TIDMLTW
RNS Number : 8203U
London Town PLC
30 June 2009
London Town plc
("London Town" or "the Company")
Results for the period ended 28 December 2008
The Board of London Town announces the final audited results of the Company for
the period ended 28 December 2008 and confirms that its Annual Report for the
year ended 28 December 2008 has been posted to shareholders and is also
available on its website at www.londontownplc.co.uk.
Enquiries:
Nicholas Wells/Max Hartley
Cenkos Securities plc 0207 397 8900
Business review
Principal activities
The principal activities of London Town plc ("the Company") and its subsidiaries
("the Group") comprise the following:
* The operation of the Group's freehold and leasehold pubs under lease and tenancy
agreements. (leased pubs)
* The direct management of pubs for other pub owners, principally on a temporary
basis, as well as the direct management of certain freehold and leasehold pubs
owned by the Group.(managed pubs)
The Group's agreements with tenants in the leased division comprise both tied
and free of tie arrangements and generate income from rents, sales of beer and
other drinks, and through profit share arrangements for income from leisure
machines.
The management of pubs for other pub owners generates income from a number of
different arrangements including management fees and profit shares. The
entitlement to revenues and the responsibility for costs varies by agreement.
The direct management of the Group's own freehold and leasehold pubs generates
income directly from pub customers from beer and other drink sales as well as
food sales.
At 28 December 2008 the Group operated 314 pubs of which 176 were leased pubs,
124 were managed pubs and a further 14 were held for sale.
Results for the period
The consolidated income statement for the period is set out below. Revenues
amounted to GBP25.9 million (2007: GBP11.4 million) and adjusted EBITDA1
amounted to GBP1.5 million (2007: GBP3.1 million). After property impairment
provisions of GBP12.7 million (2007: GBP nil), property disposal losses and
provisions of GBP2.2 million (2007: GBP 5.8 million) and
depreciation, amortisation and other provisions and charges of GBP1.2 million
(2007: GBP 0.4m) the operating loss for the period amounted to GBP14.6 million
(2007:GBP3.1 million loss).
After net finance costs of GBP10.3 million (2007: GBP8.5million) and tax, the
loss for the period was GBP24.7 million (2007: GBP11.6 million loss).
The Group balance sheet at 28 December 2008 showed net liabilities of GBP10.6
million as a result of the accumulated losses to date in excess of total equity.
The Directors are engaged in discussions with both lenders and shareholders and
exploring all options with a view to securing the long term financing of the
business. Further details relating to this are included in Note 1 to the
financial statements.
Adjusted EBITDA for the period to 28 December 2008 comprises the following:
+-----------------------------------------+----------+---------+
| | 2008 | 2007 |
+-----------------------------------------+----------+---------+
| | GBP'000 | GBP'000 |
+-----------------------------------------+----------+---------+
| Revenue | | |
+-----------------------------------------+----------+---------+
| Leased pubs | 10,058 | 11,424 |
+-----------------------------------------+----------+---------+
| Managed pubs | 15,884 | - |
+-----------------------------------------+----------+---------+
| Total revenue | 25,942 | 11,424 |
+-----------------------------------------+----------+---------+
| | | |
+-----------------------------------------+----------+---------+
| Gross profit | | |
+-----------------------------------------+----------+---------+
| Leased pubs | 6,299 | 6,905 |
+-----------------------------------------+----------+---------+
| Managed pubs | 8,841 | - |
+-----------------------------------------+----------+---------+
| | | |
+-----------------------------------------+----------+---------+
| Total gross profit | 15,140 | 6,905 |
+-----------------------------------------+----------+---------+
| | | |
+-----------------------------------------+----------+---------+
| Adjusted operating expenses 2 | | |
+-----------------------------------------+----------+---------+
| Leased pubs | (2,403) | (2,845) |
+-----------------------------------------+----------+---------+
| Managed pubs | (9,320) | - |
+-----------------------------------------+----------+---------+
| Unallocated | (1,901) | (914) |
+-----------------------------------------+----------+---------+
| | | |
+-----------------------------------------+----------+---------+
| Total adjusted operating expenses 2 | (13,624) | (3,759) |
+-----------------------------------------+----------+---------+
| | | |
+-----------------------------------------+----------+---------+
| Adjusted EBITDA1 | | |
+-----------------------------------------+----------+---------+
| Leased pubs | 3,888 | 3,988 |
+-----------------------------------------+----------+---------+
| Managed pubs | (474) | - |
+-----------------------------------------+----------+---------+
| Unallocated costs | (1,900) | (842) |
+-----------------------------------------+----------+---------+
| | | |
+-----------------------------------------+----------+---------+
| Total Adjusted EBITDA1 | 1,514 | 3,146 |
+-----------------------------------------+----------+---------+
1 Adjusted earnings before interest, tax, depreciation and amortisation and
provisions for impairment and onerous lease, losses on disposal of properties
held for sale and share based payment expense("Adjusted EBITDA") Refer to note
2.
2 Adjusted operating expenses excluding depreciation and amortisation and
provisions for impairment and onerous leases, losses on disposal of properties
held for sale and share based payment expenses ("Adjusted operating expenses")
Refer to note 2.
The period ended 28 December 2008 reflects a full period of trading for managed
pubs following the acquisition of GRS Inns Limited on 28 December 2007 as well
as a full period of trading for leased pubs which were acquired during 2007.
Adjusted EBITDA for the leased pubs at GBP3.9m (2007: GBP4.0m) reflects a
decrease in gross margin, partly offset by lower segment operating costs. Rents
at GBP3.3m (2007: GBP 3.8m) were down 13% reflecting a reduced number of leased
pubs, a number of new tenancies on lower market rents as well as a number of
concessions to assist tenants with more difficult trading conditions. Net wet
income at GBP2.6m (2007 - GBP2.7m) was down 4% reflecting reduced number of
pubs, concessions as well as industry trends. During the period 12 pubs moved
across to the managed division and 23 previously closed pubs have reopened in
the leased division. Importantly, the managed division has generally enabled the
Group to avoid the closure of pubs.
Adjusted EBITDA for the managed pubs at a loss of GBP474,000 reflects difficult
trading conditions generally across the sector as well as the inclusion of
certain loss making units where the Group is the lessee or tenant. A number of
these units have been assigned during the course of the year and others have
been handed back at the end of the lease or tenancy. The Group will continue to
review all options with regard to these units. This division also includes a
number of pubs managed for other pub owners with income derived from a number of
different arrangements including management fees and profit shares. In the last
quarter of 2008 the number of pubs under management for other pub owners
increased significantly and at the end of the period there was a total of 124
managed pubs of which 61 pubs were under management for other pub owners. The
growth of this third party business has continued during 2009 and at the end of
May 2009 there were a total of 155 pubs under management for other pub owners.
Unallocated costs at GBP1.9m (2007:GBP0.9m) includes a full period charge for
the Group's administrative and back office support function at Attleborough in
Norfolk and includes some duplication of costs following the Company's
transition from an outsourced support function in April 2008.
Operating expenses for the period include an impairment charge of GBP12.7
million (2007: nil). An impairment review is carried out annually on the Group's
freehold and leasehold pub properties, which include both leased and managed
pubs. The impairment is recognised on an individual pub basis where the value in
use, as measured by their discounted expected future cash flows, falls below
their carrying value. This impairment is charged to the income statement. Any
uplifts in value are not recognised unless they reverse a previous impairment
charge. This substantial charge reflects the poor profits experienced in 2008 of
certain of the Group's leased and managed pubs and weak future prospects for
them in a difficult trading environment.
During the period the management team continued to review its leased division
for freehold and long leasehold pubs which are surplus to requirements. These
assets are classified as non-current assets held for sale in the balance sheet
at a value of GBP3.2 million (2007 - GBP10.8 million) representing the lower of
their pre-reclassification carrying amount and their fair value less costs to
sell. A provision of GBP1.5 million (2007 - GBP5.8 million) has been charged in
the consolidated income statement in arriving at these net realisable values.
Net finance costs of GBP10.3 million (2007 - GBP8.6 million) comprises net bank
interest of GBP6.5 million (2007 - GBP6.3 million) and finance charges of GBP3.7
million (2007 - GBP2.2 million). The charges include GBP1.6 million (2007 -
GBP1.5 million) in respect of discount on the deep discount bonds held by the
three principal shareholders of the Group and GBP0.6 million in respect of
interest on the short term loans provided by two of the Company's three
principal shareholders. In November and December 2008 the Group agreed two
interest rate swaps covering GBP81.0 m (100%) of its bank debt and now has a
blended interest rate cost on its outstanding bank debt of approximately 4.9% ,
which is fixed until September 2011. Further details of these swaps are shown in
note 11.
After providing for the loss on properties held for sale and net finance costs
the loss for the period amounted to GBP24.7 million (2007 - GBP11.6 million
loss).
Pub assets
Pub numbers:
The movements in pub numbers are as follows:
+--------------------------+-----------+-----------+-----------+-----------+
| | Leased | Managed | Held for | Total |
| | | | sale | |
+--------------------------+-----------+-----------+-----------+-----------+
| | | | | |
+--------------------------+-----------+-----------+-----------+-----------+
| At 31 December 2007 | 188 | 60 | 35 | 283 |
+--------------------------+-----------+-----------+-----------+-----------+
| Additions | - | 61 | - | 61 |
+--------------------------+-----------+-----------+-----------+-----------+
| Transfers | (12) | 15 | (3) | - |
+--------------------------+-----------+-----------+-----------+-----------+
| Disposals | - | (12) | (18) | (30) |
+--------------------------+-----------+-----------+-----------+-----------+
| | | | | |
+--------------------------+-----------+-----------+-----------+-----------+
| | | | | |
+--------------------------+-----------+-----------+-----------+-----------+
| At 28 December 2008 | 176 | 124 | 14 | 314 |
+--------------------------+-----------+-----------+-----------+-----------+
Since the period end 5 pubs held for sale have been disposed of.
The Group's 176 leased pubs together with the 15 pubs owned and currently under
internal management at 28 December 2008 are included in the consolidated balance
sheet under land and buildings at a total GBP92.6 million (2007 - GBP104.3
million) representing an average value of GBP484,000 per pub (2007 -
GBP555,000). The fair value of the managed house operational leases is included
under intangible assets at a total of GBP1.6 million (2007 - GBP2.1 million
representing an average value per lease of GBP26,000 (2007 - GBP35,000).
Geographic location:
The regional distribution of the pubs at 28 December 2008 was as follows:
+--------------------------+-----------+-----------+------------+-----------+------------+
| Location Estate | Leased | Managed | Properties | Total | Percentage |
| | Estate | Estate | held for | | |
| | | | sale | | |
+--------------------------+-----------+-----------+------------+-----------+------------+
| | | | | | |
+--------------------------+-----------+-----------+------------+-----------+------------+
| Scotland | 1 | 2 | 0 | 3 | 1% |
+--------------------------+-----------+-----------+------------+-----------+------------+
| North East | 3 | 2 | 0 | 5 | 1% |
+--------------------------+-----------+-----------+------------+-----------+------------+
| North West | 64 | 13 | 7 | 84 | 27% |
+--------------------------+-----------+-----------+------------+-----------+------------+
| York/Humber | 16 | 25 | 2 | 43 | 14% |
+--------------------------+-----------+-----------+------------+-----------+------------+
| East Midlands | 4 | 5 | 0 | 9 | 3% |
+--------------------------+-----------+-----------+------------+-----------+------------+
| West Midlands | 35 | 15 | 3 | 53 | 17% |
+--------------------------+-----------+-----------+------------+-----------+------------+
| Wales | 4 | 4 | 0 | 8 | 2% |
+--------------------------+-----------+-----------+------------+-----------+------------+
| East of England | 5 | 32 | 0 | 37 | 12% |
+--------------------------+-----------+-----------+------------+-----------+------------+
| South East | 12 | 13 | 1 | 26 | 8% |
+--------------------------+-----------+-----------+------------+-----------+------------+
| South West | 32 | 11 | 1 | 44 | 14% |
+--------------------------+-----------+-----------+------------+-----------+------------+
| London | 0 | 2 | 0 | 2 | 1% |
+--------------------------+-----------+-----------+------------+-----------+------------+
| | | | | | |
+--------------------------+-----------+-----------+------------+-----------+------------+
| Total | 176 | 124 | 14 | 314 | 100% |
+--------------------------+-----------+-----------+------------+-----------+------------+
Financing
The Group's pub assets are financed by a combination of bank debt, deep discount
bonds and short term loans.
Bank debt at 28 December 2008 amounted to GBP83.8 million (2007 - GBP89.2
million) which represents approximately 88% (2007 - 76%) of the Group's pub
assets. At 28 December 2008, 100% (2006 - 99%) of the interest rate risk of the
debt was hedged with derivative financial instruments.
The deep discount bonds amounted to GBP17 million at 28 December 2008 (2007 -
GBP 15.5 million). The discount rate is 10% per annum which is accrued in the
consolidated income statement and not paid until the bond is redeemed. The Group
has the option to redeem these bonds with discount accrued to date at any time
and without penalty. The bonds are held by the three principal shareholders of
the Group.
On 21 December 2007 the Company obtained a short term unsecured loan of GBP2.5
million from Anne Street Partners Limited ("Anne Street"), a company previously
called Strand Associates Limited and incorporated in England and Wales. Anne
Street provides the services of Ian Robinson (Non-executive Chairman) to the
Company. The loan is due for repayment with interest at 10%, calculated at
quarterly rests, by 31 July 2010. There is no penalty for early repayment.
On 27 March 2008 the Company obtained a short term unsecured loan of GBP2.5
million from Burac Invest and Trade Corp ("Burac"). Burac holds 48.4% of the
issued share capital of the Company on behalf of The Horizon Charitable Trust.
The Loan carries interest at the rate of 10% per annum, calculated at quarterly
rests, and is due for repayment no later than 31 July 2010.
On 26 September 2008 the Company obtained a short term unsecured loan of GBP1.4
million from Burac Invest and Trade and Corp ("Burac") and a further GBP0.6
million from Robar Limited ("Robar"), together (the "Loans"). The Loans carry
interest at the rate of 10% per annum, calculated at quarterly rests, and is due
for repayment no later than 31 July 2010.
On 19 December 2008 the Company obtained a short term unsecured loan of
GBP2.1million from Burac Invest and Trade and Corp ("Burac") and a further
GBP0.9 million from Robar Limited ("Robar"), together (the "Loans"). The Loans
are repayable with interest at 15%, calculated at quarterly rests, no later than
31 July 2010.
As explained in Note 1 and Note 18 to the financial statements, the covenants on
the Group's bank loans were breached during 2008 and this has continued into
2009. The Group's bank loans have been classified as current despite their
scheduled repayment date being 2011 because the breach of loan covenants enables
the bank to seek immediate repayment of the bank loan.
The Directors are engaged in continuing discussions relating to the terms and
covenants of the Group's bank loans and anticipate that new covenants can be
agreed that will reflect the current operations and business structure of the
Group. The Directors expect satisfactory terms will be agreed and that
sufficient loan facilities will continue to be available to the Group and have
therefore prepared the financial statements on a going concern basis.
Board and senior management
A number of board changes have taken place during the period.
10 July 2008 John Sands resigned as Non-executive Chairman and Director of the
company.
Ian Robinson was appointed as Executive Chairman on the same date.
On 9 September 2008 Billy Buchanan was appointed to the board in the combined
roles as Chief Executive Officer and Chief Financial Officer. Richard Gundry,
previously Chief Executive Officer, was appointed Development Director of the
Company and will support the Group in developing new business opportunities. On
the same date, Ian Robinson, previously Finance Director became non-executive
Chairman and additionally Nigel Le Quesne was appointed as a non- executive
director in place of David Beech who resigned from the board on the same date.
On 18 February 2009 Richard Gundry resigned from his position as Development
Director.
Principal risks and uncertainties
Going concern
During 2008 the Group's bank loans were breached and have therefore been
reclassified as current, despite their scheduled repayment date being September
2011. The Director's expectations are that negotiations with the bank will be
satisfactorily concluded and the facility will be continued. The Group financial
statements have been prepared on a going concern basis to reflect this. Further
details relating to this are included in note 1 to the financial statements.
Economic climate
The current economic recession continues to impact consumers ability to spend
money on leisure activities generally including visiting pubs. However there are
many other factors involved in the ability of individual pubs to attract
customers and the Group continues to work with its managers and tenants to
enhance each pub's trading potential.
Recruitment and retention of managers, lessees and tenants
The recruitment and retention of managers, lessees and tenants continues to be a
principal focus of the Group's management team since this is a key driver for
the overall quality and profitability of the business. The market for good
managers, lessees and tenants is a competitive one and the Group continues to
work closely with current and prospective managers, lessees and tenants to
ensure that the Group offers the right physical and business environment for all
parties to prosper.
