RNS Number : 7227I
Preston North End PLC
21 November 2008
Preston North End plc
("Preston North End" or the "Company")
FINAL RESULTS FOR THE YEAR ENDED 30 JUNE 2008
Chairman's statement
On behalf of the Board of Directors of Preston North End plc, I am pleased to present our Annual Report and Financial Statements for the
year to 30th June 2008.
These are the first accounts we are required to produce under International Financial Reporting Standards ("IFRS") and therefore the
presentation of information is different to that produced in recent years.
The 2007/08 season was a difficult one for Preston North End, having enjoyed a few seasons in and around the Play-Off places in the
Coca-Cola Championship.
Following a poor start to the season, the Board took the difficult decision to replace the Manager. I was delighted to secure the
services of Alan Irvine who had enjoyed a number of years as David Moyes' assistant at Everton Football Club in addition to coaching
positions at Newcastle United and Blackburn Rovers. We acted quickly to secure Alan's first four signings in the January transfer window-
Chris Brown from Norwich City, Richard Chaplow from West Bromwich Albion, Michael Hart from Aberdeen and Neal Trotman from Oldham Athletic.
Despite the limited time frame, Alan achieved an excellent run of results to secure our place in the Championship with a final position
of 15th in the Division.
Our financial situation continues to be extremely challenging. Pressure from players and their agents causes continuous increases in
wages. With the financial resources available to other competitors in the Championship, either from 'parachute payments' from the Premier
League or from wealthy benefactors, it is difficult to resist player wage demands if we are to retain a competitive squad at this level.
However, being competitive comes at a price and, once again, our loss from operations before player trading and amortisation has
increased- this year to £3.4m (2007: £2.7m). This is mainly due to a significant increase in the players' wage bill between the two
seasons.
As we have done in previous years, we have again balanced these losses to some extent through proceeds on player sales. Most significant
was the sale of David Nugent to Portsmouth Football Club for a fee in excess of £6m. However, in the current player transfer market, it is
rare to receive all of these funds at the time of the transfer. Total cash received in the 2007/08 financial year from this and other player
sale transactions was £3.0m, a £400,000 shortfall against our operating loss. The cash requirement was further compounded by the £2.8m we
spent in the year on new players and agents' fees.
The result was that to run the Club as we did in the 2007/08 season, including the player transactions we entered into, required total
cash injections of some £4.7m. The Board are extremely grateful to the Club's majority shareholder, Guild Ventures Limited, for providing a
significant proportion of this cash requirement in the form of a loan to the Club. Friends of Preston North End Limited as the second
largest shareholder also advanced loan funding.
However, being a major shareholder in Preston North End plc, or indeed in any football club does not carry an obligation to fund such
losses every season. I would like our shareholders and fans to appreciate that, in the absence of such loan funding being available to the
Club, we could not make the signings we have made, nor pay the wages we currently pay. If further funding is not available in the future
then we will have to manage our resources accordingly.
Financial overview
Turnover for the year was £8.5m, an increase of 7% on 2007 (£7.9m). The main reason for the increase was the introduction of 'solidarity
payments' under a deal between the Premier League and Football League. These payments are based on a club's league position in the preceding
season and Preston North End received £1.2m in the 2007/08 financial year.
The increase in turnover from these payments was offset, however, by reduced gate receipts over the season. Average attendances were
12,815 for 2007/08 compared to 14,466 in 2006/07. Season ticket sales were also down at 8,064 compared to 8,412.
Total staff costs of £9.0m were 17% higher than 2007/08 (£7.7m) which is almost entirely related to increases in player wages.
We have continued to monitor and control the other operating cost base of the Club, actually achieving a 2.5% reduction compared to the
previous year.
The resulting loss from operations before player trading and amortisation was £3.4m, some 25% higher than the 2006/07 loss of £2.7m.
