RNS Number:8179R
Ultimate Leisure Group PLC
26 February 2007
ULTIMATE LEISURE GROUP PLC
INTERIM RESULTS
Ultimate Leisure Group plc ("Ultimate" or "the Group") the bar and nightclub
operator, today announces its interim results for the six months ended 31
December 2006.
Summary:
* Turnover of #18.2 million (2005: #17.5m)
* EBITDA (pre FRS 20 charge) of #1.8m (2005: #2.2m)
* Operating Profit (pre exceptional costs and FRS20 charge) of #0.6m
(2005: #2.0m)
* Pre-tax profit (pre exceptional costs and FRS20 charge) of #2,000
(2005: #1,642,000)
* Progress in a challenging trading environment
* Strong balance sheet, asset base and cash generation
* Preparations for smoking ban on track
* Continued focus on premium segment of the market
* Benefits of investment programme starting to come through
Commenting on the result, Mark Jones, Chairman of Ultimate Leisure Group said:
"The half year saw us make progress in a trading environment that continued to
be affected by considerable new competition in the late night market place
following the change in licensing laws. The investment in our estate, our brands
and our people has been at a heightened level in the period and this,
increasingly, is putting us on a stronger competitive footing.
Trading over Christmas was satisfactory and has improved further since the year
end. With the investment programme nearly completed and sales improving we
remain confident about the future prospects for the business"
ENQUIRIES:
Ultimate Leisure Today: 0207 831 3113
Mark Jones, Chairman Thereafter 0191 261 8800
Craig Bell, Finance Director
Financial Dynamics 0207 831 3113
Ben Foster / Charles Watenphul
CHAIRMANS REPORT
I am pleased to report the results for the 26 weeks to 31st December 2006.
The half year saw us continue to make progress in a trading environment that
continued to be affected by the after effects of the change in licensing laws
which has led to considerable new competition in the late night market place.
The investment in our estate, our brands and our people has been at a heightened
level in the period, and the benefits of this will put the group in a much
stronger position for the future.
Results
Turnover for the period increased by 4% to #18.2m (2005: #17.5m) largely due to
the benefits of additional new sites. The Company made a small profit of #2,000
(pre exceptional items and FRS 20 charge) during the period (2005: profit of
#1.6m). These results are in line with market expectations and reflect the
decline in sales in our un-invested core venues. Additionally, we were impacted
by the closures associated with necessary investment program, combined with
additional marketing costs to re-promote these venues. The Group has previously
stated its intention to re-invest in its current estate to increase shareholder
value and with this investment strategy still ongoing, the Board does not
propose a dividend for the period to December 2006.
Business Review
The trading environment continued to be tough as the impact of the licensing law
changes and the historic lack of investment in our estate had an adverse impact
on sales. However, the reinvestment program is now well underway and it was
encouraging to see our December like for like sales return to growth (+1%). This
recent improvement in sales was driven by a good performance from our invested
estate in the second quarter as well as a significant improvement in food sales.
Food sales grew to nearly three times the level in H2 05/06 overall and like for
like sales grew by 89%, albeit from a low base. It has become clear from other
bar operators with assets in Scotland that food sales can help to offset
declines in drinks sales following a smoking ban. As a result, we have invested
heavily in improving our food offer and our operational expertise in this area.
We expect food to become increasingly important to the group.
During the period, we invested in a total of 10 businesses, many which had
received negligible investment over the last 5 years and were therefore closed
for extensive periods. This is the highest number of sites we have had to close
for investment in any of the half-year periods since we began the programme.
These investments are substantial as we seek to totally transform and improve
the customer offering. This investment in the physical assets is backed up with
an extensive training programme for our team members and also significant
investment in marketing.
In total we invested #7.8 million of which #5.5 million was on acquisitions.
Smoking Ban
We have already undertaken extensive forward planning to mitigate the impact of
the bans in Northern Ireland and England and have had some limited insight from
our experiences with our one nightclub in Scotland. We are most advanced in our
planning in Belfast where the ban comes into place earlier (30th April) than in
England.