Interest rate risk
The Group borrows at a floating rate of interest at a margin above LIBOR and
uses derivative financial instruments principally comprising interest rate caps
and swaps for 100% (2007 - 99%) of its outstanding borrowing to limit the
Group's exposure to increasing interest rates.
Current trading and outlook
The Group continues to trade in line with expectations in what remains a
challenging market place for the pub industry. Since the period end the number
of pubs under management for other pub owners has grown significantly and
managed pubs now outnumber leased pubs. At the end of May 2009 the total number
of pubs in the Group was 401 of which 235 were managed, 157 were leased and 9
were held for resale.
The Group will continue to focus on the growth of its managed pubs division as
well as continuing to review further opportunities for business growth possibly
through selective acquisitions where appropriate.
The Group will also benefit from a significantly lower and fixed interest cost
on its bank debt as a result of recent interest rate swap agreements.
Consolidated income statement for the period ended 28 December 2008
+----------------------------------+------+-----+------------+------------+
| | Note | | 2008 | 2007 |
+----------------------------------+------+-----+------------+------------+
| | | | GBP'000 | GBP'000 |
+----------------------------------+------+-----+------------+------------+
| | | | | |
+----------------------------------+------+-----+------------+------------+
| Revenue | 2 | | 25,942 | 11,424 |
+----------------------------------+------+-----+------------+------------+
| Cost of sales | | | (10,802) | (4,519) |
+----------------------------------+------+-----+------------+------------+
| | | | | |
+----------------------------------+------+-----+------------+------------+
| | | | | |
+----------------------------------+------+-----+------------+------------+
| Gross profit | | | 15,140 | 6,905 |
+----------------------------------+------+-----+------------+------------+
| | | | | |
+----------------------------------+------+-----+------------+------------+
| Operating expenses | | | (29,750) | (10,027) |
+----------------------------------+------+-----+------------+------------+
| | | | | |
+----------------------------------+------+-----+------------+------------+
| | | | | |
+----------------------------------+------+-----+------------+------------+
| Operating loss | 3 | | (14,610) | (3,122) |
+----------------------------------+------+-----+------------+------------+
| | | | | |
+----------------------------------+------+-----+------------+------------+
| Finance income | 5 | | 64 | 112 |
+----------------------------------+------+-----+------------+------------+
| Finance expense | 5 | | (10,352) | (8,631) |
+----------------------------------+------+-----+------------+------------+
| | | | | |
+----------------------------------+------+-----+------------+------------+
| Loss before tax | | | (24,898) | (11,641) |
+----------------------------------+------+-----+------------+------------+
| | | | | |
+----------------------------------+------+-----+------------+------------+
| Tax credit | 6 | | 230 | - |
+----------------------------------+------+-----+------------+------------+
| | | | | |
+----------------------------------+------+-----+------------+------------+
| Loss for the period attributable | | | | |
| to the | | | | |
+----------------------------------+------+-----+------------+------------+
| equity holders of the parent | | | (24,668) | (11,641) |
| company | | | | |
+----------------------------------+------+-----+------------+------------+
| | | | | |
+----------------------------------+------+-----+------------+------------+
| Loss per share: | | | | |
+----------------------------------+------+-----+------------+------------+
| | | | | |
+----------------------------------+------+-----+------------+------------+
| Basic | 7 | | (83.96p) | (48.96p) |
+----------------------------------+------+-----+------------+------------+
| | | | | |
+----------------------------------+------+-----+------------+------------+
| Diluted | 7 | | (83.96p) | (48.96p) |
+----------------------------------+------+-----+------------+------------+
There are no other items of recognised income and expense other than those shown
in the income statement.
The current reporting period is from 1 January 2008 to 28 December 2008 and the
comparative period is for the year ended 31 December 2007.
Consolidated balance sheet at 28 December 2008
+--------------------------------------------+-------+----+----------+----------+
| | Note | | 2008 | 2007 |
+--------------------------------------------+-------+----+----------+----------+
| | | | GBP'000 | GBP'000 |
+--------------------------------------------+-------+----+----------+----------+
| Assets | | | | |
+--------------------------------------------+-------+----+----------+----------+
| Non-current assets | | | | |
+--------------------------------------------+-------+----+----------+----------+
| Property, plant and equipment | 8 | | 94,304 | 105,926 |
+--------------------------------------------+-------+----+----------+----------+
| Goodwill | 9 | | 2,928 | 2,932 |
+--------------------------------------------+-------+----+----------+----------+
| Intangible assets | 9 | | 1,577 | 2,431 |
+--------------------------------------------+-------+----+----------+----------+
| Derivative financial assets | 11 | | 126 | 300 |
+--------------------------------------------+-------+----+----------+----------+
| | | | | |
+--------------------------------------------+-------+----+----------+----------+
| | | | 98,935 | 111,589 |
+--------------------------------------------+-------+----+----------+----------+
| Current assets | | | | |
+--------------------------------------------+-------+----+----------+----------+
| Inventories | 13 | | 425 | 574 |
+--------------------------------------------+-------+----+----------+----------+
| Trade and other receivables | 14 | | 1,556 | 1,733 |
+--------------------------------------------+-------+----+----------+----------+
| Cash and cash equivalents | 15 | | 5,011 | 2,942 |
+--------------------------------------------+-------+----+----------+----------+
| | | | | |
+--------------------------------------------+-------+----+----------+----------+
| | | | 6,992 | 5,249 |
+--------------------------------------------+-------+----+----------+----------+
| Non-current assets classified as held for | 16 | | 3,185 | 10,759 |
| sale | | | | |
+--------------------------------------------+-------+----+----------+----------+
| | | | | |
+--------------------------------------------+-------+----+----------+----------+
| Total assets | | | 109,112 | 127,597 |
+--------------------------------------------+-------+----+----------+----------+
| | | | | |
+--------------------------------------------+-------+----+----------+----------+
| Liabilities | | | | |
+--------------------------------------------+-------+----+----------+----------+
| | | | | |
+--------------------------------------------+-------+----+----------+----------+
| Current liabilities | | | | |
+--------------------------------------------+-------+----+----------+----------+
| Trade and other payables | 17 | | 6,769 | 5,350 |
+--------------------------------------------+-------+----+----------+----------+
| Corporation tax payable | | | - | 41 |
+--------------------------------------------+-------+----+----------+----------+
| Loans and borrowings | 18 | | 93,957 | 3,536 |
+--------------------------------------------+-------+----+----------+----------+
| Provisions | 19 | | 545 | 87 |
+--------------------------------------------+-------+----+----------+----------+
| | | | | |
+--------------------------------------------+-------+----+----------+----------+
| | | | 101,271 | 9,014 |
+--------------------------------------------+-------+----+----------+----------+
| Non-current liabilities | | | | |
+--------------------------------------------+-------+----+----------+----------+
| Derivative financial liabilities | 11 | | 1,258 | 11 |
+--------------------------------------------+-------+----+----------+----------+
| Loans and borrowings | 18 | | 17,033 | 103,293 |
+--------------------------------------------+-------+----+----------+----------+
| Deferred tax liabilities | 12 | | 143 | 373 |
+--------------------------------------------+-------+----+----------+----------+
| | | | | |
+--------------------------------------------+-------+----+----------+----------+
| | | | 18,434 | 103,677 |
+--------------------------------------------+-------+----+----------+----------+
| | | | | |
+--------------------------------------------+-------+----+----------+----------+
| Total liabilities | | | 119,705 | 112,691 |
+--------------------------------------------+-------+----+----------+----------+
| | | | | |
+--------------------------------------------+-------+----+----------+----------+
| Total net (liabilities)/assets | | | (10,593) | 14,906 |
+--------------------------------------------+-------+----+----------+----------+
| | | | | |
+--------------------------------------------+-------+----+----------+----------+
| Equity | | | | |
+--------------------------------------------+-------+----+----------+----------+
| Called up share capital | 20,21 | | 1,469 | 1,469 |
+--------------------------------------------+-------+----+----------+----------+
| Share premium reserve | 21 | | 22,505 | 22,505 |
+--------------------------------------------+-------+----+----------+----------+
| Merger reserve | 21 | | 2,282 | 2,282 |
+--------------------------------------------+-------+----+----------+----------+
| Shares to be issued | 21 | | - | 875 |
+--------------------------------------------+-------+----+----------+----------+
| Retained earnings | 21 | | (36,849) | (12,225) |
+--------------------------------------------+-------+----+----------+----------+
| | | | | |
+--------------------------------------------+-------+----+----------+----------+
| Total equity attributable to equity | | | (10,593) | 14,906 |
| holders of the parent company | | | | |
+--------------------------------------------+-------+----+----------+----------+
Consolidated cash flow statement for the period ended 28 December 2008
+-------------------------------------+------+-----+--------------+-----------+
| | | | 2008 | 2007 |
+-------------------------------------+------+-----+--------------+-----------+
| | | | GBP'000 | GBP'000 |
+-------------------------------------+------+-----+--------------+-----------+
| Operating activities | | | | |
+-------------------------------------+------+-----+--------------+-----------+
| Loss for the period | | | (24,668) | (11,641) |
+-------------------------------------+------+-----+--------------+-----------+
| Provision for loss on disposal of properties | 1,469 | 5,849 |
| held for sale | | |
+--------------------------------------------------+--------------+-----------+
| Impairment of property, plant and equipment | 12,672 | - |
+--------------------------------------------------+--------------+-----------+
| Depreciation and amortisation | | | 918 | 388 |
+-------------------------------------+------+-----+--------------+-----------+
| Loss on disposal of property, plant and | 704 | - |
| equipment | | |
+--------------------------------------------------+--------------+-----------+
| Taxation | (230) | - |
+--------------------------------------------------+--------------+-----------+
| Finance income | | | (64) | (112) |
+-------------------------------------+------+-----+--------------+-----------+
| Finance expense | | | 10,352 | 8,632 |
+-------------------------------------+------+-----+--------------+-----------+
| Share based payment charge | | | 43 | 31 |
+-------------------------------------+------+-----+--------------+-----------+
| Provision for onerous leases | 318 | - |
+--------------------------------------------------+--------------+-----------+
| | | | | |
+-------------------------------------+------+-----+--------------+-----------+
| Cash (outflow)/inflow before changes in working | 1,514 | 3,147 |
| capital | | |
+--------------------------------------------------+--------------+-----------+
| | | | | |
+-------------------------------------+------+-----+--------------+-----------+
| Decrease in inventories | 149 | - |
+--------------------------------------------------+--------------+-----------+
| Decrease in trade and other | | | 177 | 1,793 |
| receivables | | | | |
+-------------------------------------+------+-----+--------------+-----------+
| Increase in trade and other | | | 988 | 45 |
| payables | | | | |
+-------------------------------------+------+-----+--------------+-----------+
| | | | | |
+-------------------------------------+------+-----+--------------+-----------+
| Cash inflow from operating | | | 2,828 | 4,985 |
| activities | | | | |
+-------------------------------------+------+-----+--------------+-----------+
| | | | | |
+-------------------------------------+------+-----+--------------+-----------+
| Investing activities | | | | |
+-------------------------------------+------+-----+--------------+-----------+
| Acquisition of subsidiary, net of cash acquired | - | (431) |
| | | |
+--------------------------------------------------+--------------+-----------+
| Sale of properties held for resale | | | 4,739 | - |
+-------------------------------------+------+-----+--------------+-----------+
| Purchase of property, plant and | | | (1,266) | (19,885) |
| equipment | | | | |
+-------------------------------------+------+-----+--------------+-----------+
| Sale of property, plant and equipment | 68 | - |
+--------------------------------------------------+--------------+-----------+
| Purchase of intangible assets: operating | | - | (129) |
| leases | | | |
+--------------------------------------------+-----+--------------+-----------+
| | | | | |
+-------------------------------------+------+-----+--------------+-----------+
| Cash inflow/(outflow) from investing | | 3,541 | (20,445) |
| activities | | | |
+--------------------------------------------+-----+--------------+-----------+
| | | | | |
+-------------------------------------+------+-----+--------------+-----------+
| Financing activities | | | | |
+-------------------------------------+------+-----+--------------+-----------+
| Issue of ordinary shares | | | - | 9,937 |
+-------------------------------------+------+-----+--------------+-----------+
| Share issue expense paid | | | - | (131) |
+-------------------------------------+------+-----+--------------+-----------+
| Proceeds from bank borrowings | | | - | 11,779 |
+-------------------------------------+------+-----+--------------+-----------+
| Repayment of bank borrowings | (4,785) | - |
+--------------------------------------------------+--------------+-----------+
| Proceeds from short term loan | | | 7,500 | 2,500 |
+-------------------------------------+------+-----+--------------+-----------+
| Repayment of deep discount bonds | | | - | (1,831) |
+-------------------------------------+------+-----+--------------+-----------+
| Purchase of interest rate hedge | | | - | (717) |
+-------------------------------------+------+-----+--------------+-----------+
| Interest paid | | | (6,626) | (6,380) |
+-------------------------------------+------+-----+--------------+-----------+
| Interest received | 64 | 110 |
+--------------------------------------------------+--------------+-----------+
| | | | | |
+-------------------------------------+------+-----+--------------+-----------+
| Cash (outflow)/inflow from financing | | (3,847) | 15,267 |
| activities | | | |
+--------------------------------------------+-----+--------------+-----------+
| | | | | |
+-------------------------------------+------+-----+--------------+-----------+
| Increase/ (decrease) in cash and | | | 2,522 | (193) |
| cash equivalents | | | | |
+-------------------------------------+------+-----+--------------+-----------+
| Cash and cash equivalents at | | | 2,489 | 2,682 |
| beginning of period | | | | |
+-------------------------------------+------+-----+--------------+-----------+
| | | | | |
+-------------------------------------+------+-----+--------------+-----------+
| Cash and cash equivalents at end of | | | 5,011 | 2,489 |
| period | | | | |
+-------------------------------------+------+-----+--------------+-----------+
| | | | | |
+-------------------------------------+------+-----+--------------+-----------+
| Cash and cash equivalents comprise: | | | | |
+-------------------------------------+------+-----+--------------+-----------+
| Cash at bank and in hand | | | 5,011 | 2,942 |
+-------------------------------------+------+-----+--------------+-----------+
| Bank overdrafts | | | - | (453) |
+-------------------------------------+------+-----+--------------+-----------+
| | | | | |
+-------------------------------------+------+-----+--------------+-----------+
| Cash and cash equivalents at end of | | | 5,011 | 2,489 |
| period | | | | |
+-------------------------------------+------+-----+--------------+-----------+
The current reporting period is from 1 January 2008 to 28 December 2008, and the
comparative period is for the year ended 31 December 2007.
Notes forming part of the preliminary results announcement for the period ended
28 December 2008
1 Accounting policies
Basis of preparation
The principal accounting policies adopted in the preparation of the financial
statements are set out below. The policies have been consistently applied to all
the periods presented, unless otherwise stated.
These consolidated financial statements have been prepared in accordance with
International Financial Reporting Standards, International Accounting Standards
and Interpretations (collectively IFRSs) issued by the International Accounting
Standards Board (IASB) as adopted by European Union (IFRSs) and with those parts
of the Companies Act 1985 applicable to companies preparing their financial
statements under IFRSs.
The group reporting period was changed to 28 December 2008 from 31 December
2008, as the group is in the process of migrating to a 52 week reporting cycle
for operational purposes. There were no material adjustments between the 28
December 2008 and 31 December 2008.
Going concern
The results of the Group are such that the financial covenants relating to a
bank loans totalling GBP83.7m were breached during the period and also when
tested subsequent to the period end. As a result of the loan covenant breach,
under the terms of the bank loan agreement the lender is entitled to seek
repayment of the loan on demand and therefore the bank loans have been
classified in the balance sheet as a current liability even though the loan
would not otherwise be due for repayment until September 2011. The Group is in
regular discussion with its bankers who, whilst not waiving their right or
ability to seek a remedy for the breach of loan covenants, have expressed a
willingness to enter into negotiations on the Group's banking facilities such
that the loan covenants can be complied with in future periods.
The details of the revised facilities have not yet been discussed with the bank
and therefore the Group is currently reliant on the continued support of its
bankers. It cannot be guaranteed that an acceptable agreement will be reached
but the Directors are confident that a satisfactory agreement will be reached.