As outlined above, our profit on player sales balances the loss from operations before player trading and amortisation. Total profit on
player disposals was £5.7m, principally relating to the sale of David Nugent to Portsmouth Football Club. Further details of other sums
receivable on player transfers are given in note 3 of the Financial Statements. I would like to formally place on record my thanks to those
players who have left during the year for their efforts during their time at the Club.
We continue to depreciate the value of our playing squad over the length of their initial contracts. After accounting for depreciation
charges on both our tangible assets and playing squad of £2.7m (2007: £1.6m) and total interest charges of £0.7m (2007: £0.4m), our retained
loss was £1.0m (2007: £3.2m).
Going concern
The financial statements continue to be prepared on a going concern basis as note in note 1.
Football
As outlined above, after a disappointing start to the 2007/08 season, the Board was pleased that we retained our Championship status
under the guidance of Alan Irvine.
The Board took the decision to terminate Paul Simpson's contract in November 2007. As I said in my Interim Statement, such decisions are
never easy, nor are they taken lightly. I would like to reiterate my thanks to Paul or his efforts during is time at the Club and I am
pleased that he has secured another management role at Shrewsbury Town. I wish him well in this position.
As well as maintaining our Championship status, the Board was also pleased with the Club's progression in the FA Cup. The fifth round
tie against Portsmouth at Deepdale was a great occasion and we were extremely unlucky to lose the game in the manner we did in injury time.However, the game provided a valuable source of additional income, particularly as it received live TV coverage.
In addition to the players signed by Alan in the January transfer window mentioned above, we have continued to sign players to
strengthen his squad. Barry Nicholson joined Michael Hart in signing from Aberdeen and Jon Parkin and Stephen Elliott joined from Stoke City
and Wolverhampton Wanderers respectively to strengthen the forward line-up for the start of the 2008/09 season. I would like to formally
welcome all our new signings and wish them every success for their time at the Club.
Women's Team
The PNE Women's team continue to have success achieving a very respectable mid-table finish in the FA Women's Northern Premier League
for the 2007/08 season.
Youth and Community
The youth development and community departments have continued to expand and improve under the guidance of Dean Ramsdale, Director of
Youth. Our Youth Team finished in eighth position in the league and reached the fourth round of the FA Youth Cup. Phil Appiah and Nathan
Fairhurst progressed from the youth department to receive professional contracts, and I congratulate them on this achievement.
There are currently four Northern Irish international players and one Welsh international player in our youth squad which reflects an
effective and continually improving recruitment programme.
In respect of our community activities, I am particularly proud of the Healthy Lifestyles Programme being delivered in partnership with
NHS Central Lancashire. This promotes messages of exercise and healthy diet to children in the local area. This programme, together with a
continually expanding network of football coaching sessions in the local community ensures that we identify and nurture young players in our
local area from a young age. In addition we aim to encourage a new breed of young supporters through our successful under 8's free ticket
initiative.
I would also like to place on record my thanks to Total for their continued financial support towards our work in the local community.
Stadium and commercial activities
I am delighted that the football elements of the new Invincibles Pavilion are now complete and in use from the start of the 2008/09
season. The new hospitality facilities are of an excellent standard and I would like to thank those companies and individuals who have
supported the Club by purchasing hospitality places in the executive boxes and lounges. Construction work now continues to complete the Long
Term Conditions Health Centre under the stand and we hope to have this completed by the end of 2008.
We have also entered into a number of new commercial partnerships both in relation to the new stand and also within existing facilities.Stand sponsorship deals with The New Football Pools and Westinghouse have commenced for the new 2008/09 season, and I am pleased to report
that we have extended our agreement with Campbells Caravans for the sponsorship of the Alan Kelly Town End.
I am also pleased to report that the Club and shirt sponsorship deal with Enterprise has been extended for a further two seasons to take
us to the end of 2009/10, with an option for a further year. I would like to thank the board of Enterprise for continuing to help the Club
in this way.