Approximately two thirds of our estate have the possibility of a smoking area
solution and we are taking all the necessary steps with local authorities, and
where needed landlords, to enhance these facilities.
Whilst there seems to be ample evidence that the food sales are a growth
opportunity post the smoking ban, we remain cautious about drinks sales, in
particular, in our nightclubs.
Acquisition and Development
In the reporting period we disposed of two non-core nightclub sites in Rotherham
and South Shields for book value.
We acquired two premium bars in Belfast - The Advocate and The Potthouse. In
Newcastle we acquired the freehold of The Attic and since the half year we
acquired they freehold of The Cotton Factory in Huddersfield. These bars are of
a premium nature and enjoy significant food sales and good smoking ban
solutions.
The Prohibition brand opened a 5th site, in the City of London, in December and
has since traded well. Additionally, since the year end we have let our
Mansfield site to a local operator on a 25 year lease.
Corporate Activity
On 22 January 2007 we announced out intention to raise #25m by way of a fully
underwritten placing. The Board of Ultimate Leisure Group plc believes that
Group has reached the stage where more substantial acquisitive growth would be
beneficial and this additional fundraising will improve the Group's competitive
position when reviewing acquisition targets.
People
During the half year we welcomed Stephane Nahum to the Board and after the half
year period ended we welcomed Alka Bali to the Board, both as non-executive
directors.
The Board wishes to thank all of our employees for the contribution they have
made so far this financial year.
Current Trading and Outlook
Trading since the year end has continued to improve due to the benefits of the
investment programme. Total Company sales for the first 5 weeks of the new half
year are +7.5%. Our like for likes are +2.3% and importantly our invested like
for likes are up +6.3%.
With the investment programme nearly completed and our sales improving we remain
confident about the future prospects for the business.
M Jones 26 February 2006
Chairman
CONSOLIDATED PROFIT AND LOSS ACCOUNT
Notes Unaudited Audited
Unaudited 6 months to Year to
6 months to 31 December 30 June
31 December 2005 2006
2006 As restated As restated
#'000 #'000 #'000
TURNOVER 18,179 17,497 32,451
Operating Profit (pre FRS 20 charge and 641 2,008 2,364
exceptional items)
FRS20 charge (68) (20) (117)
Exceptional Items 4 (105) (850) (5,014)
Operating Profit/(loss) 468 1,138 (2,767)
Net interest payable (639) (366) (862)
(Loss)/profit on ordinary activities
before taxation (171) 772 (3,629)
Taxation 2 (126) (243) (523)
(Loss)/Profit on ordinary activities
after taxation (297) 529 (4,152)
Restated (loss)/earnings per share - 5 (1.2)p 2.1p (16.9p)
basic and diluted
CONSOLIDATED BALANCE SHEET
Unaudited Unaudited Audited
As at As at As at
31 December 31 December 30 June
2006 2005 2006
#'000 #'000 #'000
FIXED ASSETS
Intangible assets 1,226 1,148 1,258
Tangible assets 69,528 69,260 65,336
70,754 70,408 66,594
CURRENT ASSETS
Stocks 766 727 454
Debtors 1,682 1,539 2,337
Cash at bank and in hand - 799 2,749
2,448 3,065 5,540
CREDITORS - due within one year (5,705) (8,751) (8,056)
Net current liabilities (3,257) (5,686) (2,516)
TOTAL ASSETS LESS CURRENT LIABILITIES 67,497 64,722 64,078
CREDITORS -due after one year (22,097) (14,644) (18,266)
PROVISIONS for liabilities and charges
- deferred taxation (3,123) (2,830) (3,123)
NET ASSETS 42,277 47,248 42,689
CAPITAL AND RESERVES
Called-up share capital 2,503 2,474 2,503
Share premium 25,605 25,000 25,605
Other reserves 7,013 7,013 7,013
Profit and loss account 7,156 12,761 7,568