The Directors have prepared financial projections for the Group using current
expectations for trading and cash flows. The Directors have also considered the
likelihood of the continued availability of GBP10.2m of loans from related
parties (all of which are due in July 2010) and are exploring all options with a
view to securing the long term financing of the Group. On the basis of these
projections and the expectation that bank facilities will continue to be
available in the same amount, the directors have concluded that the Group is a
going concern and will be able to meet its liabilities as they fall due for at
least the next twelve months. Accordingly these financial statements have been
prepared on a going concern basis. These conditions indicate the existence of a
material uncertainty which may cast doubt about the Group's ability to continue
as a going concern. The financial statements do not include the adjustments that
would result if the Group was unable to continue as a going concern.
Standards, amendments and interpretations to published standards not yet
effective
Certain new standards, amendments and interpretations to existing standards have
been published that are mandatory for the Group's accounting periods beginning
after 1 January 2008 or later periods and which the Group has decided not to
adopt early. These may, but are not expected to have a material impact on the
Group's financial statements but may result in presentational or disclosure
changes:
* IFRS 2 Share-based Payment: Vesting Conditions and Cancellations (effective from
1st January 2009)
* IFRS 3 Business Combinations (revised) (effective from 1st July 2009)
* IFRS 8 Operating Segments (effective from 1st January 2009)
* IAS 1 Amendments to Presentation of Financial Statements (A Revised
Presentation) (effective from 1 January 2009)
* IAS 23 Amendments to Borrowing Costs (effective from 1st January 2009)
* IAS 27 Amendments to Consolidated and Separate Financial Statements (effective
from 1st July 2009)
* IFRIC 13 Customer Loyalty Programmes (effective from 1st July 2008)
* IFRIC 15 Agreements for the Construction of Real Estate (effective from 1st
January 2009 unendorsed)
* IFRIC 17 Distribution of non-cash assets to owners (effective from 1st July 2009
unendorsed)
* IFRIC 18 Transfers of Assets from Customers (effective from 1st July 2009
unendorsed)
* IFRS 7 Improving disclosures about financial instruments (effective from 1
January 2009 unendorsed)
* IFRIC 9 Embedded derivatives (effective from 30 June 2009 unendorsed)
* IFRS 2 Group cash settled share based payments (effective from 1 January 2010
unendorsed)
* Improvements to IFRSs 2009 (effective from 1 January 2009)
* Improvements to IFRSs 2010 (effective from 1 January 2010 unendorsed)
A summary of the principal Group IFRS accounting policies is set out below.
Basis of consolidation
The consolidated financial statements incorporate the results of the parent
company London Town plc ("the Company" or "the parent company") and all of its
subsidiary undertakings (together referred to as "the Group") at 28 December
2008. Subsidiaries are consolidated from the date on which control transferred
to the Group. Intercompany transactions and balances between Group companies are
eliminated in full. Acquisition method of accounting is applied from the date
of acquisition.
Goodwill
Goodwill on acquisition is initially measured at cost, being the excess of the
cost of the business combination over the fair value of the Group's share of
identifiable assets, liabilities and contingent liabilities. Following initial
recognition, goodwill is measured at cost less any accumulated impairment
losses.
Goodwill carried in the balance sheet is not amortised. Goodwill is reviewed for
impairment annually or more frequently if events or changes in circumstances
indicate that the carrying value may be impaired.
Intangible assets
Intangible assets acquired in a business combination are initially recognised at
their fair value and, thereafter, at amortised cost less provision for
impairment. Amortisation is charged to the income statement, within operating
expenses, on a straight line basis over the estimated useful lives, as follows:
Operating leases- Over the term of the lease
Property, plant and equipment
Landlord's fixtures and fittings include removable items, which are generally
regarded as within landlord ownership. These are depreciated in accordance with
the policy detailed below.
Property, plant and equipment assets are carried at cost or deemed cost less
accumulated depreciation and any recognised impairment in value. Depreciation is
provided to write off the cost of property, plant and equipment, less estimated
residual values, by equal annual instalments as follows:
Freehold buildings- 50 years
Leasehold buildings-50 years or the life of the lease if shorter
Public house fixtures and fittings -5 - 10 years
Office furniture and fittings -5 - 10 years
Information technology - 3 years
Motor vehicles - 4 years
Freehold land is not depreciated.
Freehold buildings are depreciated so as to write off the difference between
their carrying value and residual value over their useful economic life of 50
years. Residual values are reviewed at least once in each financial period
Buildings are maintained to an operational standard either through a regular
schedule of repairs or refurbishment carried out by the Group or by the tenant
in respect of fully repairing leases. The Directors believe that this process
enables the residual values to be maintained over time as fit for
purpose since all aspects of wear and tear are covered by this process. It is
not considered obsolescence is relevant given the purpose for which these
buildings are maintained.
Impairment of non-financial assets
The need for any non-financial asset impairment write down is assessed by
comparison of the carrying value of the asset against the higher of its net
realisable value and value in use. These assessments are carried out at
reporting dates or whenever events or changes in circumstances indicate that
their carrying amount may not be recoverable. Where the carrying value of an
asset exceeds its recoverable amount, the asset is written down accordingly.
Impairment charges are included in the operating expenses line item in the
income statement.
Financial assets
The Group classifies its financial assets into one of the following categories,
depending on the purpose for which the asset was acquired. The Group's
accounting for each category is as follows:
Fair value through profit or loss: This category comprises only in-the-money
derivatives. They are carried in the balance sheet at fair value with changes in
fair value recognised in the income statement. The Group does not have any
assets held for trading nor does it voluntarily classify any assets as being at
fair value through profit or loss.
Loans and receivables: These assets are non-derivative financial assets with
fixed or determinable payments that are not quoted in an active market. They
arise principally through the provision of goods or services to customers (trade
receivables), but also incorporate other types of contractual monetary asset.
They are initially recognised at fair value and subsequently carried at cost
less any provision for impairment.
Financial liabilities
The Group's financial liabilities comprise:
* trade payables and other short-term monetary liabilities, which are initially
recognised at fair value. After initial recognition, such financial liabilities
are recognised at amortised cost.
* bank loans, short term loans and deep discount bonds issued by the Group, which
are initially recognised at fair value, net of any transaction costs directly
attributable to the issue of the instrument. After initial recognition,
interest-bearing loans and bonds are subsequently measured at amortised cost
using the effective interest rate method, which ensures that any interest
expense over the period to repayment is at a constant rate on the balance of the
liability carried in the balance sheet. "Interest expense" in this context
includes initial transaction costs and premium paid on redemption, as well as
any interest or coupon payable whilst the liability is outstanding.
* Out of the money derivatives are recognised at fair value. Changes in fair value
are recognised in the income statement.
Provisions
Provisions for onerous leases are recognised when the group has a present legal
or constructive obligation to transfer economic resources as a result of past
events.
Provisions are measured at management's best estimate of the lower of the lease
exit value and the future minimum contractual lease payments, less any expected
rental income, at the balance sheet date.
Borrowing costs
All borrowing costs are expensed in the period in which they occur. Transaction
costs are amortised over the term of the related loan.
Derivative financial instruments
Derivatives are initially recognised at fair value on the date on which a
derivative contract is entered into and are subsequently re-measured at their
fair value. Fair values are obtained from quoted market prices in active
markets, as appropriate. All derivatives are carried as financial assets when
fair value is positive and as financial liabilities when fair value is negative.
Changes in the fair value of any derivative instrument are recognised
immediately in the income statement as a component of finance income or expense.
Revenue
Revenue is measured at the fair value of the consideration received or
receivable and represents amounts receivable for goods and services provided in
the normal course of the business, net of discounts and VAT. All operations take
place solely in the United Kingdom.
· Drink and food sales
Revenue in respect of drink and food sales is recognised at the point at
which the goods are provided, net of discounts or volume rebates allowed.
· Rents receivable
Rents receivable are recognised on a straight-line basis over the lease
term.
· Machine income
The Group's share of net machine income is recognised in the period to
which it relates.
· Management services income
Revenue earned in respect of the management of pubs for other pub owners is
recognised in the period to which it relates.
Inventories
Inventories are valued at the lower of cost and net realisable value.
Cash and cash equivalents
Cash and cash equivalents in the balance sheet comprise cash at bank and in hand
and short term deposits with a maturity of 3 months or less.
Non-current assets held for sale
Profits or losses from the sale of non current assets is recognised on
completion of the sale.
Non-current assets classified as held for sale are measured at the lower of
carrying amount and fair value less costs to sell and are not depreciated.
Non-current assets and disposal groups are classified as held for sale if their
carrying amount will be recovered through a sale transaction rather than through
continuing use. This condition is regarded as met only when the sale is highly
probable and the asset is available for immediate sale in its present condition.
Management must be committed to the sale and completion should be expected
within one year from the date of classification.
Share-based payments
Where equity settled share options are awarded to employees, the fair value of
the options at the date of grant is charged to the consolidated income statement
over the vesting period. Non-market vesting conditions are taken into account by
adjusting the number of equity instruments expected to vest at each balance
sheet date so that, ultimately, the cumulative amount recognised over the
vesting period is based on the number of options that eventually vest. Market
vesting conditions are factored into the fair value of the options granted. As
long as all other vesting conditions are satisfied, a charge is made
irrespective
of whether the market vesting conditions are satisfied. The cumulative expense
is not adjusted for failure to achieve a market vesting condition.
Where equity instruments are granted to persons other than employees, the income
statement is charged with the fair value of the goods and services received,
except to the extent to which such goods or services form part of the
acquisition costs of an asset. In such cases, the fair value of goods and
services
received is added to the cost of the asset.
Leased assets
Where substantially all of the risks and rewards incidental to ownership are
retained by the lessor ("an operating lease"), the total rentals payable under
the lease are charged to the income statement on a straight-line basis over the
lease term.
The land and buildings elements of property leases are considered separately for
the purposes of lease classification, if material.
Taxation
Tax expense represents the sum of the current tax payable and deferred tax.
Current tax: The tax currently payable is based on the taxable profit for the
period. Taxable profit differs from profit as reported in the income statement
because it excludes items of income and expense that are taxable and deductible
in other years and it excludes items that are never taxable or deductible. The
Group's liability for current tax is calculated using tax rates that have been
enacted or substantively enacted at the balance sheet date.
Deferred tax: Deferred tax assets and liabilities are recognised where the
carrying amount of an asset or liability in the balance sheet differs to its tax
base, except for differences arising on:
* the initial recognition of goodwill;
* goodwill for which amortisation is not tax deductible;
* the initial recognition of an asset or liability in a transaction which is not a
business combination and at the time of the transaction affects neither
accounting nor taxable profit; and
* investments in subsidiaries and jointly controlled entities where the Group is
able to control the timing of the reversal of the difference and it is probable
that the difference will not reverse in the foreseeable future.
Recognition of deferred tax assets is restricted to those instances where it is
probable that the taxable profit will be available against which the difference
can be utilised.
The amount of the asset or liability is determined using tax rates that have
been enacted or substantively enacted by the balance sheet date and are expected
to apply when the deferred tax liabilities/(assets) are settled/(recovered).
Deferred tax balances are not discounted.
Deferred tax assets and liabilities are offset when the Group has a legally
enforceable right to offset current tax assets and liabilities and the deferred
tax assets and liabilities relate to taxes levied by the same tax authority on
either:
* the same taxable Group company; or
* different Group entities which intend to settle current tax assets and
liabilities on a net basis, or to realise the assets and settle the liabilities
simultaneously, in each future period in which significant amounts of deferred
tax assets or liabilities are expected to be settled or recovered.
Use of accounting estimates and judgements
The Group makes estimates and assumptions during the preparation of the
financial statements. Actual results may differ from these estimates under
different assumptions and conditions. The estimates and assumptions that have
the most significant effect on the amounts recognised in the financial
statements are discussed below:
a) Residual value
The Group estimates the useful life and residual value of property, plant and
equipment (PPE) and these estimates influence the depreciation charged each
period. For details of these estimates, see the detailed accounting policy for
property, plant and equipment.
b) Testing goodwill for impairment
The Group annually tests whether goodwill has been impaired. The recoverable
amount of cash generating unit that the goodwill has been allocated to is
determined based on value-in-use calculations which require estimating future
cash flows and applying a suitable discount rate. (Refer to note 9 - Goodwill
and intangible assets)
c) Testing property, plant and equipment for impairment
The Group annually tests whether property, plant and equipment has been
impaired. The assets are assessed based on the higher of net realisable value
and value in use. (Refer to note 8 - Property, plant and equipment)
d) Taxation
Judgement is required when determining the provision for taxes as the tax
treatment of some transactions cannot be finally determined until a formal
resolution has been reached with the tax authorities. Tax benefits are not
recognised unless it is probable that the benefit will be obtained. Tax
provisions are made if it is expected that a liability will arise. The Group
reviews each significant tax liability or benefit to assess the appropriate
accounting treatment.
2 Segment information
The group operates in two business segments: leased pubs and a managed pubs.
There is only one geographic segment as all activities are conducted in the
United Kingdom.
