RNS Number:8023P
Marylebone Warwick Balfour Grp PLC
11 March 2008
FOR IMMEDIATE RELEASE
11 March 2008
MARYLEBONE WARWICK BALFOUR GROUP PLC
PRELIMINARY ANNOUNCEMENT OF RESULTS
FOR THE YEAR ENDED 31 DECEMBER 2007
HIGHLIGHTS
MWB GROUP PLC
* Substantial uplift in equity attributable to shareholders of the Company over
the year, increasing by �105.1m to �204.4m from �99.3m at 31 December 2006.
* Equity attributable to shareholders of the Company in pence per share advances
107% to 254p from 123p at 31 December 2006.
* Adjusted equity attributable to shareholders of the Company in pence per
share, after taking account of stakes in MWB Business Exchange Plc and Liberty
Plc at Stock Market values at 31 December 2007 and incentives payable on
realisation, amounts to 263p, an increase of 42% from 185p at 31 December
2006.
* EBITDA (excluding profits on sales of properties and one-off transaction
costs) up 17% to �33.3m against �28.5m in the 2006 comparable period.
"I am extremely heartened by the performance of our operating businesses over
the period. We have a strong cash flow and the businesses are underpinned by
valuable property assets and excellent people. I am confident that our
businesses will continue to thrive and deliver excellent shareholder value.".
Eric Sanderson
Chairman
- more -
Contact: Marylebone Warwick Balfour Group Plc Tel: 020 7706 2121
Richard Balfour-Lynn, Chief Executive
Andrew Blurton, Group Finance Director
Baron Phillips Associates Tel: 020 7920 3161
Baron Phillips
MALMAISON AND HOTEL DU VIN
* 22 operating hotels now open - a further 4 to open over next 12 months -
compared to 17 at December 2006 year end.
* Hotel properties valued at �529m at 31 December 2007 up from �337m at 31
December 2006.
* Revenue over the year grew by 20% to �95.3m from �79.1m for the year to 31
December 2006.
* Like-for-like revenue (excluding new hotel openings) rose 5.3% over the year
to 31 December 2006.
* EBITDA before exceptional items consistent for the year at �23.9m compared to
�23.4m for the year to 31 December 2006, despite major opening programme.
* Overall occupancy for the year to 31 December 2007, including new hotels, at
79%, compared with 81% for the year to 31 December 2006, despite major opening
programme. Occupancy maintained at 81% on a like-for-like basis.
* Average room rate over period rose by 8% to �115 against �106 for the year to
31 December 2006.
"With our established pipeline of further hotel openings, we believe we will
continue to deliver further growth over the coming period. We look to the
future with a confidence that comes from an established brand which is able to
deliver what our customers demand and expect".
Robert B. Cook
Chief Executive
Malmaison Group
MWB BUSINESS EXCHANGE PLC
* Revenue grown by 22% to �100m from �82m in year to 31 December 2006.
* EBITDA rose strongly by 83% to �17m from �9.3m in year to 31 December 2006.
* Revenue Per Available Workstation (REVPAW) advanced 23% to �8,435 at
31 December 2007 from �6,870 at 31 December 2006.
* Revenue Per Occupied Workstation (REVPOW) up 6% to �9,355 at 31 December 2007
compared to �8,830 at 31 December 2006.
* Meeting and conference room division revenues up by more than 36% to �10.5m
over year to 31 December 2006.
* Occupancy increased to 90% at 31 December 2007, up from 77% at 31 December
2006.
* Robust contracted income already accounting for over 60% of current 12 month
projections to December 2008.
* Seven new Business Exchange Centres successfully opened during the year.
"This has been another year of strong earnings growth as MWB Business Exchange
continues to consolidate its position as one of the country's leading providers
of flexible office space. We believe that the right business model is in place
to ensure that we continue to deliver growth in shareholder value".
John Spencer
Chief Executive
MWB Business Exchange Plc
LIBERTY PLC
* New Chief Executive joined 1 July 2007 and additional appointments to
executive management team.
* Advance in total Group revenue to �46.7m - up from �44.6m in year to December
2006.
* Flagship store sales including concessions advanced in year to December 2007
by 2% to �38.3m.
o Menswear increased in year to 31 December 2007 by 18% to �4.6m.
o Liberty of London luxury brand up 8% in year to 31 December 2007 to �3.2m.
* Liberty balance sheet underpinned by Great Marlborough Street Flagship Store
valued at �33m.
* Independent Liberty of London shop leased in Sloane Street - anticipated
Summer 2008 opening.
"We continue to make great strides in establishing our Liberty of London luxury
products label, and its progression to becoming a global brand. The Board is
confident that Liberty has the structures, products and people to produce an
improving platform for growth in the current year".
Geoffroy de La Bourdonnaye
Chief Executive
Liberty Plc
CHAIRMAN'S STATEMENT
This has been a year that mixed great success with some disappointment.
Operationally, the three businesses within MWB Group have performed
exceptionally well, but at the corporate level we were not able to complete two
major transactions as a result of the deterioration in financial markets towards
the end of the period. I comment on this further below.
This statement covers the audited financial statements for the twelve months to
31 December 2007 and the comparative period for the eighteen months ended 31
December 2006. In some instances, where relevant, I have also commented on the
performance relative to the previous twelve months ended 31 December 2006.
I am pleased to be able to report that Business Exchange and the Malmaison group
produced excellent growth over the 12 months to 31 December 2007 while Liberty
delivered a commendable performance under difficult circumstances.
At the heart of the Group results are the revenue increases generated by
Business Exchange and Malmaison - up by 22% and 20% respectively for the year -
with our serviced office business delivering an excellent 83% increase in EBITDA
to �17.0m, from �9.3m for the year to December 2006. Malmaison saw EBITDA hold
firm at �23.9m in spite of five new hotel openings over the period. At the
operating level, Liberty saw revenue increase by 5% to �46.7m, supported by an
exceptional performance by its fabrics division, which recorded a 63% increase
in EBITDA to �2.3m over the period compared to �1.4m for the previous year.
Our strategy of developing strong management teams within the three core
businesses continues to prove a tremendous success. As each company grows, the
respective management team has been extremely adept at recruiting bright and
committed people at all levels to ensure future growth is maintained.
While there are detailed reports from each of the Chief Executives following my
statement, I would like to emphasise the importance we place on our people. In
our view, this Human Capital is as important as the tangible assets within the
Group. As a result, we invest considerable time and money in developing the
talent we have in each business. We believe we have outstanding people
throughout the Group and the results we are reporting here reflect their quality
and commitment.
Everyone in our three companies recognises a simple fact: they are in a service
orientated customer-led business. This is true whether they are a sales
assistant at Liberty, a receptionist in Business Exchange or a Hotel du Vin
restaurant waiter. And importantly, each can rise to the very top of their
respective companies if they have the desire to do so.
Our AIM-quoted MWB Business Exchange has continued to consolidate its position
as one of the UK's leading providers of flexible office space. Its strategy of
focusing on sustainable growth supported by risk mitigation has resulted in
further Central London expansion for its leased space and Operational and
Management Agreements in the regions. As a result, the West End now accounts
for 32% of Business Exchange's portfolio but generates 45% of total revenue and
54% of its EBITDA before central costs. Across the company, occupancy levels
have been strong, concluding the year at 90%, compared to 77% at the 2006 year
end, despite launching seven brand new centres during the year.
There is a similar story at Malmaison and Hotel du Vin where five new hotels
were opened during the year taking the year-end total to 22, while occupancy
levels were maintained at 79%, reflecting the speed at which these new
properties reach stabilisation. One of the key growth indicators from the
Malmaison group this year has been the substantial uplift in property values.
At 30 June 2007 our hotel portfolio was independently valued at �526m compared
with �337m at the December 2006 year-end. At 31 December 2007, our larger
portfolio was valued at �529m, representing a fall in values of some �19m in the
second half. Nevertheless, it is gratifying to note the robustness of our hotel
portfolio which has been able to withstand most of the adverse effects of the
recent market turbulence.
While some of the uplift over the year reflects capital expenditure,
particularly on our new hotels, �146m of the increase for the year represents
the valuation surplus arising over the year despite the adverse financial and
property markets over the last six months. This valuation takes no account of
the market value of the operational business, its brand and goodwill and we
therefore believe there is further capital value that can be realised for
shareholders as this successful niche business continues to grow. Secured on
this property we have debt of �240m, giving operational gearing of only 45%.
Liberty, our AIM-quoted retail emporium in London's West End, continues to
establish the Liberty of London luxury brand both within Europe and North
America. While some of its divisions performed well, uncertainties in the
financial and consumer markets resulted in a more challenging second half which,
combined with a management re-structuring, meant Liberty's progress was
restrained. Substantial investment is being made in Liberty's luxury brand and
in the current year this will include the launch of the first Liberty of London
stand-alone shop in Sloane Street. All this brand expenditure is expensed as it
is incurred which inevitably adversely affects profits. Net debt has increased
to �8.7m from �1.2m last year but still represents property gearing of only 26%
as Liberty is well underpinned by net assets of �42m, of which �33m is accounted
for by the valuable Liberty flagship store.
At the Group level, operating EBITDA was �33.3m for the 12 months to 31 December
2007, compared to �28.5m for the previous year.
As a result of the �121m Group share of the increase in property values during
the year, equity attributable to shareholders after taking account of minority
interests, rose to �204.4m from �99.3m at 31 December 2006. This represents a
drop of some 33p per share from the 287p per share reported in our June 2007
results, reflecting the adverse financial and property markets in the second
half of the year. Nevertheless, overall the results to December 2007 confirm an
increase of 131p a share for the year, up from 123p to 254p per share at 31
December 2007.
Importantly, there has also continued to be substantial growth in adjusted
equity attributable to shareholders. This has risen from �149.1m (185p a share)
at 31 December 2006 to �211.4m (263p a share) at 31 December 2007, reflecting
the growth at the Malmaison group over the period.
During the year we endeavoured to realise shareholder value and return cash or
cash equivalents under our Cash Distribution Programme through the disposal of
our hotel business. Initially we agreed terms to sell the property interests
and retain the operating business of the Malmaison and Hotel du Vin Group as set
out in our circular issued in May 2007 and shareholders approved this
transaction later that month. Unfortunately, due to financial constraints of
our proposed purchaser, this deal could not be completed. Nevertheless, there
was considerable interest in our hotels from other potential buyers and we came
extremely close to concluding a disposal of the entire division including the
operating business later in the year. However, at the last moment,
uncertainties in the debt market meant bidders could not finalise unconditional
offers for the division and these negotiations had to be terminated in September
2007.
Excluding the one-off costs of �8m in respect of this sales activity during the
year, the Group made pre-tax loss of �6m for the year ended 31 December 2007.
Overall, the loss for the year after these one-off costs, was �14.3m or 19.4p a
share.
Since the year-end we announced a major capital reorganisation and restructuring
of the Group as a key component of the Cash Distribution Programme. These
proposals involve a Group structure with greatly increased flexibility on future
disposals of our operating businesses; increases in the available options as to
when cash or cash equivalents can be returned to Shareholders; and increases in
the Group's reserves that can be distributed to Shareholders. These proposals
were approved at a shareholders meeting held on 4 March 2008.
I am extremely heartened by the performance of our operating businesses over the
period. We have a strong cash flow and the businesses are underpinned by
valuable property assets and excellent people. I am confident that our
businesses will continue to thrive and deliver excellent shareholder value.
Eric Sanderson
Chairman
11 March 2008
MALMAISON AND HOTEL DU VIN OPERATING REVIEW
This has been another exciting and rewarding year for our hotel business.
Within the Malmaison and Hotel du Vin group we opened a further five new hotels
during the period, taking the year end total to 22, and increased revenue by
some 20% to �95.3m.
We have further consolidated our position as the UK's leading lifestyle boutique
hotel group as we continue to win travel industry awards, including Business
Traveller's "World's Best Small Hotel Chain" and The Guardian's "Best Hotel
Group" which Hotel du Vin (HdV) won for the fifth consecutive year.
Over the next 12 months we are on track to open four new hotels: Poole (HdV),
Newcastle (HdV), Edinburgh (HdV) and Aberdeen (Malmaison), which will complement
our existing portfolio and generate further earnings for the Group. As a result
of the current pipeline of openings, we will have a total of 26 operating
properties in the UK by the end of 2008 - 14 HdV hotels and 12 Malmaison.
