against receivables
due from associate - 24.4
Movement in exceptional provisions 1.0 -
Hedge reserve recycled through
income statement and recognition
of new derivative financial
instrument liability upon
refinancing 9.5 -
Loss/(Profit) on sale of property,
plant and equipment 5.7 (0.5)
Non-cash charges for share-based
payments 0.5 0.5
Net finance costs 8.7 7.2
------------------------------------- ------------- -------------
15.1 27.8
Increase/(Decrease) in inventories (0.1) 0.6
Decrease in receivables 1.5 1.1
Increase/(Decrease) in trade
and other payables 1.0 (4.0)
Decrease in provisions (2.0) (2.2)
Net cash inflow from operations 15.5 23.3
------------------------------------- ------------- -------------
Cash flows from continuing operations
To assist in the understanding of cash flows relating to the
ongoing business of the Group, the following tables outline the
cash flows relating to discontinued operations and exceptional
items to be excluded in order to present operating cash flows that
relate to the Group's continuing business:
Year ended Year ended
26 February 25 February
2011 2010
GBPm GBPm
----------------------------------------- ------------- -------------
Cash flows from operating activities 7.8 17.3
Add: net cash flows from operating
activities - discontinued operations
(including exceptional cash items) 0.1 5.3
Cash flows from operating activities
- continuing operations 7.9 22.6
Add: net exceptional cash flows
from operating activities - continuing
operations 5.9 2.9
Pre-exceptional cash flows from
operating activities - continuing
operations 13.8 25.5
----------------------------------------- ------------- -------------
Year ended Year ended
26 February 25 February
2011 2010
GBPm GBPm
------------------------------------------ ------------- -------------
Net cash inflow from operations 15.5 23.3
Add: net cash flows from operating
activities - discontinued operations
(including exceptional cash items) 0.1 5.3
Net cash inflow from operations
- continuing operations 15.6 28.6
Add: net exceptional cash flows
from operations - continuing operations 5.9 2.9
Net pre-exceptional cash inflow
from operations - continuing operations 21.5 31.5
------------------------------------------ ------------- -------------
10 Goodwill
2011
GBPm
------------------------------------- -----------
Cost
Brought forward at 26 February 2010 183.6
At 26 February 2011 183.6
------------------------------------- -----------
Accumulated impairment losses
Brought forward at 26 February 2010 52.8
Impairment in the year 97.0
At 26 February 2011 149.8
------------------------------------- -----------
Carrying amount
At 26 February 2011 33.8
------------------------------------- -----------
2010
GBPm
------------------------------------- -----------
Cost
Brought forward at 27 February 2009 183.6
At 25 February 2010 183.6
------------------------------------- -----------
Accumulated impairment losses
Brought forward at 27 February 2009 11.7
Impairment in the year 41.1
At 25 February 2010 52.8
------------------------------------- -----------
Carrying amount
At 25 February 2010 130.8
------------------------------------- -----------
The majority of the Group's goodwill arose from the acquisition
of units from either Allied Leisure plc on 6 December 1999 or from
Northern Leisure Plc on 11 July 2000, together with the GBP8.1m of
goodwill that arose on the acquisition of 13 units from The
Nightclub Company ("TNC") in 2005, and the GBP0.6m of goodwill on
acquisitions in 2008.
No acquisitions occurred during the year giving rise to goodwill
additions.
A Cash Generating Unit ("CGU") is deemed to be an individual
operating unit, as each unit generates profits and cash flows that
are largely independent from other units. Where multiple CGU's are
acquired as part of a single business combination, the goodwill
arising from the business combination is attributed to individual
CGU's, but is grouped together. Accordingly, CGU's have been
grouped together for the purpose of the annual impairment review of
goodwill at total operating segment level.
Impairment of goodwill
In assessing whether a write-down of goodwill is required to the
carrying value of the related asset, the carrying value of the
combined CGUs, is compared with its recoverable amount. The
recoverable amount for each CGU, and collectively for the combined
CGU's, has been measured based on value in use ("VIU"), with the
exception of those units that were held for sale at the balance
sheet date, where the recoverable amount for these units has been
based on the lower of cost and fair value less costs to sell.
For the purposes of the annual impairment review, the
recoverable amount has been estimated on the VIU basis.