+-----------------------------+----------+----------+-------------+-----------+
| | 2008 |
+-----------------------------+-----------------------------------------------+
| | Leased | Managed | Unallocated | Total |
+-----------------------------+----------+----------+-------------+-----------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+-----------------------------+----------+----------+-------------+-----------+
| Revenue: | | | | |
+-----------------------------+----------+----------+-------------+-----------+
| Rent | 3,335 | - | - | 3,335 |
+-----------------------------+----------+----------+-------------+-----------+
| Sale of beer and other | 6,352 | 14,049 | - | 20,401 |
| drinks | | | | |
+-----------------------------+----------+----------+-------------+-----------+
| Sale of food | - | 836 | - | 836 |
+-----------------------------+----------+----------+-------------+-----------+
| Income from accommodation | - | 267 | - | 267 |
+-----------------------------+----------+----------+-------------+-----------+
| Income from leisure | 371 | 440 | - | 811 |
| machines | | | | |
+-----------------------------+----------+----------+-------------+-----------+
| Other income | - | 292 | - | 292 |
+-----------------------------+----------+----------+-------------+-----------+
| | | | | |
+-----------------------------+----------+----------+-------------+-----------+
| Total revenue | 10,058 | 15,884 | - | 25,942 |
+-----------------------------+----------+----------+-------------+-----------+
| Cost of sales | (3,759) | (7,043) | - | (10,802) |
+-----------------------------+----------+----------+-------------+-----------+
| | | | | |
+-----------------------------+----------+----------+-------------+-----------+
| Gross profit | 6,299 | 8,841 | - | 15,140 |
+-----------------------------+----------+----------+-------------+-----------+
| | | | | |
+-----------------------------+----------+----------+-------------+-----------+
| Operating expenses | (17,605) | (10,153) | (1,992) | (29,750) |
+-----------------------------+----------+----------+-------------+-----------+
| | | | | |
+-----------------------------+----------+----------+-------------+-----------+
| Segment result | (11,306) | (1,312) | (1,992) | (14,610) |
+-----------------------------+----------+----------+-------------+-----------+
| Finance income | - | - | 64 | 64 |
+-----------------------------+----------+----------+-------------+-----------+
| Finance expense | - | - | (10,352) | (10,352) |
+-----------------------------+----------+----------+-------------+-----------+
| | | | | |
+-----------------------------+----------+----------+-------------+-----------+
| Loss before taxation | (11,306) | (1,312) | (12,280) | (24,898) |
+-----------------------------+----------+----------+-------------+-----------+
| | | | | |
+-----------------------------+----------+----------+-------------+-----------+
| Taxation | - | - | 230 | 230 |
+-----------------------------+----------+----------+-------------+-----------+
| | | | | |
+-----------------------------+----------+----------+-------------+-----------+
| Loss for period | (11,306) | (1,312) | (12,050) | (24,668) |
+-----------------------------+----------+----------+-------------+-----------+
| | | | | |
+-----------------------------+----------+----------+-------------+-----------+
| Assets and liabilities | | | | |
+-----------------------------+----------+----------+-------------+-----------+
| Total assets | 98,982 | 3,973 | 6,157 | 109,112 |
+-----------------------------+----------+----------+-------------+-----------+
| Total liabilities | (3,638) | (3,587) | (112,480) | (119,705) |
+-----------------------------+----------+----------+-------------+-----------+
| | | | | |
+-----------------------------+----------+----------+-------------+-----------+
| Net assets/(liabilities) | 95,344 | 386 | (106,323) | (10,593) |
+-----------------------------+----------+----------+-------------+-----------+
| | | | | |
+-----------------------------+----------+----------+-------------+-----------+
| Other information | | | | |
+-----------------------------+----------+----------+-------------+-----------+
| Capital expenditure | 711 | 378 | 177 | 1,266 |
+-----------------------------+----------+----------+-------------+-----------+
| Share based payment charge | 43 | - | - | 43 |
| | | | | |
+-----------------------------+----------+----------+-------------+-----------+
+-----------------------------+---------+----------+-------------+-----------+
| | 2007 |
+-----------------------------+----------------------------------------------+
| | Leased | Managed | Unallocated | Total |
| | | | | |
+-----------------------------+---------+----------+-------------+-----------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+-----------------------------+---------+----------+-------------+-----------+
| Revenue: | | | | |
+-----------------------------+---------+----------+-------------+-----------+
| Rent | 3,789 | - | - | 3,789 |
+-----------------------------+---------+----------+-------------+-----------+
| Sale of beer and other | 7,248 | - | - | 7,248 |
| drinks | | | | |
+-----------------------------+---------+----------+-------------+-----------+
| Income from leisure | 387 | - | - | 387 |
| machines | | | | |
+-----------------------------+---------+----------+-------------+-----------+
| | | | | |
+-----------------------------+---------+----------+-------------+-----------+
| Total revenue | 11,424 | - | - | 11,424 |
+-----------------------------+---------+----------+-------------+-----------+
| Cost of sales | (4,519) | - | - | (4,519) |
+-----------------------------+---------+----------+-------------+-----------+
| | | | | |
+-----------------------------+---------+----------+-------------+-----------+
| Gross profit | 6,905 | - | - | 6,905 |
+-----------------------------+---------+----------+-------------+-----------+
| | | | | |
+-----------------------------+---------+----------+-------------+-----------+
| Operating expenses | (9,128) | - | (899) | (10,027) |
+-----------------------------+---------+----------+-------------+-----------+
| | | | | |
+-----------------------------+---------+----------+-------------+-----------+
| Segment result | (2,223) | - | (899) | (3,122) |
+-----------------------------+---------+----------+-------------+-----------+
| Finance income | - | - | 112 | 112 |
+-----------------------------+---------+----------+-------------+-----------+
| Finance expense | - | - | (8,631) | (8,631) |
+-----------------------------+---------+----------+-------------+-----------+
| | | | | |
+-----------------------------+---------+----------+-------------+-----------+
| Loss before taxation | (2,223) | - | (9,418) | (11,641) |
+-----------------------------+---------+----------+-------------+-----------+
| Taxation | - | - | - | - |
+-----------------------------+---------+----------+-------------+-----------+
| | | | | |
+-----------------------------+---------+----------+-------------+-----------+
| Loss for year | (2,223) | - | (9,418) | (11,641) |
+-----------------------------+---------+----------+-------------+-----------+
| | | | | |
+-----------------------------+---------+----------+-------------+-----------+
| Assets and liabilities | | | | |
+-----------------------------+---------+----------+-------------+-----------+
| Total assets | 116,194 | 5,540 | 6,073 | 127,807 |
+-----------------------------+---------+----------+-------------+-----------+
| Total liabilities | (2,168) | (3,396) | (107,337) | (112,901) |
+-----------------------------+---------+----------+-------------+-----------+
| | | | | |
+-----------------------------+---------+----------+-------------+-----------+
| Net assets | 114,026 | 2,144 | (101,264) | 14,906 |
+-----------------------------+---------+----------+-------------+-----------+
| | | | | |
+-----------------------------+---------+----------+-------------+-----------+
| Other information | | | | |
+-----------------------------+---------+----------+-------------+-----------+
| Capital expenditure | 19,918 | - | - | 19,918 |
+-----------------------------+---------+----------+-------------+-----------+
| Share based payment charge | 31 | - | - | 31 |
+-----------------------------+---------+----------+-------------+-----------+
+------------------------------------+----------+----------+-------------+----------+
| | | 2008 | | |
+------------------------------------+----------+----------+-------------+----------+
| | Leased | Managed |Unallocated | Total |
+------------------------------------+----------+----------+-------------+----------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+------------------------------------+----------+----------+-------------+----------+
| | | | | |
+------------------------------------+----------+----------+-------------+----------+
| Segment result | (11,306) | (1,312) | (1,992) | (14,610) |
+------------------------------------+----------+----------+-------------+----------+
| Add back: | | | | |
+------------------------------------+----------+----------+-------------+----------+
| Share based payment | - | - | 43 | 43 |
+------------------------------------+----------+----------+-------------+----------+
| Depreciation and amortisation | 346 | 523 | 49 | 918 |
+------------------------------------+----------+----------+-------------+----------+
| Impairment of property, plant and | 12,672 | - | - | 12,672 |
| equipment | | | | |
+------------------------------------+----------+----------+-------------+----------+
| (Profit)/loss on disposal of | | | | |
| property, plant | | | | |
+------------------------------------+----------+----------+-------------+----------+
| and equipment | 707 | (3) | - | 704 |
+------------------------------------+----------+----------+-------------+----------+
| Provision for loss on disposal of | | | | |
| properties held | | | | |
+------------------------------------+----------+----------+-------------+----------+
| for sale | 1,469 | - | - | 1,469 |
+------------------------------------+----------+----------+-------------+----------+
| Provision for onerous leases | - | 318 | - | 318 |
+------------------------------------+----------+----------+-------------+----------+
| | _______ | _______ | _______ | _______ |
+------------------------------------+----------+----------+-------------+----------+
| | | | | |
+------------------------------------+----------+----------+-------------+----------+
| Adjusted EBITDA | 3,888 | (474) | (1,900) | 1,514 |
+------------------------------------+----------+----------+-------------+----------+
| | _______ | _______ | _______ | _______ |
+------------------------------------+----------+----------+-------------+----------+
| | | | | |
+------------------------------------+----------+----------+-------------+----------+
| | | 2007 | | |
+------------------------------------+----------+----------+-------------+----------+
| | Leased | Managed |Unallocated | Total |
+------------------------------------+----------+----------+-------------+----------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+------------------------------------+----------+----------+-------------+----------+
| | | | | |
+------------------------------------+----------+----------+-------------+----------+
| Segment result | (2,223) | - | (899) | (3,122) |
+------------------------------------+----------+----------+-------------+----------+
| Add back: | | | | |
+------------------------------------+----------+----------+-------------+----------+
| Share based payment | - | - | 31 | 31 |
+------------------------------------+----------+----------+-------------+----------+
| Depreciation and amortisation | 362 | - | 26 | 388 |
+------------------------------------+----------+----------+-------------+----------+
| Provision for loss on disposal of | | | | |
| properties held | | | | |
+------------------------------------+----------+----------+-------------+----------+
| for sale | 5,849 | - | - | 5,849 |
+------------------------------------+----------+----------+-------------+----------+
| | _______ | _______ | _______ | _______ |
+------------------------------------+----------+----------+-------------+----------+
| | | | | |
+------------------------------------+----------+----------+-------------+----------+
| Adjusted EBITDA | 3,988 | - | (842) | 3,146 |
+------------------------------------+----------+----------+-------------+----------+
| | _______ | _______ | _______ | _______ |
+------------------------------------+----------+----------+-------------+----------+
| | | | | |
+------------------------------------+----------+----------+-------------+----------+
3Operating loss
+--------------------------------------------------+-----------------+--------------+
| | 2008 | 2007 |
+--------------------------------------------------+-----------------+--------------+
| | GBP'000 | GBP'000 |
+--------------------------------------------------+-----------------+--------------+
| Total costs | | |
| deducted from | | |
| revenue to | | |
| determine | | |
| operating loss: | | |
+--------------------------------------------------+-----------------+--------------+
| | | |
+--------------------------------------------------+-----------------+--------------+
| Rent costs | 2,459 | 36 |
+--------------------------------------------------+-----------------+--------------+
| Staff costs | 4,750 | 566 |
+--------------------------------------------------+-----------------+--------------+
| Central administration costs | 3,227 | 1,218 |
+--------------------------------------------------+-----------------+--------------+
| Provision for loss on disposal of properties | 1,469 | 5,849 |
| held for resale | | |
+--------------------------------------------------+-----------------+--------------+
| Depreciation and amortization | 918 | 388 |
+--------------------------------------------------+-----------------+--------------+
| Property, plant and equipment impairment | 12,672 | - |
| provisions | | |
+--------------------------------------------------+-----------------+--------------+
| Other costs | 4,255 | 1,970 |
+--------------------------------------------------+-----------------+--------------+
| | _______ | _______ |
+--------------------------------------------------+-----------------+--------------+
| | 29,750 | 10,027 |
+--------------------------------------------------+-----------------+--------------+
| | _______ | _______ |
+--------------------------------------------------+-----------------+--------------+
| | | |
+--------------------------------------------------+-----------------+--------------+
| | 2008 | 2007 |
+--------------------------------------------------+-----------------+--------------+
| | GBP'000 | GBP'000 |
+--------------------------------------------------+-----------------+--------------+
| Fees payable to Group auditors: | | |
+--------------------------------------------------+-----------------+--------------+
| - Audit: consolidation | 10 | 10 |
+--------------------------------------------------+-----------------+--------------+
| - Audit: parent | 15 | 15 |
+--------------------------------------------------+-----------------+--------------+
| - Audit: subsidiaries | 40 | 31 |
+--------------------------------------------------+-----------------+--------------+
| - Other services: taxation | 10 | 19 |
+--------------------------------------------------+-----------------+--------------+
| - Other services: acquisitions | - | 49 |
+--------------------------------------------------+-----------------+--------------+
| | _______ | _______ |
+--------------------------------------------------+-----------------+--------------+
4 Employees and directors
+----------------------------------------------------------+-------------+-------------+
| The aggregate payroll costs were as follows: | | |
+----------------------------------------------------------+-------------+-------------+
| | 2008 | 2007 |
+----------------------------------------------------------+-------------+-------------+
| | GBP'000 | GBP'000 |
+----------------------------------------------------------+-------------+-------------+
| | | |
+----------------------------------------------------------+-------------+-------------+
| Wages and salaries | 1,908 | 299 |
+----------------------------------------------------------+-------------+-------------+
| Social security costs | 160 | 34 |
+----------------------------------------------------------+-------------+-------------+
| Pension costs | 13 | 20 |
+----------------------------------------------------------+-------------+-------------+
| Redundancy costs | - | 142 |
+----------------------------------------------------------+-------------+-------------+
| Share based payment charge | 43 | 26 |
+----------------------------------------------------------+-------------+-------------+
| | _______ | _______ |
+----------------------------------------------------------+-------------+-------------+
| | | |
+----------------------------------------------------------+-------------+-------------+
| | 2,124 | 521 |
+----------------------------------------------------------+-------------+-------------+
| | _______ | _______ |
+----------------------------------------------------------+-------------+-------------+
| | | |
+----------------------------------------------------------+-------------+-------------+
| The average number of employees of the Group, including | | |
| Directors | | |
| during the year was as follows: | | |
+----------------------------------------------------------+-------------+-------------+
| | Number | Number |
+----------------------------------------------------------+-------------+-------------+
| Pub management and operations | 123 | - |
+----------------------------------------------------------+-------------+-------------+
| Administration | 28 | 6 |
+----------------------------------------------------------+-------------+-------------+
| | _______ | _______ |
+----------------------------------------------------------+-------------+-------------+
| | | |
+----------------------------------------------------------+-------------+-------------+
| Directors remuneration was as follows:- | | |
+----------------------------------------------------------+-------------+-------------+
| | 2008 | 2007 |
+----------------------------------------------------------+-------------+-------------+
| | GBP'000 | GBP'000 |
+----------------------------------------------------------+-------------+-------------+
| | | |
+----------------------------------------------------------+-------------+-------------+
| Salaries and other emoluments | 303 | 223 |
+----------------------------------------------------------+-------------+-------------+
| Compensation for loss of office | - | 126 |
+----------------------------------------------------------+-------------+-------------+
| Pension costs | - | 13 |
+----------------------------------------------------------+-------------+-------------+
| Share based payment charge | 40 | 26 |
+----------------------------------------------------------+-------------+-------------+
| | _______ | _______ |
+----------------------------------------------------------+-------------+-------------+
| | | |
+----------------------------------------------------------+-------------+-------------+
| | 343 | 388 |
+----------------------------------------------------------+-------------+-------------+
| | _______ | _______ |
+----------------------------------------------------------+-------------+-------------+
| | | |
+----------------------------------------------------------+-------------+-------------+
+----------------------+----------+----------+----------+----------+----------+----------+
| | Salary and | Compensation | | |
+----------------------+---------------------+---------------------+----------+----------+
| | other emoluments | for loss of office | Pension |
+----------------------+---------------------+---------------------+---------------------+
| | 2008 | 2007 | 2008 | 2007 | 2008 | 2007 |
+----------------------+----------+----------+----------+----------+----------+----------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+----------------------+----------+----------+----------+----------+----------+----------+
| | | | | | | |
+----------------------+----------+----------+----------+----------+----------+----------+
| Mark Crowther | - | 178 | - | 126 | - | 13 |
+----------------------+----------+----------+----------+----------+----------+----------+
| Richard Gundry | 147 | - | - | - | - | - |
+----------------------+----------+----------+----------+----------+----------+----------+
| Ian Robinson | - | - | - | - | - | - |
+----------------------+----------+----------+----------+----------+----------+----------+
| Andrew Jurenko | 10 | 20 | - | - | - | - |
+----------------------+----------+----------+----------+----------+----------+----------+
| Kailayapillai Ranjan | 20 | 20 | - | - | - | - |
+----------------------+----------+----------+----------+----------+----------+----------+
| Andrew Wilson | 20 | 5 | - | - | - | - |
+----------------------+----------+----------+----------+----------+----------+----------+
| Billy Buchanan | 106 | - | - | - | - | - |
+----------------------+----------+----------+----------+----------+----------+----------+
| David Beech | - | - | - | - | - | - |
+----------------------+----------+----------+----------+----------+----------+----------+
| Nigel Le Quesne | - | - | - | - | - | - |
+----------------------+----------+----------+----------+----------+----------+----------+
| | _______ | _______ | _______ | _______ | _______ | _______ |
+----------------------+----------+----------+----------+----------+----------+----------+
| | | | | | | |
+----------------------+----------+----------+----------+----------+----------+----------+
| | 303 | 223 | - | 126 | - | 13 |
+----------------------+----------+----------+----------+----------+----------+----------+
| | _______ | _______ | _______ | _______ | _______ | _______ |
+----------------------+----------+----------+----------+----------+----------+----------+
| | | | | | | |
+----------------------+----------+----------+----------+----------+----------+----------+
A fee of GBP76,173 (2007 - GBP185,000) was paid to Anne Street Partners Limited
for the services of Ian Robinson. One director accrued defined contribution
pension benefits during the period.
Share based payment charges:
+----------------------+----------+----------+----------+----------+----------+----------+
| | | | | | 2008 | 2007 |
+----------------------+----------+----------+----------+----------+----------+----------+
| | | | | | GBP'000 | GBP'000 |
+----------------------+----------+----------+----------+----------+----------+----------+
| | | | | | | |
+----------------------+----------+----------+----------+----------+----------+----------+
| Mark Crowther | | | | | 28 | 18 |
+----------------------+----------+----------+----------+----------+----------+----------+
| Ian Robinson | | | | | 12 | 8 |
+----------------------+----------+----------+----------+----------+----------+----------+
| | | | | | _______ | _______ |
+----------------------+----------+----------+----------+----------+----------+----------+
| | | | | | | |
+----------------------+----------+----------+----------+----------+----------+----------+
| | | | | | 40 | 26 |
+----------------------+----------+----------+----------+----------+----------+----------+
| | | | | | _______ | _______ |
+----------------------+----------+----------+----------+----------+----------+----------+
| | | | | | | |
+----------------------+----------+----------+----------+----------+----------+----------+
| | | | | | | |
+----------------------+----------+----------+----------+----------+----------+----------+
5 Finance income and expense
+------------------------------------------------------+----------+----------+----------+
| | | | |
+------------------------------------------------------+----------+----------+----------+
| Finance income | | | |
+------------------------------------------------------+----------+----------+----------+
| | | 2008 | 2007 |
+------------------------------------------------------+----------+----------+----------+
| | | GBP'000 | GBP'000 |
+------------------------------------------------------+----------+----------+----------+
| | | | |
+------------------------------------------------------+----------+----------+----------+
| Interest receivable on bank deposits | | 64 | 110 |
+------------------------------------------------------+----------+----------+----------+
| Other interest receivable | | - | 2 |
+------------------------------------------------------+----------+----------+----------+
| | | _______ | _______ |
+------------------------------------------------------+----------+----------+----------+
| | | 64 | 112 |
+------------------------------------------------------+----------+----------+----------+
| | | _______ | _______ |
+------------------------------------------------------+----------+----------+----------+
| | | | |
+------------------------------------------------------+----------+----------+----------+
| Finance expense | | | |
+------------------------------------------------------+----------+----------+----------+
| | | | |
+------------------------------------------------------+----------+----------+----------+
| Interest payable on bank loans | | 6,583 | 6,380 |
+------------------------------------------------------+----------+----------+----------+
| Amortisation of debt issue costs | | 215 | 203 |
+------------------------------------------------------+----------+----------+----------+
| Interest payable on short term loans | | 567 | 4 |
+------------------------------------------------------+----------+----------+----------+
| Finance charge on deep discount bonds | | 1,553 | 1,455 |
+------------------------------------------------------+----------+----------+----------+
| Other | | 12 | - |
+------------------------------------------------------+----------+----------+----------+
| | | | _______ |
| | | _______ | |
+------------------------------------------------------+----------+----------+----------+
| | | | |
+------------------------------------------------------+----------+----------+----------+
| | | 8,930 | 8,042 |
+------------------------------------------------------+----------+----------+----------+
| | | | |
+------------------------------------------------------+----------+----------+----------+
| Loss on derivatives used to manage fair values interest rate | 1,422 | 589 |
| risk | | |
+-----------------------------------------------------------------+----------+----------+
| | | _______ | _______ |
+------------------------------------------------------+----------+----------+----------+
| | | | |
+------------------------------------------------------+----------+----------+----------+
| | | 10,352 | 8,631 |
+------------------------------------------------------+----------+----------+----------+
| | | _______ | _______ |
+------------------------------------------------------+----------+----------+----------+
| | | | |
+------------------------------------------------------+----------+----------+----------+
The loss of GBP1,422,000 (2007 - GBP589,000) on derivatives used to manage fair
value interest rate and cash flow risk relates to the fair value adjustment to
interest caps and swaps held by the group.