This will expand further when our recently acquired Golf Hotel at St Andrews is
converted into a Hotel du Vin. We are also in negotiations for properties in
Chester and Canterbury which should be concluded shortly. Additionally, we are
making progress with our proposed makeover of the Sussex Arts Club in Brighton
which adjoins our existing HdV hotel. We acquired the building last year and
have submitted plans to the local authority to provide an additional 11
bedrooms, together with a new Pub du Vin concept.
Elsewhere we are currently targeting a further five locations which, if
successful, would take the HdV total to 18 and Malmaison to 14, making an
overall total of 32 by 2010.
What has been particularly pleasing over the period is that we have maintained
occupancy at just under 80% despite the initial short-term impact of five new
openings: Liverpool, Reading, Cambridge, Cheltenham and York, which
conventionally would have had an adverse impact on average occupancy levels.
The speed at which these new properties reach stabilisation is way ahead of the
industry norm and reflects the quality of both the product and staff, with the
latter doing much to establish the atmosphere and high service standard that
brings clients back to our hotels time and time again.
Importantly the impact of these new hotels continues to enhance the Malmaison
and Hotel du Vin brands and our position within the markets that we serve.
Overall revenue for the year rose to �95.3m from �79.1m in the year to December
2006. On a like-for-like basis underlying growth was 5.3%. Operating EBITDA
held firm at �23.9m over the 12 months to December 2007 despite the new hotel
openings. We are confident of achieving further growth in 2008, as our 2007
openings continue to establish themselves and our current year pipeline comes on
stream.
Overall occupancy on a like for like basis, remained consistent at 81%, but
Revenue per occupied room (REVPOR) increased by 8% giving us an average of �115
across the group. These occupancy achievements should also be seen against the
backdrop that two of our hotels - the Oxford Malmaison and HdV Cheltenham - had
to be closed for a period during the year; the former due to a small fire and
the latter due to last Summer's floods. Both hotels were fully covered by
insurance and the group was, therefore, fully protected from the financial
effect of these events.
In a fast growing business such as the Malmaison Group, cost control is an
increasingly important feature to ensure continually improving margins. One of
the benefits that comes from our size is our ability to buy goods and services
more competitively, although this has become more challenging in the current
environment where property rates and utilities which are major components of our
cost base, are increasing well above the rate of inflation.
Over the past year we have continued to enhance margins through continually
better controls on expenditure which has meant further improvements on both room
and catering margins. This ability to drive down costs - but without damaging
either service or quality of food and rooms - will continue as we further expand
the group.
Underpinning this growth is our ever strengthening balance sheet. All our
hotels, with the exception of the Oxford Malmaison, are owned freehold or are
effective freeholds.
As a result, the year-end independent valuation shows a �192m increase in the
value of our properties from �337m at December 2006 to �529m at this year end.
�43m of this increase comprises capital expenditure during the year and the
balance of �149m reflects the valuation surplus arising on these properties
during the year. This represents a gain of �164m in the first half of the year,
and a reduction of �15m in the second six months, reflecting the recent changes
in the financial markets. Nevertheless it is gratifying to note the robustness
of our hotel portfolio as it has been able to withstand most of the recent
market turbulence.
Against this we have debt of �240m, giving operational gearing of only 45%. It
should also be borne in mind that this latest valuation again takes no account
of the market value of our hotel operating business, its brands and goodwill,
thus underpinning further capital value that can be realised for shareholders.
It is obviously pleasing to report such positive financial progress over the
year, but none of this would be possible without the devotion and dedication of
our management and staff. Today, the Malmaison Group employs as many as 1,700
people and that over the past three years we have created more than 1,000 new
jobs, an achievement of which we are justifiably proud.
We invest considerable time and money in our people. Last year alone we spent
over �1m on people development and as a result we have one of the lowest
industry staff turnover figures at 25% compared to an industry average of over
50%. Such is the interest in the group from people wishing to start a career in
hotel and catering, or further their career by joining Malmaison, that 68% of
all new recruits last year joined us with no recruitment cost to the business.
To put these figures into further perspective, we have trained over 500 managers
during the last 3 years and 90% of our current deputy managers and chefs have
been promoted from within the organisation. Against this background it is
perhaps hardly surprising that we won an award from the Chartered Institute of
Personnel Development for Best Talent Management in the UK. This was not a
hotel industry award but was won in competition against all industries and
businesses. Malmaison also won the Best Place to Work award from the Caterer
and Hotelkeeper and was recently recognised by The Sunday Times in its Top 100
Companies to Watch.
We are conscious that current market conditions are not ideal for any business,
especially in discretionary spending sectors, but we have always relished a
challenge. Over the last five years during our ownership of Malmaison and Hotel
du Vin, events such as 9/11, foot and mouth disease and SARS, have not had the
negative impact on our hotels that have been witnessed elsewhere in the
industry. Irrespective of the economic and business climate our philosophy is,
and continues to be, that we strive to offer an exciting and memorable
experience that will bring our clients back to us time and time again.
We are not complacent but we do believe we provide a product that our clients
want and enjoy. This is borne out by our newly opened hotels that deliver
stabilised income streams extraordinarily quickly, as each one rapidly
establishes itself in its location and creates a reputation for good food, wine
and hospitality.
With our established pipeline of further hotel openings, we believe we will
continue to deliver further growth over the coming period. We look to the
future with a confidence that comes from an established brand which is able to
deliver what our customers demand and expect. While we appreciate current
market conditions are not ideal, our performance in the first quarter of 2008
suggests a continued resilience that comes from providing a quality offer at a
sensible price.
Robert B. Cook
Chief Executive
Malmaison Group
11 March 2008
MALMAISON AND HOTEL DU VIN - KEY FINANCIAL HIGHLIGHTS
Malmaison has expanded organically and by acquisition of further operating
hotels during the year under review. The key performance indicators for the
business, together with its trading and balance sheet performance in recent
periods, are summarised below:-
Eighteen
Year ended Year ended months ended
31 December 31 December 31 December
2007 2006 2006
Malmaison
_________
Total revenue �'000 58,198 48,912 70,612
Average occupancy for period % 78 79 79
Average room rate for period � 113 107 106
Operating EBITDA* �'000 14,761 9,670 17,316
Number of operating hotels at period end 11 9 9
_______ ______ ______
Hotel du Vin
_____________
Total turnover �'000 37,074 30,189 44,446
Average occupancy for period % 81 84 85
Average room rate for period � 124 118 116
Operating EBITDA* �'000 9,143 13,719 17,147
Number of operating hotels at period end 11 8 8
_______ ______ ______
Combined Malmaison and Hotel du Vin
___________________________________
Operating EBITDA* �'000 23,904 23,389 34,463
Operating profit/(loss) before tax* '000 (4,551) 5,101 7,480
Total recognised income and expense �'000 135,601 22,236 36,845
_______ ______ ______
*Operating EBITDA and operating profit/(loss) before tax exclude one off costs
of aborted sale transactions and exceptional gains and losses.
31 December 31 December
2007 2006
Balance sheet composition
_________________________
Property, plant and equipment �'000 528,923 336,958
Debt �'000 (239,512) (199,803)
Equity attributable to shareholders of MWB Group
in Malmaison and Hotel du Vin �'000 222,675 106,380
Equity attributable to shareholders of MWB Group
in Malmaison and Hotel du Vin, in pence per MWB
Group share Pence 276p 132p
_______ _______
MWB BUSINESS EXCHANGE PLC OPERATING REVIEW
This has been another year of strong earnings growth as MWB Business Exchange
continues to consolidate its position as one of the country's leading providers
of flexible office space while increasingly focusing on both client service and
profitability.
I am delighted to report a 22% growth in revenue for the 12 months to 31
December 2007 as income rose to �100.0m from �82.3m in the comparable period a
year ago. This has resulted in a 83% increase in EBITDA from �9.3m to �17.0m
for the year to December 2007, while pre-tax profits rose by almost 60% to
�12.7m from �8.0m. The Board is proposing a final dividend of 1.93p per
ordinary share, 8% higher that last year's dividend of 1.79p, which if approved,
will be payable on 30 May 2008 to shareholders on the register on 2 May 2008.
The Company's strategy of sustainable growth across its four main areas of
activity - Business Exchange, City Executive Centres (CEC), Meeting Rooms and
Partnerships - is consistent and well established. We are continually
de-risking the business to reduce volatility, although we are confident that the
current market conditions will also present opportunities.
We have a strong and established management team that combines property and
business service expertise. This has enabled us to benefit from growth
opportunities available through leasehold acquisitions, Operating and Management
Agreements (OMAs) and back-to-back deals. At the same time we have developed
our Partnerships division, which provides management solutions to landlords,
corporate occupiers and commercial property agents. We have also continued to
seek ways to add value to our client base through service enhancements and new
products, in addition to the continuous development of our people.
Our focus on sustainable growth runs in parallel with our risk mitigation
strategies. During the year to December 2007 growth has focused on two main
areas: acquisition of occupational leases in London, particularly in the West
End, where the market shows the greatest demand characteristics for the services
we provide, and regional OMAs.
By growing the number of OMAs we can expand the portfolio without exposing the
business to substantial capital expenditure or to long-term lease liabilities,
yet still generating significant management fees and profit share for the
Company. OMAs also provide a gateway for further growth opportunities in the
form of back-to-back leases, turnkey solutions, fit-out services and facilities
management, which in turn generate further returns.
We continue to review the performance of our portfolio on a regular basis with a
view to divesting any poor performing centres. Over the year to December 2007
we closed eight locations to improve our overall business model and enhance
shareholder returns.
At the year-end, Business Exchange comprised a total of approximately 15,600
workstations in 57 centres, of which 44 operated under the four/five star
Business Exchange brand including four OMAs, together with 13 City Executive
Centres, our three-star brand, which are all management contracts. As a result
we now have almost 1.5m sq ft of flexible office accommodation, incorporating
our highly successful 250 strong Meeting and Conference Room offer.
One of the business's strengths is its extremely broad client spread. We are
not reliant on a few specialised sectors and, at the same time, only a very
small number of clients occupy more than 15% of the workstations in any one
centre. This prevents the business from being materially exposed to a departure
from a large occupier at the end of a licence agreement and allows us to plan
move-outs in a controlled and efficient manner.
In instances where a client does occupy more than 15% of a centre, we ensure a
phased exit clause is incorporated into their contract enabling us to develop a
pipeline of prospective clients who can move in once the first phase of
departure occurs; further ensuring our exposure to large move-outs is limited.
Our sales and marketing continues to focus on attracting smaller and medium size
businesses (SMEs) alongside the ongoing development of existing and new
corporate relationships. As a result we have a broad range of clients across
widely diverse sectors including: professional services, media, consultancy,
leisure, real estate, financial services and government. We believe the breadth
of our client base is a major strength in the current economic and financial
climate.
Our proposition offers an ideal solution for companies, in particular SMEs,
looking to establish a footprint in major UK commercial areas. The traditional
leased office model, prevalent elsewhere in the market, is restrictive if
companies are expanding or contracting in an ever changing business environment.
It is also an unnecessary risk for companies to take on, which is why so many
are choosing the more flexible and risk adverse route we provide.
This is reflected in the demand for our unbranded proposition which has remained
strong. Lead flow has increased by 30% and the number of workstation sales
across our network increased by 31% to December 2007 in comparison to the 12
months to December 2006. The rate we accomplish for workstations sales has gone
from strength to strength and we have achieved an 11% increase in 2007 over the
previous comparable period, largely as a result of the ongoing improvement in
our proposition.
Over the year we have continued our strategy of focusing on prime office markets
with particular emphasis on London's West End. Today we have approximately 5,000
workstations in the West End, representing 32% of our portfolio, generating 45%
of our total revenue and 54% of our EBITDA before central costs.
We have significantly expanded our Central London portfolio where demand remains
strong, with new centres reaching maturity in the West End - Baker Street,
Tottenham Court Road and Cavendish Square - and the City - Cannon Street, London
Bridge and London Wall. This was further enhanced by our �12m acquisition of
Stanhope Business Centres which gave us two more excellent properties in Covent
Garden, an area where we have previously been under-represented, that we believe
will deliver significant future earnings.
Our experienced acquisitions and launch team ensures each new centre has a high
level of occupancy prior to opening. An excellent example is our latest centre
close to Liverpool Street Station in the City of London which was virtually
fully occupied on opening following the signing of a long licence agreement with
a major clearing bank.