There are, of course, many other companies who support us regularly through sponsorship, advertising and hospitality arrangements.Whilst I cannot mention all of them in this statement, we are grateful for their continued support.
I hope that our success in the latter half of the 2007/08 season will continue into 2008/09. As ever, I would like to thank our
shareholders, employees and fans for their continued loyalty and support.
D Shaw
Chairman
For further information, please contact:
Kevin Abbott, Preston North End plc Tel: 0870 442 1964
David Youngman/Katy Mitchell WH Ireland Limited Tel: 0161 832 2174
Consolidated Income Statements
for year ended 30 June 2008
Note 2008 2007
£000 £000
Revenue 8,455 7,930
Staff costs (8,991) (7,710)
Other operating expenses (2,847) (2,921)
Loss from operations before player (3,383) (2,701)
trading and amortisation
Depreciation and amortisation of (2,731) (1,634)
player registrations
Profit on disposal of player 5,740 1,420
registrations
Loss from operations (374) (2,915)
Financial expenses (733) (353)
Loss before tax (1,107) (3,268)
Taxation 83 82
Loss for the year attributable to (1,024) (3,186)
equity holders of the parent
Loss per share (basic and diluted) (31.1p) (96.7p)
Statements of Recognised Income and Expense
for year ended 30 June 2008
The consolidated Income Statement includes the only income and expenses of the Group for the current and prior year.
Balance Sheets
at 30 June 2008
Note Group Company
2008 2007 2008 2007
£000 £000 £000 £000
Non-current assets
Property, plant and equipment 17,723 11,511 17,723 11,511
Intangible assets 3,817 1,314 - -
Investments in subsidiaries - - 289 289
21,540 12,825 18,012 11,800
Current assets
Inventories 277 332 277 332
Trade and other receivables 5,452 1,014 17,902 14,172
5,729 1,346 18,179 14,504
Total assets 26,269 14,171 36,191 26,304
Current liabilities
Bank overdraft (10,210) (5,295) (10,210) (5,295)
Other interest-bearing loans (600) (500) (600) (500)
and borrowings
Trade and other payables (6,018) (2,032) (3,012) (1,606)
Deferred income (2,264) (2,441) (2,264) (2,440)
(19,092) (10,268) (16,086) (9,841)
Non-current liabilities
Other interest-bearing loans (4,776) - (4,776) -
and borrowings
Trade and other payables (661) (89) - (89)
Deferred income (2,103) (2,070) (2,103) (2,070)
Deferred tax liabilities (376) (459) (376) (459)
(7,916) (2,618) (7,255) (2,618)
Total liabilities (27,008) (12,886) (23,341) (12,459)
Net assets 261 1,285 12,850 13,845
Equity attributable to equity
holders of the parent
Share capital 3,296 3,296 3,296 3,296
Share premium 7,051 7,051 7,051 7,051
Retained earnings (10,086) (9,062) 2,503 3,498
Total equity 261 1,285 12,850 13,845
These financial statements were approved by the board of directors on 18th November 2008 and were signed on its behalf by:
Derek Shaw
Director
Cash Flow Statements
for year ended 30 June 2008
Note Group Company
2008 2007 2008 2007
£000 £000 £000 £000
Cash flows from operating
activities
Loss for the year (1,107) (3,268) (1,078) (691)
Adjustments for:
Depreciation, amortisation and 2,731 1,634 467 463
impairment
Financial expense 733 353 673 296
Gain on sale of intangible (5,740) (1,420) - -
assets
Deferred grants (58) (56) (58) (56)
(3,441) (2,757) 4 12
(Increase)/decrease in trade (461) 260 (3,711) (424)
and other receivables
Decrease in inventories 55 15 55 15
Decrease in trade and other (232) (496) (348) (32)
payables
(4,079) (2,978) (4,000) (429)
Interest paid (550) (345) (490) (289)
Net cash from operating (4,629) (3,323) (4,490) (718)
activities
Cash flows from investing
activities
Proceeds from sale of 2,980 4,376 - -
intangible assets
Acquisition of property, plant (5,115) (165) (5,115) (165)
and equipment
Acquisition of intangible (2,841) (1,771) - -
assets
Net cash from investing (4,976) 2,440 (5,191) (165)
activities
Cash flows from financing
activities
Proceeds from new loans 4,690 500 4,690 500
Repayment of borrowings - (2,500) - (2,500)
Payment of finance lease - (41) - (41)
liabilities
Net cash from financing 4,690 (2,041) 4,690 (2,041)
activities
Net decrease in cash and cash (4,915) (2,924) (4,915) (2,924)
equivalents
Cash and cash equivalents at 1 (5,295) (2,371) (5,295) (2,371)
July
Cash and cash equivalents at (10,210) (5,295) (10,210) (5,295)
30 June
Notes
(forming part of the financial statements)
1 Accounting policies
Preston North End plc (the "Company") is a company incorporated and domiciled in the UK.