6Tax expense
+-------------------------------------------+----------+----------+----------+----------+
| | | 2008 | 2007 | |
+-------------------------------------------+----------+----------+----------+----------+
| | | GBP'000 | GBP'000 | |
+-------------------------------------------+----------+----------+----------+----------+
| Current tax expense | | | | |
+-------------------------------------------+----------+----------+----------+----------+
| UK corporation tax on loss for the period | | - | - | |
+-------------------------------------------+----------+----------+----------+----------+
| | | _______ | _______ | |
+-------------------------------------------+----------+----------+----------+----------+
| | | | | |
+-------------------------------------------+----------+----------+----------+----------+
| Deferred tax | | | | |
+-------------------------------------------+----------+----------+----------+----------+
| Origination and reversal of temporary | | 230 | - | |
| differences | | | | |
+-------------------------------------------+----------+----------+----------+----------+
| | | _______ | _______ | |
+-------------------------------------------+----------+----------+----------+----------+
| | | | | |
+-------------------------------------------+----------+----------+----------+----------+
| Total tax credit | | 230 | - | |
+-------------------------------------------+----------+----------+----------+----------+
| | | _______ | _______ | |
+-------------------------------------------+----------+----------+----------+----------+
| | | | | |
+-------------------------------------------+----------+----------+----------+----------+
| The effective rate of tax for the year differs from the standard rate of corporation |
| tax. |
| The differences are explained below: |
+---------------------------------------------------------------------------------------+
| | | | | |
+-------------------------------------------+----------+----------+----------+----------+
| | | 2008 | 2007 | |
+-------------------------------------------+----------+----------+----------+----------+
| | | |Restated | |
+-------------------------------------------+----------+----------+----------+----------+
| | | GBP'000 | GBP'000 | |
+-------------------------------------------+----------+----------+----------+----------+
| | | | | |
+-------------------------------------------+----------+----------+----------+----------+
| Loss before tax | | (24,898) | (11,641) | |
+-------------------------------------------+----------+----------+----------+----------+
| | | _______ | _______ | |
+-------------------------------------------+----------+----------+----------+----------+
| | | | | |
+-------------------------------------------+----------+----------+----------+----------+
| Tax based on the standard rate | | | | |
+-------------------------------------------+----------+----------+----------+----------+
| of corporation tax in the UK of 28% (2007 | | (6,971) | (3,492) | |
| - 30%) | | | | |
+-------------------------------------------+----------+----------+----------+----------+
| | | | | |
+-------------------------------------------+----------+----------+----------+----------+
| Effect of: | | | | |
+-------------------------------------------+----------+----------+----------+----------+
| Expenses not deductible for tax purposes | | 473 | 50 | |
+-------------------------------------------+----------+----------+----------+----------+
| Capital allowances in excess of | | 5 | 5 | |
| depreciation | | | | |
+-------------------------------------------+----------+----------+----------+----------+
| Tax losses not recognised | | 6,568 | 3,487 | |
+-------------------------------------------+----------+----------+----------+----------+
| Temporary differences | | (305) | (50) | |
+-------------------------------------------+----------+----------+----------+----------+
| | | _______ | _______ | |
+-------------------------------------------+----------+----------+----------+----------+
| | | | | |
+-------------------------------------------+----------+----------+----------+----------+
| Total tax charge | | (230) | - | |
+-------------------------------------------+----------+----------+----------+----------+
| | | _______ | _______ | |
+-------------------------------------------+----------+----------+----------+----------+
| | | | | |
+-------------------------------------------+----------+----------+----------+----------+
| | | | | |
+-------------------------------------------+----------+----------+----------+----------+
| | | | | |
+-------------------------------------------+----------+----------+----------+----------+
7 Loss per share
The calculation of basic loss per share is based on a loss of
GBP24,668,000 (2007 ? GBP11,641,000) and weighted average number of shares
of 29,383,368 (2007 - 23,772,415).
There are 625,000 shares which could be exercised under the company's unapproved
share option scheme. The Group reported a loss for the period and accordingly
these potential shares are deemed to be anti-dilutive. Therefore none of these
shares have been included in the calculation of diluted loss per share. As a
result this is equal to the basic loss per share.
8Property, plant and equipment
+----------------------------+---------------+---------------+--------------+--------------+---------+
| | | Public house | | | |
+----------------------------+---------------+---------------+--------------+--------------+---------+
| | Land and | fixtures and | Motor | Office | |
+----------------------------+---------------+---------------+--------------+--------------+---------+
| | buildings | fittings | vehicles | equipment | Total |
+----------------------------+---------------+---------------+--------------+--------------+---------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 |GBP'000 |
+----------------------------+---------------+---------------+--------------+--------------+---------+
| Cost | | | | | |
+----------------------------+---------------+---------------+--------------+--------------+---------+
| At 1 January 2007 | 94,205 | - | - | 148 | 94,353 |
+----------------------------+---------------+---------------+--------------+--------------+---------+
| Additions | 19,724 | 26 | - | 35 | 19,785 |
+----------------------------+---------------+---------------+--------------+--------------+---------+
| Additions from acquisition | 117 | 3,423 | 22 | 173 | 3,735 |
+----------------------------+---------------+---------------+--------------+--------------+---------+
| Transferred to non-current | | | | | |
| assets | | | | | |
+----------------------------+---------------+---------------+--------------+--------------+---------+
| classified as held for | (9,268) | - | - | - | (9,268) |
| sale | | | | | |
+----------------------------+---------------+---------------+--------------+--------------+---------+
| | _______ | _______ | _______ | _______ | _______ |
+----------------------------+---------------+---------------+--------------+--------------+---------+
| | | | | | |
+----------------------------+---------------+---------------+--------------+--------------+---------+
| At 1 January 2008 | 104,778 | 3,449 | 22 | 356 | 108,605 |
+----------------------------+---------------+---------------+--------------+--------------+---------+
| Additions | 458 | 631 | 86 | 91 | 1,266 |
+----------------------------+---------------+---------------+--------------+--------------+---------+
| Disposals | - | (494) | (22) | (183) | (699) |
+----------------------------+---------------+---------------+--------------+--------------+---------+
| Transferred from | | | | | |
| non-current assets | | | | | |
+----------------------------+---------------+---------------+--------------+--------------+---------+
| classified as held for | 613 | - | - | - | 613 |
| sale | | | | | |
+----------------------------+---------------+---------------+--------------+--------------+---------+
| | _______ | _______ | _______ | _______ | _______ |
+----------------------------+---------------+---------------+--------------+--------------+---------+
| | | | | | |
+----------------------------+---------------+---------------+--------------+--------------+---------+
| At 28 December 2008 | 105,849 | 3,586 | 86 | 264 | 109,785 |
+----------------------------+---------------+---------------+--------------+--------------+---------+
| | _______ | _______ | _______ | _______ | _______ |
+----------------------------+---------------+---------------+--------------+--------------+---------+
| | | | | | |
+----------------------------+---------------+---------------+--------------+--------------+---------+
| Accumulated depreciation | | | | | |
+----------------------------+---------------+---------------+--------------+--------------+---------+
| At 1 January 2007 | 10 | - | - | 142 | 152 |
+----------------------------+---------------+---------------+--------------+--------------+---------+
| Additions from acquisition | - | 2,158 | 7 | 85 | 2,250 |
+----------------------------+---------------+---------------+--------------+--------------+---------+
| Depreciation charge | 265 | 3 | - | 9 | 277 |
+----------------------------+---------------+---------------+--------------+--------------+---------+
| | _______ | _______ | _______ | _______ | _______ |
+----------------------------+---------------+---------------+--------------+--------------+---------+
| | | | | | |
+----------------------------+---------------+---------------+--------------+--------------+---------+
| At 1 January 2008 | 275 | 2,161 | 7 | 236 | 2,679 |
+----------------------------+---------------+---------------+--------------+--------------+---------+
| Depreciation charge | 278 | 282 | 23 | 61 | 644 |
+----------------------------+---------------+---------------+--------------+--------------+---------+
| Impairment charge | 12,672 | - | - | - | 12,672 |
+----------------------------+---------------+---------------+--------------+--------------+---------+
| Disposals | - | (351) | (12) | (151) | (514) |
+----------------------------+---------------+---------------+--------------+--------------+---------+
| | _______ | _______ | _______ | _______ | _______ |
+----------------------------+---------------+---------------+--------------+--------------+---------+
| | | | | | |
+----------------------------+---------------+---------------+--------------+--------------+---------+
| At 28 December 2008 | 13,225 | 2,092 | 18 | 146 | 15,481 |
+----------------------------+---------------+---------------+--------------+--------------+---------+
| | _______ | _______ | _______ | _______ | _______ |
+----------------------------+---------------+---------------+--------------+--------------+---------+
| | | | | | |
+----------------------------+---------------+---------------+--------------+--------------+---------+
| Net book value | | | | | |
+----------------------------+---------------+---------------+--------------+--------------+---------+
| At 28 December 2008 | 92,624 | 1,494 | 68 | 118 | 94,304 |
+----------------------------+---------------+---------------+--------------+--------------+---------+
| | _______ | _______ | _______ | _______ | _______ |
+----------------------------+---------------+---------------+--------------+--------------+---------+
| | | | | | |
+----------------------------+---------------+---------------+--------------+--------------+---------+
| At 31 December 2007 | 104,503 | 1,288 | 15 | 120 | 105,926 |
+----------------------------+---------------+---------------+--------------+--------------+---------+
| | _______ | _______ | _______ | _______ | _______ |
+----------------------------+---------------+---------------+--------------+--------------+---------+
| | | | | | |
+----------------------------+---------------+---------------+--------------+--------------+---------+
The directors have considered the current economic climate to be an indication
that certain assets may have become impaired and as a result have performed an
impairment review. Land and buildings are reviewed for impairment based on each
cash generating unit (CGU). The cash generating units are individual pubs. The
carrying values of these individual pubs was compared to the recoverable amount
of the CGUs, which was based predominantly on value-in-use. Value-in-use is
calculated using future financial forecasts. Cash flows used in the value-in-use
calculation are based on EBITDA less capital expenditure. Beyond the initial
five year period, cash flows are extrapolated using a growth rate of 2.6% for
the remaining useful life of the CGUs. This rate is in line with the Treasury's
average anticipated growth rates. The pre-tax discount rate applied to cash flow
projections is 9%.
If the discount factor used were to increase by 1 % this would result in an
increase to the impairment charge of GBP4.4m, and if it were to decrease by 1%
it would reduce the impairment charge by GBP3.5m. A 1% increase in the first
five year growth factor would reduce the impairment charge by GBP981,000 and a
1% decrease would result in an increase to the impairment charge of GBP1.1m.
9Goodwill and intangible assets
+--------------------------------------------+----------------------+-----------------+
| | Operating | |
+--------------------------------------------+----------------------+-----------------+
| | leases | Goodwill |
+--------------------------------------------+----------------------+-----------------+
| | GBP'000 | GBP'000 |
+--------------------------------------------+----------------------+-----------------+
| | | |
+--------------------------------------------+----------------------+-----------------+
| At 1 January 2007 | 340 | - |
+--------------------------------------------+----------------------+-----------------+
| Additions | 129 | - |
+--------------------------------------------+----------------------+-----------------+
| Additions from acquisition | 2,080 | 2,932 |
+--------------------------------------------+----------------------+-----------------+
| | _______ | _______ |
+--------------------------------------------+----------------------+-----------------+
| | | |
+--------------------------------------------+----------------------+-----------------+
| At 1 January 2008 | 2,549 | 2,932 |
+--------------------------------------------+----------------------+-----------------+
| Additions | 39 | - |
+--------------------------------------------+----------------------+-----------------+
| | _______ | _______ |
+--------------------------------------------+----------------------+-----------------+
| | | |
+--------------------------------------------+----------------------+-----------------+
| At 28 December 2008 | 2,588 | 2,932 |
+--------------------------------------------+----------------------+-----------------+
| | _______ | _______ |
+--------------------------------------------+----------------------+-----------------+
| Accumulated amortisation | | |
+--------------------------------------------+----------------------+-----------------+
| At 1 January 2007 | 7 | - |
+--------------------------------------------+----------------------+-----------------+
| Amortisation charge | 111 | - |
+--------------------------------------------+----------------------+-----------------+
| | _______ | _______ |
+--------------------------------------------+----------------------+-----------------+
| | | |
+--------------------------------------------+----------------------+-----------------+
| At 1 January 2008 | 118 | - |
+--------------------------------------------+----------------------+-----------------+
| Amortisation charge | 274 | - |
+--------------------------------------------+----------------------+-----------------+
| Impairment charge | 619 | 4 |
+--------------------------------------------+----------------------+-----------------+
| | _______ | _______ |
+--------------------------------------------+----------------------+-----------------+
| | | |
+--------------------------------------------+----------------------+-----------------+
| At 28 December 2008 | 1,011 | 4 |
+--------------------------------------------+----------------------+-----------------+
| | _______ | _______ |
+--------------------------------------------+----------------------+-----------------+
| Net book value | | |
+--------------------------------------------+----------------------+-----------------+
| At 28 December 2008 | 1,577 | 2,928 |
+--------------------------------------------+----------------------+-----------------+
| | _______ | _______ |
+--------------------------------------------+----------------------+-----------------+
| | | |
+--------------------------------------------+----------------------+-----------------+
| At 31 December 2007 | 2,431 | 2,932 |
+--------------------------------------------+----------------------+-----------------+
| | _______ | _______ |
+--------------------------------------------+----------------------+-----------------+
| | | |
+--------------------------------------------+----------------------+-----------------+
The goodwill arose on the acquisition of GRS Inns Limited in December 2007.
The directors have considered the current economic climate to be an indication
that certain assets may have become impaired and as a result have performed an
impairment review of the operating lease intangible assets and goodwill. The
cash generating units are individual pub operating leases and the management
business (GRS Inns Limited) from which the goodwill arises. The carrying values
of these assets were compared to the recoverable amount of the CGUs, which was
based predominantly on value-in-use. Value-in-use is calculated using future
financial forecasts. Cash flows used in the value-in-use calculation are based
on EBITDA less capital expenditure. Beyond the initial five year period, cash
flows are extrapolated using a growth rate of 2.6% for the remaining useful life
of the CGUs. This rate is in line with the Treasury's average anticipated growth
rates. The pre-tax discount rate applied to cash flow projections is 9%.
A 1% variation in discount rate and growth rate and a 10% variation in cash
flow projections would not lead to a material change in impairment values.