In the year to December 2007 we also added new locations in Central Manchester,
Newcastle and Basinghall Street in the City of London while Baker Street and
London Bridge became fully operational. On average, all our new centres achieve
85% occupancy in less than six months of opening, representing a strong
performance for the group. As we have stated previously, our focus is on
ensuring we drive income and that each centre delivers increasingly profitable
revenue through optimising revenue per available workstation (REVPAW). This
approach, combined with targeted sales and marketing, has resulted in occupancy
over the year growing to 90% compared with 77% at the previous year-end. An
excellent achievement considering we have opened and launched five new centres
over this year, as well as the two Stanhope locations.
At the heart of this performance is the substantial progress we have made in
growing income at the basic workstation level. As a result of increases in rate
and services income, REVPAW increased 23% to �8,435 from �6,870 at December 2006
while we achieved a 6% rise in revenue per occupied workstation (REVPOW) to
�9,355 from �8,830 a year ago. Service income also improved, growing by 29%
over the year to December 2007.
Clients contract with us, on average, for an initial eight-month period, with
over 70% renewing. This leads to an average total stay of nearly two years.
Our strong contracted income equates to over 60% of our current 12-month
projections for the year to December 2008. When renewals are factored in, this
figure rises to 80% further underpinning our business model and providing
certainty of our future income stream.
Currently we have around 1,500 contracted clients with an average initial
requirement of eight workstations. We recognise that our client's brand - not
ours - is most important to them, which is why a majority of our centres are
unbranded, and all will be by the end of 2008.
Our client base is predominantly SMEs. Their feedback indicates that they
choose us on the basis of our ongoing investment in contemporary, bright and
non-branded interiors situated in prime business locations, priced reasonably
while still delivering superior service delivery.
Our highly successful meeting and conference room division, offering 250 rooms
across the UK, grew revenue by 36% to �10.5m from �7.7m for the year to December
2006. Demand remains strong for our third party business meeting rooms; the
volume of repeat bookings is growing and our sales and marketing activity
continues to generate further new business.
Our continued drive to provide clients with a truly differentiated proposition
remains critically important to us. As the first person our clients see or talk
to, and the people who support them on a day-to-day basis, our staff are
effectively an extension of our clients' business. We invest considerably in
staff training through our "We're the business" programme, to ensure that
everyone in the business fully understands our service ethos and delivers
exceptional client service.
"Centres of excellence" were established across our business during 2007 in
order to utilise exceptionally high performing centres to educate and develop
other business centre managers and develop best practice throughout the group.
This programme has been a great success and provides learning and development
opportunities both for new recruits and existing employees. Also these centres
are the first to trial our new products and services as we seek to continually
improve the service we offer to our clients.
The Group takes staff recruitment and training very seriously and retaining high
achievers is important to us. We concentrate on creating client-focused teams,
strengthening staff capabilities and rewarding people for performance.
We are extremely proud that research reveals some 75 per cent of our people are
highly committed to the business, an extraordinary statistic when compared to
other service industries. Our employees are enthusiastic and supportive and aim
to create a lively, positive atmosphere in all our centres.
We look ahead to 2008 with confidence. The strategy of sustainability and risk
mitigation is ongoing as we continue to improve profitability across the
portfolio and pursue new growth opportunities in areas that we have prioritised.
The Group will also seek to further differentiate our proposition in the
marketplace and look at new and innovative ways to improve our clients'
experience with MWB Business Exchange. We believe that the right business model
is in place to ensure that we continue to deliver growth in shareholder value.
John Spencer
Chief Executive
MWB Business Exchange Plc
11 March 2008
MWB BUSINESS EXCHANGE PLC - KEY FINANCIAL HIGHLIGHTS
The key performance indicators for this business and the trading and balance
sheet performance in recent periods, are summarised below:-
Eighteen
Year ended Year ended months ended
31 December 31 December 31 December
2007 2006 2006
Operating statistics
____________________
Revenue 100,046 82,306 118,157
Occupancy at period end % 90 77 77
Revenue per available workstation ("REVPAW")
at period end � 8,435 6,870 6,870
Revenue per occupied workstation ("REVPOW") at
period end � 9,355 8,830 8,830
EBITDA �'000 16,982 9,307 12,029
Number of operating centres at year end Number 41 39 39
Number of operating and management agreements
at year end Number 16 16 16
______ ______ ______
Financial performance
_____________________
Profit before tax �'000 12,746 8,043 10,215
______ ______ ______
31 December 31 December
2007 2006
Balance sheet composition
_________________________
Property, plant and equipment �'000 42,197 30,691
Net cash/( debt) �'000 (5,031) 1,428
Adjusted equity attributable to shareholders
of MWB Group in MWB Business Exchange Plc �'000 39,548 68,212
Adjusted equity attributable to shareholders
of MWB Group in MWB Business Exchange Plc, in
pence per MWB Group share Pence 49p 85p
______ ______
LIBERTY PLC OPERATING REVIEW
Retailing this year has been a story of two halves. The first six months of the
year under review continued the sales growth we had begun to witness towards the
end of 2006. Then in the second half we felt the impact of last Autumn's
turmoil in the financial markets. Liberty has weathered this uncertain period
well and its performance has been commendable, particularly as it has undertaken
a major management re-structuring programme over the same period.
Revenue over the 12 months to 31 December 2007 not only held up well but also
made further advances over the excellent sales platform established in the
previous year. Across the Liberty group total sales amounted to �46.7m, an
increase of 5% over 2006, with a particularly excellent performance from the
fabrics division, recording an 11% rise to �13.3m.
At the same time, we continue to make great strides in establishing our Liberty
of London luxury products label, and its progression to becoming a global brand.
Sales within the flagship store of the Liberty of London product range
continued to rise but, importantly, the brand is gaining recognition both within
Europe and North America. Liberty of London retail revenue increased
significantly during the year to �3.2m while its wholesale business is beginning
to gain ground through showcasing the range in both Milan and Paris.
However, the Liberty of London business plan continues to require substantial
investment and over the year we invested almost �3.5m in the brand. This
investment included the establishment of a stand-alone studio and showroom in
premises close to the flagship store; additional staff, brand distribution,
European product launches, and increased marketing spend.
Although this investment helps grow and enhance our increasingly valuable brand,
these costs are expensed as they occur and inevitably adversely impact the
profit and loss account over the short term. We are confident that this brand
investment will show commercial returns in the years ahead, though we do not
expect this to be translated into positive profit returns by the brand during
the next few years while we continue to increase our brand investment and
expenditure.
During the course of the current year the Liberty of London brand will continue
to establish its own identity both within the UK and internationally through the
launch of its own dedicated store in London's Sloane Street. This stand-alone
store is planned to open this Summer and is an opportunity for Liberty of London
to showcase its entire range of designs and products in an entirely dedicated
environment.
Within the flagship store the great success story of the year has been the
growth of menswear sales which have advanced by approximately 18% over the same
period last year. This rise reflects a number of initiatives that have
delivered increased footfall through the basement. Not only has the menswear
range been more exciting and attractive but also the addition of a champagne bar
and a men's grooming centre to the basement offer has been very well received by
customers.
Other star performers over the year included Gifts (up 14% over the year to
December 2006), and Beauty (up 4%) although both Ladieswear and Home generated
overall lower sales during 2007 compared to the year before. There is little
doubt that our Home range was affected by the general downturn in the second
half of the year. Our Ladieswear offer during 2007 enjoyed less success than in
the past and we have already implemented major changes to correct this for the
current year.
We have now consolidated our position in Japan and have bought out our joint
venture partners so that we now own the entire business. Not only does this
give us, naturally, far greater control of the business in Japan but it also
gives us a tremendous platform from which we can expand our product sales,
including Liberty of London, throughout the Far East. With the necessary
infrastructure in place we are very excited about the potential for our business
in this part of the world.
While the Autumn was slower in some departments, such as Ladieswear and Home,
for the reasons I outlined above, the flagship store experienced a good run up
to Christmas with sales across the business running at 5% higher than the same
four week period in 2006. This was particularly heartening for the store as it
tended to buck the general retail trend and showed a healthy rise over the
previous year's record levels.
We are also building on the increasing success of our fabrics division with a
strengthened sales team enabling us to provide a bespoke service to global
customers both in terms of design and fabric. We have appointed two experienced
sales executives to spearhead our planned growth in Fabrics and we have also
appointed new sales agents. We are also delighted to be working with Central St
Martins' students on fabric design projects.
As shareholders will have noted, expenditure on the Liberty of London brand rose
from just under �2m in the year to December 2006 to almost �3.5m for 2007. The
impact of this investment in our future and one-off reorganisation costs this
year of �2.7m, is that EBITDA for the year was a loss of �3.5m compared to last
year's loss of approximately �0.9m. After interest and depreciation totalling
�3.0m, this resulted in a loss of �6.5m compared to the pre-tax loss of �2.6m
for the previous year. We are hopeful that costs incurred during 2007 will
improve performance during this current year to December 2008.
The business is underpinned by a strong balance sheet. This comprises net
assets of �42.0m, of which �33m relates to the valuable Liberty flagship store.
Debt at December 2007 was �8.7m, up from last year's �1.2m, but still represents
property gearing of only 26%.
The major reorganisation of the business led to the departure of Iain Renwick
and the appointment of Geoffroy de La Bourdonnaye as our new Chief Executive in
July, joining from Christian Lacroix. He is now supported by two further senior
management appointments: Sara Edwards as Human Resources and Change Director,
and Guy Hipwell as Director of Internet, Supply Chain and Retail Merchandising.
In January 2008, we also appointed Jonathan Samols as IT Director and Fran Page
joined us from Harvey Nichols as Head of Marketing for Liberty. These senior
executives complement our existing team and give the business a stronger base
for future growth.
We now have a dedicated and well regarded team at Liberty and we expect to see
its impact during the course of 2008. During the first half of 2008 we are
re-launching our lingerie offer with a number of international and exclusive
brands such as Elle McPherson and Kiki de Montparnasse.
Elsewhere we have launched our comprehensive Bridal department with exclusive
designs from Christian Lacroix and Karl Lagerfeld as well as an on-line wedding
and gift list due to commence later in the year.
Importantly, in June 2008 we are launching the Liberty transactional website
enabling our world-wide customer base to choose from around 2,000 lines. These
will include Liberty of London branded goods, as well as a range of exclusive
brands and gifts. We anticipate that over the medium term we will be able to
offer more than 5,000 lines through this Internet sales platform and thereby
greatly enhance Liberty's sales capability. This is an important new
enhancement to our business model and we believe it will play a key role in
helping establish Liberty as a global brand.
At the same time we are exploring a number of initiatives aimed at raising both
Liberty's profile and widening its customer base. We have already concluded an
agreement with the Victoria and Albert Museum whereby Liberty has become its
exclusive retail partner. The first example of this partnership is the
important China Design exhibition now being launched at the V&A in March 2008
which will run through to mid-July. We have curated a selection of many high
profile fashion and design artists, including Michael Wolf, who will be
exhibiting exclusively during the exhibition.
In addition to all the commercial initiatives aimed at enhancing our product
offering, service standards and look, feel and marketing of the Store, given the
challenging economic conditions, we are streamlining our operations, which will
enable us to become more customer and category focused.
Liberty is now well placed to take advantage of its long established reputation
of offering cutting edge design based on some of the world's most recognisable
fabric prints. With the forthcoming launch of our Liberty of London stand-alone
shop, we believe the business is poised to move up to its next level of
development. While we appreciate that performance will be impacted to varying
degrees by the general economic climate. The Board is confident that Liberty
has the structures, products and people to produce an improving platform for
growth in the current year.
Geoffroy de La Bourdonnaye
Chief Executive
Liberty Plc
11 March 2008
LIBERTY PLC - KEY FINANCIAL HIGHLIGHTS
Liberty Plc is in the process of transforming itself into a dynamic retail
destination, underpinned by a strong and expanding retail brand. The historical
trading and balance sheet performance of Liberty Plc is summarised below:-
Eighteen months
Year ended Year ended ended
31 December 31 December 31 December
2007 2006 2006
Financial performance
_____________________
Total revenue �'000 46,689 44,575 67,250
Operating EBITDA before brand
expenditure and reorganisation costs �'000 2,671 1,091 1,376
Operating loss before brand expenditure
and reorganisation costs �'000 200 (451) (912)
Brand expenditure �'000 (3,484) (1,971) (2,843)
Reorganisation costs �'000 (2,702) - -
Loss before tax �'000 (6,493) (2,647) (2,293)
Total recognised income and expense �'000 (8,342) 8,462 9,854
______ ______ ______
31 December 31 December
2007 2006
Balance sheet composition
_________________________
Intangible asset - brand �'000 18,200 18,200
Property, plant and equipment �'000 34,400 36,587
Net debt �'000 (8,704) (1,191)
Adjusted equity attributable to shareholders
of MWB Group in Liberty Plc �'000 46,862 44,887
Adjusted equity attributable to shareholders
of MWB Group in Liberty Plc, in pence per MWB
Group share Pence 58p 56p
___ ___
FINANCIAL REVIEW
for the year ended 31 December 2007
________________________________________________________________________________________________________________________
INTRODUCTION
____________
The Chairman's Statement and Operating Reviews provide information on the
Group's principal operations and the Board's expectations for the future. This
Financial Review covers in greater depth the more significant features of the
financial statements for the year ended 31 December 2007, which include an
independent valuation of the Group's properties at that date.