The group financial statements consolidate those of the Company and its subsidiaries (together referred to as the "Group"). The parent
company financial statements present information about the Company as a separate entity and not about its group.
Both the parent company financial statements and the group financial statements have been prepared and approved by the directors in
accordance with International Financial Reporting Standards as adopted by the EU ("Adopted IFRSs"). On publishing the parent company
financial statements here together with the group financial statements, the Company is taking advantage of the exemption in s230 of the
Companies Act 1985 not to present its individual income statement and related notes that form a part of these approved financial
statements.
The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented in these
consolidated financial statements and in preparing an opening IFRS balance sheet at 1 July 2006 for the purposes of the transition to
Adopted IFRSs.
Basis of preparation
The financial statements have been drawn up on a going concern basis which the directors believe to be appropriate for the following
reasons:
The directors acknowledge that, in common with many clubs in the Championship, the football club is likely to continue making operating
losses. Therefore the group and company remain reliant on its ability to secure appropriate financing
The directors firmly believe that retention of Championship status is very important to the group and the company's viability and that
this belief is shared by the company's key shareholders. During the course of the past season, funds were made available to strengthen the
team in the January 2008 window, and the new East stand was brought to completion. The club now has a stadium which matches its status and
ambitions, and is a valuable asset in its own right. The new stand has been funded principally by bank debt which will be serviced from the
incremental income arising from the stand, including the rent from the Long Term Conditions Health Centre based in the stand.
The support of the company's shareholders has been evident for many years. During the year shareholder loans increased from £250,000 to
£5,126,000, and since the year end a further £2.5m has been made available to the company. The terms of these total loans have been agreed
in principle and are currently in the process of being formally documented. Once this is completed, the loans will be committed until
January 2010 and the shareholders have indicated that they may be extended thereafter if necessary. In addition, the bank overdraft
facility of £6m was renewed in September 2008 for a period expiring in March 2009 and the Group's bankers have indicated their intention to
renew the facility at this time.
The company has prepared detailed cash flow forecasts for the period to 30 November 2009. Those forecasts show that the group and
company does not currently have facilities in place to fund all of its projected cash requirements over the next twelve months with the
projected shortfall rising to £3m by November 2009. However, as in previous years, those forecasts have been prepared on a prudent basis.
Unlike previous seasons the company has not sought to secure guaranteed finance to fund its cash flow projections in full for the
forthcoming twelve months, given the high level of variables involved and the cost of securing additional facilities that may not be
required. The directors are confident that sufficient additional funds will be sourced should they be required., including player sales or
the securitisation of future income entitlements.
In the longer term, the directors consider that additional shareholder funding will be necessary. If further shareholder funding is
not available in the future then the directors will seek to manage the group's resources accordingly. As in previous years the directors
continue to seek to increase the income of the company whilst controlling costs.