10Subsidiary undertakings
The principal subsidiary undertakings at 28 December 2008, all of which are
wholly owned, are as follows:
+--------------------------------------------+----------------------+----------------------+
| | Proportion of | |
+--------------------------------------------+----------------------+----------------------+
| | voting rights and | |
+--------------------------------------------+----------------------+----------------------+
| | ownership | |
+--------------------------------------------+----------------------+----------------------+
| Name | interest held | Nature of business |
+--------------------------------------------+----------------------+----------------------+
| | | |
+--------------------------------------------+----------------------+----------------------+
| Subsidiary undertakings | | |
+--------------------------------------------+----------------------+----------------------+
| | | |
+--------------------------------------------+----------------------+----------------------+
| GRS Pubs Limited | 100% | Leased pub |
| | | operations |
+--------------------------------------------+----------------------+----------------------+
| GRS Pub Investment Limited | 100% | Leased pub |
| | | operations |
+--------------------------------------------+----------------------+----------------------+
| GRS Inns Limited | 100% | Managed pub |
| | | operations |
+--------------------------------------------+----------------------+----------------------+
| London Town Management Services Limited | 100% | Managed pub |
| | | operations |
+--------------------------------------------+----------------------+----------------------+
All of the above companies are incorporated in England and Wales.
11 Derivative financial instruments
+--------------------------------------------+--------------+---------------+-------------+-------------+
| | Non-current | Non-current |Non-current |Non-current |
+--------------------------------------------+--------------+---------------+-------------+-------------+
| | assets | liabilities | assets |liabilities |
+--------------------------------------------+--------------+---------------+-------------+-------------+
| | 2008 | 2008 | 2007 | 2007 |
+--------------------------------------------+--------------+---------------+-------------+-------------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+--------------------------------------------+--------------+---------------+-------------+-------------+
| | | | | |
+--------------------------------------------+--------------+---------------+-------------+-------------+
| Interest rate caps | 126 | - | 300 | - |
+--------------------------------------------+--------------+---------------+-------------+-------------+
| Interest | - | - | - | 11 |
| rate cap | | | | |
| and | | | | |
| collars | | | | |
+--------------------------------------------+--------------+---------------+-------------+-------------+
| Interest rate swaps | - | 1,258 | - | - |
+--------------------------------------------+--------------+---------------+-------------+-------------+
| | _______ | _______ | _______ | _______ |
+--------------------------------------------+--------------+---------------+-------------+-------------+
| | | | | |
+--------------------------------------------+--------------+---------------+-------------+-------------+
| | 126 | 1,258 | 300 | 11 |
+--------------------------------------------+--------------+---------------+-------------+-------------+
| | _______ | _______ | _______ | _______ |
+--------------------------------------------+--------------+---------------+-------------+-------------+
| | | | | |
+--------------------------------------------+--------------+---------------+-------------+-------------+
| | | | | |
+--------------------------------------------+--------------+---------------+-------------+-------------+
Interest rate caps, collars and swaps are used to manage interest rate risk and
the Group has taken out these instruments on 100% (2007 - 99%) of all bank loans
at 28 December 2008.
At 28 December 2008 interest rate swaps covered GBP81 million (2007 Interest
rate caps - GBP86.7million) of the Groups' bank loans for exposure to changes in
the floating interest charge of 1.65% plus 3-month LIBOR by fixing 3-month LIBOR
at 3.525% for an amount of GBP41.5 million and 2.99% for an amount of GBP39.5
million. The interest rate swaps mature on 28 September 2011.
The Group has retained interest rate caps covering GBP67.4 million of the
Groups' bank loans. GBP42.7 million of the caps cap 3-month LIBOR at 6.5%.
GBP24.7 million of the caps cap 3 month LIBOR at 6%. The caps terminate on 26
September 2011 and 28 September 2011 respectively.
12Deferred tax
Deferred tax is calculated on timing differences under the liability method
using a tax rate of 28% (2007 - 30%).
Net deferred tax liability
The balance of the deferred tax liability represents the tax effect of timing
differences in respect of:
+------------------------------------------------------+---------+---------+
| | 2008 | 2007 |
+------------------------------------------------------+---------+---------+
| |GBP'000 |GBP'000 |
+------------------------------------------------------+---------+---------+
| | | |
+------------------------------------------------------+---------+---------+
| At 1 January 2008 | 373 | - |
+------------------------------------------------------+---------+---------+
| Excess of depreciation over taxation allowances | - | (210) |
+------------------------------------------------------+---------+---------+
| Deferred tax on operating lease intangibles | - | 583 |
+------------------------------------------------------+---------+---------+
| Movements in temporary differences | (230) | - |
+------------------------------------------------------+---------+---------+
| |_______ |_______ |
+------------------------------------------------------+---------+---------+
| | | |
+------------------------------------------------------+---------+---------+
| At 28 December 2008 | 143 | 373 |
+------------------------------------------------------+---------+---------+
| |_______ |_______ |
+------------------------------------------------------+---------+---------+
A deferred tax asset of GBP14,840,000 (2007 - GBP9,076,000) has not been
recognised on potential trading losses of GBP53,000,000 (2007 -GBP30,254,000)
due to uncertainty over the timing and quantum of their recovery.
13Inventories
+-----------------------------------------+---------------+---------------+
| | 2008 | 2007 |
+-----------------------------------------+---------------+---------------+
| | GBP'000 | GBP'000 |
+-----------------------------------------+---------------+---------------+
| | | |
+-----------------------------------------+---------------+---------------+
| Goods held for resale | 425 | 574 |
+-----------------------------------------+---------------+---------------+
| | _______ | _______ |
+-----------------------------------------+---------------+---------------+
| | | |
+-----------------------------------------+---------------+---------------+
14Trade and other receivables
+-----------------------------------------+---------------+---------------+
| | 2008 | 2007 |
+-----------------------------------------+---------------+---------------+
| | GBP'000 | GBP'000 |
+-----------------------------------------+---------------+---------------+
| | | |
+-----------------------------------------+---------------+---------------+
| Trade receivables | 756 | 776 |
+-----------------------------------------+---------------+---------------+
| Other receivables | 474 | 335 |
+-----------------------------------------+---------------+---------------+
| Prepayments and accrued income | 326 | 622 |
+-----------------------------------------+---------------+---------------+
| | _______ | _______ |
+-----------------------------------------+---------------+---------------+
| | | |
+-----------------------------------------+---------------+---------------+
| | 1,556 | 1,733 |
+-----------------------------------------+---------------+---------------+
| All amounts are due within one year | _______ | _______ |
+-----------------------------------------+---------------+---------------+
| | | |
+-----------------------------------------+---------------+---------------+
15 Cash and cash equivalents
+-----------------------------------------+---------------+---------------+
| | 2008 | 2007 |
+-----------------------------------------+---------------+---------------+
| | GBP'000 | GBP'000 |
+-----------------------------------------+---------------+---------------+
| | | |
+-----------------------------------------+---------------+---------------+
| Cash available on demand | 5,011 | 1,942 |
+-----------------------------------------+---------------+---------------+
| Short term deposits | - | 1,000 |
+-----------------------------------------+---------------+---------------+
| | _______ | _______ |
+-----------------------------------------+---------------+---------------+
| | | |
+-----------------------------------------+---------------+---------------+
| | 5,011 | 2,942 |
+-----------------------------------------+---------------+---------------+
| | _______ | _______ |
+-----------------------------------------+---------------+---------------+
| | | |
+-----------------------------------------+---------------+---------------+
| | | |
+-----------------------------------------+---------------+---------------+
16 Non-current assets classified as held for sale
+-----------------------------------------+---------------+---------------+
| | | |
+-----------------------------------------+---------------+---------------+
| | 2008 | 2007 |
+-----------------------------------------+---------------+---------------+
| | GBP'000 | GBP'000 |
+-----------------------------------------+---------------+---------------+
| | | |
+-----------------------------------------+---------------+---------------+
| Non current assets classified as held | 7,360 | 16,608 |
| for sale | | |
+-----------------------------------------+---------------+---------------+
| Provision for loss on properties held | (4,175) | (5,849) |
| for sale | | |
+-----------------------------------------+---------------+---------------+
| | _______ | _______ |
+-----------------------------------------+---------------+---------------+
| | | |
+-----------------------------------------+---------------+---------------+
| | 3,185 | 10,759 |
+-----------------------------------------+---------------+---------------+
| | _______ | _______ |
+-----------------------------------------+---------------+---------------+
| | | |
+-----------------------------------------+---------------+---------------+
| | | |
+-----------------------------------------+---------------+---------------+
At the period end, non-current assets classified as held for sale represents
land and pubs from the leased estate that are individually being actively
marketed for sale with varying expected completion dates. The completion dates
are expected to be within a year.
17Trade and other payables
+----------------------------+--------------------+--------------------+
| | 2008 | 2007 |
+----------------------------+--------------------+--------------------+
| | GBP'000 | GBP'000 |
+----------------------------+--------------------+--------------------+
| | | |
+----------------------------+--------------------+--------------------+
| Trade payables | 2,326 | 2,314 |
+----------------------------+--------------------+--------------------+
| Other payables | 1,718 | 1,323 |
+----------------------------+--------------------+--------------------+
| Accruals | 2,725 | 1,311 |
+----------------------------+--------------------+--------------------+
| Deferred income | - | 402 |
+----------------------------+--------------------+--------------------+
| | _______ | _______ |
+----------------------------+--------------------+--------------------+
| | | |
+----------------------------+--------------------+--------------------+
| | 6,769 | 5,350 |
+----------------------------+--------------------+--------------------+
| | _______ | _______ |
+----------------------------+--------------------+--------------------+
| | | |
+----------------------------+--------------------+--------------------+
| | | |
+----------------------------+--------------------+--------------------+
18Loans and borrowings
+----------------------------+--------------------+--------------------+
| | 2008 | 2007 |
+----------------------------+--------------------+--------------------+
| Current | GBP'000 | GBP'000 |
+----------------------------+--------------------+--------------------+
| | | |
+----------------------------+--------------------+--------------------+
| Bank loan (secured) | 83,710 | 583 |
+----------------------------+--------------------+--------------------+
| Bank overdraft (secured) | - | 453 |
+----------------------------+--------------------+--------------------+
| Unsecured loans | 10,247 | 2,500 |
+----------------------------+--------------------+--------------------+
| | _______ | _______ |
+----------------------------+--------------------+--------------------+
| | | |
+----------------------------+--------------------+--------------------+
| | 93,957 | 3,536 |
+----------------------------+--------------------+--------------------+
| | _______ | _______ |
+----------------------------+--------------------+--------------------+
| | | |
+----------------------------+--------------------+--------------------+
The following loans are included within unsecured loans:-
* GBP2,747,000 from Anne Street Partners Limited inclusive of compounded interest
of GBP247,000 which is repayable with interest at 10%, calculated at quarterly
rests, by 31 July 2010. There is no penalty for early repayment.
* GBP2,500,000 from Burac Trade and Invest Corp which is repayable with interest
at 10%, calculated at quarterly rests, by 31 July 2010. There is no penalty for
early repayment.
* GBP3,540,000 from Burac Trade and Invest Corp which is repayable with interest
at 15%, calculated at quarterly rests, by 31 July 2010. There is no penalty for
early repayment.
* GBP1,460,000 from Robar Limited which is repayable with interest at 15%,
calculated at quarterly rests, by 31 July 2010. There is no penalty for early
repayment.
Further details on these unsecured loans can be found in note 24.
The bank loans are secured by a fixed charge over the Group's freehold property
and bear interest at floating rates of three month LIBOR plus 1.65%. The bank
loans are for a 5 year term ending on 26 September 2011. The covenants on the
Group's bank loans were breached during 2008 and this has continued into 2009.
The Group's bank loans have been classified as current, despite their scheduled
repayment date being September 2011, because the breach of loan covenants
enables the bank to seek immediate repayment of the bank loan. Details of
derivative financial instruments relating to the bank loans can be found in note
11.
The secured bank loan includes the balance of unamortised debt issue costs
of GBP591,000 (2007 - GBP805,000).
The Directors are engaged in continuing discussions relating to the terms and
covenants of the Group's bank loans and anticipate that new covenants can be
agreed that will reflect the current operations and business structure of the
Group.
+--------+----------------------------+--------------------+--------------------+
| | Non Current | | |
+--------+----------------------------+--------------------+--------------------+
| | | 2008 | 2007 |
+--------+----------------------------+--------------------+--------------------+
| | | GBP'000 | GBP'000 |
+--------+----------------------------+--------------------+--------------------+
| | | | |
+--------+----------------------------+--------------------+--------------------+
| | Bank loan (secured) | - | 87,812 |
+--------+----------------------------+--------------------+--------------------+
| | Deep discount bonds | 17,033 | 15,481 |
+--------+----------------------------+--------------------+--------------------+
| | | _______ | _______ |
+--------+----------------------------+--------------------+--------------------+
| | | | |
+--------+----------------------------+--------------------+--------------------+
| | | 17,033 | 103,293 |
+--------+----------------------------+--------------------+--------------------+
| | | _______ | _______ |
+--------+----------------------------+--------------------+--------------------+
| | | | |
+--------+----------------------------+--------------------+--------------------+
The deep discount bonds are secured by a fixed and floating charge over the
assets and liabilities of the Company, subject to the priority of the secured
bank loans. The deep discount bonds are redeemable at the option of the Company
at any time subject to the priority and consent of the bank. The deep discount
bonds accrue discount at 10% per annum on a compound basis. Details of the bonds
issued are summarised below:
+----------------------------+-------------------+------------------+-----------------+
| | | Subscription | Redemption |
+----------------------------+-------------------+------------------+-----------------+
| Issue date | Redemption date | price | price |
+----------------------------+-------------------+------------------+-----------------+
| | | GBP'000 | GBP'000 |
+----------------------------+-------------------+------------------+-----------------+
| | | | |
+----------------------------+-------------------+------------------+-----------------+
| 20 December 2006 | 20 December 2011 | 14,030 | 22,597 |
+----------------------------+-------------------+------------------+-----------------+
| | | _______ | _______ |
+----------------------------+-------------------+------------------+-----------------+
| | | | |
+----------------------------+-------------------+------------------+-----------------+
| | | | |
+----------------------------+-------------------+------------------+-----------------+
19Provisions
+---------------------------------------+--------------------+--------------------+
| Provision for onerous leases | 2008 | 2007 |
+---------------------------------------+--------------------+--------------------+
| | GBP'000 | GBP'000 |
+---------------------------------------+--------------------+--------------------+
| | | |
+---------------------------------------+--------------------+--------------------+
| At 1 January 2008 | 87 | - |
+---------------------------------------+--------------------+--------------------+
| On acquisition | - | 87 |
+---------------------------------------+--------------------+--------------------+
| Provided in the | 458 | - |
+---------------------------------------+--------------------+--------------------+
| | _______ | _______ |
+---------------------------------------+--------------------+--------------------+
| | | |
+---------------------------------------+--------------------+--------------------+
| At 28 December 2008 | 545 | 87 |
+---------------------------------------+--------------------+--------------------+
| | _______ | _______ |
+---------------------------------------+--------------------+--------------------+
| | | |
+---------------------------------------+--------------------+--------------------+
| Due within one year or less | 71 | 87 |
+---------------------------------------+--------------------+--------------------+
| Due after more than one year | 474 | - |
+---------------------------------------+--------------------+--------------------+
| | _______ | _______ |
+---------------------------------------+--------------------+--------------------+
| | | |
+---------------------------------------+--------------------+--------------------+
| | 545 | 87 |
+---------------------------------------+--------------------+--------------------+
| | _______ | _______ |
+---------------------------------------+--------------------+--------------------+
| | | |
+---------------------------------------+--------------------+--------------------+
Provisions for onerous leases represent the expected shortfall, for a number of
properties, between income receivable, and rents payable and operating costs.
20 Share capital
+------------------------------------------------------+-------------------+-------------------+
| | 2008 | 2007 |
+------------------------------------------------------+-------------------+-------------------+
| | GBP'000 | GBP'000 |
+------------------------------------------------------+-------------------+-------------------+
| Authorised | | |
+------------------------------------------------------+-------------------+-------------------+
| 2,000,000,000 ordinary shares of 5p each | 100,000 | 100,000 |
+------------------------------------------------------+-------------------+-------------------+
| | _______ | _______ |
+------------------------------------------------------+-------------------+-------------------+
| Allotted, called up and fully paid | | |
+------------------------------------------------------+-------------------+-------------------+
| 29,383,368 ordinary shares of 5p each | 1,469 | 1,469 |
+------------------------------------------------------+-------------------+-------------------+
| | _______ | _______ |
+------------------------------------------------------+-------------------+-------------------+
| | | |
+------------------------------------------------------+-------------------+-------------------+
| The movements in called-up share capital are set | Number | Number |
| out below: | | |
+------------------------------------------------------+-------------------+-------------------+
| | | |
+------------------------------------------------------+-------------------+-------------------+
| At 1 January - ordinary shares of 5p each | 29,383 | 16,829 |
+------------------------------------------------------+-------------------+-------------------+
| Issue of shares for cash | - | 9,434 |
+------------------------------------------------------+-------------------+-------------------+
| Issue of shares as consideration for acquisition of | - | 2,853 |
| subsidiary | | |
+------------------------------------------------------+-------------------+-------------------+
| Issue of shares as part consideration for fees | - | 267 |
+------------------------------------------------------+-------------------+-------------------+
| | _______ | _______ |
+------------------------------------------------------+-------------------+-------------------+
| | | |
+------------------------------------------------------+-------------------+-------------------+
| At 28 December - ordinary shares of 5p each | 29,383 | 29,383 |
+------------------------------------------------------+-------------------+-------------------+
| | _______ | _______ |
+------------------------------------------------------+-------------------+-------------------+
As at 28 December 2008 the Unapproved Share Options Plan remains unchanged, from
2007 when 625,000 were issued.