OBJECTIVES
__________
The strategy of the Company, led by the activities of the Board, is to realise
the Group's assets in cash or cash equivalents over the remainder of the period
of its Business Plan. This emanates from the proposals set out in the May 2002
Circular which were approved by shareholders at an extraordinary general meeting
held in May 2002. This provides a clear focus for all activities of the Group.
At an extraordinary general meeting held in May 2002, Shareholders approved
implementation of the Cash Distribution Programme. At the time, the Company's
share price was 92p per share and the Board set itself the target of returning
200p per share in cash or cash equivalents to Shareholders, initially by
December 2005. In March 2004, when the Scheme was amended and based on the
issued share capital at that time, this represented a return to Shareholders of
�220m. The realisation process was extended a further three years to December
2008 in order to enable Shareholders to benefit from the significant increase in
value being created in the Company's operating businesses.
Throughout this time, the Board has remained highly focused in delivering the
Cash Distribution Programme in the manner originally envisaged. This has
involved property sales totalling more than �600 million, all at prices well in
excess of recent valuations and original cost. As a result, the Group has paid
down the majority of its debt from the time of implementation of the programme,
the Group's three core operating businesses have been significantly enhanced, we
have created a strong and vibrant Group going forward and the Company's share
price has increased from 99p immediately prior to the issue of the May 2002
Circular, to 172p by the date of this report.
EQUITY ATTRIBUTABLE TO SHAREHOLDERS OF MWB GROUP PLC
____________________________________________________
During the year ended 31 December 2007, the Group produced an increase in equity
attributable to shareholders by growth achieved across the Group. As a result,
there was a net increase in equity attributable to shareholders of MWB Group Plc
during the year by �105.1m from �99.3m to �204.4m and by 131p from 123p to 254p
per share.
The movement in equity attributable to shareholders of MWB during the period is
summarised in the following table:-
Year ended
31 December 2007
Pence
�'000 per share
Equity attributable to shareholders of MWB Group Plc at
1 January 2007 99,322 123p
Movements during the year:
Revaluation of property, plant and equipment, net of tax 121,009 150p
Retained loss (15,635) (19p)
Effective portion on changes in fair value of derivative financial hedges (500) -
Defined benefit pension scheme actuarial gains, net of tax 527 -
Other movements including transfers and payments to minority interests (346) -
______ ______
Equity attributable to shareholders of MWB Group Plc at
31 December 2007 204,377 254p
______ ______
ADJUSTED EQUITY ATTRIBUTABLE TO SHAREHOLDERS OF MWB GROUP PLC
_____________________________________________________________
Under Adopted IFRS, the Company's interests in its two listed subsidiaries, MWB
Business Exchange Plc and Liberty Plc, continue to be consolidated in the Group
financial statements inclusive of their freehold and short leasehold properties
at current valuation or cost. However, these property valuations reflect only
the values of the properties themselves and the financial statements do not
reflect the current market value of the Group's shareholdings in these two
listed subsidiaries.
Both subsidiaries are quoted on the AIM of the London Stock Exchange and,
therefore, a market value for the Group's shareholding in each of the two
companies is readily available.
In order that shareholders are aware of the underlying value of the Group, the
increase in equity attributable to shareholders of MWB Group Plc as a result of
assessing these two investments by reference to their market value and taking
account of incentives payable on realisation at 31 December 2007 and at the
previous year end, is set out below.
31 December 2007 31 December 2006
Pence Pence
per per
�'000 share �'000 share
Equity attributable to shareholders of MWB Group Plc per
financial statements 204,377 254p 99,322 123p
Unrealised surplus of market value of MWB Group's shareholding
in MWB Business Exchange Plc(1) 24,076 30p 60,378 75p
Unrealised surplus of market value of MWB Group's shareholding
in Liberty Plc(2) 18,603 23p 11,431 14p
_______ ____ _______ _____
247,056 307p 171,131 212p
Less Central Incentive Scheme and Bonus Plan amounts that
would become payable on realisation at this value (35,603) (44p) (22,049) (27p)
_______ ____ _______ _____
Total adjusted equity attributable to
shareholders of MWB Group Plc 211,453 263p 149,082 185p
_______ ____ _______ _____
Notes
(1) The unrealised surplus of market value of MWB Group's 67.9%
shareholding in MWB Business Exchange Plc is based on the share price of MWB
Business Exchange Plc at 31 December 2007 of 110p (2006: 179p) per share,
and is after deducting deferred consideration of �9.5m that would become
payable on realisation of the Group's investment in MWB Business Exchange
and divisional bonuses payable on realisation at this value.
(2) The unrealised surplus of market value of MWB Group's 68.3% shareholding in
Liberty Plc is based on the share price of Liberty Plc at 31 December 2007
of 310p (2006: 295p) per share, after deducting divisional bonuses
that would become payable on realisation at this value.
The adjusted equity attributable to shareholders of MWB Group Plc is analysed as
follows:-
31 December 2007 31 December 2006
Pence Pence
per per
�'000 share �'000 share
Malmaison and Hotel du Vin 222,675 276p 106,380 132p
MWB Business Exchange Plc 39,548 49p 68,212 85p
Liberty Plc 46,862 58p 44,887 56p
Group debt and incentives payable, less cash and
other assets (97,632) (120p) (70,397) (88p)
_______ ______ ______ _____
Total adjusted equity attributable to shareholders of MWB
Group Plc 211,453 263p 149,082 185p
_______ ______ ______ _____
In addition to the assessment above, shareholders should be aware that the
adjusted equity attributable to shareholders of MWB Group Plc of 263p (2006:
185p) per share above does not reflect the market value of the Malmaison and
Hotel du Vin business, as this is not a listed subsidiary for which a market
value can be readily confirmed. The Board is confident that the value of the
Group's 82.5% interest in the Malmaison and Hotel du Vin business is
significantly higher than the �223m or 276p per share for this business within
adjusted equity attributable to shareholders of MWB Group Plc, thus
demonstrating a further enhancement in underlying equity value of the Group
above the adjusted figure of 263p per share in the table above.
PURCHASE OF ORDINARY SHARES BY THE COMPANY AND OTHER DISTRIBUTIONS
__________________________________________________________________
The Board is continuing to implement the Cash Distribution Programme, which
involves distributing surplus funds to Shareholders by means of buy-backs of
Ordinary Shares in the market, tender offers to Shareholders, cash
distributions, demergers, distributions of assets and similar value distribution
programmes.
Since May 2002, the Company has purchased approximately 60.5 million Ordinary
Shares under this programme, representing approximately 43% of the issued share
capital at the date of its implementation, returning approximately �70.4 million
in cash to Shareholders.
In Addition, on 7 February 2008, the Board announced details of proposals
relating to a capital reorganisation and the introduction of a new holding
company for the Group. These Proposals will facilitate the Group's strategy to
distribute in cash or cash equivalents, substantially all of its material assets
and to facilitate the returning of this under the Cash Distribution Programme.
These proposals were approved at an Extraordinary General Meeting held on 4
March 2008.
Specifically, the Proposals:
* created a group structure which increases the flexibility
for the Board on future potential disposals of the operating businesses;
* increase the available options as to when cash or cash equivalents can be
returned to Shareholders; and
* increase the distributable reserves of the Group which can be distributed to
Shareholders.
NET ASSET VALUE
_______________
The net assets of the Group are financed by Equity attributable to shareholders
of MWB Group Plc and minority interests. The sources of finance of the Group at
31 December 2007 in the consolidated balance sheet and at previous period end
were as follows:-
31 December 31 December
2007 2006
�'000 �'000
Total equity attributable to shareholders of MWB
Group Plc 204,377 99,322
Minority interests 91,783 53,963
_______ _______
Net assets at period end 296,160 153,285
_______ _______
The analysis of net assets in the consolidated balance sheet across the Group's
operations as revealed by the Consolidated Balance Sheet at 31 December 2007,
and at the previous period end, is as follows:-
Total equity
Net assets attributable to
before Less shareholders
debt and (Debt)/ Net minority of MWB
cash cash assets interests Group Plc
At 31 December 2007 �'000 �'000 �'000 �'000 �'000
___________________
Malmaison and Hotel du Vin 531,117 (239,512) 291,605 (68,930) 222,675
Liberty Plc 50,710 (8,704) 42,006 (13,747) 28,259
MWB Business Exchange Plc 27,857 (5,031) 22,826 (7,354) 15,472
Group debt, less cash and other assets (5,512) (54,765) (60,277) (1,752) (62,029)
_______ ________ _______ _______ _______
604,172 (308,012) 296,160 (91,783) 204,377
_______ ________ _______ _______ _______
Equity attributable to shareholders of
MWB Group Plc in pence per share 254p
____
Total equity
Net assets attributable to
before Less shareholders
debt and (Debt)/ Net minority of MWB
cash cash assets interests Group Plc
At 31 December 2006 �'000 �'000 �'000 �'000 �'000
___________________
Malmaison and Hotel du Vin 336,666 (199,803) 136,863 (30,483) 106,380
Hotel investments (660) 374 (286) (1,909) (2,195)
Liberty Plc 52,423 (1,191) 51,232 (17,776) 33,456
MWB Business Exchange Plc 10,249 1,428 11,677 (3,843) 7,834
West India Quay apartments 2,721 3,647 6,368 - 6,368
Group debt, less cash and other assets (3,007) (49,562) (52,569) 48 (52,521)
_______ ________ _______ _______ _______
398,392 (245,107) 153,285 (53,963) 99,322
_______ ________ _______ _______ _______
Equity attributable to shareholders of
MWB Group Plc in pence per share 123p
____
REVIEW OF PROPERTY, PLANT AND EQUIPMENT
_______________________________________
Valuation surplus on property portfolio at 31 December 2007
___________________________________________________________
A valuation of the Group's freehold and long leasehold property interests was
undertaken at 30 June 2007 and at 31 December 2007. The valuation was performed
by DTZ Debenham Tie Leung and was performed on the basis of Market Value. The
net surplus over previous book value before minority interests for the year
ended 31 December 2007 totalled �146.3m, which has been included in these
financial statements.
In accordance with normal valuation practice, the valuations of the Group's
hotel interests include value ascribed for plant, machinery, fixtures and
fittings forming part of the service installations of the building. They
therefore represent a valuation of the total interest of the Group in those
properties. The valuations exclude the value of any goodwill that may arise
from the present occupation of the properties and this is not recorded
separately in the financial statements of the Group.
In accordance with normal valuation practice, the valuation of the Group's
retail interests includes value ascribed to plant, machinery and fittings
forming part of the services and installation of the building, but excludes
moveable shop fittings. All property interests owned by MWB Business Exchange
Plc are short leasehold interests; these interests are not revalued under
Adopted IFRSs at each period end and are recorded at the lower of cost and net
realisable value.
Surpluses or deficits arising on valuation of the Group's operational properties
are transferred to revaluation reserve, while impairment of operational
properties to below their historical cost is charged directly to the Income
Statement.
Trading properties and operational properties in the course of construction are
recorded at the lower of cost and net realisable value and are therefore not
revalued upwards in the Group financial statements.