Whilst the directors believe the going concern basis is appropriate, the fact that the company does not currently have facilities in
place to fund all of its projected cash requirements over the next twelve months may cast significant doubt on the group and company's
ability to continue as a going concern. The company may therefore be unable to continue realising its assets and discharging its liabilities
in the normal course of business but the financial statements do not include any adjustments that would result from the basis of preparation
being inappropriate.
Transition to Adopted IFRSs
Both the Group and the Company are preparing their financial statements in accordance with Adopted IFRS for the first time and
consequently both have applied IFRS 1. With the exception of reclassifications, there were no material differences between profits, net
assets or cashflows presented under IFRS compared to their presentation under UK GAAP.
Measurement convention
The financial statements are prepared on the historical cost basis, with the exception of property which is stated at deemed cost.
Basis of consolidation
Subsidiaries
Subsidiaries are entities controlled by the Group. Control exists when the Group has the power, directly or indirectly, to govern the
financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights
that are currently exercisable or convertible are taken into account. The financial statements of subsidiaries are included in the
consolidated financial statements from the date that control commences until the date that control ceases.
Non-derivative financial instruments
Non-derivative financial instruments comprise trade and other receivables, cash and cash equivalents, loans and borrowings, and trade
and other payables.
Trade and other receivables
Trade and other receivables are recognised initially at fair value. Subsequent to initial recognition they are measured at amortised
cost using the effective interest method, less any impairment losses.
Trade and other payables
Trade and other payables are recognised initially at fair value. Subsequent to initial recognition they are measured at amortised cost
using the effective interest method.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable on demand and form an integral
part of the Group's cash management are included as a component of cash and cash equivalents for the purpose only of the cash flow
statement.
Loans and other borrowings
All borrowings (both interest and non-interest bearing) are recognised initially at fair value less attributable transaction costs.Subsequent to initial recognition, interest-bearing borrowings are stated at amortised cost using the effective interest method, less any
impairment losses.
Property, plant and equipment
Property, plant and equipment are stated at cost or deemed cost less accumulated depreciation and accumulated impairment losses.
Certain items of property, plant and equipment that had been revalued to fair value on or prior to 1 July 2006, the date of transition to
Adopted IFRSs, are measured on the basis of deemed cost, being the revalued amount at the date of that revaluation.
Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of
property, plant and equipment.
Depreciation is charged to the income statement on a straight-line basis over the estimated useful lives of each part of an item of
property, plant and equipment. Land is not depreciated. The estimated useful lives are as follows:
buildings 50 years
Plant and equipment 4 - 40 years
Depreciation methods, useful lives and residual values are reviewed at each balance sheet date.
Intangible assets
Player registrations and signing on fees
Transfer fees and amounts paid to third parties for player registrations are capitalised as intangible fixed assets and are amortised on
a straight line basis over the period of the respective player's initial contract. Any transfer fees payable as a result of the occurrence
of one or more uncertain future events are capitalised based on management's assessment of the amount likely to be payable.
Player registrations are assessed on an annual basis and impairment losses arising are charged to the Income Statement in the period in
which they arise. Any surpluses arising are not accounted for.
Player signing on fees have been expensed to the Income Statement as wages and salaries over the period to which they relate.
Government grants
Government grants that compensate the Group for the cost of an asset are included within deferred income in the balance sheet and
credited to the Income Statement over the estimated useful economic lives of the assets to which they relate.
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is based on the first-in first-out principle and includes
expenditure incurred in acquiring the inventories and other costs in bringing them to their existing location and condition.
Impairment excluding inventories
The carrying amounts of the Group's assets are reviewed at each balance sheet date to determine whether there is any indication of
impairment; a financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative
effect on the estimated future cash flows of that asset. If any such indication exists, the asset's recoverable amount is estimated.
An impairment loss is recognised whenever the carrying amount of an asset exceeds its recoverable amount. Impairment losses are
recognised in the income statement.