21Equity
+----------------------+----------+----------+-----------+-----------+-----------+-----------+
| | | | 2008 | | | |
+----------------------+----------+----------+-----------+-----------+-----------+-----------+
| | Share | Share | Merger | Shares to | Retained | Total |
| | Capital | Premium | Reserve | be issued | Earnings | GBP'000 |
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | |
+----------------------+----------+----------+-----------+-----------+-----------+-----------+
| | | | | | | |
+----------------------+----------+----------+-----------+-----------+-----------+-----------+
| At 1 January | 1,469 | 22,505 | 2,282 | 875 | (12,225) | 14,906 |
| | | | | | | |
+----------------------+----------+----------+-----------+-----------+-----------+-----------+
| Elimination of | - | - | - | (875) | - | (875) |
| contingent | | | | | | |
| consideration | | | | | | |
| | | | | | | |
+----------------------+----------+----------+-----------+-----------+-----------+-----------+
| Retained earnings | - | - | - | - | (24,668) | (24,668) |
| for the period | | | | | | |
| | | | | | | |
+----------------------+----------+----------+-----------+-----------+-----------+-----------+
| Share based payment | - | - | - | - | 44 | 44 |
| charge | | | | | | |
+----------------------+----------+----------+-----------+-----------+-----------+-----------+
| | _______ | _______ | _______ | _______ | _______ | _______ |
+----------------------+----------+----------+-----------+-----------+-----------+-----------+
| | 1,469 | 22,505 | 2,282 | - | (36,849) | (10,593) |
+----------------------+----------+----------+-----------+-----------+-----------+-----------+
| | _______ | _______ | _______ | _______ | _______ | _______ |
+----------------------+----------+----------+-----------+-----------+-----------+-----------+
+----------------------+----------+----------+-----------+-----------+-----------+-----------+
| | | | 2007 | | | |
+----------------------+----------+----------+-----------+-----------+-----------+-----------+
| | | | | | | |
+----------------------+----------+----------+-----------+-----------+-----------+-----------+
| At 1 January | 841 | 13,059 | - | - | (615) | 13,285 |
| | | | | | | |
+----------------------+----------+----------+-----------+-----------+-----------+-----------+
| Issue of shares | 628 | 9,577 | 2,282 | - | - | 12,487 |
| | | | | | | |
+----------------------+----------+----------+-----------+-----------+-----------+-----------+
| Contingent | - | - | - | 875 | - | 875 |
| consideration | | | | | | |
| | | | | | | |
+----------------------+----------+----------+-----------+-----------+-----------+-----------+
| Shares issue expense | - | (131) | - | - | - | (131) |
+----------------------+----------+----------+-----------+-----------+-----------+-----------+
| | | | | | | |
+----------------------+----------+----------+-----------+-----------+-----------+-----------+
| Retained earnings | - | - | - | - | (11,461) | (11,641) |
| for the year | | | | | | |
+----------------------+----------+----------+-----------+-----------+-----------+-----------+
| | | | | | | |
+----------------------+----------+----------+-----------+-----------+-----------+-----------+
| Share based payment | - | - | - | - | 31 | 31 |
| charge | | | | | | |
+----------------------+----------+----------+-----------+-----------+-----------+-----------+
| | _______ | _______ | _______ | _______ | _______ | _______ |
+----------------------+----------+----------+-----------+-----------+-----------+-----------+
| | 1,469 | 22,505 | 2,282 | 875 | (12,225) | 14,906 |
+----------------------+----------+----------+-----------+-----------+-----------+-----------+
| | _______ | _______ | _______ | _______ | _______ | _______ |
+----------------------+----------+----------+-----------+-----------+-----------+-----------+
Share premium represents the amount subscribed for shares in excess of nominal
value.
Retained earnings represent the cumulative net gains and losses recognised in
the consolidated income statement.
The merger reserve arises from the acquisition of GRS Inns Limited in respect of
the initial share consideration in accordance with Companies Act 1985 section
131.
The shares to be issued represented the expected number of ordinary shares to be
issued of 1,029,402 at 85p each for the contingent consideration relating to the
acquisition of GRS Inns Limited. No such consideration is now payable and this
amount has now been eliminated.
22Operating leases
The Group's land and buildings are leased to lessees and tenants for periods of
up to 35 years and generally contains market review clauses both annually and
periodically. The lessees and tenants do not have an option to purchase the
property at the expiry of the lease period. The minimum rent receivable under
non-cancellable operating leases is as follows:
+---------------------------------------------------+-----------------+-----------------+
| | 2008 | 2007 |
| | GBP'000 | GBP'000 |
+---------------------------------------------------+-----------------+-----------------+
| | | |
+---------------------------------------------------+-----------------+-----------------+
| Not later than one year | 2,797 | 2,225 |
+---------------------------------------------------+-----------------+-----------------+
| Later than one year but not later than five | 7,917 | 6,857 |
| years | | |
+---------------------------------------------------+-----------------+-----------------+
| Later than five years | 15,245 | 16,266 |
+---------------------------------------------------+-----------------+-----------------+
| | | |
+---------------------------------------------------+-----------------+-----------------+
| | ______ | ______ |
+---------------------------------------------------+-----------------+-----------------+
| | 25,959 | 25,348 |
+---------------------------------------------------+-----------------+-----------------+
| | _______ | _______ |
+---------------------------------------------------+-----------------+-----------------+
The Group also leases various licensed properties under non-cancellable
operating lease commitments. These leases are leased on varying terms up to 35
years and generally contains periodic market review clauses both. The minimum
rent payable under non-cancellable operating leases is as follows:
+---------------------------------------------------+-----------------+-----------------+
| | 2008 | 2007 |
| | GBP'000 | GBP'000 |
+---------------------------------------------------+-----------------+-----------------+
| | | |
+---------------------------------------------------+-----------------+-----------------+
| Not later than one year | 2,075 | 2,440 |
+---------------------------------------------------+-----------------+-----------------+
| Later than one year but not later than five | 5,796 | 7,172 |
| years | | |
+---------------------------------------------------+-----------------+-----------------+
| Later than five years | 15,543 | 19,598 |
+---------------------------------------------------+-----------------+-----------------+
| | | |
+---------------------------------------------------+-----------------+-----------------+
| | ______ | ______ |
+---------------------------------------------------+-----------------+-----------------+
| | 23,414 | 29,210 |
+---------------------------------------------------+-----------------+-----------------+
| | _______ | _______ |
+---------------------------------------------------+-----------------+-----------------+
23 Contingent liabilities
There are a number of leases from pub landlords within GRS Inns Limited that
have been subsequently assigned and may give rise to potential future claims
against the Group if the direct assignee should default against the terms
contained in the assignment. The directors do not consider it probable that a
liability will arise and therefore no provision has been recognised.
24 Related party transactions
On 21 December 2006 and 16 April 2007 the Group acquired a portfolio of 167 and
36 freehold and long leasehold pubs respectively from Save Investments Limited
for an open market consideration of GBP96.2 million and GBP16.2 million
including transaction costs. Save Investments Limited is a wholly owned
subsidiary of Incorporated Holdings Limited which is currently a 20%
shareholder.
On 21 December 2006 and in relation to the purchase of the portfolio of 167
freehold pubs, the parent company issued deep discount bonds to the three
principal shareholders. Details of the amounts due under the deep discount bonds
at the period end to the related parties are provided in the table below.
+----------------------------------------+-------------------+-------------------+
| | 2008 | 2007 |
+----------------------------------------+-------------------+-------------------+
| | GBP'000 | GBP'000 |
+----------------------------------------+-------------------+-------------------+
| Burac Invest and Trade Corp. | | |
+----------------------------------------+-------------------+-------------------+
| Subscription price | 6,264 | 6,264 |
+----------------------------------------+-------------------+-------------------+
| Accrued discount | 1,341 | 647 |
+----------------------------------------+-------------------+-------------------+
| | _______ | _______ |
+----------------------------------------+-------------------+-------------------+
| | | |
+----------------------------------------+-------------------+-------------------+
| | 7,605 | 6,911 |
+----------------------------------------+-------------------+-------------------+
| Robar Limited | | |
+----------------------------------------+-------------------+-------------------+
| Subscription price | 3,883 | 3,883 |
+----------------------------------------+-------------------+-------------------+
| Accrued discount | 831 | 402 |
+----------------------------------------+-------------------+-------------------+
| | _______ | _______ |
+----------------------------------------+-------------------+-------------------+
| | | |
+----------------------------------------+-------------------+-------------------+
| | 4,714 | 4,285 |
+----------------------------------------+-------------------+-------------------+
| | | |
+----------------------------------------+-------------------+-------------------+
| Incorporated Holdings Limited | | |
+----------------------------------------+-------------------+-------------------+
| Subscription price | 3,883 | 3,883 |
+----------------------------------------+-------------------+-------------------+
| Accrued discount | 831 | 402 |
+----------------------------------------+-------------------+-------------------+
| | _______ | _______ |
+----------------------------------------+-------------------+-------------------+
| | | |
+----------------------------------------+-------------------+-------------------+
| | 4,714 | 4,285 |
+----------------------------------------+-------------------+-------------------+
| | _______ | _______ |
+----------------------------------------+-------------------+-------------------+
| | | |
+----------------------------------------+-------------------+-------------------+
| | 17,033 | 15,481 |
+----------------------------------------+-------------------+-------------------+
| | _______ | _______ |
+----------------------------------------+-------------------+-------------------+
| | | |
+----------------------------------------+-------------------+-------------------+
Under the terms of an agreement dated 1 July 2007 GRS Inns Limited, a wholly
owned subsidiary of the Company provided accounting and other services to Wear
Inns Limited ("Wear"). John Sands, the former Chairman and a shareholder of the
Company is a 50% shareholder of Wear. Annual fees received by the Company for
these services during the period were GBP31,835 (2007 - GBP21,000). The
agreement was terminated on 31 December 2008.
On 21 December 2007 the Company obtained a short term unsecured loan of GBP2.5
million from Anne Street Partners Limited ("Anne Street"), a company previously
called Strand Associates Limited and incorporated in England and Wales. Anne
Street provides the services of Ian Robinson (Non-executive Chairman) to the
Company. The Loan carries interest at the rate of 10% per annum, calculated at
quarterly rests, and is due for repayment no later than 31 July 2010.
On 27 March 2008 the Company obtained a short term unsecured loan of
GBP2.5 million from Burac Invest and Trade Corp ("Burac"). Burac holds 48.4% of
the issued share capital of the Company on behalf of The Horizon Charitable
Trust. The Loan carries interest at the rate of 10% per annum, calculated at
quarterly rests, and is due for repayment no later than 31 July 2010.
On 26 September 2008 the Company obtained a short term unsecured loan of GBP1.4
million from Burac Invest and Trade and Corp ("Burac") and a further GBP0.6
million from Robar Limited ("Robar"), together (the "Loans"). The Loan carries
interest at the rate of 15% per annum, calculated at quarterly rests, and is due
for repayment no later than 31 July 2010.
On 19 December 2008 the Company obtained a short term unsecured loan of
GBP2.1million from Burac Invest and Trade and Corp ("Burac") and a further
GBP0.9 million from Robar Limited ("Robar"), together (the "Loans"). The Loan
carries interest at the rate of 15% per annum, calculated at quarterly rests,
and is due for repayment no later than 31 July 2010.
25 Financial risk management
Capital
The Group's capital is represented by ordinary shares in the Company. The
Group's objectives when maintaining capital are:
-to safeguard the Group's ability to continue as a going concern, so that it can
provide
returns to shareholders and benefits for other stakeholders.
-to provide an adequate return to shareholders by pricing services and
controlling costs
commensurate with the level of risk.
The Group sets the amount of capital it requires in proportion to risk. The
Group manages its capital structure and makes adjustments to it in the light of
changes in economic conditions and the risk characteristics of the underlying
assets. In order to maintain or adjust the capital structure, the Group may
issue new shares, or sell assets to reduce debt.
Financial instruments
The Group's principal financial instruments, other than derivative financial
instruments, comprise borrowings, cash and liquid resources. The main purpose of
these financial instruments is to provide finance for the Group's operations.
The Group has various other financial instruments such as trade receivables and
trade payables, which arise directly from its operations.
The main risks arising from the Group's financial instruments are interest rate
risk and liquidity risk. There is no currency exposure as all material
transactions and financial instruments are in sterling. The Group has no
material exposure to equity securities or commodity price risk and it is the
Group's policy that no speculative trading in financial instruments shall be
undertaken. There are no significant concentrations of credit risk within the
Group. The maximum credit risk exposure relating to financial assets is
represented by carrying value as at the balance sheet date. The Board reviews
and agrees policies for each of these risks and they are summarised below:
Interest rate risk
As the Group's only significant interest-bearing assets is cash, the Group's
income and operating cash flows are substantially independent of changes in
market interest rates. The cash balances attract interest at floating rates.
The Group finances its operations through a mixture of equity shareholders'
funds, bank loans and bonds. The Group borrows at both fixed and floating rates
of interest and then employs derivative financial instruments such as interest
rate caps to generate the desired interest rate profile and to manage the
Group's exposure to interest rate fluctuations.
The Group has taken out derivative financial instruments such that 100% (2007 -
99%) of all bank loans at 31 December 2008 had their exposure to interest rate
increases capped at a fixed level. Interest on the bank loans is paid quarterly
in arrears. Discount on the deep discount bonds is only payable on redemption.
Liquidity risk
The Groups' funding strategy is to ensure a mix of financing methods offering
flexibility and cost effectiveness. The Group is primarily financed by bank
loans with 100% of the capital balances of these bank loans being repayable
after more than 2 years from the balance sheet date, subject to relevant
covenants being met.
As at 28 December 2008, the Group is in breach of certain covenants which has
resulted in the bank loans being reclassified as current.
The Board continues to review alternative sources of finance. Cash balances are
invested in short term deposits such that they are readily available to settle
short term liabilities or to fund capital additions. For further information on
liquidity risk see going concern section in note 1.
Credit risk
There are no significant concentrations of credit risk within the Group. The
Group is exposed to credit risk that is primarily attributable to trade
receivables and cash balances. The Group's objective is to minimise this risk by
dealing with third parties with high credit ratings and carrying out credit
checks where appropriate. The amount of trade and other receivables included in
the balance sheet are net of a bad debt provision which has been estimated by
management following a review of individual receivable accounts and is based on
prior experience and known factors at the balance sheet date after taking into
account collateral held in the form of cash deposits. Receivables are written
off against the bad debt provision when management considers the debt is no
longer recoverable. At 31 December 2008 the value of collateral is GBP535,000
(2007 - GBP560,000). This balance is held on the balance sheet in 'other
payables'.
26 Financial instruments
Fair values of financial instruments
The fair values of the Group's financial assets and liabilities at 28 December
2008 have been estimated as follows:
Interest rate caps, collars and swaps -estimated market value
Bank loans and deep discount bonds -present value of discounted future cash
flows
For further details on the interest rate caps and collars refer to note 11.