The property market was relatively strong during the first six months of the
year to 31 December 2007. The valuation surplus credited to the revaluation
reserve during that period totalled �135.9m and arose as follows:-
Less Credited
previous Less to
Gross book Gross minority revaluation
valuation value surplus interests reserve
�'000 �'000 �'000 �'000 �'000
Malmaison 314,542 (216,634) 97,908 (17,134) 80,774
Hotel du Vin 187,080 (121,492) 65,588 (11,478) 54,110
Liberty Plc 37,000 (35,510) 1,490 (472) 1,018
________ ________ _______ ________ _______
538,622 (373,636) 164,986 (29,084) 135,902
________ ________ _______ ________ _______
During the second six months of the year to 31 December 2007, property prices in
the market have fallen as a result of the "credit crunch" and other related
matters in the financial markets. Nevertheless, it is gratifying to note the
robustness of our hotel portfolio which has been able to withstand most of the
adverse effects of the recent market turbulence. As a result, the valuation
deficit debited to the revaluation reserve during this second six months of the
year to 31 December 2007 amounted to �14.9m and arose as follows:-
Less
previous Less Debited to
Gross book Gross minority revaluation
valuation value deficit interests reserve
�'000 �'000 �'000 �'000 �'000
Malmaison 315,500 (329,225) (13,725) 2,402 (11,323)
Hotel du Vin 205,320 (206,498) (1,178) 206 (972)
Liberty Plc 33,000 (36,803) (3,803) 1,205 (2,598)
_______ ________ _______ _____ _______
553,820 (572,526) (18,706) 3,813 (14,893)
_______ ________ _______ _____ _______
The valuation surplus credited to the revaluation reserve for the year ended 31
December 2007 is the net of the �135.9m surplus in the first half and the �14.9m
deficit in the second half. This amounted to �121.0m and arose as follows:-
Less Credited/
previous Gross Less (debited) to
Gross book surplus/ minority revaluation
valuation value (deficit) interests reserve
�'000 �'000 �'000 �'000 �'000
Malmaison 315,500 (231,317) 84,183 (14,732) 69,451
Hotel du Vin 205,320 (140,910) 64,410 (11,272) 53,138
Liberty Plc 33,000 (35,313) (2,313) 733 (1,580)
_______ ________ _______ _____ _______
553,820 (407,540) 146,280 (25,271) 121,009
_______ ________ _______ _____ _______
Portfolio analysis by division
______________________________
At 31 December 2007, the Group held the majority of its direct property
interests as non-current assets. These are disclosed in the consolidated
balance sheet at that date as follows:-
31 December 31 December
2007 2006
�'000 �'000
Non current assets
__________________
Operational properties 522,663 336,150
Operational properties in the course of construction 26,047 27,144
Plant and equipment 56,923 43,558
_______ _______
Total property interests at period end 605,633 406,852
_______ _______
The above interests are analysed as follows:-
Percentage at
31 December 31 December 31 December
2007 2007 2006
�'000 % �'000
Hotels
______
Malmaison 309,044 51 212,064
Hotel du Vin 219,879 36 124,894
_______ __ _______
528,923 87 336,958
MWB Business Exchange Plc 42,197 7 30,691
_________________________
Liberty Plc 34,400 6 36,587
___________
Other 113 - 2,616
_____ _______ __ _______
Total property interests at period end 605,633 100 406,852
_______ __ _______
Intangible assets
_________________
An external professional valuation of the Liberty brand was undertaken by
Equilibrium Consulting at 31 December 2007, based on the business and operations
of the Group at that date. This confirmed the value of the Liberty brand at
more than the book value of �18.2m at which it has been included in the
financial statements of the Group throughout the year. Accordingly, the
Directors have concluded that no impairment provision is required and the brand
has been retained at a value of �18.2m in these financial statements.
In October 2007, the Group acquired the entire issued share capital of Stanhope
Business Centres Limited. Goodwill of �7.6 million arose on this acquisition.
The Directors have assessed the carrying value of this goodwill and the profit
generated from the acquisition, and have concluded that no impairment of
goodwill is necessary for the year ended 31 December 2007. In December 2007,
the Group acquired the remaining 49% of the issued share capital of Liberty
Japan Company Ltd. Goodwill of �0.2m arose on this acquisition. The Directors
have assessed the carrying value of this goodwill and have concluded that no
impairment existed at 31 December 2007.
At 31 December 2007, unamortised goodwill carried forward in the consolidated
balance sheet amounted to �7.8 million.
REVIEW OF LOAN FACILITIES
_________________________
Net debt
________
The Group's loans, borrowings and cash are included in the consolidated balance
sheet at 31 December 2007 as follows:-
31 December 31 December
Composition at period end 2007 2006
�'000 �'000
Loans and borrowings 330,194 260,832
Long leasehold obligations 703 710
Fair value of derivative financial instruments - (1,462)
_______ _______
Total loans and borrowings 330,897 260,080
Less net cash and overdrafts (22,885) (14,973)
_______ _______
Total net debt at period end 308,012 245,107
_______ _______
Analysis of debt/(cash) by operating business
_____________________________________________
Malmaison and Hotel du Vin 239,512 199,803
MWB Business Exchange Plc 5,031 (1,428)
Liberty Plc 8,704 1,191
Central debt 54,765 45,541
_______ _______
308,012 245,107
_______ _______
Net cash and overdrafts
_______________________
The Group's net cash and overdrafts are held in the following operating
divisions in the Group:-
31 December 31 December
2007 2006
�'000 �'000
Malmaison and Hotel du Vin 6,910 8,679
MWB Business Exchange Plc 4,379 1,428
Liberty Plc 4,296 (1,191)
Central 7,300 6,057
_______ _______
22,885 14,973
_______ _______
Cash balances are held within the above divisions for utilisation within their
businesses. Generally only cash within the Central division is available for
use in the Company's own activities.
Movement in net debt during the year
____________________________________
The movement in total net debt during the year ended 31 December 2007 arose as
follows:-
Year ended Year ended
31 December 31 December
2007 2006
�'000 �'000
Total net debt at start of the period 245,107 302,067
Debt drawn on expansion of Malmaison and Hotel du Vin 34,486 14,903
Net proceeds received from sales of properties, including sale of
Liverpool residential apartments and Old Bailey, (2006:
including West India Quay, Argyle Street and Park Lane) (15,189) (158,058)
Net debt repaid on West India Quay development - (46,896)
Buy back of ordinary shares - 56,382
Net cash outflow from other Group operations during the period 43,608 76,709
_______ _______
Total net debt at period end 308,012 245,107
_______ _______
Average cost of borrowings at period end, inclusive of margin 7.3% 6.5%
_______ _______
Net debt relating to Equity attributable to shareholders of MWB
_______________________________________________________________
The majority of the Group's net debt has been drawn by subsidiaries that are
majority owned, but not wholly owned, by the Group. These comprise the Group's
majority interests in its three operating businesses of MWB Malmaison Holdings
Limited, MWB Business Exchange Plc and Liberty Plc.
The net debt relating to equity attributable to shareholders of MWB Group Plc at
31 December 2007 amounted to �262m (2006: �212m), calculated as follows:-
31 December 31 December
2007 2006
�'000 �'000
Total net debt as above 308,012 245,107
Less net debt attributable to minority interests (46,288) (33,538)
_______ _______
Total net debt attributable to equity
attributable to shareholders of MWB Group 261,724 211,569
_______ _______
Gearing
_______
At 31 December 2007, gearing was 104%, calculated as follows:-
31 December 31 December
2007 2006
�'000 �'000
Total net debt 308,012 245,107
Net assets 296,160 153,285
Gearing - total net debt divided by net assets 104% 160%
_______ _______
REVIEW OF EARNINGS
__________________
Results
_______
The total recognised income and expense for the year ended 31 December 2007,
analysed between the share attributable to shareholders of MWB Group Plc and the
share attributable to minority interests, is as follows:-
Equity
Shareholders
Total for Minority of MWB
the year interest Group Plc
Year ended 31 December 2007 �'000 �'000 �'000
Income statement
Loss for the period (14,314) 1,321 (15,635)
Credited to equity through reserves
Foreign exchange translation differences for foreign operations 64 32 32
Revaluation of property, plant and equipment, net of tax 146,280 25,271 121,009
Effective portion of changes in fair value of cash flow hedges (613) (113) (500)
Defined benefit pension scheme actuarial gains,
net of tax 765 238 527
______ ______ _______
Total recognised income and expense for the year 132,182 26,749 105,433
______ ______ _______
Total recognised income and expense attributable to Shareholders
in pence per share 130.9p
_______
Equity
Shareholders
Total for Minority of MWB
the year interest Group Plc
Year ended 31 December 2006 �'000 �'000 �'000
Income statement
Profit for the period 9,013 8,031 982
Credited to equity through reserves
Foreign exchange translation differences for foreign operations (566) (228) (338)
Revaluation of property, plant and equipment, net of tax 19,949 4,511 15,438
Effective portion of changes in fair value of cash flow hedges 3,138 618 2,520
Defined benefit pension scheme actuarial gains, net of tax 4,935 1,570 3,365
Deferred tax released on sale of properties 1,214 97 1,117
______ ______ _______
Total recognised income and expense for the year 37,683 14,599 23,084
______ ______ _______
Total recognised income and expense attributable to Shareholders
in pence per share 24.0p
_______
Equity
Shareholders
Total for Minority of MWB
the period interests Group Plc
Eighteen months ended 31 December 2006 �'000 �'000 �'000
Income statement
Profit for the period 11,506 9,377 2,129
Credited to equity through reserves
Foreign exchange translation differences for foreign operations (234) 90 (324)
Revaluation of property, plant and equipment, net of tax 37,627 8,618 29,009
Effective portion of changes in fair value of cash flow hedges 5,753 1,008 4,745
Defined benefit pension scheme actuarial gains, net of tax 4,977 1,570 3,407
Deferred tax released on sale of properties 324 97 227
______ ______ _______
Total recognised income and expense for the period 59,953 20,760 39,193
______ ______ _______
Total recognised income and expense attributable to Shareholders
in pence per share 38.9p
_______
Summary of earnings
___________________
The Board's prime measure of return used to monitor the results of the operating
divisions is the level of earnings before interest, taxation, depreciation and
amortisation, or EBITDA. The results before minority interests for the year
ended 31 December 2007, together with comparative information for previous
periods is summarised below:-
Total
Profit/(loss) Recognised
before income and
Revenue EBITDA EBIT taxation expense
Year ended 31 December 2007 �'000 �'000 �'000 �'000 �'000
Malmaison and Hotel du Vin
Operating income 95,272 23,904 17,575 (4,551) 143,428
Apartment sales 10,112 2,012 2,012 2,012 2,012
Abortive transaction costs - (7,129) (7,129) (7,129) (7,129)
Pre-opening costs - (2,710) (2,710) (2,710) (2,710)
_______ ______ ______ _______ _______
105,384 16,077 9,748 (12,378) 135,601
_______ ______ ______ _______ _______
Liberty Plc
Operating income 46,689 2,671 200 (307) (2,156)
Reorganisation costs - (2,702) (2,702) (2,702) (2,702)
Expenditure on brand - (3,484) (3,484) (3,484) (3,484)
_______ ______ ______ _______ _______
46,689 (3,515) (5,986) (6,493) (8,342)
_______ ______ ______ _______ _______
MWB Business Exchange Plc
Operating income 100,046 16,982 12,993 12,746 12,640
_______ ______ ______ _______ _______
Others - 6,994 6,994 7,079 1,823
Group debt less cash and other assets - - - (4,704) (4,704)
_______ ______ ______ _______ _______
- 6,994 6,994 2,375 (2,881)
Head office administration - (9,779) (10,013) (10,013) (4,836)
_______ ______ ______ _______ _______
- (2,785) (3,019) (7,638) (7,717)