42,277 47,248 42,689
CONSOLIDATED CASH FLOW STATEMENT
Note Unaudited Unaudited Audited
6 Months to 6 months to Year to
31 December 31 December 30 June
2006 2005 2006
#'000 #'000 #'000
Cash flow from operating
activities 7 1,925 3,459 4,032
Return on investments and
servicing of finance (639) (367) (815)
Taxation paid (724) (1,436) (1,439)
Capital expenditure and
financial investment (5,547) (5,280) (6,864)
Dividends paid - (1,038) (1,390)
Cash outflow before financing (4,985) (4,662) (6,476)
Financing -net proceeds from - 62 466
Share Issue
-Bank Loan 2,225 4,800 8,378
(Decrease) / increase in cash (2,760) 200 2,368
before foreign exchange
differences
Effect of foreign exchange (56) - (50)
differences
(Decrease) / increase in cash (2,816) 200 2,318
MOVEMENTS IN NET BORROWINGS
(Decrease) / increase in cash (2,760) 200 2,368
Increase in loans and lease
financing (2,225) (4,800) (8,378)
Change in net debt resulting
from cash flows (4,985) (4,600) (6,010)
Opening net borrowings (17,295) (11,023) (11,023)
Change in net debt from 47 - (47)
non-cash changes
Foreign exchange movements 136 - (215)
Closing net borrowings (22,097) (15,623) (17,295)
Reconciliation of Movements in Shareholders' Funds
Unaudited 6 Unaudited 6 months Audited year to 30
months to 31 to 31 December 2005 June 2006 (As
December 2006 (As restated) restated)
#000's #000's #000's
(Loss)/profit for the period (297) 529 (4,152)
Credit in relation to share based payments (note 6) 68 20 117
Purchase of own shares (108) 0 0
Dividends paid 0 (1,038) (1,619)
Issue of shares 0 61 695
Foreign exchange differences on translation of net (75) 0 -28
assets of subsidiary undertakings
Net decrease in shareholders' funds (412) (428) (4,987)
Opening shareholders funds 42,689 47,676 47,676
Closing shareholders funds 42,277 47,248 42,689
NOTES
1. Basis of preparation
The interim financial statements have been prepared on the basis of the
accounting policies set out in the statutory accounts for the year ended 30 June
2006 except for the first time adoption of FRS 20 Share Based Payments. A share
matching scheme has been introduced during the interim financial period and has
been accounted for in accordance with UITF 38.
The financial information for the six months ended 31 December 2006 and 31
December 2005 is unaudited and does not constitute statutory accounts as defined
in section 240 of the Companies Act 1985. This information has been reviewed by
the Group's auditors and their report is set out at the end of this Interim
Report.
The financial information for the year ended 30 June 2006 has been extracted
from the statutory accounts for that year, which have been filed with the
Registrar of Companies and which contain an unqualified audit report.
2 Taxation
A taxation charge has been provided based on the estimated effective rate of
taxation for the full year to 30 June 2007.
3 Dividend
The Directors do not recommend the payment of an interim dividend. An interim
dividend of 2.4p per ordinary share was paid in October 2005.
4 Exceptional Items
The exceptional items in the periods to 31 December 2006 and 31 December 2005
relate to ex-gratia payments to directors who resigned during these periods. The
exceptional items in the year to 30 June 2006 relate to the impairment of fixed
assets, restructuring costs and loss on disposal of freehold properties.
5 Earnings per share
Earnings per share have been calculated using the weighted average number of
shares in issue during the relevant financial periods. The weighted average
number of shares in issue is 25,030,054 (2005: 24,730,740) and the earnings,
being (loss)/profit on ordinary activities after taxation, are (#297,000) (2005:
#529,000).