Numerical information
a)Maturity of financial liabilities
The amounts including future finance charges of financial liabilities, all of
which are exposed to cash flow or fair value interest rate risk, are repayable
as follows;
+---------------------------------------------------+-----------------+-----------------+
| | 2008 | 2007 |
| | GBP'000 | GBP'000 |
+---------------------------------------------------+-----------------+-----------------+
| | | |
+---------------------------------------------------+-----------------+-----------------+
| In less than one year | 83,710 | 9,174 |
+---------------------------------------------------+-----------------+-----------------+
| In more than one but not more than two years | - | - |
+---------------------------------------------------+-----------------+-----------------+
| In more than two but not more than five years | - | 135,601 |
+---------------------------------------------------+-----------------+-----------------+
| In more than five years | - | - |
+---------------------------------------------------+-----------------+-----------------+
| | ______ | ______ |
+---------------------------------------------------+-----------------+-----------------+
| | 83,710 | 144,775 |
+---------------------------------------------------+-----------------+-----------------+
| | _______ | _______ |
+---------------------------------------------------+-----------------+-----------------+
The bank loan has been reclassified as due within less than one year due to
covenant breaches that exist at 28 December 2008. The facility actually expires
in September 2011 and, unless the facility is withdrawn, will remain payable on
this date.
b)Interest rate risk
The interest rate profile of the Groups financial liabilities are as follows:
+--------------------------------------------------+--------------------+--------------------+
| | 2008 | 2007 |
+--------------------------------------------------+--------------------+--------------------+
| | GBP'000 | GBP'000 |
+--------------------------------------------------+--------------------+--------------------+
| | | |
+--------------------------------------------------+--------------------+--------------------+
| Floating rate | 83,831 | 88,849 |
+--------------------------------------------------+--------------------+--------------------+
| Fixed rate | 27,280 | 17,981 |
+--------------------------------------------------+--------------------+--------------------+
| Interest free | 5,131 | 5,651 |
+--------------------------------------------------+--------------------+--------------------+
| | _______ | _______ |
+--------------------------------------------------+--------------------+--------------------+
| | | |
+--------------------------------------------------+--------------------+--------------------+
| | 116,242 | 112,481 |
+--------------------------------------------------+--------------------+--------------------+
| | _______ | _______ |
+--------------------------------------------------+--------------------+--------------------+
| | | |
+--------------------------------------------------+--------------------+--------------------+
The fixed rate liabilities include the deep discount bonds of GBP17 million
(2007 - GBP15.5 million) and accrue discount 10% per annum on a compound basis.
The bonds mature in more than two years but not more than five years.
The fixed rate liabilities also include the unsecured loans of GBP10.2 million
(2007 - GBP2.5 million) and are repayable with varying rates of interest between
10% and 15%, calculated at quarterly rests. The loans are repayable in more than
one year but not more than two years.
The interest rate profile of the Groups financial assets are carried at
amortised cost as follows:
+-----------------------------------------------+--------------------+--------------------+
| | 2008 | 2007 |
+-----------------------------------------------+--------------------+--------------------+
| | GBP'000 | GBP'000 |
+-----------------------------------------------+--------------------+--------------------+
| | | |
+-----------------------------------------------+--------------------+--------------------+
| Floating rate | 3,030 | 3,242 |
+-----------------------------------------------+--------------------+--------------------+
| Interest free | 1,757 | 1,421 |
+-----------------------------------------------+--------------------+--------------------+
| | _______ | _______ |
+-----------------------------------------------+--------------------+--------------------+
| | | |
+-----------------------------------------------+--------------------+--------------------+
| | 4,787 | 4,663 |
+-----------------------------------------------+--------------------+--------------------+
| | _______ | _______ |
+-----------------------------------------------+--------------------+--------------------+
| | | |
+-----------------------------------------------+--------------------+--------------------+
c)Fair values
There were no material differences between book value and fair value of
financial instruments as at 31 December 2007 and 28 December 2008.
Movements on the group provision for impairment of trade receivables are as
follows:-
+-------------------------------------------------+--------------------+--------------------+
| | 2008 | 2007 |
+-------------------------------------------------+--------------------+--------------------+
| | GBP'000 | GBP'000 |
+-------------------------------------------------+--------------------+--------------------+
| | | |
+-------------------------------------------------+--------------------+--------------------+
| At beginning of the period | 310 | - |
+-------------------------------------------------+--------------------+--------------------+
| Provided during the period | 217 | 310 |
+-------------------------------------------------+--------------------+--------------------+
| | _______ | _______ |
+-------------------------------------------------+--------------------+--------------------+
| | | |
+-------------------------------------------------+--------------------+--------------------+
| | 527 | 310 |
+-------------------------------------------------+--------------------+--------------------+
| | ______ | ______ |
+-------------------------------------------------+--------------------+--------------------+
| | | |
+-------------------------------------------------+--------------------+--------------------+
| | | |
+-------------------------------------------------+--------------------+--------------------+
The movement on the provision for impaired receivables has been included in the
operating expenses in the income statement.
27Acquisition
On 28 December 2007 the Group acquired the whole of the issued share capital of
GRS Inns Limited ("GRS") which operates managed houses under leases and tenancy
agreements with other pub companies.
The net assets acquired, consideration paid, and goodwill upon acquisition was
as follows:
GRS's net assets at the acquisition date:
+------------------------------------------+-------------+-------------+-------------+
| | GRS | Fair value | Acquisition |
+------------------------------------------+-------------+-------------+-------------+
| | Book values | adjustment | amount |
+------------------------------------------+-------------+-------------+-------------+
| | GBP'000 | GBP'000 | GBP'000 |
+------------------------------------------+-------------+-------------+-------------+
| | | | |
+------------------------------------------+-------------+-------------+-------------+
| Other intangible assets - operating | - | 2,080 | 2,080 |
| leases | | | |
+------------------------------------------+-------------+-------------+-------------+
| Property, plant and equipment | 1,672 | (187) | 1,485 |
+------------------------------------------+-------------+-------------+-------------+
| Goodwill | 186 | (186) | - |
+------------------------------------------+-------------+-------------+-------------+
| Inventories | 574 | - | 574 |
+------------------------------------------+-------------+-------------+-------------+
| Trade and other receivables | 765 | - | 765 |
+------------------------------------------+-------------+-------------+-------------+
| Cash and cash equivalents | 55 | - | 55 |
+------------------------------------------+-------------+-------------+-------------+
| Trade and other payables | (2,597) | - | (2,597) |
+------------------------------------------+-------------+-------------+-------------+
| Financial liabilities | (583) | - | (583) |
+------------------------------------------+-------------+-------------+-------------+
| Provisions | (87) | - | (87) |
+------------------------------------------+-------------+-------------+-------------+
| Deferred tax liability | 210 | (583) | (373) |
+------------------------------------------+-------------+-------------+-------------+
| | _______ | _______ | _______ |
+------------------------------------------+-------------+-------------+-------------+
| | | | |
+------------------------------------------+-------------+-------------+-------------+
| Net identifiable assets and liabilities | 195 | 1,124 | 1,319 |
+------------------------------------------+-------------+-------------+-------------+
| | _______ | _______ | |
+------------------------------------------+-------------+-------------+-------------+
| | | | |
+------------------------------------------+-------------+-------------+-------------+
| Goodwill on acquisition | | | 2,932 |
+------------------------------------------+-------------+-------------+-------------+
| | | | _______ |
+------------------------------------------+-------------+-------------+-------------+
| | | | |
+------------------------------------------+-------------+-------------+-------------+
| Total consideration | | | 4,251 |
+------------------------------------------+-------------+-------------+-------------+
| | | | _______ |
+------------------------------------------+-------------+-------------+-------------+
| Satisfied by: | | | |
+------------------------------------------+-------------+-------------+-------------+
| Cash consideration | | | 485 |
+------------------------------------------+-------------+-------------+-------------+
| Transaction costs payable | | | 341 |
+------------------------------------------+-------------+-------------+-------------+
| Fees paid in shares | | | 125 |
+------------------------------------------+-------------+-------------+-------------+
| Initial consideration payable in shares | | | 2,425 |
+------------------------------------------+-------------+-------------+-------------+
| Contingent consideration payable in | | | 875 |
| shares | | | |
+------------------------------------------+-------------+-------------+-------------+
| | | | _______ |
+------------------------------------------+-------------+-------------+-------------+
| | | | |
+------------------------------------------+-------------+-------------+-------------+
| Total consideration | | | 4,251 |
+------------------------------------------+-------------+-------------+-------------+
| | | | _______ |
+------------------------------------------+-------------+-------------+-------------+
| | | | |
+------------------------------------------+-------------+-------------+-------------+
| Cash paid | | | (485) |
+------------------------------------------+-------------+-------------+-------------+
| Cash acquired | | | 54 |
+------------------------------------------+-------------+-------------+-------------+
| | | | _______ |
+------------------------------------------+-------------+-------------+-------------+
| | | | |
+------------------------------------------+-------------+-------------+-------------+
| Net cash outflow | | | (431) |
+------------------------------------------+-------------+-------------+-------------+
| | | | _______ |
+------------------------------------------+-------------+-------------+-------------+
If the acquisition had been completed at the beginning of the previous
financial year GRS would have contributed an additional GBP19,614,000 to Group
revenues, an additional GBP442,000 to Group EBITDA and a loss after tax of
GBP200,000. All intangible assets are recognised at their respective fair
values, the excess over the net assets acquired is recognised as goodwill in the
financial statements. Goodwill represents the value of the income stream derived
from the managed house estate and the collective management skills and
experience of the GRS management team in managing and operating public houses.
The Directors consider the fair value of the shares issued for the acquisition
to be 85 pence each. The price was below the AIM quoted share price of 167 pence
at the time of the acquisition. The reason the Directors have used a lower fair
value is because the Company's shares are not actively and regularly traded and
therefore the quoted price does not represent fair value.
In arriving at the judgement that there is not an active market in the Company's
shares the Directors considered both the frequency and quantity of share trading
transactions by shareholders in the year. During the year to 31 December 2007
the total volume of shares traded was 48,700 shares, meaning that less than 0.2%
of the Company's 29.4 million shares in issue were traded during the year. There
were several months in which no shares were traded at all.
On 11 April 2007 the company issued 9.4 million shares (an increase in 55% of
the then share capital) for cash at 104 pence per share. The Directors
recommended this value to the existing shareholders based on a pricing model
based on the net assets per share of the Company plus a premium.
In determining the fair value of the consideration to be 85 pence in December
2007, the Directors used a similar pricing model, taking into account the impact
of the decline in the leisure market between April 2007 and December 2007. The
Directors also compared this methodology to the share prices of actively traded
listed companies in the same sector and believe this to be an appropriate method
given the size and nature of the Group's business.
28 Share based payments
Unapproved share option plan ("Unapproved Plan")
On 16 May 2007, the Company adopted an unapproved share option plan.
Share options under the Unapproved Plan are exercisable in 3 equal parts.
For each part, exercise will be the later of the third anniversary of the date
of grant, and the date on which the Board determine that the performance
condition has been achieved in respect of certain holders. Options lapse no
later than the 10th anniversary of the date of grant. The vesting of the awards
in respect of Ian Robinson and Graham Lello are conditional on a minimum annual
growth in net assets per share over a three year period to 31 December 2009 of
10%. The vesting of the awards in respect of Mark Crowther are not subject to
any performance conditions.
Share options were issued under the Unapproved Plan on 16 May 2007 for
625,000 shares in the Company at an exercise price of 104 pence.
+-------------------------------------+-------------+-------------+-------------+-------------+
| | 2008 | 2008 | 2007 | 2007 |
+-------------------------------------+-------------+-------------+-------------+-------------+
| | Weighted | | Weighted | |
+-------------------------------------+-------------+-------------+-------------+-------------+
| | average | | average | |
+-------------------------------------+-------------+-------------+-------------+-------------+
| | exercise | | exercise | |
+-------------------------------------+-------------+-------------+-------------+-------------+
| | price | | price | |
+-------------------------------------+-------------+-------------+-------------+-------------+
| | (pence) | Number | (pence) | Number |
+-------------------------------------+-------------+-------------+-------------+-------------+
| | | | | |
+-------------------------------------+-------------+-------------+-------------+-------------+
| Outstanding at the start of the | 104 | 625,000 | - | - |
| period | | | | |
+-------------------------------------+-------------+-------------+-------------+-------------+
| Granted during the period | - | - | 104 | 625,000 |
+-------------------------------------+-------------+-------------+-------------+-------------+
| | _______ | _______ | _______ | _______ |
+-------------------------------------+-------------+-------------+-------------+-------------+
| | | | | |
+-------------------------------------+-------------+-------------+-------------+-------------+
| Outstanding at the period end | 104 | 625,000 | 104 | 625,000 |
+-------------------------------------+-------------+-------------+-------------+-------------+
| | _______ | _______ | _______ | _______ |
+-------------------------------------+-------------+-------------+-------------+-------------+
| | | | | |
+-------------------------------------+-------------+-------------+-------------+-------------+
| | | | | |
+-------------------------------------+-------------+-------------+-------------+-------------+
As at 28 December 2008 none of the share options had been exercised.
The exercise price of options outstanding at the end of the period were 104p
(2007 - 104p) and their weighted average contractual life was 3 years (2007 - 3
years).
Of the total number of options outstanding at the end of the year, none (2007 -
Nil) had vested and were not exercisable at the end of the year.
The weighted average share price (at the date of exercise) of options during the
period was 104p (2007 - 104p).
The weighted average fair value of each option granted during the period was 16p
(2007 - 16p).
The following information is relevant in the determination of the fair value of
options granted during the period under the Unapproved Plan.
+----------------------------------------------+--------------+-------------+
| | 2008 | 2007 |
+----------------------------------------------+--------------+-------------+
| | | |
+----------------------------------------------+--------------+-------------+
| Weighted average share price at grant date | 104 | 104 |
| (pence) | | |
+----------------------------------------------+--------------+-------------+
| Weighted average exercise price (pence) | 104 | 104 |
+----------------------------------------------+--------------+-------------+
| Weighted average contractual life (years) | 3 | 3 |
+----------------------------------------------+--------------+-------------+
| | | |
+----------------------------------------------+--------------+-------------+
| Equity-settled | | |
+----------------------------------------------+--------------+-------------+
| Expected volatility | 20% | 20% |
+----------------------------------------------+--------------+-------------+
| Expected dividend growth rate | - | - |
+----------------------------------------------+--------------+-------------+
| Risk-free interest rate | 5% | 5% |
+----------------------------------------------+--------------+-------------+
| | | |
+----------------------------------------------+--------------+-------------+
The volatility assumption, measured at the standard deviation of expected
share price returns, is based on statistical analysis of share prices over the
last 2 years.
+----------------------------------------------+-------------+-------------+
| | 2008 | 2007 |
+----------------------------------------------+-------------+-------------+
| | GBP'000 | GBP'000 |
+----------------------------------------------+-------------+-------------+
| | | |
+----------------------------------------------+-------------+-------------+
| Equity-settled schemes - charge for period | 43 | 31 |
+----------------------------------------------+-------------+-------------+
| | _______ | _______ |
+----------------------------------------------+-------------+-------------+
| | | |
+----------------------------------------------+-------------+-------------+
The Group entered into share based transactions with parties other than
employees during the period. Fair value was measured at the market price for the
services. This comprised fees as follows:
+----------------------------------------------------------+-------------+-------------+
| | | |
+----------------------------------------------------------+-------------+-------------+
| | 2008 | 2007 |
+----------------------------------------------------------+-------------+-------------+
| | GBP'000 | GBP'000 |
+----------------------------------------------------------+-------------+-------------+
| Issue on 11 April 2007 of 120,192 shares at 104 pence | | |
| per share | | |
+----------------------------------------------------------+-------------+-------------+
| in lieu of fees | - | 125 |
+----------------------------------------------------------+-------------+-------------+
| Issue on 28 December 2007 of 147,058 shares at 85 pence | | |
| per share | | |
+----------------------------------------------------------+-------------+-------------+
| in lieu of fees | - | 125 |
+----------------------------------------------------------+-------------+-------------+
| | _______ | _______ |
+----------------------------------------------------------+-------------+-------------+
| | | |
+----------------------------------------------------------+-------------+-------------+
| | - | 250 |
+----------------------------------------------------------+-------------+-------------+
| | _______ | _______ |
+----------------------------------------------------------+-------------+-------------+
Share values have been considered in note 27.
29 Ultimate controlling party
In the opinion of the Directors the ultimate controlling party up until the
acquisition of GRS Inns Limited on 28 December 2007 was The Horizon Charitable
Trust by virtue of its majority shareholding through its subsidiary, Burac
Invest and Trade Corp. Since this date it is the opinion of the directors that
there was no ultimate controlling party of the company since no one shareholder
owned more than 50% of the issued share capital.
30Report and Accounts
The financial information set out in this announcement has been extracted from
the audited consolidated financial statements of London Town plc for the period
ended 28 December 2008, which were authorised for issue by the Board as a whole
following their approval on 30 June 2009 and which have an unqualified audit
report, but included an emphasis of matter regarding going concern assumptions.
The information set out in this part does not constitute statutory accounts
within the meaning of section 240 of the Companies Act 1985. The Companies Act
1985 permits Directors to reverse the financial statements subsequent to
issuance if they are found to be defective.
The audited accounts of the Company for the period ended 28 December 2008 will
be posted to Shareholders shortly and will be delivered to the Registrar of
Companies. Copies will be available to the public at the Company's offices, 58
Queen Anne Street, London, W1G 8HW
This information is provided by RNS
The company news service from the London Stock Exchange
END
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