Employee benefits -defined contribution plans
A defined contribution plan is a post-employment benefit plan under which the company pays fixed contributions into a separate entity
and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution pension
plans are recognised as an expense in the income statement as incurred.
Provisions
A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a past
event, that can be reliably measured and it is probable that an outflow of economic benefits will be required to settle the obligation.Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects risks specific to the liability.
Revenue
Turnover comprises income from television rights, gate receipts, merchandising sales, sponsorships and other commercial activities,
exclusive of value added tax. Season ticket and sponsorship income received prior to the year end in respect of the following football
season is treated as deferred income and recognised over the season to which it relates.
Expenses
Operating lease payments
Payments made under operating leases are recognised in the income statement on a straight-line basis over the term of the lease. Lease
incentives received are recognised in the income statement as an integral part of the total lease expense.
Financing income and expenses
Financing expenses comprise interest payable and unwinding of the discount on provisions that are recognised in the income statement.
In respect of non-interest payable borrowings, financing expenses include the effective interest rate.
Taxation
Tax on the profit or loss for the year comprises current and deferred tax. Tax is recognised in the income statement except to the
extent that it relates to items recognised directly in equity, in which case it is recognised in equity.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the
balance sheet date, and any adjustment to tax payable in respect of previous years.
Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: the initial recognition of
goodwill; the initial recognition of assets or liabilities that affect neither accounting nor taxable profit other than in a business
combination, and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable
future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets
and liabilities, using tax rates enacted or substantively enacted at the balance sheet date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which
the temporary difference can be utilised.
New standards and interpretations not yet adopted
The following Adopted IFRSs were available for early application but have not been applied by the Group in these financial statements.Their adoption is not expected to have a material affect on the financial statements unless otherwise indicated:
IFRS 8 'Operating Segments' (mandatory for the year commencing on or after 1 January 2009) introduces the "management approach" to
segment reporting. IFRS 8, which becomes mandatory for the groups 2010 financial statements, will require disclosure of segment information
based on the internal reports regularly reviewed by the Group's Chief Operating Decision Maker in order to assess each segment's performance
and to allocate resources to them.
2 Earnings per share
The calculation of loss per share is based on a loss of £1,024,000 (2007: loss of £3,186,000) and on ordinary shares of 3,295,679 (2007:
3,295,679) being the weighted average number of shares in issue during the year.
3 Related parties
Group
Identity of related parties with which the Group has transacted
Friends of Preston North End Limited ('FPNE') owns 20.86% of the ordinary share capital of the company. Derek Shaw is a director of
FPNE.
Preston North End plc has made payments amounting to £61,000 (2007: £68,000) under lease agreement with FPNE for the buildings which the
Club occupies for its retail outlet and offices.
FPNE has made a loan to Preston North End plc during the year to 30 June 2008 amounting to £990,000. The loan was advanced in December
2007 and accrues interest with effect from October 2008 at a rate of 3% over Bank of England LIBOR. The loan is repayable on 31 January 2010
unless both parties mutually agree to extend the repayment date.
Guild Ventures Limited owns 28.03% of the ordinary share capital of the company.
Guild Ventures Limited has made a loan to Preston North End plc during the year to 30 June 2008 amounting to £3.6m. The loan was
advanced in various tranches during the year and accrues interest at a rate of 3% over Bank of England LIBOR. As at 30 June 2008, total
interest of £155,000 has fallen due and has been added to the total outstanding debt. The loan is repayable on 31 January 2010 unless both
parties mutually agree to extend the repayment date.
Annual Report
The annual report will be sent to shareholders on 26th November 2008 and will be made available from the Company's website www.pne.com
Annual General Meeting
The Annual General Meeting of the Company will be held at 6:30pm on Thursday 18th December 2008 at The Invincibles Lounge, Invincibles
Pavilion, Deepdale Stadium, Lowthorpe Road, Deepdale, Preston, PR1 6RU
This information is provided by RNS
The company news service from the London Stock Exchange
END
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