_______ ______ ______ _______ _______
252,119 26,759 13,736 (13,763) 132,182
_______ ______ ______ _______ _______
Notes
______
1. EBITDA = Earnings before interest, taxation, depreciation and amortisation.
2. EBIT = Earnings before interest and taxation.
Total
Profit/(loss) recognised
before income and
Revenue EBITDA EBIT taxation expense
Year ended 31 December 2006 �'000 �'000 �'000 �'000 �'000
Malmaison and Hotel du Vin
Operating income 79,101 23,389 17,598 5,101 22,236
_______ ______ ______ _______ _______
Hotel investments
Operating income 16,563 5,825 3,653 (11) (1,495)
Sale of Park Lane hotel - 3,729 3,729 3,729 5,318
Sale of West India Quay hotel - 5,825 5,825 5,825 10,177
_______ ______ ______ _______ _______
16,563 15,379 13,207 9,543 14,000
_______ ______ ______ _______ _______
Liberty Plc
Operating income 44,575 1,091 (451) (676) 10,433
Expenditure on brand - (1,971) (1,971) (1,971) (1,971)
_______ ______ ______ _______ _______
44,575 (880) (2,422) (2,647) 8,462
_______ ______ ______ _______ _______
MWB Business Exchange Plc 82,306 9,307 7,827 8,043 8,048
_______ ______ ______ _______ _______
West India Quay - apartment sales 9,364 3,320 3,320 2,970 2,909
Others 3,305 (1,680) (1,836) (1,843) 103
Group debt less cash and other assets - - - (3,213) (3,213)
_______ ______ ______ _______ _______
12,669 1,640 1,484 (2,086) (201)
Head office administration - (9,148) (9,288) (9,288) (14,862)
_______ ______ ______ _______ _______
12,669 (7,508) (7,804) (11,374) (15,063)
_______ ______ ______ _______ _______
235,214 39,687 28,406 8,666 37,683
_______ ______ ______ _______ _______
Total
Profit/(loss) recognised
before income and
Eighteen months ended Revenue EBITDA EBIT taxation expense
31 December 2006 �'000 �'000 �'000 �'000 �'000
Malmaison and Hotel du Vin
Operating income 115,058 34,463 26,401 7,480 36,845
_______ ______ ______ _______ _______
Hotel investments
Operating income 39,820 13,060 8,098 (571) (247)
Sale of Argyle Street hotel - 2,770 2,770 2,770 2,770
Sale of Park Lane hotel - 3,729 3,729 3,729 5,318
Sale of West India Quay hotel - 5,825 5,825 5,825 10,177
_______ ______ ______ _______ _______
39,820 25,384 20,422 11,753 18,018
_______ ______ ______ _______ _______
Liberty Plc
Operating income 67,250 1,376 (912) (1,170) 10,977
Sale of minor trademark - 1,720 1,720 1,720 1,720
Expenditure on brand - (2,843) (2,843) (2,843) (2,843)
_______ ______ ______ _______ _______
67,250 253 (2,035) (2,293) 9,854
_______ ______ ______ _______ _______
MWB Business Exchange Plc
Operating results - leased properties 110,274 11,692 10,083 9,878 9,824
Operating results - operating and management
agreements 7,883 337 337 337 337
_______ ______ ______ _______ _______
118,157 12,029 10,420 10,215 10,161
_______ ______ ______ _______ _______
West India Quay - apartment sales 14,457 4,350 4,350 4,000 4,000
Others 4,759 358 163 104 104
Group debt less cash and other assets - - - (6,694) (6,694)
_______ ______ ______ _______ _______
19,216 4,708 4,513 (2,590) (2,590)
Head Office administration - (12,956) (13,169) (13,169) (12,335)
_______ ______ ______ _______ _______
19,216 (8,248) (8,656) (15,759) (14,925)
_______ ______ ______ _______ _______
359,501 63,881 46,552 11,396 59,953
_______ ______ ______ _______ _______
Taxation
_________
The net tax charge for the year ended 31 December 2007 arose as follows:-
Eighteen
Year ended Year ended months ended
31 December 31 December 31 December
2007 2006 2006
�'000 �'000 �'000
Net tax (charge)/credit per Consolidated Income Statement (551) 347 110
32% minority interest in tax charge of
MWB Business Exchange Plc 58 - -
49% minority interest in tax charge of Japanese
subsidiary of Liberty Plc 182 214 328
32% minority interest in tax charge of Liberty Plc
resulting in a credit to MWB Shareholders 60 71 109
____ ___ ___
Net tax credit/(charge) received/(borne) by equity
shareholders of MWB Group Plc (251) 632 547
____ ___ ___
Earnings per share and recognised income and expense per share
______________________________________________________________
The earnings per share and recognised income and expense per share figures have
been calculated as follows:-
Eighteen
Year ended Year ended months ended
31 December 31 December 31 December
2007 2006 2006
Earnings/(loss) per Consolidated Income
Statement attributable to shareholders of
MWB Group Plc �'000 (15,635) 982 2,129
Weighted average number of shares in issue
during year '000 80,522 96,257 100,768
Earnings/(loss) per share based on Consolidated
Income Statement Pence (19.4p) 1.0p 2.1p
____ ___ ___
Recognised income and expense attributable to
shareholders of MWB Group Plc �'000 105,433 23,084 39,193
Weighted average number of shares in issue
during year '000 80,522 96,257 100,768
Recognised income per share based on recognised
income and expense Pence 130.9p 24.0p 38.9p
____ ___ ___
Dividend
________
Shareholders approved implementation of the Cash Distribution Programme and
associated cessation of annual revenue distributions at a meeting of
shareholders held in May 2002. The Board is continuing to implement the Cash
Distribution Programme and to direct disposal proceeds to the repayment of net
debt and to the buy-back of shares by the Company, thus returning cash to
shareholders.
Since May 2002, the Company has purchased approximately 60.5 million Ordinary
Shares under this programme, representing approximately 43% of the issued share
capital at the date of its implementation, returning approximately �70.4 million
in cash to Shareholders.
The Directors envisage distributing further funds to shareholders by means of
buy-backs of ordinary shares, tender offers to shareholders, cash distributions,
demergers, distributions of assets and similar.
Cash flow
_________
The consolidated cash flow statement on page 49 shows the funds generated by the
Group, those raised from external sources, the investments made and the effect
thereof on the Group's cash position.
This can be summarised as follows:-
Eighteen
Year ended Year ended months ended
31 December 2007 31 December 31 December
2006 2006
�'000 �'000 �'000
Net cash inflow from operating activities (1,639) 3,100 22,990
Net cash inflow/(outflow) from investing activities (66,061) 132,341 174,472
Net cash received/(used) in financing activities 75,612 (162,029) (222,026)
______ _______ _______
Net increase/(decrease) in cash and cash equivalents 7,912 (26,588) (24,564)
Opening cash and cash equivalents 14,973 41,561 39,537
______ _______ _______
Closing cash and cash equivalents 22,885 14,973 14,973
______ _______ _______
Conclusion
__________
The year ended 31 December 2007 has been another highly successful period for
the Group. Adjusted equity attributable to shareholders of �211m or 263p per
share, is 42% higher than the adjusted equity attributable to shareholders at 31
December 2006 of 185p per share.
Andrew Blurton
Group Finance Director
11 March 2008
CONSOLIDATED INCOME STATEMENT
for the year ended 31 December 2007
________________________________________________________________________________________________________________________
Pro-forma Eighteen
Year ended unaudited months ended
31 December year ended 31 December
2007 31 December 2006
2006
Notes �'000 �'000 �'000
________________________________________________________________________________________________________________
Revenue 252,119 235,214 359,501
Cost of sales (218,468) (200,270) (303,554)
________________________________________________________________________________________________________________
Gross profit 33,651 34,944 55,947
Administrative expenses (16,924) (15,424) (22,995)
________________________________________________________________________________________________________________
Results from operating activities 16,727 19,520 32,952
Net gain/(loss) on sale of property, plant
and equipment 3 7,586 (668) 2,326
Profit on disposal of subsidiary companies - 9,554 9,554
Abortive transaction costs 4 (8,077) - -
Capital reorganisation costs 5 (2,500) - -
Profit on disposal of trademark - - 1,720
Finance income 7 1,093 2,240 2,665
Finance expenses 7 (28,592) (21,980) (37,821)
________________________________________________________________________________________________________________
Profit/(loss) before taxation (13,763) 8,666 11,396
Taxation (551) 347 110
________________________________________________________________________________________________________________
Profit/(loss) for the period (14,314) 9,013 11,506
================================================================================================================
Attributable to:
Equity shareholders of the Company (15,635) 982 2,129
Minority interests 13 1,321 8,031 9,377
________________________________________________________________________________________________________________
Profit/(loss) for the period (14,314) 9,013 11,506
================================================================================================================
Earnings/(loss) per share (basic and diluted) 8 (19.4p) 1.0p 2.1p
================================================================================================================
All results relate to continuing operations.
CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE
_______________________________________________________
for the year ended 31 December 2007
________________________________________________________________________________________________________________________
Pro-forma unaudited
year ended Eighteen
Year ended 31 December months ended
31 December 2006 31 December
2007 �'000 2006
�'000 �'000
________________________________________________________________________________________________________________
Foreign exchange translation differences for foreign
operations 64 (566) (234)
Revaluation of property, plant and equipment 146,280 19,949 37,627
Effective portion of changes in fair value of cash flow hedges (613) 3,138 5,753
Defined benefit pension scheme actuarial gains, net of tax 765 4,935 4,977
Deferred tax released on sale of properties - 1,214 324
________________________________________________________________________________________________________________
Income and expense recognised directly to equity 146,496 28,670 48,447
Profit/(loss) for the period (14,314) 9,013 11,506
________________________________________________________________________________________________________________
Total recognised income and expense for the period 132,182 37,683 59,953
================================================================================================================
Attributable to:
Equity shareholders of the Company 105,433 23,084 39,193
Minority interests 26,749 14,599 20,760
________________________________________________________________________________________________________________
Total recognised income and expense for the period 132,182 37,683 59,953
================================================================================================================
Total recognised income and expense for the year
attributable to shareholders of MWB Group in pence per share 130.9p 24.0p 38.9p
================================================================================================================
CONSOLIDATED BALANCE SHEET
at 31 December 2007
________________________________________________________________________________________________________________________
31 December 31 December
2007 2006
Notes �'000 �'000
_______________________________________________________________________________________________________________
Non-current assets
Intangible assets and goodwill 9 25,969 18,200
Operational properties 10 522,663 336,150
Operational properties in the course of construction 10 26,047 27,144
Plant and equipment 10 56,923 43,558
Deferred tax asset 16,292 -
Financial instruments 5 1,462
_______________________________________________________________________________________________________________
647,899 426,514
_______________________________________________________________________________________________________________
Current assets
Inventories 9,489 9,126
Trade and other receivables:
Due after more than one year 2,345 1,450
Due within one year 40,652 41,035
Cash and cash equivalents 23,731 16,164
_______________________________________________________________________________________________________________
76,217 67,775
_______________________________________________________________________________________________________________
Total assets 724,116 494,289
_______________________________________________________________________________________________________________
Current liabilities
Bank overdrafts (846) (1,191)
Loans and borrowings 11 (34,579) (23,239)
Trade and other payables 12 (67,630) (64,566)
Tax payable (16,721) (783)
_______________________________________________________________________________________________________________
(119,776) (89,779)
_______________________________________________________________________________________________________________
Non-current liabilities
Loans and borrowings 11 (295,615) (237,593)
Employee benefits 6 (416) (1,548)
Other provisions - (3,400)
Trade and other payables 12 (12,149) (8,684)
===============================================================================================================
(308,180) (251,225)
===============================================================================================================
Total liabilities (427,956) (341,004)
===============================================================================================================
Net assets 296,160 153,285
===============================================================================================================
Equity
Share capital 40,261 40,261
Share premium account 79,563 79,563
Other reserves 229,074 109,806
Retained earnings (144,521) (130,308)
_______________________________________________________________________________________________________________
Total equity attributable to shareholders of the Company 204,377 99,322
Minority interests 13 91,783 53,963
_______________________________________________________________________________________________________________
Total equity 296,160 153,285
===============================================================================================================
Equity attributable to shareholders of the Company in pence per
share 14 254p 123p
===============================================================================================================
CONSOLIDATED CASH FLOW STATEMENT
for the year ended 31 December 2007
________________________________________________________________________________________________________________________
Pro-forma
unaudited Eighteen
Year ended year ended months ended
31 December 31 December 31 December
2007 2006 2006
�'000 �'000 �'000
_______________________________________________________________________________________________________________
Profit/(loss) for the period (14,314) 9,013 11,506
Adjustments for non-cash items
Taxation 551 (347) (110)
Finance expenses 28,592 21,980 37,821
Finance income (1,093) (2,240) (2,665)
Loss/(gain) on sale of property, plant and equipment (7,586) 668 (2,326)
Loss/(gain) on sale of subsidiary companies - (9,554) (9,554)
Gain on sale of trademark - - (1,720)
Depreciation of property, plant and equipment 13,023 11,281 17,329
Amortisation of intangible assets - - -
Currency translation differences 93 (462) (462)
_______________________________________________________________________________________________________________
Cash flows from operations before changes in working capital 19,266 30,339 49,819
Change in trading properties - 3,750 4,099
Change in inventories (363) (552) (845)
Change in trade and other receivables (14,805) (12,992) 8,872
Change in trade and other payables 22,138 11,351 6,518
Change in provisions and employee benefits 5,670 (4,812) (5,315)
_______________________________________________________________________________________________________________
Cash generated from operations 31,906 27,084 63,148
Interest paid (33,276) (23,505) (39,409)
Tax paid (269) (479) (749)
_______________________________________________________________________________________________________________
Net cash from operating activities (1,639) 3,100 22,990
_______________________________________________________________________________________________________________
Cash flows from investing activities
Interest received 3,267 2,229 2,661
Proceeds from sale of property, plant and equipment 12,597 - 52,500
Cash receipts from sale of subsidiary companies, net of cash
disposed - 208,664 208,664
Acquisition of subsidiaries (11,434) - -
Proceeds from sale of trademark - - 1,720
Purchase of property, plant and equipment (70,491) (78,552) (91,073)
_______________________________________________________________________________________________________________
Net cash from investing activities (66,061) 132,341 174,472
_______________________________________________________________________________________________________________
Cash flows from financing activities
Purchase of own shares, inclusive of costs (5) (56,555) (56,555)
Proceeds from issue of share capital - 173 173
Proceeds from draw down of borrowings 71,598 69,706 89,987
Borrowings repaid (2,236) (148,181) (242,380)
Receipt from/(payments to) minority interests 11,776 (25,462) (9,669)
Payment of operating lease liabilities (5,521) (1,710) (3,582)
_______________________________________________________________________________________________________________
Net cash from financing activities 75,612 (162,029) (222,026)
_______________________________________________________________________________________________________________
Net increase/(decrease) in cash and cash equivalents 7,912 (26,588) (24,564)
Opening cash and cash equivalents 14,973 41,561 39,537
_______________________________________________________________________________________________________________
Closing cash and cash equivalents 22,885 14,973 14,973
===============================================================================================================
NOTES
_____
1. ACCOUNTING POLICIES FOR GROUP FINANCIAL STATEMENTS
________________________________________________________________________________________________________________________
Basis of preparation
The financial information set out above does not constitute the Company's
statutory accounts for the year ended 31 December 2007 or the period ended 31
December 2006. Statutory accounts for 2006, which were prepared under
International Financial Reporting Standards, as adopted by the European Union
("IFRSs"), have been delivered to the registrar of companies, and those for 2007
will be delivered in due course. The auditors have reported on those accounts;
their reports were unqualified, did not include references to any matters to
which the auditors drew attention by way of emphasis without qualifying their
reports and did not contain statements under section 237(2) or (3) of the
Companies Act 1985.