Diluted earnings per share have been calculated using the weighted average
number of shares in issue diluted for the effect of share options. The diluted
weighted average number of shares is 25,030,054 (2005: 24,779,342). There are
several share options which could potentially dilute basic earnings per share in
the future but were not included in the calculation of diluted loss per share
because they were anti-dilutive for the period presented
NOTES (continued)
6 Prior year adjustment (FRS 20 Share Based Payments)
The comparative figures for 2005 and 2006 have been restated for the
requirements of FRS 20 "Share based payments" which has been adopted for the
first time in these accounts. Under FRS 20, the fair value of options granted
is recognised as an employee expense with a corresponding increase in equity.
The fair value is measured at grant date and spread over the period during which
the employees become unconditionally entitled to the options. The fair value of
the options granted has been measured using an option pricing model taking into
account the terms and conditions upon which the options were granted. The amount
recognised as an expense is adjusted to reflect the actual number of share
options that vest, except where variations are due only to share prices not
achieving the threshold for vesting. This has resulted in prior year
adjustments in 2005 and 2006. The charge in respect of the share based payments
is matched by an equal and opposite adjustment to profit and loss reserves,
thereby having no net impact on the Group's closing reserves. The full movement
on reserves is shown in the Reconciliation of movements in shareholders' funds
in this report. The effect on the period profit after interest and tax for the
periods is set out below:
30 June 2006 full 31 December 2005
year half year
#000's #000's
(Loss)/profit after interest and tax as originally (4,035) 549
reported
Charge in respect of share based payments (117) (20)
(Loss)/profit after interest and taxation as (4,152) 529
restated
7 Net cash inflow from operating activities
Unaudited Unaudited Audited
6 months to 6 months to Year to
31 December 31 December 30 June
2006 2005 2006
#'000 #'000 #'000
Operating profit / (loss) 468 1,138 (2,767)
Depreciation and impairment charges 1,209 1,081 6,257
Amortisation of intangible fixed assets 32 - 8
FRS 20 charge 68 20 117
Loss on sale of freehold properties 2 - 132
Loss on disposal of other tangible fixed - - 10
assets
Change in Stocks (312) (163) 108
Change in Debtors 547 351 (447)
Change in Creditors (89) 1,032 614
Cash Flow from operating activities 1,925 3,459 4,032
8 Copies of this report are being forwarded to all shareholders and
further copies are available from the Group's Registered Office at 26 Mosley
Street, Newcastle upon Tyne, NE1 1DF.
Independent review report by KPMG Audit Plc to Ultimate Leisure Group Plc
Introduction
We have been instructed by the company to review the financial information for
the six months ended 31 December 2006 which comprises profit and loss account,
balance sheet, cash flow statement, reconciliation of movements in shareholders'
funds and the related notes. We have read the other information contained in the
interim report and considered whether it contains any apparent misstatements or
material inconsistencies with the financial information.
This report is made solely to the company in accordance with the terms of our
engagement. Our review has been undertaken so that we might state to the company
those matters we are required to state to it in this report and for no other
purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company for our review work, for this
report, or for the conclusions we have reached.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The directors
are responsible for preparing the interim report in accordance with the AIM
Rules which require that the interim report must be presented and prepared in a
form consistent with that which will be adopted in the company's annual accounts
having regard to the accounting standards applicable to such annual accounts.
Review work performed
We conducted our review having regard to the guidance contained in Bulletin 1999
/4: Review of interim financial information issued by the Auditing Practices
Board for use in the UK. A review consists principally of making enquiries of
management and applying analytical procedures to the financial information and
underlying financial data and based thereon, assessing whether the accounting
policies and presentation have been consistently applied unless otherwise
disclosed. A review excludes audit procedures such as tests of controls and
verification of assets, liabilities and transactions. It is substantially less
in scope than an audit performed in accordance with International Standards on
Auditing (UK and Ireland) and therefore provides a lower level of assurance than
an audit. Accordingly, we do not express an audit opinion on the financial
information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 31 December 2006.
KPMG Audit Plc
Chartered Accountants
Newcastle upon Tyne
26 February 2007
This information is provided by RNS
The company news service from the London Stock Exchange
END
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