The Group estimates the VIU of its CGUs using a discounted cash
flow model ("DCF"), which adjusts the cash flows for risks
associated with the assets, and are discounted using a pre-tax rate
of 12.9% (2010: 11.4%).
The VIU calculations have not included the benefits arising from
any future asset enhancement expenditure, as this is not permitted
by IAS 36. The VIU calculations, therefore, exclude any benefits
anticipated from future asset enhancing refurbishments, together
with the related capital expenditure.
Management have performed the annual impairment review of
goodwill as required by IAS 36. As a result, an impairment of
GBP97.0m has been booked in the year to 26 February 2011 (2010:
GBP41.1m). None of this impairment (2010: GBPnil) of goodwill was
in relation to units held for sale.
Key assumptions
The key assumptions are based upon our own historical
experience. The calculation of VIU is most sensitive to the
following assumptions:
-- Sales and EBITDA - this is based on reasonable forecasts for
the first year. These have then been forecast for years two to
seven based on expected sales trends;
-- Discount rate - this reflects the Directors estimate of an
appropriate rate of return, taking into account the relevant risk
factors; and
-- Growth rate used to extrapolate beyond the budget period and
for terminal values - based upon the long-term average growth rate
of the UK of 2.2%. Management recognise that the leisure market
growth rates fluctuate both above and below this rate.
Sensitivity to changes in assumptions
The impairment calculation is sensitive to changes in the above
assumptions, primarily in relation to EBITDA forecast assumptions,
a 5% decrease in forecast EBITDA would result in a further
impairment being required of GBP21.2m.
11 Other intangible assets
2011
Software Trademarks Licences Total
GBPm GBPm GBPm GBPm
----------------------- --------- ----------- --------- ------
Cost
Brought forward at 26
February 2010 5.4 0.1 0.4 5.9
At 26 February 2011 5.4 0.1 0.4 5.9
----------------------- --------- ----------- --------- ------
Amortisation
Brought forward at 26
February 2010 3.2 - 0.1 3.3
Charge 0.6 - - 0.6
Impairments 0.2 - - 0.2
----------------------- --------- ----------- --------- ------
At 26 February 2011 4.0 - 0.1 4.1
----------------------- --------- ----------- --------- ------
Net book amount at 26
February 2011 1.4 0.1 0.3 1.8
----------------------- --------- ----------- --------- ------
2010
Software Trademarks Licences Total
GBPm GBPm GBPm GBPm
----------------------- --------- ----------- --------- ------
Cost
Brought forward at 27
February 2009 5.1 0.1 0.4 5.6
Additions 0.3 - - 0.3
At 25 February 2010 5.4 0.1 0.4 5.9
----------------------- --------- ----------- --------- ------
Amortisation
Brought forward at 27
February 2009 2.4 - 0.1 2.5
Charge 0.8 - - 0.8
At 25 February 2010 3.2 - 0.1 3.3
----------------------- --------- ----------- --------- ------
Net book amount at 25
February 2010 2.2 0.1 0.3 2.6
----------------------- --------- ----------- --------- ------
12 Property, plant and equipment
2011
Fixtures,
Long Short fittings,
Freehold leasehold leasehold furniture
land and land and land and and Motor
buildings buildings buildings equipment vehicles Total
GBPm GBPm GBPm GBPm GBPm GBPm
-------------- ---------- ---------- ---------- ---------- --------- -------
Cost
Brought
forward at
26 February
2010 54.4 3.7 106.2 319.0 0.9 484.2
Transfers 22.0 15.5 (18.2) (19.3) - -
Additions - - - 5.5 - 5.5
Disposals (13.7) (1.7) (5.3) (37.6) (0.9) (59.2)
Net transfers
to assets
held for
sale (16.5) (5.6) (0.1) (17.8) - (40.0)
-------------- ---------- ---------- ---------- ---------- --------- -------
At 26
February
2011 46.2 11.9 82.6 249.8 - 390.5
-------------- ---------- ---------- ---------- ---------- --------- -------
Depreciation
Brought
forward at
26 February
2010 20.8 3.1 46.3 186.2 0.9 257.3
Transfers 1.2 3.6 6.2 (11.0) - -
Depreciation
charge 1.4 0.3 1.9 11.0 - 14.6
Impairment 4.3 5.4 12.8 45.3 - 67.8
Disposals (8.2) (1.7) (3.8) (31.3) (0.9) (45.9)
Net transfers
to assets
held for
sale (7.9) (5.3) (0.1) (14.6) - (27.9)
-------------- ---------- ---------- ---------- ---------- --------- -------
At 26
February
2011 11.6 5.4 63.3 185.6 - 265.9