2. EARNINGS BEFORE INTEREST, TAXATION, DEPRECIATION AND AMORTISATION ("EBITDA")
________________________________________________________________________________________________________________________
Pro-forma
unaudited Eighteen
Year ended year ended months ended
31 December 31 December 31 December
2007 2006 2006
�'000 �'000 �'000
_______________________________________________________________________________________________________________
The EBITDA of the Group is calculated as follows:-
Profit before finance income, finance expenses and
taxation 13,736 28,406 46,552
Add depreciation of property, plant and equipment for
the period 13,023 11,281 18,050
Less net write back of property write downs
and other non-cash items - - (721)
______ _____ _____
Total EBITDA for the period 26,759 39,687 63,881
______ _____ _____
3. PROFIT/(LOSS) ON DISPOSAL OF PROPERTY, PLANT AND EQUIPMENT
________________________________________________________________________________________________________________________
Pro-forma
unaudited Eighteen
Year ended year ended months ended
31 December 31 December 31 December
2007 2006 2006
�'000 �'000 �'000
_______________________________________________________________________________________________________________
The profit on disposal of property, plant and equipment
arose as follows:-
Profit on disposal of Old Bailey property in London 4,711 - -
Profit/(loss) on disposal of other property, plant and
equipment 2,875 (668) 2,326
Profit/(loss) on disposal of property, plant and
equipment 7,586 (668) 2,326
______ _____ _____
4. ABORTIVE TRANSACTION COSTS
________________________________________________________________________________________________________________________
Pro-forma
unaudited Eighteen
Year ended year ended months ended
31 December 31 December 31 December
2007 2006 2006
�'000 �'000 �'000
_______________________________________________________________________________________________________________
Costs on proposed sale of properties to Vector
Hospitality Plc in June 2007, and proposed sale of
Malmaison and Hotel du Vin in September 2007 8,077 - -
_____ _____ _____
On 4 May 2007, the Board sent a circular to Shareholders setting out details of
a proposed sale to Vector Hospitality Plc of a portfolio of 24 long leasehold
properties comprising the majority of the Malmaison and Hotel du Vin properties
owned by the Group at that date, for a minimum consideration of �495.1m. That
circular also included notice of an extraordinary general meeting of the Company
at which a resolution relating to the proposed sale to Vector Hospitality was
approved by Shareholders. On 7 June 2007, the Group was informed by Vector
Hospitality Plc that the fundraising proposed to be undertaken by it to fund
this proposed acquisition would not take place and that in accordance with the
share purchase agreement with the Group, Vector Hospitality would not be able to
complete the acquisition of these long leasehold interests. The proposed sale
therefore terminated on 30 June 2007 and the costs of �4.6m incurred in relation
thereto have been written off.
On 2 July 2007, the Board appointed Bank of America Securities to conduct the
sale of 21 Malmaison and Hotel du Vin hotels owned by the Group, a further five
hotels under development, the unique Malmaison and Hotel du Vin brands and the
hotel operations of the business. Strong interest was received to acquire these
businesses from trade and private equity investors and detailed due diligence
and sale negotiations were well advanced. However, the major uncertainties
experienced within the debt financing markets which commenced in late Summer
2007 meant that bidders could not finalise unconditional offers at the high
levels previously indicated for these property interests, brands and business.
Accordingly the Board, having been advised by Bank of America Securities,
considered that delaying the sale process until after the adverse debt financing
environment that then existed and which has continued thereafter have
terminated, was in the best interests of Shareholders of the Company. The
proposed sale was therefore terminated on 20 September 2007 and the costs of
�3.5m incurred in relation thereto have been written off.
5. CAPITAL REORGANISATION COSTS
________________________________________________________________________________________________________________________
On 7 February 2008 the Board announced proposals in respect of a capital
reorganisation and the introduction of a new holding company which had been
undertaken by the Company during the fourth quarter of 2007, were set out in
detail in a Circular to Shareholders issued on that day. The proposals were
approved at an extraordinary general meeting of the Company held on 4 March
2008. These proposals increase the reserves of the Group which can be
distributed to shareholders in line with the 2002 Cash Distribution Programme.
They also create a Group structure which gives increased flexibility on future
potential disposals of the operating businesses and increases the options to the
Company as to when cash and cash equivalents can be returned to shareholders as
well as simplifying the process for returning cash. The total costs of these
proposals are anticipated to be �4.0m, of which �2.5m had been incurred by 31
December 2007. The balance is expected to have been incurred by 30 June 2008
and will accordingly be expensed in the Half-Yearly Financial Report of the
Company for the six months ended 30 June 2008.
Pro-forma
unaudited Eighteen
Year ended year ended months ended
31 December 31 December 31 December
2007 2006 2006
�'000 �'000 �'000
_______________________________________________________________________________________________________________
Capital reorganisation costs 2,500 - -
______ _____ _____
6. PENSIONS
________________________________________________________________________________________________________________________
Overall summary
_______________
The Company and its subsidiaries operate defined contribution pension schemes in
most areas of the Group. It also operates two defined benefit pension schemes
in its 68.3% owned subsidiary Liberty Plc. One of these is for certain UK
employees of its subsidiary Liberty Retail Plc, which has been closed to new
entrants since February 2002 and was closed to future accrual in January 2007.
The pension obligations of this scheme are guaranteed by the Company's 68.3%
owned subsidiary Liberty Plc but not by MWB Group Plc. The other defined
benefit pension scheme is a small scheme for employees of the Japanese
subsidiary of Liberty Plc.
The assets of all pension schemes of the Group are held in separate trust
administered funds. The total pension charge of the Group for the year ended 31
December 2007 was �0.9m (eighteen months ended 31 December 2006: �1.1m).
Pro-forma
unaudited Eighteen
Year ended year ended months ended
31 December 31 December 31 December
2007 2006 2006
�'000 �'000 �'000
_____________________________________________________________________________________________________________
Summary
________
Cumulative net liability of UK Scheme (414) (1,593) (1,593)
Cumulative net assets/(liabilities) of Japanese
Scheme (2) 45 45
______ _____ _____
Total present value of employee benefits (416) (1,548) (1,548)
______ _____ _____
7. FINANCE INCOME AND EXPENSES
________________________________________________________________________________________________________________________
Pro-forma
unaudited Eighteen
Year ended year ended months ended
31 December 31 December 31 December
2007 2006 2006
�'000 �'000 �'000
_______________________________________________________________________________________________________________
The finance income arose as follows:-
Interest income on cash deposits for the period 1,093 2,240 2,665
______ _____ _____
The finance expenses arose on financial liabilities
measured at amortised cost as follows:-
Unsecured Loan Stock 2009/2012 2,924 2,924 4,415
Unsecured Loan Stock 2005/2006 - - 173
Bank loans and overdrafts 24,431 18,963 31,309
Amortisation of debt issue costs 4,047 1,557 3,237
Finance leases and hire purchase contracts - 37 129
Defined benefit pension scheme net financing cost - 36 150
______ _____ _____
31,402 23,517 39,413
Less finance costs capitalised in respect of
development expenditure before tax relief (2,810) (1,537) (1,592)
______ _____ _____
Total finance expenses for the period 28,592 21,980 37,821
______ _____ _____
8. EARNINGS/(LOSS) PER SHARE AND RECOGNISED INCOME AND EXPENSE PER SHARE
________________________________________________________________________________________________________________________
Earnings/(loss) per share
_________________________
The earnings/(loss) per share figures are calculated by dividing the profit/
(loss) attributable to equity shareholders of the Company for the period, by the
weighted average number of shares in issue during the period, as follows:-
Pro-forma
unaudited Eighteen
Year ended year ended months ended
31 December 31 December 31 December
2007 2006 2006
�'000 �'000 �'000
_______________________________________________________________________________________________________________
Profit/(loss) for the period attributable to equity
shareholders of the Company �'000 (15,635) 982 2,129
______ _____ _____
Weighted average number of ordinary shares in issue
during the period '000 80,522 96,257 100,768
______ _____ _____
Earnings/(loss) per share (basic and diluted) Pence (19.4p) 1.0p 2.1p
______ _____ _____
Recognised income and expense per share
_______________________________________
The figures for recognised income and expense attributable to shareholders of
the Company in pence per share are calculated by dividing the recognised income
and expense attributable to equity shareholders of the Company for the period,
by the weighted average number of shares in issue during the period, as follows:-
Pro-forma
unaudited Eighteen
Year ended year ended months ended
31 December 31 December 31 December
2007 2006 2006
�'000 �'000 �'000
_______________________________________________________________________________________________________________
Recognised income and expense for the period
attributable to equity shareholders of the Company �'000 105,433 23,084 39,193
______ _____ _____
Weighted average number of ordinary shares in issue
during the period '000 80,522 96,257 100,768
______ _____ _____
Recognised income and expense attributable to
equity Shareholders of the Company, in pence per
share Pence 130.9p 24.0p 38.9p
______ _____ _____
9. INTANGIBLE ASSETS AND GOODWILL
________________________________________________________________________________________________________________________
________31 December 2007_________
31 December
Brand Goodwill Total 2006
�'000 �'000 �'000 �'000
_____________________________________________________________________________________________________________
At 1 January 2007 18,200 - 18,200 18,200
Acquisition of Stanhope Business
Centres Ltd in September 2007 - 7,587 7,587 -
Acquisition of minority interest in Liberty joint
venture in Japan - 182 182 -
______ _____ _____ ______
At 31 December 2007 18,200 7,769 25,969 18,200
______ _____ _____ ______
The value of �18.2m at 1 January 2007 relates to the Liberty brand. The
Directors consider that the Group's brands have indefinite lives due to the
durability of their underlying businesses which has been demonstrated over many
years. Accordingly the book value of the Liberty brand has not been amortised
but has instead been subject to an annual impairment review.
An external professional valuation of the Liberty brand was undertaken by
Equilibrium Consulting at 31 December 2007. This review was based on the
projected underlying business performance of the Liberty brand over the period
from January 2008 to December 2012, and assumed compound sales growth rates of
10.0%, a discount rate of 11.0% and an annual sales growth rate to perpetuity of
2.25%. This confirmed the value of the Liberty brand at more than the book
value of �18.2m at which it has been included in the financial statements
throughout the year. Accordingly, the Directors have confirmed that no
impairment provision is required and the brand has been retained at that level
in these financial statements.
On 28 September 2007, the Group acquired 100% of the issued share capital of
Stanhope Business Centres Limited for a total consideration of �12.0m. Stanhope
Business Centres Limited is the parent company of a group of companies providing
serviced office solutions. This transaction was accounted for using the purchase
method of accounting
10. PROPERTY, PLANT AND EQUIPMENT
________________________________________________________________________________________________________________________
-------------Operational properties----------------
Plant,
In the Operating machinery,
Long course of leasehold fixtures &
Freehold leasehold construction improvements equipment Total
�'000 �'000 �'000 �'000 �'000 �'000
_____________________________________________________________________________________________________________
Cost or valuation
At 1 January 2007 223,242 88,210 27,144 25,985 81,939 446,520
Additions 22,884 7,584 16,398 9,428 19,067 75,361
Reclassification 7,940 4,316 (15,025) - 2,769 -
Disposals (1,225) (8,100) (2,470) (5) (92) (11,892)
Acquisition of subsidiary - - - 1,731 308 2,039
Revaluation 92,680 50,985 - - - 143,665
______ _______ ______ ______ _______ _______
At 31 December 2007 345,521 142,995 26,047 37,139 103,991 655,693
______ _______ ______ ______ _______ _______
Depreciation
At 1 January 2007 - - - (1,287) (38,381) (39,668)
Charge for the period (1,863) (752) - (1,705) (8,703) (13,023)
Disposals - - - - 16 16
Revaluation 1,863 752 - - - 2,615
______ _______ ______ ______ _______ _______
At 31 December 2007 - - - (2,992) (47,068) (50,060)
______ _______ ______ ______ _______ _______
Net book value
at 31 December 2007 345,521 142,995 26,047 34,147 56,923 605,633
______ _______ ______ ______ _______ _______
Analysis of valuation surplus
for the period
Surplus credited to
revaluation reserve 74,102 46,907 - - - 121,009
Surplus credited to minority
interests 20,441 4,830 - - - 25,271
______ _______ ______ ______ _______ _______
Revaluation surplus
reflected in property, plant
and equipment 94,543 51,737 - - - 146,280
______ _______ ______ ______ _______ _______
31 December 31 December
2007 2006
Operational properties at net book value �'000 �'000
________________________________________
Freehold properties as above 345,521 223,242
Long leasehold properties as above 142,995 88,210
Operating leasehold improvements as above 34,147 24,698
______ _______
522,663 336,150
______ _______
-----------------------------Operational properties------
Freehold
and long Plant,
leasehold In the Operating machinery,
investment Long course of leasehold fixtures &
properties Freehold leasehold construction improvements equipment Total
Group �'000 �'000 �'000 �'000 �'000 �'000 �'000
_____________________________________________________________________________________________________________
Cost or valuation
At 1st July 2005 4,540 388,915 60,597 - 16,347 93,646 564,045
Additions - 16,440 17,283 27,144 11,911 19,931 92,709
Reclassification (4,540) 2,500 1,753 - 287 - -
Disposals - (210,230) - - (2,560) (31,638) (244,428)
Reversal of prior period
impairments - 369 - - - - 369
Revaluation - 25,248 8,577 - - _ 33,825
______ _______ ______ ______ _______ _______ _______
At 31st December 2006 - 223,242 88,210 27,144 25,985 81,939 446,520
______ _______ ______ ______ _______ _______ _______
Depreciation
At 1st July 2005 - - - - - (27,341) (27,341)
Charge for the period - (4,500) (601) - (1,427) (11,467) (17,995)
Disposals - 1,299 - - 140 427 1,866
Revaluation - 3,201 601 - - _ 3,802
______ _______ ______ ______ _______ _______ _______
At 31st December 2006 - - - - (1,287) (38,381) (39,668)
______ _______ ______ ______ _______ _______ _______
Net book value
at 31st December 2006 - 223,242 88,210 27,144 24,698 43,558 406,852
______ _______ ______ ______ _______ _______ _______
Valuation
_________
The Group's property, plant and equipment is all located in the United Kingdom.
The Group's Operational properties were valued at 31 December 2007 by qualified
professional valuers working for the company of DTZ Debenham Tie Leung,
Chartered Surveyors, ("DTZ"), acting in the capacity of External Valuers. All
such valuers are Chartered Surveyors, being members of the Royal Institution of
Chartered Surveyors ("RICS").
DTZ act as valuers to the MWB Group and undertake half year and year end
valuations for accounting purposes. DTZ has been carrying out this valuation
instruction for the Group for a continuous period since June 1999 and Paul
Wolfenden has been the signatory of Valuation Reports provided to MWB Group for
the same period since June 1999. In addition, DTZ provide ad-hoc valuation
advice to MWB Group. DTZ is a wholly owned subsidiary of DTZ Holdings plc. In
the financial year to 30 April 2007, the proportion of total fees payable by MWB
Group to the total fee income of DTZ Holdings plc was less than 5%. It is not
anticipated that this situation will vary in terms of the financial year of DTZ
to 30 April 2008. DTZ have not received any introductory fees or acquisition
fees in respect of any of the properties owned by MWB Group within the 12 months
prior to the date of valuation. DTZ have been appointed as valuers in respect
of certain of the properties and in the last 12 months they have provided
valuation advice for bank lending purposes in relation to certain of the
properties.
All valuations were carried out in accordance with the RICS Appraisal and
Valuation Standards 5th Edition ("the Manual") and the properties were valued on
the basis of Market Value of the Properties. Market Value is defined in the
Manual as the estimated amount for which a property should exchange on the date
of valuation between a willing buyer and a willing seller in an arm's length
transaction after proper marketing, where the parties had each acted
knowledgeably, prudently and without compulsion.
The valuation of the hotels is based on estimates of annual maintainable
earnings before interest, tax, depreciation and amortisation ("EBITDA") for each
property over a 10 year cash flow period. These estimates are based on the
historic, current and budgeted trading information provided by the Group to DTZ.
DTZ apply a market discount rate to the cash flow forecast of the hotels to
assess the net present value of each property asset. This is in line with the
method used by the market for the valuation of this type of property.
In valuing the Group's hotels, DTZ have had regard to the valuation of the
properties as fully equipped operational entities, and to their trading
potential. The valuation therefore includes the land and buildings; the trade
fixtures, fittings, furniture, furnishings and equipment; and the market's
perception of the trading potential excluding personal goodwill; together with
an assumed ability to renew existing licences, consents, certificates and
permits. The value excludes consumables and stock in trade.
The valuation excludes any goodwill associated with the management by the
Company or its subsidiaries but recognises that the hotel property assets would
probably be sold as trading entities. Guidance Note 3 of the Red Book states
that the valuer must lot or group properties in the manner most likely to be
adopted in the case of an actual sale. Therefore DTZ have lotted together the
hotel properties owned by the MWB Group; were the hotel properties to be
marketed individually the values achieved could be less than those included in
the Valuation Report.
Properties valued by DTZ at 31 December 2007 carried in the balance sheet at
valuation included in property, plant and equipment totalled �553.8m. The
carrying value of properties in the balance sheet excludes those revaluation
surpluses attributable to the land element of long leaseholds and developments
which are held at cost. Other minor properties, the short leasehold properties
of MWB Business Exchange Plc, and plant and equipment, are carried at the lower
of cost and realisable value in the table above. These assets had a net book
value at 31 December 2007 of �51.8m.
The historic cost of the Group's properties at 31 December 2007 includes
capitalised interest of �7.9m (31 December 2006: �5.1m).
11. LOANS AND BORROWINGS
________________________________________________________________________________________________________________________
31 December 31 December
2007 2006
�'000 �'000
________________________________________________________________________________________________________________
Current liabilities
___________________
Secured bank loans 32,959 21,619
Other unsecured loan borrowings 1,620 1,620
______ _____
34,579 23,239
______ _____
Non-current liabilities
Secured bank loans 265,170 205,566
9.75% Unsecured Loan Stock 2009/2012 29,640 29,602
Other unsecured loan borrowings 805 2,425
______ _____
295,615 237,593
______ _____
Total loans and borrowings 330,194 260,832
______ _____
12. TRADE AND OTHER PAYABLES
________________________________________________________________________________________________________________________
31 December 31 December
2007 2006
�'000 �'000
________________________________________________________________________________________________________________
Due within one year
___________________
Trade payables 18,126 13,036
Other payables 2,015 8,370
Client deposits 13,302 11,408
Accruals 27,453 24,401
PAYE, NIC and VAT 6,037 4,203
Deferred income 697 3,148
______ _____
67,630 64,566
______ _____
Due after more than one year
____________________________
Other payables 1,153 2,458
Operating lease incentives 10,293 5,516
Long leasehold obligations 703 710
______ _____
12,149 8,684
______ _____
13. MINORITY INTERESTS
________________________________________________________________________________________________________________________
The movements in minority interests of the Group during the year ended 31
December 2007 arose as follows:-
Add
Add minority
minority share of Other
At share of valuation movements At
1 January result for surplus for during 31 December
2007 the year the year the year 2007
�'000 �'000 �'000 �'000 �'000
______________________________________________________________________________________________________________
MWB Business Exchange Plc 3,843 4,186 - (675) 7,354
MWB Malmaison Holdings Limited 30,483 (1,128) 26,004 13,571 68,930
Liberty Plc 17,776 (1,905) (733) (1,391) 13,747
Others 1,861 168 - (277) 1,752
_____ _____ ______ ______ ______
53,963 1,321 25,271 11,228 91,783
_____ _____ ______ ______ ______
During the year ended 31 December 2007, the Group drew down further funds from
the minority shareholder in MWB Malmaison Holdings Limited, resulting in
minority interests increasing by the amounts drawn down plus the share of
retained equity attributable to each increased amount subscribed.
14. EQUITY ATTRIBUTABLE TO SHAREHOLDERS OF THE COMPANY IN PENCE PER SHARE
________________________________________________________________________________________________________________________
The Equity attributable to shareholders of MWB Group in pence per share is
calculated by dividing the Equity attributable to shareholders of MWB Group at
each year end by the number of ordinary shares in issue at such date. The
relevant figures are as follows:-
31 December 31 December
2007 2006
_______________________________________________________________________________________________________________
Equity attributable to shareholders of MWB
Group per consolidated balance sheet �'000 204,377 99,322
_______ ______
Number of ordinary shares in issue at year end '000 80,522 80,522
_______ ______
Equity attributable to shareholders of MWB Group in
pence per share Pence 254p 123p
_______ ______
15. COMMITMENTS AND GUARANTEES
________________________________________________________________________________________________________________________
Contingent liabilities
______________________
In June 2003 the Group bought out the minority interests in the share capital of
MWB Business Exchange Limited ("BusEx"), for an initial consideration of �16m
and deferred consideration of �9.5m. In December 2005, a new holding company
for BusEx, MWB Business Exchange Plc, was floated on AIM and the Group's
retained interest at the date of flotation was valued at �38m. This subsidiary
has continued to expand and by 31 December 2007, the Group's interest in MWB
Business Exchange Plc had increased in value to approximately �52m. The payment
of any of the deferred consideration of �9.5m referred to above from the
acquisition of minority interests in June 2003 is dependent on value being
distributed out of MWB Business Exchange Plc to MWB Group or received from a
third party sale by the Group, for the serviced office business of MWB Business
Exchange Plc before June 2018. This includes value received from income
distributions, capital repayments and proceeds from external sales of MWB
Business Exchange Plc or its business.
No provision is included in the financial statements for the deferred
consideration as its payment is contingent on value being distributed out of MWB
Business Exchange Plc and it being received by the MWB Group. However, it would
become payable if the Group's interest in MWB Business Exchange Plc was realised
in cash by the Group and it has accordingly been included as a contingent
liability at 31 December 2007.
16. DESPATCH OF FINANCIAL STATEMENTS
________________________________________________________________________________________________________________________
A copy of the above document has been submitted to the UK Listing Authority, and
will be available for inspection at the UK Listing Authority's Document Viewing
Facility, which is situated at the Financial Services Authority, 25 The North
Colonnade, Canary Wharf, London E14 5HS, telephone number 020 7676 1000.
The financial statements will be sent to Shareholders during April 2008. The
audited financial statements of Marylebone Warwick Balfour Group Plc for the
eighteen months ended 31 December 2006 and further copies of this preliminary
announcement are available from the Company Secretary, City Group P.L.C. at the
Company's registered office, 30 City Road, London EC1Y 2AG.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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