-------------- ---------- ---------- ---------- ---------- --------- -------
Net book
amount at 26
February
2011 34.6 6.5 19.3 64.3 - 124.6
-------------- ---------- ---------- ---------- ---------- --------- -------
2010
Fixtures,
Long Short fittings,
Freehold leasehold leasehold furniture
land and land and land and and Motor
buildings buildings buildings equipment vehicles Total
GBPm GBPm GBPm GBPm GBPm GBPm
-------------- ---------- ---------- ---------- ---------- --------- ------
Cost
Brought
forward at
27 February
2009 54.4 3.7 106.2 319.7 0.9 484.9
Additions - - - 3.8 - 3.8
Disposals - - - (0.6) - (0.6)
Net transfers
to assets
held for
sale - - - (3.9) - (3.9)
-------------- ---------- ---------- ---------- ---------- --------- ------
At 25
February
2010 54.4 3.7 106.2 319.0 0.9 484.2
-------------- ---------- ---------- ---------- ---------- --------- ------
Depreciation
Brought
forward at
27 February
2009 4.1 1.3 32.5 137.2 0.9 176.0
Depreciation
charge 1.7 0.6 3.2 16.4 - 21.9
Impairment 15.0 1.2 10.6 35.6 - 62.4
Disposals - - - (0.3) - (0.3)
Net transfers
to assets
held for
sale - - - (2.7) - (2.7)
-------------- ---------- ---------- ---------- ---------- --------- ------
At 25
February
2010 20.8 3.1 46.3 186.2 0.9 257.3
-------------- ---------- ---------- ---------- ---------- --------- ------
Net book
amount at 25
February
2010 33.6 0.6 59.9 132.8 - 226.9
-------------- ---------- ---------- ---------- ---------- --------- ------
The impairment of property, plant and equipment of GBP67.8m
(2010: GBP62.4m) reflects the difference between the value in use
of the units and their carrying value. An impairment review was
triggered on these assets due to the continued tough trading
conditions seen through the year, resulting in reduced profit
contributions. Value in use has been calculated using a post-tax
discount rate of 12.9% and a long term growth rate of 2.2%, and has
been calculated on an individual unit basis.
During the year, management have transferred assets within
categories to best reflect their nature, with no material impact to
the depreciation charge.
Assets held under finance leases have the following net book
amount:
26 February 25 February
2011 2010
GBPm GBPm
----------------------------------------- ------------ ------------
Cost 7.3 7.3
Accumulated depreciation and impairment
losses (5.4) (1.0)
Net book value transferred to held
for sale (0.2) -
----------------------------------------- ------------ ------------
Net book amount 1.7 6.3
----------------------------------------- ------------ ------------
Assets held under finance leases relate to the building
component of properties held under long leases.
13 Related party transactions
The Group holds a debtor balance with Eminence Leisure Limited
of GBP0.8m in respect of services provided in prior periods.
Eminence Leisure Limited is an associate of the Group and has gone
into liquidation. The debtor balance was fully provided for at 25
February 2010 and remains fully provided at 26 February 2011.
On 19 January 2007 the Group sold certain trade and assets of
its units to 3DE. Post completion on 19 January 2007 a transitional
services agreement ("TSA") was in place between the Group and 3DE
(an associate of the Group) for the provision of certain services.
Vendor loan notes totalling GBP19.3m (plus accrued interest
totalling GBP5.3m) remains owed to the Group. On 26 February 2010,
3DE was placed into administration. The administration process is
ongoing. From the date of administration, we no longer continue to
accrue any interest on the 3DE loan notes and have provided no
further services under the TSA. All debtor balances relating to 3DE
were fully provided for in the accounts for the year ended 25
February 2010 and remain fully provided for at 26 February
2011.
During the period, three properties were sold to No Saints
Limited. Stephen Thomas, who resigned from the Board on 1 March
2010, is a director of that company. The transactions were in the
ordinary course of business and at arm's length. Net sales proceeds
of GBP2.1m were received and the balance outstanding at 26 February
2011 was GBPnil.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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